Kehin India Manufacturing Pvt. Ltd., Gurgaon V. Addl, New Delhi

ITA 6085/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6782 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBHA KANT SAHU SENIOR
• Keywords: Related party transaction; Capital asset; Transfer pricing; Opportunity of being heard; International transaction; Rule of consistency; Set aside
• Section: 234B; 10B; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-1 : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6085/DEL./2016 (ASSESSMENT YEAR : 2012-13) M/S. KEIHIN INDIA MANUFACTURING PVT. LTD., VS. ADDL .CIT, (FORMERLY KEIHIN PANALFA LTD.) SPL. RANGE 5, 2315/23, OPPOSITE PAYAL CINEMA, NEW DELHI. BEHIND KARIM RESTAURANT, DELHI ROAD, GURGAON 122 001 (HARYANA). (PAN : AAACK5968J) (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. PALLAVI DINODIA, CA MS. MONIKA BHARDWAL, CA REVENUE BY : SHRI SUBHA KANT SAHU, SENIOR DR DATE OF HEARING : 09.10.2019 DATE OF ORDER : 18.10.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER THE APPELLANT, M/S. KEIHIN INDIA MANUFACTURING PVT. LTD. (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 21.10.2016 PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASS ED BY THE LD. DRP/TPO UNDER SECTION 144C (3) READ WITH SECTION 14 4C (13) OF ITA NO.6085/DEL/2016 2 THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUNDS INTER ALIA THAT :- 1. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF ASSESSEE'S CASE IN MAKING ADDITIONS/DISALLOWANCES OF RS.2,72,86,266/- ON WHOL LY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS. 2 THE ORDER OF ASSESSMENT IS BAD IN LAW. TRANSFER PRICING GROUNDS 3 THE LD/ AO/TPO/DRP HAVE GROSSLY ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE IN M AKING AN ADJUSTMENT OF RS.72,01,410/- IN RELATION TO INTERNA TIONAL TRANSACTION OF PURCHASE OF TRADED GOODS BY THE ASSE SSEE FROM THE ITS ASSOCIATED ENTERPRISE (AE) AMOUNTING TO RS.40,1 8,52,663/-. 4 THE LD. TPO/DRP AND CONSEQUENTLY LD AO HAS ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN N OT ACCEPTING THE TRANSACTIONAL NET MARGIN METHOD (TNMM) AS THE M OST APPROPRIATE METHOD (MAM) AS THE RESALE PRICE METHOD CANNOT BE LEGALLY APPLIED UNDER THE CIRCUMSTANCES WHEN THE TRADED GOODS ARE ADMITTEDLY SOLD TO AN ASSOCIATED ENTERPRI SE OF THE ASSESSEE I.E. HSCI. 5 THE LD. TPO/DRP AND CONSEQUENTLY LD AO HAVE GROS SLY ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE BY REJECTING THE SEARCH PROCESS OF THE ASSESSEE ON WHO LLY UNTENABLE GROUNDS AND WITHOUT APPRECIATING THAT THE ASSESSEE HAS CARRIED OUT ITS SEARCH PROCESS ADOPTING A SCIENTIFIC BASIS. 6 THE LD. DRP/TPO AND CONSEQUENTLY LD AO HAVE GROS SLY ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONDUCTING A FRESH SEARCH PROCESS USING 'PROWESS DA TABASE' WHICH IS BAD IN LAW ON THE FOLLOWING GROUNDS:- A) THAT FRESH SEARCH WAS CONDUCTED BY THE LD TPO WI THOUT GIVING COGENT REASONS AND THE SAME HAS NOT BEEN PRO VIDED TO THE ASSESSEE. B) THAT ALL NEW COM PARABLES SELECTED BY THE LD TPO WERE AVAILABLE IN THE ASSESSEE'S SEARCH PROCESS USING 'C APITALINE DATABASE' BUT WERE REJECTED BY ASSESSEE UNDER JUSTI FIED QUANTITATIVE AND QUALITATIVE FILTERS. ITA NO.6085/DEL/2016 3 C) THAT NEITHER INDUSTRY OR PRODUCT FILTER WAS APPL IED NOR FAR ANALYSIS OF NEW COMPANIES SELECTED BY THE LD. T PO WAS PROVIDED TO THE ASSESSEE. D) THAT NEW COMPANIES SELECTED BY THE LD TPO ARE FUNCTIONALLY, PRODUCT WISE DISSIMILAR TO THE ASSESS EE AND HENCE ARE NOT COMPARABLE AS PER RULE 10B(2). 7 WITHOUT PREJUDICE, THE LD. AO/TPO HAS GROSSLY ER RED IN LAW BY NOT FOLLOWING THE LD. DRP'S MANDATORY DIRECT IONS FOR EXCLUSION OF 'AUTOLITE (INDIA)' AS A COMPARABLE COM PANY, THEREBY DISREGARDING THE 'PRINCIPLES OF JUDICIAL HIERARCHY' . 8 WITHOUT PREJUDICE, THE LD. AO/TPO HAS GROSSLY ER RED IN COMPUTING THE GROSS PROFIT MARGINS OF THE COMPARABL E COMPANIES (PAE LIMITED & ASSOCIATED AUTO PARTS) SELECTED BY L D. AO/TPO. 9 THE LD TPO/DRP AND CONSEQUENTLY LD AO HAVE GROSS LY ERRED IN NOT GRANTING RISK ADJUSTMENT TO THE ASSESS EE IN VIEW OF RULE 10B(3) OF THE IT RULES. A) THE FINDINGS OF LD TPO/DRP ON RISK ADJUSTMENTS A RE ERRONEOUS AND CONTRADICTORY. 10. THE LD TPO/DRP AND CONSEQUENTLY LD AO HAVE GROS SLY ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE BY NOT FOLLOWING THE 'AGGREGATION' PRINCIPLE AND BY FURTHE R SEGREGATING THE TRADING SEGMENT OF THE ASSESSEE INTO TWO PRODUC T SEGMENTS NAMELY 'ECU' AND 'OTHER AC PARTS' (THUS ERRONEOUSLY HOLDING 'ECU' AS AN AE SEGMENT):- A) BY NOT OFFERING AN OPPORTUNITY TO THE ASSESSEE T O RAISE THE OBJECTION ON SEGREGATION OF SUCH SEGMENT WHICH IS A GAINST THE PRINCIPLE OF REASONABLE JUSTICE. B) BY DISREGARDING THE FACT THAT AC PARTS ARE INEXT RICABLY LINKED TO ECU SUCH THAT SEGREGATION OF TRADING SEGM ENT WHICH IS SINGLE FUNCTIONAL SEGMENT IS NOT APPROPRIATE. C) BY INCORRECTLY TREATING THE 'ECU SEGMENT' AS AE SEGMENT, WHILE ASSESSEE HAS ALSO IMPORTED 'OTHER AC PARTS' F ROM ITS AE. D) BY BASING THE SEGREGATION OF TRADING SEGMENT ON THE QUANTITATIVE DISCLOSURES AS PER SCHEDULE VI OF COMP ANIES ACT, 1956, MADE BY THE ASSESSEE IN ITS NOTES TO ACCOUNTS AS PER THE MANDATE OF LAW. E) IN NOT FOLLOWING THE RULE OF CONSISTENCY BY NOT ACCEPTING THE PRINCIPLE OF AGGREGATION. ITA NO.6085/DEL/2016 4 11 WITHOUT PREJUDICE TO THE ABOVE, THE LD TPO AND CONSEQUENTLY LD AO HAVE GROSSLY ERRED IN LAW AND IN FACTS OF THE CASE, IN NOT FOLLOWING THE MANDATORY DIRECTIONS DAT ED 23.09.16 ISSUED BY LD DRP FOR CALCULATION OF CORRECT GP MARG IN OF ECU SEGMENT. A) THE LD TPO INCORRECTLY CALCULATED THE GP MARGIN OF ECU SEGMENT AT 5.69% INSTEAD OF 16.01% BY NOT MAKIN G ADJUSTMENT OF CUSTOM DUTY OF RS.3,90,47,501. 12 THE LD TPOIDRP AND CONSEQUENTLY LD AO HAVE ERRE D IN NOT GRANTING THE BENEFIT OF SECOND PROVISO TO SECTI ON 92C(2) OF IT ACT (+5%) TO THE ASSESSEE. CORPORATE TAX GROUNDS 13 THE LD AO HAS GROSSLY ERRED IN LAW AND IN FACTS IN DISALLOWING RS.84,856 ON ACCOUNT OF ASSETS WRITTEN OFF, BY WRONGLY TREATING IT AS RELATED TO CAPITAL ASSETS. 14 THAT THE PENALTY PROCEEDINGS INITIATED UNDER SE E 27I(1)(C) IS ON WHOLLY ILLEGAL AND UNTENABLE GROUNDS SINCE TH ERE WAS NO CONCEALMENT OF ANY INCOME NOR SUBMISSION OF ANY INA CCURATE PARTICULARS OF INCOME, NOR ANY DEFAULT ACCORDING TO LAW BY THE ASSESSEE. 15 THAT THE CHARGING OF INTEREST U/S 234A, 234B AN D 234C IS BAD IN LAW AND IS PRAYED NOT TO BE UPHELD. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. KEIHIN INDIA MANUFAC TURING PVT. LTD., THE TAXPAYER IS A MANUFACTURING CONCERN SPECI ALIZING IN AUTOMOTIVE AIR-CONDITIONING UNITS AND AIR-CONDITION ER EQUIPMENTS FOR AUTOMOBILE MANUFACTURER IN INDIA. THE BUSINESS OPERATION OF THE TAXPAYER COMPANY IS DIVIDED INTO TWO DISTINCT S EGMENTS, NAMELY, MANUFACTURING AND TRADING SEGMENTS. DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER ENTERED INTO INTERNA TIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE) A S UNDER :- ITA NO.6085/DEL/2016 5 S.NO. NATURE OF INTERNATIONAL TRANSACTION VALUE (IN INR) 1 PURCHASE OF RAW MATERIALS PARTS AND COMPONENTS 667,740,754 2 PURCHASE OF TRADED GOODS 401852663 3 PURCHASE OF CAPITAL GOODS 4466952 4 PAYMENT OF ROYALTY 4719747 5 PAYMENT OF TECHNICAL GUIDANCE FEE 1079435 6 REIMBURSEMENT (PAID) 3986564 7 REIMBURSEMENT (RECEIVED) 830489 8 INTEREST FOR DELAY IN PAYMENT 156554 9 SALE OF FINISHED GOODS 192713 10 PAYMENT FOR TECHNICAL KNOW-HOW 24996000 TOTAL 1,11,00,21,871 3. IN MANUFACTURING SEGMENT, THE TAXPAYER SUPPLIED ALL ITS MANUFACTURING UNITS OF AIR-CONDITIONING EQUIPMENT U NDER TECHNICAL COLLABORATION OF ITS AE I.E. THE TAXPAYER TO HONDA SEIL CARS INDIA LTD. FOR WHICH IT IMPORTED THE RAW MATERIAL FROM IT S AE IN JAPAN. THE TAXPAYER IN ITS TRANSFER PRICING (TP) STUDY IN ORDER TO DETERMINE THE ARMS LENGTH PRICE (ALP) OF ITS INTER NATIONAL TRANSACTION APPLIED TRANSACTIONAL NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD (MAM) WITH PROFIT LEVEL IND ICATOR (PLI) AS OP/SALES AND COMPUTED ITS MARGIN AT 1.89% WITH UPDATED MARGIN OF COMPARABLES, NAMELY, AUTOLITE (INDIA) LTD . AND SUBROS CHOSEN FROM THE CAPITALLINE DATABASES AT 1.13% AND FOUND ITS TRANSACTION QUA MANUFACTURING SEGMENT AT ARMS LENG TH. 4. IN CASE OF TRADING SEGMENT, THE TAXPAYER DEALS W ITH TWO TYPES OF TRADING, I.E. PURCHASES FROM ITS AE AND LOCAL PU RCHASE FROM THIRD PARTY IN INDIA AND INTERNATIONAL TRANSACTIONS QUA T RADING ITA NO.6085/DEL/2016 6 TRANSACTIONS CONSTITUTE ALMOST 68.47%. IN ORDER TO BENCHMARK THE INTERNATIONAL TRANSACTIONS, THE TAXPAYER CANNOT USE TNMM AS THE MAM WITH OP/SALES AS THE PLI. THE TAXPAYER USED ON E COMPARABLE, NAMELY, PAE LIMITED WITH UPDATED MARGIN AT 0.62% AS AGAINST TAXPAYERS OWN MARGIN AT 0.75% AND FOUND ITS TRANSACTIONS AT ARMS LENGTH. HOWEVER, THE LD. TPO AFTER REJECTING THE TNMM AS THE MAM WITH OP/SALES AS PLI AND APPLIE D RELATED PARTY MARGIN (RPM) AS THE MAM SELECTED SIX COMPARAB LES WITH AVERAGE OF 12.88%. TPO ALSO REJECTED AGGREGATION P RINCIPLE ADOPTED BY THE TAXPAYER RATHER FURTHER SEGREGATED T RADING SEGMENT OF THE TAXPAYER INTO TWO PRODUCT SEGMENTS, NAMELY, ECU AND OTHER AC PARTS AND HELD THAT THE ECU IS AN AE SEG MENT. TPO COMPUTED THE MARGIN OF THE ASSESSEE OF GP/SALES IN THE ECU SEGMENT OF INTERNATIONAL TRANSACTION AT 5.69% AND T HEREBY PROPOSED THE ADJUSTMENT OF RS.2,72,01,410/- 5. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY WAY OF FILING OBJECTIONS, WHO HAS DISMISSED THE OBJECTI ONS. FEELING AGGRIEVED, THE TAXPAYER HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.6085/DEL/2016 7 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 & 2 7. GROUNDS NO.1 & 2 ARE GENERAL IN NATURE AND DO NO T REQUIRE ANY ADJUDICATION. GROUNDS NO.3, 4, 5, 6, 7, 8, 9, 11 & 12 8. THE LD. AR FOR THE TAXPAYER CONTENDED THAT THE AO/TPO/DRP HAVE ERRED IN REJECTING THE TNMM AS MAM WITH OP/SALES AS PLI RATHER APPLYING THE RPM WITH GP/SAL ES BECAUSE IN RELATED/CONTROLLED TRANSACTIONS RPM CANNOT BE APPLI ED AND RELIED UPON THE ORDER PASSED BY THE COORDINATE BENCH OF TH E TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2010-11 IN ITA NO.2051/DEL/2015 AY 2010-11 ORDER DATED 05.10.2018 . PERUSAL OF THE ORDER PASSED BY THE COORDINATE BENCH IN TAXPAYERS OWN CASE FOR AY 2010-11 (SUPRA), RELEVANT PARA 8, GOES TO PROVE THAT IDENTI CAL ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY R ETURNING FOLLOWING FINDINGS :- 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO P ERUSED THE RELEVANT MATERIAL REFERRED TO AT THE TIME OF HEARIN G. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAS PURCHASED TRADED GOODS FROM AE AMOUNTING TO RS. 42,67,98,329/- WHICH IS SUBJECT MATTER OF TRANSFER PRICING ADJUSTMENT. ASSESSEE IS PURCHASING THE GOODS FROM HONDA TRADING CORPORATION , JAPAN AND ONLY CUS TOMER TO WHOM IT IS SELLING THE HONDA SIEL CARS INDIA LIMITE D WHICH IS AN ENTITY CONNECTED WITH THE HONDA GROUP. THE SHARE HO LDING OF THE ASSESSEE BY DIFFERENT AES INCLUDING ONE WITH WHOM T HE ASSESSEE ITA NO.6085/DEL/2016 8 HAS UNDERTAKEN THE TRANSACTION OF PURCHASE AND SALE HAS ALREADY BEEN GIVEN IN AN EARLIER PART OF THE ORDER. THUS, B OTH HONDA TRADING CORPORATION JAPAN AND HSCIL ARE ASSOCIATED ENTERPRISES OF THE ASSESSEE. AS OBSERVED BY THE TPO , ON BOTH THE ENDS, I.E., PURCHASE AND SALE TRANSACTION IS WITH T HE RELATED PARTIES, I.E., ARE CONTROLLED TRANSACTIONS. ONCE BO TH THE LEGS OF THE TRANSACTIONS ARE WITH THE AE, THEN WHETHER UNDER TH ESE CIRCUMSTANCES RPM CAN BE HELD TO BE MOST APPROPRIAT E METHOD OR NOT. THE RELEVANT RULE 10B (L)(B) WHICH DESCRIBE S THE RPM METHOD READS AS UNDER :- 'RESALE PRICE METHOD) BY WHICH.: (I) THE PRICE AT WHICH PROPERTY PURCHASED OR SERVIC ES OBTAINED BY THE ENTERPRISE FROM AN ASSOCIATED ENTERPRISE IS RES OLD OR ARE PROVIDED TO AN UNRELATED ENTERPRISE} IS IDENTIFIED; (II) SUCH RESALE PRICE IS REDUCED BY THE AMOUNT OF A NORMAL GROSS PROFIT MARGIN ACCRUING TO THE ENTERPRISE OR TO AN U NRELATED ENTERPRISE OR TO AN UNRELATED ENTERPRISE FROM THE P URCHASE AND RESALE OF THE SAME OR SIMILAR PROPERTY OR FROM OBTA INING AND PROVIDING THE SAME OR SIMILAR SERVICES} IN A COMPAR ABLE UNCONTROLLED TRANSACTION} OR A NUMBER OF SUCH TRANS ACTIONS; (III) THE PRICE SO ARRIVED AT IS FURTHER REDUCED BY THE EXPENSES INCURRED BY THE ENTERPRISE IN CONNECTION WITH THE P URCHASE OF PROPERLY OR OBTAINING OF SERVICES; (IV) THE PRICE SO ARRIVED AT IS ADJUSTED TO TAKE IN TO ACCOUNT THE FUNCTIONAL AND OTHER DIFFERENCES, INCLUDING DIFFERE NCES IN ACCOUNTING PRACTICES, IF ANY, BETWEEN THE INTERNATI ONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACT IONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF GROSS PROFIT MARGIN IN THE OPEN MARKET; (V) THE ADJUSTED PRICE ARRIVED AT UNDER SUB-CLAUSE (IV) IS TAKEN TO BE AN ARM'S LENGTH PRICE IN RESPECT OF THE PURCHASE OF THE PROPERTY OR OBTAINING OF THE SERVICES BY THE ENTERP RISE FROM THE ASSOCIATED ENTERPRISE. 9. CLAUSE (I) CLEARLY ENVISAGES THAT RPM WOULD BE APPLICABLE ONLY WHERE PRICES AT WHICH PROPERTY PURCHASED OR SE RVICES OBTAINED BY THE ENTERPRISES ARE FROM AN AE WHICH IS RESOLD TO UNRELATED ENTERPRISES. RPM METHOD CAN BE APPLIED WH ERE THE PRICE OF THE PROPERTY PURCHASED FROM AN AE HAS TO B E BENCHMARKED. BUT IF THE GOODS OR PROPERTY OR SERVIC ES ARE OBTAINED FROM THE AE AND IS RESOLD OR PROVIDED TO R ELATED ENTERPRISES, I.E., AE AGAIN, THEN RPM CANNOT BE APP LIED. RPM IS A METHOD FOR COMPUTING THE ARMS LENGTH PRICE IN RES PECT OF ITA NO.6085/DEL/2016 9 PURCHASE OF PROPERTY FROM AE. THE METHOD IS NOTHING BUT A BACKWARD CALCULATION FROM RESALE PRICE TO OBTAIN TH E PURCHASE VALUE IN AN INDEPENDENT SCENARIO. THAT IS THE REASO N WHY IT IS APPLICABLE ONLY WHEN RESALE IS MADE TO AN UNRELATED PARTY, BECAUSE IF THE RESALE PRICE PER-SE IS TAINTED THEN IT WOULD BE IMPOSSIBLE TO COMPUTE ARM'S LENGTH PRICE IN RESPECT OF PURCHASE, OF PROPERTY. THUS, RPM CANNOT BE HELD TO BE THE MOS T APPROPRIATE METHOD WHEN BOTH THE LIMBS OF THE TRANS ACTION I.E., THE PURCHASE OF THE GOODS AND RESALE ARE WITH AE, B ECAUSE, BOTH ARE RELATED PARTIES AND ARE CONTROLLED TRANSACTIONS . ACCORDINGLY, WE REJECT APPLICABILITY OF RPM AS MAM IN THE CASE O F THE ASSESSEE. 9. FOLLOWING THE ORDER PASSED BY THE COORDINATE BEN CH OF THE TRIBUNAL IN TAXPAYERS OWNER CASE FOR AY 2010-11 (SUPRA), WHEN UNDISPUTEDLY BUSINESS MODEL OF THE TAXPAYER HAS NOT UNDERGONE ANY CHANGE DURING THE YEAR UNDER ASSESSMENT AND THE TAX PAYER HAS PURCHASED THE GOODS FROM HONDA TRADING CORPORATION, JAPAN AND HAS SOLD THE GOODS TO HONDA SIEL CARS INDIA LTD. (H SCIL) WHICH IS AN ENTITY CONNECTED WITH THE HONDA GROUP. WHEN WE GO BY THE SHAREHOLDING OF THE TAXPAYER BY DIFFERENT AES, THE ONLY CONCLUSION DRAWN IS HONDA TRADING CORPORATION, JAPAN AND HSCIL ARE AES OF THE TAXPAYER. SO, IN THESE CIRCUMSTANCES, WE ARE O F THE CONSIDERED VIEW THAT RPM CANNOT BE TREATED AS MAM TO BENCHMARK THE INTERNATIONAL TRANSACTIONS, MORE PARTICULARLY WHEN BOTH THE TRANSACTIONS QUA SALES AND PURCHASE OF THE GOODS AN D RESALE ARE WITH AES WHICH ARE RELATED PARTIES. SO, RPM CANNOT BE APPLIED IN CASE OF RELATED PARTY TRANSACTIONS/CONTROLLED TRANS ACTIONS. WE ARE OF THE FURTHER CONSIDERED VIEW THAT WHEN METHOD ADO PTED BY THE ITA NO.6085/DEL/2016 10 TPO ITSELF IS NOT SUSTAINABLE, THE ENTIRE EXERCISE AS TO BENCHMARKING THE INTERNATIONAL TRANSACTIONS HAS TO BE REDONE. CONSEQUENTLY, THE ISSUE IS SET ASIDE TO THE TPO TO DECIDE AFRESH AFTER APPLYING THE TNMM AS MAM AFTER PROVIDING ADEQ UATE OPPORTUNITY OF BEING HEARD TO THE TAXPAYER. GROUND NO.10 10. LD. AR FOR THE TAXPAYER FURTHER CONTENDED THAT THIS ISSUE IS ALSO COVERED BY TAXPAYERS OWN CASE PASSED BY THE C OORDINATE BENCH OF THE TRIBUNAL IN AY 2010-11 (SUPRA). PERUS AL OF THE ORDER PASSED BY THE TRIBUNAL, PARTICULARLY PARA 10, GOES TO PROVE THAT THIS ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE TAXPAY ER BY RETURNING FOLLOWING FINDINGS :- 10. NOW COMING TO THE APPLICABILITY OF TNMM AS MA M, WE FIND THAT IN ALL THE EARLIER YEARS TNMM HAS BEEN FINALLY HELD TO BE MOST APPROPRIATE METHOD ON THE FACTS OF THE ASSESSEE'S CASE AND SINCE THERE IS NO CHANGE IN MAT ERIAL FACTS OR FAR, THEN TNMM SHOULD BE ADOPTED AS THE MO ST APPROPRIATE METHOD TO BENCHMARK THE INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH THE AE IN THE TRAD ING SEGMENT. SINCE THIS METHOD HAS NOT BEEN ANALYSED BY THE TPO AND THE SAME COMPARABLE SELECTED BY THE ASSESSE E HAS BEEN ADOPTED BY THE TPO FOR THE PURPOSE OF RPM, THE REFORE, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REM ANDED BACK TO THE FILE OF THE TPO AND AO, FIRSTLY, TO CON SIDER TNMM AS THE MAM CONSTITUTING THE PAST HISTORY OF TH E ASSESSEE; AND SECONDLY, TO CARRY OUR FRESH SEARCH A NALYSIS OF THE COMPARABLES AND THEN BENCHMARK THE ASSESSEE'S TRANSACTION IN THE TRADING SEGMENT. THE TPO SHALL G IVE EFFECTIVE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIA TE ITS CASE AND AFTER ANALYSING THE COMPARABLES, ALP OF THE TRA DING SEGMENT SHOULD BE DETERMINED. ALL THE OTHER GROUNDS RAISED BY THE ASSESSEE BEFORE US RELATING TO TRANSFER PRIC E ITA NO.6085/DEL/2016 11 ADJUSTMENT SHALL BE OPEN BEFORE THE TPO, EXCEPT FOR THE DIRECTIONS GIVEN HEREIN ABOVE. IN THE RESULT, GROU ND PERTAINING TO TRANSFER PRICING ADJUSTMENT IS TREATE D AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. FOLLOWING THE DECISION RENDERED BY THE COORDINA TE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE PARTICULARLY WH EN TAXPAYER HAS NOT UNDERGONE ANY CHANGE IN ITS BUSINESS MODEL AS W ELL AS ITS INTERNATIONAL TRANSACTIONS WITH ITS AES, WE ARE OF THE CONSIDERED VIEW THAT TNMM AS THE MAM HAS TO BE APPLIED IN ORDE R TO BENCHMARK THE INTERNATIONAL TRANSACTIONS QUA TRADIN G SEGMENT AND THE AO/TPO IS TO DECIDE THIS ISSUE BY CARRYING OUT FRESH SEARCH ANALYSIS OF THE COMPARABLES BY PROVIDING ADEQUATE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO.10 IS ALLOW ED FOR STATISTICAL PURPOSES. GROUND NO.13 12. GROUND NO.13 IS DISMISSED HAVING NOT BEEN PRESS ED DURING THE COURSE OF ARGUMENTS. GROUND NO.14 13. GROUND NO.13 BEING PREMATURE NEEDS NO SPECIFIC FINDINGS. GROUND NO.15 14. GROUND NO.15 QUA LEVY OF INTEREST U/S 234A, 234 B AND 234C OF THE ACT NEED NO SPECIFIC FINDING BEING CONSEQUEN TIAL IN NATURE. ITA NO.6085/DEL/2016 12 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, ADJUS TMENT MADE BY THE AO/TPO/DRP QUA INTERNATIONAL TRANSACTION IS NOT SUSTAINABLE, HENCE SET ASIDE. THE CASE IS REMANDED BACK TO THE AO/TPO TO DECIDE AFRESH AFTER APPLYING THE TNMM AS THE MAM BY CARRYING OUT THE FRESH TP ANALYSIS AFTER PROVIDI NG ADEQUATE OPPORTUNITY OF BEING HEARD TO THE TAXPAYER. CONSEQ UENTLY THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF OCTOBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 18 TH DAY OF OCTOBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-44, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.