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of <h1>Appellant wins appeal: Exclusion of comparables, limited adjustments, favorable outcomes on transfer pricing</h1> The Tribunal allowed the appellant's appeal, directing the exclusion of certain comparables, restricting adjustments to international transactions with ... TP adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected. Value of domestic transaction for making adjustment instead of restricting the adjustment to the international transaction - Statutory provisions under chapter X of the Act mandates ALP to be determined only in respect of transactions with associated enterprises. Any adjustment which is in close of domestic transactions is uncalled for under this chapter. We accordingly direct the Ld. AO/TPO to restrict the adjustment if any that may be computed are wildly or giving effect to the order only in respect of the transactions that assessee had with its associated enterprises. Accordingly this ground raised by assessee stands allowed for statistical purposes. Depreciation disallowed on computer peripherals at 60% - As AR submitted that DRP had directed the Ld.AO to grant depreciation at 60% on computer peripherals which has not been followed while passing the final assessment order. We thus direct the Ld. AO to comply with the directions of DRP in accordance with law. Issues:1. Transfer pricing adjustment on international transactions.2. Selection of comparables for determining arm's length margin.3. Inclusion of domestic transactions in transfer pricing adjustment.4. Disallowance of depreciation on computer peripherals.5. Additional ground related to education cess expenses.Issue 1: Transfer pricing adjustment on international transactionsThe appellant filed an appeal against the final assessment order for the assessment year 2012-13, challenging the transfer pricing adjustment made by the Ld. TPO. The Ld. TPO observed international transactions exceeding Rs. 15 crores and referred the case under section 92C of the Act. After analyzing the details provided by the appellant, the Ld. TPO selected comparables and made adjustments, resulting in a proposed adjustment of Rs. 144,21,30,393. The Ld. AO, based on the Transfer Pricing order, passed a draft assessment order with certain disallowances. The DRP upheld some objections raised by the appellant but directed adjustments in depreciation and disallowance under section 36(1)(va) of the Act. However, the Ld. AO included domestic transactions in the adjustment under section 144C of the Act, leading to an additional adjustment of Rs. 228,60,42,170.Issue 2: Selection of comparables for determining arm's length marginThe appellant challenged the inclusion of certain comparables, citing a previous Tribunal decision where similar comparables were excluded. The Tribunal analyzed the functional profile of the appellant and compared it with the previous case, concluding that the comparables in question should be excluded. The Tribunal referred to consistent decisions in similar cases and allowed the appellant's ground regarding the exclusion of specific comparables.Issue 3: Inclusion of domestic transactions in transfer pricing adjustmentThe appellant contested the inclusion of domestic transactions in the transfer pricing adjustment, arguing that adjustments should only apply to transactions with associated enterprises. The Tribunal agreed with the appellant, directing the Ld. AO/TPO to restrict adjustments to transactions with associated enterprises only, in accordance with the statutory provisions under chapter X of the Act.Issue 4: Disallowance of depreciation on computer peripheralsThe appellant raised a ground regarding the disallowance of depreciation on computer peripherals at 60%, which was directed by the DRP but not implemented by the Ld. AO. The Tribunal directed the Ld. AO to comply with the DRP's directions and grant depreciation at 60% on computer peripherals, in line with the DRP's decision.Issue 5: Additional ground related to education cess expensesThe appellant raised an additional ground regarding the deduction of education cess expenses under section 37(1). Citing a decision of the Hon'ble Rajasthan High Court, the appellant argued that the cess should be considered as an allowable expenditure. The Tribunal agreed with the appellant, directing the Ld. AO to consider the claim of the appellant regarding education cess expenses in accordance with the law.In conclusion, the Tribunal allowed the appeal filed by the appellant on specific issues contested before the Tribunal, including the exclusion of certain comparables, restriction of adjustments to international transactions, granting depreciation at 60% on computer peripherals, and considering education cess expenses as allowable expenditure.
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