IT/ILT : Where TPO made addition to assessee's ALP in respect of selling ready to serve food to its AE without giving adjustment on account of difference in capacity utilisation between assessee and its comparable, impugned addition deserved to be set aside
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[2015] 59 taxmann.com 437 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Tasty Bite Eatables Ltd.
v.
Assistant Commissioner of Income-tax, Circle-7, Pune*
MS. SUSHMA CHOWLA, JUDICIAL MEMBER
AND R.K. PANDA, ACCOUNTANT MEMBER
IT APPEAL NO. 1682 (PN) OF 2011
[ASSESSMENT YEAR 2007-08]
JUNE 10, 2015
Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments/Adjustments - Capacity utilization) - Assessment year 2007-08 - Assessee-company was engaged in business of manufacture, marketing and distribution of ready to serve and ready to cook food products and food intermediates - During relevant year, assessee entered into international transaction relating to sale of ready to serve foods to its AE - Assessee adopted TNM method to benchmark its transaction with its Associated Enterprises - It selected ADF Foods Ltd., as a comparable company to benchmark its transactions with AEs - Assessee's case was that its PBDT on cost during year was 6.25 per cent whereas that of comparable company ADF Foods Ltd. worked out to 9.02 per cent considering average of sales and cost - Contention of assessee to consider PLI as OP/OE and adjustment on account of under utilization of capacity while determining ALP of international transaction was not found acceptable by TPO - He thus made certain addition to assessee's ALP - It was noted that capacity utilisation of assessee worked out to 15 per cent whereas capacity utilisation of comparable company was 53 per cent and therefore, difference between two was significant and material to impact profit margin of assessee - Moreover, assessee's contention that transfer pricing adjustment had to be made with respect to international transactions only and not on entire sales as done by TPO also required verification - Whether in view of aforesaid, impugned addition was to be set aside and, matter was to be remanded back for disposal afresh - Held, yes [Paras 33,36 and 37] [In favour of assessee/Matter remanded]
■■■
[2015] 59 taxmann.com 437 (Pune - Trib.)
IN THE ITAT PUNE BENCH 'B'
Tasty Bite Eatables Ltd.
v.
Assistant Commissioner of Income-tax, Circle-7, Pune*
MS. SUSHMA CHOWLA, JUDICIAL MEMBER
AND R.K. PANDA, ACCOUNTANT MEMBER
IT APPEAL NO. 1682 (PN) OF 2011
[ASSESSMENT YEAR 2007-08]
JUNE 10, 2015
Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Comparables and adjustments/Adjustments - Capacity utilization) - Assessment year 2007-08 - Assessee-company was engaged in business of manufacture, marketing and distribution of ready to serve and ready to cook food products and food intermediates - During relevant year, assessee entered into international transaction relating to sale of ready to serve foods to its AE - Assessee adopted TNM method to benchmark its transaction with its Associated Enterprises - It selected ADF Foods Ltd., as a comparable company to benchmark its transactions with AEs - Assessee's case was that its PBDT on cost during year was 6.25 per cent whereas that of comparable company ADF Foods Ltd. worked out to 9.02 per cent considering average of sales and cost - Contention of assessee to consider PLI as OP/OE and adjustment on account of under utilization of capacity while determining ALP of international transaction was not found acceptable by TPO - He thus made certain addition to assessee's ALP - It was noted that capacity utilisation of assessee worked out to 15 per cent whereas capacity utilisation of comparable company was 53 per cent and therefore, difference between two was significant and material to impact profit margin of assessee - Moreover, assessee's contention that transfer pricing adjustment had to be made with respect to international transactions only and not on entire sales as done by TPO also required verification - Whether in view of aforesaid, impugned addition was to be set aside and, matter was to be remanded back for disposal afresh - Held, yes [Paras 33,36 and 37] [In favour of assessee/Matter remanded]
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