Nissin Brake India Pvt. Ltd., Gurgaon V. DCIT, Gurgaon

ITA 3425/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4391 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 06-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ES , I - 2 NEW DELHI BEFORE SHRI B.P. JAIN , ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR , JUDICIAL MEMBER ITA N O. 3425 / DEL /201 6 A SSESSMENT YEAR : 2010 - 11 NISSIN BRAKE INDIA PVT. LTD. B - 37/38 , HIP JAPANESE BUSINESS CENTRE IDC, MEHRAULI ROAD, SECTOR - 14, GURGAON VS. DCIT CIRCLE - 3 GURGAON PAN - AACCN3633K (APPELLANT) (RESPONDENT) ASSESSEE BY SH. HIMANSHU SINHA, ADV RESPONDENT SH. SANJAY KUMAR YADAV, SR. DR DATE O F HEARING 20.09.2017 DATE OF PRONOUNCEMENT 22 . 09.2017 O R D E R PER LALIT KUMAR , J .M . : 1 . THE PRESENT APPEAL IS ARISING AFTER THE ORDER PASSED BY THE COMMISSIONER (APPEALS) - II VIDE ORDER DATED 13 TH MARCH, 2016 FOR THE FOLLOWING EFFECTIVE GROUNDS : 1 . THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT(A) U/S 250(6) OF THE INCOME TAX ACT, 1961 [ THE ACT ] UPHOLDING THE ORDER PASSED BY DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 2, GURGAON [ LD. AO ] U/S 143(3) OF THE ACT AND THE ORDER PASSED BY LD. TRANSFER PRICING OFFICER [LD. TPO] U/S 92CA OF THE ACT IS BAD IN LAW. 2 . THE LD. CIT(A)/LD. AO/LD. TPO ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN DETERMINING THE ARM S LENGTH ADJUSTMENT TO THE APPELLANT S INTERNATIONA L 2 ITA NO . 3425 / DEL /201 7 TRANSACTION FROM ASSOCIATED ENTERPRISES ( AES ), THEREBY COMPUTING THE TOTAL INCOME OF THE APPELLANT AT RS. 71,163,895/ - (TAXABLE INCOME 17,411,958 CONSIDERING THE BROUGHT FORWARD LOSSES) AS AGAINST TOTAL LOSS OF RS. 31,195,218 CLAIMED BY THE APPELLANT I N ITS TAX RETURN FOR THE AY 2010 - 11. 3. THAT LD. CIT(A) ERRED IN UPHOLDING THE REFERENCE MADE BY THE LD. AO WITHOUT RECORDING ANY REASONS IN THE ASSESSMENT ORDER BASED ON WHICH HE REACHED THE CONCLUSION THAT IT WAS EXPEDIENT AND NECESSARY TO REFER THE MA TTER TO THE LD. TPO FOR COMPUTATION OF THE ARM S LENGTH PRICE, AS IN REQUIRED UNDER SECTION 92CA(1). 4. THAT LD. CIT(A) ERRED IN UPHOLDING THE ORDERS OF THE LD.AO/LD. TPO DETERMINING THE ARM S LENGTH PRICE OF THE APPELLANT S INTERNATIONAL TRANSACTIONS FROM ASSOCIATED ENTERPRISES IN THE FOLLOWING MANNER - 4.1 BY DISREGARDING THE MULTIPLE YEAR DATA SELECTED BY THE APPELLANT IN THE TP DOCUMENTATION AND IN SELECTING THE CURRENT YEAR (I.E. FINANCIAL YEAR 2009 - 10) DATA FOR COMPARABILITY DESPITE THE FACT THAT AT TH E TIME OF COMPARISON DONE BY THE APPELLANT, THE COMPLETE DATA FOR FINANCIAL YEAR 2009 - 10 WAS NOT AVAILABLE WITHIN THE PUBLIC DOMAIN ; 4.2 BY REJECTING 3 OUT OF 4 COMPARABLE COMPANIES SELECTED BY THE APPELLANT IN THE TRANSFER PRICING DOCUMENTATION AND SELECT ING ONLY 1 COMPANY AS COMPARABLE FOR DETERMINING ARM S LENGTH PRICE. 5. THE LD. CIT(A) HAS ERRED IN REJECTING THE ALTERNATIVE APPROACH OF CONSIDERING PBDIT/SALES AS THE APPROPRIATE PLI WHICH WOULD ADDRESS. 5.1 THE DIFFERENCE IN THE DEPRECIATION POLICIES AD OPTED BY APPELLANT VIS - A - AS COMPARABLE COMPANIES AND 5.2 THE INCONSISTENCY IN DISCLOSING LICENSED/INSTALLED CAPACITY AND ACTUAL CAPACITY BY COMPARABLE COMPANIES IN ORDER TO RELIABLY PERFORM CAPACITY UTILIZATION ADJUSTMENT. 6. WITHOUT PREJUDICE TO THE ABOV E GROUNDS LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LD. AO AND THE LD. TPO BY: 6.1 TREATING FOREIGN EXCHANGE GAIN AS NON - OPERATING IN NATURE WHILE RE - COMPUTING THE ARM S LENGTH PRICE AND 6.2 TAKING ENTIRE FOREIGN EXCHANGE GAIN RELATED TO BOTH TRADIN G AND MANUFACTURING SEGMENT AS NON - OPERATING IN NATURE WHILE RE - COMPUTING THE ARM S LENGTH PRICE IN RELATION TO THE MANUFACTURING SEGMENT. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN NOT EXAMINING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 2. AT THE TIME OF HEARING, IT WAS SUBMITTED BY THE LEARNED AR FOR THE ASSESSEE THAT THE ASSESSEE IS NOT PRESSING GROUND NO. 3 , 4.1 AND 6 . AS THE ASSESSEE HAS NOT PRESSED THESE GROUNDS, THESE GROUNDS 3, 4.1 AND 6ARE 3 ITA NO . 3425 / DEL /201 7 DISMISSED AS NOT PRESSED. IT WAS ALSO SUBMITTED BY THE LEARNED AR FOR THE ASSESSEE THAT THE GROUND NO. 1 AND GROUND NO. 7 ARE GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS REQUIRED IN RESPECT OF THESE GROUNDS. THEREFORE , THE ONLY GROUNDS LEF T BEFORE US ARE GROUND NO. 4.2 AND GROUND NO. 5. 3. IN RESPEC T GROUND NO. 4.2, IT WAS SUBMITTED BY THE LD AR THAT ASSESSEE IS ENGAGED IN MANUFACTURING AND TRADING OF VARIOUS TYPES OF AUTOMOTIVE AND ALUMINUM AND/OR NON - AUTOMOTIVE BRAKE AND ALUMINUM COMPONE NTS, SPARE PARTS AND OTHER RELATED ACCESSORIES. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE INTERNATIONAL TRANSACTION THAT DURING THE YEARS UNDER CONSIDERATION IS AS UNDER: THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE COMPANY WITH ITS ASSOCIATED ENTERPRISES ARE SUMMARIZED IN THE TABLE BELOW: TYPES OF INTERNATIONAL TRANSACTION METHOD SELECTED NISSIN INDIA COMPARABLES (TESTED PARTY) TYPE OF COMPANIES FINDING TOTAL VALUE OF TRANSACTION PLI AVG. PLI IMPORT OF FINISHED GOODS FOR RESALE TNMM WITH OP/OR AS PLI 32,30,48,100 6.40% COMPANIES WITH SIMILAR TRADING ACTIVITY 4.40% IMPORT OF RAW MATERIAL AND INTERMEDIARIES TNMM WITH OP/OR AS PLI 33,33,16,565 0.82% COMPANIES WITH SIMILAR MANUFACTURING ACTIVITY 2.04% IMPORT OF CAPITAL GOODS 63,09,548 PAYMENT OF ROYALTY 32,83,626 AVAILING OF TECHNICAL SERVICES 1,72,28,906 AVAILING OF PRODUCT DEVELOPMENT SERVICES 1,46,58,966 RECEIPT OF INSPECTION CHARGES 52,46,523 SALES OF FINISHED GOODS 2,82,628 REC EIPT OF LOAN REPAYABLE AFTER 3 YEARS NO BENCHMARKI NG REQUIRED 7,66,60,993 NA NA NA INTEREST ON TERM LOAN CUP 6,29,284 1.25% 2.53% 4 ITA NO . 3425 / DEL /201 7 4 . THE ASSESSEE HAS BENCHMARKED THE ALP OF INTERNATIONAL TRANSACTION PERTAINING TO MANUFACTURING SEGMENT BY APPLYING THE TNMM METHOD USING OPERATING PROFIT MARGIN ON REVENUES OP/OR AS PLI. THERE IS NO DISPUTE ABOUT THE SELECTION OF TNMM METHOD AS MOST APPROPRIATE METHOD AMONG THE PARTIES. THE AR SUBMITTED THAT IN TP STUDY THE ASSESSEE HAD SELECTED FOUR COMPARABLES AS UNDER: I. ALLIED NIPPON LIMITED II. HINDUSTAN COMPOSITES LIMITED III. RANE BRAKE LINING LIMITED AND IV. BRAKES INDIA LIMITED. 5 . THE TPO HAS EXAMINED THE TP STUDY OF THE ASSESSEE AND THEREAFTER ISSUED SHOW CAUSE NOTICE DATED 15 TH JANUARY, 2013. IN RESPONSE TO THE SHOW CAUSE NOTICE ASSESSEE FILED THE REPLY TO IT BEFORE TPO , LEARNED TRANSFER PRICING OFFICER, WAS NOT SATISFIED WITH REPLY OF THE ASSESSEE AND ACCORDINGLY REJECTED THREE COMPARABLE OUT OF FOUR COMPARABLES NAMELY I. ALLIED NIPPON LIMITED II. HI NDUSTAN COMPOSITES LIMITED III. RANE BRAKE LINING LIMITED. IN THE TP ORDER IT WAS BY TPO IN PARA 4.1.7 (AT PAGE 69 OF THE APPEAL BOOK) IS AS UNDER: - THE WORKING WAS EXAMINED TO SEE WHY THERE IS SUCH HIGH CAPACITY UTILIZATION. IT WAS SEEN THAT FIGURES OF INSTALLED CAPACITY AND PRODUCTION ARE NOT IN SAME UNITS. FOR EXAMPLE, IN ALLIED NIPPON, INSTALLED CAPACITY OF FRICTION MATERIAL (BRAKE LINING, CLUTCH, FACING, CLUTCH PLATES, BONDED BRAKE SHOE ETC.) IS IN MT WHILE THE PRODUCTION IS GIVEN IN NUMBERS. TAXPAYE R HAS DIVIDED THE FIGURES IN DIFFERENT UNITS TO CALCULATE THE CAPACITY UTLISALION. THIS IS ENTIRELY INCORRECT AND IS LEADING TO ABSURD FIGURES THE TAXPAYER WAS ASKED VIDE NOTING DATED 03.01.14 TO GIVE CAPACITY UTILIZATION TAKING FIGURES OF PRODUCTION AS WE LL AS INSTALLED CAPACITY IN SAME UNITS. HOWEVER, THE ASSESSES HAS NOT FURNISHED THE SAME. IT IS SEEN THESE FIGURES IN SAME UNITS ARE NOT AVAILABLE IN CASE OF THREE COMPARABLES VIZ. ALLIED NIPPON LTD., HINDUSTAN COMPOSITES LTD. AND RANE BRAKE LININGS LTD. T HE FIGURES IN SAME UNITS ARE AVAILABLE ONLY IN CASE OF BRAKES INDIA LTD. HENCE, ONLY THIS COMPARABLES IS BEING TAKEN AS PROPER COMPARABLES . 6 . HENCE TPO HAS DETERMINED THE ALP ON THE BASIS OF THE ONLY ONE COMPARABLE ONLY NAMELY BRAKES INDIA LIMITED. WH ILE DOING SO, THE 5 ITA NO . 3425 / DEL /201 7 LEARNED TPO REJECTED THE SUBMISSION OF THE ASSESSEE WITH RESPECT TO CAPACITY UTILIZATION ADJUSTMENT. THE DRP HAD CONFIRMED THE ORDER WITHOUT DEALING WITH THE CONTENTION OF ASSESSEE, HENCE THE ASSESSEE IS BEFORE US. 7. AT THE OUTSET, THE LEARNED AR HAS DRAWN OUR ATTENTION TO PAGE 595 OF THE PAPER BOOK WHERE OUR SPECIFIC ATTENTION WAS DRAWN TO THE INSTALLED CAPACITY OF THE TESTED PARTY AND ALSO OF THE COMPARABLES AND FURTHER OUR ATTENTION WAS DRAWN TO CAPACITY UTILIZATION RATIO. WE WOUL D LIKE TO REPRODUCE THE COMPARATIVE TABLE FROM THE PART OF THE PAPER BOOK WHICH IS AS UNDER: - NISSIN INDIA - TESTED PARTY CLASS OF GOODS INSTALLED CAPACITY (UNIT NOS.) ACTUAL PRODUCTION (UNIT NOS.) VALUE PER UNIT INSTALLED CAPACITY (VALUE) ACTUAL PRODUCTI ON (VALUE) REFERENCE TANDEM MASTER CYLINDER ASSEMBLY 136,136 54,206 1,912 260,227,356 103,616,120 ANNEXURE 3 OF SUBMISSION DATED JAN 03, 2014. POINT 14.1 & 14.6 OF NOTES TO ACCOUNTS CALIPER ASSEMBLY 134,775 105,880 1,392 187,642,902 147,413,322 PREFILL ED CLUTCH ASSEMBLY 68,068 47,117 2,237 152,247,999 105,386,804 ENGINE MOUNT BRACKET 204, 204 48, 193 308 62,830,046 14,828,154 DISK BRAKE SYSTEM ASSEMBLY 17,017 2,894 3,304 56,229,088 9,562,613 TOTAL 560,200 258,290 719,177,391 380,807,012 CAPACI TY UTILIZATION RATIO 46.11 52.95% COMPARABLE COMPANIES 1.) ALLIED NIPPON LIMITED CLASS OF GOODS INSTALLED CAPACITY (UNIT BASED ) ACTUAL PRODUCTION (UNIT NOS.) VALUE PER UNIT INSTALLED CAPACITY (VALUE BASED ) ACTUAL PRODUCTION (VALUE BASED ) REFERENCE FRICTION MATERIAL 4,000,000 28,249,523 35 138,322,376 976,885,284 POINT 8(I) & (III) OF NOTES DISC PAD, BRAKE SHOE & LINING 12,800,000 17,240,112 46 594,301,013 800,454,377 TOTAL 16,800,000 45,489,635 732,623,389 1,777,339,661 CAPACITY UTILIZATIO N RATIO 270.77% 242.60% 2.) BRAKES INDIA LIMITED CLASS OF GOODS INSTALLED CAPACITY (UNIT NOS. ) ACTUAL PRODUCTION (UNIT NOS.) VALUE PER UNIT INSTALLED CAPACITY (VALUE) ACTUAL PRODUCTION (VALUE) REFERENCE COMPLETE BRAKE SYSTEMS 9,500,000 6,340,470 1357 12,887,700,744 8,601,482,099 PAGE NO. 18 & 19 POINT NO. 14 & 15 OF NOTES TO ACCOUNTS. TOTAL 9,500,000 6,340,470 12,887,700,744 8,601,482,099 CAPACITY UTILIZATION RATIO 66.74% 66.74 % 3.) HINDUSTAN COMPOSITES LIMITED CLASS OF GOODS INSTALLE D CAPACITY (UNIT BASED ) ACTUAL PRODUCTION (UNIT BASED ) VALUE PER UNIT INSTALLED CAPACITY (VALUE BASED ) ACTUAL PRODUCTION (VALUE BASED ) REFERENCE BRAKE LININGS 5,100 5,034 91,211 465,177,322 459,157,380 PAGE NO. 32 & 33. POINT NO. 15 & 16 OF NOTES TO ACCOU NTS. CLUTCH FACINGS 3,000 2,751 45,838 137,513,666 126,100,032 INDUSTRIAL TEXTILES 576 314 219,710 126,553,203 68,989,073 JOINTINGS/LIMPEST SHEETS 1,490 963 79,012 117,727,241 76,088,143 6 ITA NO . 3425 / DEL /201 7 COMPESTOS 50 39 1,905 95,269 74,310 OTHERS 180 161 89,168 16 ,050,262 14,356,068 TOTAL 10,396 9,262 863,116,964 744,765,005 CAPACITY UTILIZATION RATIO 89.09% 52.95% 4.) RANE BRAKE LINING LIMITED CLASS OF GOODS INSTALLED CAPACITY (UNIT NOS. ) ACTUAL PRODUCTION (UNIT NOS.) VALUE PER UNIT INSTALLED CAPACI TY (VALUE) ACTUAL PRODUCTION (VALUE) REFERENCE AUTOMOTIVE PARTS 18,988 31,288 75 1,428,757 2,354,274 PAGE NO. 29 & 39 SCHEDULE N OF P & L A/C AND POINT NO. 18 OF NOTES TO ACCOUNTS TOTAL 18,988 31,288 1,428,757 2,354,274 CAPACITY UTILIZATION RATIO 16 4.78% 164.78 % SUMMARY COMPANY CAPACITY UTILIZATION RA TIO ALLIED NIPPON 242.60% BRAKES INDIA 66.74% HINDUSTAN COMPOSITES 86.29% RANE BRAKE LININGS 164.78% AVERAGE 140.10 8 . ON THE BASIS OF THE ABOVE, IT WAS SUBMITTED THAT THE LEARNED ASSESSING OFFICER, HAD ERRED IN CONCLUDING THAT THE ASSESSEE FAILED TO SUBMIT THE PRODUCTION AND INSTALLED CAPACITY IN SAME UNITS . IT WAS SUBMITTED BEFORE US THAT FROM THE PERUSAL OF THE ABOVE NOTED CHART THE CAPACITY UTILIZATION OF VARIOUS COMPARABLES, IS DISCERNI BLE AS THE CAPACITY OF ALLIED NIPPON, BRAKES INDIA, HINDUSTAN COMPOSITES AND RANE BRAKE LINING WHICH ARE REPRODUCED HEREUNDER: PARTICULARS CAPACITY UTILIZATION % (REFER PG. 594 OF PB TESTED PARTY 52.95% COMPARABLE COMPANIES ALLIED NIPPON 242.60% B RAKES INDIA 66.74% HINDUSTAN COMPOSITES 86.29% RANE BRAKE LININGS 164.78% AVERAGE 140.10% 9 . FURTHER I T WAS SUBMITTED THAT THE COMPANY WHICH ARE IN EXISTENCE, FOR THE LAST 30 TO 40 YEARS AND ARE UTILIZING THE CAPACITIES, THE NECESSARY ADJUSTMENT AS C ONTEMPLATED UNDER RULE 10 - B ARE REQUIRED TO BE GRANTED 7 ITA NO . 3425 / DEL /201 7 TO THE ASSESSEE. OUR ATTENTION IN THE WRITTEN SUBMISSIONS WAS DRAWN TO THE JUDGMENT OF MUMBAI TRIBUNAL IN M/S KIARA JEWELLARY P. LTD. AND ALSO A MESSAGE TO MANDO INDIA STEERING IN ITA NO. 2092/MDS/2012 . ON THE BASIS OF THE ABOVE TWO JUDGMENT IT WAS SUBMITTED THAT IF THE INFORMATION PERTAINING TO CAPITAL CAPACITY UTILIZATION OF THE COMPARABLES ARE DISCERNIBLE FROM THE ANNUAL REPORTS OR OTHER DOCUMENT, THEN THE ISSUE IS REQUIRED TO BE ADJUDICATED BY THE T PO. 10 . ON THE OTHER HAND, THE LEARNED DR HAD RELIED UPON THE ORDER PASSED BY THE LOWER AUTHORITY. 11 . WE HAVE HEARD THE CONTENTION OF THE PARTIES AND PERUSED THE RECORD. THERE IS NO QUARREL FOR THE APPLICABILITY OF RULE 10 - B OF THE INCOME TAX RULES WH ICH CLEARLY PROVIDES THAT THE REASONABLE ACCURATE ADJUSTMENT CAN BE MADE TO ELIMINATE THE MATERIAL FACTS OF SUCH DIFFERENCES INTO INTERNATIONAL TRANSACTIONS WHICH ARE MAKING THE COMPARABLE AS FUNCTIONALLY SIMILAR TO THE TESTED PARTY . THE CAPACITY UTILIZATI ON BY THE COMPARABLE AS WELL AS OF THE ASSESSEE IS AN IMPORTANT DIFFERENCE ARISING ON ACCOUNT OF TECHNOLOGY, USAGE AND AGE OF SET UP ETC. THEREFORE THE TPO IS UNDER AN OBLIGATION TO IRON OUT THE DIFFERENCES ARISING ON ACCOUNT OF DIFFERENCE IN CAPACITY UTIL IZATION OF TESTED PARTY AND COMPARABLES WHILE DETERMINING THE ALP. 12 . HAVING SAID SO, THE TPO IS UNDER AN OBLIGATION TO WORK OUT THE CAPACITY UTILIZATION AND ITS EFFECT ON THE PROFIT EARNED BY THE COMPARABLE AS WELL AS BY THE ASSESSEE. FURTHER IT WAS THE DUTY OF THE ASSESSEE AND TPO TO FIND OUT THE SUITABLE COMPARABLES AND CONDUCT HIS OWN STUDY AFTER REJECTING THE THREE COMPARABLES OF THE ASSESSEE IN TP STUDY. IN THE PRESENT CASE, THE LEARNED TRANSFER PRICING OFFICER HAS REJECTED THE THREE COMPARABLE S ON THE PREMISE THAT THE ASSESSEE HAS NOT FURNISHED THE 8 ITA NO . 3425 / DEL /201 7 DETAILS, THOUGH SAID INFORMATION WAS ASCERTAINABLE AND DISCERNABLE FROM THE RECORD REPRODUCED HEREINABOVE BUT THE TP OFFICER, HAS REJECTED THE THREE COMPARABLES ON THE PREMISES THAT THE CAPACITY UTIL IZATION FIGURES OF PRODUCTION AS WELL AS OF THE INSTALLED CAPACITY ARE NOT AVAILABLE IN THE SAME UNITS. WE ARE OF THE OPINION THAT FIRSTLY IF THE TPO IS REJECTING THREE COMPARABLES ON ACCOUNT OF NON AVAILABILITY OF THE CAPACITY UTILIZATION AND INSTALLED CA PACITY IN THE SAME UNIT, IT DOES NOT DEBAR THE TPO FROM USING HIS POWERS UNDER THE ACT. THE TPO IS DUTY BOUND TO MOVE A STEP FORWARD AND ISSUE A NOTICE UNDER SECTION 133 TO SEEK THE INFORMATION OF CAPACITY UTILIZATION OF INSTALLED AS WELL AS PRODUCTION IN THE SAME UNIT WHICH IS NOT DONE BY THE TPO. MOREOVER, THE TPO WAS UNDER OBLIGATION IN LAW TO CONDUCT HIS OWN TP STUDY , IF REJECTED THE THREE COMPARABLE WERE REJECTED BY HIM BY BRINGING MORE COMPARABLE WHICH ARE COMPARABLE WITH THE PROFILE OF THE ASSESSEE . THAT EXERCISE OF BRING MORE COMPARABLES IN THE FORM OF TP STUDY HAD NOT BEEN DONE BY TPO AND TPO HAD DETERMINED THE ALP ADJUSTMENT BASED ON ONLY ONE COMPARABLE AND FURTHER NOTICE UNDER SECTION 133 WERE NOT ISSUED TO THE COMPARABLES FOR SEEKING THE NE CESSARY INFORMATION S ON CAPACITY UTILIZATION . THE CASE IN HAND IS NOT ONE CASE, WHERE IT IS NOT POSSIBLE FOR TPO TO FIND OUT THE OTHER SUITABLE COMPARABLE AFTER REJECTING THE COMPARABLES OF THE ASSESSEE. BUT NO EFFORTS WERE MADE BY THE TPO TO FIND OUT TH E MORE COMPARABLE SO AS TO MAKE THE ALP ADJUSTMENT BASED ON MEAN PROFIT MARGIN OF THE COMPARABLE S . IN OUR VIEW, THE MAKING ADJUSTMENT ON THE BASIS OF STANDALONE COMPARABLE IS NOT A HEALTHY PRACTICE, UNLESS THE COMPARABLE AVAILABLE IS INTERNAL ONE AND IS TH EREFORE REQUIRED TO BE DISSUADED . ACCORDINGLY THE ADJUSTMENT MADE BY THE TPO ON THE BASIS OF ONE COMPARABLE IS NOT SUSTAINABLE IN THE EYE OF LAW AND ACCORDINGLY WE HAVE 9 ITA NO . 3425 / DEL /201 7 NO HESITATION TO REJECT THE ORDERS PASSED BY LOWER AUTHORITIES HOWEVER WE DEEM IT APPR OPRIATE TO DIRECT THE TPO TO CONDUCT A FRESH TP STUDY AFTER TAKING INTO CONSIDERATION THE ABOVE SAID OBSERVATION AND ALSO THE PROFILE OF THE ASSESSEE . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE FOR THE STATISTICAL PURPOSES AND ENTIRE TP G ROUNDS ARE REMANDED BACK TO THE FILE OF TPO . 13 . THE NEXT GROUND URGED BEFORE US IS WITH RESPECT TO THE DEPRECIATION POLICY ADOPTED BY THE APPELLANT VIZ A VIZ THE COMPARABLE WHICH IS REPRODUCED AS UNDER: THE APPELLANT HAS ALSO ADVOCATED AN ALTERNATIVE AP PROACH OF CONSIDERING CASH PROFIT UPON SALES MARGIN (PBDIT/SALES) AS THE PLI WHEREIN THE DEPRECIATON COST WOULD BE TAKEN OUT FROM THE COMPUTATION OF PBDIT. THE SUMMARY OF RESULTS AFTER PERFORMING WORKING CAPITAL ADJUSTMENT IS TABULATED BELOW: COMPARABLE COMPANIES UNADJUSTED PBDIT/SALES WC ADJUSTMENT FACTOR (%) PBDIT/SALES AFTER WORKING CAPITAL ADJUSTMENT ALLIED NIPPON LIMITED 8.73% - 6.49% 2.24 BRAKES INDIA LIMITED 10.29% - 4.00% 6.29% HINDUSTAN COMPOSITES LIMITED 6.86% - 4.47% 2.39% RANE BRAKE LINING 12.29% - 3.74% 8.55% 9.54% - 4.68% 4.87% NISSIN INDIA (TESTED PARTY) 3.77% 1 4 . ON THE OTHER HAND, THE LEARNED DR RELIED UPON ON THE ORDERS OF THE AUTHORITIES BELOW. 1 5 . WE HAVE HEARD THE RIVAL CONTENTION OF THE PARTIES AND PERUSED THE RECORD AS WE ARE REMANDING BACK THE TP ISSUE TO BE THE F ILE OF THE TRANSFER PRICING OFFICER FOR CONDUCTING THE FRESH TP STUDY AFTER 10 ITA NO . 3425 / DEL /201 7 SEARCHING THE FRESH COM PARABLES IN ACCORDANCE WITH LAW, THEREFORE NO PURPOSE WOULD BE SERVED T O ADJUDICATE THE PRESENT GROUND A S IT WILL BE OF ACADEMIC IN NATURE . ACCORDINGLY THIS GROUND IS DISMISSED AS BEING INFRUCTUOUS. 16 . IN THE LIGHT OF THE ABOVE, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 1 7 . THE ORDER IS PRONOUNCED IN THE OP EN COURT ON .09.2017 . SD/ - SD/ - ( B.P. JAIN ) ( LALIT KUMAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 . 0 9 . 201 7 SH COPY OF ORDER TO : - 1 ) THE APPELLANT; 2 ) THE RESPONDENT; 3 ) THE CIT ; 4 ) THE CIT(A) - , NEW DELHI ; 5 ) THE DR, I.T.A.T., NEW DELHI ; BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT , NEW DELHI 11 ITA NO . 3425 / DEL /201 7 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R. 10 DATE OF DISPATCH OF ORDER