Inteva Products India Automotive Pvt Ltd, Bengaluru V. Deputy Commissioner of Income Tax, Circle-3(1)(1), Bengaluru

ITA 2843/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0650 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-12-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 22-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Initiation of penalty proceedings; Set aside
• Section: 143(3); 234B; 13; 92

Judgement Text

IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER IT(TP)A NO.2843/BANG/2017 ASSESSMENT YEAR: 2013-14 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PRIVATE LIMITED (FORMERLY KNOWN AS MERITOR LVS INDIA PRIVATE LTD.) (THE APPELLANT) MANYATA EMBASSY BUSINESS PARK, N1 BLOCK 4 TH FLOOR, OUTER RING ROAD, K.R. PURAM, HOBLI, NAGAWARA, RACHENAHALLI VILLAGE BANGALORE-560 045. PAN NO : AABCM9623K VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-3(1)(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI M.P. LOHIA, A.R. RESPONDENT BY : SHRI PRADEEP KUMAR, D.R. DATE OF HEARING : 22.12.2020 DATE OF PRONOUNCEMENT : 23.12.2020 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 144C(13) OF THE INCOME- TAX ACT,1961 ['THE ACT' FOR SHORT] PASSED IN CONSEQ UENCE TO DISPUTE RESOLUTION PANEL (HEREINAFTER CALLED AS DRP) DIREC TION U/S 144C(5) READ WITH RULE 13 OF THE DRP RULES, 2009 DATED 27.9 .2017. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 2 OF 10 GENERAL GROUND OF APPEAL 1. ERRED IN ASSESSING THE TOTAL INCOME AT INR 12,58,91,068 AS AGAINST DECLARED NIL INCOME BY THE APPELLANT IN ITS RETURN OF INCOME. GROUNDS OF APPEAL IN RELATION TO TRANSFER PRICING A DJUSTMENT MANUFACTURING SEGMENT 2. TRANSFER PRICING ADJUSTMENT ERRED ON FACTS AND IN LAW BY MAKING THE TRANSFER PR ICING ADJUSTMENT AMOUNTING TO INR 11,71,20,595 TO ITS INTERNATIONAL TRANSACTIONS IN CONNECTION WITH THE MANUFACTURING SEGMENT BY NOT AC CEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT. 3. INAPPROPRIATE USE OF SINGLE YEAR MARGINS OF THE COM PARABLE COMPANIES FOR TRANSFER PRICING ANALYSIS ERRED IN CONSIDERING THE OPERATING PROFIT MARGINS O F THE COMPARABLE COMPANIES BASED ON THE FINANCIAL DATA PERTAINING ON LY TO FINANCIAL YEAR ENDED 31 MARCH 2013 AND REJECTING USE OF FINANCIAL DATA OF COMPARABLE COMPANIES FOR MULTIPLE YEARS I.E. INCLUDING 31 MARC H 2012 AND 31 MARCH 2011. 4. NON- GRANT OF WORKING CAPITAL ADJUSTMENT ERRED IN NOT GRANTING SUITABLE ADJUSTMENTS TO ACCOU NT FOR DIFFERENCES IN THE WORKING CAPITAL EMPLOYED BY THE COMPARABLE COMPANIE S. 5. ABNORMAL EXPENDITURE CONSIDERED AS OPERATING IN NAT URE ERRED IN CONSIDERING ABNORMAL EXPENSE OF PROGRAM LA UNCH EXPENSES AS PART OF THE OPERATING EXPENSE FOR COMPUTATION OF OP ERATING MARGINS OF THE APPELLANT. 6. INAPPROPRIATELY REJECTING COMPARABLE COMPANIES IDEN TIFIED BY THE APPELLANT ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY REJ ECTING COMPANIES CONSIDERED AS COMPARABLE BY THE APPELLANT BY APPLYI NG ERRONEOUS COMPARABILITY FILTER. 7. INAPPROPRIATELY CONSIDERING ADDITIONAL COMPANIES AS COMPARABLE TO THE APPELLANT IN RELATION TO MANUFACTURING SEGMENT ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY ACC EPTING ADDITIONAL COMPANIES AS COMPARABLE TO THE APPELLANT BASED ON UNREASONABLE C OMPARABILITY CRITERIA. 8. REJECTION OF INTERNAL TNMM ANALYSIS DONE FOR INTEVA MANUFACTURING SEGMENT IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 3 OF 10 ERRED IN REJECTING THE ALTERNATIVE ANALYSIS UNDERTA KEN BY THE APPELLANT USING INTERNAL TNMM AS THE MOST APPROPRIATE METHOD TO BENCHMARK TH E INTERNATIONAL TRANSACTION PERTAINING TO MANUFACTURING SEGMENT. 9. NON- GRANT OF DEPRECIATION ADJUSTMENT ERRED IN NOT CONSIDERING THE CLAIM OF DEPRECIATION ADJUSTMENT FOR DIFFERENCE IN THE RATE OF DEPRECIATION OF INTEVA INDIA VIS--VIS COMPARABLE C OMPANIES ARISING AS A RESULT OF UNDERUTILIZED CAPACITY. 10. TP ADJUSTMENT SHOULD BE RESTRICTED TO INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES ERRED IN MAKING TRANSFER PRICING ADJUSTMENT ON THE ENTIRE MANUFACTURING SEGMENT OF THE APPELLANT RATHER THAN RESTRICTING THE ADJUSTMENT TO THE VALUE OF INTERNATIONAL TRANSACTIONS PERTAINING TO MANUFACTURING SEGMENT OF THE APPELLAN T. 11. BENEFIT OF +/- 3% AS APPLICABLE ERRED BY COMPUTING THE ARM'S LENGTH PRICE WITHOUT G RANTING THE BENEFIT OF +- 3% UNDER PROVISO TO SECTION 92C(2) OF THE ACT AS APPLICABLE. 12. ERRONEOUS LEVY OF INTEREST UNDER SECTION 234B OF TH E ACT ERRED ON FACTS AND IN LAW BY LEVYING INTEREST UNDER SECTION 234B OF THE ACT TO THE EXTENT ADDITION IS MADE TO THE TOTAL INCOME OF THE APPELLA NT ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT WITHOUT PROVIDING ANY COGENT REASONS FOR THE SAME. 13. INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 OF THE ACT ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER S ECTION 271 OF THE ACT; THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HE ARING OF THE APPEAL, SO AS TO ENABLE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THI S APPEAL ACCORDING TO LAW. EACH OF THE ABOVE GROUND OF APPEAL IS INDEPENDENT AND WITHO UT PREJUDICE TO THE OTHER GROUNDS OF APPEAL PREFERRED BY THE APPELLANT 2. THE ASSESSEE HAS FILED REVISED GROUNDS OF APPEAL FOR GROUND NOS.6 & 7 AS FOLLOWS: REVISED GROUND 6. INAPPROPRIATELY REJECTING COMPARABLE COMPANIES I DENTIFIED BY THE APPELLANT ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY REJ ECTING THE FOLLOWING COMPANIES CONSIDERED AS COMPARABLE BY THE APPELLANT BY APPLYING ERRONEOUS COMPARABILITY FILTER: IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 4 OF 10 JONAS WOODHEAD & SONS (INDIA) LIMITED; AND MUBEA SUSPENSION INDIA LIMITED 7. INAPPROPRIATELY CONSIDERING ADDITIONAL COMPANIES AS COMPARABLE TO THE APPELLANT IN RELATION TO MANUFACTURING SEGMENT ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE BY ACC EPTING THE FOLLOWING ADDITIONAL COMPANIES AS COMPARABLE TO THE APPELLANT BASED ON UNREASONABLE COMPARABILITY CRITERIA: A B I SHOWATECH (INDIA) LIMITED; AUTOLINE INDUSTRIES LIMITED; AND HARITA SEATING SYSTEMS LIMITED. THE APPELLANT CRAVES, TO CONSIDER EACH OF THE ABOVE GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES TO LEAVE OR ADD, ALTER, DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 3. AT THE TIME OF HEARING, THE ASSESSEE HAS NOT PUT ANY SERIOUS ARGUMENTS WITH REGARD TO GROUND NOS.1, 2, 3, 5, 7, 8, 9, 12 & 13. ACCORDINGLY, THESE GROUNDS ARE NOT CONSIDERED FOR A DJUDICATION AND DISMISSED AS NOT PRESSED. 4. NOW COMING TO GROUND NO.4 WITH REGARD TO NOT GIV ING THE WORKING CAPITAL ADJUSTMENT. THE LD. A.R. SUBMITTED THAT THE TPO HAS GIVEN A CONTRADICTORY FINDING IN HIS ORDER AS S EEN FROM HIS ORDER. THE LD. A.R. FURTHER SUBMITTED THAT IN PAGE NO.12 O F HIS ORDER, HE MENTIONED THAT TPO IS NOT AGAINST SUCH ADJUSTMENT, IF REASONABLE ACCURATE ADJUSTMENT CAN BE MADE AND THERE IS A METH OD TO DO SO, AS IS EVIDENT IN RESPECT OF WORKING CAPITAL ADJUSTMENT , WHICH THE TPO HAS GIVEN, IF IT IS POSSIBLE. HOWEVER, WHILE DETER MINING THE ALP, NO ADJUSTMENT INCLUDING WORKING CAPITAL ADJUSTMENT WAS GIVEN. THE DRP WAS OF THE OPINION THAT THE TPO HAS GIVEN THE W ORKING CAPITAL ADJUSTMENT AND ONLY THERE IS A MISTAKE IN COMPUTATI ON OF SUCH WORKING CAPITAL ADJUSTMENT. ACCORDING TO THE LD. A .R., THERE WAS NO WORKING CAPITAL ADJUSTMENT GIVEN MUCH LESS COMPUTAT ION MISTAKE. HENCE, ACCORDING TO THE LD. A.R., ASSESSEE IS ENTIT LED FOR WORKING CAPITAL ADJUSTMENT AS IN EARLIER YEAR HELD BY THE T RIBUNAL IN IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 5 OF 10 ASSESSEES OWN CASE IN ASSESSMENT YEAR 2010-11 IN I T(TP)A NO.83/BANG/2015 DATED 20.7.2020. 5. ON THE OTHER HAND, LD. D.R. RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT A REASONABLE ACCURAT E ADJUSTMENT IS NOT POSSIBLE, AS THE DIFFERENCES IN WORKING CAPITAL REQUIREMENT ITSELF IS BASED ON VARIOUS ASSUMPTIONS. ACCORDING TO HIM, THE ASSESSEE HAD FAILED TO DEMONSTRATE SUCH MATERIAL DIFFERENCES SO AS TO WARRANT WORKING CAPITAL RISK ADJUSTMENT, HENCE, THE DRP AS WELL AS TPO HAS REJECTED THE ASSESSEES CLAIM FOR WORKING CAPITAL R ISK ADJUSTMENT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, SIMILAR ISSUE CAME UP FOR CONSI DERATION BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO.83/BANG/2015 VIDE ORDER DATED 20.7.2016, WHE REIN IN PARA 10 IT WAS HELD AS FOLLOWS: 10. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CA REFUL PERUSAL OF THE RECORD, WE NOTE THAT THE DRP IN PARA 3.16 DIRECTED THE TPO TO COMPUTE THE WORKING CAPITAL ADJUSTMENT IN RESPECT OF THE COMPAR ABLES AFTER GIVING THE EFFECT TO THE DIRECTIONS AS UNDER: 3.16 OBJECTION 18 WORKING CAPITAL ADJUSTMENT HAVING HEARD THE OBJECTION, ON PERUSAL OF THE ORDE R OF THE TPO, WE DO NOT FIND ANY ABNORMALITY IN THE WORKING CAPITAL ADJUSTMENT ALLOWED BY THE TPO. HOWEVER, WE ARE OF THE VIEW TH AT THE WORKING CAPITAL ADJUSTMENT NEEDS TO BE COMPUTED IN RESPECT OF COMPARABLES RETAINED WITHOUT PUTTING ANY RESTRICTIONS. ACCORDI NGLY, THE TPO IS DIRECTED TO COMPUTE MEAN OF WORKING CAPITAL ADJUSTM ENT IN RESPECT OF COMPARABLES RETAINED, AFTER GIVING EFFECT TO THE DI RECTIONS CONTAINED IN THIS ORDER. SINCE THE TPO HAS NOT COMPLIED WITH THE DIRECTIONS GIVEN BY THE DRP THEREFORE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE TPO/AO FOR GIVING THE PROPER WORKING CAPITAL ADJUSTMENT WITHOUT ANY RESTR ICTION AS HELD BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF CITR IX R & D INDIA PVT. LTD. IT(TP)A NO.1289/BANG/2014 WHEREIN IT WAS HELD THAT THE TPO CANNOT RESTRICT THE WORKING CAPITAL ADJUSTMENT ARTIFICIALL Y FROM THE ACTUAL COMPUTATION. IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 6 OF 10 7. BEING SO, IN OUR OPINION, THE AO/TPO HAS TO CONS IDER THE ASSESSEES CASE AS ENTITLED FOR WORKING CAPITAL ADJ USTMENT AS IN EARLIER YEAR, WHILE DETERMINING THE ALP. ACCORDING LY, WE DIRECT THE A.O. TO DETERMINE THE APPROPRIATE RATE OF WORKING C APITAL RISK ADJUSTMENT AFTER GOING THROUGH THE RELEVANT RECORDS OF THE ASSESSEE. THE ISSUE IS REMITTED TO THE FILE OF AO/TPO FOR FRE SH CONSIDERATION TO DETERMINE THE WORKING CAPITAL ADJUSTMENT. 8. IN GROUND NO.6, THE ASSESSEE WANTS INCLUSION OF FOLLOWING COMPARABLES: 1. JONAS WOODHEAD & SONS (INDIA) LIMITED. 2. MUBEA SUSPENSION (INDIA) LIMITED. AT THE TIME OF HEARING, ASSESSEE HAS PRESSED ONLY WITH REGARD TO THE INCLUSION OF MUBEA SUSPENSION (INDIA) LTD. ACCORDINGLY, GROUND RELATED TO INCLUSION OF OTHER COMPARABLE I.E . JONAS WOODHEAD & SONS (INDIA) LTD. IS DISMISSED AS NOT PRESSED. MUBEA SUSPENSION (INDIA) LTD. THE LD. A.R. SUBMITTED THAT THIS COMPARABLE WAS RE JECTED BY THE TPO ON THE REASON THAT THIS COMPARABLE IS HAVIN G LOSS FOR 2 YEARS OUT OF 3 YEARS. THE INCLUSION OF THIS COMPARABLE I S CONFIRMED BY THE DRP. ACCORDING TO THE LD. A.R., THE TRIBUNAL IN TH E CASE OF KBACE TECHNOLOGIES PVT. LTD. IN ITA NO.3189/BANG/2018 DAT ED 29.1.2020 FOR THE ASSESSMENT YEAR 2014-15 HAS OBSERVED THAT T HE PERSISTENT LOSS FILTER CAN BE APPLIED ONLY IF THERE IS A SUCCE SSIVE LOSS IN 3 ASSESSMENT YEARS AND IF THERE IS PROFIT IN ANY ONE FINANCIAL YEAR OUT OF 3 SUCCESSIVE FINANCIAL YEARS, THEN THAT COMPANY CANNOT BE EXCLUDED ON THE BASIS OF PERSISTENT LOSS-MAKING FIL TER. 9. ON THE OTHER HAND, LD. D.R. SUBMITTED THAT THE P ERSISTENT LOSS- MAKING COMPANY CANNOT BE A GOOD COMPARABLE FOR THE PURPOSE OF DETERMINING THE ALP. HE RELIED ON THE ORDER OF THE HYDERABAD BENCH IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 7 OF 10 BENCH IN THE CASE OF BRIGADE GLOBAL SERVICES PVT. L TD. VS. ITO, WHEREIN HE HAS HELD THAT IN CASE THERE IS CONTINUOU S LOSS YEAR BY YEAR, IN SUCH A SITUATION THAT COMPANY DATA CANNOT BE CONSIDERED AS COMPARABLE. SINCE IN THE PRESENT CASE, THE MUBEA S USPENSION (INDIA) LTD. IS HAVING CONTINUOUS 2 YEARS LOSS THAT CANNOT BE CONSIDERED AS COMPARABLE TO ASSESSEES CASE. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE GONE THROUGH THE CASE LAW CITED BY THE PARTY HEREIN. IT IS NOT DISPUTED THAT THERE IS ONLY ONE-YEAR PROF IT OUT OF 3 SUCCESSIVE FINANCIAL YEARS. BEING SO, THERE IS A PROFIT IN 1 YEAR OUT OF CONSECUTIVE 3 FINANCIAL YEARS, MUBEA SUSPENSION (INDIA) LTD. T O BE CONSIDERED AS A COMPARABLE TO DETERMINE THE ALP OF THE TRANSACTIO NS IN ASSESSEES CASE AS HELD IN THE CASE OF KBACE TECHNOLOGIES PVT. LTD. (SUPRA) IN PARA 9 OF THE ORDER AS FOLLOWS: 9. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE SU BMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND ARE OF THE VIE W THAT IF IN ANY OF THE THREE PREVIOUS FINANCIAL YEARS, IF SAGARSOFT (I ) LTD. HAS MADE A PROFIT, THEN IT SHALL NOT BE EXCLUDED BY APPLYING T HE PERSISTENT LOSS FILTER. THE TPO/AO WILL VERIFY THIS ASPECT AND CON SIDER INCLUSION OF THIS COMPANY IN THE FINAL COMPARABLES IN ACCORDANCE WITH LAW, AFTER DUE OPPORTUNITY TO THE ASSESSEE. 11. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILE OF THE AO/TPO AND AS IN THE CASE OF KBACE TECHNOLOGIES INDIA PVT. LTD . (SUPRA). 12. GROUND NO.10 OF THE APPEAL STATES THAT TP ADJUS TMENT SHOULD BE RESTRICTED TO INTERNATIONAL TRANSACTION WITH THE ASSOCIATED ENTERPRISES. THE CONTENTION OF THE ASSESSEE IS THA T AS THE QUANTUM OF SALES MADE TO THE A.E. VIS--VIS TOTAL SALES IS 52.16%, IT IS STATED THAT IF THE TP ADJUSTMENT IS TO BE RESTRICTED ONLY TO THE QUANTUM OF MANUFACTURING SALES PERTAINING TO A.ES I.E. 52.16% AND IT CANNOT BE EXTENDED TO OTHER THAN INTERNATIONAL TRANSACTIONS T O A.E. IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 8 OF 10 13. ON THE OTHER HAND, LD. D.R. SUBMITTED THAT THE TPO HAS ADOPTED ALP MARGIN OF 5.61% AND THUS ARRIVED AT THE ALP PRICE AT RS.137.62 CRORES AGAINST THE OPERATING REVENUE OF R S.123.85 CRORES. THEREFORE, HE HAS PROPOSED THE ADJUSTMENT AT RS.13. 77 CRORES. THE POINT TO BE UNDERSTOOD HERE IS THAT IF AN ADJUSTMEN T OF RS.13.77 CRORES IS MADE, THE PLI OF THE ASSESSEE IN THE MANU FACTURING SEGMENT COMES TO BE AT ARMS LENGTH. IF ADJUSTMENT IS MADE AS PROPOSED BY THE ASSESSEE I.E. 52.16%, THEN THE ADJUSTMENT WILL COME TO BE RS.7.18 CRORES (52.16% OF RS.13.77 CRORES). THUS, IF THIS ADJUSTMENT IS MADE THEN THE OP/OR OF 5.61% WILL NEVER BE REACHED. FUR THER, THE MANUFACTURING SEGMENT MAY CONTAIN SO MANY COMPONENT S OF TRANSACTIONS WITH AE AND THE SALE TO REVENUE IS NOT THE ONLY ONE. ALTHOUGH THE TPO HAS MADE ADJUSTMENT IN THE REVENUE , THEREBY IMPLYING THAT THE ASSESSEE SHOULD HAVE EARNED RS.13 .77 CRORES MORE FROM ITS AE, BUT IN ESSENCE IT IS THE OVERALL ADJUS TMENT SO AS TO BRING IT TO ARMS LENGTH MARGIN. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS REPORTED FOLLOWING INTERNATIONAL TRANSACTIONS W ITH AE AS RELATED TO PUNE UNIT: TYPE OF TRANSACTION METHOD AMOUNT (RS.) MARGIN SALE OF GOODS TNMM 64,49,08,908 - 0.71% (DEPRECIATION ADJUSTED) PURCHASE OF RAW MATERIALS 1,13,96,574 ROYALTY PAID 1,74,45,628 MANAGEMENT FEE EXPENSES 6,79,70,501 THEREFORE, TO CLAIM THAT THE ADJUSTMENT SHOULD BE RESTRICTED TO ONLY 52.16% IS ERRONEOUS AS IT ASSUMES THAT ALL OTH ER TRANSACTIONS ARE AT ARMS LENGTH. THE FACT IS THAT WHEN THE COMP ARISON HAS BEEN MADE AT ENTITY LEVEL, THEN THE PROPOSED ADJUSTMENT OF RS.13.77 CRORES CANNOT BE INFERRED TO BE RELATED TO ONLY TO THE SAL E TO AES. IT IS POSSIBLE THAT A HIGHER ROYALTY HAS BEEN PAID OR A H IGHER PRICE HAS IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 9 OF 10 BEEN PAID FOR THE RAW MATERIAL OR FOR MANAGEMENT FE E OR LESS MONEY HAS BEEN RECEIVED FOR SALE TO AE. TPO HAS MADE ADJ USTMENT ON SALE BUT THE SAME CAN BE DISTRIBUTED TO OTHER TRANSACTIO NS AS WELL AS TO BRING THE PLI TO THE ARMS LENGTH MARGIN. THUS, THE IMPORTANT THING TO SEE HERE IS THE QUANTUM OF ADJUSTMENT (WHICH IN THIS CASE IS RS.13.77 CRORES TO BRING ITS OP/OR TO 5.61% WHICH I S THE PLI FOR THE COMPARABLES). ANY REDUCTION IN THE PROPOSED ADJUST MENT WILL RESULT IN A LESSER PLI AS COMPARED TO THE COMPARABLES AND HENCE, WILL NEVER BE AT ARMS LENGTH. ACCORDINGLY, THIS GROUND WAS RE JECTED BY THE DRP. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THIS ISSUE CAME FOR CONSIDERATI ON IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2010-11. THE TRIBU NAL ON THIS ISSUE OBSERVED IN PARA 23 IN ITA NO.83/BANG/2015 DATED 20 .7.2016 THAT TPO WAS CONFINED TO THE ADJUSTMENT TO THE VALUE OF INTERNATIONAL TRANSACTIONS ONLY AS THE SECTION 92 OF THE ACT APPL IES WITH REFERENCE TO COMPUTATION OF INCOME FROM INTERNATIONAL TRANSAC TIONS HAVING REGARD TO ALP IN THIS AY 2013-14 AND OTHER DOMESTIC TRANSACTIONS CANNOT BE CONSIDERED FOR DETERMINING ALP IN THIS A. Y. BEING SO, WE DIRECT THE AO/TPO TO CONFINE THE TPO ADJUSTMENT ONL Y ON INTERNATIONAL TRANSACTION IN MANUFACTURING SEGMENT ONLY. 15. NOW COMING TO GROUND NO.11 ASSESSEE APPEALS FOR BENEFIT OF +/- 3% AS APPLICABLE UNDER PROVISO TO SECTION 92C(2 ) OF THE ACT. ON THIS ISSUE, WE OBSERVE THAT WHILE COMPUTING THE ALP IF THE PROFIT MARGIN IS WITHIN THE RANGE OF +/- 3% IN TERMS OF SE CTION 92C(2) OF THE ACT THERE IT CANNOT BE ANY TP ADJUSTMENT WITH REGAR D TO THE INTERNATIONAL TRANSACTIONS. THE AO/TPO TO TAKE NOT E OF PROVISION OF SECTION 92C(2) OF THE ACT AND DECIDE ACCORDINGLY. ORDERED ACCORDINGLY. IT(TP)A NO.2843/BANG/2017 M/S. INTEVA PRODUCTS INDIA AUTOMOTIVE PVT. LTD., BA NGALORE PAGE 10 OF 10 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DEC, 2020. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER BANGALORE, DATED 23 RD DEC, 2020. VG/SPS 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.