Selection of a comparable company should be determined having regard to its functional comparability for the year under review and not with reference to preceding years

Emersons Process Management India Pvt. Ltd. Vs. Add. CIT (ITAT Mumbai)- The fact that this company was selected as one of the comparables, by assessee himself, in the preceding assessment year cannot be put against the assessee, as whether or not a comparable is to be included must depend on its merits rather than be solely guided by events of an earlier year – particularly when assessee is successfully able to demonstrate that the entity sought to be used as comparable is not engaged in same or materially similar business at least in the present year.

In addition to above Tribunal held that certain core issues in Transfer Pricing such as selection of comparables, working capital adjustments, availability of standard deduction of +/-5 percent, adjustment to be restricted only to the international transactions with the Associated Enterprises(AE’s), in favour of the taxpayer.

ITAT Mumbai

ITA No. 8118/Mum/2010

Assessment year: 2006- 07

Emersons Process Management India Pvt Ltd.

Vs. Additional Commissioner of Income Tax

Date of hearing: May 19 , 2011

Date of pronouncement: August 12 , 2011.

O R D E R

Per Pramod Kumar

1. By way of this appeal, the assessee appellant has called into question correctness of order dated 20^th September 2010, passed in the matter of assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2006-07. As the assessment has been made after assessee’s objection to the draft assessment having been examined by the Dispute Resolution Panel, this is a direct appeal to the Tribunal against the assessment so made by the Assessing Officer.