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TMI Blog2023 (4) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case in the year under consideration and that of the earlier year. Revenue has also not placed any material on record to demonstrate that the decision relied upon by the CIT(A) has been stayed/set aside/overruled by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. Exclusion of comparables - principle of res judicata - TPO study has selected certain comparable companies - TPO had rejected some of the comparables selected by the assessee and had included fresh comparables for the purpose of determination of Arm s Length Price (ALP) - HELD THAT:- We find that CIT(A) after considering the material on record has decided the issue in favour of the assessee the comparables which were rejected in all the 4 subsequent years was not be adopted for arriving at Arm s Length Margin in the current year. Further, as pointed out above out of the 4 comparables adopted by the appellant in the TP study, the TPO had objected to only 3 of the comparables and regarding Tata Elxsi Ltd. the TPO had mentioned that it was a good comparable but had not adopted the same in the final list of comparables. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. During the course of assessment proceedings, AO noticed that assessee had entered into international transactions with its Associated Enterprises (AE s). Accordingly, a reference was made to TPO to determine Arm s Length Price (ALP) of the international transactions entered by the assessee with its AE s. The TPO vide order dated 30.01.2013 passed u/s 92CA of the Act proposed an adjustment of Rs.4,96,10,800/- to the income of the assessee. AO, thereafter, passed assessment order u/s 144C of the Act dated 21.05.2013 and determined the total income at Rs.4,96,35,422/-. 4. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 15.01.2018 in Appeal No.153/2013-14 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: 1. The Ld. CIT(A) has erred on facts and in the law in allowing the working capital adjustment to the account for difference in the working capital position of the appellant and the comparable companies for the period under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation of inventory remaining tied up or receivable being held up. According to AO, this situation may not be relevant to the service industry. He observed that the assessee has not been able to demonstrate with evidence that the difference in working capital deployed is making a difference in the margin earned by the assessee and the comparables. He further noted that out of the three components of working capital namely payables, receivable and inventory only one component is effected on account of transactions with the Associated Enterprises (AEs) i.e. receivable. TPO, therefore, was of the view that to allow working capital adjustment on all the three components even though transactions with the Associated Enterprises (AEs) effect only one of them was not justified. He accordingly, denied the working capital adjustment to the assessee. 7. Aggrieved by the order of AO, assessee carried the matter before CIT(A). Before CIT(A), it was inter alia submitted that the TPO has granted working capital adjustment to the assessee in A.Ys. 2010-11 2011-12. Before CIT(A) assessee also relied on the various decisions cited by the CIT(A) in his order. CIT(A) after considering the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the component of working capital deployed should be considered on annual basis with the average of opening and closing figures. 11. Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier year. Revenue has also not placed any material on record to demonstrate that the decision relied upon by the CIT(A) has been stayed/set aside/overruled by higher judicial forum. In such a situation, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed. 12. Ground No.2 is with respect to the exclusion of comparables. 13. The assessee in the TPO study has selected certain comparable companies. The TPO had rejected some of the comparables selected by the assessee and had included fresh comparables for the purpose of determination of Arm s Length Price (ALP). Assessee had objected to the comparables that were included by TPO. TPO, however, did not accept the objection raised by assessee and proceeded to determining the Arm s Length Price. 14. Aggrieved by the order of TPO, assessee carried the matter before CIT(A). CIT(A) at para 7.12 (pages 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion above. 7.15 In the background above when most of the objections raised by the appellant are specific which have not been dealt by the TPO, there appears to be little basis to come to a conclusion that these cases are comparable to the appellant. In almost all the cases there an objection of functional dissimilarity and before drawing adverse inference based on these comparable it was incumbent upon him to address the objections raised. Furthermore, as mentioned above the rejection of these comparables in the accept/reject matrix has been accepted by the TPO in prior and subsequent years. 7.16 It is seen from the facts discussed above that some of the objections raised by the appellant before the TPO have not been dealt with during the course of proceedings before the TPO. It is also evident from the facts recorded above that similar issue of comparables was also examined by the TPO in the assessment proceedings for AY 2010- 11, 2011-12, 2012-13 and 2013-14 wherein the aforesaid comparables were considered and based on the facts of each comparables some of the comparables were rejected in all the 4 subsequent years. 7.17 Keeping in view the aforesaid facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proceedings and on perusing the details, AO noticed that assessee has claimed Rs.4,70,71,208/- on account of packing material consumed. The assessee was asked to explain as to whether any TDS was deducted on those expenses to which assessee inter alia submitted that no TDS has been deducted as all the packing material consumed during the year was purchased under contract for sale and did not involve any job work. The submissions of the assessee was not found acceptable to AO. AO was of the view that the packing material on which printing has been made as per the specifications given by the assessee is a work contract involving job work. AO also relied on the decision of Hon ble Bombay High Court in the case of Sarvodya Printing Press vs. State of Maharashtra (1994) 93 STC 387 to hold that the contract involved job work and, therefore, assessee was liable to deduct TDS. AO noted that assessee had violated the provision of Section 194C of the Act by not deducting TDS. He accordingly, held that on account of non deduction of TDS the expenditure incurred for packing material was not allowable in view of the provisions of Section 40(a)(ia) of the Act. He, accordingly, disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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