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TMI Blog2017 (1) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... es are comparable to the respondent assessee even on the parameters laid down in Rule 10B(2) of the Rules. Therefore, if in the present facts, the Revenue seeks to discard the two companies SEL and VTI from the comparables for the subject assessment year, the onus would be upon the Revenue to justify the same. The issue with regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court for earlier assessment years against the Revenue and in favour of the respondent assessee. So far as depreciation is concerned, we find that the analysis done by the Tribunal to include DEPB benefit to hold it to be an operating revenue to determine operating profit, would be equally applicable in case of depreciation for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and despite the prescription of parameters of comparability by Rule 10 B(2) of the Income Tax Rules, 1962, the Tribunal was correct in law, in directing the inclusion of DEPB in turnover and depreciation in net profit for the purpose of profit margin of comparables and assessee? 3. Regarding question (i) : (a) The respondent assessee is inter alia engaged in the business of exporting bathrobes and towels. During the subject assessment year, the respondent assessee had entered into international transactions and exported bathrobes / towels to its Associated Enterprises (AE). In its transfer pricing study, the respondent assessee determined the Arms Length Price (ALP) of exports to its A.E. by bench marking the price of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee's sales to A.E. (c) Being aggrieved, the respondent assessee carried the issue in appeal to the Tribunal. The impugned order records the fact that the two companies viz. SEL and VTI which have been excluded from the list of comparables for the subject assessment year were in fact accepted / adopted by the Revenue in the immediately preceding Assessing Year 200708. The Tribunal further held that the comparables were not shown to be consistent loss making companies. Further, the impugned order places reliance upon Rule 10B(2) of the Income Tax Rules, 1962 to hold that merely because the comparable has made a loss in one year would not ipso facto result in its exclusion from the comparable analysis. Thus, allowed the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assets employed or to be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the law and Government orders in force, costs of labour and capital in the markets, overall economics development and level of competition and whether the markets are wholesale or retail. (f) From the reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even on the parameters laid down in Rule 10B(2) of the Rules. Therefore, if in the present facts, the Revenue seeks to discard the two companies SEL and VTI from the comparables for the subject assessment year, the onus would be upon the Revenue to justify the same. (h) In the above view, in the present facts, the the view taken by the Tribunal in the impugned order is a possible view. Accordingly, question (i) as proposed does not give rise to any substantial question of law. Thus, not entertained. 4. Regarding question (ii) : (a) The TPO while arriving at the ALP for the export of bathrobes and towels had excluded the DEPB benefit and depreciation while arriving at the operating profits and total cost respectively of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to the claim of depreciation. Therefore, the DEPB was includable in arriving at the operating profit and depreciation was includable while arriving at the total costs of the respondent assessee as the same is not excluded in arriving at the profits of the comparable companies. (d) We find that so far as exclusion of DEPB benefit in arriving at the operating profit of the respondent assessee is concerned, the order of the Tribunal for the Assessment Years 200506 and 200708 were appealed by the Revenue to this Court. Mr. Suresh Kumar, learned Counsel appearing for the Revenue very fairly states that this very issue was raised by the Revenue in its appeal before this Court for the earlier assessment years being Income Tax Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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