Income Tax Appellate Tribunal - Ahmedabad
Dishman Pharmaceuticals & Chemicals ... vs Department Of Income Tax on 8 January, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH AHMEDABAD
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'सी'
Before Shri Shailendra Kumar Yadav, Judicial Member and
ी शैले कुमार यादव, या यक सद य एवं
Shri Anil Chaturvedi, Accountant Member
ी अ नल चतुव द , लेखा सद य के सम ।
ITA No. 903 & 1234/Ahd/2010
Assessment Year :2002-03
Dishman Pharmaceuticals & V/s. The ACIT(OSD)-1,
Chemicals Ltd., Ahmedabad
Bhadraraj Chambers, Swastik
Cross Roads, Ahmedabad
&
The DCIT(OSD), Dishman Pharmaceuticals &
Range-1, Chemicals Ltd.,
Ahmedabad Bhadraraj Chambers,
Swastik Cross Roads,
Ahmedabad
P AN No. AAACD4164D
(Appellant) .. (Respondent)
आवेदक क" ओर से/By Assessee Shri Tushar Hemani, A.R.
राज व क" ओर से / By Revenue Smt. Smiti Samant, Sr. D.R.
सन
ु वाई क" तार ख/Date of Hearing 23.12.2015
घोषणा क" तार ख/Date of Pronouncement 08.01.2016
ORDER
PER : Shri Anil Chaturvedi, Accountant Member
These two appeals of which one is filed by Assessee and the other by Revenue are against the order of CIT(A)-VIII, Ahmedabad, dated 30.12.2009 for the assessment year 2002-03.
I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 2
2. The relevant facts as culled out from the materials on record are as under:
3. The Assessee is a Company stated to be engaged in the business of manufacturing bulk drugs and chemicals. The Assessee filed its return of income for A.Y. 02-03 on 31.10.2002 declaring total income at Rs.Nil. The assessment was initially framed u/s.143(3) vide order dated 22.03.2005 and the total income was determined at Rs.20,51,93,078/-. On giving the appeal effect of Hon'ble ITAT's order, the income was determined at Rs.28,15,711/-.
Subsequently, the case was reopened by issuing notice u/s.148 of the Act dated 31.07.2006 and thereafter the assessment was framed u/s.147 r.w.s.
263 r.w.s. 254 r.w.s. 148(3) of the Act vide order dated 31.12.2007 and the total income was determined at Rs.5,46,52,300/-.
4. Aggrieved by the order of Assessing Officer, Assessee carried the matter before the ld. CIT(A) who vide order dated 30.12.2009 granted partial relief to the assessee.
5. Aggrieved by the order of ld. CIT(A), Revenue and Assessee both are in appeal before us. The grounds raised by the assessee in its appeal i.e. ITA No.903/Ahd/2010 read as under:
"1 The Id. CIT(A) has erred in law and on the facts of the case in going beyond the directions of this Hon'ble ITAT in a set aside proceedings, which is not permissible under the law.
I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 3 2 The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in making Transfer Pricing Adjustment of Rs.49,31,625/- in respect of one product of the Appellant by applying the CUP method instead of TNMM applied by the Appellant.
3 The Id. CIT(A) has erred in law and on the facts of the case in taking a contrary view by applying CUP method whereas the Id. CIT(A) has already accepted the TNMM applied by the Appellant for other products as the Most Appropriate Method for ALP.
4 In any case, even after applying the CUP method of finding out ALP, the Id. CIT(A) has erred in law and on the facts of the case in not taking into consideration various factors which affect the prices of a controlled transactions vis-a-vis uncontrolled transactions.
5 The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of Id. AO in disallowing written off sundry balances of Rs. 13,16,191/- after holding that to claim such amount as bad debts, debts should have bad.
6 The Id. CIT(A) has erred in law and on the facts of the case in confirming the action of the Id. AO in disallowing Loss on Forfeiture of Shares to Rs.4,65,074/-.
7 Both the lower authorities have erred in law and on facts in passing the orders without properly appreciating the fact and that he further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of both the authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
8 The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s 234B/C/D of the Act."
5.1 On the other hand, the grounds raised by the Revenue in its appeal i.e. ITA No.1234/Ahd/2010 read as under: "1. The Ld. CIT(A) erred in law and on facts in partly deleting the addition to the extent of Rs.4,51,02,696/- without appreciation of the fact that the assessee has not submitted details justifying proper application of TNMM and has not submitted details for the purpose of computing adjustments for CUP methods.
I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 4
2. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer since the assessee has failed to disclose his true income."
6. We first take up assessee's appeal in ITA No.903/Ahd/2010.
6.1 Before us, ld. A.R. at the outset submitted that ground no. 1 is general ground and therefore, needs no adjudication and that ground nos.2 to 4 of assessee's appeal and grounds raised by the Revenue are inter connected and therefore, can be considered together.
7. The TPO had made adjustment in sale price in respect of 8 products by rejecting the TNM method selected by assessee and adopted CUP as the most appropriate method and the aforesaid adjustment resulted into addition of Rs.5,00,55,321/-. The adjustment made by the Assessing Officer was upheld by ld. CIT(A) vide order dated 03.08.2005. Against the order of CIT(A), matter was carried by the assessee before hon'ble ITAT. Hon'ble ITAT vide order dated 18.08.2006 (ITA No.2111/Ahd/2005) restored the issue back to Assessing Officer for determination of ALP. Pursuant to the directions of Hon'ble ITAT, before Assessing Officer, assessee furnished details of gross profit markup. The assessee was asked to furnish necessary documents and evidence. Assessing Officer noted that assessee did not furnish the required details and therefore, Assessing Officer completed the assessment on 31.12.2007 and made additions of Rs.5,00,55,321/-, the same addition as made in the original assessment order that was framed by Assessing Officer. I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 5 7.1 Aggrieved by the order of Assessing Officer, assessee carried the matter before the CIT(A) who granted partial relief to the assessee by confirming the addition of only Rs.49,31,625/- by holding as under:
"5.5 I have considered the facts and submissions of the Id. A.R carefully. I have also gone through the TPO's order and the order of Hon'ble ITAT in this regard. The Hon'ble ITAT while setting aside the issue regarding ALP had directed as under.
In view of the totally of the facts and circumstances of the case and in (he interest of substantial justice, we are of the opinion that since the TPO/assessing officer has not been able to consider the appellant's case for determination of ALP on the basis of break-up of gross profit on exports between Dishman Europe Limited and others, the rejection of the appellant's contention for application of "Transactional Net Margin Method" cannot be upheld and, therefore, we restore the issue, relating to determination of ALP with respect to the exports under reference, back to the file of assessing officer for fresh disposal in accordance with law and after allowing the appellant a proper opportunity of being heard."
5.6 It is seen that the Assessing Officer without analyzing the whole issue again repeated the TPO's order and made the impugned addition. It may be pointed out that there are two issues in the TPO's order which require adjudication viz firstly the method adopted by the appellant for the purposes of calculation of Arm's Length Price (ALP) and any variation or change in said method by the TPO and secondly the quantification of transfer pricing addition in respect of ALP adopted by him.
5.7 There is a dispute between the TPO and the appellant with regard to selection of method for arriving at the appropriate ALP. The appellant has adopted Transactional Net Margin Method (TNMM) whereas the TPO is of the view that in the given circumstances Comparable Uncontrolled Price Method (CUP) is most appropriate to determine ALP.
5.8 In terms of Rule 10B of the IT Rules the TNMM requires establishing comparability at a broad functional level. It requires comparison between net margins derived from the operation of the uncontrolled parties and net margin derived by an associated enterprise on similar operation.
Under this method, the net profit margin realized by an associated enterprise from an international transaction is computed in relation to a particular factor such as costs incurred, sales, assets utilized, etc. The net profit margin realized by an associated enterprise is compared with net profit margin of the uncontrolled transactions to arrive at the ALP.
TNMM requires comparison between net margins derived from the operations of the uncontrolled parties and net margins derived by an I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 6 associated enterprise from similar operations. Net margin is indicated by the rate of return on sales or cost or operating assets, and this forms the basis for TNMM. A functional analysis of the tested party or" the independent enterprise, as the case may be, is required to determine whether the transactions are comparable and the adjustments that are required to be made to obtain reliable results. The tested party would have to consider other factors, like cost of assets of comparable companies, etc., while applying the return on assets measure. Ordinarily, the tested party, has to be the party provided services because it is on the basis of rate of return on sales or cost or operating assets that transactional margin is computed. These parameters generally available in the case of a party providing services.
5.9 In terms of Rule 10B the CUP method is applied when a price is charged for a product or service. This is essentially comparison of prices charged for the property or services transferred in a controlled transaction to a price charged for property or services transferred in a comparable uncontrolled transaction. The bedrock of this method is the identification of an identical transaction, in a situation where a price is charged for products or services between unrelated parties.
While applying CUP the comparability between controlled and uncontrolled transactions should not be only judged from the point of product comparability, but should also take into consideration the effect on price of other broader business functions. Even minor differences in contractual terms or economic conditions, geographical areas, risks assumed, functions assumed etc. could affect the amount charged in an uncontrolled transaction. Comparability under this method depends on close similarities with respect to various factors.
The CUP can be internal or external. The internal CUP is the price that the appellant has paid/charged in a comparable uncontrolled transaction with an independent party when compared to the price paid / charged in a controlled transaction. External CUP is a price charged in comparable uncontrolled transactions between third parties when compared to the price of a controlled transaction. However, where CUP method is to be applied on the basis of public data, it is provided in Regulation 1.482-3(b)(5) that following requirements must be met:
• The data is widely and routinely used in ordinary course of business in the industry to negotiate prices for uncontrolled sales.
• The data is used to set prices in the controlled transaction in the same way that it is used by uncontrolled taxpayers in the industry; and • The amount charged in the controlled transaction is adjusted to reflect product and service variations.
The US regulations further warn that data from public exchanges, quotation media should not be used in extraordinary situations such as war I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 7 period, economic depression, natural calamities period. We are of the considered view that above principles are of universal application and there is no good reason why they should not be applied in transfer pricing determination in India.
5.10 I find considerable force in the arguments of the Ld. A.R that the appellant has a larger say so far as selection of method for determination of ALP is concerned. The provisions direction 92C of the Act are very clear in this regard. The appellant has a right to choose the best applicable method for the purpose of calculation of ALP. The Assessing Officer/TPO can alter that method provided he finds serious defects in the same and he fulfills the three conditions as laid down in sec. 92C(3) of the Act. Hon'ble ITAT Bangalore in the case of Philips software Centre P. ltd. v/s ACIT 119 TTJ 721 has held Transfer pricing - computation of arm's length price- " Selection of appropriate method - While conducting transfer pricing study the appellant, after evaluating the criterion laid down in Rule 10C(2), having selected the CPM as the most appropriate method, TPO. Without sharing with the appellant any analysis, basis or reasons which led him to reject CPM and select TNMM as the most appropriate method, was not justified in doing so -TPO/Assessing Officer can conduct a scrutiny of the most appropriate method employed by appellant only after proving that the documentation maintained by the appellant is deficient or insufficient in any manner - Data used by the appellant being reliable and correct and appellant having discharged the onus by preparing a transfer pricing documentation, conducting a comparability analysis and furnishing the same to the TPO, there could be no intervention by the Department.".
5.11 In the facts of the present case, the appellant has adopted transactional net margin method (TNMM for short). The appellant has justified the said method by stating that having regard to the sales of large number of products to its associated enterprise, coupled with the fact that it has also sold diversify products to unrelated enterprises, and looking to the complexity of the transactions, product diversity and multiplicity of transactions, the said method was the only practicable method to determine the arms length prices, Under the said method, appellant finds the profit before interest and taxation (PBIT for short) as a percentage of turnover and the same in turn, is being compared with such PBIT of other entities dealing in identical products and having comparable turnovers. As per the report submitted under Rule 10D of the I. T. Rules, the appellant has given comparison of such PBIT with various other concerns and it has demonstrated that such PBIT of the appellant at 20.19% was higher than the average comparable PBIT of such similar entities at 15.833%. Relevant extract of Rule 10D wherein a chart has been given is reproduced herein below for ready reference:
Statement of average % of Profit before Interest and Tax of various companies in the Group of Organic Chemicals having turnover of over Rs.50 crores during Financial year 2001-2002 and have profits earned during the same year.
I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n
p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 8
Sr. Name of the Company Net Sales PBIT % of
No. (Rs.in (Rs. in PBIT to
Crores) Crores) Net Sales
1 Aarti Industries Ltd. 322.42 50.25 15.59%
2 Aegis Logistics Limited 107.33 18.41 17.15%
3 Alkyl Amines Chemicals Ltd. 85.06 13.68 16.08%
4 Deepak Nitrate Ltd. 214.11 23.37 10.91%
5 Gujarat Flourochemicals Ltd 119.45 40.47 33.88%
6 Hikal Limited 114.08 27.85 24.41%
7 Laftans Petrochemicals Ltd. 64.22 3.99 6.21%
8 Narmada Chematur Petrochemicals 203.31 46.45 22.85%
Ltd.
9 Schenectady Herdlilia Ltd. 262.75 2.77 1.05%
10 Tamilnadu Petroproducts Ltd. 697.27 119.54 17.14%
Total 2190.00 346.78 15.83%
As can be seen the overall PBIT of the appellant is better than the industry average PBIT. The only reason, apart from some general reasons, why the AO has rejected the said method was the absence of break-up of PBIT between transactions with associated enterprise and unrelated entities. If the PBIT with the associated enterprise is higher than the overall PBIT, the very ground for rejecting the said TNMM method goes away. The following chart placed before the AO as well as before me puts this issue at rest as it is very clear that the PBIT with AE was as high as 30.98% which is higher than both the PBIT of the appellant at 20.19% and overall industry average PBIT of 15.83%.
Particulars DEL Others Total
Total Income 263,332,635.00 476,746,306.00 740,078,941.33
PBIT 81,578,753.71 67,833,445.47 179,412,199.19
% 30.98% 14.23% 20.19%
5.12 It may be pointed out that the AO has given one more reason for
rejection of appellant's claim stating that necessary details as mentioned fay TPO in his order were not provided during the proceedings under reference.
This observation of the AO is without any reasonable base in the sense that the original assessment order was set aside by the Hon'ble ITAT on this ground that the material brought on record was not presented before the AO. Therefore, the Hon'ble Tribunal directed the AO to examine the details filed by the appellant before the CIT(A) after passing of the original assessment order. The AO without examining these details and analyzing the complete facts rejected the method adopted by the appellant completely.
5.13 Now coming to the TPO's order which is the basis for the adjustment in ALP under reference, it is seen that the TPO after rejecting the appellants method for determination of ALP has analysed transactions in respect of 9 I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 9 items sold by the appellant to its AE and other parties. This analysis can be seen on pages 14 to 16 of the TPOs order dated 28.2.2005.
5.14 The TPO has made adjustment with respect to 8 items namely and has ignored the variation in on& namely Centramide BP due to small effect.
5.15 I have examined the details of other eight items on the basis of which the TPO has worked out the variation in ALP. The ALP worked out by the TPO in respect of 7 items by application of CUP method cannot be upheld for the reasons discussed in the table below against each item. Therefore, the application TNMM by the appellant for determination of ALP is hereby approved in respect of 7 items of the table below. It is also held that TPO has not been able to bring sufficient materials on record to reject the appellant's method as required u/s 92C(3) of the Act.
Sr.No. Arm's Length Remarks
Price Adjustment
1. Benzyl Triethyl AM Rs.7,48,050/- Comparisons have been made with sales made to
non-AEs which are not at all comparable inasmuch
as these entities do not provide any marketing,
technical or after sales services. As against this, the AE provides all these services and therefore the prices are rot comparable as provided under Rule 10C. In any case the important factor of demand and supply situations have been given B go by. There is a marked difference in the volumes with AE vis-a-vis non-AE.
2. Cetyl Pryidinium C Rs.32,38.026/- Comparisons have been made with sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 1 0C.
Moreover the quantity sold to DEL was 34,550 kgs as against 1,591 kgs sold to different non-AE parties.
3. Ethyl Triphenyl Ph RS.66,65,863/- Comparisons have been made with sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 10C.
Moreover, the comparable sales were made in Malaysia and Korea which are Asian countries where as AE is based in Europe which is geographically distant and different market which is not at all comparable.
4. Gilbenclamide BP Rs.5,48,150/- Comparisons have been made with, sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 10C.
Moreover the quantity sold to DEL was 955 kgs as against 125 kgs sold to different non-AE parties.
5. Tetra Butyl AMM HP Rs.2,69,71.112/- Comparisons have been made With sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices are not comparable as provided under Rule 10C.
Moreover, the quantity sold to DEL was 92,500 kgs as against 2.350 kgs sold to different non-AE parties.
6. Triethyl Benzyl AM Rs.1,83,600/- Comparisons have been made with sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore the prices I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 10 are not comparable as provided under Rule 10C.
7. Tetra Ethyl AMM BR Rs. 13,79 ,800/- Comparisons have been made with sales made to non-AEs which are not at all comparable inasmuch as these entities do not provide any marketing, technical or after sales services. As against this, the AE provides all these services and therefore trie prices are not comparable as provided under Rule 10C, Moreover, the quantity sold to DEL was 20,000 kgs as against 5000 kgs sold to different non-AE parties.
5.16 As regards determination of ALP in respect of the transactions made by the appellant for Tetra Butyl AMM BR it is seen that the appellant had sold 1,91,125/- Kg of this product for Rs.4,37,07,708/-. The appellant has sold the same material to unrelated parties in Europe Namely La Porte Performance, Netherland of 1,07,100 kgs at average price of 282 per Kg. The same product is sold to the entities in Japan and Israel also, the price to those entities are more than Rs. 315 per Kg. The La Porte Performance of Netherland is very regular customer of the appellant and it has purchased bouquet of products from it and for this product also the quantities are comparable. The appellant has charged Rs. 228 per K.G to its AE Dishman Europe 95% of 282 i.e 267.9 per kg. therefore the process charged is outside the Arm's Length Price Range. Accordingly, the transaction under reference requires an upward adjustment keeping in view the provisions of Sec. 92C of the Act.
5.17 During the appellate proceedings when this discrepancy was brought to the notice of Ld. A.R, he submitted that the ALP has to be worked out on the basis of a single method for all the transactions carried out by the appellant during the relevant period. The contentions made by the Id. A.R in this regard cannot be accepted for simple reason that sec. 92C(1) of the Act lays that the Arm's Length Price in relation to an international transaction shall be determined by any of the specified methods, being most appropriate method, having regard to the nature of transactions or class of transactions or class of associated persons ........." The provisions of sec. 92C(1) are, therefore, very clear in this regard that different methods can be adopted for determining the ALP in respect of different transactions or class of transactions. I have already held above that in the given circumstances, the TNMM method is appropriate so far as the transactions in seven products entered into by the appellant with its AE and other concerns as mentioned by the TPO in his order. However, the transactions made by the appellant with regard to Tetra Butyl AMM BR as referred to above with its AE and other concerns are not at Arm's Length. This is evident from the discussion made by the TPO in its order. Further, the facts so narrated by the TPO in his order in this regard have not been contradicted by the Ld. A.R during the appellate proceedings.
5.18 Therefore, keeping in view the surrounding circumstances the ALP for the transactions made by the appellant in respect of Tetra Butyl AMM BR is required to be determined on the basis of CUP method. However, while arriving at the appropriate ALP a reasonable allowance is to be allowed to the appellant with regard to the services available to it from its AE vis-a-vis other parties, In the given circumstances it would be appropriate if 10% discount is allowed on the prices of Tetra Butyl AMM BR charged by the appellant from the party equally placed to its AE namely La Porte Performance, Netherland, The appellant has charged Rs. 282 per Kg from such parties, therefore after I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 11 allowing 10% discount on such price for miscellaneous services available to the appellant from its AE, it should have charged Rs. 253.80 per K.G from its AE. As against this the appellant has charged only Rs. 228/Kg. Therefore an upward adjustment is required to be made by Rs. 25.80 per Kg on the total sales of 1,91,125 Kg made to AE. Therefore, addition of Rs. 49,31,625/- is hereby confirmed out of Rs. 5,00,55,321/- under this head. The AO will work out relief accordingly."
7.3 Aggrieved by the order of ld.CIT(A), the matter is now before us.
7.4 Before us, at the outset, ld. A.R. reiterated the submissions made before the CIT(A). He further submitted that while deciding the issues namely the most appropriate method for determining ALP & quantification of TP adjustment, ld. CIT(A) held that TNMM method to be the most appropriate method and not the CUP method. However, while quantifying ALP adjustment, CIT(A) held that for transaction with one particular product, CUP to be the most appropriate method and accordingly TP addition was confirmed to the extent of Rs.49,31,625/- and balance addition of Rs.4,51,23,696/- was deleted. Ld. A.R. further submitted that the issue in the present case is covered by the decision of Tribunal in assessee's favour by the Tribunal's order in assessee's own case for A.Ys. 2003-04 & 2004-05 in ITA Nos. 154 & 587/Ahd/2007 & ITA Nos. 2180 & 3213/Ahd/2007, wherein Hon'ble ITAT has held that TNMM method is the most appropriate method. He further submitted that similar view has been taken in the case of assessee's associate concern i.e. DCIT vs. Schutz Dishman Bio-tech Pvt. Ltd. in ITA Nos. 2060/Ahd/09, ITA No.3141/Ahd/11 and others. He also placed on record the copy of the aforesaid order. He, therefore, submitted that in the light of the decisions of the Tribunal, the entire TP adjustment should have been deleted. Ld. D.R. on the other hand supported the order of Assessing Officer but fairly agreed that I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 12 the issue in the year under appeal is covered by the decision of the Tribunal in assessee's own case for earlier years.
7.4 We have heard the rival submissions and perused the material on record. We find that the Co-ordinate Bench of the Tribunal in assessee's own case while deciding the appeal for earlier years in ITA No.154 & 287/Ahd/2007 & 2180 & 3213/Ahd/2007 order dated 18.02.2011held as under:
"37. After going through the facts in entirety, we are of the view that the facts in the present appeals are exactly identical to the case of M/s. Schutz Dishman Biotech in ITA No.554/Ahd/2006 and this issue was answered against the Revenue by this Tribunal. In any case, even in the case of associate concern viz. Schutz Dishman (supra) this Tribunal has upheld the very same reasons given by the assessee for non-application of CUP method of AMP and accordingly, following the Tribunal's decision, we allow the claim of the assessee, upholding the order of CIT(A) on this common issue of the Revenue's appeals. This common issue of Revenue's appeals is dismissed.
In view of the submission of both the parties that the facts of the case in the year under appeal are identical to that of earlier years, we respectfully following the decision of Co-ordinate Bench of Tribunal in assessee's own case in earlier years, delete the entire additions made by the Assessing Officer. In the result, these grounds of assessee's appeal are allowed and that of Revenue are dismissed.
8. The fifth ground is with respect to claim of bad debts.
8.1 The Assessing Officer noticed that assessee had claimed Rs.13,16,191/- on account of sundry balances written off. During course of assessment proceedings, Assessing Officer asked the assessee to justify its claim to which assessee submitted that since the recovery was not possible in the near future it was decided to write off the amount. The submission of the I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 13 assessee was not found acceptable to the Assessing Officer and accordingly, disallowed the expenditure. The order of Assessing Officer was upheld by the CIT(A). Against the order of CIT(A), matter was carried before the hon'ble Tribunal who set aside the issue to the file of Assessing Officer and directed the assessee to produce the necessary evidence to substantiate the claim.
Assessing Officer noted that in pursuance to the directions of Tribunal, assessee did not file necessary evidences. He, therefore, disallowed the expenditure. In second round, CIT(A) upheld the order of Assessing Officer by following the decision of Hon'ble Gujarat High Court in case of Dhall Enterprise and Engineers Pvt. Ltd. vs. CIT 295 ITR 481 and held that assessee has to prove the debts have become bad and that it had become bad during the relevant period. He, accordingly, upheld the disallowance made by the Assessing Officer.
8.2 Aggrieved by the order of CIT(A), assessee is now in appeal before us.
8.3 Before us, ld. A.R. submitted that for claiming bad debts the only condition is its write off in the books of account and that once the assessee writes off debts as recoverable, assessee is eligible for claiming deduction u/s.36(1)(vii) of the Act. He also placed reliance on the decision of Hon'ble Apex Court in case of TRF Ltd. vs. CIT 323 ITR 397 (SC) and submitted that the ratio laid down in the case of Dhall Enterprise (supra) is no more a good law in view of the aforesaid Apex Court decision. Ld. D.R. on the other hand supported the orders of Assessing Officer and CIT(A). I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 14 8.2 We have heard the rival submissions and perused the material on record. The issue in the present case is writing off bad debts. It is an undisputed fact that the amount which has been claimed by the assessee as bad debts have been written off in the books of account. Hon'ble Apex Court in case of TRF Ltd. vs. CIT (supra) has held that in view of the amended provisions w.e.f. 01.04.1989 it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable and it is enough if the bad debt is written off as irrecoverable in the account of the assessee. In the present case, we are of the view that the ratio of the aforesaid decision of Hon'ble Apex Court in the case of TRF Ltd. vs. CIT (supra) squarely applies to the facts of the present case, we, therefore, direct the deletion of addition made by Assessing Officer. Thus, this ground of assessee is allowed.
9. The next ground of assessee's appeal is with respect to disallowing of loss on forfeiture of shares of Rs.4,65,074/-.
9.1 Before us, ld. A.R. submitted that he did not want to press this ground.
In view of the submission of ld. A.R., this ground is dismissed as not pressed.
10. In the result, the appeal of the Assessee is partly allowed and that of Revenue is dismissed.
This Order pronounced in open Court on 08.01.2016
Sd/- Sd/-
(Shailendra Kumar Yadav) (Anil Chaturvedi)
Judicial Member Accountant Member
True Copy
S.K.Sinha
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
I T A No s. 9 0 3 & 1 2 3 4 / Ahd / 2 0 1 0 A. Y. 0 2 -0 3 [ D i s h ma n
p har mac e ut ica ls & C he mi ca l s Ltd . v s. ACI T ( O SD) ] Page 15
1. अपीलाथ. / Appellant
2. 01यथ. / Respondent
3. संबं4धत आयकर आयु6त / Concerned CIT
4. आयकर आयु6त- अपील / CIT (A)
5. :वभागीय 0 त न4ध, आयकर अपील य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड@ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ4धकरण, अहमदाबाद ।