TaxTMI 
TaxTMI 
2019 (12) TMI 1706
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....Seco, Sweden and is engaged in the business of manufacturing and trading in a wide range of carbide inserts, milling cutters and turning tool holders and carriers. The assessee filed its return declaring total income of Rs.11.88 crore and odd. Certain international transactions were reported in Form No.3CEB. The AO made a reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the international transactions. The TPO observed that the assessee's business operations were segregated into three segments, namely, Manufacturing segment (covering the domestic manufacturing operations); Contract Manufacturing segment (covering the sale of manufactured goods to the Group companies outside India); and Distribution segment (covering the import of finished goods from Associated Enterprise and resale to domestic third parties). There is no dispute on the Distribution segment and Manufacturing segment, for which the Arm's Length Price (ALP) came to be accepted pursuant to the direction given by the Dispute Resolution Panel (DRP). The quarrel is on the determination of the ALP in relation to the Contract Manufacturing segment. The assessee is doing Contract....
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....ng a stand different from the one taken at the stage of the preparation of the TP study report. It goes without saying that the object of an assessment is to determine correct income. As the income not originally offered for taxation, if otherwise chargeable, is required to be included in the total income, in the same breath, any income wrongly included in the total income, which is otherwise not chargeable, should be excluded. There can be no estoppel against the provisions of the Act. Extending this proposition further in the context of the transfer pricing provisions, if the assessee fails to report an otherwise comparable case, then the TPO is obliged to include the same in the list of comparables, and in the same manner, if the assessee failed to report an otherwise comparable case in its TP study report due to one reason or the other and later on claims that it should be considered, then, there should be no fetters on the assessee claiming so, provided the company so reported is, in fact, comparable. Simply because a company was wrongly ignored by the assessee as comparable, cannot tie its hands in contending before the authorities that a particular company was wrongly exclud....
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....omparable by mentioning on page 18 of his order that the assessee stated in the initial TP study report that 'the company is engaged in manufacture of GOI boxes, plates & grids'. However, while selecting, the assessee mentioned "different business description", which defeats the fundamentals of transfer pricing. He observed that the RPT filter was not mentioned; Qualitative analysis was not described; Export filter was not placed; and the selection was only on presumptive basis. The DRP did not change the fortune of the assessee on this issue. 9. We have heard both the sides and gone through the relevant material on record. We have examined the Accept/reject matrix, a copy of which has been placed at page 1119 of the paper book. Against the company 'Dies & Tools Ltd' at Sl. no.76, the assessee has mentioned: 'The company is engaged in manufacture of GI boxes, plates & grids'. The ld. AR submitted that it was an error on the part of the assessee to mention the correct nature of manufacturing done by this company and the TPO also failed to examine the Annual report of the company, which was placed before his consideration as well. In view of the fact that the TPO has not examined ....
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....per book in which it has been mentioned as `NA (Fails initial filter)'. The ld. AR submitted that the assessee excluded this company on account of the `Negative net worth' filter on multiple year data basis. If however, the ALP determination was to be done on the basis of single year data, as was done by the TPO, the ld. AR stated, then this company has a positive net worth. As the TPO has rightly proceeded by considering single year data of the comparables and that of the assessee, it turns out that the comparability of this company remained to be examined on merits. We, therefore, set-aside the impugned order and direct the AO/TPO to examine the comparability of this company. If the same is found to be similar on the FAR analysis, then it should be included and vice-versa. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. Precomp Tools Ltd. 14. The TPO rejected this company on the ground that it was: `Not located in TP study report as selected comparable'. The TPO adduced other similar reasons like, RPT filter not mentioned; Qualitative analysis not described; Export filter not placed etc. 15. Having heard both the sides and gone through ....