Section 92C of the Income-tax Act, 1961 - Transfer pricing

IT/ILT: For Computing arm's length price, a Company under serious indictment in fraud cases is to be excluded from list of comparables on ground of unreliability of data
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[2015] 53 taxmann.com 19 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'K'
Stream International Services (P.) Ltd.
v.
Assistant Commissioner of Income-tax- 7 (2), Mumbai*
N.K. BILLAIYA, ACCOUNTANT MEMBER
AND AMIT SHUKLA, JUDICIAL MEMBER
IT APPEAL NO. 8290 (MUM.) OF 2011
[ASSESSMENT YEAR 2007-08]
OCTOBER  10, 2014
Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments) - Assessment year 2007-08 - Whether where company was under serious indictment in fraud cases it should be excluded from list of comparables for computing arm's length price on ground of unreliability of data - Held, yes - Whether where a company has low employee cost to sales as compared to that of assessee and its related party transaction is 58 per cent to 59 per cent, it is to be excluded from list of comparables - Held, yes - Whether extraordinary events like merger and de-merger will impact profitability of companies and therefore such companies should be excluded from comparables - Held, yes - Whether where companies which are not functionally comparable are to be excluded from list of comparables - Held, yes [Para 13] [In favour of assessee]