9911796707
TMI Blog2021 (2) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... ies:- (a) Manufacturing and sale of products to associated enterprises (AEs) outside India; (b) Manufacturing and distribution of products in India. 5. It is stated, 54% of its total sales effected during the year were to the AEs and the balance 46% was in domestic market. It is stated by the assessee that insofar as sales to AEs are concerned, assessee carried out manufacturing of the products and sales activities like distribution, marketing, etc. are carried out by the AEs. However, insofar as domestic sales are concerned, assessee carried out manufacturing, distribution, marketing, etc. During the year under consideration, the assessee broadly entered into following international transactions with its AEs:- sale of razor blade, sale of packing material, steel and stores, purchase of packing material and recovery of freight charges. Since all these transactions are closely linked to the manufacturing operations of the assessee, the transactions were aggregated for arm's length analysis in the transfer pricing study. For benchmarking the international transactions, the assessee prepared separate segmentals to arrive at the operating profit earned from international trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved some severe discrepancies in this 'newly audited segmental account', the same was again revised with revised allocations and produced before the DRP; and - The difference in profit of the export segment as per the two segmental accounts was] huge of INR 20.00 crores. 6. Further, the learned DRP also rejected the objection of the assessee with regard to rejection of some of the comparables by TPO and introduction of the fresh comparables by him. Thus, in sum and substance, learned DRP upheld the transfer pricing adjustment. 4. Before us, Shri J.D. Mistry, learned Senior Counsel for the assessee, referring to ground 7 raised in the Memorandum of Appeal submitted that rejection of segmental P & L account of the assessee on unsustainable reasons is bad in law; hence unacceptable. He submitted, the reasoning of the TPO that segmental P&L accounts are unaudited is totally wrong as there is no requirement in law that the segmental accounts have to be audited. Further, he submitted, the observations of the TPO that proper allocation keys were not provided by the assessee for allocating cost to both the segments is wholly unacceptable as the assessee has provided all the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se facts over again. Suffice to say, before the TPO, the assessee had furnished segmental P&L accounts. The TPO has rejected them merely on the reasoning that they were not audited. Though, before learned DRP, the assessee has made good the deficiency alleged by the TPO by furnishing audited segmental P&L accounts, learned DRP has rejected them on a unacceptable reasoning that they were not by the same auditor. From the material on record, we find that the assessee has not only furnished the segmental P&L accounts, but has also furnished the details of allocation keys for allocating various expenses. It is the contention of learned Senior Counsel that if segmental accounts are accepted, whatever allocation key is applied to the satisfaction of the TPO, still assessee's margin would be within arm's length, even, with the comparables selected by TPO. It is relevant to observe, before learned DRP, the assessee had furnished working of margin as per which it is 23.83%. The learned DRP has rejected the same on the ground that in the fresh segmental P&L account, the margin has been worked out at 17.18%. It is the contention of the learned Senior Counsel that the fresh working of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is trying to totally make out a new case and improve upon the order's of the authorities below. He submitted that it was never a case of the transfer pricing officer or even that of the dispute resolution panel that the export segment of the assessee is not comparable with the comparables selected by the transfer pricing officer. We find that nowhere the authorities below have objected in this regard. The only objection was that segmental accounts were not audited and that proper allocation keys were not submitted. However this has been duly countered by the learned counsel of the assessee by submitting that allocating the common expenses to the export segment by whatever key the result would compare favourably with the arithmetic mean of the operating margin of the comparable's selected by the transfer pricing officer. In this regard learned counsel of the assessee placed reliance upon the decision of ITAT in the case of Asstt. CIT v. Maersk Global Service Centre (I) (P.) Ltd. [2011] 16 taxmann.com 47/133 ITD 543 (Mum.) for the following proposition:- "we are unable to accept the contention of the ld. DR for excluding certain cases not rejected by the TPO but which in he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy the rationality of such allocation. Hence, it was submitted before the Hon'ble ITAT that the said ruling is not applicable to fact pattern of the Assessee's case, since the case of the Assessee the expenses are allocated on judicially recognised ratios like sales and production. 11. Up on careful consideration we find ourselves in agreement with the submissions of the learned counsel of the assessee. The assessee has submitted that the margin of its export segment compares favourably with the comparables selected by the TPO. This has been rejected by the transfer pricing officer on the ground that segmental accounts are not audited. It has further been held by the authorities below that proper allocation keys of common expenses between export and other segment have not been provided. In this connection assessee has submitted that if the common expenses are allocated by applying any of the keys the operating margin of the export segment would compare favourably with the operating margin of the comparables. This proposition has not at all been rebutted by the authorities below. The learned departmental representative also could not dispute the above proposition. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new assets were put to use for a period less than 180 days in Assessment Year 2012-13, the additional depreciation allowable at 20% to the assessee was restricted to 50% as per Second Proviso to section 32(1)(iia). The balance unclaimed additional depreciation was carried forward to the impugned assessment year and was claimed by the assessee. The Assessing Officer, however, disallowed assessee's claim on the reasoning that it has to be allowed only in the year in which plant and machinery was purchased and put to use and the unclaimed additional depreciation cannot be carried forward and allowed in the subsequent assessment year. The learned DRP also upheld the aforesaid decision of the Assessing Officer. 11. We have considered rival submissions and perused the materials on record. The facts on record clearly reveal that in Assessment Year 2012-13 the assessee had purchased new plant and machinery on which additional depreciation @20% is allowable. However, since the plant and machinery were put to use for a period of less than 180 days in Assessment Year 2012-13, the additional depreciation was restricted to 50% of the admissible amount. In other words, depreciation was ..... 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