NESS TECHNOLOGIES (INDIA) P. LTD, MUMBAI V. ASST CIT CEN CIR 34, MUMBAI

ITA 1415/MUM/2014

• Counselvise Citation: 141519914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 12-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: S SH M P LO HIANIKHIL TIWARI
• Keywords: Related party transaction; Transfer pricing; International transaction; Non passing of speaking order
• Section: 154; 92C; 143(3); 92E; 10AA; 234B

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI K BENCH . . , , , BEFO RE S/SH. A.D. JAIN,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.1415/MUM/2014, / ASSESSMENT YEAR - 2009 - 10 NESS TECHNOLOGIES (INDIA) PVT. LTD. UNIT NO.501, INTERFACE, N EW LINK ROAD, MALAD (W),MUMBAI - 400 064. PAN: AAA CA 9469 L VS ACIT, CENTRAL CIRCLE - 34 ROOM NO.104, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI - 400 020. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : S/ SH.M.P. LO HIA,NIKHIL TIWARI / REVENUE BY : SHRI N.K. CHAND - CIT / DATE OF HEARING : 23 - 07 - 2015 / DATE OF PRONOUNCEMENT : 05 - 08 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 30.12.2013 OF DISPUTE RESO L UTION PANEL II, MUMBAI AND THE ORDER OF THE ASSESSING OFFICER (AO),DATED 30.1.2014, THE ASSESSEE - COMPANY H AS RAISED FOLLOWING GROUNDS OF APPEAL. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESS ING OFFICER ,BASED ON THE DIRECTIONS O F THE HON'BLE DRP HAS: I GENERAL GROUND 1. ERRED IN ASSESSING THE TOTAL INCOME OF THE APPELLANT AT RS. 53,26,28,665 AGAINST RS. 14,15,18,000 AS COMPUTED BY THE APPELLANT IN ITS RETURN OF INCOME; A. TRANSFER PRICING GROUNDS 2.ERRED IN MAKING A TRANSFER P RICING ADJUSTMENT OFRS. 37,70,57,146 UNDER SECTION 92(4) OF THE ACT TO THE TOTAL INCOME OFTHE APPELLANT ON THE PREMISE THAT THE INTERNATIONAL TRANSACTIONS ENTERED BY THE APPELLANT WITH ITS ASSOCIATED ENTERPRISES (' AE') WERE NOT AT ARM'S LENGTH;REFERENCE M ADE TO THE TRANSFER PRICING OFFICER 3.ERRED IN REFERRING THE APPELLANT'S CASE TO THE LEARNED TRANSFER PRICING OFFICER ('TPO') UNDER SECTION 92CA(L) OF THE ACT, WITHOUT SATISFYING THE CONDITIONS SPECIFIED THEREIN; REJECTION OF ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT 4.ERRED IN REJECTING THE TRANSFER PRICING ANALYSIS UNDERTAKEN BY THE APPELLANT UNDER SECTION 92C OF THE ACT USING 3 YEAR WEIGHTED AVERAGE DATA OF COMPARABLES AND DETERMINING THE ARM'S LENGTH MARGIN PRICE USING DATA ONLY FOR FINANCIAL YEAR ('FY') 2008 - 09, WHICH WAS NOT AVAILABLE TO THE APPELLANT AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION REQUIREMENTS; SELECTION/REJECTION OF COMPARABLES 5.ERRED IN APPLYING CERTAIN REJECTION CRITERIA/ FILTERS, IN AN ARBITRARY, SUBJECTI VE AND ERRONEOUS MANNER FOR THE PURPOSE OF SELECTION OF COMPARABLE COMPANIES; 6.ERRED IN REJECTING CERTAIN COMPARABLES SELECTED BY THE APPELLANT DISREGARDING THE FACT THAT THEY MEET ALL THE COMPARABILITY CRITERIA AND ALSO ERRED IN INTRODUCING CERTAIN ADDI TIONAL COMPARABLES, WITHOUT APPRECIATING THAT THEY CANNOT BE CONSIDERED COMPARABLE TO THE APPELLANT; 1415 NESS - 09 - 10 2 COMPARABLE COMPANIES SELECTED BY THE APPELLANT 7.ERRED IN REJECTING ANCENT SOFTWARE INTERNATIONAL LIMITED AS A COMPARABLE ON THE GROUND THAT THE COMPANY FAILED THE LOWER TURNOVER FILTER OFRS. 1 CRORE, DISREGARDING THE APPELLANT'S CONTENTION THAT NO TURNOVER FILTER SHOULD BE APPLIED IN ITS CASE; 8.ERRED IN REJECTING K PIT CUMMINS INFOSYSTEMS LIMITED AS A COMPARABLE COMPANY ON THE GROUND THAT IT HAS SUBSTAN TIAL RELATED PARTY TRANSACTIONS, WITHOUT APPRECIATING THAT CONSOLIDATED FINANCIAL STATEMENTS WAS USED, WHICH ELIMINATES THE EFFECT OF RELATED PARTY TRANSACTIONS AND ALSO THE FACT THAT THE TPO HIMSELF HAS USED CONSOLIDATED FINANCIAL STATEMENTS FOR COMPUTING OPERATING MARGINS IN CASE OF MIND TREE LIMITED AND SASKEN LIMITED; 9.ERRED IN REJECTING CG - VAK SOFTWARE AND EXPORTS LIMITED AS A COMPARABLE COMPANY ON THE GROUND THAT THE COMPANY HAS PERSISTENTLY INCURRED LOSSES, DISREGARDING THE FACT THAT THE COMPANY IS NOT A PERSISTENTLY LOSS MAKING COMPANY; 10. ERRED IN REJECTING SIP TECHNOLOGIES AND EXPORTS LIMITED AS A COMPARABLE COMPANY ON THE GROUND THAT THE COMPANY HAS PERSISTENTLY INCURRED LOSSES, DISREGARDING THE FACT THAT THE COMPANY HAS EARNED OPERATING PROFIT S IN THE PREVIOUS YEARS; 11. ERRED IN REJECTING R S SOFTWARE (INDIA) LIMITED AS A COMPARABLE COMPANY ON THE GROUND THAT THE COMPANY IS FUNCTIONALLY DIFFERENT DISREGARDING THE FACT THAT THE COMPANY WAS CONSIDERED AS A COMPARABLE BY THE LEARNED TPO IN THE PR EVIOUS YEAR; 12. ERRED IN REJECTING INDIUM SOFTWARE (INDIA) LIMITED ON THE GROUND THAT THE COMPANY IS NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT DISREGARDING THE FACT THAT THE SAID COMPANY IS ENGAGED IN PROVIDING SOFTWARE SERVICES AND HENCE IS FUNCTIONAL LY COMPARABLE TO THE APPELLANT; 13. ERRED IN REJECTING M ASSESSEE RS SOFTWARE INTERNATIONAL LIMITED AS A COMPARABLE COMPANY ON THE GROUND THAT THE COMPANY FAILS THE RELATED PARTY TRANSACTION FILTER, WHEREIN THE LEARNED TPO COMPUTED THE RELATED PARTY TRANSACT IONS FILTER ERRONEOUSLY; ADDITIONAL COMPARABLES INTRODUCED BY THE LEARNED TPO 14. ERRED IN CONSIDERING CERTAIN ADDITIONAL COMPANIES WHICH ARE FUNCTIONALLY DIFFERENT, AS COMPARABLE TO THE APPELLANT VIZ BODHTREE CONSULTING LIMITED, KALS INFO SYSTEMS LIMITE D, IGATE GLOBAL SOLUTIONS LIMITED, TATA ELXSI LIMITED, AXIS IT & T LIMITED AND THIRDWARE SOLUTIONS LIMITED; 15. ERRED IN CONSIDERING AXIS IT & T LIMITED, AS COMPARABLE TO THE APPELLANT, WITHOUT APPRECIATING THAT THE COMPANY HAS EARNED SUPER PROFITS AND/ O R HAVING EXCEPTIONAL YEAR OF PERFORMANCE; WORKING CAPITAL ADJUSTMENT 16. ERRED IN NOT GRANTING THE APPELLANT THE BENEFIT OF THE WORKING CAPITAL ADJUSTMENT WHICH IS REQUIRED TO BE UNDERTAKEN TO ACCOUNT FOR THE DIFFERENCES IN LEVEL OF WORKING CAPITAL BETWE EN THE COMPARABLE COMPANIES AND THE APPELLANT IN TERMS OF RULE 10C(2)(E) OF THE RULES; RISK ADJUSTMENT 17. ERRED IN NOT GRANTING THE APPELLANT THE BENEFIT OF RISK ADJUSTMENTS WHICH IS REQUIRED TO BE UNDERTAKEN TO ACCOUNT FOR THE DIFFERENCES IN LEVEL OF R ISKS ASSUMED BETWEEN THE COMPARABLE COMPANIES AND THE APPELLANT IN TERMS OF RULE I 0C(2)( E) OF THE RULES; ENTITY LEVEL APPROACH VIS - A - VIS TRANSACTION LEVEL APPROACH 18.WITHOUT PREJUDICE TO GROUND 01 - 17,ERRED IN COMPUTING THE TRANSFER PRICING ADJUSTMENT BY APPLYING THE ARM'S LENGTH RNARKUP TO THE ENTITY - LEVEL COST AND COMPARING THE RESULTING ARM'S LENGTH PRICE WITH THE AE REVENUES ONLY, INSTEAD OF THE ENTITY - LEVEL REVENUE, THEREBY ADOPTING AN INCONSISTENT APPROACH; 19.WITHOUT PREJUDICE TO GROUND 01 - 17, ERRED IN COMPUTING THE TRANSFER PRICING ADJUSTMENT BY ADOPTING ENTITY LEVEL APPROACH, AS AGAIN T RE TRICTING THE ADJUSTMENT TO INTERNATIONAL TRANSACTION WITH AES ONLY;COMPUTATION OF OPERATING MARGINS FOR BENCH MARKING PURPOSES 20.ERRED IN CONSIDERING INC ORRECT OPERATING MARGIN FOR QUINTEGRA LIMITED AS 0.79% ON OPERATING COSTS AS AGAINST THE CORRECT MARGIN OF - 0.79%; 1415 NESS - 09 - 10 3 21.ERRED IN CONSIDERING INCORRECT OPERATING MARGINS FOR CERTAIN COMPANIES CONSIDERED TO BE COMPARABLE TO THE APPELLANT FOR THE SUBJECT ASSES SMENT YEAR VIZ MINDTREE LIMITED, KALS INFORMATION SYSTEM LIMITED, SAS KEN LIMITED AND AXIS IT & T LIMITED; 22.ERRED IN COMPUTING THE OPERATING MARGIN OF THE APPELLANT BY CONSIDERING FOREIGN EXCHANGE LOSS AS PART OF OPERATING COSTS DISREGARDING THE APPELLA NT'S SUBMISSION FOR CONSIDERING THE SAME AS A PART OF OPERATING REVENUES; BENEFIT OF +/ - 5% 23.ERRED BY NOT CONDIDERING THAT THE ADJUSTMENT TO THE ARM'S LENGTH PRICE, IF ANY, SHOULD BE LIMITED TO THE LOWER END OF THE 5 PERCENT RANGE AS THE APPELLANT HAS THE RIGHT TO EXERCISE THIS OPTION UNDER THE PROVIDED TO SECTION 92E OF THE ACT B.CORPORATE TAX GROUNDS INCORRECT COMPUTATION OF EXPORT TURNOVER 24.ERRED IN NOT EXCLUDING EXPENSES INCURRED IN FOREIGN CURRENCY FOR TRAVELLING AND COMMUNICATION CHARGES FROM THE TOTAL TURNOVER WHEREAS THE SAID SUMS WERE REDUCED FROM THE EXPORT TURNOVER, WHILE COMPUTING THE DEDUCTION AVAILABLE TO THE APPELLANT UNDER SECTION OF 10A AND SECTION 10 A A OF THE ACT. INCORRECT COMPUTATION OF DEMAND OF TAX 25.ERRED IN SHORT GRANTING C REDIT OF TAXES DEDUCTED AT SOURCE OF RS 24,28,364 WHILE COMPUTING THE TAX LIABILITY FOR THE YEAR; 26.ERRED IN LEVYING EXCESS INTEREST UNDER SECTION 234B OF THE ACT; 27.ERRED IN LEVYING INTEREST UNDER SECTION 234C OF THE ACT ON ASSESSED INCOME THAN ON RE TURNED INCOME OF THE APPELLANT; PENALTY PROCEEDINGS 28. ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT; EACH OF THE ABOVE GROUND OF APPEAL IS WITHOUT PREJUDICE TO AND INDEPENDENT OF ONE ANOTHER.THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE THE ABOVE GROUND OF APPEAL AT OR BEFORE THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. THE ASSESSEE, ENGAGED IN THE BUSINESS OF SOFTWARE DEVE LOPMENT/EXPORT AND IT ENABLED SERVICES FILED ITS RETURN OF INCOME ON 29.9.2009 DECLARING THE T OTAL INCOME AT RS.14.15 CRORES, AFTER CLAIMING EXEMPTION U/S. 10A OF THE ACT, AMOUNTING TO RS.51.82 CRORES.THE AO COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S.144C(3 ) OF THE ACT DETERMINING THE INCOME OF THE ASSESSEE AT RS.53, 26,28,665/ - .DURING THE COURSE OF HEARING BEFORE US THE AUTHORISED REPRESENTATIVE (AR) DID NOT PRESS GROUND NOS.1 TO 8 ,12 - 13,22 - 23 AND 28 .HENCE, SAME STAND DISMISSED AS NOT PRESSED. 2. FIRST EFFECT IVE GROUND OF APPEAL(GROUND NO.9 TO 21 EXCEPT GROUND NO. 12 AND 13) , DEAL WITH THE TRANSFER PRICING (TP) ADJUSTMENTS. D URING THE ASSESSMENT PROCEEDINGS , THE AO FOUND THAT THE ASSESSEE HAD ENTERED INTO VARIOUS INTERNATIONAL TRANSACTION WITH I TS AES.HE MADE A REFERE NCE U/S. 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO). THE TPO FOUND THAT THE ASSESSEE HAD OPTED TNMM METHOD FOR DE TERMINING THE ARMS LENGTH PRICE (ALP) FOR THE INTERNATIONAL TRANSACTIONS, AMOUNTING TO RS. 344. 34 CRORES ,THAT T HE PROFIT LEVEL INDI CATOR (PLI) WAS TAKEN AS OPERATING PROFIT/OPERATING COST (OP/OC) ,THAT T HE ASSESSEE HAD IDENTIFI ED 28 COMPANIES AS COMPARA BL ES. IN THE TP REPORT THE MEAN/AVERAGE MARGIN FOR THE AY .S. 06 - 07 , 07 - 08 AND 08 - 09 WERE USED, AS THE DATA FOR AY . UNDER APPEAL WERE NOT A VAILABLE IN THE CASE OF ALL THE COMPARABLES AT THE TIME OF CONDUCTING BENCH MARKING.THE ASSESSEE HAD SHOWN PLI 1415 NESS - 09 - 10 4 (OP/TC) @ 17.38%. HE DIRECTED THE ASSESSEE TO SUBMIT UPDATED PLIS FOR THE SAME SET OF COMPARA - BLES USING THE DATA FOR AY 09 - 10 ONLY. THE PLIS OF THE 19 COMPARABLES AS PER THE TP REPORT AND THE UPDATED PLIS FOR THE YEAR UNDER APPEAL WAS CONSIDER ED. THE ASSESSEE CONTENDED BEFORE THE TPO THAT THE PLI REPORTED BY IT AT THE RATE OF 17.03% WAS BETTER THAN THE AVERAGE OF PLI OF THE COMPARABLES, THAT THE T RANSACTIONS SHO U LD BE TREATED AT ARM S LENGTH.THE TPO, AFTER EXAMINING THE CLAIM OF THE ASSESSEE OBSERVE D THAT IN ITS WORKING OF THE PLI THE ASSESSEE H A D REDUCED F OREIG N EXCHANGE L OSS (FEL) FROM THE SALES, THAT IN THE ANNUAL REPORT FE L HAD BEEN MENTIONED IN SCHEDULE - 14 WHICH APPEARED AS ONE OF THE ITEMS OF EXPENDITURE, THAT IT HAD REDUCED THE COST BASE THEREBY INFLATING ITS OP/TC, THAT FE L HAD TO BE TAKEN AS THE PART OF TOTAL COST. ACCORD I NGLY , THE TPO RE - WORKED THE ASSESSEE S PL I. THE TPO ALSO EXAMINED THE COMPARABLES SELECTED BY THE ASSESSEE .HE WAS OF THE OPINION THAT IT HAD WRONGLY SELECTED SOME OF THE COMPARABLES.HE ISSUED A SHOW CAUSE NOTICE AS TO WHY THE COMPARABLES SHOULD NOT BE REJECTED FOR THE REASONS STATED AGAINST THEIR NAMES.HE ALSO OBSERVED THAT THE ASSESSEE H AD WRONGLY REJECTED SOME OF THE COMPARABLE WHICH WERE FUNCTI ONALLY SIMILAR TO IT.THEREFORE, IT WAS ASKED TO SHOW CAUSE AS TO WHY THE FOLLOWING COMPARABLES REJECTED BY IT IN ITS SEARCH MATRIX SHOULD NOT BE ADMITTED TO THE LIST OF COMPARABLES. V IDE ITS LETTER,DT.4.1.13, THE ASSESSEE CONTENDED BEFORE THE TPO THAT IT HAD CARRIED OUT TP STUDY AS P ER THE PROVISIONS OF LAW, THAT COMPARABLES ADOPTED BY IT SHOULD NOT HAVE BEEN REJECTED, THAT TO UNDERTAKE FRESH COMPARABILITY ANALYSIS ON THE BASIS OF DATA A VAILABLE FOR AY . UNDER APPEAL WAS NOT CORRECT, THAT THE USE OF MULTIPLE YEAR DATA SHOULD NOT BE REJECTED. THE ASSESSEE CHALLENGED THE REJECTION OF SOME OF ITS COMPARABLES AS WELL AS THE INCLUSION OF A FEW OF COMPARABLES FROM THE ACCEPTED/ REJECTED MATRIX.I T ALSO CHALLENGED THE MARGIN W ORKING OF THE FOUR COMPARABLES,NAMELY MINDTREE CONSULTING, SAKSEN COMMUNICATION TECHNOLOGIES LTD.(SEGMENTAL), KALS INFORMATION SYSTEM LIMITED AND AXIS IT AND T - SYSTEMS LIMITED. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE , T HE TPO HELD THAT THE ASSESSEE HAD WRONGLY RE JECTED SOME OF THE COMPARABLES, THAT IT SELECTIVELY CHOSE COMPARABLE WITH THE SOLE IDEA OF JUSTIFYING ITS PROFIT MARGINS, THAT FROM THE SEARCH MATRIX OF THE ASSESSEE IT WAS CLEAR THAT MAJORITY OF THE COMPANIES SEAR CHED HAD FINALISED THEIR AUDITED ACCOUNTS MUCH BEFORE 30/9/2009, THAT THE ASSESSEE HAD FAILED TO FURNISH ANY EVIDENCE TO SHOW THAT IT HAD MADE REASONABLE EFFORTS TO ACCESS THE CURRENT YEAR DATA EITHER ON DATA BASE OR OTHERWISE, THAT MOST OF THE COMPARABLE SELECTED BY THE ASSESSEE WERE LISTED COMPANIES WHO HAD PUBLISHED THEIR ACCOUNTS FOR THE YEAR E NDING 31.3.2009 BEFORE 30 TH SEPT EMBER 2009, THAT THE TP RE PORT WAS TO BE PREPARED BY OCT. , 2009. HE PROPOSED TP ADJUSTMENT OF RS. 37.70 CRORES .ACCORDINGLY,THE AO ISSU ED A DRAFT ASSESSMENT ORDER . 3. AGGR IEVED BY THE PROPOSED ADDITIONS, THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP AND MADE ELABO RATE SUBMISSIONS.VIDE ITS ORDER, DATED 30.12.2013, THE DRP UPHELD THE ORDER OF THE TPO WITH REGARD TO TP ISSUES.FOR DOMESTIC LAW IS SUE IT DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE . 4. DURING THE COURSE OF HEARING AR STATED THAT THE DRP HAD NOT DISCUSSED ANYTHING ABOUT THE OBJECTIONS RAISED BY THE ASSESSEE WITH REGARD TO THE COMPARABLES AND WORKING CAPITAL ADJUST MEN 1415 NESS - 09 - 10 5 - TS ,THAT T HE DRP HAD ERRED IN REJECTING CG - VAK SOFTWARE AND EXPORTS,SIP TECHNOLOGIES AND EXPORTS LTD., R . S . S OFTWARE(INDIA)LTD.,AS COMPARABLES,THAT IT ERRED IN CONSIDERING CERTAIN ADDITI ON - AL COMPANIES AS COMPARABLES WHICH WERE FUNCTIONALLY DIFFERENT,THAT IT HAD ERRE D IN NOT GRANTING THE ASSESSEE THE BENEFIT OF THE WORKING CAPITAL ADJUSTMENT THAT WAS REQUIRED TO BE UNDERTAKEN TO ACCOUNT FOR THE DIFFERENCES IN LEVEL OF WORKING CAPITAL BETWEEN THE COMPARABLES AND THE ASSESSEE ,THAT IT DID NOT ALLOW THE ASSESSEE THE BENEF IT OF RISK ADJUSTMENT ,THAT THE DRP IN ITS DIRECTIONS HAD NOT PROVIDED ANY SPECIFIC FINDINGS ON CONTENTIONS OF THE ASSESSEE TO REINSTATE THE VARIOUS COMPARABLES . IT WAS FURTHER ARGUED THAT DRP COMPUTED THE TP ADJUSTMENT BY APPLYING THE ARMS MARK - UP TO THE E NTRY LEVEL COST AND COMPARED THE RESULTANT ALP WITH THE AE REVENUE ONLY,THAT IT DID NOT APPLY ENTITY LEVEL REVENUE,THAT THE DPR HAD ADOPTED INCONSISTENT APPROACH,THAT IT ERRED IN CONSIDERING INCORRECT OPERATING MARGIN FOR QUINTEGRA LIMITED,THAT THE DRP CON SIDERED OPERATING MARGIN AS 0.79% ON OPERATING COSTS AS AGAINST THE CORRECT MARGIN OF ( - )0.79%, THAT THE APPLICATIONS FILED BY THE ASSESSEE U/S. 154 OF THE ACT BEFORE THE AO ON 04. 03. 2013 AND 24.10.2013 RESPECTIVELY WERE PENDING WITH THE AO ,THAT THE DRP ERRED IN CONSIDERING INCORRECT OPE RATING MARGIN FOR CERTAIN COMPANIES CONSIDERED TO BE COMPARABLE TO THE ASSESSEE FOR AY.UNDER APPEAL . THE AR PRESSED COMPARABLES OF MINDTREE LIMITED AND SASKEN LIMITED ONLY IN THAT REGARD. HE R EFERRED TO PAGES NO.362,365 - 367 , 379 - 389, 428 - 29, 431, 433 - 34,438 - 39 OF THE PAPER BOOK (PB) .DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDER OF THE DRP AND LEFT THE MATTER TO THE DISCRETION OF THE BENCH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THA T THE ASSESSEE HAD RAISED SPECIFIC GROUND BEFORE THE DRP AND HAD FILED SUBMISSIONS IN THAT REGARD.IT WAS ARGUED THAT THE TPO HAD INCLUDED THE COMPARABLES THAT WERE NOT RELEVANT FOR DETERMINING THE ALP OR HAD EXCLUDED THE COMPARABLES THAT WERE RELEVANT,THAT THE TPO HAD ADOPTED INCORRECT OPERATING MARGINS FOR CERTAIN COMPANIES,THAT HE HAD NOT CONSIDERED ENTITY LEVEL REVENUE,THAT HE DID NOT ALLOW THE ASSESSEE THE BENEFIT OF RISK ADJUSTMENT . WE FURTHER FIND THAT THE DIRECTIONS OF THE DRP ARE SILENT OVER ALL THE ISSUES RAISED BY THE ASSESSEE AGAINST THE ORDER OF THE TPO. IN OUR OPINION,THE ORDER OF THE DRP FALLS UNDER THE CATEGORY OF NON SPEAKING ORDER DEVOID OF REASONS. WHILE DECIDING THE GROUND WITH REGARD TO COMPARABLES,IT HAS MENTIONED IN PARAGRAPH 12.4(PG.7 OF THE ORDER)THAT THE TPO HAD DONE A SYSTEMATIC SEARCH AND IDENTIFIED COMPARABLES FROM THE ACCEPT REJECT METHOD OF THE TAXPAYERS SEARCH ITSELF,THAT THE TPO HAD APPLIED PROPER FILTERS AND OBTAINED SEGMENTAL ACCOUNTS. IN OUR OPINION,THESE OBSERVATIONS ARE VERY GENERAL AND DO NOT DEAL WITH THE SPECIFIC OBJECTIONS RAISED BY THE ASSESSEE . THE DRP IS SUPPOSED TO SUPPORT OR DISTINGUISH THE COMPARABLES,WHEN THE ASSESSEE FILES OBJECTION CITING THE DECIDED JUDGMENTS.IN THE CASE BEFORE US,THE DRP HAS NOT DISCUSSED MERITS OF ANY OF THE COMPARABLES OBJECTED TO BY THE ASSESSEE .SIMILARLY,THE FINAL DECISION OF THE DRP ABOUT FAR ANALYSIS IS VERY GENERAL. BEING THE FIRST APPELLATE AUTHORITY IT IS THE DUTY OF THE DRP OF PASS A REASONED ORDER AFTER MEETING THE ARGUMENTS RAISED BY T HE ASSESSEE .AN ORDER WITHOUT REASONS IS NO ORDER IN T HE EYES OF LAW. WE FIND THAT VIDE CIRCULAR NO.5 OF 2000 DATED 03.06.2010, THE CBDT HAD GIVEN ALL THE POWERS OF CIT (A) TO THE DRP AND IT WAS SUPPOSED TO PERFORM THE SAME DUTIES OF THE CIT(A).CIRCULAR SPECI FICALLY 1415 NESS - 09 - 10 6 PROVIDES THAT THE DRP SHALL ISSUE DIRECTIONS AFTER CONSIDERING THE OBJECTIONS FILED BY THE ASSESSEE (SUB CLAUSE B),AND EVIDENCE FURNISHED BY THE ASSESSEE (SUB CLAUSE C) .BUT,THE DRP IN THE CASE UNDER CONSIDERATION HAS NOT FOLLOWED THE SAID INSTRUCTI ON.IT HAS PASSED AN ORDER THAT IS NEITHER SPEAKING NOR REASONED. IN THE MATTER OF BUILDWELL ASSAM (P.) LTD . (133ITR736) ,THE HONBLE ASSAM HIGH COURT HAS EMPHASISED THE IMPORTANCE OF PASSING A REASONED ORDER AS UNDER : SECTION 250(6) OF THE I.T. ACT, 1961, PR ESCRIBES THE MANNER OF DISPOSAL OF AN APPEAL. AN ORDER MUST BE IN WRITING CONTAINING THE POINTS FOR DETERMINATION AND DECISION.THE OBJECT IS OBVIOUS. IT ENABLES A PARTY TO KNOW THE PRECISE POINTS DECIDED IN HIS FAVOUR OR AGAINST HIM. ABSENCE OF FORMULATION OF POINTS FOR DECISION OR WANT OF CLARITY IN DECISION PUTS A PARTY IN A QUANDARY. A DECISION AGAINST A PARTY ENABLES HIM TO GO UP IN APPEAL. A DECISION BY ITS VERY NATURE MUST BE FIRM AND SHOULD NOT BE VAGUE AND UNCLEAR.(EMPHASIS ADDED). WE HAVE NO HESIT ATION IN HOLDING THAT THE ORDER PASSED BY THE DRP IS VAGUE AND UNCLEAR. SO , IN THE INTEREST OF JUSTICE,MATTER IS BEING RESTORED BACK TO THE FILE OF THE DRP FOR FRESH ADJUDICATION, WHO WOULD AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE .IT WOULD PASS A SPEAKING ORDER AND MEETING ALL THE OBJECTION RAISED BY THE ASSESSEE. BESIDES,THE AO IS DIRECTED TO DECIDE THE RECTIFICATION APPLICATIONS FILED BY THE ASSESSEE BEFORE HIM,IF SAME ARE NOT DISPOSED OFF TILL THE RECEIPT OF THE ORDER. FIRST EFFECTIVE GROU ND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE ,IN PART. 6 . GROUND NO. 24 PERTAINS TO NON EXCLUSION OF EXPENSES INCURRED IN FOREIGN CURRENCY FOR TRAVELLING AND COMMUNICATION CHARGES FROM THE TOTAL TURNOVER. WHILE OBJECTING TO THE DRAFT ASSESSMENT ORDER,THE ASSESSEE HAD STATED THAT THE AO WHILE COMPUTING THE DEDUCTION AVAILABLE TO THE ASSESSEE UNDER SECTION OF 10A AND SECTION 10AA OF THE ACT,DID NOT PROPOSE TO EXCLUDE EXPENSES INCURRED IN FOREIGN CURRENCY FOR TRAVELLING AND COMMUNICATION CHARGES FROM THE TOTA L TURNOVER. HOWEVER,THE SAID SUMS WERE PROPOSED TO BE REDUCED FROM THE EXPORT TURNOVER, WHILE COMPUTING THE DEDUCTION AVAILABLE TO THE APPELLANT UNDER SECTION OF 10A AND SECTION 10AA OF THE ACT. 6.1. THE DRP DIRECTED THE AO TO VERIFY AND COMPUTE THE DEDUCTI ON UNDER SECTION 10A OF THE ACT AS PER LAW.BEFORE US,THE AR CONTENDED THAT THE DRP DID NOT CONSIDER THE SUBMISSION OF THE ASSESSEE AND THE JUDGMENT OF THE HONBLE J URISDICTIONAL HIGH COURT DELIVERED FOR AY.S.2005 - 06 AND 2006 - 07,THAT THE TRIBUNAL HAD DECIDE D THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE WHILE ADJUDICATING THE APPEAL FOR THE AY.2007 - 08.HE REFERRED TO THE PAGE NO.443TO4 4 5 OF THE PAPER BOOK.DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 6.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE HONBLE BOMBAY HIGH COURT HAS DECIDED THE ISSUE AS UNDER: 1. ALTHOUGH TWO QUESTIONS OF LAW ARE RAISED BY THE REVENUE IN THIS APPEAL, COUNSEL FOR THE REVENUE FAIRLY STATES - THAT SECOND QUESTION DOES NOT ARISE OUT OF TH E ORDER OF THE ITAT. THE FIRST QUESTION RAISED BY THE REVENUE IN THIS APPEAL READS THUS . - WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL, IN LAW, WAS RIGHT IN HOLDING THAT THE COMMUNICATION CHARGES, PROFESSIONAL FEES AND EXPENSE S INCURRED IN FOREIGN EXCHANGE FOR TRAVELLING SHOULD BE REDUCED FROM THE TOTAL TURNOVER AS WELL AS WELL AS FROM EXPORT TURNOVER FOR APPLYING THE PROVISIONS OF SECTION 10A OF THE INCOME TAX ACT, 1961? 2. COUNSEL FOR THE PARTIES STATE THAT THE AFORESAID QUE STION STANDS ANSWERED AGAINST THE REVENUE IN VIEW OF THE DECISION OF THIS COURT IN THE CASE OF CIT V/S. GEM PLUS JEWELLERY INDIA LTD. REPORTED 1415 NESS - 09 - 10 7 IN [2011] 330 I.T.R. 175(BOM.) IN THIS VIEW OF THE MATTER, WE SEE NO REASON TO ENTERTAIN THE APPEAL. ACCORDINGL Y, THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. RESPECTFULLY,FOLLOWING THE ABOVE,WE DECIDE GROUND NO.24 IN FAVOUR OF THE ASSESSEE . 7. WITH REGARD TO GROUND NO.25,26,27 IT IS FOUND THAT EITHER THEY ARE CONSEQUENTIAL IN NATURE OR THE APPLICATIONS FILED BY THE ASSESSEE U/S.154 OF THE ACT BEFORE THE AO ARE PENDING.AO IS DIRECTED TO DECIDE THE RECTIFICATIONS FILED BEFORE HIM WITHIN A PERIOD OF ONE MONTH OF THE RECEIPT OF THE ORDER.ALL THE THREE GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED . . ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGU ST ,2015. 5 TH , 2015 SD/ - SD/ - ( . . /A.D. JAIN) ( / RAJENDRA) / JUDICI AL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 05. 0 8 .2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. R ESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.