Case Law Details
M/s. Mckinsey Knowledge Centre India pvt. Ltd. Vs PCIT (Delhi High Court)
The revenue urged that a stringent application of the comparability test was unnecessary as was also provisioned in Chapter-6 of United Nations Practical Manual on Transfer Pricing, Edition 2013, and some flexibility in conducting this comparison was urged to be allowed.
However, from the above analysis, in the present appeals, even if due consideration is given to a certain level of dissimilarity between the Assessee and the comparable companies, it can be observed that the nature of services provided by the above mentioned comparable companies do not demonstrate even a degree of similarity with the services rendered by the Assessee that would be sufficient to qualify under rule 10B(2) of the Income Tax Rules, since, as established above, the Assessee‟s services under its R&I segment are in the nature of services provided by a KPO and they are functionally dissimilar from the comparable companies, in terms of their services as well as their risk profiles.
Relevantly reading what was highlighted in Rampgreen (supra) that while using TNMM, the search for comparables may be broadened by including comparables offering services/products which are not entirely similar to the controlled transaction/entity however, this can be done only if, inter alia, the difference in services/products offered has no material bearing on the profitability, and do not have functional differences or any differences in their risk profiles. Thus, it can be concluded that the ITAT was correct in excluding the above-mentioned comparable companies.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
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