TaxTMI 
TaxTMI 
2016 (2) TMI 1172
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....led its return of income on 30.11.2006 declaring income of Rs. 30,17,24,880/-,which was subsequently revised for claiming TDS amount. The assessee company, a 100% subsidiary of Carrier Corporation, USA, in the relevant assessment year was involved in the business of manufacture, assembly and sale of transport, air-conditioning commercial refrigeration equipments. During the year, under a scheme of arrangement and amalgamation, Carrier Aircon was merged with erstwhile Carrier Refrigeration India as a going concern. The assessee also provided market support activity in respect of direct sales made by group entities in India. 3. Ld. TPO noticed that the assessee operates through three Divisions viz. Transport Division, Refrigeration Divisio....
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.... method with operating profit earned on operating cost as the PLI. He observed that the transactions relating to import of raw material and finished goods had been compared with the aid of internal transactional margins earned by the assessee on sale of various products using raw material purchased from unrelated entities. The assessee's contention was that operating profit margin earned on the international transaction was -6.13% as against -9.30% on the internal comparable transaction. 5. With regard to the export of finished goods, ld. TPO noticed that assessee had earned margin of -4.32% on cost and it had compared the same with internal comparable margins of -8.51% earned on sale of goods using raw material purchased from unrelated ....
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....rnal comparable transactions LX.' and concluding that refrigeration (unrelated party business) business is not comparable to transportation business (related party business) of the assessee. 4. That the TPO/DRP erred in facts and circumstances and law by considering Subros Ltd, which is functionally non comparable to transportation division of the assessee, determining the Arm's length price. 5. That the TPO/DRP erred in law and facts of the case by accepting Subros Limited with significant party transactions as comparable to the transportation division of assessee. 6. That the TPO/DRP erred in not allowing appropriate adjustment for differences in economic circumstances, functions performed and risk assum....
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....ghtweight rotary compressors and factor-assembled, wired and charged water-cooled packaged units. 11. As noted earlier, there is no dispute as regards air-conditioning division and, therefore, we will primarily be dealing with transportation division being segment "A" and Refrigeration Division being further divided into two segments viz. Segment "B" - which dealt in industrial refrigeration systems and segment "C" - which dealt in commercial refrigeration system. The assessee in its TP study pointed out that products under commercial refrigeration system of the Refrigeration Division (Segment C) were assembled/ manufactured from raw-material and components procured from unrelated entities and none of this Division's requirements were me....
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....idered these as separate lines of business viz. Transport and Refrigeration Divisions. He, therefore, concluded that there existed no internal comparable for the Transport Division, which was Segment 'A'. Accordingly, he carried out search for external comparable and selected Subros Ltd. and after considering the assessee's submissions adopted the operating profit margin of 6.98% and computed the adjustment to be made to ALP as under: Operating revenue earned by the assessee : 39,18,44,000/- Op. profit at 6.98% : 2,73,50,711/- Loss booked by the assessee : 2,40,19,000/- Difference : 5,13,69,711/- 13. These findings were confirmed by ld. DRP, inter alia, observing as under: "As ....
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.... cooling of all movable systems Bus air-conditioning, truck refrigeration and container refrigeration with segment 'C' which dealt with commercial refrigeration systems of cold rooms, freezers, vizi coolers etc. where purchases were made from non AEs and sales were made to non AEs (domestic). We find from the orders of lower revenue authorities that they have not carried out detailed functional comparability and have rejected the assessee's claim on broad parameters without going into the actual substance of functions carried out by segment 'A' and 'C'. Under such circumstances, we are of the opinion that consideration of function performed by these two segments require technical expertise and, therefore, keeping in view the decision of Hon....