TaxTMI 
TaxTMI 
2019 (5) TMI 1536
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.... 99,27,16,410 RPM 2 Commission on sale of machinery 95,67,012 CUP 3 Reimbursement of expenses 13,31,068 NA In its TP study report, the assessee used RPM and MAM to benchmark its international transactions taking GP/Sales as PLI. The assessee worked out its profit margin at 17.75%. TPO rejected economic analysis of the assessee, selected his own following comparables: S. No. Name of the comparables Margin (GP/Sales)(in %) 1 AGC Networks ltd. 17.93 2 B eetel Teletech Ltd. 20.14 3 D -link Ltd. 28.46 4 Ricoh India Ltd. 2 4.64 5 S Mobility Ltd. 23.16 6 Bose Corpropation India Ltd. 44.16 7 Dynalog (India) Ltd. 44.9 Simple Average 29.06 He, therefore, while working the profit margin of 29.06% proposed adjustment of Rs. 15,47,86,172/-. Learned AO passed the order dated 27.11.2015 u/s 143(3) of the Act making addition of Rs. 15,47,86,172/- as proposed by the TPO and also the sum of Rs. 28,75,000/- u/s 14A of the Act read with Rule 8D of the Incometax Rules ("Rules"). 3. Assessee filed objections before the ld. DRP. Ld. DRP vide impugned directions consid....
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....sent in so far as the assessee is concerned. Learned DR submitted that though the financials of the company speak to the possession of the factory premises, no manufacturing activity was being carried out there and even in such a case adjustment can be given to mitigate the effect of factory premises in the P&L by appropriately reducing the claim of depreciation that will only lead to the enhancement of the margin of this comparable. He further argued thatthe work-in-progress reported in the fixed asset schedule of Dynalog manifest that the comparable may be in process of starting some set up but the same is not relevant for the year under consideration. He, therefore, submitted that this is a good comparable to the assessee company earning major portion of income from trading activity. 11. We have gone through the record in the light of the submissions on either side. It could be seen that the schedule of fixed assets of Dynalog India Ltd. Incorporated at page No 55 of the Paper book, this company is possessing three factory premises at Gali No.111, Pune and Vikhroli respectively with plant and also machinery worth Rs. 21,00,751/- in respect of which the depreciation to the tun....
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....uantified at Rs. 1,37,57,50,000/- whereas Note 'A' immediately below the table shows the trading sales at Rs. 1,33,36,76,724/-. Lastly, assessee contended that for want of complete financial data calculated for the purposes of application of filters cannot be done and due to that reason Bose Corporation India ltd. cannot be taken to be a good comparable. 14. Learned TPO held that the Bose Corporation India P. ltd. trades in audio systems, speakers, sound systems which are very much electrical machinery and Bose Corporation is answering the description of trade of electrical machinery. Further, the assessee used this comparable in the earlier year also. For these reasons, ld. TPO included the same in the list of comparables. 15. Learned DRP considered the contentions of the assessee and found that the financials of Bose Corporation are not available in the public domain. Inasmuch as the Bose Corporation is engaged in trading of high-end audio system direct to customers, it cannot be said to be a good comparable with the assessee. Further, ld. DRP found that the Bose Corporation is dealing in business to customer segment and incurring significant AMP and high rental expenses wh....
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....ds to be reduced by the expenses on Sales Promotion, Brand Building and Rentals to bring it at par with the assessee on functionality and risk criteria. So, seeing the trend in AY 2010-11, GP Rate of Bose at 42.42% needs to be reduced by 16.77% (Expenses on AMP 8.10% and Rent 8.66%). Thus, the correct GP rate to be included for comparison (if at all) will be 25.65%. 19. The learned AR relied upon the decisions in the case of (i) Willis Processing Services P. Ltd. (2013) 30 Taxmann.com 350 (Mumbai Trib.); (ii) Kailash Jewels P. Ltd. (2016) 156 ITD 685; (iii) Weatherford Drilling & Production Services India P. Ltd. (2015) 60 taxmann.com 238 (Ahmedabad-Trib.); and (iv) Benetton India P. Ltd. (2014) 134 ITD 229 (Delhi-Trib) for this purpose. 20. Learned DR submitted that the learned TPO rightly found that in the earlier years, the assessee had used this as a good comparable because this company is functioning similar to the assessee inasmuch as they are also trading in electric machinery. Learned DR further argued that for computation of gross margin,profit and loss account is not necessary and it could well be calculated with reference to the material available in the public dom....
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.... no further disallowance is justified. 25. Learned DR submitted that Section 14A refers to such expenditure in relation to income which does not form part of the total income and, therefore, it is irrelevant whether the assessee earned any income in this particular year, but it is enough if the expenditure was in relation to the income which would not be forming part of the total income. On this premise, learned DR submits that it is not open for the assessee to contend that barring BSL Dynamic Bond Retail, all other investments are taxable and the similar additions made in earlier years have been deleted by the CIT(A) and the revenue rejected the same without preferring any appeal to the ITAT. 26. It is an admitted fact that the assessee themselves disallowed a sum of Rs. 3,03,958/-. There is no dispute on the contention of the assessee that except BSL Dynamic Bond Retail, all other investments are taxable. Further, it also remains to be an admitted fact that similar additions made in earlier years is deleted by the ld. CIT(A) and no further appeal to the ITAT was preferred by the Department. In these circumstances, we find that the directions of the DRP for deletion of this....