2022 (4) TMI 840 - AT - Income Tax

TP Adjustment - comparable selection - inclusion of M/s. Ashnoor Textiles Mills Ltd - HELD THAT - DRP has held that the claim of the assessee is correct and there was no basis for the TPO to reject M/s. Ashnoor Textiles Mills Ltd. holding it as loss making. DRP has directed the TPO/AO to include M/s. Ashnoor Textiles Mills Ltd. as a comparable. We find no infirmity in the proceedings of the ld. DRP, which was rightly reflected in the final assessment order dated 28.12.2015 passed u/s 144C(13) r.w.s. 143(3) of the Act. Under the above facts and circumstances, we find no infirmity in the proceedings of the ld. DRP as well as assessment order on this issue. Directions of the ld. DRP to ascertain the percentage of risk adjustment - After considering the arguments of the assessee as regards operating in a challenging market, competitive price offer from foreign and Chinese manufacturers and the necessity of retaining skilled manpower irrespective of fluctuation in volume of productions as well as the details of break-up of the employee cost, the ld. DRP was of the opinion that appropriate adjustment should be allowed to the assessee and accordingly directed the TPO to decide the percentage of risk adjustment to be calculated in this issue after taking into account of all the relevant facts and details. After carrying out the directions contained in the proceedings of the ld. DRP, the AO has completed the final assessment order under section 144C(13) r.w.s. 143(3) of the Act by revising the upward adjustment to Nil. Thus, we find no infirmity in the order passed by the ld. DRP/AO. Appeal filed by the Revenue is dismissed.

Summary

Issues:
1. Disputed Resolution Panel's directions against the Revenue.
2. Inclusion of M/s. Ashnoor Textiles Mills Ltd. as a comparable.
3. Furnishing details of break-up of employee cost.
4. Operational expenditure calculation for PLI.
5. Jurisdictional powers of the Dispute Resolution Panel.
6. Percentage of risk adjustment determination.
7. Assessment order justification.

Issue 1:
The appeal by the Revenue challenges the Dispute Resolution Panel's directions, arguing that they are against the facts and circumstances of the case.

Issue 2:
The Dispute Resolution Panel directed the inclusion of M/s. Ashnoor Textiles Mills Ltd. as a comparable, allowing the claim of the assessee for adjustment on account of personnel cost. The Tribunal and High Court reviewed this decision, with the Tribunal initially finding the DRP exceeded its jurisdiction but the High Court directing to consider the case on merits.

Issue 3:
The DRP held that the assessee provided details of break-up of employee cost for comparables, directing appropriate adjustment. The Revenue contested this, stating the assessee failed to substantiate the claim with necessary details.

Issue 4:
Regarding the operational expenditure calculation for PLI, the TPO's rejection of M/s. Ashnoor Textiles Mills Ltd. as a comparable was challenged. The assessee argued that the company's operational cost was correctly taken, resulting in a profit, justifying its inclusion.

Issue 5:
The High Court clarified the Dispute Resolution Panel's jurisdiction, emphasizing the reduction of variation in the draft assessment order. The Tribunal was directed to consider the assessment order's justification on merits.

Issue 6:
The DRP directed the TPO to determine the risk adjustment percentage, considering factors like employee cost on turnover and market challenges. The TPO revised the upward adjustment to Nil after considering all relevant facts and details.

Issue 7:
The Tribunal found no infirmity in the DRP's proceedings and assessment order, ultimately dismissing the Revenue's appeal. The decision was based on a comprehensive review of the facts, submissions, and relevant legal provisions.

This detailed analysis covers the various issues involved in the legal judgment, highlighting the key arguments, decisions, and considerations made by the authorities involved in the case.