M/s Toyota Kirloskar Motor (P) Ltd., Bangalore V. ACIT, Bangalore

ITA 1595/BANG/2012

• Counselvise Citation: 159521114 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO I
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Transfer pricing; International transaction; Commercial expediency
• Section: 92B; 234B; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER IT(TP)A NO.1595(BANG) 2012 (ASSESSMENT YEAR : 2008-09) M/S TOYOTA KIRLOSKAR MOTOR (P)LTD., PLOT NO.1, BIDAI IND.AREA, RAMNAGARA DISTRICT, BANGALORE APPELLANT PAN NO.AAACT5415B VS THE ASST. COMMISSIONER OF INCOME-TAX (LTU) BANGALORE RESPONDENT ASSESSEE BY : SHRI PADAM CHAND KHINCHA, CA REVENUE BY : SHRI C.H.SUNDAR RAO, CIT-DR-I DATE OF HEARING : 05-08-2014 DATE OF PRONOUNCEMENT : 1 4-08-2014 O R D E R PER SHRI ABRAHAM P GEORGE, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST AN ORDER DATED 16-10-2012 OF ASST.CIT, LTU, BANGALORE PURSUANT TO THE DIRECTIONS OF DRP IN PROCEEDINGS DATED 17-08-2012. 2. LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT IF GROUNDS 7.8 TO7.14 ARE DECIDED IN FAVOUR OF THE ASS ESSEE, THEN THE OTHER GROUNDS RELATING TO TRANSFER PRICING NEED NOT BE GO NE INTO AND COULD BE LEFT FOR ADJUDICATION IN A PROCEEDING THAT COULD ARISE I N ANOTHER ASSESSMENT ITA NO.1595(BANG)2012 2 YEAR WHEN SUCH GROUNDS ARE RELEVANT. GROUNDS 7.8 T O 7.12, WHICH IS PRESSED BY THE LEARNED AR, IS REPRODUCED HEREUNDER; 7.8 NOT APPRECIATING THAT THE APPELLANT HAD ADOPT ED THE TNMM AT THE ENTITY LEVEL, IN WHICH PROCESS, THE ROYALTY PAYMENT WAS CONSIDERED AS CLOSELY LINKED TRANSACTIO N AND HENCE WAS SUBSUMED INTO THE EXPENDITURE AND ACCORDI NGLY ALREADY CONSIDERED IN THE COMPARABILITY EXERCISE. 7.9 NOT APPRECIATING THAT ONCE THE NET PROFIT MARG IN IS TESTED ON THE TOUCHSTONE OF ARMS LENGTH PRICE UNDER TNMM, IT PRE-SUPPOSES THAT THE VARIOUS COMPONENTS OF INCO ME AND EXPENDITURE CONSIDERED IN THE PROCESS OF ARRIVING A T THE NET PROFIT ARE ALSO AT ARMS LENGTH. 7.10 DOING SEPARATE EVALUATION OF ROYALTY BY ADOPT ING CUP METHOD WITHOUT JUSTIFYING HOW THE SAME WAS MOST APPROPRIATE METHOD. 7.11 CONCLUDING THAT ARMS LENGTH PRICE OF ROYALT Y TRANSACTION IS NIL WITHOUT CONSIDERING ANY COMPARAB LES. 7.12 CONCLUDING THAT THE TAXPAYER HAS NOT BEEN ABL E TO SHOW THAT IT DERIVED ANY ECONOMIC BENEFIT FROM THE ALLEGED KNOW-HOW RECEIVED FROM THE ASSOCIATED ENTERPRISES. 3. THE ASSESSEE A COMPANY ENGAGED IN MANUFACTURING AND SELLING PASSENGER CARS AND MULTI UTILITY VEHICLES FILED THE IR RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.365,08,48,45 8/-. ASSESSEE IS A ITA NO.1595(BANG)2012 3 SUBSIDIARY OF M/S TOYOTA MOTOR CORPN, JAPAN AND DUR ING THE RELEVANT PREVIOUS YEAR WAS HAVING INTERNATIONAL TRANSACTION WITH ITS HOLDING COMPANY. FOR DETERMINING THE ARMS LENGTH PRICE (AL P) OF THE INTERNATIONAL TRANSACTIONS, THE AO REFERRED TO TPO IN ACCORDANCE WITH SEC.92CA OF THE IT ACT. 4. FOR JUSTIFYING THE VALUES OF THE INTERNATIONAL T RANSACTION ENTERED INTO BY IT, ASSESSEE HAD ADOPTED TNMM METHOD AND TH E TP DOCUMENTS SUBMITTED BY THE ASSESSEE WERE AT AN ENTITY LEVEL. LEARNED TPO WAS OF THE OPINION THAT ACTIVITIES OF THE ASSESSEE HAD TO BE S EGMENTED AND TP ANALYSIS WAS REQUIRED TO BE DONE FOR EACH SEGMENT SEPARATELY . AS PER THE TPO RULE 10C(1) MANDATED ADOPTION OF MOST APPROPRIATE METHOD . TPO REJECTED THE ENTITY LEVEL AND ANALYSIS OF INTERNATIONAL TRANSACT ION DONE BY THE ASSESSEE. HE SEGMENTED THE ACTIVITIES OF THE ASSESSEE TO MANU FACTURING ACTIVITY AND TRADING ACTIVITY. THOUGH, HE INCLUDED ROYALTY PAYM ENTS MADE BY THE ASSESSEE AS A PART OF EXPENDITURE, WHILE COMPUTING THE OPERATING PROFIT UNDER THE MANUFACTURING SEGMENT, LEARNED TPO CHOSE TO HAVE A SEPARATE ANALYSIS FOR DETERMINING THE ALP OF ROYALTY PAYMENT . ROYALTY PAYMENT THAT WAS SELECTED FOR A SEPARATE ALP STUDY WERE EFF ECTED BY THE ASSESSEE TO M/S TOYOTA KIRLOSKAR MOTOR PVT.LTD., JAPAN AND M/S TOYOTA MOTOR ASIA PACIFIC PTE LTD., SINGAPORE BOTH OF WHICH WERE AE O F THE ASSESEEE AND THE AMOUNT INVOLVED WAS RS.97,82,11,238/-. WHILE MAKIN G THE TP ANALYSIS THE TPO CHOSE 4 COMPARABLES FOR THE TRADING SEGMENT AND 5 COMPARABLES ITA NO.1595(BANG)2012 4 FOR THE MANUFACTURING SEGMENT. FOR THESE SEGMENTS, HE CAME TO A CONCLUSION THAT THE OPERATING PROFITS ON SALES SHOW N BY THE ASSESSEE WERE WITHIN THE RANGE OF +/= 5% OF THE ARITHMETICAL MEAN OF THE COMPARABLES. THUS, HE ACCEPTED THE VALUE OF THE INTERNATIONAL TR ANSACTIONS IN THESE SEGMENTS. HOWEVER, VIS--VIS ROYALTY, TPO WAS OF T HE OPINION THAT IT WAS OF A CLASS OF ITS OWN, CALLING FOR A SEPARATE ANALYSIS . AS PER THE LEARNED TPO JUST BECAUSE, TNMM AT AN ENTERPRISE LEVEL WAS CONSI DERED WOULD NOT BE A REASON NOT TO MAKE A STUDY OF ARMS LENGTH PRICE OF THE ROYALTY. 5. NOTICE WAS ISSUED BY THE TPO TO THE ASSESSEE AS TO HOW IT COULD JUSTIFY THE PAYMENTS OF 5% ROYALTY TO COMPLETELY BUILT UNITS (CBU) SOLD IN INDIA, 6% OF THE ROYALTY EXPORTS OF CBU AND 3% ROYALTY ON SALE OF ACCESSORIES, SPARES AND COMPONENTS WERE JUSTIFIED. ASSESSEE REPLIED THAT ITS ASSOCIATED ENTERPRISE TO WHICH ROYALTY PAYMENTS WERE EFFECTED CHARGE ROYALTY AT THE RATE OF 6% FROM OTHER AES ALSO. HO WEVER, LEARNED TPO WAS NOT SATISFIED WITH THIS REPLY. ACCORDING TO HIM, A SSESSEE DESPITE OPPORTUNITY GIVEN TO IT COULD NOT PRODUCE ANY EVIDE NCE/DOCUMENTATION AS TO HOW THE ROYALTY RATES WERE FIXED. IT ALSO DID NOT PROVIDE ANY EVIDENCE FOR ROYALTY CHARGED BY THIRD PARTIES ON SIMILAR TECHNOL OGY AND ON SIMILAR SERVICES. AS PER LEARNED TPO, ASSESSEE COULD NOT SH OW ANY ECONOMIC BENEFIT HAVING BEEN DERIVED FROM ASSOCIATED ENTERPR ISES WHICH WARRANTED PAYMENT OF THE ROYALTY. AS PER LEARNED TPO THE PRO FIT THAT ACCRUED TO THE ASSESSEE DID NOT ARISE FROM THE TECHNOLOGY, PROVIDE D BY THE ASSOCIATED ITA NO.1595(BANG)2012 5 ENTERPRISES. HE THEREFORE, CONCLUDED THAT THE ALP OF THE ROYALTY PAYMENT UNDER CUP METHOD WOULD BE NIL AND RECOMMENDED AN AD JUSTMENT OF RS.97,82,11,238/- U/S 92CA OF THE IT ACT, 1961. FO R TAKING THE VIEW THAT DIFFERENT CLASSES OF TRANSACTION REQUIRED SEPARATE ANALYSIS, LEARNED TPO RELIED ON THE DECISION OF THE MUMBAI BENCH IN THE C ASE OF UCB INDIA PVT.LTD., VS ACIT (121 ITD 13). 6. WHEN DRAFT ORDERS ON THE ABOVE LINES WERE PUT TO THE ASSESSEE, ASSESSEE MOVED THE DRP OBJECTING TO THE SEGREGATION OF ITS ACTIVITIES AND ADJUSTMENT PROPOSED IN THE PRICING OF ITS INTERNATI ONAL TRANSACTIONS. AS PER THE ASSESSEE WHEN TNMM ANALYSIS WAS DONE ROYALT Y FORMED A PART OF THE COST IN COMPUTING THE OPERATING PROFITS AND THE REFORE, A SEPARATE ANALYSIS OF ROYALTY PAYMENTS UNDER CUP METHOD WAS N OT WARRANTED. FURTHER, AS PER THE ASSESSEE, TRADING AND MANUFACTU RING WERE NOT DISTINCT ACTIVITIES, BUT HIGHLY LINKED TRANSACTIONS AND CLOS ELY RELATED TO EACH OTHER. IN ANY CASE AS PER ASSESSEE THE ALP OF ROYALTY COUL D NEVER HAVE BEEN CONSIDERED AS NIL, AS DONE BY THE TPO THAT TOO WITH OUT BEING AIDED BY ANY COMPARABLES. ASSESSEEE ALSO CONTRADICTED THE CON CLUSION OF TPO THAT IT HAD NOT DERIVED ANY ECONOMIC BENEFIT FROM THE KNOW -HOW RECEIVED FROM THE ASSOCIATED ENTERPRISES, FOR WHICH ROYALTY PAYME NTS WERE EFFECTED. 7. HOWEVER, DRP WAS NOT APPRECIATIVE OF ANY OF THE ABOVE CONTENTIONS. IT OVER RULED THE OBJECTIONS RAISED B Y THE ASSESSEE. ITA NO.1595(BANG)2012 6 THEREAFTER, THE AO COMPLETED THE FINAL ASSESSMENT O N THE LINES PERUSED IN THE DRAFT ASSESSMENT. 8. NOW BEFORE US, LEARNED AR SUBMITTED THAT SIMILA R ISSUE HAD ALREADY COME UP BEFORE THIS TRIBUNAL, IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.1315(B)/2011 DATE D 11-07-2014. RELYING ON THIS ORDER, LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE TRIBUNAL HAD DISAPPROVED THE SEGMENTATION OF THE FU NCTIONS. AS PER THE LEARNED AR, THE TRIBUNAL HAD ACCEPTED THE CONTENTIO N OF THE ASSESSEE, THAT TRADING AND MANUFACTURING SEGMENTS OF THE ASSESSEE WERE NOT DISTINCT, BUT INTER-RELATED. FURTHER, ACCORDING TO HIM, THE ISSU E REGARDING SEPARATE TREATMENT BEING GIVEN TO ROYALTY WAS ALSO BEFORE TH IS TRIBUNAL AND THE TRIBUNAL HAD HELD THAT TPO COULD NOT ADOPT ALP OF R OYALTY PAYMENTS AS NIL. LEARNED AO HAVING ACCEPTED THE STAND TAKEN BY THE A SSESSEE THAT ROYALTY WAS ALREADY A PART OF THE MANUFACTURING COST, OUGHT NOT HAVE SEPARATED IT AT OUT FOR AN ALP ADJUSTMENT. 9. PER CONTRA, LEARNED DR SUBMITTED THAT JUST BECA USE ALP OF ROYALTY PAYMENTS COULD NOT BE CONSIDERED AS NIL, WOULD NOT MEAN THAT THE TRANSACTIONS WENT OUT OF THE PURVIEW OF A T.P ANALY SIS. ACCORDING TO LEARNED AR, IF THE TPO ERRED IN CONSIDERING THE ALP OF THE ROYALTY AS NIL, THE MATTER REQUIRED A FRESH LOOK BY HIM. ASSESSEE CO ULD NOT BE ALLOWED TO TAKE ADVANTAGE OF ITS OWN FAILURE TO PRODUCE DOCUME NTATION AS REQUIRED UNDER RULE 10D. ASSESSEE HAD FAILED TO JUSTIFY THE ROYALTY PAYMENTS BY ITA NO.1595(BANG)2012 7 MAKING COMPARISONS NOR HAD IT PROVIDED THE DATA, DE SPITE A SPECIFIC REQUEST FROM THE TPO. ROYALTY PAYMENT EFFECTED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR CAME TO RS.97.82 CROES. THI S WORKED OUT 3% OF ITS REVENUES. AS PER LEARNED DR ASSESSEE COULD NOT JU STIFY WHY AND HOW IT PAID ROYALTY OF 3% OF THE REVENUES, WHEN NO ECONOMI C BENEFITS WERE RECEIVED FROM THE ASSOCIATED ENTERPRISES. 10. AD LIBITUM REPLY OF THE LEARNED AR WAS THAT CO MPARABLE ENTITIES CONSIDERED BY THE TPO FOR ANALYZING THE TRADING AND MANUFACTURING SEGMENTS HAD SUBSTANTIAL RESEARCH AND DEVELOPMENTAL EXPENDITURE, WHEREAS ASSESSEE HAD NOT INCURRED ANY SUCH EXPENDIT URE. RESEARCH AND DEVELOPMENT EXPENDITURE INCURRED BY COMPARABLE ENTI TIES AS PER THE LEARNED AR, CAME TO 2.18% OF THEIR REVENUE AGAINST WHICH THE ROYALTY PAYMENT OF THE ASSESSEE WAS 3%. THEREFORE, ACCORDI NG TO HIM, THE QUANTUM OF PAYMENT OF ROYALTY WAS JUSTIFIED, EVEN B Y THE YARDSTICK EMPLOYED BY THE LOWER AUTHORITIES. 11. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVA L CONTENTIONS. THERE IS NO DISPUTE THAT IN THE IMPUGNED ASSESSMENT YEAR, THE TPO HAD NOT DISTURBED THE VALUES OF THE INTERNATIONAL TRANS ACTIONS WITH REGARD TO THE TRADING SEGMENT AND MANUFACTURING SEGMENT. AFTER M AKING HIS OWN ANALYSIS TPO CAME TO THE CONCLUSION THAT THE SEGMEN TAL RESULTS WERE WITHIN THE +/= 5% OF THE MEAN ARITHMETICAL MARGIN OF COMPA RABLES. ONLY ADJUSTMENT THAT HE CARRIED OUT WAS WITH RESPECT TO ROYALTY PAYMENTS ITA NO.1595(BANG)2012 8 EFFECTED BY THE ASSESSEE. IN THE FIRST PLACE WHAT WE FIND IS THAT THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN ITS DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007-08 REFERRED SUPRA, HAD CLE ARLY HELD THAT SEGMENTED APPROACH WAS NOT WARRANTED IN ASSESSEES CASE, SINCE THE TRADING AND MANUFACTURING TRANSACTIONS UNDERTAKEN B Y THE ASSESSEE WERE SO INTERLINKED AND INTERCONNECTED, REQUIRING IT TO BE EVALUATED TOGETHER. WE FIND THAT THERE WAS NO CHANGE IN THE BUSINESS MO DEL OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. HENCE, THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2007-08 WOULD BE VERY RELEVANT PORT ION. PARAS.41 TO 47 OF THE ORDER OF THE TRIBUNAL IS RE-PRODUCED HERE UNDER ; 2. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. ON THE ISSUE AS TO WHETHER THE INTERNATIONAL TRANSA CTIONS HAVE TO BE CONSIDERED SEPARATELY OR INDEPENDENTLY WITHOUT AGGR EGATING THEM AS PART OF THE SEGMENT TO WHICH THEY RELATE, WE FIND THAT THE TERM INTERNATIONAL TRANSACTION HAS BEEN DEFINED IN SECTION 92B OF THE ACT TO MEAN AND INCLUDE TRANSACTIONS BETWEEN TWO OR MORE AES, EITHER OR BOT H OF WHOM ARE NON- RESIDENTS, IN THE NATURE OF PURCHASE, SALE OR LEA SE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SERVICES, OR LENDING OR B ORROWING MONEY OR ANY OTHER TRANSACTION HAVING BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISE. SECTION 92 OF THE ACT PROVIDES THAT IN COME FROM INTERNATIONAL TRANSACTIONS BETWEEN AES SHALL BE COMPUTED HAVING R EGARD TO ALP. SECTION 92-C OF THE ACT PRESCRIBES THE METHODS OF DETERMINI NG ALP, HAVING REGARD TO THE MOST APPROPRIATE METHOD WHICH WILL BE DECIDED I N ACCORDANCE WITH THE RULES PRESCRIBED. RULE 10A(D) OF THE INCOME-TAX RU LES 1962 [THE RULES] ITA NO.1595(BANG)2012 9 PROVIDES THAT TRANSACTION WOULD INCLUDE A NUMBER OF CLOSELY LINKED TRANSACTIONS. RULE 10B(1)(D) OF THE RULES ADVOCATE PROFIT SPLIT METHOD OF DETERMINING ALP WHERE INTERNATIONAL TRANSACTIONS IN VOLVE TRANSFER OF UNIQUE INTANGIBLE OR IN MULTIPLE INTERNATIONAL TRANSACTION S WHICH ARE SO INTER-RELATED THAT THEY CANNOT BE EVALUATED SEPARATELY FOR THE PU RPOSE OF DETERMINING ALP OF ANY ONE TRANSACTION. IT THUS APPEARS THAT THE A CT AND THE RULES CONTEMPLATE DETERMINING ALP BY AGGREGATING INTERNAT IONAL TRANSACTIONS WHICH ARE MULTIPLE, INTERLINKED OR INTER-RELATED TO EACH OTHER AND CANNOT BE EVALUATED SEPARATELY. TO THIS EXTENT THE CONCLUSIO NS OF THE TPO REGARDING DETERMINATION OF ALP BY TAKING SEGMENTAL RESULTS WI THOUT LOOKING INTO AS TO WHETHER THE TWO SEGMENTS ARE INTERLINKED OR INTER-R ELATED CANNOT BE SUSTAINED. AS TO WHAT WOULD BE THE MOST APPROPRIAT E METHOD IN SUCH CASES IS AGAIN DEPENDENT ON RULES 10B(2) AND (3) OF THE RULE S. 2. THE OECD GUIDELINES AS WELL AS THE AUSTRALIAN TAX OFFICER (ATO) TAXATION RULE 97/20 ON INTERNATIONAL TRANSFER PRICI NG PARA.2.74(1) REFERRED TO BY THE ASSESSEE BEFORE THE REVENUE AUTHORITIES W HICH HAVE BEEN SET OUT IN THE EARLIER PART OF THIS ORDER SEEMS TO SUPPORT CO MBINED TRANSACTION APPROACH WHERE THE TRANSACTIONS ARE CLOSELY LINKED OR CONTINUOUS THAT THEY CANNOT BE EVALUATED ADEQUATELY ON AN INDIVIDUAL BAS IS. IN SUCH A SITUATION, RATHER THAN ASSESSING THE ALP OF THE TRANSACTIONS I NDIVIDUALLY, THE TRANSACTIONS COULD BE EVALUATED TOGETHER USING THE MOST APPROPRIATE METHOD. ITA NO.1595(BANG)2012 10 43. THE ABOVE BEING THE LEGAL POSITION, IT BECOMES NECESSARY TO EXAMINE THE INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSES SEE WITH ITS AE DURING THE PREVIOUS YEAR WHICH HAVE BEEN CATEGORIZED INTO 2 SE GMENTS BY THE TPO IN HIS ORDER AND FIND OUT IF THEY ARE INTERLINKED OR INTER CONNECTED SO THAT THE TRANSACTIONS NEED TO BE EVALUATED TOGETHER RATHER T HAN INDIVIDUALLY. IN THIS REGARD, WE FIND THAT THE SUBMISSIONS MADE BY THE AS SESSEE BEFORE TPO AS WELL AS BEFORE DRP HAVE NOT BEEN CONSIDERED AT ALL. TH E TPO PROCEEDED ON THE BASIS THAT ALP OF EACH TRANSACTION HAS TO BE EXAMIN ED INDEPENDENTLY/INDIVIDUALLY BY PLACING RELIANCE ON T HE DECISIONS OF TRIBUNAL IN THE CASE OF STAR INDIA LTD. (SUPRA) AND UKB(I) (P) LTD. (SUPRA). WE AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSE SSEE THAT THESE DECISIONS HAVE IN FACT ACCEPTED IN PRINCIPLE THAT AGGREGATION OF TRANSACTIONS HAVE TO BE DONE WHERE THEY ARE INTERLINKED BUT HAVE ON FACTS F OUND THAT TRANSACTIONS WERE NOT INTERLINKED AND THEREFORE HELD THAT ALP OF TRANSACTIONS HAVE TO BE DETERMINED INDIVIDUALLY. THE FOLLOWING DECISIONS R ELIED UPON THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUPPORTS THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE. : I. M/S.THYSSEN KRUPP INDUSTRIES VS. ACIT (ITA NO.7032/MUM/2011), II. HINDUSTAN UNILEVER LTD. VS. ACIT (ITA NO.7868/M UM/2010), AND ITA NO.1595(BANG)2012 11 III. DCIT VS. CMA CGM GLOBAL INDIA (P) LTD. (ITA NO.5979/MUM/2010) 44. THE DRP WITHOUT EXAMINING THE SUBMISSIONS ON BEHA LF OF THE ASSESSEE HAS SIMPLY ENDORSED THE FINDINGS OF THE TPO. WITH REGARD TO THE CONCLUSIONS OF THE DRP, UPHOLDING THE ORDER OF THE TPO THAT THE TRADING AND MANUFACTURING SEGMENT OF THE ASSESSEE ARE DISTINCT AND NOT INTER-RELATED WARRANTING COMBINED TRANSACTION APPROACH, THE LD. C OUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2003-04 IN ITA NO.828/B/2010, WHEREIN IDENTICAL ISS UE WAS CONSIDERED AND DECIDED BY THIS TRIBUNAL AS FOLLOWS:- '14.5.2 TAKING INTO CONSIDERATION THE SUBMISSIONS M ADE AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE AGREE WITH THE SU BMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. WHILE IT IS TRUE THAT FUNCTION, ASSETS AND RISKS OF THE TRADING AND MANUFACTURING S EGMENTS GENERALLY DIFFER, HOWEVER CIRCUMSTANCES MAY WARRANT COMBINING BOTH OF THEM. IT IS ONLY IN THE SPECIFIC FACTS OF THE CASE THAT T HE COMBINING OF BOTH SEGMENTS IS ADVISABLE. IN THE INSTANT CASE OF THE A SSESSEE, THE SALE OF SPARE PARTS IS TRIGGERED AS A RESULT OF THE MANUFAC TURING ACTIVITIES, INCLUDING WARRANTY COMMITMENTS. THEREFORE, WE ARE O F THE VIEW THAT IT WOULD NOT BE IN THE FITNESS OF THINGS FOR THE SA LE OF SPARE PARTS AND COMPONENTS TO BE CONSIDERED IN ISOLATION FROM THE S ALE OF MANUFACTURED VEHICLES. THIS VIEW IS SUPPORTED BY TH E OECD T.P. GUIDELINES, 2010, RELIED ON BY THE ASSESSEE. THIS V IEW IS ALSO BUTTRESSED BY THE FACT THAT THE COMPARABLE COMPANIE S ARE ALSO TRADING IN SPARE PARTS AND COMPONENTS. ON A OVERALL CONSIDERATION, IT CAN BE CONCLUDED THAT TRADING IN SPARE PARTS IS CLO SELY INTER-LINKED ITA NO.1595(BANG)2012 12 WITH THE MANUFACTURING SEGMENT OF THE ASSESSEE. WE ARE OF THE VIEW THAT NO MEANINGFUL PURPOSE WOULD BE SERVED IN SEGRE GATING THE TRADING AND MANUFACTURING SEGMENTS, PARTICULARLY WHEN THE A SSESSEE AND THE COMPARABLE COMPANIES ARE AT PAR WITH REGARD TO THE NATURE AND SCALE OF COMBINED ACTIVITIES. NEEDLESS TO ADD THAT THIS F INDING / DECISION BY ITS VERY NATURE HAS TO BE CASE-SPECIFIC AND YEAR-SP ECIFIC AS THE DECISION IS BASED ON THE FACTS AND CIRCUMSTANCES OF THIS PARTICULAR CASE AND OF THIS PARTICULAR YEAR AND IS NOT TO BE C ONSTRUED AS LAYING DOWN THE PRINCIPLE IN THIS REGARD. WE, THEREFORE, D IRECT THE ASSESSING OFFICER / TPO TO COMPUTE THE ALP AT THE ENTITY / EN TERPRISE LEVEL BY COMBINING THE TRADING AND MANUFACTURING SEGMENTS.' 45. IT IS NO DOUBT TRUE THAT THE TRIBUNAL HAS OBSERVED THAT THE RULING GIVEN IN THAT YEAR IS BASED ON THE FACTS THAT PREVAILED I N THAT YEAR. WE FIND THAT THE FACTS IN THE PRESENT ASSESSMENT YEAR ARE ALSO I DENTICAL AND THERE HAS BEEN NO CHANGE WHATSOEVER IN THE BUSINESS MODEL OF THE A SSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DECISION RENDERED BY THE TRIBUNAL WOULD BE APPLICABLE FOR THIS ASSESSMENT YEAR ALSO. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT THE TRADING AND MANUFACTURING SEGMENT OF THE ASSESSEE ARE NOT DISTINCT AND ARE INTER-RELA TED WARRANTING COMBINED TRANSACTION APPROACH. 46. WE HAVE ALREADY SEEN IN PARA 9 OF THIS ORDER THAT T HE TPO HAS ARRIVED AT THE BIFURCATION OF THE MANUFACTURING AND TRADING SEGMENTAL OPERATING RESULTS. IN VIEW OF OUR CONCLUSIONS THAT THE TRADI NG AND MANUFACTURING SEGMENTS ARE INTERLINKED AND THEREFORE A COMBINED T RANSACTION APPROACH HAS ITA NO.1595(BANG)2012 13 TO BE ADOPTED, WE COMBINE THE RESULTS SO ARRIVED AT BY THE TPO, WHICH IS GIVEN IN PARA 9 OF THIS ORDER. IF THE SEGMENTAL RESULTS ARE COMBINED, THE OPERATING REVENUE OF THE ASSESSEE WOULD BE 3767.91 CRORES AND THE OPERATING PROFIT WOULD BE RS.94.34 CRORES. THUS, THE OPERATING PROF IT MARGIN ON SALES WOULD BE 2.517. 47. EVEN ASSUMING THAT THE ADJUSTMENT ON ACCOUNT OF OPE RATIONAL EFFICIENCY MADE BY THE TPO IS TO BE ACCEPTED, THEN THE COMBINE D MARGIN AFTER ADJUSTMENT OF THE FIVE COMPARABLES WHICH IS GIVEN I N PARA-20 OF THIS ORDER, WOULD BE 7.10%. IF THE ARITHMETIC MEAN OF THE FIVE COMPARABLES AS ABOVE IS TESTED AS AGAINST THE OPERATING PROFIT MARGIN ON SA LES OF THE ASSESSEE AT 2.517%, THEN THE SAME WOULD BE WITHIN THE (+)/(-) 5 % RANGE OF THE ARITHMETIC MEAN AND THEREFORE NO ADDITION BY WAY OF ADJUSTMENT TO THE ALP CAN BE MADE. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE ADDITION SUSTAINED BY THE DRP DESERVES TO BE DELETED AND IS HEREBY DELETE D. GR.NO.12 IS ACCORDINGLY ALLOWED. 11. ON THE ISSUE OF ROYALTY, VIEW OF THE TRIBUNAL IN THE ORDER REFERRED SUPRA APPEARS AT PARAS 48 TO 50, WHICH ARE REPRODUC ED HERE UNDER; ITA NO.1595(BANG)2012 14 48. ON THE ISSUE WHETHER THE TPO CAN COME TO A CONCLUSION THAT THE ALP OF AN INTERNATIONAL TRANSACTION IS NIL BECAUSE NO SERVICE S WERE RENDERED OR THAT THE ASSESSEE DID NOT DERIVE ANY BENEFIT FROM THE AE FOR WHICH PAYMENTS WERE MADE, WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED C OUNSEL FOR THE ASSESSEE. THIS ISSUE IS PURELY ACADEMIC BECAUSE WE HAVE ALREA DY HELD THAT THE CONCLUSIONS OF THE TPO/DRP THAT THE TRADING AND MANUFACTURING S EGMENT OF THE ASSESSEE ARE DISTINCT AND NOT INTER RELATED WARRANTING COMBINED TRANSACTION APPROACH IS NOT CORRECT AND THAT A COMBINED TRANSACTION APPROACH HA S TO BE ADOPTED AND THAT ON THE BASIS OF COMBINED TRANSACTION APPROACH THE PRIC E PAID FOR THE INTERNATIONAL TRANSACTION IS AT ARMS LENGTH. WE MAY ALSO THAT L EGALLY THE TPO SHOULD ADOPT THE ALP AS NIL. ON SIMILAR APPROACH BY TPO ADOPTING AL P AT NIL THE ITAT, BANGALORE BENCH, IN THE CASE OF M/S.FESTO CONTROLS PVT. LTD. VS. DCIT IN ITA NO.969/BANG/2011 (AY: 2007-08) DATED 4-1-2013, THE TRIBUNAL EXAMINED THE QUESTION AS TO WHETHER THE TPO CAN DETERMINE THE AL P AT NIL ON THE GROUND THAT NO SERVICES WERE RENDERED. THE TRIBUNAL, ON THE ABOVE ISSUE FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THE ITAT IN THE CASE OF CASTROL INDIA LTD. V. ACIT IN ITA NO.3938/MUM/2010 DATED 14.09.2012 WHEREIN IT WAS HE LD THAT IT WAS INCUMBENT UPON THE TPO TO WORK OUT THE ALP OF THE RELEVANT TR ANSACTIONS BY FOLLOWING SOME AUTHORIZED METHOD AND THE ENTIRE COST BORNE BY THE ASSESSEE CANNOT BE DISALLOWED BY TAKING THE ALP AT NIL. THE TRIBUNAL ALSO REFERR ED TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. EKL APPLIANC ES LTD., ITA NO.1068/2011 DATED 29.03.2012. IN THE AFORESAID DECISION, THE A SSESSEE ENTERED INTO AN AGREEMENT PURSUANT TO WHICH IT PAID BRAND FEE/ ROYA LTY TO AN ASSOCIATED ENTERPRISE. ITA NO.1595(BANG)2012 15 THE TPO DISALLOWED THE PAYMENT ON THE GROUND THAT A S THE ASSESSEE WAS REGULARLY INCURRING HUGE LOSSES, THE KNOW-HOW/ BRAND HAD NOT BENEFITED THE ASSESSEE AND SO THE PAYMENT WAS NOT JUSTIFIED. THIS WAS REVERSED BY THE CIT (A) & TRIBUNAL ON THE GROUND THAT AS THE PAYMENT WAS GENUINE, THE TPO COU LD NOT QUESTION COMMERCIAL EXPEDIENCY. ON APPEAL BY THE DEPARTMENT, THE HONBL E DELHI HIGH COURT HELD THAT THE TRANSFER PRICING GUIDELINES LAID DOWN BY THE OECD MAKE IT CLEAR THAT BARRING EXCEPTIONAL CASES, THE TAX ADMINISTRATION CANNOT DI SREGARD THE ACTUAL TRANSACTION OR SUBSTITUTE OTHER TRANSACTIONS FOR THEM AND THE EXAM INATION OF A CONTROLLED TRANSACTION SHOULD ORDINARILY BE BASED ON THE TRANS ACTION AS IT HAS BEEN ACTUALLY UNDERTAKEN AND STRUCTURED BY THE ASSOCIATED ENTERPR ISES. THE GUIDELINES DISCOURAGE RE-STRUCTURING OF LEGITIMATE BUSINESS TR ANSACTIONS EXCEPT WHERE (I) THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM IT S FORM AND (II) THE FORM AND SUBSTANCE OF THE TRANSACTION ARE THE SAME BUT ARRAN GEMENTS MADE IN RELATION TO THE TRANSACTION, VIEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A CO MMERCIALLY RATIONAL MANNER. THE OECD GUIDELINES SHOULD BE TAKEN AS A VALID INPU T IN JUDGING THE ACTION OF THE TPO BECAUSE, IN A DIFFERENT FORM, THEY HAVE BEEN RE COGNIZED IN INDIAS TAX JURISPRUDENCE. THE HONBLE COURT HELD THAT IT IS WE LL SETTLED THAT THE REVENUE CANNOT DICTATE TO THE ASSESSEE AS TO HOW HE SHOULD CONDUCT HIS BUSINESS AND IT IS NOT FOR THEM TO TELL THE ASSESSEE AS TO WHAT EXPENDITURE TH E ASSESSEE CAN INCUR (EASTERN INVESTMENT LTD 20 ITR 1 (SC), WALCHAND & CO 65 ITR 381 (SC) FOLLOWED). EVEN RULE 10B(1)(A) DOES NOT AUTHORISE DISALLOWANCE OF E XPENDITURE ON THE GROUND THAT IT WAS NOT NECESSARY OR PRUDENT FOR THE ASSESSEE TO HA VE INCURRED THE SAME. IN LIGHT ITA NO.1595(BANG)2012 16 OF THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT THE STAND TAKEN BY THE ASSESSEE IN THIS REGARD DESERVES TO BE ACCEPTED. IT IS CLEA R FROM THE DECISIONS REFERRED TO ABOVE THAT THE TPO HAS TO WORK OUT THE ALP OF THE I NTERNATIONAL TRANSACTION BY APPLYING THE METHODS RECOGNIZED UNDER THE ACT. HE IS NOT COMPETENT TO HOLD THAT THE EXPENDITURE IN QUESTION HAS NOT BEEN INCURRED B Y THE ASSESSEE OR THAT THE ASSESSEE HAS NOT DERIVED ANY BENEFITS FOR THE PAYME NT MADE BY THE ASSESSEE AND THEREFORE HE CANNOT CONSIDER THE ALP AS NIL. WE HO LD ACCORDINGLY. 49. BESIDES THE ABOVE, EVEN ON FACTS THE DETERMINAT ION OF ALP AT NIL IN RESPECT OF ROYALTY PAYMENTS CANNOT BE SUSTAINED. IN THIS REGA RD, IT WAS BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE THAT SIMILAR PA YMENT MADE IN A.Y. 2009-10, THE DRP IN ITS DIRECTIONS DATED 19.11.2013 WAS PLEASED TO HOLD THAT THE PAYMENT OF ROYALTY WAS SUPPORTED BY THE SERVICES RENDERED BY T HE AE AND WAS JUSTIFIED. THE AFORESAID ORDER OF THE DRP WAS CONSIDERED BY THE CI T(A), LTU, BANGALORE IN A.Y. 2005-06 AND IN HER ORDER DATED 20.3.2014, THE CIT(A ) HELD AS FOLLOWS:- 10.3 THE ABOVE MATER HAD COME UP FOR ADJUDICATION BEFORE THE DRP IN THE APPEALS FOR OTHER YEARS ALSO. FOR AY 2006-07 I FIN D THAT THE DRP HAS CONFIRMED THE TPOS DETERMINATION OF ALP OF ROYALTY AT NIL THROUGH ORDER DT. 30.09.2010. IN THIS ORDER, HOWEVER, AT PAGE 10 WHI LE RECORDING ITS DIRECTIONS, THE DRP MENTIONS THE TPOS ADMISSION THAT IN VIEW O F THE TIME BARRING SITUATION HE WAS UNABLE TO EXAMINE THE OBJECTIONS R AISED BY THE ASSESSEE. AFTER INDEPENDENTLY STUDYING THESE OBJECTIONS, THE DRP CRYPTICALLY APPROVED THE TPOS POSITION OF NIL ALP. IN AY 2009-10 HOW EVER, THE DRP HAS DISCUSSED IN ELABORATE DETAIL THE ASSESSEES OBJECT IONS ON SIMILAR GROUNDS AND HAS ARRIVED AT THE CONCLUSION THAT THE ASSESSEE NOT ONLY RECEIVED THE TECHNOLOGY SUPPORT AS WELL AS THE RELATED INTANGIBL ES IN TERMS OF PRODUCTION PROCESSES, BUT HAS ALSO BENEFITTED FROM THESE TECHN OLOGICAL PRACTICES, STANDARDS AND KNOW-HOW WHICH WERE NOT CREATED LOCAL LY BY ITSELF. THE TOYOTA PRODUCTION SYSTEM, STANDARDIZED ON A WORLD-W IDE BASIS, HAS ALSO BEEN STUDIED FOR ITS OPERATIONAL EFFICIENCY BY PREM IER ACADEMIC INSTITUTIONS. I ITA NO.1595(BANG)2012 17 AM INCLINED TO AGREE WITH THIS CONCLUSION AFTER EXA MINING THE FACTS OF THE APPELLANTS CASE AND THE EVIDENCES AVAILABLE. THE TPOS ARGUMENT THAT NO BENEFIT WAS DERIVED BY THE APPELLANT FROM THE TECHN OLOGY FOR WHICH ROYALTY WAS PAID IS NOT SUPPORTED BY FACTS AND EVIDENCES. THE FACT THAT THE ROYALTY RATE WAS WITHIN THE PERMISSIBLE LIMIT SPECIFIED BY THE GOVT. OF INDIA AND APPROVED BY THE RBI IS AN ADDITIONAL ARGUMENT IN SU PPORT OF THE LEGITIMACY OF THE SAID PAYMENT. 10.4 IN VIEW OF THE ABOVE DISCUSSION, THE TPOS DE TERMINATION OF THE ALP OF THE ROYALTY PAYMENT AT NIL CANNOT BE SUPPORTED . FOR SUCH ALP DETERMINATION, A PROPER ANALYSIS OF COMPARABLES IS REQUIRED TO BE PERFORMED FOR FY 2004-05 AND THE TPO IS DIRECTED TO IDENTIFY SUITABLE COMPARABLES AND, AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE APPELLA NT TO DETERMINE THE APPROPRIATE ALP OF ROYALTY PAYMENT. FOR STATISTICA L PURPOSES, THE GROUNDS RAISED IN THIS REGARD ARE TREATED AS ALLOWED. 50. THE FACTS AND CIRCUMSTANCES REMAIN THE SAME IN THE PRESENT ASSESSMENT YEAR AS IT PREVAILED IN THE EARLIER ASSE SSMENT YEAR DECIDED BY THE CIT(A)/DRP REFERRED TO ABOVE. WE ARE OF THE VI EW THAT THE FINDINGS OF THE CIT(A)/DRP HAVE TO BE UPHELD AND IS ACCORDINGLY UPHELD. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT GR.NO.22 TO 24 HAS T O BE ALLOWED, THOUGH IT IS ONLY ACADEMIC. 12. THE TRIBUNAL HAD CLEARLY HELD IN ASSESSEES A PPEAL FOR AY: 2007- 08 THAT TPO COULD NOT CONSIDER THE ALP OF ROYALTY T RANSACTIONS AS NIL. NO DOUBT, FOR ASSESSMENT YEAR 2007-08, WHEREIN THE TRI BUNAL HAD HELD AS ABOVE, LEARNED TPO HAD NOT MADE ANY ADJUSTMENT ON R OYALTY PAYMENTS FOR A REASON THAT THE ADJUSTMENT REQUIRED ON ROYALTY ST OOD MERGED WITH THE TP ADJUSTMENTS MADE TO THE MANUFACTURING SEGMENT. IT IS FOR THIS REASON THAT THE TRIBUNAL HELD THE EXERCISE TO BE ACADEMIC AT PA RA 48 OF ITS ORDER. HOWEVER, ON THE OTHER HAND, FOR THE IMPUGNED ASSESS MENT YEAR THE TPO ITA NO.1595(BANG)2012 18 HAS NOT MADE ANY ADJUSTMENT IN THE PLI OF MANUFACTU RING SEGMENT NOR TRADING SEGMENT, THOUGH HE FOUND THAT AN ADJUSTMENT OF RS.97.82 CRORES WAS REQUIRED FOR ROYALTY PAYMENTS. SINCE THE CO-OR DINATE BENCH IN ITS ORDER FOR AY: 2007-08 HAS MADE A SPECIFIC OBSERVATI ON THAT ANALYSIS BASED ON COMBINED TRANSACTIONS ALONE COULD BE ADOPTED, IT IS NECESSARY FOR US TO HAVE A LOOK AT THE POSITION FOR THE IMPUGNED ASSESS MENT YEAR WHERE SEGMENTAL RESULTS IN TRADING AND MANUFACTURING WAS CONSIDERED BY THE TPO TO BE WELL WITHIN ARMS LENGTH. THE SEGMENTAL RESU LTS AS ANALYZED BY THE TPO FOR THE TRADING AND MANUFACTURING READ AS UNDER ; TRDG.SEGMENT MANFG.SEGMENT REVENUE FROMOPERATION 851.20 3292.77 COST OF GOODS SOLD 750.43 2562.43 GROSS PROFIT 100-77 730-74 G.P.ON SALES 11-84 22-19 TOTAL COST 825.69 3116.13 OPERATING PROFIT 25-51 176.64 PROFIT ON SALES 3% 5.36% ITA NO.1595(BANG)2012 19 THE TOTAL REVENUE IF BOTH SEGMENTS ARE CONSIDERED T OGETHER WOULD COME TO RS.4.843.97 CRORES AND OPERATING PROFIT 202 .15 CRORES. PROFIT ON SALES WHICH IS THE PLI ADOPTED, WOULD BE 4.878%. L EARNED TPO, HIMSELF AT ANNEXURE-A OF HIS ORDER HAS GIVEN A FINDING THAT A RITHMETIC MEAN OF THE PLI OF THE COMPARABLES CONSIDERED BY HIM FOR MANUFA CTURING SEGMENT AFTER ADJUSTMENT WAS 7.73% AT ANNEXURE-F, HE HAS GIVEN A FINDING THAT PLI OF THE TRADING SEGMENT OF THE COMPARABLES WAS 6.42%. LEARNED TPO HAS ALSO GIVEN A FINDING THAT BOTH THESE WERE WITHIN THE +/- 5% RANGE ALLOWABLE UNDER THE ACT. IT IS ALSO NOT DISPUTED THAT WHILE COMPUTING THE MANUFACTURING SEGMENT RESULTS THE TPO HIMSELF HAD A CCEPTED ROYALTY AS A PART OF COST. THIS IS CLEAR FROM THE SEGMENTAL RESU LT GIVEN BY THE TPO AT PARA-3 OF HIS ORDER WHICH IS NOT REPRODUCED HERE FO R BREVITY. GOING BY THE METHODOLOGY ADOPTED BY THE LEARNED TPO, THE COMBINE D RESULTS AS MENTIONED BY US ABOVE, GAVE THE ASSESSEE A PLI OF 4 .878% FOR INTERNATIONAL TRANSACTIONS. IN SUCH A SCENARIO, CONSIDERING THE ARGUMENT OF LEARNED DR, THAT ALP OF THE ROYALTY PAYMENTS THOUGH NOT NIL H AD A VALUE WHICH REQUIRED TO BE PROPERLY FIXED, A FRESH LOOK BY THE TPO/AO IS REQUIRED. AO/TPO HAS TO SEE WHETHER IN A CASE WHERE THERE IS NO ALP ADJUSTMENT REQUIRED FOR MANUFACTURING/TRADING SEGMENT OR COMBI NING BOTH OF THEM, A SEPARATE CONSIDERATION OF ROYALTY FOR ALP ADJUSTM ENTS IS REQUIRED AND IF SO WHAT COULD BE THE ALP ASSIGNED FOR IT AND THE RESUL T THEREOF. ORDER OF THE AO WITH REGARD TO ALP ADJUSTMENT ON ROYALTY IS SET ASIDE AND MATTER REMITTED BACK TO HIM FOR FRESH CONSIDERATION AS PER LAW. NEEDLESS TO SAY ITA NO.1595(BANG)2012 20 HE CAN OBTAIN REQUIRED REPORTS FROM THE TPO FOR THI S PURPOSE. GROUND 7.8 TO 7.12 OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 13. THIS LEAVES US WITH GROUND NO.8 & 9. IN GROU ND 8, ASSESSEE ASSAILS THE AOS VIEW THAT CREDIT FOR OPENING STOCK OF SLOW MOVING INVENTORY AND TEST VEHICLES COULD NOT BE GIVEN. GROUND 9, AS AGAINST LEVY OF INTEREST U/S 234B & 234D OF THE IT ACT, 1961. LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT HE WAS NOT PRESSING GROUND NO.8. THE REFORE, THE SAID GROUND IS DISMISSED AS NOT PRESSED. GROUND NO.9 B EING CONSEQUENTIAL IN NATURE DOES NOT NEED ANY ADJUDICATION. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 14-08-2014. SD/ - (SHRI RAJPAL YADAV) SD/ - (ABRAHAM P GEORGE) JUDICAL MEMBER ACCOUNTANT MEMBER BANGALORE: D A T E D : 14-08-2014 AM* ITA NO.1595(BANG)2012 21 COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE