SUPERMAX PERSONAL CARE P.LTD, THANE v. DEPUTY CIT (LTU)-1, MUMBAI

ITA 166/MUM/2019 | 2014-2015
Pronouncement Date: 20-03-2021 | Result: Partly Allowed

Appeal Details

RSA Number 16619914 RSA 2019
Assessee PAN AAOCS7144Q
Bench Mumbai
Appeal Number ITA 166/MUM/2019
Duration Of Justice 2 year(s) 2 month(s) 8 day(s)
Appellant SUPERMAX PERSONAL CARE P.LTD, THANE
Respondent DEPUTY CIT (LTU)-1, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-03-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 20-03-2021
Assessment Year 2014-2015
Appeal Filed On 11-01-2019
Judgment Text
1 I.T.A. NO.166/MUM/2019 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI RAJESH KUMAR (ACCOUNTANT MEMBER) I.T.A. NO. 166 /MUM/2019 (ASSESSMENT YEAR 20 14 - 15 ) SUPERMAX PERSONAL CARE PVT LTD WAGLE ESTATE P.O. LBS MARG THANE (W) PAN : AAOCS7144Q VS DEPUTY COMMISSIONER OF INCOME - TAX (LTU) - 1 MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI J. D. MISTRI SR. ADV. RESPONDENT BY SHRI A . MOHAN [CIT DR) DATE OF HEARING 04 - 0 3 - 2021 DATE OF PRONOUNCEMENT 2 2 - 0 3 - 2021 O R D E R PER SAKTIJIT DEY (JM) - CAPTIONED APPEAL BY THE ASSESSEE IS AGAINST THE FINAL ASSESSMENT ORDER DATED 31 - 10 - 2018 PASSED U NDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME - TAX ACT 1961 FOR THE ASSESSMENT YEAR 2013 - 14. 2. GROUND 1 BEING A GENERAL GROUND DOES NOT REQUIRE SPECIFIC ADJUDICATION. 3. GROUNDS 2 TO 13 ARE ON THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT TO THE ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION RELATING TO SALE OF RAW MATERIALS AND FINISHED PRODUCTS TO THE ASSOCIATED E NTERPRISE (AE). 2 I.T.A. NO.166/MUM/2019 4. BRIEFLY THE FACTS ARE THE ASSESSEE A RESIDENT COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SHAVING PRODUCTS SUCH AS RAZOR BLADES RAZORS PACKING MATERIALS ETC.SINCE ACCORDING TO THE ASSESSEE ALL THESE TRANSACTIO NS ARE CLOSELY LINKED THEY WERE AGGREGATED FOR ARMS LENGTH ANALYSIS IN THE TRANSFER PRICING STUDY. FOR BENCHMARKING THE INTERNATIONAL TRANSACTION S THE ASSESSEE PREPARED SEPARATE SEGMENTAL ACCOUNTS TO ARRIVE AT THE OPERATING PROFIT. SINCE THE PROFIT EA RNED BY THE ASSESSEE WAS WITHIN THE ARMS LENGTH AVERAGE MARGIN OF THE SELECTED COMPARABLES THE TRANSACTIONS WITH THE AES WERE CLAIMED TO BE AT ARMS LENGTH. THE TRANSFER PRICING OFFICER (TPO HEREINAFTER) HOWEVER DID NOT ACCEPT THE BENCHMARKING OF THE ASSESSEE BROADLY ON THE REASONING THAT THE SEGMENTAL RESULTS SHOWN BY THE ASSESSEE ARE UNRELIABLE AND THE ASSESSEE HAS NOT JUSTIFIED THE ALLOCATION KEY APPLIED FOR EXPENSES. THUS ULTIMATELY THE TPO REJECTED THE BENCHMARKING OF THE ASSESSEE AND PROCEED ED TO INDEPENDENTLY DETERMINE THE ARMS LENGTH PRICE BY SELECTING NEW COMPARABLE S . WHILE DOING SO HE PROPOSED ADJUSTMENT TO THE ALP . THOUGH THE ASSESSEE OBJECTED TO THE ADJUSTMENT MADE BY THE TPO BEFORE LEARNED DISPUTE RESOLUTION PANEL (DRP); HOWEVER I T WAS UNSUCCESSFUL. 5. SHRI J.D. MISTRI THE LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2012 - 13 AND 2013 - 14 IN FAVOUR OF THE ASSESSEE. THUS HE SUBMITTED THE ISSUE IS SQUARELY COVERED BY THE EARLIER DECISIONS OF THE TRIBUNAL. 6. SHRI A . MOHAN LEARN ED D EPARTMENTAL R EPRESENTATIVE THOUGH AGREED WITH THE AFORESAID SUBMISSION OF THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE; HOWEVER HE RELIED UPON THE OBSERVATIONS OF THE TPO AND LEARNED DRP. 3 I.T.A. NO.166/MUM/2019 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD . THE FACTUAL MATRIX REVEALS THAT ON THE BASIS OF IDENTICAL FACTUAL POSITION AND REASONING THE TPO HAD PROPOSED ADJUSTMENT IN RESPECT OF SIMILAR TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH THE AE IN ASSESSMENT YEAR 2012 - 13. WHEN THE ISSUE UL TIMATELY REACHED BEFORE THE TRIBUNAL VIDE ORDER DATED 07 - 06 - 2019 IN ITA NO. 1840/MUM/2017 THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO VERIFY T HE MARGIN OF ITS EXPORT SEGMENT AS PROJECTED IN THE SEGMENTAL ACCOUNTS AND IF THE OPERATING MARGIN OF THE EX PORT SEGMENT COMPARES FAVOURABLY WITH THE PROFIT MARGIN OF THE COMPARABLES SELECTED BY THE TPO BY APPLYING ANY ALLOCATIONAL KEY THEN NO ADJUSTMENT SHOULD BE MADE. WHILE DECIDING IDENTICAL ISSUE AGAIN IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2013 - 14 THE TRIBUNAL HAS FOLLOWED ITS EARLIER ORDER AND DECIDED THE ISSUE IN ITA NO.7 0 41/MUM/2017 DATED 27 - 01 - 2021 HOLDING AS UNDER: - 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. SINCE WE HAVE DEALT IN DETAIL WITH THE SUBMISSIONS MADE BY LEARNED SENIOR COUNSEL WITH REGARD TO THE SEGMENTAL P&L ACCOUNT FURNISHED BEFORE THE DEPARTMENTAL AUTHORITIES AND REJECTION OF THE SAME ON FLIMSY GROUND WE DO NOT INTEND TO DEAL WITH THOSE FACTS OVER AGAIN. SUFFICE TO SAY BEFORE THE TPO THE ASSESSEE HAD FURNISHED SEGMENTAL P&L ACCOUNTS. THE TPO HAS REJECTED THEM MERELY ON THE REASONING THAT THEY WERE NOT AUDITED. THOUGH BEFORE LEARNED DRP THE ASSESSEE HAS MADE GOOD THE DEFICIENCY ALLEGED BY THE TPO BY FURNISHING AUDITED SEGMENTAL P&L ACCOUNTS LEARN ED DRP HAS REJECTED THEM ON A UNACCEPTABLE REASONING THAT THEY WERE NOT BY THE SAME AUDITOR. FROM THE MATERIAL ON RECORD WE FIND THAT THE ASSESSEE HAS NOT ONLY FURNISHED THE SEGMENTAL P&L ACCOUNTS BUT HAS ALSO FURNISHED THE DETAILS OF ALLOCATION KEYS FOR ALLOCATING VARIOUS EXPENSES. IT IS THE CONTENTION OF LEARNED SENIOR COUNSEL THAT IF SEGMENTAL ACCOUNTS ARE ACCEPTED WHATEVER ALLOCATION KEY IS APPLIED TO THE SATISFACTION OF THE TPO STILL ASSESSEES MARGIN WOULD BE WITHIN ARMS LENGTH EVEN WITH THE CO MPARABLES SELECTED BY TPO. IT IS RELEVANT TO OBSERVE BEFORE LEARNED DRP THE ASSESSEE HAD FURNISHED WORKING OF MARGIN AS PER WHICH IT IS 23.83%. THE LEARNED DRP HAS REJECTED THE SAME ON THE GROUND THAT IN THE FRESH SEGMENTAL P&L ACCOUNT THE MARGIN HAS BE EN WORKED OUT AT 17.18%. IT IS THE CONTENTION OF THE LEARNED SENIOR COUNSEL THAT THE FRESH WORKING OF THE MARGIN IS ON THE DIRECTIONS OF LEARNED DRP TO RE - WORK THE MARGIN IN A PARTICULAR MANNER. BE THAT AS IT MY THE MATERIAL ON RECORD CLEARLY REVEALS THAT THE ASSESSEE HAS FURNISHED COGENT EVIDENCE TO SUBSTANTIATE THE CLAIM THAT THE MARGIN SHOWN BY IT IS WITHIN THE AVERAGE MARGIN OF THE COMPARABLES SELECTED BY THE TPO. 7. IT IS WORTH MENTIONING WHILE DECIDING IDENTICAL 4 I.T.A. NO.166/MUM/2019 ISSUE RELATING TO ADJUSTMENT MADE TO ALP OF SALE OF FINISHED PRODUCTS AND RAW MATERIALS IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2012 - 13 (SUPRA) THE CO - ORDINATE BENCH UPON EXAMINING ALMOST IDENTICAL REASONING ON WHICH THE ADJUSTMENT HAS BEEN MADE HAS DECIDED THE ISSUE IN THE FOLLOWING MAN NER. FOR BETTER CLARITY WE REPRODUCE THE OBSERVATIONS OF THE BENCH IN EXTENSO AS UNDER: - 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEANED COUNSEL OF THE ASSESSEE SUBMITTED THAT FIRSTLY THERE IS NO MANDATORY REQUIREMENT FOR SUBMITTING AU DITED SEGMENTAL ACCOUNTING. NEVERTHELESS HE SUBMITTED THAT EVEN IF THE COMMON EXPENSES ARE ALLOCATED ON THE BASIS OF WHATEVER BASIS THE OPERATING MARGIN OF THE ASSESSEE FOR THE EXPORT SEGMENT WOULD COMPARE FAVOURABLY WITH THE 6 I.T.A. NO.7041 /MUM/2017 MEA N OF THE OPERATING MARGIN OF THE COMPARABLES AS SELECTED BY THE TPO. HENCE HE SUBMITTED THAT AUTHORITIES BELOW HAVE TOTALLY ERRED IN REJECTING THE ASSESSEE'S SUBMISSION ON THE GROUND THAT SEGMENTAL ACCOUNT IS NOT AUDITED. 7. PER CONTRA LEARNED DEPARTMENTA L REPRESENTATIVE WOULD NOT DISPUTED THE PROPOSITION THAT EVEN IF THE COMMON EXPENSES ARE ALLOCATED ON THE BASIS OF WHATEVER ALLOCATION KEY CHOSEN THE OPERATING MARGIN OF THE EXPORT SEGMENT OF THE ASSESSEE WOULD COMPARE FAVOURABLY WITH THAT OF THE COMPARABL ES SELECTED BY THE TRANSFER PRICING OFFICER. HOWEVER THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THIS REGARD SUBMITTED THAT IF THIS PROPOSITION IS ACCEPTED THE MATTER MAY BE SET ASIDE TO THE TRANSFER PRICING OFFICER WHO WOULD THEN COMPARE THE PROFIT MARGIN OF THE EXPORT SEGMENT OF THE ASSESSEE TO THE PROFIT MARGIN OF THE COMPARABLE COMPANIES SINCE ONLY LIKES CAN BE COMPARED IN TRANSFER PRICING PROCEEDINGS. HE SUBMITTED THAT IT WOULD NOT BE PROPER TO COMPARE THE PROFIT MARGIN OF EXPORT SEGMENT OF THE ASSESSEE WITH THE PROFIT MARGIN OF THE ENTITY LEVEL BUSINESS OF COMPARABLES AS SUBMITTED BY THE ASSESSEE/TPO. 8. IN REJOINDER TO THE ABOVE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT LEARNED DEPARTMENTAL REPRESENTATIVE IS TRYING TO TOTALLY MAKE OUT A NEW CASE A ND IMPROVE UPON THE ORDER'S OF THE AUTHORITIES BELOW. HE SUBMITTED THAT IT WAS NEVER A CASE OF THE TRANSFER PRICING OFFICER OR EVEN THAT OF THE DISPUTE RESOLUTION PANEL THAT THE EXPORT SEGMENT OF THE ASSESSEE IS NOT COMPARABLE WITH THE COMPARABLES SELECTED BY THE TRANSFER PRICING OFFICER. WE FIND THAT NOWHERE THE AUTHORITIES BELOW HAVE OBJECTED IN THIS REGARD. THE ONLY OBJECTION WAS THAT SEGMENTAL ACCOUNTS WERE NOT AUDITED AND THAT PROPER ALLOCATION KEYS WERE NOT SUBMITTED. HOWEVER THIS HAS BEEN DULY COUNTE RED BY THE LEARNED COUNSEL OF THE ASSESSEE BY SUBMITTING THAT ALLOCATING THE COMMON EXPENSES TO THE EXPORT SEGMENT BY WHATEVER KEY THE RESULT WOULD COMPARE FAVOURABLY WITH THE ARITHMETIC MEAN OF THE OPERATING MARGIN OF THE COMPARABLE'S SELECTED BY THE TRAN SFER PRICING OFFICER. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF ITAT IN THE CASE OF ASSTT. CITV. MAERSK GLOBAL SERVICE CENTRE (I) (P.) LTD. [2011] 16 TAXMANN.COM 47/133 ITD 543 (MUM.) FOR THE FOLLOWING PROPOSITION : - 'WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ID. DR FOR EXCLUDING CERTAIN CASES NOT REJECTED BY THE TPO BUT WHICH IN HER OPINION DID NOT PASS THE TEST COMPARABILITY. IT IS EVIDENT THAT DEPARTMENTAL REPRESENTATIVE HAS THE DUTY TO DEFEND THE ORDER OF THE ASSE SSING OFFICER WHILE ARGUING THE APPEAL FILED BY THE REVENUE HE IS FULLY COMPETENT AND FREE TO SUPPORT THE REASONING OF THE ASSESSING OFFICER FROM ANY OTHER ANGLE SO AS TO PUT FORWARD A STRONG CASE OF THE REVENUE THERE IS A MARKED DISTINCTION BETWEEN SUPP ORTING ORDER OF THE AO/TPO BY THE DEPARTMENTAL REPRESENTATIVE ON ONE HAND AND FINDING FLAWS IN 5 I.T.A. NO.166/MUM/2019 THE ORDER OF THE AO/TPO IN AN ATTEMPT TO SHOW THAT THE AO/TPO FAILED TO DO WHAT WAS REQUIRED TO BE DONE BY HIM. IN OUR CONSIDERED OPINION IF THE LEARNED DEPARTME NTAL REPRESENTATIVE IS ALLOWED TO FILL IN THE GAPS LEFT BY THE AO/TPO IT WOULD AMOUNT TO CONFERRING THE JURISDICTION OF THE CIT U/S 263 TO THE DEPARTMENTAL REPRESENTATIVE WHICH IS NOT PERMITTED BY THE STATUTE. LET US TAKE ANOTHER SITUATION. SUPPOSE A PART ICULAR DEDUCTION IS PERMISSIBLE ON THE CUMULATIVE SATISFACTION OF THREE CONDITIONS. THE AO EXAMINES THE CASE AND FINDS THE VERY FIRST CONDITION AS TACKING. WITHOUT EXAMINING THE FULFILLMENT OR OTHERWISE OF THE OTHER TWO CONDITIONS HE REJECTS THE CLAIM IN THAT CASE IF SUCH FIRST 7 I.T.A. NO.7041 /MUM/2017 REQUIREMENT IS SUBSEQUENTLY FOUND TO BE FULFILLED IN THE APPELLATE PROCEEDINGS THE DEPARTMENTAL REPRESENTATIVE CAN VERY WELL POINT OUT TO THE TRIBUNAL THAT THE OTHER TWO CONDITIONS WERE ALSO NOT FULFILLE D. BY SO CONTENDING THE DR CANNOT BE SAID TO SET UP A NEW CASE RATHER IT WOULD AMOUNT TO SUPPORTING THE VIEW POINT OF THE ASSESSING OFFICER ON THE QUESTION OF DEDUCTION. BUT IN NO CIRCUMSTANCE THE DEPARTMENTAL REPRESENTATIVE CAN BE ALLOWED TO TAKE A STAND CONTRARY TO THE ONE TAKEN BY THE AO/TPO'. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS DECISION HAS BEEN UPHELD BY HON'BLE JURISDICTIONAL HIGH COURT IN ITA NO. 692/2012. 9. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE RELIANCE BY THE LEARNED COUNSEL OF THE ASSESSEE FOR THIS DECISION WAS NOT APPROPRIATE IN THIS REGARD HE REFERRED TO THE DECISION OF HONOURABLE DELHI ITAT IN THE CASE OF SWAROVSKI INDIA (P.) LTD. V. DY. C/R[2016] 69 TAXMANN.COM 124 (DELHI - TRIB.). 10. IN REJOINDER LEARNED COUNSEL OF THE ASSESSEE IN THIS REGARD SUBMITTED THAT THE SAID RULING WAS PRONOUNCED UNDER DIFFERENT FACT PATTERN WHEREIN THE ASSESSEE HAS UNDERTAKEN ALLOCATION ON AN ADHOC BASIS WITHOUT THERE BEING ANY PARAMETER TO JUSTIFY THE RATIONALITY OF SUC H ALLOCATION. HENCE IT WAS SUBMITTED BEFORE THE HON'BLE ITAT THAT THE SAID RULING IS NOT APPLICABLE TO FACT PATTERN OF THE ASSESSEE'S CASE SINCE THE CASE OF THE ASSESSEE THE EXPENSES ARE ALLOCATED ON JUDICIALLY RECOGNISED RATIOS LIKE SALES AND PRODUCTION . 11. UP ON CAREFUL CONSIDERATION WE FIND OURSELVES IN AGREEMENT WITH THE SUBMISSIONS OF THE LEARNED COUNSEL OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED THAT THE MARGIN OF ITS EXPORT SEGMENT COMPARES FAVOURABLY WITH THE COMPARABLES SELECTED BY THE TPO. THI S HAS BEEN REJECTED BY THE TRANSFER PRICING OFFICER ON THE GROUND THAT SEGMENTAL ACCOUNTS ARE NOT AUDITED. IT HAS FURTHER BEEN HELD BY THE AUTHORITIES BELOW THAT PROPER ALLOCATION KEYS OF COMMON EXPENSES BETWEEN EXPORT AND OTHER SEGMENT HAVE NOT BEEN PROVI DED. IN THIS CONNECTION ASSESSEE HAS SUBMITTED THAT IF THE COMMON EXPENSES ARE ALLOCATED BY APPLYING ANY OF THE KEYS THE OPERATING MARGIN OF THE EXPORT SEGMENT WOULD COMPARE FAVOURABLY WITH THE OPERATING MARGIN OF THE COMPARABLES. THIS PROPOSITION HAS NOT AT ALL BEEN REBUTTED BY THE AUTHORITIES BELOW. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO COULD NOT DISPUTE THE ABOVE PROPOSITION. HOWEVER LEARNED DEPARTMENTAL REPRESENTATIVE HAS TRIED TO MAKE OUT A NEW CASE BY MAKING A SUBMISSION THAT THE MATTER MAY BE SET ASIDE TO TP. THIS IN FACT TANTAMOUNTS TO SUBMISSION THAT THE TRANSFER PRICING OFFICER HAS NOT ACTED PROPERLY INASMUCH AS HE HAS NOT COMPARED THE EXPORT SEGMENT PROFIT MARGIN OF THE ASSESSEE WITH SIMILAR EXPORT SEGMENT MARGIN OF OTHER COMPARABLES . IN T HIS REGARD WE AGREE WITH THE LEARNED COUNSEL OF THE ASSESSEE THAT LEARNED DEPARTMENTAL REPRESENTATIVE IS TRYING TO MAKE OUT AN ALTOGETHER NEW CASE. AUTHORITIES BELOW OBJECTED TO COMPARABILITY OF ASSESSEE'S EXPORT SEGMENT WITH THE COMPARABLE SELECTED BY THE TPO ONLY ON ACCOUNT OF 6 I.T.A. NO.166/MUM/2019 THEIR OBSERVATIONS REGARDING ABSENCE OF PROPER ALLOCATION KEY. IT WAS NEVER THEIR CASE THAT THERE IS LACK OF COMPARABILITY. LEARNED DEPARTMENTAL REPRESENTATIVE IS WELL WITHIN HIS RIGHTS ON SUPPORTING THE ORDER'S OF THE AUTHORITIES B ELOW. HOWEVER HE CANNOT ARGUE THAT THE TRANSFER PRICING OFFICERS ACTION IS INCOMPLETE AND THEREFORE THE ISSUE NEEDS TO BE SET ASIDE SO THAT THE TRANSFER PRICING OFFICER CAN BE GIVEN A SECOND INNINGS .SUCH A VIEW WAS REJECTED BY THE ITAT IN THE CASE OF MAER SK 8 I.T.A. NO.7041 /MUM/2017 GLOBAL SERVICE CENTRE (I) P. LTD. (SUPRA) ABOVE WHICH WAS DULY UPHELD BY THE HONOURABLE JURISDICTIONAL HIGH COURT. 12. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT WE FIND COGENCY IN ASSESSEE'S SUBMISSION THAT THE OPERATING MARGIN OF THE EXPORT SEGMENT OF THE ASSESSEE CAN BE COMPARED WITH THE PROFIT MARGIN OF THE COMPARABLES SELECTED BY THE TRANSFER PRICING OFFICER BY ANY ALLOCATION KEY SELECTED. THE TPO IS DIRECTED TO EXAMINE THE VERACITY OF THIS SUBMISSION AND DEL ETE THE ADJUSTMENT ON ACCOUNT OF ARM'S LENGTH PRICE IF THE RESULT COMPARES FAVOURABLY. 8. FACTS BEING IDENTICAL RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE CO - ORDINATE BENCH WE DIRECT THE ASSESSING OFFICER TO COMPARE THE EXPORT SEGMENT OF THE ASSESSEE AS PER THE SEGMENTAL P&L ACCOUNTS WITH THE PROFIT MARGIN OF THE COMPARABLES SELECTED BY TPO BY APPLYING ANY ALLOCATION KEY AND DETERMINE THE ALP ACCORDINGLY. THIS GROUND IS ALLOWED AS INDICATED ABOVE. 8. FACTS BEING IDENTICAL RESPECTFULLY FOLL OWING THE AFORESAID DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE WE DIRECT THE ASSESSING OFFICER TO DECIDE THE ISSUE IN TERMS OF THE DIRECTIONS GIVEN BY THE TRIBUNAL AS ABOVE. GROUNDS DECIDED ACCORDINGLY. 9. IN GROUND 14 ASSESSEE HAS CHALLENGED REJE CTION OF ASSESSEES CLAIM OF REDUCING THE EXCESS INCOME OFFERED OF RS.11 19 49 144/ - . 10. BRIEFLY THE FACTS ARE IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DATED 22 - 11 - 2016 FURNISHED A REVISED COMPUTATION OF TOTAL INCOME DECLARING TOTAL L OSS AT RS.4 37 50 129/ - UNDER THE NORMAL PROVISIONS OF THE ACT .S TATING THAT THE REVISED CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED OTHERWISE THAN BY WAY OF A REVISED RETURN OF INCOME T HE ASSESSING OFFICER REJECTED ASSESSEES REVISED COMPUTATION OF INCOME BY RELYING UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF GOETZE INDIA LTD VS CIT 284 ITR 323 (SC). THOUGH THE ASSESSEE PLACED OBJECTIONS AGAINST THE AFORESAID DECISION OF THE ASSESSING OFFICER; HOWEVER 7 I.T.A. NO.166/MUM/2019 LEARNED DRP ACCEPTING THE REASONING OF THE ASSE SSING OFFICER REJECTED THE OBJECTION OF THE ASSESSEE. 11. LEARNED SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED THOUGH IN THE ASSESSMENT YEAR 2013 - 14 A DEBIT NOTE WAS RAISED IN TERMS OF INDIAN RUPEES; HOWEVER THE ASSESSEE HAD MISTAKENLY RECORDED THE AMOU NT IN TERMS OF US DOLLARS IN THE BOOKS OF ACCOUNT. HE SUBMITTED IN SUBSEQUENT ASSESSMENT YEAR THE ASSESSEE RECORDED PROFIT ON ACCOUNT OF CHANGE IN FOREIGN EXCHANGE RATE . HOWEVER THE ASSESSEE REALIZED ITS MISTAKE AT THE TIME OF FINALIZING THE FINANCIAL S TATEMENT FOR ASSESSMENT YEAR 2016 - 17. ACCORDINGLY THE SO - CALLED GAIN ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION WAS REVERSED IN THE FINANCIAL STATEMENT OF ASSESSMENT YEAR 2016 - 17 BY DISCLOSING THE SAME AS PRIOR PERIOD LOSS AND WAS ALSO DISALLOWED WHILE CA LCULATING THE INCOME. THUS ON THE AFORESAID BASIS THE ASSESSEE FILED THE REVISED STATEMENT OF INCOME IN COURSE OF ASSESSMENT PROCEEDINGS IN THE IMPUGNED ASSESSMENT YEAR BY REQUESTING THE ASSESSING OFFICER TO REDUCE THE EXCESS INCOME WRONGLY OFFERED TO TA X. IN SUPPORT OF HIS CONTENTION LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO FINANCIAL STATEMENTS OF ASSESSMENT YEAR 2016 - 17 EXTRACT OF THE TAX AUDIT REPORT SUBMISSIONS MADE AND THE DRAFT ASSESSMENT ORDER PASSED FOR ASSESSMENT YEAR 2016 - 17. TH US HE SUBMITTED DIRECTION MAY BE GIVEN TO THE ASSESSING OFFICER TO VERIFY THE CLAIM MADE BY THE ASSESSEE IN THE REVISED STATEMENT OF INCOME AND OTHER DOCUMENTARY EVIDENCES. 12. THE LEARNED D EPARTMENTAL R EPRESENTATIVE THOUGH RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED DRP HOWEVER HE SUBMITTED THE ASSESSING OFFICER MAY BE DIRECTED TO VERIFY ASSESSEES CLAIM. 8 I.T.A. NO.166/MUM/2019 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD . THE SIMPLE CASE OF THE ASSESSEE IS IT HAS RECORD ED CERTAIN RECEIPT IN ITS BOOKS OF ACCOUNT IN ASSESSMENT YEAR 2013 - 14 IN TERMS OF US DOLLARS INSTEAD OF INDIAN RUPEES. FURTHER ON THE BASIS OF SUCH MISTAKEN ENTRY ASSESSEE HAS OFFERED INCOME IN EXCESS THAN WHAT IT OUGHT TO HAVE OFFERED. IN COURSE OF ASSE SSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED A REVISED STATEMENT OF INCOME REDUCING THE EXCESS INCOME OFFERED TO TAX. HOWEVER BOTH THE ASSESSING OFFICER AND LEARNED DRP HAVE DECLINED TO EXAMINE THE REVISED STATEMENT OF INCOME SIMPLY ON THE GROUND THAT NO COGNIZANCE OF THE REVISED STATEMENT OF INCOME CAN BE TAKEN AS SUCH CLAIM WAS NOT MADE BY THE ASSESSEE THROUGH A REVISED RETURN OF INCOME. NOW IT IS FAIRLY WELL SETTLED THAT THE ASSESSEE CAN MAKE A FRESH CLAIM BEFORE THE APPELLATE AUTHORITIES. THEREFORE IN OUR CONSIDERED OPINION THE CLAIM MADE BY THE ASSESSEE IN THE REVISED STATEMENT OF INCOME HAS TO BE EXAMINED BY THE ASSESSING OFFICER ON ITS OWN MERIT ALONGWITH OTHER EVIDENCES FURNISHED BY THE ASSESSEE. HOWEVER THE BURDEN IS ON THE ASSESSEE TO ESTABLISH ITS CLAIM OF HAVING OFFERED EXCESS INCOME TO TAX THROUGH PROPER DOCUMENTARY EVIDENCES. IN VIEW OF THE AFORESAID WE ARE INCLINED TO RESTORE THIS ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN GROUNDS 15 AND 16 ASSESSEE HAS CHALLENGED DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIM ED OF RS.5 69 014/ - U NDER S ECTION 32(1)(IIA). 15. BRIEFLY THE FACTS ARE IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR UNDER DISPUTE THE ASSESSEE CLAIMED BALANCE 50% OF THE ADDITIONAL DEPRECIATION ON NEW PLANT AND MACHINERY WHICH COULD NOT BE CLAI MED IN THE PRECEDING 9 I.T.A. NO.166/MUM/2019 AS SESSMENT YEAR AS SUCH PLANT AND MACHINERY WAS PUT TO USE FOR LESS THAN 180 DAYS DURING THE YEAR. THE ASSESSING OFFICER DISALLOWED ASSESSEES CLAIM ON THE REASONING THAT THE AMENDED PROVISIONS OF SECTION 32(1)(IIA) INTRODUCED BY FINAN CE ACT 2015 WOULD APPLY PROSPECTIVELY. THE LEARNED DRP ALSO UPHELD THE AFORESAID DECISION OF THE ASSESSING OFFICER. 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. IT IS A COMMON POINT BETWEEN THE PARTIES THAT THE ISSUE IS COVERE D BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2013 - 14. AS NOTED BY US IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2013 - 14. WHILE DECIDING THE ISSUE THE TRIBUNAL I N ITA NO.7041/MUM/2017 DATED 27 - 01 - 2021 HAS HELD AS UNDER: - 11. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE FACTS ON RECORD CLEARLY REVEAL THAT IN ASSESSMENT YEAR 2012 - 13 THE ASSESSEE HAD PURCHASED NEW PLANT AND MACHINERY ON WHICH ADDITIONAL DEPRECIATION @20% IS ALLOWABLE. HOWEVER SINCE THE PLANT AND MACHINERY WERE PUT TO USE FOR A PERIOD OF LESS THAN 180 DAYS IN ASSESSMENT YEAR 2012 - 13 THE ADDITIONAL DEPRECIATION WAS RESTRICTED TO 50% OF THE ADMISSIBLE AMOUNT. IN OTHER WORDS 9 I.T.A. NO.7041 /MUM/2017 DEPRECIATION WAS ALLOWED @10%. THE BALANCE UNCLAIMED ADDITIONAL DEPRECIATION WAS CLAIMED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. NOW THE LAW IS FAIRLY WELL SETTLED THAT THE BALANCE UNCLAIMED AMOUNT OF ADDITIONAL DEPRECIATION HAS TO BE ALLOWED TO THE ASSESSEE IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR. IN THIS CONTEXT WE MAY REFER TO THE FOLLOWING DECISIONS WHEREIN IT HAS BEEN HELD THAT THE AMENDMENT MADE TO SECTION32(1)(IIA) BY FINANCE ACT 2015 BEING CLARIF ICATORY IN NATURE WOULD APPLY RETROSPECTIVELY. 1. RITTAL INDIA PVT LTD 80 ITR 423 (KAR) 2. SHREE T.P. TEXTILES PVT LTD 79 TAXMANN.COM 411 3. PCIT VS GODREJ INDUSTRIES LTD ITA NO. 511/MUM/2016 12. RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENTS NOTED ABOVE WE ALLOW ASSESSEES CLAIM. THIS GROUND IS ALLOWED. 10 I.T.A. NO.166/MUM/2019 17. FACTS BEING IDENTICAL FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE WE ALLOW ASSESSEES CLAIM. THESE GROUNDS ARE ALLOWED. 1 8 . IN GROUND 17 ASSESSEE HAS CHALLENGED DISALLOWANCE O F RS.1 66 38 000/ - BEING NOTIONAL INTEREST COMPUTED ON INTEREST FREE LOANS AND ADVANCES GIVEN BY THE ASSESSEE. 1 9 . BRIEFLY THE FACTS ARE IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER WHILE EXAMINING THE BALANCE - SHEET OF THE ASSESSEE NOTICED THAT THE ASSESSEE HA S ADVANCED INTEREST FREE LOANS AND ADVANCES TO VARIOUS ENTITIES. FURTHER HE NOTICED THE ASSESSEE HA S BORROWED SUBSTANTIAL SECURED AND UNSECURED LOAN S FOR WHICH IT IS INCURRING INTEREST EXPENS ES. FURTHER HE NOTED THE AVERAGE INTEREST EXPENDITURE INCURRED BY THE ASSESSEE ON THE BORROWED FUNDS WORKED OUT TO 14.48%. APPLYING THE SAID RATE OF INTEREST TO THE INTEREST FREE LOANS/ADVANCES GIVEN BY THE ASSESSEE THE ASSESSING OFFICER ADDED BACK THE AMOUNT OFRS.1 66 38 000/ - TOWARDS NOTIONAL INTEREST ON THE INTEREST FREE LOANS AND ADVANCES. LEARNED DRP ALSO UPHELD THE AFORESAID ADDITION. 20 . THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED AS AGAINST SURPLUS INTEREST FREE FUNDS AVAILABLE WITH T HE ASSESSEE FOR AN AMOUNT OFRS.148 CRORES INTEREST FREE LOANS AND ADVANCES GIVEN ACCOUNTED FORRS.17 CRORES. THUS HE SUBMITTED WHEN SUFFICIENT INTEREST FREE FUNDS ARE AVAILABLE WITH THE ASSESSEE TO TAKE CARE OF THE INTEREST FREE LOANS AND ADVANCES GIVEN TO SOME ENTITIES THERE CANNOT BE ANY DISALLOWANCE OF NOTIONAL INTEREST. IN SUPPORT OF SUCH CONTENTION HE RELIED UPON THE FOLLOWING DECISIONS: - 1. CIT VS RELIANCE INDUSTRIES LTD (2019) 410 ITR 466 (BOM) 2. CIT VS RELIANCE UTILITIES & POWER LTD 313 ITR 3 40 (BOM) 11 I.T.A. NO.166/MUM/2019 3. CIT VS HDFC BANK LTD 366 ITR 505(BOM) 2 1 . THE LEARNED D EPARTMENTAL R EPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED DRP. 2 2 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE PRIMARY CONTENTION OF THE ASSESSEE CONTESTING THE DISPUTED ADDITION IS THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS TO GRANT INTEREST FREE LOANS AND ADVANCES. IN CASE OF CIT VS RELIANCE UTILITIES & POWER LTD (SUPRA) HONBLE JURISDICTIONAL HIGH COURT HAS HELD WHEN THE ASSESSEE HAS A MIXED KITTY OF FUNDS CONSISTING OF INTEREST BEARING AND INTEREST FREE FUNDS THE PRESUMPTION WOULD BE THAT THE INTEREST FREE LOANS/ADVANCES HAVE BEEN GIVEN OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE AFORESAID VIEW HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS RELIANCE INDUSTRIES LTD (SUPRA). 2 3 . BEFORE US THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT AS AGAINST INTEREST FREE FUNDS AVAILABLE OF RS.148 CRORES INTEREST FREE LO ANS AND ADVANCES AMOUNT ED TO ONLY RS.17 CRORES. IN OUR CONSIDERED OPINION THE AFORESAID CLAIM OF THE ASSESSEE REQUIRES EXAMINATION BY THE ASSESSING OFFICER. IN CASE ASSESSEES CLAIM OF AVAILABILITY OF SUFFICIENT INTEREST FREE FUND IS FOUND TO BE CORRECT NO DISALLOWANCE/ADDITION OF INTEREST EXPENDITURE/INCOME CAN BE MADE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 2 4 . IN GROUNDS 18 AND 19 THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OFRS.10 50 000/ - ON ACCOUNT OF FAILURE TO DEDUCT TAX AT SOURCE. 2 5 . BRIEFLY THE FACTS ARE IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ON VERIFYING THE MATERIALS ON RECORD NOTICED THAT CERTAIN LEGAL AND PROFESSIONAL EXPENSES WERE INCURRED WITHOUT DEDUCTING TAX AT SOURCE.HE THEREFORE CALLED UPON THE ASSES SEE TO EXPLAIN AS TO WHY SUCH EXPENDITURE SHOULD 12 I.T.A. NO.166/MUM/2019 NOT BE DISALLOWED U NDER SECTION 40(A)(IA) OF THE ACT. THOUGH THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE; HOWEVER THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE DISALLOWED THE AMOUNT OF RS.10 77 350/ - . THE LEARNED DRP WHILE DEALING WITH THE OBJECTIONS OF THE ASSESSEE SUSTAINED ADDITION THE DISALLOWANCE TO THE EXTENT OF RS.10 50 000/ - BEING ALLEGED PAYMENT MADE TO ALLEGRO. 2 6 . THE LEARNED SENIOR COUNSEL SUBMITTED SINCE THE ASSESSEE HA S NOT CLAIMED ANY EXPENDITURE OF THE AMOUNT IN THE CURRENT YEAR NO DISALLOWANCE CAN BE MADE U NDER SECTION 40(A)(IA). IN THIS CONTEXT HE DREW OUR ATTENTION TO PAGE 1775 OF THE PAPER BOOK DEPICTING THE ILLUSTRATIVE EXTRACT OF CUMULATIVE P &L ACCOUNT FOR THE ASSESSMENT YEARS 2013 - 14 AND 2014 - 15 AND NOTES APPENDED THERETO. THUS HE SUBMITTED LET THE ASSESSING OFFICER VERIFY ASSESSEES CLAIM. 2 7 . THE LEARNED D EPARTMENTAL R EPRESENTATIVE AGREED FOR RESTORATION OF THE ISSUE TO THE ASSESSEE. 2 8 . WE HAVE CONSIDE RED RIVAL SUBMISSIONS AND PERUSED MATERIALS AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD LEARNED DRP HAS REJECTED THE ASSESSEES OBJECTION ON THE ISSUE SIMPLY ON THE REASONING THAT SUCH CLAIM WAS NOT SUPPORTED BY ANY EVIDENCE. IN VIEW OF THE AFORESAID WE RESTORE THE ISSUE BACK TO THE ASSESSING OFFICER FOR ENABLING THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THROUGH PROPER EVIDENCE. THE ASSESSING OFFICER IS DIRECTED TO DECIDE THE ISSUE AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 2 9 . GROUNDS 20 AND 21 ARE DISMISSED AS NOT PRESSED AS THE ASSESSEE HAS GOT THE DESIRED RELIEF THROUGH RECTIFICATION ORDER ISSUED BY THE ASSESSING OFFICER. 13 I.T.A. NO.166/MUM/2019 30 . GROUND 22 IS REGARDING NON SET OFF OF BROUGHT FORWA RD BUSINESS LOSS OF RS.6 54 499/ - . THE ISSUE RAISED IN THIS GROUND BEING CONSEQUENTIAL IN NATURE IS RESTORED BACK TO THE ASSESSING OFFICER FOR PROVIDING CONSEQUENTIAL RELIEF. 3 1 . GROUND 23 IS DISMISSED AS NOT PRESSED AS THE ASSESSEE GOT DESIRED RELIEF THR OUGH RECTIFICATION WAS ISSUED BY THE ASSESSING OFFICER. 3 2 . GROUND 24 REGARDING LEVY OF INTEREST U NDER SECTION 234B OF THE ACT BEING CONSEQUENTIAL IN NATURE DOES NOT REQUIRE ADJUDICATION. 3 3 . GROUND 25 ON THE ISSUE OF LEVY OF INTEREST U NDER SECTION 234C I S DISMISSED AS NOT PRESSED AS THE ASSESSEE HAS GOT THE DESIRED RELIEF THROUGH THE RECTIFICATION ORDER ISSUED BY THE ASSESSING OFFICER. 3 4 . IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON 2 2 /0 3 /2021. S D / - S D / - ( RAJESH KUMAR ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT : 2 2 /0 3 /2021 PAVANAN COPY TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR ITAT MUMBAI 6. GUARD FILE BY ORDER ASSTT. REGISTRAR ITAT MUMBAI