TMI Blog2017 (1) TMI 1776X X X X Extracts X X X X X X X X Extracts X X X X ..... dering it to be the most appropriate method for the purpose of benchmarking its activities under the manufacturing and distribution segments separately. The details of all these activities are set out and then what has been argued is that the item No.3 of the table is of Professional Consultancy. That was a case where a team of experienced professionals visited the assessee's vendors and performed various activities in respect of standardization and improvement of the process at the vendor's site. Thus, they carried out the work to improve the quality. The assessee furnished the details of the work performed by professionals and the details, according to the assessee, was enough for the purposes of making the adjustments. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it was operating at 50% of its actual capacity during the year under consideration and, therefore, its operating profit margin was lower as compared to all comparables selected. Thus, there were comparables and on record. It is in relation to the comparables performance that the Transfer Pricing Officer was, by taking that as a benchmark, applying the same to the assessee before the Tribunal. The assessee was a relatively new unit having put in only two years after its existence and, therefore, could not achieve the optimum capacity. That is why it urged that it was operating at 50% of its actual capacity. Thus, materials were already on record and there was no dispute about it. It is in these circumstances that the Tribunal found fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o also in law, completely erred in rejecting the claim of abnormal expenses of ₹ 2,06,11,944/-. 6 The argument is that the Tribunal could not have called upon the assessee and as is apparent from a reading of paragraph 8.3 of the impugned order, to furnish capacity utilization figures of comparables. It is in the absence of such material that the assessee's claim of adjustment on account of low capacity utilization has been rejected. 7 The argument is that the approach is erroneous on facts and in law simply because the assessee could not have been called upon to produce these materials. In the case of the assessee itself, the records were produced and the argument was that in case of a jewellery manufacturing unit, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w capacity utilization. The assessee sought adjustment of ₹ 2,06,11,944/-. The argument was that this is on account of abnormal expenses due to low capacity utilization and after excluding such expenses, it was submitted that the margin of the assessee was much higher. This claim was rejected and the Tribunal considered it again. It observed that this is a relative feature and, therefore, unless the capacity utilization figures of comparables are known, it is not possible to make adjustment in the case of the assesee. The assessee has not placed on record material relating to capacity utilization comparables. It is also difficult to standardize capacity in the case of jewellery manufacturing which involves several items with a wide va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consultancy. That was a case where a team of experienced professionals visited the assessee's vendors and performed various activities in respect of standardization and improvement of the process at the vendor's site. Thus, they carried out the work to improve the quality. The assessee furnished the details of the work performed by professionals and the details, according to the assessee, was enough for the purposes of making the adjustments. 12 Thus, this is a case where there was no absence of materials, but whether the materials supplied were sufficient and adequate for the purpose of making the adjustments or otherwise. To our mind, this case is completely distinct from the case at hand. Here, the assessee projects that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erformance that the Transfer Pricing Officer was, by taking that as a benchmark, applying the same to the assessee before the Tribunal. The assessee was a relatively new unit having put in only two years after its existence and, therefore, could not achieve the optimum capacity. That is why it urged that it was operating at 50% of its actual capacity. Thus, materials were already on record and there was no dispute about it. It is in these circumstances that the Tribunal found fault with the approach of the authorities in taking the comparables as the benchmark and applying them to a relatively new unit. Therefore, to our mind, even this Tribunal's order cannot assist the assessee in the facts and circumstances of our case. 14 As a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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