Tribunal remits transfer pricing adjustment for fresh determination, granting assessee fair hearing. Appeal allowed for statistical purposes.

The Tribunal set aside the CIT(A)'s order regarding the transfer pricing adjustment and remitted the matter to the AO/TPO for a fresh determination, allowing the assessee a reasonable opportunity to be heard. The appeal was allowed for statistical purposes, with the order pronounced in the open court on 16.05.2016.

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Issues Involved:
1. Deletion of addition of Rs. 2,86,92,601/- made by the Assessing Officer (AO) on account of transfer pricing adjustment.
2. Exclusion of Airline Financial Support Services (I) Ltd. from the list of comparables.
3. Inclusion of CS Software Enterprises Ltd. and Spanco Telesystems and Solutions Ltd. in the list of comparables.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 2,86,92,601/- on Account of Transfer Pricing Adjustment:
The assessee, a subsidiary of Keane Worldzen Inc., rendered business process services in insurance, healthcare, collection, and financial services. The assessee used the Transactional Net Margin Method (TNMM) with the Profit Level Indicator (PLI) of Operating Profit to Total Cost (OP/TC), showing a profit margin of 15.62%. The Transfer Pricing Officer (TPO) accepted TNMM but recalculated the profit margin of comparables using current year data only, leading to a proposed adjustment of Rs. 2,86,92,601/-. The AO added this amount to the total income, which was challenged by the assessee. The CIT(A) deleted the addition by modifying the list of comparables, leading to the Revenue's appeal.

2. Exclusion of Airline Financial Support Services (I) Ltd. from the List of Comparables:
The TPO included Airline Financial Support Services (I) Ltd. as a comparable, which the assessee initially accepted. However, the CIT(A) excluded this company due to its related party transactions (RPTs) being 37.38% of its sales, exceeding the acceptable threshold of 25%. The Tribunal upheld the CIT(A)'s decision, noting that a company with more than 25% RPTs is considered controlled and not comparable. The Tribunal referenced Rule 10B(1)(e) and Rule 10A(a) to support this exclusion, emphasizing that the assessment must reflect the correct income chargeable to tax.

3. Inclusion of CS Software Enterprises Ltd. and Spanco Telesystems and Solutions Ltd. in the List of Comparables:
The TPO excluded these companies based on filters of Personnel cost to Total cost (48% to 53.5%) and Depreciation to Total cost. The CIT(A) included them, noting their comparability in subsequent years. The Tribunal found the CIT(A)'s reasoning insufficient, as comparability must be assessed for the specific year. The Tribunal also found the TPO's filters erroneous due to incorrect calculation of the assessee's Personnel cost ratio. Consequently, the Tribunal remitted the matter back to the AO/TPO for fresh determination, ensuring the correct application of filters and comparability assessment.

Conclusion:
The Tribunal set aside the CIT(A)'s order regarding the transfer pricing adjustment and remitted the matter to the AO/TPO for a fresh determination, allowing the assessee a reasonable opportunity to be heard. The appeal was allowed for statistical purposes, with the order pronounced in the open court on 16.05.2016.

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