A company can be considered as incomparable if its RPT's limit exceed 25 per cent

IT/ILT: RPM is best suited for determining ALP of an international transaction in nature of purchase of goods from an AE which are resold as such to unrelated parties and it pre-supposes no or insignificant value addition to goods purchased from foreign AE
IT/ILT: A company can be considered as incomparable if its RPT's limit exceed 25 per cent
IT/ILT: Only current year's data should be applied for computation of PLI of tested party as well as comparables
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[2014] 52 taxmann.com 492 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'I'
Nokia India (P.) Ltd.
v.
Deputy Commissioner of Income-tax, Circle -13(1), New Delhi*
R.S. SYAL, ACCOUNTANT MEMBER
AND GEORGE GEORGE K, JUDICIAL MEMBER
IT APPEAL NOS.178 & 242 (DELHI) OF 2010
CO NO. 77 (DELHI) OF 2010
[ASSESSMENT YEAR 2002-03]
OCTOBER  31, 2014
I. Section 92C of the Income-tax Act, 1961 read with rule 10B of the Income-tax Rules, 1962 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/RPM) - Assessment year 2002-03 - Whether RPM is best suited for determining ALP of an international transaction in nature of purchase of goods from an AE which are resold as such to unrelated parties and it pre-supposes no or insignificant value addition to goods purchased from foreign AE - Held, yes - Whether if figure of gross profit of comparables is not readily available from their annual accounts, then application of RPM as most appropriate method would be jeopardized - Held, yes [Paras 22 & 26][In favour of assessee/Matter remanded]
II. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Comutation of arm's length price (Comparables and adjustments) - Assessment year 2002-03 - Whether a company can be considered as incomparable if its RPT's exceed limit of 25 per cent - Held, yes - Whether a company engaged in manufacturing sector cannot be compared with a company in trading profile - Held, yes - Whether any company cannot be considered by TPO as comparable, unless assessee is given a chance to show that it is not comparable - Held, yes - Whether only current year's data should be applied for computation of PLI of tested party as well as comparables - Held, yes - Whether mere fact that a company has a high or low turnover can be no reason to justify its exclusion if it is otherwise functionally comparable - Held, yes - Whether as higher amount of depreciation is usually coupled with lower repair cost etc., there can be no justification in applying filter of rejecting companies with depreciation higher or lower than a particular percentage of total costs - Held, yes [Partly in favour of assessee][Paras 23 to 40]