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TMI Blog2020 (12) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... prises - contention of the assessee is that as the quantum of sales made to the A.E. vis- -vis total sales is 52.16%, it is stated that if the TP adjustment is to be restricted only to the quantum of manufacturing sales pertaining to A.Es i.e. 52.16% and it cannot be extended to other than international transactions to A.E. - HELD THAT:- As gone through the orders of the authorities below. Admittedly, this issue came for consideration in assessee s own case in the assessment year 2010-11. The Tribunal on this issue observed in para 23 [ 2016 (7) TMI 1281 - ITAT BANGALORE] that TPO was confined to the adjustment to the value of international transactions only as the section 92 of the Act applies with reference to computation of income from international transactions having regard to ALP in this AY 2013-14 and other domestic transactions cannot be considered for determining ALP in this A.Y. Being so, we direct the AO/TPO to confine the TPO adjustment only on international transaction in manufacturing segment only. Benefit of +/- 3% as applicable under proviso to section 92C(2) - HELD THAT:- We observe that while computing the ALP if the profit margin is within the range of +/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case by rejecting companies considered as comparable by the Appellant by applying erroneous comparability filter. 7. Inappropriately considering additional companies as comparable to the Appellant in relation to manufacturing segment Erred on facts and circumstances of the case by accepting additional companies as comparable to the Appellant based on unreasonable comparability criteria. 8. Rejection of internal TNMM analysis done for Inteva manufacturing segment Erred in rejecting the alternative analysis undertaken by the Appellant using Internal TNMM as the most appropriate method to benchmark the international transaction pertaining to manufacturing segment. 9. Non- grant of depreciation adjustment Erred in not considering the claim of depreciation adjustment for difference in the rate of depreciation of Inteva India vis- -vis comparable companies arising as a result of underutilized capacity. 10. TP adjustment should be restricted to international transactions with associated enterprises Erred in making transfer pricing adjustment on the entire manufacturing segment of the Appellant rather than restricting the adjustment to the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r adjudication and dismissed as not pressed. 4. Now coming to ground No.4 with regard to not giving the working capital adjustment. The Ld. A.R. submitted that the TPO has given a contradictory finding in his order as seen from his order. The Ld. A.R. further submitted that in page No.12 of his order, he mentioned that TPO is not against such adjustment, if reasonable accurate adjustment can be made and there is a method to do so, as is evident in respect of working capital adjustment, which the TPO has given, if it is possible. However, while determining the ALP, no adjustment including working capital adjustment was given. The DRP was of the opinion that the TPO has given the working capital adjustment and only there is a mistake in computation of such working capital adjustment. According to the Ld. A.R., there was no working capital adjustment given much less computation mistake. Hence, according to the Ld. A.R., assessee is entitled for working capital adjustment as in earlier year held by the Tribunal in assessee s own case in assessment year 2010-11 in IT(TP)A No.83/Bang/2015 dated 20.7.2020. 5. On the other hand, Ld. D.R. relied on the order of the lower authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine the working capital adjustment. 8. In ground No.6, the assessee wants inclusion of following comparables: 1. Jonas Woodhead Sons (India) Limited. 2. Mubea Suspension (India) Limited. At the time of hearing, assessee has pressed only with regard to the inclusion of Mubea Suspension (India) Ltd. Accordingly, ground related to inclusion of other comparable i.e. Jonas Woodhead Sons (India) Ltd. is dismissed as not pressed. Mubea Suspension (India) Ltd. The Ld. A.R. submitted that this comparable was rejected by the TPO on the reason that this comparable is having loss for 2 years out of 3 years. The inclusion of this comparable is confirmed by the DRP. According to the Ld. A.R., the Tribunal in the case of KBACE Technologies Pvt. Ltd. in ITA No.3189/Bang/2018 dated 29.1.2020 for the assessment year 2014-15 has observed that the persistent loss filter can be applied only if there is a successive loss in 3 assessment years and if there is profit in any one financial year out of 3 successive financial years, then that company cannot be excluded on the basis of persistent loss-making filter. 9. On the other hand, Ld. D.R. submitted that the persis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .77 crores. The point to be understood here is that if an adjustment of ₹ 13.77 crores is made, the PLI of the assessee in the manufacturing segment comes to be at arm s length. If adjustment is made as proposed by the assessee i.e. 52.16%, then the adjustment will come to be ₹ 7.18 crores (52.16% of ₹ 13.77 crores). Thus, if this adjustment is made then the OP/OR of 5.61% will never be reached. Further, the manufacturing segment may contain so many components of transactions with AE and the sale to revenue is not the only one. Although the TPO has made adjustment in the revenue, thereby implying that the assessee should have earned ₹ 13.77 crores more from its AE, but in essence it is the overall adjustment so as to bring it to arm s length margin. It is pertinent to note that the assessee has reported following international transactions with AE as related to Pune Unit: Type of transaction Method Amount (Rs.) Margin Sale of goods TNMM 64,49,08,908 - 0.71% (Depreciation adjusted) Purchase of raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X
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