Intimate Fashions (India) Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2108/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61220 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 23-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Transfer pricing; International transaction
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.2116/MDS/2010 & 2108/MDS/2011 (ASSESSMENT YEARS: 2006-07 & 2007-08) M/S. INTIMATE FASHIONS (INDIA) PVT.LTD. C/O.S.VENKATRAM & CO., CAS., 218, TTK ROAD, ALWARPET, CHENNAI-600 018. PAN:AAACI2706C VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(3), CHENNAI-600 034. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. G.SEETHARAMAN, CA RESPONDENT BY : MR. K. E.B.RENGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 20 TH JUNE, 2012 DATE OF PRONOUNCEMENT : 28 TH JUNE, 2012 O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER: THESE ARE APPEALS OF THE ASSESSEE DIRECTED AGAINST ORDERS DATED 22.10.2010 & 28.09.2011 PASSED BY THE ASSESSING OFFICER PURSUANT TO THE DIRECTIONS FROM D ISPUTE RESOLUTION PANEL (DRP IN SHORT) FOR THE RESPECTIV E ASSESSMENT YEARS. GROUNDS TAKEN FOR BOTH THE ASSESS MENT YEARS ARE SIMILAR. THERE ARE TWO ISSUES ARISING OU T OF SUCH GROUNDS. ONE IS WITH REGARD TO DETERMINATION OF ARM S LENGTH PRICE WHICH RESULTED IN AN ADJUSTMENT OF ` 60,43,329/- FOR ITA NOS.2116/MDS/2010 & 2108/MDS/2011 2 ASSESSMENT YEAR 2006-07 AND ` 11,03,219/- FOR ASSESSMENT YEAR 2007-08. SECOND IS REGARDING EXCLUSION OF TELECOMMUNICATION AND FOREIGN CURRENCY EXPENSES FRO M EXPORT TURNOVER. 2. ITA NO.2108/MDS/2011 HAS BEEN FILED WITH A DELA Y OF 17 DAYS. APPLICATION FOR CONDONATION OF DELAY, CIT ING REASONS FOR THE DELAY HAS ALSO BEEN FILED ALONG WITH THE APPEAL. BEING SATISFIED ABOUT THE EXISTENCE OF REASONABLE C AUSE AND IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY OF 17 DAYS IN FILING OF THE APPEAL AND ADMIT THE SAME FOR DISPOS AL. 3. IN ALL THE GROUNDS OF THE ASSESSEE, IT IS ALLEG ED THAT THE ERRORS WERE ALL COMMITTED BY DISPUTE RESOLUTION PAN EL, SINCE THE PANEL DID NOT CONSIDER VARIOUS SUBMISSIONS MADE BY THE ASSESSEE ON THE DRAFT ASSESSMENT ORDER OF THE ASSES SING OFFICER. 4. DEPARTMENTAL REPRESENTATIVE RAISED A PRELIMINARY OBJECTION THAT THE GROUNDS REQUIRED TO BE MODIFIED SINCE IT ASSAILED THE ORDER OF THE DRP AND NOT THAT OF ASSES SING OFFICER. AS PER LEARNED D.R., NO APPEAL COULD BE FI LED AGAINST THE ORDER OF THE DRP. ON THIS LEARNED COUNSEL FOR T HE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 3 ASSESSEE SUBMITTED THAT THE APPEAL HAS BEEN FILED A GAINST THE ORDER OF ASSESSING OFFICER PASSED IN ACCORDANCE WIT H THE DIRECTION OF DRP AND MERE MENTIONING OF DRP IN THE GROUNDS WOULD NOT MAKE THE APPEAL ITSELF DEFECTIVE. 5. WE HAVE HEARD THE CONTENTIONS ON THE PRELIMINARY OBJECTION RAISED BY REVENUE. NO DOUBT, THE ASSESSEE HAS MENTIONED DRP IN ITS GROUNDS OF APPEAL. AS PER THE ASSESSEE, DRP HAD ERRED IN GIVING DIRECTIONS TO THE ASSESSING OFFICER DESPITE ITS VARIOUS OBJECTION. NE VERTHELESS, APPEAL FORM NO.36B FILED BY THE ASSESSEE CLEARLY S HOWS THAT THE RESPONDENT IS ASSISTANT COMMISSIONER OF INCOME TAX, WHO IS THE ASSESSING OFFICER OF THE ASSESSEE. IN OU R OPINION, A MERE ERROR IN MENTIONING DRP INSTEAD OF ASSESSING OFFICER IN THE GROUNDS OF APPEAL WOULD NOT BY ITSELF MAKE T HE APPEAL DEFECTIVE, WHEN OTHERWISE THE GROUNDS CLEARLY BRING OUT THE GRIEVANCES OF THE ASSESSEE. WE, THEREFORE, REJECT T HE PRELIMINARY OBJECTION RAISED BY THE REVENUE AND PRO CEED TO ADJUDICATE THE APPEALS. ITA NOS.2116/MDS/2010 & 2108/MDS/2011 4 6. SINCE FACTS ARE COMMON FOR BOTH THE YEARS EXCEPT FOR DIFFERING FIGURES, THOSE FOR ASSESSMENT YEAR 2006- 07 ARE ONLY DISCUSSED. 7. ASSESSEE ENGAGED IN THE MANUFACTURE OF LINGERIE FOR WOMEN, HAD FILED RETURNS FOR THE RESPECTIVE ASSESSM ENT YEARS CLAIMING DEDUCTION UNDER SECTION 10B OF THE ACT. SU CH DEDUCTION CLAIMED FOR ASSESSMENT YEAR 2006-07 WAS ` 48,19,56,290/-, WHEREAS IT WAS ` 55,63,49,731/- FOR ASSESSMENT YEAR 2007-08. DURING THE COURSE OF ASSES SMENT PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER T HAT ASSESSEE HAD VARIOUS INTERNATIONAL TRANSACTIONS WIT H ASSOCIATED ENTERPRISES (AES IN SHORT). ACCORDINGLY HE MADE A REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE T RANSFER PRICING OFFICER (TPO IN SHORT) FOR DETERMINATION OF ARMS LENGTH PRICE RELATING TO INTERNATIONAL TRANSACTIONS ENTERE D BY THE ASSESSEE WITH ITS AES. THE TPO IN TURN REQUIRED TH E ASSESSEE TO FILE VARIOUS TRANSFER PRICING DOCUMENTS WHICH WERE FILED BY THE ASSESSEE IN DUE COURSE BEFORE THE TOP. ASSESSEE IS A PART OF A GROUP CALLED M/S.TRIUMPH INTERNATIONAL AND MAST INDUSTRIES INC. AND THEY ARE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 5 MANUFACTURING AND SUPPLYING OUTSIDE INDIA LINGERIES IN ACCORDANCE WITH DESIGNS AND SPECIFICATIONS GIVEN BY M/S. TRIUMPH. THE TOTAL INTERNATIONAL TRANSACTIONS OF T HE ASSESSEE FOR PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2 006-07 WERE AS UNDER:- NAME OF THE AE DESCRIPTION AMOUN T IN ` MAST INDUSTRIES INC. USA SALE OF 5294299 PIECES OF LADIES LINGERIES AND FOUNDATION GARMENTS 1983278150 BODY FASHIONS (THAILAND) LTD PURCHASES RAW MATERIALS 98322 BODY LINE PRIVATE LTD. SRILANKA CONSUMABLE MATERIALS 53566 DIRECT EXPENSES LABELS 2921049 MAINTENANCE MACHINERY 166577 PURCHASES 355029 PURCHASES PACKING MATERIALS 1884274 OVERSEAS TRAVEL INSURANCE 6471 FOREIGN TRAVEL 109061 BODY FASHION (M)SDN.BHD PURCHASES-RAW MATERIALS 160 506 TRIUMPH INTERNATIONAL (VIETNAM) LTD PURCHASES-RAW MATERIALS 2988 TRIUMPH INTERNATIONAL (PHILIPPINES) INC. PURCHASES-RAW MATERIALS 17693 TRIUMPH INTERNATIONAL SPIESSHOFER & BRAUN (TI SUB) PURCHASES-RAW MATERIALS 143621762 TRIUMPH INTERNATIONAL OVERSEAS LTD. HONG KONG CONSUMABLE MATERIALS 36433563 MACHINERY ATTACHMENTS 755086 ZIG ZAG MACHINES 199427 IT RELATED COMMUNICATION 113129 TRIUMPH INTERNATIONAL AG GERMANY CONSUMABLE MATERIALS 570310 MAINTENANCE MACHINERY 428699 PRYM INTIMATES LANKA (PVT) LTD PURCHASES-RAW MATERIALS 884864 STRETCHLINE PVT.LTD. PURCHASES-RAW MATERIALS 314947 37 STAR PERFORMANCE INC PURCHASES-RAW MATERIALS 19772 MAS CAPITAL PRIVATE LTD BOOKS, JOURNALS & SUBSCRIPTION 8806 STAFF TRAINING EXPENSES 174791 HEAD OFFICE & BOARD MEETING EXPENSES 1415480 MAINTENANCE MACHINERY 36333 ITA NOS.2116/MDS/2010 & 2108/MDS/2011 6 MAS HOLDINGS PVT.LTD IT RELATED COMMUNICATION 7253 UNICHELA (PVT) LTD. STAFF TRAINING EXPENSES 22270 COURTAULDS CLOTHING LANKA PVT. LTD. FOREIGN TRAVEL 10014 STAFF TRAINING EXPENSES 3059 MAS INTIMATES (PVT) LTD FOREIGN TRAVEL 15294 TRIUMPH INTERNATIONAL OVERSEAS LTD. VADUZ AGENCY COMMISSION PAID 99148076 FOREIGN TRAVEL 819019 TOTAL 2272445430 ASSESSEE HAD ADOPTED CUP METHOD FOR ASCERTAINING TH E ARMS LENGTH PRICE AND JUSTIFYING ITS VARIOUS INTER NATIONAL TRANSACTIONS. TPO NOTED FROM THE ITEM-WISE COMPARA TIVE TABLE GIVEN BY THE ASSESSEE THAT CERTAIN MATERIALS WERE PURCHASED FROM AN AE CALLED TRIUMPH INTERNATIONAL SPIESSHOFER & BRAUN (TI-SUB) (TIB IN SHORT). AS PER THE TPO THERE WERE CERTAIN DIFFERENCES IN PRICE BETWEEN SIMILAR ITEMS PURCHASED BY THE ASSESSEE FROM NON-AES AND AE S. THE PRICE AT WHICH PURCHASES WERE EFFECTED FROM M/S . TIB WERE SUBSTANTIALLY HIGHER THAN THE PRICE AT WHICH S IMILAR ITEMS WERE PURCHASED FROM NON-AES FOR CERTAIN ITEMS. THE LIST PREPARED BY THE TPO WHERE SUCH EXCESSES WERE NOTED IS GIVEN HERE UNDER:- ITEM CODE AE INR PRICE NON -AE PRICE INR DIFFERENCE VALUE VARIATION QUANTITY VALUE ` 15272 140 64 53 11 20.75% 33,720 3,70,920.00 15301 145 91 60.25 30.75 51.03% 11,437 3,51,687.7 5 15303 145 81 50.5 30.75 60.40% 14,169 4,32,154.50 ITA NOS.2116/MDS/2010 & 2108/MDS/2011 7 15418 140 111 68 43 63.23% 16,803 7,22,529.00 28548 000 218 40 178 44.5% 5,251 9,34,678 .00 36228 011 562 409 153 37.40% 21,120 32,31,360.00 TOTAL ` 60,43,329.25 8. ASSESSEE WAS PUT ON NOTICE AS TO WHY EXCESS OF ` 60,43,329.25 PAID TO M/S. TIB FOR THE ABOVE PURCHAS ES SHOULD NOT BE ADDED BACK CONSTRUING THE SAID AMOUNT AS ALP. REPLY OF THE ASSESSEE WAS TYPICAL FOR GOODS FA LLING UNDER EACH OF THE ITEM CODE MENTIONED ABOVE. AS PER THE ASSESSEE, THE MATERIALS FALLING WITHIN ONE CARD NUM BER CONTAINED CLOTH OF DIFFERENT COLOURS AND EACH PURCH ASES WERE MADE IN DIFFERENT LOTS OF SMALL QUANTITIES. ASSESSE E ALSO GAVE A DETAILED LIST OF PROCUREMENTS OF THESE ITEMS, TO SUPPLEMENT ITS ARGUMENT THAT QUANTITIES ORDERED WERE SMALL IN EACH ORDER. AS PER THE ASSESSEE, IF THESE ITEMS WERE PURCHASED FROM NON- AES, THEN A MINIMUM ORDER QUANTITY(MOQ) WOULD HAVE TO BE MAINTAINED, WHEREAS SINCE PURCHASES WERE EFFECTED F ROM AES, SMALL QUANTITIES COULD BE PROCURED. AS PER TH E ASSESSEE FASHION KEPT ON CHANGING AND IF MORE THAN THE REQUI RED QUANTITIES WERE PURCHASED, THE BALANCE WOULD SIMPLY BECOME WASTE. THEREFORE, EVEN IF THE PRICES WERE HIGHER WH EN THESE ITEMS WERE PURCHASED FROM AES, IT HAD TO DO SO SIN CE THEY ITA NOS.2116/MDS/2010 & 2108/MDS/2011 8 ALONE WERE WILLING TO SUPPLY IN SMALL QUANTITIES. A SSESSEE ALSO GAVE A WORK-OUT OF UNWANTED STOCK THAT WOULD HAVE B EEN THERE FOR EACH OF SUCH ITEMS IF PURCHASES WERE MADE FROM NON-AES AT MINIMUM ORDER QUANTITY LEVELS. 9. HOWEVER, THE TPO WAS NOT IMPRESSED BY THIS EXPLANATION. ACCORDING TO HIM, ASSESSEE COULD NOT G IVE ANY CONVINCING REASONS WHY THERE WERE NO MINIMUM ORDER QUANTITY RESTRICTIONS FOR TRANSACTIONS WITH AES. AS PER TPO, ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TO SHOW THA T THERE WERE ANY MINIMUM ORDER QUANTITY RESTRICTIONS PLAC ED BY NON- AES FOR PURCHASES EFFECTED FROM THEM. TPO NOTED THA T ASSESSEE HAD PURCHASED 35 DIFFERENT ITEMS FROM THE SAME AE DURING THE RELEVANT PREVIOUS YEAR AND THE DIFFERENC E IN PRICES WHICH GAVE ADVANTAGE TO THE AE WERE ONLY IN SIX INS TANCES. FURTHER, AS PER THE TPO THE EXCESS STOCK RESULTING DUE TO PROCUREMENT IF EFFECTED FROM NON-AES, COULD HAVE BE EN SOLD IN THE DOMESTIC MARKET AND THERE WAS NO CHANCE OF A STOCK PILE UP. AS PER THE TPO THE PRODUCTS MANUFACTURED B Y THE ASSESSEE WERE NOT BIO DEGRADABLE AND WAS NOT INF LUENCED BY CHANGE IN FASHIONS SINCE TIB, THE COMPANY TO WH OM THE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 9 ASSESSEE WAS EFFECTING ITS SALES WAS A LEADING COMP ANY IN LINGERIE BUSINESS. BASED ON THESE REASONS, THE TPO CONCLUDED THAT ARMS LENGTH PRICE FOR THE PURCHASES EFFECTED FROM AES IN RESPECT OF THE SIX ITEMS HAD TO BE REDU CED BY A SUM OF ` 60,43,329.25. ASSESSING OFFICER, BASED ON THE TPOS DIRECTION PROCEEDED TO PREPARE A DRAFT ASSESSMENT O RDER WHEREIN HE PROPOSED TO MAKE AN ADDITION OF ` 60,43,329/- TO ITS RETURNED INCOME. 10. FROM THE COMPUTATION OF INCOME FILED BY THE ASS ESSEE, ASSESSING OFFICER ALSO NOTED THAT IT HAD NOT EXCLUD ED FROM EXPORT TURNOVER ITEMS LIKE FREIGHT, TELECOMMUNICAT ION OR INSURANCE ATTRIBUTABLE TO DELIVERY OF ARTICLES AND THINGS OUTSIDE INDIA OR EXPENSES INCURRED IN FOREIGN EXCHANGE IN P ROVIDING TECHNICAL SERVICES OUTSIDE INDIA. EXPLANATIONS WER E SOUGHT FROM THE ASSESSEE. SUBMISSION OF THE ASSESSEE WAS T HAT THESE AMOUNTS WERE INCURRED IN INDIAN CURRENCY. IT ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THA T IN PRECEDING YEARS 12.5% OF TELECOMMUNICATION EXPENSES ONLY WERE DISALLOWED. ASSESSING OFFICER WAS NOT IMPRESS ED BY THESE EXPLANATIONS. IN THE DRAFT ASSESSMENT ORDER, HE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 10 PROPOSED TO EXCLUDE THE FAX, TELEPHONE, TELECOMMUNI CATION EXPENSES AS ALSO FOREIGN CURRENCY EXPENSES FOR WORK ING OUT ELIGIBLE DEDUCTION UNDER SECTION 10B OF THE ACT. 11. ASSESSEE FILED OBJECTIONS BEFORE THE DRP AGAINS T BOTH THE ABOVE PROPOSALS IN THE DRAFT ASSESSMENT ORDER. IN SO FAR AS THE REVISION PROPOSED IN ALP WAS CONCERNED, ARGU MENT OF THE ASSESSEE WAS MORE OR LESS ON THE SAME LINES TH AT IT TOOK BEFORE THE TPO. HOWEVER, DRP WAS NOT IMPRESSED . AS PER DRP ASSESSEES CLAIM OF PURCHASES GOING WASTE COULD NOT BE PROVED BY IT WITH REFERENCE TO DOCUMENTS FURNISHED. DRP ALSO NOTED THAT THE ASSESSEE WAS NOT HAVING A SYSTEM OF IDENTIFICATION, SEGREGATION AND DISPOSAL OF WASTE M ATERIAL NOR ANY SEPARATE ACCOUNTING IN SUPPORT OF SUCH CLAIM. A S PER DRP THE WASTE CLAIMED BY THE ASSESSEE WAS A PART OF ITS CLOSING STOCK AND THEREFORE A PART OF ITS SUCCEEDING YEAR S OPENING STOCK AND COULD HAVE BEEN USED IN MANUFACTURE FOR L ATER YEARS. IN SO FAR AS THE CLAIM OF THE ASSESSEE THAT FASHION KEPT ON CHANGING AND RAW MATERIALS IF PURCHASED AT HIGHE R QUANTITIES COULD RESULT IN MAJOR LOSS TO IT, DRP W AS OF THE OPINION THAT SUCH A CLAIM WAS NOT BACKED UP BY ANY MATERIAL. ITA NOS.2116/MDS/2010 & 2108/MDS/2011 11 AS PER THE DRP CLAIM OF THE ASSESSEE REVOLVED AROU ND ITS AVERMENT THAT THERE WAS MINIMUM ORDER QUANTITY REST RICTIONS PLACED BY NON-AES ON PURCHASES EFFECTED FROM THEM. BUT AS PER DRP, ASSESSEE COULD NOT SUBSTANTIATE SUCH CLAIM AT ALL. DRP NOTED THAT ONLY IN RESPECT OF SIX ITEMS CONSID ERED BY THE TPO, RATE OF PURCHASE FROM AE HAD CROSSED TOLERANC E LIMIT AND ADDITIONS SOUGHT WERE ALSO ONLY ON SUCH ITEMS. 12. WITH REGARD TO THE PROPOSAL FOR RECOMPUTING DED UCTION UNDER SECTION 10B OF THE ACT EXCLUDING FREIGHT, TELECOMMUNICATION EXPENSES AND FOREIGN CURRENCY EXP ENSES, DRP WAS OF THE OPINION THAT THESE WERE NECESSARY TO BE EXCLUDED SINCE DEFINITION OF EXPORT TURNOVER UNDER SECTION 10B USED THE WORDS ATTRIBUTABLE TO. THEREFORE, AS PER DRP SUCH EXPENSES THOUGH IT DID NOT FORM PART OF THE BILLIN G DONE BY THE ASSESSEE, HAD TO BE EXCLUDED FROM EXPORT TURNOVER FOR WORKING OUT DEDUCTION UNDER SECTION 10B OF THE ACT. 13. IN OTHER WORDS, DRP APPROVED THE DRAFT ASSES SMENT ORDER PROPOSED BY THE ASSESSING OFFICER ON BOTH THE COUNTS, FOR BOTH THE YEARS. ACCORDINGLY, ASSESSING OFFICER COMPLETED ITA NOS.2116/MDS/2010 & 2108/MDS/2011 12 THE ASSESSMENT MAKING ADDITION FOR REVISION IN ALP AND EXCLUDING CERTAIN ITEMS OF EXPENSES FROM EXPORT TUR NOVER FOR THE PURPOSE OF WORKING OUT DEDUCTION UNDER SECTION 10B OF THE ACT. 14. NOW, BEFORE US, LEARNED A.R. STRONGLY ASSAILING THE ORDER ON BOTH THE ABOVE ASPECTS SUBMITTED THAT NEIT HER THE DRP NOR TPO CONSIDERED THE INTERNATIONAL TRANSACTI ONS ENTERED BY THE ASSESSEE DURING THE RELEVANT PREVIOU S YEARS IN THE CORRECT PERSPECTIVE. ACCORDING TO HIM, THE INT ERNATIONAL TRANSACTIONS WITH AES FOR ASSESSMENT YEAR 2006-07 C AME TO ` 227.24 CRORES. SUCH TRANSACTIONS INCLUDED SALES TO AE COMING TO ` 198.33 CRORES. EVEN AS PER ASSESSING OFFICER PURCHASES WERE MADE FROM AES OTHER THAN M/S. TIB. TPO AS WELL AS DRP FELL IN ERROR IN SELECTING SIX ITEMS F ROM A LARGE NUMBER OF PURCHASES AND MAKING A COMPARISON OF SU CH SIX ITEMS FOR CARRYING OUT AN ADJUSTMENT TO ALP, WITH R EGARD TO PURCHASE PRICE, IGNORING THE LOWER AMOUNTS PAID TO THE SAME AE ON MANY OTHER ITEMS PURCHASED FROM THEM. AS PER THE A.R., ADMITTEDLY OUT OF 35 ITEMS OF PURCHASES EFFEC TED FROM THE SAME AE NAMELY TIB, ONLY IN CASE OF SIX INSTANC ES IT WAS ITA NOS.2116/MDS/2010 & 2108/MDS/2011 13 NOTED THAT PRICES PAID WERE HIGHER WHEN COMPARED T O PURCHASES EFFECTED FROM NON-AES. AUTHORITIES BELOW IGNORED THE RESULTS OF ALL OTHER 29 CASES AS WELL AS THE HU GE VOLUME OF TRANSACTIONS ENTERED BY THE ASSESSEE WITH AES. THE OFF- TANGENT APPROACH BY THE LOWER AUTHORITIES HAD RESUL TED IN A REVISION OF ALP BY A SUM OF ` 60,43,329/- WHICH WAS NOT AT ALL CALLED FOR. A.R. SUBMITTED THAT IT WAS AN ACCEPTED PRACTICE IN GARMENT INDUSTRY THAT ORDERS FOR CLOTH AND OTHER RA W MATERIALS HAD TO BE PLACED IN MINIMUM QUANTITIES FOR THE SUPP LIERS TO EFFECT SUPPLY. AS PER AR, IT WOULD NOT BE PRACTICAB LE TO ORDER SMALL QUANTITIES SINCE SUPPLIERS WILL NOT FIND IT F EASIBLE TO SUPPLY SMALL QUANTITIES BELOW A BASIC LIMIT. HERE T HE ASSESSEE WAS CONSTRAINED TO ORDER SMALL QUANTITIES AND FOR SUCH PURCHASES IT HAD RELIED ON ITS AES. AES DID NOT INS IST ON MINIMUM ORDER QUANTITY. COMPARISON EFFECTED BY TPO WITH NON-AES WHO INSISTED ON MINIMUM ORDER QUANTITIES W OULD NEVER GIVE A FAIR RESULT. ADJUSTMENTS WERE REQUIR ED FOR FUNCTIONAL DIFFERENCES AND THIS ASPECT WAS NOT CONS IDERED BY THE TPO AT ALL. PRESUMPTION THAT IN THE BUSINESS O F LINGERIE, FASHIONS CHANGE ONLY SPORADICALLY WAS ILL-FOUNDED. ACCORDING ITA NOS.2116/MDS/2010 & 2108/MDS/2011 14 TO HIM, THE ASSESSEE HAD SUBMITTED DETAILS OF THE P URCHASE ORDERS PLACED WITH AES IN RESPECT OF EACH OF THE I TEMS MENTIONED BY TPO TO SHOW THAT ORDER QUANTITIES WERE VERY MINIMUM. HOWEVER, THIS ASPECT ALSO WAS NOT CONSIDER ED AT ALL. ACCORDING TO HIM, ASSESSEE, IF IT WISHED TO I NDULGE IN A PRACTICE WHICH COULD RESULT IN TRANSFER OF PROFITS TO ITS AES ABROAD, IT COULD HAVE BEEN DONE IN OTHER TRANSACTI ONS ENTERED WITH SUCH AES, SINCE THERE WERE SUBSTANTIA L SALES EFFECTED TO AES. FOR ALL THE OTHER TRANSACTIONS WIT H AES, TPO DID NOT SUGGEST ANY REVISION OF ALP AND THIS BY ITS ELF WOULD SHOW THAT ASSESSEE WAS VERY FAIR IN PRICING ASPECTS , BOTH WITH REGARD TO PURCHASE AS WELL AS TO SALES. THEREFORE, ACCORDING TO HIM, THE REVISION IN ALP WAS UNCALLED FOR. RELYI NG ON THE SUPPLEMENTARY WRITTEN SUBMISSIONS, LEARNED A.R. SUB MITTED THAT PER UNIT PRICING OF LINGERIE WITH LACES AND EM BROIDERY, IF GLOBAL VALUES WERE TAKEN CAME TO AN AVERAGE OF 3.43 US$ PER UNIT, WHEREAS THE AVERAGE SALE PRICE OF THE ASSESS EE TO ITS AES WAS 7.84US$ PER UNIT. THIS BY ITSELF CLEARLY DEMONSTRATED THAT ASSESSEE WAS NOT INDULGING IN ANY UNDER- HAND DEALINGS FOR INFLATING OR DEFLATING PRICE FOR THE ADVANTAGE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 15 OF AES. FOR THE PROPOSITION THAT GLOBAL VIEW HAS TO BE TAKEN WHEN THERE ARE NUMBER OF TRANSACTIONS WITH AES, A. R. RELIED ON THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF M/S. MAINETTI INDIA PVT.LTD. VS. ACIT DATED 16.03.2012 IN ITA NO.1789/MDS/2011. 15. IN SO FAR AS EXEMPTION UNDER SECTION 10B IS CO NCERNED, THE A.R. SUBMITTED THAT IF THE ITEMS WERE EXCLUDED FROM EXPORT TURNOVER, NECESSARILY IT HAD TO BE EXCLUDED FROM TO TAL TURNOVER ALSO. FOR THIS, HE RELIED ON THE SPECIAL BENCH DECI SION IN THE CASE OF ITO VS. SAK SOFT LTD., REPORTED AS 313 ITR (TRIB) 353(CHENNAI)(SB). 16. PER CONTRA, LEARNED D.R. SUBMITTED THAT ASSESSE ES SUBMISSION REGARDING ORDERS PLACED BEING SMALL IN N UMBERS WERE ILL-FOUNDED. RELYING ON THE ANNEXURE FILED BY THE ASSESSEE ALONG WITH ITS WRITTEN SUBMISSIONS, LEARNE D D.R. SUBMITTED THAT THERE WERE MANY NUMBER OF ORDERS WH ERE QUANTITIES WERE NOT THAT SMALL, AS PROJECTED BY THE ASSESSEE. AS FOR THE CLAIM OF ASSESSEE THAT STOCK WOULD HAVE BEEN THERE IF PURCHASES WERE MADE FROM NON- AES, HE SUBMITTED THAT ITA NOS.2116/MDS/2010 & 2108/MDS/2011 16 EVEN FOR PURCHASES EFFECTED FROM AES ALSO, SIMILAR STOCK WOULD HAVE REMAINED. AS PER THE DR., TPO FOLLOWED CUP METHOD AND CLEARLY IDENTIFIED SIX ITEMS ON WHICH PU RCHASE PRICES PAID WERE IN EXCESS OF COMPARABLE PRICES WI TH NON- AES. TPO HAD MADE ADJUSTMENT ONLY ON SUCH ITEMS. HE HAD NOT MADE ANY ADJUSTMENT ON OTHER ITEMS OF TRANSACTI ONS WITH AES WHICH WERE FOUND TO BE AT ARMS LENGTH PRICE. F OR THOSE ITEMS WHICH WERE CONSIDERED TO BE ABOVE ARMS LENGT H PRICE, ASSESSEE COULD NOT SAY THAT RELEVANT DATA SHOULD BE IGNORED AND A GLOBAL VIEW SHOULD BE TAKEN. ASSESSEE CANNOT PICK ANY OF THE ITEMS ON WHICH COMPARISON WAS DONE BY THE T PO TO SHOW THAT MINIMUM ORDER QUANTITY WERE A MUST IF SUC H PURCHASES WERE DONE FROM NON-AES. THEREFORE, ACCORD ING TO HIM, THE FINDINGS OF THE TPO WHICH WERE FOLLOWED BY ASSESSING OFFICER AND APPROVED BY DRP DID NOT REQUI RE ANY DISTURBANCE. IN SO FAR AS WORKING OUT OF DEDUCTION UNDER SECTION 10B IS CONCERNED, LEARNED D.R. FAIRLY AGREE D THAT IN VIEW OF THE SPECIAL BENCH DECISION EXCLUSION MADE F ROM EXPORT TURNOVER HAD TO BE MADE FROM TOTAL TURNOVER ALSO. ITA NOS.2116/MDS/2010 & 2108/MDS/2011 17 17. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS CAREFULLY. UNDISPUTED FACTS ARE THAT IN RESPECT OF MATERIALS WITH ITEM CODES MENTIONED IN PARA 7 ABOV E, ASSESSEE HAD PURCHASED AT A HIGHER PRICE FROM ITS AE THAN THE COST AT WHICH IT PURCHASED SIMILAR ITEMS FROM N ON-AES. ASSESSEE HAS NOT DISPUTED THE DATA AS GIVEN BY THE TPO. CLAIM OF THE ASSESSEE IS THAT THERE WERE MINIMUM OR DER QUANTITY RESTRICTIONS FOR PURCHASES FROM NON-AES WH ICH WERE NOT THERE FOR PURCHASES FROM AES. THERE IS A CLEAR FINDING GIVEN BY THE TPO THAT IF THIS ASSERTION IS ACCEPT ED IT WOULD AFFECT OTHER PURCHASES MADE FROM THE SAME AE AS W ELL, SINCE ASSESSEE PURCHASED 35 ITEM CODE OF MATERIALS OF WHICH ONLY 6 WERE CONSIDERED BY TPO FOR ALP ADJUSTMENT. I N THIS REGARD WHAT WE FIND IS THAT AT PARA NO.8 OF THEIR ORDER, DRP HAS SPECIFICALLY MENTIONED THAT RATE OF PURCHASE FR OM AES HAD CROSSED THE TOLERANCE LIMIT ONLY IN 6 ITEMS OF 35 ITEM CODE MATERIAL PURCHASED BY THE ASSESSEE FROM THE SAME A E. THUS, ADMITTEDLY ASSESSEE HAD EFFECTED PURCHASES OF MATERIALS COMING UNDER 35 ITEM CODE FROM AE OF WHIC H MATERIALS COMING IN SIX ITEM CODES ALONE WERE CONSI DERED FOR ITA NOS.2116/MDS/2010 & 2108/MDS/2011 18 ANALYSIS BY TPO. OTHER 29 ITEMS WERE FOUND TO BE APPROPRIATELY PRICED, SINCE NO ALP REVISION WAS RECOMMENDED IN SUCH ITEMS. LEAVING ALONE THE CLAIM OF THE ASSESSEE THAT THERE WERE MINIMUM ORDER QUANTITY RES TRICTIONS WITH NON-AES, WHICH RENDERED THE PRICES PAID BY IT TO AES, UNCOMPARABLE WITH THE PRICES PAID TO AES, UNDISPUT ED FACT HERE IS THAT ASSESSEE HAD SUBSTANTIAL VOLUME OF INT ERNATIONAL TRANSACTIONS WITH ITS AES. ASSESSEE AS PER THE FIND ING OF THE TPO HERSELF WAS A COMPANY HELD BY THREE OTHER COMPA NIES NAMELY MAS CAPITAL PVT. LTD., TRIUMPH INTERNATIONAL OVERSEAS LTD. AND MAST INDUSTRIES INC. USA. TPO HAS ALSO GIVEN A FINDING THAT TRIUMPH INTERNATIONAL WAS RESP ONSIBLE FOR DESIGNS AND STYLES WHEREAS MAST INDUSTRIES WERE PURCHASING ALMOST ALL THE PRODUCTION OF THE ASSESSE E. THUS, AES OF THE ASSESSEE WAS GIVING THE DESIGNS, PLACI NG ORDERS SUPPLYING RAW MATERIALS SUBSTANTIALLY AND FINALLY PURCHASING ITS PRODUCTS . IN SUCH A SCENARIO, IF ASSESSEE HA D AN INTENTION TO PRICE ITS PRODUCTS AND PURCHASES SO AS TO GIVE UNDUE BENEFITS TO THE AES OUTSIDE INDIA THEN IT COU LD HAVE DONE SO IN OTHER VOLUMINOUS TRANSACTIONS IT ENTER ED WITH THE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 19 AES. LIST OF AES AND THE TRANSACTIONS ENTERED WIT H SUCH AES ARE GIVEN AT PARA 7 ABOVE. OUT OF ` 227.244 CRORES WORTH TRANSACTIONS WITH AES, TPO FOUND THAT IN ALL CASES OTHER THAN 6 ITEMS CODED PURCHASES OF MATERIALS NOTHING WARRA NTING A REVISION OF ALP WAS THERE. IN OTHER WORDS, IN RESP ECT OF ` 226 CRORES WORTH INTERNATIONAL TRANSACTIONS WITH AES, T PO DID NOT FIND ANYTHING TO DISTURB ALP, WHETHER IT WAS PURCHA SE OR SALES. IN SUCH A SCENARIO, IT WILL BE DIFFICULT TO BELIEVE THAT ASSESSEE HAD INDULGED IN A PRICING METHODOLOGY TO B ENEFIT ITS AES WITH REGARD TO PURCHASE OF MATERIAL FALLING IN SIX ITEM CODES. 18. WE ARE THEREFORE OF THE OPINION THAT FACT SITU ATION IS SUCH THAT VERSION OF THE ASSESSEE THAT IN THE CASE OF ITEMS UNDER SIX CODES, IT WAS FORCED TO PAY MORE AMOUNT T HAN COMPARABLE PRICES OF SUPPLIES FROM NON-AES, DUE TO MINIMUM ORDER QUANTITY RESTRICTIONS COULD NOT BE BR USHED ASIDE. RULE 10B(1)(A)(II) CLEARLY MANDATES ADJUSTM ENT OF PRICES FOR DIFFERENCE THAT COULD MATERIALLY AFFECT THE MARKET PRICES. EVEN OTHERWISE, IF THE OTHER MATERIALS FAL LING UNDER 29 ITEM CODES PURCHASED FROM THE VERY SAME AES, WERE A LSO ITA NOS.2116/MDS/2010 & 2108/MDS/2011 20 CONSIDERED IN ALL PROBABILITY, IT WOULD HAVE WIPED OUT THE ADVANTAGE THAT ASSESSEE DERIVED FROM ANY POSSIBLE OVER PRICING ON MATERIALS FALLING IN 6 ITEM CODES PURCHA SED BY IT. TO TAKE 6 ITEMS FROM A PACK OF 35 AND CONSIDER O NLY THESE SIX ITEMS FOR MAKING A REVISION OF ALP, IN OUR OPIN ION, WILL NOT GIVE A FAIR RESULT AT ALL. A BUSINESSMAN MIGHT PURC HASE A NUMBER OF ITEMS FROM THE SAME PERSON, AND HE MIGHT ELECT TO PAY MORE ON SOME OF THE ITEMS, WHEN HE FINDS THAT THE ON MANY OTHER ITEMS, HE IS GETTING A BENEFIT DUE TO LOWER PRICES. HERE THE TPO AND ASSESSING OFFICER STEPPED INTO T HE SHOES OF THE ASSESSEE TO DECIDE ON WHICH OF THE ITEMS, IT SHOULD PAY MORE AND IN WHICH ITEMS IT HAD PAID MORE, IGNORIN G THOSE ITEMS ON WHICH IT HAD PAID LESS. IN THE CIRCUMSTANC ES OF THIS CASE, WHERE OUT OF 35 ITEMS ONLY 6 WERE ELECTED OUT FOR REACHING AN ADVERSE FINDING, WE ARE OF THE OPINION THAT THE AUTHORITIES WENT OFF TANGENT IN TAKING A NARROW V IEW WITHOUT CONSIDERING THE TOTAL VOLUME OF TRANSACTIONS ASSESS EE HAD WITH ITS AES. IN TAKING THIS VIEW, WE ARE FORTIFIED BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF ITA NOS.2116/MDS/2010 & 2108/MDS/2011 21 M/S.MAINETTI INDIA PVT. LTD. WHERE IN PARAGRAPH 8 I T WAS HELD AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. PERUSAL OF THE PROVISIONS OF SEC.92C SHOWS THAT THE WORDS USED IS IN RELATION TO AN INTERNATIONAL TRANSACTION - - - - - - HAVING REGARD TO THE NAT URE OF TRANSACTION OR CLASS OF TRANSACTION OR CLASS OF ASSOCIATED PERSONS OR FUNCTIONS PERFORMED BY SUCH PERSONS . THE TERM CLASS OF TRANSACTION AND NATURE OF TRANSACTIONS COME TO THE FOREFRONT IN T HE PRESENT CASE. IN THE ASSESSEES CASE, THE TRANSACTION WITH THE AE IS NOT ONE OF SIMPLE PURCHASE OR SIMPLE SALE. THE ASSESSEE PURCHASES FROM ONE AND SELLS TO ANOTHER. THE ASSESSEE HAS PURCHASED FROM ITS AE IN HONGKONG, SRILANKA, MALAYASIA, PAKISTAN AND RANDY ASIA AND HAS SOLD TO ITS AE IN SRILANKA, KOREA, HONGKONG, GULF, EGYPT, BANGLADESH,MALAYASIA, TAIWAN, UK AND PAKISTAN. IN REGARD TO THE SALES MADE BY THE ASSESSEE, THE TRANSACTION WITH BANGALADESH IS IN POSITIVE, THE TRANSACTION WITH EGYPT IS IN NEGATIVE , THE TRANSACTION WITH GULF IS IN THE POSITIVE, THE TRANSACTION WITH HONGKONG IS IN NEGATIVE, THE TRANSACTION WITH KOREA IS IN POSITIVE, THE TRANSACT ION WITH SRILANKA IS IN THE NEGATIVE, THE TRANSACTION W ITH MALAYASIA IS IN THE NEGATIVE, THE TRANSACTION WITH ITA NOS.2116/MDS/2010 & 2108/MDS/2011 22 PAKISTAN IS IN THE NEGATIVE, THE TRANSACTION WITH TAIWAN IS IN THE NEGATIVE AND THE TRANSACTION WITH UK IS IN THE NEGATIVE. THUS, WHAT IS NOTICED IS TH AT ON THE PURCHASE THE ASSESSEE HAS A POSITIVE DIFFERENTIAL I.E. THE ASSESSEE PURCHASES AT A LOWER PRICE FROM ITS AE THAN THE NON-AE AND WHEN ITS SALES TO THE AE, ITS SELLING PRICE IS LOWER THAN TH E SELLING PRICE AS COMPARED WITH THE NON-AE. THERE I S NO QUESTION THAT THE ASSESSEE IS GENERATING PROFITS FROM THE TRANSACTION. THERE IS NO DISPUTE THAT THE ASSESSEE IS ALSO PAYING TAXES ON THE PROFITS THAT I T HAS GENERATED FROM ITS TRANSACTION OF PURCHASE AND SALE WITH ITS AE. THE ASSESSEE, THUS IT IS NOTICED , IS DOING THE BUSINESS OF TRADING WHEN IT PURCHASED FROM ITS AE FROM ONE COUNTRY AND SELLS TO ANOTHER A E IN ANOTHER COUNTRY. THIS MARGIN COULD BE ON ACCOUNT OF BOTH FOREIGN EXCHANGE FLUCTUATIONS AS ALSO THE MARK UP DONE BY THE ASSESSEE. THESE TRANSACTIONS CLEARLY SHOW THAT WHAT IS DONE BY THE ASSESSEE IS ONE OF PURCHASE AND SALE. WITH THIS IN MIND READING OF THE PROVISIONS OF SEC.92C SHOWS THAT THE WORD USED IS NATURE OF TRANSACTION. NAT URE OF TRANSACTION WOULD BE A PARTICULAR SET OF TRANSACTION, WHICH ARE TO BE SEEN TOGETHER. WHEN THE ASSESSEE IS BUYING FROM ONE PLACE AND SELLING A T ANOTHER THAT WOULD BE A CLASS OF TRANSACTION. WHEN THE ASSESSEE IS DOING THE BUSINESS OF TRADING, ITA NOS.2116/MDS/2010 & 2108/MDS/2011 23 IT WOULD NOT BE A RIGHT TO HOLD THAT THE PURCHASE I S ONE CLASS OF TRANSACTION AND THE SALES ARE ANOTHE R CLASS OF TRANSACTION. THE ASSESSEE DEALING WITH THE AES IS A BETTER POSITION TO NEGOTIATE BETTER PR ICES AND CONSEQUENTLY WOULD BE ABLE TO GET A BETTER BARGAIN. HERE, WHAT IS TO BE SEEN IS WHETHER THE TRANSACTION OF PURCHASE AND SALE BEING THE NATURE O F TRANSACTIONS, WHEN SEEN IN CONSOLIDATED FROM, GENERATES PROFITS WHICH NORMALLY WOULD BE GENERATED. FOR THIS BOTH THE PURCHASE AND SALE TRANSACTIONS WOULD HAVE TO BE CONSIDERED. TO EXPLAIN BY AN EXAMPLE, THE ASSESSEE PURCHASES A PRODUCT AT ` 10 FROM ITS AE. THE SAME PRODUCT IS SOLD BY A NON-AE AT ` 12/-. THE ASSESSEE SELLS THE FINISHED PRODUCT TO ITS AE AT ` 15/-. THE SAME FINISHED PRODUCT IS SOLD BY A NON-AE AT ` 17/-. THE PROFITS FROM BOTH TRANSACTIONS, ASSESSEE TO AE, AS ALSO NON-AE TO NON-AE WOULD GIVE ` 5/- BUT FOR THE PURPOSE OF DETERMINING THE ALP AS THE ASSESSEE PURCHASES FROM ITS AE AT A PRICE LOWER THAN NON-AE, THE PURCHASE PRICE WOULD BE ACCEPTED AS THE DEVIATION IS NEGATIVE I.E. ` 10/- IS LOWER THAN ` 12/-, BUT AS THE ASSESSEE SELLS TO ITS AE AT A PRICE LOW ER THAN A NON-AE, THE SALE PRICE WILL BE ADJUSTED TO T HE SELLING PRICE OF THE NON-AE AS THE DEVIATION IS POSITIVE I.E. ` 15/- IS LOWER THAN ` 17/-. THEREFORE, ITA NOS.2116/MDS/2010 & 2108/MDS/2011 24 ` 17/- WILL BE CONSIDERED AS ALP. THIS WOULD RESULT I N (I) THE ASSESSEE BUYS FROM THE AE AT ` 10/- (II) THE ASSESSEES SALE PRICE IS ADJUSTED TO ALP AT `17/-. THUS THE PROFIT OF THE ASSESSEE WILL BE DETERMINED AT `7/-. NOW IF WE COMPARE THE PROFITABILITY, ASSESSEES PURCHASE AND SALE TO AE IS `5/-. PERCENTAGE OF PROFIT 5 X 100 = 33.33% 15 NON-AE PURCHASE & SALE IS `5/- PERCENTAGE OF PROFIT 5 X 100 = 29.41% 17 AFTER ADJUSTMENT PROFIT IS `7/- PERCENTAGE OF PROFIT 7 X 100 = 41.17% 17 THUS THE PROFITABILITY IF CONSIDERED WITHOUT CONSIDERING THE POSITIVE DEVIATIONS WOULD LEAD TO IMPOSSIBLE PROFITABILITY POSITIONS, WHICH IS NOT WHAT IS CONTEMPLATED UNDER THE PROVISIONS OF 92C. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE ALP BY TAKING INTO CONSIDERATION BOTH THE NET DIFFERENC E ON THE SALE FROM THE AE AND PURCHASE FROM THE AE. THE ASSESSING OFFICER MAY LOOK INTO THE FACT AS TO THE MARGINS OF THE PROFITS IN REGARD TO THE TRANSACTIONS DONE BY THE ASSESSEE WITH ITS AE, AS ALSO THE NON-AE TRANSACTIONS AND THEN COMPUTE THE ITA NOS.2116/MDS/2010 & 2108/MDS/2011 25 ADJUSTMENT OF ALP, IF ANY. IN THE CIRCUMSTANCES, THE GROUNDS NOS.5, 6, 8 & 9 OF THE ASSESSEE STAND PARTLY ALLOWED FOR STATISTICAL PURPOSES. IT WAS CLEARLY HELD BY THE CO-ORDINATE BENCH THAT A GLOBAL VIEW HAD TO BE TAKEN WITH REFERENCE TO INTERNATIONA L TRANSACTIONS. NO DOUBT, IN THE SAID DECISION THE BE NCH ELECTED TO REMIT THE MATTER BACK TO THE ASSESSING O FFICER FOR FINDING OUT NET PROFIT AND MARGINS DUE TO VARIO US TRANSACTIONS WITH AE. HERE SINCE NUMBER OF ITEMS ON WHICH REVISION OF ALP HAS BEEN DONE IS INSIGNIFICAN T WHEN COMPARED TO THE TOTAL NUMBER OF PURCHASES AND TOTAL VOLUME OF INTERNATIONAL TRANSACTIONS, SUCH A REMISSION BACK TO ASSESSING OFFICER WILL NOT SERVE ANY PURPOSE. WE ARE THEREFORE, OF THE OPINION THAT ADDI TION ON ACCOUNT OF REVISION IN ALP WAS NOT CALLED FOR. SUCH ADDITION FOR BOTH THE YEARS STAND DELETED. 19. IN SO FAR AS THE ISSUE OF CALCULATION OF DEDUCT ION UNDER SECTION 10B OF THE ACT, BY EXCLUDING FROM EXPORT TU RNOVER, FREIGHT, TELECOMMUNICATION CHARGES AND EXPENSES INC URRED IN FOREIGN EXCHANGE, WE ARE OF THE OPINION THAT SUCH A MOUNTS ITA NOS.2116/MDS/2010 & 2108/MDS/2011 26 WILL HAVE TO BE EXCLUDED FROM TOTAL TURNOVER ALSO A S HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF SA K SOFT LTD.,(SUPRA). ASSESSING OFFICER IS DIRECTED TO REWO RK THE DEDUCTION ACCORDINGLY FOR BOTH THE YEARS. 20. IN THE RESULT, APPEALS OF THE ASSESSEE FOR BOTH THE YEARS ARE ALLOWED PRO TANTO . ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, 28 TH DAY OF JUNE, 2012 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P.GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 28 TH JUNE, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.