ACIT, New Delhi V. M/s Mosaic India Pvt. Ltd., New Delhi

ITA 4831/DEL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4764 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 01-10-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 03-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN C I T D R TP
• Assessee Lawyers: SOMYA SETH; H SRINIVASULU RETD IRS
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Wholly owned subsidiary
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SMT DIVA SINGH, JUDICIAL MEMBER I.T.A .NO.-4831/DEL/2010 & 62/DEL/2011 (ASSESSMENT YEAR-2005-06) ACIT, CIRCLE-5(1), R.NO.-409A, C.R. BUILDING, I.P.ESTATE, NEW DELHI. (APPELLANT) VS M/S MOSAIC INDIA PVT. LTD., 111, RECTANGLE ONE, PLOT NO.-D-4, SAKET DISTT. CENTRE, SAKET, DELHI. P AN-AACCC4033C (RESPONDENT) APPELLANT BY SH. PEEYUSH JAIN, CIT DR (TP) RESPONDENT BY SH. H.SRINIVASULU, RETD. IRS & SMT. SOMYA SETH, CA ORDER PER DIVA SINGH, JM BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST THE SEPARATE ORDERS DATED 31.08.2010 AND 29.10.2010 OF CIT(A)-XX , NEW DELHI PERTAINING TO 2005-06 ASSESSMENT YEARS WHEREIN IN THE FIRST APPEA L THE REVENUE IS AGGREIEVED BY THE ORDER OF THE CIT(A) WHICH HAS BEEN PASSED AGAIN ST THE TPOS ORDER DATED 17.10.2008 AGAINST WHICH THE ASSESSEE FILED A PETIT ION U/S 154. AS A RESULT OF THIS ORDER THE ADDITION MADE ON ACCOUNT OF ARMS LENGTH PRICE AMOUNTING TO RS.2,11,23,382/- WAS REDUCED TO RS.71,45,622/-. TH E SECOND APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) WHER EIN HE HAS DELETED THE ADDITION MADE BY THE TPO. AGGRIEVED BY BOTH THESE ACTIONS, THE REVENUE IS IN APPEAL THE EFFECTIVE GROUND IN ITA NO.-4831/DEL/2010 IS GROUND NO-2 AND 2.1 WHICH READS AS UNDER:- ITA NO. 4831/DEL/10& 62 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN RESTRICTING THE ADDITION U/S 92CA OF THE ACT TO RS.71,45,622/- AS AGAINST RS.2,11,23,382/- ON ACCOU NT OF TPO ADJUSTMENT. 2.1. THE LD. CIT(A) IGNORED THE FACT RECORDED BY THE TPO AND ALSO THE FACT THAT THE CALCULATION HAS BEEN CORRECTLY DONE BY THE TPO. 2. THE GROUNDS RAISED IN ITA NO-62/DEL/2011 ON THE OTHER HAND READS AS UNDER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE REMAINING AD DITION OF RS.71,45,622/- MADE BY THE AO U/S 92CA OF THE ACT ON ACCOUNT OF TPO ADJ USTMENT. 2.2. THE LD. CIT(A) IGNORED THE FACT RECORDED BY THE TPO AND ALSO THE FACT THAT THE CALCULATION HAS BEEN CORRECTLY DONE BY THE TPO. 2.1. THE RECORD SHOWS THAT THE ASSESSEE IS INCORPOR ATED AS AN INDIAN COMPANY W.E.F 01.06.2004. AS PER ITS BUSINESS PROFILE IT WA S ENGAGED IN THE BUSINESS OF DISTRIBUTION AND MARKETING OF FERTILIZERS IN INDIA. THE ASSESSEE OPERATES A 100% SUBSIDIARY OF GNS II CORP USA WHICH IN TURN IS OWNE D BY THE MOSAIC COMPANY, USA. IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS SPECIFICALLY DEALING IN THE DI-AMMONIUM PHOSPHATE (DAP) FERTILIZER. AS PER R ECORD THE APPELLANT IS ALSO ENGAGED IN PROVIDING CERTAIN SUPPORT SERVICES TO IT S ASSOCIATED ENTERPRISES. THE MAIN INTERNATIONAL TRANSACTION FOR THE ASSESSEE AS PER ITS CLAIM WAS PURCHASE OF FERTILIZERS FOR FURTHER RESALE, WITHOUT ANY VALUE A DDITION, IN THE INDIAN MARKET. 2.2 A PERUSAL OF THE TRANSFER PRICING OFFICERS TP OS ORDER HEREINAFTER REFERRED TO AS THE TPO SHOWS THAT THE ASSESSEE AS PER PARA 6 .2 CHOSE A COMPARABLE UNCONTROLLED PRICE (HEREINAFTER REFERRED AS CUP) OF DAP FERTILIZERS AS ON 12.10.2004 AND 25.10.2004 FROM PRICE LIST OF FERTEC ON PRICE SERVICE. THE RECORD SHOWS THAT AS PER ASSESSEES CLAIM THE FERTECON REP ORT IS A TRADE JOURNAL PUBLISHED WEEKLY BY FERTECON LIMITED AND IS WIDELY USED IN TH E FERTILIZERS INDUSTRY. THE SAID REPORT WAS ALSO RELIED UPON BY THE TPO. ITA NO. 4831/DEL/10& 62 3 2.3 THE TPO CONSIDERED THE METHODOLOGY APPLIED BY T HE ASSESSSEE IN ORDER TO CONSIDER THE ARMS LENGTH THE PRICE (HEREINAFTER RE FERRED TO AS THE ALP OF THE FOLLOWING TRANSACTIONS:- DATE COMMODITY QUANTITY RATE TERMS OF (USD/MT) SUPPLY 12.10.2004 DAP FERTILIZER 41,140.90 277.53 CFR 25.10.2004 DAP FERTILIZER 41,066.00 277.2 7 CFR 2.4. HE OBSERVED THAT THE METHODOLOGY BY THE ASSESS EE WAS IN THE FOLLOWING MANNER:- ADJUSTMENT TO FOB CUP OF DAP FERTILIZER THE ASSESSEE HAD TAKEN DAP RATE OF US GULF FOB BULK @ US$ 235/MT AS ON 14.10.2004 AND 21.10.2004 AS THE CUP(F OB). IT ADDED FREIGHT FOR US-GULF-INDIA AT US$ 45-50 (CA RGO SIZE MORE THAN 35,000 TONS) TO CUP FOB OF US$ 235/MT IT MADE ADJUSTMENT FOR CREDIT PURCHASE BY PLI OF US $ 1.17 AND US$ 0.81 ON 12.10.2004 AND 25.10.2004 RESPECTIVELY. AFTER MAKING ABOVE ADJUSTMENT VALUE OF COMPARABLE C UP WAS COMPUTED AS UNDER :- CUP FOR CONSIGNMENT NO.1 FOR 41,140.90 MT FOR INVOI CE DATED 13.10.2004 ON CONTRACT DATED 12.10.2004 FOB VALUE OF CUP = US$ 235/MT ADD FREIGHT = US$ 47.50/MT ADD CREDIT COST = 1.17/MT VALUE OF CUP US$ 283.67 (WRONGLY MENTIONED AS US$ 285.81 IN ANNEXURE 2A) CUP FOR CONSIGNMENT NO.2 FOR 41,066 MT FOB VALUE AS ON 14.10.2004 = US$ 235.0/MT ADD: FREIGHT = US$ 47.50/MT ADD: CREDIT COST = US 0.81/MT VALUE OF CUP = US$ 283.31 (WRONGLY MENTIONED IN US$ 284.78 IN ANN EXURE 2A) 2.5. THE SAID METHOLOGY WAS NOT ACCEPTED BY THE TPO AS A RESULT OF WHICH HE REJECTED THE FOB CUP SELECTED BY THE ASSESSEE AND S ELECTED CFR CUP ON THE BASIS OF THE FERTECON PRICE SERVICE WHILE DOING SO HE TOO K INTO CONSIDERTION THE FACT THAT THE EFFECTIVE CREDIT PERIOD OF FIRST SHIPMENT WAS 9 0 DAYS CONSEQUENTLY EFFECTIVE ITA NO. 4831/DEL/10& 62 4 CREDIT PLP WAS TAKEN AS US$ 1.17 AND FOR THE SECOND SHIPMENT THE CREDIT PERIOD BEING 60 DAYS THE CREDIT COST WAS TAKEN WAS US$ 0.8 1. THE REASONS PREVAILING WITH THE TPO FOR REJECTING THE ASSESSEES METHODOLOGY AR E SET OUT IN PARA 6.3 OF THE TPOS ORDER WHICH IS EXTRACTED HEREUNDER :- 6.3 COMMENTS OF TPO: I HAVE CAREFULLY EXAMINED THE PURCHASE INVOICES, SA LE INVOICES AND FERTECON PRICE SERVICE QUOTED PRICE AND HAVE REACHED TO FOLLOWING IMPORTANT FACTS: (I) DAP FERTILIZER OF 41,140.90 MT WAS PURCHASED @ US $ 277.53 MT ON CFR BASIS UNDER CONTRACT DATED 12.10.2004 VIDE INVOICE DATED 13.10.2004 AND THE SAME CONSIGNMENT WAS SOLD UNDER HIGH SEA TO ANOTHER AE OF THE ASSESSEE IN HONGKONG ON 18.10.2004. IT IS FURTHER NOTED FROM SALE INVOICE THAT LOADING WAS UNDERTAKEN AT TAMPA, FLORIDA USA AND FINAL DEST INATION OF THE CONSIGNMENT WAS KARACHI PORT PAKISTAN. (II) SIMILARLY ANOTHER CONSIGNMENT OF DAP FERTILIZER OF 41,066 MT WAS PURCHASED @ US$ 2 77.27/MT ON CFR BASIS VIDE INVOICE DATED 13.10.2004 BUT SURPRISINGLY THEIR INVOICE DATED 1 3.10.2004 MAKE REFERENCE OF CONTRACT DATED 25.10.2004 WHICH IS NOT POSSIBLE. IN MY VIEW THIS INVOICE HAD QUOTED WRONG CONTRACT DATE. THE CONTRACT DATED 12.10.2004 WAS REVISED ON 25.10.2004; ACCORDINGLY THE CORRECT CONTRACT DATE IS 12.10.2004. THIS CONSIGNMENT WAS SOLD UNDER HIGH SEA TO THE AE IN HONGKONG VIDE INVOICE DATED 20.10.2004. IT IS NOTED FROM INVOICE THAT PORT OF LOADING OF THE FERTILIZER WAS TOWNSVILLI, AUSTRA LIA AND FINAL DESTINATION WAS KARACHI PORT, PAKISTAN. (III) IT IS EVIDENT FROM ABOVE FACT THAT BOTH THE P URCHASES WERE MADE VIDE INVOICE DATED 13.10.2004 ON CFR BASIS AS PER AGREEMENT DATED 12.10.2004. (IV) I HAVE CAREFULLY EXAMINED THE PRICE LIST OF FE RTICON PRICE SERVICE AND HAVE NOTED THAT CONTAIN CFR PRICES BULK PRICES OF DAP FERTILIZER AT INDIAN HIGH SEA WHICH WERE @ US$ 271-277/MT AS ON 7 TH OCTOBER AND 14 TH OCTOBER. SINCE INDIA BOUND CFR RATE OF DAP FERTILIZER WAS AVAILABLE, I COULD NOT FIND ANY LOGIC FOR THE ASSESSEE OF TAKING FOB VALUE RATE AND THEN MAKING S UBSEQUENT ADJUSTMENTS OF FREIGHT ETC. THE ONLY INCENTIVE IN M AKING SUCH ROUND OUT CALCULATION COULD BE SOME HOW TO SHOW CUP HAVING MORE VALUE AS COMPARED TO PURCHASE PRICE. SINCE DIR ECT CUP FOR INDIA BOUND SHIPMENT HAVING IDENTICAL CONTRACTUAL F ORM OF TRANSPORTATION (CFR.) WAS AVAILABLE, IT IS HELD THAT THIS DIRECT CUP HAVING IDENTICAL TERMS OF DELIVERY OF DAP FERTILIZER SHALL BE USED FOR MAKING COMPARABILITY ANALYSIS OF IMPORT PR ICE OF DAP FERTILIZER BY THE ASSESSEE INSTEAD OF CIJP WITH DIFFERENT TERMS O F DELIVERY AS WRONGLY CHOSEN BY THE ASSESSEE. ITA NO. 4831/DEL/10& 62 5 (V) IT IS EVIDENT FROM ABOVE FINDING THAT DIRECT CUP OF US $ 271- 277/MT AT CFR BASIS (WHICH INCLUDED FREIGHT AND COST) IS AVAILABLE FOR RELEVANT DATE 12.10.2004 THE SAME HAS BEEN TAKEN AND NO ADJUSTMENT ON ACCOUNT OF FREIGHT SHALL BE MO DE TO THE CFR CUP PRICE. (VI) I HAVE FURTHER NOTED THAT THE PRICE QUOTED ON FER TICON PRICE SERVICE ARE NET OF CREDIT ACCORDINGLY THE ABOVE REFERRED TO DIRECT CUP (CFR FORM) WOULD BE ADJUSTED BY EFFECTIVE CREDI T PLI FOR BOTH THE CONSIGNMENTS AS DISCLOSED BY THE ASSESSEE IN ANNEXURE 2A . ( VII) 1 HAVE ALREADY HELD IN ABOVE PARA (IV) THAT A DIRECT CUP WITH IDENTICAL CONTRACTUAL TERM OF TRANSPORTATION WAS AV AILABLE BUT THE ASSESSEE HAD WRONGLY SELECTED CUP HAVING DIFFER ENT CONTRACTUAL TERMS OF TRANSPORTATION. WITHOUT PREJUD ICE TO ABOVE CONCLUSION, I ALSO EXAMINED IF FREIGHT ADJUSTMENT O F EQUAL AMOUNT OF FOB QUOTED VALUE FOR BOTH SHIPMENTS WAS V ALID? IT IS PERTINENT TO MENTION THAT FIRST SHIPMENT OF FERTILI ZER WAS LOADED FROM USA WHEREAS SECOND SHIPMENT WAS LOADED FROM AU STRALIA AND DESTINATION BEING THE SAME I.E. INDIA HIGH SEA, ACCORDINGLY, EQUAL AMOUNT OF FREIGHT ADJUSTMENT OF US$ 47.50/MT TO FOB VALUE CUP BY THE ASSESSEE WAS INCORRECT AND THE SAM E IS NOT ACCEPTABLE FOR THE REASON THAT BOTH SHIPMENTS FROM TWO DIFFERENT DESTINATIONS WOULD HAVE TWO DIFFERENT FREIGHT RATES . THE FERTICON PRICE SERVICE, DOES NOT HAVE AUSTRALIAN FREIGHT ACC ORDINGLY, ADJUSTMENT IS NOT EVEN POSSIBLE TO THE FOB VALUE CU P FOR CONSIGNMENT NO.. 2. 2.6 ACCORDINGLY HE COMPUTED THE ADJUSTED CUPS FO R BOTH SHIPMENTS AS UNDER:- ( VIII) IN VIEW OF THE ABOVE IDSUCSSION I REJECT FOB CUP SELECTED BY THE ASSESSE AND HAVE SELECTED CFR CUP ON THE BASIS OF FERTICON PRICE SERVICE, A DOCUMENT RELIED UPN BY THE ASSESSSEE. SINCE BOTH THE PURCHA SES WERE ON CREDIT OF 90 AND 60 DAYS CFR CUP SHALL BE ADJUSTED FOR EFFECTIVE CREDIT PLL OF US$ 1.17 FOR FIRST SHIPMENT AND US$ 0.81 FOR SECOND SHIPMENT. CONSIGNMENT NO.1 FOR THE FIRST SHIPMENT INVOICE DATED 13/10/2004 (C ONTACT DATED 12/10/2004) FOR 41140.90 MT STEP 1. PURCHASE PRICE PAID TO AE = US$ 277.53/MT STEP 2 INDIAN CFR BULK DAP FERTILIZER = US$271-277 /MT RATE ON 7 TH OTOBER AND 14 TH OCTOBER 2004 AVERAGE OF HIGH/LOW RATE = US$274/MT STEP 3 ADJUSTMENT FOR CREDIT = US$1.17/MT PURCHASE (90 DAYS) ADD ITA NO. 4831/DEL/10& 62 6 EFFECTIVE PLR AS CLAIMED BY THE ASSSESSEE ADJUSTED CUP US$275.17/MT STEP 4 EXCESS PURCHASE PRICE PAID TO THE AE AS COMPARED TO CUP(US$277.53-US$275.17) TOTAL EXCESS PRICE PAID = US$97,092.52 (US$2.36X41140.90) STEP 5. CONVERSION IN INDIAN RUPEE =RS.44,52,178/- DAILY AVERAGE OF US$ AS ON 12/10/2005 @ RS.45.855 F OR 1 US$, (45.855X97092.52)(SOURCE-OANDA.COM) CONSIGNMENT2 FOR THE SECOND SHIPMENT INVOICE DATED 13/10/2004 (C ONTRACT DATED 12/10/2004 WHICH WAS AMENDED ON 25/10/2004) FOR 41066MT STEP1 . PURCHASE PRICE PAID TO AE =US$277.27/MT STEP.2 INDIAN CFR BULK DAP FERTILIZER RATE ON 7 TH OCTOBER 2004 AVERAGE OF HIGH/LOW RATE =US$274/MT STEP3. ADJUSTMENT FOR CREDIT PURCHASE =US$0.81/MT (FOR 62 DAYS) ADD EFFECTIVE PLR AS CLAIMED BY THE ASSESSEE ADJUSTED CUP US$274.81/MT STEP4. EXCESS PURCHASE PRICE PAID =US$ 2.46/MT TO THE AE AS COMPARED TO CUP (US$277.27-US$274.81) TOTAL EXCESS PRICE PAID =US$1,01,022.36 (US$2.46X41066)) STEP5. CONVERSION IN INDIAN RUPEE =RS.46,32,380.3 6/- DAILY AVERAGE OF US$ AS ON 12/10/2005 @ RS.45.855 FOR 1US$, (45.855X101022.36) (SOURCE-OANDA.COM) ITA NO. 4831/DEL/10& 62 7 2.7. THE TPO THEREAFTER ALSO CONSIDERED THE FACT TH AT THE ASSESSEE HAD MADE PURCHASES OF THE FOLLOWING TWO CONSIGNMENTS FROM IT S AE:- NO. OF DATE COMMODITY QUANTITY RA TE TERMS OF CONSIGNMENT (MT) (USD/MT) SUPPLY NO.3 20.08.2004 DAP FERTILIZER 46,768 266.50 CFR NO.4 20.08.2004 DAP FERTILIZER 12,700 272.14 CFR 2.8. REFERRING TO THE FACTS HE OBSERVED THAT THEREI N THE ASSESSSEE HAD CHOSEN CUP OF DAP FERTILIZER AS ON 19/8/2005 BEING THE NEAREST DATE FROM THE A DATE OF CONTRACT WHICH WAS DATED 20.08.2005 FROM THE PRICE LIST OF FERTECON PRICE SERVICE. HE DID NOT ARGUE WITH THE ARGUMENT OF THE ASSESSEE THAT THE TRANSACTION WAS AT ARMS LENGTH. THE REASON FOR NOT AGREEING ARE SET OUT IN PARA 6.6 OF HIS ORDER. IT TOOK NOTE OF THE FACT THAT AS PER THE INVOICE THE PORT OF LOADING THE FERTILIZERS WAS USA AND THE FINAL DESTINATION WAS JAMNAGAR, INDIA A ND BEING OF THE VIEW THAT SINCE PRICE OF FERTILIZERS ON CFR BASIS WERE AVAILABLE I N INDIA HE QUESTIONED THE LOGIC OF TAKING FOB VALUE RATE AND THEN MAKING SUBSEQUENT AD JUSTMENT OF FREIGHT ETC DESPITE THE FACT THAT DIRECT CUP FOR INDIA BOUND SH IPMENT HAVING IDENTICAL CONTRACTUAL FORM OF TRANSPORTATION (HEREINAFTER REF ERRED AS CFR) WAS AVAILABLE. HE WAS OF THE VIEW THAT CUP FOR INDIA SPECIFIC PRIC E SHOULD BE CONSIDERED FOR MAKING COMPARABILITY ANALYSIS OF IMPORT PRICE OF DA P FERTILIZERS FROM AE INSTEAD OF CUP WITH DIFFERENT TERMS OF DELIVERY WERE FOUND TO BE WRONGLY CHOSEN BY THE ASSESSEE. 2.9 THE REASONING IS EXTRACTED FROM HIS ORDER FOR R EADY REFERENCE:- 6.6 COMMENTS OF TPO: I HAVE CAREFULLY EXAMINED THE PURCHASE INVOICES, SA LE INVOICES AND FERTECON PRICE SERVICE QUOTED PRICE AND HAVE REACHE D TO FOLLOWING IMPORTANT FACTS. (I)CONSIGNMENT 3 OF DAP FERTILIZER OF 46,768 MT WAS PURCHASED FROM THE AE@ US$ 266.50/MT ON CFR BASIS VIDE AGREEMENT DATED 20/8/2004 ON CREDIT FOR 90 DAYS AND THE SAME CONSIGNMENT WAS SOL D IN INDIA. IT IS FURTHER NOTED FROM SALE INVOICE THAT LOADING WAS UN DERTAKEN AT USA AND FINAL DESTINATION OF THE CONSIGNMENT WAS JAMNAGAR, INDIA. ITA NO. 4831/DEL/10& 62 8 (II) SIMILARLY CONSIGNMENT 4 OF DAP FERTILIZER OF 1 2,7000 MT WAS PURCHASED @ US$ 272.14MT ON CFR BASIS VIDE AGREEMEN T DATED 20/8/2004 ON CREDIT OF 365 DAYS. THIS CONSIGNMENT WAS SOLD IN INDIA. IT IS NOTED FROM INVOCIE THAT PORT OF LOADING OF THE FERT ILIZER WAS USA AND FINAL DESTINATION WAS JAMNAGAR, INDIA. (III) IT IS EVIDENT FROM ABOVE FACTS THAT BOTH THE PURCHA SES WERE MADE ON CFR BASIS AS PER AGREEMENT DATED 20/8/2004. (IV) I HAVE CAREFULLY EXAMINED THE PRICE LIST OF FERTICO N PRICE SEREVICE AND HAVE NOTED THAT CONGAINS CFR PRICES BULK PRICES OF DAP FERTILIZER AT INDIA PORT WHICH WERE @ US$260-263/MT AS ON 19/8/2008, A DAY PRIOR TO CONTRACT DATE (ASSESSEE H AD TAKEN FOB CUP OF THE SAME DATE I.E, 19/8/2008). SINCE DAP FE RTILIZER ON CFR BASIS IN INDIA WAS AVAILABLE, I COULD NOT FIND ANY LOGIC FOR THE ASSESSEE OF TAKING FOB, VALUE RATE AND THEN MAKING SUBSEQUENT ADJUSTMENTS OF FREIGHT ETC. THE ONLY INCENTIVE IN MAKING SUCH ROUND OUT CALCULATION COULD BE SOME HOW TO SHOW A C UP HAVING MORE VALUE AS COMPARED TO PURCHASE PRICE. SINCE DI RECT CUP FOR INDIA BOUND SHIPMENT HAVING IDENTICAL CONTRACTUAL F ORM OF TRANSPORTATION (CFR) WAS AVAILABLE, IT IS HELD THAT THIS DIRECT CUP HAVING IDENTICAL TERMS OF DELIVERY OF DAP FERTILIZE R SHALL BE USED FOR MAKING COMPARABILITY ANALYSIS OF IMPORT PRICE O F DAP FERTILIZER BY THE ASSESSEE FROM THE AE INSTEAD OF CUP WITH DIF FERENT TERMS OF DELIVERY AS WRONGLY CHOSEN BY THE ASSESSEE. (V) IT IS EVIDENT FROM ABOVE FINDING THT DIRECT CUP OF US$ 260-263/MT AT CFR BASIS (WHICH INCLUDED FREIGHT AND COST) IS A VAILABLE FOR RELEVANT DATE D20/8/2004 AND THE SAME HAS BEEN TAKE N, ACCORDINGLY, NO ADJUSTMENT ON ACCOUNT OF FREIGHT SH ALL BE MADE TO THE CFR CUP PRICE. (VI) I HAVE FURTHER NOTED THAT THE PRICE QUOTED ON FERTI CON PRICE SERVICE ARE NET OF CREDIT ACCORDINGLY THE ABOVE REF ERRED TO DIRECT CUP (CFR FORM) WOULD BE ADJUSTED BY EFFECTIVE CREDI T PLI FOR THE CONSIGNMENTS 3 & 4 AS DISCLOSED BY THE ASSESSEE IN ANNEUXRE-1 (VII) I HAVE ALREADY HELD IN ABOVE PARA (IV) THAT A DIREC T CUP WITH IDENTICAL CONTRACTUAL TERM OF TRANSPORTATION WAS AV AILABLE BUT THE ASSESEE HAD WRONGLY SELECTED CUP HAVING DIFFERENT C ONTRACTUAL TERMS OF TRANSPORTATION. IT IS PERTINENT TO MENTIO N HERE THAT FOR CONSIGNMENT 4, THE ASSESSEE HAD COMPUTED CUP OF US$ 277.97 AS AGAINST PURCHASE PRICE OF US$ 272.14. HOWEVER, A C AREFUL SCRUTINY OF COMPUTATION OF CUP HAS REVELED THAT ACT UAL COST OF CUP AS PER ASSESSEES COMPUTATION IS AS US$ 270.50 WHICH WAS WRONGLY COMPUTED AT US$ 277.97 IN ANNEXURE 1. THES E FACTS HAVE PROVED THT EVEN AS COMPARED WITH CUP SELECTED BY TH E ASSESSEE FOR CONSIGNMENT 4 THE PURCHASE OF DAP @ US$ 272.14 WAS NOT AT ARMS LENGTH PRICE. (VIII) IN VIEW OF ABOVE DISCUSSION I REJECT FOB CUP SELECT ED BY THE ASSESSEE AND HAVE SELECTED CFR CUP ON THE BASIS OF FERTICON ITA NO. 4831/DEL/10& 62 9 PRICE SERVICE, A DOCUMENT RELIED UPON BY THE ASSESS EE. SINCE BOTH THE PURCHASES, CONSIGNMENT 3 & 4 WERE ON CREDIT OF 90 AND 365 DAYS RESPECTIVELY, CFR CUP SHALL BE ADJUSTED FOR EF FECTIVE CREDIT PLL OF US$ 1.11 FOR CONSIGNMENT 3 AND US$ 4.50 FOR 4 TH CONSIGNMENT. THE ADJUSTED CUPS FOR BOTH THE SHIPME NT ARE COMPUTED AS UNDER: CONSIGNMENT NO.3 CONTRACT DATED 20/8/2004 FOR 46,768MT OF DAP FERTIL IZER STEP1 PURCHASE PRICE PAID TO AE =US$266.50/MT STEP2. INDIAN CFR BULK DAP FERTILIZER =US$ 260-2 63/MT RATE ON 19/8/2004 AVERAGE OF HIGH/LOW RATE =US$261.4/MT STEP.3 ADJUSTMENT FOR CREDIT PURCHASE = US$1.11/M T (90 DAYS) ADD EFFECTIVE PLR ADJUSTED CUP =US$ 3.89/MT STEP4. EXCESS PURCHASE PRICE PAID TO = US$181927. 52 THE AE AS COMPARED TO CUP (US$3.89X46,768) CONSIGNEMTN 4 CONTRACT DATED 20/8/2004 FOR 12,700MT OF DAP FERTIL IZER STEP1 PURCHASE PRICE PAID TO AE =US$ 272.14/MT STEP 2. INDIA CFR BULK DAP FERTILIZER =US$260-26 3/MT RATE ON 19/8/2004 AVERAGE OF HIGH/LOW RATE =US$ 261.5/MT STEP3. ADJUSTMENT FOR CREDIT PURCHASE =US$4.50/M T (FOR 365 DAYS) ADD EFFECTIVE PLR AS CLAIMED BY THE ASSSESSEE ADJUSTED CUP =US$ 266/MT STEP4. EXCESS PURCHASE PRICE PAID TO THE =US$6.14 /MT AE AS COMPARED TO CUP (US$272.14-US$ 266) TOTAL EXCESS PRICE PAID =US$77,978 (IX) TOTAL EXCESS PAYMENT TO THEAE ON CONSIGNMENT 3&4 US$ (181,927.52+77,978) ITA NO. 4831/DEL/10& 62 10 EXCESS PAYMENT IN INDIAN RUPEE =RS.120,38,823.96 @ 46.32 RS. PER DOLLAR AS ON 20.08.2008; RATE TAKEN FROM OANDA.COM (RS.46.32X259,905.52) 7. IT IS EVIDENT FROM FINDINGS CONTEND IN PARA 6.3 AND 6.4 OF THIS ORDER THAT ASSESSEE HAS PAID EXCESS PURCHASE PRICE TO ITS AE AS PER FOLLOWI NG DETAILS: CONSIGNMENT EXCESS PAYMENT CONSIGNMETN1. 44,52,178 CONSIGNMENT2 46,32,380 CONSIGNMETN 3&4. 1,20,38,824 2,11,23,382 2.10. THE TPO SUMMARIZED HIS FINDINGS AS UNDER :- 8. THE MAIN FINDINGS AS RECORDED IN THIS ORDER MAY BE SUMMARIZED AS UNDER:- (I) I HAVE DETERMINED THE ARMS LENGTH PRICE OF INTERNA TIONAL TRANSACTIONS ON THE BASIS OF CUP METHOD WHICH WAS SELECTED AS MOST APPROPRIATE METHOD BY THE ASSESSEE. (II) THE ASSESSEE HAD SELECTED CUP OF PURCHASE PRICE OF DAP FERTILIZER ON THE BASIS OF FERTICON PRICE SERVICE RATE LIST. I HAVE ALSO SELECTED CUP FROM SAME PRICE LIST I.E, I HAVE SELECTED CUP FROM THE D OCUMENTS SUBMITTED BY THE ASSESSEE. (III) THE ASSESSEE HAD PURCHASE DAP FERTILIZER ON CFR TE RMS OF DELIVERY (I.E. COST+ FREIGHT) ON THE CREDIT VARYING FROM 62 DAYS T O 365 DAYS. THE RATE OF DAP FERTILIZER ON CFR TERMS FOR INDIA SHIPMENT WAS QUOTED IN THE RELIED UPON RATE LIST FOR RELEVANT DATE. HOWEVER, THE ASSE SSEE HAD SELECTED FOB PURCHASE RATE AND HAD MADE ADJUSTMENTS FOR FREIGHT AND CREDIT IN ORDER TO COMPUTE UNCONTROLLED COMPARABLE CUP ON CFR TERMS OF PAYMENT FOR REASONS BEST KNOWN TO IT. IT IS FURTHER NOTED THAT FOR SOME COUNTRY OF SHIPMENT THE FREIGHT CHARGES WERE NOT MENTIONED ON THE PRICE LIST AND THE ADJUSTMENT OF THE FREIGHT WAS MADE WITHOUT BASIS. I HAVE FURTHER NOTED VARIOUS CALCULATION MISTAKES IN DETERMINING ADJUSTE D CUP BY THE ASSESSEE AS NOTED IN PARA 6.2, 6.5 AND 6.6 (VII) OF THIS ORD ER. IN VIEW OF ABOVE FINDINGS, I HAVE REJECTED THE ADJUSTED CUP APPLIED BY THE ASSESSEE TO BENCHMARK INTERNATIONAL TRANSACTION. (IV) SINCE PURCHASE PRICE OF DAP FERTILIZER ON CFR TERMS OF DELIVERY WAS NOTED ON THE RELIED UPON DOCUMENT, I HAVE SELECTED PURCHA SE PRICE ON CFR TERMS (WHICH WAS IDENTICAL TO TERMS OF PURCHASE BY THE AS SESSEE) AS UNCONTROLLED COMPARABLE CUP AFTER MAKING ADJUSTMENT FOR CREDIT P URCHASES. (V) THE ASSESSEE WAS GIVEN NUMBER OF OPPORTUNITIES OF B EING HEARD VIDE ORDER SHEET ENTRY AND ISSUE OF NOTICES. (VI) THE TRANSFER PRICING STUDIES HAVE PROVED THAT PURCH ASE PRICES OF CONSIGNMENT 1 TO 4 WERE NOT AT ARMS LENGTH PRICE A ND THIS RESULTED IN ADJUSTMENT OF RS.2,11,23,382. 3. AGGRIEVED BY THIS, THE ASSESSEE FILED A PETITION U/S 154 BEFORE THE TPO ASSAILING THE BASIS OF THE CALCULATION OF CUP REGAR DING PURCHASE OF FERTILIZERS FROM ITA NO. 4831/DEL/10& 62 11 ITS AE STATING THAT AS PER ANNEXURE 1, ANNEXURE 2A AND ANNEXURE 2B, THE VALUE OF EFFECTIVE PLR HAD BEEN MENTIONED IN ABSOLUTE TER MS AND NOT IN PERCENTAGE TERMS WHICH WAS NOT ACCEPTED BY THE TPO AS A MISTAKE APPA RENT ON THE FACE OF THE RECORD. SIMILARLY THE REQUEST THAT THE + 5% ADJUSTMENT BENEFIT UNDER THE PROVISO TO SECTION 92C(2) BE MADE AVAILABLE TO THE ASSESSEE WA S ALSO NOT ACCEPTED BY THE TPO. 3.1 AGGRIEVED BY THIS THE ASSESSEE MOVED AN APPEAL BEFORE THE CIT(A) ASSAILING THE REJECTION OF THE 154 PETITION FILED BY THE ASSE SSEE AND ALSO ASSAILING THE ORIGINAL TPOS ORDER ALSO. 4. THE CIT(A) ACCEPTED THE ASSESSEES PETITION HOLD ING THAT THERE WERE MISTAKES APPARENT ON THE FACE OF THE RECORD WHICH W ERE RECTIFIABLE U/S 154. REFERRING TO THE PETITION WHICH IS EXTRACTED AT PAG E 12 OF THE ORDER DATED 31.08.2010 SHE ACCEPTED THE SUBMISSION OF THE ASSES SEE THAT FOLLOWING THE METHODOLOGY ADOPTED BY THE TPO, THE AMOUNT OF THE A DJUSTMENT SHOULD HAVE BEEN LIMITED TO RS.71,45,622/-. 4.1 THE SAME IS EXTRACTED HEREUNDER:- TABLE : COMPUTATION OF CORRECTED CREDIT PERIOD COST CONSIGNMENT NO. PLR (IN %) CREDIT PERIOD IN DAYS EFFECTIVE PLR (IN %) AVERAGE OF HIGH INDIA CFR PRICES CREDIT PERIOD COST (IN US$/MT) CREDIT PERIOD COST AS USED BY THE LD. TPO A B C=[(A)/365] X (B) D E=C*D 1. 4.75 90 1.17 274 3.21 1.17 2. 4.75 62 0.81 274 2.21 0.81 3. 4.5 90 1.11 261.50 2.90 1.11 4. 4.5 365 4.50 261.50 11.77 4.50 AS CAN BE SEEN FROM THE ABOVE TABLE, THE ADJUSTMENT FACTOR HAS CHANGED. WE NOW PROVIDE BELOW THE WORKING OF THE ADJUSTMENT AMOUNT FOLLOWING THE METHODOLOGY ADOPTED BY THE TPO AFTER INCORPORATING CORRECT AMOU NTS FOR CREDIT PERIOD ADJUSTMENT: ITA NO. 4831/DEL/10& 62 12 TABLE: COMPUTATION OF ADJUSTMENT AMOUNT AFTER INCORPORATIN G CORRECTED CREDIT PERIOD COST CONSI GNME NT NO. QUANT ITY (IN MT) PURCHASE PRICE PAID TO ASSOCIATE ENTERPRISE (US$/MT) INDIA CFR BULK DAP FERTILIZER RATE (US$/MT) AVER AGE OF HIGH LOW RATE ADJUSTMEN T FOR CREDIT PURCHASES ADJUSTE D CUP (US$/ MT) EXCESS PRICE PAID BY TO AE (US$/ MT) TOTAL EXCES S PRICE PAID (US$) TOTAL EXCESS PRICE PAID (INR) A B C D E F G=E+ F H=C-G I=G *B J=I*EXC HANGE RATE 1. 41,140 .90 277.53 271-277 274 3.21 277.21 0.32 1319 8.9 605.236 2. 41,066 277.27 271-277 274 2.21 276.21 1.059 4349 8.50 1,994,62 2 3. 46,768 266.50 260-263 261. 50 2.90 264.40 2.0984 9813 9.10 4,545,80 4 4. 12,700 272.14 260-263 261. 50 11.77 273.27 NONE NONE SINCE PURCHASE PRICE PAID IS LOWER THAN THE COMPARA BLE UNCONTROL LED PRICE HENCE, NO ADJUSTME NT IS REQUIRED TO BE MADE FOR THIS CONSIGNM ENT TOTAL 7,145,62 2 THUS, THE ABOVE TABLE CLEARLY DEPICTS THAT EVEN THE METHODOLOGY ADOPTED BY THE TPO THE AMOUNT OF ADJUSTMENT SHOULD HAVE BEE N RESTRICTED TO INR 7,145,622 INSTEAD OF INR 2,11,23,382. ACCORDINGLY, THE APPELLANT HUMBLY SUBMITS THAT THE ADDITION MADE BY THE TPO BE SUITAB LY RECTIFIED AND THE ORDER OF THE TPO, DENYING THE ABOVE RECTIFICATION, BE QUASHE D. ITA NO. 4831/DEL/10& 62 13 4.2. THE SAID ISSUE WAS DECIDED BY THE CIT(A) IN TH E FOLLOWING MANNER:- I HAVE CAREFULLY EXAMINED THIS ISSUE AND ALSO CONS IDERED THE SUBMISSIONS MADE BY THE APPELLANT AND ALL OTHER RELEVANT MATERI AL PLACED ON RECORD. IN THIS REGARD, I HAVE THE FOLLOWING COMMENTS: ON PERUSAL OF THE TRANSFER PRICING ORDER AND THE SU BMISSION MADE BY THE APPELLANT THERE IS NO DOUBT THAT THE TPO MADE AN AP PARENT ORDER WHILE CALCULATING THE AMOUNT OF TRANSFER PRICING ADDITION . THE TPO ERRONEOUSLY CONSIDERED THE PLR TO BE AN ABSOLUTE NUMBER INSTEAD OF PERCENTAGE. HEREIN, IT IS IMPORTANT TO NOTE THAT THE APPELLANT IN ITS SUBMISS ION DATED 14 TH JULY 2008 VERY CLEARLY MENTIONED THE TERMS SUCH AS PLR AND INTERES T RATES TO DENOTE THE RATES USED BY THE APPELLANT TO COMPUTE THE ADJUSTED CUP. THE TERMS USE BY THE APPELLANT ARE, IN COMMON PARLANCE, CONSIDERED TO BE IN PERCENTAGE RATHER THAN ABSOLUTE NUMBERS. FURTHER, A CAREFUL CONSIDERATION OF THE CALCULATIONS MADE BY THE APPELLANT IN THE SAID SUBMISSION WOULD ALSO HAV E REVEALED THE FACT THAT THOSE NUMBERS WERE MEANT TO BE IN PERCENTAGE. THUS, I AM OF THE VIEW THAT ON A CAREFUL CONSIDERAT ION OF THE SUBMISSION MADE BY THE APPELLANT, THE ERRORS MADE BY THE TPO C OULD HAVE BEEN AVOIDED ON A CAREFUL CONSIDERATION OF THE FACTS AVAILABLE WITH T HE TPO. FURTHER, I AM ALSO IN AGREEMENT WITH THE ABOVE CALCULATIONS MADE BY THE A PPELLANT. THUS, WITHOUT PREJUDICE TO ANYTHING CONTAINED LATER IN THIS ORDER , I LIMIT THE AMOUNT OF ADDITION MADE BY THE TPO TO INR 7,145,622. WITH REGARD TO THE OTHER GROUNDS RAISED BY THE APPE LLANT VIZ. APPLICATION OF +/-5% RANGE AND IMPORT OF ONE CONSIGNMENT ON FOB VS. CFR PRICE I AM OF THE OPINION THAT THESE WERE NOT APPARENT FROM RECORDS S UBMITTED BEFORE THE TPO AND HENCE ARE OUTSIDE THE SCOPE OF SECTION 154 OF THE I NCOME TAX ACT, 1961. THUS THE SAME HAVE NOT BEEN DEALT WITH IN THIS ORDER. 4.3. IN THE MAIN APPEAL THE CIT(A) TOOK NOTE OF THE SUBMISSIONS ON BEHALF OF THE ASSESSEE THAT THE SALE PRICE FOR FERTILIZERS ARE CO NTROLLED/REGULATED BY THE GOVERNMENT BY WAY OF REGULATORY RESTRICTIONS WHEREI N THE MAXIMUM RETAIL PRICE IS FILED, SUBSIDIES, DISTRIBUTION RESTRICTIONS ARE IMPOSED IMPORTS AND EVEN CHOICE OF TECHNOLOGY, FEEDSTOCK ETC FOR THE DAP FERTILIZERS A RE CONTROLLED AND MONITORED BY THE GOVERNMENT. THE RECORD SHOWS THAT IT WAS ARGUE D THAT IN THE CIRCUMSTANCES THE IMPORTER DOES NOT HAVE ANY CONTROL OVER THE SALE PR ICE. IT WAS SUBMITTED THAT SALE PRICE FIXED BY THE REGULATORS MAY BE LOWER THAN THE PURCHASE PRICE AND THE GOVERNMENT OF INDIA HAS A SYSTEM OF COMPENSATING TH E FERTILIZER COMPANY THROUGH A SUBSIDY MECHANISM. IT IS SEEN THAT IT WAS ALSO S UBMITTED THAT THE ASSESSEE ALSO ITA NO. 4831/DEL/10& 62 14 RESELLS THE DAP FERTILIZERS IN INDIA AT THE PRICE F IXED BY THE INDIAN GOVERNMENT AND IN THE YEAR UNDER CONSIDERATION HAD PURCHASED FROM A SINGLE ASSOCIATED ENTERPRISE. IT WAS FURTHER SUBMITTED THAT ALL THE PURCHASES ARE FROM THE US GULF REGION WHICH DENOTES AN AREA IN USA IN WEST OF FLORIDA IN US. I T WAS SUBMITTED THAT THE ASSESSEE HAS DEMONSTRATED THE ARMS LENGTH NATURE O F ITS PURCHASE OF DAP TRANSACTIONS BY APPLICATION OF COMPARABLE UNCONTROL LED PRICE METHOD AS THE MOST APPROPRIATE METHOD WHICH HAS BEEN ACCEPTED BY THE T PO ALSO. IT WAS SUBMITTED THAT THE ASSESSEE HAS RELIED ON THE PUBLICLY AVAILA BLE INFORMATION ON EXTERNAL CUP FROM A WEEKLY REPORT CALLED FERTECON PHOSPHATE REPO RT OF FERTECON REPORT WHICH HAS A TRADE JOURNAL PUBLISHED WEEKLY BY FERTECON LI MITED. IT WAS STATED THAT THE SAID REPORT PROVIDES PRICES AT WHICH THE DAP FERTIL IZERS ARE TRADED INTERNATIONALLY AND THE DATA PROVIDED IS WIDELY ACKNOWLEDGED WITHIN THE FERTILIZERS INDUSTRY TO BE THE MOST ACCURATE, COMPREHENSIVE, AND AUTHORITATIVE AND IT ALSO PROVIDES A TIMELY AND DETAILED FORESIGHT INTO THE DEVELOPMENT OF THE GLOBAL FERTILIZER INDUSTRY AND THE DATA PUBLISHED BY THE FERTECON REPORT IS USED BY AL L THE LEADING CORPORATIONS, TRADE BODIES AND GOVERNMENT AGENCIES BELONGING TO THE FER TILIZERS INDUSTRY THROUGHOUT THE WORLD. IT WAS FURTHER SUBMITTED THAT IT IS ALS O RELEVANT THAT THESE PRICES ARE ALSO ADOPTED BY THE GOVERNMENT OF INDIA WHILE DETERMININ G THE SUBSIDY. THE APPLICATION OF CFR PRICES WAS ASSAILED ON THE GROUN D THAT IT IS REPORTED FOR PORT OF DESTINATION WITHOUT DISCLOSING THE PORT OF ORIGIN O R PORT OF DISPATCH AND IN ORDER TO BENCHMARK ITS IMPORTS OF DAP, THE ASSESSEE IDENTIFI ED US GULF FOB PRICES PUBLISHED IN THEFERTECON REPORT AS THE APPROPRIATE DATA FOR APPLICATION OF CUP FOR THE FOLLOWING REASON NAMELY THAT THE ASSESSEE HAD P URCHASED DAP FROM US GULF REGION AND NOT FROM ANY OTHER REGION I.E MOROCCO, T UNISIA AND THE DATA RELATING TO PRICES OF IMPORTS IN INDIA ON CFR TERMS WAS NOT CON SIDERED ON ACCOUNT OF THE FOLLOWING TWO FACTORS NAMELY; THAT NEITHER THE PORT OF ORIGINAL; AND NOR THE PORT OF DISPATCH WERE SURE WHICH WAS NOT THE POSITION FOR T HE DATA PERTAINING TO CFR PRICE ITA NO. 4831/DEL/10& 62 15 WHERE THE PORT OF DISPATCH WAS FIXED. IT WAS ARGUE D THAT THE ASSESSEE HAS MADE APPROPRIATE ADJUSTMENTS TO THE COST FOR VARIATIONS FOR DIFFERENT CREDIT TERMS/PERIOD AND FREIGHT CHARGES. 4.4. ACCORDINGLY THE ASSESSEE AFTER MAKING ADJUSTME NTS FOR FREIGHT AND CREDIT TERMS JUSTIFIED ITS IMPORT TRANSACTION AT ARMS LEN GTH BY PROVIDING THE COMPARABLE ANALYSIS OF ASSESSEES PURCHASES WHICH WAS STATED T O BE LESS THE ADJUSTED CUP. THE FOLLOWING TABLE IN SUPPORT OF THE SUBMISSIONS ADVAN CED WAS RELIED UPON BEFORE THE CIT(A) THE SAME IS EXTRACTED FROM THE ORDER:- COMPARISON OF ADJUSTED CUP WITH THE APPELLANTS IM PORT PRICE DATE ADJUSTED CUP IN USD IMPORT PRICE PAID BY THE APPELLANT 20-AUG-04 268.95 266.50 20-AUG-04 277.97 272.14 7-SEP-04 277.97 272.43 18-OCT-04 287.3 268.50 25-JAN-05 293.15 272.50 12-OCT-04 285.81 277.53 25-OCT-04 236.39 227.27 4.5. IT IS SEEN THAT THE CIT(A) IN PARA 15 OF THE I MPUGNED ORDER REFERRING TO HER ORDER DATED 31.08.2010 OBSERVED THAT IN VIEW OF HER ORDER AGAINST THE RECTIFICATION MOVED BY THE ASSESSEE U/S 154 BEFORE THE TPO WHICH RESULTED IN REDUCING THE OVERALL AMOUNT OF ADJUSTMENT PROPOSED BY THE TPO FR OM RS.2,11,23,382/- TO RS.71,45,622/- AS SUCH SHE WAS OF THE VIEW THAT SHE WAS NOT REQUIRED TO FURTHER DECIDE WHETHER THE APPLICATION OF CUP BY THE ASSESS SEE WAS RELIABLE AND CORRECT OR NOT. THE RELEVANT CONCLUSION IS REPRODUCED FROM TH E SAID ORDER:- WITH RESPECT TO THE ABOVE GROUND NO. 4.2 HAS ALREAD Y BEEN ADJUDCIATED VIDE MY ORDER DATED 31 ST AUGUST 2010 WITH RESEPCT TO THE APPEAL AGAINST THE ORDER U/S 154 ISSUED BY THE TPO REDUCING THE OVERALL AMOU NT OF ADJUSTMENT TO RS. 71,45,622/- FROM RS.21,123,382. THUS THE SAME IS NOT PERUSED IN THIS ORDER. FROM THE REMAINING GROUNDS OF APPEAL FOLLOW ING ISSUES ARISE WHICH REQUIRE ADJUDICATION. I) WHETHER THE APPLICATION OF CUP BY THE APPELLANT WAS IN A RELIABLE AND CORRECT MANNER; ITA NO. 4831/DEL/10& 62 16 (II) WHETHER THE TPO ERRED IN DETERMINING THE CUP FOR CO NSIGNMENT DATED OCTOBER 25, 2004. (III) WHETHER THE TPO ERRED IN ALLOWING THE BENEFIT OF +\ 5% RANGE. 4.6. IN THE CIRCUMSTANCES THE CIT(A) CAME TO THE FO LLOWING CONCLUSION :- 24. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE B Y THE APPELLANT. IN THE CURRENT CASE THERE IS NO DISPUTE REGARDING SELE CTION OF MOST APPROPRIATE METHOD. INSTEAD THE MAJOR POINT OF DISP UTE IS WITH RESPECT TO APPLICATION OF US FOB GULF VIS-A-VIS INDIA CFR PRIC ES. 25. AFTER A CONSIDERATION OF THE SUBMISSION AND POWER P OINT PRESENTATION AND PERUSING THE TPO'S AO ORDER MADE B Y THE APPELLANT I AM OF THE VIEW THAT THE APPELLANT HAS U SED THE PRICES PUBLISHED IN THE FERTECON REPORT TO ESTABLISH THE C UP. FERTECON REPORT IS WIDELY KNOWN AMONGST INDUSTRY AND IS ALSO USED BY THE GOVERNMENT OF INDIA TO COMPUTE THE SUBSIDY OFFERED TO THE FERTILIZER COMPANIES. FURTHER, THERE IS NO DISPUTE ON THE USE OF FERTECON REPORT TO ESTABLISH THE CUP. FURTHER, IT W AS OBSERVED THAT THE FERTECON REPORT ALONGWITH US FOB GULF PRICES AL SO CONTAINS INDIA CFR PRICES. THE MAJOR DIFFERENCE BETWEEN THE TWO PRICES ARE WITH RESPECT TO GEOGRAPHICAL LOCATION OF THE TRANSA CTIONS. WHILE US FOB GULF PRICES DENOTES THE PRICES FOR FERTILIZERS IMPORTED FROM US GULF REGION TO INDIA, INDIA CFR PRICES DEPICTS PRIC ES FOR FERTILIZERS IMPORTED INTO INDIA FROM ANY OTHER GEOGRAPHICAL LOC ATIONS AND HENCE, THE PORT OF ORIGIN IN THIS CASE IS UNKNOWN. IN CASE OF THE APPELLANT, SINCE ALL THE IMPORTS MADE BY THE APPELL ANT WERE FROM US GULF REGION, US FOB GULF PRICES WERE USED BY THE AP PELLANT. FURTHER, SUITABLE ADJUSTMENTS WITH RESPECT TO DIFFERENCE IN FREIGHT AND CREDIT TERMS WERE MADE WITH RESPECT TO WHICH AGAIN, THERE IS NO DISPUTE BETWEEN THE TPO AND THE APPELLANT. 26. IN THIS REGARD RELIANCE IS PLACED ON THE RULING PRO VIDED BY HON'BLE TRIBUNAL IN CASE UCB INDIA PRIVATE LIMITED. IN THE SAID CASE THE HON'BLE IT AT HAS HELD AS FOLLOWS. QUOTE (EMPHASIS SUPPLIED) THE HON'BLE ITAT IN THE CASE OF UCB INDIA (P) LTD V S ACIT [2009} 30 SOT 95 (MUM) HAS SUMMARIZED FOLLOWING PRINCIPLES RELEVANY TO CUP METHOD AND HAS LAID DOWN REQUIREMENT FOR COMPARABILITY ANALYSI S UNDER CUP METHOD: EVEN A MINOR CHANGE IN THE PROPERTIES OF THE PRODUC TS CIRCUMSTANCES OF THE TRADE (BILLING PERIOD, AMOUNT OF CREDIT THER E IN ETC.) MAY HAVE SIGNIFICANT EFFECT ON THE PRICE AND WOULD GREATLY A FFECT COMPARABILITY UNDER CUP METHOD. THE CUP METHOD REQUIRE A HIGH DEGREE OF COMPARABILI TY ON QUANTITY OF PRODUCT OR SERVICES, CONTRACTUAL TERMS, (WARRANT IES, SALES OR PURCHASE VOLUMES, CREDIT TERMS AND TRANSPORTATION T ERMS ETC.) LEVEL OF MARKET (WHOLESALE OR RETAIL ETC), GEOGRAPHICAL M ARKET, DATE OF ITA NO. 4831/DEL/10& 62 17 TRANSACTIONS, INTANGIBLE PROPERTY ASSOCIATED WITH S ALE, FOREIGN CURRENCY RECEIPT AND ALTERNATIVES REALISTICALLY AVA ILABLE OPTION WITH BUYER OR SELLER. UNQUOTE: DATE ADJUSTED CUP IN USD (US FOB GULF PRICES) IMPORT PRICE PAID BY THE APPELLANT 20-AUG-04 268.95 266.50 20-AUG-04 277.97 272.14 12-OCT-04 285.81 277.53 25-OCT-04 236.39 227.27 *WORKING PROVIDED IN PARA 14 ABOVE. A. THE ABOVE TABLE MAKES IT VERY CLEAR THAT THAT IMPOR T PRICES PAID BY THE APPELLANT ARE LOWER THAN THE PRICES PAID FOR TH E SAME PRODUCT IN UNCONTROLLED TRANSACTIONS. BASED ON THE SAME I HOL D THE TRANSACTIONS UNDERTAKEN BY THE APPELLANT WITH RESPECT TO PURCHAS E OF DAP TO BE AT ARMS LENGTH AND ALLOW THE APPEAL OF THE APPELLANT. (II) WHETHER THE TPO ERRED IN ALLOWING THE BENEFIT OF +\5% RANGE. IN VIEW OF THE FINDING AS ABOVE, THIS GROUND DOES N OT NEED ANY ADJUDICATION. IN VIEW OF THE ABOVE THE APPEAL OF THE APPELLANT IS ALLOWED AND THE PROPOSED ADDITION BY THE TPO AMOUNTING TO RS.71,45, 622 (RS. 21,123,382) IS DELETED. 5. AGGRIEVED BY THESE FINDINGS BY WAY OF THESE THE TWO APPEALS THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE HEARING IN THE PRESENT APPEALS CONTINUED ON VARIOUS DATES WHEREIN THE LD. CIT DR HEAVILY RELYING UPON THE TPOS ORDER ASS AILED THE IMPUGNED ORDER ON THE GROUND THAT THE CIT(A) HAS ERRED IN DECIDING TH AT THE INTERNATIONAL TRANSACTION WITH RESPECT TO PURCHASE OF FERTILIZERS SHOULD BE B ENCH-MARKED BY THE USE OF US FOB GULF PRICES INSTEAD OF INDIA CFR PRICES. IT WA S HIS SUBMISSION THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE TRANSACTION W AS AT ARMS LENGTH AND THE ARGUMENTS THAT THE PRICES ARE FAVOURBALE WHEN COMPA RED TO THE ADJUSTED CUP BASED ON US FOB PRICES IS IRRELEVANT AS THE MARKET IS INDIA AND IT IS INDIA SPECIFIC PRICES WHICH SHOULD HAVE BEEN QUOTED. IT WAS HIS VE HEMENT STAND THAT ONLY TO OBLIGE ITS AE, THE ASSESSEE HAS NECESSARILY MADE P URCHASES FROM THE US AND WHEN THE PRODUCT IS AVAILABLE IN INDIA, AT A MUCH LESSER PRICE THE OCCASION TO REFER TO US ITA NO. 4831/DEL/10& 62 18 FOB GULF PRICE FOR BENCHMARKING THE TRANSACTION HAS NO LOGIC. IT WAS HIS SUBMISSION REFERRING TO THE VARIOUS CHARTS AVAILABL E ON RECORD THAT THE ISSUE IS VERY SIMPLE AND THE CORRECTNESS OF THE PRICES QUOTED IN THE FETECON REPORT IS NOT AN ISSUE. IT WAS ALSO CANDIDLY STATED THAT THE CALCULA TION MISTAKES CORRECTED IN THE IMPUGNED ORDER IS ALSO NOT THE GRIEVANCES OF THE RE VENUE. THE GRIEVANCE IS POSED ON THE LEGAL PRINCIPLES AS TO WHICH PRICE IS THE CO RRECT PRICE FOR BENCHMARKING THE TRANSACTION SO AS TO DECIDE WHETHER THE TRANSACTION WAS AT ARMS LENGTH OR NOT. THE ISSUE AT HAND AND THE GRIEVANCE OF THE REVENUE CALL ING FOR SETTING THE LEGAL POSITION IS THAT WHEN THE MARKET IN THE FACTS OF THE CASE IS INDIA THEN WHY JUSTIFICATION FOR THE TRANSACTION BEING AT ARMS LENGTH IS BEING LOOK ED AT FROM THE POINT OF PORT OF ORIGIN AS THE PORT OF ORIGIN IS IMMATERIAL AND WHAT IS MATERIAL FOR CONSIDERING THE ARMS LENGTH PRICE IS THE DESTINATION POINT WHICH I S INDIA. IN THIS BACKGROUND IT WAS SUBMITTED IT HAS TO BE CONSIDERED THAT HAS THE ASSE SSSEE SHOWN ITS TRANSACTION AT ARMS LENGTH PRICE. FOR DETERMINING THE SAME IT WAS SUBMITTED IT IS THE PRICE AT WHICH THE SPECIFIC PRODUCT IS AVAILABLE IN INDIA WH ICH IS THE RELEVANT PRICE AS THE MARKET IS INDIA AND EVEN IF ASSESSEES ARGUMENT IS CONSIDERED THAT IT IS NECESSARILY REQUIRED TO PURCHASE THE PRODUCT FROM ITS AE IT WAS HIS VEHEMENT STAND THAT THIS INTERNAL ARRANGEMENT OR NEED OF THE ASSESSEE CANNOT BE TAKEN INTO CONSIDERATION FOR THE ISSUE AT HAND THAT WAS THE TRANSACTION AT ARMS LENGTH PRICE OR NOT. IT WAS ARGUED THAT THE REVENUE HAS NO ROLE AND IS NOT CONCERNED W ITH THE INTERNAL ARRANGEMENTS. THE REVENUE IS ONLY CONCERNED THAT IS THE PRICE OF THE ASSESSEE FOR THE INTERNATIONAL TRANSACTION AT ARMS LENGTH OR NOT. KEEPING THE FA CT IN MIND THAT THE PORT OF DESTINATION BEING INDIA THEN FOR BENCHMARKING PURPO SES INDIA SPECIFIC PRICES BE CONSIDERED. THE INTERNAL AGREEMENTS, NEEDS OR CONST RAINTS OF THE ASSESSEE OR THE REGULATORY CONTROLS TO WHICH ITS AE IS SUBJECTED IT WAS ARGUED IS NOT RELEVANT TO DECIDE AS TO WHAT AN UNCONTROLLED CONCERN WOULD HAV E TRANSACTED FOR THE SAID PRODUCTS IN INDIA. RELIANCE WAS PLACED UPON THE OR DER OF THE CO-ORDINATE BENCH IN ITA NO. 4831/DEL/10& 62 19 THE CASE OF CLEAR PLUS INDIA PVT. LTD. VS DCIT, CIR CLE-3(1) IN ITA NO.- 3944/DEL/2010. 6.2. ON THE OTHER HAND LD. AR HAS ALL ALONG ARGUED THAT WHATEVER METHOD IS FOLLOWED NO ADJUSTMENTS WOULD BE WARRANTED. ADDRES SING THE FACTS ON RECORD IT WAS ARGUED THAT THE CIT(A) ON THE PECULIAR FACTS AN D CIRCUMSTANCES OF THE CASE HAS COME TO A CORRECT FINDING AS ADMITTEDLY THE ASSOCIA TED ENTERPRISE OF THE ASSESSEE IS LOCATED IN FLORIDA, USA. ACCORDINGLY THE US MEXICO AND GULF FOB PRICES CLOSE TO THE DATE OF TRANSACTION HAVE BEEN TAKEN. REFERRING TO THE ARGUMENTS BEFORE THE TPO AND THE CIT(A) AT LENGTH IT WAS ARGUED THAT IT HAD BEEN DEMONSTRATED THAT AFTER MAKING NECESSARY ADJUSTMENTS FOR FREIGHT RATE WHICH AGAIN IS QUOTED FROM THE FERTECON MANUAL AND THE CREDIT RATE THE ASSESSEE HA S MADE ADJUSTMENTS. IT WAS ALSO STATED THAT IT HAD BEEN ARGUED THAT FERTECON RATES FROM VARIOUS MARKETS IN THE WORLD ARE AVAILABLE AND NO DOUBT INDIA CFR RATES AR E ALSO AVAILABLE BUT WHEN IN THE FACTS OF THE PRESENT CASE THE GOODS ARE SOURCED FRO M FLORIDA, USA THAN THE MOST APPROPRIATE RATE WAS THE US GULF FOB RATE. IN SUPP ORT OF THE IMPUGNED ORDER IT WAS ARGUED THAT INDIA CFR RATES DID NOT ADDRESS THE PORT OF ORIGIN OF THE GOODS AND THE GOODS MAY HAVE BEEN SOURCED FROM CHINA OR VARIO US OTHER COUNTRIES WHICH MAY BE MORE ECONOMICAL FOR THE BUYER HOWEVER THE F ACTS REMAINS THAT THE QUALITY OF GOODS WHICH THE ASSESSEE WAS SUPPLYING MET WITH THE STRINGENT REGULATORY CONDITIONS PREVALENT IN THE US MARKET AND WHICH MAY OR MAY NOT BE PREVALENT IN THE OTHER SOURCE MARKET BUT WOULD CONTRIBUTE TO THE COST AS THE GOODS WERE OF A BETTER QUALITY. EVEN OTHERWISE WITHOUT PREJUDICE T O THE ABOVE IT WAS ARGUED THAT EVEN IF THE VERSION OF THE REVENUE IS ACCEPTED EVEN THEN NO ADJUSTMENT CAN BE MADE AS THE BENEFIT OF + 5 % AVAILABLE TO THE ASSESSEE UNDER THE STATUTE WO ULD DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE WARRANTI NG NO ADJUSTMENT. THE RELIANCE PLACED UPON THE ORDER OF THE CO-ORDINATE BENCH IN T HE CLEAR PLUS INDIA PVT. LTD. (CITED SUPRA) IT WAS SUBMITTED DOES NOT DETRACT FRO M THE MERITS OF THE CASE AND ITA NO. 4831/DEL/10& 62 20 ADDRESSING PAGE 10 OF THE IMPUGNED ORDER WHEREIN T HE ASSESSEE PROVIDED TABULAR PRESENTATION DEPICTING THE COMPARISON OF THE TRANSA CTION ON VARIOUS PARAMETERS IT WAS ARGUED THAT IT WOULD BE SEEN THAT THE ASSESSEE HAS MADE ACCURATE ADJUSTMENT AND THE TRANSFER PRICE METHODOLOGY ADOPTED BY THE A SSESSEE SHOULD BE ACCEPTED. 7. BOTH THE PARTIES WERE REQUIRED TO GIVE WRITTEN SUBMISSIONS ADDRESSING THE ARGUMENTS ADVANCED BY THEM. LD. CIT DR FILED HIS S UBMISSIONS DATED 01.10.2013 AND IT WAS STATED THAT COPY OF THE SAME HAD BEEN PR OVIDED TO THE LD. AR WELL IN ADVANCE WHO TOO HAS FILED WRITTEN SUBMISSIONS DATED NIL RECEIVED BY THE REGISTRY ON 20.09.2013. 8. IT MAY BE RELEVANT TO EXTRACT THE SPECIFIC ARGUM ENTS FROM THE SAID SUBMISSIONS. THE LD. CIT DR SUMMED UP THE ARGUMENT ON BEHALF OF THE REVENUE AS UNDER :- 2. THE PECULIAR FACT IN THIS CASE IS THAT THE ASSE SSEE PURCHASED FERTILIZER FROM ITS A.E. IN THE MARKET THE WORLD OVER, INDIA SPEC IFIC RATES FOR FERTILIZER ARE AVAILABLE. HOWEVER, TO ACCOMMODATE ITS AE, THE ASS ESSEE, PURCHASED GOODS FROM ITS AE, AT USA PRICE, EVEN WHEN INDIA SPECIFIC PRIC ES WERE AVAILABLE. ANY THIRD PARTY BUYING/PURCHASING GOODS IN INDIA WILL BUY GOO D AT INDIA PURCHASE PRICE. SINCE THE INDIAN ENTITY IS PURCHASING GOODS FOR USE IN INDIA, THE APPLICABLE PRICE SHOULD BE PRICES FOR PURCHASE OF FERTILIZER FOR USE IN INDIA. HOWEVER, TO ACCOMMODATE ITS AE, THE ASSESSEE HAS PURCHASED GOOD AT U.S.A PRICE. THE TESTED PARTY LOGICALLY IS/AND SHOULD BE THE INDIAN ENTITY. 3 THE ASSESSEE IS TAKING U.S.A PRICES AND THEN MAKING ADJUSTMENTS THEREON, TO SOMEHOW JUSTIFY THAT ITS PRICES ARE AT ARMS LENGTH. WHEREAS, THE PRICES TO BE TAKEN SHOULD BE INDIA PRICES AND ADJUSTMENT (IF ANY ) SHOULD BE MADE THEREUPON. 4 THE GEOGRAPHICAL MARKET IS INDIA SINCE THE TESTED P ARTY IS THE INDIAN ENTITY WHICH HAS PURCHASED/BOUGHT GOODS FOR CONSUMPTION IN INDIA . THE ASSESSEE IN ITS BID TO ACCOMMODATE ITS AE, HAS CHANGED THE MARKET TO USA. SINCE GOODS ARE PURCHASED FOR INDIA AND THERE ARE PRICES AVAILABLE FOR GOODS TO BE SOLD IN INDIA, THE MARKET IS INDIA AND THE PRICES ARE INDIA PRICES (THESE IND IA PRICES ARE AVAILABLE IN USA AND EVERYWHERE) MOREOVER, THE PORT OF ORIGIN IS NO T IMPORTANT, AS THE PRICES ARE AVERAGE PRICES, AND THE TPO HAS DULY CONSIDERED THE M. 5 THE ASSESSEE HAS NOT BEEN ABLE TO COUNTER THE CASE OF CLEAR PLUS INDIA (P.) LTD., ITA NO.3944/D/2010. IN THE CASE OF CLEAR PLU S INDIA (P) LTD.; THE MARKET WAS TAKEN TO BE THE PLACE, WHERE THE BUYER WAS SITU ATED, AND THE PRICES WERE TAKEN TO BE THE PRICES AVAILABLE TO THE BUYER (INCL UDING 3 RD PARTY BUYERS). SIMILAR FACTS ARE OBTAINING HERE ALSO. THE ASSESSEE, HERE, IS ACCOMMODATING, ITS AE ,AND THEREFORE GOING IN FOR SELLERS PRICE (AND THE SELL ER IS THE AMERICAN AE). ITA NO. 4831/DEL/10& 62 21 9. A PERUSAL OF THE WRITTEN SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE SHOWS THAT AT PAGES 1 TO 2 OF THE WRITTEN SUBMISSIO NS FILED, PARAS 1TO 6 ADDRESS THE DEPARTMENTAL STAND. THE FACTS ARE FOUND ADDRESSED IN PARA 7 TO 14.1 AT PAGES 3 TO 5 OF THE 20 PAGED WRITTEN SUBMISSIONS WHICH ARE MORE OR LESS REPETITION OF THE FACTS AVAILABLE ON RECORD WHICH HAVE ALREADY BEEN ALLUDED TO AT CONSIDERABLE LENGTH IN THE EARLIER PART OF THIS ORDER. PARA 15 TO 18.2 OF PAGES 5 TO 7 ADDRESS THE METHODOLOGY MANNER OF APPLICATION OF CUP BY THE ASS ESSEE AND PARAS 19 TO 23 AT PAGES 7 TO 8 ADDRESS THE METHODOLOGY ADOPTED BY THE TPO. THE PROCEEDINGS BEFORE THE CIT(A) ARE FOUND ADDRESSED AT PAGES 8 TO 10 VIDE PARAS 24 TO 28 WHEREIN THE RELIANCE IS PLACED ON THE ORDER OF THE CO-ORDIN ATE BENCH IN UCB INDIA PVT. LTD. VS ACIT (30 SOT 95 (DELHI. IN THIS BACKGROUND IN SUPPORT OF THE IMPUGNED ORDER, THE FOLLOWING ARGUMENTS WERE ADVANCED ON BEH ALF OF THE ASSESSEE :- ARGUMENTS OF THE RESPONDENT BEFORE THE HONBLE BENC H 29. THE LD. CIT(A)-XX, NEW DELHI HAS APPRECIATED TH E DIFFERENCE BETWEEN THE US GULF FOB PRICE AND THE INDIA CFR CASH PRICE AND ACCEPTED THE RESPONDENTS SUBMISSIONS. THE FOLLOWING ARE THE MAJOR DIFFERENC ES BETWEEN THE INDIA CFR CASH PRICE AND THE US GULF FOBPRICE: A. IN INDIA CFR CASH PRICE, THE PORT OF ORIGIN OF DAP IS NOT KNOWN. INDIA CFR CASH PRICE IS AN AVERAGE PRICE OF DAP PREVAILING I N ALL THE MARKETS, IN RESPECT OF WHICH THE FERTECON PUBLISHES THE PRICES. THE FERTECON RE PORT ITSELF REVEALS THE PRICES OF DAP ACROSS THESE MARKETS/COUNTRIES AND THE PRICE VARIES FROM MARKET TO MARKET. B. THE PORT OF ORIGIN IS AN IMPORTANT ASPECT AND IT REVEALS THE QUALITY OF PRODUCT, QUALITY OF RAW MATERIAL, TECHNOLOGY INVOLVED, COST OF LABOUR, COST OF PRODUCTION, GOVERNMENT REGULATIONS, ETC. THE DIFFERENT MARKETS HAVE DIFFERENT FOB PRICES AND THE PRICE OF DAP DEPENDS ON THE MARKET FROM WHERE THE D AP IS PURCHASED. THE TECHNOLOGY IN MANUFACTURE OF DAP PLAYS A VITAL ROLE AND SUCH T ECHNOLOGY VARIES FROM MARKET TO MARKET IN THE GLOBE. C. IN US GULF FOB, PRICE, THE PORT OR ORIGIN OF DA P IS KNOWN. THE RESPONDENTS, AE IS LOCATED IN USA AND THE GEOGRAPHICAL LOCATION OF THE INTERNATIONAL TRANSACTION GETS IDENTIFIED. THE IMPORT OF DAP WAS MADE FROM USA BY THE RESPONDENT AND THE PRICE PAID TO THE AE HAS BEEN COMPARED WITH THE PRICE PREVAILI NG IN THE SAME GEOGRAPHY, NAMELY, USA BY ADOPTING THE US GULF FOB PRICE. D. IN INDIA CFR CASH PRICE, THE DESTINATION IS IN DIA, BUT WHICH PART OF INDIA IS NOT KNOWN. THE DESTINATION COULD BE VISHAKPAPATNAM, ON THE EAST COAST AND MUNDRA ON THE WEST COAST OF INDIA. DURING THE PREVIOUS YEAR, THE RESPONDENT HAD OPERATED ON THE WEST COAST. ITA NO. 4831/DEL/10& 62 22 E. THE INDIA CFR CASH PRICE IS A SPOT PRICE AND T HE PAYMENT HAS TO BE MADE IMMEDIATELY. THE LD. TPO ADOPTED THE INDIA CFR CA SH P[RICE BUT FOR THE PURPOSE OF ADJUSTMENT IN RESPECT OF CREDIT PERIOD HAS ADOPTED THE US INTEREST RATES. IT IS HUMBLY SUBMITTED THAT THE APPROACH OF THE LD. TPO IS INCON SISTENT. IF INDIA CFR CASH PRICE IS TAKEN, THEN, THE ADJUSTMENT FOR CREDIT PERIOD SHOUL D BE THE INDIA INTEREST RATE PREVAILING AT THAT TIME AND NOT AT THE US INTEREST RATE. THIS ASPECT ALSO SUPPORTS THE DECISION OF THE LD. CIT(A) XX, NEW DELHI. 9.1 SINCE THE WRITTEN SUBMISSIONS WERE EXCHANGED B Y THE PARTIES BEFORE THE BENCH, IT IS SEEN THAT THE DEPARTMENT HAD COUNTERED THE ASSESSEES STAND, THESE ARGUMENTS WERE REBUTTED BY THE LD. AR IN THE FOLLOW ING MANNER:- 40. THE LD. CIT (DR) SUBMITTED THAT THE RESPONDENT ADOPTED THE US FOB PRICE TO ACCOMMODATE ITS AE DESPITE HAVING INDIA SPECIFIC RA TE IN THE FERTECON REPORT. THE RESPONDENT DENIES THT THE US FOB PRICE WAS ADOPTED FOR ACCOMMODATING THE AE. FOR THE PURPOSE OF GRANTING THE SUBSIDY, DEPARTMENT OF FERTILIZER, GOVERNMENT OF INDIA, HAS ADOPTED THE SAME METHOD OF CALCULATION OF PRICE WHI CH HAS BEEN ADOPTED BY THE RESPONDENT. IT IS ALSO HUMBLY SUBMITTED THAT THERE WAS NO NEED FOR THE RESPONDENT TO SHIFT THE PROFIT FROM INDIA TO USA AS THE RESPONDEN T PAID THE TAX UNDER THE MAT PROVISIONS OF THE ACT. AS SUBMITTED EARLIER, INDI A CFR CASH PRICE DOES NOT INDICATE THE PORT OF ORIGIN OF THE DAP, WHICH PLAYS A VITAL ROLE IN TAKING THE BUSINESS DECISIONS. IN SUBSEQUENT YEARS, THE REVENUE HAS ACCEPTED THE SAME METHOD OF COMPUTATION OF ALP UNDER THE CUP METHOD (AY 2007-08 TO AY 2009-10). 41. THE LD. CIT(DR) SUBMITTED THAT PORT OR ORIGIN I S NOT IMPORTANT AS THE GOODS WERE DELIVERED IN INDIA. IT IS HUMBLY SUBMITTED THAT TH E PORT OF ORIGIN IS IMPORTANT FOR TAKING VITAL BUSINESS DECISIONS AND THE DAP WAS IMPORTED F ROM USA IN PURSUANCE OF A CONTRACTUAL OBLIGATION WITH ITS AE AND THE PRICE PA ID WAS WITHIN +/-5%. 42. THE LD. CIT (DR) SUBMITTED THT INDIA SPECIFIC P RICE WAS AVAILABLE IN THE FERTECON REPORT AND RELIED ON THE RATIO LAID DOWN IN UCB IND IA PVT. LTD (PARA 79). IT IS HUMBLY SUBMITTED THAT BOTH THE LD. TPO AND THE RESPONDENT HAVE RELIED ON THE EXTERNAL CUP. THE RESPONDENT FULFILLS ALL THE CONSIDTIONS STIPULA TED BY THE HONBLE ITAT IN THE CASE OF UCB INDIA PVT. LTD (SUPRA). IN PARA 79(D0< THE PAR AMETERS LAID DOWN IN AN INDEPENDENT UNCONTROLLED TRANSACTIONS ARE: A. SIMILAR GOODS; B. SIMILAR QUANTITY; C. SIMILAR TERMS; & D. SIMILAR MARKET. OUT OF THE ABOVE CONDITIONS, THE RESPONDENT FULFILL S THE CONDITIONS AT A, B & D (REFER TO PARA 31.1). THE RESPONDENT PURCHASED THE GOODS ON CREDIT AND AN APPROPRIATE ADJUSTMENT WAS MADE FOR THE CREDIT PERIOD BY ADOPTI NG THE INTEREST RATE PREVAILING IN USA. THUS, THE RESPONDENTS, METHOD OF COMPUTING TH E ALP IN RESPECT OF PURCHASE OF DAP IS IN ACCORDANCE WITH THE RATIO LAID DOWN BY TH E HONBLE ITAT IN UCB INDIA PVT. LTD (SUPRA). ITA NO. 4831/DEL/10& 62 23 43. THE LD. CIT(DR) RELIED ON THE DECISION OF THE H ONBLE ITAT, DELHI BENCH B IN THE CASE OF CLEAR PLUS INDIA PVT. LTD, ITA NO. 3944 /DEL/2010. HE DREW THE ATTENTION OF THE HONBE BENCH TO PARA 7 OF THE ORDER AND SUBMITT ED THAT BUYER OF DAP IS INDIA AND THE MARKET IS IN INDIA, THEREFORE, INDIA CFR CASH PRICE, IS THE SPECIFIC PRICE WHICH SHOULD BE APPLIED AND NOT THE US GULF FOB PRICE. IT IS HUMBLY SUBMITTED THAT THE RATIO LAID DOWN IN CLEAR PLUS INDIA PVT. LTD (SUPRA) DOES NT SUPPORT THE CONTENTION OF THE LD. CIT(DR). 9.2 THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF CLEAR PLUS INDIA PVT. LTD. (CITED SUPRA) WHICH HAS FOLLOWED THE RATIO LAID DOW N IN SNF (AUSTRALIA PVT. LTD.) IT WAS ARGUED HAS BEEN WRONGLY APPLIED TO THE PRESENT CASE ON THE FOLLOWING GROUNDS:- BRIEF FACTS IN CLEAR PLUS INDIA PVT. LTD A. THE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF AL L SEASONS WIPERS AND SNOW WIPES, WHICH WERE SOLD TO ITS AE IN USA. THE AE AL SO PURCHASED THE SIMILAR GOODS FORM THE CHINESE MANUFACTURERS AND THE ASSESSEE MAINTAIN ED THE DETAILS OF INVOICES OF CHINESE GOODS PURCHASED BY ITS AE IN USA. THE ASSESSEE ADO PTED THE CUP METHOD AS THE MOST APPROPRIATE METHOD BY COMPARING ITS SELLING PRICE W ITH THE PURCHASE PRICE BY ITS AE FROM THE CHINESE MANUFACTURERS AS THE GOODS WERE SIMILAR AND THE PRICE PAID FOR THE INDIA PRODUCTS WAS MORE THAN THE PRICE PAID FOR THE CHINE SES PRODUCTS. B. ON THE BASIS OF THE ABOVE FACTS, THE HONBLE ITA T OBSERVED THAT GOODS WERE SOLD BY THE CHINESE MANUFACTURERS IN THE USA MARKET AND THE ASSESSEE ALSO SOLD THE GOODS IN THE USA MARKET. THEREFORE, THE MARKET CONDITIONS O F SALE ARE THE SAME. AT PARA 6.11 OF THE ORDER, THE HONBLE ITAT RELIED ON THE RATIO LAI D DOWN BY THE FEDERAL COURT OF AUSTRALIA IN THE CASE OF SNF (AUSTRALIA) PTY LTD VS . COMMISSIONER OF TAXATION, [2010] FCA 635 (25 JUNE 2010) . AT PARA 6.12, THE HONBLE ITAT OBSERVED THAT THE FOCUS IS ON THE MARKET ON WHICH THE PRODUCTS ARE ACQUIRED BY TH E ASSESSEE; AND ANY UNIQUE FEATURE OF THE MARKET IN WHICH THE SALE IS MADE IS OF NO IM PORTANCE IN RELATIVE TERMS; THE COMPARABLE TRANSACTIONS THAT OCCURRED IN AUSTRALIA WERE NOT GREAT. FURTHER, AT PARA 7.1 OF THE ORDER, THE HONBLE ITAT OBSERVED THAT IN THE CASE OF SNF (AUSTRALIA) PTY LTD (SUPRA), IT HAS BEEN HELD THAT THE FOCUS IS ON THE MARKET IN WHICH PRODUCTS ARE ACQUIRED. THE RATIO OF THIS CASE IS APPLICABLE MUTATIS-MUTAND IS TO THE FACTS OF THE CASE AS THE FOCUS IS ON THE MARKET IN WHICH PRODUCTS ARE SOLD. C. THE ABOVE RATIO LAID DOWN BY THE HONBLE ITAT IN THE CASE OF CLEAR PLUS INDIA PVT. LTD IS SQUARELY APPLICABLE TO THE FACTS OF THE RESPONDENT. THE RESPONDENT PURCHASED THE DAP FROM ITS AE IN USA AND COMPARED THE CONTROL LED TRANSACTIONS WITH THE PRICES OF DAP IN UNCONTROLLED TRANSACTIONS OF USA, WHICH WERE REPORTED BY THE FERTECON REPORT. THUS, THE PRICES OF DAP WHICH WERE COMPARED WERE FR OM THE SAME GEOGRAPHY OR MARKET. D. THE HONBLE ITAT IN CLEAR PLUS PVT LTD (SUPRA) H AS APPLIED THE RATION LAID DOWSN IN SNF (AUSTRALIA) PTY LTD (SUPRA). BRIEF FACTS IN SNF (AUSTRALIA)PTY LTD. IN THIS CASE, THE TAXPAYER CARRIED ON THE BUSINE SS OF MANUFACTURE OF CHEMICALS KNOWN AS FLOCCULANTS AND COAGULANTS IN AUSTRALIA AND FOR THE PURPOSE OF MANUFACTURE IT HAD IMPORTED PRODUCTS/RAW MATERIAL FROM ITS AES LOCATED IN FRANCE, USA AND CHINA. THE AE ITA NO. 4831/DEL/10& 62 24 IN FRANCE HAD ALSO SUPPLIED THE SAME PRODUCTS/ RAW MATERIAL TO INDEPENDENT DISTRIBUTORS IN OTHER COUNTRIES AND ALSO TO THE TAXPAYER IN AUST RALIA. THE PRICE PAID BY THE TAXPAYER IN AUSTRALIA WAS THE SAME PRICE WHICH WAS PAID BY T HE INDEPENDENT DISTRIBUTORS TO ITS AE IN FRANCE. ON THESE FACTS, THE AUSTRALIAN FEDERAL COURT AT PARA 146 OBSERVED THAT THIS EVIDENCE RELIED UPON THE TAXPAYER ESTABLISHES THE T RUE COMPARABLE NATURE OF THE TRANSACTIONS RELIED UPON. AS I HAVE ALREADY INDICA TED THE FOCUS IS ON THE MARKET IN WHICH THE PRODUCTS ARE ACQUIRED BY THE TAXPAYER AND UNIQU E FEATURES OF THE MARKET IN WHICH THE TAXPAYER SELLS IS OF NO IMPORTANCE. THUS, THE RAT IO LAID DOWN BY THE AUSTRALIAN FEDERAL COURT APPLIES TO THE FACTS OF THE RESPONDENT (THE K IND ATTENTION OF THE HONBLE BENCH IS DRAWN TO THE PARAS 3,4,68,74,75,78,82,140,144& 146 OF THE DECISION). THUS, THE RATIO LAID DOWN IN CLEAR PLUS INDIA PVT. LTD & SNF (AUSTR ALIA) PTLY LTD SUPPORT THE RESPONDENTS CASE. 44. THE LD. CIT(DR) HAS SUBMITTED THAT THE TESTED P ARTY IS THE RESPONDENT, THEREFORE, THE INDIA SPECIFIC PRICE SHOULD BE ADOPTED. HE FURTHER SUBMITTED THAT THE METHOD OF COMPUTATION OF ALP BY THE RESPONDENT IS AGAINST THE RATIO LAID DOWN IN CLEAR PLUS INDIA PVT. LTD. IT IS HUMBLY SUBMITTED THAT THERE ARE VA RIOUS DIFFERENCES BETWEEN THE INDIA CFR CASH PRICE AND THE US GULF FOB PRICE (AS SUB MITTED AT PARA 29). THE CONCEPT OF TESTED PARTY DOESNT COME IN THE WAY OF ADOPTION OF US GULF FOB PRICE AS THE IMPORTED DAP PRICE IS COMPARED WITH THE PREVAILING UNCONTROLLED PRICE IN USA (AS REPORTED IN THE FERTECON REPORT). 9.3 ADDRESSING THE INTEREST CHARGED BY THE ASSESSEE IN ORDER TO COMPUTE THE CORRECT ADJUSTMENT, THE ASSESSEES STAND WAS SUMMAR IZED AS UNDER :- 45. THE LD. CIT(DR) SUBMITTED THAT THERE IS A VARI ATION IN COMPUTATION OF INTEREST RATE AND DREW THE ATTENTION OF THE HONBLE BENCH TO PAGE 289 OF THE PAPER BOOK. IT IS HUMBLY SUBMITTED THAT LD. TPO HAS NOWHERE IN HIS ORDER DISPUTED THE SAID INTEREST RATE. THE RESPONDENT FOR THE PURPOSE OF A DJUSTMENT APPLIED THE US PRIME LENDING RATE WHICH WAS APPROXIMATELY US 4.5% DURING THE PREVIOUS YEAR AND THE LD. TPO ACCEPTED THE SAME INTEREST RATE WHILE COMPU TING THE AMOUNT OF TRANSFER PRICING ADJUSTMENT. THUS, THERE IS NO DISPUTE ON T HE INTEREST RATE WHICH SHOULD BE USED FOR THE PURPOSE OF COMPUTING THE ADJUSTMENT. 10. IT WOULD ALSO BE NECESSARY FOR THE SAKE OF COMP LETENESS TO BRING OUT THE DEPARTMENTS RESPONSE TO PARA 29, 30, 31, 32, 33, T O 38 AND 39 OF THE 20 PAGES SUBMISSIONS OF THE ASSESSEE. THE SAME IS EXTRACTED FROM THE WRITTEN DEPARTMENTAL SUBMISSIONS HEREUNDER:- COUNTER TO PARA 29 INDIA SPECIFIC PRICES ARE AVAILABLE. THE PORT OF ORIGIN OF DAP HAS BEEN DULY FACTORED IN INDIA CFR PRICES. THE TPO HAS MADE DUE ADJUSTMENT FOR FREIGHT AND FOR CREDIT TERMS. THE ASSESSEE HAS NOT BROUGHT IN ANYTHING TO PROVE T HAT THE QUALITY OF ITS AE IS SUPERIOR AND THT OF OTHER SELLERS WHO ARE SELLING AT INDIA S PECIFIC PRICES IS INFERIOR. ITA NO. 4831/DEL/10& 62 25 IN PARAGRAPH 29(B) THE ASSESSEE SPEAKS OF DIFFERENT QUALITY OF PRODUCT, OF RAW MATERIAL, TECHNOLOGY, COST OF LABOUR, COST OF PRODUCTION, GOV ERNMENT REGULATION ETC. IT IS POINTED OUT THAT ALL THESE DIFFERENCE HAVE BE EN INDICATED BY THE ASSESSEE (THOUGH NOT PROVED), MERELY TO ACCOMMODATE THE FOREIGN AE. THE QUALITY OF AE AND THE 3 RD PARTY HAS NOT BEEN DIFFERENTIATED AT ALL. A BUYER IS CONCERN ED WITH THE PRICES HE IS GETTING, AND NOT THE COST OF LABOUR, COST OF PRODUCTION, GOVERNMENT REGULATION OF A PARTICULAR SELLER. COUNTER TO PARA 30 THE LETTER OF GOVT. OF INDIA IS DATED JULY 20089, W HEREAS THE FINANCIAL YEAR INVOLVED IS FY 2004-05. THE ASSESSEE IS MERELY FABRICATING RETROS PECTIVELY IN THIS COMMUNICATION THAT THE LETER HAS FUTURE APPLICABLY IS CLEAR FROM THE W ORDING 5) MONTHLY CONCESSION FOR IMPORTED DAP WILL BE BASED ON.......... THE USE OF WORD WILL SHOWS THAT IT HAS FUTURE APP LICABILITY AND IS NOT RELEVANT. COUNTER TO PARAS 30 & 31 THE INDIA SPECIFIC PRICES ARE FOR SIMILAR GOODS, T HE MARKET IS INDIA, THE INDIAN GOVT. REGULATIONS HAVE BEEN DULY FACTORED IN, AND THE TPO HAS MADE THE DUE ADJUSTMENTS STARTING FROM INDIA SPECIFIC PRICES. EVEN THE ORDER IN THE CASE OF UCB, INDIA, AS REFERR ED TO BY THE ASSESSEE, IN PARA 31.1 OF ITS SUBMISSIONS SPEAKS OF (D) AN INDEPENDENT TERMS FROM OTHER INDEPENDENT ENTERPRISES IN A SIMILAR MARKET (AN EXTERNAL COMPARABLE) THE FACTS ARE SQUARELY APPLICABLE IN CASE OF THE AS SESSEE ALSO. SINCE THE INDIAN ASSESSEE IS BUYING/PURCHASING GOOD S, THE PRICES ARE THE ONES THAT ARE INDIA SPECIFIC. ANY THIRD PARTY BUYING GOODS IN IN DIA, WILL BUY AT THE BEST PRICES WHICH CLEARLY ARE INDIAN SPECIFIC PRIES. COUNTER TO PARA 32 THE ASSESSEE, CHOSE THE PRICES TO SUIT ITS FOREIGN AE. THE ASSESSEE DID NOT BUY AT THE BEST PRICE WHICH WAS THE INDIA SPECIFIC PRICE, WHIC H WAS LOWER THAN THE US PRICE. THIS HAS BEEN DETAILED BY THE TPO. COUNTER TO PARA 33 TO 38 THIS RELATES TO CLAIM OF SAFE HARBOUR BENEFIT, AND INVOLVES A SET OF CALCULATIONS, WHICH WAS NOT BEFORE THE TPO. COUNTER TO PARA 39 THE TPO, AS PER LAW, IS ALLOWED TO CHOOSE THE MOST APPROPRIATE METHOD. THE ASSESSEE MIGHT HAVE, IN THE SUBSEQUENT YEARS, IMPORTED/PURCH ASED GOODS AT ALP, AS PER THE TPO AND THE TPO WOULD HAVE THOUGHT IT PROPER NOT TO MAK E ANY ADJUSTMENTS ON THE BASIS OF ITA NO. 4831/DEL/10& 62 26 FACTS BEFORE HIM. THE TPO HAS BEEN VERY JUDICIOUS ON FACTS AS HE WOULD HAVE OBTAINED. THIS ARGUMENT THEREFORE IS NOT RELEVANT. 11. ON THE LAST DATE OF HEARING, BOTH THE PARTIES R EITERATED THEIR RESPECTIVE STANDS BASED ON THE WRITTEN SUBMISSIONS FILED. ADDRESSING THE ASSESSEES STAND, THE LD. CIT DR STATED THAT THE ARGUMENTS THAT THERE IS NO M OTIVE IN SHIFTING THE PROFIT FROM INDIA IS NOT A RELEVANT ARGUMENT. SIMILARLY THE AR GUMENTS ON BEHALF OF THE ASSESSEE THAT ULTIMATELY WHICHEVER METHOD IS FOLLOWED AND NO ADJUSTMENT WOULD BE CALLED FORTH IF THE BENEFIT OF + 5% AS MANDATED IN PROVISO TO SECTION 92C(2) IS GIV EN IT WAS HIS SUBMISSION IS ALSO NOT THE CRITERIA ON THE BASIS OF WHICH DECISION ON THE GRIEVANCE OF THE REVENUE IS NOT GIVEN AS WHETHER UL TIMATELY THERE IS AN ADJUSTMENT OR NOT WOULD BE A MATTER OF FACT AND WHATEVER RELIE F THE ASSESSEE IS ULTIMATELY ENTITLED TO BY THE STATUTE IS NOT AND CANNOT BE OPP OSED BY THE REVENUE, HOWEVER WHAT IS RELEVANT IS THAT IT WAS ARGUED, THE LEGAL P RINCIPLE BE DECIDED. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND CONSIDERED THE SUBMISSIONS ADVANCED ON B EHALF OF THE PARTIES BEFORE THE BENCH. ON A CAREFUL CONSIDERATION OF THE SAME, WE ARE OF THE VIEW THAT THE DEPARTMENTAL STAND TO THE EXTENT THAT THE BENCH-MAR KING SHOULD HAVE BEEN TAKING INTO CONSIDERATION BY CONSIDERING THE INDIA SPECIF IC PRICES DESERVES TO BE UPHELD. NO DOUBT THE ASSESSEE IN TERMS OF THE CONTRACT ENTE RED INTO WITH ITS AE BEING A 100% SUBSIDIARY OF GNS II CORP US MADE PURCHASES FR OM ITS AE, THE NEED AND NECESSITY OF ADHERING TO THE CONTRACTS AND ARGUMENT S WITH THE AE STANDS UNREBUTTED. HOWEVER WE HOLD ON A CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE DECISIVE CRITERIA SHOULD BE THE M ARKET IN WHICH THE GOODS ARE DESTINED. IN ORDER TO CONSIDER THE ARMS LENGTH PR ICE IT IS NECESSARY TO SEE AT WHAT PRICE THE PRODUCT WOULD BE PURCHASED IN INDIA BY AN UNCONTROLLED PARTY WHO IS TO PROCURE THE PRODUCT IN INDIA. IT IS THAT PRICE WHI CH SHOULD HAVE BEEN TAKEN BY THE ASSESSEE FOR BENCHMARKING. ITA NO. 4831/DEL/10& 62 27 12.1 WE MAY AT THIS POINT ALSO ADDRESS THE A RGUMENTS MADE IN PASSING ON BEHALF OF THE ASSESSEE ,WHICH ME MAY REFER, WERE MA DE DE HORS ANY EVIDENCE THAT THE ASSESSEES PRODUCT SOURCED IN USA NECESSARILY M AY HAVE BEEN OF A SUPERIOR QUALITY AS OPPOSED TO THE PRODUCT READILY AVAILABLE IN INDIA MAY BE FROM ASIAN COUNTRIES. IT IS A MATTER OF RECORD THAT THERE IS NO DISCUSSION IN ANY MATERIAL ON RECORD IN REGARD TO GRADING OR QUALITY OF THE PRODU CT. MOREOVER EVEN BEFORE US THERE IS NO PLEA TO CONSIDER FRESH EVIDENCE QUA THE DIFFERENCE EITHER IN GRADING OR QUALITY OF THE PRODUCT SOURCED FROM USA OR ASIA. T HUS IN THE ABSENCE OF ANY MATERIAL OR EVIDENCE IN REGARD TO THE SAME THE ARGU MENT FORWARDED FOR THE FIRST TIME NOW THAT TOO IN PASSING IN REGARD TO JUSTIFICA TION OF ARMS LENGTH PRICE ON THE REASONING OF POSSIBILITY OF SUPERIOR QUALITY OF GOO DS HAS NO MERIT OR RELEVANCE AND HAS TO BE DISMISSED AS BASED ON NO EVIDENCE. 12.2 SIMILARLY THE ARGUMENTS BASED ON UNIQUE MARKET CONDITIONS PREVALENT IN USA BY WAY OF STRINGENT REGULATORY CONDITION ADDING TO COSTS OF THE PRODUCT FOR THE ASSESSEE IS NOT RELEVANT AS THE TESTED PARTY SH OULD BE IN INDIA AND THE QUALITY OF PRODUCTS HAS NEVER BEEN ARGUED BEFORE ANY OF THE TW O FORUMS AND EVEN BEFORE US AS OBSERVED NO ATTEMPT TO PLEAD FOR PLACING SUCH EV IDENCE LET ALONE PLACING NECESSARY EVIDENCE ON RECORD HAS BEEN DONE. CONSID ERING THE LEGAL PRECEDENT AS LAID DOWN IN CLEAR PLUS WE HOLD THAT FOR THE PURPOS ES OF CONSIDERING THE ARMS LENGTH PRICE OF THE TRANSACTION IT IS NECESSARY TO BENCHMARK THE TRANSACTION WITH THE PRICE OF THE SAID COMMODITY WHICH ANY THIRD PARTY P URCHASING THE GOODS IN INDIA WOULD PAY IN INDIA. IT IS THIS PRICE WHICH SHOULD HAVE BEEN TAKEN AS A BENCH-MARK TO CONSIDER WHETHER THE PRICE PAID BY THE ASSESSEE TO ITS AE IS AT ARMS LENGTH OR NOT. ADMITTEDLY THIS WAS NOT THE APPROACH OF THE A SSESSEE AND ADMITTEDLY THIS ALSO WAS NOT THE APPROACH OF THE CIT(A). WE HAVE TAKEN INTO CONSIDERATION THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF UCB INDIA P VT. LTD. VS ACIT 317 ITR 292 (AT) WHICH IT IS SEEN HAS WRONGLY BEEN APPLIED BY T HE CIT(A) TO THE FACTS OF THE ITA NO. 4831/DEL/10& 62 28 PRESENT CASE. ON THE OTHER HAND THE VIEW TAKEN IS FOUND TO BE SUPPORTED BY THE DECISION OF THE CO-ORDINATE BENCH IN THE CASE OF CL EAR PLUS INDIA PVT. LTD. (CITED SUPRA). 12.3. WE ALSO DO NOT FIND ANY MERIT IN THE ARGUMEN TS ADVANCED ON BEHALF OF THE ASSESSEE CANVASSED FOR UPHOLDING THE IMPUGNED ORDER ON THE REASONING THAT THERE IS NO MOTIVE FOR THE ASSESSEE TO SHIFT THE PROFIT FROM INDIA AS LACK OF MOTIVE, ON THE PART OF THE ASSESSEE CANNOT BE A REASONING ON THE B ASIS OF WHICH THE DEPARTMENTAL APPEAL ON THE LEGAL ISSUE CAN BE DISMISSED UNLESS T HE ISSUE IS GIVEN UP BY THE DEPARTMENT WHICH ADMITTEDLY IS NOT A FACT IN THE PR ESENT PROCEEDINGS. 12.4 SIMILARLY THE ARGUMENT THAT NO ADJUSTMENT WOUL D BE WARRANTED WHATEVER METHOD IS FOLLOWED AS SUCH THE DEPARTMENTAL APPEAL BE DISMISSED IS ALSO NOT AN ARGUMENT WHICH CAN BE THE REASON FOR DISMISSING THE APPEAL. THE ISSUE UNDER CHALLENGE AS PER THE FOCUS OF THE ARGUMENTS ADVANCE D BY THE PARTIES IS WHETHER FOR BENCHMARKING PURPOSES THE PRODUCT PURCHASED BY THE ASSESSEE FROM ITS AE TO BE SOLD IN INDIA SHOULD BE BENCHMARKED BY TAKING INDI A SPECIFIC PRICES OR PRICES IN THE MARKET OF THE SOURCE COUNTRY. WE ARE OF THE VI EW AS OBSERVED THAT THE NEED AND COMPULSION OF THE ASSESSEE TO PURCHASE THE PRODUCT FROM ITS AE IN US AS PER THE TERMS OF AGREEMENT WITH THE AE CANNOT BE AN ARGUME NT TO TAKE THE PRICES WHICH ARE DICTATED BY UNIQUE MARKET CONDITIONS OF THE AE SINCE THE PRODUCT PURCHASED FROM THE AE HAS TO BE CONSIDERED FOR THE PURPOSES O F TRANSFER PRICING TO ADJUDICATE WHETHER THE TRANSACTION IS AT ARMS LENGTH FOR WHIC H TO OUR MINDS THE TESTED PARTY SHOULD BE IN INDIA AND THUS FOR BENCH MARKING PURPO SES THE INDIA SPECIFIC PRICES ARE TO BE CONSIDERED AND THIS DUTY AND RESPONSIBILI TY TO LAY DOWN THE PRINCIPLE CANNOT BE SHIED AWAY FROM OR ABDICATED ON THE ALTE R OF CONVENIENCE OR THERE BEING NO IMPACT ON THE ADJUSTMENT ULTIMATELY UNLESS THE AGGRIEVED PARTY PLEADS THAT ON ACCOUNT OF THIS REASONING THEY CHOOSE TO GIVE UP TH E ARGUMENT WHICH AS OBSERVED IS NOT A FACT IN THE PRESENT CASE AS THE REVENUE HAS I NSISTED UPON A FINDING. ITA NO. 4831/DEL/10& 62 29 12.5 WE MAY ALSO DEAL WITH THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE THAT IN SUBSEQUENT YEAR THE TPO HAS ACCEPTED THE ASSESSE ES STAND. CONSIDERING THE SAME WE HOLD THAT THIS ARGUMENT ALSO CANNOT FORM TH E BASIS OF A FINDING IN THE PRESENT CASE WARRANTING A DISMISSAL OF DEPARTMENTS APPEAL AS NOT ONLY IT IS A SETTLED LEGAL POSITION THAT RES-JUDICATA DOES NOT S TRICTLY APPLY TO INCOME TAX PROCEEDING AS EACH ASSESSMENT YEAR IS AN INDEPENDEN T YEAR. APART FROM THAT WE ARE OF THE CONSIDERED VIEW THATLACK OF ACTION ON THE PA RT OF THE AO IN A SUBSEQUENT YEAR ON FACTS WHICH DID NOT WARRANT INTERFERENCE OR WARRANTED INTERFERENCE DESPITE WHICH THE METHODOLOGY WAS ACCEPTED CANNOT BE THE ED IFICE ON WHICH IT CAN BE HELD THAT THE DEPARTMENTS APPEAL BE DISMISSED. ONCE AN ISSUE IS AGITATED BEFORE US FOR LAYING DOWN THE LEGAL POSITION AS TO WHETHER IN THE FACTS OF THE PRESENT CASE BENCH MARKING SHOULD HAVE BEEN DONE KEEPING INDIA SPECIFI C PRICES AS BENCHMARK OR AS PER THE UNIQUE MARKET CONDITIONS OF THE SOURCE COUN TRY THEN WE ARE BOUND TO ADDRESS THE CORRECT LEGAL PRINCIPLES WHICH WE HAVE DONE. THE DUTY PLACED UPON US TO ADDRESS THE GRIEVANCE HAS TO BE DISCHARGED UNLES S THE AGGRIEVED PARTY CHOOSE TO GIVE UP THE POINT. BY OUR DETAILED REASONING WE HA VE HELD THAT THE DEPARTMENTS STAND IS CORRECT AS UNIQUE GEOGRAPHICAL MARKET COND ITIONS OF THE SOURCE COUNTRY IN THE PRESENT FACTS OF THE CASE HAVE NO RELEVANCE FOR BENCH-MARKING PURPOSES. WE HAVE HELD THE FOCUS HAS TO BE ON INDIA PRICES AS TH E MARKET FOR THE PRODUCT OF THE ASSESSEE IS INDIA AND ANY THIRD UNCONTROLLED ENTITY FOR SELLING SIMILAR PRODUCT WOULD PAY THE PRICE FOR THE SAID PRODUCT GOING BY INDIA S PECIFIC PRICES AS SUCH THEY SHOULD FORM THE BASIS FOR BENCHMARKING. ACCORDINGLY WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE ISSUE BACK FACT TO THE TPO TO READJUDIC ATE THE ISSUE AFRESH BY WAY OF A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. THE TPO SHALL ALSO CON SIDER THE BENEFIT OF + 5%, IT AVAILABLE TO THE ASSESSEE ON FACTS OF THE CASE . T HE IMPUGNED ORDERS AS SUCH ARE SET ASIDE. ITA NO. 4831/DEL/10& 62 30 13. IN THE RESULT ITA 62/DEL/2011 AND 4831/DEL/201 0 OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 TH OF DECEMBER 2013. SD/- SD/- (S.V.MEHROTRA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICI AL MEMBER DATED: 18 /12/2013 *AMIT KUMAR/R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT, NEW DELHI