M/s Transpac Asia P Ltd, Bangalore V. Deputy Commissioner of income tax, Bangalore

ITA 1039/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9497 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR CITIII
• Assessee Lawyers: S RAMASUBRAMANIAN
• Keywords: Transfer pricing; International transaction; Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE S HRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I.T . (T.P) A. NO. 1039 /BANG/20 16 (ASSESSMENT YEAR : 20 06 - 07 ) M/S. TRANSPAC ASIA PVT. LTD., NO.150, 6 TH M AIN, INDUSTRIALSUBURB, YESHWANTHPUR, BANGALORE - 560 058 . . APPELLANT. VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1), BANGALORE. .. R ESPONDENT. APPELLANT BY : SHRI S. RAMASUBRAMANIAN, C.A. R E SPONDENT BY : SHRI SANJAY KUMAR, CIT - III (D.R) DATE OF H EARING : 25.07.2016. DATE OF P RONOUNCEMENT : 11 .8 .201 6 . O R D E R PER SHRI VIJAY P AL RAO, J .M . : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER DT.28.3.2016 PASSED BY THE ASSESSING OFFICER IN PURSUANT TO THE ORDER OF THIS TRIBUNAL AS WELL AS T HE ORIGINAL ORDER PASSED IN PURSUANT TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (IN SHORT DRP ) FOR THE ASSESSMENT YEAR 2006 - 07. 2 IT (TP) A NO. 1039 /BANG/201 6 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THAT THE ORDER OF THE LEARNED LOWER AUTHORITIES IN SO FAR IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE APPEAL AGAINST THE ORDER DATED 28.03.2016 PASSED BY THE ASSESSING OFFICER IS MA INTAINABLE BEFORE THE HON 'BLE INCOME TAX APPELLATE TRIBUNAL AS IT IS ONLY A CONSEQUENTIAL ORDER TO GIVE EFFECT TO THE DIRECTIONS OF THE HON 'BLE TRIBUNAL . 3. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT THE SUM OF RS. 15,91,39,634 HAS TO BE TAKEN AS AN EXPENDITURE CONNECTED WITH THE INTERNATIONAL TRANSACTION OF COMMISSION AGENCY EVEN THOUGH THE HON 'BLE DRP HAS EXCLUDED THE SAME AND SUCH EXCLUSION HAS BECOME FINAL AS THIS ISSUE WAS NOT IN APPEAL BEFORE THE HON BLE TRIBUNAL. 4. THAT THE ORDER OF THE LEARNED LOWER AUTHORITIES IN TREATING RS. 15,91,39,634 AS AN EXPENDITURE CONNECTED WITH THE INTERNATIONAL TRANSACTION IS BAD IN LAW AS IT HAS TRAVELLED BEYOND THE SCOPE OF THE REMAND SET OUT BY THE HON'BLE TRIBUNAL. 5. WITHOUT PREJUDICE TO GROUNDS NO.2 TO 4 ABOVE, THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS I N TREATING THE SUM OF RS. 15,91,39,634 AS AN EXPENDITURE CONNECTED WITH THE INTERNATIONAL TRANSACTION EVEN THOUGH THE TRANSACTION HAS BEEN TREATED AS A COMMISSION AGENCY TRANSACTION BY ALL CONCERNED. 6. THAT THE L EARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAD NOT EXPLAINED THAT SUM OF RS. 11,57,375 HAS BEEN ACTUALLY PAID TO M/S.BUILDMET FIBRES LTD AND THE FINDING OF THE LEARNED LOWER AUTHORITIES IN PARA 5.1 OR THE ORDER DATED 28.3.2016 ARE PERVERSE AS BEING CONTRARY TO MATERIALS ON RECORD. 7. THAT THE LEARNED LOWER AUTHORITIES ERRED IN LAW AND ON FACTS IN IN DISALLOWING A SUM OF RS. 11,57,375 U/S. 42A(IA) OF THE ACT EVEN THOUGH THE APPELLANT HAD ACTUALLY PAID THE SUM. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON'BLE INCOME - TAX APPELLATE TRIBUNAL, BANGALORE TO A DD, DELETE, MODIFY OR OTHERWISE AMEND EITHER ALL OR ANY OF THE ABOVE GROUNDS EITHER BEFORE OR DURING THE HEARING. 3 IT (TP) A NO. 1039 /BANG/201 6 3. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 4. GROUND NO.2 IS REGARDING THE MA INTAINABILITY OF APPEAL DIRECTLY FILED AGAINST THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS IS SECOND RO UND OF LITIGATION. IN THE FIRST ROUND THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER DT.14.9.2010 PASSED UNDER SECTION 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') IN PURSUANT TO THE DIRECTIONS OF THE DRP DT.9.8.2010. THE TRIBUNAL VIDE ITS ORDER DT.11.3.2015 HAS REMANDED THESE TWO ISSUES TO THE RECORD OF THE ASSESSING OFFICER IN PARAS 7 & 12 AS UNDER : 07. WE HAVE PERUSED THE ORDERS AND CONSIDERED THE RIVAL CONTENTIONS. AS ALREADY MENTIONED, ASSESSEE IS NOT AGGRIEVED WITH THE TN M METHOD ADOPTED BY THE TPO NOR ON THE AVERAGE MARGIN OF THE COMPARABLES WORKED OUT BY THE TPO. ITS ONLY GRIEVANCE IS THAT ONCE IT WAS TREATED AS A COMMISSION AGENT THEN, THE MARK - UP SHOULD BE RESTRICTED ONLY TO THE COST INCURRED WITH REFERENCE TO THE EXP ORTS TO ITS AE AND WHILE WORKING OUT SUCH COST, EXPENDITURE RELATABLE TO ITS JOB WORK BUSINESS SHOULD BE EXCLUDED. FINANCIAL RESULTS OF THE ASSESSEE AS GIVEN BY IT SHOWS TWO SEGMENTS OF ACTIVITIES AND A COST ALLOCATION AS UNDER : 4 IT (TP) A NO. 1039 /BANG/201 6 DESCRIPTION EXPORT SALES (AE) JOB WORK TOTAL AMOUNT (RS.) OPERATING REVENUE 15,91,39,634 4,33,38,455 20,24,78,089 PROPORTIONATE OPERATING EXPENDITURE 16,34,77,445 4,45,09,126 20,79,86,571 PROFIT FOR THE YEAR ( - )43,37,811 ( - )11,70,671 ( - )55,08,482 PBIT/COST ( - )2.65% ( - )2.63% ( - )2.64% PBIT/SALES ( - )2.73% ( - )2.70% ( - )2.72% IT IS NOT DISPUTED THAT REVENUES ON THE JOB WORK MENTIONED IN THE TABLE ABOVE WERE ENTIRELY ON TRANSACTIONS WITHIN INDIA. IT IS ALSO NOT DISPUTED THAT THE EXPORT SALES WERE IN ITS ENTIRETY TO ITS AE. ONCE THE LOWER AUTHORITIES HAVE COME TO A CONCLUSION THAT ASSESSEE WAS ACTING ONLY AS A COMMISSION AGENT AND THE MARK - UP SHOULD BE ONLY ON THE COST INCURRED, THEN WHILE DETERMINING ALP OF THE INTERNATIONAL TRANSACTION, IT IS NECESSARY THAT THE EXPENDITURE CONSI DERED IS ONLY WITH REGARD TO SUCH EXPORT SALE. THERE IS CONSIDERABLE STRENGTH IN THE ARGUMENT OF LEARNED AR THAT WHILE EFFECTING THE MARK - UP, EXPENDITURE RELATING TO THE JOB WORK ACTIVITY ENTIRELY UNDERTAKEN IN INDIA, THAT TOO WITH NON - AES, SHOULD BE EXCLUDED. IN OUR OPINION A GLOBAL APPROACH WHILE ALLOCATING SUCH EXPENDITURE WOULD NOT BE FAIR AND JUSTIFIED. IT IS NECESSARY TO LOOK INTO EACH HEAD OF EXPENDITURE AND REACH A CONCLUSION WHETHER IT WAS ENTIRELY RELATED TO JOB WORK OR A PART OF IT WAS RELATED TO EXPORT SALES. ONLY AFTER ANALYZING EACH HEAD OF EXPENDITURE, A RATIONAL CONCLUSION CAN BE DRAWN AS TO WHAT WAS THE ACTUAL QUANTUM OF EXPENDITURE INCURRED BY ASSESSEE WITH REGARD TO THE EXPORT SALE TO ITS AE ABROAD. THIS EXERCISE HAS NO T BEEN DONE BY ANY OF THE AUTHORITIES BELOW. IT IS TRITE LAW THAT ADJUSTMENTS TO ALP CAN BE DONE ONLY WITH REGARD TO TRANSACTIONS WITH REGARD TO AES AND NOT ON A GLOBAL MANNER. SO WHILE 5 IT (TP) A NO. 1039 /BANG/201 6 WE CONFIRM THE AVERAGE MARGIN OF 10.05% WORKED OUT BY THE TPO AS WEL L AS APPLICATION OF TNM METHOD, WE DIRECT THE LOWER AUTHORITIES TO CONFINE THE APPLICATION OF MARGIN TO THE EXPENDITURE THAT CAN BE PROPERLY ASSIGNED TO THE EXPORT SALES OF THE ASSESSEE AND NOTHING MORE. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIE S BELOW IN THIS REGARD AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER/TPO FOR REWORKING THE EXPENDITURE ON WHICH THE MARGIN OF 10.05% IS TO BE APPLIED. 12. WE HAVE PERUSED THE MATERIAL AND CONSIDERED THE RIVAL CONTENTIONS. IN OUR OPINI ON ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE THAT WHAT WAS GIVEN BY IT TO BMFL WAS ONLY REIMBURSEMENT. IT HAS NOT GIVEN ANY REASON FOR DIFFERENCE IN THE SUM PAID BY IT TO BMFL AND WHAT BMFL HAD PAID TO THE TRANSPORTERS. NEVERTHELESS, WE DO FIND MERIT IN THE ARGUMENT OF THE LEARNED AR THAT 40(A)(IA) IS APPLICABLE ONLY ON PAYABLE AMOUNTS AND NOT ON PAID AMOUNTS. THIS HAS NOT BEEN VERIFIED BY ANY OF THE AUTHORITIES BELOW. WE, THEREFORE, SET ASIDE ORDERS OF THE AUTHORITIES BELOW AND REMIT THIS ISSUE ALSO BA CK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING WHETHER THE AMOUNTS WERE PAID DURING THE RELEVANT PREVIOUS YEAR AND TO RESTRICT THE DISALLOWANCE TO ONLY SUCH SUM WHICH REMAINED PAYABLE AS AT THE END OF THE RELEVANT PREVIOUS YEAR. THIS IS CLEAR FROM THE DIRECTIONS OF THE TRIBUNAL THAT THE MATTER WAS REMANDED TO THE RECORD OF THE TPO/ A.O FOR REWORKING OF THE EXPENDITURE TO BE APPORTIONED BETWEEN THE JOB WORK AND EXPORT SALE WHICH WERE HELD TO BE ON COMMISSION BASIS. SIMILARLY ON THE ISSUE OF DISALLOW ANCE UNDER SECTION 40(A)(IA) OF THE ACT, THE TRIBUNAL HAS DIRECTED TO VERIFY THE FACT OF ACTUAL PAYMENT AND PAYABLE AMOUNT AT THE END OF THE YEAR. 6 IT (TP) A NO. 1039 /BANG/201 6 THEREFORE ON BOTH THESE ISSUES, THE SCOPE OF ASSESSMENT WAS VERY LIMITED TO VERIFY FACTS AND NOT TO TAKE A D ECISION BY THE ASSESSING OFFICER AS IT WAS ALREADY DECIDED BY THE TRIBUNAL IN THE REMAND ORDER. WHEN THE SCOPE OF REMAND TO THE ASSESSING OFFICER WAS NOT ALLOWING THE ASSESSING OFFICER TO HAVE ANY DISCRETION ON THE ISSUES THEN THE ORDER PASSED BY THE ASSE SSING OFFICER IN PURSUANT TO THE DIRECTIONS OF THIS TRIBUNAL WOULD NOT BE SUBJECT MATTER OF FURTHER OBJECTIONS BEFORE THE DRP. THE ORIGINAL ORDER WAS PASSED IN PURSUANT TO THE DRP DIRECTIONS AND THE APPEAL AGAINST THE SAID ORDER LIES BEFORE THIS TRIBUNAL. ACCORDINGLY, THE SUBSEQUENT ORDER PASSED IN PURSUANT TO THE DIRECTIONS OF THIS TRIBUNAL CAN BE CHALLENGED IN THE APPEAL FILED BEFORE THIS TRIBUNAL. THE LD. AR HAS ALSO PLACED RELIANCE ON THE DECISION OF THE CO - ORDINATE BENCHES OF THIS TRIBUNAL IN THE CA SE OF TALLY SOLUTIONS PVT. LTD. VS. DCIT IN IT(TP)A NO .101/BANG/2013 DT.2.8.2013 AS WELL AS THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF PARAS RICE MILLS V. CIT & ANR. (2009) 18 DPR 149 (P&H) . W E FIND THAT THE CO - ORDINATE BENCH OF THIS TRIB UNAL IN THE CASE OF TALLY SOLUTIONS PVT. LTD. (SUPRA) HAS TAKEN A VIEW IN PARAS 2 TO 2.2 AS UNDER : 2. TO A QUERY FROM THE BENCH AS TO THE MAINTAINABILITY OF THIS APPEAL BEFORE US, BOTH THE LEARNED A.R. AND THE LEARNED D.R RELIED ON THE JUDGMENT OF THE HON BLE PUNJAB & HARYANA 7 IT (TP) A NO. 1039 /BANG/201 6 HIGH COURT IN THE CASE OF PARAS RICE MILL V. CIT & ANOTHER REPORTED IN (2009) 18 DTR (P & H) 149 DATED 19.9.2008 AND SUBMITTED THAT AS PER THE RATIO LAID DOWN BY THE HON BLE HIGH COURT (SUPRA), THIS APPEAL LIES BEFORE THE TRIBUNAL . 2.1. WE HAVE, WITH DUE REGARDS, PERUSED THE RULING OF THE HON BLE COURT (SUPRA) WHEREIN THE HON BLE COURT HAD CATEGORICALLY RULED THAT: 6 .WE ARE OF THE OPINION THAT THE REASONING OF THE LEARNED TRIBUNAL THAT SINCE THE AO HAD MERELY GIVEN EFFECT TO THE ORDER OF THE TRIBUNAL, AN APPEAL AGAINST THE SAID ORDER WOULD LIE ONLY BEFORE THE TRIBUNAL AND NOT BEFORE THE CIT (A) IS CORRECT .. 2.2. IN VIEW OF THE JUDGMENT OF THE HON BLE P & H HIGH COURT (SUPRA) AND THE SUBMISSIONS OF BOTH THE PARTIES, WE P ROCEED TO DISPOSE OF THE APPEAL ON MERITS . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AS WELL AS THE DECISION OF THE CO - ORDINATE BENCH, WE ARE OF THE CONSIDERED OPINION THAT THE APPEAL FILED BY THE ASSESS EE AGAINST THE IMPUGNED ORDER OF THE ASSESSING OFFICER IS MAINTAINABLE. 6. GROUND NOS.3 TO 5 ARE REGARDING THE INCLUSION OF COST OF PURCHASE IN THE OPERATING COST FOR THE PURPOSE OF DETERMINING THE OPERATING MARGIN UNDER TNMM. 7. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WELL AS LE ARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE TPO DETERMINED THE ALP BY CONSIDERING THE COST OF PURCHASE AS PART OF THE OPERATING COST OF THE ASSESSEE AND FURTHER THE OTHER ADMINISTRATIVE / OPERATIVE COST WERE ALLOCATED IN THE RATIO OF 8 IT (TP) A NO. 1039 /BANG/201 6 THE TURNOVER BETWEEN THE JOB WORK AND EXPORT SALE. THE ASSESSEE CHALLENGED THE ACTION OF THE TPO BEFORE THE DRP. THE DRP WHILE PASSING THE DIRECTIONS DT.9.8.201 0 HAS HELD AT PAGE 12 AS UNDER : ON CONSIDERATION OF THE ASSESSEE'S SUBMISSION WITH REFERENCE TO RELEVANT RECORDS, THE PANEL IS OF THE VIEW THAT THE ALP OF THE CONCERNED TRANSACTIONS OF THE ASSESSEE WITH ITS AE IS REQUIRED TO BE COMPUTED AS UNDER : TOTA L OPERATING COST AS TAKEN IN THE ORDER : RS.16,34,77,445. LESS : PURCHASE PRICE OF THE GOODS AS SHOWN BY THE TAXPAYER : RS.15,91,39,634. RS.43,37,811 ARM S LENGTH MARGIN 10.05% ON COST AS TAKEN IN THE ORDER. ARM S LENGTH PRICE OF THE TRANSAC TIONS (110.05% OF RS.43,37,811) : RS.47,73,761. LESS : PRICE RECEIVED AS SHOWN IN 3 CEB REPORT AND AS CONSIDERED BY THE TPO RS.5,66,426. ADJUSTMENT TO BE MADE U/S.92CA OF THE ACT : RS.42,07,335. THE ASSESSING OFFICER IS, ACCORDINGLY, DIRECTED TO M AKE AN ADJUSTMENT OF RS.42,07,335 U/S.92CA (3) OF THE IT ACT, 1961 INSTEAD OF RS.2,02,00,868 MADE BY HIM IN THE DRAFT ORDER OF ASSESSMENT. THUS IT IS CLEAR THAT THE DRP HAS DIRECTED THE ASSESSING OFFICER TO MAKE AN ADJUSTMENT UNDER SECTION 92CA AFTER EX CLUSION OF PURCHASE PRICE OF THE GOODS FROM THE OPERATING COST. SINCE THE DIRECTIONS OF THE DRP AND 9 IT (TP) A NO. 1039 /BANG/201 6 CONSEQUENTIAL ORDER PASSED BY THE ASSESSING OFFICER WERE FINAL SO FAR AS THE REVENUE IS CONCERNED AS THE SAME COULD NOT BE CHALLENGED BY THE REVENUE AS PER THE PROVISIONS AS EXISTS IN THE RELEVANT TIME. EVEN OTHERWISE THERE WAS NO APPEAL FILED BY THE REVENUE BEFORE THIS TRIBUNAL AND THE FINDING OF THE DRP ON THIS ISSUE ATTAINED FINALITY. THE LIMITED ISSUE OF T.P. ADJUSTMENT BEFORE THE TRIBUNAL WAS RAISED B Y THE ASSESSEE IS REGARDING THE APPORTIONMENT OF THE OTHER EXPENSES BETWEEN THE JOB WORK AND EXPORT SALES. WE HAVE ALSO REPRODUCED THE ORDER OF THE TRIBUNAL IN THE FIRST ROUND WHEREIN THE TRIBUNAL HAS ALREADY DECIDED THE ISSUE AS FAR AS THE MARGIN TO BE A PPLIED AND THE MATTER WAS REMITTED TO THE A.O./TPO ONLY FOR REWORKING OF THE EXPENDITURE. THE ASSESSEE IS AGGRIEVED ONLY IN RESPECT OF THE PURCHASE COST AGAIN INCLUDED AS PART OF THE OPERATING COST BY THE TPO IN THE REMAND PROCEEDINGS. SINCE THE ISSUE OF PURCHASE PRICE BEING PART OF THE OPERATING COST WAS ALREADY DECIDED BY THE DRP AND HAS ATTAINED FINALITY AND FURTHER THE SAID ISSUE WAS NOT SUBJECT MATTER BEFORE THE TRIBUNAL THEREFORE THE JURISDICTION OF THE A.O./TPO IN THE REMAND PROCEEDINGS WAS LIMI TED ONLY TO EXAMINE AND VERIFY THE EXPENDITURE TO BE ALLOCATED BETWEEN THE JOB WORK ACTIVITY 10 IT (TP) A NO. 1039 /BANG/201 6 AND EXPORT SALE. THEREFORE THE TPO AS WELL AS ASSESSING OFFICER WAS HAVING NO JURISDICTION TO AGAIN TAKE UP THE ISSUE OF INCLUSION OF PURCHASE PRICE TO THE TOTAL OPERATING COST FOR THE PURPOSE OF DETERMINING THE ALP. BEFORE PARTING THE ISSUE, WE OBSERVE THAT WHEN THE ALP HAS BEEN DETERMINED BY CONSIDERING THE TNMM AS MAM THEN THE PURCHASE PRICE WOULD ESSENTIALLY BE PART OF THE OPERATING COST FOR DETERMINING THE O PERATING MARGIN AND FURTHER WHEN THE ASSESSEE'S MARGIN IS COMPARED WITH COMPARABLE PRICES THEN THE COMPUTATION OF OPERATING MARGIN OF ASSESSEE AS WELL AS COMPARABLE SHOULD HAVE BEEN ON IDENTICAL METHOD AND ITEM OF OPERATING COST. THEREFORE IN PRINCIPLE THE PURCHASE PRICE OF GOODS CANNOT BE EXCLUDED FROM THE OPERATING COST FOR THE PURPOSE OF COMPUTING THE OPERATING MARGIN AS THE SAME IS PART OF THE OPERATING COST OF THE COMPARABLE PRICE. HOWEVER, SINCE THIS ISSUE DOES NOT ARISE IN THE PRESENT APPEAL AS I T WAS ALREADY ACCEPTED BY THE PARTIES AS WELL AS BY THIS TRIBUNAL IN THE REMAND ORDER THEREFORE WE REFRAIN OURSELVES FOR GIVING ANY FINDING ON THIS ISSUE. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE DIRECTIONS OF DRP ON THIS ISSUE HAVE ATTAINED FIN ALITY AND 11 IT (TP) A NO. 1039 /BANG/201 6 CONSEQUENTLY WE DIRECT THE A.O./TPO TO EXCLUDE THE PURCHASE PRICE FROM THE OPERATING COST. 8. GROUND NOS.6 & 7 ARE REGARDING DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. 9. WE HAVE HEARD THE LEARNED AUTHORISED REPRESENTATIVE AS WE LL AS LEARNED DEPARTMENTAL REPRESENTATIVE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE IS CHALLENGING THE DISALLOWANCE UNDER SECTION 40(A)(IA) ON THE GROUND THAT THE AMOUNT HAS ALREADY BEEN PAID AND IT IS NOT PAYABLE. AT THE OUTSET WE N OTE THAT THIS ISSUE IS NOW SETTLED BY THE HON'BLE JURISDICTIONAL HIGH COURT AGAINST THE ASSESSEE IN THE CASE OF RYATAR SAHAKARI SAKKARE KARKHANE NIYAMIT V. ACIT, 383 ITR 561 (KARN) . ACCORDINGLY, BY FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH CO URT, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11TH DAY OF AUG., 201 6 . SD/ - ( INTURI RAMA RAO ) ACCOUNTANT MEMBER SD/ - ( VIJAY PAL RAO ) JUDICIAL MEMBER *REDDY GP