2017 (2) TMI 636 - AT - Income Tax

Assessee's appeal partly allowed, issues remitted for re-examination. Stay Application dismissed.

Vishay Components Pvt. Ltd. Versus Asst. Commissioner of Income-tax, Circle-7, Pune

Vishay Components Pvt. Ltd. Versus Asst. Commissioner of Income-tax, Circle-7, Pune - [2017] 58 ITR (Trib) 649 Issues Involved:1. Transfer Pricing Adjustment2. Disallowances/Additions Other than Transfer Pricing Adjustment3. Other Grounds of ObjectionsDetailed Analysis:Transfer Pricing Adjustment:1. General Ground Challenging Transfer Pricing Adjustment:- The assessee challenged the transfer pricing adjustment of Rs. 129,006,231 related to its manufacturing activity, arguing that the analysis undertaken to determine the arm's length price was not accepted.2. Fresh Search for Identifying Comparable Companies:- The TPO conducted a fresh search for comparable companies, including Tibrewala Electronics Ltd., which was not available in the public domain at the time of documentation. The Tribunal upheld the TPO's approach, stating that the data available at the time of assessment was valid for benchmarking.3. Use of Single Year Data:- The assessee argued against using single-year data for comparables. The Tribunal held that single-year data is mandated by Rule 10B(4) of the Income Tax Rules and dismissed the assessee's claim.4. Consideration of Non-Public Domain Companies:- The Tribunal upheld the inclusion of Tibrewala Electronics Ltd. as a comparable, despite it being added to the database after the documentation date, as it was functionally comparable.5. Selection/Rejection Criteria of Comparable Companies:- The Tribunal directed the Assessing Officer to verify whether Gujarat Poly-Avx Electronics Ltd. and Keltron Group companies were persistent loss-making concerns and to exclude them if so.6. Restructuring and Start-Up Costs:- The Tribunal directed the Assessing Officer to examine the claim of excluding restructuring costs (VRS expenses) and start-up costs from operating expenses, following the directions in the case of Demag Cranes & Components (India) Pvt. Ltd.7. Non-Exclusion of Depreciation:- The Tribunal dismissed the assessee's plea to exclude depreciation from operating expenses, stating that depreciation is a significant cost component in asset-intensive industries.8. Asset Utilization Adjustment:- The Tribunal found no merit in the assessee's claim for asset utilization adjustment, as adjustments should be made in the hands of comparables, not the tested party.9. Capacity Utilization Adjustment:- The Tribunal denied the claim for capacity utilization adjustment, noting that adjustments should be made in the hands of comparables, not the tested party.10. Working Capital Adjustment:- The Tribunal remitted the issue back to the Assessing Officer to examine the claim of working capital adjustment and make necessary adjustments.11. Benefit of +/-5% Range:- The Tribunal dismissed the assessee's claim for the benefit of the +/-5% range under the proviso to section 92C(2) of the Act.12. Transfer Pricing Adjustment with Reference to Total Turnover:- The Tribunal held that the transfer pricing adjustment should be made with reference to the value of international transactions, not the total turnover.Disallowances/Additions Other than Transfer Pricing Adjustment:13. Disallowance of Stock Written-Off:- The Tribunal remitted the issue back to the Assessing Officer to verify the claim of stock written off and decide in accordance with the law.14. Re-Computing Deduction under Section 10B:- The Tribunal directed the Assessing Officer to re-compute the deduction under section 10B by excluding insurance and communication expenses from both export turnover and total turnover.15. Reduction of Insurance and Communication Expenses:- The Tribunal remitted the issue back to the Assessing Officer to determine the appropriate amount of insurance and communication expenses attributable to exports and exclude them from both export turnover and total turnover.16. Disallowing Deduction under Section 10B:- The Tribunal held that the deduction under section 10B is unit-specific and should be computed before adjusting brought forward unabsorbed losses or depreciation.Other Grounds of Objections:17. Initiation of Penalty Proceedings under Section 271(1)(c):- The Tribunal dismissed the ground as premature.18. Erroneous Levy of Interest under Section 234B:- The Tribunal held that the issue is consequential and dismissed the ground.Conclusion:The appeal of the assessee was partly allowed, with several issues remitted back to the Assessing Officer for re-examination and re-computation as per the Tribunal's directions. The Stay Application filed by the assessee was dismissed.