Amphenol Interconnect India Pvt. Ltd., V. Assistant Commissioner of Income-tax,

ITA 449/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0901 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 92C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 449 /PN/201 4 / ASSESSMENT YEAR : 200 9 - 1 0 AMPHENOL INTERCONNECT INDIA PVT. LTD., 105, BHOSARI INDUSTRIAL ESTATE, PUNE 4110 26 . / APPELLANT PAN: AA CCA3419J VS. THE DY . COMMISSIONER OF INCOME TAX, CIRCLE 8 , PUNE . / RESPONDENT / APPELLANT BY : S/ SHRI NIKHIL PATHAK AND MAHAVEER JAIN / RESPOND ENT BY : SHRI S.K. RASTOGI, CIT / RESPOND ENT BY : SHRI S.K. RASTOGI, CIT / DATE OF HEARING : 1 2 .0 8 .2015 / DATE OF PRONOUNCEMENT: 06 . 11 .2015 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF DY . CIT , CIRCLE - 8 , PUNE DATED 03 . 0 1 .20 1 4 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 1 44C(13) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1] THE ASST. ORDER PASSED BY THE LEARNED A.O. U/S 143(3) R.W.S. 144C(13) IS BARRED BY LIMITATION AND HENCE, THE SAME MAY BE DECLARED NU LL AND VOID. ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 2 2] THE LEARNED TPO / DRP ERRED IN RECOMPUTING THE TRANSFER PRICE OF THE INTERNATIONAL TRANSACTIONS RELATING TO EXPORTS AND IMPORT OF GOODS AND PAYMENT OF COMMISSION DESPITE THE FACT THAT NONE OF THE CONDITIONS AS PRESCRIBED IN SECTION 92C(3) OF THE INCOME TAX ACT, 1961 ('THE ACT'), HAD BEEN VIOLATED BY THE APPELLANT. THUS, THE A.O. / DRP ERRED IN MAKING AN ADDITION OF RS. 90,04,462/ - U/S 92C ON THE BASIS OF THE ORDER OF THE TPO U/S 92CA(3) DATED 24.12.2012 IN THE CASE OF THE APPELLANT COMPANY. 3] THE LEARNED TPO / DRP ERRED IN MAKING AN ADDITION OF RS.90,04,462/ - WITHO UT APPRECIATING THE FACT THAT SUCH AN ADHOC ADDITION WAS NOT PERMISSIBLE UNDER LAW IN VIEW OF THE DECISION OF SUPREME COURT IN THE CASE OF K.P. VERGHESE [131ITR 597]. 4] THE LEA RNED TPO / DRP ERRED IN NOT APPRECIATING THE FACT THAT THE ADJUSTMENT OF RS.90,04,462/ - MADE TO THE TOTAL INCOME AS RETURNED IS BEYOND THE SCOPE OF TOTAL INCOME AS DEFINED IN SECTION 5 OF THE ACT. THE LEARNED TPO / DRP ALSO ERRED IN NOT APPRECIATING THE FA CT THAT THE ADJUSTMENT OF RS.90,04,462/ - DOES NOT PARTAKE THE CHARACTER OF INCOME AS DEFINED IN SECTION 2 OF THE ACT. IN VIEW OF THE ABOVE, THE ADJUSTMENT MADE BY THE TPO / DRP ARE NOT WITHIN THE PURVIEW OF THE CONCEPT OF 'INCOME' AS PER IT ACT AND HENCE, IT REQUIRES TO BE DELETED. 5] THE LEARNED TPO / DRP ERRED IN MAKING AN ADJUSTMENT OF RS.76,01,160/ - BY ADOPTING THE COMPARABLE UNCONTROLLED PRICE (CUP) METHOD FOR DETERMINING THE ARM'S LENGTH PRICE (ALP) IN RESPECT OF SOME OF THE INTERNATIONAL TRANSACTIO NS PERTAINING TO EXPORT OF FINISHED GOODS. 5.1 ] THE LEARNED TPO / DRP ERRED IN HOLDING THAT THE CUP METHOD WAS THE MOST APPROPRIATE METHOD OF DETERMINING THE ALP IN RESPECT OF SOME OF THE TRANSACTIONS OF EXPORT OF GOODS MERELY ON THE BASIS THAT THE DATA P ERTAINING TO SIMILAR TRANSACTIONS WITH THIRD PARTIES WERE AVAILABLE. P ERTAINING TO SIMILAR TRANSACTIONS WITH THIRD PARTIES WERE AVAILABLE. 5.2 ] THE LEARNED TP O / DRP FAILED TO APPRECIATE THAT THERE WERE VARIOUS DIFFERENCES ON ACCOUNT OF FUNCTIONAL, TRANSACTIONAL, GEOGRAPHICAL, VOLUME, TIMING, BUSINESS RISKS, ETC. IN RESPECT OF ALLEGED COMPARABLE TRANSACTIONS WHICH OUGHT TO HAVE BEEN CONSIDERED AND SINCE SUITABLE ADJUSTMENTS WERE NOT POSSIBLE, THERE WAS NO REASON TO ADOPT THE CUP METHOD FOR DETERMINING THE ALP. 5.3] THE LEARNED TP O / DRP FAILED TO APPRECIATE THAT THE TRANSAC TIONAL NET MARGIN METHOD (TNMM') WAS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ALP IN RESPECT OF EXPORT OF GOODS TO AE AND THE NET PROFIT MARGIN OF THE ASSESSEE WAS COMPARABLE TO THE NET PROFIT MARGIN OF THE COMPARABLE COMPANIES AND HENCE, THE TRANSA CTIONS WITH THE AE WERE AT ALP. 5.4] THE LEARNED TP O / DRP HAVE ERRED IN REJECTING THE TNMM AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING CERTAIN INTERNATIONAL TRANSACTIONS ON THE GROUNDS THAT THESE TRANSACTIONS SHOULD HAVE BEEN SEPARATELY BEN C HMARKED AND THEREBY CONTRADICTING THEMSELVES, SINCE NO SUCH SEPARATE BENCHMARKING WAS CONDUCTED BY THE LD. TP O HIMSELF, WHILE BENCHMARKING THE BALANCE INTERNATIONAL TRANSACTIONS FOR WHICH THE TNMM WAS ACCEPTED. 5.5] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE AS SESSEE SUBMITS THAT IF AT ALL, THE CUP METHOD WAS TO BE ADOPTED FOR DETERMINING THE ALP, SUITABLE ADJUSTMENTS OUGHT TO HAVE BEEN MADE FOR DIFFERENCES ON ACCOUNT OF VOLUME, TIMING, GEOGRAPHICAL, BUSINESS RISKS, ETC BETWEEN THE ALLEGED COMPARABLE TRANSACTION S. 6] THE LEARNED A. O . / DRP ERRED IN MAKING AN ADJUSTMENT OF RS.14,03,302/ - BY ADOPTING THE COMPARABLE UNCONTROLLED PRICE (CUP) ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 3 METHOD FOR DETERMINING THE ARM'S LENGTH PRICE (ALP) IN RESPECT OF SOME OF THE INTERNATIONAL TRANSACTIONS PERTAINING TO IMPORT OF GOODS. 6.1] THE LEARNED TP O / DRP ERRED IN HOLDING THAT THE CUP METHOD WAS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ALP IN RESPECT OF CERTAIN TRANSACTIONS OF IMPORT OF CERTAIN GOODS MERELY ON THE BASIS THAT THE DATA PERTAINING TO SIMILAR TRANS ACTIONS WITH THIRD PARTIES WERE AVAILABLE. 6.2] THE LEARNED TP O / DRP FAILED TO APPRECIATE THAT THERE WERE VARIOUS DIFFERENCES ON ACCOUNT OF TRANSACTIONAL, FUNCTIONAL, GEOGRAPHICAL, VOLUME, TIMING, BUSINESS RISKS, ETC. IN RESPECT OF ALLEGED COMPARABLE TR ANSACTIONS WHICH OUGHT TO HAVE BEEN CONSIDERED AND SINCE SUITABLE ADJUSTMENTS WERE NOT POSSIBLE, THERE WAS NO REASON TO ADOPT THE CUP METHOD FOR DETERMINING THE ALP. 6.3] THE LEARNED TP O / DRP FAILED TO APPRECIATE THAT THE TNMM WAS THE MOST A PPROPRIATE M ETHOD FOR DETERMINING THE ALP IN RESPECT OF IMPORT OF GOODS FROM THE AE SINCE THE NET PROFIT MARGIN OF THE ASSESSEE COMPANY WAS COMPARABLE TO THE NET PROFIT MARGIN OF THE COMPARABLE COMPANIES AND HENCE, THE TRANSACTIONS WITH THE AE WERE AT ALP. 6.4 THE LE ARNED TPO / DRP HAVE ERRED IN REJECTING THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR BENCHMARKING CERTAIN INTERNATIONAL TRANSACTIONS ON THE GROUNDS THAT THESE TRANSACTIONS SHOULD HAVE BEEN SEPARATELY BENCH MARKED AND THER EBY CONTRADICTING THEMSELVES, SINCE NO SUCH SEPARATE BENCHMARKING WAS CONDUCTED BY THE LD. TPO HIMSELF, WHILE BENCHMARKING THE BALANCE INTERNATIONAL TRANSACTIONS FOR WHICH THE TNMM WAS ACCEPTED. 6.5] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE S UBMITS THAT IF AT ALL, THE CUP METHOD WAS TO BE ADOPTED FOR DETERMINING THE ALP, SUITABLE ADJUSTMENTS OUGHT TO HAVE BEEN MADE FOR DIFFERENCES ON SUITABLE ADJUSTMENTS OUGHT TO HAVE BEEN MADE FOR DIFFERENCES ON ACCOUNT OF VOLUME, TIMING, GEOGRAPHICAL, BUSINESS RISKS, ETC BETWEEN THE ALLEGED COMPARABLE TRANSACTIONS. 7] THE LEARNED TPO / DRP ERRED IN IGNORING THE FACT THAT BASED ON THE DETAILED TRANSFER PRICING STUDY CONDUCTED BY THE APPELLANT, THE TNMM HAD BEEN DEMONSTRATED TO BE THE MOST APPROPRIATE METHOD TO DETERMINE THE ALP OF THE APPELLANT'S EXPORT AND IMPORT TRANSA CTIONS PERTAINING TO THE MANUFACTURING SEGMENT. HE ALSO FAILED TO APPRECIATE THAT THE TNMM HAD BEEN ACCEPTED BY THE LD. TPO AS THE MOST APPROPRIATE METHOD FOR AY 2004 - 05, IN WHICH YEAR THE SURROUNDING FACTS AND CIRCUMSTANCES WERE SIMILAR. 8] WITHOUT PREJ UDICE TO THE ABOVE GROUNDS, THE ASSESSEE SUBMITS THAT THE LEARNED TPO / DRP FAILED TO APPRECIATE THAT IN RESPECT OF CERTAIN PRODUCTS EXPORTED BY THE ASSESSEE, IT HAD CHARGED HIGHER PRICE TO THE AE AS COMPARED TO NON AE AND HENCE, THIS AMOUNT SHOULD HAVE BE EN ADJUSTED AND ONLY THE NET AMOUNT COULD BE ADDED. 9] WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE ASSESSEE SUBMITS THAT THE LEARNED TPO / DRP FAILED TO APPRECIATE THAT IN RESPECT OF CERTAIN PRODUCTS IMPORTED BY THE ASSESSEE, IT HAD PAID LESSER PRICE TO THE AE AS COMPARED TO NON AE AND HENCE, THIS AMOUNT SHOULD HAVE BEEN ADJUSTED AND ONLY THE NET AMOUNT COULD BE ADDED. 10] THE ASSESSEE SUBMITS THAT WITHOUT PREJUDICE TO ITS CONTENTION THAT THE ADDITION MADE U/S 92C IS NOT WARRANTED AT ALL, IT IS SUBMITTE D THAT THE LEARNED TPO / DRP OUGHT TO HAVE GRANTED THE BENEFIT OF 5% TO THE ASSESSEE COMPANY AS PER THE PROVISO TO SECTION 92C(2). 11] THE APPELLANT RESERVES ITS RIGHT TO ADD, ALTER, AMEND OR WITHDRAW ANY GROUND OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THIS APPEAL. ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 4 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE TRANSFER PRICING ADJUSTMENT MADE BY THE ASSESSING OFFICER / TRANSFER PRICING OFFICER AND UPHELD BY THE CIT(A) RESULTING IN AN ADDITION OF RS. 90 , 04 , 462 / - . 4. THE LEARN ED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE OF TRANSFER PRICING ARISING IN THE PRESENT APPEAL IS SIMILAR TO THE ISSUE RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09 AND ALSO IN ASSESSMENT YEAR 2005 - 06 . IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE GROUND OF APPEAL NO.1 WAS GENERAL IN NATURE AND GROUNDS OF APPEAL NOS.2 AND 3 ARE NOT PRESSED. THE ISSUE IN GROUND OF APPEAL NO.4 IS IN RESPECT OF ADJUSTMENT MADE OF RS.90,04,462/ - ON ACCOUNT OF ARM'S LENGTH PRICE. THE ISSUE IN GROUND OF APPEAL NO. 5 IS IN RESPECT OF THE DETERMINATION OF ARM'S LENGTH PRICE PERTAINING TO EXPORT OF FINISHED GOODS AND VIDE GROUND OF APPEAL NO. 6 , SIMILAR ADJUSTMENT TO EXPORT OF FINISHED GOODS AND VIDE GROUND OF APPEAL NO. 6 , SIMILAR ADJUSTMENT IN RESPECT OF INTERNATIONAL TRANSACTIONS PERTAINING TO IMPORT OF GOODS. VIDE GROUND OF APPEAL NO. 7 , THE ASSESSEE HAS RELIED ON THE TRANSFER PRICING STUDY CONDUCTED BY IT, IN WHICH THE TNMM METHOD WAS DEMONST RATED TO BE THE MOST APPROPRIATE METHOD TO DETERMINE THE ARM'S LENGTH PRICE OF THE ASSESSEES EXPORT AND IMPORT TRANSACTIONS PERTAINING TO THE MANUFACTURING SEGMENT. IN THE ALTERNATE, VIDE GROUND OF APPEAL NO. 8 , THE ASSESSEE HAS AGITATED THAT IN RESPECT O F CERTAIN PRODUCTS EXPORTED BY THE ASSESSEE, IT HAD CHARGED HIGHER PRICE TO ITS ASSOCIATED ENTERPRISES AS COMPARED TO NON - ASSOCIATED ENTERPRISES AND SIMILAR WAS THE POSITION IN RESPECT OF IMPORT OF GOODS, AGAINST WHICH THE ALTERNATE PLEA WAS RAISED VIDE GR OUND OF APPEAL NO. 9 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE TPO HAD APPLIED CUP METHOD, WHICH WAS NOT PRACTICAL AND THE SAME SHOULD BE IGNORED. ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 5 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACING RELIANCE ON THE ORDERS OF AUTHORITIES BELOW, FAIRLY ADMITTED THAT THE ISSUE RAISED IN THE PRESENT APPEAL WAS SIMILAR TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09 AND ALSO ASSESSMENT YEAR 2005 - 06 . 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ADDITION OF RS. 90,04,462/ - MADE TO THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES IN RESP ECT OF EXPORT OF FINISHED GOODS AND IMPORT OF GOODS. 7. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF AMPHENOL CORPORATION, USA. THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF BROAD RANGE INTER - CONNECTED PRODUCTS AND A SSEMBLIES FOR VOICE, VIDEO AND DATA COMMUNICATION SYSTEMS, COMMERCIAL AND MILITARY AEROSPACE SYSTEM AUTOMATION AND MASS TRANSPORTATION APPLICATION AND INDUSTRIAL AND FACTORY AUTOMATION EQUIPMENTS. THE MANUFACTURING ACTIVITY CARRIED ON BY THE ASSESSEE WAS CUSTOMIZED. THE TOTAL TURNOVER OF THE ASSESSEE COMPANY FOR THE YEAR UNDER CONSIDERATION WAS RS. 12 3. 04 CRORES AS AGAINST WHICH, THE ASSESSEE HAD MADE EXPORTS TO ITS ASSOCIATED ENTERPRISES OF RS. 90 , 90 , 80 , 60 8/ - AND IMPORT OF RAW MATERIALS WAS OF RS. 2 6, 58 , 4 6, 230 / - . ADMITTEDLY, THE ASSESSEE HAD APPLIED TRANSACTIONAL NET MARGIN METHOD (TNMM) METHOD FOR DETERMINING INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES AND WAS AT MARGIN HIGHER THAN THE COMPARABLES. THE ASSESSEE HAD AGGREGATED THE FOLLOWING INTERNATIONAL TRANSACTIONS: - SR. NO. DETAILS OF TRANSACTION AMOUNT (RS.) METHOD 1 IMPORT OF RAW MATERIAL S / COMPONENT 26,58,46,230 TNMM 2 EXPORT OF FINISHED GOODS 90,90,80,608 TNMM 3 IMPORT OF CAPITAL GOODS 1,82,25,394 TNMM 4 COMMISSION PAID 1,19,61,2 49 TNMM 5 COMMISSION RECEIVED 41,87,942 TNMM ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 6 6 REIMBURSEMENT OF EXPENSES (PAID) 1,03,26,097 TNMM 7 REIMBURSEMENT OF EXPENSES (RECEIVED) 1,08,26,857 TNMM TOTAL 1,23,04,54,377 8. THE TPO ON THE ANALYSIS OF THE DATA NOTED THAT THE ASSESSEE HAD EXPORT ED FINISHED GOODS TO THE ASSOCIATED ENTERPRISES AND ALSO TO THE THIRD PARTIES. ON THE PERUSAL OF THE PRODUCT - WISE DETAILS IN RESPECT OF EACH SEPARATE PRODUCT AND ALSO AFTER PERUSING THE DETAILS IN RESPECT OF SIMILAR PRODUCTS IMPORTED FROM ASSOCIATED ENTER PRISES AND THIRD PARTIES, THE TPO OBSERVED THAT ON PRODUCT - WISE COMPARABILITY OF GOODS EXPORTED AND IMPORTED AND BY TAKING AVERAGE SELLING PRICE PER UNIT OR AVERAGE PURCHASE PRICE PER UNIT IN RESPECT OF ASSOCIATED ENTERPRISES AND THIRD PARTIES WERE DIFFERE NT. THE TPO DID NOT FIND FAVOUR WITH THE BENCHMARKING OF ALL THE TRANSACTIONS BY THE ASSESSEE TOGETHER UNDER ONE SEGMENT I.E. MANUFACTURING SEGMENT EXCEPT, THE TRANSACTION RELATING TO PURCHASE OF TRADING GOODS. IT WAS FURTHER OBSERVED BY THE TPO THAT THE ASSESSEE HAD FOLLOWED TNMM METHOD FOR THE MANUFACTURING SEGMENT AND THE ASSESSEE HAD FOLLOWED TNMM METHOD FOR THE MANUFACTURING SEGMENT AND HAS BENCHMARKED THE ENTITY LEVEL PROFITABILITY VIS - - VIS EXTERNAL COMPARABLES, BUT THE ASSESSEE HAD FAILED TO BENCHMARK ITS TRANSACTION SEPARATELY. THE TPO WAS OF THE VIEW THAT IN SUCH C IRCUMSTANCES, WHERE THE ASSESSEE EXPORTS SAME PRODUCTS TO THE THIRD PARTIES AND ALSO SELLS THE SAME IN DOMESTIC MARKET AS WELL, THEN COMPARABILITY BASED ON THE SALE PRICES OF THE SAME PRODUCT WOULD GIVE MORE THAN FAIR AND REASONABLE RESULTS. THE TPO WAS O F THE VIEW THAT CUP METHOD SHOULD BE APPLIED IN THE INSTANT CASE AND APPLYING THE SAME, THE TPO WORKED OUT AN ADJUSTMENT OF RS. 90,04,462/ - TO BE MADE TO THE ARM'S LENGTH PRICE COMPUTED BY THE ASSESSEE. THE TPO THUS, PROPOSED AN ADDITION OF RS. 90 , 04 , 462 / - AS PER ITS ORDER PASSED UNDER SECTION 92CA(3) OF THE ACT. THE ASSESSING OFFICER VIDE ORDER PASSED UNDER SECTION 143(3) R.W.S. 14 4C(13) OF THE ACT ADDED THE ADJUSTMENT OF RS. 90,04,462 / - AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 7 9. THE DRP UPHELD THE ADDITION IN THE HANDS OF THE ASSESSEE, IN VIEW OF THE SIMILAR ISSUE HAVING BEEN RAISED BEFORE THE DISPUTE RESOLUTION PANEL (DRP) IN ASSESSMENT YEARS 2007 - 08 AND 2008 - 09, WHEREIN THE DRP HAD HELD AGAINST THE ASSESSEE ON BOTH THE ISSUES I.E. THE ISSUE OF APPLICATION OF CUP METHOD AND THE ISSUE OF GROUPING THE TRANSACTION UNDER THE HEAD MANUFACTURING SEGMENT. 10. BEFORE US, THE PLEA OF THE ASSESSEE WAS THAT THE TPO HAD ERRED IN APPLYING THE CUP METHOD AS AGAINST THE TNMM METHOD APPLIED BY THE ASSESSEE IN ITS TRANSFER PRICING STUDY. 11. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1486/PN/2010 , ITA NO.1548/PN/2011 AND ITA NO.142/PN/2013 , RELATING TO ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09 RESPECT IVELY AND VIDE CONSOLIDATED ORDER DATED 30.05.2014, THE TRIBUNAL DELIBERATED UPON BOTH THE ISSUES I.E. WHETHER THE CUP METHOD IS TO BE APPLIED BY BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AND / OR WHETHER THE ASSESSEE WAS CORRECT IN BUNCH ING THE INTERNATIONAL TRANSACTIONS AS ONE UNDER THE HEAD MANUFACTURING SEGMENT AND WORKING OUT THAT THE SAID TRANSACTION WAS AT ARM'S LENGTH PRICE AS COMPARED TO THE OTHER COMPARABLES PICKED UP BY THE ASSESSEE. FURTHER, THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2005 - 06 APPLIED THE SAME PRINCIPLE AND DELETED THE ADDITION. 12. AS POINTED OUT BY US IN THE PARAS HEREINABOVE, THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD ENTERED INTO THE INTERNATIONAL TRANSACTIONS OF IMPORT OF RAW MATERIALS TOTALING RS. 2 6. 58 CRORES AND EXPORT OF FINISHED GOODS OF RS. 90 . 90 CRORES. IN ADDITION, THE ASSESSEE HAD IMPORTED CAPITAL GOODS WORTH RS.1,82,25,394/ - , COMMISSION WAS PAID AT RS.1,19,61,249/ - AND COMMISSION RECEIVED AT RS.41,87,942/ - . FURTHER, REIMBURSEM ENT OF EXPENSES PAID W AS TO THE TUNE OF RS.1,03,26,097/ - AND REIMBURSEMENT OF EXPENSES ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 8 RECEIVED WAS TO THE TUNE OF 1,08,26,857/ - . ALL THE SAID TRANSACTIONS WERE AGGREGATED BY THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OU T THAT OUT OF THE TOTAL EXPORT OF FINISHED GOODS OF RS. 90 . 90 CRORES, ONLY EXPORT OF GOODS TOTALING RS.1. 51 CRORES WAS ON ACCOUNT OF SIMILAR MANUFACTURED GOODS, WHICH WERE SOLD BOTH TO ASSOCIATED ENTERPRISES AND THIRD PARTIES. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT OUT OF TOTAL IMPORT OF GOODS OF RS. 2 6. 58 CRORES, ONLY GOODS TOTALING RS. 72 . 6 4 LAKHS IMPORTED FROM THE ASSOCIATED ENTERPRISES WERE SIMILAR TO THE IMPORT MADE FROM THIRD PARTIES. THE LEARNED AUTHO RIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE PRICE CHARGED FROM THE ASSOCIATED ENTERPRISES AND / OR THE THIRD PARTIES WAS DEPENDENT ON VARIOUS ISSUES I.E. TIMING OF THE TRANSACTION, VOLUME OF ORDER AND GEOGRAPHICAL LOCATIONS. IN SUCH CIRCUMS TANCES, THE APPLICATION OF CUP METHOD WAS NOT PRACTICAL. SIMILAR REFERENCE WAS MADE TO THE TRANSACTIONS OF IMPORT OF GOODS. HE STRESSED THAT THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN A SSESSMENT YEAR 2005 - 06 AND ALSO IN THE OTHER YEARS. 13. ON PERUSAL OF RECORD AND ORDER OF TPO AND ASSESSMENT ORDER AND THE ORDER PASSED BY THE DRP, WE FIND THAT THE ISSUE ARISING IN THE PRESENT APPEAL IN RELATION TO THE BENCHMARKING OF INTERNATIONAL TRAN SACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES , IS IDENTICAL TO THE ISSUE RAISED IN THE EARLIER YEARS I.E. ASSESSMENT YEARS 2005 - 06 TO 2008 - 09 . THE TRIBUNAL IN ITA NO.678/PN/2013 , RELATING TO ASSESSMENT YEAR 2005 - 06 , IN ASSESSEES O WN CASE, VIDE ORDER DATED 27.04.2015 HELD AS UNDER: - 13. WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, THE CUP METHOD IS TO BE IGNORED, IN TURN RELYING ON T HE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 2006 - 07, 2007 - 08 AND 2008 - 09 (SUPRA). THE TRIBUNAL HAD ELABORATELY CONSIDERED THE ARGUMENTS OF THE ASSESSEE VIS - - VIS THE APPLICATION OF APPROPRIATE METHOD WHETHER THE TNMM METHOD OR CUP METHOD IS TO BE APPLIED AND HAD COME TO A FINDING THAT IN THE CIRCUMSTANCES OF THE CASE, WHERE THE PRICES VARIED ON ACCOUNT OF VARIOUS ISSUES I.E. TIMING OF THE TRANSACTION, VOLUME OF ORDER AND GEOGRAPHICAL ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 9 LOCATION, THEN CUP METHOD CANNOT BE APPLIED AND IT WAS MOST APPROPRIATE TO APPLY TNMM METHOD. THE RELEVANT FINDING OF THE TRIBUNAL IS AS UNDER: - 3.1 ACCORDING TO THE TPO, IN RESPECT OF THE PRODUCTS WHICH WERE SOLD BY THE ASSESSEE TO ITS AES AS WELL AS THIRD PARTIES, THE CUP METHOD IS THE MOST APP ROPRIATE METHOD FOR DETERMINING ALP. THE TPO HAS HELD THAT THE CUP METHOD COULD BE APPLIED IN THIS SCENARIO. HE HAS FURTHER STATED THAT THE ASSESSEE DID NOT SUBMIT ANY DATA FOR THE ADJUSTMENTS TO BE MADE ON ACCOUNT OF THE DIFFERENCES IN RESPECT OF SALES TO AES AND THIRD PARTIES. ACCORDINGLY, HE HAS MADE THE ADDITION IN RESPECT OF THOSE PRODUCTS WHEREIN THE AVERAGE SELLING PRICE CHARGED BY THE ASSESSEE TO THE AES WAS LESSER THAN THE AVERAGE SELLING PRICE CHARGED TO THIRD PARTIES. IN THIS REGARD, THE STAND O F THE ASSESSEE HAS BEEN THAT THE ADDITION IS QUESTION IS NOT JUSTIFIED. WE FIND THAT OUT OF THE TOTAL EXPORTS TO AE OF 28.64 CRORES, THE TPO HAS ACCEPTED THAT EXPORTS OF 27.24 CRS. ARE AT ALP. ONLY IN RESPECT OF EXPORTS OF 1.40 CRS. WHICH ACCOUNT FOR 5% OF TOTAL EXPORTS, THE TPO HAS APPLIED THE CUP METHOD. THE TPO HAS MADE THE ADDITION ONLY ON THE BASIS THAT THERE IS PRODUCT SIMILARITY. THE TPO HAS NOT APPRECIATED THAT THE CUP METHOD IS NOT THE MOST APPROPRIATE METHOD TO DETERMINE ALP IN THE CASE OF THE ASSESSEE BECAUSE THE ASSESSEE MANUFACTURES CUSTOMIZED PRODUCTS. THE PRICING OF THE PRODUCT DEPENDS UPON VARIOUS F ACTORS LIKE THE GEOGRAPHICAL LOCATION OF THE CUSTOMER, THE VOLUME OF THE ORDER, TIMING OF THE ORDER, URGENCY OF THE CUSTOMER, COMPETITION IN THE MARKET, ETC. THE PRICING DEPENDS UPON SO MANY FACTORS AND SUITABLE ADJUSTMENTS COULD NOT BE MADE TO ACCOUNT FOR SUCH DIFFERENCES. THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT IN RESPECT OF THE SAME PARTY AND THE SAME PRODUCT, THE ASSESSEE HAS CHARGED DIFFERENT PRICES WHICH ITSELF INDICATES THAT THE PRICING IS DEPENDENT UPON VARIOUS FACTORS FOR WHICH SUITABLE ADJUSTMENTS COULD NOT BE MADE. IN THIS REGARD, THE ATTENTION WAS DRAWN TO PAGE 165 OF THE PAPER BOOK WHEREIN WHICH MAKE IT CLEAR THAT THE ASSESSEE COMPANY HAS CHARGED DIFFERENT PRICES TO AMPHENOL LTD., GREAT BRITAIN COMPANY HAS CHARGED DIFFERENT PRICES TO AMPHENOL LTD., GREAT BRITAIN FOR THE SAME PRODUCT. 3.2 THE ASSESSEE EMPHASIZED THAT THERE ARE VARIOUS DIFFERENCES IN TRANSACTIONS WITH AES AND THE THIRD PARTIES PERTAINING TO SIMILAR PRODUCTS. THESE DIFFERENCES ARE AS UNDER A. VOLUME DIFFERENCES - THIS ASPECT WAS CLARIFIED BY THE ASSESSEE ON PAGE 150 OF THE P APER BOOK. THE ASSESSEE, INTER ALIA, HAD EXPLAINED TO THE ASSESSING OFFICER THAT VOLUMES INVOLVED FOR AES ARE MUCH HIGHER AS COMPARED TO THIRD PARTIES. THE ASSESSEE HAS FURTHER STATED THAT VOLUME DISCOUNT OFFERED DEPENDS UPON VARIOUS FACTORS LIKE PREVAILIN G MARKET CONDITIONS, LEVEL OF COMPETITION IN THE MARKET AND FUTURE GROWTH PROSPECTS. THIS FACT HAS NOT BEEN APPRECIATED BY THE TPO. B. GEOGRAPHICAL DIFFERENCES - THIS ASPECT WAS CLARIFIED BY THE ASSESSEE ON PAGE 152 OF THE PAPER BOOK, INTER ALIA, CLARI FIED TO THE ASSESSING OFFICER THAT THE PRICES CHARGED DEPENDS UPON THE COUNTRY WHERE THE AE/ THIRD PARTY IS SITUATED AND ALSO THE DEMAND AND SUPPLY FACTORS IN THE RESPECTIVE COUNTRIES. THE ASSESSEE EXPLAINED THAT CUP METHOD CAN BE APPLIED ONLY WHEN THE CON DITIONS PREVAILING IN THE MARKET IN WHICH THE RESPECTIVE PARTIES OPERATE ARE THE SAME AND ALSO THE SIZE AND LOCATION OF THE MARKET IS TO BE TAKEN INTO CONSIDERATION. THIS ASPECT HAS NOT BEEN ANALYZED BY THE TPO JUDICIOUSLY. C. TIMING DIFFERENCES ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 10 THIS ASPECT WAS CLARIFIED BY THE ASSESSEE ON PAGES 153 - 154 OF THE PAPER BOOK, INTER ALIA, SUBMITTED THAT TIMING DIFFERENCES IN THE SALES MADE TO THE AES AND THIRD PARTIES HAVE A BEARING SINCE THE PRICES ARE DEPENDENT UPON VARIOUS FACTORS. AS CLARIFIED, THE A SSESSEE MANUFACTURES AFTER RECEIVING THE ORDER FROM THE PARTY AND THE RELEVANT RAW MATERIAL COST AT THAT TIME IS ALSO A CRUCIAL FACTOR TO DETERMINE THE PRICES OF THE END PRODUCT. THUS, CONSIDERING TIMING DIFFERENCES OF TRANSACTION, APPLICATION OF CUP METHO D IS NOT JUSTIFIED. D. RISK DIFFERENCE - THIS ASPECT EMPHASIZED BY THE ASSESSEE FROM THE DETAILS AT PAGE 154 OF THE PAPER BOOK, INTER ALIA, EMPHASIZED THAT THE RISK MAINLY MARKET RISK AND PRODUCT RELATED RISK ASSUMED BY THE COMPANY IN CASE OF TRANSACTION S WITH AES ARE SIGNIFICANTLY LOWER AS COMPARED TO THE TRANSACTIONS WITH THIRD PARTIES. THEREFORE, CONSIDERING THE RISK DIFFERENCES, THE PRICES CHARGED TO THIRD PARTIES ARE HIGHER THAN THE PRICES CHARGED TO AES IN CERTAIN CASES. HENCE, CUP METHOD COULD NOT BE APPLIED IN THE CASE OF THE ASSESSEE. FURTHER, THE ASSESSEE DOES NOT HAVE ANY CREDIT RISK IN RESPECT OF SALES TO THE AES WHICH IS AN IMPORTANT FACTOR. THIS DIFFERENCE IS DISCUSSED ABOVE HAS NOT BEEN JUDICIOUSLY APPRECIATED BY THE ASSESSEE. E. FUNCTIONA L DIFFERENCES THIS ASPECT WAS CLARIFIED BY THE ASSESSEE AS PER DETAILS ON PAGE 154 OF THE PAPER BOOK, INTER ALIA, ASSESSEE EXPLAINED TO THE ASSESSING OFFICER THAT IN RESPECT OF SALES TO AES, IT WAS NOT REQUIRED TO UNDERTAKE MARKETING FUNCTIONS WHILE IN RESPECT OF SALES TO THIRD PARTIES, THE ASSESSEE HAS TO EXTENSIVELY UNDERTAKE MARKETING OPERATIONS. IGNORING UNDERTAKING OF MARKETING FUNCTION IS NOT JUSTIFIED. MARKETING FUNCTION IS NOT JUSTIFIED. F. OTHER DIFFERENCES THIS ASPECT WAS CLARIFIED BY THE ASSESSEE ON PAGE 154 OF THE PAPER BOO K, INTER ALIA, ASSESSEE EXPLAINED THAT THE AES ARE USUALLY ORIGINAL EQUIPMENT MANUFACTURERS WHILE THE THIRD PARTIES ARE USUALLY DISTRIBUTORS. THUS, THERE WAS A DIFFERENCE IN VALUE CHAIN. SIMILARLY, ASSESSEE EXPLAINED THAT IT IS ABLE TO REALIZE HIGHER PRICE ON ACCOUNT OF AMPHENOL BRAND FOR WHICH NO CONSIDERATION WAS PAID BY THE ASSESSEE. 3.3 CONSIDERING THE ABOVE DIFFERENCES, CUP METHOD WAS CLAIMED TO BE NOT THE MOST APPROPRIATE METHOD TO DETERMINE ALP. THE SUITABLE ADJUSTMENTS WERE NOT POSSIBLE FOR THE ABO VE DIFFERENCES AND THEREFORE, THE TPO WAS NOT JUSTIFIED IN ADOPTING CUP FOR EXPORTS OF 1.40 CRS. TO THE AES SPECIALLY WHEN IN RESPECT OF SOME OF THE PRODUCTS, THE ASSESSEE HAS CHARGED HIGHER PRICE TO THE AES AS COMPARED TO THE PRICES CHARGED TO THIRD PAR TIES. THIS FACT WAS CLARIFIED BY THE ASSESSEE TO THE TPO BY THE DETAILS AS MENTIONED ON PAGE 161 OF THE PAPER BOOK. CONSIDERING THE ABOVE FACT, WE FIND THAT IN RESPECT OF SOME OF THE INSTANCES, THE ASSESSEE HAS CHARGED HIGHER PRICES TO THE AES AS COMPARED TO THIRD PARTIES. THIS FACT ITSELF INDICATES THAT THE PRICING OF THE PRODUCTS IS INFLUENCED BY ECONOMIC CIRCUMSTANCES AND UNDERLYING TRANSACTIONAL DIFFERENCES. THE ASSESSEE HAS CHARGED HIGHER AMOUNT OF 16,18,244/ - TO THE AES IN RESPECT OF THE SAME PRODUCTS WHICH WERE ALSO SOLD TO THIRD PARTIES AS REFERRED ON PAGE 198 OF THE PAPER BOOK. CONSIDERING THE ABOVE DIFFERENCES, THE CUP METHOD WAS NOT THE MOST APPROPRIATE METHOD SINCE SUITABLE ADJUSTMENTS WERE NOT POSSIBLE TO BE MADE FOR THE VARIOUS DIFFERENCES. THE TPO HAS APPLIED CUP ONLY ON THE BASIS OF PRODUCT SIMILARITY WITHOUT APPRECIATING THE VARIOUS OTHER DIFFERENCES AS DISCUSSED ABOVE. ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 11 3.4 WE FIND THAT THE MUMBAI BENCH IN THE CASE OF GHARDA CHEMICAL S LTD. [130 TTJ 556 (MUM)] HAS HELD THAT THE ASSESSEE HAD SOLD A PRODUCT NAMED 'DICAMBA' TO GHARDHA USA INC. AE OF THE ASSESSEE COMPANY. TOTAL AMOUNT RECEIVED BY THE ASSESSEE AS 'ALP' TOWARDS EXPORT OF DICAMBA WAS DECLARED AT 20.71 CRORES. THE ASSESSEE HAD DETERMINED THE ALP BY COMPARABLE UNCONTROLLED PRICE METHOD. THE TPO NOTED THAT THE SALE OF DICAMBA TO UNRELATED PARTIES WAS ALSO MADE BY THE ASSESSEE IN VARIOUS OTHER COUNTRIES AT THE RATES RANGING BETWEEN 19.47 US $ TO 25. 00 US $ PER KG. AS AGAINST THAT THE DICAMBA SOLD BY THE ASSESSEE TO ITS AE WAS AT THE RATE OF 14.66 US $. IT WAS FOUND RELEVANT TO MENTION THAT THE TOTAL QUANTITY EXPORTED BY THE ASSESSEE TO DIFFERENT COUNTRIES WAS 418803 KGS. INCLUSIVE OF 272100 KGS. SOL D TO ITS AE. THE TPO DETERMINED THE AVERAGE RATE OF SALE TO ALL INDEPENDENT ENTERPRISES AT 20.67 US $ PER KG., WHICH WAS FOUND TO BE SUBSTANTIALLY HIGHER THAN 14.66 US $ CHARGED BY THE ASSESSEE FROM ITS AE. THE ITAT HELD THAT THE INTERNAL CUP METHOD ENVIS AGES COMPARING THE UNCONTROLLED TRANSACTIONS OF THE ASSESSEE ITSELF WITH OTHER UNRELATED PARTIES SO AS TO DETERMINE THE ALP WITH THE AE. HOWEVER, THE EXTERNAL CUP METHOD DISREGARDS THE PRICE CHARGED OR PAID BY THE ASSESSEE TO OR FROM ITS UNRELATED PARTIES AND CONTEMPLATES THE COMPARISON OF THE PRICE SO CHARGED FROM OR PAID TO ITS AE WITH SOME EXTERNAL INDEPENDENT RELIABLE PRICE DATA UNDER SIMILAR CIRCUMSTANCES OF TRANSACTIONS WITH AE. ORDINARILY THE INTERNAL CUP METHOD SHOULD BE PREFERRED OVER THE EXTERNAL CUP METHOD AS IT NEUTRALIZES SEVERAL DISTINGUISHING FACTORS, SUCH AS THE LOCAL FACTORS AND THE ECONOMIES AVAILABLE OR UNAVAILABLE TO THE ASSESSEE IN PARTICULAR, HAVING BEARING OVER THE COMPARISON OF PRICE CHARGED FROM UNRELATED PARTIES AND AE. THE ESSENCE OF DETERMINING ALP UNDER CUP METHOD IS TO ENSURE THAT THE PRICE CHARGED BY THE INDIAN ENTERPRISE FROM ITS AE SHOULD BE CONSISTENT WITH THAT CHARGED FROM UNRELATED PARTIES UNDER SIMILAR CIRCUMSTANCES. THE IMPORTANCE OF THE 'SIMILAR CIRCUMSTANCES' COULD NOT BE LOST SIGHT OF IN THIS CONTEXT BECAUSE A ROUND CANNOT BE COMPARED WITH A SQUARE AND A RECTANGLE WITH A TRIANGLE. IN OTHER WORDS COMPARED WITH A SQUARE AND A RECTANGLE WITH A TRIANGLE. IN OTHER WORDS THE UNCONTROLLED TRANSACTIONS WHICH ARE CONTEMPLATED FOR COMPARISON SHOULD BE ALIKE, IF NOT IDENTICAL. SIMILARITY BETWEEN THE TWO SETS OF TRANSACTIONS COULD BE JUDGED BY THE QUALITY, GRADE AND QUANTITY OF THE MATERIAL. IN ADDITION, THE FACTORS LIKE LOCATION OF THE PARTIES, AVAILABILITY OF RAW MATERIAL; DEMAND AND SUPPLY EQUATION ALSO PLAY PIVOTAL ROLE IN FINDING OUT AS TO WHETHE R THE TWO ARE REALLY COMPARABLE OR NOT. THUS IN THE INTERNAL CUP METHOD THE LOCAL FACTORS OF AE IN THE OTHER COUNTRY AND ALL THE RELEVANT FACTORS WHICH COULD HAVE BEARING ON THE PRICE SO CHARGED FROM AE MUST BE TAKEN INTO CONSIDERATION. THE TRIBUNAL WAS D EALING WITH A CASE IN WHICH THE ASSESSEE HAS ITS AE IN USA AND RATE CHARGED WAS 14.66 US $ PER KG. OF DICAMBA. THERE WAS NO OTHER EXPORT BY THE ASSESSEE TO USA. THE UNCONTROLLED TRANSACTIONS OF EXPORT MADE BY THE ASSESSEE ARE TO OTHER COUNTRIES SUCH AS UK, NETHERLANDS, NEW ZEALAND, AUSTRALIA, FRANCE, ETC. IN RESPECT OF WHICH AVERAGE RATE OF 20.67 US $ PER KG. OF DICAMBA HAS BEEN DETERMINED BY THE TPO FOR COMPUTING THE ALP. ALL OTHER TRANSACTIONS OF EXPORT BY THE ASSESSEE ARE TO NON - USA COUNTRIES. THE PRICE ON WHICH A PARTICULAR PRODUCT IS AVAILABLE IN ONE COUNTRY MAY LARGELY VARY FROM THE PRICE PREVAILING IN OTHER COUNTRIES DUE TO VARIOUS FACTORS. THE COUNTRY WHICH IS PRODUCER OF A PARTICULAR COMMODITY OR ITS RAW MATERIAL MAY HAVE LOWER SALE PRICE IN COMPARI SON WITH THE COUNTRY WHICH IS SHORT OF SUCH NATURAL RESOURCES. SIMILARLY THE PRICE MAY VARY FROM ONE COUNTRY TO ANOTHER DEPENDING UPON CLIMATIC CONDITIONS AND THE DEMAND AND SUPPLY FACTORS. THUS THE PRICE CHARGED BY AN INDIAN PARTY FROM UK OR AUSTRALIA MAY BE AT MUCH VARIANCE WITH THAT CHARGED FROM USA. IN SUCH A SCENARIO NO VALID COMPARISON COULD BE MADE BETWEEN THE PRICE CHARGED BY THE ASSESSEE FROM OTHER COUNTRIES WITH THAT FROM USA, MORE PARTICULARLY WHEN THE TRIBUNAL WAS OF THE VIEW THAT QUANTITY EXPOR TED TO USA ON WHOLESALE BASIS WITH THAT TO OTHER COUNTRIES IN SMALL LOTS ON RETAIL BASIS. IN THIS SITUATION, THE TRIBUNAL HELD THAT THE INTERNAL CUP METHOD WAS NOT SUITABLE IN THE PRESENT CIRCUMSTANCES. ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 12 3.5 WE FIND IN DUFON LABORATORIES [(39 SOT 59 (MUM)], THE TPO HAD MADE THE ADDITION BASED ON THE FACT THAT THE ASSESSEE HAD CHARGED LESSER PRICE TO ITS AE AS COMPARED TO THE PRICE CHARGED TO THIRD PARTY FOR THE SAME PRODUCT. THE ITAT HELD THAT IF THE DIFFERENCES ARE TAKEN INTO CONSIDERATION LIKE GEOGRAPHICA L, VOLUME, PROFILE OF THE CUSTOMER, ETC. ETC., NO ADDITION WAS WARRANTED. 3.6 IN UCB INDIA LTD. [121 ITD 131 (MUM)], THE ASSESSEE HAD MADE IMPORTS FROM ITS AE. THE ASSESSEE HAD APPLIED TNMM. THE TPO ADOPTED CUP METHOD TO DETERMINE ALP. THE ITAT HELD THAT THOUGH CUP WAS A DIRECT METHOD, IT COULD NOT BE APPLIED IN ALL SITUATIONS. MUCH DEPENDS ON THE AVAILABILITY OF DATA ON COMPARABLES. JUST BECAUSE IT IS THE ONLY DIRECT METHOD, IT DOES NOT AUTOMATICALLY BECOME THE MOST APPROPRIATE METHOD. THE CUP METHOD IS T HE MOST DIRECT METHOD FOR DETERMINING ALP. UNDER THIS METHOD, THE PRICE AT WHICH CONTROLLED TRANSACTION IS CARRIED OUT IS COMPARED TO THE PRICE OBTAINED IN COMPARABLE UNCONTROLLED TRANSACTION. AN UNCONTROLLED PRICE IS THE PRICE AGREED BETWEEN UNCONNECTED P ARTIES FOR THE TRANSFER OF GOODS OR SERVICES. THE CUP CAN BE EITHER (A) INTERNAL CUP OR (B) EXTERNAL CUP. IN THIS CASE ON HAND, EXTERNAL CUP IS CONSIDERED. UNDER THE CUP METHOD THE PROPERTIES OF A PRODUCT AND ACCOMPANYING CIRCUMSTANCES AND CONDITIONS HAVE TO BE EVALUATED FOR COMPARISON. EVEN A MINOR CHANGE IN THE PROPERTIES OF THE PRODUCTS, CIRCUMSTANCES OF TRADE (BILLING PERIOD, AMOUNT OF CREDIT THEREIN, ETC.) MAY HAVE A SIGNIFICANT EFFECT ON THE PRICE. PRODUCT COMPARABILITY IS ABSOLUTELY KEY, IN PARTICUL AR PHYSICAL FEATURES SUCH AS SIZE, WEIGHT, APPEARANCE ALONG WITH VOLUME, RELIABILITY/STORAGE REQUIREMENTS, REGULATORY REQUIREMENTS, ETC. PRICING OF A PRODUCT IS A VERY SUBJECTIVE EXERCISE AND ITS TRUE VALUE, AS RECEIVED BY THE RECEIVER, CAN DIFFER FROM THA T RECEIVED BY OTHERS IN THE MARKET PLACE. BROADER BUSINESS FUNCTIONS AND NOT JUST THE PRODUCT COMPARABILITY HAVE TO BE CONSIDERED. IT WOULD ALSO BE NECESSARY TO COME TO A CONCLUSION, WITH SOME SCIENTIFIC STUDY OR ENQUIRY THAT THE APIS IMPORTED BY INDEPENDE NT ENTITIES ARE SAME AS THE API IMPORTED APIS IMPORTED BY INDEPENDE NT ENTITIES ARE SAME AS THE API IMPORTED BY THE ASSESSEE, AS EVEN A MINOR DIFFERENCE COULD MATERIALLY AFFECT THE PRICE. THERE SHOULD BE A SCIENTIFIC BASIS TO SAY THAT APIS ARE IDENTICAL, WITH THE SAME PURITY, POTENCY, AND CHARACTERISTICS. APIS ARE UNIQUE C OMPOUND MAKING, AND THE EFFECT OF USAGE OF A PARTICULAR PDF USING AN API WOULD DEPEND ON THE COMPOSITION, PURITY, METHOD OF USAGE, DOSAGE USED, SIDE - EFFECTS. ALL SUCH DATA SHOULD BE FIRST OBTAINED BY THE REVENUE OR THE ASSESSEE, WHO WISH TO COMPARE PRODUCT S AND THEN ARRIVE AT THE ALP OR WISH TO MAKE ADJUSTMENTS TO A PRICE, COST OR MARGIN. 3.7 IN THE CASE OF WELSPUN ZUCCHI TEXTILES LTD. [153 TTJ 153 (MUM)], THE ASSESSEE HAD EXPORTED BATHROBES TO ITS AES. THE ASSESSEE HAD ADOPTED CUP METHOD TO DETERMINE ALP. THE TPO REJECTED CUP METHOD AND APPLIED TNMM. THE ITAT HELD THAT THE ASSESSEE HAD WRONGLY ADOPTED CUP METHOD AND IT WAS HELD THAT THE ASSESSEE HAD MADE COMPARISON OF THE AVERAGE PRICE OF ALL THE BATHROBES SOLD TO AES VIS - A - VIS THIRD PARTIES. THE ITAT HE LD THAT SUCH COMPARISON IS NOT CORRECT AND SECONDLY, THERE WERE DIFFERENCES IN GEOGRAPHICAL LOCATIONS AND SIZE OF THE MARKETS WHICH AFFECTED THE PRICE. ACCORDINGLY, CUP WAS REJECTED AS THE MOST APPROPRIATE METHOD. 3.8 IN INTERVET INDIA PVT. LTD. [39 SOT 5 9 (MUM)], ITAT HAS HELD THAT FOR APPLICABILITY OF CUP, VARIOUS DIFFERENCES INCLUDING ECONOMIC AND MARKET CONDITIONS, GEOGRAPHICAL LOCATIONS, VOLUME DISCOUNT, CREDIT RISKS, ETC. ETC. ARE TO BE TAKEN INTO ACCOUNT AND SIMPLY, PRODUCT SIMILARITY IS NOT THE ONL Y CRITERIA FOR APPLYING CUP METHOD. 3.9 WE FIND IN THE CASE OF ARVIND MILLS LTD. [11 TAXMANN.COM 67 (AHD)], ITAT HAS HELD THAT FOR APPLYING THE CUP METHOD, THERE SHOULD NOT ONLY BE PRODUCT SIMILARITY BUT IMPACT OF BROADER BUSINESS FUNCTIONS ON PRICES SHOU LD BE CONSIDERED. THE ITAT HELD THAT EVEN MINOR DIFFERENCES IN CONTRACTUAL TERMS, ECONOMIC CONDITIONS, GEOGRAPHICAL ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 13 AREAS, RISKS ASSUMED, FUNCTIONS ASSUMED COULD AFFECT THE PRICES OF THE PRODUCTS. 4. NEW LET US ANALYSE THE ARGUMENTS OF LEARNED CIT DR O N BROAD PROPOSITION THAT THE ASSESSEE WAS NOT JUSTIFIED IN AGGREGATING THE TRANSACTIONS OF EXPORTS, IMPORTS AND COMMISSION INTO A SINGLE ACTIVITY FOR THE PURPOSES OF DETERMINING THE ALP UNDER TNMM METHOD. IT WAS ARGUED BY THE LEARNED DEPARTMENTAL REPRESENT ATIVE THAT THE TRANSACTIONS ARE DISTINGUISHABLE IN THEIR NATURE AND SCOPE AND SEPARATE PROFITABILITY CAN BE ARRIVED AT IN RESPECT THESE TRANSACTIONS AND HENCE, THE AGGREGATION APPROACH ADOPTED BY THE ASSESSEE IS NOT JUSTIFIED. IN THIS REGARD, WE FIND THAT THE ASSESSEE SUBMITS THAT THE ABOVE CONTENTION IS NOT CORRECT. IT IS SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY OF MANUFACTURING CONNECTORS AND OTHER PRODUCTS AND SELLING THEM SUBSEQUENTLY TO VARIOUS PARTIES. THUS, IT IS TO BE NOTED T HAT THE TRANSACTIONS OF EXPORTS OF GOODS, IMPORT OF GOODS ARE ALL PART OF THE ASSESSEE'S BUSINESS. FURTHER, THE COMMISSION IS PAID TO VARIOUS PARTIES TO BOOST THE SALES OF THE ASSESSEE'S PRODUCTS. THEREFORE, THE TRANSACTIONS OF EXPORTS, IMPORTS AND PAYMENT OF COMMISSION TO AGENTS ARE CLOSELY INTER RELATED AND ARE PART OF SINGLE BUSINESS ACTIVITY OF THE ASSESSEE AND THE PROFIT EARNED BY THE ASSESSEE IS COLLECTIVE RESULT OF ALL THESE TRANSACTIONS AND HENCE, IT IS IMPRACTICAL TO ANALYSE THE PROFITS OF EACH IND IVIDUAL TRANSACTIONS. ACCORDINGLY, THE ASSESSEE HAS RIGHTLY AGGREGATED THE ABOVE TRANSACTIONS FOR THE PURPOSES OF DETERMINING THE ALP UNDER TNMM. EVEN IF THE VARIOUS TRANSACTIONS ARE EVALUATED INDEPENDENTLY, THE NET FINAL RESULT REMAINS THE SAME. THE ASS ESSEE HAS ADOPTED TNMM FOR DETERMINING THE ALP FOR THE VARIOUS TRANSACTIONS AND THE ASSESSEE HAD CONTENDED THAT ITS NET OPERATING MARGIN IS MUCH HIGHER THAN THE COMPARABLE COMPANIES. THIS FACT HAS NOT BEEN DISPUTED BY THE LEARNED TPO SINCE HE HIMSELF HAS A CCEPTED THAT MORE THAN 95% OF THE EXPORTS AND IMPORTS ARE AT ALP AS PER THE TNMM METHOD. ACCORDINGLY, EVEN IF THE VARIOUS INTERNATIONAL TRANSACTIONS ARE EVALUATED SEPARATELY, THE THE VARIOUS INTERNATIONAL TRANSACTIONS ARE EVALUATED SEPARATELY, THE FINAL RESULT REMAINS THE SAME. THE ASSESSEE HAS ADOPTED TNMM WHEREIN THE NET OPERATING MARGIN OF THE ASSESSEE IS COMPARED WITH THE NET OPERATING MARGIN OF THE COMPARABLES. ONCE THE NET MARGIN OF THE ASSESSEE IS HIGHER, IT MEANS THAT ALL THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AES ARE AT ALP. 4.1 THE L EARNED CIT DR HAS FURTHER SUBMITTED THAT CUP IS A MORE DIRECT METHOD FOR DETERMINING THE ALP OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY A COMPANY AND HENCE, IT SHOULD BE PREFERRED OVER TNMM METHOD. IN THIS RESPECT, SHE HAS PLACED RELIANCE ON THE DECISIO N IN THE CASE OF ACIT V. MSS INDIA [32 SOT 132(PUNE)]. ACCORDINGLY, IT HAS BEEN CONTENDED THAT THE LEARNED TPO HAS RIGHTLY APPLIED CUP METHOD FOR DETERMINING THE ALP OF CERTAIN TRANSACTIONS RELATING TO EXPORTS AND IMPORTS OF GOODS AND COMMISSION WHERE SIMI LAR TRANSACTIONS WERE AVAILABLE FOR COMPARISON. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THAT THE ABOVE CONTENTION IS NOT CORRECT. THE LEARNED TPO HAS RELIED ON THE DECISION OF MSS INDIA (SUPRA) TO STATE THAT CUP METHOD IS TO BE PREFERRED OVER T NMM METHOD. ACCORDING TO US, AS GENERAL PROPOSITION, THERE IS NO DISPUTE TO THE FACT THAT THE CUP METHOD IS A MORE DIRECT METHOD AND HENCE, IT SHOULD BE PREFERRED OVER TNMM METHOD WHEN COMPARABLE TRANSACTIONS ARE AVAILABLE. HOWEVER, IT IS TO BE APPRECIATE D THAT IN THE INSTANT CASE, WHERE THERE ARE VARIOUS DIFFERENCES LIKE GEOGRAPHICAL DIFFERENCES, VOLUME DIFFERENCES, DIFFERENT MARKET CONDITIONS, ETC. ETC. IN THE TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS AES AND THE THIRD PARTIES. IT IS NOT POSSIBLE TO MAKE SUITABLE ADJUSTMENTS IN RESPECT OF SUCH DIFFERENCES, HENCE, CUP METHOD IS NOT THE MOST APPROPRIATE METHOD IN THE INSTANT CASE. IN THE COURSE OF THE HEARING, THE LEARNED CIT DR SUBMITTED THAT THE TPO HAS RIGHTLY ADOPTED CUP FOR THE PRODUCTS IN RESPEC T OF WHICH COMPARABLE TRANSACTIONS WERE AVAILABLE. WHILE RAISING THIS CONTENTION, THE LEARNED CIT DR HAS NOT CONTROVERTED THE VARIOUS DIFFERENCES BETWEEN THE ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 14 TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AES AND THIRD PARTIES. CONSIDERING THE VARIOUS DIFFERENCES AS DISCUSSED ABOVE BETWEEN THE TWO TRANSACTIONS, CUP METHOD IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE LEARNED CIT DR HAD ALSO STATED THAT THE ONUS IS ON THE ASSESSEE TO DEMONSTRATE THAT THE METHOD SELECTED BY IT, WAS MOST APPROPR IATE. THERE IS NO DISPUTE REGARDING THIS PROPOSITION AS WELL. HOWEVER, ONCE, THE TPO HAS TRIED TO SELECT A DIFFERENT METHOD, THE ONUS IS ON THE TPO TO DEMONSTRATE THAT THE OTHER METHOD IS THE MOST APPROPRIATE METHOD. THIS PRINCIPLE HAS BEEN LAID DOWN BY SP ECIAL BENCH IN THE CASE OF AZTEC SOFTWARE LTD. [107 ITD 141 (BANG)(SB)]. THE LEARNED CIT DR FURTHER ARGUED THAT THE ASSESSEE HAD MADE INADEQUATE COMPLIANCE. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THAT IT HAD SUBMITTED ALL THE RELEVANT DETAILS T O DEMONSTRATE THAT TNMM WAS THE MOST APPROPRIATE METHOD AND THE DETAILED REPORT IN THIS REGARD IS ENCLOSED ON PAGES 54 - 84 OF THE PAPER BOOK. CONSIDERING THE VARIOUS DIFFERENCES BETWEEN THE TRANSACTIONS ENTERED INTO WITH THE AES AND THE THIRD PARTIES, TH E CUP IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SAME HOLDS GOOD FOR IMPORT AND COMMISSION ISSUES AS FAR AS DETERMINATION OF ALP IS CONCERNED. 4.2 THE LEARNED CIT DR HAS PLACED RELIANCE ON THE DECISION IN THE CASE OF KNORR - BREMSE INDIA PVT. LTD. V. ACIT [ITA NO. 5097/DEL/2011] AND CONTENDED THAT THE TRANSACTIONS OF EXPORT, IMPORT AND COMMISSION PAYMENT SHOULD HAVE BEEN BENCHMARKED SEPARATELY. THE AGGREGATION OF THESE TRANSACTIONS IS NOT JUSTIFIED. THE SAID DECISION IS DISTINGUISHABLE ON FACT S. IN THE SAID CASE, THE ASSESSEE HAD AGGREGATED TRANSACTIONS LIKE PAYMENT OF 'PROFESSIONAL CONSULTANCY FEE' AND PAYMENT OF 'MANAGEMENT FEE FOR SUPPORT SERVICES' 'AND THEREBY DETERMINED THE ALP UNDER TNMM METHOD. IN THE SAID CASE, BENCH HELD THAT THE ASSE SSEE WAS NOT ABLE TO ESTABLISH THAT THE TRANSACTIONS WERE CLOSELY LINKED WITH EACH OTHER AND HENCE, IT WAS HELD THAT THE AGGREGATION OF SUCH TRANSACTIONS WAS NOT JUSTIFIED. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS DEMONSTRATED THAT THE HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS DEMONSTRATED THAT THE TRANSACTIONS O F EXPORTS, IMPORTS AND PAYMENT OF COMMISSION TO AGENTS ARE CLOSELY INTERRELATED AND PART OF SINGLE BUSINESS ACTIVITY OF THE ASSESSEE AND THEREFORE, THE RATIO OF THE ABOVE DECISION IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 4.3 THE LEARNED DEPARTMENT AL REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE DECISION OF DELPHI TVS V. ACIT [24 TAXMANN.COM 179(CHENNAI)] IN SUPPORT OF HIS CONTENTION THAT CUP SHOULD BE APPLIED ON THE FACTS OF THE ASSESSEE'S CASE AND NOT TNMM. WE FIND THAT IN THE DELPHI TVS (SUPRA) , ITAT HAS REJECTED TNMM METHOD MAINLY BECAUSE THE COMPARABLE ENTITIES SELECTED BY THE ASSESSEE COMPANY HAD SUBSTANTIAL RELATED PARTY TRANSACTIONS. HENCE, THE COMPARISON UNDER TNMM WAS NOT POSSIBLE. SECONDLY, IN THE SAID DECISION, BENCH HAS HELD THAT WHEN A TRANSACTION TO TRANSACTION COMPARISON IS TO BE PREFERRED ONLY IF PROPER ADJUSTMENT CAN BE CARRIED OUT TO ACCOUNT FOR THE DIFFERENCES THAT COULD MATERIALLY AFFECT THE PRICES IN THE OPEN MARKET OF THE RELATED ITEMS. HOWEVER, IN THE INSTANT CASE, THE ASSES SEE HAS DEMONSTRATED THAT SUITABLE ADJUSTMENTS COULD NOT BE MADE ON ACCOUNT OF THE VARIOUS DIFFERENCES AND HENCE, THE CUP CANNOT BE APPLIED TO THE FACTS OF THIS CASE. IT IS PERTINENT TO MENTION THAT THE TNMM HAS NOT BEEN REJECTED IN THE ASSESSEE'S CASE AS THE TPO HIMSELF HAS ADOPTED IT FOR DETERMINING THE ALP FOR MAJORITY OF THE TRANSACTIONS. ACCORDINGLY, THE RATIO OF DELPHI TVS (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEE'S CASE. 4.4 REGARDING RELIANCE OF LEARNED DEPARTMENTAL REPRESENTATIVE ON THE RATIO IN THE CASE OF WRIGLEY INDIA PVT. LTD. V. ADDL. CIT [14 TAXMANN.COM 91 (DEL)(ITAT)], WHEREIN, THE ASSESSEE WAS INVOLVED IN MANUFACTURE OF CHEWING GUM. THE ASSESSEE EXPORTED SOME OF ITS PRODUCTION TO ITS AES AND ALSO MADE DOMESTIC SALES OF THE SAME PRODUCT TO UNRELATED PARTIES. THE TPO REJECTED TNMM METHOD ADOPTED ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 15 BY THE ASSESSEE AND APPLIED INTERNAL COST PLUS METHOD, THEREBY COMPARING THE MARGIN EARNED IN THE DOMESTIC SEGMENT WITH THE MARGIN EARNED IN THE EXPORTS SEGMENT AND ACCORDINGLY, MADE A DJUSTMENTS. IN THE SAID CASE, THE ISSUE WAS REGARDING APPLICABILITY OF TNMM OR THE COST PLUS METHOD. IN THE SAID CASE, THE ISSUE OF APPLICABILITY OF CUP METHOD WAS NOT INVOLVED AND HENCE, THE SAID DECISION HAS BEEN RENDERED IN DIFFERENT FACTS AND CIRCUMST ANCES. 4.5 THE LEARNED CIT DR HAS PLACED RELIANCE ON THE DECISIONS OF DCIT V. HELLOSOFT INDIA PVT. LTD. [32 TAXMANN.COM 101 (HYD)] & COCA COLA INDIA INC. V ASST. CIT [309 ITR 194] AND CONTENDED THAT IT IS OPEN FOR THE TPO TO REJECT THE METHOD ADOPTED B Y THE ASSESSEE AND APPLY A DIFFERENT METHOD WHICH IS FOUND TO BE MORE APPROPRIATE ON FACTS OF THE CASE. THIS PROPOSITION IS NOT IN DISPUTE. HOWEVER, IN 'THE INSTANT CASE, THE ASSESSEE HAS DEMONSTRATED THAT THE CUP METHOD ADOPTED BY THE LEARNED TPO IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND TNMM IS A MORE APPROPRIATE METHOD AS DISCUSSED ABOVE, THE SAME SHOULD BE APPLIED. 4.6 IN THE CASE OF ATUL LTD. V. ACIT [ITA NO. 3118/AHD/2010], WHEREIN BOTH THE ASSESSEE AND THE TPO HAD ADOPTED CUP METHOD AS THE MOST APPROPRIATE METHOD. THE BENCH HELD THAT IN THE CUP METHOD, A TRANSACTION IS HELD TO BE COMPARABLE ONLY IF BOTH, THE PRODUCT SOLD AND THE CIRCUMSTANCES SURROUNDING THE CONTROLLED TRANSACTION, ARE SUBSTANTIALLY THE SAME AS THOSE OF THE UNCONTROLLED TRANSACTION. THUS, THE COMPARABILITY DEPENDS UPON THE QUALITY OF PRODUCT, VOLUME OF SALE, MARKET LEVEL, GEOGRAPHICAL CONDITIONS, DATE AND OTHER REALISTIC FACTORS GOVERNING THE SALE PRICE. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE HAS DEMONSTRATED THAT THE TRANSACTIONS WITH RELATED PARTIES AND UNRELATED PARTIES ARE NOT COMPARABLE ON ACCOUNT OF VARIOUS DIFFERENCES AS DISCUSSED ABOVE. THEREFORE, THE RATIO IN ATUL LTD. (SUPRA) IS NOT AGAINST THE ASSESSEE. THIS LEGAL PROPOSITION WILL BE APPLICABLE ONLY TO THE ADJUSTMENT TOWARDS IMPORT AND COMMISSION. APPLICABLE ONLY TO THE ADJUSTMENT TOWARDS IMPORT AND COMMISSION. 14. THE CONCLUSION OF THE TRIBUNAL VIDE PARA 5 IS AS UNDER: - 5. IN VIEW OF THE ABOVE, WE HOLD THAT THE TPO HAS WRONGLY APPLIED THE CUP METHOD FOR DETERMINING THE ALP IN RESPECT OF SOME MENTIONED TRANSACTION S PERTAINING TO EXPORT OF FINISHED GOODS. MORE SO, WHEN THE TPO ACCEPTS THAT MORE THAN 90% OF THE EXPORTS TO THE AES ARE AT ALP, THERE IS NO REASON TO APPLY CUP METHOD FOR PART OF THE EXPORTS. ACCORDINGLY, THE ADDITIONS MADE ON THIS ACCOUNT ARE NOT JUSTIF IED AND THEY ARE DIRECTED TO BE DELETED. 15. THE TRIBUNAL ALSO DELIBERATED ON THE ADJUSTMENT MADE ON ACCOUNT OF IMPORT OF GOODS AND OBSERVED AS UNDER: - 6. REGARDING ADJUSTMENT TOWARDS IMPORTS, THE ASSESSEE HAS MADE TOTAL IMPORTS OF RAW MATERIAL AND FINISHED GOODS OF 14,59,18,186/ - FROM ITS AES AS REFERRED AT PAGE 2 OF TPO ORDER. OUT OF THESE IMPORTS, THE TPO HAS ACCEPTED TNMM METHOD FOR IMPORTS AMOUNTING TO 13,72,10,348/ - . HOWEVER, IN RESPECT OF IMPORTS AMOUNTING TO 87,07,838/ - , THE TPO HAS STATED THAT SIMILAR P RODUCTS HAVE ALSO BEEN PURCHASED BY THE ASSESSEE FROM THIRD PARTIES AND IN WHICH CASE, THE ASSESSEE HAS PAID HIGHER AMOUNT TO THE AES. ACCORDINGLY, THE TPO HAS HELD THAT IN RESPECT OF SUCH IMPORTS, CUP METHOD SHOULD BE APPLIED. THE TPO HAS COMPUTED AVERAGE PURCHASE PRICE OF THE PRODUCTS PURCHASED FROM AES AND AVERAGE PURCHASE PRICE OF SAME PRODUCTS PURCHASED FROM THIRD PARTIES AS REFERRED IN PAGES 199 - 217 OF PAPER BOOK. THUS, HE HAS HELD THAT IN CASE OF CERTAIN PRODUCTS, THE AVERAGE PURCHASE PRICE PAID BY THE ASSESSEE TO ITS AES WAS MORE THAN THE AVERAGE PURCHASE PRICE PAID TO THIRD PARTIES AND HENCE, HE HAS MADE AN ADJUSTMENT OF 2,55,003/ - IN RESPECT OF SUCH IMPORTS BY APPLYING CUP METHOD. ACCORDING TO THE TPO, IN RESPECT OF THE PRODUCTS WHICH ARE PURCH ASED BY THE ASSESSEE FROM ITS AES AS ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 16 WELL AS THIRD PARTIES, THE CUP METHOD IS THE MOST APPROPRIATE METHOD FOR DETERMINING ALP. THE TPO HAS HELD THAT THE CUP METHOD CAN BE APPLIED IN THIS SCENARIO. HE HAS FURTHER STATED THAT THE ASSESSEE DID NOT SUBMIT ANY DATA FOR THE ADJUSTMENTS TO BE MADE ON ACCOUNT OF THE DIFFERENCES IN RESPECT OF PURCHASES FROM AES AND THIRD PARTIES. ACCORDINGLY, HE HAS MADE THE ADDITION IN RESPECT OF THOSE PRODUCTS WHEREIN THE AVERAGE PURCHASE PRICE PAID BY THE ASSESSEE TO THE AES WAS MORE THAN THE AVERAGE PURCHASE PRICE PAID TO THIRD PARTIES. 6.1 IN THIS REGARD, THE STAND OF LEARNED AUTHORIZED REPRESENTATIVE HAS BEEN THAT OUT OF THE TOTAL IMPORTS FROM THE AES OF 14.59 CRS., THE TPO HAS ACCEPTED THAT IMPORTS OF 13.72 CRS. ARE A T ALP. ONLY IN RESPECT OF IMPORTS OF 0.87 CRS. WHICH ACCOUNT FOR 5.96 % OF TOTAL IMPORTS, THE TPO HAS APPLIED THE CUP METHOD. THE TPO HAS MADE THE ADDITION ONLY ON THE BASIS THAT THERE IS PRODUCT SIMILARITY. THE TPO HAS NOT APPRECIATED THAT THE CUP METHO D IS NOT THE MOST APPROPRIATE METHOD TO DETERMINE ALP IN THE CASE OF THE ASSESSEE. AS DISCUSSED BY US WITH REGARD TO EXTENT OF THE PRICING OF THE PRODUCT DEPENDS UPON VARIOUS FACTORS LIKE THE GEOGRAPHICAL LOCATION OF THE VENDOR, THE VOLUME OF THE ORDER, TI MING OF THE ORDER, URGENCY OF REQUIREMENT, COMPETITION IN THE MARKET, ETC. IN THIS REGARD, RELIANCE WAS PLACED ON THE DETAILED ARGUMENTS AS TAKEN WITH REGARD TO ADJUSTMENT FOR EXPORT AS DISCUSSED ABOVE IN PARAS 3 & 4 OF THIS ORDER. ACCORDING TO HIM, THE P RICING DEPENDS UPON SO MANY FACTORS AND SUITABLE ADJUSTMENTS CANNOT BE MADE TO ACCOUNT FOR SUCH DIFFERENCES. AS DISCUSSED ABOVE IN RESPECT OF THE SAME PARTY AND THE SAME PRODUCT, THE ASSESSEE HAS PAID DIFFERENT PRICES WHICH ITSELF INDICATES THAT THE PRICI NG IS DEPENDENT UPON VARIOUS FACTORS FOR WHICH SUITABLE ADJUSTMENTS COULD NOT BE MADE. IN THIS CONTEXT, REFER PAGE 199 OF THE PAPER BOOK WHEREIN IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS PAID DIFFERENT PRICES TO AMPHENOL AEROSPACE OPERATIONS, USA FOR THE SAME PRODUCT. ACCORDINGLY, IN VIEW OF THE VARIOUS DIFFERENCES ENUMERATED ABOVE. THE CUP METHOD IS NOT THE MOST APPROPRIATE METHOD IN THE CASE OF THE ASSESSEE SINCE THE MOST APPROPRIATE METHOD IN THE CASE OF THE ASSESSEE SINCE SUITABLE ADJUSTMENTS ARE NOT POSSIBLE TO BE MADE IN RESPECT OF THE ABOVE DIFFERENCES. SO, THE ADDITION ON THIS ACCOUNT IS NOT JUSTIFIED. 6.2 IT WAS ALSO POINTED OUT ON BEHALF OF ASSESSEE THAT IN RESPECT OF MOST OF THE PRODUCTS, THE ASSESSEE HAS PAID LOWER PRICE TO ITS AES AS COMPARED TO THE PRICES PAID TO THIRD PARTIES. THIS FACT HAS BEEN C LARIFIED BY THE ASSESSEE TO THE TPO AS DETAILED ON PAGE 161 OF THE PAPER BOOK FILED BY THE ASSESSEE. IN THIS BACKGROUND, IT WAS SUBMITTED THAT CONSIDERING THE FACT THAT IN RESPECT OF MOST OF THE INSTANCES, THE ASSESSEE HAS PAID LOWER PRICES TO THE AES AS COMPARED TO THIRD PARTIES, WHICH INDICATES THAT THE PRICING OF THE PRODUCTS IS INFLUENCED BY ECONOMIC CIRCUMSTANCES AND UNDERLYING TRANSACTIONAL DIFFERENCES. IN SOME OF THE PRODUCTS WHERE THE PRICE PAID BY THE ASSESSEE TO ITS AES IS MORE THAN THE PRICE PA ID TO THIRD PARTIES, SUCH HIGHER PRICE PAID AMOUNTS TO 2,55,063/ - . HOWEVER, IN MOST CASES, WHERE THE PRICES PAID BY THE ASSESSEE TO ITS AES IS LOWER THAN THE PRICE PAID TO THIRD PARTIES, THE LOWER PRICE PAID IS TO THE TUNE OF 18,08,201/ - AS DETAILED O N PAGE 217 OF THE PAPER BOOK. THIS ASPECT HAS NOT BEEN APPRECIATED BY THE TPO. 7. IN VIEW OF ABOVE DISCUSSION, THE TPO WAS NOT JUSTIFIED IN ADOPTING CUP METHOD FOR DETERMINING ALP IN RESPECT OF SOME OF THE INTERNATIONAL TRANSACTIONS PERTAINING TO IMPORT OF GOODS. 14. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE ISSUE ARISING IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN EARLIER YEARS AND FOLLOWING THE SAME REASONING, WE FIND NO MERIT IN THE ITA NO. 449 /PN/20 1 4 AMPHENOL INTERCONNECT INDIA PVT. LTD. 17 ORDERS OF AUT HORITIES BELOW IN DETERMINING THE ARM'S LENGTH PRICE IN RESPECT OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAID ADJUSTMENT MADE IN THE HANDS OF ASSESSEE ON ACCOU NT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. ACCORDINGLY, WE ALLOW THE GROUND OF APPEAL NOS.4, 5, 6 AND 7 RAISED BY THE ASSESSEE. THE ALTERNATE PLEA RAISED VIDE GROUND OF APPEAL NOS.8 AND 9 ARE DISMISSED. IN VIEW OF NO ADDITION BEING MADE IN THE HANDS OF ASSESSEE, THERE IS NO MERIT IN THE GROUND OF APPEAL NO.10 RAISED BY THE ASSESSEE FOR GRANTING THE BENEFIT OF 5% AS PER PROVISO TO SECTION 92C(2) OF THE ACT. 15 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER P RONOUNCED ON THIS 6 TH DAY OF NOVEMBER , 201 5 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 6 TH NOVEMBER , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE DIT (INTL. TAXATION), PUNE ; 4. THE DRP , PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT , PUNE RUE COPY//