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TMI Blog2020 (7) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... earing. We direct the DRP for the exclusion of the ABC Bearing for comparing from the list of comparable and to assess the transaction with the available comparable on record in accordance with law. Accordingly, the issue is decided in favour of the assessee against the revenue. Working capital adjustment for comparable companies on the basis of the difference - Assessee has raised the TNMM method in determining the ALP for the international transaction entered into during the year - HELD THAT:- We direct them to allow the requisite adjustment on account of the impugned 'working capital' while determining the Arm's Length operating Margin of the Comparables. Accordingly, this issue is decided in favour of the assessee against the revenue. - I.T.A. No. 463/Mum/2016 - - - Dated:- 9-7-2020 - SHRI PRAMOD KUMAR, VP AND SHRI AMARJIT SINGH, JM For the Assessee : Ms. Bhavya Goyal For the Revenue : Shri Anand Mohan (DR) ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the assessment order passed u/s.144C(5) of the Income Tax Act, 1961 ( in short the Act ) in pursuance of the directions of Dispute Resolution Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income to the tune of Rs. Nil. Thereafter, the assessee company filed a revised return of income on 19.01.2012 declaring total income to the tune of Rs. Nil. The return was processed u/s 143(1) of the I. T. Act, 1961. Thereafter, the case was selected for scrutiny under CASS. Notices u/s 143(2) 142(1) of the Act were issued and served upon the assessee. The assessee company was engaged in the business of manufacturing and trading of components for commercial vehicles like bimetal bearings, bushes, washers, flanges for automotive, industrial, agricultural, earthmoving, marine and stationary engines. The assessee company declared turn-over of ₹ 65.03 crores. The assessee company also filed the Form No. 3CEB declaring international transactions of ₹ 19.11 crores. Since the amount involved in International transactions exceeded ₹ 15 crores, the case was referred to Transfer Pricing Officer for determining the Arm s Length Price (ALP) of the International Transactions entered into by the assessee company with its Associated Enterprises (AE). Thereafter, the TPO passed the order dated 30.01.2015 suggested the addition of ₹ 3,34,21,000/-. The TPO has determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E= D * A 5,90,00,000 Proposed Adjustmet F= E C 3,34,21,000 Value of International Transactions with AEs G 28,27,59,000 Proportion H= G/B * 100 43% Revised Proportionate Adjustment I = F * H 1,44,22,000 The assessee was not satisfied, therefore, filed the present appeal before us. ISSUE NOS. 1, 2.1 TO 2.3 4. Under these issues the assessee has claimed the exclusion of ABC Bearings from the list of comparable company. It is argued that the ABC Bearing Company is quite different from every sphere with the working/transactions of the assessee company, therefore, the same is not liable to be included while comparing the transaction with the assessee company. The ABC company had been established more than 5 decades ago and was the market leader in the field and the sale was 200.27 crores representing a 24% of the growth, therefore, the said company is liable to be excluded from the list comparable while assessing the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere are lot of difference between the large business and small business operating in the same field. In the case of small business economics of scale are not available and, therefore, generally less profitable. 5. The ITAT Mumbai Bench in the case of Maersk Global Service Centre India Pvt. Ltd. has held that the company having such a high brand value along with much higher turnover, in our considered opinion has been rightly excluded by the CIT(A). Undoubtedly, in the said circumstances, the ABC Company nowhere seems comparable with the company of the assessee. Moreover, the ABC had an exceptional year of performance which shows its best ever sale of ₹ 200.27 crores representing 24% of the growth. The said margin seems non comparable in view of the decision of the Hon ble ITAT Ahmedabad bench in the case of Lubrizol Advanced Material Vs. DCIT. We also find that the ABC does not feature in the details search undertaken by the assessee on the database Prowess and Capitaline. The TPO nowhere rejecting the selection by assessee and no reason were given for the inclusion of ABC bearing. The process of identifying a new comparable has been discussed in the case of Bayer Materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of comparison. v. It may also happen that all the cases chosen by the assessee turn out to be incomparable and as such the basket of comparable cases is emptied. As the exercise of determining ALP is inconceivable without any comparable case, the TPO will have to afford one more opportunity to the assessee enabling it to give certain other cases which are really comparable. On the receipt of details of such comparable cases, the steps at ii. to iv. shall be undertaken by the TPO. vi. If despite being put to notice as per step v., the assessee fails to give any list of comparable cases or the cases given are again found to be incomparable, then the power of the TPO in voluntarily selecting comparable cases as discussed in step iv. above shall get converted in to his duty. He will have to undertake the exercise of finding comparable cases so as to complete his job. 6. The similar finding has been given in the case of CIT Vs. Mentor Graphics (Noida) Ltd. and ACIT Vs. Toshiba India Pvt. Ltd. Anyhow without any details search process for identifying the comparable. It is assumed that it is a case of cherry picked which is not justifiable in view of the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus established is then taken into account to arrive at an arm s length price in relation to the international transaction. 8. At the time of argument, the Ld. Representative of the assessee has strongly relied upon the decision in the case of Demag Cranes Components (India) Pvt. Ltd. and IKA India Pvt. Ltd. Vs. DCIT etc. In the case of Demag Cranes Components (India) Pvt. Ltd. Hon ble ITAT Pune Bench has given the following finding.:- In our opinion, it is the duty of the TPO to apply the provisions of rule 10B(1)(e) to establish the ALP in relation to international transaction as per the TNMM which is an undisputed method found applicable to the present case by both the parties Ills a settled accounting principle that the net margins can he influenced by some of the same factors which can influence price or gross margins. Further, it is the requirement of the rules / provisions that any difference which is likely to materially affect the NPM in open market has to be eliminated. TPO must know that the TNMM visualizes the undertaking of the thorough comparability analysis and elimination of the differences through the requisite adjustments Therefore, we dismiss the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. 2.5 12. The Ld. Representative of the assessee has argued that this issue has wrongly been raised in the appeal while this issue has already been allowed by AO/DRP, hence, not pressed. ISSUE NO. 2.6 13. This issue has not been pressed by the Ld. Representative of the assessee, therefore, this issue is being decided in favour of the revenue against the assessee being not pressed. ISSUE NO. 3 14. Since the issue no.3 is pre-mature, hence, is not required to be adjudication. Reasons for delay in pronouncement of order 6.1 Before parting, we would like to enumerate the circumstances which have led to delay in pronouncement of this order. The hearing of the matter was concluded on 07/02/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the lifting of lockdown . Hon ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure‟ has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled‟ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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