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2018 (10) TMI 1596 - AT - Income TaxTPA - comparable selection - the comparables which were selected by the TPO are functionally different - Held that - CIT(A) has given an extensive finding as to TPO s comparables are not relevant at all and the fresh benchmarking conducted by the assessee company is relevant. Therefore, there is no need to interfere with the findings of the CIT(A). Ground No. 1 is dismissed.
Issues:
1. Addition of arm's length price 2. Deletion of provision for expenses Analysis: Issue 1: Addition of arm's length price The appeal was filed by the Revenue against the Assessment Order regarding the addition of ?11,96,61,358 on account of arm's length price. The assessee, engaged in designing semiconductor products, software, and electronic systems, filed its return of income for Assessment Year 2005-06. The case was selected for scrutiny, and a reference was made to the Addl. CIT (TPO-I), New Delhi, to determine the arm's length price of international transactions. The Assessing Officer made the addition based on the TPO's order, stating a difference in the value of international transactions. The CIT(A) found that the comparables selected by the TPO were functionally different and not suitable for comparison. The CIT(A) accepted the fresh benchmarking conducted by the assessee, leading to the deletion of the transfer pricing addition. The CIT(A) provided detailed reasoning for rejecting the TPO's comparables and upheld the arm's length price charged by the appellant. Issue 2: Deletion of provision for expenses Regarding the deletion of ?64,83,213 on account of provision for expenses, the Assessing Officer disallowed the amount as the liability was reversed in the subsequent year. The Assessing Officer observed that the liability had not crystallized during the year. The CIT(A) partly allowed the appeal of the assessee, stating that the issue of disallowance under Section 10A requires consideration as the assessee was entitled to claim benefits under Section 10A in the respective years. The CIT(A) dismissed Ground No. 2 of the Revenue's appeal, emphasizing the need to address the entitlement under Section 10A for the assessee company. In conclusion, the appeal of the Revenue was dismissed, with the CIT(A) providing detailed analysis and reasoning for both issues raised in the appeal. The judgment highlighted the importance of proper comparables in transfer pricing analysis and the consideration of entitlement under Section 10A for the assessee company.
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