M/s Kailash Jewels Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 137/DEL/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6301 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 21-03-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 11-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Transfer pricing; International transaction; Question of law
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I, NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER I.T.A. NO.137/DEL/2016 (ASSESSMENT YEAR 2011-12) M/S. KAILASH JEWELS PVT. LTD., VS. ITO, WARD 14(1), 2396, 2 ND FLOR, GURUDWARA ROAD, NEW DELHI KAROL BAGH, NEW DELHI-110 005 GIR / PAN : AADCK5550K (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI MAYANK JAIN, SHRI MADHUR JAIN, SHRI PARMATMA SINGH, ADV. RESPONDENT BY : SHRI AMRENDRA KUMAR, CIT D R DATE OF HEARING: 21.03.2016 DATE OF PRONOUNCEMENT: 22.03.2016 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E FINAL ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (A O) U/S 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT , 1961 2 I.T.A.NO.137/DEL/2016 (HEREINAFTER ALSO CALLED THE ACT) ON 10.12.2015 I N RELATION TO THE ASSESSMENT YEAR 2011-12. 2. FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.8,65,21,650/- TOWARDS INTERNATIONAL TRANSACTION OF JOB WORK. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE, AN INDIAN COMPANY, INCORPORATED ON 01.12.2008, IS ENGA GED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD AND S ILVER JEWELLERY/ BARS/COINS AND UTENSILS ETC. THE ASSESS EE HAS ITS MANUFACTURING UNIT LOCATED IN NOIDA SEZ, WHICH IS E LIGIBLE FOR BENEFIT U/S 10A OF THE ACT. M/S. ALMOWAIJI JEWELLER S LLC (ALMOWAIJI), A DUBAI BASED COMPANY, ENGAGED IN THE TRADING AND MANUFACTURING OF GOLD AND OTHER JEWELLERY ITEMS , IS ASSESSEES ASSOCIATED ENTERPRISE (AE). THE ASSESS EE SHOWED TO HAVE PURCHASED PURE GOLD BARS OF .999 OR .995 FINEN ESS ON `FREE 3 I.T.A.NO.137/DEL/2016 OF COST (FOC) BASIS FROM ALMOWAIJI. SUCH PURE GOLD APPARENTLY SHOWN TO HAVE BEEN PURCHASED BY THE ASSE SSEE FROM ITS AE WAS CONVERTED INTO JEWELLERY AND SOLD BACK T O ITS AE. THE ASSESSEE REPORTED TWO INTERNATIONAL TRANSACTION S IN FORM NO. 3CEB VIZ., IMPORT OF BULLION WITH TRANSACTED VALU E OF RS.94,77,32,257/- AND `EXPORT OF GOLD JEWELLERY WI TH TRANSACTED VALUE OF RS.94,42,78,354/-. THE ASSESSEE BENCHMARK ED THESE INTERNATIONAL TRANSACTIONS BY USING THE COST PLUS M ETHOD AS THE MOST APPROPRIATE METHOD FOR DETERMINING THEIR ARMS LENGTH PRICE (ALP) BY TAKING CIF VALUE IN TERMS OF COSTS O F GOLD CONTENT AS PER BILL OF ENTRY + LABOUR CHARGES (AT P REDETERMINED RATES) + FREIGHT + INSURANCE. THE ASSESSEE MENTION ED IN ITS TRANSFER PRICING STUDY REPORT THAT ALMOWAIJI SENDS PURE GOLD OF REQUIRED FINENESS ON FOC BASIS TO THE ASSESSEE. SI NCE GOLD HAS TO LEAVE THE COUNTRY OF ITS ORIGIN, THE INVOICE HAS TO MADE CONTAINING QUANTITY OF GOLD AND ITS US$ VALUE. SUC H INVOICE 4 I.T.A.NO.137/DEL/2016 CLEARLY STATES THE GOLD BARS ON FOC BASIS. ALMOWAI JI PASSES NO FINANCIAL ENTRY FOR THE VALUE OF GOLD SENT TO THE A SSESSEE AND THE GOLD IS HANDED OVER, WHICH IS CARRIED AS BAGGAGE BY EMPLOYEES OF THE ASSESSEE. BILL OF ENTRY CONTAINING DETAILS OF INVOICE CLEARLY MENTIONS THAT THE GOODS ARE ON FOC BASIS. THE T.P. STUDY REPORT FURTHER CATEGORICALLY MENTIONS THAT UN DERSTANDING BETWEEN THE ASSESSEE AND ALMOWAIJI IS THAT THE ASSE SSEE WILL CONVERT THE GOLD RECEIVED FROM ALMOWAIJI INTO JEWEL LERY AS PER THEIR SPECIFICATIONS AND SEND IT BACK TO THEM WITHO UT EARNING ANY PROFITS OR LOSS IN US$ FROM THE GOLD RECEIVED, CONV ERTED IT AND EXPORTED AS JEWELLERY, SINCE THE GOLD IS SENT BY AL MOWAIJI ON FOC BASIS. PERMISSIBLE WASTAGE HAS ALSO BEEN MENTI ONED IN THE T.P. STUDY REPORT WHICH FURTHER PROVIDES THAT THE A SSESSEE WILL BE ALLOWED US$ 0.65 PER NET WEIGHT OF JEWELLERY AS `MA KING CHARGES IN ADDITION TO SEPARATE BILLS FOR FREIGHT AND INSURANCE CHARGES AT US$350/- PER CONSIGNMENT. 5 I.T.A.NO.137/DEL/2016 4. ON A REFERENCE MADE BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINATION OF ALP OF INTERNATIONAL TRANSACTION, THE TPO PROCEEDED TO REJ ECT THE ASSESSEES CONTENTION OF BEING A SIMPLE JOB WORKER AND ALSO THE APPLICATION OF COST PLUS METHOD AS THE MOST APP ROPRIATE METHOD. DURING THE COURSE OF PROCEEDINGS BEFORE TP O, THE ASSESSEE ALSO CAME OUT WITH THE APPLICATION OF COMP ARABLE UNCONTROLLED PRICE (CUP) METHOD AS THE MOST APPROPR IATE METHOD BY GIVING COMPARABLE INSTANCES, WHICH HAVE B EEN MENTIONED ON PAGE 7 OF TPOS ORDER VIZ., MIZAN & C O., DELHI WITH LABOUR CHARGES IN US$ PER GRAM OF NET WEIGHT @ US $ 0.21 TO 0.52; AVISONS JEWELLERS WITH LABOUR CHARGES @ U S $ 0.43; AND MEENAKSHI INTERNATIONAL WITH LABOUR CHARGES @ US $ 0.05 TO 0.63. THE ASSESSEE CONTENDED THAT LABOUR CHARGE S PAID TO IT BY ITS AE @ US$ 0.65 PER GRAM WERE HIGHER THAN THOSE C HARGED BY THE ABOVE THREE COMPARABLES AND HENCE AT ALP. THE TPO 6 I.T.A.NO.137/DEL/2016 REFUSED TO ACCEPT THE CUP AS MOST APPROPRIATE METHO D AND OPTED FOR THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD. HE CALCULATED THE ASSESSEES P ROFIT LEVEL INDICATOR (PLI) OF OPERATING PROFIT/ TOTAL COST (O P/TC) AT (-) 1.83% BY INCLUDING THE AMOUNT OF SALES ALONG WITH L ABOUR WORK CHARGES AS OPERATING REVENUE AND ALSO CORRESPO NDINGLY TAKING, INTER ALIA , THE AMOUNT OF `RAW MATERIAL CONSUMED, BEING THE INVOICE VALUE GOLD BARS RECEIVED FROM ITS AE. IN OTHER WORDS, THE TPO INCLUDED VALUE OF GOLD IMPORTED AND VALUE OF JEWELLERY SOLD TO ITS AE IN THE CALCULATION OF THE ASSESSEES PLI. THEREAFTER, HE SELECTED CERTAIN COMPANIES AS COMPAR ABLE, WHICH HAVE BEEN LISTED ON PAGE 41 OF HIS ORDER. AVERAGE PROFIT MARGIN OF SUCH COMPANIES WAS CALCULATED AT 7.14%. BY APPL YING THIS PROFIT MARGIN, THE TPO WORKED OUT TRANSFER PRICING ADJUSTMENT AMOUNTING TO RS.8,65,21,650/-. THAT IS HOW, THE AS SESSING OFFICER MADE THIS ADDITION AS TRANSFER PRICING ADJU STMENT IN HIS 7 I.T.A.NO.137/DEL/2016 DRAFT ASSESSMENT ORDER. THE ASSESSEE REMAINED UNSUC CESSFUL BEFORE THE DRP, WHICH RESULTED INTO MAKING OF AN AD DITION OF RS.8.65 CRORE AND ODD IN THE FINAL ASSESSMENT ORDE R, WHICH HAS BEEN ASSAILED BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. FIRST ISSUE DISPUTED IN THE DE TERMINATION OF THE ALP OF THIS INTERNATIONAL TRANSACTION IS APPLIC ATION OF THE MOST APPROPRIATE METHOD. THE ASSESSEE COMPANY INIT IALLY APPLIED COST PLUS METHOD AS THE MOST APPROPRIATE ME THOD, BUT DURING THE COURSE OF PROCEEDINGS BEFORE TPO, IT SWI TCHED OVER TO THE CUP METHOD. THE TRANSACTED VALUE OF THIS INT ERNATIONAL TRANSACTION WAS SHOWN AS ITS ALP UNDER THE CUP METH OD BY SHOWING THAT THE COMPARABLES UNCONTROLLED TRANSACTI ONS WERE AT LOWER LABOUR RATES CHARGED BY THEM VIS--VIS THE ASSESSEE CHARGING HIGHER PRICE FROM ITS AE. THE TPO REJECTE D BOTH THE METHODS APPLIED BY THE ASSESSEE AND OPTED FOR THE T NMM AS THE 8 I.T.A.NO.137/DEL/2016 MOST APPROPRIATE METHOD. THIS LEADS TO CONTROVERSY ABOUT THE SELECTION OF THE MOST APPROPRIATE METHOD FROM THE C UP AND THE TNMM. 6. THE LD. D.R. RELIED ON AN ORDER PASSED BY TH E MUMBAI BENCH OF THE TRIBUNAL IN VIJAYDIAMON DIAMOND (I) PVT . LTD. (COPY PLACED ON RECORD) TO ARGUE THAT THE TNMM HAS BEEN ACCEPTED AS THE MOST APPROPRIATE METHOD. HE FURTHE R FORTIFIED THIS ARGUMENT BY RELYING ON CERTAIN OTHER ORDERS AS WELL AS TO PUT FORTH THAT THE TNMM BE HELD AS THE MOST APPROPRIATE M ETHOD. 7. IT IS MANIFEST THAT THE TRIBUNAL IN VIJAYDIMON DIAMOND (I) PVT. LTD.(SUPRA) HAS ACCEPTED THE TNMM AS MOST APPROPRIATE METHOD. HOWEVER, IT IS IMPORTANT TO NOTE THAT ASSE SSEE IN THAT CASE WAS ENGAGED IN MANUFACTURING OF STUDDED AND PL AIN GOLD JEWELLERY AND EXPORT BUSINESS. WHEN WE ADVERT TO T HE FACTS OF THE CASE BEFORE US, IT COMES TO THE FORE THAT THE A SSESSEE IS NOT ENGAGED IN MANUFACTURING AND EXPORT OF GOLD JEWELLE RY. IT IS 9 I.T.A.NO.137/DEL/2016 SIMPLY RECEIVING GOLD BARS FROM ITS AE, DOING JOB W ORK ON THEM AND THEN RETURNING JEWELLERY IN THE MANNER ORDERED BY THE AE, AFTER CHARGING FOR JOB WORK AT US$ 0.65 PER NET GRA M OF JEWELLERY. THOUGH CERTAIN ENTRIES HAVE BEEN MADE I N THE ACCOUNTS BOOKS OF THE ASSESSEE RECORDING PURCHASE V ALUE AND SALE VALUE AT THE TIME OF RECEIPT OF GOLD AND EXPOR T OF JEWELLERY FROM/TO ITS AE, BUT THIS RECORDING OF VALUE AS PURC HASE/SALE IS NOT IN THE CAPACITY AS AN OWNER. THE ASSESSEE IS S IMPLY RECEIVING GOLD BARS FOR CONVERTING THEM INTO JEWELL ERY AND THEN SENDING IT BACK TO ITS AE AFTER DOING THE SPECIFIED JOB WORK. THE ENTRIES HAVE BEEN MADE IN THE BOOKS OF ACCOUNTS TO COMPLETE THE FORMALITIES REGARDING RECEIPT OF GOLD FROM DUBAI AN D THEN SENDING THE JEWELLERY TO DUBAI, WHICH, AS STATED, I S NOT POSSIBLE WITHOUT RECORDING THE VALUE IN INVOICES. EVEN THOU GH THE ASSESSEES AE HAS ASSIGNED INVOICE VALUE BUT HAS NE ITHER TREATED THE ASSESSEE AS PURCHASER OF ITS GOLD BARS NOR AS S ELLER OF GOLD 10 I.T.A.NO.137/DEL/2016 JEWELLERY. NEITHER ANY PAYMENT WHATSOEVER HAS BE EN MADE BY THE ASSESSEE AT THE TIME OF RECEIPT OF GOLD NOR ANY AMOUNT HAS BEEN RECEIVED FROM ITS AE AT THE TIME OF SENDING TH E JEWELLERY BACK. THE ASSESSEE IS CONFINED TO RECEIVING THE IN STRUCTIONS FROM ITS AE FOR MANUFACTURING GOLD JEWELLERY AND TH EN RETURNING THE SAME ON RECEIPT OF ITS JOB CHARGES. THUS, THE SEQUENCE OF EVENTS AMPLY INDICATES THAT THE ASSESSEE DID NOT AC QUIRE OWNERSHIP RIGHTS IN GOLD BARS AT THE TIME OF ITS RE CEIPT AND NOR DID IT PASS OVER THE ANY TITLE IN THE GOLD JEWELLER Y TO ITS AE IN DUBAI AT THE TIME OF SENDING BACK. 8. THE LD. A.R. HAS BROUGHT TO OUR NOTICE THE O RDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE IMMEDIA TELY PRECEDING ASSESSMENT YEAR 2010-11. A COPY OF SUCH ORDER IS AVAILABLE ON PAGE 185 ONWARDS OF THE PAPER BOOK. I N SUCH EARLIER YEAR ALSO, NO CONSIDERATION WAS PAID OR REC EIVED BY THE ASSESSEE FOR THE VALUE OF GOLD AND ONLY LABOUR CHAR GES WERE 11 I.T.A.NO.137/DEL/2016 RECEIVED, AS IS THE POSITION DURING THE INSTANT YEA R AS WELL. THE DEPARTMENT GAVE SIMILAR TREATMENT TO THE TRANSACTIO NS IN THE PRECEDING YEAR AS HAS BEEN GIVEN DURING THE CURREN T YEAR. WHEN THE MATTER CAME UP FOR ADJUDICATION, THE TRIBUNAL R EFUSED TO UPHOLD THE DEPARTMENTAL STAND OF PURCHASE OF GOLD B ARS BY THE ASSESSEE AND THE CONSEQUENT SALE OF GOLD JEWELLERY TO ITS AE. FURTHER OBSERVATIONS HAVE BEEN MADE IN PARA 6.5 OF THE TRIBUNAL ORDER AND A FINAL CONCLUSION HAS BEEN DRAWN THAT TH E VALUE OF GOLD IMPORTED AND EXPORTED IS ONLY A PASS THROUGH C OST AND CANNOT BE CONSIDERED AS A PART OF THE ASSESSEES OP ERATING COST. IN PARA 6.10, IT HAS BEEN HELD : THAT THE ASSESSEE IS A JOB WORKER AND NOT A MANUFACTURER AND THE LD. TPO AND DRP ERRE D IN INCLUDING THE COST OF GOLD INTO THE OPERATING COSTS OF ASSESSEE. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE TRI BUNAL IN IDENTICAL CIRCUMSTANCES HAS HELD THE ASSESSEE TO BE A SIMPLE JOB WORKER AND NOT INVOLVED IN PURCHASING OR SELLING AN Y GOLD/ 12 I.T.A.NO.137/DEL/2016 JEWELLERY. IN THIS VIEW OF THE MATTER, WE HOLD THA T THE RELIANCE OF THE LD. D.R. ON THE CASE OF VIJAYDIMON DIAMOND (I) PVT. LTD. (SUPRA) TO PUT FORTH THE APPLICATION OF THE TNMM AS MOST APPROPRIATE METHOD, IS MISCONCEIVED BECAUSE THAT AS SESSEE WAS ENGAGED IN A DIFFERENT BUSINESS, BEING THE MANUFAC TURING OF STUDDED AND PLAIN GOLD JEWELLERY AND CHARGING COST FOR THE SAME. ON THE OTHER HAND, THE EXTANT ASSESSEE IS SIMPLY EN GAGED IN DOING JOB WORK FOR ITS AE. IT IS DISCERNIBLE THAT THE TRIBUNAL IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, AFTER TR EATING THE ASSESSEE AS A JOB WORKER, HAS UPHELD THE CUP AS MOS T APPROPRIATE METHOD. SINCE THE FACTS AND CIRCUMSTANC ES FOR THE INSTANT YEAR ARE ADMITTEDLY SIMILAR TO THOSE OF THE PRECEDING YEAR, RESPECTFULLY FOLLOWING THE PRECEDENT, WE HOLD THAT THE CUP IS THE MOST APPROPRIATE METHOD IN SO FAR AS THE INT ERNATIONAL TRANSACTION IS CONCERNED. 13 I.T.A.NO.137/DEL/2016 9. THE NEXT ISSUE IS CALCULATION OF THE ALP OF THIS TRANSACTION UNDER THE CUP METHOD. THE ASSESSEE ARGUED BEFORE T HE TPO THAT IT RECEIVED US$ 0.65 PER NET WEIGHT OF JEWELLE RY AS JOB CHARGES, WHEREAS THE OTHER JOB WORKERS IN JEWELLERY UNDER SIMILAR CIRCUMSTANCES, HAVE CHARGED MUCH LESS, AS MIZAN & CO., DELHI, CHARGING US$ 0.21 TO 0.52 PER GRAM OF N ET WEIGHT AND MEENAKSHI INTERNATIONAL CHARGING US$ 0.05 TO 0. 63 PER GRAM OF NET WEIGHT. THESE FIGURES HAVE BEEN RECORD ED ON PAGE 7 OF THE TPOS ORDER. SIMILARLY, THE ASSESSING OFFIC ER HAS ALSO RECORDED SUCH FIGURES IN HIS FINAL ASSESSMENT ORDER . NONE OF THE AUTHORITIES HAS DOUBTED OR CONTROVERTED THE CORRECT NESS OF SUCH FIGURES OR THE COMPARABILITY OF THESE COMPANIES. WH EN THE COMPARABLE UNCONTROLLED PRICE CHARGED BY OTHER JOB WORKERS OF GOLD JEWELLERY FROM UNCONTROLLED TRANSACTION IS LES S THAN THAT CHARGED BY THE ASSESSEE FROM ITS AE, SUCH PRICE CHA RGED AUTOMATICALLY BECOMES ITS ALP. WE FIND THAT SIMILA R ISSUE WAS 14 I.T.A.NO.137/DEL/2016 ALSO THERE BEFORE THE TRIBUNAL FOR THE IMMEDIATELY PRECEDING YEAR AS WELL. FOR THAT YEAR ALSO, COMPARABLE COMPA NIES WERE MEENAKSHI INTERNATIONAL AND MIZAN & CO., BEING THE SA ME COMPANIES WHICH HAVE BEEN DISCUSSED FOR THIS YEAR A S WELL. AS THE RATES CHARGED BY THESE TWO COMPANIES WERE FOUND TO BE LESS THAN THAT CHARGED BY THE ASSESSEE, THE TRIBUNAL ACC EPTED THE INTERNATIONAL TRANSACTION AT ALP. 10. AT THIS STAGE, IT IS PERTINENT TO MENTION TH AT THE REVENUE ASSAILED CORRECTNESS OF THIS TRIBUNAL ORDER BEFORE HON'BLE DELHI HIGH COURT. VIDE ITS JUDGMENT DATED 21.12.2015, A C OPY PLACED AT PAGE 315 ONWARDS OF THE PAPER BOOK, THE HON'BLE HIGH COURT HAS UPHELD THE TRIBUNAL ORDER BY HOLDING THAT IT D ID NOT WARRANT ANY INTERFERENCE AND NO SUBSTANTIAL QUESTION OF LAW ARISES FOR DETERMINATION FROM THIS ORDER. IN HOLDING SO, THE HON'BLE HIGH COURT ALSO DISCUSSED THAT THE APPLICATION OF THE TN MM, AS USED BY THE REVENUE FOR BENCHMARKING, WAS NOT APPROPRIAT E AND THERE 15 I.T.A.NO.137/DEL/2016 WAS A DETAILED ANALYSIS BY THE TRIBUNAL IN HOLDING THE ISSUE IN FAVOUR OF THE ASSESSEE. THUS, IT IS PALPABLE THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDI NG ASSESSMENT YEAR HAS UPHELD THE CUP AS THE MOST APPR OPRIATE METHOD AND AFTER EXAMINATION, FOUND THAT THE RATE C HARGED BY THE ASSESSEE FROM ITS AE WAS AT ALP. SINCE THE FACTS AN D CIRCUMSTANCES FOR THE YEAR IN QUESTION ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEAR, WE ORDER FO R DELETION OF ADDITION OF RS.8.65 CRORE BY HOLDING THAT THE INTER NATIONAL TRANSACTION IS THAT OF JOB WORK AND NOT THAT OF PUR CHASE AND SALE ; THE CUP METHOD IS THE MOST APPROPRIATE METHOD; AND THAT THE PRICE CHARGED BY THE ASSESSEE FROM ITS AE UNDER THE CUP METHOD IS AT ALP. THIS GROUND IS, THEREFORE, ALLOW ED. 11. THE ONLY OTHER ISSUE WHICH IS INVOLVED IN THIS APPEAL IS THE ADDITION OF RS.1,94,53,297/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IN THE INTER NATIONAL 16 I.T.A.NO.137/DEL/2016 TRANSACTION OF PROVISIONS OF FACILITY, FREIGHT AND INSURANCE. BRIEFLY STATED, THE FACTS APROPOS THIS ISSUE ARE TH AT THE TPO FOUND THAT THE ASSESSEE HAS TAKEN HUGE RISK ON ITS PART BY CARRYING GOLD BARS / GOLD JEWELLERY FROM ONE COUNTR Y TO ANOTHER FOR WHICH IT WAS NOT COMPENSATED BY ITS AE. IT WAS OPINED THAT THE ASSESSEE OUGHT TO HAVE CHARGED 1% ON ACCOUNT OF LOSS OF JEWELLERY, WHICH MAY OCCUR DURING TRANSIT. BY CON SIDERING TOTAL WEIGHT OF GOLD JEWELLERY/BARS CARRIED AWAY AND APPL YING 1% RISK FACTOR, WITH AVERAGE PRICE OF RS.1851 PER GRAM, THE TPO COMPUTED `FINANCIAL RISK TO BE COMPENSATED BY THE AE AT RS.1,98,86,927/-. RECEIPT FROM THE AE TOWARDS INSU RANCE AT RS.4,33,630/- WAS REDUCED FROM THE ABOVE AMOUNT, WH ICH RESULTED INTO PROPOSING TRANSFER PRICING ADJUSTMENT OF RS.1,94,53,297/-. THE ASSESSING OFFICER PROPOSED A DDITION FOR THIS SUM IN THE DRAFT ORDER. WHEN THE MATTER WENT BEFORE THE DRP, IT APPROVED, IN PRINCIPLE, THE ACTION OF THE T PO BY HOLDING 17 I.T.A.NO.137/DEL/2016 THAT 1% WAS TO BE TAKEN AS VALUE OF SERVICES PROVID ED BY THE ASSESSEE. IT WAS FURTHER NOTICED THAT THE TPO HAD NOT REDUCED THE AMOUNT RECEIVED BY THE ASSESSEE FROM ITS AE IN RESPECT OF THE CHARGES OF FREIGHT AND INSURANCE. ACCORDINGLY, THE TPO WAS DIRECTED : TO REDUCE THE REIMBURSEMENT AND LIMIT T HE ADDITION TO THE REMAINING AMOUNT. THE ASSESSING OFFICER MADE THE ABOVE ADDITION IN HIS FINAL ASSESSMENT ORDER AS THE AMOUN T PROPOSED BY TPO WAS CALCULATED AFTER REDUCING THE AMOUNT OF INS URANCE RECEIPT BY THE ASSESSEE FROM ITS AE. THE ASSESSEE IS AGGRIEVED AGAINST THIS ADDITION. 12. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WITHOUT GOING INTO THE DETAILS OF THIS ISSUE, WE FIND THAT SIMILAR ISSUE WAS THERE BEFORE THE TRI BUNAL FOR THE IMMEDIATELY PRECEDING YEAR. THE TRIBUNAL HAS DISCUS SED IT IN PARA 6.18 ONWARDS OF ITS ORDER BY NOTICING THAT THE LOSS, IF ANY, WOULD BE RECOVERED FROM THE INSURANCE COMPANY AND P AID TO THE 18 I.T.A.NO.137/DEL/2016 AE. THAT IS HOW, THE TRIBUNAL DELETED SIMILAR ADDI TION MADE AT RS.1,76,66,900 FOR THE PRECEDING YEAR. THOUGH LD. D .R. RELIED ON THE ORDER PASSED BY TPO, BUT COULD NOT POINT OUT AN Y DISTINGUISHING FEATURE IN THE FACTS OF THE CURRENT YEAR VIS A VIS THE IMMEDIATELY PRECEDING YEAR, WHICH HAS BEEN DECIDED BY THE TRIBUNAL. AS THE VIEW FAVOURABLE TO THE ASSESSEE TA KEN BY THE TRIBUNAL ON THIS ISSUE HAS BEEN APPROVED BY THE HON 'BLE DELHI HIGH COURT BY HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES, RESPECTFULLY FOLLOWING THE PRECEDENT, WE ORDER FOR THE DELETION OF ADDITION OF RS.1.94 CRORE AND ODD MADE BY THE AO. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 14. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MAR., 2016. SD./- SD./- (KULDIP SINGH) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 22.03. 2016 SP. 19 I.T.A.NO.137/DEL/2016 COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 21.3.2016 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 22.3.2016 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 22/3/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 22/3 SR. PS/PS 7 FILE SENT TO BENCH CLERK 22/3 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER *