9911796707
TMI Blog2024 (2) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case and therefore, the decisions cited by the Ld. Departmental Representative have no application in the facts of the present case. We concur the observations made by the Tribunal that turnover filter cannot be applied as a tool for cherry picking the comparables at the later stage after completion of the search process with the object of excluding comparables which was otherwise found to be functionally comparables after the Functions Assets Risks (FAR) Analysis. We are of the view that the application of the second lower turnover filter by the TPO without rejecting the first turnover filter adopted by the Appellant resulted exclusion of two companies which were otherwise functionally comparable and thus, resulted in cherry picking. It is not the case of the Revenue that the comparables excluded were not functionally comparable with the Appellant. The lower turnover of filter adopted by the Appellant and the explanation provided by the Appellant for adopting the same was not rejected by the TPO. CIT(A) upheld the adoption of additional turnover filter on the incorrect premise that in the Transfer Pricing Study Report the Appellant did not apply any filters while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tested party along with the lower turnover filter of 1/10 th of the turnover of the tested party: 3.3. excluding Apitco Limited and Idma Laboratories Limited from the final list of comparable companies, though these companies are functionally comparable to the Assessee; 3.4. rejecting the additional comparable company (i.e., Cigniti Technologies Limited) which was identified by the Appellant as functionally comparable and qualifies all the filters proposed by the learned TPO; 3.5. not granting working capital adjustment for determining the arm's length price. 4. On the facts and in the circumstances the Learned AO erred in levying interest under section 234D of the Act amounting to INR 42,416. 5. On the facts and in the circumstances the Learned AO erred in initiating penalty proceedings under section 274 read with section 270A of the Act. 3. The relevant facts in brief are that the Appellant is engaged in the business of inspection, certification and training of non-marine products and services. The Appellant filed return of income for the Assessment Year 2018-19 on 30/03/2019 declaring total income of INR 5,01,60,790/-. The case of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Order, dated 28/09/2021, the Assessing Officer incorporated the above Transfer Pricing Adjustment of INR 7,11,18,430/-. The Appellant filed objections before the DRP against the aforesaid transfer pricing adjustment. However, the DRP declined to delete the transfer pricing addition vide order dated 11/05/2022. However, the DRP granted relief to the Appellant by directing the TPO to verify the margins of comparables finally selected and adopt the correct profit ratios to arrive at the transfer pricing adjustment. Further, the DRP issued directions to compute the transfer pricing adjustment taking into consideration only the international transactions with the Associated Enterprises (as opposed to all transactions undertaken by the Appellant). As per the aforesaid directions of the DRP, the TPO passed order, dated 02/06/2022, restricting the transfer pricing adjustment to INR 2,13,54,549/- which was incorporated in the Final Assessment Order, dated 24/06/2022, passed by the Assessing Officer under Section 143(3) read with section 144C(13) of the Act. 6. Being aggrieved by the above transfer pricing addition made in the Final Assessment Order, dated 24/06/2022, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by order passed by the TPO/Assessing Officer and submitted that the TPO has correctly applied, both, upper and lower turnover filter. In this regard, reliance was placed by the Ld. Departmental Representative on the following decisions Genisys Integrating Systems (India) Pvt. Ltd. vs. DCIT (ITA No. 1231/Bang/2010) and Jacobs Engineering (I) Pvt. Ltd. (ITA No. 7194/Mum/2012). The Ld. Departmental Representative further submitted that no objections were raised by the Appellant during the assessment proceedings in this regard. Therefore, the transfer pricing adjustment as made in the Final Assessment Order should be sustained. 10. In rejoinder, the Ld. Authorised Representative for the Appellant reiterated that the Assessing Officer did not reject the lower turnover filter applied by the Appellant and introduced another upper/lower turnover filter. Further, it was submitted that the Ld. Departmental Representative had made out a new case before the Tribunal. The Assessing Officer did not make any reference to the aforesaid preposition in the assessment order. Further, the CIT(A) confirmed the order passed by the TPO/Assessing Officer on the incorrect premise that no fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Functions Assets Risks (FAR) Analysis. After taking into facts and circumstances of the present case, we are of the view that the application of the second lower turnover filter by the TPO without rejecting the first turnover filter adopted by the Appellant resulted exclusion of two companies which were otherwise functionally comparable and thus, resulted in cherry picking. It is not the case of the Revenue that the comparables excluded were not functionally comparable with the Appellant. The lower turnover of filter adopted by the Appellant and the explanation provided by the Appellant for adopting the same was not rejected by the TPO. The CIT(A) upheld the adoption of additional turnover filter on the incorrect premise that in the Transfer Pricing Study Report the Appellant did not apply any filters while selecting the comparables. Accordingly, we find merit in the contentions advanced on behalf of the Appellant and direct the TPO/Assessing Officer to re-compute the ALP and transfer pricing adjustment, if any, after including (a) APITCO Limited and (b) IDMA Laboratories Limited in the final set of comparables. In terms of the aforesaid, Ground No. 3 to 3.3 raised by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
