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TMI Blog2013 (9) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... ables as mentioned in para 4.3 earlier. The assessee in the appeal before us has also raised objections in relation to some of the comparables. However we find, that the submission made by the learned AR was quite general in nature not supported by any evidence. No details of P&L account and balance sheet or annual reports were filed in respect of some comparables to substantiate the claim. The objection raised in relation to comparables is therefore rejected. However we find substance in the additional ground raised by the assessee requesting for benefit of +/-5% margin. The additional ground has already been admitted by us being a legal ground. We, therefore direct the AO to allow the benefit of +/- 5 % benefit to the assessee, which has also not been objected to by the learned DR before us - Decided partly in favour of assessee - ITA No. 7065 /Mum/2012 - - - Dated:- 17-7-2013 - I B.R. Mittal And SHRI Rajendra Singh, JJ. For the Appellant : M. Subramaniyam. For the Respondent : Ajeet Kumar Jain. ORDER:- PER : Rajendra Singh This appeal by the assessee is directed against the order dated 21/9/2012 of the AO for assessment year 2008-09 passed in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indo Bonito Multinational Limited 98.99 3.77 4. Neogem India Ltd. 54.74 3.81 5. Shreeji Jewellery Limited 59.07 3.66 6. Shrenuj diajewels Ltd. 122.35 9.40 7. Vanguard Jewels Ltd. 39.16 1.99 Arithematic Mean 5.45 Assessee 8.90* 3.1 The assessee computed its own margin (OP /TC) at 8.90% after excluding abnormal expenses of Rs. 2,06,11,944/- for steep fall in turnover and capacity utilization. The TPO after detailed examination of the TP study submitted by the assessee observed that four out of seven comparables selected by the assessee were not comparable for the reasons given below: Sr.No. Name of Comparable Company Reasons for Rejection 3. Indo Bonito Multinational Limited Dealt during the year in wide range of products i.e. ceramic tiles, building materials, gold, jewellery and mobiles and non-availability of segmental results 4. Neogem India Ltd. Trading Activity 6 Shrenuj Diajewels Ltd. Signif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.4 The assessee objected to the four comparables out of the nine comparables selected by the TPO for giving different reasons as per table given below: S.No. Name of Comparable Company Reasons for non-comparability with the assessee 1. Fine Platinum (India) Ltd. Different Geographical exports 2. Goenka Diamond Jewels Ltd. (Seg). Retails sales of branded jewellery 3. Asia Star Co. Ltd (Seg). Retails sales of branded jewellery 4. Shyma Star Gems Ltd. (Seg). Trading of studded jewels 3.5 The TPO has however rejected the objections raised by the assessee. TPO observed that M/s Fine Platinum (India) Pvt. Ltd was exploring to Australia, Europe and New Zealand whereas the assessee was exporting to USA. Thus both were dealing with the customers in developed economies and, therefore these were comparables. As regards M/s Goenka Diamond Jewellery and M/s Asian star company Ltd., the TPO observed that both these companies as well as the assessee were engaged in the manufacturing of jewellery and, therefore, were comparable. In regard to M/s Shyam Star Gems Ltd, the TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LI (OP/OC)% PLI (OP/net sales) % 1. Zodiac-JRD MKJ Ltd. 11.88 11.35 0.35 4.68 4.47 2. Sunraj Diamond Exports Ltd. 12.75 12.34 0.42 3.38 3.27 3. Mini Diamonds (India) Ltd. 20.81 20.54 0.27 1.34 1.32 4. C Mahendra International Ltd. 24.53 23.24 1.22 5.23 4.98 5. Shri Sai jewels Pvt. Ltd. 37.74 36.04 1.76 4.88 4.66 6. Vanguard jewels Ltd. 39.06 38.41 0.75 1.95 1.92 7. Emmar Diamonds Pvt. Ltd. 49.35 47.27 2.08 4.40 4.21 8. Shukra jewellery Ltd. 50.39 49.66 0.74 1.49 1.47 9. Indo Unique Trading Pvt. Ltd. 50.91 48.67 2.25 4.62 4.41 10. Varun jewels Pvt. Ltd. 140.65 135.36 5.56 4.11 3.95 Arithematic Mean 3.61 3.47 Assessee 32.96 32.81 0.15 0.45 0.45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also exports of 37% of its total trading sales and assessee's turnover is Rs. 32.95 crores and hence both are working on the same economic scale hence this objection is not acceptable." The TPO thus computed the arm's length price on the basis of PLI of 3.47% of the comparable against the PLI of .45% of the assessee and the adjustment made on this account was at Rs. 99,58,969/-. 5. The assessee raised objections against the TP adjustment proposed by the TPO before the DRP. The assessee objected to rejection of claim of the assessee of abnormal expenses in relation to the manufacturing segment as well as the selection of certain comparables by the TPO. DRP observed that the claim of the assessee of lower capacity of utilization lacked sound financial analysis and, therefore the claim of abnormal expenses was rejected. The DRP also did not find any merit in the objection raised by the assessee against some of the comparables selected by the TPO. The DRP thus confirmed the order of TPO, following which the assessment was made by AO on the basis of adjustment proposed by TPO, aggrieved by which the assessee is in appeal before Tribunal. 6. Before us the learned AR for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arm's length price on their own. He referred to clause (c) of section 92C(3) in which it was clearly mentioned that in cases where information or data used in computation of arm's length price given by the assessee was not reliable or correct, the AO could proceed to determine the arm's length price on the basis of material or information or documents in his possession. In this case, the comparables given by the assessee had not been found reliable by the TPO for various reasons given and accordingly he had proceeded to select his own comparable which could not be faulted with on the facts of the case. He also referred to the decision of Mumbai bench of Tribunal in case of Willis Processing Services (57 SOT 339) in which it was held that there was no embargo on the TPO to carry out a fresh search and there was no limit fixed in the Act or in the Rules on the number of comparables which could be used. As regards the claim of abnormal expenses on the ground of low capacity of utilization, it was submitted that it was difficult to standerdize capacity in case of manufacturing of jewellery as there is a wide variation in consumption of time and labour in manufacturing of different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Hon'ble High Court have held that in cases where conditions mentioned in section 92 C (3) are satisfied TPO/AO could proceed to determine the arm's length price on the basis of material or information or documents in his possession. One of such conditions prescribed in clause (c) of section 92 C (3)is that in case information or data used in computation of arm's length price given by the assessee are not reliable or correct, he can proceed to determine the arm's length price on his own. In this case the AO/TPO have not found the certain comparables reliable and, therefore, in such cases it is within the power of TPO to proceed to select his own comparables and determine adjustment taking into account material or documents in his possession. This aspect had also been considered by the Mumbai Bench of Tribunal in case of Willis Processing Services (I) (P.)Ltd. (supra) in which it was held that there was no embargo on the TPO to carry out a fresh search and there was no limit fixed in the Act or in the Rules on the number of comparables which could be used. We, therefore, see no merit in the objection of the assessee against the selection of more comparables by the TPO. The obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any reason. We have carefully perused the copy of annual report in respect of the said company placed on record. We find, that the said company was manufacturing as well as trading for which consolidated account had been maintained. The auditors in the note no. 7 have clearly mentioned that there were two reportable segment i.e. jewellery manufacturing and investment activity. The turnover of jewellery manufacturing segment has been given at 94.1 crore which also includes trading. Therefore, no separate data in respect of manufacturing is available. Moreover the learned DR has pointed out that there are related party transactions in that case more than 16%. In such a situation, the said company in our view, cannot be considered as comparable to the case of the assessee and it has been rightly rejected. 8.5 However, we find, merit in the submissions of learned AR that adjustment in case of the manufacturing segment has been made on the total turnover and not limited to transactions with AE. The sales of AE was Rs. 7,88,70,082/- and, therefore, the AO is required to compute the cost of such sales by applying margin in case of the assessee which was (-)5.41%. Thereafter, PLI of 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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