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2014 (6) TMI 279 - ITAT DELHITransfer pricing - determination of ALP - Rejection of working capital adjustment – Held that:- Assessee has claimed before the TPO regarding working capital adjustment, but the TPO denied on the ground that assessee failed to provide the details - AO has disregarded the submissions of the assessee - The DRP also considered the working capital adjustment only with respect to the comparables submitted by the assessee - It did not analyse the same with respect to the data of the assessee company – thus, the matter is required to be remitted back to the TPO to the issue of working capital adjustment as claimed by the assessee – Decided in favour of Assessee. Selection of comparables - ACI Infocom Ltd. not considered as comparable – Held that:- The TPO and DRP are correct in observing that the net worth of the company is eroding the data of the past years of the assessee consistently making losses certainly point out the abnormal working conditions and hence, this company cannot be taken as cogent comparable - assessee has sold its plant and machinery and substantial land and buildings also indicate that assessee is not operating any normal circumstances - assessee has claimed that manufacturing division was sold off, but the trading division continues to function - no segmental data has been provided for consideration – thus, there is no infirmity in the order – Decided against assessee. Determination of arm’s length adjustment - International transaction from AEs - Enhancement of returned income – Opportunity of being heard – Held that:- TPO has rejected 8 out of the 10 comparables submitted by the assessee - The TPO has mentioned in show cause notice his observations on the lack of comparability of 8 comparables - assessee’s submissions and objections in this regard has not been brought in TPO’s order - TPO has only mentioned that he has considered the assessee’s objections and submissions and thereafter TPO has again reproduced his original observations mentioned in the show cause notice - The DRP against assessee’s objections has laconically upheld the order of the TPO - assessee has claimed that Priya Ltd. and Savex Computer Ltd. which has been rejected the year were earlier approved by the DRP in earlier years – thus, the matter is required to be remitted back to the TPO for examination of comparability of the comparables rejected earlier – Decided in favour of Assessee.
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