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2018 (11) TMI 481 - AT - Income TaxAdjustment on account of international transactions - adjustment on account of capacity utilization - DRP confirmed the action of the AO except the fact that it restricted the adjustment to international transaction only as against the adjustment made by the TPO at enterprise level - Held that:- Merely because consequent to such adjustment downward adjustment is required and such adjustment cannot be rejected. The adjustment can be rejected only on its merit after consideration of facts and not on the ground that it will lead to downward adjustment. In fact, it is the case of the assessee that downward adjustment is required in the facts of the case. As regards the documentation required for considering such adjustment, we are not in agreement with the contention of the Ld. DR that assessee is required to produce even that data which is not in public domain. We set aside this issue to the TPO and direct the TPO to examine the data placed by the assessee before it. The TPO shall also call for the information from the comparables by issue of notice under Section 133(6). While carrying out this exercise the TPO shall also examine the ‘unit’ in which such capacity utilization is to be measured. The TPO shall also examine the capacity utilization of the assessee company and will ensure that the capacity utilization of the assessee company i.e. the tested party and that of the comparables is on the same parameters which will include assets turnover ratio. After carrying out such exercise the TPO shall compute appropriate adjustment, if any, on account of capacity utilization. The TPO shall share the details so obtained with the assessee and decide the issue afresh after giving adequate opportunity to the assessee. Allowing the benefit of (+/-) 5% in terms of proviso to Section 92C(2)- Held that:- This ground is consequential to ground above. Since we have restored the issue of adjustment on account of arm’s length price to the TPO, this issue of allowing benefit of +/- 5% will be considered appropriately by the TPO as per the proviso to Section 92C(2) of the Act while computing the adjustment if any required to be made on account of arm’s length price. Additional depreciation under Section 32(1)(iia) in respect of the new plant and machinery added by the assessee during the year - Held that:- It is not the case of the Revenue that any of the items added during the year is hit by this proviso. If that be so, we see no reason to deny the benefit of additional depreciation. Accordingly, we direct the AO to allow the additional depreciation in respect of these items. Accordingly, Ground no. 2.1 is allowed.
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