DAMCO INDIA P.LTD, MUMBAI V. DCIT CIR 6(2)(1), MUMBAI

ITA 1155/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4548 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Question of law; Initiation of penalty proceedings
• Section: 14A; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY, JM & SHRI M.BALAGANESH, AM IT (TP) A NO. 1155 / MUM/20 1 7 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. DAMCO INDIA PVT. LTD., 13 TH FLOOR, TOWER A URMI ESTATE 95, GANPATRAO KADAM MARG LOWER PAREL WEST, MUMBAI 400 013 VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE - 6(2)(1) MUMBAI PAN/GIR NO. AAHCS6078Q ( APPELLANT ) .. ( RESPONDENT ) / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IS DIRECTED AGAINST THE FINAL ORDER PASSED BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX 6(2)(1), MUMBAI [ IN SHORT THE LD AO] UNDER SECTION [ U/S] 14 3(3) READ WITH SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 15.12.2016 PURSUANT TO THE DIRECTIONS ISSUED BY THE HONOURABLE DISPUTE RESOLUTION PANEL [ IN SHORT THE LD DRP] VIDE DIRECTIONS DATED 1.12.2016 FOR THE ASSESSMENT YEAR [ IN SHORT THE ASST YEAR] 2012 - 13. 2. AT THE OUTSET, THE LD AR ARGUED THAT ONCE THE GROUND NOS. 7 & 8 RAISED BY THE A SSESSEE IS ADJUDICATED AND IF IT GOES IN FAVOUR OF THE ASSESSEE, ASSESSEE BY SHRI MANISH KANTH REVENUE BY SHRI JEEVAN LAL LAVIDIYA DATE OF HEARING 21 / 02 /2019 DATE OF PRONOUNCEMENT 20 / 03 /2019 ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 2 THEN THE OTHER GROUNDS RAISED BY THE ASSESSEE FROM GROUND S 1 TO 6 WOULD BECOME ACADEMIC AS THE ASSESSEE WOULD BE THROUGH WITH ITS MARGINS AND THAT NO FURTHER TRANSFER PRICING ADJUSTMENT WOULD BE WARRANTED. THE LD DR BEFORE US FAIRLY AGREED FOR ADJUDICATION OF GROUND NOS. 7 & 8 FIRST. FOR THE SAKE OF CONVENIENCE , THE GROUND NOS. 7 & 8 RAISED BY THE ASSESSEE ARE REPRODUCED BELOW: - 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO / AO ERRED AND THE HONBLE DRP FURTHER ERRED IN MAKING TH ENTIRE TRANSFER PRICING ADJUSTMENT OF INR 2 5,22,63,069 AT ENTITY LEVEL. IN OTHER WORDS, THE L EARNED TPO SHOULD HAVE RESTRICTED THE ADJUSTMENT ONLY IN RESPECT OF INTERNATIONAL TRANSACTIONS WITH THE AE ENTERED INTO BY THE APPELLANT. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE DRP ERRED IN DISREGARDING THE BINDING PRECEDENT LAID DOWN BY THE HONBLE BOMBAY HIGH COURT WITHOUT ASSIGNING ANY REASONS FOR THE SAME. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT DAMCO IS ONE OF THE WORLDS LEADING THIRD PARTY LOGISTICS PROVIDER S WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING LOGISTICS SOLUTIONS, ENCOMPASSING SUPPLY CHAIN MANAGEMENT, FREIGHT FORWARDING, WAREHOUSING AND DISTRIBUTION SERVICES TO GLOBAL CUSTOMERS OF MAERSK GROUP. FREIGHT FORWARDING SERVICES ENSURE THAT CARGO WILL ARR IVE AT THE PROPER DESTINATION BY AN AGREED UPON DATE, IN GOOD CONDITION USING TRANSPORT OF VARIOUS SORTS FROM AIR FREIGHT AND TRUCKING COMPANIES TO RAIL FREIGHT AND OCEAN CARRIERS. THE BUSINESS OF DAMCO COMPRISES MANY SERVICE LINES, OFTEN BUNDLED TOGETHER TO PROVIDE PARTICULAR SOLUTIONS TO THE CLIENTS AND IT BROADLY INCLUDES ADVISING ON BEST POSSIBLE FREIGHT ROUTES BASED ON COST; DETERMINING OPTIMAL STRATEGY AND FORM OF TRANSPORT; RISK MANAGEMENT, MONITORING AND CONTROL; LOADING AND UNLOADING, WAREHOUSING, PACKAGING, LABELING OF CARGO, ORDER PLANNING, CONSOLIDATION, INSURANCE, CUSTOMS, DISTRIBUTION AND HANDLING; DOCUMENTATION INCLUDING BILLS OF LADING; SUPPLY CHAIN MANAGEMENT; AND OTHER ADVISORY SERVICES. THE ASSESSEE IS PRIMARILY A FREIGHT FORWARDER PROVI DING LOGISTICS SOLUTIONS ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 3 TO GLOBAL CUSTOMERS OF MAERSK GROUP AND IS ENGAGED IN AN INTERMEDIARY ROLE BETWEEN THE CUSTOMERS AND VARIOUS TRANSPORT RELATED SERVICE PROVIDERS ON BEHALF OF CUSTOMERS ON A CONTRACT BASIS. IT WAS EXPLAINED TO THE LD TPO THAT IN FR EIGHT FORWARDING ACTIVITY, GENERALLY TWO DARNCO ENTITIES ARE INVOLVED IN ANY TRANSACTION, THE ORIGINATING ENTITY (I.E. ENTITY ORIGINATING THE SHIPMENT) AND THE DESTINATION ENTITY (I.E. ENTITY RECEIVING THE SHIPMENT). THE ASSESSEE OPERATES AT EITHER LEG - I .E., AS THE ORIGINATING ENTITY AS WELL AS THE DESTINATION ENTITY. THE SERVICES PERFORMED BY THE ASSESSEE IN RESPECT OF EXPORT CONSIGNMENTS AND IMPORT CONSIGNMENTS ARE: - - ORIGINATION SERVICES: THESE ARE THE SERVICES IN RELATION TO PICK - UP AND DELIVERY OF CARGO FROM INDIAN CONSIGNOR TO THE INDIAN PORT; AND - DESTINATION SERVICES: THESE ARE THE SERVICES IN RELATION TO PICK - UP AND DELIVERY OF CARGO FROM INDIAN PORT TO INDIAN CONSIGNEE. 3.1. DURING THE COURSE OF PERFORMING THE ABOVE ACTIVITIES, THE ASSESSEE PAYS / RECEIVES FREIGHT, TERMINAL HANDLING AND OTHER CHARGES TO / FROM ASSOCIATED ENTERPRISES (`AES). DEPENDING ON THE INTERNATIONAL COMMERCIAL TERMS (INCO TERMS) AGREED BETWEEN THE CONSIGNOR AND CONSIGNEE OF EACH TRANSACTION, THE ORIGINATION AND DESTINAT ION SERVICES PERFORMED BY THE ASSESSEE COULD BE BILLED TO AN INDIAN CONSIGNOR / CONSIGNEE OR BILLED TO DAMCO OVERSEAS AFFILIATES. 3.2. THE INTERNATIONAL TRANSACTIONS AS MENTIONED IN FORM 3CEB OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR ARE AS UNDER: - SR. NO. NATURE OF INTERNATIONAL TRANSACTION VALUE OF TRANSACTION (RS.) A.Y. 2012 - 13 VALUE OF TRANSACTION (RS.) A.Y. 2011 - 12 1. RECEIPT CHARGES OF FREIGHT AND OTHER 52,08,78,792 51,96,97,176 2. PAYMENT OF FREIGHT, TERMINAL HANDLING AND OTHER CHARGES 347,35,18,458 244,22,24,375 ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 4 3. PAYMENT CHARGES OF SUPPORT SERVICE 27,89,59,233 14,63,17,217 4. PAYMENT SERVICES FOR MISCELLANEOUS 79,95,179 98,85,452 5. RECOVERY OF EXPENSES 29,66,791 66,50,431 3.3. T HE LD TPO OBSERVED THAT FOR THE PURPOSE OF BENCHMARKING, THE ASSESSEE HAD SELECTED ITSELF AS TESTED PARTY. THE ASSESSEE SUBMITTED THAT THE ABOVE INTERNATIONAL TRANSACTIONS ARE INEXTRICABLY LINKED AND ARE WHOLLY NECESSARY FOR LOGISTICS BUSINESS AND ACCORDI NGLY HAD AGGREGATED THE SAME AND CARRIED OUT A COMMON BENCHMARKING ANALYSIS UNDER TRANSACTIONAL NET MARGIN METHOD (IN SHORT TNMM). THE LD TPO ACCEPTED THE TNMM AS THE MOST APPROPRIATE METHOD (MAM IN SHORT) BUT ADOPTED THE PROFIT LEVEL INDICATOR (IN SHORT P LI) OF THE ASSESSEE AT NET PROFIT MARGIN BY REJECTING THE PLI ADOPTED BY THE ASSESSEE AS OPERATING PROFIT (OP) / VALUE ADDED EXPENSES (VAE) . THE LD TPO FINALLY BY ADOPTING VARIOUS FILTERS DID A COMPARATIVE STUDY BY ACCEPTING CERTAIN COMPARABLES OF THE ASS ESSEE AND BY REJECTING CERTAIN COMPARABLES OF THE ASSESSEE. THE FINAL COMPARABLES ADOPTED BY THE LD TPO ARE AS UNDER: - THE WORKING OF THE FINAL COMPARABLE IS AS UNDER: SR. NO. COMPANY NAME OP / OR (%) FY 2011 - 12 1 GORDON WOODROFFE LOGISTICS SOLUTIO NS 4.68 2 HINDUSTAN CARGO LIMITED 0.28 3 YUSEN LOGISTICS (INDIA) LIMITED 4.90 4 SICAL LOGISTICS LIMITED 6.79 5 TRANSPORT CORPORATION OF INDIA LIMITED* 4.73 6 PATEL INTEGRATED LOGISTICS LIMITED* 1.93 7 OM LOGISTICS LIMITED 9.92 ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 5 8 ALLCARGO LOGISTICS LIMITED 6.02 9 ARSHIYA LIMITED* 10.55 10 ADITYA MARINE LIMITED* 8.63 AVERAGE 5.84 ASSESSEE S MARGIN 2.33 (*SEGMENTAL RESULTS) 3.4. THE LD TPO DETERMINED THE ALP OF THE TRANSACTIONS AS UNDER: - PARTICULARS AMOUNT I N RUPEES ADJUSTMENT ON AN ENTITY LEVEL BASIS OPERATING REVENUE OF THE ASSESSEE A 718,14,02,537 NPM OF COMPARABLES B 5.84% ASSESSEES NPM MARGIN C 2.33% ALP PROFIT D=A*B 41,93,93,908 ALP TOTAL COST E= A - D 676,20,08,629 ACTUAL TOTAL COST OF THE AS SESSEE F 701,42,71,698 DIFFERENCE IN ACTUAL COST AND ALP COST G = F E 25,22,63,069 +/ - 5 PERCENT COMPUTATION TOTAL TRANSACTIONS WITH AES (EXPENSES) H 376,04,72,870 5% OF THE INTERNATIONAL TRANSACTIONS I = H*5% 18,80,23,644 ADJUSTMENT 25 ,22,63,069 AS PER THE LD TPO, SINCE G IS MORE THAN I IN THE AFOR ESAID TABLE, THE ASSESSEES NPM DOES NOT FIT WITHIN +/ - 5% LEEWAY AVAILABLE. ACCORDINGLY, THE LD TPO MADE AN ADJUSTMENT TO ALP AT RS.25,22,63,069/ - IN THE ORDE R PASSED U/S 92CA(3) OF THE AC T DATED 25.01.2016. 3.5. THE ASSESSEE SUBMITTED BEFORE THE LD DRP THAT ON LY THE TRANSACTIONS WITH AE ARE TO BE CONSIDERED FOR DETERMINATION OF ALP AND ACC ORDINGLY PROVIDED THE FOLLOWING WORKINGS BEFORE THE LD DRP : - ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 6 WORKING OF ADJUSTMENT BY TAKING INTO ACCOUNT ONLYAE RELATED COST PARTICULARS AMOUNT IN IN R ADJUSTMENT BY THE TPO ON AN ENTITY LEVEL BASIS OPERATING REVENUE OF THE ASSESSEE A 718,14,02,537 NPM AS ALLEGED BY THE TPO B 5.84% ALP TOTAL COST AS ALLEGED BY THE TPO C 676,20,08,629 ACT UAL TOTAL COST OF THE ASSESSEE D 701,42,71,698 ADJUSTMENT AS PER THE TPO E=D - C 25,22,63,069 PROPORTIONATE ADJUSTMENT ON AE COST ONLY (THE ASSESSEE'S CONTENTION) TOTAL TRANSACTIONS WITH AES (EXPENSES) F 376,04,72,870 ACTUAL TOTAL COST, INCLUDING AE AND WON AE COSTS D 701.42,71,698 PROPORTION OF AES COST TO TOTAL COST G=F/D 53.61% PROPORTIONATE ADJUSTMENT H=G*E 13,52,42,612 +/ - 5 PERCENT COMPUTATION TOTAL TRANSACTIONS WITH AES (EXPENSES) F 376,04,72,870 5% OF THE INTERNATIONAL TRANSACTIONS 1 =F*S% 18,80, 23 , 644 SINCE ADJUSTMENT OF INR 13,52,42,612 IS WITHIN THE 5 PERCENT VAR IATION RANGE, PROPOSED TRANSFER PRICING ADJUSTMENT O UGHT TO BE DELETED . BASED ON THE ABOVE WORKINGS, THE ASSESSEE SUBMITTED THAT NO ADJUSTMENT SHOULD HAVE BEEN MADE AS THE DIFFERENCE BETWEEN THE ALP SO DETERMINED AND PRICE AT WHICH THE INTERNATIONAL TRAN SACTION HAS ACTUALLY BEEN UNDERTAKEN IS BELOW 5% OF THE VALUE OF INTERNATIONAL TRANSACTIONS . 3.6. THE LD DRP AMONG OTHER OBSERVATIONS CATEGORICALLY OBSERVED IN PAGE 15 OF ITS ORDER IN PARA 3.2.11 AS UNDER: - ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 7 3.2.11 SO FAR AS ASSESSEES CONTENTION THA T ADJUSTMENT MAY BE RESTRICTED TO THE INTERNATIONAL TRANSACTIONS WITH AE ONLY IS CONCERNED, THE ISSUE OF ENTITY LEVEL ADJUSTMENT VERSUS TRANSACTION LEVEL ADJUSTMENT IS PENDING BEFORE HONBLE SUPREME COURT WHICH HAS ADMITTED SLP FILED BY THE DEPARTMENT IN THE CASE OF CIT V. FIRESTONE INTERNATIONAL PVT. LTD. [ITA NO.1354 OF 2013] TS - 401 - HC - 2015 (BOM) - TP AGAINST THE DECISION OF THE HONBLE HIGH COURT HOLDING THAT TRANSFER PRICING ADJUSTMENT SHOULD BE MADE WITH REFERENCE TO THE INTERNATIONAL TRANSACTION A ND NOT WITH REFERENCE TO THE ENTITY LEVEL TURNOVER. SINCE, THERE IS A CHANCE IN THE PROVISIONS OF THE ACT AND THE DECISIONS OF DRP ARE NO LONGER APPEALABLE BY THE DEPARTMENT, IF THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, IT WILL AMOUNT TO PRE - JUDGING THE ISSUE AND BRINGING FINALITY TO AN ISSUE WHICH IS PENDING BEFORE A HIGHER JUDICIAL AUTHORITY. THEREFORE, IN ORDER TO KEEP THE ISSUE ALIVE AND PROTECT THE INTEREST OF THE DEPARTMENT, THE ACTION OF THE TPO IN MAKING A TRANSFER PRICING ADJUSTMENT BY CONSID ERING THE ENTIRE TURNOVER IS UPHELD. 3.7. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3.8. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD AR STATED THAT THE ISSUE UNDER DISPUTE IS SQUARELY COVERED BY THE RECENT DECISION OF THIS TRIBUNAL IN ASSESSEES O WN CASE FOR THE ASST YEAR 2013 - 14 IN ITA NO. 4728/MUM/2017 DATED 8.1.2019. WITH REGARD TO THE CONTENTIONS RAISED BY THE LD DRP IN PARA 3.2.11 OF ITS ORDER AS REPRODUCED SUPRA, THE LD AR ALSO PLACED ON RECORD THE COPY OF RECORD OF PROCEEDINGS OF HONBLE S UPREME COURT IN THE CASE OF CIT VS M/S FIRESTONE INTERNATIONAL PVT LTD IN SPECIAL LEAVE PETITION NO. 22512/2015 DATED 5.1.2016 WHEREIN AGAINST THE DECISION OF HONBLE BOMBAY HIGH COURT, ONLY QUESTION NO. (C ) WAS ADMITTED BY THE HONBLE SUPREME COURT AND N OTICE ORDERED TO BE ISSUED TO BOTH THE PARTIES. THE LD AR DREW OUR ATTENTION THAT QUESTION NO. (C ) WHICH WAS ADMITTED BY HONBLE APEX COURT WAS NOT ON THE IMPUGNED ISSUE AND WAS ON THE ISSUE OF DISALLOWANCE U/S 14A OF THE ACT. FOR THE SAKE OF CONVENIENC E, THE QUESTIONS THAT WERE RAISED BEFORE THE HONBLE BOMBAY HIGH COURT ARE REPRODUCED HEREUNDER: - (A) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS JUSTIFIED IN RESTRICTING THE ADJUSTMENT ONLY ON INTERNATIONAL ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 8 TRA NSACTIONS WHERE THE ASSESSEE HAS SELECTED TNMM AND APPLIED THE SAME ON ENTITY LEVEL BECAUSE PRESUMTPION UNDERLYING ARMS LENGTH PRINCIPLE IS THAT UNCONTROLLED TRANSACTIONS ARE AT ARMS LENGTH, AND THEREFORE, IF THE OVERALL MARGINS ARE LESS THAN ARMS LENGTH MARGINS, THE SHORT FALL MUST BE ON ACCOUNT OF AE TRANSACTIONS ONLY AND NOT ON PRO RATA BASIS. (B) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS JUSTIFIED IN DELETING THE ADDITION OF RS 8,39,245/ - AS THE ADJUSTMEN T IS WITH +/ - 5% AS THE ITAT HAS RESTRICTED THE ADJUSTMENT ONLY ON AE TRANSACTIONS WHICH HAS RESULTED THE ADJUSTMENT WITHIN +/ - 5% ? (C ) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS JUSTIFIED IN RESTORING THE ISS UE OF DISALLOWANCE U/S 14A BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION IN VIEW OF THE DECISION OF THIS COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD (328 ITR 81) AGAINST WHICH AN SLP HAS BEEN FILED IN THE APEX COURT ? 3.8.1. THE LD AR ALSO PLACED ON RECORD THAT THE SLP(C ) NO. 000140/2016 REGISTERED ON 5.1.2016 BEFORE THE HONBLE SUPREME COURT FOR WHICH LEAVE WAS GRANTED AND TAGGED ON WITH CIVIL APPEAL NO. 7019 OF 2011 VIDE PROCEEDINGS DATED 16.8.2016 WAS FINALLY DISMISSED BY THE HON BLE APEX COURT IN THE CASE OF CIT VS M/S FIRESTONE INTERNATIONAL PVT LTD VIDE ORDER DATED 31.1.2018. THE LD DR DISPUTED THESE DOCUMENTS FILED AND RELIED UPON BY THE LD AR AND SOUGHT TIME TO FILE THE STATUS REPORT OF PENDENCY OF CASE BEFORE THE HONBLE SUP REME COURT. ACCORDINGLY, THE BENCH TOOK THE MATTER AS HEARD AND GRANTED 7 DAYS TIME TO FILE THE STATUS REPORT AS DESIRED BY HIM. THE 7 DAYS TIME LIMIT ENDED ON 28.2.2019. BUT NO SUCH STATUS REPORT WAS FILED BY THE LD DR BEFORE US TILL THE DATE OF PASSING OF THIS ORDER. ACCORDINGLY, WE PROCEED TO DISPOSE OFF THIS APPEAL WITHOUT WAITING FOR THE STATUS REPORT FROM THE LD DR. WE WOULD LIKE TO BRING ON RECORD THAT THE LD DR INDEED MADE ELABORATE ARGUMENTS ON MERITS JUSTIFYING THE ACTION OF THE LD TPO AND LD DRP WITH REGARD TO ADJUSTMENT MADE TO ALP. 3.9. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE UNDER DISPUTE IS SQUARELY COVERED IN ASSESSEES OWN CASE FOR THE ASST YEAR 2013 - ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 9 14 IN ITA NO. 4728/MUM/2017 DATED 8.1.2019 WHEREIN IT WAS HELD TH AT TP ADJUSTMENT SHALL BE RESTRICTED TO INTERNATIONAL TRANSACTIONS WITH AE ONLY. THE OPERATIVE PORTION OF THE SAID ORDER IS REPRODUCED HEREUNDER: - 9. THE MAIN CONTENTION OF THE LD AR IS THAT THE ADJUSTMENT TO ALP SHOULD BE COMPUTED ONLY BY TAKING THE INTE RNATIONAL TRANSACTIONS CARRIED OUT WITH THE AE AND NOT AT ENTITY LEVEL WHICH ADMITTEDLY INCLUDES NON AE TRANSACTIONS ALSO. WE HOLD THAT THE OBJECTIVE OF COMPUTING THE ALP IS TO DETERMINE THE INCOME ARISING FROM AN INTERNATIONAL TRANSACTION AND ACCORDINGLY, THE ADJUSTMENT THAT IS REQUIRED TO BE MADE IS TO BE LIMITED TO THE INTERNATIONAL TRANSACTIONS WITH THE AES ONLY AND NOT TO THE ENTITY / SEGMENTAL LEVEL TRANSACTIONS. THIS PROPOSITION IF NOT ACCEPTED WOULD ALSO RESULT IN ABSURDITY WHEREIN THE TOTAL VALUE OF INTERNATIONAL TRANSACTIONS WOULD BE MUCH LESS THAN THE ADJUSTMENT MADE TO ALP. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY ANSWERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS TARA JEWELS EXPORTS PRIVATE LIMITED IN ITA NO. 1814 OF 2013 DATED 5.10.2015, WHEREIN THE QUESTION RAISED BEFORE THE HONBLE HIGH COURT IS AS UNDER: - WHETHER IN LAW AND ON THE FACTS OF THE INSTANT CASE, WAS THE TRIBUNAL JUSTIFIED IN HOLDING THAT WHILE COMPUTING THE ALP OF INTERNATIONAL TRANSACTIONS THE AO/TP O IS PRECLUDED FROM TAKING INTO CONSIDERATION TRANSACTIONS WITH NON ASSOCIATE ENTERPRISES, WHILE ARRIVING AT THE ALP USING THE NET TRANSACTIONAL MARGIN METHOD (TNMM) ; WHEREAS RULE 10B(1)(E) MANDATES THE CONSIDERATION OF PROFIT MARGINS WITH UNRELATED ENTER PRISES? IT WAS OBSERVED IN THE SAID ORDER BY THE HONBLE HIGH COURT AS UNDER: - 6. THE QUESTION AS PROPOSED BY THE REVENUE DOES NOT SEEMS TO ARISE FROM THE IMPUGNED ORDER OF THE TRIBUNAL NOR IS THE METHOD OF DETERMINATION OF ALP ON APPLICATION OF TNMM A RRIVING AT THE MARGIN OF 4.79% IS DISPUTED BEFORE TRIBUNAL OR BEFORE US. WE ARE UNABLE TO UNDERSTAND THE GRIEVANCE OF THE REVENUE AS FORMULATED IN THE PROPOSED QUESTION. THE RESPONDENT - ASSESSEE HAS NOT CHALLENGED THE APPLICATION OF TNMM AND ARRIVING AT THE MARGIN OF 4.79% ARRIVED AT BY THE TPO TO DETERMINE ALP. THE GRIEVANCE OF THE RESPONDENT - ASSESSEE BEFORE THE TRIBUNAL IS ONLY WITH THE MARGIN OF 4.79% BEING APPLIED IN RESPECT OF ALL ITS SALES AND NOT RESTRICTED TO THE INTERNATIONAL TRANSACTIONS ENTERED I NTO B Y THE RESPONDENT - ASSESSEE WITH ITS AES. IT IS EVIDENT FROM THE PROVISIONS OF CHAPTER - X OF THE ACT THAT THE ADJUSTMENT WHICH HAS TO BE DONE TO ARRIVE AT ALP IS ONLY IN RESPECT OF THE TRANSACTION WITH ITS AES. THUS NO FAULT CAN BE FOUND WITH THE ORDER OF THE TRIBUNAL. 7 . MR.PINTO IS UNABLE TO POINT OUT HOW THE AFORESAID FINDING OF ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 10 THE TRIBUNAL IS INCORRECT IN LAW IN THE FACE OF THE CLEAR PROVISIONS IN CHAPTER X OF THE ACT. THE QUESTION AS FRAMED BY THE REVENUE TO OUR MIND DO NOT ARISE FROM THE IMPUGNED O RDER OF THE TRIBUNAL AS THE ISSUE RAISED IN THE PROPOSED QUESTION IS NOT DISPUTED. ACCORDINGLY, WE SEE NO REASON TO ENTERTAIN THE PROPOSED REFRAMED QUESTION OF LAW AS IT DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. 8 . ACCORDINGLY, THE APPEAL IS D ISMISSED. NO ORDER AS TO COSTS. 9.1. SIMILAR VIEW WAS TAKEN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS HINDUSTAN UNILEVER LTD REPORTED IN (2016) 72 TAXMANN.COM 325 (BOMBAY) DATED 26.7.2016 . 9.2.WE FIND THAT THE LD DRP HAD ALSO TAKEN COGNIZANCE OF THE AFORESAID PRINCIPLE AND HAD MERELY STATED THAT THE REVENUES SPECIAL LEAVE PETITION ON THE SAID ISSUE IS PENDING BEFORE THE HONBLE APEX COURT AND THAT SINCE THE APPEAL POWER TO TRIBUNAL HAD BEEN WITHDRAWN AGAINST THE ORDER OF LD DRP FOR THE REVENUE, THIS ISSUE WAS DECIDED AGAINST THE ASSESSEE. WE FIND THAT AS ON DATE, THE ISSUE IS COVERED BY THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF THE ASSESSEE WHICH WOULD BE BINDING ON THIS TRIBUNAL. RESPECTFULLY FOLLOWING THE AFO RESAID JUDICIAL PRECEDENTS ON THE IMPUGNED ISSUE BEFORE US, WE DIRECT THE LD TPO TO RECOMPUTED THE ALP OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE BY CONSIDERING ONLY THE TRANSACTIONS WITH AE. 9.3. IN VIEW OF THESE DIRECTIONS, THE ADJUDICATION OF OT HER GROUNDS VIZ. GROUNDS 1 TO 7 AS MUTUALLY AGREED BY BOTH THE PARTIES BEFORE US DOES NOT WARRANT AT THIS STAGE AND HENCE WE REFRAIN TO GIVE OUR OPINION ON THE SAME. ACCORDINGLY, THE GROUNDS 8 & 9 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE S SUBJECT TO THE DIRECTIONS GIVEN HEREINABOVE. 3.10. RESPECTFULLY FOLLOWING THE SAME, THE GROUND NOS. 7 & 8 RAISED BEFORE US ARE ALLOWED FOR STATISTICAL PURPOSES SUBJECT TO THE DIRECTIONS GIVEN HEREINABOVE AND WITH REGARD TO GROUNDS 1 TO 6 RAISED BEFORE US , WE REFRAIN TO GIVE OUR OPINION ON THE SAME AND THE SAME ARE LEFT OPEN. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD DRP WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE LD AO IN ALLOWING DEPRECIATION ON PRINTERS AT 15% AS AGAIN ST 60% CLAIMED BY THE ASSESSEE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 11 4.1. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON PRINTERS AT THE RATE OF 60% BY STATING THAT PRINTERS ARE PART AND PARCEL OF THE COMPUTERS AND ARE COMPUTER PERIPHERALS, WHICH CANNOT WORK IN ISOLATION. THE LD AO ALLOWED DEPRECIATION AT 15% ON PRINTERS ON THE GROUND THAT THE SAID ASSETS WERE DEPRECIATED AT 15% IN THE PRECEDING YEAR I.E ASST YEAR 2011 - 12. THIS ACTION OF THE LD AO WAS UPHELD BY THE LD D RP. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE LD AR PLACED ON RECORD THE COPY OF THE ORDER OF LD CITA - 12 , MUMBAI IN APPEAL NO. CIT(A) - 12/ACIT - 6(2)(1)/143/15 - 16 DATED 7.10.2016 PASSED IN A SSESSEES OWN CASE FOR THE ASST YEAR 2011 - 12 WHEREIN DEPRECIATION ON PRINTERS WAS ALLOWED BY THE LD CITA AT 60% IN PARA 8.2 OF THE SAID ORDER BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF HAPAG LLOYD INDIA P LTD IN ITA NO. 7771/MUM/20 12 & ITA NO. 1374/MUM/2014 DATED 14.1.2015. THE LD AR ALSO STATED THAT NO SUCH DISALLOWANCE WAS MADE BY THE LD AO IN ASST YEAR 2013 - 14 (IMMEDIATELY SUCCEEDING ASSESSMENT YEAR). WE FIND THAT THE LOWER AUTHORITIES HAD DENIED DEPRECIATION AT THE RATE OF 60 % BASED ON ACTION TAKEN IN ASST YEAR 2011 - 12. BUT WE FIND FROM THE AFORESAID CITA ORDER FOR ASST YEAR 2011 - 12 IN ASSESSEES CASE, THAT THE DEPRECIATION ON PRINTERS WAS GRANTED AT 60%. HENCE THERE IS NO REASON TO TAKE A DIVERGENT STAND DURING THIS YEAR. I N ANY CASE, THE ISSUE UNDER DISPUTE IS ALREADY SETTLED IN FAVOUR OF THE ASSESSEE IN THE CASE REFERRED TO SUPRA BY THE ORDER OF THIS TRIBUNAL REFERRED TO SUPRA. ACCORDINGLY, WE DIRECT THE LD AO TO GRANT DEPRECIATION AT THE RATE OF 60% ON PRINTERS FOR THE A SST YEAR 2012 - 13. THE GROUND NO. 9 RAISED BY THE ASSESSEE IS ALLOWED. 5. THE GROUND NO. 10 RAISED BY THE ASSESSEE IS WITH REGARD TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT , THE ADJUDICATION OF WHICH , ITA NO. 1155/MUM/2017 M/S. DAMCO INDIA PVT. LTD., 12 AT THIS STAGE WOULD BE PREMATURE D. HENCE THE SAME IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 / 03 /201 9 SD/ - ( SAKTIJIT DEY ) SD/ - ( M.BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 20 / 03 /201 9 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //T RUE COPY//