By K. B. Bhujle, Advocate
CIT vs. Same Deutz – Fahr India (P.)
Ltd.; [2018] 89 taxmann.com 47 (Mad):
The assessee-company was in the segment of
manufacture of tractors and power tillers. It entered into international
transactions with its associated enterprise (AE). The Transfer Pricing Officer
(TPO) had rejected the comparable companies selected by the assessee except one
VST Tillers in the transfer pricing documentation on the ground that the said
company recorded huge turnover whereas the turnover of assessee was very small
and, hence, not comparable. TPO had selected HMT Limited as one of the
comparables on functional similarity, but while determining the ALP, he had not
included HMT Limited as a comparable. The Tribunal found, on facts, that both
were comparable and the assessee was in the segment of manufacture of tractors
and power tillers and all the functions of HMT Limited and the assessee were
the same and that TPO ought not to have rejected said company as a comparable
only because of its higher turnover, as it would be impossible to find out
comparables with all similarities, including similarity of turnover.
On appeal by the Revenue, the Madras High Court upheld the decision
of the Tribunal and held as under
“i) The Tribunal very rightly
observed and held that refusal to include a company as a comparable only on the
ground that the company had far higher turnover was not justified. The Tribunal
also very rightly observed that no comparable could have exactly the same
turnover. The Tribunal found, on facts, that both comparable and the assessee
was in the segment of manufacture of tractors and power tillers and all the
functions of HMT Limited and the assessee were the same and that TPO ought not
to have rejected said company as a comparable only because of its higher
turnover, as it would be impossible to find out comparables with all
similarities, including similarity of turnover.
ii) In the grounds of appeal,
it is urged that the Tribunal failed to appreciate that HMT Limited was a
Government owned company and the functions performed under Government
management were altogether different from a private company. There is no provision
of law which makes any distinction between a Government owned company and a
company under private management for the purpose of transfer pricing audit
and/or fixation of ALP. There is no reason why a Government owned company
cannot be treated as a comparable.
iii) It
is reiterated that the Tribunal found, on facts, that the functionality of HMT
Limited and the assessee were the same. In our considered opinion, the decision
of the Tribunal does not warrant interference of this court.”
