Appeal challenging tax assessment order partially allowed by Tribunal, focusing on transfer pricing adjustments and bad debts.

The appeal challenging the assessment order under section 143(3) r.w.s 144C of the Income-tax Act for the year 2012-13, focusing on TP adjustments and bad debts disallowance, was partially allowed by the Tribunal. Ground No.14 related to bad debts was dismissed as not pressed. Ground Nos.15 and 16 on interest charges were deemed consequential. The appeal primarily centered on transfer pricing adjustments, with the Tribunal directing the exclusion of certain high turnover companies from comparables and restoring other comparables for re-examination. The AO was instructed to re-evaluate the comparables based on objections raised by the assessee.

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Issues:
Challenge to assessment order under section 143(3) r.w.s 144C of the Act based on TP adjustments and disallowance of bad debts.

Analysis:
The appeal was filed challenging the assessment order for the year 2012-13 concerning TP adjustments and disallowance of bad debts. The issues contested in the appeal mainly revolved around TP adjustments made by the Transfer Pricing Officer (TPO) and the disallowance of bad debts claimed by the assessee.

During the hearing, the assessee did not press ground No.14 related to the disallowance of bad debts due to the smallness of the amount, leading to its dismissal as not pressed. Ground Nos.15 and 16 concerning interest charged under sections 234B and 234C of the Income-tax Act were deemed consequential and did not require adjudication.

The primary focus of the appeal was on transfer pricing adjustments. The assessee, part of a Communication group, provided media analysis services to its associated enterprises. The TPO selected comparables for benchmarking the income received from the Associated Enterprise using the TNMM method with OP/OC as PLI. The TPO's adjustments resulted in a significant addition to the income of the assessee.

The appeal further delved into the exclusion of certain companies for comparison purposes based on turnover criteria. The assessee argued that high turnover companies like Infosys BPO Ltd. and TCS-E-Serve Ltd. should be excluded as their turnover significantly exceeded that of the assessee. The Tribunal agreed with this contention and directed the AO to exclude these companies based on the turnover filter suggested in previous cases.

Additionally, the Tribunal restored certain comparables like Universal Print Systems Ltd. and BNR Udyog Ltd. to the file of AO/TPO for re-examination based on objections raised by the assessee regarding functional differences, RPT filter, and margin computation errors. The decision was supported by previous cases and aimed at a thorough reevaluation of these comparables.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the AO to exclude certain companies based on turnover criteria and re-examine other comparables in light of objections raised by the assessee. The decision was pronounced in the Open Court on 28th June 2019.

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