Jt.CIT(OSD)/Dy.Commissioner of Income Tax-6, Kanpur V. M/s. Super House Leather Ltd., Kanpur

ITA 127/LKW/2012

• Counselvise Citation: 12723714 RSA 2012
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 16-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K KAPOOR
• Keywords: Transfer pricing; International transaction; Rule of consistency
• Section: 14A; 10B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.127/LKW/2012 ASSESSMENT YEAR:2007 - 08 M/S SUPER HOUSE LEATHER LTD., 150 FT. ROAD, JAJMAU, KANPUR. PAN:AABCS9328K VS JT.C.I.T. (OSD)/ DCIT - 6, KANPUR. (RESPONDENT) (APPELLANT) SHRI O. N. PATHAK, D. R. APPELLANT BY SHRI P. K. KAPOOR, C.A. RESPONDENT BY 01/05/2015 DATE OF HEARING 11 /06/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I, KANPUR DATED 29/12/2011 FOR THE ASSESSMENT YEAR 2007 - 2008. 2. GROUND NO. 1 IS AS UNDER: 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.13,61,713/ - MADE U/S 14A WITHOUT APPRECIATING THE FACT - (A) IT WAS ONUS OF THE ASSESSEE TO FURNISH THE DETAILS OF SOURCE OF INVESTMENT IN SHARES HOWEVER, THE ASSESSEE HAD NOT DISCHARGED ITS ONUS. (B) THE PROVISIONS OF SUB SEC TION (2) & (3) TO SEC. 14A HAS BEEN INSTITUTED BY THE FINANCE ACT 2006 AND WAS EFFECTIVE FROM 01.04.2007 I .E. FROM A.Y. 2007 - 08, 2 ASSESSMENT IN QUESTION. HENCE, THE PROVISIONS OF RULE 8D ARE APPLICABLE. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THAT AS PER A DECISION OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GODREJ AND BOYCE MFG. CO . LTD. VS. DCIT AND ANOTHER [2010] 328 ITR 81 (BOM), RULE 8D IS NOT APPLICABLE PRIOR TO ASSESSMENT YEAR 2008 - 09. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS IS ADMITTED POSITION OF LAW AS PER THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT I N THE CASE OF GODREJ AND BOYCE MFG. CO. LTD. VS. DCIT (SUPRA) THAT RULE 8D IS PROSPECTIVE AND THEREFORE, APPLICABLE FROM ASSESSMENT YEAR 2008 - 09 AND AFTERWARDS. T HEREFORE, RULE 8D IS NOT APPLICABLE IN THE PRESENT YEAR. AT THE SAME TIME, EVEN PRIOR TO ASSE SSMENT YEAR 2008 - 09 FROM WHEN RULE 8D IS APPLICABLE, SOME REASONABLE DISALLOWANCE HAS TO BE MADE U/S 14A OF THE ACT. THE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.12,000/ - . IN OUR CONSIDERED OPINION, THE DISALLOWANCE OF RS.12,000/ - FOR AVERAGE INVESTMENT OF RS.491.08 LAC IS NOT REASONABLE AND THEREFORE, WE HOLD THAT DISALLOWANCE SHOULD BE MADE OF RS.50,000/ - ON ACCOUNT OF ADMINISTRATIVE EXPENSES. REGARDING DELETION OF DISALLOWANCE OF INTEREST EXPENDITURE U/S 14A, IT IS HELD BY CIT(A) THAT AS PE R THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (BOM), WHEN MIXED FUNDS ARE USED FOR MAKING INVESTMENT, THERE SHOULD BE PRESUMPTION THAT THE INVESTMENTS WERE MADE OUT OF INTER EST FREE FUNDS. PRIOR TO APPLICABILITY OF RULE 8D, WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE DELETED BY CIT(A) ON ACCOUNT OF INTEREST EXPENDITURE ON THIS BASIS THAT THE INTEREST FREE FUNDS WERE SUFFICIENT TO COVER THE INVESTMENT, NO INTERFERE NCE IS CALLED 3 FOR IN THE ORDER OF CIT(A). WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) REGARDING DELETION OF INTEREST DISALLOWANCE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE OF RS.50,000/ - U/S 14 A WILL SERVE THE INTEREST OF JUSTICE. WE HOLD ACCORDINGLY. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. GROUND NO. 2 IS AS UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,29,19,127/ - ON ACCOUNT OF ADJUSTMENT OF ARMS LENGTH PRICE WITHOUT APP RECIATING THE FACT OF THE CASE AS DISCUSSED BY THE T.P.O IN ORDER U/S 92CA(3). 6. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT LEARNED CIT(A) HAS DECIDED THIS ISSUE AS PER PARA 6.2.1 TO 6.3.1 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 6.2.1 I HAVE CONSIDERED ALL THE FACTS, THE OBSERVATIONS MADE BY THE TPO AND THE LEARNED COUNSELS . 6.2.2 ON GOING THROUGH THE RECORDS PRODUCED BY THE APPELLANT BEFORE THE TPO, IT IS SEEN THAT THE APPELLANT HAS DONE A VERY THOROUGH STUDY OF THE TRANSFER PRICING AND NO CONVINCING REASONS HAVE BEEN GIVEN BY THE T PO FOR NOT ACCEPTING SUCH A STUDY. THE ASSESSEE HAD ADOPTED COST PLUS METHOD, WHICH HAD BEEN DULY ACCEPTED BY THE ERSTWHILE TPO(S) FOR EARLIER YEAR(S). NO REASONS HAVE BEEN GIVEN BY THE PRESENT TPO TO RE JECT THE METHOD OF COST PLUS BASIS ADOPTED BY THE ASS ESSEE AND ACCEPTED BY THE D EPARTMENT IN EARLIER YEAR(S). I AM AWARE THAT PRINCIPLE OF RES - JUDICATA DOES NOT APPLY TO THE TAX PROCEEDINGS; YET, ONE CANNOT BRUSH ASIDE THE 'PRINCIPLE OF CONSISTENCY', W HICH REQUIRES THAT WHEN THE FACTS & CIRCUMSTANCES CONTINU E TO 4 REMAIN THE SAME, THEN THERE SHOULD NOT BE ANY VARIATION IN THE TREATMENT FROM EARLIER YEAR. REFERENCE IN THIS REGARD IS MADE TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG. ACCORDINGLY, IN ABSENCE OF ANY SPECIFIC FINDI NG GIVEN BY THE TPO AS T O WHY HE WAS NOT IN AGREEMENT WITH THE METHOD ADOPTED BY THE ASSESSEE FOR ALL THESE YEARS AND WHICH HAD NOT BEEN ADVERSELY COMMENTED UPON BY THE EARLIER TPOS, THE REJECTION OF METHOD AND ADJUSTMENTS AS PROPOSED BY THE TPO IS LIABLE TO BE STRUCK DOWN AS BEING IN VIOLATION OF 'PRINCIPLE OF CONSISTENCY.' 6.2.3 N OTWITHSTANDING THE AFORESAID, ON GOING THROUGH THE PROVISIONS OF TRANSFER PRICING AS DEFINED IN THE INCOME TAX ACT, 1961, IT IS VERY CLEAR THAT RESALE PRICE METHOD DOES NOT APP LY TO THE ASSESSEE AS RESALE PRICE METHOD APPLIES TO IMPORTS INTO THE COUNTRY. T H US , THE R ESALE PRICE METHOD AS ADOPTED BY THE TPO, PER - SE IS NOT CORRECT. HOWEVER, AFTER GOING THROUGH THE ORDER OF THE TPO, IT IS SEEN THAT THE TPO HAS ACTUALLY APPLIED INTER NAL CUP METHOD, BUT WRONGLY NOMENCLATED IT AS RESALE PRICE METHOD . THE TPO HAS ADOPTED THE GROSS MARGIN OF THE A.ES. @ 5%, WHICH AS PER THE TPO WAS THE CO MMISSION AVAILABLE TO A COMMISSION AGENT. THIS ASSUMPTION OF 5% IS BY ITSELF INCORRECT AS THE RECORDS SHOWS THAT THE AVERAGE COMMISSION PAID BY THE APPELLANT TO THE A E S/NON AES ON SIMILAR PRODUCT IS UPTO 20% AND AVERAGE BEING 7.2%. FURTHER, THE TPO HAS WHILE DEALING WITH INTERNATIONAL TRANSACTIONS WITH THE AES HIMSELF ACCEPTED THE COMMISSION RATES UPTO 10% GIVEN TO THE US - (AE) ON REFERRED SALES AND UPTO THE 8% TO UK - (AE). IN THIS VIEW OF THE MATTER, THE GROSS MARGIN AVAILABLE TO THE AE, SHOULD HAVE BEEN BENCHMARKED AT 8% AND NOT AT 5% AS THE TPO HAS HIMSELF TREATED ALL THESE COMMISSION PAYMENT AT ARMS LENGT H AND HAS MADE NO ADJUSTMENT IN THE COMMISSION TRANSACTIONS OF THE APPELLANT. 6.2.4 HAVING BENCHMARKED THE GROSS MARGIN TO THE AES @8%, IT WOULD BE IMPERATIVE THAT WE ALSO ALLOW CERTAIN ADJUSTMENTS ON ACCOUNT OF FUNCTIONAL DIFFERENCES BETWEEN A PERSON WH O ACTS AS 'PRINCIPAL TO PRINCIPAL' I.E. A TRADER AND A PERSON WHO ACTS AS A MERE 'COMMISSION AGENT'. IN 'PRINCIPAL TO PRINCIPAL /TRADING TRANSACTION S, A PERSON INTER - ALIA, INCURS EXPENDITURE ON IMPORTS, STORAGE AND DISTRIBUTION OF THE GOODS WHICH IN NORMA L COURSE ARE NOT INCURRED BY A COMMISSION AGENT. 5 ACCORDINGLY, SUITABLE ADJUSTMENTS FOR SUCH EXPENDITURE HAS TO BE GIVEN AND THEN ONLY THE RESULTANT GROSS MARGIN CAN BE COMPARED WITH THE BENCHMARKED 8% GROSS MARGIN. IN THIS REGARD, IT WOULD BE USEFUL TO R EPRODUCE A TYPICAL AGENCY AGREEMENT ENTERED INTO BY THE APPELLANT WHICH WORD INDICATE THE FUNCTIONS BEING PERFORMED BY A TYPICAL COMMISSION AGENT AND ALSO THE RATE OF COMMISSION BEING CHARGED. AGENCY AGREEMENT THIS AGREEMENT IS MADE IN GOOD FAITH AND HONEST UNDERSTANDING BETWEEN ( NAME & ADDRESS, PHONE, MAIL ID ETC OF COMMISSION AGENT KERAC 13 AVENUE , DANIEL PERDRIGE 93360 NEULLY PLAISANCE FRANCE AND M/S. SUPERHOUSE LTD . , 150 FEET ROAD, JAJMAU, KANPUR, INDIA THEREAFTER CALLED PRINCIPAL ON THE SECOND PA RT WHEREIN ( NAME OF THE COMMISSION AGENT) KERAC WILL WORK FOR M/S . SUPERHOUSE LTD IN INDIA FOR THE COMPLETE RANGE OF FINISHED LEATHER AND LEATHER GOODS I.E . SHOES, BOOT UPPER & LEATHER BAGS /JACKETS & LEATHER PRODUCTS ETC . AND ARTIFICIAL LEATHER / FABRIC / LEATHER GO O DS AND GARMENTS. 1 . THE PRINCIPAL AGREES THAT WILL USE THEIR BEST EFFORTS AND ENDEAVOURS TO MAKE SHIPMENT OF ALL ORDERS WITH THE CONFIRMED DELIVERY TIME, UNLESS THEY ARE PREVENTED FROM DOING SO BY CIRCUMSTANCES BEYOND CONTROL. 2 . THE AGENT AGREES THAT THEY WILL USE THEIR BEST EFFORTS AND ENDEAVOURS AT ALL TIMES DURING THE VALIDITY OF THE AGREEMENT TO PROMOTE THE SALES OF THE GOODS COVERED BY THE AGREEMENT. 3 . THE COMMISSION OF (MENTION THE PERCENTAGE OF COMMISSION MUTUALLY AGREED) 8 TO 12.5% (EIGHT T O TWELVE & HALF) ON NETT FOB WILL BE PAYABLE TO KERAC ( MENTION NAME OF THE COMMISSION AGENT) IN CASE OF PRICE AGREEMENT SETTLEMENT WITH ANY CUSTOMER, THE AGENCY COMMISSION PERCENTAGE FOR KERAC (MENTIONED THE NAME OF COMMISSION AGENT) CAN BE DISCUSSED UPON TO HELP CONCLUDE THE BUSINESS. 6 4 . THE PAYMENT OF COMMISSION WILL BE MA D E TO THE KERAC IN FORM OF THE DD/TT W ITH IN THE 30 DAYS OF RECEIPT OF FULL PAYMENT FROM THE CUSTOMER BY THE PRINCIPAL . 5 . THE AGENT WILL TAKE CARE THAT ALL THE CONSIGNMENT AGAINST ORDER BOOKED BY THEM ARE IMMEDIATELY TAKEN BY THE RESPECTIVE CUSTOMERS AS PER TERMS & CONDITIONS OF THE CONTRACT / ORDER. COMPLAINTS DISPUTE, IF ANY, MAY BE SETTLED BY THEM TO THE BEST OF IMMEDIATEL Y THE INTELLIGENCE ON BEHALF AND APPROVAL OF THE PRINCIPAL. 6 . THE PRINCIPAL AGREES THAT ALL THE CUSTOMERS BY KERAC WILL BE REGARDED AS EXCLUSIVE TO TH E M. 7 . THIS AGREEMENT IT MUTUALLY AGREED BY BOTH 'THE COMMISSION AGENT' KERAC (MENTION THE NAME OF COMMISSION AGENT) AND 'THE PRINCIPAL' M/S . SUPERHOUSE LTD . INDIA FOR A PERIOD OF 05 (FIVE) YEARS ONLY) . THE AGREEMENT MAY FURTHER BE EXTENDED / RENEWED WITH MUTUAL CONSENT BY BOTH PARTIES. 8. THIS AGREEMENT I S SUBJECT TO TERMINATION ON THE THREE MONTHS WRITTEN NOTICE BY EITHER PARTY WITHIN THE EXPIRY OF THIS AGREEMENT BUT SUCH TERMINATION WILL NOT BE DEEMED FINAL UNTIL AND UNLESS ACCOUNTS ARE SETTLED TO THE SATISFACTION OF BOTH PARTIES. 6.3 KEEPING IN VIEW THE DISCUSSION ABOVE, I DEAL WITH THE UAE (A.E). THE DETAILS OF TRANSACTIONS AND EXPENDITURE IS AS UNDER: PARTICULARS SALE PRICE BY THE AE IN AED 4631945 LESS:IMPORT EXPENSES OF GOODS **170123 **THIS IS AN EXPENSE INCURRED FOR IMPORTING GOODS WHICH IS NEVER BORNE BY THE COMMISSION AGENTS IN ITS NORMAL COURSE OF 7 BUSINESS ADJUSTED SALES IN AED 4461822 CONVERTED INTO INDIA RUPEES @11.74 52381790 PRICE CHARGED BY THE ASSESSEE 48933769 GROSS PROFIT AMOUNT 3448021 GROSS PROFIT % 7.04% 6.3.1 AS COMPUTED ABOVE, THE GROSS MARGIN OF THE AE IS LESS THAN 8% EVEN WHEN NO OTHER EXPENSES HAVE BEEN ALLOCATED. IF THE SAME ARE ALLOCATED, THE GROSS MARGIN OF THE AE WOULD BE EVEN LOWER THAN 8%. IN THIS VIEW OF THE MATTER, IT HAS TO BE HELD THAT THE PRICE CHARGED BY THE APPELLANT WAS AT ARMS' LENGTH; THE ADJUSTMENT MADE BY THE TPO IS THEREFORE DELETED. 7.1 FROM THE ABOVE PARAS FROM THE ORDER OF CIT(A), WE FIND T HAT THE CIT(A) HAS DELETED THIS DISALLOWANCE MAINLY ON TWO BASIS. ONE BASIS IS THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS BUT PRINCIPLE OF CONSISTENCY CANNOT BE BRUSHED ASIDE. HE HAS GIVEN A CLEAR FINDING THAT THE ASSE SSEE HAS FOLLOWED COST + METHOD AND NO REASONS HAVE BEEN GIVEN TO REJECT THE SAME. THE SECOND BASIS GIVEN BY HIM IS THAT THE RESALE PRICE METHOD DOES NOT APPLY IN THE ASSESSEES CASE AS RESALE PRICE METHOD IS APPLI CABLE TO IMPORTS INTO THE COUNTRY. IN THIS REGARD, WE FEEL THAT CLAUSE (B) OF SUB R U LE (1) OF RULE 10B OF INCOME TAX RULES IS RELEVANT, WHICH DEFINES THE RESALE PRICE METHOD AND THEREFORE, THE SAME IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - B) RE SALE PRICE METHOD, BY WHICH, ( I ) THE PRICE AT WHICH PROPERTY PURCHASED OR SERVICES OBTAINED BY THE ENTERPRISE FROM AN ASSOCIATED ENTERPRISE IS RESOLD OR ARE PROVIDED TO AN UNRELATED ENTERPRISE, IS IDENTIFIED; ( II ) SUCH RESALE PRICE IS REDUCED BY THE AMOUNT OF A N ORMAL GROSS PROFIT MARGIN ACCRUING TO THE ENTERPRISE OR TO AN UNRELATED ENTERPRISE FROM 8 THE PURCHASE AND RESALE OF THE SAME OR SIMILAR PROPERTY OR FROM OBTAINING AND PROVIDING THE SAME OR SIMILAR SERVICES, IN A COMPA RABLE UNCONTROLLED TRANSACTION, OR A NU MBER OF SUCH TRANSACTIONS; ( III ) THE PRICE SO ARRIVED AT IS FURTHER REDUCED BY THE EXPENSES INCURRED BY THE ENTERPRISE IN CONNECTION WITH THE PURCHASE OF PROPERTY OR OBTAINING OF SERVICES; ( IV ) THE PRICE SO ARRIVED AT IS ADJUSTED TO TAKE INTO ACCOUNT THE FUNCTIONAL AND OTHER DIFFERENCES, INCLUDING DIFFERENCES IN ACCOUNTING PRACTICES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION [ OR THE SPECIFIED DOMESTIC TRANSACTION] AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANS ACTIONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF GROSS PROFIT MARGIN IN THE OPEN MARKET; ( V ) THE ADJUSTED PRICE ARRIVED AT UNDER SUB - CLAUSE (IV) IS TAKEN TO BE AN ARM'S LENGTH PRICE IN RESPECT OF THE PURCHASE OF THE PROPERTY OR OBTAINING OF THE SERVICES B Y THE ENTERPRISE FROM THE ASSOCIATED ENTERPRISE. 7.2 FROM THE ABOVE PROVISION S OF CLAUSE (B) OF SUB RULE 1 OF RULE 10B OF INCOME - TAX RULES, IT IS SEEN THAT RESALE PRICE METHOD IS APPLICABLE WHERE THERE IS PURCHASE OF PROPERTY OR SERVICE FROM ASSOCIATE ENTERPRISE BUT IN THE PRESENT CASE, THE ASSESSEE IS NOT PURCHASING THE GOODS FROM THE ASSOCIATE ENTERPRISES BUT THE ASSESSEE IS SELLING THE GOODS TO ASSOCIATE ENTERPRISE. BASED ON THIS FACT, THIS FINDING IS GIVEN BY CIT(A) THAT RESALE PRICE METHOD DOES N OT APPLY TO THE ASSESSEE S CASE. 8. IN ADDITION TO THESE TWO BASIS DISCUSSED ABOVE, IT IS ALSO STATED BY CIT(A) IN PARA 6.2.3 OF HIS ORDER THAT THE T.P.O. HAS APPLIED INTERNAL CUP 9 METHOD BUT WRONGLY NOMENCLATED IT AS RESALE PRICE METHOD. THE CIT(A) HAS ALSO GIVEN A FINDING THAT THE T.P.O. HAS ADOPTED THE GROSS MARGIN OF A.ES @5% BUT THIS ASSUMPTION OF 5% IS NOT CORRECT BECAUSE AS PER THE RECORDS , THE AVERAGE COMMISSION PAID BY THE ASSESSEE TO THE A.ES/NON A.ES. ON SIMILAR PRODUCT IS UPTO 20% AND AVERAGE IS 7.2%. AFTER EXAMINING THE FACTS AND AFTER GIVING THIS FINDING THAT THE T.P.O., WHILE DEALING WITH INTERNATIONAL TRANSACTIONS WITH THE A.ES., HAS HIMSELF ACCEPTED THE COMMISSION RATES UPTO 10% GIVEN TO THE US (A.E.) ON REFERRED SALES AND UPTO THE 8% TO UK(A.E.) AND THEREFORE, THE CIT(A) HAS HELD THAT THE GROSS MARGIN AVAILABLE TO THE A.E. SHOULD HAVE BEEN BENCHMARKED AT 8% AND NOT AT 5% AS THE T.P.O. HAS HIMSELF TREATED ALL THESE COMMISSION PAYMENT AT ARMS LENGTH AND HAS MADE NO ADJUSTMENT IN THE COMMIS SION TRANSACTIONS OF THE ASSESSEE. THEREAFTER, THE CIT(A) HAS EXAMINED THE AGENCY AGREEMENT AND HELD THAT THAT CERTAIN ADJUSTMENTS ON ACCOUNT OF FUNCTIONAL DIFFERENCES BETWEEN A PERSON WHO ACTS AS PRINCIPAL TO PRINCIPAL I.E. A TRADER AND A PERSON WHO AC TS AS A MERE COMMISSION AGENT WOULD BE ALLOWED BECAUSE IN CASE OF PRINCIPAL TO PRINCIPAL TRANSACTION, PERSON, INTER ALIA, INCURS EXPENDITURE ON IMPORTS, STORAGE AND DISTRIBUTION OF THE GOODS WHICH IN NORMAL COURSE ARE NOT INCURRED BY A COMMISSION AGENT AND THEREFORE, SUITABLE ADJUSTMENTS FOR SUCH EXPENDITURE HAS TO BE GIVEN AND THEN ONLY THE RESULTANT GROSS MARGIN CAN BE COMPARED WITH THE BENCHMARKED 8% GROSS MARGIN. ON THIS BASIS, THE CIT(A) HAS REDUCED THE IMPORT EXPENSES OF GOODS FROM SALE PRICE BY T HE A.E. AND WORKED OUT THE GROSS MARGIN OF THE A.E. @7.04%, WHICH IS LESS THAN 8% EVEN WHEN NO OTHER EXPENSES HAVE BEEN ALLOCATED EXCEPT IMPORT EXPENSES ON GOODS AND UNDER THESE FACTS, IT WAS HELD BY CIT(A) THAT THE ADJUSTMENT MADE BY THE T.P.O. IS NOT JUS TIFIED AND DELETED THE SAME. AS PER THE ABOVE DISCUSSION, WE FIND THAT THE ORDER OF CIT(A) ON THIS ISSUE IS AFTER DETAILED EXAMINATION OF FACTS AND NO INFIRMITY C OULD BE POINTED OUT BY LEARNED D. R. IN THESE 10 FINDINGS OF CIT(A) AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY THIS GROUND OF THE REVENUE IS REJECTED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 /06/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR