BOSKALIS INTERNATIONAL- DREDGING INTERNATIONAL CV, MUMBAI V. DDIT 3(2) IT,

ITA 4862/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79472 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 19-06-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 29-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DAYAL SRIVASTAVA
• Keywords: Transfer pricing; International transaction
• Section: 92C; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'K' BENCH, MUMBAI BEFORE SHRI R.C. SHARMA ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 4862/MUM/2008 (ASSESSMENT YEAR: 2002-03) BOSKALIS INTERNATIONAL - DREDGING INTERNATIONAL CV 702, 7 TH FLOOR TRADE CENTRE, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. VS. DY. DIRECTOR OF INCOME TAX - 3(2) INTERNATIONAL TAXATION MUMBAI. (APPELLANT) (RESPONDENT) P ERMANENT ACCOUNT N O. : AADFB 48 77 B ASSESSEE BY : SHRI M.P. LOHIA REVENUE BY : SHRI S. DAYAL SRIVASTAVA DATE OF HEARING : 19/06/2014 DATE OF PRONOUNCEMENT : 18/07/2014 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 12/06/2008 OF THE CIT(A) FOR THE ASSESSMENT YEAR 20 02-03. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL :- L(A) THE LEARNED CIT(A) HAS ERRED IN DISALLOWING R S 18,93,130 IE 10.61 PERCENT OF THE LEASE RENTALS PAID BY THE APPE LLANT FOR THE SMALL VESSELS GEORGE DENIN, D1 621, D1 613 AND D1 6 22 (HEREINAFTER REFERRED TO AS 'PONTOONS'), BY STATING THAT THE SAME IS IN EXCESS OF THE ARM'S LENGTH PRICE OF THE LEASE RE NTALS PAYABLE FOR SUCH PONTOONS. L(B) THE LEARNED CIT(A) HAS ERRED IN COMPARING THE LEASE RENTALS PAID IN EXCESS OF THE VG BOUW VALUATION RATE FOR OT HER VESSELS ITA NO.4862/M/08 AY:02-03 2 USED ON THE PROJECT (SUCH AS BKM 100, PARU, SASKIA AND HASSAN) WITH THE LEASE RENTALS PAID FOR PONTOONS, TO DETERM INE THE ARM'S LENGTH LEASE RENTAL FOR SUCH PONTOONS. 2. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING RS 9 0,71,754 BY UPHOLDING THE CONTENTION OF THE AO OF ADOPTING A VE SSEL BY VESSEL APPROACH FOR DETERMINING THE LEASE RENTALS IN RESPE CT OF THE VESSELS BKM 100, PARU, SASKIA AND HASSAN, WITHOUT APPRECIAT ING THE PROVISIONS OF SECTION 92C OF THE ACT, READ WITH RUL E L0A OF THE INCOME-TAX RULES, 1962, WHICH PROVIDE FOR ADOPTION OF A 'CLASS OF TRANSACTIONS' APPROACH FOR DETERMINING THE ARM'S LE NGTH PRICE IN RESPECT OF CLOSELY LINKED TRANSACTIONS. 3. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING RS 2 ,36,49,438 BY UPHOLDING THE CONTENTION OF THE AO BY NOT CONSIDERI NG THE TERMS AND CONDITIONS OF THE BAREBOAT CHARTER AGREEMENTS A ND THEREBY DISALLOWING LEASE RENTALS COMPUTED IN EXCESS OF 267 DAYS FOR THE VESSELS D1 509, D1 508, BKM 100, PARU, OOSTENDE XII AND SASKIA. THE APPELLANT SUBMITS THAT ALL THE ABOVE GROUNDS AR E INDEPENDENT OF AND WITHOUT PREJUDICE TO ONE ANOTHER. 2. AT THE TIME OF HEARING THE LD. AR OF THE ASSESSE E HAS STATED THAT THE ASSESSEE DOES NOT PRESS GROUND NO.1(A) AND 1(B) AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD. DR HAD NO OBJECTI ON IF GROUND NO.1(A) AND 1(B) ARE DISMISSED AS NOT PRESSED. ACCORDINGLY GROUND NO.1(A) AND 1(B) ARE DISMISSED BEING NOT PRESSED. 3. GROUND NO.2 IS REGARDING TP ADJUSTMENT OF LEASE RENTALS BY REJECTING THE CONTENTION OF THE ASSESSEE FOR CLUBBI NG OF THE TRANSACTIONS TO COMPARE WITH THE ARMS-LENGTH-PRICE (ALP). THE AS SESSEE IS A LIMITED PARTNERSHIP FIRM AND INCORPORATED IN NETHERLAND TO UNDERTAKE INTERNATIONAL DREDGING CONTRACT. THE ASSESSEE ENTER ED INTO A CONTRACT WITH INDIAN OIL CORPORATION (IOC) ON 12/10/2000 FOR UNDERTAKING DREDGING AND RECLAMATION WORK FOR IOC IN PARADEEP R EFINERY PROJECT IN ORISSA (INDIA). ASSESSEE (M/S. BOSKALIS INTERNATION AL-DREDGING INTERNATIONAL ) AND DREDGING INTERNATIONAL NV, BELG IUM, AS WELL AS M/S. BOSKALIS INTERNATIONAL BV, NETHERLAND FORMED A CONS ORTIUM FOR THE ITA NO.4862/M/08 AY:02-03 3 CONTRACT. DURING THE YEAR THE ASSESSEE HAS INTERNAT IONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES NAMELY:- I) WORLD DREDGING INTERNATIONAL BV (WDI), NETHERLA ND; (II) BOSKALIS DREDGING INDIA PVT. LTD. (BDIL), MUMB AI; AND (III)DREDGING INTERNATIONAL INDIA PVT. LTD. (DIPL), NEW DELHI THE INTERNATIONAL TRANSACTIONS ARE IN RESPECT OF HI RING THE DREDGER/VESSELS ON LEASE. THUS THE ASSESSEE PAID VE SSELS AND EQUIPMENT HIRING CHARGES OF RS.128,79,89,255/- DURING THE YEA R UNDER CONSIDERATION AND THE INTERNATIONAL TRANSACTIONS WI TH AES ARE SUMMARIZED BY TPO IN PARA-4 AS UNDER :- 1. WDI CUTTER SECTION DREDGER- AMAZON TAKEN ON LEASE CUTTER SECTION DREDGER- TAURUS TAKEN ON LEASE BOOSTER STATION - COSEL, TAKEN ON LEASE BOOSTER STATION - DI 508, TAKEN ON LEASE BOOSTER STATION - DI 509, TAKEN ON LEASE SPRAY PONTOON DI 613, TAKEN ON LEASE WINCH PONTOON - DI 621, TAKEN ON LEASE ANCHOR PONTOON -DI 622, TAKEN ON LEASE TUG BOAT - OOSTENDE XII, TAKEN ON LEASE SURVEY LAUNCH - SASKIA, TAKEN ON LEASE WOKBOAT - PARU, TAKEN ON LEASE MULTICAT - BKM 100, TAKEN ON LEASE PONTOON - GEORGE DENIN, TAKEN ON LEASE 284,882,415 496,478,667 93,606,837 58,631,113 89,922,602 5,594,488 2,801,344 2,801,344 6,163,614 8,804,360 25,563,088 53,650,809 6,645,715 2. BDIPL TUG BOAT - HASSAN, TAKEN ON LEASE LEASE OF SURVEY EQUIPMENT PURCHASE OF SURVEY EQUIPMENT PROVISION OF PERSONNEL SERVICES PROVISION OF PERSONNEL SERVICES 9,666,548 990,388 1,495,118 4,121,226 54,637 3. DIPL PROVISION OF PERSONNEL SERVICES PROVISION OF PERSONNEL SERVICES 3,446,968 4,350,690 4. TO BENCH MARK THE INTERNATIONAL TRANSACTION OF L EASING OF DREDGER AND OTHER EQUIPMENTS THE ASSESSEE USED COMPARABLE U NCONTROLLED PRICE (CUP) AS MOST APPROPRIATE METHOD WHEREAS FOR PERSON AL SERVICE AND SUPPORT SERVICES THE ASSESSEE USED TRANSACTION NET MARGIN METHOD (TNMM) AND FOR LEASE OF SURVEY EQUIPMENTS COST PLUS METHOD WAS USED AS MOST APPROPRIATE METHOD. THE ASSESSEE COMPUTED T HE ALP OF ITA NO.4862/M/08 AY:02-03 4 INTERNATIONAL TRANSACTION AS THE TRANSACTIONAL VAL UE RECORDED IN THE BOOKS OF ACCOUNT. 5. BEFORE THE TRANSFER PRICING OFFICER (TPO) THE AS SESSEE FILED A TP STUDY REPORT AND COMPUTED THE ALP STUDY OF DREDGERS AND EQUIPMENTS BY USING THE VG BOUW VALUATION CERTIFICATES AS THE SAM E ARE USED IN THE DREDGING INDUSTRY FOR SETTING/NEGOTIATING THE LEASE RENTALS. THE VG BOUW VALUATION WAS ACCEPTED BY THE TPO AS A SUITABLE BEN CH MARK FOR COMPUTING THE ALP. HOWEVER, THE TPO REJECTED THE CL AIM OF THE ASSESSEE THAT THE LEASE RENTAL HAVE TO BE AGGREGATED ON THE BASIS OF CLASS OF TRANSACTIONS RATHER THAN ANALYZING THE LEASE RENTAL S ON DREDGER BY DREDGER BASIS OR ON EQUIPMENT BY EQUIPMENT BASIS. S INCE SOME OF THE LEASE TRANSACTIONS ARE LESS THAN OR BELOW THE VALUA TION OF B.G. BOUW NORMS, THEREFORE, THE ASSESSEE CLUBBED/AGGREGATED T HE TRANSACTIONS OF LEASE OF DREDGERS AND EQUIPMENTS FOR COMPUTATION OF ALP. THE TPO RELIED UPON THE OECD GUIDELINES ON TRANSFER PRICING AND H ELD THAT LEASING OF ALL EQUIPMENTS ARE SEPARATELY DONE BY THE ASSESSEE AND ALL THE TRANSACTIONS ARE SEPARATE AND NEITHER THE SAME ARE CLOSELY LINKED NOR CONTINUOUS, THEREFORE, THE SAME REQUIRES TO BE EVAL UATED SEPARATELY. ACCORDINGLY THE TPO WORKED OUT AN ADJUSTMENT OF RS. 90,71,754/- IN RESPECT OF THE LEASE RENTALS PAID BY THE ASSESSEE. THE ASSESSEE CHALLENGED THE ACTION OF THE TPO /AO BEFORE THE CIT(A) BUT COU LD NOT SUCCEED AS CIT(A) HAS CONFIRMED THE ACTION OF THE TPO/AO IN CO NSIDERING EACH TRANSACTION AS A SEPARATE AND DISTINCT TRANSACTION WHICH CAN NOT BE CLUBBED TOGETHER. 6. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE LEASE TRANSACTIONS OF DREDGER AND OTHER EQUIPMENTS ARE SI MILAR AND FALL UNDER THE SAME CLASS OF TRANSACTIONS. HE HAS REFERRED TO SECTION 92(C) AS WELL AS RULE 10A(D) AND SUBMITTED THAT THE TRANSACTION MEAN S AND INCLUDES A NUMBER OF CLOSELY LINKED TRANSACTIONS. HE HAS FURTH ER CONTENTED THAT ITA NO.4862/M/08 AY:02-03 5 THERE IS ONE COMPOSITE AGREEMENT FOR LEASING 8 VESS ELS, HOWEVER, THE LEASE RENTALS ARE SEPARATELY PROVIDED IN THE AGREEM ENT. THE LD. AR HAS POINTED OUT THAT ALL THESE EQUIPMENTS AND DREDGER A RE USED FOR CARRYING OUT A SINGLE PROJECT AND CANNOT BE USED INDEPENDENT LY RATHER THE WORKING OF THESE EQUIPMENT IS DEPENDENT UPON EACH OTHER. TH EREFORE, THE HIRING OF THESE EQUIPMENTS ARE IN THE CATEGORY OF THE CLOS ELY LINKED CLASS OF TRANSACTIONS AND, THEREFORE, FOR THE PURPOSE OF COM PUTATION OF ALP THE PRICE PAID BY THE ASSESSEE FOR ALL THESE TRANSACTIO NS HAS TO BE CLUBBED TOGETHER AND THEN COMPARED WITH THE BENCH MARK PRIC E/ALP. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION O F THE PUNE BENCH OF THIS TRIBUNAL IN THE CASE OF DEMAG CRANES AND COMPONENTS (INDIA) PVT. LTD. VS. DCIT (56 SOT 187)(PUNE) AND SUBMITTED THAT IT HAS BEEN HELD THAT ON COMBINED READING OF RULE 10A(D) AND RULE 10B OF RULES A NUMBER OF TRANSACTIONS CAN BE AGGREGATED AND CONSTRUED AS SIN GLE TRANSACTION FOR THE PURPOSE OF DETERMINING THE ALP IF SUCH TRANSACT IONS ARE CLOSELY LINKED. THE LD. AR HAS ALSO RELIED UPON THE FOLLOWI NG DECISIONS :- 1. TOYOTA KIRLOSKAR MOTORS (P.) LTD. (2012) 28 TAXMAN. COM 293(BANG.) 2. TAJ SATS AIR CATERING LTD. VS. DCIT IN ITA NO.8500/ MUM/2010 DATED 20/01/2012 3. HENKEL ADHESIVES TECHNOLOGIES INDIA PRIVATE LIMITED VS. DCIT IN ITA NO.1647/PN/2011 DATED 18/3/2014. 4. M/S. INTIMATE FASHION (INDIA) PVT. LTD. VS. ACIT IN ITA NO. 2116/MDS/2010 AND 2108/MDS/2011 DATED 28/06/2012 5. M/S. MAINETTI INDIA PVT. LTD. VS. ACIT IN ITA NO.17 89/MDS/2011 DATED 16/3/2012 7. THUS THE LD. AR HAS SUBMITTED THAT IF THESE TRA NSACTIONS ARE AGGREGATED THEN THE AGGREGATED RENT PAID BY THE ASS ESSEE IS LESS THAN THE BENCH MARK ACCEPTED BY THE TPO AND NO ADJUSTMENT IS REQUIRED. THE LD. ITA NO.4862/M/08 AY:02-03 6 AR HAS ALSO REFERRED TO THE GUIDING NOTE OF INSTITU TE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) . 8. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE V.G. - BOW BENCHMARK IS A SCIENTIFIC BENCH MARK AND ASSESSEE C ANNOT BE PERMITTED TO FURTHER STATE THAT SINCE PAYMENTS HAVE BEEN MADE IN SOME CASES ABOVE THE V.G. BOW MARK AND IN SOME CASE LESS THAN V.G. BOW MARK - THEN BASED UPON THE PRINCIPLE OF AVERAGES THE TOTAL FIGURE SHOULD BE TAKEN UP FOR CONSIDERATION BY TPO (BUNCHING) WHEREA S REVENUE CONTENDS THAT ONCE A SCIENTIFIC METHOD IS TAKEN AS A BASIS - THE SAME IS ADEQUATE AND THERE IS NO SHORT COMING OR INADEQUACY IN THIS METHOD - AND SINCE THE ASSESSEE HAS ENTERED INTO A TRANSACTION WITH IT S 'AE' - IN SUCH CASES THE PAYMENT MADE OVER AND ABOVE THE V.G. BOW MARK H AS TO BE ADJUSTED FOR - AS DONE BY THE TPO. 9. HE HAS FURTHER SUBMITTED THAT THE V.G. BOW MARK IS IN ITSELF A METHOD FOR DETERMINING THE PAYMENT FOR THE SHIP/VES SEL AND IT TAKES INTO ACCOUNT THE PARTICULAR CLASS/PECULIAR CLASS TO WHIC H THE VESSEL BELONGS AND THUS EACH VESSEL IS A CLASS BY ITSELF - AND THU S THERE CAN BE NO BUNCHING OF THIS - IT HAS TO BE CONSIDERED ON A TRA NSACTION TO TRANSACTION BASIS WHICH TPO HAS DONE - AS EACH VESSEL CONSTITUT ES A CLASS BY ITSELF AND THERE CANNOT BE CLUBBING OF CLASSES - IT HAS T O BE ON A TRANSACTION TO TRANSACTION BASIS. 10. THE LD. DR HAS CONTENDED THAT ALL THE CASES REL IED UPON BY THE ASSESSEE ARE DISTINGUISHABLE BECAUSE OF THE ABSENCE OF V.G. BOW BENCH MARK WHICH IS A SCIENTIFIC BASIS AND ALL THESE CASE S ARE PURELY BASED ON COMMERCIAL CONSIDERATIONS - HERE ASSESSEE IS TRYING TO MIX COMMERCIAL CONSIDERATION WITH TECHNICAL AND SCIENTIFIC BASIS OF CLASSIFICATION WHICH CANNOT BE PERMITTED FOR TAKING BENEFIT OF THE ABOVE DECISIONS. ITA NO.4862/M/08 AY:02-03 7 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE LIMITED ISSUE BEFORE US IS WHETHER THE LEASE RENTAL PAID BY THE ASSESSEE TO ITS ASSOCIATED ENTER PRISES IN RESPECT OF VARIOUS DREDGING EQUIPMENTS TAKEN ON LEASE CAN BE R ECORDED AS CLOSELY LINKED OR CONTINUOUS TRANSACTIONS WHICH CANNOT BE E VALUATED SEPARATELY ON INDIVIDUAL BASIS. IF A NUMBER OF TRANSACTIONS AR E CLOSELY LINKED OR CONTINUOUS IN NATURE AND ARISING FROM A CONTINUOUS TRANSACTIONS OF SUPPLY OF AMENITY OR SERVICES THE TRANSACTIONS CAN BE PERMITTED AS CLOSELY LINKED TRANSACTIONS FOR THE PURPOSE OF TRAN SFER PRICING AND IN TERMS OF RULE 10A(D). AGGREGATION AND CLUBBING OF T HE CLOSELY LINKED TRANSACTION ARE PERMITTED UNDER THE RULES AND IT IS ALSO SUPPORTED BY OECD TRANSFER PRICING GUIDELINES. IN ORDER TO EXAMI NE WHETHER THE NUMBER OF TRANSACTIONS ARE CLOSELY LINKED OR CONTIN UOUS SO AS TO AGGREGATE FOR THE PURPOSE OF EVALUATION IT IS TO BE CONSIDERED THAT ONE TRANSACTION IS FOLLOW-ON OF THE EARLIER TRANSACTION AND THEN THE SUBSEQUENT TRANSACTION IS CARRIED OUT AND DEPENDENT WHOLLY OR SUBSTANTIALLY ON THE EARLIER TRANSACTION. IT CAN BE VICE-VERSA WHEN THE EARLIER TRANSACTION HAS BEEN ENTERED INTO BETWEEN P ARTIES BY KEEPING IN MIND THAT A CONTINUOUS TRANSACTION OF SIMILAR NATUR E WILL BE ENTERED INTO BETWEEN THE PARTIES THEREAFTER. THEREFORE, WHEN THE TRANSACTIONS ARE INFLUENCED BY EACH OTHER AND PARTICULARLY IN DETERM INING THE PRICE AND PROFIT INVOLVED IN THE TRANSACTIONS THEN THOSE TRAN SACTIONS CAN SAFELY BE REGARDED AS CLOSELY LINKED TRANSACTIONS. THE OECD G UIDELINES HAS REFERRED A PORTFOLIO APPROACH AS BUSINESS STRATEGY CONSISTING OF TAX PAYERS BUNDLING CERTAIN TRANSACTION FOR THE PURPOSE OF EARNING AN APPROPRIATE RETURN ACROSS PORTFOLIO RATHER THAN SIN GLE PRODUCT. FOR INSTANCE SOME PRODUCTS MAY BE MARKETED BY THE TAX P AYER WITH A LOW PROFIT OR EVEN AT LOSS BECAUSE THEY CREATE A DEMAND FOR OTHER PRODUCTS OR RELATED SERVICES OF THE SAME TAX PAYER THAT ARE THE N SOLD OR PROVIDE HIGH PROFIT. SOME OF THE EXAMPLES GIVEN IN THE OECD GUID ELINES FOR TRANSFER PRICING ARE THE EQUIPMENT AND CAPTIVE AFTER MARKET CONSUMABLES SUCH ITA NO.4862/M/08 AY:02-03 8 AS VENDING COFFEE MACHINES AND COFFEE CAPSULES, OR PRINTERS AND CARTRIDGES. THUS PORTFOLIO APPROACH IS BUSINESS STR ATEGY THAT MAY NEED TO BE TAKEN INTO ACCOUNT IN COMPARABILITY ANALYSIS. TH EREFORE, IF TWO OR MORE TRANSACTIONS BETWEEN THE SAME PARTIES I.E., THE ASS ESSEE AND ITS ASSOCIATE ENTERPRISE CAN BE SAID TO BE CLOSELY LINKED IF THE TRANSACTIONS ARE INTERLINKED AND TERMS AND CONDITION AS WELL AS PRIC ES BETWEEN THE PARTIES ARE DETERMINED BASED ON THE TOTALITY OF THE TRANSAC TIONS AND NOT ON INDIVIDUAL AND SEPARATE TRANSACTIONS. 12. IN THE CASE IN HAND THE ASSESSEE HAS TAKEN A NU MBER OF DREDGING EQUIPMENTS FROM MORE THAN ONE ASSOCIATE ENTERPRISES . IN THE BUSINESS DECISIONS WHEN NUMBER OF TRANSACTIONS ARE ENTERED I NTO BETWEEN TWO PARTIES THEN IT IS A VERY IMPORTANT AND MATERIAL FA CTOR TO CONSIDER A PORTFOLIO APPROACH RATHER THAN THE INDIVIDUAL TRANS ACTION APPROACH FOR DETERMINATION OF PRICE OF THE TRANSACTIONS BETWEEN THE PARTIES. EVEN OTHERWISE THE SCHEME OF TRANSFER PRICING PROVISIONS IS TO AVOID BASE EROSION AND PROFIT SHIFTING FROM ONE TAX JURISDICTI ON TO ANOTHER TAX JURISDICTION. THEREFORE, THE HIRING OF VARIOUS EQUI PMENTS TO BE USED FOR EXECUTION OF A PROJECT CAN BE AGGREGATED FOR THE PU RPOSE OF DETERMINATION OF ALP ONLY TO THE EXTENT OF THE TRANSACTIONS OR TO THE EXTENT OF NUMBER OF TRANSACTIONS WITH EACH ASSOCIATED ENTERPRISE. IN OT HER WORDS THE TRANSACTIONS CARRIED OUT WITH DIFFERENT ASSOCIATE E NTERPRISES CANNOT BE CLUBBED OR AGGREGATED BECAUSE THEY CANNOT BE TERMED AS CLOSELY LINKED OR CONTINUOUS SO AS TO INFLUENCE THE PRICE IN AGGRE GATE OR THE PROFIT OF THE PARTIES ARISING FROM THESE TRANSACTIONS. HENCE, IN PRINCIPLE WE ACCEPT ARGUMENT OF THE LD.AR THAT THE VARIOUS DREDGING EQU IPMENTS HIRED FROM THE ASSOCIATE ENTERPRISES CAN BE AGGREGATED FOR THE PURPOSE OF DETERMINATION OF ALP IN TERMS OF RULE 10A(D). HOWEV ER, THE AGGREGATION OF THE VARIOUS TRANSACTIONS IS POSSIBLE ONLY WITH R ESPECT TO THE TRANSACTIONS WHICH ARE CARRIED OUT BETWEEN THE ASSE SSEE AND EACH ASSOCIATE ENTERPRISE. SINCE THE ASSESSEE HAS HIRED THESE EQUIPMENTS AND ITA NO.4862/M/08 AY:02-03 9 DREDGERS FROM MORE THAN ONE ASSOCIATE ENTERPRISE, T HEREFORE, THE AGGREGATION OF THE TRANSACTION IS PERMITTED ONLY IN RESPECT OF THOSE WHICH ARE BETWEEN THE ASSESSEE AND ONE ENTERPRISE SEPARAT ELY. ACCORDINGLY AO/TPO IS DIRECTED TO DETERMINE THE ALP BY AGGREGAT ING THE VARIOUS TRANSACTIONS BETWEEN THE ASSESSEE AND EACH ASSOCIAT E ENTERPRISE SEPARATELY AND NOT BY CLUBBING THE TRANSACTIONS WIT H ALL ASSOCIATE ENTERPRISES. 13. GROUND NO.3 REGARDING THE ADJUSTMENT BY DISALLO WING THE LEASE RENTALS PAID BEYOND THE PERIOD OF PROJECT. THE ASSE SSEE HAS PAID LEASE RENTALS FOR THE PERIOD RANGING FROM 214 DAYS TO 306 DAYS. THE TPO NOTED THAT THE LEASE RENTALS BY THE ASSESSEE WERE PAID EV EN AFTER THE PERIOD FOR WHICH THE VESSELS/DREDGER ARE USED IN THE PROJECT. THE TPO WAS OF THE VIEW THAT IN RESPECT OF ALL VESSELS THE LEASE RENTA LS ALLOWABLE WILL BE FOR 252 DAYS AND THEREFORE, THE RENTALS PAID BY THE ASS ESSEE FOR MORE THAN 252 DAYS WERE DISALLOWED BY THE TPO. THE WORKING OF DISALLOWANCE OF LEASE RENTALS IS GIVEN AT PAGE-9 OF THE TPO ORDER I N PARA 5.1.4 AS UNDER :- NAME OF VESSEL NO. OF DAYS FOR WHICH LEASE RENTAL PAID TOTAL AMOUNT PAID IN INR TOTAL AMOUNT CORRESPONDING TO 252 DAYS DIFFERENCE TAURUS 261 496,478,667 479,358,712 17,119,954 DI509 298 89,922,602 76,041,931 13,880,671 DI508 298 58,631,113 49,580,672 9,050,441 BKM 100 306 53,650,809 44,183,019 9,467,790 PARU 269 25,563,088 23,947,576 1,615,512 OOSTENDE 269 6,163,614 5,774,091 389,523 SASKIA 306 8,804,360 7,250,649 1,553,711 HASSAN 261 9,666,548 9,333,218 333,330 53,410,932 ITA NO.4862/M/08 AY:02-03 10 THUS THE TPO DISALLOWED PAYMENT OF LEASE RENTALS PE RTAINING TO THE PERIOD AFTER THE PROJECT OR IN EXCESS OF 250 DAYS, THOUGH THE TPO MADE AN ADJUSTMENT OF TOTAL DISALLOWANCE BY CONSIDERING THE ADJUSTMENT MADE REGARDING THE RATE OF LEASE RENTALS. ON APPEAL CIT( A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE TPO ON THIS ACCOUNT. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF LD.AR AS WELL AS THE LD. DR AS WELL AS THE AVAILABLE MATERIAL ON RECORD. THE AS SESSEE HAS PAID THE LEASE RENTALS AS PER TERMS OF AGREEMENT UNDER WHICH VESSEL AND EQUIPMENTS WERE HIGHER FROM ITS AES. AS PER THE TE RMS OF THE AGREEMENT THE ASSESSEE WAS REQUIRED TO PAY THE LEASE RENTALS FROM THE DATE OF DELIVERY OF VESSEL/DREDGER AND TILL THE DATE WHEN T HE VESSEL WAS REDELIVERED TO THE LESSOR OF THE VESSEL AT THE PORT OF RE-DELIVERY STATED IN THE AGREEMENT. THEREFORE, THE ASSESSEE WAS REQUIRED TO PAY LEASE RENTALS EVEN AFTER THE PROJECT TILL THE VESSEL WAS REDELIVE RED AT THE DETERMINED PORT. IN OTHER WORDS THE ASSESSEE WAS TO PAY LEASE RENTALS FOR THE PERIOD OF TIME SPENT ON DEMOBILIZATION AND TRANSPORTATION OF DREDGER AND VESSEL TO THE PORT OF REDELIVERY. IT IS PERTINENT TO NOTE THAT NEITHER ASSESSEE HAS PRODUCED ANY RECORD TO SHOW THAT THE PAYMENT OF REN TAL FOR THE PERIOD WHICH WAS SPENT FOR RE-DELIVERY OF THE DREDGER/EQUI PMENT IS A STANDARD PRACTICE IN THIS FIELD OF BUSINESS NOT THE TPO HAS BROUGHT ON RECORD ANY MATERIAL OR TRANSACTION ENTERED BETWEEN THE INDEPEN DENT PARTIES TO SHOW THAT THE RENT PAID BY THE ASSESSEE OVER AND ABOVE T HE PROJECT PERIOD IS IN EXCESS OF THE COMPARABLE CASE. THEREFORE, BOTH THE ASSESSEE AS WELL AS TPO FAILED TO DISCHARGE THEIR RESPECTIVE ONUS AND D UTIES TO DETERMINE THE ALP IN RESPECT OF LEASE RENTALS PAID BEYOND THE PER IOD OF PROJECT. THE PAYMENT IS TO BE COMPARED WITH THE INDEPENDENT AND UNCONTROLLED TRANSACTIONS OF A SIMILAR NATURE WHEREIN EITHER THE PAYMENT OF RENTALS FOR THE TIME PERIOD SPENT ON DEMOBILIZATION AND TRANSPO RTATION FOR RE- DELIVERY OF THE EQUIPMENTS ARE ACCEPTED AS A NORMAL PRACTICE OR OTHERWISE IT IS NOT ACCEPTED BEYOND THE PERIOD OF PROJECT. SI NCE THIS ISSUE REQUIRES A ITA NO.4862/M/08 AY:02-03 11 PROPER VERIFICATION AND EXAMINATION AS WELL AS PROD UCTION OF RECORD FROM BOTH THE SIDES, THEREFORE, WE SET ASIDE THIS ISSUE TO THE RECORD OF AO/TPO TO RE-CONSIDER AND DECIDE AFTER CONSIDER THE COMPAR ABLES FOR DETERMINING OF THE ALP. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH JULY, 2014. SD/- SD/- (R.C. SHARMA) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 18/07/2014. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.