Transfer pricing comparables, section 10A claim and forward contract premium all required fresh factual examination.

The discussion addresses transfer pricing and deduction issues arising in assessment. A comparable selected by the TPO was found not to prima facie satisfy the applied revenue-mix filter, so its inclusion required fresh examination on the correct facts. The assessee's alternative claim for deduction under section 10A could not be ignored after denial of section 10B relief, because the claim had been raised but not examined and needed verification against the statutory conditions. Premium on a forward exchange contract also required reconsideration, as its treatment in operating profit margin depended on whether it arose in the normal course of export-related business and hedging activity.

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Issues: (i) whether the transfer pricing comparable selected by the TPO, namely Informed Technologies Ltd., satisfied the filter adopted by the TPO and could be retained as a comparable; (ii) whether, upon denial of deduction under section 10B, the assessee's alternative claim for deduction under section 10A had to be considered; (iii) whether premium on forward exchange contract was to be included in the assessee's operating profit margin while computing the PLI.

Issue (i): whether the transfer pricing comparable selected by the TPO, namely Informed Technologies Ltd., satisfied the filter adopted by the TPO and could be retained as a comparable.

Analysis: The TPO had applied a filter that operating income from relevant services should exceed 70% of total revenue. On the material placed, the comparable's revenue mix did not prima facie satisfy that filter. Since the objection was not fully examined on the correct factual basis, and the assessee was to be given an opportunity to place supporting evidence, the matter required re-examination.

Conclusion: The issue was remitted to the TPO for fresh consideration and is in favour of the assessee for statistical purposes.

Issue (ii): whether, upon denial of deduction under section 10B, the assessee's alternative claim for deduction under section 10A had to be considered.

Analysis: The alternative claim under section 10A was raised before the assessing authority, but it was not examined in the assessment order or in the directions of the DRP. As section 10A and section 10B are treated as pari materia for the relevant purpose, the alternative claim could not be ignored once the primary claim under section 10B was denied. The matter therefore required fresh examination to determine whether the statutory conditions for section 10A were satisfied.

Conclusion: The matter was remanded to the assessing authority to consider deduction under section 10A, and the issue is in favour of the assessee for statistical purposes.

Issue (iii): whether premium on forward exchange contract was to be included in the assessee's operating profit margin while computing the PLI.

Analysis: The DRP had directed inclusion of foreign exchange gains, but the specific plea regarding premium on forward exchange contract had not been decided. The claim turned on whether such premium arose in the normal course of business and was linked to export activity and currency risk hedging. Since the specific factual foundation was not examined, the issue needed reconsideration by the TPO.

Conclusion: The issue was remitted to the TPO for fresh consideration and is in favour of the assessee for statistical purposes.

Final Conclusion: The assessee obtained remand on all surviving substantive grounds, while the proceeding was otherwise concluded without any adverse final determination on the merits of those issues.

Ratio Decidendi: Where a comparable does not prima facie satisfy the filter applied by the TPO, and where an alternative statutory deduction claim or an operating-margin adjustment is not examined on its specific facts, the matter may be remitted for fresh adjudication rather than finally rejected.

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