10A expense allocation follows prior precedent; transfer pricing comparables require a speaking order and fresh reconsideration.

Trading expense allocation between eligible 10A and non-10A units was rejected because the issue was already covered by precedent in the assessee's own earlier years, so the Assessing Officer's reallocation could not stand and the disallowance was deleted. For transfer pricing, objections to the choice of comparables and the arm's length method had to be examined in a reasoned speaking order; because the TPO did not deal with the objections and the DRP accepted the adjustment summarily, the matter was remitted for fresh adjudication after a fair hearing. The appeal was thus partly allowed for statistical purposes.

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Issues: (i) Whether trading expenses were to be reallocated between the eligible 10A unit and the non-10A unit while computing deduction under Section 10A of the Income-tax Act, 1961; (ii) whether the transfer pricing adjustment based on selection of comparables could be sustained when the objections of the assessee were not dealt with by a speaking order.

Issue (i): Whether trading expenses were to be reallocated between the eligible 10A unit and the non-10A unit while computing deduction under Section 10A of the Income-tax Act, 1961.

Analysis: The dispute concerned only the allocation of trading expenses between the eligible and non-eligible units. The same issue had already been decided in the assessee's own case for earlier years, and the Tribunal followed that earlier view. Since the issue was covered by precedent in the assessee's own case, the allocation made by the Assessing Officer could not be sustained.

Conclusion: The issue was decided in favour of the assessee and the disallowance was deleted.

Issue (ii): Whether the transfer pricing adjustment based on selection of comparables could be sustained when the objections of the assessee were not dealt with by a speaking order.

Analysis: In determining arm's length price under Chapter X, objections raised by the assessee to the method adopted and the comparables selected must be considered and dealt with by a reasoned order. Here, the Transfer Pricing Officer did not examine the objections, and the Dispute Resolution Panel also accepted the determination summarily. The matter therefore required fresh consideration after giving the assessee a fair opportunity of hearing and after passing a speaking order on the objections and comparable selection.

Conclusion: The transfer pricing issue was remitted to the Assessing Officer/TPO for fresh adjudication.

Final Conclusion: The assessee succeeded on the Section 10A expense allocation issue, while the transfer pricing adjustment was set aside for reconsideration, resulting in a partial allowance of the appeal for statistical purposes.

Ratio Decidendi: Objections to transfer pricing comparables and methodology must be addressed in a reasoned speaking order after affording a fair hearing, and an issue already covered by binding precedent in the assessee's own case should be followed consistently.

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