· The assessee was a non-resident Malasian company engaged in the project management services in relation to infrastructure and construction work in India.
· During the year under consideration the assessee had reported international transactions. As regards international transaction in respect of sub-contract payment and materials issued for work execution the assessee had benchmarked the same by selecting TNMM as the most appropriate method. Assessee selected four comparables.
· The TPO rejected the comparables selected by the assessee and carried out a fresh search and selected ten comparables with mean net margin of 8.37 per cent and proposed adjustment.
· On appeal to the Tribunal, the assessee has submitted that the company, Progressive Constructions Ltd, was having 61 per cent related party transactions and therefore the same could not be considered as a comparable for determining the ALP. He pleaded that the said company be excluded from the set of comparables.
· The Hon’ble Tribunal while deciding the issue held that 0 per cent RPT is not practically possible, and therefore, in the due course adjudication process, the Tribunal has taken a consistent view that in the normal course 15 per cent is the tolerance range of RPT which can be relaxed maximum to 25 per cent.
· Therefore, this issue was set aside to the record of the Assessing Officer / TPO to verify the RPT of the comparables and then apply a suitable filter of RPT not exceeding the maximum tolerance range of 25 per cent.
For further reading, refer the attachment.