M/s. Hyundai Consttruction Equipment India Private Limited, Pune V. Assistant Commissioner of Income-tax, Circle - 9, Pune

ITA 2453/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2361 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 04-05-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 23-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Question of law; Set aside
• Section: 143(3); 201; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C , PUNE VIRTUAL COURT BEFORE SH RI R.S. SYAL, VICE PRESIDENT AND SH RI S .S. VISWANETHRA RAVI , J UDICIAL MEMBER I TA NO. 2453 /PUN/20 1 7 / ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. HYUNDAI CONSTRUCTION EQU IPMENT INDIA PRIVATE LIMITED PLOT NO.A - 2, CHAKAN MIDC, PHASE - II, KHALUMBRE, CHAKAN - TALEGAON ROAD, CHAKAN, TAL UKA - KHED, PUNE 410501 PAN: AABCH8756Q VS. ACIT, CIRCLE 9, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL A SSESSMENT O RDER DATED 2 9. 0 8 .201 7 PASSED BY THE ASSESSING OFFICER (AO) U/S. 143(3) READ WITH SECTION 144C(13) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMENT YEAR 201 3 - 1 4 . 2 . GROUND NO.1 IS GENERAL. THE LD. AR DID NOT PRESS GROUND NO.2 TAKEN IN THE MEMORANDUM OF APPEAL. GROUND NO. 9 IS PREMATURE. THESE GROUNDS ARE, THEREFORE, DISMISSED. A SSESSEE BY S HRI M.P. LOHIA RE VENUE BY S HRI NAVIN GUP TA, CIT (DR) DATE OF HEARING 24 - 0 6 - 202 1 DATE OF PRONOUNCEMENT 29 - 0 6 - 202 1 ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 2 3 . SUCCINCTLY, THE FACTUAL MA TRIX OF THE CASE IS THAT THE ASSESSEE HAS BEEN ENGAGED IN THE MANUFACTURE AND DISTRIBUTION OF HEAVY EARTHMOVING EQUIPMENTS AND PARTS. RETURN WAS FILED DECLARING TOTAL INCOME AT NIL. THE ASSESSEE REPORTED 13 INTERNATIONAL TRANSACTIONS IN FORM NO.3CEB AND GROUPED SOME OF THEM AND THEN APPLIED DIFFERENT METHODS FOR SHOWING THEM AT THE ALP. IN THIS APPEAL, WE ARE CONCERNED ONLY WITH FOUR TRANSACTIONS CLUBBED BY THE ASSESSEE UNDER THE `MANUFACTURING ACTIVITY SEGMENT CONSISTING OF IMPORT OF RAW MATERIALS/COMPO NENTS AT RS.3,63,04,44,799; SALE OF MANUFACTURED GOODS AT RS.27,26,41,460 ; PAYMENT OF TECHNICAL LICENSE FEES/ROYALTY AT RS. 5,65,23,382; AND PAYMENT OF ONE TIME TECHNOLOGY TRANSFER FEES AT RS.62,07,978. OTHER TRANSACTIONS REPORTED BY THE ASSESSEE WERE ACCE PTED BY THE TPO AT ALP. THE ASSESSEE APPLIED THE TRANSACTIONAL NET MARGINAL METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR PROVING THE ABOVE INTERNATIONAL TRANSACTIONS, UNDER THE OVERALL MANUFACTURING ACTIVITY SEGMENT, TO BE AT ALP. THE ASSESSEE COMPUTE D ITS OWN PROFIT LEVEL INDICATOR (PLI) OF OPERATING PROFIT/REVENUE AT ( - )6.87%. TWO COMPANIES WERE CHOSEN AS COMPARABLE WITH THEIR AVERAGE PLI OF ( - )0.82%. THE DIFFERENTIAL AMOUNT IN THE ABOVE TWO PERCENTAGES WAS SUO ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 3 MOTU OFFERED BY THE ASSESSEE AS TRANSF ER PRICING ADJUSTMENT AMOUNTING TO RS.20,87,02,606. THE TPO ADDED TWO MORE COMPANIES AND COMPUTED THE AVERAGE PLI OF FINALLY SELECTED FOUR COMPARABLES AT 2.99%. THE GROSS AMOUNT OF TRANSFER PRICING ADJUSTMENT WAS ACCORDINGLY WORKED OUT AT RS.70,33,52,992. SINCE THE ASSESSEE HAD ALREADY OFFERED A VOLUNTARY TRANSFER PRICING ADJUSTMENT OF RS.20.87 CRORE, THE TPO PROPOSED A FURTHER ADJUSTMENT OF RS.49,46,50,386. THE ASSESSEE ASSAILED THE DRAFT ORDER, INCORPORATING THE ABOVE TRANSFER PRICING ADJUSTMENT, BEFORE THE DISPUTE RESOLUTION PANEL (DRP). AFTER GIVING EFFECT TO DIRECTIONS GIVEN BY THE DRP, THE AO MADE A TRANSFER PRICING ADDITION OF RS.27,83,25,927 IN THE FINAL ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. A. ADJUS TMENT TOWARDS FOREIGN EXCHANGE FLUCTUATION 4. 1. THE ASSESSEE HAS RAISED AN UNUSUALLY PECULIAR CLAIM AGAINST NON - CONSIDERATION OF IMPACT OF ABNORMAL MOVEMENT IN THE FOREIGN EXCHANGE RATES WHILE COMPUTING THE OPERATING PROFIT MARGIN. SUCH A CLAIM WAS NOT M ADE IN THE TRANSFER PRICING STUDY REPORT AND HENCE THERE IS NO DISCUSSION IN THE ORDER OF THE TPO. THIS ISSUE WAS TAKEN UP BEFORE THE DRP CONTENDING THAT THERE WAS ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 4 EXTRAORDINARY MOVEMENT IN THE RATE OF US DOLLAR AGAINST INDIAN RUPEES DURING THE YEAR UNDER CONSIDERATION VIS - - VIS THE PRECEDING YEAR, WHICH WAS QUANTIFIED AT 13.54%. A PRAYER WAS MADE TO ALLOW ADJUSTMENT IN THE PROFIT MARGIN OF THE COMPARABLES ON THIS COUNT. THE DRP NEGATIVED THE CLAIM, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 4. 2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS CLAIMING REDUCTION IN THE PROFIT MARGIN OF THE COMPARABLES ON THE GROUND THAT THE FOREIGN EXCHANGE FLUCTUATION RATE VARIED AT 13.54% IN THIS YEAR IN COM PARISON WITH THE PRECEDING YEAR. WE FAIL TO APPRECIATE AS TO WHAT IS THE RATIONALE OF COMPARING THE FOREIGN EXCHANGE RATE FOR THIS YEAR WITH THE PRECEDING YEAR WHEN THE TRANSACTIONS OF THE ASSESSEE AND THOSE OF THE COMPARABLES RELATE ONLY TO THE YEAR IN Q UESTION. THE FOREIGN EXCHANGE RATE FLUCTUATION HAS IMPACTED THE ASSESSEE IN THE SAME WAY AS THE COMPARABLES. THAT CANT BE A REASON FOR ALLOWING ANY ADJUSTMENT IN THE PROFIT MARGIN OF THE COMPARABLES. 4.3 . THERE IS ANOTHER ASPECT OF THE MATTER ALSO. OPERATING PROFIT UNDER THE TNMM IS COMPUTED BY REDUCING ALL THE OPERATING COSTS FROM THE OPERATING REVENUES. IN OTHER WORDS, ALL THE NON - OPERATING ITEMS OF EXPENSES OR REVENUE GO OUT OF RECKONING. NORMALLY, THE ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 5 FOREX LOSS OR GAIN IS TREATED AS OPERATING COST/REVENUE IN THE ALP DETERMINATION UNDER THE TNMM SAVE AND EXCEPT THE SAFE HARBOUR RULES. IT HAS BEEN HELD IN SEVERAL DECISIONS RENDERED BY THE VARIOUS COURTS OF THE COUNTRY INCLUDING THE HONBLE DELHI HIGH COURT IN PR.CIT VS. BC MANAGEMENT SERVICES PV T. LTD. (2018) 403 ITR 45 (DELHI) THAT FOREIGN EXCHANGE GAIN OR LOSS SHOULD BE CONSIDERED AS OPERATING IN DETERMINING THE OPERATING MARGIN. 4.4 . ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS SEEN THAT THE ASSESSEE TREATED FOREIGN EXCHANGE FLUCTUAT ION LOSS AS NON - OPERATING AND THUS COMPUTED ITS OPERATING MARGIN ACCORDINGLY. SUCH TREATMENT HAS BEEN ACCEPTED BY THE TPO ALSO. ONCE THE FOREX LOSS HAS ITSELF BEEN TREATED AND ACCEPTED AS NON - OPERATING FOR SELF AND THE COMPARABLES, THE SAME BECOME NEUTRAL QUA THE COMPUTATION OF OPERATING MARGIN, LEAVING NO ROOM FOR ANY FURTHER ADJUSTMENT. WE, THEREFORE, REJECT THE CLAIM OF THE ASSESSEE. THE GROUND FAILS. B. ADJUSTMENT TOWARDS EXCESS CUTOM DUTY 5.1 . THE ISSUE RAISED BY THE ASSESSEE IS FOR THE REMOVAL OF THE EFFECT OF EXCESS CUSTOM DUTY PAID ON IMPORTS BY IT VIS - - VIS THE COMPARABLES. THERE IS NO DISCUSSION IN THE ORDER OF THE TPO. IT WAS FOR THE FIRST TIME THAT THE ASSESSEE RAISED THIS ISSUE BEFORE THE DRP CONTENDING THAT THE EXCESS CUSTOM DUTY PAID BY I T ON IMPORTS ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 6 SHOULD BE ADJUSTED IN THE MARGIN OF COMPARABLES. A CHART WAS FILED BEFORE THE DRP DEMONSTRATING THAT ACTION CONSTRUCTION EQUIPMENT LTD., ONE OF THE COMPARABLES, HAD 22% IMPORTS TO THE TOTAL RAW MATERIALS CONSUMED; TATA HITACHI CONSTRUCTION MA CHINERY CO. LTD. AT 44.78%; AND JCB INDIA LTD. AT 7.86%. AS AGAINST THAT, THE ASSESSEES IMPORTS CONSTITUTED 65% OF TOTAL MATERIAL CONSUMED. IN VIEW OF SUCH HIGHER PERCENTAGE OF IMPORTS TO TOTAL MATERIAL CONSUMED, THE ASSESSEE PRAYED FOR A SUITABLE ADJUST MENT IN THE PROFIT MARGIN OF THE COMPARABLES ON ACCOUNT OF THE RESULTANT EXCESS CUSTOM DUTY PAID BY IT. THIS CONTENTION WAS REPELLED BY THE DRP, AGAINST WHICH THE ASSESSEE HAS APPROACHED THE TRIBUNAL. 5. 2. A CASE HAS BEEN SET UP THAT SINCE THE ASSESSEE MA DE MORE IMPORTS AND PAID HIGHER CUSTOM DUTY, ITS EFFECT SHOULD BE UNLOADED FROM THE PROFIT MARGIN OF COMPARABLES. ON A PERTINENT QUERY, IT WAS FAIRLY AGREED THAT THERE WAS NO DIFFERENCE BETWEEN THE RATE AT WHICH CUSTOM DUTY WAS PAID BY THE ASSESSEE AND TH E COMPARABLES. THUS THE CLAIM OF THE ASSESSEE RESTS AT ITS MAKING HIGHER IMPORTS AND PAYING MORE CUSTOM DUTY IN COMPARISON WITH THE COMPARABLES. 5.3 . THERE IS NO MERIT IN THE CONTENTION OF THE ASSESSEE. ORDINARILY, COSTLY PURCHASES ARE COUPLED WITH TH E INCREASED SALE ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 7 PRICE OF FINAL PRODUCTS, THEREBY LEAVING THE ULTIMATE PROFIT MARGIN AT ALMOST THE SAME LEVEL AS THAT WITH CHEAP PURCHASES. THERE CAN BE NO ADJUSTMENT JUST FOR THE ASSESSEE MAKING MORE IMPORTS AND CONSEQUENTLY PAYING HIGHER CUSTOM DUTY VIS - - VIS THE COMPARABLES MAKING INDIGENOUS PURCHASES AND PAYING NO CUSTOM DUTY. IT HAS NOT BEEN SHOWN THAT THE IMPORT PRICE OF THE ASSESSEE WHEN ADDED WITH CUSTOM DUTY WAS HIGHER THAN THE INDIGENOUS PURCHASE PRICE OF THE COMPARABLES OR THAT THE GOODS MANUFACT URED BY IT WITH SUCH COSTLY PURCHASES WERE SOLD AT SAME PRICES AS THE COMPARABLES. 5.4 . THE LD. AR HAS FAIRLY ADMITTED THAT THE RATE OF CUSTOM DUTY PAID BY THE ASSESSEE AND THE COMPARABLES IS SIMILAR. THE POSITION WOULD HAVE BEEN DIFFERENT IF THE ASSESS EE HAD IMPORTED THE SAME MATERIAL AT A RATE OF CUSTOM DUTY HIGHER THAN THOSE BORNE BY THE COMPARABLES. IN THAT SCENARIO, THE SUGGESTION FOR SUITABLE ADJUSTMENT WOULD HAVE MERITED CONSIDERATION. RELIANCE OF LD. AR ON THE DECISION OF PUNE TRIBUNAL IN THE CA SE OF ACIT VS. NORD DRIVE SYSTEMS PVT. LTD. (ITA NO.825/PUN/2016) IS MISCONCEIVED AND RATHER SUPPORTS THIS POINT OF VIEW ONLY. THAT WAS A CASE IN WHICH THE DIFFERENCE AROSE ON ACCOUNT OF VARYING RATES OF CUSTOM DUTY PAID BY THE ASSESSEE VIS - - VIS THE COMPA RABLES, WHICH RESULTED IN THE GRANT OF SUITABLE ADJUSTMENT INASMUCH AS THE ASSESSEE THEREIN ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 8 PAID ADDITIONAL IMPORT DUTY ALSO WHEREAS THE COMPARABLES PAID ONLY BASIC CUSTOM DUTY. RELEVANT DISCUSSION HAS BEEN MADE IN PARA 9 OF THE TRIBUNAL ORDER DATED 28.11 .2019. AS ADMITTEDLY, THERE IS NO DIFFERENCE IN CUSTOM DUTY RATE PAID BY THE ASSESSEE AND ITS COMPARABLES, THERE CAN BE NO QUESTION OF ALLOWING ANY REDUCTION IN THE PROFIT MARGINS OF COMPARABLES ON THIS SCORE SIMPLY BECAUSE THE ASSESSEES PERCENTAGE OF IMP ORT TO TOTAL MATERIALS PURCHASED IS HIGHER THAN THAT OF THE COMPARABLES. THIS GROUND IS THEREFORE, DISMISSED. C. COMPARABLES 6 . THE NEXT ISSUE RAISED THROUGH GROUND NOS.3 AND 6 IS AGAINST THE INCLUSION OF BEML AND JCB INDIA LIMITED IN THE LIST OF COMPARA BLES BY THE AUTHORITIES BELOW FOR DETERMINING THE ARM'S LENGTH PRICE (ALP) OF THE MANUFACTURING SEGMENT OF THE ASSESSEE . THE TPO ADDED TWO MORE COMPANIES IN THE LIST OF COMPARABLES, NAMELY, JCB LTD. AND BEML AND COMPUTED THE AVERAGE PLI OF FINALLY SELECTED FOUR COMPARABLES AT 2.99%. IT HAS BEEN NOTED ABOVE THAT T HE ASSESSEE , THROUGH GROUND NOS.3 AND 6, SEEKS EXCLUSION OF TWO COMPANIES FROM THE LIST OF COMPARABLES DRAWN BY THE TPO, NAMELY, BHARAT EARTH MOVERS LIMITED AND JCB INDIA LIMITED. WE WILL DEAL WITH THE M AD SERIATIM . ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 9 I. BHARAT EARTH MOVERS LIMITED 7.1 . THE TPO INCLUDED THIS COMPANY IN THE LIST OF COMPARABLES. THE ASSESSEE OBJECTED TO ITS INCLUSION ON THE GROUND THAT IT WAS FUNCTIONALLY DIFFERENT AND FURTHER IT WAS A GOVERNMENT COMPANY WITH FIXED C USTOMER BASE. FOLLOWING HIS ORDER FOR EARLIER YEARS, THE TPO INCLUDED I T IN THE LIST OF COMPARABLES. NO REPRIEVE WAS ALLOWED BY THE DISPUTE RESOLUTION PANEL (DRP). THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL. 7.2 . I T IS FOUND AS AN ADMITTED POSITION THAT BEML IS A GOVERNMENT COMPANY. THE MUMBAI BENCH OF THE TRIBUNAL IN THYSSENKRUPP INDUSTRIES INDIA PRIVATE LIMITED VS. ADDL. CIT (ITA NO.6460/MUM/2012), VIDE ITS ORDER DATED 27.02.2013 EXCLUDED ENGINEERS INDIA LTD ., INTER ALIA , ON THE GROUND THAT IT WAS A GOVERNMENT COMPANY AND PROFIT MOTIVE CAN NEVER BE A RELEVANT CONSIDERATION IN THE GOVERNMENT UNDERTAKINGS. THIS ORDER PASSED BY THE TRIBUNAL WAS ASSAILED BY THE REVENUE BEFORE THE HON'BLE BOMBAY HIGH COURT. VIDE ITS JUDGMENT DATED 28.03.2016, THE HON'B LE BOMBAY HIGH COURT HAS REFUSED TO ADMIT THE QUESTIONS OF LAW ON THIS ASPECT OF THE MATTER. FURTHER, THE DELHI BENCH OF THE TRIBUNAL IN INTERNATIONAL SOS SERVICES INDIA P. LTD. VS. DCIT (ITA NO.1631/DEL/2014) VIDE ITS ORDER DATED 08.12.2015, FOLLOWED ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 10 THE DECISION OF THE MUMBAI BENCH OF THE THYSSEN KRUPP INDUSTRIES INDIA PRIVATE LIMITED VS. ADDL. CIT (SUPRA) AND ORDERED TO EXCLUDE APITCO LTD. ON THE GROUND OF IT BEING A GOVERNMENT COMPANY. THE REVENUE PREFERRED AN APPEAL AGAINST THE ORDER. THE HON'BLE DE LHI HIGH COURT, VIDE ITS JUDGMENT DATED 30.05.2017, REFUSED TO ADMIT ANY QUESTION OF LAW ARISING FROM THIS ASPECT OF THE MATTER. 7. 3. IT IS OBSERVED THAT THE TPO WENT ON TO INCLUDE THIS COMPANY IN THE LIST OF COMPARABLES BY FOLLOWING HIS VIEW CANVASSE D FOR EARLIER YEARS. THIS COMPANY CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE APPEAL OF THE ASSESSEE FOR THE A.Y. 2011 - 12. VIDE ORDER DATED 04.06.2021 (ITA NO. 584/PUN/2016), THE TRIBUNAL HAS DIRECTED THE EXCLUSION OF THIS COMPANY BY RELYING ON IT S ORDER PASSED IN THE CASE OF THE ASSESSEE ITSELF FOR THE A.Y. 2010 - 11 . IN VIEW OF THE ABOVE POSITION, WE HOLD THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN INCLUDING BEML IN THE LIST OF COMPARABLES. THE SAME IS, THEREFORE, DIRECTED TO BE EXCLUDED. II. JCB INDIA LIMITED 8 . 1. THE TPO PROPOSED TO INCLUDE THIS COMPA NY IN THE LIST OF COMPARABLES. THE ASSESSEE OBJECTED TO ITS INCLUSION. UNCONVINCED, THE TPO WENT AHEAD . THE ASSESSEE REMAINED UNSUCCESSFUL BEFORE THE DRP . ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 11 8.2 . T HE LD. AR ARGUED FOR THE EXCLUSI ON OF JCB INDIA LTD. ON THE GROUND OF ITS FUNCTIONAL DISSIMILARITY. HE SUBMITTED THAT THE ASSESSEE HAD INTERNATIONAL TRANSACTIONS UNDER THE MANUFACTURING SEGMENT AND ALSO THE T RADING SEGMENT. BOTH THE SEGMENTS WERE SEPARATELY BENCHMARKED BY THE ASSESSEE A ND THE TPO DID NOT DISPUTE THE CORRECTNESS OF THE ALP DETERMINATION OF THE TRADING SEGMENT. THE LD. AR POINTED OUT THAT JCB INDIA LIMITED WAS ENGAGED IN MANUFACTURING, TRADING & DESIGN SERVICES AND ITS ACCOUNTS WERE MAINTAINED ON A CONSOLIDATED BASIS AND T HUS THE TPO WENT WRONG IN CONSIDERING JCB INDIA LTD. AS COMPARABLE ON ENTITY LEVEL WITH THE LONE MANUFACTURING SEGMENT OF THE ASSESSEE. 8.3 . IT IS SEEN THAT JCB INDIA LTD. WAS INCLUDED BY THE TPO IN THE LIST OF COMPARABLES FOR THE A.Y. 2011 - 12 ALSO. T HE ASSESSEE OBJECTED TO THE SAME BEFORE THE TRIBUNAL , WHICH UPHELD ITS INCLUSION BY PRIMARILY NOTING THAT THE NATURE OF M ANUFACTURING ACTIVITY OF THE ASSESSEE MATCHED WITH THAT OF JCB INDIA LTD. INASMUCH AS BOTH WERE DEALING IN SIMILAR PRODUCTS AND FURTHER THAT THE REVENUE FROM THE NON - MANUFACTURING ACTIVITY ( TRADING SEGMENT OF THAT COMPANY ALONG WITH S ERVICE CHARGES ) CONSTITUTED ONLY 0.35% OF THE M ANUFACTURING REVENUE. RELYING ON THE JUDGMENT IN THE CASE OF CIT VS. MERCER CONSULTING (INDIA) P. LTD. (2017) 390 ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 12 ITR 615 (P&H) , THE TRIBUNAL REJECTED THE CONTENTION OF ASSESSEE FOR EXCLUSION OF JCB INDIA LTD. BY HOLDING THAT IT S REVENUE FROM THE NON - MANUFACTURING ACTIVITY WAS JUST 0.35% WITH 99.65% OF ITS ACTIVITY SIMILAR TO THAT OF ASSESSEE . HOWEVER, A DIRECTIO N WAS GIVEN TO THE AO/ TPO FOR CARRYING OUT REASONABL Y ACCURATE ADJUSTMENT TO THE PROFIT OF JCB INDIA LTD. SO AS TO ELIMINATE THE EFFECT OF MICROSCOPIC DIFFERENCE OF THE INCLUSION OF REVENUE FROM TRADING A ND SERVICE SEGMENT S . RELEVANT DISCUSSION HAS BEEN MA DE IN PARAS 10 TO 21 OF THE ORDER. 8.4 . THE L D. AR CONTENDED THAT THE FACTS OF JCB INDIA LTD. FOR THE YEAR UNDER CONSIDERATION WERE NOT SIMILAR TO THOSE OF THE A.Y. 2011 - 12. HE SUBMITTED THAT FOR TH E YEAR UNDER REVIEW, JCB LTD. HAD SUBSTANTIAL TRADING A CTIVITY , WHICH WAS CONFINED NOT ONLY TO THE FINAL PRODUCTS BUT ALSO TO S PARE PARTS AND COMPONENTS. IT WAS PUT FORTH THAT THE S PARE PARTS AND COMPONENTS WERE RESTRICTED ONLY TO TRADING ACTIVITY OF TH E COMPANY AND HAD NO RELATION WITH THE MANUFACTURING ACTIV ITY. WITH REFERENCE TO THE ANNUAL REPORT OF THIS COMPANY, THE L D. AR SUBMITTED THAT OUT OF TOTAL REVENUE FROM SALE OF PRODUCTS (OTHER THAN SPARE PARTS AND COMPONENTS) AT RS. 4897.97 CRORES, REVENUE FROM THE MANUFACTURING ACTIVITY WAS RS.4893.40 CRORES AND T HE T RADING ACTIVITY RS.4.57 CRORES . IT WAS ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 13 FURTHER STATED THAT REVENUE FROM S PARE PARTS AND COMPONENTS AT RS.752.58 CRORES RELATED ONLY TO THE TRADING ACTIVITY . AS THE REVENUE FROM TRADING GOODS INCLUDING S PARE PARTS AND COMPONENTS CONSTITUTED A MAJOR COM PONENT VIS - - VIS THE REVENUE FROM THE MANUFACTURING ACTIVITY, THE L D. AR SUBMITTED THAT THIS COMPANY SHOULD BE EXCLUDED. ON BEING CALLED UPON TO SUBSTANTIATE THE SUBMISSION THAT THE REVENUE FROM S PARE PARTS AND COMPONENTS WAS ONLY A PART OF TRADING ACTIVI TY AND NOT THAT OF MANUFACTURING ACTIVITY, THE L D. AR COULD SIMILY INVITE OUR ATTENTION TOWARDS BREAK - UP OF O PENING STOCK, P URCHASES, S ALES AND C LOSING STOC K GIVEN IN THE SCHEDULES BY THE COMPANY SHOWING SEPARATE FIGURES OF SPARE PARTS AND COMPONENTS . 8. 5 . WE HAVE GONE THROUGH SUCH FIGURES WHICH DECIPHER THAT THE REVENUE FROM S PARE PARTS AND COMPONENTS STOOD AT RS.752.58 CRORES AS AGAINST CLOSING STOCK AT RS.57.09 CRORES. ON THE OTHER HAND, OPENING STOCK OF S PARE PARTS AND COMPONENTS WAS RS.65.37 CRORE S WITH P URCHASES AMOUNTING TO RS. 331.07 CRORES. ON PERUSAL OF THESE FIGURES, IT BECOMES APPARENT THAT AS AGAINST THE COMBINED O PENING STOCK AND P URCHASES TOTALING RS.396.44 CRORES, COMBINED S ALES AND C LOSING STOCK OF S PARE PARTS AND COMPONENTS COMES TO RS .809.67 CRORES , LEAVING DIFFERENCE OF RS.413.60 CRORES WHICH IS ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 14 104% OF THE COMBINED AMOUNT OF O PENING STOCK AND P URCHASES. FOR MANUFACTURING SPARE PARTS AND COMPONENTS , ONE NEEDS TO MAKE THE REQUISITE PURCHASES ALSO . THE ABOVE NARRATION OF FIGURES RELAT ING TO SPARE PARTS AND COMPONENTS SHOWS THAT 104% OF SALES IS NOTHING BUT THE COST OF THEIR MANUFACTURING EXCEPT PURCHASE OF MATE RIAL AND ALSO THE PROFIT MARGIN ON THEIR SALE . THE LD. AR FAILED TO POINT OUT ANYWHERE FROM THE ANNUAL REPORT OF THIS COMPANY T HAT THE S PARE PARTS AND COMPONENTS WERE ONLY PURCHASED AND NOT MANUFACTURED AND FURTHER THAT THE AMOUNT OF REVENUE FROM SPARE PARTS AND COMPONENTS WAS ONLY FROM TRADING SALE AND NOT THE MANUFACTURING SALES. IT IS JUST ELEMENTARY THAT SPARE PARTS AND COMPO NENTS GO WITH THE PRODUCTS FINALLY SOLD, WHETHER PURCHASED OR MANUFACTURED. ON A CONSIDERATION OF THE FIGURES OF SALES, PURCHASES AND INVENTORY OF SPARE PARTS AND COMPONENTS, IT CLEARLY TRANSPIRES THAT JCB INDIA LTD. WAS ALSO INTO MANUFACTURING OF THE SPAR E PARTS AND COMPONENTS AND FURTHER SELLING THE SAME BOTH WITH THE MANUFACT URED AND T RADED PRODUCTS . THUS THE CONTENTION OF THE LD. AR THAT THE SPARE PARTS AND COMPONENTS WERE ONLY PURCHASED AND NOT MANUFACTURED, FAILS. 8.6. NOW WE TURN TO THE BIFURCATI ON OF SALE OF SPARE PARTS AND COMPONENTS PERTAINING TO TRADING AND MANUFACTURING ACTIVITY . AS ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 15 THESE ARE AN INTEGRAL PART OF THE GOODS SOLD - BE THEY MANUFACTURED OR TRADED - WE NEED TO ALLOCATE SALE OF SPARE PARTS AND COMPONENTS IN SAME PROPORTION AS THEIR RESPECTIVE SALE S. AS THE MANUFACTURED GOODS HAVE BEEN SOLD AT RS.4893.40 CRORES WITH TRADING SALE OF GOODS AT RS.4.50 CRORES, THE AMOUNT OF SALE OF S PARE PARTS AND C OMPONENTS WOULD THUS, IN THE SAME PROPORTION , BE RS.751.87 CRORES FOR MANUFACTURING ACTIV ITY AND 0.71 CRORES FOR TRADING ACTIVITY. WHEN SUCH FIGURES ARE CLUBBED WITH THE SALE OF PRODUCTS, TOTAL AMOUNT OF MANUFACTURING ACTIVITY SALE COMES TO RS.5645.27 CRORES AND THAT OF TRADING COMES TO RS.5.28 CRORES . THE LATTER IS LESS THAN 0.1% OF THE MANU FACTURING SALE. IN ADDITION, THIS COMPANY ALSO EARNED REVENUE FROM SALE OF SERVICES AT RS.43.42 CRORES , WHICH COMES TO 0.77% OF THE MANUFACTURING SALE , THEREBY MAKING TOTAL NON - MANUFACTURING SALES AT 0.87% . 8.7 . AT THIS JUNCTURE, WE CONSIDER IT APT T O QUOTE RULE 10B(3) OF INCOME - TAX RULES, 1962 (HEREINAFTER REFERRED TO AS THE RULES) AS UNDER: - RULE 10B(1).... ........ (3) AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMESTIC TRANSACTION IF ( I ) NONE OF THE DIFFERENCES, IF ANY, BETWEEN THE TRANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIKELY TO MATERIALLY AFFECT THE PRICE ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 16 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 . 8.8 . ON GOING THROUGH THE PRESCRIPTION OF THE ABOVE RULE, IT TRANSPIRES THAT AN UNCONTROLLED TRANSACTION SHALL BE COMPARABLE TO AN INTERNATIONA L TRANSACTION IF THE DIFFERENCES, IF ANY, BETWEEN THE TWO ARE NOT LIKELY TO MATERIALLY AFFECT THE PRICE CHARGED OR PAID OR REASONABLY ACCURATE ADJUSTMENT CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES. THE CASE UNDER CONSIDERATION IS A TYPICAL EXAMPLE WHICH FITS WITHIN THE PRESCRIPTION OF RULE 10B(3) INASMUCH AS JCB INDIA LIMITED IS OTHERWISE FUNCTIONALLY SIMILAR TO THE ASSESSEE COMPANY TO THE EXTENT OF 99.13% OF ITS BUSINESS OPERATIONS . 8.9 . IN MERCER CONSULTING ( SUPRA ) , ONE OF THE FILTERS WAS THAT THE EXPORT REVENUE SHOULD NOT BE LESS THAN 75% OF TOTAL TURNOVER. ONE OF THE COMPARABLES CHOSEN BY THE ASSESSEE HAD EXPORT REVENUE TO TURNOVER AT 74.45%, WHICH GOT EXCLUDED BY THE TPO ON THE BASIS OF THIS FILTER. THE TRIBUNAL ORDERED ITS INCLUSION BY ACCEPTING THAT A DEVIATION OF 0.55% WAS IMMATERIAL. WHEN THE MATTER CAME UP BEFORE THE HONBLE HIGH COURT, IT APPROVED THE VIEW POINT OF THE TRIBUNAL BY HOLDING THAT: `THE CASE COULD NOT HAVE BEEN REJECTED ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 17 MERELY BECAUSE THERE WAS A DEVIATION OF 0.55%..... A MINUSCULE DIFFERENCE CANNOT RESULT IN THE REJECTION OF THE CASE IF IT IS OTHERWISE COMPARABLE. ANSWERING THE APPREHENSION OF THE REVENUE, IT WAS HELD: `INDEED EVEN THE TPO WOULD BE ENTITLED TO REFER TO CASES WHICH DEVIATE FROM THE FILTER BY FINALLY HOLDING THAT: `WHEN EXPORT FILTER OF 75% WAS APPLIED, A LITTLE LESS THAN 75% IN A CASE OF A COMPARABLE DOES NOT MAKE ANY DIFFERENCE, IF THE COMPANY IS OTHERWISE SIMILAR . IT HAS TO BE ACCEPTED AS COMPARABLE. THE FACTS OF THE EXTANT CASE ARE MOR E OR LESS SIMILAR AS THE ISSUE HEREIN IS ALSO OF SELECTION OR REJECTION OF A COMPARABLE ON THE GROUND OF AN INFINITESIMAL INCLUSION OF ABOUT 0.87% TURNOVER OF NON - MANUFACTURING ACTIVITIES WITH THE OTHERWISE 99.13% TURNOVER OF THE MATCHING MANUFACTURING ACT IVITY. AS SUCH, WE ARE UNABLE TO COUNTENANCE THE CONTENTION OF THE ASSESSEE FOR THE EXCLUSION OF JCB INDIA LTD. ON TH IS SOLE REASON . FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE A.Y. 2011 - 12, WE HOLD THAT JCB INDIA LTD. CANNO T BE EXCLUDED FROM THE LIST OF COMPARABLES . 8.10 . WITHOUT PREJUDICE TO OUR ABOVE DECISION ON MERITS, WE ALSO TAKE NOTE OF THE FACT THAT THE ASSESSEE DETERMINED THE ALP OF ITS MANUFACTURING SEGMENT FOR THE A.Y. 2010 - 11 AND SUO MOTU ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 18 INCLUDED JCB INDIA L IMITED IN THE LIST OF COMPARABLES, WHICH POSITION WAS NOT DISTURBED BY THE TPO AND IT GOT FINALLY MERGED IN THE LIST OF COMPARABLES. ON A POINTED QUERY, THE LD. AR FAIRLY ADMITTED THAT THERE WAS NO NOTICEABLE DIFFERENCE IN THE FUNCTIONAL PROFILE OF JCB IN DIA LIMITED FOR THE CURRENT YEAR VIS - - VIS THE EARLIER YEAR. 8.11 . IN VIEW OF THE FOREGOING DISCUSSION, WE UPHOLD THE INCLUSION OF JCB INDIA LIMITED IN THE LIST OF COMPARABLES. AT THE SAME TIME, THE TPO IS DIRECTED TO CARRY OUT REASONABLY ACCURATE ADJ USTMENT TO THE MARGIN OF JCB INDIA LTD. SO AS TO ELIMINATE THE EFFECT OF THE AMALGAM OF THE A MICROSCOPIC T RADING SALES AND SERVICE INCOME, AFTER AFFORDING HEARING OPPORTUNITY TO THE ASSESSEE. 9.1 . AT THE CONCLUSION OF THE HEARING, T HE LD. AR CAME OUT WITH STILL ANOTHER ARGUMENT STATING THAT IF, AT ALL, JCB LTD. WAS TO BE CONSIDERED AS COMPARABLE, THEN THE ASSESSEES MANUFACTURING AND TRADING ACTIVITIES SHOULD ALSO BE MERGED AND ONLY ONE ALP BE DETERMINED ON A CONSOLIDATED BASIS. 9.2 . WE ARE NOT CON VINCED WITH THIS ARGUMENT. THE REASON IS THAT THE ASSESSEE ITSELF BENCHMARKED BOTH THE SEGMENTS SEPARATELY BY CONSIDERING DISTINCT COMPARABLES WITH VARYING MARGINS. THE TPO ACCEPTED THE ALP UNDER THE TRADING SEGMENT, THEREBY ASSIGNING ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 19 FINALITY TO THAT. NOW , THE ASSESSEE CANNOT TURN AROUND AT THIS JUNCTURE AND CLAIM CLUBBING OF THE TWO, WHICH WOULD ENTAIL THE DOING OF THE ENTIRE TRANSFER PRICING EXERCISE ALL OVER AGAIN BY THE ASSESSEE (INCLUDING PREPARING A NEW TRANSFER PRICING STUDY REPORT WITH ALTOGETHER N EW PROCESS OF SELECTING COMPARABLES) AND ALSO THE TPO DOING EVERYTHING AB INITIO . IT IS BECAUSE OF THE DIFFERENCE IN THE PRECISE NATURE OF MANUFACTURING AND TRADING ACTIVITIES HAVING DIFFERENT FUNCTIONS, ASSETS AND RISKS THAT WE HAVE DIRECTED HEREINABOVE THAT SUITABLE ADJUSTMENT SHOULD BE MADE TO THE PROFIT MARGIN OF JCB LTD. ON ACCOUNT OF THE INFUSION OF ITS PROPORTIONATELY INFINITESIMAL TRADING AND SERVICES ACTIVITIES IN THE MANUFACTURING ACTIVITY. SINCE THE ASSESSEES REVENUE FROM THE MANUFACTURING SEGM ENT AT GROSS LEVEL, AS GIVEN ON PAGE 24 OF ITS ANNUAL REPORT, IS RS.788.40 CRORE AND FROM THE TRADING SEGMENT IS RS.99.46 CRORE (WHICH IS MORE THAN 12% OF THE MANUFACTURING SEGMENT), SUCH TWO SEGMENTS CANNOT BE CLUBBED. THE POSITION WOULD HAVE BEEN DIFFERE NT IF THE ASSESSEES TRADING REVENUE HAD BEEN NEGLIGIBLE , LIKE THAT OF JCB LTD, THEREBY JUSTIFYING CLUBBING OF THE TWO. WE, THEREFORE, REJECT THIS CONTENTION. D. MISCELLANEOUS ISSUES ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 20 10.1 . GROUND NO.7 OF THE ASSESSEES APPEAL IS AGAINST INAPPROPRIATE COM PUTATION OF WORKING CAPITAL ADJUSTMENT. THE FACTS APROPOS THIS ISSUE ARE THAT THE TPO DID NOT GRANT ANY WORKING CAPITAL ADJUSTMENT TO THE ASSESSEE. THE DRP AGREED IN PRINCIPLE THAT THE WORKING CAPITAL ADJUSTMENT SHOULD BE ALLOWED. IT , THEREFORE, DIRECTED THE AO/TPO TO GRANT WORKING CAPITAL ADJUSTMENT IN ACCORDANCE WITH THE METHODOLOGY GIVEN IN ANNEXURE TO CHAPTER I II OF THE OECD T RANSFER P RICING G UIDELINES, 2010. THE TPO , WHILE GIVING EFFECT TO THE DIRECTION GIVEN BY THE DRP , TOOK CERTAIN FIGURES OF OPEN ING AND CLOSING OF TRADE RECEIVABLES, TRADE PAYABLES AND INVENTORY AND ACCORDINGLY COMPUTED THEIR AVERAGE FOR DETERMINING THE AMOUNT OF WORKING CAPITAL. THE LD. AR SUBMITTED THAT SUCH FIGURES ADOPTED BY THE TPO WERE IN VARIANCE WITH THE FIGURES APPEA RING IN ITS BALANCE SHEET. HE FURTHER SUBMITTED THAT A RECTIFICATION APPLICATION IN THIS REGARD WAS FILED IN THE YEAR 201 7 WHICH IS STILL PENDING WITH THE AO. UNDER SUCH CIRCUMSTANCES, WE SET - ASIDE THE IMPUGNED ORDER ON THIS ASPECT AND REMIT THE MATTER TO THE FILE OF AO/TPO F O R RE - COMPUT ING THE WORKING CAPITAL ADJUSTMENT BY ADOPTING THE CORRECT FIGURES . 11 . 1. GROUND NO.8 OF THE APPEAL IS AGAINST MAKING TRANSFER PRICING ADJUSTMENT ON ENTITY LEVEL RATHER THAN RESTRICTING IT TO THE AE ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 21 TRANSACTIONS . THE TPO COM PUTED THE TRANSFER PRICING ADDITION BY CONSIDERING REVENUES FROM M ANUFACTURING SEGMENT IN TOTALITY AT THE ENTITY LEVEL. THE DRP DID NOT CONCUR WITH THE ASSESSEES SUBMISSION THAT SUCH ISSUE W AS DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE BOMBAY HIG H COURT ON THE GR OUND THAT THE SLP FILED BY THE D EPARTMENT WAS PENDING. 11.2 . IN OUR CONSIDERED OPINION, THIS ISSUE IS FAIRLY SETTLED BY JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. PHOENIX MECANO (INDIA) PVT. LTD. (2019) 414 ITR 704 (BOM. ), HOLDING THAT THE TRANSFER PRICING ADJUSTMENT MADE AT ENTITY LEVEL SHOULD BE RESTRICTED TO THE INTERNATIONAL TRANSACTIONS ONLY. IT IS PERTINENT TO MENTION THAT THE DEPARTMENTS SLP AGAINST THIS JUDGMENT HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME CO URT IN CIT VS. PHOENIX MECANO (INDIA) PVT. LTD. (2018) 402 ITR 32 (ST.). SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. THYSSEN KRUPP INDUSTRIES PVT. LTD. (2016) 381 ITR 413 (BOM.) AND CIT VS. TARA JEWELS EXPORTS (P). LTD. (2010) 381 ITR 404 (BOM.) . WE, THEREFORE, DIRECT THE AO/TPO TO RESTRICT THE TRANSFER PRICING ADDITION TO THE EXTENT OF INTERNATIONAL TRANSACTIONS UNDER THE SEGMENT OF M ANUFACTURING ACTIVITY. ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 22 12 . 1. THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUND, WHICH READS AS UNDER: GROUND OF APPEAL 10 RECOMPUTATION OF LOSSES TO BE CARRIED FORWARD IN CASE RESULTANT TRANSFER PRICING ADJUSTMENT IS LESS THAN VOLUNTARY ADJUSTMENT OFFERED IN TURN OF INCOME THE APPELLANT REQUESTS YOUR HONORS TO DIRECT THE LEARNED AO /TPO TO RECOMPUTED LOSSES TO BE CARRIED FORWARD IN CASE RESULTANT TRANSFER PRICING ADJUSTMENT AFTER ADJUDICATION OF ALL OTHER GROUNDS OF APPEAL IS LESS THAN VOLUNTARY TRANSFER PRICING ADJUSTMENT OFFERED IN RETURN OF INCOME. 1 2 . 2. THE HONBLE SUPREME CO URT IN NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (1998) 229 ITR 383 (SC) HAS OBSERVED THAT T HE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR E XAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. ANSWERING THE QUESTION POSED BEFORE IT IN AFFIRMATIVE, THEIR LORDSHIPS HELD THAT ON THE FACTS FOUND BY THE AUTHORITIES BELOW, IF A QUESTION OF LAW ARISES (THOUGH NOT RAISED BEFORE THE AUTHORITIES) WHICH HAS BEARING ON THE TAX LIABILITY OF THE ASSESSEE, THE TRIBUNAL HAS JURISDICTION TO EXAMINE THE SAME. HAVING GONE ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 23 THROUGH THE SUBJECT MATTER OF THE ADDITIONAL GROUND TAKEN BY THE ASS ESSEE, IT IS APPARENT THAT THE SAME RAISES A PURE QUESTION OF LAW. WE, THEREFORE, ADMIT THE SAME AND TAKE IT UP FOR ADJUDICATION. 12. 3. ON MERITS, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS FOR ALLOWING ADJUSTMENT TOWARDS VOLUNTARY TRANSFER PRICING ADDITION OFFERED BY THE ASSESSEE IN THE COMPUTATION OF TOTAL INCOME. IN THIS REGARD, WE DIRECT THE TPO TO ALLOW NECESSARY RELIEF QUA THE SUO MOTU TRANSFER PRICING ADJUSTMENT OFFERED BY THE ASSESSEE, IF THE RESULTANT TRANSFER PRICING ADDITION TURNS OUT TO BE MORE THAN THAT. 13 . TO SUM UP, THE TRANSFER PRICING ADDITION MADE IN THE IMPUGNED ORDER UNDER THE MANUFACTURING ACTIVITY SEGMENT IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO/TPO FOR RE - COMPUTING THE SAME IN ACCORDANCE WITH THE DIRECTIO NS AND OBSERVATIONS GIVEN HEREINABOVE. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED AN OPPORTUNITY OF HEARING. 14 . IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE , 202 1 . SD/ - SD/ - ( S.S. VISWANETHRA RAVI ) ( R.S.SYAL ) JUDICIAL MEMBER VICE PRESIDENT PUNE ; DATED : 29 TH JUNE , 2021 GCVSR ITA NO. 2453 /PUN/20 1 7 HYUNDAI CONSTRUCTION EQUIPMENT I NDIA PVT. LTD. 24 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE DRP - 3, MUMBAI 4. THE CIT (IT/TP) , PUNE 5. , , / DR C , ITAT, PUNE 6. / GUARD FILE / BY ORDER, / / TRUE C O PY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 24 - 0 6 - 202 1 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28 - 0 6 - 202 1 SR.PS 3. DRA FT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *