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of <h1>TPO's benchmarking flawed for using only Rs 1 crore lower turnover filter without upper limit; matter remanded for fresh exercise</h1> ITAT COCHIN AT held that the TPO erred in benchmarking by applying only a lower turnover filter of Rs. 1 crore without an appropriate upper turnover ... TP Adjustment - Comparable selection - appellant submits that the TPO ought to have applied upper turnover limit having adopted the lower turnover limit of Rs. 1.00 crore filter for the purpose of choosing the comparables - HELD THAT:- We are of the considered opinion that the TPO having adopted the lower turnover filter ought to have applied appropriate upper turnover limit filter. Thus, the exercise of benchmarking the international transaction undertaken by the TPO is flawed. Since by adoption of upper turnover filter, may undergo change in the entire complexation of the matter, we are of the considered opinion that the matter requires remand to the AO/ TPO for the purpose of undertaking the fresh exercise of benchmarking the international transaction by adopting the upper turnover filter. We make it clear that all other contentions raised before us by the appellant-company, are kept open before the AO/TPO for fresh consideration. Thus, this appeal filed by the Assessee stands partly allowed for statistical purposes. Issues: (i) Whether the benchmarking exercise and selection of comparable companies by the Transfer Pricing Officer (TPO) for determining Arm's Length Price (ALP) is valid in view of omission to apply an appropriate upper turnover limit when a lower turnover filter was applied, and whether the matter requires remand for fresh benchmarking.Analysis: The appeal challenges the TPO's comparability and benchmarking filters, specifically the adoption of a lower turnover threshold without any corresponding upper turnover limit. The reasoning examines the TPO's filtering criteria for selecting comparables and recognises that omission of an upper turnover limit can materially affect the composition of the comparable set and the resulting margin benchmarking. The decision does not determine other contested issues on merits but holds that the benchmarking exercise as carried out is flawed for the limited reason identified and that a fresh exercise by the assessing authorities is necessary. All other contentions are left open for reconsideration by the assessing authorities.Conclusion: The benchmarking exercise of the TPO is flawed due to failure to apply an appropriate upper turnover limit and the matter is remitted to the Assessing Officer/TPO for fresh benchmarking; the appeal is partly allowed for statistical purposes in favour of the assessee.
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