TaxTMI 
TaxTMI 
2024 (6) TMI 1216
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....ead case. 3. The assessee has raised following grounds of appeal: 1. General Ground That on the facts and in the circumstances of the case and in law, the Learned AO erred in assessing the total loss at INR 2,699,202,298 under normal provisions as against loss of INR 2,709,117,138 declared by the Appellant in the return of income under normal provisions of the Act. 2. Transfer Pricing Adjustment That on the facts and in the circumstances of the case, the Learned TPO and the Learned AO erred, in carrying out an adjustment to the international transactions with AEs. 2.1. Rejected Cash PLI On the facts and in the circumstances of the case and in law, with respect to the transaction of purchase of spare parts from NSENGI, the learned TPO has erred in rejecting the cash profit level indicator ("PLI") of the Appellant as well as of comparable for the purpose of bench marking. 2.2. Rejected Transfer pricing Documentation and Economic Analysis That on the facts and in the circumstances of the case, the Learned TPO and the Learned AO erred. i). in rejecting the transfer pricing documentation maintained by th....
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....alue of Adjustment: Rs.35,27,000/- For AY 2018-19 For AY 2018-19 *. Transaction Value with AE: Rs. 8,10,61,143/- *. Value of Adjustment: Rs. 20,33,322/- During calculation of Net profit margin in ALP the TPO had considered the depreciation of asseessee. The assessee is a newly set up business entity and yielding huge depreciation. The assessee requested for acceptance of cash PLI for calculation ALP which was rejected the by the TPO. The DRP had accepted the assessee' splea, but the TPO had not considered. The adjustment is calculated by the TPO amount to Rs. 35,27,000/- for AY 2017-18 which was upheld by the ld AO The aggrieved assessee assessment order filed an appeal before us by challenging the assessment order. 5. The Ld. A.R vehemently argued and filed a written submission which are kept in the record. The Ld. A.R invited our attention in written submission APB page 223 and the details of comparisons for calculation of ALP. The submission has duly inserted as below: 6. The Ld. A.R further proceed that the issue was already considered by the DRP and the assessee is using TNMM as MAM so cash credit/operating revenue as margin of the assessee there ....
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.... DCIT in ITA No. 1816/Del/2011 dated 11.2.2014 in which the'decision of SchefenackerMotherson Limited (supra) relied upon by the assessee has also been discussed." Further the Ld. A.R invited our attention in written submission related to depreciation/sale of comparable and the assessee The comparableare duly reproduced as below: The Ld. A.R respectfully relied on the decision of Co-ordinate Bench of ITAT- Kolkata in the case of DCIT vs. M/s Epcos Ferrites Ltd., in ITA No. 1597 & 1598/Kol/2017 for AY 2002-03 & 2003-04 date of order 30.01.2019. The relevant paragraph is reproduced as below: "We note that for determining the fair and true profit for the purpose of the application of the TNMM, it is appropriate that the effect of the depreciation must be excluded out of the operating profit for determining the operating profit ratio. The best way of computing operating profit would be to compute profit before depreciation in respect of each of the comparable company. It would take out the inconformity or the variation in the profit level of the comparables arising due to adoption of different method of charging depreciation. For this we rely on the judgment. of. The....
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....s been filed before the TPO and is pending for disposal and M/s Uttam Galva Steels Ltd. We direct the TPO /AO to accept both the comparable M/s Vallabh Steel Limited and M/s Uttam Galva Steels Ltd after considering the function and activity of the two companies and direct to dispose the rectification petition filed U/s 154. The TPO/AO is directed to allow the fresh search in relation to comparable of the assessee. The assessee prayed to remove the depreciation during the calculation of profit margin and requested for cash PLI in TNMM. In cash PLI the average of comparable 10.44% which is similar for assessee. The assessee stated that considering depreciation as a part of the total cost would not be appropriate for the purpose of benchmarking since the depreciation in the year under consideration was 16.92% of its revenue, vis-a-vis depreciation of 4.85% of seven comparable companies as taken by the TPO which in most cases as average depreciation as a percentage of revenue. The assessee has relied on the order of ITAT-Kolkata Bench in the case of M/s Epcos Ferrites Ltd(supra). We also relied on the same. In our considered view the depreciation should be removed for calculation of....
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.....66 AE 9 % of Purchase made from AE over = H/B Total Operating Cost 0.35% Arm's length adjustment J = GXI 35.27 Lac Document 4 ^ For AY 2017-18 Depreciation/ Sales of comparables and JCAPCPL (Pg 4 of handout for DRP hearing PPT for AY 2017- 18) Name of the company Year of incorporation Depreciation for FY 2016-17 (INR in lacs) Dep % of Revenue Stelco Limited 1995 151.93 Tata Steel BSL Limited 1983 1,68,561 1.09% 11.19% Steelco Gujarat Ltd. 1989 252.15 0.47% Metal Coatings (India) Limited 1988 73.21 0.75% Average 3.38% JCAPCPL 11,418 16.92% Document 5Cash Margins of comparables and JCAPCPL Name of the company Steelco Gujarat Ltd. Metal Coatings (India) Limited Tata Steel BSL Limited Stelco Limited Average JCAPCPL Not Margins as per TP order Cash PLI -0.41% 0.09% 3.75% 4.02% 7.75% 19.92% 16.56% 17.71% 6.91% -8.02% 10.44% 10.44% The relevant cash margins for comparables and JCAPCPL is enclosed as Annexure 1 and Annexure 2 respectively. For AY 2018-19 Depreciation/Sales of comparables and JCAPCPL (Pg 5 of handout for DRP hearing PPT for AY 2....