9911796707
TMI Blog2022 (1) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant to the issue that is being adjudicated before us. Appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... w, the order passed by the Ld. TPO/AO suffers from various arithmetic computational errors in margin of the comparable companies thereby impacting the determination of ALP and the total income of the Appellant without considering the rectification application submitted by the Appellant." 3. The assessee is engaged in the business of manufacturing and assembling of setup boxes. During the year in consideration, the assessee has entered into an international transaction with its AE for purchase of raw material. 4. The assessee has mainly argued with regard to three comparables. 5. BCH Electric Ltd. - The main argument of the assessee is that while the assessee is in manufacturing of setup boxes, the comparable is a well recognized, switchgear and low voltage panel manufacturer of low voltage electrical and electronic control. The turnover of the comparable is ₹ 281 crores compare to the turnover of the assessee of ₹ 48 crores. Though assessee argued on the un-comparable turnover, keeping in view 1:5 ratio of the comparable, we are unable to accept the contention of the assessee on the turnover filter. At the same time, we find that the operation and manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." The company is into manufacturing of Eddy current drive, drives & controls for HTS, Tachogenerator, Dynamometer, platform truck and electric buggy. 11. Since, there is a stark product differentiation, it cannot be considered as a comparable company and hence is liable to be excluded from the list of comparables. 12. Before us, the ld. AR submitted that the assessee has not represented before the AO nor filed TPSR hence the matter should be remanded back. The written arguments of the ld. DR are as under: "Kindly refer to the above. This case was argued by the undersigned. The Assessee submitted Gist of arguments in writing which was provided to the undersigned during the course of hearing through Email. During the hearing I have made following oral submissions: 1. During the course of hearing Ld. Counsel for the Assessee has said that he is pressing only ground No. 7 of the appeal and has not pressed other grounds. In the instant case assessee has declared a operating profit margin of only 1.67% (AR of the assessee also agreed to this fact). The assessee is in the business of set top boxes manufacturing and apparently a margin of 1.67% is very low on any yard stic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions] entered into by the assessee; (g) a record of uncontrolled transactions taken into account for analysing their comparability with the international transactions [or the specified domestic transactions] entered into, including a record of the nature, terms and conditions relating to any uncontrolled transaction with third parties which may be of relevance to the pricing of the international transactions [or specified domestic transactions, as the case may be]; (h) a record of the analysis performed to evaluate comparability of uncontrolled transactions with the relevant international transaction [or specified domestic transaction]; (i) a description of the methods considered for determining the arm's length price in relation to each international transaction [or specified domestic transaction] or class of transaction, the method selected as the most appropriate method along with explanations as to why such method was so selected, and how such method was applied in each case; (j) a record of the actual working carried out for determining the arm's length price, including details of the comparable data and financial information used in applying the most appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e being placed in an advantageous position vis-à via complaint assessees. 8. Without prejudice to above arguments it has been held by courts that where AO's investigations is not complete matter should be remanded. It is the duty of appellate authorities to correct the lacuna in orders of authorities below and is required to remit the issue to the AO. KAPURCHAND SRIMAL: 131 ITR 451 (SC), 40 ITR 298 (SC) Guduthur Bro vs ITO 9. In the written submission the assessee has stated that the product profile of the assessee is different and therefore some of the comparables introduced by the AO should be rejected on the ground of functional difference. This issue has been dealt by Hon. DRP in page 6 para 3.1.7 and para 3.1.8 of their order the same is reproduced below:- The Panel notes that if a company which is otherwise comparable, is also engaged in a minor activity different from the assessee then, this company cannot be excluded from the comparables only because of this minor difference. A perfect comparable is never available and such variations as pointed out by the assessee are not material, as the variations in both directions would balance themselves. This has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16(Bang)-TP] held that Vishal Information technology ltd was functionally dissimilar as it provided agency services by way of outsourcing to third party vendors and acted as an intermediary between final customer and vendor and directed the AO/TPO to re- adjudicate the issue relating to comparability of Vishal Information Technology Ltd. in respect of assessee's IT enabled back office services for AY 2005-06. Further, it also upheld Revenue's adoption of RPT filter of 15% rejecting CIT(A)'s 0% RPT filter noting that the Tribunal had, in a series of decisions, held that the tolerance range of RPT in normal circumstances was 15% and in extreme cases it could be extended upto 25%. Also, relying on the decision in the case of Wipro BPO Solution Ltd., directed TPO to apply turnover filter of 10 times of assessee's turnover on both sides since it was a consistent view that the if turnover was within range of 1/10th of the turnover or upto 10 times, then the comparable was considered to be a good comparable. Accordingly, it remitted the issue to the file of the AO/TPO to carry out the search afresh pursuant to its directions. Sykes Enterprises (India) Pvt. Ltd. [TS-410-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial transaction involving profit element while computing the percentage of related party transactions. Relying on the decision in the case of McAfee Software India P Ltd. [TS-136-ITAT-2016(Bang)] it held that the co-ordinate bench had consistently accepted the turnover filter at 1/10th to 10 times of turnover and the adoption by TPO of filter of 1/4th to 4 times the assessee's turnover was arbitrary in nature. Accordingly it directed the AO/TPQ to adopt a filter of 1/10th to 10 times of the turnover of the assessee. It accepted assessee's argument that Telecommunications Consultants India Ltd. was functionally similar to the assessee and held that since it had been accepted as a comparable in the earlier year and subsequent year in the assessee's own case, the TPO was not justified in rejecting the same during the year under consideration and accordingly restored the issue to the file of the AO with the direction to finalize the comparables. Jacobs Engineering India Private Limited vs DCIT-TS-428-ITAT-2017(MUM)-TP- I.T.A. No. 7194/Mum/2012 dated 17.05.2017 9. In view of the above it is prayed that the order of the DRP may be upheld alternatively the case may be ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
