ITAT partially allows appeal, excludes company as comparable due to changed business model. Remaining grounds dismissed.

The ITAT partially allowed the appeal, excluding Nucleus Netsoft & GIS (India) Ltd. as a comparable for the assessment year 2006-07 due to a changed business model post-amalgamation. The remaining grounds raised by the assessee were dismissed as not pressed.

---

---

Issues involved:
1. Selection of Nucleus Netsoft & GIS (India) Ltd. as a comparable for the assessment year 2006-07.

Analysis:
1. The assessee contested the selection of Nucleus Netsoft & GIS (India) Ltd. as a comparable company for the assessment year 2006-07. The taxpayer, a wholly owned subsidiary of Ameriprise Financial Inc., USA, provided IT enabled back office services to its associated enterprise on a cost plus mark up basis. The taxpayer used the Transactional Net Margin Method (TNMM) with Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator (PLI). The Transfer Pricing Officer rejected 11 comparable companies, resulting in an adjustment of &8377; 38,60,675. The taxpayer succeeded in proving that the OP/OC margin of Nucleus Netsoft & GIS (India) Ltd. was inaccurately taken as 89.67% instead of 48.64% before the CIT(A).

2. The taxpayer argued before the ITAT that Nucleus Netsoft & GIS (India) Ltd. should be excluded as a comparable due to the company's changed business model post-amalgamation. The Ld. AR cited a Co-ordinate Bench order in a similar case to support the exclusion. The Ld. CIT DR opposed the exclusion, stating that merger or demerger alone should not render a comparable incomparable unless the functionality is impacted. The ITAT noted previous tribunal decisions where issues were restored to verify functional changes post-amalgamation.

3. After considering the arguments, the ITAT agreed with the Ld. CIT DR that amalgamation alone should not render a comparable incomparable. However, based on specific findings for the assessment year 2006-07, the ITAT upheld the exclusion of Nucleus Netsoft & GIS (India) Ltd. as a comparable due to a changed business model post-amalgamation. The ITAT dismissed the other grounds raised by the assessee and partially allowed the appeal solely for the exclusion of the said comparable.

4. In conclusion, the ITAT partially allowed the appeal, excluding Nucleus Netsoft & GIS (India) Ltd. as a comparable for the assessment year 2006-07 due to a changed business model post-amalgamation. The remaining grounds raised by the assessee were dismissed as not pressed. The order was pronounced on 12th December 2014.

---