TaxTMI 
TaxTMI 
2021 (10) TMI 955
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in considering the Appellant as the tested party by wrongly considering that: 2A. The Appellant is performing simpler functions and thus least complex entity. 2B. The Appellant is dependent on intangibles of its Associated Enterprises ("AEs") 3. In law and on facts and circumstances of the case, the Ld. CIT (A) has erred in rejecting foreign AE as the tested party and rejecting comparable companies as selected by the Appellant. 4. Without prejudice to the above, and in law and on facts and circumstances of the case, the Ld. CIT (A) has erred in selecting comparable companies by considering Appellant as the tested party. 5. Without prejudice to the above, and in law and on facts and circumstances of the case, the Ld. CIT (A) has erred in computing operating margin of the Appellant even if Appellant is considered as the tested party by considering foreign exchange gain as non-operating income. 6. Without prejudice to the above, and in law and on facts and circumstances of the case, the Ld. CIT (A) has erred in rejecting complete fresh search proposed by the Appellant even if Appellant is considered as the tested party due to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act, thereby he recommended the upward adjustment of Rs. 1,96,21,839/- in respect of determination of Arm's Length Price (hereinafter 'ALP') of the international transactions. The Assessing Officer after having received the order of TPO issued a show cause notice dated 06.02.2015 calling upon as to why the adjustments as recommended by the TPO should not be made. 3. In response thereto, the assessee company filed its reply dated 13.03.2015, however, the same was not found acceptable by the Assessing Officer and the Assessing Officer on the basis of adjustment as suggested by the TPO made addition of Rs. 1,96,21,839/-, hence assessed the income at loss of Rs. 5,63,20,122/- against returned loss of Rs. 7,59,41,961/-. 4. Aggrieved against this, the assessee preferred appeal before the Ld. CIT(A) who after considering the submissions of the assessee partly allowed the appeal. Thereby, the Ld. CIT(A) sustained the finding of the Assessing Officer rejecting foreign AEs as the comparable instead opting NTN Japan as one of the comparables. Ld. CIT(A) further rejected the grounds regarding considering the appellant as a tested party and also computing mean operating m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Components Ltd.; and Gabriel India Ltd. as the comparables for the purpose of TNMM. The mean margin of these companies was 5.62%. Since the margin earned by the assessee during the year, was less than the mean margin of the comparable companies. The TPO computed the transfer pricing adjustment and thereby, he proposed adjustment of Rs. 1,96,21,839/-. The ld. counsel submitted that the Ld. TPO and Ld. CIT(A) grossly erred in considering the appellant as tested party. Thus, the impugned order has no ground to stand and was passed with predetermination of mind. It was further submitted that it is an accepted rule that least complex entity should be considered as tested party and that in this case is AEs. The automobile industry/autoparts industry is an industry driven by innovation where companies compete with each other for developing more efficient and superior products every day. Thus, in order to compete in the market, it was crucial for appellant to undertake continuous engineering R & D activities. The assessee company does not have any engineering design team of its own instead of it receives such engineering design support services from its AE-BWI Poland. In consideration, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dered least complex from the point of function performed risk borne and assets owned. Moreover, in T.P. report of the appellant has not attributed intangibles assets to any AE rather their ownership remained with BWI Group. Further, the order of the TPO suffers from various mistakes/misinterpretation which can be inferred from citing the example to explain the relationship between the assessee and its AE. Further, it was contended that Ld. CIT(A) erred in rejecting the contention of the assessee that complete and reliable data for benchmarking the international transaction was not provided. Ld. CIT(A) failed to appreciate the fact that the appellant had submitted the transfer pricing reports documentation of the foreign AE along with P&L A/c. of the foreign comparables to the TPO. 12. We have heard the rival submissions, perused the material on record and gone through the submissions of the assessee. The grievances of the assessee are in three fold, one that the appellant ought not to be considered as tested party, two the comparables selected by the TPO who are functionally different from the assessee having different business module and three not granting the appellant the opt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mparables selected by the TPO by observing as under:- "I have considered order of the TPO and arguments of the Ld. AR. The appellant has used facility of Delphi India Ltd. for manufacturing of auto components through contract manufacturing service agreement date 1st day of November 2009 between the appellant and Delphi auto motive system Ltd. This agreement is only for the use of manufacturing facility of Delphi India. There if no mention of marketing division for the sale of the products of the appellant. The facts remains that the raw materials is being provided by the appellant the production is carried out in accordance with and guidance of the appellant through the use of its AE's engineering consultancy marketing is done in the name of BWI Group therefore even though the appellant is using manufacturing facilities of other during the year, the facts remain that the appellant is in the manufacturing and sales of automobile parts three comparables namely Rane (Madras), Sona Somic Lemforder Components Ltd., and Gabriel India Ltd. Are in the business of manufacturing of auto component therefore, in my view slight variation of either engaging manpower and use....