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2016 (2) TMI 382 - AT - Income TaxTransfer pricing adjustment - Capacity underutilization - Held that:- Merely because the employee costs of the assessee are higher, it does, in our considered view, lead to the conclusion that there is an underutilization of capacity. It is also a matter of record, as noted by the assessee in the written submissions, that the underutilization is much more in the case of non AE transactions inasmuch as “the employee costs to turnover ratio in AE segment is 76% whereas in non-AE segment it is 97%”. There is no specific submission and quantification on the fact, if at all, of the underutilization of capacity. The factual elements embedded in the submissions are not at all established. There is no room for vague generalities and over simplifications, as the impact of underutilized capacity is to be, with reasonable precision, quantified and then only it can be adjusted. The exercise of quantifying the capacity underutilization has not been carried out at all. There is not even whisper of a discussion, on this aspect of the matter, in the orders of the authorities below or in the submissions of the assessee. In view of the above discussions, we are not inclined to uphold the assessee’s grievance with respect to denial of adjustment for capacity underutilization. Inclusion of three comparables, namely (a) Crossdomain Solutions Ltd (b) Maple eSolutions, and (c) Vishal Information Tech Ltd. challenge by assessee - Held that:- As evident from the working even if all the three comparables agitated by the assessee are excluded, the ALP adjustment worked out on the basis of the revised margin will be much more than the revenue realized from the non AE. Since, in terms of the DRP directions, the ALP of the international transactions is required to be restricted to the revenue realized from the non AE, i.e. ₹ 12,13,50,108, it is wholly academic whether the ALP on the basis of the comparables adopted by the assessee is ₹ 12,50,03,640, on the basis of comparables agreed to by the assessee, or is ₹ 13,46,20,929 as worked out by the TPO, on the basis of comparables adopted by him. In either of the situations, the ALP adjustment will be restricted to the difference between the transaction value (i.e. ₹ 10,39,29,814) and the revenue realized from the non AE (i.e. ₹ 12,13,50,108). The directions of the DRP having reached finality, so far as this approach adopted by the DRP is concerned, the assessee’s present grievance on comparables is wholly academic and it does not call for any adjudication at this stage
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