TMI Blog2020 (5) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2012-13 and 2013-14 wherein the capacity utilization adjustment has been duly granted. Keeping in view the industrial standing of the comparable, we hereby direct that the same benefit may be accorded in the instant year. Brought forward losses - HELD THAT:- AO is directed to consider relief on account of brought forward losses as per the Income Tax Act after taking into consideration the business losses and unabsorbed depreciation as per the earlier returns filed by the assessee. - ITA No. 9374/Del/2019 - - - Dated:- 5-5-2020 - Ms. Suchitra Kamble, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Assessee : Sh. Vishal Kalra, Adv. For the Revenue : M. Bernwal, Sr. DR ORDER PER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER: The present appeal has been filed by the assessee against the order dated 11.10.2019 passed by the AO u/s 143 (3) r. w.s. 144C of the Income Tax Act, 1961. 2. Following grounds have been raised by the assessee: 1. That on the facts and circumstances of the case and in law, the AO has erred in assessing the total income of the Appellant for the relevant AY at INR 19,52,28,784 as against the Nil returned income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the AO / DRP / TPO erred in not considering the benchmarking submitted by the Appellant wherein it has been shown that third party is also paying royalty to Nissin Kogyo Co. Ltd. ( Nissin Kogyo ) at similar rate. 9. That on the facts and circumstances of the case and in law, the AO / DRP / TPO erred in not considering that other group companies in the Nissin Group are also paying royalty and product development fees to Nissin Kogyo. 10. That on the facts and circumstances of the case and in law, the AO / DRP / TPO erred in not considering the detailed evidences furnished in relation to product development fees wherein the detailed functions being performed by the Appellant and Nissin Kogyo had been submitted. 11. That on the facts and circumstances of the case and in law, the AO / DRP / TPO erred in relying on prior year's order irrespective of the fact that sufficient information / documentation were furnished for the captioned year. 12. That on the facts and circumstances of the case and in law, the AO / DRP / TPO erred in disregarding its own approach in the case of the Appellant for AY 2009-10, AY 2010-11 and AY 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstance on the case and in law, the AO failed to provide the relief on account of brought forward losses in the income tax return. 21. That on the facts and circumstances of the case and in law, the AO erred in proposing to charge interest under section 234 B and 234C of the Act. 22. That on the facts and circumstances of the case and in law the AO erred in initiating penalty proceedings u/s 271(1)(c) of the Act. 3. The assessee is a subsidiary of Nissin Kogyo Co. Ltd., Japan ( Nissin Kogyo ) and is engaged in manufacturing, altering, conversion, procurement, sale and trading of various automotive and aluminium and / or non-automotive brake and aluminium components, spare parts and other related accessories. 4. During the year, the assessee entered into various international transactions with its associated enterprises ( AEs ) which was a subject matter of Transfer Pricing study leading to change in the transfer pricing method of TNMM to CUP and consequently inclusion of five entities as comparables which ultimately led to adjustment of 1.72 % of profit against the 3.14 % shown by the assessee in the TP documentation. The TPO made adjustments substantially on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Aggrieved with the order of the Tribunal for the assessment year 2013-14, the revenue preferred before the jurisdictional High Court 9. The Hon ble Jurisdictional High Court of Punjab Haryana vide order dated 10.01.2020 held that there is no need to deviate from TNMM followed by the assessee to CUP method followed by the revenue. 10. Hence, keeping in view the judgment of the Hon ble Jurisdictional High Court, we hereby direct the revenue to determine adjustments considering the TNMM as the most appropriate method. The appeal of the assessee on this ground is treated as allowed. Product Development Cost: 11. During the year, the assessee received product development services from the parent company and has paid fees for the same on cost-to-cost basis. The revenue contended that the assessee has carried out R D activities during the year based on the correspondence between the assessee and the holding company. The revenue contended that the assessee is paying unreasonable amount of royalty to the parent company on this head. The assessee submitted that they do not have any R D centre in India and all product development activities are done by the parent company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve business profile/manufacturing activity. 2. All the above comparable companies are in the manufacturing business of either braking systems or shock absorbers or both which are essentially connected with automobile sector and are very much identical to the line of business profile/manufacturing activity undertaken by the assessee. For the purpose of comparability under TNMM, all these companies have been identified by the TPO after applying appropriate filters as elaborately discussed in his order and the same has also been upheld by Ld. DRP. 3. The functional comparability with respect to these comparable companies with the appellant company is also supported by the meaning of Core Auto components given It has been held that In our considered opinion, no two comparable companies can be replicas of each other. The application of Rule 10 B should be carried out and judged not with technical rigor, but on a broader prospective. [Para 36, P/38 of the order dated 22.07.2011.] 6. Accordingly, it is requested that the above comparables may kindly be considered to be retained for comparability under TNMM. 7. As regards exclusion of Foundation Brake Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar to that of the assessee. However, the turnover of this comparable is 16 times to that of the assessee s turnover. In general that the turnover filter is adopted to avoid selection of high-end companies with that of minnows in a similar line of business. The range cannot be fixed and how to adopt the filter depends on the facts of each case. High turnovers cannot be rejected prima facie while low turnovers are accepted when it suits to the parties without objections from either of the sides. An acceptable range would be the turnover of the taxpayer and the range of the upper limit at ten times as well as the lower limit at ten times (1 /10) with a margin of variation may be considered as a right comparable. Since, in this case the turnover is 16 times which is well beyond the margins for a right comparison and eliciting correct results. Hence, we hold that BIPL may not be considered as a comparable in the instant case. 5. Munjal Showa Ltd.: The company is engaged in the manufacturing of shock absorbers, struts and rear cushions. Since, the product line is different the profits cannot be comparable and hence cannot be considered as a right comparable. 6. Foundation Brake ..... X X X X Extracts X X X X X X X X Extracts X X X X
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