Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (1) TMI 1395 - AT - Income TaxSelection of comparables - Held that:- Under the transfer pricing mechanism, a comparability analysis has to be undertaken for comparing the control transactions with an uncontrolled transaction. This is achieved by identifying potential comparables having similar functions that can stand the test of FAR analysis - The taxing authorities/TPO, should scrutinize the assessee's report on arm's length result and the entire process of arriving at the ALP, whether they are based on transfer pricing principles and statutory provisions or not - If he himself founds some irregularity or mistake in any of the process or the steps undertaken, then he is bound to correct in accordance with the settled principles and law - If the assessee points out some mistake or any irregularity in the arm's length result, then it is incumbent upon the TPO to examine and consider the same and if the assessee's contentions are found to be correct or tenable, then he has to accept the same - The TPO is required under law to analyze every comparables and then only determine the correct ALP based on proper comparability analysis - The assessee has object to the comparables taken by hinself if he have cogent reasons. In respect of Indo wind Energy Ltd and BF Utilities Ltd - these comparables were taken on the basis of data of three financial years which is not permissible under the law. Even the approach of the TPO and the DRP for taking the financials for June and September 2008 is not correct as it is not in conformity with the provisions of rule 10B(4) - Once the financial result for the 31st March 2008 of these comparables are not available, then the same should be excluded from the list - At the functional level also, these companies are entirely different from the assessee - These companies are into business of generation of wind energy whereas the assessee is manufacturing the parts which are used in the generation of solar energy - These two functions are entirely different. M/s. BF Utilities Ltd - This company is a holding company of various submissions and they are into various kinds of manufacturing - The revenues of all the subsidiary and associates are consolidated and do not give proper result of the segments - The revenue of B.F. Utilities Ltd. under the segment of wind energy is only 2%. M/s. Photon Energy Ltd - It is functionally comparable to the assessee and the TPO has rejected on the ground that the financial data was not available in the public domain and segmental results do not give clear profile - These data were duly available and were filed before the DRP. M/s Rajasthan Electronic and Instruments Ltd. - It is very difficult to work out the exact margin on OP/TC and also the working of the operating expenses with regard to the said segment - In the absence of proper segmental details for the working of the margin and the operating expenses, the same shall not be included as comparable. Finally three companies has been selected as comparables - The TPO is directed to look into the operating margin of the finally selected three comparables as aforesaid and bench mark the same with the assessee's PLI of 6.80% to determine the ALP - The issue has been restored. Transfer pricing adjustment relating to provision of engineering services – Held that:- The assessee has not separately bench marked the engineering services which are being carried out by a separate division - Even while selecting the comparables for manufacturing segment, the assessee has not taken into consideration the services rendered to its A.E., therefore, such a segment has to be separately bench marked - The TPO has not given any criteria for the search of his comparables and has not examined the comparables submitted by the assessee - The assessee should be given proper opportunity to explain its case as to how these transactions can be bench marked for proper determination of the ALP – The issue has been restored for fresh adjudication.
|