TaxTMI 
TaxTMI 
2016 (6) TMI 589
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....ed Transactional Net Margin Method (TNMM) as the most appropriate method with the Profit level indicator (PLI) of Operating Profit to Total Cost (OP/TC). Its own profit margin was calculated at 15.62%. The assessee selected certain companies as comparable. Considering the multiple year data, the average profit margin of those companies was worked out at 10.25%. That is how, the assessee declared that all of its international transactions were at arm's length price (ALP) on entity level. The AO referred the matter of determination of ALP of the international transactions to the Transfer Pricing Officer (TPO), who accepted the application of TNMM as the most appropriate method without disputing the PLI of OP/TC. However, the TPO re-determined the profit margin of the comparable companies chosen by the assessee for the current year alone by discarding the use of multiple year data by the assessee. It was thereafter noticed that the ratio of the assessee's Personnel expenses to Total expenses was 52.11% and that of Depreciation to Total expenses was 14.36%. He adopted filter of Personnel cost to Total cost in the range of 48% to 58.3% for selection of comparables. Similarly, filter of ....
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....l Collection; Eligibility Verification; Medical coding and billing. Financial Services Industry Back Office Account Reconciliation; Security Processing; Mutual Fund Accounting/Portfolio Valuation; Client Reporting Middle Office New Account Set-up; Client Administration-Cash receipts; Trade entry. Collections and Recovery Portfolio Recovery Analysis & Valuation Lettering; Campaign Design & Management Pre charge-off through Recovery Contact Calls Reminder Calls; Automated & Manual Skip Tracing Payment Plan Arrangement & Settlements Payment Processing; Put-back Management; Proprietary Scoring; Litigation Tracking Financial Reporting: Customized Processes to meet client's portfolio goals." 5.2. An overview of the functional profile of the assessee, seen in the context of the overall group activities, it becomes vivid that the customers in the US enter into contracts with KWZ Inc. and KWZ Inc. outsources the services to the assessee, which, ultimately, execute....
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....ransfer pricing, we find that if an assessee fails to report an otherwise comparable company, then the TPO is obliged to include it in the list of comparables, and in the same manner, if an assessee wrongly reports an incomparable case as comparable in its TP study and then later on claims that it should be excluded, then, there should be nothing to forbid the assessee from claiming so, provided the Authority is satisfied that the company so originally reported as comparable is, in fact, not comparable. The Special Bench of the Tribunal in DCIT vs. Quark Systems Pvt. Ltd. (2010) 132 TTJ (Chd) (SB) 1 has also held that a company which was included by the assessee and also by the TPO in the list of comparables at the time of computing ALP, can be excluded by the Tribunal, if the assessee proves that the same was wrongly included. We, therefore, see no embargo on the power of the ld. CIT(A) in entertaining this objection of the assessee. 6.3. Now we turn to the merits of exclusion of Airline Financial Support Services (I) Ltd. from the list of comparables. Rule 10B(1)(e)(ii) and (iii) talk of comparing the net profit margin realized by the enterprise from international transaction ....
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.... tune of Rs. 9.31 crore. This shows that the percentage of RPT is 32% (approx.), thereby failing the RPT filter of 25% as held in several cases discussed above. In view of the fact that the RPTs of this company are more than 25%, it becomes a controlled transaction and disqualifies from being considered as a comparable uncontrolled transaction, so as to find a place in the list of comparables. Ergo, we uphold the action of the ld. CIT(A) in excluding Airline Financial Support Services (I) Ltd. from the list of comparables. The impugned order is upheld on this issue. (ii) & (iii) CS Software Enterprises Ltd. and Spanco Telesystems and Solutions Ltd. 7.1. The assessee considered these two companies as comparables. However, the TPO rejected the same impliedly on the basis of two filters applied by him, namely, Personnel cost to Total cost in the range of 48% to 53.5% and Depreciation to Total cost. There is no specific discussion about the reasons for the exclusion of these two companies, but, it appears, as was conceded by the ld. AR as well, that the same were eliminated on the strength of the above referred two filters. The assessee challenged the exclusion of these two compa....