AGILITY LOGISTICS P.LTD, MUMBAI v. DCIT 8(1), MUMBAI

ITA 1181/MUM/2014 | 2009-2010
Pronouncement Date: 19-11-2014 | Result: Allowed

Appeal Details

RSA Number 118119914 RSA 2014
Assessee PAN AAACL3717A
Bench Mumbai
Appeal Number ITA 1181/MUM/2014
Duration Of Justice 8 month(s) 28 day(s)
Appellant AGILITY LOGISTICS P.LTD, MUMBAI
Respondent DCIT 8(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 19-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted K
Tribunal Order Date 19-11-2014
Date Of Final Hearing 29-10-2014
Next Hearing Date 29-10-2014
Assessment Year 2009-2010
Appeal Filed On 21-02-2014
Judgment Text
1 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 K IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH K MUMBAI . . . . . . . . ! ! ! ! '!! '!! '!! '!! ! ! ! ! # # # # BEFORE SHRI R.C. SHARMA ACCOUNTANT MEMBER AND SHRI VIVEK VARMA JUDICIAL MEMBER IT(TP) A : 1181/MUM/2014 (ASSESSMENT YEARS: 2009-10) AGILITY LOGISTICS PRIVATE LIMITED POLARIS A-501/502/503 B-501/503 FIFTH FLOOR CST NO. 604A/3 OFF MAROL MAROSHI ROAD MAROL ANDHERI (EAST) MUMBAI -400 059 $ .: PAN: AAACL 3717 A VS DCIT- 8(1) 2 ND FLOOR AAYAKAR BHAVAN M K ROAD MUMBAI -400 020 $& (APPELLANT) '($& (RESPONDENT) APPELLANT BY : SHRI DHANESH BAFNA RESPONDENT BY : SHRI VYAS J PARSHDNAND )!*+ /DATE OF HEARING : 20-10-2014 -. *+ / DATE OF PRONOUNCEMENT : __ -11-2014 0 0 0 0 O R D E R '!!! '!!! '!!! '!!! : :: : PER VIVEK VARMA JM: INSTANT APPEAL IS ASSESSEE AGAINST THE ORDER PASSED BY DRP-I UNDER SECTION 144C(5) DATED 09.12.2013. THE ASSESS EE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ASSESSMENT ORDER PASSED IN PURSUANCE TO THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL ( DRP) IS A VITIATED ORDER AS THE DRP ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICE R (AO) TO THE APPELLANTS INCOME; 2. THE DRP ERRED BOTH ON FACTS AND IN LAW IN CONFIRM ING THE ADDITION OF RS.7 03 17 843/- TO THE INCOME OF THE AP PELLANT BY HOLDING THAT ITS INTERNATIONAL TRANSACTION OF FREI GHT RECEIPTS AND EXPENSES DOES NOT SATISFY THE ARMS LENGTH PRINCIP LE ENVISAGED UNDER THE ACT. IN DOING SO THE DRP HAS ERRED IN AGREEING WITH THE T RANSFER PRICING OFFICERS (TPO) ACTION OF: 2 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 2.1. REJECTING COMPARABLE UNCONTROLLED PRICE (CUP ) METHOD AND THE CUP DATA AVAILABLE IN THE FORM OF COMPARABLE AR RANGEMENTS WITH AGILITY NETWORK AGENTS WHICH ARE UNRELATED THI RD PARTIES; 2.2. REJECTING OPERATING PROFIT (OP) TO VALUE ADD ED EXPENSES (VAE) RATIO SELECTED BY THE APPELLANT AS THE PROFI T LEVEL INDICATOR (PLI) AND INSTEAD USING OP TO TOTAL COST (TC) R ATIO AS THE PLI; 2.3. REJECTING ECONOMIC ANALYSIS UNDERTAKEN BY THE APPELLANT BY DISREGARDING SEARCH OF COMPARABLES UNDERTAKEN BY TH E APPELLANT BY CONSIDERING OP/VAE AS PLI; 2.4. NOT ALLOWING THE USE OF MULTIPLE YEAR DATA AS PRESCRIBED UNDER RULE 1OB(4) OF THE INCOME TAX RULES 1962 READ WITH T HE OECD TP GUIDELINES AND DETERMINING THE ARMS LENGTH PRICE ON THE BASIS OF FINANCIAL INFORMATION OF THE COMPARABLES FOR THE YE AR ENDED MARCH 31 2008 IDENTIFIED PURSUANT TO A FRESH SEARCH FOR COMPARABLES PERFORMED DURING THE ASSESSMENT PROCEEDINGS. THE AO/ TPO/ DRP ERRED IN REJECTING THE CONTEMPORANEOUS DOCUMENTATIO N MAINTAINED BY THE APPELLANT AS REQUIRED UNDER THE INDIAN TP RE GULATIONS; 2.5. COMPUTING THE TP ADJUSTMENT ON FREIGHT RECEIPT S (AS AGAINST FREIGHT EXPENSE) MERELY TO DERIVE A LARGER ADJUSTME NT. THE TPO SHOULD HAVE APPRECIATED THAT THE INDIAN TRANSFER PR ICING LAW DOES NOT PRESCRIBE THE MANNER IN WHICH A TRANSFER PRICIN G ADJUSTMENT NEEDS TO BE COMPUTED UNDER THE TNMM WHERE THERE AR E MORE THAN ONE INTERNATIONAL TRANSACTION. GIVEN THIS THE AO/ TPO/ DRP OUGHT TO HAVE ADOPTED THE APPROACH THAT IS IN THE FAVOR O F THE ASSESSEE (I.E. DETERMINE THE ARMS-LENGTH PRICE OF THE FREI GHT EXPENSES WHILE KEEPING THE FREIGHT INCOME CONSTANT); AND 2.6. DENIED THE BENEFIT OF (+1-) 5 PERCENT RANGE ME NTIONED IN PROVISO TO SECTION 92C(2) OF THE INCOME TAX ACT 1961 (THE ACT) WHILE COMPUTING THE ALP. THE APPELLANT PRAYS THAT THE BOOK VALUE OF THE INTE RNATIONAL TRANSACTIONS OF FREIGHT RECEIPTS AND EXPENSES BE HE LD TO BE THE ARMS LENGTH PRICE OF THE SAID TRANSACTIONS AS PER THE APPELLANTS TRANSFER PRICING DOCUMENTATION AND THE ADDITION MA DE ON ACCOUNT OF THE ABOVE GROUNDS BE DELETED. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE AO AND DRP HAVE ERRED IN LEVYING INTEREST OF RS. 41 06 495/- UNDER SECTION 234D OF THE ACT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTH ER. THE APPELLANT CRAVES LEAVE TO ALTER AMEND OR WITHD RAW ALL OR ANY OF THE ABOVE GROUNDS. 2. AT THE TIME OF HEARING THE AR SUBMITTED THAT TH E ISSUES AS PER GOA ARE COVERED BY THE VARIOUS ORDERS OF THE ITAT I N ITS OWN CASES IN PRECEDING ASSESSMENT YEARS: ASST. YEAR ITA NO. DATE OF AN ORDER 2004-05 2000/MUM/2010 25.01.2012 2005-06 6004/MUM/2010 25.01.2012 2006-07 8146/MUM/2010 25.01.2012 2007-08 8648/MUM/2011 13.04.2012 2008-09 7508/MUM/2012 23.07.2013 3 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 3. SINCE THE ISSUE IS COMING FOR THE LAST SO MANY YEARS WE FOR THE SAKE OF CONTINUITY REPRODUCE THE ORDER PASSED BY T HE ITAT K BENCH MUMBAI IN ASSESSMENT YEAR 2008-09 ON THE IMPUGNED ISSUES: 2. IT WAS SUBMITTED BY LD. AR THAT GROUND NO.1 IS GE NERAL IN NATURE AND GROUND NO.2 & 3 RELATE TO TRANSFER PRICING (TP) ADJ USTMENT OF RS.7 03 17 843/-. IT WAS SUBMITTED THAT GROUND RELA TING TO TP IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDERS OF THE TRIBUNAL. REFERENCE IN THIS REGARD WAS MADE TO THE FOLLOWING ORDERS. (I) ORDER DATED 15/11/2012 IN ITA NO.2000 6004 814 6/MUM/2010 IN RESPECT OF ASSESSMENT YEARS 2004-05 2005-06 AND 20 06-07. (II) ORDER DATED 13/4/2012 IN ITA NO.8648/MUM/2011 FOR ASSESSMENT YEAR 2007-08. IT WAS FURTHER SUBMITTED THAT PERUSAL OF PARA 5.3 OF ORDER PASSED BY LD. DRP WILL REVEAL THAT WHILE UPHOLDING THE TP ADJUSTME NT LD. DRP HAS RELIED UPON THE ORDER PASSED BY LD. DRP IN RESPECT OF A.Y 2 007-08. THUS IT WAS SUBMITTED BY HIM THAT THE ISSUE IS SQUARELY COVERED BY THE AFOREMENTIONED ORDERS. FOR THE SAKE OF CLARITY LD. AR FURTHER SUBM ITTED THAT DURING THE COURSE OF HEARING OF APPEAL BEFORE TRIBUNAL IN RES PECT OF ASSESSMENT YEAR 2007-08 IT WAS THE ARGUMENT OF DEPARTMENT THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF LD. DRP AS IT WAS DONE BY THE TRIBUNAL IN RESPECT OF ASSESSMENT 2006-07. HOWEVER ON FACTS S UCH ARGUMENTS OF DEPARTMENT WAS NOT ACCEPTED BY THE TRIBUNAL AND MAT TER WAS DECIDED IN FAVOUR OF THE ASSESSEE AFTER GOING THROUGH THE EARL IER ORDER. LD. AR HAS SUBMITTED BEFORE US COPY OF BOTH THE ORDERS AND THESE COPIES WERE ALSO GIVEN TO LD. DR. 3. LD. DR DID NOT DISPUTE THE CONTENTION OF LD. AR. H OWEVER HE RELIED UPON THE ORDERS PASSED BY AO AND LD. DRP. 4. WE HAVE HEARD BOTH PARTIES ON THIS ISSUE AND WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER OR DERS OF THE TRIBUNAL. IN PARA 5.3 OF HIS ORDER LD. DRP HAS CLEARLY OBSERVED T HAT SIMILAR ADJUSTMENT WAS CONSIDERED BY ITS PREDECESSOR PANEL FOR A.Y 200 7-08 AND PANEL HAD CONFIRMED THE ADJUSTMENT IN ITS DIRECTIONS DATED 12 /9/2011. SIMILAR DIRECTIONS HAVE BEEN ISSUED FOR THE YEAR UNDER CONS IDERATION AND TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN RESPECT OF A.Y 2007-08 FOLLOWING THE EARLIER ORDER DATED 25/1/2012. IT WA S EXPLAINED BY LD. AR THAT GROUNDS ON WHICH TP ADJUSTMENT HAS BEEN MADE F OR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE GROUND IN MAKING S IMILAR ADDITION IN RESPECT OF EARLIER ASSESSMENT YEARS. THIS CONCLUSI ON OF LD. A.R HAS NOT BEEN CONTROVERTED. THEREFORE WE HOLD THAT THIS ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS RELEVAN T PORTION OF THE ORDER OF THE TRIBUNAL IN RESPECT OF ASSESSMENT YEAR 2007-08 IS REPRODUCED BELOW: 11. AT THE OUTSET THE LD COUNSEL APPEARING FOR TH E APPELLANT SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE Y EAR UNDER APPEAL ARE IDENTICAL TO THE FACTS AS THEY WERE FOR THE AY 2004 -05 AY 2005-06 & 2006-07 AND ACCORDINGLY PRAYED THAT THE ORDER OF TH E TRIBUNAL FOR THESE YEARS SHOULD BE FOLLOWED. THE LD DR SUBMITTED THAT F OR THE AY 2006 -07 THE TRIBUNAL HAS RESTORED THE MATTERS BACK TO THE F ILES OF THE DRP AND THERE FORE REQUESTED THAT THE ISSUES IN THE PRESENT APPEA L MAY ALSO BE RESTORED 4 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 BACK TO THE FILES OF THE DRP. THE LD COUNSEL RETORTE D THAT THE ORDER OF THE DRP FOR THE AY 2006 -07 WAS LACONIC AND NOT A SPEAKIN G ORDER THEREFORE THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE FI LES OF THE DRP FOR PASSING A SPEAKING ORDER . LD AR DREW OUR ATTENTION TO THE O RDER OF THE INCOME TAX APPELLATE TRIBUNAL A BENCH FOR THE AY 2004 -05 & 2005-06 IN ITA NO. 2000/MUM/2010 ITA NO.6004/MUM/2010 & RESPECTIVELY. 12. WE HAVE GONE THROUGH THE ORDER OF THE LOWER AU THORITIES AND THE SUBMISSIONS OF THE LD AR AND ALSO PERUSED THE OR DER OF THE INCOME TAX APPELLATE TRIBUNAL IN APPEAL NUMBERS MENTIONED HERE IN ABOVE FOR THE ASSESSMENT YEARS 2004 -05 AND 2005-06 AND FIND FORC E IN THE CONTENTION OF THE LD AR THAT THE FACTS OF THE YEAR UNDER CONSID ERATION ARE IDENTICAL WITH THE FACTS OF THE PREVIOUS TWO ASSESSMENT YEARS AS MENTIONED HERE IN ABOVE. THE TRIBUNAL WHILE DECIDING THE APPEALS FOR THE ASSESSMENT YEAR 2004 05 HAS GIVEN ITS FINDINGS ON PAGE 17 AS UNDE R : 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PURSUED THE ORDERS OF THE ASSESSING OFFICER A ND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. FROM THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE IN THE PAPER BOOK AS WELL AS SUBMISSIO NS BEFORE THE LD. CIT(A) WE FIND THE ASSESSEE WAS REGULARLY ADOPTING THE CUP METHOD ON ITS INTERNATIONAL TRANSACTIONS RELATING TO FREIGHT EXPE NSES AND RECEIPTS WHICH HAS BEEN EXAMINED BY THE TPO AND ACCEPTED IN A.Y. 2 002-03 AND 2003- 04. WE FIND THE TPO DID NOT FOLLOW THE EARLIER ORDE R OF HIS PREDECESSOR AND REJECTED THE CUP METHOD USED BY THE ASSESSEE FOR TH E IMPUGNED ASSESSMENT YEAR. HE ALSO REJECTED THE OP/VAE AS THE PLI AND INSTEAD USED OP/TC AS THE PLI ON THE GROUND THAT COMPANIES ARE OPERATING IN DIFFERENT GEOGRAPHICAL REGIONS AND AGREEMENTS WITH THIRD PARTIES ARE ENTERED INTO ON A PROFIT SPLIT METHOD AND NOT ON TH E BASIS OF RATE. WHILE DOING SO HE USED THE DATA OF SOME PRIVATE LIMITED COMPANIES THE DETAILED INFORMATION OF WHICH ARE NOT AVAILABLE IN PUBLIC DO MAIN AND REJECTED THE SEARCH UNDERTAKEN BY THE ASSESSEE IN THE TP STUDY. HE FURTHER USED THE SINGLE YEAR DATA FOR THE PURPOSE OF TNMM ANALYSIS A S AGAINST MULTIPLE YEAR DATA APPLIED BY THE ASSESSEE. IT IS THE SUBMIS SION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD CONS IDERED THE CUP METHOD AS THE MOST APPROPRIATE METHOD TO DETERMINE THE ALP OF THE INTERNATIONAL TRANSACTION. ACCORDING TO HIM THE ASS ESSEE COMPANY ONLY CO- ORDINATES WITH THIRD PARTY SERVICE PROVIDERS AND DO ES NOT OWN ANY TRANSPORTATION ASSETS SUCH AS TRUCKS SHIPS AIR CR AFTS OR ANY OTHER TRANSPORTATION ASSETS OF SIMILAR NATURE AND IT OWNS ONLY OFFICE PREMISES AND COMPUTERS. THE ABOVE SUBMISSION OF THE LD. COUN SEL FOR THE ASSESSEE COULD NOT BE CONTROVERTED BY THE LD. D.R. WE FIND FO RCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT BOTH THE ORIG IN COMPANY AND THE DESTINATION COMPANY ASSUME COMPARABLE RISKS WITH TH E RISK OF BAD DEBTS BEING MINIMAL AND THAT THERE IS NO INVENTORY RISK S INCE THE ASSESSEE COMPANY ENTERS INTO A CONTRACT WITH THE SHIPPING LI NE/AIR LINE FOR BOOKING SPACE ON A SHIP/AIR CRAFT ONLY UPON RECEIPT OF CONF IRMED ORDERS FROM THE CUSTOMERS. FROM THE VARIOUS AGENCY AGREEMENTS BETWE EN GEO-LOGISTICS GROUP AND UNRELATED PARTIES PRODUCED BY THE ASSESSE E WE FIND THE TERMS AND CONDITIONS ARE SUBSTANTIALLY SAME. THE PROFIT S PLIT INFORMATION CONTAINED IN ALL THE AGREEMENTS IS TYPICAL TO THE I NDUSTRY. WE ALSO FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE TPO IN HIS TP STUDY REPORT HAS CONSIDERED CERTAIN COMPANIE S WHICH ARE NOT AVAILABLE IN THE PUBLIC DOMAIN BEING PRIVATE LIMITE D COMPANIES OR THEY ARE 5 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 NOT COMPARABLE TO THE ASSESSEE COMPANIES. FROM THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE AND THE DETAIL SUBMISSIONS IN THE PAPER BOOK WE FIND THE FOUR COMPANIES REJECTED BY THE TPO ARE FUN CTIONALLY COMPARABLE TO THE ASSESSEE AND THEREFORE SHOULD HAVE BEEN RETAINE D IN THE COMPARABLE STUDY . 12.1 THE TRIBUNAL FURTHER POINTED OUT THAT : 5.2 WE FURTHER FIND THE DELHI BENCH OF THE TRIBUNA L IN THE CASE OF SCHEFENACKER MOTHERSON LTD. VS. ITO REPORTED IN 200 9-TIOL-376-ITAT-DEL WHILE CONSIDERING THE FACTS OF THE TAX PAYER INTERP RETED NET PROFIT FOR THE APPLICATION OF THE TNMM TO MEAN CASH PROFITS I.E. EXCLUDING DEPRECIATION. THE RELEVANT OBSERVATION OF THE ORDER OF THE TRIBUN AL (AT PARA 19 OF THE ORDER) READS AS UNDER:- ...THERE IS NO FORMULA WHICH WOULD BE APPLICABLE UNIVERSALLY AND IN ALL CIRCUMSTANCES. NET PROFIT USED IN RULE 1OB CAN BE TAKEN TO MEAN COMMERCIAL PROFIT AS HELD BY T HE TPO AND CONFIRMED ON APPEAL BY THE ID. CIT(A). BUT DEPRECIA TION IN SUCH PROFIT ON COMMERCIAL PRINCIPLES HAS TO BE THE ACTU AL AMOUNT BY WHICH THE ASSETS OF BUSINESS GOT DEPLETED BETWEEN T HE TWO DATES SEPARATED BY A YEAR. IT CANNOT BE DEPRECIATION UNDE R TAX OR COMPANIES RULES OR AS PER POLICY OF THE COMPANY. IN THE CASE IN HAND REVENUE AUTHORITIES WENT WRONG IN DISREGARDIN G THE CONTEXT AND PURPOSE FOR WHICH THE NET PROFIT WAS TO BE CO MPUTED. DEPRECIATION WHICH CAN HAVE VARIED BASIS AND IS AL LOWED AT DIFFERENT RATES IS NOT SUCH AN EXPENDITURE WHICH MU ST BE DEDUCTED IN ALL SITUATIONS. IT HAS NO DIRECT CONNECTION OR B EARING ON PRICE COST OR PROFIT MARGIN OF THE INTERNATIONAL TRANSACTIONS. PRINCIPLES EMPHASIZED IN THE CASE OF BANGALORE CLOTHING BY BOM BAY HIGH COURT ARE ATTRACTED HERE. OBJECT AND PURPOSE OF THE TRANSFER PRICING TO COMPARE LIKE WITH THE LIKE AND TO ELIMINATE DIF FERENCES IF ANY BY SUITABLE ADJUSTMENT IS TO BE SEEN. THEREFORE TH ERE WAS JUSTIFICATION ON THE PART OF THE TAXPAYER IN PLEADI NG THAT PROFITS BE TAKEN WITHOUT DEDUCTION OF DEPRECIATION AS DEPRECIA TION WAS LEADING TO LARGE DIFFERENCES IN MARGINS FOR VARIOUS REASONS. 5.3 WE FIND THE OECD IN THE REVISED T.P. GUIDELINES OF 2010 HAS RECOGNIZED THE USE OF DIFFERENT MEASURES OF PRO FIT UNDER THE PROFIT SPLIT METHOD. THE RELEVANT PARA OF THE GUIDE LINE READS AS UNDER:- 2.131 GENERALLY THE COMBINED PROFITS TO BE SPLIT IN A TRANSACTIONAL PROFIT SPLIT METHOD ARE OPERATING PRO FITS. APPLYING THE TRANSACTIONAL PROFIT SPLIT IN THIS MANNER ENSURES T HAT BOTH INCOME AND EXPENSES OF THE MNE ARE ATTRIBUTED TO THE RELEV ANT ASSOCIATED ENTERPRISE ON A CONSISTENT BASIS. HOWEVER. OCCASION ALLY IT MAY BE APPROPRIATE TO CARRY OUT A SPILT OF GROSS PROFITS A ND THEN DEDUCT THE EXPENSES INCURRED IN OR ATTRIBUTABLE TO EACH RELEVA NT ENTERPRISE (AND EXCLUDING EXPENSES TAKEN INTO ACCOUNT IN COMPU TING GROSS PROFITS). IN SUCH CASES WHERE DIFFERENT ANALYSES A RE BEING APPLIED TO DIVIDE THE GROSS INCOME AND THE DEDUCTIONS OF TH E MNE AMONG ASSOCIATED ENTERPRISES CARE MUST BE TAKEN TO ENSUR E THAT THE EXPENSES INCURRED IN OR ATTRIBUTABLE TO EACH ENTERP RISE ARE CONSISTENT WITH THE ACTIVITIES AND RISKS UNDERTAKEN THERE AND THAT THE ALLOCATION OF GROSS PROFITS IS LIKEWISE CONSIST ENT WITH THE PLACEMENT OF ACTIVITIES AND RISKS. FOR EXAMPLE IN THE CASE OF AN MNE THAT ENGAGES IN HIGHLY INTEGRATED WORLDWIDE TRA DING 6 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 OPERATIONS. INVOLVING VARIOUS TYPES OF PROPERLY IT MAY BE POSSIBLE TO DETERMINE THE ENTERPRISES IN WHICH EXPENSES ARE INCURRED (OR ATTRIBUTED) BUT NOT TO ACCURATELY DETERMINE THE PA RTICULAR TRADING ACTIVITIES TO WHICH THOSE EXPENSES RELATE. IN SUCH A CASE IT MAY BE APPROPRIATE TO SPLIT THE GROSS PROFITS FROM EACH TR ADING ACTIVITY AND THEN DEDUCT FROM THE RESULTING OVERALL GROSS PROFIT S THE EXPENSES INCURRED IN OR ATTRIBUTABLE TO EACH ENTERP RISE BEARING IN MIND THE CAUTION NOTED ABOVE. 5.4 FROM THE VARIOUS SUBMISSIONS MADE BY THE ASSESS EE IT IS ALSO CLEAR THAT THE GEOGRAPHICAL DIFFERENCE IS NOT MATER IAL SO FAR AS IT APPLIES TO THE LOGISTICS INDUSTRY. FROM THE VARIOUS AGREEMENTS WE FIND THERE IS SPLITTING OF GROSS PROFIT EQUALLY AT 50:50 EVEN IN PAKISTAN BANGLADESH AND SRI LANKA WHICH FALL UNDER THE SAME GEOGRAPHICAL REGION. IN VIEW OF THE ABOVE AND IN VI EW OF THE DETAILED REASONING GIVEN BY THE LD. CIT(A) WE DO NO T FIND ANY INFIRMITY IN THE CUP METHOD (50:50 MODULE) ADOPTED BY THE ASSESSEE. ACCORDINGLY THE ORDER OF THE LD. CIT(A) O N THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMI SSED. 12.2 WHILE DECIDING THE APPEAL FOR THE AY 2005 06 THE TRIBUNAL OBSERVED AS UNDER : 9. GROUND OF APPEAL NO. 2 BY THE REVENUE READS AS U NDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADJUSTMENT U/S 92C A(3) OF THE I.T. ACT 1961 OF FREIGHT RELATED RECEIPTS AND EXPENSES AMOUNTING TO `14 62 12 134/- MADE BY THE TRANSFER PRICING OFFICE R & THE ASSESSING OFFICER AS PER THE ARMS LENGTH PRICE BY A SUM OF ` 27 54 34 623/-. 9.1 AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUND IS IDENTICAL TO GROUND NO. 1 BY THE REVENUE IN ITA NO. 2000/M/10. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVEN UE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO THIS GROUND BY THE REVENUE IS DISMISSED. 4.1 SO FAR AS IT RELATES TO OBJECTION OF THE REVENU E THAT MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO AS IT WAS DONE FOR A. Y. 2006-07 TRIBUNAL HAS REJECTED SUCH CONTENTION WITH THE FOLLOWING OBS ERVATIONS: 12.4 AFTER GOING THROUGH THE ORDER OF THE TRIBUNAL QUOTED HERE IN ABOVE WE FIND THAT THE TRIBUNAL HAS ALLOWED THE APPEALS O F THE APPELLANT FOR THE AYS 2004 -05 AND 2005 06 AND RESTORED MATTER BACK TO THE FILES OF THE DRP FOR AY 2006 07 AS THE TRIBUNAL FOUND THAT THE ORDER OF THE DRP FOR AY 2006 -07 WAS LACONIC. 12.5 AS THE FACTS IN ISSUE FOR THE YEAR UNDER APPEAL ARE IDENTICAL WITH FACTS OF THE AY 2004 -05 & 2005 -06 RESPECTFULLY FO LLOWING THE DECISIONS OF THE TRIBUNAL MENTIONED HERE IN ABOVE IN THE APPELLA NTS OWN CASE FOR THE AY 2004 -05 & 2005 -06 WE ALLOW THE APPEAL FILED BY T HE ASSESSEE AND HOLD THAT THE ADDITIONS ON ACCOUNT ADJUSTMENT IN ARMS LENGTH PRICE TO THE TUNE OF RS.110700000.00 IS UNCALLED FOR AND ACCORDINGLY T HE ADJUSTMENT IS REJECTED ON THE FACTS OF THE CASE DISCUSSED HERE IN ABOVE . THE SUBMISSIONS OF THE LD DR THAT THE MATTER BE RESTORED BACK TO THE FILES OF THE DRP AS WAS DONE IN AY 2006 07 DOES NOT HOLD ANY WATER AS WE F IND THAT FOR THE YEAR UNDER CONSIDERATION THE DRP HAS PASSED A SPEAKING OR DER WHERE AS IN AY 7 AGILITY LOGISTICS PRIVATE LIMITED POLARIS IT(TP) 1181/MUM/2014 2006 -07 THE ORDER OF THE DRP WAS LACONIC AS FOUND B Y THE TRIBUNAL WHILE DECIDING THE APPEAL FOR THE AY 200607 AND THEREFORE WE REJECT THE SUBMISSIONS OF THE LD DR . RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISION I N THE CASE OF ASSESSEE ITSELF FOR A.Y 2006-07 WE DELETE THE T.P ADJUSTMENT 4. AS THERE IS NO CHANGE IN THE FACTS AS COMING FR OM THE PRECEDING YEAR WE RESPECTFULLY THEREFORE FOLLOWING THE DE CISION DO NOT FIND ANY REASON TO DEVIATE FROM THE DECISION AS ABOVE BY THE COORDINATE BENCH AND ALLOW THE GROUNDS OF APPEAL AS FILED BY THE AS SESSEE. 5. ACCORDINGLY THE ORDER OF THE DRP IS SET ASIDE A ND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE AS RAI SED IN THE GOA. 6. IN THE RESULT THE APPEAL AS FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER 2014. SD/- SD/- ( . . . . . . . . ) ('!! ! '!! ! '!! ! '!! !) (R C SHARMA) (VIVEK VARMA) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI DATE: 19 TH NOVEMBER 2014 '+/ COPY TO:- 1) $&/ THE APPELLANT. 2) '($&/ THE RESPONDENT. 3) THE CIT (A)-___/DIT(TP)-II MUMBAI. 4) 3 CIT/DIT-CONCERN _____ MUMBAI / THE CIT/DIT-___CONCERN MUMBAI. 5) '!45'+) K / THE D.R. K BENCH MUMBAI. 6) 567 COPY TO GUARD FILE. 0) / BY ORDER / / TRUE COPY / / [ 8/9: DY. / ASSTT. REGISTRAR I.T.A.T. MUMBAI *<=9) !.).