DCIT CIR 8(2), MUMBAI V. HINDUJA VENTURES LTD ( FORMELRY M/S. HINDUJA TMT LTD), MUMBAI

ITA 920/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71886 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 26-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 05-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KANCHAN KAUSHAL
• Assessee Lawyers: AJIT KU MAR JAIN
• Keywords: Business income; Transfer pricing; International transaction
• Section: 148; 143(3); 92

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - K BENCH. . . , , BEFORE S/SH. I.P. BANSAL,JUDICIAL MEMBER & RAJENDRA ,ACCOUNTANT MEMBER /. ITA NO.920/MUM/2010 , ! ! ! ! / ASSESSMENT YEAR-2004-05 D.C.I.T CIR 8(2) ROOM NO. 216-A, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI. VS HINDUJA VENTURES LTD. (FORMERLY M/S. HINDUJA TMT LTD.) IN CENTRE, 49/50, 12 TH ROAD, ANDHERI(E), MUMBAI-400093 PAN:AAACH2058N ( '# / APPELLANT) ( $%'# / RESPONDENT) &' &' &' &' ( ( ( ( / ASSESSEE BY : SHRI AJIT KUMAR JAIN ) ( / REVENUE BY : SHRI KANCHAN KAUSHAL ) )) ) '* '* '* '* / DATE OF HEARING : 26-11-2013 +,! ) '* / DATE OF PRONOUNCEMENT : 29-11-2013 , 1961 ) )) ) 254 )1( '-' '-' '-' '-' . . . . ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM CHALLENGING THE ORDER DATED 18.11.2009 OF THE CIT(A )-15, MUMBAI ASSESSING OFFICER (AO) HAD FILED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO TREAT PROFITS ON PURCHASE AND SALE OF INV ESTMENTS AS LONG TERM AND SHORT TERM CAPITAL GAINS AS DIRECTED BY THE ASSESSEE, WITHOUT APPRECIA TING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 2,81,70,000/- ON ACCOUNT OF TRA NSFER PRICING ADJUSTMENT U/S. 92CA(3), BY RESTRICTING THE RATE OF PAYMENT OF COMMISSION TO 12 % AS ARMS LENGTH RATE INSTEAD OF 20% AS CLAIMED BY THE ASSESSEE, WITHOUT APPRECIATING THE F ACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THE FACTS THAT SIMILAR ADDITIONS MADE IN THE AY 200 2-03 AND 2003-04 HAVE BEEN CONFIRMED BY THE FIRST APPELLATE AUTHORITY, WHEREIN THE ARMS LENGTH RATE OF THE COMMISSION PAYMENT WAS DETERMINED BY THE TPO FOR THE FIRST TIME AND THERE IS NO INDIFFERENCE IN THE FACTS DURING THE YEAR UNDER CONSIDERATION, WITHOUT APPRECIATING THE FACTS OF THE CASE. 4.THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5.THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF PROVI DING I.T.ENABLED SERVICES,FINANCE- 2 ITA NO. 920/MUM/2010 HINDUJA VENTURES LTD. INVESTMENT ACTIVITY,FILED ITS RETURN OF INCOME ON 3 0.10.2004 DECLARING A TOTAL INCOME OF RS. 6.63 CRORES. AO FINALISED THE ASSESSMENT U/S. 143(3) OF THE ACT ON 29.12.2006,DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 11.70 CRORES.LATER ON ASSESSMENT WAS RE-OPENED,AFTER ISSUING A NOTICE U/S. 148 OF THE ACT AND VIDE HIS ORDER DATED 11.12.2009 AO DETERMINED THE INCOME OF THE ASSESSEE AT RS. 77. 01 CRORES. 2.1. FIRST GROUND OF APPEAL IS ABOUT TREATING PROFITS ON PURCHASE AND SALE OF INVESTMENT;AS LONG TERM CAPITAL GAIN(LTCG) AND SHORT TERM CAPITAL GAIN (STCG);AS BUSINESS INCOME.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD E ARNED AN AMOUNT OF RS. 4.23 CRORES UNDER THE HEAD LTCG;BEFORE INDEXATION AND AN AMOUNT OF RS . 40,35,095/- LTCG WITHOUT INDEXATION; AFTER SETTING OFF OF LOSS OF CURRENT YEAR OF RS. 7. 44 LACS. HE FURTHER FOUND THAT ASSESSEE HAD SHOWN INCOME OF RS. 2.81 LACS UNDER THE HEAD STCG AFTER SETTING OFF OF CURRENT YEAR LOSS TO THE TUNE OF RS. 4.43 LACS.AS PER AO WORKING OF CAPITAL GAINS CO ULD BE SUMMARISED AS UNDER: PARTICULARS AMOUNTS LONG TERM CAPITAL GAIN (FROM 01.04.2003 TO 31.03.2004 BEFORE INDEXATION) GAINS CONSIDERED I N THE RETURN WORKING OF LONG TERM CAPITAL GAIN @ 20% LONG TERM CAPITAL GAINS (WITH INDEXATION) LESS: LONG TERM CAPITAL LOSS (AFTER INDEXATION) WORKING OF SHORT TERM CAPITAL GAINS SHORT TERM CAPITAL GAINS (CURRENT YEAR) LESS: SHORT TERM CAPITAL LOSS (CURRENT YEAR) 47,79,418 (7,44,324) 40,35,095 7,25,435 (4,43,489) 4,23,67,049 4,23,67,049 2,81,946 HE DIRECTED THE ASSESSEE TO FURNISH THE REASON AS T O WHY THE SHARE TRADING ACTIVITY SHOULD NOT BE TREATED AS BUSINESS AND NOT AN INVESTMENT ACTIVITY. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,AO HELD THAT ASSESSEE HAD AMENDED ITS MEMO RANDUM OF ASSOCIATION TO EXCLUDE CERTAIN CLAUSES,THAT AMENDING THE OBJECT CLAUSE OF MEMORAND UM OF ASSOCIATION DID NOT CHANGE THE FACT THAT ASSESSEE WAS INVOLVED IN DEALING IN SHARES,THA T IT HAD CARRIED ON BUSINESS IN A SYSTEMATIC AND ORGANISED MANNER,THAT THE MOTIVE OF THE ASSESSEE WA S NOT TO MAKE INVESTMENT BUT TO EARN PROFIT, THAT IT HAD MADE HUGE INVESTMENT IN FIXED ASSETS AN D HAD ENGAGED PROFESSIONALS, EMPLOYEES AND STAFF ETC. TO CARRY OUT THESE ACTIVITIES EFFICIENTL Y,THAT THE INITIAL INVESTMENTS WERE MADE FROM THE BORROWED FUNDS, THAT THE ASSESSEES TRANSACTION IN BUYING AND SELLING SHARES AMOUNTED TO BUSINESS ACTIVITY, HE RECALCULATE THE INCOME UNDER THE HEAD CAPITAL GAINS. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDE R, HE HELD THAT ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS OF IT ENABLED SERVICES,THAT OPERATI NG INCOME FROM ITS PRIMARY ACTIVITY AMOUNTED TO RS.157.46CRORES,THAT PROFIT FROM SALE OF LONG TERM INVESTMENT WAS RS. 4.89 CRORES,THAT IT ACCOUNT -ED FOR MERELY 3% OF TOTAL INCOME,THAT THE MAJOR PO RTION OF INCOME UNDER THE HEAD LTCG WAS RESULT OF SALE OF THE SECURITIES THAT WERE HELD FOR MORE THAN ONE YEAR, THAT SOME OF THE SECURITIES WERE HELD FOR MORE THAN 3 YEARS THAT AS PER THE BRE AK UP THE LTCG WITHOUT INDEXATION WAS RS. 4.23 CRORES AND WITH INDEXATION LTCG AMOUNTED TO RS . 47.79 LACS ONLY,THAT THE INCOME UNDER THE HEAD STCG WAS OF RS.7.25 LACS ONLY, THAT THE PERIOD OF HOLDING AS WELL AS INVESTMENT IN MUTUAL FUNDS POINTED OUT THAT THESE WERE IN THE NATURE OF INVESTMENT, THAT THE SECURITIES HELD BY THE ASSESSEE WERE CHARACTERISED IN THE BOOKS OF ACCOUNT S AND IN THE BALANCE-SHEET AS INVESTMENTS, THAT THE ASSESSEE HAD MAINTAINED A SEPARATE TRADING PORT FOLIO AND HAD OFFERED ITS INCOME UNDER BUSINESS HEAD,THAT SHARES AND SECURITIES HELD FOR A LONGER P ERIOD THAT WERE DEPICTED AS INVESTMENTS IN THE 3 ITA NO. 920/MUM/2010 HINDUJA VENTURES LTD. BALANCE-SHEET WERE OFFERED IN THE HEAD CAPITAL GAI NS. RELYING UPON THE DECISIONS OF MUMBAI TRIBUNAL DELIVERED IN THE CASES OF J.M.SHARES & STO CK BROKERS PVT.LTD.(ITA NO. 2801/ MUM/ 2008),JANAK S. RANGWALE (ITA NO. 1164/MUM/2004) AND GOPAL PUROHIT (29SOT117),HE HELD THAT THERE WAS NO MERIT IN TREATING THE ABOVE GAIN AS BU SINESS INCOME. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTE D THE ORDER OF THE AO.AUTHORISED REPRES - ENTATIVE (AR) SUBMITTED THAT SIMILAR ISSUE WAS DECI DED IN FAVOUR OF THE ASSESSEE BY THE L BENCH OF MUMBAI TRIBUNAL FOR THE AY- 2005-06 ON 31.01.2012 ( ITA NO. 4089/MUM/2011).WE FIND THAT ON SIMILAR FACTS AND CIRCUMSTANCES ADDITIONS MADE BY T HE AO,FOR THE YEAR 2005-2006 WERE DELETED BY THE FAA AND DEPARTMENT HAD FILED AN APPEAL BEFORE T HE TRIBUNAL. DISMISSING THE APPEAL,TRIBUNAL HELD AS UNDER : WE OBSERVE THAT LD.DR HAS NOT DISPUTED THE FACTS A S STATED BY LD. CIT(A) IN HIS ORDER AND RELEVANT FACTS ARE MENTIONED HEREIN ABOVE THAT ASSESSEE HAS OFFERED ONLY THOSE SHARES UNDER THE HEAD CAPITAL GAINS WHICH ARE SHOWN INVESTMENT IN BALAN CE SHEET AND THE MINIMUM PERIOD OF HOLDING WAS 3 YEARS AND IN SOME CASES IT WAS MORE THAN 7 YE ARS. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT ASSESSEE HAS MAINTAINED SEPARATE PORTFOLIO FOR INVESTMENT AND STOCK-IN-TRADE. CONSIDERING THE ABOVE FACTS AND IN THE ABSENCE OF ANY CONTRARY EVID ENCE ON RECORD, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A).HENCE, GROUN D NO.1 OF APPEAL TAKEN BY DEPARTMENT IS DISMISSED BY UPHOLDING ORDER OF LD. CIT(A). RESPECTFULLY FOLLOWING THE ORDER FOR THE AY- 2005-0 6, WE DECIDE GROUND NO.1 AGAINST THE AO. 5. GROUNDS OF APPEAL NO.2 AND 3 ARE ABOUT DELETING THE ADDITION,AMOUNTING TO RS.2.81 CRORES,MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT (TPA) U/S . 92CA(3) OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD FURNISHED AU DIT REPORT IN RESPECT OF INTERNATIONAL TRANSACT -TIONS WITH ASSOCIATED ENTERPRISES (AE),THAT ASSESS EE HAD PAID COMMISSION TO ITS AE NAMELY HTMT INC. FOR MARKETING DONE ON BEHALF OF IT, THAT THE RATE OF COMMISSION CHARGED BY THE AE FOR A CLIENT AETNA WAS 20%,THAT RATE OF COMMISSION IN C ASE OF FIRST NOTICE-OTHER AE-WAS 12 %, THAT THE AO HAD RELIED ON THE ORDER OF THE TRANSFER PRIC ING OFFICER(TPO) FOR THE AYS.-2002-03 AND 2003-04 WHEREIN 12% RATE WAS HELD TO BE ARMS LENGT H RATE,THAT AO HAD MADE ADJUSTMENT,ON THE BASIS OF THE ORDER OF THE TPO, IN EARLIER YEARS.AO MADE A REFERENCE TO THE TPO U/S 92CA(1) OF THE ACT FOR COMPUTATION OF ARMS LENGTH PRICE (ALP).BAS ED ON THE ORDER OF THE TPO, AO MADE AN ADDITION OF RS. 2.84 CRORES ON ACCOUNT OF EXCESS PA YMENT OF COMMISSION OF AE. 6. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY(FAA).AFTER CONSIDERING THE ORDER OF THE TPO AND SUBMISSIONS MADE BY THE ASSESS EE,FAA HELD THAT IN THE CASE UNDER CONSIDE - RATION ONE CONTROLLABLE TRANSACTION WAS COMPARED WI TH ANOTHER CONTROLLABLE TRANSACTION, THAT THE AE WAS SUBSIDIARY OF THE ASSESSEE,THAT IT HAD ENTER ED INTO SERVICE AGREEMENT WITH BOTH OF INSURANCE COMPANIES I.E.AETNA AND FIRST NOTICE FOR UNDERTAKING INSURANCE CLAIMS,THAT IN RESPECT OF AETNA THE RATE OF COMMISSION PAYABLE WAS 12%,THA T THE TPO HAD ADOPTED THE RATE OF 12% AS ARMS LENGTH RATE AND HAD DISALLOWED 8% COMMISSION IN CASE OF AETNA,THAT THE APPROACH ADOPTED BY THE TPO WAS FUNDAMENTALLY FLAWED,THAT ON E CONTROL TRANSACTION FOR THE PURPOSE OF DETERMINING ALP COULD ONLY BE COMPARED WITH UNCONTR OLLABLE TRANSACTION, THAT TPO HAD ADOPTED AN OPPOSITE METHOD,THAT ON THIS GROUND ITSELF THE W HOLE ACTION OF THE TPO WAS LIABLE TO BE REVERSED AS IT WENT INTO THE ROOT OF THE CASE AND T ANTAMOUNTED THE JURISDICTIONAL ERROR. HE FURTHER HELD THAT TURNOVER IN RESPECT OF FIRST NOTICE WAS R S. 20 LACS AS AGAINST THE TURNOVER OF RS. 35 CRORES IN CASE OF AETNA,THAT COMMISSION WAS IN NATU RE OF MARK UP COVER THE COST INCURRED BY AE FOR MARKETING ON BEHALF OF THE ASSESSEE,THAT EFF ORTS PUT IN FOR GETTING HUGE BUSINESS WITH AETNA WOULD HAVE TO BE COMPENSATED,THAT THE VOLUME OR TURNOVER DIFFERENCE BETWEEN AETNA AND FIRST NOTICE COULD NOT BE TERMED COMPARABLE,THA T TPO HAD IGNORED THE VITAL ASPECT,THAT THE TERMS AND CONDITIONS BETWEEN THE PARTIES WERE WERE DETERMINED BY DYNAMICS OF BUSINESS INCLUDE - ING INCREASED IN VOLUME OF BUSINESS,THAT IN CASE OF AETNA NUMBER OF CLAIMS INCREASED AROUND 400%, THAT BUSINSEE INCREASED FROM 4.08 CRORES (AY- 2002-03) TO RS. 14.44 CRORES, THAT THE NATURE OF SERVICE PROVIDED TO FIRST NOTICE AND AETNA WERE ALSO DIFFERENT AND HENCE NOT COMPARABLE, THAT 4 ITA NO. 920/MUM/2010 HINDUJA VENTURES LTD. CUP METHOD REQUIRED A HIGH DEGREE OF COMPARABILITY AND ADJUSTMENT OF SUCH MATERIAL DIFFERENCES COULD NOT BE APPLIED AS A RULE OF THUMB AS DONE BY THE TPO, THAT THE INCREASED IN COMMISSION COMMENSURATED WITH INCREASED IN BUSINESS PROCURED B Y AE FOR THE ASSESSEE, THAT THE ASSESSEE HAD ADOPTED THE TNMM AS MOST APPROPRIATE METHOD IN THE LIGHT OF NATURE OF TRANSACTIONS, THAT THERE WAS NO ATTEMPT ON PART OF THE TPO TO DEMONSTRATE AS TO HOW IT WAS NOT APPROPRIATE IN DETERMINING THE ALP,THAT ASSESSEE HAD SELECTED 156 COMPANIES FO R COMPARISON AFTER TAKING DUE PROCESS OF SEARCH, THAT TPO HAD NOT QUESTIONED THE ADMISSIBILI TY OF THESE COMPARABLES,THAT TRANSACTION WITH AE WERE AT ARMS LENGTH,THAT TPO/AO HAD ACCEPTED TH E TRANSACTION WITH REGARD TO SALE OF SERVICE TO AE WHEREAS SAME METHOD HAD BEEN REJECTED FOR COM MISSION PAID,THAT BOTH THE TRANSACTION WERE PART OF THE SAME SERVICE AGREEMENT, THAT CONTRADICT ORY STAND TAKEN BY THE TPO COULD NOT BE ENDORSED.FINALLY,HE HELD THAT COMMISSION PAYMENT TO AETNA WAS AT ARM LENGTH.HE DELETED THE ADDITION MADE BY THE AO. 7.BEFORE US, REPRESENTATIVES OF THE SIDES AGREED TH AT ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR THE AY2005-06(ITA/408 9/MUM/20011-DTD.31.01.2012).WE FIND THAT TRIBUNAL HAS DEALT THE ISSUE AS UNDER: 30.WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD.REPRESENTATIVES OF PARTIES AND ORDERS OF AUTHORITIES BELOW.WE HAVE ALSO CONSIDERED ORDER OF TPO.WE OBSERVE THAT TPO SUGGESTED TO MAKE AN ADJUSTMENT OF RS.1,49,16,166/-ONLY FOR THE REASO N THAT HE COMPARED THE CASE OF FIRST NOTICE WHERE THE RATE OF COMMISSION PAID WAS 12% AS AGAINS T COMMISSION PAID TO AETNA @15%. HOWEVER,RELEVANT FACTS SUBMITTED BY ASSESSEE THAT T HE ASSESSEE GENERATED TOTAL BUSINESS OF RS. 50, 14,02,800/- FROM HTMT INC.,AE AND OUT OF WHICH BUSI NESS PERTAINING TO AETNA WAS MORE THAN 99% OF TOTAL BUSINESS AND ONLY 1% WAS WITH FIRST NO TICE TO WHOM THE COMMISSION@ 12% WAS PAID AS AGAINST PAYMENT OF COMMISSION OF 15% TO AETNA.FU RTHER IT IS ALSO NOT IN DISPUTE THAT FIRST NOTICE,IS ALSO AN ASSOCIATED ENTERPRISES OF ASSESSE E.IT IS ALSO NOT IN DISPUTE THAT ASSESSEE DETERMINED ITS PROFIT BY FOLLOWING TNMM METHOD AND THE SAME HAS NOT BEEN DISTURBED BY TPO. NO COMPARABLE HAS ALSO BEEN STATED TO ESTABLISH THAT P AYMENT OF COMMISSION BY ASSESSEE TO AETNA IS EXCESSIVE AND IS NOT AT ARMS LENGTH PRICE.WE CONSI DER IT PRUDENT TO STATE THAT SECTION 92 OF I.T.ACT,1961 PROVIDES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ALP.FURTHER SEC.92C DEALS WITH THE COMPUTATION OF ALP.SUB-SECTION(1) OF SEC.92C PRESCRIBES THAT THE ALP IN RELATION TO AN I NTERNATIONAL TRANSACTIONS SHALL BE DETERMINED BY ANY OF THE PRESCRIBED METHODS,WHICH INTER ALIA I NCLUDE TNMM. RULE10B OF I.T. RULES,1962 PROVIDES THE MECHANISM FOR DETERMINATION OF ALP U/S . 92C.RULE 10B(1)(E)(I) PROVIDES THAT THE ALP IN RELATION TO AN INTERNATIONAL TRANSACTION SHA LL BE DETERMINED BY TNMM BY WHICH THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISES FROM AN I NTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSOCIATED ENTERPRISE IS COMPUTED IN RELATION TO CO STS INCURRED OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGAR D TO ANY OTHER RELEVANT BASE.SUB-CLAUSE (II) OF CLAUSE (E) OF RULE 10B(1) PROVIDES AS UNDER THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTION IS COMPUTED HAVING REGARD TO THE SAME BASE: 31.FROM THE ABOVE IT CAN BE SEEN THAT THE NET PROFI T MARGIN IS TO BE CONSIDERED QUA THE COMPARABLE UNCONTROLLED TRANSACTION OR NUMBER OF SUCH UNCONTRO LLED TRANSACTIONS.UNCONTROLLED TRANSACTION HAS BEEN DEFINED IN RULE 10A(A) TO MEAN A TRANSACT ION BETWEEN ENTERPRISES OTHER THAN ASSOCIATE ENTERPRISES,WHETHER RESIDENT OR NON-RESIDENT.RULE 10B(1)(E) IN JUXTAPOSITION TO RULE 10A(A).THE POSITION WHICH EMERGES IS THAT IN APPLYING THE TNMM , NET PROFIT MARGIN REALIZED FROM A COMPARABLE UNCONTROLLED TRANSACTION IS TO BE TAKEN INTO CONSIDERATION.THE CONDITIONS THUS ENVISAGED FOR MAKING A CASE AS COMPARABLE FOR THIS PURPOSE,SHOULD NOT ONLY BE COMPARABLE BUT ALSO HAVE UNCONTROLLED TRANSACTION.THESE TWIN CONDI TIONS NEED TO BE CUMULATIVELY SATISFIED. IF SUCH OTHER CASE IS ONLY COMPARABLE BUT HAS CONTROLLED TR ANSACTION OR VICE-VERSA,IT SHALL FALL OUTSIDE THE AMBIT OF LIST OF COMPARABLE CASES. 32.IN THE CASE BEFORE US,TPO SUGGESTED TO MAKE ADJU STMENT ONLY BY COMPARING THE RATE OF COMMISSION PAID TO AE ON FIRST NOTICE AND NO CASE H AS BEEN BROUGHT ON RECORD THAT COMMISSION 5 ITA NO. 920/MUM/2010 HINDUJA VENTURES LTD. PAID BY ASSESSE TO AE@15% IS EXCESSIVE.FURTHER WE OBSERVE THAT LD.CIT(A)HAS HELD THAT SIMILAR ISSUE WAS ALSO CONSIDERED IN THE PRECEDING ASSESSME NT YEAR 2004-05 AND SIMILAR ADJUSTMENT MADE WERE NOT AGREED TO AND IT WAS HELD THAT ASSESSEES TRANSACTION WITH AE IN RESPECT OF COMMISSION WAS AT ARMS LENGTH. 33.CONSIDERING ABOVE FACTS AND IN THE ABSENCE OF AN Y OTHER FACTS BROUGHT ON RECORD BY DEPART - MENT,WE DO NOT FIND ANY REASON TO INTERFERE WITH TH E ORDER OF LD. CIT(A).HENCE, WE CONFIRM THE ORDER OF LD. CIT(A) AND REJECT GROUND NO. 2 & 3 TAK EN BY DEPARTMENT. RESPECTFULLY, FOLLOWING THE ABOVE ORDER, WE DECIDE GROUNDS NO.2 AND 3 AGAINST THE AO AS A RESULT,APPEAL FILED BY THE A.O. STANDS DISMISS ED & 0 &' * 1 2 3 ) ' 45 . ORDER PRONOUNCED IN THE OP EN COURT ON 29 TH NOVEMBER,2013. . ) +,! 6 29 , 2013 , ) - . SD/- SD/- ( . . , / I.P.BANSAL ) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER [ / MUMBAI, 7 /DATE: 29.11.2013 SK . . . . ) )) ) $'8 $'8 $'8 $'8 9 8!' 9 8!' 9 8!' 9 8!' / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / '# 2. RESPONDENT / $%'# 3. THE CONCERNED CIT(A)/ : ; , 4. THE CONCERNED CIT / : ; 5. DR K BENCH, ITAT, MUMBAI / 8<- $' . , . . . 6. GUARD FILE/ - = %8' $' //TRUE COPY// . / BY ORDER, > / 4 DY./ASST. REGISTRAR , /ITAT, MUMBAI