TPo cannot reject a Comparable for not figuring in his search matrix

Prism Networks Private Limited Vs ACIT (ITAT Bangalore)

The Hon’ble Tribunal held that the DRP has not considered the plea of assessee in proper perspective. The fact that the TPO rejected the TP Study of the Assessee cannot be the basis not to consider the claim of the Assessee for inclusion of comparable companies. The DRP has not adjudicated the question of inclusion of these companies as comparable companies. The fact that these companies do not figure in the search matrix of the TPO is not and cannot be a ground not to consider inclusion of these companies as comparable companies. Since the DRP has failed to do so, the Hon’ble Tribunal directed to AO/TPO for fresh consideration in light of information available in Public Domain.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This appeal by the Assessee is directed against the order dated 30.03.2021 of National e-Assessment Centre, Delhi (hereinafter referred to as the Assessing Officer, “AO” in short) passed u/s.143(3) read with Section 144C(13) of the Income Tax Act, 1961 (Act) in relation to AY 2016-2017.

2. The Assessee in engaged in the business of provision of Software Development Seryices (SWD services), to its wholly owned holding company. In terms of the provisions of Sec.92-A of the Act, the Assessee and its ‘wholly owned holding company were Associated Enterprises (“AEs”). In terms of Sec.92B(l) of the Act, the transaction of providing SWD Services was an “international transaction” i.e., a transaction between two or more associated enterprises, either or both of whom are non­residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. In terms of Sec.92(1) of the Act, the any income arising from an international transaction shall be computed having regard to the arm’s length price. In this appeal by the Assessee, the dispute is with regard to determination of Arms’ Length Price (ALP) in respect of the international transaction of rendering SWD services to the AE.

Please become a Premium member. If you are already a Premium member, login here to access the full content.