TMI Blog2023 (7) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... ot have any export turnover. TPO has not applied filter of minimum of 50% should be from exports turnover in the case of Premier Tobacco Packers Private Limited. While observing the inconsistency in the comparables selected by the Ld. TPO wherein Ld. DRP also affirmed the selection of Premier Tobacco Packers Private Limited, we find that the same is not in accordance with Rule 10B(2)(d) of the Income Tax Rules, 1962. Therefore, we direct the TPO / Ld. AO to exclude Premier Tobacco Packers Private Limited as a comparable in determining the ALP of the assessee company. We noticed that the Ld. DRP has already excluded DTE Exports Pvt Ltd., based on the insignificant turnover and following the principle of consistency, we confirm the same. Export incentives - treated as operating or non-operating income for the purpose of PLI computation - HELD THAT:- Since the assessee has adopted TNM Method which was not disputed by the Revenue, Net Profit is used as a bench mark for ALP computation. Rule 10B(1)(e)(ii) provides for computation of net profit margin in the uncontrolled comparable transactions whereas a net margin realized by the enterprise namely the tested party as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products on FOB basis Sale of unmanufactured 174,45,58,168 TNMM 2. Alliance one International AG, Switzerland Sale of unmanufactured tobacco and its byproducts on CIF basis 13,12,79,824 TNMM 3. Alliance one International Inc, USA Sale of unmanufactured tobacco and its byproducts on FOB basis 10,32,13,440 TNMM 4. Alliance one International AG, Switzerland Purchase of software License 2,46,875 CUP Method 5. Alliance one International AG, Switzerland Advance received against sales 24,52,59,000 TNMM 6. Alliance one international Inc., USA Corporate Guarantee for borrowings from bank by the extent Standard Commercial tobacco NIL CUP Method 3. The Ld. TPO also arrived at the Profit Level Indicator [PLI] as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . J J Exports Limited, ITAT Kolkata. 2. CIT-2 vs. Welspun Zucchi Textiles Limited Bombay High Court. 7. The Ld. TPO also placed reliance on the order of the Coordinate Bench of ITAT, Delhi in the case of Goodyear India Limited in ITA No. 1706/Del/2017, dated 22/01/2018. Based on the final set of comparables considered by the Ld. TPO, he computed the Arm s Length Price as follows: Sl No. Name of the company Total OR Total OC Total OP WT OP/OC WT OP/OR 1. Bommidala Ventures Pvt Ltd 80.85 73.57 7.28 9.89 9.00 2. Premier Tobacco Packers Pvt Ltd 177.77 158.01 19.76 12.50 11.11 22.39 20.11 Arithmetic Mean 11.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n prepared by the appellant company. 7. The Ld. DRP and the Ld. AO / Ld. TPO erred in selecting Bommidala Ventures Private Limited which is not comparable to the appellant on the grounds of functional dissimilarity, super profit, or other appropriate filter etc. 8. The Ld. DRP and the Ld. AO / Ld. TPO erred in not accepting the assessee s contention of inclusion of DTE Exports Private Limited as a comparable on the grounds of functional similarity. 9. Any other ground(s) that may be urged at the time of hearing. 10. In the above grounds, the following two issues are raised by the assessee: (i) Selection of comparable viz., Bommidala Ventures Pvt Limited and exclusion of comparable viz., DTE Exports Pvt Ltd., and (ii) Consideration of export incentives as Non-operating income while computing the ALP. 11. With regard to the comparables, the Ld. AR submitted that Bommidala Ventures Pvt Ltd., [BVPL] is functionally dissimilar with the assessee company as it is engaged in trading / export without any employment of assets. The Ld. AR further submitted that BVPL is not engaged in the manufacturing activity and also in threshing and redrying of the unmanufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that comparables selected by the Ld. TPO also in the business of processing of unmanufactured tobacco and hence the Ld. TPO is right in including it as a comparable. With respect to the exclusion of DTE Exports Pvt Ltd and export incentives, the Ld. DR relied on the orders of the Ld. Revenue Authorities. The Ld. DR also further placed heavy reliance in the decision of the Coordinate Bench of the Delhi in the case of Goodyear India Limited (supra). 12. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. With respect to the inclusion of comparable of BVPL by the Ld. TPO which was confirmed by the Ld. DRP, from the submissions made by the Ld. AR we find that if any company which should be considered as a good comparable with that of the assessee-company for the purpose of benchmarking its international transactions, it should be based on the FAR analysis ie., F unctions performed, A ssets employed and R isk undertaken. In the instant case, the Assets employed by the assessee company in the form of Plant Machinery is Rs. 68,67,22,223/- whereas the comparable viz., BVPL selected the Ld. TPO has employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various Courts have held the export incentives as operating in nature while calculating the operating margins. Reliance placed by the Ld. TPO in Hon ble Bombay High Court decision in the case of CIT-2 vs. Welspun Zucchi Textiles Limited wherein the Hon ble High Court dismissed the Revenue s appeal and confirmed that the DEPB benefit is operating revenue includable in arriving at operating profit. Similar views have been held by various Courts viz., (i) DCIT vs. Indo Spanish Tasty Foods Pvt Ltd TS-118-ITAT- 2016 (Bang); (ii) Greenland Exports Pvt Ltd vs. DCIT TS-879-ITAt- 2016(Chny)-TP; (iii) Cummins India Ltd vs. DCIT [2019] 101 taxmann.com 325 (Pune-Trib.); (iv) FCI OEN Connectors Ltd vs. ACIT [2017] 77 taxmann.com 223 (Cochin-Trib.) (v) AB INBEV GCC Services India Pvt Ltd vs. DCIT (IT)(TP) A No. 792/Bang/2022; (vi) Sami Labs Ltd vs. DCIT (IT)(TP) A No. 186/Bang/2015; (vii) Reitzel India Pvt Ltd vs. DCIT [2020] 119 taxmann.com 401 (Bangalore Trib.); (viii) Carraro India (P.) Ltd vs. ACIT [IT appeal No. 1629 and 1673 (Pune) of 2013), dated 19/1/2017]; (ix) Behr India Ltd vs. ACIT [2017] 81 taxmann.com 46 (Pune-Trib.). The case law relied on by the Ld. DR in the case of Goodyear I ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
