ACIT, New Delhi V. M/s. Itochu India Private Ltd., New Delhi

ITA 6612/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3440 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 05-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR YADAV SENIOR
• Keywords: Transfer pricing; International transaction; Rule of consistency; Wholly owned subsidiary

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6612/DEL./2014 (ASSESSMENT YEAR : 2009-10) ACIT, CIRCLE 12 (2), VS. M/S. ITOCHU INDIA PRIVATE LTD., NEW DELHI. GROUND FLOOR, WORLD TRADE TOWER, BARAKHAMBA ROAD, NEW DELHI 110 001. (PAN : AABCI4829F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VISHAL KALRA, ADVOCATE REVENUE BY : SHRI SANJAY KUMAR YADAV, SENIOR DR DATE OF HEARING : 30.01.2018 DATE OF ORDER : 21.02.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ASSISTANT COMMISSIONER OF INCOME-TA X, CIRCLE 12 (2), NEW DELHI (HEREINAFTER REFERRED TO A S THE REVENUE) BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE TH E IMPUGNED ORDER DATED 22.09.2014, PASSED BY THE CIT (A)-XX, NEW DEL HI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUND THAT :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.5,46,43,844/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN ARMS LENGTH PRICE. ITA NO.6612/DEL/2014 2 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. ITOCHU INDIA PVT. LT D. (IIPL) (HEREINAFTER REFERRED TO AS THE TAXPAYER) IS A WH OLLY OWNED SUBSIDIARY OF ITOCHU CORPORATION, JAPAN (ICJ) IS IN TO THE BUSINESS OF RENDERING BUSINESS SUPPORT SERVICES IN RELATION TO FACILITATION AND MARKET SUPPORT TO ITS ASSOCIATED ENTERPRISES (AES) IN ORDER TO FACILITATE SOURCING TRANSACTIONS OF ITS AES WITH PR OSPECTIVE SELLERS. THE TAXPAYER IS ALSO ENGAGED IN UNDERTAKING DOMESTI C OPERATION IN TRADING WITH THIRD PARTIES. 3. DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER E NTERED INTO INTERNATIONAL TRANSACTIONS AS UNDER :- S.NO. INTERNATIONAL TRANSACTION METHOD APPLIED AMOUNT IN INR 1. PROVISION OF BUSINESS SUPPORT SERVICES TNMM 27,66,03,508 2. RECEIPT OF INTEREST TNMM 4,41,688 3. PAYMENT OF CONSULTANCY TNMM 8,05,185 4. ALLOCATION OF EXPENSES BY AE - 1,63,34,769 5. REIMBURSEMENT OF EXPENSES TO AES - 9,14,72,680 4. DURING THE YEAR UNDER ASSESSMENT, THE TAXPAYER P ROVIDED BUSINESS SUPPORT SERVICES TO ITS AES VIZ. : (I) ARRANGING MEETING WITH PROSPECTIVE CUSTOMERS; (II) INTERACTING WITH VARIOUS GOVERNMENT OFFICIALS, INDUSTRY SPECIALISTS, POTENTIAL CUSTOMERS, ETC; (III) PROVIDING INFORMATION TO ITS AES PERTAINING T O ECONOMIC, COMMERCIAL AND INDUSTRIAL DATA, CUSTOMS ITA NO.6612/DEL/2014 3 AND PROCEDURES, BUSINESS TRENDS, MARKET CONDITIONS, ETC.; AND (IV) ARRANGING FOR FEASIBILITY STUDIES, INDUSTRY AN ALYSIS, AND PROJECT EVALUATION FOR POTENTIAL PROJECTS, IN RELATION TO A SPECIFIC PRODUCT AS IDENTIFIED BY THE AES. 5. THE TRANSFER PRICING OFFICER (TPO) HAS OBSERVED DURING THE TRANSFER PRICING PROCEEDINGS THAT THE TAXPAYER IS P ART OF SOGO SHOSHA GROUP AND IS ALSO A TRADER AND THUS INCLUDED FREE ON BOARD (FOB) VALUE OF THE GOODS SOURCED BY THE AES IN THE COST BASE OF THE TAXPAYER. 6. THE TAXPAYER IN ITS TP STUDY ADOPTED TRANSACTION AL NET MARGIN METHOD (TNMM) WITH NET OPERATING PROFIT MARG IN ON COST, SELECTED 17 COMPARABLES COMPANIES WITH MARGIN OF 14 .05% AS AGAINST MARGIN OF TAXPAYER AT 129.34% AND FOUND ITS INTERNATIONAL TRANSACTION QUA PROVISION OF BUSINESS SUPPORT SERVI CES AT ARMS LENGTH. HOWEVER, TPO AFTER RECHARACTERIZING THE BU SINESS PROFILE OF THE TAXPAYER SELECTED 29 COMPARABLES WITH MARGIN OF 2.58% AND MADE TP ADJUSTMENT OF RS.5,46,43,844/-. 7. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. C IT (A) WHO HAS DELETED THE ADDITION ON ACCOUNT OF ALP ADJUSTME NT BY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COM E UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. ITA NO.6612/DEL/2014 4 8. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. THE TPO, DURING THE TRANSFER PROCEEDINGS, RECHAR ACTERIZED THE BUSINESS PROFILE OF THE TAXPAYER FROM A BUSINES S SUPPORT SERVICES PROVIDER TO A TRADER AND WHILE COMPUTING M ARGIN OF THE TAXPAYER INCLUDED FOB VALUE OF THE GOODS SOURCED FR OM INDIA IN ITS OPERATING COST. TPO ALSO REJECTED THE TP STUDY OF THE TAXPAYER AND CONDUCTED FRESH SEARCH BY SELECTING TRADING COMPANI ES AS COMPARABLES WHICH ARE UNDER CHALLENGE. HOWEVER, TH E LD. CIT (A), BY RELYING UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN LI & FUNG INDIA PVT. LTD. (2014) 361 ITR 85, TREATED T HE TAXPAYER AS A BUSINESS SUPPORT SERVICES PROVIDER TO ITS AES AND N OT AS A TRADER AND DELETED THE ADDITION. 10. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, NOW THE SOLE QUESTION ARISES FOR CONSIDER ATION IN THIS CASE IS :- AS TO WHETHER THE TAXPAYER IS A BUSINESS SUPPORT SERVICES PROVIDER OR A TRADER AND THE FOB VALUE OF GOODS SOURCED FROM INDIA BY THE TAXPAYER IS TO BE INCLUDED IN THE OPERATING COST OF THE TAXPAYER IN O RDER TO COMPUTE ITS MARGIN? ITA NO.6612/DEL/2014 5 11. THE LD. DR FOR THE REVENUE CHALLENGING THE IMPU GNED ORDER CONTENDED THAT THE TAXPAYER IS A PART OF SOGO SHOSH A GROUP BEING STOCKHOLDER IN THE TRADING BUSINESS OF THE ENTIRE G ROUP AND THE TPO HAS RIGHTLY TREATED THE TAXPAYER AS A TRADER TO INC LUDE FOB VALUE OF GOODS IN THE OPERATING COST TO COMPUTE THE MARGIN A ND RELIED UPON THE ORDER PASSED BY THE LD. TPO. 12. HOWEVER, ON THE OTHER HAND, THE LD. AR FOR THE TAXPAYER TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. DR CONTEND ED THAT SINCE THE TAXPAYER UNDERTAKES LIMITED BUSINESS FUNCTIONS OF LICENSING AND FACILITATION OF THE BUSINESS OF ITS AES, IT IS NOT TO BE TREATED AS PART OF SOGO SHOSHA GROUP TO BE TREATED AS A TRADER; THA T THE TAXPAYER DOES NOT BEAR ANY RISK IN THE NATURE OF CREDIT RISK , PRICE RISK, INVENTORY RISK, STORAGE AND HANDLING RISK, ETC. RAT HER IT IS ASSUMING LIMITED RISK; THAT THE TAXPAYER HAS NOT DEVELOPED A NY OF ITS INTANGIBLES OR ACCORDED LOCATIONAL SAVINGS TO ITS A ES; THAT THE TPO HAS ARTIFICIALLY ENHANCED THE COST BASE OF THE TAXP AYER AND AS SUCH MARK UP VALUE OF THE FOB SOURCED BY THE AES IS NOT SUSTAINABLE UNDER THE ACT; THAT THE ISSUE IN CONTROVERSY HAS BE EN SQUARELY COVERED IN TAXPAYERS OWN CASE FOR AY 2007-08 AND 2008-09 IN ITA NOS.6287/DEL/2012 & 6288/DEL/2012 ORDER DATED 1 8.08.2017 DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL AND ALSO RELIED ITA NO.6612/DEL/2014 6 UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN LI & FUNG INDIA PVT. LTD. (SUPRA) AND THE DECISION OF THE COORDINATE BENCH O F THE TRIBUNAL IN GAP INTERNATIONAL SOURCING INDIA PRIVATE LIMITED IN ITA NO.5147/DEL/2011 & 228/DEL/2012 . 13. WHEN WE EXAMINE THE DECISION RENDERED BY THE HO NBLE HIGH COURT IN LI & FUNG INDIA PVT. LTD. (SUPRA) HAVING IDENTICAL FACTS VIS--VIS THE TAXPAYER, THE FINDINGS RETURNED BY THE LD. CIT (A) DELETING THE ADDITION MADE BY THE TPO NEED NO INTER FERENCE. THE OPERATING PART OF THE JUDGMENT DELIVERED BY THE HON BLE HIGH COURT IN LI & FUNG INDIA PVT. LTD. (SUPRA) IS REPRODUCED FOR READY PERUSAL AS UNDER :- THE ASSESSEE WAS A WHOLLY OWNED SUBSIDIARY OF A COMPANY INCORPORATED IN MAURITIUS AS A CAPTIVE OFFS HORE SOURCING PROVIDER. LFT, AN ASSOCIATED ENTERPRISE, W AS A GROUP COMPANY INCORPORATED IN HONG KONG. THE ASSESS EE ENTERED INTO AN AGREEMENT WITH THE ASSOCIATED ENTER PRISE, WHEREBY THE CONTRACT FOR RENDERING SOURCING SERVICE S WAS OUTSOURCED OR SUB-CONTRACTED TO THE ASSESSEE, FOR W HICH IT WAS REMUNERATED AT COST PLUS A MARK-UP OF 5 PER CEN T. FOR SERVICES RENDERED TO THE ASSOCIATED ENTERPRISE, AND , ULTIMATELY, THE ASSOCIATED ENTERPRISE'S CUSTOMERS. THE ASSESSEE, DURING THE RELEVANT ASSESSMENT YEAR 2006- 07, ENTERED INTO INTERNATIONAL TRANSACTIONS OF BUYING S ERVICES FOR SOURCING OF GARMENTS, HANDICRAFTS, LEATHER PROD UCTS, ETC., IN INDIA FOR ITS ASSOCIATED ENTERPRISE, AND WAS PAI D SERVICE CHARGES OF 5 PER CENT. OF COST PLUS MARK-UP INCURRE D FOR PROVIDING THESE SERVICES. THE ASSESSEE WORKED OUT T HE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS APPL YING THE TRANSACTIONAL NET MARGIN METHOD BY COMPARING THE OPERATING PROFIT MARGIN OF26 COMPANIES AND THE ASSE SSEE'S OPERATING PROFITS/OPERATING COSTS TAKEN AT 5.17 PER CENT. IT CONTENDED THAT IT WAS A LOW RISK CAPTIVE SOURCING S ERVICE PROVIDER PERFORMING LIMITED FUNCTIONS WITH MINIMAL RISK AS ITA NO.6612/DEL/2014 7 AN OFF-SHORE PROVIDER AND SUBSTANTIAL FUNCTIONS REL ATING TO BUYING SERVICES WERE PERFORMED BY THE ASSOCIATED EN TERPRISE, WHICH ALSO ASSUMED VARIOUS ENTERPRISE RISKS. ALTERN ATIVELY, THE ASSOCIATED ENTERPRISE ENTERED INTO CONTRACTS WI TH UNRELATED THIRD PARTIES FOR RENDERING BUYING SERVIC ES AT 4 PER CENT. TO 5 PER CENT. OF THE FREE ON BOARD VALUE OF EXPORTS. THE ASSESSEE HAD IN TURN RECEIVED SERVICE FEE OF RS. 47 .69 CRORES WHICH WAS EQUIVALENT TO NEARLY 4 PER CENT. OF THE F REE ON BOARD VALUE OF THE EXPORT (BY THE VENDORS) FROM THE ASSOCIATED ENTERPRISE, WHICH CONSTITUTED 80 PER CEN T. OF THE CONSIDERATION RECEIVED BY THE ASSOCIATED ENTERPRISE , WHICH, IN THE ASSESSEE'S OPINION OUGHT TO HAVE BEEN CONSID ERED AS BEING AT ARM'S LENGTH. THE TRANSFER PRICING OFFICER HELD THAT THE COST PLUS COMPENSATION AT 5 PER CENT. OF C OST OF INCURRED BY THE ASSESSEE WAS NOT AT ARM'S LENGTH AN D APPLIED A MARK-UP OF 5 PER CENT. ON THE FREE ON BOARD VALUE OF EXPORTS OF RS.1,202.96 CRORES MADE BY THE INDIAN MANUFACTURER TO OVERSEAS THIRD PARTY CUSTOMERS. THE DISPUTE RESOLUTION PANEL REDUCED THE MARK-UP OF 5 P ER CENT. OF FREE ON BOARD VALUE OF EXPORTS TO 3 PER CE NT. THE ASSESSING OFFICER COMPUTED THE ASSESSEE'S INCOME AT RS. 36,67,95,634 AS AGAINST THE RETURNED INCOME OF RS. 3,08,26,448 AFTER MAKING THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. THE TRIBUNAL HELD THAT THE ASSE SSEE WAS PERFORMING ALL CRITICAL FUNCTIONS WITH THE HELP OF TANGIBLE AND UNIQUE INTANGIBLES AS WELL AS SUPPLY CHAIN DEVE LOPED, WHICH HELPED THE ASSOCIATED ENTERPRISE TO ENHANCE I TS BUSINESS AND RESULTED IN LOCATION SAVING TO THE CON SUMER, COMPENSATION FOR THE SERVICES RENDERED BY THE ASSES SEE TO THE ASSOCIATED ENTERPRISE, EQUIVALENT TO THE COST P LUS 5 PER CENT. MARK-UP, WAS NOT AT ARM'S LENGTH. SINCE THE A SSESSEE WAS PROVIDING CRUCIAL SOURCING SERVICES AND THE ASS OCIATED ENTERPRISE WAS REMUNERATED BY THIRD PARTIES BASED O N SUCH SERVICES, THE TRIBUNAL RELIED UPON THE MARK-UP ON T HE FREE ON BOARD VALUE OF GOODS SOURCED THROUGH THE ASSESSE E AS THE APPROPRIATE METHOD TO WORK OUT THE ARM'S LENGTH COMPENSATION. THE TRIBUNAL ACCEPTED THE TRANSFER PR ICING OFFICERS REASONING FOR APPLYING THE 5 PER CENT. OF THE FREE ON BOARD VALUE OF EXPORTS TO THIRD PARTIES BY INDIA N MANUFACTURERS. ON APPEAL: HELD, ALLOWING THE APPEAL, (I) THAT TO APPLY THE TRANSACTIONAL NET MARGIN METHOD THE ASSESSEE'S NET PROFIT MARGIN REALISED FROM THE INTERNATIONAL TRANSACTIONS HAD TO BE CALCULATED ONLY WITH REFERENCE TO THE COST INCUR RED BY IT AND NOT BY ANY OTHER ENTITY EITHER THIRD PARTY VEND ORS OR THE ITA NO.6612/DEL/2014 8 ASSOCIATED ENTERPRISE. THE ASSESSING OFFICER/TRANSF ER PRICING OFFICER MUST OPERATE TEXTUALLY, AND WITHIN THE BOUNDS OF THE TEXT. RULE 10B(1)(E) OF THE INCOME-TA X RULES, 19B2, DOES NOT ENABLE CONSIDERATION OR IMPUTATION O F COST INCURRED BY THIRD PARTIES OR UNRELATED ENTERPRISES TO COMPUTE THE ASSESSEE'S NET PROFIT MARGIN FOR APPLICATION OF THE TRANSACTIONAL NET MARGIN METHOD. RULE 10B(L)(E) REC OGNIZES THAT THE NET PROFIT MARGIN REALIZED BY THE ENTERPRI SE FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSO CIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRE D OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY TH E ENTERPRISE. IT THUS CONTEMPLATES A DETERMINATION OF THE ARM'S LENGTH PRICE WITH REFERENCE TO THE RELEVANT FACTORS (COST, ASSETS, SALES, ETC.) OF THE ENTERPRISE IN QUESTION, I.E., THE ASSESSEE, AS OPPOSED TO THE ASSOCIATED ENTERPRISE O R ANY THIRD PARTY. THE TEXTUAL MANDATE, THUS, IS UNAMBIGUOUSLY CLEAR. (II) THAT THE TRANSFER PRICING OFFICER'S REASONING TO ENHANCE THE ASSESSEE'S COST BASE BY CONSIDERING THE COST OF MANUFACTURE AND EXPORT OF FINISHED GOODS, I. E., READY- MADE GARMENTS BY THIRD PARTY VENDORS (WHICH COST WA S CERTAINLY NOT THE COST INCURRED BY THE ASSESSEE), W AS NOWHERE SUPPORTED BY THE TRANSACTIONAL NET MARGIN M ETHOD UNDER RULE 10B(L)(E). HAVING DETERMINED THE TRANSAC TIONAL NET MARGIN METHOD TO BE THE MOST APPROPRIATE METHOD , ONLY THE RULES AND NORMS PRESCRIBED IN THAT REGARD COULD HAVE BEEN APPLIED TO DETERMINE WHETHER THE EXERCISE INDI CATED BY THE ASSESSEE YIELDED AN ARM'S LENGTH PRICE. THE APP ROACH OF THE TRANSFER PRICING OFFICER AND THE TAX AUTHORITIE S IN ESSENCE IMPUTED NOTIONAL ADJUSTMENT/INCOME IN THE ASSESSEE'S HANDS ON THE BASIS OF A FIXED PERCENTAGE OF THE FREE ON BOARD VALUE OF EXPORT MADE BY UNRELATED PAR TY VENDORS. (III) THAT THE ASSESSEE HAD NEITHER MADE INVESTMENT IN THE PLANT, INVENTORY, WORKING CAPITAL, ETC., NOR DID IT CLAIM TO HAVE ANY EXPERTISE IN THE MANUFACTURE OF GARMENTS. MORE IMPORTANTLY, AND GIVEN NO MATERIAL TO THE CONTRARY, THE ASSESSEE DID NOT BEAR THE ENTERPRISE RISK FOR MANUF ACTURE AND EXPORT OF GARMENTS. THE ASSESSEE'S FUNCTIONAL A ND RISK PROFILE THUS WAS ENTIRELY DIFFERENT AND HAD NOTHING TO DO WITH THE MANUFACTURE AND EXPORT OF GARMENTS BY UNRE LATED THIRD PARTY VENDORS. THE ASSESSEE RENDERED SUPPORT SERVICES IN RELATION TO THE EXPORTS, WHICH WERE MANUFACTURED INDEPENDENTLY. THUS, ATTRIBUTING THE COSTS OF SUCH THIRD PARTY MANUFACTURE, WHEN THE ASSESSEE DID NOT ENGAGE IN THAT ITA NO.6612/DEL/2014 9 ACTIVITY, AND MORE IMPORTANTLY, WHEN THOSE COSTS WE RE CLEARLY NOT THE ASSESSEE'S COSTS, BUT THOSE OF THIR D PARTIES, WAS CLEARLY IMPERMISSIBLE. (IV) THAT ONCE THE TRANSACTIONAL NET MARGIN METHOD WAS DEEMED THE MOST APPROPRIATE METHOD, THE DISTORTIONS , IF ANY, HAD TO BE ADDRESSED WITHIN ITS FRAMEWORK. THE UNREL ATED TRANSACTIONS WHICH WERE COMPARED BY THE ASSESSEE HA D NOT BEEN ADVERSELY COMMENTED UPON, AND NEITHER HAD THE CHOICE OF THE TRANSACTIONAL NET MARGIN METHOD. THE TRANSFE R PRICING OFFICER, THEREFORE, IGNORED RELEVANT AND CR UCIAL MATERIAL, AND STRAIGHTAWAY PROCEEDED TO BROADEN THE BASE FOR ARRIVING AT THE PROFIT MARGIN, FOR ATTRIBUTED I NCOME OF THE ASSESSEE. NOT ONLY WAS THIS A CLEAR INFRACTION OF THE TERMS OF THE ACT AND RULES; HE WENT AHEAD TO INTROD UCE WHAT WAS CLEARLY ALIEN TO THE PROVISIONS OF LAW AND TRAV ELLED OUTSIDE THE RULES. THEREFORE, THE TRANSFER PRICING OFFICER'S ADDITION OF THE COST PLUS 5 PER CENT. MARK-UP ON TH E FREE ON BOARD VALUE OF EXPORTS AMONG THIRD PARTIES TO THE A SSESSEE'S CALCULATION OF ARM'S LENGTH PRICE USING THE TRANSAC TIONAL NET MARGIN METHOD WAS WITHOUT FOUNDATION AND LIABLE TO BE DELETED. 14. IN VIEW OF THE UNDISPUTED FACT THAT AES OF THE TAXPAYER IS INTO TRADING ACTIVITIES OF VARIOUS PRODUCTS, SUCH A S, TEXTILES, MACHINERY, INFORMATION AND COMMUNICATIONS RELATED P RODUCTS, METALS, PRODUCTS RELATED TO OIL AND OTHER ENERGY RE SOURCES, GENERAL MERCHANDISE CHEMICALS, PROVISIONS AND FOOD AND THE TAXPAYER IS MERELY RENDERING BUSINESS SUPPORT SERVICES TO THESE AES IN THE FORM OF FACILITATION SERVICES TO SOURCE GOODS FROM INDIA. SO, THE LIMITED ACTIVITIES CARRIED OUT BY THE TAXPAYER FOR ITS AES IN THE NATURE OF LICENSING AND FACILITATION OF BUSINESS OF ITS AES SEPARATES THE TAXPAYER FROM THE SOGO SHOSHA TRADERS. FURTHER MORE, WHEN THE ITA NO.6612/DEL/2014 10 TAXPAYER IS NOT PROVED TO BE A RISK BEARER IN THE N ATURE OF CREDIT RISK, PRICE RISK, INVENTORY RISK, STORAGE AND HANDL ING RISK ETC., IT CANNOT BE TREATED AS A TRADER. MOREOVER WHEN UNDIS PUTEDLY THE TAXPAYER HAS NOT DEVELOPED ANY INTANGIBLE OR ACCORD ED LOCATIONAL SAVINGS TO ITS AES AND HAS EARNED NET OPERATING PRO FIT MARGIN ON COST OF 129.34% AGAINST THE MARGIN OF COMPARABLE AT 14.05%, IT CANNOT BE SAID THAT THE TAXPAYER HAS NOT BEEN ADEQU ATELY COMPENSATED. 15. MOREOVER, AS HAS BEEN HELD BY THE HONBLE DELHI HIGH COURT IN LI & FUNG INDIA PVT. LTD. (SUPRA), THE DETERMINATION OF 2.58% MARGIN OVER THE FOB VALUE OF THE AES CONTRACT NOT S USTAINABLE IN THE EYES OF LAW. RATHER TPO HAS ARTIFICIALLY ENHAN CED THE COST BASE OF THE TAXPAYER AND PROPOSED A MARK UP OF THE FOB V ALUE OF GOODS SOURCED BY AES AND AS SUCH THIS APPROACH IS NOT AVA ILABLE IN TNMM UNDER RULE 10B(1)(E) OF THE ACT. SO, THE TPO HAS WRONGLY RECHARACTERIZED THE BUSINESS FUNCTION OF THE TAXPAY ER FROM A BUSINESS SUPPORT SERVICE PROVIDER TO A TRADER. 16. IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AYS 2007-08 AND 2008-09 (SUPRA). 17. FURTHERMORE, SIMILAR TRANSFER PRICING ANALYSIS ADOPTED BY THE TAXPAYER IN INTERNATIONAL TRANSACTION QUA BUSINESS SUPPORT SERVICES, ITA NO.6612/DEL/2014 11 WHEN THERE IS NO CHANGE IN THE BUSINESS MODEL OF TH E TAXPAYER, HAS BEEN ACCEPTED BY THE REVENUE IN AYS 2011-12, 2012-1 3 AND 2013- 14 AS PER ORDER BROUGHT ON RECORD BY THE TAXPAYER, ANNEXED WITH ITS SYNOPSIS AS ANNEXURE 1, 2 & 3. SO, EVEN OTHERWISE, THE REVENUE IS REQUIRED TO FOLLOW THE RULE OF CONSISTENCY WHEN THE RE IS NO CHANGE IN THE BUSINESS MODEL AND FACTS & CIRCUMSTANCES OF THE CASE. 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE FI ND NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER DELE TING THE ADDITION OF RS.5,46,43,844/- BY LD. CIT (A), HENCE PRESENT A PPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF FEBRUARY, 2018. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 21 ST DAY OF FEBRUARY, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XX, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.