DCIT, New Delhi V. M/s. Itochu India (P) Ltd., New Delhi

ITA 6287/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5151 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I2
• Next Hearing Date: 12-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 19-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA MALIK
• Assessee Lawyers: T M SHIV KUMAR
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary
• Section: 10B

Judgement Text

1 ITA NOS. 6287 & 6288/DEL/2012 IN THE INCOME TAX APPEL LATE TRIBUNAL DELHI BENCH: I-2 NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 6287/DEL/2 012 (A.Y .2007-08) DCIT CIRCLE-11(1) NEW DELHI (APPELLANT) VS ITOCHU INDIA (P) LTD. GROUND FLOOR, WORLD TRADE TOWER, BARAKHAMBA LANE NEW DELHI AABCI4829F (RESPONDENT) I.T.A .NO. 6288/DEL/2 012 (A.Y .2008-09) DCIT CIRCLE-11(1) NEW DELHI (APPELLANT) VS ITOCHU INDIA (P) LTD. GROUND FLOOR, WORLD TRADE TOWER, BARAKHAMBA LANE NEW DELHI AABCI4829F (RESPONDENT) APPELLANT BY SH. VISHAL KALRA, ADV & MS. REENA MALIK, CA RESPONDENT BY SH. SANJAY KUMAR YADAV, SR. DR & SH. T. M. SHIV KUMAR, CIT DR ORDER PER BENCH THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER DATED 30/10/2012 PASSED BY CIT(A)-XX, NEW DELHI FOR ASSES SMENT YEAR 2007-08 & 2008-09 RESPECTIVELY. DATE OF HEARING 12.07.2017 DATE OF PRONOUNCEMENT 18.08.2017 2 ITA NOS. 6287 & 6288/DEL/2012 2. THE GROUNDS OF APPEAL ARE AS UNDER:- (ITA NO. 6287/DEL/2012) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,53,22,520/- MADE ON ACCOUNT OF ARMS LENGTH PRICE. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING IT IS PRAYED THAT THE ORD4ER OF THE LD-XX BEING CON TRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. (ITA NO. 6288/DEL/2012) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,69,43,894/-/ - MADE ON ACCOUNT OF ARMS LENGTH PRICE. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. IT IS PRAYED THAT THE ORD4ER OF THE LD-XX BEING CON TRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASID E AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE ASSESSEE IS, INTER ALIA, ENGAGED IN RENDERIN G BUSINESS SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISES (AES) SOGO SHOSHA GROUP ENTITIES. THE ASSESSEE RENDERS THE FOLLOWING SERVICES: A) ARRANGING MEETINGS WITH PROSPECTIVE CUSTOMERS; B) INTERACTING WITH VARIOUS GOVERNMENT OFFICIALS, I NDUSTRY SPECIALISTS, POTENTIAL CUSTOMERS, ETC; C) PROVIDING INFORMATION TO ITS AES PERTAINING TO ECONOMIC, COMMERCIAL AND INDUSTRIAL DATA, CUSTOMS AND PROCEDURES, BUSINESS T RENDS, MARKET CONDITIONS, ETC; AND 3 ITA NOS. 6287 & 6288/DEL/2012 D) ARRANGING FOR FEASIBILITY STUDIES, INDUSTRY ANAL YSIS, AND PROJECT EVALUATION FOR POTENTIAL PROJECTS IDENTIFIED BY THE AES. SOGO SHOSHA MEANS GENERAL TRADING COMPANIES. IT IS A FORM OF INDUSTRIAL ORGANIZATION, A KIND OF VERTICALLY INTEG RATED TRADING COMPANIES IN JAPAN. SOGO SHOSHA STRUCTURES ARE COMPANIES WITH IN TERLOCKING OWNERSHIPS, DEALING IN ALL PRODUCTS. THESE STRUCTURE TRANSACT I N HUGE VOLUMES, HOWEVER, OPERATE ON THIN MARGINS. SOGO SHOSHA STRUCTURES ALS O HAVE DIRECT SUBSIDIARIES WHICH SPECIALIZE IN CERTAIN TYPES OF B USINESS, SUCH AS RENDERING OF BUSINESS SUPPORT SERVICES. THE ASSESSEE FUNCTION S AS A SUPPORT SERVICE PROVIDER TO THE SOGO SHOSHA COMPANIES AND SUPPORT T HEM PROCURE GOODS FROM LNDIA. THE ASSESSEE LOCATES POTENTIAL LOCAL VE NDORS OR SUPPLIERS AND PASSES THE RELEVANT INFORMATION IN RELATION TO THE SAME TO ITS AES, WHICH THEN PERFORM THE DECISION MAKING AND PURCHASE VALUA TION FUNCTIONS. FURTHER, THE ASSESSEE FORWARDS THE BID DOCUMENTS TO THE VENDORS, IF SUCH BID IS ACCEPTED THEN THE AES ENTER INTO A PURCHASE TRAN SACTION WITH THE VENDOR. POST THE PURCHASE OF GOODS FROM SUPPLIERS, THE AES IDENTIFY POTENTIAL CUSTOMERS FOR GOODS PURCHASED FROM THE VENDORS AND SELLS THE SAME TO THIRD PARTY CUSTOMERS. THE ASSESSEES FUNCTIONS ARE LIMIT ED TO IDENTIFYING THE PROSPECTIVE SELLERS IN INDIA. THE ASSESSEES APPROACH AT THE TIME OF TRANSFER PRICING (TP) DOCUMENTATION: A.Y 2007-08 A.Y 2008-09 VALUE OF TRANSACTIONS (INR) : 13,48,00,480 15,32,52,830 METHOD ADOPTED FOR BENCHMARKING TRANSACTION NET MAR GIN METHOD(TNMM) TNMM PROFIT LEVEL INDICATOR NET OPERATING PROFIT MARGIN ON COST (NCP) NCP NO. OF COMPARABLES 13 15 4 ITA NOS. 6287 & 6288/DEL/2012 NCP OF COMPARABLES AFTER USING MULTIPLE YEAR DATA 15.29% 15.28% NCP OF ASSESSEE 11.91% 1 23.52% THE TRANSFER PRICING OFFICER (TPO) RE-CHARACTERIZ ED THE BUSINESS PROFILE OF THE ASSESSEE FROM A BUSINESS SUPPORT SERVICE PROVIDER T O A TRADER. THE TPO INCLUDED THE FREE-ON BOARD (FOB) VALUE OF GOODS S OURCED FROM INDIA IN THE OPERATING COST OF THE ASSESSEE TO COMPUTE THE NCP. THE TPO REJECTED THE ANALYSIS UNDERTAKEN BY THE ASSESSEE IN THE TP DOCUM ENTATION AND CONDUCTED A FRESH SEARCH TO IDENTIFY TRADING COMPANIES AS COMPA RABLES TO THE ALLEGED TRADING ACTIVITY OF THE ASSESSEE. THE TPO MULTIPLI ED THE FOB VALUE OF GOODS SOURCED WITH THE ARITHMETIC MEAN OF THE MARGIN OF C OMPARABLES. FROM THE AMOUNT ARRIVED, THE REVENUE EARNED BY THE ASSESSEE BY RENDERING BUSINESS SUPPORT SERVICES TO ITS AES WAS SUBTRACTED TO COMPU TE THE ADJUSTMENT. THUS, THERE WAS TP ADJUSTMENT ARE RS. 6,53,22,520/- FOR A .Y. 2007-08 AND RS. 9,69,43,894/- FOR A.Y. 2008-09 4. BEING AGGRIEVED BY THE TPO/AOS ORDER, THE ASSESS EE FILED APPEAL BEFORE THE CIT(A). THE CIT(A), VIDE ORDER DATED OCT OBER 30, 2012 FOR AY 2007- 08 AND 2008-09 HELD THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS O F RENDERING BUSINESS SUPPORT SERVICES AND IS NOT A TR ADER. FURTHER, RELYING ON THE ORDER OF THE ITAT IN CASE OF GAP INTERNATION AL SOURCING INDIA PRIVATE LIMITED (ITA NO. 5147/DEL-2011 AND 228/DEL-2012), T HE CIT(A) HELD THAT THE FOB VALUE OF GOODS SOURCED BY AES CANNOT BE INCLUDE D IN THE COST OF THE ASSESSEE. THE CIT(A) ALSO UPHELD THE USE OF COMPARA BLES SELECTED BY THE ASSESSEE IN ITS TP DOCUMENTATION. THE CIT(A) HELD T HAT THE INTERNATIONAL TRANSACTIONS WERE AT ARMS LENGTH SINCE THE MARGIN OF THE ASSESSEE COMPUTED AT 110.91% AND 123.52% RESPECTIVELY FOR TH E AYS WERE HIGHER THAN THE MEAN MARGINS OF THE COMPARABLES WITH CURRE NT YEAR DATA, SUBMITTED BEFORE THE TPO BY THE ASSESSEE, WHICH WER E 16.91% (FOR AY 2007-08) AND 15.24% (FOR AY 2008-09). NOW THE DEPAR TMENT IS IN APPEAL. 5 ITA NOS. 6287 & 6288/DEL/2012 5. THE LD. DR RELIED UPON THE ORDERS OF THE TPO & T HE AO AND SUBMITTED THAT THE TPO RIGHTLY HELD THAT THE BUSINE SS PROFILE OF ASSESSEE IS A TRADER AND NOT THAT OF BUSINESS SUPPORT SERVIC E PROVIDER. THE LD. DR FURTHER SUBMITTED THAT THE TPO HAS RIGHTLY MADE AN ADJUSTMENT OF RS. 9,69,43,894/- IN RELATION TO THE INTERNATIONAL TRAN SACTIONS ENTERED INTO BY THE ASSESSEE. THE LD. DR FURTHER SUBMITTED THAT THE TPO RIGHTLY REJECTED THE TRANSFER PRICING ANALYSIS UNDERTAKEN B Y THE ASSESSEE AND MADE ADDITION TO THE INCOME OF THE ASSESSEE BY INCL UDING THE FOB PRICE OF THE GOODS SOURCED BY THE ASSESSEES AE IN THE OP ERATING COST OF THE ASSESSEE WHILE COMPUTING OPERATING MARGINS OF THE A SSESSEE. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF ARMS LENGTH PRICE. 6. THE LD. AR FURNISHED A CHART AND EXPLAINED THE A PPROACH OF ALL THE AUTHORITIES WITH THE ISSUES CONTESTED IN THE PRESEN T APPEALS FOR SUBSEQUENT YEARS AS UNDER: A.Y TPO CIT(A) REMARKS 2007-08 TPO PROPOSED A TRANSFER PRICING CIT(A ) REJECTED THE REVENUE ADJUSTMENT AMOUNTING TO INR IMPUGNED APPROACH AUTHORITIES FILED AN 6,53,22,520/- OF TPO AND DELETED APPEAL BEFO RE THE ADJUSTMENT PROPOSED ITAT BY THE TPO ON ACCOUNT OF TRANSFER PRICING. 2008-09 ADJUSTMENT AMOUNTING TO INR 9,69,43,894/- WAS PROPOSED BY TPO 2009-10 ADJUSTMENT AMOUNTING TO INR 9,69,43,894/- WAS PROPOSED BY TPO 2010-11 ADJUSTMENT AMOUNTING TO INR 9,69,43,894/- WAS PROPOSED BY TPO. 2011-12 TPO DID NOT DRAW ANY ADVERSE TPO ASSES SING 6 ITA NOS. 6287 & 6288/DEL/2012 INFERENCE TO ANY INTERNATIONAL TRANSACTION AND THE CASE FOR A.Y ISSUED A CLEAN TRANSFER PRICING ORDER. 2007-08 A ND A.Y 2011-12 IS SAME. 2012-13 TPO DID NOT DRAW ANY ADVERSE INFERENCE TO ANY INTERNATIONAL TRANSACTION AND ISSUED A CLEAN TRANSFER PRICING ORDER. 2013-14 TPO DID NOT DRAW ANY ADVERSE INFERENC E TO ANY INTERNATIONAL TRANSACTION AND ISSUED A CLEAN TRANSFER PRICING ORDER. 7. THE LD. AR SUBMITTED THAT THE ASSESSEE UNDERTAKE S LIMITED BUSINESS FUNCTIONS IN THE NATURE OF LIAISING AND FACILITATIO N OF BUSINESS OF THE AES AND, THEREFORE, THE FUNCTIONS PERFORMED BY THE ASSESSEE ARE VERY DIFFERENT FROM SOGO SHOSHA TRADERS. THE ASSESSEE UNDERTAKES LIMITE D FUNCTIONS OF ARRANGING MEETINGS OF AES WITH PROSPECTIVE CUSTOMER S, FACILITATION OF THE TRANSACTION OF SOURCING BETWEEN THE THIRD PARTY CUS TOMERS IN INDIA AND THE AES, ETC. FURTHER, THE ASSESSEE ASSUMED LIMITED RIS KS AND DID NOT BEAR ANY RISK IN THE NATURE OF CREDIT RISK, PRICE RISK, INVE NTORY RISK, STORAGE AND HANDLING RISK, ETC. THE ASSESSEE HAS NOT DEVELOPED ANY INTANGIBLES OR ACCORDED LOCATIONAL SAVINGS TO ITS AES. LOCATIONAL SAVINGS ARE EFFECTED BY THE THIRD PARTY BUYER WHO PURCHASES THE GOODS FROM THE AES. IT CAN BE SEEN FROM THE TP DOCUMENTATION THAT THE ASSESSEE HAS BEEN ADE QUATELY COMPENSATED SINCE, IT HAS EARNED A NET OPERATING PROFIT MARGIN ON COST OF 110.91% AND 123.52% AGAINST THE ARITHMETIC MEAN OF THE MARGINS OF COMPARABLE COMPANIES AT 15.29% AND 15.28% FOR AY 2007-08 AND 2 008-09, RESPECTIVELY. THE PROVISIONS OF THE LAW DO NOT WARRANT SUCH INCLU SION OF COSTS WHICH DO NOT FORM PART OF THE ASSESSEES OPERATING COST AND IS ARTIFICIAL ENHANCEMENT OF THE COST BASE OF THE ASSESSEE. THE LD. AR SUBMIT TED THAT THE TPO HAS ERRED IN RE-CHARACTERIZING THE BUSINESS FUNCTIONS O F THE ASSESSEE TO BE THAT OF A TRADER. THE TPO FAILED TO APPRECIATE THAT THE ASS ESSEE HAS NOT UNDERTAKEN 7 ITA NOS. 6287 & 6288/DEL/2012 THE ACTIVITY OF PURCHASE AND RESALE. FURTHER, THE C OMPANIES ADOPTED BY THE TPO AS COMPARABLE ARE UNDERTAKING TRADING OPERATION S WHICH IS NOT COMPARABLE TO THE INTER-COMPANY TRANSACTIONS UNDERT AKEN BY THE ASSESSEE. THE TPO HAS ARTIFICIALLY ENHANCED THE COST BASE ON THE ASSESSEE AND PROPOSED A MARK-UP ON THE FOB VALUE OF GOODS SOURCE D BY AES, SUCH APPROACH DOES NOT CORRESPOND TO ANY ONE OF THE FIVE METHODS, AS PROVIDED UNDER THE ACT. FURTHER, THE ASSESSEE HAS EARNED A N ET OPERATING PROFIT MARGIN ON COST OF 110.91% AND 123.52% FOR AY 2007-0 8 AND 2008-09, RESPECTIVELY. COMPUTATION OF AN ADJUSTMENT (OVER AN D ABOVE THE EXISTING REMUNERATION) TO THE TUNE OF INR 6,53,22,520 AND IN R 9,69,43,894 BY THE TPO FOR THE RELEVANT AYS, HAS REQUIRED THE ASSESSEE TO EARN AN NCP OF 202.35% AND 246.09% FOR AY 2007-08 AND 2008-09, RES PECTIVELY WHICH IS PRACTICALLY IMPOSSIBLE TO ACHIEVE. 6. THE LD. AR RELIED UPON THE HONBLE DELHI HIGH CO URT JUDGMENT IN CASE OF LI AND FUNG INDIA PVT. LTD. VS. CIT (2014) 361 I TR 85 (DEL) WHEREIN IT IS HELD THAT THE APPROACH OF TPO TO ENHANCE THE ASSESS EES COST BASE BY CONSIDERING THE FOB VALUE OF CONTRACTS ENTERED INTO BY AE WITH THIRD PART VENDORS IS NOWHERE SUPPORTED BY TNMM UNDER RULE 10B (1)(E) OF THE RULES. THE ORDER OF THE ITAT, WHILE REJECTING THE TRANSFER PRICING EXERCISE OF LI FUNG INDIA, HAS NOT SHOWN THE EXTENT TO WHICH THE SIGNIF ICANT RISKS ARE BORNE BY LI FUNG INDIA AND THE LOCATIONAL SAVINGS ENJOYED BY AE S. SPECIFIC FINDINGS AND MATERIALS SHOULD BE PLACED ON RECORD WHILE CONCLUDI NG ON SPECIFIC FACTS SUCH AS SIGNIFICANT RISK, FUNCTIONAL RISK AND ENTERPRISE RISK. APPROACH OF ADOPTION OF 3 PERCENT MARGIN OVER THE FOB VALUE OF AES CONT RACT IS IN ERROR OF LAW. ADDITION OF COST PLUS MARK-UP ON FOB VALUE OF EXPOR TS AMONG THIRD PARTIES FOR CALCULATION OF ARMS LENGTH PRICE UNDER TNMM IS WITHOUT FOUNDATION AND LIABLE TO BE DELETED. THE PRINCIPLES LAID DOWN BY T HE HON'BLE DELHI HIGH COURT ARE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE SINCE THE FACTS OF THE ASSESSEE AND LI FUNG INDIA ARE ALMOST IDENTICAL. TH E LD. AR FURTHER SUBMITTED THAT THE TPO IN THE TP ORDER ALLEGED THE FOLLOWING: 8 ITA NOS. 6287 & 6288/DEL/2012 IIPL HAS UNDERTAKEN CRITICAL FUNCTIONS AND ASSUMES SIGNIFICANT RISKS. AES HAVE BENEFITTED FORM THE SUPPLY CHAIN AND HUMAN CAPITAL INTANGIBLES AND LOCATION SAVINGS DEVELOPED BY IIPL. TPO ALLEGED THAT THE IIPL IS ADDING VALUE TO THE EN TIRE SUPPLY CHAIN, HENCE, MARK-UP MUST BE APPLIED TO THE DIRECT COST OF IIPL ALONG WITH THE FOB VALUE OF GOODS SOURCED BY AE. TPO REJECTED THE BENCHMARKING ANALYSIS UNDERTAKEN B Y IIPL IN ITS TP DOCUMENTATION AND PROPOSED A SET TRADING COMPANI ES AS COMPARABLES. IN ORDER TO COMPENSATE IIPL, FOR ITS EFFORTS, THE T PO PROPOSED AN ADDITION OF 2.53% (AVERAGE NET MARGINS OF TRADING C OMPANIES) MARK-UP OF FOB VALUE OF EXPORTS MADE BY INDIA MANUF ACTURER TO OVERSEAS THIRD PARTY CUSTOMERS. THE LD. AR FURTHER SUBMITTED THAT THE CIT(A) APPRE CIATED THE FUNCTIONAL AND RISK PROFILE OF THE ASSESSEE AND HELD THAT THE TPO HAS ERRED IN TREATING THE ASSESSEE AS A TRADER AND INCLUDING THE FOB VALUE OF GOODS SOURCED IN THE OPERATING COST OF THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THE HONBLE ITAT IN LI FUNGS OWN CASE FOR AY 2007-08, 2008-09 REPORTED AT [2014] 63 SOT 61 (DEL) AND 2009-10 REPORTED AT [2016] 178 TTJ 10 (DEL), FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT HELD THAT THE BASE OF TOTAL COST AS ADOPTED BY THE TPO AND APPROVED BY DRP IN CONSIDERI NG THE FOB VALUE OF GOODS BETWEEN THE THIRD PARTY ENTERPRISES CANNOT BE ACCEPTED. THE LD. AR SUBMITTED THAT THE ORDER OF THE ITAT IN CASE OF GAP INTERNATIONAL SOURCE INDIA PVT. LTD VS. ACIT 25 TAXMAN.COM 414 (DELHI) HAS BEE N CONFIRMED BY THE HONBLE HIGH COURT BY DISMISSING THE APPEAL OF THE REVENUE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS RIGHTLY RELIED UPON THE DEC ISION TAKEN BY THE TRIBUNAL IN CASE OF GAP INTERNATIONAL SOURCING INDIA PVT. LT D WHEREIN THE REVENUE HAS 9 ITA NOS. 6287 & 6288/DEL/2012 FILED APPEAL BEFORE THE HON'BLE HIGH COURT WHICH IS DISMISSED VIDE ORDER DATED 29/1/2016. THE LD. AR ALSO POINTED OUT THAT IN SUB SEQUENT YEARS THE TPO HAS ACCEPTED THE SAID CONTENTIONS AND GRANTED THE R ELIEF RELATED TO FOB AS PER THE DECISION OF GAP INTERNATIONAL & LI & FUNG INDIA PVT. LTD. THE CASE LAWS REFERRED BY THE LD. AR ARE HAVING SIMILARITY ON THE FACTUAL ASPECT WITH THE ASSESSEE COMPANY HEREIN. ITOCHU CORPORATION, JAPAN (ICJ) IS A TRADING ORGANIZATION IN JAPAN AND IS ENGAGED IN TRADING OF VARIOUS PRODUCTS SUCH AS TEXTILES, MACHINERY, INFORMATION AND COMMUNICATIONS RELATED PRODUCTS, MEALS, PRODUCTS RELATED TO OIL AND OTHER ENERGY RESOURCES, GENERAL MERCHANDISE, CHEMICALS, PROVISIONS AND FOOD. IIPL WAS INCORPORA TED AS A WHOLLY OWNED SUBSIDIARY OF ICJ TO RENDER BUSINESS SUPPORT SERVIC ES TO ITS AES IN THE NATURE OF FACILITATION SERVICES TO SOURCE GOODS FROM INDIA . THE TPO FAILED TO APPRECIATE THAT THE ASSESSEE HAS NOT UNDERTAKEN THE ACTIVITY O F PURCHASE AND RESALE. FURTHER, THE COMPANIES ADOPTED BY THE TPO AS COMPAR ABLE ARE UNDERTAKING TRADING OPERATIONS WHICH IS NOT COMPARABLE TO THE I NTER-COMPANY TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. THE TPO HAS ARTIFICIALLY ENHANCED THE COST BASE ON THE ASSESSEE AND PROPOSED A MARK-UP ON THE FOB V ALUE OF GOODS SOURCED BY AES, SUCH APPROACH DOES NOT CORRESPOND TO ANY ON E OF THE FIVE METHODS, AS PROVIDED UNDER THE ACT. FURTHER, THE ASSESSEE HAS E ARNED A NET OPERATING PROFIT MARGIN ON COST OF 110.91% AND 123.52% FOR AY 2007-08 AND 2008-09, RESPECTIVELY. COMPUTATION OF AN ADJUSTMENT (OVER AN D ABOVE THE EXISTING REMUNERATION) TO THE TUNE OF INR 6,53,22,520 AND IN R 9,69,43,894 BY THE TPO FOR THE RELEVANT AYS, HAS REQUIRED THE ASSESSEE TO EARN AN NCP OF 202.35% AND 246.09% FOR AY 2007-08 AND 2008-09, RESPECTIVELY IS PRACTICALLY IMPOSSIBLE TO ACHIEVE. THESE CONTENTIONS TAKEN BY THE LD. AR ARE ACCEPTED. THE REVENUES APPEAL AGITATING THE ISSUE OF DELETION OF THE ADDIT ION MADE ON ACCOUNT OF ARMS LENGTH PRICE RELATED TO FOB VALUE OF COST IS SIMILA R TO THE CASE OF GAP INTERNATIONAL SOURCES INDIA PVT. LTD. THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT(A). THE ORDER OF THE CIT(A) IS UP HELD. 10 ITA NOS. 6287 & 6288/DEL/2012 9. IN THE RESULT, APPEALS OF THE REVENUES ARE DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18TH AUGUS T, 2017 . SD/- SD/- (N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 18/08/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 12/07/2017 PS 2. DRAFT PLACED BEFORE AUTHOR 13/07/2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 21.08.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 11 ITA NOS. 6287 & 6288/DEL/2012 7. FILE SENT TO THE BENCH CLERK 2 1 .0 8 .2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.