Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (5) TMI 157 - AT - Income TaxTP Adjustment - comparable selection - non-consideration of capacity utilization adjustment by the A.O./TPO while comparing the comparable companies - HELD THAT:- We find merit in the arguments advanced by the ld. counsel for the assessee that when it is operating at 51.29% of its installed capacity as against 7% in the preceding assessment year and, as such, it could not achieve economics in utilizing fixed costs, therefore, the assessee should be granted capacity utilization adjustment. However, the same needs verification at the level of A.O./TPO - we deem it proper to restore the issue to the file of A.O./TPO with a direction to give an opportunity to the assessee to substantiate with evidence to his satisfaction regarding the capacity utilization adjustment that is necessary for the assessee for this particular assessment year. A.O./TPO shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee on account of transfer pricing adjustment are accordingly allowed for statistical purposes. Nature of expenditure - Disallowance of moulds as revenue expenditure - revenue or capital expenditure - HELD THAT:- We find although the assessee filed a certificate from the Chartered Engineer to the effect that the life of moulds of cylinder liners does not exceed more than one year, the ld.CIT(A) rejected the same and upheld the action of the AO the reasons for which have already been reproduced in the preceding paragraphs. It is the submission that the assessee being the manufacturer of moulded automobile products, therefore, mould is a basic material. Such mould has been purchased and utilised in the process of production which has a very short life and needs to be replaced from time to time and, therefore, should be treated as revenue in nature. It is also his submission that the expenditure on mould is of recurring nature and, therefore, merely because it has some enduring benefit to the assessee, the same cannot be considered as capital in nature especially when the life of mould is less than one year and has to be replaced frequently. The various decisions relied on by the Ld. Counsel for the assessee also support his case to the proposition that expenditure incurred on moulds is revenue in nature. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to treat the expenditure on moulds as revenue expenditure. The grounds raised by the assessee on this issue are accordingly allowed.
|