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TMI Blog2014 (1) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... by cherry picking them rather than on the basis of analysis of the functions and risks undertaken and has consequently violated the provisions of Rules 10B(2) of the Rules and additional comparable selected by TPO be rejected on account of dissimilarity of functions. e) The TPO has erred in selecting the Net Cost Plus Mark-up ('NCP') as the Profit Level Indicator (PLI') as against Net Profit Margin ('NPM') selected by the assessee for benchmarking its international transaction under consideration. f) The TPO has erred in making adjustment on the total turnover of the company instead of making an adjustment only on the international transaction under consideration as enumerated under section 92(1) and 92(B) of the Act. g) The TPO erred in not applying the provisions of the second proviso to Section 92C(2) of the Act insofar, as the benefit of the +/-5 percent variation has not been allowed to the Assessee. h) The learned A.O. erred in not considering segmental profitability of assessee. i) The Assessee had submitted details in the course of DRP proceedings wherein it had pointed out about the revision/ correction required in the Margins of comparables selected by AO. However, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the assessee before the learned DRP that the correct net profit margin of 11 comparables is 5.79%, therefore, the correct net profit margin of comparables should be applied; Loss making company should not be rejected as the same are functionally comparable companies; segment profitability of the assessee be considered; additional comparable selected by the TPO should be rejected on account of dissimilarity of the functions and safe harbor of 5% should be provided as standard deduction. On these submissions of the assessee, learned DRP has passed an order dated 27-9-2012. In pursuance of aforementioned directions of learned DRP, the impugned assessment order has been framed. Aggrieved, the assessee has filed the aforesaid grounds of appeal. 4. At the outset, it was submitted by the learned AR that though in the grounds of appeal the assessee has expressed various grievances but the main grievances of the assessee are as follows :- (i) The TP adjustment should be restricted to the international transactions with AE and learned TPO as well as learned DRP have committed an error of law in applying the arms length price at entity level; (ii) While computing the net margin of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 72(2) & 72(3) of the Act, have observed as follows :- "11. We have perused the above sections. Under s. 32(2) of the Act, a legal fiction has been created that unabsorbed depreciation of the earlier year shall form part of the current year's depreciation allowance and, therefore, it shall have to be dealt with accordingly subject, however, to the provisions of ss.72(2) and 72(3) of the Act. Thus, under s. 72, the unabsorbed depreciation shall be carried forward to a subsequent year and it shall be deemed to form part of that year's depreciation and shall be set off against the profits of that year subject to the provisions of sub-s.(2) thereof. From these provisions, it is clear that before setting off the carried forward unabsorbed depreciation of the earlier year, the depreciation of the current year shall have to be deducted and then after setting off of the loss, the unabsorbed depreciation, which is also treated as current year's deprecation, shall be adjusted." (b) CIT Vs. Gujarat State Warehousing Corporation, reported in (1976) 104 ITR 1 (Guj), wherein it has been held that current depreciation has to be set off first, then carried forward losses and then unabsorbed dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and due to impact of foreign exchange fluctuations. The AO has written that the assessee could not file supporting evidences. However, we find that it is not clear from the assessment order, whether the AO called for any evidence in support of increase in material cost and manufacturing expenses. Further, while computing the GP rate for the year, for the purpose of comparison with the earlier year, the AO had not made any allowance for TP adjustments, which would also have impact on the GP rate and, therefore, making the additions on both the counts would result in double addition. The matter, in our view, requires fresh examination. We, therefore, set aside the order of the AO and restore the matter back to him for passing a fresh order after necessary examination in the light of observations made above and after allowing opportunity of hearing to the assessee . 6. In the result, the appeal of the assessee is allowed for statistical purpose." 6. On the other hand, learned DR relied upon the order passed by the AO. 7. We have heard both the parties and their contention have carefully been considered. So far it relates to grievance of the assessee that the TP adjustment can only ..... X X X X Extracts X X X X X X X X Extracts X X X X
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