9911796707
TMI Blog2024 (11) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... of comparable on the ground of higher turnover - There is no dispute that while selecting the comparable companies, the TPO has applied one filter of turnover but only minimum turnover filter of Rs. 1 crore was applied by the TPO and no maximum turnover filter was applied. Once the turnover is applied as a filter while selecting the comparables, then there should be a consistent parameter of such turnover filter like 10 times of the turnover of the assessee in both higher as well as lower side. Therefore, applying one side turnover filter by the TPO is not proper and justified. Accordingly, this issue of applying the turnover filter is set aside to the record of the TPO for carrying out necessary exercise for exclusion and inclusion of the comparable companies in the set of comparables while determining the ALP. We may clarify that once the turnover filter is applied as 10 times on the higher side and 1/10th of the lower side, then the same would be applicable to the entire set of comparables and not on the selective companies. Treating deferred receivables as international transaction and adjustments made by the TPO on notional interest - To maintain rule of consistency, this issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.4 The learned TPO has erred in applying related party filter of 25% in his search process instead of 15% as applied by the assessee relying on various precedents and the learned Assessing Officer and the Hon'ble DRP have erred in confirming the same. Ground No.5 The learned TPO has erred in facts and laws by considering the deferred receivables from Associated Enterprises as International Transaction within the purview of section 92B of the I.T. Act, 1961. The learned TPO has erred in holding that the appellant must charge notional interest income on such receivables and the learned Assessing Officer and the Hon'ble DRP have erred in confirming the same. Ground No.6 Without the prejudice to the ground number 5, the learned TPO has erred in not providing working capital adjustment which itself takes the impact of outstanding receivable on profitability. Accordingly, no separate adjustment is warranted on deferred receivable and the learned Assessing Officer and the Hon'ble DRP have erred in confirming the same. Ground No.7 The learned TPO erred in facts and law by considering foreign exchange currency fluctuation gain/loss as operating in nature and the learned Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions Ltd. Therefore, the assessee is now pressing for only 6 comparables to be included in the set of comparables for determination of ALP. The learned AR has referred to the decision of this Tribunal in assessee s own case in ITA No.194/Hyd/2021 dated 29/07/2024 for the A.Y 2016-17 and submitted that this Tribunal has considered an identical issue of the comparable entities which were excluded by the TPO and the matter is set aside to the record of the TPO with the direction to examine whether these companies are functionally comparable with the assessee company or not after applying the applicable filters. Thus, the learned AR has submitted that this matter may also be set aside to the record of the TPO/Assessing Officer for reconsideration of the functional comparability of these six entities. 6. The learned DR, on the other hand, has relied upon the orders of the authorities below. 7. We have considered the rival submissions as well as relevant material available on record. The assessee has challenged the rejection/exclusion of 8 comparables by the TPO as under: i) Kals Information Systems Ltd ii) Akshay Software Technologies Ltd iii) Batchmaster Software Private Ltd iv) DCIS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies are functionally comparable with the assessee company or not after applying the applicable filters. If these companies were functionally comparable, then the TPO is directed to include these companies for the purpose of computing the ALP. Thus, these grounds are allowed for statistical purposes. 10. Accordingly, to maintain rule of consistency and having the identical facts and circumstances for both the years, we remand the issue of rejection of six comparables to the record of the Assessing Officer for fresh examination and consideration of functional comparability of these six companies and then to determine the ALP in respect of the international transactions entered into by the assessee. 11. In Ground No.3, the assessee is challenging the inclusion of 16 companies in the set of comparables selected by the TPO on the ground of higher turnover, significant RPT, onsite revenues and thus the assessee is seeking exclusion of these 16 companies from set of comparables. 12. The learned AR of the assessee submitted that the TPO has not applied higher turnover, significant RPT and onsite revenues as filter while selecting these companies, whereas the only minimum turnover of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in both higher as well as lower side. Therefore, applying one side turnover filter by the TPO is not proper and justified. This Tribunal in assessee s own case for the A.Y 2016-17 has considered an identical issue in para 9 of order which read as under: 9. We have heard both sides and perused the material on record. This Tribunal has continuously been following the turnover of the filter of ten times x and 1/10th of the turnover of the assessee on both the sides. In view of the above, we deem it appropriate to remand back this issue to the file of Assessing Officer / TPO with a direction to apply ten times filter lower and upper on both the sides. The companies which are having turnover of more than 10 times are required to be excluded from the list of comparable and similarly, the companies whose turnover are less than 1/10th of the turnover of the assessee are also required to be excluded from the list of comparable. In the light of the above, the TPO is directed to exclude the comparable in the light of the above said directions. Thus, this ground is allowed for statistical purposes. 16. Accordingly, this issue of applying the turnover filter is set aside to the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
