Transfer Pricing – If loss making companies were excluded, a super profit earning company should also be removed from the comparables

By TG Team Income Tax Judiciary May 8, 2011

TaxGuru Citation: 2011 taxguru.in 387
Case Name: Sapient Corporation Pvt Ltd Vs. DCIT (ITAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2006- 07
Courts: ITAT Delhi

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Sapient Corporation Pvt Ltd Vs. DCIT (ITAT Delhi)- When loss making companies have been taken out from the list of comparables by the TPO, Zenith Infotech Ltd. which showed super profits should also be excluded. The fact that assessee has himself included in the list of comparables, initially cannot act of estoppel particularly in light of the fact that the AO had only chosen the companies which are showing profits and had rejected the other companies which showed loss (Quark System vs. DCIT 38 SOT 307 (SB) followed).

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “E” NEW DELHI
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI SHAMIMYAHYA, ACCOUNTANT MEMBER
I.T.A. No. 5263/Del/2010

A.Y.: 2006- 07

Sapient Corporation Pvt. Ltd.,

C/o Pankaj Vasani,

Sapient Tower, DLF Cyber Greens, DLF, Phase-III, Sector-25A,

Gurgaon – 122 022

(Appellant)

vs.

Dy. Commissioner of Income Tax, Circle 7(1),

New Delhi

(PAN : AAECS6286M)

(Respondent)

ORDER

1. This appeal by the assessee is directed against the order of the Assessing Officer dated 12.10.2010 and pertains to assessment year 2006-07.

2. The first issue raised is that Assessing Officer has erred in making addition of 14,79,00,000/- on account alleged difference in arms’ length price of the international transactions of software development services on the basis of the order passed u/s 92CA(3) of the Act by the Transfer Pricing Officer.