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2017 (5) TMI 1632 - ITAT PUNETransfer pricing adjustment in the manufacturing segment - comparable companies selection - considering single year’s data in order to arrive at the PLI of comparable cases - Held that:- We uphold the order of Assessing Officer / TPO in considering single year’s data in order to arrive at the PLI of comparable cases, while applying transfer pricing provisions. The Tribunal has decided this issue in assessment year 2007-08 in paras 15 to 18 and the same are being referred to and are not being reproduced for the sake of brevity. The ground of appeal No.4 raised by the assessee is thus, dismissed. Non-consideration of +/- 5% range - Held that:- Assessee is not entitled to the standard deduction under the proviso to section 92C(2) of the Act. However, where transfer pricing adjustment is within +/-5% range, then the assessee is entitled to the said benefit. Accordingly, the ground of appeal No.5 is dismissed. Comparable selection - The assessee was engaged in the manufacture of resistors and capacitors which in turn, were used in various electronic applications / products. The assessee had Domestic Tariff Area unit for manufacturing capacitors and low end resistors, and an Export Oriented Unit for manufacturing certain high end resistors which are exported to overseas group entities, thus companies functionally dissimilar with that of assessee need to be deselected. Assessee has applied the filter and rejected the concern whose turnover from capacitors and resistors was less than 75% of the total turnover. Non-exclusion of depreciation while calculating Profit Level Indicator of the assessee as well as the comparable companies arose before the Tribunal - Held that:- the assessee had made submissions for differential depreciation adjustment which was without prejudice to his claim. The assessee claims that the rate of depreciation i.e. depreciation / average written down value charged by the assessee at 17.97% was higher than average rate of depreciation charged by the comparable companies i.e. 12.07%. The assessee submits that excess depreciation should be excluded while computing operating margins of the assessee. We find no merit in the said plea of the assessee under Rule 10B(1)(e)(iii) of the Rules, adjustment if any, has to be made in the hands of comparables and not in the hands of tested party. We dismiss the plea of the assessee in this regard. However, in case the assessee is able to establish that there is material difference in the claim of depreciation by the assessee vis-à-vis comparables, then suitable adjustment may be allowed in the hands of comparables after due verification by the Assessing Officer / TPO. We direct the Assessing Officer to allow the risk adjustment, if any, and re-compute the margins of comparables and compute the TP adjustment, if any, in the hands of assessee. Computation of total income, wherein the Assessing Officer has not considered the loss but had computed the income by taking business income at Nil. The assessee fairly pointed out that it has already filed an application under section 154 of the Act before the Assessing Officer, which is pending. Accordingly, we find no merit in the said plea of assessee and the same is rejected. The Assessing Officer shall dispose of the application under section 154 of the Act as per law.
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