Assessee is in a Project Engineering line of business, which executes turnkey contracts relating to industrial gases plants, a process gas solutions line of business, etc. The issue involved is selection of comparable for computation of ALP of international transaction of purchase of raw materials and sale of finished goods. The first comparable involved is Gujarat Fluorochemicals Limited (GFL). The Assessee submitted that in Assessee’s own case, the DRP has excluded this concern on account of functional disparity in AYs 2012-13, 2013-14, 2014-15. Held, GFL is to be excluded from list of comparables. With respect to Inox Air Products Limited, the Assessee submitted that it is not specifically in the line of manufacturing gases but it also has a host of other activities. The TPO had not examined its segmental accounts and not worked out how much component of its revenue is from the same area of operation as the Assessee is engaged in. Further TPO failed to compute true operating profit margins as well as considering the adjustment for working capital before adopting true percentage of margin for compare. Therefore, matter remanded back to AO to re-examine the issue and exclude the two aforementioned comparables from the list of 12 comparables finalised by TPO.

The second issue is with respect to transfer of fixed asset. The Assessee had purchased two second-hand nitrogen generating plants which were manufactured in UK and installed in China. One of these plants were sold by the Assessee to its AE in Indonesia. The Assessee furnished additional evidence to show that it had paid customs duty which was not considered and that the Assessee had actually incurred a loss on sale. The ITAT held that this is a specific instance of purchase and sale of a plant for which it is quite difficult to find a comparable. It is a specific item for whom very limited customers would be there. Therefore, this issue was also remitted for re-examination at the level of AO. Appeal allowed. (AY.2011-12)