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2014 (4) TMI 617 - AT - Income TaxDetermination of ALP - CUP method or Profit margin method – Held that:- The TPO has judiciously arrived at a conclusion for adopting a TNMM method and compared the financial results of the assessee company and the comparable company M/s. Audco India Ltd., though there are certain dissimilarities as observed by the CIT(A) - the products manufactured by both the companies are similar though not identical - There is nothing on record to suggest that the nature of business of both the companies is different - there were no other companies which were comparable other than the one pointed out by the TPO – assessee has not brought out adequate materials on record for adopting cost plus method - CIT(A) has also not verified the computation adopted by the assessee by cost plus method and without any finding on the same simply deleted the addition made on the basis of TNMM method. The AO has excluded the research and development expenditure while arriving at the operational profit of M/s. Audco India Ltd. - both the companies are manufacturing identical type of products, it cannot be presumed that the assessee company has not incurred any expenditure on research and development – thus, the computation of the ALP in the case of the assessee shall be reworked, by treating the difference in profit margin as nil and accordingly, any upward revision cannot be sustained for making addition towards increase in income based on determination of ALP – Decided in favour of Assessee. Selection of comparables - Held that:- There was no justification as to why the TPO had not adopted the comparable company M/s. Audco India Ltd., for the subsequent assessment year. Instead Ld. TPO has adopted two different companies M/s. Orson Holdings Co. Ltd and M/s. Sakthi Auto Ancillary P Ltd., as comparable companies – the TPO without examining the intricacies of the assessee company and comparable companies cryptically arrived at the conclusion – the matter is remitted back to the TPO for fresh adjudication – Decided in favour of Revenue. Exclusion of sale of DEPB license u/s 80HHC of the Act – Held that:- The decision in Topman Exports v. CIT [2012 (2) TMI 100 - SUPREME COURT OF INDIA] followed – thus, the matter is required to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue.
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