S.V. MEHROTRA, ACCOUNTANT MEMBER 
AND SMT. DIVA SINGH, JUDICIAL MEMBER

ORDER

Diva Singh, Judicial Member - Both these appeals have been filed by the Revenue against the separate orders dated 31.08.2010 and 29.10.2010 of CIT(A)-XX, New Delhi pertaining to 2005-06 assessment years wherein in the first appeal the Revenue is aggreieved by the order of the CIT(A) which has been passed against the TPO's order dated 17.10.2008 against which the assessee filed a petition u/s 154. As a result of this order the addition made on account of arm's length price amounting to Rs.2,11,23,382/- was reduced to Rs.71,45,622/-. The second appeal has been filed by the Revenue against the order of the CIT(A) wherein he has deleted the addition made by the TPO. Aggrieved by both these actions, the Revenue is in appeal the effective ground in ITA No.-4831/Del/2010 is Ground No-2 and 2.1 which reads as under:—

"2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in restricting the addition u/s 92CA of the Act to Rs.71,45,622/- as against Rs.2,11,23,382/- on account of TPO adjustment.

2.1. The Ld. CIT(A) ignored the fact recorded by the TPO and also the fact that the calculation has been correctly done by the TPO."
2. The grounds raised in ITA No-62/Del/2011 on the other hand reads as under:—
"2. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in deleting the remaining addition of Rs.71,45,622/- made by the AO u/s 92CA of the Act on account of TPO adjustment.
2.2 The Ld. CIT(A) ignored the fact recorded by the TPO and also the fact that the calculation has been correctly done by the TPO."

2.1 The record shows that the assessee is incorporated as an Indian Company w.e.f 01.06.2004. As per its business profile it was engaged in the business of distribution and marketing of fertilizers in India. The assessee operates a 100% subsidiary of GNS II Corp USA which in turn is owned by the MosaicCompany, USA. In the year under consideration, the assessee was specifically dealing in the Di-Ammonium Phosphate ('DAP') fertilizer. As per record the Appellant is also engaged in providing certain support services to its Associated Enterprises. The main international transaction for the assessee as per its claim was Purchase of fertilizers for further resale, without any value addition, in the Indian market.

2.2 A perusal of the Transfer Pricing Officers TPO's order hereinafter referred to as the TPO shows that the assessee as per para 6.2 chose a Comparable Uncontrolled Price (hereinafter referred as 'CUP') of DAP fertilizers as on 12.10.2004 and 25.10.2004 from price list of Fertecon Price Service. The record shows that as per assessee's claim the Fertecon Report is a trade journal published weekly by Fertecon Limited and is widely used in the fertilizers industry. The said Report was also relied upon by the TPO.

2.3 The TPO considered the methodology applied by the assesssee in order to consider the Arm's Length the price (hereinafter referred to as the ALP of the following transactions:—

"Date	Commodity	Quantity	Rate (USD/MT)	Terms of supply
12.10.2004	DAP fertilizer	41,140.90	277.53	CFR
25.10.2004	DAP fertilizer	41,066.00	277.27	CFR"

2.4. He observed that the methodology by the assessee was in the following manner:—
"Adjustment to FOB CUP of DAP fertilizer

?		The assessee had taken DAP rate of US gulf FOB bulk @ US$ 235/mt as on 14.10.2004 and 21.10.2004 as the CUP(FOB).
?		It added freight for US-Gulf-India at US$ 45-50 (cargo size more than 35,000 tons) to CUP FOB of US$ 235/mt
?		It made adjustment for credit purchase by PLI of US$ 1.17 and US$ 0.81 on 12.10.2004 and 25.10.2004 respectively.

After making above adjustment value of comparable CUP was computed as under :—
CUP for consignment No.1 for 41,140.90 MT for invoice dated 13.10.2004 on contract dated 12.10.2004

	FOB value of CUP	= US$ 235/mt
	Add freight	= US$ 47.50/mt
	Add credit cost	= 1.17/mt
	Value of CUP	US$ 283.67
	(Wrongly mentioned as US$ 285.81 in Annexure 2A)
	CUP for consignment No.2 for 41,066 mt
	FOB value as on 14.10.2004	= US$ 235.0/mt
	Add: Freight	= US$ 47.50/mt
	Add: Credit cost	= US 0.81/mt
	Value of CUP	= US$ 283.31
	(wrongly mentioned in US$ 284.78 in Annexure 2A)"

2.5 The said methology was not accepted by the TPO as a result of which he rejected the FOB CUP selected by the assessee and selected CFR CUP on the basis of the Fertecon Price Service while doing so he took into consideration the fact that the effective credit period of first shipment was 90 days consequently effective credit PLP was taken as US$ 1.17 and for the second shipment the credit period being 60 days the credit cost was taken was US$ 0.81. The reasons prevailing with the TPO for rejecting the assessee's methodology are set out in para 6.3 of the TPO's order which is extracted hereunder :—
6.3 Comments of TPO:

I have carefully examined the purchase invoices, sale invoices and Fertecon Price Service quoted price and have reached to following important facts:

"(i)		DAP fertilizer of 41,140.90 mt was purchased @ US $ 277.53 mt on CFR basis under contract dated 12.10.2004 vide invoice dated 13.10.2004 and the same consignment was sold under high sea to another AE of the assessee in Hongkong on 18.10.2004. It is further noted from sale invoice that loading was undertaken at TAMPA, Florida USA and final destination of the consignment was Karachi port Pakistan.
(ii)		Similarly another consignment of DAP fertilizer of 41,066 mt was purchased @ US$ 277.27/mt on CFR basis vide invoice dated 13.10.2004 but surprisingly their invoice dated 13.10.2004 make reference of contract dated 25.10.2004 which is not possible. In my view this invoice had quoted wrong contract date. The contract dated 12.10.2004 was revised on 25.10.2004; accordingly the correct contract date is 12.10.2004. This consignment was sold under high sea to the AE in Hongkong vide invoice dated 20.10.2004. It is noted from invoice that port of loading of the fertilizer was Townsvilli, Australia and final destination was Karachi port, Pakistan.
(iii)		It is evident from above fact that both the purchases were made vide invoice dated 13.10.2004 on CFR basis as per agreement dated 12.10.2004.
(iv)		I have carefully examined the price list of Ferticon Price Service and have noted that contain CFR prices bulk prices of DAP fertilizer at Indian high sea which were @ US$ 271-277/mt as on 7th October and 14th October. Since India bound CFR rate of DAP fertilizer was available, I could not find any logic for the assessee of taking FOB value rate and then making subsequent adjustments of freight etc. The only incentive in making such round out calculation could be some how to show CUP having more value as compared to purchase price. Since direct CUP for India bound shipment having identical contractual form of transportation (CFR.) was available, it is held that this direct CUP having identical terms of delivery of DAP fertilizer shall be used for making comparability analysis of import price of DAP fertilizer by the assessee instead of CIJP with different terms of delivery as wrongly chosen by the assessee.
(v)		It is evident from above finding that direct CUP of US$ 271-277/mt at CFR basis (which included freight and cost) is available for relevant date 12.10.2004 the same has been taken and no adjustment on account of freight shall be mode to the CFR CUP price.
(vi)		I have further noted that the price quoted on Ferticon Price Serviceare net of credit accordingly the above referred to direct CUP (CFR form) would be adjusted by effective credit PLI for both the consignments as disclosed by the assessee in Annexure 2A.
(vii)		I have already held in above para (iv) that a direct CUP with identical contractual term of transportation was available but the assessee had wrongly selected CUP having different contractual terms of transportation. Without prejudice to above conclusion, I also examined if freight adjustment of equal amount of FOB quoted value for both shipments was valid? It is pertinent to mention that first shipment of fertilizer was loaded from USA whereas second shipment was loaded from Australia and destination being the same i.e. India high sea, accordingly, equal amount of freight adjustment of US$ 47.50/mt to FOB value CUP by the assessee was incorrect and the same is not acceptable for the reason that both shipments from two different destinations would have two different freight rates. The Ferticon Price Service, does not have Australian freight accordingly, adjustment is not even possible to the FOB value CUP for consignment No. 2."

2.6 Accordingly he computed the adjusted cups for both shipments as under:—

(viii) In view of the above discussion I reject FOB CUP selected by the assessee and have selected CFR CUP on the basis of Ferticon Price Service, a document relied upon by the assesssee. Since both the purchases were on credit of 90 and 60 days CFR CUP shall be adjusted for effective credit PLL of US$ 1.17 for first shipment and US$ 0.81 for second shipment.

Consignment No.1
For the first shipment invoice dated 13/10/2004 (contact dated 12/10/2004) for 41140.90 mt

	Step1	Purchase price paid to AE	=US$277.53/mt
	Step 2	Indian CFR bulk DAP Fertilizer Rate on 7th October and 14th October 2004 Average of High/low Rate	=US$274/mt
	Step 3.	Adjustment for credit Purchase (90 days) add Effective PLR as claimed By the assessee	=US$1.17/mt
		Adjusted CUP	US$275.17/mt
	Step 4.	Excess purchase price paid To the AE as compared to CUP (US$277.53-US$275.17)
		Total excess price paid	=US$97,092.52
		(US$2.36 × 41140.90)
	Step5.	Conversion in Indian Rupee	=Rs.44,52,178/-
		Daily average of US$ as on 12/10/2005 @ Rs.45.855 for 1US$, (45.855×97092.52) (source-oanda.com)

Consignment 2
For the second shipment invoice dated 13/10/2004 (contract dated 12/10/2004 which was amended on 25/10/2004) for 41066mt

	Step1	Purchase price paid to AE	=US$277.27/mt
	Step.2	Indian CFR bulk DAP Fertilizer rate on 7th October 2004 Average of High/low rate	=US$274/mt
	Step3.	Adjustment for credit purchase (for 62 days) add effective PLR As claimed by the assessee	=US$0.81/mt
		Adjusted CUP	US$274.81/mt
	Step 4.	Excess purchase price paid To the AE as compared to CUP (US$277.27-US$274.81)	=US$ 2.46/mt
		Total excess price paid (US$2.46 × 41066))	=US$1,01,022.36
	Step 5.	Conversion in Indian Rupee	=Rs.46,32,380.36/-
		Daily average of US$ as on 12/10/2005 @ Rs.45.855 for 1US$, (45.855×101022.36) (source-oanda.com)

2.7 The TPO thereafter also considered the fact that the assessee had made purchases of the following two consignments from its AE:—

	"No. of Consignment	Date	Commodity	Quantity (MT)	Rate (USD/MT)	Terms of supply
	No.3	20.08.2004	DAP fertilizer	46,768	266.50	CFR
	No.4	20.08.2004	DAP fertilizer	12,700	272.14	CFR"

2.8 Referring to the facts he observed that therein the assessee had chosen CUP of DAP fertilizer as on 19/8/2005 being the nearest date from the date of contract which was dated 20.08.2005 from the price list of Fertecon Price Service. He did not argue with the argument of the assessee that the transaction was at arm's length. The reason for not agreeing are set out in para 6.6 of his order. It took note of the fact that as per the invoice the port of loading the fertilizers was USA and the final destination was Jamnagar, India and being of the view that since price of fertilizers on CFR basis were available in India he questioned the logic of taking FOB value rate and then making subsequent adjustment of freight etc despite the fact that direct CUP for India bound shipment having identical Contractual Form of Transportation (hereinafter referred as "CFR') was available. He was of the view that CUP for India specific price should be considered for making comparability analysis of import price of DAP fertilizers from AE instead of CUP with different terms of delivery were found to be wrongly chosen by the assessee.

2.9 The reasoning is extracted from his order for ready reference:—
6.6 Comments of TPO:
I have carefully examined the purchase invoices, sale invoices and Fertecon Price Service quoted price and have reached to following important facts.

(i)	Consignment 3 of DAP fertilizer of 46,768 mt was purchased from the AE@ US$ 266.50/mt on CFR basis vide agreement dated 20/8/2004 on credit for 90 days and the same consignment was sold in India. It is further noted from sale invoice that loading was undertaken at USA and final destination of the consignment was Jamnagar, India.
(ii)	Similarly consignment 4 of DAP fertilizer of 12,7000 mt was purchased @ US$ 272.14mt on CFR basis vide agreement dated 20/8/2004 on credit of 365 days. This consignment was sold in India. It is noted from invoice that port of loading of the fertilizer was USA and final destination was Jamnagar, India.
(iii)	It is evident from above facts that both the purchases were made on CFR basis as per agreement dated 20/8/2004.
(iv)	I have carefully examined the price list of Ferticon Price Service and have noted that congains CFR prices bulk prices of DAP fertilizer at India port which were @ US$260-263/mt as on 19/8/2008, a day prior to contract date (assessee had taken FOB CUP of the same date i.e, 19/8/2008). Since DAP fertilizer on CFR basis in India was available, I could not find any logic for the assessee of taking FOB, value rate and then making subsequent adjustments of freight etc. The only incentive in making such round out calculation could be some how to show a CUP having more value as compared to purchase price. Since direct CUP for India bound shipment having identical contractual form of transportation (CFR) was available, it is held that this direct CUP having identical terms of delivery of DAP fertilizer shall be used for making comparability analysis of import price of DAP fertilizer by the assessee from the AE instead of CUP with different terms of delivery as wrongly chosen by the assessee.
(v)	It is evident from above finding that direct CUP of US$ 260-263/mt at CFR basis (which included freight and cost) is available for relevant dated 20/8/2004 and the same has been taken, accordingly, no adjustment on account of freight shall be made to the CFR CUP price.
(vi)	I have further noted that the price quoted on Ferticon Price Service are net of credit accordingly the above referred to direct CUP (CFR form) would be adjusted by effective credit PLI for the consignments 3 & 4 as disclosed by the assessee in Anneuxre-1
(vii)	I have already held in above para (iv) that a direct CUP with identical contractual term of transportation was available but the assessee had wrongly selected CUP having different contractual terms of transportation. It is pertinent to mention here that for consignment 4, the assessee had computed CUP of US$ 277.97 as against purchase price of US$ 272.14. However, a careful scrutiny of computation of CUP has reveled that actual cost of CUP as per assessee's computation is as US$ 270.50 which was wrongly computed at US$ 277.97 in Annexure 1. These facts have proved that even as compared with CUP selected by the assessee for consignment 4 the purchase of DAP @ US$ 272.14 was not at arm's length price.
(viii)	In view of above discussion I reject FOB CUP selected by the assessee and have selected CFR CUP on the basis of Ferticon Price Service, a document relied upon by the assessee. Since both the purchases, consignment 3 & 4 were on credit of 90 and 365 days respectively, CFR CUP shall be adjusted for effective credit PLL of US$ 1.11 for consignment 3 and US$ 4.50 for 4th consignment. The adjusted CUPs for both the shipment are computed as under:

Consignment No.3
Contract dated 20/8/2004 for 46,768mt of DAP fertilizer

Step 1	Purchase Price paid to AE	=US$266.50/mt
Step 2.	Indian CFR bulk DAP fertilizer Rate on 19/8/2004 Average Of High/low rate	=US$ 260-263/mt
		=US$261.4/mt
Step 3.	Adjustment for credit purchase (90 days) add effective PLR	= US$1.11/mt
	Adjusted CUP	=US$ 3.89/mt
Step 4.	Excess Purchase price paid to The AE as compared to CUP (US$3.89×46,768)	= US$181927.52

Consignment 4
Contract dated 20/8/2004 for 12,700mt of DAP fertilizer

Step 1	Purchase Price paid to AE	=US$ 272.14/mt
Step 2.	India CFR bulk DAP fertilizer Rate on 19/8/2004 Average of high/low rate	=US$260-263/mt
		=US$ 261.5/mt
Step 3.	Adjustment for credit purchase (for 365 days) add effective PLR As claimed by the assessee	=US$4.50/mt
	Adjusted CUP	=US$ 266/mt
Step 4.	Excess purchase price paid to the AE as compared to CUP (US$272.14-US$ 266)	=US$6.14/mt
	Total excess price paid	=US$77,978
	(ix) Total excess payment to the AE On consignment 3&4 US$ (181,927.52+77,978)
	Excess payment in Indian rupee @ 46.32 Rs. Per dollar as on 20.08.2008; rate taken from Oanda.com (Rs.46.32×259,905.52)	=Rs.120,38,823.96

7. It is evident from findings contend in Para 6.3 and 6.4 of this order that assessee has paid excess purchase price to its AE as per following details:

	Consignment	Excess Payment
	Consignmetn1.	44,52,178
	Consignment2	46,32,380
	Consignment 3 & 4.	1,20,38,824
		2,11,23,382

2.10 The TPO summarized his findings as under :—
"8. The main findings as recorded in this order may be summarized as under:—

(i)	I have determined the arm's length price of international transactions on the basis of CUP method which was selected as most appropriate method by the assessee.
(ii)	The assessee had selected CUP of purchase price of DAP fertilizer on the basis of Ferticon Price Service rate list. I have also selected CUP from same price list i.e, I have selected CUP from the documents submitted by the assessee.
(iii)	The assessee had purchase DAP fertilizer on CFR terms of delivery (i.e. cost+ freight) on the credit varying from 62 days to 365 days. The rate of DAP fertilizer on CFR terms for India shipment was quoted in the relied upon rate list for relevant date. However, the assessee had selected FOB purchase rate and had made adjustments for freight and credit in order to compute uncontrolled comparable CUP on CFR terms of payment for reasons best known to it. It is further noted that for some country of shipment the freight charges were not mentioned on the price list and the adjustment of the freight was made without basis. I have further noted various calculation mistakes in determining adjusted CUP by the assessee as noted in para 6.2, 6.5 and 6.6 (vii) of this order. In view of above findings, I have rejected the adjusted CUP applied by the assessee to benchmark international transaction.
(iv)	Since purchase price of DAP fertilizer on CFR terms of delivery was noted on the relied upon document, I have selected purchase price on CFR terms (which was identical to terms of purchase by the assessee) as uncontrolled comparable CUP after making adjustment for credit purchases.
(v)	The assessee was given number of opportunities of being heard vide order sheet entry and issue of notices.
(vi)	The transfer pricing studies have proved that purchase prices of consignment 1 to 4 were not at arm's length price and this resulted in adjustment of Rs.2,11,23,382."

3. Aggrieved by this, the assessee filed a petition u/s 154 before the TPO assailing the basis of the calculation of CUP regarding purchase of fertilizers from its AE stating that as per Annexure 1, Annexure 2A and Annexure 2B, the value of effective PLR had been mentioned in absolute terms and not in percentage terms which was not accepted by the TPO as a mistake apparent on the face of the record. Similarly the request that the ± 5% adjustment benefit under the proviso to section 92C(2) be made available to the assessee was also not accepted by the TPO.

3.1 Aggrieved by this the assessee moved an appeal before the CIT(A) assailing the rejection of the 154 petition filed by the assessee and also assailing the original TPO's order also.

4. The CIT(A) accepted the assessee's petition holding that there were mistakes apparent on the face of the record which were rectifiable u/s 154. Referring to the petition which is extracted at page 12 of the order dated 31.08.2010 she accepted the submission of the assessee that following the methodology adopted by the TPO, the amount of the adjustment should have been limited to Rs.71,45,622/-.

4.1 The same is extracted hereunder:—
"Table : Computation of corrected credit period cost

Consignment No.	PLR (in %)	Credit period in Days	Effective PLR (in %)	Average of highIndiaCFR Prices	Credit period cost (in US$/MT)	Credit period cost as used by the Ld. TPO
	A	B	C=[(A)/365] X (B)	D	E=C*D
1.	4.75	90	1.17	274	3.21	1.17
2.	4.75	62	0.81	274	2.21	0.81
3.	4.5	90	1.11	261.50	2.90	1.11
4.	4.5	365	4.50	261.50	11.77	4.50

As can be seen from the above table, the adjustment factor has changed. We now provide below the working of the adjustment amount following the methodology adopted by the TPO after incorporating correct amounts for credit period adjustment:
Table: Computation of adjustment amount after incorporating corrected credit period cost

	Consig- nment No.	Quan- tity (In MT)	Pur- chase price paid to Asso- ciate Enter- prise (US$/ MT)	IndiaCFR Bulk DAP ferti- lizer rate (US$/ MT)	Aver- age of high low rate	Adjust- ment for credit pur- chases	Adjusted CUP (US$/MT)	Excess Price paid by to AE (US$/ MT)	Total Excess Price paid (US$)	Total Excess Price paid (INR)
	A	B	C	D	E	F	G=E+F	H=C-G	I=G *B	J=I*exc- hange rate
	1.	41,140 .90	277.53	271-277	274	3.21	277.21	0.32	1319 8.9	605.236
	2.	41,066	277.27	271-277	274	2.21	276.21	1.059	4349 8.50	1,994,62 2
	3.	46,768	266.50	260-263	261.50	2.90	264.40	2.0984	9813 9.10	4,545,80 4
	4.	12,700	272.14	260-263	261.50	11.77	273.27	None	None	Since purchase price paid is lower than the comparable uncontrolled price hence, no adjustment is required to be made for this consignment
	Total									7,145,622

Thus, the above table clearly depicts that even the methodology adopted by the TPO the amount of adjustment should have been restricted to INR 7,145,622 instead of INR 2,11,23,382. Accordingly, the Appellant humbly submits that the addition made by the TPO be suitably rectified and the order of the TPO, denying the above rectification, be quashed."
4.2 The said issue was decided by the CIT(A) in the following manner:—

"I have carefully examined this issue and also considered the submissions made by the appellant and all other relevant material placed on record. In this regard, I have the following comments:

On perusal of the transfer pricing order and the submission made by the appellant there is no doubt that the TPO made an apparent order while calculating the amount of transfer pricing addition. The TPO erroneously considered the PLR to be an absolute number instead of percentage. Herein, it is important to note that the appellant in its submission dated 14th July 2008 very clearly mentioned the terms such as PLR and interest rates to denote the rates used by the appellant to compute the adjusted CUP. The terms use by the appellant are, in common parlance, considered to be in percentage rather than absolute numbers. Further, a careful consideration of the calculations made by the appellant in the said submission would also have revealed the fact that those numbers were meant to be in percentage.

Thus, I am of the view that on a careful consideration of the submission made by the appellant, the errors made by the TPO could have been avoided on a careful consideration of the facts available with the TPO. Further, I am also in agreement with the above calculations made by the appellant. Thus, without prejudice to anything contained later in this order, I limit the amount of addition made by the TPO to INR 7,145,622.

With regard to the other grounds raised by the Appellant viz. application of +/-5% range and import of one consignment on FOB vs. CFR price I am of the opinion that these were not apparent from records submitted before the TPO and hence are outside the scope of section 154 of the Income tax Act, 1961. Thus the same have not been dealt with in this order."

4.3 In the main appeal the CIT(A) took note of the submissions on behalf of the assessee that the sale price for fertilizers are controlled/regulated by the Government by way of Regulatory restrictions wherein the maximum retail price is filed, subsidies, distribution restrictions are imposed imports and even choice of technology, feedstock etc for the DAP fertilizers are controlled and monitored by the Government. The record shows that it was argued that in the circumstances the importer does not have any control over the sale price. It was submitted that sale price fixed by the regulators may be lower than the purchase price and the Government of India has a system of compensating the fertilizer Company through a subsidy mechanism. It is seen that it was also submitted that the assessee also resells the DAP fertilizers in India at the price fixed by the Indian Government and in the year under consideration had purchased from a single Associated Enterprise. It was further submitted that all the purchases are from the US Gulf Region which denotes an area in USA in West of Florida in US. It was submitted that the assessee has demonstrated the arm's length nature of its purchase of DAP transactions by application of Comparable Uncontrolled Price method as the most appropriate method which has been accepted by the TPO also. It was submitted that the assessee has relied on the publicly available information on External CUP from a weekly report called Fertecon Phosphate Report of Fertecon Report which has a trade journal published weekly by Fertecon Limited. It was stated that the said report provides prices at which the DAP fertilizers are traded internationally and the data provided is widely acknowledged within the fertilizers industry to be the most accurate, comprehensive, and authoritative and it also provides a timely and detailed foresight into the development of the global fertilizer industry and the data published by the Fertecon Report is used by all the leading corporations, trade bodies and government agencies belonging to the fertilizers industry throughout the world. It was further submitted that it is also relevant that these prices are also adopted by the Government of India while determining the subsidy. The application of CFR prices was assailed on the ground that it is reported for port of destination without disclosing the port of origin or port of dispatch and in order to benchmark its imports of DAP, the assessee identified "US Gulf FOB prices" published in the Fertecon report as the appropriate data for application of CUP for the following reason namely that the assessee had purchased DAP from US Gulf region and not from any other region i.e Morocco, Tunisia and the data relating to prices of imports in India on CFR terms was not considered on account of the following two factors namely; that neither the port of original; and nor the port of dispatch were sure which was not the position for the data pertaining to CFR price where the port of dispatch was fixed. It was argued that the assessee has made appropriate adjustments to the cost for variations for different credit terms/period and freight charges.

4.4 Accordingly the assessee after making adjustments for freight and credit terms justified its import transaction at arm's length by providing the comparable analysis of assessee's purchases which was stated to be less the adjusted CUP. The following table in support of the submissions advanced was relied upon before the CIT(A) The same is extracted from the order:—
"Comparison of Adjusted CUP with the Appellant's Import price

Date	Adjusted CUP in USD	Import price paid by the Appellant
20-Aug-04	268.95	266.50
20-Aug-04	277.97	272.14
7-Sep-04	277.97	272.43
18-Oct-04	287.3	268.50
25-Jan-05	293.15	272.50
12-Oct-04	285.81	277.53
25-Oct-04	236.39	227.27"

4.5 It is seen that the CIT(A) in para 15 of the impugned order referring to her order dated 31.08.2010 observed that in view of her order against the Rectification moved by the assessee u/s 154 before the TPO which resulted in reducing the overall amount of adjustment proposed by the TPO from Rs.2,11,23,382/- to Rs.71,45,622/- as such she was of the view that she was not required to further decide whether the application of CUP by the assesssee was reliable and correct or not. The relevant conclusion is reproduced from the said order:—

With respect to the above Ground NO. 4.2 has already been adjudicated vide my order dated 31st August 2010 with respect to the appeal against the order u/s 154 issued by the TPO reducing the overall amount of adjustment to Rs. 71,45,622/- from Rs.21,123,382. Thus the same is not perused in this order. From the remaining grounds of appeal following issues arise which require adjudication.

"(i)		Whether the application of CUP by the appellant was in a reliable and correct manner;
(ii)		Whether the TPO erred in determining the CUP for consignment dated October 25, 2004.
(iii)		Whether the TPO erred in allowing the benefit of +\5% range."

4.6 In the circumstances the CIT(A) came to the following conclusion :—

"24. I have carefully considered the submissions made by the appellant. In the current case there is no dispute regarding selection of most appropriate method. Instead the major point of dispute is with respect to application of US FOB gulf vis-a-vis India CFR prices.

25. After a consideration of the submission and Power Point Presentation and perusing the TPO's AO order made by the Appellant I am of the view that the Appellant has used the prices published in the Fertecon Report to establish the CUP. Fertecon Report is widely known amongst industry and is also used by the Government ofIndia to compute the subsidy offered to the Fertilizer companies. Further, there is no dispute on the use of Fertecon report to establish the CUP. Further, it was observed that the Fertecon Report along with US FOB Gulf Prices also contains India CFR prices. The major difference between the two prices are with respect to geographical location of the transactions. While US FOB Gulf prices denotes the prices for fertilizers imported from US Gulf region to India, India CFR prices depicts prices for fertilizers imported into India from any other geographical locations and hence, the port of origin in this case is unknown. In case of the Appellant, since all the imports made by the Appellant were from US Gulf region, US FOB Gulf prices were used by the Appellant. Further, suitable adjustments with respect to difference in freight and credit terms were made with respect to which again, there is no dispute between the TPO and the Appellant.

26. In this regard reliance is placed on the ruling provided by Hon'ble Tribunal in case UCB India Private Limited. In the said case the Hon'ble IT AT has held as follows.
Quote (Emphasis Supplied)

The Hon'ble ITAT in the case of UCB India (P.) Ltd. v.ACIT [2009] 30 SOT 95 (MUM) has summarized following principles relevany to CUP method and has laid down requirement for comparability analysis under CUP method:

?

Even a minor change in the properties of the products circumstances of the trade (billing period, amount of credit there in etc.) may have significant effect on the price and would greatly affect comparability under CUP method.

?

The CUP method require a high degree of comparability on quantity of product or services, contractual terms, (warranties, sales or purchase volumes, credit terms and transportation terms etc.) level of market (wholesale or retail etc), geographical market, date of transactions, intangible property associated with sale, foreign currency receipt and alternatives realistically available option with buyer or seller.

Unquote:

Date	Adjusted CUP in USD (US FOB Gulf prices)	Import price paid by the Appellant
20-Aug-04	268.95	266.50
20-Aug-04	277.97	272.14
12-Oct-04	285.81	277.53
25-Oct-04	236.39	227.27

*Working provided in para 14 above.

a.

The above table makes it very clear that that import prices paid by the Appellant are lower than the prices paid for the same product in uncontrolled transactions. Based on the same I hold the transactions undertaken by the Appellant with respect to purchase of DAP to be at arm's length and allow the appeal of the appellant.

(ii) Whether the TPO erred in allowing the benefit of +\5% range.

In view of the finding as above, this ground does not need any adjudication.
In view of the above the appeal of the appellant is allowed and the proposed addition by the TPO amounting to Rs.71,45,622 (Rs. 21,123,382) is deleted."
5. Aggrieved by these findings by way of these the two appeals the Revenue is in appeal before the Tribunal.

6. The hearing in the present appeals continued on various dates wherein the Ld. CIT DR heavily relying upon the TPO's order assailed the impugned order on the ground that the CIT(A) has erred in deciding that the international transaction with respect to purchase of fertilizers should be bench-marked by the use of US FOB Gulf prices instead of India CFR prices. It was his submission that the assessee has failed to prove that the transaction was at arm's length and the arguments that the prices are favourable when compared to the adjusted CUP based on US FOB prices is irrelevant as the market is India and it is Indiaspecific prices which should have been quoted. It was his vehement stand that only to oblige it's AE, the assessee has necessarily made purchases from the US and when the product is available in India, at a much lesser price the occasion to refer to US FOB Gulf Price for benchmarking the transaction has no logic. It was his submission referring to the various charts available on record that the issue is very simple and the correctness of the prices quoted in the Fetecon Report is not an issue. It was also candidly stated that the calculation mistakes corrected in the impugned order is also not the grievances of the Revenue. The grievance is posed on the legal principles as to which price is the correct price for benchmarking the transaction so as to decide whether the transaction was at arm's length or not. The issue at hand and the grievance of the Revenue calling for setting the legal position is that when the "Market" in the facts of the case is India then why justification for the transaction being at arm's length is being looked at from the point of port of origin as the port of origin is immaterial and what is material for considering the arm's length price is the destination point which is India. In this background it was submitted it has to be considered that has the assesssee shown its transaction at arm's length price. For determining the same it was submitted it is the price at which the specific product is available in India which is the relevant price as the market is India and even if assessee's argument is considered that it is necessarily required to purchase the product from its AE it was his vehement stand that this internal arrangement or need of the assessee cannot be taken into consideration for the issue at hand that was the transaction at arm's length price or not. It was argued that the Revenue has no role and is not concerned with the internal arrangements. The Revenue is only concerned that is the price of the assessee for the international transaction at arm's length or not. Keeping the fact in mind that the port of destination being India then for benchmarking purposes India specific prices be considered. The internal agreements, needs or constraints of the assessee or the regulatory controls to which its AE is subjected it was argued is not relevant to decide as to what an uncontrolled concern would have transacted for the said products in India. Reliance was placed upon the order of the CO-ordinate Bench in the case ofClear Plus India (P.) Ltd. v. Dy. CIT [2011] 10 taxmann.com 249 (Delhi).

6.1 On the other hand Ld. AR has all along argued that whatever method is followed no adjustments would be warranted. Addressing the facts on record it was argued that the CIT(A) on the peculiar facts and circumstances of the case has come to a correct finding as admittedly the Associated Enterprise of the assessee is located in Florida, USA. Accordingly the US Mexico and Gulf FOB prices close to the date of transaction have been taken. Referring to the arguments before the TPO and the CIT(A) at length it was argued that it had been demonstrated that after making necessary adjustments for freight rate which again is quoted from the Fertecon Manual and the credit rate the assessee has made adjustments. It was also stated that it had been argued that Fertecon rates from various markets in the world are available and no doubt IndiaCFR rates are also available but when in the facts of the present case the goods are sourced from Florida, USA than the most appropriate rate was the US Gulf FOB rate. In support of the impugned order it was argued that India CFR rates did not address the port of origin of the goods and the goods may have been sourced from China or various other countries which may be more economical for the buyer however the facts remains that the quality of goods which the assessee was supplying met with the stringent Regulatory conditions prevalent in the US market and which may or may not be prevalent in the other source market but would contribute to the cost as the goods were of a better quality. Even otherwise without prejudice to the above it was argued that even if the version of the Revenue is accepted even then no adjustment can be made as the benefit of + 5 % available to the assessee under the Statute would decide the issue in favour of the assessee warranting no adjustment. The reliance placed upon the order of the Co-ordinate Bench in theClear Plus India (P.) Ltd. (cited supra) it was submitted does not detract from the merits of the case and addressing page 10 of the impugned order wherein the assessee provided tabular presentation depicting the comparison of the transaction on various parameters it was argued that it would be seen that the assessee has made accurate adjustment and the transfer price methodology adopted by the assessee should be accepted.

7. Both the parties were required to give written submissions addressing the arguments advanced by them. Ld. CIT DR filed his submissions dated 01.10.2013 and it was stated that copy of the same had been provided to the Ld. AR well in advance who too has filed written submissions dated Nil received by the Registry on 20.09.2013.

8. It may be relevant to extract the specific arguments from the said submissions. The Ld. CIT DR summed up the argument on behalf of the Revenue as under :—

"2. The peculiar fact in this case is that the assessee purchased fertilizer from its A.E. In the market the world over, India specific rates for fertilizer are available. However, to accommodate its AE, the assessee, purchased goods from its AE, at USA price, even whenIndia specific prices were available. Any third party buying/purchasing goods in India will buy good at Indiapurchase price. Since the Indian entity is purchasing goods for use in India, the applicable price should be prices for purchase of fertilizer for use in India. However, to accommodate its AE, the assessee has purchased good at U.S.A price. The tested party logically is/and should be the Indian entity.

3. The Assessee is taking U.S.A prices and then making adjustments thereon, to somehow justify that its prices are at Arm's Length. Whereas, the prices to be taken should be India prices and adjustment (if any) should be made thereupon.

4. The geographical market is India since the tested party is the Indian Entity which has purchased/bought goods for consumption in India. The assessee in its bid to accommodate its AE, has changed the market to USA. Since goods are purchased for India and there are prices available for goods to be sold in India, the market is Indiaand the prices are India prices (These India prices are available in USA and everywhere) Moreover, the Port of Origin is not important, as the prices are average prices, and the TPO has duly considered them.

5. The assessee has not been able to counter the case of Clear Plus India (P.) Ltd., ITA No.3944/D/2010. In the case of Clear Plus India (P) Ltd.; the market was taken to be the place, where the buyer was situated, and the prices were taken to be the prices available to the buyer (including 3rd party buyers). Similar facts are obtaining here also. The assessee, here, is accommodating, its AE and therefore going in for seller's price (and the seller is the American AE)."
9. A perusal of the written submissions advanced on behalf of the assessee shows that at pages 1 to 2 of the written submissions filed, paras 1to 6 address the departmental stand. The facts are found addressed in para 7 to 14.1 at pages 3 to 5 of the 20 paged written submissions which are more or less repetition of the facts available on record which have already been alluded to at considerable length in the earlier part of this order. Para 15 to 18.2 of pages 5 to 7 address the methodology manner of application of CUP by the assessee and paras 19 to 23 at pages 7 to 8 address the methodology adopted by the TPO. The proceedings before the CIT(A) are found addressed at pages 8 to 10 vide paras 24 to 28 wherein the reliance is placed on the order of the CO-ordinate Bench in UCB India(P.) Ltd. v. Asstt. CIT [2009] 30 SOT 95 (Delhi). In this background in support of the impugned order, the following arguments were advanced on behalf of the assessee :—
"Arguments of the Respondent before the Hon'ble bench

29. The Ld. CIT(A)-XX, New Delhi has appreciated the difference between the 'US Gulf FOB' price and the 'IndiaCFR Cash' price and accepted the Respondent's submissions. The following are the major differences between the 'India CFR Cash' price and the 'US Gulf FOB' price:

a.	In 'India CFR Cash' price, the port of origin of DAP is not known. 'India CFR Cash' price is an average price of DAP prevailing in all the markets, in respect of which the Fertecon publishes the prices. The Fertecon Report itself reveals the prices of DAP across these markets/countries and the price varies from market to market.
b.	The port of origin is an important aspect and it reveals the quality of product, quality of raw material, technology involved, cost of labour, cost of production, government regulations, etc. The different markets have different FOB prices and the price of DAP depends on the market from where the DAP is purchased. The technology in manufacture of DAP plays a vital role and such technology varies from market to market in the Globe.
c.	In 'US Gulf FOB, price, the port or origin of DAP is known. The Respondent's, AE is located in USA and the geographical location of the international transaction gets identified. The import of DAP was made from USA by the Respondent and the price paid to the AE has been compared with the price prevailing in the same geography, namely, USA by adopting the 'US Gulf FOB' price.
d.	In 'India CFR Cash' price, the destination is India, but which part of India is not known. The destination could be Vishakhapatnam, on the east coast and Mundra on the west coast of India. During the previous year, the Respondent had operated on the west coast.
e.	The 'India CFR Cash' price is a spot price and the payment has to be made immediately. The Ld. TPO adopted the 'India CFR Cash' price but for the purpose of adjustment in respect of credit period has adopted the US interest rates. It is humbly submitted that the approach of the Ld. TPO is inconsistent. If 'India CFR Cash' price is taken, then, the adjustment for credit period should be the India interest rate prevailing at that time and not at the US interest rate. This aspect also supports the decision of the Ld. CIT(A) -XX, New Delhi."

9.1 Since the written submissions were exchanged by the parties before the Bench, it is seen that the department had countered the assessee's stand, these arguments were rebutted by the Ld. AR in the following manner:—

"40. The Ld. CIT (DR) submitted that the Respondent adopted the US FOB price to accommodate its AE despite having India specific rate in the Fertecon report. The Respondent denies that the US FOB price was adopted for accommodating the AE. For the purpose of granting the subsidy, Department of Fertilizer, Government of India, has adopted the same method of calculation of price which has been adopted by the Respondent. It is also humbly submitted that there was no need for the Respondent to shift the profit from India to USA as the Respondent paid the tax under the MAT provisions of the Act. As submitted earlier, 'India CFR Cash' price does not indicate the port of origin of the DAP, which plays a vital role in taking the business decisions. In subsequent years, the revenue has accepted the same method of computation of ALP under the CUP method (AY 2007-08 to AY 2009-10).

41. The Ld. CIT(DR) submitted that port or origin is not important as the goods were delivered in India. It is humbly submitted that the port of origin is important for taking vital business decisions and the DAP was imported from USA in pursuance of a contractual obligation with its AE and the price paid was within +/-5%.

42. The Ld. CIT (DR) submitted that India specific price was available in the Fertecon Report and relied on the ratio laid down in UCB India Pvt. Ltd (para 79). It is humbly submitted that both the Ld. TPO and the Respondent have relied on the external CUP. The Respondent fulfils all the conditions stipulated by the Hon'ble ITAT in the case ofUCB India Pvt. Ltd. (Supra). In Para 79(d) the parameters laid down in an independent uncontrolled transactions are:

a.	Similar goods;
b.	Similar quantity;
c.	Similar terms; &
d.	Similar market.

Out of the above conditions, the Respondent fulfils the conditions at 'a, b & d (Refer to para 31.1). The Respondent purchased the goods on credit and an appropriate adjustment was made for the credit period by adopting the interest rate prevailing in USA. Thus, the Respondents, method of computing the ALP in respect of purchase of DAP is in accordance with the ratio laid down by the Hon'ble ITAT in UCB India Pvt. Ltd (Supra).

43. The Ld. CIT(DR) relied on the decision of the Hon'ble ITAT, Delhi Bench 'B' in the case of Clear Plus India Pvt. Ltd, ITA No. 3944/Del/2010. He drew the attention of the Hon'ble Bench to para 7 of the order and submitted that buyer of DAP is India and the market is in India, therefore, 'India CFR Cash' price, is the specific price which should be applied and not the 'US Gulf FOB' price. It is humbly submitted that the ratio laid down in Clear Plus India Pvt. Ltd (supra) doesn't support the contention of the Ld. CIT(DR)."

9.2 The order of the Co-ordinate Bench in the case of Clear Plus India (P.) Ltd. (cited supra) which has followed the ratio laid down in SNF (Australia (P.) Ltd.) it was argued has been wrongly applied to the present case on the following grounds:—
Brief facts in Clear Plus India Pvt. Ltd

A.	The assessee is engaged in the manufacture of all seasons wipers and snow wipes, which were sold to its AE in USA. The AE also purchased the similar goods from the Chinese manufacturers and the Assessee maintained the details of invoices of Chinese goods purchased by its AE in USA. The Assessee adopted the CUP method as the most appropriate method by comparing its selling price with the purchase price by its AE from the Chinese manufacturers as the goods were similar and the price paid for the India products was more than the price paid for the Chineses products.
B.	On the basis of the above facts, the Hon'ble ITAT observed that goods were sold by the Chinese manufacturers in the USA market and the assessee also sold the goods in the USA market. Therefore, the market conditions of sale are the same. At para 6.11 of the order, the Hon'ble ITAT relied on the ratio laid down by the Federal Court of Australia in the case of SNF (Australia) Pty Ltd. v.Commissioner of Taxation, [2010] FCA 635 (25 June 2010) . At para 6.12, the Hon'ble ITAT observed that "the focus is on the market on which the products are acquired by the Assessee; and any unique feature of the market in which the sale is made is of no importance in relative terms; the comparable transactions that occurred in Australia were not great". Further, at para 7.1 of the order, the Hon'ble ITAT observed that "in the case of SNF (Australia) Pty Ltd (Supra), it has been held that the focus is on the market in which products are acquired. The ratio of this case is applicable mutatis-mutandis to the facts of the case as the focus is on the market in which products are sold."
C.	The above ratio laid down by the Hon'ble ITAT in the case of Clear Plus India Pvt. Ltd is squarely applicable to the facts of the Respondent. The Respondent purchased the DAP from its AE in USA and compared the controlled transactions with the prices of DAP in uncontrolled transactions of USA, which were reported by the Fertecon Report. Thus, the prices of DAP which were compared were from the same geography or market.
D.	The Hon'ble ITAT in Clear Plus Pvt Ltd (supra) has applied the ratio laid down in SNF (Australia) Pty Ltd (supra).

Brief Facts in SNF (Australia) Pty Ltd.

In this case, the taxpayer carried on the business of manufacture of chemicals known as flocculants and coagulants in Australia and for the purpose of manufacture it had imported products/raw material from its AEs located in France, USA and China. The AE in France had also supplied the same products/ raw material to independent distributors in other countries and also to the taxpayer in Australia. The price paid by the taxpayer in Australia was the same price which was paid by the Independent distributors to its AE in France. On these facts, the Australian Federal Court at para 146 observed that "This evidence relied upon the taxpayer establishes the true comparable nature of the transactions relied upon. As I have already indicated the focus is on the market in which the products are acquired by the taxpayer and unique features of the market in which the taxpayer sells is of no importance". Thus, the ratio laid down by the Australian Federal Court applies to the facts of the Respondent (the kind attention of the Hon'ble bench is drawn to the paras 3, 4, 68, 74, 75, 78, 82, 140, 144 & 146 of the decision). Thus, the ratio laid down in Clear Plus India Pvt. Ltd & SNF (Australia) Pty Ltd support the Respondent's case.

44. The Ld. CIT(DR) has submitted that the tested party is the Respondent, therefore, the India specific price should be adopted. He further submitted that the method of computation of ALP by the Respondent is against the ratio laid down in Clear Plus India Pvt. Ltd. it is humbly submitted that there are various differences between the 'India CFR Cash' price and the 'US Gulf FOB' price (as submitted at Para 29). The concept of Tested Party doesn't come in the way of adoption of US Gulf FOB price as the imported DAP price is compared with the prevailing uncontrolled price in USA (as reported in the Fertecon Report).

9.3 Addressing the interest charged by the assessee in order to compute the correct adjustment, the assessee's stand was summarized as under :—

"45. The Ld. CIT(DR) submitted that there is a variation in computation of Interest rate and drew the attention of the Hon'ble Bench to page 289 of the paper book. It is humbly submitted that Ld. TPO has nowhere in his order disputed the said interest rate. The Respondent for the purpose of adjustment applied the US prime lending rate which was approximately US 4.5% during the previous year and the Ld. TPO accepted the same interest rate while computing the amount of Transfer pricing adjustment. Thus, there is no dispute on the interest rate which should be used for the purpose of computing the adjustment."

10. It would also be necessary for the sake of completeness to bring out the department's response to Para 29, 30, 31, 32, 33, to 38 and 39 of the 20 pages submissions of the assessee. The same is extracted from the written departmental submissions hereunder:—

Counter to Para 29
"India specific prices are available. The port of origin of DAP has been duly factored in India CFR prices. The TPO has made due adjustment for freight and for credit terms. The assessee has not brought in anything to prove that the quality of its AE is superior and that of other sellers who are selling at India Specific prices is inferior.

In Paragraph 29(b) the Assessee speaks of different quality of product, of raw material, technology, cost of labour, cost of production, government regulation etc.

It is pointed out that all these difference have been indicated by the assessee (though not proved), merely to accommodate the foreign AE. The quality of AE and the 3rd party has not been differentiated at all. A buyer is concerned with the prices he is getting, and not the cost of labour, cost of production, government regulation of a particular seller.

Counter to Para 30
The letter of Govt. of India is dated July 20, 1989, whereas the financial year involved is FY 2004-05. The assessee is merely fabricating retrospectively in this communication that the letter has future applicably is clear from the wording - "5) monthly concession for imported DAP will be based on ……. "
The use of word "will" shows that it has future applicability and is not relevant.
Counter to Paras 30 & 31

The India specific prices are for similar goods, the market is India, the Indian Govt. regulations have been duly factored in, and the TPO has made the due adjustments starting from India specific prices.

Even the order in the case of UCB, India, as referred to by the assessee, in para 31.1 of its submissions speaks of "(d) an independent terms from other independent enterprises in a similar market (an external comparable)

The facts are squarely applicable in case of the assessee also.
Since the Indian assessee is buying/purchasing goods, the prices are the ones that are India specific. Any third party buying goods in India, will buy at the best prices which clearly are Indian specific pries.

Counter to Para 32
The assessee, chose the prices to suit its foreign AE. The assessee did not buy at the best price which was the India Specific Price, which was lower than the US price. This has been detailed by the TPO.
Counter to Para 33 to 38
This relates to claim of safe harbour benefit, and involves a set of calculations, which was not before the TPO.
Counter to Para 39

The TPO, as per law, is allowed to choose the Most Appropriate Method. The assessee might have, in the subsequent years, imported/purchased goods at ALP, as per the TPO and the TPO would have thought it proper not to make any adjustments on the basis of facts before him. The TPO has been very judicious on facts as he would have obtained. This argument therefore is not relevant.

11. On the last date of hearing, both the parties reiterated their respective stands based on the written submissions filed. Addressing the assessee's stand, the Ld. CIT DR stated that the arguments that there is no motive in shifting the profit from Indiais not a relevant argument. Similarly the arguments on behalf of the assessee that ultimately whichever method is followed and no adjustment would be called forth if the benefit of +/- 5% as mandated in proviso to section 92C(2) is given it was his submission is also not the criteria on the basis of which decision on the grievance of the Revenue is not given as whether ultimately there is an adjustment or not would be a matter of fact and whatever relief the assessee is ultimately entitled to by the Statute is not and cannot be opposed by the Revenue, however what is relevant is that it was argued, the legal principle be decided.

12. We have heard the rival submissions and perused the material available on record and considered the submissions advanced on behalf of the parties before the Bench. On a careful consideration of the same, we are of the view that the departmental stand to the extent that the bench-marking should have been taking into consideration by considering the Indiaspecific prices deserves to be upheld. No doubt the assessee in terms of the contract entered into with its AE being a 100% subsidiary of GNS II Corp US made purchases from its AE, the need and necessity of adhering to the Contracts and Arguments with the AE stands unrebutted. However we hold on a consideration of the facts and circumstances of the case that the decisive criteria should be the market in which the goods are destined. In order to consider the arm's length price it is necessary to see at what price the product would be purchased in India by an uncontrolled party who is to procure the product in India. It is that price which should have been taken by the assessee for benchmarking.

12.1 We may at this point also address the arguments made in passing on behalf of the assessee, which me may refer, were made de hors any evidence that the assessee's product sourced in USA necessarily may have been of a superior quality as opposed to the product readily available in India may be from Asian countries. It is a matter of record that there is no discussion in any material on record in regard to grading or quality of the product. Moreover even before us there is no plea to consider fresh evidence qua the difference either in grading or quality of the product sourced from USA or Asia. Thus in the absence of any material or evidence in regard to the same the argument forwarded for the first time now that too in passing in regard to justification of arm's length price on the reasoning of possibility of superior quality of goods has no merit or relevance and has to be dismissed as based on no evidence.

12.2 Similarly the arguments based on unique market conditions prevalent in USA by way of stringent Regulatory condition adding to costs of the product for the assessee is not relevant as the tested party should be in India and the quality of products has never been argued before any of the two forums and even before us as observed no attempt to plead for placing such evidence let alone placing necessary evidence on record has been done. Considering the legal precedent as laid down in Clear Plus we hold that for the purposes of considering the arm's length price of the transaction it is necessary to benchmark the transaction with the price of the said commodity which any third party purchasing the goods in India would pay in India. It is this price which should have been taken as a bench-mark to consider whether the price paid by the assessee to its AE is at arm's length or not. Admittedly this was not the approach of the assessee and admittedly this also was not the approach of the CIT(A). We have taken into consideration the order of the Co-ordinate Bench in the case of UCB India (P.) Ltd. (supra) which it is seen has wrongly been applied by the CIT(A) to the facts of the present case. On the other hand the view taken is found to be supported by the decision of the Co-ordinate Bench in the case of Clear Plus India (P.) Ltd. (supra).

12.3 We also do not find any merit in the arguments advanced on behalf of the assessee canvassed for upholding the impugned order on the reasoning that there is no motive for the assessee to shift the profit from India as lack of motive, on the part of the assessee cannot be a reasoning on the basis of which the departmental appeal on the legal issue can be dismissed unless the issue is given up by the department which admittedly is not a fact in the present proceedings.

12.4 Similarly the argument that no adjustment would be warranted whatever method is followed as such the departmental appeal be dismissed is also not an argument which can be the reason for dismissing the appeal. The issue under challenge as per the focus of the arguments advanced by the parties is whether for benchmarking purposes the product purchased by the assessee from its AE to be sold in India should be benchmarked by taking India specific prices or prices in the market of the source country. We are of the view as observed that the need and compulsion of the assessee to purchase the product from its AE in US as per the terms of Agreement with the AE cannot be an argument to take the prices which are dictated by unique market conditions of the AE since the product purchased from the AE has to be considered for the purposes of transfer pricing to adjudicate whether the transaction is at arm's length for which to our minds the tested party should be in India and thus for bench marking purposes the India specific prices are to be considered and this duty and responsibility to lay down the principle cannot be shied away from or abdicated on the alter of convenience or there being no impact on the adjustment ultimately unless the aggrieved party pleads that on account of this reasoning they choose to give up the argument which as observed is not a fact in the present case as the Revenue has insisted upon a finding.

12.5 We may also deal with the argument advanced on behalf of the assessee that in subsequent year the TPO has accepted the assessee's stand. Considering the same we hold that this argument also cannot form the basis of a finding in the present case warranting a dismissal of department's appeal as not only it is a settled legal position that res-judicata does not strictly apply to income tax proceeding as each assessment year is an independent year. Apart from that we are of the considered view that lack of action on the part of the AO in a subsequent year on facts which did not warrant interference or warranted interference despite which the methodology was accepted cannot be the edifice on which it can be held that the department's appeal be dismissed. Once an issue is agitated before us for laying down the legal position as to whether in the facts of the present case bench marking should have been done keeping India specific prices as benchmark or as per the unique market conditions of the source country then we are bound to address the correct legal principles which we have done. The duty placed upon us to address the grievance has to be discharged unless the aggrieved party choose to give up the point. By our detailed reasoning we have held that the departments stand is correct as unique geographical market conditions of the source country in the present facts of the case have no relevance for bench-marking purposes. We have held the focus has to be on India prices as the market for the product of the assessee is India and any third uncontrolled entity for selling similar product would pay the price for the said product going by India specific prices as such they should form the basis for benchmarking. Accordingly we set aside the impugned order and restore the issue back fact to the TPO to readjudicate the issue afresh by way of a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. The TPO shall also consider the benefit of +/- 5%, it available to the assessee on facts of the case. The impugned orders as such are set aside.

13. In the result ITA 62/Del/2011 and 4831/Del/2010 of the Revenue are allowed for statistical purposes.