9911796707
TMI Blog2016 (2) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... laring income of Rs. 30,17,24,880/-,which was subsequently revised for claiming TDS amount. The assessee company, a 100% subsidiary of Carrier Corporation, USA, in the relevant assessment year was involved in the business of manufacture, assembly and sale of transport, air-conditioning commercial refrigeration equipments. During the year, under a scheme of arrangement and amalgamation, Carrier Aircon was merged with erstwhile Carrier Refrigeration India as a going concern. The assessee also provided market support activity in respect of direct sales made by group entities in India. 3. Ld. TPO noticed that the assessee operates through three Divisions viz. Transport Division, Refrigeration Division and Air-conditioning Division. The interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal transactional margins earned by the assessee on sale of various products using raw material purchased from unrelated entities. The assessee's contention was that operating profit margin earned on the international transaction was -6.13% as against -9.30% on the internal comparable transaction. 5. With regard to the export of finished goods, ld. TPO noticed that assessee had earned margin of -4.32% on cost and it had compared the same with internal comparable margins of -8.51% earned on sale of goods using raw material purchased from unrelated entities. 6. In the case of Air-conditioning Division, the TPO noticed that the transactions relating to import of raw material and components and imports of finished goods had been benchmarked u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in facts and circumstances and law by considering Subros Ltd, which is functionally non comparable to transportation division of the assessee, determining the Arm's length price. 5. That the TPO/DRP erred in law and facts of the case by accepting Subros Limited with significant party transactions as comparable to the transportation division of assessee. 6. That the TPO/DRP erred in not allowing appropriate adjustment for differences in economic circumstances, functions performed and risk assumed by the assessee vis-a-vis comparable companies. 7. That the TPOIDRP have erred in law in not allowing the assessee the benefit of variation of 5 percent in determining the Arm's Length Price in accordance with the Proviso to sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Refrigeration Division being further divided into two segments viz. Segment "B" - which dealt in industrial refrigeration systems and segment "C" - which dealt in commercial refrigeration system. The assessee in its TP study pointed out that products under commercial refrigeration system of the Refrigeration Division (Segment C) were assembled/ manufactured from raw-material and components procured from unrelated entities and none of this Division's requirements were met from its AEs. Accordingly, this was considered as internal comparable for comparing the same with Segment "A" being Transportation Division and also segment "B" being industrial refrigeration segment. The main plea of assessee was that internal comparable transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Subros Ltd. and after considering the assessee's submissions adopted the operating profit margin of 6.98% and computed the adjustment to be made to ALP as under: Operating revenue earned by the assessee : 39,18,44,000/- Op. profit at 6.98% : 2,73,50,711/- Loss booked by the assessee : 2,40,19,000/- Difference : 5,13,69,711/- 13. These findings were confirmed by ld. DRP, inter alia, observing as under: "As has been found that the Segment A of the assessee deals with Bus and Truck refrigeration systems and the same is entirely different from the Segment C, which deals in the manufacturing for unrelated parties. Thus, the TPO has rightly rejected the comparability analysis undertaken by the assessee on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders of lower revenue authorities that they have not carried out detailed functional comparability and have rejected the assessee's claim on broad parameters without going into the actual substance of functions carried out by segment 'A' and 'C'. Under such circumstances, we are of the opinion that consideration of function performed by these two segments require technical expertise and, therefore, keeping in view the decision of Hon'ble Apex Court in the case of Bharti Cellular, it would be proper, as agreed by ld. counsel for assessee, to restore the matter to ld. TPO with liberty to both the parties viz. assessee and ld. TPO to take the services of technical experts in the field before coming to any conclusion. 17. Ld. CIT(DR) submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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