PHOENIX MECANO (INDIA) PVT. LTD., PUNE V. I.T.O.8(2)(4), MUMBAI

ITA 7361/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75219 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2008-2009
• Appeal Filed On: 12-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERJA PRADHAN
• Assessee Lawyers: SHARAD A SHAH
• Keywords: Depreciation; Transfer pricing; International transaction; Corroborative evidences; Unabsorbed depreciation
• Section: 143(3); 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI I.P.BANSAL , JM & SHRI N.K.BILLAIYA , AM ITA N O. 73 6 1 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 8 - 0 9 ) PHOENIX MECANO (INDIA) PRIVATE LIMITED, 388 BHARE, TALUKA MULSHI, POST GHOTAWADE, PIRANGOOT INDUSTRIAL AREA, PUNE - 412 108 VS. ITO 8(2)(4), MUMBAI - 20 PAN/GIR NO. : A AA C P 2452 L ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. SHARAD A. SHAH /REVENUE BY : MS. NEERJA PRADHAN DATE OF HEARING : 7 TH JANUARY , 201 4 DATE OF PRONOUNCEMENT : 7 TH JANUARY , 201 4 O R D E R PER I.P.BANSAL ( J .M.) : THIS APPEAL IS FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ASSESSMENT ORDER DATED 18 - 10 - 2012 , PASSED UNDER SECTION 143(3) READ WITH SECTION 144C(13) OF THE IT ACT, 1961( THE ACT ) FOR THE ASSESSMENT YEAR 200 8 - 0 9 . 2 . THE GROUNDS OF APPEAL IN APPEAL OF THE ASSESSEE ARE AS UNDER: - ON FACTS AND IN L A W AND WITHOUT PREJUDICE TO EACH OTHER 1) A) THE LEARNED AO. HAS ERRED (AND THE LEARNED DRP ERRED IN UPHOLDING) IN TP ADJUSTMENT OF RS. 1,13,50,821/ - ITA NO. 73 6 1 /20 1 2 2 B) THE TPO HAS MADE THE ADJUSTMENT CONSIDERING THE MARGINS OF COMPARABLE COMPANIES ONLY FOR FINANCIAL YEAR ('FY') 2007 - 08 AGAINST USING MULTIPLE YEAR DATA AS ENUMERATED UNDER RULE 10 B(4). C) THE TPO HAS ERRED IN REJECTING FUNCTIONALLY COMPARABLE COMPANIES MERELY BECAUSE THEY HAVE INCURRED A LOSS. D) THE TPO HAS ERRED IN THE SELECTION OF FOUR COMPARABLES BY CHERRY PICKING THEM RATHER THAN ON THE BASIS OF ANALYSIS OF THE FUNCTIONS AND RISKS UNDERTAKEN AND HAS CON SEQUENTLY VIOLATED THE PROVISIONS OF RULES 1 0 B(2) OF THE RULES AND ADDITIONAL COMPARABLE SELECTED BY TPO BE REJECTED ON ACCOUNT OF DISSIMILARITY OF FUNCTIONS. E) THE TPO HAS ERRED IN SELECTING THE NET COST PLUS MARK - UP ('NCP') AS THE PROFIT LEVEL INDICA TOR (PLI') AS AGAINST NET PROFIT MARGIN ('NPM') SELECTED BY THE ASSESSEE FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION UNDER CONSIDERATION. F) THE TPO HAS ERRED IN MAKING ADJUSTMENT ON THE TOTAL TURNOVER OF THE COMPANY INSTEAD OF MAKING AN ADJUSTMENT O NLY ON THE INTERNATIONAL TRANSACTION UNDER CONSIDERATION AS ENUMERATED UNDER SECTION 92(1) AND 92(B) OF THE ACT. G) THE TPO ERRED IN NOT APPLYING THE PROVISIONS OF THE SECOND PROVISO TO SECTION 92C(2) OF THE ACT I NSOFAR, AS THE BENEFIT OF THE +/ - 5 PERCE NT VARIATION HAS NOT BEEN ALLOWED TO THE ASSESSEE. H) THE LEARNED A.O. ERRED IN NOT CONSIDERING SEGMENTAL PROFITABILITY OF ASSESSEE. I) THE ASSESSEE HAD SUBMITTED DETAILS IN THE COURSE OF DRP PROCEEDINGS WHEREIN IT HAD POINTED OUT ABOUT THE REVISION / CORRECTION REQUIRED IN THE MARGINS OF COMPARABLES SELECTED BY AO. HOWEVER , DRP HAS NOT CONSIDERED THE SAM E. THE LEARNED DRP ERRED IN NOT CONSIDERING THE SUBMISSION AS REGARD CORRECTIONS REQUIRED IN THE MARGINS OF COMPARABLES (WHICH ARE SELECTED BY A 0.) W HILE GIVING THE DIRECTIONS 2) THE LEARNED AO. HAS ERRED (AND THE LEARNED DRP ERRED IN UPHOLDING) IN LEVY OF PENALTY U/S. 271(1)(C) ON ADDITION OF TP ADJUSTMENT. 3) A) THE LEARNED AO ERRED (AND DRP ERRED IN NOT CONSIDER ING) THE OBJECTION AS REGARD EXPL ICIT PROVISION OF SECTION 72 SUBSE CTION 2 WHICH READS AS UNDER. SECTION 72(2) ' WHERE ANY ALLOWANCE OR PART THEREOF IS, UNDER SUB - SECTION (2) OF SECTION 32 OR SUB - SECTION (4) OF SECTION 35, TO BE ITA NO. 73 6 1 /20 1 2 3 CARRIED FORWARD, EFFECT SHALL FIRST BE GIVEN TO THE PROVI SIONS OF THE SECTION. 'B) THE LEARNED A.O. HAS ERRED (AND THE LEARNED DRP ERRED IN UPHOLDING) IN TREATING THE BROUGHT FORWARD UNABSORBED DEPRECIATION AS CURRENT YEARS DEPRECIATION AND SETTING OF THE SA M E AGAINST THE INCOME EARNED BY THE ASSESSEE FROM BUS INESS IN AY 2008 - 09, PRIOR TO SETTING OF THE BROUGHT FORWARD BUSINESS LOSS AS PER SECTION 72 OF THE ACT. 4) THE LEARNED A.O. HAS ERRED (AND LEARNED DRP ERRED IN UPHOLDI NG) BY NOT ACCEPTING THE TAXABLE INCOME (NIL) AS DECLARED BY THE ASSESSEE. ) 3 . THE ASSESSEE IS ENGAGED IN MANUFACTURING OF METAL AND PLASTIC ENCLOSURES AND INDUSTRIAL PROFILES. IT IS ALSO ENGAGED IN TRADING OF BACKPLANES, CONNECTORS AND MOTORIZED DRIVES. IT IMPORTS RAW MATERIAL AND CONSUMABLES FROM OVERSEAS PM ENTITIES AND EXPORTS MAINL Y ENCLOSURES TO OVERSEAS PM ENTITIES. FOR BENCHMARKING THE INTERNATIONAL TRANSACTIONS WITH ITS AES, THE ASSESSEE HAS ADOPTED TNMM AS MOST APPROPRIATE METHOD USING THE NET PROFIT MARGIN (NPM) AS THE PROFIT LEVEL INDICATOR (PLI) . IN THE TP REPORT THE ASSESS EE HAS CARRIED OUT DETAILED BENCHMARKING EXERCISE AND SELECTED A SET OF 10 BROADLY COMPARABLE COMPANIES WITH A WEIGHTED AVERAGE NPM OF 3.03%. THE NET PROFIT MARGIN (NPM) OF THE ASSESSEE IS 4.21%. THE TPO REJECTED TWO COMPARABLES, NAMELY, ALUMECO INDIA EXTR USION LTD AND SHREE NARMADA ALUMINUM INDS. LTD. ON THE GROUND THAT THESE COMPARABLES HAVE INCURRED PERSISTENT LOSSES . T HE TPO ALSO SELECTED ADDITIONAL COMPARABLES, WHICH WERE REJECTED BY THE ASSESSEE IN ITS BENCHMARKING ANALYSIS IN THE TP REPORT AND FINA L SET OF 11 COMPARABLES HAS BEEN TAKEN BY THE LEARNED TPO WITH A MEAN MARGIN OF 7.26%. AGAINST SUCH COMPUTATION OF 7.26% NET MARGIN AS COMPUTED BY THE TPO, IT WAS THE ITA NO. 73 6 1 /20 1 2 4 CASE OF THE ASSESSEE BEFORE THE LEARNED DRP THAT THE CORRECT NET PROFIT MARGIN OF 11 COMP ARABLES IS 5.79% , T HEREFORE, THE CORRECT NET PROFIT MARGIN O F COMPARABLES SHOULD BE APPLIED; L OSS MAKING COMPANY SHO ULD NOT BE REJECTED AS THE SAME ARE FUNCTIONALLY COMPARABLE COMPANIES; SEGMENT PROFITABILIT Y OF THE ASSESSEE BE CONSIDERED; ADDITIONAL COMPA RABLE SELECTED BY THE TPO SHOULD BE REJECTED ON ACCOUNT OF DISSIMILARITY OF THE FUNCTIONS AND SAFE HARBOR OF 5% SHOULD BE PROVIDED AS STANDARD DEDUCTION. ON THESE SUBMISSIONS OF THE ASSESSEE, LEARNED DRP HAS PASSED AN ORDER DATED 27 - 9 - 2012. IN PURSUANCE OF AFOREMENTIONED DIRECTIONS OF LEARNED DRP, THE IMPUGNED ASSESSMENT ORDER HAS BEEN FRAMED. AGGRIEVED, THE ASSESSEE HAS FILED THE AFORESAID GROUNDS OF APPEAL. 4 . AT THE OUTSET, IT WAS SUBMITTED BY THE LEARNED AR THAT THOUGH IN THE GROUNDS OF APPEAL THE ASSE SSEE HAS EXPRESSED VARIOUS GRIEVANCES BUT THE MAIN GRIEVANCE S OF THE ASSESSEE ARE AS FOLLOWS : - (I) THE TP ADJUSTMENT SHOULD BE RESTRICTED TO THE INTERNATIONAL TRANSACTIONS WITH AE AND LEARNED TPO AS WELL AS LEARNED DRP HAVE COMMITTED AN ERROR OF LAW IN A PPLYING THE ARMS LENGTH PRICE AT ENTITY LEVEL; (II) WHILE COMPUTING THE NET MARGIN OF THE ASSESSEE, INTEREST HAS BEEN TAKEN AS OPERATIONAL EXPENSES. AS AGAINST THAT, WHILE COMPUTING THE MARGIN OF COMPARABLES, INTEREST HAS BEEN EXCLUDED FROM THE OPERATION AL ITA NO. 73 6 1 /20 1 2 5 EXPENSES. THEREFORE, THE AO MAY BE DIRECTED NOT TO EXCLUDE THE INTEREST AS OPERATIONAL EXPENSES FROM THE PROFITS OF THE COMPARABLES WHILE COMPUTING THEIR NET MARGIN. (III) IF AFTER GIVING EFFECT TO THE AFORESAID DIRECTIONS, THE DIFFERENT IN THE NET MAR GIN OF THE ASSESSEE AND MEAN MARGIN OF COMPARABLES, WILL BE LESS THAN 5%, THE REFORE, THE BENEFIT OF SAFE HARBOR SHOULD BE GRANTED TO THE ASSESSEE. 4.1 FOR GROUND NO.2 , IT WAS SUBMITTED BY THE LEARNED AR THAT THIS IS REGARDING INITIATION OF PENALTY UNDER S ECTION 271(1)(C) AND THE SAME IS PREMATURE. THEREFORE, THIS GROUND MAY BE DISMISSED. 4.2 FOR GROUND NO.3 , LEARNED AR SUBMITTED THAT LEARNED DRP HAS FAILED TO ISSUE APPROPRIATE DIRECTIONS TO THE AO FOR GIVING ADJUSTMENT OF BROUGHT F ORWARD UNABSORBED DEPREC IATION AND BROUGHT FORWARD UNABSORBED BUSINESS LOSS IN ORDER TO THEIR PRIORITY AS PROVIDED IN THE PROVISIONS OF LAW. 4.3 FOR GROUND NOS.4 & 5 , IT WAS SUBMITTED BY THE LEARNED AR THAT THESE ARE GENERAL IN NATURE AND THEY NEED NOT TO BE ADJUDICATED SEPARATE LY. 4.4 TO SUPPORT THE AFORESAID CONTENTIONS, LEARNED AR HAS RELIED UPON THE FOLLOWING DECISIONS : - ITA NO. 73 6 1 /20 1 2 6 (I) WITH REGARD TO TP ADJUSTMENT : - THE ARMS LENGTH PRICE IS REQUIRED TO COMPUTE ONLY WITH REFERENCE TO INTERNATIONAL TRANSACTI ONS OF THE ASSESSEE WITH I TS AE - THYSSEN KRUPP INDUSTRIES INDIA PVT. LTD. VS. ACIT, REPORTED IN (2013) 55 SOT 497 (MUM) , WHEREIN IT HAS BEEN HELD THAT THE TP ADJUSTMENTS ARE TO BE RESTRICTED TO INTERNATIONAL TRANSACTIONS ALONE AND CANNOT BE APPLIED TO THE ENTIRE TURNOVER OF THE CO MPANY. IT IS INCUMBENT UPON THE TPO TO WORKOUT THE ALP OF THE RELEVANT TRANSACTIONS BY FOLLOWING SOME AUTHORIZED METHOD AND THE ENTIRE C OST BORNE BY THE ASSESSEE CANNOT BE DISALLOWED BY TAKING THE ALP AT NIL. COPY OF THIS ORDER IS PLACED AT PAGES 35 TO 46 OF THE PAPER BOOK. (II) WITH REGARD TO PRIORITY OF ADJUSTMENT TOWARDS THE PROFIT OF THE YEAR UNDER CONSIDERATION IN RELATION TO UNABSORBED BROUGHT FORWARD DEPRECIATION AND UNABSORBED BUSINESS LOSS, LEARNED AR HAS RELIED UPON FOLLOWING DECISIONS : - (A) C IT VS. PREMIER AUTOMOBILES LTD., REPORTED (1994) 206 ITR 1 (BOM) , WHEREIN THEIR LORDSHIPS OF HONBLE BOMBAY HIGH COURT AFTER REFERRING TO SECTION 3 2 (2) AND THE PROVISIONS OF SECTION 72(2) & 72(3) OF THE ACT , HAVE OBSERVED AS FOLLOWS : - 11. WE HAVE PERUSED THE ABOVE SECTIONS. UNDER S. 32(2) OF THE ACT, A LEGAL FICTION HAS BEEN CREATED THAT UNABSORBED DEPRECIATION OF THE EARLIER YEAR SHALL FORM ITA NO. 73 6 1 /20 1 2 7 PART OF THE CURRENT YEARS DEPRECIATION ALLOWANCE AND, THEREFORE, IT SHALL HAVE TO BE DEALT WITH ACCORDINGLY SUBJEC T, HOWEVER, TO THE PROVISIONS OF SS.72(2) AND 72(3) OF THE ACT. THUS, UNDER S. 72, THE UNABSORBED DEPRECIATION SHALL BE CARRIED FORWARD TO A SUBSEQUENT YEAR AND IT SHALL BE DEEMED TO FORM PART OF THAT YEARS DEPRECIATION AND SHALL BE SET OFF AGAINST THE PR OFITS OF THAT YEAR SUBJECT TO THE PROVISIONS OF SUB - S.(2) THEREOF. FROM THESE PROVISIONS, IT IS CLEAR THAT BEFORE SETTING OFF THE CARRIED FORWARD UNABSORBED DEPRECIATION OF THE EARLIER YEAR, THE DEPRECIATION OF THE CURRENT YEAR SHALL HAVE TO BE DEDUCTED AN D THEN AFTER SETTING OFF OF THE LOSS, THE UNABSORBED DEPRECIATION, WHICH IS ALSO TREATED AS CURRENT YEARS DEPRECATION, SHALL BE ADJUSTED. (B) CIT VS. GUJARAT STATE WAREHOUSING CORPORATION, REPORTED IN (1976) 104 ITR 1 (GUJ) , WHEREIN IT HAS BEEN HELD THA T CURRENT DEPRECIATION HAS TO BE SET OFF FIRST, THEN CARRIED FORWARD LOSSES AND THEN UNABSORBED DEPRECIATION. THUS, IT WAS PLEADED BY THE LEARNED AR THAT THE AO SHOULD BE DIRECTED TO SET OFF THE BROUGHT FORWARD UNABSORBED DEPRECIATION AND BROUGHT FORWARD UNABSORBED LOSSES AS P ER AFOREMENTIONED TWO DECISIONS. 5 . I T WAS FURTHER PLEADED BY THE LEARNED AR THAT FOR IMMEDIATE PRECEDING YEAR, THE TPO HAD APPLIED ARMS LENGTH PRICE AT THE ENTITY LEVEL AND THE MATTER WAS RESTORED BACK BY THE TRIBUNAL TO THE FILE O F THE AO VIDE ITS ORDER DATED 23 - 12 - 2011 IN ITA NO.7646/M/2011 . COPY OF THIS ORDER IS FILED AT PAGES 243 TO 248 OF THE PAPER BOOK. THE OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER : - 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFUL LY. THE DISPUTE IS REGARDING THE ADDITION ON ACCOUNT OF GP RATE AND TP ADJUSTMENT MADE BY THE AO. IN MAKING TP ADJUSTMENT, THE AO HAS FOLLOWED THE TNMM METHOD, ABOUT WHICH THERE IS NO DISPUTE. THE DISPUTE RAISED IS ONLY ABOUT NOT GIVING THE BENEFIT OF 5% A DJUSTMENT AND MAKING THE ADJUSTMENTS IN ITA NO. 73 6 1 /20 1 2 8 RELATION TO THE ENTIRE SALES AND NOT LIMITING TO THE TRANSACTIONS WITH THE AE. THE ADJUSTMENTS ON ACCOUNT OF TRANSFER PRICING ARE TO BE RESTRICTED ONLY TO THE INTERNATIONAL TRANSACTIONS WITH THE AE, AND NOT TO THE EN TIRE TURNOVER OF THE ASSESSEE AS HELD BY THE MUMBAI BENCH OF THE TRIBUNAL IN CASE OF DCIT VS. M/S. STARLITE (SUPRA) AND IN SEVERAL OTHER CASES. SIMILARLY, IN THE PRE 01.10.2009 POSITION, THE BENEFIT OF 5% IS TO BE ALLOWED TO THE ASSESSEE, EVEN IN CASES WHE RE DIFFERENCE IN VALUE OF INTERNATIONAL TRANSACTIONS AND ITS ALP IS MORE THAN 5% AS HELD BY THE TRIBUNAL IN CASE OF EMERSONS PROCESS MANAGEMENT INDIA PVT. LTD. VS. ADD CIT (SUPRA) AND IN OTHER CASES. THE COMPUTATION MADE BY THE AO IS, THEREFORE, REQUIRED T O BE REWORKED. AS REGARDS THE GP RATE, THE AO MADE THE ADDITION ONLY ON THE GROUND THAT THE GP RATE HAD FALLEN COMPARED TO THE PREVIOUS YEAR AND THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT SUBSTANTIATED BY EVIDENCE. THE AO HAS NOT POINTED OUT ANY DE FECTS IN THE BOOKS OF ACCOUNTS. IN OUR VIEW, IN THE ABSENCE OF ANY DEFECTS, BOOKS OF ACCOUNTS CANNOT BE REJECTED. IN RELATION TO INTERNATIONAL TRANSACTIONS WITH THE AE, THERE IS PROVISION FOR SEPARATE TP ADJUSTMENTS, AND MERELY BECAUSE THERE IS TP ADJUSTME NT, ENTIRE BOOKS CANNOT BE REJECTED IN THE ABSENCE OF ANY DEFECTS. WE ALSO NOTE THAT THE ASSESSEE HAD EXPLAINED THE FALL IN GP RATE DUE TO INCREASE IN MATERIAL COST AND IN MANUFACTURING EXPENSES AND DUE TO IMPACT OF FOREIGN EXCHANGE FLUCTUATIONS. THE AO HA S WRITTEN THAT THE ASSESSEE COULD NOT FILE SUPPORTING EVIDENCES. HOWEVER, WE FIND THAT IT IS NOT CLEAR FROM THE ASSESSMENT ORDER, WHETHER THE AO CALLED FOR ANY EVIDENCE IN SUPPORT OF INCREASE IN MATERIAL COST AND MANUFACTURING EXPENSES. FURTHER, WHILE COMP UTING THE GP RATE FOR THE YEAR, FOR THE PURPOSE OF COMPARISON WITH THE EARLIER YEAR, THE AO HAD NOT MADE ANY ALLOWANCE FOR TP ADJUSTMENTS, WHICH WOULD ALSO HAVE IMPACT ON THE GP RATE AND, THEREFORE, MAKING THE ADDITIONS ON BOTH THE COUNTS WOULD RESULT IN D OUBLE ADDITION. THE MATTER, IN OUR VIEW, REQUIRES FRESH EXAMINATION. WE, THEREFORE, SET ASIDE THE ORDER OF THE AO AND RESTORE THE MATTER BACK TO HIM FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE AND AFTER AL LOWING OPPORTUNITY OF HEARING TO THE ASSESSEE . 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 6 . ON THE OTHER HAND, LEARNED DR RELIED UPON THE ORDER PASSED BY THE AO. 7 . WE HAVE HEARD BOTH THE PARTIES AND THEIR CONT ENTION HAVE CAREFULLY BEEN CONSIDERED. SO FAR IT RELATES TO GRIEVANCE OF THE ASSESSEE THAT THE TP ADJUSTMENT CAN ONLY BE APPLIED TO INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH THE AE AND IT CANNOT BE APPLIED AT ITA NO. 73 6 1 /20 1 2 9 ENTITY LEVEL, THE ISSUE IS FOUND TO BE CO VERED BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL IN THE CASE OF THYSSEN KRUPP INDUSTRIES INDIA PVT. LTD. (SUPRA) . THEREFORE, WE HOLD THAT DETERMINATION OF ARMS LENGTH PRICE SHOULD BE RESTRICTED ONLY TO INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH ITS AE. IT WAS POINTED OUT THAT THE FIGURES ARE AVAILABLE WITH THE AO, DETAIL OF WHICH HAS ALSO BEEN FILED BEFORE US AT PAGE 170 OF THE PAPER BOOK. THEREFORE, WE DIRECT THE AO TO TAKE ONLY THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH ITS AE FOR THE PUR POSE OF DETERMINING ARMS LENGTH PRICE. WE DIRECT ACCORDINGLY . 8 . THE OTHER GRIEVANCE OF THE ASSESSEE IS THAT WHILE COMPUTING THE NET MARGIN OF THE ASSESSEE, INTEREST HAS BEEN CONSIDERED AS OPERATIONAL EXPENSES AND SIMILAR TREATMENT SHOULD BE GIVEN WHILE C OMPUTING THE NET MARGIN IN THE CASE OF COMPARABLE. WE ARE OF THE OPINION THAT THERE IS A FORCE IN SUCH CLAIM OF THE ASSESSEE AS IF THE INTEREST HAS BEEN CONSIDERED TO BE OPERATIONAL EXPENSES IN THE CASE OF THE ASSESSEE, THEN THE SAME SHOULD ALSO BE CONSIDE RED AS OPERATIONAL EXPENSES IN THE CASES OF COMPARABLES. THEREFORE, WE DIRECT THE AO TO VERIFY SUCH CONTENTION OF THE ASSESSEE AND GIVE APPROPRIATE RELIEF TO THE ASSESSEE ON THIS ACCOUNT. 9 . SO FAR AS IT RELATES TO BENEFIT OF SAFE HARBOR OF 5%, IF AFTER COMPUTING THE ARMS LENGTH PRICE AS PER DIRECTIONS GIVEN ABOVE, THE DIFFERENCE BETWEEN MARGIN TAKEN FOR ARMS LENGTH PRICE AND MARGIN ITA NO. 73 6 1 /20 1 2 10 SHOWN BY THE ASSESSEE IS LESS THAN 5%, THEN APPROPRIATE RELIEF SHOULD BE GRANTED TO THE ASSESSEE. WE DIRECT ACCORDINGLY. 10 . NOW, COMING TO THE PRIORITY ADJUSTMENT OF BROUGHT FORWARD UNABSORBED DEPRECIATION AND BROUGHT FORWARD BUSINESS LOSS AND CURRENT DEPRECIATION, WE RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO READJUDICATE THE SAME IN THE LIGHT OF AFOREMENTI ONED DECISIONS RELIED UPON BY THE LEARNED AR AND AS PER PROVISIONS OF LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACCORDINGLY. 11. IT MAY ALSO BE MENTIONED HERE THAT DURING THE COURSE OF HEARING, IT WAS SUBMITTED BY LEAR NED AR THAT HE HAS NO OBJECTION REGARDING THE COMPARABLES SELECTED BY THE TPO AND THE OBJECTION OF THE ASSESSEE WAS LIMITED ONLY TO THE GRIEVANCE WHICH HAS BEEN POINTED OUT DURING THE COURSE OF HEARING OF APPEAL AND ADJUDICATION OF TP ISSUE SHOULD BE LIMIT ED TO THE SUBMISSION OF THE ASSESSEE. THUS, AS PER THE CONTENTIONS OF THE LEARNED AR, WE DISMISS GROUNDS NO.2, 4 & 5 AND PARTLY ALLOW REST OF THE GROUNDS AS RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL . CONSEQUENTLY, APPEAL FILED BY THE ASSESSEE IS DISP OSED OF IN THE MANNER AFORESAID. 1 2 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS CONSIDERED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ITA NO. 73 6 1 /20 1 2 11 ORDER PRONOUNCED IN THE OPEN COU RT ON THIS 7 TH JANUARY . 201 4 . 7 TH JAN,2014 SD/ - SD/ - ( ) ( N.K.BILLAIYA ) ( ) (I.P.BANSAL) / ACCOUNTANT MEMBER / JUDICIALMEMBER MUMBAI ; DATED 07 / 01/2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT (A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//