TaxTMI 
TaxTMI 
2020 (7) TMI 817
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.... has filed Cross Objections in the appeal by Revenue for assessment year 2004-05. We will first take-up the appeal of Revenue for AY 2003-04. ITA NO.6397/MUM/2006 - A.Y.2003-04: 2. This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-VIII, Mumbai (in short 'the CIT (A)) dated 27/09/2006 for the assessment year 2003-04. The Revenue in appeal has raised solitary ground, the same reads as under:- "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of Rs.1,41,06,903/- made on account of adjustment to the Arm's Length Price of the assessee's international transaction." 2. Sh. Dhanesh Bafna appearing on behalf of the assessee, narrating ....
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....n administrative back office support services. The arithmetic mean of the comparables was computed at 5.35%. Out of 9 companies selected by the assesse, the TPO excluded 2 companies on the ground that the companies are consistent loss-making and functionally not comparable. The TPO further excluded 3 companies i.e. AMI Computer (I) Ltd., Mercury Travels Ltd. and Nucleus Netsoft & GIS India Ltd. on the ground that these companies have incurred losses during the year under consideration. After excluding above 5 companies the TPO computed mean of remaining 4 comparable companies at 34.96% and made upward adjustment of Rs.1,41,06,903/-. 3.1. The assessee assailed the adjustment before the CIT (A). The CIT(A) vide impugned order accepted the co....
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.... ld. Departmental Representative submitted that the TPO has rightly excluded loss making companies from the list of comparables. 5. We have heard the submissions made by Rival sides and have perused the orders of authorities below. This appeal by the Revenue was decided by the Tribunal vide order dated 27/07/2011. The Co-ordinate Bench by placing reliance on the decision of Special Bench, in the case of Quark Systems Pvt. Ltd. reported as 132 TTJ 1 (Chd.)(SB) restored the issue back to the file of Assessing Officer for fresh adjudication. For the sake of completeness, operating part of the Tribunal order is reproduced herein below:- "13.4 The decision of the Special Bench cited above relates to A.Y 2004-05, whereas the assessment year in....
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....herein below:- "9. In view of the statement on behalf of the assessee, the question of law is decided in favour of the assessee. The appeal is therefore, allowed in terms of prayer (b) which reads as under:- "b) This Hon'ble Court may be pleased to set aside the impugned order and direct the Tribunal to decide appeal afresh after hearing both parties". This appeal in second round before the Tribunal is taken-up for adjudication in pursuance to the above directions of the Hon'ble Bombay High Court. 6. From the submissions made by rival sides it emerges that the sole dispute in the present appeal is selection of comparables. The assessee in transfer pricing study selected following 9 companies as comparables: Comparable Companies....
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....ng to the Assessment Year under dispute and immediately two preceding Financial Years. The thumb rule of excluding persistent loss making company has been accepted in various judicial precedents over the period of time. 8. The assessee has furnished financial statements of the aforesaid three companies for the relevant period. Summary of profits/losses of the said companies in the relevant three financial years is tabulated as under:- Sr.No. Name of the Company Financial year Net Profit/(Loss) (amount in Rs.) 1. AMI Computes (I) Ltd. 2000-01 2001-02 2002-03 58,21,187 2,98,372 (3,48,22,572) 2. Mercury Travels Ltd. 2000-01 2001-02 2002-03 59,47,110 (1,96,38,797) (2,82,76,139) 3. Nucleus Netsoft & GIS India Ltd. 2000....