SAFILO INDIA P.LTD, NAVI MUMBAI V. DCIT CIR 15(3)(2), MUMBAI

ITA 588/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0719 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 27-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANT KUMAR
• Assessee Lawyers: PERCY PARDIWALANIRAJ SHETH
• Keywords: Transfer pricing; International transaction; Question of law; Fair market value; Avoidance of tax
• Section: 92C; 92B; 10B; 37; 92

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./588/MUM/2015, /ASSESSMENT YEAR: 2010-11 ./I.T.A./4940/MUM/2015, /ASSESSMENT YEAR: 2011-12 SAFILO INDIA PRIVATE LIMITED 1ST FLOOR, RPT HOUSE (JAYSYNTH CENTRE) PLOT NO.6,SECTOR 24, TURBHE, NAVI MUMBAI-400 705. PAN:AAFCS 4638 G VS. DCIT-CIRCLE-15(3)(2) ROOM NO.451, 4TH FLOOR, AAYAKAR BHAVAN NEW MARINE LINES, MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI JAYANT KUMAR -DR ASSESSEE BY: S/SHRI PERCY PARDIWALA/NIRAJ SHETH / DATE OF HEARING: 18.10.2017 / DATE OF PRONOUNCEMENT: 12.01.2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , / PER RAJENDRA, AM - CHALLENGING THE ORDERS,DATED 30/10/2014 AND 09/06 /2015,OF THE DISPUTE RESOLUTION PANEL-II MUMBAI THE ASSESSEE HAS FILED THE APPEALS FOR THE A BOVE MENTIONED TWO ASSESSMENT YEARS (A.Y.S).ASSESSEE,AN INDIAN COMPANY WAS INCORPORATED ON 10/07/2001. IT IS A SUBSIDIARY OF SAFILO INTERNATIONAL B.V. ('SAFILO B.V.') WHICH HOL DS 88.50% OF THE SHARES OF SAFILO INDIA AND THE REMAINING 11.50% OF THE SHARES ARE HELD BY LION HOLDINGS LTD., MALTA.IT IS A PART OF THE SAFILO GROUP WITH SAFILO S.P.A,ITALY.THE PARENT COM PANY IS ENGAGED IN MANUFACTURE, MARKETING AND DISTRIBUTION OF SPECTACLE FRAMES, SUN GLASSES,ETC.UNDER ITS OWN BRAND NAME AND IS ALSO LICENSED TO SELL SPECTACLES, FRAMES, SUNGLA SSES, ETC. OF OTHER REPUTED BRAND NAMES.THE ASSESSEE IS ENGAGED IN THE DISTRIBUTION OF SAFILO P RODUCTS (SPECTACLES, SUNGLASSES, ETC.) IN INDIA AS PER THE DISTRIBUTION AGREEMENT(DA)WITH SAFILO S. P.A.DETAILS OF FILING OF RETURNS OF INCOME RETURNED INCOMES, ASSESSED INCOMES, ETC, CAN BE SUM MMARISED AS UNDER :- A.Y. ROI FILED ON RETURNED INCOME ASSTT. DT. ASSESS ED INCOME 2010-11 01/10/2010 RS.5,33,47,107/- 24/12/2014 RS.1 1,89,12,550/- 2011-12 30/11/2011 RS.1,78,82,059/- 09/06/2015 RS.1 ,99,02,330/- ITA/588/MUM/2015,AY.2010-11: 2 . DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD ENTERED IN TO INTERNATIONAL TRANSACTIONS (IT.S)WITH ITS ASSOCIATE ENTERPRISE(AE).TO DETERMINE THE ARMS 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 2 LENGTH(ALP)OF THE TRANSACTIONS,HE MADE A REFERENCE TO THE TRANSFER PRICING OFFICER(TPO). VIDE HIS ORDER,DT.1/2/122013,THE TPO PROPOSED TOTAL ADJUSTMENT OF 7.18 CRORES. ACCORDINGLY, THE AO ISSUED A DRAFT ASSESSMENT ORDER TO THE ASSES SEE WHO CHALLENGED IT BEFORE THE DRP. THE DRP ISSUED DIRECTIONS ON 30/10/2014,GIVING PART REL IEF TO THE ASSESSEE.THE AO PASSED THE FINAL ORDER AFTER RECEIVING THE DIRECTIONS OF THE D RP. 3. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT TP ADJUST MENT OF RS.6.48 CRORES.DURING THE TRANSFER PRICING(TP)PROCEEDINGS,THE TPO FOUND THAT THE ASSESSEE HAD REPORTED TWO IT.S NAMELY PURCHASE OF OPTICAL FRAMES AND SUNGLASSES(R S.13.53 CRORES)AND PURCHASE OF PROMO - TIONAL MATERIALS (RS.47,80,515/-),THAT IT HAD ADOPT ED THE RPM AND CUP METHOD RESPECTIVELY AS THE MOST APPROPRIATE METHOD TO DETERMINE THE ALP FOR ITS IT.S.HE OBSERVED THAT IT HAD NOT REPORTED THE FOLLOWING IT.S: SN. NATURE OF INTERNATIONAL TRANSACTION VALUE IN (RS.) I. ADVERTISING SPEND IN TERMS OF ART. 6.4 OF DISTRIBUTION AGREEMENT(04.10. 01) RS.2,07,82,059/-DEBITED IN P&L AS ADVERTIS - ING & SALES PROMOTION. II. MARKET INFORMATION REPORT IN TERMS OF ART 11 OF THE ABOVE AGREEMENT NOT QUANTIFIED III. CLAIM OF DAMAGED GOODS CLAIMED IN PROFIT & LOS S ACCOUNT RS.6,48, 60, 993/- AS AMOUNT OF WRITE DOWN ON CARRYING VALUE OF TRADED GOODS. DURING THE TP PROCEEDINGS,HE OBSERVED THAT THE ASSE SSEE HAD CLAIMED RS.6.48 CRORES UNDER THE HEAD WRITE DOWN OF TRADED GOODS. HE REQUIRED TH E ASSESSEE TO FILE EXPLANATION IN THAT REGARD.IT WAS STATED THAT,DURING THE YEAR,STOCK OF RS.6,48,60,993/-DECLARED AS UNFIT FOR SALE AND WAS DESTROYED.THE TPO DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHETHER THE AGENCY AGREEMENT ENTERED WITH THE AE REQUIRED IT TO DESTRO Y THE BRANDED PRODUCTS. AFTER GOING THROUGH THE DISTRIBUTION AGREEMENT(DA).DTD. 16/7/20 01,THE TPO HELD THAT IT WAS THE RESPONSIBILITY THE ASSESSEE TO NOTIFY DEFECTS IN TH E PRODUCTS TO THE AE,THAT THE DEFECTIVE PRODUCTS WERE TO BE KEPT FOR INSPECTION OF AE FOR T WO YEARS, THAT IT HAD NOT GOT ANYTHING ON RECORD TO PROVE THAT THE DEFECTIVE PRODUCTS WERE RE PORTED TO THE AE, THAT THE STOCK STATEMENT OF THE ASSESSEE DID NOT PROVE THAT DESTROYED PRODUC TS WERE MORE THAN TWO YEARS OLD, THAT THE AE WAS DUTY BOUND TO REPLACE THE GOODS OR TO REPAIR THE GOODS,THAT IT HAD NOT CLAIMED THE REPLACEMENT/REPAIRS AS STIPULATED IN THE TERMS OF T HE AGREEMENT,THAT EXPENDITURE OF RS.6.48 CRORES WAS THE EXPENDITURE OF THE AE AND THAT SAME WAS INCURRED BY ASSESSEE ON BEHALF OF THE AE. HE OBSERVED THAT IT WAS AN IT,THAT THE ASSESSEE HAD NOT REPORTED THE TRANSACTION, THAT IT WAS REQUIRED TO CLAIM DAMAGES FROM AE AS PER THE AG REEMENT, THAT THE COST OF GOODS PURCHASED HAD TO BE REIMBURSED TO THE ASSESSEE, THA T UNDER THE COMPARABLE UNCONTROLLED SITUATION THE AMOUNT OF COST OF GOODS WRITTEN OFF H AD TO BE REIMBURSED TO THE ASSESSEE,THAT THE 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 3 WRITTEN DOWN VALUE OF CARRYING COST OF GOODS HAD TO BE BASIS FOR APPLICATION OF CUP METHOD. FINALLY,HE DETERMINED THE ALP OF THE TRANSACTION AT RS.6.48 CRORES. 3.1. BEFORE THE DRP,THE ASSESSEE FILED OBJECTIONS AND MA DE DETAILED SUBMISSIONS. AFTER CONSIDERING AVAILABLE MATERIAL,IT HELD THAT THE TPO HAD RIGHTLY TREATED THE IMPUGNED SUM OF WRITE OFF IN THE CARRYING COST OF THE TRADED GOODS AS AN IT, THAT THE VALUE OF CLOSING STOCK WAS REDUCED BY THE ASSESSEE ON ACCOUNT OF CERTAIN UNSAL EABLE GOODS,THAT IT HAD A DIRECT IMPACT ON THE PROFIT AND LOSS OF THE ASSESSEE AS WELL AS THE ASSETS OF THE COMPANY, THAT THE DA PROVIDED FOR COMPENSATION IN RESPECT OF SAME FROM THE AE ,TH AT THE EVIDENCE PRODUCED BY IT IN THE FORM OF CERTIFICATES OF VALUE AND AGING SCHEDULES O F THE GOODS MERELY INDICATED THAT THE GOODS HAD IN FACT BECOME UNSALEABLE,THAT IT DID NOT ESTABLISH THE FACT THAT THE DEFECT WAS CAUSED DUE TO DEFAULT OF ASSESSEE OR THAT THERE WER E NO DEFECT AT THE TIME OF IMPORT, THAT IT COULD NOT BE HELD THAT WRITING-DOWN IN RESPECT OF T RADED GOODS WAS NOT RECOVERABLE FROM THE AE,THAT SIMILAR WRITING DOWN HAD BEEN UNDERTAKEN IN THE PRECEDING YEAR,THAT SUCH WRITING DOWN CLEARLY PROVED THAT PURCHASE PRICE OF IMPORTED GOODS WERE OVERSTATED. FINALLY IT HELD THAT TPO HAD RIGHTLY TREATED THE WRITE-DOWN IN THE VALUE OF TRADED GOODS AS AN IT,THAT ALP OF AN IT HAD TO BE NECESSARILY DETERMINED. IT FURTHER OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT THE WRITE-DOWN OF THE TRADING GOODS WAS AN EXT RA ORDINARY EVENT, WAS TOTALLY DEVOID OF MERIT, THAT WRITE-DOWN COULD NOT BE IGNORED FOR CAL CULATING GROSS PROFIT MARGIN THAT THERE WAS NO SEPARATE DEBIT NOTE.WITH REGARD TO THE ASSESSEE' S ALTERNATIVE ARGUMENT THAT WRITE-DOWN SHOULD BE CONSIDERED TO REDUCE THE PROFIT MARGIN OF THE EARLIER YEARS RIGHT FROM FY.2004 UP TO FY.2009,THE DRP HELD THAT THE ARGUMENT WAS TOTALLY WITHOUT ANY MERIT,THAT THE EVENTS HAPPENED IN THE PREVIOUS YEAR HAD TO BE CONSIDERED, THAT ACCOUNTS COULD NOT BE RE-CASTED ACCORDING TO CONVENIENCE OF THE AO/ASSESSEE, THAT T HE ASSESSEE, IN ITS AUDITED BALANCE SHEET, HAD WRITTEN DOWN THE CARRYING COST OF TRADED GOODS DURING THE YEAR UNDER APPEAL,THAT THERE WAS NO BASIS TO NOTIONALLY APPORTION THE SAME TO VA RIOUS YEARS IN THE PAST AND THEN CONTEND THAT EVEN AFTER WRITE-OFF THE PROFITS WERE AT ARM'S LENGTH IN ALL THOSE EARLIER YEARS,THAT NO SUCH CONTENTION HAD EVER BEEN RAISED BY THE ASSESSEE IN THOSE EARLIER YEARS, THAT THE SAME WAS AN AFTERTHOUGHT. 3.2. THE DRP ALSO CONSIDERED THE OTHER ALTERNATE CLAIM MADE BY THE ASSESSEE.IT WAS ARGUED THAT IF AT ALL ANY ADJUSTMENT WAS TO BE MADE, IT SH OULD BE RESTRICTED TO THE SUM OF RS.3.01 CRORES BY ADJUSTING THE VALUE OF IMPORTED GOODS BY TAKING THE CORRECT VALUE OF COST OF GOODS SOLD IN COMPUTING THE GROSS PROFIT MARGIN.THE DRP H ELD THAT AS PER THE AGREEMENT THE ASSESSEE WAS ENTITLED TO RECOVER THE COSTS OF DAMAG ED GOODS FROM AE,THAT THE COST OF THOSE 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 4 ITEMS WRITTEN OFF WAS NECESSARILY THE ALP,THAT THER E WAS NO REASON WHY THE ADJUSTMENT WAS TO BE RESTRICTED IN ANY MANNER,THAT IT WOULD BE ONLY W HEN IT WAS CONSIDERED THAT THE WRITE OFF WAS NOT RECOVERABLE FROM AE,THAT AS PER DA THE ASSE SSEE WAS ENTITLED TO RECOVER THE VALUE OF WRITE OFF,THAT THERE WAS NO JUSTIFICATION IN RESTRI CTING THE ADJUSTMENT. 3.3. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)ARGUED T HAT THE DEPARTMENTAL AUTHORITIES ERRED IN ALLEGING THAT THERE EXISTED AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE AE,THAT THEY ERRED IN CONTENDING THAT SAFILO ITALY WAS REQUIRED TO REPLACE THE GOODS OR REPAIR THE GOODS,THAT THEY FAILED TO APPRECIATE THAT THE EVENT OF 'WRITE DOWN ON CARRYING VALUE OF TRADED GOODS' WAS AN EXTRA-ORDINARY EVENT,THAT NONE OF THE COMPARABLE S HAD SUCH AN EXTRA ORDINARY EVENT,THAT WRITE DOWN OF TRADED GOODS SHOULD NOT BE CONSIDERED FOR CALCULATING PLI,THAT IN THE CASE OF THE ASSESSEE THE GOODS WERE LYING IN THE STOCK FOR SEVERAL YEARS,THAT SAME WERE NOT IN A SALEABLE CONDITION,THAT GROSS MARGIN EARNED BY THE ASSESSEE WAS AT ARMS LENGTH AFTER ALLOCATION OF STOCK WRITE DOWN TO RESPECTIVE AY.S., THAT THE TPO AND THE ASSESSEE HAD ACCEPTED GP/SALES RATIO AS THE PLI FOR DETERMINING ALP IN RESPECT OF IMPORTED GOODS,THAT EVEN AFTER CONSIDERING THE REVISED SALES/GP RATIO O F THE PETITIONER FOR THE YEAR UNDER APPEAL AFTER ALLOCATING STOCK WRITE DOWN TO RESPECTIVE YEA RS THE MARGIN WAS AS ARMS LENGTH VIS A VIS THE AVERAGE GROSS PROFIT TO SALES RATIO OF THE COMP ARABLES,THAT THE TPO HAD NOT ADOPTED ANY OF THE METHODS,AS ENVISAGED BY RULE 10B OF THE RULES,F OR MAKING ADJUSTMENT,THAT ONCE PROPERTY WAS DESTROYED CUP COULD NOT BE APPELIED.(PG.27 & 29 PARAS 64,67-68 OF ITA 7349 OF M 2012).HE RELIED UPON THE CASES OF M/S. JOHNSON & JO HNSON (IT APPEAL NO.1291 OF 2014, AY. 2006-07,DTD.03.04.2017 OF HONBLE BOMBAY HC),FEDERA L MOGUL AUTOMATIVE PRODUCTS (INDIA)PVT. LTD.(ITA/848 OF 2015,AY.2003-04 DTD.06. 11.2015 OF HONBLE DELHI HC),M/S. TUPPEWARE INDIA PVT.LTD. (ITA/2140/DEL/2011& OTHER APPEALS,AY.2003-04 DTD.29.08.2014), TRANSWITCH INDIA PVT. LTD.(ITA/6083/DEL/2010,AY.200 6-07,DTD. 30.03.2012) AND ACCOUNTING STANDARD (AS)-5. THE DEPARTMENTAL REPRESENTATIVE (DR) ARGUED THAT TR ANSACTION IN QUESTION WAS AN IT,THAT NO DETAILS OF DAMAGED STOCK WAS PROVIDED,THAT IT WAS N OT AN EXTRAORDINARY ITEM WHICH HAD TO BE EXCLUDED,THAT THE TPO HAD RIGHTLY APPLIED RPM FOR D ETERMINING THE ALP OF THE TRANSACTION, THAT PROVISONS OF SECTION 92(2)(B) WERE APPLICABLE. HE RELIED UPON THE CASE OF THOMAS COOK (INDIA)LTD.(70 TAXMANN.COM 322) 4. WE FIND THAT THE ASSESSEE HAD WRITTEN OFF GOODS WOR TH RS.6.28 CRORES DURING THE YEAR UNDER APPEAL,THAT IT HAD NOT SHOWN THE TRANSACTION AS AN IT,THAT THE TPO AND THE DRP WERE OF THE VIEW THAT STOCK WRITTEN OFF WAS AN IT AND TH AT ALP OF THE TRANSACTION HAD TO BE 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 5 DETERMINED,THAT THEY REFERRED TO THE CLAUSE 25 OF T HE DA ENTERED IN TO BY THE AE WITH THE ASSESSEE,THAT THE ASSESSEE ON THE BASIS OF SAME AGR EEMENT CONTENDED THAT SAME PROVED THE STAND TAKEN BY IT.IN OUR OPINION, IT WOULD BE USEFU L TO GO THROUGH THE RELEVANT PORTION OF THE AGREEMENT I.E.CLAUSE 25.2 OF THE AGREEMENT.AS PER T HE SAID CLAUSE THE ASSESSEE HAD TO NOTIFY THE ANY CLAIM REGARDING QUANTITY,DEFECTS IN QUALITY,LACK OF COMPLIANCE UPON ARRIVAL OF THE PRODUCTS,THAT THE GUARANTEE WOULD BE LIMITED TO DEFECTS OF PRODUCTS ARISING FROM DEFECTS IN PLANNING,MATERIALS OR MANUFACTURING ATTR IBUTABLE TO THE AE,WHICH IN TURN WOULD RENDER THE PRODUCT UNSALEABLE BY THE ASSESSEE.IT WA S ALSO PROVIDED IN THE SUB CLAUSE THAT GUARANTEE WOULD NOT BE VALID IN ABSENCE OF ASSESSEE S PROOF OF PROPER USE,MAINTENANCE AND STORAGE.THE DEFECT WAS TO BE LODGED WITH THE A E WITH IN A PERIOD OF 30 DAYS.THE AE HAD PROVIDED GUARANTEE OF THE GOODS FOR A PERIOD OF TWO YEARS FROM THE DATE OF DELIVERY. A BARE READING OF THE ABOVE TERMS AND CONDITIONS IT IS CLEAR THAT THE ASSESSEE COULD RETURN THE GOODS,IF THERE WAS ANY MANUFACTURING DEFECT.THE RE WAS NO CONTRACTUAL OBLIGATION TO REPLACE GOODS WHEN THE SAME HAD BEEN DAMAGED OR DES TROYED AFTER THE TITLE OF GOODS WAS TRANSFERRED TO THE ASSESSEE.GENERALLY ALL MANUFACTU RERS REPLACE THE GOODS SUPPLIED BY THEM TO THE AGENTS/WHOLESALERS OR SEMI WHOLESALER IF IT IS FOUND THAT SAME ARE SUFFERING FROM MANUFACTURING DEFECTS.BESIDES,SOME TIME PERIOD IS A LSO FIXED FOR RETURNING BACK THE DEFECTIVE PRODUCTS TO THE SUPPLIER.CLAUSE 25 OF THE AGREEMENT,AS REFERRED TO ABOVE,FALLS IN THE CATEGORY OF GENERAL-REPLACEMENT-GUARANTEE GIVEN BY THE MANUFACTURERS.WE ARE NOT INCLINED TO CONFIRM THE VIEWS OF THE DRP THAT THE A GREEMENT WAS ALSO FOR REPLACEMENT OF THE GOODS THAT WERE NOT DEFECTIVE I.E. WERE NOT SAL ABLE BECAUSE OF REASONS OTHER THAN MANUFACTURING DEFECT.IN OTHER WORDS,IT IS NOT AN OM NIBUS AGREEMENT COVERING ALL THE EVENTUALITIES IN ITS BROADER UMBRELLA.SO,WE HOLD TH AT THE DRP SHOULD NOT HAVE HELD THAT IT WAS AN IT.THE AE WAS NOT INVOLVED IN ANY MANNER IN WRITING OFF OF THE OBSOLETE STOCK.THE GOODS WERE SOLD BY THE AE IN THE EARLIER YEARS AND IN THE YEAR UNDER APPEAL AND SAME WERE FOUND TO BE SOLD AT ARMS LENGTH.FOR THE PURCHASES FROM THE AE NO ADJUSTMENT WAS MADE BY THE TPO IN ANY OF THE YEARS.SO CALLED GUARANTEE PER IOD WAS ALSO OVER FOR THE GOODS THAT WERE RECEIVED,BY THE ASSESSEE,BEFORE TWO YEARS.THUS ,THERE WAS NO RELATION BETWEEN THE WRITING OFF OF OBSOLETE STOCK AND THE PURCHASES MAD E BY THE ASSESSEE DURING THE YEAR UNDER APPEAL.THE INDIAN ENTITY HAD TAKEN A DECISION CONSI DERING THE LOCAL GROUND REALITIES AND NONE OF THE INGREDIENTS,THAT MAKE A TRANSACTION AN IT.,WAS EXISTING IN THE WRITING OFF CARRIED OUT BY THE ASSESSEE.EACH AND EVERY BUSINESS TRANSAC TION CANNOT BE HELD AN IT. 4.1. OBSOLENCE OF ITEMS LIKE SUNGLASSES OR READYMADE GAR MENTS OR FOOTWARES OR FOR THAT 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 6 MATTER ANY PRODUCT RELATED TO FASHION IS A WELL KNO WN FACT OF COMMERCIAL AND BUSINESS WORLD. SHELF-LIFE OF SUCH ITEMS IS NOT VERY LONG AN D WITH THE PASSAGE OF TIME THEY BECOME OUT OF FASHION ITEMS.IT IS ALSO A KNOWN FACT IN T HE BUSINESS OF SUNGLASSES THE SALESMEN USE EYEWARES FOR DEMONSTRATION PURPOSE AND THAT SUCH AN ITEM WOULD ALSO BECOME UNSALABLE.TO CLEAR SUCH INVENTORIES BUSINESSMEN HAVE TO FIND SOM E WAY.WE FIND THAT IN THE CASE UNDER CONSIDERATION,THE ASSESSEE DECIDED TO WRITE OFF AND DESTROY THE OBSOLETE STOCK-IN-TRADE.IN ITS MEETING THE BOARD OF DIRECTORS OF THE ASSESSEE-COM PANY PASSED A RESOLUTION REGARDING WRITING OFF OF GOODS.AGE-WISE INVENTORY OF THE OBSO LETE STOCK WAS PREPARED BEFORE WRITING OFF THE STOCK THAT REMAINED UNSOLD.IT HAD FURNISHED THE EVIDENCE OF DESTROYING THE GOODS BEFORE THE DEPARTMENTAL AUTHORITIES.HERE,WE WOULD L IKE TO REFER TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF FEDERAL MOG UL AUTOMATIVE PRODUCTS (INDIA)PVT. LTD.(SUPRA) AND IT READS AS UNDER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST AN ORDER DATED 25 TH MARCH. 2015 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL ('TTAT') IN ITA NO.57 69/DEL/2011 FOR THE ASSESSMENT YEAR ('AY 1 ) 2003-04. THE QUESTION URGED BY THE REVENUE IS WHETH ER THE COMMISSIONER OF INCOME TAX (APPEAL) [CIT(A)] ERRED IN ACCEPTING THE PLEA OF THE ASSESSE E THAT THE PROVISION FOR STOCK OBSOLESCENCE/INVENTO RY FOR A SUM OF RS.2,53,06,608/- SHOULD BE EXCLUDED FR OM THE NET OPERATING EXPENDITURE OF THE ASSESSEE FO R DETERMINING THE NET OPERATING MARGIN SINCE IT WA S AN ABNORMAL AND EXTRAORDINARY EXPENDITURE? 2. A PERUSAL OF THE ORDER OF THE CIT (A) IN THIS CASE REVEALS THAT THE ASSESSEE APPLIED THE TRANSACTIONA L NET MARGIN METHOD TO THE IMPORT OF RAW MATERIAL FRO M ITS ASSOCIATED ENTERPRISE. THE ASSESSEE UNDERTOOK A TRANSFER PRICING STUDY OF EIGHT COMPARA BLES WITH THE PROFIT LEVEL INDICATOR BEING OPERATIN G MARGIN ON OPERATING INCOME. SINCE ON SUCH ANALYSIS, THE OPERATING MARGIN ON OPERATING INCOME OF THE ASSESSEE (10.94%) WAS HIGHER THAN THE ARITHMETIC ME AN OF THE WEIGHTED AVERAGE MARGINS EARNED BY THE COMPARABLES (8.04%), THE ASSESSEE CONTENDED THAT TH E INTERNATIONAL TRANSACTIONS BETWEEN IT AND ITS AES WERE AT ARM'S LENGTH. 3. THE TRANSFER PRICING OFFICER (TPO) RE-COMPUTED THE NET OPERATING MARGIN AND INCLUDED THE PROVISION FOR OBSOLESCENCE IN THE SUM OF RS. 2,53,0 6,608 AS PART OF THE OPERATING EXPENDITURE OF THE ASSESSEE. AS A RESULT, THE DIFFERENCE OF RS.1,81,79 ,699 IN THE NET OPERATING MARGIN WAS ATTRIBUTED TO THE IMPORT OF RAW MATERIALS AND ACCORDINGLY, THE TPO MA DE A DOWNWARD ADJUSTMENT TO THE VALUE OF IMPORT OF RAW MATERIALS BY THE ASSESSEE FROM ITS AE. 4. THE CIT (A) AFTER ANALYSING THE STOCK OBSOLESCEN CE TO SALES RATIO FOR THE COMPARABLES FOUND THAT NONE OF THE COMPARABLE COMPANIES, EXCEPT KIRLOSKAR OIL ENGINES LTD. (KOEL) HAD MADE ANY PROVISION FOR STOCK OBSOLESCENCE/NON-MOVING INVENTORY. IN THE CASE OF KOEL, THE PROVISION FOR STOCK OBSOLESCENCE WAS ONLY 1.03% OF ITS SALES WHEREAS IT WAS 8.98% AS FAR AS THE ASSESSEE WAS CONCERNED. THE CIT (A) ALSO NOTED THAT THE MEAN OF THE REVISED MARGIN OF THE COMPARABLE COMPANIES AFTER CONSIDERING THE PROVISION FOR NON-MOVING INVENTORY AS NON-OPERATING EXPENSES WAS 8.17% AS COMPARED TO 10.85% IN THE CASE OF THE ASSESSEE. THE CIT(A) ACCEPTED THE PLEA OF THE ASSESSEE THAT SINCE THE PROVISION FOR STOCK OBSOLESCENCE WAS 'ABN ORMAL' AND EXTRAORDINARY IN NATURE, IT WAS REQUIRED TO BE EXCLUDED FOR THE COST OF THE ASSESSEE IN COMP UTING ITS OPERATING MARGIN. SINCE THE SAID ITEM OCCURRED ONLY IN KOEL. THE CIT (A) WAS OF THE OPINI ON THAT ITS MARGIN NEEDED TO BE RE-WORKED. THE RATIONALE FOR THIS WAS THAT THE SAME TREATMENT HAD TO BE ACCORDED TO THE TESTED PARTY I.E. THE ASSESSE E AND ITS COMPARABLES. SINCE THE ASSESSEE'S ALP WAS A BOVE THE MARGIN OF THE COMPARABLES, THE PROVISO TO SECTION 92 C (2) OF THE ACT WAS HELD NOT TO APPL Y. 5 HAVING HEARD THE LEARNED COUNSEL FOR THE REVENUE, THE COURT IS UNABLE TO DISCERN ANY LEGAL INFIRMITY IN THE APPROACH OF THE CIT (A) WHICH WAS UPHELD BY THE ITAT IN THE IMPUGNED ORDER. IT IS SOUGHT TO BE SUGGESTED THAT THE ASSESSEE MAKES A PROVISION FOR S TOCK OBSOLESCENCE YEAR AFTER YEAR AND,THEREFORE , THIS COULD NOT BE TREATED AS 'EXTRAORDINARY' OR 'NO N-RECURRING'. HOWEVER, WHEN ONE PERUSES THE ORDER O F THE CIT (A), IT IS SEEN THAT THE QUESTION WAS NOT W HETHER THE ASSESSEE WAS CLAIMING IT ONLY AS A ONE-T IME MEASURE BUT WHETHER IT WAS GAINING ANY UNDUE ADVANT AGE IN USING THIS DEVICE AS A MEASURE FOR AVOIDING TAX. ULTIMATELY, THE ENTIRE EXERCISE OF DE TERMINING ALP FOR INTERNATIONAL TRANSACTIONS IS TO ENSURE THAT THERE IS NO AVOIDANCE OF TAX BY AN ASSE SSEE BY RESORTING TO AN ACCOUNTING DEVICE. THE COUR T 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 7 IS UNABLE TO HOLD THAT THE PROVISION MADE FOR STOCK OBSOLESCE THE ASSESSEE RESULTED IN ANY UNDUE ADVANTAGE TO IT. THE COMPARABILITY ANALYSIS UNDERTA KEN BY THE CIT (A) WHICH HAS BEEN AFFIRMED BY THE ITAT DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. 6. NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS DISMISSED. 4.2. WE FIND THAT THE YEAR UNDER APPEAL IS NOT THE FIRST OCCASION WHEN THE ASSESSEE HAD WRITTEN OFF OUT-OF-FASHION,OLD AND OBSOLETE STOCK.I N THE EARLIER YEARS ALSO,IT HAD CARRIED OUT SAME EXERCISE AND THE TPO HAD NOT MADE ADJUSTMENT T OWARDS SUCH WRITING OFF OF STOCK.IN THE AY.S.2004-05 TO 2006-07,IT HAD WRITTEN OFF STOC K AND NO TP ADJUSTMENT WAS MADE.IT IS TRUE THAT THE PRINCIPLES OF RES JUDICATA DO NOT APP LY TO INCOME TAX PROCEEDINGS. BUT, CONSISTENCY DEMANDS THAT TPO/AO SHOULD RECORD THE R EASONS IF THEY WANT TO MAKE SOME ADDITION IN A PARTICULAR YEAR-ESPECIALLY IF ASSESSE ES SIMILAR CLAIM IS ACCEPTED IN SCRUTINY ASSESSMENT IN THE EARLIER YEARS.BASIC PRINCIPLES OF TAXATION JURISPRUDENCE STIPULATE THAT WITHOUT ASSIGNING SOME PLAUSIBLE REASON STAND TAKEN IN EARLIER AY.S. SHOULD NOT BE DISTURBED IN LATER YEARS.IN THE MATTERS OF DALMIA P ROMOTERS AND DEVELOPERS (P.)LTD.(281 ITR346) AND EXCEL INDUSTRIES (358ITR295)HAVE UPHELD THE ABOVE PRINCIPLE.IN THE CASE OF DALMIA PROMOTERS AND DEVELOPERS (P.)LTD.(SUPRA),THE HONBLE COURT HAS HELD AS FOLLOW: FOR REJECTING THE VIEW TAKEN FOR THE EARLIER ASSESS MENT YEARS, THERE MUST BE A MATERIAL CHANGE IN THE FACT SITUATION. THERE WAS NO GAINSAYI NG THAT THE PREVIOUS VIEW WOULD HAVE NO APPLICATION EVEN IN CASES WHERE THE LAW ITSELF HAD UNDERGONE A CHANGE BUT BEFORE AN EARLIER VIEW COULD BE UPSET OR DIGRESSED FROM, ONE OF TWO THINGS MUST BE DEMONSTRATED, NAMELY, A CHANGE IN THE FACT SITUATION OR A MATERIA L CHANGE IN LAW WHETHER ENACTED OR DECLARED BY THE SUPREME COURT. IN THE ABSENCE OF A CHANGE IN THE FACTS OR ANY ADDITIONAL INPUT THERE WAS NO COMPELLING REASON FOR TAKING A D IFFERENT VIEW. WE DO NOT FIND ANY REASON,IN THE ORDER OF THE AO/TP O,FOR NOT ALLOWING WRITE OFF OF OBSOLETE STOCK FOR THIS YEAR.IN OTHER WORDS,THEY HA VE MADE ADDITION WITHOUT MENTIONING THE NEW FACTS THAT HAD COME TO THEIR NOTICE WHILE COMPL ETING THE ASSESSMENT OF THE YEAR UNDER APPEAL AND WHICH WERE DIFFERENT FORM EARLIER AY.S. 4.3. INDIAN PARLIAMENT HAD INTRODUCED THE TP PROVISIONS IN THE STATUTE TO CURB THE MALPRACTICES OF THOSE ASSESSEES WHO WOULD SHIFT PRO FIT OUTSIDE INDIA AND WOULD PAY NO OR LESS TAXES IN INDIA BY SHOWING LESSER MARKET VALUE OF GOODS SOLD/PURCHASED OR SERVICES OFFERED/AVAILED TO/FROM THEIR AE.S.THE BASIC INTENT ION BEHIND THE PROVISIONS OF CHAPTER X IS TO ENSURE THAT ASSESSEES SHOULD PURCHASE OR SELL THEIR GOODS/SERVICES AT THE RATES THEY WOULD PAY OR CHARGE FROM THE INDEPENDENT THIRD PART IES.FAIR MARKET VALUE SHOULD PREVAIL IN THE TRANSACTIONS THAT ARE ENTERED IN TO BY THE AE.S .INCOME TAX RULES, 1962 (RULES) STIPULATE THE METHODOLOGY FOR COMPUTATION OF TP ADJUSTMENTS.A S PER THE EXISTING RULES FOR DETERMINING THE APL OF A TRANSACTION,THE TPO.S SHOU LD USE ANY OF THE SIX METHODS PROVIDED THEREIN.HE APPLIED CUP AS THE MOST APPROPR IATE METHOD FOR MAKING ADJUSTMENT TO 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 8 THE INCOME OF THE ASSESSEE.BUT IN OUR OPINION CUP W AS NOT THE METHOD TO DETERMINE THE ALP OF THE DISPUTED TRANSACTION.LASTLY,WE HOLD THAT DESTROYING THE OBSOLETE STOCK AFTER WRITING IT OFF WAS AN EXTRA ORDINARY EVENT. CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT TH E DRP WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE TPO WHO HAD MADE UPWARD ADJUSTMENT UNDER THE HEAD WRITING OFF OF OBSOLETE STOCK.GOA-2 IS DECIDED IN FAVOUR OF THE AS SESSEE. 5. TP ADJUSTMENT (RS.17.50 LAKHS)IN RELATION TO PROVIS ION OF MARKET INFORMATION SERVICES(MIS) PROVIDED TO THE AE IS THE SUBJECT MATTER OF THE THI RD GROUND OF APPEAL.DURING THE TP PROCEED -INGS,THE TPO NOTED THAT THE ASSESSEE HAD NOT REPOR TED ITS PROVISION OF SERVICE IN PROVIDING MARKET INFORMATION REPORT TO ITS AE AS AN IT,THAT T HE AE HAD NOT COMPENSATED THE ASSESSEE FOR THE SERVICES.HE DETERMINED THE ADJUSTMENT AT 2% OF THE TURNOVER OF THE ASSESSEE AT RS 70,03,313/- 5.1. AFTER CONSIDERING THE OBJECTIONS,FILED BEFORE IT,TH E DRP HELD THAT THE ASSESSEE WAS REQUIRED TO PROVIDE LOCAL MARKET INFORMATION TO ITS AE AS PER DA,THAT AGREEMENT BENEFITTED BOTH,THAT THE ARGUMENT OF THE ASSESSEE THAT IT WAS THE ASSESSEE'S PREROGATIVE TO CONDUCT ITS BUSINESS IN ANY MANNER WAS NOT ACCEPTABLE,THAT THE TP PROVISIONS WERE DISTINCT FROM SECTION 37 WHICH DEALT WITH EXPENSES INCURRED FOR BUSINESS, THAT UNDER THE TP PROVISIONS THE ASSESSEE HAD TO DEMONSTRATE THAT UNDER UNCONTROLLED CONDITIO NS,THAT NO COMPENSATION WAS TO BE RECEIVED FROM ANOTHER ENTITY TO WHICH MARKET INFORM ATION WAS PROVIDED,THAT THE ASSESSEEE FAILED TO DO SO,THAT IT DID NOT EVEN REPORT THE TR ANSACTION AS AN IT.REFERRING TO THE PROVISIONS OF RULE 10 B,THE DRP HELD THAT THE ASSESSEE COULD A DOPT ANY OTHER METHOD,THAT IN THE PRECEDING YEARS,ON THE SAME ISSUE,THE DRP HAD ACCEP TED 0.5% OF TURNOVER TO BE REASONABLE. FINALLY,IT RESTRICTED THE ADJUSTMENT TO 0.5% OF THE TURNOVER OF THE ASSESSEE I.E.TO RS.17.05 LAKHS. 5.2. BEFORE US,THE AR CONTENTED THAT THE ASSESSEE DID NO T PROVIDE ANY SERVICE TO SAFFILO ITALY, THAT NO MARKET INFORMATION REPORT OR ANY OTHER MATE RIAL WAS COLLATED BY IT FOR THE PURPOSE OF PROVIDING IT TO ITS AE,THAT THE TPO/DRP HAD DETERMI NED THE ALP ON AN AD HOC BASIS I.E. WITHOUT FOLLOWING ONE OF THE PRESCRIBED METHOD, THA T APPLYING RATE OF HALF A PERCENT OF THE TURNOVER OF THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW.HE REFERRED TO THE CASES OF KODAK INDIA PVT.LTD.(ITA/7349/MUM/2012),NI MBUS COMMUNICATIONS (38SOT246); NESS TECHNOLOGIES (INDIA) PVT.LTD.(ITA/696 AND 1006 /MUM/2016) AND KODAK INDIA PVT. LTD.(ITXA NO.15 OF 2014-HONBLE BOMBAY HIGH COURT, DATED 11.07.2016) AND STATED THAT IT 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 9 WAS MANDATORY FOR THE TPO TO COMPUTE ALP BY APPLYIN G ONE OF THE PRESCRIBED METHODS.THE DR SUPPORTED THE ORDER OF THE DRP AND STATED THAT T HE DRP HAD GIVEN A SUBSTANTIAL RELIEF TO THE ASSESSEE. 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE TPO HAD HELD THAT THE ASSESSEE WAS PROVIDING INFORM ATION TO ITS AE,THAT IT WAS NOT BEING COMPENSATED FOR SUCH SERVICES,THAT HE REFERRED TO T HE CLAUSE 11 OF THE DA IN HIS SUPPORT TO HOLD THAT IT WAS DUTY BOUND TO PROVIDE MIS ON QUART ERLY BASIS,THAT HE ESTIMATED THE ALP OF THE SAID ACTIVITY AT 2% OF THE TOTAL TURNOVER OF TH E ASSESSEE,THAT THE DRP REDUCED IT TO 0.5%.IN OUR OPINION THERE IS NOTHING IN THE DA THAT LEADS T O THE CONCLUSION THAT THE ASSESSEE WAS REQUIRED TO FURNISH MIS TO ITS AE.EVEN IF ,FOR THE SAKE OF ARGUMENT IT IS ACCEPTED,THEN THE AO/DRP HAD NOT FOLLOWED THE VALID PROCEDURE FOR MAK ING THE ADJUSTMENT.AS PER THE PROVISIONS OF CHAPTER X OF THE ACT,THE DEPARTMENTAL AUTHORITIES ARE REQUIRED TO FOLLOW ONE OF THE METHODS AS ENVISAGED BY RULE 10 OF THE RULES.TH EY CANNOT MAKE AD-HOC DISALLOWANCE. WHILE MAKING ASSESSMENT UNDER OTHER SECTIONS OF THE ACT AD HOC DISALLOWANCE CAN BE MADE E.G. RATE OF GP OR EXPENSES INCURRED FOR PERSONAL USE OF THE PARTNERS ETC.BUT,UNDER SECTION 92 IT IS NOT POSSIBLE.IT IS A SPECIAL SECTION WHICH PR ESCRIBES STRICT RULES FOR THE ASSESSEE AS WELL AS THE AO. BOTH OF THEM ARE SUPPOSED TO ADHERE TO THE RULES.HERE,WE WOULD LIKE TO REFER TO THE CASE OF M/S. KODAK INDIA PVT.LTD.,DECIDED BY THE HO NBLE BOMBAY HIGH COURT(SUPRA)AND IT READS AS UNDER: 1.THIS APPEAL UNDER SECTION 260-A OF THE INCOME TA X ACT, 1961 (THE ACT) CHALLENGES THE ORDER DATED 30 TH APRIL, 2013 PASSED BY THE INCOME TAX APPELLATE TRI BUNAL (THE TRIBUNAL ). THE IMPUGNED ORDER IS IN RESPECT OF ASSESSMENT YEA R 2007-08. 2.BEING AGGRIEVED BY THE IMPUGNED ORDER OF THE TRIB UNAL, THE REVENUE HAS PREFERRED THE PRESENT APPEAL RAISING THE FOLLOWING TWO QUESTIONS FOR OUR CONSIDERATION :- XXXXX (3) THE RESPONDENT ASSESSEE IS AN INDIAN SUBSIDIARY OF M/S. EASTMAN KODAK CO. USA (EKC). DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR THE RESPONDENT ASSESSEE SOLD ITS IMAGING BUSINESS TO ONE M/S. CARESTREAM HEALTH INDI A PVT. LTD, THE BUYER COMPANY I.E. M/S. CARESTREAM HEALTH INDIA PVT. LTD. WAS A INDIAN SUBS IDIARY OF M/S. CARESTREAM INC. AN USA COMPANY. THE CASE OF THE RESPONDENT ASSESSEE WAS TH AT THE TRANSACTION OF SALE OF IMAGING BUSINESS BY THE RESPONDENT ASSESSEE TO M/S. CARESTR EAM HEALTH INDIA PVT. LTD. WAS A TRANSACTIONS BETWEEN THE TWO DOMESTIC NON ASSOCIATE D ENTERPRISES. HENCE 'THE PROVISION OF CHAPTER X OF THE ACT WOULD HAVE NO APPLICATION. THU S, NOT EVEN DECLARED THIS TRANSACTION IN ITS 3 CEB REPORT. 4. HOWEVER THE TRANSFER PRICING OFFICER (TPO) WHILE EXAMINING ANOTHER TRANSFER PRICING ISSUE CAME ACROSS THE IMPUGNED TRANSACTION. IT HELD ON THE BASIS OF SECTION/92B(2) OF THE ACT THAT EVEN IF THE TRANSACTION BETWEEN KODAK\INDIA PV T. LTD. ' AND M/S. CARESTREAM HEALTH INDIA PVT. LTD. WAS BETWEEN TWO DOMESTIC NON ASSOCIATED ENTERPRISES,YET IT WOULD STILL BE CONSIDERED TO BE AN INTERNATIONAL TRANSACTION AND C HAPTER X OF',THE ACT WOULD BE APPLICABLE.THIS ON THE BASIS THAT THE HOLDING COMPA NIES OF BOTH THE RESPONDENT ASSESSEE AS WELL AS M/S. CARESTREAM HEALTH INDIA PVT. LTD. HAD ENTERED INTO A GLOBAL AGREEMENT FOR SALE 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 10 OF ITS BUSINESS. THIS GLOBAL AGREEMENT WAS PRIOR IN POINT OF TIME TO THE SALE OF IMAGING BUSINESS BY THE RESPONDENT ASSESSEE TO M/S. CARESTR EAM HEALTH INDIA PVT. LTD. THE ASSESSING OFFICER PASSED A DRAFT ASSESSMENT ORDER UNDER SECTI ON 144C OF THE ACT ON THE BASIS OF THE ORDER OF THE TPO. 5. BEING AGGRIEVED, THE RESPONDENT ASSESSEE APPROAC HED THE DISPUTE RESOLUTION PANEL (DRP). HOWEVER, THE VIEW OF THE TPO WAS UPHELD BY THE DRP. 6. ON APPEAL, THE TRIBUNAL ON INTERPRETATION OF SEC TION ; 92B (2) OF THE ACT, AS IN FORCE DURING THE SUBJECT ASSESSMENT YEAR CONCLUDED THAT THE TRAN SACTION WOULD NOT BE COVERED BY THE DEFINITION OF INTERNATIONAL TRANSACTION. THIS INTER ALIA ON THE GROUND THAT THE PRIOR TO AMENDMENT TO SECTION 92B(2) OF THE ACT W.E.F. 1 ST APRIL, 2015 SUCH A TRANSACTION WAS NOT DEEMED TO BE AN INTERNATIONAL TRANSACTION. FURTHE R, THE IMPUGNED ORDER ALSO EXAMINED THE ISSUE ON FACTS AND AND HELD THAT EVEN IF THE REVENU E'S INTERPRETATION IS ACCEPTED, NO ADDITION ON ACCOUNT OF ARMS LENGTH PRICE..(ALP) IS WARRANTED . MOREOVER, IT ALSO HELD THAT THE ALP WAS SOUGHT TO BE DETERMINED BY A METHOD NOT PRESCRI BED UNDER SECTION 92C OF THE ACT AND THE PRAYER FOR RESTORATION TO THE TPO TO APPLY THE PRESCRIBED METHOD WAS REJECTED.(EMPHASIS BY US). 7. THE GRIEVANCE OF THE REVENUE AS EVIDENT FROM THE QUESTION FORMULATED IS ONLY IN RESPECT OF INTERPRETATION OF SECTION 92B OF THE ACT. ON THE IN TERPRETATION PUT ON IT BY THE REVENUE, THE IMPUGNED TRANSACTION WOULD BE COVERED BY CHAPTER X OF THE ACT. 8. THE REVENUE HAS NOT RAISED ANY GRIEVANCE TO THE FINDING IN THE IMPUGNED ORDER OF THE TRIBUNAL, THAT EVEN IF ONE PROCEEDS ON THE BASIS OF THEORY OF PRIOR AGREEMENT, AS PROVIDED IN SUB-SECTION 2 OF SECTION 92B OF THE ACT, YET THE EN TIRE EXERCISE OF TRANSFER OF IMAGING BUSINESS DONE BY THE KODAK INDIA PVT. LTD. TO M/S. CARESTREA M HEALTH INDIA PVT. LTD. WAS INDEPENDENTLY DONE ON ITS OWN TERMS AND CONDITIONS. THE GLOBAL AGREEMENT ARRIVED AT BETWEEN ITS HOLDING COMPANIES DID NOT IN ANY MANNER CONTROL THE TERMS ARRIVED AT BETWEEN THE KODAK INDIA PVT. LTD. AND M/S. CARESTREARN HEALTH P VT. LTD. THE AFORESAID FINDING IS NOT DISPUTED BY THE REVENUE BEFORE US. 9. FURTHER,WE FIND THAT THE IMPUGNED ORDER OF THE T RIBUNAL RENDERED A FINDING OF FACT THAT THE ALP FOR TRANSFER OF ITS IMAGING BUSINESS ,AS DETERM INED BY THE RESPONDENT ASSESSEE WAS REASONABLE IS NOT DISPUTED. THE IMPUGNED ORDER NOTE S THAT AVERAGE GROSS PROFIT WAS RS.4.49 CRORES AND RESPONDENT ASSESSEE HAD WORKED OUT GROSS PROFIT AT RS,5.98 CRORES TO WORK OUT THE CONSIDERATION RECEIVABLE. THUS, QUITE REASONABLE. T HIS FINDING OF FACT HAS ALSO NOT BEEN CHALLENGED BY THE REVENUE. 10. WE MUST ALSO RECORD THE FACT THAT THE ALP WAS A RRIVED AT BY THE TRANSFER PRICING OFFICER (TPO) BY NOT ADOPTING ANY OF THE METHODS PR ESCRIBED UNDER SECTION 92C OF THE ACT. THE METHOD TO DETERMINE THE ALP ADOPTED WAS NOT ONE OF THE PRESCRIBED METHODS FOR COMPUTING THE ALP. IT WAS NOT EVEN ANY METHOD PRESC RIBED BY THE BOARD. AT THE RELEVANT TIME, I.E. FOR A.Y. 2008-09 SECTION 92C OF THE ACT DID NOT PROVIDE FOR OTHER METHOD AS PROVIDED IN SECTION 92C(1)(F) OF THE ACT. THE IMPUG NED ORDER OF THE TRIBUNAL HOLDS THAT THE METHOD ADOPTED BY THE REVENUE TO DETERMINE THE ALP WAS ALIEN TO THE METHODS PRESCRIBED UNDER SECTION 92C OF THE ACT. IN THE ABOVE CIRCUMST ANCES, THE TRIBUNAL DECLINED TO RESTORE THE,ISSUE TO THE ASSESSING OFFICER FOR RE-DETERMINI NG THE ALP BY ADOPTING ONE OF THE METHODS AS LISTED OUT IN SECTION 92C OF THE ACT. TH IS FINDING OF THE TRIBUNAL HAS ALSO NOT BEEN CHALLENGED BY THE REVENUE . 11. IN VIEW OF THE FACT THAT THE REVENUE HAS ACCEPT ED THE ORDER OF THE TRIBUNAL ON ITS FINDING ON FACTS ON THE TWO ISSUES AS POINTED OUT HEREINABO VE AS WELL AS THE REFUSAL OF THE TRIBUNAL TO RESTORE THE ISSUE OF DETERMINATION OF ALP TO THE TP O BY FOLLOWING ONE OF THE METHODS PRESCRIBED UNDER SECTION 92C OF THE ACT. THUS, THE QUESTIONS AS FORMULATED FOR OUR CONSIDERATION EVEN IF ANSWERED IN FAVOUR OF THE REV ENUE WOULD BECOME ACADEMIC IN THE PRESENT FACTS. THUS, WE SEE NO REASON TO ENTERTAIN THIS APPEAL. HOWEVER, WE MAKE IT CLEAR THAT THE ISSUES OF LAW WHICH HAS BEEN RAISED IN THE PRES ENT APPEAL ARE LEFT OPEN FOR CONSIDERATION IN AN APPROPRIATE CASE. 588/M/15 & 4940/M/15- SAFILO INDIA PRIVATE LIMITED 11 RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENT OF THE HO NBLE BOMBAY HIGH COURT,WE DECIDE GROUND NO.3 IN FAVOUR OF THE ASSESSEE,AS THE DRP HA S APPROVED THE AD HOC ADJUSTMENT WITH REGARD TO AN IT. ITA/4940/MUM/2015,AY.2011-12: 6. SOLITARY GROUND OF APPEAL IS ABOUT ADJUSTMENT MADE BY THE TPO AND CONFIRMED BY THE DPR UNDER THE HEAD MIS.FOLLOWING THE ORDER FOR THE EARL IER AY.,WE ALLOW THE GROUND RAISED BY THE ASSESSEE FOR THE YEAR UNDER APPEAL AS A RESULT,APPEALS FILED BY THE ASSESSEE FOR BOTH THE AY.S. STAND ALLOWED. .. !' !#$ . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY,2018. %&' ()*+&,- 12 , 2018 SD/- SD /- ( / RAM LAL NEGI ) ( / RAJENDRA ) , ./ / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 12 .01..2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.