9911796707
TMI Blog2021 (11) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant conducts its business activities under one consolidated business segment viz. value-added trading of steel coils. Hence, they have incorrectly erred in bifurcating the operations of the Appellant into "manufacturing" and "trading" segments. 5. Without prejudice, the Hon'ble DRP and the Learned TPO have erred in passing the impugned order ignoring the basic tenets of principle of consistency and disregarding that the Learned TPO in earlier years has himself accepted that the Appellant conducts its business activities under one consolidated business segment i.e. value-added trading of coils and the economic analysis undertaken by the Appellant to benchmark the impugned international transactions was accepted without any modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Limited. The assessee has its headquarters and processing facilities in Rajasthan. It is wholly and solely engaged in the business of trading/processing of steel coils a supports Honda Group companies in the field of motorcycles, automobiles and power equipment. 4. It was held by the TPO that the company is undertaking both the trading and manufacturing activities. TPO had asked the assessee to furnish the segmental data of these two segments. Failing to submit the relevant segmental data, the TPO rejected the entity vide margin of the assessee and bifurcated the margin into Manufacturing segment and Trading segment. Adopting TNMM as MAM and OP/OR as PLI, TPO, after making a fresh search applying appropriate filters, selected certain co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities and not full-fledged manufacturing activities, which is a high value adding activity. The assessee therefore emphasizes that it performs distribution activities and can be characterized as a distributor of steel products that performs minimum value added functions mainly and is not a manufacturer. 7. Slitting is a metal manufacturing process wherein a coil of material, such as aluminum or steel, is slit into the lengths and widths specified by the end application. As the material runs through the machine, the steel rolls are moved through extremely sharp circular blades, making the cuts. In order to make the slice, substantial compressive forces must be applied and when the forces exceed the tensile strength of the material, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in manufacturing activity 8. Heard the arguments of both the parties and perused the material available on record. 9. We have examined the page nos. 12 & 13 of the paper book which reflects the details of the revenue from operations and details of cost of material consumed. We find that the sale consists of finished goods and traded goods. The traded goods are named as steel coils. In addition, the assessee had revenue of Rs.23.51 crores from sale of scrap and very minimal revenue out of the job work. Further, the assessee had work-in-progress of the goods in manufacturing and inventories of the finished goods at beginning and closing of the year. The assessee has paid Excise Duty of Rs.69.94 crores and the consumption fuel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f FAR. Hence, we direct to exclude this comparable. Capital Adjustment: 13. With regard to the working capital adjustment, the key areas considered by the ld. DRP are inventory, account receivable and account payable. As working capital requirements affect, the margins or prices, costs or profits because this is an implicit cost which is recovered/recoverable from the customers. Therefore, the ld. DRP was of the opinion that in view of the Rule 10B(3) and to improve the comparability in the facts of the present case, while comparing the margins of tested party with that of the comparables, adjustment be made for working capital for which the reliable data is to be provided by the taxpayer. The TPO has stated that the taxpayer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments are to be added to the profit margin of comparable companies as finally determined in accordance with the directions of this Panel. 14. The Revenue relied on the judicial decisions in Mentor Graphics (109 ITD 101), Sony India (288 ITR 52 (Delhi- IT AT), Philips Software (26 SOT 226) (Bangalore- ITAT), Mercer Consulting (India) Pvt. Ltd (Delhi ITAT), Sunlife India Service Centre Pvt. Ltd. Vs DCIT (2015-TII-420-ITAT-DEL-TP). 15. In a word, the TPO is directed to give working capital adjustment by applying SBI PLR (as on 30th June of the relevant financial year) as the interest rate. 16. The issue before us is whether PLR is to be applied or base rate is to be applied for capital adjustment. PLR is the benchmark rate used for settin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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