Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (2) TMI 1237 - AT - Income TaxTP adjustment - treatment of duty drawback as non-operative in nature for computing the operating margin of the assessee - HELD THAT:- The duty drawback is provided to the manufacturer and exporter for the purpose of compensating in the duty component which is already been included in the cost of raw material and the duty drawback received against the duty paid in our view is part of the operating profit of the assessee. As relying on Sami Labs. Ltd case [2019 (4) TMI 2110 - ITAT BANGALORE] we remit the issue back to the TPO to verify that export incentive is in respect of turnover of the present year as per the ratio laid down in the above judgement. Needless to say that the assessee be given an opportunity of being heard. Comparable selection - UMW Industries Ltd - The major part of the revenue derived by the company is from sale of guidance wire. We also notice from the annual report (pg. 1493 of paper book) that one of the major suppliers for the company is Bharat Dynamics which is a Govt. of India Enterprise, which is a manufacturing base for guided weapon systems. Therefore we see merit in the submission of the ld AR that the company supplies the guided wire for defence activities and therefore not comparable with the assessee who supplies machinery to textile industry. TPO and the DRP have considered the profile of the company as manufacturer of other machinery for textiles, apparel and other industries whereas as per the annual return, the extract of which is reproduced above, the company is engaged in the manufacture of guidance wire and miniature control cable. In view of the discussion, we hold that the functional profile of UMW Industries Ltd. is different from that of the assessee and therefore not comparable. The AO/TPO is directed to exclude the company from list of comparables. Lohia Corporation Ltd. - assessee contended before the TPO and the DRP that the company incurs significant expenditure towards R&D which is more than 3% on an average for the previous 3 years and assessee on the other hand is a licensed manufacturer and relies on the technical knowhow of which AE to manufacture the product - We notice from the above judicial pronouncements relied on by the assessee that application of R&D filter with a threshold limit of 3% is a settled position now. We also notice that the Bangalore Bench of the Tribunal in the case of KBACE Technologies Pvt. Ltd. [2020 (2) TMI 78 - ITAT BANGALORE] has also taken a similar view. In view of this we direct the TPO to exclude Lohia Corporation Ltd from the list of comparables. TP adjustment restricted to the value of only international transactions - We hold that the TP adjustment should be restricted only to AE related transaction and direct the TPO/AO to compute the TP adjustment accordingly. Benefit of adjustment for working capital denied - HELD THAT:- As working capital adjustment is to be allowed as per actuals, after considering the decisions rendered in this order on the exclusion/inclusion of comparable companies out of/into the final set of comparables. The TPO/ AO are accordingly directed.
|