Assistant Commisioner of Income-tax, Pune V. Sudarshan Chemical Inudstries Limited,

ITA 1792/PUN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0378 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: DANESH BAFNA
• Keywords: Transfer pricing; International transaction
• Section: 92C; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . . , , # , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 1792/PN/2013 %( ( / ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -6, SWARGATE, PMT BUILDING, PUNE ....... / APPELLANT / V/S. SUDARSHAN CHEMICAL INDUSTRIES LIMITED, 162, WELLESLEY ROAD, PUNE 411001 PAN : AABCS4223P / RESPONDENT *+& . / CO NO. 67/PN/2014 %( ( / ASSESSMENT YEAR : 2005-06 SUDARSHAN CHEMICAL INDUSTRIES LIMITED, 162, WELLESLEY ROAD, PUNE 411001 PAN :AABCS4223P ....... / APPELLANT / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -6, PUNE / RESPONDENT ASSESSEE BY : SHRI DANESH BAFNA REVENUE BY : SHRI P.L. KUREEL / DATE OF HEARING : 10-11-2016 / DATE OF PRONOUNCEMENT : 25-11-2016 2 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 / ORDER PER VIKAS AWASTHY, JM THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST O RDER OF COMMISSIONER OF INCOME TAX (APPEALS)IT/TP, PUNE DA TED 12.07.2013 FOR THE ASSESSMENT YEAR 2005-2006. THE A SSESSEE HAS FILED CROSS OBJECTIONS IN THE APPEAL FILED BY THE D EPARTMENT. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RE CORDS ARE: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING PIGMENTS, DYE STUFF, AND PESTICIDES. DURING THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSE E ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AE AND THU S REFERENCE UNDER SECTION 92 CA (1) OF INCOME TAX ACT, 1961 (IN SHORT THE ACT) WAS MADE TO THE TRANSFER PRICING OFFICER (TPO ).THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSE SSEE WITH ITS ASSOCIATED ENTERPRISES (AE) ARE AS UNDER: SR. NO. DESCRIPTION OF TRANSACTION WITH AE AMOUNT RECEIVED/PAID AS PER BOOKS 1. PURCHASE OF RAW MATERIAL RS. 2,58,17,253/- 2. SALE OF FINISHED GOODS RS. 45,30,20,443/- 3. COMMISSION PAID RS. 48,20,826/- 3. THE ASSESSEE SELECTED COST PLUS METHOD (CPM) AS MOST APPROPRIATE METHOD FOR BENCHMARKING ITS INTERNATION AL TRANSACTIONS. THE ASSESSEE MADE CERTAIN ADJUSTMENTS , TO THE COST AND SALES PRICE TO ARRIVE AT ARMS LENGTH PRICE (AL P). THE TPO REJECTED THE ADJUSTMENTS MADE BY THE ASSESSEE IN RE SPECT OF 3 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 UNRELATED PARTIES WHILE ARRIVING AT ALP. THE TPO MA DE UPWARD ADJUSTMENT OF RS. 5,58,02,100/- IN ASSESSEES INCOM E. ON THE BASIS OF THE ORDER OF TPO, THE ASSESSING OFFICER PA SSED ASSESSMENT ORDER DATED 25.11.2008 INTER ALIA MAKING ADDITION RS. 5,58,02,100/- IN THE INCOME RETURNED BY THE ASS ESSEE. 4. AGAINST THE ASSESSMENT ORDER DATED 25.11.2008, T HE ASSESSEE PREFERRED THE APPEAL BEFORE THIS CIT (A). THE ASSESSEE DURING FIRST APPELLATE PROCEEDING RE-COMPUTERED ALP BY ADOPTING CUP AS MOST APPROPRIATE METHOD. THE CIT (A) SOUGHT REMAND REPORT FROM THE A.O. ON CHANGE OF METHOD FOR COMPUT ING ALP. ON THE BASIS OF REMAND REPORT AND THE SUBMISSION OF AS SESSEE, THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED CUP M ETHOD APPLIED BY THE ASSESSEE AS THE MOST APPROPRIATE MET HOD FOR DETERMINING ALP. 5. AGAINST THE FINDINGS OF COMMISSIONER OF INCOME T AX (APPEALS), THE REVENUE IS IN APPEAL AND THE ASSESSE E HAS FILED CROSS OBJECTIONS IN THE APPEAL FILED BY THE DEPARTM ENT. THE DEPARTMENT HAS ASSAILED THE FINDINGS OF CIT (A) BY RAISING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS E RRED IN DELETING THE TRANSFER PRICE ADJUSTMENT OF RS. 5,58,02,100/-. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD ER RED IN HOLDING THAT THE ASSESSEE CAN CHANGE ITS ADMITTED POSITION TO SAVE ITSELF FROM THE DISADVANTAGE. 3. FOR THIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX 4 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 ( APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THIS APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELL ATE PROCEEDINGS BEFORE THE HONBLE TRIBUNAL. 6. SHRI P.L. KUREEL APPEARING ON BEHALF OF THE DEPA RTMENT SUBMITTED THAT THE ASSESSEE IN ITS TP STUDY HAD ADO PTED CPM AS THE MOST APPROPRIATE METHOD FOR DETERMINING ALP. DU RING FIRST APPELLATE PROCEEDING, THE ASSESSEE CHANGED THE METH OD OF DETERMINING ALP FROM CPM TO CUP. THE CIT (A) HAS ER RED IN HOLDING THAT THE ASSESSEE CAN CHANGE METHOD OF DETE RMINING ALP. THE LD. D.R. SUBMITTED THAT THE ASSESSEE HAS CHANGE D METHOD OF DETERMINING ALP ONLY AFTER THE TPO HAS REJECTED ADJ USTMENTS MADE BY THE ASSESSEE AND MADE UPWARD ADJUSTMENT IN THE INTERNATIONAL TRANSACTION. LD. DR PRAYED FOR SETTIN G ASIDE THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AN D UPHOLDING THE ASSESSMENT ORDER. 7. ON THE OTHER HAND SHRI DANESH BAFNA APPEARING O N BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE FINDINGS O F THE COMMISSIONER OF INCOME TAX (APPEALS) IN ACCEPTING C UP METHOD AS THE MOST APPROPRIATE METHOD ADOPTED BY ASSESSEE IN DETERMINING ALP. LD. AR SUBMITTED THAT THE ASSESSE E HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH DAINIPPON INK & CHEMICALS INC, JAPAN (DIC) ITS ASSOCIATED ENTERPRISES. IN TP STUDY, THE ASSESSEE APPLIED CPM AS MOST APPROPRIATE METHOD ON THE BASIS OF INFORMATION AVAILABLE. THE ASSESSEE MADE CERTAIN AD JUSTMENTS ON COST SIDE AS WELL AS ON INCOME SIDE WITH UNCONTROLL ED TRANSACTIONS 5 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 TO MAKE IT COMPARABLE WITH THE CONTROLLED TRANSACTI ON. THE TPO REJECTED THE ADJUSTMENTS WHICH RESULTED IN UPWARD R EVISION OF INTERNATIONAL TRANSACTIONS BY RS.5, 58,02,100/-. A T THE TIME OF TP STUDY, THE DETAILS WERE NOT AVAILABLE WITH THE ASSE SSEE SO THAT THE ASSESSEE COULD APPLY CUP METHOD. SUBSEQUENTLY, WHEN THE ASSESSEE GOT THE DETAILS, THE ASSESSEE FURNISHED RE -COMPUTERED ALP BY APPLYING CUP BEFORE TPO. BUT THE TPO DID NOT TAKE COGNIZANCE OF THE SAME. THE ASSESSEE FURNISHED THE SAME DETAILS BEFORE THE FIRST APPELLATE AUTHORITY. THE COMMISSIO NER OF INCOME TAX (APPEALS) SOUGHT REMAND REPORT FROM THE AO. IN THE REMAND REPORT A.O ACCEPTED THAT CUP METHOD CAN BE APPLIED IN THE INSTANT CASE. HOWEVER, THE A.O OBJECTED FOR APPLYIN G CUP METHOD MERELY ON THE GROUND THAT IN TP STUDY, THE ASSESSEE HAD APPLIED CPM AND THE ASSESSEE CANNOT BE ALLOWED TO CHANGE TH E METHOD OF DETERMINING ALP AT SUBSEQUENT STAGE. THE LD. AR SU BMITTED THAT THE PROVISION OF ACT AND THE RULES MADE THERE UNDER ENVISAGE THAT MOST APPROPRIATE METHOD SHOULD BE ADOPTED IN DETERM INING ALP. CUP IS DIRECT AND ONE OF MOST ACCEPTABLE METHOD AND IT IS ONLY WHEN SUFFICIENT INFORMATION IS NOT AVAILABLE, OTHER METHODS PRESCRIBED UNDER SECTION 92 C OF THE ACT ARE APPLIE D. THE ACT DOES NOT PUT RESTRICTIONS ON CHANGING METHOD FOR DETERMI NING ALP IF SUBSEQUENT METHOD APPLIED, GIVES BETTER COMPARISON. THE LD. AR IN ORDER TO BUTTRESS IS CONTENTION THAT THERE IS NO BAR IN CHANGE OF METHOD PLACED LINE ON THE DECISION OF MUMBAI BENCH OF TRIBUNAL IN THE CASE MATTEL TOYS (I) PVT LTD V/S. DCIT REPOR TED AS 30 ITR (TRIB) 283 AND IN THE CASE OF ACIT V/S M/S CHEMTEX GLOBAL 6 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 ENGINEERING PVT. LTD IN ITA NO. 3590/MUM/2010 IN A. Y. 2004-05 DECIDED ON 12.06.2013. 8. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. W E HAVE ALSO CONSIDERED THE DECISIONS AND DOCUMENTS ON WHICH LD. AR HAS PLACED RELIANCE. THE PRIMARY QUESTION WHICH HAS BE EN EMERGED FROM THE SUBMISSION OF THE LD. D.R. AND THE GROUNDS OF APPEALS IS: WHETHER THE ASSESSEE CAN CHANGE THE METHOD OF DETER MINING ALP? IN THE PRESENT CASE UNDISPUTEDLY, THE ASSESSEE HAD ADOPTED CPM AS MOST APPROPRIATE METHOD DURING TRANSFER PRICE ST UDY. THE ASSESSEE HAD MADE CERTAIN ADJUSTMENT ON COST SIDE A ND INCOME SIDE OF THE UNCONTROLLED TRANSACTIONS TO MAKE IT CO MPARABLE WITH CONTROLLED TRANSACTION. OSTENSIBLY, THE DETAILS WE RE NOT AVAILABLE WITH THE ASSESSEE AT THE TIME OF TP STUDY SO AS TO APPLY CUP METHOD. SUBSEQUENTLY, WHEN ALL THE DETAILS WERE AVA ILABLE, THE ASSESSEE DETERMINED ALP BY APPLYING CUP METHOD. DUR ING FIRST APPELLATE PROCEEDINGS, THE COMMISSIONER OF INCOME T AX (APPEALS) SOUGHT REMAND REPORT FROM THE A.O REGARDING MERITS OF APPLICATIONS OF CUP METHOD. THE A.O. ACCEPTED IN P RINCIPLE THAT CUP METHOD IS MOST DIRECT WAY TO ANALYZE THE ARMS LENGTH PRICE AS IT ENTAILS COMPARING THE PRICES OF IDENTICAL PRO DUCTS, SOLD TO THIRD PARTIES AND ASSOCIATED ENTERPRISES IN IDENTIC AL CONDITION. THE A.O. FURTHER ADMITTED THAT IN THE INSTANT CASE, THIRD PARTY TRANSACTIONS PERTAIN TO SAME ENTITY WHICH IS NOT AS SOCIATED ENTERPRISES FROM A CERTAIN DATE. ACCORDINGLY, THE C IRCUMSTANCES OF SALE ARE IDENTICAL. IN SUCH SCENARIO, IT WOULD BE P OSSIBLE TO 7 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 COMPARE THE PRICES OF THE SAME PRODUCTS WHICH WERE SOLD BEFORE AND AFTER THE PARTY CEASES TO BE AN AE OF THE ASSES SEE AND THUS CUP METHOD CAN BE APPLIED. HOWEVER, A.O. OBJECTS TO APPLYING CUP METHOD ON THE GROUND THAT THE ASSESSEE HAD ADOP TED CPM IN THE TP STUDY. 9. SELECTION OF A METHOD FOR DETERMINING ARMS LENG TH PRICE FOR PARTICULAR TRANSACTION IS SUBJECT TO MOST APPROPRIA TE METHOD RULE AS SET OUT UNDER RULE 10C OF THE INCOME TAX RULES, 1962. RULE 10C (1) PROVIDES THAT FOR THE PURPOSE OF SUB SECTI ON (1) OF SECTION 92C, THE MOST APPROPRIATE METHOD SHALL BE THE METHO D WHICH IS BEST SUITED IN THE FACTS AND CIRCUMSTANCE OF PARTIC ULAR INTERNATIONAL TRANSACTION AND WHICH PROVIDES MOST RELIABLE RESULT OF ARMS LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTION. ANY OF THE METHODS GIVEN IN SECTION 92C (1) OF THE ACT, MAY BE SELECTED AS THE MOST APPROPRIATE METHOD, PROVIDED IT GIVES T HE BEST ESTIMATE OF THE ARMS LENGTH PRICE. IN EVALUATING, WHETHER THE METHOD IS BEST SUITED, FOLLOWING FACTORS ARE TO BE KEPT IN MIND: I) THE NATURE AND CLASS OF INTERNATIONAL TRANSACTI ON II) DEGREE OF COMPARABILITY BETWEEN CONTROLLED AND UNCONTROLLED TRANSACTION. III) THE CLASS OR CLASSES OF AES ENTERING INTO TR ANSACTIONS & FUNCTIONS PERFORMED BY THEM IV) RELIABILITY OF DATA AND ASSUMPTIONS. V) THE EXTENT OF RELIABLE ADJUSTMENTS THAT CAN BE M ADE TO FACTOR THE DIFFERENCES BETWEEN THE TRANSACTIONS BEI NG COMPARED. 8 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 10. THE RESULT IS MORE RELIABLE IF UNCONTROLLED TRA NSACTION IS CLOSELY COMPARABLE TO THE CONTROLLED TRANSACTIONS. CUP BEING DIRECT METHOD IS PREFERRED OVER OTHER METHODS LISTE D IN SECTION 92C (1) OF THE ACT. IF CUP METHOD IS NOT APPLICABL E BECAUSE OF ABSENCE OF COMPARABLES OR THE RELEVANT DATA, THE OT HER METHOD GIVING THE MOST FAIR RESULT, CAN BE APPLIED. IF AT THE TIME OF TP STUDY, THE DETAILS ARE NOT AVAILABLE WITH THE ASSES SEE TO APPLY CUP METHOD, THERE IS NO RESTRICTION ON THE ASSESSEE FOR RE-COMPUTING ALP BY APPLYING CUP, IF DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE RELEVANT DATA COMES IN POSSESSION O F THE ASSESSEE. THE ENDEAVOR SHOULD BE TO APPLY THE MOST APPROPRIATE METHOD WHICH WOULD GIVE CLOSEST RESULT. THERE IS NO BAR UNDER THE ACT OR RULES MADE THERE UNDER WHICH RESTRICTS THE A SSESSEE TO CHANGE THE METHOD OF DETERMINING ALP. HOWEVER, IT S HOULD BE KEPT IN MIND THAT THE CHANGE OF METHOD SHOULD BE FO R BONAFIDE REASONS AND NOT IN AN ARBITRARY MANNER JUST TO CIRC UMVENT ADJUSTMENT PROPOSED BY THE TPO. 11. THE MUMBAI BENCH OF TRIBUNAL IN THE CASE MATTEL TOYS (I) PVT LTD V/S. DCIT (SUPRA) HAS HELD THAT THE ASSESSE E IS NOT PRECLUDED FROM ADOPTING THE MOST APPROPRIATE METHOD AT THE SUBSEQUENT STAGE EVEN IF, THE ASSESSEE ADOPTED SOME OTHER METHOD AS MOST APPROPRIATE METHOD IN THE TRANSFER P RICE REPORT. IN THE SAID CASE, ASSESSEE ADOPTED TNMM AS MOST APP ROPRIATE METHOD IN TRANSFER PRICING STUDY. DURING FIRST APPE LLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT TNMM WAS N OT MOST 9 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 APPROPRIATE METHOD AND RESALE PRICE METHOD (RPM) SH OULD BE ADOPTED. THE COMMISSIONER OF INCOME TAX (APPEALS) R EJECTED THE SAME. THE TRIBUNAL HELD THAT IF ALP OF ANY TRANSACT ION CAN BE DETERMINED BY APPLYING ANY OF THE DIRECT METHODS LI KE CUP, RPM, CPM, THEN THEY SHOULD BE GIVEN PREFERENCE. ONCE THE TRADITIONAL METHOD HAS BEEN RENDERED IN APPLICABLE THEN ONLY TN MM SHOULD BE RESORTED TO. THE RELEVANT EXTRACT OF THE FINDIN GS OF THE TRIBUNAL ARE AS UNDER:- 41 . NOW COMING TO THE ARGUMENT OF THE LEARNED DEPARTM ENTAL REPRESENTATIVE THAT ONCE THE ASSESSEE ITSELF HAS CH OSEN TNMM AS MOST APPROPRIATE METHOD IN TPR, AND THEN IT CANNOT RESOR T TO CHANGE ITS METHOD AT AN ASSESSMENT OR APPELLATE STATE. IN OUR OPINION, SUCH A CONTENTION CANNOT BE UPHELD BECAUSE IF IT IS FOUND ON THE FACTS OF THE C ASE THAT A PARTICULAR METHOD WILL NOT RESULT INTO PROPER DETERMINATION OF THE AL P, THE TPO OR THE APPELLATE AUTHORITIES CAN VERY WELL HOLD THAT WHY A PARTICULA R METHOD CAN BE APPLIED FOR GETTING PROPER DETERMINATION OF ALP OR THE ASSESSEE CAN DEMONSTRATE A PARTICULAR METHOD TO JUSTIFY ITS ALP. THUS, EVEN IF THE ASSESSEE HAD ADOPTED TNMM AS THE MOST APPROPRIATE METHOD IN THE TRANSFER PRICING REPORT, THEN ALSO IT IS NOT PRECLUDED FROM RAISING THE CONTENTIONS/ OBJE CTIONS BEFORE THE TPO OR THE APPELLATE COURTS THAT SUCH A METHOD WAS NOT AN APPR OPRIATE METHOD AND IS NOT RESULTING INTO PROPER DETERMINATION OF ALP AND SOME OTHER METHOD SHOULD BE RESORTED. THE ULTIMATE AIM OF THE TRANSFER PRICING IS TO EXAMINE WHETHER THE PRICE OR THE MARGIN ARISING FROM AN INTERNATIONAL TRANSAC TIONS WITH 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. TH EREFORE, IF AT ANY STAGE OF THE PROCEEDINGS, IT IS FOUND THAT BY ADOPTING ONE O F THE PRESCRIBED METHODS OTHER THAN CHOSEN EARLIER, THE MOST APPROPRIATE ALP CAN BE 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 10 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 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 LEAR NED DEPARTMENTAL REPRESENTATIVE AND ALSO THE OBSERVATIONS OF THE ASS ESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) THAT THE ASSESSEE CA NNOT RESORT TO ADAPTION OF RPM METHOD INSTEAD OF TNMM. [ EMPHASIS APPLIED BY US ] 12. SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN THE C ASE ACIT V/S. CHEMTEX GLOBAL ENGINEERING PVT LTD (SUPRA) WHEREIN CHANGE OF MOST APPROPRIATE METHOD WAS ACCEPTED. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL IS AS UNDER: 26. FURTHER, THE ACT DOES NOT PROVIDE THAT AN ASSE SSEE HAS TO CHOOSE A PARTICULAR METHOD FOR BENCHMARKING ITS TRANSACTIONS . EVEN, IF A PARTICULAR METHOD IS CHOSEN AT THE TIME OF FURNISHING IT STUDY REPORT THE COMPANY CAN ALWAYS SUPPORT ITS TRANSACTIONS WITH ANOTHER ME THOD. IN THE INSTANT CASE ALL THE DETAILS WERE FURNISHED BEFORE THE TPO AND THE A.O TO HIGHLIGHT THAT THE AVERAGE HOURLY RATE CHARGED TO T HE THIRD PARTIES WERE LOWER COMPARED TO THE AE AND HENCE THE INTERNATIONA L TRANSACTIONS WERE AT ARMS LENGTH. EVEN AT THIS STAGE, THE LD. DR COU LD NOT PLACE ANY MATERIAL ON RECORD TO JUSTIFY THAT THE ASSESSEE IS PRECLUDED FROM TAKING SUPPORT FROM ANY OTHER METHOD FOR BENCHMARKING ITS TRANSACTIONS. IN OTHER WORDS, THE INCOME TAX ACT DOES NOT PRECLUDE T HE ASSESSEE FROM BENCHMARKING ITS TRANSACTIONS WITH THE HELP OF ANY OTHER METHOD OTHER THAN THE ONE WHICH IS TAKEN FOR CONSIDERATION IN IT S STUDY REPORT. 27. FOR THE PURPOSE OF SUB SECTION (1) OF SECTION 9 2C OF THE ACT THE MOST APPROPRIATE METHOD HAS TO BE SELECTED BY THE A.O. R ULE 10C ALSO PROVIDES THAT MOST APPROPRIATE METHOD SHALL BE THE METHOD WHICH IS BEST SUITED TO THE FACTS AND CIRCUMSTANCES OF EACH PARTI CULAR INTERNATIONAL TRANSACTION. IN OTHER WORDS, THE A.O./TPO HAS TO EX ERCISE THEIR JUDICIAL DISCRETION IN CONSIDERING AS TO WHETHER THE METHO D/ METHODS ADOPTED BY THE ASSESSEE IS SUITABLE TO THE FACTS OF THE CAS E AND IF , IN THEIR OPINION, THE METHOD FOLLOWED BY THE ASSESSEE IS N OT SUITABLE , THE A.O./TPO HAS TO GIVE SHOW CAUSE NOTICE TO THE ASSES SEE BEFORE ADOPTING AN APPROPRIATE METHOD. ORDINARILY, IN SERVICE CONTR ACTS, CUP METHOD IS MORE SUITABLE, WHERE AN ASSESSEE ENTERS INTO AGREEM ENT WITH UNRELATED THIRD PARTIES ON SIMILAR LINES AS THAT OF AE. WHEN SUCH FACTS ARE 11 ITA NO. 1792/PN/2013 & CO NO. 67/PN/2014 AVAILABLE, THE A.O./ TPO HAS TO GIVE THEIR REASONS BEFORE REJECTION OF THE DATA FURNISHED BY THE ASSESSEE. 13. THUS, IN VIEW OF THE FACTS OF THE CASE AND DECI SIONS DISCUSSED ABOVE, WE ARE OF CONSIDERED VIEW THAT THE ASSESSEE IS NOT PRECLUDED FROM CHANGING MOST APPROPRIATE METHOD FOR DETERMINING ALP. ACCORDINGLY, WE DO NOT FIND MERIT IN THE APPEAL OF REVENUE AND THUS THE SAME IS DISMISSED. 14. THE ASSESSEE HAS FILED CROSS OBJECTIONS IN THE APPEAL BY DEPARTMENT. SINCE, THE APPEAL OF REVENUE IS DISMISS ED, THE OBJECTIONS BY ASSESSEE HAVE BECOME INFRUCTUOUS AND THEY ARE DISMISSED AS SUCH. 15. IN THE RESULT, THE APPEAL OF REVENUE, AS WELL A S CROSS OBJECTIONS BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY , THE 25TH DAY OF NOVEMBER, 2016. SD/- SD/- SSDS ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) ' / ACCOUNTANT MEMBER $% ' / JUDICIALMEMBER / PUNE; & / DATED : 25TH NOVEMBER, 2016 SB - *%/# 0# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A)-IT/TP, PUNE 4. THE CIT-III, PUNE 5. ! %%) , ) , , , / DR, ITAT, B BENCH, PUNE. 6. . / GUARD FILE. / BY ORDER, // TRUE COPY// % ) / PRIVATE SECRETARY, ) , / ITAT, PUNE