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2020 (4) TMI 128 - AT - Income TaxTP Adjustment - transactions of two segments be aggregated for comparability purposes - Whether transactions of the assessee in Production and Distribution segments can be construed as ‘closely linked transactions’? - HELD THAT:- We find that an identical issue in assessee’s own case arose before the Co-ordinate Bench of Tribunal in A.Y. 2012-13 [2019 (12) TMI 456 - ITAT PUNE] - The Co-ordinate Bench of Tribunal held that manufacturing segment cannot be aggregated with distribution segment and both need to be benchmarked independent of each other We are dealing with a situation in which the assessee is trying to club the transaction of Production of finished goods with Trading of spare parts, which is a step further away from technical know-how in the process of manufacturing. In view of the foregoing discussion, it is held that the authorities below were fully justified in holding that the Manufacturing segment cannot be aggregated with the Distribution segment and both need to be benchmarked independent of each other. We, therefore, accord our imprimatur to the view canvassed by the TPO in rejecting the aggregation approach adopted by the assessee. - Decided against assessee. Include UMS Technologies Ltd. as comparable company - HELD THAT:- TPO has worked out the loss of UMS Technologies Ltd. at (-) 5% by allocating the expenses in the ratio of turnover of Engine segment to total revenue i.e. at 41.85%. He has completely disregarded the segment loss reported in the audited Balance Sheet. We further find that no reasons have been given by TPO for disregarding the segmental revenue as disclosed in the audited results. In such situation, we are of the view that TPO was not justified in working out the margins of UMS Technologies Ltd. at (-) 5% when the audited Balance Sheet itself shows the loss of Engine segment at (-) 22.89%. We find that if the margin of UMS Technologies Ltd. is considered on the basis of audited results, then it is comparable with the loss of assessee and therefore, no adjustment is called for. We therefore, set aside the adjustment made by TPO and thus, this ground is allowed. Since this ground is allowed, as submitted by assessee, ground Nos.4 and 5 becomes academic and therefore, requires no adjudication.
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