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Income Tax Appellate Tribunal, BANGALORE BENCH “ A ”
Before: SHRI ARUN KUMAR GARODIA & SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.26.09.2013 of Commissioner of Income Tax (Appeals)-IV, Bangalore for the Assessment Year 2005-06.
The assessee has raised the following grounds :
2 IT(TP)A No.1630/Bang/2013
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3. The only issue arises in this appeal of the assessee is regarding functional comparability of the companies selected by the TPO as well as various filters applied by the TPO and CIT (Appeals) in selection of the companies and consequential Transfer Pricing Adjustment. The assessee is a private limited company and captive service provider to its Associated Enterprise i.e. Athena Semiconductors Inc. USA in respect of software development services. The TPO selected 17 comparable companies for determination of Arm’s Length Price
4 IT(TP)A No.1630/Bang/2013 (ALP) in respect of international transactions of the assessee. The assessee challenged the action of the TPO before the CIT (Appeals) and raised objections against the functional comparability as well as the filters applied by the TPO regarding Related Party Transaction (RPT) turnover and foreign exchange gain / loss as well as bad debt being treated as operating cost. The CIT (Appeals) though confirmed the action of the TPO regarding the filters in respect of RPT and turnover however, it has not given a concluding finding regarding functional comparability or dissimilarity.
We have heard the learned A.R. as well as learned D.R. and considered the relevant material on record. At the outset, we note that the CIT (Appeals) while dealing with the issue of functional comparability has decided the same in para 5.2 as under :
5 IT(TP)A No.1630/Bang/2013 Operating in that very sector in different line. On due consideration of the findings recorded by the ld. TPO, we do not find any force in the contentions of ld. Counsel for the assessee.
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12 IT(TP)A No.1630/Bang/2013 Thus it is clear that in substance the CIT (Appeals) has not adjudicated this issue conclusively but remanded the same to the record of the TPO / A.O. for reconsideration and adjudication in the light of the decision of the Delhi Bench of ITAT in the case of Actis Advisers P. Ltd. Vs. DCIT 20 ITR (Trib) 138. It is 13 IT(TP)A No.1630/Bang/2013 pertinent to note that the findings reproduced by the CIT (Appeals) is only a broad guideline but not the factual finding on the comparability of each and every company selected by the TPO. Thus we find that the CIT (Appeals) has not adjudicated the issue of functional comparability of each and every company selected by the TPO and objected by the assessee. Even otherwise the CIT (Appeals) has no jurisdiction to remand the matter to the TPO or A.O. but in case the need arises for further verification of fact the remand report ought to have been sought. Therefore in the facts and circumstances of the case when CIT (Appeals) has not adjudicated the issue, we set aside this issue of functional comparability as well as the other filters applied by the TPO to the rcord of the CIT (Appeals) for fresh consideration and adjudication in the light of various decisions of this Tribunal on these points. Needless to say the assessee be given appropriate opportunity of hearing. The entire issue of TP Adjustment and comparability has been set aside to the record of the CIT (Appeals) in the above terms.
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In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 5th May, 2017.