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TMI Blog2019 (6) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that it incurred losses during the year. However, as pointed out by the CIT(A), the said concern was not persistent loss making concern and in such circumstances, there is no merit in excluding Hindustan Motors from the final list of comparables. Accordingly, we uphold the order of CIT(A) in this regard and dismiss ground of appeal No.2 raised by the Revenue Economic adjustment on import duty and adjustments to be allowed on account of capacity under utilization - HELD THAT:- The assessee is in second year of operation and has pointed out that it has only utilized 33% of the total capacity whereas the comparables have on an average utilized 50 to 70% of the total capacity and hence, the margins of the comparables need to be adjusted accordingly. The Delhi Bench of the Tribunal in DCIT Vs. Class India Pvt. Ltd. [ 2015 (8) TMI 755 - ITAT DELHI] has laid down the procedure for computing capacity utilization adjustment under the TNM method. Hence, we hold that the said procedure be applied by the Assessing Officer/Transfer Pricing Officer to work out the adjustment on account of capacity utilization. - Decided against revenue - ITA No.154/PUN/2011, CO.34/PUN/2011 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Rules, 1962 as well as the decision of Hon'ble ITAT in case of Global Vantedge Pvt. Ltd. (2010-TIOL-24-ITAT-DEL). 6. Without prejudice to the above, the Hon'ble CIT(A) erred in neither specifying the quantum of adjustment on account of under utilization of capacity, which is to be allowed to the Appellant nor suggesting any methodology for determining such quantum of adjustment. 7. The order of the AO be restored and that of the CIT(A) be vacated. 8. The appellant craves leave to add, amend or alter any grounds of appeal. 4. The Revenue is in appeal against the order of CIT(A) while deciding the issues raised in relation to the Transfer Pricing provisions. 5. Briefly, in the facts of the case, the assessee had filed original return of income declaring total income of ₹ 1,70,07,180/-. The assessee had entered into several international transactions with its Associated Enterprises. The Assessing Officer made reference to the Transfer Pricing Officer for determining the Arm s Length Price of the purchases and services availed by the assessee company u/s.92CA(1) of the Act. The Transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame the inclusion of Honda Siel, Hyundai Motors and Maruti Udyog in the final set of comparables was not warranted. Reference was made to Rule 10B(1)(e)(iii) of the Income Tax Rules in this regard. With regard to Hindustan Motors where the plea of the assessee was that it was functionally comparable and it was not a consistent operating loss making company; the CIT(A) did not agree with the order of the Assessing Officer/Transfer Pricing Officer, since Hindustan Motors had made operative profit of 0.11% during financial year ending 31-03-2003. The CIT(A) thus directed the Assessing Officer to include Hindustan Motors in the final set of comparables. 7. The next issue which was decided by the CIT(A) was the adjustments on account of high level of imports and under utilization of the capacity. Relying on the earlier orders and the decisions of other cases, this adjustment was also allowed to the assessee. The Revenue is in appeal against the order of CIT(A). 8. Ground of appeal No.1 by the Revenue is against exclusion of Honda Siel, Hyundai Motors and Maruti Udyog from the final set of comparables on the ground that the quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly any RPT filter but the CIT(A) had applied RPT filter of 15% and the three concerns were excluded in the hands of the assessee. In view thereof, we find no merit in the issue raised by the Revenue vide ground of appeal No.1. We hold that the RPT filter needs to be applied in the present set of facts and the three concerns having not fulfilled RPT filter cannot be included in the final list of comparables. In the case of assessee itself, the Assessing Officer / TPO had applied RPT filter of 25% in assessment year 2005-06. Hence, there is no merit in plea of Revenue. Ground of appeal No.1 by the Revenue is dismissed. 14. The issue raised vide ground of appeal No.2 is against the inclusion of Hindustan Motors as functionally comparable. The case of the Assessing Officer was that it cannot be included in the final list of comparables on the ground that it incurred losses during the year. However, as pointed out by the CIT(A), the said concern was not persistent loss making concern and in such circumstances, there is no merit in excluding Hindustan Motors from the final list of comparables. Accordingly, we uphold the order of CIT(A) in this regard and dismiss ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjusted accordingly. 20. The Hon ble Bombay High Court in CIT Vs. Petro Araldite (P) Ltd. (supra) had held that while computing the Arm s Length Price wherein adjustments need to be made in the hands of the comparables and where there was difference in level of capacity utilization of assessee and level of capacity utilization of the comparables, then adjustment would be required to be made to provide margins of the comparables in terms of Rule 10B(1)(e)(iii) of the Income Tax Rules. Similar is the proposition laid down by the Pune Bench of the Tribunal in Tasty Bite Eatables Ltd. Vs. ACIT (supra) and Vishay Components Pvt. Ltd. Vs. ACIT (supra). 21. The Delhi Bench of the Tribunal in DCIT Vs. Class India Pvt. Ltd. has laid down the procedure for computing capacity utilization adjustment under the TNM method. Hence, we hold that the said procedure be applied by the Assessing Officer/Transfer Pricing Officer to work out the adjustment on account of capacity utilization. We direct accordingly. The Grounds of appeal No.5 and 6 by the Revenue are thus dismissed. In view of the concession of the assessee, the grounds of appeal No.3 and 4 become academic a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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