Appeal details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 5505 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
6 year(s) 2 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-02-2018
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
B
Next Hearing Date
23-08-2017
Assessment Year
2005-2006
Appeal Filed On
05-12-2011
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, B ENGALURU BEFORE S HRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I T (TP) A NO. 1212 / BANG/2 0 1 1 (ASSESSMENT YEAR: 20 05 - 06 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 12(2 ), BENGALURU. VS. APPELLANT M/S.NETSCOUT SYSTEMS SOFTWARE INDIA PVT. LTD. (EARLIER KNOWN AS NETWORK GENERAL SOFTWARE INDIA PVT. LTD.) EMBASSY ICON , GROUND FLOOR, NO.3, INFANTRY ROAD, BENGALURU - 1. PAN:AAICS 0944 E RESPONDENT AND CROSS OBJN.NO.30/BANG/2012 (IN IT(TP)A NO.1212/BANG/2011) (ASSESSMENT YEAR: 2005 - 06) (BY THE ASSESSEE) REVENUE BY : SMT. PADMA MEENAKSHI, JCIT(DR) ASSESSEE BY : SHRI CHAVALI NARAYAN, CA DATE OF HEARING : 11/12/2017 DATE OF PRONOUNCEMENT : 28 / 0 2 /201 8 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION S BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - T AX(APPEALS) - 4, BANGALORE , [CIT(A)] DATED 30/09/2011 FOR THE ASSESSMENT YEAR 2005 - 06. 2. B RIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY DUAL INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT , 1956 . I T IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE RESEARCH AND DEVELOPMENT IT (TP) A NO . 1212 /BANG/201 1 PAGE 2 OF 17 SERVICES TO NET SCOUT GROUP OF C OMPANIES . I T IS REGISTERED AS HUNDRED PERCENT EOU. T HE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 - 0 6 WAS FILED ON 30 /1 0 / 2005 DECLARING TAXABLE INCOME OF RS. 75 , 92 ,3 00 / - . T HE ASSESSEE ALSO REPORTED THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ITS A SSOCIATED ENTERPRISES (AE) : THE ASSESSEE - COMPANY SOUGHT TO JUSTIFY THE CONSIDERATION RECEIVED FOR THE ABOVE INTERNATIONAL TRANSACTIONS ENTERED WITH ITS ASSOCIATED ENTERPRISES TO BE AT ARM'S LENGTH . T HE ASSESSEE - COMPANY SUBMITTED TRANSFER PRICI NG STUDY REPORT ADOPTING TNMM WHICH WAS CONSIDERED TO BE THE MOST APPROPRIATE METHOD FOR THE PURPOSE OF BENCHMARKING THE ABOVE INTERNATIONAL TRANSACTIONS . T HE ASSESSEE - COMPANY APPLIED THE OPERATING PROFIT TO THE OPERATING COST AS ITS PROFIT LEVEL INDICATOR . T HE ASSESSEE S PROFIT MARGIN WAS COMP UTED AT 14.27% AND ASSESSEE - COMPANY C LAIMED THAT THE SAME WAS COMPAR ABLE WITH OTHER COMPANIES RENDERING SOFTWARE DEVELOPMENT SERVICES . F OR T HE PURPOSE OF TP STUDY, THE ASSESSEE HAD CHOSEN 45 COMPARABLE S AND TH E ARITHM ETIC AVERAGE OF PROFIT MARGIN WAS COMP UTED AT 9.97% . A CCORDING TO THE ASSESSEE - COMPANY IT S PLI WAS MUCH MORE THAN THE A RITHMETIC AL MEAN OF THE COMPA RABLE ENTITIE S . H ENCE IT WAS CLAIMED THAT THE TRANSACTION S WITH ITS ASSOCIATED PRICES ARE AT ARM'S LENGTH . THE ASSESSEE - COMPANY HAD CHOSEN THE FOLLOWING ENTITIES : IT (TP) A NO . 1212 /BANG/201 1 PAGE 3 OF 17 3. THE AO REFERRED THE MATTER TO THE TRANSFER PRICING OFFICER FOR THE PURPOSE OF BENCH MARKING THE INTERNATIONAL TRANSACTIONS. THE TPO, BY ORDER DATED 11/03/2008 PASSED U/S 92CA OF THE ACT SUGGES TED TP ADJUSTMENT OF RS.73,43,892/ - . THE TPO ACCEPTED TNMM METHOD ADOPTED BY THE ASSESSEE COMPANY BUT REJECTED THE TP STUDY REPORT. THE TPO PROCEEDED TO IDENTIFY DIFFERENT SET OF COMPARABLES FOR THE PURPOSE OF DETERMINING THE ALP. WHILE DOING SO, THE TPO A PPLIED THE FOLLOWING FILTERS: IT (TP) A NO . 1212 /BANG/201 1 PAGE 4 OF 17 BY APPLYING THE ABOVE FILTERS , THE TPO REJECTED 35 COMPARABLES AND INTRODUCED 7 NEW COMPARABLES AND FINALLY SELECTED THE FOLLOWING ENTITIES AS COMPAR ABLES: THE TPO COMPUTED AVERAGE PROFIT OF THE COMPARABLES FINALLY SELE CTED AT 26.59% AFTER GIVING WORKING CAPITAL ADJUSTMENT OF 2.29% ADJUSTED ASYMMETRICAL MEAN OF PL I WAS DETERMINED AT 24.3% . O N THE ABOVE BASIS , THE TPO COMPUTED TP ADJUSTMENT AS FOLLOWS : 4. THE ASSESSING OFFICER PASSED ASSESSMENT ORDER UNDER SECTION 143 ( 3 ) DATED 17 / 04 / 2008 INCORPORATING THE ABOVE TP ADJU STMENTS. 5. BEING AGGRIEVED BY THE ABOVE ASSESSMENT ORDER , AN APPEAL WAS PRE FERRED BEFORE THE LEARNED CIT (A) WHO , VIDE IMPUGNED ORDER UPHELD THE EXCLUSION OF SUPER PROFIT COMPANIES AND ALSO UPHELD T HE TURNOVER FILTER OF IT (TP) A NO . 1212 /BANG/201 1 PAGE 5 OF 17 RS. 1 TO RS. 200 CRORES AND EXCLUDED THE COMPANIES HAVING TURNOVER OF MORE THAN RS. 200 CRORES AND ALSO APPLIED THE 0% RPT FILTER AND THEREFORE EXCLUDED CERTAIN COMPANIES . T HE L D. CIT (A) EXCLUDED THE FOLLOWING COMPANIES CONSIDERED BY THE TPO : 6. BEING AGGRIEVED BY THIS DIRECTION OF THE LD. CIT (A) EX CLUDING ABOVE COMPANIES , THE REVENUE IS IN APPEAL BEFORE US IN IT(TP)A NO.1212/BANG/2011 AND THE ASSESSEE - COMPANY IS IN CROSS OBJECTIONS BEARING CO NO.30/BANG/2012. 7. NOW WE SH ALL TAKE U P THE REVENUE S APPEAL . T HE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: IT (TP) A NO . 1212 /BANG/201 1 PAGE 6 OF 17 8. GROUND NOS. 1 , 7 AND 8 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDI CATION . 9. GROUND NO. 2 CHALLENGES THE FINDING OF THE LD. CIT (A) THAT 0% RPT FILTER SHOULD BE APPLIED . IT IS TRITE LAW THAT APPLICATION OF RPT FILTER IS AN APPROPRIATE METHOD AS THE PARTICULAR ENTITY HAVING PREDOMINANT LY TRANS A CTIONS WITH ITS AE IN EXCESS OF CERTAIN THRESHOLD O R PERCENTAGE ; PROFITABILITY MAY RESULT IN DISTORTED PICTURE . H OWEVER , SINCE IT IS NOT PRACTICALLY POSSIBLE TO FIND OUT THE COMPARABLE HAVING NO RPT TRANSACTION, COMPANIES HAVING REASONABLE TRANSACTION S CAN BE CONSIDERED FOR SELECTING THE COMPARABLES . I N THE PRESENT CASE , THE ASSESSEE - COMPANY AS WELL AS TPO HAD APPLIED RPT F ILTER OF 25% . HOWEVER, THE LD. CIT (A) APPLYING 0% RPT FILTER, DELETED THE FOLLOWING COMPANIES: I. FOUR SOFT LTD. II. GEOMETRIC SOFTWARE SOLUTIONS CO. LTD. III. RS SOFTWARE (INDIA) LTD. IV. SASKEN COMMUNICATIONS TECHNOLOGIES LTD. V. SASKE N NETWORK SYSTEMS LTD. VI. TATA ELXSI LTD. IT (TP) A NO . 1212 /BANG/201 1 PAGE 7 OF 17 WE FIND FROM THE ORDER OF TPO THAT APPLICATION OF RPT OF MORE THAN 25% W AS APPLIED BY TPO AS WELL AS THE ASSESSEE - COMPANY . THEREFORE, THE LD. CIT (A) WAS NOT JUSTIFIED IN EXCLUDING THE ABOVE COMPANIES BY APPLYING 0% OF RPT FILTER. ACCORDINGLY, THIS GROUND OF APPEAL FILED BY THE REVENUE IS ALLOWED . 10. GROUND NO. 3 CHALLENGES THE FINDING OF THE LD.CIT(A) THAT THE COMPANIES HAVING ABNORMAL PROFIT S SHOULD BE EXCLUDED DRAWING SUPPORT FROM THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF MENTOR GRAPHICS (NOI DA) (P.) LTD. VS. DY.CIT (109 ITD 101). T HE SPECIAL BENCH OF TRIBUNAL (CHANDIGARH) IN THE CASE OF DCIT VS. QUARK SYSTEMS (P) LTD. [TS 23 - ITAT - 200 (CHD) HELD THAT MAKING SUPER PROFITS OR LOSSES CANNOT BY IPSE FACTO REASON TO EXCLUDE THESE COMPANIES FROM THE LIST OF COMPARABLES. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS ALSO ALLOWED. 11. GROUND NO.4 CHALLENGES THE FINDING OF THE LD.CIT(A) DELETING M/S.INFOSYS TECHNOLOGIES LTD. ON THE GROUND OF HIGH TURNOVER AND BRAND VALUES. THE ISSUE OF COMPARAB ILITY OF INFOSYS TECHNOLOGIES LTD. HAD COME UP FOR CONSIDERATION IN THE CASE OF M/S.NTT DATA GLOBAL DELIVERY SERVICES LTD. VS. ASST. CIT IN IT(TP)A NO.1487/BANG/2013 DATED 06/04/2016 WHEREIN IT WAS HELD AS FOLLOWS: 23. THE REVENUE IS CHALLENGING D IRECTION OF THE CIT(A) TO EXCLUDE THE FOLLOWING COMPANIES FROM THE LIST OF COMPARABLES ON THE GROUND THAT THE TURNOVER OF THE ABOVE COMPANIES IS MORE THAN RS.200 CRORES RELYING ON THE DECISION IN THE CASE OF GENESIS INTEGRATING SYSTEMS (INDIA) PVT. LTD. VS . DCIT (20 TAXMANN.COM 715(BANG.): I. INFOSYS II. L&T INFOTECH III. SATYAM COMPUTER SYSTEMS THESE COMPANIES WERE SELECTED BY THE TPO AS COMPARABLES AND THE ASSESSEE - COMPANY OBJECTED TO THEIR INCLUSION IN THE LIST OF COMPARABLES ON THE GROUND OF TURNOVER OF THE ABOV E COMPANIES IS MORE THAN RS.200 CRORES AND THE COMPANIES HAD RELATED PARTY TRANSACTIONS. THE TPO REJECTED THE SUBMISSION BY HOLDING THAT THE TURNOVER HAD NO CO - RELATION WITH THE PROFIT MARGIN EARNED BY THE COMPANY AND ALSO REBUTTED THAT THE IT (TP) A NO . 1212 /BANG/201 1 PAGE 8 OF 17 COMPANIES HAD RELATED PARTY TRANSACTIONS BY DRAWING THE ATTENTION OF THE ASSESSEE - COMPANY TO THE ANNUAL REPORTS OF THOSE COMPANIES. 24. WE NOW DEAL WITH EACH OF THESE COMPANIES. BEFORE ADVERTING TO THE COMPARABLES, IT IS WORTH MENTIONING HERE THAT THERE ARE DIVERGEN T DECISIONS OF THE TRIBUNAL WHETHER HIGH TURNOVER IS A RELEVANT FOR ACCEPTING/REJECTING A COMPARABLE IN THE CASE OF A SERVICE COMPANY. FOR EXAMPLE, THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF CAPGEMINI INDIA PVT LTD. VS. ACIT (TS 45 ITAT 2013(MUM)(TP) HELD THAT THE TURNOVER WAS RELEVANT ONLY TO THE MANUFACTURING CONCERNS NOT TO THE SERVICE ORIENTED COMPANIES. ON THE OTHER HAND, THE COORDINATE (BANGALORE) BENCH OF THE TRIBUNAL IN THE CASE OF GENESIS INTEGRATING SYSTEMS (INDIA) PVT. LTD. (CITED SUPRA) H ELD THAT TURNOVER IS A RELEVANT FACTOR FOR ACCEPTING/REJECTING THE COMPARABLE. HOWEVER, WITHOUT GOING INTO THE TURNOVER FACTOR, WE HOLD THAT INFOSYS LTD., CANNOT BE CONSIDERED AS COMPARABLE WITH THAT OF THE ASSESSEE - COMPANY SINCE INFOYSIS LTD. IS A GIANT IN THE AREA OF SOFTWARE DEVELOPMENT AND IT ASSUMED ALL RISKS LEADING TO HIGHER PROFIT. ON THE OTHER HAND, THE ASSESSEE - COMPANY IS A CAPTIVE UNIT OF ITS PARENT COMPANY IN US AND ASSUMED ONLY LIMITED RISK. IN THE SIMILAR CIRCUMSTANCES, THE HON BLE DELHI HIG H COURT IN THE CASE OF CIT VS. AGNITY INDIA TECHNOLOGIES P.LTD. HELD THAT INFOSYS CANNOT BE TREATED AS A COMPARABLE. EVEN SEVERAL CO - ORDINATE BENCHES OF TRIBUNAL HELD THAT INFOSYS LTD. CANNOT BE CONSIDERED AS COMPARABLE AS IT IS HAVING HIGH INTANGIBLES A ND GOODWILL. ACCORDINGLY, INFOSYS CANNOT BE CONSIDERED AS A COMPARABLE. 12. R ESPECTFULLY FOLLOWING THE ABO VE DECISION , WE HOLD THAT M/S. INFOSYS TECHNOLOGIES CANNOT BE CONSIDERED AS A COMPA RA BLE ON THE GROUND OF BRAND VALUE . A CCORDINGLY , WE UPHOLD TH E FINDING O F THE LD. CIT (A) TO EXCLUDE THIS COMPANY FROM THE LIST O F COMPARABLES. GROUND NO.4 RAISED OF THE R EVENUE IS DISMISSED. 1 3 . GROUND NO.5 CHALLENGES THE FINDING OF THE LD. CIT (A) THAT FLUCTUATIONS IN FOREIGN EXCHANGE EARNINGS SHOULD BE TREATED AS OPERATING PROFIT . N OW THE LAW IS SETTLED TO THE EXTENT THAT FOREIGN EXCHANGE GAIN ARISING OUT OF S ALE PROCEEDS RECEIVED FROM AE CONSTITUTES PART OF OPERATING INCOME . THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF RUSABH DIAMONDS VS. ASST.CIT (145 ITD 499) HELD AS FOLLOWS: 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS ENTERED INTO FORWARD CONTRACTS FOR THE PURPOSE OF HEDGING OF FOREIGN CURRENCY EXPOSURE ON EXPORT AND IMPORT OF DIAMONDS WITH AE S. THEREFORE, THE HEDGING OF FOREIGN CURRENCY HAS NEXUS WITH THE EXPORT AND IMPORT ACTIVITY OF THE ASSESSEE IT (TP) A NO . 1212 /BANG/201 1 PAGE 9 OF 17 AND THE EXPOSURE OF THE ASSESSEE IN RELATION TO THE EXPORT AND IMPORT. THE OECD GUIDELINES IN PARA 2.82 ARE AS UNDER; '2.82 WHETHER FOREIGN EXCHANGE GAINS AND LOSSES SHOULD BE INCLUDED OR EXCLUDED FROM THE DETERMINATION OF THE NET PROFIT INDICATOR RAISES A NUMBER OF DIFFICULT COMPARABILITY ISSUES. FIRST, IT NEEDS TO BE CONSIDERED WHETHER THE FOREIGN EXCHANGE GAINS AND LOSSES ARE OF A TRADING NATURE (E .G. EXCHANGE GAIN OR LOSS ON A TRACE RECEIVABLE OR PAYABLE) AND WHETHER OR NOT THE TESTED PARTY IS RESPONSIBLE FOR THEM. SECOND, ANY HEDGING OF FOREIGN CURRENCY EXPOSURE ON THE UNDERLYING TRADE RECEIVABLE OR PAYABLE ALSO NEEDS TO BE CONSIDERED AND TREATED IN THE SAME WAY IN DETERMINING THE NET PROFIT. IN EFFECT, IF A TRANSACTIONAL NET MARGIN APPLIED TO A TRANSACTION IN WHICH THE FOREIGN EXCHANGE RISK IS BORNE BY THE TESTED PARTY, FOREIGN EXCHANGE GAINS OR LOSSES SHOULD BE CONSISTENTLY ACCOUNTED FOR (EITHER IN THE CALCULATION OF THE NET PROFIT INDICATOR OR SEPARATELY).' 10.1 IT IS CLEAR THAT IN CASE OF HEDGING OF FOREIGN CURRENCY EXPOSURE ON THE UNDERLINING TRADE RECEIVABLE OR PAYABLE THE PROFIT OF LOSS WILL BE TREATED IN THE SAME WAY IN DETERMINING THE NET P ROFIT. 10.2 IN VIEW OF THE FACTS THAT THE ASSESSEE HAS ENTERED INTO FORWARD CONTRACTS FOR THE PURPOSE OF HEDGING OF FOREIGN CURRENCY EXPOSURE ON THE EXPORT AND IMPORT OF DIAMOND, THE GAIN OR LOSS ARISING OF THE SAID, WILL BE TREATED AS PART AND PARCEL OF T HE OPERATING PROFIT. 14 . RESPECTFULLY FOLLOWING THE RATIO OF THE ABOVE DECISION, WE REMA ND THIS ISSUE TO THE FI L E OF THE AO/TPO TO RE - COMPUTE THE MARGIN OF THE ASSESSEE BY TREATING FOREIGN EXCHANGE GAIN AS PART OF OPERATING INCOME AND ALSO COMPUTE PROFIT MARGINS OF THE COMPARABLE ENTITIES BY TREATING FOREIGN EXCHANGE GAIN AS OPERATING INCOME . THIS GROUND OF APPEAL FILED BY THE REVENUES IS PARTLY A LLOWED FOR STATISTICAL PURPOSES . 15 . GROUND NO.6 CHALLENGES THE FINDING OF THE LD. CIT (A) TO ALLOW DEDUCTI ON OF 5% FROM ARMS LENGTH AS STANDARD DEDUCTION. THIS ISSUE IS COVERED BY THE DECISION OF THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ADDITION OF THE CODE ADVENTURE OF THE TABLE IN THE CASE OF TATRA VECTRA MOTORS LTD. VS. DY.CIT ( 20 TAXMANN.COM 131 ) IN FAVOUR OF THE ASSESSEE - COMPANY WHEREIN IT HAS BEEN HELD AS UNDER: 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CA SE, THE ASSESSEE HAS NOT DISPUTED THE ADJUSTMENTS U/S. 92CA OF THE ACT, BUT CHALLENGING THE WORKING OF ALP WITHOUT GIVING BENEFIT OF THE OPTION AVAILABLE UNDER THE ERSTWHILE PROVISO TO SECTION 92C(2) OF THE ACT, SO IT IT (TP) A NO . 1212 /BANG/201 1 PAGE 10 OF 17 BECOMES RELEVANT TO DISCUSS THE PROVIS IONS CONTAINED IN THE ERSTWHILE PROVISO TO SECTION 92C(2) OF THE ACT, WHICH WAS INSERTED BY FINANCE ACT, 2002 W.E.F. 1 - 4 - 2002 AND READS AS UNDER: 'PROVIDED, THAT WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARM'S LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES, OR, AT THE OPTION OF THE ASSESSEE, A PRICE WHICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING FIVE PER CENT OF SUCH ARITHMETICAL MEAN.' 13. FROM THE PLAIN READING OF THE ABOVE PROVISO, IT IS CLEAR THAT THE OPTION IS AVAILABLE TO THE ASSESSEE FOR ADJUSTMENT OF +/ - 5% VARIATION FOR THE PURPOSES OF COMPUTING ALP. AS PER THE SAID PROVISO, WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ALP SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES, OR, AT THE OPTION OF THE ASSESSEE, A PRICE WHICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING FIVE PER CENT OF SUCH ARITHMETICAL MEAN. IN OUR OPINION, THE BENEFIT OF OPTION I.E. , ADJUSTMENT OF + / - 5% VARIATION, AS PROVIDED IN PROVISO TO SECTION 92C(2) OF THE ACT IS AVAILABLE TO THE ASSESSEE. 14. ON A SIMILAR ISSUE, THE ITAT DELHI BENCH IN THE CASE OF SONY INDIA (P.) LTD. ( SUPRA ) HAS HELD AS UNDER: 'THE PROVISO TO SECTION 92C(2) OF THE ACT CON SISTS MAINLY OF TWO PARTS: ( A ) WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THEN THE ARM'S LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICE; OR (B) AT THE OPTION OF THE ASSESSEE, A PRICE WHICH MAY VARY FROM T HE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING 5 PER CENT OF SUCH ARITHMETICAL MEAN. THE FIRST LIMB OF THE PROVISO HAS GENERAL APPLICATION. THERE IS NO OPTION WITH NOR ANY SORT OF CONCESSION ALLOWED TO THE ASSESSEE. THE ARM'S LENGTH PRICE SO DETERMINED MA Y BE ACCEPTED OR CONTESTED BY THE ASSESSEE OR BY ANY AGGRIEVED PERSON IN ACCORDANCE WITH THE STATUTORY PROVISIONS. IT IS A STATUTORY LEVY WITHOUT ANY OPTION. THE SECOND LIMB OF THE PROVISO GIVES 'AN OPTION' TO THE ASSESSEE TO TAKE THE ARM'S LENGTH PRICE WH ICH MAY VARY FROM THE ARITHMETIC MEAN BY AN AMOUNT NOT EXCEEDING 5 PER CENT OF SUCH ARITHMETIC MEAN. THE WORD 'OPTION' IS SYNONYMOUS WITH 'CHOICE' OR 'PREFERENCE'. THEREFORE, IT IS THE CHOICE OF THE ASSESSEE TO TAKE THE ARM'S LENGTH PRICE WITH A MARGINAL B ENEFIT AND NOT THE ARITHMETICAL MEAN DETERMINED AS THE MOST APPROPRIATE METHOD. THERE IS NOTHING IN THE LANGUAGE TO RESTRICT THE APPLICATION OF THE PROVISION ONLY TO MARGINAL CASES WHERE THE PRICE DISCLOSED BY THE ASSESSEE DOES NOT EXCEED 5 PER CENT OF THE ARITHMETIC MEAN. THE ARM'S LENGTH PRICE DETERMINED ON APPLICATION OF THE MOST APPROPRIATE METHOD IS ONLY AN APPROXIMATION AND IS NOT A SCIENTIFIC EVALUATION. THEREFORE, THE LEGISLATURE THOUGHT IT PROPER TO ALLOW MARGINAL BENEFIT TO ASSESSEES WHO OPT FOR S UCH BENEFIT. IN THE CASE OF AN ASSESSEE WHO EXERCISES THE OPTION AND ACCEPTS THE ARM'S LENGTH PRICE EVEN EXCEEDING 5 PER CENT OF THE ARITHMETIC MEAN DETERMINED BY THE IT (TP) A NO . 1212 /BANG/201 1 PAGE 11 OF 17 TAX AUTHORITY AS CORRECT AND IS READY TO PAY TAX ON THE DIFFERENCE BETWEEN THE PRICE DISC LOSED BY HIM AND THE ARM'S LENGTH PRICE THE APPLICATION OF THE PROVISO IS NOT EXCLUDED. THE LEGAL POSITION CANNOT BE DIFFERENT IN A CASE WHERE MINOR VARIATION OF 5 PER CENT IS NOT ACCEPTED AND THE ARM'S LENGTH PRICE IS FURTHER CHALLENGED IN APPEAL. THE MER E FACT OF ACCEPTANCE OR NON - ACCEPTANCE OF THE ARITHMETIC MEAN CANNOT BE TAKEN TO BE THE DETERMINING FACTOR RELATING TO THE RIGHT TO CONTEST THE ARM'S LENGTH PRICE IN APPEAL. SUCH INFERENCE IS NOT SUPPORTED BY THE LANGUAGE OF THE PROVISION. BOTH IN THE FIRS T AS ALSO IN THE SECOND LIMB, THE IMPLICATIONS OF THE DETERMINED THE ARM'S LENGTH PRICE ARE THE SAME EXCEPT FOR THE MARGINAL BENEFIT ALLOWED TO THE ASSESSEE UNDER THE SECOND LIMB. HENCE, THE SECOND LIMB OF THE PROVISO IS APPLICABLE EVEN TO CASES WHERE THE ASSESSEE INTENDS TO CHALLENGE THE ARM'S LENGTH PRICE TAKEN AS ARITHMETIC MEAN AND DETERMINED THROUGH THE MOST APPROPRIATE METHOD. THEREFORE, THE BENEFIT OF SECOND LIMB IS AVAILABLE TO ALL ASSESSEES IRRESPECTIVE OF THE FACT THAT THE PRICE OF INTERNATIONAL T RANSACTION DISCLOSED BY THEM EXCEEDS THE MARGIN PROVIDED IN THE PROVISION.' 15. IN THE PRESENT CASE, IT APPEARS THAT THE BENEFIT OF +/ - 5% ADJUSTMENT HAS NOT BEEN GIVEN TO THE ASSESSEE FOR THE REASON (AS MENTIONED BY THE TPO) THAT SALES MADE BY THE A SSESSEE TO THIRD PARTIES WERE HIGHER IN COMPARISON TO THE RATES OF SALE BY AES TO THE ASSESSEE. BUT NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THE AFORESAID OBSERVATIONS OF THE TPO. THE AO HAD ACCEPTED THE RECOMMENDATION OF THE TPO IN HIS REPORT DATED 30 .8.2000 AND MADE THE ADDITION OF RS.1,76,56,164, HOWEVER, WHILE DOING SO, HE DID NOT ALLOW THE BENEFIT OF THE ADJUSTMENT AS PROVIDED IN THE PROVISO TO SECTION 92C(2) OF THE ACT AND THE CONTENTION OF THE LD. CIT(DR) WAS THAT SINCE THE IMPUGNED ASSESSMENT WA S MADE AFTER 1.10.2009, THE AMENDED PROVISO TO SECTION 92C(2) OF THE ACT SHALL APPLY IN THIS CASE, WHICH ARE APPLICABLE FROM W.E.F. 1.10.2009. AND SHALL ACCORDINGLY APPLY TO THE CASES IN WHICH THE PROCEEDINGS WERE PENDING BEFORE THE TPO ON OR AFTER SUCH DA TE. THEREFORE, THE BENEFIT OF +/ - 5% INTENDED BY THE ERSTWHILE PROVISO TO SECTION 92C(2) OF THE ACT WAS NOT AVAILABLE TO THE ASSESSEE. ACCORDINGLY THE LD. CIT(DR) HAD STRONGLY DEFENDED THE ASSESSMENT FRAMED BY THE AO AND HIS METHOD OF DETERMINING THE ALP. 16. AS REGARDS TO THE APPLICABILITY OF THE AMENDED PROVISIONS IN PROVISO TO SECTION 92C(2) OF THE ACT WHICH IS APPLICABLE W.E.F. 1.10.2009 IS CONCERNED, IT IS NOTICED THAT THIS ISSUE HAS BEEN ADJUDICATED BY THE ITAT PUNE BENCH 'A', PUNE IN ITA NO.1350 /PN/2010 IN THE CASE OF STARNET NETWORKS (INDIA) (P.) LTD. ( SUPRA ), WHEREIN THE RELEVANT FINDINGS HAS BEEN GIVEN IN PARAS 20 TO 23 OF THE ORDER DATED 03.10.2011 AND READ AS UNDER: '20. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, A PER TINENT ISSUE WHICH HAS BEEN VEHEMENTLY AGITATED BY THE APPELLANT IS WITH REGARD TO ITS CLAIM OF SEEKING BENEFIT OF THE OPTION AVAILABLE UNDER THE ERSTWHILE PROVISO TO SECTION 92C(2) OF THE ACT. THE ERSTWHILE PROVISO WHICH WAS INSERTED BY FINANCE ACT, 2002 WITH EFFECT FROM 1.4.2002 READ AS UNDER: IT (TP) A NO . 1212 /BANG/201 1 PAGE 12 OF 17 'PROVIDED THAT WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARM'S LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES, OR, AT THE OPTION OF THE ASSESSEE, A PRICE WHI CH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING FIVE PERCENT OF SUCH ARITHMETICAL MEAN.' AS PER THE SAID PROVISO, AN OPTION IS AVAILABLE TO THE ASSESSEE FOR ADJUSTMENT OF +/ - 5% VARIATION FOR THE PURPOSES OF COMPUTING ALP. AS PER THE PROVI SO, WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARM'S LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES OR AT THE OPTION OF THE ASSESSEE, A PRICE WHICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NO T EXCEEDING 5% OF SUCH ARITHMETICAL MEAN. THE POINT MADE OUT BY THE ASSESSEE IS BASED ON THE LATTER PART OF THE PROVISO WHEREBY AN OPTION IS GIVEN TO THE ASSESSEE TO TAKE AN ALP WHICH MAY VARY FROM THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING 5% OF SUC H ARITHMETICAL MEAN. FIRSTLY, THE CLAIM OF THE REVENUE IS THAT SUCH BENEFIT IS NOT AVAILABLE TO THE PRESENT ASSESSEE, BECAUSE THE PRICE OF INTERNATIONAL TRANSACTION DISCLOSED BY THE ASSESSEE EXCEEDS THE MARGIN PROVIDED IN THE PROVISO. THIS ASPECT OF THE CO NTROVERSY, IN OUR VIEW, IS NO LONGER GERMANE IN VIEW OF THE PLETHORA OF DECISIONS OF OUR CO - ORDINATE BENCHES, NAMELY, SONY INDIA (P) LTD. ( SUPRA ); ELECTROBUG TECHNOLOGIES LTD. ( SUPRA ), AND DEVELOPMENT CONSULTANT P LTD V DCIT 115 TTJ 577 (KOL.) WHEREIN IT HAS BEEN OBSERVED THAT THE BENEFIT OF THE OPTION CONTAINED IN THE LATTER PART OF THE PROVISO TO SECTION 92C(2) IS AVAILABLE TO ALL ASSESSEES, IRRESPECTIVE OF THE FACT TH AT PRICE OF THE INTERNATIONAL TRANSACTION DISCLOSED BY THEM EXCEEDS THE MARGIN PRESCRIBED IN THE PROVISO. 21. SO, HOWEVER, THE OTHER ARGUMENT SET UP BY THE REVENUE AND WHICH HAS BEEN MORE POTENTLY ARGUED IS TO THE EFFECT THAT THE BENEFIT OF SUCH PROVISO IS NOT AVAILABLE TO THE ASSESSEE IN THE INSTANT CASE, BECAUSE THE SAID PROVISO HAS BEEN AMENDED BY THE FINANCE (NO 2) ACT, 2009 WITH EFFECT FROM 1.10.2009 WHICH READS AS UNDER: 'PROVIDED THAT WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARM'S LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES: PROVIDED FURTHER THAT IF THE VARIATION BETWEEN THE ARM'S LENGTH PRICE SO DETERMINED AND PRICE AT WHICH THE INTERNATIONAL TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN DOES NOT EXCEED FIVE PER CENT OF THE LATTER, THE PRICE AT WHICH THE INTERNATIONAL TRANSACTION HAS ACTUALLY BEEN UNDERTAKEN SHALL BE DEEMED TO BE THE ARM'S LENGTH PRICE.' THE CASE SET UP BY THE REVENUE IS THAT THE AMENDED PROVISO SHALL GOVERN THE DETERMINATION OF ALP IN THE PRESENT CASE, INASMUCH AS THE AMENDED PROVISIONS WERE ON STATUTE WHEN THE PROCEEDINGS WERE CARRIED ON BY THE TRANSFER PRICING OFFICER (TPO). AS PER THE REVENUE, THE AMENDED PROVISO WOULD HAVE A RETROSPECTIVE OPERATION AND IN ANY CASE, WOULD B E APPLICABLE TO THE PROCEEDINGS WHICH ARE PENDING BEFORE THE TPO ON INSERTION OF THE AMENDED PROVISO, WHICH HAS BEEN INSERTED BY THE FINANCE (NO. 2) ACT, 2009 WITH EFFECT FROM 1.10.2009 AND, IN THIS CASE, THE TPO HAS PASSED HIS IT (TP) A NO . 1212 /BANG/201 1 PAGE 13 OF 17 ORDER ON 30.10.2009. THE LEA RNED DEPARTMENTAL REPRESENTATIVE HAS ALSO REFERRED TO THE CBDT CIRCULAR NO 5/2010 (SUPRA) READ WITH CORRIGENDUM DATED 30.9.2010 ISSUED BY THE CBDT IN THIS REGARD. PER CONTRA, THE STAND OF THE ASSESSEE IS THAT THE AMENDED PROVISO WOULD BE APPLICABLE PROSPEC TIVELY AND WOULD NOT APPLY IN RESPECT OF THE STATED ASSESSMENT YEAR, WHICH IS PRIOR TO THE INSERTION OF THE AMENDED PROVISO WITH EFFECT FROM 1.10.2009. 22. WE HAVE CAREFULLY EXAMINED THE RIVAL STANDS ON THIS ASPECT. THE AMENDED PROVISO HAS BEEN BROUGHT ON THE STATUTE BY THE FINANCE (NO. 2) ACT, 2009 WITH EFFECT FROM 1.10.2009. THE EXPLANATORY NOTES TO THE PROVISIONS OF FINANCE (NO 2) ACT, 2009 CONTAINED IN CIRCULAR NO 5 OF 2010 (SUPRA) PROVIDES THE OBJECTIVE BEHIND THE AMENDMENT OF THE PROVISO. THE LEGISLAT URE NOTICED THE CONFLICTING INTERPRETATION OF THE ERSTWHILE PROVISO BY THE ASSESSEE AND THE INCOME - TAX DEPARTMENT. THE ASSESSEE'S VIEW WAS THAT THE ARITHMETICAL MEAN SHOULD BE ADJUSTED BY 5% TO ARRIVE AT ALP, WHEREAS THE DEPARTMENTAL VIEW WAS THAT NO SUCH ADJUSTMENT IS REQUIRED TO BE MADE IF THE VARIATION BETWEEN THE TRANSFER PRICE AND THE ARITHMETICAL MEAN IS MORE THAN 5% OF THE ARITHMETICAL MEAN. WITH A VIEW TO RESOLVING THIS CONTROVERSY, THE LEGISLATURE SOUGHT TO AMEND THE PROVISO TO SECTION 92C(2), WHIC H HAS BEEN REPRODUCED BY US IN THE EARLIER PART OF THIS ORDER. IN THE SAID CIRCULAR, IT HAS ALSO BEEN ELABORATED THAT THE ABOVE AMENDMENT HAS BEEN MADE APPLICABLE WITH EFFECT FROM 1.4.2009 AND WILL ACCORDINGLY APPLY IN RESPECT OF ASSESSMENT YEAR 2009 - 10 AN D SUBSEQUENT YEARS. IN ANY CASE, THE PROVISO CONTAINS A PRESCRIPTION TO DETERMINE THE ALP AND QUITE CLEARLY IT IS A SUBSTANTIVE PROVISION ENCOMPASSING THE EVENTUAL DETERMINATION OF AN ASSESSEE'S TAX LIABILITY. THUS, IT CAN BE SAID THAT THE PROVISO IS NOT A PROCEDURAL PIECE OF LEGISLATION AND THEREFORE, UNLESS IT IS SO CLEARLY INTENDED, THE NEWLY AMENDED PROVISO CANNOT BE UNDERSTOOD TO BE RETROSPECTIVE IN NATURE. IN FACT, IT IS A WELL - SETTLED PROPOSITION THAT THE STATUTORY PROVISIONS AS THEY STAND ON THE FIR ST DAY OF APRIL OF THE ASSESSMENT YEAR MUST APPLY TO THE ASSESSMENT OF THE YEAR AND THE MODIFICATION OF THE PROVISIONS DURING THE PENDENCY OF ASSESSMENT WOULD NOT GENERALLY PREJUDICE THE RIGHTS OF THE ASSESSEE. FURTHERMORE, WE ARE FORTIFIED BY THE INTENTIO N OF THE LEGISLATURE AS FOUND FROM CIRCULAR NO 5 OF 2010 (SUPRA) WHEREBY IN PARA 37.5, THE APPLICABILITY OF THE ABOVE AMENDMENT HAS BEEN STATED TO BE WITH EFFECT FROM 1.4.2009 SO AS TO APPLY IN RESPECT OF ASSESSMENT YEAR 2009 - 10 AND SUBSEQUENT YEARS. IN TH IS REGARD, WE ALSO FIND THAT THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V UE TRADE CORPORATION INDIA (P) LTD. VIDE ITA NO 4405(DEL)/2009 DT 24.12.2010 HAS OBSERVED THAT THE PROVISO INSERTED BY THE FINANCE (NO 2) ACT, 2009 WOULD NOT APPLY TO AN ASS ESSMENT YEAR PRIOR TO ITS INSERTION. IN THIS VIEW OF THE MATTER, WE THEREFORE FIND NO JUSTIFICATION TO DENY THE BENEFIT OF +/ - 5% TO THE ASSESSEE IN TERMS OF THE ERSTWHILE PROVISO FOR THE PURPOSES OF COMPUTING THE ALP. 23. HOWEVER, BEFORE PARTING WE MAY AL SO REFER TO A CORRIGENDUM DATED 30.9.2010 BY THE CBDT BY WAY OF WHICH PARA 37.5 OF THE CIRCULAR NO 5/2010 (SUPRA) HAS BEEN SOUGHT TO BE MODIFIED. THE CORRIGENDUM READS AS UNDER: 'CORRIGENDUM IN PARTIAL MODIFICATION OF CIRCULAR NO. 5/2010 DATED 03.6.2010, IT (TP) A NO . 1212 /BANG/201 1 PAGE 14 OF 17 ( I ) IN PARA 37.5 OF THE SAID CIRCULAR, FOR THE LINES 'THE ABOVE AMENDMENT HAS BEEN MADE APPLICABLE WITH EFFECT FROM 1ST APRIL, 2009 AND WILL ACCORDINGLY APPLY IN RESPECT OF ASSESSMENT YEAR 2009 - 10 AND SUBSEQUENT YEARS.' THE FOLLOWING LINES SHALL BE READ; 'T HE ABOVE AMENDMENT HAS BEEN MADE APPLICABLE WITH EFFECT FROM 1ST OCTOBER, 2009 AND SHALL ACCORDINGLY APPLY IN RELATION TO ALL CASES IN WHICH PROCEEDINGS ARE PENDING BEFORE THE TRANSFER PRICING OFFICER (TPO)ON OR AFTER SUCH DATE.' ( II ) IN PARA 38.3, FOR THE DATE '1ST OCTOBER, 2009, THE FOLLOWING DATE SHALL BE READ: '1ST APRIL, 2009'. IN TERMS THEREOF, IT IS CANVASSED THAT THE AMENDED PROVISO HAS BEEN MADE APPLICABLE WITH EFFECT FROM 1.10.2009 AND SHALL APPLY EVEN TO CASES WHERE PROCEEDINGS WERE PENDING BEFOR E THE TPO ON OR AFTER SUCH DATE, IRRESPECTIVE OF THE ASSESSMENT YEAR INVOLVED AND, THEREFORE, IN THE INSTANT CASE THE BENEFIT OF THE ERSTWHILE PROVISO CANNOT BE EXTENDED TO THE ASSESSEE. WE HAVE CAREFULLY PONDERED OVER THE ASSERTION MADE BY THE APPELLANT T HAT THE CORRIGENDUM IS UNTENABLE IN THE EYES OF LAW. FIRSTLY, THE SAID CORRIGENDUM DOES NOT BRING OUT ANY PREAMBLE SO AS TO THROW LIGHT ON THE CIRCUMSTANCES AND THE BACKGROUND IN WHICH THE SAME HAS BEEN ISSUED. SECONDLY, IT IS WELL UNDERSTOOD THAT THE EXPL ANATORY NOTES TO THE PROVISIONS OF A FINANCE ACT PASSED BY THE PARLIAMENT SEEKS TO EXPLAIN THE SUBSTANCE OF THE PROVISIONS OF THE ACT AS INTENDED BY THE LEGISLATURE. IN FACT, THE HON'BLE SUPREME COURT IN THE CASE OF K.P VARGHESE V ITO 131 ITR 597 (KER) EMPHASIZED THE SANCTITY OF THE STATEMENTS CONTAINED IN THE EXPLANATORY NOTES OF THE PROVISIONS AND STATED THAT THE INTERPRETATION PLACED IN SUCH DOCUMENTS IS BINDING INTER PRETATION OF LAW. THE CONTENTS OF THE CORRIGENDUM ARE QUITE INEXPLICABLE. NOTWITHSTANDING THE AFORESAID AND WITHOUT GOING INTO THE VALIDITY OF THE CORRIGENDUM DATED 30.9.2010 (SUPRA), WE ARE OF THE VIEW THAT THE SAME WOULD NOT OPERATE TO THE DETRIMENT OF T HE ASSESSEE SINCE AT THE RELEVANT POINT OF TIME THE CONTENTS OF THE CIRCULAR NO 5/2010 (SUPRA) WERE IN OPERATION. IN OTHER WORDS, THE WITHDRAWAL OF THE INTERPRETATION PLACED IN CIRCULAR NO 5 /2010 (SUPRA) ON THE APPLICABILITY OF THE AMENDED PROVISO IS SOUG HT TO BE DONE AWAY BY THE CORRIGENDUM DATED 30.9.2010 AND, THEREFORE, SUCH WITHDRAWAL SHALL BE EFFECTIVE ONLY AFTER 30.9.2010, EVEN IF SUCH CORRIGENDUM IS ACCEPTED AS VALID. WE MAY NOTE HERE THAT THE APPELLANT HAS ASSAILED THE VALIDITY OF THE CORRIGENDUM I TSELF ON WHICH WE HAVE NOT MADE ANY DETERMINATION. THEREFORE, THE CORRIGENDUM DATED 30.9.2010, IN OUR CONSIDERED OPINION, HAS NO BEARING SO AS TO DIS - ENTITLE THE ASSESSEE FROM ITS CLAIM OF THE BENEFIT OF +/ - 5% IN TERMS OF THE ERSTWHILE PROVISO TO SECTION 9 2C(2) OF THE ACT. IN COMING TO THE AFORESAID, WE HAVE BEEN GUIDED BY THE PARITY OF REASONING LAID DOWN IN THE JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASES OF BASF (INDIA) LTD. V CIT 280 ITR 136 (BOM); SHAKTI RAJ FILMS DISTRIBUTORS V CIT 213 ITR 20 (BOM); AND, UNIT TRUST OF INDIA & ANRS. V ITO 249 ITR 612 (BOM). THE HON'BLE HIGH COURT HAS OPINED IN THE CASE OF BASF (INDIA) LTD. ( SUPRA ) THAT THE CIRCULARS WHICH ARE IN FORCE DURING THE RELEVANT PERIOD ARE TO BE APPLIED AND THE SUBSEQUENT CIR CULARS EITHER WITHDRAWING OR MODIFYING THE EARLIER CIRCULARS HAVE NO APPLICATION. IT (TP) A NO . 1212 /BANG/201 1 PAGE 15 OF 17 MOREOVER, THE CIRCULARS IN THE NATURE OF CONCESSION CAN BE WITHDRAWN PROSPECTIVELY ONLY AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF STATE BANK OF TRAVANCORE V CIT 50 CTR 102 (SC). CONSIDERING ALL THESE ASPECTS, WE THEREFORE FIND NO JUSTIFICATION IN THE ACTION OF THE LOWER AUTHORITIES IN DISENTITLING THE ASSESSEE FROM ITS CLAIM FOR THE BENEFIT OF +/ - 5% TO COMPUTE ALP IN TERMS OF THE ERSTWHILE PROVISO TO SECTION 92C(2) O F THE ACT. WE ORDER ACCORDINGLY.' I N THE LIGHT OF THE ABOVE DECISION, WE HOLD THAT THERE IS NO FALLACY IN THE FINDING OF THE LD. CIT (A) . THE GROUND OF APPEAL FILED BY THE REVENUE IS DISMISSED . 1 6 . IN THE RESULT , T HE A PPEAL FILED BY THE REVENUE IS PARTLY A LLOWED CROSS OBJECTION: 17 . THE ASSESSEE - COMPANY RAISED THE FOLLOWING G ROUNDS OF CROSS OBJECTIONS AND ALSO ADDITIONAL G ROUNDS OF CROSS OBJEC TIONS VIDE ITS CROSS OBJECTIONS: IT (TP) A NO . 1212 /BANG/201 1 PAGE 16 OF 17 ADDITIONAL GROUNDS OF CROSS OBJECTIONS: 17. THE ASSESSEE COMPANY IS SEEKI NG EXCLUSION OF THE FOLLOWING COMPANIES WHICH CAME TO BE INCLUDED O N ACCOUNT OF ALLOWING THE GROUND OF APPEAL FILED BY THE REVENUE ON THE GROUND THAT TURNOVER IS NOT A CRITERIA AS WELL AS 0% RPT FILTER CANNOT BE APPLIED AND ALSO ON THE GROUND IT (TP) A NO . 1212 /BANG/201 1 PAGE 17 OF 17 THAT SUPER PR OFIT S CANNOT BE INCLUDED. T HE ASSESSEE - COMPANY IS SEEKING EXCLUSION OF THE FOLLOWING COMPANIES ON FUNCTIONAL DISSIMILARITIES: I. VISUALSOFT TECHNOLOGIES LTD. II. FOUR SOFT LTD. W E FIND THAT THERE IS NO FINDING EITHER BY THE LD. CIT OR BY THE TPO ON FUNCTIONAL DIFF ERENCES VIS - - VIS TESTED PARTY . S INCE THE RELEVANT INFORMATION IS NOT ON RECORD WE DEEM IT FIT TO ADMIT THE ADDITIONAL GROUND OF APPEAL AND SET ASIDE THE ISSUE TO THE FILE OF THE TPO TO DECIDE THE ISSUE OF COMPARABILITY ON FUNCTIONAL DIFFERENCES OF THE ABO VE COMPANIES . 18. I N THE RESULT , THE CROSS - OBJECTIONS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY , 2018 S D/ - SD/ - ( SUNIL KUMAR YADAV ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BENGALURU. D A T E D : 28 / 02 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE
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