SI GROUP-INDIA LTD, NAVI MUMBAI V. DCIT -LTU, MUMBAI

ITA 9197/MUM/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3201 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 06-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Transfer pricing; International transaction; Arm length price
• Section: 92C; 143(3); 92D; 10B; 10; 92

Judgement Text

I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 1 OF 18 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH, MUMBAI [CORAM: PRAMOD KUMAR AM AND PAWAN SINGH JM ] I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 SI GROUP - INDIA LIMITED ..... . .APPELLANT PLOT NO.D - 2/1, TTC INDUSTRIAL AREA, OPP. J UINAGAR RAILWAY STATION, THANE - BEL A PUR ROAD, TURBHE, NAVI MUMBAI . [PAN: AA A C H 7323 L ] VS. DY. COMMISSIONER OF INCOME TAX - LTU ....... .. . RESPONDENT MUMBAI. APPEARANCES BY: KARISHMA R . PHATARPHEKAR, DIVYESH I. SHAH, HARSH SHAH , PRATIK POD DAR, FOR THE A PPELLANT N.K. CHAND , FOR RESPONDENT DATE OF CONCLUDING THE HEARING : JANUARY 1 4 TH , 2016 DATE OF PRONOUNCING THE ORDER : MARCH 31 ST , 201 6 ORDER PER PRAMOD KUMAR , AM : THIS APPEAL, FILED BY THE ASSESSEE APPELLANT, IS DIRECTED AGAINST THE DIRECTIONS ISSUED BY THE DISPUTES RESOLUTION PANEL IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 2006 - 07. 2. GROUND NO.1 & 2, BEING GENERAL IN NATURE AND THE ISS UES RAISED THEREIN BEING COVERED BY SPECIFIC GROUNDS SET OUT LATER, DO NOT CALL FOR ANY SPECIFIC ADJUDICATION BY US. 3. IN GROUND NO.3, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES : - I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 2 OF 18 GROUND NO. 3 - ADDITION UNDER SECTION 92CA(3) OF THE ACT IN RESPECT OF PAYMENT OF ROYALTY TO THE ASSOCIATED ENTERPRISE: SCHENECTADY INTERNATIONAL INC. AMOUNTING TO RS. 2,71,11,495 3.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO AND THE AO ERRED, AND THE DRP FURTHER ERRED IN CONFIRMING THE ADDITION RELATING TO PAYMENT OF ROYALTY UNDER SECTION 92CA(3) OF THE ACT BY DISREGARDING THE DOCUMENTATION MAINTAINED UNDER SECTION 92D OF THE ACT READ WITH RULE 10D OF THE INCOME - TAX RULES, 1962 ('THE RULES') AND NOT APPRECIATING THE FACTUAL DETAILS, SUB MISSIONS AND VARIOUS DOCUMENTARY EVIDENCES DEMONSTRATING BENEFITS TO THE APPELLANT UNDER THE TECHNICAL SERVICES AGREEMENT (AGAINST WHICH THE ROYALTY IS PAID). 3.2 THE APPELLANT SUBMITS THAT THE TPO, THE AO AND THE DRP FAILED TO APPRECIATE THAT: (I) NON - ACCEPTANCE OF THE ARM'S LENGTH PRICE OF THE AFORESAID TRANSACTION CREATES AN ABSURD SITUATION WHERE THE APPELLANT IS EXPECTED TO RECEIVE THE LATEST TECHNOLOGICAL ADVANCEMENT AND UPGRADATION FREE OF COST. HENCE, CONSIDERING THE ARM'S LENGTH VALUE OF THE TRANSACTION TO BE NIL IS IMPROPER. (II) MEASURING PAYMENT OF ROYALTY BASED ON THE COMPANY'S PROFITABILITY WOULD BE INAPPROPRIATE AND HAS TO BE INSTEAD BASED ON THE TECHNICAL EXPERTISE AFFORDED TO THE APPELLANT FROM THE AE AND THE BENEFIT DERIVED UNDER SUCH TECHNICAL SUPPORT. (III) THE AFORESAID PAYMENT WAS ESSENTIAL SINCE IT WAS FOR THE SUPPLY OF KNOW - HOW, PROVISION OF TECHNICAL ASSISTANCE, ETC. WHICH WERE NECESSARY FOR THE PRODUCTION OF GOODS BY THE APPELLANT, SUSTAIN THE MARKET COMPETITION AND H AVE A PERENNIAL SOURCE OF SUPPLY FOR TECHNOLOGICAL ADVANCEMENT AND UP - GRADATION. 3.3 THE APPELLANT PRAYS THAT THE TRANSFER PRICING ADJUSTMENT MADE UNDER SECTION 92CA(3) OF THE ACT IN RELATION TO PAYMENT OF ROYALTY IS ERRONEOUS, UNWARRANTED AND BE DELE TED. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSE E HAS PAID AN AMOUNT OF RS.2,71,11,495/ - TO SCHENECTADY INTERNATIONAL INC IN RESPECT OF THE ROYALTY. THIS IS RELATED TO PRODUCTION OF GOODS IN INDIA, A ND IS COMPUTED @ 2% OF NET SALES PRICE OF GOODS MANUFACTURED IN INDIA. THE SUBMISSION OF THE ASSESSEE WAS THAT SINCE THE REMITTANCE OF ROYALTY IS MADE ON THE BASIS OF APPROVAL BY I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 3 OF 18 THE RESERVE BANK OF INDIA, IT SHOULD BE TREATED AS AN ARM S LENGTH TRANSACTI ON. THE TRANSFER PRICING OFFICER, HOWEVER, REJECTED THE CLAIM OF THE ASSESSEE, AND PROCEEDED TO RECOMMEND AN ARM S LENGTH PRICE ADJUSTMENT OF RS.2,71,11,495/ - BY OBSERVING AS FOLLOWS : - DURING A.Y. 2006 - 07, THE COMPANY HAS PAID AN AMOUNT OF RS.2,71,11,49 5/ - TO SCHENECTADY INTERNATIONAL INC. I N RESPECT OF ROYALTY. THE KNOW - HOW IS RELATED TO THE PRODUCTION OF GOODS IN INDIA AND THE ASSESSEE HAS TO PAY TECHNICAL ASSISTANT FEE @ 2% OF THE NET SALES PRICE OF THE PRODUCTS MANUFACTURED IN INDIA. THE ASSESSEE HAS MERELY MENTIONED IN ITS SUBMISSION THAT THE TECHNI CAL COLLABORATION AGREEMENT HAS BEEN APPROVED BY THE RESERVE BA N K OF INDIA. 5. IT WAS IN THIS BACKDROP THAT AN ARM S LENGTH PRICE ADJUSTMENT OF RS.2,71,11,495/ - WAS DROPPED BY THE ASSESSING OFFICER. AGGRIEVED, ASSESSEE CARRIED THE MAT T ER BEFORE THE DRP BUT WITHOUT AN Y SUCCESS. LEARNED DRP UPHELD THE ACTION OF THE T RANSFER PRICING OFFICER BY OBSERVING AS FOLLOWS : - 2.4 WE HAVE CONSIDERED THE ISSUE AND OUR COMMENTS ARE AS UNDER - 2.4.1 IT IS SEEN TH AT FOR BENCHMARKING ITS TRANSACTION PERTAINING T O THE ROYALTY PAYMENT, THE ASSESSEE HAS USED THE CUP METHOD AND JUSTIFIED ITS TRANSACTION ON THE BASIS OF THE APPROVAL OF R BI. HOWEVER, IT IS SEEN THAT THE APPLICATION OF CUP METHOD WHICH HAS BEEN GIVEN IN R ULE 10B OF I NCOME - T AX RULES, 1962, SAYS THE FOLLOWING ____________________________________________________________________ _________________________ 10B. (1) FOR THE PURPOSES OF SUB - SECTION (2) OF SECTION 92C , THE ARM S LENGTH PRICE IN RELATION TO AN INTER NATIONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEING THE MOST APPROPRIATE METHOD, IN THE FOLLOWING, MANNER, NAMELY: (A) COMPARABLE UNCONTROLLED PRICE METHOD, BY WHICH, (I) THE PRICE CHARGED OR PAID FOR PROPERTY TRANSFERRED OR SERVICES PROVIDED IN A COMPARABLE UNCONTROLLED TRANSACTION, OR A NUMBER OF SUCH TRANSACTIONS, IS IDENTIFIED; (II) SUCH PRICE IS ADJUSTED TO ACCOUNT FOR DIFFERENCES, I F ANY , BETWEEN THE INTERNATIONAL TRANSACTION AND THE COMPARABLE UNCONTRO LLED TRANSACTIONS OR BETWEEN T HE ENTERPRISES ENTERING INTO SUCH TRANSACTIONS, WHICH COULD MATERIALLY AFFECT THE PRICE IN THE OPEN MARKET; I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 4 OF 18 (III) THE ADJUSTED PRICE ARRIVED AT UNDER SUB - CLAUSE (II) IS TAKEN TO B E AN ARM'S LENGTH PRICE IN RESPECT OF THE PROP ERTY TRANSFERRED OR SERVICES PROVIDED IN THE INTERNATIONAL TRANSACTION; ____________________________________________________________________ _________________________ IT IS THUS CLEAR THAT FOR APPLICATION OF THE CUP METHOD, A COMPARABLE UNCONTROLLED TRANSA CTION OR A NUMBER OF COMPARABLE UNCONTROLLED TRANSACTIONS NEED TO BE IDENTIFIED AND THE PRICE CHARGED IN SUCH COMPA RABLE UNCONTROLLED TRANSACTION/ TRANSACTIONS IS THE ARM'S LENGTH PRICE SUBJECT TO ANY ADJUSTMENT WARRANTED, IF ANY. NOW, IN THE INSTANT CASE, THE ASSESSEE HAS NOT IDENTIFIED ANY SUCH COMPARABLE UNCONTROLLED TRANSACTION WHICH COULD BE USED FOR BENCHMARKING ITS INTERNATIONAL TRANSACTION PERTAINING TO ROYALTY PAYMENT. 2.4.2 THE ASSESSEE HAS ALSO CONTENDED THAT THE ROYALTY RATES ARE APPROVED BY R ESERVE BANK OF INDIA, THEREFORE, THE RATES ARE AT ARM'S LENGTH. THE CONTENTION OF THE COMPANY IS NOT ACCEPTABLE AS THE APPROVAL WAS SOUGHT BY THE COMPANY AND GRANTED BY THE RESERVE BANK OF INDIA, UNDER THE EXCHANGE CONTROL POLICY OF THE GOVERNMENT OF INDI A. THE BRANDING FEE PAYMENT, AS A GENERAL RULE IS ALLOWED BY : PRESS NOTE NO.9 ISSUED BY MINISTRY OF COMMERCE AND INDUSTRY. THE RESERVE BANK OF INDIA, IN THE APPROVAL LETTER, IS MENTIONING SOME STANDARD CONDITIONS. CONDITION NO.7 READS AS : 'YOU MAY PLEA SE NOTE THAT OUR APPROVAL IS ONLY FOR PAYMENT TOWARDS TECHNOLOGY TRANSFER FROM FEMA ANGLE AND SHOULD NOT BE CONSTRUED AS APPROVAL UNDER T HE PROVISIONS OF ANY OTHER LA W IN FORCE.' THEREFORE, RESERVE BANK OF INDIA IS CLARIFYING THE PURPOSE OF GIVING THE APP ROVAL. SUCH APPROVALS BY RESERVE BANK OF INDIA INDICATE THAT SUCH PAYMENTS ARE NOT PREVENTED OR BLOCKED BY THE GOVERNMENT, CONSIDERING THE PRESENT EXCHANGE CONTROL POLICY BU T SUCH TRANSACTION SATISFIES THE PRINCIPLES OF ARM'S LENGTH OR NOT IS NOT VERIFIED BY THE RESERVE BANK OF INDIA. THE PAYMENT SHOULD SATISFY THE PROVISIONS OF THE ACT, SEPARATELY AND INDEPENDENTLY, IRRESPECTIVE OF THE ALLOWABILITY OF PAYMENT AS PER THE PROVISIONS OF FEMA. SIMILAR IS THE VIEW OF TAX ADMINISTRATION OF MOST OF THE COUNTRIE S. T HE GUIDELINES OF TAX ADMINISTRATION OF FRANCE, ON THE ISSUE, REFER TO 'PLEASE NOTE, FINALLY, THAT, ALTHOUGH THE AUTHORIZATION GIVEN BY THE MINISTRY OF INDUSTRIES OR BY ANY OTHER TECHNICAL DEPARTMENT, WITH RESPECT TO THE RATE OF A ROYALTY OR OF THE AMO UNT WHICH MAY BE TRANSFERRED ABROAD, IS NOT BINDING ON THE TAX ADMINISTRATION, THE INSPECTOR, NEVERTHELESS HAVE REGARD TO IT (SOURCE : IBFD PUBLICATIONS). . 2.4.3 MOREOVER, IT WAS ALSO OBSERVED BY THE TPO DURING THE PROCEEDINGS THA T THE NET PROFIT M ARGIN OF THE ASSESSEE WAS LOWER THAN A SET OF THE COMPARABLE COMPANIES. THIS WOULD ALSO SHOW THAT THE PAYMENT OF ROYALLY HAS BEEN ONE OF THE REASONS FOR ADVERSELY AFFECTING THE MARGINS OF THE ASSESS E E COMPANY. IN FACT, HAD ALL THE TRANSACTIONS WERE COMBIN ED TOGETHER AND TNMM WOULD HAVE BEEN APPLIED ON AGGREGATED BASIS AT ENTITY LEVEL, THERE WOULD HAVE STILL BEEN ADJUSTMENTS DUE TO MARGINS OF THE ASSESS E E BEING LOWER THAN THE AVERAGE MARGIN OF THE COMPARABLE COMPANIES. I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 5 OF 18 ACCORDINGLY, THE CONTENTION OF THE ASS ESS E E THAT ROYALLY PAYMENT MADE BY IT TO ITS AE IS AT ARM'S LENGTH BASIS IS HEREBY REJECTED. 6. THIS IS HOW THE ASSESSING OFFICER HAS MADE THE IMPUGNED ARM S LENGTH PRICE ADJUSTMENT, AGGRIEVED BY WHICH ASSESSE E IS IN APPEAL BEFORE US. 7. WE HAVE HEARD TH E RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. W E FIND THAT THE TRANSFER PRICING OFFICER DID NOTE, AND WAS APPARENTLY SWAYED BY THE FACT OF , ASSESSEE S MAKING LOSSES . IT WAS FOR THIS REASON THAT THE PAYMENT OF ROYALTY WAS HELD TO BE NOT AT AN ARM S LENGTH PRICE, AS IS IMPLICIT IN THE TRANSFER PRICING OFFICER S OBSERVATION TO THE EFFECT THAT HAVING CONSIDERED THE SUBMISSION MADE BY THE ASSESSEE IN RESPECT OF PAYMENT OF ROYALTY, THE POSITION OF THE ASSESSEE CANNOT BE ACCEPTED DUE TO THE FACT THAT THE ASSESSEE HAS INCURRED AN OPERATING LOSS DURING THE YEAR UNDER CONSIDERATION . THE TRANSFER PRICING OFFICER HAS THEREAFTER PROCEEDED TO TREAT THE ARM S LENGTH PRICE OF THE ROYALTY AS NIL , THUS VIRTUALLY DISALLOWING ENTIRE ROYALTY PAYMENT. IT IS NOT, HOWEVER, CLEAR AS TO UNDER WHICH METHOD OF ASCERTAINING THE ARM S LENGTH PRICE, THE VALUE OF ROYALTY HAS BEEN DETERMINED AS NIL . THERE CANNOT BE AN ADHOC ADJUSTMENT IN THE COURSE OF ASCERTAINING THE ARM S LENGTH PRICE. IF THE TRANSFER PRICING OFFICER WAS TO REJECT THE ASSESSEE S BENCHMARKING ON THE BASIS OF RESERVE BANK OF INDIA S APPROVAL UNDER CUP METHOD, THE TRANSFER PRICING OFFICER WAS REQUIRED TO DECIDE THE CORRECT ME CHANISM OF DECIDING THE ARM S LENGTH PRICE AND COMPUTE THE ARM S LENGTH PRICE ON THAT BASIS. IT WAS NOT OPEN TO HIM TO SIMPLY BRUSH ASIDE THE BENCHMARKING DONE BY THE ASSESSEE AND ADOPT THE NIL VALUE. THAT IS NOT A SCIENTIFIC METHOD OF DETERMINING THE AR M S LENGTH PRICE AND IT CANNOT MEET ANY JUDICIAL APPROVAL. IN THIS VIEW OF THE MATTER, I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 6 OF 18 AND ALSO HAVING REGARD TO A SERIES OF JUDICIAL PRECEDENTS FROM THE CO - ORDINATE BENCHES HOLDING THAT EVEN RESERVE BANK OF INDIA S APPROVAL OF ROYALTY CAN BE A REASONABLE CUP INPUT FOR DETERMINING ARM S LENGTH PRICE SUCH AS IN THE CASE OF DCIT VS. OWENS CORNING INDUSTRIES (INDIA) PVT. LTD., AND VICE VER SA (ITA NOS.549 & 595/HYD/2014), W E CONSIDER IT APPROPRIATE TO UPHOLD THE GRIEVANCE OF THE ASSESSEE, AND DELETE THE IMPU GNED ADJUSTMENT OF RS.2,71,11,495/ - . THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 8. GROUND NO.3 IS THUS ALLOWED. 9 . IN GROUND NO.4, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : - GROUND NO. 4 - ADDITION UNDER SECTION 92CA(3) OF THE ACT IN RESPECT O F IMPORT OF PRODUCT PTOP FROM THE ASSOCIATED ENTERPRISE, AMOUNTING TO RS.8,28,196 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO AND THE AO ERRED, AND THE DRP FURTHER ERRED IN CONFIRMING THE ADDITION RELATING TO IMPORT OF THE PR ODUCT PTOP TO THE EXTENT OF RS. 8,28,196 UNDER SECTION 92CA(3) OF THE ACT BY NOT APPRECIATING SUBMISSIONS MADE BY THE APPELLANT. 4.2 THE AO AND THE DRP ERRED COMPARING THE ENTITY LEVEL MARGINS OF THE APPELLANT WITH THAT OF THE COMPARABLE COMPANIES FOR BEN CHMARKING THE INTERNATIONAL TRANSACTION VALUE UNDER CONSIDERATION WHICH FORMS ONLY 0.13 PERCENT OF THE TOTAL PURCHASES OF THE COMPANY. 4.3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO ERRED AND THE HON'BLE DRP FURTHER ERRE D IN UPHOLDING/CONFIRMING THE ACTION OF THE TPO IN REJECTING THE WITHOUT PREJUDICE CONTENTION OF THE APPELLANT TO CONSIDER THE CORRECT MARGIN OF ALLEGED COMPARABLE COMPANIES COMPUTED BASED ON THE ANNUAL REPORT AVAILABLE IN THE PUBLIC DOMAIN. 4.4 THE APPEL LANT PRAYS THAT THE TRANSFER PRICING ADJUSTMENT MADE UNDER SECTION 92CA(3) OF THE ACT IN RELATION TO IMPORT OF PRODUCT PTOP IS ERRONEOUS, UNWARRANTED AND BE DELETED. 10 . SO FAR A S THIS GROUND OF APP E AL IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE T HIS. DURING TH E RELEVANT PREVIOUS YEAR, THE AS SESSEE IMPORTED A RELATIVELY SMALL QU A N T ITY OF 84 MT OF PARA TERTIARY OCTYL PHENOL (PTOP) FROM IT S ASSOCIATED ENTERPRISE I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 7 OF 18 BASED IN SOUTH KOREA, NAMELY SCHENECTADY KOREA LIMITED. THESE PURCHASES WERE MADE AT A VERAGE CIF VALUE OF US $ 1,425 PER M T , WHICH CONVERTED INTO FOB VALUE, WORKED OUT TO US $ 1,337.83 PER MT. THE TOTAL VALUE OF HIS IMPORT WAS RS.53,26,020/ - . IN THE COURSE OF PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER, VALUE OF THIS TRANSACTION WAS A SCERTAINED AT NIL, A ND THE JUSTIFICATION FOR THIS DETERMINATION WAS AS FOLLOWS : - (C) I N RESPECT OF PTOP IMPORTED BY THE ASS E SS E E DURING THE Y E AR FROM ITS AE, THE ASSESSEE HAS NOT PROVIDED A NY DE T AILS OR DOCUMENTATION REG AR DING THE BENCHMARKING OF THE SAI D TRANSACTION. THE ASSESSEE WAS PROVIDED A FURTHER OPPORTUNITY IN THE PERSONAL HEARING HELD ON 26 OCTOBER 2009 TO JUSTIFY THE ARM S LENGTH NATURE OF THE IMPORT OF PTOP. IN THIS REGARD , THE ASSESSEE SUBMITTED SOME CUSTOMS RELATED DOCUMENTS IN ITS SUBMISSI ON DATED 27 OCTOBER 2009. HOWEVER, THE SAME CANNOT BE CONSIDERED AS INCOME - T AX PROCEEDINGS AND CUSTOMS PROCEEDINGS ARE TOTALLY SEPARATE IN NATURE. ACCORDINGLY, THE DOCUMENTS SUBMITTED DO NOT PROVIDE ANY CONCRETE EVIDENCE TO SUBSTANTIATE THE POSITION OF T HE ASSESSEE THAT THE IMPORT OF PTOP SATISFIES THE ARM S LENGTH STANDARD. ACCORDINGLY , THE ENTIRE AMOUNT PAID BY THE ASSESSEE IN RESPECT OF IMPORT OF PTOP IS CONSIDERED AS EXCESS AND ACCORDINGLY AN ADJUSTMENT OF RS.5,326,020 IS MADE TO THE IMPORT OF PTOP. 11. AGGRIEVED BY THE ADDITION SO PROPOSED BY THE ASSESSING OFFICER, ASSESSEE RAISED THE OBJECTION BEFORE THE DRP BUT WITHOUT COMPLETE SUCCESS . THE MAIN JUSTIFICATION OF CONFIRMING THE ADJUSTMENT, IN PRINCIPLE, WAS AS FOLLOWS : - 4.9 WE HAVE CONSIDERED THE ISSUE AND OUR COMMENTS AR E AS UNDER : - 4.9.1 IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE IN I TS REPLY DATED 26 TH OCT, 2009 BEFORE THE TPO HAS SUBMITTED THA T NO INDEPENDENT THIRD PARTY CUP DATA IS AVAILABLE LO BENCHMARK THE INTERNATIONA L TRANSACTION PERTAINING TO IMPORT OF PTOP FROM SCH ENECTADY KOREA L TD. AGAIN AS PER T HE SUBMISSION OF T HE ASSESSEE, IT PRODUCED A FRESH SUBMISSION DATED 27 LH OCTOBER, 2 009, WHERE IT TRIED TO JUSTIFY THE IMPORT TRANSACTION OF PTOP PRODUCT BY COMPARING THE PRICES PAID BY IT TO ITS A E WITH THE PRICES PAID BY AN INDEPENDENT THIRD PARTY IN CHINA TO ITS AE. THE ASSESSEE HAS CONTENDED THAT THE BENCHMARKING OF INTERNATIONAL TRANSACTION NEEDS TO BE DONE BY USING THE CUP AS THE MOST APPROPRIATE METHOD AND BY COMPARI NG THE PRICES PAID BY AN INDEPENDENT THIRD PARTY IN CHINA WITH THAT THE PRICE PAID BY THE ASSESSEE. 4.9.2 HOWEVER, SUBMISSION OF THE ASSESSEE CANNOT BE ACCEP T ED IN VIEW OF THE FACT THAT THE ASSESSEE HAS FAILED TO DEMONSTRATE AND EVEN ADMITTED TO THA T EXT ENT THAT NO COM PARABLE UNCONTROLLED TRANSACTION HAS BEEN CARRIED OUT BY ITS AE IN INDIA. I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 8 OF 18 THE ASSESSE E WANTS TO COMPARE T HE PRICES PAID BY I T TO ITS AE WITH THE PRICES PAID BY AN INDEPENDENT THIRD PARTY IN CHINA TO ITS AE. HOWEVER, SUCH COMPARISON IS NOT POSSIBLE IN VIEW OF THE FOLLOWING DIFFERENCES NOTICED : - I. DIFFERENCE IN THE MARKET (AN INDIAN MARKET CANNOT HE COMPARED WITH THE CHINESE MARKET) II. DIFFERENCES IN THE GEOGRAPHICAL AREA ( I N ONE CASE, THE PRODUCT WAS SOLD IN INDIA AND IN THE OT HER CASE, THE PRODUCT WAS SOLD IN CHINA) III. DIFFERENCE IN THE QUANTITY SOLD (560 MT SOLD TO CHINESE PAR T Y AND 84 MT SOLD TO INDIAN PARTY) IV. DIFFERENCE IN THE PERIOD OVER WHICH THE SALE WAS MADE BY THE A E . (ONLY 2 INSTANCES OF SALE DURING ONE YEAR FOR THE ASSESSEE, WHEREAS, FIVE INSTANCES OF SALE OVER THE YEAR FOR THE CHINESE PARTY) MOREOVER, THE TERMS AND CONDITIONS OF THE SALE ARE ALSO NOT AVAILABLE FOR BOTH THESE TRANSACTIONS. 12 . THE DRP, HOWEVER, RE S TRICTED THE ALP ADJUSTMENT TO RS.8,28,196/ - BY ADOPTING TNMM, AND OBSERVED , INTER ALIA , AS FOLLOWS : - 4.9.5 HOWEVER, WE ACCEPT THE SUBMISSION OF THE ASSESSEE T HA T THE ADJUSTMENT MADE BY THE TPO ON THE ENTIRE AMOUNT PAID BY THE ASSESSEE TO ITS AE SEEMS TO BE ADHOC, ARBITRARY. HOWEVER, IT WAS ALSO SE EN THAT THE METHOD OF THE ASS ESSEE TO ADOPT CUP AS THE MOST APPROPRIATE METHOD AND ACCORDINGLY BENCHMARKING THE TRANSACTIONS ALSO SUFFER FROM INHERENT PROBLEMS. ACCORDINGLY, WE THEREFORE DECIDE TO BENCHMARK THE SAID INTERNATIONAL TRANSACTIONS BY ADOPTING T HE TRANSACTIONAL NET MARGIN METHOD BY ADOPTING THE COMPARABLES CHOSEN BY THE TPO. AS NO SEPARATE NET MARGINS ARE AVAILABLE FOR THE IMPORT OF PTOP, THE ADJUSTMENT HAS BEEN LIMITED ONLY ON THE AMOUNT OF INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSESSEE FO R THE IMPORT OF PTOP AND BY ADOPTING THE ENTITY LEVEL MARGIN OF THE ASSESSEE AT ( - ) 4.90 AND THAT OF THE COMPARABLES AT 10.65% . ACCORDINGLY, THE ADJUSTMENT IS WORKED OUT AS FOLLOWS: IMPORT COST FOR PTOP: RS. 53,26,020 DIFFERENCE IN THE MEAN OF THE OP ERATING MARGIN OF THE COMPARABLES AND THAT OF THE ASSESSEE: 15.55% ADJUSTMENT OVER THE IMPORT COST: RS.8,28,196/ - 13 . THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 14 . WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE MATERIAL ON R ECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. WE FIND THAT PTO P , WHICH STANDS FOR PARA TERTIARY OCTYL PHENOL , IS ESSENTIALLY A GENERIC PRODUCT. AS A LOOK AT THE IMPORT STATISTICS WOULD SHOW THAT PTOP PRICES, E XCEPT IN THE SPECIALISED I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 9 OF 18 CATEGORIES SUCH AS ORGANIC CHEMICAL OR SPECIFIC PRINTING INK USAGE, MOVE IN A NARROW RANGE . IN THESE CIRCUMSTANCES, EMPHASIS ON EXACT PRODUCT COMPARISON IS WHOLLY UNWARRANTED. WE HAVE NOTED THAT THE PRICES WHICH HAVE BEEN T AKEN F OR COMPARISON ARE FOB PRICES IN KOREA AND AS SUCH IMPACT OF GEOGRAPHICAL DIFFERENCES IS MINIMISED. THE QUANTITIES AND SALE INSTANCES IN THE CASE OF THE TESTED PARTY ARE FEWER BUT THAT DOES NOT LEAD TO TH E INFERENCE THAT A COMPARISON CANNOT BE MADE AT ALL. IT IS ONLY WHEN COMPARABLE INSTANCES ARE OF RELATIVE SMALLER QUANTITY AND BASE D ON FEWER SALE INSTANCES THAT THE BONAFIDES OF COMPARABLE ARE IN THE DOCK. WHEN THE QUANTITY AND THE INSTANCES OF COMPARABLES IS MUCH HIGHER VIS - A - VIS THE TRANSACTION WITH AE , ISSUES CANNOT BE RAISED ABOUT THE BONAFIDES. SO FAR AS CUP COMPARABILITY IS CONCERNED, DIFFERENCES IN THE SIZE, GEOGRAPHICAL LOCATION ETC. CANNOT BE REASON ENOUGH TO DISCARD THE COMPARABLES, UNLESS IT IS SHOWN THAT SUCH FACTORS INF LUENCE CONDITIONS IN T HE MARKET IN WHICH RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE. THERE IS , IN THE ORDERS OF THE AUTHORITIES BELOW, NOT EVEN A WHISPER ABOUT THE IMPACT, IF ANY, OF THESE FACTORS ON THE MARKET CONDITIONS. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THA T THE IMPORTS ARE OF VERY SMALL QUANTITIES WHICH DOES NOT EVEN ACCOUNT FOR ONE PERCENT OF TOTAL TRANSACTIONS . IN THE LIGHT OF ALL THESE FACTORS, AND PARTICULARLY BEARING IN MIND SMALLNESS OF THE AMOUNT INVOLVED, IN OUR CONSIDERED VIEW, IT WAS NOT A FIT CA SE FOR REJECTION OF CUP METHOD, AS EMPLOYE D BY THE ASSESSEE. WE, THEREFORE, DEEM IT FIT AND PROPER TO UPHOLD THE GRIEVANCE OF THE ASSESS EE AN D DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ALP ADJUSTMENT OF RS.8,28,196/ - 15 . GROUND NO.4 IS THUS ALLO WED. 16 . IN G ROUND NO.5, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE : GROUND NO. 5 - ADDITION UNDER SECTION 92CA(3) OF THE ACT IN RESPECT OF EXPORT OF THE PRODUCT IBB TO THE ASSOCIATED ENTERPRISE, AMOUNTING TO RS.41,19,424 I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 10 OF 18 5.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TPO AND THE AO ERRED, AND THE DRP FURTHER ERRED IN CONFIRMING THE ADDITION RELATING TO THE EXPORT OF THE PRODUCT PTOP AMOUNTING TO RS.41,19,424 TO ITS AE, UNDER SECTION 92CA(3) OF THE ACT BY NOT APPRECIATIN G/ DISREGARDING THE BENCHMARKING ANALYSIS, COMPARABLE TRANSACTIONS SELECTED AND THE DETAILED SUBMISSIONS AND THE DOCUMENTARY EVIDENCE SUPPLIED BY THE APPELLANT. 5.2 THE APPELLANT PRAYS THAT THE TRANSFER PRICING ADJUSTMENT MADE UNDER SECTION 92CA(3) O F THE ACT IN RELATION TO EXPORT OF THE PRODUCT IBB IS ERRONEOUS, UNWARRANTED AND BE DELETED. 17 . DURING THE RELEVANT PREVIOUS YEAR , THE ASSESSEE EXPORTED IBB FOR RS.64,26,5789/ - TO IS ASSOCIATED ENTERPRISES. IN THE COURSE OF PROCEEDINGS BEFORE THE TPO, IT WAS NOTED THAT THE ASSESSEE HAS INCURRED LOSS OF RS.23,02,921/ - ON THIS TRANSACTION. ON THIS BASIS, THE TPO CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT EXPORTED IBB TO IT S AE AT AN ARM LENGTH PRICE. ADOPTING A MARK UP @ 10.65% ON THE COST, THE TPO RECOMPUTED THE ARM S LENGTH EXPORT PRICE. AN ALP ADJUSTMENT OF RS.41,19,424/ - WAS, ACCORDINGLY, MADE BY THE TPO. AGGRIEVED, ASSESSEE RAISED AN OBJECTION BEFORE THE DRP BUT OF NO AVAIL. LEARNED DRP CONFIRMED THE ACTION OF THE DRP BY OBSERVING AS FOLL OWS : - 5. GROUNDS OF OBJECTION NO. 1.4: TRANSFER PRICING ADJUSTMENT TO THE VALUE OF THE INTERNATIONAL TRANSACTION OF THE ASSESSEE IN RESPECT OF EXPORT OF THE PRODUCT IBB 5.1 FROM THE GROUNDS OF OBJECTION FILED BY THE ASSESSEE WE UNDERSTAND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EXPORTED PRODUCT NAMED IBB TO ITS A E , AMOUNTING T O RS. 6 , 426 , 578 / - AT A RATE OF USD 1, 5 06 PER METRIC TONNE. DURING THE COURSE OF TRANSFER PRICING ASSESSMENT PROCEEDINGS, THE ASSESSEE PROVIDED CERTAIN COSTING DATA AND SUBMISSIONS REGARDING THE NATURE OF THE PRODUCT AND ITS DEPENDENCE ON VARIOUS COMMERCIAL FACTORS. 5.2 HOWEVER, THE TPO DISREGARDED THE SUBMISSIONS MADE BY THE ASSESSE E AND MADE AN ADJUSTMENT OF RS. 4,119 , 424 / - TO THE EXPORT VALUE OF THE SAID PROD UCT BASED ON THE COSTING DATA OF IBB PROVIDED BY THE ASSESSEE. . 5.3 IN VIEW OF SUBSTANTIATING THE ARM'S LENGTH NATURE OF THE INTERNATIONAL TRANSACTION OF EXPORT OF IBB, THE ASSESSEE EXTRACTED THE CUSTOMS DATA PERTAINING TO ALL THE EXPORTS OF IBB MADE OU T OF INDIA DURING AY 2006 - 07 AND SUBMITTED THE SAME TO THE AO. THE DETAILS OF EXPORTS WERE PROVIDED BY INTERNATIONAL BUSINESS I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 11 OF 18 INFORMATION SERVICES (A THIRD PARTY SERVICE PROVIDER). AS PER THE ASSESSEE, BASED ON THE ABOVE EXTRACTED DETAILS, THE AVERAGE F O B VALUE OF EXPORT OF IBB WORKS OUT TO USD 1446.44 PER METRIC TONNE. 5.4 HOWEVER, THE AO DISREGARDED ABOVE SUBMISSION MADE BY THE ASSESSEE AN D PROPOSED AN ADJUSTMENT OF RS. 4,119,424 / - TO THE IN TERNATIONAL TRANSACTION PERTAINING TO EXPORT OF IBB BY STATING THAT - 'I HAVE PERUSED THE ASSESSEE'S SUBMISSIONS. HOWEVER, T HE ORDER OF T HE TRANSFER P RICING OFFICER HAS CONSIDERED THE ISSUES IN DETAIL AND I AGREE WITH THE ORDER OF THE TPO. 5.5 IN THIS REGARD, THE ASSESSEE'S A.R. SUBMITTED THAT THE AO HAS NOT PROVID ED ANY REASONS FOR REJECTING THE ADDITIONAL SUBMISSION MADE BY THE ASSESSEE BEFORE HIM IN RESPECT OF EXPORT OF IBB. ACCORDING TO THE ASSESS EE , IT HAD SUBMITTED DETAILS PERTAINING TO ALL THE EXPORTS OF IBB MADE OUT OF INDIA DURING AY 2006 - 07 BY WAY OF ITS S UBMISSIONS DATED 22 DECEMBER 2009 TO AO. BASED ON THE CUP DATA, IT IS EVIDENT THAT THE INTERNATIONAL TRANSACTION PERTAINING TO IMPORT OF IBB BY THE ASSESSEE FROM ITS AC IS AT ARM S LENGTH FROM AN INDIAN TRANSFER PRICING PERSPECTIVE. . 5.6 THE A.R. ALSO S UBMITTED THAT THE AO WAS WRONG IN OBSERVING THAT THE ORDER OF T HE TPO HAS CONSIDERED THE ISSUES IN DETAIL. THE ADDITIONAL CUP INFORMATION SUBMITTED BY THE ASSESSEE IN ITS SUBMISSION DATED 22 DECEMBER 7009 TO THE AO COULD OBVIOUSLY NOT HAVE BEEN CONSIDERED BY THE TPO AS THE SA ME WAS NOT SUBMITTED TO THE TPO DURING THE COURSE OF TRANSFER PRICING ASSESSMENT. HENCE, THE AO OUGHT TO HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE AND SHOULD HAVE PASSED T HE ORDER BASED ON THE MERITS OF THE CASE AFTER CONSIDERING T HE CUP INFORMATION IN RESPECT OF IBB SUBMITTED BY THE ASSESSEE VIDE SUBMISSION DATED 22 DECEMBER 2009. THEREFORE, HAVING REGARD TO THE ADDITIONAL DETAILS SUBMITTED BY THE ASSESSEE, ITS INTERNATIONAL TRANSACTION IN RESPECT OF EXPORT OF IBB IS AT ARM'S LENG TH FROM AN INDIAN TRANSFER PRICING PERSPECTIVE AND HENCE, THE ADDITION MA DE BY THE TPO SHOULD BE DELETED. 5.7 WE HAVE CONSIDERED THE ISSUE AND OUR COMMENTS ARE AS UNDER : - 5.7.1 IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE IN ITS REPLY DAT ED 26 TH OCT. 2009 BEFORE THE TPO HAS SUBMITTED THAT NO INDEPENDENT THIRD PARTY CUP DATA IS AVAILABLE TO BENCHMARK THE INTERNATIONAL TRANSACTION PERTAINING TO EXPORT OF THE PRODUCT IBB . MOREOVER, THE ASSESSEE ITSELF SUBMITTED BEFORE THE TPO THAT THE ADJUST MENT IN THIS REGARD CONSIDERING THE LOSSES INCURRED BY IT WOULD BE AMOUNTING TO RS.4 , 1 9,424/ - . HOWEVER, AGAIN AS PER THE SUBMISSION OF THE ASSESSEE , IT PRODUCED A FRE S H SUBMISSION DATED 22 ND DECEMBER, 2009 BEFORE THE AO, WHERE IT TRIED TO JUSTIFY THE EXPOR T TRANSACTION OF IBB PRODUCT BY PRODUCING THE EXPORT DATA AS PROVIDED BY INTERNATIONAL BUSINESS INFORMATION SERVICES (IBIS). THE ASSESS EE HAS CONTENDED THAT THE BENCHMARKING OF INTERNATIONAL TRANSACTION NEEDS TO BE DONE BY USING THE CUP AS THE MOST APPROPR IATE METHOD AND BY COMPARING THE AVERAGE PRICE AS DETERMINED FROM THE DA T A PR OVIDED BY IBIS WITH THE RATE EARNED BY IT FROM ITS TRANSACTION WITH THE AE. I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 12 OF 18 5.7.2 HOWEVER, SUBMISSION OF THE ASSESSEE CANNOT BE ACCEPTED IN VIEW OF THE FACT THAT THE ASS ESSEE HAS FAILED TO DEMONSTRATE AND EVEN ADMITTED TO THAT EXTENT THAT NO COMPARABLE UNCONTROLLED TRANSACTION HAS BEEN CARRIED OUT BY ITS AE IN INDIA. MOREOVER, IT IS NOT KNOWN AS TO IN WHOSE REGARD THE DATA HAS BEEN PROVIDED BY IBIS AND WHAT WERE THE TERMS AND C ONDITIONS OF THE SALE OF IBB PRODUCTS IN THESE TRANSACTIONS. THE CUP METHOD CANNOT BE APPLIED IN ISOLATION BY COMPARING ONLY THE AVERAGE PRICE EARNED AND BY IGNORING AL L OTHER DETAILS PERTAINING TO THE TRANSACTION SUCH AS VOLUME OF THE TRANSACTION, FINAL M ARKET OF THE TRANSACTION, DISCOUNT AND BONUS IN THE TRANSACTION, PRODUCT QUALITY, TERMS OF PAYMENT ETC. WE HAVE ALREADY DISCUSSED IN DETAIL IN PARA 4.10, 4. 1 1 AND 4.12 OF THIS ORDER THAT THE CUP METHOD IS LO BE JUDICIOUSLY USED FOR THE BENCHMARKING TRANSAC TION AND THE SAME ENVISAGES A STRICT COMPARABILITY. NO SUCH EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE IN THIS CASE. MOREOVER, IT IS ALSO OBSERVED THAT THE ASSESSEE HAS INCURRED A SUBSTANTIAL LOSS IN THIS TRANSACTION OF EXPORT OF IBB WHICH EVIDEN CES THE FACT THE ASSESSEE HAS NOT EVEN TRIED TO COVER UP THE COSTS OF PRODUCTION INCURRED BY IT. IN VIEW OF THE FACTS MENTIONED ABOVE, THE CONTENTION OF THE ASSESSEE IS HEREBY REJECTED. 1 8 . THE ASSESSEE IS AGGRIEVED AND IS IN FURTHER A PPEAL BEFORE US. 19 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 20 . WE FIND THAT IBB (I.E. ISOBUTYL BENZENE) IS A GENERIC CHEMICAL PRODUCT AND SO FAR AS PRICES OF GE NERIC PRODUCTS ARE CONCERNED, CUP , ON THE BASIS OF DATABASE BUILT ON INPUTS LIKE CUSTOMS DATA , IS REASONABLY ACCEPTABLE. WHILE ON THIS ASPECT OF THE MATTER, WE MAY REFER TO THE FOLLOWING OBSERVATIONS MADE BY A CO - ORDINATE BENCH IN THE CASE OF TILDA RICELA ND PVT. LTD. V S. ACIT [(2014) 64 SOT 61 (DELHI)] : - 11. WE HAVE NOTED THAT THE INFORMATION INPUTS GIVEN BY THE TIPS SOFTWARE, ON THE FACTS OF THIS CASE, ARE INPUTS WITH REGARD TO THE INFORMATION PUBLICLY AVAILABLE WITH THE CUSTOMS DEPARTMENT AT THE DIFFER ENT PORTS. THESE INPUTS ARE NOT THE INDEPENDENT 'QUOTES', AS REFERRED TO BY THE TPO, BUT ONLY COMPILATION OF THE DATA AVAILABLE IN PUBLIC DOMAIN. IN OUR CONSIDERED VIEW, THE TRANSFER PRICING OFFICER WAS CLEARLY IN ERROR IN REJECTING THESE INPUTS ON THE GRO UND THAT SUCH INFORMATION IS NOT COVERED BY RULE 10D (3) FOR THE SIMPLE REASON THAT RULE 10 D(3) IS ONLY ILLUSTRATIVE IN NATURE AND IT MERELY DESCRIBES THE INFORMATION, REQUIRED TO BE MAINTAINED BY THE ASSESSEE UNDER SECTION 92 D, SHALL BE SUPPORTED BY A UTHENTIC DOCUMENTS, WHICH MAY INCLUDE THE FOLLOWING (I.E. DOCUMENTS SPECIFIED THEREIN )'. THE LOGIC EMPLOYED BY THE TRANSFER PRICING OFFICER IS THAT SINCE DATABASES COMPILED BY I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 13 OF 18 PRIVATE ENTITIES IS NOT INCLUDED IN RULE 10 D(3), SUCH DATABASES CANNOT BE RELIE D UPON BY THE ASSESSEE. THIS LOGIC IS CLEARLY FALLACIOUS INASMUCH AS AN ITEM NOT BEING INCLUDED IN ILLUSTRATIVE LIST OF REQUIRED DOCUMENTS DOES NOT TAKE OUTSIDE THE AMBIT OF 'ACCEPTABLE DOCUMENT' FOR THE REQUIRED PURPOSES. IN ANY EVENT, ALL THAT TIPS SOFTW ARE DOES IS TO COLLECT THE DATA, COMPILE THE SAME IN EASY TO REFER FORMAT AND MAKE IT AVAILABLE TO THE END - USER OF SUCH DATA ONLINE ( WWW.TIPSEXIM.COM ) OR ON ELECTRONIC MEDIA, BUT THIS DATA, NONETHELESS, IS PUBLIC DATA MAINTAINED BY THE CUSTOMS DEPARTMENT AT VARIOUS PORTS. IT WAS ALSO OPEN TO THE TRANSFER PRICING OFFICER TO, IF HE HAD ANY DOUBTS, CALL FOR FURTHER INFORMATION FROM THIS DATABASE SUPPLIER AND EXAMINE AUTHENTICITY OF THE DATA SO FURNISHED. YET , INSTEAD OF DOING SO, HE SUMMARILY REJECTED THE DATA AS UNRELIABLE ON A TECHNICAL GROUND - WHICH, AS WE HAVE SEEN ABOVE, IS NOT TENABLE IN LAW. 12. WE HAVE ALSO SEEN THAT THE INFORMATION SO FURNISHED BY THE DATABASE USED BY THE ASSESSEE IS FAIRLY COMPRE HENSIVE INFORMATION, INCLUDING DESCRIPTION AND PRICES AS PER INVOICES PRESENTED TO CUSTOMS - A FACT NOTED BY THE TPO HIMSELF, WHICH CAN BE CROSS CHECKED AND VERIFIED, IN CASE OF DOUBTS. THE TPO HAS, AT PAGE 11 OF THE TRANSFER PRICING ORDER, HIMSELF STATED THAT THE PRODUCT DATA COMPILED IN THE TIPS DATABASE IS TAKEN FROM CUSTOM DATA RELATING TO RICE, BUT ALSO SPECIFIES THE VARIETY AND BRAND OF BASMATI/ NON BASMATI RICE'. IN THESE CIRCUMSTANCES, THE VAGUE DOUBTS EXPRESSED BY THE TPO ON THE RELEVANCE OF THIS DATABASE ARE CLEARLY UNFOUNDED. HIS ACTION IS INCORRECT IN LAW AS INDEED INAPPROPRIATE TO THE FACTS OF THIS CASE. THEREFORE, IN OUR CONSIDERED VIEW, THE TRANSFER PRICING OFFICER WAS CLEARLY IN ERROR IN REJECTING THE INFORMATION INPUTS RECEIVED FROM THE TI PS SOFTWARE AND THE DATABASE MADE AVAILABLE BY THE SAID ENTITY. THE DRP LAID SO MUCH OF EMPHASIS ON THE OBSERVATION THAT THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THE ARGUMENT OF THE TPO THAT RULE 10D(3) DOES NOT ALLOW THE USE OF PRIVATE DATABASES BUT DID NOT NOTE OF THE GLARINGLY ILLUSTRATIVE, RATHER THAN EXHAUSTIVE, CHARACTER OF THE DOCUMENTS LISTED IN THE SAID RULE. AS A QUASI - JUDICIAL AUTHORITY, AND WHILE PURSING THE GOAL OF JUSTICE, ONE CANNOT REMAIN AT THE MERCY OF THE WISDOM OF REPRESENTATIVES OF TH E PARTIES APPEARING BEFORE SUCH AN AUTHORITY; IT IS BOUNDEN DUTY OF EVERY QUASI - JUDICIAL AUTHORITY TO APPRECIATE THE SCOPE OF THE LEGAL PROVISIONS AND APPLY THEM IN LETTER AND IN SPIRIT. WE UPHOLD THE GRIEVANCE OF THE ASSESSEE TO THE EXTENT THE AUTHORITIES BELOW HAVE INDEED ERRED IN SUMMARILY REJECTING ASSESSEE'S RELIANCE ON THE DATABASE, WITH RESPECT TO INFORMATION PUBLICLY AVAILABLE WITH CUSTOMS DEPARTMENT AT VARIOUS PORTS, COMPILED BY A PRIVATE ENTITY. 13. AS REGARDS LEARNED DRP'S ADDITIONAL OBSERVATIO N THAT, FURTHER, IN A COMMODITY LIKE BASMATI RICE, IT IS VERY DIFFICULT TO FIND THE EXACT COMPARABLES WHICH CAN MEET THE STRINGENT STANDARDS REQUIRED FOR APPLICATION OF CUP METHOD , WE ARE UNABLE TO SEE ANY MERITS IN THIS APPROACH EITHER. UNDOUBTEDLY, PR ODUCT COMPARABILITY SHOULD BE CLOSELY EXAMINED IN APPLYING THE CUP METHOD AS A PRICE MAY BE MATERIALLY INFLUENCED BY DIFFERENCES BETWEEN THE GOODS IN THE CONTROLLED AND UNCONTROLLED TRANSACTIONS, BUT PRODUCT COMPARABILITY DOES NOT REQUIRE THE COMPARABLES T O BE EXACTLY THE SAME. THE PRODUCT CATEGORIZATION HAS BEEN DONE ON THE BASIS OF REASONABLE GENERIC DESCRIPTION, AND THE PRODUCT BEING GENERIC IN NATURE, SUCH CATEGORIZATION IN REASONABLE AND SUFFICIENT. GENERIC GOODS, EVEN UNDER DIFFERENT BRAND NAMES, DO N OT CEASE TO BE COMPARABLE WITH EACH OTHER - UNLESS THE I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 14 OF 18 IMPACT OF BRAND OR OTHER INTANGIBLES IS SO SUBSTANTIAL THAT IT DISTORTS THE COMPARISON ALTOGETHER. IN ANY EVENT, EVEN IF THERE ARE MINOR VARIATIONS IN PRICES OF GENERIC GOODS, SUCH FACTORS ARE ADEQUATEL Y TAKEN CARE OF BY AVERAGE IN THE CASE OF LARGE SIZE OF COMPARABLES, AS IS THE SITUATION BEFORE US. AS NOTED IN THE UN TRANSFER PRICING MANUAL FOR DEVELOPING COUNTRIES, WITH WHICH WE ARE IN CONSIDERED AGREEMENT, THE CUP METHOD IS APPROPRIATE ESPECIALLY IN CASES WHERE AN INDEPENDENT ENTERPRISE BUYS OR SELLS PRODUCTS THAT ARE IDENTICAL OR VERY SIMILAR TO THOSE SOLD IN THE CONTROLLED TRANSACTION ....'. IT WOULD, THEREFORE, INDEED SEEM THAT FOR THE PURPOSE OF APPLYING CUP METHOD WOULD BE, A REASONABLE CLASSIFIC ATION, WHICH COULD JUSTIFIABLY DEFINE THE PRICES, WOULD SUFFICE. WE HAVE ALSO NOTED THAT THE ASSESSEE HAS DONE CATEGORIZATION OF BASMATI RICE, AS EVIDENT FROM PAGES 352 AND 253 OF THE TRANSFER PRICING STUDY FILED BEFORE US, IN THREE BROAD GEOGRAPHICAL CATE GORIES AND SEVEN SUB CATEGORIES, AND OF NON - BASMATI RICE IN FOUR BROAD GEOGRAPHICAL CATEGORIES AND SIX SUB CATEGORIES. LET US ALSO NOT FORGET THAT THE CLASSIFICATION IS DONE ON THE BASIS OF GEOGRAPHICAL MARKETS AND NORMALLY THE PRODUCTS SOLD IN A GEOGRAPHI CAL MARKET, DUE TO SHEER COMPETITIVE FORCES, ARE BROADLY SIMILAR. IT IS ALSO USEFUL TO REFER TO CERTAIN OBSERVATIONS MADE IN UN TRANSFER PRICING MANUAL, WITH WHICH WE ARE IN CONSIDERED AGREEMENT, TO THE EFFECT THAT EXTERNAL COMPARABLES MAY BE DIFFICULT TO FIND IN PRACTICE UNLESS THE TRANSACTIONS INVOLVE A FAIRLY COMMON AND HOMOGENEOUS PRODUCT OR SERVICE. HOWEVER, THE ADVANTAGES OF THE CUP METHOD ARE GREAT ENOUGH TO WARRANT A SIGNIFICANT EFFORT TO APPLY THE METHOD AS NOT TO BE INFLUENCED BY MINOR VARIATIONS IN THE FINE POINTS ABOUT PRODUCT QUALITY'. VIEWED THUS, EVEN IF THERE BE SOME MINOR VARIATIONS IN THE QUALITY EVEN UNDER THE ELABORATE CATEGORIZATION OF RICE VARIETIES, SUCH VARIATIONS, WHICH DO NOT MATERIALLY AFFECT THE PRICES OF UNCONTROLLED TRANSACTION S DUE TO LARGE SIZE OF COMPARABLES AND THE SAME GEOGRAPHICAL CONSUMPTION MARKET BEING COVERED BY THE COMPARABLES, CAN BE IGNORED. 14. AS FOR REJECTION OF CUP METHOD ON THE GROUND THAT PRICES OF UNCONTROLLED TRANSACTIONS OFTEN FLUCTUATE ON WEEKLY AND EVEN DAILY BASIS. THE TPO HIMSELF HAS NOTED IN HIS ORDER, THE ASSESSEE DID NOT HAVE ANY CONTRACTUAL ARRANGEMENT AND THESE WERE MARKET DRIVEN PRICES ON WHICH THE EXPORTS TO AES TOOK PLACE. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE ASSESSEE HAS TAKEN AVERAGE OF A QUARTER SO AS TO ENSURE THAT DAY TO DAY VARIATIONS IN PRICES DO NOT DISTORT THE COMPARABILITY. NEITHER THERE IS ANY SPECIFIC OBJECTION TO THIS AVERAGING, NOR HAS THE TPO SUGGESTED ANY BETTER ALTERNATIVE TO THIS APPROACH. IN OUR HUMBLE UNDERST ANDING, THIS METHOD DOES PROVIDE FOR A REASONABLE, EVEN IF NOT PERFECT, SOLUTION TO THE DISTORTION WHICH MAY CREEP IN CASE COMPARISON OF PRICES IS DONE ON DAY TO DAY BASIS, AND DUE TO LIMITED COMPARABLES BEING AVAILABLE FOR THE SAME. TRANSFER PRICING IS NO T A PERFECT SCIENCE BUT WE STILL HAVE TO CHOOSE A LESS IMPERFECT ALTERNATIVE FROM THE VARIOUS ALTERNATIVES AVAILABLE. 15. COMING TO THE INHERENT EDGE THAT DIRECT METHODS HAVE OVER INDIRECT METHODS OF DETERMINING THE ARM'S LENGTH PRINCIPLE, WHICH JUSTIFIES SELECTION OF CUP METHOD AS THE MOST APPROPRIATE METHOD, WE MAY REFER TO THE FOLLOWING OBSERVATIONS MADE BY A COORDINATE BENCH IN THE CASE OF SERDIA PHARMACEUTICALS PVT. LTD. VS. ACIT (136 TTJ 139): 60. THE THRUST OF LEARNED COUNSEL'S ARGUMENTS IS THAT S INCE TRANSFER PRICING LEGISLATION DOES NOT PROVIDE FOR ANY ORDER OF PREFERENCE IN I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 15 OF 18 SELECTION OF THE MOST APPROPRIATE METHOD, NO SUCH ORDER OF PREFERENCE DIRECT OR IMPLIED, CAN BE EXERCISED BY US EITHER. 61. THIS ISSUE IS NO LONGER RES INTEGRA. IN THE CASE OF ASSTT. CIT VS. MSS INDIA (P) LTD. (2009) 123 TTJ (PUNE) 657 : (2009) 25 DTR (PUNE)(TRIB) 1 : (2009) 32 SOT 132 (PUNE), A CO - ORDINATE BENCH OF THIS TRIBUNAL, SPEAKING THROUGH ONE OF US (I.E. THE AM), HAD, INTER ALIA, OBSERVED THAT 'WHILE THERE IS NO PAR TICULAR ORDER OR PRIORITY OF METHODS WHICH THE ASSESSEE MUST FOLLOW, AND NO METHOD CAN INVARIABLY BE CONSIDERED TO BE MORE RELIABLE THAN OTHERS, ON A CONCEPTUAL NOTE, TRANSACTIONAL PROFIT METHODS(I.E., TNMM AND PROFIT SPLIT METHOD) ARE TREATED AS METHODS O F LAST RESORT WHICH ARE PRESSED INTO SERVICE ONLY WHEN THE STANDARD METHODS, WHICH ARE ALSO TERMED AS 'TRADITIONAL METHODS' (I.E., CUP METHOD, RESALE PRICE METHOD AND COST PLUS METHOD) CANNOT BE REASONABLY APPLIED'. IT WAS NOTED BY THE COORDINATE BENCH THA T THE OECD GUIDELINES ALSO RECOGNIZE THIS APPROACH, AND THE BENCH EXPRESSED ITS CONSIDERED AGREEMENT WITH THIS APPROACH. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE CO - ORDINATE BENCH. IN OUR CONSIDERED VIEW, THE TRADITIONAL TRANSACTIO N METHODS HAVE AN INHERENT EDGE OVER THE TRADITIONAL PROFIT METHODS IN MOST OF THE SITUATIONS, AND, THEREFORE, WHEREVER BOTH THE METHODS CAN BE APPLIED IN AN EQUALLY RELIABLE MANNER, TRADITIONAL TRANSACTION METHODS ARE TO BE PREFERRED OVER TRADITIONAL PROF IT METHODS. 62. WE ARE ALIVE TO THE FACT THAT IN THE 2010 VERSION OF OECD GUIDELINES, OECD HAS DONE AWAY WITH HIERARCHICAL APPROACH IN SELECTING THE METHOD FOR DETERMINATION OF ALP. THE OECD HAS ABANDONED ITS EARLIER POSITION THAT TRANSACTIONAL PROFIT ME THODS MAY BE USED 'TO APPROXIMATE ARM'S LENGTH CONDITIONS WHEN TRADITIONAL TRANSACTIONAL METHODS CANNOT BE RELIABLY APPLIED ALONE, OR EXCEPTIONALLY CANNOT BE APPLIED AT ALL'. IN SHARP CONTRAST TO THE SAID OBSERVATION, 2010 OECD GUIDELINES, IN PARA 2.4, REC OGNIZE THAT 'THERE ARE SITUATIONS WHEN TRANSACTIONAL PROFIT METHODS ARE FOUND TO BE MORE SUITABLE (VIS - A - VIS TRADITIONAL TRANSACTIONAL METHODS)' SUCH AS, IN A SITUATION, 'WHERE EACH OF THE PARTY MAKES A UNIQUE CONTRIBUTION IN RELATION TO CONTROLLED TRANSA CTION, OR WHERE THE PARTIES ENGAGE IN HIGHLY INTEGRATED ACTIVITIES'. THIS CHANGE IN OECD APPROACH IS QUITE IN LINE WITH INDIAN TRANSFER PRICING LEGISLATION WHICH REQUIRES SELECTION OF MOST APPROPRIATE METHOD RATHER THAN THE METHOD BEING PICKED UP IN THE OR DER OF PRIORITY. TO THIS EXTENT, THE APPROACH OF OECD AND INDIAN TRANSFER PRICING LEGISLATION IS NOW QUITE IN HARMONY WITH EACH OTHER. 63. IT WILL, HOWEVER, BE STRETCHING THE THINGS TOO FAR TO SUGGEST THAT IN THE 2010 VERSION OF OECD GUIDELINES, ALL THE METHODS OF DETERMINING THE ALP HAVE BEEN PLACED AT PAR WITH EACH OTHER. THE CHANGE IN THE OECD GUIDELINES, AS WE SEE IT, IS IN RESPECT OF THE ORDER IN WHICH SUITABILITY OF THE METHODS IS TO BE CONSIDERED AND IN RECOGNITION OF THE FACT THAT THERE CAN BE SIT UATIONS IN WHICH TRANSACTIONAL PROFIT METHODS CAN HAVE AN EDGE OVER TRADITIONAL TRANSACTIONAL METHODS. HOWEVER, WHEREVER TRANSACTIONAL I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 16 OF 18 PROFIT METHODS AS ALSO TRADITIONAL TRANSACTIONAL METHODS CAN BE APPLIED IN EQUALLY RELIABLE MANNER, THE OECD GUIDELINES S TILL CONSIDER THE TRADITIONAL TRANSACTIONAL METHODS TO BE PREFERABLE, AS IS EVIDENT FROM FOLLOWING OBSERVATIONS IN PARA 2.3 OF THE OECD GUIDELINES 2010 2.3 TRADITIONAL TRANSACTION METHODS ARE REGARDED AS THE MOST DIRECT MEANS OF ESTABLISHING WHETHER CON DITIONS IN THE COMMERCIAL AND FINANCIAL RELATIONS BETWEEN AES ARE AT ARM'S LENGTH. THIS IS BECAUSE ANY DIFFERENCE IN THE PRICE OF A CONTROLLED TRANSACTION FROM THE PRICE OF A COMPARABLE UNCONTROLLED TRANSACTION CAN NORMALLY BE TRACED DIRECTLY TO THE COMMER CIAL AND FINANCIAL RELATIONS MADE OR IMPOSED BETWEEN THE AES, AND THE ARM'S LENGTH CONDITIONS CAN BE ESTABLISHED BY DIRECTLY SUBSTITUTING THE PRICE IN COMPARABLE UNCONTROLLED TRANSACTION FOR THE PRICE OF THE CONTROLLED TRANSACTION. AS A RESULT, WHERE, TAKI NG INTO ACCOUNT THE CRITERIA ESTABLISHED IN PARA 2.2, A TRADITIONAL TRANSACTION METHOD AND A TRADITION PROFIT METHOD CAN BE APPLIED IN A EQUALLY RELIABLE MANNER, THE TRADITIONAL TRANSACTION METHOD IS TO BE PREFERRED OVER TRADITIONAL PROFIT METHOD. MOREOVER , WHERE, TAKING INTO ACCOUNT THE CRITERIA ESTABLISHED IN PARA 2.2, THE CUP METHOD AND ANOTHER TRANSFER PRICING METHOD CAN BE APPLIED IN AN EQUALLY RELIABLE MANNER, THE CUP METHOD IS TO BE PREFERRED' 64. IN OTHER WORDS, THEREFORE, EVEN AS THERE MAY NOT BE ANY ORDER OF PREFERENCE IN WHICH METHODS OF DETERMINING THE ALP MUST BE CONSIDERED, THE TRADITIONAL TRANSACTION METHODS, AND PARTICULARLY CUP, HAVE AN EDGE IN THE SENSE THAT ALL THINGS BEING EQUAL, CUP AND TRADITIONAL TRANSACTION METHODS ARE PREFERRED OVE R THE TRANSACTION PROFIT METHOD. WE ARE BROADLY IN AGREEMENT WITH THESE VIEWS. WHETHER WE PROCEED ON THE BASIS THAT THERE IS AN ORDER OF PREFERENCE IN WHICH TRANSFER PRICING METHODS ARE TO BE APPLIED, OR WHETHER WE PROCEED WITHOUT ANY SUCH PRIORITY ORDER, THE FACT REMAINS THAT AS LONG AS CUP METHOD CAN BE REASONABLY APPLIED IN DETERMINING THE ALP OF AN INTERNATIONAL TRANSACTION IN A PARTICULAR FACT SITUATION, AND UNLESS ANOTHER METHOD IS PROVEN TO BE MORE RELIABLE A METHOD VIS - A - VIS THE FACT SITUATION OF TH AT PARTICULAR CASE, THE CUP METHOD IS TO BE PREFERRED. THE REASON IS SIMPLE. WHEN AES ENTER INTO A TRANSACTION AT SUCH CONDITIONS IN COMMERCIAL AND FINANCIAL TERMS, WHICH ARE DIFFERENT FROM COMMERCIAL AND FINANCIAL TERMS IMPOSED IN COMPARABLE TRANSACTION B ETWEEN INDEPENDENT ENTERPRISES, THE DIFFERENCES IN THESE TWO SETS OF CONDITIONS IN FINANCIAL AND COMMERCIAL TERMS ARE ATTRIBUTED TO INTER - RELATIONSHIP BETWEEN THE AES, AND IT IS THIS IMPACT OF INTER - RELATIONSHIP BETWEEN THE AES THAT IS SOUGHT TO BE NEUTRAL IZED BY THE TRANSFER PRICING REGULATIONS. AS LONG AS CUP METHOD CAN BE RELIABLY APPLIED ON THE FACTS OF A CASE, IT DOES OFFER MOST DIRECT METHOD OF NEUTRALIZING THE IMPACT OF INTERRELATIONSHIP BETWEEN AES ON THE PRICE AT WHICH THE TRANSACTIONS HAVE BEEN EN TERED INTO BY SUCH AES. I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 17 OF 18 16. IN VIEW OF THE ABOVE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE ALP DETERMINATION UNDER CUP METHOD ON THE BASIS OF 'DAILY EXPORT PORT DATA - APRIL 2007 - MARCH 2008', BY ADOPTI NG QUARTERLY AVERAGES, WAS WRONGLY REJECTED BY THE TPO AND THE DRP. 21. IN THIS VIEW OF THE MATTER, AND PARTICULARLY LOOKING TO THE SMALLNESS OF TRANSACTION, THE INPUTS FROM INTERNATIONAL BUSINESS INFORMATION SERVICES WERE REASONABLE AND SHOULD HAVE BEEN ACCEPTED. 22. WE HAVE NOTED THAT THE ASSESS E E HAS INCURRED A LOSS ON THIS TRANSACTION BUT WHEN ARM S LENGTH PRICE IS DETERMINED ON THE BASIS OF CUP, IT IS WHOLLY IMMATERIAL AS TO WHETHER THE ASSESSEE HAS EARNED PROFIT OR INCURRED A LOSS. THE TRANSFER PRI CING OFFICER WAS THUS SWAYED BY A WHOLLY IRRELEVANT CONSIDERATION. THE SUITABILITY OF CUP METHOD CANNOT BE REJECTED BECAUSE OF THE COMMERCIAL OUTCOME OF THE TRANSACTION BEING IN THE NATURE OF LOSS. 23. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE. ACCORDINGLY, THE ARM S LENGTH PRICE ADJUSTMENT OF RS.41,19,424/ - IN RESPECT OF EXPORTS OF ISOBUTYL BENZENE IS ALSO DELETED. 24. GROUND NO.5 IS THUS ALLOWED. 25. BY WAY OF GROUND NO.6 & 7, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES: - GROUND NO.6 - THE AO ERRED IN NOT FOLLOWING THE DIRECTION GIVEN BY THE TO SET OFF SHORT TERM CAPITAL LOSS OF RS. 1,44,134 AGAINST SHORT TERM CAPITAL GAINS OF RS . 29,12,827 AS PER LAW. 6.1 THE A.O. ALS O ERRED IN FIRST ADJUSTING THE BUSINESS LOSSES OF THE CURRENT YEAR AGAINST THE INCOME FROM CAPITAL GAINS AND ALLOWED THE SET OFF OF THE BALANCE CAPITAL GAINS AGAINST BROUGHT FORWARD CAPITAL LOSSES OF EARLIER YEARS. I.T.A. NO. 9197 /MUM/201 0 ASSESSMENT YEAR: 200 6 - 07 PAGE 18 OF 18 6.2 THE APPELLANT PRAYS THAT THE DIRECTI ON GIVEN BY THE DRP BE BINDING ON THE A.O. AND AS SUCH THE SHORT TERM CAPITAL LOSS OF RS. 1,44,134 OF EARLIER ASSESSMENT YEAR 2002 - 03 BE ALLOWED TO BE SET OFF AGAINST THE SHORT TERM CAPITAL GAIN OF RS.29,12,827. 6.3 THE APPELLANT FURTHER PRAYS THAT TH E SHORT TERM CAPITAL LOSS OF RS.1,44,134 OF ASSESSMENT YEAR 2002 - 03 BE ALLOWED TO BE SET OFF AGAINST SHORT TERM CAPITAL GAINS OF RS.29,I2,827. GROUND NO.7 - THE A.O. ERRED IN SETTING OFF THE BUSINESS LOSS OF RS.14,38,04,694 AGAINST THE SHORT TERM CAPITAL GAIN OF RS.29,12,827 AND THE LONG TERM CAPITAL GAIN OF RS.25,29,16,974. 7.1 THE APPELLANT PRAYS THAT THE BUSINESS LOSS OF RS.14,08,91,867 BE ALLOWED TO BE CARRIED FORWARD IN THE SUBSEQUENT YEAR INSTEAD OF TREATING THE TOTAL INCOME AS NIL. 26. NO S PECIFIC ARGUMENTS ARE ADVANCED IN SUPPORT OF THESE GROUNDS. THESE GRIEVANCES ARE, THEREFORE, TREATED AS NOT PRESSED. 27 . IN THE RESULT, APPEAL IS PARTLY ALLOWED . PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF MARCH , 2016. SD/ - SD/ - PAWAN SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 31 ST DAY OF MARCH , 2016. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) G UARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI