TaxTMI 
TaxTMI 
2014 (4) TMI 556
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....der of the TPO does not have any material or cogent reason for rejecting the economic analysis undertaken by the appellant. During the course of hearing the learned Departmental Representative ("DR") could not support the stand of the TPO and merely relied on the order of the TPO. The DRP has also not given any specific finding in this regard to support the stand of the TPO and controvert the TP Study of the appellant with reasons for being disregarded, as has been done by the TPO. 2. The TPO/ AO/ DRP have erred in law and on facts of the case in applying TNMM as the Most Appropriate method (MAM) over the CPM and RPM adopted by the Appellant for the purpose of benchmarking its international transactions related to (a) Sale of finished goods, (b) Sale of components and spares, (c) Purchase of raw materials, and (d) Purchase of finished goods for resale (The Impugned Transactions). 3. The AO/ DRP have erred in not granting a relief to the Appellant for Fringe Benefit Tax paid (Rs 1,822,367) and including the same in the total income for AY 2008-09. 2. Brief facts are: FIPL is in the business of glass door merchandising with a manufacturing plant in Gurgaon. It is engaged in manufa....
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....MM is available then there is no need to go to CPM especially when the reliable data either in the taxpayer's case or in the comparables case is not available for ascertaining the direct and indirect cost of production of services. B. In rejecting RPM Method in respect of Trading Segment: 3.1. Further, the Ld. TPO in his order contented that RPM is not the most appropriate method on account of the following reasons: (Refer Page 96 - 98 of the Item 6 of the Appeal Set) i. Close comparability of products is required in RPM ii. The resale price margin may be effected if there are material differences in the way associated enterprises and independent enterprises carry out their businesses iii. Resale price margin are more accurate when it is realized in a short span of time. Thus level of inventory and costs involved in keeping the inventories have to be adjusted, which may not be possible based on the information available in the public domain. Further, the Ld. TPO also stated that FIPL is maintaining very high inventory (almost 11.50% of purchases, Rs 9.17 crores/Rs 79.86 crores of sales), which indicates the products are not moving fast for correct availability of RPM. iv. Res....
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....peal is pending before Hon'ble ITAT. (ITA No. 3894/Del-2013) 3.8. Ld. Counsel relied on Alumeco India Extrusion Ltd that if internal CPM are available than they should be accepted over external TNMM. Thus the TPO's action is contrary to this important ITAT judgment. In assessee's case CPM has been adopted consistently in earlier year, which has been consistently accepted by the department(except in AY 2006-07 wherein the matter is pending before the Hon'ble ITAT), this had been . It is further contended that: 3.9. The appellant has carried out separate analysis for manufacturing segment (using CPM) and for trading segment (using RPM). 3.10. Manufacturing and trading activities are distinct from each other and carry a different set of function profile. 3.10. The operating profit of the appellant was low as a result of capacity building and related costs. The installed capacity of the appellant was increased to 180000 units during the relevant financial year as compared to 52000 units in the immediately preceding year. Making comparison of net profit at entity level by applying TNMM without making adjustment for capacity would lead to higher adjustment, which influenced the TPO to....
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.... Segment includes Colour Televisions, Air Conditioners, Refrigerators,Microwave Ovens, Washing Machines, Compressors, Name of Company Reason for non-comparabilityVacuum Cleaners Non Comparable Turnover - Rs 5,430.62 crores Without prejudice, only 'Home Appliances Segment'can be considered at comparable Voltas Limited Insufficient Segmental Information - Company'ssegments includes Electro-mechanical Projects &Services, Engineering Products & Services, UnitaryCooling Products for Comfort & Commercial Use, and Others Unitary Cooling Products business is engaged in manufacturing and sale of Air Conditioners, Commercial Refrigerators, Water Coolers and Dispensers Non Comparable Turnover - Rs 3,202.93 crores Without prejudice, only 'Unitary Cooling ProductsSegment' can be considered at comparable Whirlpool of India Limited Insufficient segmental information - manufacturing and trading of Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens and other appliances Refrigerators contribute only 64% of total revenue Non Comparable Turnover - Rs 1,762.24 crores 3.14. Without prejudice it is further contended that at the specific....
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....for the purpose of computation of operating margins. Only the interest income can be said to be non-operating in nature, and other income should be considered for the purpose of computing the operating margins. It is important to highlight here that vide submission dated 2 August 2011 to the TPO, the Appellant had himself excluded the interest income amounting to 6,817,186 for the purpose of computing the operating margins at an entity level at the specific request of the Ld TPO. Besides, since similar income is considered as part of operating income for comparables, the same should be considered for the purpose of computation of operating margins of FIPL. 3.19. Without prejudice, if 'Service Provider Fees' is to be excluded from income side, corresponding expenses should also be excluded as directed by the DRP. 3.20. It is further contended by ld. Counsel that the TPO/ AO/ DRP have further erred in law and on facts of the case in not considering the available segmental data and adopting the company-wide data, which is contrary to well accepted international principles and practice as well as the law laid down in this regard by various Courts. The TPO has considered the company w....
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....as contended that adjustment for capacity has to be given as the juice plant was shut down for some time due to loss for order. No details have been filed before the DRP. From accounts it is seen that the assessee operated at 30.55% as against 58.69% of comparables, In submission dated 11.10.2011 before TPO is stated the data for FY 2005-06 has been considered". 3.26. In this regard the Appellant submits that FIPL is in the business of glass door merchandising. Further, FIPL doesn't own any juice plant and the data used for capacity utilization submitted before the Ld TPO was for relevant year i.e. FY 2007-08. Hence, the directions passed by the DRP are incorrect and without application of mind. 3.27. The Learned TPO/ AO/ DRP have erred in law by making an adjustment based on the companywide analysis and not considering the Appellant' plea for a proportionate adjustment which should be computed in proportion to the value of the international transactions. Ld. Counsel stated that notwithstanding that it does not agree with the approach of the TPO, even if any adjustment was to be done, it could be done with respect to the transactions with the AEs. The TPO has erred in law and on ....