TMI Blog2019 (5) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since the credit figure has been netted off against the debit figure, it shall not have any effect on the Net Profit. We notice that an identical view has been expressed by the Delhi bench of Tribunal in the case of ITO vs. E Value Serve.Com [ 2016 (9) TMI 1363 - ITAT DELHI] Accordingly, we reject the presumption entertained by TPO holding the same as fallacious. Accordingly we direct AO/TPO to re-work the PLI of the assessee. Inclusion of two comparables named M/s Talbros Engineering Limited and Jotindra Steel Tubes Limited. - HELD THAT:- It is stated that M/s Talbros Engineering Limited is engaged in the business of production of motor vehicle parts and M/s Jotindra Steel Tubes Limited is engaged in the business of manufacture of steel pipes tubes. We have earlier noticed that the assessee is engaged in the business of manufacture and export of aircraft engine parts, components and sub-assemblies. Before us, the assessee could not show as to how the functional profile of both the comparable companies, referred above, is similar to that of assessee. Accordingly we reject this ground of the assessee. Computation of Net profit margin of comparable companies - Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here may be some error in it, since it would be difficult to achieve capacity utilization of 218% in the normal industry standard. We notice that the assessee has not attempted to ascertain the facts in this regard and offer reasonable explanations. Accordingly we do not find merit in this ground urged by the assessee and accordingly reject the same. Benefit of +/- 5% range. It is consequential in nature. In view of the above, the issue relating to determination of ALP of international transactions needs to be recomputed in the light of discussions made supra. Computation of deduction u/s 10B - HELD THAT:- According to Ld A.R, the AO was not justified in deducing the brought forward losses and unabsorbed depreciation while computing deduction u/s 10B of the Act. The Ld A.R submitted that the contention of the assessee is supported by the decision rendered in the case of CIT vs. Yokogawa India Ltd [ 2016 (12) TMI 881 - SUPREME COURT] Accordingly we restore this issue to the file of the AO for examining the claim of the assessee by duly considering the decision of Hon ble Supreme Court, referred above. Method of allowing set off of brought forward losses and unabsorbed depr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), without any cogent reason. 6. That on the facts and circumstances of the case and in law, the AO/DRP/ TPO have erred in not providing any comparability, economic and capacity utilization adjustments, as required under Rule 10B(1)(e)(iii) of the Income Tax Rules 1962 ( Rules ). 7. That on the facts and circumstances of the case and in law, the DRP I AO / TPO have erred in not providing the Appellant the benefit of (+ / -) 5% range as provided by the proviso to section 92C(2) of the Act. Other grounds of appeal: 8. That on the facts and in the circumstances of the case and in law, the AO / DRP have erred in not allowing the deduction under section 1 OB of the Act, in respect of profits of the 100% export oriented unit (EOU'). 9. That on the facts and in the circumstances of the case and in law, the AO I DRP have erred in setting off brought forward business losses and unabsorbed depreciation which were pertaining to the EOU, against the profit of the EOU, before computing deduction under section l0B of the Act. 10. That on the facts and in the circumstances of the case an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the PLI. The Ld DRP also confirmed the same. 6. We heard the parties on this issue and perused the record. In the financial statements, the Stock difference was shown in the credit side of Profit and Loss account, since the value of closing stock was more than the value of opening stock. Accordingly, the value of raw material consumed was shown at gross figure of ₹ 1172.18 lakhs. However, while computing PLI, the assessee has reduced the value of stock difference from the value of raw material consumed, i.e., the credit figure was netted off against the debit figure. Hence, this action of the assessee would not change the net profit. Accordingly, we are of the view that the TPO was not correct in presuming that the assessee has purposefully done this in order to artificially reduce the operating cost. Even if it is assumed for a moment that the TPO was right, then the reduction of operating cost should have increased the profit margin, since any reduction in expenses should increase the profit. We notice that the assessee has adopted different form of depicting the Profit for the purpose of PLI. Since the credit figure has been netted off against the debit figu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethodology adopted by it with that of the TPO. Accordingly, this issue requires fresh examination at the end of AO/TPO. Accordingly we restore this issue to the file of AO/TPO. 10. Ground No.5 relates to the computation of PLI by adopting Cash profit. By placing reliance on the decision rendered in the case of BA Continuum India (P) Ltd (2013)(28 ITR(T) 445), the Ld A.R submitted that the cash profit should be considered for computing PLI. The Ld D.R, on the contrary, submitted that the quantum of depreciation would depend upon the value of assets. If any of the companies have replaced its assets with latest one, then the cost of new asset would be high resulting in high amount of depreciation. Accordingly he opposed to the plea of the assessee. 11. With regard to this contention of the assessee that the cash profit (profit before depreciation) should be considered as PLI, we notice that the same finds support from the decision rendered by the co-ordinate bench in the case of DCIT vs. M/s Centum Rakon India P Ltd (IT(TP)A No.472/Bang/2016 dated 20-07-2018), wherein the co-ordinate bench has followed the decisions rendered in the case of Honeywell Techn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly reject the same. 13. Ground No.7 relates to the benefit of +/- 5% range. It is consequential in nature. In view of the above, the issue relating to determination of ALP of international transactions needs to be recomputed in the light of discussions made supra. 14. Ground No.8 9 relates to the computation of deduction u/s 10B of the Act. According to Ld A.R, the AO was not justified in deducing the brought forward losses and unabsorbed depreciation while computing deduction u/s 10B of the Act. The Ld A.R submitted that the contention of the assessee is supported by the decision rendered by Hon ble Supreme Court in the case of CIT vs. Yokogawa India Ltd (2017)(391 ITR 274). Accordingly we restore this issue to the file of the AO for examining the claim of the assessee by duly considering the decision of Hon ble Supreme Court, referred above. 15. Ground No.10 relates to the method of allowing set off of brought forward losses and unabsorbed depreciation. This issue also needs to be restored to the file of the AO, as the decision taken in the earlier grounds shall have impact on this issue. Accordingly we restore this issue to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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