The ACIT,(OSD)Circle-8, Ahmedabad V. M/s. Schutz Dishman Biotech Pvt.Ltd., Ahmedabad

ITA 1229/AHD/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8144 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 20-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 06-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI
• Keywords: Related party transaction; Business income; Transfer pricing; International transaction

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA.NO.954/AHD/2012 / ASSTT. YEAR: 2007-2008 SCHUTZ DISHMAN BIOTECH P.LTD. BHADRARAJ CHAMBERS NR. SWASTIK CROSS ROADS NAVRANGPURA, AHMEDABAD. PAN : AACCS 0988 C. VS. DCIT(OSD) CIR.8, AHMEDABAD. ./ ITA.NO.1229/AHD/2012 / ASSTT. YEAR: 2007-2008 DCIT(OSD) CIR.8, AHMEDABAD. VS. SCHUTZ DISHMAN BIOTECH P.LTD. BHADRARAJ CHAMBERS NR. SWASTIK CROSS ROADS NAVRANGPURA, AHMEDABAD. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI T.P. HEMANI, AND SHRI PARIMAL PARMAR, AR REVENUE BY : SHRI VASUNDHARA UPMANYU, CIT-DR SHRI R.P. MAURYA, SR.DR / DATE OF HEARING : 22/03/2018 / DATE OF PRONOUNCEMENT: 05 /06/2018 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: REVENUE AND ASSESSEE ARE IN CROSS-APPEALS AGAINST O RDER OF THE LD.CIT(A) DATED 19.3.2012 PASSED FOR THE ASSESSMENT YEAR 2007-08. ITA NO.954 AND 1229/AHD/2012 2 2. ASSESSEE HAS TAKEN TEN GROUNDS OF APPEAL, WHEREA S REVENUE HAS TAKEN NINE GROUNDS OF APPEAL. HOWEVER, ALL THESE GROUNDS ARE ARGUMENTATIVE AND DESCRIPTIVE IN NATURE. SOLE ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE IS INTER-CONNECTED WITH GROUND NO.1 AND 2 OF THE REVEN UES APPEAL. ISSUE AGITATED IN ALL THESE GROUNDS RELATES TO DETERMINAT ION OF ARMS LENGTH PRICE (ALP) OF INTERNATIONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES (AE). IN OTHER WORDS, WHETHER ADJUST MENT RECOMMENDED BY THE TPO IS TO BE MADE IN THE VALUE OF INTERNATIONAL TRA NSACTIONS WITH THE AE OR IT IS TO BE CONFIRMED AT THE AMOUNT CIT(A) UPHELD IT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF BULK DRUGS. IT HAS FILED IS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL LOSS AT RS.2,15,99,577/-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THA T THE ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTION WITH ITS AE. THEREFORE, HE MADE REFERENCE UNDER SECTION 92CA(1) OF THE INCOME TAX ACT TO THE TPO FO R DETERMINING ALP OF INTERNATIONAL TRANSACTION. THE LD.TPO HAD NOTED TH E FOLLOWING INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE WITH ITS AE : SR. NO. NAME OF AE NATURE OF TRANSACTIONS VALUE OF TRANSACTION (IN) 1. AMATI PACKING MANUFACTURERS GMBH, GERMANY PURCHASE OF RAW MATERIAL 2,64,77,444/- 2. SCHUTZ & CO. (GMBH & CO.), GERMANY SALE OF VARIOUS PRODUCTS 9,63,10,736 TOTAL 12,27,88,180 4. THE LD.TPO DID NOT MAKE ANY ADJUSTMENT SO FAR AS TRANSACTION WITH AMATI PACKAGING MANUFACTURING (GERMANY) IS CONCERNE D. HE HAS RECOMMENDED ADJUSTMENT QUA SALE OF VARIOUS PRODUCTS. IN ORDER TO DETERMINE ITA NO.954 AND 1229/AHD/2012 3 ALP OF INTERNATIONAL TRANSACTION, THE ASSESSEE HAS ADOPTED TNMM (TRANSACTIONAL NET MARGIN METHOD) WHICH HAS BEEN AC CEPTED BY THE TPO. IN OTHER WORDS, HE DID NOT DISPUTE SELECTION OF APPROP RIATE METHOD FOR DETERMINING INTERNATIONAL TRANSACTION. HENCE, TNMM HAS BEEN SELECTED AS AN APPROPRIATE METHOD. SIMILARLY, THE ASSESSEE HAS SE LECTED SCHUTZ DISHMAN BIOTECH LTD. AS TESTED PARTY KEEPING IN VIEW THE CO MPLEXITY OF FUNCTIONS PERFORMED, AVAILABILITY OF COMPARABLE DATA AND REQU IRED MINIMUM ADJUSTMENT. TREATMENT GIVEN IN THE TP DOCUMENTS BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE LD.TPO. THE ASSESSEE IN ITS TP DOCUMENTATIO N HAS SELECTED FOUR COMPARABLES WHICH WERE NOT ACCEPTED BY THE LD.TPO B ECAUSE THE LD.TPO WAS OF VIEW THAT COMPARABLE SELECTED BY THE ASSESSEE WE RE ENGAGED IN MANUFACTURING OF FORMULATIONS I.E. TABLETS, CAPSULE S, SYRUPS ETC. WHEREAS THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF BUL K DRUGS. THESE FUNCTIONS PERFORMED BY THE COMPARABLES WERE NOT SIMILAR TO TH AT OF ASSESSEE. HENCE, COMPARABLE SELECTED BY THE ASSESSEE HAVE BEEN REJEC TED. THE LD.TPO THEREAFTER SELECTED FOUR MORE COMPARABLES WHO WERE ENGAGED IN BULK DRUG MANUFACTURING. IT IS ALSO PERTINENT TO NOTE THAT T HE LD.TPO HAS ACCEPTED SELECTION OF PROFIT LEVEL INDICATOR (PLI) ADOPTED BY THE ASSESSEE I.E. OPERATIVE PROFIT DIVIDED BY OPERATIVE COST (OP/OC). WE WILL BE GOING TO TAKE NOTE OF THE DETAILS WITH RESPECT TO ALL THESE FOUR COMPARABLES IN SUBSEQUENT PART OF THIS ORDER. ON THE BASIS OF PLI OF FOUR CO MPARABLES SELECTED BY THE TPO, HE RECOMMENDED AN UPWARD ADJUSTMENT OF RS.4,10 ,40,877/- IN THE VALUE OF INTERNATIONAL TRANSACTION UNDERTAKEN BY THE ASSE SSEE. 5. THE RECOMMENDATION OF THE LD.TPO HAS BEEN GIVEN EFFECT IN THE ASSESSMENT ORDER AND AN ADDITION OF RS.4,10,40,877/ - HAS BEEN MADE TO THE TOTAL INCOME OF THE ASSESSEE. DISSATISFIED WITH TH E ADDITION, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THELD.CIT(A). THE ASSESSEE MAINLY IMPUGNED ORDER OF THE LD.TPO ON THE GROUND THAT TUR NOVER OF THE COMPARABLES ITA NO.954 AND 1229/AHD/2012 4 EITHER VERY LOW OR IT IS VERY HIGH. THEREFORE, THE LD.TPO OUGHT TO HAVE APPLIED A TURNOVER FILTER BEFORE SELECTING COMPARABLES. TH E ASSESSEE FURTHER CONTENDED THAT WELCURE DRUG & PHARMACEUTICALS LTD., ONE OF THE COMPARABLES SELECTED BY THE ASSESSEE, WHICH IS ENGAGED IN MANUF ACTURING OF BULK DRUGS. SIMILARLY, ISHITA DRUGS LTD. SELECTED BY THE ASSESS EE WAS ALSO ENGAGED IN BULK DRUG MANUFACTURE. THUS, THESE TWO COMPARABLES HAVE WRONGLY BEEN EXCLUDED BY THE LD.TPO. THE LD.CIT(A) HAS GONE THROUGH THE CONTENTION OF THE ASSESSEE AND OBSERVED THAT TURNOVER FILTER IS ONE O F THE ESSENTIAL FILTERS WHICH OUGHT TO HAVE BEEN APPLIED BY THE TPO. THE LD.CIT( A) HAS OBSERVED THAT COMPANIES HAVING SALES IN THE RANGE OF RS.8 CRORES TO 23 CRORES ARE TO BE TAKEN FOR COMPARISON. THIS EXERCISE HAS ELIMINATED THREE COMPARABLES OUT OF FOUR SELECTED BY THE TPO. ONLY COMPARABLE LEFT IS GENNE X LABORATORIES LTD. ON THE BASIS OF PLI OF THIS COMPANY, THE LD.CIT(A) UPH ELD ADJUSTMENT REQUIRED TO BE MADE IN THE VALUE OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. THIS EXERCISE HAS REDUCED THE ADJUSTMENT IN THE VAL UE OF INTERNATIONAL TRANSACTIONS TO RS.2,83,07,144/- AS AGAINST THE ADJ USTMENT RECOMMENDED BY THE TPO AT RS.4,10,40,877/-. REVENUE IS IMPUGNING THE REDUCTION OF SUCH ADJUSTMENT IN ITS APPEAL, WHEREAS THE ASSESSEE IS I MPUGNING RETENTION OF ADJUSTMENT IN THE VALUE OF INTERNATIONAL TRANSACTIO NS. 6. WHILE IMPUGNING THE ORDER OF THE LD.CIT(A), THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT BASICALLY, STAND TAKEN BY T HE ASSESSEE IN TPO DOCUMENTATION HAS NOT BEEN DISPUTED BY THE LD.REVEN UE AUTHORITIES I.E. TP HAS ACCEPTED TNMM AS MOST APPROPRIATE METHOD. HE HAS A LSO ACCEPTED SELECTION OF THE ASSESSEE AS TESTED PARTIES AND HE HAS ALSO A CCEPTED WORKING OF PLI ON THE BASIS OF OPERATING PROFIT DIVIDED BY OPERATING COST (OP/OC). THE ONLY DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE IS, WH ETHER TURNOVER FILTER IS TO BE APPLIED NOR NOT. THE ASSESSEE IS NOT DISPUTING APPLICATION OF TURNOVER FILTER, RATHER SUPPORTING THE ORDER OF THE LD.CIT(A ). HE FURTHER CONTENDED THAT ITA NO.954 AND 1229/AHD/2012 5 DURING THE COURSE OF HEARING BEFORE THE LD.CIT(A), THE ASSESSEE HAS CONTENDED THAT WELCURE DRUG & PHARMACEUTICALS LTD. IS ENGAGED IN THE BUSINESS OF BULK MANUFACTURING OF DRUGS, AND THEREFORE IT IS COMPARA BLE. ITS SALE IS ALSO RS.18.79 CRORES WITHIN THE RANGE OF TURNOVER FILTER . THUS, ACCORDING TO THE LD.COUNSEL FOR THE ASSESSEE, THE LD.CIT(A) OUGHT TO HAVE INCLUDED THIS COMPARABLE BEFORE DETERMINING ALP OF INTERNATIONAL TRANSACTIONS. IN HIS NEXT FOLD OF CONTENTIONS, HE SUBMITTED THAT SINCE THE AS SESSEE DOES NOT HAVE ANY MARKET RISK AND HENCE NORMAL PROFIT MARGIN ATTRIBUT ABLE TO MARKET/DISTRIBUTION FUNCTION, RANGING FROM 1.5% TO 3% ARE NOT EARNED BY THE ASSESSEE AND ADEQUATE ADJUSTMENT OUGHT TO BE MADE. HE FURTHER C ONTENDED THAT THE ASSESSEE HAS BEEN SUPPLYING BULK DRAGS UNDER A LONG TERM SUPPLY AGREEMENT IN SUBSTANTIAL QUANTITIES, WHERE THERE WOULD BE ATLEAS T 10% TO 15% QUANTITATIVE DISCOUNT ON ACCOUNT OF CERTAINTY OF SUPPLY AND CERT AINTY OF CASH FLOW VIS--VIS THE ORDERS FOR SPECIFIC SIMILAR VOLUME OF DISPATCH. THUS, HE CONTENDED THAT ADJUSTMENT ON THAT ACCOUNT OUGHT TO BE MADE. APART FROM THE ABOVE, HE WORKED OUT DETAILS EXHIBITING THAT NO ADJUSTMENT WO ULD BE REQUIRED, IF WELCURE DRUG & PHARMACEUTICALS LTD. HAS BEEN TAKEN INTO CONSIDERATION. 7. ON THE OTHER HAND, THE LD.CIT-DR HAS SUBMITTED T HAT SHRI JIGAR RAVAL, DCIT, TPO-I, AHMEDABAD HAS FILED WRITTEN SUBMISSION S VIDE LETTER DATED 7.7.2015 WHICH IS AVAILABLE ON RECORD. SHE RELIED UPON THIS LETTER. SHE CONTENDED THAT ONLY ISSUE ON BEHALF OF THE REVENUE INVOLVED IN THIS APPEAL IS WITH REGARD TO THE APPLICATION OF TURNOVER FILTER. IF THAT FILTER HAS NOT BEEN ALLOWED, THEN THE COMPARABLE SELECTED BY THE TPO AR E NOT BEING DISPUTED BY THE ASSESSEE, OTHERWISE ON MERIT. ON THE STRENGTH OF ORDER OF THE ITAT, IN THE CASE OF SYMANTECH SOFTWARE SOLUTIONS P.LD. 46 SOT 4 8(MUM), SHE CONTENDED THAT ASSESSEE SHOULD DEMONSTRATE AS TO HO W THE DIFFERENCE IN THE TURNOVER HAS INFLUENCED THE RESULT OF COMPARABLE. LOW TURNOVER DOES NOT NECESSARILY MEAN HIGH MARGIN IN COMPETITIVE MARKET CONDITION. THEREFORE, ITA NO.954 AND 1229/AHD/2012 6 UNLESS AND UNTIL IT HAS BEEN BROUGHT IN THE RECORD BY THE ASSESSEE THAT TURNOVER OF SUCH COMPARABLE HAS UNDUE INFLUENCE IN THE MARGI N, IT SHOULD NOT BE APPLIED IN ORDER TO EXCLUDE THE COMPARABLES. 8. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD. AS OBSERVED EARLIER, THE REVENUE AND THE A SSESSEE HAVE NOT DISPUTED SELECTION OF APPROPRIATE METHOD I.E. TNMM; SELECTI ON OF TESTED PARTY I.E. ASSESSEE; SELECTION OF PROFIT LEVEL INDICATOR I.E. OPERATIVE PROFIT/OPERATIVE COST. THEY ARE ONLY DISPUTING ON SELECTION OF COMPARABLES . THE ASSESSEE HAS SELECTED FOUR COMPARABLES VIZ. ADVIK LABORATORIES LTD., GUJARAT TERCE LABORATORIES LTD., ZYDEN GENTC LD., AND WELCURE DRU G & PHARMACEUTICALS LTD. ALL THESE COMPARABLES WERE NOT ACCEPTED BY TH E TPO BECAUSE ACCORDING TO HIM, THEY WERE NOT ENGAGED IN MANUFACTURING BULK DRUG, RATHER THEY ARE MANUFACTURING FORMULATIONS I.E. TABLETS, CAPSULES, SYRUPS ETC. THUS, THE LD.TPO SELECTED COMPARABLES WHICH WERE ENGAGED IN M ANUFACTURING OF BULK DRUGS. THE COMPARABLES SELECTED BY THE TPO AND WORK ING OF THEIR PLI READS AS UNDER: NAME OF COMPANY ECONOMIC ACTIVITY SALES CR. EXPORT CR. EXPORT % OF THE TOTAL SALES ADVIK LABORATORIES LTD. DRUG FORMULATIONS 9.74 0.0 0% GUJARAT TERCE LABORATORIES LTD. DRUG FORMULATIONS 11.22 0.04 0.36% ZYDEN GENTEC LTD. DRUG FORMULATIONS 7.12 1.2 16.85% WELCURE DRUG & PHARMACEUTICAL LTD. DRUG FORMULATIONS 18.79 0.07 0.37% 9. ON THE BASIS OF ABOVE PLI, THE LD.TPO HAS WORKED OUT ADJUSTMENT REQUIRED TO BE MADE IN THE VALUE OF INTERNATIONAL T RANSACTIONS ENTERED BY THE ASSESSEE WITH ITS AE. THE FIRST QUESTION FOR OUR D ETERMINATION IS WHETHER TURNOVER FILTER IS TO BE APPLIED OR NOT. ACCORDING TO THE LD.DR, THIS FILTER OUGHT ITA NO.954 AND 1229/AHD/2012 7 NOT TO BE APPLIED. SHE MADE REFERENCE TO THE DECIS ION OF ITAT, MUMBAI. HOWEVER, WE ARE OF THE VIEW THAT IN LARGE NUMBER OF DECISIONS, IT HAS BEEN HELD THAT TURNOVER FILTER IS ONE OF THE ESSENTIAL F ILTER IN ORDER TO SELECT COMPARABLES WHEN ACTED IN SAME ATMOSPHERE. IT IS P ERTINENT TO OBSERVE THAT WHILE CONDUCTING TRANSFER PRICE ANALYSIS AN EFFORT IS BEING MADE TO COMPARE RELATED PARTY TRANSACTIONS UNDERTAKEN BY THE ASSESS EE WITH THE UNCONTROLLED TRANSACTIONS UNDERTAKEN BY THE COMPARABLE, AND THUS ARRIVE AT A CONCLUSION AS TO WHETHER TRANSACTION BENCH MARK IS AT ARMS LENGT H OR NOT. FOR EXAMPLE, A CHOSEN COMPANY, THOUGH FUNCTIONALLY COMPARABLE HAS ENTERED INTERNATIONAL TRANSACTIONS BEYOND A PERCENTAGE WITH RELATED PARTI ES, IT IS QUITE POSSIBLE THAT ITS OVERALL PROFIT MAY HAVE DISTORTED DUE TO SUCH T RANSACTION RENDERING IT AS UN- COMPARABLE. THERE ARE SO MANY OTHER CIRCUMSTANCES WHICH ARE REQUIRED TO BE EXAMINED UNDER FAR ANALYSIS, AND DUE TO THIS, ADJUD ICATOR IS REQUIRED TO APPLY APPROPRIATE FILTER IN ORDER TO WORK OUT COMPA RABLES WHICH HAVE NOT UNDER ANY INFLUENCE OF THE RELATED PARTY TRANSACTIO NS. HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PENTAIR WATER INDIA (P .) LTD., 381 ITR 216 CONCLUDED THAT TURNOVER IS OBVIOUSLY A RELEVANT FAC TOR TO BE CONSIDERED FOR COMPARABILITY. HONBLE HIGH COURT HAS RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AGNITY INDI A TECHNOLOGIES (P.) LTD., (2013) 36 TAXMANN.COM 289. THUS, THERE ARE CONFLI CTING DECISIONS IN FAVOUR OR AGAINST THE APPLICATION OF TURNOVER FILTER. HOW EVER, THE LD.REVENUE AUTHORITIES HAVE NOT BROUGHT TO OUR NOTICE OF ANY J UDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH PROHIBITS APPLICATI ON OF TURNOVER FILTER. THEREFORE, WE ARE OF THE VIEW THAT THE LD.CIT(A) HA S RIGHTLY MADE AN ANALYSIS THAT SMALLER COMPANIES HAVING TURNOVER OF RS.3 CROR ES COULD NOT BE CONSIDERED AS COMPARABLE WITH THE ASSESSEE WHO HAS TURNOVER OF RS.15.84 CRORES. SIMILARLY, THE COMPANY WHO HAS TURNOVER OF MORE THAN RS.30 CRORES COULD NOT BE COMPARED WITH THE ASSESSEE. THUS, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) ON THIS ASPECT, AND IF W E UPHOLD THE TURNOVER FILTER ITA NO.954 AND 1229/AHD/2012 8 THEN THE GROUND OF APPEAL RAISED BY THE REVENUE IS REQUIRED TO BE REJECTED. ACCORDINGLY, WE REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 10. SO FAR AS ADJUSTMENTS CONFIRMED BY THE LD.CIT(A ) IS CONCERNED, WE FIND THAT THE ASSESSEE HAS DEMONSTRATED THAT WELCURE DRU G & PHARMACEUTICALS LTD. WAS ENGAGED IN THE MANUFACTURING OF BULK DRUGS. HE NCE, IT WAS A COMPARABLE. IT HAS BEEN EXCLUDED BY THE TPO AS WELL AS NO REASO N HAS BEEN ASSIGNED BY THE LD.CIT(A) IN THE IMPUGNED ORDER. WORKING MADE BY THE LD.COUNSEL FOR THE ASSESSEE IN THE SYNOPSIS READS AS UNDER: PARTICULARS GENNEX WELCURE TOTAL SALES 10.98 18.79 29.77 OPERATING COST 9.70 21.21 30.91 OPERATING PROFIT 1.28 -2.42 -1.14 OP/OC (%) 13.20 -11.41 -3.69 11. SALES OF WELCURE DRUG & PHARMACEUTICALS LTD. AR E LESS THAN THE TURNOVER FILTER OF RS.23 CRORES. THUS, IT FALLS IN THE CRITERIA OF CONSIDERATION AND OUGHT TO BE INCLUDED IN THE LIST OF COMPARABLE. ONCE IT IS INCLUDED IN THE LIST OF COMPARABLE, THEN THE PROFIT LEVEL INDICATOR WOULD BE (-) 3.69% AND NO ADJUSTMENT WOULD BE REQUIRED IN THE VALUE OF INTERN ATIONAL TRANSACTION AS PER SECTION 92(3) OF THE ACT, BECAUSE IT WILL GO TO RED UCE THE VALUE OF THE INTERNATIONAL TRANSACTION AS DECLARED BY THE ASSESS EE. CONSIDERING THIS ASPECT, WE ALLOW APPEAL OF THE ASSESSEE AND DELETE ADJUSTME NT MADE IN THE VALUE OF INTERNATIONAL TRANSACTIONS. 12. IN THE REVENUES APPEAL, NEXT ISSUE AGITATED BY THE LD.REVENUE AUTHORITIES IS THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITIONS OF RS.1,43,79,263/- AND RS.62,63,591/- WH ICH WAS ADDED BY THE AO ON ACCOUNT OF INFLATION OF PURCHASE OF RAW-MATERIAL . ITA NO.954 AND 1229/AHD/2012 9 13. BRIEF FACTS IN THIS REGARD ARE THAT THE LD.AO N OTICED THAT THERE WAS A VARIATION IN ACTUAL CONSUMPTION OF RAW-MATERIAL AND STANDARD CONSUMPTION OF MATERIAL. TO THE SHOW CAUSE, ASSESSEE EXPLAINED RE ASONS FOR THE VARIATIONS IN THE CONSUMPTION OF THE RAW MATERIAL AS ALSO EXTENT OF AND HOW THE VARIATIONS ARISEN. HOWEVER, THE LD.AO DID NOT ACCEPT THE EXPL ANATION OF THE ASSESSEE AND BASING HIS EARLIER ORDER FOR THE ASSESSMENT YEAR 20 02-03 TO 2006-07, AN ADDITION OF RS.62,63,591/- ON ACCOUNT OF ITEMS CONS UMED LESS THAN THE STANDARD NORMS AND FURTHER ADDITION OF RS.1,43,79,2 63/- ON ACCOUNT OF ITEMS CONSUMED MORE THAN THE STANDARD NORMS WERE MADE. THESE TWO ADDITIONS WERE CHALLENGED BEFORE THE LD.FIRST APPELLATE AUTHO RITY, WHO FOLLOWING HIS ORDER OF THE ASSESSMENT YEAR 2006-07 WHILE FOLLOWIN G THE ORDER OF THE TRIBUNAL IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 DELETED THE IMPUGNED ADDITIONS. 14. AT THE OUTSET, LD.COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD COPY OF THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSMENT YEAR 2005-06 AN 2006-07 IN ITA NO.2060/AHD/2009 AND 3141/AHD/2011 WHEREIN SIMI LAR ADDITION HAS BEEN DELETED. THE LD.FIRST APPELLATE AUTHORITY HAS FOLLOWED THE ORDER OF THE TRIBUNAL PASSED IN THE ASSESSMENT YEARS 2002-03, 20 03-04 AND 2004-05. THE RELEVANT OBSERVATION OF THE LD.CIT(A) READS AS UNDE R: 4.3 DECISION: I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND T HE SUBMISSIONS GIVEN BY THE APPELLANT. THE ADDITION WAS MADE BY TH E A. O. BY FOLLOWING THE ORDER OF THE A. O. FOR A. Y. 2002-03. THE SIMILAR ADDITION WAS ALSO MADE BY THE A. O. FOR A. Y. 2006-07 WHILE DECIDING OF THE APPELLANT FOR THAT YEAR. THE ADDITION HAVE BEEN DEL ETED BY ME BY FOLLOWING THE ORDER OF THE ITAT, AHMEDABAD IN THE C ASE OF THE APPELLANT FOR A. YS. 2002-03, 2003-04 & 2004-05. AC CORDINGLY, THE ADDITION MADE BY THE A. O. IN THIS YEAR IS ALSO DIR ECTED TO BE DELETED. THEREFORE, THE ADDITIONS OF RS.1 ,43,79,2637-ON ACC OUNT OF INFLATION OF PURCHASE OF RAW MATERIALS AND RS.62,63,591/- U/S. 6 9 OF THE ACT IS ITA NO.954 AND 1229/AHD/2012 10 DIRECTED TO BE DELETED. THE GROUNDS OF APPEAL ARE A CCORDINGLY ALLOWED. 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE T HROUGH THE RECORD. WE FIND THAT THE TRIBUNAL HAS DISCUSSED THIS ISSUE FROM PARA 4 TO 4.1 IN THE ASSESSMENT YEAR 2005-06 AND IN PARA 9 IN ASSESSMENT YEAR 2006-07. BASICALLY THE TRIBUNAL HAS FOLLOWED ORDER PASSED IN THE ASSES SMENT YEAR 2003-04 AND 2005-06 ON THIS ISSUE AND CONFIRMED THE ORDER OF TH E LD.CIT(A). CONSIDERING THE SIMILARITY OF THE ISSUE, WE DO NOT FIND ANY ERR OR IN THE ORDER OF THE LD.CIT(A). THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED, AND WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 5 TH JUNE, 2018 AT AHMEDABAD. SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 05/06/2018