Shanti Prime Publication Pvt. Ltd.
Sec. 92C of Income Tax Act, 1961—Transfer Pricing—Selection of Comparables - Matter remanded to TPO as the procedures followed by TPO were in total contradiction to transfer pricing law laid down by legislature.
Facts:AO rejected most of the comparables selected by assessee by applying various filters and shortlisted a final set of comparables with 13 comparables having an average margin of 22.82%. TPO made the adjustment Aggrieved by proposed adjustment, assessee raised objections before DRP. DRP while considering the objections raised by assessee excluded some comparables and restricted the working capital adjustment to 1.63%, DRP upheld the same. On receipt of DRP directions, AO passed final assessment order determining arms length price of international transaction from AE after making adjustment of Rs. 27,56,53,609/-. Aggrieved by additions made by AO, assessee as well as revenue filed appeal before Tribunal.
Held, that TPO has considered entity level revenue as well as cost for computing margin of assessee which was compared with the segmental margin of comparables. This is in total contradiction to transfer pricing law laid down by legislature. As regards the comparables though DRP excluded certain comparables as well as upheld inclusion of remaining comparables, has not given proper reasoning for its exclusion/inclusion. It is observed that certain comparables cannot be considered in case of a captive service provider like assessee. We also note that working capital adjustment has been restricted by Ld.TPO and upheld by DRP at 1.63% which is contrary to provisions of transfer pricing rules. In the light of aforestated observations and directions, the transfer pricing issues raised by assessee is set aside to AO/TPO and they are directed to pass a detailed order by considering all the submissions advanced by assessee in respect of each objections raised therein. In the result, appeal filed by assessee as well as, revenue stands allowed for statistical purposes. - NXP INDIA (P.) LTD. V/s DY. CIT - [2020] 182 ITD 163 (ITAT-BANGALORE)