MUMBAI ITAT PREFERRED THE DATA GIVEN IN AUDITED FINANCIAL STATEMENTS OVER THE DATA GIVEN IN PROWESS DATABASE FOR CALCLULATION OF PLI

Case Name: M/s Basell Polyolefins India Private Limited v. Asst. CIT [ITA No. 4724 & 4725/Mum/2018] [AY 2009-10 & 2010-11]

Outcome: In favor of Assessee

Facts:

1. The Assessee is engaged in the business of rendering project, engineering and polyolefins product related services etc. During assessment, Ld. TPO proposed an upward adjustment of Rs. 1,20,17,520/- to the operating income received by the assessee from its AEs towards rendering of business facilitation services.
2. Ld. AO passed the order u/s 143 (3) r.w.s. 144C (3) of the Act and assessed Total Income of the Assessee at Rs. 3,29,32,000/-. 
3. Aggrieved, the assessee filed an appeal before Ld. CIT (A), but failed to get relief and hence, the assessee filed a further appeal before the ITAT.

Issues:

1. Ld. CIT (A) grossly erred in not considering the plea of the Appellant that the OP/OC of the 4 comparable companies shall be calculated based on the financial data reported in their Audited Financial Statements and not based on the data reported in the Prowess Database and thereby upholding the arithmetic mean of OP/OC of the said 4 comparable companies at 19.05% instead of 5.86%.

Observations/findings and decision of Hon’ble ITAT are:

1. ITAT observed that before Ld. CIT(A), the assessee submitted the OP/OC margin of the aforementioned 4 comparable companies calculated on the basis of financial data reported in their Audited Financial Statements, and not on the basis of the data reported in the Prowess Database. However Ld. CIT (A) had failed to adjudicate the aforesaid claim of the assessee. 
2. ITAT further observe that the assessee had furnished the Annual Reports of the aforementioned comparable companies in the course of the proceeding before the TPO, vide its letter dated 21.12.2012. However, TPO did not consider that.
3. Hon’ble ITAT state that this office is unable to comprehend as to why the lower authorities had shirked  from calculating the OP/OC margin of the aforementioned 4 comparable companies on the basis of the financial data reported in their Audited Financial Statements, which would be more authentic as in comparison to that reported in prowess database.
4. ITAT placed reliance order of the ITAT Delhi in the case of DCIT vs. Swarovski India Pvt. ltd. (ITA No.100/Del/2011), wherein it has been held as under: 

“10.   Regarding  the  submissions  advanced  by  both  the  parties  relating  to the inclusion/exclusion of the 2 comparables being Goldiam International Ltd. and Punit Commercials Ltd, it is observed that the annual report submitted by the  assessee,  was  not  available  on  the  database  at  the  time  of  TP proceedings.  The plea advanced by the ld.  A.R  is  that,  in  the  event  these companies  are  included  then the  correct  margin as  per  the  annual  accounts must  be  considered.  We accordingly, set aside these to the Ld.  TPO for verification of the data provided in the annual accounts of these 2 companies and to calculate the gross margin by using the correct figures.”

5. Hence, based on above observations and findings, direct the TPO to calculate the OP/OC margin of the aforesaid 4 comparable companies on the basis of the financial data reported in their Annual Financial Reports for the year under consideration.