1. In this appeal by the Revenue for the assessment year 2007-08, the following reframed questions of law have been proposed for our consideration,
“(a) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that comparables selected by the Transfer Pricing Officer were not functionally comparable while determining the arm's length price?
(b) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in allowing safe harbour margin of (+/−) to the assessee?”
2. The basic dispute in this case is the determination of arm's length price (ALP) in respect of investment advisory and related support services by the respondent-assessee to its associated enterprises (AE) in Hong Kong. It is undisputed that the transaction net margin method (TNMM) is the most appropriate method for determining the arm's length price. There was one comparable, viz., M/s. IDC (India) Ltd. which was common between the Revenue and the assessee. However, eight more comparables were relied upon by the Revenue. On the basis of the mean so determined, the Transfer Pricing Officer (TPO) concluded that the difference was in excess of 5 per cent, variables and, therefore, the arm's length price, determined by the respondent-assessee was not accepted.
3. The Tribunal by the impugned order held that the eight comparables other than M/s. IDC (India) Ltd. were not functionally comparable with the respondent and, therefore, could not be relied upon. The counsel for the Revenue states that for the Subsequent assessment years, the Assessing Officer has found that the eight comparables selected by the Transfer Pricing Officer were not functionally comparable with the respondent for determining the arm's length price. Moreover, in the impugned order the Tribunal has in detail pointed out why the selected comparables are not proper and failure of the Assessing Officer to consider the objections of the assessee. In this view of the matter, we see no reason to entertain question (a) as framed.
4. In so far as question (b) is concerned, it becomes academic as if the eight comparables selected by the Transfer Pricing Officer are found not to be functionally comparable then the difference between the operating margin of the respondent at 15. 05 per cent, as against the 18. 97 per cent, of comparable companies being within the range of +/− 5 per cent, the amounts received by the respondent-assessee is within the statutory limits. Therefore, we see no reason to entertain question (b).
5. Accordingly, the appeal is dismissed with no order as to costs.