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15.2 We have heard both the parties and perused the material on record. We notice from the financial statement that the net worth of the company has been eroded and it is negative net worth company. During the FY 31.3.2016 the negative net worth was Rs. 10.31 crores and in the current year Rs.11.91 crores. Resultantly, the negative net worth is increased by Rs.1.60 crores. However, the revenue from operations has been increased by Rs.2.07 crores, The total net profit before adjusting exceptional item is Rs.0.16 crores and profit from operations before adjusting exceptional item and taxes was decreased IT(TP)A No.153/Bang/2022 by Rs.0.12 crores. On observation of the financial statement, the negative net worth of the company has increased. Further on perusal of the Note No.18 revenue from operations, the company has shown consulting income of Rs.10.58 crores and as per Note No.36, which is placed at Pg. 1490 of PB, states as under:-

15.3 Since the lower authorities have rejected this company only on the basis of negative net worth, which leads to intrinsically sick and non-performing companies, but FAR analysis has not been done by both the parties. If the company passes FAR applied by the ld. TPO, the company cannot be excluded only because of the negative net worth. This view is supported in the judgment relied by the AR in the case of Gillette Diversified Operations Pvt Ltd (supra) in which it has been held as under:-
24. Ld. TPO rejected two comparables which are discussed as under:-
a. Argus Cosmetic Ltd.
............
IT(TP)A No.153/Bang/2022 b. Muller & Phipps India Ltd.
i. The ld TPO has excluded this comparable stating that it has a negative net worth for the year 2005 hence it is not fit comparable to be taken. On appeal before the ld CIT(A) the assessee submitted that the TP regulation and OECD guidelines do not suggest that loss making company should not be taken as comparable. The ld CIT (A) has hold that this company is not simply the loss making company but is also a company having negative net worth and according to him when a company suffers from erosion of its wealth because of continuous loss, same cannot be taken as comparable. The case laws relied upon by the appellant were also rejected as according to him those were relied upon high loss making company and not for a negative net worth comparables.
ii. Before us the ld AR submitted that merely because a company is having negative net worth it cannot be excluded as comparable if the functions performed, Assets deployed and risk assumed are comparable with the business of the company. Against this the ld AR relied on the order of the lower authorities
25. We have carefully considered the rival contentions.

According to rule 10(B)(a) of the Income Tax Rules the comparability of international transactions with an uncontrolled transaction shall be judged with respect to the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions. According to the Rule 10B(3) a uncontrolled transaction shall be comparable to an international transaction none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market. We do not find any such exception provided under the Income Tax Rules 1962. Furthermore neither the ld CIT(A) nor the ld AO had pointed out that how the negative net worth of the comparable make the price of the goods or the profitability arising from such transaction not comparable. Merely because the company is having negative net worth but when the FAR is comparable, it cannot be said to be non comparable unless it is shown that how the negative net worth of IT(TP)A No.153/Bang/2022 the company has impacted the profitability of the comparable company. We have alos noted the issue decided by Special bench in the case of DCIT V Quark Systems Limited in 2010-TII-02- ITAT-CHD-SB-TP where in the negative net worth company was considered and it was held that business organization with negative net worth cannot be treated at par with a normal business organization. However while considering that issue the comparable was also functionally not comparable in that case. Therefore there was no view expressed in that decision that though comparable has similar FAR still negative net worth company is required to be excluded without showing the impact of negative net worth on the profitability of the company. In view of this we direct the inclusion of this Company i.e. Muller & Phipp India Limited as comparable for the purpose of determining arms length price.