TaxTMI 
TaxTMI 
2026 (1) TMI 1376
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....ad submitted a transfer pricing report with certain comparables which were substantially altered by the Ld. TPO to result in a final picture as under: - S.No. Company Name OP/OC % 1. ICRA Management Consulting Services Ltd. 16.14% 2. Quadrant Communication Ltd. 14.58% 3. Global Procurement Consultant Ltd. 30.86% 4. Cyber Media Research Ltd. 10.60% Average 18.05% Particulars Amount in INR Operating Cost 14,78,88,744 OP/OC (%) 18.05% Arm's Length Price at a Margin of 18.05% 17,45,82,662 Price received 16,40,98,223 Revised addition 1,04,84,439 It is seen that one of the directions of the Ld. DRP for providing working capital adjustment was not considered by the TPO in arriving at the impugned upward revision. The assessee is aggrieved with this action and has approached the ITAT with the following grounds: "1. The order dated December 30, 2015 passed by the Learned Assessing Officer ("Ld. AO") under Section 143(3) read with Section 144C of the Income Tax Act, 1961 ("the Act"), pursuant to the directions of the Hon'ble Dispute Resolution Panel ("Hon'ble DRP") d....
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....d of objection raised by the appellant on incorrect computation by the Ld. TPO of net margin of the comparables and the Ld. AO has erred in observing in the final order that the aforesaid ground was rejected by the Hon'ble DRP on the basis that the appellant had failed to furnish the details to substantiate its claim. 9. The Ld. TPO and the Ld. AO have erred in not following the directions of the Hon'ble DRP, while computing the ALP of the international transaction undertaken by the appellant during the FY 2010-11." 1.2 The assessee has also filed additional evidence under Rule 29 of the ITAT Rules,1963 and has tendered financial statements of M/s Quadrant Communication Ltd. for the year ended on 31.03.2011. This entity was chosen by the Ld. TPO as a comparable. 1.3 It is also seen that the Revenue has moved an application under Rule 27 of the ITAT Rules in support of Ld. DRP's direction to enhance the income on account of secondment of employees. The ground raised through Rule 27 is as under: "Additions of enhancement of income of Rs. 6,18,74,478/- with regard to secondment of employees, as per the direction of the Hon'ble DRP are sustainable as there i....
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....tions were comparable with the assessee and the segmental data is also available, then merely because that division had incurred losses in two years, it should not be excluded since it is not a case of persistent loss making. In light of this finding the ITAT in AY 2012-13 has directed; "that .........respectfully following the decision of the coordinate bench in assessee's own case, we direct the Ld. TPO to decide about the comparability of the arm's segment of the comparable companies with the assessee" [para 19 in this order]. c) The assessee has also challenged the introduction of Global Procurement Consultants Ltd. The Ld. AR pointed out the relevant portions from the ITAT's order for AY 2010-11, whereby it is recorded that this entity provides high end technical consultancy in International Funding Regulations and cannot be compared to market support services provided by the assessee. Thereafter the ITAT has rejected this comparable on the ground that the services provided by this entity are similar to those provided by the consultants who assist the clients in preparing for large scale infrastructure projects and certain other connected services. For this reason, th....
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....f the International Transactions. It was pointed out that the Ld. TPO treated bank charges and provision for doubtful debts as non-operating while computing margins of the comparables. It was pointed out that the ITAT in AY 2010- 11 has directed the Ld. TPO to consider such charges on the basis of clear directions given in paras 47 & 478 of the said order. The Ld. AR read out the said paragraphs, whereby it is mentioned that bank charges are levied by banks for maintenance of bank accounts and other facilities closely linked to the business operations of an assessee and thus, the same should be considered as operating expenses while computing operating margins of the comparables. Furthermore, the provision for doubtful debt was held directly to relate to the business operations of an assessee and thus, this should also be considered as operating expenses while computing operating margins of comparables. 2.5 Ground no.9 pertains to not following of certain directions of the Ld. DRP by the Ld. TPO. In this regard it was specifically pointed out that the TPO has not allowed working capital adjustment in spite of fact that the Ld. DRP has given a specific direction; "hence, from the....
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....e issues have been dealt with while recording the submissions of the Ld. AR. Thus, following the two orders of ITAT before us and since the facts remain the same for this year, we direct as under: i. Regarding In house Production Ltd. as a comparable, the matter is remanded back to the file of Ld. TPO to decide on including this company after considering the segmental data of this entity; ii. Regarding considering India Tourism Development Corporation Ltd. as a comparable, respectfully following the ITAT's order (supra), the Ld. TPO is directed to decide about the comparability of ARMS Segment of this entity and consider using the same as a comparable. iii. Regarding the case of Global Procurement Consultants, respectfully following the ITAT's order for AY 2010-11 (findings given in paras 22 to 24 thereon) this entity is directed to be rejected as a comparable. iv. Regarding the case of M/s Quadrant Communication Ltd., it is felt that the Ld. TPO may consider adopting this entity as a comparable only after examining the entire business profile of the said entity and also considering the documents filed before us by way of Rule 29. The Ld. AO is d....