TaxTMI 
TaxTMI 
2017 (9) TMI 1776
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....aves leave to prefer an appeal under section 253(1 )(a) of the Income tax Act, 1961 ('hereinafter referred to as 'the Act), against the order dated 20 February 2014 (received by the Appellant on 3 March 2014) passed by the Commissioner of Income Tax (Appeals)(hereinafter referred to as the 'Ld. CIT(A)') on the following grounds, which are independent of and without prejudice to each other. Corporate Tax Adjustment Ground 1: Disallowance of payment of excise duty including interest thereon Based on the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in confirming the action of the Ld. AO in disallowing the amount of excise duty and interest thereon amounting to Rs. 11,60,72,000. Prayer The Appellant prays that the amount of excise duty and the interest thereon of Rs. 11,60,72,000 be allowed as a deductible expenditure. Ground 2: Applicability of the provisions of section 40(a)(i) of the Act on payment towards technical fees The Ld. CIT (A) has erred in confirming the action of the Ld. AO in disallowing the expenses towards technical fees amounting to Rs. 2,45,515 by holding that no tax has been ....
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.... The Appellant prays that the excise duty payment amounting to Rs. 52,678,000 should be considered as extraordinary expenditure while calculating the operating margin of the Appellant. 6.3 Not allowing for depreciation adjustment for the difference between the Appellant vis-a-vis comparables. Prayer The Appellant prays that the excess depreciation amounting to Rs. 82,28,000 should not be considered while calculating the operating margin of the Appellant. Ground 7 : Rejection of comparables submitted as additional evidence to Ld.CIT(A). Based on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in rejecting the comparables submitted as additional evidence. Prayer The Appellant prays that the comparables as submitted by the Appellant should be accepted. Ground 8 : Proportionate adjustment Based on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in confirming the action of Ld. AO in computing transfer pricing adjustment on the basis of entity level sales instead of computing a proportionate adjustment only in connection with the international tr....
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....y in current assessment year be added to M/s. Yazaki India Limited's profit for calculation of Profit Level Indicator (PLI). 2. Whether on the facts and in the circumstances of the case, the Learned CIT (A)-IT/TP is justified in directing that while disallowance on account of payment of earlier assessment year's excise duty in current assessment year be added to profit in calculation of Profit Level Indicator (PLI) for M/s. Yazaki India Limited, when PLI of comparable companies was directed to be calculated as per financial results. 3. Whether on the facts and in the circumstances of the case, the Learned CIT(A)-IT/TP erred in directing that while disallowance on account of payment of earlier Assessment year's excise duty in current Assessment year be added to profit in calculation of Profit Level Indicator (PLI) for M/s. Yazaki India Limited, should not have directed that higher figure of the two additions of (a) TP adjustment of Rs. 14.09 crore or (b) disallowance on account of payment of earlier Assessment year's excise duty in current Assessment year of Rs. 11.60 crores be confirmed. 4. The appellant craves to add, amend or alter any grounds of appeal....
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....2 of CENVAT Rules 2002. The said interest was due because of delay in payment of Excise duty after the prescribed due date. Thus, the said interest was compensatory payment to government i.e. to compensate for delay in payment of duty and was neither fine nor penalty. It was a statutory duty which was paid before the due date of filing the return of income and was allowable in the hands of assessee. The assessee also explained that penalty of Rs. 11 lakhs imposed by the Excise Department was neither provided nor paid during the year, it was merely a contingent liability. The Assessing Officer noted that the assessee had two work units - one Export Oriented Unit (EOU) unit and one Domestic Tariff Area (DTA) unit. While the DTA unit was in operation since 1998 from Gat No.93, S.No.166, Highcliff Industrial area, Wagholi Rahu Road, Kesnand, Pune, the EOU was set up in July 2002 by converting a part of existing DTA unit into EOU unit. No deduction under section 10B of the Act was claimed for 100% EOU unit. The assessee had waived the Excise and Customs duty on export and import in respect of EOU unit. The assessee had imported capital goods, spares, components and duty free material th....
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....ee was thus, found to have infringed the proviso to section 3(1) of CEA, 1944. Consequent to search, the assessee admitted the charges leveled by the Excise Department in its show cause notice for infringement of law and paid defaulted duties and interest thereon, aggregating to Rs. 11.60 crores. The said were claimed as expenses by the assessee. The Assessing Officer notes that the assessee had carried out the said offences systematically over the previous year relevant to assessment years 2003-04, 2004-05 and 2005-06. The assessee had systematically over the said period removed the goods worth Rs. 45.32 crores without payment of Excise duty and sold it to the customers in DTA. In fact, the Excise Department had proved that that at the time of manufacture, the assessee was in absolute knowledge of the fact that the facilities of 100% EOU were being used to manufacture products for sale to clients situated in DTA, hence, the liability arisen to the assessee on account of payments made for the offences committed under various provisions of Customs and Central Excise Acts was spread over the previous years relevant to the assessment years mentioned. The Assessing Officer was of the v....
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.... the year and the same were claimed as deduction. Referring to various provisions of Central Excise Rules, 2002, the Assessing Officer held that the liability to be charged with Excise duty arose on production or manufacture of goods or articles and the same had to be paid immediately on removal of goods. Since the assessee had removed the goods in various years without payment of Excise duty and since all the goods were clandestinely removed from 100% EOU unit for sale to DTA unit during the relevant previous year, then liability to pay Excise duty arose and crystallized at the time of removal and not at the time of detection of nonpayment by the Central Excise Department. The Assessing Officer referred to the provisions of section 43B of the Act that in respect of statutory dues, deduction is to be allowed in the computation of income irrespective of the previous year in which the liability to pay was incurred by the assessee, according to the method of accounting regularly employed by the assessee. In other words, liability to make payments had to be discharged before the due date for filing the return of income as stipulated in section 139(1) of the Act. The Assessing Officer t....
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....66/- on account of international transactions, which was adopted by the Assessing Officer while framing assessment. 14. Now, coming to the order of CIT (A). The first issue of disallowance on payment of Excise duty and interest thereon, the claim of the assessee was that it had voluntarily paid the Excise duty of Rs. 10.53 crores under the proviso to section 3 and there was no element of penalty embedded thereon. In respect of another payment of Rs. 1,07,19,000/- i.e. interest on delayed payment of Excise duty was also claimed to have been voluntarily paid and no element of penalty was embedded in it. The assessee also claimed that the said Excise duty and interest thereon was allowable under section 43B of the Act being statutory liabilities. Reliance was placed on various decisions before the CIT (A). The CIT (A) noted that the assessee had made the provision for payment of Excise duty in consequence to the discovery of regulatory lapses and consequent shortfall in payment of Excise duty found by the Central Excise authorities. Consequently, the assessee had paid the deficit Excise duty of Rs. 11.67 crores. The assessee contended that it had voluntarily paid the amount and not....
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....ing the TP issue. 16. The learned Authorized Representative for the assessee in respect of claim of deduction on account of Excise duty paid and interest on Excise duty after taking us through the facts of case, pointed out that the said demand was raised during the year consequent to the action taken by the Excise authorities and even if related to the past years, since the amount was paid during the year and was not claimed in earlier years as deduction, the same was allowable as deduction under section 43B of the Act. In this regard, the learned Authorized Representative for the assessee placed reliance on the decision of Special Bench of Chandigarh Tribunal in Dy. CIT v. Glaxo Smithkline Consumer Healthcare Ltd. [2007] 107 ITD 343 (SB). The learned Authorized Representative for the assessee further pointed out that under the provisions of section 43B of the Rules, the year to which the said Excise duty relates does not matter and on payment of Excise duty dues, the same are deductible in the hands of assessee. Our attention was drawn to the details of Excise duty payment placed at page 150 of the Paper Book. 17. The learned Departmental Representative for the Revenue poin....
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..... 52,675('000) in respect of the earlier years and interest thereon of Rs. 10,719 ['000]. These payments have been provided for in the accounts of the Company for the year ended March 2005. However no provision has been made in the accounts for any penalties that may be levied due to regulatory lapses since the authorities have so far not made any demand for the same and the same are not ascertainable on a reasonably accurate basis. The penalties could be levied under the provisions of the Central Excise Act, 1944, the Customs Act, 1962 and the Foreign Trade (Development & Regulation) Act, 1992." 21. The assessee had two units operating i.e. DTA unit and 100% EOU unit. The assessee did not claim any deduction under section 10B of the Act for 100% EOU unit but it waived the excise and customs duty on export and import in respect of said unit as per EXIM Policy. As per the norms of said policy, for import of duty free raw material, capital goods and components, the assessee was compulsorily required to export its entire production from 100% EOU unit except for the quantum permitted, which could be sold through DTA unit for internal consumption. Consequent to search operation on th....
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....er provided that any sum payable means a sum for which the assessee incurred liability in the previous year even though the same might not have been payable within that year under the relevant law. Thus, section 43B of the Act allows deduction on account of any tax, duty, cess or fees irrespective of the previous year in which the liability to pay such sum was incurred by the assessee. In other words, intention of the Legislature is to allow deduction under section 43B of the Act of a sum whether relating to previous year or to any earlier or later years. Explanation (2) further lays down that "any sum payable" means sum for which the assessee incurred the liability for the previous year where the sum may not have been payable in that year under the relevant law. In the light of specific and strong intention of the Legislature, there is no scope for argument that besides actual payment, the assessee must also prove the incurring of liability prior to payment, to be entitled to deduction in the year of payment. Such was the proposition laid down by the Special Bench of Chandigarh Tribunal in Glaxo Smithkline Consumer Healthcare Ltd's case (supra), which read as under:- "38.....
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.... account. The ratio laid down by the Mumbai Bench of Tribunal is not applicable to the facts of the present case, where the assessee had disclosed sales in its books of account, except showing the sales to be of EOU unit, whereas in fact the sales were made by DTA unit. Hence, no merit in the said reliance. 26. Applying the said principle to the facts of the present case, we hold that the claim of assessee is in respect of Excise duty paid and the interest on Excise duty paid in July, 2005 i.e. before the due date for filing the return of income under section 139(1) of the Act, for which a provision was made as on the close of the year. The said payment is in respect of Excise duty due for the current year and also for the previous years and the interest is due on the late payment of Excise duty dues for the earlier years. We find no merit in the stand of Revenue that the said Excise duty being not recorded in the books of account in the respective years, cannot be allowed as business expenditure during the previous year in which they were paid. Reversing the order of CIT (A), we direct the Assessing Officer to allow the claim of assessee on account of provision made for Excise ....
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....fits and hence, has to be considered as part of operating expenditure. 33. We have already decided the said issue in the paras hereinabove and allowed the claim of assessee. Once the Excise duty is allowed as expenditure, then Excise duty for the current year is to be included as part of operating expenditure. However, Excise duty relating to earlier years does not affect the margins of assessee for current year and the same is to be excluded. Accordingly, we hold so. 34. The next ground of appeal No.6.3 is against the order of CIT (A) in not allowing depreciation adjustment on account of excess depreciation of Rs. 82,28,000/-, while calculating the operating margins of assessee. 35. The ground of appeal No.7 is against additional comparables submitted by the assessee as additional evidence which were rejected by the CIT (A). The ground of appeal No.8 is against proportionate adjustment to be made only in connection with international transactions of assessee. The additional grounds of appeal raised by the assessee are also relating to computation of operating margins of assessee, which we shall deal in the paras hereinafter. 36. Brief facts relating to the issue are th....
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.... procurement, manufacturing, marketing, sales and after sales service, in which Yazaki Corporation has no role to play, does not make the assessee to be labour oriented unit. The second issue which was raised by the learned Departmental Representative for the Revenue was that as per the provisions of the Act, what has to be selected is the most appropriate method and the same has to be applied to benchmark the international transactions. Further, referring to different methods provided, the learned Departmental Representative for the Revenue stressed that for applying CUP method, there should be various factors including product comparability, sourcing of products, etc. but the assessee except for filing the price list has not furnished any other evidence. The certificate of CA filed by the assessee is also not backed by any evidence with relevant data that the price list has been relied upon for making any other sales, so the said certificate has no relevant as far as applicability of CUP method is concerned. He further stressed that in spite of price list i.e. where the assessee had purchased the goods on predetermined price, it had incurred losses and he thus, pointed out that C....
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.... transactions. Following TNMM method, the arithmetic mean of comparables, PLI worked out to 3.56%. The assessee explained that in respect of import of raw materials and consumables, materials are sold by Yazaki Corporation to any buyer at the price which is stated in the price list. In respect of import of machinery also, similar pleas were raised. As far as export of goods were concerned, the assessee pleaded that the margins earned on export to associated enterprises was comparable with the margins earned on sales to non-associated enterprises. The payment of royalty and technical fees was also held to be at arm's length price. The TPO rejected the claim of assessee of application of CUP method as the assessee despite being given several opportunities to establish any comparable uncontrolled transactions, except price list of associated enterprises and the benchmarking done by the assessee by applying CUP method was rejected. The TPO noted that except for claiming that the transactions were based on internal price list for all group entities on which such raw materials / consumables were sold to affiliates and where the existence of comparable uncontrolled price could not be demo....
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....ce basis as comparable as they were engaged in the same line of automobile industry except for the exclusion of the company Premium Auto Electricals. The arithmetic mean of PLI of set of comparables was 3.56% as against the operating profit of the assessee at (-) 8.3% and consequently, adjustment was made under section 92C of the Act at Rs. 14,09,92,866/-. 41. The CIT (A) upheld the order of TPO in rejecting the CUP method on the ground that Rule 10B(1a) of the Income Tax Rules, 1962 (in short 'the Rules') provides for comparison of controlled transactions with uncontrolled transactions for application of CUP method. However, the price list perse could not constitute uncontrolled transaction. It was further observed by the CIT (A) that as per Rule 10D(3) of the Rules, information in sub-rule (1) is to be supported by authentic documents. However, the document maintained in support of transfer price could not be substituted of the uncontrolled transactions. In the absence of comparison with uncontrolled transactions, where the controlled transaction was compared with price list and in the absence of the assessee furnishing any evidence of transaction with third parties being unde....
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.... time and again asked to justify that the said goods were also sold by the associated enterprises to third parties. In this regard, the assessee has only furnished a certificate of CA without any supporting evidence that associated enterprises has sold the goods to other parties on the basis of price list. In this regard, it may be noted that though the assessee claims that it had bought the goods as per price list of associated enterprises but for the year under consideration, the assessee has shown loss in its hands from its transaction. Further, in the absence of assessee having established that price list was applicable to third parties for exports and in the absence of any third party evidence, we find no merit in the plea of assessee in applying CUP method to benchmark its international transactions. The learned Authorized Representative for the assessee stressed that under section 92F(ii) of the Act, arm's length price of international transactions is to be worked out on the basis of price applied or proposed to be applied, hence it was not necessary to have exact transaction but even proposed transactions could be covered. However, Rule 10B(1) of the Rules talks of price ch....
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....he plea of assessee before the CIT (A) was that the companies which were selected by the TPO were in different sub- industries, though part of auto component industries. However, the assessee was in the business of manufacturing and selling of wire harnesses, which was very competitive business, but with low margins. The assessee stressed that the concerns which were primarily engaged in wire and harnessing should be selected as comparable. In this regard, additional evidence was furnished before the CIT (A) under Rule 46A of the Rules and identified the companies which were engaged in the said business and related products and selected two concerns i.e. Ellora Trading Ltd. and Minda S A I Ltd. The additional evidence was remanded to the TPO, who rejected the plea of assessee on the ground that the report for assessment year 2005-06 was not made available of Ellora Trading Ltd. and the turnover of the said concern was just about at Rs. 1.17 crores. The other concern Minda S A I Ltd. was rejected since it earns royalty meaning the comparable had intangibles, which was bringing in revenue as against the assessee which was a simple manufacturing concern. Further, there were certain ex....
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....thod, then the margins of assessee are to be compared with functionally comparable companies. The assessee during the TP proceedings had on without prejudice basis selected certain concerns which were in automobile sector and its components. The TPO selected five concerns out of six suggested by the assessee, had benchmarked the international transactions and determined the arm's length price of international transactions. The assessee before the CIT (A) pointed out that on later search, it has found two additional concerns to be in the same segment of wiring harnesses as that of the assessee and were functionally comparable to the assessee, as against the concerns which were initially selected. The plea of assessee in this regard was that though those concerns were in automobile sector but they were under different sub-heads, whereas the concerns selected Minda S A I Ltd. and Ellora Trading Ltd. were engaged in manufacture of wiring harnesses systems as that of the assessee. The objection of CIT (A) in applying margins of said concerns was that new search cannot be permitted as late as appellate proceedings. 48. The first plea of assessee raised before us is in respect of addit....
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....proper arm's length price could be determined in accordance with law. 50. We further find that the Tribunal in Vishay Components (P.) Ltd. v. Asstt. CIT [2017] 79 taxmann.com 281 (Pune - Trib.), relating to assessment year 2007-08, order dated 10.02.2017, has also upheld the order of TPO in selecting the concerns as comparable on the basis of data which came in public domain after the TP study report. The relevant findings of the Tribunal in Vishay Components (P.) Ltd's case (supra), are as under:- "11. We have heard the rival contentions and perused the record. The first issue which arises by way of grounds of appeal No.2 and 4 raised by the assessee under transfer pricing provisions is the selection of data by the TPO during the course of TP proceedings. The plea of assessee before us is that selection process carried out by the TPO during the course of TP proceedings is that the data of certain companies which was not originally available in public domain, is used by the TPO while benchmarking international transactions of the assessee in the manufacturing segment. Undoubtedly, the learned Authorized Representative for the assessee has not submitted that the said con....
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....escribed under Rule 10D of the Rules. The plea of the assessee before us is that by way of maintenance of such information and documents, the assessee is to keep a record of its international transactions and by way of clause (l) to also prepare the details of adjustments, if any, made to the transfer prices to align them with arm's length prices determined under these Rules and consequent adjustments made to the total income for tax purposes. The proviso under sub-rule (2) to Rule 10D of the Rules provides that the assessee shall be required to substantiate, on the basis of material available with him, that income arising from international transaction entered into by him has been computed in accordance with section 92 of the Act. Further, information which is specified in sub-rule (1) is to be supported by authentic documents which include various publications, reports and financial statements as per sub-rule (3) to the said Rule 10D of the Rules. Under sub-rule (4), it is provided that the information and documents specified under sub-rules (1) and (2) as far as possible be contemporaneous and should exist latest by specified date referred to in clause (4) of section 92F of the ....
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....nformation or document which he was required to furnish by a notice issued under sub-section (3) of section 92D, the Assessing Officer may proceed to determine the arm's length price in relation to the said international transaction [or specified domestic transaction] in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him." 17. Under the said sub-section, the Assessing Officer during the course of any proceedings for assessment of income, on the basis of material or information or documents in his possession, is of the opinion that the conditions laid in clauses (a) to (d) are not fulfilled, then the Assessing Officer may proceed to determine the arm's length price in relation to such international transaction in accordance with sub-section (1) and (2), on the basis of material or information or documents available with him. The said exercise of power by the Assessing Officer is after affording an opportunity of hearing to the assessee to show cause as to why the arm's length price should not be so determined on the basis of material or information or documents in the possession of Assessing Officer....
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..... Further, as decided by us in the paras hereinabove in view of Rule 10B(4) of the Rules, the data should be relatable to the financial year in which the international transaction has been entered into. Thus, it is incumbent upon the TPO to ensure that all the conditions provided under the Act and as per the Rules are fulfilled. 19. In the facts of the present case itself, we have noted that the assessee had prepared its transfer pricing report and computed the PLI of comparables by adopting the data for preceding two years. The assessee in its transfer pricing report had not used the data of the year in which the international transaction had taken place to benchmark its international transaction to be at arm's length price or not. During the course of transfer pricing proceedings, the TPO show caused the assessee as to why instant year's data should not be used and further computed the arithmetic mean of PLI of comparables on the basis of data relating to assessment year 2006-07. The data compiled by the TPO relates to assessment year 2006-07 of the listed companies which were picked up by the assessee itself as being comparables. However, while doing the search process ....
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....if any, in the hands of the assessee. Accordingly, the TPO under the Act is fully justified in carrying out the fresh search, if needed, for identifying the comparable companies, may be additional and proceed with transfer pricing proceedings. Such data collected by the TPO cannot be called as non-contemporaneous, where the concerns picked up by the TPO are functionally comparable and the data for the relevant year was available. 20. We find support from the ratio laid down by the Bangalore Special Bench in Aztec Software and Technology v. ACIT (supra), wherein the Tribunal while considering the statutory provisions for determination of arm's length price of a taxpayer observed that the burden to establish the transaction to be at arm's length price was upon the taxpayer, who had to furnish comparable transactions, apply appropriate method for determination of arm's length price and justify the same by producing the relevant material and documents before the Revenue authorities. Where the Revenue authorities were not satisfied with the arm's length price and supporting documents / information furnished by the taxpayer, the Tribunal held that the authorities had an ample po....
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.... the statutory provisions, particularly the mandate of sections 92(1) and 92D read with relevant rules, we hold that it is obligatory on the part of the taxpayer to furnish information relating to controlled international transactions, select a suitable method for determination and furnish ALP of such international transactions carried by it and give basis and supporting authentic evidence of ALP and adjustments made. The taxpayer has further to cooperate in the determination of the ALP by the tax authorities by furnishing all relevant information. The tax authorities in cases where they are of the opinion that ALP has not been correctly determined by the taxpayer, can substitute their own ALP on the basis of material or information furnished by the assessee or collected by them. However, such ALP has to be determined having in mind provisions of sections 92 and 92C and other rules and regulations. While determining ALP, tax authorities are bound to follow principles of natural justice and be fair and reasonable to the taxpayer. Any material collected to be used against the taxpayer is to be put to taxpayer to explain. Having regard to the purpose of the legislation and application....
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....d in exercise of such authority, certain information is collected by the TPO, which in turn, is confronted to the assessee and thereon applied to determine the arm's length price of international transaction, the said exercise of the jurisdiction by the TPO cannot possibly be questioned. Accordingly, we find no merit in the reliance placed upon by the learned Authorized Representative for the assessee. The learned Authorized Representative for the assessee further relied upon on other decisions which are factually different from the issue before us. Accordingly, we find no merit in the claim of assessee in this regard and upholding the action of TPO, the grounds of appeal Nos.2 and 3 raised by the assessee are dismissed." 14. The issue arising in the present grounds of appeal Nos.2 and 4 is identical to the issue before the Tribunal in assessment year 2006-07 and following the same parity of reasoning, we hold that the TPO had rightly exercised its powers in selecting the said concern and hence, we find no merit in the grounds of appeal Nos.2 and 4 raised by the assessee." 51. Applying the said proposition, we accordingly hold that in the case before us, the year of tax....
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....ar 2006-07. Hence, the data which was available could be considered as reliable data. We find merit in the plea of assessee. Accordingly, we direct the Assessing Officer to benchmark the international transactions of assessee by applying TNMM method and comparing the margins of assessee with margins of two concerns i.e. Minda S A I Ltd. and Ellora Trading Ltd. as against the comparables originally adopted by the TPO and upheld by the CIT (A). The Assessing Officer shall determine the addition, if any, with respect to assessee's international transactions with its associated enterprises on an aggregate basis under TNMM method. This takes care of grounds of appeal Nos.6.1 and 7. 54. The issue in ground of appeal Nos.6.3 is against adjustment on account of rate of depreciation. 55. The plea of assessee before us was that it had provided for depreciation at rates higher than the rates prescribed in Schedule XIV of Companies Act, whereas the comparable companies had followed the rates prescribed as per the Companies Act. The assessee thus, wants adjustment on account of such difference in the depreciation between assessee and comparable companies under TNMM method. We have already....
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....oyota Kirloskar Motors (P) Ltd. v. ACIT (2012) 28 Taxman.com 293 (Bang.) had in such circumstances observed as under:- "19.4.1 We have heard both parties and carefully perused and considered the material on record including the judicial decisions cited on both sides. There are varying opinions among experts whether depreciation should be taken into account for working out profits of an enterprise. One view is that it is not revenue deduction at all. As per that view, depreciation is only an annual loss in the cost / value of the capital assets due to factors like age of assets, their usage etc. and therefore allowance of depreciation, being capital in nature, should find no place in the computation of profits. The opposite view is that depreciation, though a capital loss, needs to be deducted, to replace the value of assets to the extent it has depreciated. Be that as it may, in the present case, ALP of the transactions to be determined by comparing the profits of the assessee with that of the comparable companies. There are no express statutory provisions which indicate that deduction for depreciation is a must. Depreciation, which can have varied basis and is allowed at ....
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.... view of the finding of the Mumbai ITAT in the case of Fiat India Pvt Ltd (supra) in which the assessee therein is in the asset intensive automobile industry, as is the assessee in the present case, that cash PLI or PBDIT to sales is not the appropriate PLI and also note that the TPO has given depreciation adjustment for differences in relative level of depreciation cost with reference to sales. We, therefore, dismiss this ground raised by the assessee." 36. The learned Authorized Representative for the assessee has placed heavy reliance on the ratio laid down by the Delhi Bench of Tribunal in Schefenacker Motherson Ltd. v. ITO (supra), but the same has been distinguished by the later decision of Bangalore Bench of Tribunal in Toyota Kirloskar Motors (P) Ltd. v. ACIT (supra), where reliance is placed on the decision of Mumbai Bench of Tribunal in Fiat India Pvt. Ltd. v. DCIT (2010- TIOL-30-ITAT-Mum-TP). Hence, we find no merit in the said reliance placed upon by the learned Authorized Representative for the assessee. 37. Another reliance which was placed upon by the learned Authorized Representative for the assessee is on the ratio laid down by the Hyderabad Bench....
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.... rejected since the change in policy was only in respect of some of the assets, otherwise the depreciation method had not changed. The plea of the assessee that suitable adjustment was warranted because of assessee's ratio of depreciation / sales was at 24% as compared to the average ratio of 5.48%, in case of comparable companies, was held to be irrelevant because depreciation had to be reckoned with cost of assets rather than sales. Another plea of the assessee that the TPO had accepted CP/S as PLI for subsequent tax period and to be applied in accordance with rule of consistency was also rejected as for two years subsequent to the relevant tax year the TPO had rejected the CP/S. 39. Further, in another decision of Delhi Bench of Tribunal in Honda Motorcycle & Scooters India Pvt. Ltd. in ITA No.1379/Del/2011, order dated 13.04.2015 involving the manufacturing enterprise where the TNMM method was adopted as most appropriate method, the Tribunal held that for the for purpose of TNMM, "operating profits" as envisaged under the relevant Indian Transfer Pricing Rules embraced cumulative effect of all items of operating income and expenses. In other words, it was not permissib....
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.... 2005-06 and 1st July, 2016 for A.Y. 2007-08, dismissed the Revenue's appeal. In the above view, the issue with regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court against the Revenue and in favour of the respondent assessee. (e) So far as depreciation is concerned, we find that the analysis done by the Tribunal to include DEPB benefit to hold it to be an operating revenue to determine operating profit, would be equally applicable in case of depreciation for the purposes of holding it to be an operating expenses to determine operating costs. It must be borne in mind that the depreciation which is incurred by the comparables are not being excluded before arriving at the total cost while applying the TNMM method for the purposes of determining the ALP price of the respondent assessee's export to its Associate Enterprise. The comparison to determine the ALP has to the extent possible has to be done between like to like and similar to similar. One sided exclusion would lead to distortion in comparison." 43. In view of above said, we hold that where the assessee is engaged in the business of manufacture of resistors and capacit....
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.... i.e. loan processing charges, loss on disposal of assets and interest on loan taken as operating in nature. The case of assessee is that the said items are on capital account and cannot be considered as part of operating cost for the purpose of calculating operating margins. Further, the assessee is also aggrieved in ignoring to consider scrap sales as operating income while computing operating margins of assessee. The claim of assessee in this regard is that scrap sales are linked to the regular manufacturing activities of the assessee and thus, should be considered as operating in nature. In the petition filed for admission of additional evidence, the assessee has pointed out that calculation of operating margins was submitted before the lower authorities. However, specific ground seeking for correct treatment of aforesaid items in calculation of operating margins was not taken before the lower authorities and hence, additional ground of appeal before the Tribunal. This issue vide additional ground of appeal No.9 is raised by the assessee. 62. The learned Authorized Representative for the assessee pointed out that working of operating margins excluding the items of interest e....
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.... the same is to be included in the hands of assessee as operating revenue. The Assessing Officer / TPO is also directed to verify this claim and allow the claim of assessee as similar claim has been allowed in the hands of assessee in later years. The Assessing Officer shall afford reasonable opportunity of hearing to the assessee. The ground of appeal No.9 raised by the assessee is thus, allowed for statistical purposes. 65. Now, coming to the last ground of appeal i.e. additional ground of appeal No.10 raised by the assessee against economic adjustment to be allowed on higher import content. 66. The additional ground of appeal raised by the assessee is a new plea raised before us i.e. in respect of economic adjustment for higher import content of assessee vis-a-vis comparable companies. The first aspect of additional ground of appeal is that no such plea was ever raised before any authorities below. The assessee in order to plead its case of economic adjustment for higher import content of the assessee vis-a-vis its comparables has moved an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 seeking permission to file additional evidence. In support....