Transfer Pricing: Comparables with more than 25% RPTs have to be excluded. There are no fetters on the assessee's right to claim that a comparable included by him should be excluded

(i) The principal question about the exclusion of companies with more than 25% RPTs from the list of comparables on account of these becoming controlled transactions, has been fairly decided by various benches of the Tribunal. It has been held by the Delhi Bench of the Tribunal in Agilent Technologies International Pvt. Ltd. Vs. ACIT (2013) 36 CCH 187 (Del) (Trib.) that a potential comparable having more than 25% of the related party transactions is to be ignored. Similar view has been taken in Actis Advisors Pvt. Ltd. Vs. DCIT (2012) 20 ITR (Trib.) 138 (Del). Recently, the same view has been reiterated in Nokia India Pvt. Ltd. Vs. DCIT (2013)-TIL-224-ITAT-DEL-TP. In view of the above decisions, we do not find any infirmity in the reasoning given by the ld. CIT(A) for the exclusion of companies on the basis of related party transactions of more than 25%.

(ii) A comparable included by the assessee can be claimed to be excluded. Just like a situation in which the assessee chooses a company as comparable which can be excluded by the TPO on finding it as incomparable, there can be no fetters on the assessee requesting for the exclusion of a company originally considered by it as comparable by inadvertence. After all, it is for the TPO to examine and evaluate such contention and decide about its comparability on merits. To foreclose the raising of such a contention by the assessee for further appraisal at the TPO’s end, is impermissible. The Special Bench of the Tribunal in the case of DCIT vs. Quark Systems Pvt. Ld. (2010) 132 TTJ (Chd) (SB) has allowed the assessee to claim exclusion of certain companies from the list of comparables, which were inadvertently included by it in its Transfer pricing study.