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2017 (2) TMI 1286 - AT - Income TaxTPA - idle capacity adjustment - Held that:- The assessee company has requested for idle capacity adjustment as per Rule 10B(1)(e)(iii),10B(2) and 10B(3) but company is not a new company or startup company. The company along with Greaves manufacturing the tractors prior to 2002.The ld A.R has not furnished the details of installed capacity and utilized capacity from the beginning of its operations. Since the company is reasonably old from the profile, justifiable reasons have to be explained for non-utilization of the capacity and the fixed costs incurred from the year of inception, the installed capacity, utilized capacity and capacity of breakeven point. Under-utilization of production capacity is a vital factor, as per the information available, this is more than five years old company and did not explain the reasons leading to underutilization of installed capacity. Whether it was on account of non-availability of material, electricity, infrastructures, lack of working capital, etc. In the absence of the details, the case laws relied upon by the assessee are of no help to make adjustment of idle capacity. Therefore we are unable accept the assessee’s request for idle capacity adjustment and the same is rejected. Accordingly grounds raised on this issue are dismissed. Selection of comparable - Held that:- Assessee is engaged into manufacture of tractors, thus companies functionally dissimilar with that of assessee need to be deselected from final-list. Working capital adjustment - Held that:- While arguing the case before us, the assessee has not furnished the pricing policy and the interest clauses to make necessary working capital adjustment. This is one of the important factors to make the necessary working capital adjustment. Further, though the TPO has determined the margin adopting M/s.VST Tillers as comparable, we have directed the TPO to include M/s.HMT Ltd., as additional comparable. The TPO should take both the comparables and re-work the margins and make necessary adjustments for working capital in the light of above discussion. This ground of appeal is allowed for statistical purposes. Rationale for the use of multiple year data - Held that:- As per the discussion made by the TPO and as per the Rule 10B(4) of IT Rules, it is binding of the assessee company to adopt the relevant FY data only in the year in which the international transaction has been entered into. Therefore, the AO has rightly rejected the multiple year data and we do not find any inconformity in the order of the Ld.CIT(A) and TPO. This ground of the appeal is dismissed.
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