The assessee contended that the fall in GP rate was due to an increase in power and fuel costs. The Assessee provided detailed documentary evidence to support this claim. Also, the assessee received non-compete fees from its subsidiary, which prevented it from selling products to certain customers, impacting its GP rate.  The Revenue claimed that the fall in GP rate was due to the diversion of profits to the subsidiary entity which claimed deductions under section 80IC.  Further alleged that this was a colorable mechanism to reduce tax liability. The Hon’ble Tribunal agreed with the CIT(A) that the fall in GP rate was justified due to increased power and fuel costs.  The Hon’ble Tribunal observed that the assessee provided sufficient documentary evidence to support this claim.  Additionally, the Hon’ble Tribunal also noted that any adjustment for alleged profit diversion should have been made in the hands of the subsidiary entity under section 80IA (10), not in the hands of the assessee.  The Hon’ble Tribunal also held that on Non-compete fees acknowledged that the non-compete fees received by the assessee impacted its ability to sell products to certain customers, which was a valid business consideration affecting its GP rate.  (AY 2012-13, 20013-14)