DCIT 15(3)(1), MUMBAI V. ROLLS ROYCE MARINE INDIA P.LTD, NAVI MUMBAI

ITA 1035/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3212 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: RADHIKA THAKKAR
• Keywords: Transfer pricing; Principle of natural justice; Additional evidence; Bad and doubtful debts

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -KBENCH MUMBAI , . . , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND C.N. PRASAD,JUDICIAL MEMBER ./I.T.A./1035/MUM/2015, /ASSESSMENT YEAR: 2010-11 DY. CIT-15(3)(1) ROOM NO.451, 4 TH FLOOR, AAYAKAR BHAVAN,M.K. ROAD, MUMBAI-400 020. VS. M/S. ROLLS ROYCE MARINE INDIA PVT. LTD. PLOT NO.D-505, TTC INDUSTRIAL AREA, MIDC TURBHE,NAVI MUMBAI-400 703. PAN:AAACU 4687 L ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI N.K. CHAND ASSESSEE BY: SHRI AJIT KUMAR JAIN & MS. RADHIKA THAKKAR / DATE OF HEARING: 03.05.2016 / DATE OF PRONOUNCEMENT: 27.05.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) !' PER RAJENDRA, AM - CHALLENGING THE DIRECTIONS,DT. 14.11.2014 OF THE DI SPUTE REGULATION PANEL- II, MUMBAI THE AO HAS FILED THE PRESENT APPEAL ,RAISING TWO EFFECTIVE GROUNDS OF APPEAL.THE ASSESSEE IS A PART OF ROLLS-ROYCE GROUP WHICH OPERATES IN 4 GLOBAL MARKETS NAMELY CIVIL-AEROSPACE, DEFENCE-AEROSPACE, MARINE AND ENERGY.IT IS PART OF THE MARINE DIVISION OF THE GROUP.THE GROUP OFFER S A PRODUCT PORTFOLIO RANGING FROM VESSEL DESIGN AND GAS TURBINE ENGINES TO WATER JETS AND DECK HANDLING EQUIPMENT.THE ASSESSEE IS ENGAGED IN PROVIDING MAR KETING, SALES SUPPORT, CO- ORDINATION AND ALLIED SERVICES TO ITS GROUP. IT ALS O PROVIDES ASSEMBLING AND DELIVERY MANAGEMENT SUPPORT SERVICES TO ITS GROUP I N INDIA AND ALSO PROVIDES AFTER SALES SERVICES. 2. DURING THE YEAR SIGNIFICANT INTERNATIONAL TRANSACTI ONS(IT.S)ENTERED INTO BY THE ASSESSEE ARE ON ACCOUNT OF PROVISION OF MARKETING A ND SALES SUPPORT, PROVISION OF ASSEMBLY AND DELIVERY MANAGEMENT SUPPORT SERVICE S, PROVISION OF REPAIRS AND MAINTENANCE OF MARINE EQUIPMENT AND PROVISION OF BU SINESS PROMOTION AND LIAISON SERVICES.THE ASSESSEE HAD BIFURCATED ITS AC TIVITIES INTO FOUR SEGMENTS AS FOLLOWS: 1035/M/15-ROLLS ROYCE MARINE-(10-11) 2 I) AFTER SALES SERVICE,II) ASSEMBLY AND DELIVERY MA NAGEMENT SUPPORT SERVICES III)MARKETING, SALES SUPPORT COORDINATION AND OTHER ALLIED ACTIVITIES, IV) APPLICATION ENGINEERING SERVICES THE ASSESSEE HAD BENCHMARKED ITS TRANSACTIONS BY U SING TNMM IN RESPECT OF SL.NO.(II),(III) AND (IV).AS REGARDS SALES SERVICES SEGMENT IT USED CUP METHOD. THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFF ICER(TPO)FOR DETERMINING THE ARMS LENGTH PRICE(ALP)OF THE TRANSACTIONS AS P ER PROVISION OF SEC.92 OF THE ACT.DURING THE TP PROCEEDINGS THE TPO FOUND THA T THE PROFIT LEVEL INDICA - TOR(PLI)WAS NET OPERATING PROFIT TO OPERATING COST (OP/OC),THAT FOR ASSEMBLY AND DELIVERY MANAGEMENT SERVICES,THE ASSESSEE HAD SELECTED FOLLOWING SIX COMPARABLES: SN. NAME OF THE COMPARABLE COMPANY PLI AS PER TP REPORT (%) UPDATED PLI 1. ANUP MALLEABLE LTD.* 12.60 24.44 2. BLOOM INDISTRIES LTD.* 0.00 (17.21) 3. DE TWO FORGING PVT. LTD. 16.29 11.70 4. METAL COATINGS (INDIA) LTD. 2.45 4.18 5. OMAX AUTOS LTD. 3.71 3.71 6. RISHI LASER LTD. 1.71 1.71 ARITHMETIC MEAN 6.13 4.76 ASSESSEE MARGIN 9.32 9.32 * SEGMENTAL DATA HE FURTHER FOUND THAT PLI OF THE ASSESSEE WAS AT 9 .32% AS AGAINST THE ARITHMETIC MEAN OF THE COMPARABLE OF 6.13%,THAT THE ASSESSEE H AD CLAIMED THAT THE TRANSACTION IN QUESTION WAS AT ARMS LENGTH.THE ASS ESSEE HAD WORKED THE PLI PARTICULARS REF. RUPEES SALES 45,791,463/- TOTAL INCOME A 45,791,463/- MANUFACTURING EXPENSES 14,068,232/- SERVICING COSTS (INCLUDING TOOLS) 1,158,052/- EMPLOYEES COSTS 20,640,971/- ADMINISTRATION COST 6,020,385/- TOTAL EXPENSES B 41,887,640/- NET PROFIT CCMF(A-B) 3,903,823/- NET PROFIT AS % OF COST C/B*100 9.32% THE UPDATED PLI OF THE COMPARABLES WAS FOUND TO BE AT 4.76%. SN. NAME OF THE COMPANY NCP(%) BASED ON 3 YEARS DATA NC P(%)FY.09-10 1. ANUP MALLEABLES LTD. 12.60 24.44 2. BLOOM INDUSTRIES LTD. 0.00 (17.21) 1035/M/15-ROLLS ROYCE MARINE-(10-11) 3 3. DE TWO FORGING PVT. LTD. 16.29 11.70 4. METAL COATINGS (INDIA) LTD. 2.45 4.18 5. OMAX AUTOS LTD. 3.71 3.71 6. RISHI LASER LTD. 1.71 1.71 ARITHMETIC MEAN 6.13 4.76 THE TPO REJECTED FOUR COMPARABLES GIVING THE FOLLOW ING REASONS: COMPARABLE REASON FOR REJECTION BY TPO BLOOM INDUSTRIES FUNCTIONALLY DIFFERENT- DISCLOSED PRIMARY SEGMENT AS BUSINESS SEGMENT METAL COATINGS(INDIA) LTD. FUNCTIONALLY DIFFERENT- COMPANY IS ENGAGED IN MANUFACTURE AND SALE OF STEEL STRIPS COLD ROLLED -CR FLAT WIRE STRIPS OMAX AUTOS FUNCTIONALLY DIFFERENT-COMPANY ENGAGED I N MANUFACTURE AND SALE OF AUTO COMPONENTS FOR 2 WHEELERS AND 4 WHEELERS RISHI LASER LTD. FUNCTIONALLY DIFFERENT- ENGAGED IN THE FIELD OF AUTOMOTIVE, CONSTRUCTION EQUIPMENT, POWER SEGMENTS AND RAIL TRANSPORTATION S EGMENTS. AFTER ISSUING A SHOW CAUSE NOTICE TO THE ASSESSEE,T HE TPO FINALISED THE SET OF COMPARABLES AND ARRIVED AT THE ARITHMETIC MEAN OF 18.07%.- SR.NO. NAME OF THE COMPANY NCP(%) 1. ANUP MALLEABLES LTD. 22.44 2. DE TWO FORGING PVT. LTD. 11.70 ARITHMETIC MEAN 18.07 HE COMPUTED THE ALP AS UNDER :- AE SALES 45,791,463 OP/OC OF ASSESSEE 9.32% CORRECTED AE COST 41887543 ALP MEAN 18.07 ALP SALES 49456622 105% OF SALES 48081036 95% 43501889 ADJUSTMENT 3665159 AS A RESULT,HE PROPOSED AN ADJUSTMENT OF RS.36.65 L AKHS FOLLOWING THE ORDER OF THE TPO,THE AO MADE AN ADDITION OF THE SAID AMOUNT IN HIS DRAFT ORDER. 3. AGGRIEVED BY THE ORDER OF THE TPO/AO THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP.BEFORE IT,THE ASSESSEE ARGUED THAT IT WAS A CONTRACT SERVICE PROVIDER, THAT THE AE WOULD SELL ITS PRODUCTS TO THIRD PARTY IN INDIA, THAT THE CONTRACT WOULD BE ENTERED INTO BETWEEN THE THIRD PARTY AND AE DIRECTLY, THAT THE ASSESSEE WOULD BE SUB-CONTRACTED THE MANUFACTURING AND ASSEM BLING WORK IN RESPECT OF SUCH CONTRACT ENTERED INTO BY THE AE WITH THE THIRD PARTY,THAT THE MANUFACTURING 1035/M/15-ROLLS ROYCE MARINE-(10-11) 4 AND ASSEMBLING WORK WAS CARRIED OUT IN ACCORDANCE W ITH THE SPECIFICATION PROVIDED BY AE,THAT THE GOODS WERE DELIVERED BY ASS ESSEE TO THIRD PARTY CUSTOMER IN INDIA,THAT IT WAS NOT RESPONSIBLE FOR A NY RISK OR LOSS OR DAMAGE OF GOODS ONCE THE SAME WAS OFFERED FOR TRANSPORT,THAT IT HAD CHARACTERISED ITS ACTIVITY IN THE SEGMENT OF ASSEMBLY AND DELIVERY MA NAGEMENT AS THAT OF CONTRACT MANUFACTURING(CMF),THAT IT HAD IDENTIFIED OTHER COM PANIES THAT WERE ENGAGED IN PROVIDING CMF SERVICES OR PRODUCTS THAT WERE BROAD LY SIMILAR TO THE ASSESSEE, THAT THE AVERAGE MARGIN OF THOSE COMPANIES WORKED O UT TO 4.76%, THAT THE ASSESSEES MARGIN WAS 9.32%,THAT THE TRANSACTION IN THE SEGMENT IN QUESTION WERE AT ARMS LENGTH,THAT THE COMPARABLE SELECTED B Y THE ASSESSEE WERE FUNCTIONALLY COMPARABLE,THAT UNDER THE TNMM,TO BENC HMARK THE TRANSACTION OF CONTRACT MANUFACTURER (CM)IT WAS MORE IMPORTANT TO IDENTIFY OTHER COMPANIES ENGAGED IN CMF ACTIVITY EVEN IF IT WAS NOT MANUFACT URING THE SAME PRODUCT, THAT IT WAS MORE IMPORTANT TO IDENTIFY A CM RATHER THAN AN ENTREPRENEUR,THAT ALL THE COMPANIES IDENTIFIED BY IT HAD PRIMARY INCOME ON AC COUNT OF JOB WORK CHARGES,THAT THEY WERE PERFORMING CMF SERVICES FOR OTHER PERSONS,THAT IF CLOSE PRODUCT COMPARABILITY WAS TO BE INSISTED UPON FOR A CCEPTING THE COMPARABLES THE TPO SHOULD HAVE REJECTED THE REMAINING TWO COMPARAB LES ALSO,THAT THE REMAINING TWO COMPARABLE COMPANIES WERE ENGAGED IN CMF OF STEEL CASTING AND COLD FORGING,THAT BOTH WERE NOT COMPARABLE TO THE P RODUCTS MANUFACTURED BY THE ASSESSEE, THAT IF PRODUCT COMPARABILITY WAS TO BE U SED AS A YARDSTICK TO IDENTIFY COMPARABLES THEN ALL COMPARABLES IDENTIFIED BY THE ASSESSEE OUGHT TO HAVE BEEN REJECTED,THAT THE TPO WAS INCONSISTENT IN REJECTING FOUR COMPARABLES AND ACCEPTING REMAINING TWO COMPARABLES WHICH SUFFERED FROM SAME DEFICIENCY. 4. DRP WAS THE OF THE OPINION THAT THE ARGUMENT OF EIT HER REJECTING ALL OR ACCEPTING ALL THE COMPARABLES WAS A VALID ARGUMENT. IT DIRECTED THE ASSESSEE TO FURNISH AN ALTERNATE SET OF COMPARABLES.IN PURSUANC E OF THE DIRECTIONS OF THE 1035/M/15-ROLLS ROYCE MARINE-(10-11) 5 DRP,THE ASSESSEE FILED A FRESH SET OF COMPARABLES B Y CONDUCTING A STRUCTURED SEARCH PROCESS OF SIX MORE COMPARABLE CASES THAT WE RE ENGAGED IN MANUFACTURING OF PRODUCT MORE CLOSELY COMPARABLE TO THE ASSESSEE. FOLLOWING COMPARABLE WERE SELECTED BY THE ASSESSEE: SN. NAME OF COMPANY SALES (IN CRORES) PLI %(OP/OC) 1. ADOR POWERTON LTD. 68.76 2.81 2. ADOR WELDING LTD. 261.48 12.67 3. APLAB LTD. 97.96 -2.14 4. KEYCEE INDUSTRIES LTD. 25.52 6.29 5. SALZER ELECTRONICS LTD. 171.16 12.04 6. SWITCHING TECHNOLOGIES GUNTHER LD. 6.53 -0.94 ARITHMETIC MEAN 5.12% AS THE ALTERNATE COMPARABLES SET WERE PRODUCED BEFO RE THE DRP FOR THE FIRST TIME THE SAME WAS REMANDED TO THE TPO FOR SEEKING H IS COMMENTS ON COMPARA- BILITY OF THOSE COMPARABLES.IN HIS REPORT,THE TPO S TATED THAT THE ASSESSEE COULD NOT SUBMIT NEW SET OF COMPARABLE AT THE APPELLATE S TAGE, THAT THE REMAINING TWO COMPARABLES( ANUP MALLEABLES LTD. & DE TWO FORGING PVT. LTD .)WERE FUNCTIONALLY SIMILAR TO THE ASSESSEE. AFTER EXAMINING THE REMAND REPORT,THE DRP HELD THAT THE TPO HAD FAILED TO ADDRESS THE CORE ISSUE ON WHICH THE REPORT WAS CALL ED FOR, THAT HE AGAIN AND AGAIN REITERATED THE POINT THAT TWO COMPARABLES FIN ALLY ACCEPTED BY HIM WERE THE VALID COMPARABLE TO DETERMINE THE ALP, THAT HE FAIL ED TO ADDRESS THE ISSUE AS TO WHY THE FOUR COMPARABLES WERE REJECTED WHEN THEY WE RE PERFORMING THE SAME JOB AS THAT OF THE REMAINING TWO,THAT THE REMAINING TWO COMPARABLES SUFFERED THE SAME INFIRMITY OF THE REJECTED FOUR COMPARABLES ,THAT HE HAD FAILED TO ADDRESS THE ISSUE OF COMPARABILITY OF SIX NEW COMPARABLES I DENTIFIED BY THE ASSESSEE,THAT HE HAD FAILED TO AVAIL THE OPPORTUNITY GIVEN TO HIM ,THAT IT WAS NOT POSSIBLE TO CONDONE THE APPROACH OF THE TPO IN ACCEPTING/IN REJ ECTING THE COMPARABLES. THE DRP HELD THAT THE NEW COMPARABLE IDENTIFIED BY THE ASSESSEE WERE FOUND TO BE ENGAGED IN MANUFACTURING OF PRODUCT THAT ARE MORE S IMILAR TO THE ASSESSEE,THAT THE ASSESSEES MARGIN WAS BETTER THAN THE AVERAGE M ARGIN OF THE COMPARABLES, 1035/M/15-ROLLS ROYCE MARINE-(10-11) 6 THAT THERE WAS NO JUSTIFICATION TO MAKE ANY ADJUSTM ENT IN RESPECT OF IT OF THAT SEGMENT. 5. BEFORE US,THE DEPARTMENTAL REPRESENTATIVES(DR),ARGU ED THAT NO POSITIVE FINDING WAS GIVEN BY THE DRP,THAT THE DRP HAD ADMIT TED ADDITIONAL EVIDENCES . THE AUTHORISED REPRESENTATIVE(AR)SUPPORTED THE ORDE R OF THE DRP. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD SELECTED SIX COMPARABLES ,THAT THE COMPARABLE COMP - ANIES WERE ENGAGED IN MANUFACTURING ACTIVITIES,THAT THE UPDATED AVERAGE MARGIN OF THE COMPARABLE COMPANIES WORKED OUT TO 4.76% AS AGAINST ASSESSEES MARGIN OF 9.32%, THAT THE TPO REJECTED FOUR COMPARABLES OU T OF THE SIX ON THE GROUND THAT THEY WERE FUNCTIONALLY DIFFERENT,THAT HE SELEC TED TWO COMPARABLES FOR DETERMINING THE ALP,THAT HE PROPOSED AN ADJUSTMENT OF RS.36,65,159/-, THAT THE TRIBUNAL FOUND FORCE IN THE ARGUMENT OF THE ASSESSE E THAT THERE WAS NO VALID BASIS FOR REJECTING OR ACCEPTING THE COMPARABLES,TH AT THE REMAINING TWO COMPARABLES,FINALLY SELECTED BY THE TPO,WERE NOT MA NUFACTURING THE PRODUCTS THAT WERE MANUFACTURED BY THE ASSESSEE,THAT THE DR P DIRECTED THE ASSESSEE TO FILE FRESH SET OF COMPARABLES,THAT IT FURNISHED A N EW SET OF SIX COMPARABLES, THAT THE NEW SETS WERE FORWARDED TO THE TPO FOR HIS COMM ENTS,THAT AFTER CONSIDERING THE AVAILABLE MATERIAL THE DRP DELETED THE ADDITION . WE HAVE GONE THROUGH THE REMAND REPORT OF AO.(PG.2 46-48 OF THE PB.)WE FIND THAT THE TPO HAD NOT DEALT WITH THE CORE ISSUE I.E. REJECTING/ACCEPTING THE COMPARABLES SELECTIVELY.ALL THE COMPARABLES SUBMITT ED BY THE ASSESSEE BEFORE HIM WERE ENGAGED IN THE JOB WORK SEGMENT.HE HAD SIM PLY STATED THAT FOUR OF THE COMPARABLES WERE FUNCTIONALLY DIFFERENT.BUT,HE HAS NOT BROUGHT ON RECORD AS TO HOW THEY WERE FUNCTIONALLY NOT SIMILIAR.THE CHART A PPEARING IN HIS ORDER CLEARLY REVEAL THAT ALL THE SIX COMPARABLES WERE IN THE SAM E SEGMENT, THEREFORE PICKING UP ONLY TWO COMPARABLES WAS HIGHLY OBJECTIONABLE.TH E DRP HAD SPECIFICALLY 1035/M/15-ROLLS ROYCE MARINE-(10-11) 7 ASKED HIM TO JUSTIFY THE SELECTIVE ACCEPTANCE/REJEC TION OF THE COMPARABLES. INSTEAD OF CARRYING OUT THE DIRECTION OF THE DRP,HE QUESTIONED THE AUTHORITY OF THE PANEL IN ACCEPTING THE NEW COMPARABLES.IN OUR,O PINION THE STAND TAKEN BY TPO IS NOT SUPPORTED BY PROVISIONS OF ANY OF THE SE CTIONS OF THE ACT.PRINCIPLES OF NATURAL JUSTICE DEMAND THAT BEFORE USING NEW MAT ERIAL THE AFFECTED PARTY SHOULD BE GIVEN AN OPPORTUNITY TO REBUT SUCH MATERI AL.THE DRP HAD GIVEN A REASONABLE OPPORTUNITY TO HIM.BUT,INSTEAD OF AVAILI NG AND MAKING A POSITIVE CONTRIBUTION HE STUCK TO THE TWO COMPARABLES THAT W ERE ENDORSED BY HIM FOR COMPUTING ALP. IF WE TAKE INTO CONSIDERATION THE BEHAVIOR OF THE T PO, IT BECOMES CLEAR THAT HE WAS NOT FOLLOWING THE MANDATE OF CHAPTER-X OF THE A CT.IT APPEARS THAT HE HAD DECIDED TO MAKE ADJUSTMENT AT ANY COST.THEREFORE,HE SIDELINED THE BASIC ISSUE RAISED BY DRP AND DID NOT OFFER ANY COMMENT OF NEW COMPARABLES. THEREFORE, WE HAVE NO HESITATION TO HOLD THAT DRP HAD RIGHTLY AND JUSTIFIABLY HELD THAT THE APPROACH OF THE TPO WAS ILLOGICAL AND INCONSISTE NT.AS FAR AS ADMISSION OF ADDITIONAL EVIDENCE/NEW EVIDENCE IS CONCERNED WE AR E OF THE OPINION THAT THE DRP BEING AN APPELLATE AUTHORITY HAS ALL THE POWERS AS THAT OF THE CIT(A). THE PROCEEDINGS BEFORE THE DRP IS AN EXTENSION OF THE A SSESSMENT PROCEEDINGS AND ADMITTING ADDITIONAL EVIDENCE IS PART OF THE POWERS OF THE DRP. WE FIND THAT IN THE CASE OF LAHMEYER HOLDING GMBH (W.P.)C-7417/2012 AND CM NO.1879/ 2012 )THE HONBLE DELHI HIGH COURT HAS HELD AS UNDE R :- IT MUST BE NOTED THAT THE DRP PROCEDURE IS PART OF ASSESSMENT PROCEEDINGS QUERIES RAISED AND ANSWERED DURING DRP PROCEEDINGS WOULD STAND IN THE SAME FOOTING AS QUERIES RAISED AND ANSWERED IN THE COURS E OF AN ASSESSMENT PROCEEDINGS BEFORE AN AO WHERE THE DRP PROCEDURE IS NOT APPLICA BLE IT WOULD HAVE BEEN BETTER IF THE TPO HAD DEALT THE ISSUE RAISED BY THE DRP RATHER THAN CHALLENGING THE JURISDICTION OF THE DRP .IT IS A FACT THAT THE TWO COMPARABLE COMPANIES WERE NOT DEALING IN THE SAME P RODUCT AS THAT OF THE ASSESSEE.THEREFORE, THEY WERE AT PAR WITH THE OTHER FOUR COMPARABLES.IN THE 1035/M/15-ROLLS ROYCE MARINE-(10-11) 8 TNMM WHAT IS TO BE SEEN IS FUNCTIONAL COMPARABILITY AND NOT THE PRODUCT COMPARABILITY.IF THE TPO WANTED TO EMPHASIS ON PROD UCT COMPARABILITY,THEN HE SHOULD NOT HAVE ACCEPTED THE REMAINING TWO COMPARAB LES.CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT THE ORDER OF THE D RP DOES NOT SUFFER FROM ANY INFIRMITY.FIRST EFFECTIVE GROUND (GOA 1 & 2 ) IS DE CIDE AGAINST THE AO. 7. NEXT GROUND OF APPEAL IS ABOUT ALLOWING THE CLAIM OF BAD DEBTS.DURING THE TP PROCEEDINGS,THE TPO OBSERVED THAT THE ASSESSEE HAD WRITTEN OFF/WRITTEN BACK CERTAIN AMOUNTS IN RESPECT OF ITS OVERSEAS AE,THAT IT HAD CLAIMED THAT SAME WERE NO LONGER RECEIVABLE/PAYABLE.HE HELD THAT ASSESSEE HAD NOT FURNISHED ANY EVIDENCE IN THAT REGARD,THAT IT WAS ALSO NOT CLEAR AS TO WHAT WAS THE NATURE OF BAD DEBTS,THAT THE TP REPORT AND THE ACCOUNTS OF THE AS SESSEE DID NOT INDICATE ANY SUBSTANTIAL REASON FOR WRITING OFF/WRITING BACK THE AMOUNTS IN QUESTION, THAT THE BAD DEBTS COULD NOT BE ACCEPTED AS ARMS LENGTH.FIN ALLY HE MADE AN ADJUSTMENT OF RS.13.00 LAKHS. 7.1 AGGRIEVED BY THE ORDER OF THE TPO/AO THE ASSESSEE F IELD OBJECTIONS BEFORE THE DRP.BEFORE IT THE ASSESSEE ARGUED THAT BALANCE WRITTEN BACK FORMED PART OF THE TOTAL INCOME OF THE ASSESSEE THAT HAD ARISEN IN THE NORMAL COURSE OF BUSINESS.THE DRP OBSERVED THAT THE ONLY REASON GIVE N BY THE TPO FOR MAKING THE ADJUSTMENT WAS THAT ASSESSEE HAD NOT JUSTIFIED THE WRITING OFF, THAT ASSESSEE HAD WRITTEN BACK ONLY A SUM OF RS.39,056/-, THAT IT HAD WRITTEN BACK THE BALANCE SUM OF RS.12.49 LAKHS IN THE BOOKS OF ACCOUNT,THAT THE TPO HAD NOT GIVEN ANY COMMENT IN RESPECT OF THE ITEMS THAT WERE WRITTEN B ACK, THAT THE ASSESSEE HAD ALREADY OFFERED THE AMOUNT OF RS.12,49,939/- AS PAR T OF ITS INCOME, THAT THE ADJUSTMENT MADE BY THE TPO RESULTED IN TAXING THE S AME AMOUNT TWICE.FINALLY THE DRP DELETED THE ADDITION EXCEPT FOR RS.39,056/- . 1035/M/15-ROLLS ROYCE MARINE-(10-11) 9 7.2. BEFORE US,THE DR STATED THAT THE MATTER COULD TO BE DECIDED ON MERITS.THE AR SUPPORTED THE ORDER OF THE DRP.WITHOUT PREJUDICE ,IT WAS STATED THAT WORKING CAPITAL ADJUSTMENT SHOULD BE GRANTED TO THE ASSESSE E OF RS.39.056/-. 7.3. IT IS FOUND THAT FOLLOWING AMOUNTS WERE WRITTEN OFF /WRITTEN BACK BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION: SN. NAME OF THE AE DESCRIPTION AMOUNT 1. ROLLS-ROYCE MARINE AS DEP. PROPULSION BALANCE WR ITTEN BACK 19,188 2. ROLLS-ROYCE MARINE MIDDLE EAST BALANCE WRITTEN B ACK 3,27,177 3. ROLLS-ROYCE MARINE AS DEP. ENGINES BALANCE WRITT EN BACK 4,02,952 4. ROLLS-ROYCE OY AB-FINLAND BALANCE WRITTEN BACK 2,60,935 5. ROLLS-ROYCE MARINE AS DEP DECK MACHINERY BALANCE WRITTEN BACK 2,30,687 TOTAL OF BALANCE WRITTEN BACK 12,40,939 6. RR NAVAL MARINE BALANCE WRITTEN OFF 39,056 TOTAL 39,056 WE FIND THAT THE ASSESSEE HAD WRITTEN OFF RS.39,056 /- ONLY IN THE BOOKS OF ACCOUNTS DURING THE YEAR UNDER CONSIDERATION ,WHERE AS AN AMOUNT OF 12.40 LAKHS WAS WRITTEN BACK.IT APPEARS THAT THE TPO WITHOUT UN DERSTANDING THE DIFFERENCE BETWEEN THE WRITING BACK OF BALANCE AND WRITING OFF THE BALANCE HAD MADE THE ADJUSTMENT.THE BALANCE WRITTEN BACK WAS OFFERED FOR TAXATION BY THE ASSESSEE. THEREFORE,WE FAIL TO UNDERSTAND THAT HOW THE TPO P ROPOSED THE ADJUSTMENT.IN OUR OPINION,THE DRP HAD RIGHTLY DELETED THE ADDITIO N BUT WE ARE SURPRISED TO NOTICE THAT IN SUCH A STRAIGHT CASE THE DEPARTMENT HAS DECIDED TO FILE AN APPEAL. IT SHOWS LACK OF JUDICIAL DISCRETION ON PART OF THE OF FICERS WHO HAVE RECOMMENDED/ APPROVED THE APPEAL.SUCH FRIVOLOUS APPEAL NOT ONLY WASTE THE TIME OF THE TRIBUNAL,BUT ALSO INCREASE THE BURDEN OF THE DRS UN NECESSARILY.IN OUR OPINION, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF DRP . SO CONFIRMING ITS ORDER WE DECIDE SECOND EFFECTIVE GROUND AGAINST THE AO. 1035/M/15-ROLLS ROYCE MARINE-(10-11) 10 AS FAR AS THE REQUEST OF THE ASSESSEE TO CONSIDER R S.39,096/- AS WORKING CAPITAL ADJUSTMENT,WE WOULD LIKE TO STATE THAT SAME COULD B E GRANTED AS IT HAS ALREADY SUFFERED TAXATION. AS A RESULT,APPEAL FILE D BY THE AO STANDS DISMISSED. ORDER PRONOUNCED IN THE OP EN COURT ON 27 TH MAY, 2016. 27 , 2016 SD/- SD/ - ( . . /C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 27 .05.2016. JV.SR.PS. # $ / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / !'#$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ ' !' ( , 4. THE CONCERNED CIT / ' ( 5. DR K BENCH, ITAT, MUMBAI / %* , ' , . ! . . 6. GUARD FILE/ - &' % //TRUE COPY// / BY ORDER, ' / ' DY./ASST. REGISTRAR !' !* , /ITAT, MUMBAI.