Marathon Electric India Pvt. Ltd., Faridabad V. ACIT, Faridabad

ITA 6100/DEL/2012

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2556 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 02-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDAR PAL
• Keywords: Transfer pricing; Business expenditure; Principle of natural justice; International transaction
• Section: 92D; 10B; 195; 80IA; 13; 22; 144

Judgement Text

1 ITA NO. 6100/DEL/2012 IN THE INCOME TAX APPELLAT E TRIBUNAL DELHI BENCH: I-1 NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 6100/DEL/2012 ( A .Y 2008-09) (THROUGH VIDEO CONFEREN CING) MARATHON ELECTRIC INDIA PVT. LTD. SECTOR-11, MODEL TOWN FARIDABAD AAACG5525H (APPELLANT) VS ACIT CIRCLE-1 FARIDABAD (RESPONDENT) APPELLANT BY SH. ROHIT TIWARI, ADV RESPONDENT BY SH. SURENDAR PAL, CIT DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 19.10.2012 PASSED UNDER SECTION 254/143(3) READ WITH SECTION 1 44 C OF THE INCOME TAX ACT, 1961 PASSED BY ACIT, CIRCLE-1, NEW DELHI (ASSE SSING OFFICER), FOR ASSESSMENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. GROUND 1: THAT THE LEARNED ASSESSING OFFICER (L D. AO) ERRED IN PASSING THE IMPUGNED DRAFT ASSESSMENT ORDER DATED DECEMBER 23, 2011 (THE DRAFT ASSESSMENT ORDER) AND THE LEARNED DISPUTE RESOLUTI ON PANEL (LD. DRP) ERRED IN PASSING DIRECTIONS UNDER SECTION 144(C) OF THE INCOME TAX ACT, 1961 (THE ACT) CONFIRMING THE DRAFT ASSESSMENT ORDER. ON THE FACTS AND DATE OF HEARING 01.09.2020 DATE OF PRONOUNCEMENT 27.11.2020 2 ITA NO. 6100/DEL/2012 CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A O ERRED IN ASSESSING THE INCOME OF THE APPELLANT AT RS.35,93,36,280 AS AGAIN ST THE RETURNED INCOME OF RS.21,89,02,842. 2. GROUND 2: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO / LEARNED TRANSFER PRICING OFFICER (LD. TPO ) AND THE LD. DRP HAVE ERRED IN MAKING AN ADDITION OF RS. 12,19,46,634 IN RELATION TO THE MANUFACTURING SEGMENT OF THE APPELLANT. 2.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO / LD. TPO AND LD. DRP GROSSLY ERRED IN DISREGARD ING THE METHODICAL BENCHMARKING PROCESS CARRIED OUT BY THE APPELLANT I N THE TRANSFER PRICING (TP) DOCUMENTATION MAINTAINED BY IT IN TERMS OF S ECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962 (RULES ); AND IN PARTICULAR MODIFYING/ REJECTING THE FILTERS APPLIED BY THE APP ELLANT; 2.2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. AO / LD. TPO AND LD. DRP GROSSLY ERRED IN REJECTING COMPARABILITY ANALYSIS IN THE TP DOCUMENTATION AND IN CONDUCTING A FRESH COMP ARABILITY ANALYSIS BASED ON APPLICATION OF ADDITIONAL FILTERS IN AN ARBITRAR Y MANNER WHILE DETERMINING THE ARMS LENGTH PRICE; AND 2.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO/ TPO AND LD. DRP GROSSLY ERRED IN INCLUDING COMP ANIES IN THE COMPARABILITY ANALYSIS WHICH DO NOT SATISFY THE TES T OF COMPARABILITY, REJECTING COMPANIES SIMILAR TO THE APPELLANT WHILE PERFORMING THE COMPARABILITY ANALYSIS AND THEREBY RESORTING TO CHERRY PICKING OF COMPARABLES. GROUND 3: THAT THE LD. AO / LD. TPO AND THE LD. DRP HAVE FAILED IN UNDERSTANDING THE NATURE OF THE TRANSACTION FOR PAY MENT OF TESTING, WARRANTY REPAIR AND SERVICE CHARGES FEE AND THE FUNCTIONS BE ING PERFORMED BY THE AE IN RELATION TO THE TRANSACTION UNDER REVIEW AND THEREB Y PROPOSING AN ALTERNATIVE ADDITION OF RS. 2,75,86,070. 3 ITA NO. 6100/DEL/2012 GROUND 4: THAT THE LD. AO / LD. TPO AND THE LD. DRP HAVE ERRE D BY QUESTIONING THE COMMERCIAL / BUSINESS WISDOM OF THE APPELLANT FOR UNDERTAKING THE TRANSACTION FOR PAYMENT OF TESTING, WARRANTY REPAIR AND SERVICE CHARGES FEE AND NOT APPRECIATING THE FACT T HAT MERE NON-EXISTENCE OF A COMPARABLE ARRANGEMENT DOES NOT MEAN THAT THE TRANS ACTION HAS NOT BEEN UNDERTAKEN AT ARMS LENGTH. GROUND 5: THE LD. AO / LD. TPO AND THE LD. DRP HAVE GROSSLY ERRED BY APPLYING COMPARABLE UNCONTROLLED PRICE (CUP) METH OD IN CONTRAVENTION OF THE PROVISIONS OF RULE 10 B OF THE INCOME TAX RULES, 19 62. GROUND 6: THAT THE LD. AO / LD. TPO AND THE LD. DRP HAVE FAILED TO UNDERSTAND THE CHARACTERIZATION OF THE ENTITIES INV OLVED IN THE TRANSACTIONS BY NOT APPRECIATING THE FACT THAT THE ASSOCIATED ENTER PRISE (AE) IS A ROUTINE DISTRIBUTOR BEARING NORMAL RISKS AND IS THE LEAST C OMPLEX OF THE TWO ENTITIES INVOLVED IN THE TRANSACTION. GROUND 7: THE LD. AO / LD. TPO AND LD. DRP HAVE GROSSLY ERRED BY NOT APPRECIATING THE CORROBORATIVE ANALYSIS FURNISHED B Y THE APPELLANT FOR THE TRANSACTION RELATING TO EXPORT OF MOTORS AND TESTIN G, WARRANTY REPAIR AND SERVICE CHARGES FEE. GROUND 8: THAT ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, BOTH LD. AO AND LD. DRP ERRED IN DENYING APPELLANT S CLAIM OF DEDUCTION UNDER SECTION 10B OF THE ACT AMOUNTING TO RS. 1,84, 86,800 IN RESPECT OF ITS NEWLY ESTABLISHED HUNDRED PERCENT EXPORT ORIENTED U NIT (EOU) DESPITE THE FACT THAT THE APPELLANT SATISFIED ALL THE CONDITION S LAID DOWN UNDER SECTION 10B OF THE ACT. 8.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, BOTH THE LD. AO AND LD. DRP ERRED IN REJECTING THE APPEL LANTS CLAIM OF THE DEDUCTION UNDER SECTION 10B OF THE ACT IGNORING THE FACTUAL AND LEGAL POSITION THAT THE NEW UNIT IS A 100 PERCENT EOU DULY APPROVE D BY THE PRESCRIBED 4 ITA NO. 6100/DEL/2012 AUTHORITIES AND A SEPARATE UNDERTAKING FOR THE PURP OSE OF DEDUCTION UNDER SECTION 10B OF THE ACT. 8.2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO AND LD. DRP ERRED IN HOLDING THAT NO SEP ARATE INDUSTRIAL UNIT CAME INTO EXISTENCE FOR MANUFACTURING OF ARTICLES OR THI NGS. 8.3 THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO AND LD. DRP HAS ERRED IN HOLDING THAT THE NE W UNIT WAS AN EXPANSION OF THE EXISTING UNIT AND NOT AN INTEGRATED NEW UNIT GROUND 9: THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE BOTH LD. AO AND LD. DRP ERRED IN NOT FOLLOWING THE ORDER PASSED BY HONBLE COMMISSIONER (APPEALS) [HONBLE CIT(A)] FO R PREVIOUS ASSESSMENT YEARS (AY) I.E. AY 2003-04 TO AY 2006-07, WHEREIN HONBLE CIT(A) HAS UPHELD THE APPELLANTS CLAIM OF DEDUCTION UNDER SEC TION 10B OF THE ACT AND DELETED THE ADDITION MADE ON THIS ACCOUNT. THAT THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT AN D WITHOUT PREJUDICE TO EACH OTHER. 3. THE ASSESSEE COMPANY I.E. MARATHON ELECTRIC INDI A PVT. LTD. (MEIPL) IS ENGAGED IN MANUFACTURING AND SALE OF FRACTIONAL HOR SE-POWER (FHP) ELECTRIC MOTORS. THESE MOTORS FIND A WIDE APPLICATION IN PRO DUCTS LIKE AIR CONDITIONERS, COOLERS, WASHING MACHINES AND ELECTRIC FANS. FOR TH E YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A TOTAL INCOME OF INR 218,902,842. DURING THE ASSESSMENT PROCEEDINGS, THE TRANSFER PRICING OFFICER (TPO) REJECTED THE TP DOCUMENTATION OF THE ASSESSEE BY NOT ACCEPTING THE COMPARABLES ON THE GROUND OF BEING FUNCTIONALLY DIS SIMILAR. ACCORDINGLY, THE TPO REJECTED THE ARGUMENTS PUT FORTH BY THE ASSESSE E AND PASSED AN ORDER MAKING AN ADJUSTMENT OF INR 121,946,634 IN THE MANU FACTURING SEGMENT. THE TPO ALSO MADE AN UPWARD ADJUSTMENT OF INR 27,586,07 0 ON ACCOUNT OF TESTING 5 ITA NO. 6100/DEL/2012 AND WARRANTY SERVICES CHARGES AND ACCORDINGLY TOTAL ENHANCEMENT OF INR 149,532,704 WAS MADE TO THE INCOME OF THE ASSESSEE. ACCORDINGLY DRAFT ASSESSMENT ORDER DATED 23.12.2011 WAS PASSED. AGGRI EVED BY THE DRAFT ORDER, THE ASSESSEE FILED ITS OBJECTIONS BEFORE THE DISPUT E RESOLUTION PANEL (DRP). THE DRP VIDE DIRECTION DATED 27.08.2012 UPHELD THE ADJU STMENT PROPOSED BY THE TPO/ AO. THE ASSESSING OFFICER VIDE ORDER DATED 19. 10.2012 THEREBY UPHOLDING THE ADJUSTMENT PROPOSED BY THE TPO. IN ADDITION TO THE TRANSFER PRICING ADJUSTMENT, THE ASSESSING OFFICER ALSO HELD THAT EX PORT ORIENTED UNIT (EOU) IS JUST AN EXPANSION OF EXISTING UNIT AND NOT AN INTEG RATED NEW UNIT AND IN VIEW OF SAME DISALLOWED THE CLAIM U/S 10B OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. 5. AS REGARDS TO GROUND NO. 1, THIS GROUND IS GENER AL AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER IN THE FINAL ASSESSME NT ORDER. HENCE, GROUND NO. 1 IS DISMISSED. 6. AS REGARDS TO GROUND NO. 2 RELATING TO AN ADDITI ON OF RS. 12,19,46,634 IN RELATION TO THE MANUFACTURING SEGMENT OF THE ASSESS EE. THE LD. AR SUBMITTED THAT THE AO/TPO AND THE DRP GROSSLY ERRED IN DISREG ARDING THE METHODICAL BENCHMARKING PROCESS CARRIED OUT BY THE ASSESSEE IN THE TRANSFER PRICING DOCUMENTATION MAINTAINED BY IT IN TERMS OF SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME-TAX RULES, 1962; AND IN PART ICULAR MODIFYING/ REJECTING THE FILTERS APPLIED BY THE ASSESSEE. THE LD. AR SUB MITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AO/TPO AND THE DRP GROSSLY ERRED IN REJECTING COMPARABILITY ANALYSIS IN THE TP DOCUMENT ATION AND IN CONDUCTING A FRESH COMPARABILITY ANALYSIS BASED ON APPLICATION O F ADDITIONAL FILTERS IN AN ARBITRARY MANNER WHILE DETERMINING THE ARMS LENGTH PRICE. THE LD. AR SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW THE AO/TPO AND THE DRP GROSSLY ERRED IN INCLUDING COMPA NIES IN THE COMPARABILITY ANALYSIS WHICH DO NOT SATISFY THE TES T OF COMPARABILITY, REJECTING 6 ITA NO. 6100/DEL/2012 COMPANIES SIMILAR TO THE ASSESSEE WHILE PERFORMING THE COMPARABILITY ANALYSIS AND THEREBY RESORTING TO CHERRY PICKING OF COMPARAB LES. THE ASSESSEE IS ENGAGED IN MANUFACTURING AND SALE OF FRACTIONAL HOR SE POWER (FHP) ELECTRIC MOTORS USED IN AIR CONDITIONERS, COOLERS, WASHING M ACHINES, ETC. DURING THE YEAR, THE ASSESSEE PREPARED A DETAILED TP STUDY BY FOLLOWING A METHODICAL APPROACH AND SELECTED 7 COMPARABLE COMPANIES FOR BE NCHMARKING THE ITS INTERNATIONAL TRANSACTION. THE BUSINESS DESCRIPTION OF THE COMPARABLES SELECTED IN THE TP STUDY IS AS FOLLOWS: S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 1 EMGEE CABLES & COMMUNICATIONS LTD. ENGAGED IN MANUFACTURE OF ELECTRIC CABLES, COMMUNICATION CABLES, TRANSMITTERS AND RECEIVERS 2 FEDDERS LLOYD CORP. LTD. ENGAGED IN HOME APPLIANCES AND CONSUMER ELECTRIC SEGMENT 3 GUARDIAN CONTROLS LTD. ENGAGED IN MANUFACTURING OF RELAYS THAT FIND APPLICATION IN HOME APPLIANCES 4 VALUE INDUSTRIES LIMITED ENGAGED IN MANUFACTURING OF ELECTRICAL AND ELECTRONIC HOME APPLIANCES LIKE WASHING MACHINES, REFRIGERATORS, ETC. 5 LA-GAJJAR MACHINERIES LTD. ENGAGED IN MANUFACTURING OF SUBMERSIBLE PUMPS AND SUBMERSIBLE MOTORS 6 REXNORD ELECTRONICS LIMITED ENGAGED IN MANUFACTURING OF INSTRUMENT COOLING FANS, EXHAUST FANS AND MOTORS USED FOR INDUSTRIAL AND DOMESTIC PURPOSE 7 ITA NO. 6100/DEL/2012 S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 7 ORIENT PAPER & INDUSTRIES LTD. FAN SEGMENT ENGAGED IN MANUFACTURE OF ELECTRICAL FANS ON THE BASIS OF THE ABOVE BUSINESS DESCRIPTION, THE ASSESSEE SELECTED THE AFOREMENTIONED COMPANIES FOR BENCHMARKING THE INTER NATIONAL TRANSACTION. FURTHER, THE LD. AR POINTED OUT THAT ASSESSEE SELEC TED ALL THE COMPARABLES WHICH WERE ENGAGED IN MANUFACTURING FUNCTION WHICH IS OF PRIME IMPORTANCE WHILE CONDUCTING A BENCHMARKING ANALYSIS WHILE APPL YING TNMM WHICH IS TOLERANT TO PRODUCT DIFFERENTIATION. DURING COURSE OF ASSESSMENT PROCEEDINGS, THE LD. TPO REJECTED THE APPROACH FOLLOWED BY THE A SSESSEE IN ITS TP STUDY STATING THAT THE COMPANIES ARE FUNCTIONALLY DIFFERE NT . THE TPO REJECTED THE COMPARABLE SEARCH UNDERTAKEN BY THE ASSESSEE IN THE TRANSFER PRICING DOCUMENTATION AND PROCEEDED TO PERFORM A FRESH SEAR CH OF COMPARABLE COMPANIES PROPOSING A FINAL SET OF 3 COMPARABLES IN ITS ORDER. THE FINAL SET OF COMPARABLE COMPANIES (ALONG WITH BUSINESS DESCRIPTI ON) PROPOSED IN THE TPO ORDER IS AS FOLLOWS: S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 1 ALFA TRANSFORMERS LTD. ENGAGED IN MANUFACTURING OF TRANSFORMERS ONLY. 2 APAR INDUSTRIES LIMITED ENGAGED IN TWO SEGMENT: MANUFACTURING OF SPECIALTY AND TRANSFORMER OIL AND CONDUCTOR SEGMENT 8 ITA NO. 6100/DEL/2012 S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 3 PITTI LAMINATIONS LIMITED ENGAGED IN PRODUCTS LIKE ELECTRICAL STEEL LAMINATES, MOTOR CORES, SUB-ASSEMBLIES, DIE- CAST ROTORS, ETC DURING COURSE OF PROCEEDINGS, THE DRP UPHELD THE FR ESH SEARCH OF COMPARABLE UNDERTAKEN BY THE TPO DURING COURSE OF ASSESSMENT P ROCEEDINGS AND CONFIRMED THE ADDITION PROPOSED IN THE ORDER. 6.1 THE LD. AR SUBMITTED THAT THE TPO HAS REJECTED THE COMPARABLE SELECTED BY THE ASSESSEE IN TP DOCUMENTATION STATING THAT TH EY ARE FUNCTIONALLY DIFFERENT. HOWEVER, THE COMPARABLE COMPANIES SELECT ED BY THE ASSESSEE WERE ENGAGED IN MANUFACTURING FUNCTION AND ONLY THE PROD UCTS WERE DIFFERENT. THE BUSINESS DESCRIPTION OF COMPARABLE COMPANIES AL ONG WITH SUPPORTING DESCRIPTIONS IS AS FOLLOWS: S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 1 EMGEE CABLES & COMMUNICATIONS LTD. ENGAGED IN MANUFACTURE OF ELECTRIC CABLES, COMMUNICATION CABLES, TRANSMITTERS AND RECEIVERS 2 FEDDERS LLOYD CORP. LTD. ENGAGED IN HOME APPLIANCES AND CONSUMER ELECTRIC SEGMENT 3 GUARDIAN CONTROLS LTD. ENGAGED IN MANUFACTURING OF RELAYS THAT FIND APPLICATION IN HOME APPLIANCES 9 ITA NO. 6100/DEL/2012 S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 4 VALUE INDUSTRIES LIMITED ENGAGED IN MANUFACTURING OF ELECTRICAL AND ELECTRONIC HOME APPLIANCES LIKE WASHING MACHINES, REFRIGERATORS, ETC. 5 LA-GAJJAR MACHINERIES LTD. ENGAGED IN MANUFACTURING OF SUBMERSIBLE PUMPS AND SUBMERSIBLE MOTORS 6 REXNORD ELECTRONICS LIMITED ENGAGED IN MANUFACTURING OF INSTRUMENT COOLING FANS, EXHAUST FANS AND MOTORS USED FOR INDUSTRIAL AND DOMESTIC PURPOSE 7 ORIENT PAPER & INDUSTRIES LTD. FAN SEGMENT ENGAGED IN MANUFACTURE OF ELECTRICAL FANS FURTHER, THE LD. AR SUBMITTED THAT THE SEARCH STRAT EGY FOLLOWED IN THIS YEAR HAS BEEN FOLLOWED BY THE ASSESSEE CONSISTENTLY OVER THE YEARS WITHOUT ANY CHANGE, WHICH HAS BEEN ACCEPTED BY THE REVENUE DEPA RTMENT IN FUTURE YEARS. THE SUMMARY OF COMPARABLE COMPANIES ACCEPTED IN THE FUTURE YEAR BY DEPARTMENT IS AS FOLLOWS: S NO. COMPARABLE COMPANY FY 2007- 08 FY 2008- 09 1 EMGEE CABLES & COMMUNICATIONS LTD. 2 FEDDERS LLOYD CORP. LTD. 10 ITA NO. 6100/DEL/2012 3 GUARDIAN CONTROLS LTD. 4 VALUE INDUSTRIES LIMITED 5 LA-GAJJAR MACHINERIES LTD. 6 REXNORD ELECTRONICS LIMITED 7 ORIENT PAPER & INDUSTRIES LTD. FAN SEGMENT THE TPO HAS CHANGED FEW QUALITATIVE FILTERS AND INT RODUCED NEW COMPARABLES WITHOUT PROVIDING THE ACCEPT/ REJECT MATRIX. FURTHE R, WHILE PROPOSING THE FRESH COMPARABLE SET, THE TPO HAS NOT FOLLOWED ITS OWN AP PROACH (FOLLOWED FOR REJECTING ASSESSEES COMPARABLE) WHILE SELECTING TH E FRESH COMPARABLES AS ALL THE AFOREMENTIONED COMPARABLE ARE ALSO ENGAGED IN M ANUFACTURING OF DIFFERENT PRODUCTS. THE BUSINESS DESCRIPTION OF COMPARABLE CO MPANIES IS AS FOLLOWS: S NO. NAME OF COMPARABLE BUSINESS DESCRIPTION 1 ALFA TRANSFORMERS LTD. ENGAGED IN MANUFACTURING OF TRANSFORMERS ONLY. 2 APAR INDUSTRIES LIMITED ENGAGED IN TWO SEGMENT: MANUFACTURING OF SPECIALTY AND TRANSFORMER OIL AND CONDUCTOR SEGMENT 3 PITTI LAMINATIONS LIMITED ENGAGED IN PRODUCTS LIKE ELECTRICAL STEEL LAMINATES, MOTOR CORES, SUB-ASSEMBLIES, DIE- CAST ROTORS, ETC 11 ITA NO. 6100/DEL/2012 THE LD. AR SUBMITTED THAT, IT IS CLEARLY VISIBLE TH AT THE COMPANIES FINALLY SELECTED BY THE TPO ARE ALSO ENGAGED IN DIFFERENT P RODUCTS AND IS A CLEAR DEPARTURE FROM THE APPROACH OF SELECTING THE COMPAR ABLES WHICH ARE ENGAGED IN SIMILAR BUSINESS OF THE ASSESSEE. THIS A PPROACH FOLLOWED BY THE TPO CLEARLY INDICATES THAT THE TPO HAS RESORTED TO CHERRY PICKING OF THE COMPARABLES AND THUS DEMONSTRATED AN INTENTION TO A RRIVE AT A PRE- FORMULATED OPINION WITH AN INTENTION OF MAKING AN A DDITION TO THE RETURNED INCOME OF THE ASSESSEE. IN THIS REGARD, THE ASSESSE E WOULD PLACE RELIANCE ON THE FOLLOWING JUDGEMENT IN RESPECT OF CHERRY PICKIN G OF COMPARABLES. ACIT VS M/S TOSHIBA INDIA PVT LTD (ITA NO.3175/DEL /2007) PHILIPS SOFTWARE CENTRE PRIVATE LIMITED VS. ACIT, B ANGALORE (ITA NO. 218(BNG)/08) GE INDIA TECHNOLOGY CENTRE PRIVATE LIMITED VS DDIT (ITA NO. 789/BANG/2010 AND ITA NO. 487 & 025/BANG/2011) THE LD. AR SUBMITTED THAT THE ANALYSIS UNDERTAKEN B Y THE ASSESSEE AS A PART OF TRANSFER PRICING DOCUMENTATION SHOULD BE UPHELD AND THE APPROACH ADOPTED BY THE TPO TO CHERRY PICK HIGH MARGIN COMPANIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS OUGHT TO BE REJECTED. 6.2 WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS, THE LD. AR FURTHER SUBMITTED THAT IF THE COMPARABLES SELECTED BY THE TPO ARE TO BE CONSIDERED, THEN THE COMPARABLES SELECTED BY THE ASSESSEE IN THE TP DOCU MENTATION WITH SIMILAR BUSINESS DESCRIPTION VIS--VIS THE TPOS COMPARABLE S SHOULD ALSO BE SELECTED. IN ADDITION TO ABOVE, THE LD. AR ALSO SUBMITS THAT THE TPO HAS ERRED IN CALCULATING THE MARGIN FOR THE MANUFACTURING SEGMEN T. THE DETAILED MARGIN COMPUTATION WAS GIVEN IN APPENDIX G OF THE TP STUDY OF THE ASSESSEE. HOWEVER, THE TPO WHILE RECOMPUTING THE MARGIN OF THE ASSESSE E HAS NOT GIVEN ANY COGENT REASON FOR DOING SO. CONSIDERING THE SAME, T HE LD. AR PRAYED THAT THE 12 ITA NO. 6100/DEL/2012 MARGIN SELECTED BY THE ASSESSEE IN THE TP STUDY SHO ULD BE CONSIDERED FOR BENCHMARKING THE SUBJECT INTERNATIONAL TRANSACTION. 7. THE LD. DR SUBMITTED THAT IN RESPECT OF THE ISSU E OF TPOS POWER TO MODIFY/REJECT THE ECONOMIC ANALYSIS OF THE ASSESSEE , THE DECISION OF DENSO INDIA LTD VS CIT {2016- TII- 14- HC- DEL- TP} IS AP PLICABLE, WHEREIN IT IS HELD THAT THE AO IS UNDER NO OBLIGATION TO DEMONSTRATE T HE EXISTENCE OF TAX AVOIDANCE FOR INVOCATION OF TRANSFER PRICING PROVIS ION. THE LD. DR RELIED UPON THE FOLLOWING CASE LAWS AS WELL: COCA COLA PVT. LTD 309 ITR-194 (P&H), ITO V TIANJIN TIANSHI INDIA PVT LTD (ITA NO 3991/DE L/2010) AY 2006-07 ITAT DELHI H BENCH, SAP LABS INDIA PVT LTD VS ACIT 2011 44 SOT 156 BANG ALORE, ITAT SPECIAL BENCH DECISION IN THE CASE OF AZTEC SO FTWARE AND TECHNOLOGIES SERVICES LTD VS ACIT 2007 294 ITR (AT) 32 (BANG) SB, AZTEC SOFTWARE AND TECHNOLOGY LTD VS DCIT 107 ITD 1 41 (BANG) (SB), UE TRADE CORPORATION (INDIA) (2011-TII-04-ITAT-DEL- TP) AND M/S ADP PVT. LTD (2011-TII-44-ITAT-HYD-TP). ON THE ISSUE OF USE OF CURRENT YEAR DATA VS. MULTI PLE YEAR DATA, THE LD. DR RELIED UPON THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS DENSO HARYANA PVT LTD (2009- TIOL- 696- DEL- IT), WHEREIN THIS VIEW HAS BEEN AFFIRMED. IN DELOITTE CONSULTING INDIA PVT. LTD (IT A NO.1082/HYD/2010), THE TRIBUNAL REJECTED THE TAXPAYERS CLAIM ABOUT NON AV AILABILITY OF CURRENT YEAR DATA AT THE TIME OF FILING THE RETURN. THE VIEW OF REVENUE IS ALSO SUPPORTED BY A LARGE NUMBERS OF JUDGMENTS OF TRIBUNALS DECISION W HICH ARE MENTIONED BELOW: I. HARWORTH (INDIA) PVT. LTD(2011- TII- 64- ITAT- DEL- TP) II. STMICRO ELECTRONICS (2011- TII- ITAT- DEL- TP) III. BIRLA SOFT LTD (2011-TIOL- 24-ITAT- DEL) 13 ITA NO. 6100/DEL/2012 IV. DELHI HIGH COURT IN CIT VS. CHRYSCAPTIAL INVESTMENT S ADVISORS (INDIA) PVT LTD V. ITAT MUMBAI IN THE CASE OF M/S EMERSON ELECTRIC COMPANY (INDIA) PVT LTD VS DCIT AS REGARDS TO DIFFERENT FINANCIAL YEAR ENDING FILTE R, THE LD. DR RELIED UPON THE DECISION IN TECHBOOKS INTERNATIONAL PVT. LTD VS DC IT (2015- TII- 282- ITAT- DEL- TP) AND M/S ADP (P.) LTD. [2011] 10 TAXMANN.C OM 160 (HYDERABAD),/[2012]15 ITR(T) 203 (HYDERABAD), WHERE IN IT IS HELD THAT DATA OF SUBSEQUENT PERIOD CANNOT BE CONSIDERED FOR COMPARIS ON WHILE DETERMINING ARM'S LENGTH PRICE. AS REGARDS TO APPLICATIONS OF RPT FILTER, THE LD. DR SUBMITTED THAT CASES HAVING SOME RPT CAN BE TAKEN A S COMPARABLE AS THEY DO NOT MATERIALLY AFFECT THE PRICE/MARGINS. THIS VIEW HAS BEEN UPHELD BY VARIOUS TRIBUNAL ORDERS, INCLUDING DELHI BENCHES. FOLLOWING ARE THE JUDGMENTS WHICH FAVOUR THE REVENUE:- ACTIS ADVISERS PVT. LTD VS DCIT(2013) 146 ITD 314( DELHI) DSM ANTI INVECTIVES INDIA LTD VS DCIT TS- 243- ITAT - 2013(CHAND)- TP GLOBAL LOGICS INDIA PVT. LTD VS DCIT 2013- TII- 43- ITAT- DEL- TP ACIT VS ZEE ENTERTAINMENT ENTERPRISES LTD 2014- TII - 181- ITAT- MUM- TP ITAT BANGALORE IN M/S ACI WORLD WIDE SOLUATION PVT. LTD VS ACIT 2015- TII- 430- ITAT- BANG- TP AS REGARDS TO COMPARABLES VIS-A-VIS RPT FILTER, TH E LD. DR RELIED ON FOLLOWING DECISIONS: ITO VS. NIT DATA GLOBAL DELIVERY SERVICES LTD 2016- TII- 261- ITAT- DEL- TP 14 ITA NO. 6100/DEL/2012 TOLUNA INDIA LTD. AND ACTIS ADVISORS PVT. LTD. VS. DCIT {2012-TII-136- ITAT-DEL-TP} STREAM INTERNATIONAL SERVICES PVT. LTD . VS. ACIT {2013- TII-42-ITAT-MUM-TP} AS REGARDS TO DIMINISHING REVENUES TREND, THE LD. D R RELIED UPON THE CASE OF SONY INDIA PVT. LTD. VS DCIT (114 ITD 448) WHERE O NE OF THE CONSEQUENCES OF SUCH ERRONEOUS TREND IN GROWTH OF COMPANY IS ALS O THE COMPANY RESULTING INTO NEGATIVE NET WORTH. AS REGARDS TO PERSISTENT LOSS AND PECULIAR CIRCUMSTANCES FILTER AND NEGATIVE NET WORTH, THE LD. DR RELIED UPON THE FOLLOWING DECISIONS:- A. CRM SERVICES INDIA (P) LTD (2011-TII-86-ITAT-DEL-TP ) B. EXXON MOBIL COMPANY INDIA PVT LTD (2011-TII-68-ITAT - MUM-TP) C. BP INDIA SERVICES (2011-TII-118-ITAT-MUM-TP) D. NAVISITE INDIA PVT LTD V ITO (2013-TII-153-ITA T-DEL-TP); (E) SONY INDIA (P) LIMITED VS DCIT (114 ITD 448) THE LD. DR ALSO RELIED UPON THE CASE OF SUMITOMO CH EMICALS INDIA PVT. LTD. WHEREIN TRIBUNAL CONFIRMED THAT COMPANIES INCURRING PERSISTENT LOSSES CANNOT BE CONSIDERED AS VALID COMPARABLES. AS REGARDS TO COMPANIES NEED NOT BE EXACT COMPARABLE, AS PER FAR, THE LD. DR RELIED UPO N THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SONY ERICSON UPHOLD THE US E OF TNMM AS THE MOST APPROPRIATE METHOD. THE DR ALSO RELIED UPON THE CAS E OF DELOITTE CONSULTING INDIA PVT. LTD (ITA NO. 1082/HYD/2010). AS REGARDS TO COMPARABLES CANNOT BE REJECTED ON ACCOUNT OF SUPER NORMAL PROFITS OR HIGH ER PROFIT MARGINS, THE LD. DR RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT, IN CASE OF CHRYS CAPTIAL INVESTMENT ADVISORS (INDIA) PVT. LTD. WHER EIN THE HONBLE HIGH COURT HAS REJECTED THE TAXPAYERS ARGUMENTS IN RESPECT OF SUPER NORMAL PROFITS BY 15 ITA NO. 6100/DEL/2012 HOLDING THAT IN THE PRESENT CASE, THIS COURT HOLDS THAT ONCE BRESCON, KEYNOTE AND KHANDWALA SECURITIES ARE HELD TO BE FUNCTIONALL Y SIMILAR TO THE ASSESSEE, THEY WOULD BE INCLUDED AS COMPARABLES, NOTWITHSTAND ING THEIR HIGH PROFITS MARGINS, PROVIDED THAT THE MATERIAL DIFFERENCE ON A CCOUNT OF SUCH HIGH PROFIT MARGINS CAN BE ELIMINATED UNDER THE RULE 10B(3) ANA LYSIS. SAME VIEW UPHELD IN M/S RAMPGREEN CASE BY HONBLE DELHI HIGH COURT. THE LD. DR ALSO RELIED UPON THE DECISION OF DELHI TRIBUNAL IN CASE OF XCHA NGING TECHNOLOGY SERVICES INDIA PVT. LTD. VS DCIT, 2015-TII-396- ITA T- DEL- TP AS WELL AS THE DECISION OF THE HONBLE DELHI HIGH COURT IN CAS E OF CHRYSCAPITAL INVESTMENTADVISORS (INDIA) PVT. LTD VS DCIT ITA NO 417/2014. THE LD. DR ALSO RELIED UPON THE FOLLOWING CASE LAWS: A) THOMSON REUTERS INDIA SERVICES PVT. LTD. [T5-171-IT AT-2016(BANG)-TP] B) IHG IT SERVICES (INDIA) PVT. LTD [TS-476-ITAT-2015( DEL-TP] C) SYNOPSIS INDIA P LTD [TS-504-ITAT-2015(BANG)-TP] D) NET DEVICES INDIA PVT. LTD.[TS-354-ITAT-2016(BANG)- TP] E) AMERICAN EXPRESS INDIA PVT. LTD. [TS-349-ITAT-2016( DEL)-TP] ITAT F) NTT DATA GLOBAL DELIVERY SERVICES LTD VS ACIT- [201 6] 69 TAXMANN.COM 7 (BANGALORE-TRIB) G) JDA SOFTWARE INDIA PVT. LTD. VS ITO (2016) 66 TAX MANN.COM 327(HYD) H) PAREXEL INTERNATIONAL (INDIA) PVT. LTD. VS ACIT- (2 016) 66 TAXMANN.COM 150 (HYD) I) AMERIPRISE INDIA PVT. LTD. VS DCIT- (2016) 66 TAXM ANN.COM 246 (DEL) THE LD. DR RELIED UPON THE FOLLOWING CASE LAW WHICH ALSO SUPPORTS THE LACK OF CORRELATION BETWEEN TURNOVER AND MARGINS: I. ARIBA TECHNOLOGIES INDIA PVT. LTD VS ITO- (2016) 67 TAXMANN.COM (BANGALORE-TRIB). II. AMERICAN EXPRESS SERVICES INDIA LTD VS DCIT (2013) 32 TAXMANN.COM 143(DELHI TRIB). 16 ITA NO. 6100/DEL/2012 III. ITO VS NEXTLINE INDIA PVT. LTD (ITA NO 454 OF 2011, DTF 19.10.2012 (BANG TRIB). IV. 24/7 CUSTOMER.COM (P) LTD VS DCIT (2012) 28 TAXMANN .COM 258-. V. TRILOGY E-BUSINESS SOFTWARE INDIA (P) LTD VS DCIT ( 2013) 29 TAXMANN.COM 310-. VI. WILLIS PROCESSING SERVICES (I) (P) LTD VS DCIT (201 3) 30 TAXMANN.COM 350, MUMBAI, ITAT. VII. NOKIA INDIA PRIVATE LIMITED VS DCIT (2014-TLL-224-I TAT-DEL-TP) VIII. MAERSK GLOBAL CENTERS (INDIA) (P.) LTD VS ACIT 2014 -TII-52-ITAT- MUM-SB-TP IX. NAVISITE INDIA PVT. LTD VS ACIT 2014-TII-249-ITAT- DEL-TP THE LD. DR FURTHER SUBMITTED THAT THE COMPARABLE CA N BE REJECTED IF SEGMENTAL RESULTS ARE NOT AVAILABLE. THE LD. DR RELIED UPON T HE DECISION IN CASE OF AVAYA INDIA (P) LTD VS ADDL. CIT (2015-TII-DEL-TP), ITA N O 5528/DEL/2011.THE LD. DR SUBMITTED THAT THE COMPARABLE HAVE TO BE TESTED ON VARIOUS PARAMETERS AND NOT REJECTED ON MINOR DIFFERENCES AND RELIED UP ON THE DECISION OF M/S E- ZEST SOLUTIONS LTD AND M/S TECHBOOKS INTERNATIONAL PVT. LTD VS DCIT [2015- TII-282-ITAT-DEL-TP). THE LD. DR FURTHER SUBMITTED THAT THE COMPARABLES HAVE TO BE DECIDED ON FACTS AND NOT ON PRECEDENTS A ND RELIED UPON THE DECISION IN CASE OF VIRAGE LOGIC INTERNATIONAL INDI A VS JDIT {2016-TII- 378-ITAT-DEL-TP}, WHEREIN IT IS HELD THAT COMPARABI LITY SHOULD BE DECIDED ON THE BASIS OF FACTS AND NOT ON THE BASIS OF PRECEDEN TS. THE LD. DR FURTHER SUBMITTED THAT THE COMPARABLES CANNOT BE REJECTED O N THE BASIS OF TURNOVER AND RELIED UPON THE DECISION IN CASE OF ITO VS GDA SOFTWARE INDIA PVT. LTD. [2016-TII-68-ITAT-HYD-TP] AND SMART CUBE INDIA, ITA 1103/DEL/2015 VIDE ORDER DATED 27/4/2018. THE LD. DR RELIED UPON THE F OLLOWING ORDERS OF THE TRIBUNAL WHICH ALSO SUPPORT REVENUE ON THE ISSUE OF TURNOVER: 17 ITA NO. 6100/DEL/2012 SAP LABS INDIA PVT. LTD [2018] 92 TAXMANN.COM 412 (BENGALURU TRIB.) TURNOVER CANNOT BE RELEVANT CRITERIA TO DECIDE COMPARABILITY UNLESS IT IS DEMONSTRATED THAT TURNOVER HAS GOT AN IMPACT ON PROFITABILITY OF A CONCERN FIS GLOBAL BUSINESS INDIA PVT. LTD. [2018] 94 TAXMANN.COM 314 (DELHI TRIB.) HIGH OR LOW TURNOVER IS NOT A CRITERIA FOR EXCLUDING AN OTHERWISE COMPARABLE COMPANY SOCIETE GENERALE GLOBAL SOLUTION CENTRE PVT. LTD. [2016] 69 TAXMANN.COM 336 (BANGALORE TRIB) TURNOVER CANNOT BE RELEVANT CRITERIA IN A SERVICE SECTOR WHERE FIXED OVERHEADS ARE NOMINAL AND THE COST OF SERVICE IS IN DIRECT PROPORTION TO THE SERVICES RENDERED SCANCAFE DIGITAL SOLUTIONS PVT LTD [2017] ITA NO. 502/BANG/2015 OF ITAT, BANGALORE DATED 12/04/2017 TURNOVER CANNOT BE RELEVANT CRITERIA IN A SERVICE SECTOR WHERE FIXED OVERHEADS ARE NOMINAL AND THE COST OF SERVICE IS IN DIRECT PROPORTION TO THE SERVICES RENDERED (PARAGRAPH 17 OF THE DECISION). CHRYSCAPITAL INVESTMENT ADVISORS (INDIA) P LTD. [2015] 56 TAXMANN.COM 417 (DELHI)/[2015] 232 TAXMAN 20 (DELHI)/[2015] 376 ITR 183 (DELHI)/[2015] 277 CTR 137 (DELHI) COMPARABLES DISCHARGING BROADLY SIMILAR FUNCTIONS CANNOT BE EXCLUDED MERELY ON THE BASIS OF HIGH PROFITS OR TURNOVER, UNLESS MATERIAL DIFFERENCES ON ACCOUNT OF THE SAID FACTORS IS ESTABLISHED THE LD. DR SUBMITTED THAT IN THE CASE OF THE ASSESS EE, THE ENTIRE GLOBAL GROUP OF THE ASSESSEE AND ITS AES, IN MANY COUNTRIE S, INCLUDING THE PARENT AE, HAVE A TURNOVER, WHICH IS COMPARABLE TO THE COMPARA BLES TO WHICH THE ASSESSEE IS OBJECTING. THEREFORE, THE LD. DR SUBMITTED THAT THE ARGUMENT OF THE ASSESSEE DOES NOT HOLD ANY GROUND ON THIS ISSUE. AS REGARDS TO COMPARABLES HAVING 18 ITA NO. 6100/DEL/2012 SIMILAR FAR ARE TO BE INCLUDED, THE SAME CANNOT BE REJECTED ON ACCOUNT OF JUDICIAL VIEW OF COURT ON DIFFERENT FACTS AND SIMIL ARLY FAR IS THE CRITERIA FOR INCLUDING THE COMPARABLE AS HELD IN CASE OF M/S COW I INDIA PVT. LTD. VS ACIT,GURGAON [2016-TII-242-ITAT-DEL-TP]. IN RESPECT OF THE ISSUE OF RISK ADJUSTMENTS, THE LD. DR SUBMITTED THAT THE ASSESSEE HAS TO PROVIDE RELIABLE, ROBUST AND RELEVANT EVIDENCE TO PROVE THAT RISKS UN DER ONE OR MORE OF THE FOLLOWING CATEGORIES WERE UNDERTAKEN :- BUSINESS RISK DAY STRATEGIC DECISIONS- ORGANISATION OF WORK FLOW, FINDING SOLUTIONS TO LOGISTICAL CONSTRAINTS, ALLOCATION OF BUDGET FOR OPTIMAL OUTCOMES. MANPOWER RISK HIRING, FIRING, TRAINING OF MANPOWER, RETENTION OF MANPOWER, TECHNOLOGY RISK IDENTIFICATION AND SOURCING OF REQU IRED RESOURCES GOVERNMENT POLICY RISK, COMPLIANCE WITH REGULATORY ENVIRONMENT, COPING WITH CHARGES IN LAWS AND REGULATIONS, TRACKING AND REPORTING ON COMPETITION AND MARKET, POLITICAL AND COUNTRY RISK IMPORT RELATED LOGISTICAL RISKS MARKET RISK SINGLE CUSTOMER RISK SERVICE RISK MONITORING OF SERVICES PROVIDED, FOR QUALITY, CONSISTENCY AND CONFORMITY WITH SPECIFICATIONS ETC DESIGNING STRATEGIES FOR GROWTH AND MARKET PENETRA TION, CUSTOMIZING AND ENHANCING VALUE OF GROUP INTANGIBLE S ON JOB, CAPTURING THE LOCATION SAVINGS ADVANTAGE INTO THE BUSINESS. THE LD. DR RELIED UPON THE FOLLOWING DECISIONS: A. HUAWEI TELECOMMUNICATIONS (INDIA) COMPANY (P.) LTD . VS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 1 (1), GURGAON, [2015] 61 TAXMANN.COM 198 (DELHI-TRIB) 19 ITA NO. 6100/DEL/2012 B. NXP SEMI CONDUCTORS INDIA (P.) LTD.VS DCIT CIRCLE 1 2(2), BANGALORE[2015] 56 TAXMANN.COM 140 (BANGALORE-TRIB. ) C. INTEGRATED DECISIONS & SYSTEMS (INDIA) (P.) LTD. VS ITO WARD 6 (3), JAIPUR [2015] 60 TAXMANN.COM 27 (JAIPUR -TRIB.) D. STRYKER GLOBAL TECHNOLOGY CENTRE (P) LTD DCIT(2015- TII-426-ITAT- DEL-TP) E. EXL SERVICE. COM (INDIA) P. LTD VS ACIT 2014-TII-31 3-ITAT-DEL-TP F. TECHBOOKS INTERNATIONAL P. LTD VS DCIT 2015-TII-282 -ITAT-DEL-TP G. CLENA INDIA(P) LTD VS ITO WARD 3(3)(2015) 59 TAXMAN N.COM 92(DELHI- TRIB) DT 24 APRIL 2015, H. GENERAL ATLANTIC (P) LTD. VS ACIT(OSD), CIRCLE- 3(1 ) (2013) 36 TAXMANN.COM 44 MUM TRIB DT 17 MAY 2013 AS REGARDS TO OBJECTIONS TO COMPARABILITY ON ACCOUN T OF FUNCTIONAL DIFFERENCE, THE LD. DR RELIED UPON THE DECISION OF THE TRIBUNAL IN CASE OF DELOITTE CONSULTING INDIA PVT. LTD. (ITA NO 1082/HYD/2010) A ND THE OECD GUIDELINES WHICH ALSO SPEAKS OF THE STRENGTH OF TNMM 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS GROUND NO. 2 TO 2.3 REJECTION OF COMPARABLE IS NOT JUST AND PROPER. IN-FACT, THE TPO HAS NOT TAKE N INTO CONSIDERATION HIS OWN PARAMETERS SET OUT IN THE ORDER. THE BROAD COMPARI SON SHOULD HAVE BEEN DONE AND THE COMPARABLE SELECTED BY THE ASSESSEE SHOULD HAVE BEEN TAKEN INTO ACCOUNT BY THE TPO ON THE BASIS OF HIS OWN PARAMETE RS. THEREFORE, THE SUBMISSION OF THE LD. AR IS ACCEPTED AS THE TPO HAS NOT PROPERLY FOLLOWED ITS OWN FILTERS AND OVER LOOKED ITS OWN FILTER WHILE MA KING A FINAL LIST OF COMPARABLES WITHOUT TAKING INTO ACCOUNT THE FUNCTIO NAL DIFFERENCE OF THOSE COMPARABLES. IN FACT, VARIOUS CASES LAWS CITED BY THE LD. DR ALSO HIGHLIGHT THAT EACH PARAMETERS/FILTERS SET OUT BY THE REVENUE HAS TO BE TAKEN INTO CONSIDERATION. BUT IN THE PRESENT CASE THE TPO FAIL ED TO DO SO. THEREFORE, WE REMAND BACK THIS ISSUE FOR FRESH ADJUDICATION TO TH E FILE OF THE TPO IN 20 ITA NO. 6100/DEL/2012 CONSONANCE WITH THE OBSERVATIONS MADE BY US HEREINA BOVE. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOL LOWING PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NOS. 2 TO 2.3 ARE PARTLY ALLO WED FOR STATISTICAL PURPOSE. 9. AS REGARDS TO GROUND NOS. 3 TO 7 RELATING TO TH E TRANSACTION FOR PAYMENT OF TESTING, WARRANTY REPAIR AND SERVICE CHARGES FEE AND FUNCTIONS BEING PERFORMED BY THE AE IN RELATION TO THE TRANSACTION UNDER REVIEW AND THEREBY PROPOSING AN ALTERNATIVE ADDITION OF RS. 2,75,86,07 0/- (FIREWALL CHARGES), THE LD. AR SUBMITTED THAT WHEN FINISHED GOODS ARE SHIPP ED TO THE AE IN US FROM INDIAN PORTS, THERE IS A TIME LAG BEFORE THE PRODUC TS REACH THE DESTINED PORT. AT TIMES, MOTORS CAPTURE MOISTURE DURING THE TRANSIT P ERIOD AND THIS CAN ADVERSELY IMPACT THEIR FUNCTIONING. THE MOISTURE IN THE MOTOR MAY CAUSE SPARKING AT THE TIME OF USAGE AND CAN CAUSE HARM TO THE USER. ON THE REQUEST OF MEIPL, THE AE ENGAGES A THIRD PARTY THAT TESTS A LL THE MOTORS TO ENSURE THE DESIRED QUALITY STANDARDS OF THE US MARKET. IN ORDE R TO DETERMINE WHETHER ALL MOTORS MEET THE DESIRED QUALITY STANDARDS, EACH MOT OR NEEDS TO BE TESTED INDIVIDUALLY. SUCH TESTING CHARGES INCURRED ARE PAI D BY MEIPL TO THE AE WHICH THE AE PAYS TO THE THIRD PARTY ON COST-TO-COST BASI S I.E. MEIPL PAID DIRECTLY TO AE EXACTLY THE SAME AMOUNT WHICH THE AE PAID TO THE THIRD PARTY PERFORMING THE TESTING SERVICES (WITHOUT ANY MARK-UP). SINCE T HE PAYMENT OF FIREWALL CHARGES WAS MADE BY THE ASSESSEE TO ITS AE WAS AN I NTEGRAL PART OF THE MANUFACTURING FUNCTION, THE SAME WAS AGGREGATED AND BENCHMARKED USING THE TNMM AS THE MOST APPROPRIATE METHOD. IT WAS ALSO CO RROBORATED USING CUP METHOD AS MENTIONED ABOVE. DURING THE ASSESSMENT PR OCEEDINGS, THE LD. TPO ASKED THE ASSESSEE TO SUBMIT THE REASON AS TO WHY T HE PAYMENT OF FIREWALL CHARGES TO THE AE SHOULD NOT BE CONSIDERED NIL. THE ASSESSEE FILED ITS REPLIES ON VARIOUS DATES IN EACH ASSESSMENT YEAR AS TO WHY THE TRANSACTION SHOULD BE CONSIDERED AT ARMS LENGTH. THE TPO REJECTED THE AR GUMENTS PUT FORTH BY THE ASSESSEE BY STATING THE FOLLOWING REASONS: 21 ITA NO. 6100/DEL/2012 A. AN UNRELATED PARTY WOULD NOT MAKE SUCH A PAYMENT; B. IF THE AE WISHES TO TEST ALL THE MOTORS FOR ITS SAT ISFACTION, THEN IT AMOUNTS TO DUPLICATIVE SERVICE AND NO SEPARATE PAYMENT IS REQU IRED TO BE MADE BY THE ASSESSEE; C. NO UNRELATED PARTY WOULD MAKE PAYMENT FOR TESTING O F MOTORS IN WHICH NO FAULT IS DETECTED; D. NO INDEPENDENT PARTY WOULD PAY SUCH TESTING CHARGES WHEN GOODS ARE COVERED BY WARRANTY; AND E. TPO HAS CORRECTLY APPLIED THE CUP METHOD FOR BENCHM ARKING THE SUBJECT TRANSACTION . FURTHER, THE DRP HAS NOT GIVEN ANY DETAILED FINDING OR JUSTIFICATION FOR REJECTING THE ASSESSEES CONTENTIONS. IT ACCEPTED THE APPROAC H FOLLOWED BY THE TPO AND MADE ADJUSTMENT ON ACCOUNT OF FIREWALL CHARGES . THE LD. AR SUBMITTED THAT THE TPO / DRP HAS GROSSLY ERRED IN NOT APPRECIATING THE NATURE AND IMPORTANCE OF THIS TRANSACTION. BY SEEKING SUCH ANSWERS FROM THE ASSESSEE, THE TPO / DRP HAS IGNORED THE FOLLOWING POINTS WHICH ARE THE PRIM ARY REASONS FOR WHICH THE ASSESSEE IS INCURRING SUCH EXPENSE: (I) IMPACT ON THE BRAND REPUTATION : IT IS IMPORTANT TO UNDERSTAND THAT THE MAIN REASON BEHIND INCURRING SUCH EXPENSES IS TO EN SURE THAT NONE OF THE MOTORS ARE DEFECTIVE WHEN SOLD TO THE CUSTOMER IN THE OVERSEAS MARKET. IT IS PERTINENT TO NOTE THAT THE PRODUCT LI ABILITY RISK, IN A VALUE CHAIN, IS THAT OF A MANUFACTURER. SINCE IN THE INST ANT CASE, MEIPL IS THE MANUFACTURING ENTITY, ANY DEFECT IN THE PRODUCT WIL L HAVE A DETRIMENTAL EFFECT ON THE BRAND REPUTATION OF MEIPL. IN CASE AN Y DEFECT IS IDENTIFIED IN THE GOODS WHICH ARE BEING SOLD IN THE US MARKET, THE REPUTATION OF MEIPL WOULD BE IMPACTED AND NOT THAT OF THE DISTRIB UTOR AS THE DISTRIBUTOR IS EARNING A GROSS MARGIN BY JUST RENDE RING DISTRIBUTION 22 ITA NO. 6100/DEL/2012 SERVICES. ADVERSE BRAND REPUTATION WOULD LEAD TO DR ASTIC REDUCTION IN SALES IN SUBSEQUENT YEARS AND HENCE THE PROFITABILI TY OF THE ASSESSEE. (II) PENAL CHARGES: IT IS IMPORTANT TO UNDERSTAND THAT US BEING THE MOS T DEVELOPED COUNTRY IN THE WORLD HAS THE MOST STRINGE NT LAWS AGAINST THE DAMAGES CAUSED BY THE USE OF FAULTY/ DEFECTIVE ITEM S. A COMPANY COULD EVEN FACE TRIAL FOR PROVIDING FAULTY PRODUCTS. IN T HE INSTANT CASE, IF THE MOTORS SUPPLIED BY MEIPL TO THE CUSTOMER IS USED IN A BUILDING AND DUE TO A SHORT CIRCUIT IN THE MOTOR (BECAUSE OF THE MOI STURE) IT CATCHES FIRE, THEN THIS COULD LEAD TO HUGE PRODUCT LIABILITY CLAI MS BEEN INITIATED AGAINST THE MANUFACTURER I.E. MEIPL AND NOT THE DIS TRIBUTOR. THE ASSESSEE COULD ALSO FACE TRIAL FOR THE SAME APART F ROM HUGE DAMAGES CLAIM WHICH WILL IMPACT THE OVERALL REPUTATION/ FUN CTIONING OF THE ASSESSEE. (III) COST TO COST CHARGES: AN IMPORTANT POINT WHICH MUST BE CONSIDERED WHILE EVALUATING ARMS LENGTH NATURE OF THIS TRANSA CTION IS THAT, ON REQUEST OF MEIPL, THE AE APPOINTS THE THIRD PARTY T HAT PERFORMS UNPACKING, TESTING AND REPACKING OF MOTORS. THE COS T OF SUCH ACTIVITIES IS BORNE BY THE AE WHICH THEN RECOVERS EXACTLY THE SAM E FROM MEIPL I.E. WITHOUT CHARGING ANY MARK-UP. IN OTHER WORDS, THIS IS A COST TO COST REIMBURSEMENT AND HENCE THE AE HAS NOT BENEFITTED A NYTHING FROM THIS ARRANGEMENT. THESE MOTORS OUGHT TO HAVE BEEN TESTED IN US ONLY AND COULD NOT HAVE HAPPENED IN INDIA (AS TESTING IS PER FORMED TO CHECK MOISTURE IN MOTORS DURING TRANSIT). IF TESTING WAS POSSIBLE IN INDIA, MEIPL WOULD HAVE DIRECTLY APPOINTED THE THIRD PARTY . IN THIS CASE, SINCE THE AE IS FAMILIAR WITH THE US MARKET, HAS APPOINTE D THIS THIRD PARTY FOR THE PURPOSE OF TESTING. BACK TO BACK INVOICES HAVE ALREADY BEEN SUBMITTED BY THE ASSESSEE TO THE LD. TPO / LD. DRP (ON FULL BACK-UP IN AY 2008-09). 23 ITA NO. 6100/DEL/2012 (IV) COST NOT RELATED TO AE: THE LD. AR STATED THAT THE AE IS A DISTRIBUTOR OF GOODS WHICH ARE MANUFACTURED BY THE ASSESSEE. IT HAS ALSO BEEN STATED BEFORE THE LOWER AUTHORITIES THAT THE A E RETAINS ONLY 10% OF REVENUE AND THE BALANCE IS REMITTED BACK TO THE ASS ESSEE. HENCE, THE PROFIT IS THAT OF THE ASSESSEE WITH LIMITED RETURNS TO THE AE A GROSS MARGIN OF 10%. UNDER THESE CIRCUMSTANCES IT THAT TH E AE WOULD NOT BEAR SUCH EXPENSE OF TESTING WHEN IT IS EARNING ONLY MIN IMAL RETURNS. SHOULD THE AE START TO BEAR THESE EXPENSES ITS MARGINS WO ULD TAKE A HIT. IN ANY THIRD PARTY SET-UP SUCH COSTS CAN NEVER BE PASSED O NTO THE DISTRIBUTOR. THE LD. AR ALSO SUBMITS ITS CONTENTIONS AGAINST THE GROUNDS RAISED BY THE TPO AS TO WHY SUCH TESTING IS REQUIRED AND HOW DIFFEREN T IT IS TO WARRANTY AND OTHER EXPENSES. THE LD. AR FURTHER SUBMITTED THAT THE TPO HAS COMPARED THIS EXPENSE WITH WARRANTY EXPENSES. IT IS TRUE THAT ASS ESSEE PROVIDES WARRANTY, BUT THIS EXPENSE IS SEPARATE AND DISTINCT TO FIREWALL C HARGES. ANY MOTOR THAT DOES NOT CONTAIN MOISTURE MAY ALSO HAVE FUNCTIONAL PROBL EMS (I.E. OTHER PROBLEM RELATING TO FUNCTIONALITY OF THE MOTOR) BECAUSE OF WHICH MEIPL COULD BEAR THE WARRANTY CHARGES. BUT IT IS THE RESPONSIBILITY OF T HE ASSESSEE TO PROVIDE THE MOTORS IN WORKING CONDITIONS. IT IS ALSO IMPORTANT TO POINT OUT THAT IF PRODUCTS ARE SOLD WITHOUT TESTING, IT CAN LEAD TO EXTRA CLAI MS ON WARRANTY WHICH NOT ONLY IS ECONOMICALLY NON-VIABLE BUT ALSO IMPACTS RE PUTATION OF THE COMPANYS BRAND. THE TPO HAS ALSO STATED THAT THIS IS A DUPLI CATIVE SERVICE. AGAIN, THE TPO/ DRP HAS NOT APPRECIATED OR UNDERSTOOD THE NATU RE OF THE TRANSACTION. THIS TESTING CAN NEVER BE DONE IN INDIA AS THE PURP OSE IS TO CHECK FAULTS DUE TO MOISTURE WHILE STILL IN TRANSIT. IT IS BEYOND THE U NDERSTANDING HOW THIS CAN TANTAMOUNT TO DUPLICATION. THE TPO HAS MENTIONED TH AT NO THIRD PARTY WOULD INCUR SUCH EXPENSES IN WHICH NO FAULT IS DETECTED. WHILE SAYING THIS, THE TPO HAS NOT GIVEN ANY REFERENCE TO ANY THIRD PARTY NOT INCURRING SUCH EXPENSE. IT IS APPARENT, THAT FAULT OR NO FAULT IN THE MOTORS CAN ONLY BE DETERMINED ONCE ALL THE MOTORS ARE TESTED. HENCE THIS ARGUMENT IS ALSO FLAWED. FURTHER, THE ASSESSEE BELIEVES THAT IT IS THE RESPONSIBILITY OF THE MANUFACTURER TO PROVIDE 24 ITA NO. 6100/DEL/2012 GOODS IN WORKING CONDITIONS TO ITS DISTRIBUTOR. HEN CE ALL THIRD-PARTY MANUFACTURERS ARE LIKELY TO INCUR SUCH EXPENSES. TH E LD. AR ALSO SUBMITS THAT THIS IS A GENUINE BUSINESS EXPENDITURE. ANY EXPENDI TURE THUS INCURRED WHOLLY AND SOLELY FOR THE PURPOSE OF THE BUSINESS OF THE A SSESSEE CANNOT BE DISALLOWED OR QUESTIONED BY THE REVENUE. THE WAY ASSESSEE COND UCTS ITS BUSINESS IS PURELY THE CALL OF THE TAXPAYER AND NOT THE REVENUE . THE REVENUE CANNOT QUESTION THE COMMERCIAL WISDOM OF THE ASSESSEE. CAS E LAWS PERTAINING TO THIS ARE ENCLOSED BELOW: HIGH COURTS RULING IN THE CASE OF EKL APPLIANCES L TD. (I.T.A. NOS.1068/2011 & I.T.A. NOS.1070/2011) KEIHIN PANALFA LTD. VS ACIT (ITA NO. 1790 & 1201/DE L/2014); GLOBE GROUND INDIA PVT. LTD. VS DCIT (ITA NO. 2785/ DEL/2014); BAIN & COMPANY INDIA PRIVATE LIMITED(ITA NO. 378 & 379/DEL/2015 & CO 275 & 276/DEL/2015); SABIC INNOVATIVE PLASTICS INDIA PVT. LTD. (ITA NO. 1125/AHD/2014) AND (ITA NO. 427/AHD/2016);AND DRESSER-RAND INDIA PVT. LTD. VS ACIT (ITA NO. 8753/ MUM/2010). THE LD. AR FURTHER POINTED OUT THAT THE AE IS MEREL Y ACTING AS A DISTRIBUTOR. THE DISTRIBUTOR IS NEVER LIABLE FOR THE GOODS MANUF ACTURED. ENTITY BEARING THE RESPONSIBILITY OF THE GOODS AND EARNING PROFITS ON ACCOUNT OF SALES OF GOODS, IS EXPECTED TO BEAR THE COSTS AS WELL. THE TPO HAS FUR THER REJECTED THE AGGREGATION APPROACH AND BENCHMARKED THE TRANSACTION USING CUP METHOD. IN THIS REGARD, THE LD. AR SUBMITS THAT SUBJECT TRANSACTION IS INTE RLINKED WITH THE PRIMARY TRANSACTION. HOWEVER, WITHOUT PREJUDICE TO THE ABOV E, EVEN IF THE APPROACH OF THE TPO IS TO BE SELECTED, THE ASSESSEE FURNISHED T HIRD PARTY INVOICES WHICH REPRESENTED CUP FOR THE SUBJECT TRANSACTION. HOWEVE R, THE TPO IGNORED THE 25 ITA NO. 6100/DEL/2012 SAME AND DETERMINED THE VALUE TO BE NIL WITHOUT I DENTIFYING A SINGLE COMPARABLE. IN RELATION TO THE SAME, THE APPELLANT WISHES TO RELY ON THE FOLLOWING JUDICIAL RULINGS, WHEREIN IT HAS BEEN HEL D THAT IT IS IMPERATIVE TO HAVE A COMPARABLE UNCONTROLLED TRANSACTION. CASE LAWS PE RTAINING TO THIS ARE AS FOLLOWS: UNITTA INDIA COMPANY PRIVATE LIMITED (ITA NO. 2745/ CHNY/2017) SNF (INDIA) PVT. LTD. (ITA NO. 279 & 280/VIZ/2017) TRINITI ADVANCED SOFTWARE LABS PVT. LTD. (ITA NO. 1 427/HYD/2014); SPENCER STUART (INDIA) PRIVATE LIMITED (ITA NO. 711 7/2012, 1680/2014, 922/2015 AND 1832/2016) JUDGEMENT OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2007-08 AND AY 2009- 10 IN ITA NO. 5257/DEL/2011 AND ITA NO. 1060/DEL/20 14 VIDE ORDER DATED 19 TH FEBRUARY 2020 10. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE TPO AS WELL AS THE DIRECTIONS OF THE DRP. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE PAYMENT FOR THE FUNCTIONS PERFORMED BY THE AE IN RESPECT OF TESTING, WARRANTY , REPAIR AND SERVICE CHARGES FEE IN RELATION TO THE TRANSACTIONS AND THE ASSESSI NG OFFICER PROPOSED AND ALTERNATIVE ADDITION TO RS. 2,75,86,070/- (FIREWALL CHARGES), THIS ISSUE IS DECIDED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 & 2009-10 VIDE ORDER DATED 19/2/2020. THE CO-ORDINATE BENCH OF THE TRIBUNAL HELD THAT MOTORS WERE REQUIRED TO CHECK FOR CONTEMPT OF MOIST URE REQUIRED IN TRANSFER FROM INDIA TO USA I.E. THE DESTINATION POINT AND IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO PROVIDE DEFECT FREE MOTORS TO THE END C USTOMERS. THEREFORE, THE SAME WAS DELETED ACCORDINGLY BY THE TRIBUNAL. IN T HE PRESENT CASE ALSO, THE TESTING, WARRANTY REPAIR AND SERVICE CHARGES FEE WE RE THE FUNCTIONS PERFORMED 26 ITA NO. 6100/DEL/2012 BY THE AE AND THUS THEY ARE THE EXPENDITURE INCURRE D BY THE ASSESSEE, WHILE PAYING IT TO THE AE. THEREFORE, GROUND NO. 3 TO 7 ARE ALLOWED. 12. AS REGARDS TO GROUND NOS. 8 AND 9 RELATING TO D ENIAL OF ASSESSEES CLAIM OF DEDUCTION U/S 10B OF THE ACT AMOUNTING TO RS. 1, 84,86,800/- IN RESPECT OF NEWLY ESTABLISHED 100% EXPORT ORIENTED UNIT (EOU), THE LD. AR SUBMITTED THAT THE ASSESSEE HAS STARTED A NEW EXPORT ORIENTED UNIT FOR MANUFACTURING OF WASHER MOTOR IN FY 2002-03. IN RESPECT OF SUCH UNIT , THE ASSESSEE HAS CLAIMED DEDUCTION OF INR 1,84,86,800 U/S 10B OF THE ACT. IN AY 2008-09, ASSESSING OFFICER WITHOUT PROVIDING ANY REASONS FOR DISALLOWA NCE, JUST BY RELYING ON THE ORDERS OF PREVIOUS YEARS, HELD THAT EOU IS JUST AN EXPANSION OF EXISTING UNIT AND NOT AN INTEGRATED NEW UNIT. IN VIEW OF SAME, TH E ASSESSING OFFICER DISALLOWED THE CLAIM U/S 10B OF THE ACT. SINCE THE SIMILAR ADDITION WAS MADE BY THE ASSESSING OFFICER IN THE PREVIOUS YEAR AND T HE SAME WAS CONFIRMED BY THE DRP, THEREFORE DRP WITHOUT PROVIDING ANY REASON S AFFIRMED THE DECISION OF ASSESSING OFFICER. THE LD. AR SUBMITTED THAT THE IS SUE OF ALLOWANCE OF DEDUCTION U/S 10B OF THE ACT HAS BEEN EVALUATED BY TRIBUNAL AND ALLOWED VIDE ORDER DATED 26 MARCH 2019 FOR AY 2003-04 & AY 2004- 05. THEREAFTER SAME HAS ALSO BEEN ALLOWED IN AY 2005-06, AY 2006-07, AY 200 7-08 AND AY 2009-10 BASIS ORDER OF AY 2003-04 AND AY 2005-06. THE LD. A R SUBMITTED THAT ELIGIBILITY CONDITION TO CLAIM DEDUCTION U/S 10B OF THE ACT HAVE TO BE FULFILLED IN INITIAL YEAR AND THEREAFTER DEDUCTION HAS TO BE ALL OWED FOR 10 YEARS. IN THIS REGARD RELIANCE CAN BE PLACED ON DECISION OF HONBL E DELHI HIGH COURT IN CASE OF CIT V. TATA COMMUNICATIONS INTERNET SERVICES LTD. [ 2012] 204 TAXMAN 606/17 TAXMANN.COM 241 (DELHI), IT WAS CLARIFIED BY THE HONBLE HIGH COURT COURT WI TH SPECIFIC REFERENCE TO SECTION 80-IA WHICH IS PARI M ATERIA WITH SECTION 10B THAT 'THE BAR AS PROVIDED UNDER SECTION 80-IA(3) IS TO B E CONSIDERED ONLY FOR THE FIRST YEAR OF CLAIM FOR DEDUCTION UNDER SECTION 80-IA' TH E LD. AR ALSO RELIED UPON DECISION OF AHMADABAD TRIBUNAL IN CASE OF DCIT V TY CO VALVES & CONTROL INDIA (P.) LTD.[2013] 33 TAXMANN 223 AS WELL AS THE HONB LE KARNATAKA HC IN CASE OF ACE MULTI AXES SYSTEMS LTD. V. DY. CIT [2014] 367 I TR 266 DEALING WITH ISSUE 27 ITA NO. 6100/DEL/2012 OF DEDUCTION U/S 80IA IN SUBSEQUENT YEARS. THE LD. AR ALSO RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT V INTERNATIONAL TRACTORS LTD.[2017] 84 TAXMANN 132, WHEREIN THE HONBLE HIGH COURT REJECTED REVENUES PLEA THAT ASSESSEE NEED TO FULFILL CONDITIONS OF 80 IA IN EACH OF THE SUBSEQUENT YEARS. THUS, THE LD. AR SUBMITTED THAT THE ISSUE OF ALLOWANCE OF 10B HAS ALREADY BEEN DECIDED IN FIRST YEAR OF CLAIM I.E. AY 2003-04 & AY 2004-05 BY THE TRIBUNAL IN FAVOR OF ASSESSEE AND THEREAFTER ALLOWE D IN AY 2005-06, AY 2006- 07, AY 2007-08 AND AY 2009-10 ALSO, BY PLACING RELI ANCE ON ITS PREVIOUS ORDER FOR AY 2003-04 AND AY 2004-05. SINCE ELIGIBILITY OF DEDUCTION U/S 10B HAS TO BE EVALUATED IN THE INITIAL YEAR ONLY, THEREFORE DE DUCTION U/S 10B SHALL BE ALLOWED IN THE AY 2008-09. 13. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ISSUE OF ALLOWANCE OF CLAIM OF DEDUCTION OF 10B WAS ALREADY DECIDED IN FIRST YEAR I.E. ASSESSMENT YEAR, 2003- 04 AS WELL AS 2004-05, 2005-06, 2006-07, 2007-08 AN D 2009-10 AS WELL. AS PER THE PROVISIONS OF SECTION 10B, THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 10B, IN RESPECT OF A NEW EXPORT ORIENTED UNIT FOR M ANUFACTURING OF WASHER MOTORS IN FINANCIAL YEAR 2002-03. THE TRIBUNAL HEL D AS UNDER: AY 2007-08 AND AY 2009-10 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PA RTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE YEAR UNDER CONS IDERATION, THE ASSESSING OFFICER RELYING ON THE ORDER OF THE IMMEDIATELY PRE CEDING YEAR HELD THAT EXPORT ORIENTED UNIT (EOU) IS JUST AN EXPANSION OF THE E XISTING UNIT AND NOT AN INTEGRATED NEW UNIT. THE LEARNED DRP ALSO UPHELD TH E SAME. WE FIND THAT THE TRIBUNAL IN ITA NO. 3650/DEL/2009 AND 1196/DEL/2010 FOR ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY, FOLLOWING THE EAR LIER ORDER DELETED THE DISALLOWANCE OF DEDUCTION UNDER SECTION 10B OF THE ACT OBSERVING AS UNDER: 28 ITA NO. 6100/DEL/2012 4. WE HAVE GONE THROUGH THE ORDER DATED 26.03.2019 PASSED IN ASSESSEES OWN CASE FOR THE AYS 2003-04 AND 2004-05 IN THE APPEAL S PREFERRED BY THE REVENUE, WHEREIN IN RESPECT OF THE CLAIM OF DEDUCTION U/S 10 B OF THE ACT, A COORDINATE BENCH OF THIS TRIBUNAL FOUND THAT BY APPLYING THE D ECISION OF THE HONBLE APEX COURT IN THE CASE OF TEXTILE MACHINERY CORPORATION LTD. VS. CIT, 107 ITR 195 (SC) LEARNED CIT(A) HAD RIGHTLY EXTENDED THE RELIEF TO T HE ASSESSEE U/S 10B OF THE ACT AND, THEREFORE, THE REVENUE CANNOT HAVE ANY GRIEVAN CE AGAINST THE SAME. IT IS NOT THE CASE OF THE REVENUE THAT ANY APPEAL WAS PREFERR ED AGAINST THE ORDER OR THAT THIS POSITION WAS DISTURBED. 5. IT IS NOT THE CASE OF REVENUE THAT THERE IS ANY CHANGE OF FACTS AND CIRCUMSTANCES INVOLVED IN THIS CASE TO TAKEN A DIFF ERENT VIEW. WE, THEREFORE, WHILE RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE EARLIER ASSTT. YEARS HOLD THAT THE ASSESSEE IS ENTITLED TO THE RELIEF U/S 10B OF THE ACT. 4.3 SINCE IN THE YEAR UNDER CONSIDERATION, THE ASSE SSING OFFICER HAS FOLLOWED THE EARLIER YEARS ORDER, THEREFORE, THE ISSUE IN DISPU TE BEING SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL (SUPRA), WE DELETE THE DIS ALLOWANCE. THE GROUNDS OF APPEAL OF THE ASSESSEE FROM GROUND NOS. 1 TO 8 ARE ACCORDINGLY ALLOWED. 7. IN THE GROUNDS RAISED ALSO THERE ARE TWO ISSUES INVOLVED, I.E., IS TRANSFER PRICING ADJUSTMENT AND DISALLOWANCE OF DEDUCTION UN DER SECTION 10B OF THE ACT. WE HAVE ALREADY ADJUDICATED BOTH THE ISSUES IN THE FOREGOING PARAS IN ITA NO. 5257/DEL/2011 (AY: 2007-08). THE FACTS AND CIRCUMST ANCES OF THE CASE IN ITA NO 1060/DEL/2014 (AY: 2009-10) ARE IDENTICAL TO THE FA CTS AND CIRCUMSTANCES OF THE CASE IN ITA NO. 5257/DEL/2011 (AY: 2007-08) 8. THUS, TO HAVE CONSISTENCY IN OUR DECISION, FOLLO WING OUR FINDINGS IN ASSESSMENT YEAR 2007-08, GROUNDS RAISED BY THE ASSE SSEE ON BOTH THE ISSUES 29 ITA NO. 6100/DEL/2012 ARE ALLOWED MUTATIS MUTANDIS. IN THE RESULT, THE AP PEAL OF THE ASSESSEE IS ALLOWED. AY 2005-06 AND AY 2006-07 41. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT BY APPLYING THE DECISION RENDERED BY HON' BLE SUPREME COURT IN TEXTILE MACHINERY CORPORATION LTD. (SUPRA) AND THE CASE LAWS DISCUSSED IN THE PRECEDING PARAS, THE ID. CIT (A) HAS RIGHTLY EX TENDED THE RELIEF TO THE ASSESSEE U/S 10BOF THE ACT. CONSEQUENTLY, GROUND NO .I& ADDITIONAL GROUND NOS.13 TO 16 OF ITA NO.2622/DEL/2008 AND GROUND NO. 1 OF ITA NO.3649/DEL/2009 ARE DETERMINED AGAINST THE REVENUE . ....................... 4. WE HAVE GONE THROUGH THE ORDER DATED 26 . 3 . 2019 PASSED I N ASSESSEE'S OWN CASE FOR THE AYS 2003 - 04 AND 2004-05 IN THE APPEALS PREFERRED BY THE REVENUE, WHEREIN IN RESPECT OF THE C L AIM OF DEDUCTION U/S 108 OF THE ACT , A COORDINATE BENCH OF THIS TRIBUNAL FOUND THAT BY APPLYING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF TEXTILE MACHINERY CORPORAT I ON LTD . VS CIT, 107 ITR 195 (SC) ID. CIT(A) HAD RIGHTLY EXTENDED THE RELIEF TO THE ASSESSEE U/S 108 OF THE ACT AND, THEREFORE, THE REVENUE CANNOT HAVE ANY GRIEVANCE AGAINST THE SAME. IT IS NOT THE CASE OF THE REVENUE THAT ANY APPEAL WAS PREFERRED AGAINST THE ORDER OR THAT THIS POSITION WAS DISTURBED. 5 . IT IS NOT THE CASE OF REVENUE THAT THERE I S ANY CHANGE OF FACTS AND CIRCUMSTANCES INVOLVED IN THIS CASE TO TAKE A DIFFERENT VIEW . WE , THEREFORE, WHILE RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE COORDIN A TE BENCH I N ASSESSEE'S OWN CASE FOR THE EARL I ER A S S T T. YEA R S HOLD T HAT THE ASSESSEE IS ENTITLED TO THE RELIEF U/S 10B OF THE ACT 30 ITA NO. 6100/DEL/2012 THE FACTS ARE IDENTICAL AND THIS ASSESSMENT YEAR IS COMING UNDER THE 10 CONSECUTIVE YEARS, THEREFORE, THE ASSESSEE IS RIGHT IN CLAIMING THE DEDUCTION UNDER SECTION 10B OF THE ACT. THUS, GROUND NO. 8 & 9 ARE ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF NOVEMBER, 2020 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED: 27/11/2020 R. NAHEED COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 31 ITA NO. 6100/DEL/2012