Case Law Details
Jamshedpur Continuous Annealing & Processing Company Pvt. Ltd. Vs National e-Assessment Centre (ITAT Kolkata)
ITAT Kolkata held that for determining fair and true profit for the purpose of application of Transactional Net Margin Method (TNMM), it is appropriate that the effect of depreciation must be excluded.
Facts- Jamshedpur Continuous Annealing & Processing Co. Pvt Ltd was incorporated on 17th March 2011 as a wholly owned subsidiary of Tata Steel Limited (TSL). It was later converted into a Joint Venture (JV) between TSL and Nippon Steel and Sumitomo Metal Corporation (NSSMC) on 17th August 2012. The commercial operations of JCAPCPL commenced on 01/04/2015. The company has been set up as India’s first CAPL 600,000 tonnes per annum of high-quality cold rolled sheets exclusively for the automotive industry.
During calculation of Net profit margin in ALP the TPO had considered the depreciation of assessee. The assessee is a newly set up business entity and yielding huge depreciation. The assessee requested for acceptance of cash PLI for calculation ALP which was rejected the by the TPO. The DRP had accepted the assessee’s plea, but the TPO had not is calculated the considered. The adjustment by TPO amount to Rs. 35,27.000/- 2017 for AY 2017-18 was which upheld by AO.
Conclusion- Held that in our considered view the depreciation should be removed for calculation of net profit margin and cash profit level indicator (PLI) is justified method. Accordingly, we remit back the matter to the file of TPO/AO for further calculation of TP adjustment by considering the direction of the Bench. We order accordingly.
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