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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 ..... d by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The Revenue in ITA No.154/PUN/2011 has raised the following grounds of appeal:- "1. The Hon'ble CIT(A) erred in considering Honda Siel, Hyundai Motors and Maruti Udyog as not comparable companies to that of the Appellant without taking into consideration that in case of these companies, the quantum of total related party transactions is less than 25% of total transactions and the said companies were also selected as comparables by the appellant itself for the AY 2003-04. 2. The Hon'ble CIT(A) erred in considering Hindustan Motors as a comparable company for the purpose of determining companies comparable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 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 Transfer Pricing Officer noted that the assessee was engaged in the business of manufacture and sale of passenger cars. The Transfer Pricing Officer issued a show cause notice to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the companies with Related Party Transactions (RPT) should be rejected. However, it was pointed out that in the Automobile Sector it was very difficult to have companies with no Related Party Transactions. Hence, all companies with Related Party Transactions exceeding 15% of the total income be rejected as comparables. The assessee also referred to the decision of Pune Bench of the Tribunal in assessee's own case for assessment year 2003-04 reported in 122 TTJ 699 (Pune), order dated 12-03-2009 wherein it was held that the transaction has to be between two entities which could not influence or control each other decisions. The CIT(A) observed that in view of the same the inclusion of Honda Siel, Hyundai Motors and Maruti Udyog in the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply RPT filter whereas the CIT(A) had applied a filter of 15%. By such measuring the three concerns Honda Siel, Hyundai Motors and Maruti Udyog were excluded from the final set of comparables by the CIT(A). However, the Revenue is in appeal against the same. It is further pointed out by the assessee that in the assessment year 2005-06, the Transfer Pricing Officer had applied filter of 25%. 11. We have heard the rival contentions and perused the record. The issue which arises in the present appeal vide ground No.1 raised by the Revenue is against the application of RPT filter. The Revenue is aggrieved and has pointed out that the RPT filter which is applied was less than 25% of the total transaction and hence, three concerns originally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentative for the assessee fairly pointed out that the CIT(A) did not say how the said capacity adjustment on account of capacity utilization is to be allowed, i.e. how the margins of the comparables are to be adjusted. However, the Delhi Bench of the Tribunal in DCIT Vs. Class India (P) Ltd. reported in 62 taxmann.com 173 (Delhi-Trib.) had prescribed the method which may be applied. 19. We have heard the rival contentions and perused the record. The issue which is arising by ground of appeal Nos. 5 and 6 is against the order of CIT(A) in directing the Assessing Officer/Transfer Pricing Officer to allow capacity utilization adjustment. The assessee is in second year of operation and has pointed out that it has only utilized 33% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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