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| The Tax Publishers2020 TaxPub(DT) 1421 (Bang-Trib) INCOME TAX ACT, 1961
Section 92C
Since the company chosen as a comparable by assessee in its TP study was functionally similar to the assessee, such company would be considered as a valid comparable company and hence, the same was liable to be included in the final list of comparable companies.
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Transfer pricing - Computation of ALP - Selection of comparables - Functional similarity
Assessee-company was engaged in providing software development (SWD) services to its AE, which was an international transaction. It chosen a company named 'E' as comparable company in its TP study and TPO accepted the said company as comparable company. However, DRP suo motto excluded such company from the list of comparable companies on the ground that the margin of the 'E' was abnormally low as compared to other comparable companies. Assessee contended that 'E' was functionally comparable as it was also a SWD service provider and that low margins could not be the basis to exclude the said company. Held: The reason assigned by DRP for exclusion of company 'E' was not sound especially when both assessee and Revenue sought inclusion of such company. Further, there was no valid basis for the DRP to suo motto exclude said company from the list of comparable companies. Moreover, 'E' was also a SWD service provider such as the assessee. Hence, the 'E' was considered as a valid comparable company and included in the final list of comparable companies.
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
INCOME TAX ACT, 1961
Section 92C
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