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2019 (6) TMI 663 - AT - Income TaxTP Adjustment - comparable selection - Functional dissimilarity - application of RPT filter - exclusion of Honda Siel, Hyundai Motors and Maruti Udyog from the final set of comparables on the ground that the quantum of total Related Party Transactions was less than 25% of the total transaction - HELD THAT:- AO did not apply any RPT filter but the CIT(A) had applied RPT filter of 15% and the three concerns were excluded in the hands of the assessee. In view thereof, we find no merit in the issue raised by the Revenue vide ground of appeal No.1. We hold that the RPT filter needs to be applied in the present set of facts and the three concerns having not fulfilled RPT filter cannot be included in the final list of comparables. In the case of assessee itself, the Assessing Officer / TPO had applied RPT filter of 25% in assessment year 2005-06. Hence, there is no merit in plea of Revenue. Inclusion of Hindustan Motors as functionally comparable - The case of AO was that it cannot be included in the final list of comparables on the ground that it incurred losses during the year. However, as pointed out by the CIT(A), the said concern was not persistent loss making concern and in such circumstances, there is no merit in excluding Hindustan Motors from the final list of comparables. Accordingly, we uphold the order of CIT(A) in this regard and dismiss ground of appeal No.2 raised by the Revenue Economic adjustment on import duty and adjustments to be allowed on account of capacity under utilization - HELD THAT:- The assessee is in second year of operation and has pointed out that it has only utilized 33% of the total capacity whereas the comparables have on an average utilized 50 to 70% of the total capacity and hence, the margins of the comparables need to be adjusted accordingly. The Delhi Bench of the Tribunal in DCIT Vs. Class India Pvt. Ltd. [2015 (8) TMI 755 - ITAT DELHI] has laid down the procedure for computing capacity utilization adjustment under the TNM method. Hence, we hold that the said procedure be applied by the Assessing Officer/Transfer Pricing Officer to work out the adjustment on account of capacity utilization. - Decided against revenue
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