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TMI Blog2021 (5) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... chineries and component such as positive displacement blowers. The assessee in the year under consideration has carried out certain international transactions with its associated enterprise based in Germany. The details of such transaction stand as under: Sr.No. Description AE Amount(Rs) 1. Purchase of positive displacement blowers, screw compressors and allied products, its spares and components Aerzener Maschinenfabrik Verwaltuingsund betelligungsesellschaft mbH Rejerweg 2831855 Aerzen Germany 8,32,23,667/- 2. Design and development charges received Aerzener Maschinenfabrik Verwaltuingsund betelligungsesellschaft mbH Rejerweg 2831855 Aerzen Germany 68,36,53 3. Interest paid on External Commercial Borrowing Aerzener Maschinenfabrik Verwaltuingsund betelligungsesellschaft mbH Rejerweg 2831855 Aerzen Germany 15,77,326/- 4 Warranty claim receivable Aerzener Maschinenfabrik Verwaltuingsund betelligungsesellschaft mbH Rejerweg 2831855 Aerzen Germany Rs. 32,23,090 3.1 The assessee has determined the arm length price (ALP) of the aforesaid transactions using CPM method for purchases and design and development charges received and CUP method with respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes is concerned, it is seen from the judicial decisions relied upon by appellant that in those cases either the TPO or the assessee could found out only one comparable case. In such circumstances, the Tribunals have held that for transfer pricing purposes, even one comparable can be selected. Nowhere it has been held that in no case more than one comparable should be selected even if such other comparables are available. The appellant has nowhere submitted that the comparables selected by the AO are not comparable to it under TNMM method. Hence this contention of the appellant is also rejected. 4.5.3. So far as submissions relating to computation of operating margins of the appellant are concerned, the appellant's contention that if rental income is not considered as a part of operating revenue, then the expenses related to such income should also not be considered for this purpose is correct and acceptable. It is seen that a part of the factory building of appellant company had been let out temporarily during this year. Such temporary letting out of part of the business premises has to be held to be the income from business activity. Moreover, expenses like depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y only relying upon the decisions relied upon by the appellant in its favour. The onus is on the appellant to show that it has taken into account all the related expenses to the assets employed i.e. depreciation, repairs and maintenance, insurance etc. for the purposes of I determining the adjustments to its own operating profit as well as of the comparables. In the absence of such exercise made by the appellant, its contention of adjustment on account of depreciation is not acceptable. Hence it is held that the TPO has rightly adopted PBIT for the purposes of computation of the operating profits. 5. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 6. The learned AR before us has made twofold contentions. Firstly, it was contended by the AR that there is a huge difference in the amount of depreciation claimed by the assessee viz a viz claimed by the comparable companies. Therefore, in such a situation the PBDIT should have been taken as profit level indicator while computing operating margin instead of PBIT. As such the profit level indicator i.e. PBIT is giving distorting positions of the assessee as well as of the comparable companies wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable to the tested party for any reason, then the necessary adjustments are required to be made. The provisions of rule 10B (2) & (3) of Income Tax Rules also provide for such adjustments which is reproduced as under: (2) For the purposes of sub-rule (1), the comparability of an international transaction [or a specified domestic transaction] with an uncontrolled transaction shall be judged with reference to the following, namely:- (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets employed or to be employed and the risks assumed, by the respective parties to the transactions; (c) the contractual terms (whether or not such terms are formal or in writing) of the transactions which lay down explicitly or implicitly how the responsibilities, risks and benefits are to be divided between the respective parties to the transactions; (d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,684 4.040% 4. Neo Tech-Aid Compressor Pvt. Ltd. 84,880,439 81,822,075 7,950,177 9.366% Average 9.366% 8.5 The amount of depreciation claimed by the assessee in the ratio of turnover stands at 9.366% whereas average ratio of depreciation of the comparable companies claimed to their turnover stands at 2.086%. Thus it is inferred that the adjustments in the depreciation is required to be made. Now, the issue arises how to make the adjustments. In this regard we find that there is no guidelines or the provisions of law providing the mechanism for making the adjustments with respect to the depreciation. Furthermore, it also appears that there cannot be any guidelines or formula for making such adjustments, rather it depends upon various factors and circumstances. However, we find that none of the authorities below has made such adjustments while determining the PLI for working out the ALP despite such contention was raised by the assessee before the learned CIT (A). In holding so we draw support and guidance from the order of the coordinate bench of this ITAT in case of Erhardt + Leimer (Inida) (P.) Ltd (supra) wherein the bench held as under: The assessee's sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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