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TMI Blog2014 (8) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... ck company and subsequently, pursuant to the scheme of Merger as sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) vide its order dated 22.12.2008, it was merged with Rieter India Pvt. Ltd. with retrospective effect from 01.04.2007. The assessment year under consideration before us is 2006-07. The appellant company is engaged in the manufacturing of textile spinning machines, parts and components. For the assessment year under consideration, it filed a return of income on 28.11.2006 showing a net loss of Rs. 3,71,99,855/-. Apart from being engaged in the business of manufacture of textile spinning machines, parts and components, its activities also comprised of post-sales services support for such products in India and abroad. The assessee company also imports components and parts for manufacturing Ring Spinning machines, and other parts and components namely TOP Rollers, Bottom Rollers, Top Arms Inserts. Components are also imported as per the requirements of customers who purchase the textile manufacturing machines. For the assessment year under consideration, assessee was found to have entered into international transactions with its associated enterpris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d he accordingly re-worked assessee's net profit margin after excluding the aforesaid income. This resulted in operating margin of the assessee at (-) 24.55%. As a result, the TPO worked out an upward adjustment of Rs. 8,11,47,490/- to the international transactions of the assessee. The Assessing Officer has adopted the aforesaid adjustment for the purposes of computing total income of the assessee with respect to the international transactions with the associated enterprises. The objections raised by the assessee before the DRP were dismissed and accordingly the final assessment order made by the Assessing Officer u/s 143(3) r.w.s. 144C of the Act dated 2309.2010 contained an addition of Rs. 8,11,47,419/- to the returned income. The said addition is the subject-matter of dispute before us. 4. At the time of hearing, learned Representative for the assessee referred to an application dated 07.03.2012 made by the assessee under rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 (in short "the Appellate Tribunal Rules) seeking permission to produce additional evidence in support of its ground challenging the addition of Rs. 8,11,47,419/- made to the total income by way of upw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally, written comments dated 07.05.2012 have been filed and at the time of final hearing on 12.06.2014, another written comments dated 24.09.2013 made by the Assessing Officer have also been furnished by the learned CITDR appearing for the Revenue. We deem it fit and proper to reproduce the relevant extract from the comments offered by the Assessing Officer on two different occasions i.e. of 07.05.2012 and 24.09.2013 (supra). The comments dated 07.05.2012 read as under :- "1. The additional evidences mentioned at sr. no. 1, 2, 3 and 5 in the above table may be permitted to file. However, the Appellant has not submitted the specific details alongwith the amounts which are sought to be used and its impact on the determination of arm's length price. Therefore, at this stage, it is difficult to comment on the relevance as well as accuracy of the data sought to be used by the Appellant. 2. Further, the Appellant had not raised the ground of working capital adjustment either before the TPO/AO or before the DRP, Pune or before ITAT. Therefore, the same may not be allowed at this stage before ITAT. 3. The additional evidences mentioned at sr. no. 4 in the above table shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no objection for submission of the additional evidence. However, it may be brought to be notice to the Hon'ble ITAT, that similar situation has been dealt with by Pune ITAT in the case of Vishay Components, AY 2006-07 (ITA 133/PN/11), In this case, TPO had rejected one of the comparable on the groud that it was a sick company and referred to BIFR. The ITAT has rejected the contention of the department and has directed to include the company in comparability analysis. Audited segmental profitability statement of the Appellant for the year under consideration. As per the 3CEB report, the assessee company had benchmarked all the transactions except for export of goods by using the TNMM Method. The transactions of export of goods were benchmarked by using Cost Plus Method. However, on verification of the Transfer Pricing report submitted by the assessee during the course of proceedings, the TPO observed that the assessee had aggregated all the transactions and had applied the Transactional Net Margin Method (TNMM) on aggregate level considering the data of the entire company as a whole. Now the assessee once again want to change the analysis method. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is nothing but an afterthought and if the same is admitted for adjudication it would amount to altering the entire transfer pricing analysis originally carried out by the assessee in its transfer pricing study. 9. We have heard the rival parties with respect to the preliminary prayer of the assessee seeking admission of the aforesaid additional evidence in terms of rule 29 of the Appellate Tribunal Rules. At the outset, we may reproduce hereinafter rule 29 of the Appellate Tribunal Rules which reads as under :- "29. Production of additional evidence before the Tribunal.- The parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or, if the income-tax authorities have decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them, or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affida ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow additional evidence not only if it requires such evidence to enable it to pronounce judgement', but also for 'any other substantial cause'. There may well be cases where even though the Court finds that it is able to pronounce judgement on the stage of record as it is, and so it cannot strictly say that it requires additional evidence to enable it to pronounce judgement, it still considers that in the interest of justice something which remains obscure should be filled up so that it can pronounce its judgement in a more satisfactory manner. Such a case will be one for allowing additional evidence for any other substantial cause under rule 27(1)(b) of the Code. Such requirement of the Court is not likely to arise ordinarily unless some inherent lacuna or defect becomes apparent on an examination of the evidence. It may well be that the defect may be pointed out by a party, or that a party may move the Court to supply the defect, but the requirement of the Court upon its appreciation of the evidence it stands." 10. It is in this background, we may now proceed to consider efficacy of the assessee's instant plea for admission of additional evidence. The additional evidence so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to an addition of Rs. 8,95,141/- made by the Assessing Officer which represented assessee's claim for deduction on account of product warranty liability. The claim of the assessee was that the Provision for warranty was claimed as a deduction in view of the decision of the Hon'ble Supreme Court in the case of Rotork Controls India P. Ltd. vs. CIT, (2009) 314 ITR 62 (SC). The DRP dealt with the issue in the following manner :- "6.5. Warranty Provision: The objections raised in this matter have been already noted. The Assessing Officer has disallowed the assessee's claim on account of provision for warranty mainly on the ground that the said provision was only an arrangement for setting apart of money for a contingent liability and till that liability became real, there was no expenditure. We cannot confirm the stand thus taken by the Assessing Officer, more so when he has not considered such relevant factors as (a) whether or not the warranty in terms of the contract as well as past results could be treated as an integral part of the sale price, (b) whether or not the assessee in view of the past experience / records could be said to have had a present obliga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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