Extreme Labs India Private Limited Vs National Faceless Assessment Centre ( ITAT Delhi)
The Delhi Income Tax Appellate Tribunal considered an appeal filed against the assessment order passed under Sections 143(3), 144C(13), and 144B of the Income Tax Act for Assessment Year 2021-22. The assessee challenged various transfer pricing adjustments and alleged non-compliance by the Assessing Officer (AO) and Transfer Pricing Officer (TPO) with the directions issued by the Dispute Resolution Panel (DRP).
The assessee, an Indian private limited company, was engaged in the business of marketing and distribution of peering software and licensing services for the right to use computer software and database services. During the relevant assessment year, it entered into an international transaction involving operational expenses towards technology and management support amounting to Rs. 10,32,25,426 with its associated enterprises. For determining the Arm’s Length Price (ALP), the assessee adopted the Transactional Net Margin Method (TNMM) and selected comparable companies based on filters relating to sales, net worth, trading sales ratio, software distribution activities and related party transactions.
The TPO accepted the filters applied by the assessee but modified the list of comparable companies by excluding certain comparables selected by the assessee and introducing additional companies. Based on the revised comparables, the TPO proposed a transfer pricing adjustment of Rs. 72,74,035 under Section 92CA(3). The Assessing Officer subsequently issued a draft assessment order incorporating the adjustment. The assessee filed objections before the DRP challenging inclusion and exclusion of several comparables. The DRP issued directions requiring exclusion or re-examination of certain companies. However, according to the assessee, the AO failed to properly implement those directions while passing the final assessment order, leading to the present appeal.
