AT & S India Pvt. Ltd., Karnataka V. DCIT, CIR-11(1), KOLKATA, Kolkata

ITA 179/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4795 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-06-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 08-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJULA
• Assessee Lawyers: RITUPARN SINGH
• Keywords: Related party transaction; Transfer pricing; International transaction; Rule of consistency; Bad and doubtful debts; Arm length price; Revised return; Ignorance of law
• Section: 92C; 143(3); 92B; 12A; 10B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.179/KOL/2016 ASSESSMENT YEARS:2011-12 AT & S INDIA PVT. LTD. 12A INDUSTRIAL AREA, NANJANGUD 571301, MYSORE DIST. KARNATAKA, [ PAN NO.AAECA 2930 J ] / V/S . DCIT, CIRCLE-11(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SOUMITRA CHOUDHURY, ADVOCATE & SMT. RITUPARN SINGH, AR /BY RESPONDENT SHRI G. MALLIKARJULA, CIT-DR /DATE OF HEARING 24-06-2016 /DATE OF PRONOUNCEMENT 03-08-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF DISPUTE RESOLUTION PANEL-2 (DRP FOR SHORT), NEW DELHI DATED 21.12.2015 . ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-11(1) KOLKATA U/S 143(3) R.W.S. 144C(1 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 27.01.2016 FOR ASSESSMENT YEAR 2011-12. 2. THE REVISED GROUNDS RAISED BY THE ASSESSEE PER I TS APPEAL ARE AS UNDER:- TRANSFER PRICING 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW. THE DISPUTE RESOLUTION PANEL ('DRP') 1 ASSESSING OFFICE R (,AO,) ERRED IN MAKING ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 2 AN ADJUSTMENT OF INR 69,30,53,397/- TO THE TOTAL IN COME OF TILE APPELLANT, MANUFACTURER OF PRINTED CIRCUIT BOARDS, IN RESPECT OF EXPORTS AMOUNTING TO INR 197,55.19.0001- MADE BY THE APPELLANT TO AT &8 AG F OR FURTHER SALE TO INDEPENDENT CUSTOMERS AT SAME PRICES. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE DRP/AO ERRED IN NOT APPRECIATING THAT TILE COMPARAB LE UNCONTROLLED PRICE ('CUP') METHOD WOULD BE THE MOST APPROPRIATE METHOD IN DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION INVOLVING SALE OF PRINTED CIRCUIT BOARDS BY THE APPELLANT 10 AT &S AG. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE DRP/AO FAILED TO ADOPT TRANSACTION-BY-TRANSACTION A PPROACH AND DETERMINE SEPARATELY THE ARM'S LENGTH PRICE OF THE INTERNATIO NAL TRANSACTION INVOLVING PAYMENT OF DISTRIBUTION COMMISSION BY THE APPELLANT TO AT&S AG, HAVING BEEN INCOME IN THE HANDS OF AT&S AG, WHICH WAS NETTED OF AGAINST SALES IN THE BOOKS OF THE APPELLANT AND DULY DEMONSTRATED BEFORE THE DRP/TPO. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE DRP/AO ERRED IN DISREGARDING THE PRINCIPLE OF CONS ISTENCY ENUNCIATED BY THE HON'BLE SUPREME COURT OF INDIA IN VARIOUS JUDICIAL PRECEDENTS OF OUR COUNTRY, ALTHOUGH THE SAME WAS SPECIFICALLY MENTIONED BEFORE THE DRP DURING THE COURSE OF PROCEEDINGS. 5. WITHOUT PREJUDICE TO WHAT WE HAVE STATED HEREINA BOVE, THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TILE D RP/AO ERRED IN CONFIRMING SELECTION OF INDEPENDENT COMPANIES UNDER THE TNMM A T THE ENTITY LEVEL WHICH WERE NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT. CORPORATE TAX (OTHER THAN TRANSFER PRICING) 6 THAT ALL THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE AO / DRP ERRED IN NOT DELETING THE INADVERTENT ERROR COM MITTED BY THE APPELLANT BY MAKING AN ADDITION TO THE RETURNED INCOME FOR A SUM OF INR 7,53,519/- REPRESENTING THE NEGATIVE BALANCE OF THE OPENING AN D CLOSING PROVISION MADE FOR DIMINUTION IN THE VALUE OF INVENTORIES, BY MECH ANICALLY RELYING UPON THE DECISION OF THE HON'BLE APEX COURT IN. THE CASE OF GOETZ INDIA LTD VS. CIT. 7 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO /DRP ERRED IN NOT ALLOWING THE CLAIM MADE BY THE AP PELLANT DURING THE COURSE OF ASSESSMENT FOR A SUM OF INR 753519/- REPRESENTIN G THE NEGATIVE BALANCE OF THE OPENING AND CLOSING PROVISION MADE TOR DIMINUTI ON IN THE VALUE 01 INVENTORIES, BY MECHANICALLY RELYING UPON THE DECIS ION OF THE HON'BLE APEX COURT IN THE CASE OF GOETZ INDIA LTD VS. CIT. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 3 8. THAT THE APPELLANT CRAVES LEAVE TO ADD TO AND / OR AMEND, ALTER, MODIFY OR RESCIND THE WOUNDS HEREINABOVE BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL. SHRI SOUMITRA CHOUDHURY AND MRS RITUPARNA SINH, LD. AUTHORIZED REPRESENTATIVES APPEARED ON BEHALF ASSESSEE AND SHRI G. MALLIKARJUL A, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 3. THE FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO 1 & 2 IN THIS APPEAL IS THAT DRP ERRED IN MAKING AN ADJUSTMENT OF 69,30,53,397/- TO THE TOTAL INCOME OF THE ASSESSEE BY USING THE TRANSACTIONAL NET MARGIN METHOD (TNMM OF SHORT) METHOD INSTEAD OF COMPARABLE UNCONTROLLED PRICE (CUP FOR SHORT) METHO D AS SUGGESTED BY THE ASSESSEE. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRES ENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE MANUFACTURING BUSINESS O F PRINTED CIRCUIT BOARD (PCB FOR SHORT). THE ASSESSEE IS A SUBSIDIARY OF A COMPA NY NAMELY AT&S AG BASED IN AUSTRIA. THE PCB MANUFACTURED BY THE ASSESSEE WAS U TILIZED IN AUTOMOTIVE, INDUSTRIAL TELECOMMUNICATION AND MEDICAL INDUSTRIES. THE ASSES SEE FILED ITS INCOME TAX RETURN DECLARING A LOSS OF 74,11,66,860/-. THEREAFTER THE CASE WAS SELECTED F OR SCRUTINY AND ACCORDINGLY NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE DURING THE YEAR HAD INTERNAT IONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE FOR SHORT) FOR SUPPLYING THE PCB MANUFACTURED BY IT. THE ASSESSING OFFICER AFTER HAVING THE APPROVAL FROM TH E CIT MADE REFERENCE TO THE TRANSFER PRICING OFFICER (TPO FOR SHORT) U/S 92 CA( 1) OF THE ACT TO DETERMINE THE ARMS LENGTH PRICE (FOR SHORT ALP) IN RESPECT OF IN TERNATIONAL TRANSACTIONS REPORTED IN THE AUDIT REPORT IN FORM 3CEB AS SUBMITTED BY THE A SSESSEE. THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION HAS UNDERTAKEN VARIOUS INTERNAT IONAL TRANSACTION INTER-ALIA EXPORT OF PCB FOR A VALUE OF 197,55,19,200/- TO ITS AE WHICH IS UNDER DISPUTE. T HE TRANSFER PRICING STUDY OF THE ASSESSEE FOR DETERMINING THE A LP OF THE PCB GOODS EXPORTED TO ITS AE REVEALS THE FOLLOWING FACTS :- THE ASSESSEE IS PERFORMING VARIOUS FUNCTIONS SUCH A S PRODUCTION & MANUFACTURING, LOGISTICS, WARRANTY SUPPORT, SALES & MARKETING FOR INDIAN ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 4 CUSTOMERS, INFORMATION TECHNOLOGY AND OUTSOURCING O F SOME ACTIVITIES. HOWEVER CERTAIN FUNCTIONS SUCH AS CORPORATE STRATEG Y, FINANCE, ACCOUNTING, TREASURY, LEGAL AND HUMAN RESOURCE MANAGEMENT ARE P ERFORMED BY THE ASSESSEE UNDER THE GUIDANCE OF THE AE. ON THE OTHER HAND THE AE IS PERFORMING DISTRIBUTION FUNCTION OF PRODUCTS MANUFACTURED BY T HE ASSESSEE. SO THE SALES NETWORK OF AE IS USED FOR THE SALE OF THE GOODS MAN UFACTURED BY THE ASSESSEE. THE AE PLACES ORDER TO THE ASSESSEE ON THE BASIS OF THE REQUIREMENT OF END CUSTOMERS ON PRINCIPAL TO PRINCIPAL BASIS. THE MARG IN FOR THE AE IS 6% AS PER THE AGREEMENT WITH THE ASSESSEE. THUS THE FUNCTION OF THE AE IN THE INSTANT CASE IS LIMITED TO DISTRIBUTION OF THE PRODUCTS MANUFACT URED BY THE ASSESSEE. HENCE THE ASSESSEE IN THE PRESENT CASE HAS SELECTED THE A E AS TESTED PARY AS IT IS HAVING LESS FUNCTIONS. 4.1 THE ASSESSEE OWNS ALL THE TANGIBLE ASSETS AND T ECHNOLOGY INVOLVED IN MANUFACTURING OF PCB. ON THE OTHER HAND THE AE OWNS ALL THE SIGNIFICANT INTANGIBLES AND UNDERTAKES RESEARCH AND DEVELOPMENT WORK. THE ASSESSEE AND ITS AE BEAR THE MARKET RISK BUT TH E AE RISK IS LIMITED TO THE EXTENT OF GUARANTEED COMMISSION GRANTED. THE CREDIT/ BAD DEBT RISK TO THE ASSESSEE IS LOWER AS MAJOR SALE OF THE ASSESSEE IS TO THE GROUP COMPANY. THE ASSESSEE BEARS THE FOREIGN EXCHANGE RISK, INVENTORY RISKS, MAN-POWER RISKS, PR ICE RISK, LEGAL & STATUTORY RISK, ENVIRONMENTAL RISK, AND WARRANTY RISK. 5. IN VIEW OF ABOVE THE ASSESSEE WAS CHARACTERIZED AS FULL-FLEDGED MANUFACTURER WHICH ASSUMES SIGNIFICANT BUSINESS RISK ASSOCIATED WITH ITS MANUFACTURING ACTIVITY AND ON THE CONTRARY THE AE CAN BE CHARACTERIZED AS ROUT INE DISTRIBUTOR. ACCORDINGLY THE ASSESSEE SELECTED THE TNMM AS MOST APPROPRIATE METH OD IN RELATION TO TESTED PARTY I.E. AE IN THE INSTANT CASE AND FOUND 25 COMPANIES OF FO REIGN COUNTRIES FOR THE COMPARABLES USING AMADEUS DATABASE TO DETERMINE THE ALP. THE PLI WAS ADOPTED AS OPERATING PROFIT MARGIN ON OPERATING REVENUE AND COMPARED WITH THE COMPARABLE COMPANIES. AS A RESULT THE ASSESSEE FINDS ARITHMET IC MEANS OF COMPARABLE COMPANIES ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 5 WHICH ARE ENGAGED IN DISTRIBUTION ACTIVITY IN EUROP EAN REGION IS @ 2.79%. ON THE OTHER HAND THE AE EARNS RETURN ON SALES @ 2.57% IN THE YEAR 2010-11. FROM THE ABOVE IT WAS CONCLUDED THAT AE DOES NOT EARN EXCESS IVE PROFIT FROM THE TRANSACTIONS WITH THE ASSESSEE. THEREFORE THE TRANSACTION BETWEE N THE ASSESSEE AND AE IS AT ARM LENGTH PRICE. 5.1 HOWEVER DURING THE ASSESSMENT PROCEEDINGS, TPO OBSERVED THAT ONLY 9 COMPANIES ARE MENTIONED IN THE TP REPORT THOUGH THE ASSESSEE CLAIMED TO HAVE SELECTED 25 COMPANIES. THE COMPANIES SELECTED BY TH E ASSESSEE ARE IN DIFFERENT ACTIVITY SUCH AS COMPUTER, FAX, PRINTER, TONER, TEL ECOMMUNICATION PRODUCTS, PC HARDWARE, SOFTWARE, PERIPHERALS, PROJECTORS, CARTRI DGES, SCANNER, USB, TVS ETC. BUT NOT THE PCB. THE ANNUAL REPORT, FAR ANALYSIS OF THE COM PANIES SELECTED AS COMPARABLES HAS NOT BEEN SUBMITTED TO ASCERTAIN THE FUNCTIONAL COMPARABILITY. THE ANNUAL REPORT AND FINANCIAL STATEMENT OF THE TESTED PARTY WAS ALS O NOT SUBMITTED TO ASCERTAIN THE FUNCTIONAL COMPARABILITY. IN VIEW OF ABOVE, THE TPO ISSUED THE SHOW CAUSE NOTICE FOR REJECTING THE TP STUDY OF THE ASSESSEE WITH REGARD TO THE DETERMINATION OF ALP FOR THE EXPORT OF PCB. THE TPO PROCEEDED TO DETERMINE THE A LP BY SELECTING THE ASSESSEE AS TESTED PARTY I.E. AT& S INDIA WITH TNMM METHOD AND PLI AS OPERATING PROFIT ON SALES. ACCORDINGLY THE TPO SEARCHED FOR SUITABLE CO MPARABLES FROM DIFFERENT DATA BASE OF PUBLIC DOMAIN ON CERTAIN CRITERIA AS MENTIONED O N PAGE 58 OF THE TPO ORDER. ACCORDINGLY, THE TPO WORKED OUT THE AVERAGE MEAN OF PLI AT 8.75% AS OPERATING PROFIT / OPERATING REVENUE BUT IN CASE OF ASSESSEE OPERATING PROFIT / OPERATING REVENUE OF THE ENTITY WAS WORKED OUT AT -27.04%. THE PLI OF THE COMPARABLES SELECTED IS QUITE HIGHER THAN THE OPERATING MARGIN OF THE ASSESSEE. I N VIEW OF ABOVE, THE TPO PROPOSED TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTI ONS ENTERED INTO BY THE ASSESSEE WITH REGARD TO THE EXPORT OF PCB OF 197,55,19,000/-. IN COMPLIANCE TO THE ABOVE SHOW CAUSE NOTICE IT WAS SUBMITTED THAT THE ASSESSEE HAS PROVIDED THE DETAILED SEARCH PROCESS CARRIED OUT IN AMADEUS DATABASE ALONG WITH THE FILTERS APPLIED FOR SELECTING THE QUANTITY AND QUAL ITATIVE COMPANIES. THE NECESSARY DETAILS WITH REGARD TO THE SELECTED 25 COMPANIES WE RE FURNISHED. THERE WAS ABSOLUTELY ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 6 NO REASON TO FURNISH THE ACCEPTED AND REJECTED MATR IX AND THEREFORE IT SHOULD NOT BE CONSIDERED. PCB IS ELECTRONIC PRODUCT AND AS PER THE NOTIFICAT ION OF DEPARTMENT OF ELECTRONICS & INFORMATION TECHNOLOGY OF THE GOVERNMENT OF INDIA H AS MANDATED THE 15 ITEMS FOR THE COMPULSORY REGISTRATION WHICH ARE AS BELOW:- ELECTRONIC GAMES LAPTOP/NOTEBOOK/TABLET PLASMA/LCD/LED TELEVISION OPTICAL DISC PLAYER MICROWAVE OVEN VISUAL DISPLAY UNIT AND VIDEO MONITOR PRINTERS AND PLOTTERS SCANNERS WIRELESS KEYBOARDS TELEPHONE ANSWERING MACHINE AMPLIFIERS ELECTRONIC MUSICAL SYSTEM ELECTRONIC CLOCKS SET TOP BOX AUTOMATIC DATA PROCESSING MACHINE. 5.2 IN VIEW OF ABOVE THE COMPANIES SELECTED FOR THE COMPARABLES ARE WITHIN THE CATEGORY OF ELECTRONIC PRODUCT AND BESIDES THIS IT IS WITHIN THE OECD GUIDELINES. THE ASSESSEE FURTHER SUBMITTED THAT THE COMPARABLES WER E SELECTED FROM THE FOLLOWING INDUSTRY CODES:- O WHOLESALE OF COMPUTER, COMPUTER PERIPHERAL EQUIPMEN T AND SOFTWARE O WHOLESALE OF ELECTRONIC AND TELECOMMUNICATION EQUIP MENT AND PARTS O WHOLESALE OF CIRCUIT, SWITCHBOARD, MOTHERBOARD, CHI P, ELECTRONIC COMPONENTS, PARTS OR IC. IT WAS SUBMITTED THAT THE AFORESAID SELECTION OF CO MPARABLE COMPANIES IN THE SAME LINE WAS ACCEPTED BY THE THEN LD. TPO DURING THE COURSE OF HEARING IN THE ASSESSMENT YEAR 2009-10. ACCORDINGLY THE ASSESSEE PRAYED FOR THE P RINCIPAL OF CONSISTENCY. 5.3 THE ASSESSEE DURING ASSESSMENT PROCEEDINGS HAS ALSO SUBMITTED THE CURRENT YEAR ANNUAL REPORTS OF 20 COMPARABLE COMPANIES FOR THE P URPOSE OF FUNCTIONAL ANALYSIS. THE ASSESSEE FROM THE 20 COMPARABLE COMPANIES WORKED OU T THE ARITHMETIC MEAN @ 2.95% ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 7 AND THE RETURN ON SALES OF AE FOR THE YEAR UNDER CO NSIDERATION IS 2.6% AS CERTIFIED BY PWC. THE ASSESSEE HAS ALSO SUBMITTED AUDITED STANDALONE FINANCIAL STATEMENTS OF THE TESTED PARTY FOR THE YEAR 2009-10 AND THE CONSOLIDATED FIN ANCIAL STATEMENTS OF THE TESTED PARTY FOR THE YEAR 2010-11 FOR THE PURPOSE OF MAKING THE FUNCTIONAL ANALYSIS. AS PER THE OECD GUIDELINES THE TESTED PARTY SHOULD BE THE ONE THAT HAS LESS COMPLEX FUNCTIONAL ANALYSIS. IN THE INSTANT CASE THE ASSESS EE IS A FULL FLEDGED MANUFACTURER AND THEREFORE IT HAS MORE COMPLEX FUNCTIONS RATHER THAN THE AE AS IT HAS LESS RISKS AND ITS FUNCTION IS LIMITED TO DISTRIBUTION ACTIVITY. THE A O IN THE AY 2009-10 AND 2010-11 HAS ACCEPTED THE AE AS TESTED PARTY FOR CARRYING OU T FOREIGN BENCH MARKING IN RELATION TO THE AFORESAID INTERNATIONAL TRANSACTIONS. 6. IN THE INSTANT CASE THE AE IS ENTITLED ONLY FOR DISTRIBUTION COMMISSION @ 6% OF THE GROSS PRICE AND PRELIMINARY GUARANTEE PRICE @ 2 % OF THE GROSS PRICE WHICH IS FINALLY SETTLED ON ACTUAL BASIS. IN SUPPORT OF ITS CLAIM, THE ASSESSEE HAS SUBMITTED BACK TO BACK INVOICES ON SAMPLE BASIS WHICH ARE RECORDED IN THE ORDER OF TPO. FINALLY THE ASSESSEE REQUESTED NOT TO REJECT THE TP DONE BY IT. YOUR KIND SELF MAY PLEASE FURTHER APPRECIATE THAT THERE IS NO JUSTIFICATION FOR CARRYING OUT AN ENTITY LEVEL BENCHMARKING CONSIDERI NG THE ASSESSEE AS TESTED PARTY IN ORDER TO DETERMINE THE ARMS LENGTH PRICES OF THE FOLLOWING: SALES MADE BY THE ASSESSEE DIRECTLY TO THIRD PARTY CUSTOMERS (INR259811 THOUSAND) SALES MADE BY THE ASSESSEE TO THIRD PARTY CUSTOMERS OUTSIDE INDIA THROUGH AT&S AUSTRIA FUNCTIONING AS DISTRIBUTOR OF THE ASSESSEE (INR 1975519 THOUSAND) [TOTAL SALES INR 2235330 THOUSAND = INR 259811 THOUSAND + INR 1975519 THOUSAND] THUS, THE BENCHMARKING APPROACH PROPOSED BY YOU IN THE AFORESAID NOTICE CONSIDERING ASSESSEE AS TESTED PARTY LEADS TO ABSURD RESULT INV OLVING BENCHMARKING OF THIRD PARTY SALE WHICH IS NOT REQUIRED UNDER THE INDIAN TRANSFE R PRICING REGULATION. IN VIEW OF OUR SUBMISSIONS, AS WE BEG TO DIFFER IN THE SELECTION O F TESTED PARTY, SE HAVE NOT OFFERED ANY COMMENT ON THE INDIAN COMPARABLE COMPANIES SELE CTED BY YOU AND COMPUTATION OF MARGIN BY YOU. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 8 HOWEVER THE TPO REJECTED THE SUBMISSION OF THE ASSE SSEE BY OBSERVING AS UNDER : 1. THE ASSESSEE FAILED TO SUBMIT THE TOTAL INVOICE WIS E SALE AND SCHEDULE OF PRODUCTION OF FINISHED MATERIALS WHICH WAS ROUTED T HROUGH AE BUT THE ASSESSEE SUBMITTED MONTH-WISE SCHEDULE. 2. THE ASSESSEE FAILED TO RECOVER THE DIRECT COST ASSO CIATED WITH THE PRODUCTION OF PCB. THERE WAS GROSS LOSS @ 17.08%. 3. THE ASSESSEE IN THE PRESENT CASE IS ACTING MORE A C ONTRACT MANUFACTURER AS ITS ACTIVITIES ARE MAJORLY CONTROLLED BY ITS AE AS PER COST ALLOCATION AGREEMENT. 4. THE QUESTION WHY THE ASSESSEE IS SELLING AT A PRICE WHICH IS SUFFICIENT ENOUGH TO RECOVER THE DIRECT COST. IT IS ALSO NOT KNOWN UNDER WHAT CONDITIONS THE AE IS SELLING THE GOODS TO ITS CUSTOMERS. HOWEVER IT NOT THE CONCERN OF INDIAN TRANSFER PRICING REGULATION BUT IT HAS CONCERN WITH THE SUPP LYING OF THE PRODUCTS AT ALP TO AE. AS PER THE GENERAL MARKET TREND IN THE PCB I NDUSTRY THE TRANSACTION WITH THE AE IS NOT AT ALP. 5. THE BACK TO BACK INVOICES WERE SUBMITTED IN CD ROM BUT COULD NOT BE FOUND RELIABLE. MORE OVER THE OPERATIONS OF THE AE CANNO T BE VERIFIED AND RELIED. BESIDES THE ABOVE THE TP STUDY WAS NOT ACCEPTABLE A S THE AE WAS TREATED THE TESTED AND FAR ANALYSIS OF THE COMPARABLE COMPANIES SELECT ED ARE NOT AVAILABLE. 6.1 THE TPO HAS ALSO NOT ACCEPTED THE FINANCIAL OF THE DISTRIBUTION SEGMENT OF AE AS IT WAS NOT THE PART OF ANNUAL REPORT OF THE AE A ND IT WAS PREPARED FOR THE MANAGEMENT ONLY FOR THE PURPOSE OF TAX AUDIT IN IND IA. THE TPO ALSO OBSERVED WITH CERTAIN DEFECTS IN THE FINANCIAL INFORMATION SUBMIT TED BY THE ASSESSEE WHICH ARE ENUMERATED ON PAGE 73 OF THE ASSESSMENT ORDER. THE TPO ALSO NOT ACCEPTED THE PLEA OF THE ASSESSEE FOR TREATING THE AE AS TESTED PARTY IN VIEW OF THE HONBLE MUMBAI ITAT ORDER IN THE CAS E OF ONWARD TECHNOLOGIES LIMITED VS. DCIT 35 TAXMANN.COM 584 AND CYBER TECH SYSTEM & SOFTWARE LIMITED VS. ACIT 33 TAXMANN.COM 371 WHERE IT WAS DECIDED TH AT ONLY INDIAN ENTITY CAN BE HELD AS TESTED PARTY. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 9 IN THE INSTANT CASE THE FINANCIAL PREPARED OF THE A E ARE BASED ON THE GAAP WHICH ARE DIFFERENT WITH INDIA GAAP. BESIDES THE FOREIGN COMP ANIES SELECTED FOR COMPARABLES ARE NOT FOLLOWING INDIAN ACCOUNTING STANDARDS SO TH OSE COMPANIES CANNOT BE COMPARED. WITH REGARD TO THE CONSISTENCY OF THE ASSESSEE METH OD ACCEPTED IN THE EARLIER YEARS, THE TPO HELD THAT THE IN CASE OF INCOME TAX PROCEED INGS RES JUDICATA DOES NOT APPLY AND THESE ARE YEAR SPECIFIC. THE APPROACH IN THE CU RRENT YEAR IS BETTER THAN THE ERRONEOUS APPROACH IN THE EARLIER YEAR THEREFORE IT CANNOT ACT AS ESTOPPEL ON CARRYING OUT THE CORRECT ANALYSIS. FINALLY THE TPO HAS REJECTED THE AE AS TESTED PARTY AND TREATED THE ASSESSEE AS TESTED PARTY. THE TPO TREATED THE TNMM AS MOST APPROPRIATE METHOD AND PLI AS OPERATING PROFIT ON SALES. AN UPWARD ADJUSTMENT WAS MADE BY T HE TPO FOR THE EXPORT OF PCB TO ITS PE FOR RS. 68,97,22,939/- 7. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO DRP. THE ASSESSEE BEFORE THE DRP REITERATED THE SUBMISSION MADE BEFORE THE TPO. THE ASSESSEE SUBMITTED THAT THE AE BEING DISTRIBUTOR IS LESS COMPLEX ENTITY IN TERMS O F FAR ANALYSIS ('FUNCTION-ASSET- RISK'). THEREFORE THE AE WAS SELECTED AS THE 'TESTE D PARTY' AND ACCORDINGLY MARGIN EARNED BY AE (SEGMENTAL ACCOUNTS CERTIFIED BY INDEP ENDENT AUDITOR SUBMITTED TO THE TPO) WERE COMPARED WITH THE DISTRIBUTION MARGINS EA RNED BY VARIOUS DISTRIBUTION COMPANIES IN EUROPE IN RESPECT OF WHICH FINANCIAL I NFORMATION WAS AVAILABLE IN AMADEUS DATABASE. THE AMADEUS DATABASE IS ADMINIST ERED BY A GLOBALLY REPUTED INDEPENDENT MARKET RESEARCH COMPANY AND DATABASE PR OVIDER NAMED ' BUREAU VAN DIJK' . 7.1 THE ASSESSEE FURTHER SUBMITTED THAT BENCHMARKIN G ANALYSIS AND COMPUTATION OF PLI OF FOREIGN COMPARABLE COMPANIES PERFORMED BY TH E ASSESSEE WAS ACCEPTED AND ACCORDINGLY THE AE WAS ALSO ACCEPTED AS TESTED PART Y IN RESPECT OF THE AFORESAID INTERNATIONAL TRANSACTION FOR THE AY 2009- 10 AND A Y 2010-11. THERE WAS NO ADJUSTMENT MADE IN RESPECT OF THIS CONTROLLED TRANS ACTION FOR AY 2009-10 AND 2010- ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 10 11. THERE WAS NO CHANGE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE FOR THE AY 2011- 12. HENCE, TPO VIOLATED THE PRINCIPLE OF CONSISTENC Y ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE MATTER OF RADHASOAMI SATSANG V. CIT REPORTED IN 193 ITR 321. IT WAS ALSO SUBMITTED THAT AE HAD BORNE ALL RISKS O F NON-PAYMENT BY CUSTOMERS WHO PURCHASED THE PCBS MANUFACTURED BY THE ASSESSEE. TH E ASSESSEE HAD BORNE ALL RISKS ASSOCIATED WITH THE MARKETABILITY OF THE PCBS AND A LL THE RISKS ASSOCIATED WITH PRODUCT DEFECTS OR NON-CONFORMITIES THAT EXISTED AT THE TIM E OF DELIVERY BY THE ASSESSEE TO THE WAREHOUSE OF A T&S AUSTRIA. HENCE, THE TPO WAS NOT JUSTIFIED IN DESCRIBING THE ASSESSEE AS A CONTRACT MANUFACTURER. 7.2 HOWEVER THE DRP HAS DISREGARDED THE CLAIM OF TH E ASSESSEE AND UPHELD THE ORDER OF THE AO AFTER MAKING SOME CHANGES AND BY OB SERVING AS UNDER : THE PANEL HAS EXAMINED FAR ANALYSIS OF THE ASSESSE E AND ITS FOREIGN AE. IT IS SEEN THAT FOREIGN AE IS GATHERING' BUSINESS BY OBTAINING ORDERS FROM POTENTIAL CUSTOMERS ABROAD. IT IS NEGOTIATING SALE PRICE WITH CUSTOMERS AND IS LIABLE TO CUSTOMER REGARDING PRODUCT QUALITY AND WARRANTY. ALL CREDIT RISK LIES WITH FOREIGN AE. IT IS RESPONSIBLE FOR GETTING THE PRODUCT MANUFACTURED FROM ITS GROUP COM PANY HAVING RIGHT KIND OF TECHNOLOGY FOR THE PRODUCT UNDER CONSIDERATION. THE FOREIGN AE IS HAVING SUBSTANTIAL INTANGIBLES. ON THE OTHER HAND, THE ASSESSEE IS RES PONSIBLE FOR MANUFACTURING THE PRODUCT AS ASKED FOR BY ITS FOREIGN AE. IT IS ASSUR ED OF PRE-DETERMINED SALE PRICE AND IS NOT LIABLE TO END CUSTOMER [OR WARRANTY ETC. THO UGH THE ASSESSEE MAY NOT BE IN A POSITION OF CONTRACT' MANUFACTURE IN STRICT SENSE, YET IT IS NOT EVEN FULL-FLEDGED MANUFACTURER. CONSIDERING FUNCTION AND RISK ANALYSI S AS ABOVE, IT CAN BE SAID THAT THE ASSESSEE IS MORE CLOSE TO CONTRACT MANUFACTURER. IN NO WAY, IT CAN BE INFERRED THAT FOREIGN AE IS DOING LESS COMPLEX ACTIVITIES. THE AS SESSEE IS JUST MANUFACTURING THE PRODUCT AS GUIDED/DIRECTED BY ITS FOREIGN AE. THE A SSESSEE IS NOT HOLDING ANY SIGNIFICANT INTANGIBLES. THEREFORE, THE PANEL DOES NOT FIND FAULT WITH APPROACH OF TPO OF TAKING THE ASSESSEE AS TESTED PARTY. VARIOUS DEC ISIONS OF HIGHER APPELLATE AUTHORITIES ARE FACT SPECIFIC AND LAY DOWN THAT TES TED PARTY SHOULD BE SUCH THAT WHICH COULD BE BENCHMARKED IN A MORE REASONED MANNER. THE FUNCTIONAL AND RISK ANALYSIS OF THE ASSESSEE AS DISCUSSED SUPRA IS SUCH THAT IT NOT DIFFICULT TO FIND SUITABLE COMPARABLES FROM INDIAN DATABASE. THEREFORE, APPROA CH OF THE TPO CANNOT BE SAID TO BE PERVERSE OR PREJUDICIAL TO THE ASSESSEE, THE PAN EL THEREFORE HOLDS THAT THE ASSESSEE SHOULD BE TAKEN AS TESTED PARTY. IT IS RELEVANT HER E TO MENTION THAT THE ASSESSEE HAS NOT FURNISHED COMPLETE ANNUAL REPORTS OF ITS FOREIGN AE AND OTHER COMPARABLES TAKEN BY IT IN ITS TP STUDY REPORT, IN THE ABSENCE OF WHICH BENCHMARKING FOREIGN SHALL NOT BE PRACTICAL. THE DISTRIBUTION SEGMENTAL DATA OF AT &S AUSTRIA AS FURNISHED BY THE ASSESSEE IS NOT AUDITED ONE. TPO HAS ALSO WORKED OU T ON PAGE 71 PARA 25 OF HIS ORDER THAT THE BEEN ABLE TO RECOVER ITS DIRECT COST OF MA NUFACTURING WHICH CLEARLY INDICATES THAT SOMETHING IS WRONG WITH SALE PRICE. IT IS ALSO TO BE NOTED THAT ABOUT 89% OF SALES OF THE ASSESSEE IS TO THE FOREIGN AE AND THERE IS A LMOST FULL CAPACITY UTILIZATION. WHY THE FOREIGN AE IS SELLING THE PRODUCT AT SUCH COST WHICH DOES NOT COVER EVEN THE COST OF PRODUCTION OF THE ASSESSEE. TPO IS NOT REQUIRED TO EXAMINE THE DEAL BETWEEN ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 11 FOREIGN AE AND FOREIGN CUSTOMERS. THE MANDATE OF PO IS EXAMINE INTERNATIONAL TRANSACTION WHICH IS BETWEEN THE ASSESSEE AND ITS F OREIGN AE. HERE IN THIS CASE, IT IS ADMITTED FACT THAT INTERNATIONAL TRANSACTION IS SAL E BY THE ASSESSEE TO ITS FOREIGN AE. DRP HAS ALSO GONE THROUGH VARIOUS SUBMISSIONS MADE AGAINST COMPARABLES TAKEN BY TPO. THE ASSESSEE HAS NOT CHALLENGED THE COMPARABIL ITY OF COMPARABLES BEFORE TPO DURING TP AUDIT. THE ASSESSEE HAS SUBMITTED THAT AK ASAKA ELECTRONICS LTD., BLG ELECTRONICS LTD., CALCOM ELECTRONICS LTD., CIRCUIT SYSTEM LTD., DEKI ELECTRONICS LTD., NAINA SEMICONDUCTORS LTD., RURTONSA INTERNATIONAL R ECTIFIER LTD. AND TIBERWAL ELECTRONICS LTD. OPERATE MAINLY IN DOMESTIC MARKET WHICH IS NOT COMPARABLE TO EUROPEAN MARKET WHERE THE ASSESSEE OPERATES. THE PA NEL IS OF THE VIEW THAT TPO SHOULD HAVE APPLIED EXPORT INCOME FILTER SO AS TO E NHANCE COMPARABILITY ANALYSIS. THE PANEL CONSIDERS 50% EXPORT INCOME FILTER TO BE APPR OPRIATE AND THEREFORE THESE COMPANIES SHALL NOT BE GOOD COMPARABLES. REGARDING CENTRUM ELECTRONICS LTD., THE ASSESSEE SU BMITTED THAT IT HAS TWO SEGMENTS, PRODUCT AND SERVICE. FURTHER, A SCHEME OF AMALGAMAT ION HAS BEEN APPROVED BY HON'BLE HC WHICH INDICATES EXCEPTIONAL ECONOMIC EVE NT. DRP IS OF THE VIEW THAT SINCE TPO HAS USED ONLY PRODUCT SEGMENT FOR COMPARA BILITY ANALYSIS AND THE ASSESSEE COULD NOT ESTABLISH WHETHER AMALGAMATION HAS IMPACT ED THE PROFITABILITY OF THE COMPANY, IT IS A GOOD COMPARABLE. REGARDING ESSAE ELECTRONICS PVT. LTD., THE ASSESSEE SUBMITTED THAT ITS FINANCIALS ARE NOT AVAILABLE ON PUBLIC DOMAIN. DRP IS OF THE VIEW THAT SUFFICIENT GUIDANCE IS AVAILABLE FROM VARIOUS JUDICIAL DECISIONS THAT INFO RMATION COLLECTED BY TPO CANNOT BE USED AT BACK OF THE ASSESSEE. THEREFORE, THIS COMPA RABLE IS TO BE DROPPED. REGARDING FINELINE CIRCUIT (L) LTD., THE ASSESSEE S UBMITTED THAT IT OPERATES IN A BIGGER MARKET. THIS OBJECTION OF THE ASSESSEE DOES NOT SOUND GOOD AS THE ASSESSEE IS ALSO NOT A SMALL PLAYER. HENCE, THIS COMPARABLE IS TO BE RETAINED. REGARDING HIND RECTIFIER LTD., THE ASSESSEE SUBMITT ED THAT IT DEALS IN DIVERSE PRODUCTS AND HENCE FUNCTIONALLY DIFFERENT. THE PANEL IS OF T HE VIEW THAT DUE TO PRODUCT DIVERSITY, IT IS NOT A GOOD COMPARABLE. REGARDING SPEL SEMICONDUCTOR LTD, THE ASSESSEE SUBM ITTED THAT THIS COMPANY IS OPERATING IN USA WHICH IS DIFFERENT MARKET FROM EUR OPE. THE PANEL IS OF THE VIEW THAT THE ASSESSEE COULD NOT ESTABLISH HOW ECONOMICALLY T HESE ARE TWO DIFFERENT MARKETS, HENCE, IT IS TO BE RETAINED AS COMPARABLE. 8. AGGRIEVED BY THE ORDER OF DRP, THE ASSESSEE IS IN A PPEAL BEFORE US : THE LD. AR FILED PAPER BOOKS WHICH ARE RUNNING FROM PAGES 1 TO 982. THE LD. AR BEFORE US SUBMITTED THAT THE ASSESSEE FUNCTIONED AS MANUFACTURER AND SUPPLIER OF PRINTED CIRCUIT BOARDS (HEREINAFTER REFERRED TO AS 'PCBS) DURING THE YEAR ENDED 31ST MARCH, 2011. THIS FACT IS RECORDED IN FORM NO. 3CEB (PAGE NO. 778 OF THE PAPER BOOK) FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSM ENT YEAR 2011-12. THE ASSESSEE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 12 EXPORTED FINISHED GOODS VALUED INR 197,55,19,000/- TO AT&S AG (AUSTRIA, EUROPE) DURING THE FINANCIAL YEAR ENDED 31 ST MARCH, 2011 FOR FURTHER SALE IN EUROPE AS A DISTRIBUTOR. THE DRP INTER ALIA HELD IN PARAGRAPH N O. 6.2 OF THE ORDER THAT THE AFORESAID INTERNATIONAL TRANSACTION CONSTITUTED SALE BY THE A PPELLANT TO AT&S AG. IT IS AN UNDISPUTED FACT THAT AT&S AG SOLD THE PCBS IMPORTED FROM THE ASSESSEE TO INDEPENDENT CUSTOMERS WITHIN EUROPE AT THE SAME PRI CES AT WHICH THE PCBS WERE EXPORTED BY THE APPELLANT TO AT&S AG. IT IS ALSO AN UNDISPUTED FACT THAT AT&S AG REMITTED TO THE APPELLANT THE SALES PRICES CHARGED BY THE ASSESSEE TO AT&S AG FOR EXPORT OF PCBS AFTER DEDUCTION THERE FROM DISTRIBUT ION COMMISSION AND PRELIMINARY WARRANTY GUARANTEE PAYABLE BY THE ASSESSEE TO AT&S AG AT AGREED RATES UNDER THE DISTRIBUTION AGREEMENT (AGREEMENT BEING ENCLOSED IN PAGE NO. 728 OF THE PAPER BOOK). AS PER THE DISTRIBUTION AGREEMENT ENTERED INTO BY T HE APPELLANT WITH AT&S AG, DISTRIBUTION COMMISSION @ 6% OF GROSS DISTRIBUTOR'S PRICE WAS PAYABLE BY THE APPELLANT TO AT&S AG FOR RECEIVING DISTRIBUTION SER VICES IN DIFFERENT EUROPEAN COUNTRIES. FOR ADMINISTRATIVE CONVENIENCE, AT&S AG DEDUCTED THE AFORESAID DISTRIBUTION COMMISSION OUT OF THE SALE PROCEEDS PA YABLE BY AT&S AG TO THE APPELLANT IN RESPECT OF EXPORT OF PCBS BY THE APPEL LANT TO AT&S AG. IT IS ALSO IMPORTANT TO NOTE THAT AT&S AG FURTHER DEDUCTED PRE LIMINARY WARRANTY GUARANTEE @ 2% OF GROSS DISTRIBUTOR'S PRICE OUT OF THE AFORESAI D SALE PROCEEDS FOR THE PURPOSE OF INCURRING WARRANTY EXPENSES ARISING FROM FURTHER SA LE OF PCBS OF THE APPELLANT BY AT&S AG TO INDEPENDENT CUSTOMERS. IT WAS ALSO SUBMI TTED THAT THE TOTAL AMOUNT OF DEDUCTION MADE BY AT&S AG FOR PRELIMINARY WARRANTY GUARANTEE EXCEEDED THE ACTUAL WARRANTY EXPENSES INCURRED BY AT&S AG DURING THE RE LEVANT FINANCIAL YEAR AND THE EXCESS DEDUCTION WAS RETURNED BY AT&S AG TO THE APP ELLANT AS RECORDED IN FORM NO. 3CEB. THE DISTRIBUTION COMMISSION AND PRELIMINARY W ARRANTY GUARANTEE WERE THUS NETTED OFF AGAINST SALES IN THE BOOKS OF THE APPELL ANT AND DULY DEMONSTRATED BEFORE THE DRP/AO. IN ORDER TO SUBSTANTIATE THE ABOVE FACTS, THE ASSES SEE SUBMITTED COPIES OF BACK-TO-BACK INVOICES (I.E. INVOICES ISSUED BY THE APPELLANT TO AT&S AG FOR SALE OF PCBS AND THE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 13 CORRESPONDING INVOICES ISSUED BY AT &S AG TO INDEPE NDENT CUSTOMERS IN EUROPE FOR FURTHER SALE OF THE PCBS IMPORTED FROM THE APPELLAN T) ON SAMPLE BASIS TO THE TPO [ENCLOSED IN PAGE NO. 347, 349 AND 348 (COMPUTATION ) AND 527 TO 553 ( COPIES OF BACK- TO-BACK INVOICES ON SAMPLE BASIS ) OF THE PAPER BOOK] AND SUBSEQUENTLY TO THE DRP [ENCLOSED IN PAGE NO. 243 TO 246 (COMPUTATION) AND 201 TO 231 ( COPIES OF BACK-TO- BACK INVOICES ON SAMPLE BASIS ) OF THE PAPER BOOK] DURING THE COURSE OF RESPECTIV E PROCEEDINGS. YOUR HONORS MAY PLEASE NOTE THAT NEITH ER THE DRP NOR THE TPO DISPUTED THE AFORESAID FACTS IN THEIR RESPECTIVE ORDERS. 9. THE LD. AR HAS FURNISHED HERE IN BELOW SOME IMPO RTANT CLAUSES OF THE 'DISTRIBUTION AGREEMENT' IN ORDER TO SUBSTANTIATE T HAT THE APPELLANT FUNCTIONED AS A FULL RISK- BEARING ENTREPRENEUR COMPANY WHICH WAS ENGAGE D IN FULL-FLEDGED MANUFACTURE AND SUPPLY OF PCBS : TRANSFER OF TITLE : AS DISCLOSED IN PARAGRAPH NO. 4.4 OF THE DISTRIBUTI ON AGREEMENT (PLEASE REFER TO PAGE NO. 730 OF THE PAPER BOOK), THE TITLE OF THE PCBS W AS PASSED ON TO AT&S AG FROM THE APPELLANT WHEN THE PCBS WERE DELIVERED BY THE APPEL LANT TO THE WAREHOUSES OF AT&S AG. EXPOSURE TO INVENTORY RISK : AS DISCLOSED IN PARAGRAPH NO. 4.3 OF THE DISTRIBUTI ON AGREEMENT (PLEASE REFER TO PAGE NO. 730 OF THE PAPER BOOK), THE APPELLANT WAS RESPO NSIBLE FOR THE MANAGEMENT AND INSURANCE OF ALL SHIPMENTS, INCLUDING, WITHOUT LIMI TATION, SHIPPING COSTS, MARINE INSURANCE AND CUSTOMS DUTIES UNTIL SUCH TIME AS SHI PMENTS WERE DELIVERED TO THE WAREHOUSES OF AT&S AG. FROM AND AFTER THE TIME SUCH SHIPMENTS WERE DELIVERED TO THE WAREHOUSES OF AT&S AG, IT WAS THE RESPONSIBILIT Y OF AT&S AG FOR ITS MANAGEMENT AND INSURANCE OF ANY INVENTORY. THUS, TH E APPELLANT WAS EXPOSED TO INVENTORY RISK UNTIL SUCH TIME AS SHIPMENTS WERE DE LIVERED TO THE WAREHOUSES OF AT&S AG. THEREAFTER AT&S AG WAS EXPOSED TO INVENTOR Y RISK FROM AND AFTER THE TIME SUCH SHIPMENTS WERE DELIVERED TO THE WAREHOUSE S OF AT&S AG. WARRANTY RISK : ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 14 AS MENTIONED IN PARAGRAPH NO. 5.5(C) OF THE DISTRIB UTION AGREEMENT (PLEASE REFER TO PAGE NO. 730 OF THE PAPER BOOK), THE APPELLANT WAS EXPOSED TO RISK ASSOCIATED WITH PRODUCT DEFECT AND NON- CONFORMITIES THAT EXISTED A T THE TIME OF DELIVERY BY THE APPELLANT TO THE WAREHOUSES OF AT&S AG. IN VIEW OF THIS, AT&S AG RETAINED PRELIMINARY WARRANTY GUARANTEE @2% OF GROSS DISTRIB UTOR'S PRICE OUT OF THE ACN.AI WARRANTY EXPENSES AS RECORDED IN FORM NO. 3CEB. CREDIT RISK : SINCE THE INTERNATIONAL TRANSACTION INVOLVING EXPOR T OF PCBS BY THE APPELLANT TO AT&S AG CONSTITUTED 'SALES' AND TITLE OF THE PCBS WAS PA SSED ON TO AT&S AG FROM THE APPELLANT WHEN THE PCBS WERE DELIVERED BY THE APPEL LANT TO THE WAREHOUSES OF AT&S AG, AT&S AG WAS EXPOSED TO CREDIT RISK IN RELATION TO FURTHER SALE BY AT&S AG TO INDEPENDENT CUSTOMERS IN THE OPEN MARKET AS MENTION ED IN PARAGRAPH NO. S.S(A) OF THE DISTRIBUTION AGREEMENT. 9.1 IN VIEW OF THE LD. AR SUBMITTED THAT IN THE INS TANT CASE, THE PRICES AT WHICH PCBS WERE SOLD BY THE APPELLANT TO AT&S AG HAVING B EEN EQUAL TO THE PRICES AT WHICH PCBS WERE SOLD BY AT&S AG TO INDEPENDENT CUST OMERS. THEREFORE THE INTERNATIONAL TRANSACTION INVOLVING SALE OF FINISHE D GOODS BY THE APPELLANT TO AT&S AG IS AT THE ARM'S LENGTH PRINCIPLE AS PER THE INDI AN TRANSFER PRICING REGULATION UNDER THE CUP METHOD. IN THE INSTANT CASE, AT&S AG EARNED INCOME FROM THE INTERNATIONAL TRANSACTION INVOLVING PAYMENT OF DISTRIBUTION COMMI SSION BY THE APPELLANT TO AT&S AG IN RETURN FOR DISTRIBUTION SERVICES RECEIVED BY THE APPELLANT FROM AT&S AG UNDER THE ' DISTRIBUTION AGREEMENT ' DURING THE RELEVANT FINANCIAL YEAR. IN VIEW OF TH E ABOVE IT CAN BE CONCLUDED THAT THE INCOME ACTUALLY REALIZ ED BY AT&S AG IN RETURN FOR DISTRIBUTION SERVICES RENDERED TO THE APPELLANT NEE D TO BE COMPARED WITH THOSE OF THE COMPARABLES. THERE COULD BE NO QUESTION OF SUBSTITU TING THE DISTRIBUTION INCOME REALIZED BY AT&S AG FROM DISTRIBUTION OF PCBS WITH THE PROFIT REALIZED ENTITY LEVEL FROM MANUFACTURE AND SALE OF PCBS TO THE ULTIMATE C USTOMERS BECAUSE THE 'FAR' (I.E. FUNCTION-ASSET-RISK) OF THE DISTRIBUTION FUNCTION W AS ABSOLUTELY DIFFERENT FROM THE ' FAR ' OF FULL-FLEDGED MANUFACTURE AND SUPPLY OF PCBS. I T MAY PLEASE BE NOTED THAT FOR THE ASSESSMENT YEAR 2011-12, THE TPO RAISED THE ISS UES WHICH HAD ALREADY BEEN ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 15 APPROVED AND SETTLED AT REST BY THE INCOME TAX DEPA RTMENT IN RESPECT OF THE ASSESSMENT YEAR 2009-10 AND 2010-11. IN THIS CONNEC TION, ATTENTION MAY PLEASE BE INVITED TO THE DECISION GIVEN BY THE HON'BLE SUPREM E COURT OF INDIA IN THE MATTER OF RADHASOAMI SATSANG V COMMISSIONER OF INCOME TAX REPORTED IN 193 ITR 321 (SC) WHEREIN THE HON'BLE SUPREME COURT HAS INTER ALIA HE LD AS UNDER: 'WE ARE AWARE OF THE FACT THAT, STRICTLY SPEAKING, RES JUDI CATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORD ER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. ON THESE REASONINGS, IN THE ABSENCE OF ANY MATERIAL CHANGE J USTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTER - AND, IF THERE WAS NO CHANGE, IT WAS IN SUPPORT OF THE ASSESSEE - WE DO NOT THINK THE QUEST ION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECIDED BY T HE COMMISSIONER OF INCOME-TAX IN THE EARLIER PROCEEDINGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN. 'PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIO NS BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE, OR NEW VERSIO NS WHICH THEY PRESENT AS TO WHAT SHOULD BE PROPER APPREHENSION BY THE COURT OF THE LEGAL RESULT EITHER OF THE CONSTRUCTION OF THE DOCUMENTS 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 CANNO T BE PERMITTED ... IN VIEW OF ABOVE SUBMISSIONS, IT WAS PRAYED THAT TH E ADJUSTMENT OF INR 69,30,53,3971/- DIRECTED BY THE DRP AND MADE BY THE AO IN THE FINAL ASSESSMENT ORDER HAS NO VALID BASIS IN VIEW OF VARIOUS DECISIO NS RENDERED BY THE HON'BLE TRIBUNALS OF OUR COUNTRY, WHEREIN THE HON'BLE TRIBU NALS HAVE HONOURED THE ' PRINCIPLE OF CONSISTENCY ' ENUNCIATED BY THE HON'BLE SUPREME COURT OF INDIA AND DIRECTED BENCH MARKING OF AN INTERNATIONAL TRANSACTION ON 'TRANSAC TION-BY-TRANSACTION' BASIS. THE HON'BLE TRIBUNALS IN VARIOUS DECISIONS HAVE ACCEPTE D THE SELECTION OF FOREIGN TESTED PARTY IN APPROPRIATE CASES AND FURTHER ACCEPTED SEL ECTION OF FOREIGN COMPARABLE COMPANIES AVAILABLE IN FOREIGN DATABASE WHERE TESTE D PARTY IS A FOREIGN ENTITY. THOUGH THE RELEVANT DECISIONS WERE SUBMITTED BEFORE THE DR P DURING THE COURSE OF PROCEEDINGS, THE SAME WERE DISREGARDED BY THE DRP A ND THE APPELLANT DID NOT GET JUSTICE FROM THE DRP. FINALLY THE LD. AR PRAYED THA T THE AE SHOULD BE TREATED AS TESTED ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 16 PARTY AND ITS TRANSFER PRICING REPORT SHOULD BE ACC EPTED. ALTERNATIVELY THE AR ALSO SUBMITTED THAT IN CASE THE ASSESSEE IS TREATED AS T HE TESTED PARTY THEN CUP METHOD SHOULD BE APPLIED FOR THE DETERMINATION OF ALP. AS THE PRICE CHARGED BY THE ASSESSEE IS SAME AS THE PRICE CHARGED BY THE AE FROM ITS CUS TOMERS THEN THE SAME PRICE SHOULD BE TAKEN AS ALP IN THE INSTANT CASE. FINALLY IT WA S HUMBLY PRAYED TO DELETE THE AFORESAID ADJUSTMENT AND TO PROVIDE FULL RELIEF TO THE ASSESSEE. 10. ON THE OTHER HAND THE LD. DR SUBMITTED THAT THE INDIAN PARTY SHOULD BE TREATED AS THE TESTED PARTY AND RELIED ON THE FOLLOWING OEC D GUIDELINES WHICH READS AS UNDER: 3.18 WHEN APPLYING A COST PLUS, RESALE PRICE OR TR ANSACTIONAL NET MARGIN METHOD AS DESCRIBED IN CHAPTER II, IT IS NECESSARY TO CHOOSE THE PARTY TO THE TRANSACTION FOR WHICH A FINANCIAL INDICATOR (MARK-UP ON COSTS, GROS S MARGIN, OR NET PROFIT INDICATOR) IS TESTED. THE CHOICE OF THE TESTED PARTY SHOULD BE CONSISTENT WITH THE FUNCTIONAL ANALYSIS OF THE TRANSACTION. AS A GENERAL RULE, THE TESTED PARTY IS THE ONE TO WHICH A 57 TRANSFER PRICING METHOD CAN BE APPLIED IN THE MOST RELIABLE MANNER AND FOR WHICH THE MOST RELIABLE COMPARABLES CAN BE FOUND, I.E. IT WIL L MOST OFTEN BE THE ONE THAT HAS THE LESS COMPLEX FUNCTIONAL ANALYSIS. 3.19 THIS CAN BE ILLUSTRATED AS FOLLOWS. ASSUME THA T COMPANY A MANUFACTURES TWO TYPES OF PRODUCTS, P1 AND P2, THAT IT SELLS TO COMP ANY B, AN ASSOCIATED ENTERPRISE IN ANOTHER COUNTRY. ASSUME THAT A IS FOUND TO MANUFACT URE P1 PRODUCTS USING VALUABLE, UNIQUE INTANGIBLES THAT BELONG TO B AND FOLLOWING T ECHNICAL SPECIFICATIONS SET BY B. ASSUME THAT IN THIS P1 TRANSACTION, A ONLY PERFORMS SIMPLE FUNCTIONS AND DOES NOT MAKE ANY VALUABLE, UNIQUE CONTRIBUTION IN RELATION TO THE TRANSACTION. THE TESTED PARTY FOR THIS P1 TRANSACTION WOULD MOST OFTEN BE A. ASSU ME NOW THAT A IS ALSO MANUFACTURING P2 PRODUCTS FOR WHICH IT OWNS AND USE S VALUABLE UNIQUE INTANGIBLES SUCH AS VALUABLE PATENTS AND TRADEMARKS, AND FOR WH ICH B ACTS AS A DISTRIBUTOR. ASSUME THAT IN THIS P2 TRANSACTION, B ONLY PERFORMS SIMPLE FUNCTIONS AND DOES NOT MAKE ANY VALUABLE, UNIQUE CONTRIBUTION IN RELATION TO THE TRANSACTION. THE TESTED PARTY FOR THE P2 TRANSACTION WOULD MOST OFTEN BE B. 10.1 THE LD. DR ALSO RELIED IN THE ORDER OF HONBLE DELHI HIGH COURT IN THE CASE OF SONY ERICSSON & OTHERS [TS-96-HC-2015(DEL)-TP] THER EFORE, IT IS HIGHLY IMPERATIVE THAT WHILE APPLYING RELEVANT METHODOLOGIES IN SELEC TION OF MOST APPROPRIATE METHOD , UNDERTAKING AGGREGATE V. TRANSACTION-BY-TRANSACTION ANALYSIS, CLAIMING ADJUSTMENTS AND OTHER AREAS ONE NEEDS TO CLOSELY EVALUATE THE F ACTS AND CIRCUMSTANCES AS THEY EXIST IN THAT PARTICULAR CASE. FURTHER, IT IS EQUALLY IF NOT MORE IMPORTANT TO MAINTAIN AND APPROPRIATELY PRESENT EVIDENCE INCLUDING BUT NOT LI MITED TO AGREEMENTS, CORRESPONDENCE AND OTHER DOCUMENTS THAT BRING OUT T HE ACTUAL CONTRIBUTIONS, ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 17 CAPABILITIES, AND OTHER FEATURES OF THE CONCERNED P ARTIES, EX-ANTE NEGOTIATIONS / STUDIES, BUSINESS STRATEGIES ADOPTED BY THE MANAGEMENT IN TH E ATTENDANT CIRCUMSTANCES, RISK MANAGEMENT STRATEGIES, DATA ON COMPARABLES AND THE MARKET (IN TERMS OF THE GEOGRAPHIC LOCATION; THE SIZE OF THE MARKETS; THE E XTENT OF COMPETITION IN THE MARKETS AND THE RELATIVE COMPETITIVE POSITIONS OF THE BUYER S AND SELLERS, ETC.) AND OTHER ECONOMIC CONDITIONS, AT THE TIME OF AUDIT TO SUBSTA NTIATE THE VARIOUS CLAIMS / AVERMENTS AND PASS THE LITMUS TEST . SUCH AN APPROACH WOULD GO A LONG WAY TO AVERT PROTRACTED LITIGATION AND GAIN CERTAINTY IN AN EVER -EVOLVING FIELD OF TRANSFER PRICING. LD. DR FURTHER RELIED IN THE CASE LAW IN THE CASE O F SONY ERICSSON MOBILE COMMUNICATION INDIA PVT. LTD. V. CIT (ITA NO. 16/2014) TAXSUTRA.COM, WHEREIN THE HONBLE HIGH COURT HELD THAT DISTRIBUTION AND M ARKETING ARE INTERTWINED AND MAY BE EXAMINED AS BUNDLED/INTER-CONNECTED TRANSACTIONS CLUBBING OF CLOSELY LINKED TRANSACTIONS, WHICH INCLUDES CONTINUOUS TRANSACTION S IS PERMISSIBLE UNDER LAW. HOWEVER, CLOSE LINKAGE OF TRANSACTIONS IS A PRE-CON DITION FOR AGGREGATION. FOR EXAMPLE, TRANSACTION FOR IMPORT OF RAW MATERIAL FOR MANUFACTURING MAY NOT BE AGGREGATED WITH DISTRIBUTION ACTIVITY DUE TO ABSENC E OF THE CLOSE LINKAGE. THE HIGH COURT HELD THAT IT WOULD BE INAPPROPRIATE TO PROCEE D WITH ARMS LENGTH PRICE DETERMINATION WITH A PRE-CONCEIVED SUPPOSITION THAT EACH TRANSACTION MUST BE ANALYSED SEPARATELY. THE HIGH COURT ALSO OBSERVED THAT IN CA SE THE TESTED PARTY IS ENGAGED IN SINGLE LINE OF BUSINESS, THERE IS NO PROHIBITION IN APPLYING TRANSACTIONAL NET MARGIN METHOD (TNMM) ON AN ENTITY WIDE BASIS. THE LD. DR H AS MADE THE FOLLOWING SUBMISSION AGAINST THE SUBMISSION OF THE ASSESSEE W HICH READS AS UNDER : 1. APPLICATION OF CUP METHOD FOR THE PURPOSE OF DETERM INING ARM'S LENGTH PRICES OF INTERNATIONAL TRANSACTIONS INVOLVING EXPORT OF P CBS BY THE APPELLANT TO AT&S AG. 2. ADOPTION OF TRANSACTION BY TRANSACTION APPROACHED I NVOLVING PAYMENT OF COMMISSION AND WARRANTY BY THE APPELLANT TO AT&AG. 3. SELECTION OF FOREIGN A.E AS TESTED PARTY. 4. RULE OF CONSISTENCY. 5. SELECTION OF INDEPENDENT COMPANIES UNDER THE TNMM A T THE ENTITY LEVEL. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 18 IN THIS REGARD, COUNTER ARGUMENTS AGAINST THE ABOVE SUBMISSIONS OF THE APPELLANT ARE GIVEN AS UNDER :- 1. APPLICATION OF CUP METHOD: AT THE OUTSET, IT IS BROUGHT TO THE NOTICE OF THE H ON'BLE BENCH THAT THE APPELLANT ITSELF HAS ADOPTED TNNM METHOD IN ITS TRANSFER PRIC ING STUDY. THE APPELLANT HAS COME UP FOR THE FIRST TIME BEFORE THE HON'BLE ITAT TO AP PLY CUP METHOD FOR DETERMINING THE ARM'S LENGTH PRICE FOR DISTRIBUTION OF COMMISS ION THAT CONSTITUTED INCOME IN THE HANDS OF AT&S AG. THE APPELLANT HAS ADOPTED TNMM ME THOD IN ITS TRANSFER PRICING STUDY REPORT BECAUSE IT HAS CHOSEN AT&S AG HAS TEST ED PARTY. WHEN TPO HAS REJECTED THE SELECTION OF AT&S AG (FOREIGN AE) AS T ESTED PARTY, THE APPELLANT NOW PREFERS CUP METHOD TO TNMM METHOD, FOR DETERMINING ALP OF ITS INTERNATIONAL TRANSACTION WITH AE. IN VIEW OF THE IDENTIFICATION OF THE EXPORT OF PCBS TO AT &S AG BY THE APPELLANT AS A SEPARATE TRANSACTION (SALE) B Y THE TPO AS WELL AS DRP, THE APPELLANT NOW, BEFORE THE HON'BLE TRIBUNAL PLEADED TO BENCH MARK THE EXPORT TRANSACTION SEPARATELY UNDER THE CUP METHOD. 1.1 IN THIS REGARD THE APPELLANT HAS RELIED ON THE DECISION OF THE HON'BLE MUMBAI TRIBUNAL IN THE MATTER OF MATTEL TOYS (I) (P ) LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(3) REPORTED IN [20131 34 TAXMANN.COM 203 (MUMBAI TRIB.) .FURTHER, THE APPELLANT HAS RELI ED ON VARIOUS JUDICIAL DECISIONS IN ITS WRITTEN SUBMISSION WHICH ARE REPRO DUCED AS UNDER: 2.7.75 ATTENTION IS FURTHER INVITED TO THE DECISION OF THE HON 'BLE DELHI TRIBUNAL IN THE MATTER OF HUGHES SYSTIQUE INDIA (P) LTD. VS. ACIT REPORTED IN [2073] 36 TAXMANN.COM 47 (DELHI-TRIB), WHEREIN THE HON'BLE TR IBUNAL INTER ALIA HELD THAT: ' 6.5 THE CUP METHOD PROVIDES THE MOST DIRECT COMP ARISON FOR THE PURPOSE OF DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS AND IS TO BE PREFERRED OVER THE OTHER PROFIT BASED METHODS. RELI ANCE IS PLACED IN THIS REGARD ON THE FOLLOWING DECISIONS: - AZTEC SOFTWARE & TECHNOLOGIES SERVICES LTD. VS. A SSTT. CIT [2009] 107 ITO 141/162 TAXMAN 179 (BANG.)(SB) - UCB INDIA (P) LTD. V. ASSTT CIT [2009130 SOT 95 ( MUM.) - GHARDA CHEMICALS LTD. V. DY. CIT [2070135 SOT 406 (MUM.) - INTERVET INDIA (P) LTD. V. ASSTT CIT [2070139 SOT 93 (MUM.) - ASSTT. CIT V. DUFON LABORATORIES [2070139 SOT 59 (MUM.) ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 19 2.7.76. RELIANCE IN THIS REGARD IS ALSO PLACED ON T HE DECISION OF HON 'BLE MUMBAI TRIBUNAL IN THE CASE OF SERDIA PHARMACEUTICA LS (INDIA) (P) LTD V. ASSTT. CIT REPORTED IN [2011] 44SOT 391/9 TAXMANN.C OM 13, WHEREIN THE HON'BLE TRIBUNAL WHILE DEALING WITH THE PRIORITY OF APPLICATION OF METHODS, HAS HELD AS UNDER: '64 ... AS LONG AS CUP METHOD CAN BE REASONABLY APP LIED IN DETERMINING THE ARM'S LENGTH PRICE OF AN INTERNATIONAL TRANSACTION IN A PARTICULAR FACT SITUATION, AND UNLESS ANOTHER METHOD IS PROVEN TO BE MORE RELI ABLE A METHOD VIS-A-VIS THE FACT SITUATION OF THAT PARTICULAR CASE, THE CUP MET HOD IS TO BE PREFERRED. THE REASON IS SIMPLE. WHEN ASSOCIATED ENTERPRISES ENTER INTO A TRANSACTION AT SUCH CONDITIONS IN COMMERCIAL AND FINANCIAL TERMS, WHICH ARE DIFFERENT FROM COMMERCIAL AND FINANCIAL TERMS IMPOSED IN COMPARABL E TRANSACTION BETWEEN INDEPENDENT ENTERPRISES, THE DIFFERENCES IN THESE T WO SETS OF CONDITIONS IN FINANCIAL AND COMMERCIAL TERMS ARE ATTRIBUTED TO I NTER RELATIONSHIP BETWEEN THE ASSOCIATED ENTERPRISES, AND IT IS THIS IMPACT O F INTERRELATIONSHIP BETWEEN THE ASSOCIATED ENTERPRISES THAT IS SOUGHT TO BE NEUTRAL IZED BY THE TRANSFER PRICING REGULATIONS. AS LONG AS CUP METHOD CAN BE RELIABLY APPLIED ON THE FACTS OF A CASE, IT DOES OFFER MOST DIRECT METHOD OF NEUTRALIZ ING THE IMPACT OF INTER RELATIONSHIP BETWEEN AES ON THE PRICE AT WHICH THE TRANSACTIONS HAVE BEEN ENTERED INTO BY SUCH AES. ' 2.1.17. RELYING ON THE DECISION OF SERDIA PNORNVACE UTLCOTS INDIA (P) LTD. (SUPRA). THE HON'BLE DELHI TRIBUNAL IN THE CASE OF CLEAR PLUS INDIA (P) LTD. V. DY. CIT REPORTED IN [20 ILJ 10 TAXMANN.COM 249, INT ER ALIA HELD THAT: '7. IN THE CASE OF SERDIA PHARMACEUTICALS INDIA (P) LIMITED, IT HAS BEEN HELD THAT CUP METHOD IS A PREFERRED METHOD AND IT LEADS TO MORE RELIABLE RESULTS VIS-A-VIS THE RESULTS OBTAINED BY APPLYING TRANSACT ION PROFIT METHOD. IN THE CASE OF SNF (AUSTRALIA) PTY. LIMITED, IT HAS BEEN HELD T HAT THE ' FOCUS IS ON THE MARKET IN WHICH PRODUCTS ARE ACQUIRED .' THE RATIO OF THIS CASE IS APPLICABLE MUTATIS-MUTANDIS TO THE FACTS OF THE CASE AS THE FO CUS IS 'ON THE MARKET IN WHICH PRODUCTS ARE SOLD'. 2.1.18. IN THE CASE OF GHARDA CHEMICALS LTD. (SUPRA ), THE HON'BLE INCOME TAX APPELLATE TRIBUNAL HELD THAT INTERNAL COMPARABLE SH OULD BE PREFERRED OVER EXTERNAL COMPARABLES. THE RELEVANT EXTRACT OF THE J UDGMENT IS FURNISHED HEREIN BELOW: 'INTERNAL CUP METHOD ENVISAGES COMPARING THE UNCONT ROLLED TRANSACTIONS OF THE APPELLANT ITSELF WITH OTHER UNRELATED PARTIES S O AS TO DETERMINE THE ALP WITH THE AE. HOWEVER, THE EXTERNAL CUP METHOD DISREGARDS THE PRICE CHARGED OR PAID BY THE APPELLANT TO OR FROM ITS UNRELATED PART IES AND CONTEMPLATES THE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 20 COMPARISON OF THE PRICE SO CHARGED FROM OR PAID TO ITS AE WITH SOME EXTERNAL DEPENDENT RELIABLE PRICE DATA UNDER SIMILAR CIRCUMS TANCES OF TRANSACTIONS WITH AE. ORDINARILY THE INTERNAL CUP METHOD SHOULD BE PR EFERRED OVER EXTERNAL CUP METHOD AS IT NEUTRALIZES SEVERAL DISTINGUISHING FACTORS, SUCH AS THE LOCAL FACTORS AND THE ECONOMIES AVAILABLE OR UNAVAILABLE TO THE APPELLANT IN PARTICULAR, HAVING BEARING OVER THE COMPARISON OF P RICE CHARGED FROM UNRELATED PARTIES AND AE'. 1.2. THE CUP METHOD IS FOLLOWED TO DETERMINE THE P RICE OF THE GOODS OR SERVICES TRANSACTED WHEREAS PROFIT OF INTERNATIONAL TRANSACTION BETWEEN RELATED PARTIES IS DETERMINED UNDER TNMM METHOD. IN DETERMI NING ARM'S LENGTH PRICE, THERE ARE, TWO ASPECTS VIZ. FAR AN ANALYSIS AND ECO NOMIC ANALYSIS. IN THE FAR ANALYSIS, AFTER SELECTION OF MOST APPROPRIATE METHO D, THE COMPARISON HAS TO BE MADE WITH RESPECT TO PRODUCT, FUNCTION, RISKS AND I DENTICAL CIRCUMSTANCES, MARKET CONDITIONS AND CONTRACTUAL TERMS. THE FOREMO ST REQUIREMENT UNDER CUP METHOD IS HIGH DEGREE OF COMPARABILITY BETWEEN PROD UCTS. 1.3 IT IS IMPORTANT TO CONSIDER THE RELEVANT PORTI ON OF RULE 10B(1), 10B(2) AND RULE 10B(3) OF THE RULES IN HARMONIOUS MANNER W HICH STATES THAT FOR APPLICATION OF THE CUP METHOD IT IS ESSENTIAL TO FO LLOW THE FOLLOWING STEPS: - I. IDENTIFY PRICE CHARGED UNDER UNCONTROLLED TRAN SACTIONS II. EVALUATE THE COMPARABILITY ON THE BASIS OF CH ARACTERISTICS OF THE PRODUCT SOLD / PURCHASED, THE FUNCTIONS PERFORMED, THE CONT RACTUAL TERMS, CONDITIONS PREVAILING IN THE MARKETS IN WHICH THE R ESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INCLUDING THE GEOGRAPHICA L LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORC E, COSTS OF LABOUR AND CAPITAL IN THE MARKETS, OVERALL ECONOMIC DEVELO PMENT AND LEVEL OF COMPETITION AND WHETHER THE MARKETS ARE WHOLESALE O R RETAIL. III. ADJUST THE PRICE CHARGED UNDER UNCONTROLLED T RANSACTIONS FOR DIFFERENCE ON ACCOUNT OF ABOVE REFERRED COMPARABILITY PARAMETE RS. THE ABOVE WOULD BE ESSENTIAL AS THE UNCONTROLLED TRANSACTION WILL BE AKIN TO INTERNATIONAL TRANSACTION ONLY IF REASONABLY ACCURA TE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFF ERENCES. IV. FINALLY, IF IT IS NOT POSSIBLE TO MAKE REASONA BLY ACCURATE ADJUSTMENTS TO ELIMINATE THE MATERIAL EFFECTS OF SUCH DIFFERENCES OR THERE EXIST DIFFERENCES, WHICH ARE LIKELY TO MATERIALLY AFFECT THE PRICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM, SUC H TRANSACTIONS IN THE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 21 OPEN MARKET, THEN THE UNCONTROLLED TRANSACTIONS COU LD NOT BE CONSIDERED AS COMPARABLE TO INTERNATIONAL TRANSACTIONS RESULTI NG INTO FAILURE IN APPLICATION OF CUP METHOD 1.4 BASED ON ABOVE, IF CUP IS TO BE CONSIDERED AS THE MOST APPROPRIATE METHOD, THE FOLLOWING FACTORS SHOULD BE CONSIDERED: I. GEOGRAPHICAL DIFFERENCE THE PRICE AT WHICH A PRODUCT IS SOLD IN ONE COUNTRY CANNOT BE COMPARED WITH THE PRICE AT WHICH THE SAME PRODUCT IS SOLD IN ANOT HER COUNTRY BECAUSE OF THE IMPACT ON ACCOUNT OF GEOGRAPHICAL DIFFERENCES I.E. COUNTRY SPECIFIC DEMAND/ SUPPLY FACTORS, MARKET CONDITIONS, REGULATIONS AND GOVERNMENT ORDERS IN FORCE, LEVEL OF COMPETITION, AVAILABILITY OF SUBSTITUTE PR ODUCTS, CONSUMER PURCHASING POWER, ETC. WHICH HAVE A BEARING ON THE PRICE. II. DIFFERENCE IN CREDIT RISK THE APPELLANT FACES MINIMAL CREDIT RISK ON SALE OF FINISHED PRODUCTS TO ITS AES, BECAUSE THE RISK OF DEFAULT ON ACCOUNT OF NON-REALI ZATION OF SALES PROCEEDS IS VERY NEGLIGIBLE. WHEREAS, THE APPELLANT BEARS THE C REDIT RISK WHEN IT SELLS THE FINISHED GOODS TO THIRD PARTIES, AND WOULD HAVE TO BEAR THE LOSS ON ACCOUNT OF BAD DEBTS IF IT FAILS TO REALIZE THE SALES PROCEEDS . III. DIFFERENCE IN CREDIT PERIOD THE CREDIT PERIOD OFFERED BY THE APPELLANT TO ITS A ES DIFFERS FROM THE CREDIT PERIOD OFFERED BY THE APPELLANT TO THIRD PARTIES. T HE APPELLANT HAS A POLICY OF OFFERING 30 DAYS CREDIT ON SALES MADE TO ITS AES, F ROM THE DATE OF THE AIRWAY BILL. WHEREAS, THE CREDIT PERIOD OFFERED TO THIRD P ARTIES IS 45 DAYS FROM THE DATE OF AIRWAY BILL INVOICE. THE AFORESAID DIFFERENCES A LSO HAVE AN IMPACT ON THE PRICING AT WHICH THE PRODUCTS ARE SOLD BY THE APPEL LANT TO ITS AES/ THIRD PARTIES. IV. DIFFERENCE IN SALES VOLUME QUANTITY SOLD TO THE AE IS ALMOST 88 PERCENT OF TOT AL SALES AND THE QUANTITY SOLD TO THE THIRD PARTY CONSTITUTE MINIMAL. V. MARKETING FUNCTION IT IS IMPORTANT TO NOTE THAT WITH RESPECT TO SALE O F FINISHED PRODUCTS TO AES, THE APPELLANT IS NOT REQUIRED TO UNDERTAKE ANY SIGNIFIC ANT SALES AND MARKETING EFFORTS, WHEREAS, THE APPELLANT IS NECESSITATED TO UNDERTAKE SALES AND MARKETING EFFORTS WITH RESPECT TO ITS THIRD PARTY BUSINESS. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 22 THE FACT THAT SIMILAR PRODUCTS WERE SOLD BY THE APP ELLANT TO ITS AES AS WELL AS THIRD PARTIES WAS ALSO EVALUATED AT THE TIME OF DOI NG THE TP ANALYSIS. HOWEVER, IT WAS DETERMINED THAT IT IS NOT POSSIBLE TO MAKE R ELIABLE AND ACCURATE ADJUSTMENTS TO IRON OUT THE DIFFERENCES BETWEEN THE TWO TRANSACTIONS (I.E. SALES TO AES AND SALES TO THIRD PARTIES), AND HENCE THE C UP METHOD WAS NOT CONSIDERED AS THE MOST APPROPRIATE METHOD BY THE AP PELLANT. 1.5 FURTHER, THE HON'BLE PUNE BENCH OF ITAT IN THE CASE OF AMPHENOL INTERCONNECT INDIA PRIVATE LIMITED V. DCIT (ITA NO. 1548/PN/2011) HAS UPHELD THAT- CUP CANNOT BE CONSIDERED AS THE MOST A PPROPRIATE METHOD WHERE THERE ARE DIFFERENCES, AND RELIABLE AND ACCURATE AD JUSTMENTS CANNOT BE MADE TO IRON OUT SUCH DIFFERENCES AND MAKE THE TRANSACTIONS COMPARABLE. WHEN 95% OF THE EXPORTS TO THE AES ARE CONSIDERED TO BE AT ALP BY APPLYING TNMM AS THE MOST APPROPRIATE METHOD, THERE IS NO REASON TO APPL Y CUP METHOD FOR BENCH MARKING PART OF THE EXPORT TRANSACTION. 1.6 IN THE APPELLANT'S CASE ALSO SINCE RELIABLE AN D ACCURATE ADJUSTMENTS CANNOT BE MADE TO MAKE THE TRANSACTIONS OF EXPORT O F FINISHED GOODS TO THIRD PARTIES COMPARABLE TO THE TRANSACTION OF EXPORT OF FINISHED GOODS TO AES, SUCH A COMPARISON CANNOT BE MADE AT ALL. FURTHER, IN APPEL LANT'S CASE ALSO, 88% OF THE TRANSACTION HAS BEEN ACCEPTED AT ALP BY CHOOSING TN MM AS THE MOST APPROPRIATE METHOD AND HENCE, THERE IS NO REASON TO APPLY CUP METHOD FOR BENCH MARKING PART OF THE EXPORT TRANSACTION. 1.7 THE DECISIVE FACTOR, ON THE BASIS OF WHICH COM PARABILITY IS TO BE JUDGED, IS THE STATE OF 'CONDITIONS PREVAILING IN THE MARKE TS IN WHICH THE RESPECTIVE TRANSACTIONS TO THE PARTIES OPERATE I. UNLESS MARKE T CONDITIONS, IN WHICH UNCONTROLLED TRANSACTIONS HAVE TAKEN PLACE, ARE MAT ERIALLY DIFFERENT VIS-A-VIS CONDITIONS IN WHICH INTERNATIONAL TRANSACTION HAS T AKEN PLACE, AND SUCH A DIFFERENCE IS ON ACCOUNT OF GEOGRAPHICAL LOCATION O F THE MARKET, GEOGRAPHICAL LOCATION OF THE MARKET IS OF NO CONSEQUENCE IN JUDG ING COMPARABILITY OF AN UNCONTROLLED TRANSACTION FOR THE PURPOSE OF APPLYIN G CUP METHOD. THESE MARKET CONDITIONS COULD BE AFFECTED BY A NUMBER OF FACTORS, AS TRUE SUB-RULE ITSELF SUGGESTS, INCLUDING (A) GEOGRAPHICAL LOCATI ON AND SIZE OF MARKET (B) OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPETITI ON IN THE MARKET; AND (C) WHETHER THE MARKET ARE WHOLESALE OR RETAIL. THE TRU E TEST, THEREFORE, IS WHETHER THE MARKET IN WHICH UNCONTROLLED TRANSACTIONS HAVE TAKEN PLACE ARE MATERIALLY DIFFERENT THAN THE MARKET IN WHICH CONTROLLED TRANS ACTIONS HAVE TAKEN PLACE. IN A SITUATION IN WHICH THERE ARE INDEED MATERIAL DIFFER ENCES, INCLUDING, OF COURSE, FOR THE REASON OF GEOGRAPHICAL LOCATION AND SIZE OF MARKETS, THOSE UNCONTROLLED TRANSACTIONS CANNOT CONSTITUTE VALID COMPARABLES FO R BENCHMARKING SIMILAR TRANSACTIONS BETWEEN THE AES'. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 23 GIVEN THE ABOVE, IT IS SUBMITTED THAT THE CUP METHO D CANNOT BE CONSIDERED AS THE MOST APPROPRIATE METHOD TO DEMONSTRATE THE ARM' S LENGTH NATURE OF INTERNATIONAL TRANSACTION PERTAINING TO EXPORT OF F INISHED GOODS. 1.8 NOW, IT IS BETTER TO APPRECIATE THE RELEVANCE T NMM METHOD OVER THE CUP METHOD. 1.8.1 MEANING EXAMINES THE NET PROFIT MARGIN RELATIVE TO AN APP ROPRIATE BASE THAT A TAXPAYER REALIZES FROM A CONTROLLED TRANSACTION - COSTS - SALES - ASSETS - OTHER RELEVANT BASE MOST FREQUENTLY USED METHOD - IN INDIA, DUE TO LA CK OF AVAILABILITY OF COMPARABLE UNCONTROLLED PRICES AND GROSS MARGIN DAT A REQUIRED FOR APPLICATION OF THE COMPARABLE UNCONTROLLED PRICE METHOD / COST PLUS METHOD / RESALE PRICE METHOD LEVEL OF COMPARABILITY - BROAD LEVEL OF PRODUCT C OMPARABILITY - HIGH LEVEL OF FUNCTIONAL COMPARABILITY 1.8.2 THE UN TP MANUAL OFFERS THE FOLLOWING GUIDANC E ON THE USE OF TNMM: TNMM IS USUALLY APPLIED WITH RESPECT TO BOARD COM PARABLE FUNCTIONS RATHER THAN CONTROLLED TRANSACTIONS. TNMM IS MOSTLY APPLIED TO THE PARTY PERFORMING RO UTE MANUFACTURING, DISTRIBUTION OR OTHER FUNCTIONS THAT DO NOT INVOLVE CONTROL OVER INTANGIBLES. TNM MAY BE MORE ATTRACTIVE IF THE DATA ON GROSS M ARGINS ARE LESS RELIABLE DUE TO ACCORDING DIFFERENCES BETWEEN THE TESTED PARTY A ND THE COMPARABLE COMPANIES. 1.8.3 CERTAIN FEATURES OF TNMM: TNMM COMPARES NET MARGINS BY USING CERTAIN RATIOS ( PIS) TO EXPRESS, NEW PROFIT AS A % OF A GIVEN BASE WHICH COMMONLY INCLUD ES OPERATING COST, OPERATING INCOME, TOTAL ASSETS, OPERATING INCOME, TOTAL ASSETS, OPERATING EXPENSES, ETC. TNMM IS SIMILAR TO RPM AND CPM TO THE EXTENT THAT I T INVOLVES A COMPARISON OF MARGINS EARNED IN A CONTROLLED SITUATION WITH MA RGINS EARNED FROM COMPARABLE UNCONTROLLED SITUATIONS. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 24 HOWEVER, TNMM DIFFERS FROM RPM AND CPM TO THE EXTEN T THAT IT INVOLVES COMPARISON OF MARGINS AT NET PROFIT LEVEL AS AGAINS T AT GROSS PROFIT LEVEL. 1.8.4 STRENGTHS OF TNMM : TNMM HAS CERTAIN STRENGTHS WHICH ARE AS FOLLOWS: A. TNMM REQUIRES COMPARABILITY AT A BROAD FUNCTIONA L LEVEL AND PRODUCT DIFFERENCES ARE ACCEPTABLE PROVIDED IT DOES NOT MAT ERIALLY AFFECT THE NET PROFIT MARGIN. B. OPERATING PROFIT MARGINS ARE LESS AFFECTED BY TR ANSACTIONAL DIFFERENCES AS IS THE CASE WITH PRICE WHILE APPLYING CUP METHOD. C. IT IS NECESSARY TO EXAMINE THE FINANCIAL INDICAT OR OF ONLY ONE OF THE AES (I.E. THE TESTED PARTY.) D. IT IS NOT NECESSARY TO RESTATE THE BOOKS AND REC ORDS FOR ALL PARTICIPANTS ON A COMMON BASIS OR TO ALLOCATE COSTS AS IS THE CASE WI TH PSM. E. THE DIFFERENCES IN FUNCTIONS PERFORMED BETWEEN E NTERPRISES ARE OFTEN REFLECTED IN VARIATION IN OPERATING EXPENSES. CONSE QUENTLY, ENTERPRISES MAY HAVE WIDE RANGE OF GROSS PROFIT MARGINS BUT IT MAY STILL EARN BROADLY SIMILAR LEVEL OF NET PRO-ITS, F. BECAUSE TNMM IS APPLIED TO THE LESS COMPLEX PART Y, IT CAN BE USED EVEN THOUGH ONE OF THE RELATED PARTIES HOLD INTANGIBLE A SSETS FOR WHICH COMPARABLE RETURN CANNOT BE DETERMINED. G. TNMM IS APPLICABLE TO EITHER SIDE OF THE CONTROL LED TRANSACTION (I.E. RELATED PARTY MANUFACTURER OR THE DISTRIBUTOR). 1.8.5 IN VIEW OF ABOVE, THE APPLICATION OF TNNM MET HOD IS MOST IDEAL WHEN COMPARED TO CUP METHOD. THE ASSESSEE ITSELF HAS APP LIED TNMM IN ITS TRANSFER PRICING STUDY REPORT. JUST BECAUSE THE TPO REJECTED FOREIGN AES AS TESTED PARTY, THE ASSESSEE CLAIMED APPLICATION OF C UP METHOD. AS STATED ABOVE TNMM IS APPLICABLE TO EITHER SIDE OF THE CONTROLLED TRANSACTION (I.E. RELATED PARTY MANUFACTURER OR THE DISTRIBUTOR). THE CASE LA WS RELIED UPON BY THE APPELLANT ALSO STATE THAT THE ULTIMATE AIM OF THE T RANSFER PRICING IS TO EXAMINE WHETHER THE PRICE OR MARGIN ARISING FROM INTERNATIO NAL TRANSACTION WITH RELATED PARTY IS AT ALP OR NOT. THE VARIOUS JUDICIAL DECISI ONS RELIED UPON BY THE APPELLANT HOLD THAT THE MOST APPROPRIATE METHOD SHA LL BE ADOPTED. IN THE INSTANT CASE, SINCE, PROFIT DERIVED BY THE APPELLANT OUT OF THE SALE OF PCBS TO THE FOREIGN AES IS AT ALP OR HAS TO BE ASCERTAINED. THE MOOT POINT IS TO DETERMINE WHETHER THE PROFIT IS AT ALP OR NOT AND NOT THE PRI CES AT WHICH THE GOODS ARE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 25 SOLD TO FOREIGN AE. THEREFORE, THE MOST APPROPRIATE METHOD WOULD BE TNMM METHOD AND NOT THE CUP METHOD. THEREFORE, IT IS HUM BLY PRAYED THAT THE APPELLANT'S CLAIM OF SELECTION OF CUP METHOD MAY BE REJECTED. 1.8.6 THE APPELLANT RELIANCE ON THE CASE OF GHARDA CHEMICALS LTD. V. DCIT (MUM) (2009-TIOL-790-ITAT-MUM) IS MISPLACED. IN THE CASE OF GHARDA CHEMICALS LTD. V. DCIT (MUM) (2009-TIOL-790-ITAT-MU M) THE ISSUE WAS APPLICATION OF INTERNATIONAL CUP OR EXTERNAL CUP ME THOD IN DETERMINING THE PRICE OF THE GOODS AND NOT THE PROFIT OR MARGIN ON THE EXPORTS OF GOODS FOREIGN AE. 2. TRANSACTIONS BY TRANSACTIONS APPROACH: IT IS BETTER TO APPRECIATE THE CONCEPT BY THE TRANS ACTION BY TRANSACTION BASIS OR BUNDLED APPROACH. SECTION 92C(1) OF THE INCOME TAX ACT, 196 1 (THE ACT) REQUIRES THAT ARM'S LENGTH PRICE (ALP) SHOULD BE DETERMINED IN RELATION TO AN INTERNATIONAL TRANSACTION. THE TERM 'INTERNATIONAL TRANSACTION' HAS BEEN DEFIN ED IN SECTION 92B TO MEAN 'A TRANSACTION BETWEEN TWO OR MORE AES... '. THEREFORE , FROM SECTION 92B IT CAN BE INTERPRETED THAT DEFINITION OF INTERNATIONAL TRANSA CTION REFERS TO 'A TRANSACTION'. THE TERMS 'TRANSACTION' HAS ALSO BEEN DEFINED IN SECTIO N 92F(V) AND RULE 10A(D) OF THE INCOME TAX RULES, 1962 (THE RULES). RULE 10A(D) DEF INES 'TRANSACTION' TO INCLUDE A NUMBER OF 'CLOSELY LINKED TRANSACTIONS'. 2.1. THEREFORE, ON COMBINED READING OF THE AFOREMEN TIONED PROVISION, IT IS DISCERNIBLE THAT ALP IS ESSENTIALLY TO BE DETERMINED ON TRANSAC TION-BY- TRANSACTION APPROACH FOR EACH INTERNATIONAL TRANSACTION; AND FOR THAT PURPOS E, A TRANSACTION IN SINGULAR MAY ALSO INCLUDE PLURAL FOR CLOSELY LINKED TRANSACTIONS. 2.2 IN THIS REGARD THE INDIAN COURTS AND TRIBUNAL A ND ANALYZED AND DISCUSSED THE CONCEPT OF THE BUNDLED APPROACH. 2.2.1 WHETHER TRANSACTIONS ARE CLOSELY LINKED OR CO NTINUOUS CAN BE EXAMINED ON THE TOUCHSTONE OF THE PRINCIPLES LAID DOWN BY MUMBAI TR IBUNAL IN THE CASE OF GODREJ SARA LEE LTD. [TS-125-ITAT-2015(MUM)-TP). ONE TRANSACTIO N IS TO BE A FOLLOW ON OF THE EARLIER TRANSACTION AND EACH SUBSEQUENT TRANSACTION CARRIED OUT IS DEPENDENT WHOLLY OR ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 26 SUBSTANTIALLY ON THE EARLIER TRANSACTION. IN SUCH A CASE, THE TRANSACTIONS ARE CONSIDERED TO BE CLOSELY LINKED OR CONTINUOUS. THEREFORE, FOR THE PURPOSE OF EVALUATION THESE HAVE TO BE AGGREGATED. 2.2.2 .THE AGGREGATION AND CLUBBING OF CLOSELY LINK ED TRANSACTIONS IS PERMITTED UNDER INDIAN TRANSFER PRICING LEGISLATION. SECTION 92C(1) OF THE INCOME TAX ACT, 1961 SPEAKS ABOUT 'NATURE OF TRANSACTION OR CLASS OF TRANSACTIO N'. FURTHER THE TERMS 'TRANSACTION' ITSELF IS DEFINED IN RULE 10A(D) OF THE INCOME TAX RULES, 1962 TO INCLUDE A NUMBER OF 'CLOSELY LINKED TRANSACTIONS'. 2.2.3 THE OECD TRANSFER PRICING GUIDELINES .PARA 3. 9 AND 3.11 ALSO HIGHLIGHT THAT IN CERTAIN SITUATIONS IT IS DIFFICULT TO EVALUATE TRAN SACTIONS SEPARATELY AND NEED TO BE EVALUATED BY BUNDLING THEM. 2.2.4. RECENT LANDMARK RULING OF DELHI HIGH COURT I N CASE OF SONY ERICSSON MOBILE COMMUNICATION PVT. LTD(TS96-HC-2015 ( DEL)- TP) WHI LE DECIDING ON THE ISSUE OF AMP HAS ALSO DISCUSSED IN DETAIL ABOUT THE AGGREGAT ION OF TRANSACTIONS WHILE USING THE TRANSACTION NET MARGIN METHOD ( 'TNMM'). IT HAS CON SIDERED THE OECD GUIDELINES LINKING THE SAME WITH THE INDIAN REGULATION. THE HI GH COURT OBSERVED THAT EXPRESSION 'CLASS OF TRANSACTION', 'FUNCTIONS PERFORMED BY THE PARTIES' UNDER SECTION 92C( 1) OF THE ACT, ILLUSTRATE THAT THE WORD 'TRANSACTION' INC LUDES A BUNDLE OR GROUP OF CONNECTED TRANSACTIONS. CLUBBING OF CLOSELY LINKED, WHICH INC LUDE CONTINUOUS TRANSACTIONS, MAY BE PERMISSIBLE UNDER THE ACT AND THE TAXPAYER CAN A GGREGATE THE CONTROLLED TRANSACTIONS IF THE TRANSACTIONS MEET THE SPECIFIED COMMON PORTFOLIO OR PACKAGE PARAMETER. 2.2.5. THE MUMBAI TRIBUNAL IN CASE OF MELSTAR INFOR MATION TECHNOLOGIES LTD. [TS- 74-ITAT -2015(MUM)- TP] HELD THAT A SERVICE PROVIDE R CHARGING ITS AES AT HOURLY RATES WILL BENCHMARK ITS TRANSACTIONS ON AN AGGREGA TE BASIS. THE SERVICES PROVIDED BY THE SOFTWARE DEVELOPMENT SERVICE PROVIDER IS A COMP OSITE WORK OF DEVELOPMENT OF SOFTWARE BY THE TEAM AND THE WORK OF ONE MEMBER OF TEAM CANNOT BE SEPARATED FOR THE PURPOSE OF CHARGING THE PRICE BUT IT IS ONLY THE BA SIS OF CHARGING THE PRICE OF THE FINAL PRODUCT. THEREFORE, THE TRANSACTION BETWEEN THE SER VICE PROVIDER AND ITS CLIENTS IS TO PROVIDE SOFTWARE DEVELOPMENT SERVICES AND IS NOT TO PROVIDE MAN HOUR SERVICES. THIS TRANSACTION INVOLVES NUMBER OF TRANSACTIONS WHICH A RE SO CLOSELY LINKED OR CONTINUOUS ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 27 IN NATURE AND ARISING FROM THE CONTINUOUS TRANSACTI ON OF SUPPLY OF SERVICES THAT THE PRICE OF ONE TRANSACTION CANNOT BE DETERMINED INDEP ENDENTLY WITHOUT HAVING BEEN INFLUENCED ON THE PRICE OF THE OTHER CLOSELY LINKED TRANSACTION OF BEING INFLUENCED BY THE PRICE OF OTHER CLOSELY LINKED TRANSACTION. THER EFORE, THE PORTFOLIO APPROACH IS TO BE TAKEN INTO ACCOUNT IN THE COMPARABILITY ANALYSIS. A CCORDINGLY, THE OVERALL PRICE CHARGED FOR A PARTICULAR SERVICE BEING THE FINAL PR ICE OF A SERVICE HAS TO BE COMPARED WITH OVERALL PRICE CHARGED FOR THE SAME SERVICES PR OVIDED TO AN UNRELATED PARTY. 2.2.6. FURTHER, THE MUMBAI TRIBUNAL IN CASE OF GODR EJ SARA LEE LTD.(TS-125-ITAT- 2015(MUM)- TP) HELD THAT THE CONCEPT OF CLUBBING AN D AGGREGATING THE TRANSACTION IS BASED ON THE PREMISE THAT SUCH TRANSACTIONS INFLUEN CED BY EACH OTHER AND PARTICULARLY DETERMINING THE PRICE AND PROFIT INVOLVED IN THE TR ANSACTIONS THEN SUCH TRANSACTIONS CAN SAFELY BY REGARDED AS CLOSELY LINKED TRANSACTIONS. THE OECD GUIDELINES HAVE REFERRED A PORTFOLIO APPROACH AS BUSINESS STRATEGY CONSISTIN G OF TAX PAYERS BUNDLING CERTAIN TRANSACTION FOR THE PURPOSE OF EARNING AN APPROPRIA TE RETURN ACROSS PORTFOLIO RATHER THAN A SINGLE PRODUCT. THE TRIBUNAL FURTHER HELD THAT IF ALL PRODUCTS ARE FAILING UNDER SAME CATEGORY AND ARE USED AS COMPLIMENTARY TO EACH OTHE R THEN THESE PRODUCTS MAY BE PRICED BY TAKING PORTFOLIO APPROACH BY THE ASSESSEE AND NOT CONSIDERING THE PROFIT MOTIVE FROM EACH AND EVERY SINGLE PRODUCT WITHIN TH E PORTFOLIO. THE PRODUCTS WITHIN THE PORTFOLIO MAY BE PRICED DIFFERENTLY FOR MARKETI NG STRATEGY TO PROMOTE CERTAIN PRODUCTS OR PENETRATE IN A PARTICULAR MARKET. 2.2.7 IN THE PRESENT CASE, THE APPELLANT HAS TREATE D COMMISSION AND WARRANTY PAYMENTS IN CONNECTION WITH EXPORT OF PCBS TO AE AS DISTINCT TRANSACTIONS AND WOULD LIKE TO DETERMINE THE PRICE BY TRANSACTION BY TRANSACTION B ASIS. IT IS PERTINENT TO MENTION HERE THAT THE APPELLANT HAS TO PAY COMMISSION AND WARRAN TY TO AE PURELY ON ACCOUNT OF EXPORT TRANSACTION WITHOUT THE GOODS BEING EXPORTED THE APPELLANT HAS NO OCCASION TO MAKE PAYMENT OF COMMISSION AND WARRANTY. THE PAYMEN TS OF COMMISSION AND WARRANTY ARE INEXTRICABLY RELATED TO EXPORT TRANSAC TION. IN OTHER WORDS THE PAYMENTS OF COMMISSION AND WARRANTY GERMINATE FROM THE EXPORT T RANSACTION. THE ABOVE PAYMENTS DO NOT HAVE INDEPENDENT EXISTENCE. THEREFORE, AS HE LD IN THE ABOVE JUDICIAL DECISIONS, THE EXPORT OF PCBS TO AE AND THE PAYMENTS OF COMMIS SION AND WARRANTY ARE CLOSELY ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 28 LINKED TRANSACTIONS. HENCE THE ACTION OF TPO IN TRE ATING THEM TOGETHER AND ARRIVING AT ALP IS IN ORDER. 3. SELECTION OF TESTED PARTY: IN THIS REGARD IN ITS SUBMISSION THE APPELLANT HAS RELIED UPON ON THE FOLLOWING DECISIONS: (I) TATA MOTORS EUROPEAN TECHNICAL CENTRE PLC. V. A SSISTANT DIRECTOR OF INCOME TAX REPORTED IN (2014) 52 TAXMAN. COM 411 (MUMBAI - TRI BUNAL). (II) GENERAL MOTORS INDIAN (P) LTD. VS. DEPUTY COMM ISSION OF INCOME TAX / ASSISTANT COMMISSIONER OF INCOME TAX REPORTED IN [2013] 37 TA XMAN . COM. 403 (AHMEDABAD - TRIBUNAL) (III) DEVELOPMENT CONSULTANTS (P) LTD. VS. DEPUTY C OMMISSIONER OF INCOME TAX REPORTED IN [2008] 23 SOT 455 (KOL). 3.1. IN TATA MOTORS CASE SERVICES FOR RENDERED BY U K (FOREIGN AE TO INDIAN COMPANY). IN GENERAL MOTORS CASE ALSO FOREIGN AE SO LD GM CARS TO THE INDIAN COMPANY. THUS, IT IS SEEN THAT BOTH CASES RELIED UP ON OF THE APPELLANT, THE FOREIGN AES ARE THE MANUFACTURERS AND THE INDIAN COMPANIES ARE THE DISTRIBUTORS, WHEREAS IN THE INSTANT CASE, THE SCENARIO IS EXACTLY OPPOSITE TO THE ABOVE TWO CASES. IN MORE CLEAR TERMS, THE APPELLANT INDIAN COMPANY IS THE MANUFACT URER AND THE FOREIGN AE IS THE DISTRIBUTOR. THEREFORE THE RATIO OF THE ABOVE DECIS IONS IS NOT APPLICABLE TO THE CASE OF THE APPELLANT. IN THE ABOVE JUDICIAL DECISIONS, IT HAS BEEN HELD THAT (I) 'THE TESTED PARTY MAY BE A LOCAL OR FOREIGN ENT ITY I.E. ONE PARTY TO THE CONTROLLED TRANSACTION. (II) 'THE SELECTION OF TESTED PARTY HAS TO BE CONSI STENT WITH THE FUNCTIONAL ANALYSIS OF THE CONTROLLED TRANSACTION (I.E. TRANSACTION-BY-TRA NSACTION APPROACH.) (III) THE TESTED PARTY IS THE LEAST COMPLEX PARTY T O THE CONTROLLED TRANSACTION IN RESPECT OF WHICH RELEVANT DATA FOR COMPARISON ARE AVAILABLE IN PUBLIC DOMAIN. (IV) THE HON'BLE TRIBUNALS ACCEPTED THE SELECTION OF FOREIGN COMPARABLE COMPANIES IN THE EVENT THE TESTED PARTY IS FOREIGN ASSOCIATED EN TERPRISE. 3.2. IT IS CLEAR FROM THE ABOVE DECISIONS THAT FORE IGN AE BEING MANUFACTURER HAS BEEN SELECTED AS TESTED PARTY. IF THE SAME ANALOGY IS AP PLIED THE TESTED PARTY SHOULD BE THE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 29 MANUFACTURER/WHETHER IT IS INDIAN OR FOREIGN AE. SO IN THE CONTEXT OF THE ROLE PLAYED BY THE AE THE ABOVE DECISIONS HAS BEEN RENDERED. 3.4 IN THIS REGARD THE RECENT DECISION OF MUMBAI TR IBUNAL IN THE CASE BY ONWARD TECHNOLOGIES LTD (2013)35 TAXMAN.COM 584 (MUM) IS M ORE RELEVANT TO THE FACTS OF THE PRESENT CASE. FOR THE CONVENIENCE OF UNDERSTANDING THE BRIEF FACTS OR ABOVE CASE ARE REPRODUCED AS UNDER: 1. ASSESSEE IS PARENT COMPANY 0; ONWARD TECHNOLOGIE S INC., USA AND ONWARD TECHNOLOGIES GMBH, GERMANY. 2. ONWARD GROUP IS GLOBAL PROVIDER OF ENGINEERING S OFTWARE DEVELOPMENT SERVICES AND SOLUTIONS TO END USERS. 3. DURING THE RELEVANT PREVIOUS YEAR, ASSESSEE REND ERED IT ENABLES SERVICES TO ITS AE IN USA AND GERMANY FOR RS. 22 CR. 4. ASSESSEE SUBSIDIARIES IN USA AND GERMANY WERE RE SPONSIBLE FOR CARRYING OUT PRIMARILY SALES AND MARKETING ACTIVITY ALONG WITH S ALES AND SITE SUPPORT SERVICES TO CLIENTS IN RESPECTIVE COUNTRIES AND REMUNERATE SUBS IDIARIES AT COST PLUS 5% MARK UP. FURTHER SALE PRICE RECEIVED BY FOREIGN AE FROM SERV ICES ULTIMATELY SOLD TO CUSTOMERS IS EQUAL TO THAT CHARGED BY THE ASSESSEE FIRM ITS A E. 5. ASSESSEE CHOOSE ITS FOREIGN AE AS TESTED PARTY, ADOPTED TNMM AS APPROPRIATE METHOD AND DID TP STUDY BY COMPARING NP PROFIT MARG IN OF FOREIGN AE WITH SIX FOREIGN COMPANIES DOING SIMILAR ACTIVITIES. 6. TPO HELD THAT PRICE DETERMINED BY ASSESSEE IN PR OVIDING IT ENABLES SERVICES IS NOT IN ACCORDANCE WITH 92C( 1) & 92C(2) AND REJECTED AS SESSEE TP STUDY. THE ISSUE BEFORE TRIBUNAL WAS CAN FOREIGN AE BE TAKEN AS TESTED PART Y FOR TP STUDY HELD FOREIGN AE CANNOT BE TAKEN AS TESTED PARTY BY EXPLAINING TP LA W IN INDIA AS UNDER: (A) SECTION 92( 1) PROVIDES THAT ANY INCOME FROM IN TERNATIONAL TRANSACTIONS SHALL BE DETERMINED HAVING REGARD TO THE ARM'S LENGTH PRICE. (B) SECTION 92B DEFINES INTERNATIONAL TRANSACTION T O BE TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISE. (C) SECTION 92C READ WITH RULE 10B (1)( E) SPECIFIE D TNMM AS ONE OF METHOD FOR DETERMINING ALP, WHICH METHOD PROVIDES THAT NET PRO FIT MARGIN REALIZED BY THE ENTERPRISE FROM AN INTERNATIONAL TRANSACTION ENTERE D INTO WITH AN ASSOCIATED ENTERPRISE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 30 IS COMPUTED IN RELATION TO COST INCURRED OR SALE EF FECTED OR ASSETS EMPLOYED OR HAVING REGARD TO ANY OTHER RELEVANT BASE. (D) THE MODUS OPERANDI OF DETERMINING ALP OF AN INT ERNATIONAL TRANSACTION UNDER THIS METHOD IS THAT FIRSTLY, THE PROFIT RATE EARNED BY T HE ASSESSEE FROM A TRANSACTION WITH ITS AE IS DETERMINED (SAY, PROFIT A), WHICH IS THEN COM PARED WITH THE RATE OF PROFIT OF COMPARABLE CASES (SAY, PROFIT B) FOR ASCERTAINING A S TO WHETHER PROFIT A IS AT ARM I S LENGTH VIS-A-VIS THE PROFIT. (E) HOWEVER, IN SO FAR AS CALCULATION OF PROFIT A I S CONCERNED, THERE CANNOT BE ANY DISPUTE AS THE SAME HAS TO NECESSARILY RESULT ONLY FROM THE TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, AS IN THE MANDATE OF S ECTIONS 92 READ WITH 92B IN JUXTAPOSITION TO RULE 10B. THE NATURAL COROLLARY WH ICH, THUS, FOLLOWS IS THAT UNDER NO SITUATION CAN THE CALCULATION OF 'PROFIT A' BE SUBS TITUTED WITH ANYTHING OTHER THAN FROM THE INTERNATIONAL TRANSACTION, THAT IS, A TRANSACTI ON BETWEEN THE ASSOCIATED ENTERPRISES. SO, IT IS THE PROFIT ACTUALLY REALIZED BY THE INDIA N ASSESSEE FROM THE TRANSACTION WITH ITS FOREIGN AE WHICH IS COMPARED WITH THAT OF THE COMPA RABLES. THERE CAN BE NO QUESTION OF SUBSTITUTING THE PROFIT REALIZED BY THE INDIAN E NTERPRISE FROM ITS FOREIGN AE WITH THE PROFIT REALIZED BY THE FOREIGN AE FROM THE ULTIMATE CUSTOMERS FOR THE PURPOSES OF DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO N OF THE INDIAN ENTERPRISE WITH ITS FOREIGN AE. 2.3. FURTHER IN THE FOLLOWING CASE ALSO THE TRIBUNA LS HAVE HELD THAT FOREIGN AES CANNOT BE THE TESTED PARTIES. CYBERTECH SYSTEMS & SOFTWARE LTD. VS. ASSISTANT C OMMISSIONER OF INCOME TAX REPORTED IN (2013) 33 TAXMAN.COM 371 (MUMBAI- TRIBU NAL) AURIONPRO SOLUTIONS PVT. LTD. VS. ASSISTANT COMMI SSIONER OF INCOME TAX, RANGE- 4(3), MUMBAI ITA NO. 7872 (MUMBAI) OF 2011. DELHI BENCH IN THE CASE OF GE MONEY FINANCIAL SER VICES PVT LTD [TS- 457-ITAT-20 16(DEL)-TP]. EXPLICITLY DISCARDED ASSESSEE'S SELECT ION OF FOREIGN AE AS TESTED PARTY. WHILE ARRIVING AT ITS CONCLUSION, IT AT CATEGORICAL LY HELD THAT UNDER TRANSACTIONAL NET MARGIN METHOD ('TNMM'), IT IS THE NET MARGIN EARNED BY THE INDIAN ASSESSEE AND NOT IT'S FOREIGN AE WHICH IS COMPARED WITH THAT OF THE COMPARABLE COMPANIES. THE IT AT INTERPRETED THE MEANING OF WORD 'ENTERPRISE' USED I N RULE 1 OB( 1 )(E) OF THE INCOME ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 31 TAX RULES, 1962 ('RULES') (WHICH DESCRIBES THE MANN ER OF APPLICATION OF TNMM) AS 'INDIAN ENTITY'. THE HON'BLE ITAT ALSO HELD THAT AD OPTION OF FOREIGN AE AS TESTED PARTY HAS NO LEGAL SANCTITY UNDER THE INDIAN TRANSFER PRI CING REGULATIONS. FURTHERMORE, THE ITAT ALSO MENTIONED THAT THE DATA USED BY THE ASSES SEE WITH RESPECT TO THE COMPARABLE COMPANIES DOES NOT CONFORM TO THE COMPARABILITY STA NDARD LAID DOWN UNDER RULE 10B OF THE RULES. IN VIEW OF THE ABOVE THE DECISION OF ONWARD TECHNO LOGIES IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE. HENCE THE ACTION OF TPO IN REJEC TION OF FOREIGN AE AS TESTED PARTY MAY BE SUSTAINED. FURTHER AS OBSERVED BY THE DRP IN ITS ORDER AT PAGE NO. 9 PARA 6.2, THE FINDINGS OF THE DRP ARE REPRODUCED AS UNDER. 6.2. THE PANEL HAS EXAMINED FAR ANALYSIS OF THE ASS ESSEE AND ITS FOREIGN AE. IT IS SEEN THAT FOREIGN AE IS GATHERING BUSINESS BY OB TAINING ORDERS FROM POTENTIAL CUSTOMERS ABROAD. IT IS NEGOTIATING SALE PRIDE WITH CUSTOMERS AND IS LIABLE TO CUSTOMER REGARDING PRODUCT QUALITY AND WARRANTY. AL L CREDIT RISK LIES WITH FOREIGN AE. IT IS RESPONSIBLE FOR GETTING THE PRODU CT MANUFACTURED FROM ITS GROUP COMPANY HAVING RIGHT KIND OF TECHNOLOGY FOR T HE PRODUCT UNDER CONSIDERATION. THE FOREIGN AE IS HAVING SUBSTANTIAL INTANGIBLES. ON THE OTHER HAND, THE ASSESSEE IS RESPONSIBLE FOR MANUFACTURING THE PRODUCT HAS ASKED FOR BY ITS FOREIGN AE. IT IS ASSURED OF PRE-DETERMINED SALE PRICE AND IS NOT LIABLE TO END CUSTOMER FOR WARRANTY ETC. THOUGH THE ASSESSEE MAY NOT BE IN A POSITION OF CONTRACT MANUFACTURE IN STRICT SENSE, YET IT IS NOT EVEN FULL FLEDGED MANUFACTURER. CONSIDERING FUNCTION AND RISK ANALYSI S AS ABOVE, IT CAN BE SAID THAT THE ASSESSEE IS MORE CLOSE TO CONTRACT MANUFAC TURER. IN NO WAY, IT CAN BE INFERRED THAT FOREIGN AE IS DOING LESS COMPLEX ACTI VITIES. THE ASSESSEE IS JUST MANUFACTURING THE PRODUCT AS GUIDED / DIRECTED BY I TS FOREIGN AE. THE ASSESSEE IS NOT HOLDING ANY SIGNIFICANT INTANGIBLES. THEREFO RE, THE PANEL DOES NOT FIND FAULT WITH APPROACH OF TPO OF TAKING THE ASSESSEE A S TESTED PARTY. VARIOUS DECISIONS OF HIGHER APPELLATE AUTHORITIES ARE FACT SPECIFIC AND LAY DOWN THAT TESTED PARTY SHOULD BE SUCH THAT WHICH COULD BE BEN CHMARKED IN A MORE REASONED MANNER. THE FUNCTIONAL AND RISK ANALYSIS O F THE ASSESSEE AS DISCUSSED SUPRA IS SUCH THAT IT NOT DIFFICULT TO FIND SUITABL E COMPARABLES FROM INDIAN DATABASE. THEREFORE, APPROACH OF THE TPO CANNOT BE SAID TO BE PERVERSE OR PREJUDICIAL TO THE ASSESSEE. THE PANEL THEREFORE HO LDS THAT THE ASSESSEE SHOULD BE TAKEN AS TESTED PARTY. IT IS RELEVANT HERE TO ME NTION THAT THE ASSESSEE HAS NOT FURNISHED COMPLETE ANNUAL REPORTS OF ITS FOREIGN AE AND OTHER COMPARABLES TAKEN BY IT IN ITS TP STUDY REPORT IN THE ABSENCE O F WHICH BENCHMARKING FOREIGN SHALL NOT BE PRACTICAL. THE DISTRIBUTION SEGMENTAL DATA OF AT&S AUSTRIA AS ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 32 FURNISHED BY THE ASSESSEE IS NOT AUDITED ONE. TPO HAS ALSO WORKED OUT ON PAGE 71 PARA 25 OF HIS ORDER THAT THE ASSESSEE HAD NOT B EEN ABLE TO RECOVER ITS DIRECT COST OF MANUFACTURING WHICH CLEARLY INDICATES THAT SOMETHING IS WRONG WITH SALE PRICE. IT IS ALSO TO BE NOTED THAT ABOUT 89% O F SALES OF THE ASSESSEE IS TO THE FOREIGN AE AND THERE IS ALMOST FULL CAPACITY UTILIZ ATION. WHY THE FOREIGN AE IS SELLING THE PRODUCT AT SUCH COST WHICH DOES NOT COV ER EVEN THE COST OF PRODUCTION OF THE ASSESSEE. TPO IS NOT REQUIRED TO EXAMINE THE DEAL BETWEEN FOREIGN AE AND FOREIGN CUSTOMERS. THE MANDATE OF TP O IS TO EXAMINE INTERNATIONAL TRANSACTION WHICH IS BETWEEN THE ASSE SSEE AND ITS FOREIGN AE. HERE IN THIS CASE, IT IS ADMITTED FACT THAT INTERNA TIONAL TRANSACTION IS SALE BY THE ASSESSEE TO ITS FOREIGN AE. 4. RULE OF CONSISTENCY: I. FIRSTLY, THE RULE OF CONSISTENCY IS APPLICABLE O NLY WITH RESPECT TO ANY METHOD OF ACCOUNTING TREATMENT. II. SECONDLY, AS THE SUBJECT OF TRANSFER PRICING IS EVOLVING DAY BY DAY, RULE OF CONSISTENCY MAY NOT BE STRICTLY APPLICABLE. III. THIRDLY, THE TPOIN HIS ORDER HAS DISCUSSED ON THE ISSUE OF CONSISTENCE BY REFERRING TO THE COMMENTS MADE BY HON' BLE JUSTICE P. N. BHAGAVATI (PAGE NO. 193 TO PAPER BOOK). IV. LASTLY, THE APPELLANT CANNOT RELY ON RULE OF CO NSISTENCY WHEN THE APPELLANT ITSELF HAS DEVIATED AND CLAIMED THAT CUP METHOD TO BE APPLIED. AS TPO HAS REJECTED SELECTION FOREIGN AE AS TESTED PARTY THE ASSESSEE CHARGED HIS STANCE AND WOULD LIKE TO ADOPT CUP METHOD INSTEAD OF TNMM METHOD. THEREFORE, THERE IS NO FORCE IN THE APPELLANT'S REL IANCE ON THE RULE TO CONSISTENCY. 5. SELECTION OF COMPARABLES: IN THIS REGARD, THE DRP AT PAGE NO. 10 PARA 6.3 OF THE ORDER FOR ASSESSMENT YEAR 2011-12 HAS DISCUSSED THE ISSUE OF COMPARABLES. THE FINDINGS OF THE DRP MAY BE CONSIDERED AS THE ARGUMENTS AGAINST THE SUBMISSION OF APPELLANT WITH RESPECT TO THE COMPARABLES. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 33 6. CONCLUSION: 1. THE MOST APPROPRIATE METHOD FOR DETERMINING ALP OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE APPELLANT WITH AE IS TNMM METHO D IN VIEW OF THE REASONS MENTIONED ABOVE. 2. AS PER THE FACTS OF THE CASE THE TPO RIGHTLY SE LECTED THE APPELLANT AS TESTED PARTY AS AGAINST FOREIGN AE AND APPLIED TNNM METHOD . THE ABOVE VIEW OF THE TPO IS SUPPORTED BY THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF ONWARD TECHNOLOGIES. 3. THE COMMISSION AND THE WARRANTY PAID BY APPELLA NT TO AE ARE CLOSELY LINKED TO THE INTERNATIONAL TRANSACTION WITH AE. THE TPO HAS CORRECTLY APPLIED TNNM METHOD AT THE ENTITY LEVEL. THIS VIEW OF THE TPO IS ALSO SUPPORTED BY VARIOUS DECISIONS MENTIONED ABOVE ON THIS ISSUE. 4. RULE OF CONSISTENCY IS ALWAYS NOT APPLICABLE IN COME TAX CASES, ESPECIALLY IN THE FIELD OF TRANSFER PRICING WHERE THE LAW IS EVOLVING IN INDIA. THE TPO HAS ALSO DISCUSSED IN HIS ORDER ON NON APPLICABILITY OF RULE OF CONSISTENCY. 5. ON THE ISSUE OF COMPARABLES .THE ORDER OF DRP H AS CONSIDERED THE ARGUMENTS OF THE APPELLANT AND THE DIRECTIONS OF DRP HOLD GOOD. FINALLY, THE LD. DR SUPPORTED THE ORDER THE LOWER AUTHORITIES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING D ISCUSSION WE FIND THAT THE TPO HAS MADE AN UPWARD ADJUSTMENT FOR RS. 69,30,53,397/- OF THE GOODS EXPORTED TO THE AE. THE TPO TREATED THE ASSESSEE AS TESTED PARTY AND SE LECTED VARIOUS COMPANIES FOR COMPARABLES. THE TPO HAS TAKEN THE PLI AS OPERATING PROFIT TO SALES FOR THE WORKING OF ALP. THE DRP CONFIRMED THE SAME AFTER MAKING SOM E CHANGES IN THE COMPANIES SELECTED FOR COMPARABLES BY THE TPO. IN THE LIGHT O F ARGUMENTS ADVANCED BY THE LD. AR AND DR WE FIND THAT THE ACTION OF LOWER AUTHORIT IES WITH REGARD TO THE SELECTION OF TESTED PARTY IS CORRECT IN THE LIGHT OF FOLLOWING J UDGMENTS. ONWARD TECHNOLOGIES LIMITED VS DCIT 35 TAXMANN.COM 584 WHEREIN IT WAS HELD AS UNDER : ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 34 A CONJOINT READING OF THE ABOVE PROVISIONS INDICAT ES THAT FIRSTLY, A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES IS CALLE D AN INTERNATIONAL TRANSACTION; SECONDLY, ANY INCOME FROM SUCH INTERNATIONAL TRANSA CTION IS REQUIRED TO BE DETERMINED AT ALP; THIRDLY, THE ALP IN RESPECT OF S UCH INTERNATIONAL TRANSACTION SHOULD BE DETERMINED BY ONE OF THE PRESCRIBED METHO DS, WHICH ALSO INCLUDE THE TNMM. UNDER THIS METHOD, THE NET PROFIT MARGIN REAL IZED BY THE ENTERPRISE FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSO CIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRED OR SALES EFFECTED OR ASS ETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGARD TO ANY OTHER RELEVA NT BASE, WHICH IS THEN COMPARED WITH THE NET PROFIT MARGIN REALIZED BY THE ENTERPRI SE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION. THE MOD US OPERANDI OF DETERMINING ALP OF AN INTERNATIONAL TRANSACTION UNDER THIS METH OD IS THAT FIRSTLY, THE PROFIT RATE EARNED BY THE ASSESSEE FROM A TRANSACTION WITH ITS AE IS DETERMINED (SAY, PROFIT A), WHICH IS THEN COMPARED WITH THE RATE OF PROFIT OF C OMPARABLE CASES (SAY, PROFIT B) FOR ASCERTAINING AS TO WHETHER PROFIT A IS AT ARM'S LEN GTH VIS--VIS THE PROFIT B. IF IT IS NOT, THEN THE TRANSFER PRICING ADJUSTMENT IS MADE HAVING REGARD TO THE DIFFERENCE BETWEEN THE RATES OF PROFIT A AND PROFIT B. THE RATE OF PRO FIT OF COMPARABLE CASES (PROFIT B) MAY BE COMPUTED FROM INTERNALLY OR EXTERNALLY COMPA RABLE CASES, DEPENDING UPON THE FAR ANALYSIS AND THE FACTS AND CIRCUMSTANCES OF EAC H CASE. THUS THE CALCULATION OF PROFIT B MAY UNDERGO CHANGE WITH THE VARYING SET OF COMPARABLE CASES. HOWEVER, IN SO FAR AS CALCULATION OF PROFIT A IS CONCERNED, THE RE CANNOT BE ANY DISPUTE AS THE SAME HAS TO NECESSARILY RESULT ONLY FROM THE TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, AS IS THE MANDATE OF SECTIONS 92 READ WITH 92B IN JUXTAPOSITION TO RULE 10B. THE NATURAL COROLLARY WHICH, THUS, FOLLOWS IS THAT UNDER NO SITUATION CAN THE CALCULATION OF 'PROFIT A' BE SUBSTITUTED WITH ANYTH ING OTHER THAN FROM THE INTERNATIONAL TRANSACTION, THAT IS, A TRANSACTION BETWEEN THE ASS OCIATED ENTERPRISES. SO, IT IS THE PROFIT ACTUALLY REALIZED BY THE INDIAN ASSESSEE FRO M THE TRANSACTION WITH ITS FOREIGN AE WHICH IS COMPARED WITH THAT OF THE COMPARABLES. THE RE CAN BE NO QUESTION OF SUBSTITUTING THE PROFIT REALIZED BY THE INDIAN ENTE RPRISE FROM ITS FOREIGN AE WITH THE PROFIT REALIZED BY THE FOREIGN AE FROM THE ULTIMATE CUSTOMERS FOR THE PURPOSES OF DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO N OF THE INDIAN ENTERPRISE WITH ITS FOREIGN AE. THE SCOPE OF TP ADJUSTMENT UNDER THE IN DIAN TAXATION LAW IS LIMITED TO TRANSACTION BETWEEN THE ASSESSEE AND ITS FOREIGN AE . IT CAN NEITHER CALL FOR ALSO ROPING IN AND TAXING IN INDIA THE MARGIN FROM THE A CTIVITIES UNDERTAKEN BY THE FOREIGN AE NOR CAN IT CURTAIL THE PROFIT ARISING OUT OF TRA NSACTION BETWEEN THE INDIAN AND FOREIGN AE AT ARM'S LENGTH. THE CONTENTION OF THE L D. AR IN CONSIDERING THE PROFIT OF THE FOREIGN AE AS 'PROFIT A' FOR THE PURPOSES OF CO MPARISON WITH PROFIT OF COMPARABLES, BEING 'PROFIT B', TO DETERMINE THE ALP OF TRANSACTION BETWEEN THE ASSESSEE AND ITS FOREIGN AE, MISSES THE WOOD FROM T HE TREE BY MAKING THE SUBSTANTIVE SECTION 92 OTIOSE AND THE DEFINITION OF 'INTERNAL T RANSACTION' U/S 92B AND RULE 10B REDUNDANT. THIS IS PATENTLY AN UNACCEPTABLE POSITIO N HAVING NO SANCTION OF THE INDIAN TRANSFER PRICING LAW. BORROWING A CONTRARY MANDATE OF THE TP PROVISIONS OF OTHER COUNTRIES AND READING IT INTO OUR PROVISIONS IS NOT PERMISSIBLE. THE REQUIREMENT UNDER OUR LAW IS TO COMPUTE THE INCOME FROM AN INTERNATIO NAL TRANSACTION BETWEEN TWO AES HAVING REGARD TO ITS ALP AND THE SAME IS REQUIRED T O BE STRICTLY ADHERED TO AS PRESCRIBED. THIS CONTENTION, IS THEREFORE, REPELLED . RELIANCE IS ALSO PLACED IN ANOTHER DECISION OF HON BLE MUMBAI BENCH IN THE CASE OF CYBERTECH SYSTEMS & SOFTWARE LIMITED VS. ACIT (33 T AXMANN.COM 371) WHEREIN THE ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 35 ASSESSEE HAD TRIED TO JUSTIFY THE ARMS LENGTH VALU E OF THE TRANSACTION ON THE GROUND THAT THE OVERSEAS AE HAD BEEN INCURRING LOSSES ON T HE MARGIN RETAINED FROM THE ASSESSEE. ON APPEAL, THE TRIBUNAL REJECTED THE ASSE SSEES ARGUMENT THAT SUCH TRANSACTIONS HAVE TO BE CONSIDERED AT ARMS LENGTH ON GROUND THAT THERE IS NO SHIFTING OF PROFITS. THE TRIBUNAL CATEGORICALLY HELD THAT TH E ASSESSEE I.E., THE INDIAN PARTY HAS TO BE TAKEN AS THE TESTED PARTY AND THE TNMM METHOD IS TO BE FOLLOWED. RECENTLY THE DELHI BENCH OF ITAT IN THE CASE OF RANBAXY LAB LTD. VS. ADDL CIT (AY 2004-05) REJECTED THE ASSESSEES CASE SINCE IT HAD TAKEN THE FOREIGN AES AS TESTED PARTIES AND CALCULATED ITS ALP. THE ITAT AGREED WITH THE AOS C ONTENTION THAT SUCH BENCHMARKING IS NOT IN CONSONANCE WITH THE INCOME T AX RULES. BESIDES THE ABOVE THE AE CANNOT BE TREATED AS TESTE D PARTY BECAUSE ITS ACCOUNTS ARE BASED ON AUSTRIA GAAP WHICH IS DIFFERENT FROM INDIA N GAAP. ACCORDINGLY THE METHOD OF ACCOUNTING, ALLOCATION OF COSTS, RECOGNIT ION OF REVENUE ETC. DIFFER FOR MAKING THE COMPARISON. IN THE INSTANT CASE WE NEED TO DETERMINE THE ALP OF THE TRANSACTION BETWEEN THE ASSESSEE AND AE FOR THE EXP ORT OF THE PCB. THEREFORE THE TESTED PARTY WILL BE THE INDIAN PARTY. IN VIEW OF A BOVE WE FIND NO REASON TO INTERFERE IN THE ORDER OF DRP. HENCE THE ASSESSEE HAS RIGHTLY BE EN TREATED AS TESTED PARTY. WITH REGARD TO THE TNMM METHOD ADOPTED BY THE LOWER AUTHORITIES FOR THE COMPUTATION OF ALP WE FIND THAT THE VARIOUS COURTS HAVE HELD TO ADOPT THE CUP METHOD IN THE AFORESAID FACTS AND CIRCUMSTANCES. AT THIS JUNCTURE IT IS IMPORTANT TO UNDERSTAND THE CUP METHOD AS PER THE PROVISIONS OF CLAUSE (A) OF SUB-RULE (1) OF RULE 10B OF THE INCOME-TAX RULES (HEREINAFTER REFERRED T O AS THE 'RULES'), WHICH INTER ALIA READS AS FOLLOWS: '10B. (1) FOR THE PURPOSES OF SUB-SECTION (2) OF SE CTION 92C, THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION [ OR A SPECIFIED DOMESTIC TRANSACTION] SHALL BE DETERMINED BY ANY OF THE FOLL OWING METHODS, BEING THE MOST APPROPRIATE METHOD, IN THE FOLLOWING MANNER, N AMELY :- (A) COMPARABLE UNCONTROLLED PRICE METHOD, BY WHICH,- (I) THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFER RED OR SERVICES PROVIDED IN A COMPARABLE UNCONTROLLED TRANSACTION, OR A NUMBER OF SUCH TRANSACTIONS, IS IDENTIFIED; ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 36 (II) SUCH PRICE IS ADJUSTED TO ACCOUNT FOR DIFFEREN CES, IF ANY, BETWEEN THE INTERNATIONAL TRANSACTION [OR THE SPECIFIED DOMESTI C TRANSACTION] AND THE COMPARABLE UNCONTROLLED TRANSACTIONS OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFECT TH E PRICE IN THE OPEN MARKET; (III) THE ADJUSTED PRICE ARRIVED AT UNDER SUB-CLAUSE (II) IS TAKEN TO BE AN ARM'S LENGTH PRICE IN RESPECT OF THE PROPERTY TRANSFERRED OR SERVICES PROVIDED IN THE INTERNATIONAL TRANSACTION 558 [OR THE SPECIFIED DOM ESTIC TRANSACTION] ;' THE TERM COMPARABLE UNCONTROLLED TRANSACTION HAS NOT BEEN DEFINED IN THE ACT AND THE RULE. AS PER CLAUSE OF RULE 10A OF THE RULE S, AN UNCONTROLLED TRANSACTION MEANS A TRANSACTION BETWEEN ENTERPRISES OTHER THAN ASSOCIATED ENTERPRISES, WHETHER RESIDENT OR NON-RESIDENT. THE TERM 'COMPARABLE UNCO NTROLLED TRANSACTION' HAS BEEN DEFINED IN THE OECD TRANSFER PRICING GUIDELINES FOR MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATION, JULY 2010 (HEREINAFTER REFE RRED TO AS THE 'OECD GUIDELINES), WHICH INTER-ALIA READS AS UNDER: 'COMPARABLE UNCONTROLLED TRANSACTION A COMPARABLE UNCONTROLLED TRANSACTION IS A TRANSACT ION BETWEEN TWO INDEPENDENT PARTIES THAT IS COMPARABLE TO THE CONTR OLLED TRANSACTION UNDER EXAMINATION. IT CAN BE EITHER A COMPARABLE TRANSACT ION BETWEEN ONE PARTY TO THE CONTROLLED TRANSACTION AND AN INDEPENDENT PARTY ('INTERNAL COMPARABLE') OR BETWEEN TWO INDEPENDENT PARTIES, NEITHER OF WHIC H IS A PARTY TO THE CONTROLLED TRANSACTION ('EXTERNAL COMPARABLE'). THE OECD GUIDELINES INTER ALIA DEFINES THE CUP METH OD AS FOLLOWS: COMPARABLE UNCONTROLLED PRICE (CUP) METHOD A TRANSFER PRICING METHOD THAT COMPARES THE PRICE F OR PROPERTY OR SERVICES TRANSFERRED IN A CONTROLLED TRANSACTION TO THE PRIC E CHARGED FOR PROPERTY OR SERVICES TRANSFERRED IN A COMPARABLE UNCONTROLLED T RANSACTION IN COMPARABLE CIRCUMSTANCES. ' 11.1 WE ALSO FIND SUPPORT FROM THE DECISION OF THE HON'BLE MUMBAI TRIBUNAL IN THE MATTER OF DCIT VS. ISAGRO (ASIA) AGROCHEMICALS (P.) LTD REPORTED IN [2013] 31 TAXMANN.COM 388 (MUMBAI - TRIB.), WHEREIN THE HON'B LE TRIBUNAL INTERALIA HELD THAT : 'VARIOUS BENCHES OF THE TRIBUNAL INCLUDING ASSTT. C IT V. MSS INDIA (P.) LTD. [2009J 32 SOT 132 (PUNE) AND PHILIPS SOFTWARE CENTR E (P.) LTD. V. ASSTT. CIT ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 37 [2008] 26 SOT 226 (BANG.) HAVE PREFERRED THE FOLLOW ING OF CUP METHOD. IT IS OBVIOUS THAT WHEN THE PRICE OF SIMILAR GOODS OR SER VICES AS SOLD OR PROVIDED TO THE NON-AES IS AVAILABLE, SUCH A PRICE CONSTITUTES THE BEST GUIDE TO FIND OUT WHETHER THE PRICE CHARGED OR PAID TO THE AES IS AT ALP OR NOT IT IS MORE SO WHEN SUCH COMPARABLE UNCONTROLLED TRANSACTIONS IS I NTERNAL. WHEN SIMILAR GOODS AS TRADED WITH AES CONSTITUTING INTERNATIONAL TRANSACTIONS ARE TRADED WITH NON-AES, IT ALWAYS PROPER TO CONSIDER THE PRIC E OF GOODS TRADED WITH NON- AES, FOR BENCHMARKING PRICE OF GOOD TRADED WITH AES . IN OUR CONSIDERED OPINION THE ID. CIT(A) WAS JUSTIFIED IN UPHOLDING T HE PREFERENCE OF CUP METHOD OVER TNMM. ' IN THE INSTANT CASE, THE TRANSACTIONS INVOLVING SAL E OF PCBS BY THE APPELLANT TO AE DURING THE FINANCIAL YEAR 2010-11 STOOD AS CONTROLL ED TRANSACTIONS, WHEREAS THE TRANSACTIONS INVOLVING SALE OF EXACTLY THE SAME PCB S IN THE SAME QUANTITY AS THOSE TRANSACTED BETWEEN THE APPELLANT AND AE AND BY AE ( I.E. ONE OF THE PARTIES TO THE CONTROLLED TRANSACTION) TO INDEPENDENT CUSTOMERS IN EUROPE DURING THE RELEVANT FINANCIAL YEAR STOOD AS COMPARABLE UNCONTROLLED TRA NSACTIONS. THE PRICES AT WHICH PCBS WERE SOLD BY THE ASSESSEE TO AE ARE EQUAL TO T HE PRICES AT WHICH PCBS WERE SOLD BY AE TO INDEPENDENT CUSTOMERS. THUS THE INTER NATIONAL TRANSACTION INVOLVING SALE OF FINISHED GOODS BY THE ASSESSEE TO AE ADHERE S TO THE ARM'S LENGTH PRINCIPLE EMBODIED IN THE INDIAN TRANSFER PRICING REGULATION UNDER THE CUP METHOD. BESIDES THE ABOVE THE ASSESSEE HAS SUBMITTED BACK TO BACK I NVOICES AND ON WHICH NO ADVERSE COMMENT HAS BEEN PASSED BY THE LOWER AUTHORITIES ON ITS GENUINENESS. IT WAS ALSO OBSERVED THAT THE FINANCIAL DISTRIBUTION SEGMENT RE PORT OF AE SUBMITTED BY THE ASSESSEE WAS REJECTED BY THE TPO WITHOUT ASSIGNING ANY SPECIFIC REASONS AND DEFECTS IN THE REPORT. WE THEREFORE INCLINED TO TREAT THE P RICE CHARGED BY THE ASSESSEE OF THE GOODS EXPORTED TO AE AS ALP AS THE SAME PRICE WAS C HARGED BY THE AE FROM THE OTHER CUSTOMERS. 11.2 WE ALSO FIND THAT IN FORM NO. 3CEB FOR THE PRE VIOUS YEAR UNDER CONSIDERATION THE ASSESSEE MENTIONED THE METHOD OF DETERMINING AR M'S LENGTH PRICE AS 'TNMM' IN RESPECT OF EXPORT OF PCBS VALUED INR 197,55,10,0001 - WITH REGARD TO THE COMMISSION AND PRELIMINARY WARRANTY GUARANTEE. TRANSFER PRICIN G STUDY WAS SILENT ABOUT THE METHOD FOR BENCHMARKING THE GROSS PRICES RECEIVABLE BY THE APPELLANT FROM AE FOR EXPORT OF PCBS. BUT THE DRP IDENTIFIED THE AFORESAI D EXPORT AS A SEPARATE TRANSACTION ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 38 ('SALE') AND CONFIRMED THE APPLICATION OF THE TNMM AT THE ENTITY LEVEL. HOWEVER, WE FIND THAT THE DRP SHOULD HAVE APPLIED THE METHOD WH ICH IS THE MOST APPROPRIATE AND IN THE INSTANT WE HAVE ALREADY HELD THAT THE CUP ME THOD AS THE MOST APPROPRIATE METHOD. 11.3 IN THIS CONNECTION, WE RELY IN THE DECISION OF THE HON'BLE MUMBAI TRIBUNAL IN THE MATTER OF MATTEL TOYS (I) (P.) LTD VS. DEPUTY COMMISSIONER OF INCOME-TAX , CIRCLE - 6(3) REPORTED IN [2013] 34 TAXMANN.COM 203 (MUMBAI - TRIB.), WHEREIN THE HON'BLE TRIBUNAL INTER ALIA HELD THAT: 41. NOW COMING TO THE ARGUMENT OF THE LEARNED DEPA RTMENTAL REPRESENTATIVE THAT ONCE THE ASSESSEE ITSELF HAS CHOSEN TNMM AS MO ST APPROPRIATE METHOD IN TPR, THEN IT CANNOT RESORT TO CHANGE ITS METHOD AT AN ASSESSMENT OR APPELLATE STAGE. IN OUR OPINION, SUCH A CONTENTION CANNOT BE UPHELD BECAUSE IF IT IS FOUND ON THE FACTS OF THE CASE THAT A PARTICULAR METHOD W ILL NOT RESULT INTO PROPER DETERMINATION OF THE ALP, THE TPO OR THE APPELLATE AUTHORITIES CAN VERY WELL HOLD THAT WHY A PARTICULAR METHOD CAN BE APPLIED FO R GETTING PROPER DETERMINATION OF ALP OR THE ASSESSEE CAN DEMONSTRAT E A PARTICULAR METHOD TO JUSTIFY ITS ALP. THUS, EVEN IF THE ASSESSEE HAD ADO PTED TNMM AS THE MOST APPROPRIATE METHOD IN THE TRANSFER PRICING REPORT, THEN ALSO IT IS NOT PRECLUDED FROM RAISING THE CONTENTIONS/OBJECTIONS BEFORE THE TPO OR THE APPELLATE COURTS THAT SUCH A METHOD WAS NOT AN APPROPRIATE METHOD AN D IS NOT RESULTING INTO PROPER DETERMINATION OF ALP AND SOME OTHER METHOD S HOULD BE RESORTED. THE ULTIMATE AIM OF THE TRANSFER PRICING IS TO EXAMINE WHETHER THE PRICE OR THE MARGIN ARISING FROM AN INTERNATIONAL TRANSACTIONS W ITH THE RELATED PARTY IS AT ALP OR NOT. THE DETERMINATION OF APPROXIMATE ALP IS THE KEY FACTOR FOR WHICH MOST APPROPRIATE METHOD IS TO BE FOLLOWED. THEREFOR E, IF AT ANY STAGE OF THE PROCEEDINGS, IT IS FOUND THAT BY ADOPTING ONE OF TH E PRESCRIBED METHODS OTHER THAN CHOSEN EARLIER, THE MOST APPROPRIATE ALP CAN B E DETERMINED, THE ASSESSMENT AUTHORITIES AS WELL AS THE APPELLATE COU RTS SHOULD TAKE INTO CONSIDERATION SUCH A PLEA BEFORE THEM PROVIDED, IT IS DEMONSTRATED AS TO HOW A CHANGE IN THE METHOD WILL PRODUCE BETTER OR MORE AP PROPRIATE ALP ON THE FACTS OF THE CASE. ACCORDINGLY, WE REJECT THE CONTENTIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ALSO THE OBSERVATIONS OF THE ASS ESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) THAT THE ASSESSEE CA NNOT RESORT TO ADOPTION OF RPM METHOD INSTEAD OF TNMM.' FROM THE ABOVE WE FIND THAT THE HON'BLE MUMBAI TRIB UNAL HAS INTER ALIA HELD THAT THE ULTIMATE AIM OF TRANSFER PRICING IS TO EXAMINE WHET HER THE PRICE OR THE MARGIN ARISING FROM AN INTERNATIONAL TRANSACTIONS WITH THE RELATED PARTY IS AT ARM'S LENGTH PRICE (IN SHORT, 'ALP) OR NOT. ACCORDINGLY, EVEN IF AN ASSESS EE HAS ADOPTED TNMM AS THE MOST ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 39 APPROPRIATE METHOD IN THE TRANSFER PRICING REPORT, THEN ALSO IT IS NOT PRECLUDED FROM RAISING THE CONTENTIONS/OBJECTIONS BEFORE THE ASSES SMENT AUTHORITIES AND THE APPELLANT COURTS THAT SUCH A METHOD WAS NOT AN APPROPRIATE ME THOD AND IS NOT RESULTING INTO PROPER DETERMINATION OF ALP AND SOME OTHER METHOD S HOULD BE RESORTED. IN VIEW OF THE PRINCIPLE ENUNCIATED BY THE HON'BLE MUMBAI TRIB UNAL IN THE AFORESAID CASE, WE APPLY THE CUP METHOD IN RESPECT OF THE INTERNATIONA L TRANSACTION INVOLVING EXPORT OF PRINTED CIRCUIT BOARDS AND ACCORDINGLY DELETE THE A DJUSTMENT OF INR 69,30,53,397/- MADE IN THE ASSESSMENT ORDER. 11.4 WE ALSO FIND THAT VARIOUS HONBLE COURT HAVE H ELD THAT THE CUP METHOD BEING PREFERRED OVER THE PROFIT BASED METHODS. IN THIS C ONNECTION WE RELY IN THE DECISION OF THE HON'BLE DELHI TRIBUNAL IN THE MATTER OF HUGHES SYSTIQUE INDIA (P.) LTD VS. ACIT REPORTED IN [2013] 36 TAXMANN.COM 41 (DELHI - TRIB. ), WHEREIN THE HON'BLE TRIBUNAL INTER ALIA HELD THAT: 6.5 THE CUP METHOD PROVIDES THE MOST DIRECT COMPAR ISON FOR THE PURPOSE OF DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS AND IS TO BE PREFERRED OVER THE OTHER PROFIT BASED METHODS. RELI ANCE IS PLACED IN THIS REGARD ON THE FOLLOWING DECISIONS: - AZTEC SOFTWARE & TECHNOLOGIES SERVICES LTD. V. AS STT. CIT [2007] 107 ITD 141/162 TAXMAN 119 (BANG.) (SB) - UCB INDIA (P.) LTD. V. ASSTT. CIT [2009] 30 SOT 9 5 (MUM.) - GHARDA CHEMICALS LTD. V. OY. CIT [2010] 35 SOT 40 6 (MUM.) - INTERVET INDIA (P.) LTD. V. ASSTT. CIT [2010] 39 SOT 93 (MUM.) - ASSTT. CIT V. DUFON LABORATORIES [2010] 39 SOT 59 (MUM.) 11 RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECIS ION OF HON'BLE MUMBAI TRIBUNAL IN THE CASE OF SERDIA PHARMACEUTICALS (INDIA) (P.) LTD. V. ASSTT. CIT REPORTED IN [2011] 44 SOT 391/9 TAXMANN.COM 13 WHEREIN THE HON'BLE TRI BUNAL WHILE DEALING WITH THE PRIORITY OF APPLICATIONS OF METHODS FOR THE DETERMI NATION OF ALP, HAS HELD AS UNDER: '64... AS LONG AS CUP METHOD CAN BE REASONABLY APPL IED IN DETERMINING THE ARM'S LENGTH PRICE OF AN INTERNATIONAL TRANSACTION IN A PARTICULAR FACT SITUATION, AND UNLESS ANOTHER METHOD IS PROVEN TO BE MORE RELI ABLE A METHOD VIS-A-VIS THE FACT SITUATION OF THAT PARTICULAR CASE, THE CUP MET HOD IS TO BE PREFERRED. THE REASON IS SIMPLE. WHEN ASSOCIATED ENTERPRISES ENTER INTO A TRANSACTION AT SUCH CONDITIONS IN COMMERCIAL AND FINANCIAL TERMS, WHICH ARE DIFFERENT FROM ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 40 COMMERCIAL AND FINANCIAL TERMS IMPOSED IN COMPARABL E TRANSACTION BETWEEN INDEPENDENT ENTERPRISES, THE DIFFERENCE IN THESE TW O SETS OF CONDITIONS IN FINANCIAL AND COMMERCIAL TERMS RE ATTRIBUTED TO INT ER RELATIONSHIP BETWEEN THE ASSOCIATED ENTERPRISES THAT IS SOUGHT TO BE NEUTRAL IZED BY THE TRANSFER PRICING REGULATIONS. AS LONG AS CUP METHOD CAN BE RELIABLY APPLIED ON THE FACTS OF A CASE, IT DOES OFFER MOST DIRECT METHOD OF NEUTRALIZ ING THE IMPACT OF INTER- RELATIONSHIP BETWEEN AES ON THE PRICE AT WHICH THE TRANSACTIONS HAVE BEEN ENTERED INTO BY SUCH AES. ' RELYING ON THE DECISION OF SERDIA PHARMACEUTICALS I NDIA (P.) LTD. (SUPRA), THE HON'BLE DELHI TRIBUNAL IN THE CASE OF CLEAR PLUS INDIA (P.) LTD. V. DY. CIT REPORTED IN [2011] 10 TAXMANN.COM 249, INTERALIA HELD THAT: '7 .... IN THE CASE OF SERDIA PHARMACEUTICALS INDIA (P) LIMITED, IT HAS BEEN HELD THAT CUP METHOD IS A PREFERRED METHOD AND IT LEADS TO MORE RELIABLE RESULTS VIS-A-VIS THE RESULTS OBTAINED BY APPLYING TRANSACT ION PROFIT METHOD. IN THE CASE OF SNF (AUSTRALIA) PTY. LIMITED, IT HAS BEEN HELD T HAT THE FOCUS IS ON THE MARKET IN WHICH PRODUCTS ARE ACQUIRED. THE RATIO OF THIS C ASE IS APPLICABLE MUTATIS- MUTANDIS TO THE FACTS OF THE CASE AS THE FOCUS IS O N THE MARKET IN WHICH PRODUCTS ARE SOLD. IN THE CASE OF GHARDA CHEMICALS LTD. (SUPRA), THE H ON'BLE INCOME TAX APPELLATE TRIBUNAL HELD THAT INTERNAL COMPARABLE SHOULD BE PR EFERRED OVER EXTERNAL COMPARABLES. THE RELEVANT EXTRACT OF THE JUDGMENT IS FURNISHED H ERE IN BELOW: 'INTERNAL CUP METHOD ENVISAGES COMPARING THE UNCONT ROLLED TRANSACTIONS OF THE APPELLANT ITSELF WITH OTHER UNRELATED PARTIES S O AS TO DETERMINE THE ALP WITH THE AE. HOWEVER THE EXTERNAL CUP METHOD DISREGARDS THE PRICE CHARGED OR PAID BY THE APPELLANT TO OR FROM ITS UNRELATED PART IES AND CONTEMPLATES THE COMPARISON OF THE PRICE SO CHARGED FROM OR PAID TO ITS AE WITH SOME EXTERNAL INDEPENDENT RELIABLE PRICE DATA UNDER SIMILAR CIRCU MSTANCES OF TRANSACTIONS WITH AE. ORDINARILY THE INTERNAL CUP METHOD SHOULD BE PREFERRED OVER THE EXTERNAL CUP METHOD AS IT NEUTRALIZES SEVERAL DISTI NGUISHING FACTORS, SUCH AS THE LOCAL FACTORS AND THE ECONOMIES AVAILABLE OR UN AVAILABLE TO THE APPELLANT IN PARTICULAR, HAVING BEARING OVER THE COMPARISON OF P RICE CHARGED FROM UNRELATED PARTIES AND AE.' 11.5 IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS, WE F IND THAT THE CUP METHOD PROVIDES THE MOST DIRECT COMPARISON FOR THE PURPOSE OF DETER MINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS AND IS TO BE PREFERRED O VER THE OTHER PROFIT BASED METHODS. ACCORDINGLY IN THE INSTANT CASE INTERNAL CUP METHOD SHOULD BE PREFERRED OVER THE EXTERNAL CUP METHOD. HENCE, WE HOLD THAT IN THE INS TANT CASE, THE CUP METHOD ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 41 (INTERNAL) IS THE MOST APPROPRIATE METHOD IN DETERM INING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION INVOLVING EXPORT OF PCBS BY THE ASSESSEE TO AE AND ACCORDINGLY, DELETE THE ADJUSTMENT OF INR 69,30,53, 3971- MADE IN THE ASSESSMENT ORDER. 12. AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF ASSES SEE WITH REGARD TO THE DETERMINATION OF ALP, WE ARE NOT INCLINED TO ADJUDI CATE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE. HENCE THE GROUND NO. 3 TO 5 DO NOT REQUIRE ANY ADJUDICATION. 13. THE SECOND ISSUE RAISED BY THE ASSESSEE IN GROUND NO. 6 TO 7 IN THIS APPEAL IS THAT DRP ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINING THE DISALLOWANCE OF RS.7,53,519/- ON ACCOUNT OF DIMINUTION IN THE VALUE OF INVENTORIES. 14. THE ASSESSEE WAS MAKING THE PROVISIONS FOR DIMI NUTION IN THE VALUE OF INVENTORIES ON YEAR TO YEAR BASIS BY DEBITING THE P ROFIT & LOSS ACCOUNT. THE ASSESSEE WAS CONSISTENTLY DISALLOWING THE AMOUNT OF SAID PRO VISION DEBITED IN THE PROFIT & LOSS ACCOUNT IN THE COMPUTATION OF INCOME. HOWEVER FOR T HE YEAR UNDER CONSIDERATION THE OPENING BALANCE OF THE PROVISION FOR DIMINUTION IN THE VALUE OF INVENTORIES WAS INR 6,60,23,000/- AND THE CLOSING BALANCE OF THE PROVIS IONS WAS INR 6,52,75,000/-. SO THE EXCESS PROVISION OF RS.7,53,519/- WAS WRITTEN BACK BY CREDITING THE PROFIT & LOSS ACCOUNT. THE ASSESSEE WAS ENTITLED TO CLAIM THE DED UCTION FROM THE COMPUTATION OF INCOME FOR SAID AMOUNT BUT HE INADVERTENTLY ADDED B ACK THE SAME IN THE COMPUTATION OF INCOME. ACCORDINGLY, THE ASSESSEE REQUESTED THE AO ALLOW THE DEDUCTION OF THE ABOVE STATED AMOUNT FROM THE COMPUTATION OF INCOME. HOWEVER THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT THE THE RE IS NO PROVISION UNDER THE INCOME TAX ACT TO MAKE ANY CHANGE IN THE RETURN OF INCOME BY WAY OF APPLICATION WITHOUT FILING THE REVISED RETURN. 15. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO DRP W HO HAS UPHELD THE ORDER OF THE AO BY OBSERVING AS UNDER : DRP HAS DULY EXAMINED THE ISSUE. IT IS SEEN THAT T HE ASSESSEE HA S NOT FILED ANY REVISED RETURN WITH RESPECT TO ITS CLAIM OF NON -TAXABILITY OF PROVISION ADDED TO TAXABLE INCOME IN ROI. ACCORDINGLY, RELYING UPON RATIO OF DECISION OF ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 42 HON'BLE SUPREME COURT IN THE CASE OF GOETZ INDIA L TD., THE PANEL IS NOT INCLINED TO INTERFERE WITH ACTION OF THE AO. THE OB JECTION IS DISMISSED. 15.1 AGGRIEVED BY THE ORDER OF DRP, THE ASSESSEE IS IN SECOND APPEAL BEFORE US . THE LD. AR BEFORE US SUBMITTED THAT THE APPELLANT F OLLOWS A CONSISTENT ACCOUNTING POLICY OF ADDING BACK THE EXCESS PROVISION WHILE CO MPUTING TAXABLE INCOME IN CASE THE CLOSING BALANCE EXCEEDS THE OPENING BALANCE AND DEDUCTING THE EXTRA PROVISION CREATED IN CASE THE OPENING BALANCE EXCEEDS THE CLO SING BALANCE OF THE PROVISION. THE SAID PRINCIPLES HAVE BEEN ACCEPTED BY THE AD IN ALL THE PRIOR YEARS. IN THE ASSESSMENT YEAR UNDER CONSIDERATION, YOUR HO NORS MAY PLEASE NOTE THAT THE OPENING BALANCE OF THE PROVISION FOR DIMINUTION IN THE VALUE OF INVENTORIES WAS INR 6,60,23,0001/- WHILE THE CLOSING BALANCE OF THE PRO VISIONS WAS INR 6,52,75,0001/- THEREBY LEADING TO AN EXCESS PROVISION OF INR 7,53, 519/- BEING CREATED DURING THE YEAR WHICH WAS OTHERWISE ENTITLED TO DEDUCTION FROM THE COMPUTATION OF INCOME BUT WAS INADVERTENTLY ADDED BACK IN THE COMPUTATION OF TOTA L TAXABLE INCOME. IN VIEW OF OUR ABOVE SUBMISSIONS, THAT THE ABOVE AM OUNT REPRESENTING THE EXCESS PROVISIONS IS NOT TAXABLE IN THE HANDS OF THE APPEL LANT. IT WAS AN INADVERTENT MISTAKE COMMITTED BY THE APPELLANT WHILE FILING THE RETURN OF INCOME WHICH SHOULD HAVE BEEN OTHERWISE NOT ADDED TO THE TOTAL INCOME OF THE APPE LLANT. 16. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORT ED THE ORDER OF THE AO. 17. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSES SEE INADVERTENTLY ADDED BACK THE NEGATIVE BALANCE OF THE OPENING AND CLOSING PROVISI ONS MADE FOR DIMINUTION IN THE VALUE OF INVENTORIES IN THE RETURN FILED WHICH SHOU LD HAVE OTHERWISE REDUCED FROM THE TOTAL INCOME OF THE APPELLANT. LATER ON, REALIZING THE INADVERTENT MISTAKE, THE ASSESSEE FILED A WRITTEN SUBMISSION BEFORE THE AO DATED 2ND MARCH, 2015 PRAYING BEFORE THE AO TO ALLOW THE DEDUCTION OF THE EXCESS PROVISION W HICH WAS INADVERTENTLY ADDED BACK. THE SAME WAS TURNED DOWN BY THE ASSESSING OFF ICER ON THE ALLEGED GROUND THAT THE SAME COULD ONLY BE RECTIFIED BY A REVISED RETUR N AND AS THE APPELLANT HAS NOT FILED ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 43 THE REVISED RETURN THE SAME COULD NOT BE ENTERTAINE D EVEN AFTER ACCEPTING THE FACT THAT THE APPELLANT SHOULD HAVE BEEN ALLOWED WITH THE CLA IM. NOW THE QUESTION BEFORE US ARISES WHETHER THE DEDUCTION CAN BE ALLOWED WITHOUT FILING THE REVISED RETURN. IN THIS CONNECTION, WE RELY IN THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT RENDERED IN THE CASE OF CIT VS. BHASKAR MITTER REPORTED IN 73 TAXMA N 437 (CAL) WHEREIN THE HON'BLE COURT HAS HELD AS UNDER: 'THE REVENUE AUTHORITIES IN OUR VIEW CANNOT BE HEAR D TO SAY THAT MERELY BECAUSE THE ASSESSEE HAS RETURNED A FIGURE WHICH IS HIGHER THAT THE ANNUAL VALUE DETERMINED IN ACCORDANCE WITH THE CORRECT LEG AL PRINCIPLES, SUCH HIGHER AMOUNT AND NOT THE CORRECT AMOUNT SHOULD BE LAWFULL Y ASSESSED. AN ASSESSEE IS LIABLE TO PAY TAX UPON SUCH INCOME AS CAN BE IN LAW INCLUDED IN THE TOTAL INCOME AND WHICH CAN BE LAWFULLY ASSESSED UNDER THE ACT. THE LAW EMPOWERS THE ITO TO ASSESS THE INCOME OF AN ASSESSEE ACCORDI NG TO LAW AND DETERMINE THE TAX PAYABLE THEREON. IN DOING SO HE CANNOT ASSESS A N ASSESSEE ON AN AMOUNT, WHICH IS NOT TAXABLE IN LAW, EVEN IF THE SAME IS SH OWN BY AN ASSESSEE. THERE IS NO ESTOPPELS BY CONDUCT AGAINST LAW NOR IS THERE AN Y WAIVER OF THE LEGAL RIGHT AS MUCH AS THE LEGAL LIABILITY TO BE ASSESSED OTHER WISE THAN ACCORDING TO THE MANDATE OF THE LAW (SIC). IT IS ALWAYS OPEN TO AN A SSESSEE TO TAKE THE PLEA THAT THE FIGURE, THOUGH SHOWN IN HIS RETURN OF INCOME, I S NOT TAXABLE IN LAW. ' WE ALSO RELY IN THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SHELLY PRODUCTS AND ANOTHER REPORTED IN 261 ITR 367 , WHEREIN THE HON'BLE SUPREME COURT HAS INTER-ALIA HELD THAT IF AN ASSESSEE BY MI STAKE OR INADVERTENCE OR ON ACCOUNT OF IGNORANCE OF LAW INCLUDED IN ITS INCOME ANY AMOU NT WHICH IS EXEMPT FROM PAYMENT OF INCOME TAX OR IS NOT INCOME WITHIN THE CONTEMPLA TION OF LAW, HE MAY BRING TO THE NOTICE OF THE ASSESSING AUTHORITY WHICH, IF SATISFI ED, MAY GRANT HIM RELIEF AND REFUND THE TAX PAID IN EXCESS, IF ANY. 17.1 IN THIS CONNECTION, WE ALSO FIND THAT THE ISSU E ON SIMILAR FACTS HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY THE HON'BLE KOLKATA TRIBUN AL RENDERED IN THE CASE OF DC IT VS. JUSTICE OILIP KUMAR SETH REPORTED IN 98 ITO 241 (KO I) WHEREIN THE HON'BLE TRIBUNAL HAS HELD THAT THE ASSESSING OFFICER IS WEL L COMPETENT TO RECTIFY ANY MISTAKE WHICH IS BROUGHT TO ITS NOTICE BY THE ASSESSEE ALSO AND THEREFORE, THE OBSERVATION OF ASSESSING OFFICER AND THE LD OR THAT SUCH MISTAKE C OMMITTED BY THE ASSESSEE COULD BE RECTIFIED VIDE REVISED RETURN ONLY, DOES NOT STA ND AT ALL. ITA NO.179/KOL/2016 A.Y 201 1-12 AT & S INDIA PVT. LTD. VS. DCIT CIR-11(1), K OL PAGE 44 17.2 IN VIEW OF THE ABOVE WE ARE INCLINED TO REVERS E THE ORDER OF AUTHORITIES BELOW AND DELETE THE DISALLOWANCE MADE BY THE ASSESSING O FFICER / DRP AMOUNTING TO INR 7,53,519/- IN RESPECT OF THE NEGATIVE PROVISIONS FO R DIMINUTION IN THE VALUE OF INVENTORIES. 18. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 03/08/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 03/08/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-AT & S INDIA PVT. LTD., 12A INDUSTRIAL A REA, NANJANGUD 571301, MY SORE DIST. KARNATAKA 2. /RESPONDENT-DCIT,CIRCLE-11(1),AAYAKAR BHAWA, 7, CHO WRINGHEE SQ. KOL-69 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,