ROCHE PRODUCTS (INDIA) P.LTD ( EARLIER KNWONAS ROCHE SCIENTIFIC COMPANY (I) P. LTD), MUMBAI V. ASST CIT 1(3), MUMBAI

ITA 7035/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4156 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 16-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DEBASHIS CHANDRA
• Assessee Lawyers: ARVIND SONDE
• Keywords: Transfer pricing; International transaction
• Section: 92

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C.N. PRASAD,JUDICIAL MEMBER ./I.T.A./7035/MUM/2012 , / AY.: 2008-09 ROCHE PRODUCTS (INDIA) PRIVATE LIMITED THE CAPITAL, 1503, 15 TH FLOOR, BANDRA KURLA COMPLEX; BANDRA (EAST) MUMBAI-400 018. PAN: AAACR 2744 K VS. ASSTT. C IT - 1(3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI DEBASHIS CHANDRA ASSESSEE BY: SHRI ARVIND SONDE / DATE OF HEARING: 12.04.2016 / DATE OF PRONOUNCEMENT: 12.04.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 24/9/2012,OF THE ASSESS ING OFFICER(AO),COMPLETED U/S.143(3) R.W.S. 144C(13) OF THE ACT,IN PURSUANCE OF THE DIRECTION O F THE DISPUTE RESOLUTION PANEL(DRP)- MUMBAI, DATED 31/07/2012,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF PROVIDING MARKETING AND OTHER SU PPORT SERVICES TO ITS ASSOCIATED ENTERPRISE (AE)I.E. F HOFFMANN LA ROCHE LTD.(FHLR),FILED ITS R ETURN OF INCOME ON 29/09/2008,DECLARING TOTAL INCOME OF RS.2.91 CRORES. 2. FIRST EFFECTIVE GROUND OF APPEAL IS ABOUT MAKING AD DITION OF RS. 2.66 CRORES MADE UNDER THE PROVISIONS OF CHAPTER X OF THE ACT ON THE BASIS OF A MARKUP OF COST PLUS 21.30%.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS AE,THAT THE AMOUNT INVOLVED IN THE TRANSAC TION WAS OF RS. 26.34 CRORES UNDER THE HEAD PROVISION OF MARKETING AND OTHER SUPPORT SYSTEM.HE MADE A REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER(TPO) TO DET ERMINE THE ARMS LENGTH PRICE(ALP) WITH REFERENCE TO THE INTERNATIONAL TRANSACTIONS.THE TPO FOUND THAT THE ASSESSEE HAD ADOPTED THE TNMM FOR DETERMINING THE ALP,THAT THE PROFIT LEVEL INDICATOR (PLI) WAS THE OPERATING PROFIT TO OPERATING COST (OP/TC),THAT SIX COMPANIES WERE IDEN TIFIED AS COMPARABLE IN INDIA DATA BASE,THAT THE PLI OF THE ASSESSEE WAS 10.14% AS AGAINST THE A RITHMETIC MEAN OF SIX COMPARABLES COMPANIES AT 14.62%. DURING THE TP PROCEEDINGS,THE ASSESSEE WAS ASKED TO UPDATE THE PLI OF THE COMPARABLES FOR THE FINANCIAL YEAR 2007-08 ONLY,AS IN THE TP REPORT WEI GHTED AVERAGE PLI BASED ON MULTIPLE YEAR WAS COMPUTED.ACCORDINGLY,THE ASSESSEE SUBMITTED THE UPD ATED SINGLE YEAR PLI OF THE COMPARABLES. THE TPO FURTHER DIRECTED IT TO EXCLUDE THE COMPARAB LES BY APPLYING FILTER OF TURNOVER EXCEEDING 200 CRORES,SINCE THE ASSESSEES TURNOVER WAS ONLY R S.26.34 CRORES.THE ASSESSEE EXCLUDED ONE COMPARABLE FROM THE SET OF SIX COMPANIES. AS PER THE TPO IN VIEW OF INADEQUACY OF REASONABLE NUMBER OF COMPARABLES AND THE BROAD LEVEL OF COMPARABILITY ALLOWED UNDER TNM METHOD,HE DECIDE D TO GAVE THE ASSESSEE A SET OF SEVEN COMPARABLES WHICH WERE PERFORMING FUNCTION BROADLY COMPARABLE TO THE ACTIVITIES OF THE ASSESSEE.THE ARITHMETIC MEAN OF THOSE COMPARABLES W AS 22.24%,AS AGAINST THE MATHEMATICAL MEAN SHOWN BY THE ASSESSEE @10.14%.VIDE ITS LETTER, DATED 02/08/2011,THE ASSESSEE OBJECTED THE 7035/M/12-ROCHE 2 COMPARABLE-SET SELECTED BY THE TPO. AFTER CONSIDERI NG THE SUBMISSION OF THE ASSESSEE, THE TPO HELD THAT ARITHMETIC MEAN OF PLI OF 19 COMPARABLES WAS 21.30% AS AGAINST PLI OF THE ASSESSEE AT 10.14%,THAT THE TRANSACTIONS HAD NOT BEEN ENTERED A T ALP.HE RECOMMENDED AN ADJUSTMENT OF RS. 2,66,86,133/-TO THE VALUE OF THE INTERNATIONAL TRAN SACTIONS IN QUESTION.THE AO PASSED THE DRAFT PROPOSED ASSESSMENT ORDER IN PURSUANCE OF THE ORDER OF THE TPO. 3. THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP.BEFORE IT,THE ASSESSEE ARGUED THAT THE TPO HAD NOT FULFILLED ANY OF THE FOUR CONDITIONS AS A SPECI FIED U/S/.92C(3) OF THE ACT BEFORE FOISTING A FRESH SET OF COMPARABLES ON THE ASSESSEE,THAT MULTIPLAYER YEAR ANALYSES SHOULD BE CONSIDERED AS IT WOULD ASSIST IN MINIMISING THE IMPACT OF ABNORMAL F ACTORS ON THE OUTCOME OF COMPARABLE DATA FOR ANY SINGLE YEAR,THAT THE TPO HAD NOT CONSIDERED THE UPDATED FINANCIAL FIGURE OF THE FY.2007- 08,THAT THE TPO HAD SELECTED THE COMPARABLES WHICH WERE FUNCTIONALLY DIFFERENT OR THERE WAS NOT SUFFICIENT INFORMATION OR THE DATA WAS NOT AVAILAB LE,THAT HE HAD REJECTED ONE OF THE ASSESSEES COMPARABLES BY APPLYING TURNOVER FILTER OF RS.200 C RORES ON THE GROSS TURNOVER OF THE ASSESSEE DESPITE THE FACT THAT IT HAD CONSIDERED ONLY THE PR OMOTIONAL SEGMENT OF THE COMPANY, THAT THE TPO HAD INCLUDED FUNCTIONALLY DISSIMILAR COMPANIES IN THE COMPARABILITY ANALYSIS, THAT THE TPO HAD FAILED TO APPLY THE PROVISION OF SECTION 92C(2) AND HAD NOT ALLOWED STANDARD DEDUCTION OF 5%. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ORDERS OF THE TPO,THE DRP HELD THAT THE DETERMINATION OF ALP BY THE ASSESSEE HAD BEEN DONE ON THE BASIS OF COMPARABLES SELECTED BY THE ASSESSEE WHICH WERE FUNCTIONALLY DIFFERENT FROM THE ASSESSEE COMPANY, THAT THE ACTION OF THE TPO IN REJECTING THE TP STUDY OF THE ASSESSEE WAS C ORRECT,THAT AS PER THE PROVISIONS OF RULE10B (4)THE MULTIPLE YEAR DATA WAS TO BE USED ONLY WHEN THERE WAS A DIRECT INFLUENCE OF THE PREVIOUS YEARS FIGURE ON THE PROFITABILITY OF THE YEAR UNDE R CONSIDERATION, THAT IN THE CASE UNDER APPEAL NO SUCH INFLUENCE OR CORRELATION WAS FOUND, THAT ASSES SEE WAS ENGAGED IN PROVIDING SCIENTIFIC AND OTHER INFORMATION REGARDING ROCHE PHARMA PRODUCTS T O MEDICAL FRATERNITY HOSPITALS AND WAS PROVIDING MARKETING SUPPORT SERVICES FROM SALES OF ROCHE PHARMA PRODUCTS IN INDIA,THAT THE TPO HAD SELECTED THE COMPARABLES KEEPING IN VIEW THOSE FUNCTION OF THE ASSESSEE, THAT THE ARITHMETICAL MEAN MARGIN OF THOSE COMPANIES WAS 22.24% AGAINST T HE ASSESSEES MARGIN OF 10.14%, THAT THE EXACT MATCH OF THE ASSESSEE FOR COMPARABILITY ARE N OT EASY TO GET, THAT TNMM WAS A RESIDUE METHOD AND IT WAS MORE BROAD-BASED,THAT THE COMPARA BLES WERE TAKEN FROM COMPANIES WHICH WERE MORE OR LESS IN THE SIMILAR LINE OF BUSINESS,T HAT THE CUP METHOD COULD NOT BE APPLIED IN THE ASSESSEES CASE,THAT THE SEARCH OF THE TPO WAS SCIE NTIFIC,TECHNICALLY SOUND AND CORRECT, THAT THE ACTION OF THE TPO WAS JUSTIFIED,THAT THE FINAL SET OF COMPARABLES PICKED UP BY THE TPO INCLUDED FIVE COMPARABLES OF THE ASSESSEE.FINALLY, THE DRP U PHELD THE ORDER OF THE TPO. 4. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE(AR) STATED THAT THE ASSESSEE WAS DISPUTING THE SIX COMPARABLES SELECTED BY THE TPO,THAT THOSE SIX COMPANIES WERE FUNCTIONALLY DIFFERENT FROM THE JOB CARRIED OUT BY THE ASSESSEE,THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MARKETING AND ANALYSIS,THAT WHAT WA S THE BASIS FOR SELECTING THE NEW COMPARABLE WAS NEVER DISCUSSED BY THE TPO,THAT IF THOSE SIX CO MPARABLES WERE EXCLUDED THE TRANSACTION WOULD FALL WITHIN THE RANGE OF +/-5%.HE REFERRED T HE PAGE NOS.20,509,512,610 OF THE PAPER BOOK.DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE O RDER OF THE DRP. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD SELECTED SIX COMPARABLES FOR TP PURPOS ES,THAT ONE OF THE COMPARABLE WAS REJECTED 7035/M/12-ROCHE 3 BY THE TPO, THAT THE TPO GAVE A LIST OF 14 NEW COMP ARABLES TO THE ASSESSEE,THAT WHAT WAS THE BASIS FOR SELECTING THE COMPARABLES BY HIM IS NOT F OUND ANYWHERE IN HIS ORDER.WE FIND THAT THE TPO HAD,WHILE HANDING OVERTHE LIST OF THE 19 COMP ARABLES,ASKED THE ASSESSEE TO OFFER ITS COMMENTS,THAT THE ENTRIES IN THE ORDER SHEET DO NOT REVEAL AS TO HOW THE SELECTION OF THE COMPARABLES WAS MADE BY HIM,THAT THE DRP HAS NOT DE ALT WITH THE ISSUE WHILE DEALING WITH THE OBJECTIONS RAISED BY THE ASSESSEE-THOUGH IT HAS MEN TIONED THAT THE COMPARABLES WERE PROVIDED BY THE TPO,THAT IT WAS FURTHER MENTIONED BY THE DRP THAT THE SEARCH OF THE TPO WAS SCIENTIFIC, TECHNICAL SOUND AND CORRECT.WE ARE UNABLE TO UNDER STAND AS TO WHICH SEARCH THE DRP IS REFERRING TO BEFORE HOLDING IT SCIENTIFIC AND TECHNICAL SOUND .THE TPO IS SUPPOSED TO MENTION THE BASIS OF SELECTING COMPARABLES AND THE SOURCE OF HIS INFORMA TION BEFORE USING THE DATA. IN THE CASE UNDER CONSIDERATION NO SUCH EXERCISE WAS EVER CARRIED OUT .EVEN IF THE TPO HAD DONE THE EXERCISE,SAME IS NOT EMERGING OUT FROM THE RECORDS AVAILABLE.WHIL E PASSING AN APPEALABLE ORDER, ADJUDICATING AUTHORITIES ARE SUPPOSED TO GIVE THE BASIS OR REASO NING FOR ARRIVING AT A PARTICULAR CONCLUSION.MAKING A STATEMENT IS NOT SUFFICIENT-IT HAS TO BE SUPPORTED BY EVIDENCES OR ARGUMENTS.BUT,IN THE CASE UNDER CONSIDERATION THE T PO/DRP HAS NOT GIVEN ANY REASON FOR SELECTING THE 19 NEW COMPARABLES NOR IT HAS BEEN EX PLAINED AS TO HOW SAME WERE FUNCTIONALLY SIMILAR TO THE ACTIVITIES OF THE ASSESSEE. 5.1. WE WOULD LIKE TO DEAL WITH EACH OF THE SIX COMPARAB LES OBJECTED BY THE ASSESSEE.FIRST OF THEM IS CHOKSI LABORATORIES LTD.IN THE CASE OF NORT EL NETWORKS INDIA (P.)LTD.(164TTJ21-AY.S. 2007-08 AND 2008-09)THE TRIBUNAL HAD HELD THAT CHOK SI LABORATORIES WAS ENGAGED IN ENGINEERING ACTIVITIES.IN THE CASE OF YUM!RESTAURAN T(INDIA) (P) LTD.(48 TAXMANN.COM 384- AY.2008-09),THE TRIBUNAL HELD THAT CHOKSI LABORATOR IES WAS ENGAGED IN CHEMICAL TESTING SERVICES.SIMILARLY IN THE MATTER OF CIENA INDIA PVT . LTD. (ITA/3324/DL/2013-AY.-2008-09)IT WAS HELD THAT CHOKSI LABORATORIES WAS ENGAGED IN PROVID ING TESTING SERVICES FOR VARIOUS PRODUCTS AND WAS ALSO OFFERING SERVICES IN THE FIELD OF POLLUTIO N-CONTROL.HERE,WE WOULD LIKE TO MENTION THAT THE AO, IN HIS ORDER, DATED 24/09/2012,HAS MENTIONED TH AT DURING THE YEAR UNDER CONSIDERATION,THE ASSESSEE WAS ENGAGED IN PROVIDING MARKETING AND OT HER SUPPORT SERVICES TO ITS AE.IN OUR OPINION,CHOKSI LABORATORIES CANNOT BE TREATED AS A VALID COMPARABLE AS FAR AS ASSESSEE IS CONCERNED.IN THE CASES OF PRACTICE ADVISORS PRIVATE LIMITED (36 TAXMANN.COM 320,AY. 2008-09) NOVARTIS HEALTHCARE PRIVATE LIMITED(ITA/7643/M/2012 -AY.2008-09)AND CISCO SYSTEMS (INDIA) (P.) LTD.(37 ITR,TRIB -133,AY.2009-10)VARIOUS BRANC HES OF THE TRIBUNAL HAVE HELD THAT VAPI WASTE AND EFFLUENT MANAGEMENT COMPANY LTD.WAS AN EN GINEERING COMPANY PROVIDING END-TO- END SERVICE/ COMPREHENSIVE ENVIRONMENT AND MANAGEME NT PROGRAM.THEREFORE,WE ARE OF THE OPINION THAT VAPI WASTE HAS TO BE EXCLUDED FROM THE LIST OF THE COMPARABLES,AS IT IS FUNCTIONALLY DIFFERENT FROM THE JOB DONE BY THE ASSESSEE.WE FURT HER FIND THAT IN THE CASE OF WAPCOS LTD.,THE TRIBUNAL HAS HELD THAT IT WAS ENGAGED IN ENGINEERIN G ACTIVITIES WHICH CANNOT BE COMPARED WITH MARKETING SUPPORT SERVICES,WHILE DECIDING THE APPEA LS IN THE CASES OF NORTEL NETWORKS INDIA(P)LTD.(SUPRA),PRACTICE ADVISORS PRIVATE LIMIT ED(SUPRA),NOVARTIS HEALTHCARE (SUPRA) YUM! RESTAURANTS (SUPRA).IN THE CASE OF APITCO LTD.,IT I S FOUND THAT THE TRIBUNAL HAD HELD THAT THE NATURE OF OPERATIONS CARRIED OUT BY IT WAS TOWARDS MICRO-ENTERPRISE DEVELOPMENT,SKILL DEVELOPMENT AND PROJECT RELATED SERVICES, TOURISM R ESEARCH STUDIES, ENVIRONMENT MANAGEMENT ETC.,WHILE DECIDING THE APPEALS OF SINAI INDIA PRIV ATE LTD.(SUPRA)AND CISCO SYSTEMS (SUPRA).CONSIDERING THE ABOVE REFERRED TWO CASES WE ARE OF THE OPINION THAT APITCO LTD.HAS TO BE EXCLUDED FROM THE LIST OF COMPARABLES AS IT WAS FUN CTIONALLY DIFFERENT.NOW,WE WOULD TAKE UP THE NEXT COMPARABLES I.E. INDIA CEMENTS CAPITAL LTD. FR OM THE REPORT OF THE DIRECTOR (PG.509 OF THE 7035/M/12-ROCHE 4 PB),IT IS FOUND THAT THE ASSESSEE WAS ENGAGED IN TH E BUSINESS OF FOREIGN EXCHANGE RELATED SERVICE AND TRAVEL AGENCY SERVICES.PAGE 512 OF THE PAPER BO OK READS AS UNDER: FEE-BASED ACTIVITIES THE FEE-BASED DIVISION OF THE COMPANY HAVE SHOWN CR EDITABLE PERFORMANCE. FORXCHANGE: THIS DIVISION WHICH IS A FULLY FLEDGED MONEY-CHANGERS IS AT PRESENT OPERATING IN 28 LOCATIONS AND HAS ESTABLISHED ITSELF AS A LEADING M ONEYCHANGERS IN THE SOUTH. IN ADDITION TO BUYING AND SELLING OF ALL MAJOR CURRENCIES AND TRAV ELLERS CHEQUES, THE DIVISION ALSO STOCK AMEX TRAVELLERS CHEQUES AND CITIBANK WORLD MONEY CARDS A ND AXIS BANK TRAVEL CURRENCY PREPAID CARDS. THEY ARE ALSO SUBAGENTS OF WESTERN UNION MON EY TRANSFER. COROMANDEL TRAVELS: THIS DIVISION IS HAVING SEVEN I TAT A APPROVED BRANCHES AT CHIMNEY, MUMBAI (TWO ITAT A ACCRETED BRANCHES), BANGALORE, DELHI, C ALCUTTA AND HYDERABAD, APART FROM HANDLING TICKETING FOR DOMESTIC AND INTERNATIONAL T RAVEL, THIS DIVISION IS ALSO HANDLING INBOUND AND OUTBOUND TOURS. AS PER THE PAGE NO.540 OF THE PB,THE COMPANY WAS EN GAGED IN HIRE PURCHASE,LEASING, BILL DISCOUNTING, MONEY CHANGING, TRAVEL AGENCY. THE LAST COMPARABLE,OBJECTED BY THE ASSESSEE IS SEN CO TRANCE LTD.ON PERUSAL OF THE DIRECTORS REPORT IT IS FOUND THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONTAINER FREIGHT STATION (PG. 597OF THE PB),THAT THE INCOME FROM OPERATIONS OF TH E ASSESSEE COMPRISED OF HANDLING CHARGES, EQUIPMENT,WAREHOUSING CHARGES AND AGENCY AND OTHER CHARGES.UNDER THE HEAD DISCLOSURE UNDER SEGMENT REPORTING THE ASSESSEE HAD STATED THAT COMP ANY IS PRINCIPALLY ENGAGED IN A SINGLE BUSINESS SEGMENT VIZ.CUSTOMS CLEARING AND FORWARDIN G,CONTAINER FREIGHT STATION AND RELATED ACTIVITIES (PG.614 OF THE PB).IN OUR OPINION,THERE IS NO NEED TO HOLD THAT SENCO TRANCE LTD.IS FUNCTIONALLY DIFFERENT FROM THE WORK DONE BY THE AS SESSEE.IF ALL THE ABOVE SIX COMPARABLES ARE REMOVED FROM THE LIST THAN THE ASSESSEE FALLS WITHI N THE PRESCRIBED LIMIT OF +/-5%. IN OUR OPINION,FOR DETERMINING ALP THE TPO SHOULD IDENTIFY THE IDENTICAL OR ALMOST IDENTICAL SERVICES/ BUSINESS/PRODUCTS.IT IS RIGHTLY SAID THAT A MANGO C ANNOT BE COMPARED WITH AN APPLE THOUGH BOTH GROW ON TREES AND BOTH ARE FRUITS. PROVISIONS OF SECTION 92 WERE INTRODUCED IN THE ACT ,SO THAT UNDER-CHARGING OR OVER-CHARGING BY AE IN INTRA-GROUP TRANSACTIONS CAN BE PREVENTED THA T INTRA-GROUP TRANSFERS CAN BE VALUED.IN SHORT, TP MECHANISMS AIMS TO IMPLEMENT AND CHECK CONTROLLI NG PRICING.IT IS SAID THAT THE TAX AUTHORITIES ARE FREE TO EXAMINE RELATED AND ASSOCIATED PARTIES TRANSACTION AS ACTUALLY UNDERTAKEN AND STRUCTURED BY THE PARTIES.BUT,THEY CANNOT DISREGARD THE ACTUAL TRANSACTION OR SUBSTITUTE IT FOR ANOTHER TRANSACTION ACCORDING TO THEIR PERCEPTIONS. RESTRUCTURING OF LEGITIMATE BUSINESS TRANSACTION WOULD BE AN ARBITRARY EXERCISE.HOWEVER, THERE ARE TWO EXCEPTIONS TO THE RULE.THE FIRST BEING WHERE THE ECONOMIC SUBSTANCE OF THE TRANSACTI ON DIFFERS FROM ITS FORM. IN SUCH CASES, THE TAX AUTHORITIES MAY DISREGARD THE PARTIES CHARACTE RISATION OF THE TRANSACTION AND RE-CHARACTERISE THE TRANSACTION IN ACCORDANCE WITH ITS SUBSTANCE. T HE SECOND EXCEPTION IS WHEN THE FORM AND SUBSTANCE OF THE TRANSACTION ARE THE SAME BUT THE A RRANGEMENTS MADE IN RELATION TO THE TRANSACTION,WHEN VIEWED IN THEIR TOTALITY,DIFFER FR OM THOSE WHICH WOULD HAVE BEEN ADOPTED BY THE INDEPENDENT ENTERPRISE BEHAVING IN A COMMERCIAL LY RATIONAL MANNER.THE SECOND EXCEPTION ALSO MANDATES THAT THE ACTUAL STRUCTURE SHOULD PRAC TICALLY IMPEDE THE TAX AUTHORITIES FROM DETERMINING AN APPROPRIATE TRANSFER PRICE.WE FIND T HAT THE TPO/DRP HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT EITHER OF THE TWO EXCEPT IONS WERE PRESENT IN THE CASE UNDER CONSIDERATION. PROVISIONS OF CHAPTER X WERE NEVER AIMED TO MAKE AD JUSTMENT AT ANY COST,BUT TO DECIDE FAIRLY AND EQUITABLY THAT THE PRICE QUOTED BY AN ASSESSEE WITH REGARD TO AN INTERNATIONAL TRANSACTIONS 7035/M/12-ROCHE 5 ENTERED INTO WITH ITS AES ARE AT ALP.THE BURDEN IS ON THE ASSESSEE TO PROVE THAT TRANSACTIONS WITH ITS AES ARE ABOVE BOARD AND IT IS PAYING/CHARGING T HE SAME RATE THAT IS PREVALENT IN THE OPEN MARKET.THE COMPARABLES SELECTED BY THE ASSESSEE SHO ULD NOT BE IGNORED LIGHTLY, UNLESS AND UNTIL IT CAN BE PROVED THAT THE VARIABLES SELECTED BY IT WERE FUNCTIONALLY OR OTHERWISE DIFFERENT FROM THE JOB DONE BY IT. THE TPO IS FREE TO MAKE SEARCH AND REFER TO OTHER COMPARABLES. BUT,THIS IS NOT AN UNBRIDLED POWER.HE HAS TO PROVE THAT COMPARABLES SE LECTED BY HIM WERE ENGAGED IN THE SIMILAR OR ALMOST SIMILAR ACTIVITIES OF THE ASSESSEE.IN THE CASE UNDER CONSIDERATION, THE TPO HAD SELECTED COMPARABLES WHICH HAD NO SIMILARITY AT ALL WITH THE ACTIVITIES OF THE ASSESSEE.WE ARE UNABLE TO UNDERSTAND IS HOW THE RESULTS OF COMPANIES DEALING IN FOREIGN EXCHANGE/MAINTAINING FREIGHT STATION OR ENGAGED IN PROVIDING END-TO-END ENGINEER ING SERVICES CAN BE COMPARED WITH MARKETING AND ALLIED SERVICES.ACCORDINGLY,WE HOLD THAT THE SE LECTION MADE BY THE TPO IS COMPARABLES WAS NEITHER METHODICAL NOT SCIENTIFIC.IT IS FOUND THAT NCP MARGIN AS PER THE TP STUDY OF THE ASSESSEE WAS 10.14%,THAT NCP MARGIN,AFTER EXCLUDING THE SIX COMPARABLES, IS 12.05%. THUS,IT IS WITHIN THE PERMISSIBLE LIMIT OF +/-5%.CONSIDERING THESE FA CTS,WE DECIDE THE FIRST EFFECTIVE GROUND OF APPEAL(GOA-1TO7) IN FAVOUR OF THE ASSESSEE. 6. NEXT EFFECTIVE GROUND (GOA-8)IS ABOUT NON-COMPLIANC E OF THE DIRECTION OF THE DRP BY THE AO. IT WAS ARGUED BY THE AR THAT THE DRP HAD DIRECT ED THE AO TO ALLOW DEDUCTION OF RS. 1.32 LAKHS UNDER SECTION 80 G OF THE ACT AGAINST THE INT EREST INCOME OF RS. 10.02 LAKHS, THAT THE AO HAD NOT ALLOWED THE SAID DEDUCTION. WE ARE OF THE OPINION THAT THE AO IS BOUND TO GIVE EFFECT TO THE ORDER OF THE DRP. IF HE HAS NOT PASSED THE ORDER TILL DATE WITH REGARD TO DEDUCTION UNDER SECTION 80 G OF THE ACT,HE SHOULD PASS THE ORDER WITHIN A FORTNIGHT AFTER RECEIVING OUR OR DER. 7. REST OF THE GROUNDS,ABOUT CHARGING OF INTEREST U/S. 234 OF THE ACT,ARE OF CONSEQUENTIAL NATURE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH ,APRIL, 2016. 12 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12.04.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.