Summary and Review of Case Laws Decided by Income Tax Appellate Tribunals
Thursday, 06 August 2015 13:13

Transfer Pricing - How to decide Comparables - Parameters suggested by Bangalore Tribunal, Section 10A allowed Featured

Written by
  • font size decrease font size increase font size
  • Print
  • Email
  • Be the first to comment!
Rate this item
(0 votes)


For the purpose of ALP (Arms Length Price) the TPO and the Assessee are at liberty to consider as many as possible companies as comparable for the purpose of determining the ALP, subject to the parameters on the basis of which the earlier companies selected by the TPO are rejected.


1. Assessee is a company established as 100% EOU registered under Software Technological Parks of India (SWTPI) at Bangalore

2. Assessee is a company primarily engaged in designing and development of software for its parent company.

3. Assessee selected 18 comparables in its TP study report to bench mark its international transactions and arrived at 10.28% of mean margin

4. Out of 18 comparables 14 were rejected by the TPO and selected 20 companies as comparables including 4 companies from the list of assessee

5. TPO calculated mean margin of 23.65% against assessee’s margin of 10.28%

6. Assessee challenged the action of the TPO in rejecting the comparables selected by the assessee and adding 16 more comparables in the list of comparables for determination of ALP before the DRP.

7. The DRP did not accept objections raised by the assessee and confirmed the proposed adjustment on account of ALP in respect of international transactions of the assessee.

8. AO rejected assessee’s claim of deduction u/s 10A and CIT(A) confirmed it.

9. Assessee appealed to the Tribunal who suggested various parameters to be followed in determining comparables in deciding ALP. Tribunal allowed assessee’s claim u/s 10A relying upon assessee’s own case for the assessment year 2004-05 in ITA No.616/Bang/2009 by order dated 10/08/2010


For Transfer Pricing - Since most of the comparables selected by the TPO has been rejected by us in the foregoing findings therefore, the assessee as well as the TPO are at liberty to consider as many as possible companies as comparable for the purpose of determining the ALP, subject to the parameters on the basis of which the earlier companies selected by the TPO are rejected. Thus, the AO/TPO are directed to re

compute the ALP by doing a fresh exercise of selecting the suitable comparables apar from he comparables which are accepted by both the parties in the present of comparables.

For Section 10A - We find that the issue is squarely covered by the decisions relied upon by the learned counsel for assessee. The distinctions sought to be brought about by the learned Department Representative, in our opinion, are not relevant to the facts of the case before us. In view of the same, the appeal of the revenue is dismissed”.

Following the order of the coordinate bench of this Tribunal in assessee’s own case (Supra), we decide this issue in favour of the assessee and direct the AO to allow the claim of deduction u/s 10A of the IT Act, 1961.

Cases Referred to

Tech Books Electronics Services (P) Ltd Vs Addl.CIT 100ITD125

Kumaran Systems (P) Ltd., Vs ACIT 106TTJ494

AP LABS India Pvt. Ltd. Vs. ACIT ITA. No. 398/Bang/2008

E-gain Communication Pvt. Ltd. ITA No. 1685/Pune

Sony India Pvt. Ltd ITA  No. 1189/Delhi

Additional Info

Read 2999 times Last modified on Saturday, 13 February 2016 16:53
Anil B.

A practicing Chartered Accountant Anil B. acquired CA, CS and LL.B degrees with over 12 years of rich and diverse management experience across Banking & Financial Services, Insurance and the Logistics industry spanning various markets and geographies globally.

This email address is being protected from spambots. You need JavaScript enabled to view it.

Leave a comment

Thank you for reading! We welcome and appreciate your comments, but at the same time, make sure you are adding something valuable to this article. If you have any serious queries, suggestions or anything related to this article, feel free to share them, we really appreciate that.

If you want to give us any feedback or report any errors, you can email your concerns on and we'll revert back soon.

Most Popular Case Summary

  • Default
  • Title
  • Date
  • Random
load more hold SHIFT key to load all load all

Recommended Articles


Have you done Analysis of any Case? Tell Us About It.


All content herein is the copyright of Taxpundit. No images, text, or any other content may be, reproduced or redistributed without the express written consent of Taxpundit.

All Rights Reserved. All Content Copyright.


Subscribe to our newsletter and stay updated on the latest developments and special offers!

Vivad Se Vishwas Scheme announced in Union Budget, 2020. Download Now
Toggle Bar