Partial stay granted for 6 months in Stay Application on AO order. ALP adjustment limited to international transactions.

The Tribunal granted a partial stay for six months in a Stay Application regarding an order passed by the AO for the A.Y. 2009-10. The Tribunal directed the AO/TPO to restrict the adjustment of ALP to international transactions only, set aside the issue of functional comparability for further examination, and remitted the issue of working capital adjustment to the TPO. The Tribunal also directed reconsideration of the functional profile of another company and calculated the impact on the adjustment required. The stay was granted subject to specific conditions, with any adjournment petition leading to vacation of the stay.

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Issues:
Stay Application in respect of order passed by the AO under Section 143(3) read with Section 144C(5) for the A.Y.2009-10.

Analysis:

1. The appellant contended that the appeal for A.Y. 2009-10 is similar to the order in the appellant's own case for A.Y. 2008-09. The Tribunal directed the AO/TPO to restrict the adjustment of ALP to the international transactions only.

2. The Tribunal set aside the issue of functional comparability of a specific company vis-`a-vis the assessee for proper examination and clarified that if only a segment of the business is comparable, segmental results may be considered for ALP determination.

3. The appellant argued for the benefit of a tolerance margin of 5% under Section 92C(2), as directed by a previous decision in the appellant's own case, which was not properly appreciated by the authorities.

4. The issue of adjustment for the difference in working capital employed was remitted to the TPO for proper examination as it was not adequately addressed by the lower authorities.

5. The Tribunal observed that the functional profile of another company was not properly assessed and directed the TPO to reconsider and pass an appropriate order, affecting the computation of the revised arithmetic mean of comparables.

6. The Tribunal considered the differential in arm's length margin and the impact on the adjustment required, leading to a detailed calculation for potential refund or additional tax liability for the appellant.

7. After considering the arguments and the previous order for A.Y. 2008-09, the Tribunal granted a partial stay for six months, subject to specific conditions including a payment by the appellant and an expedited appeal hearing date.

8. The Tribunal emphasized that any adjournment petition by the appellant would result in the vacation of the stay granted. The decision was concluded by allowing the stay application partly as indicated in the order.

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