Essentra (India) Pvt Ltd, Bangalore V. Income Tax Officer, Ward-2(1)(4), Bangalore

ITA 1610/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1012 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 27-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T SURYANARAYANA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Set aside
• Section: 92C; 133(6); 10B; 201; 13; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V VASUDEVAN, VICE PRESIDNET AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER IT(TP)A NO.1610/BANG/2017 ASSESSMENT YEAR : 2013-14 M/S ESSENTRA (INDIA) PVT. LTD., NO.3 (OLD PLOT NOS.18 AND 23) 3 RD MAIN ROAD, PEENYA INDUSTRIAL AREA, PHASE-1, YESHWANTHPUR HOBLI, BENGALURU-560 058. PAN - VS. THE INCOME-TAX OFFICER, WARD-2(1)(4), BENGALURU. APPELLANT RESPONDENT ASSESSEE BY : SHRI T SURYANARAYANA, ADVOCATE REVENUE BY : SHRI PRADEEP KUMAR, CIT (DR) DATE OF HEARING : 04.06.2020 DATE OF PRONOUNCEMENT : 05.06.2020 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER THE APPEAL HAS FILED THIS APPEAL CHALLENGING THE A SST. ORDER DATED 24/5/2017 PASSED BY THE AO FOR ASST. YEAR 201 3-14 U/S 143 R.W.S 144C(13) OF THE ACT IN PURSUANCE OF DIRECTION S GIVEN BY LD DISPUTE RESOLUTION PANEL (DRP). 2. THOUGH THE ASSESSEE HAS RAISED MANY GROUNDS, THE LD AR RESTRICTED HIS ARGUMENTS WITH REGARD TO NON-GRANTIN G OF CAPACITY UNDER UTILIZATION ADJUSTMENT WHILE DETERMINING ARM S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. IT(TP)A NO.1610/BANG/2017 PAGE 2 OF 17 3. THE LD AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SELF ADHESIVE T EAR TAPES. IT IS SUCCESSOR OF M/S PAYNE (INDIA) PVT. LTD AND IS A WH OLLY OWNED SUBSIDIARY OF M/S CIGARATEE COMPONENTS LTD., UK. TH E ULTIMATE HOLDING COMPANY OF THE GROUP IS M/S FILTRONA PIC., UK 4. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD ENTERED INTO FOLLOWING TRANSACTIONS. THE ASSESSEE SELECTED TNMM METHOD AS MOST APPROPRIA TE METHOD FOR BENCHMARKING THE TRANSACTIONS. THE SAME WAS AC CEPTED IN RESPECT OF ALL ITEMS EXCEPT PAYMENT FOR MANAGEMENT SUPPORT SERVICES. THE OPERATING PROFIT TO TOTAL COST WAS T AKEN AS PROFIT LEVEL INDICATOR (PLI). 5. THE LD AR SUBMITTED THAT THE ONLY DISPUTE BETW EEN THE ASSESSEE AND THE AO/TPO PERTAINS TO UNDER-CAPACITY UTILIZAT ION ADJUSTMENT CLAIMED BY THE ASSESSEE IN ITS PROFIT. HE SUBMITTE D THAT ASSESSEE HAS OPERATED DURING THE YEAR UNDER CONSIDERATION AT A LEVEL OF 28.95% INSTALLED CAPACITY ONLY AND HENCE UN-UTILIZE D CAPACITY WAS 71.05%. ACCORDINGLY, WHILE DETERMINING ITS PLI, TH E ASSESSEE IT(TP)A NO.1610/BANG/2017 PAGE 3 OF 17 DEDUCTED A SUM OF RS.2.48 CRORES AS ADJUSTMENT TOW ARDS COST OF UNUTILIZED CAPACITY. THE ASSESSEE SUBSTANTIATED I TS CLAIM BY STATING THAT IT HAD TO INCUR HUGE FIXED EXPENSES I RRESPECTIVE OF THE CAPACITY UTILIZATION, WHICH WILL BADLY AFFECT ITS P ROFITABILITY IN THE EVENT OF UNDER UTILIZATION OF THE CAPACITY. HENCE T HE ASSESSEE HAS ALLOCATED A SUM OF RS.2.48 CORES OUT OF FIXED EXPEN SES TOWARDS UN- UTILIZED CAPACITY AND CLAIMED THE SAME AS DEDUCTIO N AS ADJUSTMENT TOWARDS UNDER-UTILIZED CAPACITY. IT I S PERTINENT TO NOTE THAT THE ASSESSEE HAS PRESUMED THAT THE COMPAR ABLE COMPANIES HAVE OPERATED AT 100% CAPACITY AND ACCORD INGLY IT HAS COMPUTED THE AMOUNT OF ADJUSTMENT TOWARDS UNUTILIZE D CAPACITY. THE LD A.R FAIRLY ADMITTED THAT THE ASSESSEE DID NO T HAVE DETAILS OF ACTUAL CAPACITY UTILIZATION OF COMPARABLE COMPANIES , SINCE THE SAME IS NOT AVAILABLE IN PUBLIC DOMAIN. 6. THE LD AR FURTHER SUBMITTED THAT THOUGH THE ADJU STMENT IS REQUIRED TO BE MADE IN THE HANDS OF COMPARABLE COMP ANIES IN THE NORMAL CIRCUMSTANCES, YET THE BANGALORE BENCH OF TR IBUNAL, IN THE CASE OF IKA (INDIA) PVT. LTD. VS. DCIT (2018) 98 TA XMANN.COM 312, HAS TAKEN THE VIEW THAT THE CAPACITY UTILIZATION AD JUSTMENT COULD BE MADE IN THE HANDS OF TESTED PARTY ALSO. 7. THE LD AR SUBMITTED THAT THE DETAILS RELATING TO CAPACITY UTILIZATION OF COMPARABLE COMPANIES ARE NOT AVAILAB LE IN PUBLIC DOMAIN AND HENCE THE ASSESSEE WAS CONSTRAINED TO CO MPUTE THE ADJUSTMENT TOWARDS UNDER-UTILIZATION OF CAPACITY BY PRESUMING THAT THE COMPARABLE COMPANIES ARE OPERATING AT 100% CAPA CITY LEVEL. THE LD AR SUBMITTED THAT THE TPO IS EMPOWERED TO CO LLECT THE IT(TP)A NO.1610/BANG/2017 PAGE 4 OF 17 DETAILS OF CAPACITY UTILISATION FROM THE COMPARABLE COMPANIES BY ISSUING NOTICES U/S 133(6) OF THE ACT TO THEM. THE LD AR ACCORDINGLY SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FI LE OF THE TPO TO COLLECT THE DETAILS OF CAPACITY UTILIZATION OF COMP ARABLE COMPANIES SO THAT THE CAPACITY UNDER-UTILIZATION ADJUSTMENT C AN SUITABLY BE MODIFIED, IF THE SAME IS NOT 100% IN THE CASE OF CO MPARABLE COMPANIES AS PRESUMED BY THE ASSESSEE. HE SUBMITTE D THAT, IN THE CASE OF IKA (INDIA) PVT. LTD (SUPRA), THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF TPO WITH SIMILAR DIRECTIONS. 8. WE HEARD LD DR AND PERUSED THE RECORD. THE ONLY ISSUE URGED BY THE ASSESSEE RELATES TO NON-GRANTING OF C APACITY UNDER- UTILIZATION ADJUSTMENT TO THE ASSESSEE WHILE COMPU TING PLI. THE ASSESSEE ALSO SOUGHT TO AVAIL THE ABOVE SAID ADJUST MENT TO ITS PLI INSTEAD OF THE PLI OF COMPARABLE COMPANIES. WE NOTI CE THAT AN IDENTICAL ISSUE HAS BEEN EXAMINED BY THE COORDINATE BENCH IN THE CASE OF IKA INDIA PVT. LTD., (SUPRA). FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW RELEVANT OBSERVATIONS MADE IN THE ABO VE CSE BY COORDINATE BENCH. GROUND NO.7: THE LEARNED CIT(A) HAS ERRED, IN LAW A ND IN FACTS, BY UPHOLDING THE ACTION OF THE AO/TPO IN REJ ECTING CAPACITY ADJUSTMENT TO ACCOUNT FOR DIFFERENCES IN C APACITY UTILIZATION OF THE APPELLANT VIS--VIS THE COMPARAB LE COMPANIES. 21. THE ASSESSEE IN ITS TP DOCUMENTATION AS WELL AS BEFORE THE TPO AND THE CIT(A), HIGHLIGHTED THE FACT THAT T HERE ARE SIGNIFICANT DIFFERENCES IN THE CAPACITY UTILIZATION BETWEEN IT(TP)A NO.1610/BANG/2017 PAGE 5 OF 17 THE ASSESSEE VIS--VIS THE COMPARABLES. IT WAS ALSO BROUGHT TO THE NOTICE OF THE TPO AND THE CIT(A) THAT THE AS SESSEE WAS INCORPORATED IN FY 2008-09 AND FY 2011-12 (I.E. , FY RELEVANT TO THE IMPUGNED AY) WAS JUST THE THIRD YEA R OF COMMERCIAL OPERATION OF THE ASSESSEE DURING WHICH T HE INSTALLED CAPACITY WAS UNDER-UTLIZED TO A SIGNIFICA NT EXTENT. THE ASSESSEE PLEADED BEFORE THE TPO AND CIT(A) TO P ROVIDE AN ADJUSTMENT FOR IDLE CAPACITY. HOWEVER, THE TPO/C IT(A) DID NOT ALLOW ANY ADJUSTMENT TO ACCOUNT FOR THE DIF FERENCES IN THE CAPACITY UTILIZATION BY THE ASSESSEE VIS--V IS THE COMPARABLES WHILE COMPUTING PROFIT MARGIN OF ASSESS EE AS WELL AS THE COMPARABLE COMPANIES. 22. WE HAVE HEARD THE SUBMISSIONS OF THE ASSESSEE A ND THE ID. DR ON THE ISSUE RAISED BY THE ASSESSEE IN GROUN D NO. 7. WE SHALL FIRST SEE THE STATUTORY PROVISIONS RELEVAN T TO THE ISSUE. RULE IOB(L)(E) OF THE RULES STATES THAT ADJU STMENTS SHOULD BE MADE TO ACCOUNT FOR: '...THE DIFFERENCES, IF ANY, BETWEEN THE INTERNATIO NAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANS ACTIONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF NET PRO FIT MARGIN IN THE OPEN MARKET' 23. RULE 10B(2) OF THE RULES PROVIDES COMPARABILITY OF AN INTERNATIONAL TRANSACTION WITH AN UNCONTROLLED TRAN SACTION NEEDS TO BE JUDGED WITH REFERENCE TO CERTAIN SPECIF IED FACTORS. ONE SUCH FACTOR IS CONDITIONS PREVAILING I N THE MARKETS IN WHICH THE RESPECTIVE PARTIES TO THE TRAN SACTIONS OPERATE, INCLUDING THE GEOGRAPHICAL LOCATION AND SI ZE OF THE IT(TP)A NO.1610/BANG/2017 PAGE 6 OF 17 MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORCE, C OSTS OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER TH E MARKETS ARE WHOLESALE OR RETAIL. 24. RULE 10B(3) OF THE RULES PROVIDE THAT: 'AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONAL TRANSACTION IF (I) NONE OF THE DIFFE RENCES, IF ANY, BETWEEN THE TRANSACTIONS BEING COMPARED, OR BE TWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT THE PRICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM, SUCH TRANSACTIONS IN THE OPEN MARKET, OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. ' 25. AS PER SECTION 92C OF THE ACT, ALP IS REQUIRED TO BE COMPUTED USING ANY OF THE GIVEN SIX METHODS AND IN THE MANNER AS IS PRESCRIBED IN RULE 10B OF THE RULES. R ULE 10B IN TURN STATES THAT THE MOST APPROPRIATE METHOD WOU LD BE ONE WHICH INTER ALIA PROVIDES THE MOST RELIABLE MEA SURE OF ALP, AND ONE OF THE IMPORTANT FACTORS TO BE TAKEN I NTO ACCOUNT HEREIN IS THE ABILITY TO MAKE RELIABLE AND ACCURATE ADJ USTMENTS. 26. THE OECD GUIDELINES ON THIS ASPECT IS AS FOLLOW S: PARA 1.35 OF THE OECD GUIDELINES STATES AS FOLLOWS: 'WHERE THERE ARE DIFFERENCES BETWEEN THE SITUATIONS BEING COMPARED THAT COULD MATERIALLY AFFECT THE COMPARISO N, COMPARABILITY ADJUSTMENTS MUST BE MADE, WHERE POSSI BLE, TO IMPROVE THE RELIABILITY OF THE COMPARISON. THERE FORE, IN NO IT(TP)A NO.1610/BANG/2017 PAGE 7 OF 17 EVENT CAN UNADJUSTED INDUSTRY AVERAGE RETURNS THEMS ELVES ESTABLISH ARM'S LENGTH CONDITIONS' PARA 1.36 OF THE OECD GUIDELINES STATES AS FOLLOWS: .MATERIAL DIFFERENCES BETWEEN THE COMPARED TRANSACTIONS OR ENTERPRISES SHOULD BE TAKEN INTO AC COUNT. IN ORDER TO ESTABLISH THE DEGREE OF ACTUAL COMPARABILI TY AND THEN TO MAKE APPROPRIATE ADJUSTMENTS TO ESTABLISH A RM'S LENGTH CONDITIONS (OR A RANGE THEREOF), IT IS NECES SARY TO COMPARE ATTRIBUTES OF THE TRANSACTIONS OR ENTERPRIS ES THAT WOULD AFFECT CONDITIONS IN ARM'S LENGTH DEALINGS. A TTRIBUTES THAT MAY BE IMPORTANT INCLUDE THE CHARACTERISTICS O F THE PROPERTY OR SERVICES TRANSFERRED, THE FUNCTIONS PER FORMED BY THE PARTIES (TAKING INTO ACCOUNT ASSETS USED AND RI SKS ASSUMED), THE CONTRACTUAL TERMS, THE ECONOMIC CIRCUMSTANCES OF THE PARTIES, AND THE BUSINESS STRA TEGIES PURSUED BY THE PARTIES.' FURTHER. PARA 2.74 OF THE OECD GUIDELINES WHILE LAY ING DOWN THE COMPARABILITY CRITERIA TO BE ADOPTED WHILE APPLYING THE TRANSACTION NET MARGIN METHOD STATES A S FOLLOWS: ..THUS WHERE THE DIFFERENCES IN THE CHARACTERIST ICS OF THE ENTERPRISES BEING COMPARED HAVE A MATERIAL EFFE CT ON THE NET MARGINS BEING USED, IT WOULD NOT BE APPROPR IATE TO APPLY THE TRANSACTIONAL NET MARGIN METHOD WITHOUT M AKING ADJUSTMENTS FOR SUCH DIFFERENCES. THE EXTENT AND RE LIABILITY OF THOSE ADJUSTMENTS WILL AFFECT THE RELATIVE RELIA BILITY OF THE ANALYSIS UNDER THE TRANSACTIONAL NET MARGIN METHOD' (EMPHASIS SUPPLIED) IT(TP)A NO.1610/BANG/2017 PAGE 8 OF 17 27. US TRANSFER PRICING REGULATIONS ON THIS ASPECT IS AS FOLLOWS: IN ADDITION, THE US TRANSFER PRICING REGULATIONS, U /S. 482 OF THE INTERNAL REVENUE CODE (HEREINAFTER REFERRED TO AS 'THE US REGULATIONS') ALSO SUPPORT THE ABOVE. REGULATION 1.482-1 (D)(2) OF THE US REGULATION STATES AS FOLLOWS: 'IN ORDER TO BE CONSIDERED COMPARABLE TO A CONTROLL ED TRANSACTION, AN UNCONTROLLED TRANSACTION NEED NOT B E IDENTICAL TO THE CONTROLLED TRANSACTION, BUT MUST B E SUFFICIENTLY SIMILAR THAT IT PROVIDES A RELIABLE ME ASURE OF AN ARM'S LENGTH RESULT. IF THERE ARE MATERIAL DIFFEREN CES BETWEEN THE CONTROLLED AND UNCONTROLLED TRANSACTION S, ADJUSTMENTS MUST BE MADE IF THE EFFECT OF SUCH DIFF ERENCES ON PRICES OR PROFITS CAN BE ASCERTAINED WITH SUFFIC IENT ACCURACY TO IMPROVE THE RELIABILITY OF THE RESULTS. FOR PURPOSES OF THIS SECTION, A MATERIAL DIFFERENCE IS ONE THAT WOULD MATERIALLY AFFECT THE MEASURE OF AN ARM'S LEN GTH RESULT UNDER THE METHOD BEING APPLIED.' 28. THE INDIAN TRANSFER PRICING REGULATIONS, OECD GUIDELINES AND THE US TRANSFER PRICING REGULATIONS CALL FOR AN ADJUSTMENT TO BE MADE IN CASE OF MATERIAL DIFFER ENCES IN THE TRANSACTIONS OR THE ENTERPRISES BEING COMPARED SO AS TO ARRIVE AT A MORE RELIABLE ARM'S LENGTH PRICE! MARGI N. WHILE THE INDIAN TRANSFER PRICING REGULATIONS REFER TO TH E ADJUSTMENTS ON UNCONTROLLED TRANSACTIONS, HOWEVER T HE SAME HAS TO BE READ WITH RULE 10B(3) OF THE RULES W HICH CLEARLY EMPHASIZES THE NECESSITY AND COMPULSION OF UNDERTAKING ADJUSTMENTS. HENCE IN CASE APPROPRIATE IT(TP)A NO.1610/BANG/2017 PAGE 9 OF 17 ADJUSTMENTS CANNOT BE MADE TO THE UNCONTROLLED TRANSACTION, DUE TO LACK OF DATA, THEN IN ORDER TO READ THE PROVISIONS OF TRANSFER PRICING REGULATIONS IN HARMO NY, THE ADJUSTMENTS SHOULD BE MADE ON THE TESTED PARTY. IN THE FOLLOWING DECISIONS IT HAS BEEN HELD THAT ADJUSTMEN T TO THE PROFIT MARGINS HAVE TO BE MADE ON ACCOUNT OF UNDERUTILIZATION OF CAPACITY: (I) IN THE CASE OF MANDO INDIA STEERING SYSTEMS (P. ) LTD. V. ASSTT. CIT [20141 45 TAXMANN.COM 160/149 LTD 284 (CHENNAI TRIB) THE TRIBUNAL UPHELD THE CONTENTION O F THE TAXPAYER FOR MAKING A SUITABLE ADJUSTMENT ON ACCOUN T OF IDLE CAPACITY FOR THE PURPOSE OF MARGIN COMPUTATION . THE RELEVANT EXTRACT IS REPRODUCED AS BELOW: '10. .......... WE ARE OF THE CONSIDERED VIEW THAT UNDER- UTILIZATION OF PRODUCTION CAPACITY IN THE INITIAL Y EARS IS A VITAL FACTOR WHICH HAS BEEN IGNORED BY THE AUTHORIT IES BELOW WHILE DETERMINING THE ALP COST. THE TPO SHOULD HAVE MADE ALLOWANCE FOR THE HIGHER OVERHEAD EXPENDITURE DURIN G THE INITIAL PERIOD OF PRODUCTION.' (II) IN THE RULING OF DY. CIT V. PANASONIC AVC NETW ORKS INDIA CO. LTD. F01414 TAXMANN.COM 420/63 SOT 121 (U RO) (DELHI - TRIB.) IT WAS HELD THAT:- '5......CAPACITY UNDERUTILIZATION BY ENTERPRISES IS CERTAINLY AN IMPORTANT FACTOR AFFECTING NET PROFIT MARGIN IN THE OPEN MARKET BECAUSE LOWER CAPACITY UTILIZATION RESULTS I N HIGHER PER UNIT COSTS, WHICH, IN TURN, RESULTS IN LOWER PR OFITS. OF COURSE, THE FUNDAMENTAL ISSUE, SO FAR AS ACCEPTABIL ITY OF IT(TP)A NO.1610/BANG/2017 PAGE 10 OF 17 SUCH ADJUSTMENTS IS CONCERTED, IS REASONABLE ACCURA CY EMBEDDED IN THE MECHANISM FOR SUCH ADJUSTMENTS, AND AS LONG AS SUCH AN ADJUSTMENT MECHANISM CAN BE FOUND, NO OBJECTION CAN BE TAKEN TO THE ADJUSTMENT.' (III) IN THE CASE OF BIESSE MFG. CO. LTD. V. ASSTT. CIT 120161 69 TAXMANN.COM 428 (BANG. TRIB.) THE TRIBUNA L HELD AS FOLLOWS: '10.4.1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED AND CAREFULLY CONSIDERED THE SUBMISSIONS MADE AND MATERIAL ON RECORD; INCLUDING THE JUDICIAL PRONOUNC EMENTS CITED. THE ISSUE FOR CONSIDERATION IS WHETHER ADJUS TMENT FOR UNDER-UTILISATION OF CAPACITY IS ALLOWABLE IN THE C ASE ON HAND AND IF SO, THE MANNER OF COMPUTATION THEREOF A ND THE QUANTUM OF ADJUSTMENT ** ** 10.4.5 IN THE ABOVE CITED CASE OF THE MUMBAI TRIBUN AL I.E. PETRO ARALDITE P. LTD. (SUPRA), THE TRIBUNAL HAS UP HELD THE PRINCIPLE THAT ADJUSTMENT FOR CAPACITY UNDERUTILISA TION CAN BE GRANTED ..............FOLLOWING THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF PETRO ARALDITE P. LTD. (SUPRA ), WE HOLD THAT ANY ADJUSTMENT FOR CAPACITY UNDERUTILISATION C AN BE GRANTED (IV) IN THE RECENT CASE OF GE INTELLIGENT PLATFORM (P.) LTD. (IT(TP)A NO. 148FBANG/2015 AND 164/BANGI2015) FOR A Y. 2010-11 WAS HELD AS FOLLOWS: '8 ..........NOW THE LAW IS QUITE SETTLED TO THE EX TENT THAT ONCE THERE IS UNUTILIZED CAPACITY OR MEN POWER, SUCH UNDERUTILIZATION IMPACTS MARGIN AND THEREFORE, THE ADJUSTMENT SHOULD BE MADE WHILE COMPUTING THE ALP IT(TP)A NO.1610/BANG/2017 PAGE 11 OF 17 .........IF THE UNDERUTILIZATION IS MORE THAN AVERA GE UNDERUTILIZATION OF THE INDUSTRY THEN NECESSARY ADJ USTMENT IS REQUIRED TO BE MADE TO THE MARGIN OF COMPUTING A LP' 29. MOREOVER, THE ABOVE ARGUMENT OF THE ASSESSEE FO R GRANT OF CAPACITY UTILIZATION ADJUSTMENT IS ALSO SUPPORTE D BY THE FOLLOWING DECISION OF BANGALORE ITAT IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) (P.) LTD. V. DY. CIT[20 12120 TAXMANN.COM 7.15/53 SOT 159. RELEVANT EXTRACT OF TH E DECISION IS UNDER: '15.2 WE AGREE WITH THIS CONTENTION OF THE COUNSEL FOR THE ASSESSEE. ALL THE COMPARABLES HAVE TO BE COMPARED O N SIMILAR STANDARDS AND THE ASSESSEE CANNOT BE PUT IN A DISADVANTAGEOUS POSITION, WHEN IN THE CASE OF OTHER COMPANIES ADJUSTMENTS FOR UNDER UTILIZATION OF MANP OWER IS GIVEN. THE ASSESSEE SHOULD ALSO BE GIVEN ADJUSTMENT FOR UNDER UTILIZATION OF ITS INFRASTRUCTURE. THE AO SHA LL CONSIDER THIS FACT ALSO WHILE DETERMINING THE ALP AND MAKE T HE TP ADJUSTMENTS. WITH THESE DIRECTIONS, THE APPEAL OF T HE ASSESSEE IS DISPOSED OF.' 30. THE RELIABILITY AND ACCURACY OF ADJUSTMENTS WOU LD LARGELY DEPEND ON AVAILABILITY OF RELIABLE AND ACCU RATE DATA. FOR CERTAIN TYPES OF ADJUSTMENTS, RELEVANT DATA FOR COMPARABLES MAY EITHER NOT BE AVAILABLE IN PUBLIC D OMAIN OR MAY NOT BE RELIABLY DETERMINABLE BASED ON INFORM ATION AVAILABLE IN PUBLIC DOMAIN, WHEREAS, IT MAY BE POSS IBLE TO MAKE EQUALLY RELIABLE AND ACCURATE ADJUSTMENTS ON T HE TESTED PARTY (WHOSE DATA WOULD GENERALLY BE EASILY ACCESSIBLE). IT(TP)A NO.1610/BANG/2017 PAGE 12 OF 17 31. IN SUCH A SCENARIO, ONE HAS TO RESORT TO THE PR OVISIONS OF RULE IOB(3)(II) WHICH PROVIDES FOR MAKING 'REASONAB LY ACCURATE ADJUSTMENTS' FOR ELIMINATING ANY MATERIAL DIFFERENCES BETWEEN THE TWO TRANSACTIONS BEING COMP ARED. THE PURPOSE OR INTENT OF THE COMPARABILITY ANALYSIS IS TO EXAMINE AS TO WHETHER OR NOT, THE VALUES STATED FOR THE INTERNATIONAL TRANSACTIONS ARE AT ALP I.E., WHETHER THE PRICE CHARGES IS COMPARABLE TO THE PRICE CHARGES UNDER AN UNCONTROLLED TRANSACTION OF SIMILAR NATURE. THE REG ULATIONS DON'T RESTRICT OR PROVIDE THAT THE ADJUSTMENTS CANN OT HE MADE ON THE RESULTS OF THE TESTED PARTY. THEREFORE, KEEPING IN MIND THE AFORESAID OBJECTIVE, THE NET PROFIT MAR GIN OF THE TESTED PARTY DRAWN FROM ITS FINANCIAL ACCOUNTS CAN BE SUITABLY ADJUSTED TO FACILITATE ITS COMPARISON WITH OTHER UNCONTROLLED ENTITIES/TRANSACTIONS AS PER SUB-CLAUS E (I) OF RULE 10B(1)(E) OF THE RULES ITSELF. THE ABSENCE OF SPECIFIC PROVISION IN RULE 10B(1)(E)(III) OF THE RULES DOES NOT IMPEDE THE ADJUSTMENT OF THE PROFIT MARGIN OF TESTED PARTY . THE ABOVE VIEW HAS ALSO BEEN UPHELD IN THE FOLLOWING DECISIONS:- CAPGEMINI INDIA PVT. LTD. V. ASSTT. CIT [20131 33 TAXMANN.COM 5/120141 147 LTD 330 (MUM. - TUB.) DEMAG CRANES & COMPONENTS (INDIA) (P.) LTD. V. DY. CIT [201 21 17 TAXMANN.COM 190/49 SOT 610 (RUNE) 32. AS FAR AS DATA OF COMPARABLE COMPANIES ON CAPAC ITY UTILIZATION BEING NOT AVAILABLE IN PUBLIC DOMAIN IS CONCERNED, IT IS PRACTICALLY NOT POSSIBLE TO OBTAIN DATA ON CAPACITY UTILIZATION OF COMPARABLE COMPANIES AND IT(TP)A NO.1610/BANG/2017 PAGE 13 OF 17 CONSEQUENTLY COMPUTE ADJUSTMENT ON THE COMPARABLE COMPANIES, THE OPERATING COST OF THE TESTED PARTY I S ADJUSTED FOR CAPACITY UTILIZATION ADJUSTMENT. 33. THE ASSESSEE HAS UNDER-UTILIZED CAPACITY DURING THE SUBJECT AY AND IS ACCORDINGLY FACTUALLY AND LEGALLY ELIGIBLE TO AN ADJUSTMENT FOR THE SAME. THEREFORE, SUCH A BE NEFIT CANNOT BE DENIED TO THE ASSESSEE ONLY FOR THE REASO N THAT THE DATA ABOUT COMPARABLE COMPANIES IS NOT AVAILABL E. REQUIRING THE ASSESSEE TO PRODUCE SUCH A DATA WHICH IS NOT AVAILABLE IN PUBLIC DOMAIN WOULD TANTAMOUNT TO REQU IRING THE APPELLANT TO PERFORM AN IMPOSSIBLE TASK. THE ON LY WAY TO GET THE DATA IN THE CURRENT CASE, WOULD BE WHERE THE TPO COLLATES THE SAME FROM THE COMPARABLE COMPANIES BY EXERCISING HIS POWERS UNDER SECTION 133(6) OF THE A CT. THE RELEVANT EXTRACTS OF THE SECTION ARE AS UNDER: '(6) REQUIRE ANY PERSON, INCLUDING A BANKING COMPAN Y OR ANY OFFICER THEREOF, TO FURNISH INFORMATION IN RELA TION TO SUCH POINTS OR MATTERS, OR TO FURNISH STATEMENTS OF ACCO UNTS AND AFFAIRS VERIFIED IN THE MANNER SPECIFIED BY THE ASS ESSING OFFICER, THE DEPUTY COMMISSIONER (APPEALS), THE JOI NT COMMISSIONER OR THE COMMISSIONER (APPEALS), GIVING INFORMATION IN RELATION TO SUCH POINTS OR MATTERS A S, IN THE OPINION OF THE ASSESSING OFFICER, THE DEPUTY COMMIS SIONER (APPEALS), THE JOINT COMMISSIONER OR THE COMMISSION ER (APPEALS), WILL BE USEFUL FOR, OR RELEVANT TO, ANY ENQUIRY OR PROCEEDING UNDER THIS ACT :' 34. IN THIS REGARD, WE FIND THAT THE MURNBAI ITAT I N CASE OF M/S JT. CIT V. KIARA JEWELLEIY P. LTD. 120141 45 IT(TP)A NO.1610/BANG/2017 PAGE 14 OF 17 TAXMANN.COM 548/120151 152 LTD 891 (MUM. TRIB.) HAS DIRECTED THE TO OBTAIN THE EXACT DETAILS OF CAPACIT Y UTILIZATION OF COMPARABLE COMPANIES, IF NOT AVAILABLE IN PUBLIC DOMAIN. THE RELEVANT EXTRACT OF THE AFORESAID DECISION IS A S UNDER: '11. KEEPING IN VIEW THE DECISION OF THE TRIBUNAL I N THE CASE OF PETRO ARALDITE (P) LTD (SUPRA) LAYING DOWN THE G UIDELINES ON THE ISSUE OF CAPACITY UTILIZATION, WE CONSIDER I T APPROPRIATE TO RESTORE THIS ISSUE RELATING TO ADJUS TMENT ON ACCOUNT OF CAPACITY UTILIZATION IN THE CASE OF ASSE SSEE COMPANY TO THE FILE OF AO/TPO FOR DECIDING THE SAME AFRESH KEEPING IN VIEW THE SAID GUIDELINES. IF THE EXACT D ETAILS OF CAPACITY UTILIZATION OF THE COMPARABLE COMPANIES AR E NOT AVAILABLE IN THE PUBLIC DOMAIN, THE AO/TPO IS DIREC TED TO OBTAIN THE SAME DIRECTLY FROM THE CONCERNED PARTIES AND TO DECIDE THIS ISSUE AFRESH AFTER GIVING ASSESSEE AN OPPORTUNITY OF BEING HEARD.' (EMPHASIS SUPPLIED) 35. ACCORDINGLY, WE DIRECT THE TPO TO EXERCISE POWE RS UNDER SECTION 133(6) OF THE ACT TO CALL FOR INFORMATION O N CAPACITY UTILIZATION OF THE COMPARABLE COMPANIES SUCH AS - INSTALLED CAPACITY, ACTUAL PRODUCTION IN UNITS, BREAK-UP OF FIXED COST AND VARIABLE COST; SEGMENTAL / PRODUCT WISE INFORMATION, IF ANY. 36. POST OBTAINING THE INFORMATION, HE IS REQUESTED TO PROVIDE THE ASSESSEE AN OPPORTUNITY BY SHARING THE DETAILS IT(TP)A NO.1610/BANG/2017 PAGE 15 OF 17 SO OBTAINED, AND ACCORDINGLY, GRANT THE ADJUSTMENT FOR CAPACITY UNDER-UTILIZED. GROUND NO.7 IS DECIDED ACCORDINGLY. 9. WE ALSO NOTICE THAT THE DECISION RENDERED BY COO RDINATE BENCH IN THE CASE OF IKA INDIA LTD.(SUPRA), HAS BEE N FOLLOWED BY ANOTHER COORDINATE BENCH IN THE CASE OF M/S FLINT G ROUP (INDIA) PVT. LTD., (IT(TP)A NO.3285/BANG/2018 DATED 31/10/2019. ACCORDINGLY, FOLLOWING THE ABOVE SAID DECISIONS, WE HOLD THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION FROM ITS PLI TOW ARDS CAPACITY UNDER-UTILISATION ADJUSTMENT. 10. HOWEVER, WE HAVE NOTICED EARLIER THAT THE A SSESSEE HAS COMPUTED THE ADJUSTMENT BY PRESUMING THAT THE COMPA RABLE COMPANIES HAVE OPERATED AT 100% OF CAPACITY. THE L D A.R ALSO ACCEPTED THAT THE SAID ADJUSTMENT SHOULD HAVE BEEN COMPUTED BY CONSIDERING THE DETAILS OF ACTUAL CAPACITY UTILIZAT ION BY COMPARABLE COMPANIES. SINCE THE SAID DETAILS ARE NOT AVAILABL E IN PUBLIC DOMAIN, IT IS IMPERATIVE TO RESTORE THIS ISSUE TO T HE FILE OF AO/TPO WITH THE DIRECTION TO COLLECT THE RELEVANT DETAILS FROM COMPARABLE COMPANIES FOR THE YEAR UNDER CONSIDERATION AND ACCO RDINGLY COMPUTE THE ADJUSTMENT. WE NOTICE THAT THE CO-ORDI NATE BENCH HAS GIVEN CERTAIN DIRECTIONS TO BE FOLLOWED BY THE AO/T PO IN THE CASE OF IKA INDIA LTD (SUPRA). ACCORDINGLY, WE SET ASIDE T HE ORDER PASSED BY AO ON THE IMPUGNED ISSUE AND RESTORE THE SAME TO TH E FILE OF AO/TPO WITH SIMILAR DIRECTIONS. IT(TP)A NO.1610/BANG/2017 PAGE 16 OF 17 11. SINCE OTHER GROUNDS URGED BY THE ASSESSEE WER E NOT ARGUED BY THE LD A.R, THEY ARE NOT ADJUDICATED AS STATED EARL IER. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JUNE 2020. SD/ - (N.V VASUDEVAN) VICE PRESIDENT SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 5 TH JUNE 2020. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE IT(TP)A NO.1610/BANG/2017 PAGE 17 OF 17 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..