TP: Turnover is a relevant factor to consider comparability

By Suraj R Agrawal Income Tax Judiciary February 25, 2016

TaxGuru Citation: 2016 taxguru.in 187
Case Name: CIT Vs Pentair Water India Pvt. Ltd (Bombay High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2007-08
Courts: All High Courts, Bombay High Court

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CA Suraj R. Agrawal

Brief of the Case:-

Infosys & Wipro are no doubt large and distinct companies where the area of development of subject services is different and as such the profit earned there from cannot be a bench-marked or equated with the assessee.

Facts of the case:

Assessee is engaged in the business of manufacture of fiber glass pressure vessel used for water treatment, swimming pool equipments and that the Respondent-Company is making three kinds of vessels namely (I) Code Line, (ii) Composite pressure vessels and (iii) FRP pressure vessels and set up an in-house facility for catering to its needs on the area of engineering, designing & product development.
It is further their case that the Company has rendered such services in the relevant assessment year 2007-2008 to some of its group companies abroad and that the Respondent is the subsidiary to Pentair INC, USA and is involved in the same business. The said Respondent-Company has a unit at Verna Industrial Estate where the said manufacturing activity is taking place.
It is further their case that the Respondent-Assess has filed returns of Income on 30.10.2007 disclosing total income of Rs.5,28,09,795/- on which total tax was Rs.1,81,13,280/-.
An Order under Section 92CA was passed on 27.10.2010 by the TPO and the AO on 21.12.2010 added an amount of Rs.1,68,60,877/- in the Order passed under Section 143 (3) of the said Act.
It is further the contention of the Appellant that being aggrieved by the said Order, the Respondent-Assessee preferred an Appeal before the Commissioner Income Tax Appeal and by its Order dated 16.11.2012, directed the AO to compute the TP adjustment by taking the operating margin at the comparable rate of 22.92%.
Being aggrieved by the said Order, both the Respondent as well as the Appellant filed Appeals before the Income Tax Appellate Tribunal which came to be disposed of by Order dated 23.05.2014. Being aggrieved by the said Order, the Appellant has preferred the present Appeal.

Contentions of Appellant: