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TMI Blog2014 (4) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... er unit costs, which, in turn, results in lower profits - CIT(A)'s approach is reasonable in this regard and the adjustments are on a conceptually sound basis – Decided against Revenue. Allowability of comparables – Held that:- CIT(A) rightly held that the decision in DCIT v. Quark Systems (P.) Ltd [2009 (10) TMI 591 - ITAT, CHANDIGARH] followed - there cannot be any estoppel against pointing out assessee's own errors in selection of comparables and that aspect of the matter is to be decided on merits, and on merits as also since the AO has not made any submissions against the same in remand report, these additional comparables can be accepted – thus, there is no need to interfere in the findings of the CIT(A). Exclusion of comparable - Major dissimilarities between the tested party and the comparables – Held that:- There cannot be a cherry picking for deciding parameters of rejection of a comparable, and the parameters have to be broad enough of being general application - In the scheme of things envisaged under the TNMM, it is inevitable that there will be some differences between the comparables and the tested party but the impact of these differences is substantially miti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis. Carrier Aircon Ltd. and Whirpool of India Ltd. which were not used by the A.O. and one comparable Videocon International has been excluded on the basis of functional profile. 4. So far as first ground of appeal is concerned, the issue in appeal lies in a very narrow compass of material facts. The assessee is engaged in the business of manufacturing and sale of colour television sets. During the course of assessment proceedings, the international transactions entered into by the assessee with its AEs were referred to the Transfer Pricing Officer for determination of arm's length price. The assessee had used the TNMM with net profit margin on sales as profit level indicator. While this method was accepted by the TPO as well, one of the issues on which TPO did not agree with the assessee was adjustments for capacity utilization. The TPO rejected the assessee's claim for capacity utilization on the ground that, all the comparables are also operating in same economic environment and all are playing same game of price cutting and volume generation and therefore, any adjustment on account of these two factors ( i.e. capacity adjustment and risk adjustment) will change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or affecting net profit margin in the open market because lower capacity utilization results in higher per unit costs, which, in turn, results in lower profits. Of course, the fundamental issue, so far as acceptability of such adjustments is concerted, is reasonable accuracy embedded in the mechanism for such adjustments, and as long as such an adjustment mechanism can be found, no objection can be taken to the adjustment. In our considered view, the learned CIT(A)'s approach is reasonable in this regard and the adjustments are on a conceptually sound basis. In any case, as pointed out by the learned counsel, the adjustments so directed by the learned CIT(A) have duly been made by the Assessing Officer, and there have been no issues regarding implementing these adjustments. We approve the conclusions arrived by the CIT(A) on this issue and decline to interfere in the matter. 6. Ground No. 1 is thus dismissed. 7. Coming to the second ground of appeal, we find that this grievance has two facets - first, against the admission of two new comparables by the CIT(A) and - second, against CIT(A)'s exclusion of a comparable which was used by the Transfer Pricing Officer in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat when assessee himself has discarded these comparables at the stage of assessment, it should not be open to him to pick the same comparables at the appellate stage. However, as learned representatives agree, this issue is now covered, in favour of the assessee, by a special bench decision in the case of Quark Systems (supra). In this view of the matter, and having regard to the entirety of the case, we approve the stand of the CIT(A) and decline to interfere in the matter. That takes us to Assessing Officer's grievance against CIT(A)'s excluding the one comparable, i.e. Videocon International, on the ground that there are major dissimilarities between the tested party and this comparables. During the course of hearing, the assessee was asked to demonstrate that this kind of an analysis, as was done to argue on unsuitability of Videocon International, was also done on the other comparables. Learned counsel admittedly his inability to do so but fairly accepted that the matter can be remitted to the file of the learned CIT(A) for fresh adjudication by applying uniform norms on the analysis of all the entities picked up as comparables. Learned Departmental Representative was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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