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2023 (3) TMI 1138 - AT - Income TaxTP adjustment - Comparable selection - Functional dissimilarity - HELD THAT:- Auto Ignition Ltd.- On diversified business, export sale, incurring of expenditure on R&D activities and presence of intangibles, we are of the considered opinion that Auto Ignition cannot be considered as a comparable company. We, therefore, direct the A.O./TPO to exclude Auto Ignition from the list of comparables. Chheda Electricals - Main ground on which the assessee is seeking exclusion of this company are capacity utilisation and Chheda claiming tax deduction u/s.80IC - The adjustment towards capacity utilisation has been contended as a separate issue by the assessee and hence the exclusion of this cannot be sought on this ground. Further the company enjoying the tax deduction u/s.80IC in our view is not a criteria for seeking exclusion. Further we notice that Chedda is functionally similar to the assessee. We, therefore, uphold inclusion of Chheda Electricals in the list of comparables. Naina Semiconductors Ltd - In view of all these i.e., diversified business, export sale, and incurring of expenditure on R&D activities, we are of the considered opinion that Naina cannot be considered as a comparable company. We, therefore, direct the A.O./TPO to exclude Naina from the list of comparables. Hind Rectifiers Ltd. - We notice that the comparable company has earned profits in FY 2012-13 and therefore following the ratio laid down in Affinity Express India P Ltd (2016 (3) TMI 1121 - ITAT PUNE] we hold that these companies should be included for the purpose of comparability and computation of ALP. Incap Limited - TPO rejected the comparable on the ground that the same did not appear in search undertaken by TPO - We are of the view that identical directions as per PRISM NETWORKS PRIVATE LIMITED case [2022 (2) TMI 1296 - ITAT BANGALORE] it would be just and sufficient in the present case hence the regarding inclusion of the aforesaid company as comparable company is hereby set aside to AO/TPO for fresh consideration. Continental Device India Private Limited - We are of the considered view that the exclusion of Continental Device should be upheld as the company is having spends on R&D and carry intangible whereas for the assessee the year under consideration is the first year of operation. Working capital adjustment - We remit the issue to the file of AO/TPO to consider the working capital adjustment taking into consideration the details submitted by the assessee after allowing an opportunity of hearing to the assessee. Denial of capacity utilisation - assessee had made an adjustment toward capacity utilisation on the ground that it is the first year of operation in the manufacturing segment - TPO denied the same by stating that the capacity utilisation adjustment can only be made for comparable and not in the hands of the tested party - HELD THAT:- We notice that the assessee has submitted the workings for the capacity utilisation of for the manufacturing segment . Considering the details furnished and respectfully following the above decision M/S. TOKAI RIKA MINDA INDIA PVT. LTD. [2023 (3) TMI 706 - ITAT BANGALORE] we remit the issue back to the AO/TPO with similar directions. Needless to say that the assessee be given a reasonable opportunity of being heard. It is ordered accordingly. TPO considering the incorrect operating cost - HELD THAT:- In the interest of justice to give one more opportunity to the assessee, we remit the issue to the TPO to verify and allow the correct operating expenses for the purpose of computing the operating margin of the assessee. Additions made to building and plant & machinery - HELD THT:- AO in the remand proceedings has enhanced the disallowance for the reason that invoices were not enclosed for some of the additions and also purchase vouchers were not enclosed for certain other additions. We also notice that the assessee has submitted the full details pertaining to the additions before the lower authorities. Given these facts, in the interest of justice, we are of the considered view that the assessee should be given one more opportunity to substantiate the claim.
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