Nordex India Pvt Ltd Vs DCIP (ITAT Bangalore)
ITAT Bangalore held that if two out of the three preceding assessment year the comparable has earned profits it cannot be held a persistent loss making company. Hence, persistent loss filter can be applied only if there is loss in three successive assessment years.
Facts- Assessee is a company being wholly owned subsidiary of Acciona Windpower International S.L., Spain. The assessee aggregated the purchases of raw materials and purchase of fixed assets under manufacturing segment.
The only segment disputed by the TPO was in the manufacturing segment. It was noted by the TPO that assessee computed its margin under the manufacturing segment to be 5.83%. Assessee selected six comparable with a median of 5.47% thereby treating its transaction to be at arm’s length under the manufacturing segment. Disagreeing with the transfer pricing study, the TPO applied certain filters and shortlisted the comparables with a mean of 11.62%. Accordingly, TPO proposed an adjustment of Rs. 30,14,11,018/- to be the shortfall.
DRP upheld the observations of the TPO and rejected the objections raised by the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Hon’ble Pune Tribunal, in case of Yazaki (India) Pvt. Ltd. vs. ACIT, has held that persistent loss filter can be applied only if there is loss in three successive assessment years and that if there is a profit in any one of the three past Financial Years, then that company cannot be excluded on the basis of this filter.
Accordingly, this Tribunal has observed that if two out of the three preceding assessment year the comparable has earned profits it cannot be held a persistent loss making company.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present appeal is filed by assessee against the final assessment order dated 16.02.2022 passed by NFAC, for Assessment Year 2017-18 on following grounds of appeal:
2. Brief facts of the case are as under:
2.1 Assessee is a company being wholly owned subsidiary of Acciona Windpower International S.L., Spain. Assessee is engaged in assembly of wind turbine generators, including parts such as nacelle, rotor, tower etc. It filed its return of income on 30.11.2017 declaring a loss of Rs.2,97,69,675/- and income under 1 15JB of Rs.6,55, 16,748/-. The case was selected for scrutiny and notice u/s. 143(2) was issued to assessee. In response to the statutory notices, the Ld.AO noted that, the assessee had entered into international transaction with its associated enterprises in Spain that exceeded Rs. 15 crores. A reference was therefore made to the transfer pricing officer to determine the arms length price of the international transaction. 2.2 On receipt of the reference, the Ld.TPO called upon assessee to file the economic details of international transaction in form 3CEB. The Ld.TPO noted that assessee had following international transactions with associated enterprises.
