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TMI Blog2022 (9) TMI 1505X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is reproduced below provide that the company is in the wholesale trading and retail trading have to be considered separately for the purpose of comparison and for the purpose of comparability with an uncontrolled transaction, whether the market in which the companies are operating is wholesale or retail needs to be considered - In view of the above and considering the provisions contained in Rule 10B (2)(d) we are of the considered view that Sreeleather Ltd. should be excluded as comparable. VF Brands Pvt. Ltd. and Tommy Hilfiger Arvind Fashion Pvt. Ltd. - As per the working submitted by the learned A.R. during the course of hearing the margin of VF Brands Pvt. Ltd. is at 12.07% while the TPO has considered it at 14.56%. Similarly the margin as per computation submitted for Tommy Hilfiger Arvind Fashion Pvt. Ltd. is at 3.23%. The TPO has considered the percentage at 8.24%. We therefore remit this issue back to the TPO to look at the financials of these two companies and arrive at the margins afresh in accordance with law. This issue is allowed for statistical purposes. TPO is directed to re-compute the ALP based on the directions given in this order. - Shri George Geor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on import of raw materials etc. The bench wanted to see the finding of DRP on these aspects and when the order of DRP was read, it was noticed that the order of DRP is cryptic and it is not a speaking and reasoned order. At this juncture, the bench made out this proposition that the matter has to go back to DRP for a fresh decision by way of a speaking and reasoned order. In reply, both sides agreed to this proposition but this was the common request of both sides that all aspect of the matter about T P adjustment should be left open for a fresh decision by DRP. 4. The DPR in the remand proceedings vide order dated 25.01.2022 retained the same TP adjustment as in the earlier round. The assessee is now in appeal against the order giving effect to the order of the ITAT. 5. The assessee raised 13 grounds of appeal. During the course of hearing the learned A.R. submitted that out these grounds he is contending only the following issues with regard to TP adjustment: i. Exclusion of Metro Shoes Ltd. ii. Exclusion of Sreeleathers Ltd. iii. Margin correction of VF Brands India Pvt. Ltd. and Tommy Hilfiger Arvind Fashion Pvt. Ltd. The learned A.R. prayed that if these iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The TPO rejected the comparable companies chosen by the assessee and proceeded to select fresh set of comparable companies by applying different filters. The final set of comparable companies, selected by the TPO the mean margin of which worked to be 12.63%. is given in the table below : - Sr.No Company Name Weighted PLI for three Years (OP/OR) (%) 1 Metro Shoes Ltd. 13.78 2 V F Brands India Pvt. Ltd. 14.56 3 Tommy Hilfiger Arvind Fashion Pvt. Ltd. 8.24 4 Solace Fashon Pvt. Ltd. 8.81 5 Sreeleathers Ltd. 17.76 Mean 12.63 Accordingly the TPO computed the ALP of the assessee as under: - Particulars Amount of International Transaction Purchases of materials and consumables 104,03,32,387 Payment of Sourcin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than 75% filter applied by the TPO indicating that it has a small portion of manufacturing income. The learned A.R. further submitted that the Metro Shoes has paid excise duty under Central Excise Act, 1949 thereby highlighting that the company is engaged in manufacturing activity and there is no segmental bifurcation between trading and manufacturing activities. On this premises the learned A.R. prayed for exclusion of Metro Shoes from comparable companies. 11. We heard the DR. During the course of hearing the ld AR drew our attention to the details tabulated from the financials of Metro Shoes Ltd., wherein trading income as a percentage of the total revenue is more than 25%. The details of the same is extracted below: - Particulars Metro Shoes Ltd Mar-13 Page no. ref PB II Mar-14 Page no. ref PB II Mar-15 Page no. ref PB II Trading Income 24,741 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red separately for the purpose of comparison: - (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)*** (b)*** (d)*** (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 the markets, overall economic development and level of competition and whether the markets are wholesale or retail. (emphasis supplied) 15. From the reading of the above rule it is clear that for the purpose of comparability with an uncontrolled transaction, whether the market in which the companies are operating is wholesale or retail needs to be considered. In the given case the financials of Sreeleather Ltd., which is extracted below shows that the company is deriving major part of its revenue from ritual business: - Sl. No. Name Description of main products/ services NIC Code of the Product/Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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