TMI Blog2011 (2) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 5% out of the arithmetic mean - Consequently, the impugned order of the CIT(A) is required to be reversed on this issue relating to the applicability of the first proviso to the assesse – Decided in the favour of the assessee Regarding deduction u/s. 80HHC – Whether excise duty and sales tax are excluded for the purpose of calculating deduction u/s. 80HHC - Supreme Court in the case of Lakshmi Machine Works 290 ITR 667(SC) – Held that the issue has to be decided in favour of the assessee – Accordingly appeal is dismissed Regarding inclusion of income from scrap, sale, discount and commission, inspection and testing charges, job work and income derived from the suppliers for the purpose of 80HHC deduction should be referred to the files of the AO for re-adjudication after considering various binding judgments on each issue - Assessee is directed to file the evidences to support his case and also the copies of the decisions/judgments if any, which shall be taken into cognizance by the I.T. Authorities while adjudicating the issue afresh - In the result, all the four appeals are decided pro-tanto - ITA No. 277 & 1412/ PN/07, ITA No. 148 /PN/07 ITA No. 1430/PN/07 - - - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the multiple prices involved, as per the first proviso, at the option of the assessee, the assessee is entitled to the benefit of reduction of 5% from the arithmetic mean of such prices. In this regard he relied on various orders of the Honble Tribunal such as SAP Labs India Pvt. Ltd. 6 ITR (Trib) 81 (Bangalore) and Soni (I) Pvt. Ltd. 315 ITR (AT) 150. Further, he mentioned that the CIT(A) did not have the benefit of the said orders of the Tribunal. As per the Counsel, the decisions in the case of Soni (I) Pvt. Ltd (supra) and SAP Labs India Pvt. Ltd (supra) are famous for the proposition that the benefit of deduction at 5% has to be given to the assessee as per the first proviso for the AY 2002-03 onwards till the amendment brought in by the Finance (no 2) Act, 2009. Applying the said ratio to the assessee s case Ld. Counsel took us through para 7.3 of the impugned order and stated that the CIT(A) did not have the benefit of above referred orders and therefore the issue was not decided in favour of the assessee. Per contra, Ld. DR for the Revenue relied on the orders of the CIT(A) and the TPO. Further, Ld CIT-DR relied on the orders of the Tribunal in the case of Essar St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th price. 6. First proviso to section 92C(2) of the Act is required to the explained here and same as existed at the relevant point of time reads as follows. provided that where more than one price is determined by the most appropriate method, the arms length price shall be taken to be the arithmetical mean of such prices or at the option of the assessee, a price which may vary from the arithmetical mean of an amount not exceeding five per cent of such arithmetical mean. From the above provisions, it is clear that the assessee has an option when there is arithmetical mean involved while computing the arm s length price and it happens only if more than one price is determined by the most appropriate method as in the case of the present assessee.There are three prices determined involving three comparable namely Gilcon Projects Services Ltd., Rites Ltd. NIS Sports Ltd. Ld Counsel has demonstrated above from the text of the order of the CIT(A) too, where plurality was used in the such text. From the judicial decisions relied upon by both the parties, we find that first proviso becomes operational where there are more comparable price cases are determined in computation of arm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 is applicable. In that case, the said proviso shall apply only if the most appropriate method results in more than one price, in which case the arithmetical mean of such prices shall be taken as the ALP. However, the assessee shall have an option to adopt a price which may vary from the arithmetical mean by an amount not exceeding five percent of such arithmetical mean. D. Extract from a decision in the case of Perot Systems TSI (I) Ltd 130 TTJ 685 (Delhi) The Tribunal came to the conclusion that since only one rate was used as a comparable transaction, it cannot be equated with more than one price. Therefore, the tolerance limit of 5% was not available in the relevant proviso applicable to the proceedings of these years: (Emphasis supplied). E. Extract from a decision in the case of Sony India P. Ltd. 315 ITR 150, at page 155 for explaining of the proviso The proviso to section 92C() of the Act consists mainly of two parts: (a) where more than one price is determined by the most appropriate method, then the arm s length price shall be taken to be the arithmetical mean of such price; or (b) at the option of the assessee, a price which may vary from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the most appropriate method. Therefore, the benefit of the price of international transaction disclosed by them exceeds the margin provided in the provision. 8. All the above mentioned judicial pronouncements are uniform in making a proposition that where arithmetic mean is involved, the assessee obtains the eligibility for claim of deduction out of such arithmetic mean. It is commonsense that the statistical concept of arithmetic mean arises only when there exists more than one price data. Such concept is irrelevant to the data with only one variable. In the assessee s case undisputedly, there are three comparable price data and further, it is a fact that, as per the said first proviso, the assessee exercised the option too. In such circumstances, in our considered opinion, the said first proviso has direct application to the facts of the case and the assessee is entitled for deduction not exceeding 5% out of the arithmetic mean. In the earlier paragraphs, we have explained the meaning of the first proviso as the one comparable price vis a vis many comparable prices for the purpose of granting deduction not exceeding 5% out of the arithmetic mean of the comparable pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Accordingly, this ground no. 1 of the Revenue s appeal is dismissed. 12. Regarding ground no. 2, it is relating to inclusion of income from scrap, sale, discount and commission, inspection and testing charges, job work and income derived from the suppliers for the purpose of 80HHC deduction should be referred to the files of the AO for re-adjudication after considering various binding judgments on each issue. As seen from both order of the A.O and of the CIT(A) it is noticed that both the authorities have not applied their mind to each of the receipts and instead they have summarily adjudicated the issue without passing a speaking order. Considering this fact, both the parties have concurred to the proposal of sending these multiple issues raised in this ground to the files of the A.O. We find no reason to dishonour their request. Assessee is directed to file the evidences to support his case and also the copies of the decisions/judgments if any, which shall be taken into cognizance by the I.T. Authorities while adjudicating the issue afresh. A.O shall grant reasonable opportunity of being heard to the assessee as per the established principle of Natural Justice. Thus, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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