TMI Blog2022 (5) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... inkering with its inherent value, we countenance the view taken by the ld. CIT(A) in approving the application of the Internal RPM as most appropriate method against the TNMM applied by the TPO. This ground fails. Comparable selection for Manufacturing Segment - HELD THAT:- It is evident that the only reason for the exclusion of this company by the TPO is the losses incurred by it in the year under consideration. In CIT vs. Welspun Zucchi Textiles Ltd. [ 2017 (1) TMI 1037 - BOMBAY HIGH COURT] has held that loss made in one year would not ipso facto result in exclusion of a company from comparability analysis. In an earlier decision in CIT Vs. Goldman Sachs (India) Securities (P) Ltd [ 2016 (4) TMI 1136 - BOMBAY HIGH COURT] has held that only persistent loss making companies can be excluded from the list of comparability. Since Electronica Machine Tools Ltd. admittedly incurred loss only in the year under consideration and was into profits in the earlier years, it ceased to be persistent loss making company. We are thus satisfied that the ld. CIT(A) was justified in including this company in the list of comparables. This ground fails. Direction of the ld. CIT(A) to allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss account for this year, which shows the figure of `Revenue from operations in the preceding year at Rs.7.75 crore as against Rs.7.99 crore for the year. This manifests that the unit was already set up in an earlier year and was in operation even in the preceding year much less the year under consideration. This appears to be the reason for the assessee claiming deduction for such expenses in its Profit loss account and not capitalizing the same. But for that, there is no dispute that the expenses are otherwise of the operating nature. We, therefore, uphold the view taken by the ld. CIT(A) in treating Rs.1.12 crore as operating cost and including it in operating cost base. This is not allowed. Non-adjudication by the ld. CIT(A) of the exclusion of consultancy charges from the total AE cost while computing the proportionate adjustment - HELD THAT:- We have given directions hereinabove concerning the ALP of the Manufacturing segment, which would require a re-do of the exercise, the AO / TPO will examine this claim of assessee also in such fresh proceedings. Needless to say, the assessee will be given reasonable opportunity of hearing. - ITA No. 581/PUN/2021 CO No. 27/PUN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and gone through the relevant material on record. The Trading segment is under consideration, in which the goods purchased by the assessee were admittedly sold as such without any value addition. The ld. DR, on the basis of the remand report of AO, fairly conceded that no value addition was made by the assessee to the goods purchased under the Trading segment. He harped on other factors to support his contention that the RPM was not correctly applied by the assessee. In view of the fact that the assessee purchased and sold the same goods without increasing or reducing their inherent value, clearly the most appropriate method for determining the ALP in such a situation is the RPM. The Hon ble Delhi High Court in Pr.CIT vs. Matrix Cellular International Services Pvt. Ltd. (2017) 100 CCH 0191 (DelHC) has held that where the goods are re-sold without making any value addition, the RPM is the most appropriate method. The contention of the ld. DR that more employee cost was booked in the Trading segment or that there was something amiss in the computation of the ALP under the RPM are irrelevant considerations. The ground before the Bench is against the selection of the most appropri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s making company. We are thus satisfied that the ld. CIT(A) was justified in including this company in the list of comparables. This ground fails. 5.1. Another issue raised by the Department is against direction of the ld. CIT(A) to allow adjustment on account of higher Customs duty paid by the assessee. 5.2. The facts apropos this issue are that the assessee submitted before the TPO that it had made 100% import of raw materials and components in comparison with comparables importing at 25.20%. It was urged that the increased cost of raw materials having the effect of Customs duty element, should be proportionately scaled down so as to bring the assessee at par with the comparables. The TPO rejected such a contention which however, met with concurrence in the first appeal. 5.3. After considering the rival submissions and perusing the relevant material on record, it is observed that the claim of assessee for exclusion of Customs duty is based on the premise that it made more imports with the resultant increased cost of production because of higher incidence of Customs duty as against the comparables paying less amount of Customs duty. In our considered opinion, this argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing unit was already in existence, which fact is borne out from the assessee s Profit loss account for this year, which shows the figure of `Revenue from operations in the preceding year at Rs.7.75 crore as against Rs.7.99 crore for the year. This manifests that the unit was already set up in an earlier year and was in operation even in the preceding year much less the year under consideration. This appears to be the reason for the assessee claiming deduction for such expenses in its Profit loss account and not capitalizing the same. But for that, there is no dispute that the expenses are otherwise of the operating nature. We, therefore, uphold the view taken by the ld. CIT(A) in treating Rs.1.12 crore as operating cost and including it in operating cost base. This is not allowed. 7. The only other ground taken by the assessee in its Cross Objection is against non-adjudication by the ld. CIT(A) of the exclusion of consultancy charges from the total AE cost while computing the proportionate adjustment. The assessee had raised ground No.3 in Form No. 35 before the ld. CIT(A) in this regard, which remained to be adjudicated. In view of the fact that we have given direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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