Sumitomo Corporation India Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6646/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91117 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I2
• Next Hearing Date: 29-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUNJAN PRASAD CIR
• Assessee Lawyers: C S AGARWAL; R P MALL
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Rule of consistency
• Section: 92C; 143(3)

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : I : NEW DELHI BEFORE SHRI R.S. SYAL , ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO . 6646 / DEL / 201 4 ASSESSMENT YEAR : 20 1 0 - 20 1 1 SUMITOMO CORPORATION INDIA PVT. LTD. VS. DCIT, CIRCL E - 24(2), 4 TH FLOOR, DLF CENTRE NEW DELHI SANSAD MARG, NEW DELHI (APPEL LANT) (RESPONDENT) DATE OF HEARING : 02 .0 6 .2015 DATE OF PRONOUNCEMENT : 05 .06 2015 A SSESSEE BY : SRI C.S. AGARWAL, SR. ADVOCATE AND SRI R.P. MALL ADVOCAT E RESPONDENT BY: SRI GUNJAN PRASAD , CIR D.R. ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER 1 . THIS APPEAL , BY THE ASSESSEE , HAS BEEN DIRECTED AGAINST THE ORDER PASSED U/S 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) DATED 25.11.2 014 PASSED IN PURSUANT TO THE DIRECTION OF THE DISPUTE RESOLUTION PANEL (DRP) DATED 21.10.2014 U/S 144C(5) OF THE ACT. 2. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDER: - 1. THAT THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 24(2), NEW DELHI H AS GROSSLY ERRED BOTH ON FACTS AND, IN LAW IN DETERMINING THE INCOME OF THE APPELLANT AT RS.1,11,09,85,160/ - IN AN ORDER OF ASSESSMENT DATED NOVEMBER 25, 2014 FRAMED ULS 143(3) READ WITH SECTION 144C(13) OF THE ACT AS AGAINST THE DECLARED INCOME OFRS.6,13, 95,092/ - . 2. THAT THE LEARNED AO/DRP/TPO HAVE GROSSLY ERRED BOTH IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS. 1 ,04,95,90,066 / - ON ACCOUNT OF ALLEGED UNDERSTATEMENT ITA NO 6646 /DEL/1 4 2 OF ARM'S LENGTH PRICE IN RESPECT OF INDENTING TRANSACTION ON WHICH IT EARNED COMMISSION INCOME FROM ITS ASSOCIATED ENTERPRISES ('HEREIN AFTER REFERRED TO AS AE'), BY COMPLETELY OVERLOOKING THE FINDINGS OF THE HON'BLE TRIBUNAL FOR THE THREE PRECEDING YEARS I.E. FOR AY 2007 - 2008, 2008 - 2009 AND 2009 - 10, DESPITE THE FACT THAT FACTS AND CIRCUMSTAN CES OF INSTANT ASSESSMENT YEAR WERE IDENTICAL TO THE PRECEDING ASSESSMENT YEARS AND NO DISTINGUISHING FACTS ARE BROUGHT ON RECORD TO TAKE A CONTRARY VIEW AS SUCH, FINDING OF THE LEARNED AO/DRP/TPO ARE HIGHLY ARBITRARY AND THUS THE ORDER IS A VITIATED ORDER . 3. THAT IN MAKING THE AFORESAID ADDITION, THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAD ERRED IN REFERRING THE MATTER TO THE LEARNED TPO U/S 92CA OF THE ACT ON THE FOLLOWING AMONGST OTHER GROUNDS, RENDERING THE ORDER OF THE LEARNED TPO AS UNSUSTAINA BLE BOTH IN LAW AND ON FACTS: A) AS THE REFERENCE MADE BY THE LEARNED AO TO THE LEARNED TPO IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92CA( 1 ) OF THE ACT; B) AS NO OPPORTUNITY OF BEING HEARD WAS GRANTED AT ANY STAGE OF THE PROCEEDINGS FOR THIS P URPOSE, WHETHER AT THE PROPOSAL OR THE APPROVAL STAGE; AND C) BY NOT FURNISHING THE LETTER OF REFERENCE ('LOR') TO THE APPELLANT. 3.1 THAT SINCE THE REFERENCE BY THE LEARNED AO UNDER SECTION 92CA( 1 ) OF THE ACT WAS BAD IN LAW AND VOID - AB - INITIO, CONSE QUENTIALLY THE ENTIRE PROCEEDINGS BY THE LEARNED TPO, ORDER OF LEARNED TPO, DIRECTIONS OF LD. DRP AND, ALSO THE IMPUGNED ADJUSTMENT TO THE ARM'S LENGTH PRICE OFRS.I,04,95,90,066/ - IS VITIATED, INVALID, ILLEGAL AND HENCE, A NULLITY. 4. THE ORDER OF LD. AO/ TPO AND DIRECTIONS OF LD. DRP IS BASED ON COMPLETE DISREGARD OF THE FACTS OF THE CASE OF THE APPELLANT AND THE STATUTORY PROVISIONS CONTAINED IN THE INCOME TAX ACT, 1961. 4.1 THE LEARNED AO/TPO/DRP HAS ERRED IN DISREGARDING THE FOLLOWING OBJECTIONS APPAR ENT ON FACTS AND IN LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT: A) THAT THE LEARNED AO /TPO/ DRP HAS ERRED IN DISREGARDING THE TRANSFER PRICING APPROACH ADOPTED BY THE ASSESSEE TO DETERMINE THE ARM'S LENGTH PRICE ('ALP') OF ITS INTERNAT IONAL TRANSACTIONS. THE ASSESSEE'S USE OF TNMM WITH OPERATING PROFIT MARGIN UPON VALUE ADDED EXPENSES ('OPN AE') AS THE PROFIT LEVEL INDICATOR ('PLI') HAS BEEN DISREGARDED WITHOUT ANY JUSTIFICATION WHATSOEVER; B) THAT THE LEARNED AO/TPO/DRP HAS ERRED IN MAKING THE TRANSFER PRICING ADJUSTMENT WITHOUT ESTABLISHING THE EXISTENCE OF ANYONE OF THE FOUR PRE CONDITIONS PROVIDED IN SECTION 92C(3) WHICH IS A MANDATORY REQUIREMENT, FOR MAKING AN ADJUSTMENT UNDER SECTION 92CA(3) OF THE ACT. C) THAT THE LD. AO/TPO/D RP GROSSLY ERRED IN ADOPTING INTERNAL RESALE PRICE METHOD AS THE MOST APPROPRIATE METHOD OF DETERMINING ARM'S LENGTH ITA NO 6646 /DEL/1 4 3 PRICE OF INTERNATIONAL TRANSACTIONS WITHOUT EITHER EXPLAINING THE BASIS THEREOF AND FAILED TO COMPREHEND THAT THE TRANSACTIONS DID NOT INVO LVE RE - SALE BETWEEN THE ASSESSEE AND ASSOCIATED ENTERPRISES; INFACT, THE DETERMINATION OF THE 'ARM'S LENGTH PRICE' AS ENVISAGED U/S 92C( 1) OF THE ACT BY THE LEARNED TPO IS NOT BASED ON ANY OF THE METHODS PRESCRIBED UNDER SUB - SECTION (1) OF SECTION 92C AND THE ADJUSTMENT MADE IS BASED ON AN HIGHLY ARBITRARY APPROACH ADOPTED BY THE LEARNED TPO AND AFFIRMED IN THE DIRECTIONS BY THE DRP.; D) THE LD. AO/TPO/DRP HAS ERRED IN CONCLUDING THAT THE ASSESSEE HAS CHANGED ITS METHOD COMPARED TO EARLIER YEARS WHICH IN HER VIEW IS IN CONTRADICTION TO THE CLAIM OF THE ASSESSEE THAT THERE HAS BEEN NO CHANGE IN FUNCTIONS PERFORMED BY IT. E) LD. AO/TPO/DRP HAS ERRED IN CONCLUDING THAT INDENTING BUSINESS AND THE TRADING BUSINESS OF THE ASSESSEE ARE SIMILAR AND HOMOGENEOUS IN NATURE AND IN HOLDING THAT THE FUNCTIONS PERFORMED, AND RISKS ASSUMED IN THE NON - AE TRADING SEGMENT IS SIMILAR TO FUNCTIONS AND RISKS IN INDENTING SEGMENT COMPLETELY DISREGARDING THE ASSERTIONS AND EVIDENCES FILED BY THE ASSESSEE IN THIS REGARD. F) LD. A O/TPO/DRP HAS ERRED IN DISREGARDING THE COMMERCIAL AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH AES AND NON - AES WITHOUT ANY VALID AND COGENT REASONS AND HAS ASSUMED THAT THE ASSESSEE FUNCTIONS AS A TRADER OF GOODS IN RELATION TO INDENTING SEGMENT; G) LD. AO/TPO/DRP HAVE FAILED TO APPRECIATE THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE DULY BEEN AUDITED BY A CHARTERED ACCOUNTANT AND NO ADVERSE OBSERVATIONS HAVE BEEN MADE BY THE CHARTERED ACCOUNTANT IN HIS AUDIT REPORT. THUS, THE ID. TPO HAD GROSSLY ERRED IN ADDING THE FOB VALUE OF GOODS SOURCED BY THE AES/OTHER PARTIES AS PART OF TOTAL COST OF THE ASSESSEE WHICH TANTAMOUNT TO ALTERING THE ACCOUNTING PRACTICES FOLLOWED BY THE ASSESSEE; H) LD. AO/TPO/DRP HAS ERRED IN CHOOSING INCORRECT INTERNAL COMPARABLE AND PREFERRING THE SAME OVER THE EXTERNAL COMPARABLE WITHOUT APPRECIATING THE FACTS AND LEGAL POSITION INVOLVED IN THE CASE OF THE ASSESSEE. I) THAT THE LEARNED AO/TPO/DRP HAS ERRED IN ASSUMING AND CONCLUDING THAT INDENTING BASED TRANSACTIONS OF THE ASSES SEE COMPANY WITH ITS AES HAVE SAME FUNCTIONS AND, RISK AS THE TRADING TRANSACTIONS WITH NON - AES OVERLOOKING THE FACTUAL AND LEGAL SUBMISSIONS FURNISHED BY THE ASSESSEE DURING THE TRANSFER PRICING PROCEEDINGS. J) THAT THE LD. AO/TPO/DRP HAS ERRED IN HOLDIN G THAT DIFFERENCE IN VOLUME OF INDENTING AND TRADING TRANSACTIONS NEED TO BE ANALYZED ON TRANSACTION TO TRANSACTION BASIS AND NOT ON AN AGGREGATE BASIS AND IN NOT GRANTING ADJUSTMENT TO ACCOUNT FOR - THE DIFFERENCE IN THE VOLUME OF THE TWO SEGMENTS DESPITE T HE FACT THAT IT WAS ADMITTED THAT VOLUME OF TRANSACTION IN THE AE AND NON AE IS NOT SAME; ITA NO 6646 /DEL/1 4 4 K) WITHOUT PREJUDICE TO THE GROUND ABOVE, THERE IS A HUGE DIFFERENCE IN THE VOLUME OF EACH TRADING TRANSACTION WITH INDENTING TRANSACTION ENTERED ON A STANDALONE BAS IS AND, THEREFORE, THE LD. TPO ERRED IN DISREGARDING THE DIFFERENCE IN VOLUME OF TRADING AND INDENTING TRANSACTION WHILE CONCLUDING ON COMPARABILITY OF INDENTING AND TRADING TRANSACTIONS; L) THE LD. AO/TPO/DRP HAS ERRED IN HOLDING THAT THE ASSESSEE HAS AS SUMED ALL MAJOR RISKS IN ITS INDENTING BUSINESS AND ALSO ASSUMED 'SINGLE CUSTOMER RISK', 'RISK ASSOCIATED WITH DEVELOPMENT AND USE OF INTANGIBLES', 'RISK ASSOCIATED WITH QUALITY SERVICE', AND 'CAPACITY UTILIZATION RISK'. M) THAT IN ABSENCE OF VALID BASIS MUCH LESS ANY VALID MATERIAL, THE LEARNED AO/TPO/DRP HAS ERRED IN HOLDING THAT, INDENTING BASED TRANSACTIONS OF THE ASSESSEE COMPANY WITH AES ARE AKIN TO TRADING TRANSACTIONS OF NON - AES; N) THAT THE LEARNED AOITPOIDRP HAVING FOUND THE INDENTING TRANSACTIO NS ENTERED INTO WITH NON - AE'S ON IDENTICAL CIRCUMSTANCES ARE INDENTING TRANSACTIONS I.E. SERVICE BASED TRANSACTIONS, HE HAS ERRED IN HOLDING THAT, SIMILAR TRANSACTIONS WITH AE'S ARE TRADING TRANSACTIONS AND THEREFORE, ADDITION PROPOSED IS BASED ON AN INCON SISTENT STAND AND CONTRADICTORY APPROACH; 0) THAT THE LEARNED TPO HAS ERRED IN DISREGARDING THE RELIANCE PLACED BY THE ASSESSEE ON THE HC JUDGMENT IN LI & FUNG CASE. THE LEARNED TPO COMPLETELY OVERLOOKED THE HON'BLE DELHI HIGH COURT JUDGMENT WHERE IT WAS STATED THAT FOR A SERVICE PROVIDER COMPANY OPERATING MARGIN ON COSTS IS AN APPROPRIATE PROFIT LEVEL INDICATOR AND REMUNERATION OF SUCH A COMPANY CANNOT BE LINKED WITH THE VALUE OF GOODS BOUGHT/SOLD BY THE AE OF THE ASSESSEE COMPANY. THE ASSESSEE BEING A SE RVICE PROVIDER COMPANY GETS COVERED BY THE SAID HON'BLE DELHI HIGH COURT RULING; P) LD. AO/DRP HAS FAILED TO APPRECIATE THAT IF THE ADDITION PROPOSED IN THE ORDER UNDER' SECTION 92CA(3) BY THE ID. TPO WAS TO BE ADOPTED AS ALP, THE ASSESSEE WOULD BE REQUIR ED TO EARN AN ABSURDLY HIGH OPERATING PROFIT ON COST OF 355% Q) THAT THE LEARNED TPO HAS FAILED TO APPRECIATE THE DIFFERENCE IN RISK PROFILE OF THE INDENTING AND TRADING TRANSACTIONS. IT IS RELEVANT TO NOTE THAT THERE IS VAST DIFFERENCE IN INDENTING AND T RADING ACTIVITIES. TRADING ACTIVITY REQUIRES EFFORT FOR BUSINESS CREATION, UNDERTAKES THE RISK IN MAINTAINING INVENTORY, REALIZATION OF SALE PROCEEDS, INCURRING INTEREST AND OTHER COSTS IN RESPECT OF MAINTAINING AND KEEPING THE STOCK. IN SUCH A CASE, THE F UNCTIONS ALSO INCLUDE UNLOADING THE GOODS, BRINGING THEM TO ITS WAREHOUSE, LOADING AND UNLOADING AT THE CUSTOMER'S PLACE SO ON AND SO FORTH. ON THE OTHER HAND, THE INDENTING ACTIVITY IS CONFINED ONLY IN ASSISTING AND PROVIDING SUPPORT SERVICES IN THE NATUR E OF TRADE FACILITATION AND OTHER AUXILIARY SERVICES. THERE ARE NO FINANCIAL RISKS INVOLVED IN INDENTING ACTIVITY AND FURTHER THE COSTS INCURRED HEREIN ARE SUBSTANTIALLY ITA NO 6646 /DEL/1 4 5 LESS WHEN COMPARED WITH THE TRADING ACTIVITY. FROM HERE, IT FOLLOWS THAT TRADING AND I NDENTING ACTIVITIES ARE QUITE DISTINCT FROM EACH OTHER; R) THAT THE LEARNED AO/TPO/DRP HAS OVERLOOKED THAT IN RESPECT OF INDENTING BASED TRANSACTIONS, SERVICE TAX IS APPLICABLE AND IN RESPECT OF TRADING BASED TRANSACTIONS, SALES TAX IS APPLICABLE. THUS, A PPARENTLY, THE TWO TRANSACTIONS ARE DIFFERENT CLASS OF TRANSACTIONS. S) THAT THE LEARNED AO/TPO/DRP HAS FAILED TO APPRECIATE THAT, ACCOUNTANTS REPORT IS MERELY AN EXPRESSION OF OPINION AND, WHAT IS DETERMINATIVE IS THE REAL NATURE OF TRANSACTION AS HELD B Y APEX COURT IN THE CASE OF NATIONAL CEMENT MINES INDUSTRIES LTD. V CIT REPORTED IN 42 ITR 69; T) THAT THE LEARNED AO/TPO/DRP HAS ERRED IN OVERLOOKING THAT TRANSACTIONS MADE BY THE ASSESSEE COMPANY ARE OF DIFFERENT PRODUCT SEGMENTS AND, AT DIFFERENT INTER VALS AND DIFFERENT VOLUMES AND, THEREFORE, AS SUCH THE INDENTING TRANSACTIONS CANNOT BE COMPARED TO THE TRADING TRANSACTIONS. U) THAT WITHOUT PREJUDICE& IN THE ALTERNATIVE (WITHOUT ADMITTING) THE - LEARNED AO/TPO/DRP HAS ERRED IN DISREGARDING THE ORDER OF THE HONORABLE TRIBUNAL FOR THE AY 2007 - 2008, AY 2008 - 2009 AND AY 2009 - 10 IN ASSESSEE'S OWN CASE AND ON IDENTICAL FACTS AND CIRCUMSTANCES [ALTHOUGH THE ORDERS HAVE BEEN APPEALED AGAINST BY THE ASSESSEE AND THE MATTER HAS BEEN ADMITTED BY THE HIGH COURT. FOR AY 2009 - 10, THE ORDER OF HIGH COURT ADMITTING THE APPEAL IS YET TO BE RECEIVED),BY COMPARING INDENTING BASED TRANSACTIONS OF AE'S WITH TRADING TRANSACTIONS OF NON - AE'S AND NOT WITH INDENTING TRANSACTION OF NON - AE AFTER ALLOWING APPROPRIATE ADJUSTMENTS(LI KE VOLUME, BUSINESS SEGMENTS ETC.) AND, HENCE THE ADDITION SO MADE OF RS.1,04,95,90,066/ - IS MISCONCEIVED, MISPLACED, ARBITRARY AND HENCE THUS, UNSUSTAINABLE; V) THAT LEARNED DRP HAS FURTHER FAILED TO APPRECIATE THAT THE FINDING OF THE LEARNED ORP THAT BO TH THE SEGMENT ARE COMPARABLE WITHOUT ANY ADJUSTMENT OF VOLUME IS WHOLLY ERRONEOUS AS THE VOLUME OF TRANSACTION IS HIGHLY RELEVANT TO DETERMINE THE VALUE OF THE TRANSACTION AND HENCE UNLESS SUITABLE ADJUSTMENT INCLUDING VOLUME ADJUSTMENT IS MADE, BOTH THE SEGMENTS ARE NOT COMPARABLE; W) THAT THE LEARNED AO/TPO/DRP CONCLUSIONS ARE ARBITRARY AND BASED ON CONJECTURES AND SURMISES. 5. THAT THE LEARNED AO/TPO/DRP HAS ERRED IN NOT MAKING ADJUSTMENTS TO THE UNCONTROLLED TRANSACTION TO ACCOUNT FOR THE MATERIAL IM PACT OF THE ECONOMIC DIFFERENCES BETWEEN THE CONTROLLED AND UNCONTROLLED TRANSACTIONS AS MANDATED UNDER RULE 10B(3) OF THE INCOME TAX RULES 1962. THE LD. TPO HAS FURTHER ERRED IN NEGATING THE APPLICABILITY OF LI & FUNG DECISION OF THE DELHI HIGH COURT AND IN CONCLUDING THAT THE APPROACH OF THE ASSESSEE IN RESPECT OF VOLUME AND VALUE OF TRANSACTIONS IS CONTRADICTORY WITH ITS ASSERTION REGARDING INDENTING AND TRADING BEING SEPARATE AND DISTINCT SEGMENTS. ITA NO 6646 /DEL/1 4 6 6. THAT THE LEARNED AO/TPO/DRP HAS ERRED IN HOLDING TH AT THE APPELLANT HAS CREATED HUMAN AND SUPPLY CHAIN INTANGIBLES FOR WHICH IT IS NOT BEING ADEQUATELY COMPENSATED BY THE AE WHICH FINDING WAS REACHED ON MERE ASSUMPTIONS AND HAD BEEN FOUND TO BE WITHOUT SUBSTANCE AND WITHOUT ANY MATERIAL ON RECORD FOR THE P RECEDING YEARS ON IDENTICAL FACTS AND CIRCUMSTANCES AND ERRED IN RELYING ON EXCERPTS FROM THE SUMITOMO CORPORATION OF AMERICA (SIC) TO CONCLUDE THAT THE ASSESSEE IS CREATING HUMAN ASSETS INTANGIBLES FOR WHICH IT IS NOT BEING REMUNERATED. 7. THAT EVEN OTHE RWISE, THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX HAS ERRED IN PROPOSING THE ADDITION ON THEORETICAL AND, MATHEMATICAL CALCULATIONS ADOPTED BY THE LEARNED TPO TO DETERMINE THE ARM'S LENGTH PRICE, WHICH IS NOT IN ACCORDANCE WITH LAW AND IS HIGHLY ARBITRA RY AND, UNTENABLE . GROUND NOS. 1 TO 7 3. APROPOS THESE GROUNDS OF THE ASSESSEE, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD BEFORE US , I NTER - A LIA , THE ORDER OF THE TPO DATED 17.01.2014, DI RECTION OF THE DRP DATED 21.10.2014 AND IMPUGNED ORDER OF THE AO DATED 25.11.2014 AND TWO PAPER BOOKS OF THE ASSESSEE SPREAD OVER 778 PAGES AND WRITTEN CONTENTIONS OF THE ASSESSEE PLACED IN GROUND NO.4 . LD. SR. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE AS SESSING OFFICER HAS GROSSLY ERRED BOTH ON FACTS AND IN LAW IN DETERMINING THE TAXABLE INCOME OF THE ASSESSEE AT RS.1,11,09,85,160/ - IN THE IMPUGNED ORDER AS AGAINST THE DECLARED INCOME OF RS.6,13,95,092/ - . THE LD. SENIOR COUNSEL FURTHER CONTENDED THAT LD. AO/DRP/TPO HAVE GROSSLY ERRED IN MAKING AN ADDITION OF RS.1,04,95, 90, 066/ - ON ACCOUNT OF ALLEGED UNDERSTATEMENT OF ARM S L ENGTH P RICE (A LP) IN RESPECT OF INDENTING TRANSACTION ON WHICH THE ASSESSEE EARNED COMMI SSION INCOME FROM ITS ASSOCIATE ENTERPRISES ( FOR SHORT AE ) BY COMPLETELY OVERLOOKING AND IGNORING THE FINDINGS OF THE TRIBUNAL FOR THE EARLIER THREE PRECEDING YEARS I.E. FOR AYS. 2007 - 08, 2008 - 09 AND 2009 - 10, DESPITE THE FACT THAT THE FACTS AND CIRCUMSTANCES OF THE INSTANT ASSESSMENT YEAR UNDER CON SIDERATION ITA NO 6646 /DEL/1 4 7 ARE SIMILAR AN D IDENTICAL TO THE PRECEDING THREE ASSESSMENT YEARS AND NO DISTINGUISHING FACTS ARE BROUGHT ON RECORD BY THE AUTHORITIES BELOW TO TAKE A CONTRARY VIEW AS SUCH, HAS HELD THAT THE FINDINGS AND CONCLUSION OF THE AO/DRP/TPO ARE HIGHLY ARBITRARY AND NOT SUSTAINABLE AND NOT IN ACCORDANCE WITH LAW. 4. LD. SENIOR COUNSEL VEHEMENTLY CONTENDED THAT THE MARGIN OF COMMISSION EARNED BY THE ASSESSEE FROM UNCONTROLLED TRANSACTION WITH NON ASSOCIATE ENTERPRISES IS LESS THAN THE COMMISSION EARNED F ROM THE AE. LD. SENIOR COUNSEL DRAWN OUR ATTENTION TOWARDS PAGE 461 OF THE ASSESSEE S PAPER BOOK AND SUBMITTED THAT THE ASSESSEE EARNED COMMISSION ON FOB VALUE OF GOODS AMOUNTING TO RS.86,22,96,437/ - FROM NON ASSOCIATED ENTERPRISES (AE) OF RS. 1,47,60,299/ - WHICH IS 1.71% OF FOB VALUE OF THE GOODS. LD. SENIOR COUNSEL FURTHER POINTED OUT THAT THE ASSESSEE EARNED COMMISSION ON FOB VALUE OF GOODS AMOUNTING TO RS.21,20,88,46,377/ - OF RS.38,83,69,718/ - AT THE RATE OF 1.83% OF THE FOB VALUE OF THE GOODS WHICH IS H IGHER THAN THE COMMISSION INCOME/SERVICE FEES EARNED FROM THE NON ASSOCIATED ENTERPRISES, THEREFORE, IMPOSED ADDITION ON ACCOUNT OF ALLEGED UNDERSTATEMENT ARMS LENGTH PRICE IS NOT SUSTAINABLE AND IN ACCORDANCE WITH LAW. 5. LD. SENIOR COUNSEL FURTHER TOOK US TO ORDER OF THE TRIBUNAL IN ASSESSEE OWN CASE FOR AY 2007 - 08 AND SUBMITTED THAT IN THE SIMILAR FACTS AND CIRCUMSTANCES , THE ADDITION MADE BY THE AO/TPO WAS DELETED BY HOLDING THAT THE COMMISSION PERCENTAGE OF NON AE SEGMENT AND THE SAME IS AT THE ARM S LENGTH AND NO ADDITION IS SUSTAINABLE. LD. SENIOR COUNSEL FURTHER DRAWN OUR ATTENTION TOWARDS ORDER OF THE TRIBUNAL IN ASSESSEE OWN CASE FOR AY 2008 - 09 DATED 15.03.2013 IN ITA 5850/DEL/2012 AND SUBMITTED THAT THE SIMILAR KIND OF ADDITION WAS FURTHER DELET ED BY FOLLOWING ORDER OF THE TRIBUNAL FOR ITA NO 6646 /DEL/1 4 8 AY 2007 - 08 DATED 31.01.2013 FOR AY 2007 - 08 , THEREFORE, IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES, IMPUGNED ADDITION MADE BY THE AO IS ALSO NOT SUSTAINABLE. 6 . LD. SENIOR COUNSEL ALSO DRAWN OUR ATTENTION TOWARD S ORDER OF THE TRIBUNAL DATED 14.07.2014 FOR AY 2009 - 10 IN ITA NO.328/DEL/2014 AND SUBMITTED THAT IN THE SIMILAR LINE OF PRECEDING AYS. 2007 - 08 AND 2008 - 09 T HE TRIBUNAL ALSO DELETED THE SAME ADDITION MADE BY THE AO/DRP IN ASSESSEE S OWN CASE . IT WAS ALSO C ONTENDED THAT THE IMPUGNED ADDITION ON THE SIMILAR SET OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS NOT SUSTAINABLE AND NOT IN ACCORDANCE WITH LAW AND, THEREFORE, THE SAME MAY BE DIRECTED TO BE DELETED. 7 . LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ORDER OF THE AO/TPO . HOWEVER, HE SUBMITTED THAT THE FIGURES SHOWN BY THE ASSESSEE AT PAGE 461 OF THE ASSESSEE S PAPER BOOK ARE NOT DISPUTED AND HE FAIRLY ACCEPTED THAT THE COMMISSION EARNED BY THE ASSESSEE DURING FINANCIAL PERIOD UNDER CONSIDERATION FROM NON AE SEGMENT IS 1.71% , WHEREAS COMMISSION EARNED FROM ASSOCIATE D ENTERPRISES SEGMENT IS 1.83% OF FOB VALUE OF THE GOODS. 8 . ON CAREFUL CONSIDERATION OF OUR SUBMISSIONS OF BOTH THE SIDES , AT THE VERY OUTSET, WE RESPECTFULLY TAKE COGNIZANCE OF THE DECISI ON OF THE TRIBUNAL FOR AY 2008 - 09 WHEREIN FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL FOR AY 2007 - 08 IN ITA NO.509/DEL/2011 (SUPRA) SIMILAR KIND OF ADDITION HAVE BEEN FOUND TO BE UNSUSTAINABLE. THE RELEVANT OBSERVATIONS AND CONCLUSION OF THE TRIBUNAL IN AY 20 08 - 09 READ AS UNDER: - 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. THE TRIBUNAL IN ASSESSEE S OWN CASE VIDE AFORESAID ORDER HAS HELD AS UNDER: - ITA NO 6646 /DEL/1 4 9 21. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE AGREE WITH THE PROPOSITION THAT IN TRANSFER PRICING ANALYSES INTERNAL COMPARABLE ARE PREFERABLE OVER EXTERNAL COMPARABLES. 22. WE NOTE THAT ASSESSEE HAS ENTERED INTO TWO TYPES OF TRANSACTION (I) INDENT/ COMMISSION TRANSACTION WHERE THE ASSESSEE EARNED COMMISSION / FIXED SERVICE FEE, (II) TRADING / PROPER TRANSACTION WHEREIN THE ASSESSEE PURCHASED GOOD AND EARNED TRADING MARGIN THEREON. THE ABOVE TWO TYPES OF TRANSACTION HAS BEEN ENTERED INTO BOTH WITH AES AND NON - AES. 23. WE AGREE WITH THE ASS ESSEE S PROPOSITION THAT THE NATURE OF INDENTING TRANSACTION IS DIFFERENT FROM THE TRADING TRANSACTIONS. THE TRADING TRANSACTION INVOLVES RISKS AND FINANCES, WHEREAS IN THE INDENTING TRANSACTION THE ASSESSEE HAS NOT TO INCUR ANY SUCH FINANCIAL OBLIG ATION OR CARRY ANY SIGNIFICANT RISK. MOREOVER, WE NOTE THAT IN RESPECT OF INDENTING TRANSACTION WITH NON - AE S, THE AVERAGE MEAN MARGIN OF PROFIT OF 2.26% HAS BEEN ACCEPTED BY THE TPO. WE FURTHER FIND THAT THE INDENT BUSINESS OF THE ASSESSEE WAS NOTHING B UT TRADE FACILITATION AND IS PURELY OF INDENT NATURE BOTH IN FORM AND SUBSTANCE. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO REGARD THE INDENT TRANSACTION AS TRADING TRANSACTIONS. 24. ASSESSEE ITSELF HAS AGREED WITH THE PROPOSITION THAT AN APPROPRIATE C OMPARISON WOULD BE TO COMPARE THE COMMISSION/ SERVICE INCOME EARNED BY THE ASSESSEE FROM AES TO THAT OF THE NON - AES. THIS ASPECT OF ASSESSEE S SUBMISSION HAS NOT BEEN REBUTTED BY THE REVENUE. HOWEVER, THE ASSESSEE HAS CONTENDED THAT THE REASON OF DIFFERE NCE BETWEEN THEM WAS ATTRIBUTABLE TO VOLUME OF BUSINESS HANDLED IN AE SEGMENT AND NON AE SEGMENT AND CREDIT RISK ASSOCIATED IN NON AE SEGMENT. THEREFORE, IT HAS BEEN ARGUED THAT ECONOMIC ADJUSTMENT IS REQUIRED TO IMPROVE THE COMPARABILITY BETWEEN COMMIS SION EARNED IN AE SEGMENT VIS - A - VIS COMMISSION EARNED IN NON - AE SEGMENT. IT HAS FURTHER BEEN SUBMITTED THAT IT IS CUSTOMARY IN COMMERCIAL DEALING OF BROKER/COMMISSION AGENT TO OFFER DISCOUNT ON THE BASIS OF VOLUME OR VALUE OF BUSINESS GENERATED; THAT SIMIL ARLY COMMISSION/BROKERAGE CHARGED FROM LOW VALUE / SMALL CUSTOMERS IS MUCH HIGHER ON ACCOUNT OF THE PREMIUM RATE OF COMMISSION CHARGED FROM THEM. HENCE THE ASSESSEE HAS COME TO THE CONCLUSION THAT DISCOUNT OF 50% WAS TO BE APPLIED ON NON - AE SEGMENT COMMIS SION PERCENTAGE TO ARRIVE AT THE ARM S LENGTH COMMISSION PERCENTAGE. 25. HOWEVER, WE DO NOT AGREE WITH THE PROPOSITION THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE VOLUME IMPACTS THE RATE OF COMMISSION. FOR EACH AND EVERY SINGLE TRANSACTION A SEPARA TE CONTRACT IS ENTERED AND THE COMMISSION RATE / SERVICE FEE IS MENTIONED IN THIS CONTEXT. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT VOLUME OF A SINGLE TRANSACTION VARIES IN THE AE AND NON - AE SEGMENT. ITA NO 6646 /DEL/1 4 10 26. WE FIND THAT MERE DIFFERENCE IN TURNOVER IS NOT SUFFICIENT FOR TREATING TWO ENTITIES OR TWO TRANSACTIONS AS NOT COMPARABLE OR WARRANT ANY ADJUSTMENT. IN THIS REGARD WE REFER TO THE FOLLOW CASE LAWS. - IN THE CASE OF M/S SYMANTEC SOFTWARE (SUPRA) IN ARA 15 FOLLOWING HAS BEEN LAID DOWN: - IN THE CASE IN HAND, THE ASSESSEE RAISED THESE OBJECTIONS ONLY BECAUSE SOME OF THE COMPARABLES ARE HAVING HIGH PROFIT AND ALSO HIGH DIFFERENCE IN THE TURNOVER AND NOT BECAUSE OF THE HIGH OR LOW TURNOVER HAS INFLUENCED THE OPERATING MARGIN OF THE COMPARABL ES. ALL THE OBJECTIONS AND CONTENTIONS RAISED BY THE ASSESSEE IN RESPECT OF THIS ISSUE ARE GENERAL IN NATURE AND NO SPECIFIC FACT HAS BEEN BROUGHT ON RECORD TO SHOW THAT DUE TO THE DIFFERENCE IN TURNOVER THE COMPARABLES BECOME NON - COMPARABLES. THE ASSES SEE HAS NOT DEMONSTRATED AS TO HOW THE DIFFERENCE IN THE TURNOVER HAS INFLUENCED THE RESULT OF THE COMPARABLES. IT IS ACCEPTED ECONOMIC PRINCIPLES AND COMMERCIAL PRACTICE THAT IN HIGHLY COMPETITIVE MARKET CONDITION, ONE CAN SURVIVE AND SUSTAIN ONLY BY KEEPING LOW MARGIN TURNOVER. THUS, HIGH TURNOVER AND LOW MARGIN ARE NECESSITY OF THE HIGHLY COMPETITIVE MARKET TO SURVIVE. SIMILARLY, LOW TURNOVER DOES NOT NECESSARILY MEAN HIGH MARGIN IN COMPETITIVE MARKET CONDITION. THEREFORE, UNLESS AND UNTIL IT I S BROUGHT TO RECORD THAT THE TURNOVER OF SUCH COMPARABLES HAS UNDUE INFLUENCE ON THE MARGINS, IT IS NOT THE GENERAL RULE TO EXCLUDE THE SAME THAT TOO WHEN THE COMPARABLES ARE SELECTED BY THE ASSESSEE ITSELF. - SIMILARLY IN THE CASE OF M/S BAYER MATERIA L SCIENCES (P) LTD. (SUPRA) IN PARA 23 FOLLOWING PROPOSITION WAS LAID DOWN: - NOW THE QUESTION IS WHETHER THESE CASES, WHICH ARE OTHERWISE COMPARABLES, SHOULD BE DISREGARDED SIMPLY ON THE GROUND OF SMALLNESS OF TURNOVER WHEN COMPARED WITH THAT OF THE ASSESSEE. CONSIDERING THE FACT THAT THE ASSESSEE DID NOT COME OUT WITH ANY COMPARABLE CASE TO JUSTIFY ITS PRICE AT ARM S LENGTH AND FURTHER THE TPO FOUND OUT THESE CASES HAVING FUNCTIONALLY IDENTICAL ACTIVITIES DULY CONFRONTED TO THE ASSESSEE, IT IS NOT POSSIBLE TO DISREGARD SUCH CASES MERELY ON THE GROUND THAT THE VOLUME OF TURNOVER IS LOWER IN COMPARISON TO THAT HANDLED BY THE ASSESSEE. ONE MORE IMPORTANT FACTOR WHICH CANNOT BE LOST SIGHT OF IS THAT IN THE CASE OF M/S RATHI BROTHERS MADRAS LTD. INDE NTING COMMISSION IS 5% TO 6% WITH TURNOVER OF ` 10.65 CRORES. THE SAME RATE OF COMMISSION OF 5% PREVAILS IN THE CASE OF M/S HUNTSMAN INTERNATIONAL (P) LTD. AND M/S INEOS ABS (INDIA) LTD. WITH TURNOVER OF AROUND ` 75 CORES AND AROUND ` 80 CORES RESPECTIV ELY. IT SHOWS THAT THE RATE OF COMMISSION IN SUCH BUSINESS DOES NOT VARY ON THE BASIS OF TURNOVER. ITA NO 6646 /DEL/1 4 11 27. HENCE WHEN THE INDENT/ COMMISSION TRANSACTION WITH THE AE IS TO BE BENCHMARKED, THE SAME SHOULD BE DONE WITH INDENT / COMMISSION TRANSACTION WITH NO N - AE. HENCE THERE IS A NO NEED TO DWELL FURTHER ON THE COMPARISON BETWEEN INDENTING TRANSACTION AND TRADING TRANSACTION. 28. ON THE BASIS OF ABOVE DISCUSSION AND PRECEDENTS WE REJECT THE ASSESSEE S CONTENTION THAT DISCOUNT OF 50% IS REQUIRED IN COMMIS SION PERCENTAGE IN THE NON - AE SEGMENT TO MAKE IT COMPARABLE WITH COMMISSION PERCENTAGE IN THE AE SEGMENT. 29. NOW WE COME TO ARGUMENT OF THE ASSESSEE THAT THERE IS NO CHANGE IN THE OPERATING MODEL OR THE BUSINESS ACTIVITY OF THE ASSESSEE COMPANY, HENC E, RULE OF CONSISTENCY SHOULD BE FOLLOWED AND HENCE NO ADJUSTMENT IS WARRANTED. IN THIS REGARD WE ARE OF THE OPINION THE RES JUDICATA IS NOT APPLICABLE TO TAXATION CASES. MOREOVER, AS HELD BY APEX COURT IN DISTRIBUTORS (BARODA) P LTD. VS. UNION OF INDIA & ORS. 155 ITR 120 THAT TO PERPETUATE AN ERROR IS NO HEROISM. TO RECTIFY IS THE COMPULSION OF THE JUDICIAL CONSCIENCE. 30. IN LIGHT OF THE DISCUSSIONS AND PRECEDENTS CITED ABOVE, WE ARE OF THE OPINION THAT COMMISSION PERCENTAGE IN AE SEGMENT SHOULD BE COMPARED WITH COMMISSION PERCENTAGE IN NON - AE SEGMENT. ACCORDINGLY, THE COMMISSION PERCENTAGE @ 2.26% IN NON - AE SEGMENT SHOULD BE TAKEN AS THE ARM S LENGTH RATE AT WHICH ASSESSEE SHOULD HAVE EARNED ITS COMMISSION INCOME IN THE AE SEGMENT. 7. FROM THE ABOVE WE NOTE THAT IN ASSESSEE S OWN CASE THE TRIBUNAL HAS PASSED THE ORDER AS ABOVE. HENCE, IN OUR CONSIDERED OPINION, THE SAME PROPOSITION HAS TO BE FOLLOWED. ACCORDINGLY, WE HOLD THAT COMMISSION PERCENTAGE IN AE SEGMENT SHOULD BE COMPARED WITH THE COM MISSION PERCENTAGE IN NON - AE SEGMENT. ACCORDINGLY, THE COMMISSION PERCENTAGE @ 2.30% IN NON - AE SEGMENT TO BE TAKEN AS THE ARM S LENGTH PRICE ON WHICH THE ASSESSEE SHOULD HAVE EARNED ITS COMMISSION INCOME IN THE AE SEGMENT. 9 . WE FURTHER OBSERVE TH AT IN THE SIMILAR MANNER THE TRIBUNAL IN THE ORDER DATED 14.07.2014 FOR AY 2009 - 10 FOLLOWING THE ORDER OF THE TRIBUNAL FOR AYS 2007 - 08 AND 2008 - 09 HAS DELETED SIMILAR ADDITION WITH THE FOLLOWING OBSERVATIONS AND CONCLUSIONS: - 5. WE HAVE HEARD THE RIVAL SU BMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE TPO RELIED ON THE VIEW TAKEN BY HIM FOR PRECEDING YEARS IN PROPOSING THE TRANSFER PRICING ADJUSTMENT. THE LD. AR ALSO CANDIDLY ADMITTED THAT THE ORDER FOR THE CURRENT YEAR IS REP LICA OF THE EARLIER YEARS ORDER PASSED EXCEPT FOR THE CHANGE IN FIGURES. THE POSITION WHICH, THEREFORE, ADMITTEDLY EMERGES IS THAT THE FACTS AND CIRCUMSTANCES OF THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING TWO ITA NO 6646 /DEL/1 4 12 YEARS. THE APPEAL OF THE ASSESSEE FOR THE AY 2007 - 08, IN WHICH TRANSFER PRICING ADJUSTMENT WAS MADE UNDER SIMILAR CIRCUMSTANCES, CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ITA NO.5095/DEL/2011. VIDE ORDER DATED 31.01.13, THE TRIBUNAL HAS HELD THAT THE INDENTING TRANS ACTIONS ARE DIFFERENT FROM TRADING TRANSACTIONS IN TERMS OF FUNCTIONAL DIFFERENCES, RISKS UNDERTAKEN AND ASSETS EMPLOYED, AND HENCE BOTH CANNOT BE CONSIDERED AS UNIFORM. THE TRIBUNAL HELD THAT THE COMMISSION EARNED BY THE ASSESSEE FROM ITS AES UNDER THE INDENTING SEGMENT WAS REQUIRED TO BE BENCHMARKED ON THE BASIS OF COMMISSION EARNED BY THE ASSESSEE FROM NON - AES UNDER INDENTING SEGMENT . THE ASSESSEE S CONTENTION BEFORE THE TRIBUNAL THAT DISCOUNT OF 50% SHOULD BE GIVEN FROM COMMISSION EARNED FROM NON - AES TO MAKE IT COMPARABLE WITH THE COMMISSION EARNED FROM AES, WAS REJECTED. IT WAS FINALLY HELD THAT THE COMMISSION PERCENTAGE FROM AE TRANSACTIONS SHOULD BE COMPARED WITH THE COMMISSION PERCENTAGE FROM NON - AE TRANSACTIONS. THAT IS HOW, IT WAS DIRECTED T HAT SUCH COMMISSION PERCENTAGE AT 2.26% FROM NON - AE TRANSACTIONS SHOULD BE TAKEN AS ARM S LENGTH RATE AT WHICH THE ASSESSEE SHOULD HAVE EARNED COMMISSION FROM AE TRANSACTIONS. SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN ITS ORDER FOR THE AY 2008 - 09 IN WHICH THE COMMISSION PERCENTAGE @ 2.23% FROM NON - AE TRANSACTIONS WAS HELD TO BE ARM S LENGTH RATE OF COMMISSION TO BE APPLIED IN RESPECT OF TRANSACTIONS WITH AES. AS THE FACTS AND CIRCUMSTANCES OF THE INSTANT YEAR ARE ADMITTEDLY SIMILAR TO THOSE OF TWO PRECEDING YEARS, RESPECTFULLY FOLLOWING THE PRECEDENTS, WE HOLD THAT THE ACTION OF THE TPO/AO IN DETERMINING THE ALP IN RESPECT OF INDENTING BUSINESS BY APPLYING PROFIT PERCENTAGE EARNED BY THE ASSESSEE FROM NON - AE TRANSACTIONS UNDER THE TRADING BUSINESS SEGMENT CANNOT BE UPHELD. IT GOES WITHOUT SAYING THAT BOTH THE TRADING AS WELL AS COMMISSION BUSINESSES ARE FUNCTIONALLY DIFFERENT FROM EACH OTHER, APART FROM HAVING VARYING RISKS AND CAPITAL EMPLOYED. WE HOLD THAT THE COMMISSION PERCENTAGE FROM AE TRANSACTIONS SH OULD BE BENCHMARKED ON THE BASIS OF COMMISSION RATE FROM NON - AE TRANSACTIONS UNDER THE INDENTING BUSINESS AND THE ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT, IF ANY, SHOULD BE MADE IN CONSONANCE WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE IMMEDIAT ELY TWO PRECEDING YEARS. 6. THE LD. AR TRIED IN VAIN TO IMPRESS UPON US THAT THE VIEW TAKEN BY THE TRIBUNAL IN THE PRECEDING TWO YEARS SHOULD NOT BE FOLLOWED AND THE APPLICATION OF TNMM AS EMPLOYED BY THE ASSESSEE SHOULD BE ACCEPTED LEADING TO NO ADDITION ON ACCOUNT OF TP ADJUSTMENT. TO BUTTRESS HIS CONTENTION FOR THE APPLICATION OF TNMM, HE PLACED ON RECORD A COPY OF THE ORDER PASSED BY THE DELHI BENCH OF THE TRIBUNAL IN MARUBENI INDIA P. LTD. VS. DCIT (ITA NO. 5397/DEL/2912). THIS CONTENTION WAS COUNTER ED BY THE LD. DR BY STATING THAT THE TPO HAS APPLIED INTERNAL RPM AS THE ASSESSEE S TNMM WAS FAULTED WITH DUE TO THE REASONS GIVEN IN THE ORDER. WE ARE NOT CONVINCED WITH THE CONTENTION OF THE LD. AR URGING US TO OBSERVE DEPARTURE FROM EARLIER VIEW TAKEN B Y THE TRIBUNAL FOR THE OBVIOUS REASON THAT WHEN THE TRIBUNAL IN IDENTICAL FACTS HAS TAKEN A PARTICULAR VIEW IN ASSESSEE S OWN CASES FOR THE IMMEDIATELY TWO PRECEDING ASSESSMENT YEARS, WE CANNOT TINKER ITA NO 6646 /DEL/1 4 13 WITH THE SAME. WE, THEREFORE, HOLD THAT THE COMMISSION PERCENTAGE ON THE BASIS OF FOB VALUE OF GOODS FROM TRANSACTIONS WITH NON - AES BE COMPUTED AND TAKEN AS ARM S LENGTH RATE OF COMMISSION FOR THE PURPOSES OF THE TRANSACTIONS WITH AES UNDER THE INDENTING BUSINESS SEGMENT. IN THIS REGARD, THE LD. AR SUBMITTED THAT THE PERCENTAGE OF COMMISSION FROM AE TRANSACTIONS FOR THE INSTANT YEAR STOOD AT 1.83% AS AGAINST 2.86% FROM NON - AES. WE FIND THAT THE RATES OF COMMISSION NOW SOUGHT TO BE PLACED BEFORE US, ARE NOT EMANATING FROM THE ORDERS OF THE AUTHORITIES BELOW. U NDER SUCH CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF THE AO/TPO WITH A DIRECTION TO FIND OUT THE RATE OF COMMISSION INCOME ON FOB VALUE OF THE TRANSACTIONS WITH NON - AES UNDER THE INDENTING BUSINESS SEGMENT AND THE N APPLY THE SAME RATE TO THE FOB VALUE OF GOODS IN AE TRANSACTIONS UNDER THE INDENTING BUSINESS SEGMENT, AS WAS DIRECTED IN THE EARLIER YEARS. NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF BEING HEARD IN SUCH PROCEEDINGS. 10 . IN VIEW OF ABOVE SUBMISSION OF BOTH THE SIDES AND ORDER OF THE TRIBUNAL FOR PRECEDING AYS 2007 - 08, 2008 - 09 AND 2009 - 10, WE OBSERVE THAT IN THE SIMILAR SET OF FACTS AND CIRCUMSTANCES , IT WAS HELD THAT THE COMMISSION PERCENTAGE , ON THE BASIS OF FOB VALUE O F THE GOODS , FROM THE TRANSACTIONS WITH NON - AE, ARE AT ARM S LENGTH UNDER THE INDENTING BUSINESS SEGMENT. THE TRIBUNAL ALSO OBSERVE D THAT THE PERCENTAGE OF COMMISSION EARNED FROM AE TRANSACTION IS HIGHER THAN THE COMMISSION EARNED FROM THE NON AE TRANSAC TIONS IN THE INDENTING BUSINESS SEGMENT, THEREFORE, NO FURTHER ADDITION IN THIS REGARD IS REQUIRED. IN THE PRESENT CASE, LD. DR HAS SUPPORTED THE ACTION OF THE AO/DRP/TPO WHEREIN IMPUGNED ADDITION WAS DIRECTED TO BE MADE AND THE AO MADE IMPUGNED ADDITION B Y PASSING ORDER IN PURSUANT TO DIRECTION OF DRP. HOWEVER, LD. DR HAS FAIRLY ACCEPTED THAT THE FIGURES SHOWN BY THE ASSESSEE AT PAPER BOOK PAGE 461 WHICH WAS ALSO FILED BEFORE THE AUTHORITIES BELOW ARE UNDISPUTED AND CORRECT. WE FURTHER NOTE THAT AS PER SAI D FIGURES , COMMISSION EARNED FROM NON AE TRANSACTION COMES TO 1.71% AND COMMISSION EARNED FROM AE TRANSACTIONS COMES TO 1.83% OF THE FOB VALUE OF THE GOODS. IN VIEW OF ABOVE, IT IS VIVID THAT THE ASSESSEE EARNED HIGHER PERCENTAGE OF ITA NO 6646 /DEL/1 4 14 COMMISSION INCOME FROM AE TRANSACTIONS IN COMPARISON TO NON AE TRANSACTION ON INDENTING BUSINESS SEGMENT. IT IS SAID LEGAL PROPOSITION THAT WHEN INTERNAL COMPARABLE IS AVAILABLE THEN THE SAME SHOULD BE CONSIDERED AS SUITABLE AND APPROPRIATE COMPARABLE FOR ASSESSING THE ARM S L ENGTH PRICE OF THE INTERNATIONAL TRANSACTION UNDERTAKEN WITH AE ON A PARTICULAR SEGMENT. 11 . IN THE INSTANT CASE, THE COMMISSION EARNED FROM NON AE TRANSACTION IS AN APPROPRIATE A SUITABLE INTERNAL COMPARABLE FOR THE PURPOSE OF COMPARING THE INTERNATIONAL TRANSACTIONS AFFECTED BY THE ASSESSEE WITH ASSOCIATE ENTERPRISE PERTAINING TO SIMILAR SEGMENT DURING THE FINANCIAL PERIOD UNDER CONSIDERATION . IN VIEW OF ABOVE , RESPECTFULLY FOLLOWING THE VIEW TAKEN BY THE TRIBUNAL FOR AY 2008 - 09 (SUPRA) , WE INCLINED TO H OLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND THE IMPUGNED ADDITION MADE BY THE AO IN PURSUANT TO DIRECTION OF THE DRP BY PASSING THE IMPUGNED ORDER U/S 142(3) R.W.S. 144C OF THE ACT IS NOT SUSTAINABLE AND THE AO/DRP IS DIRECTED TO D ELETE THE SAME. ACCORDING LY, THE GROUND NOS. 1 TO 7 OF THE ASSESSEE ARE ALLOWED. 12 . GROUND NO. 8 & 9 ARE CONSEQUENTIAL AND IN VIEW OF ABOVE OUR CONCLUSION ON THE MAIN ISSUE S THESE GROUNDS BECOMES ACADEMIC AND INFRUCTUOUS AND WE DISMISS THE SAME WITHOUT A NY FURTHER DELIBERATION. 1 3 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 05.06.2015) SD/ - SD/ - ( R.S. SYAL ) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBE DATED: 5 TH JUNE , 201 5 . AKS/ - ITA NO 6646 /DEL/1 4 15 COPY FORWARDED TO 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI