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TMI Blog2016 (2) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... y allowing ld. TPO to examine the correctness of the segmental details furnished by assessee, which were not disputed by the ld. TPO, particularly when ld. TPO himself accepted the segmental details and also accepted the results of Segment “B”. If we accept the plea of ld. CIT(DR) then it would imply that even Segment “B” results will have to be examined afresh, if the Segment C details are not found to be correct. The very premise of the proceedings cannot be altered while setting aside the matter because it is not a case where entire order of ld. TPO is not acceptable to assessee. - ITA no. 5123/Del/2010 - - - Dated:- 12-2-2016 - SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI KULDIP SINGH: JUDICIAL MEMBER For The Appellant : Shri Deepak Chopra Adv. Shri Harpreet Singh Adv. Shri Rohan Khare Adv For The Respondent : Shri Amrendra Kumar CIT (DR) ORDER PER S.V. MEHROTRA, A.M: This is assessee s appeal against the assessment order dated 21.09.2010 passed u/s 143(3) in pursuance to DRP s directions u/s 144C of the Act, relating to AY 2006-07. 2. Brief facts of the case are that the assessee E-filed its return of income on 30.11.2006 declaring income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Cost Recharge by CARL 4,82,76,568/- 9. Cost Recharge to CARL 1,19,59,347/- 4. Ld. TPO noticed that in the Transportation and Refrigeration Division the transactions relating to import of raw-material and components and import of finished goods had been benchmarked, using TNM method with operating margin on operating revenue as Profit Level Indicator ( PLI ). In respect of export of manufactured finished goods it had used TNM method with operating profit earned on operating cost as the PLI. He observed that the transactions relating to import of raw material and finished goods had been compared with the aid of internal 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 go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, 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 section 92C of the Act. 9. Ground nos. 1,2 and 6 are general and require no adjudication. Ground no.7 was not pressed at the time of hearing and stands dismissed accordingly. 10. The main dispute in the present appeal is in regard to the internal comparable adopted by assessee being segment C - commercial refrigeration for justifying the PLI of Transport Division being segment A . In order to appreciate this controversy, it is necessary to examine the assessee s business model. In its TP study, the assessee has pointed out that in FY 2005-06 it operated through the following business divisions: (a) Transport Division, which dealt in refrigeration and cooling of all movable systems Bus air-conditioning, truck refrigeration and container refrigeration. (b) Refrigeration Division dealt in industrial and commercial refrigeration systems cold rooms, freezers, vizi-coolers etc. (c) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that the function related to transport refrigeration could not be compared to the refrigeration considered in Segment C because of the fact that the assessee itself had considered these as separate lines of business viz. Transport and Refrigeration Divisions. He, therefore, concluded that there existed no internal comparable for the Transport Division, which was Segment A . Accordingly, he carried out search for external comparable and selected 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld before coming to any conclusion. 17. Ld. CIT(DR) submitted that if the matter is to be restored back to the TPO, then de novo exercise should be carried out and the segmental results of assessee should also be examined afresh. This plea of ld. DR was vehemently opposed by ld. counsel for the assessee pointing out that when ld. TPO has not disputed the segmental details, then at this juncture the entire process cannot be reversed, particularly when the segmental details have been utilized by ld. TPO while accepting the assessee s results in regard to Segment B . 18. We are in agreement with ld. counsel for the assessee that by setting aside the matter to the file of ld. TPO, the controversy cannot be enlarged by allowing ld. TPO to examine the correctness of the segmental details furnished by assessee, which were not disputed by the ld. TPO, particularly when ld. TPO himself accepted the segmental details and also accepted the results of Segment B . If we accept the plea of ld. CIT(DR) then it would imply that even Segment B results will have to be examined afresh, if the Segment C details are not found to be correct. The very premise of the proceedings cannot be alter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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