Court favors appellant on common expenses allocation, rejects TPO adjustment. Issue of comparable company accepted for transfer pricing reviewed.

The Court ruled in favor of the appellant regarding the allocation of common expenses using the headcount method, emphasizing its acceptability and rejecting the Assessing Officer/TPO's adjustment. The Court also allowed the appeal partly on the issue of accepting a functionally different company as a comparable for transfer pricing, remanding the case for a thorough review of comparables.

---

---

Issues:
1. Allocation of common expenses using the headcount method
2. Acceptance of a functionally different company as a comparable for transfer pricing

Issue 1: Allocation of common expenses using the headcount method
The case involved the appellant challenging the transfer pricing adjustment made by the Assessing Officer/TPO regarding the allocation of common expenditure using the headcount method. The appellant argued that the headcount method was suitable for allocating expenses, but this argument was rejected by the TPO, DRP, and ITAT. The appellant relied on a previous judgment to support the use of the headcount method, emphasizing that it had been applied consistently in the past. The Court noted that the headcount basis is an acceptable principle and recognized by law. It highlighted a previous case where the headcount method was considered acceptable, even when there was a disparity in employee salaries. The Court concluded that the choice of the headcount principle for allocation of expenses could not have been rejected in the present case, answering the question of law in favor of the assessee.

Issue 2: Acceptance of a functionally different company as a comparable for transfer pricing
The ITAT remitted the matter for consideration of a comparable company, M/S Indus Technical and Financial Consultants Ltd. The ITAT had rejected the reliance on details from the company's website and remanded the case for further review. The Court acknowledged that the comparable was included based on information available at the time from the internet. It stated that the authorities could consider all relevant material, including credible sources, for evaluating comparables. The Court declined to make a final decision on the merits, leaving it open for the authorities to assess the comparables thoroughly. Consequently, the second question of law was answered accordingly, and the appeal was partly allowed in the mentioned terms.

In conclusion, the judgment addressed the issues of allocation of common expenses using the headcount method and the acceptance of a functionally different company as a comparable for transfer pricing. The Court upheld the use of the headcount method for expense allocation and allowed the appeal partly, remanding the matter for further consideration of comparables.

---