TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 647
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....ize that Appellant is joint venture between two unrelated entities. B. Inappropriate economic analysis 4. That on the facts and in law, the Learned AO/TPO grossly erred in undertaking an opaque analysis and acting in violation of natural justice by not sharing the search methodology, keywords used, criterions of selection/rejection of companies, number of companies rejected by way of applying various filters applied for identification of comparable companies, for the purpose of making impugned adjustment. 5. That on the facts and in law, the present comparability analysis needs to be discarded and a fresh analysis having regard to the functional profile ought to be undertaken whereby determination of most appropriate method considering appropriate comparable data along with necessary comparability adjustment needs to be undertaken. 6. That on the facts and in law, the Learned AO/TPO did not apply a scientific process of selection of new comparable companies and merely "cherry-picked" companies arbitrarily without providing any cogent reasons for selecting the companies. 7. That on the facts and in law, the Learned AO/TPO erred in selecting inappropriate set of comparables....
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....e to accept the contention of the assessee on the turnover filter. At the same time, we find that the operation and manufacturing of the assessee is functionally dissimilar to the comparable which is in the manufacturing of voltage panels. Hence, we hold that the comparable doesn't pass the functional analysis and is liable to be excluded from the list of comparables. 6. Havells India Ltd. - The turnover of the company is Rs. 5833 crores and is involved in manufacturing of domestic electronic and electrical products like switches, heaters etc. 7. It has been decided in number of Tribunal decisions that the companies having a turnover from Rs. 1 Crore to Rs. 200 Crores have to be taken as a particular range. Since the assessee company falls in this range having total turnover of Rs. 18.97 Crores, the companies which have turnover in the range of Rs. 1 Crore to Rs. 200 Crores only should be taken into consideration for comparable for the purpose of determining arm's length price. This proposition is being consistently followed by various benches of the ITAT such as: * Yokogawa IA Technologies India (P.) Ltd. vs. DCIT [2019] 112 taxmann.com 341 (Bangalore - Trib.) * Trio....
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....facturing and apparently a margin of 1.67% is very low on any yard stick for manufacturing sector. 2. As seen from the TPO order there was repeated non-compliance on the part of the assessee by the TPO. Relevant part of the TPO order is reproduced below:- S. N. Notice u/ s / reminder Date of notice/ reminder Date of compliance fixed as Per the notice Summary contents of Remarks 1 92 CA( 2 ) 92 D(3 ) and 14 . 12 . 2018 26 . 12 . 2018 Detailed questionnaire initiation of proceedings for TP No compliance and no request for adjournment either 2 92 CA( 2 ) 92 D(3 ) and 17 . 01 . 2019 29 . 01 . 2019 Detailed questionnaire TP proceedings for -do- 3 92 CA( 2 ) 92 D(3 ) and 13 . 09 . 2019 19 . 09 . 2019 Detailed questionnaire TP proceedings for -do- 4 271 G 20 . 09 . 2019 27 . 09 . 2019 Notice u/ s 271 G- penalty notice for failure in compliance -do- 5 92 CA{ 2 )and 92 D(3 ) . 10 . 2019 21 . 10 . 2019 Detailed questionnaire for TP proceedings -do- 3. After the repeated non compliance AO had issue detailed show cause notice to the assessee vide notice dated 15.10.2019 however assessee did not submit any reply. A....
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....cluding details of the comparable data and financial information used in applying the most appropriate method, and adjustments, if any, which were made to account for differences between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions; 6. In view of the above it can be seen that the order which has come before the Hon. Tribunal is in the nature of ex-parte of the order. Following judicial pronouncements forbid any change in best judgment assessment- (i) 24 ITR 95 (Del) - Singh Engg. Work - Best judgement Assessment cannot be interfered with by appellate authority or courts unless it is shown to be malafide and capricious. The burden is on Assessee to show AO's order malafide capricious and unreasonable. (ii) Best judgement of the Assessing Officer cannot be converted into regular assessment at appellate stage by producing fresh material the best judgement of the Assessing Officer cannot be questioned so long as it is not arbitrary & has a nexus with facts. RAYALA CORPORATION 215 ITR 883 (Madras), 898, SUFALI ABDVLALI 90 ITR 271, 278-280 (SC) 7....
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....see are not material, as the variations in both directions would balance themselves. This has been recognized by the Hon'ble ITAT in the following decisions: (i) ST Microelectronics Pvt. Ltd. v Addl. CIT 2011-TII-63-ITAT-DEL-TP (ii) Variant Systems (India) Pvt. Ltd. v ITO 2015-411-362-ITAT-DEL-TP 3.1.8 Comparable cannot be expected to be a perfect replica A comparable cannot be expected to be a perfect replica. This has been recognized by the Hon'ble ITAT in the following decisions: (i) DCIT v Deloitte Consulting India Pvt. Ltd. ( 2011 -TII-88-ITAT-HYD-TP) In our considered opinion, no two comparable companies can be replicas of each other. Tire application of Rule 10B should be carried out and judged not with technical rigor, but on c broader prospective. (ii) ITO v CRM Services India (P) Ltd. (2011-TII-80-ITAT-DEL-TP) As is our experience, it is nearly impossible to get comparable cases with no difference at all. As discussed in the earlier paras if the comparables are to be rejected on the ground of functional difference in that case AO may be directed to look into all cases of set up boxes manufactures and the assessee may be directed to submit a TP stud....
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....ch afresh pursuant to its directions. Sykes Enterprises (India) Pvt. Ltd. [TS-410-ITAT-2017(Bang)-TP] - IT(TP)A No. 1034//Bang/2011 dated 28.04.2017 (iii) The Tribunal following the ruling in McAfee India excluded 3 companies viz. L&T Infotech Ltd. (turnover of 2.959.55 cr). Persistent Systems Ltd. (turnover of 810.36 cr.) and Mindtree Ltd. (Turnover of 1255.80 cr) from the list of comparables while benchmarking the international transaction of the assessee engaged in the business of software development services as the said companies failed to satisfy the turnover filter of 10 times the assessee's turnover i.e. 38.07 cr. Aptean Software India Pvt. Ltd. vs DCIT [TS-332-ITAT-2017(Bang)-TP- I.T(TP).A No. 1826/Bang/2016 dated 15.05.2017 (iv) The Tribunal upheld the application of the turnover filter of 10 and 1/10th times assessee's turnover and also directed the TPO to adopt a 15% related party transaction filter in view of the fact that there were adequate number of comparable companies. It observed that the entire TP-issue required fresh examination and consideration at AO/TPO's level as the comparability of the entire set of comparables had to be decided by app....