DCIT Circle 9 (1), V. Stratex Network (India) (P) Ltd,

ITA 3640/DEL/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3985 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 21-01-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Arm length price
• Section: 92C; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A NO. 3640/DEL/07 ASSTT. YEAR 2004-05 DCIT, CIR. 9 (1) R.NO. 163, C.R. BLDG. I.P. ESTATE VS. M/S. STRATEX NET WORKS (INDIA) PVT. LTD. 4, LSC A CENTRE, SECTOR-C-6 & 7 VASANT KUNJ, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJEEV SHARMA, DR RESPONDENT BY: DR. RAKESH GUPTA ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT (A) DATED 30 TH MAY 2007 PASSED FOR ASSTT. YEAR 2004-05. THE SOLIT ARY GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A) HAS ERR ED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,19,41,893/- MADE BY THE AO ON ACCOUNT OF ARMS LENGTH PRICE ADJUSTMENT. ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 1 ST NOVEMBER, 2004 DECLARING AN INCOME OF RS. 28,59,88 1/-. ALONG WITH THE RETURN OF INCOME ASSESSEE HAS FILED AUDITED ACCOUNTS IN THE FORM OF BALANCE SHEET, P & L ACCOUNT WITH RELEV ANT ANNEXURES AND TAX AUDIT REPORT IN THE PRESCRIBED FORM. A NOTICE U /S 143 (2) WAS ISSUED ON 28 TH FEBRUARY, 2005 WHICH WAS DULY BEEN RESPONDED BY TH E ASSESSEE. THE ASSESSEE COMPANY IS A WHOLLY OWNED SU BSIDIARY OF M/S. DIGITAL MICROWAVE (MAURITIUS) LTD. IT IS MAINLY EN GAGED IN UNDERTAKING CONTRACTS FOR INSTALLATION, COMMISSIONING AND EQUIP MENT MAINTENANCE CONTRACTS OF TELECOMMUNICATION EQUIPMENTS, THE AO W HILE SCRUTINISING THE RETURN OF ASSESSEE OBSERVED THAT ORDER U/S 92 C A (3) OF THE INCOME TAX ACT HAS BEEN PASSED IN THE CASE OF ASSESSEE BY THE TRANSFER PRICING OFFICER NEW DELHI ON 7.12.2006. HE FOUND THAT ASSES SE HAD INTERNATIONAL TRANSACTION WITH ASSOCIATE ENTERPRISES. ON AN ANAL YSIS OF METHOD ADOPTED BY THE ASSESSEE FOR DETERMINATION OF ITS AR MS LENGTH PRICE OF INTERNATIONAL TRANSACTION VIS A VIS THE MOST APPROP RIATE METHOD REQUIRED TO BE ADOPTED HE POINTED OUT THAT TNMM IS THE MOST APPROPRIATE METHOD DETERMINING THE ARMS LENGTH PRI CE IN THE CASE OF ASSESSEE IN RESPECT OF INTERNATIONAL TRANSACTION. T HE RELEVANT DISCUSSION MADE BY THE TPO HAS BEEN REPRODUCED BY THE AO WHICH READ AS UNDER:- ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 3 THE ARM LENGTH PRICE OF THE INTERNATIONAL TRANSAC TIONS ENTERED INTO WITH THE AE IS COMPUTED IN THE FOLLOWING MANNER :- TOTAL COST RS. 7,94,78,065 OPERATING PROFIT RS. 10,44,822 OPERATING PROFIT MARGIN 1.31% ARMS LENGTH OPERATING PROFIT MARGIN 16.34% ARMS LENGTH OPERATING PROFIT RS. 1,29,86,715 DIFFERENCE BEING ADJUSTMENT REQUIRED RS. 1,19,41, 893 ACCORDINGLY, THE ADJUSTMENT OF RS. 1,19,41,893/- I S REQUIRED TO BE MADE TO THE VALUE OF INTERNATIONAL TRANSACTION RELATED T O COMMISSION ON SALES AND WARRANTY SUPPORT SERVICES. THE ADJUSTMENT IS BEING MADE PROPORTIONATELY TO BOTH THE TRANSACTIONS. THE ARMS LENGTH PRICE OF TH ESE TRANSACTIONS IS COMPUTED IN THE FOLLOWING MANNER : S.NO. INTERNATIONAL TRANSACTION VALUE OF INTERNATIONAL TRANSACTION PROPORTIONATE ADJUSTMENT ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION 1. WARRANTY SUPPORT SERVICES 2,32,37,906 72,95,302 3,05,33,208 2. COMMISSION INCOME 1,47,96,910 46,46,591 1,94,43,501 THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSA CTION RELATED TO WARRANTY SUPPORT SERVICES HAS THUS BEEN COMPUTED AT RS. 3,05 ,33,208/-. THE (+-) RANGE OF THE ARMS LENGTH PRICE IS RS. 3,20,59,868/- (+5%) TO 2, 90,06,547/- (-5%). SINCE THE VALUE OF INTERNATIONAL TRANSACTION IS RS. 2,32,37,906/-, WHI CH FALLS OUTSIDE THE (+-5%) TOLERANCE BAND, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT O F PROVISO TO SUB-SETION (2) TO SECTION 92C OF THE INCOME TAX ACT. THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSA CTION RELATED TO COMMISSION INCOME HAS THUS BEEN COMPUTED AT RS. 1,94,43,501/-. THE (+-) RANGE OF THE ARMS LENGTH PRICE IS RS. 2,04,15,676/- (+5%) TO 1,84,71, 325/- (-5%). SINCE THE VALUE OF INTERNATIONAL TRANSACTION IS RS. 1,47,96,910/-, WHI CH FALLS OUTSIDE THE (+-5%) TOLERANCE BAND, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT O F PROVISO TO SUB-SECTION (2) TO SECTION 92C OF THE INCOME TAX ACT. AFTER RECEIVING THE ORDER FROM TPO, A SHOW CAUSE D ATED 08.12.2006 WAS ISSUED TO THE ASSESEEE. IN RESPONSE TO THE SHOW-CAUSE, ASS ESSEE HAS SUBMITTED THE SUBMISSION VIDE LETTER DATED 20.12.2006 STATED THER EIN AS UNDER :- THE TPO HAS WRONGLY CONCLUDED THAT ARMS LENGTH P RICE OF INTERNATIONAL TRANSACTIONS RELATEDE TO COMMISSION ON SALES AND PA YMENT OF REPAIR CHARGES TO AES ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 4 ON ACCOUNT OF REPAIR OF EQUIPMENT UNDER MAINTENANCE CONTRACT HAS NOTBEEN DETERMINED AT ALL. THE CLIENT IS AT LIBERTY TO GET THE INSTALLATION AND COMMISSIONING DONE EITHER BY HIMSELF OR THROUGH ASSESSEE COMPANY OR THROUGH SOME OUTSIDE VENDOR. THE TPO FAILED TO APPRECIATE THE MODUS OPER ANDI FO THE ASSESSEE COMPANY. THE TPO IS NOT JUSTIFIED IN CALCULATING PLI OF 1.3 1% BY COMBINING (1) INSTALLATION AND COMMISSIONING REVENUE, (II) RE-ENGINEERIGN & MA INTENANCE CONTRACT REVENUE, (III) WARRANTY SERVICES REVENUE AND (IV) COMMISSION INCOME. THE ASSESSEE COMPANY NEVER PROVIDES WARRANTY FOR INSTALLATION & COMMISSI ONING WORK CARRIED OUT BY IT. THE WARRANTY FACILITIES IS PROVIDED ONLY BY THE AE ON E QUIPMENT SUPPLIED BY IT WHICH STARTS FROM THE DATE OF SHIPMENT OF THE EQUIPMENT ITSELF. THE SUBMISSION FILED BY THE ASSESSEE HAS BEEN CONS IDERED AND FOUND NOT SATISFACTORY. THE ISSUE RAISED BY THE ASSESSEE HAS ALREADY BEEN DISCUSSED BY THE TPO IN HIS ORDER AT LENGTH. ACCORDINGLY INTERNATIONAL TRANSACTION OF RELATED T O COMMISSION ON SALES AND WARRANTY SUPPORT SERVICES WILL GET ADJUSTED UPWARDS TO THE EXTENT TO RS. 46,46,591- AND RS. 72,95,302/- RESPECTIVELY. THE AO SHALL, THE REFORE, ENHANCE THE INCOME OF THE ASSESSEE BY RS. 1,19,41,893/-. 3. ON APPEAL LD. CIT(A) HAS DELETED THIS ADDITION. 4. LD. DR WHILE IMPUGNING THE ORDER OF LD. CIT (A) CONTENDED THAT THE ASSESSEE IS WHOLLY OWNED SUBSIDIARY OF DIGITAL MICR OWAVE MAURITIUS LTD. WHICH IN TURN HELD BY DIGITAL MICROWAVE, USA. THE A SSESSEE SUPPLIES EQUIPMENT I.E. MICROWAVE LINKS TO THE BASIC AND CEL LULAR SERVICE PROVIDER, MV LINKS ARE USED TO TRANSMIT INFORMATION BETWEEN TWO POINTS IN TELECOMMUNICATION NETWORK. HE DREW OUR ATTE NTION TOWARDS PAGE NO. 20 OF THE PAPER BOOK WHERE L IST OF PARTIES TO WHOM EQUIPMENTS WERE SUPPLIED BY THE ASSOCIATE EN TERPRISES THROUGH THE ASSESSEE. ACCORDING TO LD. DR THE INST ALLATION RE ENGINEERING SERVICES CAN NOT BE TOTALLY SEPAR ATE ACTIVITY, UNDERTAKEN ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 5 4. BY THE ASSESSEE INDEPENDENTLY, RATHER ALL THESE ACTIVITIES IN RESPECT OF THE GOODS SUPPLIED BY THE ASSOCIATE ENTE RPRISES. THUS THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE EVEN DOMESTICALLY ARE ASSOCIATE ENTERPRISES ORIENTED. TH EY HAVE NOT PROVIDED ANY SERVICE TO ANY THIRD PARTY WHICH PURCH ASED THE EQUIPMENT FROM THE PARTY OTHER THAN FROM ASSOCIATE ENTERPRISES. THE TPO HAS ADOPTED TNMM METHOD WHICH IS MOST APPROPRIATE METHOD IN THE PRESENT CASE. THE ASSESS EE IS MANNED BY TECHNICAL PERSONS. IT IS DOING SURVEY FO R INSTALLATION. IT SUPPLIED TECHNICAL HANDS FOR ENGINEERING THEREFO RE THE TPO HAS RIGHTLY TAKEN INTO CONSIDERATION THE INSTALLATI ON AND REENGINEERING RECEIPTS WHILE COMPUTING THE ARMS LE NGTH PRICE DETERMINED BY THE ASSESSEE AND THE ONE REQUIRED TO BE DETERMINED AFTER TAKING INTO CONSIDERATION THE COMP ARABLE CASES. HE FURTHER POINTED OUT THAT INTERNATIONAL TR ANSACTIONS ARE BOTH SIDES I.E. INCOME SIDE AND EXPENSES SIDE. REFERRING TO PAGE 12 OF THE PAPER BOOK HE POINTED OUT THAT CERTA IN EXPENSES ARE RELATED WITH RESPECT OF THE MATERIAL P URCHASED FROM ASSOCIATE ENTERPRISE BUT SUPPLIED TO THIRD PAR TY. THESE EXPENSES ARE RELATED TO INSTALLATION AND COMMISSION THOUGH THE EXPENSES ARE SMALL IN QUANTITY BUT THEY ARE GOO D FACTOR TO GOAD ANY AUTHORITY TO SAY THAT EXPENSES PROVIDE A L IVE LINKS ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 6 BETWEEN THE INSTALLATION RECEIPT AND TRANSACTIONS W ITH AE. BECAUSE THESE EXPENSES ARE IN RESPECT OF EQUIPMENT SUPPLIED BY THE ASSOCIATE ENTERPRISE. LD. DR FURTHER TOOK US TO THE DETAILS OF OTHER EXPENSES AVAILABLE ON THE PAPER BOOK. 5. LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND P OINTED OUT THAT THERE ARE TWO ASPECTS IN THE PRESENT CASE. THE FIRS T ISSUE IS WHETHER TPO HAS SELECTED PROPER COMPARABLE CASES FOR DETERMININ G THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION ENTER ED INTO WITH THE ASSOCIATE ENTERPRISES. THE SECOND ASPECT IS EVEN FO R THE SAKE OF ARGUMENT IT IS CONSTRUED THAT THESE COMPARABLES ARE MOST APPROPRIATE CASES AND THE METHOD ADOPTED BY THE TPO IS ALSO THE MOST APPROPRIATE METHOD THEN WHETHER ANY ADJUSTMENT IS R EQUIRED OR NOT. THE ASSOCIATE ENTERPRISES DIRECTLY ENTERED INTO THE TRANSACTION WITH THE CUSTOMER. ASSESSEE GET 3% COMMISSION. THERE IS NO T RIPARTITE AGREEMENT BETWEEN THE ASSESSEE, CUSTOMER AND THE ASSOCIATE EN TERPRISES. ON BEHALF OF THE ASSOCIATE ENTERPRISES ASSESSEE DO PRO VIDE WARRANTY ETC. THE ASSESSEE ITSELF HAS INCLUDED WARRANTY SERVICE R ECEIPT AND COMMISSION RECEIPT IN THE INTERNATIONAL TRANSACTION AND COMPUTED THE ARMS LENGTH PRICE. AS FAR AS THE RECEIPT IN RESPEC T OF INSTALLATION AND COMMISSIONING REENGINEERING AND MAINTENANCE ARE CON CERNED THEY ARE DOMESTIC RECEIPTS WHICH ASSESSEE HAS EARNED IND EPENDENTLY WITHOUT ANY CONTRIBUTION OF THE AE. FOR BUTTERACING HIS CONTENTION HE ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 7 REFERRED TO THE LETTER DATED 16.11.2006 WRITTEN TO THE AO POINTING OUT THAT INSTALLATION AND COMMISSIONING SERVICES PROVID ED BY THE ASSESSEE ARE NOT INTERNATIONAL TRANSACTION. TAKING US THROUG H PAGE 20 OF THE PAPER BOOK HE POINTED OUT THAT AE HAS SUPPLIED EQUI PMENTS TO 40 PARTIES DURING THE YEAR. THE ASSESSEE HAS EXTENDED INSTALLATION AND COMMISSIONING SERVICES ONLY TO THREE PARTIES NAMELY TATA TELESERVICES LTD., ESCOTEL MOBILE COMM. LTD. AND BHARTI CELLULAR LTD. THE OTHER CUSTOMERS DID NOT GIVE INSTALLATION ORDERS TO THE A SSESSEE. THEY HAVE INSTALLED THESE EQUIPMENTS EITHER AT THEIR OWN OR F ROM THIRD PARTY. HE FURTHER CONTENDED THAT THE TPO HIMSELF HAS ACCEPTED WARRANTY AND COMMISSION INCOME ONLY, AS INTERNATIONAL TRANSACTIO N. HE MADE A REFERENCE TO PAGE 12 OF HIS ORDER AND POINTED OUT T HAT ONLY REVISION MADE BY THE TPO WITH UPWARD SIDE IS IN RESPECT OF W ARRANTY AND COMMISSION INCOME. HE HAS NOT MADE ADJUSTMENT IN T HE INSTALLATION AND REENGINEERING RECEIPTS. IF THESE ARE NOT RECEIP TS WHICH REQUIRED TO BE ADJUSTED THEN WHILE COMPUTING THE PROFIT LEVEL I NDICATOR IN THE CASE OF ASSESSEE THE TPO OUGHT TO HAVE TAKEN INTO CONSID ERATION THE TWO RECEIPTS NAMELY WARRANTY SERVICE AND COMMISSION INC OME. WHILE COMPUTING THE PLI DISCLOSED BY THE ASSESSEE HE HAS CONSIDERED THE FOUR RECEIPTS AND THEN WORKED OUT THE PROFIT LEVEL INDIC ATOR. IF THESE RECEIPTS ARE EXCLUDED FROM THE COMPUTATION THEN PROFIT MARGI N IN RESPECT OF THE INTERNATIONAL TRANSACTION IS 18.98% WHICH IS HIGHER THAN THE ONE ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 8 DETERMINED BY THE TPO AT 16.34%. HE EMPHASISED THAT LD. TPO HAS TOTALLY FAILED TO CONSTRUE THE TRANSACTIONS OF THE ASSESWEE, 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. FROM THE PERUSAL OF THE TPOS ORDER IT REVEALS THAT HE HAS MADE ADJUSTMENT ONLY IN RESPECT OF WARRANTY RECEIPTS AND COMMISSION INCOME. IT IS DISCERNABLE FROM THE FINDI NG OF HIS ORDER EXTRACTED SUPRA, WHILE COMPUTING THE PROFIT LEVEL I NDICATOR OF THE ASSESSEE HE TOOK INTO CONSIDERATION THE INSTALLATIO N, COMMISSIONING RECEIPTS, REENGINEERING AND MAINTENANCE RECEIPTS. T HE WORKING HAS BEEN MADE BY THE TPO ON PAGE 10 OF HIS ORDER WHICH IS AVAILABLE AT PAGE 12 OF THE PAPER BOOK WHICH READ AS UNDER :- COMPUTATION OF PLI OF THE ASSESSEE DURING THE CURSE OF PROCEEDINGS THE ASSESSEE HAS FI LED A DETAIL OF COMPUTATION OF NET MARGIN FROM VARIOUS ACTIVITIES. THE OPERATING REVENUE AND OPERATING COST IN RESPECT OF ACTIVITIES OF INSTALLA TION AND COMMISSIONING, RE- ENGINEERING AND MAINTENANCE, WARRANTY SUPPORT SERVI CES AND COMMISSION INCOME ARE AS UNDER :- S.NO. ACTIVITY OPERATING REVENUE OPERATING COST 1. INSTALLATION AND COMMISSIONING 74,96,321 1,46,31 ,089 2. RE-ENGINEERING AND MAINTENANCE 3,49,91,750 3,40, 30,354 3. WARRANTY SERVICES 2,32,37,906 1,91,75,407 4. COMMISSION INCOME 1,47,96,910 1,16,41,215 TOTAL 8,05,22,887 7,94, 78,065 OPERATING PROFIT = OPERATING REVENUE OPERATING COST = RS. 8,05,22,887 RS. 7,94,78,065 ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 9 = RS. 10,44,822/- PLI = 1.31% 7. THE TPO ON PAGE 12 IN THE ORDER EXTRACTED BY THE AO IN THE ASSTT. ORDER HIMSELF ACCEPTED THAT ADJUSTMENT IS REQUIRED TO BE MADE TO THE VALUE OF INTERNATIONAL TRANSACTION RELATED TO COMMI SSION ON SALES AND WARRANTY SERVICE. HE HAS MADE THE ADJUSTMENT ON THE SE TWO ITEMS ONLY. THE GRIEVANCE OF THE ASSESSEE IS THAT IF THE TPO WA NTS TO DETERMINE THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION WITH ASSOCIATE CONCERN THEN HE SHOULD WORK OUT THE PROFIT DISCLOSED BY THE ASESEE ON THOSE RECEIPTS AND COMPARE THAT RESULT WITH THE COMPARABL ES OF INDEPENDENT CASES, WHO HAVE CARRIED OUT SIMILAR INT ERNATIONAL TRANSACTIONS WITH INDEPENDENT PARTIES. IN THAT EXER CISE THE DOMESTIC RECEIPTS WHICH HAS NOTHING TO DO WITH THE ASSOCIATE ENTERPRISES ARE REQUIRED TO BE EXCLUDED FOR WORKING OUT THE PROFIT LEVEL INDICATOR SHOWN BY THE ASSESSEE IN RESPECT OF INTERNATIONAL TRANSAC TION. WE FIND FORCE IN THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE . THE TPO OUGHT TO HAVE CONSIDERED THE INTERNATIONAL RECEIPTS WITH THE ASSOCIATE ENTERPRISES ONLY WHILE DETERMINING THE PROFIT SHOWN BY THE ASSESSEE IN SUCH TRANSACTION IF THE PLI IS LOWER THAN THE ONE C OMES OUT FROM COMPARABLE CASES ONLY THEN HE COULD MAKE NECESSARY ADJUSTMENT. IN THE PRESENT CASE WHILE WORKING OUT THE PLI SHOWN BY THE ASSESSEE HE ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 10 INCLUDED THE DOMESTIC RECEIPT WHICH GIVES LESSER F IGURE AND THEN COMPARE THIS RESULT WITH THE COMPARABLE CASES, AFTE R THE COMPARISON HE APPLIED THE DIFFERENCE ONLY TO THE INTERNATIONAL RECEIPTS. TO OUR MIND THAT IS NOT THE APPROPRIATE STEP PERMISSIBLE IN LAW AND THE LD. CIT(A) HAS RIGHTLY APPRECIATED THIS ASPECT. THE OTHER QUESTION IS WHETHER THESE RECEIPTS ARE FOR THE SERVICES PROVIDED DOMESTICALLY AND REQUIRED TO BE EXCLUDED FOR THE COMPUTATION OF PLI. WE FIND THAT A SSESSEE HAS DEMONSTRATED ON THE RECORD THAT THERE ARE INDEPEND ENT AGREEMENT. MOST OF THE AGREEMENTS WERE ENTERED WITH THE CUSTOM ER AFTER EXPIRY OF WARRANTY PERIOD. WE HAVE SPECIFICALLY GONE THROUGH PAGE 20 OF THE PAPER BOOK WHEREIN IT IS EVIDENT THAT EQUIPMENT SUP PLIED TO 40 CUSTOMER BY THE AE, ONLY THREE HAS AVAILED INSTALLA TION SERVICE FROM THE ASSESSEE. THE OTHER CORROBORATIVE CIRCUMSTANCE IN ORDER TO CONSTRUE THESE TRANSACTIONS AS RELATED TO DOMESTIC TRANSACTI ON IS THE ORDER OF THE TPO ITSELF WHEREIN HE HAS NOT MADE ANY ADJUSTMENT T O THESE RECEIPTS. SINCE THE PROFIT LEVEL INDICATOR SHOWN BY THE ASSES SEE ON THESE TWO SERVICES IS 18.98% WHICH HAS BEEN WORKED OUT BY THE ASSESSEE AS UNDER:- WARRANTY SERVICE RS. 2,32,37,906/- RS. 1,91,75,40 7 COMMISSION INCOME RS. 1,47,96,910 RS. 1,16,41,215 RS. 3,80,34,816 RS. 3,08,16,622 72,18,194 X 100 38034816 ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 11 = 18.98% 8. THIS PROFIT IS MORE THAN THE PLI DETERMINED BY T HE TPO AT 16.34%. THEREFORE THERE IS NO REASON TO EXAMINE THE ISSUE O N THE ARGUMENT OF ASSESSEE THAT TPO HAS NOT APPLIED PROPER COMPARABLE WHILE WORKING OUT THIS PLI, BECAUSE THAT ISSUE WILL BE AN ACADEMI C ISSUE IN THE PRESENT CASE EVEN IF SOME OF THE CASES ARE NOT OF COMPARABL E THEN ALSO WE CANNOT TAKE THE PLI MORE THAN THE ONE ADOPTED BY TH E TPO AT 16.34 % WHICH IS LOWER THAN THE ONE SHOWN BY THE ASSESSEE. THE LD. CIT(A) HAS THOUGH CONSIDERED THIS ASPECT ALSO BEFORE DELETING THE ADDITION. IN VIEW OF THE ABOVE DISCUSSION AND TAKING INTO CONSID ERATION THE ORDER OF LD. CTI(A) WE DO NOT FIND ANY REASON TO INTERFERE I N IT. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2010. [K.D. RANJAN] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: 30.4.2010 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) ITA NO. 3640/DEL/07 ASSTT. YEAR 2004-05 12 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT