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TMI Blog2015 (3) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... owing ground: On the facts and in the circumstances of the case and in law, learned CIT(A) has erred in deleting the addition of Rs. 1,65,87,730 on account of arm's length price (ALP) adjustment made as per TPO order under section 92CA (3) of the Act. 2. Briefly stated, material facts of the case, as culled out from material on record, are like this. The assessee before us is a subsidiary of a German company by the name of EDAG Engineering & Designs AG, engaged in the business as an engineering expert in the automotive industry and is said to be one of the global leaders in offering 'closed process chain' services i.e. complete services for integrated development- including design and product development, template and prototype constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO did not dispute the comparables selected by the assessee and computed the operating profit margin ( i.e. OP/TC) of these comparables at 5.59% and computed the arm's length revenue at 105.59% of the cost incurred by the assessee, which came to Rs. 6,91,13,540 as against book value of these revenues at Rs. 4,22,37,633. The difference thus came to Rs. 2,68,75,906. However, as the assesse had subsequently received a financial support, by way of waiver of dues by the AE, amounting to Rs. 1,02,88,176, the ALP adjustment was reduced by this amount. The ALP adjustment was thus computed at Rs. 1,65,87,730. In the course of the assessment proceedings, the Assessing Officer made this ALP adjustment to the value of transaction entered into with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re allowed. 27. In view of the above, the appeal is allowed. 3. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case in the light of the applicable legal position. 5. We find that learned CIT(A) has granted the impugned relief by making adjustments, on account of capacity underutilization, in the results shown by the tested party and thus computing hypothetical financial results which the tested party would have achieved in perfect conditions. Such an exercise, in our humble understanding of law, is impermissible. As as is the undisputed legal position, such comparability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground, and on what basis, this financial support is given. The reason for underutilized capacity and the facts regarding financial support extended to the assessee are not clear from the material on record. Learned CIT(A) has granted the impugned relief merely by making capacity underutilization adjustments to the profits achieved by the tested party, but then such an approach, as we have noted earlier, is wholly unsustainable in law. 6. In view of the above discussions, as also bearing in mind entirety of the case, we deem it fit and proper to vacate the impugned order and direct the CIT(A) to decide the matter afresh after giving an opportunity of hearing to the assessee, in accordance with the law and by way of a speaking order. We or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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