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TMI Blog2016 (5) TMI 1491X X X X Extracts X X X X X X X X Extracts X X X X ..... the writing back of balance and writing off the balance had made the adjustment. The balance written back was offered for taxation by the assessee. Therefore, we fail to understand that how the TPO proposed the adjustment. DRP had rightly deleted the addition but we are surprised to notice that in such a straight case the department has decided to file an appeal. It shows lack of judicial discretion on part of the officers who have recommended/approved the appeal. Such frivolous appeal not only waste the time of the Tribunal, but also increase the burden of the DRs unnecessarily. In our opinion, there is no need to interfere with the order of DRP. So confirming its order we decide second effective ground against revenue. Working capital adjustment - HELD THAT:- As far as the request of the assessee to consider 39,056/- as working capital adjustment, we would like to state that same could be granted as it has already suffered taxation. X X X X Extracts X X X X X X X X Extracts X X X X ..... rked the PLI Particulars Ref. Rupees Sales 45,791,463/- Total Income A 45,791,463/- Manufacturing expenses 14,068,232/- Servicing costs (including tools) 1,158,052/- Employees Costs 20,640,971/- Administration Cost 6,020,385/- Total Expenses B 41,887,640/- Net Profit CCMf(A-B) 3,903,823/- Net Profit as % of cost C/B*100 9.32% The updated PLI of the comparables was found to be at 4.76%. S.N. Name of the Company NCP(%) based on 3 years data NCP(%) FY 09-10 1. Anup Malleables Ltd. 12.60 24.44 2. Bloom Industries Ltd. 0.00 (17.21) 3. De Two Forging Pvt. Ltd. 16.29 11.70 4. Metal Coatings (India) Ltd. 2.45 4.18 5. Omax Autos Ltd. 3.71 3.71 6. Rishi Laser Ltd. 1.71 1.71 Arithmetic Mean 6.13 4.76 The TPO rejected four comparables giving the following reasons: Comparable Reason for Rejection by TPO Bloom Industries Functionally different- disclosed primary segment as business segment Metal Coatings (India) Ltd. Functionally different- company is engaged in manufacture and sale of steel strips cold rolled -CR flat wire strips Omax Autos Functionally different- company engaged in manufacture and sale of auto components for 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified by it had primary income on account of job work charges, that they were performing CMf services for other persons, that if close product comparability was to be insisted upon for accepting the comparables the TPO should have rejected the remaining two comparables also, that the remaining two comparable companies were engaged in CMf of steel casting and cold forging, that both were not comparable to the products manufactured by the assessee, that if product comparability was to be used as a yardstick to identify comparables then all comparables identified by the assessee ought to have been rejected, that the TPO was inconsistent in rejecting four comparables and accepting remaining two comparables which suffered from same deficiency. 4. DRP was of the opinion that the argument of either rejecting all or accepting all the comparables was a valid argument. It directed the assessee to furnish an alternate set of comparables. In pursuance of the directions of the DRP, the assessee filed a fresh set of comparables by conducting a structured search process of six more comparable cases that were engaged in manufacturing of product more closely comparable to the assessee. Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to 4.76% as against assessee's margin of 9.32%, that the TPO rejected four comparables out of the six on the ground that they were functionally different, that he selected two comparables for determining the ALP, that he proposed an adjustment of ₹ 36,65,159/-, that the Tribunal found force in the argument of the assessee that there was no valid basis for rejecting or accepting the comparables, that the remaining two comparables, finally selected by the TPO, were not manufacturing the products that were manufactured by the assessee, that the DRP directed the assessee to file fresh set of comparables, that it furnished a new set of six comparables, that the new sets were forwarded to the TPO for his comments, that after considering the available material the DRP deleted the addition. We have gone through the remand report of AO (Pg. 246-48 of the PB.) We find that the TPO had not dealt with the core issue i.e. rejecting/accepting the comparables selectively. All the comparables submitted by the assessee before him were engaged in the job work segment. He had simply stated that four of the comparables were functionally different. But, he has not brought on record as to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er four comparables. In the TNMM what is to be seen is functional comparability and not the product comparability. If the TPO wanted to emphasis on product comparability, then he should not have accepted the remaining two comparables. Considering the above, we are of the opinion that the order of the DRP does not suffer from any infirmity. First effective Ground (GOA 1 & 2) is decided against the AO. 7. Next Ground of appeal is about allowing the claim of bad debts. During the TP proceedings, the TPO observed that the assessee had written off/written back certain amounts in respect of its overseas AE, that it had claimed that same were no longer receivable/payable. He held that assessee had not furnished any evidence in that regard, that it was also not clear as to what was the nature of bad debts, that the TP report and the accounts of the assessee did not indicate any substantial reason for writing off/writing back the amounts in question, that the bad debts could not be accepted as arm's length. Finally he made an adjustment of ₹ 13.00 lakhs. 7.1 Aggrieved by the order of the TPO/AO the assessee filed objections before the DRP. Before it the assessee argued that bala ..... X X X X Extracts X X X X X X X X Extracts X X X X
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