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TMI Blog2011 (7) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... e and also the interest chargeable u/ss 234B, and 234C as per the tax payable computed after making the assessment. - IT APPEAL NO. 5336 (Delhi) OF 2010 - - - Dated:- 8-7-2011 - C.L. SETHI, K.G. BANSAL, JJ. Vijay Iyer and Manoneet Dalal for the Appellant. Sanjay Puri for the Respondent. ORDER K.G. Bansal, Accountant Member The assessee-company had filed its return on 28.11.2006 declaring total income of Rs. 12,47,44,908/-. The return was initially processed u/s 143(1) on 25.12.2007 and thereafter it was picked up for assessment by issuing statutory notice u/s 143(2) of the Act. In the course of assessment, reference was made to TPO 1(2), New Delhi, for determining arm's length price of international transactions entered into by the assessee with the Associated Enterprises ('AE' for short. The TPO suggested upward revision by an amount of Rs. 18,22,82,026/-. This adjustment was made by the Assessing Officer and the total income was determined at Rs. 30,70,26,936/- in the draft order. The assessee filed objections before the learned Dispute Resolution Panel, New Delhi ('DRP' for short). However, the DRP approved the draft order. Consequently, the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 Nagarjuna Agrichem Ltd. 13.08% 14 New Chem (India) Ltd. 4.56% 15 Phyto Chem (India) Ltd. 13.20% 16 Rallis India Ltd. 5.14% 17 Sabreo Organics Gujarat Ltd. 5.82% 18 Sudarshan Chemicals Ltd. -2.45% Arithmatic Mean 7.08% 3.1 Thereafter, the TPO proceeded to make the computation of required adjustment of Rs. 18,22,82,026/-, which has been adopted by the Assessing Officer in the draft assessment order. The computation is as under:- "Operating Income in CPP segment Rs. 2,75,959,718 Operating profit Rs. (-)21,144,078 Arm's Length Margin @7.08% Rs. 161,137,948 Difference Rs. 182,282,026" 4. The order passed by the Assessing Officer was disputed before the DRP. The learned DRP heard the assessee. The learned DRP approved the draft order with the following remarks:- "The main objection of the assessee is regarding the non consideration of capacity utilization data provided by the assessee to the TPO. The assessee filed before us Economic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- "3. The Hon'ble DRP/Ld.Assessing Officer/Ld.TPO have erred in law and in facts in not accepting the economic analysis undertaken by the appellant in accordance with the provision of the Act read with the Income-tax Rules, 1962 ("the Rules"), for determination of the arm's length price in connection with the impugned international transaction. 4.The Hon'ble DRP has erred in law and in facts in not correctly applying the provision of section 92C(2) of the Act to allow the appellant an option for using the downward variation of 5% while determining the arm's length price. ** ** ** 6.The Hon'ble DRP has erred in law and in facts in allowing the levy of interest u/ss 234B and 234C of the Act by the Assessing Officer." 5.1 In the course of hearing before us, the assessee sought to raise an additional ground. However, the ground was not pressed by mentioning that it is only a plea, which can be taken up in the course of arguments. 6. Before us, the learned counsel for the assessee submitted that it is engaged in the business of manufacturing products, which find applications in food and nutrition, health care, apparels, homes and construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. [2009] 34 SOT 532 (Delhi), Global Vantedge (P.) Ltd. v. Dy. CIT [2010] 37 SOT 1 (Delhi) and Skoda Auto India (P.) Ltd. v. Asstt. CIT [2009] 30 SOT 319 (Pune). Therefore, it is argued that if reduction is granted, no adjustment could be made to the income of the assessee on account of aligning international transactions with arm's length price. 6.2 In reply, the learned CIT-DR submitted that the only dispute in this case is regarding capacity under-utilization adjustment to be made to the profit declared by the assessee in respect of crop protection segment. According to the assessee adjustment to the extent of 6.66% has to be granted for making the case of the tested party comparable with the uncontrolled comparables. He referred to the OECD guidelines, which suggest adjustments on this count. However, he relied on the order of the Assessing Officer in this behalf and argued that data for making reasonably accurate adjustment had not be furnished before the lower authorities. 6.3 In the rejoinder, the learned counsel submitted that fixed costs remain the same irrespective of the percentage of capacity utilization. Therefore, there is a need to make adjustment in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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