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2011 (6) TMI 386 - AT - Income TaxTransfer pricing adjustment - external comparables v/s domestic comparables - unadjusted operating margin of the export segments with 91.14% of the total annual sales of the assessee is -13.57 per cent thus lower operating margin is due to labour unrest and therefore, the capacity of the company was under-utilized - Held that:- Assessee is entitled to economic adjustments in the circumstances of under capacity utilization of the company. Of course, such adjustments must be restricted to fixed cost/overheads only. In the instant case, the Assessing Officer/TPO did not have the occasion to go into the period or the extent of the labour unrest, break up of the claimed adjustments amounting Rs. 7.32 crores (rounded off), fixed cost versus the variable cost etc. as they summarily rejected the external comparables in view of their preference to the operating profits of the domestic segment of the carpets. Therefore and consequently, this key issue has to be set aside to the files of the TPO/Assessing Officer for fresh examination.TPO/AO shall pass a speaking order in this regard. External comparable v/s domestic comparable - the revenue authorities or the DRP deliberated on the acceptability of the six comparable furnished by the assessee summarily dismissing the assessee's submissions in this regard. The same is not proper that the Assessing Officer/TPO have not find mistake with the six external comparable filed by the assessee. They merely held that the domestic comparables are to be relied as the labour related problems are common to both export and domestic segments. In fact, considering the facts relevant to the subsequent assessment year where the Assessing Officer/TPO accepted the six external comparable for the purpose of the TNMM, the assessee conveyed no objection for going to the files of the Assessing Officer/TPO in this regard - Rule of consistency - assessee contested that the external comparable prices for the AY 2006-07 when accepted by AO for that assessment year must be accepted for this year in view of the absence of material facts - Held that:- It is a settled law that the principle of res judicata is inapplicable to Income-tax matters. However, the same is true as long as the facts of different in different assessment years. Otherwise, the rule of consistency is relevant to Income-tax matters and Assessing Officer cannot be ignore the same. There ought to be uniformity in treatment and consistency when the facts and circumstances are identical. Applicability of the provisions of section 10B & 93C(2) - Held that:- these issues should go to the files of the Assessing Officer as they are dependent on the outcome of the key issues set aside above - appeal decided in favour of assessee for statistical purpose
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