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TMI Blog2024 (12) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... are of the considered view that the entire controversy would be set at rest if both the parties to this lis bring in their respective comparables which deal in electronic products only. Once there is a level playing field, the determination of the ALP would become easier. We are of the considered view that apples cannot be compared with oranges, though, both are fruits and are kept in the same fruit basket but are totally different from each other. Therefore, in the interest of justice and fair play, we deem it fit to restore the controversy to the file of the TPO. The TPO is directed to bring comparables on record which deal in electronic products supported by the certificate of some technical experts. Since the assessee is a 100% EOU, it would be proper to apply filter of export turnover of more than 75% of the total turnover and further related party transactions (RPT) should be less than 25%. The assessee is also free to bring fresh comparables in line with its business to justify its determination of ALP keeping in mind the filters mentioned hereinabove. Since the representatives of both sides fairly agreed on the aforementioned proposition also made during the course of hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Comparables selected by the Ld. AO /TPO were (i) not functionally comparable with the Assessee; and; (i) The test of export turnover less than 75% was applied by the AO/TPO in a completely biased manner contrary to law; and: d. In not appreciating that the comparables relied on by th A.O were not even remotely connected with the products manufactured by Appellant. It is like comparing oranges with apple. e. Incorrectly affirming the rejection of comparable namely Cosmos Ferrite and Aplab Ltd as taken by the Assessee; 2.2. Without prejudice to the above, the Ld. CIT(A) failed to appreciate that, the Appellant's case falls within the margin of +/- 3%, as provided u/s 92C(2) of the and therefore no addition is at all warranted 2.3 In the facts and circumstances of the case and in law, the adjustments as affirmed by the Ld. CIT(A) deserve to be reversed and deleted in toto being contrary to the extant law. ON OTHER DISALLOWANCES: 3.1 In the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the disallowance of Rs. 2,08,825/- u/s 40A(a) of the Act being cash payments made in excess of Rs. 20000/- being payments made to Agents for clearance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee) D= (C/B) 2.89% 10. Based on the above, the assessee concluded that its international transactions are at ALP. The TPO did not accept the margin working provided by the assessee and re-computed the same as under:- Particulars Amount (Rs) Operating Income A Export Sales 2,140,087,822 Sale of Scrap generated from manufacturing process 4,113,401 Foreign Exchange Gain A 2,144,201,223 Operating Cost B 2,083,278,135 Operating Profit C=(A-B) 60,923,088 OP/TC *100 (i.e., the cost plus mark up, actually earned by the assessee) D= (C/B) 2.92% 11. The TPO proceeded by analyzing the comparables as provided by the assessee in its TPSR and asked the assessee to submit comparables based on search criteria i.e., FY ending 31/03/2013, company having export turnover more than 75% of total turnover, single year data, RPT 25% of operating revenue and functionally comparable manufacturing company. In response to the same, assessee chose the following three fresh comparables:- Name of the Company Product/Operations Fine Line Circuits Ltd. A company manufacturing Printed circuit boards which are main Raw material for our products Switch mode Power Supply Cosmos Ferrite Ltd. A company manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT(A). 15. We have given a thoughtful consideration to the orders of the authorities below. The entire quarrel revolves around, whether the comparable selected by the TPO are in the same line of business as that of the assessee. 16. A certificate by a chartered engineer certifies that switch mode power supply (SMPS) is an electronic product and not an electrical product as electrical systems deal with the flow of electrical power of charge, while electronic systems deal with the flow of electrons. Electrical devices convert electrical energy into other forms, such as heat, light, or sound, to perform tasks. Electronic devices control the flow of electrons to perform tasks like calculations or amplifications. Hence, SMPS is an electronic product. 16.1. In our general understanding, electronic products are different from electrical products and since we are no technical experts in this domain, we cannot say with certainty about the comparables used by the TPO as to whether, they deal with electronic products or electrical products because that is the prerogative of a technical expert. However, we are of the considered view that the entire controversy would be set at rest if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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