Broad functionality insufficient while selecting transactions/entities for transfer pricing comparables

DCIT Vs New Delhi Television Ltd. (ITAT Delhi)

ITAT Delhi held that while selecting the comparables transactions or entities, in case of international transactions, the basis should be one of similarity with the control transactions/entities and mere broad similarity is not sufficient.

Facts- The assessee company is engaged in the business of television news broadcasting. The case of the assessee was selected for scrutiny and notice u/s 143(2) of the Act was issued on 14.09.2011. Since the assessee was having international transactions with its Associated Enterprises, therefore, a reference was made u/s 92CA of the Act to Transfer Pricing Officer for determination of Arm’s Length Price of the international transactions carried out by the assessee.

The TPO vide its order dated 22.01.2016, had enhanced the income of the assessee by making transfer pricing adjustment for the transactions with its AEs at INR 3,29,04,214/- which comprises of INR 39,02,614/- adjustments on account of Business Support Services and further adjustment of INR 2,90,01,600/- towards Corporate Guarantee. Thereafter, AO passed draft assessment order u/s 143(3)/144C(1) of the Act dated 30.04.2015 wherein the AO proposed total income to be assessed at INR 29,59,08,060/-

DRP accepted some of the objections raised by the assessee and rejected the remaining. Thereafter, AO passed the final assessment order u/s 143(3)/144C of the Act dated 27.01.2016 at a total income of INR 17,06,11,869/- including TP adjustment of INR 3,11,92,489/- comprising of adjustment towards business support segments of INR 21,90,889/- and adjustment towards corporate guarantee of INR 2,90,01,600/-. Aggrieved by the said order, both parties are in appeal before the Tribunal.