Lonsen Kiri Chemical Industries Ltd., Ahmedabad V. The Dy.CIT, (OSD)-1, Circle-4, Ahmedabad

ITA 1116/AHD/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9424 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 27-03-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 01-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI; PARIMAL SINH PARMAR ARS
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Arm length price
• Section: 92A; 10B; 195; 250; 13

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD [ CONDUCTED THROUGH VIRTUAL COURT] BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ITA NO. 1116/AHD/2015 ( /ASSESSMENT YEAR : 2010-11) LONSEN KIRI CHEMICAL INDUSTRIES LTD. 7 TH FLOOR, HASUBHAI CHAMBERS ELLISBRIDGE, AHMEDABAD / VS. THE DCIT (OSD)-1 CIRCLE-4 AHMEDABAD ./ ./PAN/GIR NO. : AABCL 4527 B ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI T.P. HEMANI, SR.ADV & SHRI PARIMAL SINH PARMAR, ARS / RESPONDENT BY: SHRI DILEEP KUMAR, SR.DR / DATE OF HEARING 06/08/2020 / DATE OF PRONOUNCEMENT 19/08/2020 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS)2, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO. CIT(A)- 2/DCIT (OSD)-I, CIR.4/241/13-14 DATED 09/03/2015 ARISING IN THE A SSESSMENT ORDER PASSED UNDER S.143(3) R.W.S.144C OF THE INCOME TAX ACT, 19 61(HEREINAFTER REFERRED TO AS 'THE ACT') DATED 12/03/2014 RELEVANT TO ASSE SSMENT YEAR (AY) 2010- 11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN UPHOLDING THE ACTION OF LD. AO IN MAKING UPWARD TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.41,18,700/-. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF TH E CASE IN UPHOLDING THE ACTION OF LD. AO IN REFERRING THE CASE OF THE APPEL LANT TO THE TRANSFER PRICING OFFICER. THE LD. CIT(A) OUGHT TO HAVE CONS IDERED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE WAS NO R EASONS TO INTERFERE WITH THE PRICING ADOPTED BY THE APPELLANT AS THE SA ME IS FALLING WITHIN THE PARAMETERS OF TRANSFER PRICING LAID DOWN UNDER THE SCHEME OF THE ACT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN UPHOLDING THE ACTION OF LD. AO IN INVOKING THE PROVISIONS OF CHA PTER X WITHOUT PRIMA FACIE DEMONSTRATING THAT THERE WAS SOME TAX AVOIDAN CE. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN UPHOLDING THE ACTION OF LD. AO IN MAKING A REFERENCE TO THE TRAN SFER PRICING OFFICER U/S.92C(3) R.W.S. 92CA(1) OF THE ACT WITHOUT PROVID ING ANY OPPORTUNITY OF BEING HEARD TO THE APPELLANT. 5. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT IN ANY CASE THE WHOLE REFERENCE AND THE CONSEQUENT ORDERS WERE BAD AND IL LEGAL BECAUSE THE ALLEGED APPROVAL GRANTED BY THE COMMISSIONER OF INC OME TAX U/S.92CA(1) OF THE ACT IN LAW FIRSTLY ON ACCOUNT OF FACT THAT THE APPELLANT WAS NOT HEARD BEFORE ANY SUCH APPROVAL AND SECONDLY BECAUSE THE SAME HAS BEEN GRANTED MECHANICALLY, WITHOUT ANY APPLICAT ION OF MIND AND WITHOUT DUE DILIGENCE. 6. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS OF THE CASE IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS S UBMISSIONS, EVIDENCES AND SUPPORTING DOCUMENTS SUBMITTED BY THE APPELLANT FROM TIME TO TIME BEFORE PASSING THE IMPUGNED ORDER. 7. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN CHARGING INTEREST U/S.234A/B/C /D OF THE ACT. 8. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN INITIATING PENALTY PROCEEDINGS U/S.271(1)9C) OF THE ACT WITHOUT RECORDING MANDATORY SATISFACTION AS CONTEMP LATED UNDER THE ACT. 3. THE NECESSARY FACTS REQUIRED FOR DISPOSING O FF THE PRESENT APPEAL ARE THAT THE ASSESSEE IS A JOINT-VENTURE OF TWO COMPANI ES NAMELY WELL PROSPERING LTD A CHINESE COMPANY AND KIRI DYES AND CHEMICALS L TD, AN INDIAN COMPANY ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 3 - WHICH WAS ENTERED AS ON 4 TH FEBRUARY 2010. THE INDIAN COMPANY, KIRI DYES AND CHEMICALS LTD, BELONGS TO DYESTAR GROUP OF COMP ANIES. IN OTHER WORDS, THE DYESTAR GROUP OF COMPANIES BECAME ASSOCIATED EN TERPRISES WITH EFFECT FROM 4 TH OF FEBRUARY 2010 OF THE ASSESSEE COMPANY. THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS TYPES O F SYNTHETIC DYES. 3.1. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS ENTERED INTO CERTAIN INTERNATIONAL TRANSACTIONS, EXPORT OF FINISHED GOOD S, WITH ITS AE NAMELY DYESTAR GROUP AND WELL PROSPERING LTD. THE ASSESSEE TO DETERMINE THE ALP OF SUCH TRANSACTIONS HAS USED COMPARABLE UNCONTROLL ED PRICE (CUP) METHOD AS THE MOST APPROPRIATE METHOD. INTERNATIONAL TRANSACTIONS WITH DYESTAR GROUP 3.2. THE DYESTAR GROUP OF COMPANIES BECAME THE AE OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, DATED 4 TH FEBRUARY 2010. THUS THE ASSESSEE, TO DETERMINE THE ALP FOR THE EXPORT OF THE GOODS TO DY ESTAR GROUP OF COMPANIES AFTER 4 TH FEBRUARY 2010, COMPARED THE AVERAGE PRICE CHARGED POST 4 TH FEBRUARY 2010 WITH THE AVERAGE PRICE FOR THE EXPORT OF THE GOODS PRIOR TO 4 TH FEBRUARY 2010 AS UNCONTROLLED TRANSACTION. AS PER T HE ASSESSEE, THE ACTUAL AVERAGE PRICE PRIOR TO 4 TH FEBRUARY 2010, WITH RESPECT TO ITS PRODUCT NAMELY REACTIVE BLUE 250 COMES AT 177.10 PER KG WHEREAS THE ACTUAL AVERAGE PRICE POST 4 TH FEBRUARY 2010, WITH RESPECT TO ITS PRODUCT NAMELY REACTIVE BLUE 250 COMES AT 169.19 PER PIECE. ACCORDINGLY, THE ASSESS EE CLAIMED THAT IT HAS CHARGED THE PRICE FROM ITS AE AFTER 4 TH FEBRUARY 2010 AT THE ARM LENGTH PRICE AND THEREFORE NO ADJUSTMENT IS REQUIRED TO BE MADE. 3.3. HOWEVER, THE TPO OBSERVED THAT PRICE CHARGED FROM ITS AE ARE VARYING SIGNIFICANTLY AS EVIDENT FROM INVOICE WISE DETAILS AVAILABLE ON RECORD. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 4 - THEREFORE, TPO WAS OF THE VIEW THAT EACH INVOICE SH OULD BE COMPARED SEPARATELY. THE TPO WAS ALSO OF THE VIEW THAT UNCON TROLLED PRICE OF OTHER NON AE SHOULD ALSO BE INCLUDED FOR CALCULATING THE ALP OF THE COMPARABLES. ACCORDINGLY, TPO WORKED OUT THE REVISED ALP OF THE COMPARABLES I.E. AVERAGE OF PRICE CHARGED FORM DYESTAR GROUP PRE 04 TH FEBRUARY 2010 AND PRICE CHARGED FROM OTHER NON AE. THE TPO COMPARED THE SAM E WITH EACH INVOICE OF EXPORTS MADE TO DIFFERENT UNITS OF DYESTAR GROUP AFTER 04 TH FEBRUARY 2010. DURING THE PROCEEDINGS, THE TPO FOUND THAT IN CASE OF TWO INVOICES WITH RESPECT TO THE PRODUCT NAMELY REACTIVE BLUE 250, TH E ASSESSEE HAS NOT CHARGED PRICE AT ALP AS THERE WAS VARIANCE OF MORE THAN 5%. THUS THE TPO ISSUED SHOW CAUSED NOTICE VIDE LETTER NO. DCIT (TPO -II)/AHD/KRI DYES/92CA(1)/12-13 DATED 18 TH OCTOBER 2013 PURPOSING ADDITION OF RS. 2,20,704/-IN THE FOLLOWING MANNER: 3.4. THE ASSESSEE IN RESPONSE TO SUCH SHOW CAUSE NOTICE MADE REPLY VIDE LETTER DATED 29 TH OCTOBER 2013 BY SUBMITTING THAT NON-AE ENTITIES CA NNOT BE CONSIDERED AS COMPARABLE WHILE WORKING OUT THE ALP AS THESE ENTITIES ARE LOCATED IN DIFFERENT GEOGRAPHICAL AREAS. 3.5. SIMILARLY, THE ASSESSEE ALSO CONTENDED THAT THERE IS A SIGNIFICANT DIFFERENCE IN THE QUANTITY SOLD TO AE (DYESTAR GROU P OF COMPANIES) AND NON- AE. 3.6. HOWEVER, THE TPO FOUND THAT THE ASSESSEE HAS NOT CONSIDERED THE GEOGRAPHICAL LOCATION FOR WORKING OUT THE ALP FOR T HE GOODS EXPORTED TO THE AE. AS SUCH THE ASSESSEE ITSELF HAS CONSIDERED PRIC E OF THE EXPORT OF THE GOODS FOR ITS PRODUCT NAMELY REACTIVE BLUE 250 TO T HE DYESTAR GROUP WHICH IS LOCATED IN USA, MAXICO AND BRAZIL PRIOR TO THE DATE OF ACQUISITION I.E. 4 ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 5 - FEBRUARY 2010. ACCORDINGLY, THE AO HELD THAT THE AS SESSEE CANNOT TAKE DIFFERENT YARDSTICK FOR ITS DIFFERENT PRODUCTS WHIC H IS SUITABLE TO IT FOR THE PURPOSE OF COMPARABILITY ANALYSIS. 3.7. THE TPO FOR THE 2 ND OBJECTION RAISED BY THE ASSESSEE FOR THE QUANTITY OF THE GOODS SOLD I.E. 3000 KG TO ITS NON-AE, FOUND TH AT THE ASSESSEE ITSELF WHILE TAKING THE COMPARABLE HAS TAKEN THE QUANTITY OF 500 0 KG SOLD PRIOR TO 4 TH OF FEBRUARY 2010. ACCORDINGLY THE TPO REJECTED THE CON TENTION OF THE ASSESSEE BY HOLDING THAT IF QUANTITY 5000KG CAN BE CONSIDERE D THEN THERE IS NO INFIRMITY IN CONSIDERING QUANTITY OF 3000KG FOR THE PURPOSE OF COMPARABILITY ANALYSIS. 3.8. IN VIEW OF THE ABOVE, THE TPO REJECTED THE CONTENTION OF THE ASSESSEE AND MADE AN UPWARD ADJUSTMENT OF RS.2,20,704/- ON A CCOUNT OF TRANSFER PRICING BY ADDING TO THE TOTAL INCOME OF THE ASSESS EE. INTERNATIONAL TRANSACTIONS WITH WELL PROSPERING LTD . 3.9. THE ASSESSEE WHILE WORKING OUT THE ALP FOR T HE INTERNATIONAL TRANSACTIONS FOR THE EXPORT OF GOODS WITH ITS AE I. E. WELL PROSPERING LIMITED CHINA HAS CONSIDERED ONLY THE AVERAGE PRICE OF THE TRANSACTIONS CARRIED OUT IT WITH ITS NON-AES ENTITIES WHICH WAS COMPARED WITH A VERAGE PRICE CHARGED FROM ITS AE FOR EXPORT OF GOODS. ACCORDINGLY THE AS SESSEE CLAIMED THAT THE PRICE CHARGED FROM ITS AE WELL PROSPERING LIMITED A RE AT ARM LENGTH. 3.10. HOWEVER, THE TPO WAS OF THE VIEW THAT THE A SSESSEE SHOULD HAVE ALSO CONSIDERED THE TRANSACTIONS CARRIED OUT BY IT WITH RESPECT TO THE EXPORT OF GOODS TO DYESTAR GROUP BEFORE 04 TH FEBRUARY 2010 WHILE DETERMINING THE ALP FOR ITS INTERNATIONAL TRANSACTIONS WITH THE PRESENT AE. THEREAFTER, THE AVERAGE ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 6 - PRICE OF THE COMPARABLE SHOULD HAVE BEEN COMPARED W ITH EACH INVOICE RAISED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES. ACC ORDINGLY, THE TPO WORKED OUT REVISED ALP OF THE COMPARABLES AFTER CONSIDERIN G PRICE CHARGED FROM DYESTAR GROUP BEFORE ACQUISITION I.E. 4-2-2010 ALON G WITH PRICE CHARGED FROM OTHER NON AE. THE REVISED ALP WAS COMPARED WITH THE ACTUAL PRICE CHARGED BY THE ASSESSEE FOR EACH INVOICES RAISED TO ITS AE. IT WAS FOUND THAT SOME OF THE INVOICE ISSUED FOR THE PRODUCT NAMELY REACTIVE RED 195 AND REACTIVE BLACK 5 WERE VARYING SIGNIFICANTLY. THE RELEVANT D ETAILS ARE AVAILABLE ON THE PAGES 5 AND 6 OF THE TPO ORDER. 3.11. ACCORDINGLY, THE TPO ISSUED A SHOW CAUSE NO TICE VIDE LETTER NO. DCIT(TPO-II)/AHD/KRI DYES/92CA(1)/12-13 DATED 18 TH OCTOBER 2013 PURPOSING ADDITION OF RS. 38,97,996/- FOR THE UPWAR D ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION. 3.12. THE ASSESSEE IN RESPONSE SUCH SHOW CAUSE NO TICE MADE REPLY VIDE LETTER DATED 29 TH OCTOBER 2013 BY SUBMITTING THAT THE AE (WELL PROSP ERING LTD) IS LOCATED IN THE CHINA WHEREAS THE DYESTAR GR OUP IS MAINLY BASED IN EUROPE AND USA WHERE THE MARKET CONDITIONS ARE DIFF ERENT FROM THE ASIA . 3.13. THE ASSESSEE ALSO SUBMITTED THAT THE PRODUCT S SUPPLIED IN THE ASIAN MARKET WERE INFERIOR IN COMPARISON TO THE QUALITY O F THE PRODUCTS SOLD TO DYESTAR GROUP. 3.14. THE ASSESSEE FURTHER CONTENDED THAT THE PRO DUCTS SOLD TO THE AE WAS 273,000 KG WHEREAS THE GOODS SOLD TO THE NON-AES WE RE ONLY OF 57,500 KGS. AS SUCH THE DIFFERENCE IN THE QUANTITY WOULD CERTAI NLY LEAD TO DIFFERENCE IN THE PRICE AND THEREFORE, IT WOULD NOT GIVE A CORRECT PI CTURE. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 7 - 3.15. HOWEVER, THE TPO FOUND THAT THE DYESTAR GR OUP OF COMPANIES ARE NOT ONLY LOCATED IN EUROPE AND USA BUT ALSO, THE ASSESS EE IS SUPPLYING ITS FINISHED PRODUCTS TO DYESTAR GROPU, LOCATED IN INDO NESIA AND BRAZIL. EVEN OTHERWISE THE DEVELOPED COUNTRIES USA AND EUROPE AR E EXCLUDED FOR THE PURPOSE OF COMPARABLES, THEN THE AVERAGE RATE INCRE ASES FROM 139.51 TO 142.08 PER KG. 3.16. SIMILARLY THE TPO ALSO FOUND THAT THE ASSESSE E HAS SUPPLIED GOODS TO DYESTAR GROUP FOR 246112 KGS WHEREAS THE QUANTITY S UPPLIED TO THE NON-AE IS ONLY 57,500 THEREFORE IF THE QUANTITY SUPPLIED TO D YESTAR GROUP IS INCLUDED THEN IT WOULD LEAD TO A MORE ACCURATE COMPARABLE. 3.17. IN VIEW OF THE ABOVE, THE TPO INCLUDED THE DYESTAR GROUP AS COMPARABLE AND MADE AN UPWARD ADJUSTMENT OF 38,97, 996/- ONLY ON ACCOUNT OF TRANSFER PRICING BY ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 3.18. FINALLY, THE AO MADE AN UPWARD ADJUSTMENT O F 41,18,700/- ON ACCOUNT OF TRANSFER PRICING BY ADDING TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE LEARNED CIT (A) WHO UPHELD THE ACTION OF AO/TPO BY OBSERVING AS UNDER: ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE CASE, IT IS NOTED THAT THE TPO HAS ADOPTED CUP FOR COMPARING THE INTERNATIONAL TRANSAC TIONS AND DETERMINATION OF ARMS LENGTH PRICE. IT IS NOTED THAT THE INTERNATI ONAL TRANSACTIONS HAVE BEEN MADE WITH THOSE COMPANIES WHICH WERE EARLIER NOT RELATED TO THE APPELLANT COMPANY AND LATER ON, ON ACCOUNT OF MERGER AND ACQUISITIONS, TH E COMPANIES HAVE BECOME ASSOCIATED ENTERPRISES OF THE APPELLANT COMPANY. T HE TPO HAS COMPARED THE RATES AT WHICH THE MATERIAL WAS SOLD TO THOSE COMPANIES P RIOR TO BECOMING THE ASSOCIATED ENTERPRISE WITH THE RATES AT WHICH THE MATERIAL AHS BEEN SUBSEQUENTLY SOLD BY THE ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 8 - APPELLANT COMPANY. HE HAS ALSO TAKEN INTO ACCOUNT VARIOUS OBJECTIONS REQGARDING LOCATION AND QUANTITY OF THE DYE. IT IS NOTED THAT NO NEW OBJECTION OR LINE OF ANALYSIS HAS BEEN POINTED OUT BY THE APPELLANT DURING THE CO URSE OF APPELLATE PROCEEDINGS. FURTHER, THE TPO HAS DULY TAKEN INTO ACCOUNT ALL TH E OBJECTIONS TAKEN BY THE APPELLANT AT THE STAGE BEFORE HIM. I AM IN COMPLET E AGREEMENT WITH HIS FINDINGS, AND IT IS NOTED THAT THE ORDER OF THE TPO IS WELL R EASONED AND DETAILED. THE COMPARABILITY ANALYSIS ALSO HAS BEEN PROPERLY DONE BY HIM. THE CLAIM OF THE APPELLANT THAT WHEN THE PURPOSE OF COMPARISON OF THE SAME ENTITY (POST ACQUISITION) WAS AVAILABLE COMPARISON WITH OT HER NON-AE WAS NOT REQUIRED IS WITHOUT ANY BASIS. THE METHOD WHICH HAS BEEN ADOPT ED BY THE TPO IS CUP AND THE COMPARISON WOULD BE BETTER, IF THE BROADER BASE OF COMPARABLE UNCONTROLLED TRANSACTIONS IS TAKEN. THEREFORE, THE ACTION OF TH E AO WAS JUSTIFIED. IT IS NOTED THAT THE APPELLANT IS CHARGING DIFFERENT RATE TO THE SAM E COMPANY, PRIOR TO ACQUISITION AND POST ACQUISITION, AND THEREFORE, THIS HAS LED T O THE ADJUSTMENT IN ARMS LENGTH PRICE. REGARDING THE OBJECTION TAKEN BY THE APPELLANT IN R ESPECT OF DYSTAR GROUP, THE APPELLANT HAS POINTED OUT THAT THERE IS A GEOGRAPHI CAL LOCATION, A DIFFERENCE WITH WOULD AFFECT THE SALE PRICE OF THE PRODUCT. IT HAS RIGHTLY BEEN POINTED OUT BY THE TPO THAT THE APPELLANT ITSELF DID NOT CONSIDER THE GEOGRAPHICAL DIFFERENCES WHILE MAKING THE COMPARISON IN THE TRANSFER PRICING STUDY REPORT. SIMILARLY, IN RESPECT OF REACTIVE BLUE 250, THE APPELLANT HAD ALSO NOT CONSI DERED AND DIFFERENTIATED BETWEEN THE GEOGRAPHICAL MARKET. THEREFORE, THE APPELLANT SHOULD NOT RAISE OBJECTION OF THIS POINT OF TIME NOW. REGARDING THE OBJECTION TAKEN BY THE APPELLANT REGA RDING DIFFERENCE IN QUANTITY, IT IS NOTED THAT THE APPELLANT HAS CONTENDED THAT THE QUA NTITIES IN BULK WOULD BE SOLD AT LESS THE PRICE AS COMPARED TO THE LESS QUANTITY. THE OBJECTION OF THE APPELLANT HAS ALSO DULY BEEN TAKEN CARE BY THE TPO IN PARA-6.2.3 OF ITS ORDER. IT HAS RIGHTLY BEEN POINTED OUT BY HIM THAT THERE IS NOT MUCH DIFFERENC E BETWEEN THE QUANTITY OF 5000 KG AND 3000 KG. THE APPELLANT HAD ITSELF MADE TH E COMPARISON OF 20,000 KG. AND 5000 KG. IN VIEW OF ALL THESE FACTS, I AM OF THE CONSIDERED OPINION THAT THE ADJUSTMENTS RECOMMENDED BY IPO ARE IN ORDER. THE ADDITION MADE BY THE AO ACCORDINGLY, IS UPHELD. 5. BEING AGGRIEVED BY THE ORDER OF THE LEARNED C IT (A) THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 9 - 6. THE LEARNED AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 178 AND CONTENDED THAT THE BENEFIT OF 5% VARIATION SHOULD BE CALCULATED ON THE ALP OF THE COMPARABLES. BUT THE TPO HAS WRONGLY APPLIED THE BENEFIT OF 5% VARIATION WITH RESPECT TO THE ACTUAL PRICE CHARG ED BY THE ASSESSEE. ACCORDINGLY THE LEARNED AR WORKED OUT THE ALP OF TH E COMPARABLES AT 168.85 AFTER GIVING THE BENEFIT OF 5% VARIATION AND COMPARED THE SAME WITH THE ACTUAL AVERAGE PRICE CHARGED BY IT FROM ITS AE I.E. 169.19 WHICH IS HIGHER THAN THE ALP OF THE COMPARABLES. 6.1. SIMILARLY, THE LEARNED AR FOR THE ASSESSEE ALSO CONTENDED THAT THE TPO HAS TAKEN THE AVERAGE PRICE OF THE COMPARABLES WHICH WAS COMPARED WITH THE INDIVIDUAL INVOICE RAISED BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISES. AS PER THE LEARNED AR THE TPO SHOULD H AVE TAKEN THE SAME YARDSTICK BY TAKING THE AVERAGE PRICE CHARGED BY TH E ASSESSEE AFTER 4 TH FEBRUARY 2010 WHICH COMES OUT AT 169.19 WHEREAS TH E ALP OF THE COMPARABLE COMES OUT AT 168.85 ONLY. 6.2. THE LEARNED AR, FOR THE ASSOCIATED ENTERPRI SES NAMELY WELL PROSPERING LTD, CONTENDED THAT DYESTAR GROUP OF COMPANIES BEIN G ASSOCIATED ENTERPRISE CANNOT BE CONSIDERED AS COMPARABLES. THE LEARNED AR IN SUPPORT OF HIS CONTENTION PLACED HIS RELIANCE ON THE ORDER OF THIS TRIBUNAL IN THE CASE OF GEMSTONE GLASS PVT LTD. 6.3. THE LEARNED AR ALSO CONTENDED THAT THE TPO H AS TAKEN THE AVERAGE PRICE OF THE COMPARABLES WHICH WAS COMPARED WITH TH E INDIVIDUAL INVOICES RAISED BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISE S. AS PER THE LEARNED AR THE TPO SHOULD HAVE TAKEN THE SAME YARD STICK BY TA KING THE AVERAGE PRICE CHARGED BY THE ASSESSEE INSTEAD OF INDIVIDUAL INVOI CE. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 10 - 7. ON THE OTHER HAND, THE LEARNED DR VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS OF THE CAS E ARE NOT IN DISPUTE WHICH HAVE BEEN ELABORATED IN THE PRECEDING PARAGRAPH. TH EREFORE WE ARE NOT INCLINED TO REPEAT THE SAME FOR THE SAKE OF BREVITY AND CONVENIENCE. 8.1. IN THE PRESENT CASE, THE ISSUE RELATES TO T HE DETERMINATION OF THE ALP FOR THE EXPORT OF THE FINISHED GOODS MADE BY THE AS SESSEE WITH RESPECT TO TWO ASSOCIATED ENTERPRISES NAMELY DYESTAR AND WELL PROSPERING LTD. TO ADJUDICATE THE ISSUE, WE DEAL WITH THE ISSUE INVOLV ED IN THE PRESENT APPEAL WITH THE INDIVIDUAL ASSOCIATED COMPANIES. HENCE, WE , FIRST TAKE UP, THE ISSUE INVOLVED IN THE CASE OF DYESTAR GROUP. 8.2. THE 1 ST ISSUE ARISES FOR ADJUDICATION WHETHER THE TPO IS R IGHT IN COMPARING THE AVERAGE PRICE OF THE COMPARABLES WITH THE INDIVIDUAL INVOICES RAISED BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISE S FOR DETERMINING THE ALP. FROM THE PRECEDING DISCUSSION, WE FIND THAT THE ASS ESSEE HAS COMPARED THE AVERAGE PRICE OF THE COMPARABLE COMPANIES WITH THE AVERAGE PRICE OF THE GOODS EXPORTED TO THE ASSOCIATED ENTERPRISE. THE AS SESSEE HAS WORKED OUT THE AVERAGE PRICE OF THE COMPARABLE COMPANIES WITH RESPECT TO REACTIVE BELOW 250 AT 177.10 WHICH WAS COMPARED WITH THE AVE RAGE PRICE OF THE GOODS EXPORTED AT RS.169.19. THE ASSESSEE, HAS WORK ED OUT THE AVERAGE PRICE OF THE GOODS EXPORTED AT RS.169.19 AFTER CONS IDERING ALL THE INVOICES SUBSEQUENT TO THE POST ACQUISITION DATE 4TH FEBRUAR Y 2010. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 11 - 8.3. HOWEVER, THE TPO HAS COMPARED EACH INVOICE FOR THE EXPORT OF THE GOODS SEPARATELY IN ORDER TO DETERMINE WHETHER IT W AS AT THE ALP OR NOT, INSTEAD OF AVERAGE PRICE AS CLAIMED BY THE ASSESSEE . 8.4. TO RESOLVE THE ISSUE ON HAND, IT IS PERTIN ENT TO REFER THE PROVISIONS OF RULE 10B(1) OF INCOME TAX RULE WHICH IS REPRODUCED AS UNDER: 1) FOR THE PURPOSES OF SUB-SECTION (2) OF SECTION 9 2C, THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION [ OR A SPECIFIED DOMESTIC TRANSACTION ] SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING T HE MOST APPROPRIATE METHOD, IN THE FOLLOWING MANNER, NAMELY: ( A ) COMPARABLE UNCONTROLLED PRICE METHOD, BY WHICH, ( I ) THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFERRED OR SERVICES PROVIDED IN A COMPARABLE UNCONTROLLED TRANSACTION, OR A NUMB ER OF SUCH TRANSACTIONS, IS IDENTIFIED; ( II ) SUCH PRICE IS ADJUSTED TO ACCOUNT FOR DIFFERENCES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION [ OR THE SPECIFIED DOMESTIC TRANSACTION ] AND THE COMPARABLE UNCONTROLLED TRANSACTIONS OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACT IONS, WHICH COULD MATERIALLY AFFECT THE PRICE IN THE OPEN MARKE T; ( III ) THE ADJUSTED PRICE ARRIVED AT UNDER SUB - CLAUSE ( II ) IS TAKEN TO BE AN ARM'S LENGTH PRICE IN RESPECT OF THE PROPERTY TR ANSFERRED OR SERVICES PROVIDED IN THE INTERNATIONAL TRANSACTION [ OR THE SPECIFIED DOMESTIC TRANSACTION ] ; 8.5. A PLAIN READING OF THE ABOVE PROVISION REVEAL S THAT THE PROVISION OF RULE 10B(1)(A)(I) AUTHORIZED TO IDENTIFY THE COMPARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS. IN OTHER WORDS THE P ROVISIONS OF THE RULE PERMITS TO AGGREGATE THE COMPARABLE UNCONTROLLED TR ANSACTIONS FOR DETERMINING THE ALP. HOWEVER, THE RULE DOES NOT PER MIT TO AGGREGATE THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSES SEE TO WORK OUT THE AVERAGE PRICE FOR THE PURPOSE OF THE COMPARISON. IN HOLDING SO WE DRAW SUPPORT AND GUIDANCE FROM THE ORDER OF THE DELHI TR IBUNAL IN THE CASE OF TILDA RICELAND (P) LTD VS. ACIT REPORTED IN 42 TAXMANN.C OM 400 WHEREIN IT WAS HELD AS UNDER: ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 12 - THE FIRST THING AS NOTICED IS THAT THE ASSESSEE HA S DETERMINED ARM'S LENGTH PRICE OF ITS TRANSACTIONS WITH THE AES BY COMPARING AVERAGE EXPORT PRICE CHARGED BY THE ASSESSEE TO ITS AES WITH THE AVERAGE UNCONTROLLED E XPORT PRICE. THIS APPROACH IS PATENTLY INCORRECT INASMUCH AS WHILE UNDER RULE 10B (1)(A)(I), IT IS INDEED OPEN TO COMPUTE ALP ON THE BASIS OF PRICE CHARGED IN A COMP ARABLE CONTROLLED TRANSACTION OR 'A NUMBER OF SUCH TRANSACTIONS', BUT THE ARM'S LENG TH PRICE SO COMPUTED IS, UNDER RULE 10B(1)(A)(III), TAKEN AS ARM'S LENGTH PRICE IN RESPECT OF PROPERTY TRANSFERRED IN THE INTERNATIONAL TRANSACTION. THE EXPRESSION 'THE INTERNATIONAL TRANSACTION' REFE RRED TO IN RULE 10B(1)((A)(III) IS USED IN SINGULAR AND DOES NOT PERMIT TAKING INTO AC COUNT, UNLIKE RULE 10B(1)(A)(I), 'A NUMBER OF SUCH TRANSACTIONS'. WHILE AVERAGING IS TH US PERMISSIBLE FOR THE UNCONTROLLED TRANSACTIONS, EACH INTERNATIONAL TRANS ACTION IS TO BE TAKEN ON STAND- ALONE BASIS. IT IS NOT OPEN TO THE ASSESSEE TO COMP ARE THE AVERAGE PRICE IN HIS TRANSACTIONS WITH AES WITH AVERAGE PRICE IN UNCONTR OLLED TRANSACTIONS. [PARA 18] 8.6. IN VIEW OF THE ABOVE, WE ARE NOT IMPRESSED WI TH THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TPO ERRED IN COMPARING THE ALP OF THE COMPARABLE COMPANIES WITH THE INDIVIDUAL INVOIC ES RAISED BY THE ASSESSEE TO THE ASSOCIATED ENTERPRISE. ACCORDINGLY, WE REJEC T THE SAME. 8.7. THE 2 ND ISSUE ARISES FOR OUR CONSIDERATION WHETHER THE BEN EFIT OF 5% VARIATION IS TO BE CALCULATED WITH REFERENCE TO THE ALP DETERMINED FROM THE COMPARABLE UNCONTROLLED TRANSACTIONS OR AT THE PRIC E AT WHICH THE ASSESSEE EXPORTED THE GOODS. IN THIS REGARD, WE FIND PERTINE NT TO REFER THE RELEVANT PROVISIONS AS PROVIDED IN THE PROVISO TO SUB RULE ( 7) OF RULE 10CA OF THE RULES WHICH IS REPRODUCED AS UNDER: (7) IN A CASE WHERE THE PROVISIONS OF SUB-RULE (4) ARE NOT APPLICABLE, THE ARM'S LENGTH PRICE SHALL BE THE ARITHMETICAL MEAN OF ALL THE VALUES INCLUDED IN THE DATASET: PROVIDED THAT, IF THE VARIATION BETWEEN THE ARM'S LENGTH PRI CE SO DETERMINED AND PRICE AT WHICH THE INTERNATIONAL TRANSACTION OR SPE CIFIED DOMESTIC TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN DOES NOT EXCEED SUCH PERCE NTAGE NOT EXCEEDING THREE PER CENT OF THE LATTER, AS MAY BE NOTIFIED BY THE CENTR AL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF, THE PRICE AT WHICH THE INTE RNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN S HALL BE DEEMED TO BE THE ARM'S LENGTH PRICE. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 13 - 8.8. FROM THE ABOVE PROVISION, IT IS REVEALED THA T 1 ST OF ALL THE DIFFERENCE IS WORKED OUT BETWEEN THE ALP OF THE COMPARABLE UNCONT ROLLED TRANSACTIONS AND THE PRICE CHARGED BY THE ASSESSEE WITH RESPECT TO I TS INTERNATIONAL TRANSACTION. THAT DIFFERENCE HAS TO BE SEEN WITH RE FERENCE TO THE ACTUAL PRICE CHARGED BY THE ASSESSEE TO WORK OUT THE PERCENTAGE. 8.9. FOR EXAMPLE, THE RATE OF THE ALP OF THE COMPA RABLE UNCONTROLLED TRANSACTION WORKS OUT AT 104 WHEREAS THE PRICE CHA RGED BY THE ASSESSEE STANDS 100 LEADING TO A DIFFERENCE OF 4 ONLY. NOW THIS DIFFERENCE OF 4 HAS TO BE SEEN IN CONNECTION WITH THE ACTUAL PRICE CHAR GED BY THE ASSESSEE. AS SUCH PERCENTAGE WORKS OUT AT 4% IN THIS EXAMPLE. 8.10. BEFORE PARTING, IT IS ALSO PERTINENT TO NOTE THAT EVEN ASSUMING FOR THE SAKE OF UNDERSTANDING, THE CONTENTION OF THE ASSESS EE IS CORRECT THEN ALSO THE DIFFERENCE BETWEEN THE ALP AND THE PRICE CHARGED BY THE ASSESSEE EXCEEDS 5% THEREFORE THERE CANNOT BE ANY BENEFIT TO THE ASS ESSEE ON ACCOUNT OF SUCH VARIATION. FOR THE READY REFERENCE, WE CALCULATE TH E DIFFERENCE AS DETAILED BELOW: ALP OF THE COMPARABLE UNCONTROLLED TRANSACTIONS RS . 177.74 LESS : BENEFIT OF 5% VARIATION RS. 8.89 8.11. THE ALP AFTER 5% VARIATION COMES TO RS.168. 85 WHEREAS THE PRICE CHARGED BY THE ASSESSEE STANDS AT 167.81 AND 165. 59 FOR THE INVOICES WHICH ARE IN DISPUTE. 8.12. AT THIS JUNCTURE, IT IS ALSO IMPORTANT TO UN DERSTAND THAT THE ASSESSEE HAS TAKEN SAME ENTITY (DYESTER GROUP) AS ONE OF THE COMPARABLE FOR THE ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 14 - TRANSACTIONS CARRIED OUT BY IT BEFORE BECOMING SUCH COMPARABLE COMPANY ITS AE. THE QUESTION ARISES WHETHER SUCH COMPANY CAN BE CONSIDERED FOR THE PURPOSE OF DETERMINING THE ALP. TO RESOLVE THE CONT ROVERSY WE FIND IMPORTANT TO REFER THE PROVISIONS OF SECTION 92A (2 ) OF THE ACT WHICH READS AS UNDER: (2) FOR THE PURPOSES OF SUB-SECTION (1), TWO ENTERP RISES SHALL BE DEEMED TO BE ASSOCIATED ENTERPRISES IF, AT ANY TIME DURING THE PREVIOUS YEA R, ************** 8.13. FROM THE ABOVE PROVISION, IT IS REVEALED T HAT A COMPANY SHALL BECOME THE ASSOCIATE ENTERPRISE OF ANOTHER COMPANY IF AT A NY TIME DURING THE RELEVANT PREVIOUS YEAR SUCH COMPANY MEETS THE CRITE RIA SPECIFIED UNDER THE PROVISIONS OF SECTION 92A OF THE ACT. ADMITTEDLY, T HE DYESTAR GROUP OF COMPANIES BECAME THE AE OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION I.E. 4 TH FEBRUARY 2010. THUS, TO OUR UNDERSTANDING SUCH COM PANY CANNOT BE TAKEN AS COMPARABLE COMPANY FOR THE PURPOSE OF DETE RMINING THE ALP UNDER RULE 10A OF THE RULES AS REPRODUCED UNDER: 10A. FOR THE PURPOSES OF THIS RULE AND RULES [ 10AB ] TO 10E, ( AB ) ] 'UNCONTROLLED TRANSACTION' MEANS A TRANSACTION BETW EEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHETHER RESIDENT OR NON-RES IDENT; 8.14. THUS, WHAT IS LEFT IS THE NON-AE PARTY TRA NSACTIONS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FOR TH E PURPOSE OF DETERMINING THE ALP WHICH WORKS OUT AT RS. 191.52 WHICH IS MUCH MORE THAN THE PRICE CHARGED BY THE ASSESSEE WITH THE ASSOCIATED ENTERPR ISE. HOWEVER, IT IS NOT ISSUE ARISING FROM THE ORDER OF THE AUTHORITIES BEL OW AND SIMILARLY NEITHER THE LEARNED AR NOR THE LEARNED DR BROUGHT TO OUR NOTICE AT THE TIME OF HEARING. ACCORDINGLY, WE DO NOT TOUCH UPON SUCH ISSUE AS DIS CUSSED ABOVE. IT IS ALSO IMPORTANT TO NOTE THAT THE ITAT MUMBAI IN THE CASE OF IN CASE OF VODAFONE INDIA SERVICES (P.) LTD. V. ACIT [2014] 52 TAXMANN.COM 241 HAS HELD AS UNDER: ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 15 - 122'. . . . . . . . . . . . THUS ONCE TWO ENTERPRISES ARE ASSOCIATED ENTERPRISE SAT ANY TIME DURING THE PREVIOUS YEAR THEY SHALL BE DEE MED TO BE THEASSOCIATED ENTERPRISES FOR THE PURPOSE OF SECTION 92A (1). HAV ING HELD THATBOTH HTIL AND VIH BV WERE THE ASSOCIATED ENTERPRISES OF THE A SSESSEEDURING THE YEAR UNDER CONSIDERATION; IT MAKES NO DIFFERENCE WHETHER THECALL CENTRE SALE TRANSACTION WAS PRECEDED TO THE STA OF SUBSEQUENT T O THESTA. THIS ASPECT IS RELEVANT ONLY TO THE EXTENT THAT AT THE TIME OF TRA NSFER OFCALL CENTRE BUSINESS, THE ASSESSEE WAS SUBSIDIARY OF HTIL OR VIH BV. AS P ERTHE CLAUSE 8.8 (J) OF THE SPA, THE HTIL WAS UNDER THE OBLIGATION TO DELIV EROR PROCURE THE DELIVERY TO THE PURCHASER (VIH BV), THE GSPL TRANSF ERAGREEMENT DULY EXECUTED BY THE PARTIES THERETO. GSPL TRANSFER AGRE EMENT ISDEFINED IN THE DEFINITION AND INTERPRETATION CLAUSE 1 OF THE SPA A S UNDER' 8.15. IN VIEW OF THE ABOVE, AND AFTER CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE AUTHORIT IES BELOW FOR MAKING SUCH UPWARD ADJUSTMENT OF RS. 2,20,704/- TO THE TOTAL IN COME OF THE ASSESSEE. 8.16. MOVING TO THE INTERNATIONAL TRANSACTIONS CA RRIED OUT BY THE ASSESSEE WITH WELL PROSPERING LTD, THE 1 ST ISSUE ARISES FOR OUR CONSIDERATION WHETHER THE TRANSACTIONS CARRIED OUT WITH THE AE CAN BE CON SIDERED AS ONE OF THE COMPARABLE FOR DETERMINING THE ALP FOR THE PURPOSE OF THE COMPARISON. ADMITTEDLY, THE DYESTAR GROUP OF COMPANIES BECAME T HE AE IN THE YEAR UNDER CONSIDERATION DATED 4 TH OF FEBRUARY 2010. THE PROVISIONS OF SECTION 92A(2) CLEARLY STATES THAT A COMPANY SHALL BECOME AE OF AN OTHER COMPANY AT ANY TIME DURING THE YEAR UNDER CONSIDERATION IF IT MEET S THE CRITERIA PROVIDED UNDER SECTION 92A OF THE ACT. ONCE THE COMPARABLE C OMPANY BECOMES THE AE OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, TH EN SUCH COMPANY CANNOT BE CONSIDERED FOR THE PURPOSE OF COMPARABLE. IN HOL DING SO WE PLACE OUR RELIANCE ON THE ORDER OF THIS TRIBUNAL IN THE CASE OF GEMSTONE GLASS PVT LTD. REPORTED IN 63 TAXMANN.COM 1 WHEREIN IT WAS HELD AS UNDER: THE FIRST ESSENTIAL INPUT FOR APPLICATION OF CUP M ETHOD IS THE PRICE CHARGED OR PAID FOR SIMILAR PRODUCT IN A TRANSACTION BETWEEN TWO EN TERPRISES, WHETHER RESIDENT OR ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 16 - NON-RESIDENT, WHICH ARE NOT ASSOCIATED ENTERPRISES. IN THE PRESENT CASE, THE COMPARABLE PRICE ADOPTED FOR DETERMINING THE ARM'S LENGTH PRICE IS THE PRICE AT WHICH THE ASSESSEE HAS SOLD THE SAME PRODUCT TO OTHER GRO UP ENTITIES, WHICH ARE, THUS, 'ASSOCIATED ENTERPRISES', RESIDENTS IN INDIA. IT HA S BEEN DEFENDED BY THE DRP ON THE GROUND THAT THERE CANNOT BE ANY TAX AVOIDANCE MOTIV E IN SELLING THE PRODUCTS AT AN ARTIFICIAL PRICE. HOWEVER, THIS ASPECT OF THE MATTE R IS IRRELEVANT INASMUCH AS THE VERY DEFINITION OF 'UNCONTROLLED TRANSACTION' UNDER RULE 10A EXCLUDES THE TRANSACTIONS WITH ASSOCIATED ENTERPRISES 'WHETHER RESIDENT OR NON-RES IDENT'. ONCE IT IS NOT IN DISPUTE THAT 'UNCONTROLLED TRANSACTION' IS A STATUTORILY DE FINED TERM, THERE IS NO ROOM FOR DISCARDING OR QUESTIONING THIS DEFINITION ON THE BA SIS OF SUPERIOR LOGIC IN AN ALTERNATIVE DEFINITION. SUCH HEROICS ARE NOT CALLED FOR IN THE PROCESS OF JUDICIAL INTERPRETATION. WHETHER THE TRANSACTIONS ARE WITH A SSOCIATED ENTERPRISES RESIDENT IN INDIA OR WITH ASSOCIATED ENTERPRISES RESIDENT OUTSI DE INDIA, THE PRICES AT WHICH SUCH TRANSACTIONS ARE ENTERED INTO WITH SUCH ENTERPRISES CANNOT BE TAKEN AS 'COMPARABLE UNCONTROLLED PRICE' FOR THE PURPOSE OF DETERMINING THE ARM'S LENGTH PRICE. [PARA 6] IT IS, THEREFORE, THE PRICES ON WHICH THE ASSESSEE HAS SOLD THE SAME PRODUCTS TO RESIDENT ASSOCIATED ENTERPRISES CANNOT BE TAKEN AS BENCHMARK FOR ASCERTAINING THE ARM'S LENGTH PRICE OF ITS SIMILAR SALE TRANSACTION WITH THE NON-RESIDENT ENTERPRISE. ONCE NECESSARY INPUTS FOR ASCERTAINING THE ALP UNDE R CUP ARE NOT AVAILABLE, THERE CANNOT BE ANY OCCASION TO APPLY THE SAME. IN THE AS SESSMENT YEAR 2008-09, THE TPO HIMSELF ABANDONED THE CUP METHOD AND RESTORED TO CO ST PLUS METHOD. [PARA 8] 8.17. GOING FORWARD, WE ALSO NOTE THAT THE ASSESS EE IN ITSELF HAS TAKEN DYESTAR GROUP OF COMPANIES AS 1 OF THE COMPARABLE I N ITS TRANSFER PRICING STUDY WHICH WAS ALSO NOT DISPUTED EITHER BY THE TPO OR LEARNED CIT (A). NOW THE QUESTION ARISES, WHETHER SUCH ISSUE CAN BE RAIS ED BY THE ASSESSEE BEFORE US. IN THIS REGARD WE NOTE THAT IT IS THE DUTY OF T HE INCOME TAX AUTHORITIES TO IMPLEMENT THE PROVISIONS OF INCOME TAX ACT WHILE FR AMING THE ASSESSMENT. IN OTHER WORDS, IF THE ASSESSEE HAS MADE A MISTAKE IN THE INTERPRETATION OF THE PROVISIONS OF THE ACT THEN IT IS THE DUTY OF TH E AUTHORITIES TO RECTIFY SUCH MISTAKE. ACCORDINGLY, IT IS INFERRED THAT ASSUMING THE ASSESSEE HAS PAID THE TAXES ON THE ITEMS OF INCOME WHICH WERE NOT CHARGEA BLE TO TAX UNDER THE MISCONCEPTION OF THE PROVISION OF THE ACT. THE INCO ME TAX AUTHORITIES ARE DUTY-BOUND TO CORRECT SUCH MISTAKE AND EXTEND THE N ECESSARY RELIEF TO THE ASSESSEE. THUS THE INCOME TAX AUTHORITIES CANNOT EX ERCISE THEIR JURISDICTION WITH RESPECT TO THE MATTERS WHICH HAS NOT BEEN AUTH ORIZED UNDER THE PROVISIONS OF LAW DESPITE THE FACT THAT THE ASSESSE E HAS GIVEN HIS CONSENT. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 17 - 8.18. IN HOLDING SO, WE DRAW SUPPORT AND GUIDANCE FROM THE ORDER OF DELHI TRIBUNAL IN CASE OF TILDA RICELAND (P) LTD. (SUPRA) WHERE IT WAS HELD AS UNDER: AS A QUASIJUDICIAL AUTHORITY, AND WHILE PURSING TH E GOAL OF JUSTICE, ONE CANNOT REMAIN AT THE MERCY OF THE WISDOM OF REPRESENTATIVES OF TH E PARTIES APPEARING BEFORE SUCH AN AUTHORITY; IT IS BOUNDEN DUTY OF EVERY QUASIJUDI CIAL AUTHORITY TO APPRECIATE THE SCOPE OF THE LEGAL PROVISIONS AND APPLY THEM IN LET TER AND IN SPIRIT. 8.19. NOW, KEEPING THE ABOVE PRINCIPLES IN MIND, W E MOVE TO DECIDE THE ISSUE ON HAND. ADMITTEDLY, THE ASSESSEE IN THE TRAN SFER PRICING STUDY HAS TAKEN NON-AE AS COMPARABLE BUT THE TPO HAS CONSIDER ED THE ONLY THOSE TRANSACTIONS CARRIED OUT WITH THE AE (DYESTER GROUP ) PRIOR TO 4 TH FEBRUARY 2010 I.E. BEFORE IT BECAME THE AE AS COMPARABLE WHI CH IS NOT PERMISSIBLE UNDER THE PROVISIONS OF RULE 10A(AB) R.W.S 92A(2) W HICH READS AS UNDER: 10A. FOR THE PURPOSES OF THIS RULE AND RULES [ 10AB ] TO 10E, ( AB ) ] 'UNCONTROLLED TRANSACTION' MEANS A TRANSACTION BETW EEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHETHER RESIDENT OR NON-RES IDENT; 8.20. IN HOLDING SO, WE ALSO DRAW SUPPORT AND GUI DANCE FROM THE ORDER OF THIS TRIBUNAL IN THE CASE OF GEMSTONE GLASS PVT LTD REPORTED IN 63 TAXMAN.COM 1. THE RELEVANT EXTRACT OF THE ORDER HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPH. 8.21. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASS ESSEE HAS MISTAKENLY CONSIDERED ONE OF ITS AE (DYESTER GROUP) AS THE COM PARABLE IN ITS TRANSFER PRICING STUDY REPORT FOR THE TRANSACTION CARRIED OU T WITH THE DYESTER GROUP ONLY AS DISCUSSED ABOVE, BUT THE INCOME TAX AUTHORI TIES WERE DUTY-BOUND TO RECTIFY SUCH MISTAKE AS DISCUSSED IN THE PRECEDING PARAGRAPH. ITA NO.1116/AHD/2015 LONSEN KIRI CHEMICAL INDUSTRIES LTD. VS. DCIT (OS D)-I ASST.YEAR - 2010- 11 - 18 - 8.22. NOW COMING ON THE MERIT OF THE CASE, IF WE EXCLUDE THE DYSTAR GROUP AS 1 OF THE COMPARABLE FOR DETERMINING THE ALP, THE N THE ARM LENGTH PRICE COMES OUT AT RS. 115.5 AND RS. 122.66 FOR PRODUCT N AMELY REACTIVE RED 195 AND REACTIVE BLACK 5 RESPECTIVELY WHEREAS THE PRI CE CHARGED BY THE ASSESSEE FROM THE AE RANGES BETWEEN RS. 108.75 TO 128.12 FOR PRODUCT REACTIVE RED 195 AND RS. 110.06 TO RS. 115.22 FOR REACTIVE BLA CK 5. ACCORDINGLY, WE DIRECT THE AO/TPO TO COMPARE THE ALP WITH THE EACH INVOICE RAISED BY THE ASSESSEE AND WHEREVER HE FINDS THE DIFFERENCE EXCEE DING 5% OF THE ACTUAL PRICE, MAKE NECESSARY ADJUSTMENTS. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 19/08/2020 SD/- SD/- ( RAJPAL YADAV ) ( WASEEM AHMED ) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED 19/08/2020 # . . , . $ . . / T.C. NAIR, SR. PS !' #' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. %&' ( / CONCERNED CIT 4. ( ( ) / THE CIT(A)-2, AHMEDABAD 5. )*+ $$&' , &' , % / DR, ITAT, AHMEDABAD 6. +./ / GUARD FILE. / BY ORDER, ) //TRUE COPY// $ / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD