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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
These cross appeals, two by the assessee and two by the Revenue, are arising out of the order of Commissioner of Income Tax (Appeals)-55, Mumbai [in short CIT(A)], in appeal No. CIT(A)-55/Addl.(Int. Tax)-3/IT-115, 130/11-12, 13-14 dated 28.01.2015 & 29.01.2015. The Assessment was framed by the Addl. Director of Income Tax, Range-3, Mumbai (in short ‘ADIT’) for the A.Ys. 2008-09 &n 2009-10 vide order dated 31.01.2012 & 26.03.2013 under section 143(3) read with section 144(C) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee in for AY 2008-09 is as regards to the order of CIT(A) confirming the action of the DVO in upholding the 20% of agency fee and interest income earned by the overseas branch of the assessee for computing arm’s length price in respect of international transactions of Intra group services relating to external commercial borrowings. For this assessee has raised the following ground No. 1: -
1. In applying/upholding an adhoc and arbitrary rate of 20 percent to the agency fees and interest income earned by the overseas branches of the Appellant, thereby amounting to an addition of ₹ 82,383,516 for the purpose of computing the arm's length price in services rendered by the not relating to External Commercial Borrowing (ECB).”
At the outset, the learned Counsel for the assessee took us through the order of CIT(A) and TPO, wherein CIT(A) has relied on the earlier years decision for AY 2006-07 and 2007-08 whereby he in Para 7.5 of order adjudicated the issue and the relevant portion of the Para referred by the learned Counsel reads as under:-
……I find that the same issue arose for adjudication before my learned predecessors for A.Ys.2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and my' order of 2007-08. My predecessor has fixed the rate at 20 percent. I fully agree with the rate fixed by my predecessor and the same is fully justified keeping in view of the fact that the entire risk on credit (ECB) is borne by the foreign branch. The AO is accordingly directed to adopt 20 percent of the interest and the commission as attributable to the Appellants branches in India and accordingly tax it. The AO is directed to rework the TP adjustments at 20 percent of interest and fee income accordingly. Hence this ground in partly allowed.
The learned Counsel for the assessee stated that this issue is squarely covered by Tribunal’s decision in assessee’s own case for AY 2006-07 and 2007-08 in and 4030/Mum/2014 respectively, wherein Tribunal vide Para 4.4. has decided the issue deleting the addition and the same reads as under:-
“4.4. We have heard the rival submissions and perused the material before us. We find that the assessee was playing a very limited role in the sequence of activities of sanctioning of loan by the AE’s to the Indian customers. The contribution on part of the assessee was limited to establishing initial contact with Indian entities and acting as a liaison between the AE and the customer. It is a fact that loan was granted by the AE.s and all the gains and risks of the transaction was with them only. The assessee was compensated by the AE.s for the job done by it. As far as interest income is concerned, it is clear that there was no contract /agreement between the assessee and the AE.s to share the interest amount. The assesse is objecting to the adjustment made under the head interest income. It has no objection with regard to the other portion of the adjustment. So, we direct the TPO/AO that only 20% of the agency fee should be attributed to the assessee and the interest attributed to its income should be deleted.
Here, we would like to refer to the case of M/s Credit Lyonnais (supra), wherein identical issue has been discussed as follows:
"8.8 Having held that para 4 of the Protocol does not apply to the case of the assessee, now, the question arises as to whether the adjustment made by the authorities below is justified. For making the adjustment, the authorities below have taken into consideration, the income towards interest as well as the fee charged by the foreign branch from the clients. It is pertinent to note that when the loan is provided by the syndicate and the assessee has not contributed to the loan amount then as regards the income of interest, the same cannot be attributed to the assessee for providing the services of the financial analysis of the borrowers, market condition and regulatory environment in India. Since the assessee has provided certain services for that arms length charges can be determined as per the provisions of transfer pricing regulation. The TPO as well as CIT(A) has not brought out any comparable for determination of the arms length price but look the total income comprising interest as well as other fees charged by the foreign branches for allocation/attribution to the assessee. In this case, the ALP has not been determined by taking into consideration uncontrolled similar transaction. In our view, the interest cannot be taken info account for attribution of income towards service charges/fees and, therefore, in the facts and circumstances of the case only the fee charged by the foreign branches can be taken into consideration for making adjustment under transfer pricing provisions.
The above decision of the Tribunal was upheld by the Hon'ble Bombay High Court in of 2014.Considering the aforesaid facts, ground no.3 is decided in favour of the assessee, in part.”
The learned Sr. Departmental Representative also agreed that the issue is exactly identical in this year also what was in AYs 2006-07 and 2007-08, whereby Tribunal has directed TPO that only 20% of agency fee should be attributed to the assessee and interest attributed to its income should be deleted. We direct the AO / TPO to follow the Tribunal’s order. Accordingly, this issue of assessee’s appeal is partly allowed.
Similar is the issue in assessee’s appeal for AY 2009-10 in and hence taking a consistent view, we allow the appeal of the assessee partly and direct the AO to follow the Tribunal’s order for AYrs 2006-07 and 2007-08. This issue of assessee’s appeal is partly allowed.
The first issue in Revenue’s appeal in AY 2008-09 is as regards to the order of CIT(A) in deleting the addition made by TPO on account of receipt of sales credited relating to derivatives on cost plus margins of 72.94% earned by assessee, which was more than 25% earned by comparable price. For this Revenue has raised the following ground No. 1.1 and 1.2 as under:-
“1.1 On the facts and in the circumstances of the case and in law, the ld.. CIT(A) erred in deleting the addition of Rs. 1,628,474,794/- made by the assessing officer/Transfer pricing Officer on account of receipt of sales credit relating to derivatives deals by observing that the cost plus margin of 72.94 % earned by the assessee was far more than 25% earned by comparable companies. The ld.. CIT(A) erred in not appreciating that TNM method was not the most appropriate method in this case because the profit from marketing of derivatives was not a cost driven activity but was driven by the assessee's customer relationship.
1.2 On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding 25% of Initial Net Present value (INPV) as against 60% adopted by Transfer Pricing Officer.”
At the outset, the learned Counsel for the assessee filed copy of Tribunal’s order in assessee’s own case for AY 2006-07 and 2007-08 in and 4235/Mum/2014 vide order dated 12-01- 2018, wherein Tribunal has exactly on identical facts confirmed the action of the CIT(A) deleting the addition by observing in Para 5.3 to 5.6 as under: - “5.3.We have heard the rival submissions and perused the material before us.We find that one of the divisions of the assessee i.e. Barclays Capital would handle the global derivative operations, that same included foreign exchange,interest rate, equity, commodity and credit derivatives, that the activities of the assessee were limited to marketing activities,that the AE.s were concluding the sale- transaction,that for the year under consideration the assessee was compensated at the rate of 24%(approximately)of the estimated day-1profit/loss from the said deals in accordance with the GTPP of the group,that the TPO had rejected the TNMM applied by the assessee and had used PSM for benchmarking the transaction of marketing of derivative products,that he concluded that risk relating to the derivative business remained partly in India and partly outside India and that the key assets in derivative were its people,that one of the foreign bank branch was being compensated at the rate of 60% for the same derivative business, that he made an addition of Rs.51.12 crores,that the FAA granted relief to the assessee.We find that the TPO had accepted,in principle,that the functional role of the assessee was limited to rendering the marketing services to overseas branches,that rest of the activities were handled by the AE.s.The derivative transaction does not end with marketing.It is a complex process.So,the AE would compensate the assessee for the services rendered to it.There would always be a relation between the compensation paid and availed services.The assessee had adopted the GTPP to determine. ALP of the IT.s.In our opinion, there was no defect in its approach.On the other hand,method applied by the TPO and the details of controlled transactions,relied upon by him,were not available in the public domain. The assessee did not have any opportunity to examine the comparability of FAR of the transactions selected by the TPO. In our opinion,use of untested comparables to determine the ALP is against the basic spirit of the TP provisions and the Rule 10 of the Rules The TPO had also violated the principles of natural Justice by not confronting the assessee with the comparables used against it. He proposed an addition of Rs. 51.12 crores to the income of the assessee without affording an opportunity to it,so that it could become aware of the basis for the adjustment.Only on this count the adjustment could be validly deleted.
5.4.But,we would like decide the issue on merits also.It is found that the assessee had followed GTPP for TP purposes,that as per the global policy the Indian branches-rendering the services and arranging for the sales of the derivative products for its customers from its foreign brancheswere to get at 24.40 percent of the INPV.The Appellant had carried out a TP study and had applied TNMM for determining the ALP.We find that the average cost plus margin of the uncontrolled comparables was 19% and in the assessee’s case,cost plus margin was 424%. If we look at these figures,it becomes clear that compensation received by the assessee from its AE for derivative deal was at arm’s length.INPV of a derivative transaction is calibrated based on projection of expected cash flow on a derivative transaction and applying appropriate discounting factor.INPV calculation can be different for different banks because of their functioning.So,in our opinion it would be inappropriate to apply for a uniform multiplier effect on the value of sales credit/INPV of derivative transactions.In other words,the INPV fixed by Indian branch of another foreign bank in India should not have been compared with the assessee case,because the above said branch of the foreign bank itself was dealing with its another AE.In short,we hold that the methodology adopted by the TPO,for determining the ALP of INPV of the derivative transactions,was incorrect from the very beginning and was fundamentally wrong.We would like to refer to the case of Technimont ICB(P.)Ltd.(supra) and it reads as under:
"14. What is an 'uncontrolled transaction' has been clearly defined under Rule 10A(a) to mean 'a transaction between enterprises other than associated enterprises whether resident or nonresident'. A plain reading of the meaning given to the expression 'uncontrolled transaction1 leaves no room for any doubt that it is a transaction between two non-associated enterprises. If the transaction is between two associated enterprises, it goes out of the ambit of' uncontrolled transaction' under Rule 10A.When section 92C is read along with Rules 10B(e), and 10A, it becomes abundantly clear that in computing ALP under the transaclional net margin method, a comparison of the assessee's net profit margin from international transactions with its AEs has necessarily to be made with that of the net pro fit margin realized by the same enterprise or an unrelated enterprise from a comparable but definitely uncontrolled transaction i.e., a transaction between non-associated enterprises. There is no statutory sanction for roping in a comparable controlled transaction for the purposes of benchmarking. When it has been clearly mandated in all the relevant methods for determining ALP that the comparison has to be made by the enterprise's international transaction with comparable uncontrolled transaction, by no sheer logic a comparable controlled transaction can be employed for the purposes of making comparison. There is no warrant for diluting the prescription given by the statute or rules when such prescription itself serves the ends of justice properly and is infallible. If the view of the Revenue that a controlled transaction should not be shunted out for the purposes of benchmarking is accepted, then all the relevant provisions contained in Chapter X in this regard, will become otiose. If such a contention oj making comparison with a comparable controlled transaction is taken to its logical conclusion, then there will never arise any need to take up any case for transfer pricing scrutiny. The reason is obvious. ALP is determined for application in respect of transactions between two AEs so that the profit likely to arise from such transactions is not under-reported vis-a-vis from similar transactions with third parties. If the comparison is made again with net profit margin realized from transactions between two AEs, instead of third parties, it may demonstrate the same cooked results in both the situations, thereby leaving no scope for any adjustment. In this eventuality, the very object of such provisions will be frustrated. Thus it follows that the ALP can be determined only by making comparison with a comparable uncontrolled transaction and not a comparable controlled transaction.
We are of the opinion that the FAA had rightly held that the TPO was not justified in considering JP Morgan Chase Bank and Bank of America, NA having similar arrangements with their AEs as appropriate comparables for the aforesaid transaction.
5.5. We also find that the method applied by the TPO is not PSM as defined under the Rules.Rule 10B of the Rules stipulates that the for the purpose of applying PSM the Net Profit derived by the AE from the international transactions is to be considered. However, the TPO has made the adjustment by taking 60% of Day 1 INPV, which is a hypothetical value representing the gross surplus cash.In the matter of Johnson & Johnson Ltd. (247 Taxman 136) the Hon’ble Bombay High Court has held that the TPO is obliged under the law to determine the ALP by following any one of the prescribed methods of determining the ALP as detailed in Section 92C(1) of the Act,that the determination of the ALP has to be done only by following one of the method prescribed under the Act.We are also agreeable to the argument submitted by the assessee that the PSM can never be applied for benchmarking marketing support service functions. As per Rule 10B(d),PSM is applicable "mainly in IT.s involving transfer of unique intangibles or in multiple IT.s which are so inter- related that they cannot be evaluated separately for the purpose of determining the ALP of any one transaction.
5.6. We are not inclined to refer the matter to the file of the TPO. We would like to refer to the case of Kodak India(P)Ltd.(155TTJ697) wherein the Tribunal has held as under:
“69. We also cannot agree with the DR that the issue be restored to the TPO because the methods, as prescribed by the legislature are mandatory, not directory. When mandatory provision is either superseded or ignored, it straightway affects the jurisdiction. In the instant case, we have to mention that it was a case of suo moto reference to the TPO and it is the case of the revenue authorities, to import the provisions of Chapter X. In this circumstance, since the ATPO ddid not adhere to the prescribed methods consciously, another innings to rectify the mistake cannot be allowed, as the TPO infringed the relevant provision of the Income tax act and Rules.”
In the case of Havells India Ltd.(140 TTJ 283)the Tribunal has dealt with the issue of restoring the matter to the file of the TPO and has held as under:
29.Apropos the ld.DR’s contention asking for remitting the matter to the Assessing Officer, it must be noted here that such a course is neither required, nor appropriate to be adopted. As an appellate authority, the Tribunal has to see whether the assessment framed has been framed in accordance with law and if there is sufficient material to support it. If that is so, it is not for the Tribunal to start investigation suo moto and to thereby fill up the lacunae if there is material to support the assessment, the assessment, as confirmed or upheld by the CIT(A) needs to be sustained by the Tribunal If not, the assessment falls. It is for the department to gather material and make proper assessment and the Tribunal is not in that manner, an income-tax authority. The income-tax Act does not envisage the ITAT as an income-tax authority, rather in the scheme of the Act, it is a purely appellate authority. That being so, as observed in Raj Kumar Jain v. Asstt. CIT [1994] 501TD I (All.)(TM), the object of the appeal before the Tribunal is whether the addition or disallowance sustained was in accordance with law. If there is sufficient material, the addition must be upheld. If not, the addition must be deleted. No further enquiry can be ordered by the Tribunal with a view to fill in the lacunae and sustain the addition/disallowance. Doing so would amount to taking sides with the parties, which is not the function of a judicial authority like the Tribunal. It is only that if there is any error in the proceedings or the procedure, the appellate authority could correct it. Making further investigation, however, is not apart of the procedure, but is substantive and is beyond the purview of the Tribunal "”
Considering the above discussion and the peculiar facts and circumstances of the case, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. So, confirming the same, we decide the effective ground of appeal against the AO.”
9. When this was confronted to the learned Sr. Departmental Representative he only relied on the TPO’s order but could not differentiate the facts. We find from the order of CIT(A) that he has also relied on the earlier order of TPO for AYs 2006-07 and 2007-08 and considering earlier year of CIT(A)’s order deleted the addition by observing in Para 8.7 as under: - “8.7 Further, as pointed out by Appellant, methods and statistical models for calculation of INPV of one bank may vary with those of another bank. Further, the extent of services done for marketing and arranging derivative deals may differ from one bank to another. In view of this, I am of the view that it would not be appropriate to compare INPV base of one foreign bank with another bank, as the same are not "comparable transactions". Further, I find that the Appellant has made a proper transfer pricing study and has applied TNM method. I could not find any grounds to reject the Transfer Pricing Study made by the Appellant. It is also to be appreciated that the prices are fixed on the basis of the Global Transfer Policy. Further, the cost plus mark for the services rendered is far higher than the comparable transactions. My predecessor has considered the issue in assessment year 2004-05, 2005-06 and 2006-07 and has deleted the addition recommended by the TPO. The same ground has also been upheld by my order for AY 2007-08. In view of this, I hold that the price charged by the Appellant's branch in India is at arm's length price. I have no reason to deviate from my earlier order and hence, the TP adjustments made by the AO with regard to the derivative products are deleted. The AO is directed to delete the addition made in this regard.”
10. As the facts are exactly identical and lower authorities have relied on earlier years orders, which are decided in favour of assessee and against Revenue. Respectfully following the Tribunal’s order, we confirmed the order of CIT(A) deleting the addition.
11. Similar is the first issue in Revenue’s appeal for AY 2009-10 in whereby the first issue is regarding the TP adjustment to the profit from marketing of derivatives. Since, we have decided the issue in AY 2008-09 in CIT(A) deleting the addition, taking a consistent view we confirm the order of CIT(A) in this year also. This issue of Revenue’s appeal is dismissed.
12. The one more issue in Revenue’s appeal in for AY 2009-10 is as regards to the order of CIT(A) directing the AO / TPO to aggregate the various transaction relating to many deposits by placing reliance on IT Rules 10A(d) of the Rules. For this Revenue has raised the following ground No. 2.1 and 2.2 as under: - “2.1 Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO/ TPO to aggregate the various transaction relating to money deposits by placing reliance on I.T. Rules 10A(d) without appreciating that while applying CUP method of ALP determination each such transaction could be evaluated/ benchmarked separately.
2.2 Whether on the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO/ TPO to aggregate the transactions and thereby directing to delete the adjustment/ addition of ₹ 80,45,571/- in a case where the ALP of each transaction could be arrived at separately.”
Briefly stated facts are that the TPO after going through the Transfer Pricing study in the case of assessee noted that even though the assessee has used LIBOR rate as indicative rate to Bench mark the transaction on interest on money market loans and deposits received from or paid to Associated Enterprise (AE’s). According to the TPO, there is variation in the actual rate vis-a-vis the LIBOR rate. The assessee explained before the AO about variation and stated that it has worked out the interest rate arising from such fluctuations of the LIBOR rates in respect of money market deposits and loans transactions and computed the same by aggregating all the parties. However, according to AO/ TPO there is excess payment of interest by the assessee on one hand and there is short receipt of interest by assessee on the other hand. And Hence, the TPO has not accepted the explanation of the assessee and made an adjustment of amount of ₹ 80,45,517/- for short interest received/ excess interest paid on money market deposits given or accepted by the assessee. The AO has also given summary of transaction in its order. Aggrieved, assessee preferred the appeal before CIT(A), who is deleted the addition by stating that the assessee has rightly aggregating the transactions of all the parties and then reached to proper LIBOR rate. The CIT(A) deleted the addition by observing in para 7.3 to 7.5 as under: - “7.3 I have received the facts and the submissions of the appellant and the learned TPO. With regard to the aggregation, the Appellant has placed reliance on the ruling of the Mumbai Bench of the Income- Tax Appellate Tribunal (Mumbai ITAT) in the case of Essar Steel Ltd. (ITA No 3727/Mum/2011), wherein the Mumbai ITAT has drawn reference to Rule 10(A)(a) of the Income tax Rules, 1962, which defines a “transaction” to include a number of closely linked transactions. In such a case, the Mumbai ITAT held that if the transactions are closely linked, then they can be aggregated for determining the ALP. In the aforementioned case, it was held that if the product remains the same and the source from which the average price has been taken remains the same, it is a fit case for aggregation. A similar view was also taken by the Mumbai ITAT has upheld the aggregation of transactions as against arbitrary selection of individual items. Separately, in the case of Boskalis International – Dredging International CV (ITA 4862/Mum/2008), the Mumbai. The Mumbai ITAT noted that aggregation and clubbing of the closely linked transactions are permitted under the Income- tax Rules, 1962 and it is also supported by OECD transfer pricing guidelines.
7.4 A summary of the interest paid and received on all money market deposit transactions is provided below:
Particulars Foreign Currency INR Interest paid as per transfer price USD 44,67,397 13,05,43,42,638 JPY 2,84,60,412 Interest to be paid as per arm’s length USD 43,53,447 13,04,84,54,457 price JPY 2,60,55,770 Interest Paid in excess of arm’s length USD 1,13,950 58,88,181 price JPY 24,04,642 Interest to be received as per arm’s USD 7,87,27,213 3,51,81,23,621 length price Interest received in excess of arm’s USD 2,28,279 1,11,44,768 length price Net transfer pricing adjustment NIL NIL 7.5 Having taken note to the appellant's submission, I find that while doing the addition on account of adjustment by the TPO u/s. 92CA(3), the TPO has ignored all such international transactions pertaining to this area wherein the appellant has derived excess interest in comparison with LIBOR method. I find force in appellant's this submission that the TPO cannot do the adjustment merely on account of his personal decision to pick up one transaction and not the other. The appellant has filed a detailed chart as per 'Annexure 7' of Paper Book through which it is evident that if the same norms is adopted as LIBOR in working out the interest liability/ interest receipt, the appellant still has a better profit margin which is positive amounting to Rs. 1,11,44,768/-. The appellant has relied on the following decisions of jurisdictional ITAT, Mumbai as under:
(i) Essar Steel Ltd. (ITA No. 3727/Mum/2011) (ii) Audco India Ltd. (ITA No. 2642/Mum/2009) (iii) Boskalis International – Dredging International CV (ITA 4862/Mum/2008)
Having taken note to the above decisions of the ITAT, Mumbai, referred by the appellant in its submission dated 22.01.2015, I find that the contention so made by the appellant is justified and hence, adjustment so made by the TPO is not correct. However, I consider it proper and appropriate to direct the AO to verify the correctness of the working done by the appellant as filed before me and before the AO as claimed by the appellant as per Annexure 7 and if the same if the same is found to be correct after making necessary verification, then the addition so made by the AO on the adjustment made by the TPO stands deleted. With this observation, the appellant’s this ground is adjudicated.”
Aggrieved, now Revenue is in appeal before us.
Before us, the learned Sr. Departmental Representative relied on the TPO/ APO’s order. On the other hand, the learned Counsel for the assessee stated that the issue is covered by the co-ordinate Bench of this Tribunal in the case of ACIT vs. Audco India Ltd. (2011) 47 SOT 420 (Mum), wherein it is held as under:-
We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute. We further find that the ld. CIT(A) has observed in paras 4.4 and 4.8 of his order as under:
"4.4 I have perused the facts of the case, Transfer Pricing Officer's (TPO) order and assessment order thereof on this point. It is observed that the appellant had supplied the gate, globe and check valves to its AE amounting to Rs. 2,13,64,571. The primary business of the AE is sourcing of valves from the appellant company and marketing them in American markets. The appellant had the confidence to adopt CUP methodology which is the traditional method to justify its Arm's Length. It filed full details, in this regard, before the TPO as well as the undersigned. While passing the order, the TPO ignored this data by dismissing it as general in nature.
4.8 The aggregate sale to an AE at USA is only Rs. 2,13,64,571, which is hardly 1% of the total sales of the company. It does not appear probable that for such a small turnover, which would hardly have any material affect on the income, the appellant would have tried to shift its profits."
In para 4.9 of his order, he held as under:
"4.9 More importantly, the aggregate difference of Rs. 6,94,310 between sale of L&T LLC (Rs. 2,13,64,571) Arm's Length Price (Rs. 2,06,70,261) is only 3.35% and is well within the 5% of the tolerance limit permitted by the law. It is observed from the details filed by the appellant before the TPO as well as at the appellate stage that the prices realized from unrelated parties for an item is not uniform but higher or lower than the prices charged to related party (L&T LLC). That is to say that there are transactions for which data has been furnished, which shows that the appellant has charged higher rates from its AE as compared to third party uncontrolled transactions. The TPO while making the adjustments took only those figures in which valves were sold at the lower prices to the USA based AE while ignoring those figures and data where the same were sold at the higher price. Thus while making the adjustments, he disregarded the fact that the appellant has also sold valves to its AE at prices higher as compared to the average charged to the third unrelated parties. It would have been fair and reasonable on the part of the TPO to consider the aggregate of the sales made to the AE and then compare it with third parties as against the individual items considered by him. He has been selective in his approach and made the order arbitrary. Had the aggregate of sales made to the AE and that to the third parties been taken into account then the appellant's case squarely falls within 5% tolerance threshold. To my mind, it is appropriate to consider the aggregate sales to AE as against individual items selected arbitrarily. It is not fair for a quasi-judicial authority to pick up those data, which are convenient and suitable to it and ignore the corresponding data which goes against it. Ultimately an order to stand has to have a mark of fairness, reasonableness and judiciousness. Taking all the above facts and circumstances, I am of the view that there is no case for adjustments of Rs. 7,28,865 in respect of the export price of finished valves of L&T LLC by selectively utilizing the data where the 5% limit is lower in respect of AE and ignoring those figures/data where sale of valves to the AE are at prices higher as compared to the average prices charged to third unrelated parties. The addition so made on totality of facts is, therefore, deleted.
In the absence of any contrary material placed on record by the revenue against the finding of the ld. CIT(A) and keeping in view that the difference between the sale of L&T LLC and Arm's Length Price is only 3.35% which is well within the limit of 5%, we are inclined to uphold the finding of the ld. CIT(A) in deleting the addition made by the Assessing Officer. The ground taken by the revenue is, therefore, rejected.”
Similarly, in the case of ACIT vs. Essar Steel Ltd. (2014) 50 taxmann.com 183 (Mumbai-Trib.), wherein it is held as under: - “10. We have considered rival contentions and gone through the orders of the authorities below. A clear finding has been recorded by the CIT(A) to the effect that assessee has already considered all the 8 transactions with its AE in totality by aggregating the same whereas the TPO picked up two transactions where the price charge was less than the average market price. Rule 10(A)(a) defines a transaction to include a number of closely linked transaction. In case they are closely linked then they can be aggregated for determining the ALP. We found that assessee has exported hot rolled coils to its AE between 30-6-2005 to 10-3-2006, the price has been determined from the website whose data is not subject to challenge. The product remains the same and the source from which the average price has been taken remains the same. Accordingly, it is a fit case for aggregation. We found that if the average price is adopted for all the 8 transactions, then the average comes exactly to 420.71 which is what the price charged by the assessee to its AE. Furthermore, the detailed finding recorded by the CIT(A) at para 3.4 to 3.8 has not been controverted by learned DR by bringing any cogent material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition in respect of adjustment made of Rs.5,82,41,193/-.”
After going through the facts and arguments of the both the sides, we noticed that the Tribunal is consistently taking the view that arms length price should be after aggregation and there was no scope for adjustment without aggregation. Taking a consistent view by following the co-ordinate benches decisions cited supra, we confirm the order of CIT(A) deleting the addition. This issue of Revenue’s appeal is dismissed.
In the result, both the appeals of the Revenue are dismissed and that of the assessee are allowed.
Order pronounced in the open court on 13-04-2018.