HENKEL ANAND INDIA PVT. LTD., NEW DELHI V. DCIT, CIRLCE- 11(1), NEW DELHI

CO 209/DEL/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3704 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 17-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJIT SINGH
• Assessee Lawyers: MANISHA SHARMA; AJAY VOHRA SR SHRI GAURAV JAIN
• Keywords: Depreciation; Transfer pricing; International transaction; Rule of consistency; Revenue expenditure
• Section: 80C; 143(3); 80IB; 37(1); 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DLEHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO.1742/DEL/2014 ASSESSMENT YEAR: 2009-10 M/S HENKEL TEROSOM INDIA LTD. VS COMMISSIONER OF INCOME-TAX 1, SRI AUROBINDO MARG, NEW DELHI. DELHI-IV, NEW DELHI. (PAN:AAACH5216Q) I.T.A. NOS.681 & 5198/DEL/2017 I.T.A. NOS.2496 & 1952/DEL/2016 ASSESSMENT YEARS: 2009-10 TO 2012-13 COMMISSIONER OF INCOME-TAX, VS M/S HENKEL TEROSOM INDIA LTD. DELHI-IV, NEW DELHI. 1,SRI AUROBINDO MARG, NEW DELHI. CROSS OBJECTION NO.209/DEL OF 2017 (IN I.T.A. NO.5198/DEL/2017) ASSESSMENT YEAR: 2009-10 M/S HENKEL TEROSOM INDIA LTD. VS COMMISSIONER OF INCOME-TAX 1, SRI AUROBINDO MARG, NEW DELHI. DELHI-IV, NEW DELHI. (PAN:AAACH5216Q) (APPELLANT) (RESPONDENT) 2 ASSESSEE BY: SHRI AJAY VOHRA, SR. ADVOCATE SHRI GAURAV JAIN & MS MANISHA SHARMA RESPONDENT BY: SHRI SANJIT SINGH, CIT- DR DATE OF HEARING: 27.03.201 8 DATE OF PRONOUNCEMENT: 11.04.201 8 ORDER PER K. NARASIMHA CHARY, JM I.T.A NO.1742/DEL/2014 IS FILED BY THE ASSESSEE CHAL LENGING THE ORDER DATED 10.2.2013 PASSED BY THE LEARNED COMMISSIONER OF INCO ME-TAX, DELHI (FOR SHORT LD.CIT) U/S 263 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) WHERE UNDER THE LEARNED CIT DIRECTED THE LEARNED AO TO WITHDRAW THE DEDUCTION U/S 80C OF THE ACT FOR THE REASON THAT THE LEARNED AO FAILED TO VERIFY WHETHER FORM NO.10CCB WAS AVAILABLE WITH HIM AT THE TIME OF SCRUTINY AND ALSO THE LEARNED AO FAILED TO VERIFY WHETHER THOSE ARE COVERED IN THE NEGATIVE LIST AS S PECIFIED IN SCHEDULE XII OF THE ACT. ITA NOS.681/DEL/2017, 2496/DEL/2016, 1952/DEL /2016 AND 5198/DEL/2016 ARE THE APPEALS PREFERRED BY THE REVENUE CHALLENGING THE ORDERS OF THE LEARNED CIT(A)-XVI, NEW DELHI (FOR SHORT CIT(A)) DELETING THE ADDITIONS MADE BY THE LEARNED AO IN RESPECT OF THE ASSTT. YEARS 2009-10 T O 2012-13, CROSS OBJECTION NO.209/DEL/2017 IS PREFERRED BY THE ASSESSEE CHALLEN GING THE OBSERVATIONS OF THE LEARNED CIT(A) IN RESPECT OF ASSTT. YEAR 2012-13 FO R THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IC OF THE ACT TO BE RE-WORKED OUT AS PROFIT OF THE ELIGIBLE UNIT AT PARWANOO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF ALL KINDS OF ADHESIVE AN D PILLAR FILLER. THEY ARE 3 MANUFACTURING DGX AND PILLER FILLER AT THE BUSINESS OF THE UNDERTAKING AT PARWANOO IN RESPECT OF WHICH THEY ARE CLAIMING DEDUC TION U/S 80IC OF THE ACT. ACCORDING TO THE ASSESSEE, THEY STARTED MANUFACTURIN G ALL THESE ITEMS FROM THE FINANCIAL YEAR 2004-05 I.E. ASSESSMENT YEAR 2005-06 ONWARDS AND THE AUDIT OF THE EXCISE OFFICIALS CONFIRMS THAT THE DGX ADHESIVE IS COVERED UNDER 35069999 AND PILLER FILLER IS COVERED UNDER 87089900. TILL THE ASSTT. YEAR 2009-10, EXEMPTION HAS BEEN CLAIMED BY THE ASSESSEE AND WAS GRANTED TOO . HOWEVER, DURING THE ASST. YEAR 2009-10, LEARNED CIT ON EXAMINATION OF R ECORD OBSERVED THAT FORM 10CCB WAS NOT FOUND WITH THE AO AT THE TIME OF SCRU TINY AND THE AO FAILED TO EXAMINE WHETHER THE PRODUCT MANUFACTURED BY THE ASSE SSEE WAS COVERED IN THE NEGATIVE LIST AS SPECIFIED IN SCHEDULE XIII OF THE ACT, AS SUCH, THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT WAS PRE JUDICIAL TO TH E INTEREST OF THE REVENUE. ON THAT SCORE, IN EXERCISE OF POWERS UNDER SECTION 263 OF T HE ACT, LEARNED CIT SET ASIDE THE ASSTT. ORDER AND DIRECTED THE LEARNED AO TO WIT HDRAW THE DEDUCTION U/S 80IC OF THE ACT AS FORM NO.10CCB IS NOT FILED BY THE ASSE SSEE. IT WAS FURTHER OBSERVED BY THE LEARNED CIT IF THE SAID FORM IS FILED IN THE SET ASIDE PROCEEDINGS THEN THE AO SHOULD EXAMINE THE EXACT NATURE OF THE ITEM MANUFAC TURED BY THE ASSESSEE SO AS TO ASCERTAIN AS TO WHETHER THE SAME WAS COVERED IN THE NEGATIVE LIST AS SPECIFIED IN SCHEDULE XIII OF THE ACT. SUBSEQUENTLY, THE LEAR NED AO STARTED EXAMINING THE PRODUCTS MANUFACTURED BY THE ASSESSEE WITH REFERENCE TO THE NEGATIVE LIST SPECIFIED IN SCHEDULE XIII AND MADE ADDITION DISALL OWING EXEMPTION UNDER SECTION 80IC AND ROYALTY. 3. ASSESSEE FILED ITA NO 1742/DEL/2014 CHALLENGING THE ORDER UNDER SECTION 263 OF THE ACT IN RESPECT OF AY 2009-10. REVENUE PR EFERRED ITA NO 681/DEL/2017 CHALLENGING THE DELETION OF DISALLOWANCE UNDER SECT ION 80 IC IN RESPECT OF 4 ASSESSMENT YEAR 2009-10, ITA NUMBERS 2496 AND 1952/D EL/2016 AND ITA NO. 5198/DEL/2017 CHALLENGING THE DISALLOWANCE UNDER SE CTION 80 IC AND ROYALTY IN RESPECT OF ASSESSMENT YEARS 2010-11 TO 2012-13; WHE REAS ASSESSEE PREFERRED CO NO. 209/DEL/2017 AGGRIEVED BY NOT EXPUNGING THE OBSE RVATIONS OF ASSESSING OFFICER BY THE LEARNED CIT(A) IN RESPECT OF THE DEDU CTION OF RS. 2,36,61,436/- CLAIMED BY THE ASSESSEE UNDER SECTION 80 IC TO REWOR K THE PROFITS OF ELIGIBLE UNIT AT PARWANOO AS EXCESSIVE. 4. NOW COMING TO THE QUESTION OF THE LEGALITY OF THE PROCEEDINGS UNDER SECTION 263 CHALLENGED IN ITA NO 1742/DEL/2014, IT IS FOUND FROM THE RECORD THAT SUBSEQUENT TO THE ASSESSMENT U/S 143(3) OF THE ACT COMPLETED BY ORDER DATED 5.2.2011, LEARNED CIT SCRUTINIZED THE ASSESSMENT RE CORDS AND FOUND THAT THE REPORT OF AUDIT IN FORM NO.10CCB CONTAINING THE PAR TICULARS SPECIFIED UNDER RULE 18BBB AND DULY SIGNED AND VERIFIED BY THE ACCOUNTANT AS DEFINED IN EXPLANATION BELOW SUB SECTION 2 OF SECTION 288 CERTIFYING THAT T HE DEDUCTION HAS BEEN CORRECTLY CLAIMED, WAS NOT FOUND IN THE RECORD. HE FURTHER OBSERVED THAT AO ALSO DID NOT CALL FOR ANY SUCH CERTIFICATE. LEARNED CIT FURTHER RECORDED THAT HE FOUND THE LEARNED AO NOT MAKING ANY REQUISITE ENQUIRY REGAR DING THE ALLOWABILITY OF DEDUCTION AND THE ASSESSEE COMPANY ALSO FAILED TO FU LFILL ALL THE CONDITIONS AS STIPULATED U/S 80IC OF THE ACT. ACCORDING THE LEAR NED CIT(A), THESE TWO CONDITIONS MADE THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PRE JUDICIAL TO THE INTEREST OF REVENUE. 5. IT IS SUBMITTED BY THE LEARNED AR THAT FORM NO.10 CCB WAS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS BUT, HOWEVER, IT WAS FIL ED AT LEAST BEFORE THE LEARNED CIT AS COULD BE FOUND FROM THE RECORD. IT IS ARGUE D BY THE LEARNED AR THAT IN THE ABSENCE OF ANY SPECIFIC FINDING BY THE COMMISSIONER A S TO HOW THE ORDER IS 5 ERRONEOUS AS WELL AS PRE JUDICIAL TO THE INTEREST O F REVENUE, NO REVISION U/S 263 OF THE ACT IS PERMISSIBLE. HE FURTHER ARGUED THAT ALL OWABILITY OF DEDUCTION HAS TO BE TESTED IN THE FIRST YEAR OF THE CLAIM AND THERE CANN OT BE ANY REVISION U/S 263 OF THE ACT WHERE THE CLAIM HAS BEEN CONSISTENTLY ACCEPT ED IN EARLIER YEARS. FURTHER, WHEN THE VIEW TAKEN BY THE LEARNED AO IS ALSO A PLAU SIBLE VIEW, THERE CANNOT BE ANY REVISION U/S 263 OF THE ACT. BASING ON A DECISI ON OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KEWAL KRISHAN CLOTHING P. L TD. VS CIT VS. CIT, ITA 2173/MUM/2009 HE SUBMITTED THAT FOR NON AVAILABILIT Y OF FORM 10CCB, NO ORDER U/S 263 COULD BE PASSED. 6. LEARNED DR SUBMITTED THAT IN THIS MATTER IT IS N OT THE NON FILING OF THE FORM 10 CCB THAT ALONE PROMPTED THE LD. CIT TO DIRECT TH E ASSESSING OFFICER TO WITHDRAW THE EXEMPTION UNDER SECTION 80 IC BUT IT WAS ALSO FOUND THAT THE LD. ASSESSING OFFICER DID NOT MAKE ANY ATTEMPT TO VERIFY THE ELIGIB ILITY OF THE PRODUCT TO CLAIM THE DEDUCTION UNDER SECTION 80 IC OF THE ACT. HE SU BMITS THAT THE FACTS OF KEWAL KIRAN CLOTHING P. LTD. (SUPRA) ARE NOT APPLICABLE T O THE FACTS OF THIS CASE. 7. WE HAVE GONE THROUGH THE IMPUGNED ORDER. LEARNE D CIT RECORDED THAT THE ASSESSEE DID NOT FILE CERTAIN DOCUMENTS ALONG WITH THE LETTER DATED 7.2.2011 AND THE SAID LETTER REVEALS THAT THE ASSESSEE FILED ONL Y COPY OF COMPUTATION OF INCOME, BALANCE SHEET, PROFIT AND LOSS ACCOUNT, TAX AUDIT R EPORT U/S 44AB IN FORM 3CA WITH ANNEXURE IN FORM NO.3CD, REPORT IN FORM NO.29B WITH ANNEXURE, ACKNOWLEDGEMENT OF INCOME-TAX RETURN BUT NO FORM NO .10CCB WAS FILED ALONG WITH SUCH LETTER NOR ANY SUCH FORM WAS FOUND IN THE RECORD. 8. LEARNED CIT(A) FURTHER RECORDED THAT SIMPLY BECAU SE THE ASSESSEES CLAIM WAS ALLOWED IN THE INITIAL YEARS I.E. IN ASSTT. YEAR 2005-06, IT DOES NOT PRECLUDE THE 6 DEPARTMENT FROM EXAMINING THE SAME IN THE SUBSEQUEN T YEARS AND THOUGH THE ASSESSEE HAS NOMENCLATURE THE ITEMS MANUFACTURED BY IT AS DGX ADHESIVE AND PILLAR FILLER, ITS EXACT NATURE WAS NEVER ASCERTAI NED. ACCORDING TO THE LEARNED CIT(A), AS SEEN FROM THE 13 TH SCHEDULE OF THE ACT, FILLERS AND OTHER MASTICS AND ALSO THE PLASTICS AND ARTICLES THEREOF ARE APPEARIN G IN THE LIST OF ARTICLES WHICH ARE NOT ELIGIBLE U/S 80IC OF THE ACT. AS THE ITEMS MANU FACTURED BY THE ASSESSEE BEING THE FILLER, THE AO SHOULD HAVE EXAMINED ITS COMPOSI TION AND ALSO AS TO WHETHER IT WAS COVERED BY THE NEGATIVE LIST OF SCHEDULE 13 SO A S TO KNOW WHETHER IT IS REALLY ELIGIBLE U/S 80IC OF THE ACT. INASMUCH AS THE LEAR NED AO DID NOT CALL FOR FORM NO.10CCB AND NOT VERIFIED THE ELIGIBILITY OF THE PR ODUCTS MANUFACTURED BY THE ASSESSEE U/S 80IC OF THE ACT, LEARNED CIT FOUND THE ORDER TO BE ERRONEOUS IN SO FAR IT IS PRE JUDICIAL TO THE INTEREST OF REVENUE. 9. ON A READING OF THE DECISION IN KEWAL KISHAN CLO THING P. LTD. (SUPRA) WE FIND THAT THE FACTS ARE ALMOST IDENTICAL. IN THAT C ASE ALSO FORM 10 CCB WAS NOT FILED AND THE ASSESSING OFFICER ALLOWED THE CLAIM MADE BY THE ASSESSEE FOR EARLIER NINE YEARS. WHILE PLACING RELIANCE ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN ZENITH PROCESSING MILLS (219 ITR 721), THE MUMBAI TRIBUNAL HELD THAT THE AUDIT REPORT IN PRESCRIBED FORM NO.10CCB COULD BE FILED E VEN IF REVISION JURISDICTION IS EXERCISED BY THE CIT U/S 263 OF THE ACT. RELEVANT PO RTION OF THE DECISION OF IN KEWAL KISHAN CLOTHING (SUPRA) IS AS FOLLOWS:- FACTS OF THE CASE WERE THAT WHILE FRAMING THE ASSES SMENT FOR THE AY.1976-77 OF THE ASSESSEE- FIRM, THE AO ALLOWED THE CLAIM FOR DE DUCTION U/S. 80J OF THE ACT, IN RESPECT OF PROFIT AND LOSS ARISING FROM ITS NEWLY E STABLISHED UNDERTAKING. WITH EFFECT FROM 01.04.1976, SUB-SECTION (6A) WAS INSERT ED IN SECTION 80J, VIDE THE FINANCE ACT, 1975, WHICH REQUIRED THE ASSESSEE TO F ILE AUDITED REPORT OF AN ACCOUNTANT, AS DEFINED BY THE EXPLANATION BELOW SUB SECTION 2 OF THE SECTION 288 OF THE ACT, ALONG WITH THE RETURN OF INCOME. THE CI T, EXERCISING HIS POWERS 7 U/S.263,CONSIDERED THE ALLOWANCE OF DEDUCTION UNDER SECTION 80J, INTER ALIA, ALONG WITH THE ALLOWANCE OF INITIAL DEPRECIATION IN SO FA R AS IT IS AGAINST THE INTERESTS OF THE REVENUE AND ISSUED NOTICE TO THE ASSESSEE. WHIL E THE ASSESSEE DID NOT CONTEST THE NOTICE UNDER SECTION 263 WITH RESPECT TO INITIA L DEPRECIATION THE ASSESSEE CONTESTED THE WITHDRAWAL OF RELIEF UNDER SECTION 80 J. ACCORDING TO THE CIT, SUB- SECTION (6A) OF SECTION 80J LAID DOWN THE MANDATORY REQUIREMENT THAT BEFORE A CLAIM UNDER SECTION 80J WAS ADMISSIBLE FOR ANY ASSE SSMENT YEAR, THE ASSESSEE MUST HAVE HIS ACCOUNTS OF THE RELEVANT PREVIOUS YEA R AUDITED BY AN ACCOUNTANT AND IT MUST FURNISH ALONG WITH HIS RETURN OF INCOME THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH AC COUNTANT. ACCORDING TO THE CIT, THE ASSESSEE HAD NOT FURNISHED THE REPORT OF SUCH A UDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY THE ACCOUNTANT, THE ASS ESSEE WAS NOT ENTITLED TO RELIEF UNDER SECTION 80J(EMPHASIS SUPPLIED).THE ASSESSEE C LAIMED THAT FURNISHING THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM WHICH I S FORM NO. 10D UNDER THE RULES READ WITH RULE 18C, WAS NOT MANDATORY BUT A DIRECTO RY PROVISION AND, THEREFORE, WHEN THE QUESTION OF DISALLOWANCE ON THAT GROUND IS CONSIDERED, THE ASSESSEE COULD BE PERMITTED TO FURNISH THEM. THIS CONTENTION DID NOT FIND FAVOUR WITH THE CIT AND HE DIRECTED THAT THE AO SHOULD MAKE THE NEC ESSARY AMENDMENT IN THE ASSESSMENT ORDER FOR THE YEAR 1976-77.WHEN THE MATT ER TRAVELLED TO THE HON'BLE COURT, IT HELD AS UNDER: 'FROM A PERUSAL OF SUB-SECTION (6A), IT IS APPARENT THAT COMPLIANCE WITH TWO THINGS IS NECESSARY . THE FIRST REQUIREMENT IS THAT THE STATEMENT OF ACCOUNTS FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR F OR WHICH DEDUCTION IS CLAIMED MUST HAVE BEEN AUDITED BY AN ACCOUNTANT AND THE SEC OND PART IS THAT THE ASSESSEE MUST FURNISH ALONG WITH HIS RETURN OF INCO ME THE REPORT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUC H ACCOUNTANT. IT CAN BE STATED WITHOUT FEAR OF CONTRADICTION THAT THE FORMER IS TH E REQUIREMENT WHICH FURNISHES SUBSTANTIAL FOUNDATION FOR CLAIMING ALLOWANCE AND T HE LATTER IS THE REQUIREMENT OF FURNISHING PROOF THAT FOUNDATION FOR CLAIMING SU CH DEDUCTION HAS BEEN LAID. IN OUR OPINION, WHILE COMPLIANCE WITH THE FORMER BEFOR E THE DEDUCTION IS CLAIMED IS MANDATORY AND SO FAR AS MANNER OF SUBMITTING PROOF OF SUCH COMPLIANCE OF FILING ALONG WITH THE RETURN IS CONCERNED, IS DIRECTORY BE CAUSE SUCH REQUIREMENT FALLS IN THE REALM OF PROCEDURE FOR FURNISHING EVIDENCE IN S UPPORT OF THE CLAIM AND WHICH CAN BE FURNISHED AT THE TIME WHILE ALLOWANCE OR DIS ALLOWANCE UNDER SECTION 80J IS BEING CONSIDERED BY THE CONCERNED AUTHORITY. XXXXXXX IN VIEW OF THE AFORESAID DISCUSSION, QUESTION NO. 2 REFERRED TO ABOVE IS TO BE ANSWERED IN THE NEGATIVE BY HOLDING THAT THE PROVIS ION OF SECTION 80J(6A) TO THE EXTENT IT REQUIRES FURNISHING OF THE AUDITOR'S REPO RT IN THE PRESCRIBED FORM ALONG WITH THE RETURN IS DIRECTORY IN NATURE AND NOT MAND ATORY. 8 COMING TO THE FIRST QUESTION, WE ARE OF THE OPINION THAT AS THE PROVISION OF FURNISHING OF THE REPORT IN THE PRESCRIBED FORM IS HELD TO BE DIRECTORY, THE ASSESSEE CAN BE PERMITTED TO PRODUCE SUCH REPORT AT A LATER STAGE WHEN THE QUESTION FOR DISALLOWANCE ARISES DURING THE COURSE OF THE PROCEEDINGS IN A GIVEN CASE, IT WILL DEPEND UPON THE FACTS AND CIRCUMSTANC ES OF EACH CASE AND, THEREFORE, THE ASSESSEE MAY BE PERMITTED TO PRODUCE SUCH REPOR T, IF IT HAS NOT BEEN PRODUCED EARLIER(EMPHASIS SUPPLIED).THE LEARNED ADV OCATE FOR THE REVENUE VEHEMENTLY CONTENDED ON THE BASIS OF THE OBSERVATIO NS MADE IN GUJARAT OIL AND ALLIED INDUSTRIES' CASE [1993] 201 ITR 325 (GUJ) TH AT THE REQUIREMENT OF FURNISHING OF AUDITORS' REPORT IN THE PRESCRIBED FORM HAS TO B E COMPLIED WITH BEFORE THE ASSESSMENT IS COMPLETED AND THE ASSESSEE CANNOT CLA IM DEDUCTION UNDER SECTION 80J BY PRODUCING THE REPORT LATER ON(EMPHASIS SUPPL IED).WE ARE UNABLE TO SUSTAIN HIS CONTENTION. IN GUJARAT OIL AND ALLIED INDUSTRIE S' CASE [1993] 201 ITR 325 (GUJ), THE 'PROOF OF THE ACCOUNTS BEING AUDITED' WAS NOT F URNISHED ALONG WITH THE RETURN IN SUPPORT OF THE CLAIM. HOWEVER, DURING THE COURSE OF THE PROCEEDINGS WHEN THE INCOME TAX OFFICER WAS CONSIDERING THE CLA IM, HE DISALLOWED THE ASSESSEE'S REQUEST FOR FURNISHING THE AUDITORS' REP ORT IN THE PRESCRIBED FORM AT THAT STAGE AND THE CLAIM WAS DISALLOWED. IT WAS IN THESE CIRCUMSTANCES, THE CLAIM FOR DISALLOWANCE WAS BEING CONSIDERED BY THE INCOME TAX OFFICER. THE INCOME TAX OFFICER HAD MADE IT KNOWN, THAT HE IS NOT TO ALLOW DEDUCTION UNDER SECTION 80J UNLESS A CERTIFICATE IS ACCOMPANIED WITH THE FORM A ND THE ASSESSEE HAVING KNOWN FOR NO REASONS FOR THE SAID DISALLOWANCE HAS PROMPT LY SUBMITTED REPORT WHICH WAS NOT SUBMITTED EARLIER. IT IS IN THESE CIRCUMSTA NCES, THAT OBSERVATIONS WERE MADE THAT A REPORT SHOULD BE MADE AVAILABLE TO THE INCOME TAX OFFICER. WE MAY NOTICE THAT IT HAS BEEN HELD BY THIS COURT WITH WHI CH WE AGREE THAT THE REQUIREMENT OF FURNISHING THE AUDITORS' REPORT IS I N THE REALM OF FURNISHING PROOF ABOUT THE FACT THAT ACCOUNTS HAVE BEEN AUDITED AND SUBSTANTIAL COMPLIANCE WITH THIS PROVISION HAS BEEN HELD TO BE SUFFICIENT COMPL IANCE. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE HAS FURNISHED ACCOUNTS STA MPED WITH THE AUDITOR'S SEAL AS NOTICED ABOVE WHICH WERE TREATED BY THE ASSESSEE AS WELL AS THE ASSESSING OFFICER TO BE SUFFICIENT COMPLIANCE OF GIVING PROOF OF THE FACT THAT ACCOUNTS HAVE IN FACT BEEN AUDITED AND ON THAT BASIS THE ASSESSME NT WAS FRAMED. IT WAS ONLY DURING THE COURSE OF PROCEEDINGS BEFORE THE COMMISS IONER OF INCOME-TAX UNDER SECTION 263 THAT THE QUESTION WAS CONSIDERED WHETHE R THE DOCUMENT FURNISHED BY THE ASSESSEE AMOUNTED TO SUFFICIENT COMPLIANCE OF F URNISHING SUCH PROOF OR NOT AND THAT HAVING BEEN NEGATIVED THE OCCASION AROSE T O FURNISH THE PROOF WHICH ACCORDING TO THE COMMISSIONER OF INCOME-TAX WAS WAN TING IN DECLARATION THAT THE ACCOUNTS HAVE BEEN DULY AUDITED WHICH IS REQUIR ED BY SUB-SECTION (6A) OF SECTION 80J AND IF THE ASSESSEE REQUIRES PRODUCTION OF EVIDENCE BEFORE THE ALLOWANCE MADE BY THE INCOME TAX OFFICER UNDER SECT ION 80J WAS WITHDRAWN. IN OUR OPINION, THAT WOULD HAVE BEEN SUFFICIENT COMPLI ANCE WITH THE REQUIREMENT AND THE ASSESSEE OUGHT NOT TO HAVE BEEN VISITED WIT H THE DISALLOWANCE OR WITHDRAWAL OF THE ALLOWANCE ALREADY MADE WITHOUT AF FORDING OPPORTUNITY TO DO SO. IT MAY BE NOTED THAT IN A GIVEN CASE, THE ASSES SEE'S RETURN HAVING A CLAIM OF 9 DEDUCTION UNDER SECTION 80J MAY BE ACCEPTED BY THE INCOME TAX OFFICER WITHOUT HOLDING AN INQUIRY, THOUGH IT MAY NOT HAVE BEEN ACC OMPANIED WITH PROOF OF ACCOUNTS BEING AUDITED IN THE MANNER PRESCRIBED. TH E QUESTION OF FURNISHING PROOF OF SUCH AUDITED ACCOUNTS IN THE PRESCRIBED FO RM AT A LATER STAGE ARISES ONLY WHEN THE MATTER IS BEING ACTIVELY CONSIDERED FOR DI SALLOWANCE BY THE CONCERNED AUTHORITY. IF THE ASSESSEE DOES NOT OFFER TO FURNIS H PROOF EVEN AT THE STAGE WHEN IT IS POINTED OUT TO HIM THAT REQUIREMENTS OF LAW ARE NOT FULFILLED TO SUSTAIN THE CLAIM MADE BY HIM AND HE FAILS TO FULFIL THE REQUIR EMENTS OF LAW AT THAT STAGE, IT CAN BE SAID THAT THE ASSESSEE HAD FAILED TO RECTIFY THE DEFECT AT THE EARLIEST OPPORTUNITY OFFERED TO HIM. IT IS AN INHERENT PART OF SECTION 143(3) THAT WHERE THE ASSESSING OFFICER IS NOT INCLINED TO ACCEPT THE RETURN SUBMITTED BY THE ASSE SSEE AND IF HE WANTS TO MODIFY THE ASSESSMENT FROM THE RETURN A SHOW-CAUSE NOTICE IS REQUIRED TO BE GIVEN TO THE ASSESSEE. GIVING OF THIS OPPORTUNITY WILL INCLUDE O PPORTUNITY TO ERASE PROCEDURAL DEFECT, IF ANY, WHICH IS DIRECTORY IN NATURE. IF WE EXAMINE THE MATTER FROM THAT POINT OF VIEW WE ARE SATISFIED THAT IN THE PRESENT CASE, THE CLAIM MADE BY THE ASSESSEE THOUGH NOT ADMISSIBLE FOR WANT OF THE AUDI TOR'S REPORT ON RECORD, YET THE SAME WAS ALLOWED UNDER A MISTAKE BY THE ASSESSING O FFICER LEAVING NO OPPORTUNITY TO THE ASSESSEE TO COMPLETE THE REQUIRE MENTS. THE CONDITION OF NON- FULFILMENT OF THE REQUIREMENT UNDER SUB- SECTION(6A )WAS MADE KNOWN TO THE ASSESSEE DURING THE PROCEEDINGS UNDER SECTION 263 A LTHOUGH THE ASSESSEE ASKED FOR AN OPPORTUNITY TO PRODUCE THE AUDITOR'S REPORT TO FULFIL THE REQUIREMENTS UNDER SECTION 80J(6A), THE COMMISSIONER OF INCOME-TAX OUG HT TO HAVE AFFORDED AN OPPORTUNITY TO THE ASSESSEE TO FURNISH THAT PROOF A ND THEN EXAMINED THE ADMISSIBILITY OF THE CLAIM IN THE LIGHT OF THE PROO F FURNISHED.'(EMPHASIS SUPPLIED). WE ALSO FIND THAT THE BASIC ISSUE AS TO HOW THE ORD ER OF THE AO WAS ERRONEOUS AND PREJUDICIAL TO REVENUE HAS NOT BEEN DISCUSSED BY TH E CIT. IT IS ALSO A FACT, AS STATED EARLIER, THAT THE ISSUE OF 80IB DEDUCTION WAS AGITA TED BY THE ASSESSEE BEFORE THE CIT .IN THESE CIRCUMSTANCES THE CIT SHOULD NOT HAVE ISSUED NOTICE 263 OF THE ACT. SECONDLY, THE CIT HAD TOTALLY IGNORED THE FACT THAT THE AO HAD IN EARLIER NINE YEARS ALLOWED THE CLAIM MADE BY THE ASSESSEE. IT IS TRUE THAT THE RULE OF RES JUDICATA IS NOT APPLICABLE TO THE INCOME TAX PROCEEDINGS. BUT, THE RULE OF CONSISTENCY DEMANDS THAT WITHOUT BRINGING DISTINGUISHING FACT O F THE YEAR UNDER APPEAL WITH THE FACTS OF EARLIER YEARS AN OPPOSITE STAND TO THE STAND OF EARLIER YEARS SHOULD NOT BE TAKEN. THE ONLY DIFFERENCE NOTED IS THAT IN THE YEAR UNDER APPEAL THE ASSESSEE HAD NOT FILED AUDIT REPORT BEFORE THE AO. BUT, THE REPORT WAS MADE AVAILABLE TO THE CIT AND FOR DISALLOWING THE CLAIM ALLOWED IN TH E EARLIER YEARS HE SHOULD HAVE PIN POINTED THE REASONS FOR REFUSING IT AS TO HOW S AME WAS DIFFERENT FROM THE REPORTS OF EARLIER YEARS. WE HAVE PERUSED THE CASES RELIED UPON BY THE DR. WE FIND THAT THOSE CASES LAY DOWN CERTAIN PRINCIPLES ABOUT REVISIONARY PROCEEDINGS. BUT, THOSE PRINCIPLES ARE NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION. HERE, THE BASIC ISSUE IS VALIDITY OF 263 PROCEEDING . AN ISSUE DELIBERATED UPON BY 10 THE CIT PARTIALLY OR FULLY, IS OUT OF PREVIEW OF PR OCEEDINGS TO BE INITIATED U/S.263 OF THE ACT. IN OUR OPINION, THE ORDER OF THE CIT FAILS ON TOUCHSTONE OF THE MERGER DOCTRINE AND THEREFORE IS NOT VALID. WE HOLD THAT T HE ASSESSEES ARE REQUIRED TO FILE AUDIT REPORTS, BUT FILING IT BEFORE THE CIT WOULD N OT DISENTITLE IT FROM CLAIMING THE DEDUCTION. THE PURPOSE BEHIND FILING THE REPORT IS THAT NO FICTITIOUS CLAIM IS MADE AND THE ACTIVITIES OF THE ASSESSEES ARE CERTIFIED B Y A PROFESSIONAL. DEDUCTIONS, INCLUDING 80IB OF THE ACT ARE CONSIDERED TO BE BENE VOLENT PROVISIONS. IT IS A FACT THAT NO FAULT HAS BEEN POINTED OUT BY THE CIT ABOUT CORRECTNESS OF THE REPORT, WHILE PASSING THE REVISIONARY ORDER. HIS WHOLE EMPH ASIS IS ON NOT FILING IT BEFORE THE AO. CONSIDERING THE PURPOSE BEHIND THE LEGISLAT ION THE HON'BLE COURTS HAVE HELD THAT IF THE REPORT IS SUBMITTED AT THE TIME OF ACTIVE CONSIDERATION OF THE CLAIM IT HAS TO BE TAKEN AS SUFFICIENT COMPLIANCE OF THE PROVISIONS OF THE ACT. RESPECTFULLY FOLLOWING THE JUDGMENTS OF ZENITH PROC ESSING MILLS(SUPRA),WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASS ESSEE. 10. SINCE THE FACTS OF THESE TWO CASES ARE SIMILAR, WHILE RESPECTFULLY FOLLOWING THE DECISION OF THE MUMBAI TRIBUNAL IN KEWAL KISHAN CLOTHING (SUPRA) WE HOLD THAT NON-SUBMISSION OF THE FORM 10 CCB OR THE NON-VERIFI CATION OF THE ELIGIBILITY OF THE PRODUCT TO CLAIM DEDUCTION UNDER SECTION 80 IC OF T HE ACT, IN VIEW OF THE FACT THAT SUCH A DEDUCTION WAS ALLOWED FOR 5 YEARS EARLIER, DO NOT CONSTITUTE VALID GROUNDS TO EXERCISE JURISDICTION UNDER SECTION 263 OF THE A CT. WE THEREFORE FIND IT DIFFICULT TO SUSTAIN THE ORDER DATED 10/02/2013 PASSED UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOME TAX, DELHI. WE THEREFORE ALL OW THE GROUNDS OF APPEAL IN ITA NO. 1742/DEL/2014. 11. INSOFAR AS THE DELETION OF DISALLOWANCE OF CLAI M OF THE ASSESSEE UNDER SECTION 80 IC CHALLENGED BY THE REVENUE IN ITA NO 68 1/DEL/2017 AND ITA NUMBERS 2496 AND 1952/DEL/2016 AND ITA NO. 5198/DEL/2017 IN RESPECT OF AY 2009-10 TO 2012-13 IS CONCERNED, ASSESSEES CASE IS THAT THE P ILLAR FILLER IS IN AN IRREGULAR SHAPE, SPECIFIC TO THE REQUIREMENT OF THE MOTOR VEH ICLE MANUFACTURED HAS ASSUMED THE CHARACTER OF AN AUTOMOBILE COMPONENT AN D IT CANNOT BE USED FOR ANY OTHER PURPOSE. IT HAS TO BE PLACED AT A SPECIFI C LOCATION IN THE MOTOR VEHICLE 11 WHEREIN IT IS WELDED. PILLER FILLER IS, THEREFORE, ESSENTIALLY AN AUTO COMPONENT AND MORE APPROPRIATELY CLASSIFIABLE AS PART OF THE MOTOR VEHICLE AND, THEREFORE, CLASSIFIABLE UNDER THE HEAD 87.08 OF THE CENTRAL EXCISE ACT, 1956. ACCORDING TO THE ASSESSEE, THE DGX ADHESIVE IS ALSO CLASSIFIABLE UNDER THE HEAD PREPARED GLUES AND OTHER PREPARED ADHESIVE UNDER CHAPTER 35. 12. HOWEVER, LEARNED AO REFERRED THE MATTER TO THE CENTRAL INSTITUTE OF PLASTIC ENGINEERING AND TECHNOLOGY (FOR SHORT CIPET) WITH REFERENCE TO THE SAMPLES OF PILLAR FILLER AND DGX AND BASING ON THE REPORT OF T HE CIEPT CONCLUDED THAT VISUAL APPEARANCE OF THE DGX IS THIXOTOPIC AND THE POLYURET HEN IS NOT AVAILABLE AS THIXOTROPIC AND IS AVAILABLE IN LIQUID. POLYURETHEN NEEDS AN UV RESISTANCE TO MEET DGX ADHESIVE REQUIREMENT. APPLICATION OF DGX NEED VERY HIGH LEVEL OF THIXOTROPIC PROPERTIES SO THAT IT CAN BE PUMPED AND APPLIED AS STABLE BEAD AND, THEREFORE, THE ASSESSEE COMPANY IS MANUFACTURING ITEM WHICH IS INCLUDED IN THE NEGATIVE LIST OF SCHEDULE XIII WHICH DISENTITLE THE ASSESSEE TO C LAIM DEDUCTION U/S 80IC OF THE ACT. 13. LEARNED AO ALSO DID NOT ALLOW THE DEDUCTION OF ROYALTY PAID BY THE ASSESSEE TO HENKEL KGAA, GERMANY STATING THAT SUCH AN EXPENDI TURE IS TOWARDS THE ACQUISITION OF ASSETS BY WAY OF INTANGIBLE ASSETS OF THE NATURE PROVIDED U/S 32(1)(II) OF THE ACT AND ACCORDINGLY ALLOWED DEPRECI ATION @ 25% AND MADE ADDITION ON THAT ACCOUNT. 14. LEARNED CIT(A), IN TURN, HELD THAT THE ASSESSE E IS ENTITLED TO THE DEDUCTION U/S 80IC OF THE ACT AND ALSO THAT THE PAYMENT OF RO YALTY IS REVENUE IN NATURE. ON THAT PREMISE, LEARNED CIT(A) DELETED BOTH THE ADDIT IONS. HENCE, CHALLENGING THE DELETION OF THESE ADDITIONS MADE BY THE LEARNED AO O N ACCOUNT OF DISALLOWANCE OF 12 DEDUCTION U/S 80IC AND ALSO ON ACCOUNT OF ROYALTY, RE VENUE PREFERRED THE APPEALS WHEREAS CHALLENGING THE ORDER U/S 263 IN RESPECT OF ASSTT. YEAR 2009-10 AND THE OBSERVATIONS OF THE AO THAT DEDUCTION CLAIMED BY THE ASSESSEE U/S 80C IN RESPECT OF ASSESSMENT YEAR 2012-13 OUGHT TO BE RE-WORKED AS PROFITS OF THE ELIGIBLE UNIT, ASSESSEE PREFERRED CROSS OBJECTION NO.209 OF 2017. 15. NOW COMING TO THE DISALLOWANCE OF THE CLAIM OF THE ASSESSEE U/S 80IC IS CONCERNED, LEARNED AO OBSERVED THAT IN THE UNIT AT PARWANOO, THE ASSESSEE HAS BEEN MANUFACTURING DGX AND PILLAR FILLER AND ACCORD ING TO THE LEARNED AO, THESE TWO ITEMS ARE THERE IN SCHEDULE XIII EXCLUDED FOR T HE CLAIM OF DEDUCTION. LEARNED AO OBTAINED THE REPORT OF CIPET AND CONCLUDED THAT THE PLASTIC ITEM INCLUDED IN CHAPTER 39 IN CENTRAL EXCISE CLASSIFICATION WOULD A LSO COVER THE FINAL PRODUCTS OF THE ASSESSEE COMPANY. ON THAT PREMISE, HE DENIED TH E DEDUCTION U/S 80IC OF THE ACT. 16. IT IS THE SUBMISSION ON BEHALF OF THE ASSESSEE THAT ASSESSEE IS ENGAGED IN MANUFACTURING OF DGX AND PILLAR FILLER IN ITS PARWA NOO UNIT FROM THE FINANCIAL YEAR 2004-05 ONWARDS AND ALL THROUGH THE YEARS UPTO THE F INANCIAL YEAR 2008-09, DEDUCTION U/S 80IC WAS ALLOWED. IT IS FURTHER SUBM ITTED THAT THE EXCISE CLASSIFICATION OF DGX ADHESIVE IS 35069999 WHEREAS THE PILLAR FILLER IS 87089900 AND IT IS EVIDENCED BY THE AUDIT DONE BY THE EXCISE A UTHORITIES FOR THE PERIOD BETWEEN OCTOBER 2011 AND DECEMBER 2012 CONFIRMING T HAT THE DGX ADHESIVE IS COVERED IN 87089900. ASSESSEES CONTENTION IS THAT THEY ARE NOT AT ALL PLASTIC OR THE ARTICLES THEREOF FALLING UNDER THE EXCISE CLASS IFICATION OF 39.09 TO 29.13 AS PER SCHEDULE XIII TO THE ACT, SO ALSO CHAPTER NO.32 OF THE EXCISE CLASSIFICATION SPEAKS ONLY ABOUT THE PAINTERS FILLING, WHICH IS NOT THE P RODUCT CLASSIFIED AS PILLAR FILLER BY THE ASSESSEE. IT IS SUBMITTED THAT PILLAR FILLER I S AN IRREGULAR SHAPE, SPECIFIC TO THE 13 REQUIREMENT OF THE MOTOR VEHICLE MANUFACTURER AND A SSUMES THE CHARACTER OF AUTOMOBILE COMPONENT WHICH CANNOT BE USED FOR ANY PU RPOSE, AS SUCH, IN VIEW IT HAS NECESSARILY TO BE PLACED AT SPECIFIC LOCATION I N THE MOTOR VEHICLE WHEREIN IT WOULD BE WELDED, IT IS ESSENTIALLY AN AUTOMOBILE COM PONENT AND APPROPRIATELY CLASSIFIED AS THE PART OF MOTOR VEHICLE FALLING IN THE CLASSIFICATION UNDER THE HEAD 87.08 OF THE CENTRAL EXCISE ACT. 17. OUR ATTENTION WAS FURTHER DRAWN TO NOTE 2 OF CH APTER 39 OF CENTRAL EXCISE TARIFF ACT,1985 WHEREIN IT IS STATED THAT THE CHAPT ER DOES NOT COVER THE PART OF AIRCRAFT OR VEHICLES U/S XVII WHICH MAKES IT CLEAR THAT ANY PART OF VEHICLE COVERED IN SECTION 17 CANNOT BE COVERED UNDER CHAPTER 39 OF THE CENTRAL TARIFF ACT, 1985 TO WHICH CHAPTER 87 ONLY APPLIES. 18. ON THIS ASPECT, WE HAVE GONE THROUGH THE RECORD INCLUDING THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). AT PAGE NO.100 AND 101, THERE IS AUDIT REPORT OF THE CENTRAL EXCISE WHEREIN IN UNEQUIVOCAL TERM I T IS STATED THAT AT THE UNIT AT PARWANOO, THE ASSESSEE HAS BEEN MANUFACTURING PREPA RED GLUE AND OTHER ADHESIVES, PARTS AND ACCESSORIES OF MOTOR VEHICLES PARTS, ANTI FREEZING PREPARATIONS AND DEICING FLUID FALLING UNDER CHAPTE R 35069999, 87089900, 38200000 OF THE 1 ST SCHEDULE TO THE CENTRAL EXCISE TARIFF ACT, 1985. NOWHERE THIS REPORT READS THAT THE ASSESSEE HAS BEEN MANUFACTURI NG ANY PRODUCT FALLING WITHIN THE EXCISE CLASSIFICATION OF 39.09 TO 39.15 AS PER SCHEDULE XIII TO THE ACT NOR ANY PRODUCT OF EXCISE CLASSIFICATION 32 WAS FOUND TO HA VE BEEN MANUFACTURED THERE. WE HAVE GONE THROUGH THE ENTRIES IN THE CHAPTER 35 AND 87 AND FOUND THAT ENTRY RELATING TO SERIES 3506 DEAL WITH PREPARED GLUES AN D OTHER PREPARED ADHESIVE ETC. WHEREAS SERIES 8708 DEALT WITH THE PARTS AND ACCES SORIES OF MOTOR VEHICLES. 14 19. LEARNED CIT(A) AFTER HAVING EXHAUSTIVELY DEALT W ITH TECHNICAL DETAILS COVERED BY THE LEARNED AO IN THE LIGHT OF THE SUBMIS SIONS MADE ON BEHALF OF THE ASSESSEE COUPLED WITH CIPET REPORT OPINED THAT INAS MUCH AS CIPET IS A HIGHLY TECHNICAL ORGANIZATIONS AND ITS FINDINGS CAN NEVER BE DISPUTED BUT THE MATTER DOES NOT END THERE. HE SUBMITTED THAT THE CIPET DEALT W ITH ONLY THE CHEMICAL COMPOSITION OF THE DGX OR PILLAR FILLER BUT THEY COU LD NOT AND RIGHTLY DID NOT ENTER INTO THE ASPECT OF THE COMMERCIAL NATURE OF THE PRO DUCTS OR ITS NAME WITH WHICH IT IS KNOWN IN THE MARKETS. LEARNED CIT(A) NOTICED TH AT THE MANUFACTURING AT THE PARWANOO UNIT HAS BEEN SUBJECTED TO EXCISE AND AUDI T OF ACCOUNTS WHEREIN PRODUCTS MANUFACTURED WERE FOUND TO BE FALLING UNDE R THE EXCISE CLASSIFICATION OF 87.08 AND 35.06 RESPECTIVELY. 20. LEARNED CIT(A) FOLLOWED THE DECISION OF THE HON BLE APEX COURT IN ASPINWALL AND CO. LTD. VS CIT, 251 ITR 323 (SC) WHEREIN THE H ONBLE SUPREME COURT OBSERVED THAT THE ASSESSEE AFTER PLUCKING OR RECEIVING THE R AW COFFEE BERRIES MAKES IT UNDERGO NINE PROCESSES TO GIVE IT THE SHAPE OF COFF EE BEANS. THE NET PRODUCT IS ABSOLUTELY DIFFERENT AND SEPARATE FROM THE INPUT AND THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE WHIC H IS RECOGNIZED IN THE TRADE AS A NEW AND DISTINCT COMMODITY. THE HONBLE APEX COURT MADE THE DIFFERENCE BETWEEN THE COFFEE BEANS AND RAW MATERIAL FROM WHIC H IT IS MANUFACTURED ON THE BASIS OF THE PROCESSES THE RAW MATERIAL HAS UNDERGO NE AND THE USAGE OF THE FINAL PRODUCT. 21. IN SO FAR AS THIS DISTINCTION IS CONCERNED, THE REPORT OF CIPET DOES NOT THROW ANY LIGHT. LEARNED AO MADE THE REPORT OF CIPET THE SOLE BASIS FOR HIS CONCLUSION THAT THE ASSESSEE HAS BEEN MANUFACTURING PLASTIC AN D PLASTIC PRODUCT AND FAILED TO NOTICE THE ELABORATE PROCESS WHICH THE RAW MATERIAL S HAVE UNDERGONE TO BECOME 15 THE FINISHED PRODUCT WHICH HAVE ONLY ONE USAGE I.E. IN AUTOMOBILE INDUSTRY AND NONE ELSE. IT IS NOT BROUGHT TO OUR NOTICE THAT TH ESE TWO PRODUCTS EITHER PILLAR FILLER OR THE DGX ARE GENERIC IN THEIR USE AS PLAST IC OR THEY COULD BE PUT TO USE EVERYWHERE THE PLASTIC COULD BE. THE SOLE AND SINGL E PURPOSE OF THE FINISHED GOODS IN THE AUTOMOBILE INDUSTRY SETS THE RAW MATERI AL OF PLASTIC APART FROM THE FINISHED GOODS WHICH ARE KNOWN AS AUTOMOBILE PARTS IN THE COMMERCIAL WORLD. WE DO NOT FIND ANY PERVERSITY EITHER IN THE APPROACH OR IN THE CONCLUSIONS REACHED BY THE LEARNED CIT(A) AFTER APPRECIATING THE SAME MATERIAL WHICH THE LEARNED AO MADE BASIS FOR HIS CONCLUSION. LEARNED AO STOPPED AT THE CHEMICAL COMPOSITION WHEREAS LEARNED CIT(A) TOOK IT A LITTLE FURTHER TO ITS LOGICAL CONCLUSION BY IDENTIFYING THE PRODUCTS WITH THEIR USAGE AND THEI R NOMENCLATURE IN THE WORLD WHERE THEY ARE MADE USE OF. THE REASONING GIVEN BY T HE LEARNED CIT(A) IS IMPECCABLE AND WE FIND OURSELVES IN AGREEMENT WITH THE SAME. SUCH FINDINGS OF LEARNED CIT(A) DO NOT WARRANT ANY INTERFERENCE. WE U PHOLD THE FINDINGS OF LEARNED CIT(A) AND DISMISS THE GROUND OF APPEAL RELATING TO THIS ASPECT IN ITA NO 681/DEL/2017 AND ITA NUMBERS 2496 AND 1952/DEL/2016 AND ITA NO. 5198/DEL/2017. 22. NOW COMING TO THE NEXT ASPECT OF ROYALTY, THE DEL ETION OF WHICH IS CHALLENGED BY THE REVENUE IN ITA NUMBERS 2496 AND 19 52/DEL/2016 AND ITA NO. 5198/DEL/2017 IN RESPECT OF AY 2010-11 TO 2012-13 L EARNED CIT(A) IN HIS ORDER OBSERVED THAT IN ASSESSEES OWN CASE FOR ASSTT. YEA R 2004-05 AND 2008-09, A COORDINATE BENCH OF THIS TRIBUNAL ALLOWED THE ROYALT Y FEE PAID TO THE HENKEL KGAA U/S 37(1) OF THE ACT AS REVENUE EXPENDITURE ON THE GROUND THAT SUCH PAYMENT WAS ONLY FOR RIGHT TO USE THE TECHNICAL KNOWHOW AND NO B ENEFIT OF ENDURING NATURE ACCRUED TO THE ASSESSEE. LEARNED CIT(A) FURTHER RE CORDED THAT IN RESPECT OF ASSTT. 16 YEAR 2006-07 TO 2008-09, SUCH A FINDING WAS RETURNE D BY THE FIRST APPELLATE AUTHORITY ONLY. AS RIGHTLY OBSERVED BY THE LEARNED CI T(A), THE AO HAS NOT BROUGHT ON RECORD ANY CHANGE IN THE FACTS AND CIRCUMSTANCES THAT TOOK PLACE FROM THE EARLIER YEARS. IN THE ABSENCE OF ANY COMPELLING REAS ONS PLEADED BY THE REVENUE BEFORE US, WE DO NOT FIND ANY REASON TO TAKE A DIFFE RENT VIEW FROM THE ONE TAKEN FOR THE EARLIER YEARS BY THE AUTHORITIES BELOW AS WEL L AS BY THE COORDINATE BENCHES OF THIS TRIBUNAL. WITH THIS VIEW OF THE MATTER, WE DO NOT PROPOSE TO DISTURB THIS SETTLED POSITION AND ON THAT PREMISE DISMISS THE GR OUNDS RELEVANT TO THIS ASPECT IN ITA NUMBERS 2496 AND 1952/DEL/2016 AND ITA NO. 5198 /DEL/2017. 23. TURNING TO THE CROSS OBJECTION IN RESPECT OF AS STT. YEAR 2012-13 IS CONCERNED, LEARNED AO RECORDED THAT THE ASSESSEE HA D DISCLOSED SALES OF RS.25,39,99,078/- IN PARWANOO UNIT AND GROSS PROFIT THEREON AT RS.11,24,36,580/- GIVING A PROFIT RATE OF 36% AS AGAINST SALES OF OVE RALL BUSINESS AT RS.162,95,42,828/- AND THE GROSS PROFIT THEREON AT RS.41,87,11,458/- GIVING THE GROSS PROFIT RATE OF 26%. THUS, THERE IS A DIFFERE NCE OF 10% GROSS PROFIT RATE. LEARNED AO FURTHER RECORDED THAT WANT OF RECORD PRE VENTED HIM FROM VERIFYING THE RATES CHARGED BY THE ASSESSEE COMPANY FROM SISTE R CONCERN ARE PAID BY THE ASSESSEE COMPANY TO SISTER CONCERN TO KNOW WHETHER T HE TRANSFER OF STOCKS FROM PARWANOO UNIT TO OTHER UNITS AND FROM OTHER UNITS T O THE PARWANOO UNIT IS CORRESPONDING TO THE MARKET VALUE OF SUCH GOODS AS ON THE DATE OF TRANSFER AS PROVIDED U/S 80IA(8) AND SAME IS ALSO APPLICABLE FO R THE PROVISIONS OF SECTION 80IC. BASING ON THE COMPARATIVE GROSS PROFIT, LEAR NED AO OPINED THAT THE ASSESSEE HAD DISCLOSED MORE PROFIT IN 80IC UNIT THA N THE OTHER UNIT BY 10% JUST TO CLAIM ENHANCED DEDUCTION U/S 80IC AND THE PROFIT OF THE ELIGIBLE UNIT NEED TO BE CALCULATED AND RESULTANT DISALLOWANCE ON ACCOUNT OF CLAIM OF DEDUCTION U/S 80IC 17 NEED TO BE CALCULATED. ALL THIS WAS DONE BY THE LEA RNED AO BECAUSE THE ASSESSEE COMPANY WAS NOT FOUND TO BE ELIGIBLE FOR CLAIM OF DE DUCTION U/S 80IC IN RESPECT OF THE PARWANOO UNIT. LEARNED CIT(A) DID NOT REVERSE THIS FINDING OF LEARNED AO BUT LEARNED CIT(A) FOUND THAT SINCE THE FULL DETAILS AN D FIGURES WERE NOT AVAILABLE TO EXAMINE THE PRICE AT WHICH THE INPUTS ARE OBTAINED OR THE OUTPUT IS TRANSFERRED TO THE WAREHOUSE SO TO DRAW AN APPROPRIATE CONCLUSION, THE AO MAY MAKE FURTHER ENQUIRY TO ARRIVE AT A SUITABLE CONCLUSION. 24. IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE PURCHASED RAW MATERIAL FROM HENKEL KGAA AT MARKET PRICE AND THE S AME WAS SUBJECTED TO THE INTERNATIONAL TRANSACTION AND TP RULES, WHICH WAS A CCEPTED BY THE REVENUE. AS REGARDS THE FINISHED PRODUCTS MADE AT PARWANOO UNIT FOR THE CONVENIENCE OF SUPPLY TO THE CUSTOMERS, WHO PLACED ORDERS FOR MATER IAL IN A ONE OR TWO DAYS REQUIREMENT, TO ENSURE TIMELY DELIVERY AS PER REQUIRE MENT, THE FINISHED GOODS ARE FIRST TRANSFERRED TO WAREHOUSE OF GURGAON, PUNE AND CHENNAI UNITS WITH WAREHOUSE FACILITY. THIS PROVIDES PROXIMITY TO THE LO CATION OF THE CUSTOMER FOR IMMEDIATE TRANSFER AS PER THEIR REQUIREMENT. IT IS SUBMITTED THAT AS PER THE EXCISE LAWS, THE TRANSFER OF FINISHED GOODS FROM TH E MANUFACTURING PLANT TO THE WAREHOUSE IS TO BE MADE AT THE FINAL SALE PRICE TO CUSTOMERS I.E. MARKET PRICE ITSELF AND THEREFORE, QUESTION OF ADJUSTMENT U/S 80 IA(8) DOES NOT ARISE. 25. AS A MATTER OF FACT, LEARNED CIT(A) OBSERVED TH AT BASICALLY IF IN MARKET CONDITION THE GOODS COULD HAVE BEEN SOLD AT THE SA ME PRICES AT WHICH THESE ARE TRANSFERRED BY THE NON-ELIGIBLE UNIT TO THE ELIGIBLE UNIT OR VICE VERSA, THEN THERE IS NO CASE OF ANY ADDITION UNDER SECTION 80 IA(8) FOLLO WING THE ARMS-LENGTH PRINCIPLE. HE CONSIDERED THE SUBMISSIONS ADVANCED O N BEHALF OF THE ASSESSEE THAT ONLY TO ENSURE TIMELY DELIVERY AS PER THE REQUIREMENT , THE FINISHED GOODS ARE FIRST 18 TRANSFERRED TO THE WAREHOUSE OF GURGAON, PUNE AND C HENNAI UNITS WITH WAREHOUSE FACILITY ONLY IN ORDER TO PROVIDE PROXIMITY TO THE LOCATION OF THE CUSTOMER TO ENSURE IMMEDIATE TRANSFER AS PER REQUIR EMENT. 26. LD. CIT(A) FURTHER CONSIDERED THE SUBMISSION ON BEHALF OF THE ASSESSEE THAT AS PER EXCISE, THE TRANSFER IS TO BE MADE TO THE WA REHOUSE AT THE FINAL SALE PRICE TO THE CUSTOMERS THAT IS MARKET PRICE AND THEREFORE QU ESTION OF ADJUSTMENT UNDER SECTION 80 IA (8) DOES NOT ARISE. LASTLY HE RECORDED THAT HE BROADLY AGREED WITH THE RATIONALE OF THIS ARGUMENT. HOWEVER, INASMUCH A S THE FACTS AND FIGURES WERE NOT AVAILABLE TO THE FULL EXTENT, HE ALLOWED THE AO TO MAKE FURTHER ENQUIRY IN THIS REGARD. HAVING OBSERVED SO, LEARNED CIT(A) FOUND T HAT TO DRAW AN APPROPRIATE CONCLUSION, THE FULL DETAILS AND FIGURES ARE NECESS ARY TO EXAMINE THE PRICE AT WHICH THE INPUTS ARE OBTAINED ARE THE OUTPUT IS TRANSFERR ED TO THE WAREHOUSE AND FOR SUCH PURPOSE LEARNED CIT(A) PERMITTED THE AO TO MAK E FURTHER ENQUIRY IN THIS REGARD AND REACH A SUITABLE CONCLUSION. 27. IN THE CIRCUMSTANCES WE DO NOT FIND ANY NECESSI TY TO INTERFERE WITH THIS OBSERVATION OF THE LD. CIT(A) AND SUFFICE IT TO SAY THAT THE LD. AO MAY BASE THE CONCLUSION ON THE FACTS AND FIGURES OBTAINED DURING THE ENQUIRY BUT NOT ON ANY SURMISES AND CONJECTURES OR EXTRANEOUS INFERENCES. WE THEREFORE APPROVE THE OBSERVATIONS OF THE LEARNED CIT(A) TO THE LD. AO TO CAUSE ENQUIRY AFTER OBTAINING THE FULL DETAILS AND FIGURES TO EXAMINE THE PRICE A T WHICH THE INPUTS ARE OBTAINED OR THE OUTPUT IS TRANSFERRED TO THE WAREHOUSE AND R EACH A FACTUAL CONCLUSION FIRMLY BASED ON THE FACTS AND FIGURES. CROSS OBJECT ION FILED BY THE ASSESSEE ARE ALLOWED ACCORDINGLY IN PART. 19 28. IN THE RESULT, ITA NO. 1742/DEL/14 IS ALLOWED, ITA NO 681/DEL/2017 AND ITA NUMBERS 2496 AND 1952/DEL/2016 AND ITA NO. 5198/DEL /2017 ARE DISMISSED AND THE CROSS OBJECTION IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL, 2018. SD/- SD/- (PRASHANT MAHARISHI) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH APRIL, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) BY ORDER 5. DR, ITAT ASSTT. REGISTRA R, ITAT