DCIT, V. M/s Genisys Integrating Systems (India) Pvt. Ltd., Bangalore

ITA 869/BANG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95364 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Related party transaction; Depreciation; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Question of law; Unabsorbed depreciation
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMARAO, ACCOUNTANT MEMBER IT(IT)A NO.869(B)/2013 (ASSESSMENT YEAR : 2005-06) THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-11(3)R. P BHAVAN, NRUPATHUNGA ROAD, BANGALORE-560 001 APPELLANT VS M/S GENESIS INTEGRATING SYSTEMS (IND.) PVT.LTD. PLOT NO.33-36 & 43-46, EXPORT PROMOTION IND. PARK(E PIP) WHITEFIELD BANGALORE-560 066 PAN NO.AAACG6635N RESPONDENT AND C.O. NO.168(B)/2015 (IN ITA NO.869(B)/2013 (ASSESSMENT YEAR : 2005-06) M/S GENESIS INTEGRATING SYSTEMS (IND.) PVT. LTD. PLOT NO.33-36 & 43-46, EXPORT PROMOTION IND. PARK(E PIP) WHITEFIELD, BANGALORE-560 066 PAN NO.AAACG6635N APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-11(3)R.P BHAVAN, NRUPATHUNGA ROAD, BANGALORE-560 001 RESPONDENT REVENUE BY : DR. P.K.SRIHARI, ADDL.CIT ASSESSEE BY : SHRI PADAMCHAND KHINCHA, CA DATE OF HEARING : 19-11-2015 DATE OF PRONOUNCEMENT : 30-11-2015 0 R D E R ITA NO.869(B)/13 & CO NO.168(B)/15 2 PER SHRI INTURI RAMARAO, AM: THE APPEAL IN IT(TP)A NO.869(B)/13 IS BY THE REVEN UE AND THE CROSS OBJECTION IN C.O.NO.168(B)/15 IS BY THE ASSESSEE-C OMPANY ARE DIRECTED AGAINST THE ORDER DATED 08-03-2013 OF CIT(A)-IV, BA NGALORE FOR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL; 1.THE ORDER OF THE LD.CIT(A) IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF REVENUE IS OPPOSED TO LAW AND TH E FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A) ERRED IN HOLDING THAT THE SIZE, T URNOVER OF THE COMPANY ARE DECIDING FACTORS FOR TREATING A COMPANY AS A COMPARABLE AND ACCORDINGLY, ERRED IN M/S WIPRO LTD. AS A COMPARABLE IN THE SEGMENT. 3. THE LD.CIT(A) HAS REJECTED COMPANIES ON THE BA SIS OF ABNORMAL PROFIT WITHOUT DEFINING WHAT CONSTITUTES A BNORMAL PROFIT FILTER AND HOW THE SAME IS DETERMINED AND ER RED IN EXCLUDING THE COMPARABLE COMPANY M/S VISHAL INFORM ATION TECHNOLOGIES LTD. 4. THE LD.CIT(A) ERRED IN REJECTING THE DIMINISHIN G REVENUE FILTER USED BY THE TPO TO EXCLUDE COMPANIES THAT DO NOT REFLECT THE NORMAL INDUST6RY TREND. 5. THE LD.CT(A) HAS ERRED IN ELIMINATING M/S NUCLE US NETSOFT & GIS LTD. AS COMPARABLE WITHOUT RECORDING ANY ITA NO.869(B)/13 & CO NO.168(B)/15 3 FINDING AS TO HOW HE COMPANY DOES NOT PASS THROUGH THE FILTERS APPLIED BY THE TPO. 6. THE LD. CIT(A) HAS ERRED IN ELIMINATING M/S MICR OLAND LTD. AS A COMPARABLE WITHOUT RECORDING ANY FINDING AS TO HOW THE COMPANY DOES NOT PASS THROUGH THE FILTERS APPLI ED Y THE TPO AND UPHELD BY THE CIT(A). 7. THE LD. CIT(A) HAS ERRED IN DIRECTING FOR UNDER UTILIZATION OF CAPACITY ADJUSTMENT IGNORING THE FACTS THAT THE ADJ USTMENT IS ABSTRACT IN NATURE AND EXACT UNDER UTILIZATION OF T HE FIXED COSTS CANNOT BE QUANTIFIED OBJECTIVITY AS IT IS NOT POSSIBLE TO ASCERTAIN THE SAME. 8. THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING TH E AO TO COMPUTE THE DEDUCTION U/S 10A WITHOUT SETTING OF LO SSES OF ONE UNIT AGAINST THE PROFITS OF ANOTHER. 9. THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT AS PER THE AMENDED PROVISIONS OF SEC.10A W.E.F.1.4.2001, THE DEDUCTION U/S 10A HAS TO BE FINALLY ALLOWED FROM TH E TOTAL INCOME OF THE ASSESSEE AND TOTAL INCOME IS COMPUTED AFTER AGGREGATION OF THE PROFITS LOSSES OF VARIOUS UNITS AND AFTER SETTING OFF B/F LOSS/UNABSORBED DEPRECIATION RELATI NG TO THE EARLIER ASSESSMENT YEAR. 10. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FAC T THAT THE JURISDICTIONAL HIGH COURT DECISION RELIED UPON BY HIM IN THE CASE OF M/S YOKOGAWA INDIA HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND A SLP HAS BEEN FILED BEFORE THE HON BLE SUPREME COURT WHICH IS STILL PENDING. ITA NO.869(B)/13 & CO NO.168(B)/15 4 11. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING IT IS HUMBLY PRAYED THAT THE OR DER OF THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 12. THE ASSESSEE CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE RES PONDENT -ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 ENGAGED IN THE BUSINESS OF SOFTWARE DEVELOPMENT, CO NSULTANCY SERVICES AND IT ENABLED SERVICES. IT FILED ITS RETURN OF I NCOME FOR THE AY: 2005-06 ON 31-10-2005 DECLARING LOSS OF RS.7,05,400/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT. DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD ENTERED INTO INTER NATIONAL TRANSACTIONS AND THEREFORE, MADE A REFERENCE TO THE TPO FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL T RANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AE). DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO NOTICED THE FOLLOWING INTERNATI ONAL TRANSACTIONS REPORTED BY THE ASSESSEE IN THIS TP STUDY; PROVISION FOR SOFTWARE DEVELOPMENT SERVICE RS.4,74, 92,116/- SALARY PAID TO DIRECTORS RS.1,64,39,283/- PROVISION CALL CENTRE SERVICES RS.3,16,62,195/- INTEREST FREE LOAN AVAILED UK POUNDS 3,2 0,000/- ITA NO.869(B)/13 & CO NO.168(B)/15 5 4. THE AO AFTER OBTAINING NECESSARY APPROVAL FROM T HE COMMISSIONER MADE A REFERENCE TO THE TPO FOR THE PU RPOSE OF DETERMINING THE ALP. THE ASSESSEE COMPANY IN ITS TP STUDY ADOP TED COST PLUS METHOD AS THE MOST APPROPRIATE METHOD AND SELECTED 12 COMP ARABLES BY USING THE FOLLOWING FILTERS; A. COMPANIES LISTED IN THE DATA BASES AS ENGAGED I N BUSINESS SERVICES WERE IDENTIFIED. B. COMPANIES NOT HAVING DATA FOR FY: 2003-04 OR 20 04-05 WERE IGNORED. C. COMPANIES WHICH HAD NOT INCURRED EXPENDITURE ON MARKETING AND SALES WERE CALCULATED. D. FINANCIAL DATA RELATING TO ONLY COMPANIES ENGAG ED IN CALL CENTRE, CUSTOMER CARE OR ITES/BPO WERE CONSIDERED. OTHER SERVICE COMPANIES WERE EXCLUDED. THE AVERAGE GROSS PROFIT MARGIN OF THE COMPARABLES WORKED OUT AT16.92% ON THE COST. THE LEARNED TPO VIDE HIS ORD ER DATED 26-09-2014 PASSED U/S 92CA OF THE IT ACT REJECTED THE TP STUDY OF THE ASSESSEE COMPANY AND PROCEEDED TO SELECT THE FOLLOWING COMPA RABLES WHOSE AVERAGE MARGIN IN COST WORKED OUT TO 24.68% BY ADO PTING TNM METHOD AS THE MOST APPROPRIATE METHOD. ITA NO.869(B)/13 & CO NO.168(B)/15 6 SL. COMPANY NAME SALES OP TO TOTAL COST% EXPORT (RS.CR) % OF EXPORTS OVER SALES RPT AS % OF REVENUE SALES & MARKETING EXP.(CR.) 1 ALLSEC TECH.LTD** 57.76 29.85 56.15 97.2% - 7.60 2 SAFFRON GLOBAL LTD. 27.78 24.88 27.78 100% - 0.12 3 VISHAL INFORMATION 20.82 45.62 20.82 100% - - 4 COSMIC GLOBAL LTD (TULSYAN TECH.LTD) 1.90 17.02 1.70 89.5% - - 5 TRANSWORKS INFORMATION SERVICES LTD. 108.23 2.81 107.78 99.6% 3.57 2.59 6 WIPRO BPO SOLUTIONS LTD 617.71 18.59 617.71 100% 6.34 3.63 7 ACE SOFTWARE EXPORTS LTD. 5.90 14.50 5.90 100% 0.3 0.02 8 NUCLEUS NETSOFT & GIS LTD. 2.79 40.06 1.24 44.4% - - 9 MAPLE E SOLUTIONS LTD 1.47 28.75 1.47 100% - 0.20 AVERAGE 24.68 5. AFTER ALLOWING THE WORKING CAPITAL ADJUSTMENT OF 3.10% THE ARITHMETIC MEAN WAS OF PLI WORKED OUT TO 23.08% AND FINALLY THE ALP WAS DETERMINED AS FOLLOWS; ITA NO.869(B)/13 & CO NO.168(B)/15 7 5.1 THE TRANSACTIONS RELATING TO RENDERING OF SOFTW ARE DEVELOPMENT SERVICES, [PAYMENT OF SALARY TO DIRECTORS AND BORRO WING OF INTEREST FREE LOANS WERE CONSIDERED TO BE AT ARMS LENGTH BY THE TPO (A,C AND D ABOVE) ONLY ADDITION MADE IS FOR ITES SEGMENT. 12.6. COMPUTATION OF ARMS LENGTH PRICE THE ARITHMETIC MEAN OF THE PROFIT LEVEL INDICATORS IS TAKEN AS THE ARMS LENGTH MARGIN (PLEASE SEE ANNEXURE-B FOR DETAILS OF COMPUTATION OF PLI OF THE COMPARABLES). BASED ON THIS, THE ARMS LENGTH PR ICE OF THE SOFTWARE SERVICES RENDERED IS COMPUTED AS UNDER; ARITHMETIC MEAN PLI 26.18% LESS WORKING CAPITAL ADJUSTMENT AS PER ANN.C 3.10% ADJ. ARITHMETIC MEAN PLI 23.08% ARMS LENGTH PRICE: OPERATING COST (AS PER SEGMENTAL ACCOUNT IN THE ANNUAL REPORT) 3,46,72,290*(EXCLUDING INTEREST) ARMS LENGTH PRICE 23.08% ARMS LENGTH PRICE (ALP) 123.08% OF OPERATING COST 4,26,74,654 12.7 PRICE RECEIVED VIS-AVIS THE ARMS LENGTH PRICE: THE PRICE CHARGED BY THE TAXPAYER TO ITS ASSOCIATED ENTERPRISES IS COMPARED TO THE ARMS LENGTH PRICE AS UNDER; ARMS LENGTH PRICE @ 123.08% OF OPERATING COST 4.26,74,654 ITA NO.869(B)/13 & CO NO.168(B)/15 8 PRICE RECEIVED 3,19,85,157 SHORTFALL BEING ADJUSTMENT U/S 92CA 1,06,89,497 THE AO PASSED THE ASSESSMENT ORDER AFTER MAKING THE ADJUSTMENT FOR ALP OF RS.1,06,89,497/- VIDE ORDER DATED 26-12-2008. 6. BEING AGGRIEVED BY THIS ASSESSMENT ORDER AN APP EAL WAS FILED BEFORE THE CIT(A), WHO VIDE ORDER DATED 08-03-2013 PARTLY ALLOWED THE APPEAL. THE LEARNED CIT(A) HAD DEALT WITH THE COM PARABLES SELECTED BY THE TPO AS UNDER; 7. M/S ALLSEC TECHNOLOGIES LTD, THOUGH INCLUDED IN THE LIST OF COMPARABLES THE LEARNED CIT(A) HAD DIRECTED TO ADOP T THE OPERATING MARGIN AT 26.19%. 8. IN THE CASE OF M/S VISHAL INFORMATION TECHNOLOGI ES LTD., THIS COMPARABLE WAS DIRECTED TO BE EXCLUDED ON THE GROUN D OF ABNORMAL PROFIT MARGIN. 9. IN THE CASE OF M/S COSMIC GLOBAL LTD INCLUSION O F THIS COMPANY IN THE LIST OF COMPARABLES WAS UPHELD BY THE CIT(A) REJECTING THE CONTENTION OF THE ASSESSEE THAT OUTSOURCED WORK AND FUNCTIONALLY DISSIMILAR. ITA NO.869(B)/13 & CO NO.168(B)/15 9 10. M/S NUCLEUS NETSOFT & GIS LTD. THIS COMPANY W AS DIRECTED TO BE EXCLUDED FROM THE LIST OF COMPARABLES APPLYING F ILTER OF RELATED PARTY TRANSACTIONS. 11. M/S WIPRO BPO SOLUTIONS LTD., THE INCLUSION O F THIS COMPANY IN THE LIST OF COMPARABLES WAS UPHELD BY THE CIT(A) REJECTING THE CONTENTION OF THE ASSESEE COMPANY THAT IT CANNOT BE TAKEN AS A COMPARABLES ON THE GROUND THAT IT HAD TAINTED MANAG EMENT. 12. THE CIT(A) VIDE PARA-7 OF HIS ORDER DIRECTED T HE AO TO INCLUDE THIS COMPANY CALLED M/S MICROLAND LTD. IN THE LIST OF COMPARABLES AND FINALLY, THE ARITHMETIC MEAN WAS COMPUTED AS FOLLOW S; SL.NO COMPARABLE COMPANY OP/OC(%) 1 ALLSEC TDECHNOLOGIES LTD 26.19 2 SAFFRON GLOBAL LTD 24.88 3 COSMIC GLOBAL LTD 17.02 4 TRANSWORKS INFORMATION SERVICES LTD 02.81 5 ACE SOFT EXPORTS LTD. 14.50 6 MAPLE E-SOLUTIONS LTD 28.75 7 MICROLAND LTD 01.72 ARITHMETIC MEAN 16.55 ITA NO.869(B)/13 & CO NO.168(B)/15 10 THE CIT(A) HAS FURTHER ALLOWED THE ADJUSTMENT ON AC COUNT OF UNDER UTILIZATION CAPACITY. THE CIT(A) FURTHER DIRECTED T HAT THE BENEFIT U/S 10A SHOULD BE WORKED OUT BEFORE SETTING OF THE BROUGHT FORWARD LOSSES FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF ACIT VS M/S YOKOGAWA INDIA LTD. (2012) 21 TAXMANN.COM 15 4(KAR.) 13. BEING AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 14. THE LEARNED SENIOR DR VEHEMENTLY ARGUED BEFORE US THAT THE CIT(A) OUGHT NOT TO HAVE DELETED THE COMPARABLE OF M/S VISHAL INFORMATION TECH.LTD (SUPRA) APPLYING THE FILTER OF ABNORMAL PROFIT AND M/S WIPRO BPO SOLUTIONS LTD. APPLYING THE TURNOVER FILTER. HE FURTHER ARGUED THAT THE COMPARABLE COMPANY M/S NUCLEUS NETS OFT & GIS LTD. SELECTED BY THE ASSESSEE AND PASSED THROUGH ALL THE FILTER PASS BY THE TPO AND THEREFORE, THE COMPANY SHOULD BE INCLUDED I N THE LIST OF COMPARABLES. 15. THE LEARNED SR DR FURTHER CONTENDED THAT THE C OMPARABLE M/S MICROLAND SHOULD NOT HAVE BEEN DIRECTED TO BE INCLU DED IN THE LIST OF COMPARABLES., AS IT DOES NOT PASS THROUGH FILTERS A PPLIED BY THE TPO. HE FURTHER CONTENDED THAT THE CIT(A) OUGHT NOT TO HAVE DIRECTED THE ADJUSTMENT ON ACCOUNT OF UNDER UTILIZATION OF CAPAC ITY. THE LEARNED SR DR FINALLY CONTENDED THAT THE CIT(A) OUGHT NOT TO H AVE DIRECTED THE AO TO ITA NO.869(B)/13 & CO NO.168(B)/15 11 ALLOW THE DEDUCTION U/S 10A OF THE IT ACT BEFORE SE TTING OFF OF BROUGHT FORWARD LOSSES, AS THE DECISION OF THE HONBLE KAR NATAKA HIGH COURT IN THE CASE OF M/S YOKOGAWA INDIA LTD. (SUPRA) IS UNDE R CHALLENGE BEFORE THE HONBLE SUPREME COURT AND AN SLP HAS BEEN GRANTED. 16. ON THE OTHER HAND, LEARNED AR OF THE ASSESSEE VEHEMENTLY OPPOSED THE ARGUMENT OF THE LEARNED SR DR. AT TH E OUTSET HE SUBMITTED THAT THE AVERAGE MARGIN OF THE COMPARABLES SELECTED B Y THE TPO ACTUALLY WORKED OUT TO 24.68% AND WHEREAS THE TPO WHILE COMP UTING THE ALP ADOPTED THE AVERAGE PROFIT MARGIN AT 26.18% AND THE TPO HAD NOT EVEN ALLOWED CREDIT OF WORKING CAPITAL ADJUSTMENT AT 1.3 % WHILE WORKING OUT THE ALP AND FINALLY SUBMITTED THAT M/S VISHAL INFOR MATION TECH. LTD. HAS TO BE REJECTED ON THE GROUND OF FUNCTIONALLY DISSIM ILARITY AND EMPLOYED COST FILTER AND ABNORMAL PROFIT. FOR THIS PURPOSE , HE THEREFORE, RELIED ON THE FOLLOWING DECISIONS; 1. VISHAL INFORMATION TECHNOLOGIES LTD. HAS TO BE R EJECTED AS A COMPARABLE IN VIEW OF THE FOLLOWING DECISIONS; I. RAMPGREEN SOLUTIONS PVT.LTD. VS CIT TS-387-HC- 2015(DEL.)-TP II. ACIT VS MAERSK GLBAL SERVICE CENTRE (IND.)PVT. LTD (2011) 16 TAXMANN.COM 47 (MUM.) FOR AY: 2005-06 III. ITO VS NETLINX INDIA PVT. LTD. TS-722-ITAT-2 012(BANG)-TP FOR AY: 2005- 06 IV. HSBC ELECTRONICS DATA PROCESSING PVT.LTD. VS DCIT (2013) 37 TAXMANN.COM 129(HYD.) FOR AY: 2005-05 V. IVY COMPTECH PVT. LTD. VS ACIT TS-17-ITAT-2014 (HYD.)-TP FOR AY: 2005- 06 ITA NO.869(B)/13 & CO NO.168(B)/15 12 VI. MARKET TOOLS RESEARCH PVT.LTD. VS DCIT TS-30 -ITAT-2014(HYD.)-TP FOR AY: 2005-06 VII. 24/7 CUSTOMER.COM PVT.LTD IT APPEAL NO.227/BA NG/2010 (2012) 28 TAXMANN.COM 258(BANG). VIII BRIGADE GLOBAL SERVICES PVT.LTD. VS ITO (201 3) 33 TAXMANN.COM 618 (HYD.) IX. M/S CAPITAL IQ INFORMATION SYSTEMS (IND.) PVT. LTD ITA NO.1961/HYD/2011 X. STREAM INTERNATIONAL SERVICES PVT. LTD VS ADIT ITA NO.8997/MUM/2010 XI. M/S FIRST ADVANTAGE OFFSHORE SERVICES PVT.LTD. ITA NO.IT(TP)A NO.1086(BANG.)/2011 IN THE CASE OF M/S TULSYAN TECH.LTD. FORMERLY KNOWN AS COSMIC GLOBAL COMPANY LTD. THAT IT HAS TO BE REJECTED AS COMPARAB LE ON THE GROUND OF FUNCTIONAL DISSIMILARITY. HE RELIED ON THE DECISION OF ACIT VS MAERSK GLOBAL SERVICE CENTRE (IND.) PVT.LTD (2011) 16 TAXM ANN..COM 47 (MUM.) FOR AY: 2005-06. HE FURTHER SUBMITTED THAT M/S WIP RO BPO SOLUTIONS LTD. SHOULD BE REJECTED AS A COMPARABLE ON THE BASI S OF HIGH TURNOVER FILTER. IN THIS REGARD HE RELIED ON THE FOLLOWIN G DECISIONS; M/S WIPRO BPO SOLUTIONS LTD. HAS TO BE REJECTED AS A COMPARABLE ON THE BASIS OF HIGH TURNOVER IN VIEW OF HONBLE ITAT IN THE FOLLOW ING DECISIONS; I. ACIT VS MAERSK GLOBAL SERVICE CENTRE (IND.)PVT. LTD(2011) 16 TAXMANN.COM 47 (MUM) FOR AY: 2005-06 II. MARKET TOOLS RESEARCH PVT.LTD. TS-30-ITAT-2014( HYD.)-TP-AY: 2005-06. III.DELOITE CONSULTING INDIA PVT.LTD TS-401-ITAT-20 11(HYD.)-TP-AY: 2004-05 IV. 24/7 CUSTOMER.COM PVT.LTD. VS DCIT TS-708-ITA T-2012(BANG)-TP-AY: 2004-05. ITA NO.869(B)/13 & CO NO.168(B)/15 13 HE FURTHER SUBMITTED THAT M/S NUCLEUS NETSOFT LTD. HAS TO BE REJECTED AS A COMPARABLE IN VIEW OF THE FOLLOWING DECISIONS; NUCLEUS NETSOFT & GIS LTD. AS TO BE REJECTED AS A C OMPARABLE IN VIEW OF HONBLE ITAT IN THE FOLLOWING DECISIONS; I. ITO VS CRM SERVICES INDIA PVT.LTD. TS-307-ITAT-2 011(DEL.)AY: 2006-07 II. HSBC ELECTRONIC DATA VS ACIT (TS-174-ITAT-2013( HYD.)-TP (AY: 2006-07) III. BA CONTINUUM INDIA PVT.LTD. VS ACIT (TS-295- ITAT-2013 (HYD.)-TP(AY: 2005-06) IV. MARKET TOOLS RESEARCH PVT.LTD. VS DCIT TS-30-I TAT-2014(HYD.)-TP FOR AY: 2005-06 V. IVY COMPUTECH PVT.LTD. VS ACIT TS-17-ITAT-2014 (HYD.)-TP FOR AY: 2005-06. HE FINALLY SUBMITTED THAT M/S MAPLE E SOLUTIONS LTD . HAS TO BE REJECTED AS A COMPARABLE ON THE GROUND OF TAINTED MANAGEMENT IN VIEW OF DECISIONS HONBLE ITAT IN THE FOLLOWING CASES; MAPLE E SOLUTIONS LTD. HAS TO BE REJECTED AS A COMP ARABLE ON THE GROUND OF TAINTED MANAGEMENT IN VIEW OF HONBLE ITAT IN THE FOLLOWING DECISIONS; I. ITO VS CRM SERVICES INDIA PVT.LTD. TS-307-ITAT-2 011(DEL.) AY: 2006-07 II. STREAM INTERNATIONAL SERVICES PVT.LTD. VS ADIT (ITA NO.8997/MUM/2010) III. CAPITAL IQ INFORMATION SYSTEMS (IND.) PVT.LTD. HYDERABAD (ITA NO.1961/HYD/2011) IV. MARKET TOOLS RESEARCH PVT.LTD. VS DCIT TS-30- ITAT-2014(HYD.)-TP-FOR AY: 2005-06 V. IVY COMPTECH PVT.LTD. VS ACIT TS-ITAT-2014(HYD.) /-TP FOR AY: 2005-06 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ITA NO.869(B)/13 & CO NO.168(B)/15 14 18. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. 19. GROUND NO.2 CHALLENGES THE DIRECTIONS OF THE L EARNED CIT(A)EXCLUDING M/S WIPRO BPO SOLUTIONS PVT.LTD. FR OM THE LIST OF COMPARABLES ON THE GROUND THAT THE TURNOVER OF THE COMPARABLE IS MORE THAN RS.200.00 CRORES. FROM THE ORDER OF THE CIT( A), WE FIND THAT THE COMPARABLE I.E M/S WIPRO LTD. IS NOT DEALT BY THE C IT(A). THEREFORE, THIS GROUND OF APPEAL DOES NOT ARISE OUT OF THE IMPUGNED ORDER. HENCE, THIS GROUND OF APPEAL IS DISMISSED AS SUCH. 20. GROUND NO.3 & 4 CHALLENGES THE DIRECTIONS OF T HE LEARNED CIT(A) DELETING THE COMPARABLE OF M/S VISHAL INFORMATION T ECH. LTD. SELECTED BY THE TPO FROM THE LIST OF COMPARABLES. WE FIND MERI T IN THE SUBMISSION OF THE LEARNED COUNSEL THAT THE COMPANY IS FUNCTIONALL Y DIFFERENT AS THIS COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING CAL L CENTRE SERVICES. THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S RAMPGRE EN SOLUTIONS PVT. LTD VS CIT IN ITA NO.105/2015 DATED 10-08-2015 HAD DIST INGUISHED THE NATURE OF BUSINESS BETWEEN THE KPO AND ITES AS FOLL OWS; 34. WE HAVE RESERVATIONS AS TO THE TRIBUNALS AFORESAID VIEW IN MAERSK GLOBAL CENTRES (INDIA) PVT . LTD. (SUPRA). AS INDICATED ABOVE, THE EXPRESSION BPO AN D KPO ARE PLAINLY, UNDERSTOOD IN THE SENSE THAT WHEREAS, BPO DOES NOT NECESSARILY INVOLVE ADVANCED SKILLS AND KNOWLEDGE, KPO, ON THE OTHER HAND, WOULD INVOLVE ITA NO.869(B)/13 & CO NO.168(B)/15 15 EMPLOYMENT OF ADVANCED SKILLS AND KNOWLEDGE FOR PROVIDING SERVICES. THUS, THE EXPRESSION KPO IN CO MMON PARLANCE IS USED TO INDICATE AN ITES PROVIDER PROVI DING A COMPLETELY DIFFERENT NATURE OF SERVICE THAN ANY OTH ER BPO SERVICE PROVIDER. A KPO SERVICE PROVIDER WOULD ALSO BE FUNCTIONALLY DIFFERENT FROM OTHER BPO SERVICE PROVI DERS, IN ASMUCHAS THE RESPONSIBILITIES UNDERTAKEN, THE ACTIV ITIES PERFORMED, THE QUALITY OF RESOURCES EMPLOYED WOULD BE MATERIALLY DIFFERENT. IN THE CIRCUMSTANCES, WE AR E UNABLE TO AGREE THAT BROADLY ITES SECTOR CAN BE USED FOR S ELECTING COMPARABLES WITHOUT MAKING A CONSCIOUS SELECTION AS TO THE QUALITY AND NATURE OF THE CONTENT OF SERVICES. RULE 10B(2)(A) OF THE IT RULES, 1962 MANDATES THAT THE COMPARABILITY OF CONTROLLED AND UNCONTROLLED TRANSA CTIONS BE JUDGED WITH REFERENCE TO SERVICE PRODUCT CHARACT ERISTICS. THIS FACTOR CANNOT BE UNDERMINED BY USING A BROAD CLASSIFICATION OF ITES WHICH TAKES WITHIN ITS FOLD VARIOUS TYPES OF SERVICES WITH COMPLETELY DIFFERENT CONTENT AND VALUE. THUS, WHERE THE TESTED PARTY IS NOT A KPO SE RVICE PROVIDER, AN ENTRY RENDERING KPO SERVICES CANNOT BE CONSIDERED AS A COMPARABLE FOR THE PURPOSE OF TRANS FER PRICING ANALYSIS THIS PERCEPTION THAT A BPO SERVICE PROVIDER MAY HAVE THE ABILITY TO MOVE UP THE VALUE CHAIN BY OFFERING KPO SERVICES CANNOT BE A GROUND FOR ASS ESSING THE TRANSACTIONS RELATING TO SERVICES RENDERED BY T HE BPO SERVICE PROVIDER BY BENCHMARKING IT WITH THE TRANSA CTIONS OF KPO SERVICE PROVIDERS. THE OBJECT IS TO ASCERTA IN THE ALP OF THE SERVICE RENDERED AND NOT OF A SERVICE (HIGHE R IN VALUE CHAIN) THAT MAY POSSIBLY BE RENDERED SUBSEQUENTLY. ITA NO.869(B)/13 & CO NO.168(B)/15 16 35. AS POINTED OUT BY THE SPECIAL BENCH OF THE TRIBUNAL IN MAERSK GLOBAL CENTRES (IND.) PVT. LTD ( SUPRA), THERE MAY BE CASES WHERE AN ENTITY MAY BE RENDERING A MIX OF SERVICES SOME OF WHICH MAY BE FUNCTIONALLY COMPARABLE TO A KPO WHILE OTHER SERVICES MAY NOT. IN SUCH CASES, A CLASSIFICATION OF BPO AND KPO MAY NOT BE FEASIBLE. CLEARLY, NO STRAITJACKET FORMULA CAN BE APPLIED. IN CASES WHERE THE CATEGORIZATION OF SERVICES RENDE RED CANNOT BE DEFINED WITH CERTAINTY, IT WOULD BE APPOS ITE TO EMPLOY THE BROAD FUNCTIONALITY TEST AND THEN EXCLUD E UNCONTROLLED ENTITIES, WHICH ARE FOUND TO BE MATERI ALLY DISSIMILAR IN ASPECTS AND FEATURES THAT HAVE A BEAR ING ON THE PROFITABILITY OF THOSE ENTITIES. HOWEVER, WHER E THE CONTROLLED TRANSACTIONS ARE CLEARLY IN THE NATURE O F LOWER- END ITES SUCH AS CALL CENTRES ETC. FOR RENDERING DA TA PROCESSING NOT INVOLVING DOMAIN KNOWLEDGE, INCLUSIO N OF ANY KPO SERVICE PROVIDER AS A COMPARABLE WOULD NOT BE WARRANTED AND THE TRANSFER PRICING STUDY MUST TAKE THAT INTO ACCOUNT AT THE THRESHOLD. FURTHERMORE, THE COMPANY OPERATING MARGIN IS 50.68 % WHICH IS CONSIDERED TO BE ABNORMAL, IN THE LINE OF BUSINESS IT IS ENGAGED. THEREFORE, IT CANNOT BE CONSIDERED AS A COMPARABLE IN THE LIGHT OF THE FOLLOWING DECISIONS OF THE CO-ORDINATE BENCHES; 1. GERNISYS INTEGRATING SYSTEMS (IND.) PVT.LTD VS D CIT IN ITA NO.1231(B)/2010 2. M/S GOOGLE INDIA PVT.LTD VS DCIT (IT)TS-261-ITAT -2014(B)/TP 3. ITO VS CRM SERVICES INDIA PVT. LTD(2011) 14 TAXM ANN.COM 96(DEL.) 4. FIAT INDIA PVT.LTD VS ACIT 2010-TII-30-ITAT-MUM- TP ITA NO.869(B)/13 & CO NO.168(B)/15 17 5. GLOBAL TURBINE SERVICES INC VS ADIT TS259 ITAT -2013- 9(DEL.)-TP 6. DCIT VS PANASONIC AVC NETWORKS INDIA CO. LTD TS- 55-ITAT-2014(DEL.)-TP 7. DCIT VS PETRO ARALDITE PVT.LTD TS-201-ITAT-2013( MUM)-TP 8. ARISTON THERMO INDIA LTD. VS DCIT TS-221-ITAT- 2013 (PUNE)-TP 9. HONEYWELL TECHNOLOGY SOLUTIONS PVT.LTD VS DCITIT (TP)A NO.1344/BANG/2011 10. M/S TOYOTA KIRLOSKAR MOTORS PVT. LTD VS ACIT ( 2012) 28 TAXMANN.COM 293 (BANG.). THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE REASONING OF THE LEARNED CIT(A). HENCE, THESE GROUNDS OF APP EAL FILED BY THE REVENUE ARE DISMISSED. 21. GROUND NO.5 CHALLENGES THE DIRECTIONS OF THE L EARNED CIT(A) TO EXCLUDE MS/S NUCLEUS NETSOFT & GIS IND. LTD FROM TH E LIST OF COMPARABLES SELECTED BY THE TPO. THE CIT(A) DELETED THIS COMPA NY ON THE GROUND THAT THE TPO HAD NOT CLARIFIED WHETHER THIS COMPANY SATI SFIES THE FILTER OF RELATED PARTY TRANSACTIONS. WE FIND THAT FROM ITS A NNUAL ACCOUNT IT HAD OUTSOURCED A CONSIDERABLE PORTION OF ITS BUSINESS, WHERE AS ASSESSEE COMPANY, IT CARRIED OUT THE ENTIRE OPERATION BY ITS ELF. IT CANNOT BE CONSIDERED AS A COMPARABLE ON THE SAME REASONING TH E CO-ORDINATE BENCH OF HYDERABAD IN THE CASE OF M/S IVY COMPTECH PVT. L TD, HYDERABAD IN ITA NO.1558/HYD/2010TS-17 ITAT-014(HYD.)-TP FOR AY: 200 5-06 DELETED THIS COMPANY FROM THE LIST OF COMPARABLES BY HOLDING AS UNDER; WE HAVE HEARD THE PARTIES. THE SOLE CONTENTION O F THE ASSESSEE FOR EXCLUDING THE AFORESAID COMPANY IS THE ITA NO.869(B)/13 & CO NO.168(B)/15 18 EMPLOYEE COST AS A PERCENTAGE OF THE OPERATING REVE NUE IS MUCH LOWER COMPARED TO THE ASSESSEE. ON A PERUSAL O F THE ORDER PASSED BY THE CO-ORDINATE BENCH IN THE CASE O F HSBC ELECTRONIC DATA PROCESSING INDIA PVT. LTD.(SUPRA), IT IS TO BE NOTED THAT THE CO-ORDINATE BENCH WHILE CONSIDERING THE OBJECTION OF THE ASSESSEE WITH REGARD TO THE AFORES AID COMPANY IN PARA-13 ACCEPTED ASSESSEES CONTENTION T HAT THE COMPANY OUTSOURCED ITS WORK AND HAS HELD THAT T HE COMPANY CANNOT BE SELECTED AS A COMPARABLE ON ACCO UNT OF ITS LOW EMPLOYEE COST. IN VIEW OF SUCH ORDER OF TH E CO- ORDINATE BENCH, WE DIRECT THE AO/TPO TO EXAMINE THI S ASPECT AND IF THERE IS SUBSTANTIAL DIFFERENCE BETWE EN THE ASSESSEE AND THE AFORESAID COMPANY, THEN THIS COMPA NY CANNOT BE TREATED AS A COMPARABLE. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DECISI ON, WE HOLD THAT THE LEARNED CIT(A) IS JUSTIFIED IN GIVING DIRECTION TO DELETE M/S NUCLEUS NETSOFT & GIS IND. LTD. AS A COMPARABLE. HENCE, TH IS GROUND OF APPEAL FILED BY THE REVENUE IS DISMISSED. 22. GROUND NO.6 CHALLENGES THE DIRECTION OF THE LE ARNED CIT(A) TO EXCLUDE M/S MICROLAND LTD . FROM THE LIST OF COMPAR ABLE SELECTED BY THE TPO. FROM THE ORDER OF THE LEARNED CIT(A), IT IS CLEAR THAT M/S MICROLAND LTD. WAS DIRECTED TO BE INCLUDED IN THE LIST OF COM PARABLES. IT WAS NOT EXCLUDED BY THE LEARNED CIT(A), HENCE THIS GROUND O F APPEAL DOES NOT SURVIVE AND DISMISSED AS SUCH. ITA NO.869(B)/13 & CO NO.168(B)/15 19 23. GROUND NO.7 CHALLENGES THE DIRECTIONS OF THE L EARNED CIT(A) TO ALLOW THE ADJUSTMENT TOWARDS CAPACITY UTILIZATION. THE CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT THE ASSESSEE COMPANY IPLC LINK COST OF 54.66% WERE ONLY TO THE EXTENT OF 44.34% THEREBY THE CAPAC ITY WAS UNDER UTILIZATION TO THE EXTENT OF 54.66%. HE ACCORDINGL Y, DIRECTED THE TPO TO ALLOW THIS ADJUSTMENT TOWARDS UNDER UTILIZATION AND WHILE DOING SO, THE LEARNED CIT(A) RELIED ON THE DECISION OF THE HONBL E DELHI BENCH IN THE CASE OF M/S GLOBAL VANTTEDGE PVT.LTD (2010-TIOL-24 -ITAT-DEL.) FOR THE PURPOSE OF BENCHMARKING THE INTERNATIONAL T RANSACTIONS, IT IS IMPERATIVE THAT THE EFFECT OF SUCH UNDERUTILIZAT ION OF CAPACITY/EXCESS FIXED COSTS IS ELIMINATED, WHILE COMPUTING THE OPER ATING MARGINS OF THE APPELLANT. RULE 10B(3) OF THE RULES PROVIDES THAT AN APPROPRIA TE ADJUSTMENT IS REQUIRED TO BE MADE TO ACCOUNT FOR THE DIFFERENCES BETWEEN THE CONTROLLED AND UNCONTROLLED TRANSACTIONS: 'AN UNCONTROLLED TRA NSACTION SHALL BE COMPARA.BLE TO AN INTERNATIONAL TRANSACTION IF-- (I ) NONE OF THE DIFFERENCES, IF ANY, BETWEEN THE TRANSACTIONS BEING COMPARED, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS ARE LIK ELY TO MATERIALLY AFFECT THE PRICE OR COST CHARGED OR PAID IN, OR THE PROFIT ARISING FROM, SUCH TRANSACTIONS IN THE OPEN MARKET; OR (II) REASONABLY ACCURATE ADJUSTMENTS CAN BE MADE TO ELIMINATE THE MATERIAL EFFECTS OF SU CH DIFFERENCES. ITA NO.869(B)/13 & CO NO.168(B)/15 20 RELIANCE IN THIS REGARD IS ALSO PLACED ON THE RECEN T DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF MANDO INDIA STEERING SYSTEMS PVT. LTD. VS. ACIT (ITA NO. 2092/MDS/2012), WHEREIN, THE HON'BLE BENCH HAS REMITTED THE ISSUE BACK TO THE FI LE OF THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER THE CLAIM OF T HE ASSESSEE WITH RESPECT TO IDLE CAPACITY ADJUSTMENT DURING THE RELEVANT PER IOD WHILE DETERMINING THE ALP COST. THE RELEVANT EXTRACT OF THE DECISION READS AS UNDER: 'WE ARE OF THE CONSIDERED VIEW THAT UNDER-UTILIZATION OF PR ODUCTION CAPACITY IN THE INITIAL YEARS IS A VITAL FACTOR WHICH HAS BEEN IGNO RED BY THE AUTHORITIES BELOW WHILE DETERMINING THE ALP COST. THE TPO SHOUL D HAVE MADE ALLOWANCE FOR THE HIGHER OVERHEAD EXPENDITURE DURIN G THE INITIAL PERIOD OF PRODUCTION. IN VIEW OF THE ABOVE, WE DEEM IT APPROP RIATE TO REMIT THIS ISSUE BACK TO THE ASSESSING OFFICER WITH A DIRECTIO N TO CONSIDER THE CLAIM OF THE ASSESSEE WITH RESPECT TO IDLE CAPACITY ADJUS TMENT DURING THE RELEVANT PERIOD WHILE DETERMINING THE ALP COST. THE ASSESSEE IS ALSO DIRECTED TO PRODUCE RELEVANT DOCUMENTS IN COMPARABL E UNITS FOR THE NECESSARY ANALYSIS. THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES IN THE AFORESAID TERMS.' RELIANCE IN THIS REGARD IS PLACED ON THE DECISION O F PUNE BENCH OF THE TRIBUNAL IN THE CASE OF AMDOCS BUSINESS SERVICE S PVT. LTD. VS. DCIT (ITA NO. 14212/PN/11), WHEREIN, THE TRIBUNAL ALLOWE D ECONOMIC ADJUSTMENT ON ACCOUNT OF UNDER CAPACITY UTILIZATION HOLDING THAT THE ITA NO.869(B)/13 & CO NO.168(B)/15 21 APPELLANT WAS IN START UP PHASE DURING THE ASSESSME NT YEAR CONSIDERATION. THE RELEVANT EXTRACT OF THE DECISION IS REPRODUCED AS UNDER: '9. THE NEXT MAJOR POINT MADE OUT BY THE APP ELLANT IS THAT THIS BEING THE FIRST FULL YEAR OF OPERATION, THE ASSESSE E HAD INCURRED CERTAIN EXPENDITURE WHICH ARE START-UP COSTS AND CANNOT BE FULLY RECOVERED IN THE INSTANT YEAR ITSELF, AND SUCH AN EXPENDITURE HAS AB NORMALLY AFFECTED THE PROFIT MARGIN. IT IS ALSO CANVASSED THAT DUE TO THE START-UP YEAR THE CAPACITY UTILIZATION WAS NOT SATISFACTORY, WHEREAS ITS PROFITABILITY HAS BEEN BENCH MARKED AGAINST COMPARABLES WHICH ARE ESTABLIS HED ENTITIES -AND HAVE BEEN SET UP OVER THE YEARS. THE PLEA SETUP BY THE ASSESSEE FOR ECONOMIC ADJUSTMENTS ON ACCOUNT OF UNDER CAPACITY U TILIZATION AND BEING IN START UP PHASE, IS NOT SOMETHING WHICH IS UNREAS ONABLE AND NEITHER IT IS OTIOSE TO THE MECHANISM OF TRANSFER PRICING ASSE SSMENTS. IN FACT, IN PRINCIPLE, THE PLEA OF THE ASSESSEE IS IN LINE WITH THE DECISIONS OF THE TRIBUNAL IN THE, CASE OF GLOBAL VENTTEDGE P. LTD V. DCIT IN ITA NOS. 1763- 2764IDEL/09 (DEL); BRINTONS CARPERS' ASIA (P) LTD V . DCIT 139 TT J -177; AND, SKODA, AUTO INDIA P. LTD. V. A CIT 122 TT J 69 9. IN OUR VIEW, THE MATTER REQUIRING FACTUAL APPRECIATION, THE SAME IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL CONSIDER T HE PROPOSITIONS PUT FORTH BY THE ASSESSEE AND ALLOW APPROPRIATE ECONOMIC ADJU STMENTS ON A REASONABLE BASIS.' ITA NO.869(B)/13 & CO NO.168(B)/15 22 ON THE SAME LINES, DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF GLOBAL TURBINE SERVICES INC. VS. ADIT (ITA NO. 3484 /0E1/2011) ALLOWED ECONOMIC ADJUSTMENT ON-ACCOUNT OF UNDER CAPACITY UT ILIZATION CONSIDERING THE FACT THAT THE YEAR UNDER CONSIDERATION WAS THE FIRST FULL YEAR OF OPERATION OF THE APPELLANT. RELEVANT EXTRACT OF THE DECISION READS AS UNDER: '10. -WE HAVE HEARD THE RIVAL CONTENTIONS AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SUITABLE ADJUSTME NT FOR NON-UTILISATION OF CAPACITY IS TO BE TAKEN IN TO ACCOUNT AFTER CONS IDERING THE ALP WHILE WORKING OUT TP ADJUSTMENT, THIS PROPOSITION HAS BEE N HELD BY COORDINATE BENCH IN THE CASE OF THE AMDOCS BUSINESS SERVICES ( P.) LTD. (SUPRA) AND VARIOUS OTHER CASES AS CITED HERE IN ABOVE . 11. IN THE GIVEN FACTS AND CIRCUMSTANCES IT WAS REQUIRED ON THE PART OF THE LO WER AUTHORITIES TO HAVE GIVEN DUE EFFECT TO UNDER CAPACITY UTILIZATION OF T HE ASSESSEE WHICH HAS NOT BEEN DONE TPO FOR ADJUSTMENT FOR ALP DETERMINAT ION. IN VIEW OF THE FACTS AND CIRCUMSTANCES WE ARE INCLINED TO SET ASID E THE MATTER AND RESTORE THE ISSUE OF UNDER CAPACITY UTILIZATION BAC K TO THE FILE OF THE ASSESSING OFFICER ITPO TO DECIDE THE SAME AFRESH AF TER GIVING ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD AND TO FILE THE NECESSARY EVIDENCE ON THIS BEHALF. NEEDLESS TO SAY THAT A PROPER AND SPEA KING ORDER WILL BE PASSED DECIDING THE ISSUE IN ACCORDANCE WITH LAW.' RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING OBSERVATION OF THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. FIAT INDIA ITA NO.869(B)/13 & CO NO.168(B)/15 23 PVT. LTD (ITA NO 1848/MUM/2009): 'AS RIGHTLY HELD B Y THE ID. CIT(A), THE SAID SUBMISSION MADE BY THE APPELLANT IS SUFFICIENT TO DEMONSTRATE THAT THERE WAS A MATERIAL DIFFERENCE IN THE FACTS OF THE APPELLANT'S CASE AND THAT OF THE COMPARABLE CASES IN TERMS OF CAPACITY U TILIZATION AS WELL AS IN OTHER TERMS. APPROPRIATE ADJUSTMENTS THUS WERE REQU IRED TO BE MADE TO ELIMINATE SUCH DIFFERENCES' FURTHER, THE HON'BLE PUNE BENCH OF THE OF TRIBUNAL IN THE CASE OF BRINTONS CARPERS ASIA PVT. LTD. VS. ACIT ITA. NO. 1 296/PN/10) WHILE ALLOWING ADJUSTMENT FOR IDLE CAPACITY CAUSED DUE T O LABOUR UNREST/STRIKE AND RELYING UPON THE ABOVE OBSERVATION OF THE MUMBA I TRIBUNAL HELD AS FOLLOWS: '15. FROM THE ABOVE, IT IS CLEAR THE AO HA S AUTHORITY VIDE CLAUSE (III) ABOVE TO MAKE THE ADJUSTMENTS. SUCH ADJUSTMEN TS ARE NECESSARY ONLY TO REMOVE OR MINIMIZE THE DIFFERENCES IN THE COMPAR ABLE OR ANOMALY IN' THE SAID COMPARABLE. -SUCH ADJUSTMENTS ARE AUTHENTI CATED BY THE OECD GUIDELINES TOO. IN THIS REGARD, WE HAVE PERUSED THE IMPORTANT FINDINGS OF THE TRIBUNAL IN THE CASE OF THE FIAT INDIA P LTD (S UPRA) PLACED AT PAGE 191 OF THE PAPER BOOK. FOR THE SAKE COMPLETENESS, THE S AME IS REPRODUCED AS UNDER. .AS REGARDS THE ADJUSTMENTS MADE BY THE AP PELLANT TO WORK OUT ITS OPERATING MARGIN FOR COMPARING THE SAME WIT H THE PROFIT MARGIN OF COMPARABLE CASES, IT WAS HELD THAT THERE WAS A MATE RIAL DIFFERENCE IN THE FACTS OF THE APPELLANT'S CASE AND THAT OF THE COMPA RABLE CASES IN TERMS OF CAPACITY UTILIZATION AS WELL AS IN OTHER TERMS. APP ROPRIATE ADJUSTMENTS ITA NO.869(B)/13 & CO NO.168(B)/15 24 THUS WERE REQUIRED TO BE MADE TO ELIMINATE SUCH DIF FERENCES. FURTHER, THE TPO HIMSELF HAS ALLOWED SIMILAR ADJUSTMENTS MADE BY THE APPELLANT IN THE IMMEDIATE PRECEDING YEARS I.E. AY 2002- 03, 200 3-04 AS WELL AS IN THE IMMEDIATE SUCCEEDING YEARS I.E. 2005-06 AND 2006-07 WHEREIN THE FACTS INVOLVED WERE SIMILAR TO THAT OF THE YEAR UNDER CON SIDERATION I.E. AY 2004- 05; + ACCORDINGLY, NO INFIRMITY IS FOUND IN THE IMP UGNED ORDER OF THE CIT(A) AS THE ADJUSTMENTS MADE BY THE APPELLANT IN TNMM ANALYSIS WERE REASONABLE AND ACCURATE AND AS REFLECTED IN THE SAI D ANALYSIS, INTERNATIONAL TRANSACTIONS MADE BY THE APPELLANT CO MPANY WITH ITS ASSOCIATED CONCERNS DURING THE YEAR UNDER CONSIDERA TION WERE AT ARM'S LENGTH REQUIRING NO ADJUSTMENT/ADDITION ON THIS ISS UE.' 16. FROM THE ABOVE, IT IS EVIDENT THAT THE APPELLANT IS ENTITLED TO ECONOMIC ADJUSTMENTS IN THE CIRCUMSTANCES OF UNDER CAPACITY UTILIZATION OF THE COMPANY. OF COURSE, SUCH ADJUSTMENTS MUST BE RESTRICTED TO FIX ED COST/OVERHEADS ONLY. IN THE 14 INSTANT CASE, THE AO/TPO DID NOT HA VE THE OCCASION TO GO INTO THE PERIOD OR THE EXTENT OF THE LABOUR UNREST, BREAK-UP OF THE CLAIMED ADJUSTMENTS AMOUNTING RS.7.32 CRORES '(ROUNDED OFF) , FIXED COST VERSUS THE VARIABLE COST ETC AS THEY' SUMMARILY REJECTED T HE EXTERNAL COMPARABLES IN VIEW OF THEIR PREFERENCE TO THE OPERATING PROFIT S OF THE DOMESTIC SEGMENT OF THE CARPETS. THEREFORE AND CONSEQUENTLY, THIS K EY ISSUE ALSO HAS TO BE SET ASIDE TO THE FILES OF THE' TPO/AO FOR FRESH EXA MINATION OF THE ISSUE. PRIMA FACIE WE SEE THE NEED FOR SUCH ECONOMIC ADJUS TMENTS TO THE TOTAL COST OF THE CARPET OF THE EXPORT SEGMENT. WE REFUSE TO COMMENT ON THE ITA NO.869(B)/13 & CO NO.168(B)/15 25 FACTS RELATING TO THE FIGURES AS NONE OF THE AUTHOR ITIES HAS GONE INTO THE DETAILS OF SUCH ECONOMIC ADJUSTMENTS AND THEY SUMMA RILY REJECTED THE CLAIMS. AS SUCH, THE REQUISITE ADJUSTMENTS ARE BORN E OUT OF THE RELEVANT RULES/PROVISIONS AND THEREFORE, THE CLAIM IS BONA F IDE AND HAS SUPPORT OF THE LAW. FOR THIS,' THE APPELLANT PREFERS TO GO TO THE FILES OF THE AO FOR WANT OF A SPEAKING ORDER ON THIS ISSUE. IN OUR OPINION, THE REQUEST OF THE APPELLANT DESERVES TO' BE CONSIDERED FAVOURABLE. ALSO, IN THE CASE OF E.I. DUPONT INDIA PVT. LTD. VS . DCIT (ITA NO 5336/0/2010), THE HON'BLE DELHI BENCH OF THE TRIBUN AL, WHILE ALLOWING THE ADJUSTMENT FOR CAPACITY UTILIZATION HELD THAT ; 'IT IS A MATTER OF FACT THAT FIXED COSTS REMAIN THE SAME EVEN WHEN THERE IS UNDER UTILIZATION OF CAPACITY. THEREFORE, THE CASE OF THE APPELLANT AND THE COMPARABLE CASES HAVE TO BE EXAMINED IN RESPECT OF CAPACITY UTILIZAT ION SO AS TO MAKE THE CONTROLLED AND UNCONTROLLED TRANSACTIONS COMPARABLE .' ALSO, THE HON'BLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. CRM SERVICES INDIA PVT. LTD UPHELD THE CLAIM OF THE APPELLANT TOWARDS ADJUS TMENT OF IDLE CAPACITY: '8.1 THIS BRING US TO THE ALTERNATIVE ARGUMENT THAT THE APPELLANT IS ENTITLED TO GET ADJUSTMENT IN RESPECT OF CAPACITY U NDER-UTILIZATION. NO OBJECTION HAS BEEN RAISED BY THE ID. GIT, DR IN THI S MATTER. AS A MATTER OF FACT, HE HAS FAIRLY ACCEPTED THE PROPOSITION THAT A DJUSTMENT IN THIS REGARD IS-REQUIRED TO BE MADE. AT THE SAME TIME, IT IS A/ SO HELD THAT SUITABLE ADJUSTMENT HAS TO BE MADE TO SUCH PLI IN RESPECT OF IDLE CAPACITY.' ITA NO.869(B)/13 & CO NO.168(B)/15 26 FURTHER, THE HON'BLE BANGALORE BENCH OF THE TRIBUNA L IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) PVT. LTD VS. DC IT (ITA NO 1231/BANG/2010) THE HON'BLE TRIBUNAL HELD AS UNDER: 'THE APPELLANT SHOULD ALSO BE GIVEN ADJUSTMENT FOR UNDER UTILIZATI ON OF ITS INFRASTRUCTURE. THE AO SHALL CONSIDER THIS FACT ALSO WHILE DETERMIN ING THE ALP FIND MAKE THE TP, ADJUSTMENTS. WITH THESE DIRECTIONS, THE APP EAL OF THE APPELLANT IS DISPOSED OF. ' FURTHER, THE HON'BLE DELHI' BENCH OF THE TRIBUNAL I N THE CASE OF TRANSWITCH INDIA PVT. LTD VS. ACIT (I.T.A. NO. 6083 /DE1/2010) HELD AS UNDER: '4.11 ANOTHER' TPO'S CONTENTION IS THAT CLAI M OF THE APPELLANT THAT THE SEALING DRIVE REDUCED ITS REVENUE IS UNSUBSTANT IATED. IN THIS REGARD, APPELLANT HAS SUBMITTED THAT THE APPELLANT HAD PLAC ED ON RECORD ITS QUARTERLY 'CAPACITY' UTILIZATION STATEMENT DEMONSTR ATING THE FALL IN ITS CAPACITY UTILIZATION DURING THE QUARTER JANUARY TO MARCH, 2006. THE CAPACITY UTILIZATION, OF THE APPELLANT DURING THE Q UARTER JANUARY TO MARCH, 2006 FELL TO I2% AS' AGAINST THE NORMAL CAPACITY UT ILIZATION OF 87% TO 94% DURING THE FINANCIAL YEAR ENDING DECEMBER, 31, 2005 . FURTHER, THE FACT THAT THE APPELLANT HAD TO SHIFT ITS OFFICE PREMISES AT A VERY SHORT NOTICE, SUFFICIENTLY SUBSTANTIATES THE LOW CAPACITY UTILIZA TION OF THE APPELLANT DURING THE LAST QUARTER OF FINANCIAL YEAR 2005-06. WE FIND OUT OURSELVES IN AGREEMENT WITH THE APPELLANT'S SUBMISSION IN THIS R EGARD.' ITA NO.869(B)/13 & CO NO.168(B)/15 27 HON'BLE DELHI HIGH COURT, IN THE APPEAL PREFERRED B Y THE REVENUE IN THE CASE OF TRANSWITCH INDIA (SUPRA), VIDE ORDER DA TED 17.07.2013, UPHELD THE ADJUSTMENT CLAIMED BY THE ASSESSEE ON ACCOUNT O F CAPACITY UTILIZATION. RELIANCE IN THIS REGARD IS ALSO PLACED ON THE RECEN T DECISION DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. PANASONIC A VC NETWORKS INDIA CO. LTD. (ITA NO. 4620/0EI/2011), WHEREIN THE HON'BLE B ENCH HAS HELD THAT CAPACITY UNDERUTILIZATION IS AN IMPORTANT FACTOR AF FECTING NET PROFIT MARGIN AS LOWER CAPACITY UTILIZATION RESULTS IN HIGHER PER UNIT COSTS WHICH IN TURN RESULTS IN LOWER PROFITS. THE RELEVANT FINDING OF T HE DECISION READS AS UNDER: '5. HAVING HEARD THE RIVAL CONTENTIONS AND H AVING PERUSED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN VERY WELL REASONED FINDINGS AND DIRECTIONS OF THE LEARNED CIT (A). RUL E 10B (1 )(E)(II) OF THE INCOME TAX RULES 1962 DOES INDEED PROVIDE THAT THE NET PROFIT MARGIN REALIZED IN A COMPARABLE UNCONTROLLED TRANSACTION I S ADJUSTED, INTER ALIA, FOR DIFFERENCES IN ENTERPRISE ENTERING INTO SUCH TR ANSACTIONS, WHICH COULD MATERIALLY AFFECT THE NET PROFIT MARGIN IN OPEN MAR KET. CAPACITY UNDERUTILIZATION BY ENTERPRISES IS CERTAINLY AN IMP ORTANT FACTOR AFFECTING NET PROFIT MARGIN IN THE OPEN MARKET BECAUSE LOWER CAPACITY UTILIZATION RESULTS IN HIGHER PER UNIT COSTS, WHICH, IN TURN, R ESULTS IN LOWER PROFITS. OF COURSE, THE FUNDAMENTAL ISSUE, SO FAR AS ACCEPTABIL ITY OF SUCH ADJUSTMENTS IS CONCERTED, IS REASONABLE ACCURACY EM BEDDED IN THE MECHANISM FOR SUCH ADJUSTMENTS, 'END AS LONG AS SUC H AN ADJUSTMENT ITA NO.869(B)/13 & CO NO.168(B)/15 28 MECHANISM CAN BE FOUND, NO OBJECTION CAN BE TAKEN T O THE ADJUSTMENT. IN OUR CONSIDERED VIEW, THE LEARNED CIT(A)'S APPROACH IS REASONABLE IN THIS REGARD AND THE ADJUSTMENTS ARE ON A CONCEPTUALLY SO UND BASIS. IN ANY CASE, AS POINTED OUT BY THE LEARNED COUNSEL, THE AD JUSTMENTS SO DIRECTED BY THE LEARNED GIT(A) HAVE DULY BEEN MADE BY THE AS SESSING OFFICER, AND THERE HAVE BEEN NO ISSUES REGARDING IMPLEMENTING TH ESE ADJUSTMENTS. WE APPROVE THE CONCLUSIONS ARRIVED BY THE CIT(A) ON TH IS ISSUE AND DECLINE TO INTERFERE IN THE MATTER. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE H ONBLE DELHI HIGH COURT WE DISMISS THE GROUND OF APPEAL FILED BY THE REVENUE. 24. GROUND NO.8 TO 10 CHALLENGES THE DIRECTIONS OF THE LEARNED CIT(A) TO COMPUTE PROFIT U/S 10A OF THE ACT, BEFORE SETTING OFF OF THE LOSSES OF ANOTHER UNIT. THE CITA), FOLLOWING THE JURISDICT IONAL HIGH COURT DECISION IN THE CASE OF CIT VS M/S YOKOGAWA INDIA LTD. (201 2) 21 TAXMANN.COM 154(KAR.) WHEREIN THE HONBLE HIGH COURT HELD AS UN DER; AS THE INCOME OF THE SECTION 10A UNIT HAS TO BE E XCLUDED AT SOURCE ITSELF BEFORE ARRIVING AT THE GROSS TOTAL INCOME, THE LOSS OF THE NON-SECTION 10A UNIT CANNOT BE SET OFF AGAINST THE INCOME OF SEC.10A UNIT U/S 72. THE LOSS INCURR ED BY THE ASSESSEE UNDER THE HEAD PROFITS AND GAINS OF BUSIN ESS OR PROFESSION HAS TO SET OFF AGAINST THE PROFITS AND GAINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY SU CH ASSESSEE. THEREFORE, AS THE PROFITS AND GAINS UNDE R SECTION ITA NO.869(B)/13 & CO NO.168(B)/15 29 10A IS NOT BE INCLUDED IN THE INCOME OF THE ASSESSE E AT ALL, THE QUESTION OF SETTING OFF OF LOSS OF THE ASSESSEE OF ANY PROFITS AND GAINS OF BUSINESS AGAINST SUCH PROFITS AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. SIMILARLY, AS P ER SECTION 72(2) UNABSORBED BUSINESS LOSS IS TO BE FIST SET OF AND THEREAFTER UNABSORBED DEPRECIATION TREATED AS CURRE NT YEARS DEPRECIATION UNDER SECTION 32(2) IS TO BE SE T OFF. AS DEDUCTION UNDER SECTION 10A HAS TO BE EXCLUDED FROM THE TOTAL INCOME OF THE ASSESSEE THE QUESTION OF UNABSO RBED BUSINESS LOSS BEING SET OFF AGAINST SUCH PROFIT AND GAINS OF THE UNDERTAKING WOULD NOT ARISE. IN THAT VIEW OF T HE MATTER, THE APPROACH OF THE ASSESSING AUTHORITY WAS QUITE C ONTRARY TO THE AFORESAID STATUTORY PROVISIONS AND THE APPEL LATE GRANTING THE BENEFIT OF SECTION 10A TO THE ASSESSEE . HENCE, THE MAIN SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSES AND AGAINST THE REVENUE. THE CIT(A) ONLY FOLLOWED THE DECISION OF THE HONB LE KARNATAKA HIGH COURT. WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE ORDER OF THE CIT(A) ON THIS GROUND. HENCE, THIS GROUND OF APPEAL OF T HE REVENUE IS DISMISSED. 25. GROUND NO.11 & 12 ARE GENERAL IN NATURE DOES N OT REQUIRE ANY ADJUDICATION. ITA NO.869(B)/13 & CO NO.168(B)/15 30 C.O.NO.168(BNG)/2015 (IN ITA NO.869(B)/13) (AY: 200 5-06) 26. THE CROSS OBJECTION HAS BEEN FILED BY THE ASSE SSEE-COMPANY RAISING THE FOLLOWING GROUNDS OF APPEAL; 1. THE ORDER OF THE LD.CIT(A)-IV, BANGALORE TO TH E EXTENT PREJUDICIAL TO THE RESPONDENT IS BAD IN LAW. 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO AND TPO IN; A. PASSING THE ORDER IN VIOLATION OF THE PRINCIPLE S OF NATURAL JUSTICE BY NOT AFFORDING THE RESPONDENT AN OPPORTUNITY TO SUBSTANTIATE ITS CLAIM AND REBUT THE METHOD AND BASIS FINALLY ADOPTED FOR TP ANALYSIS; AND B. NOT APPRECIATING THAT THE CHARGING OR COMPUTATI ON PROVISION RELATING TO INCOME UNDER THE HEAD PROFIT S & GAINS OF BUSINESS OR PROFESSION DO NOT REFER TO O R INCLUDE THE AMOUNTS COMPUTED UNDER CHAPTER X AND THEREFORE, THE ADDITION MADE UNDER CHAPTER X IS BAD IN LAW. 3. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE AO IN MAKING A REFERENCE O TPO FOR DETERMINING THE ARMS LENGTH PRICE WITHOUT DEMONSTRATING AS TO HOW OR WHY IT WAS NECESSARY AND EXPEDIENT TO DO SO. GROUNDS RELATING TO TRANSFER PRICING: 4. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE AO AND TPO IN; ITA NO.869(B)/13 & CO NO.168(B)/15 31 A. REJECTING THE TP ANALYSIS UNDERTAKEN BY THE RESPONDENT; AND B. HOLDING THAT THE COST PLUS METHOD (CPM) ADOPTED BY THE RESPONDENT IS NOT THE MOST APPROPRIATE METHO D AND 5. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTIO N OF THE TPO IN; A. ADOPTING TRANSACTIONAL NET MARGIN METHOD (TNMM) FOR DETERMINATION OF ARMS LENGTH PRICE WITHOUT DEMONSTRATING HOW TNMM WAS THE MOST APPROPRIATE METHOD UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E. B. NOT GIVING THE COMPLETE PROCESS UNDER TNMM THROUGH WHICH THE FINAL COMPARABLES WERE SELECTED. C. ADOPTING COSMIC GLOBAL LTD. AS A COMPARABLE EVE N THOUGH IT DESERVES TO BE REJECTED ON THE GROUND OF TAINTED MANAGEMENT. D. ADOPTING MAPLE E-SOLUTIONS LTD. AS A COMPARABLE EVEN THOUGH IT DESERVES TO BE REJECTED ON THE GROUN D OF TAINTED MANAGEMENT. 6. THE LD.CIT(A) HAS ERRED IN NOT CONSIDERING HERO MANAGEMENT SERVICES LTD. AS A COMPARABLE EVEN THOUG H IT PASSES ALL THE FILTERS. 27. GROUND NO.1 IS GENERAL IN NATURE DOES NOT REQU IRE ANY ADJUDICATION. ITA NO.869(B)/13 & CO NO.168(B)/15 32 28. GROUND NOL.2 TO 4 ARE NOT PRESSED BY THE LEARN ED COUNSEL FOR THE ASSESSEE HENCE, DISMISSED AS SUCH. 29. GROUND NO.5, A, B & C ARE NOT PRESSED BY THE L EARNED COUNSEL, HENCE DISMISSED. 30. GROUND NO.5, D, CHALLENGES INCLUSION OF M/S MA PLE-E-SOLUTIONS LTD. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE SAID COMPANY CANNOT BE INCLUDED AS A COMPARABLE FROM THE LIST OF COMPARABLES ON THE GROUND OF TAINTED MANAGEMENT. IN THIS REGAR D, HE RELIED ON THE FOLLOWING DECISIONS; A. ITO VS CRM SERVICES INDIA PVT. LTD TS-307-ITAT-2 011(DEL.) AY: 2006-07 B. STREAM INTERNATIONAL SERVICES PVT.LTD. VS ADIT ( ITA NO.8997/MUM/2010) C. CAPITAL IQ INFORMATION SYSTEMS (IND.) PVT.LTD. HYDERABAD (ITA NO.1961/HYD/2011) D. MARKET TOOLS RESEARCH PVT.LTD. VS DCIT TS-30-I TAT-2014(HYD.) TP FOR AY: 2005-06 E. IVY COMPTECH PVT.LTD. VS ACIT TS-17-ITAT-2014(H YD.)-TP FOR AY: 2005-06. 31. WE FIND MERIT IN THE SUBMISSION OF THE LEARNED AR AND DIRECT THE AO/TPO TO DELETE THE ABOVE FROM THE LIST OF COMPARA BLES. 32. GROUND NO.5 CHALLENGES THE DIRECTION OF THE L D.CIT(A) IN NOT CONSIDERING M/S HERO MANAGEMENT SERVICE LTD. AS A C OMPARABLE. THE ITA NO.869(B)/13 & CO NO.168(B)/15 33 LD. CIT(A) EXCLUDED THIS COMPANY FROM THE LIST OF C OMPARABLE ON THE GROUND OF NEGATIVE OPERATING MARGIN OF 10.03%. WE F IND THAT THE REASONING OF THE LD. CIT(A) IS NOT SOUND. NOW IT I S SETTLED PROPOSITION OF LAW THAT A COMPANY INCURRING NORMAL LOSSES MAY BE I NCLUDED IN THE LIST OF COMPARABLES. HENCE, WE DIRECT THE AO/TPO TO INCLUDE IN THE LIST OF COMPARABLES. THE C.O FILED BY THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 33. IN THE RESULT, THE REVENUES APPEAL IS DISMISS ED AND THE ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE 30 TH NOVEMBER, 2015 SD/- SD/- (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER D A T E D : 30-11-2015 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE ITA NO.869(B)/13 & CO NO.168(B)/15 34 1. DATE OF DICTATION .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR. P. S. .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S. .. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR / SR. P.S. .. 9. DATE OF DISPATCH OF THE ORDER .