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Techbooks International Pvt. Ltd., O-100, 1st Floor, Sector-12, Noida (UP) Vs Assistant Commissioner of Income Tax, Circle-1, Noida
May, 06th 2014
                                   Fit for Publication
                                             Sd/-       Sd/-
                                            (JM)       (AM)
       IN THE INCOME TAX APPELLATE TRIBUNAL
             DELHI BENCH `I', NEW DELHI
     Before Sh. R. S. Syal, AM And Sh. Rajpal Yadav, JM
                ITA No. 722/Del/2014 : Asstt. Year : 2009-10

Techbooks International Pvt. Vs    Assistant Commissioner of Income
Ltd., O-100, 1st Floor,            Tax, Circle-1,
Sector-12, Noida (UP)              Noida
(APPELLANT)                        (RESPONDENT)
PAN No. AABCT3774A
        Assessee by : S/ Shri C. S. Aggarwal & Ravi Pratap Mall
        Revenue by : S/Shri Peeyush Jain & Yogesh Kumar Verma

Date of Hearing : 24.4.2014        Date of Pronouncement : 28.4.2014

                                  ORDER

Per R. S. Syal, AM:

       This appeal by the assessee is directed against the order passed
by the Assessing Officer u/s 143(3) read with section 144C of the
Income-tax Act, 1961 (hereinafter also called `the Act') on 20.1.2014
in relation to the assessment year 2009-10.


I.    LACK OF JURISDICTION

2.1.        The first issue espoused up by the ld. AR raised through
ground No. 3 is against the non-discharging of the statutory onus cast
upon the Assessing Officer in terms of clauses (a) to (d) of sec. 92C(3)
                                   2                       ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

of the Act. The ld. Senior Counsel for the assessee submitted that a
specific objection in this regard was taken before the Dispute
Resolution Panel (DRP) which has been summarily dismissed without
giving any convincing reason. On the merits of the ground, it was put
forth that the Assessing Officer (AO) failed to discharge the onus to
establish that the assessee's case was covered under any of the
clauses (a) to (d) of sec. 92C(3) which is a pre-condition for assuming
jurisdiction to proceed with the determination of Arm's Length Price
(ALP) of the international transactions. In support of this contention,
the ld. AR relied on certain lines from the judgment of the Hon'ble
Delhi High Court in the case of Sony India (P) Ltd. Vs CBDT and Anr.
(2007) 288 ITR 52 (Delhi). He stated that it was obligatory on the part
of the A.O to form an opinion as regards fulfillment of either or all of
requirements stipulated in the clauses (a) to (d) of sec. 92C(3).
Having not done so, the ld. AR urged that the following entire exercise
of determining the ALP and the resultant transfer pricing addition got
vitiated. The ld. DR opposed this argument but stating that no such
requirement is enshrined in the provision. He also relied on the
judgment in the case of Sony India (supra).




2.2.       We have heard the rival submissions and perused the
relevant material on record. The thrust of the ld. AR is on sub-sec. (3)
of sec. 92C which, in turn, provides that where during the course of
any proceeding for the assessment of income, the Assessing Officer,
on the basis of material or information or document in his possession,
is of the opinion that (a) the price charged or paid in an international
transaction has not been determined in accordance with sub-sections
(1) and (2); or (b) any information and documents relating to an
                                   3                       ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

international transaction have not been kept and maintained by the
assessee in accordance with the provisions contained in sub-section
(1) of sec. 92D; or (c) the information or data used in computation of
the arm's length price is not reliable or correct; or (d) the assessee
has failed to furnish, within the specified time, any information or
document which he was required to furnish by a notice issued under
sub-section (3) of sec. 92D, then he may proceed to determine the
ALP in relation to the said international transaction. Sec. 92CA, which
is quite relevant for our purpose deals with making a reference to the
Transfer Pricing Officer (TPO).   Sub-sec. (1) of sec. 92CA of the Act
mandates that where an assessee has entered into an international
transaction in any previous year, and the AO considers it necessary or
expedient so to do, he may, with the previous approval of the
Commissioner, refer the computation of the arm's length price in
relation to the said international transaction under sec. 92C to the
TPO. Here it is relevant to take note of Instruction No. 3 of 2003 dated
28.5.2003 issued in the context of section 92CA, which provides that
wherever the aggregate value of international transactions of an
assessee in a year exceeds Rs. 5 crore, the case should be picked up
for scrutiny and reference    u/s 92CA be made to the TPO.                    The
assessee in Sony India (supra) challenged the vires of the Instruction
No. 3 of 2003 by claiming that the words `necessary and expedient' in
section 92CA(1) require formation of opinion by the A.O before making
a reference to the TPO.    Rejecting this contention, the Hon'ble High
Court held that : `There is nothing in s. 92CA itself that requires the
AO to first form a considered opinion in the manner indicated in s.
92C(3) before he can make a reference to the TPO. In our view, it is
                                    4                      ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

not possible to read such a requirement into s. 92CA(1). However, it
will suffice if the AO forms a prima facie opinion that it is necessary
and expedient to make such a reference.'. It was further noticed by
Their Lordships that the transactions of high value require a careful
examination to determine if the declared price is in fact acceptable as
at ALP. It may not be expedient for the AO to efficiently deal with the
assessment involving such an exercise. In that sense it achieves the
expedient disposal of the assessment by the AO if the exercise is
referred for a specialised determination by the TPO. That is how the
Instruction No. 3 dt. 20th May, 2003 issued by the CBDT was held to
be consistent with the statutory objective underlying s. 92CA(1) and
acting as a guidance to the AO in the exercise of discretion in referring
an international transaction to the TPO for determination of its ALP.
Eventually, it was held by Their Lordships that such Instruction "is
neither arbitrary nor unreasonable, and is not ultra vires the Act.". It
is palpable from the above judgment that the AO is required to form
only a prima facie view at the stage of making reference to the TPO.
The effect of holding such Instruction as intra vires is that all of its
contents are legally sustainable. Similar view has been reiterated by
the Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. VS. CIT
(2013) 245 ITR 193 (Del). It is further relevant to note that the
Hon'ble Punjab & Haryana High Court was called upon to answer inter
alia question : (iv) Whether opportunity of being heard is required
before referring the matter of determination of ALP to TPO ?" in Coca
Cola Inc. VS. Asstt. CIT   (2009) 309 ITR 194 (P&H). Answering this
question in negative, the Hon'ble High Court observed that : `The
decision is to be taken by the AO having regard to the question
                                          5                        ITA No. 722/Del/2014
                                                           Techbooks International Pvt. Ltd.

whether it will be proper for the AO himself to determine the ALP or it
will be expedient to have it determined from the TPO. There is
safeguard of seeking prior approval of the CIT. Whether computation
of ALP is made by one officer or by the other, does not in any manner
affect the assessee.'. These judgments make it clear that there is no
such requirement in the language of the statute as is sought to be
read by the ld. AR.

2.3.         We find that the legislature has provided sufficient safeguards
to protect the interest of the assessee in this regard. Firstly, the
reference by the A.O to the TPO u/s 92CA(1) can be made only with
the previous approval of Commissioner. Secondly, the TPO gives
sufficient opportunity to the assessee to show cause as to how its
international transactions are at ALP. Thirdly, the assessee is free to
challenge the draft order passed by the A.O, giving effect to the TPO's
finding, before the Dispute Resolution Panel. The DRP is required to
give due opportunity of hearing to the assessee before giving decision
on the objections raised against the draft order including the transfer
pricing adjustment.       It is only thereafter that the final assessment
order   is    passed.   Thus,   it   is   evident   that   assessee         gets      two
opportunities to put forth its point of view before the finalization of the
assessment order, viz., firstly before the TPO and then the DRP. The
resultant assessment order passed after these twin opportunities is
again subject to appeal before the tribunal. In view of the aforenoted
safeguards provided by the legislature shielding the interest of the
assessee, we are of the considered opinion that there is no need to
device and introduce one more protection in terms of the recording of
detailed satisfaction by the A.O before making reference to the TPO
                                   6                       ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

that the price charged/paid in an international transaction is not at
ALP.

2.4.    The ld. AR harped on one-two lines from the judgment of the
Hon'ble jurisdictional High Court in the case of Sony India (supra) to
unsuccessfully bolster his point of view about the necessity of
formation of a considered view (analogous to that u/s 147 before
issuing notice u/s 148) by the AO before making a reference in terms
of clauses (a) to (d) of section 92C(3). There is hardly any doubt that
the requirements of section 147 are quite distinct from that of section
92. Even otherwise, it is trite that requirements of one section cannot
be bodily lifted and read into another unless the statute so mandates.
Admittedly the value of the assessee's international transactions
standing at Rs.116 crore is far in excess of the threshold limit of Rs.5
crore given in the Instruction, which, in turn, has been issued in the
context of section 92CA. It is significant to note that the case of the
assessee is covered under section 92CA and not section 92C as has
been argued which is also evident from a reading of ground no.3.
Arguments have been advanced by taking recourse to clauses (a) to
(d) that are part of section 92C(3) and not section 92CA, which is
really applicable to the assessee. When the Hon'ble Delhi High Court in
Sony India (supra) has considered and decided the question of validity
of the Instruction issued in the context of section 92CA against the
assessee, which is fully and directly applicable in the instant case, we
fail to appreciate as to how the ratio decidendi of the judgment can be
kept at bay and a different conclusion arrived at. Everyone, be the
contesting parties or the authorities, acting under the jurisdiction of
the Hon'ble High Court are bound by its judgment. It is neither
                                        7                           ITA No. 722/Del/2014
                                                            Techbooks International Pvt. Ltd.

permissible to the appearing parties to seek to canvass a contrary
view nor the authorities to be swayed by such arguments and render a
divergent view.     As the case of the assessee is governed by the
Instruction issued in the context of section 92CA and there are direct
judgments of the Hon'ble jurisdictional High Court against the
assessee on this issue, we jettison this contention raised on behalf of
the assessee.

2.5.    The ld. AR also submitted during the course of arguments that
his objection would be taken care if something is brought on record to
demonstrate that the AO did form an opinion as to the fulfillment of
the conditions as stipulated in sections 92C/92CA. We are unable to
countenance this contention for the obvious reason that when there is
a procedure prescribed for doing a particular thing and that thing is
done by the concerned authority, then the presumption is that the
requisite    prescribed     procedure       was    properly          followed.        This
presumption would fail if the assessee brings on record some cogent
material to indicate that the authority failed to follow the prescribed
procedure.    A   bald    statement   about       not   fulfilling     the     requisite
formalities by the concerned authority, unbacked by any evidence,
cannot be accepted. If such a contention is accepted, then it would
open floodgates of disputes thereby causing unnecessary delay in the
disposal of appeals inasmuch as the assessee would be challenging
each and every step taken by the AO demanding proof of having
complied with the requisite requirements. Obviously, such a position
cannot be accepted. The nutshell is that the prescribed procedure is to
be presumed as having been rightly complied with by the concerned
authority unless it is specifically and explicitly shown otherwise.
                                   8                       ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

Scrutiny in this regard can be undertaken by the appellate authorities
only when the assessee adduces some evidence to indicate that there
was a failure on the part of the authority to adhere to the prescribed
procedure. No material worth the name has been brought on record by
the assessee to demonstrate that the AO failed to form a prima facie
view at the time of making a reference to the TPO. Finding no merit in
this legal ground, we dismiss the same.


II.    RULE OF CONSISTENCY
3.1.      Next argument taken by the ld. Counsel for the assessee is
that no TP adjustment was called for in the extant year inasmuch as
the assessee's working of ALP for the preceding year was accepted by
the authorities. He relied on the judgments of the Hon'ble Supreme
Court in Radhasoami Satsang Vs CIT (1992) 193 ITR 321 (SC) and CIT
Vs Excel Industries Ltd. 2013 358 ITR 259 (SC) to accentuate on the
rule of consistency.


3.2.     In principle, we appreciate the rule of consistency. It goes
without saying that if a particular issue has been decided in a
particular manner in a preceding year, similar view should be taken on
such issue in the subsequent year. But it is pertinent to note that the
rule of consistency is not without exception. It comes with a rider that
there should be no change in the factual or legal position governing
that issue in the preceding year vis-à-vis the succeeding year. If the
facts and circumstances and the legal position obtaining in the
preceding year is similar to that in the later year, then the view taken
in the preceding year should ordinarily be followed. However, we find
                                    9                       ITA No. 722/Del/2014
                                                    Techbooks International Pvt. Ltd.

that the instant case falls in the exception to the rule of consistency.
It is relevant to highlight that presently we are dealing with the
applicability of Chapter-X, being special         provision relating to
avoidance of tax. The core of this Chapter is that any income arising
from an international transaction should be computed having regard to
the Arm's Length Price. Certain methods have been prescribed for the
determination of ALP. Under the Transactional Net Margin Method
(TNMM), which has been applied in the present case, the ratio of net
operating profit margin to one of the bases adopted by the assessee is
compared with similar base of the comparables for ascertaining
whether the assessee's international transactions are at ALP. Certain
filters are applied for choosing comparables, which form the bedrock
for the setting of the benchmark. The profit margin or even the
comparables sometimes undergo change from one year to another.
Simply because the Arm's Length Price declared by the assessee was
accepted in a preceding year does not put an embargo on the powers
of the authority to determine the ALP of the international transactions
for the subsequent year. There are several factors which are taken into
consideration for determining the ALP of an international transaction.
It is also quite possible that a particular case incomparable in one year
may become comparable in the subsequent year and vice versa. The
ld. DR submitted that some of the assessee's own chosen comparables
for the preceding year are not there in the list of comparables for the
instant year. This contention has not been controverted on behalf of
the assessee. Further a case though functionally comparable may find
exclusion from the list of comparables for a year because of certain
specific filter in one year, such as the `Related Party Transactions'
                                     10                        ITA No. 722/Del/2014
                                                       Techbooks International Pvt. Ltd.

breaching the reasonable percentage, but it may again find its place in
the list of comparables for the subsequent year. The mere fact that no
Transfer Pricing Adjustment was made in the preceding year would
simply mean that the profit shown by the assessee from its
international transactions is equal to or more than the benchmarked
profit. If the assessee has shown profit at Arm's Length Price in one
year, which has been accepted as such, it does not necessarily mean
that the assessee's profit from international transaction in the
succeeding year is also better than that of the comparables. It is
axiomatic that if profit from the assessee's international transactions in
succeeding year is equal to or better than that of comparables after
considering the cushion available, then there can be no question of
making any transfer pricing adjustment notwithstanding the fact that
the international transactions were scrutinized in terms of section 92.
The crux of the matter is that there are several factors which affect the
determination of the ALP, which may be present in one year but
absent in the other year. It is too far to claim that the acceptance of
international transaction at ALP in one year should preclude the
authorities from the determination of ALP in a subsequent year. We,
therefore, reject this contention.



III.    FOREIGN EXCHANGE FLUCTUATION GAIN/LOSS

4.1.     The next issue taken up by the ld. AR is against the exclusion
of     foreign   exchange   fluctuation   gain/loss   from     the      operating
revenue/cost of the assessee as well as the comparables.
                                    11                           ITA No. 722/Del/2014
                                                         Techbooks International Pvt. Ltd.




4.2.   Briefly stated the facts of this issue are that the assessee is a
wholly owned subsidiary of Aptara. It offers a combined print and
electronic delivery solutions based on XML to publishers. It is engaged
in development of customized electronic data. It converts data from
hard copy or files into XML/SGML/HTML, creating electronic style file.
The assessee earned revenue of Rs. 113.76 crores from its Associated
Enterprises (AEs) towards provision of I.T Enabled data conversion
services. The assessee chose TNMM as the most appropriate method
and Profit Level Indicator (PLI) of Operating profit to Total Cost. The
assessee declared its OP/OC ratio at 15.64%. Five comparable cases
were chosen, whose average PLI, on the basis of weighted average for
the current year and immediately preceding two years, was shown at
12.81%. On the basis of such calculations, it was claimed that its
international    transactions were at      ALP. The TPO            accepted the
application of    TNMM     as the   most       appropriate    method          without
disturbing the PLI of OP/OC. However, the use of multiple years' data
was restricted to only the current year's data. All the five comparables
reported by the assessee in its TP study were held to be incomparable.
The TPO conducted his own search and came up with certain new
comparables as tabulated on page 14 of his order. The assessee also
selected certain new comparable cases and offered to the TPO for
consideration.    After   considering    the    entire   material,        the      TPO
shortlisted five comparable cases with their OP/TC as under:
                                    12                       ITA No. 722/Del/2014
                                                     Techbooks International Pvt. Ltd.

       Sl.   Name of the Company                     OP/TC(%)
       No.
       1.    Aditya Birla Minacs Worldwide Ltd.      13.91%
       2.    Crossdomain                             25.63%
       3.    Cosmic Global                           48.12%
       4.    Cepha Imaging                           20.08%
       5.    Coral Hub                               36.93%
             Average                                 28.93%


4.3.     Thereafter, he proceeded to compute the ALP and proposed
transfer pricing adjustment of Rs. 14,33,87,402/-. Pursuant to the
direction given by the DRP, the A.O passed the final order making
addition on account of TP adjustment at Rs. 18,29,51,057/-. The
assessee is aggrieved against this addition.


4.4.    The first issue agitated before us is against treating the foreign
exchange fluctuation as an item of non-operating nature which was
excluded by the TPO for the purposes of computing the margin of the
assessee as well as of the comparables. The ld. AR contended that the
assessee     earned   foreign   exchange     gain   amounting            to      Rs.
1,17,78,842/- which was declared as part of the operating profit by
reducing it from the operating expenses incurred by the assessee, but
the TPO reduced such amount of foreign exchange fluctuation gain
from the assessee's profit and also embarked upon the same exercise
for excluding the effect of similar foreign exchange gain/loss from the
financial results of the five comparables cases finally chosen by him.
It was urged that the forex gain/loss is required to be considered as a
part of the operating revenue/cost.
                                       13                         ITA No. 722/Del/2014
                                                          Techbooks International Pvt. Ltd.




4.5.          We observe that the assessee raised objection at Serial No.
11 before the DRP contending for the inclusion of foreign exchange
gain/loss as part of the operating cost/revenue. The DRP vide page 9
of its order directed the TPO: `to rectify the arithmetical errors in the
computation of margins of the comparables in accordance with the
provision of the Act'. There is no decision on the assessee's objection
against not including foreign exchange gain/loss as the operating
revenue/cost.     On a specific query, it was pointed out by the ld. AR
that   the    assessee's    foreign   exchange    gain    resulted        from       the
international transactions in question which are of the revenue
character.


4.6.   We find merit in the contention raised on behalf of the assessee
about the inclusion of foreign exchange gain/loss in the operating
revenue/costs of the assessee as well as that of the comparables.
When we advert to the nature of such foreign exchange gain earned
by the assessee, it comes out that the same is in relation to the
revenue earned by the assessee from its A.Es in connection with the
provision of I.T Enabled data conversion services, which has been
reported as international transaction to the tune of Rs. 113.76 crores.
When    the     foreign    exchange   gain   directly    emanates         from       the
consideration received for rendering of services to its A.E, we fail to
appreciate as to how such foreign exchange gain fluctuation can be
considered as an item of non-operating revenue. What is true for
foreign exchange gain from the transactions of the revenue nature
being considered as part of operating revenue is equally true for the
                                    14                      ITA No. 722/Del/2014
                                                    Techbooks International Pvt. Ltd.

foreign exchange loss being considered as part of operating costs from
the transactions of the revenue nature.


4.7.       The Special Bench of the Tribunal in ACIT Vs Prakash I.
Shah (2008) 115 ITD 167 (Bom)(SB) has held that the gain due to
fluctuation in the foreign exchange rate emanating from export is its
integral part and cannot be differentiated from the export proceeds
simply on the ground that the foreign currency rate has increased
subsequent to sale but prior to realization. It went on to add that when
goods are exported and     the invoice is raised in the currency of the
country from where the goods are sold and subsequently when the
amount is realized in that foreign currency and then converted into
Indian rupees, the entire amount is relatable to the exports made. In
fact it is only the translation of invoice value from the foreign currency
to the Indian rupees. It held that the exchange rate gain or loss
cannot have a different character than the transaction to which it
relates. The Bench further found fallacy in the submission made on
behalf of the Revenue that the exchange rate difference should be
detached from the exports and be considered as an independent
transaction. Eventually, the Special Bench held that such exchange
rate gain arising from export cannot be viewed in a different shade.


4.8.    In the context of transfer pricing, the Bangalore Bench of the
Tribunal in SAP Labs India Pvt. Ltd. Vs ACIT (2011) 44 SOT 156
(Bangalore) has held that foreign exchange fluctuation gain is part of
operating profit of the company and should be included in the
operating revenue. Similar view has been taken in Trilogy E Business
                                      15                         ITA No. 722/Del/2014
                                                         Techbooks International Pvt. Ltd.

Software India (P) Ltd. Vs DCIT (2011) 47 SOT 45 (URO) (Bangalore).
The Mumbai Bench of the Tribunal in S. Narendra Vs Addtl. CIT (2013)
32 taxman.com 196 has also laid down to this extent. In view of the
foregoing discussion, we are of the considered opinion that the amount
of foreign exchange gain/loss arising out of revenue transactions is
required to be considered as an item of operating revenue/cost.


4.9.     Since, the TPO has computed PLI of the assessee as well as
comparables by ignoring the amount of forex gain/loss, we set aside
the impugned order and remit the matter to the file of AO/TPO to
recompute the assessee's margin as well as that of the comparables
by considering foreign exchange gain/loss as an item of operating
revenue/cost. We want to make it clear that our finding in this regard
is restricted to considering forex gain/loss from the transactions of the
revenue nature as part of operating revenue/cost. If the forex
gain/loss is relatable to capital account, then that cannot be
considered as part of operating revenue/cost. In the fresh exercise to
be undertaken by the TPO/AO, it is directed to examine the nature of
forex gain/loss in the light of our above observations not only in the
case of the assessee but also the comparables for deciding as to
whether such forex gain/loss should constitute part of operating
revenue/costs.


IV.    CORAL HUB LTD.

5.1.    The next objection of the ld. AR is against the inclusion of the
case   of   Coral   Hub   Ltd.   (earlier   known   as    Vishal       Information
                                   16                      ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

Technologies Ltd.[VITL]) in the list of comparables. The ld. AR argued
that the TPO erred in including this case in the list of comparables,
which is quite different from that of the assessee. It was submitted
that this company was involved in an altogether different business
model of outsourcing activities; owning significant intangibles with
minimum employees cost ratio as compared to that of the assessee.
He stated that this case has been held by the revenue authorities
themselves to be incomparable for the immediately preceding year,
that is, A.Y. 2008-09. It was pointed out that this case was included
by the TPO in the list of comparables while determining the ALP for the
assessment year 2007-08. Inviting our attention towards the order
passed by the Tribunal in assessee's own case for the assessment year
2007-08, the ld. AR contended that this case has been held to be
incomparable.     It was, therefore, prayed that this case be excluded
from the list of comparables for the instant year. Per contra, the ld. DR
relied on the impugned order on this issue.



5.2.      After considering the rival submissions and perusing the
relevant material on record, we find that the contention of the ld. AR
that the case of VITL be excluded because it was done for the A.Y.
2008-09, is not tenable. It is relevant to note that this case was held
to be not comparable on the basis of filter of `Related party
transactions at more than 25%', thereby taking it out of the purview
of     uncontrolled transaction. Nothing has been brought on record to
demonstrate that the related party transactions of VITL for the current
year exceed the threshold limit of 25%. While dealing with the rule of
consistency supra, we have observed that simply because a case has
                                    17                      ITA No. 722/Del/2014
                                                    Techbooks International Pvt. Ltd.

been held to be incomparable for one year cannot per se be considered
as incomparable for the succeeding year. It is essential to consider the
basis on which such case was held to be not comparable. If the same
basis continues in the succeeding year, then, of course, such case
merits exclusion. As the base for leaving out the case of VITL from
comparables for the immediately preceding year has not been proved
for the instant year, we cannot approve this contention of the ld. AR.


5.3.    However, we find from the Tribunal order for the assessment
year 2007-08 that the case of Vishal Information Technologies Ltd.
(now called as Coral Hub Ltd.) has been held to be not comparable
because of different business model as it was outsourcing execution of
contract from external vendors. The Tribunal has noted in para 13 of
its order, a copy of which is available on record, that the employee
cost in the case of VITL was a mere 3% of the total cost, whereas in
the case of the assessee it stood at 60%. The position for the current
year is also more or less similar. The employees cost of VITL for the
instant year is at 2.71% of the total cost as against a little more than
60% of the assessee.


5.4.      At this juncture, it is paramount to record the contention of
the ld. DR that the filter of employees cost to total cost is not relevant
as it does not ultimately impact the overall profitability. He fortified
this contention on the strength of the order passed by the Hyderabad
Bench of the Tribunal in the case of DCIT Vs Deolite Consulting India
Pvt. Ltd. (a copy of order placed on record) in which it has been held
                                   18                      ITA No. 722/Del/2014
                                                   Techbooks International Pvt. Ltd.

that such a filter does not impact the overall profitability and the
specific case of VITL has been held to be comparable.


5.5.     Confronted with two orders passed by the tribunal taking
diagonally opposite views on this filter,   we find that one of such
orders has been passed in the case of this very assessee for the
preceding year directing the exclusion of VITL from the list of
comparables on the basis of the filter of employees cost to total cost.
One option in such circumstances is to refer the matter for the
constitution of special bench on this issue and the second is to follow
the view taken in assessee's own case. Without making an indepth
analysis, prima facie we feel that the view taken by the tribunal in
assessee's own case is equally convincing vis-à-vis the contrary view
taken by the Hyderabad Bench. Since the rule of consistency enjoins
to follow the view taken in the preceding year when there is no change
in facts or law, we are persuaded to follow the view canvassed by the
Tribunal in assessee's own case, more so, when the ld. DR failed to
show that the facts and circumstances of the instant year are not
similar to those of the A.Y. 2007-08.   However, we want to make it
clear that our decision to follow the view taken by the tribunal in
assessee's own case is founded on the principle of stare decisis without
independent evaluation of the rival views. The issue, as to which of the
two views is more convincing de hors any specific background as is
there before us in which the tribunal has taken one view in assessee's
own case, can be independently examined at some other appropriate
time in a suitable case.   Since the Tribunal in a preceding year has
held this case to be not comparable on the strength of filter of
                                      19                       ITA No. 722/Del/2014
                                                       Techbooks International Pvt. Ltd.

percentage of employees cost to total cost and the assessee passes
the test of this filter for the instant year as well, we direct the
exclusion of this case from the list of comparables.



6.      Initially, the ld. AR made certain submissions against the
exclusion of some comparables cases chosen by the assessee and
inclusion of some fresh cases by the TPO. However,             it was later on
submitted during the course of hearing that if the Bench agrees with
the assessee's contention on the inclusion of foreign exchange
fluctuation gain/loss in the operating revenue/cost in assessee's case
as well as the comparables and the exclusion of the case of Coral Hub
Ltd.,    he will not press for adjudication on other issues. As we have
decided these two issues in assessee's favour, there is no need to deal
with the other grounds inter alia challenging the inclusion or exclusion
of other cases in the final list of comparables. We consider it our duty
to record that on such submission advanced by the ld. AR, we did not
permit the ld. DR to argue in support of the orders passed by the
authorities below on such other issues.


7.      In the result, the appeal is partly allowed for statistical purposes.




            Sd/-                                               Sd/-
  (Rajpal Yadav)                                    (R. S. Syal)
JUDICIAL MEMBER                                ACCOUNTANT MEMBER
Dated: 28/4/2014
*Subodh*
                                             20                           ITA No. 722/Del/2014
                                                                  Techbooks International Pvt. Ltd.



Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
                                                               ASSISTANT REGISTRAR




                                                       Date    Initial
1.    Draft dictated on                            24.4.2014                PS
2.    Draft placed before author                   28.4.2014                PS
3.    Draft proposed & placed before the                                    JM/AM
      second member
4.    Draft discussed/approved by Second                                    JM/AM
      Member.
5.    Approved Draft comes to the Sr.PS/PS                                  PS/PS
6.    Kept for pronouncement on                                             PS
7.    File sent to the Bench Clerk                                          PS
8.    Date on which file goes to the AR
9.    Date on which file goes to the Head Clerk.
10.   Date of dispatch of Order.
*

 
 
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