TEREX INDIA PVT. LTD.,TAMIL NADU vs. DCIT, NEW DELHI

(PAN : AACCT6500D) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Ved Jain, Advocate Shri Ashish Goel, CA Shri Rishabh Jain, CA REVENUE BY : Shri H.K. Choudhary, CIT DR Date of Hearing : 09.05.2019 Date of Order : 30.05.2019

O R D E R PER KULDIP SINGH, JUDICIAL MEMBER :

Appellant, M/s. Terex India Private Ltd. (hereinafter referred to as ‘the taxpayer’) by filing the present appeal sought to set aside the impugned order dated 27.01.2015 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Income-tax Act, 1961 (for short ‘the Act’) qua the assessment year 2010-11 on the grounds inter alia that :-

“The grounds of appeal listed below are without prejudice to each other:

1. The order of the learned Deputy Commissioner of Income Tax, Circle - 25(1), New Delhi ('Assessing Officer' or 'AO') passed pursuant to the order of the learned Additional Director of Income Tax (Transfer Pricing Officer) - II (4), New Delhi (Transfer Pricing Officer' or TPO') and the directions issued by the Hon'ble Dispute Resolution Panel (the 'DRP'), to the extent prejudice to the Appellant, is erroneous, bad in law and contrary to the facts and circumstances of the case.

2. That on the facts and in the circumstances of the case the AO, TPO and DRP erred in making an adjustment of INR 9,87,50,638/- in the Arm's Length Price (,ALP') of the Appellant's international transactions with Associated Enterprises ('AEs'). Grounds in relation to Engineering Design Services COEDS') segment 3. The TPO, AO and DRP have erred, in law and in facts, by not accepting the economic analysis in respect of EDS segment undertaken by the Assessee in accordance with the provisions of the Act read with the Rules, and conducting a fresh economic analysis for the determination of the ALP in connection with the impugned international transaction and holding that the Assessee's international transaction is not at arm's length. 4. The TPO, AO and DRP have erred, in law and in facts, by not providing the details of the search process in respect of the EDS segment.

5. The TPO, AO and DRP have erred, in law and in facts, by applying certain quantitative and qualitative filters which are arbitrary in nature for computing the ALP in respect of EDS segment.

6. The TPO, AO and DRP have erred, in law and in facts, by selecting certain additional companies as comparables which do not satisfy various comparability criteria and also erred in rejecting pertain companies identified by the Assessee based on incorrect reasons in respect of EDS segment.

7. The TPO, AO and DRP have erred, in law and in facts, by not making suitable adjustments to account for various differences in the risk profile of the assessee vis-à-vis the comparables. Grounds relating to Manufacturing segment 8. The TPO, AO and DRP have erred, in law and facts, by not appreciating that the losses incurred by the Appellant was on account of economic and commercial reasons due to the first year of operation of the Appellant. 9. The TPO, AO and DRP have erred, in law and facts, by not appreciating the fact that the AEs have not made excessive margins on the exports made to the Appellant and accordingly, the loss was not attributable to the international transactions undertaken by the Appellant with the AEs. 10. The TPO, AO and DRP have erred, in law and facts, by not providing for suitable adjustments for differences like under- utilization of capacity, excessive customs duty to account for differences in the capacity utilisation and other adjustments for economic and commercial reasons by the Assessee vis-a-vis the com parables. By not doing so, neglecting the Indian transfer pricing regulations and the OECD guidelines on transfer pricing and judicial precedence. 11. The learned TPO and the learned AO have erred, in law and in facts, by not restricting the transfer pricing adjustment in respect of the import of raw materials transaction to the value of consumption of materials of the Assessee. Grounds common to both EDS and Manufacturing segments 12. The TPO, AO and DRP have erred, in law and in facts, by determining the arm's length margin / price using only FY 2009- 10 data which was not available to the Assessee at the time of complying with the transfer pricing documentation requirements. 13. The TPO, AO and DRP have erred, in not allowing the benefit under the proviso to section 92C(2) of the Income-tax Act ('the Act').”

During the year under assessment, the taxpayer entered into international transactions with its AE as under :-

Nature of International Transaction Method Amount (In INR) Purchase of raw material TNMM 160,782,287 Purchase of spare TNMM 3,502,093 Purchase of services TNMM 69,705,032 Receipt of services TNMM 34,491,124 Interest of ECB CUP 8,155,970 Corporate Chargers NA 16,313,777 Receipt of interest on overdue TNMM 989,789 Payment of interest on overdue TNMM 43,565 Reimbursements NA 9,992,070 Receipt of share application money NA 63,093,299

(i) Use of correct keywords; (ii) Companies with positive networth; (iii) Use of current year data; (iv) Reject comparables having different financial year; (v) Reject companies where turnover is less than Rs.1 crores; (vi) Select companies where the ratio of service income to total income is at least 75%; (vii) Reject companies where related party transactions exceed 25% of sales; (viii) Reject companies that have employee cost less than 25% of total cost; (ix) Reject companies that are affected by some peculiar economic circumstances; (x) Select companies providing business services, facility management services, technical services, advisory services.

GROUNDS NO.1 & 2

GROUNDS NO.3 TO 5 10. Grounds No.3 to 5 are also general in nature relating to engineering design segment and do not require any adjudication.

ENGINEERING DESIGN SEGMENT GROUND NO.6 11. The ld. TPO in order to benchmark the international transactions qua engineering design segment services provided by the taxpayer to its AE rejected all the 8 comparables chosen by the taxpayer and selected 10 new comparables with average OP/OC at 28.20% which are as under :-

S.No. Company Name OP/OC (%) 1. Cades Digitech Pvt. Ltd. 9.02 2. Dalkia Energy Services Ltd. 20.81 3. Engineers India 62.94 4. IBI Chematur 52.66 5. I-Design Engg. 11.88 6. Kirloskar Consultants Ltd. 15.64 7. Kitco Ltd. 14.01 8. Mahindra Consulting Engineers Ltd. 23.50 9. Rites Ltd. 45.71 10. T C E Consulting Engineers Ltd. 25.88 Average 28.20

Operating Cost 5,12,95,776 Arm’s Length Margin OP/OC % 28.20% Arm’s Length Price (ALP) 6,57,61,185 Price shown in the international transactions 5,95,03,423 Shortfall being adjustment u/s 92CA 62,57,762

Engineers India Ltd.; (ii) IBI Chematur; (iii) Mahindra Consulting Engineers Ltd. ; (iv) Rites Ltd. ; (v) Kitco Ltd. ; (vi) TCE Consulting Engineers Ltd.; (viii) Kirloskar Consultants Ltd.; and (vii) Dalkia Energy Services Ltd..

ENGINEERS INDIA LTD. (EIL) 17. The taxpayer sought to exclude EIL on grounds inter alia that it is a Government company surviving on the basis of contracts provided by the Government of India; that it is functionally different; that it has incurred substantial expenditure of Rs.11.40 crores on its R&D activities; and relied upon the decision rendered by the coordinate Bench of the Tribunal in case of Boeing International Corporation India Pvt. Ltd. vs. DCIT in dated 30.10.2018 and decision rendered by Hon’ble Bombay High Court in case of CIT vs. Thyseen Krupp Industries Pvt. Ltd. (2016) 385 ITR 612. On the other hand, ld. DR for the Revenue supported the retention of EIL by the ld. TPO and contended that there is no bar to select Government company as comparable unless its entire revenue is from the Government.

18.1 On the other hand, the taxpayer being a captive entity is engaged in providing engineering design services to its AE as against high end and full-fledged engineering and technical services being provided by EIL for petroleum refineries and other industrial projects. EIL has incurred huge R&D expenditure to the tune of Rs.11.40 crores which is 0.53% of the turnover which makes it not a suitable comparable.

Hon’ble Delhi High Court in case of Pr.CIT vs. 19.

International SOS Services India P. Ltd. – 2017 (5) TMI 1588 while examining the comparability of Government company vis-à- vis private company held that EIL could not be considered to be a comparable for the reason that the contracts between public sector undertaking are not driven by profit motive alone but other consideration also weigh in such as discharge of social obligation etc. by returning following findings :-

“10 The Court on perusing the aforementioned judgment of the Bombay High Court finds that in para 4(a) and 4(b) of the said order the Bombay High Court has held that the view taken by the Mumbai Bench of the ITAT “is a reasonable and plausible view.” It noted that the ITAT, Mumbai Bench had held that the Engineers India Ltd. could not be considered to be comparable for the reason “that contracts between Public Sector Undertakings are not driven by profit motive alone but other consideration also weigh in such as discharge of social obligations etc. Thus, it is not comparable.” Interestingly in the present case the Assessee itself picked up two of the 100% government owned companies namely ECIL and ITDCL as its comparables but that was not accepted by the TPO or the DRP. The reason for the ITAT excluding Apitco as a comparable is also for the same reason that it was a 100% government owned company”.

IBI CHEMATUR (ENGINEERING & CONSULTANCY) LTD. (IBI CHEMATUR) 21. The taxpayer sought exclusion of IBI Chematur from the final set of comparables for benchmarking the international transaction on grounds inter alia that it is functionally dissimilar to the taxpayer that it has significant R&D expenditure and relied upon the decisions of the coordinate Bench of the Tribunal in (i) taxpayer’s own case in for AY 2011-12 dated 26.03.2019; (ii) BG Exploration and Production India Ltd. vs. JCIT in ITA No.1170/Del/2015 dated 24.04.2017; (iii) Bechtel India P. Ltd. vs. DCIT in ITA No.1478/Del/2015 dated 21.12.2015; and (iv) ITO vs. Colt Technology Services India (P.) Ltd. – (2014) 146 ITD 46.

“We have perused the financial statements of the company placed at Paper Book pages 461 – 490. On going through the same, we note that this company fails the 75% service revenue filter which has been adopted by the TPO. This fact is corroborated from the Profit & Loss account of the company, wherein the Engineering Service charges of the company are shown at Rs.18,88,21,452/-, out of the total revenue of the company of Rs.29,74,92,912/-. Therefore, the service/revenue ratio of the company comes out to 63.47%, which is less than 75%, which is one of the filters adopted by the TPO himself. Moreover, no segmental information with regard to the different segments of the company is available in the financial statements. This company has been considered by the ITAT Delhi Bench in the case of Bechtel India (P.) Ltd. v. DCIT in dated 21.12.2015 and in the case of BG Exploration & Production India Ltd. v. JCIT in ITA Nos. 1170 & 1581/Del/2015 dated 24.04.2017 wherein it has been held to be not a good comparable. Taking into consideration all the above facts, we are of the view that this company is not a good comparable with that of the assessee company and, accordingly, we direct the AO to exclude this comparable.”

“This comparable has been selected by the Ld. Transfer Pricing Officer which is a joint venture company promoted in association with Swedish company to render basic engineering, detailed engineering and consultancy services in the field of petrochemicals, fine chemicals and chemicals, cosmetics, pharmaceuticals, industrial explosive and west acid recovery. The Ld. Authorised Representative submitted that The company generates income from provision of engineering services like designing and drawing, 3D modeling, piping and instrumentation diagram, smart plant instrumentation, process simulation, inspection services and erection supervision services, which are not similar to services provided by the Assessee. The company generates income from provision of engineering services and software services. It is further submitted that company has earned a high profit margin of 52.66% during the FY 2009-10. It was further stated that there is an existence of significant research and development cost to sales ratio for the FY 2009-10 is 5.41%. He further placed reliance on the decision of Delhi ITAT in case of iQor India Services Private Ltd. Vs ITO where in the Hon‘ble ITAT held that the high end services involving special knowledge cannot be compared with the low end ITES services provided by the Assessee. We have carefully perused the annual accounts of the company, which are placed at page No. 93 -117 of the paper book. At page No. 94 of the paper book where review of performance of company is noted, it shows that company has employed highly trained technical staff and is also marketing these capabilities in the domestic as well as the overseas market. It further uses SMART plant foundation, which is software for bringing the technologies specific to several industries. It also has the new division in the form of research and technology Centre, which started functioning during the year. Looking to the assets employed by the company, It uses the computer software in the name of smart plant suite. Further during the year. It has incurred research and development expenditure of Rs. 11699720/– which was not there in the earlier year. Further, the company is also planning to use Smart plant foundation for integration of other smart plant tools. In view of this we agree with the argument of the Ld. Authorised Representative that this company is engaged in the business of high-end engineering services which is based and supported by the use of a specific technologies and huge research and development expenditure along with an R&D centre. In view of this, the functions performed by this comparable company are not comparable with the Assessee‘s functions. For this reason only, we direct the Ld. Transfer Pricing Officer/AO, rejecting this comparable, to exclude the same for the comparability analysis.”

MAHINDRA CONSULTING & ENGG. SERVICES LIMITED (MAHINDRA)

RITES LTD. & KITCO LTD.

Company continued to provide specialized, integrated, single roof services in transportation infrastructure sector and export packages for supply of locomotives, coaches, spare parts and modernization of workshops. Company is also intending to expand the rolling stock leasing business activities in domestic market. The company is exploring business opportunities in captive railway systems in India through equity participation with other stake holders, with a main focus to prove total transportation solution as against pure consultancy assignment). The company has secured new orders worth of Rs. 972.59 crores during the year 2009-10. So, functional profile of Rites Ltd. goes to prove that it is dissimilar to taxpayer being diversified services like providing single roof services in transportation infrastructure sector and export packages for supply of locomotives, coaches, spare parts and modernization of workshop. It is also getting into business of captive railway systems in India having a preferential treatment in business avenue being a Government company.

“10 The Court on perusing the aforementioned judgment of the Bombay High Court finds that in para 4(a) and 4(b) of the said order the Bombay High Court has held that the view taken by the Mumbai Bench of the ITAT “is a reasonable and plausible view.” It noted that the ITAT, Mumbai Bench had held that the Engineers India Ltd. could not be considered to be comparable for the reason “that contracts between Public Sector Undertakings are not driven by profit motive alone but other consideration also weigh in such as discharge of social obligations etc. Thus, it is not comparable.” Interestingly in the present case the Assessee itself picked up two of the 100% government owned companies namely ECIL and ITDCL as its comparables but that was not accepted by the TPO or the DRP. The reason for the ITAT excluding Apitco as a comparable is also for the same reason that it was a 100% government owned company”.

TCE Consulting Engineers Ltd. (TCE CONSULTING) 39. The taxpayer sought to exclude TCE Consulting as comparable on the grounds inter alia that it is functionally dissimilar; that its segmental financials are not available; that TCE Consulting is into providing high end consulting services and relied upon taxpayer’s own decision in AY 2011-12 (supra).

However, we are of the considered view that it is not a valid comparable on account of functional dissimilarity and non- availability of its segmental financials. Moreover, in 2009-10, TPO himself excluded TCE Consulting from final set of comparables on raising objections by the taxpayer and since then, taxpayer’s business profile has not undergone any change.

“12.6 The Comparable Company is involved in activities beyond engineering design. It is engaged in activities that extend from concept to commissioning. Whereas the assessee provides services as a captive unit to its overseas AEs. The diversified functions of this comparable company include pre-project activities, procurement assistance, project management, commissioning and coordination, inspection, construction and supervision. Further, there is no segmental accounting in the annual report of the Company which provides profitability, for the engineering design segment. Hence the same cannot be accepted as a comparable.”

KIRLOSKAR CONSULTANTS LTD. (KIRLOSKAR) 45. The taxpayer sought exclusion of Kirloskar on the ground that sufficient information is not available in annual report to know the nature and volume of services of consultancy being provided by it. Its financial segmental are also not available and relied upon BG Exploration and Production India Ltd. vs. JCIT – 2017 (4) TMI 1145- ITAT Delhi.

“This comparable is selected by the Ld. Transfer Pricing Officer which is engaged in the area of engineering consultancy, project management services and architectural consultancy. The comparable company specializes in conceptualizing, designing and executing architectural, civil, structural, electrical, mechanical fire and life safety, water supply, drainage, storm water management, networking, surveillance, telephone and building management systems required for any large integrated project. According to the Ld. Authorised Representative, this company is engaged in the high-end service provider segment and it was also stated that he does not have the segmental information pertaining to the segment in which the Assessee operates, and therefore, this cannot be accepted as a comparable. We have carefully considered the rival contention and also perused the annual report of the company available in paper book at page No. 246 – 304. No information is available with respect to the provision of the services of consultancy, its nature, and its volume. It is simply mentioned that this company is engaged in the business of consultancy services at the consultancy revenue shown in the profit and loss account as a single item. There are no specific bifurcations given of various services provided by the Assessee as well as the nature of such services or the segmental information. Further, it is also noted that during the year the Assessee has entered into transactions for receipt of the consultancy fee from the related parties to the tune of Rs. 89.59 lakhs out of the total consultancy fee receipt of Rs. 586 Lacs. Though the related party filter has passed but during the year itself the Assessee has entered into all these transactions, which were not there in the past year. However, in view of the absence of complete information about the business profile of the company as well as the nature of the services rendered by the company, this comparable cannot be accepted. Hence, we reject this comparable due to inadequate information available before us.”

DALKIA ENERGY SERVICES LTD. (DALKIA)

“Dalkia Energy Services Company Ltd. offers alternate energy sources. The Company develops renewable energy power projects for the biomass and hydro sector. Dalkia Energy Services also provides energy cost reduction consulting services for industrial, commercial, fertilizer, chemicals, plastics, cement, sugar, power generation and municipal sectors.”

“This comparable selected by the Ld. Transfer Pricing Officer is engaged in the business of service in the area of energy manner and developing energy efficiency and energy projects with focus on reducing the energy cost and deriving of consequent environment benefiting the various sectors of economy in India and abroad. The comparable company adopts a multiproject approach when the individual customer defines the scope and structure of the services beginning with relatively simple projects, depending on the comfort level of the client, the scope and complexity of the service is expanded to multitier product package. The Ld. Authorised Representative objected to the inclusion of the above company as comparable for the simple reason that it did not have the financial available in the public domain. Neither the Ld. Transfer Pricing Officer nor the Ld. DRP has considered this aspect that when the financial of the comparable is not available how the assets employed by that company vis-a-vis‘s risk assumed and functions performed can be compared. Therefore, in absence of any financial information available of this company, either in the order of the Ld. Transfer Pricing Officer or available with the Assessee, we reject this comparable at the threshold itself.”

When we examine the profit & loss account of Neilsoft Ltd. for the year under assessment, available at page 565 of the paper book, it has shown its substantial income from “services and products” with no segmental information available.

56.1 No doubt, Neilsoft Ltd. was ordered to be included in the final set of comparables in taxpayer’s own case for AY 2009-10, but the year under assessment being different, the same order cannot be relied upon and a company having income from products though rendering software engineering services, in the absence of segmental information cannot be a suitable comparable. So, the contention of the taxpayer to include Neilsoft Ltd. in the final set of comparables is not sustainable, hence we confirm the order passed by the TPO as well as DRP.

VAMA INDUSTRIES LTD. (VAMA)

57.1 Perusal of the annual report of Vama particularly its financial highlights at page 8 shows that out of the total turnover of Rs.903.17 lakhs, Vama has earned income from software development and ITES to the tune of Rs.561.86 lakhs. The ld. AR for the assessee contended that in its TP analysis the taxpayer has considered software development and service segment for the purpose of comparability. However, when we examine profit & loss account of Vama, available at page 33 of the paper book, it has shown income under the head Domestic Rs.50,387,389/-, Export Rs.39,929,771/- and other income Rs.329,272/-, but no segmental information is available so as to compute actual profitability of Vama. Moreover, in the financial highlights, available at page 8, it is categorically mentioned that it has earned income from product/hardware sales and services, but again segmental financials are not available in the profit & loss account.

57.2 No doubt, comparability of Vama was examined by the coordinate Bench of the Tribunal in assessee’s own case for AY 2009-10 and directed the AO/TPO to consider the software development and service for the purpose of comparability but the same cannot be followed being of different assessment year and that time complete financials of Vama might not be brought before the Bench. So, when segmental financials are not available on record Vama cannot be a valid comparable, hence rightly been not included by the TPO.

GROUND NO.7

“27. After the selection of the comparables, best method of determining Arm’s Length Price is selected. Thereafter, functional analysis is carried to identify functions, risk and assets of uncontrolled transactions and comparison is carried with characteristics of the controlled transaction. This is necessary to find whether comparable selected are really comparable and reliable. Comparison based on functional analysis include economically significant activities and responsibilities undertaken or to be undertaken by the independent and associated enterprises. The structure and organization of the group and more particularly the judicial relationship between different entities of same group are to be seen. The function that need to be identified while carrying comparison as per OECD guidelines include design, manufacturing, assembling, research and development, servicing, purchasing, distribution, marketing, advertising, transportation, financial and management activities. It is also necessary to examine as to what is the principal function of the entities. The analysis of comparison should consider total assets employed and assets used to earn profit. The risk assumed by respective parties is a very important consideration. It is a simple principle of economics that the greater the risk, the greater the expected return (compensation). If there are material and significant differences in the risk involved, then the comparable identified are not correct as appropriated adjustments for differences in such cases are not possible. Therefore, while performing searches for potential comparable companies, not only turnover and operating profit but functions performed and risk profile are also to be considered. However, it can always be shown on the given facts of the case that comparable found are similar or almost similar to the controlled transaction and no adjustments are needed. It is useful to see the level of intangible assets in comparable to an appropriate base. Depending on facts of the case, final set of comparables may need to eliminate differences by making adjustments for the following: (a) working capital (b) adjustment for risk and growth (c) adjustment of R&D expenses. 27.1 The risk not only due to human resources, infrastructure and quality which are normally taken into account yet more significant risks like market risk, contract risk, credit and collection risk and risk of infringement of intellectual property are being ignored here. In most of the comparable analysis carried in India, the latter type of risk are not being taken into consideration although these can lead to major difference in Market Value of transactions.”

GROUNDS NO.8 & 9

GROUND NO.10

62.1 It is not in dispute that the taxpayer has started its commercial operation in October 2009. It is also not in dispute that during the year under assessment, the taxpayer has produced only 17 units of equipments as against the installed capacity of 238 equipments, as is evident form financials statement, available at page 16 of the paper book. So, the capacity utilization ratio of taxpayer’s company is only 7.14%.

A.Y. Installed capacity Actual production 2010-11 238 17 2011-12 238 98 2012-13 238 128 2013-14 252 175

“3.5.14 Now, coming to the methodology to be adopted for allowing the capacity adjustment in this case. The Ld. DRP has taken cognizance of the same but instead of allowing the adjustment on account of capacity utilization, it has directed to exclude depreciation and repairs of machinery from the comparables as well as the assessee. We are of the view that capacity adjustment is not limited to depreciation and repair of machinery. In a business entity, there are certain fixed overheads such as rent, administrative expenses etc., which have to be incurred irrespective of the percentage of capacity utilization. There are variable expenditures which are in direct proportion to the production i.e. the capacity utilized. The net margin of an entity will vary with that of another entity in case there is a difference in the capacity utilization. If there is higher capacity utilization, then the fixed overheads get spread over such higher capacity utilization with the result that the net margin of such entity will be much higher as compared to the another entity where the capacity utilization is low and as such there is a higher proportion of fixed overheads which get allocated to such lower capacity/production. Thus, the right method is to identify all the fixed expenses including depreciation and to adjust the same in the ratio of the capacity utilized. In view of the above analysis, we direct the TPO to exercise his powers under section 133(6) of the Act and to call for the information on capacity utilization of comparable companies. After obtaining the information, he will share the details so obtained with the assessee and give an opportunity to the assessee and grant adjustment for capacity under- utilized.”

So, this issue is remanded back to the TPO to decide afresh in view of the direction given in taxpayer’s own case for AY 2011-12 (supra) by the Tribunal. So, ground no.10 is determined in favour of the taxpayer for statistical purposes.

“3.8.3 We have considered the rival submissions and perused the order passed by the authorities below. The Ld. DRP has rejected this contention of the assessee company on the ground that custom duty does not have any impact on the net profit level of the assessee. While deciding the issue of the capacity adjustment, we have held that in terms of Rule 10B (3) all the adjustments which are materially affecting the transaction being compared need to be eliminated. Thus, in case non-cenvat-able custom duty on import made by the assessee company is materially affecting the transaction vis-à-vis the comparables being considered by the TPO then the same needs to be eliminated. Since, this issue has not been considered by the TPO and considering the fact that we have remitted the matter back to AO for allowing adjustment on account of capacity utilization, we deem it fit to restore this issue also to the TPO. The TPO will examine whether non-cenvat-able custom duty on imports paid by the assessee is materially affecting the PLI of the assessee company and if he finds that this payment of non-cenvat-able custom duty is materially affecting the transaction with that of the comparables then he will suitably make adjustment thereof.”

(Rs. in lakhs) A.Y. Import Sales Import/Sales in Ratio 2010-11 1586.44 1302.01 121.85% 2011-12 5573.74 9882.41 56.40% 2012-13 8070 19954 40.44% 2013-14 10914 23257 46.93% 2014-15 7060.64 21916.36 32.22%

GROUND NO.11

“3.10.3 We have considered the rival contentions. It is undisputed fact that the assessee has made purchases of Rs.105,55,16,000/- during the year out of which material worth Rs.41,34,29,000/- was not consumed during the year and, therefore, the impact on the margin, if any, in respect of such purchases during the year is only of the material consumed and not of the material purchased and which is lying unutilized at the end of the year as closing stock. The purchase cost debited in respect of such raw material and the valuation of such material as closing stock is at same cost. Considering this fact, we direct the TPO that in case any adjustment is required to be made after giving effect to the adjustment on account of capacity and other issues decided by us in this appeal the same is to be restricted to the material purchased from the AE and consumed during the year.”

GROUND NO.12

Ground No.12 is dismissed having not been pressed during 72. the course of arguments.

GROUND NO.13