SYNGENTA BIOSCIENCES P.LTD, PUNE V. DCIT CIR 1(3), MUMBAI

ITA 1083/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4073 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: K
• Assessment Year: 2008-2009
• Appeal Filed On: 20-02-2015
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA P YADAV
• Keywords: Related party transaction; Depreciation; Transfer pricing; International transaction; Working capital adjustments; Cost of acquisition; Bad and doubtful debts; Onus to prove; Unabsorbed depreciation
• Section: 143(3); 92F; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUM BAI BEFORE SHRI MAHAVIR SINGH, JM & SHRI ASHWANI TANEJA, AM ITA NO. 1083/MUM/2015 (ASSESSMENT YEAR: 2008-09) SYNGENTA BIOSCIENCES PRIVATE LIMITED AMAR PRADIGM, SURVEY NO.110/113, BANER ROAD, PUNE-411045 (PAN:AAACZ0348M) VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(3), MUMBAI. 564, AAYKAR BHAWAN, M. K. MARG, CHURCHGATE, MUMBAI- 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJIT KUMAR JAIN RESPONDENT BY : SHRI AKHILENDRA P. YADAV DATE OF HEARING: 06.04.2016 DATE OF PRONOUNCEMENT: 22.04.2016 O R D E R PER MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF CIT(A)-58, MUMBAI IN APPEAL NO. CIT(A)-58/ARR.36/14-15 VIDE ORDER DATED 02.12.2014. ASSESSMENT WAS FRAMED BY DCIT-1(3), MUMBAI U/S. 143(3) R.W.S. 144(C)(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FO R AY 2008-09 VIDE HIS ORDER DATED 24.01.2012. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AGAIN ST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN MAKING ADJUSTMENT OF ARMS LENGTH PRICE (ALP) DETERMINED BY THE ASSESSEE IN RESPECT TO INTERNATIO NAL TRANSACTION IN CONNECTION WITH RESEARCH & TECHNICAL SERVICES (R&T) PROVIDED T O ASSOCIATE ENTERPRISES (AE). FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING GROUND NO.2: 2 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 2. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN PROPOSING AN ADJUSTMENT OF RS 1,55,48,991 TO THE ARM'S LENGTH PR ICE ('ALP') DETERMINED BY THE APPELLANT IN RESPECT OF THE INTERNATIONAL TR ANSACTION IN CONNECTION WITH RESEARCH AND TECHNICAL SERVICES ('R& T) PROVID ED BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE ('AE'). IN DOING SO, THE LD CIT (A) HAS ERRED IN LAW AND IN FACTS AS FOLLOWS: 2.1 CONSIDERING R & T SERVICE INCOME AS RS 24,37,36 ,200 AS AGAINST RS 25,11,25,447 DETERMINED BY THE APPELLANT. 2.2 REJECTING THE ECONOMIC ANALYSIS/TRANSFER PRICIN G STUDY UNDERTAKEN BY THE APPELLANT. 2.3 NOT COMPUTING THE ALP IN RESPECT OF THE INTERNA TIONAL TRANSACTION AS COMPUTED BY THE APPELLANT AND IGNORING THE PROVISIO NS OF THE RULE 10 B(4) OF THE INCOME-TAX RULES 1962 (,RULES') WHICH AUTHOR IZES USAGE OF MULTIPLE YEAR DATA OF COMPARABLE COMPANIES FOR THE PURPOSE O F DETERMINATION OF ALP UNDER SECTION 92F OF THE ACT. 2.4 REJECTING THE GROUNDS RAISED BY THE APPELLANT I N RELATION TO SELECTION / REJECTION OF COMPARABLE COMPANIES WHILE DETERMINING THE ALP. 2.5 NOT ALLOWING AN ADJUSTMENT FOR THE DIFFERENCE B ETWEEN THE WORKING CAPITAL LEVEL OF THE APPELLANT AND THE COMPARABLE C OMPANIES. 2.6 FAILING TO GRANT THE BENEFIT OF +/- 5 PERCENT R ANGE AS ENVISAGED BY THE PROVISIONS OF SECTION 92C(2) OF THE ACT.. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF RENDERING RTS TO SYNGENTA GROUP, WHICH IS A GLOBAL PLAYER IN HYV SEEDS & CROP PROTECTION SCIENCES. IT HAS ALSO A LABORATORY IN G OA. THE ASSESSEE HAS DISCLOSED RECEIPT OF RS.25,11,25,447/- FROM ITS AES AND THIS REPRESENTS ASSESSEES ENTIRE TURNOVER. THE ASSESSEES ACTIVITY ON R&T INCLUDES UNDERTAKING CERTAIN SAMPLES PREPARATION AND CHEMICAL ANALYSIS ACTIVITIES FOR TH E AGRO CHEMICAL BUSINESS. IT SUPPLIES TO ITS AES THE NECESSARY FORMULA, INFORMAT ION AND EXPERTISE TO ENABLE IT TO PROVIDE R&T ACTIVITIES. THE ASSESSEE FURNISHED THE COMPUTATION OF OPERATING MARGINS ON OPERATING COSTS AND THE BENCH MARK SELEC TED FOR THE SAME WAS TNMM. THE DETAILS OF THE SAME ARE AS UNDER: TRANSACTION METHOD PLI ASSESSEES MARGIN COMPARABLES MARGIN (3 YEARS AVERAGE) UPDATED COMPARABLES MARGIN FOR FY 2007-08 3 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 R&T SERVICES INCOME TNMM OP/TC 20.81% AS PER SUBMISSION DATED 16.12.2008-TPSR APPENDIX-G 1 6.96% TPSR PG.24 19.83% VIDE TPSR ANNEXURE F THE ASSESSEE SELECTED NINE COMPARABLES AND ACCORDIN G TO ASSESSEE, WHOSE FUNCTIONAL PROFILES ARE SIMILAR TO THAT OF THE ASSE SSEE. THE ASSESSEE HAS PROVIDED TP STUDY REPORT AND THE NATURE OF BUSINESS OF ITS C OMPARABLES. THE TPO ACCEPTED THE COMPARABLES NUMBERING 4 OUT OF TOTAL 9 AND BALANCE 5 HE REJECTED AS UNDER: S. NO. COMPARABLES NATURE OF BUSINESS REMARKS OF TH E UNDERSIGNED 1. ALPHAGEO INDIA LTD. THE COMPANY IS ENGAGED IN CONDUCTING SEISMIC SURVEYS AND OTHER SERVICES FOR THE OIL EXPLORATION COMPANIES. IT IS ALSO IN THE BUSINESS OF PROVIDING TESTING/CERTIFICATION SERVICES ON A CONTRACTUAL BASIS. ACCEPTED AS COMPARABLE 2. CHOKSI LABORATORIES LTD. THE COMPANY IS A COMMERCIAL TESTING HOUSE ENGAGED IN THE BUSINESS OF TESTING PRODUCTS. THE COMPANY PROVIDES VARIOUS TYPES OF ANALYTICAL SERVICES LIKE PHARMACEUTICAL ANALYSIS (BIO ANALYSIS, IMPURITY DECISION, INVIRTO EQUIVALENCE, ETC.), FOOD AND BEVERAGE ANALYSIS, WATER ANALYSIS AND CONSTRUCTION MATERIAL ANALYSIS. THE COMPANY ALSO PROVIDES CLINICAL RESEARCH SERVICES ON A SMALL SCALE. ACCEPTED AS COMPARABLE 3. DOLPHIN MEDICAL SERVICES LTD. THE COMPANY PROVIDES MEDICAL (DIAGNOSTIC), SERVICES LTD. OPHTHALMOLOGIC AND HEALTHCARE SERVICES TO PHARMACEUTICAL COMPANIES UNDERTAKING CLINICAL REJECTED AS COMPARABLE FUNCTIONAL PROFILE DISSIMILAR 4 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 TRIALS. 4. MEDINOVA DIAGNOSTIC SERVICES LTD. THE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING DIAGNOSTIC SERVICES LIKE PRE-EMPLOYMENT CHECK-UPS, SITE HEALTH CHECK- UPS AND EXECUTIVE HEALTH CHECK- UPS AND RELATED SERVICES. REJECTED AS COMPARABLE FUNCTIONAL PROFILE DISSIMILAR 5. N.G. INDUSTRIES LTD. THE COMPANY HAS MEDICAL CENTRES WHICH ARE ENGAGED IN PROVIDING DIAGNOSTIC SERVICES REJECTED AS COMPARABLE FUNCTIONAL PROFILE DISSIMILAR 6. TCG LIFESCIENCES LTD. THE COMPANY IS PRIMARILY ENGAGED IN THE BUSINESS OF CONTRACT RESEARCH AND TESTING ACTIVITIES IN VARIOUS DISCIPLINES: CONTRACT RESEARCH (CLINICAL AND PRE-CLINICAL), CLINICAL REFERENCE LABORATORY SERVICES (CENTRAL LAB), ANALYTICAL TESTING OF WATER, FOOD, DRUGS, ETC. AND ENVIRONMENTAL MONITORING AND IMPACT ASSESSMENTS STUDIES. ACCEPTED AS COMPARABLE 7. VIMTA LABS LTD. THE COMPANY IS A LEADING LIFE SCIENCES CONTRACT RESEARCH AND INFORMATIC SOLUTIONS ORGANISATION FOCUSED ON ENABLING TRANSLATIONAL MEDICINE APPROACHES TO DISCOVERY AND DEVELOPMENT OF SUPERIOR DRUGS AND BIOLOGICS. ACCEPTED AS COMPARABLE 8. MAX NEEMAN MEDICAL INTL. LTD. - CLINICAL RESEARCH SEGMENT THE CLINICAL RESEARCH SEGMENT IS INTO CONTRACT RESEARCH ORGANISATION OFFERING A BOUQUET OF SERVICES TO GLOBAL PHARMACEUTICALS, BIOTECH AND DEVICE COMPANIES RELATED PARTY TRANSACTION 25% 9. PFIZER LTD. SERVICES SEGMENT THE SERVICES SEGMENT OF THE COMPANIES IS PRIMARILY INTO CONDUCTING CLINICAL RESEARCH AND TRIALS AND UNDERTAKING DATA MANAGEMENT FOR NEW DRUG REJECTED AS COMPARABLE SEGMENTS A/C 5 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 DEVELOPMENT FOR ITS GROUP ENTITIES 4. THE ASSESSEE BEFORE TPO FURNISHED REPLY DATED 30.06 .2011 STATING THAT IT HAS SELECTED ITS COMPARABLE IN A SCIENTIFIC MANNER. THE ASSESSEE TOOK ANOTHER GROUND THAT IN CASE COMPARABLES AT SL. NOS. 3, 4 AN D 5 (GIVEN IN ABOVE CHART) WERE TO BE REJECTED THEN COMPARABLES GIVEN AT SL. NO. 1 SHOULD ALSO BE REJECTED FOR THE REASON THAT IT DOES NOT UNDERTAKE ANY WORK IN LABOR ATORIES BUT UNDERTAKES FIELD CONTROLS, SERVICE, DESIGNS AND PLANNING FOR OIL IND USTRY. THE ASSESSEE BEFORE THE TPO SUBMITTED A FRESH LIST OF COMPARABLES, TPO OUT OF WHICH, REJECTED ORIGIN DISCOVERY TECHNOLOGIES LTD. FOR THE REASONS THAT IT HAS CONSISTENTLY BEEN INCURRING LOSSES FROM FYS 2005-06 TO 2007-08 AND ACCORDINGLY, IT IS NOT CONSIDERED AS COMPARABLE COMPANY. THE TPO AFTER REJECTING THE CO MPARABLES AND CONSIDERING THE COMPARABLES GIVEN BY ASSESSEE ORIGINALLY AT SL. NO. 1 I.E. ALPHAGEO (INDIA) LTD. FINALLY CHOOSE SET OF NINE COMPARABLE COMPANIES AS UNDER: SL. NO. NAME OF THE COMPANY OP/OC (UNADJUSTED) 1. 2. 3. 4. 5. 6. 7. 8. 9. ALPHAGEO (INDIA) LTD. CHOKSI LABORATORIES LTD. GVK BIOSCIENCE PVT. LTD. JUBILANT CHEMSYS LTD. RESEARCH SUPPORT INTL. PVT. LTD. TCG LIFESCIENCE LTD. SIRO CLINPHARM PVT. LTD. SYNGENE INTERNATIONAL LTD. VIMTA LABS LTD. ARITHMETIC MEAN 41.05% 29.95% 20.84% 16.75% 9.34% 29.97% 28.84% 30.74% 15.84% 24.74% ACCORDING TO TPO, THE OP/OC OF THE FINAL SET OF NI NE COMPANIES IS AT 27.74% AND THE MEAN OF THE SAME AT 24.74% WAS APPLIED FOR ADJU STMENT. THE ASSESSEE HAS DISCLOSED OP/OC AT 17.20%, WHICH IS LESS THAN COMPA RABLE COMPANIES AND ACCORDINGLY, ADJUSTMENT TO ALP WAS MADE OF RS.1,55, 48,991/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 6 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 5. CIT(A) AFTER CONSIDERING THE FUNCTIONS OF DOLPHIN M EDICAL SERVICES LTD., MEDINOVA DIAGNOSTIC SERVICE AND N. G. INDUSTRIES NO TED THAT THESE THREE COMPANIES ARE NOT FUNCTIONALLY COMPARABLE TO THE BU SINESS OF THE ASSESSEE AND HENCE, THESE HAVE RIGHTLY BEEN REJECTED BY TPO. TH E CIT(A) ALSO REJECTED THE PLEA OF THE ASSESSEE THAT ALPHAGEO (INDIA) LTD. SHOULD H AVE ALSO BEEN REJECTED. HE CONSIDERED THE PLEA AND REJECTED THE SAME AND FINAL LY UPHELD THE ORDER OF TPO/AO VIDE PARA 5.4 (IV) TO (IX), WHICH READ AS UN DER: IV) THE APPELLANT CONTENDED THAT IF ABOVE THREE CO MPANIES ARE REJECTED ON FUNCTIONAL DISSIMILARITY, THEN ALPHAGEO (INDIA) LTD . ALSO SHOULD HAVE BEEN REJECTED. IN THIS REGARD IT IS MENTIONED THAT THIS COMPANY WAS SELECTED BY THE ASSESSEE ITSELF. IN THIS REGARD IT IS MENTIONED TH AT THIS COMPANY WAS SELECTED BY THE ASSESSEE ITSELF. THE TPO IN HIS ORDER HAS M ENTIONED THAT THE ASSESSEE HAD CATEGORICALLY STATED DURING FINAL HEARING ON 04 .08.2011 THAT THEY HAVE DONE FAR ANALYSIS FOR THE COMPARABLES. AS QUOTED F ROM THE AGREEMENT ABOVE, THE APPELLANT COMPANY IS IN THE BUSINESS OF RESEARCH ACTIVITY TO BE PERFORMED ON BEHALF OF ITS AE AS PER THEIR DIRECTIO NS. SIMILARLY IN CASE OF ALPHAGEO, RESEARCH IS BEING CONDUCTED WHICH INCLUDE S 3D, SEISMIC DATA ACQUISITION IN PROCESSING AND CARRYING OUT ANALYSIS AND ADVISING/CERTIFICATION SERVICES ON CONTRACTUAL BASIS. THE FUNCTION OF THI S COMPANY ARE THUS IN THE AREA OF RESEARCH ACTIVITY AND HENCE COMPARABLE. AC CORDINGLY, CONTENTION OF THE APPELLANT IS NOT ACCEPTABLE. V) THE APPELLANT STATED THAT THE AO HAS REJECTED PF IZER LTD. ON THE BASIS OF SEGMENTAL ACCOUNTS WHICH IS NOT JUSTIFIED. IN THI S REGARD IT IS MENTIONED THAT AS STATED BY THE ASSESSING OFFICER IN THE ORDER, TH IS COMPANY WAS EXCLUDED ALSO ON THE GROUND THAT ITS ANNUAL ACCOUNT WAS FOR THE PERIOD 30.11.2007 AND THUS ONLY 7 MONTHS (APRIL 2007 TO NOVEMBER 2007 ) DATA WAS AVAILABLE WAS OVERLAPPING WHICH IS NOT COMPARABLE TO THE FULL FINANCIAL YEAR DATA OF THE APPELLANT. THE COMPANIES HAVING DIFFERENT FINANCIA L YEAR/ACCOUNTING YEAR DATA (I.E. OTHER THAN ENDING 31 ST MARCH) ARE TO BE REJECTED BECAUSE IF A TESTED PARTY ENDS ITS ACCOUNTING YEAR BY MARCH THEN TAKING COMPANIES WHOSE ACCOUNTING YEAR ENDS IN MARCH ONLY CAN BE COMPARABL E. THIS VIEW HAS BEEN UPHELD BY HONBLE ITAT PUNE BENCH IN THE CASE OF HO NEYWELL AUTOMATION INDIA LTD. (IN ITA NO. 4/PN/08 ORDER DATED 10/2/200 9.) ALSO IN THE CASE OF WELLWIN INDUSTRY LTD., THE HONBLE ITAT PUNE UPHELD THE TPOS VIEW THAT DIFFERENT ACCOUNTING YEAR DATA CANNOT BE USED. IN VIEW OF THESE JUDICIAL PRONOUNCEMENTS THE CONTENTION OF THE APPELLANT IS R EJECTED. VI) THE APPELLANT CONTENDED THAT WORKING CAPITAL AD JUSTMENT SHOULD HAVE BEEN ALLOWED TO IT BY TPO. IN THIS REGARD IT IS ME NTIONED THAT HONBLE ITAT WHILE DECIDING THE APPEAL IN THE CASE OF SYMENTEC S OFTWARE SOLUTIONS PVT. 7 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 LTD. FOR ASST. YEAR 2006-07 HAS NOT GRANTED ADJUSTM ENT FOR DIFFERENCE IN WORKING CAPITAL LEVEL AND FUNCTIONAL AND RISK PROFI LE OF COMPARABLE COMPANIES VIS--VIS THE APPELLANT. IN THIS REGARD, OBSERVATIONS OF THE HONBLE ITAT IN CONTEXT OF RISK AND WORKING CAPITAL ADJUSTM ENT ARE THERE IN PARA 14 AND PARA 16 OF THE ORDER; WHEREIN IT HAS BEEN OBSER VED AS UNDER: THE APPELLANT DID NOT MAKE ANY SUCH ADJUSTMENT OF D IFFERENCE IN FUNCTION AND RISK PROFILE OF THE COMPARABLES IN THE TRANSFER PRICING STUDY. IT IS ONLY WHEN THE TPO PROPOSED TO EXCLUD E SOME OF THE COMPARABLES AND TO TAKE ONLY CURRENT YEAR UPDATED D ATA INTO CONSIDERATION FOR DETERMINING THE ALP, THE APPELLAN T RAISED THESE OBJECTIONS. THE CALCULATION OF RISK AND WORKING CAPITAL ADJUSTM ENT SUBMITTED BY THE APPELLANT IS ALSO NOT ON THE BASIS OF ANY FORMU LA OR PRINCIPLE RATHER IT IS GENERAL IN NATURE. EVEN OTHERWISE UNTIL AND UNLESS SUCH DIFFERENCE RESULTS IN DEFLATION OR INFLATION OF FIN ANCIAL RESULT OF THE COMPARABLES, IT IS NOT GENERAL RULE OF STANDARD ADJ USTMENT. THE APPELLANT HAS NOT BROUGHT OUT ON RECORD HOW SUCH FU NCTIONAL DIFFERENCE AND RISK HAS INFLUENCED THE RESULT OF THE COMPARABL ES WITH QUANTIFIED DATA TO THE SATISFACTION OF THE AUTHORITIES. SINCE IT IS IMPOSSIBLE TO HAVE A PERFECT COMPARABLE WITHOUT ANY DIFFERENCE OR VARIATION REGARDING TURNOVER RISK PRO FILE AND FUNCTIONAL DIFFERENCES; THEREFORE, THE LEGISLATURE HAS PROVIDE D A MARGIN OF +/- 5% WHILE DETERMINING THE ALP. OBSERVING AS ABOVE THE HONBLE ITAT MUMBAI BENCH I N THE CASE OF SYMENTEC SOFTWARE SOLUTIONS PVT. LTD. HAS NOT ALLOW ED THE GROUNDS OF THE APPEAL IN RESPECT OF WORKING CAPITAL ADJUSTMENT AND RISK ADJUSTMENT. THE FACTS OF THE CASE UNDER CONSIDERATION ARE ALSO SIMI LAR. FURTHER THERE NOTHING DEMONSTRATED BY THE APPELLANT THAT THE ADJUSTMENT I N ANY CASE IS ESSENTIAL IN THE FACTS OF THE CASE. BECAUSE WHAT COULD BE MERE DIFFERENCE AND NOT MATERIAL DIFFERENCE WOULD NOT BE REQUIRING ADJUSTME NTS. FURTHER ANY ADJUSTMENT WHICH IS REQUIRED TO BE MADE WOULD BE IN TERMS AND IN ACCORDANCE WITH RULE 10B(1)(E)(III) AND NOT OTHERWI SE. APPELLANT HAS NOT MADE OUT ANY CASE AS TO HOW SO CALLED DIFFERENCES A RE MATERIALLY AFFECTING THE AMOUNT OF NET PROFIT MARGIN IN THE OPEN MARKET. FURTHER THE APPELLANT BUT FOR MAKING A TECHNICAL SUBMISSION IN THIS REGARD HA S NOT ACTUALLY GIVEN ANY SUBMISSION/WORKING OF THE ADJUSTMENTS AS IT SOUGHT FOR WORKING CAPITAL, WHICH ONLY MEANS THAT THE APPELLANT IS ONLY INTERES TED IN THE RAISING TECHNICAL ISSUE AND NOT SERIOUS ON FACTS IN THIS REGARD. ACC ORDINGLY AND IN VIEW OF THE DECISION OF THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF SYMENTEC SOFTWARE SOLUTIONS PVT. LTD. FOR ASST. YEAR 2006-07 IN ITA N O.7894/MUM/2010, THE CONTENTIONS OF THE APPELLANT REGARDING THE COMPARAB ILITY ADJUSTMENT IS NOT FOUND TO BE ACCEPTABLE. 8 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 VII) THE APPELLANT ALSO OBJECTED TO THE REJECTION O F CONTEMPORARY DOCUMENTATION AND USE OF MULTIPLE YEAR DATA. IN RESPECT OF THE S UBMISSION IN RESPECT OF USE OF FINANCIAL INFORMATION PERTAINING TO THE YEAR IN QUESTION WHICH WAS NOT AVAILABLE AND ASSESSEES CONTENTION THAT THE DATA F OR THE EARLIER YEARS SHOULD BE USED INSTEAD, IT IS STATED THAT RULE 10B(4) OF I .T. RULE, 1962 IS WHAT GIVES MANDATE FOR THE USE OF DATA AND NOT RULE 10D OF THE RULES. IN RESPECT OF THE SUBMISSION IN RESPECT OF USE OF FINANCIAL INFORMATI ON PERTAINING TO THE YEAR IN QUESTION WHICH WAS NOT AVAILABLE AND ASSESSEES CON TENTION THAT THE DATA FOR THE EARLIER YEARS SHOULD BE USED INSTEAD, IT IS STA TED THAT RULE 10B(4) OF I.T. RULES, 1962 IS WHAT GIVES MANDATE FOR THE USE OF DA TA, WHICH IS REPRODUCED HEREIN UNDER: 4) THE DATA TO BE USED IN ANALYZING THE COMPARABIL ITY OF AN UNCONTROLLED TRANSACTION WITH AN INTERNATIONAL TRA NSACTION SHALL BE THE DATA RELATING TO THE FINANCIAL YEAR IN WHICH THE IN TERNATIONAL TRANSACTION HAS BEEN ENTERED INTO. PROVIDED THAT DATA RELATING TO A PERIOD NOT BEING M ORE THAN TWO YEARS PRIOR TO SUCH FINANCIAL YEAR MAY ALSO BE CONSIDERED IF SUCH DATA REVEALS FACTS WHICH COULD HAVE AN INFLUENCE ON THE DETERMINATION OF TRANSFER PRICES IN RELATION TO THE TRANSACTIONS BEI NG COMPARED. (EMPHASIS SUPPLIED) IT CAN BE SEEN THAT THE RULE 10B(4) PRESCRIBES USE OF DATA FOR THE FY IN WHICH AN INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO AND IN THE PROVISO WHAT HAS BEEN FURTHER PERMITTED IS THAT DATA RELATING TO A PERIOD NOT BEING MORE THAN TWO YEARS PRIOR TO SUCH FY MAY ALSO BE CONSIDE RED, IF CONDITIONS GIVEN THERE ARE SATISFIED. THE WORD ALSO GIVEN IN PROV ISO OF RULE 10B(4) WOULD ONLY MEAN THAT UNDER SOME PARTICULAR CIRCUMSTANCES AS HAS BEEN DETAILED IN THE RULE, DATA FOR EARLIER TWO YEARS CAN BE USED IN ADDITION TO THE DATA FOR THE YEAR IN WHICH INTERNATIONAL TRANSACTION HAS BEEN EN TERED INTO IT CANNOT BE INTERPRETED TO MEAN THAT EVEN IF THE DATA FOR THE Y EAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO, IS NOT AVAILABLE, THEN TOO THE DATA FOR THE TWO YEARS PRIOR TO THE F.Y. CAN BE USE D. THE CONTENTION OF THE ASSESSEE THAT THE DATA SHOULD BE CONTEMPORANEOUS AN D DATA AVAILABLE AT THE TIME OF ANALYSIS WHEN THE INTERNATIONAL TRANSACTION HAS BEEN ENTERED INTO SHOULD BE USED IS NOT ACCEPTABLE IN VIEW OF THE RUL E 10B(4) REPRODUCED ABOVE. WHAT THE RULE PROVIDES IS USE OF THE DATA RE LATING TO THE FINANCIAL YEAR IN WHICH THE INTERNATIONAL TRANSACTION HAS BEEN ENT ERED INTO AND DOES NOT SAY ANYTHING ABOUT CONTEMPORANEOUS OF DATA OR ANYTHING OF THE SORT THAT SUCH DATA SHOULD BE AVAILABLE AT THE TIME OF TRANSACTION /ANALYSIS, ASSESSEE'S CONCLUSION IS BASED ON THE RULE 10D(4) OF I.T RULES , 1962. RULE 10D(4) ONLY PUTS AN OBLIGATION ON THE ASSESSEE THAT THE INFORMA TION AND DOCUMENTS WHICH AN ASSESSEE IS REQUIRED TO MAINTAIN SHOULD, AS FAR AS POSSIBLE, BE CONTEMPORANEOUS AND SHOULD EXIST LATEST BY THE SPEC IFIED DATE REFERRED TO IN CLAUSE (IV) OF SECTION 92F; BUT THIS IS NOT INDICAT IVE OR SUGGESTIVE OF THE FACT THAT THE DATA TO BE USED FOR THE ANALYSIS/BENCHMARK ING OF INTERNATIONAL TRANSACTION SHOULD NECESSARILY EXIST AT THE TIME OF UNDERTAKING THE TRANSACTION/ANALYSIS CONDUCTED BY THE ASSESSEE FOR ITS BENCHMARKING AND 9 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 THAT EVEN IF THE DATA FOR THE RELEVANT PERIOD IS AV AILABLE AT THE TIME OF CONDUCTING ANALYSIS BY THE DEPARTMENT, THE SAME CAN NOT BE USED. USE OF DATA FOR THE PURPOSES OF ANALYSIS GOVERNED BY RULE 10B(4) OF THE I. T. RULES, 1962 AND WHEN A SPECIFIC RULE IS GIVEN IN RESPECT O F DATA TO BE USED FOR THE PURPOSES OF COMPARABILITY OF AN UNCONTROLLED TRANSA CTION WITH AN INTERNATIONAL TRANSACTION, THEN TO DRAW AN INDIRECT INFERENCE BASED ON THE RULE 10D(4) WHICH ONLY ENCUMBERS, MAINTENANCE OF TY PE OF INFORMATION/DOCUMENTS BY THE ASSESSEE, IN RESPECT O F AN INTERNATIONAL TRANSACTION WOULD NOT ONLY BE OUT OF PLACE BUT INCO RRECT ALSO AND FURTHER EVEN IF THE INFERENCE IS DRAWN FROM THERE THEN THE SAME CAN IN NO WAY SUPERSEDE THE PROVISION GIVEN IN THE RULE 10B (4) WHICH DIREC TLY DEALS WITH USE OF DATA FOR COMPARABILITY. IN VIEW OF THE FACTS AS AFORESAI D AND DISCUSSION AS ABOVE, THE SUBMISSION OF THE APPELLANT REGARDING IMPOSSIBI LITY OF PERFORMANCE IS NOT FOUND TO BE ACCEPTABLE AND ACCORDINGLY THE CASE LAW S RELIED UPON IN SUPPORT OF DOCTRINE OF IMPOSSIBILITY OF PERFORMANCE IS NOT FOUND TO BE APPLICABLE IN THIS CASE. IT MAY BE MENTIONED THAT THE IN THE DECISION OF HON'BLE I.T.A. T DELHI IN THE CASE OF CUSTOMER SERVICES INDIA (P) LTD. VS. AC IT (2009) IT HAS BEEN OBSERVED AS UNDER: 'NON AVAILABILITY OF INFORMATION IN THE PUBLIC DATA BASE MAY AT BEST BE RELEVANT TO EXPLAIN THE DISCHARGE OF THE APPELLANT' S OBLIGATION OF MAINTAINING THE PRESCRIBED DOCUMENTATION UNDER SE CTION 92D(1) OF THE ACT READ WITH RULE 10D OF THE RULES . IT THEREFORE CLEARLY MEANS THAT NON-AVAILABILITY OF INFORMATION AT THE TIME WHEN APPELLANT CONDUCTED ITS BENCHMARKING IS NOT RE LEVANT FOR THE PURPOSE OF BENCHMARKING AND THAT THE SAME CANNOT BE IMPORTED T O UNDERSTAND THE MEANING OF RULE 10B(4), WHICH IN ITSELF IS QUITE CL EAR AND UNAMBIGUOUS. IT IS FURTHER MENTIONED THAT THE HONBLE SPECIAL BENCH OF ITAT, CHANDIGARH IN THE CASE OF QUARK SYSTEMS PVT. LTD. 38 SOT 307 (SB) HAV E CLEARLY GIVEN THE FINDINGS THAT THE COMPARABLES WHICH ARE AVAILABLE I N THE PUBLIC DOMAIN EVEN AFTER THE CONDUCT OF THE STUDY BY APPELLANT CAN BE TAKEN AS COMPARABLE AND CAN BE CONSIDERED FOR COMPARABILITY/BENCHMARKING. EVEN OTHERWISE APPELLANT HAS NOT SUBMITTED ANYTHING WHICH WOULD NE CESSITABLE USE OF MULTIPLE YEAR DATA. APPELLANTS SUBMISSION THAT US E OF DATA FOR THREE YEARS DECREASES ANY VARIABILITY/DISTORTIONS IS NOT COMING OUT OF THE FACTS OF THE CASE, WHAT ARE THE VARIABILITY/DISTORTIONS WHICH AR E HAVING EFFECT ON DETERMINING THE TRANSFER PRICE OF THE INTERNATIONAL TRANSACTION? AND HOW ARE THEY SUPPOSED TO BE ADDRESSED BY TAKING MULTIPLE YE AR DATA? THESE ASPECTS HAVE NOT BEEN DETAILED WITH ANY FACTS AND FIGURES. THEREFORE IT IS NOWHERE DEMONSTRATED THAT DATA PERTAINING TO TWO YEARS PRIO R TO THE FINANCIAL YEAR 2007-08 HAVE ANY INFLUENCE ON THE DETERMINATION OF TRANSFER PRICES IN RELATION TO THE TRANSACTIONS BEING COMPARED. THEREFORE IT I S NOT DEMONSTRATED THAT DATA PERTAINING TO TWO YEARS PRIOR TO THE FINANCIAL YEAR 2007-08 HAVE ANY INFLUENCE ON THE DETERMINATION OF TRANSFER PRICES I N RELATION TO THE TRANSACTIONS BEING COMPARED. THE APPELLANT HAS ALSO BASED ITS A RGUMENTS ON THE PARA 5.9 OF THE OECD GUIDELINES. FOR THE SAKE OF CLARITY TH E RELEVANT PORTION RELIED UPON BY THE APPELLANT IS REPRODUCED AS UNDER: 10 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 PARA 5.9 OF THE OECD GUIDELINES: TAX ADMINISTRATIONS ALSO SHOULD LIMIT REQUESTS FOR DOCUMENTS THAT BECAME AVAILABLE ONLY AFTER THE TRANSACTION IN QUESTION OC CURRED TO THOSE THAT ARE REASONABLY LIKELY TO CONTAIN RELEVANT INFORMATION A S DETERMINED UNDER PRINCIPLES GOVERNING THE USE OF MULTIPLE YEAR DATA IN CHAPTER 1 OR INFORMATION ABOUT THE FACTS THAT EXISTED AT THE TIME THE TRANSF ER PRICING WAS DETERMINED. IN CONSIDERING WHETHER DOCUMENTATION IS ADEQUATE, A TAX ADMINISTRATION SHOULD HAVE REGARD TO THE EXTENT TO WHICH THAT INFO RMATION REASONABLY COULD HAVE BEEN AVAILABLE TO THE TAXPAYER AT THE TIME TRA NSFER PRICING WAS ESTABLISHED. THE OECD GUIDELINES AT PARA 5.9 ARE IN RESPECT OF T HE KIND OF DATA WHICH SHOULD BE ASKED BY TAX ADMINISTRATOR. FROM THE GUI DELINES, IT CAN BE SEEN THAT IT IS CLEARLY MENTIONED THERE THAT THE RELEVAN T DOCUMENT THAT ARE REASONABLY LIKELY TO CONTAIN THE RELEVANT INFORMATI ON AND WHICH IS OTHERWISE AVAILABLE IN PUBLIC DOMAIN CAN BE CALLED FOR BY THE TAX ADMINISTRATOR. THE AFORESAID GUIDELINES OF THE OECD DO NOT SUGGEST THA T THE ANALYSIS CANNOT BE CONDUCTED BASED ON THE INFORMATION WHICH CURRENTLY AVAILABLE IN THE PUBLIC DOMAIN AS HAS BEEN CONTENDED BY THE APPELLANT. FUR THER RELIANCE IS PLACED ON THE ITAT DECISION IN CASE OF RANBAXY LABORATORY LTD. VS. ADDL. CIT RANGE- 15, NEW DELHI (ITA NO. 2146 DELHI OF 2007, ASST. YE AR 2004-05) AND MENTOR GRAPHICS (NOIDA) PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX (ITA NO. 1969/D/2006 ASST. YEAR 2002-03). IN A RECENT JUDGM ENT IN THE CASE OF ACIT VS. INFOTECH ENTERPRISES LTD. (2014) 41 TAXMANN.COM 335, IT WAS HELD BY HON'BLE HYDERABAD ITAT THAT TPO CANNOT DETERMINE AR MS LENGTH PRICE UNDER TNM METHOD BY RELYING UPON MULTIPLE YEAR DATA WHERE CURRENT YEAR DATA OF COMPARABLE COMPANIES ARE AVAILABLE IN PUBLIC DOMAIN . ACCORDINGLY THE APPELLANT'S CONTENTION ABOUT USE OF MULTIPLE YEAR D ATA IS NOT FOUND TO BE ACCEPTABLE. VIII. THE APPELLANT HAS CONTENDED ABOUT NON FULFILL MENT OF ANY OF THE CONDITIONS MENTIONED IN SECTION 92C(3} AND THEREFORE REJECTION OF THE BENCHMARKING DONE BY THE APPELLANT BEING NOT JUSTIFIED. IN THIS REGARD IT IS MENTIONED THAT THE APPELLANT IN ITS T.P. STUDY HAS CONSIDERED DATA FOR THE COMPARABLES FOR EARLIER TWO YEARS ALSO AND THEIR WEIGHTED AVERAGE OF MARGINS HAS BEEN CONSIDER ED FOR THE PURPOSES OF BENCH MARKING. CONSIDERATION OF DATA FOR THE EARLIER YEAR S WITHOUT THE SAME BEING SUBSTANTIATED IN TERMS OF PROVISO TO RULE 10B(4) IS NOT IN CONFORMITY WITH THE INDIAN TRANSFER PRICING REGULATIONS. FURTHER CONSIDERATIO N OF WEIGHTED AVERAGE OF MARGINS OF THE COMPARABLES IS AGAINST HT PROVISO TO SECTION 92C(2) OF THE ACT. ACCORDINGLY IT CAN BE ARRIVED THAT THE BENCHMARKING DONE BY THE AP PELLANT IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92C(1) & 92C(2) OF T HE ACT. FURTHER, THE APPEL,ANT HAD CONSIDERED COMPANY NAMED AS MAX NEEMAN MEDICAL INTE RNATIONAL LTD. AS A COMPARABLE IN ITS TRANSFER PRICING STUDY REPORT, W HICH WAS NOT FOUND COMPARABLE BY TPO AND SAME WAS ACCEPTED BY THE APPELLANT AS NO T BEING COMPARABLE. ACCORDINGLY IT CAN BE ARRIVED AT THAT THE DATA/INFO RMATION USED BY THE APPELLANT FOR THE PURPOSES OF BENCHMARKING IS NOT RELIABLE OR COR RECT. UNDER SUCH FACTS AND CIRCUMSTANCES, THE CASE OF THE APPELLANT WOULD CLEA RLY FALL UNDER THE CLAUSES (A) AND (C) OF THE SECTION 92C(3) OF THE ACT. THEREFORE UN DER SUCH FACTS AND CIRCUMSTANCES OF 11 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 THE CASE REJECTION OF THE BENCHMARKING DONE BY THE APPELLANT AND THE REDETERMINATION OF THE CASE REJECTION OF THE BENCHM ARKING DONE BY THE APPELLANT AND THE REDETERMINATION OF THE ALP BY THE TPO IS JUSTIF IED IN TERMS OF SECTION 92C(3) OF THE ACT. CONTENTION OF THE APPELLANT IS THEREFORE NOT ACCEPTABLE. IX. WITH REGARDS TO THE APPELLANTS CONTENTION THAT BURDEN OF PROOF RESTED WITH THE REVENUE, IT IS MENTIONED THAT IN THE CASE OF AZTEC SOFTWARE AND TECHNOLOGY SERVICES LIMITED 107 ITD 141, HONBLE ITAT BANGALORE (SPECI AL BENCH) (WHICH HAS BEEN UPHELD BY HONBLE KARNATAKA HIGH COURT) HELD THAT T HE BURDEN TO ESTABLISH THAT INTERNATIONAL TRANSACTION WAS CARRIED AT ARMS LEN GTHS PRICE IS ON TAXPAYER. HE IS ALSO TO FURNISH COMPARABLE TRANSACTIONS, APPLY APPR OPRIATE METHOD FOR DETERMINATION OF ALP AND JUSTIFY THE SAME BY PRODUCING RELEVANT M ATERIAL AND DOCUMENTS BEFORE THE REVENUE AUTHORITIES. FURTHER IN A RECENT JUDGM ENT IN THE CASE OF CIT VS. SHATRUNJAY DIAMONDS (2003) 261 ITR 258 (BOM) IT WAS HELD THAT THE INTRICACIES OF THE TRANSACTIONS ARE REQUIRED TO BE EXPLAINED BY TH E ASSESSEE AND THE ONUS IS ON THE ASSESSEE TO EXPLAIN THE DIFFERENCES WHILE LEADING P ROPER EVIDENCE. THIS CONTENTION OF THE APPELLANT IS THEREFORE NOT ACCEPTABLE. X. IN VIEW OF THE FACTS AND LEGAL POSITION AS DISCU SSED ABOVE THE ADJUSTMENT MADE BY THE TPO/AO IS UPHELD. AGGRIEVED, ASSESSEE CAME IN SECOND APPEAL BEFORE TR IBUNAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FA CTS AND CIRCUMSTANCES OF THE CASE. BEFORE US LD. COUNSEL F OR THE ASSESSEE ONLY MADE REQUEST THAT IN CASE THESE THREE COMPANIES VIZ., DO LPHIN MEDICAL SERVICES LTD., MEDINOVA DIAGNOSTIC SERVICE AND N. G. INDUSTRIES AR E REMOVED AS COMPARABLES AS REJECTED BY TPO AND CONFIRMED BY CIT(A) THEN THE FU NCTIONAL ASPECT OF ALPHAGEO (INDIA) LTD. I.E. GIVEN AT SL. NO. 1 OF THE COMPARA BLES (AT PARA 4 PAGES 3 AND 4 ABOVE) SHOULD ALSO BE REJECTED OR REMOVED AS COMPAR ABLES. ON QUERY FROM THE BENCH, LD. COUNSEL FOR THE ASSESSEE EXPLAINED THE F UNCTIONAL DIFFERENCE BETWEEN THE ASSESSEE AND ALPHAGEO (INDIA) LTD. FIRST OF AL L, LD. COUNSEL FOR THE ASSESSEE TOOK US TO PAGES 148 TO 154 OF THE ASSESSEES PAPER BOOK WHEREIN ANNUAL REPORT FOR THE YEAR 2007-08 OF ALPHAGEO (INDIA) LTD. IS EN CLOSED. HE STATED THAT THE FUNCTIONS OF THE ALPHAGEO (INDIA) LTD. IS EXPLORATI ON AND PRODUCTION OF OIL. HE REFERRED TO PAGE 151 OF ASSESSEES PAPER BOOK, WHIC H READS AS UNDER: AT ALPHAGEO, WE ARE HELPING A NUMBER OF OUR EXPLOR ATION AND PRODUCTION CUSTOMERS DO PRECISELY THIS. 12 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 THROUGH SEISMIC DATA CAPTURE AND ANALYSIS. AIDING OUR CUSTOMERS IN THEIR QUEST FOR OIL. AND TELLING THEM HOW EASIEST TO EXTR ACT IT. ACCELERATING EXPLORATION INVESTMENTS. SHRINKING EXP LORATION TENURES. TAKING THE BUSINESS OF OUR CUSTOMERS AHEAD. THEN HE TOOK US TO PAGE 154 OF ASSESSEES PAPER BOO K, WHICH READS AS UNDER: WHAT SERVICES WE PROVIDE WE PROVIDE THE FOLLOWING 2-D AND 3-D SEISMIC SERVI CES: - DESIGN AND PREPLANNING OF 2D AND 3D SURVEYS. - SEISMIC DATA ACQUISITION IN 2D AND 3D - SEISMIC DATA PROCESSING/REPROCESSING/SPECIAL PROCES SING - SEISMIC DATA INTERPRETATION - GENERATION, EVALUATION AND RANKING OF PROSPECTS - RESERVOIR DATA ACQUISITION - RESERVOIR ANALYSIS - TOPOGRAPHIC SURVEYS WITH GPS/RTK - DIGITISATION OF HARD COPIES OF MAPS, SEISMIC SECTIO NS AND WELL LOGS INTO CGM/SEGY/LAS FORMATS - THIRD PARTY QUALITY CONTROL FOR ACQUISITION AND PRO CESSING. HE THEN TOOK US TO P&L ACCOUNT OF ALPHAGEO (INDIA) LTD. WHICH IS GIVEN AT PAGE 210 OF ASSESSEES PAPER BOOK, WHEREIN SURVEY EXPEND ITURE FOR THE YEAR IS RS.35,51,51,974/- WHICH IS A MAJOR COMPONENT OF EXP ENDITURE OUT OF TOTAL EXPENDITURE OF RS.61,34,81,150/-. IT IS TO BE NOTED THAT THE DEPRECIATION EXPENSES ARE AT RS.13,85,43,810/-. HE TOOK US TO THE SCHEDU LE 15 TO THE P&L ACCOUNT WHICH IS GIVEN AT PAGE 217 OF ASSESSEES PAPER BOOK WHICH INCLUDES EXPENSES OF SURVEY AND DRILLING CHARGES WHICH IS A MAJOR COMPON ENT OUT OF TOTAL SURVEY EXPENSES AT RS.26,49,32,587/-. IN VIEW OF THESE FA CTS, LD. COUNSEL FOR THE ASSESSEE TOOK US TO THE FUNCTIONS OF THE ASSESSEE C OMPANY WHICH IS GIVEN IN TRANSFER PRICING STUDY FOR THE FY 2007-08 RELEVANT TO ASST. YEAR 2008-09 AT PAGE 32 OF ASSESSEES PAPER BOOK. THE FUNCTION ANALYSIS IS GIVEN AS UNDER: 4.2 OVERVIEW 13 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 4.2.1 SBPL AND SCPAG HAVE ENTERED INTO AN ARRANGEM ENT, WHEREBY SBPL HAS BEEN ENGAGED TO PERFORM R&T ACTIVITIES LIK E UNDERTAKING CERTAIN SAMPLE PREPARATION AND CHEMICAL SYNTHESIS A CTIVITY ON BEHALF OF SCPAG WHO WILL IN TURN SUPPLY SBPL WITH THE NECE SSARY FORMULAE, INFORMATION AND EXPERTISE TO ENABLE IT TO DO SO. 4.2.2. SBPLS BUSINESS MAINLY INVOLVES PROVIDING R& T SERVICES. THIS INVOLVES MANUFACTURING TEST COMPOUNDS TO BE SENT TO SYNGENTA RESEARCH FACILITIES AT SWITZERLAND OR THE UK. THE OTHER ACTIVITY INVOLVES ASSISTANCE FOR BIOLOGICAL EVALUATION AT TH E RESEARCH FACILITIES. 4.2.3. THE STATE OF THE ART RESEARCH CENTRE, LOCATE D AT GOA, IS WELL EQUIPPED TO CONDUCT ORGANIC CHEMICAL RESEARCH WITH ADVANCED ANALYTICAL EQUIPMENT. GIVEN BELOW ARE THE BRIEF NOT E ON THE KEY FUNCTIONS PERFORMED BY SBPL AND FURTHER, WHERE RELE VANT, THE CORRESPONDING FUNCTIONS PERFORMED BY ITS AE I.E. SC PAG ARE ALSO DISCUSSED. 7. HE ALSO DREW OUR ATTENTION TO THE FUNCTIONS PERFORM ED WHICH ARE GIVEN AT PAGES 32 AND 33 OF ASSESSEES PAPER BOOK. IN VIEW OF THESE FACTS, LD. COUNSEL FOR THE ASSESSEE BEFORE US CONTENDED AND AGREED THAT DO LPHIN MEDICAL SERVICES LTD., MEDINOVA DIAGNOSTIC SERVICE AND N. G. INDUSTRIES AR E FUNCTIONAL DISSIMILAR BUT THEN ALPHAGEO (INDIA) LTD. IS ALSO NOT SAME IN VIEW OF THE ABOVE FUNCTIONAL DISSIMILARITY WITH THAT OF THE ASSESSEE, THE SAME S HOULD HAVE BEEN REJECTED OR REMOVED FOR TAKING COMPARABLES. FINALLY, HE LIMITED HIS PLEA ONLY TO THIS EXTEND. ANOTHER ASPECT HE ARGUED WAS THAT THERE IS NEED TO CARRY OUT WORKING CAPITAL ADJUSTMENT BETWEEN THE WORKING CAPITAL LEVEL OF THE ASSESSEES COMPARABLE COMPANIES. TPO HAS NOT ALLOWED WORKING CAPITAL ADJ USTMENT. 8. ON THE OTHER HAND, LD. CIT (DR) ARGUED THAT THE TPO AND CIT(A) BOTH HAVE RIGHTLY TAKEN ALPHAGEO (INDIA) LTD. AS COMPARABLE F OR THE REASON THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF RESEARCH ACTIVITY TO BE PERFORMED ON BEHALF OF ITS AES. SIMILARLY, ALPHAGEO (INDIA) LTD. ALSO CONDUCT ED RESEARCH WHICH INCLUDES 3D SEISMIC DATA ACQUISITION IN PROCESSING AND CARRYING OUT ANALYSIS AND ADVISING/CIRCULATION SERVICES ON CONTRACTUAL BASIS. ACCORDING TO LD. CIT,DR, THE FUNCTIONS OF ALPHAGEO (INDIA) LTD. ARE SIMILAR TO T HAT OF THE ASSESSEE FOR THE REASON THAT THE AREAS OF RESEARCH ACTIVITY ARE THE SAME AN D HENCE, COMPARABLE. LD. CIT, 14 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 DR ALSO STATED THAT THE ASSESSEE HIMSELF HAS TAKEN ALPHAGEO (INDIA) LTD. AS COMPARABLE AND NOW HE CANNOT COME BACK FROM THE SAM E. 9. IN VIEW OF ABOVE FACTS, NOW LIMITED QUESTION REMAIN S FOR ADJUDICATION, ON THIS ISSUE, BEFORE US IS THAT WHETHER THE COMPARABL E CHOSEN BY ASSESSEE I.E. ALPHAGEO (INDIA) LTD. CAN BE REMOVED FOR COMPUTATIO N OF MARGIN AND WORKING CAPITAL ADJUSTMENT TO THE COMPARABLES SELECTED BY R EVENUE CAN BE ALLOWED WHILE COMPUTING MARGINS. WE FIND THAT THE AO HAS REJECTED OR REMOVED THREE COMPANIES VIZ., DOLPHIN MEDICAL SERVICES LTD., MEDI NOVA DIAGNOSTIC SERVICE AND N. G. INDUSTRIES AS COMPARABLES REJECTED BY TPO AND CONFIRMED BY CIT(A). THE ASSESSEES ONLY PLEA WAS THAT IN CASE THESE THREE C OMPANIES ARE REMOVED/REJECTED AS COMPARABLES IN THAT CASE THE FUNCTIONAL ASPECT O F ALPHAGEO (INDIA) LTD. SHOULD ALSO BE REJECTED/REMOVED AS COMPARABLES CAN BE CONS IDERED BECAUSE THE ASSESSEE FROM THE VERY BEGINNING BEFORE THE TPO AND BEFORE C IT(A) HAS TAKEN THIS PLEA THAT THERE IS FUNCTIONAL DIFFERENCE BETWEEN THE ASSESSEE AND ALPHAGEO (INDIA) LTD. WE FIND THAT THE ASSESSEES ACTIVITY IN R&T INCLUDES U NDERTAKING CERTAIN SAMPLES PREPARATION AND CHEMICAL ANALYSIS ACTIVITIES FOR TH E AGRO CHEMICAL BUSINESS. IT SUPPLIES TO ITS AES THE NECESSARY FORMULA, INFORMAT ION AND EXPERTISE TO ENABLE IT TO PROVIDE R&T ACTIVITIES. WHEREAS ON THE OTHER HA ND, ALPHAGEO (INDIA) LTD. IS IN THE BUSINESS OF EXPLORATION AND PRODUCTION OF OIL. WE ARE OF THE VIEW THAT THESE TWO COMPANIES I.E. THE ASSESSEE AND ALPHAGEO (INDIA ) LTD. ARE FUNCTIONALLY NOT COMPARABLES AND CANNOT BE TAKEN INTO CONSIDERATION. THE ARGUMENT OF LD. SR. DR THAT ONCE ASSESSEE HAS CHOSEN ALPHAGEO (INDIA) LTD. AS COMPARABLES IT CANNOT BACK OUT NOW WITHOUT FILING MULTIPLE YEAR DATA. WE FIND THAT THE ASSESSEE IN THE CASE OF ALPHAGEO (INDIA) LTD. HAS FILED THE DATE OF THREE YEARS TO SHOW ANY VARIABILITY DISTORTIONS WHICH ARE HAVING EFFECT ON DETERMINATION OF TRANSFER PRICING OF THE INTERNATIONAL TRANSACTION. WE ARE OF THE VI EW THAT THE COMPARABLES WHICH ARE AVAILABLE IN PUBLIC DOMAIN EVEN AFTER THE CONDU CTION OF THE STUDIES BY ASSESSEE CAN BE TAKEN AS COMPARABLES AND CONSIDERED FOR BENCHMARKING. THE ASSESSEE FILED COMPLETE MULTIPLE YEAR DATA IN THE C ASE OF ALPHAGEO (INDIA) LTD. IN 15 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 ITS PAPER BOOK, WHICH IS REFERRED BY LD. COUNSEL FO R THE ASSESSEE IN HIS ARGUMENTS. THIS VIEW OF OURS IS ALSO SUPPORTED BY THE DECISION OF HONBLE SPECIAL BENCH OF THIS ITAT, CHANDIGARH BENCH IN THE CASE OF QUARK SYSTEMS PVT. LTD. VS. ITO, (2010) 38 SOT 307 (SB) HAS HELD AS UNDER: '25 ... WHILE WE AGREE THAT MERELY BECAUSE A COMPAR ABLE IS MAKING LOSS, IT CANNOT BE EXCLUDED FROM THE LIST OR COMPARABLES (OR THE PURPOSES OF COMPUTATION OR ARM'S LENGTH PRICE. IMERCIUS IS A CASE IN WHICH NOT ONLY FUNCTIONAL AREA IS DIFFERENT. IMERCIUS HAS A NEGATIVE NET WORTH BUT AL SO BECAUSE TURNOVER OF THE IMERCIUS HAS NO COMPARISON WITH THE ASSESSEE COMPAN IES.' 10 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIE W THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN INCLUDING ALPHAGEO (INDIA) LTD. AS COMPARABLE FOR BENCHMARKIN G FOR DETERMINING ALP U/S. 92C(1) AND 92C(2) OF THE ACT. THE TPO IS DIRECTED TO EXCLUDE ALPHAGEO (INDIA) LTD. AS COMPARABLE FOR BEN CHMARKING FOR DETERMINING ALP. FOR REST OF THE COMPARABLES FOR BENCHMARKING A S SELECTED BY REVENUE HAS NOT BEEN DISPUTED BY ASSESSEE EXCEPT CLAIM MADE THA T WORKING CAPITAL ADJUSTMENT SHOULD BE GIVEN. THE ASSESSEES CONTENTI ON REGARDING ADJUSTMENT FOR THE DIFFERENCES IN WORKING CAPITAL LEVEL OF THE ASS ESSEE AND COMPARABLE COMPANIES SELECTED BY REVENUE, WE FIND THAT THE REQUIRED DATA IN RELATION TO THESE COMPANIES ARE NOT AVAILABLE IN THE ORDERS OF THE LOWER AUTHOR ITIES OR THE DETAILS FILED BY THE ASSESSEE BEFORE US. HOWEVER, WE ARE OF THE VIEW TH AT THE NEED TO CARRY OUT THE WORKING CAPITAL ADJUSTMENTS IS FOR THE REASON THAT THE DIFFERENCES ON ACCOUNT OF WORKING CAPITAL CYCLE NOT ONLY IMPACT THE FINANCE C OST BUT IT ALSO AFFECTS ITEMS OF P&L ACCOUNT LIKE EXPENSES, SALE PRICE OF PRODUCT, P ROVISION FOR BAD DEBTS ETC. AND IN TURN IT AFFECTS THE PROFIT BEFORE INTEREST AND T AX. ACCORDINGLY, WE ARE OF THE VIEW THAT TO TAKE INTO ACCOUNT THE DIFFERENCE IN THE NET WORKING CAPITAL REQUIREMENTS BETWEEN THE ASSESSEE AND COMPARABLES SELECTED BY RE VENUE, APPROPRIATE ADJUSTMENTS SHOULD BE MADE ON ACCOUNT OF DEBTORS AN D CREDITORS. AND ADJUSTMENT TO WORKING CAPITAL CYCLE OF ASSESSEE SHO ULD BE MADE VIS--VIS THE SALE AND TOTAL COST OF EACH OF THE COMPARABLE COMPANIES. LET THE ASSESSEE PRODUCE THE DATA AND TPO SHOULD ANALYSE THE SAME. LD. COUNSEL FOR THE ASSESSEE HAS GIVEN 16 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 THE COMPUTATION OF MARGIN AS TAKEN BY REVENUE OF CO MPARABLES AFTER EXCLUSION OF ALPHAGEO (INDIA) LTD. AS UNDER:- SL. NO. NAME OF THE COMPANIES MARGIN AS PER TPO MARGIN POST WORKING CAPITAL ADJUSTMENT 1 ALPHAGEO (INDIA) LTD. NIL NIL 2. CHOKSHI LABORATORIES LTD. 29.95% 16.17% 3. GVK BIOSCIENCES PVT. LTD. 20.84% 19.74% 4. JUBILANT CHEMSYS LTD. 16.75% 14.40% 5. RESEARCH SUPPORT INTL. PVT. LTD. 9.34% 9.53% 6. TCG LIFESCIENCES LTD. 29.97% 24.04% 7. SIRO CLINPHARM PVT. LTD. 28.84% 23.29% 8. SYNGENE INTERNATIONAL LTD. 30.07% 29.07% 9. VIMTA LABS LTD. 15.84% 15.19% AVERAGE 22.70% 18.93% IN VIEW OF THE ABOVE DIRECTIONS, WE RESTORE THE ISS UE TO THE FILE OF THE AO/TPO TO GIVE ADJUSTMENT ACCORDINGLY. THIS ISSUE OF ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 11. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINS T THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN TREATING THE RELINQU ISHMENT OF RIGHT AS SHORT TERM CAPITAL GAIN. FOR THIS, ASSESSEE HAS RAISED FOLLOW ING GROUND NOS. 3 AND 4: 3. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONSIDERING THE REFUND OF DEPOSIT OF R S.1,86,47,800/- RECEIVED BY THE APPELLANT AS SALE CONSIDERATION FOR RELINQUISHM ENT OF RIGHT AND THE SAME IS TREATED AS SHORT TERM CAPITAL GAINS. 4. WITHOUT PREJUDICE, TO GROUND NO. 3 ABOVE, THE AP PELLANT PRAYS THAT IF THE REFUND OF DEPOSIT IS CONSIDERED AS SALE CONSIDERATI ON RECEIVED FOR RELINQUISHMENT OF RIGHTS, THEN COST OF ACQUISITION SHOULD BE CONSIDERED WHILE COMPUTING THE SHORT TERM CAPITAL GAINS. 12. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS SOLD ITS PROPERTY AT GUMMIDIPOONDI, TAMILNADU FOR A SUM OF RS.6.45 CR. A S PER AGREEMENT TO SALE. THE CONSIDERATION SPLITTED AS UNDER: 17 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 I) RS.1,86,47,800/- (RUPEES ONE CRORE EIGHTY SIX L AKH FORTY SEVEN THOUSAND EIGHT HUNDRED ONLY) TOWARDS THE AMOUNT DEPOSITED BY THE VENDOR WITH THE LESSOR, WHICH SHALL STAND ASSIGNED AND TRANSFERRED TO THE PURCHASER OR ITS NOMINEE ON THE DATE OF COMPLETION AND THEREUPON THE VENDOR SHALL ABSOLUTELY RELINQUISH ALL RIGHT, TITLE & INTEREST THERETO AND SHALL FOREVER ACQUIT, DISCHARGE AND RELEASE THE LESSOR FROM PAYMENT THEREOF TO THE VENDOR. II) RS.3,83,52,200/- (RUPEES THREE CRORE EIGHTY THR EE LAKH FIFTY TWO THOUSAND TWO HUNDRED ONLY) TOWARDS THE BUILDINGS- III) RS.75,00,000/- (RUPEES SEVENTY FIVE LAKH ONLY) TOWARDS THE PLANT & MACHINERY. ACCORDING TO AO, THE ASSESSEE HAS SHOWN THE SALE CO NSIDERATION OF THIS BLOCK OF ASSETS AT RS.4,58,52,200/- AFTER REDUCING THE COST OF ACQUISITION AT RS.23.31 LACS. THE DISPUTE IS REGARDING THE AMOUNT DEPOSITED BY AS SESSEE WITH THE SIPCOT, TAMILNADU BEING THE DIFFERENTIAL AMOUNT WHICH WAS N OT ACCOUNTED FOR. THE ASSESSEE CONSIDERED THE SALE CONSIDERATION AT RS.4, 58,52,200/-. THE AO SHOW CAUSED TO THE ASSESSEE AS TO WHY THE DIFFERENTIAL A MOUNT OF RS.1,86,47,800/- BE NOT TREATED AS INCOME OF THE ASSESSEE ACCRUED DURIN G THE YEAR ON RELINQUISHMENT OF RIGHTS, TITLES AND INTEREST IN THE SAID PROPERTY . THE ASSESSEE EXPLAINED THAT THIS AMOUNT WAS DEPOSITED WITH SIPCOT, GOVT. OF TAMIL NA DU FOR LEASEHOLD LAND AT GUMMIDIPOONDI, TAMILNADU WHICH WAS SOLD BY THE ASSE SSEE TO SANMAR SPECIALITY CHEMICALS LTD. HENCE, THERE WAS A NULLIFYING EFFEC T AND THIS WAS NOT CONSIDERED IN THE CONSIDERATION. ACCORDING TO AO, THE SAME IS INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN AND HE TAXED THIS AMOUNT OF RS.1, 86,47,800/- ACCORDINGLY. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEF ORE TRIBUNAL. 13. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FA CTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E HAS RECEIVED TOTAL CONSIDERATION OF RS.6.45 CR. AS AGAINST THE SALE OF THE ASSET I.E. BUILDING AND LAND ALLOTTED BY SIPCOT AT GUMMIDIPOONDI, TAMILNADU. TH E ASSESSEE DECLARED SALE CONSIDERATION WHILE COMPUTING CAPITAL GAINS AT RS.4 ,58,52,200/- AND CLAIMED COST OF ACQUISITION AT RS.23.31 LACS. SIPCOT HAS A LSO ADJUSTED A SUM OF RS.1,86,47,800/- TOWARDS REFUND OF DEPOSIT MADE BY ASSESSEE AND ASSESSEE 18 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 REDUCED THIS AMOUNT FROM THE TOTAL CONSIDERATION. THE AO AS WELL AS CIT(A) INCLUDED THIS AMOUNT IN TOTAL SALE CONSIDERATION AN D COMPUTED CAPITAL GAINS ACCORDINGLY. NOW BEFORE US, ASSESSEE CLAIMED THAT I N CASE THIS ADJUSTMENT OF REFUND OF DEPOSIT BY SIPCOT IS TO BE TREATED AS SAL E CONSIDERATION THEN THE ASSESSEE SHOULD BE ALLOWED THIS AS COST OF ACQUISIT ION FOR THE PURPOSE OF COMPUTING CAPITAL GAINS. WE FIND THE PLEA OF THE A SSESSEE QUITE REASONABLE AND ACCORDINGLY DIRECT THE AO TO CONSIDER THIS REFUND O F DEPOSIT MADE BY ASSESSEE WITH SIPCOT AS COST OF ACQUISITION FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS. THE AO WILL VERIFY THE ADJUSTMENT OF REFUND OF THIS DEPOSIT MADE BY THE ASSESSEE WITH SIPCOT AND ACCORDINGLY ALLOW THE CLAI M OF THE ASSESSEE. THIS ISSUE OF ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF AO IN TERM OF THE ABOVE DIRECTION AND IS ALLOWED FOR STATISTICAL PURPOSES. 14. THE NEXT TWO ISSUES IN THIS APPEAL OF ASSESSEE ARE AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN DISALLOWING T HE DEDUCTION OF RS.11,37,500/- FOR NON-DEDUCTION OF TDS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND CONFIRMING THE ACTION OF AO IN NOT ALLOWING SET OFF OF BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION WHILE COMPUTING TAXA BLE INCOME. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO. 5 AND 6: 5. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN NOT ALLOWING A DEDUCTION OF RS.11,37,500/- WHICH WAS DISALLOWED IN THE COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2007- 08 ON ACCOUNT OF SECTION 40(A) DISALLOWANCE WITHOUT ASSIGNING ANY REASONS TH ERETO. 6. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN NOT ALLOWING SET OFF OF BROUGHT FORWARD LOSSES/UNABSORB ED DEPRECIATION WHILE COMPUTING THE TAXABLE INCOME. 15. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FA CTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO HAS NOT MADE ANY SUCH DISALLOWANCE IN THE ASSESSMENT ORDER AND CIT(A) HAS ALSO RECORDED THE FINDING AS UNDER: 7.3. I HAVE CONSIDERED THE FACTS OF THE CASE, SUB MISSION OF THE APPELLANT AS AGAINST THE FINDINGS/OBSERVATIONS OF THE AO IN HIS ORDER U/S. 143(3) R.W.S. 19 ITA NO. 1083/MUM/2015 SYNGENTA BIOSCIENCES PVT. LTD. ASST. YEAR 2008-09 144C(1) OF THE I. T. ACT. THE CONTENTIONS AND SUBM ISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I) THERE IS NO DISCUSSION MADE BY THE AO ON THESE TWO ISSUES AND HENCE THE SAME DOES NOT ARISE FROM THE ASSESSMENT O RDER. ACCORDINGLY, SAME CANNOT BE CONSIDERED IN THE APPEL LATE PROCEEDINGS. THESE GROUNDS OF APPEAL ARE THEREFORE DISMISSED. IN VIEW OF THE FACT THAT THE AO HAS NOT MADE ANY DI SALLOWANCE U/S. 40(A)(IA) OF THE ACT AND NOT ALLOWING SET OFF OF BROUGHT FORWARD LOS SES/UNABSORBED DEPRECIATION AS IS APPARENT FROM THE ASSESSMENT ORDER AND CIT(A) HAS ALSO GIVEN FINDING OF FACT QUA THAT. SINCE THE ISSUES ARE NOT ARISING OUT OF THE ORDERS OF THE LOWER AUTHORITIES, WE DISMISS THESE ISSUES OF ASSESSEES APPEAL. 16. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22ND APRIL , 2016. SD/- SD/- (ASHWANI TANEJA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 22ND APRIL, 2016 JD. SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) -58, MUMBAI 4. CIT- , MUMBAI 5. DR, K BENCH ITAT, MUMBAI 6. GUARD FILE. BY ORDER //TRUE COPY// (ASSTT. REGISTRAR) ITAT, MUMBAI