TMI Blog2016 (9) TMI 1650X X X X Extracts X X X X X X X X Extracts X X X X ..... in earlier year but the TPO worked the ALP of the International transactions on the basis of functional analysis do not hold good. In our view before adopting the CPM/RPM, the TPO had to first reject TNMM and that too with reasons for the rejection. TPO has considered only cost of raw materials consumed and no other associated costs was considered in arriving at the G.P. margin.TPO in order to apply CP Method cost pertaining to raw materials, labour, factory overheads, direct indirect expenses etc should take into consideration. All the aforesaid cost heads are included for determination of the 'cost of goods sold' as per Rule 10B of the I.T. Rules, 1962 which lays down the manner in which the CP method is to be applied. The profit margins varied significantly depending upon the fact that the products were either sourced locally or imported. Assessee had imported printing inks from AEs worth Rs. 7.06 crores which was sold to unrelated parties for Rs. 8.09 crores resulting in gross profit margin of 13%. Correspondingly the assessee had imported press chemicals from unrelated parties worth Rs. 1.75 crores which was sold to unrelated parties for Rs. 2.02 crores yieldi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeared on behalf of assessee and Sk. Zafarul Haque Tanweer Shri Kalyan Nath, Ld. Departmental Representatives appeared on behalf of Revenue. 2. Both appeals are heard together and deem it appropriate to dispose of them by this common order. First we take up Revenue s appeal ITA No.181/Kol/2010 for A.Y 04-05. 3. Revenue has raised following grounds as under:- 1. That on the facts and in the circumstances of the case, Ld. CIT(A) erred in deleting the addition of Rs. 50,15,212/- made by the TPO due to adjustment of arm s length price adopting RPM method being the most appropriate having regard to the facts and circumstances of each particular transaction after giving reasonable opportunity to the assessee. 2. On the facts and in the circumstances of the case, Ld. CIT(A) erred in directing not to include service charge amounting to Rs. 90 lakhs in total turnover while computing deduction u/s. 80HHC of the IT Act. 3. That on the facts and in the circumstances of the case, Ld. CIT(A) erred din allowing deduction of customs duty of Rs. 11,77,331/- which was adjusted against advance license benefit available to the company rather than payment thereby violating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods from AE at ALP. However, the AO disagreed with the method adopted by the assessee for working out ALP of the goods exported/ imported. The AO observed that the total value of import/ export is only Rs. 104 million in comparison to the total turnover of Rs. 2334 million of the assessee. The transactions with AE are less than 5%, therefore TNMM is not the most appropriate method. The AO also observed that the assessee for the AY 2003-04 used the CPM method for the export to AE and RPM method for the Export from AE. So the AO adopted the CPM method and worked out the ALP for the exported goods as under:- The manufacturing details submitted by the assessee are as under:- Total Domestic sales Export to AEs Export to non-AEs Net sales 2,288,221,250 2,024,504,485 37,986,395 80,760,331 Other income 45,519,716 Raw material consumption 1,616,195,407 1,400,627,381 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Raw materials consumptions 1,569,885 70,670,144 5,166,711 42,047,002 Gross profit 703,130 10,271,025 2,111,289 12,430,853 GP on sales 31% 13% 29% 23% It was observed that the GP is 23% in respect of trading of goods with unrelated parties which are the uncontrolled transactions so it considered the Arms Length Margin. Whereas the GP in the case of import from related parties and further sales to unrelated parties, the GP margin earned by the assessee is only 13%. On question by the TPO, the assessee demonstrated the products imported and sold from related parties and unrelated parties are different. However the TPO disregarded the plea of the assessee by observing that the assessee himself used RPM for AY 2003-04 to determine the ALP of the import transactions with. It is not necessary that the product should be similar. It is in the CUP method, the exact comparability of the product is a essential. Under the RPM, the similarity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering the submission of assessee and facts of the case ld. CIT(A) deleted the addition made by the AO by observing as under : 6. I have considered the submissions of the appellant and perused the documents furnished in support of ALP determined by the appellant, relying on TNMM Method. The assessee furnished before me the reports prepared by its auditors M/s Price Waterhouse u/s 92CA, for the AYs 20-04 2004-05. On going through Transfer Pricing reports for AY 2003-04 * 2004-05 I find the Auditors had examined merits demerits of various methods prescribed in the Act for determination of ALP. On comparative analysis of the methods prescribed in the Act the Auditors preferred to apply Transactional Net Margin Method (TNMM) for determination of ALP In the appellant s case for ay 2003-04 also AY 2004-05. it appeared from the order passed u/s. 93CA(3) for the ay 2003-04 that no adjustment was proposed in respect of appellant had justified ALP in respect of its international transactions with AEs with reference to TNMM method. 7. I may however hasten to add that TNMM method may not be the appropriate method to be adopted in all cases. If the circumstances so demanded, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty to its parent company @ 2% of sales, other than sales made to AEs. In working out the profit margin in respect of exports to non AEs the AO therefore should have taken into account impact of royalty payment because in case of exports to AEs; the assessee did not bear incidence of royalty. Similarly, to obtain export orders for sale to non-AEs; assessee had engaged services of agents, to whom commission was paid. Whereas on exports to AEs the assessee did not bear incidence of commission. In respect of exports to unrelated parties amounting to Rs. 8,07,60,331/-, appellant had paid sales commission of Rs. 35,41,431/-. Besides the selling overheads; TPO did not consider incidence of manufacturing costs. If the TPO had considered direct material cost manufacturing cost sales overheads then the comparative position in respect of exports to related and unrelated parties would be as follows: Manufacturing Domestic sales Export to Related unrelated NET SALES 2,024,504,485 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO the cost of materials imported from AEs was required to be adjusted downward by 5%. In support of his conclusion, TPO held that the appropriate method of determining ALP was RPM method and not TNMM method. As noted by me earlier; in the AY 2003-04 also appellant had justified its transactions with AEs with reference to TNMM method and not RPM method which was specifically rejected by the Auditor, in its report u/s. 92CA. according to TPO in RPM, main requirement was the similarity of the functions performed. In his opinion in case of trading business; functions performed were not material as there is no substantial value addition by the assessee. 12. After considering the submissions of the A/R and the acts on record however, I find that the TPO determined the ALP by making comparison of dissimilar products which were having different end uses the products did not match each other in any specific manner. The TPO first considered profit margin in materials imported from AEs for trading purposes which were sold to domestic unrelated parties wherein the profit margin was found to be 13%. The TPO then compared such profit margins with assessee s trading transactions where bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f two products, it was necessary for the TPO to establish that the products considered for comparison matched each other at least in their essential attributes. In the present case the TPO compares profit margin in respect of printing ink on one hand and combined profit margin on sale of press chemicals, blankets machines. The facts noted above however established that each of the 3 products which were purchases sold to unrelated parties; had independent and varying profit margins and even amongst then these products were not comparable. The facts further indicate that profit margin of printing chemicals sourced locally was 31% whereas profit margin for imported press chemicals was only14%. These facts indicated that even within the same product category; profit margins substantially varied in respect of imported printing chemicals profit margin was 14% which is comparable with profit margin of 13% earned by the assessee in respect of trading in import printing ink. On considering the totality of the facts circumstances of the case therefore I find that TPO did not appreciate facts of the case in proper perspective but made comparison of profit margins of dissimilar product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AEs under the manufacturing function, the TPO selected the CPM as the most appropriate method as he was using the gross level margins. He stressed on functional similarity with regard to export to AEs (margin = 18% over cost) and export to non-AEs (margin = 26% over cost). Based on these, he made upward adjustment to the ALP of the goods exported to the AEs for Rs. Rs. 9,68,1514.00. With regard to the trading function, the TPO noted that while in case of purchases made from unrelated parties for making sales to unrelated parties, the gross level margin on sales was 23%. This he considered as the arm's length margin for trading activity in uncontrolled circumstances and selected the RPM as the most appropriate method. He noted that in respect of import from related parties for sales to unrelated parties, the gross profit margin was only 13%. The assessee explained that the products are different. But the TPO was of the view that in the RPM, the main requirement is similarity of functions. Thus, he made a downward adjustment to the price of the imports from AEs for Rs. 40,47,058.00. On receipt of these determinations from the TPO, the AO gave opportunity to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformed by the assessee and its AEs involved in the international transactions. In this context, reference is made to Part-IV of the Report submitted by the assessee, which carries out the functional analysis. Pages 22 and 23 of this Report clearly describe the Functions performed as consisting of, inter alia, trading activities - where the assessee is purchasing for resale and acting as a normal distributor, and manufacturing activities - where the assessee is carrying out normal manufacturing function which also involves importing raw materials and exporting goods. Further, at page 29 of this Report, the assessee has clearly being characterized as an entity having routine manufacturing and routine trading activities. A copy of these three pages is attached as Annexure 1 to these written submissions. Once the functional analysis has been made, the Assessee is required to show that it has conducted a comparability analysis and also an analysis of the Methods prescribed for determination of the ALP of the international transactions. So far as the assessee is concerned, this has to be done in accordance with section 92C(1) (2) of the Act read with Rule 10B of the Rules. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepts that RPM could have been applicable in case of import of finished goods for resale in the Indian market, but has rejected this Method on the ground that (Para 5.22): ... since DIC is engaged in trading of different classes of goods, the profitability of which may vary vastly (since the variety of products that DIC trades in has different profitability levels), the margins on related and unrelated party transactions cannot be compared reliably. This only leaves the TNMM. The assessee has considered the TNMM as the most appropriate method. However, in applying it, it has aggregated all the international transactions together and compared the operating profits in relation to sales with those of comparable entities selected by it. At this juncture, it would be appropriate to make a reference to Rule 10B(1)(e) which prescribes the manner in which TNMM is to be applied. The Rule clearly mentions that in this method, the net margin realized from an international transaction is to be computed in relation to a relevant base and this is to be compared with the net margin realized by the same enterprise or by an unrelated enterprise from a one or more comparable uncontroll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mentioned earlier, the TPO was of the view that due to the small volume of international transactions in relation to the turnover, net profit from the transactions would not give a correct picture for comparison. Further, he also wanted to look at the two functions - manufacturing and trading - separately. 8. On the basis of the above, it is apparent that the TPO did not reject TNMM on the basis of any reference to application of CPM and RPM in the earlier year. Secondly, even if the TNMM is considered to be the most appropriate method in the circumstances of the assessee, it has not been applied correctly as the functions, assets and risks in case of manufacturing function are completely different from the functions, assets and risks in case of trading function. Further, even in the case of TNMM, the application is transactional - the transactions are to be taken separately based on the factors mentioned section 92C(1) of the Act. The reference to CPM and RPM used in earlier year i.e. AY 2003-04, was made in the context of justifying the price of the transactions during the course of proceedings before the TPO . It is seen that during proceedings before the TPO for AY 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24). Accordingly, it was held that the adjustments made were not proper. In this context, it needs to be mentioned here that Rule 10B(1)(b) provides that comparison can be made with products which are similar. In that case, comparison could have been made to margins earned from press chemicals. Secondly, the infirmity in the overall application of TNMM to the two functions has already been pointed out. As the assessee has filed an application under Rule 27 of the Appellate Tribunal Rules 1963, no arguments are made against other objections raised by the assessee before Ld. CIT(A) . 9. On the other hand the ld. AR before us submitted that this appeal has been preferred by the Department against the appellate order passed u/s 250/143(3) dated 17.09.2009 by the Commissioner of Income-tax (Appeals)XXXII, Kolkata ['CIT(Appeals)']. In the course of last hearing before the Bench, the Id. Departmental Representative ['D/R'] furnished written arguments objecting to the reasoning findings given by the Id. CIT(Appeals) in his appellate order and supporting the transfer pricing order passed by the Transfer Pricing Officer ['TPO']. Our rebuttals comments to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions was not substantial the TNMM Method was not suitable. In this regard it is submitted that nowhere does Rule 10B of the I.T. Rules, 1962 require that the volume of the transactions conducted with AEs is a relevant or decisive parameter for application of TNMM Method. Reference in this regard may be made to Rule 10C which lays down the decisive parameters to determine the most appropriate method. The relevant extracts are as follows: Most Appropriate Method (a) the nature and class of the international transaction or the specified domestic transaction; (b) the class or classes of associated enterprises entering into the transaction and the functions performed by them taking into account assets employed or to be employed and risks assumed by such enterprises; (c) the availability, coverage and reliability of data necessary for application of the method; (d) the degree of comparability existing between the international transaction or the specified domestic transaction] and the uncontrolled transaction and between the enterprises entering into such transactions; (e) the extent to which reliable and accurate adjustments can be made to account for differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal turnover was ex-facie fallacious. It is also pertinent to mention that similar quantum of imports/exports from AEs were made in the earlier AY 2003-04 and the subsequent years as well. Even in the preceding AY 2003-04 and the subsequent AY 2006-07 onwards, value of import/ export transactions with AEs was near about 5% of the total turnover. However neither in the TP order for the earlier year nor in transfer pricing orders for AYs 2006-07 onwards; the application of TNMM Method was rejected by TPO on the ground that the value of international transactions with AEs was less than 5% of total turnover. The assessee submits that principle of res judicata though not strictly applicable in tax proceedings; yet the established rule of consistency must also be followed on factual matters permeating through the yeaRs. It is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular view or proposition in the past, it is not open for the Revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to distinguish the reasoning furnished by the Transfer Pricing Auditor and arbitrarily applied CP Method RP Method. Furthermore even the benchmarking exercise conducted by the TPO suffered from factual inaccuracies infirmities which therefore yielded incorrect results. The primary reason cited by the TPO for applying CP Method RP Method for benchmarking Export of manufactured goods and Trading of various goods was that the assessee himself adopted the aforesaid two methods in the immediate preceding year i.e. AY 2003-04. The relevant extracts of the TPO order is as follows: The assessee himself used CPM/ RPM for AY 2003-04 to justify its export transactions with AE during the course of proceedings before the TPO. Now, this year when the results are not in favour the assessee, it cannot turn back and find faults with the appropriateness of the method. It is clearly evident from the above that the TPO proceeded to apply CP Method RP Method on the premise that the assessee itself benchmarked its transactions using this method in the earlier year and therefore in the relevant year the assessee could not turn around and question the appropriateness of this method. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hon'ble membeRs. On one hand the D/R admits that the reference to earlier year's TP order was to justify application of CP RP Method but then contradicts himself by stating that such reference was not meant to reject the TNMM. Understandably the TPO could not have applied both TNMM CPM/RPM to benchmark the transactions. In order to apply CPM/RPM, the TPO had to first reject TNMM specifically adopted by the assessee in its TP report and only then he could have proceeded to apply alternate methods. From bare perusal of the TPO's order and also from the D/R's arguments, it is clear that the reference to earlier year was made to justify CPM/RPM; and as a corollary to reject TNMM. The TPO clearly states that in the year in question Le AY 200405 that he is applying CPM RPM since the said method was followed in earlier year and therefore rejected the application of TNMM. The argument of the D/R that the Id. CIT(Appeals) wrongly asserted that the TPO had rejected the TNMM because the assessee had applied CPM/RPM in earlier year is clearly untenable and incorrect. 9.1 From the written arguments, it is further stated that the Id. D/R has not been able to dislodge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; correct and the relevant facts. 9.2 The Ld. D/R in his written arguments has bier tried to find faults errors in the aforesaid benchmarking exercised out by the CIT(Appeals). The allegations levelled by the Ld. D/R in his written arguments are unjustified both on facts in law at Page 7 of his submissions the Ld. D/R has pointed out alleged faults committed by the Id. CIT(Appeals) while applying CP Method RP Method to the export of manufactured products trading of various goods respectively. In the first instance, we deal with the allegations in respect of benchmarking of the export of manufactured goods to AEs by applying the CPM. On Page 7 of his arguments the Ld. D/R has alleged that the assessee filed different statements of gross profit margin before the TPO and the Id. CIT(Appeals). It is the Ld. D/R's contention that the different calculation sheet furnished before the Ld. CIT(Appeals) was in the nature of additional evidence and the AO /TPO was never confronted with these facts figures for their comments. In this regard, it is submitted that the observations of the Ld. D/R are misleading, erroneous unjustified. At this juncture, it would be releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the export sales value cost of raw materials consumed and no other associated costs was required to be considered in arriving at the G.P. margin. The TPO was all along well aware that he had called for only the details of export sales corresponding cost of raw materials consumed. TPO consciously did not call for further details of manufacturing marketing costs because in his view for applying CP Method, the data required pertained only to cost of material consumption nothing more. In TPO's view other direct costs/ expenses indirect overheads were not required to be imputed in arriving at the gross profit margin for the purposes of arriving at ALP of manufactured goods while applying CP Method. This fact is substantiated from the TPO's order itself. The relevant extracts from the TPO's order is as follows: 9.3 From the above calculation table prepared by the TPO himself, it is clearly evident that the TPO had required the assessee to furnish only the details of sales corresponding cost of raw materials consumed. Reason being that TPO himself had requisitioned this limited data from the assessee. It is also pertinent to note that the TPO in his ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much of the data was requisitioned by him. It was the TPO's own understanding that for applying CP Method, the gross profit margin was to be computed only with reference to sales cost of materials consumed and nothing more. It is for this reason the TPO has nowhere alleged in his order that there was failure on the assessee's part to furnish the relevant information. The assessee became aware about TPO's wrong understanding of CP Method only when the order is] s 92CA(3) was received. On noting the factual infirmities committed by the TPO in computing profit margin and thereby computing wrong ALP, the assessee challenged the TPO's order in appeal. In the course of appeal, the assessee in support of its contention, explained that for computing the correct gross profit margin of manufactured products, in addition to cost of materials consumed other direct indirect costs factory overheads were also required to be included. Reference in this regard was invited to Rule 10B of the I.T. Rules, 1962 which lays down the manner in which the CP method is to be applied. The relevant part of the said Rule provides as follows: cost plus method, by which,- (i) the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The CIT(A) accordingly allowed relief to the assessee. The Hon'ble ITAT will therefore appreciate that it was not a case where the assessee filed additional evidence or had furnished different statements before TPO and CIT(Appeals) as alleged by the Id. D/R in his written submissions. The calculation sheet filed by the assessee was its submission in rebuttal to the wrong computation of profit margins as made by the TPO in his impugned order. It was not in the nature of additional evidence. It was only the case where the TPO's assessee's versions of computation of gross profit margin in CP Method were different. The facts figures were taken by both from the audited accounts which were available both to the AO and the TPO. The CIT(A) merely decided on the question as to which of the two computation statements was more appropriate. The D/R has however wrongly stated that the assessee filed additional evidence before the CIT(A). It is further pertinent relevant to state that even though the Id. D/R has made elaborate written submissions, no attempt whatsoever has been made by him to rebut the CIT(A)'s factual findings by pointing out any factual infirmities o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that even if there are no sales, there would still be cost of production and thereby the gross margin will be a loss. However in absence of any sale there would be no expenditure of account of royalty or commission paid. The argument of the D/R is absurd, illogical and self-contradictory. If there are no sales there would be no need to carry out benchmarking exercise. If the assessee does not undertake any sales then the entire cost of production debited to the profit loss account would reflect in the credit side of the said profit loss account as cost of finished goods in stock and accordingly there would neither be any - gross profit or loss. It is only when the goods manufactured are sold either to AEs or non AEs the question of computation of ALP consequently computation of the profit margin would arise. It is only because the assessee had made sales to its AEs that ALP was required to be computed by adopting one of the recognized but suitable method. However the fact remains that one of important pre-requisite to apply CP Method is that there should be sales to AE. In absence of any sale of manufactured goods the gross profit margin would be unascertainable. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it mark-up which one would earn in a comparable uncontrolled transaction. The term comparable uncontrolled transaction has been defined in sub-clause (3) of Rule 10B which reads as follows: An uncontrolled transaction shall be comparable to an international transaction or a specified domestic transaction if-- (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged or paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments can be made to eliminate the material effects of such differences. Similar provision is contained in clause (c) of Rule 10B which lays down the manner in which the CP Method is to be applied. The relevant extracts of the aforesaid Rule is as follows: cost plus method, by which,- ......... (iii) the normal gross profit mark-up referred to in sub-clause (ii) is adjusted to take into account the functional and other differences. if any. between the international transaction and the comparable uncontrolled transactions. or between the enterprises ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the ALP by making comparison of dissimilar products having different applications uses and therefore having different profit margins. The TPO however GP rate of materials (printing inks) imported from AEs and sold to unrelated parties compared with GP rate of all purchases sales made to unrelated parties for application of RP Method. Comparing combined GP rate of totally dissimilar products with GP rate of printing inks was wholly illogical and without meaning. It was further explained before the CIT(A) that the profit margins substantially varied on account of geographical differences. The profit margins of products sourced locally or imported varied significantly. These infirmities were pointed out before the Id. CIT(A). The Ld. CIT(A) observed that the assessee had three different trading items, blankets, machines press chemicals which were totally dissimilar and incomparable. The Ld. CIT(A) further observed that profits margins varied substantially depending upon the fact that the products were either sourced locally or imported. The Ld. CIT(A) therefore compared product-wise geographical-wise profit margins of trading transactions with AEs vis-a-vis trading transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nothing adverse to state in the context of computation of ALP under RPM Method as contended by the assessee and applied by the Id. CIT(A). In the circumstances the appeal of the Revenue to the extent of TP adjustment on trading transactions also fails. 11. We have heard the rival contentions and perused the materials available on record. The facts of case have already been discussed in detail in the foregoing paragraphs. Therefore the same are not elaborated here to avoid the repetition. We find that there is no provision under the Act with regard to the value of the transactions for selecting the method for the determination of ALP. In the instant case the TPO has rejected the transfer pricing study of the assessee without finding any defect therein. The TPO further held that the international transaction is less than the 5% to the business therefore he adopted the other method for determining the ALP. But contrary to his finding the TPO has accepted the other international transactions where the volume was again less than 5% to the total turnover of the assessee i.e. Royalty, commission etc. In the earlier years and subsequent years the assessee entered into internationals tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enterprise. From bare perusal of the above Rule it is evident that for applying CP method, one has to compute the cost of production which shall include both direct indirect costs. The TPO was therefore clearly wrong in considering only the cost of raw materials as the complete cost of production . Similarly the product similarity in the products is essential for the determination of ALP. The profit margins of products sourced locally or imported varied significantly. These infirmities were not considered by the TPO. The profit margins varied significantly depending upon the fact that the products were either sourced locally or imported. From the submission we find that the assessee had imported printing inks from AEs worth Rs. 7.06 crores which was sold to unrelated parties for Rs. 8.09 crores resulting in gross profit margin of 13%. Correspondingly the assessee had imported press chemicals from unrelated parties worth Rs. 1.75 crores which was sold to unrelated parties for Rs. 2.02 crores yielding profit margin of 14%. Without prejudice to the assessee's contention that the aforesaid margins would require turnover adjustment and working capital adjustment, it was ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal for AY 2003-04 I direct the AO to exclude service charges income of Rs. 90 lakhs from the total turnover. The AO shall accordingly recomputed the deduction u/s. 80HHC. Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 14. Both parties relied on the orders of authorities below as favourable to them. 15. We have heard rival parties and perused the materials available on record. At the outset, we find that issue is squarely covered in favour of assessee in assessee s own case in ITA No.499/Kol/2007 dated 30.04.2008. Respectfully following the decision of the Co-ordinate Bench we dismiss the appeal of the Revenue. 16. Coming to next issue is as regards that Ld. CIT(A) erred in allowing the deduction of custom duty of Rs. 11,77,331/- against the advance license and thereby violating the provision of Sec. 43B of the Act. This issue is emanating from the assessment order for the AY 2003-04 for the addition made by the AO on account of non-payment of custom duty before filing the return of income for that year for Rs. 11,77,331/- The assessee has written back in the profit loss account in the AY 2004-05 i.e. the year under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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