TaxTMI 
TaxTMI 
2021 (1) TMI 621
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.... following grounds of appeal:- "1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ("AO") is bad in law. 2. That on facts and circumstances of the case and in law, the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO did not record any reasons in the assessment order based on which he reached the conclusion that it was "expedient and necessary" tc refer the matter to the Ld. Transfer Pricing Officer ("TPO") for computation of the arm's length price, as is required under section 92CA(1) of the Act. 3. That on the facts and circumstances of the case and in law, the Ld. AO erred in determining the arm's length price ("ALP") of the Appellant's international transactions at Rs. 21,307,974 as against Rs. 18,263,276 determined by the Appellant and recommending an addition of Rs. 30,44,698 on that account to the Appellant's income by:- 3.1. not appreciating the fact that AE segment of the Assessee is profitable as compared to the Non- AE segment. 3.2. modifying the comparability analysis conducted in the transfer pricing documentation of the Appellant on inappropriate and inadequate g....
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....ng margin of 10.57%. The assessee's margin was 14.78% and thus according to TP study report the assessee stated that its international transactions are at arm's length. 5. On reference to the ld. TPO, he tinkered with the comparables selected by the assessee for the reasons of filters and other functional dissimilarities. After giving a proper show-cause notice, the ld. TPO kept 9 comparables whose adjusted PLI of OP / OC was determined at 33.92%. This ratio was applied to the operational cost of the assessee at Rs. 1,59,10,972/- and arm's length price was determined at Rs. 2,13,07,974/- against which price received by the assessee was only Rs. 1,82,63,276/- and, therefore, adjustment was proposed of Rs. 30,44,698/- as per order under Section 92CA(3) dated 30th January, 2014. Consequently, the Dy. Commissioner of Income Tax, Circle- 2, Gurgaon, passed a draft assessment order on 19th March, 2014 determining total loss of the assessee at Rs. 46,60,48,138/- against returned loss of Rs. 46,90,92,838/-. 6. Aggrieved by the same, assessee filed its objection before the ld. Dispute Resolution Penal-III, New Delhi. Assessee objected to the comparability analysis where certain comparable....
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....usion or inclusion of any comparable, only two things are required to be looked into (1) the functional profile of the assessee, (2) the annual reports of the comparable companies. Therefore each comparable is required to be dealt with on these aspect only And now we deal with each of the comparable company:- (i) Accentia Technologies Limited : The assessee contested that it is functionally not comparable, does not have segmental data, entered into extra-ordinary events during the year, own brand. It is also argued that it has a fluctuation in Revenue and profit; therefore, it should be excluded. The ld. TPO has considered and held it to be functionally similar. It is further held that it has only one segment and, therefore, there is no requirement of any segmental analysis. With respect to the extra-ordinary events He held that there is no demonstrative effect that it is influencing the price or profit of the company. He further held that even the acquisition of goodwill did not have any effect on the pricing and performance of the assessee company. The annual accounts of the above company are placed before us at page Nos. 525 to 631 of the paper book. Stand alone annual accounts....
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....parable are placed at page No. 632 to 662 of the paper book. On looking at Schedule 12 at page 643 the comparable company has income of Rs. 21.43 crores in the previous year whereas in the current year it is Rs. 9.75 crores. The assessee has submitted a chart at page 214 of the paper book stating that since financial year 2007-08 the Revenue of the company is falling. The ld. TPO when submitted so, he merely compared the revenue of only previous year against which it is shown that its revenue is half. However, looking at page No. 133, we find that filter No. 8 applied by the ld. TPO also includes declining sales. Therefore apparently, this comparable company does not pass is a filter applied by the learned TPO himself. In view of this, we direct the ld. TPO to exclude Fortune Infotech Ltd. (iii) Igate Clobal Solutions Ltd. : The assessee has contested that it has entered into an extra-ordinary event during the year as it is subsidiary amalgamating with the comparable company. It is further stated that the comparable has a turnover of Rs. 932 crores whereas turnover of the assessee is merely Rs. 1.83 crores, which is 509 times more. We rely on the decision of the honourable Bombay ....