India Pistons Limited, CHENNAI v. ACIT, CHENNAI

ITA 2186/CHNY/2010 | 2006-2007
Pronouncement Date: 30-09-2016

Appeal Details

RSA Number 218621714 RSA 2010
Assessee PAN AAACI1439E
Bench Chennai
Appeal Number ITA 2186/CHNY/2010
Duration Of Justice 5 year(s) 9 month(s) 3 day(s)
Appellant India Pistons Limited, CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Assessee
Bench Allotted D
Date Of Final Hearing 14-09-2016
Next Hearing Date 14-09-2016
Assessment Year 2006-2007
Appeal Filed On 27-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . !' . #$#% & '' ( [ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER ] ./ I.T.A.NO.2186/MDS/2010 & 1948/MDS/2011 / ASSESSMENT YEARS : 2006-07 AND 2007-08 M/S INDIA PISTONS LTD HUZUR GARDEN SEMBIUM CHENNAI 600 011 VS. THE ASST T. COMMISSIONER OF INCOME-TAX COMPANY RANGE II(3) CHENNAI [PAN AAACI 1439 E] ( )* / APPELLANT) ( + )* /RESPONDENT) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN ADVOCATE /RESPONDENT BY : SMT. JAY ANTHI KRISHNAN CIT / DATE OF HEARING : 14 - 0 9 - 2016 ! / DATE OF PRONOUNCEMENT : 30 - 0 9 - 2016 / O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE FOR ASSE SSMENT YEARS 2006-07 AND 2007-08 DIRECTED AGAINST THE ASS ESSMENT ORDERS DATED 22.10.2010 AND 28.9.2011 RESPECTIVELY BOTH P ASSED PURSUANT TO THE DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PAN EL U/S 144C(5) R.W.S 144C(8) OF THE INCOME-TAX ACT 1961(IN SHORT THE ACT). ITA NOS. 2186/10 & 1948/11 :- 2 -: 2. APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 IS TAKEN UP FIRST FOR DISPOSAL. 3. ASSESSEE HAS TOGETHER TAKEN EIGHT GROUNDS OF WHICH GROUND NOS. 1 AND 8 ARE GENERAL IN NATURE NEEDING NO SPECI FIC ADJUDICATION. 4. VIDE ITS GROUND NO.2 GRIEVANCE RAISED BY THE ASSES SEE IS ON AN ADDITION OF ` 41 36 103/- MADE TOWARDS TRANSFER PRICING REGULATI ON ON THE VALUE OF INTERNATIONAL TRANSACTIONS UNDERTAK EN BY THE ASSESSEE TO ITS AE DURING THE RELEVANT PREVIOUS YEAR. 5. LD. AR SUBMITTED THAT ASSESSING OFFICER HAD REJECTE D THE CUP METHOD ADOPTED BY THE ASSESSEE FOR VALUING THE INT ERNATIONAL TRANSACTIONS UNDERTAKEN BY IT AND SUBSTITUTED IT WI TH TNM METHOD. AS PER THE LD. AR WHILE APPLYING TNM METHOD TPO/ASSE SSING OFFICER MADE A FUNDAMENTAL MISTAKE IN CALCULATING THE PLI O F THE ASSESSEE WITHOUT SEGREGATING THE INTERNATIONAL TRANSACTIONS UNDERTAKEN. LD. AR FURTHER SUBMITTED THAT THE ASSESSEES RATIO OF PRO FIT BEFORE INTEREST AND TAXES TO SALES WAS 9.27% WHEREAS THE TPO HAD ADOPTE D 4.37%. AS PER THE LD. AR THE ARITHMETIC MEAN OF THE PROFIT L EVEL INDICATOR (PLI) OF THE COMPARABLES SELECTED BY THE TPO FOR BENCHMAR KING THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE CAME T O 10.98%. CONTENTION OF THE LD. AR WAS THAT IF ASSESSEES WO RKING OF ITS OWN PLI AT 9.27% WAS ACCEPTED THEN THIS FELL WITHIN 5% OF THE ARITHMETIC ITA NOS. 2186/10 & 1948/11 :- 3 -: MEAN OF THE PLI OF THE COMPARABLES. THUS ACCORDING TO HIM THERE WAS NO REQUIREMENT FOR MAKING ANY ADJUSTMENT FOR AL P. LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAD TOOK THE P ROFITS ON ENTERPRISE BASIS CONSIDERING THE COMPANY AS A WHOLE WITHOUT SEGREGATING THE EXPORT AND LOCAL BUSINESS. A PER THE LD. AR THE T PO HAD CONSIDERED THE MARGIN OF OPERATING PROFIT OVER COST FOR THE A SSESSEE-COMPANY AS A WHOLE AND THIS WAS THE REASON WHY TPOS PLI CAME TO 4.37%. ACCORDING TO HIM SUCH AN ERRONEOUS CALCULATION LED TO THE RECOMMENDED ADJUSTMENT OF ` 41 36 103/- TOWARDS ALP OF ITS INTERNATIONAL TRANSACTIONS. 6. PER CONTRA LD. DR SUBMITTED THAT WHEN THE PLI OF T HE COMPARABLES WAS TAKEN ON AGGREGATE BASIS THERE WAS NO REASON WHY THE ASSESSEES SALES SHOULD BE SEGREGATED BETWEEN EXPORT AND NON- EXPORT FOR TRANSFER PRICING ANALYSIS. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WHAT WE FIND IS T HAT THE ASSESSEE HAD NOT OBJECTED TO THE ADOPTION OF TNM METHOD FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS. THE INTERNATIONAL TRAN SACTIONS UNDERTAKEN BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR WERE AS UNDER: ITA NOS. 2186/10 & 1948/11 :- 4 -: NAME OF THE ASSOCIATED ENTERPRISE DETAILS OF TRA NSACTIONS AMOUNT OF TRANSACTION (IN RS.) METHOD ADOPTED FEDERAL MOGUL CORPORATION USA PURCHASE OF RAW MATERIALS CONSUMABLES AND SPARES 87 84 887 NO METHOD EXPORT OF FINISHED PISTON AND PISTON PRODUCTS 4 41 57 463 CUP T&N PISTONS PRODUCT GROUP UK RO YALTY 27 00 000 NO METHOD WALLACE CARTWRIGHT & CO. LTD. UK PURCHASE OF RAW MATERIALS CONSUMABLES AND SPARES 8 52 036 NO METHOD EXPORT OF FINISHED PISTON AND PISTON PRODUCTS 2 39 22 302 CUP COMMISSION ON EXPORTS 10 31 347 NO METHOD FEDERAL MOGUL BURSCHEID GMBH GERMANY PURCHASE OF CAPITAL EQUIPMENT CHROME PLATING EQUIPMENT - MAIN SPARE 20 92 042 NO METHOD AE LIMITED MANCHESTER INTERNATIONAL UK DIVIDEND ON REDEEMABLE CUMULATIVE PREFERENCE SHARES 12 75 000 NO METHOD TOTAL 8 48 15 077 8. ASSESSEE HAD IN ITS FORM 3CEB WITH REGARD TO EXPO RT OF FINISHED GOODS ADOPTED CUP METHOD FOR BENCHMARKING ITS INTERNATIONAL TRANSACTIONS. FOR SOME OTHER SEGMENT S IT HAD ADOPTED COST PLUS METHOD. IN VIEW OF DIFFERENT METHODS ADO PTED BY THE ASSESSEE TPO CHOSE TO FOLLOW TNM METHOD AS THE MOS T APPROPRIATE ONE. HE MADE A SELECTION OF COMPARABLES FROM PROWE SS AND CAPITAL LINE PLUS DATA BASE. TPO HAD SELECTED THREE COMPAR ABLES VIZ. M/S MENON PISTONS LTD. M/S SAMKRG PISTONS & RINGS LTD. AND M/S SHRIRAM ITA NOS. 2186/10 & 1948/11 :- 5 -: PISTONS AND RINGS LTD AS PROPER COMPARABLES. TPO WORKED OUT THE ARITHMETIC MEAN OF OTHER PLI AT 10.98%. ASSESSEE HAD GIVEN A WORK OUT OF ITS OWN PLI TO THE TPO THROUGH ITS LETTER D ATED 27.2.2008 AND AS PER THIS WORK OUT ITS PLI CAME TO 6.46%. IN SUCH WORK OUT ASSESSEE HAD SEGREGATED ITS TRANSACTIONS SEPARATELY FOR EXPORT. AS PER THE ASSESSEE FOR THE EXPORT SALES PROFIT RANGED WAS 6.46% AD THIS WAS COMPARABLE WITH THE AVERAGE PLI OF THE RELATED COMPARABLES. HOWEVER TPO REFUSED TO ACCEPT THIS. HE WAS OF THE OPINION THAT THE PLI OF THE COMPANY AS A WHOLE ALONE COULD BE CONSID ERED AND NOT FOR THE EXPORT SEGMENTS ALSO. THIS VIEW OF THE TPO WAS CONFIRMED BY THE DRP. ASSESSMENT WAS COMPLETED ACCORDINGLY MAKING A N UPWARD REVISION OF ` 41 36 103/- FOR UNDERSTATING ITS INTERNATIONAL TRA NSACTIONS WITH THE AE. 9. NOW BEFORE US RELYING ON SEC. 92C OF THE ACT LD . AR SUBMITTED THAT DETERMINATION OF ALP HAD TO BE DONE IN RELATION O INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSES SEE. ACCORDING TO HIM WHEN WORKING OUT THE PLI PROFITS EARNED BY T HE ASSESSEE FROM INTERNATIONAL TRANSACTIONS ALONE HAD TO BE CONSIDER ED AND NOT FROM THE COMPANY AS A WHOLE. RELIANCE WAS PLACED ON THE DEC ISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS TEJ D IAM [2010] 37 SOT 341. ITA NOS. 2186/10 & 1948/11 :- 6 -: 10. PER CONTRA LD. DR SUPPORTED THE ORDERS OF THE AUTH ORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS CAREFULLY. CLAI M OF THE ASSESSEE IS THAT ITS TRANSACTIONS SHOULD BE SEGREGA TED BETWEEN DOMESTIC AND INTERNATIONAL AND ITS OWN PLI FOR COM PARABILITY PURPOSE SHOULD BE COMPUTED FROM ITS INTERNATIONAL TRANSACT IONS. WHEN TNM METHOD IS APPLIED COMPARISON OF NET PROFIT MARGIN REALIZED BY AN ENTERPRISE FROM AN INTERNATIONAL TRANSACTION OR AN AGGREGATE OF INTERNATIONAL TRANSACTIONS HAS TO BE DONE AND NOT C OMPARISON OF OPERATING MARGIN AS SUCH OF AN ENTERPRISE. THIS I S THE RULE LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F TEJ DIAM (SUPRA). A READING OF SEC. 92C ALSO WOULD JUSTIFY THIS VIEW. ARMS LENGTH PRICING IS TO BE DETERMINED ON THE INTERNATIONAL T RANSACTIONS BY THE ASSESSEE WITH ITS AES. HENCE PLI IF CONSIDERED O N AN AGGREGATE BASIS INCLUDING BOTH INTERNATIONAL AS WELL AS DOME STIC TRANSACTIONS IT WOULD GIVE A DISTORTED FIGURE. IN OUR OPINION THE LOWER AUTHORITIES FELL IN ERROR IN CONSIDERING THE PLI AS A WHOLE OF THE ASSESSEE FOR THE PURPOSE OF COMPARABILITY. NEVERTHELESS IT IS TO B E ADDED THAT SUCH SEGREGATION IS ALSO TO BE DONE IN RELATION TO THE C OMPARABLES THAT ARE SELECTED SO THAT THE AVERAGE PLI OF THE COMPARABLES ARE ALSO WORKED OUT ON A SIMILAR FOOTING. IN THE FACTS AND CIRCUMS TANCES OF THE CASE WE ARE OF THE OPINION THAT THE MATTER NEEDS A FRESH LOOK BY THE LOWER ITA NOS. 2186/10 & 1948/11 :- 7 -: AUTHORITIES. WE THEREFORE SET ASIDE THE ORDERS O F THE AUTHORITIES BELOW IN RELATION TO THE ARMS LENGTH PRICING ADJUS TMENT OF THE INTERNATIONAL TRANSACTIONS OF THE ASSESSEE AND REM IT IT BACK TO THE ASSESSING OFFICER/TPO FOR CONSIDERING AFRESH IN ACC ORDANCE WITH LAW. GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. 12. VIDE GROUND NO.3 GRIEVANCE RAISED BY THE ASSESSEE IS DISALLOWANCE OF `70 00 666/- U/S 14A OF THE ACT. 13. LD. AR SUBMITTED THAT THE ASSESSEE HAD CLAIMED EXE MPTION OF DIVIDEND INCOME OF `17 69 461/- U/S 10(34) OF THE ACT. AS PER THE LD. AR THE ASSESSING OFFICER TOOK A VIEW THAT REAS ONABLE EXPENDITURE WOULD HAVE BEEN INCURRED BY THE ASSESSEE FOR EARNI NG EXEMPT INCOME. LD. AR SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE THAT THE INVESTMENT ON WHICH DIVIDEND WAS EARNED WAS MADE OUT OF ITS SHARE CAPITAL AND RESERV ES. AS PER THE LD. AR THE ASSESSING OFFICER MADE A DISALLOWANCE OF `70 00 666/- RELYING ON RULE 8D WITHOUT APPRECIATING THE FACT. AS PER THE LD. AR THE DRP CONFIRMED THE VIEW TAKEN BY THE TPO DISREGA RDING ASSESSEES CONTENTION. SUBMISSION OF THE LD. AR WAS THAT RUL E 8D WAS NOT APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. ITA NOS. 2186/10 & 1948/11 :- 8 -: 14. PER CONTRA THE LD. DR SUBMITTED THAT ASSESSEE ITS ELF HAD ACCEPTED DISALLOWANCE OF 2% VIS--VIS THE EXEMPT IN COME. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUT E THAT RULE 8D WAS NOT APPLICABLE FOR THE IMPUGNED ASSESSMENT YEAR. N EVERTHELESS WE ALSO FIND THAT ASSESSEE HAD ITSELF AGREED FOR DISA LLOWANCE OF 2% OF THE EXEMPT INCOME. EVEN WHEN RULE 8D IS NOT APPLICABLE IN OUR OPINION A DISALLOWANCE U/S 14A COULD BE MADE FOR THE SIMPLE REASON THAT ASSESSEE WOULD HAVE INCURRED SOME EXPENDITURE FOR E ARNING THE EXEMPT INCOME. CO-ORDINATE BENCHES OF THIS TRIBUN AL HAS BEEN TAKING A CONSISTENT VIEW THAT PRIOR TO THE PERIOD WHEN RUL E 8D COULD BE APPLIED DISALLOWANCE OF 2% OF EXEMPT INCOME WOULD SUFFICE. ACCORDINGLY WE RESTRICT THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. ORDERED ACCORDINGLY. GROUND NO.3 IS PARTLY ALLOWED . 16. IN THE VERY SAME GROUND NO.3 ASSESSEE HAS ASSAILE D DISALLOWANCE OF INTEREST OF `17 16 611/- ON A LOAN ADVANCED TO IS SUBSIDIARY M/S I.P POWER & CYLINDERS SYSTEMS LTD. 17. LD. AR RELYING ON THE JUDGMENT OF APEX COURT IN THE CASE OF S.A. BUILDERS VS CIT 288 ITR 1 SUBMITTED THAT ONC E LOAN WAS GIVEN TO A SUBSIDIARY DISALLOWANCE OF INTEREST COULD NOT HA VE BEEN MADE U/S 37 OF THE ACT. ITA NOS. 2186/10 & 1948/11 :- 9 -: 18. PER CONTRA LD. DR SUPPORTED THE ORDERS OF THE AUTH ORITIES BELOW. 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAD PRO VIDED FINANCIAL ASSISTANCE TO THE TUNE OF `3 15 00 000/- TO ITS SUBSIDIARY M/S I.P POWER & CYLINDERS SYSTEMS LTD. AND HAD NOT CHARGED ANY INTEREST THEREON. ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE HAD BORROWED CONSIDERABLE FUNDS. ACCORDING TO THE ASSE SSING OFFICER UNSECURED LOANS CAME TO 15.42 CRORES AND SECURED L OANS CAME TO 53.47CRORES. HE MADE A DISALLOWANCE OF PROPORTIONAT E INTEREST @ 12%. CONTENTION OF THE ASSESSEE IS THAT THIS DISALLOWA NCE IS UNCALLED FOR SINCE THE ADVANCE WAS GIVEN TO A SUBSIDIARY. WE AR E INCLINED TO ACCEPT THIS CONTENTION OF THE LD. AR. THE APEX COURT IN TH E CASE OF S.A BUILDERS (SUPRA) HAD CLEARLY HELD THAT ADVANCES GIV EN TO SUBSIDIARY COMPANY COULD ONLY BE CONSIDERED AS ONE FOR COMMERC IAL EXPEDIENCY. IN THE CASE BEFORE US ASSESSEE HAD ADVANCED LOAN T O ITS SUBSIDIARY AND IT WAS OUT OF COMPULSION AND NOT VOLUNTARY. IN SUCH CIRCUMSTANCES WE ARE OF THE OPINION THAT THE DISAL LOWANCE OF PROPORTIONATE INTEREST WAS NOT CALLED FOR. SUCH DI SALLOWANCE STANDS DELETED. GROUND NO.3 IS ALLOWED. ITA NOS. 2186/10 & 1948/11 :- 10 -: 20. VIDE GROUND NO.4 GRIEVANCE RAISED BY THE ASSESSEE IS DISALLOWANCE OF BAD DEBTS OF `24 00 000/-. 21. LD. AR SUBMITTED THAT THERE WAS AN ACTUAL WRITE OFF OF ` 24 LAKHS IN ITS BOOKS OF ACCOUNT AND THEREFORE CLAIM HAD TO BE ALLOWED. 22. PER CONTRA LD. DR SUPPORTED THE ORDERS OF THE AUTH ORITIES BELOW. 23. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAD WRI TTEN OFF ADVANCE OF ` 20 LAKHS GIVEN TO M/S HI TECH LTD A GROUP COMPANY AND ` 4 LAKHS TO M/S FERRO ALLOYS CORPORATION A SUPPLIER. ASSESSIN G OFFICER TOOK A VIEW THAT EVIDENCE COULD NOT BE ADDUCED BY THE ASSESSEE FOR PROVING THAT THESE WERE AMOUNTS GIVEN DURING THE COURSE OF ITS O RDINARY BUSINESS. ASSESSEES ARGUMENT BEFORE THE DRP WAS THAT THE AMO UNT ADVANCED COULD NOT BE RECOVERED SINCE THE COMPANY HAD BECOM E SICK AND THE ASSESSEE WRITTEN OFF THE DEBTS DURING THE RELEVANT PREVIOUS YEAR. THE DRP TOOK A VIEW THAT ASSESSEE HAD CLAIMED THE DEDU CTION ON A PREMISE THAT FOR THE YEAR ENDED 31.3.2005 THE PROVI SION WAS ADDED BACK WHILE COMPUTING ITS INCOME FOR ASSESSMENT YEAR 2005-06. HOWEVER AS PER THE LD. DR IN THE COPY OF THE RETUR N FILED FOR ASSESSMENT YEAR 2005-06 NO SUCH ADD BACK WAS THERE. WE ARE OF THE OPINION THAT THE ISSUED REQUIRES A FRESH LOOK BY TH E ASSESSING OFFICER. ITA NOS. 2186/10 & 1948/11 :- 11 -: IF THE ASSESSEE HAD WRITTEN OFF THE DEBTS IN ITS BOOKS OF ACCOUNT AND IF THE DEBT HAD CAME OUT OF ITS TRADING TRANSACTION S THEN THE CLAIM HAS TO BE ALLOWED. HOWEVER THE FACTS ARE NOT CLEAR O N RECORD. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH IN ACCORDANCE WITH LAW. 24. VIDE GROUND 5 THE GRIEVANCE RAISED BY THE ASSESSE E IS DISALLOWANCE OF 20% OF COMMISSION AND DISCOUNTS PAI D TO CUSTOMERS. 25. LD. AR SUBMITTED THAT ASSESSEE HAD CLAIMED DISCOUNT(OTHERS) OF `3 19 55 499/- COMMISSION ON EXPORTS OF ` 10 18 845/- SALES COMMISSION OF `16 52 365/- AND DISCOUNT ON HUNDIES OF `8 12 170/-. AS PER THE LD. A.R ASSESSEE HAD FURNISHED FULL INFORMATION AND DETAILS REGARDING THE ABOVE CL AIM. DESPITE THAT ASSESSING OFFICER HAD MADE DISALLOWANCE OF 20% OF T HE AMOUNT OF `3 19 55 499/-. AS PER THE LD. AR THESE WERE DISCOUNTS OFFERED TO CUSTOMERS BASED ON TURNOVER TARGETS AND IT WENT TO REDUCE THE AMOUNTS PAYABLE BY THE AGENTS. FURTHER AS PER THE LD. AR THE DETAILS OF DISCOUNTS/COMMISSION TOTALLING TO ` 1 75 48 192 WAS SUBMITTED BEFORE THE LOWER AUTHORITIES BUT WERE BRUSHED ASIDE . LD. AR FURTHER SUBMITTED THAT IF GIVEN AN OPPORTUNITY ASSESSEE W OULD BE ABLE TO SHOW THAT THE EXPENDITURE WAS PROPERLY VOUCHED. ITA NOS. 2186/10 & 1948/11 :- 12 -: 26. PER CONTRA THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 27 2727 27. .. . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT IN DISP UTE THAT ASSESSEE HAD CLAIMED DISCOUNT OF `3 19 55 499/-. THE DETAILS FILED BY THE ASSESSEE WAS ONLY IN RELATION TO 11 PARTIES TOTALLI NG TO ` 1 75 48 192/-. ASSESSEE WAS GIVEN NUMBER OF OPPORTUNITIES BY THE A SSESSING OFFICER AS WELL AS DRP FOR PROVING ITS CLAIM OF DISCOUNT OF ` 3 19 55 499/-. IN OUR OPINION CLAIM OF THE LD. AR THAT ASSESSING OFF ICER DID NOT CALL FOR THE DETAILS TO PROVE THE EXPENDITURE IS INCORRECT. THIS IS BECAUSE OF THE REASON THAT ASSESSING OFFICER HAD SPECIFICALLY REQUIRED THE ASSESSEE TO GIVE DETAILS OF THE CLAIM IN THE FORMAT PROVIDED BY HIM BUT ASSESSEE FAILED TO FURNISH IT. IN SUCH CIRCUMSTANC ES WE FIND THAT THE LOWER AUTHORITIES WERE JUSTIFIED IN MAKING THE DISA LLOWANCE OF 20% OF SUCH DISCOUNT. WE DO NOT FIND ANY REASON TO INTERF ERE WITH THE ORDER OF THE ASSESSING OFFICER. GROUND NO.5 IS DISMISSED. 28 2828 28. .. . VIDE GROUND NO.6 GRIEVANCE RAISED BY THE ASSESSEE IS DISALLOWANCE OF EXPORT PROMOTION EXPENSES OF ` 17 58 965/-. 29 2929 29. .. . LD. AR SUBMITTED THAT THE CLAIM WAS WITH REGARD TO COMMON EXPENDITURE INCURRED BY THE LONDON OFFICE WHICH WAS REIMBURSED BY ITA NOS. 2186/10 & 1948/11 :- 13 -: THE ASSESSEE. AS PER THE LD. AR FOREIGN BRANCH L IAISON REPRESENTATIVE WAS ACTING ON BEHALF OF ALL GROUP CO MPANIES AND THE EXPENDITURE INCURRED BY THE REPRESENTATIVE WAS SHAR ED BY THE GROUP COMPANIES. ACCORDING TO HIM THE LOWER AUTHORITIES ERRED IN DISALLOWING THE CLAIM. 30 3030 30. .. . PER CONTRA THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 31 3131 31. .. . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE DISALLOWANCE OF SHARE OF EXPENDITURE OF LONDON LIAISON OFFICE WAS MADE BY TH E LOWER AUTHORITIES FOR THE REASON THAT ASSESSEE COULD NOT PRODUCE ANY EVIDENCE TOWARDS EXPENDITURE BY THE SAID LONDON LIA ISON OFFICE. EXPLANATION OF THE ASSESSEE WAS THAT LIAISON OFFIC E WORKED ON BEHALF OF ALL THE GROUP COMPANIES AND M/S AMALGAMATIONS PV T LTD ONE OF THE GROUP COMPANIES MADE PAYMENT TO LONDON LIAISON OFFI CE AND RECOVERED SHARE OF EXPENDITURE FROM THE INDIVIDUAL COMPANIES. WE ARE OF THE OPINION THAT EXCEPT FOR GIVING THIS EXPLANAT ION WHICH WAS NOT SUPPORTED BY ANY EVIDENCE ASSESSEE HAD NOT GIVEN ANY DETAILS OF THE SERVICES RENDERED BY THE LONDON LIAISON OFFICE NOR ANY CORRESPONDENCE WITH THEM. ASSESSEE ALSO COULD NOT SHOW THE NEED OF LIAISON OFFICE AND WHY THE PAYMENTS WERE ROUTED THR OUGH A HOLDING ITA NOS. 2186/10 & 1948/11 :- 14 -: COMPANY. IN SUCH CIRCUMSTANCES THE DISALLOWANCE W AS RIGHTLY MADE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ERS OF THE LOWER AUTHORITIES. GROUND NO.6 IS DISMISSED. 32 3232 32. .. . VIDE GROUND NO.7 GRIEVANCE OF THE ASSESSEE IS THAT THE LOWER AUTHORITIES DISALLOWED 10% OF THE EXPENDITURE OF `2 41 62 616/- INCURRED TOWARDS MARKETING INCENTIVES. 33 3333 33. .. . LD. AR SUBMITTED THAT ASSESSEE HAD PRINTED MARKET INCENTIVE COUPONS VALUED AT ` 2 41 62 616/- AND DISTRIBUTED AMONGST ITS DEALERS DURING THE RELEVANT PREVIOUS YEAR. AS PER THE ASS ESSEE THE ULTIMATE CUSTOMER WHO OPENED THE PRODUCT AND OBTAINED THESE COUPONS WERE REIMBURSED BY ITS DEALERS TO THE EXTENT OF VALUE OF THE COUPONS. WHEN THE COUPONS WERE PRODUCED BY THE DEALERS AS PER TH E LD. AR CREDIT NOTES WERE GIVEN TO SUCH DEALERS. THIS AS FOR THE LD.AR WAS PURELY A CUSTOMER CENTRIC MARKET EXPENDITURE AND THE LOWER A UTHORITIES ERRED IN MAKING THE DISALLOWANCE. 34 3434 34. .. . PER CONTRA THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 35 3535 35. .. . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CLAIM OF THE ASS ESSEE THAT EVERY PACK CONTAINING A SET OF PISTONS WERE PASTED WITH A COUP ON WHICH WOULD ITA NOS. 2186/10 & 1948/11 :- 15 -: GIVE THE BUYERS A RIGHT TO A CASH DISCOUNT. AS PER THE ASSESSEE DEALER WAS REQUIRED TO GIVE THE CASH DISCOUNT TO SU CH CUSTOMERS. THOUGH THE ASSESSEE CLAIMED THAT IT WAS HAVING EVI DENCE IN THIS REGARD IT COULD NOT PRODUCE DEALERWISE DETAILS OF THE REIMBURSEMENT AND HOW THE SUM OF ` 2 41 62 616/- WAS ARRIVED AT. WHEN NO EVIDENCE IN SUPPORT OF THE CLAIM WAS PRODUCED BY TH E ASSESSEE LOWER AUTHORITIES IN OUR OPINION WAS JUSTIFIED IN MAKING A DISALLOWANCE OF 10%. WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE ORDERS OF THE LOWER AUTHORITIES. GROUND NO.7 IS DISMISSED. 36 3636 36. .. . IN THE RESULT APPEAL OF THE ASSESSEE FOR ASSESSME NT YEAR 2006-07 IS PARTLY ALLOWED. 37 3737 37. .. . NOW WE TAKE UP APPEAL FOR ASSESSMENT YEAR 2007-08 I N I.T.A.NO.1948/MDS/2011. 38 3838 38. .. . THE ASSESSEE HAS RAISED ALTOGETHER TEN GROUNDS IN ITS APPEAL OF WHICH GROUND NO.1 AND 10 ARE GENERAL IN NATURE N EEDING NO SPECIFIC ADJUDICATION. 39. VIDE GROUND NOS. 2 AND 3 ASSESSEE IS AGGRIEVED O F ALP ADJUSTMENT OF ` 25 63 148/-. THE MAIN THRUST OF THE ARGUMENT OF T HE ASSESSEE WAS WITH REGARD TO COMPARING OPERATING MAR GIN OF THE ASSESSEE AS A WHOLE INSTEAD OF SEGREGATING ITS INTE RNATIONAL ITA NOS. 2186/10 & 1948/11 :- 16 -: TRANSACTIONS. AS PER THE LD. AR IF THE INTERNATIO NAL TRANSACTIONS WERE SEGREGATED AND PLI ARRIVED AT THEN THE PRICING OF ITS INTERNATIONAL TRANSACTION WOULD BE WITHIN 5% AND HENCE NO ADJUSTMENT WOULD BE REQUIRED. 40. WE FIND THAT THE ISSUE RAISED BY THE ASSESSEE IS S IMILAR TO ITS GROUND NO.2 FOR ASSESSMENT YEAR 2006-07. WE HAVE R EMITTED THIS ISSUE BACK TO THE FILE OF THE TPO/ASSESSING OFFICER WITH DIRECTIONS GIVEN IN PARA 10. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL THE SIMILAR DIRECTIONS ARE GIVEN FOR THE IMPUGNED ASSESSMENT YE AR ALSO. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER /TPO FOR CONSIDERING THE CLAIM OF THE ASSESSEE FOR BENCHMARKING ITS INT ERNATIONAL TRANSACTIONS CONSIDERING THE PLI OF THE INTERNATIO NAL TRANSACTIONS ALONE AND NOT ON AN UNDERTAKING BASIS. ORDERED ACCORDING LY. GROUND NO.2 AND 3 OF THE APPEAL ARE ALLOWED FOR STATISTICAL PUR POSES. NEEDLESS TO SAY OTHER ISSUES WITH REGARD TO ADJUSTMENT MADE FOR ARMS LENGTH PRICING SHALL REMAIN OPEN. 41. VIDE GROUND NO.3 GRIEVANCE RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF ` 72 87 449/- U/S 14A OF THE ACT. 42. WE FIND THAT SIMILAR HAD COME UP IN ASSESSEES AP PEAL FOR ASSESSMENT YEAR 2006-07 VIDE ITS GROUND NO.3 WE H AVE HELD IN PARA ITA NOS. 2186/10 & 1948/11 :- 17 -: 15 THAT DISALLOWANCE OF 2% OF THE EXEMPT INCOME WOU LD SUFFICE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. SIMILAR DIREC TIONS ARE GIVEN HERE ALSO. GROUND NO.3 IS PARTLY ALLOWED. 43. VIDE GROUND NO.4 GRIEVANCE RAISED BY THE ASSESSEE IS ON DISALLOWANCE OF ADDITIONAL DEPRECIATION OF ` 20 15 922/- BEING RESIDUAL OF SUCH DEPRECIATION CLAIMED IN THE IMMEDIATELY PR ECEDING YEAR. 44. LD. AR SUBMITTED THAT THE ISSUE WHETHER CARRIED FOR WARD OF ADDITIONAL DEPRECIATION FOR NEW MACHINERY COULD BE CLAIMED IN ASUCCEEDING YEAR HAD COME UP BEFORE THE KARNATAKA H IGH COURT IN THE CASE OF CIT VS RITTAL INDIA PVT. LTD. 380 ITR 423 AND THE HIGH COURT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDING TO THE LD. AR THE ASSESSEE WAS THEREFORE ENTITLED FOR ADD ITIONAL DEPRECIATION. 45. PER CONTRA THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 46. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE KARNATAKA HIGH COURT IN THE CASE OF RITTAL INDIA PVT. LTD. (SUPRA) HAD HELD AS UNDER : ITA NOS. 2186/10 & 1948/11 :- 18 -: 6. THE RELEVANT PROVISIONS OF SECTION 32 ARE REPROD UCED BELOW : '32.(1) IN RESPECT OF DEPRECIATION OF (I) BUILDINGS MACHINERY PLANT OR FURNITURE BEING TANGIBLE ASSETS ; (II) KNOW-HOW PATENTS COPYRIGHTS TRADE MARKS LI CENCES FRAN CHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIG HTS OF SIMILAR NATURE BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL 1998 OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION THE FOLLOWING DEDUCTIONS SHALL BE ALLOW ED (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER SUCH PERCENTAGE ON THE ACTUAL COST THEREOF TO THE ASSESS EE AS MAY BE PRESCRIBED ; (II) IN THE CASE OF ANY BLOCK OF ASSETS SUCH PERCE NTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED : . . . PROVIDED FURTHER THAT WHERE AN ASSET REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA) AS THE CASE MAY BE IS ACQUIRED BY THE ASSES SEE DURING THE PREVIOUS YEAR AND IS PU T TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PE RIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVI OUS YEAR THE DEDUCTION UNDER THIS SUB-SEC TION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT. OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSE T UNDER CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA) AS THE C ASE MAY BE . . . (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT) WHICH HAS BEEN ACQUIRED AND IN STALLED AFTER THE 31ST DAY OF MARCH 2005 BY AN ASSESSEE E NGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING OR IN THE BUSINESS OF GENERATION OR GENERA TION AND DISTRIBUTION OF POWER A FURTHER SUM EQUAL TO TWENT Y PER CENT. OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II).' 7. CLAUSE (IIA) OF SECTION 32(1) OF THE ACT AS IT NOW STANDS WAS SUBSTITUTED BY THE FINANCE ACT 2005 APPLICABLE WI TH EFFECT FROM APRIL 1 2006. PRIOR TO THAT A PROVISO TO THE SAID CLAUSE WAS THERE WHICH PROVIDED FOR THE BENEFIT TO BE GIVEN ONLY TO A NEW INDUSTRIAL UNDERTAKING OR ONLY WHERE A NEW INDUSTRIAL UNDERTA KING BEGINS TO ITA NOS. 2186/10 & 1948/11 :- 19 -: MANUFACTURE OR PRODUCE DURING ANY YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR. 8. THE AFORESAID TWO CONDITIONS I.E. THE UNDERTAK ING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDERTAKING OR THAT IT SHOULD BE CLAIMED IN ONE YEAR HAVE BEEN DONE AWAY BY SUBSTITUTING CLAUSE (IIA) WITH EFFECT FROM APRIL 1 2006. THE GRANT OF ADDITIONAL DEPRECIATION UNDER THE AFORESAID PRO VISION IS FOR THE BENEFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENC OURAGING INDUSTRIALISATION BY EITHER SETTING UP A NEW INDUS TRIAL UNIT OR BY EXPANDING THE EXISTING UNIT BY PURCHASE OF NEW PLAN T AND MACHINERY AND PUTTING IT TO USE FOR THE PURPOSE OF BUSINESS. THE PROVISO TO CLAUSE (II) OF THE SAID SECTION MAKES IT CLEAR THAT ONLY 50 PER CENT. OF THE 20 PER CENT. WOULD BE ALLOWABLE I F THE NEW PLANT AND MACHINERY SO ACQUIRED IS PUT TO USE FOR LESS TH AN 180 DAYS IN A FINANCIAL YEAR. HOWEVER IT NOWHERE RESTRICTS THAT THE BALANCE 10 PER CENT. WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. 9. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SE CTION CLEARLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20 PER CENT. OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDU CTION UNDER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLA USE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20 PER CENT. ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO R EFERRED TO ABOVE ONLY 10 PER CENT. CAN BE CLAIMED IN ONE YEAR IF PL ANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS IN T HE SAID FINANCIAL YEAR. THIS WOULD NECESSARILY MEAN THAT THE BALANCE 10 PER CENT. ADDITIONAL DEDUCTION CAN BE AVAILED OF IN THE SUBSE QUENT ASSESSMENT YEAR OTHERWISE THE VERY PURPOSE OF INSE RTION OF CLAUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20 PER CENT. DEDUCTION WHICH SHALL BE ALLOWED. 10. IT HAS BEEN CONSISTENTLY HELD BY THIS COURT AS WELL AS THE APEX COURT THAT THE BENEFICIAL LEGISLATION AS IN THE P RESENT CASE SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT TH E ASSESSEE. IN THIS CASE THE INTENTION OF THE LEGISLATION IS ABSOLUTEL Y CLEAR THAT THE ASSESSEE SHALL BE ALLOWED CERTAIN ADDITIONAL BENEFI T WHICH WAS RESTRICTED BY THE PROVISO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YEAR IF CERTAIN CONDITION WAS NOT F ULFILLED. BUT THAT IN OUR CONSIDERED VIEW WOULD NOT RESTRAIN TH E ASSESSEE FROM CLAIMING THE BALANCE OF THE BENEFIT IN THE SUBSEQUE NT ASSESSMENT ITA NOS. 2186/10 & 1948/11 :- 20 -: YEAR. THE TRIBUNAL IN OUR VIEW HAS RIGHTLY HELD THAT ADDITIONAL DEPRECIATION ALLOWED UNDER SECTION 32(1)(IIA) OF TH E ACT IS A ONE- TIME BENEFIT TO ENCOURAGE INDUSTRIALISATION AND TH E PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY LIBE RALLY AND PURPOSIVELY TO MAKE THE PROVISION MEANINGFUL WHILE GRANTING THE ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. 11. IN VIEW OF THE AFORESAID WE DO NOT FIND THAT A NY INTERFERENCE IS CALLED FOR WITH THE ORDER OF THE TRIBUNAL OR THAT ANY QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. 47. IT IS NOT DISPUTED THAT THE DISALLOWANCE WAS ON DIS ALLOWANCE OF THE BALANCE OF THE ADDITIONAL DEPRECIATION OF ` 72 87 449/- CARRIED FORWARD FROM THE EARLIER YEAR SINCE ASSESSEE HAD P UT THE NEW ASSETS IN USE FOR A PERIOD LESS THAN 180 DAYS IN SUCH EARL IER YEAR. IN VIEW OF THE JUDGMENT OF THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD(SUPRA) WE FIND THAT THE ASSESSEE IS ENTITLED T O CLAIM THE BALANCE AMOUNT IN THE SUCCEEDING YEAR. DISALLOWANCE IS DELE TED. GROUND NO.4 STANDS ALLOWED. 48. VIDE GROUND NO.5 GRIEVANCE OF THE ASSESSEE IS WIT H REGARD TO DISALLOWANCE OF INTEREST ON A LOAN OF ` 3 15 00 000/- GIVEN TO ITS SUBSIDIARY. 49. THE ISSUE RAISED BY THE ASSESSEE IS SIMILAR TO THE ONE RAISED IN ITS APPEAL FOR ASSESSMENT YEAR 2006-07 AS GROUND NO.3. WE HAVE ITA NOS. 2186/10 & 1948/11 :- 21 -: HELD AT IN PARA 19 THAT SUCH DISALLOWANCE WAS NOT JUSTIFIED IN VIEW OF THE JUDGMENT OF APEX COURT IN THE CASE OF S.A. BUIL DERS (SUPRA). SINCE THE FACTS AND CIRCUMSTANCES ARE THE SAME FOR THE IM PUGNED ASSESSMENT YEAR ALSO WE DELETE THE DISALLOWANCE. GROUND NO.4 OF THE ASSESSEE STANDS ALLOWED. 50. VIDE GROUND NO.6 GRIEVANCE OF THE ASSESSEE IS WI TH REGARD TO A DISALLOWANCE OF BAD DEBTS OF ` 31 89 221/- WRITTEN OFF. 51. WE FIND THAT SIMILAR ISSUE REGARDING DISALLOWANCE OF BAD DEBT HAD COME UP IN ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2006-07 ALSO AS GROUND NO.4. WE HAD REMITTED THIS ISSUE BA CK TO THE FILE OF ASSESSING OFFICER FOR CONSIDERATION AFRESH AT PARA 23 ABOVE. FOR THE IMPUGNED ASSESSMENT YEAR ALSO WE ARE OF THE OPINION THAT THE ISSUE NEEDS FRESH LOOK BY THE ASSESSING OFFICER. WE THE REFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THE ISSUE OF BAD DEBTS AND REMIT IT BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSI DERATION AFRESH. GROUND NO.6 IS ALLOWED FOR STATISTICAL PURPOSES. 52. VIDE GROUND NO.7 GRIEVANCE RAISED BY THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF 2% OF COMMISSION AND DIS COUNTS OF ` 74 64 985/-. ITA NOS. 2186/10 & 1948/11 :- 22 -: 53. WE FIND THAT SIMILAR ISSUE HAS BEEN DEALT WITH BY U S IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 ALSO. ASSESSEE HAD RAISED A SIMILAR GROUND WITH REGARD TO DISALLOWANCE OF COMMISSION/DISCOUNT. WE HAD HELD THAT SUCH DISALLO WANCE WAS JUSTIFIED IN PARA 27 ABOVE. FACT SITUATION REMAIN ING THE SAME WE FIND THAT FOR THE IMPUGNED ASSESSMENT YEAR ALSO DISALLO WANCE WAS JUSTIFIED. GROUND NO.7 STANDS DISMISSED. 54. VIDE GROUND NO.8 GRIEVANCE OF THE ASSESSEE IS THA T EXPORT PROMOTION EXPENDITURE OF ` 21 LAKHS WAS DISALLOWED. 55. THE ABOVE DISALLOWANCE WAS IN RELATION TO LONDON LIAISON OFFICE MAINTENANCE EXPENSES CLAIMED BY THE ASSESS EE TO HAVE BEEN SHARED ALONGWITH THE OTHER GROUP COMPANIES. SIMILA R ISSUE HAS BEEN RAISED BY THE ASSESSEE IN ITS APPEAL FOR IN ASSES SMENT YEAR 2006-07. WE HAVE HELD IN PARA 31 THAT THE DISALLOWANCE WAS R IGHTLY DONE. SINCE THE CIRCUMSTANCES UNDER WHICH DISALLOWANCE WAS MADE ARE SIMILAR WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER S OF THE AUTHORITIES BELOW. GROUND NO.8 STANDS DISMISSED. 56. VIDE GROUND NO.9 GRIEVANCE OF THE ASSESSEE IS WIT H REGARD TO DISALLOWANCE OF MARKETING EXPENDITURE OF ` 16 59 380/-. ITA NOS. 2186/10 & 1948/11 :- 23 -: 57. THE ABOVE DISALLOWANCE WAS MADE AS THE ASSESSEE HA D FAILED TO PRODUCE EVIDENCE WITH REGARD TO THE INCEN TIVE CLAIMED TO HAVE BEEN GIVEN TO THE ULTIMATE USERS OF ITS PRODUCTS. SIMILAR ISSUE HAD COME UP IN APPEAL FOR ASSESSMENT YEAR 2006-07 ALSO AND AT PAR 35 ABOVE WE HAVE HELD SUCH DISALLOWANCE TO BE JUSTIFI ED CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. SINCE THE FAC T SITUATION REMAINED THE SAME IN THE IMPUGNED ASSESSMENT YEAR WE HOLD T HE DISALLOWANCE WAS RIGHTLY MADE BY THE AUTHORITIES BELOW. WE DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITI ES. GROUND NO.9 STANDS DISMISSED. 58. IN THE RESULT THE APPEAL OF THE ASSESSEE FOR ASS ESSMENT YEAR 2007-08 IS PARTLY ALLOWED. 59. TO SUMMARIZE BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2016 AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 30 TH SEPTEMBER 2016 RD ITA NOS. 2186/10 & 1948/11 :- 24 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ) - . / DR 3. +/' / CIT(A) 6. -01 / GF