TaxTMI 
TaxTMI 
2013 (8) TMI 826
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.... be deleted. 2. The learned CIT(A) has erred in confirming the action of the TPO/AO in determining arm's length price in respect of payment of royalty at Rs. Nil as against Rs. 1,50,68,228/- determined by the appellant under Transaction Net Margin Method (TNMM). While doing so, the learned CIT(A), inter alia, erred in - i) Not considering adjustment for functional analysis of comparable companies furnished during the course of assessment/appeal proceedings. ii) Not dealing with/accepting the appellant's submissions that M/s. SM Energy Tekniks & Electronics Ltd. (SM Energy) can not be rejected as comparable only on the ground that the said comparable company is consistently incurring losses. iii) Rejecting Schlafhorst Engineering India Ltd. (Schlafhorst) as comparable company, without giving opportunity to the appellant, merely on the grounds that the accounting years of Schlafhorst and the appellant are different and that Schlafhorst had abnormal loss during the year. iv) Not directing the AO to carry out fresh search finding out appropriate comparables while holding that comparables adopted by the appellant are not appropriate. v) Not dealing with appellant's sub....
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....sing the order passed by the Transfer Pricing Officer (TPO). The assessment order having been passed in accordance with the provisions of section 92CA(4) of the Act and the Learned CIT(A) having no power or jurisdiction to revise/review the order of the TPO, the enhancement to income of Rs. 1,05,94,098/- directed by the Learned CIT(A) ought to be set aside. 2. Without prejudice to Ground 3 in appeal, in the even it is held that Transaction Net Margin Method is the most appropriate method to determine the arm's length price in respect of purchase of components then the adjustments on account or arm's length price, if any, ought to be made by applying the profit Level Indicator to only the international transactions entered into by the appellant with the associated enterprises as against the Profit Level Indicator applied by the Commissioner of Income Tax (Appeals) to the total transactions entered into by the appellant." 4. Thus, the assessee has raised the original ground as well as additional ground vide letter dated 25.3.2013 only with respect to the addition on account of transfer pricing adjustment. 5. At the time of hearing the assessee has also raised an additiona....
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....he reply and submission of the assessee the TPO held that the payment of royalty made by the assessee is not at arm's length. The TPO has applied TNMM as most appropriate method for bench marking, the international transaction and worked out an adjustment at Rs. 1.80 crores but since the payment of royalty being only at Rs. 1.50 crores, the ALP of such payment of royalty has been determined by the TPO at Nil and accordingly made an adjustment of Rs. 1.50 crores. On appeal, the Commissioner of Income Tax(Appeals) enhance the assessment by making the adjustment in respect of the International transaction of purchase of components. The Commissioner of Income Tax(Appeals) has bench marked all the International transaction of the assessee by using TNMM as most appropriate method and operating profit to sale as PLI and considering only two comparables. The Commissioner of Income Tax(Appeals) has determined the arithmetic mean at 8.33% as against the assessee's operating profit/sale at 4.71%. Accordingly, the Commissioner of Income Tax(Appeals) has enhanced an adjustment to Rs. 2,56,62,326/- as against the adjustment made by the TPO at Rs. 1,50,68,228/-. Consequently, a differential amoun....
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....he ALP being operating cost at Rs. 56,80,42,516/- as against the operating cost of the assessee at Rs. 59,37,04,842/- and accordingly made the adjustment of the difference amount into Rs. 256,62,326/-. The operating cost of the assessee is within the 5% tolerance range of the ALP determined by the Commissioner of Income Tax(Appeals), therefore, no adjustment is called for on this account. It is pertinent to note that the Commissioner of Income Tax(Appeals) has determined the arm's length by considering the entity level results of the assessee which includes all the international transactions, therefore, when the over all price of the assessee is within the range of 5% of ALP being the arithmetic mean then no adjustment is permitted. 10. In view of the findings on the ground no. 2(v) above the other grounds of the assessee's appeal including the additional grounds of the assessee's appeal regarding to TP adjustment become in fructuous being academic in nature. Hence, we do not propose to go into the other grounds raised by the assessee though the same are kept open except the additional ground raised by the assessee at the time of hearing regarding the adjustment of Rs. 162,91,48....
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....ct is required to be examined. The Assessing Officer has not examined this issue from the angle of the actual written of the amount as the assessee conceded the same. But in view of the various decisions on the point and particularly in the case of CIT Vs Yokogawa India Ltd. (supra), this issue requires a fresh consideration. Accordingly in the interest of justice, we admit the additional ground and remit, the same to the record of the Assessing Officer for examining and deciding the same in the light of the judicial precedent on this point. 15. The revenue has raised the following ground in this appeal: "On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax(Appeals) erred in deleting the addition of Rs. 47,52,496/- on account of 'Provision of warrant." "On the facts and in the circumstances of the case and in law, the Ld, Commissioner of Income Tax(Appeals) erred in not appreciating that the provision is not crystalised and hence is in the nature of contingent liability and consequently not allowable." On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax(Appeals) erred in directing t....
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....under the explanation to section 115JB and therefore requires to be added back. 18. On the other hand, the Ld. AR has submitted that provision was made @ 1% of sales during the period from August 2006 to March 2007. Sales made prior to the said period, the warranty period expired on or before 31st March 2007 and therefore, no provision is required as the actual expenses incurred are charged to profit and loss account. The Ld. AR has pointed out as per the past record of the expenses incurred on the warranty, it comes to an average of 1% to the turnover. Therefore, the provision for the year is equivalent to 1% of the sale effected during the period from August 2006 to March 2007 is based on the data of past expenses on warranty. He has relied upon the decision of Hon'ble Supreme Court in case of Rotork Controls India Pvt. Ltd. Vs CIT (supra). As regards the adjustment for computing the book profit u/s 115JB, the Ld. AR of the assessee has submitted that when the provision is made based on the past experience and matching concept, no adjustment can be made u/s 115JB of the Act. He has relied upon the following decision of page No. 26-27: CIT Vs National Hydro Electric Power Co....