M/s Marvell India Pvt Ltd , Bangalore V. Assistant Commissioner of Income Tax, Circle-4(1)(2), Bangalore

MA 338/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1490 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 22-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SRINANDINI DAS
• Assessee Lawyers: KARAN DHANUKA
• Keywords: Transfer pricing; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER M.P. NO. 338/BANG/2018 (IN ITA NO. 2173 /BANG/201 7 ) ASSESSMENT YEAR : 20 1 3 - 1 4 M/S. MARVELL INDIA PVT. LTD., RMZ ECOWORLD, 3 RD FLOOR, EAST WING, BUILDING 8A, MARATHAHALLI SARJAPUR OUTER RING ROAD, BANGALORE 560103. PAN: AAECM5559R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4 (1) (2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI MUKESH BUTANI, ADVOCATE & SHRI KARAN DHANUKA, ADVOCATE RESPONDENT BY : SMT. SRINANDINI DAS, ADDL. CIT (DR) DATE OF HEARING : 1 6 . 11 .2018 DATE OF PRONOUNCEMENT : 27 . 11 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS M.P. IS FILED BY THE ASSESSEE CONTENDING THAT THERE ARE CERTAIN APPARENT MISTAKES IN THE IMPUGNED TRIBUNAL ORDER DATED 06.04 .2018. THE MISTAKES ALLEGED IN THE M.P. CAN BE FOUND OUT FROM PARAS 3 T O 6 IN THE M.P. AND HENCE THE SAME ARE REPRODUCED HEREINBELOW. 3. IT IS STATED THAT AN ERROR HAS OCCURRED WHILE DI SPOSING GROUND OF APPEAL NO. 5 RAISED IN THE APPEAL MEMO WHICH REA DS AS FOLLOWS: 5. COMPUTATION OF OPERATING PROFIT MARGI NS OF COMPARABLE COMPANIES THE HON'BLE DRP AND THE LEARNED AO / TPO HAVE ERRED IN LAW AND ON FACTS IN CONSIDERING PROVISION FOR DOUBTFUL DEBTS TO BE NON-OPERATING IN NATURE WHILE COMPUTING THE OPERATI NG PROFIT MARGINS OF THE COMPARABLE COMPANIES OVERLOOKING THE FACT THAT THE SAME RESULTED FROM COMPANY'S NORMAL BUSINESS OP ERATIONS. 4. THE HON'BLE TRIBUNAL DECIDED THE GROUND OF APPEA L NO. 5 OF THE APPEAL FOR AY 2013-2014, AGAINST THE APPLICANT, INADVERTENTLY IGNORING THE SUBMISSIONS MADE BEFORE THE LOWER AUTH ORITIES AS WELL AS THE CASE LAWS RELIED UPON BY THE APPLICANT, FILED BEFORE THE HON'BLE TRIBUNAL, AT THE HEARING. M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 2 OF 8 5. IT IS SUBMITTED THAT DETAILED SUBMISSIONS WERE M ADE AS A PART OF FORM 35A BEFORE THE HON'BLE DRP AND RELEVANT CASE L AWS RELIED UPON BY THE APPLICANT WERE NOT DISTINGUISHED BY THE DRP. FURTHER, THE SAME WERE CITED DURING THE COURSE OF THE PROCEE DING BEFORE YOUR HONOURS AND THE SAME HAVE NOT BEEN CONSIDERED IN THE ORDER DATED APRIL 6, 2018. FOLLOWING ARE THE RELEVANT CAS E LAW CITATIONS AND COPIES OF THE ORDER ARE ALSO ANNEXURE HEREWITH: A) ALLIANCE GLOBAL SERVICES IT INDIA PVT LTD (HYDER ABAD ITAT- [2015] 57 TAXMANN.COM 272-PARA 18 - ANNEXURE # 2) B) KENEXA TECHNOLOGIES PVT LTD (HYDERABAD ITAT-[201 4] 51 TAXMANN.COM 282-PARA 42 - ANNEXURE # 3) REFERRED TO IN CASE OF ALLIANCE GLOBAL SERVICES IT INDIA PVT LTD. (HYDERAB AD ITAT- [2015] 57 TAXMANN.COM 272) 6. IN VIEW OF THE AFORESAID, AND IN THE INTEREST OF JUSTICE, IT IS RESPECTFULLY PRAYED, THAT TRIBUNAL MAY REMIT THE FI LE OF THE TPO TO SPECIFICALLY DEAL WITH THE CONTENTIONS OF THE APPLI CANT. 2. IN COURSE OF HEARING BEFORE US, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THIS ISSUE WAS DECIDED BY THE TRIBUNAL AS PER PARA NO. 7 OF THE IMPUGNED TRIBUNAL ORDER. HE SUBMITTED THAT WHILE DEALING WI TH THE TRIBUNAL ORDER ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF ASSESSE E IN COURSE OF HEARING HAVING BEEN RENDERED IN THE CASE OF KENEXA TECHNOLO GIES (P.) LTD. VS. DCIT AS REPORTED IN 51 TAXMANN.COM 282 (HYDERABAD-T RIB.) COPY AVAILABLE ON PAGES 345 TO 357 OF CASE LAW COMPILATION FILED I N COURSE OF HEARING OF THIS APPEAL, THE TRIBUNAL HAS CONSIDERED THE WRONG PARA OF THIS TRIBUNAL ORDER AND THE CORRECT PARA WHICH SHOULD HAVE BEEN C ONSIDERED BY THE TRIBUNAL ARE PARAS 40 TO 42 OF THIS TRIBUNAL ORDER. IT CAN BE SEEN FROM PAGE NO. 43 OF THE M.P. BECAUSE COPY OF THIS TRIBUNAL OR DER IS FILED BY THE ASSESSEE ALONG WITH THE MP ALSO. IT WAS SUBMITTED BY HIM THAT THESE CORRECT PARAS OF THIS TRIBUNAL ORDER SHOULD BE CONS IDERED AND THE ISSUE SHOULD BE DECIDED BY CONSIDERING THESE PARAS OF THI S TRIBUNAL ORDER. 3. AS AGAINST THIS IT WAS SUBMITTED BY LD. DR OF RE VENUE THAT THERE IS NO APPARENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER AND THEREFORE, THE MP FILED BY THE ASSESSEE SHOULD BE DISMISSED. M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 3 OF 8 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE PARA NO. 7 OF THE IMPUGNED TRIBUNAL ORDER AS PER WHICH T HIS ISSUE WAS DECIDED BY THE TRIBUNAL. 7. NOW WE EXAMINE THE APPLICABILITY OF THE SECOND T RIBUNAL ORDER ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. AR OF ASS ESSEE I.E. TRIBUNAL ORDER RENDERED IN THE CASE OF KENEXA TECHNOLOGIES P VT. LTD. VS. DCIT (SUPRA). IN THIS CASE, THERE IS NO SUCH ISSUE REGA RDING PROVISION OF BAD AND DOUBTFUL DEBTS. NO PARTICULAR PARA WAS REFERRE D TO BY LD. AR OF ASSESSEE. WHEN WE GO THROUGH THIS ENTIRE TRIBUNAL ORDER, WE FIND THAT GROUND NOS. 2 AND 3 RAISED IN THIS APPEAL IS SIMILA R TO THE ASSESSEES CLAIM. AS PER THIS GROUND NOS. 2 AND 3, THE ISSUE IN DISPUTE WAS REGARDING CONSIDERING FOREIGN EXCHANGE LOSS AS OPER ATING LOSS. THE TRIBUNAL IN THAT CASE FOLLOWED ANOTHER TRIBUNAL ORD ER RENDERED IN THE CASE OF CAPITAL IQ INFORMATION SYSTEMS INDIA (P.) L TD. VS. DCIT (INTERNATIONAL TAXATION) AS REPORTED IN 57 SOT 14 ( HYD. TRIB.). IN THAT CASE, THE ISSUE IN DISPUTE WAS REGARDING FOREI GN EXCHANGE FLUCTUATION GAIN AND IT WAS HELD THAT FOREIGN EXCHA NGE FLUCTUATION INCOME IS FORMING PART OF THE SALES PROCEEDS OF THE ASSESSEE. THERE CANNOT BE ANY DISPUTE ON THIS ASPECT BUT FOR SUCH I SSUE ALSO, IT HAS TO BE SEEN AS TO WHETHER FOREIGN EXCHANGE FLUCTUATION GAI N IS ON SALE OF THE PRESENT YEAR OR OF AN EARLIER YEAR. IF SUCH FOREIG N EXCHANGE FLUCTUATION GAIN IS IN RESPECT OF SALE OF THE SAME YEAR THEN SU CH FOREIGN EXCHANGE GAIN HAS TO BE CONSIDERED FOR THE PURPOSE OF TP ANA LYSIS AND COMPUTATION OF ALP BUT IF SUCH GAIN IS IN RESPECT O F SALE OF AN EARLIER YEAR THEN THE SAME CANNOT BE CONSIDERED FOR THE PUR POSE OF ALP BECAUSE IN THAT SITUATION ALSO, THE NUMERATOR WILL INCREASE I.E. THE PROFIT BUT NOT THE DENOMINATOR I.E. THE TURNOVER BECAUSE T HE TURNOVER WAS CONSIDERED IN THE EARLIER YEAR. IN THIS TRIBUNAL O RDER, THERE IS NO DISCUSSION ON THIS ASPECT OF THE MATTER AND THEREFO RE, FOR THE PURPOSE OF DECIDING THIS ASPECT, THIS TRIBUNAL ORDER IS ALSO N OT APPLICABLE AND THE ASSESSEE DOES NOT GET ANY HELP FROM THIS TRIBUNAL O RDER. THIS GROUND IS REJECTED. 5. FROM THE ABOVE PARA REPRODUCED FROM THE IMPUGNED TRIBUNAL ORDER, WE FIND THAT IT IS STATED BY THE TRIBUNAL IN THIS PARA OF T HIS TRIBUNAL ORDER THAT ALTHOUGH THE TRIBUNAL HAS GONE THROUGH THE ENTIRE T RIBUNAL ORDER, IT WAS FOUND THAT THERE IS NO SUCH ISSUE REGARDING PROVISI ON OF BAD AND DOUBTFUL DEBTS BUT IT IS POINTED OUT BY LD. AR OF ASSESSEE T HAT IT IS NOTED BY TRIBUNAL IN PARA 40 OF THIS TRIBUNAL ORDER THAT AS PER GROUN D NOS.2.6.3 AND 2.6.4, THE ISSUE RAISED BY THE ASSESSEE IS IN RESPECT OF CONSI DERING THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND BAD DEBTS AS NON-OPERATI VE EXPENDITURE. HENCE, TO THIS EXTENT, WE ACCEPT THAT THERE IS APPA RENT MISTAKE IN THE IMPUGNED TRIBUNAL ORDER IN SAYING THAT NO SUCH ISSU E HAS BEEN RAISED IN M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 4 OF 8 THAT CASE. HENCE WE FEEL IT PROPER THAT THE ISSUE IN QUESTION SHOULD BE DECIDED AFTER CONSIDERING THESE THREE PARAS OF THIS TRIBUNAL ORDER I.E. PARAS 40 TO 42. FOR READY REFERENCE, THESE PARAS ARE REP RODUCED HEREINBELOW FROM PAGE NO. 43 OF THE M.P. THE SAME ARE AS UNDER . 40. WITH RESPECT TO GROUND NO. 2.6.3 AND 2.6.4, IT WAS ARGUED BY THE LEARNED COUNSEL THAT THE TPO ERRED IN COMPUTING THE MARGINS OF COMPARABLE COMPANIES BY CONSIDERING THE PROVISIO N FOR BAD AND DOUBTFUL DEBTS AND BAD DEBTS AS NON-OPERATIVE E XPENDITURE. 41. WE PLACE RELIANCE ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF SONY INDIA PVT. LTD. VS. DCIT, ITA NO. 1189 /DEL/2005, 819/DEL/2007 AND 820/DEL/2007. THE RELEVANT PORTION IS EXTRACTED BELOW: '106.2 THUS, CREATION OF UNPAID LIABILITY AND ITS W RITE BACK IS A NORMAL INCIDENT OF A BUSINESS OPERATION WHICH IS CA RRIED EVERYWHERE IN ACCOUNTS TO HAVE TRUE PICTURE OF PROF ITS OF THE RELEVANT PERIOD. HAVING REGARD TO STATUTORY PROVISIONS, IT CANNOT BE SAID THAT PROVISIONS OR WRITING BACK OF LIABILITY IS NOT PART OF OPERATING PROFIT OR WOULD NOT BE TAKEN INTO CONSIDERATION FOR COMPUTING THE SAME. WE CAN THEREFORE MAKE A GENERAL OBSERVATION THAT AL L BUSINESS ENTERPRISES ARE MAKING AND WRITING BACK LIABILITIES AS A NORMAL INCIDENT OF OPERATING BUSINESS. THEREFORE ON FACTS WE DO NOT SEE ANY JUSTIFICATION FOR EXCLUDING PROVISIONS WRITTEN BACK IN THE PROFIT AND LOSS ACCOUNT AS NOT FORMING PART OF THE OPERATI NG PROFIT OF THE TAXPAYER. ACCORDINGLY CLAIM OF THE TAXPAYER IS ACCE PTED. 107. THE NEXT ITEM RELATES TO BALANCES WRITTEN BACK . IN OUR CONSIDERED OPINION, FINDING GIVEN IN RESPECT OF PRO VISIONS WRITTEN BACK IS EQUALLY APPLICABLE TO BALANCES WRITTEN BACK MORE PARTICULARLY WHEN LD. CIT(A) HAS NOT GIVEN ANY SEPA RATE FINDING AND THE TRANSFER PRICING OFFICER HAS SAID NOTHING S PECIFICALLY ON THIS ITEM. THE BALANCES WRITTEN BACK SHOULD ALSO BE TREATED AS PART OF OPERATING PROFIT. WE DIRECT ACCORDINGLY.' 42. WE ARE OF THE VIEW THAT IN THE INSTANT CASE BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS ARE PART OF TH E OPERATING EXPENSES AND WE DIRECT THE TPO TO RE-COMPUTE THE MA RGINS OF COMPARABLE COMPANIES BY INCLUDING BAD DEBTS AND PRO VISION FOR BAD AND DOUBTFUL DEBTS AS OPERATING EXPENSES FOR TH E PURPOSE OF COMPUTING PROFIT AND LOSS OF COMPARABLE COMPANIES. M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 5 OF 8 6. BUT BEFORE DECIDING THE ISSUE ON THE BASIS OF TH ESE THREE PARAS OF THIS TRIBUNAL ORDER, WE FEEL IT PROPER TO TAKE NOTE OF T HE MANNER IN WHICH THE PROFIT OF THE TESTED PARTY AND COMPARABLES IS CONSIDERED F OR TP ANALYSIS. WHEN WE DO SO, WE FIND THAT THE ACTUAL PROFIT IN ABSOLUTE T ERMS OF THE TESTED PARTY AND THE COMPARABLE COMPANIES ARE NOT COMPARED FOR THIS PURPOSE. WHAT IS COMPARED IS THE PERCENTAGE OF PROFIT OF THE TESTED PARTY AND AVERAGE PERCENTAGE OF PROFIT OF THE COMPARABLES. PERCENTAGE OF PROFIT IS WORKED OUT BY DIVIDING THE PROFIT BY THE CORRESPONDING TURNOVE R. HENCE, ANY RECEIPT OR EXPENDITURE ALTHOUGH OPERATING IN NATURE BUT FOR WH ICH THE CORRESPONDING TURNOVER OF WHICH IS NOT THE PART OF THE TURNOVER O F THE PRESENT YEAR CANNOT BE CONSIDERED FOR THIS PURPOSE BECAUSE IT WILL RESU LT IN ABSURD RESULT SINCE THE NUMERATOR WILL STAND INCREASED OR DECREASED AS THE CASE MAY BE BUT THE DENOMINATOR WILL NOT REFLECT THE INCLUSION OF THE C ORRESPONDING TURNOVER. IN FACT, IN PARA 7 OF THE IMPUGNED TRIBUNAL ORDER AS R EPRODUCED ABOVE, ALTHOUGH A WRONG PARA IS CONSIDERED IN RESPECT OF F OREIGN EXCHANGE FLUCTUATION GAIN BUT THE MAIN REASON FOR DECIDING T HIS ISSUE AGAINST THE ASSESSEE WAS THIS THAT IF SUCH GAIN IS NOT IN RESPE CT OF THE TURNOVER OF THE SAME YEAR, ADDING SUCH GAIN IN THE NUMERATOR WILL L EAD TO ABSURD RESULT BECAUSE THE CORRESPONDING TURNOVER IS NOT REFLECTED IN DENOMINATOR. WE HAVE SEEN THAT BY THE SAME LOGIC, IN CASE OF PROVIS ION FOR BAD OR DOUBTFUL DEBTS ALSO, EVEN AFTER HOLDING THAT THE SAME IS AN OPERATING EXPENDITURE, IT HAS TO BE HELD THAT IT CANNOT BE TAKEN INTO ACCOUNT FOR TP ANALYSIS BECAUSE THE DENOMINATOR WILL NOT REFLECT THE INCLUSION OF T HE CORRESPONDING TURNOVER. IN THE TRIBUNAL ORDER RENDERED IN THE CASE OF KENE XA TECHNOLOGIES (P.) LTD. VS. DCIT (SUPRA), THIS ASPECT WAS NEITHER DISCUSSED NOR DECIDED AND THEREFORE, THIS TRIBUNAL ORDER DOES NOT LAY DOWN A BINDING PRECEDENCE IN THIS REGARD. 7. FROM THE ABOVE PARAS REPRODUCED FROM THIS TRIBUN AL ORDER IT IS SEEN THAT IN THAT CASE THE TRIBUNAL HAS CONSIDERED ANOTHER TRIBU NAL ORDER OF THE DELHI BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF SONY INDIA (P.) LTD. VS. DCIT AS REPORTED IN [2008] 114 ITD 448 AND THE RELEVANT PORTION OF THAT TRIBUNAL ORDER WAS ALSO REPRODUCED. FROM THE SAME, IT IS SE EN THAT ONLY THIS ASPECT WAS DECIDED AS PER THIS TRIBUNAL ORDER THAT IT CANN OT BE SAID THAT PROVISIONS M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 6 OF 8 OR WRITING BACK OF LIABILITY IS PART OF OPERATING P ROFIT. FOLLOWING THIS TRIBUNAL ORDER OF DELHI BENCH OF THE TRIBUNAL, IT WAS HELD B Y TRIBUNAL IN THE CASE OF KENEXA TECHNOLOGIES (P.) LTD. VS. DCIT (SUPRA) THAT BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS ARE PART OF OP ERATING EXPENSES. TO THIS EXTENT, THERE IS NO QUARREL BUT EVEN AFTER HOLDING THAT BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS ARE OPERATING EXPENSES, IT HAS TO BE SEEN AND DECIDED AS TO WHETHER THE SAME CAN BE CONS IDERED FOR THE PURPOSE OF COMPUTING THE PROFIT MARGIN OF THE TESTE D PARTY OR OF THE COMPARABLE COMPANY. IN PARA NO. 7 OF THE IMPUGNED TRIBUNAL ORDER WHICH IS REPRODUCED ABOVE, IT HAS BEEN HELD BY THE TRIBUN AL THAT IN REGARD TO FOREIGN EXCHANGE GAIN, IT IS OPERATING PROFIT BUT E VEN AFTER THAT, IT WAS REQUIRED TO BE SEEN AS TO WHETHER SUCH FOREIGN EXCH ANGE FLUCTUATION GAIN IS ON THE SALE OF THE OF THE PRESENT YEAR OR OF AN EAR LIER YEAR AND IT WAS HELD THAT IF THE FOREIGN EXCHANGE FLUCTUATION GAIN IS IN RESPECT OF SALE OF THE SAME YEAR THEN SUCH FOREIGN EXCHANGE GAIN HAS TO BE CONS IDERED FOR THE PURPOSE OF TP ANALYSIS AND COMPUTATION OF ALP BUT IF SUCH G AIN IS IN RESPECT OF SALE OF AN EARLIER YEAR THEN THE SAME CANNOT BE CONSIDER ED FOR THE PURPOSE OF ALP BECAUSE IN THAT SITUATION, THE NUMERATOR WILL I NCREASE I.E. THE PROFIT BUT NOT THE DENOMINATOR I.E. THE TURNOVER BECAUSE THE T URNOVER WAS CONSIDERED IN THE EARLIER YEAR. IN OUR CONSIDERED OPINION, TH IS RATIO LAID DOWN IN PARA NO. 7 OF THE IMPUGNED TRIBUNAL ORDER HAS TO BE APPLIED WITH REGARD TO PROVISION FOR BAD DEBTS AND DOUBTFUL DEBTS ALSO EVEN AFTER HO LDING THAT SUCH PROVISION TO BAD AND DOUBTFUL DEBTS IS OPERATING EXPENSES. I T HAS TO BE SEEN THAT WHETHER SUCH PROVISION IS AGAINST TURNOVER OF THE P RESENT YEAR OR AGAINST THE TURNOVER OF A PRECEDING YEAR BECAUSE IF SUCH PROVIS ION IS IN RESPECT OF THE TURNOVER OF THE PRECEDING YEAR, IN THAT SITUATION T HE RELEVANT TURNOVER IS NOT FORMING PART OF THE DENOMINATOR AND THEREFORE, NO E FFECT CAN BE CONSIDERED FOR NUMERATOR ALSO BY REDUCING THE PROVISION FOR BA D AND DOUBTFUL DEBTS FROM THE PROFIT MARGIN. SUCH DETAILS ARE GENERALLY NOT AVAILABLE PARTICULARLY IN CASE OF COMPARABLE COMPANIES ALTHOUGH IN CASE OF TE STED PARTY, THE ASSESSEE CAN PROVIDE SUCH DETAIL BUT THIS IS ALSO T RUE THAT IN NORMAL CASES, PROVISION FOR BAD AND DOUBTFUL DEBTS ARE NOT MADE I N THE YEAR OF SALE AND GENERALLY THEY ARE MADE IN THE SUBSEQUENT YEARS ONL Y AND HENCE, UNLESS IT M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 7 OF 8 IS ESTABLISHED BY THE ASSESSEE B BRINGING EVIDENCE ON RECORD THAT SUCH PROVISION IS AGAINST THE TURNOVER FOR THE CURRENT Y EAR, IT SHOULD BE HELD THAT SUCH PROVISION IS AGAINST TURNOVER OF AN EARLIER YE AR AND NOT AGAINST THE TURNOVER OF THE PRESENT YEAR AND THE SAME CANNOT BE REDUCED FROM THE PROFIT MARGIN OF THE TESTED PARTY OR OF COMPARABLE COMPANY FOR THE PURPOSE OF ALP COMPUTATION BECAUSE IT WILL GIVE ABSURD RESULT SINC E THE PROFIT MARGIN WILL BE REDUCED IN THE YEAR IN WHICH THE PROVISION IS MADE ALTHOUGH NEITHER THE PROFIT NOR THE TURNOVER IN RESPECT OF THE CORRESPON DING TURNOVER IS PART OF NUMERATOR OR DENOMINATOR BEING PROFIT MARGIN (NUMER ATOR) AND TURNOVER (DENOMINATOR). HENCE EVEN AFTER CONSIDERING PARA N OS. 40 TO 42 OF THIS TRIBUNAL ORDER, WE HOLD THAT IN THE FACTS OF PRESEN T CASE AND IN VIEW OF THE ABOVE DISCUSSION, SUCH PROVISION FOR BAD AND DOUBTF UL DEBTS CANNOT BE CONSIDERED FOR WORKING OUT THE PROFIT MARGIN OF THE COMPARABLE COMPANIES. WE ARE AWARE THAT WHEN THE PRECEDENCE IS POINTED OU T, WE SHOULD FOLLOW THE SAME UNLESS IT IS SEEN THAT THERE IS SOME DIFFE RENCE IN FACTS OR SUCH EARLIER TRIBUNAL ORDER HAS NO PRECEDENCE VALUE. IN THE PRESENT CASE, WE FIND THAT THIS TRIBUNAL ORDER AND TRIBUNAL ORDER RE NDERED IN THE CASE OF SONY INDIA (P.) LTD. VS. DCIT (SUPRA) HAS NOT CONSIDERED AND EXAMINED THIS ASPECT AS TO WHETHER THE PROVISION FOR BAD AND DOUB TFUL DEBTS OR EXCESS PROVISION WRITTEN BACK IS IN RESPECT OF TURNOVER OF THE SAME YEAR OR OF AN EARLIER YEAR AND WHETHER BY CONSIDERING THE SAME AS PART OF OPERATING EXPENSES / OPERATING PROFIT, THE RESULT WILL BE AN ABSURD RESULT AND HENCE, IN OUR CONSIDERED OPINION, BOTH THESE TRIBUNAL ORDERS HAVE NO PRECEDENCE VALUE ONCE WE EXAMINE THIS ASPECT AS TO WHETHER BY CONSIDERING THE PROVISIONS FOR BAD AND DOUBTFUL DEBTS AS OPERATING EXPENSES FOR THE WORKING OF ALP FOR TP ANALYSIS, IT WILL GIVE ABSURD RESULT IF SUCH PROVISION FOR BAD AND DOUBTFUL DEBTS IS NOT MADE IN THE YEAR OF SALE AND IT IS MADE IN THE SUBSEQUENT YEAR AFTER THE SAME. 8. IN VIEW OF ABOVE DISCUSSION, WE RECTIFY THE IMPU GNED TRIBUNAL ORDER BY SAYING THAT THIS TRIBUNAL ORDER RENDERED IN THE CAS E OF KENEXA TECHNOLOGIES (P.) LTD. VS. DCIT (SUPRA) IS DISCUSSING ABOUT THIS ASPECT ALSO AS TO WHETHER THE PROVISION FOR BAD AND DOUBTFUL DEBTS IS OPERATI NG EXPENSES OR NOT AND WE HOLD THAT THE SAME IS DEFINITELY AN OPERATING EX PENSE BUT STILL THE SAME M.P. NO. 338/BANG/2018 (IN ITA NO. 2173/BANG/2017) PAGE 8 OF 8 CANNOT BE CONSIDERED FOR TP ANALYSIS BECAUSE IT HAS NOT BEEN SHOWN THAT SUCH PROVISION FOR BAD AND DOUBTFUL DEBTS IS FOR TH E CURRENT YEARS TURNOVER. 9. IN THE RESULT, THE M.P. FILED BY THE ASSESSEE ST ANDS DISPOSED OF IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (N.V. VASUDEVAN) (ARUN KUMAR GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH NOVEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.