VWR Lab Products Private Limited, Bangalore V. DCIT, Bangalore

ITA 513/BANG/2015

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7185 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-01-2021
• Assessment Year: 2010-2011
• Appeal Filed On: 30-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Unabsorbed depreciation; Set aside; CHAPTER IV
• Section: 143(3); 10B; 43; 48; 72

Judgement Text

IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL ABENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER IT(TP)A NO.513/BANG/2015 ASSESSMENTYEAR:2010-11 VWR LAB PRODUCTS PRIVATE LTD. 139, 6 TH MAIN, BDA INDUSTRIAL SUBURB TUMKUR ROAD PEENYA POST BANGALORE-560 058 PAN NO :AACCV3080E VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-7(1)(2) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI DARPAN KRIPLANI, A.R. RESPONDENT BY : MS. NEERA MALHOTRA, D.R. DATE OF HEARING : 20.01.2021 DATE OF PRONOUNCEMENT : 27.01.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ASSESSMENT ORDER DATED 27.01.2015 PASSED BY THE A.O. FOR ASSES SMENT YEAR 2009-10 U/S 143(3) R.W.S. 144C(13) OF THE INCOME-T AX ACT,1961 ['THE ACT' FOR SHORT] PURSUANT TO THE DIRECTIONS GI VEN BY LD. DISPUTE RESOLUTION PANEL (LD. DRP). 2. THE ASSESSEE HAS FILED CONCISE GROUNDS OF APP EAL AND ALSO ADDITIONAL GROUNDS OF APPEAL. AT THE TIME OF HEARI NG, THE LD. A.R. DID NOT PRESS THE ADDITIONAL GROUNDS OF APPEAL. IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 2 OF 11 3. GROUND NOS.1 TO 5 RAISED BY THE ASSESSEE ARE GEN ERAL IN NATURE. GROUND NO.6 RELATES TO TRANSFER PRICING AD JUSTMENT MADE IN RESPECT OF BACK OFFICE SUPPORT SERVICES (ITES SE RVICES). GROUND NO.7 RELATES TO TRANSFER PRICING ADJUSTMENT MADE IN RESPECT OF DISTRIBUTION SEGMENT. GROUND NO.9 RELATE TO DIRECT ION GIVEN BY LD. DRP TO COMPUTE DEDUCTION U/S 10A OF THE ACT AFTER S ET OFF OF LOSS/UNABSORBED DEPRECIATION RELATING TO NON10A UNI TS. 4. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRA DING & DISTRIBUTION OF LABORATORY PRODUCTS & CHEMICALS, ST RATEGIC SOURCING, INFORMATION TECHNOLOGY ENABLED SERVICES ( OFFSHORE ACCOUNTING & DATA MANAGEMENT), MARKETING SUPPORT SE RVICES, RESEARCH IDENTIFICATION, IMPROVEMENT EVALUATION, SE LECTION, TESTING OF ANY MECHANICAL, ELECTRICAL, ELECTRONIC, CHEMICAL , PLASTIC, TELECOM & INFORMATION TECHNOLOGY PRODUCTS. 5. WE SHALL TAKE UP THE ISSUE RELATING TO TRANSFER PRICING ADJUSTMENT MADE IN RESPECT OF BACK OFFICE SUPPORT S ERVICES (ITES SERVICES). THE ASSESSEE ADOPTED TNMM METHOD AND OP /OC (OPERATING PROFIT BY OPERATING COST) AS PROFIT LEVE L INDICATOR. THE ASSESSEE DECLARED MARGIN OF 19%. THE TURNOVER OF T HE ASSESSEE FROM THIS SEGMENT WAS RS.20.27 CRORES. THE ASSESSE E HAD SELECTED 15 COMPARABLE COMPANIES. THE T.P.O. REJECTED THE T RANSFER PRICING STUDY OF THE ASSESSEE AND ACCORDINGLY SELECTED FOLL OWING 10 SETS OF COMPARABLES: SL.NO. NAME PLI 1. ACCENTIA TECHNOLOGIES LTD. 43.06% 2. ACROPETAL TECHNOLOGIES LTD. (SEG) 22.27% 3. E - CLERX SERVICES LTD. 55.97% 4. FORTUNE INFOTECH LTD. 22.80% 5. ICRA ONLINE LTD. (SEG) 43.39% 6. INFORMED TECHNOLOGIES INDIA LTD. 26.15% IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 3 OF 11 7. INFOSYS BPO 31.23% 8. COSMIC GLOBAL LTD. 14.97% 9. SUNDARAM BUSINESS SERVICES LTD. - 12.31% 10. JEEVAN SCIENTIFIC TECHNOLOGY LTD. (SEG) 21.05% AVERGE 26.86% THE AVERAGE MARGIN OF THE COMPARABLE COMPANIES WAS 26.86%. AFTER ALLOWING WORKING CAPITAL ADJUSTMENT OF 0.23%, THE TPO COMPUTED THE ADJUSTED MARGIN AT 26.63%. ACCORDINGL Y, HE MADE TRANSFER PRICING ADJUSTMENT OF RS.1,30,63,508/-. T HE LD. DRP CONFIRMED THE SAME. 6. THE LD. A.R. SUBMITTED THAT THE ASSESSEE SEEKS E XCLUSION OF FOLLOWING 3 COMPANIES: A) E-CLERX SERVICES LIMITED B) INFOSYS BPO LIMITED C) ICRA ONLINE LIMITED (SEG) THE LD. A.R. SUBMITTED THAT THE ABOVE SAID 3 COMPAN IES HAVE BEEN EXCLUDED IN AN IDENTICAL CASE RENDERED IN THE DECIS ION BY THE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF M/S. AKA MAI TECHNOLOGIES INDIA PRIVATE LIMITED IN IT(TP)A NO.30 7/BANG/2015 DATED 29.7.2020. ACCORDINGLY, HE PRAYED FOR EXCLUS ION OF ABOVE SAID 3 COMPANIES. 7. ON THE CONTRARY, THE LD. D.R. SUPPORTED THE ORDE R PASSED BY THE LD. DRP. 8. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECOR D. WE NOTICE THAT THE COORDINATE BENCH IN THE CASE OF AKA MAI TECHNOLOGIES INDIA PVT. LTD. HAS EXAMINED THE ABOVE SAID 3 COMPA NIES IN THE CONTEXT OF ITES SERVICES RENDERED BY AN THE INDIA N COMPANY TO ITS FOREIGN ASSOCIATED ENTERPRISES. THE COORDINATE BEN CH HAS HELD AS UNDER IN RESPECT OF THESE 3 COMPANIES: IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 4 OF 11 16. AS FAR AS GR.NO.4 & 5 RAISED BY THE REVENUE ARE CONCERNED, THE REVENUE IS CHALLENGING THE EXCLUSION ICRA, INFOSYS BPO LTD., AND ECLERX SERVICES LTD. 17. AS FAR AS EXCLUSION OF ICRA IS CONCERNED, BEFOR E THE DRP THE ASSESSEE SOUGHT EXCLUSION OF ICRA FROM THE LIST OF COMPARABL ES ON THE GROUND THAT THIS COMPANY IS FUNCTIONALLY DISSIMILAR TO THE ASSE SSEE. IT WAS SUBMITTED THAT ICRA IS ENGAGED IN PROVIDING SERVICES WHICH AR E IN THE NATURE OF KPO SERVICES. IT PROVIDES FINANCIAL AND ANALYTICAL SERV ICES AND SUPPORT TO CLIENTS IN THE AREA OF DATA EXTRACTION, AGGREGATION, ELECTR ONIC CONVERSION OF FINANCIAL STATEMENTS, VALIDATION AND ANALYSIS, ACCO UNTING AND FINANCE, RESEARCH AND ANALYTICS WHICH ARE DISSIMILAR TO THE SERVICES RENDERED BY THE ASSESSEE. IT WAS SUBMITTED THAT OUTSOURCED SERVICES SEGMENT OF THE COMPANY IS ENGAGED IN THE PROVISION OF HIGH END CONSULTANCY SERVICES WHICH CANNOT BE COMPARED TO THE ASSESSEE WHO IS INTO PROVISION O F LOW END IT ENABLED SERVICES WHICH ARE ROUTINE IN NATURE. FURTHER, THE SAFE HARBOUR RULES CLEARLY DISTINGUISH BETWEEN AN ITE SERVICE PROVIDER AND A KPO SERVICE PROVIDER. THE DRP HAS NOT CONSIDERED ANY OF THE ABO VE OBJECTIONS. 18. BEFORE THE TRIBUNAL, THE ASSESSEE HAS BROUGHT T O OUR NOTICE THAT THIS TRIBUNAL HAS HELD THAT A KPO SERVICE PROVIDER CANNO T BE COMPARED TO AN ITE SERVICE PROVIDER. RELIANCE IN THIS REGARD IS PL ACED ON THE DECISION IN THE CASE OF ARCTERN CONSULTING PVT. LTD. (SUPRA) IT (TP)A NO.195/BANG/2015 & 302/BANG/2015 ORDER DATED 11.08. 2017 FOR AY 2010- 11, & IN THE CASE OF OUTSOURCE PARTNERS INTERNATION AL (P) LTD. I.T(TP).A NO.337/BANG/2015 ORDER DATED 6.2.2017 FOR AY 2010-1 1, WHEREIN ON IDENTICAL CIRCUMSTANCES, THE EXCLUSION OF THIS COMP ANY CAME TO BE UPHELD/THE COMPANY WAS DIRECTED TO BE EXCLUDED. THE LEARNED DR REITERATED THE STAND OF THE REVENUE AS REFLECTED TH E GROUNDS OF APPEAL OF THE REVENUE. 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE CASE OF OUTSOURCES PARTNERS INTERNATIONAL (P) LTD.,(SUPRA), THIS TRIBUNAL HAS ADJUDICATED IDENTICAL ISSUE AND HELD THAT THIS COMP ANY WAS NOT FUNCTIONALLY COMPARABLE TO AN ITES COMPANY SUCH AS THE ASSESSEE AND FOR THE REASON THAT THIS COMPANY FAILS THE EXPORT EARNING FILTER. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD EXCLUSION OF THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES FOR THE REASONS GIVEN IN THIS PARAGRAPH. 20. AS FAR AS EXCLUSION OF INFOSYS BPO LTD., IS CON CERNED, THE SAID COMPANY WAS EXCLUDED ON THE GROUND THAT THE COMPANY IS ENGA GED IN PROVIDING HIGH-END INTEGRATED SERVICES, AND WHEREAS, THE ASSE SSEE IS ENGAGED IN PROVIDING LOW LEVEL BACK-OFFICE SUPPORT SERVICES. F URTHER, THE COMPANY HAS HUGE BRAND NAME AND OWNS SIGNIFICANT INTANGIBLES. I T IS SUBMITTED THAT THE BRAND NAME THAT IS ASSOCIATED WITH INFOSYS TECHNOLO GIES LTD. HAS AN IMPACT ON THE BUSINESS OPERATIONS OF INFOSYS BPO. ALSO, DU RING THE FINANCIAL YEAR 2009-10, THE COMPANY ACQUIRED ALL THE OUTSTANDING M EMBERSHIP INTERESTS OF MCCAMISH SYSTEMS LLC WHICH CONSTITUTES A PECULIAR E CONOMIC IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 5 OF 11 CIRCUMSTANCE FOR WHICH NO REASONABLE ADJUSTMENT COU LD BE MADE TO MITIGATE ITS EFFECT ON THE COMPANY'S MARGIN. ALSO, THE COMPANY HAS INCURRED HUGE SELLING AND MARKETING EXPENSES AND THE SAME HA S BEEN INCREASING YEAR ON YEAR. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISION IN THE CASE OF ARCTERN CONSULTING PVT. LTD. (SUPRA) AND TESCO H INDUSTAN SERVICE CENTRE (P.) LTD. (2017)77 TAXMANN.COM 48 (BANGALORE ) FOR AY 2010-11, WHERE IN IDENTICAL CIRCUMSTANCES, THE EXCLUSION OF THE COMPANY CAME TO BE UPHELD/COMPANY WAS DIRECTED TO BE EXCLUDED. THE LEA RNED DR REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE GROUND S OF APPEAL OF THE REVENUE. 21. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE CASE OF TESCO HINDUSTAN SERVICE CENTRE PVT.LTD.(SUPRA) VIDE PARAGRAPH 47 & 48 OF ITS ORDER, THE TRIBUNAL UPHELD EXCLUSION OF THIS CO MPANY FROM THE LIST OF COMPARABLE COMPANIES, ON THE GROUND OF PRESENCE OF BRAND VALUE AND OTHER FACTORS. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE UPHOLD THE ORDER OF DRP EXCLUDING THIS COMPANY FROM THE LIST OF COMPARABLE COMPANIES. 22. AS FAR AS EXCLUSION OF ECLERX SERVICES LTD., IS CONCERNED, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THE DRP RIGHTLY EXCLUDED THIS COMPANY FROM THE FINAL LIST OF COMPARABLES AS THE SAME IS F UNCTIONALLY DISSIMILAR TO THE ASSESSEE. IN THIS REGARD, IT WAS SUBMITTED THAT THE COMPANY IS FUNCTIONALLY DISSIMILAR AS IT IS A KPO ENGAGED IN P ROVIDING DATA ANALYTICS AND DATA PROCESS SOLUTIONS. IT PROVIDES END-TO-END SUPPORT THROUGH THE TRADE LIFECYCLE, INCLUDING TRADE CONFIRMATION, SETT LEMENTS, TRANSACTION MAINTENANCE, RISK ANALYTICS AND REPORTING. THE DATA ANALYTICS SERVICES BEING PROVIDED BY ECLERX IS SIGNIFICANTLY DIFFERENT FROM THE ROUTINE ITE SERVICES PROVIDED BY THE ASSESSEE. RELIANCE IN THIS REGARD WAS PLACED ON THE DECISIONS IN THE CASES OF ARCTERN CONSULTING PV T. LTD. (SUPRA) AND TESCO HINDUSTAN SERVICE CENTRE (P.) LTD. (SUPRA), WHERE I N IDENTICAL CIRCUMSTANCES, THE EXCLUSION OF THE COMPANY CAME TO BE UPHELD/THE COMPANY WAS DIRECTED TO BE EXCLUDED. THE LEARNED DR REITERATED THE STAND OF THE REVENUE AS IS REFLECTED IN THE GROUNDS OF AP PEAL RAISED BY THE REVENUE. 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE CASE OF TESCO HINDUSTAN SERVICE CENTRE (P) LTD. (SUPRA), TH IS COMPANY WAS EXCLUDED FROM THE LIST OF COMPARABLE COMPANIES IN T HE CASE OF A COMPANY RENDERING ITES SIMILAR TO THE SERVICES RENDERED BY THE ASSESSEE IN THIS APPEAL, OBSERVING AS FOLLOWS: '37. ECLERX SERVICES LTD. : IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS COMPANY'S FUNCTION IS DISSIMILAR WITH THE ASSESSEE COMPANY AS IT PROVIDES INDUSTRY S PECIALISED SERVICES LIKE DATA ANALYTICS, OPERATIONS MANAGEMENT AND AUDITS & RECONCILIATION SERVICES WHICH CANNOT BE COMPARED TO A BPO OR IT OFFSHORING COMPANY. IT WAS FURTHER CONTENDED THAT T HIS COMPANY IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 6 OF 11 HAS ABNORMAL PROFITS AND SALES FOR THE YEAR. THE LD . COUNSEL FURTHER CONTENDED THAT THIS COMPANY WAS EXAMINED BY THE TRI BUNAL IN THE CASE OF STREAM INTERNATIONAL SERVICES (P) LTD. (SUP RA)AND THE TRIBUNAL HAS HELD THAT EVEN THE COMPANY'S FUNCTIONS ARE DIFFERENT, THEREFORE IT CANNOT BE CONSIDERED AS COMPARABLE, FO LLOWING THE ORDER OF THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF MAERSK GLOBAL CENTRES (INDIA) (P.) LTD. V. ASSTT . CIT [2014] 43 TAXMANN.COM 100/147 ITD 83 (MUM.) (SB). THEREFORE, THIS COMPANY MAY BE EXCLUDED FROM THE LIST OF COMPARABLE S. 38. THE LD. DR SIMPLY PLACED RELIANCE UPON THE ORDE R OF THE AO. 39. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER A UTHORITIES IN THE LIGHT OF TRIBUNAL'S FINDING IN THE CASE OF STREAM I NTERNATIONAL SERVICES (P) LTD. (SUPRA), WE FIND THAT THE PROFILE OF THIS COMPANY WAS EXAMINED BY THE TRIBUNAL IN THIS CASE AND FOLLO WING THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAERSK GLOBAL CENTRES (INDIA) (P.) LTD. (SUPRA), THE TRIBUNAL HEL D THIS COMPANY TO BE NON- COMPARABLE. FOR THE SAKE OF REFERENCE, WE E XTRACT THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL:-- '(XI) ECLERX SERVICES LTD. & MOLD-TEK TECHNOLOGIES LTD.:- FOR BOTH THESE COMPANIES, THE LD. COUNSEL FOR THE A SSESSEE STATED THAT THESE COMPANIES ARE FUNCTIONALLY DIFFER ENT, THEREFORE, CANNOT BE CONSIDERED AS COMPARABLES. WE FIND THAT THE MUMBAI SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MAERSK GLOBAL CENTRES (INDIA) PVT. LTD. IN ITA NO. 7466/MUM/2012 HAS REJECTED ECLERX SERVICES LIMITED BECAUSE SOLUTIONS OFFERED BY THIS COMPANY INCLUDED DATA ANALYTICS, OPERATIONS, MANAGEMENT, AUDITS AND RECONCILIATION, METRICS MANAGEMENT AND REPORTING SE RVICES. THE SPECIAL BENCH OPINED THAT IF THESE FUNCTIONS AC TUALLY PERFORMED BY THE ASSESSEE COMPANY FOR ITS AES ARE COMPARED WITH THE FUNCTIONAL PROFILE OF M/S ECLERX SERVICES LIMITED AND MOLD-TEK TECHNOLOGIES LTD., IT IS DIFFI CULT TO FIND OUT ANY RELATIVELY EQUAL DEGREE OF COMPARABILI TY AND THE SAID ENTITIES CANNOT BE TAKEN AS COMPARABLE FOR THE PURPOSE OF DETERMINING ALP OF THE TRANSACTIONS OF THE ASSES SEE COMPANY WITH ITS AES. FACTS BEING IDENTICAL, RESPEC TFULLY FOLLOWING THE OBSERVATIONS OF THE SPECIAL BENCH (SU PRA), WE DIRECT THAT THESE TWO ENTITIES BE EXCLUDED FROM THE LIST OF FINAL COMPARABLES.' 40. SINCE THE TRIBUNAL HAS EXAMINED THIS ISSUE UNDE R SIMILAR SET OF FACTS, WE FIND NO REASON TO TAKE A CONTRARY VIEW. A CCORDINGLY FOLLOWING THE ORDER OF THE TRIBUNAL IN THE CASE OF STREAM INTERNATIONAL SERVICES (P) LTD. (SUPRA), WE HOLD TH AT THIS COMPANY IS NOT A GOOD COMPARABLE AND DIRECT THE AO/TPO TO EXCL UDE IT FROM THE LIST OF COMPARABLES.' IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 7 OF 11 RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE U PHOLD THE ORDER DRP EXCLUDING THE AFORESAID COMPANY FROM THE LIST OF CO MPARABLE COMPANIES. 24. THUS GR.NO.4 & 5 RAISED BY THE REVENUE IS WITHO UT ANY MERIT. BOTH THE PARTIES AGREED THAT THERE IS PARITY OF FAC TS BETWEEN THE INSTANT CASE AND THE CASE DECIDED BY THE CO-ORDINAT E BENCH. ACCORDINGLY, RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION, WE DIRECT EXCLUSION OF M/S. E-CLERX SERVICES LTD., ICRA ONLIN E LTD. AND INFOSYS BPO LTD. THE ALP OF THE INTERNATIONAL TRAN SACTIONS SHALL BE COMPUTED AFRESH ACCORDINGLY. 9. THE NEXT ISSUE RELATES TO TRANSFER PRICING ADJU STMENT MADE IN RESPECT OF DISTRIBUTION SEGMENT. 10. THE LD A.R SUBMITTED THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF DISTRIBUTION OF PHARMACEUTICAL PRODUCTS WITHOUT MAKING ANY VALUE ADDITION. ACCORDINGLY, HE SUBMITT ED THAT THE RESALE PRICE METHOD IS THE MOST APPROPRIATE METHO D TO BENCH MARK THE INTERNATIONAL TRANSACTIONS UNDER THIS SEGM ENT. IN SUPPORT OF THIS PROPOSITION, HE RELIED UPON THE DEC ISION RENDERED BY THE CO-ORDINATE BENCH IN THE CASE OF M/S ELEMENT 14 INDIA PVT LTD VS. DCIT (IT(TP)A NO.351/BANG/2016 DATED 16.09.2020 ). 11. ON THE CONTRARY, THE LD D.R PLACED HER RELI ANCE ON THE DECISION RENDERED BY CO-ORDINATE BANGALORE BENCH OF TRIBUNAL IN THE CASE OF KOHLER INDIA CORP (P) LTD VS. DCIT (201 6)(67 TAXMANN.COM 200) AND SUBMITTED THAT IT IS IMPERATIV E TO MAKE CLOSE ANALYSIS OF ITEMS WHICH WERE BOUGHT BY THE AS SESSEE FROM ITS AE SO AS TO VERIFY WHETHER SUCH ITEMS WERE COMPARAB LE WITH THE ITEMS SOLD BY THE COMPARABLE COMPANIES. ACCORDINGL Y, THE LD DR PRAYED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE TPO. IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 8 OF 11 12. WE HEARD THE PARTIES ON THIS ISSUE AND PERU SED THE RECORD. WE NOTICE FROM PARAGRAPH 13.1 OF THE TPOS ORDER TH AT THE TPO HAS OBSERVED THAT THE ASSESSEE HAS APPLIED TNMM METHOD FOR DISTRIBUTION SEGMENT ALSO. HOWEVER, AS PER PARAGRA PH 9 IN PAGE 79 OF THE TRANSFER PRICING STUDY OF THE ASSESSEE, IT I S STATED THAT THE ASSESSEE HAS CONSIDERED RESALE PRICE METHOD AS AN A PPROPRIATE METHOD TO EVALUATE THE ARMS LENGTH NATURE OF THE I MPORT OF PHARMACEUTICAL PRODUCTS BY THE ASSESSEE FROM ITS GR OUP COMPANY. THUS, THERE IS MISUNDERSTANDING ON THE PART OF THE TPO ON THIS BASIC ASPECT, WHICH GOES TO THE ROOT OF THE ISSUE. 13. BEFORE LD DRP ALSO, THE ASSESSEE HAS RAISED AN SPECIFIC OBJECTION IN PARAGRAPH 6.1 THAT THE TPO HAS NOT GIV EN COGENT REASON FOR SELECTING TNMM AS MOST APPROPRIATE METHO D AS AGAINST RESALE PRICE METHOD ADOPTED BY THE ASSESSEE. HOWEV ER, THE LD DRP ALSO UPHELD TNM METHOD ADOPTED BY THE TPO WITHOUT A DDRESSING THE CONTENTIONS OF THE ASSESSEE FOR ADOPTING RESALE PRICE METHOD. 14. THE NET EFFECT IS THAT NEITHER THE TPO NOR T HE LD DRP HAS EXAMINED THE T.P STUDY OF THE ASSESSEE MADE BY ADOP TING RESALE PRICE METHOD. FURTHER, AS NOTICED EARLIER, THE TPO WAS UNDER ERRONEOUS BELIEF THAT THE ASSESSEE HAS ADOPTED TNM METHOD FOR ITS DISTRIBUTION SEGMENT ALSO, WHICH IS PATENTLY WRONG. IT IS WELL SETTLED PRINCIPLE THAT THE TPO HAS TO GIVE COGENT R EASON AS TO WHY THE METHOD SELECTED BY THE ASSESSEE IS NOT AN APPRO PRIATE METHOD IN THE FACTS AND CIRCUMSTANCES OF THE CASE, BEFORE DISCARDING IT. SINCE THE TPO HAD MISDIRECTED HIMSELF, THERE WAS NO OCCASION FOR HIM TO EXAMINE THE RESALE PRICE METHOD ADOPTED BY T HE ASSESSEE. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION T HAT THE ENTIRE ISSUE RELATING TO TRANSFER PRICING ADJUSTMENT MADE IN RES PECT OF IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 9 OF 11 DISTRIBUTION SEGMENT NEEDS TO BE EXAMINED AFRESH BY DULY CONSIDERING THE TRANSFER PRICING STUDY CONDUCTED BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE A O ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO/TPO FOR EXAM INING IT AFRESH. 15. THE LAST ISSUE RELATES TO THE COMPUTATION OF DEDUCTION U/S 10A OF THE ACT. THE ASSESSEE WAS HAVING A UNIT IN COIM BATORE, WHICH IS ELIGIBLE FOR DEDUCTION U/S 10A. IT WAS ALSO HAVING OTHER BUSINESS UNITS LOCATED IN MUMBAI, BANGALORE AND HYDERABAD. THE ASSESSEE MADE PROFIT FROM ITS COIMBATORE UNIT AND MADE LOSSE S FROM OTHER UNITS. IT CLAIMED DEDUCTION U/S 10A OF THE ACT WIT HOUT ADJUSTING LOSS FROM OTHER UNITS. THE AO, HOWEVER, ADJUSTED B USINESS LOSSES OF OTHER UNITS AGAINST THE PROFITS OF COIMBATORE UNIT AND ACCORDINGLY ALLOWED DEDUCTION U/S 10A OF THE ACT. THE LD CIT(A ) ALSO CONFIRMED THE SAME. 16. WE HEARD THE PARTIES ON THIS ISSUE AND PE RUSED THE RECORD. THIS ISSUE HAS SINCE BEEN SETTLED BY HONBLE SUPREM E COURT IN THE CASE OF CIT & ANS. VS. M/S YOKOGAWA INDIA LTD (CIVI L APPEAL NO. 8498 OF 2013 DATED 16-12-2016). THE RELEVANT OBSER VATIONS MADE BY HONBLE SUPREME COURT ARE EXTRACTED BELOW:- 16. FROM A READING OF THE RELEVANT PROVISIONS OF SECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED T HEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNITS OR UNDERTAKING S OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE IND IVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MOR E THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO. 794 DATED 9.8.2000 WHI CH STATES IN PARAGRAPH 15.6 THAT, THE EXPORT TURNOVER AND THE T OTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKING S, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSH IP WITH THE OTHER BUSINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR TH E PURPOSES OF THIS PROVISION. 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVID E [FIRST PROVISO TO SECTIONS 10A(1) ; 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTE MPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO.794 DATED 09.08.2000) IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 10 OF 11 UNDERSTOOD THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THERE FORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70 , 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOT AL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDAN T USE OF THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERST ANDING THE EXPRESSION TOTAL INCOME OF THE ASSESSEE IN SECTION 10A AS TOTAL INCOME OF THE UNDERTAKING. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THI S ORDER, BY HOLDING THAT THOUGH SECTION 10A , AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STA GE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. A LL THE APPEALS SHALL STAND DISPOSED OF ACCORDINGLY. 17. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE AO ON THIS ISSUE AND DIRECT HIM TO COMPUTE THE DEDUCTION U/S 1 0A WITHOUT ADJUSTING LOSSES AS HELD BY HONBLE SUPREME COURT I N THE ABOVE SAID CASE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JAN, 2021. SD/- (N.V. VASUDEVAN) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 27 TH JAN, 2021. VG/SPS IT(TP)A NO.513/BANG/2015 VWR LAB PRODUCTS PVT. LTD., BANGALORE PAGE 11 OF 11 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.