Intimate Fashions (India) Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 1163/CHNY/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4903 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 10-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2014
• Court: TRIBUNAL
• Assessee Lawyers: MILIND MADHUKAR BHUSSAN
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 143(3); 234B; 14A; 260A; 10B; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , # $ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 1163/MDS/2014 / ASSESSMENT YEAR : 2009-10 M/S. INTIMATE FASHIONS INDIA PVT. LTD., THIRUPORUR KOTTAMEDU HIGH ROAD, NANDHIVARAM VILLAGE, GUDUVANCHERY - 603 202. [PAN: AAACI 2706C] VS . DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE -II(3), ROOM NO. 513, 5TH FLOOR, NEW BLOCK, 121, M.G. ROAD, CHENNAI - 600 034. ./ I.T.A. NO. 1016/MDS/2014 / ASSESSMENT YEAR : 2009-10 DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE -II(3), ROOM NO. 513, 5TH FLOOR, NEW BLOCK, 121, M.G. ROAD, CHENNAI - 600 034. VS. M/S. INTIMATE FASHIONS INDIA PVT. LTD., THIRUPORUR KOTTAMEDU HIGH ROAD, NANDHIVARAM VILLAGE, GUDUVANCHERY - 603 202. [PAN: AAACI 2706C] ( / APPELLANT) ( /RESPONDENT) & ' / APPELLANT BY : SHRI MILIND MADHUKAR BHUSSAN, CIT, DR *+& ' / RESPONDENT BY : SHRI PERCY PARDIWALA, SR. ADVOCATE ' /DATE OF HEARING : 10.01.2017 ' /DATE OF PRONOUNCEMENT : 10.04.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: :-2-: I.T.A. NOS. 1016 & 1163/MDS/2014 THESE ARE THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER OF DEPUTY COMMISSIONER OF INCOME TAX, COM PANY CIRCLE-II(3), CHENNAI PASSED U/S. 143(3) R.W.S. 144C(13) OF THE ACT DATED 25.02.2014 IN PURSUANCE OF DIRECTIONS OF DRP U/S. 144C(5) OF THE ACT DATED 20. 12.2013. SINCE, THE ISSUES IN THE APPEALS ARE COMMON, THE APPEALS ARE CLUBBED AND HEARD TOGETHER AND DISPOSED OFF BY A COMMON ORDER. FOR THE SAKE OF CO NVENIENCE, WE CONSIDER THE FACTS NARRATED IN THE ASSESSEE APPEAL IN ITA NO. 11 63/MDS/2014 FOR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIV E GROUNDS (I) THE LD. TPO/DRP ERRED IN CONFIRMING THE ARM LE NGTH PRICE (ALP) OF COMMISSION PAID BY THE ASSESSE TO THE ASSOCIATE ENT ERPRISE (AE) AS NIL AND FAILED TO APPRECIATE THAT THE COMMISSION PAID BY THE ASSES SE TO ITS AE COMMENSURATE WITH VARIOUS SERVICES RECEIVED. (II) THE LD. AO ERRED IN EXCLUDING THE FOREIGN CU RRENCY EXPENDITURE AND 30% OF TELECOMMUNICATION EXPENSES FROM THE EXPORT TURNO VER FOR CLAIM OF DEDUCTION U/S. 10B OF THE ACT, (III) THE LD. AO ERRED IN MAKING DISALLOWANCE U/S. 14A R.W.R. 8D OF INCOME TAX ACT WITHOUT APPRECIATING THAT THE ASSESSEE HAS DISA LLOWED THE EXPENDITURE ATTRIBUTABLE FOR EARNING EXEMPTED DIVIDEND INCOME U /S. 14A OF THE ACT AND LD. AO HAS ERRED IN CONSIDERING PROFIT BEFORE TAXES AS PER PROFIT AND LOSS ACCOUNT AS :-3-: I.T.A. NOS. 1016 & 1163/MDS/2014 PROFIT AND GAINS FROM BUSINESS WHILE COMPUTING THE TOTAL INCOME AND THE LD. AO ERRED IN LEVY OF INTEREST U/S. 234B & C OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS IN THE BUSINESS OF MANUFACTURE OF FOUNDATION GARMENTS AND FILED THE RETURN OF INCOME ELECTRONICALLY FOR THE ASSESSMENT YEAR 2009-10 ON 2 6.09.2009 WITH TOTAL INCOME OF RS. 1,52,42,020/- AND THE RETURN OF INCOME WAS P ROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUT INY UNDER CASS AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED. IN COMPLIANCE T O NOTICE, LD. AR APPEARED FROM TIME TO TIME AND FILED THE DETAILS AS CALLED F OR AND THE CASE WAS DISCUSSED. THE LD. AO ON VERIFICATION OF FINANCIAL STATEMENTS AND REPORT IN FORM 3CEB FOUND THAT THE ASSESSEE HAS INTERNATIONAL TRANSACTI ONS WITH THE AE'S SITUATED OUTSIDE INDIA AND THE VALUE OF THE TRANSACTIONS ARE MORE THAN RS. 15 CRORES AND MADE REFERENCE TO THE TPO FOR DETERMINING THE ALP O F INTERNATIONAL TRANSACTIONS. THE LD. TPO VIDE ORDER DATED 23.01.2013 MADE DOWNWA RD ADJUSTMENT OF RS. 29,46,518/- AS EXCESS PAYMENT MADE BY THE ASSESSEE IN PROCURING RAW MATERIAL FROM ITS AE'S AND THE COMMISSION OF RS. 7,73,77,422 /- PAID BY THE ASSESSEE COMPANY TO ITS AE'S FOR SERVICES RECEIVED ARE TREAT ED AS RS. NIL. THE LD. TPO FOUND THAT THE ASSESSEE COMPANY HAS INTERNATIONAL T RANSACTIONS IN THE FINANCIAL YEAR 2008-09 WITH ITS 12 AES HAVING AGGREGATED VAL UE OF RS. 159,79,40,290/-. THE ASSESSEE COMPANY IS IN THE DESIGNING AND DEVELO PING VARIOUS STYLES OF GARMENTS AND GETS APPROVAL FROM THE COMPANIES. THE LD. AR SUBMITTED AND FILED WRITTEN SUBMISSIONS IN RESPONSE TO THE SHOW CAUSE N OTICE, THE LD. TPO ON :-4-: I.T.A. NOS. 1016 & 1163/MDS/2014 VERIFICATION FOUND THAT THE ASSESSEE COMPANY HAS FO LLOWED THE CUP METHOD TO BENCHMARK ITS TRANSACTIONS OF PURCHASE OF RAW MATER IAL FROM ITS AE'S AND THE ASSESSEE HAS CONSIDERED INTERNATIONAL CUP METHOD FO R COMPARING PRICES PAID TO THE AE VIS-A-VIS TO THE NON-AE'S FOR PURCHASE OF RA W MATERIAL. THE LD. TPO OBSERVED THAT THE ASSESSEE HAS PAID HIGHER AMOUNT T O ITS AE ON COMPARISON WITH NON-AE'S IN PROCURING RAW MATERIAL. 3.1 THE LD. AR SUBMITTED THAT THE ASSESSEE COMPAN Y EQUITY IS HELD BY THREE COMPANIES NAMELY MAS CAPITAL PRIVATE LIMITED (MAS), TRIUMPH INTERNATIONAL OVERSEAS LIMITED (TRIUMPH) AND MAST INDUSTRIES INC. , USA (MAST). THE ASSESSEE COMPANY PURCHASE SMALL QUANTITY OF CLOTHES OF DIFFERENT COLORS FROM DIFFERENT AE'S DUE TO CHANGE IN FASHION, STYLE AND TO AVOID WASTAGE AND IF THE MATERIAL IS PURCHASED FROM NON-AE THE MINIMUM ORDER QUANTITY WILL BE HIGHER. THE LD. AR SUBSTANTIATED THE ARGUMENTS WITH STATEME NTS AND SUBMISSIONS AT PAGE 4 AND 5 OF THE TPO ORDER AND EXPLAINED THAT TH E NEGATIVE VARIANCE DUE TO HIGHER IMPORT PRICE PAID TO AE'S IS ONLY BE 0.17% O F TOTAL SALES. THE LD. TPO WAS NOT SATISFIED WITH THE STATEMENT AND THE CUP ME THOD ADOPTED BY THE ASSESSEE AS THE COMPARISON IS ON TRANSACTION BASIS AND NOT ON AGGREGATE OF TRANSACTIONS. THEREFORE, THE ADJUSTMENTS PROPOSED ON THE TRANSACTIONS IS WITHIN THE PROVISIONS OF RULE 10B(1)(A) OF IT RULES. THE ASSESSEE COMPANY HAS ADOPTED THE CUP METHOD TO BENCHMARK ITS INTERNATION AL TRANSACTIONS AND FURTHER ADOPTING THE TNMM AS THE SECONDARY METHOD TO BENCHM ARK THE TRANSACTIONS IS NOT VALID AND THE PURCHASE TRANSACTIONS WITH ITS AE 'S IN RESPECT OF THE CERTAIN :-5-: I.T.A. NOS. 1016 & 1163/MDS/2014 ITEMS ARE NOT ON ALP. THE LD. TPO MADE DOWNWARD AD JUSTMENT/REDUCED THE AMOUNT OF RS. 29,46,518/- FROM THE PURCHASE PRICE O F THE ASSESSEE COMPANY. 3.2 THE SECOND DISPUTED ISSUE THAT THE ASSESSEE COM PANY HAS PAID COMMISSION AT 5% ON NET EXPORT SALES FOR THE SERVIC ES AVAILED FROM ITS AE. THE ASSESSEE COMPANY IS A JOINT VENTURE BETWEEN THE THR EE INDEPENDENT PARTIES NAMELY MAS, TRIUMPH AND MAST AND IS NOT A WHOLLY OW NED SUBSIDIARY OF ONE HOLDING COMPANY AND THE JOINT VENTURE PARTNERS HOLD S AT 33.3% EACH AND NEITHER OF THEM CAN CONTROL AND INFLUENCE INDEPENDENTLY. TH E LD. TPO CONSIDERED THE PRODUCTION STATUS REPORT, NEW ORDERS, FOLLOW AND SA MPLE APPROVALS, AND CAPACITY UTILISATION AND FINALLY CONCLUDED THAT THE ASSESSEE COMPANY HAS PAID 5% OF NET EXPORT SALES TO ITS AE, WHERE THE TRIUMPH INTERNATI ONAL OVERSEAS HOLDS 33% STAKE AND THE COMMISSION PAYMENTS ARE MADE AGAINST THE SALE OF RS. 139.71 CRORES TO MAST INDUSTRIES INC. WHICH HOLDS 33% STAK E IN THE ASSESSEE COMPANY. THE LD. TPO PERUSED THE ASSESSMENT AND ARTICLE 5.1. 4 IN RESPECT OF TRANSACTIONS WITH MAST INDUSTRIES INC. AND FIND THE AE'S ARE SEN DING MAILS RECEIVED FROM MAST INDUSTRIES INC. TO THE ASSESSEE, AND THE ASSES SEE COMPANY COULD NOT DEMONSTRATE THE EFFORTS OF THE M/S. TRIUMPH INTERNA TIONAL OVERSEAS LIMITED OBTAINING THE ORDERS. WITH THESE FINDINGS AND OBSE RVATIONS, THE LD. TPO IS OF THE OPINION THAT THE ALP OF SERVICES OBTAINED BY THE AS SESSEE COMPANY FROM ITS AE TRIUMPH INTERNATIONAL OVERSEAS WILL BE NIL AND MADE THE DOWNWARD ADJUSTMENT OF INTERNATIONAL TRANSACTIONS OF COMMISSION TO THE EXTENT OF RS. 7,73,77,422/- AND PASSED ORDER U/S. 92CA(3) OF THE ACT DATED 23.01.20 13. :-6-: I.T.A. NOS. 1016 & 1163/MDS/2014 3.3 THE LD. AO OBSERVED THAT THE ASSESSEE COMPANY H AS RECEIVED DIVIDEND INCOME OF RS. 50,59,412/- AND CLAIMED EXEMPTION U/S . 10(34) OF THE ACT AND SUMOTO MADE A DISALLOWANCE OF EXPENDITURE OF RS. 33 ,333/- AN ADHOC BASIS. BUT THE LD. AO CALCULATED THE DISALLOWANCE U/S. 14A R.W .R. 8D(II) RS. 3,10,519/- AS THE ASSESSEE HAS NOT CONSIDERED THE EXPENSES OF MAN AGEMENT INVOLVING IN DECISION MAKING. FURTHER, THE LD. AO EXCLUDED THE TELECOMMUNICATION EXPENSES INCURRED IN FOREIGN CURRENCY FOR COMPUTATION OF DED UCTION U/S. 10B OF THE ACT AND FOUND THAT THE ASSESSEE HAS INCURRED RS. 1,41,61,37 0/- TOWARDS POSTAGE, TELEGRAM AND TELEPHONE EXPENSES (TELECOMMUNICATION EXPENSES) AND RS. 12,94,71,213/- TOWARDS TRAVELLING EXPENDITURE ETC., INCURRED IN FOREIGN EXCHANGE. THE ASSESSING OFFICER CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF ITO V S. SAKSOFT LTD., WHERE IT WAS HELD THAT WHEN THE EXPENSES ARE REDUCED FROM THE EX PORT TURNOVER IT SHOULD ALSO BE REDUCED FROM THE TOTAL TURNOVER. BUT, THE LD. A O FOUND SPECIAL BENCH DECISION OF THE TRIBUNAL IS CONTESTED BY THE DEPARTMENT AT H IGHER FORUM AND THEREFORE REDUCED EXPENSES OF RS. 13,37,19,624/- ONLY FROM TH E EXPORT TURNOVER FOR COMPUTING DEDUCTION U/S. 10B OF THE ACT AND WITH OT HER ADDITIONS PASSED DRAFT ASSESSMENT ORDER WITH ASSESSED INCOME OF RS. 11,27, 93,990/- U/S. 143(3) R.W.S. 144(C)(1) OF THE ACT DATED 26.03.2013. 3.4 AGGRIEVED, THE ASSESSEE FILED OBJECTIONS AGAIN ST THE DRAFT ASSESSMENT ORDER WITH THE DRP. THE DRP CONSIDERED THE FACTS T HAT THE ASSESSEE COMPANY IS DEVELOPING AND DESIGNING THE PRODUCTS TO CUSTOMERS AND HAD INTERNATIONAL :-7-: I.T.A. NOS. 1016 & 1163/MDS/2014 TRANSACTIONS WITH AE RS. 159,79,40,290/- AND ON THE OBJECTIONS WITH RESPECT TO DOWNWARD ADJUSTMENT OF REDUCTION FROM THE PURCHASE RS. 29,46,518/-, THE LD. DRP FIND THE LD. TPO IS OF THE OPINION THAT THE AMO UNT PAID BY THE ASSESSEE TO THE AE'S IS HIGHER THAN THE PAYMENT MADE TO NON-AE FOR PROCUREMENT OF SIMILAR RAW MATERIAL AND LD. DRP DEALT THE ISSUE AT PAGE 4 PARA 5 OF THE ORDER AND RELIED ON THE TRIBUNAL DECISION IN THE ASSESSEE'S OWN CASE FOR THE EARLIER ASSESSMENT YEAR 2006-07 & 2007-08 AND DIRECTED THE ASSESSING O FFICER/TO TO DELETE THE ADDITION. 3.5 FURTHER, THE DRP FIND THAT THE ASSESSEE COMPANY HAS PAID COMMISSION @ 5% ON NET EXPORT SALES RS. 7,73,77,422/- TO ITS AE' S AND THE LD. TPO CONSIDERED THE FACTS OF JOINT VENTURE OF THREE COMPANIES AND T HE ASSESSEE COMPANY COULD NOT JUSTIFY THE PAYMENT OF COMMISSION AND THE ASSES SEE COULD NOT PRODUCE THE EVIDENCE OF SERVICES RECEIVED EXCEPT THE E-MAIL COR RESPONDENCE AND FURTHER THE ASSESSEE COULD NOT ESTABLISH THE LIAISON SERVICES O R SUCH OTHER ACTUAL SERVICES SUPPORTING FOR PAYMENT OF COMMISSION AND DETERMINED THE VALUE OF ALP AS RS. NIL. THE LD. DRP DISCUSSED AT PARA 3.1 OF THE ORDE R AND CONSIDERED THE AGENCY AGREEMENT WITH THE ASSESSEE AND AE'S AND THE JOINT VENTURE, SELLING AGENTS AND CONFIRMED THE DISALLOWANCE OF THE LD. TPO AND REJEC TED THE ASSESSEE OBJECTIONS. 3.6 THE LD. DRP DEALT ON DISPUTED ISSUE OF EXCLUSIO N OF FOREIGN CURRENCY EXPENDITURE AND 30% TELECOMMUNICATION EXPENSES FROM THE EXPORT TURNOVER FOR CLAIM OF DEDUCTION U/S. 10B OF THE ACT. THE LD. DR P FOUND THE ISSUE IS COVERED IN :-8-: I.T.A. NOS. 1016 & 1163/MDS/2014 FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL B ENCH OF TRIBUNAL IN ITO VS SAK SOFT LTD, 121 TTJ 865 AND ASSESSEE'S OWN CASE FOR T HE EARLIER ASSESSMENT YEARS 2006-07 & 2007-08 IN ITA NOS. 2116/MDS/2010 & 2108/ MDS/2011 AND DIRECTED THE LD. AO TO EXCLUDE THE EXPENSES FROM THE EXPORT TURNOVER AND TOTAL TURNOVER. FURTHER, THE DRP DIRECTED THE LD. AO TO RECORD HIS SATISFACTION IN COMPUTATION OF DISALLOWANCE FOR APPLYING SEC. 14A R.W.R. 8D AND TH E ASSESSEE SHALL BE PROVIDED AN OPPORTUNITY AND ON OTHER ISSUES OF TDS CREDITS T HE DRP DIRECTED THE AO TO VERIFY AND ALLOW THE TAX CREDIT CLAIMED BY THE ASSE SSEE AND IN RESPECT OF LEVY OF INTEREST U/S. 234B & C OF THE ACT AND THE DRP CONSI DERED IT AS CONSEQUENTIAL AND PASSED ORDER U/S. 144C(5) OF THE ACT DATED 20.12.20 13 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) R.W.S. 144(C)(13) OF THE ACT IN PURSUANCE OF DRP DIRECTION S THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. AR ARGUED THE GROUNDS ON THE TRANSFER PRICING ADJUSTMENTS THAT THE DRP CONFIRMED THE ALP ON COMMISSION PAID TO THE AE'S AS NIL. THE LD. AR SUBMITTED THAT SUCH COMMISSION WAS ALLOWED EARLIER IN THE ASSESSMENT YEAR 2001-02 AND THERE IS NO DISALLOWANCE OF COMMISSION BY THE REVENUE FOR THE ASSESSMENT YEARS 2002-03 TO 2007-08. THE LD. AR REFERRED TO THE AGENCY COMMISSION AGREEMENT ON TRANSACTIONS WITH THE JOINT VENTURE COMPANIES ON COMMISSION PAYMENTS. T HE LD. AR DREW ATTENTION TO THE PAGE NO. 179 OF THE PAPER BOOK, WHERE THE DE TAILS OF SHAREHOLDERS OF JOINT VENTURE PARTNERS HOLDING STAKES WERE EXPLAINED AS U NDER: :-9-: I.T.A. NOS. 1016 & 1163/MDS/2014 S.NO COMPANY NAME NAME OF SHAREHOLDERS SHAREHOLDING PATTERN ADDRESS OF SHAREHOLDERS 1. TRIUMPH INTERNATIONAL OVERSEAS PRIVATE LIMITED, VADUZ, LIECHTENSTEIN TRIUMPH INTERNATIONAL SPIESSHOFER & BRAUN KG WHOLLY OWNED SUBSIDIARY PROMENADENSTRASSE 24 BAD ZURZACH, 5330 SWITZERLAND 2. MAS INTIMATES PRIVATE LIMITED, SRI LANKA MAS HOLDINGS PRIVATE LIMITED WHOLLY OWNED SUBSIDIARY AITKEN SPENCE, TOWER II, NO. 315 VA, COLOMBO, SRILANKA 3. MAST INDUSTRIES INC, USA LIMITED BRANDS INC WHOLLY OWNED SUBSIDIARY THREE LIMITED PARKWAY, P.O. BOX 16000, COLUMBUS, OHIO, USA THE LD. AR PRAYED THAT THE ASSESSEE COMPANY AVAIL ED SERVICES FROM THE AE'S AND COMMISSION WAS PAID AND FURTHER ASSESSEE H AS ADOPTED CUP METHOD AS TRANSACTION METHOD WHICH IS NOT DISPUTED AND PRAYED FOR DELETION OF ADDITION. CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE ASSE SSING OFFICER AND DRP AND SUBMITTED THAT THE COMMISSION WAS NOT ALLOWED BY TH E LD. AO AS NO PROPER DETAILS WERE SUBMITTED AND ALSO NO EVIDENCE WAS PRO DUCED IN RESPECT OF SERVICES AVAILED FROM THE AE'S AND OPPOSED TO THE GROUNDS. 5. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE SOLE CRUX OF THE ISS UE THAT THE LD. TPO HAS MADE DISALLOWANCE OF THE COMMISSION PAYMENT AS THERE IS NO EVIDENCE PRODUCED AND :-10-: I.T.A. NOS. 1016 & 1163/MDS/2014 ONLY STATEMENTS WERE PROVIDED ON AVAILING SERVICES THROUGH E-MAIL CORRESPONDENCE AND THE SALES COMMISSION IS PAID BAS ED ON THE AGREEMENT AND THE LD. TPO HAS ACCEPTED THESE FACTS AND HAS NOT DO UBTED THE DOCUMENTS BUT ONLY THE NATURE OF SERVICES AVAILED. WE FIND STREN GTH IN THE ARGUMENTS OF LD. AR AND THE COMMISSION IS PAID FOR THE PURPOSE OF BUSIN ESS WHOLLY AND EXCLUSIVELY BASED ON THE TURNOVER. WE FOUND SIMILAR DISPUTED I SSUE WAS CONSIDERED IN ASSESSEE OWN CASE BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 2427/MDS/2005 FOR THE ASSESSMENT YEAR 2001-02 DATED 27.03.2007, WHERE THE TRIBUNAL HAS REMITTED THE DISPUTED ISSUE TO BE RE-E XAMINED BY THE ASSESSING OFFICER AS HELD AT PARA 9 OF THE ORDER AS UNDER: ' 9. LAST ISSUE RELATED TO THE MAINTENANCE OF DISA LLOWANCE OF COMMISSION OF RS. 1,82,06,482/-. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ASSES SEE IS A MANUFACTURER OF LADIES LINGERIE AND FOUNDATION GARM ENTS. THE SHARES OF THE ASSESSEE COMPANY ARE HELD 1/3RDL EACH BY M/S. M AST INDUSTRIES, USA. M/S. TRIUMPH INTERNATIONAL. GERMANY AND M/S. MAS IN TERNATIONAL PVT LTD., SRI LANKA. ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S. TRIUMPH INTERNATIONAL. AN INTERNATIONAL COMPANY ENGAGED IN THE MARKETING OF LINGERIE, FOR MARKETING THE GOODS. IT WAS' STIPULAT ED THAT EVERY YEAR M/S. TRIUMPH INTERNATIONAL WILL GET THE INFORMATION ON Y EARLY PROJECTIONS ASSESSEE COULD MAKE THE ANNUAL CAPACITY PLAN FOR TH E SUBSEQUENT YEAR. IT. WAS ALSO AGREED THAT M/S. TRIUMPH. INTERNATIONAL: W ILL FILL UP THE CAPACITY OF THE FACTORY BY GIVING THE ACTUAL ORDERS EVERY MO NTH. M/S. TRIUMPH INTERNATIONAL ALSO GAVE PROJECTIONS FAT THE REST OF THE YEAR BY WAY OF RESERVATIONS BY COORDINATING WITH THE CUSTOMERS DEP ENDING UPON THE MARKET TREND TO FACILITATE THE PRODUCTION PLANNING DEPARTMENT TO PLAN THE ACTUAL CAPACITY ON, AN ON-GOING BASIS. M/S. TRIUMPH ALSO DID DESIGNING THE :-11-: I.T.A. NOS. 1016 & 1163/MDS/2014 PRODUCT TO SUIT THE CUSTOMER REQUIREMENTS, CHECKING ON THE DESIGN SUGGESTED BY THE CUSTOMER AND GIVING ALTERATIONS TO SUIT THE CUSTOMER. IT ALSO DID THE MARKET RESEARCH INDEPENDENTLY ON THE N EW STYLES WITH REGARD TO DESIGNS. 11. LEARNED COUNSEL FOR THE ASSESSEE DID FILE SOM E DOCUMENTS TO DEMONSTRATE THE VOLUME OF SERVICES RENDERED BY M/S. TRIUMPH INTERNATIONAL. ASSESSEE HAD PAID COMMISSION OR RS. 2,27,06,482/- CALCULATED AT THE RATE OF 5% FOR THE .EXPORT SALES WHICH INCLUDED MARKETING EXPENSES. IT WAS ALLEGED THAT THIS IS NORMAL PAYME NT RESPECT OF FOREIGN MARKETING EXPENSES AND HAS BEEN PERMITTED BY THE RE SERVE BANK OF INDIA. 12. HOWEVER, THE AO FELT THAT ONLY RS. 45,00,000/- COULD BE ALLOWED. ACCORDINGLY, HE DISALLOWED THE BALANCE OF RS. 1,82,06,482/-. TO JUSTIFY THE ADDITION, AO STATED IN THE ORDER THAT T HE ASSESSEE DID NOT HAVE ANY TRADE MARK RIGHT OR PATENT RIGHT ON THE MANUFAC TURED PRODUCTS TO ENHANCE ITS BUSINESS IN FUTURE ON THE BRAND NAME BE ING, BUILT. THE PRODUCTS ARE SOLD TO ML/S. MAST INDUSTRIES M/S. TRI UMPH INTERNATIONAL AND ITS BRANCH IN HONGKONG WERE SERVING THE ASSESSEE. THE QUANTUM OF COMMISSION PAID BY THE ASSESSEE WAS NOT IN PROPORTI ON TO THE SERVICES RENDERED BY M/S. TRIUMPH INTERNATIONAL. THE REASON IS THAT THE ENTIRE PRODUCT MANUFACTURED BY THE ASSESSEE WAS SOLD TO M/ S. MAST INDUSTRIES, WHICH IS HOLDING 1/3RD SHARE OF THE ASSESSEE COMPAN Y. THUS M/S. TRIUMPH INTERNATIONAL WAS NOT SPENDING ANY ENERGY OR TIME F OR GETTING CUSTOMERS FOR THE ASSESSEE. THE ONLY CUSTOMER IS M/S. MAST IN DUSTRIES. AO, DID ASK THE ASSESSEE TO FILE DETAILS OF STYLES PROVIDED BY M/S. TRIUMPH INTERNATIONAL. THERE WERE ONLY 22 STYLES INTRODUCED IN THE YEAR WHEREAS THE COMMISSION PAID WAS RS. 2,27,06,482/-. IT WAS A LSO ALLEGED BEFORE THE AO THAT IF A MARKETING OFFICE IS MAINTAINED BY THE ASSESSEE IN NEW YORK, THE COST WOULD BE MORE THAN THE COMMISSION PAID BY THE ASSESSEE. AO NEGATIVED THIS NRGUL11CLLT ON THE GROUND THAT PRODU CTS ARE SOLD TO A SHAREHOLDER ONLY. THE BENEFITS LISTED BY THE ASSESS EE ACCRUED ONLY TO THE' :-12-: I.T.A. NOS. 1016 & 1163/MDS/2014 SHAREHOLDERS AND NOT TO OUTSIDERS. THEREFORE, THERE WAS NO NEED FOR HAVING A MARKETING OFFICE ABROAD. 13. IT APPEARS THAT THE AO DID NOT EXAMINE THE DO CUMENTS. IT IS NECESSARY TO SEE WITH EXACTITUDE WHAT SERVICES WERE RENDERED BY M/S. TRIUMPH INTERNATIONAL TO THE ASSESSEE AND IN THE CO NTEXT OF THOSE SERVICES WHETHER THE COMMISSION WAS REASONABLE OR NOT. IF IT IS NOT REASONABLE ADEQUATE GROUNDS MUST BE GIVEN FOR TREATING IT UNRE ASONABLE. IT APPEARS THAT THE DOCUMENTS PRODUCED BEFORE US WERE NOT CONS IDERED BY THE AO. WE THEREFORE IN THE INTEREST OF JUSTICE SET ASIDE T HE IMPUGNED ORDER OH THIS COUNT AND RESTORE TO THE FILE OF THE AO WITH DIRECT ION TO DECIDE IT DE NOVO IN ACCORDANCE WITH LAW AFTER PROVIDING IT DE NOVO I N ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSE E OF BEING HEARD.' WE RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DEC ISION AND IN THE INTEREST OF JUSTICE, WE REMIT THE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH BASED ON THE AVAILABLE SUPPORTING MATERIAL AND EVIDENCE AND THE ASSESSEE SHALL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING TO SUBSTANTIATE ITS CLAIM BEFORE PASSING THE ORDER ON MERITS AND AL LOWED THE GROUND OF THE ASSESSEE FOR STATISTICAL PURPOSE. 6. ON THE SECOND ISSUE OF CLAIM OF DEDUCTION U/S. 1 0B AND EXCLUSION OF FOREIGN CURRENCY FROM EXPORT TURNOVER AND 30% TELEC OMMUNICATION EXPENSES FROM THE EXPORT TURNOVER, WE FOUND THIS ISSUE IS SQ UARELY COVERED IN ASSESSEE'S OWN CASE IN ITA NO. 2116/MDS/2010 AND 2108/MDS/2011 , ASSESSMENT YEARS 2006-07 & 2007-08 RELYING ON THE SPECIAL BENCH DE CISION AT PARA 19 PAGE 25 READ AS UNDER: :-13-: I.T.A. NOS. 1016 & 1163/MDS/2014 '19. IN SO FAR AS THE ISSUE OF CALCULATION OF DEDUC TION UNDER SECTION 10B OF THE ACT, BY EXCLUDING FROM EXPORT TURNOVER, FREIGHT, TELECOMMUNICATION CHARGES AND EXPENSES INCURRED IN FOREIGN EXCHANGE, WE ARE OF THE OPINION THAT SUCH AMOUNTS WILL HAVE TO B E EXCLUDED FROM TOTAL TURNOVER ALSO AS HELD BY THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF SAK SOFT LTD.,(SUPRA). ASSESSING OFFICER IS DIRECTE D TO REWORK THE DEDUCTION ACCORDINGLY FOR BOTH THE YEARS.' WE RESPECTFULLY FOLLOWING THE ABOVE DECISION DIRECT THE ASSESSING OFFICER TO RE- EXAMINE THE DEDUCTION AND ALLOW THE GROUND OF THE A SSESSEE FOR STATISTICAL PURPOSE. 7. WE FIND THE THIRD DISPUTED ISSUE BEING THE ASSES SING OFFICER HAS MADE DISALLOWANCE U/S. 14A R.W.R. 8D RS. 3,10,519/-, WE FOUND THAT THE ASSESSING OFFICER HAS APPLIED THE PROVISIONS OF SECTION 14A R .W.R. 8D AND THE DRP HAS CONSIDERED THESE FACTS AND DIRECTED THE ASSESSING O FFICER TO RE-WORK THE COMPUTATION OF DISALLOWANCE AND ACCORDINGLY REMITTE D TO ASSESSING OFFICER. WE FIND THE PROVISIONS OF SECTION 14A R.W.S. 8D ARE MA NDATORILY APPLICABLE W.E.F. 24.03.2008 AND ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF DRP AND UPHELD THE ACTION OF DRP AND DISMISS THE AS SESSEE GROUND. FURTHER, DIRECT THE AO TO ADOPT CORRECT PROFIT FOR ASSESSING THE INCOME AND LEVY OF INTEREST U/S. 234B & C IS CONSEQUENTIAL AND SHALL BE CALCULA TED ON ASSESSED INCOME. ACCORDINGLY, THE ASSESSEE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8. NOW WE TAKE UP THE REVENUE APPEAL IN ITA NO. 101 6/MDS/2014. THE REVENUE HAS RAISED TWO SUBSTANTIVE GROUNDS IN RESPE CT OF DELETING THE DOWNWARD :-14-: I.T.A. NOS. 1016 & 1163/MDS/2014 ADJUSTMENT BY THE DRP RS. 29,46,518/- ON ACCOUNT OF PURCHASES WITH AE. WE FIND DRP RELIED ON THE ORDERS OF THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08 IN ITA NO. 2116/MDS/2010 AND 21 08/MDS/2011 AND DELETED THE ADDITION. CONTRA, THE LD. AR RELIED ON THE ORDER OF DRP AND ASSESSEE'S OWN CASE. WE FIND THE DISPUTED ISSUE W AS DECIDED BY THE CO-ORDINATE BENCH OF TRIBUNAL AT PARA 18 WHICH READ AS UNDER: '18. WE ARE THEREFORE OF THE OPINION THAT FACT SIT UATION IS SUCH THAT VERSION OF THE ASSESSEE THAT IN THE CASE OF ITEMS U NDER SIX CODES, IT WAS FORCED TO PAY MORE AMOUNT THAN COMPARABLE PRICES OF SUPPLIES FROM NON- AES, DUE TO MINIMUM ORDER QUANTITY RESTRICTIONS COU LD NOT BE BRUSHED ASIDE. RULE 10B(1)(A)(II) CLEARLY MANDATES ADJUSTME NT OF PRICES FOR DIFFERENCE THAT COULD MATERIALLY AFFECT THE MARKET PRICES. EVEN OTHERWISE, IF THE OTHER MATERIALS FALLING UNDER 29 ITEM CODES PUR CHASED FROM THE VERY SAME AES, WERE ALSO CONSIDERED IN ALL PROBABILITY, IT WOULD HAVE WIPED OUT THE ADVANTAGE THAT ASSESSEE DERIVED FROM ANY POSSIB LE OVER PRICING ON MATERIALS FALLING IN 6 ITEM CODES PURCHASED BY IT. TO TAKE 6 ITEMS FROM A PACK OF 35 AND CONSIDER ONLY THESE SIX ITEMS FOR MA KING A REVISION OF ALP, IN OUR OPINION, WILL NOT GIVE A FAIR RESULT AT ALL. A BUSINESSMAN MIGHT PURCHASE A NUMBER OF ITEMS FROM THE SAME PERSON, AN D HE MIGHT ELECT TO PAY MORE ON SOME OF THE ITEMS, WHEN HE FINDS THAT T HE ON MANY OTHER ITEMS, HE IS GETTING A BENEFIT DUE TO LOWER PRICES. HERE THE TPO AND ASSESSING OFFICER STEPPED INTO THE SHOES OF THE ASS ESSEE TO DECIDE ON WHICH OF THE ITEMS, IT SHOULD PAY MORE AND IN WHICH ITEMS IT HAD PAID MORE, IGNORING THOSE ITEMS ON WHICH IT HAD PAID LES S. IN THE CIRCUMSTANCES OF THIS CASE, WHERE OUT OF 35 ITEMS ONLY 6 WERE ELE CTED OUT FOR REACHING AN ADVERSE FINDING, WE ARE OF THE OPINION THAT THE AUT HORITIES WENT OFF TANGENT IN TAKING A NARROW VIEW WITHOUT CONSIDERING THE TOT AL VOLUME OF TRANSACTIONS ASSESSEE HAD WITH ITS AES. IN TAKING T HIS VIEW, WE ARE FORTIFIED :-15-: I.T.A. NOS. 1016 & 1163/MDS/2014 BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNA L IN THE CASE OF M/S.MAINETTI INDIA PVT. LTD. WHERE IN PARAGRAPH 8 I T WAS HELD AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. PER USAL OF THE PROVISIONS OF SEC.92C SHOWS THAT THE WORDS U SED IS IN RELATION TO AN INTERNATIONAL TRANSACTION - - - - - - HAVING REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTION OR CL ASS OF ASSOCIATED PERSONS OR FUNCTIONS PERFORMED BY SUCH PERSONS. TH E TERM CLASS OF TRANSACTION AND NATURE OF TRANSACTIONS COME TO T HE FOREFRONT IN THE PRESENT CASE. IN THE ASSESSEES CASE, THE TRANSACTI ON WITH THE AE IS NOT ONE OF SIMPLE PURCHASE OR SIMPLE SALE. THE ASSE SSEE PURCHASES FROM ONE AND SELLS TO ANOTHER. THE ASSESSEE HAS PUR CHASED FROM ITS AE IN HONGKONG, SRILANKA, MALAYASIA, PAKISTAN AND R ANDY ASIA AND HAS SOLD TO ITS AE IN SRILANKA, KOREA, HONGKONG, GU LF, EGYPT, BANGLADESH, MALAYASIA, TAIWAN, UK AND PAKISTAN. IN REGARD TO THE SALES MADE BY THE ASSESSEE, THE TRANSACTION WITH BA NGALADESH IS IN POSITIVE, THE TRANSACTION WITH EGYPT IS IN NEGATIVE , THE TRANSACTION WITH GULF IS IN THE POSITIVE, THE TRANSACTION WITH HONGKONG IS IN NEGATIVE, THE TRANSACTION WITH KOREA IS IN POSITIVE , THE TRANSACTION WITH SRILANKA IS IN THE NEGATIVE, THE TRANSACTION W ITH MALAYASIA IS IN THE NEGATIVE, THE TRANSACTION WITH PAKISTAN IS IN T HE NEGATIVE, THE TRANSACTION WITH TAIWAN IS IN THE NEGATIVE AND THE TRANSACTION WITH UK IS IN THE NEGATIVE. THUS, WHAT IS NOTICED IS THA T ON THE PURCHASE THE ASSESSEE HAS A POSITIVE DIFFERENTIAL I.E. THE A SSESSEE PURCHASES AT A LOWER PRICE FROM ITS AE THAN THE NON-AE AND WH EN ITS SALES TO THE AE, ITS SELLING PRICE IS LOWER THAN THE SELLING PRICE AS COMPARED WITH THE NON-AE. THERE IS NO QUESTION THAT THE ASSE SSEE IS GENERATING PROFITS FROM THE TRANSACTION. THERE IS N O DISPUTE THAT THE ASSESSEE IS ALSO PAYING TAXES ON THE PROFITS THAT I T HAS GENERATED FROM ITS TRANSACTION OF PURCHASE AND SALE WITH ITS AE. THE ASSESSEE, THUS IT IS NOTICED, IS DOING THE BUSINESS OF TRADIN G WHEN IT PURCHASED FROM ITS AE FROM ONE COUNTRY AND SELLS TO ANOTHER A E IN ANOTHER :-16-: I.T.A. NOS. 1016 & 1163/MDS/2014 COUNTRY. THIS MARGIN COULD BE ON ACCOUNT OF BOTH FO REIGN EXCHANGE FLUCTUATIONS AS ALSO THE MARK UP DONE BY THE ASSESS EE. THESE TRANSACTIONS CLEARLY SHOW THAT WHAT IS DONE BY THE ASSESSEE IS ONE OF PURCHASE AND SALE. WITH THIS IN MIND READING OF THE PROVISIONS OF SEC.92C SHOWS THAT THE WORD USED IS NATURE OF TRAN SACTION. NATURE OF TRANSACTION WOULD BE A PARTICULAR SET O F TRANSACTION, WHICH ARE TO BE SEEN TOGETHER. WHEN THE ASSESSEE IS BUYING FROM ONE PLACE AND SELLING AT ANOTHER THAT WOULD BE A C LASS OF TRANSACTION. WHEN THE ASSESSEE IS DOING THE BUSINE SS OF TRADING, IT WOULD NOT BE A RIGHT TO HOLD THAT THE PURCHASE IS O NE CLASS OF TRANSACTION AND THE SALES ARE ANOTHER CLASS OF TR ANSACTION. THE ASSESSEE DEALING WITH THE AES IS A BETTER POSITION TO NEGOTIATE BETTER PRICES AND CONSEQUENTLY WOULD BE ABLE TO GET A BETT ER BARGAIN. HERE, WHAT IS TO BE SEEN IS WHETHER THE TRANSACTION OF PURCHASE AND SALE BEING THE NATURE OF TRANSACTIONS, WHEN SEEN IN CONSOLIDATED FROM, GENERATES PROFITS WHICH NORMALLY WOULD BE GEN ERATED. FOR THIS BOTH THE PURCHASE AND SALE TRANSACTIONS WOULD HAVE TO BE CONSIDERED. TO EXPLAIN BY AN EXAMPLE, THE ASSESSEE PURCHASES A PRODUCT AT RS.10 FROM ITS AE. THE SAME PRODUCT IS S OLD BY A NON-AE AT RS.12/-. THE ASSESSEE SELLS THE FINISHED PRODUCT TO ITS AE AT RS.15/-. THE SAME FINISHED PRODUCT IS SOLD BY A NON -AE AT RS.17/-. THE PROFITS FROM BOTH TRANSACTIONS, ASSESSEE TO AE, AS ALSO NON-AE TO NON-AE WOULD GIVE RS.5/- BUT FOR THE PURPOSE OF DETERMINING THE ALP AS THE ASSESSEE PURCHASES FROM ITS AE AT A PRIC E LOWER THAN NON-AE, THE PURCHASE PRICE WOULD BE ACCEPTED AS THE DEVIATION IS NEGATIVE I.E. RS.10/- IS LOWER THAN RS.12/-, BUT AS THE ASSESSEE SELLS TO ITS AE AT A PRICE LOWER THAN A NON-AE, THE SALE PRICE WILL BE ADJUSTED TO THE SELLING PRICE OF THE NON-AE AS THE DEVIATION IS POSITIVE I.E. RS.15/- IS LOWER THAN RS.17/-. THEREF ORE, RS. 7/- WILL BE CONSIDERED AS ALP. THIS WOULD RESULT IN (I) THE ASSESSEE BUYS FROM THE AE AT RS.10/- :-17-: I.T.A. NOS. 1016 & 1163/MDS/2014 (II) THE ASSESSEES SALE PRICE IS ADJUSTED TO ALP AT RS.17/-. THUS THE PROFIT OF THE ASSESSEE WILL BE DETERMINED AT RS.7/-. NOW IF WE COMPARE THE PROFITABILITY, ASSESSEES PUR CHASE AND SALE TO AE IS RS.5/-. PERCENTAGE OF PROFIT 5 X 100 = 33.33% 15 NON-AE PURCHASE & SALE IS RS.5/- PERCENTAGE OF PROFIT 5 X 100 = 29.41% 17 AFTER ADJUSTMENT PROFIT IS RS.7/- PERCENTAGE OF PROFIT 7 X 100 = 41.17% 17 THUS THE PROFITABILITY IF CONSIDERED WITHOUT CONSID ERING THE POSITIVE DEVIATIONS WOULD LEAD TO IMPOSSIBLE PROFITABILITY P OSITIONS, WHICH IS NOT WHAT IS CONTEMPLATED UNDER THE PROVISIONS OF 92 C. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE ALP BY TAKING INTO CONSIDERATION BOTH THE NET DIFFE RENCE ON THE SALE FROM THE AE AND PURCHASE FROM THE AE. THE ASSESSING OFFICER MAY LOOK INTO THE FACT AS TO THE MARGINS OF THE PROFITS IN REGARD TO THE TRANSACTIONS DONE BY THE ASSESSEE WITH ITS AE, AS A LSO THE NON-AE TRANSACTIONS AND THEN COMPUTE THE ADJUSTMENT OF ALP , IF ANY. IN THE CIRCUMSTANCES, THE GROUNDS NOS.5, 6, 8 & 9 OF THE A SSESSEE STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. IT WAS CL EARLY HELD BY THE CO- ORDINATE BENCH THAT A GLOBAL VIEW HAD TO BE TAKEN W ITH REFERENCE TO INTERNATIONAL TRANSACTIONS. NO DOUBT, IN THE SAID D ECISION THE BENCH ELECTED TO REMIT THE MATTER BACK TO THE ASSESSING O FFICER FOR FINDING OUT NET PROFIT AND MARGINS DUE TO VARIOUS TRANSACTI ONS WITH AE. HERE SINCE NUMBER OF ITEMS ON WHICH REVISION OF ALP HAS BEEN DONE IS INSIGNIFICANT WHEN COMPARED TO THE TOTAL NUMBER OF PURCHASES AND TOTAL VOLUME OF INTERNATIONAL TRANSACTIONS, SUCH A REMISSION BACK TO ASSESSING OFFICER WILL NOT SERVE ANY PURPOSE. WE AR E THEREFORE, OF :-18-: I.T.A. NOS. 1016 & 1163/MDS/2014 THE OPINION THAT ADDITION ON ACCOUNT OF REVISION IN ALP WAS NOT CALLED FOR. SUCH ADDITION FOR BOTH THE YEARS STAND DELETED.' WE RESPECTFULLY FOLLOW THE CO-ORDINATE BENCH DECISI ON IN DELETING THE DOWNWARD ADJUSTMENT AND WE ARE NOT INCLINED TO INTERFERE WIT H THE ORDER OF THE DRP AND UPHELD THE SAME AND DISMISS THE REVENUE GROUND. 9. ON THE DISPUTED ISSUE OF DEDUCTION OF EXPENSES F ROM EXPORT TURNOVER AND TOTAL TURNOVER FOR CALCULATION OF 10B. THE LD. DR SUBMITTED THAT THE CO- ORDINATE BENCH DECISION HAS NOT ATTAINED FINALITY A ND THE REVENUE HAS FILED AN APPEAL U/S. 260A OF THE ACT WITH THE JURISDICTIONAL HIGH COURT OF MADRAS AND IS PENDING. FURTHER, THE LD. DR EMPHASIZED THAT THE D RP HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE TELECOMMUNICATION EXPE NDITURE CHARGES AND EXPENSES INCURRED IN FOREIGN CURRENCY FROM TOTAL TU RNOVER ALSO FOR COMPUTATION OF DEDUCTION U/S. 10B OF THE ACT. THE DRP RELIED ON T HE DECISION OF SPECIAL BENCH OF TRIBUNAL IN ITO VS. SAKSOFT LTD., (SUPRA) AND IN AS SESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08 WHICH HAS NOT B ECOME FINAL AND PRAYED FOR SET ASIDE OF DIRECTIONS OF DRP ORDER. 10. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS. THE DISPUTED ISSUE OF CLAIM AN D EXCLUSION OF TELECOMMUNICATION CHARGES INCURRED IN FOREIGN CURRE NCY FROM TOTAL TURNOVER WAS UPHELD BY THE CO-ORDINATE BENCH DECISION OF THIS TR IBUNAL IN ASSESSEE'S OWN CASE :-19-: I.T.A. NOS. 1016 & 1163/MDS/2014 IN ITA NO. 2116/MDS/2010 & 2108/MDS/2011 AT PARA 19 RELYING ON THE SAKSOFT LTD. WHICH READ AS UNDER: ' 19. IN SO FAR AS THE ISSUE OF CALCULATION OF DEDUCT ION UNDER SECTION 10B OF THE ACT, BY EXCLUDING FROM EXPORT TURNOVER, FREIGHT, TELECOMMUNICATION CHARGES AND EXPENSES INCURRED IN FOREIGN EXCHANGE, WE ARE OF THE OPINION THAT SUCH AMOUNTS WILL HAVE TO B E EXCLUDED FROM TOTAL TURNOVER ALSO AS HELD BY THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF SAK SOFT LTD.,(SUPRA). ASSESSING OFFICER IS DIRECTE D TO REWORK THE DEDUCTION ACCORDINGLY FOR BOTH THE YEARS.' WE RESPECTFULLY FOLLOW THE JURISDICTIONAL PRECEDENC E OF CO-ORDINATE BENCH DECISION AND CONFIRMED THE DIRECTION OF THE DRP AND DISMISS THE REVENUE GROUNDS. 11. IN THE RESULT, ASSESSEE APPEAL IN ITA NO. 1163/ MDS/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE REVENUE APP EAL IN ITA NO. 1016/MDS/2014 IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 10 TH DAY OF APRIL, 2017 AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 10TH APRIL, 2017. JPV ' *#23 43 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 *## /DR 6. 8 /GF