AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (8) TMI 928
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....ssessing Officer ('AO') passed under Section 143(3) read with section 144C(13) of the Act and the order of 'the Honourable Commissioner of Income Tax (Appeals), New Delhi (hereinafter referred to as the 'Hon. CIT(A)') passed on 29 May 2015 received by the Appellant on 18 June 2015. 1. Transfer Pricing Grounds 1.1 On the facts and in circumstances of the case and in law, the Ld. Transfer Pricing Officer ('TPO')/AO has erred and the Hon. CIT(A) has further erred in upholding/confirming the action of the Ld. TPO/AO by making transfer pricing addition of Rs. 152,075,072 to the Appellant's income. 1.2 On the facts and in circumstances of the case and in law, the Ld. TPO/AO has erred and the Hon. CIT(A) has further erred in upholding/confirming the action of the Ld. TPO/AO by disregarding the benchmarking analysis and comparable companies selected by the Appellant based on the contemporaneous data in the transfer pricing study report maintained as per Section 92D of the Act read with Rule 10D of the Incometax Rules, 1962 ('the Rules') and the various submissions made by the Appellant. 1.3 On the facts and in circumstances of the case and in law, the Ld....
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....rate Tax Grounds 2.1 On the facts and in circumstances of the caseand in law, the Ld. TPO/AO has erredand the Hon. CIT(A)has further erred in upholding/confirming the action of the Ld.TPO/AO by disallowing Miscellaneous Expenses. 2.2On the facts and in circumstances of the caseand in law, the Ld. TPO/AO has erredand the Hon. CIT(A)has further erred in upholding/confirming the action of the Ld. TPO/AO by not considering the accumulated brought forward losses up to the captioned assessment year amounting to Rs. 1,22,04,525, while determining the assessed income of the Appellant. The above 'Grounds of Appeal' are all independent and without prejudice to one another. The Appellant craves leave to supplement, to cancel, amend, add and/or otherwise alter or modify, any or all, grounds of appeal stated hereinabove. 4. Ground No.1.1 and 1.2 which are general in nature and needs no separate adjudication. 5. Ground No.1.3 and 1.4 are not pressed and are accordingly dismissed. 6. Ground No.1.5 the assessee alleged that the CIT erred in upholding/ confirming the action of the AO by selecting Heinz India Pvt. Ltd. and rejecting Godrej Hershe....
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....inally selected for the benchmarking of the international transaction :- 13. Proceeding further the AO disallowed 10%of miscellaneous expenses of Rs.2897951/- claimed by the assessee and made an addition of Rs.289800/- on ad-hoc basis. Assessee challenged the assessment before the CIT(A) but without any success. 14. Before us the counsel for the assessee assailed the approach of the lower authorities on the following issues :- 1. Exclusion of Heinz India Private Limited as comparables 2. Adjustment on account of custom duty and capacity utilisation 3. Ad-hoc disallowance of miscellaneous expenses 4. Allow Set off of brought forward accumulated losses 15. It is the say of the counsel that it was challenged before the TPO for the exclusion of Heinz India as a comparable in the final set off comparables on the ground that the turnover of Heinz India Pvt. Ltd. Was Rs. 720 crores and that of the assessee is only 34 crores. 16. The counsel vehemently stated that such higher turnover company should not be used as comparable with a low turnover company like the assessee. 17. The counsel continued by stating that the company engaged in manu....
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....tities must be selected on the basis of similarity with the controlled transaction/entity. Comparability of controlled and uncontrolled transactions has to be judged, inter alia, with reference to comparability factors as indicated under rule 10B(2) of the Income Tax Rules, 1962. Comparability analysis by TNMM method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable transactions/entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable ALP. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in PIT must trigger further investigations/ analysis." 23. In the light of the aforesaid observations of the Hon'ble High Court of Delhi we direct the AO / TPO to exclude Heinz India from the final set of comparables. 24. The next issue relates to the adjustment on account of custom duty. 25. The appellant company claimed custom duty adjustments since the year under consideration is the first full year ....
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.... details and the same can be used for giving the benefit of under utilisation of capacity by the appellant company. We accordingly direct the AO /TPO to allow adjustment of capacity utilisation by comparing the data of the comparable companies in so far as capacity utilisation is concerned with that of the assessee. In alternate the assessee shall furnish the relevant data and the AO / TPO shall examine the same after giving a reasonable opportunity of being heard to the assessee. 35. The next issue relates to the ad-hoc disallowance of miscellaneous expenses of Rs.50,000/- 36. Facts on record show that the AO has disallowed Rs.289800/-being 10% of the miscellaneous expenses incurred during the year and the CIT( has restricted the disallowance to Rs.50,000/-. In our understanding of the facts the first appellate authority has already given substantial relief to the assessee and considering the smallness of the amount we decline to interfere. This ground is accordingly dismissed. 37. The next grievance relates to non granting of set of brought forward losses. 38. We find that in A.Y.2008-09 the assessed loss was determined by the AO. The same was brought forward in A.Y. ....
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....mpany has provided for impairment of losses to be incurred on sale of machines. It is the say of the counsel that the treatment given by the assessee is in compliance with the accounting standard issued by the ICAI and hence the impairment of asset should be considered as non operating expenses. 6. Per contra the DR supported the findings of the lower authorities. 7. We have carefully considered the orders of the authorities below. There is no dispute that the machinery purchased by the assessee was lying in capital work in progress. It is also not in dispute that the treatment given by the assessee is in line with the accounting standard issued by the ICAI. In our considered opinion a provision for impairment of assets is not a depreciation charge nor amortisation of fixed assets but it is a provision made to the carring amount of the fixed assets which is reversible in nature. Moreover section 92 (1) of the Act requires that any income arsing from an international transaction / allowance for any expenses shall be computed having regard to arms length price. In our considered view impairment of assets cannot be related as international transaction of the assessee. Further th....
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....ecisions referred here in above we direct the AO / TPO to include Candico India in the final set of comparables. 16. The next issue relates the adjustment on account of custom duty and capacity utilisation this issue has been discussed by us at length in ITA No. 5158/Del/2015 for A. Y.2009-10 (supra) in detailed discussion therein we order accordingly. 17. In the result, the appeal filed by the assessee is allowed in part for statistical purpose. Order pronounced in the open court on 21.08.2020. ============= Document 1 Comparable as Name of the OP/ per Comparable Sales 1 As per show- Heinz India cause Pvt Ltd. 15.68 As per assessee Nutrine reply dated Confectionery 2 3 09.01.2013 As per assessee reply dated 09.01.2013 As per assessee Company Ltd -2.95 Ravalgaon Sugar Farm Ltd. 11.85 Sampre Nutrition Ltd reply dated 4 09.01.2013 Arithmetic Mean 16.35 10.233 Document 2 Total Total raw Raw imported raw Name of the Comparable materials (in material material (in Rs.) import % Nutrine Confectionery Company Limited Ravalgaon....