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TMI Blog2018 (6) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of international transactions. Addition on account of inflation of purchase of raw-material- Held that:- To the show cause, assessee explained reasons for the variations in the consumption of the raw material as also extent of and how the variations arisen. As decided in assessee's own case [2015 (9) TMI 325 - ITAT AHMEDABAD] such addition to be deleted. X X X X Extracts X X X X X X X X Extracts X X X X ..... bles who were engaged in bulk drug manufacturing. It is also pertinent to note that the ld.TPO has accepted selection of profit level indicator ("PLI") adopted by the assessee i.e. operative profit divided by operative cost (OP/OC). We will be going to take note of the details with respect to all these four comparables in subsequent part of this order. On the basis of PLI of four comparables selected by the TPO, he recommended an upward adjustment of ₹ 4,10,40,877/- in the value of international transaction undertaken by the assessee. 5. The recommendation of the ld.TPO has been given effect in the assessment order and an addition of ₹ 4,10,40,877/- has been made to the total income of the assessee. Dissatisfied with the addition, the assessee carried the matter in appeal before theld.CIT(A). The assessee mainly impugned order of the ld.TPO on the ground that turnover of the comparables either very low or it is very high. Therefore, the ld.TPO ought to have applied a turnover filter before selecting comparables. The assessee further contended that Welcure Drug & Pharmaceuticals Ltd., one of the comparables selected by the assessee, which is engaged in manufacturing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et/distribution function, ranging from 1.5% to 3% are not earned by the assessee and adequate adjustment ought to be made. He further contended that the assessee has been supplying bulk drags under a long term supply agreement in substantial quantities, where there would be atleast 10% to 15% quantitative discount on account of certainty of supply and certainty of cash flow vis-à-vis the orders for specific similar volume of dispatch. Thus, he contended that adjustment on that account ought to be made. Apart from the above, he worked out details exhibiting that no adjustment would be required, if Welcure Drug & Pharmaceuticals Ltd. has been taken into consideration. 7. On the other hand, the ld.CIT-DR has submitted that Shri Jigar Raval, DCIT, TPO-I, Ahmedabad has filed written submissions vide letter dated 7.7.2015 which is available on record. She relied upon this letter. She contended that only issue on behalf of the Revenue involved in this appeal is with regard to the application of turnover filter. If that filter has not been allowed, then the comparable selected by the TPO are not being disputed by the assessee, otherwise on merit. On the strength of order of the ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fort is being made to compare related party transactions undertaken by the assessee with the uncontrolled transactions undertaken by the comparable, and thus arrive at a conclusion as to whether transaction bench mark is at arm's length or not. For example, a chosen company, though functionally comparable has entered international transactions beyond a percentage with related parties, it is quite possible that its overall profit may have distorted due to such transaction rendering it as uncomparable. There are so many other circumstances which are required to be examined under FAR analysis, and due to this, adjudicator is required to apply appropriate filter in order to work out comparables which have not under any influence of the related party transactions. Hon'ble Bombay High Court in the case of CIT Vs. Pentair Water India (P.) Ltd., 381 ITR 216 concluded that turnover is obviously a relevant factor to be considered for comparability. Hon'ble High Court has relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Agnity India Technologies (P.) Ltd., (2013) 36 taxmann.com 289. Thus, there are conflicting decisions in favour or against the application of turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption of raw-material and standard consumption of material. To the show cause, assessee explained reasons for the variations in the consumption of the raw material as also extent of and how the variations arisen. However, the ld.AO did not accept the explanation of the assessee and basing his earlier order for the assessment year 2002-03 to 2006-07, an addition of ₹ 62,63,591/- on account of items consumed less than the standard norms and further addition of ₹ 1,43,79,263/- on account of items consumed more than the standard norms were made. These two additions were challenged before the ld.First Appellate Authority, who following his order of the assessment year 2006-07 while following the order of the Tribunal in the case of assessee for the assessment years 2002-03, 2003-04 and 2004-05 deleted the impugned additions. 14. At the outset, ld.counsel for the assessee has placed on record copy of the order of the Tribunal passed in the assessment year 2005-06 an 2006-07 in ITA No.2060/Ahd/2009 and 3141/Ahd/2011 wherein similar addition has been deleted. The ld.First Appellate authority has followed the order of the Tribunal passed in the assessment years 2002-03, ..... 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