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2016 (5) TMI 334 - AT - Income TaxDisallowance u/s 14A - investments made in the sister concerns - Held that:- In view of the judgment of Apex Court in S.A. Builders Ltd. v. CIT (2006 (12) TMI 82 - SUPREME COURT) this Tribunal is of the considered opinion that the investments made by the assessee in the equity shares of the sister concerns, which were established by joint venture, have to be necessarily treated as for business purpose. Therefore, as rightly found by this Tribunal by majority decision in EIH Associated Hotels Ltd. (2013 (9) TMI 604 - ITAT CHENNAI ), the dividend income earned by the assessee, if any, from subsidiary companies, is incidental one, therefore, the investments made by the assessee in its subsidiary companies cannot be reckoned for disallowance under Section 14A of the Act. - Decided in favour of assessee Adjustment of Arm's Length Price - selection of comparable - Held that:- Admittedly, the comparable companies selected by the assessee-company are suffering persistent loss in their business activities. The assessee-company is also making losses. However, it is not a persistent loss making company as that of comparables. Except for the year under consideration, the assessee-company is also making positive profit. Therefore, this Tribunal is of the considered opinion that the assessee-company is not a persistent loss making company. The loss suffered by the assessee during one year might not be compared with that of the comparable companies. Since the comparables selected by the assessee-company are admittedly persistent loss making companies, the DRP has rightly rejected the comparables selected by the assessee. Lucas TVS is manufacturing components for every vehicle like cars, two wheelers, etc., whereas, the assessee-company is manufacturing DC micro motors and sub-assemblies only for the cars. Therefore, there is a vast functional difference between the manufacturing activity of the assessee and Lucas TVS. Lucas TVS has no segment wise details for manufacturing components for cars, two wheelers, etc. The TPO or DRP has not taken any effort for taking the segment wise details while preferring Lucas TVS for making adjustment in the assessee’s case. Taking the overall profit of Lucas TVS in the TVS group of companies manufacturing automobile products, this Tribunal is of the considered opinion that Lucas TVS cannot be a comparable case at all. Therefore, in the given facts and circumstances of the case, comparing the transaction of the assessee with non-associate enterprise would give the correct picture of the transaction. Therefore, this Tribunal is of the considered opinion that the Arm's Length Price has to be determined on the basis of the transaction made by the assessee with non-associate enterprise. Accordingly, we are unable to uphold the orders of the lower authorities.
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