Tribunal sets aside comparables with unique brand value in transfer pricing appeal.

The Tribunal partially allowed the appeal filed by the assessee, excluding companies with different functions or extraordinary profits due to brand value from being comparables. The judgment addressed the determination of arms length price, selection of comparable companies, objections by the assessee, and the appeal before the Tribunal regarding comparables.

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Issues:
1. Determination of arms length price by TPO
2. Selection of comparable companies by TPO
3. Objections by assessee and consideration by DRP
4. Appeal before Tribunal regarding comparables

Issue 1: Determination of arms length price by TPO
The assessee, a subsidiary of a US company, declared income under section 115JB of the Act. The TPO determined the arms length price of transactions at a certain amount and made adjustments under section 92CA(3) of the Act. The TPO included companies with high operating margins as comparables.

Issue 2: Selection of comparable companies by TPO
The TPO selected comparables after rejecting the T.P. study by the assessee. The DRP observed that some selected companies were not comparable in terms of Functions performed, Assets employed, and Risks assumed (FAR). The DRP excluded certain companies based on objections raised by the assessee.

Issue 3: Objections by assessee and consideration by DRP
The assessee filed objections to the draft assessment order, which were considered by the Disputes Resolution Panel (DRP). The DRP excluded certain companies with abnormal turnover and profits but upheld the inclusion of others as comparables, rejecting the assessee's contentions.

Issue 4: Appeal before Tribunal regarding comparables
The assessee appealed before the Tribunal, arguing that certain comparables were not functionally similar. The Tribunal considered past orders and excluded companies engaged in KPO services or with extraordinary profits due to brand value from being comparables. The Tribunal directed the exclusion of certain companies as comparables and partially allowed the appeal.

In conclusion, the judgment addressed the determination of arms length price, selection of comparable companies, objections by the assessee, and the appeal before the Tribunal regarding comparables. The Tribunal excluded companies with different functions or extraordinary profits due to brand value from being comparables, partially allowing the appeal filed by the assessee.

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