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TMI Blog2018 (6) TMI 1771X X X X Extracts X X X X X X X X Extracts X X X X ..... Acropetal Technologies Ltd., cannot be adopted as a comparable company. Therefore we hereby direct the Ld.AO to exclude M/s. Acropetal Technologies Ltd., while determining the ALP of the assessee. Disallowance of Research Development Expenditure - nature of expenditure - HELD THAT:- AR submitted before us that the assessee had rendered Research Development services to its related party against which the assessee has earned revenue income. AR further pleaded that the matter may be remitted back to the file of Ld.AO for fresh examination of the facts. DR strongly objected to the submission of the Ld.AR. After hearing both the parties, considering the strong arguments advanced by the Ld.AR, we are of the considered view that in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 04.09.2014. Finally the assessment order was passed U/s.143(3) r.w.s. 144C(1) 92CA of the Act on 09.12.2016 wherein the Ld.AO made an upward adjustment of ₹ 2,00,98,068/- and Research and Development expenses amounting to ₹ 1,99,60,831/- was disallowed treating it as capital expenditure. 4.Ground No. 2(i) : Upward revision of ₹ 2,00,98,068/-:- At the outset the Ld.AR submitted before us that the Ld.Revenue Authorities has erroneously adopted M/s. Acropetal Technologies Ltd., as comparable company because of the following reasons:- 1) The profit earned by M/s. Acropetal Technologies Ltd., during the relevant assessment year was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38.05 Average 27.90 From the above it is crystal clear that the average operating margin of M/s. Acropetal Technologies Ltd., is 57.66 which is significantly high and not consistent with the other comparables. Therefore we find merit in the submission of the Ld.AR that the statement of accounts of M/s. Acropetal Technologies Ltd., during the relevant assessment year cannot be relied upon and even if it is relied upon the profit of the company is abnormally high during the relevant assessment year. Hence, we are of the considered view that for the relevant assessment year M/s. Acropetal Technologies Ltd., cannot be adopted as a comparable company. Therefore we hereby direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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