KGS Sourcing India Pvt. Ltd Vs ACIT (ITAT Delhi)
ITAT Delhi partly allowed the assessee’s appeal for AY 2018-19 in KGS Sourcing India Pvt. Ltd., holding that the AO/TPO adopted an unsustainable approach in comparable selection. The authorities included Info Edge (India) Ltd., Majestic Research Services & Solutions Ltd. and AXS Online Pvt. Ltd. without considering settled judicial principles on turnover filters, functional dissimilarity and employee-cost filters.
More importantly, the Tribunal noted that the TPO completely ignored 28 comparables proposed by the assessee, despite detailed business descriptions and benchmarking data being furnished during assessment proceedings. Such non-consideration was held to be contrary to fair TP analysis and settled law.
Relying on multiple coordinate-bench rulings on turnover filter, employee cost to sales ratio and functional comparability, the Tribunal held that the issue requires fresh examination. The matter was therefore remanded to the AO/TPO with a clear direction to:
– re-examine inclusion of disputed comparables in light of judicial precedents, and
– duly consider all 28 comparables proposed by the assessee before finalising the ALP.
Result:
– TP issue set aside to AO/TPO for de novo benchmarking
– Appeal partly allowed for statistical purposes
– Clear signal: TP analysis cannot be one-sided; assessee’s comparables must be examined.
FULL TEXT OF THE ORDER OF ITAT DELHI
