2023 (3) TMI 1093 - AT - Income Tax

TP Adjustment - comparable selection - modifying the turnover filter applied by the Assessee - AR submitted that comparables whose turnover is more than 200 crores have to be excluded since the TPO has not applied the upper turnover filter Rs.200 crores - HELD THAT - The coordinate bench of the Tribunal in the case of Autodesk India Pvt.Ltd. 2018 (7) TMI 1862 - ITAT BANGALORE took note of all the conflicting decision to held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. Thus comparables whose turnover is more than 200 crores should be excluded from the list of comparables.

Summary

Issues Involved:
1. Turnover Filter
2. Companies not part of TP Order and Draft Assessment Order, erroneously included in Final Assessment Order

Issue-wise Detailed Analysis:

1. Turnover Filter:
The appellant contested the modification of the turnover filter applied by the Assessing Officer (AO) and Transfer Pricing Officer (TPO). The appellant argued that the TPO failed to apply the upper turnover filter of Rs. 200 crores, which should exclude companies with significantly higher turnovers from the comparable set. The Tribunal referenced the case of Autodesk India Pvt. Ltd. Vs. DCIT, where it was established that high turnover is a valid ground for excluding companies as not comparable with a company having low turnover. The Tribunal, following the principle that where two views exist, the view favorable to the assessee should be adopted, upheld the exclusion of companies with turnovers exceeding Rs. 200 crores from the list of comparables.

2. Companies not part of TP Order and Draft Assessment Order, erroneously included in Final Assessment Order:
The appellant argued that six companies were erroneously included in the final assessment order, which were not part of the TPO's final list of comparables. The Tribunal reviewed the records and confirmed that these companies were indeed not part of the final list of comparables as per the TPO's order. The Tribunal directed the AO/TPO to delete these companies from the list of comparables and recompute the Arm's Length Price (ALP) accordingly.

Conclusion:
The Tribunal allowed the appeal, directing the AO/TPO to exclude companies with turnovers exceeding Rs. 200 crores from the list of comparables and to delete the erroneously included companies, thereby recomputing the ALP in accordance with the Tribunal's directions. The appeal was pronounced in favor of the assessee on December 19, 2022.