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2015 (6) TMI 243 - ITAT DELHI

2015 (6) TMI 243 - ITAT DELHI - TMI - Transfer pricing adjustment - CIT(A) deleting the addition made on account of adjustment of arm’s length price - Held that:- The assessee in this case has created a provision for obsolete stocks. Admittedly, such the provision for obsolesce stock has not been made by any of the companies, which are taken as comparables as per the TPO’s order, except for Kirsolkar Oil Engines Ltd. where the provision for stock obsolesce / non moving inventory is only 1.03% of .....

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ity in the well reasoned order passed by the Ld. CIT(A) on the issue in dispute - Decided against revenue. - I.T.A. No. 5769/DEL/2011 - Dated:- 25-3-2015 - Shri H.S. Sidhu And Shri J.S. Reddy JJ. For the Appellant : Sh. Judy James, Spl. Counsel/DR For the Respondent : S h. Himanshu Sinha, Adv. & Anil Gupta, CA & Archit Rastogi, CA ORDER Per H.S. Sidhu : JM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XX, New Delhi dated 31.10.20 .....

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ation US, is the parent company of the group. The assessee is in the Automobile ancillary business. The assessee is engaged in manufacturing the group s popular line of champion spark plugs and undertakes marketing and distribution operation for a wide range of group products including wiper blades, glow pugs, ignition coils, oil seals etc. The manufacturing facility of the company is located at Bhiwadi. During the year the assessee has imported raw materials, semi finished goods and finished go .....

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ssessee. 4. Aggrieved with the order of the Ld. CIT(A), Revenue is in appeal before the Tribunal. 5. After hearing the rival contentions, we find that Ld. CIT(A) has held as under:- 4.6 Assessee did not create any provision of stock obsolesce / non moving inventory during the previous years (i.e. AY 2001-02 and AY 2002- 03) and subsequent year (i.e. A.Y. 2004-05). Further, an analysis of stock obsolescence to sales ratio for the comparables companies (as provided by the appellant) is reproduced .....

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none of the comparable companies, except Kirloskar Oil Engines Ltd., has any provision for stock obsolesce / non moving inventory. Further, for Kirloskar Oil Engines Ltd., the provision for stock obsolesce / non moving inventory is only 1.03% of sales as against a similar provision of 8.98% for the Appellant. If provision of stock obsolesce / non moving inventory is considered as non operating expense for the comparable companies and the Appellant, then the analysis is as follows:- Name of the .....

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ased on the above, arithmetic mean of the revised margin of the comparable companies after considering provision of stock obsolesce / non moving inventory as non operating is 8.17%. As per the TPO s order, the operating margin of the Appellant after undertaking similar analysis is 10.85% Based on the paragraphs above, it is clearly evident that the Provision for stock obsolescene amounting to ₹ 25,306,608/- was abnormal and extraordinary in nature, and the same is required to be excluded f .....

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seen from the calculation above, margin of the assessee is above that of the comparables. Therefore, the AO is directed to delete the additions made on account of transfer pricing adjustment. Since the assessee s ALP is above the margin of the comparables proviso to section 92C(2) is not applicable in this case. 5.1. From the above finding of the Ld. CIT(A), we find no infirmity in the same. The assessee in this case has created a provision for obsolete stocks. Admittedly, such the provision fo .....

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