WILLIS PROCESSING SERVICES INDIA P.LTD, V. DCIT RG 2(3),

MA 204/MUM/2013

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 1156 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Next Hearing Date: 25-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K JAIN
• Assessee Lawyers: F V IRANI
• Keywords: Related party transaction; Transfer pricing; Rectification of order; International transaction; Rule of consistency; Difference of opinion; Arm length price
• Section: 92C; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'K' BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL ME MBER M.A. NO. 204/MUM/2013 (ARISING OUT OF ITA NO. 4547/MUM/2012) (ASSESSMENT YEAR: 2007-08) WIL LIS PROCESSING SERVICES INDIA PVT. LTD. PLANT NO.6, GODREJ & BOYCE MFG. CO. COMPOUND LBS MARG, VIKHROLI (W) MUMBAI-400 079. PAN NO. AAACT 1796 R VS. DY. COMMISSIONER OF INCOME TAX RANGE-2(3), AAYAKAR BHAVAN M.K. ROAD MUMBAI-20. ( APPLICANT ) (RESPONDENT) ASSESSEE BY : SHRI F.V. IRANI REVENUE BY : SHRI A.K. JAIN DATE OF HEARING : 06/11/2013 DATE OF PRONOUNCEMENT : 13/11/2013 O R D E R PER VIJAY PAL RAO, AM: THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE IS I N RESPECT OF THE ORDER OF THIS TRIBUNAL DATED 01.3.2013 WHEREBY THE APPEAL OF THE ASSESSEE WAS DISPOSED OFF FOR THE ASSESSMENT YEAR 2 007-08. 2. THE ASSESSEE HAS STATED IN THE MISCELLANEOUS APP LICATION THAT VARIOUS MISTAKES CREPT IN THE IMPUGNED ORDER ARE TO BE RECTIFIED. THE FIRST MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 2 GRIEVANCE AS RAISED IN THE MISCELLANEOUS APPLICATIO N IS REGARDING THE FINDING OF THIS TRIBUNAL ON THE ISSUE OF DISALLOWAN CE OF DEDUCTION UNDER SECTION 10A OF THE ACT. THE LD. COUNSEL FOR THE ASS ESSEE HAS SUBMITTED THAT THE AO HAS DISALLOWED THE DEDUCTION UNDER SECT ION 10A IN RESPECT OF VIKROLI UNIT WHEREAS FOR THE ASSESSMENT YEAR 2000-0 1 THE DEDUCTION UNDER SECTION 10A WAS ALLOWED BY THE AO. THE LD. AR HAS FURTHER SUBMITTED THAT EVEN IN THE SUBSEQUENT ASSESSMENT YE ARS DEDUCTION UNDER SECTION 10A WAS ALLOWED UP TO ASSESSMENT YEAR 2003-04. FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06 THOUGH THE AO D ISALLOWED THE DEDUCTION UNDER SECTION 10A BUT THE SAME WAS RESTRI CTED TO EXCLUSION OF SATELLITE LINK CHARGES AND TECHNICAL FEE FROM EXPOR T TURNOVER. HOWEVER, THE LD. CIT(A) AND FURTHER THIS TRIBUNAL ALLOWED TH E FULL CLAIM OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. SIMILARLY FOR THE ASSESSMENT YEAR 2005-06, THE LD. CIT(A) ALLOWED THE FULL DEDUC TION. THE LD. AR HAS SUBMITTED THAT FOR THE ASSESSMENT YEAR 2006-07 THIS TRIBUNAL HAS REMANDED THE ISSUE TO THE RECORD OF THE AO TO THE E XTENT OF COMPUTATION OF DEDUCTION THOUGH ON PRINCIPLE THE CLAIM OF THE A SSESSEE WAS ALLOWED. THUS THE LD. AR HAS SUBMITTED THAT ONCE THE CLAIM O F THE ASSESSEE UNDER SECTION 10A WAS ALLOWED IN THE FIRST YEAR WHICH IS THE YEAR OF FORMATION OF VIKROLI UNIT THEN THE SAME CANNOT BE DISALLOWED IN THE SUBSEQUENT YEARS IN VIEW OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. PAUL BROTHERS (216 ITR 548) AS WELL AS THE DECISION DATED 14.08.2010 IN CASE OF CIT VS. WESTERN OUTDOOR INTERACTIVE P. LTD. THE LD. AR HAS SUBMITTED THAT THE TRIBUNAL HAS COMMITTED AN ERROR IN THE IMPUGNED ORDER WHILE SETTING ASIDE THE ISSUE TO THE RECORD OF THE AO FOR EXAMINATION AND ADJUDICATION OF THE ISSUE. HE HAS F ORCEFULLY CONTENDED THAT THE ELIGIBILITY HAS TO BE DECIDED IN THE FIRST YEAR AND, THEREFORE, THE ORDER IS ERRONEOUS SO FAR AS SETTING ASIDE THE ISSU E TO THE AO AND CONTRARY TO THE DECISIONS OF THE HON'BLE HIGH COURT . MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 3 3. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE TRIBUNAL HAS ALREADY CONSIDERED ALL THE DECISIONS RELIED UPON BY THE ASSESSEE AND PRINCIPALLY DECIDED THE ISSUE THAT IF THE CLAIM OF THE ASSESSEE WAS ALLOWED FOR THE FIRST YEAR THEN WITHOUT WITHDRAWING THE CLA IM GRANTED FOR THE EARLIER YEAR IT CAN NOT BE DENIED IN THE SUBSEQUEN T YEAR WHEN THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES WHICH WERE EX ISTING DURING THE FIRST YEAR AND IN THE SUBSEQUENT YEAR WHEN THE CLAI M WAS DENIED. THE LD. DR HAS SUBMITTED THAT SINCE CERTAIN NEW FACTS HAVE BEEN POINTED OUT AND BROUGHT ON RECORD BY THE LD. CIT(A) REGARDING C ONSOLIDATION OF TWO EXISTING UNITS AND, THEREFORE, THIS FACTUAL ASPECT HAS BEEN REMANDED FOR VERIFICATION AT THE LEVEL OF THE AO. THUS, THE LD. DR HAS SUBMITTED THAT THERE IS NO APPARENT ERROR IN THE FINDING OF THE TR IBUNAL IN RESPECT OF THE ISSUE OF DEDUCTION UNDER SECTION 10A WHICH CAN BE R ECTIFIED UNDER SECTION 254(2). 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE RECORDS. THE GRIEVANCE AND SUBMISSION O F THE ASSESSEE IN THE MISCELLANEOUS APPLICATION IS AGAINST REMANDING THE MATTER TO THE RECORD OF THE AO FOR EXAMINATION OF THE ASPECT OF CONSOLID ATION OF TWO EXISTING UNITS AS OBSERVED BY THE LD. CIT(A). IT IS PERTINEN T TO NOTE THAT THE SUBMISSION WHICH HAS BEEN MADE IN THE PROCEEDINGS O F THE MISCELLANEOUS APPLICATION HAVE ALREADY BEEN CONSIDE RED BY THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSESSEE BY THE IM PUGNED ORDER. THE ASSESSEES GRIEVANCE IS AGAINST THE FINDING OF THE TRIBUNAL AND NOT AGAINST THE FACTUAL MISTAKE APPARENT ON RECORD IN T HE ORDER. AS FAR AS THE ISSUE OF ELIGIBILITY OF DEDUCTION UNDER SECTION 10A OF THE ACT, THE TRIBUNAL HAS PRINCIPALLY AGREED WITH THE CONTENTION OF THE A SSESSEE THAT ONCE THE CLAIM OF THE ASSESSEE WAS ALLOWED IN THE FIRST YEAR , THEN IT CANNOT BE DENIED IN THE SUBSEQUENT YEAR IF THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES. THE DECISIONS RELIED UPON BY THE ASS ESSEE HAVE BEEN DULY CONSIDERED IN THE IMPUGNED ORDER. FOR THE ASSESSMEN T YEAR 2006-07 THE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 4 TRIBUNAL HAS REMANDED THE ISSUE TO THE RECORD OF TH E AO FOR THE PURPOSE OF COMPUTATION OF DEDUCTION AS THE AO DID NOT EXAMI NE THE APPORTIONMENT OF EXPORT TURNOVER AND EXPENSES OF TH E UNIT. FOR THE YEAR UNDER CONSIDERATION, THE TRIBUNAL AFTER CONSIDERING THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2006-07 AS WELL AS DECI SIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PAUL BROTHERS (SUPRA), AS WELL AS IN THE CASE OF CIT VS. WESTERN OUTDOOR INTERACTIVE P. LTD. (SUPRA), HAS CONCLUDED IN PARA-7 TO 8 AS UNDER :- 7 THUS, IT IS CLEAR THAT, IF THE CLAIM OF THE ASSE SSEE WAS ALLOWED FOR THE FIRST YEAR, THEN WITHOUT WITHDRAWIN G THE CLAIM GRANTED FOR THE EARLIER AY, THE REVENUE CANNOT DENY THE BENEFIT OF SEC. 10A OF THE SUBSEQUENT YEARS, IF THERE IS NO CH ANGE IN THE FACTS AND CIRCUMSTANCES, WHICH WERE IN EXISTENCE DURING T HE FIRST ASSESSMENT YEAR AND THE ASSESSMENT IN WHICH THE CLA IM HAS BEEN DENIED. HENCE, IN CASE THERE IS NO CHANGE IN THE F ACTS AND CIRCUMSTANCES SUBSEQUENT TO FIRST YEAR WHICH COUL D HAVE RENDERED THE ASSESSEE INELIGIBLE FOR DEDUCTION U/S 10A, THE CLAIM OF THE ASSESSEE CANNOT BE DENIED IN THE SUBSEQUENT ASSESSM ENT YEAR WHEN THE CLAIM IS ACCEPTED FOR THE FIRST ASST YEAR. 7.1 HOWEVER, IN THE CASE OF THE ASSESSEE, THE CIT(A ) HAS POINTED OUT A NEW ASPECT TO THE ISSUE FOR THE FIRST TIME D URING THE AY UNDER CONSIDERATION THAT THE ASSESSEE HAS FORMED A CONSOL IDATED UNIT BY RESTRUCTURING OF TWO EXISTING UNITS. BUT THIS FACT IS NOT CLEAR FROM THE RECORD WHETHER THIS NEW DEVELOPMENT HAD OCCURRE D DURING THE YEAR UNDER CONSIDERATION OR IT WAS ALREADY IN EXIST ENCE RIGHT FROM THE FIRST YEAR OF ASSESSMENT. 8 SINCE IT IS NOT CLEAR WHETHER THE NON-ELIGIBLE UN IT AT ANDHERI WAS STILL IN EXISTENCE OR CLOSED BY THE ASSESSEE TO BRING INTO EXISTENCE THE ALLEGED CONSOLIDATED UNIT AS HELD BY THE CIT(A); THEREFORE, THIS FACT IS REQUIRED TO BE EXAMINED BY CONSIDERING INTER- ALIA THE NUMBER OF EMPLOYEES WORKING IN THE TWO UNI TS WHEN THE NEW UNIT WAS ESTABLISHED BY THE ASSESSEE AT VIKROLI ONLY AFTER COMPARING THE NUMBER OF EMPLOYEES AND MACHINERY IN STALLED IN BOTH THE UNITS, TT CAN BE DETERMINED WHETHER THE TW O EXISTING UNITS WERE MERGED AND CONSOLIDATED TO BRING INTO EXISTENC E A NEW UNIT AND THEREBY A NEW UNIT HAS BEEN SET UP BY RESTRUCTU RING OF THE EXISTING UNIT DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY, ON BOTH THE ASPECTS; ONE CONSIDERED BY THE TRIBUNAL IN THE AY 2006-07; AND THE OTHER ONE WHICH HAS BEEN BROUGHT OUT BY THE CIT(A) FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION, THE MATTER IS REMANDED TO THE RECORDS OF THE ASSESSING OFFICER F OR EXAMINATION, VERIFICATION AND THEN DECIDE THE ISSUE AS PER LAW. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 5 3.2 IT IS CLEAR FROM THE CONCLUDING FINDINGS ON THE ISSUE THAT THE TRIBUNAL HAS ACCEPTED THE CONTENTION OF THE ASSESSE E THAT IN CASE THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES SUBSEQUENT TO THE FIRST YEAR, WHICH COULD HAVE RENDERED THE ASSESSEE INELIGIBLE F OR DEDUCTION UNDER SECTION 10A, THE CLAIM OF THE ASSESSEE CAN NOT BE D ENIED IN THE SUBSEQUENT ASSESSMENT YEAR WHEN THE SAME IS ACCEPTE D IN THE FIRST ASSESSMENT YEAR . THE ISSUE WAS REMANDED TO THE REC ORD OF THE AO ONLY ON TWO ASPECTS ONE, AS IT WAS ALREADY SET ASIDE BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2006-07 REGARDING APPORTIONMENT OF TURNOVER EXPENSES OF THE UNITS AND ANOTHER, FORMATION OF THE CONSOLID ATED UNIT BY MERGING OF TWO UNITS DURING THE YEAR UNDER CONSIDERATION AS POINTED OUT BY THE LD. CIT(A). SINCE THIS ASPECT WAS BROUGHT ON RECORD FOR THE FIRST TIME IN THE YEAR UNDER CONSIDERATION AND WAS NOT EXAMINED B Y THE CIT(A), THEREFORE, THE SAME WAS REMANDED TO THE AO FOR EXAM INATION OF THE LIMITED FACT OF FORMATION OF CONSOLIDATED UNIT BY M ERGING TWO EXISTING UNITS DURING THE YEAR UNDER CONSIDERATION. THEREFOR E, THIS DIRECTION OF THE TRIBUNAL DOES NOT AFFECT THE CLAIM OF THE ASSESSEE IF THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER C ONSIDERATION AS EXISTED IN THE FIRST YEAR OF FORMATION OF THE VIKRO LI UNIT. EVEN OTHERWISE THE ASSESSEE HAS NOT MADE OUT A CASE OF APPARENT ER ROR WHICH CAN BE RECTIFIED UNDER SECTION 254(2) OF THE INCOME TAX AC T. HENCE, WE DO NOT FIND ANY MERIT OR SUBSTANCE IN THE MISCELLANEOUS AP PLICATION WITH REGARD TO THE FINDING OF THE TRIBUNAL ON THE ISSUE OF DEDU CTION UNDER SECTION 10A. 4. THE NEXT GRIEVANCE OF THE ASSESSEE IS REGARDING THE TRANSFER PRICING ISSUE AND PARTICULARLY ON INCLUSION/EXCLUSION OF CE RTAIN COMPARABLE CASES. THE FIRST COMPARABLE AGAINST WHICH THE ASSES SEE RAISED THE GRIEVANCE IN THE MISCELLANEOUS APPLICATION IS ASIT C. MEHTA FINANCIAL MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 6 SERVICES LTD. THE LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE SAID COMPANY IS NOT FUNCTIONALLY COMPARABLE WITH THAT OF THE ASSESSEE, THEREFORE, CANNOT BE INCLUDED AS COMPARABLE FOR THE PURPOSE OF DETERMINATION OF ALP. HE HAS SUBMITTED THAT THIS CO MPANY IS INTO ITES AND SOFTWARE SERVICES APART FROM PORTFOLIO MANAGEME NT SERVICES AND INVESTMENT ACTIVITY. HENCE, THIS COMPANY IS FUNCTIO NALLY NOT COMPARABLE TO THE ASSESSEE. THE LD. AR HAS POINTED OUT THAT TH E TRIBUNAL WHILE DECIDING THE COMPARABILITY OF THIS COMPANY HAS CONS IDERED THAT 96% OF THE REVENUE OF THE SAID COMPANY IS FROM ITES WHEREA S AS PER THE ANNUAL REPORT 96% OF THE TOTAL REVENUE IS DERIVED FROM ITE S AND SOFTWARE SERVICES AND NO FURTHER SEGMENTAL BREAKUP IS GIVEN. THE LD. AR HAS SUBMITTED THAT IN CASE OF APEX KNOWLEDGE SOLUTION P VT. LTD. THE TRIBUNAL HAS REJECTED THIS COMPANY ON THE GROUND OF NON-AVAI LABILITY OF SEGMENT BREAK-UP OF ITES AND SOFTWARE SERVICES. THUS, THE L D. AR HAS SUBMITTED THAT ASIT C. MEHTA FINANCIAL SERVICES IS NOT FUNCTI ONALLY COMPARABLE WITH THE ASSESSEE AND SHOULD BE EXCLUDED. ON THE OTHER H AND THE LD. DR SUBMITTED THAT THE SEGMENTAL RESULTS WERE AVAILABLE ON RECORD. HE HAS REFERRED TO PAGE-135 OF THE MISCELLANEOUS APPLICATI ON AND SUBMITTED THAT THE SEGMENTAL RESERVES ARE AVAILABLE ON RECORD. HE HAS ALSO REFERRED TO THE ANNUAL REPORT WHEREIN THE SEGMENTAL REVENUE DET AILS ARE GIVEN AND THE ENTIRE REVENUE OF RS.60.09 CRORES IS ONLY FROM IT ENABLED SERVICES AND NOT FROM SOFTWARE. THE TPO HAS CONSIDERED THE REVEN UE DERIVED FROM IT ENABLED SERVICES, THEREFORE, WHEN SEGMENTAL RESULTS ARE CONSIDERED BY THE TPO WHICH IS 96% OF THE TOTAL REVENUE PERTAINS TO THE IT ENABLE SERVICES THEN THIS COMPANY IS FUNCTIONALLY COMPARAB LE TO THE ASSESSEE. 4.1 IN REBUTTAL THE LD. AR HAS SUBMITTED THAT IN SC HEDULE-VIII THE REVENUE OF RS.60.09 CRORES HAS BEEN SHOWN AS DERIVE D FROM INFORMATION TECHNOLOGY ENABLED SERVICES AND SOFTWARE SERVICES A ND NO FURTHER DIVISION IS GIVEN IN SCHEDULE-VIII. THE DETAILS PRODUCED BY THE LD. DR ARE NOT RELIABLE AND CANNOT BE CONSIDERED. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 7 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE RELEVANT RECORD. THE TRIBUNAL HAS GIVEN THE FIN DING ON THIS COMPARABLE IN PARA-27 TO 27.2 AS UNDER :- 27 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THOUGH, T HE TPO HAS TAKEN THE ENTITY LEVEL RESULTS IN THE CASE OF THIS COMPARABLE; HOWEVER, THE LD DR HAS BROUGHT THE DETAILS, WHICH S HOW THAT THE INCOME FROM ITES IS ABOUT 96% OF THE TOTAL REVENUE. THEREFORE, AS FAR AS THE FUNCTIONAL COMPARABILITY OF THIS COMPANY IS CONCERNED, WE FIND THAT THIS COMPANY IS FUNCTIONALLY COMPARABLE W ITH THE ASSESSEE. 27.1 MOREOVER, WHEN SEGMENT RESULTS ARE AVAILABLE, THEN THE SAME CAN BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF DETERMINATION OF THE ALP. 27.2 AS REGARDS THE RELATED PARTY TRANSACTIONS ARE CONCERNED, SINCE THE RELATED PARTY TRANSACTIONS ARE IN RESPECT OF THE TOTAL BUSINESS AND IT IS NOT CLEAR AS HOW MUCH PERCENTAGE OF THE RELATED PARTY TRANSACTIONS IS IN THE ITES SEGMENT. THEREFO RE, THIS MATTER IS REQUIRED VERIFICATION AND EXAMINATION ON THE FACTS AS BROUGHT BEFORE US BY THE LD DR. ACCORDINGLY, WE REMIT THIS COMPARA BLE TO THE RECORD OF THE ASSESSING OFFICER/TPO TO RECONSIDER THE SAME AFTER TAKING INTO ACCOUNT THE SEGMENT RESULTS AND RELATED PARTY TRANSACTIONS IN ITES SEGMENTS AND ACCORDINGLY DECIDE THE COMPARABIL ITY OF THIS COMPANY IN VIEW OF OUR OBSERVATIONS. 4.3 IT IS CLEAR FROM THE FACTS RECORDED IN THE ORDE R THAT THE ISSUE HAS BEEN REMANDED TO THE RECORD OF AO/TPO TO CONSIDER T HE SEGMENTAL RESULTS OF THIS COMPANY. IF THE ASSESSEE HAS ANY DO UBT ABOUT THE RELIABILITY OF THE DATA / DETAILS PRODUCED BY THE L D. DR BEFORE US, THEN THE SAME WOULD HAVE BEEN RAISED BEFORE THE TPO/AO. IN V IEW OF THE FACT THAT THE ISSUE HAS BEEN REMANDED FOR CONSIDERING THE SEG MENTAL RESULTS AND RELATED PARTY TRANSACTIONS IN ITES SEGMENT THEN WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSION OF THE ASSESSEE AND THE GRIEVANCE RAISED IN THE MISCELLANEOUS APPLICATION. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 8 5. THE NEXT GRIEVANCE OF THE ASSESSEE IS REGARDING THE FINDING OF THE TRIBUNAL ON THE ISSUE OF COMPARABILITY OF INFOSYS AND WIPRO . THE LD. AR HAS SUBMITTED THAT THE TRIBUNAL HAS TAKEN A DIVERGE NT VIEW FROM THE EARLIER ORDERS OF THE TRIBUNAL IN CASE OF CAPITAL IQ INFORMATION, AGNITY INDIA TECHNOLOGY, TRINIT ADVANCE SOFTWARE LAB AND G ENESYS INTEGRATING SYSTEM INDIA PVT. LTD. WHICH IS CONTRARY TO THE DECISION OF THE HON'BLE HIGH COURT IN CASE OF MERCEDES BENZ . THE LD. AR HAS FORCEFULLY CONTENDED THAT THIS TRIBUNAL CANNOT TAKE A DIFFERENT VIEW TAK EN BY THE CO-ORDINATE BENCHES ON THE SAME ISSUE. HE HAS REITERATED HIS CO NTENTIONS AS RAISED DURING THE HEARING OF THE APPEAL AND SUBMITTED THAT THE ISSUE OF TURNOVER FILTER WAS DULY DELIBERATED BY THE CO-ORDINATE BENC HES OF THIS TRIBUNAL AND, THEREFORE, A DIFFERENT VIEW IS NOT PERMITTED. APART FROM THE TURNOVER FILTER - THE LD. AR HAS SUBMITTED THAT WHILE DECIDI NG THE ISSUE THE TRIBUNAL HAS NOT CONSIDERED THE OBJECTION OF THE AS SESSEE ON BRAND VALUE OF INFOSYS AND WIPRO WHICH MAKE THEM DIFFERENT AND NON-COMPARABLE TO THE ASSESSEE. ON THE OTHER HAND THE LD. DR HAS SUBM ITTED THAT DURING THE HEARING THE LD. AR OF THE ASSESSEE HAS HEAVILY RELIED UPON THE CASE OF CAPITAL IQ SYSTEMS ONLY WHICH IS ON THE ISSUE OF HI GH TURNOVER. THE LD. DR HAS SUBMITTED THAT AT THE TIME OF HEARING THE D ECISION OF THE DELHI BENCH IN CASE OF ACTIS ADVISERS ITA NO.4654/DEL./2010 WAS RELIED UPON WHEREIN THESE TWO COMPANIES WERE CONSIDERED AS GOOD COMPARABLE BY REJECTING THE OBJECTIONS OF THE ASSESSEE ON THE ISS UE OF HIGH TURNOVER AND BRAND VALUE. 5.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE RELEVANT RECORD. AS REGARDS HIGH TURNOV ER OBJECTION THE TRIBUNAL HAS CONSIDERED THIS ASPECT IN THE LIGHT OF THE NEW FACTS BROUGHT ON RECORD BY THE LD. DR WHEREIN THE DETAILS CLEARLY SHOW THAT THE DIFFERENCE IN TURNOVER HAS NO DIRECT RELATION WITH THE MARGIN. EVEN IN THE ISSUE OF TURNOVER FILTER THERE ARE DECISIONS OF THE TRIBUNAL HAVING DIVERGENT VIEW WHICH HAS BEEN DULY CONSIDERED BY TH E TRIBUNAL IN THE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 9 CASE OF THE ASSESSEE AND THEREAFTER BY CONSIDERING THE ADDITIONAL DETAILS AND FACTS THE TRIBUNAL HAS ARRIVED AT THE CONCLUSIO N THAT THE ASSESSEE HAS NOT MADE OUT A CASE AS TO HOW THE HIGH OR LOW T URNOVER HAS INFLUENCED THE OPERATING MARGINS. ON THE CONTRARY I T WAS FOUND THAT THERE IS NO DIRECT RELATION BETWEEN TURNOVER AND MA RGIN AT LEAST IN SERVICES SECTOR. THE TRIBUNAL HAS ANALYZED THE FACT S IN DETAIL AND THEN ARRIVED AT THE CONCLUSION IN PARA - 47 TO 47.7 AS U NDER :- 47 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS MAIN LY EMPHASISED THE OBJECTION OF HIGH TURNOVER OF INFOSYS BPO LTD I N COMPARISON TO THE ASSESSEE; THEREFORE, THIS COMPANY CANNOT BE TRE ATED AS A COMPARABLE. THE RELIANCE WAS PLACED ON THE DECISION OF THE HYDERABAD BENCHES OF THIS TRIBUNAL IN CASE OF CAPIT AL IQ INFORMATION (SUPRA) AS WELL AS IN THE CASE OF AGNIT Y INDIA TECHNOLOGIES (SUPRA) 47.1 WE NOTE THAT IN THE CASE OF CAPITAL IQ INFORMA TION (SUPRA) THE TRIBUNAL HAS RELIED UPON THE DECISION IN THE CASE O F AGNITY INDIA TECHNOLOGIES (SUPRA) AS WELL AS IN THE CASE OF TRIN ITI ADVANCED SOFTWARE LABS P LTD (SUPRA) . WE FURTHER NOTE THAT ALL THESE DECISIONS HAVE PRIMARILY RELIED UPON THE DECISION OF BANGAL ORE BENCHES OF THIS TRIBUNAL IN THE CASE OF GENESYS INTEGRATING SY STEMS INDIA P LTD(SUPRA) WHICH HAS BEEN RELIED UPON BY THE TRIBU NAL IN CASE OF CAPITAL IQ INFORMATION IN PARA 21 AS UNDER: 21. ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN RELATION TO THESE THREE COMPANIES, WE FIND THAT THE TPO HAS EXCLUDED THE COMPANIES WHOSE TURNOVER IS LESS THAN RS.ONE CRORE, ON THE GR OUND THAT THEY MAY NOT BE REPRESENTING THE INDUSTRY TREND. THAT VERY L OGIC ALSO APPLIES TO THE COMPANIES HAVING HIGH TURNOVER OF OVER RS.200 C RORES AS AGAINST THE ASSESSEES TURNOVER OF ONLY RS.60 CRORES, AND THERE FORE, IT WOULD BE FAIR ENOUGH TO EXCLUDE THOSE COMPANIES ALSO. IN THE CASE OF AGNITY INDIA TECHNOLOGIES P. LTD. (SUPRA), THE DELHI BENCH OF TH E TRIBUNAL, WHILE CONSIDERING THE COMPARABILITY WITH COMPANIES WHICH ARE MARKET LEADERS IN THEIR FIELD, AND HAVING SUBSTANTIALLY HIGH TURNO VER, OBSERVED AS FOLLOWS- 5.2. VARIOUS ARGUMENTS, AS STATED EARLIER, WERE TA KEN BEFORE THE DRP WHICH INTER-ALIA INCLUDED REJECTION OF COMP ARABLE CASES; APPLICATION OF ARBITRARY FILTER OF WAGE TO S ALES RATIO; IGNORING THAT THE ASSESSEE IS A LIMITED RISK COMPAN Y; INCLUSION OF INFOSYS TECHNOLOGIES LTD.; AND INCLUSI ON OF SATYAM COMPUTERS SERVICES LTD. IN SPITE OF THE FACT THAT ITS DATA IS NOT RELIABLE AS PUBLICLY KNOWN. ON THE BASI S OF THESE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 10 ARGUMENTS, THE DRP EXCLUDED THE CASE OF SATYAM COMP UTERS SERVICES LTD., THEREBY REDUCING THE ARMS LENGTH MA RGIN TO 25.6IO. IT IS ARGUED THAT THE CASE OF THE ASSESSEE IS NOT COMPARABLE WITH INFOSYS TECHNOLOGIES LTD., THE REAS ON BEING THAT THE LATER IS GIANT IN THE AREA OF DEVELOPMENT OF SOFTWARE AND IT ASSUMES ALL RISKS, LEADING TO HIGHER PROFIT. ON THE OTHER HAND, THE ASSESSEE IS A CAPTIVE UNIT OF ITS P ARENT COMPANY IN THE USA AND IT ASSUMES ONLY LIMITED CURR ENCY RISK. HAVING CONSIDERED THESE POINTS, WE ARE OF THE VIEW THAT THE CASE OF THE AFORESAID INFOSYS AND THE ASSESSEE ARE NOT COMPARABLE AT ALL AS SEEN FROM THE FINANCIAL DATA E TC. OF THE TWO COMPANIES MENTIONED EARLIER IN THE ORDER. THERE FORE, WE ARE OF THE VIEW THAT THIS CASE IS REQUIRED TO BE EX CLUDED. SIMILAR VIEW HAS ALSO BEEN EXPRESSED BY THE HYDERAB AD BENCH OF THE TRIBUNAL IN THE CASE OF TRINITY ADVANCED LABS P . LTD. (SUPRA). IN THE CASE OF MIS. GENESYS INTEGRATING INDIA P. LTD. (SUPRA), THE BANGALORE BENCH OF THE TRIBUNAL HAS OBSERVED IN THE FOLLOWING MANNER- 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS AND ALSO THE JURIDICAL PRECEDENTS ON THE ISSUE, WE FIND THAT THE TPO HIMSELF HAS REJECTED TH E COMPANIES WHICH ARE MAKING LOSSES AS COMPARABLES. T HIS SHOWS THAT THERE IS A LIMIT FOR THE LOWER END FOR I DENTIFYING THE COMPARABLES. IN SUCH A SITUATION, WE ARE UNABLE TO UNDERSTAND AS TO WHY THERE SHOULD NOT BE AN UPPER L IMIT ALSO. WHAT SHOULD BE UPPER LIMIT IS ANOTHER FACTOR TO BE CONSIDERED. WE AGREE WITH THE CONTENTION OF THE LEA RNED COUNSEL FOR THE ASSESSEE THAT THE SIZE MATTERS IN B USINESS. A BIG COMPANY WOULD BE IN A POSITION TO BARGAIN FOR T HE PRICE AND ALSO ATTRACT MORE CUSTOMERS. IT WOULD ALSO HAVE A BROAD BASE OF SKILLED EMPLOYEES WHO ARE ABLE TO GIVE BETT ER OUTPUT. A SMALL COMPANY MAY NOT HAVE THESE BENEFITS AND THE REFORE, THE TURNOVER ALSO WOULD COME DOWN REDUCING PROFIT M ARGIN. THUS, AS HELD BY THE VARIOUS BENCHES OF THE TRIBUNA L WHEN COMPANIES WHICH ARE LOSS MAKING ARE EXCLUDED FROM COMPARABLES, THEN THE SUPER PROFIT MAKING COMPANIES SHOULD ALSO BE EXCLUDED. FOR THE PURPOSE OF CLASSIFICATION OF COMPANIES ON THE BASIS OF NET SALES OR TURNOVER, WE FIND THAT A REASONABLE CLASSIFICATION HAS TO BE MADE. DUN & BRADSTREET AND NASSCOM HAS GIVEN DIFFERENT RANGES. TAKING THE INDIAN SCENARIO INTO CONSIDERATION, WE FEEL THA T THE CLASSIFICATION MADE BY DUN & BRADSTREET IS MORE SUI TABLE AND REASONABLE. IN VIEW OF THE SAME, WE HOLD THAT T HE TURNOVER FILTER IS VERY IMPORTANT AND THE COMPANIES HAVING A TURNOVER OF RS.1.00 CRORE TO 200 CRORES HAVE TO BE TAKEN AS A PARTICULAR RANGE AND THE ASSESSEE BEING IN THE RANG E HAVING TURNOVER OF 8.15 CRORES, THE COMPANIES WHICH ALSO H AVE TURNOVER OF 1.00 TO 200.00 CRORES ONLY SHOULD BE TA KEN INTO CONSIDERATION FOR THE PURPOSE OF MAKING TP STUDY. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 11 IN VIEW OF THE AFORESAID CONSISTENT DECISIONS OF TH E TRIBUNAL, WE ACCEPT THE CONTENTION OF THE LEARNED AUTHORISED REP RESENTATIVE FOR THE ASSESSEE THAT THE AFORESAID THREE COMPANIES CAN NOT BE TREATED AS COMPARABLE, CONSIDERING THEIR SUBSTANTIALLY HIGH TURNOVER AS COMPARED TO THAT OF THE ASSESSEE. WE ALSO AGREE THA T THE TURNOVER FILTER OF RS1 CRORE TO RS2OO CRORE AS APPLIED BY TH E ITAT BANGALORE BENCH IN THE AFORESAID DECISION, SHOULD ALSO APPLY TO THE FACTS OF THE PRESENT CASE, CONSIDERING THE ASSESSEES TURNOVER O F MERE RS.60 CRORES. WE THEREFOR4E, HOLD THAT COMPANIES HAVING T URNOVER OF RS.1CRORE TO RS.200 CRORE ALONE CAN BE CONSIDERED A S COMPARABLE, IN THE CASE OF THE ASSESSEE. 47.2 IN THE CASE OF GENESYS INTEGRATING SYSTEMS IND IA P LTD(SUPRA) , THE TRIBUNAL HAS MADE A CLASSIFICATION OF COMPANY IS HAVING TURNOVER OF RS. 1 CRORE TO RS 200 CRORES AS THE CO MPARABLE RANGE OF SIZE OF COMPANIES AND FURTHER FROM RS. 200 CRORES TO RS. 2000 CRORES AS ANOTHER SLAB OF TURNOVER. THIS CLASSIFICA TION IS BASED ON DUN & BRADSTREET HAVING GIVEN DIFFERENT RANGES OF S IZE OF COMPANIES I.E. LARGE, MEDIUM AND SMALLER. SUCH CLASSIFICATION BY DUN & BRADSTREET WAS NOT MADE IN THE CONTEXT OF CO0MAPRAB LES UNDER T P REGULATIONS. 47.3 IT IS PERTINENT TO NOTE THAT AS PER THIS CLASS IFICATION OF THE COMPANY ON THE BASIS OF TURNOVER FROM RS. 1 CRORE T O ` RS.200 CRORES, AN ENTITY HAVING RS.1 CRORE CAN BE COMPARED WITH AN ENTITY HAVING RS.200 CRORES TURNOVER ; BUT AT THE SAME TIME, AN E NTITY HAVING RS. 200 CRORES TURNOVER CANNOT BE COMPARED WITH THE ENT ITY HAVING RS. RS.201 CRORES TURNOVER. THUS, THIS CLASSIFICATION G IVES UNREALISTIC RESULT AS FAR AS THE COMPARABILITY OF TWO ENTITIES HAVING DIFFERENCE OF RS. ONE CRORE ONLY CANNOT BE COMPARED. IN OUR VIEW FOR THE PURPOSE OF COMPARING THE PROFIT MARGIN OF FUNCTIONALLY SIM ILAR ENTITY THE CLASSIFICATION OF SUCH SLAB RANGE IS NOT PRACTICALL Y WORKABLE. THEREFORE, AS IT IS APPARENT FROM THIS CLASSIFICATI ON THAT TWO ENTITIES CAN BE COMPARED HAVING DIFFERENCE IN THE TURNOVER U PTO RS.199 CRORES; BUT AT THE SAME TIME, CANNOT BE COMPARED EV EN IF THE DIFFERENCE OF TURNOVER OF ONE CR. THEREFORE, WITH D UE RESPECT, WE ARE UNABLE TO ACCEPT SUCH CLASSIFICATION OF COMPARABLES ON THE BASIS OF FIXED SLABS OF TURNOVER. 47.4 FURTHER, AS BROUGHT TO OUR NOTICE BY THE LD DR THROUGH THE DETAILS AND GRAPHIC CHART THERE IS NO DIRECT PROPOR TIONATE RELATION BETWEEN THE TURNOVER AND MARGIN. THE DETAILS APPLIE D BY THE LD DR AS SHOWN IN THE GRAPHIC CHART ARE AS UNDER: MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 12 MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 13 47.5 IT IS MANIFEST FROM THIS DETAILS AND THE COMPA RATIVE CHART THAT THERE IS NO RELATION BETWEEN THE TURNOVE R AND MARGIN OF AN ENTITY AS IT SHOWS THAT THE HIGHEST MARGIN OF T HE ENTITY HAVING RS.50 CRORES TURNOVER AND THE LOWEST MARGIN IN CASE OF THE TURNOVER UPTO RS. 200 CRORES. IT MAKES FURTHER CLE AR THAT THERE IS NOT MUCH DIFFERENCE IN THE MARGIN OF THE VARIOUS EN TITIES HAVING TURNOVER UPTO RS.940 CRORES AS THE AVERAGE MARGIN O F THE ENTITIES UPTO THE TURNOVER OF RS.50 CRORES IS 31.36%; WHERE AS THE MARGIN OF THE ENTITIES HAVING TURNOVER UPTO RS. 940 CRORES IS 30.74%. THUS, THERE IS NOT MUCH DIFFERENCE IN THE MARGIN WH EREAS THERE IS A VAST DIFFERENCE IN THE TURNOVER. THE TURNOVER IS NOT A CRITERIA AS PRESCRIBED UNDER THE RULE 10B(2) FOR SELECTING THE COMPARABLES. IT IS SETTLED PROPOSITION THAT THE DECISIVE FACTOR FOR DETERMINING INCLUSION OR EXCLUSION OF ANY CASE AS A COMPARABLE ARE PRESCRIBED UNDER RULE 10B(2) WHICH DOES NOT SPECIFY ANY SUCH F ACTOR OF TURNOVER ON THE BASIS OF WHICH A PARTICULAR CASE CA N BE INCLUDED OR EXCLUDED IN THE LIST OF COMPARABLES. 47.6 IN THE CASE OF M/S SYMANTEC SOFTWARE SOLUTION S P LTD (SUPRA), THIS TRIBUNAL (ONE OF US- JM- IS THE PARTY ) HAS CONSIDERED AND DECIDED THE ISSUE OF TURNOVER FILTER IN PARA 12 .15.1 AS UNDER: 12. NEXT OBJECTION OF THE ASSESSEE IS REGARDING TU RNOVER FILTERING AS WELL AS DIFFERENCE IN FUNCTIONS AND RI SK PROFILE OF COMPARABLES. 13. THE MAIN CONTENTION OF THE ID AR OF THE ASSESSE E IS THAT THE COMPARABLES HAVING MORE THAN 50 CRORES AND LESS THAN 5 CRORES OF TURNOVER SHOULD BE EXCLUDED FOR DETERMINI NG THE ALP BECAUSE THE ASSESSEES REVENUE FROM MARKETING S UPPORT SERVICES IS ABOUT RS. 20 CRORES. HE HAS POINTED OUT THAT AS PER RULE 1OB(3), IF THERE ARE MATERIAL DIFFERENCE B ETWEEN THE TRANSACTION BEING COMPARED, THEN, REASONABLY ACCURA TE ADJUSTMENTS SHOULD BE MADE TO ELIMINATE THE MATERIA L DIFFERENCE. THE ID AR ASSERTED THAT SINCE THE TPO H AS NOT MADE ANY SUCH ADJUSTMENT; THEREFORE, THE COMPARABLE S, WHICH ARE HAVING MORE THAN 50 CRORES AND LESS THAN 5 CRORES OF TURNOVER SHOULD BE DISCARDED. 14. UNDISPUTEDLY, THE COMPARABLES CONSIDERED BY THE TPO ARE SELECTED BY THE ASSESSEE AND IN ITS TP STUDY; T HE ASSESSEE DID NOT EXCLUDE THE COMPARABLES ON SUCH BA SIS OF TURNOVER. THE ASSESSEES CONTENTION IS THAT THE ASS ESSEE IS A RISK FREE ENTITY WHEREAS THE COMPARABLES ARE NOT FR EE FROM VARIOUS RISKS AND THEREFORE APPROPRIATE ADJUSTMENT ON ACCOUNT OF DIFFERENCE IN FUNCTION AND RISK PROFILE SHOULD BE MADE. WE NOTE THAT THE ASSESSEE DID NOT MAKE ANY SU CH ADJUSTMENT OF DIFFERENCE IN FUNCTION AND RISK PROFI LE OF THE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 14 COMPARABLES IN THE TP STUDY. IT IS ONLY WHEN THE TP O PROPOSED TO EXCLUDE SOME OF THE COMPARABLES AS AGRE ED BY THE ASSESSEE AND TO TAKE ONLY CURRENT YEAR UPDATED DATA INTO CONSIDERATION FOR DETERMINING THE ALP, THE ASSESSEE RAISED THESE OBJECTIONS. THERE IS NO QUARREL ON THE POINT THAT IF THE COMPARABLES PROPOSED TO BE TAKEN INTO CONSIDERATION BY THE TPO ARE HAVING AN ABNORMAL DIFFERENCES OF TURNOVER IN COMPARISON TO THE TURNOVER OF THE ASSESSEE, AND IF IT IS APPARENT DUE TO SUCH ABNORMAL DIFFERENCE IN THE TUR NOVER, THE OPERATING PROFITS OF THE COMPARABLES IS GOT DIS TORTED THEN IN SUCH A CASE, THOSE COMPARABLES SHOULD BE EXCLUDE D FROM THE LIST OF THE ALP. 15. IN THE CASE IN HAND, THE ASSESSEE RAISED THESE OBJECTIONS ONLY BECAUSE SOME OF THE COMPARABLES ARE HAVING HIG H PROFIT AND ALSO HIGH DIFFERENCE IN THE TURNOVER AND NOT BE CAUSE OF THE HIGH OR LOW TURNOVER HAS INFLUENCED THE OPERATI NG MARGIN OF THE COMPARABLES. ALL THE OBJECTIONS AND CONTENTI ONS RAISED BY THE ASSESSEE IN RESPECT OF THIS ISSUE ARE GENERA L IN NATURE AND NO SPECIFIC FACT HAS BEEN BROUGHT ON RECORD TO SHOW THAT DUE TO THE DIFFERENCE IN TURNOVER THE COMPARABLES B ECOME NON-COMPARABLES. THE ASSESSEE HAS NOT DEMONSTRATED AS TO HOW THE DIFFERENCE IN THE TURNOVER HAS INFLUENCED T HE RESULT OF THE COMPARABLES. IT IS ACCEPTED ECONOMIC PRINCIP LES AND COMMERCIAL PRACTICE THAT IN HIGHLY COMPETITIVE MARK ET CONDITION, ONE CAN SURVIVE AND SUSTAIN ONLY BY KEEP ING LOW MARGIN BUT HIGH TURNOVER. THUS, HIGH TURNOVER AND L OW MARGIN ARE NECESSITY OF THE HIGHLY COMPETITIVE MARK ET TO SURVIVE. 15.1 SIMILARLY, LOW TURNOVER DOES NOT NECESSARILY M EAN HIGH MARGIN IN COMPETITIVE MARKET CONDITION. THEREFORE, UNLESS AND UNTIL IT IS BROUGHT ON RECORD THAT THE TURNOVER OF SUCH COMPARABLES HAS UNDUE INFLUENCE ON THE MARGINS, IT IS NOT THE GENERAL RULE TO EXCLUDE THE SAME THAT TOO WHEN THE COMPARABLES ARE SELECTED BY THE ASSESSEE ITSELF. 47.7 WHEN THE ASSESSEE HAS NOT MADE OUT A CASE AS H OW THE HIGH OR LOW TURNOVER HAS INFLUENCED OPERATING MARGIN AND ON THE CONTRARY THERE IS NO DIRECT RELATION BETWEEN THE TURNOVER AN D MARGIN AS CLEAR FROM THE DETAILS AND GRAPHIC CHART REPRODUCED ABOVE , THEN A COMPARABLE CANNOT BE REJECTED SOLELY ON THE BASIS O F HIGH TURNOVER. EVEN OTHERWISE, THE LARGER TURNOVER AND SIZE OF THE ENTITY MAY HAS AN IMPACT OF ECONOMICAL COST OF PRODUCTION IN THE M ANUFACTURING INDUSTRY DUE TO HUGE COST OF FIXED ASSET BUT NOT IN SERVICE SECTOR. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 15 5.2 THUS, IT IS CLEAR THAT THE FINDING HAS BEEN GIV EN ON EXAMINATION AND ANALYSIS OF THE FACTS AND THE ASSESSEE HAS NOT POINTED OUT IN THE MISCELLANEOUS APPLICATION ANY FACTUAL MISTAKE IN TH E FACTS WHICH ARE CONSIDERED BY THE TRIBUNAL WHILE GIVING THE FINDING . THE LD. AUTHORIZED REPRESENTATIVE HAS ALSO ADVANCED THE CONTENTION THA T THE TRIBUNAL IS BOUND BY THE DECISION OF THE CO-ORDINATE BENCH AND THEREFORE, CANNOT TAKE A DIVERGENT VIEW WHEN A DECISION OF CO-ORDINAT E BENCH IS AVAILABLE ON THE ISSUE OF TURN OVER FILTER. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HON'BLE HIGH COURT IN CASE OF MERCEDES BENZ VS. UNION OF INDIA. TO COUNTER THE ARGUMENTS OF THE LD. AR, THE LD. DR HAS RELIED UPON THE DECISION OF THIRD MEMBER OF DELHI B ENCH OF THIS TRIBUNAL IN CASE OF NAPAR DRUGS (P.) LTD. V. DCIT IN 98 ITD 285 (DELHI) (TM) AND SUBMITTED THAT WHEN NEW MATERIAL FACTS ARE AVAILABL E BEFORE THE TRIBUNAL WHICH WERE NOT AVAILABLE IN THE EARLIER CASES THEN THE TRIBUNAL CAN TAKE A DIFFERENT VIEW OF THE MATTER. THERE IS NO QUARREL O N THE POINT THAT IF PRECEDENT IS AVAILABLE ON A LEGAL POINT THEN THE TR IBUNAL HAS TO MAINTAIN RULE OF CONSISTENCY. IN CASE THE TRIBUNAL DOES NOT AGREE WITH THE VIEW OF THE CO-ORDINATE BENCH THEN THE PROPER COURSE IS TO REFER THE MATTER TO THE LARGER BENCH. HOWEVER, IN THE CASE IN HAND THE ISSUE HAS BEEN DECIDED ON THE BASIS OF PECULIAR, RELEVANT AND VITA L FACTS BROUGHT BEFORE THE TRIBUNAL WHICH WERE NOT AVAILABLE IN THE CASE R ELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE. THE THIRD MEMBER DECISIO N IN THE CASE OF NAPAR DRUGS (SUPRA), AFTER CONSIDERING THE VARIOUS DECISIONS OF HON'BLE SUPREME COURT AND HON'BLE HIGH COURT ON THE POINT H AS CONCLUDED IN PARE 49 TO 51 AS UNDER:- MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 16 49. I HAVE IN THE FOREGOING PARAGRAPHS BRIEFLY ENUMERAT ED THE JUDGMENTS OF HONBLE HIGH COURTS AND SUPREME COURT WHERE THEY ARE DIRECTLY CONCERNED WITH THE QUESTION OF TH E NATURE AND SCOPE OF ONE DECISION OF THE TRIBUNAL AS A PREC EDENT ON SUBSEQUENT BENCH OF THE TRIBUNAL DECIDING THE SIMIL AR ISSUE. THERE IS UNANIMITY AND DIRECT AUTHORITY OF HONBLE SUPREME COURT IN MORE THAN ONE JUDGMENTS THAT IN INCOME-TAX MATTERS THE DECISION OF ONE BENCH OF THE TRIBUNAL DOES NOT CONSTITUTE A BINDING PRECEDENT ON SUBSEQUENT BENCH OF THE TRIBUN AL DECIDING UPON THE SAME OR SIMILAR ISSUES OR FACTS. THERE IS, HOWEVER, A STRONG UNDERCURRENT IN JUDICIAL THINKING THAT WHERE THERE IS ONLY DIFFERENCE OF OPINION ON THE SAME FAC TS AND THE SAME ASPECTS, THE SUBSEQUENT BENCH OUGHT NOT TO PRO CEED TO DECIDE THE MATTER ON ITS OWN CONTRARY TO THE EARLIE R DECISION AND SHOULD REFER THE MATTER TO THE PRESIDENT OF THE TRIBUNAL FOR CONSTITUTION OF A LARGER BENCH. AT THE SAME TIME TH ERE IS PLETHORA OF AUTHORITY THAT A SUBSEQUENT BENCH CAN D RAW DIFFERENT CONCLUSION IF THERE IS ADEQUATE JUSTIFICA TION TO DEPART FROM THE EARLIER VIEW, E.G. WHERE SUBSEQUENTLY NEW OR MORE FACTS COME TO LIGHT. (1961) 41 ITR 685 (SC) (SUPRA) ; 1974 CTR (SC) 167 : (1972) 84 ITR 273 (SC) (SUPRA) ; (1982) 138 ITR 326 (CAL) (SUPRA); (1986) 57 CTR (RAJ) 249 : (1986) 160 ITR 243 (RAJ) (SUPRA), ETC. OR IF THE EARLIER BENCH OMITTED TO CONSIDER CERTAIN MATERIAL ASPECTS (1961) 41 ITR 685 (SC) (SU PRA); (1962) 44 ITR 529 (SC) (SUPRA); (1993) 203 ITR 304 (GUJ) ( SUPRA); (1994) 122 CTR (KER) 410 : (1995) 211 ITR 635 (KER) (SUPRA). IN THE CASE OF CIT VS. KALPETTA ESTATES LTD. (SUPRA ), HONBLE KERALA HIGH COURT HAVE FURTHER STATED THAT THE TRIB UNAL IS ENTITLED TO TAKE A DIFFERENT VIEW OF THE MATTER ON A CLOSER AND MORE INTELLIGENT ANALYSES. 50. THUS, FROM THE JUDGMENTS ENUMERATED IN THIS ORDER, I UNDERSTAND THAT THE DECISIONS OF A CO-ORDINATE BENC H OF THE TRIBUNAL DO NOT CONSTITUTE BINDING PRECEDENT ON ANY SUBSEQUENT BENCH OF THE TRIBUNAL. AT THE SAME TIME IF IT IS ONLY A CASE OF DIFFERENT OPINION BEING HELD ON THE SAME FACTS, MATERIAL AND ASPECTS ALREADY CONSIDERED, THE SUBSEQ UENT BENCH SHOULD NOT PROCEED ON ITS OWN TO MAKE A CONTR ARY DECISION AND INSTEAD REFER THE MATTER FOR CONSTITUT ION OF A LARGER BENCH. AT THE SAME TIME, IT IS NEITHER REQUI RED NOR PRACTICABLE AS A RULE, TO MAKE A REFERENCE FOR CONS TITUTION OF A LARGER BENCH FOR REASON ONLY OF DIFFERENT CONCLUSIO N BEING REACHED EVEN WHEN THERE IS QUALITATIVE DIFFERENCE A S RESPECTS ISSUES, FACTS, EVIDENCE AND MATERIAL CONSIDERED BET WEEN THE EARLIER BENCH AND THE SUBSEQUENT BENCH. IN OTHER WO RDS THE SUBSEQUENT BENCH IS ENTITLED TO TAKE A DIFFERENT VI EW OF THE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 17 MATTER IF THERE IS AMPLE JUSTIFICATION. IN THIS CON TEXT, THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F H.A. SHAH & CO. VS. CIT (1956) 30 ITR 618 (BOM) LAYS DOW N COMPREHENSIVE GUIDELINE. IN THAT CASE HIRALAL A. SH AH USED TO BE ASSESSED IN THE STATUS OF AN HUF. IT WAS CLAIMED THAT THERE WAS DISRUPTION OF HUF ON 16TH APRIL, 1938 AND THERE AFTER A PARTNERSHIP FIRM WAS CONSTITUTED. THE DEPARTMENT DI D NOT RECOGNIZE THE DISRUPTION AND HELD THE VIEW THAT DIS RUPTION TOOK PLACE ONLY ON 13TH OCT., 1943 WHEN THE MINOR S ON OF HIRALAL ATTAINED MAJORITY. THE TRIBUNAL BY ITS ORDE R DT. 29TH JAN., 1952 HELD THAT THE DISRUPTION OF THE FAMILY T OOK PLACE AS ON 16TH APRIL, 1938. FOR ASST. YR. 1941-42 THE DEPA RTMENT MADE THE ASSESSMENT HOLDING THAT HIRALAL REPRESENTE D THE HUF IN THE FIRM. AS A RESULT OF THE ACCEPTANCE OF T HE DISRUPTION OF THE HUF ON AN EARLIER DATE, THE TRIBUNAL HELD TH AT MR. HIRA LAL WAS ONLY MINORS TRUSTEE. FOR ASST. YRS. 1942-4 3, 1943-44 AND 1944-45, THE TRIBUNAL WENT INTO THE QUESTION IN MUCH GREATER DETAIL AND HELD THAT HIRA LAL WAS A PARTNER IN HIS OWN RIGHT. THEREAFTER AT THE INSTANCE OF THE ASSESSEE, THE FOLLOWING QUESTION WAS REFERRED TO HONBLE BOMBAY HIGH COURT FOR THEIR OPINION : 'WHETHER IN THE CIRCUMSTANCES OF THE CASE, THE TRIB UNAL WAS JUSTIFIED IN LAW IN DEPARTING FROM ITS PREVIOUS FIN DING THAT HIRALAL WAS TRUSTEE OF THE MINOR VASANTLAL.' A LARGE NUMBER OF AUTHORITIES WERE CITED BEFORE THE HONBLE BOMBAY HIGH COURT. THE HONBLE BOMBAY HIGH COURT RE FERRED TO THE JUDGMENT IN THE CASE OF IRC VS. SLEATH 17 TA X CASES 149 AT 163. 'THE ASSESSMENT IS FINAL AND CONCLUSIVE BETWEEN THE PARTIES ONLY IN RELATION TO THE ASSESSMENT FOR THE PARTICULAR YEAR FOR WHICH IT IS MADE. NO DOUBT, A DECISION REA CHED IN ONE YEAR WOULD BE A COGENT FACTOR IN THE DETERMINATION OF A SIMILAR POINT IN A FOLLOWING YEAR, BUT I CANNOT THINK THAT IT IS TO BE TREATED AS AN ESTOPPEL BINDING UPON THE SAME PARTY FOR ALL YEARS.' HONBLE HIGH COURT FOUND THAT THE PRINCIPLE THAT EACH ASSESSMENT IS A DIFFERENT ASSESSMENT YEAR IS NOT ME RELY HELPFUL TO THE IT AUTHORITIES BUT IT IS EQUALLY HEL PFUL TO THE ASSESSEE. SHRI N.A. PALKHIWALA, THE EMINENT COUNSEL FOR THE ASSESSEE ARGUED THAT THE TRIBUNAL STOOD ON A DIFFER ENT FOOTING FROM AN IT AUTHORITY NOT BOUND BY AN EARLIER DECISI ON. RELIANCE WAS PLACED BY HIM ON A LARGE NUMBER OF AUTHORITIES INCLUDING THE STATEMENT OF THE LAW WITH REGARD TO RES JUDICA TA APPEARING IN HALSBURY, VOL. 13, P. 449. HONBLE BOM BAY HIGH COURT HELD THE VIEW THAT THE CASES MENTIONED IN HAL SBURY ARE CASES OF A TRIBUNAL DEALING WITH A SPECIFIC ISSUE W HICH IS NOT MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 18 LIKELY TO ARISE AGAIN. THE PRINCIPLE SHOULD NOT HAV E APPLICATION IN RELATION TO THE POWER OF ONE TRIBUNAL TO REVISE OR REOPEN A DECISION GIVEN BY ANOTHER TRIBUNAL IN A DIFFERENT A SSESSMENT. IN THE WORDS OF HONBLE COURT, 'IT TRIBUNALS DEAL W ITH DIFFERENT ASSESSMENTS, AND IT COULD NOT BE SAID THAT WHEN THE FIRST TRIBUNAL GAVE A DECISION, THE ISSUE WAS AT AN END A ND THE QUESTION COULD NOT BE RAISED AGAIN BECAUSE WHEN A F RESH ASSESSMENT CAME BEFORE THE LATER TRIBUNAL, THE QUES TION DID ARISE BUT IT AROSE IN A DIFFERENT ASSESSMENT.' WHIL E HONBLE BOMBAY HIGH COURT HELD THAT THE SECOND TRIBUNAL WAS NOT BOUND BY THE DECISION GIVEN BY THE FIRST TRIBUNAL I N A DIFFERENT ASSESSMENT, THE HONBLE HIGH COURT HELD THAT IT DID NOT MEAN THAT IT IS OPEN TO A TRIBUNAL TO COME TO A DIFFEREN T CONCLUSION TO THE ONE ARRIVED AT BY THAT VERY TRIBUNAL EARLIER WI THOUT ANY LIMITATION WHATSOEVER. HONBLE BOMBAY HIGH COURT TH EREAFTER INDICATED THE LIMITATIONS UPON THE RIGHT OF AN IT A UTHORITY OR TRIBUNAL NOT TO BE BOUND BY THE EARLIER DECISION OR THE RIGHT TO REVISE THE EARLIER DECISION. HONBLE BOMBAY HIGH CO URT HAVE DECLARED THE LEGAL POSITION IN THIS REGARD IN THE F OLLOWING WORDS : '...... IT SEEMS TO US THAT THE MERE FACT THAT THE SECOND TRIBUNAL MAY LOOK UPON THE DECISION OF THE FIRST TRIBUNAL AS ERRONEOUS IN LAW WOULD NOT JUSTIFY IT IN COMING TO A CONTRARY CONCLUSION OR REVERSING THE FINDING OF THE FIRST TRIBUNAL NOR ARE WE SATISFIED THAT IN ORDER TO ENABLE THE SECOND TRIBUN AL TO DEPART FROM THE FINDING OF THE FIRST TRIBUNAL IT IS ESSENT IAL THAT THERE MUST BE SOME FRESH FACTS WHICH MUST BE PLACED BEFOR E THE SECOND TRIBUNAL WHICH WERE NOT PLACED BEFORE THE FI RST TRIBUNAL. IF THE FIRST TRIBUNAL FAILED TO TAKE INTO CONSIDERATION MATERIAL FACTS, FACTS WHICH HAD A CONSIDERABLE BEAR ING UPON THE ULTIMATE DECISION, AND IF THE SECOND TRIBUNAL W AS SATISFIED THAT THE DECISION WAS ARRIVED AT BECAUSE OF THE FAI LURE TO TAKE INTO CONSIDERATION THOSE MATERIAL FACTS AND THAT IF THESE MATERIAL FACTS HAD BEEN TAKEN INTO CONSIDERATION TH E DECISION WOULD HAVE BEEN DIFFERENT, THEN THE SECOND TRIBUNAL WOULD BE IN THE SAME POSITION TO REVISE THE EARLIER DECISION AS IF FRESH FACTS HAD BEEN PLACED BEFORE IT. ON PRINCIPLE THERE IS NOT MUCH DIFFERENCE BETWEEN FRESH FACTS BEING PLACED BEFORE THE SECOND AND THE SECOND TRIBUNAL TAKING INTO CONSIDERATION C ERTAIN MATERIAL FACTS WHICH THE FIRST TRIBUNAL FAILED TO T AKE INTO CONSIDERATION. IT MAY BE SAID THAT EVEN THOUGH THE FIRST TRIBUNAL MAY TAKE INTO CONSIDERATION ALL THE FACTS, STILL ITS DECISION MAY BE SO ERRONEOUS AS TO JUSTIFY THE SUBS EQUENT TRIBUNAL IN NOT ADHERING TO THAT DECISION. IN A CAS E LIKE THIS, WHICH INDEED MUST BE AN EXTREME CASE, IT COULD BE S AID THAT MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 19 THE DECISION OF THE FIRST TRIBUNAL WAS A PERVERSE, DECISION, AND IF THE DECISION OF THE FIRST TRIBUNAL WAS EITHER AR BITRARY OR PERVERSE IT WOULD JUSTIFY THE SECOND TRIBUNAL IN DE PARTING FROM THE DECISION ARRIVED AT BY THE FIRST TRIBUNAL. THER EFORE, IN OUR OPINION, AN EARLIER DECISION ON THE SAME QUESTION C ANNOT BE REOPENED IF THAT DECISION IS NOT ARBITRARY OR PERVE RSE, IF IT HAD BEEN ARRIVED AT AFTER DUE INQUIRY, IF NO FRESH FACT S ARE PLACED BEFORE THE TRIBUNAL GIVING THE LATER DECISION AND I F THE TRIBUNAL GIVING THE EARLIER DECISION HAS TAKEN INTO CONSIDER ATION ALL MATERIAL EVIDENCE. WE SHOULD ALSO LIKE TO SOUND A N OTE OF WARNING, ESPECIALLY WITH REGARD TO A TRIBUNAL LIKE THE APPELLATE TRIBUNAL, THAT IT SHOULD BE EXTREMELY SLO W TO DEPART FROM A FINDING GIVEN BY AN EARLIER TRIBUNAL. EVEN T HOUGH THE PRINCIPLE OF RES JUDICATA MAY NOT APPLY, EVEN THOUG H THERE MAY BE NO ESTOPPEL BY RECORD, IT IS VERY DESIRABLE THAT THERE SHOULD BE FINALITY AND CERTAINTY IN ALL LITIGATIONS INCLUD ING LITIGATIONS ARISING OUT OF THE IT ACT. IT IS NOT A VERY SATISFA CTORY THING THAT AN ASSESSEE SHOULD FEEL A GRIEVANCE THAT ONE TRIBUN AL CAME TO ONE CONCLUSION AND ANOTHER TRIBUNAL CAME TO A DIFFE RENT CONCLUSION AND THAT THE TWO CONCLUSIONS ARE ENTIREL Y INCONSISTENT WITH ONE ANOTHER. THEREFORE, THE SECON D TRIBUNAL MUST BE SATISFIED THAT THE CIRCUMSTANCES ARE SUCH A S TO JUSTIFY IT IN DEPARTING FROM THE ORDINARY PRINCIPLES WHICH APPLY TO ALL TRIBUNALS TO TRY AND GIVE AS FAR AS POSSIBLE A FINA LITY AND. A CONCLUSIVENESS TO THE DECISION ARRIVED AT. WE SHOUL D ALSO LIKE TO LAY DOWN A FURTHER LIMITATION UPON THE POWER OF THE TRIBUNAL TO REVISE THE DECISION GIVEN EARLIER BY THAT VERY T RIBUNAL. THE EFFECT OF REVISING THIS DECISION SHOULD NOT LEAD TO INJUSTICE AND THE COURT MUST ALWAYS BE ANXIOUS TO AVOID INJUSTICE BEING DONE TO THE ASSESSEE.' 51. IT, THEREFORE, FOLLOWS THAT IF WHILE DECIDING A CAS E THE FIRST TRIBUNAL DID NOT HAVE A PARTICULAR MATERIAL BEFORE IT OR DID NOT TAKE INTO CONSIDERATION PARTICULAR FACTS AND IF THE SECOND TRIBUNAL IS SATISFIED THAT IF THOSE MATERIAL FACTS HAD BEEN TAKEN INTO CONSIDERATION, THE DECISION OF THE FIRST TRIBUNAL WOULD HAVE BEEN DIFFERENT, IT WOULD JUSTIFY THE SEC OND TRIBUNAL IN NOT ADHERING TO THE DECISION OF THE FIR ST TRIBUNAL. ON APPLYING THIS LEGAL PRINCIPLE I FIND THAT HONBL E JM CAME TO THE CONCLUSION THAT THE FACTS OF THE CASE OF THE AS SESSEE COULD NOT BE VIEWED IN ISOLATION WHEN IT BECAME KNOWN THA T THERE WERE A LARGE NUMBER OF COMPANIES SIMILARLY PLACED. SHE FOUND THAT IT WAS TOO MUCH OF A COINCIDENCE THAT IN THE C ASE OF ALL THE COMPANIES FLOATED BY THE SEARCHED PERSON, ALL THE SHAREHOLDERS AT THE SAME POINT OF TIME WERE IN NEED OF DIRE FUNDS AND ALL OF THEM APPROACHED THE SEARCHED PERSO N AND MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 20 LEFT SIGNED BLANK DOCUMENTS. IN OTHER WORDS ACCORDI NG TO THE HONBLE JM, ONCE IT WAS REALIZED THAT IN THE PECULI AR FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE WAS NOT ALON E BUT WAS ONE OF MANY, THE WHOLE COMPLEXION OF THE FACTS AND CIRCUMSTANCES OF THE CASE BECAME ALTOGETHER DIFFERE NT. I SEE CONSIDERABLE FORCE IN THIS REASONING. THE TRIBUNAL HAS DECIDED THE APPEALS ON IDENTICAL FACTS IN THE CASE OF REAL OVERSEAS (P) LTD.; MAKHNI & TYAGI (P) LTD.; INDRADHAN AGRO PRODU CTS LTD.; (SUPRA) AKRITI MEDIA (P) LTD. AND GARG POLYMERS (P) LTD., EACH IN ISOLATION WITHOUT EXAMINING THE TOTALITY OF THE PICTURE THAT EMERGES ONCE ALL THESE CASES ARE CONSIDERED AS PIEC ES OF A LARGE MOSAIC. IN OTHER WORDS, WHAT THE LEARNED AM C ONSIDERED TO BE THE STRENGTH OF THE CASE OF THE ASSESSEE, PRE CISELY THE SAME HAS BEEN CONSIDERED BY THE LEARNED JM, TO BE T HE WEAKNESS IN THE CASE OF THE ASSESSEE. ACCORDING TO THE LEARNED JM BY VALIANT EFFORTS MADE, THE LEARNED DEP ARTMENTAL REPRESENTATIVE COULD CHANGE THE ENTIRE COMPLEXION O F THE CASE AS COMPARED TO THE CASES EARLIER DECIDED BY THE TRI BUNAL INCLUDING HERSELF. IT IS NEEDLESS TO SAY THAT IN SU CH CIRCUMSTANCES THE CASE BEFORE HER FELL IN THE CATEG ORY OF EXCEPTIONS CARVED OUT BY THE SERIES OF JUDGMENTS OF HONBLE SUPREME COURT AND OF VARIOUS HIGH COURTS DISCUSSED BY ME AT LENGTH FROM PARA 28 ONWARDS. IN MY OPINION, THE LEA RNED AM (SIC-JM) WAS ENTITLED TO TAKE A DIFFERENT VIEW OF T HE MATTER WHEN AN ALTOGETHER DIFFERENT CASE WAS PRESENTED BEF ORE HER. IT IS CLEAR THAT IN CASE OF NAPAR DRUGS THE TRIBUNA L HAS CONSIDERED VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SHAH (H.A.) AND CO. V. CIT/EXCESS PROFITS TAX [30 I TR 618] AND HELD THAT IF WHILE DECIDING A CASE THE FIRST TR IBUNAL DID NOT HAVE A PARTICULAR MATERIAL BEFORE IT AND IF THE SECOND T RIBUNAL IS SATISFIED THAT IF THOSE MATERIAL FACTS HAVE BEEN TAKEN INTO CONSID ERATION THE DECISION OF FIRST TRIBUNAL WOULD HAVE BEEN DIFFERENT, IT WOULD JUSTIFY THE SECOND TRIBUNAL IN NOT ADHERING TO THE DECISION OF THE FIR ST TRIBUNAL. ACCORDINGLY WHEN THE ISSUE HAS BEEN DECIDED AFTER CONSIDERING C ERTAIN VITAL FACTS WHICH WERE NOT BEFORE THE CO-ORDINATE BENCHES RELIE D UPON BY ASSESSEE THEN TAKING A DIFFERENT VIEW ON THE BASIS OF NEW FA CTS WOULD NOT AMOUNT TO TAKING A DIVERGENT VIEW OF THE MATTER ON SAME FA CTS, MATERIAL AND ASPECTS ALREADY CONSIDERED. AS REGARDS BRAND VALUE, THOUGH THE ASSESSEE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 21 HAS RAISED THE OBJECTION OF BRAND VALUE HOWEVER, NO THING HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO SHOW HOW THE B RAND VALUE HAS AN INFLUENCE ON THE MARGINS IN THE CASE OF THE COMPARA BLES. EVEN NO QUANTITATIVE DETAILS OF THE ADJUSTMENT IF ANY ON AC COUNT OF BRAND VALUE ARE GIVEN. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN THE OBJECTIONS OF THE ASSESSEE AGAINST THE FINDING OF THE TRIBUNAL. T HE ASSESSEES GRIEVANCE IS AGAINST THE REASONING OF THE TRIBUNAL IN NOT ACC EPTING THE CONTENTION OF THE ASSESSEE AND NOT AGAINST ANY ERROR OR MISTAK E WHICH IS APPARENT ON RECORD SHOWING CONSIDERATION OF WRONG FACTS OR N ON CONSIDERATION OF RELEVANT FACTS. IN OUR HUMBLE VIEW THE GRIEVANCE AG AINST THE REASONING CAN NOT BE RAISED IN THE PROCEEDINGS UNDER SECTION 254(2). 6. THE NEXT GRIEVANCE OF THE ASSESSEE IS REGARDING FINDING OF THE TRIBUNAL IN RESPECT OF COMPARABLE MAPLE-ESOLUTION LTD. THE LD. AR OF THE ASSESSEE HAS REFERRED TO PARA 51.1 AT PAGE-65 O F THE IMPUGNED ORDER AND SUBMITTED THAT THE OBJECTION OF THE ASSESSEE WA S REJECTED BY THE TRIBUNAL ON THE GROUND THAT THE ASSESSEE ITSELF HAS SELECTED THIS COMPANY AS COMPARABLE. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF DCIT VS. QUARK SYSTEMS PVT. LTD. [132 TTJ (CHD.) (SB)1] AND SUBMITTED THAT THE TRIBUNAL ACCEPTED THE ASSESSEES CONTENTION FOR EXCLUSION OF CERTAIN CASES WHICH WERE WRONGLY INCLUDED IN THE TP STUDY BUT WERE NOT COMPA RABLE. ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE ISSUE OF COMPARABILITY FIRST IN PARA .51 AND THEN REJECTED T HE OBJECTION OF THE ASSESSEE IN PARA 51.1. THEREFORE THERE IS NO MISTAK E IN PARA 51.1 6.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE RELEVANT RECORDS. THE ISSUE HAS BEEN CONSIDERED AND DECIDED BY THE TRIBUNAL IN PARA 51 TO 51.2 AT PAGE 65 AND 66 OF TH E IMPUGNED ORDER AS UNDER :- MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 22 51 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RE LEVANT MATERIAL ON RECORD. THE FIRST OBJECTION RAISED BY T HE ASSESSEE IS THE INVOLVEMENT OF THE DIRECTORS OF THIS COMPANY IN THE FRAUD. THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION (SUP RA) AS WELL AS CRM REJECTED THIS COMPANY AS COMPARABLE. UNDISPUTED LY, THE ALLEGED FRAUD RELATES BACK TO THE PERIOD OF 1980 TO 1990 AND IT WAS IN RESPECT OF BUSINESS IN BICYCLE PARTS NOT CONNECT ED WITH THE BUSINESS ACTIVITY OF THIS COMPANY. THERE WAS NO AL LEGATION OF ANY MALPRACTICE OR FRAUD IN THE BUSINESS OF THESE COMPA NIES AND THE ALLEGATION OF FRAUD WAS AGAINST THE DIRECTORS IN PE RSON. THOUGH THE TRIBUNAL IN THE CASE OF CAPITAL IQ INFORMATION (SU PRA) AND CRM SERVICES (SUPRA) HAS TAKEN ONE OF THE GROUNDS FOR REJECTING THIS COMPANY AS A COMPARABLE BECAUSE THE DIRECTOR OF TH IS COMPANY WAS REPORTEDLY INVOLVED IN THE FRAUD, IN OUR CONSID ERED OPINION THE SAID ALLEGATION OF FRAUD AGAINST THE DIRECTORS AND THAT TOO IN THE YEAR 1980 TO 1990 WOULD NOT HAVE INFLUENCED THE BU SINESS AND MARGIN OF THESE COMPANIES WHEN THERE IS NO ALLEGATI ON OF ANY MALPRACTICE OR FRAUD IN CONNECTION WITH THE BUSINE SS OF THESE COMPANIES. FURTHER, CONSIDERABLE TIME HAS PASSED WH EN THESE ALLEGATIONS WERE REPORTED UP TILL THE AY UNDER CONS IDERATION. THEREFORE, SOLELY ON THE BASIS OF THE ALLEGATIONS O F FRAUD AND MALPRACTICE AGAINST A PERSON IN RESPECT OF UNCONNEC TED BUSINESS ACTIVITY BECAUSE THE SAID PERSON HAPPENS TO BE THE DIRECTOR OF THESE COMPANIES, CANNOT RENDER THESE COMPANIES AS NON-COM PARABLES. THERE IS NO ALLEGATION AGAINST THESE COMPANIES OR B USINESS ACTIVITY OF THESE COMPANIES. THEREFORE, IT CANNOT BE CONSID ERED THAT THE BUSINESS OR RESULTS OF THESE COMPANIES ARE IN ANY M ANNER INFLUENCED OR AFFECTED BY THE ALLEGATION OF FRAUD A GAINST THE DIRECTORS IN RESPECT OF OTHER BUSINESS ACTIVITY THA T TOO MORE THAN TWO DECADES BACK. 51.1 SO FAR AS THE MAPLE ESOLUTION LTD ., IS CONCE RNED, THIS COMPANY WAS SELECTED BY THE ASSESSEE ITSELF IN TP S TUDY AS COMPARABLE; THEREFORE, WE ARE NOT INCLINED TO ACCEP T THE OBJECTION RAISED BY THE ASSESSEE BEFORE US THAT THE DIRECTORS OF THESE COMPANIES WERE INVOLVE DIN THE FRAUD. 51.2 HOWEVER, SINCE TRITON CORPN LTD., ACQUIRED BY MAPLE ESOLUTION LTD., THEREFORE, WE ARE OF THE VIEW THA T IF EXTRA ORDINARY EVENTS LIKE MERGER AND DE-MERGER OR AMALGAMATION TO OK PLACE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMEN T YEAR UNDER CONSIDERATION, AND BECAUSE OF THE MERGER/DE-MERGER THE COMPANY BECAME FUNCTIONALLY DIFFERENT THEN THE SAID COMPANY SHOULD BE EXCLUDED FROM THE COMPARABLES. HOWEVER, IF THE MERG ER OF THE TWO FUNCTIONALLY SIMILAR COMPANIES TOOK PLACE THEN THE EVENT OF MERGER ITSELF CANNOT BE TAKEN A FACTOR FOR EXCLUSION OF TH E SAID COMPARABLE.. ACCORDINGLY, WE DIRECT THE AO/TPO TO VERIFY THIS FA CT AND ACCORDINGLY DECIDE THE COMPARABILITY OF THIS COMPAN Y NAMELY ACCENTIA TECHNOLOGIES LTD. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 23 6.2 THE OBJECTION OF THE ASSESSEE AGAINST THE INCLU SION OF MAPLE ESOLUTIONS IS THE ALLEGATION OF FRAUD AGAINST THE DIRECTOR OF THE SAID COMPANY. AS IT IS CLEAR FROM THE FINDING OF THE TRI BUNAL IN PARA-51 THE SAID OBJECTION WAS FOUND NOT RELEVANT FOR THE BUSIN ESS OF THESE COMPANIES AND FOR THE YEAR UNDER CONSIDERATION. ONC E THE GROUND OF ALLEGATION OF FRAUD AGAINST DIRECTORS WAS NOT ACCEP TED THEN THE FINDING OF THE TRIBUNAL IN PARA-51 TO 51.2 HAS TO BE READ AS A WHOLE. THE OBSERVATION OF THE TRIBUNAL IN PARA 51.1 IS BASED O N THE FINDING IN PARA- 51 AND THEREFORE, PARA 51.1 CAN NOT BE READ IN ISOL ATION. ACCORDINGLY WE DO NOT FIND ANY SUBSTANCE IN THE SUBMISSIONS OF THE ASSESSEE ON THIS POINT. 7. THE NEXT ERROR ALLEGED BY THE ASSESSEE IS REGARD ING THE FINDING OF THE TRIBUNAL IN RESPECT OF COMPARABILITY OF ECLERX SERVICES LTD. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAS RAISED THE G ROUND ON FUNCTIONAL COMPARABILITY BEFORE THE CIT(A) AND ALSO RELIED UPO N THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN CASE OF CAPITAL IQ INFORMATION SYSTEM INDIA PVT. LTD. WHEREIN THE TRIBUNAL HAS HELD THAT ECLERX SERVICE S LTD. COULD NOT BE REGARDED AS COMPARABLE, AS IT WAS INVOLVED IN KPO SERVICES WHICH IS DIFFERENT FROM BPO SERVICES. HOWE VER, THIS TRIBUNAL HAS OMITTED TO CONSIDER THIS DECISION AND GAVE A FI NDING COMPLETELY CONTRARY TO THE FINDING IN THE CASE OF CAPITAL IQ INFORMATION SYSTEM INDIA PVT. LTD. ON THE OTHER HAND THE LD. DR HAS SU BMITTED THAT THE AUTHORIZED REPRESENTATIVE DID NOT ADVANCE THE ARGUM ENT ON THE FUNCTIONAL COMPARABILITY OF ECLERX SERVICES LTD. BU T RELIED UPON THE DECISION OF CAPITAL IQ INFORMATION SYSTEM INDIA PVT . LTD. HE HAS FURTHER CONTENDED THAT IN THE SAID CASE OF CAPITAL IQ INFOR MATION SYSTEM, ECLERX SERVICES LTD. WAS REJECTED AS COMPARABLE ON THE GRO UND OF SUPER NORMAL PROFITS AND KPO SERVICES. ON THE ISSUE OF SUPER NOR MAL PROFITS THERE ARE VARIOUS DECISION AND TRIBUNAL RULINGS WHEREIN IT HA S BEEN HELD THAT MERELY ON THE BASIS OF SUPER NORMAL PROFIT A COMPAN Y CANNOT BE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 24 EXCLUDED AS A COMPARABLE. IT IS THE REASON OF EXIST ING ABNORMAL CIRCUMSTANCES LEADING TO SUPER NORMAL PROFIT WHICH IS RELEVANT FOR DECIDING THE COMPARABILITY AND NOT SUPER NORMAL PRO FIT ALONE. HE HAS RELIED ON THE DECISION OF THIS TRIBUNAL IN CASE OF EXXON MOBILE COMPANY INDIA AS WELL AS FOUR OTHER DECISIONS OF THE TRIBUN AL. I) SAP LABS-I.T.A NO.398/BANG/2010 II) GOOGLE INDIA P. LTD.-I.T.A/BANG/2010 III) ADOBE SYSTEMS IPL-ITA NO.5043/DEL/2010 IV) TEVA INDIA-ITA NO.6107/MUM/2009 V) CAPITAL IA-ITA NO.1961/HYD/2011 7.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE RECORD. THE ARGUMENT OF BOTH THE PARTIE S HAVE BEEN RECORDED AT LENGTH IN PARA-34 TO 34.3 OF THE IMPUGNED ORDER. BOTH PARTIES HAVE RELIED UPON FIVE DECISIONS EACH OF THE TRIBUNAL IN SUPPORT OF THEIR CONTENTIONS. THE ASPECT OF FUNCTIONAL COMPARABILITY HAS BEEN CONSIDERED IN PARA 34.5 AND 34.6 AS UNDER :- 34.5 EVEN AS PER OECD TP GUIDELINES, THE EXTREME R ESULTS MIGHT CONSIST OF LOSSES OR UNUSUALLY HIGH PROFITS I TSELF CANNOT BE A FACTOR FOR POTENTIAL COMPARABLES; BUT FURTHER EXAMINATION WOULD BE NEEDED TO UNDERSTAND THE REASONS FOR SUCH EXTREME RESULTS. IF SOME REASONS ARE DETECTED WHICH INDICA TE A DEFECT IN THE COMPARABILITY OR EXCEPTIONAL CONDITIONS FOR SUCH AN EXTREME RESULTS, THEN ONLY THE CASE MAY BE EXCLUDED FROM THE PROPOSED COMPARABLES. THE CONCLUDING REMARKS GIVEN UNDER THE OECD TP GUIDELINES IN PARA 3.65 & 3.66 ARE AS UNDER: 3.65 GENERALLY SPEAKING, A LOSS-MAKING UNCONTROLLED TRANSACTION SHOULD TRIGGER FURTHER INVESTIGATION IN ORDER TO ESTABLISH WHETHER OR NOT IT CAN BE A COMPARABLE. CIRCUMSTANCES IN WHICH LOSS-MAKING TRANSACTIONS! ENTERPRISES SHOULD BE EXCLUDED FROM THE LIST OF COM PARABLES INCLUDE CASES WHERE LOSSES DO NOT REFLECT NORMAL BU SINESS CONDITIONS, AND WHERE THE LOSSES INCURRED BY THIRD PARTIES MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 25 REFLECT A LEVEL OF RISKS THAT IS NOT COMPARABLE TO THE ONE ASSUMED BY THE TAXPAYER IN ITS CONTROLLED TRANSACTI ONS. LOSS- MAKING COMPARABLES THAT SATISFY THE COMPARABILITY A NALYSIS SHOULD NOT HOWEVER BE REJECTED ON THE SOLE BASIS TH AT THEY SUFFER LOSSES. 3.66 A SIMILAR INVESTIGATION SHOULD BE UNDERTAKEN F OR POTENTIAL COMPARABLES RETURNING ABNORMALLY LARGE PR OFITS RELATIVE TO OTHER POTENTIAL COMPARABLES. THUS, IT IS CLEAR THAT EVEN THE LOSS MAKING OR HIGH PROFIT MAKING COMPARABLES THAT SATISFY COMPARABILITY ANALY SIS SHOULD NOT BE REJECTED ON THE SALE BASIS THAT THEY SUFFERS LOSS OR EARNED HIGH PROFIT. 34.6 IN THE CASE OF EXMXON MOBIL COMPANY INDIA P LT D (SUPRA), THE TRIBUNAL HAS DISCUSSING THE ISSUE IN P ARA 31((XI) AS UNDER: (XI) NOW, COMING TO THE ALTERNATIVE ARGUMENTS OF T HE ASSESSEE THAT ABNORMAL PROFIT MAKING UNIT IS ALSO T O BE ELIMINATED ON THE SAME ANALOGY ON WHICH LOSS MAKING UNITS ARE EXCLUDED, WE, IN PRINCIPLE, DO NOT DISPUTE THIS PROPOSITION. THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE L AY DOWN THAT A COMPARABLE CANNOT BE ELIMINATED JUST BECAUSE IT IS A LOSS MAKING UNIT. SIMILARLY, A HIGHER PROFIT MAKING UNIT CANNOT ALSO BE AUTOMATICALLY ELIMINATED JUST BECAUS E THE COMPARABLE COMPANY EARNED HIGHER PROFITS THAN THE A VERAGE. THE REASON FOR REJECTING THE TWO LOSS MAKING UNITS IS NOT JUST BECAUSE THEY WERE LOSS MAKING UNITS BUT FOR THE REA SONS WHICH ARE ALREADY STATED IN THE PRECEDING PARAGRAPH S. IF SIMILAR REASONS EXISTED IN THE HIGHER PROFIT MAKING UNIT, THEN, IT IS FOR THE ASSESSEE TO BRING OUT THOSE REASONS A ND SEEK EXCLUSION OF THE SAME. A GENERAL ARGUMENT THAT, YOU HAVE TO EXCLUDE UNITS WHICH HAVE HIGH PROFIT RANGE, IN CASE YOU EXCLUDE UNITS WHICH HAVE MADE LOSS IS A GENERAL SUB MISSION WHICH CANNOT BE ACCEPTED. IN OTHER WORDS, AS A GENE RAL PRINCIPLE, BOTH LOSS MAKING UNIT AND HIGH PROFIT MA KING UNIT CANNOT BE ELIMINATED FROM THE COMPARABLES UNLESS, T HERE ARE SPECIFIC REASONS FOR ELIMINATING THE SAME WHICH IS OTHER THAN THE GENERAL REASON THAT A COMPARABLE HAS INCURRED L OSS OR HAS MADE ABNORMAL PROFITS. THUS, THIS GROUND IS DIS MISSED. SIMILARLY IN THE CASE OF M/S B P INDIA SERVICES P L TD,(SUPRA) THE COORDINATE BENCHES OF THIS TRIBUNAL HAS ADJUDIC ATED THIS ISSUE IN PARA 1.2.6 AS UNDER: 12.6. THUS IT IS EVIDENT THAT THE DECISIVE FACTORS FOR DETERMINING INCLUSION OR EXCLUSION OF ANY CASE IN/F ROM THE LIST OF COMPARABLES ARE THE SPECIFIC CHARACTERISTIC S OF SERVICES MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 26 PROVIDED, ASSETS EMPLOYED, RISKS ASSUMED, THE CONTR ACTUAL TERMS AND CONDITIONS PREVAILING INCLUDING THE GEOGR APHICAL LOCATION AND SIZE OF THE MARKETS, COSTS OF LABOUR A ND CAPITAL IN THE MARKETS ETC. NOWHERE, THE HIGHER OR LOWER PR OFIT RATE, AS PRESUMED BY THE ID. CIT(A), HAS BEEN PRESCRIBED AS THE DETERMINATIVE FACTOR TO MAKE A CASE INCOMPARABLE. R IGHTLY SO, BECAUSE PROFIT IS NOT A FACTOR IN ITSELF, BUT C ONSEQUENCE OF THE EFFECT OF VARIOUS FACTORS. ONLY IF THE HIGHER O R LOWER PROFIT RATE RESULTS ON ACCOUNT OF THE EFFECT OF FACTORS GI VEN IN RULE 10B(2) READ WITH SUB-RULE (3), THAT SUCH CASE SHALL MERIT OMISSION. IF HOWEVER SUCH EXTREME PROFIT RATE IS AC HIEVED BECAUSE OF FACTORS OTHER THAN THOSE GIVEN IN THE RU LE, THEN SUCH CASE WOULD CONTINUE TO FIND ITS PLACE IN THE L IST OF COMPARABLES. 7.2 ONCE THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL BY HOLDING THAT THE COMPANY PROVIDING DATA PROCESSING AND DATA ANA LYSIS SERVICE IS SIMILAR TO THE SERVICES OF THE ASSESSEE THEN IT BEC OMES IRRELEVANT WHETHER THE ASSESSEE HAS RAISED THE OBJECTION BEFORE THE AU THORITIES BELOW OR NOT. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE SUBMISS ION OF THE ASSESSEE ON THIS ISSUE. 8. THE NEXT MISTAKE ALLEGED BY THE ASSESSEE IS REGA RDING THE FINDING IN RESPECT OF COMPARABILITY OF MOLD TEX TECHNOLOGIES LTD. (MTL) . THE LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE CH ALLENGED THE SELECTION OF MTL ON THREE GROUNDS VIZ. (A) THE COMPANY EARNS SUPER NORMAL PROFITS; (B) THE COMPANY IS ENGAGED IN ENGINEERING SERVICES WHICH IS FUNCTIONALLY DIFFERENT FROM THE ASSESSEE AND THEREFORE, NOT COMP ARABLE AND (C) EXTRA ORDINARY EVENT IN THE FORM OF MERGER. 8.1 ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE ISSUE HAS BEEN REMANDED TO THE RECORD OF THE AO/TPO FOR VERIF ICATION OF EXTRA ORDINARY EVENTS OF MERGER AND THEN TO DECIDE THE CO MPARABILITY OF THE COMPANY. THEREFORE, ISSUE OF COMPARABILITY HAS TO B E DECIDED ONLY AFTER VERIFICATION OF FACTUM OF MERGER. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 27 8.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS PERUSED THE RELEVANT RECORD. THE TRIBUNAL HAS CONSIDERED AND DE CIDED THIS ISSUE IN PARA -52 AND 52.1 AS UNDER :- 52 THE LD AR HAS REFERRED THREEFOLD OBJECTIONS AGAI NST INCLUSION OF THIS COMPANY IN THE COMPARABLES. FIRST LY, THIS COMPANY HAS EARNED SUPER NORMAL PROFIT; SECONDLY TH IS IS NOT FUNCTIONALLY COMPARABLE AS IT IS ENGAGED IN THE ENG INEERING SERVICES. HE HAS REFERRED PAGE 301 & 302 OF THE PAP ER BOOK AND SUBMITTED THAT THE ASSESSEE RAISED THESE OBJECT IONS THAT THERE IS A CONSIDERABLE DIFFERENCES IN THE BUSINESS PROFILE AND THE FUNCTIONS PERFORMED BY THIS SEGMENT OF MOLD TEX VIS--VIS THE BUSINESS PROFILE AND FUNCTIONS PERFORMED BY THE ASSESSEE. THE LD AR HAS POINTED OUT THAT THIS COMPANY OPERATE S IN TWO BUSINESS SEGMENTS; PLASTIC DIVISION AND IT DIVISIO N. PLASTIC DIVISION IS ENGAGED IN THE MANUFACTURE OF LUBE & OI LS, PAINTS, PET PRODUCTS, CONSUMER PRODUCTS ETC., AND IT DIVISI ON OF THE COMPANY SPECIALIZES IN PROVIDING STRUCTURAL DESIGN AND DETAILING SERVICES WHICH CAN BE CATEGORIZED AS STRU CTURAL ENGINEERING SERVICES AND IN THE NATURE OF KPO. THU S, THE I T SEGMENTS OF THIS COMPANY CANNOT BE CLASSIFIED AS FA LLING WITHIN THE SCOPE AND AMBIT OF ITES SEGMENT. THE TH IRD OBJECTION OF THE LD AR IS WITH RESPECT TO THE EXTRA ORDINARY EVENTS IN THE FORM OF MERGER DURING THE YEAR AS THI S FACT HAS BEEN RECORDED BY THE HYDERABAD BENCH IN CAPITAL IQ INFORMATION (SUPRA). IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF CA PITAL IQ INFORMATION (SUPRA). 51.4 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T IN THE CASE OF ACTIS ADVISORS P LTD (SUPRA), THE DELHI BEN CHES OF THIS TRIBUNAL HAS CONSIDERED THIS COMPANY AS A GOOD COMP ARABLE AFTER EXAMINING ALL THE ASPECTS RELATES TO THIS COM PANY. HE HAS RELIED UPON THE DECISION IN THE CASE OF ACTIS A DVISORS P LTD (SUPRA), 52 WE HAVE CONSIDERED THE RIVAL SUBMISSION AND RELE VANT MATERIAL ON RECORD. AS FAR AS THE OBJECTION REGARD ING SUPER NORMAL PROFIT IS CONCERNED, THIS OBJECTION CANNOT B E A SOLE GROUND FOR REJECTION OF A COMPARABLE IN VIEW OF OUR FINDINGS WHILE DISCUSSING THE COMPARABLE ECLERX SERVICES P L TD IN PARA 34.4 MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 28 52.1 AS REGARDS THE EXTRA ORDINARY EVENTS OF MERGER , WE HAVE DECIDED THE IDENTICAL ISSUE WHILE DISCUSSING T HE COMPARABLE ACCENTIA TECHNOLOGIES LTD IN PARAS 17 TO 18.3. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER/TPO TO VERIFY THIS FACT AND ACCORDINGLY DECIDE THE COMPARABILITY OF TH E COMPANY. 8.3 SINCE THE ISSUE OF SUPER NORMAL PROFITS HAS BEE N DECIDE IN PARA 34.4 WHILE CONSIDERING COMPARABILITY OF ECLERX SER VICES LTD. THEREFORE, NO DETAILED FINDING WAS GIVEN FOR THE SAKE OF BREV ITY AND TO AVOID DUPLICATION. AS REGARDS THE FUNCTIONAL COMPARABILIT Y WHEN THE FACT OF MERGER WAS NOT EXAMINED BY THE AUTHORITIES BELOW AS IT WAS NOT RAISED, THEREFORE, THE TPO WAS DIRECTED TO VERIFY THIS FACT AND ACCORDINGLY DECIDE THE COMPARABILITY OF THE COMPANY. IT IS PERTINENT T O NOTE THAT FUNCTIONAL COMPARABILITY CAN BE DETERMINED ONLY AFTER ISSUE OF MERGER IS VERIFIED AND DECIDED, THEREFORE, THE TRIBUNAL DID NOT PROPOSE TO GO INTO THE ISSUE OF COMPARABILITY AS IT WAS SUBJECT TO EVENT OF MERGER. ACCORDINGLY WHEN THE ISSUE OF MERGER HAS BEEN REMANDED TO THE RECORD OF AO/TPO FOR VERIFICATION CONSEQUENTLY, THE ISSUE OF FUNCTIONAL COMPARABILITY HAS ALSO TO BE DECIDED BY THE AO/TPO. HENCE, FINDING IN PARA 52.1 IS ACCORDINGLY CLARIFIED. 8.4 THE ASSESSEE HAS ALSO RAISED GRIEVANCE IN RESPE CT OF FINDING OF THE TRIBUNAL ON THE ISSUE OF TOLERANCE RANGE OF RELATED PARTY TRANSACTION FOR EXCLUSION OF COMPARABLE CASES. THE LD. AR OF THE AS SESSEE HAS SUBMITTED THAT THE ASSESSEE HAS RELIED UPON VARIOUS DECISIONS OF THE TRIBUNAL WHEREIN THE TRIBUNAL HAS HELD THAT 0-15% OF THE REL ATED PARTY TRANSACTION SHOULD BE CONSIDERED A THRESHOLD FOR CO NSIDERING AN ENTITY AS COMPARABLE. HOWEVER, THE TRIBUNAL IN THE IMPUGNED O RDER HAS APPLIED THE LIMIT OF 15% ON THE ASSUMPTION THAT IF GOOD NUM BER OF COMPARABLE ARE AVAILABLE AN ENTITY IS HAVING 15% RELATED PARTY TRANSACTIONS CAN BE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 29 CONSIDERED AS UNCONTROLLED ENTITY. THUS, THE LD. AR HAS SUBMITTED THAT THE TRIBUNAL HAS TAKEN A CONTRARY VIEW TO THE RULIN G OF THE CO-ORDINATE BENCH OF THE TRIBUNAL WHICH WERE RELIED UPON BY THE ASSESSEE. 8.5 ON THE OTHER HAND THE LD. DR HAS SUBMITTED THAT THE TRIBUNAL HAS DISCUSSED THE ISSUE IN DETAIL AND FIXED THE TOLERAN CE RANGE BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF ASSESSEES CASE. THE REFORE, THERE IS NO ERROR OR MISTAKE APPARENT ON RECORD TO BE RECTIFIED UNDER SECTION 254. 8.6 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RELEVANT RECORD. THE TRIBUNAL HAS CONSIDERED THIS I SSUE IN PARA-21 TO 22.11 AS UNDER :- 21 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE VARIOUS DECISIONS RELIED UPON BY E ITHER OF THE PARTIES. AS PER THE TP REGULATIONS, THE INTERNATION AL TRANSACTION IS REQUIRED TO BE COMPARED WITH A SIMIL AR; BUT UNCONTROLLED TRANSACTION BETWEEN UNRELATED PARTIES. THEREFORE, AS A RULE OF PRUDENCE, SO FAR AS POSSIBLE A COMPARA BLE SHOULD BE CONSIDERED HAVING NO RELATED PARTY TRANSACTION. BUT AS WE ARE CONSCIOUS AND AWARE OF THE FACT THAT SUCH A SIT UATION IS HIGHLY IMPRACTICAL AND ALMOST IMPOSSIBLE TO HAVE A COMPARABLE WITHOUT A SINGLE RELATED PARTY TRANSACTI ON. THEREFORE, RELATED PARTY TRANSACTION CANNOT BE COMP LETELY RULED OUT WHILE SELECTING THE COMPARABLES. THE QUES TION ARISES AS HOW MUCH AND TO WHAT EXTENT RELATED PARTY TRANSA CTION CAN BE ACCEPTED FOR CONSIDERING THE COMPANY AS A GOOD COMPARABLE. THIS TRIBUNAL HAS GIVEN VARIOUS THRESHO LD LIMITS IN SERIES OF DECISIONS. 21.1 IN THE CASE OF AVAYA INDIA P LTD (SUPRA), THE TRIBUNAL IN PARA 18 HAS OPINED AS UNDER: 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. SO FAR AS I T RELATES TO APPLYING THE FILTER FOR REJECTION OF COMPARABLE COM PANIES HAVING RELATED PARTY TRANSACTIONS AS A PERCENTAGE O F SALES MORE THAN 15%, WE UPHOLD THE SAID FILTER. SO AS IT RELATES TO ANOTHER FILTER REJECTING THE COMPARABLES WHOSE CURR ENT YEAR FINANCIAL DATA IS NOT AVAILABLE WE FIND THAT THE SA ID FILTER HAS BEEN UPHELD BY THE DRP BY FOLLOWING THE DECISION OF ITAT MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 30 DELHI BENCH IN THE CASE OF CUSTOMER SERVICES P LTD VS ACIT 30 SOT 486 IN WHICH IT HAS BEEN HELD THAT COMMISSIO NER OF INCOME TAX (APPEALS) WAS FULLY JUSTIFIED IN HOLDING THAT MAIN RULE OF SEC. 10B(4) WAS APPLICABLE TO THE FACTS OF THE ASSESSEES CASE AND IT WAS MANDATORY ON THE PART OF THE TPO TO USE DATA RELATING TO FINANCIAL YEAR 2002-03 IN WHICH THE INTERNATIONAL TRANSACTIONS WERE ADMITTEDLY ENTE R INTO BY THE ASSESSEE WITH ITS ASSOCIATE ENTERPRISES. THEREF ORE, THE SECOND FILTER IS ALSO UPHELD. 21.2 THE TRIBUNAL HAS UPHELD THE DECISION OF THE AU THORITIES BELOW IN APPLYING FILTER FOR REJECTION OF COMPARABL E COMPANY HAVING RELATED PARTY TRANSACTION MORE THAN 15% OF THE TOTAL SALES. SIMILARLY IN THE CASE OF SONY INDIA P LTD ( SUPRA), , THE TRIBUNAL HAS DEALT WITH AN IDENTICAL ISSUE IN PARA 115.3 ASUNDER: 115.3 ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS , WE SEE NO JUSTIFICATION FOR EXCLUDING ABOVE NAMED THREE EN TITIES FROM THE LIST OF COMPARABLE FOR WORKING OUT MEAN OPERATI NG PROFIT. IT IS AN ADMITTED POSITION THAT THESE COMPANIES SAT ISFY SCREENING CRITERIA (FILTERS) ADOPTED BY THE TRANSFE R PRICING OFFICER AT PAGE 10 OF THE ORDER EXCEPT HIS OBSERVAT ION THAT COMPANIES WERE HAVING CONTROLLED TRANSACTIONS WITH RELATED PARTIES. THE TPO AND ON APPEAL, THE LEARNED CIT (AP PEALS) DID NOT SUBSTANTIATE THE ALLEGATION BY FURNISHING F IGURES OF CONTROLLED TRANSACTIONS TO SHOW THAT SUCH TRANSACTI ON HAD SIGNIFICANT IMPACT ON THE PROFITS OF THESE COMPANIE S. THE TAXPAYER, ON THE OTHER HAND, HAS GIVEN PERCENTAGE O F TRANSACTION WITH RELATED PARTIES AND WE ARE OF VIEW THAT THEY ARE NOT SO HIGH AS TO EXCLUDE THEM FROM THE LIST OF COMPARABLES. WE ARE FURTHER OF VIEW THAT AN ENTITY CAN BE TAKEN AS UNCONTROLLED IF ITS RELATED PARTY TRANSACT ION DO NOT EXCEED 10 TO 15% OF TOTAL REVENUE. WITHIN THE ABOVE LIMIT, TRANSACTIONS CANNOT BE HELD TO BE SIGNIFICANT TO IN FLUENCE THE PROFITABILITY OF COMPARABLE. FOR THE PURPOSES OF CO MPARISON, WHAT IS TO BE JUDGED IS THE IMPACT OF THE RELATED P ARTY TRANSACTION VIS-A-VIS SALES AND NOT PROFIT SINCE PR OFIT OF AN ENTERPRISE IS INFLUENCED BY LARGE NUMBER OF OTHER F ACTORS. NO DISPUTE HAVING BEEN RAISED BY TPO OR THE ID. CIT(A) THAT THE OTHER FILTERS OF FUNCTIONS, ECONOMIC ACTIVITIES, PR ODUCT PROFILES ETC ARE SATISFIED, WE ARE OF VIEW THAT THESE THREE ENTITIES SHOULD ALSO BE TAKEN IN THE LIST OF COMPARABLES FOR WORKING AVERAGE / MEAN OPERATING PROFIT. EVEN AS PER OECD GUIDELINES, IT IS EMPHASIZED THAT LARGE NUMBER OF S IMILAR ENTITIES SHOULD BE TAKEN TO MAKE COMPARISON BROAD B ASED. RESPECTFULLY, FOLLOWING THE ORDER OF THE TRIBUNAL, WE DO NOT FIND ANY INFIRMITY IN CIT(A)S ORDER. ACCORDINGLY G ROUND NO.1.3 OF REVENUES APPEAL STANDS DISMISSED. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 31 22.3 IN THE SAID CASE, THE TRIBUNAL HAS VIEWED THAT AN ENTITY CAN BE TAKEN AS UNCONTROLLED IF ITS RELATED PARTY TRANS ACTION DO NOT EXCEED 10 TO 15% OF THE TOTAL REVENUE. IN THIS CASE , THE TRIBUNAL HAS NOT FIXED ANY CRITERIA OF THRESHOLD; BUT LAID DOWN A RANGE FROM 10 TO 15% RELATED PARTY TRANSACTION OF TOTAL REVENUE FOR CONSIDERING THE ENTITY AS AN UNCONTROLLED COMPARABLE. 22.4 IN THE CASE OF PHILIPS SOFTWARE CENTRE PVT LTD (SUPRA), THE TRIBUNAL IN PARA 5.71 (VII) HAS OBSERVED THAT FOR T HE PURPOSE OF THE COMPARABILITY COMPANIES WITH EVEN A SINGLE RUPEE OF TRANSACTIONS WITH AE CANNOT BE CONSIDERED AS COMPARABLE. 22.5 IN THE CASE OF CRM SERVICES INDIA P LTD (SUPRA ), THE TRIBUNAL HAS REAFFIRMED THE VIEW AS TAKEN IN THE CASE OF SON Y INDIA (SUPRA) AND HELD THAT THE TOLERANCE LIMIT OF RELATED PARTY TRANSACTIONS WOULD BE IN THE VICINITY OF 10 TO 15%. 22.6 IN THE CASE OF BENETTON INDIA P LTD (SUPRA), A SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL THAT THE RELATED PARTY TR ANSACTIONS SHOULD NOT EXCEED 10 TO 15% OF THE TOTAL REVENUE. 22.7 ON THE CONTRARY, THE TRIBUNAL IN THE CASE OF ACTIS ADVISERS (SUPRA) HAS HELD THAT AN ENTITY CAN BE TAKEN AS UNC ONTROLLED, IF ITS RELATED PARTY TRANSACTION DO NOT EXCEED 25% OF THE TOTAL REVENUE. THIS VIEW OF THE TRIBUNAL IS BASED UPON THE CRITERI A ENUMERATED U/S 92A(2) OF THE IT ACT WHEREIN EXPRESSION OF ASSOCIAT E ENTERPRISES HAS BEEN DEFINED, IF CERTAIN CONDITIONS AND CRITERIA A S PROVIDED THEREUNDER ARE SATISFIED. ONE OF THE CRITERIA IS I F AN ENTITY HOLDS 26% SHARES IN ANOTHER ENTITY, THEN IT CAN BE CONSID ERED AS AE. THUS IT IS CLEAR THAT THE BENCHES OF TRIBUNAL HAVE TAKEN DIVERGENT VIEW IN VARIOUS DECISIONS AND HELD THAT AN ENTITY CAN BE TAKEN AS UNCONTROLLED, IF ITS RELATED PARTY TRANSACTION RANG ING FROM 0 TO 25% OF THE TOTAL REVENUE. IN THE MAJORITY OF THE CASES , THE RANGE OF RELATED PARTY TRANSACTION HAS BEEN CONSIDERED BETWE EN 10 TO 15% OF THE TOTAL REVENUE. IT IS DISCERNIBLE FROM THE DIFF ERENT VIEWS TAKEN BY THE TRIBUNAL IN THESE DECISIONS THAT THERE CANNOT B E A FIXED CRITERIA/PARAMETER WHICH CAN BE APPLIED AS A FILTER IN RESPECT OF RELATED PARTY TRANSACTIONS FOR CONSIDERING AN ENTIT Y AS UNCONTROLLED FOR THE PURPOSE OF DETERMINATION OF THE ALP. 22.8 IN OUR VIEW 0% RELATED PARTY TRANSACTION IS AN IMPOSSIBLE SITUATION AND THEREFORE, IT IS PRACTICALLY NOT POSS IBLE TO FIND OUT A COMPARABLE HAVING NO RELATED PARTY TRANSACTION. TH EREFORE, A REASONABLE PERCENTAGE OF THE TOTAL REVENUE FROM THE RELATED PARTY TRANSACTION CAN BE CONSIDERED FOR SELECTING AN UNCO NTROLLED COMPARABLE. THERE CANNOT BE A SINGLE CRITERIA/PARA METER WHICH CAN BE APPLIED AS GENERAL RULE IN ALL THE CASES. THE RE LATED PARTY TRANSACTION RANGING FROM 10 TO 25% OF THE TOTAL REV ENUE CAN BE CONSIDERED HAVING REGARD TO THE FACTS AND CIRCUMSTA NCES OF THE GIVEN CASES, 10% IS THE LOWEST LIMIT AND CAN BE TAK EN IN THE CASE WHERE ABUNDANCE NUMBER OF COMPARABLES ARE AVAILABLE . THEREFORE, WHEN THERE IS NO DIFFICULTY IN SEARCHING THE COMPAR ABLES, THEN THE ENTITY HAVING MORE THAN 10% OF THE RELATED PARTY T RANSACTION SHOULD BE EXCLUDED BECAUSE THE COMPARABLE SHOULD BE AN MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 32 UNCONTROLLED TRANSACTION AND THEREFORE, SO FAR AS IT IS POSSIBLE, ITS RESULT SHOULD NOT BE INFLUENCED BY RELATED PARTY T RANSACTION. IN THE NORMAL CIRCUMSTANCES, WHERE A GOOD NUMBER OF COMPAR ABLES ARE AVAILABLE, THEN THE LIMIT OF RELATED PARTY TRANSACT IONS SHOULD BE 15% OF THE TOTAL REVENUE AND IN SUCH CASE, AN ENTITY CA N BE CONSIDERED AS UNCONTROLLED, IF RELATED PARTY TRANSACTIONS DO N OT EXCEED 15% OF THE TOTAL REVENUE. 22.9 WE ARE ALSO OF THE VIEW THAT 15% IS AN AVERAGE AND SHOULD BE GENERALLY ACCEPTED IN NORMAL CASES AS A RELATED PARTY FILTER. IN CASES WHERE COMPARABLES ARE NOT AVAILABLE IN SUFFIC IENT NUMBER, THEN THIS THRESHOLD LIMIT OF RELATED PARTY TRANSACT ION CAN BE RELAXED TO 20% OF THE TOTAL REVENUE. 22.10 THE RELAXATION UPTO 20% IS PURELY WITH A VIEW TO MAKE IT POSSIBLE THAT A LARGER NUMBER OF ENTITIES ARE TAKEN AS COMPARABLE SO THAT THE ALP SO DETERMINED SHOULD BE BASED ON A BRO AD BASED AND TECHNICALLY REPRESENTS PRICE IN THE FREE MARKET. IN A EXTREME CASE WHERE ONLY ONE OR FEW COMPARABLES ARE AVAILABLE, TH EN AN ENTITY HAVING RELATED PARTY TRANSACTIONS NOT EXCEEDING 25 % OF THE TOTAL REVENUE CAN BE CONSIDERED SO THAT THE ALP SHOULD BE DETERMINED HAVING COMPARISON BROAD BASED, THOUGH THIS EXTREME LIMIT OF 25% CAN BE CONSIDERED ONLY IN EXCEPTIONAL CASES. 22.11 IN THE CASE IN HAND, AS IT IS EVIDENT THAT TH E TPO HAS FOUND SUFFICIENT NUMBER OF COMPARABLES AND FINALLY TOOK 3 0 COMPANIES AS COMPARABLES; THEREFORE, THIS CASE DOES NOT FALL UND ER THE CATEGORY OF EXCEPTIONAL CASES WHERE CRITERIA OF RELATED PARTY TRANSACTIONS CAN BE RELAXED MORE THAN 15% OF THE TOTAL REVENUE OF TH E ENTITY. HENCE, WE ARE OF THE CONSIDERED OPINION THAT IN THE CASE I N HAND, WHEN THERE IS NO SHORTAGE OF COMPARABLES, AN ENTITY CAN BE CONSIDERED AS UNCONTROLLED, IF THE RELATED PARTY TRANSACTION DO N OT EXCEED 15% OF THE TOTAL REVENUE. 8.7 IT IS CLEAR FROM THE FINDING OF THE TRIBUNAL TH AT THE TOLERANCE RANGE OF 15% WAS TAKEN IN THE CASE OF ASSESSEE BY CONSIDE RING THE VARIOUS DECISIONS OF THE TRIBUNAL WHEREIN THIS RANGE HAS BE EN CONSIDERED FROM 0-25%. THE ASSESSEES GRIEVANCE IS AGAINST REASONIN G AND VIEW OF THE TRIBUNAL AND NOT AGAINST ANY ERROR OR MISTAKE APPAR ENT ON RECORD. EVEN IN THE DECISIONS RELIED UPON BY THE ASSESSEE RELATE D PARTY TRANSACTIONS HAVE BEEN CONSIDERED BETWEEN 10-15% . THE VIEW TAKE N BY THE TRIBUNAL IN ASSESSEES CASE IS NOT DIVERGENT FROM THE VIEW I N OTHER CASES. HENCE, THE ASSESSEE FAILED TO MAKE OUT ANY ERROR APPARENT FROM RECORD ON THIS ISSUE. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 33 8.8 THE ASSESSEE HAS ALSO RAISED AN OBJECTION IN TH E MISCELLANEOUS APPLICATION AGAINST THE FINDING OF THE TRIBUNAL ON THE ISSUE OF JUSTIFICATION OF CARRYING OUT FRESH SEARCH BY THE T PO. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE RELIED UPO N THE DECISION OF THE TRIBUNAL IN CASE OF HAWORTH (INDIA) PVT. LTD. AND IN CASE OF VEDARIS TECHNOLOGIES P. LTD. WHEREIN THE TRIBUNAL HAS CONSIDERED EVEN ONE COMPARABLE SUFFICIENT FOR DETERMINING THE ALP. THE LD. AR HAS SUBMITTED THAT IN ASSESSEES CASE TPO ACCEPTED EIGHT COMPARAB LES SELECTED BY THE ASSESSEE AND FURTHER CARRIED OUT THE SEARCH TO INCL UDE 22 MORE COMPARABLES. THUS, TPO WAS NOT JUSTIFIED IN CARRYIN G OUT THE FRESH SEARCH WHEN EIGHT COMPARABLES SELECTED BY ASSESSEE WERE ACCEPTED BY TPO. THE LD. AR CONTENDED THAT THE FINDING OF THE T RIBUNAL IS CONTRARY TO THE DECISION IN CASE OF HAWORTH (INDIA) PVT. LTD. AND VEDARIS TECHNOLOGIES P. LTD. AND THEREFORE, THE MATTER SHOULD HAVE BEEN REFERRE D TO THE LARGER BENCH/SPECIAL BENCH. ON THE OTHER HAND THE LD. DR H AS RELIED UPON THE THIRD MEMBER DECISION IN THE CASE OF NAPAR DRUGS PVT. LTD. (98 ITD 285) AND SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING T HE VARIOUS DECISION OF HON'BLE HIGH COURTS AND HON'BLE SUPREME COURT INCLU DING THE DECISION OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF CIT VS. KALPETTA ESTATES LTD. (211 ITR 635) HAS HELD THAT THE TRIBUNAL IS ENTITLED TO TAKE A DIFFERENT VIEW OF THE MATTER ON A CLOSER AND MORE I NTELLIGENT ANALYSIS. 8.9 IN THE REBUTTAL THE LD. AR HAS RELIED UPON THE FOLL OWING DECISIONS 1. OMAR SALAY MOHD. SAIT VS. CIT 37 ITR 151 (SC); 2. KILLICK NIXON AND CO. VS. CIT 66 ITR 714 (SC) AND 3. UDHAVDAS KEWALRAM V CIT 66 ITR 462 (SC) 8.10 HE HAS SUBMITTED THAT IT HAS BEEN HELD BY THE HON'BLE SUPREME COURT THAT THE TRIBUNAL BEING FINAL AUTHORITY ON TH E QUESTION OF FACT WAS BOUND TO CONSIDER ALL EVIDENCE AND ARGUMENTS RAISED BY THE PARTIES. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 34 8.11 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND C AREFULLY PERUSED THE RELEVANT RECORDS. THE TRIBUNAL HAS CONSIDERED A ND DECIDED THE ISSUE IN PARA-14 TO 14.7 AS UNDER :- 14 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE RELEVANT MATERIAL AS WELL AS THE P ROVISIONS RELATING TO THE TRANSFER PRICING REGULATIONS. AS PER THE PROVISIONS OF SEC. 92CA(3), THE TPO HAS JURISDICTIO N/POWER TO GATHER AND CONSIDER ALL RELEVANT MATERIAL AND INFOR MATION APART FROM THE EVIDENCE, INFORMATION AND DOCUMENTS PRODUCED BY THE ASSESSEE AS REQUIRED U/S 92D(3) TO DETERMINE THE ALP IN RELATION TO THE INTERNATIONAL TRANSACTION. 14.1 SUB SEC. (7) OF SEC 92CA EMPOWERS THE TPO FOR THE PURPOSE OF DETERMINING THE ALP TO EXERCISE ANY OF T HE POWERS SPECIFIED IN CLAUSE (A) TO (D) OF SUB.SEC. (1) OF SEC 132 OR SUB.SEC. (6) OF SEC 133 OR 133A. THUS, UNDER THE TP REGULATIONS, THERE IS NO EMBARGO ON THE POWERS OF T HE TPO IN CARRYING OUT FRESH SEARCH FOR GATHERING MORE RELEV ANT INFORMATION, DOCUMENTS ETC., WHILE DETERMINING THE ALP IN RELATION TO INTERNATIONAL TRANSACTIONS. 14.2 THE ASSESSEE HAS CHALLENGED THE ACTION OF THE TPO ON THE GROUND THAT AFTER ACCEPTING 8 COMPARABLES SELEC TED BY THE ASSESSEE, THE TPO IS NOT JUSTIFIED IN CARRYING OUT FRESH SEARCH AND ADDING 22 MORE COMPARABLES. THE CONTENTION OF THE LD SR COUNSEL IS BASED ON THE LOGIC THAT THE 8 COMPARABLE S, AS SELECTED BY THE ASSESSEE AND ACCEPTED BY THE TPO, A RE MORE THAN SUFFICIENT FOR DETERMINATION OF THE ALP AND TH EREFORE, THERE WAS NO REQUIREMENT, WHICH JUSTIFIED THE FRESH SEARCH CARRIED OUT BY THE TPO IN INCLUSION OF 22 MORE COMP ARABLES . 14.3 WE DO NOT AGREE WITH THE PROPOSITION ADVANCED BY THE LD SR COUNSEL FOR THE ASSESSEE BECAUSE THERE CANNOT BE A FIXED NUMBER OF COMPARABLES TO BE CONSIDERED AS SUFFICIEN T OR APPROPRIATE NUMBER FOR DETERMINATION OF THE ALP AS A GENERAL PARAMETER. THE SUFFICIENT NUMBER OF COMPARABLES DE PENDS UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE A ND THERE CANNOT BE A FIXED CRITERIA OR PARAMETER FOR NUMBER OF COMPARABLES, WHICH CAN BE UNIVERSALLY APPLIED TO EA CH AND EVERY CASE FOR DETERMINATION OF THE ALP. IT IS AN ACCEPTED RULE OF SAMPLING THAT LARGER SIZE OF SAMPLE WOULD BETTER AND ADEQUATE REPRESENT THE LOT OR POPULATION TO WHICH T HE SAMPLE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 35 BELONGS. THEREFORE, TO GET AN ADEQUATE RESULT AND BETTER REPRESENTATION, THE SIZE OF SAMPLE MUST BE LARGE EN OUGH. THE SAME RULE IS APPLICABLE IN THE CASE OF NUMBER OF CO MPARABLES SELECTED FOR REPRESENTING THE TRUE AND CORRECT ALP IN RELATION TO THE INTERNATIONAL TRANSACTION. THE ENDEAVOUR SHOUL D BE MADE TO BRING MORE AND MORE COMPARABLES SO THAT A PROPER AND REALISTIC PRICE CAN BE DETERMINED WHICH REPRESENTS THE PRICE PREVAILING IN THE OPEN MARKET. 14.4 UNDER THE TRANSFER PRICING REGULATIONS, THE NU MBER OF COMPARABLES MAY BE ONE OR MORE THAN ONE; BUT THERE IS NO UPPER LIMIT PRESCRIBED U/S 92C OF THE I T ACT. HOW EVER, THE FIRST PROVISO TO SE.92(2) INDICATES THAT MORE THAN ONE PRICE CAN BE CONSIDERED FOR DETERMINATION OF ALP AND IN SUCH A CASE, THE ALP SHALL BE TAKEN TO BE ARITHMETIC MEAN OF SU CH PRICE. THEREFORE, THE SIZE OF NUMBER OF COMPARABLES HAS NO T BEEN PRESCRIBED UNDER THE PROVISIONS OF TP REGULATIONS P ROVIDED UNDER THE I T ACT. HOWEVER, THE SUFFICIENCY OF NUM BER DEPEND LARGELY ON THE AVAILABILITY OF THE COMPARABLES WHER E THE NUMBER OF COMPARABLES AVAILABLE IS LARGE, THEN IT IS ALWAYS BETTER TO CONSIDER AS MANY AS POSSIBLE NUMBER OF COMPARABLES WHICH CAN GIVE AN ADEQUATE AND PROPER REPRESENTATION OF THE PRICE PREVAILING IN OPEN MARK ET IN THE SAID INDUSTRY, BUSINESS, TRADE ETC., TO WHICH THE C OMPARABLES AND INTERNATIONAL TRANSACTIONS BELONG. 14.5 IN THE CASE OF HAWORTH INDIA P LTD,(SUPRA). T HE TRIBUNAL HAS OBSERVED THAT ONLY ONE COMPARABLE WAS LEFT WHIC H WAS SELECTED BY THE ASSESSEE ITSELF IN ITS TP STUDY AN D THE TPO DID NOT CHOOSE TO CARRY OUT A FRESH SEARCH, THEN TH E SAID COMPARABLE CAN BE TAKEN TO COMPUTE THE ALP. THE REL EVANT PART OF THE TRIBUNALS OBSERVATION IN PARA 77 IS AS UNDER: 77. NOW COMING TO THE CASE LAW RELIED UPON BY ID. D R WHICH CONVEY THAT ONLY ONE COMPARABLE IS SUFFICIENT AND IT HAS BEEN HELD BY THE TRIBUNAL IN OTHER CASES THA T ARM LENGTH PRICE CAN BE WORKED OUT EVEN ON THE BASIS OF ONE COMPARABLE. IN THE CASE OF VEDARIS TECHNOLOGY PVT. LTD. VS. ACIT (SUPRA) 20 COMPARABLES WERE SHORT LISTED A ND MEAN MARGIN WAS WORKED OUT AT 16.585% AND OUT OF THOSE ONLY ONE COMPARABLE WAS LEFT NAMELY SOPHIA SOFTWARE LTD. ON THE BASIS OF WHICH THE ARM LENGTH PRICE WAS DETERMINED. HERE, IT IS THE CASE OF LD. A R THAT THE SAID CASE IS NOT APPLICABLE TO ASSESSEES CASE AS IN THAT CASE BOTH THE PARTIES HAD ACCEPTED ONE COMPARA BLE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 36 ONLY. BUT THAT IS NOT THE ONLY BASIS ON WHICH THE TRIBUNAL HAS RESTED ITS DECISION. THE OTHER CASE OF SIMILAR NATURE IS PARROT SYSTEMS TSI INDIA LTD. VS. DCIT (SUPRA). MOREOVER, THE COMPARABLE WHICH HAS BEEN LE FT WAS SELECTED BY THE ASSESSEE ITSELF IN ITS TP STUDY AND NO REASON WHATSOEVER IS GIVEN THAT HOW THE SAID COMPARABLE COULD NOT BE TAKEN TO COMPUTE ARM LENGTH PRICE OF THE ASSESSEE. THEREFORE, WE REJECT THE SUBMISSION OF THE ASSESSEE THAT ON THE BASIS OF ONE COMPARABLE, THE ARM LENGTH PRICE COULD NOT BE DETERMINED AND FRESH SEARCH WAS REQUIRED TO BE TAKE N AS PER SUBMISSIONS MADE BEFORE DRP. THE FACTS OF TH E PRESENT CASE DO NOT WARRANT THE FRESH SEARCH TO BE TAKEN INTO CONSIDERATION AS THERE IS NO VALID REASO N TO DO SO. 14.6 THE FINDING OF THE TRIBUNAL IS ON THE POINT WH ETHER IN A CASE WHERE ONLY COMPARABLE IS LEFT WHICH IS SELECTE D BY THE ASSESSEE IN THE TP STUDY, THEN THE TPO IS NOT BOUND TO CARRY OUT A FRESH SEARCH. THEREFORE, THE TRIBUNALS DECI SION IS NOT ON THE POINT OF RESTRICTING THE POWER AND JURISDICTION OF THE TPO TO CARRY OUT THE FRESH SEARCH; BUT IT IS IN THE PECULI AR FACTS OF THE SAID CASE WHEN ONLY ONE COMPARABLE WAS LEFT AND IN VIEW OF THE TPO, NO FRESH SEARCH WAS REQUIRED, THEN THE ALP CAN BE DETERMINED ON THE BASIS OF ONE COMPARABLE. THEREFOR E, THE SAID FINDING OF THE TRIBUNAL CANNOT BE UNDERSTOOD A ND INFERRED AS A BAR ON THE JURISDICTION OF THE TPO TO CARRY OU T A FRESH SEARCH. 14.7 IN THE CASE OF VEDARIS TECHNOLOGY(P) LTD (SUPR A) ALSO, THE TRIBUNAL HAS OBSERVED THAT WHEN BOTH THE PARTI ES HAVE ACCEPTED THE SOLE COMPARABLE LEFT, THEN IT IS TO B E A VALID COMPARABLE CASE. AGAIN THE FINDING OF THE TRIBUNA L IS NOT ON THE POINT OF JURISDICTION OF THE TPO; BUT IS ON THE POINT WHEN ONE COMPARABLE WHICH IS LEFT AND ACCEPTED BY BOTH T HE PARTIES AND THE TPO CHOSE NOT TO CARRY OUT A FRESH SEARCH, THEN THE ALP CAN BE DETERMINED ON THE BASIS OF ONE COMPARABL E. BUT WHERE THE TPO IN HIS WISDOM DECIDES TO EXERCISE HIS POWER AND JURISDICTION TO CARRY OUT A FRESH SEARCH, THEN THERE IS NO SUCH PROVISION OR LAW WHICH RESTRICTS THE POWERS/JU RISDICTION OF THE TPO TO CARRY OUT THE FRESH SEARCH, IF THE CO MPARABLES INCLUDED BY THE TPO ARE FOUND AS GOOD COMPARABLES FOR DETERMINATION OF THE ALP. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 37 8.12 FROM THE FINDING (SUPRA) IT IS CLEAR THAT THE TRIBUNAL HAS NOT TAKEN ANY DIVERGENT VIEW FROM THE VIEWS IN THE OTHER CASE S BECAUSE THE ISSUE AND FACTS AND CIRCUMSTANCES IN THE CASES RELIED UPO N BY THE ASSESSEE ARE ENTIRELY DIFFERENT. IN THOSE CASES THE TPO REJECTED THE OTHER COMPARABLES SELECTED BY THE ASSESSEE EXCEPT ONE AND ALP WAS DET ERMINED ON THE BASIS OF ONE COMPARABLE SELECTED BY THE ASSESSEE. T HEREFORE, WHEN THE TPO ITSELF DID NOT CHOOSE TO CARRYOUT FURTHER SEAR CH THEN ISSUE OF JUSTIFICATION OF TPO DID NOT ARISE BEFORE THE TRIBU NAL. IN THE CASE IN HAND THE ASSESSEE RAISED THE QUESTION ABOUT THE JURISDIC TION OF TPO TO CARRYOUT FRESH SEARCH WHICH HAS BEEN CONSIDERED AND DECIDED AFTER CONSIDERING THE RELEVANT PROVISIONS, DECISIONS AS WELL AS ARGUM ENTS OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN THE CONT ENTION OF THE ASSESSEE. THE DECISION RELIED UPON BY THE LD. AR IN THE PRESENT PROCEEDINGS ARE UNDISPUTEDLY ON THE POINT OF CONSID ERING THE EVIDENCES AND NECESSARY FACTS BEFORE THE TRIBUNAL. THEREFORE, THERE IS NO QUARREL AS REGARDS THE DECISION OF HON'BLE SUPREME COURT RELIE D UPON BY THE ASSESSEE BUT IT IS NOT THE CASE OF THE ASSESSEE THA T TRIBUNAL HAS IGNORED AND ANY FACT OR EVIDENCE WHILE PASSING THE IMPUGNED ORDER. 8.13 THE ASSESSEE HAS ALSO OBJECTED AGAINST THE FIN DING OF THE TRIBUNAL ON THE COMPARABILITY OF TRITONE CORPORATION AND MAP LE ESOLUTIONS LTD. IT HAS BEEN SUBMITTED THAT THE TRIBUNAL HAS TAKEN A DI VERGENT VIEW FROM THE DECISION IN CASE OF IQ INFORMATION SYSTEM. THER EFORE, THE MATTER SHOULD HAVE BEEN REFERRED TO THE SPECIAL BENCH TO T HE EXTENT OF TAKING DIVERGENT VIEW. 8.14 AS WE HAVE ALREADY CONSIDERED THIS OBJECTION O F THE ASSESSEE AND REPRODUCED THE FINDINGS OF THE TRIBUNAL IN PARA NO. 6.1 OF THIS ORDER, THE DECISION RELIED UPON BY THE ASSESSEE HAS ALSO BEEN DULY CONSIDERED WHILE GIVING THE FINDING. THE ALLEGATION OF FRAUD IS AGAI NST THE DIRECTOR OF THE COMPANY BUT IN RESPECT OF BUSINESS OF BICYCLE SPARE PARTS AND FURTHER IT MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 38 RELATED TO THE YEAR 1980-1990. THEREFORE, BY CONSI DERING THIS PARTICULAR FACT OF A DIFFERENT BUSINESS AND LAPSE OF CONSIDERA BLE TIME AS WELL AS ALLEGATION WERE AGAINST DIRECTOR AND NOT AGAINST TH E COMPANY THE TRIBUNAL HAS DECIDED THE ISSUE. IN OUR VIEW THE DEC ISION TAKEN ON MERITS AND RECORDING SUFFICIENT REASONS CANNOT BE ASSAILED IN THE PROCEEDINGS UNDER SECTION 254(2). ACCORDINGLY WE DO NOT FIND AN Y ERROR APPARENT ON RECORD QUA THIS ISSUE. 8.15 AS IT IS CLEAR FROM THE AVERMENTS MADE IN THE MISCELLANEOUS APPLICATION AS WELL AS ARGUMENTS/SUBMISSIONS ADVANC ED BY THE LD. AR THAT ALL THESE CONTENTIONS AND SUBMISSIONS ARE REPE ATED BY THE ASSESSEE AS IT WAS ADVANCES DURING THE HEARING OF THE APPEAL . IT IS SETTLED LEGAL PROPOSITION OF LAW THAT ONLY APPARENT MISTAKE ON RE CORD WHICH IS OBVIOUS MANIFEST AND PATENT AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY LONG DRAWN PROCESS AND REASONING ON THE POINT CAN BE REC TIFIED. THE SCOPE OF SECTION 254(2) IS VERY LIMITED AND CIRCUMSCRIBED. F OR EXERCISING JURISDICTION UNDER SECTION 254(2) IT IS MANDATORY C ONDITION THAT SUCH MISTAKE SHOULD BE VIDE APPARENT MANIFEST, AND PATEN T ON RECORD AND NOT SOMETHING WHICH INVOLVE SERIOUS CIRCUMSTANCES OF DI SPUTES OF QUESTION OF FACT OR LAW. SECTION 254(2) DOES NOT CONFER POWER O N THE TRIBUNAL TO REVIEW ITS EARLIER ORDER. THEREFORE, THE TRIBUNAL H AS NO POWER TO REVIEW ITS ORDER PASSED ON MERITS AND IN THE GARB OF RECTIFICA TION OF MISTAKE NO ORDER CAN BE PASSED UNDER SECTION 254(2) WHICH AMOU NTS TO REVERSAL OF ORDER PASSED AFTER DISCUSSING ALL FACTS AND STATUTO RY PROVISIONS IN DETAIL. THE TRIBUNAL HAS NO JURISDICTION UNDER SECTION 254( 2) TO RE-APPRECIATE OR REEVALUATE EVIDENCES. 8.16 IT IS TO BE NOTED THAT THE CONTENTION AND AVER MENTS MADE IN THE MISCELLANEOUS APPLICATION AS WELL AS ARGUMENTS OF T HE LD. AR ARE DIRECTED TO CRITICIZE THE IMPUGNED ORDER OF THE TRI BUNAL WHICH DOES NOT FALL IN THE SCOPE OF SECTION 254(2). IF THE ASSESS EE HAS ANY GRIEVANCE MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 39 AGAINST THE IMPUGNED ORDER, THE PROPER AND EFFICACI OUS REMEDY IS TO CHALLENGE THE SAME IN APPEAL AND NOT TO CHALLENGE T HE FINDING OF THE TRIBUNAL IN THE PROCEEDINGS UNDER SECTION 254(2). THUS THE PRIMARY PURPOSE OF THE PRESENT MISCELLANEOUS APPLICATION IS AN ATTEMPT TO CRITICIZE THE IMPUGNED ORDER OF THE TRIBUNAL WITHOU T POINTING OUT ANY OBVIOUS, PATENT OR APPARENT MISTAKE IN THE ORDER WH ICH CAN BE RECTIFIED UNDER SECTION 254(2). THE ASSESSEE HAS EXPRESSED I TS GRIEVANCE AGAINST THE ORDER AND NOT POINTED OUT ANY ERROR OR MISTAKE APPARENT. FURTHER, THE GRIEVANCE OF THE ASSESSEE IS AGAINST REASONING AND FINDING OF THE TRIBUNAL ON MERITS. THUS IT IS APPARENT THAT THE M ISCELLANEOUS APPLICATION IS A DELIBERATE ATTEMPT TO ATTACK AND C RITICIZE THE TRIBUNAL AND ITS ORDER. WE TAKE A SERIOUS VIEW OF THE CONDU CT OF THE ASSESSEE IN FILING FRIVOLOUS MISCELLANEOUS APPLICATION IN THE G ARB OF RECTIFICATION OF MISTAKE WHICH IS HIGHLY IMPROPER AND CONDEMNABLE. THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE IS NOT ONLY A GRO SS MISUSE AND ABUSE OF PROCESS OF LAW BUT ALSO HAS CAUSED WASTAGE OF THE T IME OF THE COURT AT LENGTH. 9. IN VIEW OF THE ABOVE DISCUSSION WE FIND THAT THE MISCELLANEOUS APPLICATION IS DEVOID OF ANY MERIT OR SUBSTANCE. A CCORDINGLY, SAME IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2013. SD/- SD/- (RAJENDRA SINGH) ACCOUNTANT MEMBER (VIJAY PAL RAO ) JUDICIAL MEMBER MUMBAI, DATED: 13/11/2013. JV. MA NO.204/M/13 ARISING OUT O ITA NO.4547/M/12 A.Y.07-08 40 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.