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2019 (9) TMI 921 - HC - Income TaxTP Adjustment - adjustment in respect of the international transaction only and not on the entire sales - Whether the assessee had failed to prove that the margin of profit of the AE transaction is the same as the margin of profit of the non-AE transaction? - HELD THAT - Transfer Pricing adjustment has to be done only in respect of related party transactions and not on all transactions. See SANDVIK ASIA PVT. LTD., 2018 (5) TMI 262 - BOMBAY HIGH COURT Exclude Genesys International Corporation Ltd. And Cosmic Global Ltd. from the set of comparables - HELD THAT - Functionally M/s. Genesys And Cosmic Global Ltd. was different from the Respondent. Therefore, would not be an appropriate comparable. Risk adjustment - HELD THAT - Tribunal allows the Respondent s appeal by way of remand to the Assessing Officer to examine the issue of risk adjustment while arriving at the ALP. In fact, it follows its earlier order 2016 (7) TMI 238 - ITAT PUNE in respect of Assessment Year 2008-09 in respect of the same Respondent. From The order of tribunal, no substantial question of law arises - appeal of the revenue dismissed.
Issues:
1. Transfer pricing adjustment on international transaction only. 2. Exclusion of companies from the set of comparables. 3. Exclusion of a company based on high profits. 4. Granting risk adjustment without demonstrating the link of risk with financial results. Transfer Pricing Adjustment: The Tribunal's order directed the Transfer Pricing Officer (TPO) to make adjustments only on related party transactions, not all transactions. This decision was supported by a previous court ruling in a similar case. As a result, the issue did not raise any substantial question of law and was not entertained. Exclusion of Companies from Comparables: Regarding the exclusion of companies from comparables, the Tribunal excluded M/s. Genesys and M/s. Cosmic Global Ltd. The decision to exclude M/s. Genesys was upheld based on functional differences with the respondent and a previous court ruling. Similarly, M/s. Cosmic Global Ltd. was excluded due to functional differences in services provided, which was deemed reasonable. As no substantial question of law arose from these exclusions, the issue was not entertained. Exclusion Based on High Profits: The question of excluding a company based on high profits was deemed academic as M/s. Cosmic Global Ltd. was already excluded due to functional differences. Therefore, the issue of exclusion on the grounds of super profits did not raise any substantial question of law and was not entertained. Granting Risk Adjustment: The Tribunal allowed the appeal by remanding the issue of risk adjustment to the Assessing Officer. This decision was based on a previous order in a similar case. The court dismissed the Revenue's appeal on the same issue for a previous assessment year, as no distinction in facts or law was shown. Consequently, the question of granting risk adjustment did not give rise to any substantial question of law and was not entertained. In conclusion, the appeal was dismissed based on the analysis of each issue raised by the Revenue, which did not present substantial questions of law warranting consideration.
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