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Income Tax Appellate Tribunal, DELHI BENCH: ‘I-2’ NEW DELHI
Before: SHRI S.V. MEHROTRA & SMT SUCHITRA KAMBLE
ORDER PER SUCHITRA KAMBLE, JM
This appeal is filed by the assessee against the order u/s 143(3) read with Section 144C(4) dated 26/12/2013 passed by the Assessing Officer for Assessment Year 2009-10.
The assessee is a subsidiary of Japan Parent Company Yutaka Giken Company Ltd. and incorporated in March 2007. Assessment Year 2009-10 was practically first year of operation of the assessee company. The actual capacity was utilized to the extent of 35.70% only for the actual production. Thus, the capacity was not fully utilized by the assessee. Therefore, the assessee submitted the summary of financials and details of capacity utilization. The same is as under:- Summary of Financials (Amount in Rs.) For Financial Year Ending 31st March 2009 31st March 2008 INCOME Net Sales 384,409,500 Other Income 1,765,583 8,984,107 Increase/Decrease in 16,134,709 Stock 402,309,792 8,984,107 EXPENDITURE Material Consumed 336,637,308 Employee Remuneration 12,987,528 Manufacturing, Admin & 34,524,075 Other Financial Charges 35,423,483 Depreciation 26,676,877 744,677 Total 446,249,271 744,67 Profit/(Loss) before (43,939,480) 8,239,430 Income Tax
4. Details of capacity utilization:-
S. Company Capacity Actual % No. Production Assessee 7,56,000 2,69,863 35.70 Comparable Companies 1. Jai Bharat 8,000 38,800 100% Exhaust Systems Ltd.
2. Inzi 1,53,20,00 1,14,17,545 74.53% Controls 0 3. JNS 74,25,000 64,89,185 87.40% Instrument 4. Mubea 15,00,000 11,46,862 76.46% Suspensio n Ltd. (now known as TC Springs Ltd)
The TPO rejected the contentions of the assessee by observing that on the utilization of man power/machinery, the fact that whether there was assured volumes and the decision as to who bears the cost of idle capacity etc. were not stated by assessee. In the absence of such details and data, the question of granting adjustment on the ground of idle utilization of capacity does not arise. The assessee was required to support its claim for any adjustment with robust data and full details and evidences so as to enable the TPO to examine the claim. The burden was on the assessee when it made a claim and in this case, it did not discharge the burden of proof. The adjustment has to be made in the hands the comparables, however no reliable data of the comparables is available. The said observations were accepted by the DRP as well.
The Ld. AR submitted that all details were submitted to the TPO & DRP they should have allowed capacity utilization as per the guidelines laid down. In Delhi ITAT order in case of DCIT vs. Class India Pvt. Ltd. (ITA No. 1783/Del/2011 dated 12.08.2015) it was held that the computation of capacity utilization has to be inconsonance and the comparables has to be looked into in the respective aspect.
The Ld. DR submitted that there is only percentage-wise data given and if in case there is something more information required that was missing in respective capacity utilization before the TPO/AO.
We have heard both the parties and perused all the documents it is pertinent to note that actual capacity and the utilization of that capacity in the lesser form has to be looked into. This issue was considered by the Delhi Tribunal in case of Class India Pvt. Ltd. wherein it is held that the computation of capacity utilization has to be inconsonance and the comparables has to be looked into in the respective aspect. Thus in present case as well the capacity utilization has to be looked into while selecting the comparables. Therefore, this needs to be looked into by the Assessing Officer/TPO. Under these circumstances, we are of the considered opinion that if the impugned order is set aside and the matter is restored to the file of the Assessing Officer/TPO it will be appropriate. We order accordingly. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh assessment proceedings.
In the result, appeal is partly allowed for statistical purpose.
The order is pronounced in the open court on 09th of December, 2016.