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2019 (12) TMI 1041 - AT - Income TaxTP Adjustment - selecting Future Capital Holding as comparable - Whether TPO has wrongly applied OP margin as 37.68% as against actual OP margin of 15.21% - assessee has also filed calculation giving details of computation of OP margin in the case of Future Capital Investment segment - HELD THAT - We are of considered view that there appears to be a clerical error in calculation of OP margins. This issue is restored to the file of Assessing Officer/TPO for recomputation of OP margin in respect of Future Capital/investment segment. The TPO/Assessing Officer after recomputing O.P margin shall apply corrected margins in accordance with law. The ground No.1 of the cross objections is allowed for statistical purposes. Selection of Kshitij Investment Advisory Co. Ltd as comparable - HELD THAT - The assessee company is justified in asserting that Kshitij Investment Advisory Co. Ltd. deserves to be excluded from the final set of comparables on account of peculiar economic circumstances during the year under consideration
Issues:
1. Dismissal of Revenue's appeals due to low tax effect. 2. Condonation of delay in filing cross objections by the assessee. 3. Grounds raised in the cross objections by the assessee regarding comparables. Issue 1: Dismissal of Revenue's appeals due to low tax effect: The appeals by the Revenue against the orders of Commissioner of Income Tax(Appeals) for the assessment years 2010-11 and 2011-12 were dismissed by the Appellate Tribunal ITAT Mumbai due to the tax effect being less than the prescribed limit by CBDT Circular No. 17/2019. The Tribunal emphasized that without delving into the merits of the issues raised in the appeals, they were dismissed solely on account of low tax effect below the monetary limit set by the circular. Issue 2: Condonation of delay in filing cross objections by the assessee: The assessee filed cross objections for assessment year 2010-11, which were time-barred by 249 days. The assessee sought condonation of delay, attributing it to a belief that complete relief had been received earlier. The Tribunal, after considering arguments from both sides, invoked the principle that acceptance of explanation should be the rule. Referring to relevant legal precedents, the Tribunal decided to condone the delay and admitted the cross objections for hearing and disposal on merits. Issue 3: Grounds raised in the cross objections by the assessee regarding comparables: The assessee raised two grounds in the cross objections related to the comparables chosen by the Transfer Pricing Officer (TPO). The first ground challenged the OP margin calculation for Future Capital Holding Ltd., and the second ground questioned the selection of Kshitij Investment Advisory Co. Ltd. as a comparable. The Tribunal, after hearing arguments from both sides, allowed the first ground for statistical purposes and directed a recomputation of OP margin. For the second ground, the Tribunal agreed with the assessee's contention that Kshitij Investment Advisory Co. Ltd. was not a suitable comparable, based on previous tribunal decisions, and directed its exclusion from the list of comparables. In conclusion, the Appellate Tribunal ITAT Mumbai dismissed the Revenue's appeals due to low tax effect, condoned the delay in filing cross objections by the assessee, and partially allowed the cross objections by directing recomputation of OP margin and exclusion of an unsuitable comparable. The judgment was delivered on December 20, 2019.
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