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2019 (9) TMI 308 - AT - Income TaxTP adjustment - Adjustment made on account of domestic transactions - comparable selection - HELD THAT:- AO has picked up the figures of segmental revenue but has failed to take cognizance the reporting made under the head ‘segment reporting’, wherein the assessee following the requirement of AS-17 has segregated two segments i.e. the transaction of gold and silver division and transaction of diamond and others. Another analogy which has to be considered in the approach of AO that while picking up the margins of comparables, it had considered the revenue earned by said comparables from gold and silver and diamond jewellery transactions. Similarly, the said approach should have been applied in the hands of assessee. Our attention was drawn to the financial statements of PC Jeweller Ltd. wherein it is reported that revenue arises from the sale of gold, diamond and silver jewellery. Similarly, in the case of Tribhovandas Bhimji Zaveri Ltd., the entity-wise margins were applied wherein no breakup or no segmental of items dealt in had been given. In the case of KP Sanghvi International Limited, the sale of products on account of cut and polished diamonds at ₹ 75.93 crores, jewellery at ₹ 135 crores and other raw materials at ₹ 79 lakhs has been reported. The margins of third concern have been given but no segmentals in that concern has been given and the total revenue has been applied to compute the margins of said comparable. In such scenario, the TPO has erred in applying two different approaches i.e. first in computing margins of assessee by only taking segmentals of gold and silver division and excluding the second division of diamonds and semi precious stones. On the other hand, in the case of three comparables, revenue from all the divisions has been applied as no segmentals have been supplied or made available to the TPO in this regard. Accordingly, we hold that the assessee’s entity-wise margins i.e. its dealings in gold, silver and diamond jewellery in entirety is to be applied and in this regard, the margins of assessee would work out to 8.47%. The TPO has after the directions of DRP worked out the mean margins of comparables at 8.73%. In such scenario, the margins shown by assessee were at arm's length price of its domestic transactions and no adjustment is warranted in the hands of assessee. Payment of Directors remuneration - HELD THAT:- We find that Mumbai Bench of Tribunal in the case of Hindustan Unilever Limited Vs. Addl.CIT [2012 (12) TMI 458 - ITAT MUMBAI] had deliberated on the issue and held that if benchmarking was being done at the entity level either for the AE transactions or for the entire transactions, then there was no requirement for further adjustment as all the adjustments made by Assessing Officer / TPO would get automatically subsumed including those adjustments also relating to royalty, etc. as done by the TPO. Applying the said principle, we hold that no separate adjustment is to be made on account of Directors remuneration in the hands of assessee.
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