TaxTMI 
TaxTMI 
2024 (11) TMI 1634
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....d to be in loss? 3. Whether on the facts and circumstances of the case, the learned CIT (A) was justified in directing the AO to reject Gatiman Auto Private Limited as comparable for the computation of PLI on the grounds of having low turnover, as the company having low turnover is not a sole reason for exclusion of a comparable company? 4. Whether on the facts and circumstances of the case, the learned CIT (A) was justified in directing the AO to reject Bundy India Limited as comparable for the computation of PU on the grounds that the company is into diverse activities, as considerable portion of Turnover of the company is from manufacture of Auto Components? 5. Whether on the facts and circumstances of the case, the learned CIT (A) was justified in directing the Assessing Officer to reject Brakes India Private Limited as comparable for the computation of PLI on the grounds that the company is into R &D activities, as the TNMM requires transactions to be "broadly similar" to qualify as comparable? 6. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT (A) may be set aside and th....
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....sp; 0 Other method Total 1,70,08,29,727 4. The TPO rejected the TP document filed by the assessee by rejecting two comparable companies and accepted two comparable companies as detailed below: Sl. No. Name of the Company Weighted average OP/Sales Remarks 1 Autoline Industries Limited -7.19% Rejected, Persistent loss making company 2 Automotive stampings & Assemblies Ltd. -6.74% Rejected. Persistent loss making company 3 Satyam Auto Components Pvt Ltd. 3.48% Accepted, TPO considered as comparable 4 Maini Precision Products Limited 7.73% Not available in prowess database & public domain, hence the authenticity of the comparable can't be determined. Arithmetic Mean -0.68% 4.1 Later, the TPO added three companies along with two comparable companies adopted by the assessee and accepted by TPO as detailed below: Sl. No. Name of the Company Weighted OP/OI 1 Satyam Auto Components Pvt. Ltd. 4.19 2 Gatiman Auto Pvt. Ltd. 4.40 3 Bundy India Ltd. 6.44 4 Brakes India Pvt. Ltd. 9.81 5 Maini Precision Produc....
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....ected comparable companies i.e., Gatiman Auto Pvt Ltd, Bundy India Ltd, Brakes India Pvt Ltd., stating that these companies are functionally dissimilar and Gatiman auto private limited has lower turnover, by passing an order dated 22.12.2023. Aggrieved by the order of the ld.CIT(A), the revenue preferred an appeal before us. 6. The ld.DR stated that the ld.CIT(A) has erred in directing the Assessing Officer in accepting the comparable of following two companies i.e., Autoline Industries Ltd and Automotive Stampings & Assemblies Ltd. Further, the ld.DR submitted that the ld.CIT(A) also erred in directing the Assessing Officer in rejecting the comparables considered by the TPO of the following companies i.e., Gatiman Auto Pvt Ltd, Bundy India Ltd, Brakes India Pvt Ltd. The ld.DR argued that the ld.CIT(A) has directed the Assessing Officer to accept the Autoline Industries Ltd and Automotive Stampings & Assemblies Ltd as comparable for the computation of PLI even though the margin of these companies are found to be loss continuously. Further, the ld.DR submitted that the ld.CIT(A) has directed the Assessing Officer to reject Bundy India Ltd., as comparable for the computation of PL....
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....that the inclusion of a company should be based on facts and circumstances not only because it has incurred loss which is reproduced below: "... In general, all relevant information should be used and there should not be any overriding rule on the inclusion or exclusion of lossmaking comparables. Indeed, it is the facts and circumstances surrounding the company in question that should determine its status as a comparable, not its financial result." Therefore, merely because a company has incurred loss, it should not be eliminated from the comparable set, since the company continues to engage itself in manufacturing of automobile components similar to that of the assessee. 7.1.2 In light of the above submissions and judicial precedents, the ld.AR prayed that Autoline Industries Ltd and Automotive Stampings & Assemblies Ltd are functionally comparable engaged in similar products as that of the assessee and hence, the ld.CIT(A) direction to Assessing Officer to accept the comparable is in order and prayed for dismissing the ground of appeal of the revenue. 7.2 The next issue argued by the ld.AR is that the comparable selected by the TPO. In this regard, the ld.AR sta....
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....rther, the turnover of the comparable company in the F.Y. 2017-18 was Rs. 113.56 crores compared to the turnover of the assessee at Rs. 1535.44 crores which is less than 1/10th of the assessee's turnover and hence, the rejection as comparable as directed by the ld.CIT(A) is to be upheld. This analogy has been decided in the case of Misys Software Solutions (India) P. Ltd vs DCIT [2017] 1650 (Bang). 7.4 The next comparable chosen by the TPO is Bundy India Ltd, engaged in the business of operating in the passenger vehicle segment of the automobile industry, which designs and manufactures fluid carrying systems, including fuel lines, brake lines, tank top lines, heated selective catalytic reduction (SCR) lines, vacuum booster lines etc., as the company also has a tank manufacturing business and imports pumps and modules in the tanks. The company specifically manufactures weld tubes, brake and fuel lines clusters and other basic accessories for manufacturing motor vehicles. Since, the company's operations are functionally dissimilar with that of the assessee and also the comparable company earns revenue from diversified business and is not available any information on the ....
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....he Autoline Industries Ltd and Automotive Stampings & Assemblies Ltd., selected by the assessee as comparable companies in its TP study report are functionally similar and passed all the filters adopted by the TPO. However, the TPO has rejected these two companies for the only reason that the companies are incurred losses persistently. Merely because the comparable company has incurred losses, it should not be necessarily eliminated the company as a valid comparable company. This view has been upheld in the case of Quark Systems Pvt Ltd vs ITO (Supra) and hence, we do not find any infirmity in the decision of the ld.CIT(A) in directing the Assessing Officer to accept these two companies as comparable to the assessee. Therefore, by respectfully following the above decision, we are of the considered view that these two companies are to be accepted as comparable companies to the assessee and hence, we dismiss the ground no. 2 of the revenue appeal. 8.1 Coming back to the other companies considered as comparable by the TPO, we note that Gatiman Auto Pvt. Ltd. is in the business of manufacture of sheet metal automobile components and tipper assembly and parts of earth moving equipmen....