TMI Blog2015 (5) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of determining the arm's length price - Held that:- Suzlon Energy Ltd. was engaged in the activities of supply alone whereas the assessee is in the business of supply, installation, commissioning as well as development of sites. Thus, it is clear that the business activities carried out by the assessee are not comparable with the Suzlon Energy Ltd., for the purpose of determination of arm's length price. The Transfer Pricing Officer included the Suzlon Energy Ltd. in the computation of arm's length price, however, in view of the fact that the Suzlon Energy Ltd. is not a functional comparable to the assessee, therefore, the inclusion of Suzlon Energy Ltd. in the list of comparable is not proper. The learned CIT(A) accepted the objection of the assessee that Suzlon Energy Ltd. alone is not a good comparison of the assessee and, therefore, clubbed the margins of all the three companies. Further, we note that the Transfer Pricing Officer has determined the arm's length price at 13.39% in the comparison to the operating margin of the assessee @ 11.57%. However, the Transfer Pricing Officer has not given the benefit of tolerance range of + 5% while making the adjustment. Without g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the subsidiary company, therefore, no disallowance is called for. The Assessing Officer did not accept the contention of the assessee and worked out the disallowance as per rule 8D for the purpose of section 14A of the Act. Consequently, the Assessing Officer made a disallowance of ` 15,64,000 under section 14A. 3. On appeal, the learned CIT(A) held that provisions of rule 8D is not applicable for the year under consideration in view of the judgment of the Hon'ble Jurisdictional High Court in Godrej Boyce Mfg. Co. Ltd. v/s DCIT, [2010], 328 ITR 081 (Bom.). However, the learned CIT(A) has made a reasonable estimate of disallowance at ` 5,00,000, under section 14A. 4. Before us, the learned Departmental Representative submitted that though the provisions of rule 8D is not applicable for the year under consideration, however, it has persuasive value for computing a reasonable disallowance of expenditure under section 14A of the Act. He further contended that the learned CIT(A) has not given any basis for restricting the disallowance to ` 5,00,000. 5. On the other hand, the learned Counsel for the assessee reiterated its contention as raised before the authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration as under: Sr.no. Category Description Amount of Transaction (` in lakh) 1. Imports goods components and spare parts EIL imports raw material from its group entities for its manufacturing activity ` 31624.14 2. Exports manufactured Blades / CBCT EIL manufacturers blades / CBCT for export (e 40 Model) ` 342.27 3. Import capital goods EIL imports capital goods like machinery, accessories, spares, etc., from its group entities ` 5772.57 4. Reimbursement of guarantee charges Reimbursement of guarantee charges ` 243.33 5. Sale of computer Sale of computer ` 0.87 9. In its transfer pricing study, the assessee has bench marked its international transaction in respect of import of raw materials / spares from the group entity for its manufacturing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioning and land purchase and development of site. Thus, the assessee submitted that all other activities of installation, commissioning and land purchase and development of site are performed by the other group companies and not by the Suzlon Energy Ltd. and, therefore, Suzlon Energy Ltd. is not a functionally comparable with the assessee. The assessee has also provided the data of the other two companies namely Suzlon Infrastructures Ltd. and Sarjan Realities Ltd., which are performing the activities of installation and commissioning as well as land purchase and development of site. The learned CIT(A) has accepted the combined / consolidated operating margin of all the three companies as re calculated by the assessee instead of the margin of Suzlon Energy Ltd. alone. Thus, the learned CIT(A) has taken into consideration the combined margin of Suzlon Energy Ltd. along with the other two companies at 18.10% and, thereafter, worked out the operating mean margin of the comparables at 11.21% as against the profit margin of the assessee @ 11.15% and held that the international transaction of the assessee is at arm s length and consequently, deleted the addition which was made by the Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to note that the Revenue has not disputed the fact that Suzlon Energy Ltd. is engaged in supply of wind mills and other related activities of installation and commissioning were being performed by the other group companies viz. Suzlon Infrastructure Ltd. Further, the land purchased and development of site work is dealt with by Sarjan Realities Ltd., a group company of Suzlon Energy Ltd. Therefore, Suzlon Energy Ltd. was engaged in the activities of supply alone whereas the assessee is in the business of supply, installation, commissioning as well as development of sites. Thus, it is clear that the business activities carried out by the assessee are not comparable with the Suzlon Energy Ltd., for the purpose of determination of arm's length price. The Transfer Pricing Officer included the Suzlon Energy Ltd. in the computation of arm's length price, however, in view of the fact that the Suzlon Energy Ltd. is not a functional comparable to the assessee, therefore, the inclusion of Suzlon Energy Ltd. in the list of comparable is not proper. The learned CIT(A) accepted the objection of the assessee that Suzlon Energy Ltd. alone is not a good comparison of the assessee and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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