TaxTMI 
TaxTMI 
2019 (6) TMI 663
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.... of these companies, the quantum of total related party transactions is less than 25% of total transactions and the said companies were also selected as comparables by the appellant itself for the AY 2003-04. 2. The Hon'ble CIT(A) erred in considering Hindustan Motors as a comparable company for the purpose of determining companies comparable to that of the Appellant without taking into consideration that it incurred loss for the year under consideration on account of abnormal circumstances. 3. The Hon'ble CIT(A) erred in directing the AO to allow economic adjustment towards additional non-cenvatable duties paid by the Appellant vis-a-vis the comparable companies without considering that the business model followed by the appellant is consistently same over a period of time. 4. Without prejudice to the above, the Hon'ble CIT(A) erred in neither specifying the quantum of adjustment on account of additional non-cenvatable duties paid by the Appellant, which is to be allowed to the Appellant nor suggesting any methodology for determining such quantum of adjustment. 5. The Hon'ble CIT(A) erred in directing the AO to allow the adjustme....
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....Hindustan Motors was rejected being consistently loss making. Accordingly, the Transfer Pricing Officer drew up the list of final comparables totalling 6 and the mean margin of the said company was 6.64%, as against the margin of the assessee at (-) 7.25%; the Transfer Pricing Officer proposed an upward adjustment of Rs. 52,01,32,552/-. The Assessing Officer passed an assessment order proposing the said addition of Rs. 52.01 crore against which the assessee filed an appeal before the CIT(A). 6. Before the CIT(A), the first plea of the assessee was that the companies with Related Party Transactions (RPT) should be rejected. However, it was pointed out that in the Automobile Sector it was very difficult to have companies with no Related Party Transactions. Hence, all companies with Related Party Transactions exceeding 15% of the total income be rejected as comparables. The assessee also referred to the decision of Pune Bench of the Tribunal in assessee's own case for assessment year 2003-04 reported in 122 TTJ 699 (Pune), order dated 12-03-2009 wherein it was held that the transaction has to be between two entities which could not influence or control each other decisions. The ....
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.... Pricing Officer should be included for benchmarking the international transaction between the assessee and its Associated Enterprise. The assessee in the present case while benchmarking the international transaction undertaken, had excluded three concerns Honda Siel, Hyundai Motors and Maruti Udyog on the ground of RPT filter of 15%, though they were functionally similar to the assessee. The assessee's objection to the same was that the margins of the said concerns could not be applied because they do not fulfil the RPT filter. In several cases, the Tribunal had held that while benchmarking the international transaction between the assessee and its Associated Enterprise and comparing the margins with margins of concerns, then one of the filter to be applied is RPT filter. 12. Such is the proposition laid down in Sony India Pvt. Ltd. reported in 106 TTJ 175 (Del). The observations are reproduced under para 4.3 at page 7 of appellate order. 13. Applying the said filter of RPT, the benchmarking has to be carried out. In the facts of the present case before us, the Assessing Officer did not apply any RPT filter but the CIT(A) had applied RPT filter of 15% and the three concer....
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....gment of Hon'ble Bombay High Court in CIT Vs. Petro Araldite (P) Ltd. reported in 93 taxmann.com 428 (Bombay). 18. The learned Authorized Representative for the assessee fairly pointed out that the CIT(A) did not say how the said capacity adjustment on account of capacity utilization is to be allowed, i.e. how the margins of the comparables are to be adjusted. However, the Delhi Bench of the Tribunal in DCIT Vs. Class India (P) Ltd. reported in 62 taxmann.com 173 (Delhi-Trib.) had prescribed the method which may be applied. 19. We have heard the rival contentions and perused the record. The issue which is arising by ground of appeal Nos. 5 and 6 is against the order of CIT(A) in directing the Assessing Officer/Transfer Pricing Officer to allow capacity utilization adjustment. The assessee is in second year of operation and has pointed out that it has only utilized 33% of the total capacity whereas the comparables have on an average utilized 50 to 70% of the total capacity and hence, the margins of the comparables need to be adjusted accordingly. 20. The Hon'ble Bombay High Court in CIT Vs. Petro Araldite (P) Ltd. (supra) had held that while computing the Arm's Length Price....