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2023 (7) TMI 746 - AT - Income TaxTP adjustment - comparable selection - parameters of FAR analysis ie., Assets employed - HELD THAT:- In the instant case, the Assets employed by the assessee company in the form of Plant & Machinery whereas the comparable viz., BVPL selected the Ld. TPO has employed Assets in the form of Plant & Machinery. We are therefore of the considered view that based on one of the parameters of FAR analysis ie., Assets employed, we hold that the comparable BVPL could not be a good comparable with that of the assessee company. Hence, the TPO / Ld. AO is directed to exclude the entity BVPL from the final set of comparables while reworking the international transactions. DTE Exports Pvt Ltd. and Premier Tobacco Packers Private Limited - We find that the exports constitute only 3.74% of the total turnover and therefore the Ld. TPO / Ld. DRP considered the insignificant exports of DTE Exports Pvt Ltd., and rejected it as a comparable. DRP has considered the inclusion of Premier Tobacco Packers Private Limited which does not have any export turnover. TPO has not applied filter of minimum of 50% should be from exports turnover in the case of Premier Tobacco Packers Private Limited. While observing the inconsistency in the comparables selected by the Ld. TPO wherein Ld. DRP also affirmed the selection of Premier Tobacco Packers Private Limited, we find that the same is not in accordance with Rule 10B(2)(d) of the Income Tax Rules, 1962. Therefore, we direct the TPO / Ld. AO to exclude Premier Tobacco Packers Private Limited as a comparable in determining the ALP of the assessee company. We noticed that the Ld. DRP has already excluded DTE Exports Pvt Ltd., based on the insignificant turnover and following the principle of consistency, we confirm the same. Export incentives - treated as operating or non-operating income for the purpose of PLI computation - HELD THAT:- Since the assessee has adopted TNM Method which was not disputed by the Revenue, Net Profit is used as a bench mark for ALP computation. Rule 10B(1)(e)(ii) provides for computation of net profit margin in the uncontrolled comparable transactions whereas a net margin realized by the enterprise namely the tested party as well as the comparables, the total income and expenditure of the business should be considered. It is also a general principle that all the subsidies / export incentives are factored by all the exporters while determining their sales price in the international market. We direct the Ld. TPO / Ld. AO to consider the export incentives as operating income while computing the PLI of the assessee. It is ordered accordingly.
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