The Issue for consideration was whether there can be difference in treatment of export incentives while computing margins of comparables and Assessee

The assessee made export sales to its AE in UK for AY 2008-2009. The TPO passed an order making TP adjustments. The CIT(A) observed that the TPO has computed the operating margin of the Assessee by excluding export incentives, however while computing that of comparables, the export incentives was included by the TPO. The CIT(A) directed the AO to recompute the disallowance based on similar status and comparables either with or without export incentives. On appeal by Revenue, the same was upheld by the Tribunal by making the following observation:

“While making a comparison of the operating profit with other comparables, the TPO is required to compute the operating profit by applying the same formula. He has no jurisdiction to apply a different formula to work out the operating profit for the comparables and for the assessee.” The HC upheld the view as while giving OGE the AO accepted the CIT(A) order.

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