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TMI Blog2015 (9) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... hould not be included as comparables. The decision in Chryscapital Investment (2015 (4) TMI 949 - DELHI HIGH COURT) also underscores that any one parameter cannot ipso facto be determinative of how an ALP has to be determined. In the facts and circumstances of the present case, where the TPO has accepted both filters, i.e. the filter on the basis of depreciation to the total costs less than 5% and more than 50% as well as the turnover filter, the Assessee is right in contending, on the strength of the decision MCorp Global (P) Ltd. v. CIT, Ghaziabad (2009 (2) TMI 5 - SUPREME COURT), that the benefit granted to the Assessee by the AO, who has accepted and acted upon the report of the TPO, could not have been taken away by the ITAT. X X X X Extracts X X X X X X X X Extracts X X X X ..... ces and network management solutions. The fourth is the Nokia Networks Technology R&D Division (Nokia Net R &D) which acts as a contract R & D service provider to the NIC Research Centre. Most of the work of Nokia Net R&D relates to development of base stations for telecom networks. For Net R &D and NIC divisions, the Assessee acts as a contract research and development provider. 5. For the AY in question, the Assessee filed its return of income declaring loss of ₹ 2,18,10,212. Since the Assessee had entered into international transactions in the relevant AY, a reference was made under Section 92 CA(1) of the Act to the Transfer Pricing Officer („TPO‟) for computing the arm‟s length price (ALP) in relation thereto. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose proportion of wages to total cost is less than 10% or more than 90% have been excluded; g) the companies whose proportion of depreciation to total cost is less than 5% and more than 50% have been excluded; h) thereafter those companies whose operating profit margin on costs was below -20% and above 100% were excluded; i) thereafter 10 companies whose activities were completely divergent or had significant controlled party transactions having material bearing on the profitability were excluded; j) the final list of 60 comparable companies has been drawn up."; 7. After considering the objections of the Assessee, the TPO determined the arm‟s length margin at 15% of costs after allowing an adjustment of 5% on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thirteen companies which were probably favouring the case of the Assessee. The ITAT felt that it was unable to order at that stage that this filter be not applied since the companies favouring the Assessee on this filter "must have already been excluded by the TPO, which now cannot be brought back." The ITAT upheld the exclusion of two companies on the basis of filter of rejection of companies having related party transaction over 25%. As regards the exclusion of the last set of seventeen companies on the turnover filter, the ITAT again was of the view that the mere fact that a company has a high or low turnover cannot be the reason to justify its exclusion if it was otherwise functionally comparable. However, the ITAT noticed that the TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have taken back the benefit granted to the Assessee by the Assessing Officer („AO‟) who had passed the order on the basis of TPO‟s order. 13. This Court has examined Rule 10B (1) & (2) and is of the view that the said provisions are to be read as laying down broad guidelines as regards the exercise of determining ALP for an international transaction using certain parameters. The provisions may themselves not spell out the manner and the basis for choosing or excluding comparables. The nature of the industry, the nature of the transactions, the accepted norms and practices of an industry, the structuring and behaviour of markets and a host of other unspecified parameters may have to be considered while determining an A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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