M/s. Showa India Pvt. Ltd., Faridabad V. DCIT, New Delhi

ITA 166/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7098 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I1
• Next Hearing Date: 24-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Additional evidence; Commercial expediency
• Section: 92A; 133(6); 37; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I, NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.(TP) NO.166/DEL.2013 (ASSESSMENT YEAR 2008-09) M/S. SHOWA INDIA PVT. LTD., VS. DCIT, CIRCLE 8(1), 23-32, SECTOR 58, NEW DELHI FARIDABD, HARYANA-121002 GIR / PAN :AABCE5725G (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI ASEEM CHAWLA, ADV. MS. PRIYANKA MONGIA, CA RESPONDENT BY :SHRI AMRENDRA KUMAR, CIT DR DATE OF HEARING: 17.06.2016 DATE OF PRONOUNCEMENT: 30.06.2016 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 08/11/2012 OF DCIT CIRCLE-8 (1), NEW DELHI FOR ASSESSMENT YEAR 2008-09 ON THE FOLLOW ING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER ('LD. AO' ) HAS ERRED IN DETERMINING TOTAL LOSS AMOUNTING TO RS.4,09,77,489/- AS AGAINST THE RETURNED LOSS AMOUNTING TO RS.39,34,19,281/-. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO HAS ERRED IN MAKING DETERMINATION OF INTERNATIONAL TRANSACTION RELATED TO PAYMENT OF TECHNICAL FEE AT RS.65,06,275/- AS AGAIN ST RS.3,01,70,776/- RESULTING IN AN ADDITION AMOUNTING TO RS.2,36,64,501/- ON THE BASIS OF THE ORDER PASSE D 2 I.T.A.NO.166/DEL/2013 UNDER SECTION 92CA(3) OF THE INCOME TAX ACT, 1961 ('THE ACT') BY THE LEARNED TRANSFER PRICING OFFICER ('LD TPO'). 2.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, BOTH THE LD. TPO AND HON'BLE DISPUTE RESOLUTION PANEL ('DRP') HAVE FAILED IN APPRECIATING THAT THE SAID TECHNICAL SERVICES WERE ACTUALLY RENDERED BY THE PARENT COMPANY UNDER THE TECHNICAL SERVICES CONTRACT. 2.2. THAT ON THE FACTS OF THE CASE, THE LD. TPO HAS ERRED IN COMPUTING ARM'S LENGTH PRICE. ('ALP') OF RS.6,506,275/- BEING COST OF AIRLINE TICKETS AS AGAINST ACTUAL COST OF RS. 6,646,298/-. 2.3. THAT ON THE FACTS OF THE CASE AND IN LAW, LD. TPO/HON'BLE DRP HAS ERRED IN MAKING A DETERMINATION OF THE TRANSACTION ENTERED INTO WITH M/S. KOSHIN TRADING CO. LTD., AN UNRELATED PARTY ON AN ARM'S LENGTH PRINCIPLE, DISREGARDING THAT THE SAME IS NOT AN ASSOCIATED ENTERPRISE OF THE APPELLANT IN ACCORDANCE WITH SECTION 92A OF THE ACT. . 2.4. THAT ON THE FACTS OF THE CASE THE LD. AO HAS GROSSLY ERRED IN MAKING AN ADDITION AMOUNTING TO RS.12,829,790/- TWICE, THE SAME ALREADY BEING INCLUDED IN THE AFORESAID ADDITIONS AMOUNTING TO RS.23,664,501/-. 3. THAT ON THE FACTS OF THE CASE THE LD. AO HAS GROSSLY ERRED IN MAKING AN ADDITION OF RS.6,69,05,725/- IN RESPECT OF UNDISCLOSED SALES. 3.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO/ HON'BLE DRP HAS FAILED TO FULLY APPRECIATE THE PARTICULARS OF THE EVIDENTIARY DOCUMENTATION FURNISHED BY THE APPELLANT TO EXPLAIN THE DISCREPANCIES BETWEEN THE SALES RECORD PROCURED BY THE LD. AO FROM M/S. MARUTI UDYOG LIMITED AND THE SALES FIGURES RETURNED BY THE APPELLANT. 3 I.T.A.NO.166/DEL/2013 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. ASSESSING OFFICER/ HON'BLE DRP HAS ERRED IN ITS FINDING THAT THE LIST OF SUNDRY CREDITORS AS FURNISHED BY THE APPELLANT AND IN MAKING AN ADDITIO N AMOUNTING TO RS.8,760,176/-. 4.1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO VIOLATING THE PRINCIPLE OF NATURAL JUSTICE DID NOT PROVIDE AN ADEQUATE OPPORTUNITY OF BEING HEARD TO THE APPELLANT AND THEREBY MADE AN ADDITION MERELY ON THE BASIS THAT FEW CORRESPONDENCES SENT UNDER SECTION 133(6) OF THE ACT REMAINED UNANSWERED. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO IS NOT JUSTIFIED IN DISALLOWI NG THE GARDENING EXPENDITURE OF RS.28,78,262/- CLAIMED BY THE APPELLANT UNDER THE HEAD 'REPAIR AND MAINTENANCE - BUILDING'. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO/ HON'BLE DRP HAS FAILED TO CONSIDER THE SUBMISSIONS FURNISHED BY THE APPELLANT IN RELATION TO WARRANTY EXPENSES AND HAS MADE A DISALLOWANCE AMOUNTING TO RS.50,75,794/-. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. AO HAS ERRED IN DISALLOWING THE CASH DISCOUNT EXPENSES AMOUNTING TO RS.26,50,994/- PAID TO M/S. MARUTI UDYOG LIMITED AND HAS DISREGARDED THE RELATED DOCUMENTARY EVIDENCE. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO/ HON'BLE DRP HAS FAILED TO APPRECIATE TH E DETAILS AND PARTICULARS FURNISHED BY THE APPELLANT TO SUBSTANTIATE PROVISION FOR ASCERTAINED LIABILITIES AND HAS MADE A DISALLOWANCE AMOUNTING TO RS.22,96,76,550/-. 4 I.T.A.NO.166/DEL/2013 9. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT. 10. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW LD. AO HAS ERRED IN NOT ALLOWING BROUGHT FORWARD LOSSES TO BE CARRIED FORWARD. 11. THAT THE ORDER PASSED BY LD. AO/LD. TPO/ HON'BLE DRP IS BAD IN LAW AND VOID AB-INITIO. ALL OF THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE AND NOTWITHSTANDING EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMI T OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEA L AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. ANY CONSEQUENTIAL RELIEF, TO WHICH THE APPELLANT MA Y BE ENTITLED UNDER THE LAW IN PURSUANCE OF THE AFORESAID GROUNDS OF APPEAL, OR OTHERWISE, THUS MAY BE GRANTED. 2. THE BRIEF FACTS THAT ARISE FROM THE ORDER OF THE AUTHORITIES BELOW ARE AS UNDER: 2.1 THE ASSESSEE IS ENGAGED IN MANUFACTURE OF ELECT RIC POWER STEERING FOR FOUR WHEELERS AND ALSO HAS A NON - EXCLUSIVE RIGHT AND LICENSE FOR THE KNOW-HOW AND INTELLECTUAL PROPERTY RIGHTS IN RESPECT OF DESIGNS, DRAWINGS, STANDARDS, SPECIFICATIONS AND ALL OTHER T ECHNICAL DATA RELATING TO VARIOUS PRODUCTS. THE ASSESSEE FIL ED ITS RETURN OF INCOME ON 30.09.2008, DECLARING A LOSS OF RS.39,34,19,281/- FOR THE YEAR UNDER CONSIDERATION. SINCE THE ASSESSEE HAD UNDERTAKEN INTERNATIONAL TRANSACTI ONS WITH ITS ASSOCIATED ENTERPRISES (AE), A REFERENCE W AS MADE 5 I.T.A.NO.166/DEL/2013 BY THE ASSESSING OFFICER TO THE TRANSFER PRICING OF FICER II (2), NEW DELHI (TPO). 2.2 DURING THE COURSE OF THE PROCEEDINGS IT WAS OBS ERVED BY THE LD. TPO THAT THE ASSESSEE HAS MADE A PAYMENT OF RS.34,13,665/-AS ROYALTY FOR THE TECHNICAL KNOW-HOW , DOCUMENTATION CHARGES AMOUNTING TO 10 MILLION PER PRODUCT MODEL. THE LD.TPO NOTED THAT, AS PER ARTICL E 7 OF THE TECHNICAL COLLABORATION CONTRACT, THE AE WAS TO PROVIDE TECHNICAL ASSISTANCE, INCLUDING TRAINING AN D TECHNICAL PERSONNEL. THE ASSESSEE BESIDES THE ROYAL TY HAS MADE THE FOLLOWING PAYMENTS TO ITS AES: I) TESTING CHARGES- RS.8,79,103/- II) TRAINING CHARGES- RS. 6,90,153/- 2.3 THE ASSESSEE HAD UNDERTAKEN VARIOUS INTERNATION AL TRANSACTIONS WHICH ARE AS UNDER: S.NO. NATURE OF INTERNATIONAL TRANSACTION METHOD SELECTED VALUE OF INTER -NATIONAL TRAN -SACTION (INR) 1 IMPORT OF RAW MATERIAL AND COMPONENTS TNMM 526,502,967 2 IMPORT OF CAPITAL GOODS 53,431,620 3 IMPORT OF FINISHED GOODS 39,559,387 4 EXPORT OF RAW MATERIAL AND COMPONENT 4,335,493 5 PAYMENT UNDER TECHNICAL COLLABORATION AGREEMENT TECHNICAL SUPPORT CHARGES ROYALTY TESTING CHARGES TRAINING CHARGES 30,170,776 3,413,665 879,103 690,153 6 PROFESSIONAL SERVICES 614,410 7 EXPORT OF FINISHED GOODS 319,789 8 PAYMENT OF INTEREST ON BORROWED CPM 8,210,336 6 I.T.A.NO.166/DEL/2013 CAPITAL 2.4 AS PER FORM NO.3CEB FILED BY THE ASSESSEE ALONG WITH ITS RETURN, THE ASSESSEE MADE A PAYMENT OF RS.3,01,70,776/-AS TECHNICAL SUPPORT CHARGES TO ITS AES. SUBSEQUENTLY IT WAS STATED BY THE ASSESSEE THAT THE RE WAS A MISTAKE IN THE FORM NO.3CEB AND THE TOTAL AMOUNT OF RS.3,01,70,776/-INCLUDED AN AMOUNT OF RS.48,81,310/ - PAID TO UNRELATED PARTY FOR SUPPLY OF CAPITAL GOODS . THE LD. TPO REJECTED THE PLEA OF THE ASSESSEE AND TREAT ED THE WHOLE OF THE AMOUNT OF RS.3,01,70,776/-AS INTERNATI ONAL TRANSACTION. 2.5 THE LD. TPO CONCLUDED THAT NO INDEPENDENT PARTY WOULD HAVE MADE SUCH PAYMENTS WHEN IT HAS ALREADY MADE PAYMENT OF ROYALTY, TRAINING CHARGES AND TESTI NG CHARGES. AS PER THE LD. TPO, THE AE WAS OBLIGED TO PROVIDE TECHNICAL SUPPORT SERVICES UNDER THE TECHNICAL COLLABORATION CONTRACT WITH THE ASSESSEE AND NO FUR THER CHARGES WERE REQUIRED TO BE PAID FOR SUCH SERVICES. THE LD. TPO HELD THAT THESE SERVICES ARE INCIDENTAL TO THE SUBSIDIARY BEING A MEMBER OF A LARGE GROUP. THE LD .TPO REFERRED TO OECD GUIDELINES WITH REGARD TO INTRAGRO UP SERVICES AND CALCULATED THE ARMS LENGTH PRICE (ALP ) AT NIL. OUT OF THE TOTAL AMOUNT OF RS.3,01,70,776/- THE LD. TPO ALLOWED THE DEDUCTION IN RESPECT OF AIR TICKETS SPE NT BY THE 7 I.T.A.NO.166/DEL/2013 ASSESSEE ON ACCOUNT OF TECHNICAL SUPPORT SERVICE FE E, AMOUNTING TO RS.65,6,275/-. THE LD.TPO CONSIDERED T HE TRANSACTION FOR ROYALTY AND THE TRANSACTION FOR TEC HNICAL SUPPORT SERVICE FEES SEPARATELY. 2.6 THE LD. AO MADE CERTAIN ADDITIONS IN DRAFT ASSESSMENT ORDER IN RESPECT OF CORPORATE TAXES WHIC H ARE AS UNDER: I) ADDITION MADE IN RESPECT OF UNDISCLOSED SALES TO MARUTI UDYOG LTD RS.6,69,05,725/- II) SUNDRY CREDITORS RS. 87,60, 176/- III) GARDENING EXPENSES RS. 28,78,262/- IV) WARRANTY EXPENSES RS. 50,75,794/- V) CASH DISCOUNT PAID TO M/S MARUTI UDYOG LTD RS. 26,50,994/ - VI) PROVISION FOR RELIABILITY RS. 22,96,76,550/- VII) CARRY FORWARD LOSSES OF PREVIOUS YEAR RS.1,07,89,9 18/- 3. AGGRIEVED BY THE ORDER OF THE LD.TPO THE ASSESSE E FILED OBJECTIONS BEFORE THE DRP. TRANSFER PRICING ISSUE: 4. THE DRP PRIMARILY EXAMINED 2 ISSUES BEING; I) WHETHER THE TRANSACTION RELATED TO PAYMENT OF TECHNICAL SUPPORT CHARGES, SHOULD BE EVALUATED ON A STAND-ALONE BASIS OR BY AGGREGATING THIS TRANSACTION WITH THE OTHER TRANSACTIONS OF MANUFACTURING SEGMENT OF THE ASSESSEE AND 8 I.T.A.NO.166/DEL/2013 II) WHAT SHOULD BE THE ARMS LENGTH PRICE OF THE PURPORTED SERVICES. 4.1 IN RESPECT OF THE 1 ST ISSUE THE DRP HELD AS UNDER: 6.1 WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF THE ACT, THE OECD GUIDELINES ON THIS ISSUE AS WELL AS THE VARIOUS JUDGMENT CITED BY THE TPO IN HER ORDER. HERE, THE PAYMENT OF TECHNICAL SUPPORT CHARGES IS A SEPARATELY IDENTIFIABLE TRANSACTION AND THERE IS NO DIFFICULTY IN EVALUATING THE TRANSACTION SEPARATELY . WE DO NOT THINK THAT THERE IS ANY DISPUTE, AS FAR AS POSSIBLE, INCOME ARISING FROM EACH INTERNATIONAL TRANSACTION SHOULD BE DETERMINED SEPARATELY UNLESS IT IS NOT POSSIBLE TO DO SO BECAUSE THE TRANSACTION IS CLOSELY LINKED WITH EACH OTHER. WE ARE IN COMPLETE AGREEMENT WITH THE APPROACH OF THE TPO THAT THIS TRANSACTION SHOULD BE EVALUATED SEPARATELY TO ASCERTAIN THE EFFECT OF THE TRANSACTION ON THE INCO ME OF THE ASSESSEE. THEREFORE, THE CONTENTION OF THE ASSESSEE, I.E., THE PAYMENT OF MANAGEMENT FEE SHOUL D BE EXAMINED BY AGGREGATING IT WITH OTHER TRANSACTIO NS OF MANUFACTURING SEGMENT, IS REJECTED BY THE PANEL. 4.2 IN RESPECT OF THE 2 ND ISSUE THE DRP HELD AS UNDER: 6.4 WE HAVE CAREFULLY GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND THE TPO'S ORDER ON THIS ISSUE. WE HAVE ALSO CONSULTED OECD GUIDELINES ON THIS ISSUE. ACCORDING TO THE GUIDELINES, SUCH SERVICES ARE IN T HE NATURE OF SHAREHOLDER SERVICES. THESE ARE SERVICES THAT THE AE PROVIDES TO ITS SUBSIDIARIES TO PROTECT THE FORMERS INHERENT INTEREST IN THE LATTER'S BUSINESS. THE OECD GUIDELINES RECOGNIZE THE FACT THE RECIPIENT OF SUCH SERVICES NEED NOT MAKE A SEPARATE PAYMENT ON 9 I.T.A.NO.166/DEL/2013 THIS ACCOUNT. PARA7.6 OF OECD GUIDELINES DEALS WIT H 'SHAREHOLDER SERVICES'. '7.5 THERE ARE TWO ISSUES IN THE ANALYSIS OF TRANSFER PRICING FOR INTRA-GROUP SERVICES. ONE ISSUE IS WHETHER INTRA-GROUP SERVICES HAVE IN FACT BEEN PROVIDED. THE OTHER ISSUE IS WHAT THE INTRA- GROUP CHARGE FOR SUCH SERVICES FOR TAX PURPOSES SHOULD BE IN ACCORDANCE WITH THE ARM'S LENGTH PRINCIPLE. 7.6 UNDER THE ARM LENGTH PRINCIPLE, THE QUESTION WHETHER AN INTRA-GROUP SERVICES HAS BEEN RENDERED WHEN AN ACTIVITY IS PERFORMED FOR ONE OR MORE GROUP MEMBERS BY ANOTHER GROUP MEMBER SHOULD DEPEND ON WHETHER THE ACTIVITY PROVIDES A RESPECTIVE GROUP MEMBER WITH ECONOMIC OR COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION. THIS CAN BE DETERMINED BY CONSIDERING WHETHER AN INDEPENDENT ENTERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY IF PERFORMED FOR IT BY AN INDEPENDENT ENTERPRISE OR WOULD HAVE PERFORMED THE ACTIVITY IN-HOUSE FOR ITSELF. IF THE ACTIVITY IS NOT ONE FOR WHICH THE INDEPENDENT ENTERPRISE WOULD HAVE BEEN WILLING TO PAY OR PERFORM FOR ITSELF, THE ACTIVITY ORDINARILY SHOULD NOT BE CONSIDERED AS AN INTRA-GROUP SERVICE UNDER THE ARM'S LENGTH PRINCIPLE. ' 6.5 AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, THE PANEL IS OF THE VIEW THAT IT WAS OBLIGATORY ON THE PART OF THE PARENT COMPANY TO PROVIDE TECHNICAL SUPPORT SERVICES UNDER THE TECHNI CAL COLLABORATION CONTRACT AND THE ASSESSEE WOULD NOT HAVE AVAILED SUCH SERVICES HAD IT BEEN AN INDEPENDENT ENTERPRISE. WE ARE, THEREFORE, AN AGREEMENT WITH THE CONCLUSION DRAWN BY THE TPO THAT EVEN IF THE SERVICES WERE RENDERED TO THE ASSESSEE, THEY WERE IN THE NATURE OF DUPLICATE SERVICES AND INDEPENDENT ENTERPRISE WOULD NOT HAVE PAID ANY SEPARATE CONSIDERATION FOR SUCH SERVICES. ACCORDING LY, 10 I.T.A.NO.166/DEL/2013 PANEL UPHOLDS THE ACTION OF TPO, I.E., THE ALP OF S UCH SERVICES WAS RS. 65,06,275/- AND THE OBJECTION RAIS ED BY THE ASSESSEE IS REJECTED. 4.3 IN RESPECT OF EXCLUSION OF THE PAYMENT MADE TO THIRD-PARTY AMOUNTING TO RS.48,84,310/-, THE DRP OBSERVED THAT THE ASSESSEE HAS MOVED AN APPLICATION UNDER SECTION 154 OF THE ACT BEFORE THE LD. AO TO EXCLUDE IT FROM THE VALUE OF INTERNATIONAL TRANSACT ION. THE DRP DIRECTED TO LD.AO/TPO TO DISPOSE OF THE APPLICATION OF THE ASSESSEE AND TO EXCLUDE SUCH THI RD PARTY PAYMENTS FROM THE VALUE OF INTERNATIONAL TRANSACTION AFTER VERIFICATION. 4.4 REGARDING THE ASSESSEES ARGUMENT THAT ONLY DEPRECIATION ON THE AMOUNT CAPITALISED TO THE FIXED ASSETS SHOULD BE DISALLOWED, WAS AGREED BY THE DRP. THE DRP THUS HELD AS UNDER: 6.7 REGARDING THE OTHER ARGUMENT THAT, ONLY THE DEPRECIATION ON THE AMOUNT CAPITALIZED TO FIXED ASS ET SHOULD BE DISALLOWED, WE ARE IN AGREEMENT WITH THE CONTENTION OF THE ASSESSEE. THE TPO IS DIRECTED TO REDUCE THE AMOUNT CAPITALIZED TO FIXED ASSETS FROM THE 'BLOCK OF ASSETS' AND RE-COMPUTE THE DEPRECIATION. THE BALANCE AMOUNT, I.E., RS. 1,28,29,790 [3,01,70,776/ - (2,22,25,296- 48,84,310)] SHALL BE ADDED TO THE INCOME OF THE ASSESSEE. 4.5 BEFORE US THE LD.AR SUBMITTED AS UNDER: THAT THE ASSESSEE IS ENTITLED TO RECEIVE TECHNICAL ASSISTANCE IN THE PROCESS OF MANUFACTURING POWER STEERING AND ALSO HAS A NONEXCLUSIVE RIGHT AND LICENSE FOR THE KNOW-HOW AND INTELLECTUAL PROPERTY 11 I.T.A.NO.166/DEL/2013 RIGHTS REFERRED TO IN THE AGREEMENT DATED 16.10.2006, ENTERED INTO BY THE ASSESSEE WITH ITS AE; THAT ARTICLE 7 OF THE AGREEMENT PROVIDES THAT THE ASSESSEE SHALL RECEIVE TECHNICAL TRAINING AND TECHNICAL ASSISTANCE FROM THE AE AND THE AE SHALL CAUSE THE TECHNICIANS TO BE DISPATCHED FOR THE ASSISTANCE OF THE ASSESSEE. IT IS IN LIEU OF THESE SERVICES, THAT THE ASSESSEE HAS PAID RS.3,01,70,776/-TO ITS AE. THAT THE REVENUE AUTHORITIES CANNOT VENTURE INTO THE QUESTION OF COMMERCIAL EXPEDIENCY, AS IT IS THE BUSINESSMAN WHO TAKES THE DECISION DEPENDING UPON THE PECULIAR NATURE OF THE BUSINESS. LD.AR RELIED UPON THE FOLLOWING DECISIONS TO SUBSTANTIATE HIS SUBMISSIONS WHICH ARE AS BELOW: A) NARRINGDAS SUMJMAL PROPERTIES VS. CIT REPORTED IN 127 ITR 221 B) CIT VS. EKL APPLIANCES LTD REPORTED IN (2012) 209 TAXMAN 200 (DELHI) C) REEBOK INDIA COMPANY VS ACIT IN ITA NO. 5857/DEL/2012 D) DRESSER-RAND INDIA PRIVATE LIMITED VS. ACIT, ITA NO. 8753/MUM/2010 E) IT HAS BEEN SUBMITTED BY THE LD. A.R. THAT THE SERVICES AVAILED FROM THE AE BY ASSESSEE HAS NOT BEEN AVAILED FROM ANY INDEPENDENT PARTIES. FURTHER HE SUBMITTED THAT THE AE IS NOT RENDERING 12 I.T.A.NO.166/DEL/2013 SUCH SERVICES TO ANY OTHER AE/INDEPENDENT PARTIES. LD.AR SUBMITTED THAT THE TRANSACTION FOR ROYALTY AND TECHNICAL SUPPORT SERVICE FEES CANNOT BE CONSIDERED DISTINCT. THE LD. AR RELIES UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S HERO MOTO CORP LTD VERSUS ACIT IN ITA NO. 5130/DEL/2010. THE LD. A R SUBMITTED THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AE ARE CLOSELY LINKED WITH EACH OTHER AND HAS TO BE ANALYSED BY WAY OF COMBINED TRANSACTION APPROACH 5. ON THE CONTRARY THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW THAT IT HAS ACTU ALLY RECEIVED THE SERVICES FOR WHICH IT HAS MADE THE PAY MENT OF TECHNICAL FEES. FURTHER THE LD. DR SUBMITTED THAT T HE ASSESSEE HAS BEEN UNABLE TO DEMONSTRATE THAT AN INDEPENDENT ENTITY WOULD HAVE MADE SUCH A PAYMENT UNDER SIMILAR CIRCUMSTANCES. HE ARGUED THAT THE BENCHMARKING PROCESS CARRIED OUT BY THE ASSESSEE IS NOT ADEQUATE. THE LD. DR SUPPORTED THE ADDITIONS MADE B Y THE LD.TPO. HE PLACED RELIANCE ON THE FOLLOWING JUDGEMENTS: A) M/S GEM PLUS INDIA PRIVATE LIMITED VERSUS ACIT REPORTED IN 2010-TIOL-55-ITAT-BANG-TP; 13 I.T.A.NO.166/DEL/2013 B) CRANES SOFTWARE INTERNATIONAL LTD VS. DCIT REPORTED IN (2014) 52 TAXMAN.COM 19 (BANGALORE-TRIB.) C) M/S GILLETTE INDIA LTD VERSUS ACIT REPORTED IN 2015 - TIOL-340-ITAT-JAIPUR-TP D) BOMBARDIER TRANSPORTATION INDIA PRIVATE LIMITED VERSUS DCIT IN ITA NO. 1626/DEL/2015 (ORDER DATED 4.11.2015) 6. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW, THE SUBMISSIONS MADE BY BOTH THE SIDES AND THE JUDGEMENTS AND THE RELEVANT PAGES OF THE PAPER BOOK RELIED UPON. 6.1 THE PRINCIPAL ACTIVITY OF THE ASSESSEE IS TO MANUFACTURE THE AUTOMATED PRODUCT BEING POWER STEER ING. ON PERUSAL OF THE TECHNICAL COLLABORATION CONTRACT AND TECHNICAL PERSONNEL DISPATCH AGREEMENTS DATED 16/10 / 2006 (PLACED AT 31 TO 58 OF VOLUME I OF PAPER BOOK) , IT IS OBSERVED THAT THE ASSESSEE DEPENDS UPON THE TECHNIC AL SUPPORT RECEIVED FROM THE TECHNICAL PERSONNEL SENT BY THE AE. IT IS ALSO CLEAR THAT, HAD THE ASSESSEE NOT ENT ERED INTO A TECHNICAL COLLABORATION AGREEMENT WITH ITS AE, IT WOULD NOT HAVE BEEN ABLE TO MAKE ANY SALES WHATSOEVER USI NG THE TECHNOLOGY. THESE AGREEMENTS ARE APPROVED BY TH E MINISTRY OF COMMERCE, DEPARTMENT OF INDUSTRIAL POLI CY AND PROMOTION, INCLUDING THE PAYMENT OF ROYALTY AND LUMP SUM TECHNICAL KNOW-HOW FEE (CERTIFICATE PLACED AT PAGE 65 TO 71 OF PAPER BOOK VOLUME 1). ARTICLE 5 OF THE TECHNICAL COLLABORATION CONTRACT PROVIDES THAT, TEC HNICAL 14 I.T.A.NO.166/DEL/2013 ASSISTANCE WOULD BE PROVIDED BY THE AE, WHICH SHALL INCLUDE, DISPATCH AND TRAINING OF TECHNICAL PERSONN EL. THE VERY EXISTENCE OF THE ASSESSEES BUSINESS DEPENDED UPON THE TECHNICAL COLLABORATION CONTRACT AND THE TECHNI CAL PERSONNEL DISPATCH AGREEMENTS. 6.2 FURTHER THE TRANSFER PRICING STUDY (PLACED AT P AGE 164 OF THE PAPER BOOK VOLUME 1, IN PARA 4.7) EXPLAI NS THE NATURE AND TERMS OF THE INTERNATIONAL TRANSACTION E NTERED INTO BY THE ASSESSEE WITH ITS AE. THE ASSESSEE AS P ER THE TP STEADY IS DEPENDENT UPON ITS AE, EVEN FOR CARRYI NG OUT RESEARCH AND DEVELOPMENT ACTIVITIES AND PROVIDING MANUFACTURING TECHNOLOGY. FURTHER AT PAGES 253 TO 2 81 OF THE PAPER BOOK NARRATES THE DETAILS OF THE TECHNICA L FEES PAID FOR THE YEAR UNDER CONSIDERATION. WHENEVER INTERNATIONAL TRANSACTION OF SUCH A NATURE IS UNDER TAKEN, IT IS A COMBINATION OF TECHNICAL KNOW-HOW, ROYALTY AND TECHNICAL ASSISTANCE THROUGH DEPUTATION OF EMPLOYEE S. MERELY BY IMPORTING MACHINERY OR DESIGNS AND DRAWIN GS, IT CANNOT BE SAID THAT THE ASSESSEE WOULD BE COMPET ENT TO MAKE USE OF SUCH MACHINERY. NO DOUBT THAT THE TECHN ICAL KNOW-HOW OF THE ABLE PERSONNEL IS NEEDED UNDER NORM AL CIRCUMSTANCES. 6.3 IT IS NOTICED THAT THE TPO IN PARA 4 OF HIS ORD ER, HAS RECORDED THAT THE ASSESSEE HAS MADE FURTHER SUBMISS IONS BY LETTER DATED 07/10/2011. ALONG WITH THE SAID LET TER THE ASSESSEE HAS FURNISHED INVOICES THAT HAS BEEN RAISE D. THE LD. TPO THEN OBSERVED AS UNDER: 15 I.T.A.NO.166/DEL/2013 4. THE ASSESSEE HAS MADE A FURTHER SUBMISSION ON 07.10.2011 WHEREIN HE HAS SUBMITTED SOME DOCUMENTS WHICH ARE CLAIMED TO BE EVIDENCE OF THE SERVICE HAVING BEEN RECEIVED. THE DOCUMENTS ARE INVOICES THAT HAVE BEEN RAISED BY THE ASSESSEE. THE FACT THAT THE ASSESSEE WOULD HAVE BEEN IN THE POSSESSION OF THESE INVOICES WAS NEVER IN DOUBT. TH E POINT THAT IS BEING EXAMINED HERE IS WHETHER THE ASSESSEE ACTUALLY NEEDED THESE SERVICES AND WHETHER THEY HAVE BEEN BENCH MARKED CORRECTLY. ON BOTH COUNTS THE ANSWER IS IN THE NEGATIVE. THE BENCHMARKING PROCESS OF THE ASSESSEE HAS BEEN FOUND TO BE INCORRECT. THE ASSESSEE HAS NOT BEEN AB LE TO SHOW THAT IT ACTUALLY REQUIRED THESE SERVICES AF TER IT HAS RECEIVED ENOUGH INPUT AFTER PAYING FOR ROYALTY ETC. THE ASSESSEE MUST REALISE THAT THE AE IS BOUND TO PROVIDE SOME SERVICES TO IT TO PROTECT ITS INHERENT INTEREST IN THE ASSESSEE'S BUSINESS. 6.4 THE EVIDENCE HAS BEEN SUBMITTED BEFORE THE AUTHORITIES BELOW SHOWING RENDERING OF CERTAIN SERV ICES AGAINST THE PAYMENTS MADE TO THE AE. A COORDINATE B ENCH OF THIS TRIBUNAL IN THE CASE OF MC CAN ERICKSON IND IA (P.) LTD. VS ACIT REPORTED IN (2012) 24 TAXMAN.COM 21 HA S HELD AS UNDER: IN THE ARENA IN WHICH THE ASSESSEE IS FUNCTIONING, IT WILL BE DIFFICULT TO IMAGINE A SUCCESSFUL BUSINESS ENTITY IN THE GLOBAL ENVIRONMENT WITHOUT RECEIPT OF THE SERVICES WHICH CARRIES HUGE INTRINSIC AND CREATIVE VALUE. IT IS ONLY A PARTICULAR BUSINESS EXPERT WHO CAN EVALUATE THE TRUE INTRINSIC AND CREATIVE VALUE OF S UCH SERVICES. IN VIEW OF THESE FACTS IT SHALL BE JUST T O AVOID ANY GUESSWORK TO EVALUATE OR JUDGE VALUE OF THESE SERVICES IN ISOLATION OR INDIVIDUALLY. 6.5 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF 16 I.T.A.NO.166/DEL/2013 HIVE COMMUNICATIONS (P.) LTD., VS. CIT REPORTED IN (2011) 201 TAXMAN 99 HAS HELD THAT THE LEGITIMATE BUSINESS NEEDS OF THE COMPANY MUST BE CHARGED FROM THE VIEWP OINT OF THE COMPANY ITSELF AND MUST BE VIEWED FROM THE P OINT OF VIEW OF A PRUDENT BUSINESSMAN. HONBLE COURT HAS OBSERVED AS UNDER: IT IS NOT FOR THE ASSESSING OFFICER TO DICTATE WHA T THE BUSINESS NEEDS OF THE COMPANY SHOULD BE AN RE IS ONLY TO JUDGE THE LEGITIMACY OF THE BUSINESS NEEDS OF THE COMPANY FROM THE POINT OF VIEW OF A PRUDENT BUSINESSMAN. THE BENEFIT DERIVED OR ACCRUING TO THE COMPANY MUST ALSO BE CONSIDERED FROM THE ANGLE OF A PRUDENT BUSINESSMAN. THE TERM 'BENEFIT' TO A COMPANY IN RELATION TO ITS BUSINESS, IT MUST BE REMEMBERED, HAS A VERY WIDE CONNOTATION AND MAY NOT NECESSARILY BE CAPABLE OF BEING ACCURATELY MEASURED IN TERMS OF POUND, SHILLINGS AND PENCE IN ALL CASES. BOTH THESE ASPECTS HAVE TO BE CONSIDERED JUDICIOUSLY, DISPASSIONATELY WITHOUT ANY BIAS OF AN Y KIND FROM THE VIEW-POINT OF A REASONABLE AND HONEST PERSON IN BUSINESS. 6.6 SO FAR AS THE SEGREGATION OF INTERNATIONAL TRAN SACTION IS CONCERNED, IT IS ASSUMED THAT THE VARIOUS INTERN ATIONAL TRANSACTION WERE ENTERED INTO WITH RESPECT TO THE F INAL COMMERCIAL VENTURE UNDERTAKEN BY THE ASSESSEE, BE I T THE MANUFACTURE AND THE SALE OF THE GOODS OR PROVISION OF SERVICES BY IT. THE ASSESSEE HAS PRICED THE ROYALTY AND THE TECHNICAL SERVICES PROVIDED BY THE AE SEPARATELY, A ND THEY WERE ALL PROVIDED UNDER 2 DIFFERENT AGREEMENTS WHIC H CONSTITUTES AN INTERNATIONAL TRANSACTION. LD. TPO O N ONE BREATH DOES NOT DOUBT THE EXISTENCE OF SERVICES BEI NG RENDERED BY THE PERSONNEL SENT BY THE AE, WHILE ON THE 17 I.T.A.NO.166/DEL/2013 NEXT BREATH HE HAS DENIED THAT TECHNICAL SUPPORT FE ES PAID BY THE ASSESSEE TO ITS AE, ON THE GROUND THAT NO INDEPENDENT ENTERPRISE WOULD PAY SUCH EXPENSES UNDE R SIMILAR CIRCUMSTANCES. 6.7 IN OUR VIEW, NEITHER THIS CAN BE A GROUND FOR REJECTING THE CLAIM FOR DEDUCTION NOR IT CAN BE A G ROUND FOR ASSUMING THAT THE TECHNICAL SERVICE FEES PAID B Y THE ASSESSEE TO THE AE IS NOT AT ARMS-LENGTH. THE DOCUMENTS/EVIDENCE SUBMITTED BY THE ASSESSEE WIDE LETTER DATED 07/10/2011 HAS NOT BEEN ANALYSED BY TH E TPO. IT CANNOT BY ANY STRETCH OF IMAGINATION BE HE LD THAT THE EVIDENCES ARE IRRELEVANT. FOR EXAMPLE THE ASSES SEE HAS PRODUCED ALL THE INVOICES AND THE PROOF OF PAYMENTS IN RESPECT OF THE SERVICES RENDERED BY THE EMPLOYEES O F THE AE. ON ONE HAND COMMERCIAL EXPEDIENCY IS RECOGNISED BUT ON THE OTHER HAND IT HAS BEEN HELD THAT THE TRANSAC TIONS WERE REALLY NOT FOR THE BENEFIT OF THE ASSESSEE. 6.8 WE ARE THEREFORE INCLINED TO SET ASIDE THIS ISS UE TO THE LD. TPO FOR DETERMINATION THE ALP IN ACCORDANC E WITH THE RATIO LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF EKL APPLIANCES LTD REPORTED AT 209 TAXMAN.COM 200, WHEREIN IT HAS BEEN HELD AS UNDER: 19. THERE IS NO REASON WHY THE OECD GUIDELINES SHOULD NOT BE TAKEN AS A VALID INPUT IN THE PRESENT CASE IN JUDGING THE ACTION OF THE TPD. IN FACT) THE CIT (APPEALS) HAS REFERRED TO AND APPLIED THEM AND HIS DECISION HAS BEEN AFFIRMED BY THE TRIBUNAL. THESE GUIDELINES) IN A DIFFERENT FORM) HAVE BEEN RECOGNIZ ED 18 I.T.A.NO.166/DEL/2013 IN THE TAX JURISPRUDENCE OF OUR COUNTRY EARLIER. IT HAS BEEN HELD BY OUR COURTS THAT IT IS NOT FOR THE REVE NUE AUTHORITIES TO 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 THE ASSESS EE CAN INCUR. 21. THE POSITION EMERGING FROM THE ABOVE DECISIONS IS THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO SHOW T HAT ANY LEGITIMATE EXPENDITURE INCURRED BY HIM WAS ALSO INCURRED OUT OF NECESSITY. IT IS ALSO NOT NECESSARY FOR THE ASSESSEE TO SHOW THAT ANY EXPENDITURE INCURRED BY HIM FOR THE PURPOSE OF BUSINESS CARRIED ON BY HI M HAS ACTUALLY RESULTED IN PROFIT OR INCOME EITHER IN THE SAME YEAR OR IN ANY OF THE SUBSEQUENT YEARS. THE ON LY CONDITION IS THAT THE EXPENDITURE SHOULD HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY' FOR THE PURPOSE O F BUSINESS AND NOTHING MORE. IT IS THIS PRINCIPLE THA T INTER ALIA FINDS EXPRESSION IN THE OECD GUIDELINES) IN THE PARAGRAPHS WHICH WE HAVE QUOTED ABOVE. 6.9 AS WE ARE REMANDING THE MATTER, WE DIRECT THE LD. TPO TO CONSIDER THE EVIDENCE SUBMITTED BY THE ASS ESSEE IN THE PAPER BOOK AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. 6.10 ACCORDINGLY, GROUNDS NO.2.1 AND 2.2 OF ASSESSE ES APPEAL STAND ALLOWED FOR STATISTICAL PURPOSES. 6.11 IN RESPECT OF GROUND NO. 2.3, THE ASSESSEE HAD ADMITTED AN INADVERTENT MISTAKE, THAT HAS CREPT IN FORM 3CEB UNDER THE HEAD TECHNICAL SUPPORT SERVICE FEE P AID TO AE, AGAINST WHICH THE ASSESSEE HAD FILED A RECTIFIC ATION APPLICATION DATED 30.10.2012 BEFORE THE LD.AO/TPO. IT IS FURTHER OBSERVED THAT ALONG WITH THIS APPLICATION T HE ASSESSEE HAS ALSO FILED CONFIRMATION OF THE AE THE PARENT 19 I.T.A.NO.166/DEL/2013 COMPANY M/S. SHOWA CORPORATION, JAPAN (26 TO 28 OF THE SUPPLEMENTARY PAPER BOOK), WHICH SUGGESTS THAT M/S. KOSHIN TRADING CO. LTD., IS NOT AN AE OF THE PARENT COMPANY IN JAPAN. THE DRP HAD DIRECTED THE LD.AO/TP O TO DEAL WITH THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE AND TO EXCLUDE THE SAME FROM THE INTERNATI ONAL TRANSACTION SUBJECT TO VERIFICATION. HOWEVER THE LD . AO HAS NOT COMPLIED WITH THE DIRECTIONS OF THE DRP. ACCORDINGLY THE GROUND IS SET ASIDE TO THE LD. AO/T PO TO EXCLUDE THE PAYMENTS MADE BY THE ASSESSEE TO UNRELA TED PARTY FROM THE TECHNICAL SUPPORT FEE PAID BY THE AS SESSEE TO ITS AE AFTER VERIFICATION AS DIRECTED BY THE DRP . 6.12 IN RESPECT OF GROUND NO. 2.4 RAISED BY THE ASS ESSEE, THE DRP HAD DIRECTED THE LD.AO TO REDUCE THE AMOUNT CAPITALISED TO FIXED ASSETS FROM THE BLOCK OF ASSET S. THE RELEVANT PARA OF THE DRP HAS BEEN EXTRACTED IN PARA 4.4 ABOVE. IT IS OBSERVED THAT THE LD. AO HAS NOT FOLLO WED THE DIRECTIONS OF THE DRP. ACCORDINGLY THIS GROUND IS SET ASIDE TO LD. TPO/AO TO DO THE WORKING AS PER THE DR P DIRECTION. 7. CORPORATE TAX ISSUES GROUND NO. 3 : 7.1 THE LD. AO NOTICED THAT ASSESSEE HAD MADE SALES AMOUNTING TO RS.50,56,99,152/- TO MARUTI UDYOG LTD. THE AO NOTICED THAT AS PER THE ASSESSEE'S SUBMISSIO NS, IT HAD MADE SALES AMOUNTING TO RS.50,56,99,152/- TO 20 I.T.A.NO.166/DEL/2013 MARUTI UDYOG LTD. ON THE BASIS OF INFORMATION RECEI VED BY THE AO FROM MARUTI UDYOG-LTD, U/S 133(6) THAT THE ASSESSEE HAD MADE SALES OF RS.75,04,70,614/-TO MARU TI UDYOG LTD., THE AO ASKED ASSESSEE TO SHOW CAUSE AS TO WHY ITS SALES SHOULD NOT BE INCREASED BY AN AMOUNT OF RS.24,47,71,462/- AND ADDED BACK TO ITS INCOME. IN REPLY DATED 26.12.2011, THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE FIGURE OF RS.75,04,70,614/- SHOWN BY MARUT I UDYOG LTD. DID NOT ENTIRELY REPRESENT THE TURNOVER AND ALSO INCLUDED AMOUNTS ON ACCOUNT OF VAT, EXCISE DUT Y, TURNOVER OF LAST YEAR ETC. WHEREAS THE SALES SHOWN BY THE ASSESSEE TO MARUTI UDYOG LTD. WERE NET OF SUCH AMOU NTS, APART FROM THIS, THERE WERE SOME CLERICAL MISTAKES. 7.2 THE LD.AR SUBMITTED THAT RECONCILIATION OF THE TURNOVER WITH THE WORKING OF MARUTI UDYOG LTD AS PROVIDED BY THEM UNDER 133 (6) OF THE INCOME TAX AC T HAS BEEN CALCULATED AND PLACED AT PAGE 301 OF THE PAPER BOOK VOLUME II, WHICH IS AS UNDER: PARTICUALRS AMOUNT RS. AMOUNT RS. SALES AS PER MARUTI YDYOG LTD. (MUL) ADD: SALES NOT CONSIDERED BY YOU FOR GURGAON UNIT OF MUL LESS: AMOUNT EXCESS TAKEN BEING THE AMOUNT OF OPENING BALANCES OF EACH QTR WRONGLY CONSIDERED AS TURNOVER BY YOU (DETAIL AS BELOW) LESS AMOUNT OF PRICE DECREASE OF RS.22224454 WRONGLY TAKEN AS PRICE INCREASE LESS: EXCISE DUTY LESS: SALES TAX LESS: AMOUNT OF TURNOVER FOR 2006- 66,135,920 44,448,908 88,084,014 23,353,507 750,470,615 1,634,110 752,104,725 21 I.T.A.NO.166/DEL/2013 07 WRONGLY ADDED TO CURRENT YEAR SALES LESS: AMOUNT OF PRICE DECREASE TAKEN TWICE BY YOU AND ALREADY RECTIFIED AS ABOVE TURNOVER AS PER YOUR WORKING TURNOVER AS PER THE ASSESSEE REJECTION ETC. NOT ACKNOWLEDGED BY THE ASSESSEE AS ON 31.03.08 2,391,133 22,224,454 246,637,936 505,466,789 505,699,152 (232,363) DETAIL OF OPENING BALANCES OF QUARTERLY DIFFERENCES: SUMMARY QTR.4 QTR.3 QTR.2 QTR.1 TOTAL 57,286,036.11 3,597,941.00 5,251,942.89 - 66,135,920.00 7.3 THE LD.AR SUBMITTED THAT THE AO HAS ACCEPTED SO ME OF THE ITEMS OF THE RECONCILIATION. HOWEVER HE HEL D THAT THE RECONCILIATION FILED BY THE ASSESSEE IN RESPECT OF EXCISE DUTY, SALES TAX, AMOUNT OF PRICE DECREASE WRONGLY T AKEN AS PRICE INCREASE WAS NOT SUPPORTED WITH ANY EVIDENCE. THE LD. AR HAS SUBMITTED THAT THE ASSESSEE HAD FILED ADDITIONAL EVIDENCES IN SUPPORT OF THE SAME WHICH W AS SENT TO THE ASSESSING OFFICER FOR REMAND REPORT. TH E RELEVANT PORTION OF THE REMAND REPORT HAD BEEN REPRODUCED AT PARA 2.3 OF THE DRP ORDER WHICH IS AS UNDER: 2.3 IN THE REMAND REPORT THE AO AFTER VERIFICATION HAS STATED THAT EXCISE DUTY OF RS.8,80,84,014/- HAS BEE N VERIFIED FROM THE RECORDS AND THE SAME HAS BEEN PAI D. HE ALSO STATED THAT THE SALE OF RS.2,33,53,507/- IS ALSO VERIFIABLE FROM THE SALE TAX ASSESSMENT ORDER AND, THEREFORE, THE CLAIM OF THE ASSESSEE IS IN ORD ER. IN RESPECT OF THE OTHER ITEMS OF RECONCILIATION AS GIV EN IN 22 I.T.A.NO.166/DEL/2013 THE ABOVE CHART THE AO HAS NOT ACCEPTED THE SUBMISSIONS MADE BY THE ASSESSEE. HE HAS SUBMITTED THAT THE PRICE DECREASE HAS BEEN TAKEN AS PER THE BOOKS OF MARUTI UDYOG LTD., WHEREIN AN AMOUNT OF RS.2,22,24,454/- HAS BEEN SHOWN AS DEBIT AMOUNT IN THE ACCOUNTS OF M/S SHOWA INDIA PVT. LTD. REGARDING THE ADDITIONAL PRICE DECREASE EFFECT OF RS. 4,44,48,908/- IT SEEMS IT IS THE RESULT OF THE DOUB LE EFFECT OF THE PRICE DECREASE. HOWEVER, THE MECHANIS M OF PRICE DECREASE IS NOT TRANSPARENT, AS THERE IS N O SPECIFIC CLAUSE IN THE AGREEMENT IN THIS REGARD ENT ERED BETWEEN M/S MARUTI UDYOG LTD. AND THE ASSESSEE. MISCELLANEOUS REJECTIONS OF RS.2,32,363/- ARE NOT VERIFIABLE NEITHER FROM THE DETAILS GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING NOR FROM THE SUBMISSIONS GIVEN BEFORE THE DISPUTE RESOLUTION PANEL. THE ASSESSEE DID NOT SUBMIT THE REQUIRED DETAILS DURING THE PROCEEDINGS ALONG WITH BACKUP FOR THE RECONCILIATION STATEMENT. 7.4 THE LD.AR SUBMITTED THAT THE DRP/TPO/AO, DID NO T APPRECIATE THE DETAILS OF THE PRICE DECREASE FILED BY THE ASSESSEE AND THE LEDGER ACCOUNT OF MARUTI UDYOG LTD(PLACED AT PAGES 302 TO 331 OF PAPER BOOK VOLUME II), SHOWING THE SALES FOR THE YEAR UNDER CONSIDERATION. THE DRP GAVE RELIEF TO ANY EXTENT OF RS.11,14,37,512/-. 7.5 ON THE CONTRARY THE LD. DR RELIED UPON THE ORDE R OF THE DRP . 7.6 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH TH E PARTIES AND THE ORDERS PASSED BY THE AUTHORITIES BE LOW. IT IS OBSERVED THAT THE AUTHORITIES BELOW HAVE NOT CON SIDERED THE EVIDENCE FILED BY THE ASSESSEE IN THE RIGHT PER SPECTIVE THE CALCULATION OF RECONCILIATION SUBMITTED BY THE ASSESSEE AT PAGE 301 OF THE PAPER BOOK VERY CLEARLY SHOWS TH E 23 I.T.A.NO.166/DEL/2013 DIFFERENCE IN THE TURNOVER DUE TO VARIOUS STATUTORY PAYMENTS THAT THE ASSESSEE HAS COLLECTED FROM M/S M ARUTI UDYOG LTD. THE STATUTORY PAYMENTS AS SUBMITTED BY T HE ASSESSEE HAS BEEN PAID TO THE GOVERNMENT ACCOUNT WH ICH CAN BE VERIFIED BY THE AUTHORITIES VERY EASILY. 7.7 WE ARE, THEREFORE, INCLINED TO SET ASIDE THIS I SSUE TO THE FILE OF THE LD. AO FOR VERIFICATION OF THE DETA ILS FILED BY THE ASSESSEE AND TO ALLOW THE CLAIM OF THE ASSESSEE AS PER LAW. ACCORDINGLY THIS GROUND FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO. 4 8.1 FROM THE DETAILS FILED BY THE ASSESSEE ALONG W ITH THE RETURNS THE LD. AO OBSERVED THAT THERE WERE SUNDRY CREDITORS. ACCORDINGLY THE LD. AO ISSUED NOTICE UND ER 133 (6) TO RANDOM CREDITORS FOR VERIFICATION OF PURCHAS ES AND BALANCE CONFIRMATIONS. OUT OF THE NOTICES SENT BY T HE LD. AO FOLLOWING PARTIES DID NOT FILE CONFIRMATION WHIC H ARE AS UNDER: NAME DESCRIPTION AMOUNT RS. VEE GEE INDUSTRIAL ENTERPRISES PURCHASE 22,95,040/- PROGRESSIVE TOOLS AND COMPONENTS PVT. LTD. PURCHASE 64,65,136/- PROGRESSIVE TOOLS AND COMPONENTS PVT. LTD. CREDITOR 20,52,430/- TOTAL 1,08,12,606/- 8.2 THE LEARNING AO, THEREFORE, MADE AN ADDITION OF RS.1,80,12,606/-. 24 I.T.A.NO.166/DEL/2013 8.3 THE DRP OBSERVED AS UNDER: 3.2 WE HAVE CONSIDERED THE MATTER. SINCE THE ASSESSEE COULD NOT FILE CONFIRMATIONS FROM THE ABOV E MENTIONED PARTIES AND THEY ALSO DID NOT RESPOND TO THE NOTICES U/S 133(6) ISSUED BY THE AO, MERE FILIN G OF COPIES OF THEIR ACCOUNTS AND COPIES OF PURCHASE BIL LS DOES NOT PROVE THE GENUINENESS OF PURCHASES FROM THESE PARTIES. THEREFORE, THE AO'S PROPOSED ACTION IS UPHELD. HOWEVER, IT IS NOTICED THAT IN RESPECT OF M/S PROGRESSIVE TOOLS AND .COMPONENT PVT. LTD. THE AO HAS ADDED RS.64,65,136/- BEING PURCHASES FROM THIS PARTY AND ALSORS.20,52,430/-' ON ACCOUNT OF UNCONFIRMED CREDIT BALANCE ON 31.03.2008 OF THIS PARTY. SINCE THE CREDIT BALANCE ON 31.03.2008 OF TH IS PARTY IS AFTER TAKING INTO ACCOUNT PURCHASES OF RS.64,65,136/- FROM THIS PARTY, THERE IS A DOUBLE ADDITION TO THE EXTENT OF RS.20,52,430/- AS ADDITIO N OF RS.64,65,136/- IS BEING UPHELD IN RESPECT OF PURCHASES FROM THIS PARTY. THUS OUT OF PROPOSED ADDITION OF RS.L,08,12,606/-, ADDITION OF THE EXTEN T OF RS.87,60,I 76/- (1,08,12,606 - 20,52,430) IS UPHELD . 8.4 THE LD.AR SUBMITTED THAT THE TRANSACTIONS OF PURCHASE FROM THESE PARTIES HAVE BEEN MADE IN THE NORMAL COURSE OF THE BUSINESS BY THE ASSESSEE, WHIC H ARE DULY SUPPORTED BY BILLS FOR PURCHASES AND THAT THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS BY THE ASSESSEE. HE SUBMITTED THAT THESE EVIDENCES HAV E BEEN FILED WHICH WERE REMANDED TO THE AO. HOWEVER T HE LD. AO HAS NOT CONSIDERED THE SAME. 8.5 ON THE CONTRARY THE LD. DR RELIED UPON THE ORDE R PASSED BY THE AUTHORITIES BELOW AND THE REMAND REPO RT 25 I.T.A.NO.166/DEL/2013 8.6 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH TH E PARTIES AS WELL AS THE ORDERS PASSED BY THE AUTHORI TIES BELOW. IT IS OBSERVED BY THE DRP THAT THE AO HAS AD DED CERTAIN PURCHASES FROM THESE PARTIES. FURTHER ADDI TIONS HAVE BEEN MADE ON ACCOUNT OF CONFIRMED CREDIT BALAN CES FROM THE SAME PARTIES. IT IS ALSO OBSERVED THAT THE DETAILS/EVIDENCES FILED BY THE ASSESSEE (PAGES 650 TO 1093 OF PAPER BOOK VOLUME III) HAS NOT BEEN VERIFIED AND CONSIDERED BY THE LD. AO. 8.7 WE ARE THEREFORE INCLINED TO SET ASIDE THE ISSU E TO THE FILES OF THE LD. AO FOR CONSIDERING THE EVIDENCES F ILED BY THE ASSESSEE AND TO ALLOW THE CLAIM AS PER LAW AFTE R PROPER VERIFICATION. ACCORDINGLY THIS GROUND REACHED BY TH E ASSESSEE STANDS STATISTICALLY ALLOWED. 9. GROUND NO. 5 9.1 THE LD. AO NOTICED THAT ASSESSEE HAS DEBITED A SUM OF RS.28,78,262/- ON ACCOUNT OF GARDENING EXPENSES WHICH WAS CLAIMED BY THE ASSESSEE UNDER THE HEAD RE PAIR AND MAINTENANCE-BUILDING. THE LD. AO FOLLOWING THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS. JAGPAL UDYOG LTD DISALLOWED THE GARDENING EXPENSES. 9.2 THE LD. DRP HELD AS UNDER: 5.2 IT WAS SUBMITTED BY THE ASSESSEE THAT GARDENIN G EXPENSES WERE INCURRED AT THE FACTORY PREMISES TO MAINTAIN FLORA AND FAUNA OF THE FACTORY COMPLEX. IT WAS SUBMITTED THAT THESE EXPENSES WERE INCURRED 26 I.T.A.NO.166/DEL/2013 WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEE'S BUSINESS AND THE RATIO OF THE DECISION O F RAJASTHAN HIGH COURT CITED BY THE AO WAS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN THE REMAND REPORT DATED 20.09.2012, THE ASSESSING OFFICER SUBMITTED THAT THE ASSESS'EE HAS PRODUCED ONLY BILLS AND VOUCHERS TO PROVE THIS EXPENDITURE. THE ASSESSEE DID NOT GIVE ANY DETAILS ABOUT THE 'LOCATI ON OF THE GARDEN OR THE STATUTORY REQUIREMENTS OF MAINTENANCE OF THE GARDEN. ON GOING THROUGH THE BIL LS, IT WAS ALSO OBSERVED THAT THE EXPENDITURE PERTAINS TO PURCHASE OF PLANTS AND HOSEPIPES. THEREFORE, THE AO 'S CONTENTION WAS THAT THE ADDITION WAS RIGHTLY MADE. 9.3 THE LD.AR SUBMITTED THAT THE GARDENING EXPENSES WERE INCURRED AT THE FACTORY PREMISES TO MAINTAIN F LORA AND FAUNA OF THE FACTORY COMPLEX. IT IS SUBMITTED B Y THE LD.AR THAT THESE EXPENSES ARE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF ASSESSEES BUSINESS . 9.4 ON THE CONTRARY THE LD. DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 9.5 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH TH E PARTIES AS WELL AS THE ORDERS PASSED BY THE AUTHORI TIES BELOW. IT IS OBSERVED THAT THE LD.AO HAS NOT VERIFI ED THAT DETAILS/EVIDENCES FILED BY THE ASSESSEE AND ALSO HA S NOT VERIFIED AS TO WHETHER THERE EXISTED ANY GARDEN WIT HIN THE FACTORY PREMISES OF THE ASSESSEE. 9.6 WE ACCORDINGLY SET ASIDE THIS ISSUE TO THE LD.A O FOR VERIFICATION OF THE FACTS AND TO CONSIDER THE CLAIM OF THE ASSESSEE WITHIN THE PARAMETERS OF LAW. ACCORDINGLY THIS GROUND FILED BY THE ASSESSEE STANDS STATISTICALLY A LLOWED. 27 I.T.A.NO.166/DEL/2013 10. GROUND NO. 6 10.1 FROM THE DETAILS FILED BY THE ASSESSEE ALONG W ITH THE RETURNS IT WAS OBSERVED BY LD. AO THAT ASSESSEE HAD CLAIMED WARRANTY EXPENSES AMOUNTING TO RS.50,75,794 /-. THE LD. AO DISALLOWED THE CLAIM ON THE GROUND THAT NO SUPPORTING DOCUMENTS IN THIS REGARD WERE FURNISHED BY THE ASSESSEE. 10.2 THE DRP CONFIRMED THE ADDITION ON THE GROUND T HAT THE ASSESSEE DID NOT GIVE ANY RELIABLE DATA/DETAILS ABOUT MAKING THE ESTIMATE OF THE WARRANTY EXPENSES. 10.3 BEFORE US THE LD.AR SUBMITTED THAT ASSESSEE SE LLS ELECTRONIC POWER STEERING FOR 4 WHEELERS MAINLY TO MARUTI UDYOG LTD. AT THE TIME OF SALE THE ASSESSEE PROVIDE S A STANDARD WARRANTY, WHEREBY IN THE EVENT OF FAILURE OR STEERING BECOMES DEFECTIVE, THE COMPANY UNDERTAKES TO RECTIFY OR REPLACE THE STEERING FREE OF COST. 10.4 THE LD.AR SUBMITTED THAT PROVISION FOR WARRANT Y WAS MADE AT THE RATE OF 1% OF THE TURNOVER. HE RELIED U PON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF M/ S. ROTORK CONTROLS INDIA PVT. LTD., VS. CIT REPORTED I N (2009) 180 TAXMAN 422 (SC). HE FURTHER SUBMITTED THAT CIT (A)-9 WIDE ORDER DATED 28/05/2014, FOR ASSESSMENT YEAR 20 09- 10 HAS ALLOWED THE CLAIM OF THE ASSESSEE BY HOLDING AS UNDER: 8.3. IN THE APPELLANT'S CASE, THE PROVISION OF WAR RANTY EXPENSES IS REGULARLY BEING MADE BY IT. AS HELD BY 28 I.T.A.NO.166/DEL/2013 THE HON'BLE COURT, THE WARRANTY ESTIMATES NEED REASSESSMENT AT THE YEAREND EVERY YEAR. AS ONE REACHES CLOSE TO THE END OF THE WARRANTY PERIOD, TH E PROBABILITY THAT THE WARRANTY EXPENSES WILL BE INCURRED IS CONSIDERABLY REDUCED AND THAT SHOULD BE REFLECTED IN THE ESTIMATION AMOUNT. THE AO'S OBSERVATION THAT IT WAS REDUCED TO 0.50% DURING THE YEAR FROM 0.75% IN EARLIER YEARS SHOWS APPLICATION OF MIND ON THE PART OF THE APPELLANT WHILE MAKING SUCH PROVISION. MOREOVER, IT WAS CLAIMED BY THE APPELLAN T THAT DURING F.Y. 2011-12, THE EXCESS PROVISION FOR WARRANTY MADE IN THE PRIOR YEARS AMOUNTING TO RS.1,44,49,381/- WAS REVERSED CONSIDERING THAT NO CLAIM WAS MADE DURING THE WARRANTY TENURE OF THE PRODUCTS FOR EARLIER YEARS AND NO ADJUSTMENT FOR SU CH REVERSAL WAS MADE IN THE COMPUTATION OF INCOME FOR A.Y.2012-13. THESE FACTS SHOW THAT THE PROVISION OF WARRANTY EXPENSES HAS BEEN MADE ON THE BASIS OF SCIENTIFIC ESTIMATION KEEPING IN MIND THE ANTICIPAT ED LIABILITY LIKELY TO ARISE IN FUTURE. THE A.O. HAS N OT POINTED OUT ANY DISCREPANCY IN THE SUPPORTING DATA PRODUCED BY THE APPELLANT FOR MAKING SUCH ESTIMATION. THE LIABILITY IS NOT PURELY A CONTINGEN T LIABILITY BUT A DETERMINED LIABILITY WITH SOME DEGR EE OF ESTIMATION INVOLVED IN IT. THEREFORE, THE SAME IS A N ALLOWABLE EXPENSE U/S 37 OF THE ACT. THE A.O'S ACTI ON IS DISALLOWING THE WARRANTY EXPENSES OF RS.1,34,21,722/- IS NOT JUSTIFIED. THE ADDITION MAD E BY THE AO ON ACCOUNT OF SUCH DISALLOWANCE IS DIRECT ED TO BE DELETED. GROUND NO.3 OF APPEAL IS ALLOWED. 10.5 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH T HE PARTIES AS WELL AS THE ORDERS PASSED BY THE AUTHORI TIES BELOW. IT IS OBSERVED THAT THE ASSESSEE HAS PRODUCE D WARRANTY ANALYSIS AND LEDGER ACCOUNT FOR WARRANTY EXPENSES FOR THE YEAR UNDER CONSIDERATION AT PAGE 3 78 OF THE PAPER BOOK VOLUME II. 29 I.T.A.NO.166/DEL/2013 10.5 WE ACCORDINGLY SET ASIDE THE ISSUE TO THE FILE OF THE LD.AO FOR VERIFICATION OF THE DETAILS/EVIDENCES FIL ED BY THE ASSESSEE AND TO ALLOW THE CLAIM FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF M/ S ROTORK CONTROLS INDIA PVT. LTD. (SUPRA). ACCORDINGL Y THIS GROUND OF THE ASSESSEE STANDS STATISTICALLY ALLOWED . 11. GROUND NO. 7 11.1 IT WAS OBSERVED BY THE LD. AO THAT ASSESSEE HA S CLAIMED CASH DISCOUNT EXPENSES PAID TO MARUTI UDYOG LTD TO AN EXTENT OF RS.26,50,994/-. THE LD. AO DISALLOW ED THE ASSESSEES CLAIM AS ASSESSEE COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE SAME. 11.2 THE DRP HELD AS UNDER: 7.3 WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND HAVE PERUSED THE MATERIAL ON RECORD. FROM PERUSAL OF PAGE NO. 157 TO 163 OF THE PAPER BO OK RELATING TO THIS GROUND OF APPEAL, .IT IS SEEN THAT NO SUCH CONFIRMATION FROM MARUTI HAS BEEN FURNISHED. I T HAS BEEN SUBMITTED THAT CASH DISCOUNT IS GIVEN WHER E PAYMENT IS RECEIVED WITHIN 30 DAYS OF THE RECEIPT O F THE MATERIAL FROM THE COMPANY. THE ASSESSEE COULD NOT PRODUCE ANY SUPPORTING DOCUMENTS DEPICTING THE CASH DISCOUNT GIVEN TO M/S MARUTI UDHYOG LTD. EXCEP T THE E-MAIL WHICH SAYS, AS A POLICY MATTER CASH DISCOUNT AT 12.25% WOULD BE DEDUCTED IN CASE OF EARLY PAYMENTS. THE ASSESSEE HAS FAILED TO GET A CONFIRMATORY LETTER OR COPY OF THE LEDGER ACCOUNT F ROM M/S MARUTI UDYOG LTD., WHO IS THE SOLE PURCHASER. I N THE ABSENCE OF ANY MATERIAL TO PROVE THAT INDEED CA SH DISCOUNTS WERE GIVEN, WE DECLINE TO INTERFERE IN TH E ORDER OF THE ASSESSING OFFICER. 30 I.T.A.NO.166/DEL/2013 11.3 THE LD. A.R. SUBMITTED THAT CASH DISCOUNT IS G IVEN WHEN THE PAYMENT IS RECEIVED WITHIN 30 DAYS OF THE RECEIPT OF THE MATERIAL FROM MARUTI UDYOG LTD. THE LD. A.R. SUBMITTED THAT ASSESSEE HAD SUBMITTED EMAILS BETWEEN THE ASSESSEE AND MARUTI UDYOG LTD SHOWING PAYMENTS MADE AFTER REDUCTION OF CASH DISCOUNT AT 12.25% (WHICH WAS THE PRIME LENDING RATE OF SBI DUR ING THE YEAR). THE LD. A.R. SUBMITTED THAT THIS WAS AN INCENTIVE GIVEN TO THE PARTIES FOR ENSURING EARLY P AYMENT OF SALE PROCEEDS AND THE SAME IS ALLOWABLE UNDER SE CTION 37 OF THE ACT AS IT IS A STANDARD BUSINESS PRACTICE IN THE TRADE AND ALLOWED TO THE CUSTOMER OUT OF COMMERCIAL EXPEDIENCY. 12.3 ON THE CONTRARY THE LD. D.R. SUBMITTED THAT TH E ASSESSEE HAD NOT DISCLOSED THE DETAILS OF THE BILL DATES AND DESCRIPTION OF THE GOODS SUPPLIED. HE THUS SUBMITTE D THAT THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW SHOU LD NOT BE INTERFERED WITH. 12.4 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH T HE PARTIES AS WELL AS THE ORDERS PASSED BY THE AUTHORI TIES BELOW. IT IS OBSERVED THAT A SIMILAR ISSUE HAD ARIS EN FOR THE SUBSEQUENT YEAR BEFORE THE LD. CIT (A)IX. THE L D. CIT (A) WIDE ORDER DATED 28/05/2014 HAD ALLOWED THE CLA IM OF THE ASSESSEE. HOWEVER WE OBSERVED FROM THE RECORDS FILED BEFORE US THAT THE AUTHORITIES BELOW HAS NOT PROPER LY VERIFIED THE QUANTUM WHICH IS AVAILABLE FROM THE DE TAILS FILED BY THE ASSESSEE IN THE PAPER BOOK. WE THUS SE T ASIDE 31 I.T.A.NO.166/DEL/2013 THIS ISSUE TO THE LD.AO FOR VERIFICATION OF THE DETAILS/EVIDENCES FILED BY THE ASSESSEE AND TO ALLO W THE CLAIM WITHIN THE PARAMETERS OF LAW. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE STANDS STATISTICALLY ALLOWED. 13. GROUND NO. 8 13.1 DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE HAD MADE A PROVISION FOR LIABILITIES TO AN EXTENT O F RS.22,96,76,550/-. THE LD. AO DISALLOWED THE CLAIM AS THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM WITH PROPER DOCUMENTARY EVIDENCES. 13.2 THE LD.DRP HELD AS UNDER: 8.2. WE HAVE CONSIDERED THE MATTER. THE DETAILS SUBMITTED BY THE ASSESSEE IN THE PAPER BOOK AND ALS O IN THE COMPILATION OF ADDITIONAL EVIDENCES WERE EXAMINED. THE AUDIT FEES PAYABLE TO ERNST & YOUNG HAS BEEN SHOWN AT RS.3 LACS WHEREAS THE INVOICE IS FOR RS.3,53,765/-. SIMILARLY, THE AUDIT FEE PAYABLE TO S.R. BATLIBOI AS PER THE DETAILS IS NOT MATCHING WI TH THE SUPPORTING DOCUMENTS FILED AS ADDITIONAL EVIDENCE. SIMILARLY, EXPENSES IN RESPECT OF M/S HON DA EXPRESS LOGISTICS SHOWN IN THE DETAILS ARE NOT VERIFIABLE FROM THE ADDITIONAL EVIDENCES. REGARDING STAMP DUTY ON LAND, THE ASSESSEE DID NOT GIVE ANY REPLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, ON PERUSAL OF PROVISION FOR LIABILITIES IN THE BALANCE SHEET, IT WAS NOTICED THAT PROVISION FOR RS.81,36,000/- WAS MADE FOR PAYMENT FOR STAMP DUTY FOR THE FINANCIAL YEAR 2007-08. HOWEVER, THE ACTUAL PAYMENT WAS MADE FOR RS.71,19,000/- ONLY AND THAT TOO DURING THE ASSTT. YEAR 2010-11. THE ASSESSEE DID NOT FILE ANY RECONCILIATION STATEMENT IN THIS REGARD. THEREFORE, IN THE LIGHT OF VARIOUS 32 I.T.A.NO.166/DEL/2013 DISCREPANCIES IN THE DETAILS FILED AND THE DOCUMENT ARY EVIDENCE, THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED. THUS IT IS FOUND THAT THE DETAILS SUBMITT ED BY THE ASSESSEE DO NOT PRIMA-FACIE LEAD TO ANY DECIPHERABLE INFERENCES TO ACCEPT THE CLAIM. THEREF ORE, WE DECLINE TO INTERFERE IN THE ORDER OF THE ASSESSI NG OFFICER IN RESPECT OF THIS GROUND 'OF OBJECTION. 13.3 THE LD.AR SUBMITTED THAT THE PROVISIONS ARE IN RESPECT OF UNASCERTAINED LIABILITY FOR EXPENSES PRO VIDED ON ACCRUAL BASIS OR FOR ACCOUNTS SUCH AS MATERIAL IN T RANSIT OR REGISTRATION FEE ON LAND WHICH HAS NO BEARING ON THE INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE LD. A O DID NOT CALL FOR ANY FURTHER DETAILS AND MADE THE ADDIT ION WHICH WAS UNWARRANTED FOR. THE ASSESSEE THEREFORE F ILED ADDITIONAL EVIDENCE BEFORE THE DRP. 13.4 THE LD. A.R. SUBMITTED THAT HAD THE LD.AO TO C ALL FOR FURTHER DETAILS ALL THE EVIDENCES WOULD HAVE BEEN F ILED BEFORE THE ASSESSMENT PROCEEDINGS. HE FURTHER SUBMI TTED THAT THESE LIABILITIES WERE DISCHARGED IN THE NEXT FINANCIAL YEAR. 13.5 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH T HE PARTIES AS WELL AS THE ORDERS PASSED BY THE AUTHORI TIES BELOW. IT IS OBSERVED THAT THE LD.AO/TPO HAS NOT VE RIFIED THE CORRECT FACTUAL POSITION ON THE BASIS OF THE DOCUMENTS/EVIDENCES FILED BY THE ASSESSEE. WE THERE FORE SET ASIDE THE ISSUE TO THE FILE OF THE LD. AO FOR D UE VERIFICATION OF THE FACTS AND TO ALLOW THE CLAIM AS PER LAW. ACCORDINGLY THIS GROUND RAISED BY THE ASSESSEE STAN DS ALLOWED FOR STATISTICAL PURPOSES 33 I.T.A.NO.166/DEL/2013 14. GROUND NO. 9: 14.1 THIS GROUND RAISED BY THE ASSESSEE IS PREMATUR E IN NATURE THAT DOES THUS DOES NOT CALL FOR ANY ADJUDIC ATION. WE ACCORDINGLY DISMISS THIS GROUND UNANSWERED. 15. GROUND NO. 10 15.1 IT IS OBSERVED BY THE LD. AO THAT THE ASSESSEE HAD CLAIMED SETOFF OF BROUGHT FORWARD LOSSES FOR THE ASSESSMENT YEAR 2007-08, TO AN EXTENT OF RS.1,07,89,918/-. THE LD. AO DID NOT ALLOW THIS CLA IM FOR THE REASON THAT IT IS NOT AN ASSESSED LOSS. 15.2 THE DRP HELD AS UNDER: 9.1. THE ASSESSING OFFICER DID NOT ALLOW THE SET O FF OF BROUGHT FORWARD LOSSES OF RS.1,07,89,918/- FOR THE ASSESSMENT YEAR 2007-08 ON THE GROUND THAT THE LOSS WAS NOT ASSESSED AND, THEREFORE, NOT ALLOWED TO BE CARRIED FORWARD. THIS IS A FACTUAL ISSUE AND CAN BE DETERMINED BASED ON THE RETURNS FILED AND LOSSES DECLARED AND DETERMINED IN THE EARLIER ASSESSMENT YEARS. 15.3 THE LD.AR SUBMITTED THAT UNDER SECTION 139, NO LOSSES ALLOWED IF RETURN OF LOSS HAS NOT BEEN FILED BY THE DUE DATE MENTIONED IN SECTION 139 (1). IN THE CAS E OF THE ASSESSEE THE RETURN DECLARING THE LOSS WAS DULY FIL ED ON 14/11/2007 WHICH WAS WITHIN THE DUE DATE RELEVANT F OR THE ASSESSMENT YEAR 2007-08. 15.4 ON THE CONTRARY THE LD. DR RELIED UPON THE ORD ERS PASSED BY THE AUTHORITIES BELOW 34 I.T.A.NO.166/DEL/2013 15.5 WE HAVE PERUSED THE SUBMISSIONS MADE BY BOTH T HE PARTIES AS WELL AS THE ORDERS PASSED BY THE AUTHORI TIES BELOW. IT IS OBSERVED THAT THE DRP HAS DIRECTED THE LD. AO TO DETERMINE THE LOSSES BASED ON THE RETURN FILED B Y THE ASSESSEE FOR THE YEAR 2007-08. THE LD. AO DID NOT F OLLOW THE DIRECTIONS OF DRP. 15.6 WE THUS SET ASIDE THE ISSUE TO THE FILES OF TH E LD. AO TO GIVE EFFECT TO THE DIRECTIONS OF THE DRP AND TO ALLOW THE CLAIM AS PER LAW. ACCORDINGLY THIS GROUND RAISED BY THE ASSESSEE STANDS STATISTICALLY ALLOWED. 16. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2016. SD./- SD./- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:30.06.2016 SP. COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) 35 I.T.A.NO.166/DEL/2013 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 30/6/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 30/6 SR. PS/PS 7 FILE SENT TO BENCH CLERK 30/6 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER