Goldman Sachs (India) Securities Pvt. Ltd Vs Assessment Unit (ITAT Mumbai)
Conclusion: While computing arm’s length price (ALP), it is required both the tested party and the comparable should have similar financial year endings for proper analysis of the functions performed, assets employed and risks assumed. The company, which was otherwise functionally similar, could not be rejected as a comparable merely on the basis that its accounts were maintained with a different financial year ending, provided that results for the relevant financial year could reasonably be extrapolated from the available data on record. Assessee was directed to provide the extrapolated data of R Systems International Ltd. for necessary examination by TPO.
Held: During the year under consideration, assessee received an amount of ₹ 207,96,21,727/- from the provision of ITeS to its associated enterprises. Assessee benchmarked the transaction by adopting TNMM as the most appropriate method with PLI of OP/OC. By considering itself as a tested party, assessee identified eleven companies as comparable with a 35th to 65th percentile range between 10.65% to 18.75%, with a median of 13.98%. As the assessee computed its own PLI at 16% on operating cost from ITeS transaction, it accordingly claimed that the international transaction pertaining to the provision of ITeS is at ALP. TPO, vide order passed under section 92 CA(3), rejected seven companies considered as comparable by assessee and introduced one new company as a comparable and arrived at a set of the following five comparable companies for benchmarking the international transaction of provision of ITeS. During the hearing, assessee submitted that if only one company, e., R Systems International Ltd. (Segmental), which was excluded by TPO on the basis of different financial year ending was directed to be included, then the international transaction pertaining to provision of ITeS would be at arm’s length and the entire transfer pricing adjustment made in respect thereof should be deleted. On appeal. It was held from the relevant portion of the financial statements of R Systems International Ltd., it was noticed that this company was maintaining its accounts with the year ending December. On the other hand, assessee was maintaining its account with the year ending March. Thus, it was evident that the company sought to be included by assessee as a comparable had a different financial year ending. For the purpose of proper comparability, it was relevant that both the tested party and the comparable should have similar financial year endings for proper analysis of the functions performed, assets employed and risks assumed. The company, which was otherwise functionally similar, could not be rejected as a comparable merely on the basis that its accounts were maintained with a different financial year ending, provided that results for the relevant financial year could reasonably be extrapolated from the available data on record. Assessee was directed to provide the extrapolated data of R Systems International Ltd. for the relevant financial year ending March 2021, if so available, for necessary examination by TPO. The data, if so provided, should be examined by TPO for the purpose of comparability of R Systems International Ltd. with the assessee. The issue of comparability of R Systems International Ltd. was remaded to the file of the TPO/AO for de novo.
