DCIT, New Delhi v. M/s JSL Ltd.,, Hisar

ITA 4111/DEL/2013 | 2006-2007
Pronouncement Date: 03-11-2017 | Result: Dismissed

Appeal Details

RSA Number 411120114 RSA 2013
Assessee PAN AABCJ1969M
Bench Delhi
Appeal Number ITA 4111/DEL/2013
Duration Of Justice 4 year(s) 3 month(s) 30 day(s)
Appellant DCIT, New Delhi
Respondent M/s JSL Ltd.,, Hisar
Appeal Type Income Tax Appeal
Pronouncement Date 03-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted I1
Tribunal Order Date 03-11-2017
Date Of Final Hearing 12-07-2017
Next Hearing Date 12-07-2017
First Hearing Date 12-07-2017
Assessment Year 2006-2007
Appeal Filed On 04-07-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI R. K. PANDA ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE JUDICIAL MEMBER ITA NO.4111/DEL/2013 ASSESSMENT YEAR : 2006-07 DCIT CIRCLE- 4(1) NEW DELHI. VS. JSL LTD. O.P. JINDAL MARG HISAR. PAN : AABCJ1969M (APPELLANT) (RESPONDENT) ITA NO.4248/DEL/2013 ASSESSMENT YEAR : 2006-07 JSL LTD. (NOW KNOWN AS JINDAL STAINLESS LTD. ) O.P. JINDAL MARG HISAR. VS. ACIT CENTRAL CIRCLE- 6 NEW DELHI. PAN : AABCJ1969M (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI KUMAR PRANAV SR.DR ASSESSEE BY : SHRI AJAY VOHRA SR. ADV. SHRI NEERAJ JAIN ADV. SHRI ABHISHEK AGARWAL CA DATE OF HEARING : 07-08-2017 DATE OF PRONOUNCEMENT : 03-11-2017 O R D E R PER R. K. PANDA AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE REVENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DIRECTED A GAINST THE ORDER DATED 2 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 29.04.2013 OF CIT(A)-XX NEW DELHI RELATING TO ASSE SSMENT YEAR 2006-07. FOR THE SAKE OF CONVENIENCE THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESS EE COMPANY HAS AN INTEGRATED STAINLESS STEEL MANUFACTURING PLANT AT HISSAR WHIC H IS ENGAGED IN MANUFACTURING OF STAINLESS STEEL SLABS FLATS COIL S BLADES STEEL BLACK COINS ETC.. IT HAS BOTH COLD AND HOT ROLLING MILLS AT HI SSAR. IT HAS ALSO FERRO CHROME MANUFACTURING PLANT AT VISHAKHAPATNUM. THE ASSESSE E IS A LISTED COMPANY AND FILED ITS RETURN OF INCOME ON 23.11.2006 DECLARING TOTAL INCOME AT RS.83 00 83 200/-. SUBSEQUENTLY ON 23.11.2007 TH E ASSESSEE FILED A REVISED STATEMENT SHOWING THE TOTAL INCOME OF RS.81 77 08 9 59/-. THE ASSESSING OFFICER MADE A REFERENCE TO THE TPO FOR DETERMINATI ON OF THE ARMS LENGTH PRICE U/S 92CA(3) IN RESPECT OF THE INTERNATIONAL TRANSAC TIONS ENTERED INTO BY THE ASSESSEE DURING THE FINANCIAL YEAR 2005-06. THE TP O DURING THE TP ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS UNDERTAK EN THE FOLLOWING INTERNATIONAL TRANSACTIONS DURING THE YEAR :- S.NO. NATURE OF TRANSACTION VALUE OF TRANSACTION 1. IMPORT OF SS SCRAP 86 540 291 2. EXPORT OF COLD ROLLED PRODUCT 22 68 203 983 3. THE TPO OBSERVED THAT THE ASSESSEE DURING THE IM PUGNED ASSESSMENT YEAR HAS A TOTAL TURNOVER OF RS.3494.60 CRORES OUT OF WH ICH RS.2297.28 CRORES IS 3 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 DOMESTIC TURNOVER AND RS.1197.31 CRORES IS EXPORT T URNOVER. HE OBSERVED THAT THE ASSESSEE HAS BENCHMARKED ITS INTERNATIONAL TRAN SACTION OF SALES TO ITS AE PT JINDAL STAINLESS (INDONESIA) OF RS.226.82 CRORES US ING CUP METHOD. SIMILARLY THE ASSESSEE HAS ALSO IMPORTED SCRAPS GRADES VALUED AT RS.86 540 291/- FROM PT JINDAL STAINLESS INDONESIA. AFTER CONSIDERING T HE SUBMISSIONS MADE BY THE ASSESSEE FROM TIME TO TIME THE ASSESSING OFFICER H ELD THAT CERTAIN SALES TO AE WERE NOT MADE AT ARMS LENGTH PRICE AND THE INTERNA TIONAL TRANSACTIONS WERE UNDERSTATED BY RS.2 75 21 494/- IN RESPECT OF FOLLO WING : (I) EXPORT OF GRADE J4 COIL RS.22 031 098/- AND (II) EXPORT OF J4 HR COI L RS.54 90 396/- TOTALING TO RS.27 521 424/-. THE ASSESSING OFFICER IN THE O RDER PASSED U/S 143(3) R.W.S. 144C MADE ADDITION OF RS.27 521 494/- TO THE TOTAL INCOME OF THE ASSESSEE AS PER DIRECTION OF THE TPO IN DETERMINATION OF THE AR MS LENGTH PRICE. SIMILARLY THE ASSESSING OFFICER ALSO MADE ADDITION OF RS.50 0 00/- U/S 14A ON THE GROUND THAT THE ASSESSEE HAS EARNED SUM OF RS.482.26 CRORE S AS DIVIDEND ON INVESTMENT OF RS.25 209.08 LACS AND NO DISALLOWANCE HAS BEEN M ADE U/S 14A OF THE I.T. ACT. SIMILARLY OUT OF TOTAL CLAIM OF RS.3066.07 L ACS ON ACCOUNT OF DECAPITALIZATION OF INTEREST THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.24 91 16 438/-. FURTHER AS AGAINST THE CLAIM O F RS.732 77 722/- U/S 80IA MADE BY THE ASSESSEE THE ASSESSING OFFICER ALLOWED RS.6 43 01 040/- BEING 10% OF TOTAL TURNOVER OF POWER UNITS NO.V & VI AT R S.64 30 10 400/-. THIS RESULTED INTO DISALLOWANCE OF RS.89 76 682/- ON ACC OUNT OF EXCESS DEDUCTION 4 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 CLAIMED U/S 80IA OF THE I.T. ACT. SIMILARLY THE A SSESSING OFFICER ALSO MADE DISALLOWANCE OF RS.87 45 000/- ON ACCOUNT OF BAD DE BTS AND MADE ADDITION OF RS.1 45 001/- ON ACCOUNT OF DEDUCTION TREATING THE SAME AS UNSUBSTANTIVE. 4. IN APPEAL LD. CIT(A) ALLOWED THE CLAIM OF DEDUC TION U/S 80IA OF RS.89 76 682/- DELETED THE ADDITION ON ACCOUNT OF BAD DEBTS AMOUNTING TO RS.87 45 000/- DELETED THE DISALLOWANCE OF RS.50 0 00/- MADE BY THE ASSESSING OFFICER U/S 14A AND DELETED THE ADDITION OF RS.24 9 1 16 438/- ON ACCOUNT OF DECAPITALIZATION OF INTEREST INCOME. SO FAR AS THE TRANSFER PRICING ADJUSTMENT IS CONCERNED THE LD. CIT(A) DELETED AN ADDITION OF RS .21 54 152/- AND SUSTAINED AN ADDITION OF RS.28 89 032/-. AGAINST SUCH PARTIA L RELIEF GIVEN BY THE LD. CIT(A) THE REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS :- ITA NO.4111/DEL/2013 (BY REVENUE) : 5. GROUNDS OF APPEAL : 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS.21 54 152/- BY NOT APPL YING THE RATE OF THE NEAREST DATE FOR COMPARISON PURPOSE AFTER AGREEING THAT NEAREST DATE SHOULD BE APPLIED FOR COMPARISON PURPOSES? 1.A. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN APPLYING THE AVERAGE RATE OF 8-03-2005 AND 11-3-200 5 FOR COMPRISING THE SINGLE PRODUCT SALE TRANSACTION OF 01-03-2005 WHEN RATE O F SINGLE NEAREST DATE OF 08-03- 2005 SHOULD HAVE BEEN APPLIED? 1.B. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN CONSIDERING THE PERIOD OF SALE FROM 01-03-2005 TO 1 5-03-2005 WHEN THE PRODUCT BEING CONSIDERED HAS BEEN TRANSACTED ON SINGLE DATED OF 0 1-03-2005 AND THE TRANSACTION IN SUBSEQUENT DATE PERTAIN TO DIFFERENT PRODUCT? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.50 000/- U/S 14-A MADE BY THE A.O.? 5 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.24.91 CRORES BY IGNORIN G THE FINDINGS OF THE A.O. WHICH WERE BASED ON THE DECISION OF TUTICORIN ALKALIS CHE MICAL & FERTILIZERS LTD. VS. CIT 227 ITR 172 (SC)? 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.89 76 682/- BY FULLY AL LOWING THE CLAIM OF DEDUCTION U/S 80IA IN RESPECT OF CAPTIVE POWER PLANT OF THE ASSES SEE WITHOUT DECIDING THE SPECIFIC FINDINGS OF THE A.O. THAT PROFIT OF THE UNIT WAS IN FLATED BECAUSE OF NON ACCOUNTING OF INTEREST ON BORROWED FUND LOW ADMINISTRATIVE EXPEN SES ETC.? 5. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.87 45 000/- ON ACCOUNT OF BAD DEBTS WRITE OFF BY IGNORING THE FINDINGS OF THE A.O. THAT THESE DEBTS WERE NOT BAD IN NATURE? 6. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AN D IS NOT TENABLE ON FACTS AND IN LAW. ITA NO.4248/DEL/2013 (BY ASSESSEE) : 6. GROUNDS OF APPEAL : 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN THE LAW IN SUSTAINING TRANSFER PRICING ADJUSTMENT TO THE EX TENT OF RS.28 89 032/- MADE IN RESPECT OF THE INTERNATIONAL TRANSACTIONS OR EXPORT OF STEEL PRODUCTS ON THE BASIS OF THE ORDER PASSED UNDER SECTION 92CA(3) OF THE INCOME-TA X ACT 1961 (THE ACT) BY THE TRANSFER PRICING OFFICER. 1.1 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PRICE PAID ON INTERNATION AL TRANSACTION OF EXPORT OF GOODS TO ASSOCIATED ENTERPRISE WAS WITHIN ARMS LENGTH RANGE OF +/-5% OF THE PRICE CHARGED TO UNRELATED THIRD PARTIES IN TERMS OF THE PROVISO TO SECTION 92C(2) OF THE ACT. 1.2 THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED ON FACTS AND IN LAW IN HOLDING THAT THE BENEFIT OF ARMS LENGTH RANGE OF + /-5% AS PER THE PROVISO TO SECTION 92C(2) OF THE ACT WOULD NOT BE APPLICABLE WHERE THE ARMS LENGTH PRICE SO DETERMINED IS ONLY A SINGLE PRICE AND NOT AVERAGE OF MULTIPLE ARMS LENGTH PRICE. THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER AND VARY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 7. SO FAR AS THE GROUND NO.2 BY THE REVENUE IS CONC ERNED THE SAME RELATES TO THE ORDER OF THE LD. CIT(A) IN DELETION OF RS.50 000/- MADE BY THE ASSESSING OFFICER U/S 14A OF THE I.T. ACT. 6 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 8. AFTER HEARING BOTH THE SIDES WE FIND THE ASSESS ING OFFICER HAD MADE DISALLOWANCE OF RS.50 000/- U/S 14A ON THE GROUND T HAT ASSESSEE HAD EARNED EXEMPT INCOME OF RS.482.26 CRORES ON INVESTMENT OF RS.25 209.08 CRORES AND NO DISALLOWANCE U/S 14A WAS MADE BY THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE THAT NO DISALLOWANCE U/S 14A IS REQUIRED S INCE ALL THE INVESTMENTS ARE OUT OF COMPANIES OWN FUNDS WAS REJECTED BY THE ASSE SSING OFFICER ON THE GROUND THAT SUCH EXPLANATION IS VAGUE AND GENERAL I N NATURE AND ASSESSEE HAS NOT PROVED ANY NEXUS WHETHER INVESTMENT HAS BEEN MADE O UT OF SURPLUS FUND OR BORROWED CAPITAL. HOWEVER HE HAS ALSO MENTIONED T HAT THE AMOUNT OF INVESTMENT AND DIVIDEND INCOME BOTH ARE VERY NOMINA L VALUE LOOKING TO THE SIZE OF THE COMPANY. WE FIND THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AS SUBSTANTIAL FUNDS OF ITS OWN TO MAKE INVESTMENT FOR EARNING EXEMPT INCOME AN D THEREFORE THE AD-HOC ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.50 000/- IS NOT JUSTIFIED. HE HAS ALSO GIVEN A FINDING THAT NO NEX US HAS BEEN ESTABLISHED BY THE ASSESSING OFFICER TO SHOW THAT ANY EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING AS SESSMENT YEAR. THE TRIBUNAL AT PARA 46 OF THE ORDER HAS RESTRICTED SUC H DISALLOWANCE TO RS.25 000/- BY OBSERVING AS UNDER :- 7 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 46. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AS WELL AS THE CIT( A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS EARNED EXEMPT INCOME OF RS.3 60 000/- ON INVESTMENT OF RS.15 00 000/- IN MAGNUM GLOBAL FUND. SINCE NO SUO MOTO DISALLOWANCE WAS MADE BY THE ASSESSEE U/S 14A OF TH E I. T. ACT THE ASSESSING OFFICER OBSERVED THAT ASSESSEE MUST HAVE INCURRED SOME EXPE NDITURE FOR EARNING TAX-FREE INCOME AND MADE ADHOC DISALLOWANCE OF RS.50 000/- W HICH HAS BEEN UPHELD BY THE CIT(A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NO DISALLOWANCE HAS BEEN MADE IN THE PAST AND NO NEXUS HAS BEEN PRO VED BY THE ASSESSING OFFICER. NO MATERIAL HAS BEEN PLACED ON RECORD TO SHOW THAT THE ASSESSEE HAS INCURRED SOME EXPENDITURE FOR EARNING TAX-FREE INCOME. IN OUR OPI NION ALTHOUGH THERE IS NO DISALLOWANCE OF INTEREST EXPENDITURE FOR EARNING TA X-FREE DIVIDEND INCOME HOWEVER IT CANNOT BE SAID THAT NO ADMINISTRATIVE EXPENDITURE H AS BEEN INCURRED FOR EARNING THE TAX-FREE INCOME OF RS.3 60 000/- ON THE INVESTMENT OF RS.15 00 000/-. SINCE THE DIVIDEND INCOME IS ON ACCOUNT OF INVESTMENT IN MAGN UM GLOBAL FUND OF RS.15 00 000/- THEREFORE CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE DISALLOWANCE OF RS.50 000/- ON AD-HOC BASIS UNDER T HE FACTS AND CIRCUMSTANCES OF THE CASE APPEARS TO BE ON HIGHER SIDE. ALTHOUGH THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE HAS BEEN MADE IN THE PAST HOW EVER IT WAS NOT BROUGHT TO OUR NOTICE AS TO WHETHER THE DISALLOWANCE WAS NOT MADE IN SCRUTINY ASSESSMENT OR SUMMARY ASSESSMENT. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE DISALLOWANCE OF RS.25 000/- UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE IN OUR OPINION WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY . THE GROUND NOS.1.1 TO 1.2 BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 9. FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WE DIRECT TH E ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS.25 000/- U/S 14A OF THE I.T. ACT. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY PARTLY ALLOWED . 10. SO FAR AS THE GROUND NO.3 BY THE REVENUE IS CON CERNED THE SAME RELATES TO DISALLOWANCE OF RS.24.91 CRORES ON ACCOUNT OF CA PITALIZATION OF INTEREST. 11. AFTER HEARING BOTH THE SIDES WE FIND THE ASSES SING OFFICER MADE DISALLOWANCE OR ADDITION OF RS.24 91 16 438/- ON TH E GROUND THAT THE ASSESSEE COMPANY ON THE ONE HAND HAS MADE DECAPITALIZATION O F INTEREST INCOME OF 8 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 RS.3066.07 LACS AND ON THE OTHER HAND HAS SHOWN SUC H INTEREST EXPENSES AS REVENUE TO THE EXTENT OF RS.9539.99 LACS. REJECTIN G THE VARIOUS DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KARNAL COOPERATIVE SUGAR MILLS LTD. REPORTED IN 243 ITR 2 RELIED UPON BY THE ASSESSEE THE ASSESSING OFFICER HELD THAT THE INTER EST EARNED AS A RESULT OF APPORTIONMENT OF LOAN RECEIVED FOR THE PURPOSE OF G REEN FIELD PROJECT AT ORISSA PROJECT IS INEXTRICABLY AND INTRINSICALLY LINKED. 12. WE FIND THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- 6.3. THE FACTS OF THE CASE ARE NOT UNDER DISPUTE B ETWEEN THE ASSESSEE AND THE AO. THE APPELLANT HAD REDUCED THE COST OF CAPITAL BY IN TEREST EARNED ON THE BORROWED FUND FOR ACQUISITION OF CAPITAL. THE AO HAD TAXED THIS INTEREST INCOME. THE AO HAS RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF TUTICORIN ALKALI CHEMICALS AND FERTILIZERS LTD. VS. CIT (227 ITR 172). ON THE OTHER HAND THE APPELLANT HAS RELIED ON THE DECISION OF JURISDICTION HIGH COURT I N THE CASE OF NTPC SAIL POWER COMPANY PVT. LTD. VS. CIT (ITA NO.1238/2011 ORDER DATED 17.07.2012). THE FACTS OF THIS DECIDED CASE AND THAT OF THE APPELLANT ARE SIM ILAR. IN THE CASE OF NTPC SAIL POWER COMPANY PVT. LTD. THE COMPANY HAD BORROWED F UND FOR CAPITAL INVESTMENT IN NEW UNITS WHICH WAS UTILIZED TO EARN INTEREST ON DE POSITS AND ADVANCES MADE OUT OF SUCH FUNDS AND CLAIMED IT AS CAPITAL RECEIPT. THE HIGH COURT HELD THAT THE APPELLANT WAS RIGHT IN CLAIMING IT AS CAPITAL RECEIPT BY SETT ING OFF/ NETTING OFF AGAINST INTEREST ON BORROWED SUM. IN THE PRESENT CASE ALSO THE APPELL ANT NETTED OFF THE INTEREST RECEIVED ON THE AMOUNT WHICH WAS BORROWED FOR INVESTMENT IN GREEN FIELD ORISSA PROJECT AGAINST THE EXPENDITURE INCURRED ON THE PROJECT. F URTHER THE HONBLE HIGH COURT OF DELHI IN THE CASE OF NTPC SAIL POWER COMPANY PVT. L TD. (SUPRA) HAS DISCUSSED THE CASE CITED BY THE AO NAMELY TUTICORIN ALKALI CHEM ICALS AND FERTILIZERS LTD. (SUPRA) IN THE JUDGMENT. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT AS WELL AS DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF CIT VS BOKARO STEEL LTD. (1999) 102 TAXMAN 94 (SC) I HOLD THAT T HE INTEREST RECEIVED ON THE BORROWED FUND EXCLUSIVELY FOR THE PURPOSE OF SETTIN G UP OF A UNIT AT ORISSA IS NOT TAXABLE AS INTEREST INCOME. AO IS DIRECTED TO DELE TE THE ADDITION MADE IN THIS REGARD. 13. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE. WE ALSO FIND THE TRIBUNAL VIDE ITA NO.25 18/DEL/2013 ORDER DATED 9 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 30.05.2017 HAS ACCEPTED THE ALTERNATE CONTENTION OF THE ASSESSEE AND ALLOWED DEDUCTION OF INTEREST EXPENSES INCURRED ON EARNING INTEREST INCOME ON CERTAIN DEPOSITS U/S 57(III) BY OBSERVING AS UNDER :- 53. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECIS IONS CITED BEFORE US. THE ONLY ISSUE TO BE DECIDED IN THE IMPUGNED GROUNDS IS REGA RDING THE TREATMENT OF RS.6 11 95 775/- BEING INTEREST EARNED ON TEMPORARY FUNDS AND THE INCOME OF RS. 1 32 88 663/- ON SALE OF INVESTMENT TRANSFERRED TO ORISSA PLANT. ACCORDING TO THE ASSESSING OFFICER SUCH INTEREST INCOME HAS TO BE B ROUGHT TO TAX AS INCOME FROM OTHER SOURCES WHICH HAS BEEN UPHELD BY THE CIT(A) BY RELY ING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TUTICORN ALKAL I CHEMICALS AND FERTILIZERS LIMITED (SUPRA) AND VARIOUS OTHER DECISIONS. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SUCH INTEREST INCOME SHOULD BE RE DUCED FROM THE CAPITAL WORK IN PROGRESS. IT IS HIS ALTERNATE CONTENTION THAT IF TH E INTEREST INCOME IS TAXED AS INCOME FROM OTHER SOURCES THEN DEDUCTION SHOULD BE ALLOWE D ON THE INTEREST EXPENDITURE FOR EARNING SUCH INTEREST INCOME AS PER THE PROVISIONS OF SECTION 57(III). WE FIND MERIT IN THE ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE ASSESSEE HAS SUBMITTED BEFORE THE LOWER AUTHORITIES THAT THE INT EREST RECEIVED OF RS.6 11 95 775/- IS ON ACCOUNT OF INVESTMENT OUT OF LOAN FUNDS RAISED F OR THE ORISSA PROJECT. COPY OF THE LOAN SANCTION LETTER IN RESPECT OF ORISSA PROJECT W AS ALSO SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAD CATEGORICA LLY SUBMITTED BEFORE THE LOWER AUTHORITIES THAT SUCH INTEREST EXPENSES AND THE INT EREST INCOME AS A RESULT OF APPORTIONMENT OF LOAN RECEIVED ON ACCOUNT OF ORISSA PROJECT A E INEXTRICABLY AND INTRINSICALLY LINKED WITH EACH OTHER. 54. WE FIND THE HONBLE SUPREME COURT IN THE CASE O F RAJENDRA PRASAD MODY [SUPRA] HAS HELD HAT EXPENDITURE LAID OUT OR EXPEND ED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME IS AN ALLO WABLE DEDUCTION. FOLLOWING THE ABOVE DECISION WE ARE OF THE CONSIDERED OPINION TH AT ASSESSEE SHOULD BE GIVEN DUE CREDIT FOR INTEREST EXPENDITURE INCURRED FOR EARNIN G SUCH INTEREST INCOME. ACCORDINGLY THE ALTERNATE SUBMISSION OF THE ASSESSEE IS ALLOWED . THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE AMOUNT OF EXPENDITURE APPORTIONED FOR THE INVESTMENT REQUIRED FOR EARNING SUCH INTEREST INCOME. THE GROUND NO.2 TO 2. 3 RAISED BY THE ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED FOR STATISTICAL PURPOSES . 14. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE WE RESTORE THE ISS UE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO FOLLOW THE ORDER OF THE TRIBUNAL AND RE-COMPUTE THE 10 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 DISALLOWANCE. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 15. IN GROUND NO.4 THE REVENUE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN DELETING THE CLAIM OF DEDUCTION U/S 80IA AMOUNTING TO RS.89 76 682/-. 16. AFTER HEARING BOTH THE SIDES WE FIND THE CLAIM OF DEDUCTION OF RS.7 32 77 722/- U/S 80IA WAS REJECTED BY THE ASSES SING OFFICER ON THE GROUND THAT THE FORM NO.10CCB FILED BY THE ASSESSEE IS INC OMPLETE AND PROPER BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ARE NOT AVAILABLE FOR EACH UNIT. THE ASSESSING OFFICER THEREFORE ESTIMATED THE PROFIT ELIGIBLE F OR DEDUCTION U/S 80IA OF THE I.T. ACT AT THE RATE OF 10% TURNOVER OF THE POWER UNITS AND WORKED OUT THE DEDUCTION AT RS.6 43 01 040/- AS AGAINST THE CLAIM OF THE ASS ESSEE AT RS.7 32 77 772/- WHICH RESULTED INTO DISALLOWANCE OF RS.89 76 682/-. 17. WE FIND THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER :- 7.3. I HAVE PERUSED THE SUBMISSION OF THE APPELLAN T AND THE ORDER OF THE AO. THE ALLEGATION OF THE AO IS THAT FORM NO.10CCB IS INCOM PLETE SINCE IT WAS CERTIFIED BASED ON MEMORANDUM BALANCE SHEET WHICH WAS NOT THE ACTUA L BALANCE SHEET OF THE UNITS AND SECONDLY THE INTEREST EXPENSES WERE NOT ALLOCAT ED TO THE UNITS. THE DEFENSE OF THE APPELLANT IS THAT IT HAS COMPLIED WITH THE REQUIREM ENT OF LAW BY FILING CERTIFICATE OF THE CHARTERED ACCOUNTANT WHO HAS DULY AUDITED THE PROFI T & LOSS ACCOUNT AND BALANCE SHEET OF THE APPELLANT. FURTHER THE APPELLANT HAS STATED THAT LOANS WERE UNDERTAKEN BY THE APPELLANT FOR ITS VARIOUS PROJECTS WHICH WER E UNDER PRE-OPERATIVE PHASE AND NO LOAN WAS USED FOR OPERATING THESE UNITS WHERE DEDUC TION UNDER 80IA WAS CLAIMED. THE LINE BY LINE ITEMS IN THE PROFIT AND LOSS ACCOU NT AND IN THE BALANCE SHEET OF THE APPELLANT WHICH WAS THE ANNEXURE TO FORM NO.10CCB W AS FILED BY THE APPELLANT DURING THE COURSE OF THE APPEAL HEARING AND ON GOIN G THROUGH THE SAME I FIND THAT THERE IS NO JUSTIFICATION TO CALCULATE THE 80IA ON AN ARBITRARY AND ESTIMATION BASIS. THE FORM NO.3CEB IS DULY SIGNED BY THE CHARTERED AC COUNTANT HAVING VERIFIED ACCOUNT OF THE APPELLANT AND CERTIFYING THAT THE UNITS WERE ELIGIBLE FOR DEDUCTION U/S 80IA. THE 11 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 CLAIM OF THE APPELLANT THAT THE BORROWED FUNDS WERE FOR SETTING UP OF NEW UNITS AND SUCH MONEY WAS USED IN THE UNITS WHICH CLAIMED DEDU CTION U/S 80IA IS ALSO CORRECT SINCE THE APPELLANT HAS SUFFICIENT FUNDS AS ITS WOR KING CAPITAL AS DISCUSSED IN GROUND NO.1. IN VIEW OF THIS I HOLD THAT THE APPELLANT I S ELIGIBLE FOR 80IA DEDUCTION AS CLAIMED BY THE APPELLANT IN FORM NO.10CCB. ADDITIO N MADE ON ACCOUNT OF DISALLOWANCE UNDER THIS GROUND SHOULD BE DELETED. 18. SINCE THE TRIBUNAL HAS ALREADY UPHELD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THEREFORE FOLLOWING THE SAME WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ALLOWING THE CLAIM OF DEDUCTION U/S 80IA OF THE I.T. ACT. ACCORDINGLY T HE ORDER OF THE LD. CIT(A) IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISM ISSED. 19. SO FAR AS THE GROUND NO.5 BY THE REVENUE IS CON CERNED THE SAME RELATES TO THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDI TION OF RS.87.45 CRORES ON ACCOUNT OF BAD DEBT WRITTEN OFF. 20. AFTER HARING BOTH THE SIDES WE FIND THE ASSESS EE HAD CLAIMED DEDUCTION OF RS.87.45 CRORES AS BAD DEBT IN THE PROFIT & LOSS AC COUNT. THESE BAD DEBTS ARISE OUT OF THE SALE OF COLD ROLLED STAINLESS STEEL COIL S MADE TO DAI ICHI USA NY IN THE FINANCIAL YEAR 2004-05 ON ACCOUNT OF QUALITY IS SUE. HOWEVER THE ASSESSING OFFICER CONCLUDED THAT THE CONDITIONS AS ENUMERATED IN THE PROVISIONS OF SECTION 36(2) OF THE I.T. ACT ARE NOT FULFILLED AND THEREFO RE HE DISALLOWED THE CLAIM OF BAD DEBTS OF RS.87.45 CRORES. 21. WE FIND IN APPEAL THE LD. CIT(A) ALLOWED THE CL AIM OF SUCH BAD DEBTS ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT GIVEN THE REASON FOR HIS 12 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 CONCLUSION. FROM THE VARIOUS SUBMISSIONS FILED BY THE ASSESSEE HE OBSERVED THAT THE ASSESSEE HAD BOOKED THE INCOME IN THE EARL IER YEAR BY RAISING INVOICE AGAINST THE PARTY AND ASSESSEE HAD CONCLUDED THAT T HE AMOUNT STANDING AGAINST THE PARTY WAS NOT REALIZABLE AND CONSEQUENTLY HAS A CTUALLY WRITTEN OFF AS THE AMOUNT AS BAD DEBTS. HE HELD THAT THE VARIOUS DECI SIONS RELIED UPON BY THE ASSESSEE BEFORE HIM ALSO SUPPORT THE CASE OF THE AS SESSEE. HE ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE. FROM THE DETAIL S SUBMITTED BY THE ASSESSEE DURING THE COURSE OF HEARING BEFORE US WE FIND THE WRITING OFF OF SUCH BAD DEBTS AS IRRECOVERABLE SATISFY THE REQUIREMENT OF ALLOWAN CE AND DEDUCTION AS PER SECTION 36(1)(VII) R.W.S. 36(2) OF THE I.T. ACT. I T IS HELD BY VARIOUS DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. CIT REPORTED IN 323 ITR 397 THAT IT IS SUFFICIE NT COMPLIANCE FOR THE CLAIM OF BAD DEBTS IF THE DEBT IS ACTUALLY WRITTEN OFF IN TH E BOOKS OF ACCOUNT OF THE ASSESSEE AND HE IS NOT REQUIRED TO DEMONSTRATE OR P ROVE AS TO WHETHER THE DEBT HAS ACTUALLY BECOME BAD DEBT. THE REVENUE CANNOT I NSIST ON DEMONSTRATIVE PROOF AS TO WHETHER THE DEBT HAS BECOME BAD DEBT AN D NON-INITIATION OF LEGAL PROCEEDINGS AGAINST THE DEBTOR WOULD ALSO NOT AUTOM ATICALLY LEAD TO THE INFERENCE THAT THE ASSESSEE IS NOT ENTITLED TO WRIT E OFF THE AMOUNT OF THE BAD DEBT. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE O RDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE. ACCORDINGLY THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 13 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 22. SO FAR AS THE GROUND NO.1 TO 1.1 BY THE REVENUE AND 1.1 TO 1.2 BY THE ASSESSEE ARE CONCERNED THESE RELATE TO THE PARTIAL RELIEF GIVEN BY THE LD. CIT(A) ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT MADE BY T HE ASSESSING OFFICER. 23. AS MENTIONED EARLIER IN PARA 4 OF THIS ORDER W E FIND BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD. CIT(A) SUSTAINED THE AMOUNT OF RS.28 89 032/- AND DIRECTED THE ASSESSING OFFICER T O DELETE THE BALANCE AMOUNT. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) READS A S UNDER :- 3.2. THE APPELLANT HAD ENTERED INTO INTERNATIONAL TRANSA CTION WITH ITS AE IN INDONESIA OF IMPORT OF SCRAP AMOUNTING TO RS. 8.6 CRORES AND EXPORT OF COLD ROLLED PRODUCTS AMOUNTING TO RS. 226.82 CRORES. AS PER THE ORDER OF THE TPO THE APPELLANT HAD 6.87% NET PROFI T AND 11.99% GROSS PROFIT DURING THE YEAR. 3.3. THE APPELLANT HAD USED CUP METHOD TO BENCHMARK ITS INTERNATIONAL TRANSACTION. THE INTERNATIONAL TRANSA CTION INVOLVED IN IMPORT OF MATERIAL WAS ACCEPTED AS AT ARM'S LENGTH BY THE TPO. SIMILAR PRODUCTS WERE ALSO EXPORTED TO UNRELATED PARTIES IN MIDDLE EAST WHICH WERE TAKEN AS CUP FOR JUSTIFYING ITS INTERNATIONAL TRANSACTION INVOLVED IN EXPORTS OF STEEL PRODUCTS. IN THE TRANSFER PRICING DOCUMENTATION THE ASSESSEE HAS BENCHMARKED THE TRANSACTION OF EXPORT OF STEEL PRODUCTS TO RELATED PARTY BY COMPARING IT WITH EXPORT OF STEEL PRODUCTS TO UNRELATED PARTY ON MONTHLY AVERAGE PRICE BASIS. HOWEVER TPO FOUND THAT THE DATES OF THE COMPARABLE TRANSACTIONS WERE DIFFERENT AND W ENT OUT TO COMPARE THE TRANSACTIONS HAPPENING ON THE SAME DATES. AS A RESULT OF THIS THE TPO ENDED UP COMPARING DIFFERENT PRODUCTS TRADED ON THE SAME DATES WHICH RESULTED INTO AN ADDITION OF RS. 2.75 CRORES. 3.4. I HAVE CAREFULLY EXAMINED THE ISSUE BASED ON THE SU BMISSION OF THE APPELLANT MATERIAL ON RECORD AND ORDER OF THE TPO. THE INTERNATIONAL TRANSACTIONS UNDER DISPUTE HAVE TAKEN PLACE ON 22.0 4.2005 30.04.2005. 19.08.2005 27.02.2006 AND 01.03.2005 TO 15.03.2005 (THE ACTUAL TRANSACTION HAPPENED 02.04.2005 ONWARDS). THE TRANS ACTIONS ON THESE DAYS ARE DISCUSSED AND DECIDED IN THE FOLLOWING PAR AGRAPHS. THERE ARE TWO COMMON ISSUES RELEVANT IN THIS CASE REGARDING T HE DETERMINATION OF THE ALP OF THE INTERNATIONAL TRANSACTION. THEY ARE 1. THE SIMILARITY OF PRODUCTS TO BE COMPARED. 2. THE DATES OF TRANSACTIONS TO BE COMPARED. 4. ISSUE 1 THE SIMILARITY OF PRODUCTS TO BE COMPARED: 14 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 IN THE CUP TRANSACTION THE SIMILARITY OF THE PRODU CT IS THE MOST IMPORTANT ELEMENT UNDER RULE 10B(1)(A). AN APPLE NE EDS TO BE COMPARED WITH AN APPLE AND FURTHER A SHIMLA APPLE SHOULD BE COMPARED WITH A SHIMLA APPLE ONLY. IF SHIMLA APPLE IS BEING COMPARE D WITH A CALIFORNIA APPLE THEN SUITABLE ADJUSTMENTS NEEDS TO BE MADE EVEN THOUGH THEY BELONG TO THE BROAD CATEGORY OF APPLES. IN THE PRES ENT CASE THE APPELLANT IS ENGAGED IN MANUFACTURING STEEL PRODUCTS AND THER E ARE VARIOUS STAGES OF PRODUCTION AND THE FINAL PRODUCT ALSO VARY DEPEN DING ON THE PROCESS OF MANUFACTURING THE QUALITY AND QUANTITY OF INPUT S BEING USED PURPOSE FOR WHICH THE PRODUCTS MANUFACTURED ETC. THEREFORE IF THE SIMILAR PRODUCTS ARE AVAILABLE FOR COMPARISON THE SAME SHOU LD BE TAKEN. ISSUE 2 THE DATES OF TRANSACTIONS TO BE COMPARED: AS FAR AS POSSIBLE IF THE COMPARABLE TRANSACTIONS HAVE HAPPENED ON THE SAME DAY BETWEEN THE AE AND THE NON AES THE DATE O F TRANSACTION SHOULD BE THE SAME. HOWEVER IF THE SAME OR SIMILAR PRODUCTS ARE NOT TRANSACTED ON THE SAME DATE THEN THE NEAREST DATE ON WHICH THE SIMILAR PRODUCTS ARE TRANSACTED SHOULD BE DATES FOR COMPARI SON. IN THE TRANSFER PRICING REPORT APPELLANT HAS TAKEN MONTHLY AVERAGE RATES. HOWEVER IT IS CLEAR FROM THE SAME TP REPORT SIMILAR TRANSACTIONS HAVE HAPPENED EITHER ON THE SAME DAY OR WITHIN THE SAME WEEK WHEREIN SIM ILAR PRODUCTS ARE TRADED WITH A AE AS WELL AS NON AES. THEREFORE TH E TRANSACTION HAPPENING ON THE NEAREST DATE SHOULD BE TAKEN FOR COMPARISON. IT IS POSSIBLE THAT A FLUCTUATION MAY HAPPEN IN THE SAME MONTH. THEREFORE A TRANSACTION HAPPENING IN THE BEGINNING OF THE MONTH MAY SUBSTANTIALLY VARY FROM THE ONE WHICH HAD HAPPENED AT THE END OF THE SAME MONTH. THIS MAY CALL FOR 'SUITABLE ADJUSTMENT' WHICH IS DIFFICU LT TO QUANTIFY. THIS DIFFICULTY CAN CERTAINLY BE OVERCOME IF THE NEAREST DATE OF TRANSACTION IS TAKEN FOR COMPARISON SINCE THE VARIATION IN PRICES OF THE STEEL PRODUCTS SOLD BY THE APPELLANT IN THE FACTS AND CIRCUMSTANC ES OF THIS CASE DOES NOT VARY AS MUCH WITHIN A SHORT SPAN OF TIME. IT CAN BE SEEN IN THE SUBSEQUENT PARAGRAPHS THAT MOST OF THE TRANSACTIONS ARE BEING COMPARED ON THE SAME DATE OR AT THE MOST WITHIN A SPAN OF 7 TO 8 DAYS. 4.1. TRANSACTION DATED 22.04.2005: THE TPO HAS COMPARED GRADE J4 COIL EXPORTED TO THE AE WITH THE EXPORTS ON THE SAME DATE TO THIRD PARTY (UNRELATED) CUSTOME RS BY THE AE. THIS IS TABULATED IN PAGE NO. 7 OF THE TPO ORDER IN TABLE N O. III AND IV WHICH IS FURTHER SUMMARIZED IN TABLE NO. V AND VI. THE MOST IMPORTANT DISCREPANCY POINTED OUT BY THE APPELLANT IN THE ORD ER OF THE TPO IS THAT THE QUALITY OF COIL SOLD TO THE AE WAS GRADE J4 BLA CK COIL WHICH WAS DIFFERENT FROM J4 HRAP COILS SOLD ON THE SAME DATE TO UNRELATED PARTIES (IN THE TABLE NO. III OF THE TPO ORDER) AND THEREFO RE THEY CANNOT BE COMPARED. THE APPELLANT HAS ALSO SUPPLIED THE INVOI CES TO SHOW THAT THEY ARE NOT COMPARABLE PRODUCTS WHICH WERE BEING COMPAR ED BY THE TPO. 15 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 4.1.1. GRADE J4 COILS BEING EXPORTED TO THE AE AT INDONESI A AND J4 HRAP COILS EXPORTED TO THIRD PARTIES ARE DESCRIBED AS FO LLOWS IN THE SUBMISSION OF THE APPELLANT: 'IT IS FURTHER SUBMITTED THAT THE PRICE OF PRODUCTS HAVING GRADE J4 HRAP IS HIGHER AS COMPARED TO THE GRADE J4 BLACK COIL DUE T O THE REASON THAT THE FORMER IS A RAW COIL AND THE LATTER IS A FINAL PRODUCT OF STAINLESS STEEL COIL MADE AFTER UNDERTAKING VARIOUS PROCESS SUCH AS ANNEALING-PICKLING BATHING WITH ELECTROLYTIC SULPHURIC ACID AND MIXED ACID. SA ME IS EVIDENT FROM THE EXTRACT OF THE WEBSITE OF THE COMPANY REPRODUCED AS UNDER: HR COIL HR BLACK: AS CAST/ GROUND SLABS ARE FIRST HEATED AN D SOAKED IN REHEATING FURNACE ROLLED IN ROUGHING MILL TO INTERMEDIATE TH ICKNESS AND THEN TO THE FINAL THICKNESS IN THE STECKEL MILL. HRAP : HOT ROLLED COILS ARE ANNEALED & PICKLED IN CONTINUOUS ANNEALING- PICKLING LINES HAVING SCALE BREAKER SHOT BLASTING UNIT ELECTROLYTIC SULPHURIC ACID AND MIXED ACID BATH. HRAP COILS HAVE A CLEANER SURFACE & HAVE IMPROVED MECHANICAL PROPERTIES FOR DOWNSTREAM PROCESSING. IN VIEW OF THE AFORESAID DIFFERENCE IN THE PRODUCT COMPOSITION IT IS RESPECTFULLY SUBMITTED THAT THE AFORESAID PRODUCTS CANNOT BE COM PARED FOR THE PURPOSE OF BENCHMARKING ANALYSIS APPLYING CUP METHOD WHICH REQUIRES STRICT COMPARABILITY.' I HAVE ALSO VISITED THE WEBSITE OF THE APPELLANT AT HTTP://WWW.JSLSTAINLESS.COM/PRODUCTLINE.PHP#HRCOIL AND FOUND THAT THE ABOVE DISTINCTION WAS MADE ABOUT THE PRODUCTS AND I T WAS AVAILABLE FOR EVERYBODY TO SEE. 4.1.2. IN TABLE NO. III OF THE TPO ORDER TPO HAS CONSIDER ED 7 TRANSACTIONS DATED 22.04.2005 OF DIFFERENT QUANTITY OF GRADE J4 COILS SOLD TO THE AE. THE INVOICE RATE TAKEN IS 1100 USD PER M ETRIC TON. ON THE SAME DAY THE APPELLANT HAD EXPORTED TO SON HA CO. LTD. AT VIETNAM. THIS TRANSACTION WAS TAKEN AS COMPARABLE BY THE TPO . THE 'MATERIAL OF SUPPLY' AS MENTIONED IN THE INVOICE IS 'HOT ROLLED STAINLESS STEEL PREMIUM QUALITY'. THE FINISH IS NO. I. WHEREAS THE FINISH A S MENTIONED IN THE INVOICE SOLD TO THE AE MENTIONS THE FINISH AS 'BLACK AS ROL LED'. THEREFORE THE APPELLANT WAS RIGHT IN POINTING OUT THAT THE TPO HA S ENDED UP COMPARING DIFFERENT PRODUCTS. 4.1.3. ON THE OTHER HAND THE APPELLANT HAS COMPARED THE B LACK ROLLED COILS SOLD TO M/S FOSHAN SHI SHIWANQU AT FOSHAN CITY ON 18.04.2005 TO THE SALE MADE TO THE AE ON 22.04.2005. THE RATE PER METRIC TON IS 1100 USD IN THIS TRANSACTION. THEREFORE THE INTERNATION AL TRANSACTION SHOULD BE TREATED AS AT ARM'S LENGTH. NO ADDITION IS REQUI RED TO BE MADE ON THIS 16 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 TRANSACTION. 4.2. TRANSACTION DATED 19.08.2005: THE APPELLANT HAD SOLD GRADE J4 HR COIL TO THE AE A S WELL AS THE NON AES. THEREFORE) THERE IS NO QUESTION OF DIFFERENCE OF DA TES OR QUALITY IN THIS TRANSACTION. THE ONLY POINT RAISED BY THE APPELLANT IS THAT THE APPELLANT HAD TO PAY COMMISSION TO THE MIDDLE MEN IN THE TRAN SACTION WITH UNRELATED PARTIES AND NO SUCH COMMISSION IS PAYABLE IN THE TR ANSACTION WITH AE. THEREFORE THE PRICE PAID TO THE UNRELATED PARTIES NEED TO BE SUITABLY ADJUSTED BY DEDUCTING THE COMMISSION PAID OR TO BE PAID FROM THE INVOICE PRICE RAISED AGAINST THE THIRD PARTIES. THE APPELLA NT HAD FILED THE DETAILS ABOUT COMMISSION PAID BEFORE THE TPO. THE SAME IS P RODUCED IN THE PAPER BOOK AS ANNEXURE TO THE TP DOCUMENTATION AT P AGE NO. 38. THE APPELLANT HAS PAID USD 25 PER METRIC TON AS COMMISS ION AND IT WAS BUILT IN THE INVOICE PRICE OF USD 970. IF THIS COMMISSION AMOUNT IS REDUCED THEN THE PRICE PAID BY THE THIRD PARTY CUSTOMER TO THE IDENTICAL GOODS COMES TO USD 945 PER METRIC TON. AS MENTIONED BY TH E TPO THE 27 COMPARABLE TRANSACTIONS RESULTED INTO AN AVERAGE PR ICE OF USD 970 PER METRIC TON WHERE IN ALL THE CASES USD 25 PER METRIC TON WAS PAID AS A COMMISSION. THE TP DOCUMENTATION ALSO CONTAINED 15 TRANSACTIONS WITH UNRELATED PARTIES WHEREIN PRICE OF USD 920 WAS CHAR GED EVEN TO UNRELATED PARTIES ON THE SAME DAY ON AN IDENTICAL G OOD. THERE WERE TOTALLY 15 TRANSACTIONS UNDER THIS HEAD WHICH WAS N OT CONSIDERED BY THE TPO. IT IS ALSO NOTICED THAT IN THE INVOICES RAISED AGAINST THIRD PARTIES WHERE USD 920 WAS CHARGED NO COMMISSION WAS PAID BY THE APPELLANT. IF ALL THESE TRANSACTIONS HAPPENED ON SAME DAY ARE TAK EN INTO CONSIDERATION THE AVERAGE PRICE OF THE 42 INTERNAT IONAL TRANSACTION COMES TO USD 952 PER METRIC TON [(970 * 27 + 920 * 15)/ 42]. THIS PRICE SHOULD BE TAKEN AS ARM'S LENGTH PRICE. THE PROVISO TO SECTION 92C(2) COMES INTO OPERATION SINCE MULTIPLE PRICE ARE AVAIL ABLE ON THE SAME DATE FOR THE IDENTICAL PRODUCT. THEREFORE THE INTERNATI ONAL TRANSACTION ON 19.08.2005 SHOULD BE HELD AT ARM'S LENGTH. NO ADDIT ION IS NEEDED TO BE MADE ON THIS TRANSACTION. 4.3. TRANSACTION DATED 27.02.2006 AND 30.04.2005: THE APPELLANT HAD SOLD GRADE J4 HR COIL TO THE AE A S WELL AS THIRD PARTIES ON THE SAME DAY I.E. ON 27.02.2006. THERE I S NO DIFFERENCE BETWEEN THE APPELLANT AND THE TPO ON THE DATE OF THE TRANSA CTION OR ON QUALITY OF THE PRODUCT SOLD. AS PER THE ORDER OF THE TPO IN PA RA 5.4.5 THERE WERE TOTALLY 19 TRANSACTIONS WITH THE AE ON THIS DATE. T HE AVERAGE PRICE WAS USD 915 PER METRIC TON. ON THE SAME DAY THERE WERE RELEVANT TRANSACTIONS WHEREIN THE RATE CHARGED TO THIRD PART IES WAS USD 930 PER METRIC TON. THE APPELLANT CONTENDS THAT THE ' PROVISO TO SECTION 92C(2) SHOULD BE INVOKED IN THIS CASE. SIMILARLY IN TABLE NO. IV THE DISPUTE IS ABOUT CA LCULATION OF + / -5% AS PER THE PROVISO TO SECTION 92C(2). THE DATE OF COMP ARISON IS 30.04.2005 17 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 AND THE QUALITY OF PRODUCT BEING COMPARED IS ALSO G RADE J4 BLACK COIL. THE APPELLANT CONTENDS THAT THE INTERNATIONAL TRANS ACTION IS WITHIN +/-5% OF THE COMPARABLE TRANSACTION. 4.4. I FAIL TO UNDERSTAND THE ARGUMENT OF THE APPELLANT SINCE THERE IS ONLY ONE PRICE OF THE COMPARABLE TRANSACTION ON 27.02.20 06 AND 30.04.2005 WHICH IS USD 930 PER METRIC TON AND USD 1120 PER ME TRIC TON RESPECTIVELY OF THE SAME QUALITY GOODS SOLD WHICH I S TAKEN AS ARM'S LENGTH PRICE BY THE TPO. AS PER PROVISO TO SECTION 92C(2) THE TRIGGERING FACTOR TO INVOKE CALCULATION OF +/-5% IS 'WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD .... '. I N THE PRESENT CASE THE TPO HAS CERTAINLY TAKEN 11 TRANSACTIONS FOR THE TRA NSACTION DATED 27.02.2006 AND TWO INVOICES OF UNRELATED PARTIES FO R THE TRANSACTION DATED 30.04.2005 RESPECTIVELY HOWEVER IT RESULTS INTO ONLY ONE PRICE I.E. USD 930 FOR TRANSACTION DATED 27.02.2006 AND USD 1120 F OR TRANSACTION DATED 30.04.2005. IN THE CUP METHOD TRANSACTION BY TRANS ACTION ARE COMPARED. THE NEAREST DATE ON WHICH SIMILAR COMMODITY IS SOLD IS TAKEN FOR COMPARISON. ON BOTH THE DATES THE TRANSACTIONS HAV E HAPPENED WITH THE AE AS WELL AS WITH NON AES. THE TRANSACTION WITH TH E NON AES HAS HAPPENED WITH THE SAME PRICE IN ALL THE INVOICES. T HEREFORE THERE IS NO MULTIPLE PRICES ESTABLISHED FOR THE TRANSACTION WHI CH HAS HAPPENED ON THE SAME DAY. THEREFORE I HOLD THAT THE TPO WAS RIGHT IN REJECTING THE APPELLANT'S CONTENTION THAT THE PROVISO TO SECTION 92C(2) SHOULD BE INVOKED. THEREFORE THE ADDITION OF RS. 13 91 117/- AND RS. 14 97 915/- ON ACCOUNT OF INTERNATIONAL TRANSACTIONS CONDUCTED ON 27.02.2006 AND 30.04.2005 ARE UPHELD IN THIS 4.5. TRANSACTION BETWEEN 01.03.2005 TO 15.03.2005 (TABLE NO. VII OF THE TPO ORDER): THE ABOVE DATES ARE 'ORDER ACCEPTANCE DATES'; THE A CTUAL TRANSACTIONS HAVE HAPPENED ON/ AFTER 02.04.2005. THE APPELLANT HAS SOLD THE PRODUCTS AT USD 1250 TO USD 1325 PER METRIC TON IN ALL THESE 15 TRANSACTIONS. THERE WAS A TRANS ACTION WITH THE UNRELATED PARTY ON 08.03.2005. THE RATE WAS USD 140 0 PER METRIC TON. TPO HAS TAKEN THIS TRANSACTION AS ALP TO COMPARE. THE APPELLANT HAS POINTED OUT THAT THE ABOVE 15 TRA NSACTIONS HAD TWO DIFFERENT VARIETIES OF STEEL COILS SOLD TO AE. 9 TR ANSACTIONS WERE SUPPLY OF J4 HRAP COILS AND REMAINING 6 TRANSACTIONS WERE SUP PLY OF GRADE J4 BLACK COILS. THE CHART OF THE COMPARABLE TRANSACTIO N AS SUBMITTED BY THE APPELLANT IS REPRODUCED BELOW: 18 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 TABLE-I: S.NO. MATERIAL O.A. O.A. DATE QUANTITY INVOICE VALUE NET V ALUE AVERAGE GRADE NO. RATE USD USD RATE (USD) 1 J4 HRAP COILS 1 325 580 I - MAR - 200 5 95.550 1 325 126 604 126 604 2 J4 HRAP COILS 1 325 580 I - MAR - 2005 47.025 1 325 62 308 62 308 3 J 4 HRAP COILS 1 325 580 I - MAR - 2005 15.895 1 325 21 061 21 061 4 J4 HRAP COILS 1 325 580 I - MAR - 2005 77.525 1 325 102 721 102 721 5 J4 HRAP COILS 1 325 580 I - MAR - 2005 15.535 1 325 20 584 20 584 6 J4 HRAP COILS 1 325 580 I - MAR - 2005 218.370 1 325 289 340 289 340 7 J4 HRAP COILS 1 325 580 I - MAR - 200 5 94.985 1 325 125 855 125 855 8 J4 HRAP COILS 1 325 580 I - MAR - 2005 47.980 1 325 63 574 63 574 9 J4 HRAP COILS 1 325 580 I - MAR - 2005 47.105 1 325 62 414 62 414 659.970 874 460 874 460 1 325 10 J4 BLACK COIL 1 250 604AL 9 - MAR - 2005 181.650 1 250 227 063 227 063 11 J4 BLACK COIL 1 250 604AL 9 - MAR - 2005 147.225 1 250 184 031 184 031 12 J4 BLACK COIL 1 250 618 15 - MAR - 2005 48.865 1 250 61 081 61 081 13 J4 BLACK COIL 1 250 618 15 - MAR - 2005 32.545 1 250 40 681 40 681 14 J4 BLACK COIL 1 250 618 15 - MAR - 2005 64.955 1 250 81 194 81 194 15 J4 BLACK COIL 1 250 618 15 - MAR - 2005 33.135 1 250 41 419 41 419 508.375 635 469 635 469 1 250 1 168.345 1 509 929 1 509929 1 292 4.6. FURTHER THE APPELLANT HAS ALSO STATED THAT ON 11.0 3.2005 THE APPELLANT HAD SOLD J4 HRAP COILS AT THE RATE OF USD 1220 PER METRIC TON. THE NAME OF THE PARTY TO WHOM THIS WAS SOLD ON 11.03.2005 WAS M/S SHUNDE BAISHENG TRADING COMPANY LTD. THIS INFORMATI ON WAS PART OF THE TP DOCUMENTATION WHICH IS AT PAGE 26 OF THE PAPER BOOK. ACCORDINGLY THE AVERAGE PRICE OF J4 HRAP COILS SHO ULD BE TAKEN AT USD 1310 [(1400 * 1 + 1220 * 1)/ 2]. THEREFORE THE TRANSACTIONS IN THE S. NO.1 TO 9 OF THE ABOVE TABLE HAS TAKEN PLACE AT USD 1325 WHICH IS ABOVE THE AVERAGE ALP AT USD 1310. THEREFORE THEY SHOULD BE HELD AT ARM'S LENGTH EVEN THE REST OF THE TRANSACTIONS MEN TIONED FROM S. NO. 10 TO 15 OF THE ABOVE TABLE FALL WITHIN +/ -5% OF THE AVERAGE ALP. IT SHOULD BE NOTED THAT APPELLANT HAS PLEADED THAT THE QUALIT Y OF PRODUCTS SOLD ARE GRADE J4 BLACK COIL TO THE AE WHERE AS THE QUALITY SOLD TO THE NON AE WAS J4 HRAP COIL. 19 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 THEREFORE THE TOTAL ADDITION SUSTAIN IN THIS CASE IS TO THE EXTENT OF RS. 28 89 032/-. THE AO/ TPO ARE DIRECTED TO DELETE THE BALANCE OF THE ADDITION MADE IN THIS REGARD. 24. SO FAR AS ADJUSTMENT OF RS.14 97 915/- IS CONCE RNED THE LD. AR SUBMITTED THAT THE PRICE CHARGED BY THE ASSESSEE AT USD 1100 PMT FROM ITS AES IS WITHIN +/-5% RANGE OF THE PRICE CHARGED FROM THE UNRELATED PARTY AT USD 1120 PMT. THEREFORE THE TRANSACTION OF EXPORT OF GOODS DATED 30.04.2005 OUGHT TO BE CONSIDERED TO BE AT ARMS LENGTH PRICE. 25. SO FAR AS THE ADJUSTMENT OF RS.13 91 117/- IS C ONCERNED HE SUBMITTED THAT THE PRICE CHARGED BY THE ASSESSEE AT RS.915 PMT FRO M ITS AE IS WITHIN +/-5% RANGE OF THE PRICE CHARGED FROM THE UNRELATED PARTY AT 930 PMT AND THEREFORE THE ADJUSTMENT MADE BY THE TPO IS LIABLE TO BE DELE TED. EVEN OTHERWISE HE SUBMITTED THAT THE TPO WHILE BENCHMARKING THE INTER NATIONAL TRANSACTION FAILED TO ALLOW ADJUSTMENT ON COMMISSION EXPENSE OF USD 15 PMT IN THE PRICE OF UNCONTROLLED TRANSACTION. HE FILED A CHART TO SUBS TANTIATE THE SAME AND SUBMITTED THAT AFTER CONSIDERING THE ADJUSTMENT ON ACCOUNT OF PAYMENT OF COMMISSION OF USD 15 THE PRICE CHARGED BY THE ASSE SSEE FROM THE AE WORKS OUT THE SAME AS THE PRICE CHARGED BY THE UNRELATED THIRD PARTY. THEREFORE THE ADJUSTMENT MADE BY THE TPO IS LIABLE TO BE DELETED. 26. SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNE D THE LD. AR SUBMITTED THAT DURING THE PERIOD 01.03.2005 TO 15.03.2005 TH E ASSESSEE HAS UNDERTAKEN 9 20 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 TRANSACTIONS OF SALES OF J4 HRAP COILS AT 1325 PMT AND 6 TRANSACTIONS OF SALES OF J4 BLACK COILS AT 1250 PMT. THE TPO BENCHMARKED THE SAID TRANSACTIONS CONSIDERING THE SALE OF GOODS UNDERTAKEN BY THE ASS ESSEE. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. THE DEVELOPMENT BANK OF SINGAPORE IN ITA NO.6631/MUM/2006 ORDER DATED 17.05.2013 TO SUPPORT THE ORDER OF THE LD. CIT(A) FOR THE RELIEF GRANTED BY HIM. 27. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER/TPO. 28. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT(A) AND PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER IN THE IN STANT CASE HAS MADE UPWARD ADJUSTMENT OF RS.27 521 494/- ON THE BASIS OF ORDER OF THE TPO. WE FIND IN APPEAL THE LD. CIT(A) SUSTAINED AN AMOUNT OF RS.28 89 032/- AND DELETED THE ADDITION OF RS.21 54 152/- AND SUCH REASONS ARE ALR EADY MENTIONED IN THE PRECEDING PARAGRAPHS. ALTHOUGH THE LD. CIT(A) HAS SUSTAINED ONLY AN AMOUNT OF RS.28 89 032/- AND DELETED THE BALANCE AMOUNT WE FIND THE REVENUE HAS CHALLENGED THE DELETION FOR ADDITION OF RS.21 54 15 2/- AND HAS NOT CHALLENGED FOR THE BALANCE ADDITION. SO FAR AS THE ADDITION O F RS.21 54 152/- IS CONCERNED THE ASSESSEE HAS DEMONSTRATED BEFORE THE LD. CIT(A) THAT HE HAS ALSO ENTERED INTO 21 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 TRANSACTION ON SALE OF J4 HRAP COILS WITH UNRELATED THIRD PARTIES ON 14.03.2005 AT THE PRICE OF USD 1120 PMT. THEREFORE THE LD. C IT(A) WAS FULLY JUSTIFIED IN UPHOLDING THE ACTION OF THE CUP METHOD. 29. SO FAR AS THE SUSTAINING OF RS.21 54 152/- IS C ONCERNED IT IS THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THA T PRICE CHARGED BY THE ASSESSEE FROM ITS AE IS WITHIN +/-5% RANGE. 30. WE FIND FROM THE SUBMISSIONS THAT THE DETAILS A RE NOT COMING OUT CLEARLY WHICH REQUIRES A RE-VISIT TO THE FILE OF THE TPO FO R PROPER APPRECIATION OF THE FACTS. WE THEREFORE IN THE INTEREST OF JUSTICE DEEM IT PROPER TO RESTORE THE GROUND RAISED BY THE ASSESSEE RELATING TO TP ADJUST MENT TO THE FILE OF THE TPO FOR FRESH ADJUDICATION OF THE ISSUE IN THE LIGHT OF THE SUBMISSIONS/DETAILS FILED BY THE ASSESSEE IN THE PAPER BOOK. THE GROUNDS NO.1 & 1.A AND 1.1 & 1.2 BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PU RPOSES. 31. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 RD DAY OF NOVEMBER 2017. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03-11-2017. SUJEET 22 ITA NO.4111/DEL/2013 ITA NO.4248/DEL/2013 COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR I.T.A.T. NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT NEW DELHI