| COURT: | ITAT Delhi |
| CORAM: | I. C. Sudhir (JM), Inturi Rama Rao (AM) |
| SECTION(S): | 92CA(3) |
| GENRE: | Transfer Pricing |
| CATCH WORDS: | start up costs, Transfer Pricing, underutilization of capacity |
| COUNSEL: | Ajay Vohra |
| DATE: | July 10, 2015 (Date of pronouncement) |
| DATE: | July 20, 2015 (Date of publication) |
| AY: | 2003-04 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| Transfer Pricing: For the purpose of benchmarking the international transactions, the effect of underutilization of capacity/excess fixed costs has to be eliminated while computing the operating margins of the assessee | |
Under-utilization of production capacity in the initial years is a vital factor which has been ignored by the authorities below while determining the ALP cost. The TPO should have made allowance for the higher overhead expenditure during the initial period of production. The claim of the assessee with respect to idle capacity adjustment during the relevant period while determining the ALP cost. Economic adjustment on account of under capacity utilization when the assessee was in start up phase has to be considered (Mando India Steering Systems Pvt. Ltd. vs. ACIT (ITA No. 2092/Mds/2012), Amdocs Business Services Pvt. Ltd. vs. DCIT (ITA No. 14212/PN/11), Global Turbine Services Inc. vs. ADIT (ITA No. 3484/De1/2011) ACIT vs. Fiat India Pvt. Ltd (ITA no 1848/Mum/2009) Brintons Carpers Asia Pvt. Ltd. vs. ACIT ITA. No. 1296/PN/10) E.I. Dupont India Pvt. Ltd. vs. DCIT (ITA No 5336/0/2010) Genisys Integrating Systems (India) Pvt. Ltd vs. DCIT (ITA No 1231/Bang/2010) Transwitch India Pvt. Ltd VS. ACIT (I.T.A. No. 6083/De1/2010 referred)
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