TMI Blog2014 (6) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... sold its plant and machinery and substantial land and buildings also indicate that assessee is not operating any normal circumstances - assessee has claimed that manufacturing division was sold off, but the trading division continues to function - no segmental data has been provided for consideration – thus, there is no infirmity in the order – Decided against assessee. Determination of arm’s length adjustment - International transaction from AEs - Enhancement of returned income – Opportunity of being heard – Held that:- TPO has rejected 8 out of the 10 comparables submitted by the assessee - The TPO has mentioned in show cause notice his observations on the lack of comparability of 8 comparables - assessee’s submissions and objections in this regard has not been brought in TPO’s order - TPO has only mentioned that he has considered the assessee’s objections and submissions and thereafter TPO has again reproduced his original observations mentioned in the show cause notice - The DRP against assessee’s objections has laconically upheld the order of the TPO - assessee has claimed that Priya Ltd. and Savex Computer Ltd. which has been rejected the year were earlier approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned OP/sales of 3.49%. It was thus concluded that the international transactions of the assessee were at arm s length. During the course of transfer pricing assessment proceedings, the Ld. TPO accepted TNMM as the most appropriate method and also accepted the PLI as OP/Sales. However, the Ld. TPO disagreed with the comparability analysis conducted by the assessee and rejected 5 comparables out of the total 9 companies selected by the Company. Further, the Ld. TPO modified the margins of Kanika Infrastructure based on the segmental accounts. Therefore, the Ld. TPO accepted only 4 companies as comparables for the TP analysis, which showed a mean OP/sales of 9.48% resulting in a TP adjustment of INR 37,81,265. The TPO selected following comparables and calculated mean margins as follows:- Name of comparable company OP/Sales Bartronics India Ltd. 22.39% Compuage Infocom Ltd. 1.93% Kanika Infrastructure and Power Ltd. 6.10% Kilburn Office Automation 7.51% Arithmetic Mean 9.48% 4. In the proceedings before the DRP, the DRP upheld the finding of the TPO. 5. Against the above order the Assessee is in appeal before us. 6. Ground No. 1:- The first grievance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled by way of several judicial pronouncements. 7. We have heard both the counsel and perused the records on this issue. We note that assessee has claimed before the TPO regarding working capital adjustment, but the same has been denied by the TPO on the ground that assessee failed to provide the details and working in this regard. However, we note that as per the submissions of the Ld. Counsel of the assessee as above. AO has disregarded the submissions of the assessee in this regard. The DRP also considered the working capital adjustment only with respect to the comparables submitted by the assessee. It did not analyse the same with respect to the data of the assessee company. In light of the above, in our considered opinion, interest of justice will be served if the matter is remitted to the file of the TPO to consider the issue of working capital adjustment as claimed by the assessee. We hold and direct accordingly. 8. Ground No. 2 In this ground assessee has agitated that DRP/TPO has erred in in law and on facts of the case in not considering ACI Infocom Ltd. as a comparable company. 8.1 The TPO has rejected the above comparable on the ground that the said compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken as cogent comparable. The fact that assessee has sold its plant and machinery and substantial land and buildings also indicate that assessee is not operating any normal circumstances. Ld. Counsel of the assessee has claimed that manufacturing division was sold off, but the trading division continues to function. However, we note that no segmental data has been provided for consideration in this regard. In our considered opinion, there is no infirmity in the orders of the authorities below in rejecting this comparable. 10. In the result, this appeal by the assessee stands partly allowed for statistical purposes. ITA No. 607/DEL/2014 (A.Y. 2009-10) 11. The only ground pressed in this appeal read as under:- 1. The Ld. AO/Ld. TPO and Ld. DRP erred on facts and circumstances of the case in determining the arm s length adjustment to the appellant s international transaction from AEs, thereby in the enhancement of returned income of the appellant by Rs. 36,584,195. 2. That the reference made by the Ld. AO suffers from jurisdictional error as the Ld. AO has not recorded any reasons in the assessment order based on which he reached the conclusion that it was expedient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment of INR 36,584,195. The TPO selected following comparables and calculated mean margins as follows:- Name of comparable company OP/Sales Bartronics India Ltd. 29.00% Kilburn Office Automation Limited 15.98% Arithmetic Mean 22.49% 17. The above computation by the TPO was upheld by the DRP which rejected the assessee s submissions in this regard. 18. In this regard, Ld. Counsel of the assessee submitted before us that the TPO has chosen high margin companies and the same indicated his intentions to make a transfer pricing adjustment for the business operations of the assessee for its group companies. Therefore, the assessee would like to emphasize that the TPO has resorted to cherry picking of comparables based on margins irrespective of disparity in functional profile. That during the proceedings before the DRP, detailed submissions on the above points were filed. The DRP provided only a single opportunity of personal representation where all of the above points were presented, albeit briefly, as the DRP was operating on a time constraint. That the DRP without considering the facts and merits of the cse, upheld the findings of the TPO. That in this regard, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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