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TMI Blog2013 (11) TMI 1703X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 4,06,17,5821- ; and (b) Duly entitlement pass book receipts of Rs. 4,93,68,1361-. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of Jt. Commissioner of Income Tax I AO/TPO in making adjustment by applying CUP method in case of exports of manufactured goods on account of following: (i) Applied Comparable Uncontrolled Price ('CUP") method selectively for certain international transactions of exports, without rejecting Transactional Net Margin Method ("TNMM") method. (ii) Confirmed the order passed by the TPOIAO without appreciating that none of the conditions set out in section 92C (3) of the Act are satisfied in the case. (iii) Not appreciated the fact that geographical difference causes significant variation in the pricing of International transaction. (iv) Ignored the differences in sales volume while applying the CUP method and restricted the volume discount to 5%. The appellants crave leave to add, to amend or alter the foregoing grounds of appeal or to take an additional ground if need be." Grounds of appeal in ITA No.2328/Mum/2011(Revenue's appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee under Explanation (baa) to section 80 HHC of the Act. 3.1 Ld. DR did not raise any objection regarding this contention of the assessee. Therefore, after hearing both the parties on this issue, so as it relates to the ground regarding exclusion of net interest is restored to the file of AO with a direction to reduce net amount of interest from the profit in accordance with the aforementioned decision of Hon'ble Supreme Court in the case of ACG Associated Capsules Pt. Ltd. (supra). This part of the ground is considered to be allowed for statistical purposes in the manner aforesaid. 4. So far as it relates to Ground No.1(i)(b) i.e. regarding duty entitlement pass book receipts the said part of the ground was stated to be covered by the decision of Hon'ble Supreme Court in the case of Topman Exports vs. CIT, 342 ITR 49(SC). After hearing both the parties and accepting the submissions of Ld. AR, the issue is restored to the file of AO with a direction to recalculate deduction under section 80HHC of the Act on the issue of DEPB as per aforementioned decision on Hon'ble Supreme Court in the case of Topman Exports (supra). We direct accordingly. This part of the first ground is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E's and non-AE's are in different countries. In the analysis, like last year, all the sales are taken together, irrespective of the country of sale and quantity sold to individual entities. Further, after applying 5% range to the Weighted Average Price (hereinafter: WAP) of sales made to unrelated parties, as mentioned under section 92C(2) of the Income Tax Act, 1961 it is observed that the WAP charged to related parties is at Arm's length and therefore no adjustment is made in case of the above mentioned products. (iii) For the following products WA? charged to unrelated parties is not within 5% range of the WA? charged to unrelated parties i.e. average realization in case of related parties is lower than that in case of unrelated parties. a. HOSTAPERM GREEN ON b. PERMANENT RUBINE CA-E c. .ACID ORANGE 1O (iv) For the products HOSTAPERM GREEN GN. the sales to related parties is 29,400 kgs at a WA? of Rs. 302.38 per kg. 700 kg is sold to unrelated parties at WAP of Rs. 383.89. The assessee has contended that considering the huge difference in quantity sold to related and unrelated parties, sales made to related parties should be accepted to be at Arms Length. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties. In ground No.12, the assessee sought rebate on account of geographical regions as the sales of the assessee were spread to Thailand and China. In ground No.13, the assessee sought rebate on account of functional difference in the transactions and in Ground No.14, the assessee sought 5% safe harbour as per proviso to section 92C(2) of the Act. Briefly; Ld. CIT(A) has upheld the application of most appropriate method as CUP. Ld. CIT(A) after considering the submissions of the assessee has granted the rebate on account of volume difference @5%. Ld. CIT(A) did not accept the submissions of the assessee regarding rebate on account of geographical regions and functional difference. However, Ld. CIT(A) has provided the benefit of safe harbour to the assessee under proviso to section 92C(2). 5.5 It may be mentioned that Ld. CIT(A) did not upheld the adjustment in respect of ACID ORANGE sales and, thus, an addition of Rs. 30,97,751/- made on that account was deleted. Similarly, after giving rebate of 5% on account of volume discount and 5% proviso benefit, Ld. CIT(A) has found that no adjustment was maintainable in respect of Permanent Rubain CA-E and adjustment in that regard was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the discount benefit in this regard only to the extent of 5%, whereas the assessee is entitled to get it @20%. It was also the contention of Ld. AR that 20% discount on account of volume is a usual discount and has been accepted by the Tribunal in the case of Intervet India Pvt. Ltd. vs. ACIT, 39 SOT 93(Mum) and reference was made to the following observations: "51. As far as the adjustment on account of volume factor difference in the market conditions and economic development level is concerned, the Transfer Pricing Officer has allowed the adjustment to the extent to 10 per cent while the appellant has sought for an adjustment of 50 per cent. There is no doubt that the claim of the appellant is rather excessive, while that made by the Transfer Pricing Officer is rather on a lower side. Hence, considering that in the local trading the appellant in similar circumstances has been providing discounts while t ere is a case for higher adjustment than what has been made by the Transfer Pricing Officer, it cannot be as high as sought for by the appellant. It would be reasonable if the adjustment for the purpose is restricted to 20 percent on this account as against 10 per cent made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsistency should not be accepted. 5.9 Arguing the second ground of appeal raised in the Revenue's appeal, it was submitted by Ld. DR that Ld. CIT(A) was wrong in upholding CUP method instead of TNMM. Thus, it was pleaded by Ld. DR that TP Adjustment made by TPO should have been confirmed. 6. We have heard both the parties on this issue and their contentions have carefully been considered. We have also carefully gone through the case law and documents relied upon by both the parties. The main contention of the assessee in this regard is grant of 20% discount on volume difference.. This contention of the assessee is supported by the arguments that in immediate preceding assessment year TPO had accepted such volume discount and reference in this regard has been made to the order of TPO rendered in respect of assessment year 2002-03, the relevant portion of which has been reproduced in the above part of this order. The relevant portion of impugned TPO's order has also been reproduced in the above part of this order. So as it relates to chemical HOSTAPERM the turnover for this year to the related parties is 29,400 Kgs. @ 302.38 per Kg as against similar sales made to AE's in A.Y 2002- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time, we want to highlight that the doctrine of estoppel together with its exceptions cannot be ignored. It is trite that there can be no estoppel against the provisions of the Act or the binding interpretation given to such provisions by the judicial forums. This rule has been cited with approval by several courts including the Hon'ble Supreme Court in CIT vs. V.MR.P. Firm (1965) 56 ITR 67 (SC). Where the facts of a case prima facie show that the authorities took a clearly incorrect view on the provisions of the Act in an earlier year, whether favoring the assessee or the Revenue, it cannot be argued in the subsequent year that the same incorrect approach should be repeated. The Hon'ble Delhi High Court in CWT vs. Meattles (P) Ltd. (1984) 156 ITR 569 (Del) has held that the Revenue authorities cannot be stopped from taking a correct view of statutory provisions in a later year. 16.3. We have elaborately discussed above that how the method employed by the assessee for determining the ALP in respect of international transactions for the year under consideration is contrary) to the statutory provisions having no approval from any judicial forum. If such a wrong method has been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onclusion, this court referred to an interesting passage from Hoystead v. Commissioner of Taxation [1926] AC 155 (PC) wherein it was said (page 328 of 193 1TR) "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle- namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." Reference was also made to Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 1TR 1 (SC) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied CUP method for determining the ALP of international transaction and if TPO himself has applied that method, Revenue does not have right to agitate the same as the method applied by the TPO has been upheld by Ld. CIT(A). Therefore, this ground of the Revenue is rejected. 6.5 It may be mentioned here that no other arguments were addressed by both the parties apart from which are mentioned above. 6.6 In view of above discussion the second ground of the assessee's appeal is partly allowed in the manner aforesaid and Ground No.2 of the Revenue's appeal is dismissed. 7. Apropos Ground No.1 of Revenue's appeal; the assessee claimed deduction under section 80M of the Act to the extent of gross dividend income received amounting to Rs. 94,17,412/-. The AO found that interest expenses to the extent of Rs. 11,67,900/- were attributable to expenditure incurred by the assessee for the purpose of earning dividend income. Similarly, AO observed that Rs. 50,000/- was further allocated as indirect expenses towards earning of the dividend income . The aggregate of both these amounts i.e. a sum of Rs. 12,17,900/- was reduced from the gross dividend income received and deduction under section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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