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TMI Blog2025 (1) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... JBM Auto Ltd. on the ground that this entity is functionally not comparable - AR has placed on record product information as available in public domain. The same is not supported by any segmental data or financials of these entities. Therefore, merely on the basis of product information as available in public domain, such argument cannot be accepted. We are also of the opinion that TNMM require broad comparability only and therefore, if business model is same, these entities could be accepted. >Therefore, M/s Spicer India Pvt. Ltd. has rightly been included. The Ld. AR stated that segmental of M/s JBM Auto Ltd. is available and the assessee is in a position to provide the requisite details thereof. Considering the same, the issue qua this entity is restored back to the file of AO/TPO with a direction to the assessee to provide segmental information. AO / Ld. TPO is directed to re-adjudicate the issue with respect to this entity. >AR has stated that forex exchange loss would be nonoperating in nature. This argument could not be accepted since the assessee has carried out import transactions and forex loss has direct linkage with the international transactions as carried out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dispute Resolution Panel-2, Bengaluru (DRP) u/s 144C(5) dated 28-04-2017. Since the assessee carried out certain international transactions with its Associated Enterprises (AE), the same were referred to Ld. DCIT (TPO)-2(1), Chennai (TPO) for determination of Arm's Length Price (ALP). The Ld. TPO passed an order u/s 92CA (3) on 25-10-2016 proposing certain Transfer Pricing (TP) adjustment. Incorporating the same, a draft assessment order was passed on 16-11-2016 which was subjected to assessee's objections before Ld. DRP. Pursuant to the directions of Ld. DR, Ld.AO passed final assessment order dated 18-05-2017 which is in further appeal before us. >1.2 The grounds raised by the assessee read as under:- >The grounds of appeal stated hereunder are independent of, and without prejudice to one another: >GROUNDS OF APPEAL >1. General >On the facts and the circumstances of the case, the impugned order passed by the learned Deputy Commissioner of Income Tax / Assessing Officer ('AO') is erroneous and contrary to the principles of natural justice and bad in law. >2. Grounds in relation to transfer pricing adjustment >The learned Transfer Pricing Officer ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INR 126,207,203 under section 43A of the Act as capital in nature. >4.2 Failed to appreciate that the aforesaid total forex loss includes INR 109,085,767 pertaining to buyer's credit which is revenue in nature. >4.3 Erred in computing the total unrealized loss on buyer's credit amounting to INR 16,435,794 disregarding the fact that the Appellant had earned an unrealized profit of INR 430,820. >4.4 Failed to appreciate that forex loss of INR 109,085,767 is allowable under section 37(1) of the Act. >5. Erred in law and on facts in initiating penalty u/s 271(1)(c) of the Act >5. 1 The learned AO erred in levying penalty on an adjustment which has resulted from a mere difference of opinion between the learned AO I TPO and the Appellant. >5.2 The Learned AO has failed to appreciate that there was neither any concealment of particulars of income nor furnishing of any inaccurate particulars of such income by the Appellant. >5.3 The learned AO has failed to appreciate that a mere disallowance of a claim does not automatically result in levy of penalty. >5.4 The learned AO has failed to appreciate that the Appellant had acted in good faith and with du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -alia, assailed inclusion of JBM Auto Ltd. and Spicer India Ltd. on the ground that these entities were not functionally comparable. The Ld. DRP rejected the same on the ground that Ld. TPO had provided the search process and filter applied. The assessee could not establish that the comparable entities fail any of the filters as applied by Ld. TPO. M/s JBM Auto Ltd. was engaged in manufacturing of sheet metal components, tools, dies and moulds which was in similar line of activity. Similarly, M/s Spicer India Ltd. was engaged in manufacturing of drive-train products and parts which could be said to be functionally comparable to the assessee. Under TNMM, strict product comparability was not necessity but broad functional comparability was the requirement. The assessee objected to rejection of comparable entities viz. M/s Automotive Stamping and Assemblies Ltd and M/s Majestic Auto Ltd. The same was rejected on the ground that these were loss making entities. The Ld. TPO reported that these two entities had negative PLI during this year only and these were not persistent loss making entities. However, these entities did not appear in the product filter. Considering the same, Ld. DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese entities could be accepted. Therefore, M/s Spicer India Pvt. Ltd. has rightly been included. The Ld. AR stated that segmental of M/s JBM Auto Ltd. is available and the assessee is in a position to provide the requisite details thereof. Considering the same, the issue qua this entity is restored back to the file of Ld. AO / Ld. TPO with a direction to the assessee to provide segmental information. The Ld. AO / Ld. TPO is directed to re-adjudicate the issue with respect to this entity. >2.5 The Ld. AR has stated that forex exchange loss would be nonoperating in nature. However, this argument could not be accepted since the assessee has carried out import transactions and forex loss has direct linkage with the international transactions as carried out by the assessee. Therefore, forex losses / gains have to be considered as operating in nature. >2.6 The Ld. AR has sought various economic adjustments. However, it was admitted position that these adjustments were not granted by Tribunal in earlier years. Therefore, no indulgence is required on the same. >2.7 No other ground has been urged in the appeal. All the corresponding grounds stands disposed-off accordingly, >3. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign currency loan amount. If it was for capital purpose, loss would not be deductible being capital in nature. In this year, the assessee claimed forex loss, both realized and unrealized, pertaining to ECB loan which was claimed to be capital in nature whereas forex loss pertaining to Buyer's credit was claimed as revenue in nature. However, the claim was not supported by the necessary details and documents. The claim of the assessee was required to be supported by clear bifurcation of loss linking to the specific loan amount in order to decide whether a particular claim is capital or revenue in nature. The assessee did not furnish the breakup of the loss linking to the specific borrowing though asked to file a chart for the same. Accordingly, the action of Ld. AO was upheld against which the assessee is in further appeal before us. >3.3 It could be seen that the assessee has failed to provide the requisite details of forex loss before lower authorities. The Ld. AR has submitted that the impugned loss has two components i.e., ECB Loan which is capital in nature and second component is forex on Buyer's credit which is revenue in nature. Since adequate details thereof were not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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