9911796707
TMI Blog2017 (2) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Act and Rules has clearly laid down the principle that the turnover filter is an important criteria in choosing the comparables because significant differences in size of the companies would impact comparability even there is no functional difference in their activities. 3. Whether on the facts and circumstances of the case the Hon. ORP failed to appreciate that the said stance is also upheld in various cases by the courts such as Sony India 114 ITO 448 (Del)(2008)? 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. In the cross objection, the assessee has raised the following Grounds of appeal:- "1. The learned Assessing Officer has erred in raising the ground related to turnover filter in respect of the comparable Anshumi Commercials Ltd. as the same was rejected as "not found functionally comparable", whereas the following entities in Diamond Business were selected based on "criteria of functional similarity" inspite of they having huge difference in turnover when compared to turnover of the appellant at Rs. 32.32 crores. Comparable Total Turnover (Rs. In Crores) Turnover in Diamond (Rs. In Crores) Sunraj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgin was 6.82%, he determined an adjustment ofRs.1,27,21,348/- which according to him was required to be made in order to compute the arm's length price of the international transactions in an order passed under section 92CA(3) of the Act dated 16/01/2013. As a consequence of the order of the Transfer Pricing Officer, the Assessing Officer, passed a draft assessment order dated 08/03/2013, against which assessee raised objections before the DRP. The DRP has passed an order dated 01/11/2013 giving certain directions to the Assessing Officer in order to finalize the assessment . One of the directions given the DRP was to the effect that M/s. Anshuni Commercials Ltd.,which was not included in the final set of comparables by the Transfer Pricing Officer, be included as a comparable. Following the said direction, the Transfer Pricing Officer recomputed the arms length price of the international transactions and found that the arithmetic mean of the expanded set of comparables (by including M/s. Anshuni Commercials Ltd) came to 10.41%, against which assessee's margin was 6.82%. Since the assessee's margin was within +/- 5% range, the Transfer Pricing Officer held that no further adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said aspect of the controversy is not manifested in the Grounds of appeal raised by the Revenue, which only encompass a plea that the DRP erred in deciding that the turnover was not a valid criteria in selection of the comparables. Therefore, on this point itself, the present appeal of the Revenue is unsustainable. 8.1 Be that as it may, we may also now take up for consideration the plea of the Revenue as manifested in the Grounds of appeal raised before us . Going back to the discussion of the DRP in para-9, which is reproduced above, it can be seen that apart from establishing functional comparability with the assessee, the DRP found that the total sales of M/s.Anshuni Commercials Ltd. was only Rs. 79.80 lacs, whereas that of the assessee was Rs. 33.32 crores. The DRP noted that such difference in turnover is not a valid criteria to exclude a concern from the list of comparable so long as it is otherwise functionally comparable. The Revenue seeks to assail the premise of the DRP that difference in turnover cannot be regarded as a valid criteria in order to include or exclude a concern from the final set of comparables. In other words, as per the Revenue, turnover is a deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital Trust Ltd. was wrongly excluded, on the basis of difference in turnover, especially after it was found that the activities of M/s. Capital Trust Ltd. were comparable with those of the assessee. The aforesaid decision of the Tribunal was sought to be contested by the Revenue before the High Court on the ground that the reason for exclusion of M/s. Capital Trust Ltd. was sound and reasonable and that the Tribunal erred in over- emphasizing the size of turnover in relation to said concern. The Hon'ble High Court disagreed with the Revenue and noted the conclusion of the Tribunal that turnover filter was not applied by either of the parties at any stage. As per the Hon'ble High Court, the issue as to whether the turnover filter is an appropriate one and applicable in a case cannot be answered in the abstract and is entirely fact-dependent. The Hon'ble High Court further noted that the record of the case before it indicated that the Transfer Pricing Officer chose to apply the turnover filter in an inconsistent manner so as to exclude only the concern M/s. Capital Trust Ltd., which was impermissible. Pertinently, the Hon'ble High Court noted that turnover filter was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
