The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) in the case of: Philips Medical Systems (P.) Ltd. v. ITO, held that an entity engaged in both manufacturing and trading activities cannot be a comparable company for benchmarking the taxpayer engaged principally in a trading activity.
However, the tribunal found that the Transfer Pricing Officer could select comparable companies, even if the data were not publicly available.
The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) that the restriction stipulated in Rule 10D is applicable only to the auditor and not to the TPO, who has an inherent power to make enquiry and collect and use the information and material which is found to be relevant for the purpose of transfer pricing analysis in order to determine the arm’s length price of the relevant international transactions between the associated enterprise.
