9911796707
TMI Blog2024 (9) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... the rejection of comparability analysis conducted by the TPO as affirmed by the DRP and followed by AO. Ground No. 11 is with respect to the adjustment of working capital denied by TPO affirmed by DRP and followed by AO. Ground No. 12 is with respect to the disallowance of foreign exchange fluctuation and ground Nos. 13 & 14 is with respect to the payments made to headquarters in lieu of services obtained by applying TNMM method by the assessee. Ground Nos. 15 & 16 are related to the addition of provision for warranty. 2. Facts leading to the filing of the present appeal are as under: - 2.1 The assessee company M/s. GE Intelligent Platforms Pvt.Ltd, is in the business of Manufacturer of Programmable logic controllers, automation software and related automation products. The assessee company filed its return of income for the Assessment Year 2014-15 electronically on 29.11.2014 declaring total current year loss of Rs.52219307 under the normal provisions of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') and Negative book profit of Rs.62245783 under the MAT provision u/s. 115JB. The return was processed u/s. 143(1) of the Income Tax Act, 1961. 3. A notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93,591 3 HQ Charges 1,30,25,887 Total adjustment u/s. 92CA 18,24,02,900 7. In view of the above factual background, the assessee assailed the order of DRP / AO mainly on three segments a. Manufacturing of automation product b. Distribution of automation product c. Provisions of marketing support services. 8. In manufacturing automation segment, the main grievance of the assessee is with respect to the rejection of adjustment in support of custom duty paid by the assessee on the import of spare parts from its associated enterprises (AE). The relevant findings of the TPO with respect to the adjustment of custom duty are as under:- "7.11.6 Customs Duty Adjustment: In the assessee's case, operating cost of the tested party has been adjusted instead of that of comparable companies. This is in contradiction of the fundamental principles of making any adjustment under the transfer pricing analysis. Further the tax payer company has imported goods after payment of customs duty at a higher price than domestic goods, this decision has been taken by it consciously considering all the commercial considerations including the obvious benefits of better quality which is bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for the production of finished goods. Majority of the raw material purchases is by way of import and only a certain consumables are procured locally. Hence GEIP incurs significant cost by way of customs duty. Whereas, in case of comparable companies, raw material purchases by way of import is much lower as compared to GEIP which pushes down their cost of production. Hence, a necessary adjustment has been undertaken to give effect to the excess customs duty incurred by GEIP. Accordingly, excess customs duty incurred amounting to INR 59,29,919 relative to comparable companies, has been excluded in computing the operating margins. The Assessee further submits that the ratio of imports to purchases of the Company in FY 2013- 14 is at 66.72 percent of the purchase. However, on review of the imports of the comparable companies it is seen that the average imports to purchases ratio is only 26.61 percent. Particulars Amount (INR) Total purchases of GEIP 54,38,78,670 Total imports of GEIP 36,28,70,345 Imports as % of total purchases for GEIP 66,72% Imports as % of total purchases for Comparables 26.61% Total Custom duty paid by GEIP (Manufacturing segment) 98,63,570 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustments for functional differences. In this regard, Assessee would like to additionally rely on the principal emerging from the following rulings adjudicated by various Tribunals on the allowance of adjustments on additional import cost: The Assessee wishes to place reliance on the Pune Tribunal judgment in the Case of Demag Cranes & Components (India) Pvt. Limited vs DCIT (ITA no 120/PN/2011) wherein the matter was set aside to the files of the TPO to examine the claim of the Assessee relating to the import cost factor in view of the guidelines put forth by decision of the Pune Tribunal in the case of Skoda Auto India Private Limited. The Assessee wishes to place reliance on the Panaji Tribunal judgment in the case of Putzmeister Concrete Machines Pvt Limited vs DCIT (ITA No. 107/PNJ/2012) wherein the matter was set aside to the files of the TPO to examine the claim of the Assessee relating to the import cost factor in view of the guidelines put forth by decision of the Pune Tribunal in the case of Skoda Auto India Private Limited and eliminate the differences, if any. Based on the above the Assessee humbly wish to submit and request the Hon'ble Panel to allow adjus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, but the same were on different facts altogether. 14. Similarly, the contention of the assessee viz a viz adjustment of base cost in manufacturing segment is also rejected by the TPO affirmed by DRP and followed by AO. With respect to this adjustment also, the assessee has candidly accepted that no such adjustment has been allowed to the assessee in previous years by the assessing authorities or by the appellate authorities and the assessee himself has stopped claiming this adjustment from A.Y. 2016-17 onwards in its TP documentation. Therefore, we do not find any infirmity in the order of DRP / AO hence, this contention of the assessee is also de void of any merits. 15. One more fresh adjustment has been sought by the assessee by way of additional ground in relation to the grant of proportionate adjustment. The bone of contention of the assessee with respect to this adjustment is that the TPO has allowed this adjustment in A.Y. 2013-14 and hence the same may kindly be provided in this year also. The ld. AR has filed the copy of TPO's order for A.Y. 2013-14 along with its synopsis marked as Annexure 2. We observed that from the order of TPO for A.Y. 2013-14 adjusted margin h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue would also require fresh consideration at the end of TPO and in case the facts of the impugned year are akin to the facts of the A.Y. 2013-14 then applying the consistency principle, the TPO will decide the matter. During the course of hearing, the Bench has also raised a query as to whether the assessee has incurred expenses on advertising and packing of the material purchased for trading purposes. In response to the query of Bench, the assessee submitted that the appellant has incurred sales promotion and advertisement cost under the head 'other expenses' however, the value of these expenses is minimal amounting to Rs. 2,67,396/- only. We direct the TPO to give benefit of this fact to the assessee. 19. Therefore, ground no. 7 of the appellant is allowed for statistical purposes. 20. So far as the ground nos. 8 & 9 are concerned, the ld. AR has reiterated the synopsis filed before the Bench and the ld. DR relied upon the orders of the authorities below. 21. After considering the rival submissions, we are of the view that these grounds are related to trading and distribution segment. Since, we have already set aside the AMP expenses issue and the issue of applying the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal of the comparables with that to tested party. Then suitable adjustment is required to be made. However, since the assessee failed to provide any analytical approach before the lower authorities assessee could not get any relief. Before us the counsel of assessee strongly contended that assessee can prove with TP documentation and other material that there was huge difference in the working capital of the comparables and tested party. Therefore, in the interest of justice we remit this issue to the file of TPO for examining a fresh. We also direct assessee to provide all the necessary details / material in support of his contention. 27. In the result, the Ground No. 11 is allowed for statistical purposes. 28. Ground No 12 is specific ground for foreign exchange fluctuation loss. However, this ground has not been pressed by the assessee hence the same is liable to be dismissed as not pressed. 29. Ground Nos. 13 & 14 are with respect to the payments made to the headquarters in lieu of services received from the AE. In respect of this ground, the ld. counsel for the assessee has argued that the assessee has received following services from its AE, which are as under:- o Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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