TaxTMI 
TaxTMI 
2014 (4) TMI 932
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....e case. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in taking Avery India as the only case comparable with the assessee ignoring the other two comparable cases adopted by the TPO. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred not considering the TPO's reasons for rejecting the other two comparables selected by the assessee. 2. The appellant prays that the order of the Ld. CIT(A) on the above ground be set aside and that of the AO be restored. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." ....
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....sessee had purchased raw-material/components worth Rs.8.08 Crores from the assessee, that it had also purchased trading goods worth Rs.40 lacs, that it had adopted TNMM method, that eight companies were identified as comparable, that the operating profit (two sales) margin of the assessee was at 5.22% as against the comparables of 4.83% as claimed by the assessee. He re-worked the operating margins of the above comparables and the assessee company as under: SN Name of the Company Sales Total Cost Op.profit OP/TC % OP/Sa les % Assessee* 29.72 28.17 1.55 5.50 5.09 Comparables: 1 Addison & Co. Ltd. 115.87 109.65 6.2....
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....Ltd. 74.15 68.59 5.56 8.11 7.50 3 Gansons Ltd. 39 37.05 1.95 5.26 5.00 4 L G Balakrishnan & Bros. Ltd. 409.03 373.37 35.66 9.55 8.72 5 Monozyme India Ltd. 9.82 8.94 0.88 9.84 8.96 6 Rajasthan Udyog & Tools Ltd. 42.66 40.75 1.91 4.69 4.84 7 Rolcon Engineering Co. Ltd. 19.57 18.94 0.63 3.33 3.22 8 T A L Manufacturing Solutions Ltd. 88.81 84.16 4.65 5.53 5.24 9 Flex Engineering Ltd. (Merged) 59.16 49.99 9.17 18.34 15.50 10 Manugraph India Ltd. 282.92 237.09 45.83 19.33 16.20 Arithmetical mean 8.97 8.02 &n....
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....see, he held that the TPO had not disputed the amount of the international transactions and the TNMM method applied for justifying the arm's length nature of the transaction-in-question, that although both the assessee and the TPO had agreed to eight comparables yet the operating margins of the said comparables were different, that the assessee had carried out detailed Transfer Pricing Study justifying the ALP of the international transactions with its AEs by considering the various factors, particularly a comparative analysis of the functions performed by the assessee-company as against functions performed by the host of companies, that in addition the functional comparability the assessee had applied quantitative filters like turnover....
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....otal eight comparables and the said comparable were accepted by the AO, that there was absence of any workings with regard to operating margins relied upon by the TPO, that the assessee could not verify the correctness in the said margins, that the TPO had not considered various factors like provision written back and bad debts recovered, bad-debts and provision for doubtful debts, advances written off and deferred expenses written off, that these factors were operating in nature, that the operating margin of AIL arrived at 1.65%,based on the audited financial statements, was correct and it was lower than the operating margin of 5.22%of the assessee, that if the operating margin of all other seven comparables(excluding FEL and MIL)were cons....
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.... in the case of assessee Carlyle India Advisors (P.) Ltd. (supra) was confirmed. 2.4.We have heard the rival submissions and perused the material before us. We find that while finalising the ALP,TPO had added two new comparables i.e. FEL and MIL to the eight comparables adopted by the assessee, that because of the inclusion of the said two companies variation in operating margin arose, that the operating margin was within the range of 5% of the arithmetic mean of the operating margin of the comparable companies. We find that TPO had not given any reason as to why he was including FEL and MEL in the list of comparables. He did not give any notice to the assessee for inclusion of two new variables. Basic principles of natural justice deman....