TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1681
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.... substantiated the availability and reliability of financial data of overseas comparable companies, 1.2 Rejecting Cost Plus Method (CPM) and in the motu carrying out fresh search under TNMM Method 1.3 In carrying out comparability analysis under TNM Method without carrying out proper FAR analysis of the tested party and of the comparables selected by him 1.4 Selecting certain companies which are otherwise incomparable. 1.5 Rejecting companies otherwise functionally comparable on the ground of persistent losses for a consecutive period of two years instead of period of three years. 1.6 Not selecting companies, though functionally comparable, because of turnover of less than Rs. I crore. 1.7 Incorrectly computing the net margin of the tested party and of the comparables. 2. On the facts and in the circumstances of the case, and in law, the Ld AO erred in initiating the penalty proceedings under Section 271(1)(c) of the Act wherein the addition sustained is merely difference of opinion and does not reflect any omission or misrepresentation of facts. The Appellant prays that the Ld AO be directed to drop the penalty proceedings initiated under Section 271(1)(c) of the A....
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....al transaction G 43,48,17,719 Proportionate cost H=G/C 82.48% Adjustment I=F*H 4,39,30,329/- 6. A final assessment order came to be passed u/s 143(3)/144C of the Act by making the adjustment of Rs. 4,39,30,329/- to international transactions pertaining to purchase of raw materials, other materials and payment of royalty u/s 92CA of the Act. The Revenue while making the above adjustments, selected 12 comparables. The details of the Companies finally selected by the DRP are as under:- Name of the Company Revised OP/OC after working Capital Adjustment 1 Rane Brake Lining Limited. 1.81% 2 Aurangabad Electricals Ltd. 4.39% 3 Sankei Giken India (P) Ltd. 5.37% 4 Talbors Engineering Private Ltd. 2.56% 5 Roots Industries India Ltd. 3.22% 6 Fiem Industries Ltd. 7.49% 7 GNA Axles Ltd. 5.52% 8 Roop Automotives Ltd. 10.40% 9 Lumax Automotive Systems Ltd. 2.88% 10 Remsons Industries Ltd. 3.19% 11 Dali & Summer Engineering Ltd. -0.52% 12 Mindarika India Private Ltd. 1.95% Average 4.02% Assessee's OP/OI Post DRP order -7.87% 7. Aggrieved by the final assessment order dated 09/07/2018, the Assesse....
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.... contended that products are different. The contention of the assessee is rejected due to the following:- 5.4.2. purpose For comparability the of one has to see whether the company has passed approximating filters the business conditions of the taxpayer and on the basis that main activity is that of providing business services, which may not be exactly same as that of taxpayer but requires engagement of employees with similar qualifications. It is with this view, every company should be seen and effort should be to find the substantial activity of the company and not to get dis oriented with certain key words, effort for developing intellectual property specialization, tools used by the company for delivering services and given special name company by distinguish itself. 5.4.3 Hence, the effort should be to see the company's activity in its entirety and find out what it is doing substantially. Further, when the TNMM is used for comparability analysis the advantages are that it allows some degree of flexibility and tolerance in the matter of selection of comparables. Under this method, net margins are compared and some amount of functional dissimilarity can be tolerated at....
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....y the ld. CIT (A) while rejecting the comparables chosen by the TPO. 20. So, we are of the considered view that distinction of the core and non-core auto components is the key to benchmark the international transactions undertaken by the taxpayer in this case and this view is supported with the decision of the coordinate Bench of the Tribunal in Minda Acoustic Ltd. (now Minda Industries Ltd.) (TS-468- ITAT-2019 (DEL)-TP). 21. Coordinate Bench of the Tribunal in the case of Minda Acoustic Ltd (supra) had made the distinction between core and non-core auto components as per Clause (b) & (h) of Rule 10TA of the Income-tax Rules, 1962 applicable to the identical facts of this case by returning following findings :- "14. Based on this distinction brought in the statute, the Ld. DRP has rejected most of the comparables selected by the TPO holding that these comparables were manufacturing core products which cannot be compared with the assessee which is purely into production of noncore auto components mainly various types of horns. From the perusal of the definition of 'core auto components' as given in the Rules, it can be inferred that core auto components are crucial par....
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....es category, unlike the assessee company, which manufactures non-core components for two wheeler vehicles. The said information can be corroborated from its functional profile of Roop Automotives Annual Report produced at Pg. 1108, 1109, 1117 & 1148 of paper book Vol-IV. The relevant portion are as under:- "38 Segment Reporting The Company is primarily engaged in the business of manufacture of Auto Components for four wheelers in both in heavy carriage and passenger car vehicle category. The exports turnover of the Company is more than 50% of its total turnover. The company is engaged primarily in the manufacture and assembly of automotive components such as Universal Joints, Steering Column Shaft. Rotor Oil Filter (ROF) Carden Joints, Case Differential for the four wheelers both in heavy carriage and passenger car vehicle category... Snapshot of the company website is as under:- "Roop Automotives Limited (ROOP) is currently into manufacturing steering Yokes (both cold/hot and ferrous/non-ferrous forging, sheet metal), Steering Joints, Slip Shaft Assemblies, I Shaft Assemblies, Steering Columns, Differential Housing, Steering Gearbox housing. Axle drive shafts, Tie Rod Ends....
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.... are entirely different from the Assessee Company. 18. As per the Functional Profile of the company as seen from its Annual Report produced at page 922 of the paper book Vol-IV, the Company is engaged in manufacturing of Automotive Lighting &Signalling Equipment, Rear View Mirrors, LED Luminaires for both Indoor & Outdoor Lighting, Integrated Passenger Information Systems with Display & Software for Railways, Metro, Airport & Busses (IPIS) and Plastic & Sheet Metal Components. 19. Further, in the Letter to Shareholder of the above Company [produced at pg. 923, 931 & 932 of the paper book Vol-IV],it is stated as under: i) "Your Company inculcates a deep culture of continuous improvement in its products driven by Research & Development and adoption of new technologies with upgraded infrastructure. We are extremely passionate about our products and with a large line-up of new and exciting LED Luminaires, 'IPIS' and LED Panel with Display & Software, we are strongly confident to create niche in the market. We are continuously working on a strong pipeline of new and exciting range of products, which are highly technology & research driven. ii) The Company has entered into ....
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....oper or suitable comparable. In view of the above, relying on the order of the co-ordinate bench of the tribunal in the case of Sanden Vikas India Ltd.(supra), we are of the considered opinion that, GNA Axles Limited is not an appropriate comparable. Sankei Giken India (P) Ltd. 24. As per the Annual Report on notes to Financial Statements under Corporate Information (produced at Page No. 878 of Paper book Vol-IV), the above Company is engaged in the business of manufacturing components such as Gear guard pedal, auto, Exhaust pipes for 4 wheelers muffler components, Rear Arm, AC parts cooling system for four wheeler as well as two wheelers in automobile industry. It is to be noted that items manufactured by the above Company are 'core auto components' Rule 10TA(b)(i)&(ii) of the Rules. Relying on the order of the co-ordinate bench of the tribunal in the case of Sanden Vikas India Ltd.(supra), we find that the above Company it is not an appropriate comparable with the assessee who is manufacturing non-core components for two wheelers only. Aurangabad Electricals Ltd. 25. The annual report of the above Company under the head of corporate information states as under: "Auranga....
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....asting components, Plastic moulding, Precision Tools, Die &Mould Solutions and Calibration Solutions. The Export turnover of the above Company was Rs. 5174.30 Lakhs in 2013-14, as compared to Rs. 4399.14 Lakhs in 2012-13. The tremendous growth in Export turnover of HEP segment has helped the company to achieve better overall turnover and profitability, which can be corroborated from Pg. 691 of the Paper book Vol-III. 29. The above Company is not only into automobiles industry, but has varied and diversified areas of manufacturing such as medical aerospace lab testing and commercial furniture manufacturing, which are not in the automobile industry. On the other hand, the Assessee's products are only in the automobile Industry. Hence functionally it is entirely mis-matched and not a proper comparable. In addition it has huge exports as well as R&D activities. For this it is obvious that this is not a proper comparable with the assessee as this company has full-fledged manufacturing facilities in different countries and vide range of products including electric horns, medical aerospace as well as commercial furniture. Whereas Assessee manufacture non-core components for two wheel....
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....k Kits, Winches, Pedal Boxes and Parking Brake Cable Assemblies, to name a few. In line with our future ready vision we are manufacturing state of the art sensor products across the automotive, earth moving, agriculture and marine sectors. With advanced manufacturing facilities across the country, including a brand new facility at Pune and an advanced manufacturing facility in UK our global presence has increased through through Joint Venture collaborations with Aircom Group a leading global manufacturer of Tire repair kits & Daichi a leading player in automotive infotainment systems." 35. The Co-ordinate Bench of the Tribunal in the case of DCIT Vs. Minda Acoustic Ltd. [2019] 107 taxmann.com 475 (Delhi), while excluding the above Company held as under:- .. in cases of Suprajit Engineering and Remsons Industries Ltd., it is seen that these companies are engaged in manufacturing of control cables, push pull cables, parking brake assemblies which controls the mechanical functions of the accelerator, brakes, clutches etc. These again are core components of any vehicle without which the vehicle cannot run and is also classified as core component under safe harbour rules..." 36. In ....