2015 (3) TMI 235

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....r the assessment year 2005-06, on the following ground: On the facts and in the circumstances of the case and in law, learned CIT(A) has erred in deleting the addition of Rs. 1,65,87,730 on account of arm's length price (ALP) adjustment made as per TPO order under section 92CA (3) of the Act. 2. Briefly stated, material facts of the case, as culled out from material on record, are like this. The assessee before us is a subsidiary of a German company by the name of EDAG Engineering & Designs AG, engaged in the business as an engineering expert in the automotive industry and is said to be one of the global leaders in offering 'closed process chain' services i.e. complete services for integrated development- including design and product ....

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.... capacity was to be compensated by the AE. The TPO did not dispute the comparables selected by the assessee and computed the operating profit margin ( i.e. OP/TC) of these comparables at 5.59% and computed the arm's length revenue at 105.59% of the cost incurred by the assessee, which came to Rs. 6,91,13,540 as against book value of these revenues at Rs. 4,22,37,633. The difference thus came to Rs. 2,68,75,906. However, as the assesse had subsequently received a financial support, by way of waiver of dues by the AE, amounting to Rs. 1,02,88,176, the ALP adjustment was reduced by this amount. The ALP adjustment was thus computed at Rs. 1,65,87,730. In the course of the assessment proceedings, the Assessing Officer made this ALP adjustment to....

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.... Therefore, ground nos. 1 and 2 of the appellant are allowed. 27. In view of the above, the appeal is allowed. 3. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case in the light of the applicable legal position. 5. We find that learned CIT(A) has granted the impugned relief by making adjustments, on account of capacity underutilization, in the results shown by the tested party and thus computing hypothetical financial results which the tested party would have achieved in perfect conditions. Such an exercise, in our humble understanding of law, is impermissible. A....