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2019 (4) TMI 1286 - AT - Income TaxTPA - Comparable selection - exclusion of BEML Government Companies - HELD THAT:- Government Companies operate entirely different controlled environment. Their customers are different. Their raw material suppliers are different. Their profit margins are different. They would not operate in a free competitive environment. Therefore, in our opinion, the orders of the lower authorities need to be reversed. The Co-ordinate Bench of the Tribunal has already taken a view in the matter. Government company like BEML cannot be held as a good comparable to the one like the present assessee – a private company under consideration. Regarding the DR’s argument about the existence of profit making company in the client list of BEML, we find it is not a sustainable argument. We find Hon’ble Bombay High Court has given a categorical finding about the requirement of excluding Government companies like M/s. Engineers India Limited held in the case of M/s. Thyssen Krupp Industries India Pvt. Ltd. [2013 (11) TMI 930 - ITAT MUMBAI] , is relevant and binding on us. Shifting of ₹ 10 crores from trading segment to the manufacturing segment on ad-hoc basis - HELD THAT:- There is requirement for the Assessing Officer/CIT(A) to undertake the scrutiny of each of the expenditure accounts and analyze the nexus of the expenditure to the trading and manufacture segments on one side and the application of proper and appropriate basis to allocate the expenditure between the segments. AO should also pass a speaking order why the stated sales ratio is inappropriate on given facts. Therefore, we are of the opinion, this issue is required to be remanded to the file of the Assessing Officer/TPO with regard to the approved the applicability of the basis of sales ratio uniformly to all the accounts qua the trading and manufacturing account. With these directions, we remand this issue to the file of the Assessing Officer/TPO for fresh examination of the issue. The Assessing Officer shall grant a reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. Accordingly, relevant ground no.5 is allowed for statistical purposes. Computation of transfer pricing adjustment - additional ground - TP adjustment to the international transactions with non AEs - HELD THAT:- We are of the opinion that the said issue raised in the additional ground has to be decided in favour of the assessee. Consequently, we direct the Assessing Officer to restrict the adjustments, if any only to the international transaction with AEs. Accordingly, additional ground is adjudicated in favour of the assessee. Accordingly, the additional ground is allowed. Capacity adjustment to the cost - HELD THAT:- Therefore, rejecting the assessee’s method for quantifying the “capacity utilization adjustment” to the tested party, we direct the Assessing Officer to follow the judgement of the Jurisdictional High Court in the case of Petro Araldite (P.) Ltd. [2018 (6) TMI 452 - BOMBAY HIGH COURT] . Assessing Officer to follow the precedent in existence on this issue and make the adjustment in any after granting a reasonable opportunity of being heard to the assessee.
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