Company with extraordinary events cannot be considered as comparable

ITAT held that on account of extra ordinary events viz. acquisition of IQ group of companies and amalgamation of Accentia Infoserve Pvt. Ltd with Accentia Technologies Ltd, the said company cannot be considered as good comparable.

Full Text of the ITAT Order is as follows:-

The present cross appeals by the Revenue and the assessee are directed against the Assessment order dated 23-2-2015 passed under section 144C(13) read with section 143(3) of the Income Tax Act 1961 (hearing after referred to as the Act).

2. The brief facts of the case as emanating from records are: The assessee is engaged in the business of manufacture and sale of turbo chargers. The assessee is also engaged in the business of Information Technology enabled Services (ITeS). During the period relevant to assessment year under appeal, the assessee entered into various international transactions. The assessee selected Transactional Net Margin Method (TNMM) as the most appropriate method to bench mark its international transactions and adopted operating profit/operating cost as profit level indicator. The assessee selected comparables to bench mark its international transactions on the basis of FAR analysis. The average unadjusted margin of the comparables in the international transactions related to ITeS was determined by the assessee at 14.95 percent as against 11.64 percent of its own. The Transfer Pricing Officer (TPO) determined arms length margin of the comparable at 32.12 percent and made adjustment of Rs. 2,62,00,000 in respect of international transactions relating to ITeS. Aggrieved by the order of TPO dated 28-1-2014, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP vide directions dated 26-12-2014 partly accepted the objections raised by the assessee. On the basis of directions of the DRP, the assessing officer vide impugned order made upward adjustment of Rs. 2.41crores in the income returned by the assessee.

3. The assessee in appeal before the Tribunal as assailed the assessment order by raising following grounds :–

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