General Motors India Private Limited, Panchmahal V. The ACIT.,Panchmahal Circle, Godhra

ITA 1294/AHD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0807 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Capital asset; Business income; Transfer pricing; International transaction; Rule of consistency; Additional evidence; Question of law; Working capital adjustments; Corroborative evidences; Notional interest
• Section: 143(3); 92D; 263; 132

Judgement Text

I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 1 OF 53 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO S . : 1293/AHD/2015 AND1294/AHD/2015 ASSESSMENT YEAR S : 2006 - 07 AND 2007 - 08 GENERAL MOTORS INDIA PVT LTD . .APPELLANT CHANDRAPU RA INDUSTRIAL ESTATE, HALOL DISTRICT PANCHMAHAL, GUJARAT - 389 351 [PAN: AA A CG8371P] VS. ASSISTANT COMMISSIONER OF INCOME TAX GODHARA CIRCLE, GODHARA . RESPONDENT APPEARANCES BY : S N SOPARKAR , SR ADVOCATE, ALONG WITH MUKESH BUTANI , VI SHAL KALRA , SHWETA KASHYAP, SUMIT SINGH, SAUMYA SHETH AND DHINAL SHAH FOR THE APPELLANT SANJAY AGARWAL CIT(DR) ALONG WITH B Y CHAVAN FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : MAY 11 , 201 6 DATE OF PRONOUNCING THE ORDER : AUGUST 11 , 201 6 O R D E R PER PRAMOD KUMAR , AM : 1. THESE TWO APPEALS FILED BY THE ASSESSEE ARE AGAINST THE ORDER GIVING EFFECT TO THE DIRECTIONS OF THIS TRIBUNAL, VIDE ORDER DATED 2 ND AUGUST 2013, IN THE MATTER OF ASSESSMENT S UNDER SECTION 143(3) R.W.S. 144 C OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. AS THE ISSUES ARE INVOLVED IN COMMON AND ARISING ON THE SAME SET OF FACTS, WE WILL TAKE UP THESE TWO APPEALS, FOR DISPOSAL, BY THIS COMMON ORDER. 2. WHEN THESE APPEALS WERE CALL ED OUT FOR HEARING, LEARNED DEPARTMENTAL REPRESENTATIVE RAISED A PRELIMINARY OBJECTION REGARDING MAINTAINABILITY OF THESE APPEALS. IT WAS SUBMITTED THAT SINCE THE APPEALS ARE AGAINST THE A PPEAL EFFECT ORDER PASSED BY THE ASSESSING OFFICER, BASED ON FRESH I NPUTS FROM THE TRANSFER PRICING OFFICER, THE APPEAL CAN ONLY BE FILED BEFORE THE DISPUTE RESOLUTION PANEL OR THE CIT(A). IT IS SUBMITTED THAT THIS TRIBUNAL IS NOT THE FORUM FOR THE FIRST APPEAL, THAT THE ASSESSMENT WAS DONE DE NOVO IN TERMS OF THE DIRECTIO NS OF THE TRIBUNAL AND THAT IT I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 2 OF 53 WAS NOT CASE OF MERE ARITHMETICAL EXERCISE HAVING BEEN DONE AT THE ASSESSMENT STAGE. HE URGED US TO REJECT THE APPEALS AS N ON MAINTAINABLE, WITH THE LIBERTY, MAYBE, TO THE ASSESSEE TO FILE THE FRESH APPEALS BEFORE THE CIT(A) ALONG WITH A PETITION SEEKING CONDONATION OF DELAY, IF SO ADVISED. HE SUBMITS THAT THE ORDER NOT HAVING BEEN APPEALED BEFORE THE RIGHT FORUM, THE MATTER HAS NOW ACHIEVED FINALITY. AS FOR CONDONATION OF DELAY, THAT IS THE PREROGATIVE OF THE FORUM WHICH THE ASSESSEE OUGHT TO HAVE APPROACHED ANYWAY. 3. LEARNED SENIOR COUNSEL OPPOSES THESE SUBMISSIONS ON TWO GROUNDS. HIS FIRST PLEA IS THAT IF THE STAND IS TAKEN THAT THIS ORDER IS TO BE TAKEN ON THE SAME FOOTING AS AN ASSESSMENT ORDER PASSED UNDER SECTION 143( 3), THE ORDER MUST STAND QUASHED FOR THE SHORT REASON THAT THE ASSESSING OFFICER DID NOT FIRST ISSUE A DRAFT ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S 144C, AND, HIS NOT DOING SO, WOULD RENDER THE ORDER NULL AND VOID. OUR ATTENTION IS INVITED TO THE JUDG MENT OF HON BLE MADRAS HIGH COURT, IN THE CASE OF VIJAY TELEVISION PVT LTD VS DRP [(2014) 46 TAXMANN.100 (MAD)], WHEREIN THEIR LORDSHIPS HAVE HELD THAT NON ISSUANCE OF A DRAFT ORDER, AS REQUIRED BY THE SCHEME OF SECTION 144C. IN THE CASE OF ELIGIBLE ASSESS ES, RENDERS THE ASSESSMENT ORDER ITSELF LIABLE TO BE QUASHED. OUR ATTENTION IS ALSO INVITED TO THE JUDGMENT OF HON BLE AP HIGH COURT, IN THE CASE OF ZUARI CEMENTS LTD, AS REFERRED TO IN THE AFORESAID JUDGMENT OF HON BLE MADRAS HIGH COURT, ON THE SAME LINES , AND THE FACT THAT THE SPECIAL LEAVE PETITION AGAINST THE SAID HON BLE AP HIGH COURT HAS BEEN REJECTED BY HON BLE SUPREME COURT. HIS SECOND LINE OF DEFENCE IS THIS. HE INVITES OUR ATTENTION TO A COORDINATE BENCH DECISION IN THE CASE OF TALLY SOLUTIONS PVT LTD VS DCIT [(2014) 30 ITR (TRIB) 591 (BANGALORE)] WHICH HAS HELD THAT IN THE CASE OF APPEAL AGAINST TPO S ORDER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL, THE APPEAL LIES BEFORE THE TRIBUNAL. IT IS POINTED OUT THAT THIS DECISION, WHICH HAS BEEN FO LLOWED BY THE COORDINATE BENCHES IN OTHER CASES AS WELL, BINDS US, AND THAT IT IS NOT OPEN TO US TO TAKE ANY OTHER VIEW OF THE MATTER. THAT SITUATION WOULD, HOWEVER, BE ONLY RELEVANT WHEN THE IMPUGNED ORDER IS HELD TO BE LEGALLY SUSTAINABLE IN LAW. HE, H OWEVER, SUBMITS THAT HE DOES NOT WISH TO PURSUE HIS POINT AGAINST THE IMPUGNED APPEAL EFFECT ORDER, NOT HAVING BEEN PRECEDED BY A DRAFT ORDER - AS REQUIRED UNDER THE SCHEME OF SECTION 144C, AS LONG AS THE LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT OBJECT TO DISPOSAL OF APPEAL ON MERITS. HE SUBMITS THAT HE WOULD URGE THE DEPARTMENTAL REPRESENTATIVE NOT TO TAKE A PEDANTIC APPROACH OF THE MATTER AND JOIN HIM IN REQUESTING US TO DISPOSE OF THE MATTER ON MERITS. 4. LEARNED DEPARTMENTAL REPRESENTATIVE, AT THIS STAGE, GIVES UP HIS PRELIMINARY OBJECTION, AND URGES US TO DECIDE THE MATTER ON MERITS. HE SPECIFICALLY SUBMITS THAT THE APPEAL AGAINST THE APPEAL EFFECT ORDER IS REQUIRED TO BE DECIDED BY US, AND, AS IS THE VIEW OF THE COORDINATE BENCH, THE ASSESSEE NEED NOT FI R ST GO TO THE CIT(A) OR THE DRP. 5. IN THE LIGHT OF THE CONSENT OF BOTH THE PARTIES BEFORE US , AND IN THE LIGHT OF THE STAND SO TAKEN BY THE COORDINATE BENCH, WE PROCCED TO ADJUDICATE UPON THE GRIEVANCES OF THE ASSESSEE AGAINST THE APPEAL EFFECT OR DER. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 3 OF 53 6. LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, HAS ONE MORE PRELIMINARY OBJECTION. HE SUBMITS THAT THE CORE ISSUE IN THIS APPEAL IS WHETHER A FOREIGN ENTITY CAN BE TESTED PARTY OR NOT, AND SINCE THERE ARE CONFLICTING OPINIONS BY THE COORDINATE BEN CHES, ON THIS ISSUE, THE MATTER SHOULD BE REFERRED TO A SPECIAL BENCH. WHEN IT WAS POINTED OUT TO THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT RIGHT NOW WE ARE IN THE SECOND ROUND OF PROCEEDINGS, AND THAT ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE AS SESSEE IN THE FIRST ROUND OF PROCEEDINGS BEFORE US, AND THE APPEAL AGAINST THE TRIBUNAL DECISION IS PENDING BEFORE HON BLE HIGH COURT ON THAT ISSUE, HE SUBMITS THAT EVEN IN THE IMPUGNED ORDER THE TRANSFER PRICING OFFICER HAS NOT ACCEPTED THE STAND OF THE T RIBUNAL, AND THE ISSUE IS THUS OPEN FOR ADJUDICATION. HE SUBMITS THAT SINCE THE SAME ISSUE IS COMING UP IN THE OTHER YEARS, WHICH ARE IN THE FIRST ROUND AND AT LEAST ONE OF WHICH IS ALSO BEING HEARD ALONG - WITH THESE APPEAL, THIS ISSUE SHOULD BE REFERRED AT LEAST FOR THE YEARS OTHER THAN THE YEARS IN THE SECOND ROUND OF PROCEEDINGS. 7. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ISSUE AS TO WHETHER A FOREIGN ENTITY CAN BE TAKEN AS A TESTED PARTY FIRST CAME UP BEFORE THE TRIBUNAL IN THE CASE OF RANB AXY LABORATORIES LIMITED VS ACIT [(2008) 110 ITD 428 (DEL)] WHEREIN THE COMMISSIONER HAD EXERCISED HIS REVISION POWERS UNDER SECTION 263 AS THE ASSESSEE HAD TAKEN A FOREIGN ENTITY AS THE TESTED PARTY AND REQUISITE INFORMATION WAS NOT AVAILABLE IN RESPECT O F THE SAME. HE POINTS OUT THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT WHEN ASSESSEE IS UNABLE TO FURNISH INFORMATION ON COMPARABLE COMPANIES FOR USING FOREIGN ENTITY AS TESTED PARTY, THE SELECTION OF TESTED PARTY WAS VITIATED IN LAW AND SUBJECT TO REVISION UNDER SECTION 263. HE THEN REFERS TO THE DECISION OF ANOTHER COORDINATE BENCH IN THE CASE OF G L OBAL VANTE D GE PVT LTD VS DCIT [(2009) 37 SOT 1 (DEL)] WHEREIN THE COORDINATE BENCH HAS CONFIRMED, THOUGH WITHOUT ADDING MUCH REAS ONING OF ITS OWN, STAND OF THE CIT(A) THAT THE FOREIGN ENTITY CANNOT BE ACCEPTED AS A TESTED PARTY IN THE ABSENCE OF COMPLETE INFORMATION. IT IS THEN SUBMITTED THAT ANOTHER COORDINATE BENCH, IN THE CASE OF ON WARD TECHNOLOGIES LTD VS DCIT [ (2014) 147 ITD 53 4 (BOM)], HAS GONE A STEP FURTHER AND HELD THAT THE SCHEME OF ACT, UNDER SECTION 92C, DOES NOT ALLOW FOR A CHOICE OF TESTED PARTY TO BE OF FOREIGN ENTITY. OUR ATTENTION IS ALSO INVITED TO ANOTHER COORDINATE BENCH DECISION IN THE CASE OF AURIONPRO SOLUTIONS LTD VS ACIT [(2013) 27 ITR (TRIB) 276 (BOM)] WHEREIN IT IS HELD THAT THE SELECTION OF FOREIGN ENTERPRISE AS A TESTED PARTY IS EXCLUDED FROM THE PURVIEW OF INDIAN TRANSFER PRICING LEGISLATION. IN THE LIGHT OF ALL THESE JUDICIAL PRECEDENTS, ACCORDING TO TH E LEARNED DEPARTMENTAL REPRESENTATIVE, IT WAS WHOLLY INAPPROPRIATE , AND CONTRARY TO THE JUDICIAL PROPRIETY, FOR THE BENCH TO HOLD, IN THE FIRST ROUND AND VIDE ORDER DATED 2 ND AUGUST 2013, THAT A FOREIGN PARTY, I.E. GM - DAT OF KOREA, CAN INDEED BE TAKEN AS A TESTED PARTY. IN ANY EVENT, CLEARLY THERE ARE CONFLICTING VIEWS ON THIS ISSUE AND, WITH A VIEW TO ENSURE THAT A UNIFORM STAND IS TAKEN ON THE ISSUE BY VARIOUS BENCH, THE CONSTITUTION OF A SPECIAL BENCH IS OF UTMOST IMPORTANCE. LEARNED DEPARTMENTAL REPRE SENTATIVE INVITED OUR ATTENTION TO THE DECISION OF A SPECIAL BENCH, IN THE CASE OF DCIT VS SUMMIT SECURITIES LIMITED [(2011) 132 ITD SB 1 (BOM)] , IN SUPPORT OF THE PROPOSITION THAT MERE PENDENCY OF AN APPEAL BEFORE THE HON BLE HIGH COURT CANNOT BE A REASON ENOUGH TO DECLINE REFERENCE TO THE SPECIAL BENCH, IN A SITUATION IN WHICH ADMITTEDLY I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 4 OF 53 THERE IS A CLEAVAGE OF OPINION BY THE DIVISION BENCHES. WE ARE URGE D TO RECOMMEND CONSTITUTION OF A SPECIAL BENCH, TO HON BLE PRESIDENT, FOR ADJUDICATION ON THIS ISSUE. 8. LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY OPPOSES THESE SUBMISSIONS. HIS STAND IS THAT THE MATTER THAT THIS SPECIFIC ISSUE, I.E. A FOREIGN PARTY BEING TAKEN AS TESTED PARTY, IS NOW BEFORE HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE IN TH E FIRST ROUND OF ASSESSMENT , AND NO USEFUL PURPOSE WILL, THEREFORE, BE SERVED BY RECOMMENDING CONSTITUTION OF SPECIAL BENCH ON THE SAME ISSUE. IT IS POINTED OUT THAT THEIR LORDSHIPS HAVE ADMITTED, IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 AND ON COMMISSIONER S APPEAL, THE QUESTION WHETHER INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE TRANSFER PRICING OFFICER TO ACCEPT GMDAT AS THE TESTED PARTY FOR ADJUDICATION ON MERITS. OUR ATTENTION IS THEN INVITED TO SEVERAL DEC ISIONS OF SUCCESSIVE HON BLE PRESIDENTS OF THIS TRIBUNAL, TO THE EFFECT THAT WHEN HON BLE JURISDICTIONAL HIGH COURT IS IN SEISIN OF AN ISSUE IN ASSESSEE S OWN CASE EVEN FOR EARLIER ASSESSMENT YEAR, THERE IS NO POINT IN CONSTITUTION OF A SPECIAL BENCH OF TH IS TRIBUNAL TO DECIDE THE SAME ISSUE. SUCH AN EXERCISE WILL BE A PARALLEL JUDICIAL EXERCISE IN FUTILITY AS WHATEVER , PARALLEL TO THIS SPECIAL BENCH ADJUDICATION ON THE SAME ISSUE IS IN PROGRESS AT A HIGHER JUDICIAL FORUM, AND EVEN SUCH A SPECIAL BENCH DECI DES WILL FADE INTO IRRELEVANCE ONCE A SUPERIOR JUDICIAL FORUM EXERCISES ITS HIGHER WISDOM, AND EXPRESSES ITS VIEWS. LEARNED COUNSEL INVITED OUR ATTENTION TO THE ORDER DATE 22 ND NOVEMBER 2006 PASSED BY HON BLE PRESIDENT, IN THE CASE OR STAR LIMITED (ITA NO . 4348/MUM/2005) DISBANDING THE SPECIAL BENCH ON THE GROUND THAT THE SAME ISSUE, ON WHICH SPECIAL BENCH WAS CONSTITUTED, WAS PENDING BEFORE HON BLE HIGH COURT. OUR ATTENTION WAS ALSO INVITED TO THE ORDER DATED 3 RD JULY 2009 PASSED BY A COORDINATE BENCH, I N THE CASE OF G E CAPITAL SERVICE INDIA VS DCIT AND VICE VERSA (ITA NOS. 3198 AND 3200/DEL/04) DECLINING CONSTITUTION OF A SPECIAL BENCH WHEN THE ISSUE, ON WHICH SPECIAL BENCH IS SOUGHT TO BE CONSTITUTED, IS PENDING BEFORE HON BLE JURISDICTIONAL HIGH COURT . OUR ATTENTION IS THEN DRAWN TO THE ORDER DATE 7 TH SEPTEMBER 2000 PASSED BY HON BLE PRESIDENT, IN THE CASE OF TIVOLI INVESTMENT AND TRADING CO PVT LTD (ITA NOS. 2808 AND 2809/MUM/1996) WITHDRAWING SPECIAL BENCH ON THE GROUND THAT THE SAME ISSUE WAS PENDI NG FOR DECISION BEFORE HON BLE JURISDICTIONAL HIGH COURT, AND THUS FOLLOWING THE SAME PATH, AS WAS TRAVERSED BY HIS PREDECESSOR IN STAR LTD S CASE. THE LEGAL POSITION, ACCORDING TO THE LEARNED COUNSEL, IS THUS VERY WELL SETTLED. T HERE IS NO POINT IN SUCH A FRUITLESS AND RITUALISTIC ADJUDICATION BY A SPECIAL BENCH. WITHOUT PREJUDICE TO THIS LINE OF THIS ARGUMENT, LEARNED COUNSEL FURTHER SUBMITS THAT THE LAW IS VERY WELL SETTLED THAT THERE IS NO SPECIFIC BAR IN THE TRANSFER PRICING REGULATIONS FROM ADOPTION O F A FOREIGN ENTERPRISE, THAT AS LONG AS REQUISITE INFORMATION IS AVAILABLE, THERE CANNOT BE ANY OBJECTION TO A FOREIGN ENTERPRISE BEING TAKEN AS TESTED PARTY; AND ALL THAT IS NEEDED IS THAT THE TESTED PARTY SHOULD BE LEAST COMPLEX AND THE REQUISITE INFORMA TION IS AVAILABLE FOR NECESSARY COMPARABILITY. AS REGARDS ONWARD TECHNOLOGIES DECISION (SUPRA) AND AURIONPRO SOLUTIONS DECISION (SUPRA), THESE DECISIONS, ACCORDING TO THE LEARNED COUNSEL, WERE CONTRARY TO THE LA W LAID DOWN BY THE OTHER DIVISION BENCHES, A ND , THEREFORE, PER INCURIUM . LEARNED COUNSEL FOR THE ASSESSEE THEN TOOK US THROUGH THE ORDER OF THE COORDINATE BENCH, IN THE FIRST ROUND OF PR OCEEDINGS, HOLD ING THAT, ON THE FACTS OF THIS CASE, GMDA, WHICH IS A NON - RESIDENT ENTITY, SHOULD BE TREATED AS A T ESTED PARTY , AND JUSTIFIED THE STAND SO I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 5 OF 53 TAKEN BY THE COORDINATE BENCH . LEARNED COUNSEL SUBMITS THAT REFERRING A MATTER TO A SPECIAL BENCH CANNOT BE A MATTER OF COURSE PARTICULARLY WHEN A WELL - CONSIDERED VIEW IS TAKEN ON THAT ISSUE IN ASSESSEE S OWN CASE , J UST BECAUSE IN SOME OTHER CASE A CONTRARY VIEW IS TAKEN ON AN ALTOGETHER DIFFERENT SET OF FACTS. IT IS ONLY WHEN THE BENCH HAS DOUBTS ON CORRECTNESS OF THE EARLIER DECISION THAT THE RE CAN BE OCCASION FOR MAKING A REFERENCE TO THE SPECIAL BENCH. THERE IS N O GOOD REASON, ACCORDING TO THE LEARNED COUNSEL, TO DOUBT THE CORRECTNESS OF THE VIEW SO TAKEN BY THE COORDINATE BENCH IN ASSESSEE S OWN CASE. LEARNED COUNSEL THEN MADE ELABORATE SUBMISSIONS ON MERITS OF THE PROPOSITION AS WELL. ON THE STRENGTH OF THES E ARGUMENTS, WE ARE URGED TO FOLLOW THE DECISION OF THE COORDINATE BENCH AND NOT TO REFER THE SAME TO HON BLE PRESIDENT FOR CONSTITUTION OF A SPECIAL BENCH. 9. WE HAVE NOTED THAT THERE IS NO DISPUTE ABOUT THE FACTUAL POSITION THAT THE QUESTION , AS TO WHE THER A NON - RESIDENT ENTITY CAN BE A TESTED PARTY OR NOT, IS PENDING FOR ADJUDICATION BEFORE HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE . THE QUESTION BEFORE THEIR LORDSHIP IS WHETHER INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN DIRECTING TH E TRANSFER PRICING OFFICER TO ACCEPT GMDAT AS THE TESTED PARTY AND THAT IS PRECISELY WHAT THE LEARNED COUNSEL IS URGING US TO REFER FOR THE CONSIDERATION OF A SPECIAL BENCH. THE SITUATION IN THE CASE OF TIVOLI INVESTMENT & TRADING CO LTD (SUPRA) WAS ALMO ST SIMILAR BUT THAT WAS A CASE IN WHICH THE INITIAL DIVISION BENCH DECISION WAS AGAINST THE ASSESSEE, REPORTED AS TIVOLI INVESTMENT & TRADING CO. LTD VS ACIT [(2004) 90 ITD 163 (BOM)] , THE MISCELLANEOUS PETITION FILED AGAINST THE SAID DECISION WAS DISMISSE D BY THE TRIBUNAL, AND THE SUBSEQUENT DIVISION BENCH DOUBTED CORRECTNESS OF THE EARLIER DECISION. IT WAS IN THIS BACKDROP THAT THE MATTER WAS REFERRED TO HON BLE PRESIDENT FOR CONSTITUTION OF THE SPECIAL BENCH. WHEN THE SPECIAL BENCH WAS CONSTITUTED, IT WA S NOTICED BY THE SPECIAL BENCH THAT APPEALS AGAINST THE DECISION OF THE TRIBUNAL FOR BOTH THE ASSESSMENT YEARS COVERED BY THE DECISION , DECIDING THE ISSUE IN FAVOUR OF THE REVENUE, WERE ALREADY ADMITTED BY HON BLE JURISDICTIONAL HIGH COURT, AND ARE PENDING BEFORE THEIR LORDSHIPS FOR FINAL DISPOSAL. IT APPEARS THAT T HE SPECIAL BENCH WAS OF THE VIEW THAT, IN THESE CIRCUMSTANCES, NO USEFUL PURPOSE WILL BE SERVED BY A PARALLEL ADJUDICATION OF THE SAME ISSUE BY THE SPECIAL BENCH. ON THE RECOMMENDATION, DATED 6 TH SEPTEMBER 2010, OF THE SPECIAL BENCH AGAINST CONTINUATION OF SUCH A SPECIAL BENCH ITSELF, THE THEN PRESIDENT AND ONE OF THE MOST DISTINGUISHED JURIST EVER HEADING THIS TRIBUNAL , HON BLE SHRI R V EASWAR WAS PLEASED TO OBSERVE AS FOLLOWS: I HAVE GONE THROU GH CAREFULLY THE NOTE DATED 6 - 9 - 2010 SIGNED BY THE MEMBERS OF THE SPECIAL BENCH SUGGESTING THE WITHDRAWAL OF THE REFERENCE TO THE SPECIAL BENCH ON THE GROUND THAT THE ASSESSEE S APPEALS AGAINST THE ORDER OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR THE A YS 1990 - 91 & 1991 - 92 HAVE BEEN ADMITTED BY THE HON BLE BOMBAY HIGH COURT AND ARE PENDING FOR FINAL DISPOSAL . SUBSTANTIAL QUESTION OF LAW HAS BEEN FRAMED. COPIES OF THE ORDER OF THE HON BLE HIGH COURT PASSED ON 2.12.2004 HAVE BEEN PLACED ON RECORD. I HAVE ALSO GONE THROUGH CAREFULLY THE EARLIER COMMUNICATION DATED 23.6.2009 WRITTEN BY THE MEMBERS WHO AT THAT TIME CONSTITUTED THE I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 6 OF 53 SPECIAL BENCH TO THE THEN HON BLE PRESIDENT, ITAT CONTAINING A SIMILAR SUGGESTION . ON THE COMMUNICATION, THE PRESIDENT HAD PASSED THE FOLLOWING NOTE: LET S.B. CONSIDER WHETHER CASE IT IS NECESSARY TO ADJOURN HEARING OF THE CASE TILL THE MATTER IS DISPOSED BY THE HON BLE H/C . (DATE: 28 - 7 - 2009) THE SPECIAL BENCH NEED TO BE RECONSTITUTED THEREAFTER DUE TO TRANSFER OF TWO OF THE MEMB ERS. THE MEMBERS OF THE SPECIAL BENCH AS CONSTITUTED THEREAFTER REITERATED THE EARLIER SUGGESTION IN THEIR NOTE DATED 6 - 9 - 2010. THEY HAVE HELD THAT THE SAME REASONS GIVEN IN THE EARLIER COMMUNICATION DATED 23.6.2009 CONTINUE TO HOLD GOOD . THE SITUATION AS OF NOW IS THAT THE EARLIER ORDERS OF THE TRIBUNAL FOR THE AY S 90 - 91 & 91 - 92, WHICH ARE AGAINST THE ASSESSEE, ARE PENDING IN APPEAL BEFORE THE HON BLE HIGH COURT AWAITING ADJUDICATION OF THE SUBSTANTIAL QUESTION OF LAW. FOR THE AYS 92 - 93 & 93 - 94, A SPECIA L BENCH HAS BEEN CONSTITUTED TO DECIDE THE SAME QUESTION. I AGREE WITH THE POINT MADE BY THE MEMBERS THAT IT IS NOT PROPER TO CONTINUE WITH THE SPECIAL BENCH WHEN THE SAME ISSUE IS PENDING ADJUDICATION FOR THE EARLIER YEARS BEFORE THE HON BLE BOMBAY HIGH C OURT. I AM OF THE HUMBLE OPINION THAT SUCH CONTINUANCE WILL NOT BE IN CONFORMITY WITH JUDICIAL DISCIPLINE, PROPRIETY AND DECORUM. THE APPROPRIATE COURSE WILL BE TO DISBAND THE SPECIAL BENCH AND ALLOW THE REGULAR BENCH TO DECIDE THE ISSUES IN ACCORDANCE WIT H LAW. I AM IN RESPECTFUL AGREEMENT WITH THE VIEW EXPRESSED BY THE THEN PRESIDENT, ITAT ON THE QUESTION OF CONSTITUTING/CONTINUING WITH A SPECIAL BENCH WHEN THE ISSUE IS PENDING BEFORE THE HON BLE JURISDICTIONAL HIGH COURT IN HIS ORDER IN THE CASE OF STAR LIMITED, HONGKONG, DATED 26 - 11 - 2006 AND ALSO BY THE BENCH IN ITS ORDER IN THE CASE OF HARSH ACHYUT BHOGALE BY WHICH THE BENCH REFUSED TO SUGGEST THE CONSTITUTION OF A SPECIAL BENCH WHEN THE EARLIER ORDER OF THE TRIBUNAL WAS PENDING ADJUDICATION BEFORE THE HON BLE BOMBAY HIGH COURT. ADJOURNING THE HEARING BEFORE THE SPECIAL BENCH TILL THE DECISION OF THE HON BLE BOMBAY HIGH COURT FOR THE EARLIER YEARS WILL HOLD UP A NUMBER OF APPEALS INVOLVING THE IDENTICAL ISSUE, IN WHICH THE DIVISION BENCHES ARE ADJOURNI NG THE APPEALS COMING UP BEFORE THEM ON THE GROUND THAT THE ISSUE IS PENDING BEFORE THE SPECIAL BENCH. I ACCORDINGLY WITHDRAW THE REFERENCE TO THE SPECIAL BENCH IN THE CASE OF TIVOLI INVESTMENT AND TRADING CO. PVT. LTD (AYS: 1992 - 93 & 1993 - 94) IN ITA NOS. 2808 & 2809/MUM/1996. THE APPEALS WILL GO BEFORE THE REGULAR BENCH FOR DISPOSAL IN ACCORDANCE WITH LAW . I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 7 OF 53 [EMPHASIS, BY UNDERLINING, SUPPLIED BY US ] 10. IT IS, THEREFORE, CLEAR THAT NOT ONLY HON BLE PRESIDENT OF THIS TRIBUNAL, IN HIS CAPACITY AS PRESIDENT , BUT ALSO A SPECIAL BENCH CONSTITUTED BY HON BLE PRESIDENT - WHICH IS A HIGHER JUDICIAL FORUM AND WHOSE DECISIONS ARE JUDICIALLY BINDING ON THIS DIVISION BENCH, HOLDS THE VIEW THAT WHEN THE SAME ISSUE IS PENDING ADJUDICATION FOR THE EARLIER YEARS BEFORE TH E HON BLE JURISDICTIONAL HIGH COURT, THERE IS NO POINT IN THAT ISSUE BEING CONSIDERED BY A SPECIAL BENCH OF THE TRIBUNAL. AS A MATTER OF FACT, EVEN CONTINUANCE OF A SPECIAL BENCH, WHEN IT WAS ALREADY FORMED, WAS SEEN AS AN ACT NOT IN CONFORMITY WITH JUDIC IAL DISCIPLINE, PROPRIETY AND DECORUM . UNDOUBTEDLY, NO USEFUL PURPOSE CAN BE SERVED BY THE EXERCISE OF CONSTITUTING A SPECIAL BENCH, BECAUSE NO MATTER HOW MAY MEMBERS SIT ON SUCH A SPECIAL BENCH, THE VIEWS EXPRESSED BY THE TRIBUNAL REMAIN, AND SHALL ALW AYS REMAIN, SUBJECT TO THE APPROVAL OF THEIR LORDSHIPS. WHEN THE MATTER IS AWAITING ADJUDICATION BY HON BLE HIGH COURT, THE SPECIAL BENCH DECISION, IRRESPECTIVE OF THE NUMERAL STRENGTH OF SUCH A SPECIAL BENCH, IS NOTHING MORE THAN WRITING ON THE SAND WHICH IS BOUND TO GET WASHED AWAY BY A WAVE, OF BINDING JUDICIAL PRECEDENT, APPROACHING THE SAND. HAVING SAID THAT, WE MUST TAKE NOTE OF THE FACT THAT ANOTHER SPECIAL BENCH OF THIS TRIBUNAL, IN THE CASE OF SUMMIT SECURITIES (SUPRA), HA S TOUCHED A DIFFERENT CHO RD. PRESENTING AN ANTITHESIS OF THE VIEW S EXPRESSED BY THE SPECIAL BENCH IN THE CASE OF TIVOLI (SUPRA) , THIS SPECIAL BENCH, INTER ALIA , STATES AS FOLLOWS: 13. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RAISED OBJECTION TO THE CONTINUATION OF THE SPECIAL BE NCH ON THE GROUND THAT SIMILAR QUESTION OF LAW HAS BEEN ADMITTED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA). THE ONLY REASON ADVANCED BY THE LEARNED AUTHORISED REPRESENTATIVE FOR THE DECONSTITUTION OF THE SPECIAL BENCH IS THE ADMISSION OF THE QUESTION OF LAW BY THE HON BLE HIGH COURT IN MARCH, 2007. IT IS NOT THE CASE OF THE PARTIES THAT ANY JUDGMENT HAS BEEN DELIVERED ON MERITS BY THE HON BLE BOMBAY HIGH COURT ON THE POINT. 14. WE ARE UNABLE TO ACCEDE TO THIS REQUEST MAD E ON BEHALF OF THE ASSESSEE FOR THE MANIFEST REASON THAT THE HON BLE HIGH COURT HAS NEITHER DECIDED THE POINT ON MERITS NOR BLOCKED HEARING OF CASES INVOLVING IDENTICAL QUESTION OF LAW BY THE TRIBUNAL TILL THE DISPOSAL OF APPEAL PENDING BEFORE IT. THE MERE FACT THAT A SUPERIOR AUTHORITY IS SEIZED OF AN ISSUE IDENTICAL TO THE ONE BEFORE THE LOWER AUTHORITY, THERE CANNOT BE ANY IMPEDIMENT ON THE POWERS OF THE LOWER AUTHORITY IN DISPOSING OF THE MATTERS INVOLVING SUCH ISSUE AS PER PREVAILING LAW. THE FIRST APP ELLATE AUTHORITIES IN ALL SUBSEQUENT CASES SHALL BE DEBARRED FROM HEARING THE MATTERS INVOLVING A QUESTION AGAINST WHICH EITHER THE REVENUE OR THE ASSESSEE HAVE PREFERRED APPEAL BEFORE THE TRIBUNAL AND THE MATTER IS STILL UNDECIDED. THE SAME CONSEQUENCES W ILL FOLLOW IF THE TRIBUNAL IS PROSCRIBED FROM HEARING THE MATTERS ON THE ADMISSION OF IDENTICAL QUESTION OF LAW BY THE HON BLE HIGH COURT TILL A FINAL DECISION IS RENDERED, WHICH MAY TAKE A COUPLE OF YEARS. IT CAN BE SEEN THAT THE I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 8 OF 53 SUBSTANTIAL QUESTION OF L AW WAS ADMITTED BY THE HON BLE HIGH COURT IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA) IN MARCH, 2007 AND WE ARE RUNNING THROUGH 2011. MORE THAN FOUR YEARS HAVE ELAPSED AND THE MATTER HAS STILL NOT BEEN TAKEN UP FOR CONSIDERATION AND FINAL DISPOSAL. IF THE ARGUMENT RAISED ON BEHALF OF THE ASSESSEE IS ACCEPTED AND FURTHER ADVANCED THEN ALL THE HON BLE HIGH COURTS WILL HAVE TO BRING TO AN END THE HEARING OF APPEALS BEFORE THEM INVOLVING A QUESTION OF LAW ON WHICH SLP HAS BEEN ADMITTED BY THE HON BLE SUPREME C OURT, WHICH MAY AGAIN TAKE A NUMBER OF YEARS. 15. THE CONSEQUENCES OF SUCH A COURSE OF ACTION SUGGESTED BY THE LEARNED AUTHORISED REPRESENTATIVE WOULD LEAD TO A CHAOTIC SITUATION. THE ENTIRE WORKING OF THE TRIBUNAL WILL COME TO STANDSTILL IF A REFERENCE T O THE SPECIAL BENCH IS WITHDRAWN SIMPLY ON THE GROUND THAT IDENTICAL QUESTION OF LAW HAS BEEN ADMITTED BY THE HON BLE HIGH COURT. THE ABOVE DISCUSSED THREE JUDGMENTS INCLUDING THAT OF THE HON BLE SUPREME COURT AND THAT OF THE HON BLE JURISDICTIONAL HIGH CO URT DO NOT PERMIT SUBSEQUENT BENCH OF THE TRIBUNAL TO TAKE A CONTRARY VIEW FROM THE ONE EXPRESSED BY AN EARLIER BENCH. CONTEMPLATE A SITUATION IN WHICH AN EARLIER BENCH DECIDES AN ISSUE IN FAVOUR OF ONE PARTY, BE IT THE REVENUE OR THE ASSESSEE AND THE AGGR IEVED PARTY APPEALS AGAINST THE SAID TRIBUNAL ORDER WHICH IS ADMITTED BY THE HON BLE HIGH COURT. SUPPOSE SIMILAR ISSUE COMES UP BEFORE A SUBSEQUENT BENCH WHICH FINDS ITSELF UNABLE TO ENDORSE THE VIEW TAKEN BY THE EARLIER BENCH. THE ONLY COURSE OPEN TO THE SUBSEQUENT BENCH, AS PER THE AFORESTATED THREE JUDGMENTS, IS TO MAKE A REFERENCE TO THE PRESIDENT FOR THE CONSTITUTION OF A SPECIAL BENCH INSTEAD OF RECORDING A CONTRARY DECISION AT ITS OWN. ON THE CONSTITUTION OF THE SPECIAL BENCH IF AN ARGUMENT IS TAKEN THAT SINCE THE SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED BY THE HON BLE HIGH COURT AGAINST THE EARLIER ORDER OF THE TRIBUNAL AND HENCE SUCH REFERENCE BE WITHDRAWN, THERE WOULD BE A DEADLOCK. THE SUBSEQUENT BENCH WOULD LAND ITSELF IN A QUAGMIRE, BEING N EITHER IN A POSITION TO SWALLOW THE EARLIER VIEW NOR SPIT IT OUT. FOLLOWING THE EARLIER DECISION OF THE CO - ORDINATE BENCH WOULD BE DIFFICULT BECAUSE OF ITS NON - CONCURRENCE WITH IT. IN THE LIKE MANNER IT WOULD FIND ITS HANDS TIED TO DIRECTLY RECORD A CONTRA RY CONCLUSION BECAUSE OF THE PREVALENCE OF THE AFORESTATED LEGAL POSITION EXPRESSED BY THE HON BLE SUPREME COURT AND OTHER HON BLE HIGH COURTS PROHIBITING ADOPTING SUCH A COURSE OF ACTION. DISPOSAL OF APPEAL AGAINST THE EARLIER ORDER BY THE HON BLE HIGH CO URT MAY TAKE SEVERAL YEARS AND DURING THE CURRENCY OF THESE YEARS THE TRIBUNAL WOULD BECOME DEFUNCT ON SUCH ISSUES. 16. IN ORDER TO COME OUT OF SUCH A TRICKY SITUATION, THE LEGISLATURE HAS PROVIDED A SOLUTION BY ENSHRINING S. 255(3) EMPOWERING THE PRESIDE NT OF THE TRIBUNAL TO CONSTITUTE THE SPECIAL BENCH, WHICH READS AS UNDER : I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 9 OF 53 '255(3). THE PRESIDENT OR ANY OTHER MEMBER OF THE TRIBUNAL ....., AND THE PRESIDENT MAY, FOR THE DISPOSAL OF ANY PARTICULAR CASE, CONSTITUTE A SPECIAL BENCH CONSISTING OF THREE OR MORE MEMBERS, ONE OF WHOM SHALL NECESSARILY BE A JUDICIAL MEMBER AND ONE AN ACCOUNTANT MEMBER.' 17. A BARE PERUSAL OF THE RELEVANT PART OF SUB - S. (3) OF S. 255 TRANSPIRES THAT THE PRESIDENT MAY FOR THE DISPOSAL OF ANY PARTICULAR CASE CONSTITUTE A SPECIAL BENCH CONSISTING OF THREE OR MORE MEMBERS. THE PRESIDENT IS EMPOWERED TO CONSTITUTE A SPECIAL BENCH UNDER S. 255(3) ON HIS OWN VOLITION IF HE CONSIDERS ANY ISSUE OF A GREATER SIGNIFICANCE AFFECTING LARGE NUMBER OF TAXPAYERS OR DUE TO THE IMPORTANCE OF THE ISSUE EVEN IF IT DOES NOT AFFECT SEVERAL ASSESSEES OR OTHERWISE. THE POWERS OF THE PRESIDENT IN FORMING THE SPECIAL BENCH AT HIS OWN WILL ARE PLENARY, UNFETTERED AND UNLIMITED. APART FROM MAKING A SPECIAL BENCH ON THE PRESIDENT S OWN CHOICE, SUCH A BENCH C AN ALSO BE CONSTITUTED BY THE PRESIDENT ON A REPRESENTATION MADE EITHER BY THE ASSESSEE OR BY THE REVENUE. FURTHER IF A SINGLE MEMBER BENCH OF THE TRIBUNAL OR A DIVISION BENCH HEARING A PARTICULAR CASE CONSIDERS IT EXPEDIENT TO HAVE OPINION OF THE LARGER B ENCH ON THE ISSUE BECAUSE OF ITS VITAL IMPLICATIONS OR THEY FEEL THEMSELVES UNABLE TO AGREE WITH THE VIEW EXPRESSED BY AN EARLIER BENCH ON SIMILAR POINT, THEY CAN REQUEST THE PRESIDENT FOR THE MAKING OF A SPECIAL BENCH ON SUCH ISSUE. BESIDES THAT THERE MAY BE CERTAIN OTHER CIRCUMSTANCES ALSO IN WHICH THE PRESIDENT CAN CONSTITUTE SPECIAL BENCH UNDER S. 255(3) CONSISTING OF THREE OR MORE MEMBERS FOR THE DISPOSAL OF ANY PARTICULAR CASE. 18. THUS IT CAN BE NOTICED THAT THE CONSTITUTION OF THE SPECIAL BENCH CAS ES THE SITUATION IN A CASE WHERE THE SUBSEQUENT BENCH FINDS ITSELF UNABLE TO ENDORSE THE VIEW TAKEN BY THE EARLIER BENCH ON THE POINT. THE ORDER OF THE SPECIAL BENCH HELPS IN PROVIDING CONSISTENCY QUA DIFFERENT BENCHES OF THE TRIBUNAL UNTIL THE MATTER RECE IVES CONSIDERATION OF THE HIGHER JUDICIAL FORUMS. IT IS FURTHER PERTINENT TO NOTE THAT THE PRACTICE, SIMILAR TO THE CONSTITUTION OF SPECIAL BENCH BY THE TRIBUNAL TO RESOLVE A POSSIBLE CONFLICT IN THE VIEWS AMONGST VARIOUS BENCHES OF THE TRIBUNAL AND NOT WA ITING TILL THE MATTER IS FINALLY DECIDED BY THE HIGH COURT, IS ALSO UNIFORMLY FOLLOWED BY THE HIGH COURTS AS WELL. WHENEVER A VIEW IS TAKEN ON A POINT BY A BENCH OF A HIGH COURT AND THE SUBSEQUENT BENCH OF THE SAME HIGH COURT FINDS IT DIFFICULT TO ACCEPT T HE SAME, THE PRACTICE IS TO REFER THE MATTER TO THE CHIEF JUSTICE OF THE CONCERNED HIGH COURT FOR CONSTITUTION OF A LARGER BENCH. NOTWITHSTANDING THE FACT THAT SLP AGAINST THE JUDGMENT OF ITS EARLIER BENCH HAS BEEN ADMITTED BY THE HON BLE SUPREME COURT, TH E HON BLE HIGH COURT DOES NOT STOP ITS FUNCTIONING TO WAIT FOR THE OUTCOME BEFORE THE HON BLE SUPREME COURT FOR AN INDEFINITE TIME. THE LARGER BENCH SO CONSTITUTED HEARS THE MATTER AND GIVES ITS CONCLUSION, WHICH BECOMES FINAL QUA VARIOUS BENCHES OF I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 10 OF 53 THAT H IGH COURT UNTIL THE FINAL JUDGMENT IS RENDERED BY THE HON BLE SUPREME COURT. 19. THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ASIAN HOTELS LTD. (2008) 215 CTR (DEL) 84 : (2008) 2 DTR (DEL) 129 : (2010) 323 ITR 490 (DEL) HELD THAT NOTIONAL INTEREST ON REFUNDABLE INTEREST - FREE DEPOSIT RECEIVED FROM THE TENANT IS NEITHER TAXABLE AS BUSINESS INCOME UNDER S. 28(IV) NOR AS INCOME FROM HOUSE PROPERTY UNDER S. 23(1)(A). SUBSEQUENTLY SIMILAR ISSUE CAME UP BEFORE THE HON BLE DELHI HIGH COURT IN CIT VS. MONI K UMAR SUBBA (2010) 235 CTR (DEL) 132 : (2010) 45 DTR (DEL) 25 IN WHICH THE QUESTION WAS WHETHER NOTIONAL INTEREST ON INTEREST - FREE SECURITY DEPOSIT WAS TO BE TAKEN INTO CONSIDERATION TO ARRIVE AT FINAL VALUE OF THE PROPERTY. THE HON BLE COURT CONSIDERED THE EARLIER JUDGMENT IN THE CASE OF ASIAN HOTELS LTD. (SUPRA) AND ON OBSERVING THAT CERTAIN RELEVANT ASPECTS WERE NOT CONSIDERED IN THE AFORESAID EARLIER JUDGMENT, THE MATTER WAS REFERRED TO THE HON BLE CHIEF JUSTICE FOR CONSTITUTING FULL BENCH. THEREAFTER TH E MATTER CAME UP BEFORE THE LARGER BENCH OF THE HON BLE DELHI HIGH COURT IN CIT VS. MONI KUMAR SUBBA (2011) 240 CTR (DEL)(FB) 97 : (2011) 53 DTR (DEL)(FB) 289 : (2011) 333 ITR 38 (DEL)(FB). FROM THE ABOVE DISCUSSION IT CAN BE SEEN THAT THE SUBSEQUENT BENCH OF THE HON BLE DELHI HIGH COURT IN MONI KUMAR SUBBA (SUPRA) DID NOT FIND ITSELF IN RESPECTFUL CONCURRENCE WITH THE VIEW TAKEN IN THE CASE OF ASIAN HOTELS LTD. (SUPRA). INSTEAD OF ADOPTING ITS OWN VIEW CONTRARY TO THE ONE TAKEN EARLIER, THE MATTER WAS PLAC ED BY THE LATTER BENCH FOR CONSIDERATION BY THE LARGER BENCH FOR RENDERING FINALITY TO THE ISSUE. THE LATTER BENCH DID NOT STOP THE HEARING TO WAIT FOR THE HON BLE SUPREME COURT TO DECIDE ABOUT THE CORRECTNESS OF THE EARLIER JUDGMENT IN THE CASE OF ASIAN H OTELS LTD. (SUPRA). IT WAS RIGHT BECAUSE THE DISPOSAL BY THE HON BLE SUPREME COURT MAY HAVE TAKEN SEVERAL YEARS. WITH THE ADVENT OF THE DECISION BY THE LARGER BENCH THE ISSUE HAS NOW ATTAINED FINALITY INSOFAR AS THE HON BLE DELHI HIGH COURT IS CONCERNED. 20. SIMILAR PRACTICE IS FOLLOWED IN THE HON BLE SUPREME COURT AS WELL INASMUCH AS WHERE A BENCH DOUBTS THE CORRECTNESS OF THE VIEW EXPRESSED BY ITS ANOTHER BENCH OF SAME STRENGTH, THE CONTROVERSY IS REFERRED TO A LARGER BENCH. IT CAN BE NOTICED FROM THE JU DGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARAMENDRA TEXTILE PROCESSORS (2007) 212 CTR (SC) 432 THAT WHEN THE QUESTION OF PENALTY CAME UP BEFORE IT, AN EARLIER JUDGMENT IN THE CASE OF DILIP N. SHROFF VS. JT. CIT (2007) 210 CTR (SC) 228 : (2007) 291 ITR 519 (SC) WAS CITED IN WHICH THE VIEW WAS TAKEN IN ASSESSEE S FAVOUR. FINDING IT DIFFICULT TO APPROVE THE EARLIER VIEW IN DILIP N. SHROFF (SUPRA), THE MATTER WAS PLACED BEFORE THE LARGER BENCH TO TAKE A FINAL DECISION, WHICH HAS SI NCE BEEN DECIDED IN UNION OF INDIA & ORS. VS. DHARAMENDRA TEXTILE PROCESSORS & ORS. (2008) 219 CTR (SC) 617 : (2008) 14 DTR (SC) 114 : (2008) 306 ITR 277 (SC). I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 11 OF 53 21. IN THE NAME OF PRECEDENTS, THE LEARNED SENIOR AUTHORISED REPRESENTATIVE IN SUPPORT OF HIS O BJECTION, APART FROM RELYING ON CERTAIN ADMINISTRATIVE ORDERS PASSED BY THE HON BLE PRESIDENT, HAS RELIED ON THE SOLITARY CASE OF HARSHA ACHYUT BHOGLE (SUPRA). THAT CASE RESTED ON THE FACTS IN WHICH THE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSESSEE IN HI S OWN CASE IN THE EARLIER YEAR. WHEN THE SUBSEQUENT YEAR CAME UP FOR HEARING, THE ASSESSEE CAME OUT WITH A REQUEST THAT A SPECIAL BENCH BE FORMULATED ON THE SUBJECT BECAUSE THE TRIBUNAL IN ANOTHER CASE HAD TAKEN A DIFFERENT VIEW. THE DIVISION BENCH DEALING WITH THE ASSESSEE S CASE FOR THE SUBSEQUENT YEAR OBSERVED THAT THE FACTS OF THE OTHER CASE CITED BY THE ASSESSEE WERE DIFFERENT. FOLLOWING THE VIEW TAKEN BY THE EARLIER BENCH IN ASSESSEE S OWN CASE, THE TRIBUNAL REFUSED TO ACCEDE TO THE REQUEST OF THE ASS ESSEE THAT SPECIAL BENCH BE PROPOSED. 22. AT THE COST OF REPETITION WE REITERATE THAT CONSISTENCY IN THE APPROACH OF THE TRIBUNAL IN THE SENSE OF FOLLOWING THE EARLIER VIEW IS A RULE BUT DOUBTING ITS CORRECTNESS IS AN EXCEPTION. NO FAULT CAN BE FOUND WITH THE TRIBUNAL FOLLOWING THE VIEW TAKEN BY IT IN AN EARLIER CASE/YEAR WHEN IT IS SATISFIED WITH ITS CORRECTNESS. SO WHAT THE TRIBUNAL DID IN THE CASE OF HARSHA ACHYUT BHOGLE (SUPRA) WAS TO FOLLOW THE RULE OF CONSISTENCY. OBVIOUSLY NO EXCEPTION CAN BE FOUND IN THE WAY IN WHICH THE TRIBUNAL PROCEEDED WITH THE MATTER IN THAT CASE. WHEN AN ISSUE IS DECIDED IN FAVOUR OF ONE PARTY, THE AGGRIEVED PARTY MAY SEEK TO GET IT REVIEWED THROUGH THE ROUTE OF THE SPECIAL BENCH. UNLESS THE BENCH REALLY DOUBTS THE CORRECTNESS OF THE EARLIER VIEW, IT DOES NOT RECOMMEND THE MAKING OF A SPECIAL BENCH. WHEREAS THE CASE OF HARSHA ACHYUT BHOGLE (SUPRA) FELL IN THE DOMAIN OF THE RULE OF CONSISTENCY, THE CASE OF THE PRESENT ASSESSEE HAS FALLEN IN THE AMBIT OF EXCEPTION INASMUCH AS THE DIVISION BENCH WAS HESITANT TO FOLLOW THE EARLIER VIEW IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA). THUS IT IS AXIOMATIC THAT THERE IS A SEA CHANGE IN THE FACTS AND CIRCUMSTANCES PREVAILING IN THE CASE OF HARSHA ACHYUT BHOGLE (SUPRA) AND THOSE PRESENTLY UNDER CONSIDERATION. IN THAT CASE THE DIVISION BENCH WAS SATISFIED WITH THE CORRECTNESS OF THE VIEW TAKEN BY THE TRIBUNAL IN THE EARLIER YEAR AND THAT IS HOW IT REFUSED TO MAKE A REFERENCE FOR THE CONSTITUTION OF THE SPECIAL BENCH. WE ARE DEALING WITH A CA SE IN WHICH THE DIVISION BENCH IS NOT SATISFIED WITH THE CORRECTNESS OF THE EARLIER VIEW IN ZUARI INDUSTRIES LTD. (SUPRA) AND VERY GRACIOUSLY, INSTEAD OF IMPOSING ITS OWN CONTRARY VIEW, IT MADE A REFERENCE TO THE HON BLE PRESIDENT TO CONSTITUTE A SPECIAL B ENCH SO THAT A LARGER VIEW ON THE SUBJECT MAY COME ON SURFACE. 23. THUS IT CAN BE NOTICED THAT THE CASE OF HARSHA ACHYUT BHOGLE (SUPRA) DOES NOT ADVANCE THE CASE OF THE ASSESSEE ANY FURTHER. IN ALL CIRCUMSTANCES WHERE THE SUBSEQUENT BENCH FINDS IT DIFFICU LT TO ACCEPT AND ADOPT THE VIEW TAKEN BY THE EARLIER BENCH, THE ONLY COURSE OPEN TO IT IS TO MAKE A REFERENCE FOR THE CONSTITUTION OF THE SPECIAL BENCH. OUR VIEW IS FORTIFIED BY THE SPECIAL BENCH ORDER IN THE CASE OF DAKS COPY I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 12 OF 53 SERVICES (P) LTD. VS. ITO (19 89) 34 TTJ (MUMBAI)(SB) 604 : (1989) 30 ITD 223 (MUMBAI)(SB). IN THAT CASE THE POINT IN QUESTION WAS DECIDED AGAINST THE ASSESSEE IN AN EARLIER YEAR. WHEN THE SUBSEQUENT YEAR OF THAT ASSESSEE CAME UP BEFORE THE NEXT BENCH, IT WAS NOTICED THAT A CONTRARY VI EW WAS ALSO AVAILABLE. IN ORDER TO RESOLVE THIS CONFLICT A LARGER BENCH OF THREE MEMBERS WAS FORMED. IN THAT CASE ALSO A PRELIMINARY OBJECTION WAS RAISED ON BEHALF OF THE REVENUE THAT SINCE THE POINT IN CONTROVERSY WAS ALREADY DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN AN EARLIER YEAR AND SUCH MATTER WAS PENDING BEFORE THE HON BLE HIGH COURT, THE SAME VIEW SHOULD BE FOLLOWED IN THE SUBSEQUENT ASSESSMENT YEARS AS WELL AND AS SUCH THERE WAS NO NEED FOR A SPECIAL BENCH. REPELLING THIS CONTENTION, THE SPEC IAL BENCH HELD THAT WHEN THE SUBSEQUENT BENCH WAS NOT CONVINCED WITH THE EARLIER VIEW, THE CONSTITUTION OF THE LARGER BENCH FOR RESOLVING THE CONFLICTING DECISIONS OF THE BENCHES OF THE TRIBUNAL WAS IN ORDER. 24. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT SITUATION IS IDENTICAL APART FROM THE CHANGE OF PARTIES. WHEREAS IN THAT CASE THE REVENUE RAISED PRELIMINARY OBJECTION FOR NOT PROCEEDING WITH THE SPECIAL BENCH IN VIEW OF THE EARLIER BENCH S DECISION IN THEIR FAVOUR PENDING FOR ADJUDICATION BEFORE THE HON BLE HIGH COURT, NOW IS THE TURN OF THE ASSESSEE TO TAKE SIMILAR OBJECTION IN SEEKING THE DECONSTITUTION OF THE SPECIAL BENCH BECAUSE THE EARLIER DECISION GIVEN BY THE TRIBUNAL IN ITS FAVOUR IS AWAITING ADJUDICATION BY THE HON BLE HIGH COURT. AS THE FACTS AND CIRCUMSTANCES ARE SIMILAR IN THE PRESENT CASE, WE ARE NOT PERSUADED TO ACCEPT THE ASSESSEE S PRELIMINARY OBJECTION FOR WITHDRAWAL OF THE REFERENCE TO THE SPECIAL BENCH BY FOLLOWING THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CASE OF DAKS C OPY SERVICES (P) LTD. (SUPRA). 25. THERE IS ONE MORE ADDITIONAL REASON FOR NOT ACCEPTING THE ASSESSEE S PRELIMINARY OBJECTION. WE HAVE NOTICED FROM THE REFERENCE MADE BY THE DIVISION BENCH TO THE HON BLE PRESIDENT FOR THE CONSTITUTION OF THE SPECIAL BENCH THAT WHEN THE DIVISION BENCH EXPRESSED ITS DISAGREEMENT WITH THE EARLIER DECISION IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA), THE ASSESSEE TOOK A PLEA THAT IF THE DIVISION BENCH WAS NOT AGREEABLE WITH THE VIEW TAKEN BY THE TRIBUNAL IN ZUARI INDUSTRIES L TD. (SUPRA), THEN IT SHOULD MAKE A REFERENCE TO THE HON BLE PRESIDENT FOR THE CONSTITUTION OF SPECIAL BENCH. THE BENCH ACCEPTED THE ASSESSEE S REQUEST AND FOLLOWING THE JUDICIAL DISCIPLINE MADE SUCH REFERENCE TO THE HON BLE PRESIDENT. IT IS NOW THAT WHEN T HE SPECIAL BENCH HAS BEEN CONSTITUTED AND THE HEARING IS FIXED THAT THE ASSESSEE HAS COME UP WITH A PLEA THAT THE SPECIAL BENCH SHOULD BE DECONSTITUTED. WE ARE REMINDED OF THE DOCTRINE OF APPROBATE AND REPROBATE WHICH DEBARS A PERSON FROM BLOWING HOT AND C OLD IN THE SAME FLOW. ONE CANNOT APPROVE AND REJECT THE SAME THING IN THE SAME STREAM. THE ASSESSEE IS TRYING TO DO THE SAME IN THE INSTANT CASE. WHEN DURING THE HEARING OF ITS CASE BY THE DIVISION BENCH IT FOUND THE BENCH TO BE NOT ACCEPTING THE DECISION IN I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 13 OF 53 THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA) WHICH WAS IN ITS FAVOUR, THE ASSESSEE REQUESTED THE BENCH TO MAKE A REFERENCE TO THE HON BLE PRESIDENT FOR CONSTITUTING A SPECIAL BENCH. WITH SUCH A REQUEST THE ASSESSEE FOUND AN ESCAPE ROUTE FROM THE VIEW LIKEL Y TO BE TAKEN AGAINST IT. NOW IT IS PRESSING THAT THE REFERENCE TO THE SPECIAL BENCH BE WITHDRAWN AND THE CASE BE HEARD BY THE DIVISION BENCH SO THAT THE EARLIER VIEW IN THE CASE OF ZUARI INDUSTRIES LTD. (SUPRA) MAY BE PRESSED INTO SERVICE ONCE AGAIN. WE A RE UNABLE TO FIND A SOLUTION TO THE LIKELY PROBLEM TO ARISE IF THE ASSESSEE S CONTENTION IS ACCEPTED AND THE SPECIAL BENCH IS DECONSTITUTED AND AGAIN THE DIVISION BENCH FINDS ITSELF UNABLE TO AGREE WITH THE EARLIER VIEW. WILL THE ASSESSEE IN THAT CASE AGAI N REQUEST THE DIVISION BENCH TO MAKE A REFERENCE FOR THE CONSTITUTION OF SPECIAL BENCH AND ON SUCH CONSTITUTION WIL L AGAIN REQUEST TO DISMANTLE IT ? LAW DOES NOT PERMIT A PERSON TO BOTH APPROBATE AND REPROBATE. WHEN THE SPECIAL BENCH HAS ACTUALLY BEEN CONST ITUTED AT THE PLEA OF THE ASSESSEE, NOW THE ASSESSEE CANNOT TURN AROUND AND ARGUE THAT THE SPECIAL BENCH BE DECONSTITUTED. WE DO NOT APPROVE SUCH A VACILLATING STAND OF THE ASSESSEE. 26. IT IS BEYOND OUR COMPREHENSION AS TO WHAT DIFFERENCE IT MAKES TO THE ASSESSEE WHEN HIS CASE IS HEARD BY THE DIVISION BENCH OR THE SPECIAL BENCH. THE HEARING BY THE SPECIAL BENCH INTER ALIA, IS ONLY TO REGULARIZE THE WORKING OF THE TRIBUNAL AIMED AT ACHIEVING A UNIFORM VIEW BY DIFFERENT BENCHES ON THE POINT. THE ASSESSEE S INTEREST IS NOT AFFECTED IN ANY MANNER WHETHER THE CASE IS HEARD BY THE DIVISION BENCH OR THE SPECIAL BENCH. THE ASSESSEE S LOGIC FOR WITHDRAWING THE REFERENCE TO THE SPECIAL BENCH ON THE GROUND THAT SIMILAR ISSUE IS PENDING FOR ADJUDICATION BEFORE THE HON BLE HIGH COURT WOULD APPLY WITH FULL FORCE EVEN TO THE MATTERS PENDING BEFORE THE DIVISION BENCH. TOMORROW SOMEONE WILL COME OUT WITH A SIMILAR PLEA REQUESTING THE KEEPING OF THE SUBSEQUENT APPEALS IN THE DIVISION BENCH ALSO ON HOLD TILL THE EARLIER DECIS ION OF THE CO - ORDINATE BENCH IS EXAMINED AND FINALLY DECIDED BY THE HON BLE HIGH COURT. ACCEPTING SUCH LOGIC WOULD MEAN MAKING THE TRIBUNAL NON - OPERATIONAL. WE CANNOT ACCEPT SUCH A CONTENTION. 11. THE VIEWS SO EXPRESSED BY THE SPECIAL BENCH ALSO DESERVE U TMOST RESPECT AND REV ERENCE FROM THIS DIVISION BENCH. WE THUS HAVE A PECULIAR SITUATION IN WHICH CONFLICTING VIEWS ARE EXPRESSED BY DIFFERENT SPECIAL BENCHES , AND WE HAVE TO RECONCILE THESE VIEWS NEVERTHELESS. THE SAVING GRACE OF THIS CONFLICTING SITUATION IS THAT THERE IS A MATERIAL DIFFERENCE IN THE SITUATIONS FACED BY THE TWO SPECIAL BENCHES IN THE SENSE THAT WHILE, IN THE CASE OF TIVOLI (SUPRA), THE APPEALS PENDING BEFORE THE HON BLE HIGH COURT, IN WHICH THE SAME QUESTIONS OF LAW WERE ADMITTED, WERE IN ASSESSEE S OWN CASE, WHILE IN SUMMIT SECURITIES CASE (SUPRA), THE SIMILAR QUESTIONS WERE ADMITTED IN THE CASE OF A DIFFERENT ASSESSEE, I.E. ZUARI INDUSTRIES LIMITED. AS FOR THE DECISION IN THE CASE OF DAK COPY SERVICES PVT LTD [(1989) 30 ITD SB 223 (BOM)] , RELIED UPON IN SUMMIT SECURITIES DECISION (SUPRA) , IT WAS NOT AT ALL THE ISSUE BEFORE THAT SPECIAL BENCH IN THE CASE OF DAK COPY SERVICES (SUPRA) WHETHER, IN I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 14 OF 53 THE LIGHT OF THE SIMILAR QUESTION HAVING BEEN ADMITTED FOR ADJUDICATION BY HON BLE JURISDICTIONA L HIGH COURT, THE SPECIAL BENCH SHOULD CONDUCT THIS PARALLEL EXERCISE AT ALL. THE SHORT POINT MADE BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, IN THAT CASE, WAS THAT ONCE TRIBUNAL HAS TAKEN A PARTICULAR VIEW OF THE MATTER IN THE CASE OF THIS VERY ASSESSEE, THOUGH IN A DIVISION BENCH, THE SAME VIEW SHOULD BE FOLLOWED EVEN BY THE SPECIAL BENCH AND DESPITE A CONTRARY VIEW HAVING BEEN EXPRESSED BY ANOTHER DIVISION BENCH IN THE CASE OF SOME OTHER ASSESSEE . THIS ASPECT OF THE MATTER IS CLEAR FROM THE OBSERVATION MADE BY THE SPECIAL BENCH TO THE EFFECT THAT (T)HE LEARNED DEPARTMENTAL REPRESENTATIVE BY WAY OF A PRELIMINARY OBJECTION SUBMITTED THAT SINCE THE POINT IN CONTROVERSY, AFTER ELABORATE DISCUSSION, HAD BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN T HE APPEAL FOR EARLIER YEARS AND THE MATTER WAS PENDING BEFORE THE HIGH COURT IN REFERENCE UNDER S.256(1) OF THE ACT, THE SAME VIEW SHOULD BE ADOPTED FOR THE ASSESSMENT YEARS WITH WHICH WE ARE CONCERNED AND THAT NO DEPARTURE FROM THAT VIEW SHOULD BE MADE ON THE GROUND THAT A DIFFERENT VIEW HAD BEEN TAKEN IN THE CASE OF ANOTHER ASSESSEE BY ANOTHER BENCH OF THE TRIBUNAL . THIS PLEA WAS REJECTED BY THE SPECIAL BENCH ON THE GROUND THAT WE ARE BOUND TO CONSIDER ALL THE ASPECTS OF THE POINTS IN CONTROVERSY AFRESH AND COME TO INDEPENDENT CONCLUSION AND THE FACT THAT IN THE EARLIER YEARS THE POINT HAD BEEN DECIDED AGAINST THE ASSESSEE WOULD NOT BY ITSELF PRECLUDE THE SPECIAL BENCH FROM TALKING A CONTRARY VIEW . THE ISSUE WHETHER CONSTITUTION OF A SPECIAL BENCH WOULD BE JUSTIFIED IN A SITUATION IN WHICH THE MATTER IS PENDING BEFORE HON BLE HI GH COURT IN ASSESSEE S OWN CASE WAS NEITHER RAISED BY THE PARTIES NOR DECIDED BY THE SPECIAL BENCH. IT IS ONLY ELEMENTARY THAT A JUDICIAL PRECEDENT IS BINDING FOR WHAT IS ACTUALLY DECIDES AND NOT FOR WHAT MAY EVEN LOGICALLY FOLLOW FROM THIS. AS HELD BY HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SUDHIR JAYANTILAL MULJI [(1995) 214 ITR 154 (BOM)], A JUDICIAL PRECEDENT IS ONLY 'AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT W HAT MAY COME TO FOLLOW FROM SOME OBSERVATIONS WHICH FIND PLACE THEREIN'. THE PROPOSITIONS WHICH ARE ASSUMED BY THE COURT TO BE CORRECT FOR THE PURPOSE OF DECIDING THE SAME ARE, ACC ORDING TO THIS BINDING JUDICIAL PRECEDENT , LACK PRECEDENCE VALUE AND ARE NOT BINDING IN NA TURE. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT , ON THE FACTS OF THE CASE OF TIVOLI (SUPRA), AN ORDER PASSED BY THE PRESIDENT DISBANDING A SPECIAL BENCH CANNOT BE TERMED AS AN ADMINISTRATIVE ORDER, AS IT DEALS WITH A JUDICIAL MATTER AND IS A REASONED ORDER WEIGHING PROS AND CONS OF JUDICIAL POSITION , AND PARTICULARLY AS IT IS ACCEPTING A RECOMMENDATION MADE, IN JUDICIAL CAPACITY, BY THE SPECIAL BENCH . THE CONSTITUTION OF SPECIAL BENCH IS SOMETHING TO BE DECIDED BY THE PRESIDENT OF TH E TRIBUNAL , AND THE ROLE OF THE DIVISION BENCH IS NO MORE THAN RECOMMENDATORY , EVEN THOUGH JUDICIAL, IN NATURE. AS NOTED BY HON BLE SUPREME COURT, IN THE CASE OF ITAT VS DCIT [(1996) 218 ITR 275 (SC)], THIS CALL FOR CONSTITUTION OF A SPECIAL BENCH IS TO BE TAKEN IN ADMINISTRATIVE CAPACITY BY THE PRESIDENT, AND HE CAN DO SO EVEN SUO MOTU . , WHEN HE THINKS IT IS A FIT CASE TO DO SO. IT IS NOT THE DOMAIN OF A DIVISION OR EVEN SPECIAL BENCH TO ACTUALLY DECIDE AS TO HOW THE PRESIDENT OF THIS TRIBUNAL SHOULD EXERC ISE SUCH A DISCRETION OF CONSTITUTING THE SPECIAL BENC HES , EVEN THOUGH THESE BENCHES, IN THE COURSE OF THEIR JUDICIAL FUNCTIONING, CAN MAKE RECOMMENDATIONS FOR CONSTITUTION OR DISBANDING OF THE SPECIAL BENCHES . THE SUCCESSIVE PRESIDENTS OF THIS TRIBUNAL H AVE CONSISTENTLY TAKEN A POSITION THAT IN A SITUATION IN WHICH THE SAME ISSUE IS PENDING BEFORE THE HON BLE HIGH COURT IN ASSESSEE S OWN CASE, A SPECIAL BENCH CANNOT BE I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 15 OF 53 CONSTITUTED TO DECIDE THAT ISSUE. SUCH BEING THE SETTLED POSITION, EVEN MAKING A REFERE NCE FOR CONSTITUTION OF SPECIAL BENCH IN THIS CASE WILL BE A MEANINGLESS FORMALITY. THAT IS APART FROM THE FACT THAT EVEN MAKING SUCH A RECOMMENDATION WILL BE CONTRARY TO THE LAW LAID DOWN IN THE PROCESS OF RECOMMENDING DISBANDING OF SPECIAL BENCH IN THE C ASE OF TIVOLI INVESTMENT (SUPRA). AS REGARDS THE SUMMIT SECURITIES (SUPRA) DECISION OF THE SPECIAL BENCH, AS WE HAVE ALREADY NOTED, THAT WAS A CASE IN WHICH IDENTICAL ISSUE WAS PENDING BEFORE HON BLE HIGH COURT IN THE CASE OF SOME OTHER ASSESSEE, NOT THE ASSESSEE HIMSELF. WE MUST ALSO BEAR IN MIND THE FACT THAT, PLACED IN A LOWER TIER OF JUDICIAL HIERARCHY, W E , BEING A DIVISION BENCH, HAVE TO HARMONISE THESE BINDING PRECEDENTS. VIEWED IN THIS PERSPECTIVE, AND WITH ANALYSING THE LEGAL POSITION WITH THIS OBJ ECTIVE, WE FIND THAT T HE SUM TOTAL OF THESE DISCUSSION IS THAT (A) SUMMIT SECURITIES DECISION WAS IN A SITUATION IN WHICH THE APPEAL ADMITTED, AND PENDING FOR FINAL ADJUDICATION, BY HON BLE HIGH COURT WAS IN THE CASE OF A PERSON OTHER THAN THE ASSESSEE CON CERNED, AND WOULD NOT, THEREFORE, APPLY TO THE FACT SITUATION BEFORE US; (B) DAK COPY CENTRE DECISION DID ONLY DEAL WITH THE LIMITED PLEA OF THE ASSESSEE THAT SPECIAL BENCH SHOULD FOLLOW EARLIER DIVISION BENCH IN ASSESSEE S OWN CASE, EVEN IF A CONTRARY VIE W IS TAKE BY A DIVISION BENCH IN SOME OTHER CASE; AND, THEREFORE, (C) TIVOLI DECISION HOLDING THAT WHEN THE MATTER IS ADMITTED, AND PENDING FOR FINAL ADJUDICATION, BY HON BLE JURISDICTIONAL HIGH COURT IN ASSESSEE S OWN CASE, THERE IS NO NEED FOR CONSTITUTI ON OF SPECIAL BENCH ON THE SAME ISSUE, HOLDS GOOD LAW AND THERE IS NO CONTRARY JUDICIAL PRECEDENT TO THE SAME . RESPECTFULLY FOLLOWING THE ESTEEMED VIEWS OF THE SPECIAL BENCH, DIRECTLY ON THE ISSUE IN THE CASE OF TIVOLI INVESTMENT (SUPRA) , WE REJECT THE CON TENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, AND DECLINE TO REFER THE ISSUE REGARDING SELECTION OF A NON - RESIDENT ENTITY AS A TESTED PARTY FOR THE CONSIDERATION OF A SPECIAL BENCH. 12. WE MAY ALSO ADD THAT, WITH A VIEW TO AVOID ANY CONTROVERSY AND LITIGATION ON THIS PROCEDURAL ISSUE, WE DID WAIT FOR, AND RECHECKED, THE POSITION REGARDING STATUS OF THE PENDING APPEAL BUT THE MATTER IS STILL PENDING BEFORE THEIR LORDSHIPS AND IT WOULD NOT BE APPROPRIATE FOR US TO HOLD DISPOSAL OF THESE APPEALS ANY FU RTHER - PARTICULARLY AS IT IS SECOND ROUND OF LITIGATION. 13. LET US NOW ADDRESS OURSELVES TO THE CORE ISSUES IN APPEAL ON MERITS. 14 . THIS IS SECOND ROUND OF PROCEEDINGS BE FORE THIS TRIBUNAL. THE MATTER WITH RESPECT TO BOTH OF THESE ASSESSMENT YEARS HAD EARLIER COME UP BEFORE A COORDINATE BENCH OF THIS TRIBUNAL, AND THE SAID COORDINATE BENCH, VIDE ORDER DATED 2 ND AUGUST 2013, REMITTED THE MATTER BACK TO THE ASSESSMENT STAGE WITH A DIRECTION TO RE - EXAMINE THE MATTER IN THE LIGHT OF CERTAIN DIRECTIONS. WHA T IS BEFORE U S IN THESE APPEALS IS CHALLENGE TO THE STAND TAKEN IN THE COURSE OF PROCEEDINGS SO REMANDED BY T HE TRIBUNAL. SO FAR AS THE TRANSFER PRICING ISSUES ARE CONCERNED, IN THE ASSESSMENT YEAR 2006 - 07 - WHICH WE WILL TAKE UP AS THE LEAD YEAR, THERE ARE ONLY TWO ADJUSTMENTS IN CHALLENGE - FIRST, ARM S LENGTH PRICE ADJUSTMENT OF RS 33.49 CRORES IN RESPECT OF IMPORTS OF COMPLETELY KNOCKED DOWN KITS (CKD KITS); AND SECOND, ARM S LENGTH PRICE ADJUSTMENT OF RS 19.66 CRORES IN RESPECT OF PROVISION FOR ENGINEE RING SERVICES. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 16 OF 53 15. THE ASSESSEE BE FORE US IS A COMPANY ENGAGED IN THE BUSINESS OF ASSEMBLY, MARKETING AND SALES OF MOTOR VEHICLES, AND SALE OF SPARE PARTS AND ACCESSORIES. GENERAL MOTORS ASIA PACIFIC HOLDINGS LLC USA IS STATED TO CURRENTLY HOLD 83.91% O F ITS EQUITY AND THE EQUITY OF 16.08% IS HELD BY THE HOLDEN LIMITED AUSTRALIA. THE ASSESSEE REPORTED INTERNATIONAL TRANSACTIONS , INTER ALIA, IN RESPECT OF IMPORTS OF CKD KITS AND COMPONENTS FOR AN AMOUNT OF RS 149,44,65,321, AND IMPORTS OF SPARE PARTS AND ACCESSORIES FOR AN AMOUNT OF RS 17,35,17,920. THESE TRANSACTIONS WERE BENCHMARKED UNDER THE TRANSACTIONAL NET MARGIN METHOD (TNMM) . THE ASSESSEE ADOPTED THE GM - DAT, KOREA, ITS ASSOCIATED ENTERPRISES FROM WHICH THESE IMPORTS WERE EFFECTED, AS THE TESTED PA RTY. IN THE COURSE OF PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER, THE ASSESSEE S CLAIM OF DM - DAT AS TESTED PARTY, AS ALSO THE TRANSFER PRICING STUDY IN SUPPORT OF THIS STAND, WAS NOTED BUT REJECTED. THE TRANSFER PRICING OFFICER WAS OF THE VIEW THAT IN THE ABSENCE OF RELIABILITY OF DATA, IT IS NOT POSSIBLE TO TREAT GM - DAT AS TESTED PARTY AS FURTHER ANALYSIS OF TRANSFER PRICING IS BASED ON RELIABILITY OF THESE DATA . THE TRANSFER PRICING OFFICER WAS FURTHER OF THE VIEW THAT SELECTION OF GMDAT AS TESTE D PARTY BECAUSE THE TESTED PARTY SHOULD BE LEAST COMPLEX ENTITY WHICH DOES NOT OWN VALUABLE INTANGIBLE PROPERTY OR UNIQUE ASSETS, WHILE GMDAT OWNS UNIQUE INTANGIBLES AND CARRIES OUT LARGE NUMBER OF RELATED PARTY TRANSACTIONS WITH ITS SUBSIDIARIES. HE ALSO NOTED THAT THE GMDAT IS RECEIVING ROYALTY/ TECHNICAL KNOWHOW FEES FROM LARGE NUMBER OF ITS SUBSIDIARIES IN DIFFERENT PARTS OF EUROPE AND ASIA. IT WAS ALSO NOTED THAT THERE IS NO DISPUTE ABOUT OWNERSHIP AND DEVELOPMENT OF MANUFACTURING INTANGIBLES BY GMDAT . THE ASSESSEE S PLEA ABOUT AVAILABILITY OF SUB - SEGMENTAL DATA, WHICH DOES NOT REFLECT IMPACT OF INTANGIBLES, WAS ALSO REJECTED BECAUSE, AS NOTED BY THE TPO, ENTITY SHOULD BE LEAST COMPLEX, NOT THE DATA . IT WAS ALSO NOTED THAT THE CHOICE OF TESTED PARTY MAY ALSO BE RESTRICTED BY LIMITED DATA AVAILABILITY REGARDING THE TRANSACTIONS UNDERTAKEN BY ENTERPRISE LOCATED IN A DIFFERENT TAX JURISDICTION. THE TRANSFER PRICING OFFICER THUS REJECTED THE GMDAT AS THE TESTED PARTY. THE TRANSFER PRICING OFFICER THEN P ROCEEDED TO TREAT THE ASSESSEE AS A TESTED PARTY AND SELECTED COMPARABLES. THE CAPACITY UNDERUTILIZATION ADJUSTMENT ETC, AS MADE BY ASSESSEE, WERE REJECTED. THE NET OPERATING MARGIN OF THE ASSESSEE WAS COMPUTED AT 3.45% WHEREAS THE NET OPERATING MARGIN OF THE COMPARABLES WAS COMPUTED AT 8.145. IT WAS IN THIS BACKGROUND THAT THE TPO PROCEEDED TO MAKE AN ADJUSTMENT OF RS 33.49 CRORES IN RESPECT OF THE IMPORTS OF CKDS FROM THE AES. AS FOR THE TECH CENTRE OF THE ASSESSEE, WHICH IS A RESEARCH AND DEVELOPMENT CE NTRE - ALSO KNOWN AS INDIA SC IENCE LAB, IT WAS NOTED THAT, AS PER THE ASSESSEE, IT IS PERFORMING ROUTINE, AND LOW VALUE ADDITION RESEARCH AND DEVELOPMENT ACTIVITIES. THE TPO, HOWEVER, NOTED THAT 6% OF ITS WORK FORCE IS HOLDING PH. D. QUALIFICATIONS, 37% ME/ M TECH QUALIFICATIONS, 57% B E/ B TECH QUALIFICATIONS AND 3% BUSINESS ADMINISTRATION QUALIFICATIONS. HE ALSO NOTED THE STATEMENT MADE BY THE CHAIRMAN OF COMPANY, AND CONCLUDED THAT ALL THIS SHOWS TECHNICAL CAPABILITIES OF TECH CENTRE, WHICH HAS HUGE INTEL LECTUAL ASSET BASE . IT WAS ALSO NOTED THAT THE ASSESSEE COMPANY HAS BEEN COMPENSATED BY GE AT COST PLUS 5% BASIS , AND THAT ITS NET OPERATING MARGIN SHOWS 5.79% ON COST. THE TPO ACCEPTED TNMM AS THE MOST APPROPRIATE METHOD BUT REJECTED THE USE OF MULTIPLE YEAR DATA. AS AGAINST THE SEVEN COMPARABLES CHOSEN BY THE ASSESSEE, I.E. ACE SOFTWARE EXPORTS LTD, GENESYS INTERNATIONAL CORPORATION LTD, KGS SYSTEL LIMITED, ONWARD TECHNOLOGIES LIMITED, I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 17 OF 53 PENTASOFT TECHNOLOGIES LTD, TATA TECHNOLOGIES LTD AND ZENSAR TECHNO LOGIES LTD, THE TRANSFER PRICING OFFICER FINALIZED FOUR COMPARABLES, NAMELY HCL TECHNOLOGIES LTD, KLG SYSTEL LTD, POWERSOFT GLOBAL SOLUTIONS LTD AND ROLTA INDIA LTD. THE ARITHMETIC MEAN OF THE PROFIT MARGIN OF THESE COMPARABLES CAME TO 30.28% . AN ALP ADJUS TMENT OF RS 19.66 CRORES WAS MADE ON THAT BASIS. AGGRIEVED, ASSESSEE RAISED GRIEVANCES BEFORE THE DRP BUT WITHOUT ANY SUCCESS. THE ASSESSING OFFICER, ACCORDINGLY, PROCEEDED TO MAKE ALP ADJUSTMENTS OF RS 33.49 CRORES FOR THE IMPORTS OF CKD AND RS 19.66 CRO RES FOR THE TECH CENTRE OPERATIONS. ON THE SIMILAR LINES, THOUGH WITH SOME VARIATIONS IN COMPARABLES SELECTED FOR TECH CENTRE OPERATI ONS , THE ASSESSING OFFICER ALSO MADE ALP ADJUSTMENTS FOR THE ASSESSMENT YEAR 2007 - 08 WHICH WERE QUANTIFIED AT RS 237.73 CRO RES THE CKD IMPORTS AND RS 18.98 CRORES FOR TECH CENTRE OPERATIONS. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE A COORDINATE BENCH OF THIS TRIBUNAL. 16. THE COORDINATE BENCH, VIDE ORDER DATED 2 ND AUGUST 2013 IN THE FIRST ROUND OF PROCEEDIN GS, REMITTED BOTH OF THESE ISSUES TO THE FILE OF THE TRANSFER PRICING OFFICER. THE OPERATIVE PORTION OF THE ORDER OF THE COORDINATE BENCH WAS AS FOLLOWS: (A) ON THE ISSUE OF ALP ADJUSTMENT FOR CKD KIT IMPORTS 11.6.1. WE ARE IN DISAGREEMENT WITH THE REVEN UE S ARGUMENT THAT GMDAT SHOULD NOT BE SELECTED AS A TESTED PARTY AS THE COMPARABLE AS THE COMPARABLE COMPANIES SELECTED BY THE ASSESSEE DOESN T FALL WITHIN THE AMBIT OF TPO S JURISDICTION AND, THUS, HE CAN NEITHER CALL FOR ANY ADDITIONAL INFORMATION NOR SCRUTINIZE THEIR BOOKS OF ACCOUNTS. THE REVENUE CAN GET ALL THE RELEVANT PARTICULARS AROUND THE GLOBE BY USING THE LATEST TECHNOLOGY UNDER ITS THUMB OR DIRECT THE ASSESSEE TO FURNISH THE SAME. 11.6.2. AS RIGHTLY HIGHLIGHTED BY THE ASSESSEE, WE FIND INCON SISTENCY IN THE APPROACH OF THE TPO WITH REGARD TO THE ISSUE OF TESTED PARTY . ON THE ONE HAND, THE TPO AVERRED THAT THERE WAS NO RELIABLE DATA AVAILABLE FOR BOTH GMDAT AND COMPARABLES; HOWEVER, ON THE OTHER HAND, HE HAD CONVENIENTLY TAKEN GMDAT AS THE T ESTED PARTY WHILE MAKING ADJUSTMENT TO TRANSACTION RELATING TO PAYMENT OF ROYALTY BY THE ASSESSEE TO GMDAT. THIS EXPOSES THE INCONSISTENCY APPROACH OF THE TPO. 11.6.3. THE FINANCIAL STATEMENTS OF COMPARABLE COMPANIES HAVE SINCE BEEN AUDITED BY THE INDEPE NDENT AUDITORS AND, THUS, THERE CAN BE NO RESERVATION IN PLACING A RELIANCE ON THE SAME. 11.6.4. HOWEVER, THE LEARNED SR. COUNSEL SUBMITTED THAT SEGMENT FINANCIAL DATA FOR BENCHMARKING - A PART OF GMDAT S BUSINESS - WAS MADE AVAILABLE TO THE TPO AND ALSO ON HIS REQUEST, THE FINANCIAL STATEMENTS OF GMDAT (AT COMPANY LEVEL) WAS FURNISHED TO THE TPO AND THE SAME IS NOT DISPUTED. THEREFORE, THERE SHOULD BE NO GRIEVANCE ON THE PART OF THE REVENUE TO SAY THAT NO SUFFICIENT DATA WAS MADE AVAILABLE. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 18 OF 53 11.6.5. TAKIN G ALL THE ABOVE FACTS AND CIRCUMSTANCES OF THE ISSUE AS DISCUSSED IN THE FOREGOING PARAGRAPHS, IN CONSONANCE WITH THE CASE LAWS QUOTED (SUPRA) AND ALSO THE UNITED NATION S PRACTICAL MANUAL ON TRANSFER PRICING, WE DIRECT THE TPO TO ADOPT GMDAT AS THE TESTE D PARTY FOR ANALYZING THE INTER - COMPANY TRANSACTIONS OF THE ASSESSEE FOR BOTH THE AYS UNDER CONSIDERATION. TO FACILITATE THE TPO TO ANALYZE THE INTER - COMPANY TRANSACTIONS IN THE CASE OF THE ASSESSEE BY SELECTING GMDAT AS TESTED PARTY AS DIRECTED ABOVE, THIS ISSUE IS RESTORED ON THE FILES OF THE TPO. IT IS ORDERED ACCORDINGLY. (B) ON THE ALP ADJUSTMENT FOR TECH CENTRE OPERATIONS 17.8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS ON THE ISSUE AS RECORDED SUPRA. THE DRP FOR THE AY 2007 - 08 HAD, IN A UNIQUE WAY CRYPTICALLY RECORDED ITS DIRECTIONS AS UNDER: '1 1 THE ASSESSEE HAS NOT GIVEN ANY ARGUMENTS AGAINST ACE SOFTWARE EXPORTS LIMITED AND KLG SYSTEL LTD. M/S. POWERSOFT GLOBAL SOLUTIONS LIMITED DOES NOT HAVE RELATED PARTY TRANSACTIONS. ROLTA INDIA LIMITED HAS ONLY 20% RELATED PARTY TRANSACTIONS. THEREFORE, THE WORKING OF THE TPO DESERVES T O BE SUSTAINED .' 17.8. 1. THE DRP S ASSUMPTION WAS THAT THE ASSESSEE HAD NOT PUT FORTH ANY ARGUMENTS WITH REGARD TO ACE SOFTWARE EXPORTS AND KLG SYSTEL LIMIT ED. 17.8.2. THE ASSESSEE HAD IDENTIFIED ITSELF AS LOW - END ENGINEERING AND R&D WORK AND A SMALL MARKUP OF 7% WAS GIVEN FOR ITS WORK. HOWEVER, THE TPO ANALYZED THE SELECTED PARTIES AND REJECTED FOR THE REASONS RECORDED [WHICH HAVE BEEN CITED SUPRA] THE FOLL OWING COMPANIES: (I) ONWARD TECHNOLOGIES LIMITED; (II) PENTASOFT TECHNOLOGIES LIMITED; (III) TATA TECHNOLOGIES LIMITED 17.8.3. HOWEVER, IT WAS CONTENTION OF THE ASSESSEE THAT THE TPO ERRED WHILE STATING THAT ASSESSEE S TECH - CENTER IS ENGAGED IN PROVIDI NG HIGH - END RESEARCH SERVICES. TECH - CENTER IS ESSENTIALLY ENGAGED IN PROVISION OF ENGINEERING DESIGN AND ANALYSIS OF AUTOMOBILE PARTS, ASSEMBLIES AND MANUFACTURING TOOLS. THIS ENTAILS PROVISION OF COMPUTER - AIDED DESIGN AND DATA TRANSLATION SERVICES. SUCH S ERVICES INVOLVE PRODUCT ASSEMBLY DOCUMENTATION, EXTERIOR AND INTERIOR SURFACING / DESIGNING, 3D MODELING AND 2D DRAWINGS ETC. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 19 OF 53 17.8.4. IT WAS FURTHER SUBMITTED THAT TECH - CENTER FOCUSES MAINLY ON PROVIDING ROUTINE SERVICES IN RELATION TO NEXT GENERATION MAT ERIALS, DESIGNS, MANUFACTURING PROCESSES. PRIMARY RESEARCH AND DEVELOPMENT OF STRATEGY (INCLUDING IDENTIFICATION OF PROJECTS) IS DONE AT US LEVEL. WORK IS PERFORMED WITHIN TECH - CENTER USING THE STANDARD GM PRACTICES AND PROCESSES. THERE ARE STANDARD BUDGE TARY CONTROLS AND PROCEDURES APPLICABLE FOR ISL INCLUDING STANDARD PROCESS OF APPROVALS BASED ON COST OF PROJECTS. THESE GUIDELINES AND PROCEDURES ARE COMMON FOR ALL GM OPERATIONS AROUND THE WORLD. THESE PROCEDURES ARE DEFINED IN ADVANCE BEFORE EXECUTING T HIS WORK FROM INDIA. ISL IS ENGAGED IN PROVISION OF VARIOUS SUPPORT SERVICES FOR COMPUTER AIDED DESIGNING AND ANALYSIS OF AUTOMOBILE PARTS FOR THE GROUP S INTERNAL REQUIREMENTS FOR PROVISION OF ENGINEERING SERVICES. IT WAS, FURTHER, SUBMITTED THAT THE TPO S ASSERTION THAT PROVISION OF CAD/CAM SERVICES IS FUNCTIONALLY COMPARABLE TO PROVISION OF HIGH - END RESEARCH SERVICE PROVIDERS IS MISPLACED. IT WAS ALSO POINTED OUT THAT THE TPO ERRED IN REJECTING FOUR OUT OF SIX COMPARABLES SELECTED BY THE ASSESSEE ON THE FOLLOWING REASONS: (I) DIFFERENT BUSINESS PROFILE; (II) SEGMENTAL RESULTS NOT AVAILABLE; & (III) RELATED PARTY TRANSACTIONS. 17.8.5. THE TPO WAS INCONSISTENT WHILE APPLYING FILTERS AND SELECTING THE FINAL COMPARABLES. THE ASSESSEE HAD ALSO ASSAILED THE REJECTION OF COMPANIES SUCH AS (I) ONWARD TECHNOLOGIES LTD., (II) PENTASOFT TECHNOLOGIES LTD., (III) PSI DATA SYSTEMS LTD; & (IV) TATA TECHNOLOGIES LIMITED AND ALSO OBJECTED TO THE SELECTION OF (I) POWERSOFT GLOBAL SOLUTIONS LIMITED, (II) ROLTA INDIA LIMI TED FOR THE REASONS WE HAVE ALREADY RECORDED (SUPRA). 17.9. WE HAVE DULY CONSIDERED THE ISSUE IN DETAIL. SURPRISINGLY, THE DRP S DIRECTION, WHICH WAS BALD AND CRYPTIC, HAD SUBSCRIBED THAT THE FUNCTIONS ETC OF ALL THESE COMPANIES ARE COMPARABLE WITH THE AS SESSEE. THEREFORE, THE WORKING OF THE TPO DESERVES TO BE SUSTAINED. HOW DID THE DRP COME TO SUCH CONCLUSION THAT THE WORKING OF THE TPO DESERVES TO THE SUSTAINED WAS NOT FINDING A PLACE IN ITS DIRECTION? 17.10. IN SUCH A SCENARIO, WE HAVE BEEN LEFT WITH N O ALTERNATIVE, BUT, TO REMIT BACK THE ISSUE ON THE FILES OF THE TPO FOR FRESH CONSIDERATION. TO ENABLE THE TPO TO THE ABOVE EXERCISE, THE ISSUE IS RESTORED WITH A SPECIFIC DIRECTION TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AF TER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IN THE MEANWHILE, THE ASSESSEE, THROUGH ITS ARS, TO FURNISH ALL THE RELEVANT DETAILS AS TO WHY THE COMPANIES QUOTED IT SHOULD BE TAKEN AS COMPARABLES AND ALSO AS TO WHY THE COMPANIES SE LECTED BY THE TPO I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 20 OF 53 CANNOT BE AS COMPARABLES SO AS TO ENABLE THE TPO ARRIVE AT A CONCLUSION AS DIRECTED BY US SUPRA . IT IS ORDERED ACCORDINGLY. 17. THAT S HOW THE TRANSFER PRICING OFFICER CAME TO BE IN SEISIN OF THE MATTER AGAIN SO FAR DETERMINATION OF THE ARM S LENGTH PRICE OF CKD KITS AND TECH CENTRE REVENUES ARE CONCERNED. 18. IN THE REMANDED PROCEEDINGS, THE TRANSFER PRICING OFFICER NOTED THAT THE FACTS HAVE BEEN WRONGLY REPRESENTED BY THE APPELLANT BEFORE THE ITAT AND THESE WRONG SET OF AVERMENTS BE FORE THE ITAT HAVE FORMED THE BASIS OF DECISION BY THE ITAT AND THEN HE GAVE THE DETAILED ANALYSIS OF HOW, ACCORDING TO HIM, DECISION OF THE TRIBUNAL WAS FALLACIOUS AND INCORRECT. HE ALSO NOTED THAT DURING THE COURSE OF SET ASIDE PROCEEDINGS BEFORE THIS OFFICE, THE ASSESSEE HAS NOT COMPLIED WITH THE DIRECTIONS OF THE ITAT CONTAINED IN THE ABOVE ORDER , AND SPECIFICALLY POINTED OUT THAT IN THE PRESENT CASE, INSPITE OF SPECIFIC REQUESTS MADE BY THE TPO TO THE ASSESSEE TO PRODUCE SUITABLE DATA IN RESPECT O F NON - RESIDENT TESTED PARTY A N D ALSO TO PRODUCE PERSON WELL CONVERSANT WITH THE SUCH ACCOUNTS AS TO DEMONSTRATE TO THE TPO, RELIABILITY OF ARRIVING AT THE SEGMENTAL OPERATING PROFIT PRODUCED BEFORE THE T P O, NO SUCH DATA HAS BEEN FURNISHED . THE TRANSFER P RICING OFFICER ONCE AGAIN PICKED UP THE TRANSFER PRICING REPORT AND DISCUSSED AT LENGTH, WHAT HE PERCEIVED AS, FLAWS IN THE TRANSFER PRICING STUDY. SETTING OUT THESE DISCUSSIONS IN GREAT DETAIL, AT PAGE 53 OF THE REMAND ORDER, H E THEN REGRETTED HIS INABIL ITY TO COMPLY WITH THE DIRECTIONS OF THE TRIBUNAL AND JUSTIFIED HIS INERTIA AS FOLLOWS: 8.2.13 .THE SELECTION OF GMDAT AS TESTED PARTY IS CONTRARY TO THE CRITERIA LAID DOWN BY THE INDIAN TRANSFER PRICING REGULATIONS AS WELL AS GUIDELINES OF THE OE CD. WHILE TRANSFER PRICING REGULATIONS DO NOT STIPULATE THAT ONLY AN INDIAN PARTY SHOULD BE TESTED PARTY , IT IS ESSENTIAL THAT CRITERIA, AS DISCUSSED IN THE EARLIER PARAGRAPH, IS FOLLOWED WHILE SELECTING THE TESTED PARTY. IN THE LIGHT OF THE DISCUSSIONS HE LD ABOVE AND WITH DUE RESPECT TO THE DIRECTIONS GIVEN BY THE HON BLE ITAT, IN ABSENCE OF ANY DATA BEING SUPPLIED BY THE ASSESSEE WITH RESPECT TO GMDAT, IT IS NOT POSSIBLE TO CONDUCT THE TRANSFER PRICING STUDY ADOPTING THE GMDAT AS TESTED PARTY. 8.3 IN THE LIGHT OF THE DETAILED DISCUSSIONS AND FAILURE/ DEFIANCE ON THE PART OF THE ASSESSEE COMPANY TO FURNISH SUFFICIENT AND RELIABLE DATA IN RESPECT OF THE TESTED PARTY SELECTED BY IT TO BENCHMARK THE TRANSACTIONS OF THE TESTED PARTY WITH THE COMPARABLES SELECT ED BY THE ASSESSEE AS WELL AS FAILURE ON THE PART OF THE ASSESSEE TO SUPPLEMENT ITS STAND BEFORE THE ITAT WITH REFERENCE TO CONTRADICTORY STAND OF THE TPO, THE TPO IS UNABLE TO FOLLOW THE DIRECTIONS GIVEN BY THE HON BLE BENCH TO CONDUCT TRANSFER PRICING ST UDY TAKING GMDAT AS TESTED PARTY. ACCORDINGLY, THE TPO STUDY IS CONDUCTED ON THE BASIS OF DOCUMENTS AVAILABLE ON RECORD AND IN LINE WITH CURRENT GUIDELINES ON THE ISSUE. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 21 OF 53 8.4 AS DISCUSSED ABOVE, THE GMDAT IS HAVING MORE COMPLEX FUNCTIONS AS COMPARED TO GMI PL AND ALSO HAVING SUBSTANTIAL INTANGIBLES AS ALREADY DISCUSSED BY THE TPO IN THE ORIGINAL TP ORDER FOR 2006 - 07, AND SEGMENTAL PLI MARGIN WAS NOT SUPPORTED BY THE PROPER EVIDENCE, GMDAT CANNOT BE TAKEN AS THE TESTED PARTY. FURTHER, NONE OF THE COMPARABLES SELECTED BY THE ASSESSEE ARE FOUND TO BE FUNCTIONALLY COMPARABLE WITH THE TESTED PARTY SELECTED BY THE ASSESSEE AT TRANSACTIONAL LEVEL - A PRINCIPLE STRESSED BY ITAT IN ITS ORDER. 8.4.1 IT IS ALSO SEEN THAT APPEAL NO. 495 OF 2014 AND 500 OF 2014 OF DEPARTM ENT HAVE BEEN ADMITTED BY HON BLE GUJARAT HIGH COURT, VIDE ORAL ORDER DATED 16/09/2014, WHEREIN FOLLOWING QUESTIONS OF LAW WERE RAISED: (A) WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS JUSTIFIED IN DIRECTING THE TRANSFER PRICING OFFICER (TPO) TO ACCEPT GMDAT AS TESTED PARTY? (B) WHETHER THE FINDINGS RECORDED BY THE INCOME TAX APPELLATE TRIBUNAL ARE PERVERSE TO THE RECORDS OF THE CASE? 8.4.2 IN VIEW OF THE ABOVE, AND IN VIEW OF THE FAILURE ON THE PART OF THE ASSESSEE TO COOPERATE WITH THE TPO IN EXECUT ING THE DIRECTIONS OF THE ITAT, IT IS IMPOSSIBLE TO DETERMINE ALP BY TAKING AE AS TESTED PARTY. THEREFORE, WITH DUE RESPECT TO THE DIRECTIONS OF THE HON BLE ITAT, THE ALP DETERMINED BY THE TPO AS PER ORIGINAL ORDER TAKING ASSESSEE AS TESTED PARTY IS RETAIN ED AS IT IS. THUS, THE ADJUSTMENT OF RS 33.49 CRORES MADE TO THE INTERNATIONAL TRANSACTION OF IMPORT OF CKD KITS AND OTHER RAW MATERIALS, RECOVERY OF COSTS AND PURCHASE OF CAPITAL ASSETS IS PROPOSED AS PER ORIGINAL ORDER. 19. AS REGARDS THE ALP ADJUSTMENT IN RESPECT OF TECH CENTRE OPERATIONS, THE TPO NOTED THAT THE ASSESSEE, VIDE LETTER DATED 7 TH OCTOBER 2014, HAD RAISED OBJECTIONS IN TH E MATTER OF FOLLOWING COMPARABLES - NAMELY GENESYS INTERNATIONAL CORPORATION LIMITED, PENTASOFT TECHNOLOGIES LIMITED, ONWA RD TECHNOLOGIES LIMITED, TATA TECHNOLO GIES LIMITED, ZENS AR TECHNOLOGIES LTD, PSI DATA SYSTEMS LIMITED, POWERSOFT GLOBAL SOLUTIONS LIMITED AND ROLTA INDIA LIMITED. THE SUMMARY OF THESE OBJECTIONS WERE ALSO REPRODUCED. THE TPO NOTED THAT SIMILAR OBJECTIONS WERE ALSO RAISED IN THE FIRST ROUND OF PROCEEDINGS, AND THEN REPRODUCED THE OBSERVATIONS IN THE ORDER PASSED IN THE FIRST ROUND OF PROCEEDINGS BEFORE HIM. HE THEN SIMPLY REITERATED THE ALP ADJUSTMENT BY OBSERVING, RATHER CRYPTICALLY, AS FOLLOWS: 8.6.3 .IT IS NOTICED THAT THOUGH THE HON BLE ITAT HAD DIRECTED THE ASSESSEE TO SUBMIT THE REASONS BEFORE THE TPO AS TO WHY THE COMPARABLES QUOTED BY IT SHOULD BE ACCEPTED BY THE TPO AS COMPARABLES AND WHY THE COMPARABLES SELECTED BY TPO SHOULD BE REJECTED, ..TH E ASSESSEE SUBMITTED REPLY/ INFORMATION RAISING SIMILAR OBJECTIONS, WHICH HAVE ALREADY BEEN DEALT BY THE TPO IN THE ORIGINAL ORDER. IN VIEW OF THE ABOVE FACTS, THE ADJUSTMENT OF RS 19.66 CRORES IS RETAINED AS IT IS. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 22 OF 53 20. THE ASSESSEE IS AGGRIEVED AND IS I N APPEAL BEFORE US. 21. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 22. WE HAVE NOTED THAT, IN THE REMANDED PROCEEDINGS, THE TRANSFER PRICING OFF ICER HAS TAKEN CONSIDERABLE PAINS TO POINT OUT, WHAT HE PERCEIVED AS, INFIRMITIES IN THE ORDER OF THE TRIBUNAL HOLDING THAT GMDAT SH OULD BE TAKEN AS TESTED PARTY. SUCH AN EXERCISE WAS ENTIR ELY UNCALLED FOR. ONCE A DIRECTION IS GIVEN BY THE TRIBUNAL TO THE TRANSFER PRICING OFFICER , UNLESS SUCH A DIRECTION IS REVERSED BY THE HIGHER JUDICIAL FORUM, THE SAME IS TO BE IMPLEMENTED WITHOUT ANY RESERVATIONS. THERE IS NO POINT IN POINTING OUT HOW AND WHY THESE DIRECTIONS ARE UNACCEPTABLE TO THE TR ANSFER PRICING OFFI CER. WHETHER THE TPO FINDS THESE DIRECTIONS TO BE REASONABLE OR NOT, THESE ARE REALITIES WHICH CANNOT BE SIMPLY WISHED AWAY. WE HAVE FURTHER NOTED THAT AFTER THE MATTER WAS RESTORED TO THE FILE OF THE TPO, THE TPO ISSUED THE LETTER DATED 10 TH JULY 2014 TO THE ASSESSEE FOR COMPLYING WITH THE DIRECTIONS OF THE TRIBUNAL. THIS LETTER, INTER ALIA, STATED AS FOLLOWS: KIND REFERENCE IS INVITED TO THE DECISION OF HON BLE ITAT IN THE CASE OF THE ABOVE ASSESSEE FOR AY 2006 - 07 AND 2007 - 08. THE ISSUE OF BENCHMARKING OF VARIOUS TRANSACTIONS HAS BEEN SET ASIDE FOR FRESH DETERMINATION. THE CASE HAS BEEN REFERRED TO THIS OFFICE BY THE AO FOR COMPLIANCE WITH THE ORDER OF THE HON BLE ITAT AND NECESSARY ACTION. 2. IN LIGHT OF THE VARIOUS DIRECTIONS GIVEN BY THE HON'BLE BEN CH, YOU ARE REQUESTED TO FURNISH FURTHER INFORMATION AS DETAILED BELOW; A: PURCHASE OF CKD KITS - 8. DETAILED ANNUAL ACCOUNTS OF GMDAT WITH REFERENCE TO THE COMPONENTS INCLUDED IN THE CKD ALONG WITH COST ALLOCATION DETAILS. INDIVIDUAL COST CENTRE LEDG ER ACCOUNTS IN RESPECT OF COMPONENTS OF THE KITS, THE BASIS OF COSTING OF THE COMPONENT WITH REFERENCE TO THE TOTAL COST OF THE CENTRE WHERE IT WAS PRODUCED, THE FINAL PRICING OF THESE COMPONENTS, DETAILS RELATING TO OTHER EXPENSES INCURRED BY GMDAT RELATE D TO THEIR MANUFACTURING AND THE PROPORTION IN WHICH THEY HAVE BEEN INTEGRATED IN CKD COSTS MAY ALSO BE FURNISHED. 9. KINDLY ENSURE THAT A COMPETENT PERSON AWARE OF FINANCES OF THE TESTED PARTY WHO CAN DEMONSTRATE AS TO HOW THE GMDAT'S TURNOVER AND OTH ER FINANCIAL DATA HAS BEEN ARRIVED AT FROM ITS ANNUAL FINANCIAL DATA OF 2005/2006 USING THE PLP SUBMITTED BY YOU. HE IS REQUIRED TO EXPLAIN THE DETAILS OF EXTRACTION OF COSTS RELATED TO CKDS SUPPLIED TO THE INDIAN ENTITY AND CULLING OF DATA RELATING TO I NDIAN CKD SUPPLY FROM THE DATA AS SPECIFIED ABOVE. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 23 OF 53 10. BEFORE THE ITAT IT HAS BEEN CLAIMED BY YOU THAT YOU HAVE PROVIDED SEGMENTAL DATA TO THE TPO. THE OBSERVATIONS OF ITAT IN THE ORDER ARE REPRODUCED BELOW : 11.6.4. HOWEVER, THE LEARNED SR. COUNSEL SUBMITTED THAT SEGMENT FINANCIAL DATA FOR BENCHMARKING - A PART OF GMDAT'S BUSINESS - WAS MADE AVAILABLE TO THE TPO AND ALSO ON HIS REQUEST, THE FINANCIAL STATEMENTS OF GMDAT (AT COMPANY LOVE!) WAS FURNISHED TO THE TPO AND THE SAME IS NOT DISPUTED. THEREFO RE, THERE SHOULD BE NO GRIEVANCE ON THE PART OF THE REVENUE TO SAY THAT NO SUFFICIENT DATA WAS MADE AVAILABLE.' WITH RESPECT TO RELIABILITY OF INFORMATION PERTAINING TO TESTED PARTY SELECTED BY YOU, KINDLY FURNISH; I. DETAILS OF ADJUSTMENT MADE TO THE A NNUAL ACCOUNT OF GMDAT TO ARRIVE AT APRIL '05 TO MARCH'6 ACCOUNT FIGURES FROM THE PUBLISHED ANNUAL ACCOUNTS OF YEAR 2005 AND 2006. II. FINAL OVERALL ADJUSTED GMDAT FIGURES FOR APRIL '2006 TO MARCH 2007 FROM WHERE PROFITS FOR INDIAN SUPPLY HAVE BEEN EXTRA CTED AND DETAILS OF SEGMENT FINANCIAL DATA UTILIZED FOR BENCHMARKING. III. REASON FOR COMPARING APRIL MARCH FIGURES OF GMDAT WITH JANUARY - DECEMBER FIGURES OF THE COMPARABLES SELECTED IV. THE EXCEL SHEETS REFERRED TO IN THE AUDIT REPORT OF DELOITTE REPO RT FILED BY YOU BEFORE THE HON'BLE ITAT WHICH HAS BEEN EXAMINED BY THE AUDITORS TO CERTIFY THE CORRECTNESS OF THE ACCOUNTS. V. LINKAGE OF THE EXCEL SHEETS TO THE TURNOVER SHOWN IN THE PUBLISHED ACCOUNTS OF GMDAT TO ASCERTAIN THE CORRECTNESS OF THE EXCEL SHEET. SUITABLE PERSON COMPETENT TO EXPLAIN AND DEMONSTRATE THE CORRECTNESS MAY KINDLY ACCOMPANY SUCH ACCOUNTS, 11. THE VARIOUS AGREEMENTS/AUDITED ACCOUNTS SUBMITTED BY YOU REVEAL THAT GMDAT KEEPS THE TECHNOLOGY AND CHARGES APPROPRIATE ROYALTY WHILE IN Y OUR ANALYSIS, YOU HAVE CLAIMED THAT GMDAT DOES NOT OWN INTANGIBLES. PLEASE EXPLAIN. ALSO EXPLAIN AS TO WHY GMDAT SHOULD NOT BE TAKEN AS A PARTY HAVING SIGNIFICANT INTANGIBLES IN LIGHT OF SIGNIFICANT EXPENDITURE MADE BY IT TOWARDS R&D AND SIGNIFICANT EARNIN GS FROM ROYALTY RECEIPTS ON TRANSFER OF TECHNOLOGY. 12. WITH REGARD TO YOUR SELECTION OF COMPARABLES, YOU HAVE BENCHMARKED THE PROFITS MADE BY THE TESTED PARTY (GMDAT) IN ITS TRANSACTION OF MANUFACTURING AND EXPORT OF COMPLETELY KNOCKED DOWN KITS FROM KO REA TO INDIA. TO THIS EXTENT, YOUR COMPARABLES SHOULD HAVE DEALT IN CKDS, LOCATED IN I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 24 OF 53 SOUTH KOREA AND SHOULD HAVE EXPORTED TO SIMILAR GEOGRAPHICAL LOCATIONS. KINDLY FURNISH AN ANALYSIS OF EACH OF YOUR COMPARABLES WITH REGARDS TO THEIR COMPARABILITY WITH YOU R TESTED PARTY WITH REFERENCE TO THEIR FUNCTIONS, ASSETS AND RISKS. 13. AS REGARDS YOUR CONTENTION RELATING TO USE OF MULTIPLE YEAR DATA, IT IS NOW A SETTLED PRINCIPLE THAT DATA FOR THE RELEVANT YEAR IS TO BE USED. TO THIS EXTENT, YOUR STUDY DOES NOT CO NFORM TO THE SETTLED PRINCIPLES OF LAW AND IS, THEREFORE, LIABLE TO BE REJECTED. KINDLY EXPLAIN WHY THE TP STUDY SHOULD NOT BE REJECTED TO EXCLUDE THE MULTIPLE YEAR WORKING. 14. IT HAS BEEN YOUR CONTENTION THAT THE TPO HAS ADOPTED GMDAT AS TESTED PARTY WHILE BENCHMARKING ROYALTY PAYMENT WHILE ASSESSEE'S SELECTION OF GMDAT HAS BEEN REJECTED BY HIM. THIS HAS BEEN ONE OF THE MAJOR GROUNDS ON WHICH THE ITAT HAS DIRECTED ADOPTION OF GMDAT AS TESTED PARTY IN TRANSACTION RELATING TO PURCHASE OF CKD KITS. THE RELEVANT PARA IS REPRODUCED BELOW: 11.6.2. AS RIGHTLY HIGHLIGHTED BY THE ASSESSEE, WE FIND INCONSISTENCY IN THE APPROACH OF THE TPO WITH REGARD TO THE ISSUE OF 'TESTED PARTY'. ON THE ONE HAND, THE TPO AVERRED THAT THERE WAS NO RELIABLE DATA AVAILABLE F OR BOTH GMDAT AND COMPARABLES, HOWEVER, ON THE OTHER HAND, HE HAD CONVENIENTLY TAKEN GMDAT AS THE 'TESTED PARTY' WHILE MAKING ADJUSTMENT TO TRANSACTION RELATING TO PAYMENT OF ROYALTY BY THE ASSESSEE TO GMDAT. THIS EXPOSES THE INCONSISTENCY APPROACH OF THE TPO. THIS OFFICE HAS NOT BEEN ABLE TO FIND ANY SUCH EVIDENCE. YOU ARE REQUESTED TO DEMONSTRATE EVIDENCES SUBMITTED TO THE ITAT RELATING TO THE CHANGE IN TESTED PARTY EFFECTED BY THE TPO IN BENCHMARKING THE ROYALLY TRANSACTION, BASED ON WHICH THE ABOVE INFERENCE HAS BEEN DRAWN BY THE HON BLE BENCH. B: WITH REGARDS TO BENCHMARKING OF THE TECH CENTRE OPERATIONS; 5. THE DIRECTIONS OF THE ITAT IN THIS REGARD ARE AS REPRODUCED BELOW; '17.10. IN SUCH A SCENARIO, WE HAVE BEEN LEFT WITH NO ALTERNATIVE, BUT, TO REMIT BACK THE ISSUE ON THE FILES OF THE TPO FOR FRESH CONSIDERATION. TO ENABLE THE TPO TO THE ABOVE EXERCISE, THE ISSUE IS RESTORED WITH A SPECIFIC DIRECTION TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IN THE MEANWHILE, THE ASSESSEE, THROUGH ITS ARS, TO FURNISH ALL THE RELEVANT DETAILS AS TO WHY THE COMPANIES QUOTED IT SHOULD BE TAKEN AS COMPARABLES AND A/SO AS TO WHY THE COMPANIES SELECTED BY THE T PO CANNOT BE AS COMPARABLES SO AS TO ENABLE THE TPO ARRIVE AT A CONCLUSION AS DIRECTED BY US SUPRA. IT IS ORDERED ACCORDINGLY.' I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 25 OF 53 6. KINDLY FURNISH ANY DOCUMENT YOU WISH TO RELY ON AND ANY EXPLANATION YOU WISH TO FURNISH IN RESPECT TO YOUR TRANSFER PRICI NG STUDY CONDUCTED TO JUSTIFY THE TRANSACTIONS RENTED TO TECH CENTRE. 7. IT HAS BEEN PLEADED BY YOU BEFORE THE HON BLE BENCH THAT THE CONSOLIDATED ACCOUNTS OF THE COMPARABLES SELECTED BY YOU ARE COMPARABLE TO YOUR ACCOUNTS ARID HENCE SHOULD RIOT HAVE B EEN REJECTED ON ACCOUNT OF RELATED PARTY TRANSACTIONS. YOU ARE REQUESTED TO DISCUSS EACH COMPARABLE IN LIGHT OF THE ABOVE STATEMENT AND SHOW THAT THESE COMPARABLES ARE PROPER COMPARABLES EVEN AFTER ADOPTING CONSOLIDATED ACCOUNTS. 8. YOUR ATTENTION IS IN VITED TO A SERIES OF JUDICIAL PRONOUNCEMENTS RELATING TO NON - SELECTION OF CASES AS COMPARABLE IN CASE OF RELATED PARTY TRANSACTIONS. PLEASE EXPLAIN WHY THE COMPARABLES SELECTED BY YOU SHOULD NOT BE REJECTED ON THIS GROUND. C: WITH REGARDS TO BENCHMARKIN G OF ROYALTY: 4. THE OBSERVATIONS OF THE ITAT ARE REPRODUCED BELOW; 19.12. ON CONSIDERING THE CONTENTIONS OF THE RIVAL PARTIES, IT IS OBSERVED THAT THE TUSSLE BETWEEN THE PARTIES HAS BEEN NARROWED DOWN TO THE ISSUE OF COMPARING OF THE AGREEMENTS. TH E ASSESSEE HAD TAKEN THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND ISUZU AND TREATED AS CUP WHERE THE TPO HAD AS CUP THE AGREEMENTS OF (I) NAMYANG - HENGLONG; AND (II) DELPHI - JINGZHOU. THIS HAS BEEN ASSAILED BY THE ASSESSEE FOR THE REASONS NARRATED AB OVE. THE AGREEMENT ENTERED INTO BY THE ASSESSEE AS WELL AS THE AGREEMENTS OF UNRELATED PARTIES REFERRED TO BY THE TPO CONTAINED [TERMS AND CONDITIONS] THE NATURE AND SCOPE OF SERVICES INVOLVED WHICH REQUIRED TO BE EXAMINED. THE DRP HAD, WITHOUT INVOLVING ITSELF IN ANALYZING THE CONTENTIONS PUT - FORTH BY THE ASSESSEE WITH THAT OF THE TPO IN REJECTING THE ASSESSEE S COMPARABLE, SUSTAINED THE TPO S STAND WITHOUT ASSIGNING ANY PLAUSIBLE REASON WHATSOEVER. MOREOVER THE RELEVANT AGREEMENTS WHICH CONTAINED TERMS AND CONDITIONS ON THE BASIS OF WHICH, THEY WERE TO BE SELECTED AS COMPARABLES. OBVIOUSLY, THIS REQUIRES CONSIDERABLE VERIFICATION, EXAMINATION AND COMPARISON. 19.13 IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE REQUIRES TO BE REMI TTED BACK ON THE FILE OF THE TPO FOR A DETAILED EXAMINATION AND VERIFICATION OF THE ASSESSEE S CONTENTIONS. TO FACILITATE THE TPO TO IMPLEMENT THE ABOVE DIRECTION, THIS ISSUE IS RESTORED ON THE FILE OF THE TPO TO TAKE APPROPRIATE ACTION AFTER AFFORDING A R EASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IT IS ORDERED ACCORDINGLY.' 5. KINDLY FURNISH ANY DOCUMENT YOU WISH TO RELY ON AND ANY EXPLANATION YOU WISH TO FURNISH IN RESPECT TO YOUR TRANSFER PRICING STUDY CONDUCTED TO JUSTIFY THE TRANSACTION S RELATED TO PAYMENT OF ROYALTY. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 26 OF 53 6. FURNISH A CHART FOR THE PERIOD 1/4/2005 TO 31/3/2006 COMPUTING ROYALTY PAYMENT AND SALES ON WHICH ROYALTY PAID, PARTY - WISE IN RESPECT OF ALL THE ROYALTIES PAID BY THE COMPANY, WHETHER TO RELATED OR UNRELATED PARTIES. D. WORKING CAPITAL ADJUSTMENTS: 2. PLEASE FURNISH RELEVANT DETAILS AND JUSTIFICATION FOR WORKING CAPITAL ADJUSTMENTS TO BE ALLOWED TO YOU . 23. IN REPLY TO THIS LETTER, SO FAR AS THE ASSESSMENT YEAR 2006 - 07 AND THE RELATED ISSUES ARE CONCERNED, TH E ASSESSEE, VIDE LETTER DATED 1SYT SEPTEMBER, 2014, 26 TH SEPTEMBER 2014 AND 7 TH OCTOBER 2014, SUBMITTED NECESSARY CLARIFICATIONS TO THE TRANSFER PRICING OFFICER. THE ANNUAL FINANCIAL STATEMENTS, ALONGWITH SCHEDULES AND NOTES, WERE DULY FURNISHED. IT WAS AL SO SUBMITTED THAT MR M S VASAN AND/OR MS ANNU SARIN, EMPLOYEES OF THE ASSESSEE COMPANY, WILL ALSO BE ACCOMPANYING THE LEGAL COUNSEL SO AS TO GIVE NECESSARY CLARIFICATIONS , IN RESPECT OF THE BACK UP EXCEL FILES, TO THE TPO. AS REGARDS THE ISSUES RAISED WIT H RESPECT TO DETAILS OF ADJUSTMENT MADE TO THE ANNUAL ACCOUNTS OF GM KOREA FIGURES FROM WHICH THE PROFIT AND LOSS RELATING TO TRANSACTIONS OF PURCHASE OF COMPONENTS AND PARTS OF GMIPL HAVE BEEN EXTRACTED, THE BACK UP DOCUMENTS RELIED BY THE AUDITORS TO CER TIFY CORRECTNESS OF THE GM KOREA ACCOUNTS, LINKAGE OF THE BACK UP DOCUMENTS TO THE PUBLISHED ACCOUNTS OF GM KOREA , THE ASSESSEE FURTHER SUBMITTED (A) RECONCILIATION OF THE AUDITED SEGMENTAL REPORT PREPARED BY THE AUDITOR VIS - - VIS THE PL P DATA SUBMITTED BY THE ASSESSEE (ALONGWITH THE ANNUAL FIGURES FOR GM KOREA FOR FY 2005 - 06);(B) BACK UP EXCEL FILES REFERRED BY THE AUDITOR WHILE PREPARING THE SEGMENTAL AUDIT REPORT FOR FY 2005 - 06; AND (C) RECONCILIATION OF THE BACK UP EXCEL FILES WITH THE ANNUAL STANDALONE FINANCIAL STATEMENT OF GM KOREA. IT WAS ALSO, INTER ALIA, EXPLAINED THAT ONLY SINGLE YEAR DATA IS BEING USED IN THE PRESENT CASE AND THAT IT IS NOT A CASE OF USE OF MULTIPLE YEAR DATA . THE ASSESSEE ALSO FILED SEGMENTAL DATA OF GMDAT, ALONG WITH CERTIFICA TE DATED 8 TH JANUARY 2013 ISSUED BY DELOITTE ANJIN LLC KOREA, AND COMPLETE FINANCIAL STATEMENTS OF THE GMDAT. THE COPIES OF THESE DETAILED REPLIES, AS ALSO THE DOCUMENTS FURNISHED BEFORE THE TRANSFER PRICING OFFICER, HAVE BEEN PLACED BEFORE US IN THE PAPER BOOKS AND EXAMINED BY US. IT IS, THEREFORE, CLEARLY INCORRECT STATEMENT OF THE TRANSFER PRICING OFFICER THAT THE REQUISITE INFORMATION HAS NOT BEEN FURNISHED BY THE ASSESSEE. WE HAVE NOTED THAT THE ASSESSEE HAS PRODUCED CERTIFIED PLP DATA FROM THE STATUT ORY AUDITORS OF GM KOREA, CONSOLI DATED ANNUAL REPORT OF GM KOREA, ALLOCATION KEYS, RECONCILIATION OF THE CERTIFIED SEGMENTAL REPORT PREPARED BY THE AUDITOR VIS - - VIS THE PLP DATA SUBMITTED BY THE ASSESSEE, BACK - UP EXCEL FILES REFERRED BY THE AUDITOR WHILE PREPARING THE CERTIFIED REPORT FOR AYS 2006 - 07 AND 2007 - 08 . THE TPO IS, THEREFORE, IN ERROR IN TAKING A STAND THAT THE ASSESSEE HAS NOT PROVIDED ANY SEGMENTAL DATA NOR CONSOLIDATED FINANCIAL STATEMENT OF GM KOREA. AS A MATTER OF FACT, THE ASSESSEE HAD FURN ISHED SEGMENTAL DATA OF GM KOREA IN THE TRANSFER PRICING DOCUMENTATION ITSELF AND THESE ARE CERTIFIED FROM STATUTORY AUDITORS OF GM KOREA - A FACT WHICH FINDS PLACE IN THE TRIBUNAL S ORDER, IN THE FIRST ROUND OF PROCEEDINGS, AT PARAGRAPH 10.1.15. THE COST A LLOCATION KEYS WERE ALSO GIVEN TO THE I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 27 OF 53 TPO AND THIS FACT IS ALSO CLEARLY BORNE OUT OF RECORD. DURING THE COURSE OF HEARING BEFORE US, OUR ATTENTION WAS ALSO INVITED TO THE VOLUMINOUS INFORMATION, INCLUDING DETAILED SPREADSHEET FILES AND ACCOMPANYING CLARIF ICATIONS, FILED BY THE ASSESSEE IN THE REMANDED PROCEEDINGS. IN THE FACE OF ALL THESE DETAILS ON RECORD, WE ARE UNABLE TO CONCUR WITH THE FINDINGS OF THE TPO THAT REQUISITE INFORMATION, AS NECESSARY TO DECIDE ALP ON THE BASIS OF GMDAT AS TESTED PARTY, WAS NOT FURNISHED BY THE ASSESSEE. THE ASSESSEE CAN ONLY GIVE THE NECESSARY INFORMATION, AND, WHEN NO LEGALLY SUSTAINABLE DEFECTS ARE FOUND IN THE INFORMATION SO FURNISHED, THE SAME IS TO BE ACCEPTED AND NATURAL COROLLARIES THERETO ARE TO FOLLOW. THE STAND OF THE TPO IS UNSUSTAINABLE IN LAW AND ON THE FACTS OF THIS CASE. IT DOES NOT MEET OUR JUDICIAL APPROVAL. WHEN WE PUT THIS IS TO THE TPO, WHO WAS PRESENT DURING HEARING BEFORE US, HE ACCEPTED THAT THE DETAILS SO FURNISHED WERE NOT EXAMINED IN SUFFICIENT DETA IL AND PRAYED ONE MORE OPPORTUNITY TO EXAMINE THE INFORMATION SO FURNISHED BY THE ASSESSEE. IT WAS IN THIS BACKDROP THAT WE DIRECTED THE ASSESSEE TO APPEAR BEFORE THE TPO AND GIVE SUCH FURTHER CLARIFICATIONS, AS HE MAY REQUIRE, AND DIRECTED THE TPO TO FILE A REPORT THEREAFTER. 24. THE TPO HAD, AFTER THE SA ID OPPORTUNITY OF HEARING, FILED A REPORT BEFORE US. THE REPORT FILED BY THE TPO STATES AS FOLLOWS: 2. DURING THE HEARING FOR AY 2006 - 07 TO 2010 - 11 IN THE ABOVE CASE, THE HON'BLE BENCH DIRECTED THE T PO TO FURNISH THE COMPUTATION OF ALP OF INTERNATIONAL TRANSACTION OF IMPORT OF CKD KITS, COMPONENTS, SPARE PARTS, ACCESSORIES AND CAPITAL GOODS FROM GMDAT FOR AY 2006 - 07 & 2007 - 08 ADOPTING AE AS TESTED PARTY AND AFTER VERIFYING ONESOURCE DATABASE (FOREIG N DATABASE) USED BY THE ASSESSEE. SINCE THIS DATABASE IS PAID DATABASE AND TPO HAS NO ACCESS TO THE SAME, THE ASSESSEE WAS DIRECTED TO PROVIDE THE ACCESS TO THE SAID DATABASE AND OTHER INFORMATION RELATING TO SEGMENTAL PLI WORKING MADE BY THE ASSESSEE. AC CORDINGLY, MS. SHWETA KASHYAP, CA/AR ATTENDED THIS OFFICE ALONG WITH SHRI KUNAL KESHANI, CA/AR ON 06/11.2015 AND EXPLAINED THE SEGMENTAL PLI WORKING OF THE TESTED PARTY FOR AY 2006 - 07 & AY 2007 - 08. THEY DEMONSTRATED THE PROCESS OF SELECTION OF COMPARABLES THROUGH 'ONESOURCE DATABASE BY USING THE SIMILAR KEYWORDS TO FIND OUT THE COMPARABLE COMPANIES FUNCTIONALLY SIMILAR TO THE TESTED PARTY. SINCE THE TESTED PARTY IS LOCATED IN SOUTH KOREA, THE REGION WAS RESTRICTED TO KOREA ONLY TO AVOID GEOGRAPHICAL DIFFE RENCES. THE SOFT COPY OF SCREEN SHOTS OF SEARCH PROCESS IS ENCLOSED IN CD. 3. AS A RESULT OF SEARCH, 74 COMPARABLE COMPANIES LOCATED IN KOREA ARE FOUND. ON FURTHER EXAMINATION THE SEARCH RESULT, IT IS FOUND THAT ONLY 33 COMPANIES ARE FUNCTIONALLY SIMIL AR. SINCE THE ASSESSEE HAS SELECTED TNM METHOD FOR BENCHMARKING, THE ABOVE 33 COMPANIES ARE FOUND BROADLY ENGAGED IN SIMILAR FUNCTIONS THAT ARE CARRIED OUT BY THE TESTED PARTY. IT IS NOTICED FROM THE COPIES OF FINANCIAL STATEMENTS OF THE COMPARABLES SUBM ITTED BY THE ASSESSEE THAT THE FINANCIAL STATEMENTS OF ONLY 17 COMPANIES ARE SUBMITTED. THEREFORE, AN ATTEMPT WAS MADE TO OBTAIN THE FINANCIAL STATEMENTS I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 28 OF 53 OF REMAINING 16 COMPARABLES FROM THE 'ORBIS DATABASE' FOR WHICH THE ACCESS IS NOW AVAILABLE TO THE TP O. PREVIOUSLY, ACCESS WAS ALLOWED TO THE TPO FOR VERY LIMITED TERRITORY OF THE WORLD. AFTER EXAMINING THE FINANCIAL STATEMENTS OF ALL THE 33 COMPARABLE COMPANIES, THE DETAILED COMPUTATION OF PLI WORKING IS MADE. A COPY OF THE SAME IS ENCLOSED AS PER ANNE XURE - A. BEFORE THE SUBMITTING THE COMMENTS ON ALP COMPUTATION, CERTAIN ISSUES WHICH HAVE BEEN CONSIDERED WHILE DOING THE ALP COMPUTATION ARE DISCUSSED AS UNDER: - (I) THE SEGMENTAL PLI COMPUTATION SUBMITTED BY THE ASSESSEE, WHICH WAS PREPARED ON THE BASI S OF REPORT OF INDEPENDENT AUDITOR, IS FOR THE PERIOD FROM 01/04/2005 TO 31/03/2006 FOR AY 2006 - 07 AND FOR THE PERIOD FROM 01/06/2006 TO 31/03/2007 FOR AY 2007 - 08. HOWEVER, THE DATA OF ALL THE COMPARABLES IS FOR JAN. TO DEC. PERIOD. THOUGH THE FINANCIAL S TATEMENTS OF TESTED PARTY (GMDAT) ARE ALSO FOR THE PERIOD JAN TO DEC., THE ASSESSEE HAS PREPARED SEGMENTAL ACCOUNTS FOR THE PERIOD FROM 1ST APRIL TO 31ST MARCH AND NO JUSTIFICATION IS GIVEN IN THE TP STUDY REPORT. HOWEVER, SINCE THE HON'BLE BENCH HAS DIRE CTED TO ADOPT THE SEGMENTAL PLI AFTER VERIFICATION, THE SAME IS ACCEPTED FOR ALP COMPUTATION SUBJECT TO CORRECTION OF ARITHMETICAL ERRORS DISCUSSED IN POINT NO.(II) & (III) BELOW (II) FOR AY 2006 - 07, THE SEGMENTAL REVENUE (FOR SALE OF CKD KITS, COMPONENT S, SPARE PARTS, ACCESSORIES AND CAPITAL GOODS) I.E. REVENUE FROM RELATED PARTIES IS SHOWN AT 54.50 MILLION USD WHEREAS PAYMENTS MADE BY THE ASSESSEE TO GMDAT DURING AY 2006 - 07 ALONE COMES TO 63.44 MILLION USD (TOTAL VALUE OF ABOVE TRANSACTIONS IN INR 283,0 0, 72,139 DIVIDED BY 44.61 I.E. PREVAILING RATE OF ONE DOLLAR AND FURTHER CONVERTED INTO MILLION). THE FIGURE OF 63.44 MILLION USD IS REVENUE FROM INDIAN AE ONLY. THE DETAILS OF REVENUE EARNED BY TESTED PARTY FROM ABOVE MENTIONED INTERNATIONAL TRANSACTIONS FROM OTHER AES ARE NOT AVAILABLE. HOWEVER, ON THE BASIS OF AVAILABLE FIGURES, THE SEGMENTAL REVENUE OF THE TESTED PARTY SHOULD HAVE MINIMUM 63.44 MILLION USD WHEREAS IN THE SEGMENTAL ACCOUNTS, THE SAME IS SHOWN AT 54.50 MILLION USD. THIS SHOWS THAT THE SEGMENTAL PLI WORKING MADE BY THE ASSESSEE IS NOT RELIABLE. HOWEVER, AS PER THE DIRECTIONS OF THE HON'BLE ITAT, SEGMENTAL PLI OF THE ASSESSEE IS ACCEPTED SUBJECT TO ABOVE MENTIONED ARITHMETICAL CORRECTION. THUS AFTER ADOPTING THE CORRECT FIGURE OF SEGMENTA L REVENUE AS ABOVE, THE REVISED PROFIT COMES TO 5.32 MILLION USD (SEG. REVENUE 63.44 MN USD ( - ) SEG. COST 58.12 MN USD) AND THE OP/OC% COMES TO 9.15% AS AGAINST ( - ) 6.23% SHOWN BY THE ASSESSEE IN RESPECT: OF TESTED PARTY. (III) FOR AY 2007 - 08. THE SEGMEN TAL REVENUE (FOR SALE OF CKD KITS, COMPONENTS, SPARE PARTS, ACCESSORIES AND CAPITAL GOODS) I.E. REVENUE FROM RELATED PARTIES IS SHOWN AT 81.73 MILLION USD WHEREAS PAYMENTS MADE BY THE ASSESSEE TO GMDAT DURING AY 2007 - 08 ALONE COMES TO 81.30 MILLION USD (TO TAL VALUE OF ABOVE TRANSACTIONS IN INR 353,15,40,392 DIVIDED BY 43.44 I.E. PREVAILING RATE OF ONE DOLLAR AND FURTHER CONVERTED INTO MILLION). THE FIGURE OF 81.30 MILLION USD IS REVENUE FROM INDIAN AE ONLY. THE DETAILS OF REVENUE EARNED BY TESTED PARTY FRO M ABOVE MENTIONED INTERNATIONAL TRANSACTIONS FROM I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 29 OF 53 OTHER AES ARE NOT AVAILABLE. HOWEVER ON THE BASIS OF AVAILABLE FIGURES, THE SEGMENTAL REVENUE OF THE TESTED PARTY SHOULD HAVE MINIMUM 81.30 MILLION USD WHEREAS IN THE SEGMENTAL ACCOUNTS, THE SAME IS SHOWN A T 81.73 MILLION USD. THEREFORE IT IS PRESUMED THAT THE DIFFERENCE FIGURE OF 0. 43 MN USD PERTAINS TO SEGMENTAL REVENUE EARNED FROM OTHER AES AND AS SUCH THE PLI RATIO OF 10.50% (OP/OC) IS ADOPTED FOR COMPUTATION OF ARM'S LENGTH PRICE. (IV) IN THE TP STU DY REPORT, THE ASSESSEE HAS USED FILTER OF SALES MORE THAN ZERO AND NO UPPER LIMIT IS APPLIED. THE SAME APPROACH IS ADOPTED WHILE SELECTING THE COMPARABLES UNDER REPORT. (V) FOR COMPUTATION OF PLL OF THE COMPARABLES, THE ASSESSEE, IN ITS TP STUDY REPORT HAS EXCLUDED THE INTEREST INCOME, DIVIDEND INCOME AND NON - RECURRING INCOME. THE ASSESSEE HAS CONSIDERED THE OTHER INCOME AS OPERATING, HOWEVER, TPO HAS NOT THE SAME AS OPERATING INCOME IN ABSENCE OF DETAILS OF SUCH OTHER INCOME. IN RESPECT OF EXPENSES, THE ASSESSEE HAS EXCLUDED NON - RECURRING EXPENSES, INTEREST AND FINANCIAL CHARGES. THE TPO HAS ADOPTED SIMILAR APPROACH. (VI) THE BASIC PRINCIPLE TO COMPUTE THE ARM'S LENGTH PRICE IS THAT TO FIND OUT WHAT WOULD HAVE BEEN THE PRICE OF THE SIMILAR SERVICES /GOODS TRANSFERRED BY THE INDEPENDENT PARTIES (UNCONTROLLED PARTIES) IN THE SIMILAR CIRCUMSTANCES. IT IS SETTLED LEGAL POSITION AS DECIDED BY THE VARIOUS TRIBUNALS THAT IF THE RELATED PARTY TRANSACTIONS IN THE CASE OF COMPARABLE CASE ARE LESS THAN 25%, TH EN SUCH COMPARABLE CASE IS TREATED AS UNCONTROLLED PARTY. ON THIS BACKGROUND, IT IS SEEN IN THE PRESENT CASE THAT THE FINANCIAL STATEMENTS/ANNUAL REPORTS OF ALL THE COMPARABLES ARE IN A PARTICULAR STANDARD FORMAT AND THEY DO NOT CONTAIN THE INFORMATION OF RELATED PARTY TRANSACTIONS. THUS IT IS NOT POSSIBLE TO VERIFY THE ASPECT OF RELATED PARTY TRANSACTIONS PERCENTAGE. 4. AS A RESULT OF ALP COMPUTATION FOR AY 2006 - 07, IT IS FOUND THAT THE AVERAGE PLI MARGIN OF COMPATIBLES USING SINGLE YEAR DATA COMES TO 2.98% (NCP I.E. PROFIT/COST) WHEREAS THE REVISED PLI MARGIN OF THE TESTED PARTY (AE) IS 9.15% SINCE AE (TESTED PARTY) HAS EARNED MORE PROFIT FROM THE EXPORTS MADE TO INDIAN AE THAN THE COMPARABLES, THE TRANSACTION IS NOT FOUND AT ARM'S LENGTH PRICE I.E. EX CESS PRICE IS PAID TO AE. FURTHER THE ARM'S LENGTH PRICE FALLS BEYOND +/ - 5% OF THE VALUE OF INTERNATIONAL TRANSACTION. THE ALP PROFIT FOR AY 2006 - 07 COMES TO 1.73 USD MILLION WHEREAS, THE PROFIT WORKED OUT BY THE TPO IS 5.32 MILLION USD. THIS SHOWS THAT 3.59 MILLIONS USD IS PAID MORE THAN THE ALP. THE VALUE OF PAYMENTS MADE BY THE INDIAN PARTY IS 63.44 MILLION USD. HOWEVER, AFTER REDUCING THE EXTRA PROFIT OF 3.59 MILLIONS USD, THE ALP PRICE OF INTERNATIONAL TRANSACTION COMES TO 59.85 MILLIONS USD. THUS T HE ADJUSTMENT OF 3.59 MILLIONS USD EQUIVALENT TO RS.16,01,49,900/ - (35,90,000 USD X 44.61 PREVAILING USD RATE IN INR) NEEDS TO BE MADE. 5. IN RESPECT OF AY 2007 - 08. IT IS SEEN FROM PLI COMPUTATION OF THE COMPARABLES THAT THE AVERAGE PLI MARGIN SINGLE YEAR DATA COMES TO 2.20% I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 30 OF 53 (NCP I.E. PROFIT/COST) WHEREAS THE PLI MARGIN OF THE TESTED PARTY (AE) IS 10.50%. THIS SHOWS THAT THE AE HAS EARNED EXTRA PROFIT BY 8.30% THAN THE ARM'S LENGTH PRICE FROM THE TRANSACTION WITH INDIAN AE. IN OTHER WORDS, THE ASSESSEE H AS PAID MORE PRICE TO THE AE THAN THE ARM'S LENGTH PRICE. SINCE THE DIFFERENCE ALP MARGIN AND ACTUAL MARGIN EARNED FALLS BEYOND THE BENEFIT OF +/ - 5%, ADJUSTMENT IS REQUIRED TO BE MADE IN THIS YEAR. THE ALP PROFIT FOR AY 2007 - 08 COMES TO 1.63 USD MILLION WHEREAS, THE PROFIT WORKED OUT BY THE ASSESSEE IS 7.77 USD MILLION. THIS SHOWS THAT 6.14 USD MILLIONS IS PAID MORE THAN THE ALP. THE VALUE OF PAYMENTS MADE BY THE INDIAN PARTY IS 81.73 USD MILLION. HOWEVER, AFT ER REDUCING THE EXTRA PROFIT OF 6.14 USD MI LLION, THE ALP PRICE OF INTERNATIONAL TRANSACTION COMES TO 75.59 USD MILLIONS. THUS THE ADJUSTMENT OF 6.14 USD MILLION EQUIVALENT TO RS.26,67,21.600/ - (61,40,000 USD X 43.44 PREVAILING USD RATE IN INR) NEEDS TO BE MADE. 6. THE SOFT COPY OF SEARCH PROCES S IN ONE SOURCE DATABASE CARRIED OUT ON 06/11/2015, COPIES OF ANNUAL REPORTS OF COMPARABLES FURNISHED BY THE ASSESSEE, COPIES OF ANNUAL REPORTS OF COMPARABLES DOWNLOADED FROM ORBIS DATABASE, STEPS USED TO ARRIVE AT 33 COMPARABLES AND PLI COMPUTATION OF COM PARABLES IS ENCLOSED IN THE CD FOR INFORMATION. 25. LEARNED COUNSEL FOR THE ASSESSEE, IN RESPONSE TO THIS SUBMISSION, HAS FILED A NOTE WHICH, INTER ALIA, STATES AS FOLLOWS: THE LEARNED TPO VIDE ABOVE LETTER HAS UNDERTAKEN A FRESH SEARCH IN RELATION TO TH E IMPORT OF PARTS AND COMPONENTS AND MADE OBSERVATIONS IN RELATION TO NET PROFIT MARGIN COMPUTATION OF TESTED PARTY. IN THIS REGARD, FOLLOWING SUBMISSIONS ARE BEING MADE: PARA 2 OF THE SUBMISSION EXTRACT FROM THE LEARNED TPO S SUBMISSION IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: 2. DURING THE HEARING FOR AY 2006 - 07 TO 2010 - 11 IN THE ABOVE CASE, THE HON'BLE BENCH DIRECTED THE TPO TO FURNISH THE COMPUTATION OF ALP OF INTERNATIONAL TRANSACTION OF IMPORT OF CKD KITS, COMPONENTS, SPARE PARTIE S, ACCESSORIES AND CAPITAL GODS FROM GMDAT FOR AY 2006 - 07 & 2007 - 08 ADOPTING AE AS TESTED PARTY AND AFTER VERIFYING THE 'ONESOURCE DATABASE' (FOREIGN DATABASE) USED BY THE ASSESSEE. SINCE THIS DATABASE IS PAID DATABASE AND TPO HAS NO ACCESS TO THE SAME, TH E ASSESSEE WAS DIRECTED TO PROVIDE THE ACCESS TO THE SAID DATABASE AND OTHER INFORMATION RELATING TO SEGMENTAL PLI WORKING MADE BY THE ASSESSEE. ACCORDINGLY, MS SHWETA KASHYAP, CA/AR ATTENDED THIS OFFICE ALONG WITH SHRI. KUNAL KESHANI, CAJAR ON 06/1112015 AND EXPLAINED THE SEGMENTAL PLI WORKING OF THE TESTED PARTY FOR AY 2006 - 07 & AY 2007 - 08. THEY DEMONSTRATED THE PROCESS OF SELECTION OF COMPARABLES THROUGH 'ONESOURCE DATABASE' BY USING THE SIMILAR KEYWORDS TO FIND OUT THE COMPARABLE COMPANIES FUNCTIONALLY SIMILAR TO THE TESTED PARTY. SINCE THE TESTED PARTY IS LOCATED IN SOUTH KOREA, THE REGION WAS RESTRICTED TO KOREA ONLY TO AVOID GEOGRAPHICAL DIFFERENCES. THE SOFT COPY OF SCREEN SHOTS OF SEARCH PROCESS IS ENCLOSED IN CD. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 31 OF 53 THE LEARNED TPO HAS MENTIONED THAT THE APPELLANT HAS FOLLOWED THE DIRECTIONS PASSED BY THE HON BLE BENCH AND EXPLAINED THE BENCHMARKING EXERCISE FOLLOWED IN THE TRANSFER PRICING DOCUMENTATION IN RELATION TO INTERNATIONAL TRANSACTION OF IMPORT OF PARTS AND COMPONENTS BY SELECTING GENERAL MOT ORS KOREA COMPANY ( GM KOREA ) AS THE TESTED PARTY. THE APPELLANT APPEARED BEFORE THE LEARNED TPO AND EXPLAINED IN DETAILED SEARCH STRATEGY, MARGIN COMPUTATION OF TESTED PARTY AND COMPARABLE COMPANIES. APPELLANT ALSO PROVIDED ALL BACK - UP FINANCIAL DATA IN HARD AND SOFT COPIES FOR BOTH TESTED PARTY AND COMPARABLE COMPANIES VIDE SUBMISSION DATED NOVEMBER 6, 2015. PARA 3 OF THE SUBMISSION EXTRACT FROM THE LEARNED TPO S SUBMISSION IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: 3. AS A RESULT OF SEA RCH, 74 COMPARABLE COMPANIES LOCATED IN KOREA ARE FOUND. ON FURTHER EXAMINATION THE SEARCH RESULT, IT IS FOUND THAT ONLY 33 COMPANIES ARE FUNCTIONALLY SIMILAR. SINCE THE ASSESSEE HAS SELECTED TNM METHOD FOR BENCHMARKING, THE ABOVE 33 COMPANIES ARE FOUND BR OADLY ENGAGED IN SIMILAR FUNCTIONS THAT ARE CARRIED OUT BY THE TESTED PARTY. LT IS NOTICED FROM THE COPIES OF FINANCIAL STATEMENTS OF THE COMPARABLES SUBMITTED BY THE ASSESSEE THAT THE FINANCIAL STATEMENTS OF ONLY 17 COMPANIES ARE SUBMITTED. THEREFORE, AN ATTEMPT WAS MADE TO OBTAIN THE FINANCIAL STATEMENTS OF REMAINING '16 COMPARABLES FROM THE 'ORBIS DATABASE' FOR WHICH THE ACCESS IS NOW AVAILABLE TO THE TPO. PREVIOUSLY, ACCESS WAS ALLOWED TO THE TPO FOR VERY LIMITED TERRITORY OF THE WORLD. AFTER EXAMINING THE FINANCIAL STATEMENTS OF ALL THE 33 COMPARABLE COMPANIES, THE DETAILED COMPUTATION OF PLI WORKING IS MADE. A COPY OF THE SAME IS ENCLOSED AS PER ANNEXURE - A BEFORE THE SUBMITTING THE COMMENTS ON ALP COMPUTATION, CERTAIN ISSUES WHICH HAVE BEEN CONSIDERED WHILE DOING THE ALP COMPUTATION ARE DISCUSSED AS UNDER: AT THE OUTSET, THE APPELLANT WOULD LIKE TO MENTION THAT YOUR HONOURS DIRECTED THE LEARNED TPO TO ADOPT GM KOREA AS THE TESTED PARTY AND CHECK THE BENCHMARKING EXERCISE AS UNDERTAKEN IN THE TRANSFER P RICING DOCUMENTATION TO UNDERSTAND THE SEARCH METHODOLOGY AND THE PROCEDURE FOLLOWED ON ONESOURCE DATABASE. THE APPELLANT, FOLLOWING THE DIRECTIONS OF YOUR HONOURS, CARRIED OUT A SAMPLE SEARCH TO DEMONSTRATE TO THE LEARNED TPO THAT THE ECONOMIC ANALYSIS IS RELIABLE AND ACCURATE. HOWEVER, THE LEARNED TPO HAS ERRED IN RELYING ON FRESH BENCHMARKING ANALYSIS AND SELECTING COMPARABLE COMPANIES BASED ON SUCH ANALYSIS. THE FRESH SEARCH WAS CARRIED OUT TO FACILITATE LEARNED TPO IN UNDERSTANDING THE SEARCH METHODOLO GY. ALSO, THE SEARCH WAS CARRIED ON ONESOURCE DATABASE WHICH WAS UPDATED AS ON NOVEMBER 6, 2015. THE LEARNED TPO ERRED IN RELYING ON THE FRESH SEARCH ANALYSIS WITHOUT PROVIDING ANY REASON FOR REJECTING THE BENCHMARKING ANALYSIS UNDERTAKEN BY THE APPELLA NT IN THE TRANSFER PRICING DOCUMENTATION. THE LEARNED TPO, IN HIS SUBMISSION, HAS FAILED TO PROVIDE ANY REASON OR JUSTIFICATION FOR CARRYING OUT A FRESH SEARCH ANALYSIS. FURTHER, THE APPELLANT HUMBLY SUBMITS THAT THE REMAND TO THE LEARNED TPO BY YOUR HONOU RS WAS ONLY IN RESPECT OF VERIFICATION OF THE BENCHMARKING ANALYSIS PRESENTED IN THE APPELLANT S DOCUMENTATION. THE LEARNED TPO ERRED IN CARRYING OUT THE FRESH SEARCH ANALYSIS WITHOUT EVEN ANALYSING THE SEARCH PROVIDED BY THE APPELLANT. ALSO, IT IS IMPORTA NT TO NOTE HERE THAT THE LEARNED TPO HAS FOLLOWED THE SIMILAR SEARCH STRATEGY AS ADOPTED BY THE APPELLANT IN ITS DOCUMENTATION TO CARRY OUT THE FRESH SEARCH. CONSIDERING THE SAME STRATEGY WAS ADOPTED, THERE WAS NO NEED TO CARRY OUT THE FRESH I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 32 OF 53 SEARCH AND THE LEARNED TPO SHOULD HAVE CONSIDERED THE SAME COMPARABLES AS SELECTED IN THE DOCUMENTATION INSTEAD OF RUNNING A NEW SEARCH. THE LEARNED TPO IS BOUND TO ACCEPT THE APPELLANT S ANALYSIS ON ACCOUNT OF FOLLOWING REASONS: ANALYSIS UNDERTAKEN IN ACCORDANCE WITH THE LAW THE APPELLANT HAS COMPLIED WITH ALL REQUIREMENTS AS PRESCRIBED UNDER THE ACT READ WITH RULE 10D OF THE RULES. THE TRANSFER PRICING ANALYSIS WAS UNDERTAKEN AS PER THE PROCEDURES OUTLINED AND IN GOOD FAITH, TO COMPLY WITH ALL THE PROVISIONS OF LAW A ND TO PROVIDE A TRUE AND FAIR ANALYSIS. NO REASONS TO BELIEVE THAT THE TRANSACTIONS WERE NOT AT THE ARM S LENGTH WITH PROVIDING ANY COGENT REASONS AS PROVIDED IN SECTION 92C(3) OF THE ACT, THE TPO CAN PROCEED TO DETERMINE THE ARM S LENGTH PRICE ONLY IN CIRCUMSTANCES ENUMERATED UNDER CLAUSE (A) TO (D) PROVIDED THEREIN. SECTION 92C(3) OF THE ACT PROVIDES AS UNDER: WHERE DURING THE COURSE OF ANY PROCEEDING FOR THE ASSESSMENT OF INCOME, THE ASSESSING OFFICER IS, ON THE BASIS OF MATERIAL INFORMATION OR DOCUMENT IN HIS POSSESSION, OF THE OPINION THAT A ) THE PRICE CHARGED OR PAID IN AN INTERNATIONAL TRANSACTION HAS NOT BEEN DETERMINED IN ACCORDANCE WITH SUB - SECTION (1) AND (2); B ) ANY INFORMATION AND DOCUMENT RELATING TO AN INTERNATIONAL TRANSACTION HAVE NO T BEEN KEPT AND MAINTAINED BY THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SUB - SECTION (1) OF SECTION 92D AND THE RULES MADE IN THIS BEHALF; C ) THE INFORMATION OR DATA USED IN COMPUTATION OF THE ARM S LENGTH PRICE IS NOT RELIABLE OR CORRECT; D ) THE ASSESSEE HAS FAILED TO FURNISH, WITHIN THE SPECIFIED TIME, ANY INFORMATION OR DOCUMENT WHICH HE WAS REQUIRED TO FURNISH BY A NOTICE ISSUED UNDER SUB - SECTION (3) OF SECTION 92D. SINCE THE LEARNED TPO HAS NOT REFUTED THE TRANSFER PRICING ANALYSIS UND ERTAKEN BY THE APPELLANT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES, IT IS UNFAIR AND UNWARRANTED TO CARRY OUT A FRESH ANALYSIS. IT IS ALSO PERTINENT TO NOTE THAT OUT OF THE TOTAL SET OF 33 COMPARABLES PROPOSED BY THE LEARNED TPO, 16 COMPANIES ARE FORMING PART OF APPELLANT S SET OF COMPARABLE COMPANIES SELECTED IN TP DOCUMENTATION. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 33 OF 53 GIVEN THIS, WE WISH TO SUBMIT AND REITERATE THAT THE METHODOLOGY ADOPTED, INCLUDING SELECTION OF COMPARABLES BY APPELLANT REQUIRES NO CHANGE AND DOES NOT REQUIRE A RE - DETERMINATION OF THE ARM S LENGTH MARGIN OR THE COMPARABLES. THE LEARNED TPO CAN T UNDERTAKE A FRESH ANALYSIS AGAINST THE DIRECTIONS OF THE HON BLE TRIBUNAL. THIS VIEWPOINT ALSO FINDS SUPPORT IN THE FOLLOWING JUDICIAL PRONOUNCEMENTS. HON BLE THE SUPREME COURT RULING IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD VS ITO [1977] 106 ITR 1 (SC) STATES: IT HAS BEEN SAID THAT THE TAXES ARE THE PRICE THAT WE PAY FOR CIVILIZATION. IF SO, IT IS ESSENTIAL THAT THOSE WHO ARE ENTRUSTED WITH THE TASK OF CALCULATING AND REALISING THAT PRICE SHOULD FAMILIARISE THEMSELVES WITH THE RELEVANT PROVISIONS AND BECOME WELL - VERSED WITH THE LAW ON THE SUBJECT. ANY REMISSNESS ON THEIR PART CAN ONLY BE AT THE COST OF THE NATIONAL EXCHEQUER AND MUST NECESSARILY RESULT IN LOSS OF REVENUE. AT THE SAME TIME, WE HAVE TO BEAR IN MIND THAT THE POLICY OF LAW IS THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUC E REPOSE IN AND SET AT REST JUDICIAL AND QUASI - JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. SO FAR AS THE INCOME - TAX ASSESSMENT ORDERS ARE CONCERNED, THEY CANNOT BE REOPENED ON THE SCORE OF INCOME ESCAPING ASSESSMENT UNDER SECTION 147 OF THE ACT OF 1961 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR UNLESS THERE BE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. AS ALREADY MENTIONED, THI S CANNOT BE SAID IN THE PRESENT CASE. THE APPEAL IS CONSEQUENTLY ALLOWED, THE JUDGMENT OF THE HIGH COURT IS SET ASIDE AND THE IMPUGNED NOTICES ARE QUASHED. THE PARTIES IN THE CIRCUMSTANCES SHALL BEAR THEIR OWN COSTS THROUGHOUT. THE GUJRAT HIGH COURT IN THE CASE OF CIT VS HARIKISHAN JETHALAL PATEL [1987] 168 ITR 472 (GUJ) HAS HELD THAT WHEN THERE IS NO DISPUTE AS TO THE FACTS OF THE CASE OR THE MATERIAL AVAILABLE ON RECORD THEN REMANDING BACK OF THE PROCEEDINGS IS NO WARRANTED. THE HIGH COURT HELD AS UNDE R: 13. IN THE PRESENT CASE ALSO, AS POINTED OUT EARLIER, THE INCOME TAX OFFICER NEVER DOUBTED THE GENUINENESS OF THE FIRM AND/OR THE TRANSACTION. ON THE RECORD, THERE IS NO MATERIAL WHATSOEVER TO DOUBT EITHER. WHAT THE REVENUE DESIRES IS A REMAND SO THAT IT MAY, ON INTRODUCTION OF FRESH FACTS, IF ANY, EXAMINE THE GENUINENESS OF THE FIRM AND/OR THE TRANSACTION. EVEN AT PRESENT, IT IS NOT THE CASE OF THE REVENUE THAT IT HAS COME INTO POSSESSION OF FRESH FACTS WHICH CAST A DOUBT ON THE GENUINENESS OF THE FIRM AND/OR THE TRANSACTION. THE REVENUE WANTS TO TAKE A SHOT IN THE DARK HOPING THAT IT MAY ON REMAND BE ABLE TO DIG OUT FRESH FACTS WHICH MAY CAST A DOUBT ON THE GENUINENESS OF THE FIRM AND OR THE TRANSACTION. IT IS MERELY A POSSIBILITY AND THAT TOO NOT SUPP ORTED BY AN IOTA OF MATERIAL. THE REVENUE DESIRES TO ENTER UPON A MERE FISHING INQUIRY HOPING THAT IN THE COURSE OF THE INQUIRY SOME MATERIAL MAY FALL INTO ITS HANDS WHICH MAY THROW A DOUBT ON THE GENUINENESS OF THE FIRM AND/OR THE TRANSACTION. WE ARE AFRA ID THAT SUCH A FISHING INQUIRY WHICH WOULD CAUSE CONSIDERABLE HARASSMENT, HARDSHIP AND EXPENDITURE TO THE ASSESSEE CANNOT BE PERMITTED ON THE MERE POSSIBILITY OR HOPE THAT SOME FACTS MAY EMERGE WHICH MAY CAST A I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 34 OF 53 DOUBT ON THE GENUINENESS OF THE FIRM AND/OR T HE TRANSACTION. WE ARE, THEREFORE, OF THE VIEW THAT SUCH A FISHING INQUIRY OUGHT NOT TO BE ALLOWED. 14. IN VIEW OF THE ABOVE, WE ANSWER THE QUESTION RAISED FOR OUR DECISION IN THE AFFIRMATIVE, THAT IS, AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. TH E REFERENCE IS DISPOSED OF ACCORDINGLY WITH NO ORDER AS TO COSTS. IN THE LIGHT OF THE ABOVE JUDICIAL PRECEDENTS, IT CAN BE SAFELY CONCLUDED THAT LEARNED TPO HAS UNDERTAKEN ANALYSIS WHICH WAS NEITHER WARRANTED NOR WAS ASKED BY YOUR HONOURS. IT IS HUMBLY SU BMITTED THAT SEARCH UNDERTAKEN BY THE APPELLANT AND PRESENTED BEFORE THE HONOURS SHOULD BE CONSIDERED FOR BENCHMARKING PURPOSES. ON A WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, IT SHOULD BE NOTED THAT THE LEARNED TPO NEVER REQUESTED APPELLANT TO PROVIDE THE DATA OF THE NEW COMPANIES CONSIDERED BY HIM. ALSO, THE LEARNED TPO HAS RELIED UPON THE DATA FROM A DATABASE NAMED ORBIS FOR WHICH THE APPELLANT DOESN T HAVE ANY ACCESS. FURTHER, IT IS PERTINENT TO NOTE HERE THAT THE FINANCIAL INFORMATION PROVIDED BY THE LEARNED TPO IN RELATION TO THE NEW COMPANIES DOESN T HAVE BREAK - UP OF THE REVENUE OR COST COMPONENT. CONSIDERING THE CONTENTION RAISED BY THE LEARNED TPO IN PARA (V) OF HIS SUBMISSION, THESE COMPUTATION CAN T BE RELIED UPON FOR UNDERTAKING THE BENCHMAR KING ANALYSIS. PLEASE REFER ANNEXURE 1 ATTACHED TO THIS FOR SAMPLE SCREENSHOT OF THE FINANCIAL INFORMATION OF COMPANIES SELECTED BY THE LEARNED TPO. ALSO, IT IS SHOULD BE NOTED THAT THE LEARNED TPO ERRED IN SELECTING MAJORITY OF NEW COMPANIES AS COMPARABL ES. THESE COMPANIES ARE FUNCTIONALLY DISSIMILAR OR THEY DON T HAVE SEGMENTAL RESULTS FOR THE RELEVANT ACTIVITIES. FURTHER, THE COMPUTATIONS CARRIED OUT BY THE LEARNED TPO DIDN T RECONCILE WITH THE FINANCIAL BACK - UP EVEN AFTER EXCLUDING OTHER REVENUE . PA RA 3 (I) OF THE SUBMISSION EXTRACT FROM THE LEARNED TPO S SUBMISSION IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: (I) THE SEGMENTAL PLI COMPUTATION SUBMITTED BY THE ASSESSEE, WHICH WAS PREPARED ON THE BASIS OF REPORT OF INDEPENDENT AUDITOR, IS FOR THE PERIOD FROM 01/04/2005 TO 31/03/2006 FOR AY 2006 - 07 AND FOR THE PERIOD FROM 01/06/2006 TO 31/03/2007 FOR AY 2007 - 08. HOWEVER, THE DATA OF ALL THE COMPARABLES IS FOR JAN. TO DEC. PERIOD. THOUGH THE FINANCIAL STATEMENTS OF TESTED PARTY (GMDAT) ARE ALSO FOR THE PERIOD JAN. TO DEC., THE ASSESSEE HAS PREPARED SEGMENTAL ACCOUNTS FOR THE PERIOD FROM L' APRIL TO 31' MARCH AND NO JUSTIFICATION IS GIVEN IN THE TP STUDY REPORT. HOWEVER, SINCE THE HON'BLE BENCH HAS DIRECTED TO ADOPT THE SEGMENTAL PLI AFTER V ERIFICATION, THE SAME IS ACCEPTED FOR ALP COMPUTATION SUBJECT TO CORRECTION OF ARITHMETICAL ERRORS DISCUSSED IN POINT NO. (II) & (III) BELOW AT THE VERY OUTSET, IT IS HIGHLIGHTED THAT THE LEARNED TPO ERRED IN STATING THAT THE DATA FOR AY 2007 - 08 WAS FOR P ERIOD FROM 01/06/2006 TO 31/03/2007. HOWEVER, THE DATA FOR AY 2007 - 08 HAS BEEN CONSIDERED FOR PERIOD FROM 01/04/2006 TO 31/03/2007. ALSO, IT IS PERTINENT TO NOTE THAT THE APPELLANT FOLLOWS AN ACCOUNTING YEAR FROM APRIL TO MARCH IN ITS FINANCIAL STATEMENTS AND EVEN THE INTERNATIONAL TRANSACTIONS DISCLOSED IN ACCOUNTANT S REPORT IN PRESCRIBED FORM 3CEB PERTAINS TO THE SAME PERIOD (I.E. APRIL I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 35 OF 53 TO MARCH). ACCORDINGLY, THE REPORT OF INDEPENDENT AUDITOR FOR VERIFYING THE SEGMENTAL RESULTS OF APPELLANT WAS PREPARED FOR THE SAME PERIOD. FURTHER, THE APPELLANT WOULD LIKE TO HIGHLIGHT THAT THE ABOVE ARGUMENTS HAVE ALREADY BEEN PRESENTED AND CONSIDERED DURING THE COURSE OF THE HEARINGS. ALSO, DETAILED ARGUMENTS WITH REGARD TO USE OF DIFFERENT YEAR ENDING DATA WERE PRESE NTED BEFORE YOUR HONOR S. RELIANCE IN THIS REGARD WAS PLACED ON FOLLOWING J UDGEMENTS WHEREIN IT HAS BEEN ADJUDICATED THAT COMPANIES WITH DIFFERENT YEAR ENDING DATA MAY BE CONSIDERED: HIGH COURT RULING IN THE CASE OF CIT VS. MCKINSEY KNOWLEDGE CENTER INDIA PVT LTD (ITA 217/2014) MAERSK GLOBAL SERVICE CENTRES (INDIA) PVT. LTD VS. DCIT (ITA NO. 2594/MUM/2014) AEGIS LIMITED VS. ACIT (ITA NO.1213/M/2014) DCIT VS. MCKINSEY KNOWLEDGE CENTER INDIA PVT LTD (ITA NO 2195/DEL/2011) ALSO, THE LEARNED TPO HAS ALLEGED T HAT THERE ARE FEW ARITHMETICAL ERROR IN THE COMPUTATION PRESENTED BY THE APPELLANT IN THE MARGINS OF TESTED PARTY I.E. GM KOREA. THE SAME HAS BEEN EXPLAINED IN THE FOLLOWING PARAGRAPHS. PARA 3 (II), 3(III) 4 AND 5 OF THE SUBMISSION EXTRACT FROM THE LEAR NED TPO S SUBMISSION IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: (II) FOR AY 2006 - 07, THE SEGMENTAL REVENUE (FOR SALE OF CKD KITS, COMPONENTS, SPARE PARTS, ACCESSORIES AND CAPITAL GOODS) I.E. REVENUE FROM RELATED PARTIES IS SHOWN AT 54.50 MIL LION USD WHEREAS PAYMENTS MADE BY THE ASSESSEE TO GMDAT DURING AY 2006 - 07 ALONE COMES TO 63.44 MILLION USD (TOTAL VALUE OF ABOVE TRANSACTIONS IN INR 283,00,72,189 DIVIDED BY 44.61 I.E. PREVAILING RATE OF ONE DOLLAR AND FURTHER CONVERTED INTO MILLION). THE FIGURE OF 63.44 MILLION USD IS REVENUE FROM INDIAN AE ONLY. THE DETAILS OF REVENUE EARNED BY TESTED PARTY FROM ABOVE MENTIONED INTERNATIONAL TRANSACTIONS FROM OTHER AES ARE NOT AVAILABLE HOWEVER, ON THE BASIS OF AVAILABLE FIGURES, THE SEGMENTAL REVENUE OF THE TESTED PARTY SHOULD HAVE MINIMUM 63.44 MILLION USD WHEREAS IN THE SEGMENTAL ACCOUNTS, THE SAME IS SHOWN AT 54.50 MILLION USD. THIS SHOWS THAT THE SEGMENTAL PLI WORKING MADE BY THE ASSESEE IS NOT RELIABLE HOWEVER, AS PER THE DIRECTIONS OF THE HON'BLE IT AT, SEGMENTAL PLI OF THE ASSESSEE IS ACCEPTED SUBJECT TO ABOVE MENTIONED ARITHMETICAL CORRECTION. THUS AFTER ADOPTING THE CORRECT FIGURE OF SEGMENTAL REVENUE AS ABOVE, THE REVISED PROFIT COMES TO 5.32 MILLION USD (SEG. REVENUE 63.44 MN USD ( - ) SEG COST 58. 12 MN USD) AND THE OP/OC % COMES TO 9.15% AS AGAINST ( - )6 23 % SHOWN BY THE ASSESSEE IN RESPECT OF TESTED PARTY . (III) FOR AY 2007 - 08, THE SEGMENTAL REVENUE (FOR SALE OF CKD KITS, COMPONENTS, SPARE PARTS, ACCESSORIES AND CAPITAL GOODS) I.E. REVENUE FROM RELATED PARTIES IS SHOWN AT B'1.73 MILLION USD WHEREAS PAYMENTS MADE BY THE ASSESSEE TO GMDAT DURING AY 2007 - 08 ALONE COMES TO 81.30 MILLION USD (TOTAL VALUE OF ABOVE TRANSACTIONS IN INR 353,15,40,392 DIVIDED BY 43.44 I.E. PREVAILING RATE OF ONE DOLLAR AND FURTHER CONVERTED INTO MILLION). THE FIGURE OF 81.30 MILLION USD IS REVENUE FROM INDIAN AE ONLY. THE DETAILS OF REVENUE EARNED BY TESTED PARTY FROM ABOVE MENTIONED INTERNATIONAL TRANSACTIONS FROM OTHER AES ARE NOT AVAILABLE. HOWEVER, ON THE BASIS OF AVAIL ABLE FIGURES, THE SEGMENTAL REVENUE OF I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 36 OF 53 THE TESTED PARTY SHOULD HAVE MINIMUM 8'1.30 MILLION USD WHEREAS IN THE SEGMENTAL ACCOUNTS, THE SAME IS SHOWN AT 81.73 MILLION USD. THEREFORE IT IS PRESUMED THAT THE DIFFERENCE FIGURE OF 0.43 MN USD PERTAINS TO SEGMENT AL REVENUE EARNED FROM OTHER AES AND AS SUCH THE PLI RATIO OF 10.50% (OP/OC) IS ADOPTED FOR COMPUTATION OF ARM'S LENGTH PRICE 4. AS A RESULT OF ALP COMPUTATION FOR AY 2006 - 07, IT IS FOUND THAT THE AVERAGE PLI MARGIN OF COMPARABLES USING SINGLE YEAR DATA C OMES TO 2.98% ( NCP I.E. PROFIT/COST) WHEREAS THE REVISED PLI MARGIN OF THE TESTED PARTY (AE) IS 9.'15%. SINCE AE (TESTED PARTY) HAS EARNED MORE PROFIT FROM THE EXPORTS MADE TO INDIAN AE THAN THE COMPARABLES, THE TRANSACTION IS NOT FOUND AT ARM'S LENGTH PR ICE I.E. EXCESS PRICE IS PAID TO AE. FURTHER THE ARM'S LENGTH PRICE FALLS BEYOND +/ - 5% OF THE VALUE OF INTERNATIONAL TRANSACTION. THE ALP PROFIT FOR AY 2006 - 07 COMES TO 1.73 USD MILLION WHEREAS, THE PROFIT WORKED OUT BY THE TPO IS 5.32 MILLION USD. THIS S HOWS THAT 3.59 MILLIONS USD IS PAID MORE THAN THE ALP. THE VALUE OF PAYMENTS MADE BY THE INDIAN PARTY IS 63.44 MILLION USD. HOWEVER, AFTER REDUCING THE EXTRA PROFIT OF 3.59 MILLIONS USD, THE ALP PRICE OF INTERNATIONAL TRANSACTION COMES TO 59.85 MILLIONS US D. THUS THE ADJUSTMENT OF 3.59 MILLIONS USD EQUIVALENT TO RS.16,01,49,900/ - ( 35,90,000 USD X 44.61 PREVAILING USD RATE IN INR) NEEDS TO BE MADE. 5. IN RESPECT OF AY 2007 - 08, IT IS SEEN FROM PLI COMPUTATION OF THE COMPARABLES THAT THE AVERAGE PLI MARGIN S INGLE YEAR DATA COMES TO 2.20% (NCP I.E. PROFIT/COST) WHEREAS THE PLI MARGIN OF THE TESTED PARTY (AE) IS 10.50%. THIS SHOWS THAT THE AE HAS EARNED EXTRA PROFIT BY B 30% THAN THE ARM'S LENGTH PRICE FROM THE TRANSACTION WITH INDIAN AE. IN OTHER WORDS, THE AS SESSEE HAS PAID MORE PRICE TO THE AE THAN THE ARM'S LENGTH PRICE. SINCE THE DIFFERENCE ALP MARGIN AND ACTUAL MARGIN EARNED FALLS BEYOND THE BENEFIT OF +/ - 5%, ADJUSTMENT IS REQUIRED TO BE MADE IN THIS YEAR. THE ALP PROFIT FOR AY 2007 - 08 COMES TO 1 63 USD M ILLION WHEREAS, THE PROFIT WORKED OUT BY THE ASSESSEE IS 7.77 USD MILLION THIS SHOWS THAT 614 USD MILLIONS IS PAID MORE THAN THE ALP THE VALUE OF PAYMENTS MADE BY THE INDIAN PARTY IS 81.73 USD MILLION. HOWEVER, AFTER REDUCING THE EXTRA PROFIT OF 6.14 USD M ILLION, THE ALP PRICE OF INTERNATIONAL TRANSACTION COMES TO 75.59 USD MILLIONS. THUS THE ADJUSTMENT OF 6.14 USD MILLION EQUIVALENT TO RS.26,67,21,600/ - (61,40,000 USD X 43.44 PREVAILING USD RATE IN INR) NEEDS TO BE MADE . THE APPELLANT WOULD LIKE TO STATE THAT THE LEARNED TPO HAS ERRED IN COMPUTING THE MARGINS OF THE TESTED PARTY I.E. GM KOREA FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. THE LEARNED TPO HAS ERRED IN ADDING THE VALUE OF IMPORT OF PARTS AND COMPONENTS AND SPARE PARTS OF OTHER ASSOCIATED ENTITIES AS WELL WHICH RESULTED IN A HIGHER VALUE. THE TOTAL VALUE OF IMPORT OF PARTS AND COMPONENTS AND SPARE PARTS FROM GM KOREA AS PER FORM 3CEB IS PROVIDED BELOW FOR YOUR HONOURS CONSIDERATION: PARTICULARS AMOUNT (INR) AY 2006 - 07 AMOUNT (INR) AY 2007 - 08 IMPO RT OF PARTS AND COMPONENTS FROM GM KOREA 2,269,447,566 3,275,793,039 IMPORT OF SPARE PARTS 64,307,683 147,226,276 CAPITAL GOODS 162,088,948 56,852,642 I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 37 OF 53 TOTAL AMOUNT (INR) A 2,495,844,197 3,479,871,957 TOTAL AMOUNT (INR) CONSIDERED BY THE TPO B 2, 830,072,189 3,531,540,392 DIFFERENCE B - A 33,42,27,992 5,16,68,435 THE DIFFERENCE HIGHLIGHTED ABOVE IS THE VALUE OF IMPORTS FROM OTHER ASSOCIATED ENTITIES. THE LEARNED TPO HAS ERRED IN INCLUDING THIS VALUE TO GM KOREA S FINANCIAL DATA. FROM THE ABOVE , IT IS CLEAR THAT THE LEARNED TPO HAS ERRED IN CONSIDERING THE VALUE OF THE IMPORT OF PARTS AND COMPONENTS, SPARE PARTS AND CAPITAL GOODS IN BOTH THE ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. ACCORDINGLY, IT IS PRAYED THAT THE SEGMENTAL DATA WHICH HAS ALSO BE EN VERIFIED BY EXTERNAL AUDITORS SHOULD BE CONSIDERED FOR COMPUTING THE MARGINS OF GM KOREA AND BENCHMARKING ANALYSIS. FURTHER, IT SHOULD BE NOTED THAT IF THE COMPARABLE SET SUBMITTED BY THE APPELLANT BEFORE YOUR HONOURS DURING THE COURSE OF HEARINGS DATE D NOVEMBER 2, 2015 TO NOVEMBER 4, 2015 IS IS CONSIDERED THAN THE APPELLANT S INTERNATIONAL TRANSACTION OF IMPORT OF PARTS AND COMPONENT WILL COMPLY WITH ARM S LENGTH PRINCIPLE. THIS SET WAS PREPARED CONSIDERING THE CONTENTIONS OF THE LEARNED TPO RAISED IN THE REMAND ORDER. THE SAME IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: - PARTICULARS AY 2006 - 07 (NCP IN PERCENT) 1 AY 2007 - 08 (NCP IN PERCENT) COUNTRY NAME FINANCIALS JICO CO., LTD. 3.38 2.71 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT OR IENT PRECISION INDUSTRIES INC (DAEJIN INDUSTRIAL CO. LTD.) 5.16 6.97 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT PUSAN CAST IRON CO., LTD. 4.92 5.41 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT SAERON AUTOMOTIVE CORP 14.32 17.68 SOUTH KOREA STANDALO NE PROFIT AND LOSS ACCOUNT WOOSU AMS CO., LTD. 0.20 3.90 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT YEONGHWA METAL CO LTD 15.98 17.60 SOUTH KOREA SEGMENTAL (AUTOMOBILE PARTS SEGMENT AND PIPE FITTING & CONNECTOR SEGMENT) ARITHMETIC MEAN (IN PERCENT) 7.33 9.04 1 NET OPERATING PROFIT RATIO BASED ON COST I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 38 OF 53 CONSIDERING THE ABOVE, IT IS REASONABLE TO CONCLUDE THAT GMIPL S INTERNATIONAL TRANSACTIONS RELATING TO IMPORT OF PARTS AND COMPONENTS IS AT ARM S LENGTH AND NO ADJUSTMENT SHOULD BE CARRIED OUT IN RELATION TO THE SAME. PARA 3 (IV) AND 3 (V) OF THE SUBMISSION EXTRACT FROM THE LEARNED TPO S SUBMISSION IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: (IV) IN THE TP STUDY REPORT, THE ASSESSEE HAS USED FILTER OF SALES MORE THAN ZERO AND NO UPPER LIMIT IS APPLIED. THE SAME APPROACH IS AD OPTED WHILE SELECTING THE COMPARABLES UNDER REPORT. (V) FOR COMPUTATION OF PLI OF THE COMPARABLES, THE ASSESSEE, IN ITS TP STUDY REPORT HAS EXCLUDED THE INTEREST INCOME, DIVIDEND INCOME AND NON - RECURRING INCOME. THE ASSESSEE HAS CONSIDERED THE OTHER INCOM E AS OPERATING, HOWEVER, TPO HAS NOT THE SAME AS OPERATING INCOME IN ABSENCE OF DETAILS OF SUCH OTHER INCOME. IN RESPECT OF EXPENSES, THE ASSESSEE HAS EXCLUDED NON - RECURRING EXPENSES - INTEREST AND FINANCIAL CHARGES THE TPO HAS ADOPTED SIMILAR APPROACH THE LEARNED TPO HAS PROPOSED TO EXCLUDE OTHER INCOME FOR THE PURPOSE OF MARGIN COMPUTATION. IN THIS REGARD, IT IS RESPECTFULLY SUBMITTED THAT THE LEARNED TPO NEVER RAISED THIS CONTENTION BEFORE IN THE ORIGINAL ASSESSMENT OR REMAND PROCEEDINGS. FURTHER, IT I S PERTINENT TO NOTE THAT THE COMPARABLES FINANCIAL REPORTS OBTAINED FROM ONESOURCE DATABASE ( ALSO SHARED WITH THE LEARNED TPO ) DISCLOSES THE NON - OPERATING INCOME AND EXPENSE HEADS SEPARATELY AND THE SAME HAS NOT BEEN CONSIDERED BY THE APPELLANT WHILE COMPU TING THE OPERATING PROFIT MARGINS OF THE COMPARABLE COMPANIES. THE OTHER REVENUE HEAD PROPOSED TO BE EXCLUDED BY THE LEARNED TPO IS RELATED TO THE BUSINESS ACTIVITY OF THE COMPARABLE COMPANIES. CONSIDERING THE NON - OPERATING HEADS HAVE ALREADY BEEN DISCLO SED SEPARATELY, THE OTHER REVENUE ITEM SHOULD BE CONSIDERED AS OPERATING IN NATURE. A SAMPLE SCREENSHOT OF THE ANNUAL REPORTS EXTRACT TO DEMONSTRATE THAT NON - OPERATING ITEMS HAVE BEEN DISCLOSED SEPARATELY IS ATTACHED AS ANNEXURE 2 TO THIS SUBMISSION. F URTHER, IT SHOULD BE NOTED THAT THE LEARNED TPO IN COMPUTATION OF OPERATING PROFIT MARGIN OF COMPARABLE COMPANIES IN TECH - CENTER SEGMENT FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 HAS CONSIDERED OTHER INCOME OR MISCELLANEOUS INCOME AS OPERATING IN NATURE . KIND ATTENTION IS DRAWN TO ANNEXURE 3 TO THIS SUBMISSION WHERE THE LEARNED TPO HAS CONSIDERED OTHER INCOME AND MISCELLANEOUS INCOME IN COMPUTATION OF THE OPERATING MARGINS FOR POWERSOFT GLOBAL SOLUTIONS LIMITED AND ACE SOFTWARE EXPORTS LIMITED RESPEC TIVELY. THE INCONSISTENT APPROACH ADOPTED BY TPO CLEARLY SHOWS THAT THE LEARNED TPO HAS CHERRY PICKED EXCLUSION OF OPERATING HEADS TO MAKE ADJUSTMENT IN THE APPELLANT S CASE. CONSIDERING THE SAME, APPELLANT WOULD HUMBLY SUBMIT THAT OTHER INCOME SHOULD BE INCLUDED IN THE COMPUTATION OF THE OPERATING MARGINS. AS MENTIONED ABOVE, IT IS PERTINENT TO NOTE THAT THE LEARNED TPO HAS CONSIDERED DATA FROM ORBIS DATABASE FOR THE NEW SET OF COMPARABLE COMPANIES PROPOSED BY THE TPO. THE FINANCIAL DATA FROM THE SAID DA TABASE DOESN T PROVIDE BREAK - UP OF THE REVENUE OR COST COMPONENTS SEPARATELY AND THE GROSS TOTAL AMOUNTS HAVE BEEN I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 39 OF 53 CONSIDERED BY THE LEARNED TPO. SUCH AN INCONSISTENT APPROACH ADOPTED BY THE LEARNED TPO IS CLEARLY UNFAIR AND UNJUST. ALSO, WITHOUT PREJUDI CE TO ABOVE CONTENTIONS OF THE APPELLANT, EVEN IF OTHER REVENUE IS EXCLUDED FROM THE OPERATING MARGIN OF THE COMPARABLE COMPANIES, THE APPELLANT S INTERNATIONAL TRANSACTION OF IMPORT OF PARTS AND COMPONENT WILL COMPLY WITH THE ARM S LENGTH PRINCIPLE BASE D ON THE COMPARABLE SET SUBMITTED BY THE APPELLANT DURING THE PRESENT COURSE OF HEARINGS BEFORE YOUR HONOURS: COMPANY NAME AY 2006 - 07 (NCP IN PERCENT) AY 2007 - 08 (NCP IN PERCENT) COUNTRY NAME FINANCIALS DAE JIN INDUSTRIAL COMPANY 5.16 6.97 SOUTH KOREA S TANDALONE PROFIT AND LOSS ACCOUNT JICO CO., LTD. 3.38 2.71 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT PUSAN CAST IRON COMPANY LIMITED 7.38 7.69 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT SAERON AUTOMOTIVE CORPORATION 14.79 17.68 SOUTH KOREA STAN DALONE PROFIT AND LOSS ACCOUNT WOOSU AMS CO., LTD. 0.20 3.90 SOUTH KOREA STANDALONE PROFIT AND LOSS ACCOUNT YEONGHWA METAL CO., LTD. 15.98 17.60 SOUTH KOREA SEGMENTAL (AUTOMOBILE PARTS SEGMENT AND PIPE FITTING & CONNECTOR SEGMENT) ARITHMETIC MEAN (IN PE RCENT) 7.82 9.42 PARA 3 (VI) OF THE SUBMISSION EXTRACT FROM THE LEARNED TPO S SUBMISSION IS REPRODUCED BELOW FOR YOUR HONOURS KIND CONSIDERATION: - (VI) THE BASIC PRINCIPLE TO COMPUTE THE ARM'S LENGTH PRICE IS THAT TO FIND OUT WHAT WOULD HAVE BEEN T HE PRICE OF THE SIMILAR SERVICES/GOODS TRANSFERRED BY THE INDEPENDENT PARTIES (UNCONTROLLED PARTIES) IN THE SIMILAR CIRCUMSTANCES. LT IS SETTLED LEGAL POSITION AS DECIDED BY THE VARIOUS TRIBUNALS THAT IF THE RELATED PARTY TRANSACTIONS IN THE CASE OF COMPAR ABLE CASE ARE LESS THAN 25%, THEN SUCH COMPARABLE CASE IS TREATED AS UNCONTROLLED PARTY ON THIS BACKGROUND, IT IS SEEN IN THE PRESENT CASE THAT THE FINANCIAL STATEMENTS/ANNUAL REPORTS OF ALL THE COMPARABLES ARE IN A PARTICULAR STANDARD FORMAT AND THEY DO N OT CONTAIN THE INFORMATION OF RELATED PARTY TRANSACTIONS. THUS IT IS NOT POSSIBLE TO VERIFY THE ASPECT OF RELATED PARTY TRANSACTIONS PERCENTAGE IN RELATION TO THE ABOVE CONTENTION OF THE LEARNED TPO, IT SHOULD BE NOTED THAT THE SAME WAS NEVER MENTIONED OR STATED TO THE APPELLANT IN THE ORIGINAL ASSESSMENT PROCEEDINGS OR REMAND PROCEEDINGS. THE LEARNED TPO, IN HIS REMAND ORDER, MADE CERTAIN ASSERTIONS ABOUT RELATED PARTY TRANSACTIONS. CONSIDERING THE SAME, APPELLANT I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 40 OF 53 DURING THE COURSE OF THE PRESENT HEARINGS PRESENTED AN ADDITIONAL SUBMISSION BEFORE YOUR HONOURS WITH THE RELATED PARTY DETAILS OF COMPARABLE COMPANIES. THEREFORE, BASED ON THE ABOVE CONTENTIONS AND PLEA, IT IS REASONABLE TO CONCLUDE THAT ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT IN THE TRANS FER PRICING DOCUMENTATION SHOULD BE ACCEPTED AND NO ADJUSTMENT SHOULD BE CARRIED OUT IN RELATION TO THE INTERCOMPANY TRANSACTION OF IMPORT OF PARTS AND COMPONENTS. 26. UPON RECEIPT OF THIS REPORT FROM THE TPO, AND REJOINDER THERETO BY THE ASSESSEE, WE ON CE AGAIN REFIXED THE MATTER SO THAT BOTH THE PARTIES CAN BE HEARD ON THIS ASPECT OF THE MATTER. LEARNED TPO, HOWEVER, REGRETTED HIS INABILITY TO ATTEND THE HEARING AS HE WAS STATED TO BE PREOCCUPIED WITH URGENT WORK, WHICH HE SPECIFIED IN GREAT DETAIL IN THE LETTER, BUT HE DID SUBMIT THAT THE FRESH SEARCH OF COMPARABLES WAS NECESSARY AS THE ASSESSEE WAS NOT ABLE TO DEMONSTRATE THE SE ARCH PROCESS C ARRIED OUT AT THE TIME OF PREPARING THE TRANSFER PRICING STUDY. HE ALSO SUBMITTED THAT THE TPO HAS NOT CONDUCTE D A FRESH SEARCH (OF C OMPARABLES) ON HIS OWN BUT VERIFIED THE SEARCH PROCESS DEMONSTRATED BY THE ASSESSEE AS PER DIRECTIONS OF HON BLE ITAT AND THE RESULTS THEREOF HAVE BEEN SUBMITTED BEFORE THE ITAT AS REGARDS THE USE OF FINANCIAL STATEMENTS OF NEW COMP ARABLES, IT WAS CLARIFIED BY THE TPO THAT SINCE THE INFORMATION WAS STATED TO BE NOT READILY AVAILABLE WITH THE ASSESSEE AND SINCE THE REPORT WAS TO BE FURNISHED TO THE ITAT IN A TIME BOUND MANNER, HE HAD NO CHOICE BUT TO ACCESS WHATEVER DATABASE IS AVAILA BLE TO HIM. AS REGARDS CORRECTIONS IN SEGMENTAL PLI WORKING OF THE TESTED PARTY, AND ALLEGEDLY ERRONEOUS INCLUSION OF IMPORTS OF SPARE PARTS AND COMPONENT OF OTHER AES, IT WAS SUBMITTED THAT THE ASSESSEE ITSELF HAS DONE SO AND THAT THE TPO HAS NOT, THEREFO RE, CHANGED THE METHOD OF COMPUTATION. ACCORDING TO THE TPO, WHILE COMPUTING PLI MARGIN OF TESTED PARTY, THE REVENUE EARNED FROM THE TESTED PARTY FROM SIMILAR ACTIVITY, I.E. SEGMENTAL ACTIVITY, AND RELATED EXPENDITURE HAS TO BE CONSIDERED . AS REGARDS THE RELATED PARTY TRANSACTIONS ISSUE, IT WAS SUBMITTED THAT SINCE EFFECT TO THE DIRECTIONS OF HON BLE ITAT COULD NOT BE GIVEN AND THERE WAS OCCASION BEFORE THE TPO TO VERIFY THE COMPARABILITY OF COMPARABLES EARLIER. HE THUS JUSTIFIED THE STAND TAKEN BY HIM I N THE EARLIER REPORT. 27. AS WE TAKE NOTE OF THE ABOVE FACTS, IT IS NECESSARY TO TAKE A LOOK AT THE STAND TAKEN BY THE TPO IN THE IMPUGNED ORDER. WE HAVE NOTED THAT THE TPO REITERATED THE IMPUGNED ALP ADJUSTMENTS ON THE GROUND THAT WITH DUE RESPECT TO T HE DIRECTIONS GIVEN BY THE HON BLE ITAT, IN ABSENCE OF ANY DATA BEING SUPPLIED BY THE ASSESSEE WITH RESPECT TO GMDAT, IT IS NOT POSSIBLE TO CONDUCT THE TRANSFER PRICING STUDY ADO PTING THE GMDAT AS TESTED PARTY , THAT I N THE L IGHT OF (INTER ALIA) FAILURE/ DEFIANCE ON THE PART OF THE ASSESSEE COMPANY TO FURNISH SUFFICIENT AND RELIABLE DATA IN RESPECT OF THE TESTED PARTY SELECTED BY IT TO BENCHMARK THE TRANSACTIONS OF THE TESTED PARTY WITH THE COMPARABLES SELECTED BY THE ASSESSEE , THAT NONE OF THE COMPARA BLES SELECTED BY THE ASSESSEE ARE FOUND TO BE FUNCTIONALLY COMPARABLE WITH THE TESTED PARTY SELECTED BY THE ASSESSEE AND THAT IN VIEW OF THE FAILURE ON THE PART OF THE ASSESSEE TO COOPERATE WITH THE TPO IN EXECUTING THE DIRECTIONS OF THE ITAT, IT IS IMPO SSIBLE TO DETERMINE ALP BY TAKING AE AS TESTED PARTY . THE TPO ALSO NOTED THAT IN ORDER TO ENSURE CONFORMITY WITH THE ABOVE PRINCIPLE, THE ASSESSEE WAS CALLED I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 41 OF 53 UPON TO SUBMIT THE DATA RELATING TO THE TESTED PARTY WHICH WAS AVAILABLE WITH IT FOR THE PURPO SE OF BENCHMARKING. SUCH DATA HAS BEEN SUBMITTED BY IT IN RESPONSE TO THE LETTER DATED 10/7/2014. THE DATA MERELY COMPRISES OF THE CONSOLIDATED ANNUAL REPORT OF GMDAT FOR 2004 AND 2005, A PLP SCHEDULE AND THE PROFIT STATEMENT FROM SUPPLY OF CKDS TO INDIAN COMPANY 28. ALL THESE OBJECTIONS, HOWEVER, NOW STAND ABANDONED BY THE TRANSFER PRICING OFFICER, AND HE HAS NOW TURNED TO THE NEW ISSUES. WHILE, AT ONE STAGE, THE STAND OF THE TPO WAS THAT NONE OF THE COMPARABLES SELECTED BY THE ASSESSEE ARE FOUND TO B E FUNCTIONALLY COMPARABLE WITH THE TESTED PARTY SELECTED BY THE ASSESSEE , AS IT NOW TRANSPIRES, IN THE REPORT FILED BEFORE US, ALL THE COMPARABLES SELECTED BY THE ASSESSEE ARE FOUND TO BE FUNCTIONALLY COMPARABLE AS HE NOW HAS 33 COMPARABLES AS A RESULT OF HIS NEW SEARCH - WHICH INCLUDE 16 COMPARABLES SELECTED BY THE ASSESSEE. IN THE LIGHT OF THIS STAND OF THE ASSESSEE, HIS EARLIER OBSERVATION WAS CLEARLY INCORRECT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT DETAILE D FUNCTIONAL ANALYSIS AND MARGIN COMPUTATIONS WERE PROVIDED IN THE TRANSFER PRICING C OMPUTATIONS, AND THE TPO HAS NOT REJECTED THE SAME. AS FOR THE OBSERVATION THAT THE SELECTION SHO UL D BE OF THE COMPANIES DEALING ONLY IN ENGINE AND TRANSMISSION PARTS, THAT THE ASSESSEE HAS FURNISHED A DE TAILED LIST OF IMPORTS FROM AE WHICH INCLUDES SEAT CUSHION, REAR PANEL, DOOR, SIDE PANEL, WINDOW FRAME, BRAKE PART, SECURITY LOCKS, WINDSHIELDS, AND OTHER PARTS. HIS EARLIER STAND WAS THAT IN ABSENCE OF ANY DATA BEING SUPPLIED BY THE ASSESSEE WITH RESPEC T TO GMDAT, IT IS NOT POSSIBLE TO CONDUCT THE TRANSFER PRICING STUDY ADO PTING THE GMDAT AS TESTED PARTY , BUT ONCE HIS ATTENTION IS DRAWN TO THE INFORMATION ALREADY FURNISHED BY THE ASSESSEE, AND THE CERTIFICATION OF SUCH INFORMATION BY PUBLIC ACCOUNTANTS, HE NO LONGER HAS A GRIEVANCE ON THAT ISSUE. AS REGARDS THE T PO S OBSERVATION TO THE EFFECT IN ORDER TO ENSURE CONFORMITY WITH THE ABOVE PRINCIPLE, THE ASSESSEE WAS CALLED UPON TO SUBMIT THE DATA RELATING TO THE TESTED PARTY WHICH WAS AVAILABLE WITH IT F OR THE PURPOSE OF BENCHMARKING. SUCH DATA HAS BEEN SUBMITTED BY IT IN RESPONSE TO THE LETTER DATED 10/7/2014. THE DATA MERELY COMPRISES OF THE CONSOLIDATED ANNUAL REPORT OF GMDAT FOR 2004 AND 2005, A PLP SCHEDULE AND THE PROFIT STATEMENT FROM SU PPLY OF CKD S TO INDIAN COMPANY , WE MAY ONLY REFER TO THE UNCONTROVERTED CLARIFICATIONS GIVEN BY THE ASSESSEE TO THE EFFECT THAT THE ASSESSEE HAS PRODUCED THE DOCUMENTS BEFORE THE TPO DURING THE ORIGINAL AND REMAND PROCEEDING NAMELY (A) C ERTIFIED PLP DATA FROM THE STATUTORY AUDITORS OF GM KOREA;(B) C ONSOLID ATED ANNUAL REPORT OF GM KOREA; (C) ALLOCATION KEY (D) R ECONCILIATION OF THE CERTIFIED SEGMENTAL REPORT PREPARED BY THE AUDITOR VIS - - VIS THE PLP DATA SUBMITTED BY THE ASSESSEE; (E) B ACK - UP EXCEL FILES REFERRED B Y THE AUDITOR WHILE PREPARI NG THE CERTIFIED REPORT FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 . THIS OBJECTION, THEREFORE, DOES NOT HOLD GOOD EITHER, NOR DID THE REVENUE CANVASS IT BEFORE US ANY LONGER AS AGGRESSIVELY. ALL THE REASONS FOR WHICH THE IMPUGNED A LP ADJUSTMENTS WERE REITERATED STAND ABANDONED. WE MAY MENTION THAT EVEN WITH RESPECT TO THE ASSESSEE BEING TREATED AS A TESTED PARTY, THE TPO DID NOT DEAL WITH THE SPECIFIC ISSUES REGARDING REJECTION OF FORCE MOTORS, HINDUSTAN MOTORS, SWARAJ MAZDA LIMITED ATUL AUTO LIMITED AND ASHOK LEYLAND LIMITED AS COMPARABLES OR IN CORRECTION OF THE MARGINS OF THE MAHINDRA & MAHINDRA LIMITED. THE EXERCISE CONDUCTED BY THE TPO WAS THUS QUITE SUPERFICIAL AND WITHOUT APPLICATION OF MIND . THE ALP ADJUSTMENTS, AS PROPOSED B Y THE TPO IN THE REPORT FILED BEFORE US, ARE I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 42 OF 53 SUGGESTED AT RS 16.01 CRORE FOR THE ASSESSMENT YEAR 2006 - 07 AND RS 26.67 CRORES FOR THE ASSESSMENT YEAR 2007 - 08. TO JUSTIFY THESE ADJUSTMENT , HAS SOME NEW S, HE HAS AN ALTOGETHER NEW BASIS . THE QUESTION REALLY IS WHETHER SUCH A COURSE OF ACTION, IN IMPROVING CASE OF THE REVENUE AT THIS STAGE OF PROCEEDINGS, CAN BE PERMITTED. 29. THE JUSTIFICATION GIVEN BY THE TPO FOR IMPROVING HIS CASE , AS HE PUTS IT, IS DIRECTION GIVEN BY US DURING THE COURSE OF HEARING. THAT IS NOT CORRECT. WHILE CONDUCTING THE HEARING, THE TRIBUNAL COULD NOT HAVE DIRECTED , AND DID NOT, THE TPO TO MAKE A TRANSFER PRICING ASSESSMENT DE - NOVO . DURING THE COURSE OF HEARING, WHEN TPO WAS CONFRONTED WITH VOLUMINOUS INFORMATION FURNISHED TO HIM IN THE REMANDED PROCEEDINGS AND THE FACT THAT HE DID NOT FIND ANY FAULT IN THE INFORMATION SO FURNISHED, LEARNED TPO SOUGHT AN OPPORTUNITY TO ONCE AGAIN EXAMINE THE DETAILS. IT WAS IN RESPONSE TO THIS PRAYER THAT THE ASSESSEE WAS DIRECTED TO APPEAR BEFORE THE TP O, ASSIST HIM BY EXPLAINING ALL THE INF ORMATION ETC, AND THE TPO WAS DIRECTED TO BRING IT OUR NOTICE IN CASE THERE WERE ANY PATENT INFIRMITIES OR INCONSISTENCIES IN THE MATERIAL SO FURNISHED BY THE ASSESSEE AND ALREADY ON RECORD. THE EXERCISE WAS TO ESSENT IALLY REMAIN CONFINED TO THE MATERIAL ALREADY ON RECORD DURING THE REMANDED PROCEEDINGS; OUR SCOPE OF ADJUDICATION CANNOT GO BEYOND THAT ASPECT OF THE MATTER. THE ISSUES THAT THE TPO ARE RAISING NOW ARE THE ISSUES THAT OUGHT TO HAVE BEEN EXAMINED WHEN THE TPO WAS GIVEN AN OPPORTUNITY TO RE - EXAMINE THE MATTER. IN ANY CASE, THE ASSESSEE HAS, AS WE HAVE NOTED EARLIER, MET THESE ISSUES NOW BEING RAISED BY THE TPO. THERE ARE CLEAR AND BLATANT ERRORS IN THE REPORT FILED BY THE TPO, INASMUCH AS E VEN INTEREST, DIV IDENDS AND NON RECURRING INCOMES ARE INCLUDED IN THE OPERATIONAL INCOME, BUT NON RECURRING EXPENSES, INTEREST AND FINANCIAL CHARGES ARE EXCLUDED FROM THE OPERATIONAL EXPENSES. SUCH AN APPROACH IS EX FACIE INCORRECT. SIMILARLY, ADJUSTMENTS TO THE REVENUES ARE INCORRECT INASMUCH AS THESE DONOT TAKE INTO ACCOUNT TRANSACTIONS WITH OTHER AES. THE INFERENCES DRAWN BY THE TPO ARE UNJUSTIFIED AND INCORRECT. THE FIGURES GIVEN BY THE ASSESSEE, EXPLAINING THESE VARIATIONS, DEMONSTRATE THE SAME, AND WHEN THE TPO WAS CALL ED UPON TO APPEAR AND EXPLAIN THE SAME, HE DID NOT HAVE ANYTHING SPECIFIC ON THESE POINTED ISSUES . THE TPO DID FILE A REPLY BUT IT DID NOT COMPREHENSIVELY DEAL WITH THESE ISSUES . WE HAVE ANYWAY NOTED THAT T HE TP STUDY WAS VERY MUCH BEFORE THE TPO AT THE REMAND STAGE AS WELL BUT HE HAD NO ISSUES WITH THE SELECTION OF COMPARABLES BUT NOW HE CONDUCTS A FRESH STUDY AND ENLARGES THE SCOPE OF COMPARABLES. SUCH AN APPROACH, IN OUR HUMBLE UNDERSTANDING AND SUBJECT TO WHAT HON BLE COURTS ABOVE HOLD, IS NOT PERMISS IBLE IN LAW. THE PROCEEDINGS BEFORE US ARE NOT EXTENSION OF ASSESSMENT PROCEEDINGS, AND THERE ARE SERIOUS LIMITATIONS ON THE POWERS OF THIS TRIBUNAL, SO FAR IMPROVEMENT OF CASE BY THE REVENUE IS CONCERNED. WHAT IS BEFORE US IS WHETHER OR NOT THE TPO CORREC TLY GAVE EFFECT TO THE DIRECTIONS OF THE TRIBUNAL, AND WE FIND THAT THE TPO DID NOT DO SO AT ALL. DESPITE THE FACT THAT HE HAD ALL THE INFORMATION AT THE STAGE OF ORIGINAL PROCEEDINGS AS ALSO REMANDED PROCEEDINGS, HE DID NOT FIND ANY FAULT IN THE SAME. EVE N WHEN HE WAS GIV E N OPPORTUNITY TO DO SO DURING THE COURSE OF HEARING BEFORE US, HE DID NOT POINT OUT ANY INFIRMITIES IN THE INFORMATION FURNISHED BY THE ASSESSEE. THE TPO HAS NOW RAISED THE ISSUE REGARDING RELATED PARTY TRANSACTIONS BUT THAT ISSUE WAS NO T TAKEN UP AT ANY STAGE BY THE TPO EARLIER. THE ASSESSEE HAS FILED A PETITION FOR ADMISSION OF ADDITIONAL EVIDENCE AND SUBMITTED THE INFORMATION REGARDING RELATED PARTY TRANSACTIONS AND SUBMITTED THAT THERE SUCH I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 43 OF 53 RELATED PARTY TRANSACTIONS, AS CERTIFIED, AR E WITHIN PERMISSIBLE LIMITS. THE INERTIA OF THE TPO AT THE REMAND STAGE CANNOT BE REWARDED BY GIVING HIM YET ANOTHER OPPORTUNITY OF EXAMINING THE MATTER ONCE AGAIN, AND BY SENDING THE MATTER BACK TO HIM FOR DE - NOVO EXAMINATION YET AGAIN. THE MATTER HAS TO REACH FINALITY AT SOME STAGE . IN OUR CONSIDERED VIEW, AND PARTICULARLY AS THE ISSUES RAISED BY THE TPO IN THE REMAND PROCEEDINGS ARE DEVOID OF LEGALLY SUSTAINABLE MERITS, THE BENCHMARKING DONE BY THE ASSESSEE CANNOT BE FAULTED WITH. ONCE THE TRIBUNAL DIRE CTS GMAT TO BE TAKEN AS TESTED PARTY - A DIRECTION WHICH REMAINS INTACT AS ON NOW, AND UNLESS THERE ARE ANY LEGALLY SUSTAINABLE DEFECTS POINTED OUT IN THE TRANSFER PRICING ANALYSIS BY THE ASSESSEE, THERE CANNOT BE ANY GOOD REASON TO HOLD THAT THE IMPORTS OF CKD KITS BY THE AES IS NOT AT AN ARM S LENGTH PRICE. THE MATERIAL ON RECORD DOES NOT JUSTIFY REJECTION OF THE ASSESSEE S TP ANALYSIS. WE HAVE NOTED THAT, IN THE TRANSFER PRICING STUDY REPORTS FILED BEFORE US, THE ASSESSEE HAD SHOWN THE DETAILED PROCESS W HEREBY THE COMPARABLES WERE SELECTED, AND THE TPO DID NOT EVEN LOOK AT THIS ASPECT OF THE MATTER. FOR THE ASSESSMENT YEAR 2006 - 07, FOR EXAMPLE, TP STUDY SHOWS, AT PAGE 1346 OF THE PAPER - BOOK (INTERNAL PAGE 24), THE US SIC CODE APPLIED, AND THEN ACCEPT - REJE CT MATRIX FOR 442 COMPARABLES, ALONGWITH A BRIEF REASON OF REJECTION - WHERE APPLICABLE, IN ANNEXURE 2. THE BUSINESS DESCRIPTION OF THE COMPARABLES HAS ALSO BEEN SET OUT AT PAGE 1417 ONWARDS. THE TPO HAS NO ISSUES WITH THE SAME, NO COMMENTS ON THESE INPUTS AND YET HE PROCEEDS TO DRAW THE FRESH COMPARABLES ON THE BASIS OF NEW SEARCH. IT IS ONLY ELEMENTARY THAT UNLESS THE TPO IS ABLE TO SHOW INFIRMITIES IN THE TP DOCUMENTATION OF THE ASSESSEE, HE CANNOT EMBARK UPON THE EXERCISE OF THE PROCESS OF BENCHMARKING A FRESH. REJECTION OF THE TP DOCUMENTATION BY THE ASSESSEE IS A SINE QUA NON FOR THE TPO RESORTING TO THE FRESH EXERCISE OF CHOOSING COMPARABLES AND STARTED THE PROCESS OF DETERMINATION OF ARM S LENGTH PRICE DE NOVO. THE ACTION OF THE TPO IS INAPPROPRIATE AN D UNSUSTAINABLE IN LAW. 30. AS WE UPHOLD THE GRIEVANCE OF THE ASSESSEE, WE MAKE IT CLEAR THAT THIS DECISION ESSENTIALLY RESTS ON THE BASIC LEGAL POSITION THAT THE TPO CANNOT BE ALLOWED TO MAKE AN ALTOGETHER NEW CASE AT THE STAGE OF REMAND PROCEEDINGS , EV EN THOUGH, AS WE HAVE NOTED EARLIER, THERE ARE CLEAR INCONSISTENCIES IN THE APPROACH OF THE TPO EVEN AT THIS STAGE, SUCH AS, FOR EXAMPLE, ON ESTIMATION OF SEGMENTAL REVENUES, ON INCLUSION OF NONRECURRING REVENUES, INTEREST AND DIVIDEND INCOME, AS ALSO HIS SELECTING THE FRESH COMPARABLES, ON THE BASIS OF HIS UNDERSTANDING THAT HE WAS DIRECTED BY THE ITAT TO DO THE TRANSFER PRICING ANALYSIS DE - NOVO. 31. THE ALP ADJUSTMENTS OF R S. 33.49 CRO R ES (ASSESSMENT YEAR 2006 - 07) AND RS 237.73 CRORES (ASSESSMENT YEAR 2007 - 08), IN RESPECT OF IMPORTS OF CKD KITS FROM THE AES AND AS REITERATED BY THE TPO IN THE REMAND PROCEEDINGS, THUS STAND DELETED. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 32. THAT NOW TAKES US TO THE ALP ADJUSTMENTS IN RESPECT OF TECH CENTRE. 33. W E HAVE NOTED THAT THE TPO, IN THE REMAND PROCEEDINGS, HAS REITERATED HIS EARLIER STAND ON THE BASIS OF RATHER VAGUE OBSERVATIONS TO THE EFFECT THAT IT IS I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 44 OF 53 NOTICED THAT THOUGH THE HON BLE ITAT HAD DIRECTED THE ASSESSEE TO SUBMIT THE REASONS BEFORE THE TPO A S TO WHY THE COMPARABLES QUOTED BY IT SHOULD BE ACCEPTED BY THE TPO AS COMPARABLES AND WHY THE COMPARABLES SELECTED BY TPO SHOULD BE REJECTED, ..THE ASSESSEE SUBMITTED REPLY/ INFORMATION RAISING SIMILAR OBJECTIONS, WHICH HAVE ALREADY BEEN DEALT BY THE TPO IN THE ORIGINAL ORDER. IN VIEW OF THE ABOVE FACTS, THE ADJUSTMENT OF RS 19.66 CRORES IS RETAINED AS IT IS . IN OUR CONSIDERED VIEW, THIS IS A SWEEPING GENERALIZATION WHICH IS NOT BO R NE OUT OF THE MATERIAL ON RECORD AND IS AT VARIANCE WITH THE ACTUAL FACT S. WE MUST, THEREFORE, TAKE UP THE GRIEVANCE OF THE ASSESSEE WITH RESPECT TO INCLUSION OR EXCLUSION OF EACH OF THE COMPARABLE ON MERITS AND DEAL WITH THE SAME. THE ASSESSEE HAS MADE ELABORATE SUBMISSIONS, ALONG WITH SUPPORTING EVIDENCES, AND THE TPO HAS SI MPLY BRUSHED THE MATERIAL ASIDE. THAT IS AN APPROACH WHICH CANNOT MEET ANY JUDICIAL APPROVAL. 34. EVEN ON MERITS, THE ASSESSEE DESERVES TO SUCCEED. HAVING GONE THROUGH THE MATERIAL ON RECORD, AND HAVING HEARD THE RIVAL CONTENTIONS, WE SEE MERITS IN THE PL EA OF THE ASSESSEE. WE FIND THAT AS FAR ACE SOFTWARE EXPORTS IS CONCERNED, THE DRP ITSELF HAS SELECTED THE SAID COMPARABLE AND THE TPO HAS ALSO INCLUDED THIS COMPARABLE IN THE ASSESSMENT YEAR 2007 - 08. THIS IS AN ASSESSEE ENGAGED IN RENDERING CAD/CAM SERVIC ES AND GIS SERVICES WHICH ARE QUITE SIMILAR TO ENGINEERING SERVICES. THERE IS NO GOOD REASON FOR THE TPO TO EXCLUDE THE SAME. WE, THEREFORE, DIRECT THAT THIS COMPARABLE BE INCLUDE D. SO FAR AS POWERSOFT GLOBAL SOLUTIONS LTD, AS A COMPARABLE, IS CONCERNED, DURING THE RELEVANT PREVIOUS YEAR CADGIS CONSULTANTS MERGED WITH POWERSOFT AND THE CLAIM OF THE ASSESSEE IS THAT DUE TO THIS EXTRAORDINARY EVENT, THIS COMPARABLE SHOULD BE EXCLUDED. A LARGE NUMBER OF JUDICIAL PRECEDENTS ARE ALSO CITED IN SUPPORT OF THIS A RGUMENT, INCLUDING THE COORDINATE BENCH DECISIONS IN THE CASES OF BEHR INDIA LTD [(2014) 52 TAXMANN.COM 447], CAPITAL IQ INFORMATION SYSTEMS (ITA NO. 1961/HYD/2011, APPROVED BY HON BLE AP HIGH COURT VIDE JUDGMENT DATED 5 TH JUNE 2014), CES PVT LTD (ITA NO. 1445/HYD/2010, APPROVED BY HON BLE AP HIGH COURT VIDE JUDGMENT DATED 16 TH JULY 2014 ), AND ZAVATA INDIA PVT LTD. THERE IS NO SPECIFIC ARGUMENT AGAINST THIS EXCLUSION. CONSISTENT WITH THE STAND TAKEN BY THE COORDINATE BENCHES, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE TPO TO EXCLUDE THIS COMPARABLE. SO FAR AS ROLTAS INDIA LIMITED IS CONCERNED, WE HAVE NOTED THAT THIS COMPANY HAS ALMOST 25% (24.77 % TO BE PRECISE) RELATED PARTY TRANSACTIONS, AND THAT, FOR THIS REASON ALONE, THIS COMPARABLE DESERV ES TO BE EXCLUDED. THAT APART, EVEN THE FUNCTIONAL PROFILE OF THE COMPARABLE IS DIFFERENT INASMUCH AS APART FROM ENGINEERING SERVICES, THIS ENTITY IS ADMITTEDLY ENGAGED IN DESIGN, PROCUREMENT AND CONSTRUCTION MANAGEMENT ACTIVITIES AS WELL. FOR ALL THESE RE ASONS, IN OUR CONSIDERED VIEW, THE ASSESSEE WAS QUITE JUSTIFIED IN CLAIMING THAT ROLTAS INDIA LTD IS TO BE EXCLUDED FROM THE LIST OF COMPARABLES. WE UPHOLD THIS PLEA AS WELL. COMING TO THE ASSESSEE S PLEA REGARDING INCLUSION OF PSI DATA SYSTEMS LTD, THE A DDITIONAL COMPARABLE SELECTED BY THE ASSESSEE, WE FIND THAT THIS COMPARABLE IS ENGAGED IN PROVIDING IT SOLUTIONS TO BANKING AND FINANCIAL SECTOR - A SEGMENT, WHICH INCLUDES, INTER ALIA, PRODUCT ENGINEERING, MIGRATION, INDEPENDENT VERIFICATION AND VALIDATION AND ERP IMPLEMENTATION. HAVING EXAMINED THE DETAILS OF THE SERVICES, AND THE MATERIAL ON RECORD, WE ARE INCLINED TO ACCEPT THE PLEA OF THE ASSESSEE ON THIS COUNT AS WELL. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 45 OF 53 ACCORDINGLY, THE TPO IS DIRECTED TO INCLUDE THIS COMPARABLE AS WELL. AS REGARDS TH E WORKING CAPITAL ADJUSTMENT SOUGHT BY THE ASSESSE, LEARNED TPO HAS FAIRLY ACCEPTED THE SAME IN PRINCIPLE. HE, HOWEVER, SUBMITS THAT THE LOW RISK ADJUSTMENT SOUGHT BY THE ASSESSEE IS GOOD IN THEORY BUT IS DIFFICULT TO BE IMPLEMENTED INASMUCH AS THERE IS NO WAY IT CAN BE QUANTIFIED. ON THIS ISSUE ALSO, WHILE WE UPHOLD THE PLEA IN PRINCIPLE, WE DIRECT THE ASSESSEE TO MAKE OUT A CLAIM, ON A FAIR AND OBJECTIVE BASIS, WHICH CAN BE EXAMINED BY THE ASSESSING OFFICER. TO THIS EXTENT, THEREFORE, WE UPHOLD THE PLEA O F THE ASSESSEE. 35. LEARNED COUNSEL SUBMITS THAT IN THE EVENT OF THE ACCEPTANCE OF THE PLEA OF THE ASSESSEE IN RESPECT OF THE ABOVE COMPARABLES, THE MARGINS OF THE TECH CENTRE WILL BE WELL WITHIN THE ALP MARGINS. THAT ASPECT OF THE MATTER, HOWEVER, NEED S TO BE VERIFIED BY THE TPO. THE MATTER IS RESTORED TO THE FILE OF THE TPO FOR THIS LIMITED PURPOSES. THE PLEA OF THE ASSESSEE IS THUS UPHELD I N PRINCIPLE BUT REMITTED TO THE FILE OF THE TPO FOR LIMITED VERIFICATION. 36. SO FAR AS TRANSFER PRICING ISSUES ARE CONCERNED, THAT LEAVES US WITH ONLY ONE ITEM I.E. ALP ADJ USTMENT OF RS 4,89, 60,504 IN RESPECT OF ROYALTY PAID BY THE ASSESSEE T O ITS KOREA N AE. THIS ADJUSTMENT IS ONLY WITH RESPEC T TO THE ASSESSMENT YEAR 2007 - 08 . 37. AS FAR AS PAYMENT OF ROYALTY TO THE AE IS CONCERNED, WE HAVE NOTED THAT THE TPO HIMSELF HAS ACCEPTED THIS TO BE AT AN ARM S LENGTH IN THE EARLIER ASSESSMENT YEARS. HOWEVER, IN THE PRESENT CASE, HE HAS SOUGHT TO DISCARD THIS APPROACH ON THE BASIS OF AN EXTERNAL COMPARABLE WHICH IS USED A S AN INPUT FOR DETERMINING THE ALP ON THE BASIS OF CUP METHOD. THE DRP CONFIRMED THIS ADJUSTMENT, AS NOTED BY THE COORDINATE BENCH IN THE FIRST ROUND OF PROCEEDINGS, IN A RATHER MECHANICAL MANNER. WHEN THE MATTER REACHED COORDINATE BENCH FOR ADJUDICATION, IT WAS REMITTED TO THE FILE OF THE TPO BY OBSERVING AS FOLLOWS: 19.11. WE HAVE CAREFULLY CONSIDERED THE LENGTHY SUBMISSION MADE BY THE ASSESSEE WHICH HAS BEEN EQUALLY REFUTED BY THE REVENUE BY ITS ELABORATE SUBMISSION 19.12. ON CONSIDERING THE CONTENTIO NS OF THE RIVAL PARTIES, IT IS OBSERVED THAT THE TUSSLE BETWEEN THE PARTIES HAS BEEN NARROWED DOWN TO THE ISSUE OF COMPARING OF THE AGREEMENTS. THE ASSESSEE HAD TAKEN THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND ISUZU AND TREATED AS CUP WHEREAS THE TPO HAD AS CUP THE AGREEMENTS OF (I) NAMYANG - HENGLONG; AND (II) DELPHI - JINGZHOU. THIS HAS BEEN ASSAILED BY THE ASSESSEE FOR THE REASONS NARRATED ABOVE. THE AGREEMENT ENTERED INTO BY THE ASSESSEE AS WELL AS THE AGREEMENTS OF UNRELATED PARTIES REFERRED TO B Y THE TPO CONTAINED [TERMS AND CONDITIONS] THE NATURE AND SCOPE OF SERVICES INVOLVED WHICH REQUIRED TO BE EXAMINED. THE DRP HAD, WITHOUT INVOLVING ITSELF IN ANALYZING THE CONTENTIONS I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 46 OF 53 PUT - FORTH BY THE ASSESSEE WITH THAT OF THE TPO IN REJECTING THE ASSESSEE S COMPARABLE, SUSTAINED THE TPO S STAND WITHOUT ASSIGNING ANY PLAUSIBLE REASON WHATSOEVER. MOREOVER THE RELEVANT AGREEMENTS WHICH CONTAINED TERMS AND CONDITIONS ON THE BASIS OF WHICH, THEY WERE TO BE SELECTED AS COMPARABLES. OBVIOUSLY, THIS REQUIRES CONSID ERABLE VERIFICATION, EXAMINATION AND COMPARISON. 19.13. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE REQUIRES TO BE REMITTED BACK ON THE FILE OF THE TPO FOR A DETAILED EXAMINATION AND VERIFICATION OF THE ASSESSEE S CONTENTIONS. TO F ACILITATE THE TPO TO IMPLEMENT THE ABOVE DIRECTION, THIS ISSUE IS RESTORED ON THE FILE OF THE TPO TO TAKE APPROPRIATE ACTION AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IT IS ORDERED ACCORDINGLY 38. WHEN THE MATTER THUS TRAVE LLED BACK TO THE TPO, HE REITERATED THE ALP ADJUSTMENT. WHILE DOING SO, THE TPO OBSERVED AS FOLLOWS: DURING THE COURSE OF TP PROCEEDINGS FOR GIVING APPEAL EFFECT TO THE ORDER OF ITAT, A NOTICE U/S 92CA WAS ISSUED TO SUBMIT THE REPLY ON THE POINT OF ROYAL TY ADJUSTMENT TO ENABLE TO GIVE EFFECT OF THE DIRECTIONS OF ITAT. ACCORDINGLY THE ASSESSEE HAS SUBMITTED THE REPLY ON 07/10/2014 WHEREIN IT IS STATED THAT PAYMENT OF ROYALTY WAS ACCEPTED AS AT ARM'S LENGTH DURING FINANCIAL YEAR 2005 - 06, HENCE A CONSISTENT APPROACH SHOULD BE ADOPTED TO BENCHMARK THE PAYMENT OF ROYALTY. THE ASSESSEE HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF RADHASOAMI SATSANG VS. CIT (193 ITR 321) AND CLAIMED THAT HON'BLE SUPREME COURT HAS CLEARLY LAID DOWN THAT THOUGH STRICTLY SPEAKING, THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO THE INCOME TAX PROCEEDINGS, BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAVE BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THE POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT IS NOT ALLOWED CHANGE THE POSITION IN ANY SUBSEQUENT YEAR. HOWEVER, IT NOTICED FROM THE ORIGINAL TP ORDER FOR AY 2007 - 08 THAT DURING ORIGINAL TP PROCEEDINGS, THE SEARCH OF ADGAR ONLINE DATABASE (WHICH IS BASED ON SEC FILINGS) WAS CARRIED OUT TO SEARCH FOR ROYALTY AGREEMENT FOR INDEPENDENT PARTIES RELATED TO ASSEMBLIES FOR AUTOMOBILES, AND ACCORDINGLY TWO AGREEMENTS WERE FOUND AND ONE OF THESE AGREEMENTS WERE RELATED TO GMDAT'S, M - 150 AND M - 200 PROJECT ITSELF I.E. THE PROJECT FOR WHICH ASSESSEE HAS PAID ROYALTY TO M/S. GMDAT. THIS AGREEMENT WAS EXACTLY THE SAME ON ACCOUNT OF PRODUCT ROYALTY WITH THE ASSESSEE'S PRODUCT ROYALTY AGREEMENT. ACCORDINGLY A SHOW CAUSE NOTICE ISSUED TO THE ASSESSE E PROPOSING TO USE THE ABOVE AGREEMENT AS CUP TO BENCHMARK THE ALP OF ROYALTY PAYMENT. IN ITS REPLY DATED 30.9.2010 ASSESSEE HAD STATED THAT IT HAS BENCHMARKED ITS TRANSACTIONS WITH INTERNAL CUP AVAILABLE ON SIMILAR AGREEMENT WITH THE THIRD PARTY I.E. ISUZ U MOTORS LIMITED, JAPAN TO OBTAIN CERTAIN TECHNICAL INFORMATION AND ASSISTANCE IN RELATION TO MANUFACTURING OF TAVERA IN INDIA AND AS PER THIS AGREEMENT, ISUZU CHARGED ROYALTY AT I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 47 OF 53 THE RATE OF 5% OF NET SELLING PRICE TO THE ASSESSEE FOR PROVIDING TECHNICAL I NFORMATION AND ASSISTANCE IN THIS REGARD. THE ASSESSEE FURTHER HAD STATED THAT NET ROYALTY PAYMENT WAS APPROXIMATELY 0.54% OF THE GROSS SELLING PRICE AND HENCE SAME WAS BELOW 3% AND SHOULD BE ACCEPTED AS BENCHMARK RATE FOR ROYALTY TRANSACTION. HOWEVER, THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE TPO STATING THAT ISUZU'S AGREEMENT AND THIS AGREEMENT IS NOT EXACTLY COMPARABLE WITH ASSESSEE'S AGREEMENT FOR ROYALTY FOR M - 200 PROJECT; WHEREAS AGREEMENT BETWEEN KOREA DELPHY AUTOMOTIVE SYSTEMS CORPORATI ON, KOREA AND JINGZHOU HENGLONG AUTOMOTIVE PARTS COMPANY LIMITED, CHINA IS EXACTLY COMPARABLE IN RESPECT OF ALL TECHNICAL SPECIFICATION AND FOR SAME PROJECT OF GMDAT M - 200. THIS AGREEMENT CLEARLY SPECIFIES THAT TECHNOLOGY IS OF GMDAT ONLY. UNDER THE CIRCUM STANCES, THIS AGREEMENT CAN BE SAID AS EXACT COMPARABLE FOR ASSESSEE'S ROYALTY AGREEMENT IN THIS REGARD; WHEREAS ISUZU'S AGREEMENT IS ONLY FOR SOME CERTAIN SPECIFIC TECHNOLOGIES AND NOT OF THIS SPECIFIC GMDAT'S TECHNOLOGY FOR ASSEMBLY OF CAR, HENCE, CANNOT BE TREATED AS EXACT COMPARABLE. THE ASSESSEE HAD FURTHER STATED THAT ROYALTY PAYMENT IS ONLY 0.54% OF GROSS SELLING PRICE WHICH IS NOT CORRECT WAY OF COMPARING PRICES. THEREFORE THE TPO HAD MADE ADJUSTMENT OF RS.4,89,60,504/ - RESTRICTING THE PAYMENT @ 3% A S AGAINST 5% CLAIMED BY THE ASSESSEE. IN VIEW OF ABOVE, IT IS CLEAR THAT THOUGH THE ROYALTY PAYMENT WAS TREATED AT ALP IN EARLIER YEAR, DURING THIS YEAR, DUE TO DETECTION OF VALID INTERNAL CUP, ADJUSTMENT WAS MADE. THEREFORE THE ADJUSTMENT OF RS.4,89,60,50 4/ - IS RETAINED AS IT IS. 39. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 40. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 41. WE FIN D THAT WHEN THE MATTER TRAVELLED BACK TO THE TPO, THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS IN RESPECT OF THE ABOVE: C. P AYRNENT OF ROYALTY (POINT 1 AND 2 OF THE NOTICE) IT IS PERTINENT TO NOTE THAT YOUR GOODSELF HAS HELD THE PAYMENT OF ROYALTY AT ARM' S LENGTH IN THE FINANCIAL YEAR 05 - 06. HENCE, IT IS SUBMITTED THAT A CONSISTENT APPROACH SHOULD BE ADOPTED TO BENCHMARK THE PAYMENT OF ROYALTY. IT IS PERTINENT TO NOTE THAT VIS - A - VIS THE PRIOR YEAR THERE HAS BEEN NO FUNDAMENTAL CHANGE AT ALL IN THE FACTS AN D CIRCUMSTANCES, FUNCTIONS, ASSETS AND RISK PROFILE OF THE ASSESSEE OR THE NATURE OF INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY DURING THE CAPTIONED FINANCIAL YEAR. HENCE, ALL OTHER THINGS BEING THE SAME, THE TRANSFER PRICING APPROACH (BASED ON INTERN AL CUP) SHOULD BE UPHELD FOR THE CURRENT FINANCIAL YEAR AND CANNOT BE ARBITRARILY CHANGED IN THE CURRENT YEAR WITHOUT ANY REASONABLE BASIS. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 48 OF 53 IN THIS CONNECTION, IT IS RESPECTFULLY SUBMITTED THAT THE HON'BLE SUPREME COURT HAS CLEARLY LAID DOWN THAT THOUGH ST RICTLY SPEAKING, THE PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS, BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAVE BEEN FOUND AS A FACT ONE WAY OR THE OTHER, AND THE PARTIES HAVE ALLOWED THE POSIT ION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT IS NOT ALLOWED TO CHANGE THE POSITION IN ANY SUBSEQUENT YEAR. THE SUPREME COURT IN RADHASOAMI SATSANG VS. CIT (193 ITR 321) HAS CLEARLY LAID DOWN THE ABOVE RULE OF LAW BY MAKING THE FOLLOWING OBSERVATION : ONE OF THE CONTENTIONS WHICH LEARNED SENIOR COUNSEL FOR THE APPELLANT RAISED AT THE HEARING WAS THAT, IN THE ABSENCE OF ANY CHANGE IN THE CIRCUMSTANCES, THE REVENUE SHOULD HAVE FELT BOUND BY THE PREVIOUS DECISIONS AND NO ATTEMPT SHOULD HAVE BEEN MADE TO REOPEN THE QUESTION. HE RELIED UPON SOME AUTHORITIES IN SUPPORT OF HIS STAND. A FULL BENCH OF THE MADRAS HIGH COURT CONSIDERED THIS QUESTION IN T.M.M. SANKARALINGA NADAR AND BROS, VS. CIT[1929] 4 ITC 226. AFTER DEALING WITH THE CONTENTION, THE FULL BENCH EXPRESSED THE FOLLOWING OPINION (P. 242). THE PRINCIPLE TO BE DEDUCED FROM THESE TWO CASES IS THAT WHERE THE QUESTION RELATING TO ASSESSMENT DOES NOT VARY WITH THE INCOME EVERY YEAR BUT DEPENDS ON THE NATURE OF THE PROPERTY OR ANY OTHER QUESTION ON WHICH T HE RIGHTS OF THE PARTIES TO BE TAXED ARE BASED, E.G., WHETHER A CERTAIN PROPERTY IS TRUST PROPERTY OR NOT, IT HAS NOTHING TO DO WITH THE FLUCTUATIONS IN THE INCOME; SUCH QUESTIONS, IF DECIDED BY A COURT ON A REFERENCE MADE TO IT WOULD BE RES JUDICATA IN TH AT THE SAME QUESTION CANNOT BE SUBSEQUENTLY AGITATED. ONE OF THE DECISIONS REFERRED TO BY THE FULL BENCH WAS THE CASE OF HOYSTEAD VS. COMMISSIONER OF TAXATION [1926] AC 155 (PC) . SPEAKING FOR THE JUDICIAL COMMITTEE, LORD SHAW STATED (P.165): PARTIES ARE NO T PERMITTED TO BEGIN FRESH LITIGATIONS BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE, OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE A PROPER APPREHENSION BY THE COURT OF THE LEGAL RESULT EITHER OF THE CONSTRUCTION OF THE DOCUMENT S OR THE WEIGHT OF CERTAIN CIRCUMSTANCES. IF THIS WERE PERMITTED LITIGATION WOULD HAVE NO END, EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. IT IS A PRINCIPLE OF LAW THAT THIS CANNOT BE PERMITTED, AND THERE IS ABUNDANT AUTHORITY REITERATING THAT PRINCIPLE. THI RDLY, THE SAME PRINCIPLE - NAMELY, THAT OF A SETTING TO REST RIGHTS OF LITIGANTS, APPLIES TO THE CASE WHERE A POINT, FUNDAMENTAL TO THE DECISION, TAKEN OR ASSUMED BY THE PLAINTIFF AND TRAVERSABLE BY THE DEFENDANT, HAS NOT BEEN TRAVERSED. IN THAT CASE ALSO A DEFENDANT IS BOUND BY THE JUDGMENT, ALTHOUGH IT MAY BE TRUE ENOUGH THAT SUBSEQUENT LIGHT OR INGENUITY MIGHT SUGGEST SOME TRAVERSE WHICH HAD NOT BEEN TAKEN. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 49 OF 53 THE SAME REITERATED BY THE HIGH COURT IN ITS RECENT DECISION RENDERED IN THE CASE OF LI AND FUNG I NDIA PVT. LTD. VS CIT [(2013) 40 TAXMANN.COM 300 (DELHI)] , WHEREIN THE FOLLOWING OBSERVATIONS WERE MADE: IT IS ALSO PLEADED THAT THE ASSESSEE HAS RECEIVED 80 - O DEDUCTION IN THE EARLIER YEARS IN RESPECT OF PROVIDING THESE PROFESSIONAL AND TECHNICAL SERVICE S. IN THIS REGARD, WE HOLD THAT EVERY ASSESSMENT YEAR IS A SEPARATE ASSESSMENT YEAR FOR INCOME TAX PURPOSES AND THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE. FURTHER DURING THIS YEAR, THE ASSESSEE HAS NOT CLAIMED OR ENTITLED FOR 80 - O DEDUCTION. THEREFOR E, IT CANNOT BE A PLEA TO JUSTIFY THE TRANSACTION AT THE ARM'S LENGTH THE LAW WAS AGAIN REITERATED BY THE SUPREME COURT IN ITS DECISION RENDERED IN BERGER PAINTS INDIA LTD. VS. CIT (266 ITR 99) , WHEREIN THE FOLLOWING OBSERVATIONS WERE MADE: IN VIEW OF THE JUDGMENTS OF THIS COURT IN UNION OF INDIA VS. KAUMUDINI NARAYAN DALAL [2001] 249 ITR 219; CIT VS. NARENDRA DOSHI [2002] 254 ITR 606 AND CIT VS. SHIVASAGAR ESTATE [2002] 257 ITR 59, THE PRINCIPLE ESTABLISHED IS THAT IF THE REVENUE HAS NOT CHALLENGED THE CO RRECTNESS OF THE LAW LAID DOWN BY THE HIGH COURT AND HAS ACCEPTED IT IN THE CASE OF ONE APPELLANT, THEN IT IS NOT OPEN TO THE REVENUE TO CHALLENGE ITS CORRECTNESS IN THE CASE OF OTHER APPELLANT WITHOUT JUST CAUSE. IN THE INSTANT CASE, THERE IS NO JUST CAUS E MENTIONED BY YOUR GOODSELF IN THE NOTICE OR THE ORDER EXPLAINING THE BASIS FOR TAKING A VIEW CONTRARY TO THE VIEW TAKEN IN THE EARLIER YEAR. IN UNION OF INDIA VS. KAUMUDINI NARAYAN DALAL AND ANOTHER (249 ITR 219) , THE SUPREME COURT HAS REITERATED THE VIE W THAT IF THE REVENUE HAS ACCEPTED A POINT RAISED BY THE APPELLANT, IT IS SUBSEQUENTLY DEBARRED FROM CHALLENGING THE SAME POINT. THIS IS HOW THE SUPREME COURT RULED: THE ORDER UNDER CHALLENGE IN THIS APPEAL BY THE REVENUE FOLLOWED THE EARLIER JUDGMENT OF T HE SAME HIGH COURT IN THE CASE OF PRADIP RAMANLAL SHETH VS. UNION OF INDIA [1993] 204 ITR 866. LEARNED COUNSEL FOR THE REVENUE STATES THAT THE PAPERS BEFORE US SUGGEST THAT A SPECIAL LEAVE PETITION WAS PREFERRED AGAINST THAT JUDGMENT BUT HE HAS NO INSTRUCT IONS AS TO WHAT HAPPENED THEREAFTER. LEARNED COUNSEL FOR THE RESPONDENTS STATES THAT THEIR ENQUIRIES WITH THE REGISTRY REVEAL THAT NO APPEAL AGAINST THAT JUDGMENT WAS PREFERRED BY THE REVENUE. IF THE REVENUE DID NOT ACCEPT THE CORRECTNESS OF THE JUDGMENT I N THE CASE OF PRADIP RAMANLAL SHETH [1993] 204 ITR 866 (GUJ), IT SHOULD HAVE PREFERRED AN APPEAL THERE AGAINST AND INSTRUCTED COUNSEL AS TO WHAT THE FATE OF THAT APPEAL WAS OR WHY NO APPEAL WAS FILED. IT IS NOT OPEN TO THE REVENUE TO ACCEPT THAT JUDGMENT I N THE CASE OF THE APPELLANT IN THAT CASE AND CHALLENGE ITS I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 50 OF 53 CORRECTNESS IN THE CASE OF OTHER APPELLANTS WITHOUT JUST CAUSE. FOR THIS REASON, WE DECLINE TO CONSIDER THE CORRECTNESS OF THE DECISION OF THE HIGH COURT IN THIS MATTER AND DISMISS THE CIVIL APPEAL . SIMILARLY, THE SUPREME COURT IN CIT VS. SHIVSAGAR ESTATE (257 ITR 59) HAS HELD THAT IF THE REVENUE HAS ACCEPTED THE CONTENTION OF THE APPELLANT FOR AN EARLIER YEAR, IT WOULD NOT BE ENTITLED TO CHALLENGE THAT CONTENTION IN A SUBSEQUENT YEAR. THIS HAS BEEN STATED BY THE SUPREME COURT IN THE FOLLOWING WORDS: HAVING REGARD TO THE FACT THAT NO APPEAL HAS BEEN CARRIED AGAINST THE ORDERS OF IDENTICAL ASSESSMENT FOR THE PREVIOUS YEAR, THE CIVIL APPEALS AND SPECIAL LEAVE PETITIONS ARE DISMISSED. IN A RECENT DECIS ION, THE JURISDICTIONAL DELHI HIGH COURT IN COMMISSIONER OF INCOME TAX VS. A.R.J. SECURITY PRINTERS (266 ITR 276), FOLLOWING THE ABOVE LEGAL POSITION LAID DOWN BY THE SUPREME COURT, HAS DISMISSED AN APPEAL BY THE DEPARTMENT BY HOLDING THAT EARLIER DECISION S ON THE SAME QUESTION SHOULD NOT BE REOPENED UNLESS SOME FRESH FACTS ARE FOUND IN THE SUBSEQUENT YEAR. THE HIGH COURT OBSERVED AS FOLLOWS: WE FIND SUBSTANCE IN THE CONTENTION URGED BY LEARNED COUNSEL FOR THE APPELLANT TRUE THAT EACH ASSESSMENT YEAR BEING INDEPENDENT OF THE OTHER, AS A GENERAL RULE, THE PRINCIPAL OF RES JUDICATA OR ESTOPPEL BY RECORD, WHICH APPLIES TO CIVIL COURTS, DOES NOT APPLY TO INCOME TAX PROCEEDINGS BUT, YET FOR THE SAKE OF CONSISTENCY AND FOR THE PURPOSE OF FINALITY IN ALL LITIGATION S, INCLUDING LITIGATION ARISING OUT OF FISCAL STATUTES, EARLIER DECISIONS ON THE SAME QUESTION SHOULD NOT BE REOPENED UNLESS SOME FRESH FACTS ARE FOUND IN THE SUBSEQUENT YEAR THE SUPREME COURT IN RADHASOAMI SATSANG VS. CIT [1992] 193 ITR 321 OBSERVED THAT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND THE PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. THE SUPREME COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT AGAINST THE DECISION OF THE DELHI HIGH COURT (SUPRA) IN CIT VS. ARJ SECURITY PRINTERS (VIDE 266 ITR 4 REPORTER.) IT IS SUBMITTED THAT THE LAW L AID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG (SUPRA) WOULD APPLY TO THE ASSESSEE'S CASE AS WELL WITH EQUAL FORCE. AS SUBMITTED ABOVE, THE APPLICATION OF CUP AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING ASSESSEE'S INTERNATIONAL TRANSACTIONS HAVE BEEN ACCEPTED BY YOUR GOODSELF DURING THE TP AUDIT PROCEEDINGS FOR THE EARLIER FINANCIAL YEAR. THE FACTS OF THE CASE, THE NATURE OF INTERNATIONAL TRANSACTION AND THE MANNER OF APPLICATION OF THE CUP HAVE REMAINED THE SAME IN FINANCIAL YE AR 2005 - 06. ACCORDINGLY, A COMPLETE AND I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 51 OF 53 FUNDAMENTAL SHIFT IN THE VIEW/ OPINION OF THE REVENUE IS UNWARRANTED AND GOES AGAINST THE LEGAL PR ECEDENTS SET - OUT ABOVE ALSO, RELIANCE CAN BE PLACED ON THE FOLLOWING RECENT JURISPRUDENCE AVAILABLE IN THIS REGARD: - NGC NETWORKS (INDIA) PRIVATE LIMITED VS. ACIT [2011 10 TAXMANN 140 (MUM.)]; - CIT VS. NEO POLYPACK (P) LTD [(2000) 245 ITR 492 (DELHI)]; - CIT VS. GIRISH MOHAN GANERIWALA [2003 260 ITR 417 (PUNJ & HAR)]; - M/S. KUEHNE+NAGEL PVT. LIMITED VS. ACIT [2012 17 TAXRNANN.COM 97 (DELHI)]; ALSO, WHILE ARRIVING AT THE CONCLUSION THAT INTERNAL CUP CANNOT BE APPLIED IN THE SAID CASE, YOUR GOODSELF HAS NOT BROUGHT ON RECORD ANY FACTS CONTRARY TO THE FACTS IN THE EARLIER YEAR THAT WARRANT A CHANGE IN THE CHOICE OF MOS T APPROPRIATE METHOD APPLICABLE FOR TESTING THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY BY THE ASSESSEE FOR THIS YEAR (WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEAR). BASED ON THE ABOVE JUDICIAL VIEW, GIVEN THAT THERE HAS BEEN NO CH ANGE IN THE NATURE AND TERMS OF THE INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY ENTERED INTO BY THE ASSESSEE, THERE IS NO JUSTIFICATION FOR TAKING A DIFFERENT VIEW ON A FUNDAMENTAL ISSUE I.E. CHOICE OF THE TRANSFER PRICING METHOD WHEN THERE ARE SIMILAR FACTS AND HENCE, IN LINE WITH THE EARLIER YEAR, INTERNAL CUP SHOULD BE ACCEPTED AS THE MOST APPROPRIATE METHOD FOR THE CURRENT FINANCIAL YEAR. THE ABOVE CONTENTION IS IN ADDITION TO THE DETAILED OBJECTIONS FILED BY THE ASSESSEE IN THE ORIGINAL PROCEEDINGS BEFORE YOUR GOODSELF AND LEARNED DRP. 42. CLEARLY, EVEN IN THIS ROUND OF PROCEEDINGS, THE ASSESSEE DID NOT HAVE MUCH TO SAY ON THE EXTERNAL COMPARABLE GIVEN BY THE TPO. ONCE AN ASSESSEE IS GIVEN A COMPARABLE INSTANCE AN OPPORTUNITY TO EXPLAIN AS TO WHY SUCH A COMPARABLE SHOULD NOT ADOPTED, AND YET ASSESSEE REMAINS QUIET ON THE ISSUE, IT SHOULD NOT BE OPEN TO HIM TO BE AGGRIEVED OF THE SAME EXTERNAL COMPARABLE BEING ADOPTED. NO OTHER MATERIAL IS ON RECORD TO SHOW THAT THE ASSESSEE MADE ANY EFFORTS TO DEMO NSTRATE THAT THE SAID EXTERNAL COMPARABLE FOR CUP IS NOT COMPARABLE WITH THE FACTS OF THIS CASE. UNDOUBTEDLY, A PARTICULAR STAND WAS TAKEN IN THE ASSESSMENT YEAR 2005 - 06 BUT THAT WAS A STAGE IN WHICH NO EXTERNAL COMPARABLE WAS AVAILABLE TO THE TPO. NOW THA T AN EXTERNAL COMPARABLE AS CUP INPUT IS AVAILABLE, AND THE ASSESSEE HAS NOT MADE ANY EFFORTS TO SHOW AS TO THIS CUP INPUT IN DIFFERENT IN RESPECT TO THE ROYALTY TRANSACTION UNDERTAKEN BY THE ASSESSEE, SUCH AN EXTERNAL COMPARABLE CAN INDEED BE ACCEPTED. WE SEE NO INFIRMITY IN THE SAME AND WE, THEREFORE, CONFIRM THE ACTION OF THE TPO ON THIS COUNT. I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 52 OF 53 43. TO THE EXTENT ABOVE, THE ALP ADJUSTMENT OF RS 4.89 CRORES IS CONFIRMED. 44. LET US NOW TAKE UP ISSUES, OTHER THAN TRANSFER PRICING I SSUES, RAISED IN THES E APPEALS. 45. SO FAR AS THE ASSESSMENT YEAR 2006 - 07 IS CONCERNED, THE ONLY OTHER GRIEVANCE OF THE ASSESSEE IS AGAINST DISALLOWANCE OF RS 8,02,194 ON ACCOUNT OF PROVISION FOR OBSOLETE INVENTORY. 46. SO FAR AS THIS ISSUE IS CONCERNED, WE HAVE NOTED THAT WHILE THE ASSESSING OFFICER HAS, FOLLOWING ORDER OF A COORDINATE BENCH IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2006 - 07 WHICH HE WAS DIRECTED TO FOLLOW IN THE FIRST ROUND OF PROCEEDINGS, ALLOWED THE PROVISION OF RS 2,50,68,560 ON ACCOUNT OF PROVISIO N FOR SLOW MOVING STOCK AND INVENTORY, HE HAS ESTIMATED MARKET VALUE OF SUCH STOCK AT 3.2% AS WAS HELD BY THE COORDINATE BENCH. THE AMOUNT OF ESTIMATED VALUE THUS WORKED OUT TO RS 8,02,194. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 47. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD, WE FIND THAT IN PRINCIPLE THERE IS NO NEED TO INTERFERE IN THE MATTER AS THE TRIBUNAL, IN ASSESSEE S OWN CASE, HAS HELD THAT THE MARKET VALUE OF SUCH OBSOLETE STOCK ETC, WHICH WAS QUAN TIFIED AT 3.2%, IS TO BE TAKEN INTO ACCOUNT IN COMPUTATION OF INCOME. THAT IS PRECISELY WHAT THE ASSESSING OFFICER HAS DONE. HOWEVER, IN CASE THE ASSESSEE CAN DEMONSTRATE THAT THIS RESIDUAL VALUE OF THE SLOW MOVING STOCK AND INVENTORY HAS BEEN TAKEN INTO A CCOUNT IN COMPUTATION OF PROVISION, TO THAT EXTENT, THE DISALLOWANCE WILL STAND DELETED. 48. WITH THESE DIRECTIONS AND FOR THE LIMITED PURPOSES SET OUT ABOVE, THE MATTER, REGARDING DISALLOWANCE OF RS 8,02,194, STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 49. THE ADDITIONAL GROUNDS FILED BY THE ASSESSEE, WITH RESPECT TO APPLICABILITY OF VARIOUS ADJUSTMENTS - EVEN IN CASE THE ASSESSEE ITSELF IS TO BE TAKEN AS TESTED PARTY, GIVEN OUR CONCLUSIONS ABOVE, ARE INFRUCTUOUS AND CALL FOR NO COMMENTS. 50 . THE ONLY OTHER ISSUE REQUIRING OUR ADJUDICATION, IN THE ASSESSMENT YEAR 2007 - 08, IS WITH RESPECT TO THE DISALLOWANCE OF RS 7,81,722 ON ACCOUNT OF SLOW MOVING OR OBSOLETE STAFF. IT IS NOT IN DISPUTE THAT ALL THE MATERIAL FACTS AND CIRCUMSTANCES OF THE CAS E ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR 2006 - 07 DISCUSSED ABOVE. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING OUR FINDINGS FOR THE ASSESSMENT YEAR 2006 - 07, THIS ISSUE IS ALSO REMITTED TO THE FILE OF THE ASSESSING OFFICER, AND IT IS I.T.A. NO.: 1293/AHD/2015 AND 1294/AHD/2015 A SSESSMENT YEARS 2006 - 07 AND 2007 - 08 PAGE 53 OF 53 DIRECTED THAT THE DIRECTIONS FOR THE ASSESSMENT YEAR 2006 - 07 WILL APPLY MUTATIS MUTANDIS FOR THIS ASSESSMENT YEAR AS WELL. WITH THESE DIRECTIONS, THIS ISSUE STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 51. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLO WED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 11 TH DAY OF AUGUST, 2016. SD/ - SD/ - S S G ODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: AUGUST 11 , 201 6 . COPIES TO : (1) THE APPE LLANT (2) THE RESPONDENT (3) D IT (4) DRP (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD