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TMI Blog2022 (9) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... ay in which the TPO can exclude certain companies, included by the assessee in the list of comparables, which are actually not found out to be so, the assessee can also seek exclusion of a company which was wrongly treated by it as comparable. Our view is fortified by the judgment of the Hon ble jurisdictional High Court in CIT Vs. Tata Power Solar Systems Ltd. [ 2016 (12) TMI 1600 - BOMBAY HIGH COURT] . ICC International Agencies Ltd.company returning higher OP/OC for the year - We reiterate that an otherwise comparable company with a high or low profit margin cannot be excluded just because of low or high profit rate. It would merit exclusion if it is proved that such high or low profit margin was because of some abnormal business conditions relevant to the year under consideration. Apart from contending that this company returned higher OP/OC for the year, no specific argument was put forth by the ld. AR to show that such profit margin was not the normal incidence of business. The assessee has not disputed the functional comparability of this company or the FAR analysis. AR failed to bring to our notice the company not passing any of the filters. In view of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and applied the Transactional Net Margin Method (TNMM) for determining its Arm s Length Price (ALP). Calculating its Operating Profit/Operating Cost (OP/OC) as Profit Level Indicator (PLI) at 4.20% from the above five transactions, the assessee chose certain comparables giving lower similar average PLI for demonstrating that the international transaction was at ALP. The Transfer Pricing Officer (TPO) changed the composition of comparables and shortlisted ten companies as comparables with their average OP/OC at 25.30%. On this basis, he determined the amount of transfer pricing adjustment at Rs.1,26,70,656/-. The AO initially notified the draft order incorporating the transfer pricing adjustment as proposed by the TPO and thereafter passed the final assessment order. The assessee filed appeal before the ld. CIT(A) and got certain reliefs. The ld. DR has not brought to our notice any appeal having been filed by the Department against the impugned order. In the instant appeal, the assessee is aggrieved by the exclusion of two companies and inclusion of one company from/to the final tally of comparables. I. Ma Foi Global Search Services Limited and Ma Foi Management Consultants Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention, the assessee submitted the PLI (OP/OC ratio) of this company, as recorded on page 27 of the impugned order, at 187% for the year 2008; 38% for the year 2009; 96% for the year 2010; 34% for the year 2011; and 27% for the year 2012. The assessee also made a mention that the OP/OC for the year 2010, namely the year under consideration, was wrongly taken by the TPO at 106% as against the correct profit rate of 96%. It is on the strength of this fluctuation in the profit margins over the period that the assessee is seeking exclusion of this company from the list of comparables. 9. At this stage, it is relevant to note that the computation of arm's length price under the Indian transfer pricing provisions is embodied in section 92C of the Act. Sub-section (1) of this section provides that the arm's length price in relation to an international transaction shall be determined by any of the given methods, being the most appropriate method, having regard to certain factors. Proviso to sub-section (2), which assumes significance for the present purpose, states that : where more than one price is determined by the most appropriate method, the arm's length price shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the instant case, we find that the TPO considered ten comparable companies including the relevant segment of ICC International Agencies with OP/OC at 106.80%. Apart from that, the TPO also green-signaled the inclusion of two more companies with negative profit margins, namely, Overseas Manpower Corporation Limited with OP/OC at (-)23.31% and Times Innovative Media Limited with OP/OC at (-)11.35%. This shows that the approach of the TPO in treating the otherwise comparable companies for the purposes of inclusion in the list of comparables by the TPO is consistent, irrespective of their having earned high profits or incurred losses. 11. Though the TPO recorded OP/OC of ICC International Agencies at 106.80%, the assessee contended before the ld. CIT(A) that its correct profit margin was 96%. Now a diametrically opposite stand is being taken by the ld. AR contending that the actual profit margin of this company is more than 106.80%. To support such a contention, he put forth certain unverified calculations, which were not before any of the authorities below. In support of his contention urging for the exclusion of this company on the ground of high profit, he relied on a T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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