OSI Systems Private Limited, Hyd, Hyderabad V. ACIT, Circle-16(2), Hyderabad, Hyderabad

ITA 426/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6686 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAN KUMAR SINGHANIA
• Assessee Lawyers: AJIT TOLANI
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.426/HYD/2015 ASSESSMENT YEAR 2010-2011 OSI SYSTEMS PRIVATE LIMITED, HYDERABAD. PAN AAACO4438M VS. THE ACIT, CIRCLE - 16(2), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. AJIT TOLANI FOR REVENUE : MR. MOHAN KUMAR SINGHANIA DATE OF HEARING : 1 7 .03.2016 DATE OF PRONOUNCEMENT : 06 .0 4 .2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2010- 2011 AGAINST THE ASSESSMENT ORDER PASSED BY THE A.O . UNDER SECTION 143(3) READ WITH SECTION 144C OF THE I.T. ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF MEDICAL PRODUCTS AND S ALE AND SERVICE OF THE SAME AND ALSO SOFTWARE DEVELOPME NT, FILED ITS RETURN OF INCOME FOR THE A.Y. 2010-2011 O N 12.10.2010 ADMITTING TOTAL INCOME OF RS.NIL UNDER NORMAL PROVISIONS AND RS.11,99,03,491 AS BOOK PROFI T 2 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. UNDER SECTION 115JB OF THE ACT. DURING THE ASSESSME NT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT, T HE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAD INTERNATIONA L TRANSACTIONS WITH A.E. DURING THE FINANCIAL YEAR 20 09- 2010 RELATING TO THE A.Y. 2010-2011. THEREFORE, THE CASE WAS REFERRED TO THE TPO UNDER SECTION 92CA OF THE A CT FOR COMPUTATION OF THE ARMS LENGTH PRICE (ALP). THE TPO, VIDE ORDERS DATED 21.01.2014, REJECTED THE ASSESSEE S T.P. STUDY IN WHICH THE ASSESSEE HAD ADOPTED RPM AS THE MOST APPROPRIATE METHOD (MAM) AND ADOPTED TNMM AS THE MAM AND PROCEEDED TO COMPUTE THE ALP. THEREAFTE R, THE A.O. PROPOSED THE DRAFT ASSESSMENT ORDER AGAINS T WHICH THE ASSESSEE PREFERRED OBJECTIONS BEFORE THE DRP. THE DRP, HOWEVER, CONFIRMED THE DRAFT ASSESSMENT OR DER, IN CONSONANCE WITH WHICH, THE FINAL ASSESSMENT ORDE R WAS PASSED MAKING THE T.P. ADJUSTMENT OF RS.1,08,92,035 . AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE IS IN A PPEAL BEFORE US. 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ISSUE OF MAM FOR COMPU TING THE ALP OF THE INTERNATIONAL TRANSACTION OF TRADING OF MEDICAL EQUIPMENT BY THE ASSESSEE HAD COME UP BEFOR E THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2 009- 2010 AND THE TRIBUNAL HAS HELD THE RESALE PRICE MET HOD (RPM) TO BE MAM. HE HAS FILED A COPY OF THE ORDER BEFORE US AND SUBMITTED THAT THIS TRANSACTION ALSO IN SIMI LAR AND THE TPO SHOULD BE DIRECTED TO APPLY RPM FOR DETERMINATION OF ALP FOR THIS ASSESSMENT YEAR ALSO. 3 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. 4. THE LD. D.R. HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT FOR THE A.Y. 2009- 2010 IN ITA.NO.683/HYD/2014 & ITA.NO.542/HYD/2014 VIDE ORDERS DATED 12.08.2015, THIS TRIBUNAL AT PARAS-43 AND 44 OF ITS ORDER HAS HELD AS UNDER : 43. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THERE IS NO DISPUTE AS FAR AS THE FACTUAL ASPECT IS CONCERNED. IT IS A FACT ON RECORD THAT ASSESSEE PURCHASES MEDICAL EQUIPMENTS FROM ITS AE AND SELLS THEM TO THIRD PARTIES IN INDIA WITHOUT MAKING ANY VALUE ADDITION TO THEM. THEREFORE, ASSESSEE IS PURE LY A RESELLER OF THE PRODUCTS. THAT BEING THE CASE, TH E MOST APPROPRIATE METHOD FOR DETERMINING THE ALP OF SUCH TRANSACTIONS, IN OUR VIEW, IS RE SALE PRICE METHOD. IN THIS CONTEXT REFERENCE CAN BE MADE TO SECTION 10B(1)(B). ON A PERUSAL OF THE SAID PROVISI ON, IT IS VERY MUCH CLEAR THAT THE MOST APPROPRIATE METHOD IN THIS NATURE OF TRANSACTIONS IS THE RESALE PRICE METHOD. IN THIS CONTEXT, THE DECISION OF ITAT DELHI BENCH IN CASE OF LUXOTTICA INDIA EYEWEAR PVT LTD IN ITA NO.1115/DEL/2014 DATED 05.11.2014 REQUIRES CONSIDERATION. AS COULD BE SEEN FROM THE FACTS OF THIS CASE, ASSESSEE IS TRADING IN SUN GLAS SES AND SUN GLASS FRAME. IT PURCHASES SUCH PRODUCTS FROM AE AND SELLS THEM TO THIRD PARTIES WITHOUT ANY VALUE ADDITION. ASSESSEE IN ITS TP STUDY REPORT SUBMITTED THAT THE TNNM IS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ALP. HOWEVER, ASSESSEE HAS ALSO MADE AN ALTERNATIVE ANALYSIS UNDER THE RPM. BEFORE THE TRIBUNAL, ASSESSEE TOOK A PLEA THAT RPM SHOULD BE ADOPTED AS THE MOST APPROPRIATE METHOD TO DETERMINE THE ALP. DEPARTMENT CONTESTED ASSESSEES CLAIM BY CONTENDING THAT WHEN THE ASSESSEE HIMSELF HAS ADOPTED TNNM AS THE MOST 4 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. APPROPRIATE METHOD IN ITS TP STUDY, IT CANNOT TURN AROUND AND ARGUE FOR ADOPTION OF RESALE PRICE METHO D AS THE MOST APPROPRIATE METHOD. AFTER CONSIDERING T HE SUBMISSIONS OF THE PARTIES AS AFORESAID AND KEEPING IN VIEW THE DECISIONS OF OTHER BENCHES OF ITAT ON T HE ISSUE, THE DELHI BENCH OF THE TRIBUNAL ACCEPTED ASSESSEES CLAIM FOR ADOPTING RESALE PRICE METHOD B Y HOLDING AS UNDER: 10.2. COMING TO THE ARGUMENT THAT THE ASSESSEE HIM SELF HAS ADOPTED TNMM AS THE MAM FOR ITS TRANSFER PRICING ST UDY AND HENCE IT CANNOT TURN AROUND AND ARGUE FOR ADOPTION OF RSPM AS THE MAM, WE FIND THAT THE MUMBAI BENCH OF THE TRIBU NAL IN THE CASE OF MATTEL TOYS(I) PVT.LTD. IN ITA NO.2476/MUM/ 2008 HELD AS FOLLOWS. 41. NOW COMING TO THE ARGUMENT OF THE LD.DR THAT O NCE THE ASSESSEE ITSELF HAS CHOSEN TNMM AS THE MAM 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 THA T A PARTICULAR METHOD WILL 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 FOR GETTING PROPER DETERMINATION OF ALP OR THE ASSESSEE CAN DEMONSTRAT E A PARTICULAR METHOD TO JUSTIFY ITS ALP. THUS, EVEN IF THE ASSESSEE HAD ADOPTED TNMM AS THE MAM IN THE TP REPORT, THEN ALSO IT IS NOT PRECLUDED FROM RAISING THE CONTENTIONS/OBJECTIONS B EFORE THE TPO OR THE APPELLATE COURTS THAT SUCH A METHOD WAS NOT AN APPROPRIATE METHOD AND IS NOT RESULTING INTO PROPER DETERMINATION OF ALP AND SOME OTHER METHOD SHOULD B E RESORTED. THE ULTIMATE AIM OF THE TP IS TO EXAMINE WHETHER TH E PRICE OR THE MARGIN RISING FROM AN INTERNATIONAL TRANSACTION WIT H THE RELATED PARTY IS AT ALP OR NOT. THE DETERMINATION OF APPROX IMATE ALP IS THE KEY FACTOR FOR WHICH THE MAM IS TO BE FOLLOWED. THEREFORE, IF AT ANY STAGE OF THE PROCEEDINGS, IT IS FOUND THAT B Y ADOPTING ONE OF THE PRESCRIBED METHODS OTHER THAN CHOSEN EARLIER , THE MOST APPROPRIATE ALP CAN BE DETERMINED, THE ASSESSMENT A UTHORITIES AS WELL AS THE APPELLATE COURTS SHOULD TAKE INTO CO NSIDERATION SUCH A PLEA BEFORE THEM PROVIDED, IT IS DEMONSTRATE D AS TO HOW A CHANGE IN THE METHOD WILL PRODUCE BETTER OR MORE AP PROPRIATE ALP ON THE FACTS OF THE CASE. ACCORDINGLY, WE REJEC T THE CONTENTIONS OF THE LD.DR AND ALSO THE OBSERVATIONS OF THE AO AND THE LD.CIT(A) THAT THE ASSESSEE CANNOT RESORT TO AD OPTION OF RPM METHOD INSTEAD OF TNMM. 5 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. 10.3. THE CASE OF THE ASSESSEE IS MUCH BETTER THAN THE CASE OF M/S MATTEL TOYS (I) PVT.LTD. (SUPRA) FOR THE REASON THA T THE ASSESSEE IN ITS TRANSFER PRICING REPORT HAS ALSO USED RSPM AS T HE MAM. HENCE THIS ARGUMENT OF THE REVENUE IS REJECTED. 10.4. AS THE UNDISPUTED FACT IS THAT THE FUNCTIONAL PROFILE OF THE ASSESSEE IS THAT OF A TRADER AND AS THE CHARACTERIZ ATION OF THE TRANSACTION IS PURCHASE AND SALE OF GOODS, WE HOLD THAT RSPM IS THE MAM BY APPLYING THE FOLLOWING DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL. (I) IN THE CASE OF STAR DIAM OND GROUP NV MUMBAI (ITA NO.3923/MUM/2008), IT IS HELD AS FOLLOW S: 13. THIS FINDING IN OUR HUMBLE OPINION IS WRONG FO R THE REASON THAT THE CIT(A) HAS ADOPTED THESE VERY COMPARABLES, ALONG WITH THREE OTHERS WHILE ARRIVING AT THE OPERATING MARGIN S AT PARA 7.16 OF HIS ORDER. AS THE ASSESSEE IS A TRADER, WITHOUT VALUE ADDITION TO THE GOODS, WE FIND FORCE IN THE SUBMISSIONS OF THE ASSESSEE THAT RESALE PRICE METHOD IS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ALV WITH RESPECT TO AE TRANSACTION. IN FACT, THE REVENUE HAS ACCEPTED THIS METHOD IN EARLIER TWO YEA RS. THE TPO IN HIS ORDER DT. 7.3.2005 FOR THE AY 2002-03 AND OR DER DT. 20.3.2006 FOR THE AY 2003-04, HAS AGREED WITH THE C OMPUTATION OF ARMS LENGTH PRICE MADE BY THE ASSESSEE UNDER THE R ESALE PRICE METHOD. (II) IN THE CASE OF LOREAL INDIA P.LTD. V S. ITO (ITA NO.5423/MUM/2009) IT IS HELD AS FOLLOWS: 19. DURING THE COURSE OF HEARING, LD.DR ALSO SUPPO RTED THE METHOD CONSIDERED BY TPO AND REFERRED TO PARA 2.29 OF OECD PRICE GUIDELINES 2010 AS STATED HEREINABOVE. ON THE OTHER HAND, LD.AR JUSTIFIED THE RP< METHOD ADOPTED BY IT AND AL SO REFERRED TO ORDER OF TPO IN THE PRECEDING AY AS WELL AS SUCCEED ING AY TO THE AY UNDER CONSIDERATION TO SUBSTANTIATE THAT RPM IS THE MOST APPROPRIATE METHOD TO DETERMINE ALP. HE SUBMITTED T HAT THE ASSESSEE MADE ADJUSTMENT FOR MARKETING AND SELLING EXPENSES TO THE PROFITS TO MAKE IT COMPARABLE TO THE COMPARABLE COMPANIESPROFITS. WE AGREE WITH THE LD.CIT(A) THAT THERE IS NO ORDER OF PRIORITY OF METHODS TO DETERMINE ALP. RPM IS ONE OF THE STANDARD METHOD AND OECD GUIDELINES ALSO STATES THA T IN CASE OF DISTRIBUTION AND MARKETING ACTIVITIES WHEN THE GOOD S ARE PURCHASED FROM AES WHICH ARE SOLD TO UNRELATED PART IES, RPM IS THE MOST APPROPRIATE METHOD. IN THE CASE BEFORE US, THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE BUYS PRODUCTS FROM ITS AES AND SELLS TO UNRELATED PARTIES WITHOUT ANY FURTHER PROCESSING. (III) IN THE CASE OF DANISCO (INDIA) PVT.LTD. VS. ACIT , CIRCLE 10(1), NEW DELHI (ITA NO.5291/DEL/2010), IT IS HELD AS FOLLOWS: 6 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. 22. CONSIDERING THE ABOVE SUBMISSIONS WE FIND THAT THE ASSESSEE ESTABLISHED IN 1998 AS A 100% SUBSIDIARY OF DANISCO A/S DENMARK. DANISCO INDIA IS ENGAGED IN THE BUSINESS OF MANUFAC TURING AND TRADING OF FOOD ADDITIVES. THE MANUFACTURING BUSINE SS IN RESPECT OF FOOD FLAVOURS AND THE TRADING BUSINESS IS FOR PR ODUCTS FOR FALLING UNDER THE CATEGORY OF FOOD INGREDIENTS. THE MAIN GR IEVANCES OF THE ASSESSEE AGAINST THE ORDER OF THE LD.TPO UPHELD BY THE LD.DRP ARE REGARDING THEIR APPROACH IN THE MANNER IN WHICH TRA NSFER PRICING ADJUSTMENT HAS BEEN MADE, THE APPROACH ADOPTED BY T HE LD.TPO IN GRANTING 17 COMPARABLE COMPANIES DENYING THE ECO NOMIC ADJUSTMENT CLAIM MADE BY THE ASSESSEE, REGARDING CO MPUTATION OF MARGINS OF THE ASSESSEE, NON CONSIDERATION OF SUPPL EMENTARY TRANSACTION AND DENIAL OF ADEQUATE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE BY THE AUTHORITIES BELOW AS WELL AS TH EIR FAILURE TO EXAMINE THE CONTENTIONS AND ARGUMENTS OF THE ASSESS EE IN THIS REGARD. CONSIDERING THESE GRIEVANCES AS DISCUSSED H EREIN ABOVE BY US IN THE ARGUMENTS ADVANCED BY THE PARTIES/THEIR S UBMISSIONS AND HAVING GONE THROUGH THE DECISION RELIED UPON, W E FIND SUBSTANCE IN THE SUBMISSION OF THE ASSESSE3E AND TH US WE ARE OF THE VIEW THAT IT IS A FIT CASE TO SET ASIDE THE MAT TER TO THE FILE OF THE LD.TPO FOR HIS FRESH CONSIDERATION AND DECIDE THE I SSUE AFRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E AND DISCUSSING THEIR SUBMISSIONS IN THE ORDER AND REASO NS, IF ANY, FOR NOT AGREEING OR AGREEING WITH THEM. IT IS ORDERED A CCORDINGLY WITH DIRECTION TO THE LD.TPO TO: A) FIRST EXAMINE AS TO WHETHER, WAS THERE ANY VALUE ADDITION ON IMPORTED GOODS, AND IF ANSWER IS IN NEGATIVE THEN APPLY RPM AS A MOST APPROPRIATE METHO D FOR TRADING TRANSACTIONS OF IMPORTED GOODS AND IN CONSE QUENCE EXAMINE THE APPLICATION OF APPROPRIATE METHOD AS CO MMISSION PAYMENT; (IV) FRIGOGLASS INDIA P.LTD. (ITA NO.463/DEL/2013), IT IS HELD AS FOLLOWS: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW, ONCE A SSESSEE HAS GIVEN A METHODOLOGY FOR WORKING OF ALP ON SELECTION OF A PARTICULAR METHOD SUPPORTED BY APPROPRIATE COMPARAB LES, THE WORKING CAN BE DISLODGED BY TPO ON THE BASIS OF COG ENT REASONS AND OBJECTIVE FINDINGS. IN THIS CASE EXCEPT THEORET ICAL ASSERTIONS AND GENERALIZED OBSERVATIONS, NO OBJECTIVE FINDINGS HAVE BEEN GIVEN TO COME TO A REASONED CONCLUSION THAT ASSESSE E'S ADOPTION OF CPM FOR MANUFACTURING SEGMENT AND RPM FOR TRADIN G SEGMENT WAS FACTUALLY AND OBJECTIVELY NOT CORRECT. THUS THE REJECTION OF METHODS BY TPO AS ADOPTED BY ASSESSEE IS BEREFT OF ANY COGENCY AND OBJECTIVITY. THE SAME IS A WORK OF GUESSING AND CONJECTURED. SIMILARLY THE TNMM METHOD APPLIED BY THE TPO SUFFER S FROM THE SAME INHERENT ABERRATIONS AS MENTIONED ABOVE. IN TH ESE 7 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. CIRCUMSTANCES WE ARE OF THE VIEW THAT ASSESSEE'S ME THODS OF CPM AND RPM RESPECTIVELY WORKED BY APPLYING APPROPRIATE COMPARABLES IS TO BE UPHELD. THUS THE ALP WORKING R ETURNED BY THE ASSESSEE IS UPHELD. THE ASSESSEE'S TP GROUNDS A RE ALLOWED.' (V) TEXTRONIC INDIA PVT.LTD. VS. DCIT (ITA NO. 1334/BANG/2010), IT IS HELD AS FOLLOWS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE DISP UTE IS WITH REGARD TO THE ALP IN RESPECT OF INTERNATIONAL TRANS ACTIONS WHEREBY THE ASSESSEE IMPORTS EQUIPMENT FROM ITS AE AND RESE LLS THEM WITHOUT ANY VALUE ADDITION TO THE INDIAN CUSTOMERS. IN SIMILAR CIRCUMSTANCES, MUMBIA BENCH OF THE TRIBUNAL IN THE CASE OF LOREAL INDIA PVT.LTD. (SUPRA) HAS TAKEN THE VIEW T HAT THE RPM WOULD BE THE MOST APPROPRIATE METHOD FOR DETERMININ G THE ALP. THE MUMBAI BENCH OF TRIBUNAL IN THIS REGARD, HAS RE FERRED TO THE OECD GUIDELINES WHEREIN A VIEW HAS BEEN EXPRESSED T HAT RPM WOULD BE THE BEST METHOD WHEN A RESALE TAKES PLACE WITHOUT ANY VALUE ADDITION TO A PRODUCT. IN THE PRESENT CASE, T HE ASSESSEE BUYS PRODUCTS FROM THE AE AND SELLS IT WITHOUT ANY VALUE ADDITION TO THE INDIAN CUSTOMERS. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIB UNAL IN THE CASE OF L 'OREAL INDIA PVT. LTD. (SUPRA) WOULD BE S QUARELY APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. IN THAT EVENT, THE GP AS A PERCENTAGE OF SALES ARRIVED AT BY THE TPO IN ANNEXU RE TO THE TPO'S ORDER INSOFAR AS TRADING ACTIVITY OF COMPARABLES ID ENTIFIED BY THE TPO AT 12.90%. THE GP AS A PERCENTAGE OF SALES OF T HE ASSESSEE IS AT 35.6% WHICH IS MUCH ABOVE THE PERCENTAGE OF COMP ARABLES IDENTIFIED BY THE TPO. IN SUCH CIRCUMSTANCES, WE AR E OF THE VIEW THAT NO ADJUSTMENT COULD BE MADE BY WAY OF ALP. WE, THEREFORE, ACCEPT THE ALTERNATIVE PLEA OF THE ASSESSEE AND DEL ETE THE ADDITION MADE BY THE AO. IN VIEW OF THE ABOVE CONCLUSION, WE ARE NOT GOING INTO THE OTHER ISSUES ON MERITS RAISED BY THE ASSES SEE ON THE APPROACH ADOPTED BY THE TPO IN ARRIVING AT THE ALP. THUS, GROUND NOS. 2 TO 7 ARE ALLOWED. 10.5. IN VIEW OF THE ABOVE DISCUSSION, WE DIRECT TH E TPO TO ADOPT RSPM AS THE MAM IN THIS CASE. 44. ON A PERUSAL OF THE EXTRACTED PORTION FROM THE ORDER OF THE COORDINATE BENCH, IT IS VERY MUCH CLEAR THAT AF TER CONSIDERING A NUMBER OF DECISIONS ON THE VERY SAME ISSUE FROM DIFFERENT BENCHES OF THE ITAT, IT WAS HELD THAT IN CASE OF TRANSACTIONS RELATED TO PURCHASE AND SALE OF GOODS, RPM IS THE MOST APPROPRIATE METHOD. THE PRINCIPLES LAID DOWN B Y THE DELHI BENCH CLEARLY APPLIES TO THE FACTS OF THE PRESENT C ASE NOT ONLY BECAUSE THE ASSESSEE IS INVOLVED PURELY IN TRADING ACTIVITY, BUT ALSO IN THE TP STUDY ASSESSEE HAS ADOPTED RPM AS TH E MOST APPROPRIATE METHOD. ONLY BECAUSE IN THE PRECEDING A SSESSMENT 8 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. YEAR FOR SOME REASON ASSESSEE HAS NOT CHALLENGED TH E DECISION OF DRP IN UPHOLDING APPLICATION OF TNMM, ASSESSEE C ANNOT BE PREVENTED FROM OBJECTING TO ADOPTION OF TNMM IN THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE AFORESAID, WE REMIT THE MATTER BACK TO THE FILE OF THE AO/TPO TO EXAMINE ASSESSEE S ANALYSIS UNDER THE RPM AND DECIDE THE ISSUE ACCORDINGLY AFTE R DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5.1. SINCE THE FACTS OF THE CASE FOR THE IMPUGNED ASSESSMENT YEAR ARE ALSO SIMILAR, RESPECTFULLY FOLL OWING THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN THE ASSESSEES OWN CASE WE REMIT THE MATTER BACK TO THE FILE OF THE AO/TPO TO EXAMINE THE ASSESSEES ANALYS IS UNDER RPM AND DECIDE THE ISSUE ACCORDINGLY AFTER DU E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. THE LD. COUNSEL FOR THE ASSESSEE, FURTHER SUBMITTED THAT IN ORDER TO HAVE A UNIFORM AND CONSI STENT APPROACH, THE A.O. MAY BE DIRECTED TO GIVE THE WORK ING CAPITAL ADJUSTMENT AS GIVEN FOR SOFTWARE DEVELOPMEN T, ALSO TO TRADING TRANSACTION. HE HAS DRAWN OUR ATTENTION TO PAGES 20 OF THE T.P. ORDER, WHEREIN, THE TPO HAS GI VEN WORKING CAPITAL ADJUSTMENT OF 0.47% FOR ITES SEGMEN T WHILE AT PAGE NO.65 OF THE T.P. ORDER, NO WORKING C APITAL ADJUSTMENT WAS GIVEN TO THE TRADING SEGMENT. THE LD . COUNSEL FOR THE ASSESSEE PRAYED THAT A DIRECTION MA Y BE GIVEN TO THE TPO TO ADOPT A UNIFORM WORKING CAPITAL ADJUSTMENT TO BOTH THE SEGMENTS. FURTHER, AS REGARD S THE INCLUSION OF AN AMOUNT OF RS.3,98,107 AS UNALLOCATE D COST TO THE OPERATING COST OF THE TRADING SEGMENT, THE L D. COUNSEL SUBMITTED THAT THERE WAS NO SUCH UN-ALLOCAT ED COST AND IT IS NOT UNDERSTANDABLE AS TO HOW THE TPO HAS 9 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. BROUGHT IN THE SAME AND HAS MADE THE ADDITION TO TH E OPERATING COST. 7. THE LD. D.R. ON THE OTHER HAND, SUBMITTED THAT IF THE DETERMINATION OF ALP IS REMITTED BACK T O THE FILE OF THE TPO TO ADOPT RPM AS THE MOST APPROPRIATE MET HOD, THEN THE TPO MAY BE DIRECTED TO COMPUTE THE ALP IN ACCORDANCE WITH LAW AND THERE BE NO RIDERS AS TO HO W THE T.P. ORDER SHOULD BE PASSED. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE WORKING CAPITA L ADJUSTMENT HAS BEEN GIVEN BY THE TPO ONLY TO THE IT ES SEGMENT AND NOT TO THE TRADING SEGMENT. THE BASIS F OR SUCH A DIFFERENCE IN APPROACH IS NOT EVIDENT IN THE ORDER. AS REGARDS THE ALLOCATION OF UN-ALLOCATED EXPENSES OF RS.3,98,107 ALSO, WE DO NOT FIND ANY MATERIAL OR BA SIS. THEREFORE, WE DIRECT THE A.O. TO VERIFY THE CLAIM O F THE ASSESSEE BEFORE ALLOCATING SUCH COSTS TO THE OPERAT ING COST WHILE COMPUTING THE ALP. THE TPO, THEREFORE, IS DIR ECTED TO COMPUTE THE ALP IN ACCORDANCE WITH LAW, AFTER GI VING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING. 9. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.04.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 06 TH APRIL, 2016 VBP/- 10 ITA.NO.426/HYD/2015 OSI SYSTEMS P. LTD., HYDERABAD. COPY TO : 1. OSI SYSTEMS P. LTD., 4 TH FLOOR, ORION BUILDING, VITP, PLOT NO.17, SOFTWARE UNIT LAYOUR, MADHAPUR, HYDERABAD 500 081. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 16(2), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. THE DISPUTES RESOLUTION PANEL, HYDERABAD. 4. THE COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), I.T. TOWERS, 10-2-3, A.C. GUARDS, HYDERABAD. 5 . THE ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICING), HYDERABAD. 6. THE COMMISSIONER OF INCOME TAX - 4, HYDERABAD - 004. 7. D.R. ITAT A BENCH, HYDERABAD. 8. GUARD FILE