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The TPO was of the view that the assessee had only searched for comparable, which were engaged in the management consultancy and support services, immaterial of the vertical/functional or service line, in which the company was engaged and hence, search process was not correct. The TPO vide para 4.4 at page 18, analyzed the employee profile of the assessee for providing various business services to its AEs and he was of the view that the assessee was providing high-end services. The TPO, thus, benchmarked the international transaction after dealing with objections raised by the assessee and finally selected 20 concerns as functionally comparables. The mean margin of comparables is computed at 34.53% and he proposed an upward adjustment of Rs.5,06,79,911/-. The AO issued draft assessment order to the assessee proposing upward adjustment of Rs.5.06 crores. The assessee filed objections before the DRP, who rejected the same and the AO passed the final assessment order, against which the assessee is in appeal.

Shanti Prime Publication Pvt. Ltd.

Section 92C of the Income Tax Act, 1961- Transfer Pricing - Computation of arms length price - DRP after making far analysis of the activities performed by assessee and functional profile of the comparables selected, shall benchmark international transaction of management consultancy and support services provided by the assessee company to its AEs and determine the Arm’s Length Price of the international transaction.

Facts: The dispute which needs adjudication is the selection of comparables wherein out of 8 comparables selected by the assessee, 2 were held to be functionally comparables and 6 companies were rejected. The assessee is aggrieved by the rejection of the said comparables. Further, the assessee is also aggrieved by the fresh selection made by the TPO by applying different set of filters both on functionality and other aspects.

Held, that DRP has in mechanical manner rejected the objections raised by assessee and has concluded by observing that where TPO's order makes it clear that the aforesaid segment carved out was basically to identify the high-end transactions, then to benchmark the same by using companies which were providing high-end services. It concluded by holding that since the assessee had not disputed that the assessee was providing high-end services, therefore, the reason given by the TPO were justified. It is incumbent upon DRP to consider the objections raised by assessee and then decide the same. But no such exercise has been carried out by DRP. We find no merit in the order of the DRP. Accordingly, we remit this issue back to the file of DRP with the direction to look into the functions performed by assessee company and the activities carried out by assessee and whether the same were high-end or low-end activities. DRP is also directed to consider whether the concerns finally selected by TPO were functionally comparable or not and also look into the functionality and other aspects of the concerns, which were selected by assessee, but were rejected by the TPO. The DRP after examining the facts, and making far analysis of the activities performed by the assessee and functional profile of the comparables selected, shall benchmark international transaction of management consultancy and support services provided by the assessee company to its AEs and determine the Arm’s Length Price of the international transaction, if any. Reasonable opportunity of being heard shall be afforded to the assessee in this regard. Hence, the matter is set aside to the file of the DRP with our direction mentioned above - RIO TINTO INDIA (P.) LTD. V/s DY. CIT - [2020] 182 ITD 389 (ITAT-DELHI)