ONWARD TECHNOLOGIES LTD, V. DCIT ( OSD) RG 8(1),

MA 203/MUM/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1468 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 22-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 04-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: YOGESH A THAR
• Keywords: Transfer pricing; Rectification of order; International transaction; Rule of consistency; Avoidance of tax
• Section: 92C; 92B; 10B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI SANJAY ARORA, AM & SHRI VIJAY PAL RAO, JM MISCELLANEOUS APPLICATION NO. 203/MUM/2013 ( ARISING FROM ITA NO. 7985/MUM/2010 A. Y - 2006-07 ) M/S ONWARD TECHNOLOGIES LIMITED, 2 ND FLOOR, STERLING CENTRE, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400018 VS THE DY. COMMISSIONER OF INCOME TAX (OSD), RANGE 8(1) MUMBAI (APPLICANT) (RESPONDENT) PAN NO. AAACO3742J ASSESSEE BY SHRI YOGESH A. THAR REVENUE BY SHRI AJIT KUMAR JAIN DATE OF HEARING 13 TH DECEMBER 2013 DATE OF PRONOUNCEMENT 17 TH JANUARY 2013 ORDER PER VIJAY PAL RAO, JM THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE FOR SEEKING RATIFICATION OF MISTAKE IN THE ORDER DATED 30.4.201 3 OF THIS TRIBUNAL IN RESPECT OF THE FINDING ON THE ISSUE WHETHER A FOREI GN PARTY/AE OF THE ASSESSEE CAN BE A TESTED PARTY FOR COMPUTATION OF A LP IN RESPECT OF INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESS EE. 2. THE LD. A.R OF THE ASSESSEE HAS SUBMITTED THAT T HE TRIBUNAL WHILE DECIDING THE ISSUE HAS PROCEEDED ON THE FOOTING THA T THE TPO HAS MENTIONED IN HIS ORDER THAT THE PRICE CHARGED BY TH E ASSESSEE IS NOT IN ACCORDANCE WITH SUB-SECTIONS (1) AND (2) OF SECTION 92 OF THE ACT AFTER CONSIDERING AND REJECTING THE CONTENTION OF THE ASS ESSEE THAT A FOREIGN PARTY CAN BE A TESTED PARTY. HOWEVER, THE TPO HAS N OT CONSIDERED THE CONTENTION OF THE ASSESSEE AS TO WHETHER FOREIGN PA RTY CAN BE THE TESTED MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 2 PARTY. INDEED, THE TPO WAS UNDER THE IMPRESSION THA T THE ASSESSEE HAS DONE ITS TP STUDY ON THE BASIS THAT THE ASSESSEE IS THE TESTED PARTY. THE SECOND LIMB OF THE ARGUMENT OF THE LD. A.R IS THAT THE TRIBUNAL HAS NOT CONSIDERED THE DECISIONS RELIED UPON BY THE ASSESSE E IN THE FOLLOWING CASES: I) RANBAXY LABORATORIES LIMITED VS ACIT 110 ITD 428 II) DEVELOPMENT CONSULTANTS PRIVATE LIMITED VS DCIT ITA NOS. 79 AND 80/KOL/2008 3. THUS, THE LD. A.R HAS SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF HONDA SIEL POWER P RODUCTS LTD. VS CIT 295 ITR 466 NON-CONSIDERATION OF A DECISION PLACED BEFORE THE TRIBUNAL IS A MISTAKE APPARENT ON RECORD WHICH NEEDS TO BE RECT IFIED. THE THIRD LIMB OF THE ARGUMENT OF THE ASSESSEE IS ON THE POINT THA T IF THIS TRIBUNAL DOES NOT AGREE WITH THE VIEW TAKEN BY THE CO-ORDINATE BE NCH THEN THE ONLY COURSE THAT IS OPEN WOULD BE TO MAKE REFERENCE FOR CONSTITUTION OF SPECIAL BENCH TO RESOLVE THE CONTROVERSY. HE HAS ALSO RELIE D UPON THE DECISION OF HONBLE GUJARAT HIGH COURT IN CASE OF AFFECTION INV ESTMENTS LTD. VS ACIT 326 ITR 255. THUS, THE LD. A.R HAS URGED THAT THE T RIBUNAL MAY BE PLEASED TO RECTIFY THE ERRORS CREPT IN THE IMPUGNED ORDER A S POINTED OUT IN THE MISCELLANEOUS APPLICATION. ON THE OTHER, THE LD. D. R HAS SUBMITTED THAT THE ISSUE IS FACTUAL IN NATURE AND ONCE THE TPO HAS REJECTED THE COMPARABLES SELECTED BY THE ASSESSEE AS WELL AS THE ALP AND DETERMINE THE ALP BY CONSIDERING THE SEPARATE SET OF CASES AS COMPARABLES BY TAKING THE ASSESSEE AS A TESTED PARTY THEN IT CANNO T BE SAID THAT THE A.O HAS NOT CONSIDERED AND DECIDED THE ISSUE OF FOREIGN PARTY AS A TESTED MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 3 PARTY. HE HAS RELIED UPON THE DECISION OF THIRD MEM BER IN CASE OF 98 ITD 285. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RELEVANT RECORD AS WELL AS THE IMPUGNED ORDER. THE GRIEVANCE RAISED BY THE ASSESSEE IN THE MISCELLANEOUS APPLICATION AGAIN ST THE FINDING OF THE TRIBUNAL ON THE ISSUE WHETHER A FOREIGN PARTY/AE OF THE ASSESSEE CAN BE A TESTED PARTY FOR DETERMINATION OF ALP. AS REGARDS T HE FIRST CONTENTION OF THE LD. A.R THAT THE TPO HAS NOT CONSIDERED THE CON TENTION OF THE ASSESSEE THAT FOREIGN PARTY CAN BE A TESTED PARTY, WE NOTE THAT WHEN THE ALP DETERMINED BY THE ASSESSEE WAS REJECTED BY THE TPO ON THE GROUND THAT IT IS NOT AS PER THE PROVISIONS OF SECTION 92, THIS ITSELF SHOWS THAT THE COMPUTATION OF THE ALP BY CONSIDERING THE FOREIGN P ARTY AS TESTED PARTY WAS FOUND NOT AS PER THE PROVISIONS OF SECTION 92. THEREFORE, WE DO NOT FIND ANY MERIT IN THE SAID CONTENTION OF THE ASSESS EE. THE TRIBUNAL IN THE IMPUGNED ORDER HAS ELABORATELY DISCUSSED AND ANALYS ED THE TRANSFER PRICING PROVISION AS CONTAINED U/S 92 OF THE INCOME TAX ACT AS WELL RULE 10B OF THE INCOME TAX RULES 1963 IN PARA 11.2.1 TO 11.3 AS UNDER: 11.2. 1 WE TAKE UP THE FIRST CONTENTION BY WHICH T HE ASSESSEE HAS COMPARED THE PROFIT EARNED BY ITS FORE IGN AE WITH OUTSIDE COMPARABLES TO PROVE THAT THE PRICE CHARGED BY IT FROM THE TRANSACTIONS WITH THE AES IS AT ALP. AS CAN HE NOTICED FROM INTERNAL PAGE NO. 34 OF THE TP STUDY THAT THE ASSES SEE IS HARPING ON THE SELECTION OF ITS AE AS TESTED PARTY ON THE B ASIS OF THE US AND UK REGULATIONS. WE HAVE TO DECIDE AS TO WHETHER THE SELECTION OF THE FOREIGN AE AS TESTED PARTY IS CORR ECT IN THE INDIAN CONTEXT. FOR THAT PURPOSE, WE NEED TO VISIT THE PRO VISIONS OF THE CHAPTER X OF THE ACT WITH THE CAPTION SPECIAL PROV ISIONS RELATING TO AVOIDANCE OF TAX DEALING WITH THE COMPUTATION O F INCOME FROM INTERNATIONAL TRANSACTIONS HAVING REGARD TO AL P. SECTION 92(1) OF THE ACT PROVIDES THAT : ANY INCOME ARISIN G FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 4 ARMS LENGTH PRICE. THE TERM INTERNATIONAL TRANSA CTION HAS BEEN DEFINED IN SECTION 92B TO MEAN A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF W HOM ARE NON- RESIDENTS, IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SERVICES, OR THE METHODOLOGY FOR THE COMPUTATION OF ARMS LENGTH PRI CE HAS BEEN SET OUT IN SECTION 92C(1) TO BE AS PER ANY OF THE P RESCRIBED METHODS, INCLUDING TRANSACTIONAL NET MARGIN METHOD (TNMM). THIS METHOD HAS BEEN ADMITTEDLY EMPLOYED BY THE ASS ESSEE IN THE PRESENT CASE AS THE MOST APPROPRIATE METHOD FOR DETERMINING THE ALP IN RESPECT OF THE INTERNATIONAL TRANSACTIONS UNDER CONSIDERATION. SUB-SECTION (3) OF SECTION 92C PROVIDES THAT: WHERE DURING THE COURSE OF ANY PROCEEDING FO R THE ASSESSMENT OF INCOME, THE ASSESSING OFFICER IS, ON THE BASIS OF MATERIAL OR INFORMATION OR DOCUMENT IN HIS POSSESSI ON, OF THE OPINION THAT--(A) THE PRICE CHARGED OR PAID IN AN I NTERNATIONAL TRANSACTION HAS NOT BEEN DETERMINED IN ACCORDANCE W ITH SUB- SECTIONS (1) AND (2); OR. THE ASSESSING OFFIC ER MAY PROCEED TO DETERMINE THE ARMS LENGTH PRICE IN RELA TION TO THE SAID INTERNATIONAL TRANSACTION IN ACCORDANCE WITH S UB-SECTIONS (1) AND (2), ON THE BASIS OF SUCH MATERIAL OR INFORMATI ON OR DOCUMENT AVAILABLE WITH HIM. RULE 10B DEALING WITH THE DETE RMINATION OF ARMS LENGTH PRICE UNDER SECTION 92C PROVIDES THROU GH SUB-RULE (1) THAT FOR THE PURPOSES OF SUB-SECTION (2) OF SEC TION 92C, THE ARMS LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEIN G THE MOST APPROPRIATE METHOD. THE MECHANISM FOR DETERMINING A LP UNDER TNMM HAS BEEN ENSHRINED UNDER CLAUSE (E), WHICH STA TES THAT: (I) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE FROM AN INTERNATIONAL TRANSACTION ENTERED INTO WITH AN ASSO CIATED ENTERPRISE IS COMPUTED IN RELATION TO COSTS INCURRE D OR SALES EFFECTED OR ASSETS EMPLOYED OR TO BE EMPLOYED BY TH E ENTERPRISE OR HAVING REGARD TO AN OTHER RELEVANT BASE; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE OR BY AN UNRELATED ENTERPRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION OR A NUMBER OF SUCH TRANSACTIONS IS COMPUTED HAVING REGARD TO THE SAME BASE; (III) THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAU SE (II) ARISING IN COMPARABLE UNCONTROLLED TRANSACTIONS IS ADJUSTED TO TAKE INTO ACCOUNT THE DIFFERENCES, IF ANY, BETWEEN THE INTERN ATIONAL TRANSACTION AND THE COMPARABLE UNCONTROLLED TRANSAC TIONS, OR BETWEEN THE ENTERPRISES ENTERING INTO SUCH TRANSACT IONS, WHICH COULD MATERIALLY AFFECT THE AMOUNT OF NET PROFIT MA RGIN IN THE OPEN MARKET ; (II) THE NET PROFIT MARGIN REALISED BY THE ENTERPRI SE AND REFERRED TO IN SUB-CLAUSE (I) IS ESTABLISHED TO HE THE SAME AS THE NET PROFIT MARGIN REFERRED TO IN SUB-CLAUSE (III). MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 5 (V) THE NET PROFIT MARGIN THUS ESTABLISHED IS THEN TAKEN INTO ACCOUNT TO ARRIVE AT AN ANNS LENGTH PRICE IN RELAT ION TO THE INTERNATIONAL TRANSACTION. 11.2.2 A CONJOINT READING OF THE ABOVE PROVISIONS I NDICATES THAT FIRSTLY, A TRANSACTION BETWEEN TWO OR MORE ASSOCIAT ED ENTERPRISES IS CALLED AN INTERNATIONAL TRANSACTION; SECONDLY, A NY INCOME FROM SUCH INTERNATIONAL TRANSACTION IS REQUIRED TO HE DE TERMINED AT ALP; THIRDLY, THE ALP IN RESPECT OF SUCH INTERNATIO NAL TRANSACTION SHOULD HE DETERMINED BY ONE OF THE PRESCRIBED METHO DS, WHICH ALSO INCLUDE THE TNMM. UNDER THIS METHOD, THE NET P ROFIT MARGIN REALIZED BY THE ENTERPRISE FROM AN INTERNATIONAL TR ANSACTION ENTERED INTO WITH AN ASSOCIATED ENTERPRISE IS COMPU TED IN RELATION TO COSTS INCURRED OR SALES EFFECTED OR ASS ETS EMPLOYED OR TO BE EMPLOYED BY THE ENTERPRISE OR HAVING REGARD T O ANY OTHER RELEVANT BASE, WHICH IS THEN COMPARED WITH THE NET PROFIT MARGIN REALIZED BY THE ENTERPRISE OR BY AN UNRELATED ENTER PRISE FROM A COMPARABLE UNCONTROLLED TRANSACTION. THE MODUS OPER ANDI OF DETERMINING ALP OF AN INTERNATIONAL TRANSACTION UND ER THIS METHOD IS THAT FIRSTLY, THE PROFIT RATE EARNED BY T HE ASSESSEE FROM A TRANSACTION WITH ITS AE IS DETERMINED (SAY, PROFI T A), WHICH IS THEN COMPARED WITH THE RATE OF PROFIT OF COMPARABLE CASES (SAY, PROFIT B) FOR ASCERTAINING AS TO WHETHER PROFIT A I S AT ARMS LENGTH VIS-A-VIS THE PROFIT B. IF IT IS NOT, THEN THE TRAN SFER PRICING ADJUSTMENT IS MADE HAVING REGARD TO THE DIFFERENCE BETWEEN THE RATES OF PROFIT A AND PROFIT B. THE RATE OF PROFIT OF COMPARABLE CASES (PROFIT B) MAY BE COMPUTED FROM INTERNALLY OR EXTERNALLY COMPARABLE CASES, DEPENDING UPON THE FAR ANALYSIS A ND THE FACTS AND CIRCUMSTANCES OF EACH CASE. THUS THE CALC ULATION OF PROFIT B MAY UNDERGO CHANGE WITH THE VARYING SET OF COMPARABLE CASES. HOWEVER, IN SO FAR AS CALCULATION OF PROFIT A IS CONCERNED, THERE CANNOT HE ANY DISPUTE AS THE SAME HAS TO NECE SSARILY RESULT ONLY FROM THE TRANSACTION BETWEEN TWO OR MOR E ASSOCIATED ENTERPRISES, AS IS THE MANDATE OF SECTIONS 92 READ WITH 92B IN JUXTAPOSITION TO RULE 10B. THE NATURAL COROLLARY WH ICH, THUS, FOLLOWS IS THAT UNDER NO SITUATION CAN THE CALCULAT ION OF PROFIT A BE SUBSTITUTED WITH ANYTHING OTHER THAN FROM THE IN TERNATIONAL TRANSACTION, THAT IS, A TRANSACTION, THAT IS, A TRA NSACTION BETWEEN THE ASSOCIATED ENTERPRISES. SO, IT IS THE PROFIT AC TUALLY REALIZED BY THE INDIAN ASSESSEE FROM THE TRANSACTION WITH ITS F OREIGN AE WHICH IS COMPARED WITH THAT OF THE COMPARABLES. THE RE CAN HE NO QUESTION OF SUBSTITUTING THE PROFIT REALIZED BY THE INDIAN ENTERPRISE FROM ITS FOREIGN AE WITH THE PROFIT REAL IZED BY THE FOREIGN AE FROM THE ULTIMATE CUSTOMERS FOR THE PURP OSES OF DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTIO N OF THE INDIAN ENTERPRISE WITH ITS FOREIGN AE. THE SCOPE OF TP ADJ USTMENT UNDER THE INDIAN TAXATION LAW IS LIMITED TO TRANSACTION B ETWEEN THE ASSESSEE AND ITS FOREIGN AE. IT CAN NEITHER CALL FO R ALSO ROPING IN AND TAXING IN INDIA THE MARGIN FROM THE ACTIVITIES UNDERTAKEN BY MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 6 THE FOREIGN AE NOR CAN IT CURTAIL THE PROFIT ARISIN G OUT OF TRANSACTION BETWEEN THE INDIAN AND FOREIGN AE AT AR MS LENGTH. THE CONTENTION OF THE ID. AR IN CONSIDERING THE PRO FIT OF THE FOREIGN AE AS PROFIT A FOR THE PURPOSES OF COMPAR ISON WITH PROFIT OF COMPARABLES, BEING PROFIT B, TO DETERMINE THE ALP OF TRANSACTION BETWEEN THE ASSESSEE AND ITS FOREIGN AE , MISSES THE WOOD FROM THE TREE MAKING THE SUBSTANTIVE SECTION 9 2 OTIOSE ARID THE DEFINITION OF INTERNAL TRANSACTION U/S 92B AN D RULE 10B REDUNDANT. THIS IS PATENTLY AN UNACCEPTABLE POSITIO N HAVING NO SANCTION OF THE INDIAN TRANSFER PRICING LAW. BORROW ING A CONTRARY MANDATE OF THE TP PROVISIONS OF OTHER COUNTRIES AND READING IT INTO OUR PROVISIONS IS NOT PERMISSIBLE. THE REQUIRE MENT UNDER OUR LAW IS TO COMPUTE THE INCOME FROM AN INTERNATIONAL TRANSACTION BETWEEN TWO AES HAVING REGARD TO ITS ALP AND THE SA ME IS REQUIRED TO BE STRICTLY ADHERED TO AS PRESCRIBED. T HIS CONTENTION, IS THEREFORE, REPELLED. 11.3 NOW WE ESPOUSE THE SECOND CONTENTION OF THE ID . AR THAT THE AUTHORITIES CANNOT GO BEYOND THE OVERALL PROFIT OF THE GROUP OF AES IN DETERMINING THE ALP OF THE INTERNATIONAL TRANSACTION. IT HAS BEEN NOTICED SUPRA THAT THE OBJECT OF CHAPTER-X OF THE ACT IS TO PREVENT THE AVOIDANCE OF TAX FROM TRANSACTIONS B ETWEEN TWO OR MORE AES. BECAUSE OF SUCH INTERNAL RELATION, THE AFFAIRS BETWEEN THE AES ARE CAPABLE OF BEING ARRANGED IN SU CH A WAY SO AS TO REDUCE THE INCIDENCE OF TAX IN INDIA. IT IS W ITH THIS AVOWED OBJECT THAT THE LEGISLATURE HAS COME OUT WITH THE C HAPTER-X BY DECLARING THAT AN INCOME ARISING FROM AN INTERNATIO NAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE. THE MATTER DOES NOT END HERE. THE LEGISLATUR E IN ITS WISDOM HAS INSERTED SECTION 92C WHICH CONTAINS APPA RATUS FOR THE DETERMINATION OF THE ALP IN RESPECT OF INTERNAT IONAL TRANSACTIONS. SUB-SECTION (1) OF SECTION 92C PROVID ES THAT: THE ARMS LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION SHALL HE DETERMINED BY ANY OF THE FOLLOWING METHODS, BEIN G THE MOST APPROPRIATE METHOD, HAVING REGARD TO THE NATURE OF TRANSACTION OR CLASS OF TRANSACTION OR CLASS OF ASSOCIATED PERS ONS OR FUNCTIONS PERFORMED BY SUCH PERSONS OR SUCH OTHER RELEVANT FA CTORS AS THE BOARD MAY PRESCRIBE, NAMELY; (A) COMPARABLE UNCONTR OLLED PRICE METHOD; (B) RESALE PRICE METHOD; (C) COST PLUS METH OD; (D) PROFIT SPLIT METHOD; (E) TRANSACTIONAL NET MARGIN METHOD; (F) SUCH OTHER METHOD AS MAY HE PRESCRIBED BY THE BOARD. SUB-SECT ION (2) MAKES THE SAME POSITION BEYOND THE SHADOW OF ANY DO UBT BY PROVIDING THAT: THE MOST APPROPRIATE METHOD REFERRE D TO IN SUB- SECTION (1) SHALL BE APPLIED, FOR DETERMINATION OF ARMS LENGTH PRICE, IN THE MANNER AS MAY BE PRESCRIBED. ON A CAR EFUL ANALYSIS OF THE PROVISIONS OF SECTION 92 READ WITH SECTION 9 2C IT IS CRYSTAL CLEAR THAT THE ALP IS TO BE DETERMINED BY ANY ONE O F THE PRESCRIBED METHODS, WHICH IS MOST APPROPRIATE UNDER THE FACTS OF THE CASE. IT IS ONLY THE CHOICE OF ONE OF THE PRESC RIBED METHODS MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 7 WHICH HAS BEEN LEFT TO THE ASSESSEE OR THE AUTHORIT IES. IT IS NEITHER OPEN TO THE ASSESSEE NOR THE TP0 TO DISCARD THE PRESCRIBED METHODS AND INVENT A NEW METHOD OR APPLY ANY OTHER YARDSTICK FOR DETERMINING THE ALP. COMING HACK TO T HE FACTUAL CONTEXT PREVAILING BEFORE US, IT IS NOTICED THAT TH E ID. AR IS ACCENTUATING ON CONSIDERING THE OVERALL PROFIT OF T HE GROUP AS A WHOLE FOR THE DETERMINATION OF THE ALP IN RESPECT O F THE INTERNATIONAL TRANSACTIONS, WHICH COURSE OF ACTION HAS NOT BEEN PRESCRIBED BY THE ACT OR RULES UNDER ANY OF THE MET HODS GOVERNING THE ASSESSMENT YEAR UNDER CONSIDERATION. AS THE ARGUMENT ADVANCED BY THE ID. AR THAT THE PROFIT OF THE GROUP OF AES SHOULD BE KEPT IN VIEW AND IN NO CASE THE TP AD JUSTMENT SHOULD HAVE THE EFFECT OF BREACHING THE OVERALL PRO FIT EARNED BY ALL THE AES TAKEN AS ONE UNIT, HAS NO STATUTORY MAN DATE AND IS NOT STIPULATED UNDER ANY OF THE PRESCRIBED METHODS. AS SUCH, THE SAME IS LIABLE TO HE JETTISONED AS SANS MERIT. WE O RDER ACCORDINGLY. 5. IT IS CLEAR FROM THE FINDING OF THE TRIBUNAL IN THE IMPUGNED ORDER THAT THE ISSUE HAS BEEN DECIDED BY CONSIDERING THE TRANS FER PRICING PROVISIONS OF CHAPTER-X OF THE INCOME TAX ACT R.W. RULE 10B. T HE CONCLUSION ARRIVED BY THE TRIBUNAL IS BASED ON THE AMBIT AND SCOPE OF THE PROVISIONS OF CHAPTER-X AND RULE 10B. IT IS PERTINENT TO NOTE THA T THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF RANBAXY LABORAT ORIES LIMITED AND DEVELOPMENT CONSULTANTS PRIVATE LIMITED HAVE NOT GI VEN ANY FINDING ABOUT THE SCOPE OF PROVISIONS OF CHAPTER-X FOR DETE RMINATION OF THE ALP AND SPECIFICALLY BY CONSIDERING A FOREIGN ENTITY/AS SOCIATED ENTERPRISES OF THE ASSESSEE AS TESTED PARTY. THUS, THESE DECISIONS AS RELIED UPON BY THE ASSESSEE ARE SUB-SILENTIO ON THE ISSUE OF THE SCOPE OF INDIAN TRANSFER PRICING REGULATION. EVEN OTHERWISE UNDER THE INDIAN TRANSFER PRICING REGULATION AS CONTAINED IN THE CHAPTER-X OF THE INC OME TAX ACT THE COMPARISON OF INTERNATIONAL TRANSACTION CARRIED OUT BY THE ASSESSEE IS TO BE MADE WITH THE UNCONTROLLED AND UNRELATED TRANSAC TION TO ARRIVE AT MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 8 ARMS LENGTH PRICE (ALP). THUS, THE COMMERCIAL/FINA NCIAL EFFECT OF AN INTERNATIONAL TRANSACTION IN THE CONTEXT OF THE ASS ESSEE/TAXPAYER HAS TO BE COMPARED WITH THE FINANCE/COMMERCIAL OUTCOME IF THE SAME TRANSACTION WOULD HAVE BEEN CARRIED OUT BY THE ASSESSEE WITH UN RELATED THIRD PARTY. IN THE MATTER OF TRANSFER PRICING AND DETERMINATION OF ALP WHICH IS FACTUAL IN NATURE THE PRINCIPLE OF CONSISTENCY OR RES JUDICATA IS NOT APPLICABLE UNTIL AND UNLESS THE FACTS AND CIRCUMSTANCES GOVERNING TH E SITUATION AND LEGAL POSITION ARE IDENTICAL IN EACH CASE. THE TRIBUNAL I N PARA 16.2 AND 16.3 HAS CONSIDERED THIS POINT AS UNDER: 16.2 THE HONBLE SUPREME COURT HAS HELD IN SEVERAL CASES INCLUDING M.M. IPOH & ORS. VS CIT (1968) 67 ITR 106 (SC) THAT: THE DOCTRINE OF RES JUDICATA DOES NOT APPLY SO AS T O MAKE A DECISION ON A QUESTION OF FACT OR LAW IN A PROCEEDI NG FOR ASSESSMENT IN ONE YEAR BINDING IN ANOTHER YEAR. AT THE SAME TIME, IT IS EQUALLY TRUE THAT THE PRINCIPLE OF CONS ISTENCY HAS ALSO BEEN ADVOCATED BY SEVERAL HONBLE COURTS INCLUDING THE HONBLE SUPREME COURT IN RADHASOAMI SATSANG VS CIT (1992) 1 93 ITR 321 (SC) AND THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. ARTHUR ANDERSEN & CO. (2009) 318 ITR 229 (BOM) BY H OLDING THAT THE DECISION MADE IN EARLIER YEARS IS BINDING IN SU BSEQUENT YEARS AND SHOULD BE FOLLOWED. FROM THE ABOVE DECISIONS, I T FOLLOWS THAT A DELICATE BALANCE NEEDS TO HE MAINTAINED BETWEEN T HE PRINCIPLE OF CONSISTENCY AND THE RULE OF RES JUDICATA DEPENDI NG UPON THE FACTS AND THE GOVERNING LEGAL POSITION PREVAILING I N EACH EASE. AT THE SAME TIME, WE WANT TO HIGHLIGHT THAT THE DOCTRI NE OF ESTOPPEL TOGETHER WITH ITS EXCEPTIONS CANNOT BE IGNORED. IT IS TRITE THAT THERE CAN HE NO ESTOPPEL AGAINST THE PROVISIONS OF THE ACT OR THE BINDING INTERPRETATION GIVEN TO SUCH PROVISIONS BY THE JUDICIAL FORUMS. THIS RULE HAS BEEN CITED WITH APPROVAL BY S EVERAL COURTS INCLUDING THE HONBLE SUPREME COURT IN CIT VS. V. M R.P FIRM (1965) 56 ITR 67(SC). WHERE THE FACTS OF A CASE PRI MA FACIE SHOW THAT THE AUTHORITIES TOOK A CLEARLY INCORRECT VIEW ON THE PROVISIONS OF THE ACT IN AN EARLIER YEAR, WHETHER F AVOURING THE ASSESSEE OR THE REVENUE, IT CANNOT BE ARGUED IN THE SUBSEQUENT YEAR THAT THE SAME INCORRECT APPROACH SHOULD BE REP EATED. THE HONBLE DELHI COURT IN CWT VS MEATTLES (P) LTD. (19 84) 156 ITR 569 (DEL) HAS HELD THAT THE REVENUE AUTHORITIES CAN NOT BE STOPPED FROM TAKING A CORRECT VIEW OF STATUTORY PRO VISIONS IN A LATER YEAR. MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 9 16.3 WE HAVE ELABORATELY DISCUSSED ABOVE THAT HOW T HE METHOD EMPLOYED BY THE ASSESSEE FOR DETERMINING THE ALP IN RESPECT OF INTERNATIONAL TRANSACTIONS FOR THE YEAR UNDER CONSI DERATION IS CONTRARY TO THE STATUTORY PROVISIONS HAVING NO APPR OVAL FROM ANY JUDICIAL FORUM. IF SUCH A WRONG METHOD HAS BEEN INA DVERTENTLY ACCEPTED BY THE TPO IN AN EARLIER YEAR, WE CANNOT G RANT A LICENSE TO THE ASSESSEE TO CONTINUE CALCULATING THE ALP IN SUCH A GROSSLY ERRONEOUS MANNER IN PERPETUITY. IT NEEDS TO HE DISC ONTINUED FORTHWITH. WE, THEREFORE, REJECT THIS CONTENTION AD VANCED ON BEHALF OF THE ASSESSEE THAT THE APPLICATION OF SUCH A WRONG METHOD HE GRANTED A SEAL OF APPROVAL ON THE BASIS O F ITS ACCEPTANCE BY THE TPO IN A PRECEDING YEAR. 6. ONCE THE ISSUE HAS BEEN DECIDED ON MERITS BY CON SIDERING THE RELEVANT FACTS AND MATERIAL THEN THE SAME CANNOT BE REVIEWED IN THE GARB OF RECTIFICATION OF MISTAKE U/S 254(2). THE TRIBUNA L CANNOT RE-EVALUATE OR RE-APPRECIATE THE EVIDENCE AND FACTS IN THE PROCEED INGS U/S 254(2). THE SCOPE OF SECTION 254(2) IS VERY LIMITED AND CIRCUMS CRIBED. ONLY A MISTAKE WHICH IS WIDE APPARENT, MANIFEST AND PATENT ON THE FACE OF THE ORDER CAN BE RECTIFIED U/S 254(2) AND NOT SOMETHING WHICH CAN BE INVOLVED SERIOUS CIRCUMSTANCES OF DISPUTES OF QUESTION OF FACTS OR L AW CAN BE ESTABLISHED BY LONG DRAWN PROCESS OF REASONING ON THE POINT. TH US, THE TRIBUNAL HAS NO POWER OF RECTIFICATION OF MISTAKE U/S 254(2) WHI CH AMOUNTS TO REVERSAL OF THE ORDER PASSED AFTER DISCUSSING ALL THE FACTS AND STATUTORY PROVISIONS IN DETAIL. 7. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE RELIEF SOUGHT IN THE MISCELLANEOUS APPLICA TION WOULD CERTAINLY AMOUNT TO REVIEW OF EARLIER ORDER WHICH IS BEYOND T HE JURISDICTION OF THE TRIBUNAL AND SCOPE OF SECTION 254(2). ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE. MA 203/M/2013 ONWARD TECHNOLOGIES LIMITED 10 8. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JANUARY 2014 SD/- SD/- (SANJAY ARORA) ACCOUNTANT MEMBER (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI: DATED: 17 TH JANUARY 2014 SUBODH. COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI