Transfer pricing adjustment and book profit add-back rejected where comparables stood accepted on unchanged facts and section 115JB permitted no such adjustment.

Transfer pricing adjustment was held unsustainable where the assessee's comparables had been accepted in earlier and later years on unchanged facts, no material change in business profile was shown, and the tested margin remained within the arm's length range. The rejection of comparables lacked adequate reasoning, so the adjustment was deleted. The related addition was also not permissible in book profit computation under section 115JB, because that provision is a self-contained code and only expressly authorised adjustments can be made. The transfer pricing addition was therefore deleted for both normal assessment and book profit purposes.

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Issues: (i) whether the transfer pricing adjustment made by rejecting the assessee's comparables and disturbing the arm's length price was sustainable; (ii) whether the transfer pricing addition could be added back while computing book profit under section 115JB.

Issue (i): whether the transfer pricing adjustment made by rejecting the assessee's comparables and disturbing the arm's length price was sustainable.

Analysis: The assessee's comparables had been accepted in preceding and subsequent assessment years on the same facts, and no change in the business profile or relevant material was shown for the year under appeal. The rejection of comparables was not supported by adequate reasoning. On the facts placed, the margin under the tested PLI remained within the arm's length range, and the adjustment was therefore not justified.

Conclusion: The transfer pricing adjustment was deleted and the issue was decided in favour of the assessee.

Issue (ii): whether the transfer pricing addition could be added back while computing book profit under section 115JB.

Analysis: Section 115JB operates as a self-contained code, and only the adjustments specifically permitted by that provision can be made while computing book profit. A transfer pricing adjustment under Chapter X does not form part of the permissible additions to book profit merely because it was made in the normal assessment.

Conclusion: The addition to book profit on account of the transfer pricing adjustment was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessment addition on account of transfer pricing was set aside both for the normal provisions and for computation of book profit, resulting in complete relief to the assessee.

Ratio Decidendi: A transfer pricing adjustment cannot be sustained where identical comparables were accepted in other years on unchanged facts and the assessee's margin is within the arm's length range, and such adjustment cannot be mechanically added to book profit under section 115JB unless expressly authorised by that provision.

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