9911796707
TMI Blog2024 (6) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... 21in pursuant to the directions of Dispute Resolution Panel-2 (in brevity DRP), New Delhi, dated 13/09/2021 issued U/s 144C(5) of the Act pertains to Assessment years 2017-18 & 2018-19. 2. At the outset both the appeals have the same nature and fact and have a common factual issue. For brevity we have taken together, heard together and disposed of together. We have taken on ITA No. 595/Kol/2021 as the lead case. 3. The assessee has raised following grounds of appeal: 1. General Ground That on the facts and in the circumstances of the case and in law, the Learned AO erred in assessing the total loss at INR 2,699,202,298 under normal provisions as against loss of INR 2,709,117,138 declared by the Appellant in the return of income under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed by the Appellant which were functionally comparable. *. Vallabh Steel Limited, for which rectification application under Section 154 has been filed with the learned Transfer pricing officer and is pending for disposal. *. Uttam Galva Steels Ltd. c. In selecting the companies engaged in functionally different operations: *. Tata Steel BSL Limited *. M/s Stelco Limited 3. On the facts and circumstances of the case, the Ld. AO has erred in proposing to initiate penalty proceedings under Section 270A of the Act against the Appellant, which is bad in law. 4. Brief facts of the case are that Jamshedpur Continuous Annealing & Processing Co. Pvt Ltd ('JCAPCPL' or the assessee')was incorporated on 17th March 2011 as a wholly owne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order filed an appeal before us by challenging the assessment order. 5. The Ld. A.R vehemently argued and filed a written submission which are kept in the record. The Ld. A.R invited our attention in written submission APB page 223 and the details of comparisons for calculation of ALP. The submission has duly inserted as below: 6. The Ld. A.R further proceed that the issue was already considered by the DRP and the assessee is using TNMM as MAM so cash credit/operating revenue as margin of the assessee there on was 3.45%. Whereas including depreciation the margin comes to 16.92%. The Ld. A.R further proceeded that the company is newly set up and all the fixed assets are yielding huge depreciation. Considering excluding depreciation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , US transfer pricing regulations and ICAI guidance note in this regard. The assessee also relied upon various decisions including that of Hon'ble Delhi ITAT in SchefenackerfMotherson Limited (123 TTJ 509) wherein it was held that the transfer pricing regulations do not provide for mandatory deduction of depreciation and that depreciation could be disregarded to compute the operating margin of the tax payer and the comparables. 4.2 The submissions have been perused along with the materials on record. The Panel finds that this issue has been elaborately discussed by the Hon'ble ITAT, Delhi order dated Sumi Motherson Innovative Engineering Ltd vs DCIT in ITA No. 1816/Del/2011 dated 11.2.2014 in which the'decision of SchefenackerMotherso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble High Court confirmed the application of the cash profit margin for the purpose of computation of net profit indicator (PLI) under the TNMM. Keeping in view the aforesaid judicial precedents, we approve the use of cash profit margin by the assessee for placing the tested party and the comparable companies on equal footing. The assessee has demonstrated that the cash profit margin of the assessee was 8% (approximately), whereas the arithmetic mean of the cash . profit margins of the aforesaid nine comparable companies stands at 12,41%. It is noted that the net profit margin of the tested party was (-)6.70%, whereas the cash profit margin of the tested party stood 8% thereby indicating that the loss was caused by a considerable incre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and direct to dispose the rectification petition filed U/s 154. The TPO/AO is directed to allow the fresh search in relation to comparable of the assessee. The assessee prayed to remove the depreciation during the calculation of profit margin and requested for cash PLI in TNMM. In cash PLI the average of comparable 10.44% which is similar for assessee. The assessee stated that considering depreciation as a part of the total cost would not be appropriate for the purpose of benchmarking since the depreciation in the year under consideration was 16.92% of its revenue, vis-a-vis depreciation of 4.85% of seven comparable companies as taken by the TPO which in most cases as average depreciation as a percentage of revenue. The assessee has relie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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