The Tax Publishers2020 TaxPub(DT) 4469 (Mum-Trib)

INCOME TAX ACT, 1961

Section 92C

Since turnover of CG-VAK Software and Exports Ltd. was 59 times lesser than assessee leading to decline in revenue and profits, thus company could not be taken as comparable to assessee (ITES provider).

Transfer pricing - Determination of ALP 9314985057 - Selection of comparables - Rejection of company otherwise comparable on the ground of low turnover in concerned segment

Assessee rendered IT enabled services to its AE abroad. TPO considered CG-VAK Software and Exports Ltd., as not comparable to assessee case on ground that in case of CG-VAK software services contributed 86% and BPO services contributed only 14% to operations of the company. Assessee's case was that low turnover could be no reason to eliminate otherwise comparable company.Held: Turnover filter is an important filter which is a tool to eliminate large entites which enjoy considerable advantage with their huge revenue generation abilty and capability to absorb fixed overheads. Turnover of CG Vak was 59 times lesser than assessee. It was one of the reason that this company's revenues were coming down and its profits were also declining. Since this company failed in revenue filter and segment was declaring consistent losses over the years, there was no reason to include this as comparable company.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 92C

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