CASTROL INDIA LTD, MUMBAI V. ADDL CIT RG 8(1), MUMBAI

ITA 195/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2137 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 19-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 09-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHANDNA
• Assessee Lawyers: APURVA K SHAH
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Transfer pricing; Principle of natural justice; International transaction; Cost of acquisition; Fair market value; Valuation report; Revenue expenditure; Capital expenditure
• Section: 143(3); 50C

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.195 /MUM/2012 ( / ASSESSMENT YEAR : 2007-08) CASTROL INDIA LIMITED TECHNOPOLIS KNOWLEDGE PARK MAKALI CAVES ROAD, CHAKALA ANDHERI(EAST) MUMBAI 400093 / V. THE DEPUTY COMMISSIONER OF INCOME TAX RANGE 8(3) INCOME TAX OFFICE AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AAACC4481E ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO. 13/MUM/2012 ( / ASSESSMENT YEAR : 2007-08) THE DEPUTY COMMISSIONER OF INCOME TAX RANGE 8(3) INCOME TAX OFFICE AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / V. CASTROL INDIA LIMITED TECHNOPOLIS KNOWLEDGE PARK MAKALI CAVES ROAD, CHAKALA ANDHERI(EAST) MUMBAI 400093 ./ PAN : AAACC4481E ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO.5671 /MUM/2013 ( / ASSESSMENT YEAR : 2008-09) CASTROL INDIA LIMITED TECHNOPOLIS KNOWLEDGE PARK MAKALI CAVES ROAD, CHAKALA ANDHERI(EAST) MUMBAI 400093 / V. THE DEPUTY COMMISSIONER OF INCOME TAX RANGE 8(3) INCOME TAX OFFICE AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. ./ PAN : AAACC4481E ( / APPELLANT ) .. ( / RESPONDENT ) ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 2 ./ I.T.A. NO. 5846/MUM/2013 ( / ASSESSMENT YEAR : 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX RANGE 8(3) INCOME TAX OFFICE AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. / V. CASTROL INDIA LIMITED TECHNOPOLIS KNOWLEDGE PARK MAKALI CAVES ROAD, CHAKALA ANDHERI(EAST) MUMBAI 400093 ./ PAN : AAACC4481E ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI APURVA K. SHAH AND SH. DHANESH BAFNA REVENUE BY : SHRI N.K.CHANDNA, CIT-DR / DATE OF HEARING : 20-07-2016 / DATE OF PRONOUNCEMENT : 18-10-2016 / O R D E R PER BENCH: 1. THE ASSESSEE AND REVENUE HAVE FILED CROSS APPEALS A GAINST THE ORDER OF LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09. 2. SINCE COMMON GROUNDS ARE INVOLVED IN BOTH THE YEARS UNDER CONSIDERATION, THEREFORE, ALL THESE FOUR APPEALS WERE HEARD TOGETH ER AND ARE NOW DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL IN ITA NO. 195/MUM/2012 FOR THE ASSESSMENT YEAR 2007-08. IN THE ASSESSMENT YEAR 2007-08, THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE DISALLOWAN CE OF IT COSTS I.E. COE3 RELATED EXPENSES TO THE TUNE OF 50% OF THE EXPENSES 70,02,606/- OUT OF THE TOTAL EXPENSES OF RS. 1,40,05,212/- CLAIMED BY THE ASSESSEE. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 3 3.1 THE CIT(A) DELETED THE DISALLOWANCE PARTLY TO THE T UNE OF 50% WHILE UPHOLDING DISALLOWANCE TO THE TUNE OF 50% OF IT COS TS I.E. COE3 RELATED EXPENSES WITH THE FOLLOWING OBSERVATIONS:- 3.3.3 I HAVE CONSIDERED THE FACTS OF THE CASE , WR ITTEN SUBMISSION AND ORAL ARGUMENTS OF THE APPELLANT AS AGAINST THE OBSERVATI ONS/FINDINGS OF THE TPO/AO IN THEIR ORDERS U/S. 92CA(3) / 143(3) OF THE ACT. THE SUBMISSION AND CONTENTION OF THE APPELLANT ARE BEING DISCUSSED DECIDED AS UNDER :- I. THE TPO HAD ALSO CALLED FOR THE DETAILS OF IT COSTS AND THEIR BASIS FOR ALLOCATION. THE APPELLANT SUBMITTED THE RELEVANT IN FORMATION, TO THE EXTENT AVAILABLE IN ITS POSSESSION. II. THE APPELLANT PROVIDED MOST OF THE INFORMATION THAT THE TPO HAD CALLED FOR WHICH WAS AVAILABLE IN ITS POSSESSION. HOWEVER, D ETAILS RELATING TO THE BASIS OF ALLOCATION WERE AVAILABLE WITH THE ASSOC IATED ENTERPRISES(AES) ONLY. THE APPELLANT HAD REQUESTED ITS AES TO PROVIDE SUCH DETAILS DURING THE COURSE OF THE ASSESSMENT PR OCEEDINGS WITH THE TPO ON SPECIFIC REQUEST. TO THE EXTENT THE APPELLAN T COULD PROVIDE THESE DETAILS , THE SAME WERE ACCEPTED TO BE AT ARM S LENGTH BY THE TPO. III. THE TPO HAS , IN HIS ORDER U/S 92CA(3) DETERMINED T HE ARMS LENGTH PRICE IN RESPECT O DCT CENTRAL CHARGES AS NIL AGAIN ST THE BOOK VALUE OF RS.1,40,05,712 ON THE GROUND THAT THE APPELLANT DID NOT SUBMIT RELEVANT DOCUMENT AND DETAILS FOR CALCULATION OF TH E SAID EXPENSES. IV. DURING THE YEAR ENDED MARCH 31, 2005 , SIGNIFICANT IT COSTS WERE INCURRED RELATED TO A COMMON OPERATING ENVIRONMENT SYSTEM (COE3) DEPLOYED BY THE BP GROUP WORLDWIDE. COE3 OFFERS SIGN IFICANT BENEFITS TO THE PARTICIPATING ENTITIES AND RESULTS IN EFFICIENT FUNCTIONING OF THE BUSINESS. THESE COSTS WERE ALLOCATED TO GROUP COMPA NIES PARTICIPATING IN THE SYSTEM, ON THE BASIS OF NUMBER COE3 ENABLED COMPUTERS INSTALLED AT EACH ENTITY AND/OR AN APPROPRIATE ALLO CATION KEY. V. THE APPELLANT SUBMITTED VARIOUS DETAILS ON COE3 TO THE TPO AND THE SAME WERE SUMMARIZED BELOW: EXPLANATION OF THE SERVICES RECEIVED THE BASIS OF ALLOCATION OF THE COSTS;(EXCEPT IN TH E CASE OF DCT CENTRAL CHARGES) COPIES OF INVOICES VI. THE APPELLANT HIGHLIGHTED THE LEVEL OF INFORMATION SUBMITTED BY THE COMPANY . IT SUBMITTED THAT IT HAD FURNISHED PLETHO RA OF INFORMATION TO THE TPO. FURTHER,THE PAYMENTS MADE BY CASTROL INDIA HAVE ALL BEEN MADE THROUGH NORMAL BANKING CHANNELS . ACCORDINGLY, THE GENUINENESS OF THE PAYMENTS IS NOT IN DOUBT. MOREOVER, THE RECE IPTS OF SERVICES AND BENEFITS DERIVED BY CASTROL INDIA HAS ITSELF NOT BE EN CHALLENGED BY THE TPO/AO. THEREFORE, JUST BECAUSE A SMALL PART OF TH E INFORMATION IS NOT AVAILABLE WITH THE COMPANY, IT DID NOT MERIT DISALLO WING THE ENTIRE ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 4 AMOUNT . THE SERVICE CLEARLY HAS A VALUE AND AN ARM S LENGTH CHARGE FOR THE SAME CANNOT BE NIL AS COMPUTED BY THE TPO. VII. THE TOTAL AMOUNT RELATING TO COST SHARING WAS RS.6, 23,22,885 OUT OF WHICH THE APPELLANT WAS ABLE TO SUBMIT DETAILS OF BAS IS OF ALLOCATION IN RESPECT OF ALL THE AMOUNT EXCEPT FOR RS.1,40,05,212 . ON THE BASIS OF THE SAID DETAILS THE COST ALLOCATIONS WERE CONSIDERE D TO BE AT ARMS LENGTH .WITH REGARDS TO THE DISALLOWANCE OF RS.1,40 ,05,212 THE APPELLANT HAD REQUESTED TO DETERMINE THE ARMS LENG TH PRICE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 92C(1) AND 92C(2) OF THE ACT. SINCE, THE GENUINENESS OF THE PAYMENTS IS NOT IN DO UBT AND THE RECEIPT OF SERVICES AND BENEFITS DERIVED BY CASTROL INDIA H AS ITSELF NOT BEEN CHALLENGED BY THE TPO/AO , THE ALLP OF RELATING TO THE SAME CANNOT BE DETERMINED TO BE NIL AND SOME VALUE NEEDS TO BE ATT RIBUTED. IT WOULD BE UNJUST TO THE APPELLANT TO DISALLOW THE ENTIRE AMOUN T OF EXPENDITURE AND DETERMINE THE ARMS LENGTH PRICE AS NIL. FOR WA NT OF ADEQUATE DETAILS, THIS INTERNATIONAL TRANSACTION CANNOT BE B ENCHMARKED STRICTLY AS PER THE PROVISIONS OF SECTION 92C(1) AND 92C(2) OF THE ACT. IN THE IMMEDIATE PRECEDING YEAR, UNDER SIMILAR CIRCUMSTANC ES , 50% OF THE TRANSACTION VALUE WAS ADOPTED AS ALP . KEEPING IN VI EW THE FACTS OF THE CASE AND ALSO THE PRECEDENCE IN THE CASE AND THE SI NCE MOST OF THE DETAILS WERE SUBMITTED EXCEPT THE BASIS OF ALLOCATIO N , THE ALP IS HELD TO BE 50% OF THE TRANSACTION VALUE OF RS.1,40,05,212 I .E. RS.70,02,606. THE APPELLANT GETS PARTIAL RELIEF. ACCORDING THIS GROUND OF APPEAL IS PARTLY ALLOWED. 3.2 LEARNED AR PLACED ON RECORD ORDER OF TRIBUNAL IN AS SESSEES OWN CASE FOR THE ASSESSMENT YEARS 2002-03, 2003-04, 2004-05, 2005-06 AND 2006-07 WHEREIN THE MATTER WAS REMANDED BACK TO THE FILE OF THE AO/TPO FOR DECIDING THE MATTER AFRESH WHEREIN THE O BSERVATIONS OF THE TRIBUNAL IN ITA NO. 8359/MUM/2010 FOR ASSESSMENT YE AR 2005-06 VIDE ORDERS DATED 14-11-2014 ARE AS UNDER:- 6.IN THE APPEAL FILED BY THE REVENUE, THE REVENUE IS AGGRIEVED FOR DELETING THE DISALLOWANCE IN RELATION TO IT COST. 6.1 THE CIT(A) DELETED THE DISALLOWANCE PARTLY AFTER HAVING THE FOLLOWING OBSERVATION :- 3.10 I HAVE PERUSED THE TPO'S ORDER AND THE WRITTEN SUBMISSION. THE TOTAL AMOUNT RELATING TO COST SHARING WA S RS 2,24,25,081 OUT OF WHICH THE APPELLANT WAS ABLE TO SUB MIT DETAILS OF BASIS OF ALLOCATION AMOUNTING TO RS 2,21,3 4,295. ON THE BASIS OF THE SAID DETAILS THE COST ALLOCATIONS ERE CONSIDERED TO BE AT ARM'S LENGTH. WITH REGARDS TO THE DISALLOWANCE OF RS.290,786, THE APPELLANT HAD REQUESTED TO DETERMINE THE ARMS ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 5 LENGTH PRICE IN ACCORDANCE WITH THE PROVISIONS OF SE CTION 92C(1) AND 92C(2) OF THE ACT. SINCE, THE GENUINENESS OF THE P AYMENTS IS NOT IN DOUBT AND THE RECEIPT OF SERVICES AND BENEFITS D ERIVED BY CASTROL INDIA HAS ITSELF NOT BEEN CHALLENGED BY THE TP O/AO, THE ALP RELATING TO THE SAME CANNOT BE DETERMINED TO BE NIL AND SOME VALUE NEEDS TO BE ATTRIBUTED. IT WOULD BE UNJUST TO THE APPELLANT TO DISALLOW THE ENTIRE AMOUNT OF EXPENDITURE AND DETERMINE THE ARM'S LENGTH PRICE AS NIL. SINCE MOST OF THE DETAILS WERE SUBMITTED EXCEPT THE BASIS OF ALLOCATION, THE ALP IS HELD TO BE 50% OF THE TRANSACTION VALUE OF RS. 290,786 I.E RS . 145,393. THE APPELLANT GETS PARTIAL RELIEF. 6.2LEARNED AR PLACED ON RECORD ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS.2002-03, 2003-04 & 2004-05, WHEREI N THE MATTER WAS REMANDED BACK TO THE FILE OF THE TPO FOR STATISTICAL P URPOSES. THE PRECISE OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER :- 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS & PERUSI NG THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT SIMIL AR ISSUE WAS INVOLVED IN THE CASE OF THE ASSESSEE FOR A.Y. 2002-0 3 AND THE SAME WAS RESTORED BY THE TRIBUNAL TO THE FILE OF THE A O/TPO WITH THE FOLLOWING OBSERVATIONS/ DIRECTIONS AS CONTAINED I N PARAGRAPH NO.7 OF ITS ORDER DATED 14TH SEPTEMBER 2012 PASSED IN ITA NO. 3938/MUM/2010. IN SO FAR AS THE ALLOCATION/REIMBURSEMENT OF COE3 EXPENSES TO THE EXTENT OF RS. 1,68,80,675/- IS CONCER NED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEF ORE US THAT THERE IS NO DISPUTE ABOUT THE FACT THAT SIGNIFIC ANT COSTS WERE INCURRED RELATED TO COE3 PROJECT DEPLOYED B Y THE BP GROUP WORLDWIDE AND THE ASSESSEE COMPANY AS A PART OF THE SAID GROUP HAD DERIVED BENEFIT THEREOF. AS SUBMITTED BY HIM, THE DISPUTE IS ABOUT THE BASIS OF ALLOCATION AND WANT OF DETAILS IN THIS REGARD. HE HAS SUBMITTED THAT THE COPIES OF INVOICES RAISED IN THIS R EGARD BY THE AES WERE FURNISHED BY THE ASSESSEE ALONG WIT H RESPECTIVE ALLOCATION KEYS. KEEPING IN VIEW THIS SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE ASS ESSEE AS WELL AS ON PERUSAL OF THE RELEVANT DETAILS AVAILABL E ON RECORD,WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THERE IS NO JUSTIFICATI ON IN THE ACTION OF THE TPO IN IGNORING ALL THESE DETAILS AND TAKING THE ALP OF THE RELEVANT TRANSACTIONS AT NIL. IN OU R OPINION, IT IS INCUMBENT IMPOMI THE TPO TO WORK OUT THE ALP OF THE RELEVANT TRANSACTIONS BY FOLLOWING SOME AUTHORIZED METHOD AND THE ENTIRE COST BORNE BY THE ASSESSEE CANNOT HE DISALLOWED BY TAKING THE ALP AT NIL KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CA SE ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 6 AND THE RELEVANT DETAILS FURNISHED BY THE ASSESSEE. TH E LEARNED COUNSEL FOR THE ASSESSEE IN THIS REGARD HAS SUBMITTED THAT IN THE SUBSEQUENT YEARS I.E. ASSESSMENT YEARS 2005-06 AND 2006-07, A SIMILAR ISSUE WAS IN I 'OLVED IN THE ASSESSEE 'S CASE AND THE LEARNED CIT(APPEALS) HAS ALLOWED THE EXPENSES ALLOCATED TO THE EXTENT OF 50%. W E HAVE PERUSED THE ORDERS OF THE LEARNED CIT(APPEALS) PASSED IN THE ASSESSEE 'S CASE FOR ASSESSMENT YEARS 2 005- 06 AND 2006-07. IT IS NOTED THAT NO CONVINCING OR SOU ND BASIS HAS BEEN GIVEN BY THE LEARNED CIT(APPEALS) THER EIN IN SUPPORT OF THE 50% COST ALLOCATION ACCEPTED BY HIM A ND SUCH ESTIMATE HAS BEEN MADE PURELY ON ADHOC BASIS. I N OUR OPINION, THE EXERCISE OF ASCERTAINING ALPS HAS TO HE DONE BY THE TPO KEEPING IN VIEW THE WELL LAID DOWN SCHEME IN THE RELEVANT PROVISIONS OF THE ACT AND ADDITI ON, IF ANY, ON ACCOUNT OF TP ADJUSTMENT, HAS TO BE MADE ONLYAFTER DOING SUCH EXERCISE. WE, THEREFORE, RESTOR E THIS ISSUE TO THE FILE OF THE AO/TPO WITH A DIRECTION TO DO SUCH EXERCISE AND MAKE ADDITION, IF AN ON THIS ISSUE AFTE R COMPLETING SUCH EXERCISE IN ACCORDANCE WITH LAW . GR OUND N6.2 OF THE ASSESSEE 'S APPEAL IS ACCORDINGLY TREATE D AS ALLOWED FOR STATISTICAL PURPOSES.' 16. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION I.E. 2003-04 AS WELL AS ALL THE MATERIAL FACTS RELEVANT THE RETO ARE SIMILAR TO A.Y. 2002-03, WE RESPECTFULLY FOLLOW THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL FOR A.Y. 2002-03 AND RESTORE THIS ISSUE TO THE FILE OF THE AO/TPO FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTIONS AS GIVEN BY THE TRIBUNAL IN A.Y. 2002- 03. GROUND NO. 5 OF THE ASSESSEE'S APPEAL IS ACCORDI NGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6.3 WE HAVE CONSIDERED RIVAL CONTENTIONS. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN A SSESSEES OWN CASE, WE RESTORE THE MATTER BACK TO THE FILE OF AO FOR DECIDIN G AFRESH IN TERMS OF OBSERVATION GIVEN BY THE TRIBUNAL IN AFOREMENTION ED ASSESSMENT YEARS ON SIMILAR ISSUE. WE DIRECT ACCORDINGLY. 3.3 THE LEARNED DR RELIED UPON DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF M/S KNORR BREMS E INDIA PRIVATE LIMITED V. ACIT IN ITA NO. 182 OF 2013(O&M) VIDE OR DERS DATED 06-11- 2015. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 7 3.4 WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD INCLUDING CASE LAWS. AS THE FACTS AND CIRCUM STANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME AS WERE IN PRECED ING YEARS, RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL I N ASSESSEES OWN CASE IN THE PRECEDING YEARS, WE RESTORE THE ISSUE /MATTE R BACK TO THE FILE OF AO FOR DECIDING AFRESH IN TERMS OF OBSERVATIONS GIV EN BY THE TRIBUNAL IN AFOREMENTIONED ASSESSMENT YEARS ON SIMILAR ISSUE. W E ORDER ACCORDINGLY. 4. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO CLAIM OF UNUTILIZED CENVAT CREDIT U/S 145A OF THE ACT. 4.1 WE FOUND THAT EXACTLY SIMILAR ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL IN ITS ORDER FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO 8371/MUM/2010 VIDE ORDERS DATED 14-11-2014 . THE RE LEVANT OBSERVATIONS OF THE TRIBUNAL AT PARA 13 PAGE 12 ARE AS UNDER:- 13.THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO CLAI M OF CENVAT U/S.145A. 13.1 WE FOUND THAT EXACTLY SIMILAR ISSUE HAS BEEN DEAL T BY THE TRIBUNAL IN ITS ORDER FOR A.Y.2003-04. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 16 PAGE 24 IS AS UNDER :- 24 AS REGARDS THE ISSUE RAISED IN GROUND NO. 8 REL ATING TO ADDITION MADE ON ACCOUNT OF MODVAT CREDIT BY INCLUDIN G THE SAME IN THE VALUE OFCLOSING STOCK, THE ID. REPRESENTATI VES OF BOTH THE SIDES HAVE AGREED THAT A SIMILAR ISSUE HAS ALREAD Y BEEN DECIDED IN ASSESSEE'S OWN CASE FOR A.Y. 2001-02 WHE REIN THE SAME WAS RESTORED BY THE TRIBUNAL TO THE FILE OF AO VID E ORDER DATED 30TH JULY 2009 PASSED IN ITA NO. 2363/MUM/200 5 WITH A DIRECTION TO MAKE THE ADJUSTMENT ON ACCOUNT OF EXCISE DU TY ALSO TO THE VALUE OF OPENING STOCK AS WELL AS SALES AND PUR CHASE IN ACCORDANCE WITH SECTION 145A. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL, WE RESTORE THIS ISSUE TO THE FIL E OF AO FOR DECIDING THE SAME AFRESH AS PER SAME DIRECTIONS AS G IVEN BY THE TRIBUNAL IN A.Y. 2001-02. GROUND NO. 8 OF THE ASSES SEE'S APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PU RPOSES. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 8 13.2WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE T HROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2003- 04 AS REPRODUCED ABOVE. AS THE FACTS AND CIRCUMSTANCES OF THE CASE DURIN G THE YEAR UNDER CONSIDERATION ARE SAME, WE RESTORE THIS ISSUE BACK TO THE FILE OF AO WITH REGARD TO CLAIM OF CENVAT U/S.145A FOR DECI DING AFRESH IN TERMS OF DIRECTION GIVEN BY THE TRIBUNAL IN AFOREMEN TIONED ORDER. WE DIRECT ACCORDINGLY. 4.2 WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROU GH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 AS REPRODUCED ABOVE. AS THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEAR UNDER CONSIDERATION ARE SAME, WE RESTORE T HIS ISSUE BACK TO THE FILE OF AO WITH REGARD TO CLAIM OF CENVAT U/S.1 45A FOR DECIDING AFRESH IN TERMS OF DIRECTION GIVEN BY THE TRIBUNAL IN AFOREMENTIONED ORDER. WE DIRECT ACCORDINGLY. 5. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE R E-COMPUTATION OF THE CLAIM OF DEPRECIATION ON ASSETS LOCATED AT SILVASSA UNIT ALTHOUGH THE ASSESSEE HAD SPECIFICALLY NOT CLAIMED DEPRECIATION IN THE PAST. 5.1 THE ASSESSEE DID NOT CLAIM DEPRECIATION ON SILVASSA UNIT FOR THE ASSESSMENT YEAR 1997-98 TO 2001-02 WHILE THE REVENU E ALLOWED THE DEPRECIATION SUO-MOTU FOR ASSESSMENT YEAR 1997-98 T O 2001-02. THUS, THE DEPRECIATION WAS ALLOWED BY THE REVENUE OVER TH E YEARS. THE AO DISALLOWED THE EXCESS DEPRECIATION OF RS.1,66,79,48 8/- CLAIMED BY THE ASSESSEE OWING TO ADJUSTMENT OF WRITTEN DOWN VALUE DUE TO GRANT OF DEPRECIATION BY THE REVENUE NOT SO CLAIMED BY THE A SSESSEE, WHICH ORDER OF THE AO WAS CONFIRMED BY THE LEARNED CIT(A) BY HOLDING AS UNDER:- 3.9.3 I HAVE CONSIDERED THE FACTS OF THE CASE, WRI TTEN SUBMISSION AND ORAL ARGUMENTS OF THE APPELLANT AS AGAINST THE OBSERVATION / ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 9 FINDINGS OF THE AO IN HIS ORDER U/S. 143(3) OF THE ACT. THE HONBLE ITAT , WHILE ADJUDICATING THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2001-02 (ITA NO. 2363/MUM/2005) HAS DISALLOWED THE APPEAL OF THE ASSESSEE ON THIS ISSUE AND A SIMILAR VIEW HAD BEEN TAKEN BY MY PREDECESSOR WHILE ADJUDICATING THE APPE AL FOR ASSESSMENT YEAR 2002-03 . THE JURISDICTIONAL HIGH C OURT HAS , SINCE THEN, ALSO TAKEN A SIMILAR VIEW IN THE FULL B ENCH DECISION DELIVERED IN THE CASE OF PLASTIBLENDS LTD. VS. ADDI TIONAL CIT REPORTED AT 318 ITR 352. CONSISTENT WITH THIS VIEW AND WITH THE VIEW TAKEN BY MY PREDECESSOR , WHILE DECIDING THE A PPEAL FOR ASSESSMENT YEAR 2005-06 , 2002-03 AND 2004-05, I UP HOLD THE ACTION OF THE ASSESSING OFFICER. 5.2 THE LEARNED AR PLACED ON RECORD ORDER OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 AND 2005-0 6, WHEREIN THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE . THE OBSERVATION OF THE TRIBUNAL IN ASSESS EE OWNS CASE IN ITA NO. 8191/MUM/2010 VIDE ORDERS DATED 14-11-2014 ARE AS UNDER: 4. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO C LAIM OF DEPRECIATION WHICH HAS BEEN DEALT BY THE AO AT PARA 14 AND BY CIT(A) AT PARA 16. 4.1 LEARNED AR PLACED ON RECORD ORDER OF TRIBUNAL I N ASSESSEES OWN CASE FOR THE A.Y.2003-04, WHEREIN THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL PARTLY AGAINST THE ASSESSEE . THE PRECISE OBSERVATIONS OF THE TRIBUNAL AT PAGE 20 PARA 35 ARE AS UNDER :- 35. AS REGARD THE ISSUE RAISED IN GROUND NO. 13 OF THE ASSESSEE'S APPEAL RELATING TO DISALLOWANCE OF DEPRE CIATION ON THE ASSETS OF SILVASA UNIT, THE LD. REPRESENTATI VES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS SQUAR ELY COVERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE R EVENUE BY THE ORDER OF THE TRIBUNAL DATED 13TH APRIL 2009 (SUPRA) PASSED IN ASSESSEE'S OWN CASE FOR A.Y. 2001-02, WHE REIN THE SIMILAR ISSUE WAS DECIDED AGAINST THE ASSESSEE BY FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF SCOPE INDUSTRIES PVT. LTD. 289 ITR 195 AS WELL AS THAT THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR A.Y . 2000- ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 10 01. RESPECTFULLY FOLLOWING THESE JUDICIAL PRONOUNCE MENT WE DECIDE THIS ISSUE AGAINST THE ASSESSEE AND DISMISSE D GROUND NO. 13 OF ITS APPEAL. 4.2 WE HAVE CONSIDERED RIVAL CONTENTIONS. THE ISSUE WITH REGARD TO CLAIM OF DEPRECIATION OF ASSETS OF SILVASA UNIT WAS DECLINED BY THE TRIBUNAL IN ASSESSES OWN CASE BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SCOPE INDU STRIES PVT. LTD., 289 ITR 195. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE CONFIRM THE ACTION OF THE LOWER AUTHOR ITIES FOR DECLINE OF CLAIM OF DEPRECIATION ON ASSETS OF SILVA SA UNIT. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. THE ISSUE WITH REGARD TO CLAIM OF DEPRECIATION OF A SSETS OF SILVASA UNIT WAS DECLINED BY THE TRIBUNAL IN ASSESSES OWN CASE BY F OLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SCOPE INDU STRIES PVT. LTD., 289 ITR 195. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUN AL IN PRECEDING YEARS, WE CONFIRM THE ACTION OF THE LOWER AUTHORITIES FOR DEC LINE OF CLAIM OF DEPRECIATION ON ASSETS OF SILVASA UNIT . WE ORDER ACCORDINGLY. 6.THE NEXT GRIEVANCE OF THE ASSESSEE IS WITH RESPEC T TO THE APPLICABILITY OF SECTION 50C OF THE ACT . THE AUTHORITIES BELOW HAVE ADOPTED STAMP DUTY VALUE ADOPTED BY STAMP DUTY AUTHORITIES FOR THE PROPERTIE S SOLD BY THE ASSESSEE AS THE FULL VALUE OF CONSIDERATION FOR COMPUTING CAPIT AL GAINS AS AGAINST THE ACTUAL SALE CONSIDERATION RECEIVED BY THE ASSESSEE AS ACCRUING FROM THE SALE OF THE PROPERTIES. THE ASSESSEE DISPUTED THE ADOPTION OF STAMP DUTY VALUE AS ADOPTED BY STAMP DUTY VALUATION AUTHORITIES AS FULL VALUE OF CONSIDERATION U/S 50C(2) OF THE ACT AND THE LEARNED AO REFERRED T HE MATTER TO THE DVO FOR DETERMINATION OF FAIR MARKET VALUE OF THE PROPERTY. THE VALUATION REPORT OF THE DVO WAS NOT RECEIVED TILL THE CONCLUSION OF THE APP ELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A). THE SAID REPORT WAS RECEIVED SU BSEQUENTLY AND THE ASSESSEE IS CHALLENGING AND DISPUTING THE SAID VALU ATION REPORT OF DVO ON MANY COUNTS WHICH HAS BEEN RAISED VIDE ADDITIONAL G ROUND BEFORE THE ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 11 TRIBUNAL, AFTER RECEIVING THE VALUATION REPORT OF T HE DVO BY THE ASSESSEE. THE SAID ADDITIONAL GROUNDS ARE ADMITTED IN THE INTERES T OF JUSTICE . THE ASSESSEE IS CONTENDING WHEN THE AUTHORITIES BELOW PASSED THE ORDERS , THEY DID NOT HAD THE BENEFIT OF VALUATION REPORT OF THE DVO AND IN T HE INTEREST OF JUSTICE , THE MATTER MAY BE SET ASIDE AND RESTORED TO THE AUTHORI TIES BELOW FOR DE-NOVO DETERMINATION OF THE ISSUE ON MERITS AFTER CONSIDER ING THE VALUATION REPORT OF DVO AND THE OBJECTIONS OF THE ASSESSEE. THE LD. DR SUBMITTED THAT THE MATTER MAY BE SET ASIDE TO THE FILE OF AUTHORITIES BELOW F OR DE-NOVO DETERMINATION OF THE ISSUE ON MERITS AFTER CONSIDERING THE VALUATION REPORT OF THE DVO. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW AND IN THE INTEREST OF JUSTICE, THIS ISSUE OF DETERMINATION OF FULL VALUE OF CONSIDERATION FOR CO MPUTATION OF CAPITAL GAINS IN RESPECT OF PROPERTIES SOLD NEED TO BE SET ASIDE AND RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION OF THE ISSUE ON MERITS AF TER CONSIDERATION OF THE VALUATION REPORT OF THE DVO AND ALSO OBJECTIONS OF THE ASSESSEE . THE AO SHALL GIVER PROPER AND ADEQUATE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLES OF NATURAL JUSTICE AND T HE ASSESSEE SHALL BE ALLOWED TO FILE ALL NECESSARY EVIDENCES AND MATERIA L IN SUPPORT OF ITS CONTENTIONS INCLUDING OBJECTIONS TO THE DVO VALUATI ON REPORT WHICH SHALL BE EVALUATED ON MERITS TO COMPUTE CAPITAL GAINS PAYABL E BY THE ASSESSEE IN ACCORDANCE WITH PROVISIONS AND SCHEME OF THE ACT.WE ORDER ACCORDINGLY. THE ASSESSEE IS ALSO AGGRIEVED BY TREATMENT OF LONG TERM CAPITAL GAINS EARNED ON SALE OF PROPERTIES WHICH WERE HELD FOR A PERIOD OF MORE THAN THREE YEARS AS SHORT TERM CAPITAL GAINS AND BRINGING TO TAX AT THE NORMAL RATE OF TAX I.E. 30% KEEPING IN VIEW PROVISIONS OF SECTION 50 OF THE ACT AS THE PROPERTIES BEING DEPRECIABLE ASSETS WHILE THE TAX RATE APPLICABLE AS PER THE ASSESSEE IS CONCESSIONAL TAX RATE AS APPLICABLE TO LONG TERM CA PITAL GAINS@20% AS PROVIDED U/S 112 OF THE ACT. IT IS THE SAY OF THE A SSESSEE THAT FOR WORKING OUT ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 12 CAPITAL GAINS , A DEEMING FICTION IS CREATED BY SEC TION 50 OF THE ACT FOR COMPUTING CAPITAL GAINS IN THE CASE OF DEPRECIABLE ASSETS WHEREBY THE SAID CAPITAL GAINS SHALL BE DEEMED TO BE ARISING FROM TR ANSFER OF SHORT TERM CAPITAL ASSETS, BUT THEREAFTER FOR PURPOSES OF APPLYING TAX RATE THE SAME SHALL BE TREATED AS LONG TERM CAPITAL GAINS AND CONCESSIONAL TAX RATE @20% AS PROVIDED U/S 112 OF THE ACT SHALL BE APPLICABLE. TH E ASSESSEE HAS RAISED THIS GRIEVANCE VIDE ADDITIONAL GROUND RAISED BEFORE THE TRIBUNAL WHICH ARE ADMITTED IN THE INTEREST OF JUSTICE. THE LEARNED CO UNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF SMIT A CONDUCTORS LIMITED V. DCIT IN ITA NO. 4004/MUM/2011 FOR THE ASSESSMENT YE AR 2006-07 VIDE ORDERS DATED 17.09.2013. THE LEARNED DR ON THE OTHE R HAND SUBMITTED THAT SECTION 50 OF THE ACT IS A NON-OBSTANTE CLAUSE AND THE GAINS ARISING THERE- FROM ARE TO BE TREATED AS SHORT TERM CAPITAL GAINS CHARGEABLE TO TAX AT THE NORMAL RATE AS APPLICABLE FOR SHORT TERM CAPITAL GA INS AND NOT CONCESSIONAL RATE AS PROVIDED U/S 112 OF THE ACT. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD INCLUDING CASE LAWS RELIED UPON. WE ARE OF CONSIDER ED OPINION THAT SECTION 50 OF THE ACT IS A PROVISION WITH DEEMING FICTION WHER EBY FOR THE PURPOSES OF COMPUTING CAPITAL GAINS IN THE CASE OF DEPRECIABLE ASSETS , THE GAINS ARISING FROM THE TRANSFER OF THE SAID ASSETS HAS TO BE TREA TED AS CAPITAL GAINS ARISING FROM TRANSFER OF SHORT TERM CAPITAL ASSETS U/S 50 O F THE ACT, BUT FOR THE PURPOSE OF APPLICABILITY OF TAX RATE IT HAS TO BE T REATED AS LONG TERM CAPITAL GAIN IF HELD FOR MORE THAN THREE YEARS AND BROUGHT TO TAX AT RATE@20% AS STIPULATED U/S 112 OF THE ACT. THIS PROPOSITION IS SUPPORTED BY THE ORDER OF CO-ORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF SMITA CONDUCTORS LIMITED V. DCIT IN ITA NO. 4004/MUM/2011 FOR ASSESSMENT YEA R 2006-07 VIDE ORDERS DATED 17.09.2013. WE ORDER ACCORDINGLY. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 13 7. NOW WE WILL TAKE REVENUE APPEAL IN ITA NO 13/MUM/2 012 FOR THE ASSESSMENT YEAR 2007-08 8. THE FIRST GRIEVANCE OF THE REVENUE IS WITH RESPECT TO THE LEARNED CIT(A) ALLOWING 50% OF IT CHARGES I.E. COE3 EXPENSES BEING RS.70,02,606/- OUT OF TOTAL DISALLOWANCE OF COE3 EXPENSES TO THE TUNE OF RS.1,40,05,712/- BY THE AO. THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY US IN THE ASSESSEES APPEAL IN ITA NO. 195/MUM/2012 FOR ASSESSMENT YEAR 2007-08 IN PRECEDING PARA NUMBER 3 OF THIS ORDER. OUR AFORESAI D DECISION SHALL APPLY MUTATIS MUTANDIS TO THIS ISSUE IN THE REVENUES APP EAL IN ITA NO. 13/MUM/ 2012.WE ORDER ACCORDINGLY. 9. THE SECOND GRIEVANCE OF THE REVENUE IS WITH RESPECT TO THE DECISION OF LEARNED CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO WITH RESPECT TO ROYALTY PAYMENT AMOUNTING TO RS.77,60,843/- MADE U/S 92CA OF THE ACT , BY THE TRANSFER PRICING OFFICER/ASSESSING OFF ICER. THE LEARNED CIT(A) HELD AS UNDER : 3.2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, WRITTEN SUBMISSION AND ORAL ARGUMENTS OF THE APPELLANT AS AGAINST THE OBSERVATIONS/ FINDINGS OF THE TPO/AO IN THEIR ORDERS U/S. 92CA (3) /143(3) OF THE A CT. THE SUBMISSION AND CONTENTION OF THE APPELLANT ARE BEING DISCUSSED AND D ECIDED AS UNDER:- I. THE QUESTION INVOLVED HERE IS OF INTERPRETING THE SIA APPROVAL. AS PER THE BENCHMARKING ANALYSIS CARRIED OUT BY THE APPELLAN T, THE ARITHMETICAL MEAN OF ROYALTY RATES OF ROYALTY RATES OF COMPARABLE TRANSACTIONS WAS 4.5%. THE APPROVAL REQUESTED AND OBTA INED BY THE ASSESSEE FROM THE SIA FOR PAYMENT OF ROYALTY WAS FOR A LOWER RATE(3.5% OF INTERNAL SALES) AS COMPARED TO THE RESULTS OF THE B ENCHMARKING ANALYSIS. ACCORDINGLY, THE ARMS LENGTH PRICE/RATE A T WHICH ROYALTY IS PAID IS NOT IN DISPUTE HERE. II. THE APPELLANT BEING A PUBLIC LIMITED COMPANY AND TAKI NG INTO ACCOUNT CORPORATE GOVERNANCE CONSIDERATIONS, HAS VOLUNTARILY RESTRICTED THE PAYMENT OF ROYALTY TO 10% OF ITS PROFIT IN THE TCA BET WEEN THE APPELLANT AND CASTROL LTD.,UK . AS PER THE SAID AGREEMENT , THE A MOUNT OF ROYALTY PAYABLE SHALL BE 3.5% OF INTERNAL SALE WHICH WAS FU RTHER CAPPED TO 10% PROFITS. THE ALTERNATIVE LIMIT OF 10% OF PROFITS IS VO LUNTARY LIMIT THAT HAS BEEN SELF-IMPOSED BY THE APPELLANT. THE APPELLANT HIG HLIGHTED THAT THE ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 14 ROYALTY ACTUALLY BASED ON 10% OF PROFITS IS SUBSTANT IALLY LOWER THAN WHAT IT WOULD HAVE BEEN BASED ON THE SIA APPROVAL. H AD THE APPELLANT PAID ROYALTY@3.5% ON INTERNAL SALES, THE PAYMENT OF ROYALTY WOULD BE ALMOST RS.35.37 CRORES MORE THAN WHAT IT HAS ACTUALLY PAID. THE EFFECTIVE ROYALTY PAID BY THE APPELLANT WORKS OUT TO 1. 29% OF SALES AS AGAINST THE APPROVAL OBTAINED OF 3.5% OF INTERNAL SALE S .ALSO AS PER THE AGREEMENT , THE APPELLANT IS REQUIRED TO PAY ROYALTY O N PROFITS AS LONG AS THE ROYALTY PAYMENT DOES NOT EXCEED 3.5% OF SALES. THE TERM PROFITS AS DEFINED IN THE TCA DOES NOT DISTINGUISH BETWEEN DOMESTIC OR EXPORT PROFITS. III. IN THE APPLICATION MADE TO THE SIA , THE APPELLANT HAD EXPLICITLY MENTIONED THAT ROYALTY PAYABLE WOULD BE 3.5% OF SALES, AND IT SHALL BE CAPPED TO 10% OF CASTROL INDIAS PROFIT IN ANY RELEVAN T FINANCIAL YEAR. THE APPELLANT HAD ALSO SUBMITTED TO SIA DETAILS OF TOTAL FOREIGN EXCHANGE INFLOW AND OUTFLOW DURING THE PERIOD OF CO LLABORATION. IN THE SAID WORKING, THE APPELLANT HAD EVIDENTLY BROUGHT OUT F OREIGN EXCHANGE OUTFLOW ON ACCOUNT OF ROYALTY @10% OF PROFITS BEFORE TAXES. IV. THE PAYMENTS MADE BY THE APPELLANT THROUGH THE AUTHORI ZED DEALERS(BANKERS) ARE MADE IN ACCORDANCE WITH THE PR EVALENT EXCHANGE CONTROL REGULATIONS. HAD THE COMPANY MADE ANY EXCESS PAYMENTS , IT WOULD HAVE BEEN OBJECTED TO BY THE AUTHORIZED DEALER S , WHO HAVE THE DELEGATED AUTHORITY UNDER THE FOREIGN EXCHANGE MANAGE MENT ACT,1999 TO ADMINISTER COMPLIANCE WITH EXCHANGE CONTROL LAWS I N INDIA. V. VIEWED IN THE ABOVE BACKGROUND, THE TPOS INTERPRETATI ON OF THE SIA APPROVAL WAS ERRONEOUS. THE TPO HAS ERRED IN DISALL OWING ROYALTY OF RS. 77,60,843 . ACCORDINGLY, THE APPELLANTS APPEAL IS AL LOWED AND THE ADJUSTMENT MADE BY THE TPO IS DIRECTED TO BE DELETED. BOTH THE PARTIES AGREE THAT THE ISSUE IS COVERED BY THE TRIBUNALS DECISION IN THE EARLIER YEARS AND THE FACTS ARE IDENTICAL. THE LEARNED DR HOWEVER SUBMITTED THAT THE ASSESSEE DID NOT FURNISH THE COM PARABLE DATA IN RESPECT OF UNCONTROLLED TRANSACTIONS WHICH ARE SIMILAR TO THE TRANSACTIONS OF THE ASSESSEE AS TO THE AE AND THE ASSESSEE IS MERELY RE LYING ON SIA/ RBI APPROVALS WHICH DO NOT TAKE INTO ACCOUNT TP ISSUES AND RELEVANT LAW AS MANDATED UNDER THE ACT TO DETERMINE ALP. THE LEARNE D DR RELIED ON DECISION OF THE TRIBUNAL IN THE CASE OF SKOL BREWERIES LIMIT ED V. ACIT (2013) 29 TAXMANN.COM 111(MUM-TRIB.) ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 15 WE HAVE OBSERVED THAT THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR 2006- 07 IN THE ASSESSEES OWN CASE IN ITA NO.8371/MUM/20 10 VIDE ORDERS DATED 14-11-2014 HAS OBSERVED AS UNDER: 7. THE CIT(A) HAS ALSO DELETED THE DISALLOWANCE OF R OYALTY PAYMENT AFTER HAVING THE FOLLOWING OBSERVATION : 2.20 I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT. THE QUESTION INVOLVED HERE IS OF INTERPRETING THE SIA APP ROVAL. AS PER THE BENCHMARKING ANALYSIS CARRIED OUT BY THE APPELLANT, TH E ARITHMETICAL MEAN OF ROYALTY RATES OF COMPARABLE TRANSACTIONS WA S 4.75%. THE APPROVAL REQUESTED AND OBTAINED BY THE ASSESSEE FROM THE SIA FOR PAYMENT OF ROYALTY WAS FOR A LOWER RATE (3.5% OF INT ERNAL SALES) AS COMPARED TO THE RESULTS OF THE BENCHMARKING ANALYSIS. A CCORDINGLY, THE ARMS LENGTH PRICE/ RATE AT WHICH ROYALTY IS PAID IS NOT IN DISPUTE HERE. THE APPELLANT BEING A PUBLIC LIMITED COMPANY AND TAKI NG INTO ACCOUNT CORPORATE GOVERNANCE CONSIDERATIONS, HAS VOLUNTARILY RESTRICTED THE PAYMENT OF ROYALTY TO 10% OF ITS PROFIT IN THE TCA BET WEEN THE APPELLANT AND CASTROL LTD., UK. AS PER THE SAID AGREEMENT, THE AM OUNT OF ROYALTY PAYABLE SHALL BE 3.5.% OF INTERNAL SALE WHICH WAS F URTHER CAPPED TO 10% OF PROFITS. THE ALTERNATIVE LIMIT OF 10% OF PROFI TS IS VOLUANTARY LIMIT THAT HAS BEEN SELF IMPOSED BY THE APPELLANT. THE APPEL LANT HIGHLIGHTED THAT THE ROYALTY ACTUALLY PAID BASED ON 10% OF PROFITS IS SUBSTANTIALLY LOWER THAN WHAT IT WOULD HAVE PAID BASED ON THE SIA APP ROVAL. HAD THE APPELLANT PAID ROYALTY @ 3.5% ON INTERNAL SALES. THE PAYMENT OF ROYALTY WOULD BE ALMOST RS. 23.94 CRORES MORE THAN WHAT IT HAS ACTUALLY PAID. THE EFFECTIVE ROYALTY PAID BY THE APPELLANT WORKS OUT TO 1.68% OF SALES AS AGAINST THE APPROVAL OBTAINED OF 3.5% OF SALES. ALS O AS PER THE AGREEMENT, THE APPELLANT IS REQUIRED TO PAY ROYALTY ON 'PROFITS' AS LONG AS THE ROYALTY PAYMENT DOES NOT EXCEED 3.5% OF SALES. THE TERM 'PROFITS' AS DEFINED IN THE TCA DOES NOT DISTINGUISH BETWEEN DO MESTIC OR EXPORT PROFITS. 2.21 IN THE APPLICATION MADE TO THE SIA, THE APPELLANT HAD EXPLICITLY MENTIONED THAT ROYALTY PAYABLE WOULD BE 3.5% OF SALES, AND IT SHALL BE CAPPED TO 10% OF CASTROL INDIA'S PROFIT IN ANY RELEVAN T FINANCIAL YEAR. THE APPELLANT HAD ALSO SUBMITTED TO SIA DETAILS OF TOTAL FOREIGN EXCHANGE INFLOW AND OUTFLOW DURING THE PERIOD OF COL LABORATION. IN THE SAID WORKING, THE APPELLANT HAD EVIDENTLY BOUGHT OUT FOREIGN EXCHANGE OUTFLOW ON ACCOUNT OF ROYALTY @ 10% OF PROFITS BEFOR E TAXES. ACCORDINGLY, THE TPO'S ALLEGATION THAT THERE IS NO QUES TION OF ANY 'IMPLICIT' APPROVAL SEEMS TO BE ERRONEOUS. THE PAYMENTS MADE BY THE APPELLANT THROUGH THE AUTHORIZE D DEALERS (BANKERS) ARE MADE IN ACCORDANCE WITH THE PREVELANT E XCHANGE CONTROL ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 16 REGULATIONS. HAD THE COMPANY MADE ANY EXCESS PAYMENTS, IT WOULD HAVE BEEN OBJECTED TO BY THE AUTHORIZED DEALERS, WHO HAVE THE DELEGATED AUTHORITY UNDER THE FOREIGN EXCHANGE MANAG EMENT ACT, 1999 TO ADMINISTER COMPLIANCE WITH EXCHANGE CONTROL L AWS IN INDIA. VIEWED IN THE ABOVE BACKGROUND, THE TPO'S INTERPRETATI ON OF THE SIA APPROVAL WAS ERRONEOUS. THE TPO HAS ERRED IN DISALL OWING ROYALTY OF RS.40,25,954. ACCORDINGLY, THE APPELLANT'S APPEAL IS ALLOWED AND THE ADJUSTMENT MADE BY THE TPO IS DIRECTED TO BE DELETED. 7.1 WE FOUND THAT THE ISSUE REGARDING DISALLOWANCE OF ROYALTY HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF ASSESSEE IN A.Y .2003-04 & 2004- 05. THE PRECISE OBSERVATIONS OF THE TRIBUNAL AT PARA 1 1 & 43 ARE AS UNDER :- 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE IM PUGNED ROYALTY WAS PAID BY THE ASSESSEE COMPANY TO ITS AE N AMELY CASTROL LTD. UK AT 3.5 % OF THE NET EX- FACTORY SALE P RICE OF PRODUCTS MANUFACTURED AND SOLD IN INDIA AS PER THE TEC HNICAL COLLABORATION AGREEMENT. THIS INTERNATIONAL TRANSACTION INVOLVING PAYMENT OF ROYALTY TO ITS AE WAS BENCHMARKED BY THE AS SESSEE BY FOLLOWING CUP METHOD IN ITS TP STUDY REPORT AND SINC E AVERAGE RATE OF ROYALTY OF THREE COMPARABLES SELECTE D BY IT WAS HIGHER AT 4.67% THAN THE RATE AT WHICH ROYALTY WAS PAI D BY THE ASSESSEE TO ITS AE, THE TRANSACTION INVOLVING PAYMEN T OF ROYALTY WAS CLAIMED TO BE AT ARM'S LENGTH. A PERUSAL OF THE ORD ER PASSED BY THE TPO U/S 92CA (3) OF THE ACT SHOWS THAT NEITHER THES E COMPARABLES SELECTED BY THE ASSESSEE IN ITS TP STUD Y REPORT WERE REJECTED BY HER NOR ANY NEW COMPARABLES WERE SELECT ED BY HER BY MAKING A FRESH SEARCH IN ORDER TO SHOW THAT THE PAYMEN T OF ROYALTY BY THE ASSESSEE TO ITS AE WAS NOT AT ARM'S LEN GTH. SHE SIMPLY RELIED ON THE APPROVAL OF SIA TO HOLD THAT ANY R OYALTY PAID BY THE ASSESSEE ON EXPORTS AND OTHER INCOME WAS NOT ALL OWABLE AND DISALLOWED THE ROYALTY PAYMENT TO THE EXTENT OF R S. 40,51,486/- TREATING THE SAME AS THE ROYALTY PAID BY THE ASSESSEE IN RESPECT OF EXPORTS SALE AND OTHER INCOME. WE ARE UNABLE TO AGREE WITH THIS STRANGE METHOD FOLLOWED BY T HE TPO TO MAKE A TP ADJUSTMENT IN RESPECT OF ROYALTY PAYMENT WH ICH IS NOT SUSTAINABLE EITHER IN LAW OR ON THE FACTS OF THE CASE. SHE HAS NEITHER REJECTED THE METHOD FOLLOWED BY THE ASSESSEE TO BENCH- MARK THE TRANSACTION IN RESPECT OF PAYMENT OF ROYALTY N OR HAS BEEN ADOPTED ANY RECOGNIZED METHOD TO DETERMINE THE A LP OF THE SAID TRANSACTIONS. THE APPROVAL OF SIA ADOPTED BY TH E TPO AS BASIS TO MAKE TP ADJUSTMENT IN RESPECT OF ROYALTY PAYM ENT WAS UNTENABLE AND EVEN GOING BY THE SAID BASIS WRONGLY AD OPTED BY THE TPO, NO TP ADJUSTMENT IN RESPECT OF ROYALTY PAYMENT WAS LIABLE TO BE MADE. AS PER THE SAID BASIS, THE NET SALES OF THE ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 17 ASSESSEE AFTER EXCLUDING EXPORT SALE AND OTHER INCOM E WERE TO THE EXTENT OF RS. 1118.70 CRORES AND THE ROYALTY PAID THEREON AT RS. 24.38 CRORE BEING LESS THAN THE RATE OF 3.5% APP ROVED BY SIA, THERE WAS NO CASE OF ANY EXCESS PAYMENT MADE OF ROYA LTY BY ASSESSEE THAN APPROVED BY SIA TO JUSTIFY ITS DISALLOW ANCE BY WAY OF TP ADJUSTMENT. IN OUR OPINION, THE ID. CIT (A) C OULD NOT APPRECIATE THESE INFIRMITIES IN THE ORDER OF THE TPO DESPITE THE SAME WERE SPECIFICALLY BROUGHT TO HIS NOTICE ON BEHAL F OF THE ASSESSEE AND CONFIRMED THE TP ADJUSTMENT MADE BY THE TPO IN RESPECT OF ROYALTY PAYMENT WHICH WAS TOTALLY UNJUSTIFI ED. WE THEREFORE, DELETE THE ADDITION MADE BY THE AO/TPO AND CONFIRMED BY THE ID. CIT ON ACCOUNT OF TP ADJUSTMENT I N RESPECT OF ROYALTY PAYMENT AND ALLOW GROUND NO. 3 OF THE ASSE SSEE'S APPEAL. X X X X X X X X X X X X 43 THE FIRST ISSUE RAISED BY THE REVENUE IN ITS APP EAL FOR A.Y. 2004-05 RELATING TO DELETION BY THE ID. CIT(A) OF THE ADDITION MADE BY THE AO/TPO ON ACCOUNT OF TP ADJUSTMENT IN RESP ECT OF ROYALTY PAYMENT IS SIMILAR TO THE ONE INVOLVED IN GRO UND NO. 3 OF THE ASSESSEE'S APPEAL FOR A.Y.2003-04 WHICH HAS ALRE ADY BEEN DECIDED BY US IN FOREGOING PORTION OF THIS ORDER. F OLLOWING OUR CONCLUSION DRAWN IN A.Y. 2003-04 ON THE SIMILAR ISSU E, WE UPHOLD THE IMPUGNED ORDER OF THE ID. CIT(A) FOR A.Y. 2004-05 DELETING THE ADDITION MADE BY THE AO/TPO ON ACCOUNT OF TP ADJUSTMENT IN RESPECT OF ROYALTY PAYMENT AND DISMISS GR OUND NO. 1 OF THE REVENUE'S APPEAL. 7.2 WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE AS STATED ABOVE. T HE FACTS AND CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, AS STATED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF ROYALTY PAYMENT. WE HAVE CONSIDERED RIVAL CONTENTIONS , PERUSED THE MATERIAL ON RECORDS INCLUDING CASE LAWS AND GONE THROUGH THE ORDER OF T HE TRIBUNAL IN ASSESSEES OWN CASE AS STATED ABOVE. THE FACTS AND CIRCUMSTANC ES DURING THE YEAR UNDER CONSIDERATION ARE SAME AS IN THE EARLIER YEARS. RES PECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN PRECEDING YEARS, AS STA TED ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING T HE DISALLOWANCE OF ROYALTY PAYMENT.WE ORDER ACCORDINGLY. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 18 10. THE REVENUE IS ALSO AGGRIEVED BY THE DECISION OF LE ARNED CIT(A) IN TREATING THE CAPITAL EXPENDITURE INCURRED ON ADVERT ISEMENT FILMS AS REVENUE EXPENDITURE AND ACCORDINGLY DELETING THE DI SALLOWANCE MADE BY THE AO. THE LEARNED CIT(A) HELD AS UNDER: 3.8.3 I HAVE CONSIDERED THE FACTS OF THE CASE, WRITTEN SUBMISSION AND ORAL ARGUMENTS OF THE APPELLANT AS AGAINST THE OBSERVATIONS/ FINDINGS OF THE AO IN HIS ORDER U/S. 143(3) OF THE ACT. THE HONBLE ITAT , WHILE ADJUDICATING THE REVENUES APPEAL FOR ASSESSMENT YEAR 2001-02 (ITA NO . 3245/MUM/2005) HAS HELD THAT EXPENDITURE ON ADVERTISEMENT FILMS IS RE VENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE . CONSISTENT WITH THIS VIEW AND THE VIEW TAKEN BY MY PREDECESSORS, WHILE DECIDING THE APPEAL FOR ASSESSME NT YEAR 2005-06 , 2002- 03 AND 2004-05, I DIRECT THE ASSESSING OFFICER TO AL LOW EXPENDITURE ON ADVERTISEMENT FILMS. BOTH THE PARTIES AGREE THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN EARLIER YEARS. THE TRIBUNAL IN REVENUES APPEAL FOR THE ASSESSMENT YEAR 2005-06 IN ITA NO. 8359/MUM /2010 VIDE ORDERS DATED 14-11-2014 HELD AS UNDER:- 8. THE NEXT GRIEVANCE OF THE REVENUE RELATES TO EXPEN DITURE ON ADVERTISEMENT FILMS, WHICH HAS BEEN DEALT BY THE AO AT PARA 13 AND BY CIT(A) AT PARA 15. THE PRECISE OBSERVATION OF THE CIT( A) ARE AS UNDER :- GROUND NO. 12 OF THE APPELLANT IS REPRODUCED AS UND ER:- 12.IIN TREATING EXPENDITURE ON ADVERTISEMENT FILMS A S CAPITAL EXPENDITURE INSTEAD OF REVENUE AND WITHOUT PREJUDICE , IN NOT ALLOWING DEPRECIATION THEREON. 12.1 THE HONBLE ITAT, WHILE ADJUDICATING THE REVENUE 'S APPEAL FOR ASSESSMENT YEAR 2001-02 (ITA NO. 3245/MUM/2005) HAS HELD THAT EXPENDITURE ON ADVERTISEMENT FILMS IS REVENU E EXPENDITURE AND NOT CAPITAL EXPENDITURE. 12.2 CONSISTENT WITH THIS VIEW AND THE VIEW TAKEN BY ME WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2002-03 AND ASSESSMENT YEAR 2004-05, DIRECT THE ASSESSING OFFICER TO ALLOW ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 19 EXPENDITURE ON ADVERTISEMENT FILMS. ACCORDINGLY GROU ND NO. 12 IS ALLOWED. 8.1 WE FOUND THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y.2003-04. TH E PRECISE OBSERVATION OF THE TRIBUNAL FOR A.Y.2003-04 ARE AS U NDER :- 41. AS REGARDS THE ISSUE RAISED IN GROUND NO. 2 REL ATING TO THE DISALLOWANCE MADE ON ACCOUNT OF ADVERTISEMENT EXPENSES, IT IS OBSERVED THAT THIS ISSUE IS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNA L DATED 30T JULY 2009 (SUPRA) FOR A.Y. 2001-02 WHEREI N ORDER OF THE ID. CIT(A) DELETING THE SIMILAR DISALLOW ANCE MADE BY THE AO ON ACCOUNT OF ADVERTISEMENT EXPENSES TREATING THE SAME AS CAPITAL EXPENDITURE WAS UPHELD BY THE TRIBUNAL FOLLOWING ITS ORDER IN ASSESSEE'S OWN F OR A.Y. 1998-99. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR A.Y. 2000-01, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ADVERTISEMENT EXPENDITURE AND DISMISS GROU ND NO. 2 OF THE REVENUE'S APPEAL. 8.2 AS THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL FOR A.Y.2003-04, WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE OF EXP ENDITURE ON ADVERTISEMENT FILMS. AS THE FACTS AND CIRCUMSTANCES OF THE CASE DURING T HE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE DECISION OF TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LEARNED CIT(A) FOR DELETING THE DISALLOWANCE OF EXP ENDITURE ON ADVERTISEMENT FILMS.WE ORDER ACCORDINGLY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 195/MUM/2012 FOR THE ASSESSMENT YEAR 2007-08 AND REVENUE APPEAL IN ITA NO. 13/MUM/2012 FOR ASSESSMENT YEAR 2007-08 ARE PARTLY ALLOWED AS INDICATED ABOVE. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 20 12. NOW WE WILL TAKE UP THE ASSESSEE APPEAL IN ITA NO. 5671/MUM/2013 FOR THE ASSESSMENT YEAR 2008-09. 13. THE FIRST GRIEVANCE OF THE ASSESSEE IS WITH RESPECT TO THE UPHOLDING OF THE DISALLOWANCE BY THE LEARNED CIT(A) OF THE IT CH ARGES I.E. COE3 RELATED EXPENSES TO THE TUNE OF 50% BEING RS.73,01,695 OUT OF THE TOTAL EXPENSES OF RS.1,46,03,390 BEING DISALLOWED BY THE AO. WE HA VE ADJUDICATED THIS ISSUE IN THE PRECEDING PARA NO 3 OF THIS ORDER WHIL E ADJUDICATING THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08. OUR ABOVE DECISION / ORDER FOR THE ASSESSMENT YEAR 2007-08 SHALL APPLY M UTATIS MUTANDIS TO THE IDENTICAL ISSUE OF DISALLOWANCE OF IT CHARGES I .E. COE3 EXPENSES DURING THIS YEAR. WE ORDER ACCORDINGLY. 14. THE NEXT GRIEVANCE OF THE ASSESSEE IS WITH RESPECT TO CLAIM OF UNUTILIZED CENVAT CREDIT U/S 145A OF THE ACT. WE HAVE ALREADY ADJUDICATED THIS ISSUE IN PARA 4 OF THIS ORDER WHILE ADJUDICATING TH E ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08.OUR ABOVE DECISION FOR THE ASSESSMENT YEAR 2007-08 SHALL APPLY MUTATIS MUTANDIS TO THE IDENTIC AL ISSUE OF CLAIM OF UNUTILIZED CENVAT CREDIT DURING THIS YEAR. WE ORDER ACCORDINGLY. 15. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE R E-COMPUTATION OF THE CLAIM OF DEPRECIATION ON ASSETS LOCATED AT SILVASA ALTHOUGH THE ASSESSEE HAD SPECIFICALLY NOT CLAIMED DEPRECIATION IN THE PA ST. WE HAVE ALREADY ADJUDICATED THIS ISSUE IN PARA 5 OF THIS ORDER WHIL E ADJUDICATING THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08.O UR ABOVE DECISION FOR THE ASSESSMENT YEAR 2007-08 SHALL APPLY MUTATIS MUT ANDIS TO THE IDENTICAL ISSUE OF CLAIM OF RE-COMPUTATION OF THE CLAIM OF DE PRECIATION ON ASSETS LOCATED AT SILVASA DURING THIS YEAR. WE ORDER ACCOR DINGLY. 16. THE ASSESSEE HAS SOLD FIXED ASSETS OF RS. 34,71,820 /- . THE SOLD ASSETS ARE SCRAP OF BUILDING. HOWEVER, THE SALES CONSIDERA TIONS WERE NOT BEEN ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 21 OFFERED FOR TAXATION. THE ASSESSEE WAS ASKED BY THE AO TO EXPLAIN WHY THE DEPRECIATION OF THE BUILDING SHOULD NOT BE COMPUTED BY ADJUSTING THE SALE CONSIDERATION OF RS.34,71,820/-. IT WAS SUBMITTED B Y THE ASSESSEE THAT IN DEPRECIATION CHART , THE SALES CONSIDERATION HAS BE EN ADJUSTED AGAINST THE ADDITION TO BUILDING MADE DURING THE YEAR AND A NET CONSIDERATION OF RS.21,58,407/- HAS BEEN WORKED OUT AS A CAPITAL GAI N. THE AO OBSERVED THAT AS PER THE PROVISION OF SECTION 50 OF THE ACT IF THE ENTIRE BLOCK OF AN ASSET IS SOLD AND THE SALE CONSIDERATION EXCEEDS TH E COST OF ACQUISITION (OPENING W.D.V. PLUS ADDITIONS) , THE EXCESS AMOUNT SHALL BE TAXABLE AS SHORT TERM CAPITAL GAIN. ACCORDINGLY, RS.21,58,407/ - WAS ADDED TO THE TOTAL INCOME AS SHORT TERM CAPITAL GAINS BY THE AO. BEFORE THE LEARNED CIT(A) , THE ASSESSEE SUBMITTED THAT DURING THE YEAR, THE ASSESSEE HAS SOLD BUILDING FOR A SUM OF RS.34,7 1,821/- AND ADDITIONS TO BUILDING WERE RS.13,13,413/- , RESULTING IN A NE T REDUCTION OF RS.21,58,407/- . SINCE THE CLOSING BLOCK WAS REDUCE D TO NIL WHILE COMPLETING THE ASSESSMENT FOR ASSESSMENT YEAR 2007- 08 , THE SAME HAS BEEN TAXED AS SHORT TERM CAPITAL GAIN U/S. 50 OF TH E ACT . WHILE ADJUDICATING THE APPEAL FOR ASSESSMENT YEAR 2007-08 , IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT THE LEA RNED CIT(A) UPHELD THE CALCULATION OF GAIN BY INVOKING SECTION 50C OF THE ACT AND CONSISTENT WITH THE SAME , THE SAID CALCULATIONS WOULD BE CORRECT. THE ASSESSEE PLEADED THAT ITS BLOCK OF ASSETS WOULD BE HIGHER DUE TO ITS OPTION TO CLAIM DEPRECIATION IN EARLIER YEARS OF SILVASSA UNIT AND ALSO ON THE BASIS OF VALUATION REPORT WHICH MAY BE RECEIVED FROM DVO U/S 50C(2) OF THE ACT FOR THE ASSESSMENT YEAR 2007-08 AND HENCE THE ASSESSEE PLEADED THAT IT RESERVES THE RIGHT TO CLAIM A RESETTING OF THE BLOC K BASED ON A DETERMINATION OF FAIR VALUE AND CLOSING WDV OF EARL IER YEARS. ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 22 THE LEARNED CIT(A) OBSERVED THAT THE ISSUE IS CONS EQUENTIAL TO THE ONE DEALT IN ASSESSMENT YEAR 2007-08 WHEREIN THE ISSUE WAS DECIDED AGAINST THE ASSESSEE AS UNDER FOR THE ASSESSMENT YEAR 2007- 08 BY LEARNED CIT(A):- IN RESPECT OF THE SUBMISSIONS AND FACTS OF THE CA SE, IT IS MENTIONED HERE THAT THERE IS NO DOUBT THAT THE APPELLANT HAS SOLD BUSINESS ASSETS ON WHICH THE DEPRECIATION HAS BEEN ALLOWED BY THE D EPARTMENT. THE CLAIM OF THE APPELLANT THAT IT HAD NOT CLAIMED DEPR ECIATION BUT THE DEPRECIATION WAS ALLOWED TO THE APPELLANT BY THE DE PARTMENT AND THIS ISSUE WAS AGITATED BY THE APPELLANT. THIS ISSUE HAS BEEN DECIDED AGAINST THE APPELLANT BY THE HONBLE BOMBAY HIGH CO URT. IN THIS SET OF FACTS IT IS CLEAR THAT WHAT HAS BEEN SOLD BY THE AP PELLANT ARE CAPITAL ASSETS FORMING PART OF ASSETS IN RESPECT OF WHICH T HE DEPRECIATION HAS BEEN ALLOWED UNDER THE ACT AND ACCORDINGLY THE PROV ISIONS OF SEC. 50 ARE SQUARELY APPLICABLE IN THE APPELLANT CASE. FURT HER, AS PER PROVISIONS OF SEC. 50C OF THE ACT WHERE THE CONSIDERATION DECL ARED TO BE RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF LAND OR BUIL DING OR BOTH IS LESS THAT THE VALUE ADOPTED , ASSESSED OR ASSESSABLE BY ANY A UTHORITY OF STATE GOVERNMENT (STAMP VALUATION OFFICER) FOR THE PURP OSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE S O ADOPTED OR ASSESSED OR ASSESSABLE SHALL BE DEEMED TO BE VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING FOR THE PURPOSES OF SECTION 48 OF THE ACT. ACCORDINGLY THE ISSUE RAISED BY THE APPELLANT IN SU B GROUND 8.1 AND 8.2 OF THE APPEAL ARE NOT CONSIDERED TO BE ACCEPTAB LE AND ARE ACCORDINGLY DISMISSED. THUS, THE LEARNED CIT(A) DECIDED THE SUBSTANTIVE IS SUE OF TAXABILITY OF GAINS U/S 50C OF THE ACT AGAINST THE ASSESSEE. WITH RESPE CT TO THE RESETTING OF THE BLOCK BASED ON THE OUTCOME OF THE VALUATION OR THE CLAIM OF DEPRECIATION , IT WAS HELD THAT THE SAME WOULD BE CONSEQUENTIAL IN NA TURE AND AS SUCH NO SEPARATE DIRECTIONS WERE ISSUED BY LEARNED CIT(A). WE HAVE ADJUDICATED THIS ISSUE IN THE PRECEDING PAR A 6 OF THIS ORDER W.R.T. ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2007-08 A ND OUR DECISION IN THE AFORESAID PARA NO 6 OF THIS ORDER SHALL APPLY MUTAT IS MUTANDIS TO THIS ISSUE IN THE ASSESSEES APPEAL FOR THIS ASSESSMENT YEAR 2008 -09. WITH RESPECT TO THE CLAIM OF DEPRECIATION ON SILVASSA UNIT, THE SAID IS SUE WAS DECIDED AGAINST THE ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 23 ASSESSEE VIDE THIS ORDER IN PARA 5 FOR ASSESSMENT Y EAR 2007-08 IN ASSESSEES APPEAL AND IN PARA 15 OF THIS ORDER FOR ASSESSMENT YEAR 2008-09 IN ASSESSEES APPEAL AND OUR AFORESAID DECISIONS SHALL APPLY MUTA TIS MUTANDIS TO THIS ISSUE IN APPEAL. WE ORDER ACCORDINGLY. 17. NOW WE SHALL TAKE UP REVENUES APPEAL IN ITA NO 584 6/MUM/2013 FOR THE ASSESSMENT YEAR 2008-09. 18. THE FIRST GRIEVANCE OF THE REVENUE IS WITH RESPECT TO THE DECISION OF LEARNED CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO WITH RESPECT TO ROYALTY PAYMENT AMOUNTING TO RS.1,20,29,596/- MA DE U/S 92CA OF THE ACT , BY THE TRANSFER PRICING OFFICER/ASSESSING OFF ICER. WE HAVE ALREADY ADJUDICATED THIS ISSUE IN PARA 9 OF THIS ORDER WHIL E ADJUDICATING THE REVENUES APPEAL FOR THE ASSESSMENT YEAR 2007-08.OU R ABOVE DECISION FOR THE ASSESSMENT YEAR 2007-08 SHALL APPLY MUTATIS MUT ANDIS TO THE IDENTICAL ISSUE OF CLAIM OF ROYALTY DURING THIS YEAR. WE ORDE R ACCORDINGLY. 19. THE NEXT GRIEVANCE OF THE REVENUE IS WITH RESPECT T O THE DELETING OF THE DISALLOWANCE BY THE LEARNED CIT(A) OF THE IT COST I .E. COE3 RELATED EXPENSES TO THE TUNE OF 50% BEING RS.73,01,695 OUT OF THE TOTAL EXPENSES OF RS.1,46,03,390 BEING DISALLOWED BY THE AO. WE HA VE ADJUDICATED THIS ISSUE IN THE PRECEDING PARA NO 13 OF THIS ORDER WHI LE ADJUDICATING THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2008-09.O UR ABOVE DECISION IN ASSESSEES APPEAL APPLY MUTATIS MUTANDIS TO THE IDE NTICAL ISSUE IN REVENUES APPEAL OF DELETING OF DISALLOWANCE OF IT COSTS I.E. COE3 EXPENSES BY LEARNED CIT(A) DURING THIS YEAR. WE ORD ER ACCORDINGLY. 20. THE REVENUE IS ALSO AGGRIEVED BY THE DECISION OF LE ARNED CIT(A) IN TREATING THE CAPITAL EXPENDITURE INCURRED ON ADVERT ISEMENT FILMS AS REVENUE EXPENDITURE AND ACCORDINGLY DELETING THE DI SALLOWANCE MADE BY THE AO. WE HAVE ADJUDICATED THIS ISSUE IN THE PREC EDING PARA NO 10 OF THIS ITA 195 & 13/MUM/2012 & ITA 5671 & 5846/MUM/2013 24 ORDER WHILE ADJUDICATING THE REVENUES APPEAL FOR T HE ASSESSMENT YEAR 2007-08.OUR ABOVE ORDER IN REVENUES APPEAL FOR ASS ESSMENT YEAR 2007- 08 SHALL APPLY MUTATIS MUTANDIS TO THE IDENTICAL IS SUE IN REVENUES APPEAL FOR THE ASSESSMENT YEAR 2008-09 WITH RESPECT TO ALL OWABILITY OF COSTS OF ADVERTISEMENT FILMS AS REVENUE EXPENDITURE BY LEARN ED CIT(A) DURING THIS YEAR. WE ORDER ACCORDINGLY. 21. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 5671/MUM/2013 FOR THE ASSESSMENT YEAR 2008-09 AND REVENUE APPEAL IN ITA NO. 5846/MUM/2013 FOR ASSESSMENT YEAR 2008-09 ARE PARTL Y ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2016. # $% &' 18-10-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 18-10-2016 [ !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. 9 / CIT- CONCERNED, MUMBAI 5. <=( >>?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, < > //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI