GCO Technologies Centre P.Tld vs ITO
The assessee company is engaged in the business of providing software outsourcing services exclusively to its parent company viz. M/s Global Conference Organizers, B.V, Netherland. The return of income filed by the assessee was processed u/s 143(1) and subsequently, the assessee filed its revised return of income determining its loss at Rs.1,09,393/-. Thereafter, the case of the assessee was selected for scrutiny assessment u/s 143(2). During the course of the assessment proceedings, it was observed by the A.O that the assessee company had entered into a service agreement with its parent company viz. M/s Global Conference Organizers, B.V, Netherland. However, as observed by the A.O, the assessee in its profit and loss account had booked expenses for the period prior to 01.08.2009 i.e for the period of 20.04.2009 to 30.07.2009, aggregating to an amount of Rs.19,78,700/-. For the purpose of benchmarking its international transactions the assessee had adopted 6 comparable companies. It was submitted by the assessee that its international transactions with its AE viz. M/s Global Conference Organizers, B.V, Netherland, were within arm’s length.
Admittedly, the assessee being captive unit of its parent company viz. Global Conference Organizers, B.V, Netherland, therein operates in an environment which is free of risk, and resultantly, its margin of profit for the said reason is on the lower side. The claim of the assessee for the risk adjustment while benchmarking its international transactions in the backdrop of the financial of the comparables companies merits acceptance. Accordingly, issue is restored to the file of the A.O, with a direction to consider the assessee’s claim for risk adjustment for benchmarking its international transactions. The Ground of appeal is allowed for statistical purposes.