Income Tax Rule 10B(1)(e) provides for making adjustments only to the operating margin of the comparable companies, says assessee

Last updated: 14 August 2021

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This Income Tax Appellate Tribunal ruling clarifies that adjustments under Rule 10B(1)(e) should only be made to the operating margin of comparable companies. The assessee argued, and the tribunal agreed, that cash profit margins should be considered before deducting depreciation. Consequently, the Revenue's appeal was dismissed.

Court :
ITAT Bangalore

Brief :
This appeal at the instance of the Revenue is directed against CIT(A)’s order dated 27.10.2017. The relevant assessment year is 2012-2013.

Citation :
ITA No.526/Bang/2018 : Asst.Year 2012-2013

IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCHES “C”, BANGALORE
Before Shri George George K, JM & Shri B.R.Baskaran, AM
ITA No.526/Bang/2018 : Asst.Year 2012-2013

Dy.Commissioner of Incom-tax
Circle 1(1)(2)
Bangalore.

(Appellant)

M/s.Bosch Automotive
Electronics India Pvt. Ltd.
Building No.703,
Naganathapura, PB No.10029
Electronics City Post Office
Bangalore – 560 100.
PAN : AADCB4330L.

(Respondent)

Appellant by : Sri.Pradeep Kumar, CIT_DR
Respondent by :Sri.T.Suryanarayana, Advocate
Date of Hearing : 28.07.2021
Date of
Pronouncement : 28.07.2021

O R D E R

This appeal at the instance of the Revenue is directed against CIT(A)’s order dated 27.10.2017. The relevant assessment year is 2012-2013.

2.The assessee is a wholly owned subsidiary of Robert Bosch Investment Nederland B.V. The assessee is engaged in
manufacture of components for the automotive industry. For the relevant assessment.

3.Aggrieved by the final assessment order, the assessee preferred appeal to the first appellate authority. One of the
contentions raised before the first appellate authority was cash profit margin of the assessee and the comparable shoul be taken prior to the deduction of depreciation allowance.

4. The learned AR, on the other hand, submitted that the ground raised is not correct since the CIT(A) has directed the
A.O. to arrive at the cash profit margin of the assessee as well as the comparables prior to the deduction of depreciation
allowance.

5.In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on this 28th day of July, 2021.

Please find attached the enclosed file for the full judgement

FAQ :

The appeal concerns whether adjustments under Income Tax Rule 10B(1)(e) should be made to the operating margin of comparable companies, specifically regarding the deduction of depreciation.

The assessee argued that the cash profit margin of both the assessee and comparable companies should be calculated prior to the deduction of depreciation allowance.

The appeal filed by the Revenue was dismissed by the Income Tax Appellate Tribunal.

Income Tax Rule 10B(1)(e) was central to the case, concerning adjustments to operating margins for comparable companies.