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Functional comparability governs software-service benchmarking: dissimilar companies are excluded, while related-party filters, margins and working-ca...
The ITAT held that the TPO's allocation of indirect expenses proportionate to export revenue was erroneous, as these expenses were also attributable to an abandoned project. The assessee had consistently disallowed the entire indirect expenses in income computation and allocated actual expenses to the trading activity. The tribunal found the TPO's approach flawed, resulting in an improper tinkering of the assessee's operating margin. Consequently, the ITAT directed the TPO to accept the assessee's operating margin of 6.24% for the trading activity. No transfer pricing adjustment was warranted. The grounds raised by the assessee were accordingly allowed, resolving the dispute in their favor.
The ITAT held that the TPO's allocation of indirect expenses proportionate to export revenue was erroneous, as these expenses were also attributable to an abandoned project. The assessee had consistently disallowed the entire indirect expenses in income computation and allocated actual expenses to the trading activity. The tribunal found the TPO's approach flawed, resulting in an improper tinkering of the assessee's operating margin. Consequently, the ITAT directed the TPO to accept the assessee's operating margin of 6.24% for the trading activity. No transfer pricing adjustment was warranted. The grounds raised by the assessee were accordingly allowed, resolving the dispute in their favor.
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