Transfer pricing comparables excluded earlier must be removed again, with arm's length price recomputed and section 10A figures verified.

ITAT Hyderabad noted that transfer pricing comparables excluded in earlier years on identical functional and factual settings should also be removed in the later year, and the arm's length price must be recomputed after excluding Accentia Technologies, Eclerx Services, Genesys International and Infosys BPO. It also recorded that the deduction under section 10A required verification and rectification of the book profit figure from the record, with the interest ground being consequential to that computation. The appeal was thus allowed in part, with transfer pricing relief and correction of the section 10A computation.

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Issues: (i) Whether the Transfer Pricing Adjustment was liable to be recomputed by excluding four comparables found to be non-comparable in earlier assessment years; (ii) Whether the computation of deduction under section 10A required verification and rectification of the book profit figure, with interest being consequential.

Issue (i): Whether the Transfer Pricing Adjustment was liable to be recomputed by excluding four comparables found to be non-comparable in earlier assessment years.

Analysis: The assessee challenged inclusion of Accentia Technologies Limited, Eclerx Services Ltd., Genesys International Ltd. and Infosys BPO Ltd. in the final set of comparables. The same entities had already been excluded in earlier years on similar facts, while the remaining two contested entities were not accepted for exclusion. Following the earlier coordinate bench decisions on identical functional and factual settings, the list of comparables required modification and the arm's length computation had to be redone after removing those four entities.

Conclusion: The issue was decided in favour of the assessee and the Assessing Officer was directed to exclude the four comparables and recompute the arm's length price.

Issue (ii): Whether the computation of deduction under section 10A required verification and rectification of the book profit figure, with interest being consequential.

Analysis: The assessee pointed out a mistake in the figure adopted for computation of deduction under section 10A and sought verification from the record. The Revenue did not object to such verification. The interest ground was only consequential to the main computation issue and did not call for separate substantive adjudication.

Conclusion: The issue was decided in favour of the assessee to the extent of verification and rectification, and consequential relief was directed on the interest ground.

Final Conclusion: The appeal succeeded in part, with transfer pricing relief granted by directing exclusion of the identified comparables and recomputation, and with the section 10A computation to be verified and corrected from the record.

Ratio Decidendi: Comparables that have been found functionally non-comparable in earlier years on similar facts should be excluded from the arm's length analysis for later years as well, and the resulting transfer pricing adjustment must be recomputed accordingly.

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