2017 (11) TMI 1975 - AT - Income Tax

TP Adjustment - comparable selection for Design Engineering Services - HELD THAT:- Rolta India Ltd. having different accounting period cannot be selected as comparable and hence, the same is directed to be excluded from the final list of comparables.

Accentia Technologies Ltd. was engaged in KPO services, then the margins of same cannot be compared with the margins of assessee being functionally different. Accordingly, we hold so and direct the Assessing Officer/TPO to exclude Accentia Technologies Ltd. from final list of comparables.

KLG Systel Ltd. - We direct the Assessing Officer/TPO to apply segmental details of activity which is functionally comparable to the assessee in order to work out the margins of said concern. Accordingly, we direct the Assessing Officer/TPO to re-compute the margins of KLG Systel Ltd. and include the same in final list of comparables.

Neilsoft Ltd. - From the details filed by the assessee, we find that in all the earlier years, wherein the said concern was selected as comparable and its margins were applied as part of final set of comparables, the said concern was showing profits and only in this year it had shown marginal loss; hence there is no merit in excluding the said concern from the final set of comparables in the instant assessment year on the ground that it has shown losses. In the absence of Revenue establishing that the said concern was persistent loss making concern, merely because the said concern during the year had shown losses, the margins of the said concern could not be excluded. Accordingly, we hold so and direct the Assessing Officer to include the margins of said concern in order to benchmark international transactions of Design Engineering Services Division of assessee. The ground of appeal No. 2 raised by the assessee is thus, allowed.

Exclusion of Manufacturing Division - non-allowance of capacity under-utilization in the Manufacturing Division of the assessee - Though the assessee had received support payments from its associated enterprises at ₹ 3.16 crores but it had still suffered losses because of under-utilization of the capacity. The assessee wanted carve out on account of capacity under-utilization. Following the same parity of reasoning as in assessment year 2009-10, we hold that the assessee is entitled to said carve out. Accordingly, we direct the Assessing Officer to allow the capacity under-utilization in the hands of assessee. Secondly, we also hold that there is no merit in the orders of TPO/Assessing Officer in holding that support payments received from associated enterprises should have been to the extent of under-utilization of capacity. Applyingin CIT Vs. Whirlpool [2015 (12) TMI 1188 - DELHI HIGH COURT], we reverse the findings of Assessing Officer/TPO in this regard and delete the addition made in the hands of assessee in the Manufacturing Segment Consequently, the ground of appeal No. 3.1 raised by the assessee is allowed.