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ITA 248/BANG/2016

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Summary of Tribunal Opinion — IT(TP)A No.248/Bang/2016 & IT(TP)A No.2960/Bang/2018

Factual and Procedural Background

The assessee is a company engaged in export of standardized herbal extracts and related products, operating from multiple units including two 100% EOU units and holding several registered patents. For the year under consideration the assessee filed its original return on 29/09/2011 declaring a loss of Rs.2,34,72,710/-, and later revised it on 13/12/2012 to a loss of Rs.2,28,25,845/-. The Assessing Officer (AO) issued notice under s.143(2) on 03/08/2012. The AO observed international transactions with associated enterprises (AEs) exceeding Rs.15 crores and made a reference to the Transfer Pricing Officer (TPO) under s.92CA.

The TPO called for Form 3CEB details and proposed a transfer pricing adjustment of Rs.19,25,91,246/- and corporate tax adjustment of Rs.96,250/-. The assessee objected before the Dispute Resolution Panel (DRP). The DRP, by directions dated 20/11/2015, partially deleted the TPO's adjustment and gave specific directions (e.g., restricting ALP adjustment to international transactions with AEs, treating stock write-off as extraordinary, excluding excise from operating expenses of comparables, and applying a 75% export turnover filter).

The TPO issued a reworked order dated 15/12/2015 increasing the adjustment to Rs.19,99,97,862/-. The AO issued the final assessment order dated 30/12/2015 but did not give effect to the TPO's reworked adjustment. The assessee filed appeal ITA No.248/B/2016 against that final order.

A rectification order under s.154 dated 01/06/2016 (and later referenced as 07/05/2019 in the hearing) was passed reversing total income (the opinion records a figure: "Rs.17,72,68,2067/-") and rectifying demand to Rs.8,74,57,770/-. Against the rectification, the assessee filed appeal ITA No.2960/Bang/2018 and later sought withdrawal of ITA No.2960/Bang/2018 after the TPO passed an order dated 07/05/2019 addressing issues relied upon by the assessee.

Legal Issues Presented

Whether the AO acted in violation of s.144C read with s.143 by completing the assessment without giving effect to specific DRP directions.
Whether the TPO erred in making a transfer pricing adjustment (quantified by the assessee) to the prices charged by the assessee.
Whether the Cost Plus Method rejected by the TPO was the Most Appropriate Method (MAM) and whether TNMM was rightly adopted.
Whether any adjustment is allowable for idle costs due to excess capacity of the assessee during the year.
Whether adjustments should be made for differences in functions and risks between the assessee and the comparables (risk & FAR differences).
Whether certain comparables selected by the TPO should have been rejected or whether certain comparables proposed by the assessee should have been accepted.
Whether a guarantee commission (3% as added by the TPO) is appropriate, and, if not, what arm's length rate should be adopted.

Arguments of the Parties

Appellant's Arguments (Assessee / Ld. AR)

The AO completed assessment without giving effect to DRP directions (specific directions listed: restrict ALP to international transactions with AEs; treat stock write-off Rs.5.35 crores as extraordinary; exclude excise duty from operating expenses of comparables; apply 75% export turnover filter rather than 25%).
The TPO erred in making a transfer pricing adjustment of Rs.18,61,90,843/- (and other figures as noted in the order) to the assessee's transfer prices.
The Cost Plus Method adopted by the assessee should have been accepted as the MAM; the TPO and DRP erred in rejecting it and adopting TNMM.
No adjustment was allowed for idle costs/excess capacity; the assessee sought such adjustments.
Adjustments for differences in functions and risks (FAR) between the assessee and comparables were not allowed; assessee does not undertake marketing for transactions with AEs.
The TPO wrongly rejected comparables proposed by the assessee and picked functionally different companies; some selected comparables bear no commonality with the assessee's operations.
The TPO made apparent errors in margin computation for comparables despite these being pointed out.
The DRP erred in upholding a guarantee commission of Rs.64,00,403/- on the ground that a guarantee could not be considered arm's length where no commission was charged; the assessee contended legal provisions prohibit charging such commission.
The assessee relied heavily on coordinate-bench decisions in the assessee's own earlier years (AY 2008-09, 2009-10, 2010-11) to support its claims and requested relief accordingly.

Respondent's Arguments (Revenue / Ld. CIT-DR)

The CIT-DR relied on the orders passed by authorities below (AO/TPO) and placed reliance on those records.
At one point, the CIT-DR did not object to the assessee's application for withdrawal of ITA No.2960/Bang/2018.
The CIT-DR did not point out any factual distinctions from prior years when the Tribunal had taken certain consistent views in the assessee's own cases.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
IT(TP)A No.1197/Bang/2012 (assessee's own case for AY 2008-09), Order dated 08/05/2015	Upheld the Transaction Net Margin Method (TNMM) as the Most Appropriate Method (MAM) for that year; directed consideration of adjustments such as idle capacity, risk, and other FAR-related claims; cautioned that idle capacity calculations must be based on proper principles and machine capacities.	The Tribunal in the present opinion respectfully followed this earlier order: it upheld TNMM as MAM for the year under consideration (by respecting the earlier finding) and remanded issues (idle capacity, risk adjustments and related matters) to the TPO/AO for fresh consideration in accordance with the directions in that earlier order.
Trilogy E Business Software India Pvt. Ltd. v. CIT (2013) 140 ITR 540	Referenced for the proposition that forex gain relating to export business is part of operating revenues and must be considered while working out ALP.	The Tribunal noted the principle from this decision when addressing operating revenues and comparability matters; it used this to support remand/direction to consider operating and non-operating items properly while fixing ALP.
Kirloskar Toyota Textiles Machinery P. Ltd. v. ACIT [IT(TP)A No.401/Bang/2010, dt. 14.11.2014]	Authority for confining transfer pricing adjustment to international transactions with associated enterprises in the relevant context.	The Tribunal accepted the coordinate-bench view that TP adjustment should be confined to international transactions with AEs and referenced this principle in remitting issues to the TPO/AO for fresh consideration.
This Tribunal — assessee's own case for Assessment Year 2009-10 (referred to in the opinion)	Used as precedent for adopting an arm's length commission for corporate guarantee (0.5%) and other consistent views for comparability and adjustments in successive years.	The Tribunal applied the earlier year's direction and directed AO/TPO to adopt an arm's length commission of 0.5% for corporate guarantee in the present assessment year.
This Tribunal — assessee's own case for Assessment Year 2010-11 (referred to as "supra")	Referred to support consistency of Tribunal's prior conclusion on guarantee commission and other TP issues.	The Tribunal followed its earlier views from these assessment years and directed similar treatment (notably adoption of 0.5% guarantee commission) in the present matter.

Court's Reasoning and Analysis

The Tribunal proceeded by examining each ground raised by the assessee, frequently referencing and following consistent rulings by coordinate benches in the assessee's own earlier years. The reasoning and disposition for principal issues are summarized below in the sequence used by the Tribunal:

Ground No.1 (failure to give effect to DRP directions): The assessee did not press this ground because rectification under s.154 had been passed by the AO on these issues (the order/rectification dates and figures are recorded in the opinion). Accordingly, Ground No.1 stands dismissed as not pressed.
Ground No.2 (general complaint about TPO adjustment): The Tribunal considered this ground general in nature and stated it did not require specific adjudication.
Ground No.3 (challenge to choice of MAM — Cost Plus v. TNMM): The Tribunal relied on its prior decision in IT(TP)A No.1197/Bang/2012 (AY 2008-09) where TNMM had been upheld as the MAM. The prior order had noted the assessee's own admissions in its TP study that comparables were not fully comparable and that Cost Plus (CPM) would require inclusion of direct and indirect expenses (Rule 10B context). Respectfully following that order, the Tribunal dismissed this ground.
Ground No.4 (idle costs/excess capacity): The Tribunal recalled its prior findings in IT(TP)A No.1197/Bang/2012 that idle-cost calculations by the assessee were not based on scientific principles (e.g., presuming fixed costs vary with turnover). Nevertheless, the Tribunal held that if the assessee can show idle capacity on proper evidence (machine capacities, utilisation) an adjustment must be considered under Rule 10B. Given the need for fresh consideration in line with the prior order, the Tribunal remanded the issue back to the TPO/AO for re-examination and allowed the ground for statistical purposes.
Ground No.5 (FAR differences / risk adjustments): The Tribunal again followed directions given in the assessee's prior years (reproducing paras from earlier order) and directed AO/TPO to consider the assessee's claim for risk adjustment on the basis of details furnished by the assessee. The ground was allowed for statistical purposes and remanded for consideration.
Ground No.6 & 7 (comparables inclusion/exclusion): Where the assessee had identified particular comparables (e.g., Indfrag Ltd., AVT Natural Ltd., Shilpa Medicare Ltd., Vinati Organics Ltd., Glenmark Generic Ltd.) and the DRP had not given specific reasons for upholding exclusions, the Tribunal found that the DRP's treatment was cryptic/insufficient. The Tribunal remanded these comparable-related objections back to the DRP for fresh adjudication and directed the DRP to pass reasoned orders after affording the assessee proper opportunity of being heard. These grounds were allowed for statistical purposes.
Ground No.9 (guarantee commission at 3%): The Tribunal relied on its earlier decisions in the assessee's prior years (noting that AO/TPO were directed to adopt an arm's length guarantee commission of 0.5% in AY 2009-10 and followed in AY 2010-11). As revenue had not shown any factual change to distinguish the present year, the Tribunal directed AO/TPO to adopt 0.5% as the arm's length commission for corporate guarantee and allowed this ground.
General procedural observations: The Tribunal noted that the CIT-DR relied on lower authorities' orders but did not point out distinguishing factual features for the year under consideration. Where the DRP's orders lacked specific reasoning (particularly on comparables), the Tribunal required the DRP to provide reasoned decisions.
On the procedural posture of the two appeals: ITA No.2960/Bang/2018 was dismissed as withdrawn on the assessee's request since Ld. TPO had passed an order dated 07/05/2019 addressing issues raised. IT(TP)A No.248/Bang/2016 was partly allowed as summarized above.

Holding and Implications

Holding:

IT(TP)A No.248/Bang/2016 stands partly allowed — several grounds were remanded to the AO/TPO/DRP for fresh consideration in accordance with the directions and prior coordinate-bench orders; certain grounds (e.g., selection of MAM/TNMM) were dismissed by following prior orders.
IT(TP)A No.2960/Bang/2018 stands dismissed as withdrawn — the assessee withdrew this appeal after the TPO passed an order (dated 07/05/2019) addressing issues relied upon by the assessee and the Revenue did not object to the withdrawal.

Implications and Direct Consequences:

The AO/TPO is directed to reconsider certain issues afresh (idle capacity adjustments, FAR/risk adjustments, and certain comparable-company inclusions/exclusions) in accordance with law and with proper opportunity of being heard afforded to the assessee.
The DRP is specifically directed to pass reasoned orders on comparables where it previously gave cryptic or non-specific reasons, and to afford the assessee an opportunity to be heard.
The Tribunal directed the AO/TPO to adopt an arm's length commission for corporate guarantee at 0.5% for the year under consideration, following the Tribunal's prior consistent views in the assessee's earlier years.
The record reflects that a rectification under s.154 altered the demand to Rs.8,74,57,770/- (order dated 07/05/2019) and earlier an order recording total income reversal (the opinion records a figure "Rs.17,72,68,2067/-"); the Tribunal noted these procedural developments and the assessee's decision not to press certain grounds as a result.
No new binding legal precedent beyond the consistent application of the Tribunal's earlier orders in the assessee's own case was created; the Tribunal expressly followed coordinate-bench decisions and remitted factual and computational matters for fresh consideration in accordance with law.

Order pronounced in open court on 25th Aug, 2020. Bench: (A.K. Garodia) Accountant Member and (Beena Pillai) Judicial Member.

Distribution / Miscellaneous

The order's copy list includes: Appellant, Respondent, CIT, CIT(A), DR ITAT Bangalore, Guard file. The opinion records standard bench processing steps (draft dictation, placement before members, approval, uploading and dispatch procedures).

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Sami Labs Limited, Bangalore v. DCIT, Bangalore

PER BEENA PILLAI, JUDICIAL MEMBER Present appeals has been filed by assessee against order dated 30/12/2015 passed by Ld.AO under section 143(3) r.w.s 144C(13) of the Act. Brief facts of the case are as under:

2. It has been submitted that, assessee is a company engaged in export of standardised herbal extracts, fine chemicals, specialty chemicals, cosmeceuticals, fight or nutrients and probiotics. It carries its activities from several Page 2 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 units including two unit which are 100% EOU. Assessee also holds several registered patents to its credits, and is one of the few Indian companies that manufacture products in India, using agricultural produce as ingredients, and sells it internationally, through subsidiaries and associates. 2.1. For year under consideration, assessee filed its return of income on 29/09/2011 declaring loss of Rs.2,34,72,710/- Later on, return was revised on 13/12/2012 declaring loss of Rs.2,28,25,845/-. Notice under section 143(2) was issued on 03/08/2012, in response to which, representative of assessee appeared and filed various details. Ld.AO observed that, assessee has international transaction with its associated enterprises exceeding Rs.15crores, and accordingly, reference was made to Transfer Pricing officer. 2.2. On receipt of reference under 92CA, Ld.TPO called upon assessee to file economic details of international transaction in Form 3 CEB. Ld.TPO passed order proposing adjustment of Rs.19,25,91,246/-and corporate tax adjustment of Rs.96,250/-.

3. Aggrieved by additions proposed, assessee raised objections before DRP. DRP vide direction dated 20/11/2015 partially deleted adjustment proposed by Ld.TPO, and directed Ld.AO to give following effect: To restrict ALP adjustment to international transaction with associated enterprises only; Page 3 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 To consider stock write-off Rs.545 Lacs as extraordinary expenses, and not to include as part of operating expenses for computing PLI; To exclude excise duty from operating expenses in the computation of PLI of comparables selected by TPO; To apply 75% filter for export turnover instead of 25% adopted by the TPO. 3.1. On the basis of DRP directions, Ld.TPO passed order dated 15/12/2015, according to which, adjustment was increased to Rs.19,99,97,862/-. Ld.AO while passing order dated 30/12/2015, did not consider the adjustment reworked by Ld. TPO.

4. Against final assessment order dated 30/12/2015, assessee filed appeal before this Tribunal being ITA No. 248/B/2016 4.1. Ld.AR submitted that, on 01/06/2016 rectification order under section 154 was passed, reversing total income to Rs.17,72,68,2067/-. Against this order, assessee filed appeal before this Tribunal being ITA No. 2960/Bang/2018 along with application for condonation of delay. 4.2. Ld.AR, at the outset, submitted that issues alleged in IT(A)No.2960/Bang/2018, has been rectified vide order passed by Ld.TPO dated 07/05/2019, and accordingly, no grievance arises out of this appeal. He accordingly submitted for withdrawal of IT(A)No.2960/Bang/2018. Page 4 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 4.3. Ld.CIT.DR did not object for the appeal being withdrawn. On the basis of submissions made by both sides hereunder, appeal being ITA No.2960/Bang/2018 stands dismissed as withdrawn. ITA No.248/Bang/2016

5. Ld.AR submitted that, demand arising out of impugned order stands rectified to Rs.8,74,57,770/- by order passed by Ld.AO under section 154 of the Act, dated 07/05/2019. Grounds raised by assessee in this appeal are as under: The Grounds of Appeal are as given below. All the following grounds are without prejudice to each other.

1. The learned AO has acted in gross violation of the section 144C read with section 143 by completing the assessment without giving effect to the specific directions of the DRP. The following directions given by the DRP has not been given effect to: a. To restrict ALP adjustment to international transactions with Associated\Enterprises only - Para 7 of the directions. b. To consider stock write off of Rs.5.35 crores as extra ordinary expenses and not include the same as part of operating expenses for computation of PLI of your appellant. - Para 8.3 of the direction. c. To exclude excise duty from operating revenues in the computation of PLI of comparables selected by TPO. Para 9.2(u) of the direction. d. To apply 75% filter for export turnover instead of 25% adopted by the TPO. Para 9.2(iii) of the direction

2. The TPO has grievously erred in making transfer pricing adjustment of Rs.18,61,90,843/- to prices charged by your appellant.

3. The TPO has erred in rejecting the Cost Plus Method adopted by your appellant as the most appropriate method (MAM) for the determination of the Arm's Length Price (ALP) and wrongly adopting Transaction Net Margin Method (TNMM).The DRIP has erred in upholding the same.

4. The DRP and TPO has erred in not allowing any adjustment for idle costs of excess capacity of your appellant during the year.

5. The DRIP has erred in not allowing for any adjustments for the differences in the functions and risks which are not undertaken by your appellant but undertaken by the comparable companies Page 5 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 considering the fact that your appellant does not undertake marketing activities in respect of transactions with AEs.

6. The TPO has erred in rejecting the companies selected as comparable by your appellant.

7. The TPO has erred in selection of companies that are functionally different from your appellant as comparables, in order to determine the ALP. The TPO has wrongly selected 22 companies as comparable whose businesses and operations have nothing in, common with that of your appellant.

8. The TPO has erred in making apparent errors in margin computation of comparables selected by himself, despite these being pointed out by your appellant.

9. In the light of the binding legal provisions that prohibit charging commission on guarantees of the nature extended by your appellant, the DRP has erred in upholding guarantee commission of Rs.64,00,403/- charged by the learned TPC in his order on the contention that the guarantee could not be considered to be at arm's length since no commission was charged.

10. Your appellant craves leave to add, amend, alter, vary and/ or withdraw any or all of the above grounds of appeal.

11. For these and other grounds that may be adduced at the time of hearing, it may be directed that the order of the learned Assessing Officer as upheld by the Hon'ble DRP be modified to the extent appealed against. 5.1. At the outset, Ld.AR submitted that, all issues raised in this appeal stands covered by orders passed by coordinate benches of this Tribunal in assessees own case for assessment years 2008-09, 2009-10 and 2010-11.

6. Ld.AR submitted that, Ground No. 1 is not pressed as rectification order has been passed on these issues by Ld.AO. Accordingly, Ground No.1 raised by assessee stands dismissed. Ground No. 2 is submitted to be general in nature and therefore do not require adjudication.

7. Ground No.3 is raised against most appropriate method to be adopted for determining ALP of international transaction. Page 6 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 7.1. Ld.AR submitted that, this issue stands against assessee by order of this Tribunal in assessees own case for assessment year 2008-09 in IT(TP)A No.1197/Bang/2012, by order dated 08/05/2015. He referred to para 15 of order, wherein TNMM has been upheld as most appropriate method as under:

15. We have perused the orders and heard the rival contentions. We find that assessee in its letter dated 21/10/2011 addressed to the TPO, plays as Annexure J of the paper book, had itself stated at page 3 that expenditure like depreciation and repair cost were not considered by it in the margin analysis. Even in the TP study furnished by assessee, analysis based on gross profit margins alone has been done and page 27 of Annexure G of paper book clearly being brings out this. Assessee had considered this GP ratio of 23.36% and compared it with GP margin of companies selected by it as comparables, namely, Vivimad Labs Ltd, Anuh Pharma Ltd., and Synthite industrial chemicals Ltd., Assessee itself as mentioned therein that none of these 3 companies were fully comparable to the business of assessee. Vivmed labs Ltd was manufacturing chemicals and formulations and not herbal extracts. Anuh Pharma Ltd was manufacture of antibiotics and Symthite industrial chemicals Ltd was manufacturing essential oils, Oleoresines and spices. When assessee itself as stated in its TP study that the companies selected by it for comparison were not in the same manufacturing line and when rule 10 B of the act clearly specifies deduction of both direct and indirect expenditure for CPM, we are of the opinion that lower authorities were right in rejecting the methodology adopted by assessee and substituting it with TNMM. Ground 11 of assessee therefore stands dismissed. Respectfully following the same, we uphold TNMM as most appropriate method for year under consideration, Accordingly, this ground raised by assessee stands dismissed.

8. Ground No. 4 is raised by assessee for not allowing adjustment for idle cost of excess capacity. Page 7 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 8.1. Ld.AR submitted that, this issue stands settled by order of this Tribunal in assessees own case for assessment year 2008-09 in IT(TP)A No.1197/Bang/2012, by order dated 08/05/2015. He referred to para 25 of order that reads as under:

25. There also is much strength in the argument of assessee that the margins of the comparables worked out by the AU required to be adjusted for discrepancy in stock, excessive R & D expenditure etc., Similarly, coordinate bench of this Tribunal has held in the case of Trilogy E Business Software India Pvt. Ltd. v. Cit (2013)

140 lTD 540, that forex gain relating to export business were part of the operating revenues and had to be considered while working out the ALP of the international transactions undertaken by it. Lower authorities have also not verified the claim of assessee that non-operating expenditures were not excluded while working out the operating expenditure. Similarly its claim that TP adjustment has to be confined to the international transaction with AE is also justified in view of the decision of the coordinate bench in the case of Kirloskar Toyota Textiles Machinery P. Ltd. V. ACIT [IT(TP)A No.4O1/Bang/2010, dt 14.11.20 14]. On the other hand, we find that the working out of idle cost done by assessee was not based on any scientific Principles. It took a presumption that fixed costs varies with turnover. Reduction in turnover can be due reduction in prices and need not always be due to reduction in production. Idle capacity can be worked out only based on machine capacities and utilisation of the machines in manufacturing sector. Exercises done by the assessee for working out the fixed cost attributable to idle capacity at 31% was incorrect. However, if assessee is able to show that there was any idle capacity, then proper adjustment has to be carried out for it, in accordance with Rule 1 OB of the Act. Therefore, even while accepting TNNM adopted by the TPO, we are of the opinion that analysis of the transfer pricing of the international transactions requires a fresh look by the TPO / AO by considering all the averments taken by assessee in detail. We, therefore, set aside the orders of the authorities below and remit the issue with regard to fixing of ALP of the international transactions, back to the file of TPO / AO for consideration afresh in accordance with the directions given above. No doubt, if the study made afresh show that the margin of the assessee on the cost was within + / - 5% of the arithmetic mean, the AO shall not make any adjustment. Page 8 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 8.2. Ld.CIT.DR placed reliance on orders passed by authorities below. We have perused submissions filed by both sides in light of records placed before us. 8.3. Nothing has been brought on record by revenue to establish any factual changes. Therefore we do not find any reason to deviate from consistent view taken by this Tribunal in assessees own case. 8.4. Respectfully following the same, we remand the issue back to Ld.TPO for considering it afresh, in light of observations made by this Tribunal in assessees own case for assessment year 2008-09 (supra), in accordance with law. Needless to say that proper opportunity of being heard is to be granted to assessee. Accordingly, this ground raised by assessee stands allowed for statistical purposes

9. Ground No. 5 is raised for not allowing adjustment for differences in functions and risks that are not undertaken by assessee but undertaken by comparable companies. 9.1. Ld.AR submitted that, this issue has been decided by this Tribunal in assessees own case for assessment year 2008-09 in IT(TP)A No.1197/Bang/2012, by order dated 08/05/2015. He referred to para 15 of order, that reads as under:

15. We have considered the rival submissions. First of all, we reproduce paras 17 and 18 from the Tribunal order which is available on page no. 353 of paper book. The same reads as under. "17. Ground No.6 is regarding risk adjustment. Page 9 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018

18. We have heard the learned A. R. as well as learned D, R. and considered the relevant material on record The assessee is claiming the risk adjustment because of the majority of the sale to the AE in comparison to the comparables making sales to the third party. The Id. AR of the assessee has submitted that the assessee has furnished all the requisite details. Risk adjustment is one of the component to be taken into account for FAR analysis. Therefore the TPO/A.O./A.O is directed to consider the claim of risk adjustment on the basis of the details to be furnished by the assessee."

16. From the above pares reproduced from the Tribunal order, it is seen that in the AO/TPO were directed to consider the claim of risk adjustments of the details to be furnished by the assessee. Hence in the present year also, we restore this matter back to AOJJPO with similar directions. Ground no. 8 is also allowed for statistical purposes. 9.2. He submitted that, this Tribunal relied on observations of coordinate bench in assessees own case for assessment year 2009-10, which is placed at page 148-165 of paper book volume 1. 9.3. Ld.CIT.DR placed reliance on orders passed by authorities below. However, he also could not place on record, any distinguishing feature for year under consideration on facts. 9.4. Respectfully following the same, we direct Ld.AO/TPO to consider claim of risk adjustment on the basis of details furnished by assessee, as directed by this Tribunal in earlier years in assessees own case. Accordingly this ground raised by assessee stands allowed for statistical purposes.

10. Ground No.6 is in respect of rejecting one comparable alleged by assessee for inclusion. 10.1. We note that there is no specific comparable that has been raised in the ground. However, Ld.AR relied on written Page 10 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 submissions filed before us, wherein, assessee alleges exclusion of Indfrag Ltd. He submitted that, objection was raised before DRP, however, DRP passed cryptic order without giving any specific reason upholding its exclusion. 10.2. Ld.CIT.DR relied on orders passed by authorities below. We have perused order passed by DRP. We note that, DRP did not give any specific reason upholding exclusion of this comparable by Ld.TPO. We also note that submissions made by assessee have not been considered. 10.3. In the light of such situation, we deem it fit to remand this comparable back to DRP to adjudicate it afresh. DRP is directed to pass a reason order in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, this ground raised by assessee stands allowed for statistical purposes.

11. Ground No.7-8 is in respect of certain comparables for exclusion. 11.1. Ld.AR submitted that, objection was raised in respect of certain comparables for exclusion before DRP, however, DRP failed to adjudicate Objection E, more particularly mentioned in DRP direction. 11.2. Ld.CIT.DR relied on orders passed by authorities below. We have perused order passed by DRP and noted the manner in which the issue has been dealt with. We note Page 11 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 that, there is no comparable specific ground, raised by assessee alleging exclusion. However, Ld.AR relied on written submissions filed before us, wherein, assessee alleges exclusion of AVT Natural Ltd., Shilpa Medicare Ltd., Vinati Organics Ltd., Glenmark Generic Ltd. We note that DRP did not deal with any of these comparables objected by assessee. 11.3. In the light of such situation, we deem it fit to remand this comparable back to DRP to adjudicate it afresh. DRP is directed to pass a reasoned order, in accordance with law. Needless to say that, proper opportunity of being heard must be granted to assessee. Accordingly, this ground raised by assessee stands allowed for statistical purposes.

12. Ground No.9 is regarding addition of Guarantee Commission at 3%. 12.1. It has been submitted by Ld.AR that this issue stands settled by orders of this Tribunal in earlier assessment years. He referred to order passed by this Tribunal in assessment year 2010-11(supra), wherein, this Tribunal followed view taken in AY 2009-10, and held as under:

17. Regarding ground no. 9 also, it was submitted that para no.

20 of the same Tribunal order in assessee's own case for Assessment Year 200910 is relevant and in that year, the AO/TPO were directed to adopt the arm's length commission of corporate guarantee at 0.5%. The Id. DR of revenue could not point out any difference in facts in the present year. Hence respectfully following this Tribunal order in assessee's own case, we direct the AO/TPO to adopt the arm's length commission of corporate guarantee at 0.5%. Ground no. 9 is allowed. Page 12 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 12.2. Ld.CIT.DR placed reliance on orders passed by authorities below. We have perused submissions filed by both sides in light of records placed before us. 12.3. Nothing has been brought on record by revenue to establish any factual changes. Therefore we do not find any reason to deviate from consistant view taken by this Tribunal in assessees own case. Based on the above observations by this Tribunal in assessees own case, we direct Ld.AO/TPO to adopt arms length commission at 0.5%. Accordingly, this ground raised by assessee stands allowed.

13. Ground No.11 is general in nature and do not require any adjudication. In the result, IT(TP)A No.248/Bang/2016 stands partly allowed as indicated hereinabove, and IT(TP)A No.2960/Bang/2018, stands dismissed as withdrawn. Order pronounced in the open court on 25th Aug, 2020. Sd/- Sd/- (A.K GARODIA) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 25th Aug, 2020. /Vms/ Page 13 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 Copy to:

1. Appellant

2. Respondent

3. CIT

4. CIT(A)

5. DR, ITAT, Bangalore

6. Guard file By order Assistant Registrar, Income-Tax Appellate Tribunal. Bangalore Page 14 of 14 IT(TP)A No.248/Bang/2016 IT(TP)A No.2960/Bang/2018 Date Initial

1. Draft dictated on On Dragon Sr.PS

2. Draft placed before author -08-2020 Sr.PS

3. Draft proposed & placed before the second member -08-2020 JM/AM

4. Draft discussed/approved by Second Member. -08-2020 JM/AM

5. Approved Draft comes to the Sr.PS/PS -08-2020 Sr.PS/PS

6. Kept for pronouncement -08-2020 Sr.PS

7. Date of uploading the order on Website -08-2020 Sr.PS

8. If not uploaded, furnish the reason -- Sr.PS

9. File sent to the Bench Clerk -08-2020 Sr.PS

10. Date on which file goes to the AR

11. Date on which file goes to the Head Clerk.

12. Date of dispatch of Order.

13. Draft dictation sheets are attached No Sr.PS

Sami Labs Limited, Bangalore v. DCIT, Bangalore

Summary of Tribunal Opinion — IT(TP)A No.248/Bang/2016 & IT(TP)A No.2960/Bang/2018

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments (Assessee / Ld. AR)

Respondent's Arguments (Revenue / Ld. CIT-DR)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Distribution / Miscellaneous

Sami Labs Limited, Bangalore v. DCIT, Bangalore

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