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TMI Blog2023 (7) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... our consideration. - HON'BLE MR. JUSTICE RAJIV SHAKDHER AND HON'BLE MR. JUSTICE GIRISH KATHPALIA For the Appellant Through: Mr Zoheb Hossahin, Sr. Standing Counsel with Mr Sanjeev Menon, Jr. Standing Counsel. For the Respondent Through: Mr C.S. Aggarwal, Sr. Adv. with Mr Prakash Agarwal, Adv. RAJIV SHAKDHER, J.: (ORAL) 1. These appeals concern Assessment Years (AYs) 2013-14 (ITA No. 22/2023) and 2012-13 (ITA No. 23/2023). 2. On 30.01.2023, we had heard the matter at some length, when we had etched out the broad controversy that arose between the parties. For the sake of convenience the said order is extracted hereafter: 1. These appeals impugn a common order dated 21.05.2019 passed by the Income Tax Appellate Tribunal [in short, Tribunal ]. 2. ITA No. 22/2023 concerns Assessment Year (AY) 2013-14, while ITA No. 23/2023 concerns AY 2012-13. 3. According to Mr Vipul Agarwal, who appears on behalf of the appellant/revenue, the impugned order passed by the Tribunal was received by the appellant/revenue on 06.06.2019. 3.1 We may note that the affidavits accompanying the appeals indicate that they were sworn on 17.08.2020. Prima facie, there is delay in filing the appeals as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of fact: 10.1 First, the Transaction Net Margin Method (TNMM) would be the most suitable method for determining Arm s Length Price (ALP) for international transactions concerning indenting transactions entered into by the respondent/assessee with its AEs. 10.2 Second, the Berry ratio method for calculating Profit Level Indicator (PLI) would be most appropriate insofar as the respondent/assessee is concerned. 11. In respect of the aforesaid findings of fact, a detailed analysis has been made by the Tribunal in paragraphs 15 to 19 of its order dated 22.10.2018. For the sake of convenience, the relevant paragraphs are extracted hereafter: 15. We have heard the parties at length and also perused the material referred to before us as discussed herein above. The approach of determining the ALP on the basis of average percent of commission reported by the assessee in respect of indenting transactions with the non AEs as held by the Tribunal has not found judicial favour with the Hon'ble High Court and matter has been remanded back for further examination of similarity between the two transactions and to conduct further in depth inquiry to examine the high degree of comparability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... glaring that under both the transactions, i.e., controlled transaction with the AE and uncontrolled transaction with the non AEs, there are huge dissimilarity between the products, difference in volume, difference in value, markets and geographical location. 16. It is quite settled proposition that while applying CUP method, a very high degree of similarity has to be seen between the control and uncontrolled transactions not only in terms of products, contractual terms, volume, value but also market and geography locations. The reason being under CUP, price charged or paid for the property transferred has to be identified and the differences between the international transaction and the comparable uncontrolled transactions has to be seen which could materially affect the price in the open market. The price of different products cannot be the same as it depends upon the negotiation based on volumes, value and other contractual terms. Further different market and geographical location also affects the pricing factors and therefore, if there are differences on account of these factors CUP cannot be held to be the most appropriate method for bench marking the arm's length price. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Here in this case, the assessee is acting as an indenting agent commission service provider, i.e., as a facilitator of a trade and has no financial risk, because assessee was not required to raise any invoice for sale and purchase in its financial commitment and risk are insignificant. As a service provider, the key business driver for the assessee is operating expenses incurred on establishment and operation of business, i.e., salary, rent and other such expenses and it does not employ any significant assets in the business except for routine assets like office, furniture and fixtures to run its business and also there is no intangible creation by the assessee company. Besides there is no trading capital employed as goods are neither bought nor sold by the assessee in the indenting segment. Under these facts and circumstances, the profit derived by the assessee is mainly depended on its operating expenditure as the value of goods does not enter in its financial. As a low risk service provider, it seeks to obtain adequate return on its operating expenses as the operating expenses incurred represents the value added carried on by the assessee. In other words, the operating expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e granted proper opportunity as per law. 12. Mr Vipul Agarwal, who appears on behalf of the appellant/revenue, says that the Tribunal has not carried out an independent exercise in the AYs in issue, i.e., AY 2013-14 and AY 2012-13. 12.1 It is Mr Vipul Agarwal s submission that the Tribunal has simply followed the judgment of the coordinate bench, whereas, in fact, the decision required the Tribunal to carry an independent exercise bearing in mind the principle laid down therein. 13. Prima facie, the submission advanced by Mr Vipul Agarwal does not impress us. The appellant/revenue has not brought on record anything which would suggest that the analysis carried out by the Tribunal in its order dated 22.10.2018 was egregiously faulty. 13.1 The record does not seem to suggest to us that there is any diametric change in circumstances and facts, as recorded by the Tribunal in its order dated 22.10.2018. 14. At this stage, we may also note that Mr C.S. Aggarwal says that insofar as AY 2012-13 is concerned, there is an upward adjustment of Rs. 1,16,22,485/-. 14.1 Therefore, according to Mr C.S. Aggarwal, if this adjustment is taken into account, the tax impact would be less than the presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed by Mr C.S. Aggarwal, learned senior advocate, who appears on behalf of the respondent/assessee that on 25.09.2021, the AO has passed an order concerning AY 2012-13 and, likewise, on 26.08.2021, the AO passed an order concerning AY 2013-14. 10. As noted on 30.01.2023, an issue had also arisen concerning delay in filing the appeal as well. According Mr Aggarwal, this is not a case of delay in re-filing, but is, actually, a delay in filing the appeal. 10.1 Mr Hossain has attempted to give an explanation as to why it is a delay in re-filing. 11. For the present, it is not necessary to dwell on whether it is a delay in filing or re-filing, having regard to the facts noted above. We are closing the instant appeals in view of the fact that the appellant/revenue chose not prefer an appeal against the order dated 22.10.2018 passed by the Tribunal in the AYs referred to hereinabove. According to us, the issues in the above-captioned appeals are pari materia with those that arose in AY 2007-08 to AY 2010-11. 12. Via the impugned order, the Tribunal has, in sum, sought to re-examine the issue, in the light of the directions contained therein. 13. The above-captioned appeals are, accordin ..... 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