Eaton Fluid Power Ltd.,, Pune vs Assessee

Eaton Fluid Power Limited 145, Off Mumbai-Pune Road, Pimpri, Pune - 411 018 PAN : AAACV8426E .... Appellant

Vs.

Asstt. Commissioner of Income Tax Circle - 8, Pune .... Respondent

Appellant by : Mr. Percy Pardiwalla Respondent by : Mrs. M. S. Verma, CIT

ORDER

PER G. S. PANNU, AM

The captioned appeal has been preferred by the assessee pertaining to

the assessment year 2007-08, which is directed against the order of the

Dy. Commissioner of Income Tax, Circle- 8, Pune (in short 'the Assessing

Officer') passed u/s 143(3) r.w.s. 144C(1) of the Income Tax Act, 1961

(in short "the Act") dated 31.12.2010, which is in conformity with the directions

given by the Dispute Resolution Panel, Pune (in short 'the DRP') dated

02.08.2011.

2. In this appeal, the Grounds of Appeal raised by the assessee read as

under :-

"1. The Learned Assessing Officer ('Ld. AO'), pursuant to the directions of the Learned Dispute Resolution Panel ('Ld. DRP'), erred in rejecting the approach adopted for transfer pricing analysis / contemporaneous documentation maintained by the appellant. The Ld. DRP / AO thereby erroneously made a transfer pricing adjustment of Rs.52,197,453 to the income of the appellant by holding that the international transactions of the appellant do not satisfy the arm's length principle envisaged under the Income-tax Act, 1961 ('the Act').

2 ITA No.1623/PN/2011 2. The Ld. DRP / AO erred in determining the arm's length price of the international transactions pertaining to the manufacturing segment of the appellant, by comparing with external comparables when functionally similar internal comparables are available to determine the arm's length price under the internal Transactional Net Margin Method which is more reliable.

3. Without prejudice to Ground 2, the Ld. DRP / AO erred in selecting certain external comparables which were not functionally comparable and in rejecting certain comparables that were functionally comparable, and thereby choosing an incorrect set of comparables.

4. Without prejudice to Ground 2, the Ld. DRP / AO erred in not granting the benefit of +/- 5% range as envisaged by the proviso to Section 92C(2) of the Act.

5. Without prejudice to Ground 2, the Ld. DRP / AO erred in using data which was not available to the appellant at the time of conducting the transfer pricing analysis for computing the transfer pricing adjustment, not allowing the use of multiple year data as prescribed under Rule 10B(4) of the Rules thereby unfairly penalising the appellant for an act that was impossible to perform on the part of the appellant.

6. Without prejudice to Ground 2, the Ld. DRP / AO erred in applying the adjustment made to the import prices pertaining to AEs across the entire raw material consumption rather than applying it proportionately based on the ratio of raw materials consumed from AEs to total raw materials consumed.

7. The Ld. DRP/AO erred in disallowing the expenditure incurred on lease rentals for use of vehicles amounting to Rs.12,14,618 and Rs.3,30,371 on the premise that this expenditure is of capital nature. Without prejudice to Ground No. 7, the Ld. DRP/AO erred in not allowing the depreciation under Section 32 of the Act on such lease rentals paid during the year.

8. On the facts and circumstances of the case and in law, the Ld. AO ought to have considered the fact that the appellant provided all the information requested during the assessment proceedings and has not provided inaccurate particulars of its income. Therefore, the Ld. AO has erred in initiating the penalty proceedings under Section 271 (1)(c) of the Act on the premise that the appellant has furnished inaccurate particulars of income."

3. In this appeal, although the assessee has raised multiple Grounds of

Appeal but the substantive dispute is with regard to an addition of

Rs.5,21,97,453/- made by the Assessing Officer on account of transfer pricing

adjustment while computing arm's length price of the international transactions

of the assessee. On behalf of the assessee voluminous Paper Books have

been filed, which has been referred to during the course of hearing. The

Departmental side has also supported the adjustments made by the income-

tax authorities and has also furnished written submissions by the Assessing 3 ITA No.1623/PN/2011

Officer, which have also been referred to in the course of hearing before us.

The rival submissions have been heard and the relevant record perused.

4. In order to appreciate the controversy and the rival stands it would be

appropriate to briefly touch upon the background and the relevant facts. The

appellant before us is a company incorporated under the provisions of the

Companies Act, 1956 and is inter-alia engaged in the business of

manufacturing and distribution of hydraulic components and packaged

systems. It manufactures a wide range of 'Vickers' vane and pistons, pumps,

power units, cylinders control valves and filters for mobile and industrial

applications. The manufacturing facilities of the assessee are located at Pune

and at Mumbai. Initially, the company was incorporated in the year 1965 as a

joint venture between Mahindra & Mahindra Ltd. and Vickers Inc., but

presently it is a wholly owned subsidiary of Eaton Corporation, a foreign based

entity.

5. During the year under consideration, Assessing Officer noted that the

assessee had entered into certain international transactions with its associated

enterprises within the meaning of section 92B of the Act. As the income

arising from 'international transactions' is required to be computed having

regard to the arm's length price in terms of section 92(1) of the Act, the

Assessing Officer referred the matter of computation of arm's length price of

the international transactions to the Transfer Pricing Officer (in short 'the TPO')

in terms of section 92CA(1) of the Act. The TPO after allowing the assessee

requisite opportunity of being heard determined the arm's length price of the

international transactions pertaining to the manufacturing activities of the

assessee at an amount higher than the stated values by a sum of

Rs.5,21,97,453/-. In terms thereof, the Assessing Officer passed a draft

assessment order dated 31.12.2010 u/s 144(3) r.w.s. 144C(1) of the Act 4 ITA No.1623/PN/2011

against which assessee preferred objections before the DRP. By way of an

order dated 02.08.2011, the DRP rejected the objections raised by the

assessee and thereafter the Assessing Officer passed an order u/s 143(3)

r.w.s. 144C(13) of the Act dated 30.09.2011 determining the income of the

international transactions in conformity with the order of the TPO in terms of

Section 92CA(4) of the Act and accordingly, he made an addition of

Rs.5,21,97,453/- to the returned income on account of transfer pricing

adjustments.

6. By way of present appeal, assessee has challenged the addition of

Rs.5,21,97,453/- made to the returned income. Before proceeding to

adjudicate the specific grievances raised by the assessee it would be

appropriate to refer to the salient features of the dispute. As noted earlier,

assessee is a wholly owned subsidiary of Eaton Corporation, a global,

diversified manufacturer of fluid power systems, electric power quality,

distribution and control, automotive engine air management and fuel economy

systems. The appellant-assessee is engaged in the business of

manufacturing and trading of fluid power hydraulic equipments and related

components and it manufactures gear pumps and cylinders, vane/piston

pumps, power units, cylinders control valves and filters for mobile and

industrial applications. During the year under consideration, assessee was

found to have entered into the following international transactions with its

associated enterprises :-

Sl.

Description of International Transaction Amount (Rs.) No.

1. Import of raw materials, trading goods & 31,23,60,854 components

2. Purchase of License for mfgPro software 13,14,598

3. Administrative and related services rendered 1,10,93,981

4. Export of finished goods 2,35,95,314 5 ITA No.1623/PN/2011

7. For the purposes of determining the arm's length price in relation to the

aforesaid international transactions, assessee aggregated the same and

applied the Transactional Net Margin Method (i.e. TNM Method) as the most

appropriate method. The assessee considered Operating profit to Operating

revenue as the PLI (i.e. Profit Level Indicator). The PLI of the assessee was

worked out at 6.87% and as the average PLI of the external comparables was

determined at 9.62%, assessee concluded that the stated value of the

international transactions entered with the associated enterprises was at an

arm's length price consistent with the requirements of the Indian Transfer

Pricing Regulations. In carrying out the aforesaid benchmarking analysis,

assessee adopted a set of 14 comparable concerns and the operating margins

of such comparable concerns was taken on the basis of three year's financial

data and accordingly, the arithmetic mean of the average operating margins

was determined at 9.62%. At this point, it may be noticed that the TPO has

differed with the assessee on this aspect and while ascertaining the operating

margins of the comparable cases he has not considered the multiple year's

data and has instead considered the data relating to the financial year in which

international transactions have been entered into. The aforesaid point of

difference has not been agitated by the assessee before us and is not being

dealt with further. Another aspect of the issue relates to the use of data by the

TPO, which was not available in public domain at the time assessee

conducted its Transfer Pricing Study. The said approach of the TPO has also

not been disputed by the assessee and we do not deal with the same any

further.

8. The major points of difference between the assessee and the Revenue

can be understood as follows. Firstly, the TPO noticed that the principal

activity of the assessee was the manufacture and trading of fluid power

hydraulic equipments and related components. The Assessing Officer further 6 ITA No.1623/PN/2011

noticed that out of the total turnover of the assessee of Rs.121.69 crores,

approximately 40% income has been earned from trading activity and another

40% income from sale of pumps, gear pumps and valves. Thus, as per the

TPO, there was a substantial activity of trading undertaken by the assessee.

The TPO further noticed that the assessee had aggregated the manufacturing

and the trading segments for the purposes of carrying out the comparability

analysis to compute the arm's length price. As per the TPO, separate

benchmarking was required to be undertaken for Manufacturing as well as

Trading segment. On being required by the TPO, assessee provided

segmental results and on the basis of the same it was observed that the

assessee had earned an operating margin of 1.57% on sales in its

Manufacturing segment. The TPO proceeded to compare the operating

margins of the manufacturing segment of the assessee with the operating

margins of the comparable cases to determine the arm length price of the

international transactions following the TNM Method. Ostensibly, the TPO has

not differed with the assessee with regard to the adoption of the TNM Method

as the most appropriate method for the purposes of computing the arm's

length price as per section 92C(1) of the Act. The TPO, after providing

assessee an opportunity of being heard, adopted a set of 11 comparable

cases whose arithmetic mean of operating margin was determined at 14.57%,

as detailed below :-

PLI Sl.

Name of the company (Operating Profit/ No. Operating Income 1. Bemco Hydraulics Ltd. 9.52 2. Dynamatic Technologies Ltd. (Hydraulics and 11.04 Precision engineering segment) 3. K S B Pumps Ltd. (Pumps segment and Valves 20.57 segment) 4. Mather & Platt Pumps Ltd. 10.53 5. Roto Pumps Ltd. 11.42 6. Schrader Duncan Ltd. (Pneumatic products 10.59 segment) 7. Sulzer Pumps India Ltd. 12.08 7 ITA No.1623/PN/2011

8. Yuken India Ltd. 10.61 9. Asco (India) Ltd. 38.36 10. Beacon Industries & Pumps Ltd. 11.34 11. Johnson Pump (India) Ltd. 14.17 Mean 14.57

9. The arithmetic mean of operating margin of the comparable cases

arrived at 14.57% was compared with the operating margin of the assessee in

respect of manufacturing segment which was 1.57%. Accordingly, an

adjustment of Rs.5,21,97,453/- was computed which was required to be made

to the international transactions pertaining to Manufacturing segment of the

assessee so as to bring it to the level of arm's length price. Pertinently,

bifurcation of assessee's financial results into manufacturing and trading

segment was done only in the course of proceedings before the TPO and so

far as the segment of Trading activity is concerned the TPO accepted the

position that it was at arm's length price and no addition has been proposed.

The addition in question has been made only with regard to the Manufacturing

segment.

10. By way of Ground of Appeal No.2, assessee has assailed the approach

of the TPO while computing the arm's length price in relation to the

Manufacturing segment by applying the external TNM Method. At the outset,

the Ld. Representative for the assessee pointed out that the TPO erred in

determining the arm's length price of the international transactions pertaining

to the Manufacturing segment by ignoring assessee's plea to consider internal

TNM Method in preference to the external comparables considered by the

TPO. The Ld. Representative pointed out that initially in the Transfer Pricing

Study assessee had considered the manufacturing and trading activities as a

single segment on the ground that the trading activities was closely interlinked

with the manufacturing activity. However, on the asking of the TPO, assessee

had furnished the segmental profitability statement showing profitability for the 8 ITA No.1623/PN/2011

manufacturing and trading activities separately. At that stage, assessee had

submitted that it would be more appropriate to compare the profitability from

the transactions with the associated enterprises with the profitability from

transactions with third parties. The aforesaid was justified on the ground that

both the segments are functionally comparable in every respect. The Ld.

Representative pointed out that in support of the aforesaid, assessee

furnished a segmental profitability statement whereby the transactions with the

associated enterprises in the Manufacturing segment showed an operating

margin of 3.2% and those with the third parties showed an operating margin of

2.80%. The relevant details in this regard have also been furnished in the

Paper Book at page 114. The assessee justified its assertion that the

international transactions of the assessee with the associated enterprises in

the Manufacturing segment are at an arm's length price. We find that the

aforesaid plea of the assessee has not been accepted by the TPO as per the

discussion contained in paras 6.2.2 to 6.2.6 of his order. The Ld.

Representative submitted that the TPO has unjustly rejected the submissions

put-forth by the assessee which are otherwise justifiable having regard to the

facts and circumstances of the case.

11. On the other hand, the Ld. Departmental Representative appearing for

the Revenue submitted that the benchmarking analysis proposed by the

assessee based on the internal TNM Method did not give the correct picture of

the transactions between the assessee and its associated enterprises. The

case made out by the Ld. Departmental Representative is that the transactions

with the associated enterprises are not purely identical with the transactions

with third parties and in support reference has been made to a Tabulation in

para 6.2.3 of the order of the TPO. As per the Ld. Departmental

Representative, internal TNM Method canvassed by the assessee was in

relation to benchmarking on the basis of sales made, but not that of purchases 9 ITA No.1623/PN/2011

from associated enterprises, which was of a substantive value. The

segmental statement between associated enterprises segment and third

parties segment was based on sales, and in-fact the purchases are not

evaluated separately. It was therefore contended that the approach of the

TPO was quite justified.

12. We have carefully considered the rival submissions. The dispute on

this aspect relates to a plea put-forth by the assessee during the course of the

proceedings before the TPO whereby assessee canvassed that the

international transactions in the Manufacturing segment be benchmarked by

using internal TNM Method. No doubt, in the Transfer Pricing Study carried

out by the assessee initially it had adopted the external comparability on an

aggregated segment of Manufacturing plus Trading activities. The TPO had

rejected the aggregation of the two activities and benchmarked the

Manufacturing segment independent of the Trading segment. At that stage,

assessee put-forth a plea that the benchmarking of the Manufacturing

segment be carried out by using the internal TNM Method. Before the TPO,

assessee pointed out that in the Manufacturing segment, the products

manufactured by assessee consumed various raw materials and components,

which were procured domestically from third parties as well as imported from

associated enterprises and overseas third parties. Assessee segregated the

products which did not consume raw material and components procured from

associated enterprises from those products which consumed such raw

material and components. Similarly, assessee separately identified the sales

of these products. Primarily, assessee identified sales of products which

neither had any consumption of raw material and components procured from

associated enterprises and nor sold to the associated enterprises. This

segment comprised of gear pumps and cylinders and it was accordingly

considered as Third party segment. The operating margin in the said segment 10 ITA No.1623/PN/2011

was determined at 2.80% in terms of the Tabulation which is placed in the

Paper Book at page 114. The balance sales comprising of other products,

namely, vane/piston, pumps, power units, cylinders control valves, etc. which

entailed consumption of raw material and components purchased from

associated enterprises were identified as the associated enterprises segment.

This segment also included some gear pumps and cylinders which did not

consume raw material and components procured from associated enterprises

though the sales were to the associated enterprises. The operating margin in

the associated enterprises segment in the Manufacturing segment was thus

computed at 3.2% in terms of the Tabulation, a copy of which has been placed

in the Paper Book at page 114. The aforesaid profitability statement showed

that the profitability from transactions with associated enterprises was higher

than the profitability of the transactions with the third parties. We find that

assessee also asserted before the TPO that both the segments, namely, the

associated enterprises segment and the third parties segment were

functionally comparable in every aspect. Therefore, it was canvassed that

based on the aforesaid internal TNM analysis, the international transactions of

the assessee in the Manufacturing segment were at an arm's length price.

13. In-fact, the internal comparables do have a more direct and closer

relationship to the tested transactions rather than the external comparables.

In other words, the profitability of an assessee from the controlled transactions

can be benchmarked more meaningfully with reference to the assessee's

profitability from similar transactions carried out in uncontrolled conditions, i.e.

with third parties. In the present case, assessee pointed out that the

associated enterprises segment and the third parties segment were

functionally comparable and therefore the third parties segment was a good

uncontrolled comparable available to benchmark the international transactions

entered with the associated enterprises.

11 ITA No.1623/PN/2011

14. Pertinently, assessee also undertook similar analysis with regard to its

Trading segment before the TPO. In the Trading segment also, assessee

tabulated the associated enterprises segment and the third parties segment

and pointed out that the operating margin in the associated enterprises

segment was higher than the operating margin in the third parties segment.

The said calculation is a part of the Tabulation furnished to the TPO, a copy of

which has been placed in the Paper Book at page 114. This approach of the

assessee was similar to the approach in relation to the Manufacturing segment

as discussed earlier. In so far as the international transactions entered with

the associated enterprises in the Trading segment are concerned, the TPO

was satisfied that they are at an arm's length price as no adjustment has been

proposed by him. However, similar approach taken by the assessee with

respect to the Manufacturing segment has not been accepted by the TPO. In

our considered opinion, the grounds taken by the TPO to reject the assessee's

plea for internal TNM comparable are neither germane and nor justified, apart

from being inconsistent with his stand relating to similar situation in the

Trading segment. We find from a copy of submissions dated 14.09.2010

addressed to the TPO, a copy of which has been placed in the Paper Book at

pages 599 to 603 that assessee had explained the manner in which the

bifurcation of Manufacturing segment was done into associated enterprises

segment and the non-associated enterprises segment. The following

averments made by the assessee are worthy of notice :-

"As explained during the hearing held on August 31, 2010, the Company manufactures certain products which do not entail consumption of any raw material imported from AEs. Thus, further split of manufacturing segment into AE and Non-AEY segment was done on a product basis i.e. products, manufacturing of which requires raw material imported from AE (categorized as 'AE segment1) and products, manufacturing of which does not require raw materials imported from AEs (categorized as 'Non-AE segment'). The Non-AE segment represents the profitability made by the company from manufacture and sale of products which do not entail consumption of any raw material imported from AEs. The AE segment represents the profitability from 12 ITA No.1623/PN/2011

manufacture and sale of products which entail consumption of raw materials from AEs.

While preparing the AE and Non-AE segment, the revenue and costs to the extent identifiable are determined based on actual. The common costs I expenses, being insignificant portion of total operating expenses, as explained above were allocated considering net sales of each segment as the reasonable allocation key.

Your good self would appreciate that Transactional Net Margin Method ('TNMM') requires a functional similarity rather than product similarity. Thus, under both the aforesaid segments, there is a functional similarity viz. manufacturing function though the product may not be identical. In view of the above, the internal comparability of profit from sale of manufactured products under AE and Non-AE segment would be the most appropriate method to benchmark the international transactions pertaining to manufacturing segment."

15. The aforesaid shows that the segmentation of Manufacturing segment

into associated enterprises segment and Third parties segment was done by

the assessee on product basis, i.e. the associated enterprises segment reflect

profitability on products which require consumption of raw material and

components from associated enterprises whereas the Third parties segment

reflects profitability from products which do not entail purchases of raw

materials and components from associated enterprises. The TPO has pointed

out that the sale of finished goods in the associated enterprises segment

includes a component of sale of Rs.8,37,000/- of products which do not

consume any raw material or component purchased from associated

enterprises. The assessee had explained that this was a minor transaction

involving Gear pumps & Cylinders out of total sales of finished goods to

associated enterprises of Rs.2.36 crores (approx). It was explained that

profitability of this minor transaction was included in the associated enterprises

segment to ensure comprehensive benchmarking of international transaction

of sales to the associated enterprises. In our considered opinion, the said

minor transaction does not vitiate the segmentation of Manufacturing segment

into associated enterprises segment and Third parties segment done by the

assessee for the purpose of internal TNM Method.

13 ITA No.1623/PN/2011

16. On the basis of the aforesaid, we find that the bifurcation of

Manufacturing segment into associated enterprises and the third parities done

by the assessee is fair and apt. The TNM Method does not envisage an

absolute product similarity but rather emphasizes on functional similarity.

Quite clearly, in the associated enterprises segment as well as the third party

segment in the Manufacturing segment there is a functional similarity and

therefore the internal TNM Method comparable professed by the assessee

was wrongly rejected by the TPO. Before we parting on this issue, we would

also refer to the following analysis of the segmentation in Manufacturing

segment canvassed by the assessee before the TPO vide communication

dated 28.10.2010 :-

• "The profitability of the international transaction pertaining to purchase of raw material and components from AEs (approximate transaction value Rs.8.32 crores) is reflected in the operating margin of the AE segment, since the transaction forms a part of the same. (This includes the profitability of the minor sale transaction of Rs.8.37 lakhs to AEs of products that do not entail consumption of raw material and components purchased from AEs. The balance sales of Rs.2.28 crores entail consumption of raw material and components purchased from AEs and are automatically covered in this segment.) • The profitability of comparable transaction pertaining to purchase of raw material and components purchased from third parties is reflected in the operating margin of the Third party segment. • The operating margin derived from the international transaction pertaining to purchase of raw material and components purchased from AEs (forming a part of in the AE segment) would be benchmarked against the comparable operating margin derived from the third party transactions (covered in the AE segment).

• The operating margin derived from the international transaction pertaining to sale of finished products to AEs (forming a part of in the AE segment) would be benchmarked against the comparable operating margin derived from the third party transactions (covered in the AE segment)."

17. On the basis of the aforesaid fact analysis, which has not been

controverted by the TPO, we find that in the present case internal comparison

of the operating margins using internal TNM Method is liable to be upheld in

order to compute arm's length for the international transactions of purchase of 14 ITA No.1623/PN/2011

raw material and components from associated enterprises as well as sales of

finished goods effected to the associated enterprises. On the basis of the

aforesaid benchmarking, the profitability of international transactions under the

associated enterprises segment computed at 3.25% is higher than the

profitability of transactions under the Third parties segment computed at

2.80%. Hence, the international transactions entered with the associated

enterprises under the Manufacturing segment on account of purchase of raw

material and components and also sales are consistent with the arm's length

price and no transfer pricing adjustment is thus required to be made. On this

aspect, we uphold the plea of the assessee and accordingly, the Ground of

Appeal No.2 raised by the assessee is allowed.

18. Apart from the aforesaid, assessee has also raised other Grounds of

Appeal challenging the adjustment made, even as per the methodology of the

external TNM Method applied by the TPO. On this aspect, it has been

canvassed that the TPO has erred in rejecting certain comparables adopted

by the assessee and at the same time he has also erred in selecting certain

comparables which were not otherwise functionally comparable with the

assessee and thereby incorrect set of comparables has been chosen.

Further, without prejudice basis it is contended by the assessee that

adjustment, if any, should be limited to the import prices of raw materials

consumed which have been imported from associated enterprises alone and it

cannot be applied to the entire raw material consumption as the latter contains

raw material sourced from non-related parties also. All the above aspects are

rendered academic as the assessee has succeeded on Ground of Appeal

No.2, and therefore the same are not being adjudicated for the present.

19. In the last Ground, assessee has assailed the action of the income-tax

authorities in disallowing the expenditure incurred on lease rentals for use of 15 ITA No.1623/PN/2011

Vehicles and Computers amounting to Rs.12,14,618/- and Rs.3,30,371/-

respectively by wrongfully holding that such expenditure is of capital nature. It

is further contended, without prejudice to the aforesaid, that if the expenditure

on lease rental was to be treated as capital in nature, depreciation under

Section 32(1) of the Act ought to have been allowed by the income-tax

authorities.

20. On this aspect, brief facts are that in the earlier assessment years

starting from assessment year 2003-04, assessee had taken on lease vehicles

and computers from M/s Kotak Mahindra Primus Ltd. and First Leasing Co. of

India Ltd. respectively. Assessee had capitalized the entire amount in its

books of account but no depreciation was claimed, and it claimed deduction

for the principal portion of the lease rentals. In the assessment year 2003-04,

Assessing Officer observed that since the assets were registered in the name

of the assessee thereby giving it ownership, the expenditure towards re-

payment of principal values of the assets was to be treated as a capital

expenditure and the amount was disallowed. Following the aforesaid, in the

present year also the Assessing officer disallowed the claim of the assessee

towards re-payment of principal value of lease rentals amounting to

Rs.12,14,618/- and Rs.5,30,371/- on account of vehicles and computers

respectively.

21. In this background, the learned counsel for the assessee pointed out

that the dispute for the assessment year 2003-04 was still not final and

therefore the matter may be set-aside to the file of the Assessing Officer with

the directions to decide the issue in the light of the ultimate decision with

regard to such dispute in the assessment year 2003-04. The learned

Departmental Representative appearing for the Revenue has not contested 16 ITA No.1623/PN/2011

the aforesaid factual matrix and has also not opposed the plea of the

assessee for remanding the issue back to the file of the Assessing Officer.

22. In view of the aforesaid, we restore the matter back to the file of the

Assessing Officer who shall consider the claim of the assessee in conformity

with the ultimate decision on this aspect in the assessment year 2003-04.

Thus, on this aspect, assessee succeeds for statistical purposes.

23. In the result, the appeal of the assessee is partly allowed.

Order pronounced on 27 th February, 2015.

Sd/- Sd/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 27 th February, 2015. Sujeet

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The DRP, Pune; 4) The DIT (International Taxation), Pune; 5) The DR, "A" Bench, I.T.A.T., Pune; 6) Guard File.

By Order //True Copy//

Assistant Registrar I.T.A.T., Pune