TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 25
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....ot established the need for working capital adjustment by showing that the credit period agreed between the assessee and its AE are more than the agreed period availed by the comparables. On this very issue, the Revenue has also raised that the CIT(A) failed to understand the issue that only difference in the days of credit between that of comparable and the agreed credit period as per invoice / agreement with the AE should be taken into account and not the availed credit period. For this, the Revenue has raised various grounds 1 to 4, which are argumentative in nature and hence, need not be reproduced. 3. Brief facts are that the assessee was incorporated as private limited company under the Companies Act, during October 2007 as a wholly owned subsidiary of the Korean Holding company Woosu AMS Co. Ltd., South Korea. The company is having its manufacturing facility in Sriperumbudur. It is mainly engaged in the manufacture of transmission parts for automobile products such as Rail-sub Assembly, Fork-Shift, Rail shift, Complete Shaft Assemble, Brkt Assemble-Eng Supt, Gear Differential and Shaft Input. The company caters to OEM Hyundai Motors India and its ancillary units. The AO con....
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....w of the same, the Assessing Officer/TPO are directed to provide the working capital adjustment as in AY 2013-14 in the case of the assessee. Aggrieved, now Revenue is in appeal before the Tribunal. 4. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the TPO himself in the proceedings for assessment year 2013-14 considering the impact of negative working capital in profitability of assessee allowed working capital adjustment. Now the contention of the Revenue is to restrict the adjustment to the difference in agreed credit period between the AO and the assessee and that of comparables. But according to assessee, this is improbable as similar data is not available in the case of comparable companies. The ld.counsel for the assessee drew our attention to OECD guidelines which provides for considering the availed credit period rather than agreed credit period. The ld.counsel for the assessee filed the OECD guidelines of July, 2010, wherein it is mentioned as under:- "A major issue in making working capital adjustments involves the selection of the appropriate interest rate (or rates) to use. The rate (or rates) should generall....
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....O again rejected the claim of adjustment on various losses as non-operating in nature by observing as under:- "7.9 The assessee's business primarily involves importing raw materials and components from its associated enterprises for the purpose of manufacturing transmission parts used in automobile industry for its sole customer namely, M/s.Hyundai Motors India Ltd. The assessee has chosen a decisive call in leaving its exposure to Forex fluctuations uncovered through hedging. This is strengthened by its FAR analysis as well. The assessee did not reduce its claim of loss filed in the Return of Income treating Forex loss arising on account of transactions and translations. Taking into account the above set of factors, the adjustment sought for by the assessee is rejected." The TPO rejected the custom duty adjustment by observing as under:- "8.1 At the outset, it is pertinent to note that this adjustment is sought only in the response the show cause notice and not as part of the Transfer Pricing Study. The plethora of decisions relied upon by the assessee have been considered. Each business has its own unique features. In this case, if the pattern of imports of raw materials and....
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....sessee could not pass on the impact of entire higher import duty to its customer and as a consequence to the extent of such higher non-cenvatable duty, assessee's PLI needs to be adjusted before comparing against the comparable companies. He also stated that the comparable companies have largely indigenized their operations with majority of the raw materials procured locally and the comparable companies do not bear the additional cost of the customs duty in regard to their indigenized operation. According to counsel, the assessee has no choice but to import the raw material either from its AE or from other parties due to business reasons. The assessee has to pay higher import duties on account of stringent quality requirement. The assessee has tried to show the details of higher custom duty incurred but no comparable was cited but ld.counsel for the assessee stated that his mater can go back to the file of AO for verification whether the assessee is paying higher custom duty i.e., non-cenvatable custom duty and the comparables are either procuring indigenous raw material or buying lesser custom duty which could be set-off against cenvat. We noted that the authorities below have not....