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2014 (10) TMI 505 - AT - Income TaxTransfer pricing adjustment – Inclusion and exclusion of comparables – Functionally different - Held that:- CIT(A) rightly was of the view that M/s. Spectrum Infotek Pvt. Ltd. was found to be engaged in the business of manufacturing as well as research & development, but no segmental details were available - the company was found to be mainly in the domestic business, whereas the assessee was 100% EOU - there was no functional comparability found between assessee company and M/s. Seven Gentech Pvt Ltd., and it cannot be treated as comparable with that of the assessee company - CIT(Appeals) was fully justified in taking 8 comparables selected by the Tribunal in the case of Tevapharm (P.) Ltd. Versus Additional Commissioner of Income-tax - 10(3), Mumbai [2011 (12) TMI 284 - ITAT MUMBAI] - as the difference between the Transfer price and the value determine doesnot exceed 5% of Transfer price thus no need to dispute the price - as the final comparables for the purpose of TP analysis in the assessee's case and in directing the AO to restrict the addition made on account of TP adjustment by applying the average OP/OC of the said comparables at 19.08% - the order of the CIT(A) is upheld partly the addition made by the AO/TPO on account of TP adjustment – Decided partly in favour of assessee. Deduction on profit derived from 100% EOU by allocating the expenditure on director's remuneration u/s 10B – Held that:- The assessee company had only one working director during the year under consideration to whom the remuneration of ₹ 1.93 crores was paid - the export turnover of the EOU during the year under consideration was ₹ 25.63 crores and the profit shown by the assessee of the EOU was ₹ 5.12 crores - it is difficult to accept the contention raised on behalf of the assessee that the only working director was not at all involved in the affairs of the EOU, especially when there is no evidence brought on record to support and substantiate this contention - the involvement of the only working director in the affairs of the EOU in the facts and circumstances of the case was inevitable, especially when both its domestic unit and EOU were managed by the assessee company - the working furnished by the assessee giving segmental details, was for specific purpose and it was prepared by the assessee and appreciated by the TPO in the context of TP analysis - the segmental details were furnished by the assessee for the enterprise as a whole and there was no bifurcation made on the basis of export and domestic turnover - the director's remuneration was liable to be allocated to the EOU for the purpose of computing profit of the said EOU eligible for deduction u/s. 10B and since the allocation thereof was made by the AO on a reasonable basis i.e., turnover, we find no infirmity in the order of the CIT(A), upholding the action of the AO – Decided against assessee. Treatment of expenses – Expenses incurred on repairs to building – Capital or revenue in nature – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been rightly held that civil works to be treated as capital expenditure - The exact nature of expenditure during the year under consideration, however, is not clear either from the order of the AO or from the order of the CIT(A) - Even the details furnished by the assessee in the paper book are not sufficient to ascertain the exact nature of expenditure incurred by the assessee on civil works so as to decide whether the same are capital in nature or revenue – thus, the matter is to be remitted back to the AO for fresh consideration – Decided in favour of assessee.
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