TMI Blog2016 (5) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... persistent loss making company as that of comparables. Except for the year under consideration, the assessee-company is also making positive profit. Therefore, this Tribunal is of the considered opinion that the assessee-company is not a persistent loss making company. The loss suffered by the assessee during one year might not be compared with that of the comparable companies. Since the comparables selected by the assessee-company are admittedly persistent loss making companies, the DRP has rightly rejected the comparables selected by the assessee. Lucas TVS is manufacturing components for every vehicle like cars, two wheelers, etc., whereas, the assessee-company is manufacturing DC micro motors and sub-assemblies only for the cars. Therefore, there is a vast functional difference between the manufacturing activity of the assessee and Lucas TVS. Lucas TVS has no segment wise details for manufacturing components for cars, two wheelers, etc. The TPO or DRP has not taken any effort for taking the segment wise details while preferring Lucas TVS for making adjustment in the assessee’s case. Taking the overall profit of Lucas TVS in the TVS group of companies manufacturing automobi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The Ld. representative further submitted that the investments were made not for the purpose of earning any exempt income but for the purpose of business expediency. According to the Ld. D.R., both Bosh Electrical Drives India Private Ltd. and IJT Plastics and Tools Private Ltd. are sister concerns of the assessee, therefore, the investments were made due to commercial expediency. According to the Ld. representative, Bosh Electrical Drives India Private Ltd. was a joint venture company with M/s Bosh Electricals. Similarly, IJT Plastics and Tools Private Ltd. was also formed as joint venture with Yang International Group. Therefore, according to the Ld. representative, the investments made by the assessee in the joint venture companies are only for commercial expediency and not for earning exempt income. The Ld. representative placed his reliance on the decision of this Bench of the Tribunal in EIH Associated Hotels Ltd. v. DCIT (2013) 9 TMI 604. 5. On the contrary, Shri Arun C. Bharath, the Ld. Departmental Representative, submitted that during the year under consideration, Rule 8D of Income-tax Rules, 1962 is very much applicable. The issue whether no income was derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, a copy of which is available at page 80 of the paper-book. The Mumbai Bench of this Tribunal in JM Financial Ltd. v. Addl. CIT in ITA No.4521/Mum/2012 has also taken a similar view. The assessee has produced a copy of the order at page 93 of the paper-book. The assessee has also placed reliance on the decision of Delhi Bench of this Tribunal in Interglobe Enterprises Ltd. v. DCIT (2014) 40 CCH 22. Since the investments were made in the sister concerns as found by this Tribunal in EIH Associated Hotels Ltd. (supra), this Tribunal is of the considered opinion that there cannot be any disallowance under Section 14A of the Act. Accordingly, the orders of the lower authorities are set aside and the disallowance made by the Assessing Officer is deleted. 7. The next issue arises for consideration is with regard to adjustment of Arm's Length Price to the extent of ₹ 9,30,00,000/-. 8. Sh. T. Banusekar, the Ld. representative for the assessee, submitted that the assessee-company is engaged itself in the business of manufacturing DC micro motors and sub-assemblies for DC motors. The assessee-company is a joint venture between Crompton Greaves Limited and Igarashi Electric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lucas TVS has transactions with related parties, namely, subsidiaries. Lucas TVS sells directly to the companies like Tata Motors, Mahindra, etc. However, the assessee-company sells the manufactured products to their own vendors. Thus, there is a vast difference in the business model of Lucas TVS and the assessee-company. 10. Referring to the order of the Dispute Resolution Panel, the Ld. representative for the assessee submitted that the Transfer Pricing Officer applied the filter with a threshold level having related for transactions upto 25%. The number of comparable companies operating in similar segments are small in number. When the Lucas TVS has transactions with related parties upto 25% of their sales, the same cannot be taken as comparable at all. 11. According to the Ld. representative for the assessee, the assessee-company chose auto electrical filter as the first criteria which is the most nearest indicator of the assessee s business model and function. The Ld. representative further clarified that selecting functionally similar companies is the first step for making comparison to determine the Arm's Length Price. Referring to the three comparables rejected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-assemblies for DC motors. The assessee selected three comparables, namely, Sibar Auto Parts Ltd., K.S. Diesels Ltd. and Suyaan Transmissions Ltd. From the product details, it appears Sibar Auto Parts Ltd. is manufacturing aluminium hard chrome plated cylinder kits, cylinder blocks, blind-end cylinder blocks, air cooler cylinder heads and water cooled cylinders. This company may be manufacturing subassemblies for DC motors. Similarly, K.S. Diesels Ltd. is manufacturing spares for fuel pumps, parts for fuel injection equipment for diesel engines, Nozzles, elements, delivery valves, injector complete and single cylinder pump, and Suyaan Transmissions Ltd. is manufacturing crank shafts. These comparable companies selected by the assessee may be subassembling for DC motors. Admittedly, the comparable companies selected by the assessee-company are suffering persistent loss in their business activities. The assessee-company is also making losses. However, it is not a persistent loss making company as that of comparables. Except for the year under consideration, the assessee-company is also making positive profit. Therefore, this Tribunal is of the considered opinion that the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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