M/S BERGEN ENGINES INDIA PVT. LTD.,,NEW DELHI vs. ACIT, NEW DELHI

The assessee company was incorporated on 3/11/2011 and this is the first year of operation of the company. The assessee is a subsidiary of Bergen Engine, AS, Norway. The Company operates in India primarily in the business of supply of spare parts and other equipments used by engine based power plants and Oil & Gas Pumping System and also provides technical services in relation thereto. It also renders market support services and Project Management Services to its AEs. The assessee’s group companies include Rolls Royce Plc. and Rolls Royce Singapore Pte. Ltd. The assessee has entered into several international transactions with its AEs. The TPO has made an adjustment in the international transaction of purchase of traded goods. The assessee benchmarked this transaction using RPM as the Most Appropriate Method. The TPO rejected the use of RPM and adopted TNMM as the Most Appropriate Method. The TPO selected 7 comparables with an average OP/OI of 10.09% and made an adjustment of Rs. 70,61,839/- vide order dated 28.01.2016 only in respect of the transaction of purchase of the added goods. The other international transactions were held to have been conducted at ALP by the TPO and hence no corporate tax adjustment was in dispute. The assessee raised objections before the DRP and the DRP vide directions dated 12/8/2016 disposed of the same. The assessment order dated 30/08/2016 was passed thereby assessing loss of (-) Rs. 5,61,90,150/-.

Being aggrieved by the assessment order, the present appeal is filed by the assessee before us.

As regards Ground No. 2, relating to rejection of RPM for purchase of traded goods, the Ld. AR submitted that the assessee imported traded goods for subsequent sales to third parties in India without any value addition, RPM was considered as the most appropriate method (MAM). The RPM is considered as the most appropriate method in the transactions involving purchase made from an associated enterprise and resale to a non-associated enterprise, and there is very little or no value addition by the taxpayer which is the case of the assessee. The Ld. AR submitted that OECD in its Transfer Pricing guidelines state that, “It is generally accepted amongst most tax authorities that the RPM is applicable and preferable where the entity performs basic sales, marketing and distribution functions. (i.e. where there is little or no value added by reseller prior to the resale of the goods acquired from related parties). The Method is applicable even with differences in products, as long as the functions performed are similar.”

The Ld. DR relied upon the order of the TPO.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the TPO did not dispute the fact that the assessee is a trader and admitted that assessee is engaged in the business of a distributor. RPM is one of the standard method when the goods are purchased from the AE’s and there are sales effected to unrelated parties without any further processing. In present assessee’s case, the goods are purchased from AE and are sold to third party without any value addition as evident from audited Financials Note 19 wherein the revenue from operations has been shown from sale of traded goods. There is no raw material cost incurred by the assessee which is evident from the Profit and loss account. Thus, there no value addition done through further processing or manufacturing. This factual aspect was not at all disputed by the TPO. The resale price method is to be adopted only when goods purchased from an AE are resold to unrelated parties and therefore, the present assessee must have taken RPM as most appropriate method (MAM). But Most appropriate method is ultimately selected for the purpose of determining ALP after benchmarking and correct selection of comparables. From the perusal of the order of the TPO and the observations of the DRP it can be seen that in present assessee’s case, in its search process the assessee selected engineering companies of various types and after excluding companies with insufficient financial information, the assessee was left with 97 companies. Thereafter, the assessee selected 37 companies with similar business activities/products. Thereafter, the assessee again excluded 24 companies on the basis of different functional profile. Finally, the assessee selected 3 comparables with an average gross profit margin of 29.89%. The assessee has not furnished complete details of the companies which have been excluded on the basis of a different functional profile. The assessee has selected 3 companies but these companies are engaged in a wide variety of activities even in their trading segment. For example, as per the information given in the assessee’s TP study, Batliboi Ltd. is engaged in trading in various types of machine tools. Similarly, Greaves Cotton is engaged in the business of various types of engines, gensets, agro equipment and construction equipment. Kirloskar Oil is also engaged in a wide variety of activities. The DRP was right in holding that the RPM requires stricter comparability whereas TNMM is more tolerant of functional differences. Merely, stating that the RPM is most appropriate method does not serve the purpose of selecting the comparability method. It should be more useful centric and should be meaningful while arriving at the appropriate ALP. Even if the assessee has applied qualitative criteria and manually checked each company on functions performed, still it lacks the actual functional similarities after going through the order of the TPO & DRP as well as the TP study report. As regards the case laws referred by the Ld. AR during the hearing, we have considered each case law cited before us separately and come to the conclusion that not a single decision is applicable in assessee’s case as facts of those cases are different and distinguishable. Thus, the contentions of the assessee failed to justify RPM as most appropriate method. Though the TPO in subsequent AY 2013-14 has accepted the Retail Price Method (RPM) adopted by the assessee for purchase of traded goods that cannot be treated as the threshold for allowing the correct appropriate method of benchmarking. In the present assessment year, there is no proper comparable available for allowing the RPM as the most appropriate method. In fact, the TNMM is proper in the present assessee’s case because the said method is tolerant of functional differences as well as it is adaptive in nature while benchmarking the other comparables. So the Transfer Pricing will be more appropriate by adopting TNMM. Therefore, the TPO as well as the DRP rightly rejected RPM as most appropriate method (MAM). Thus, Ground No. 2 is dismissed.

As regards to Ground No. 4 relating to objection for considering TNMM as most appropriate method over RPM, the Ld. AR submitted that the TPO has taken the TNMM as Most Appropriate method for benchmarking the purchase of traded goods by stating that “TNMM is the most, preferred‟ method in analyzing transactions (at the net level) as it is more tolerant to differences between the tested party and comparable uncontrolled transactions”.

The Ld. DR relied upon the order of the TPO and the order of the DRP.

We have heard both the parties and perused all the relevant material available on record. Since we have already answered the question as to which is the Most Appropriate Method (MAM) while dealing Ground No. 2 of the appeal and held that Resale Price Method taken by the assessee is not the Most Appropriate Method (MAM), the TNMM adopted by the TPO is correct. The contention of the assessee that there cannot be the consideration for diluting the standards of comparable transactions/entity, does not have practical approach as in the present case RPM fails the threshold of benchmarking while taking up the comparables which are not at all proper. Thus, the most appropriate method is TNMM as held by the TPO and the DRP. Hence, Ground No. 4 is dismissed.

As regards Ground No. 3.1.1 relating to objection to rejection of search process of the assessee, the Ld. AR submitted that out of 6 quantitative filters used by the TPO for the new search process, 5 filters are same as that of the assessee which has been used for obtaining the comparables in its TP study report, and in subsequent submission before TPO. The common filters are as under: i) Use of current year data ii) Reject companies having different financial year iii) Reject companies where turnover is less than Rs. 1 crore iv) Select companies where the ratio of service income to total income is at least 75% v) Reject companies where related party transactions exceed 25% of sales The filter which was not taken into account by the assessee company is relating to rejection of companies that are affected by some peculiar economic circumstances. It was not lawful for the TPO to reject the search process of the assessee without cogent objections with respect to the choice of filters and consequently the search process carried out by the assessee. A similar view has been upheld in M/s Frigoglass India Pvt. Ltd Vs DCIT [ITA No. 463/Del/2013] and ACIT vs. MSS India (P.) Ltd [ITAT-2009 -32 SOT 132- PUNE], establishing that the search process of the assessee cannot be rejected without cogent reasons.

The Ld. DR relied upon the order of the TPO and the order of the DRP.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that out of 6 quantitative filters used by the TPO for the new search process, 5 filters are same as that of the assessee which has been used for obtaining the comparables in its TP study report. But while not taking into account one filter and rejecting the same, the TPO has not given any proper reasons as to why the said filter is not applicable. The TPO was not right in rejecting the said filter as the same is very much relevant for the search process of the assessee for arriving at the correct margin. Hence, Ground No. 3.1.1 is allowed.

As regards to Ground No. 3.1.2, relating to objection to rejection of assessee’s comparables, the Ld. AR submitted that the TPO rejected the assessee’s comparables stating functionally not similar. The assessee has chosen companies trading in tools and equipments for large industrial diesel engines that generate high/medium speed to be used in industrial applications, making them functionally similar to the assessee. Having rejected the assessee’s comparables on the basis of functionally not similar, the TPO subsequently stated in its order that the basis of rejecting the three comparables selected by the assessee namely Batliboi Ltd., Kirloskar Oil Engines Ltd. & Greaves Cotton is that these failed in the filter of total income from trading activity more than 75% revenue. Thus the reason of functional dissimilarity of these comparables does not hold good when read with TPO’s subsequent comments. However, without prejudice, the Ld. AR submitted that the TPO’s observation that the assessee’s comparables failed trading filter of 75% is erroneous, as the assessee has taken only the trading data of comparables for the benchmarking the transaction of purchase of traded goods which is also specified in the TP study and submissions of the assessee before TPO. The annual reports of assessee comparables showing that only trading data was used for benchmarking the transaction were before the TPO. The TPO overlooked the search criteria of the assessee and rejected such comparables in summary manner. The Ld. AR submitted that the 75% trading revenue filter is not required since the assessee considered only trading segment of these companies, thus 100% revenue is from trading activities. The Ld. AR relied upon the decision of Delhi ITAT in case of Vestergaard Asia Pvt. Ltd [TS-1020-ITAT- 2017(DEL)] where it was held that 75% service income filter not required since only service segment of comparable was considered. Thus, the assessee which is operating in trading of spares in engineering industry can only be compared with the companies operating in similar industry and not with the companies with automotive industry. The Ld. AR relied upon the decision of Toshiba India Pvt. Ltd (TS-123-ITAT-2009 (Del), wherein it was held that, the AO cannot make arbitrary addition without giving any reasonable ground for disregarding assessee’s transfer pricing analysis, such an arbitrary approach of the AO is not in accordance with law. Similar view was upheld in the decision of GE India Technology Centre Pvt. Ltd vs. DDIT (TS-768-ITAT- 2012 (Bang)-TP). The DRP in para 4.4 of its order alleged that the assessee has not furnished complete detail of companies which have been excluded on the basis of different functional profit. This allegation of the DRP is not correct since the profile of the companies excluded is given in TP Study report. The detailed calculation of PLI is also given in the TP Study report only. The relevant extract of annual reports of these companies was also furnished before TPO/ DRP. Thus, the Ld. AR prayed that the assessee’s 3 comparables be included in the final list of comparables.

The Ld. DR relied upon the order of the TPO and the order of the DRP.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the detailed calculation of PLI is also given in the TP Study report only. The relevant extract of annual reports of these companies was also furnished before TPO/ DRP. The assessee has chosen companies trading in tools and equipments for large industrial diesel engines that generate high/medium speed to be used in industrial applications, making them functionally similar to the assessee. Having rejected the assessee’s comparables on the basis of functionally dissimilar, the TPO subsequently stated in its order that the basis of rejecting the three comparables selected by the assessee namely Batliboi Ltd., Kirloskar Oil Engines Ltd. & Greaves Cotton is that these failed in the filter of total income from trading activity more than 75% revenue. Thus the reason of functional dissimilarity of these comparables have been rightly justified by the TPO in the order. Thus, these comparables are not functionally similar in respect of the trading in tools and equipments for large industrial diesel engines to that of assessee company. Thus, Ground No. 3.1.2 is dismissed.

As regards Ground No. 3.1.3 relating to objection for not providing fresh search process to the assessee, the Ld. AR submitted that the TPO has erred in law and on facts for conducting a fresh search process without giving the assessee to the detailed search process to the assessee. Therefore, in that case the assessee is unable to submit its detailed objection to such search process applied, which is against the principles of natural justice. The Ld. AR relied upon the judgment of Exevo India Private Limited [TS-527-ITAT-2012(Del)] in which it held that, information unavailable to the assessee that is sought to be used for the assessee shall be shared with the assessee. A similar view has been upheld in the following judgments: • Colt Technology Services India Pvt. Ltd v Dy CIT • Sum Total Systems (India) Pvt. Ltd v ITO • Adobe Systems India Pvt. Ltd • Genisys Intergrating Systems India Limited • Ameriprise India Pvt. Limited v DCIT • First Advantage Offshore Services Pvt. Ltd. • Agilent Technologies Delhi Considering the above facts and the case laws, the Ld. AR submitted that carrying out the fresh search process without giving the assessee the complete search process is bad in law and not warranted under chapter X of the Act hence, prayed to be rejected.

The Ld. DR relied upon the order of the TPO and the order of the DRP.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that since the search process given by the assessee is held as not correct by us in the abovesaid paras, hence, Ground No. 3.1.3 is dismissed.

As regards to Ground No. 3.1.4 & Ground 5 relating to objections to TPO’s comparables and cherry picking, the Ld. AR submitted that all the comparables taken by the TPO for benchmarking the transaction of purchase of traded goods is related to auto sector that is “provision of breaking part services” which is not at all related to the business of the assessee as assessee is admittedly engaged in the trading of spare parts used in engine based power plant which cannot be equated with the engine used in auto sector. Thus, all the comparables taken by the TPO are not at all comparables to the assessee company and shows that product criteria applied (if any) and the search process followed has not been on a scientific basis for obtaining companies comparable to the assessee’s trading segment and thus do not satisfy the criteria of Rule 10(B)(2) of the Income Tax Rules. The Hon’ble Delhi High Court in case of Li & Fung (India) Pvt. Ltd [2019-TII-169-HC-DEL-TP ] while following Rampgreen Solutions upheld the ITAT ruling in which it was held that a higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable arm's length price. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in profit level indicator must trigger further investigations/analysis. The Ld. AR submitted that the product criteria used by the assessee is correct which is evident from the fact that the TPO has asked the assessee to submit updated search process using the same products as used in TP Study report vide submission dated 21.09.2015 (PB 158-159). This shows that the TPO had no objections with the product criteria used by the assessee for obtaining comparables for trading segment. The specific objections in respect to each of the comparables of the TPO were already submitted before the TPO vide submission dated 20.01.2016 in response to SCN dated 14.01.2016. The Ld. AR submitted that none of the comparables chosen by the TPO satisfy the comparability criteria of Rule 10(B)(2) and accordingly prayed to be rejected.

Without prejudice, the companies selected by the TPO does not satisfy the 75% trading activity criteria of TPO itself as all the companies selected by the TPO are substantially or wholly manufacturing companies as objected by the assessee in its show cause reply dated 20.1.2016. The Ld. AR submitted that the DRP has not discussed the assessee’s specific objections of comparables and rejected the same by generally stating that RPM requires stricter comparability whereas TNMM is more tolerant of functional differences and referring the judgement of Hon’ble Delhi HC in case of Rampgreen Solutions Pvt. Ltd. 2015-TII-33-HC-Delhi-TP. The Ld. AR submitted that the Hon’ble Delhi HC in case of Rampgreen (supra) held that even KPO and BPO are not comparable due to functionally different even though broadly falls in services. Thus how can a manufacturing company be compared with the trading segment of the assessee in which there is extreme functional difference. The Ld. AR relied upon the judgment of Hon'ble jurisdictional Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.) Ltd. Vs. DCIT reported in (2015) 376 ITR 183 (Delhi) wherein the Hon'ble High Court upheld the importance of functional comparability for determination of ALP. Similar view has been upheld by Hon’ble Delhi HC in case of PCIT vs. Open Solutions Software Services P Ltd. Thus, while under TNMM the sensitivity is reduced, the Ld. AR submitted placing reliance on Rampgreen Solutions Pvt. Ltd. (supra) that a trader of spare parts of engines used in the oil and gas industry cannot be compared with a manufacturer of engine parts which are used in an automobile. Thus, placing reliance on the decision of the Hon’ble Delhi HC and without prejudice to assessee’s our objections for TPO’s comparables which are primarily involved in manufacturing activity, the Ld. AR submitted that even if the gross profit ratio of these comparables is compared with the GP ratio of the assessee for benchmarking the transaction of purchase of traded goods, since RPM is the MAM then also the assessee would be at ALP. Thus even if comparables obtained by the TPO are retained but the RPM method is applied for benchmarking, then also the international transaction of purchase of traded goods shall be at ALP, as GP margin of comparable i.e. 36.93% is less than the GP margin of the assessee i.e. 43.21%.

The Ld. DR relied upon the order of the TPO and the order of the DRP.

We have heard both the parties and perused all the relevant material available on record. From the perusal of records it can be seen that the Ld. AR has contended that none of the comparables chosen by the TPO satisfy the comparability criteria of Rule 10(B)(2) and accordingly the contention of the Ld. AR that these comparables should be rejected appears to be genuine. But further, the Ld. AR contended that even if comparables obtained by the TPO are retained but the RPM method is applied for benchmarking, then also the international transaction of purchase of traded goods shall be at ALP, as GP margin of comparable i.e. 36.93% is less than the GP margin of the assessee i.e. 43.21%. Since we have already held that RPM is not the most appropriate method, we are not interfering with the comparables selected by the TPO. Ground No. 3.1.4 & Ground 5 are dismissed.

As regards to Ground No. 6 relating to objection to treating goodwill written off as operating in nature for computing operating PLI as per TNMM is concerned, the Ld. AR submitted that pursuant to the resolution passed by board of directors in Feb 2012, the Diesel Power Business of Rolls Royce India Pvt. Ltd. was purchased for a lump-sum consideration of Rs. 103.5 crore as against net assets purchased of Rs. 43.72 crore. The excess consideration of Rs. 59.78 crore paid on account of business purchase has been recognized as goodwill in the books of the assessee, to be amortized over a period of 5 years. Thus amortization of such goodwill arising on business purchase is an extra- ordinary event that needs to be adjusted for computing the PLI of the assessee company from routine business operations. It is settled law that extra ordinary expenses are not a part of the routine operations of the company, and therefore, cannot, by very nature be expected to recur, such that they would be reflective of business cycles comparable to other companies chosen for benchmarking and accordingly must be adjusted. The Ld. AR further submitted that the amortization of business purchase goodwill arising on purchase of a business is an extra-ordinary event in the business life cycle of a company that needs to be adjusted for computing the PLI of the assessee company. Extra ordinary items are not a part of the routine operations of the company, and therefore, cannot, by their very nature be expected to recur, such that they would be reflective of business cycles comparable to other companies chosen for benchmarking. Comparisons under the Transfer Pricing regime are to be carried out based on the FAR analysis. The assets employed in FAR means, physical assets/intangibles employed for operations. The Ld. AR submitted that as per the FAR analysis carried out in the TP Study. Assets employed, Goodwill has not been included, since it has not been used for regular business operations of the assessee. Thus, the same is not used for carrying out the normal business operations of the assessee or for undertaking international transactions, and it is to be treated as non-operating in nature. The amortization of goodwill, which was the difference between the costs of actual physical/tangible assets purchased and the price paid for acquiring a running business represents an intangible asset purchased. Goodwill is an intangible rather invisible asset which cannot be brought into FAR analysis while comparing the financial results of the entities since the contribution of intangibles cannot be computed. The purpose of TP analysis is to compare the like with like.

The Ld. DR relied upon the order of the TPO and the order of the DRP

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the TPO has treated goodwill written off as operating in nature for computing operating PLI as per TNMM. The assessee while claiming of depreciation on Goodwill (intangibles) accounted the same for due to a Business purchase under Sec 32 of the Income Tax Act and submitted that the same cannot change the extra ordinary nature of Goodwill amortized in the Audited Financials as per the Companies Act, which is used for the computation of ALP (including PLI) under Chapter-X of the Act, as these are mutually exclusive. The Ld. AR submitted that the assessee had also objected the treatment of goodwill as operating before the ITAT in AY 2013-14 wherein the Tribunal did not adjudicate this ground since the assessee had got the entire relief of TP adjustment without adjudicating this. But the TPO has rightly pointed out that in assessee’s FAR analysis, assessee has not depicted ‘goodwill’ in assets employed. The reason given by the Ld. AR that because ‘goodwill’ may result in increase in sales over the years but it certainly does not affect the operations which are required to be examined for the purposes of determining PLI of tested party for comparisons for TP analysis does not have any bearing to support the case of the assessee. Therefore, this contention of the assessee fails. As regards to without prejudice argument of the Ld. AR has submitted the calculation of PLI of the assessee after treating the amortization of goodwill as non-operating as well as operating in nature. As against the average PLI of the comparables of 10.09%, assessee PLI of the assessee is 9.08% which is within +/-5% range as per the proviso to Sec 92C of the Act. Thus these submissions of the Ld. AR are more practical in nature and are accepted and it appears that the goodwill written off of Rs.1,99,27,211/- is an extraordinary expense which affects the normal profitability for the period in which it is amortized and should be adjusted for computing the PLI of the assessee company after taking into account whether the assessee claimed for depreciation or not on the goodwill. Therefore, we remand back this issue to the file of the TPO/AO for proper verification in light of the above findings. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Thus, Ground No. 6 is partly allowed for statistical purpose.

As regards Ground No. 7 relating to objection for aggregating the trading and service segments for benchmarking the transaction of purchase of traded goods, without prejudice to above contentions, the Ld. AR submitted that the TPO has benchmarked the transaction of purchase of traded goods and correspondingly proposed an adjustment by aggregating the trading and service segment without appreciating the fact that purchase of traded goods is part of the trading segment, therefore the adjustment should be proposed by considering only the trading segment. The Ld. AR has given the working of TP adjustment by considering only the trading segment. The said working represent that if the TPO would have proposed the adjustment on the transaction of purchase of traded goods by considering only trading segment then the adjustment should be restricted to Rs. 64,14,301/- only instead of Rs. 70,61,839/- as originally proposed by TPO. Thus, without prejudice to the submission above, the Ld. AR prayed to restrict the TP adjustment to Rs. 64,14,301/- only and correspondingly deleted the excess adjustment of Rs. 6,47,538 (i.e. Rs. 70,61,839/- minus 64,14,301/-).

The Ld. DR relied upon the order of the TPO and the order of the DRP.

We have heard both the parties and perused all the relevant material available on record. From the perusal of the record, it can be seen that the TPO has benchmarked the transaction of purchase of traded goods and correspondingly proposed an adjustment by aggregating the trading and service segment without appreciating the fact that purchase of traded goods is part of the trading segment, therefore the adjustment should be proposed by considering only the trading segment. The Ld. AR has given the working of TP adjustment by considering only the trading segment. The said working represent that if the TPO would have proposed the adjustment on the transaction of purchase of traded goods by considering only trading segment then the adjustment should be restricted to Rs. 64,14,301/- only instead of Rs. 70,61,839/- as originally proposed by TPO. Thus, the contentions of the Ld. AR appears to be genuine but the same needs verification. Therefore, we direct the TPO to verify the same and if it is proper then to restrict the TP adjustment to Rs. 64,14,301/- only and correspondingly delete the excess adjustment of Rs. 6,47,538 (i.e. Rs. 70,61,839/- minus 64,14,301/-) as per due process of law and facts. Thus, Ground No. 7 is partly allowed.

As regards to Ground No. 8 relating to quashing of order passed by the AO/TPO/DRP, the Ld. AR submitted that the order is based on conjunctures and surmises and is against transfer pricing regulations and rules and same may be quashed. The Ld. AR submitted that the TPO observed in the order that the assessee has given certain arguments in support of retaining persistent loss companies. But the Ld. AR submitted that this issue was never dicussed in the assessment nor assessee filed any submissions for objecting use of this filter. Rather no comparable of the assessee was persistent loss making, thus, the TPO’s allegations are baseless. The Ld. AR further submitted that the TPO while supporting the use of current/single year data filter alleged that taxpayer has used multiple year data, which is totally wrong fact as the assessee himself used the current year data filter. The TPO reproduced the submission in support of multiple year data alleging that the same has been filed by the assessee, which is grossly incorrect. The assessee never filed such submission and no query in this regard was asked. This act of the TPO further strengthens the fact that TPO has done copy paste of some other assessee order without appreciating whether such issue was involved in assessee case or not. Such a casual approach by TPO is not warranted. At Page 17 onwards the TPO gave 5 page arguments for treating Forex gain/ loss as non-operating, and ended up concluding on pg.22 that Goodwill amortization is non-operating expense. This clearly shown non-application of mind while preparing the order. Moreover the TPO itself treated Forex loss as non-operating expense and the assessee did not object to the same. On Pg.39 the TPO accepts that the taxpayer is primarily in the business of trading of spare parts and other equipment used by engines based power plant and oil & gas pumping systems. However in the same para alleged that assessee and the comparable are in auto sector. How can the oil and gas extracting industry be equated to auto sector? The TPO at Pg. No. 8 of the order putting some market trends graph without specifying that how it is relatable to the assessee’s case. The TPO discussing the appropriate level indicator at Pg. No. 17-22 of the order without specifying that how it is relatable to the assessee case and the same has been pasted again at Pg. No. 32-37 of TPOs order. Most parts of the TPO order are repetition as evident from Pg.29 which is repetition of Pg.27. The above observations in the TP order demonstrate that the TPO passed his order without applying his mind as to the facts and circumstances of the assessee’s case. The objections was also filed before DRP, but DRP has not addressed the same in its order. Therefore, in view of above discussions it is evident that the TPO order has been made by non-application of mind, the Ld. AR prayed that the TP order, being bad in law, non-est and void-ab-intio, be quashed. In support of above prayer of quashed the order, the Ld. AR relied upon the judgment of Hon’ble Mumbai High Court in the case of CIT v. M/s. Maersk Global Service Centre (I) Pvt. Ltd. [ITA No. 692 & 693 of 2012] wherein the Ld. DR alleged that Transfer pricing order has in a short and cryptic order as he did not identify the parties / instances as comparable. The Ld. AR also stated that Transfer Pricing Officer blindly and boldly refused to carry out the exercise and thereafter passed an order in terms of section 92CA sub-section (3) thus the matter ought to go back to the Transfer Pricing Officer. However, the Hon’ble High Court dismissed this ground and does not allow the 2nd chance of inning to TPO and upheld the ITAT order. The Mumbai ITAT in the case of Supermax Personal Care Private Limited v. ACIT [I.T.A. No. 1840/Mum/2017] follows the above view of Hon’ble Mumbai High Court in the case of CIT v. M/s. Maersk Global Service Centre (I) Pvt. Ltd. [ITA No. 692 & 693 of 2012].

The Ld. DR relied on the order of the AO/TPO and submitted that its valid order.

We have heard both the parties and perused the material available on record. The TPO while deciding the filters has given his own reasons and the same does not make an order bad in law or non-est & void-ab-initio in totality. The case laws cited before us are not applicable in the present case as the assessee’s factual aspect has been rightly pointed out by the TPO in the order which are not denied in toto by the Ld. AR and also not brought on record any contrary facts to that effect. Thus, the contention of the Ld. AR appears to be not correct. Hence, Ground No. 8 is dismissed.

As regards to Ground No. 1, 9, 12 & 13 are general in nature, hence, the same are not adjudicated.

As regards to Ground No. 10 & 11, the same are consequential in nature, hence not adjudicated.

In result, appeal of the assessee is partly allowed for statistical purpose.