Retail traders are functionally dissimilar to wholesale traders and cannot be selected as comparables.

By | May 25, 2026
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Retail traders are functionally dissimilar to wholesale traders and cannot be selected as comparables.

Issue

  • Issue I & II (Transfer Pricing): Whether companies operating in the retail or after-sales market are functionally comparable to a wholesale trader supplying components directly to Original Equipment Manufacturers (OEMs) for the determination of Arm’s Length Price (ALP).

  • Issue III (TDS on Transporters): Whether a non-deduction disallowance under Section 40(a)(ia) should be sustained when the assessee claims statutory exemption based on transporter declarations that have not been examined by the lower tax authorities.

Facts

  • The assessee is a wholesale trader of automotive electronic control units, fuel injection parts, and CNG assembly parts purchased from both Associated Enterprises (AEs) and non-AEs, selling them primarily to unrelated OEMs.

  • For AY 2016-17 and AY 2017-18, the Transfer Pricing Officer (TPO) and Dispute Resolution Panel (DRP) selected companies (such as Associated Auto Parts Ltd. and Salsons Impex Pvt. Ltd.) that operated in the retail and after-sales markets as comparables.

  • For AY 2016-17, the sole remaining valid comparable after exclusions had a profit margin of 2.03% compared to the assessee’s margin of 2.46%. For AY 2017-18, the remaining comparable fell within the legally permitted statutory tolerance range.

  • Separately, for AY 2017-18, the tax audit report highlighted payments to transporters totaling approximately ₹1.08 crores made without deducting tax at source.

  • The assessee submitted a revised Form 3CD claiming TDS immunity under Section 194C(6) based on declarations and certificates obtained from the transporter deductees, but the Assessing Officer sustained the disallowance without factual verification.

Decision

  • Held, Transfer Pricing issues decided in favour of the assessee; TDS issue remanded for verification.

  • Rejection of Retail Comparables: Retail and after-sales market traders are functionally dissimilar to wholesale traders under Rule 10B(2)(d) due to different risk profiles, distribution chains, and pricing structures. The inclusion of these companies by the Revenue was incorrect.

  • Deletion of TP Adjustments: Since the margins of the remaining valid comparables were either below the assessee’s margin or within the allowable tolerance range, the international transactions were at arm’s length, and no TP adjustments survive.

  • Remittal of TDS Disallowance: Because the lower authorities (AO and DRP) completely failed to examine the physical declarations and certificates submitted by the assessee under Section 194C(6), the issue is restored to the file of the AO for fresh verification and adjudication.

Key Takeaways

  • Market Level Comparability matters: In transfer pricing analysis, functional comparability requires alignment in the level of market operations; a wholesale distributor cannot be benchmarked against a retailer or after-market supplier.

  • Dominant Comparable Impact: Eliminating inappropriate comparables can bring the remaining transaction profile completely within the safe harbor or competitive margin limits, invalidating the entire transfer pricing addition.

  • Strict Compliance over Form 3CD Errors: Even if an initial tax audit report flags a non-deduction of TDS, an assessee can successfully defend against Section 40(a)(ia) disallowances by producing the requisite statutory declarations from transporters during assessment.

IN THE ITAT DELHI BENCH ‘I’
Astemo India (P.) Ltd.
v.
Addl. CIT, National e-assessment Centre*
Yogesh Kumar U.S., Judicial Member
and S. Rifaur Rahman, Accountant Member
IT Appeal No.523 (Del.) of 2021 & 142 (Del.) of 2022
[Assessment years 2016-17 and 2017-18]
MAY  20, 2026
Pradeep Dinodia, Ms. Monika Bhardwaj and Ms. Deepti Gupta, CAs for the Appellant. Nikhil Kumar Govila, CIT DR for the Respondent.
ORDER
S. Rifaur Rahman, Accountant Member.- These two appeals are filed by the assessee against the final order of assessment passed by the AO, National Faceless Assessment Centre, New Delhi u/s 143(3) read with section 144C(13)/143(3A)/143(3B) of the Income Tax Act (hereinafter called ‘the Act’) pursuant to the directions of the Ld. Dispute Resolution Panel (DRP) under section 144C of the Act.
2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order.
3. The assessee in both the years had raised Additional Grounds of Appeal on DIN issue. The assessee had filed application along with affidavits withdrawing these Grounds of Appeal pertaining to DIN. Accordingly, the ground on DIN is allowed to be withdrawn and the appeal is being heard on the other grounds raised by the assessee.
4. First we take up assessee’s appeal being ITA No.523/Del/2021 for AY 2016-17.
5. The facts in brief are that the assessee is engaged primarily in the business of selling of Electronic Control Units and trading of Fuel Injection Parts and CNG Assembly parts. The assessee had purchased the goods for the purposes of trading from its Associated Enterprises as well as from the unrelated parties and sold these goods primarily to the unrelated parties. For this trading segment, the assessee had adopted the Re-Sale price method as the most appropriate method and had calculated its gross profit margins based on GP/sales @ 2.46%. This margin of the assessee was compared with the sole comparable selected by the assessee, which comparable had been selected after detailed transfer pricing analysis whose GP margin was 3.77% and assessee had claimed the transactions with the AE i.e. purchase of traded goods at the arms length because margin of the assessee and comparables fell within the tolerance range.
6. The TPO in the order passed by him u/s 92CA accepted that Re-Sale price method i.e. RPM is the appropriate method. However, he was not satisfied with the sole comparable and carried out a fresh search wherein he selected 4 comparables whose gross profit margins based on the resale price method were determined at 10.28% and accordingly recomputed the margins which according to the ld. TPO, assessee should have earned from the trading segment and advised an adjustment of Rs.2,03,02,340/-.
7. Against a reference filed by the assessee before the ld. DRP, the ld. DRP rejected one of the comparables namely Advantek Fuel Systems Pvt. Ltd. which was held to be a manufacturer and retained 3 other comparables which were Associated Auto Parts Limited, Salsons Impex Pvt. Ltd. and Stanes Motor (South India) Ltd. From the record, one of these comparables i.e. Stanes Motor (South India) Ltd. was not agitated by the assessee even before the DRP and had been accepted. However, the other two comparables were agitated by the assessee before the ld. DRP due to functional dissimilarity. It was the case of the assessee before the ld. DRP that the other two comparables i.e. Associated Auto Parts Limited and Salsons Impex Pvt. Ltd. was catering to a different market segment i .e. retail trade under different marketing conditions and had dealt in very different product range. The ld. DRP was not satisfied about the contentions of the assessee. The ld. DRP also directed the TPO to allow the working capital adjustment to the assessee. The directions of the ld. DRP of rejecting one comparable resulted into the adjustment proposed by the TPO getting reduced to Rs.1,12,00,180/- as against Rs.2,03,02,340/- as was proposed by the ld. TPO.
8. Aggrieved with the above order, the assessee has raised the following Grounds of Appeal :-
1. That the Ld. Assessing Officer (‘AO’) of National eAssessment Centre (‘NeAC’) and the Ld. Transfer Pricing Officer (‘TPO’) and consequently the Hon’ble Dispute Resolution Panel (‘DRP’) have erred in law and on facts and circumstances of the appellant’s case, in making a transfer pricing (‘TP’) adjustment of INR 1,12,00,180/- on account of Arm’s Length Price of the International Transactions under the appellant’s Trading Segment under section 92CA of the Income Tax Act, 1961 (‘the Act’), wholly on illegal, erroneous and untenable grounds.
2. That the order of Assessment including order of the Ld. TPO is bad in law and erroneous on the facts of the appellant.
3. That the Ld. AO (NeAC) /TPO and consequently Hon’ble DRP have grossly erred in law and on facts and circumstances of the appellant’s case in selection and cherry picking of new comparables viz. Associated Auto Parts Limited and Salsons Impex Private Limited which have dissimilar functional, product and industrial profiles as compared to the appellant and do not meet the comparability criteria as prescribed under Rule 10B(2) of the Income Tax Rules, 1962 (‘the Rules’) and their selection is therefore bad in law and erroneous on the appellant’s facts.
4. The Ld. AO (NeAC) /TPO and consequently Hon’ble DRP have grossly erred in law and on facts and circumstances of the appellant’s case in not appreciating the fact that Stanes Motor (South India) Limited is the only comparable company functionally similar to the appellant’s Trading Segment.
5. The Ld. AO (NeAC) has erred in law and on facts and circumstances of the appellant’s case in charging interest under Chapters XVII and XIX of the Act, which is wholly illegal and is prayed not to be upheld.
6. The penalty proceedings initiated u/s Sec 271(1)(c) are on wholly illegal and untenable grounds since there was no concealment of any income nor submission of inaccurate particulars of income, nor any default according to law by the appellant.
9. At the time of the hearing, ld. AR of the assessee submitted that the ld. TPO had done a cherry picking by selecting the comparables which are functionally dissimilar. It has been submitted that functional profile of the assessee clearly reveals that the assessee is trading in wholesale trading of electronic control units, fuel injection parts and CNG assembly parts which is supplied to OEM i.e. original equipment manufacturers. It has been submitted that the sales made by the assessee by importing the goods from the AE are made to renowned companies like India Yamaha Motor Pvt. Ltd., Maruti Suzuki India Limited, MANN+HUMMEL (CZ) S.R.O. whereas the comparables selected by the TPO are into a totally different market segments i.e. retail segment and after sale service segment. It is submitted that the wholesale market and the retail market have different target customers and also the risk involved in both the market segments are not comparable at all. The ld. AR by referring to the functional profile of these two comparables i.e. Associated Auto Parts Limited and Salsons Impex Pvt. Ltd. has submitted that whereas assessee’s 97% of the sale is from the wholesale trading, the comparables selected by the ld. TPO are totally different. Our attention has been drawn to the functional profile of M/s. Associated Auto Parts Limited which is at Paper Book Page-209 to prove that the contentions raised by the assessee in this regard are correct. Similarly as regards other comparable, i.e. Salsons Impact Pvt. Ltd. our attention has been drawn to Paper Book Page 210 to 211 from where it is noticed that this entity is engaged in the retail trade service to retailers and end users and after market industry.
10. By referring and relying upon Rule 10B(2) of the Income Tax Rules, assessee has submitted that Rule 10B(2) sub-rule (d) specifically talks of the market conditions for which the comparable between the control and under control transactions. Rule 10B(2) for the sake of ready reference is reproduced as under:
“Rule 10B(2) For the purposes of sub-rule (1), the comparability of an international transaction [or a specified domestic transaction] with an uncontrolled transaction shall be judged with reference to the following, namely;.
(d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail.”
11. Ld. AR also relied upon various judgements in the synopsis filed before us to contend that product and functional similarity are of paramount while selecting the comparables for judging the control and un-control transactions. Some of the judgements relied upon by the assessee for this proposition and the broad propositions laid down in these judgements are as under:
– Daido India (P.) Ltd. v. Dy. CIT  (Delhi – Trib.)/[2025-Tn—218-ITAT-DEL-TP]
“16. As could be seen from the profile of the company, above company manufactures ‘core auto components’ hence ex-facie it is not a proper or suitable comparable. The company manufactures the components for four wheeler in commercial and passenger vehicles category, unlike the Assessee Company which serves the two wheeler vehicle industry. In view of the above, relying on the order of the co-ordinate bench of the tribunal in the case of Sanden Vikas India Ltd. (supra), we are of the considered opinion that, Roop Automotives Limited is not an appropriate comparable.”
– Louis Vuitton India Retail (P.) Ltd. v. Dy. CIT  (Delhi – Trib.) [TS-287-ITAT-2025(DEL)-TP]
“11. Raymond Apparel Limited
This company has been held to be suitable on the ground that the above Company is engaged in the similar type offunctions. Further TNMM provides wider flexibility to select comparable in terms of FAR Analysis. Thus, rejecting the contention of the Appellant, the Ld. TPO/A.O. retained the above Company in the final list of comparables.
11.1. The above Company is engaged in the business of manufacturing of fabric. The primary source of the Revenue of operation of the Company is sale of manufactured goods. Raymond is one of the largest branded Apparel Company, it operates a highly brand-driven industry.Raymond has a wide range of operation in local as well as foreign market. The Company sells in India through independent retailers, large format stores and its own retail outlets. The above facts can be corroborated with the Annual Report of the said Company placed at the Paper Book Volume 2.
The Appellant is selling felt packaging material which serve as protective outer layer for its bags, hence, the fundamental nature of business and product differs significantly. Therefore, Raymond Apparel Limited is not appropriate comparable.
20. In view of the above discussions, we direct the AO/TPO to exclude the above 10 companies included by the TPO i.e., Tangerine Design Private Limited, Raymond Apparel Limited, Shiva Suitings Limited, V-Mart Retail Limited, V2 Retail Ltd., 7NR Retail Limited, New India Retailing & Investments Ltd., Aarnav Fashions Ltd., Nivaka Fashions Ltd. and Euro Vistaa India Ltd., from the final set of comparable for determining the Arm’s Length Price in the international transaction. Accordingly we allow the Grounds of Appeal No.3 of the Assessee.
– Dayco Power Transmission (P.) Ltd. v. Union of India  (Allahabad)/[2024] 104 GST 305 (Allahabad)/[2024] 87 GSTL 76 (Allahabad) [TS-151-ITAT-2024(DEL)-TP]
“4.1 The assessee challenged the inclusion of comparable namely ‘Roto Pumps Ltd.’ and ‘Simmonds Marshall Ltd.’ on the grounds of product dissimilarity. It was contended that Roto Pumps Ltd. manufactures pumps mainly for non-auto sector such as oil, gas, sugar, marine, chemicals, foods and beverages etc. whereas the assessee-company manufactures core engine part for four wheelers. Consequently, the operating margins of the product manufactured by Roto Pumps are not comparable with that of assessee-company.
4.2 Similarly, it was contended before the CIT(A) that Simmonds Marshall Ltd. also cannot be treated as comparable company for the determination of ALP owing to Product dissimilarity. This company manufactures fastener such as nuts, bolts and screws which are non-core auto components as compared to four wheelers engine components manufactured by the assessee-company. It was thus contended that the PLI of such comparables are not functionally comparable with that of assessee-company.
9. We take note of the contentions of the assessee and observe at the outset that the comparable companies in dispute namel’, Roto Pumps and Simmonds Marshal Ltd. are engaged in totally dissimilar business and financials of such comparable companies selected by the TPO would give wholly incongruent results owing to overwhelming product dissimilarity. The AO/TPO to our mind wrongl’ modified transfer pricing anal’sis of the assessee b’ wrongfull’ including these two companies with inherent dissimilarit’. The CIT(A) has set right the glaring error committed b’ the AO/TPO. We thus see no reason to interfere with the finding offacts arrived at by the CIT(A). The grievances raised by the Revenue as per its grounds no.1 and 2 are thus devoid of any merit . Hence, we decline to interfere.”
– Fluor Daniel India (P.) Ltd. v. Asstt. CIT  (Delhi – Trib.) [TS-701-HC-2019(DEL)-TP]
“3. The Court notes that the ITAT has given detailed reasons in support of its conclusions by discussing each of the comparables from the point of view of the functionality assets and risk test in terms of Rule 10B of the Income Tax Rules.
4. The Court is unable to find any legal infirmity in the impugned order which gives rise to any the substantial question of law that requires determination.”
– Sanden Vikas India Ltd. v. Asstt. CIT  (Delhi – Trib.) [TS-1220-ITAT-2019(DEL)-TP]
“24. Ld. AR for the taxpayer further contended that the matter may be remitted back to the TPO for the limited issue of use of comparability and computation of PLI of SwarajAutomotives Ltd. & Jagan Lamps Ltd. We are of the considered view that in view of the slipshot TP analysis made by the ld. TPO as well as ld. CIT (A) conditional remand cannot be made. At the same time, we are of the considered view that to determine the arm’s length price of the international transaction undertaken by the taxpayer, fresh open ended TP analysis is required to be made by the TPO keeping in view the factum of product comparability as well as keeping in view the distinction between the core and non-core auto component manufactured for the purpose of comparability of the companies vis-a-vis the taxpayer. “
– Rampgreen Solutions (P.) Ltd. v. Dy. CIT  (Delhi – Trib.) [2015-TII-33-HC-DEL-TP]
“43. In our view, the aforesaid approach would not be apposite. Insofar as identifying comparable transactions/entities is concerned, the same would not differ irrespective of the transfer pricing method adopted. In other words, the comparable transactions/entities must be selected on the basis of similarity with the controlled transaction/entity. Comparability of controlled and uncontrolled transactions has to be judged, inter alia, with reference to comparability factors as indicated under rule 10B(2) of the Income Tax Rules, 1962. Comparability analysis by TNMM method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable transactions/entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable ALP. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in PLI must trigger further investigations/analysis.”
– PCIT v. Open Solutions Software Services Pvt. Ltd. [(2020) 315 CTR (Del) 497]
– PCIT v. Li and Fung India Pvt. Ltd. (Following Rampgreen Solutions) [2019-TII-169-HC-DEL-TP] (Above Para 43 of Rampgreen Ruling is reiterated at Para 9 of this ruling).
– Minda Acoustic Ltd. (Now Minda Industries Ltd.) [TS-468-ITAT-2019(DEL)-TP]
– Kaplan India Pvt Ltd [TS-417-ITAT-2019(DEL)-TP]
– Carrier Air-conditioning & Refrigeration Ltd [TS-798-ITAT-2018(DEL)-TP]
– Schenck Process India Limited [TS-397-ITAT-2018(Kol)-TP]
– Uni Design Jewellery Pvt Ltd [TS-769-ITAT-2018(Mum)-TP]
– Cypress Semiconductors Technology India Pvt Ltd. [TS-1009-ITAT-2016(Bang)-TP]
– Flextronics Technologies (India) Pvt Ltd. [TS-982-ITAT-2016(Bang)-TP]
– Tata Power Solar Systems Ltd. [TS-1007-HC-2016(BOM)-TP]
– Evaluesserve.com Pvt Ltd[TS-1060-ITAT-2016(DEL)-TP]
– Chryscapital Investment Advisors (India) (P.) Ltd. v. DCIT [(2015) 376 ITR 183 (Delhi)]
– Mitsubishi Corporation India Pvt. Ltd. [TS-200-HC-2014(DEL)-TP]
– Aztec Software [294 ITR (AT) 32 Bangalore]
– Mentor Graphics P. Ltd. [TS-7-ITAT-2007(Del)-TP]
• Rulings on dealing in After-market / Retail industry and type of customers as essential factors for the purpose of FAR and Benchmarking Analysis:Your Honours would appreciate that aftermarket / retail sales generate better operating margins than OEM sales. Thus, the after-market distribution / retail sales requires different marketing skillsets and intensive sales promotion related functions which are totally different from the functions of whole-sale trading of auto-components to OEMS by the Assessee.
– PUMA Sports India (P.) Ltd. v. Dy. CIT (Bangalore – Trib.) [TS-665-ITAT-2022(Bang)-TP]
“13. With regard to the exclusion of Sreeleather Ltd: the ld. A.R. contended that Sreeleather Ltd. is engaged in both wholesale and retail trading of footwear and leatherarticles. The ld. A.R. drew our attention to the financials of the company for FY 2014-15 (page 1973 of the paper book III) wherein out of the total turnover of the company 66.76% is derived from retail trading activity and only 12.78% is derived from wholesale trading activity. The ld. A.R. therefore contended that the assessee who is into wholesale trading business cannot be compared with Sreeleather Ltd. whose major income is from retail trading.
14. We heard the rival contentions and perused the material on record. We notice that Rule 10B(2)(d) of the Act, the relevant extract is reproduced below provide that the company is in the wholesale trading and retail trading have to be considered separately for the purpose of comparison:-
(2) For the purposes of sub-rule (1), the comparability of an international transaction [or a specified domestic transaction] with an uncontrolled transaction shall be judged with reference to the following, namely:-
(a) *** (b) ***
(d) ***
(d) conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail. (emphasis supplied)
12. It has been submitted that when these two comparables chosen by the ld. TPO are rejected then even as per the TPO’s own methodology a single comparable is left i.e. Stanes Motor (South India) Ltd. whose margins are 2.03% as against the margins of the assessee which are admittedly at 2.46%.
13. On the other hand, ld. DR has vehemently argued that the approach of the TPO and that of the DRP is correct and small difference in functional profile should not lead to rejection of the comparables. He has mainly relied upon the orders of the authorities below.
14. Considered the rival submissions and material placed on record. We are of the opinion that the functional profile of the comparables is different from the functions which are performed by the assessee, the ld. /DR or the TPO at the lower level has not been able to controvert these contentions of the assessee which to our mind are very relevant and required to be appreciated. Considering the legal propositions on this issue read with Rule 10B(2) of the Income Tax Rules, we are of the opinion that the two comparables namely Associated Auto Parts Limited and Salsons Impex Pvt. Ltd. cannot be retained as comparables for computing the ALP of these transactions. We accordingly direct the AO/TPO to reject these two comparables. Once so done, then the sole comparable left as was also selected by the TPO is Stanes Motor (South India) Ltd. whose margins are worked out 2.03% as against assessee’s margin 2.46%. Therefore, the transactions of the assessee with the AE are required to be treated at arms length warranting no adjustment whatsoever of the adjustment of Rs.1,12,00,180/- (after the directions of DRP) is hereby directed to be deleted.
15. Ground No. 6 is regarding initiation of penalty u/s 271(1)(c) of the Act is premature, hence treated as infructuous and dismissed.
16. In the result, the appeal being ITA No.523/Del/2021 is partly allowed.
17. Now we take up ITA No.142/Del/2022 for AY 2017-18.
18. The business profile of the assessee and AE, the nature of transactions with the AE, the transactions examined by the AO for bench marking i.e. the trading segment etc. are all identical as have been discussed in Assessment Year 2016-17, ITA No.523//Del./2021 above. The ld. TPO, after rejecting the search process of assessee had selected four comparable companies, namely :
1. Associated Auto Parts Ltd.
2. India Motor Parts Accessories Ltd.
3. Jullunder Motor Agencies Ltd.
4. Stanes Motor (South India) Ltd.
19. The average PLI of all such four comparables was computed at 3.96%. Since the margins of the assessee were only at 0.11% based on OP/OR, the Ld. TPO made an adjustment of Rs.1,08,65,935/- on proportionate basis on the purchase of traded goods from the assessee’s AE.
20. Before the Ld. DRP, assessee objected to three comparables namely Jullunder Motor Agency, India Motors Accessories Ltd. and Associated Auto Parts Pvt. Ltd. who mainly are into retail and after sales business whereas assessee is a wholesale trader supplying goods to OEMs. The Ld. DRP noted all such contentions but retained all the comparables as were selected by the Ld. TPO. Assessee has raised many other grounds of appeal but at the threshold opted to argue the Ground No. 5, which is on the selection of these three comparables. The Ld. AR for the assessee has reiterated his submissions on these three comparables on the identical lines as are made in A.Y. 2016-17 in ITA No.523//Del./2021. It is the case of Ld. AR that functional dissimilarity does not allow a comparable to be retained. A reference and reliance has been made on Rule 10B(2)(d) of the Income Tax Rules. Similarly various case laws as referred to by the AR in A.Y. 2016-17 have been relied upon.
21. The Ld. CIT/DR on the other hand has relied upon the order of TPO and DRP. It is submitted by the Ld. DR that DRP has held that the three comparables, although challenged by assessee before DRP, have been found to be appropriate comparable by the Ld. DRP and urged upon the Bench to uphold the findings of Ld. DRP.
22. Considered the rival submissions and material placed on record. The fact remains undisputed that all these three comparables are in retail and after sales trade as has also been noted by Ld. DRP. The Ld. DRP has held that Associated Auto Parts Ltd. was upheld by DRP in A.Y. 2016-17 also. However, we have, in A.Y. 2016-17 found this comparable to be not proper comparable. Similarly regarding India Motor Parts Accessories Ltd., the DRP, after noting the contentions of assessee, held that FAR of this comparable is similar to assessee. The same is the case with Jullunder Motor Agency. No clue is coming forth from the order of Ld. DRP as to how FAR is similar to the assessee in respect of India Motor Parts and Jullunder Motor Agencies.
23. The contentions of the assessee that these two comparables i.e. India Motor Parts and Jullunder Motor Agencies are in retail trade are unrebutted and uncontroverted. That being the case, we are of the firm view that these two comparables are also liable to be rejected as not appropriate comparable due to functional similarity on the basis of Rule 10B(2)(d) of the Income Tax Rules. In nutshell, all the three comparables objected to by the assessee in ground No. 5 are held to be inappropriate and the sole comparable left to be considered is M/s. Stanes Motor (South India) Ltd. which is also selected by the Ld. TPO. Since the margins/pLI of this comparable at (-) 1.51% as worked out by TPO is within the tolerance range as compared to the margin of assessee at 0.11% or even the reworked out margin by the TPO of the assessee at (-) 0.01%, no addition or adjustment can be made. The TP adjustment made by TPO/DRP at Rs.1,08,65,935/- is thereby directed to be deleted.
24. Grounds No.8, 8.1 & 8.2 is with regard to disallowance u/s 40(a)(ia) of the Act of Rs.28,31,406/-.
25. This amount of disallowance had been made by the CPC in the intimation u/s 143(1) of the Act. The AO has picked up the income as was assessed in the intimation u/s 143(1)(a). The facts as narrated by the AR of assessee are that the tax audit report in Form 3CD, identified a sum of Rs.1,08,31,211/- being payments made to various persons, mainly transporters without deducting tax at source-TDS. However, assessee had suo-moto disallowed Rs.4,17,957/- whereas according to CPC 30% of Rs.1,08,31,211/- should have been disallowed which worked out to be Rs.32,49,363/-. The difference of Rs.28,31,406/- was thus disallowed by CPC. The assessee, after filing the original tax audit report, is claimed to have revised its tax audit report because assessee got a certificate from one such payee namely Kisan Truck Transport Service that it was plying trucks which were less than the specified limit u/s 194C(6) of the Income Tax Act, therefore, no TDS was to be deducted on the payments made to it which amounted to Rs.95,80,230/-. Such certificate is also claimed to have been filed before the Hon’ble DRP along with the revised Form 3CD filed by the assessee. However, the ld. DRP observed that the declaration made by the deductee i.e. Kisan Truck Transport Service has not been brought on record.
26. It is under these circumstances that the assessee has come up for appeal on the enhanced disallowance made by the ld. AO in the final assessment order.
27. On the other hand, ld. DR of the Revenue relied upon the orders of the authorities below.
28. Considered rival contentions and material placed on record. We are of the opinion that since this is a completely factual issue and various facts i .e. filing of certificate from the deductee have not been considered either by the AO or the DRP. We, therefore, deem it fit to refer the issue back of the file of the AO with a direction that the AO shall verify in accordance with law on this issue upon satisfaction of the necessary conditions and furnishing of certificate as the assessee has obtained from the deductee namely Kisan Truck Transport Service. This ground is therefore treated as allowed for statistical purposes. Needless to say that the ld. AO would allow proper opportunities to the assessee for furnishing all the necessary details that may be required to adjudicate on this issue.
29. In the result, the appeal being ITA No.142/Del/2022 is partly allowed as indicated above.
30. To sum up : both the appeals are partly allowed as indicated above.