ADIT, New Delhi V. M/s ABB Lummus Heat Transfer BV, Gurgaon

ITA 2763/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97593 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 14-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: PAWAN AGGARWAL CAS; RAJIV SHAH SMT POOJA RAO
• Keywords: Transfer pricing; International transaction
• Section: 92C; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-2 : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI KULDIP SINGH, JM ITA NO.2763/DEL/2013 ASSESSMENT YEAR : 2005-06 ADIT, CIRCLE 1(1), INTERNATIONAL TAXATION, NEW DELHI. VS. ABB LUMMUS HEAT TRANSFER BV, S-22, LOWER GROUND FLOOR, GREATER KAILASH-I, NEW DELHI 110 048. PAN: AABCA9045K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV SHAH, SMT. POOJA RAO & SHRI PAWAN AGGARWAL, CAS. DEPARTMENT BY : SHRI PEEYUSH JAIN, CIT, DR DATE OF HEARING : 14.10.2015 DATE OF PRONOUNCEMENT : 15.10.2015 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 8.2.2013 IN RELATION TO THE ASSESSMEN T YEAR 2005-06. ITA NO.2763/DEL/2013 2 2. THE FIRST GROUND IS AGAINST THE VIEW TAKEN BY TH E LD. CIT(A) THAT THE SERVICE OF NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) WAS NOT WITHIN THE LIMITATIO N PERIOD. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS RETURN ON 31.10.2005 DECLARING NIL INCOME. THE SAM E WAS PROCESSED U/S 143(1). FIRST NOTICE U/S 143(2) OF THE ACT WAS ISS UED ON 27.10.2006. AT THE TIME WHEN THIS NOTICE WAS TAKEN FOR DELIVERY BY THE POSTAL AUTHORITIES, IT TRANSPIRED THAT THE ASSESSEE HAD AL READY SHIFTED FROM THE ADDRESS GIVEN IN THE RETURN OF INCOME AT WHICH THE NOTICE WAS ADDRESSED. ON ENQUIRY, THE DEPARTMENT OF POSTS, INDRAPRASTHA P OST OFFICE, NEW DELHI, VIDE ITS LETTER DATED 6.10.2007, CONFIRMED T HAT THE NOTICE WAS BOOKED FOR DELIVERY ON 27.10.2006 BY SPEED POST AND DISPATCHED BY THEM ON 27.10.2006, BUT, THE DAK COULD NOT BE DEL IVERED TO THE ADDRESSEE AND THE SAME WAS RETURNED TO THE INCOME-T AX OFFICER ON 1.11.2006. AGAIN, ANOTHER NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 7.2.2007 ON THE SAME ADDRESS WHICH ALSO MET WITH TH E SAME FATE. THE AO GOT INQUIRY CONDUCTED AND TRACED OUT THE NEW ADD RESS OF THE ITA NO.2763/DEL/2013 3 ASSESSEE. IT WAS ON THIS NEW ADDRESS THAT ONE MORE NOTICE U/S 143(2) WAS ISSUED ON 10.7.2007 WHICH WAS DULY SERVED AND THE P ROCEEDINGS WERE ATTENDED BY THE AUTHORIZED REPRESENTATIVE. THE ASS ESSEE CHALLENGED THE LATE SERVICE OF NOTICE BEFORE THE LD. CIT(A), WHO H ELD THAT NO NOTICE U/S 143(2) WAS VALIDLY SERVED UPON THE ASSESSEE WITHIN THE PRESCRIBED TIME LIMIT AND HENCE ASSESSMENT WAS BAD IN LAW. THE REV ENUE IS AGGRIEVED AGAINST THIS FINDING RETURNED BY THE LD. CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACTS OF THE CASE LIE IN A NARROW COMPASS INASMUCH AS THE FIRST NOTICE U/S 143(2) OF THE ACT WAS ISSUED BY THE AO ON 27.10.2006 WHICH FACT HAS BEEN CONFIRMED BY THE POSTAL AUTHORITIES AS WELL. THIS NOTICE WAS SENT AT THE ADDRESS GIVEN BY THE ASSESSEE IN ITS RETURN OF INCOME. IT IS AN ACCEPTED POSITION THAT THE ASSESSEE CHANGED ITS ADDRESS, BUT, DID NOT INTIMATE SUCH CHANGE TO THE A O AND, AS SUCH, THE NOTICE WAS SENT AT THE ADDRESS GIVEN IN THE RETURN OF INCOME. PROVISO TO SECTION 143(2) PROVIDES THAT: NO NOTICE UNDER CLAU SE (II) SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF TWELVE MONTHS F ROM THE END OF THE ITA NO.2763/DEL/2013 4 MONTH IN WHICH THE RETURN IS FURNISHED. RETURN IN THE INSTANT CASE WAS FILED ON 31.10.2005. THE SAID PERIOD OF 12 MONTHS EXPIRED ON 31.10.2006. ADMITTEDLY, NOTICE U/S 143(2) WAS ISSUED BY THE AO ON 27.10.2006 ON THE ADDRESS STATED IN THE RETURN OF I NCOME WHICH COULD NOT BE SERVED BECAUSE THE ASSESSEE HAD CHANGED ITS ADDR ESS WITHOUT INTIMATING THE NEW ADDRESS TO THE AO. THE LD. DR S UBMITTED THAT THE WORD SERVED USED IN THE PROVISO TO SECTION 143(2) SHOULD BE R EAD AS THE WORD ISSUED AS HAS BEEN HELD BY THE HONBLE PUNJAB & HARYANA H IGH COURT IN V.R.A. COTTON MILLS PVT. LTD. VS. UNION OF INDIA AN D ORS. (2013) 359 ITR 495 (P&H). HE CONTENDED THAT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THIS CASE DEALT WITH THE SAME QUESTIO N, BEING THE SERVICE OF NOTICE IN TERMS OF PROVISO TO SECTION 143(2). D ISMISSING THE ASSESSEES OBJECTION, THE HONBLE HIGH COURT HAS HE LD THAT THE EXPRESSION SERVED USED IN PROVISO TO SECTION 143(2) SHOULD BE READ A S ISSUED. SINCE, IN THIS CASE, THE NOTICE WAS ADMITTEDLY ISSUED BY THE AO WITHIN THE PRESCRIBED PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED BY THE ASSESSEE, WHICH F ACT HAS BEEN CONFIRMED BY THE POSTAL AUTHORITIES AS WELL, THE LD . DR CONTENDED THAT IT ITA NO.2763/DEL/2013 5 SHOULD BE CONSIDERED AS DULY SERVED ON THE ASSESSEE WITHIN THE MEANING OF PROVISO TO SECTION 143(2). ALBEIT, THIS CONTENTION WAS EARLIER RESISTED, BUT DURING THE COURSE OF HEARING, THE LD. AR DID NOT OPPOSE THIS ARGUMENT ADVANCED ON BEHALF OF THE REVENUE. HE CAN DIDLY, ADMITTED THAT THIS ISSUE MAY BE DECIDED IN FAVOUR OF THE REV ENUE. WITHOUT GOING INTO THE LEGAL ASPECTS OF THE ARGUMENTS ON THIS ISS UE, WE ALLOW THIS GROUND OF APPEAL ON THE CONCESSION MADE BY THE LD. AR. THIS GROUND IS, THEREFORE, ALLOWED. 5. THE ONLY OTHER GROUND RAISED IN THIS APPEAL IS A GAINST THE DELETION OF ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTME NT. SUCCINCTLY, THE FACTS AS RECORDED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED IN THE NETHERLANDS WHICH HAD S ET UP A LIAISON OFFICE IN NEW DELHI IN 1997. IN 1999, THE COMPANY CONVERTED ITS LIAISON OFFICE IN INDIA TO A BRANCH OFFICE. THE INDIAN BRA NCH OFFICE IS PRIMARILY ENGAGED IN THE DESIGNING OF ENGINEERING AND CONSTRU CTION PROJECTS IN THE POWER, OIL AND GAS, FERTILIZER AND PETROCHEMICAL SE CTORS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE REPORTED AN INTER NATIONAL TRANSACTION OF ITA NO.2763/DEL/2013 6 RENDERING `SERVICES TO ITS AES FOR A SUM OF RS.3, 01,96,496/- AND ALSO EARNING OF REVENUE FROM `EQUIPMENT SUPPLY TO THE TUNE OF RS.29,16,764/-, TOTALING RECEIPTS FROM ITS AES AT RS.3,31,13,260/-. THE ASSESSEE ALSO DECLARED TRANSACTIONS WITH NON-AES TO THE TUNE OF RS.8,08,550/-. THE ASSESSEE USED THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD TO DEMONSTRAT E THAT ITS INTERNATIONAL TRANSACTIONS WERE AT ARMS LENGTH PRI CE (ALP). THE ASSESSEE COMPUTED ITS OPERATING PROFIT MARGIN AT 10 .81% FROM THE INTERNATIONAL TRANSACTIONS AS AGAINST LOSS OF 17.89 % FROM UNRELATED TRANSACTIONS. THAT IS HOW, IT WAS CLAIMED THAT THE INTERNATIONAL TRANSACTIONS WERE AT ALP. THE AO DID NOT ACCEPT TH E APPLICATION OF TNMM AS THE MOST APPROPRIATE METHOD. HE OPINED THA T THE COMPARABLE UNCONTROLLED PRICE (CUP) METHOD SHOULD HAVE BEEN AP PLIED ON THE INTERNATIONAL TRANSACTIONS OF RENDERING OF SERVICES WITH THE TRANSACTED VALUE OF RS.3.01 CRORE. HE COMPARED THE HOURLY RAT E CHARGED BY THE ASSESSEE FROM ITS AES AT RS.1,135/- WITH THAT CHARG ED FROM NON-AES, NAMELY, INDIA GLYCOLS LTD. AND PETRON ENGINEERING C ONSTRUCTION LTD., AT RS.1,500/-. WHEN CONFRONTED, THE ASSESSEE CONTENDE D THAT THE ITA NO.2763/DEL/2013 7 CALCULATION OF RS.1,500/- MADE BY THE AO WAS INCOR RECT INASMUCH AS THE AVERAGE HOURLY RATE CHARGED BY IT FROM THE UNRELATE D PARTIES STOOD AT RS.717/-. NOT CONVINCED WITH THE ASSESSEES CONTEN TION, THE AO WENT AHEAD BY CONSIDERING THE HOURLY RATE OF RS.1,500/- AS A BENCHMARK AND, CONSEQUENTLY MADE AN ADDITION OF RS.1,35,52,504/- ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. THE LD. CIT(A) GOT CON VINCED WITH THE ASSESSEES CONTENTION ABOUT THE AO NOT TAKING CORRE CT AVERAGE OF ALL THE HOURLY RATES CHARGED BY IT FROM UNRELATED PARTIES. CONSIDERING SUCH AVERAGE HOURLY RATE OF RS.717/- CHARGED FROM NON-AE S, THE LD. CIT(A) HELD THAT THE RATE CHARGED BY THE ASSESSEE FROM ITS AES AT RS.1,135/- PER HOUR WAS AT ARMS LENGTH. THE REVENUE IS AGGRIEVED AGAINST THE DELETION OF CONSEQUENTIAL ADDITION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST ISSUE IS ABOUT THE A PPLICATION OF THE MOST APPROPRIATE METHOD TO THE INTERNATIONAL TRANSACTION S REPORTED BY THE ASSESSEE. HERE, IT IS PERTINENT TO NOTE THAT THE A SSESSEE REPORTED TWO INTERNATIONAL TRANSACTIONS, VIZ., SERVICE REVENUE OF RS.3.01 CRORE AND ITA NO.2763/DEL/2013 8 EQUIPMENT SUPPLY REVENUE AMOUNTING TO RS.29.16 LA C. THE ASSESSEE APPLIED TNMM AS THE MOST APPROPRIATE METHOD ON BOTH THESE TRANSACTIONS. PAGE 15 OF THE ASSESSMENT ORDER REPR ODUCES THE ASSESSEES CONTENTION MADE BEFORE THE AO THAT IT RENDERED SIMI LAR SERVICES TO AES AND INDEPENDENT THIRD PARTIES. WHEN THE SERVICES P ROVIDED TO THE AES ARE SIMILAR TO THOSE PROVIDED TO NON-AES, WE FAIL T O UNDERSTAND AS TO HOW THE CUP METHOD CAN BE DISCARDED. IT GOES WITHOU T SAYING THAT IN A CASE WHERE GOODS/SERVICES ARE SOLD/PROVIDED TO THE RELATED PARTIES AND INSTANCES OF COMPARABLE UNCONTROLLED TRANSACTIONS A RE ALSO AVAILABLE, COUPLED WITH THE FACT THAT OTHER ATTENDING CIRCUMST ANCES ALSO BEING SIMILAR OR CAPABLE OF ADJUSTMENT, USUALLY CUP IS TH E MOST PREFERABLE METHOD. APPLICATION OF THE CUP AS THE MOST APPROPRI ATE METHOD BECOMES MORE IMMINENT IN A CASE WHERE COMPARABLE UN CONTROLLED TRANSACTIONS ARE INTERNAL. ADVERTING TO THE FACTS O F THE INSTANT CASE, WE FIND THAT THE ASSESSEE ITSELF ADMITTED BEFORE THE A O THAT THE SERVICES PROVIDED TO THE AES AND NON-AES ARE SIMILAR. SINCE THE INTERNALLY UNCONTROLLED COMPARABLE TRANSACTIONS OF RENDERING S IMILAR SERVICES AS PROVIDED TO THE AES ARE AVAILABLE, WE HOLD THAT TH E DECISION OF THE AO ITA NO.2763/DEL/2013 9 TO APPLY CUP AS THE MOST APPROPRIATE METHOD DOES N OT WARRANT ANY INTERFERENCE. WE, THEREFORE, APPROVE THE VIEW TAKE N BY THE AO IN DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO N OF `SERVICE REVENUE FROM ITS AE ON THE BASIS OF CUP METHOD AS A GAINST TNMM APPLIED BY THE ASSESSEE. HERE, IT IS PERTINENT TO M ENTION THAT THE AO HAS CONFINED HIMSELF ONLY TO THE DETERMINATION OF ALP I N RESPECT OF `SERVICE REVENUE BY IMPLIEDLY ACCEPTING THE INTERN ATIONAL TRANSACTION OF `EQUIPMENT SUPPLY REVENUE AT ALP. 7. NOW, WE ESPOUSE THE DETERMINATION OF ALP OF THE INTERNATIONAL TRANSACTION OF SERVICE REVENUE UNDER THE CUP METH OD. IT IS NOTICED THAT THE AO HAS DETERMINED THE HOURLY RATE CHARGED BY TH E ASSESSEE FROM ITS AES AT RS.1,135/-. SUCH A DETERMINATION HAS NOT BE EN CONTESTED BY THE ASSESSEE. THIS RATE CHARGED IS REQUIRED TO BE COMPA RED WITH THE HOURLY RATE CHARGED IN A COMPARABLE UNCONTROLLED TRANSACTI ON, WHICH FORMS THE BEDROCK OF A BENCHMARK PRICE. AT THIS STAGE, IT IS SIGNIFICANT TO MENTION THAT THE AO HAS TAKEN INTERNALLY COMPARABLE UNCONTR OLLED TRANSACTIONS FOR BENCHMARKING AND THERE IS NO REFERENCE TO THE AVAILABILITY OR USE OF ITA NO.2763/DEL/2013 10 ANY EXTERNALLY COMPARABLE UNCONTROLLED HOURLY RATE. IN DOING SO, THE AO HAS COMPUTED HOURLY ARMS LENGTH RATE ON THE BASIS OF THE ASSESSEES TRANSACTIONS WITH UNRELATED PARTIES, AT RS.1,500/-, AS AGAINST THE ASSESSEES CONTENTION THAT THE AVERAGE PRICE CHARGE D FROM UNRELATED PARTIES IS RS.717/- PER HOUR. THUS, IT IS VIVID TH AT THE AREA OF DISPUTE IS THE DETERMINATION OF THE CORRECT HOURLY RATE CHARGE D BY THE ASSESSEE FROM UNRELATED PARTIES. 8. AT THIS JUNCTURE, IT IS RELEVANT TO MENTION T HAT RULE 10B(1)(A) DEALS WITH THE DETERMINATION OF ALP UNDER THE CUP METHOD. SUB-CLAUSE (I) OF THIS RULE PROVIDES THAT : `THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFERRED OR SERVICES PROVIDED IN A COMPARABLE UN CONTROLLED TRANSACTION, OR A NUMBER OF SUCH TRANSACTIONS, IS I DENTIFIED. SUB-CLAUSE (II) TALKS OF MAKING ADJUSTMENT TO SUCH PRICE SO AS TO BRING THE INTERNATIONAL TRANSACTION AT PAR WITH THE COMPARABL E UNCONTROLLED TRANSACTION. THEN SUB-CLAUSE (III) PROVIDES THAT T HE ADJUSTED PRICE ARRIVED AT UNDER SUB-CLAUSE (II) IS TAKEN AS AN ARMS LENGT H PRICE IN RESPECT OF THE PROPERTY TRANSFERRED OR SERVICES PROVIDED IN THE IN TERNATIONAL TRANSACTION. ITA NO.2763/DEL/2013 11 THERE IS NO ISSUE OF MAKING ANY ADJUSTMENTS IN TERM S OF SUB-CLAUSE (II) IN THE INSTANT CASE. ACCORDINGLY, WE ARE REQUIRED T O CONCENTRATE ONLY ON SUB-CLAUSE (I) WHICH TALKS OF IDENTIFYING PRICE CHA RGED OR PAID FOR SERVICES PROVIDED IN A COMPARABLE UNCONTROLLED TRANSACTION, OR A NUMBER OF SUCH TRANSACTIONS. A BARE PERUSAL OF THIS PROVISION MAKES IT CLEAR THAT IF THERE IS ONLY ONE COMPARABLE UNCONTRO LLED TRANSACTION, THEN SUCH SOLE TRANSACTION SHOULD BE CONSIDERED AS A BEN CHMARK. ON THE OTHER HAND, IF THERE ARE A NUMBER OF SUCH TRANSACTIONS, T HEN ALL SUCH TRANSACTIONS SHOULD BE CONSIDERED. IN OTHER WORDS, IN CASE OF PLURALITY OF THE COMPARABLE UNCONTROLLED TRANSACTIONS, THEIR AVE RAGE PRICE IS TAKEN AS A BENCHMARK AS PER SUB-CLAUSE (I). THIS HAS BEEN PR OVIDED IN NO UNAMBIGUOUS TERMS IN SECTION 92C OF THE ACT, WHICH DEALS WITH THE COMPUTATION OF THE ALP. FIRST PROVISO TO SECTION 92 C(2) STATES : `THAT WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARM'S LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN OF SUCH PRICES. ERGO, IT IS MANIFEST THAT IN CASE OF AVAILABILITY OF A NUMBER OF COMPARABLE UNCONTROLLED TRANSACTIONS, IT IS THE ARITHMETIC MEAN OF THE PRICE CHARGED IN ALL SUCH TRANSACTIONS, WHICH IS CONSIDERED ITA NO.2763/DEL/2013 12 FOR DETERMINING THE ALP OF AN INTERNATIONAL TRANSAC TION. IN SUCH A CASE, NEITHER THE AO NOR THE AO/TRANSFER PRICING OFFICER CAN RESORT TO CHERRY- PICKING. 9. REVERTING TO THE FACTS OF THE EXTANT CASE, W E FIND THAT THE ASSESSEE HAS ENTERED INTO TRANSACTIONS WITH TWO PARTIES, NAM ELY, INDIA GLYCOLS LTD., AND PETRON ENGINEERING CONSTRUCTION LTD. TOT AL REVENUE FROM RENDERING OF SERVICE TO THESE TWO PARTIES IS RS.8,0 8,550/-. IN ALL, THERE ARE 8 INVOICES RAISED BY THE ASSESSEE, VIZ., SEVEN ON I NDIA GLYCOLS LIMITED AND ONE ON PETRON ENGINEERING CONSTRUCTION LTD., AS UNDER:- DATE INVOICE NO. NAME OF THE COMPANY AMOUNT 21.04.2004 6-2302-3-LHTD-04 INDIA GLYCOLS LIMITED 2 80,000 05.05.2004 6-2302-3-LHTD-05 INDIA GLYCOLS LIMITED 2 4,000 05.07.2004 6-2302-3-LHTD-06 INDIA GLYCOLS LIMITED 2 4,000 22.07.2004 6-2302-3-LHTD-07 INDIA GLYCOLS LIMITED 2 00,000 09.08.2004 6-2302-3-LHTD-08 INDIA GLYCOLS LIMITED 1 ,22,000 05.11.2004 6-2302-3-LHTD-09 INDIA GLYCOLS LIMITED 9 0,000 10.01.2005 6-2302-3-LHTD-10 INDIA GLYCOLS LIMITED 2 4,000 19.05.2004 6-2375-1-LHTD-007 PETRON ENGINEERING CONSTRUCTION LTD. 44,550 TOTAL 808,550 10. COPIES OF THESE INVOICES WERE ADMITTEDLY FILED BEFORE THE AO AND THE SAME HAVE BEEN PLACED FOR OUR CONSIDERATION ALS O. IT CAN BE SEEN THAT ITA NO.2763/DEL/2013 13 OUT OF SEVEN INVOICES RAISED ON INDIA GLYCOLS LTD., THREE INVOICES FOR RS.24,000/- EACH REPRESENT `SITE VISIT TO M/S INDI A GLYCOLS LTD., FOR DISCUSSIONS ABOUT THE WORK UNDERTAKEN TO BE DONE BY THE ASSESSEE FOR THEM. THESE INVOICES REPRESENT SITE VISITING CHARG ES BY THE ASSESSEES EMPLOYEES FOR WHICH THERE IS A CHARGE OF RS.24,000/ -, WHICH RATE ON HOURLY BASIS, COMES TO RS.1,500/-. IN SO FAR AS TH E RENDERING OF ACTUAL SERVICE IS CONCERNED, THE INVOICES ARE FOR SUM OF R S.2,80,000/-, RS.2LAC, RS.1,22,000/- AND RS.90,000/- ON INDIA GLYCOLS LTD. , AND RS.44,550/- ON M/S PETRON ENGINEERING CONSTRUCTION LTD. THESE FIV E INVOICES REPRESENT SERVICE CHARGES FOR THE ACTUAL WORK DONE BY THE ASS ESSEE TO THESE UNRELATED PARTIES. THE AO HAS IGNORED THESE FIVE I NVOICES AND PICKED UP ONLY THREE INVOICES OF RS.24,000/- EACH FOR DETERM INING THE BENCHMARK RATE OF RS.1,500/- PER HOUR, WHICH, IN FACT, REPRES ENTED MERELY SITE VISITING CHARGES UNDERTAKEN BY THE ASSESSEES EMPLO YEES. IF ALL THE EIGHT INVOICES ARE CONSIDERED, THE AVERAGE HOURLY RATE CO MES TO RS.717/- PER HOUR WHICH WAS PLACED BEFORE THE AO, WHO CHOSE TO I GNORE THE SAME. IF WE IGNORE THE THREE INVOICES OF RS.24,000/- EACH FR OM BOTH THE SIDES, NAMELY, REVENUE AS WELL AS THE NUMBER OF HOURS, THE AVERAGE HOURLY RATE ITA NO.2763/DEL/2013 14 CHARGED COMES TO RS.682/-. VIEWED FROM ANY ANGLE, T HE PRICE CHARGED BY THE ASSESSEE FROM ITS AES AT RS.1135/- PER HOUR IS DEFINITELY AT ARMS LENGTH IN COMPARISON WITH THE AVERAGE PRICE OF RS.7 17/- OR RS.682/-, AS THE CASE MAY BE. IN VIEW OF THE FOREGOING DISCUSSIO N, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS JUSTIFIE D IN DELETING THE ADDITION ON MERITS. WE, THEREFORE, COUNTENANCE THE IMPUGNED ORDER ON THIS SCORE. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.10.201 5. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 15 TH OCTOBER, 2015. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.