TaxTMI 
TaxTMI 
2015 (9) TMI 65
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.... grounds of appeal: "On the facts and circumstances of the case and in law, the Learned Assessing Officer ("the Ld. AO") has erred in passing the assessment order dated 20 October 2010 u/s 143(3) read with section 144C of the Income Tax Act, 1961 ('the Act') in conformity with the directions of the Hon'ble Dispute Resolution Panel ("DRP") vide letter dated 8 September 2010 and adjustments made by the Learned Transfer Pricing Officer ('the Ld. TPO') in his order dated 13 October 2009 passed u/s 92CA(3) of the Act. That on the fact and in circumstances of the case and in law, 1. the Ld. AO 1 DRP have grossly erred in upholding the adjustment made by the Ld. TPO of Rs. 3,028,346/- to the total income of the appellant vid....
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.... and Ld. TPO 1 AO have erred by not applying a working capital results of the companies selected by the Ld. TPO to account for differences between the working capital requirements of the appellant visa- vis these companies. 6. the Hon'ble DRP and Ld. AO I TPO have grossly erred by ignoring the business/ commercial reality that since the Appellant undertakes minimal business risks as against comparable companies which are full risk bearing entrepreneur(s), thereby erred in not allowing a risk adjustment to the Appellant. 7. the Hon'ble DRP and TPO/AO have grossly erred by denying the benefit of the arm's length range as provided under proviso to Section 92C of Act for purposes of computing the arm's length price under Secti....
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....es selected by the assessee in the TP report, which were 13 in number having arithmetic mean of 7.68% a against the NP margin of assessee being 5.79%. After considering the updated margins of the comparables and after removing the consistent loss making companies and the companies which were not comparable or whose current year financials were not available, the final set of comparables for seven companies was accepted by ld. TPO, the arithmetic mean of which worked out to 11.15%. In doing so the ld. TPO, inter alia, had rejected Capital Trust Ltd., having arithmetic mean of -9.18%, from the set of comparables. 3.4. The main dispute in the present appeal is regarding exclusion of this comparable, which the assessee has taken as ground no. ....
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.... banks in country review etc. 3.5. Ld. DRP confirmed the ld. TPO's action, inter alia, observing that besides the issue of persistent losses, the nature of services rendered in the telecom field were very different from the banking industry. 4. Ld. counsel for the assessee submitted that though persistent loss making companies were to be rejected from the set of comparables but Capital Trust Ltd., was wrongly rejected because ld. TPO failed to take into consideration the fact that in AY 2005-06, this company earned a profit margin of 26.23%. 4.1. Ld. counsel referred to page 390 of the PB, wherein P&L A/c of Capital Trust Ltd. for the period ended 31-3-2006 is contained to point out that the company, inter alia, had earned income from ma....
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....d not on an arbitrary or adhoc criteria. From the facts on record and argument advanced before us, it emerges that the functional profile of Capital Trust Limited's consultancy segment is similar to that of Nortel India the same needs to be included in the final comparables for working the ALP. The AO will accordingly apply this comparable while working out the ALP, this ground of assessee is allowed. 4.4. Ld. counsel also relied on the decision of ITAT Pune Bench "A" dated 9-10-2014 in the case of M/s Bobst India Pvt. Ltd. (rendered in ITA no. 1380/Del/2010 for AY 2006-07) in support of its contention that the company cannot be rejected merely on the basis of incurring losses, wherein in para 5.2 of the order it has been observed as unde....
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....e record of the case. The assessee was in the business of repair services, computer hardware and software related services, erection, commissioning and installation services. Capital Trust Ltd. was, inter alia, imparting consultancy to foreign banks not having any branches or representative offices in India. The assessee's contention is that this consultancy segment is comparable to the services rendered by assessee. We are not inclined to accept the assessee's contention on this ground because the consultancy service rendered to foreign banks are in no way comparable with the assessee's business. Ld. counsel has relied on the decision of ITAT in the case of Nortel Networks India P. Ltd. (supra) and M/s Bobst India Pvt. Ltd. (supra). We fin....