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TMI Blog2012 (10) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... international transaction - If the parent company is making any losses, then the said company to claim the losses in accordance with the laws of the country in which it is taxable - the working capital adjustment is accordingly allowed for statistical purpose - Partly in favor of revenue - ITA No.454/Bang/2011 - - - Dated:- 19-10-2012 - SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER Appellant by : Shri Farhat Hussain Qureshi, CIT Respondent by : Shri Srinivasan, C.A ORDER PER P MADHAVI DEVI, JUDICIAL MEMBER : This appeal is filed by the Revenue. The relevant assessment year is 2005-06. The appeal is directed against the order of the Commissioner of Income-tax - (Appeals) IV at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternational transaction is not guided purely by commercial considerations and as an independent company. v. The CIT(A) erred in allowing a standard deduction of 5% from the arithmetical mean price determined after excluding three comparables, based on the judgment of the Hon ble ITAT in SAP Labs India Pvt. Ltd., in ITA No.298/418/Bang/2008 without appreciating the fact that the department has assailed the said ITAT s order before the Hon ble High Court in an appeal u/s 260A. vi. The CIT(A) erred in concluding that ALP adjustment is to be made only after allowing 5% from the arithmetical mean price based on the decision of the Hon ble ITAT in SAP Labs India Pvt. Ltd. in ITA No.398/418/Bang/2008, even when the price charged by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has determined the ALP. The AO made the adjustment accordingly. 5. Aggrieved by the said adjustment, the assessee preferred an appeal before the CIT(A). The CIT(A) excluded three companies i.e 1) Vishal Information Technology Ltd. 2) Nuclear Netsoft GIS (India) Ltd. 3) Transworks Information Services Ltd., from the list of comparables holding that Vishal Information Technology Ltd. and Nuclear Netsoft GIS (I) Ltd., are super profit making companies, while Transworks Information Services Ltd. is having very low margin. 6. Aggrieved by the exclusion of these companies from the list of comparables, the Revenue is in appeal before us. 7. The learned DR, Farhat Hussain Qureshi, submitted that the exclusion of the first two of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this company is of subsequent years only while only contemporary data is to be considered for the purposes of making the transfer pricing study. He submitted that the TPO has considered the subsequent year data of this comparable which, according to him, is not tenable and hence CIT(A) has rightly excluded the same. Thus according to him, these two companies having super profits and also irrelevant data have to be excluded from the list of comparables. For similar reasons he supported the order of the CIT(A) excluding the Transworks Information Services Ltd., also from the list of comparables. 9. Having heard both the parties and having considered their rival contentions, we find that the Mumbai Tribunal in the case of M/s Mearsk Global ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry. 40% profit in the ITES industry cannot be held to be extra ordinary or super profit. In view of the same, we hold that the net margin of Nuclear Netsoft has to be considered. Similarly, the net margin of Transwork Information Services Ltd., also have to be considered for the purpose of computing the ALP of the international transaction. This ground is accordingly partly allowed. 10. As regards ground No.4, the brief facts of the case are that the assesee had submitted before the CIT(A) that the holding company of the assessee in USA was incurring losses for the past three years and after considering the same, the CIT(A) has allowed 2% deduction from the ALP after excluding the 3 comparable cases. The grievance of the Revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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