9911796707
TMI Blog2020 (8) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... AO/TPO to include Sabero Organics Gujarat Ltd., Aksharchem (India) Ltd. and Bhageria Dyechem Ltd. as comparable and compute the arithmetic mean margin and pass consequential order. Needless to say, the AO would give a reasonable opportunity of being heard to the appellant before passing the order. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. - Shri Saktijit Dey (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Mr. Rajan R. Vora/Mr. Pranay Gandhi, AR For the Revenue : Mr. Anand Mohan, DR ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2012-13. The appeal is directed against the order dated 24.01.2017 passed by the Income Tax Officer, 14(1)(3), Mumbai( hereinafter the AO ) u/s 143(3) 144C(13) of the Income Tax Act 1961, (the Act ). 2. The grounds of appeal filed by the assessee read as under : On the facts and in the circumstances of the case as well as in law, the AO/ Transfer Pricing officer 1(3)(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a comparable, without appreciating that the companies were engaged in pharmaceutical activities as against the agrochemical business of the appellant: Aarti Drugs Ltd; Avon Organics Ltd; Divi's Laboratories Ltd; Kopran Ltd; Kothari Phytochemicals Inds. Ltd; Nectar Lifesciences Ltd. Sai life science Ltd. Samrat Pharmachem Ltd. Sterling Biotech Ltd; Sunil Healthcare Ltd. and NGL Fine Chem Ltd. 12. erred in not granting the benefit of working capital adjustment, wherein lower authorities failed to appreciate the fact that detailed calculation of working capital adjustment along with the need and justification for carrying out such working capital adjustment was submitted by the Appellant. 13. erred in treating an amount of ₹ 5,54,19,490/- received from an AE as exceptional income in nature and thereby reducing the same from operating income and thereby computing the operating margin of the appellant at 8.51 % as against 9.38 % on cost. 14. erred in not granting risk and other economic adjustments based on functions, assets and risk analysis, 15. erred in not providing the benefit of the variation/ reduction of 5 % from the value of the international transaction as provided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and export of finished goods of ₹ 4,28,76,946/- made by the TPO and affirmed by the DRP. During the year under consideration, the appellant entered into the following international transactions with its AEs : Sr. No. Nature of transaction Transaction value (in Rs.) 1. Import of raw material 3,26,50,998/- 2. Export of manufactured goods 68,54,67,996/- The transaction of import of raw material and export of manufactured goods have been benchmarked under a combined transaction approach as adopted in the transfer pricing study. The appellant has adopted Transactional Net Margin Method (TNMM) to be the most appropriate method for this international transaction. The operating margin earned by the appellant with respect to the manufacturing segment is 9.38%. For the companies identified as comparables, the weighted average of operating profits earned on operating costs were computed using the financial data pertaining to the previous years 2009-10, 2010-11 2011-12 ( to the extent available) which was available to the appellant at the time of complying with the transfer pricing documentation requirements. Based on the search criteria/filters adopted by the appellant, a total of 39 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Ltd. 3.39% 4.72% -1.23% 2.20% 6.50% Relying on the above data, the Ld. counsel submits that the aforementioned entities have earned a profit in FYs 2009-10, 2010-11, 2012- 13 and 2013-14 and incurred losses only in FY 2011-12. Stating that the word Net Profit Margin in Rule 10B(1)(e) of Rules includes loss within its purview and hence loss reflected in net profit margin in comparable company reflects the arm s length nature of price of goods or service transferred in such uncontrolled transaction, reliance is placed by him on the decision in Welspun Zucchi Textiles Ltd. [TS-9-HC-2017(BOM)-TP], Chryscapital Investment Advisors (India) Pvt. Ltd. v. DCIT [(2015) 376 ITR 0183 (Delhi)], DCIT v. Quark Systems Private Limited [132 TTJ (Chd) (SB) (2010) affirmed by Punjab and Haryana High Court in 62 DTR 0182], Actavis Pharma Development Centre Private Limited v. DCIT [ITA No. 2224/Mum/2017, dated 9 March 2018], Goldman Sachs (I) Securities Pvt. Ltd. v. ACIT [ITA No. 7724/Mum/2011, 23 January 2013], Yum Restaurants v. ACIT [ITA Nos. 3796 4154 (Delhi) of 2006, 31 May 2011], ASB International (P.) Ltd. v. ACIT [IT Appeal (TP) Nos. 1978 2137 (Mum) of 2016], Nomura Research Institute Financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the company managed to secure permission for capacity utilization from the zero level in April 2011 to up to 75%, as from December, 2011. Therefore, Sabero Organics Gujarat Ltd. cannot be considered as a good comparable even functionally. Thus the Ld. DR supports the order passed by the AO as per the direction of the DRP. 6. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. The only issue before us, pertains to transfer pricing adjustment in respect of international transaction pertaining to manufacturing activity i.e. import of raw material and export of finished goods of ₹ 4,28,76,946/- made by the Transfer Pricing Officer (TPO) and affirmed by the Dispute Resolution Panel (DRP) on account of the following reasons: (i) Considering recovery of fixed cost of ₹ 5,54,19,490/- as nonoperating item and thereby reducing operating margin of the appellant to 8.51% as against 9.38% as per the transfer pricing study; and (ii) Selection of the comparable companies, whereby arm s length price (ALP) is determined at ₹ 14.98%. An examination of the accounts clearly indicates that Sabero Organics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the taxing authorities. The introductory paragraph reads as under : Hyderabad, May 31, 2011: Coromandel International Limited, India s leading manufacturer of a wide range of fertilizers, Crop protection products and Speciality Nutrient products, has signed definitive share purchase agreement to acquire promoters stake in Sabero Organics Gujarat Ltd. , an establishment agrochemical manufacturer headquartered in Mumbai, India. In view of the above factual scenario, we direct the AO/TPO to include Sabero Organics Gujarat Ltd., Aksharchem (India) Ltd. and Bhageria Dyechem Ltd. as comparable and compute the arithmetic mean margin and pass consequential order. Needless to say, the AO would give a reasonable opportunity of being heard to the appellant before passing the order. In view of our above findings, the other grounds of appeal become academic in nature. 7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 09.01.2020, this order thereon is being pronounced today, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
