ASST CIT 16(2), MUMBAI V. GOLAWALA DIAMONDS, MUMBAI

ITA 443/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1704 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 27-04-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 20-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Business income; Transfer pricing; International transaction
• Section: 92C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.443/MUM/2014 (ASSESSMENT YEAR 2002-03) THE ACIT 16(2) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI 400 004 ...... APPELLANT VS. M/S. GOLAWALA DIAMONDS, 212, PANCHRATNA, OPERA HOUSE, MUMBAI 400 004 PAN:AACFG 5729L .... RESPOND ENT C.O.NO.171/MUM/2014 (ARISING OUT OF ITA NO.443/MUM/2014, ASSESSMENT YEAR 2009-10) M/S. GOLAWALA DIAMONDS, 212, PANCHRATNA, OPERA HOUSE, MUMBAI 400 004 PAN:AACFG 5729L ..... CROSS OBJECTOR VS. THE ACIT 16(2) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI 400 004 ...... APPELLANT IN APPEAL REVENUE BY : SHRI N.K.CHAND ASSESSEE BY : MS. ARATI VISSANJI DATE OF HEARING : 25 /11/2016 DATE OF PRONOUNCEMENT : 30/11/20 16 2 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL BY THE REVENUE AND CROSS- OBJECTION BY THE ASSESSEE ARISE FROM AN ASSESSMENT ORDER PASSED BY T HE ASSESSING OFFICER UNDER SECTION. 143(3) R.W.S. 144(1) THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT), WHICH HAS BEEN PASSED AS PER THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL- 1,(DRP) DATED 01/11/2013 PERTAINING TO ASSESSMENT Y EAR 2002-03. 2. IN THE APPEAL OF THE REVENUE, THE FOLLOWING GROU NDS OF APPEAL HAVE BEEN RAISED:- 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE DRP-I, MUMBAI HAS ERRED IN IGNORING THE TURNOVER AS VALID CRITERIA IN CHOOSING THE COMPARABLES? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE DRP FAILED TO APPRECIATE THAT IT IS A SETTLED FACT THAT S/S 92C & RULE 108(2) OF INCOME TAX ACT AND RULES HAS CLEARLY LAID DOWN THE PRINCIPLE T HAT THE TURNOVER FILTER IS AN IMPORTANT CRITERIA IN CHOOSING THE COMPARABLES BECA USE SIGNIFICANT DIFFERENCES IN SIZE OF THE COMPANIES WOULD IMPACT COMPARABILITY EVEN TH ERE IS NO FUNCTIONAL DIFFERENCE IN THEIR ACTIVITIES. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE HON. ORP FAILED TO APPRECIATE THAT THE SAID STANCE IS ALSO UPHELD IN V ARIOUS CASES BY THE COURTS SUCH AS SONY INDIA 114 ITO 448 (DEL)(2008)? 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER AN Y GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN RAIS ING THE GROUND RELATED TO TURNOVER FILTER IN RESPECT OF THE COMPARABLE ANSHUMI COMMERC IALS LTD. AS THE SAME WAS REJECTED AS 'NOT FOUND FUNCTIONALLY COMPARABLE', WH EREAS THE FOLLOWING ENTITIES IN DIAMOND BUSINESS WERE SELECTED BASED ON 'CRITERIA O F FUNCTIONAL SIMILARITY' INSPITE OF 3 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) THEY HAVING HUGE DIFFERENCE IN TURNOVER WHEN COMPAR ED TO TURNOVER OF THE APPELLANT AT RS. 32.32 CRORES. COMPARABLE TOTAL TURNOVER (RS. IN CRORES) TURNOVER IN DIAMOND (RS. IN CRORES) SUNRAJ DIAMOND EXPORTS 1.58 1.05 ASIAN STAR COMPANY LIMITED 756.4 0 756.40 SUASHISH DIAMONDS LTD. 493.77 478.55 2. THE LEARNED ASSESSING OFFICER AND THE LEARNED M EMBERS OF HONBLE DRP HAVE ERRED IN CONSIDERING THE FOLLOWING ENTITIES AS COMPARABLE :- NAME NATURE OF BUSINESS TOTAL TURNOVER TURNOVER IN JEWELLERY BUSINESS TURNOVER IN DIAMOND BUSINESS GOLDIAM INTIMATE LTD. DIAMOND &JEWLLERY 100.89 93.43 7.46 SB&TRIBUNAL INTERNATIONAL LTD. JEWELLERY 109.45 1009.45 NIL 3. THE LEARNED TRANSFER PRICING OFFICER HAS ERRED I N NOT GIVING STANDARD DEDUCTION OF + (-) 5% U/S. 92C(2) 4. THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT R EDUCING EXCHANGE DIFFERENCE OF RS. 11,79,872 FROM TOTAL INCOME OF THE CURRENT YEAR FOR COMPUTING TAXABLE INCOME OF THE CURRENT YEAR INSPITE OF SPECIFIC DIRECTION OF HON'B LE DRP IN THIS RESPECT. 4. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE IS O N ACCOUNT OF THE DIRECTION OF THE DRP THAT THE TRANSFER PRICING ADJU STMENT OF RS.1,27,21,348/- DETERMINED BY THE TRANSFER PRICING OFFICER ON ACCOU NT OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES ON ACCOUNT OF IMPORT AND EXPORT OF DIAMONDS IS NOT MER ITED. 5. IN ORDER TO APPRECIATE THE CONTROVERSY, THE FOLL OWING BACKGROUND IS RELEVANT. THE ASSESSEE BEFORE US IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE 4 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) BUSINESS OF CUTTING AND POLISHING OF DIAMONDS. IN THIS CASE, INITIALLY, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT AND THE INCOME ASSESSED AT RS.1,77,34,100/-, WHICH HAS SINCE BEEN SET-ASIDE BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO.2346/MUM/2006 AND THE M ATTER WAS RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRES H. IN THE REMANDED PROCEEDINGS, THE ASSESSING OFFICER REFERRED THE MAT TER OF DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION S OF IMPORT AND EXPORT OF DIAMONDS ENTERED BY THE ASSESSEE WITH ITS ASSOCIAT ED ENTERPRISES UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER. THE TRANSFER PRICING OFFICER HAS EXAMINED THE INTERNATIONAL TRANSACTIONS OF IMPORT AND EXPORT OF DIAMONDS WITH THE ASSOCIATED ENTERPRISES AND BENCH MARKED THE SAME BY SELECTING THE TNM METHOD AS THE MOST APPROPRIATE ME THOD. THE TRANSFER PRICING OFFICER SELECTED 15 CONCERNS, WHICH WERE CO MPARABLE TO THE ASSESSEE AND DETERMINED THEIR MEAN PROFIT MARGIN AT 11.02% AND SINCE ASSESSEES MARGIN WAS 6.82%, HE DETERMINED AN ADJUSTMENT OFRS .1,27,21,348/- WHICH ACCORDING TO HIM WAS REQUIRED TO BE MADE IN ORDER TO COMPUTE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS IN A N ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT DATED 16/01/2013. AS A CONSEQUE NCE OF THE ORDER OF THE TRANSFER PRICING OFFICER, THE ASSESSING OFFICER, P ASSED A DRAFT ASSESSMENT ORDER DATED 08/03/2013, AGAINST WHICH ASSESSEE RAISED OB JECTIONS BEFORE THE DRP. THE DRP HAS PASSED AN ORDER DATED 01/11/2013 GIVIN G CERTAIN DIRECTIONS TO THE ASSESSING OFFICER IN ORDER TO FINALIZE THE ASS ESSMENT . ONE OF THE DIRECTIONS GIVEN THE DRP WAS TO THE EFFECT THAT M/S . ANSHUNI COMMERCIALS LTD . ,WHICH WAS NOT INCLUDED IN THE FINAL SET OF COMPARA BLES BY THE TRANSFER PRICING OFFICER, BE INCLUDED AS A COMPARABLE. FOLL OWING THE SAID DIRECTION, THE TRANSFER PRICING OFFICER RECOMPUTED THE ARMS LENGTH PRICE OF THE INTERNATIONAL 5 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) TRANSACTIONS AND FOUND THAT THE ARITHMETIC MEAN OF THE EXPANDED SET OF COMPARABLES (BY INCLUDING M/S. ANSHUNI COMMERCIALS LTD) CAME TO 10.41%, AGAINST WHICH ASSESSEES MARGIN WAS 6.82%. SINCE T HE ASSESSEES MARGIN WAS WITHIN +/- 5% RANGE, THE TRANSFER PRICING OFFICER H ELD THAT NO FURTHER ADJUSTMENT WAS REQUIRED TO BE MADE TO THE STATED V ALUE OF THE INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOC IATED ENTERPRISES. 6. BEFORE US, THE GRIEVANCE OF THE REVENUE IS PRI MARILY AGAINST THE DIRECTION OF THE DRP TO INCLUDE M/S. ANSHUNI COMME RCIALS LTD IN THE FINAL SET OF COMPARABLES. AT THE TIME OF HEARING , LD. DEPAR TMENTAL REPRESENTATIVE POINTED OUT THAT THE TRANSFER PRICING OFFICER HAD E XCLUDED THE SAID CONCERN ON THE GROUND THAT IT WAS NOT FUNCTIONALLY COMPARABLE. AGAINST THIS, THE DRP HAS DIRECTED FOR ITS INCLUSION BY MAKING THE FOLLOWIN G DISCUSSION IN THE ORDER:- 9.ANSHUNI COMMERCIALS LTD IS SEEN TO BE IN THE BUS INESS OF EXPORT OF ROUGH DIAMONDS AND CUT AND POLISHED DIAMONDS. HOWEVER, TOTAL SALES ARE ONLY 79.8 LAKHS WHEREAS THE SALE OF THE ASSESSEE IS 33.32 CRORES. HOWEVER, DIFF ERENCE IN TURNOVER CANNOT BE 'REGARDED AS VALID CRITERIA TO EXCLUDE A COMPARABLE . OTHERWISE, IT IS FUNCTIONALLY COMPARABLE. THE TPO HAS THEREFORE WRONGLY MENTIONED THAT IT IS NOT FUNCTIONALLY COMPARABLE WITHOUT ASSIGNING ANY SPECIFIC REASON. T HEREFORE, TPO IS DIRECTED TO USE THIS COMPANY AS COMPARABLE FOR BENCHMARKING. 6.1 ADVERTING TO THE GROUNDS OF APPEAL, THE LD. CIT -DR POINTED OUT THAT THE DRP HAS ERRED IN HOLDING THAT THE DIFFERENCE IN TUR NOVER CANNOT BE REGARDED AS A VALID CRITERIA TO EXCLUDE A CONCERN FROM THE LI ST COMPARABLES. 7. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR TH E ASSESSEE HAS PRIMARILY DEFENDED THE DIRECTION OF THE DRP BY ASSERTING THAT M/S.ANSHUNI COMMERCIALS LTD. HAS BEEN RIGHTLY DIRECTED TO BE INCLUDED IN TH E FINAL SET OF COMPARABLES. 6 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. AT THE OUTSET, IN OUR CONSIDERED OPINION, THE CONTENTION OF THE REVEN UE SEEKING TO REVERSE THE FINDING OF THE DRP TO INCLUDE M/S. ANSHUNI COMMER CIALS LTD. FROM THE FINAL SET OF COMPARABLE IS MISCONCEIVED. IN THIS CONTEXT, IT IS NOTABLE FROM THE RELEVANT DISCUSSION BY THE DRP THAT THE SAID CONCERN HAS BEE N DIRECTED TO BE INCLUDED ON THE GROUND THAT IT IS FUNCTIONALLY COMPARABLE W ITH THE ASSESSEE. IN FACT, THE TRANSFER PRICING OFFICER HAD EXCLUDED IT FROM THE F INAL SET OF COMPARABLES ON THE GROUND THAT THE SAID CONCERN WAS NOT FOUND FUN CTIONALLY COMPARABLE. THUS, THE OBJECTION OF THE TRANSFER PRICING OFFICER WITH REGARD TO THE FUNCTIONAL COMPARABILITY HAS NOT BEEN ACCEPTED BY THE DRP, WHO IN TURN HAS HELD IT BE FUNCTIONALLY COMPARABLE. THE SAID ASPECT OF THE C ONTROVERSY IS NOT MANIFESTED IN THE GROUNDS OF APPEAL RAISED BY THE REVENUE, WH ICH ONLY ENCOMPASS A PLEA THAT THE DRP ERRED IN DECIDING THAT THE TURNOV ER WAS NOT A VALID CRITERIA IN SELECTION OF THE COMPARABLES. THEREFORE, ON THIS P OINT ITSELF, THE PRESENT APPEAL OF THE REVENUE IS UNSUSTAINABLE. 8.1 BE THAT AS IT MAY, WE MAY ALSO NOW TAKE UP FOR CONSIDERATION THE PLEA OF THE REVENUE AS MANIFESTED IN THE GROUNDS OF APPEAL RAISED BEFORE US . GOING BACK TO THE DISCUSSION OF THE DRP IN PARA-9, WHICH IS REPRODUCED ABOVE, IT CAN BE SEEN THAT APART FROM ESTABLISHING FUNCTIONAL COM PARABILITY WITH THE ASSESSEE, THE DRP FOUND THAT THE TOTAL SALES OF M/S .ANSHUNI COMMERCIALS LTD. WAS ONLY RS.79.80 LACS, WHEREAS THAT OF THE ASSESS EE WAS RS.33.32 CRORES. THE DRP NOTED THAT SUCH DIFFERENCE IN TURNOVER IS NOT A VALID CRITERIA TO EXCLUDE A CONCERN FROM THE LIST OF COMPARABLE SO LONG AS IT I S OTHERWISE FUNCTIONALLY COMPARABLE. THE REVENUE SEEKS TO ASSAIL THE PREMIS E OF THE DRP THAT DIFFERENCE IN TURNOVER CANNOT BE REGARDED AS A VALI D CRITERIA IN ORDER TO INCLUDE 7 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) OR EXCLUDE A CONCERN FROM THE FINAL SET OF COMPARA BLES. IN OTHER WORDS, AS PER THE REVENUE, TURNOVER IS A DECIDING FACTOR IN CONSI DERING WHETHER A CONCERN IS COMPARABLE OR NOT. 8.2 QUITE CLEARLY, ECONOMICALLY, THE RELEVANT CHARA CTERISTICS OF A CONCERN IN ANY UNCONTROLLED TRANSACTION BETWEEN INDEPENDENT EN TERPRISES MUST BE SUFFICIENTLY COMPARABLE WITH THE TESTED TRANSACTION S IF THE TWO ARE TO BE PLACED IN SIMILAR SITUATION. THE HON'BLE BOMBAY HIGH COUR T IN THE CASE OF CIT V. M/S. PENTAIR WATER INDIA PVT. LTD. IN TAX APPEAL NO.18 O F 2015 DATED 16 TH SEPTEMBER, 2015 HAS OBSERVED THAT TURNOVER IS A REL EVANT FACTOR TO CONSIDER THE COMPARABILITY. NOTABLY, THE HON'BLE BOMBAY HIG H COURT WAS DEALING WITH THE STAND OF THE REVENUE THAT THE TRIBUNAL HAD ERR ED IN HOLDING THAT THE SIZE AND TURNOVER OF CONCERNS ARE DECIDING FACTORS IN TREATING A CONCERN AS COMPARABLE OR NOT. SO HOWEVER, THE STAND OF THE RE VENUE BEFORE US IS OPPOSITE TO WHAT WAS BEING CANVASSED BEFORE THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S. PENTAIR WATER INDIA PVT. LTD(SUPRA), WHEREIN THE HON'BLE HIGH COURT OBSERVED THAT THE TURNOVER WAS INDEED A RELEVANT CRITERIA. BE THAT AS IT MAY, IN SO FAR AS THE PRESENT CASE IS CONCERNED, EVEN IF WE WERE TO UPHOLD THE STAND OF THE REVENUE THAT TURNOVER IS A DECIDING FACTOR IN CONSIDERING COMPARABILITY OF CONCERN FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF M/S.PENTAIR WATER INDIA PVT. LTD.(SUPRA) YET, IN OUR CONSIDERED OPINION, IT WOULD MAKE NO DIFFERE NCE TO THE ULTIMATE DECISION OF THE DRP TO INCLUDE M/S.ANSHUNI COMMERC IALS LTD. IN THE FINAL SET OF COMPARABLES, AS OUR FOLLOWING DISCUSSION WOULD SHOW . FIRSTLY, DRP HAS INCLUDED IT ON ACCOUNT OF FUNCTIONAL SIMILARITIES W ITH THE ASSESSEE, AN ASPECT WHICH IS NOT CHALLENGED BY THE REVENUE IN ITS A PPEAL. SECONDLY AND MORE 8 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) IMPORTANTLY, IN OUR VIEW, THE RATIO OF THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NORTEL NETWORKS INDIA A. PVT. LTD. IN ITA 115/2015 DATED 24/02/2015 IS VERY APT AND FULLY GOVERNS THE CONTROVERSY BEFORE US. IN THE CASE OF NORTEL NETWORKS INDIA A. PVT. LTD.(SUPR A), THE TRANSFER PRICING OFFICER HAD EXCLUDED M/S.CAPITAL TRUST LTD. FROM THE LIST OF COMPARABLES ON ACCOUNT OF ITS LOW TURNOVER. THE DRP ALSO CONCURRE D WITH THE TRANSFER PRICING OFFICER NOTING THAT BECAUSE OF THE SMALL TURNOVER, THE SAID CONCERN COULD NOT BE TAKEN AS COMPARABLE. THE TRIBUNAL NOTED THAT NO TURNOVER FILTER WAS APPLIED BY EITHER OF THE PARTIES AND, THEREFORE, M/S. CAPITAL TRUST LTD. WAS WRONGLY EXCLUDED, ON THE BASIS OF DIFFERENCE IN TUR NOVER, ESPECIALLY AFTER IT WAS FOUND THAT THE ACTIVITIES OF M/S. CAPITAL TRUST LTD . WERE COMPARABLE WITH THOSE OF THE ASSESSEE. THE AFORESAID DECISION OF THE TR IBUNAL WAS SOUGHT TO BE CONTESTED BY THE REVENUE BEFORE THE HIGH COURT ON T HE GROUND THAT THE REASON FOR EXCLUSION OF M/S. CAPITAL TRUST LTD. WAS SOUND AND REASONABLE AND THAT THE TRIBUNAL ERRED IN OVER- EMPHASIZING THE SIZE OF TURNOVER IN RELATION TO SAID CONCERN. THE HON'BLE HIGH COURT DISAGREED WIT H THE REVENUE AND NOTED THE CONCLUSION OF THE TRIBUNAL THAT TURNOVER FILTER WAS NOT APPLIED BY EITHER OF THE PARTIES AT ANY STAGE. AS PER THE HON'BLE HIGH COURT, THE ISSUE AS TO WHETHER THE TURNOVER FILTER IS AN APPROPRIATE ONE A ND APPLICABLE IN A CASE CANNOT BE ANSWERED IN THE ABSTRACT AND IS ENTIRELY FACT-DEPENDENT. THE HON'BLE HIGH COURT FURTHER NOTED THAT THE RECORD OF THE CASE BEFORE IT INDICATED THAT THE TRANSFER PRICING OFFICER CHOSE T O APPLY THE TURNOVER FILTER IN AN INCONSISTENT MANNER SO AS TO EXCLUDE ONLY THE C ONCERN M/S. CAPITAL TRUST LTD., WHICH WAS IMPERMISSIBLE. PERTINENTLY, THE HO N'BLE HIGH COURT NOTED THAT TURNOVER FILTER WAS NOT A TEST EVEN IN RESPECT OF THE SURVIVING COMPARABLES. IN OUR CONSIDERED OPINION, THE AFORESAID PARITY OF REA SONING LAID DOWN BY THE 9 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) HON'BLE HIGH COURT IN THE CASE OF M/S. NORTEL NETW ORKS INDIA A. PVT. LTD.(SUPRA)IS SQUARELY ATTRACTED IN THE PRESENT CAS E. IN THE PRESENT CASE TOO, THE TURNOVER FILTER HAS NOT BEEN APPLIED BY ANY OF THE PARTIES AT ANY STAGE. IN FACT, AT THE TIME OF HEARING, IT WAS SPECIFICALLY P UT-ACROSS TO THE LD. DEPARTMENTAL REPRESENTATIVE. THE LD. REPRESENTATIV E FOR THE ASSESSEE, ON THE OTHER HAND, POINTED OUT THAT IN THE LIST OF 14 CO NCERNS SELECTED BY THE TRANSFER PRICING OFFICER AS COMPARABLES, THERE ARE CONCERNS VIZ. M/S. SUNRAJ DIAMONDS EXPORTS, M/S. ASIAN STAR COMPANY LTD., AN D M/S. SUASHISH DIAMOND LTD., WHICH WERE INCLUDED ON THE GROUND OF FUNCTIO NAL COMPARABILITY INSPITE OF THE FACT THAT THERE WAS HUGE DIFFERENCES IN TURN OVER IN COMPARISON TO THE TURNOVER OF ASSESSEES TESTED SEGMENT. THEREFORE, IN OUR CONSIDERED OPINION, THE REVENUE IS MISPLACED IN SEEKING TO RAISE THE AF ORESAID GROUNDS OF APPEAL, WHEN THE RECORD CLEARLY SHOW THAT THE TURNOVER FIL TER IS BEING SELECTIVELY SOUGHT TO BE USED BY THE REVENUE TO EXCLUDE M/S.AN SHUNI COMMERCIALS LTD., WHEREAS THE SURVIVING COMPARABLES HAVE NOT BEEN PU T TO SUCH A TEST BY THE TRANSFER PRICING OFFICER. THEREFORE, FOLLOWING THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF M/S. NORTEL NETWORKS IND IA A. PVT. LTD.(SUPRA), THE STAND OF THE REVENUE SEEKING EXCLUSION OF M/S. ANSHUNI COMMERCIALS LTD. FROM THE SET OF FINAL COMPARABLES IS QUITE UNTENABL E AND IS HEREBY REJECTED. 8.4 IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 9. NOW WE MAY TAKE UP THE CROSS OBJECTION OF THE AS SESSEE. IN SO FAR AS GROUNDS OF APPEAL NO.1 & 2 ARE CONCERNED, THE SAME ARE TO THE EFFECT THAT THE STATED CONCERNS BE EXCLUDED FROM THE FINAL SET OF C OMPARABLES ON THE BASIS OF DIFFERENCE IN TURNOVER. THE ABOVE GROUNDS SPRING -UP IN THE CONTEXT OF THE 10 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) GROUND RAISED BY THE REVENUE IN ITS CROSS-APPEAL. HAVING REGARD TO THE REASONS FOR WHICH THE GROUNDS OF APPEAL OF THE REVE NUE HAVE BEEN DISMISSED, THE SAID GROUNDS RAISED BY THE ASSESSEE BECOME AC ADEMIC, AND, IN ANY CASE, THERE IS NO ADDITION SURVIVING ON ACCOUNT OF DETERM INATION OF ARM'S LENGTH PRICE IN THE INSTANT CASE AFTER THE DISMISSAL OF TH E APPEAL OF THE REVENUE. THEREFORE, THE GROUNDS OF APPEAL NO.1 & 2 IN THE CR OSS-OBJECTION OF THE ASSESSEE ARE TREATED AS INFRUCTUOUS AND ARE ACCORDI NGLY DISMISSED. 10. THE ONLY OTHER GROUND IN THE CROSS-OBJECTION OF THE ASSESSEE IS TO THE EFFECT THAT THE ASSESSING OFFICER ERRED IN NOT REDU CING THE EXCHANGE DIFFERENCE OF RS.11,79,872/- FROM THE TOTAL INCOME OF THE CUR RENT YEAR FOR COMPUTING TAXABLE INCOME INSPITE OF A SPECIFIC DIRECTION BY THE DRP IN THIS REGARD. WE FIND THAT THE RELEVANT DIRECTION BY THE DRP IS CONT AINED IN PARA-21 OF ITS ORDER. ON THIS ASPECT, IT WOULD SUFFICE TO DIRECT THE ASSESSING OFFICER TO GIVE EFFECT TO THE DIRECTIONS OF THE DRP TO EXCLUDE EXCHANGE DI FFERENCE OF RS.11,79,872/- FROM THE TOTAL INCOME OF THE CURRENT YEAR IN ORDER TO ARRIVE AT THE TAXABLE INCOME. WE HOLD SO. THUS, ON THIS ASPECT, ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 11. RESULTANTLY, WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED, THE CROSS- OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/11/2016 SD/- SD/- ( AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 30/11/2016 VM , SR. PS 11 ITA NO.443/MUM/2014 & C.O NO.171/MUM/2014 (ASSESSMENT YEAR 2002-03) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI