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2016 (5) TMI 1474 - AT - Income TaxTPA - Non accepting working capacity utilization furnished by the assessee in relation to CPP segment - Held that:- The assessee has, furnished segmental reporting of Annual Report 2007 of Hikal Ltd. for the first time before the ITAT with decision of Special Bench of the ITAT in the case of Quark Systems (P.) Ltd. v. ITO [2009 (10) TMI 591 - ITAT, CHANDIGARH] holding that a comparable can be considered even at the appellate stage for the first time. Similarly, the authorities below were not justified in selecting Dhanuka Agritech Ltd. as comparables since it has gone through restructuring as per director's report referred in Annual Report 2006-07. As during the year under consideration, sales of Dhanuka went up by 260%, profits by 152%, whereas overall profit margin dipped by nearly 3% as compared to earlier years. This argument has been raised by the assessee before the ITAT for the first time. Since facts of the case for the assessment year under consideration are similar to the facts in the case for the assessment year 2006-07, we respectfully following the decision taken on an identical issue in the case of assessee itself set aside the matter to the file of the Assessing Officer to decide the issue afresh. Rejection of comparable - Held that:- A company cannot be rejected merely because it is making losses - filter of selecting company with R & D Expense less than 3% as comparable needs verification - CIT(Appeals) was not justified in allowing some of the services and rejecting others which are being part of the same agreement. We are of the view that when nature of services provided to CPP and OC Segments is same as provided to other segments, the learned TPO ought to have adopted consistent treatment to the services utilized in CPP as well as OC Segments and services rendered to the other business segments. We are of the view that it is not the prerogative of tax authorities to ascertain the benefit received from the availment of services and the benefit received from a particular service has to be perceived from the point of view of businessman and not the tax authorities. The grievance of the assessee also remained that it had duly submitted evidences on sample basis relating to receipt of services from its AEs. These services were (i) marketing and business support services; (ii) sources/logistics/HR services; (iii) legal services; & (accounting and financial services). A detailed submission in this regard made on behalf of the assessee has been reproduced hereinabove while discussing submissions made by the Learned AR. It was submitted that in reference to some additional evidences, remand report was obtained by the Learned CIT(Appeals) but the same has not been duly considered. Since we are setting aside the matter to the file of the learned TPO for his fresh adjudication on the issue, he is also directed to verify the above grievance and consider the same while deciding the issue. Further contention of the AR remained that the assessee company has no intention to shift profits from India to other jurisdiction having regard to the fact that it is some of service provider countries, the corporate tax rate is as high as 41% (Japan) and 30% (Australia, Newzeland and Thailand) which is more than or closed to the corporate tax rates in India. Reliance has been placed on several decisions in this regard including the decision in the case of Loreal India Pvt. Ltd. [2015 (2) TMI 407 - BOMBAY HIGH COURT] approving the decision of ITAT accepting the method adopted by the assessee observing that AE's which supplied to the tax-payers earned only 2-4%, hence, it cannot be said that there is set of profits. As discussed above, TPO is directed to decide the issue of adjustment in relation to intergroup services afresh after affording opportunity of being heard to the assessee on the grievances discussed above. The ground of the appeal preferred by the assessee are thus allowed for statistical purposes. Adjustment under intra group services and allowing the expenses related to treasury charges and safety consultancy services availed - Held that:- CIT(Appeals) has rightly come to the conclusion that no adjustment should be made on account of treasury charges services, process safety management services etc. resulted in the relief of ₹ 14,19,69,937 to the assessee. The first appellate order on the issue is reasoned one, hence, we are not inclined to interfere therewith. The same is upheld. The ground of the appeal of the Revenue are accordingly rejected. TPO is also directed to use the data available at the time of deciding the issue of ALP afresh and consider the benefit available under proviso to section 92C of the Income-tax Act, 1961 for downward variation of 5% from the arm's length price. These grounds are thus allowed for statistical purposes.
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