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The Tribunal held that the Transfer Pricing Officer (TPO)/Assessing Officer (AO) should exclude companies having turnover exceeding Rs. 200 crores from the comparability analysis while calculating the arm's length price (ALP) of the assessee's international transactions with its associated enterprise, after necessary verification. The companies ICRA Techno Analytics Ltd and Kals Information Systems Ltd. were found functionally different from the assessee engaged in software development services and hence cannot be included as comparables. However, Quintegra Solution Limited, being functionally similar and having similar turnover, cannot be excluded merely for showing losses due to extraordinary deductions. The AO/TPO was directed to include it as a comparable. Regarding working capital adjustment, the Tribunal remanded the matter to the AO/TPO for fresh adjudication as per law, allowing the assessee to furnish necessary details. The royalty expenses were held as revenue in nature based on earlier years' decisions. The AO was directed to correctly compute interest u/ss 234D and 244A as per provisions of law.
The Tribunal held that the Transfer Pricing Officer (TPO)/Assessing Officer (AO) should exclude companies having turnover exceeding Rs. 200 crores from the comparability analysis while calculating the arm's length price (ALP) of the assessee's international transactions with its associated enterprise, after necessary verification. The companies ICRA Techno Analytics Ltd and Kals Information Systems Ltd. were found functionally different from the assessee engaged in software development services and hence cannot be included as comparables. However, Quintegra Solution Limited, being functionally similar and having similar turnover, cannot be excluded merely for showing losses due to extraordinary deductions. The AO/TPO was directed to include it as a comparable. Regarding working capital adjustment, the Tribunal remanded the matter to the AO/TPO for fresh adjudication as per law, allowing the assessee to furnish necessary details. The royalty expenses were held as revenue in nature based on earlier years' decisions. The AO was directed to correctly compute interest u/ss 234D and 244A as per provisions of law.
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