2022 (5) TMI 1001

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....Y. 2013-14. 2. Pithily put, the facts of the case are that the assessee is a wholly owned subsidiary of LMT Group, headquartered in Germany, which is a leading Metalworking technologies group. The products and services of the assessee include precision tools and cutting materials for the most diverse applications in cutting and non-cutting processing as well as tool reconditioning and tool management packages. The assessee filed return declaring total income at Nil with current year loss of Rs.1,54,13,216. The assessee had reported certain international transactions. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) for determining their Arm's length price (ALP). I. Trading Segment 3.1. The first....

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.... the remand report of AO, fairly conceded that no value addition was made by the assessee to the goods purchased under the Trading segment. He harped on other factors to support his contention that the RPM was not correctly applied by the assessee. In view of the fact that the assessee purchased and sold the same goods without increasing or reducing their inherent value, clearly the most appropriate method for determining the ALP in such a situation is the RPM. The Hon'ble Delhi High Court in Pr.CIT vs. Matrix Cellular International Services Pvt. Ltd. (2017) 100 CCH 0191 (DelHC) has held that where the goods are re-sold without making any value addition, the RPM is the most appropriate method. The contention of the ld. DR that more emplo....

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....the remand report of the AO, as reproduced at pages 24 and 29 of the impugned order, that: "As per the details available, it is not a persistent loss making company, as it has earned profits in earlier two years and next two years compared to the relevant year". The TPO, however, accentuated on the fact that there was a huge dip in the revenue for this year. Thus, it is evident that the only reason for the exclusion of this company by the TPO is the losses incurred by it in the year under consideration. The Hon'ble Bombay High Court in CIT vs. Welspun Zucchi Textiles Ltd. (2017) 92 CTR 1 (Bom) has held that loss made in one year would not ipso facto result in exclusion of a company from comparability analysis. The Hon'ble Bombay High Court ....

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....ying less amount of Customs duty. In our considered opinion, this argument is devoid of merits. It is not a case of payment of Customs duty by the assessee at a higher rate vis-a-vis comparables. It is just fundamental that if a person uses better quality raw materials, obviously, the corresponding sale price also goes up and vice-versa. Given the fact that the assessee imported more raw materials for manufacturing, it is but natural that the corresponding sale price would also have been on higher side, thereby nullifying the effect of higher payment of Customs duty, forming a part of the Operating cost base on the overall basis. The situation would have been different if the assessee had paid Customs duty at a rate higher than that paid by....

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.... case has been set up that such expenditure related to the setting up phase of the manufacturing unit and hence, should be considered as non-operating. We are unable to countenance this contention for the reason that the Manufacturing unit was already in existence, which fact is borne out from the assessee's Profit & loss account for this year, which shows the figure of `Revenue from operations' in the preceding year at Rs.7.75 crore as against Rs.7.99 crore for the year. This manifests that the unit was already set up in an earlier year and was in operation even in the preceding year much less the year under consideration. This appears to be the reason for the assessee claiming deduction for such expenses in its Profit & loss account and n....