M/S. HINDUJA TMT LTD, MUMBAI v. THE ACIT CIR 8(2), MUMBAI

ITA 2790/MUM/2007 | 2003-2004
Pronouncement Date: 06-04-2010 | Result: Allowed

Appeal Details

RSA Number 279019914 RSA 2007
Assessee PAN AAACH2058N
Bench Mumbai
Appeal Number ITA 2790/MUM/2007
Duration Of Justice 2 year(s) 11 month(s) 26 day(s)
Appellant M/S. HINDUJA TMT LTD, MUMBAI
Respondent THE ACIT CIR 8(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 06-04-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted L
Tribunal Order Date 06-04-2010
Assessment Year 2003-2004
Appeal Filed On 10-04-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 2790/MUM/2007 (ASSESSMENT YEAR: 2003-04) M/S. HINDUJA TMT LTD. ACIT CIRCLE 8(2) 49/50 IN CENTRE 12TH ROAD AAYAKAR BHAVAN M.K. ROA D M.I.D.C. ANDHERI VS. MUMBAI 400020 MUMBAI 400093 PAN - AAACH 2058 N APPELLANT RESPONDENT APPELLANT BY: SHRI H.P. MAHAJANI & SHRI B.K. KHARE RESPONDENT BY: SHRI NARENDER SINGH O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- VIII MUMBAI DATED 20.02.2010. 2. ASSESSEE HAS RAISED TWO GROUNDS IN THIS APPEAL. GRO UND NO. 1 IS AS UNDER: - 1. THE COMMISSIONER OF INCOME TAX (APPEALS) VIII MUMBAI HAS ERRED IN HOLDING THAT THE ASSESSING OFFICER WAS RIGHT IN REJ ECTING THE CLAIM OF THE APPELLANT THAT THE SALE OF INVESTMENT MADE BY T HE APPELLANT COMPANY WAS IN THE NATURE OF SHORT TERM/LONG TERM C APITAL GAIN AND NOT AS BUSINESS INCOME. THE APPELLANT COMPANY IS IN THE BUSINESS OF IT AND ITES AND NOT IN SHARE TRADING AND WHATEVE R INVESTMENTS THEY ARE HOLDING FROM THE PAST ARE BEING DISPOSED O F AT APPROPRIATE TIMES. THE LONG TERM CAPITAL GAIN IS FROM SALE OF O LD INVESTMENTS HELD WHICH ARE NOT TRADING ASSETS AND THEREFORE THE ASSESSING OFFICER WAS WRONG IN TREATING THIS INCOME AS BUSINE SS INCOME AND THE CIT(A) HAS WRONGLY CONFIRMED THE SAID METHOD OF TAXING THE INCOME. 3. DURING THE YEAR THE ASSESSEE HAS EARNED SHORT TERM AND LONG TERM CAPITAL GAINS AND AFTER SETTING OFF TO THE CARRY FO RWARD LONG TERM LOSSES AND SHORT TERM LOSSES FURTHER CLAIMED CARRY FORWARD OF THE BALANCE LOSSES. THE A.O. ISSUED SHOW CAUSE NOTICE WHY THE PROFIT ON SAL E OF SHARES NOT BEEN ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 2 TREATED AS PROFIT AND NOT CAPITAL GAINS. AFTER CONS IDERING ASSESSEES EXPLANATION THE A.O. HELD THAT THE ASSESSEE HAS DEA LT WITH SHARES FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY THE SHARES ARE TO BE TREATED AS STOCK IN TRADE OF THE ASSESSEE AND CLAIM OF THE ASSESSEE OF INDEXATION AS PER PROVISIONS OF SECTION 48 WAS REJECTED. SAME WAS CON FIRMED BY THE CIT(A) ON THE FACT THAT THE ASSESSEE COULD NOT CONTROVERT THE FINDINGS OF THE A.O. BY ANY POSITIVE EXPLANATION OR FINDING. IT WAS THE CON TENTION OF THE ASSESSEE THAT THE SHARES HAVE BEEN HELD AS INVESTMENT AND DU RING THE YEAR NO PURCHASE OF SHARES WERE BEING DONE AND ASSESSEE CON TINUED SELLING SHARES. IT IS ALSO BEEN ONE OF THE CONTENTIONS THAT PERCENT AGE OF CAPITAL GAIN INCOME TO THE TOTAL REVENUE WAS VERY LOW AND IT CAN BE HEL D THAT ASSESSEE WAS IN THE BUSINESS OF TRADING IN SHARES. 4. DRAWING OUR ATTENTION TO THE PAPER BOOK FILED IN TH IS REGARD THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAS BEE N DISCLOSING ALL THE INVESTMENTS IN SHARES UNDER THE HEAD INVESTMENT IN SCHEDULE D WHICH IS TO THE EXTENT OF RS.230 CRORES. IT IS ALSO SUBMITTED T HAT THE ASSESSEE IS ALSO HAVING STOCK-IN-TRADE WHICH IS SEPARATELY SHOWN AN D REFERRED TO ANNEXURE B TO THE P & L ACCOUNT. THUS HIS SUBMISSION THAT TH E ASSESSEE HAS EARNED LONG TERM CAPITAL GAINS ON THE SALE OF SHARES HELD FOR MANY YEARS AND WITH REFERENCE TO THE DETAILED STATEMENT ON PAGES 3 TO 5 OF THE PAPER BOOK SUBMITTED THAT THE SHARES ARE HELD FOR MORE THAN ON E YEAR TO 7 YEARS. IT WAS HIS SUBMISSION THAT ALL LONG THE DEPARTMENT HAS ACC EPTED THE INVESTMENT IN SHARES AND THERE IS NO REASON TO DIFFER FROM THE EA RLIER FINDINGS. WITH REFERENCE TO THE SHORT TERM CAPITAL GAINS THE LEARN ED COUNSEL REFERRED TO PAGES 6 TO 9 OF THE PAPER BOOK TO SUBMIT THAT THERE IS ONLY ONE SHARE WHICH WAS PURCHASED AND SOLD WITHIN 36 DAYS OF WHICH A SM ALL PROFIT OF RS.317/- WAS EARNED BUT REST OF THE TRANSACTIONS PERTAINING TO SHORT TERM CAPITAL OF RS.88 68 276/- PERTAINS INVESTMENTS IN VARIOUS MUTU AL FUNDS OUT OF THE SURPLUS FOUND AVAILABLE WITH THE ASSESSEE FOR SHORT PERIOD WHICH CANNOT BE CONSIDERED AS BUSINESS INCOME. IT WAS HIS SUBMISSIO N THAT THE ASSESSEES INCOMES ARE TO BE CONSIDERED AS CAPITAL GAINS ONLY AND NOT AS BUSINESS INCOME. ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 3 5. THE LEARNED D.R. HOWEVER SUBMITTED THAT THE QUEST ION TO BE CONSIDERED IS THE INTENTION OF THE ASSESSEE IN TREA TING THE SHARES AS BUSINESS INCOME OR INVESTMENT. HE DREW OUR ATTENTION TO THE FACT THAT THE ASSESSEE IS ALSO HAVING TRADING IN SHARES AND IT IS VERY DIFFIC ULT TO DISTINGUISH BETWEEN BUSINESS OF TRADING IN SHARES AND INVESTMENT. SURRO UNDING CIRCUMSTANCES ARE TO BE CONSIDERED. IT WAS HIS SUBMISSION THAT TH E ASSESSEE HAS LARGE NUMBER OF TRANSACTIONS AND THE ASSESSEES SHARE TRA NSACTIONS ARE TO BE CONSIDERED AS ONLY BUSINESS INCOME AND NOT AS INVES TMENT. FURTHER IT WAS POINTED OUT THAT THE ASSESSEE HAS SURPLUS FUNDS AND THESE ARE PARKED IN MUTUAL FUNDS ONLY TO GAIN PROFIT AND THESE PROFITS ARE TO BE CONSIDERED AS BUSINESS PROFIT ONLY AS THESE ARE SURPLUS FUNDS UTI LISED FOR PURCHASING VARIOUS MUTUAL FUNDS. THE CLASSIFICATION AS SHORT T ERM AND LONG TERM CAPITAL GAINS IS FOR THE PURPOSE OF REDUCING TAX LIABILITY BUT IN FACT THERE IS NO DIFFERENCE IN THE TRANSACTIONS. 6. THE LEARNED COUNSEL IN REPLY SUBMITTED THAT THE ASS ESSEE IS CONSISTENTLY SHOWING THE INVESTMENTS WHICH ARE BEIN G ACCEPTED IN EARLIER YEARS. HOWEVER THE A.O. WITHOUT TAKING THE INCOME AS BUSINESS INCOME HAS INVOKED THE PROVISIONS OF SECTION 73 IN EARLIER YEA RS AND THE HON'BLE ITAT HAS RESTORED THE MATTER BACK TO THE A.O. AND REFERR ED TO THE ORDERS. IT WAS HIS SUBMISSION THAT EVENTHOUGH THE ISSUE WAS RESTOR ED BACK TO THE A.O. IN EARLIER YEARS IT HAS NO BEARING AS THERE ARE SPECIF IC FINDINGS BY THE A.O. AND CIT(A). IT IS TO BE CONSIDERED ON FACTS. 7. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE FACT S PLACED ON RECORD THE ASSESSEE IS SHOWING INVESTMENTS IN VARIOUS YEAR S AND THESE ARE BEING ACCEPTED BY THE REVENUE. EVEN IN THE EARLIER 2 YEAR S ALSO THE A.O. HAS ACCEPTED THE CAPITAL GAINS BUT INVOKED THE PROVISIO NS OF SECTION 73 FOR CONSIDERING THE GAIN AS SPECULATIVE GAINS. AS STATE D EARLIER THE ITAT IN ITA NO. 7664/MUM/2004 FOR A.Y. 2000-01 DATED 30 TH APRIL 2008 HAS RESTORED THE ISSUE TO THE FILE OF THE A.O. BY STATING AS UND ER: - 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RECORDS. IT IS AN ESTABLISHED PRINCIPLE THAT IN THE CASE THE SH ARES ARE BEING HELD AS INVESTMENT THE PROVISIONS OF EXPLANATION TO SECTIO N 73 OF THE I.T. ACT ARE NOT APPLICABLE TO SUCH TRANSACTIONS. IN THE FACTS O F THE PRESENT CASE ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 4 BEFORE US AFTER ADJUSTMENT OF THE NET LONG TERM LO SS AGAINST THE NET SHORT TERM GAIN THE RESULTANT IS A POSITIVE SHORT TERM GA IN TOTALLING RS.2 43 79 393/- AFTER INDEXATION AND RS.9.32 CRORE S BEFORE INDEXATION. THE SAID SHARES SOLD BY THE ASSESSEE ARE CLAIMED TO BE HELD AS INVESTMENT BY THE ASSESSEE. IN CASE THE ASSESSEE IS HOLDING CERTAIN SHARES BY WAY OF INVESTMENT FROM YEAR TO YEAR THE TRANSACTION OF ITS SALE RESULTING IN PROFIT IS NOT COVERED BY THE PROV ISIONS OF EXPLANATION TO SECTION 73 OF THE I.T. ACT. IN CASE THE ASSESSEE I S TRADING IN PURCHASE AND SALE OF SHARES THEN THE RESULTANT LOSSES ARE TO BE TREATED AS PER THE PROVISIONS OF EXPLANATION TO SECTION 73 OF THE I.T. ACT. FROM THE DETAILS FILED BEFORE US WE ARE NOT IN A POSITION TO VERIFY WHETHER THE SAID SHARES SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION AGAINST WHICH LONG TERM CAPITAL GAIN/LOSS OR SHORT TERM CAPITAL G AIN/LOSS IS CLAIMED ARE BEING HELD AS INVESTMENT BY THE ASSESSEE. ACCORDING LY WE DEEM IT FIT TO RESTORE THIS ISSUE BAS TO THE FILE OF THE ASSESSING OFFICER FOR A LIMITED PURPOSE OF DETERMINING WHETHER THE SAID SHARES SOLD BY THE ASSESSEE WERE HELD AS INVESTMENT AND IN CASE THE SAID SHARES WERE HELD AS INVESTMENT BY THE ASSESSEE THE PROVISIONS OF EXPLA NATION TO SECTION 73 OF THE I.T. ACT ARE NOT APPLICABLE. AND IN CASE T HE ASSESSEE IS DEALING IN SHARES THEN THE PROFIT/LOSS ARISING FROM SUCH TRANS ACTION IS TO BE DEALT WITH AS PER THE PROVISIONS OF EXPLANATION TO SECTIO N 73 OF THE I.T. ACT. ACCORDINGLY WE RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE ISSUE IN LINE WITH OUR DIRECTIONS HEREIN ABOVE. THUS THE GROUND NO. 2 RAISED BY THE REVENUE IS ALLOWED FOR S TATISTICAL PURPOSE. 8. AS CAN BE SEEN FROM THE ABOVE IN THE EARLIER YEARS THE A.O. HAS DISALLOWED CARRY FORWARD AND SET OFF LOSSES INVOKIN G THE PROVISIONS OF SECTION 73. THE SAID FINDINGS OF THE A.O. WILL HAVE A BEARI NG FOR THIS YEAR ALSO. NOT ONLY IN A.Y. 2000-01 EVEN IN A.Y. 2002-03 THE MATTE R WAS RESTORED BACK TO THE FILE OF THE A.O. VIDE ORDER IN ITA NO. 1085/MUM /2005 DATED 30 TH MAY 2008. EVEN THOUGH FOR THIS YEAR THE A.O. HAS GIVEN SOME FINDINGS THAT THE ASSESSEES TRANSACTIONS ARE TO BE TREATED AS STOCK- IN-TRADE THE ISSUE IS PENDING WITH THE A.O. FROM A.Y. 2001-02 ONWARDS. IN VIEW OF THIS WITHOUT GIVING ANY FINDING THE ISSUE IS AGAIN RESTORED BAC K TO THE A.O. TO TAKE A CONSISTENT VIEW AFTER CONSIDERING ASSESSEES SUBMIS SIONS FACTS ON RECORD AND ALSO ORDERS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT IN ITA NO. 1211 OF 2009. ACCORDINGLY THE GR OUND IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSE. 9. GROUND NO. 2 IS WITH REFERENCE TO THE ISSUE OF TRAN SFER PRICING. THE GROUND IS AS UNDER: - ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 5 2. THE LEARNED CIT(A) ALSO ERRED IN HOLDING THAT T HE ASSESSING OFFICER HAS RIGHTLY ALLOWED COMMISSION PAID TO THE FOREIGN SUBSIDIARY COMPANY @12% AND DISALLOWING THE BALANCE OF 8% APPL YING THE PROVISIONS OF SEC. 92CA(3) (THE TRANSFER PRICING RU LES). THE APPELLANT SUBMIT THAT THE CIT(A) AND THE AO FAILED TO APPRECI ATE THAT THE WHOLLY OWNED SUBSIDIARY OF THE APPELLANT COMPANY IN USA WAS WORKING ONLY FOR THE BUSINESS OF THE APPELLANT COMP ANY AND THE ENHANCED COMMISSION @20% WAS GRANTED ONLY ON THE BA SIS OF THE EXPENSES INCURRED BY THAT COMPANY FOR PROMOTING THE BUSINESS OF THE APPELLANT AND EVEN AFTER PAYING THE ENHANCED CO MMISSION THE APPELLANT COMPANY WAS MAKING ADEQUATE PROFITS ON TH E TRANSACTIONS WHEREAS THE SUBSIDIARY COMPANY WAS HAR DLY ABLE TO MEET WITH THE EXPENSES AND MAKE A MARGINAL PROFIT O N THE TRANSACTIONS. THE APPELLANTS SUBMIT THAT THIS WAS N OT A CASE OF SUPPRESSING THE PROFITS OF THE APPELLANT COMPANY OR TRANSFER OF FUNDS BY THE PARENT COMPANY ON ANY UNETHICAL GROUND S OR THERE WAS ANY ABSENCE OF TRUTH OR BONAFIDE AND WAS MERELY BASED ON THE AGREEMENT OF CONVENIENCE AS HAS BEEN HELD BY THE CI T(A). 10. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD A S UBSIDIARY IN USA TO WHICH COMMISSION WAS PAID. THE SUBSIDIARY IS COVERE D BY THE PROVISIONS OF SECTION 92CA(3) AND INVOKING THE TRANSFER PRICING P ROVISIONS THE A.O. REFERRED THE MATTER TO TRANSFER PRICING OFFICER AND AN ORDER UNDER SECTION 92CA(3) DATED 30.12.2005 WAS PASSED BY THE TRANSFER PRICING OFFICER. ACCORDINGLY THE COMMISSION PAID TO THE ASSOCIATED E NTERPRISE WAS RESTRICTED TO RS.284.84 LAKHS I.E. 12% OF THE CLAIM AS AGAINS T RS.474.74 LAKHS I.E. 20% CLAIMED. THE ASSESSEE SUBSIDIARY IS WORKING AS BUSINESS PROCESS ORGANISER IN USA TO ACQUIRE WORK OF M/S. ALIT. THE SAID SUBSIDIARY BILLS THE PARTY AT 100% WHEREAS IT WAS REMITTING 88% OF THE A MOUNT TO THE ASSESSEE COMPANY THUS RETAINING 12% AS COMMISSION. IN THE IM PUGNED YEAR BY AGREEMENT IN JAN 2003 THE ASSESSEE HAS INCREASED T HE RATE OF COMMISSION FROM 12% TO 20% THEREBY ONLY 80% OF THE AMOUNT RECE IVED WAS BILLED TO THE ASSESSEE THUS RETAINING 20% IN USA. THE ASSESSEE SE EMS TO HAVE FILED A REPORT UNDER FORM 3CEB ALONGWITH THE TRANSFER PRICI NG STUDY REPORT FOR MARCH 31 2003 AND ALSO SERVICE AGREEMENT DATED 2 ND JUNE 2000 WITH THE ASSOCIATE ENTERPRISE. THE ASSESSEE JUSTIFIED THE IN CREASE IN COMMISSION FROM 12% TO 20% BY INCREASE IN VOLUME OF BUSINESS. THE A .O. FOLLOWED THE ORDER OF THE TPO EVENTHOUGH HE HAS ASKED FOR ASSESSEES C OMMENTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IT SEEMS THAT THE ASSESSEE HAS NOT ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 6 FILED ANY EXPLANATION. IN VIEW OF THAT HE HAS DISAL LOWED AN AMOUNT OF RS.189.90 LAKHS UNDER SECTION 92CA(4) AND ANNEXURED ORDER UNDER 92CA(3) TO THE ASSESSMENT ORDER. AGGRIEVED THE ASSESSEE CAR RIED THE MATTER TO THE CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS JUSTIFIE D THE INCREASE IN COMMISSION. AS THE SAID ASSOCIATE ENTERPRISE WHICH IS WHOLLY A SUBSIDIARY WAS INCURRING SUBSTANTIAL LOSS AND THE COST OF WHIC H MUST BE ABSORBED BY THE HOLDING COMPANY AND THE ASSESSEE HAS SUBMITTED A REPORT FOLLOWING THE TRANSACTIONAL NET MARGIN METHOD (TNM METHOD) WHICH THE TRANSFER PRICING OFFICER ERRED IN NOT CONSIDERING AND ADOPTED DIRECT COMPARABLE PERCENTAGE METHOD OF EARLIER YEARS. THE CIT(A) HOWEVER EXAMI NED THE ISSUE AND NOTICED THAT THE ASSESSEE HAS ENTERED INTO AGREEMEN T ONLY IN JANUARY 2003 AND IT DID NOT JUSTIFY SHARP INCREASE OF COMMISSION FROM 12% TO 20%. HE ALSO OBSERVED THAT THERE IS NO RATIONALE IN THE ASS ESSEE CONTENTION THAT REDUCTION OF ADJUSTMENT OF ARMS LENGTH COMMISSION C OULD NOT HAVE ANY IMPACT ON THE TAXABILITY OF THE ASSESSEE COMPANY. T HE CIT(A) HAS CONFIRMED THE ORDER OF THE TPO/ AO.. 11. THE LEARNED COUNSEL SUBMITTED THAT UNDER THE PROVIS IONS OF SECTION 92(1) ARMS LENGTH PRICE IS TO BE DETERMINED BY ONE OF THE METHODS PRESCRIBED UNDER SECTION 92C AND THE A.O. HAS NOT R EJECTED THE TP REPORT FILED IN THIS REGARD. WHILE ADMITTING THAT THE ASSE SSEE HAS INCREASED THE COMMISSION RETROSPECTIVELY FROM JANUARY 2003 MADE EFFECTIVE FROM 01.04.2002 IT WAS HIS SUBMISSION THAT THERE WAS CO RRESPONDENCE WITH THE SUBSIDIARY COMPANY EARLIER THAT IN CASE THE BUSINE SS WAS INCREASED PARENT COMPANY WOULD CONSIDER ENHANCING THE RATE OF COMMIS SION. HE REFERRED TO VARIOUS CORRESPONDENCE PLACED IN THE PAPER BOOK AS ALSO FILED BEFORE THE TPO. IT WAS HIS SUBMISSION THAT THE ORDER OF THE TR ANSFER PRICING OFFICER IS NOT CORRECT AS HE HAS NOT REJECTED THE ASSESSEES M ETHOD NOR FOLLOWED ANY METHOD PRESCRIBED UNDER THE RULES BUT ONLY REJECTED ON THE PLEA THAT THE ASSESSEE ITSELF HAS PAID 12% COMMISSION IN EARLIER YEAR AND THE ADDITIONAL 8% WAS CONSIDERED AS EXCESS UNDER THE PROVISIONS. H E REQUESTED FOR SETTING ASIDE THE ORDER OF THE TPO. IT WAS HIS SUBMISSION T HAT THERE WAS INCREASE OF MORE THAN 150% OF THE BUSINESS AND PROFIT ALSO INCR EASED AND THEREFORE THE ASSESSEE WAS JUSTIFIED IN PAYING HIGHER COMMISSION TO REIMBURSE THE COSTS. ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 7 12. THE LEARNED D.R. IN REPLY SUBMITTED THAT THE ASSE SSEE HAS SHOWN TRANSACTIONAL NET MARGIN METHOD AND HAS NOT GIVEN A NY COMPARABLE FIGURES FOR JUSTIFYING THE INCREASE IN COMMISSION FROM 12% TO 20%. HE REFERRED TO THE ARGUMENT OF THE A.O. THAT INCREASE IN BUSINESS VOLUME WILL ALSO JUSTIFY THE INCREASE IN COMMISSION PROPORTIONATELY BUT NO J USTIFICATION HAS BEEN GIVEN IN INCREASING THE RATE OF COMMISSION. THE ASS ESSEE HAS NOT EXPLAINED WHY THE PERCENTAGE WAS INCREASED FROM 12% TO 20% AN D HAS NOT JUSTIFIED BY FILING CORRECT REPORT. HENCE THE TPO WAS JUSTIFIED IN NOT RELYING ON ASSESSEES REPORT. HE HOWEVER HAS SUBMITTED THAT IT IS THE D UTY OF THE ASSESSEE TO SUBMIT STRICT UNCONTROLLED COMPARABLE TRANSACTIONS FOR THE PURPOSE OF DETERMINING THE ARMS LENGTH PRICE AND AS THE ASSESS EE HAS NOT JUSTIFIED THE ORDERS ARE TO BE UPHELD AND IN THE CASE IT IS REQUI RED THE MATER CAN BE RESTORED BACK TO THE A.O. 13. THE LEARNED COUNSEL OBJECTED TO THE ABOVE PROPOSITI ON AND SUBMITTED THAT THE ASSESSEE HAS JUSTIFIED THE INCREASE IN COM MISSION FROM 12% TO 20% SO THERE IS NO NEED FOR REFERRING THE MATTER BACK T O THE A.O. 14. WE HAVE CONSIDERED THE ISSUE. IT IS A FACT THAT 100 % SUBSIDIARY IN USA HAS UNDERTAKEN BUSINESS PROCESSING OPERATIONS OF TH E ASSESSEE COMPANY IN USA AND WAS BILLING ON THE BASIS OF THE SERVICE AGR EEMENT ENTERED IN 2000. IT IS ALSO ON RECORD THAT PRIOR TO INCREASE MADE EF FECTIVE FROM 1 ST APRIL 2002 THE SAID ASSOCIATE ENTERPRISES WAS RETAINING ONLY 1 2% OF THE BILLING AMOUNT TO THE US PARTIES AND REMITTED THE BALANCE 88% BACK TO THE ASSESSEE COMPANY THUS EFFECTIVELY RETAINING ONLY 12% COMMISS ION/SERVICE CHARGES. EVENTHOUGH THE ASSESSEE HAS PLACED SOME CORRESPONDE NCE IN THE PAPER BOOK BETWEEN THE CHIEF EXECUTIVE OFFICER OF THE ASS ESSEE COMPANY AND THE CHIEF OPERATING OFFICER IN NEW YORK NEITHER THE A. O. NOR THE TRANSFER PRICING OFFICER HAS EXAMINED THE ISSUE AT ALL WHETH ER THE INCREASE IN COMMISSION WAS JUSTIFIED. AS SEEN FROM THE ORDER OF THE TPO THE TPO HAS NOT DISCUSSED ANY OF THE METHODS PRESCRIBED UNDER T HE I.T. ACT PROVISIONS AND RULES NOR DISCUSSED WHY THE TNM METHOD ADOPTED BY ASSESSEE WAS NOT APPROPRIATE BUT HAS SIMPLY JUSTIFIED THE DISALLOWAN CE ON THE BASIS OF ASSESSEES OWN ACTION IN EARLIER YEARS. IT IS FOR T HE ASSESSEE TO JUSTIFY THE ITA NO. 2790/MUM/2007 M/S. HINDUJA TMT LTD. 8 INCREASE IN RATE OF COMMISSION AND SUBMIT THE COMPA RABLE CASES WHERE SIMILAR COMMISSION IS PAID. IT IS THE PRIMARY DUTY OF THE ASSESSEE TO SUBMIT THE RELEVANT DETAILS THE ONUS OF WHICH WAS PLACED BY THE ACT ON THE ASSESSEE. THE A.O. / TPO HAS TO EXAMINE THE DETAILS AND ARRIVE AT THE CORRECT ARMS LENGTH PRICE BY UTILISING VARIOUS METH ODS PRESCRIBED UNDER THE ACT. IN OUR VIEW THESE ASPECTS HAVE NOT BEEN EXAMIN ED CORRECTLY EITHER BY THE TPO OR BY THE A.O. IN VIEW OF THIS WE ARE OF TH E OPINION THAT THE ISSUE COVERED IN GROUND NO. 2 REQUIRES RE-EXAMINATION BY THE A.O/TPO AND THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY IN JUST IFYING THE INCREASE IN RATE OF COMMISSION. FOR THIS PURPOSE WE SET ASIDE THE ORDERS OF THE TPO AND A.O/ CIT(A) AND RESTORE THE ISSUE BACK TO THE A.O. TO CONSIDER THE ISSUE AFRESH BY GIVING OPPORTUNITY TO THE ASSESSEE TO JU STIFY ITS CLAIMS. NEEDLESS TO SAY THAT THE A.O./TPO SHOULD FOLLOW THE RULES PRESC RIBED IN THIS REGARD IN ARRIVING AT THE ARMS LENGTH PRICE AS PER THE PROVIS IONS AND PRESCRIBED RULES. ACCORDINGLY GROUND NO. 2 IS ALSO RESTORED BACK TO T HE A.O. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH APRIL 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 6 TH APRIL 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VIII MUMBAI 4. THE CIT VIII MUMBAI CITY 5. THE DR L BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P