Tribunal excludes comparables, upholds reimbursement treatment in Transfer Pricing Adjustment for A.Y. 2009-2010.

The Tribunal allowed the appeal of the assessee in a Transfer Pricing Adjustment dispute for A.Y. 2009-2010. It excluded certain comparable companies for determining ALP margin and accepted the treatment of reimbursement of expenses as presented by the assessee.

---

---

Issues:
1. Dispute related to Transfer Pricing Adjustment under section 144C(5) for A.Y. 2009-2010.
2. Selection of comparable companies for determining ALP margin.
3. Treatment of reimbursement of expenses in the P & L account.

Issue 1: Dispute related to Transfer Pricing Adjustment:
The appeal was filed against the Order passed under section 144C(5) for the A.Y. 2009-2010. The case involved the valuation of ALP of transactions as the TPO's proposed adjustment was detrimental to the assessee's interests. The ACIT finalized the order, adding the adjustment amount to the income as T.P. adjustment. The assessee challenged this before the Tribunal.

Issue 2: Selection of Comparable Companies:
The assessee argued that certain comparable companies should be excluded due to dissimilarity with the assessee company. The list of comparables selected by the TPO was scrutinized, and it was contended that companies like Bodhtree Consulting Ltd., Infosys Ltd., and Kals Information Systems Ltd., were functionally different and should be removed. Relying on precedents, the Tribunal excluded these companies, resulting in an ALP margin within an acceptable range.

Issue 3: Treatment of Reimbursement of Expenses:
Regarding the reimbursement of expenses, the assessee presented evidence that the amount did not feature in the P & L account but was a balance sheet entry. The Tribunal referred to a previous case and concluded that if the expenditure was not part of the claim in the computation of income, it should be excluded from the operating profits. In this case, as the reimbursement was not debited to the P & L account, the Tribunal allowed the ground raised by the assessee regarding the treatment of reimbursement of expenses.

In conclusion, the Tribunal allowed the appeal of the assessee, excluding certain comparable companies for determining ALP margin and accepting the treatment of reimbursement of expenses as presented by the assessee.

---