Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (8) TMI 928 - AT - Income TaxTP Adjustment - comparable selection - CIT upholding action of the AO by selecting Heinz India Pvt. Ltd. as comparable - HELD THAT:- As in commercial world, the manufactures in order to earn higher turnover at times reduce their margin of profit. It means higher turnover lower the margin of the profit, therefore, merely because a comparable company as a higher turnover cannot be the ground for its exclusion. However, we find that Heinz India Ltd. cannot be a good comparable as it is engaged in a different set of products. As mentioned elsewhere Heinz India manufactures products like drinks, Prickly Heat Power (Nycil), Tomato Ketchup and Ghee whereas the appellant is a manufacturer of chocolate and confectionaries goods. Being functionally dissimilar, Heinz India fails the test of functional similarity and deserves to be excluded. As relying on RAMPGREEN SOLUTIONS PVT LTD case [2015 (8) TMI 931 - DELHI HIGH COURT] we direct the AO / TPO to exclude Heinz India from the final set of comparables. Adjustment on account of custom duty - HELD THAT:- The undisputed fact is that the assessee has imported 100% of its raw material whereas the average import in the case of the comparable companies is only 0.56% -As relying on TEREX INDIA PVT. LTD. AND (VICE-VERSA) [2019 (4) TMI 412 - ITAT DELHI] we direct the AO/TPO to allow the adjustment of custom duty. Adjustment on account of capacity utilisation - As financial report of every company contains the details relating to the capacity utilisation and the same are available in the public domain also. The financial reports of the comparable companies used by the TPO do contain the capacity utilisation details and the same can be used for giving the benefit of under utilisation of capacity by the appellant company. We accordingly direct the AO /TPO to allow adjustment of capacity utilisation by comparing the data of the comparable companies in so far as capacity utilisation is concerned with that of the assessee. In alternate the assessee shall furnish the relevant data and the AO / TPO shall examine the same after giving a reasonable opportunity of being heard to the assessee. Ad-hoc disallowance of miscellaneous expenses - HELD THAT:- Facts on record show that the AO has disallowed Rs.289800/-being 10% of the miscellaneous expenses incurred during the year and the CIT( has restricted the disallowance to Rs.50,000/-. FAA has already given substantial relief to the assessee and considering the smallness of the amount we decline to interfere. This ground is accordingly dismissed. Set of brought forward losses - HELD THAT:- We find that in A.Y.2008-09 the assessed loss was determined by the AO. The same was brought forward in A.Y. 2009-10 at Rs.12204535/-. The AO is directed to allow set of brought forward losses as per the provisions of the law. In the result the appeal by the assessee is allowed in part for statistical purpose. Treatment of provision for impairment of assets as non operation - HELD THAT:- A provision for impairment of assets is not a depreciation charge nor amortisation of fixed assets but it is a provision made to the carring amount of the fixed assets which is reversible in nature. Moreover section 92 (1) of the Act requires that any income arsing from an international transaction / allowance for any expenses shall be computed having regard to arms length price. Impairment of assets cannot be related as international transaction of the assessee. Provision for impairment of assets is not regular business expenditure since it is not recurring in nature and is not related normal business operation and hence not in the nature of operation expenses, therefore, in our considered opinion the same cannot be treated as operating expenditure for the calculation of PLI of the assessee. We accordingly direct the AO / TPO to exclude provision of impairment of assets as operating expenditure. Exclusion of Candico India Ltd. in the final set of comparables - only reason for rejecting it is a persistent loss making company - HELD THAT:- As relying on case of GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD. [2016 (4) TMI 1136 - BOMBAY HIGH COURT] we direct the AO / TPO to include Candico India in the final set of comparables.
|