Deputy Commissioner Of Income Tax, Circle- 1(1)(1), Bengaluru V. M/s. Adcock Ingram Limited, Bangalore

ITA 2053/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6483 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-09-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 24-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Related party transaction; Transfer pricing; Opportunity of being heard; International transaction
• Section: 43B; 139

Judgement Text

ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.2052 & 2053/BANG/2019 ASSESSMENT YEARS: 2011-12 & 2014-15 DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1(1) BANGALORE VS. M/S. ADCOCK INGRAM LIMITED #49, C & D BOMMASANDRA INDUSTRIAL AREA ANEKAL TALUK BANGALORE KARANATAKA PAN NO : AAGCA4343M APPELLANT RESPONDENT A PPELLANT BY : SHRI SUNIL KUMAR SINGH, D.R. RESPONDENT BY : SHRI BHARATH L., A.R. DATE OF HEARING : 08.09.2020 DATE OF PRONOUNCEMENT : 18.09.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE O RDERS PASSED BY LD. CIT(A) FOR ASSESSMENT YEAR 2011-12 AND 2014- 15. SINCE COMMON ISSUE IS BEING URGED IN THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER, FOR THE SAKE OF CONVENIENCE. 2. THE COMMON ISSUE URGED IN BOTH THE APPEALS RELAT ES TO TRANSFER PRICING ADJUSTMENT MADE BY THE A.O. AND DE LETED BY LD. CIT(A). ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 2 OF 9 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING PHARMACEUTICAL FORMULATION AND ALSO PROVIDING OUTSO URCED FORMULATIONS MANUFACTURING SERVICES. THE ASSESSEE WAS INCORPORATED IN APRIL, 2007 AS A JOINT VENTURE BETW EEN M/S. MEDREICH LIMITED, INDIA AND M/S. ADCOCK INGRAM HOLDING PTY L IMITED, SOUTH AFRICA (AIHPC). THEY HOLD 50.1% AND 49.9% IN THE S HAREHOLDING OF THE ASSESSEE COMPANY. THE ASSESSEE DECLARED INTERN ATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE. HENCE , THE A.O. REFERRED THE MATTER OF DETERMINATION OF ARMS LENGTH PRICE O F INTERNATIONAL TRANSACTION TO TPO. THE TPO ACCEPTED ALP OF INTERN ATIONAL TRANSACTIONS EXCEPT PAYMENT OF MANAGEMENT FEE TO M/ S. MEDREICH S.A. AND LICENSE FEE TO AIHPL. THE TPO DETERMINED THE ALP VALUE OF BOTH THE TRANSACTIONS AT NIL IN BOTH THE YEARS. AC CORDINGLY, HE MADE TRANSFER PRICING ADJUSTMENT OF RS.6,44,08,340/-IN A SSESSMENT YEAR 2011-12 AND RS.12,75,98,570/- IN ASSESSMENT YEAR 20 14-15. 4. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAD BE NCH MARKED THE TRANSACTION UNDER TNMM METHOD BY AGGREGATING ALL TH E INTERNATIONAL TRANSACTIONS. IT IS ALSO PERTINENT TO NOTE THAT THE TPO HAD BENCHMARKED THE TRANSACTION RELATING TO PAYMENT OF MANAGEMENT FEE AND LICENSE FEE SEPARATELY IN A.Y. 2009-10 AND 2010 -11. THE ASSESSEE HAS CHALLENGED THE ACTION OF THE TPO BY FI LING APPEAL BEFORE THE TRIBUNAL IN THOSE YEARS. THE ITAT, VIDE ITS OR DER DATED 31.1.2018 PASSED IN IT(TP)A NO.1039 & 1078/BANG/2015, HAS TAK EN THE VIEW THAT THE TPO HAS TO DETERMINE THE ALP OF THE TRANSA CTION UNDER ONE OF THE PERMISSIBLE METHODS AND TO HOLD THE ARMS LE NGTH PRICE AS NIL UNDER CUP METHOD, THE TPO HAD TO NECESSARILY DEMONS TRATE THAT THE SAME SERVICES WERE AVAILABLE FOR NIL CONSIDERATION IN AN UNCONTROLLED SITUATION. IT WAS ALSO HELD BY COORDINATE BENCH TH AT CLOSELY LINKED TRANSACTIONS HAVE TO BE AGGREGATED. ACCORDINGLY, T HE TRIBUNAL HAS RESTORED THE MATTER OF DETERMINING ALP OF THE TRANS ACTION TO THE FILE OF LD. CIT(A) WITH A DIRECTION TO EXAMINE THE TNMM METHOD ADOPTED BY THE ASSESSEE BY CALLING FOR A REMAND REPORT FROM TPO. IT WAS ALSO ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 3 OF 9 BROUGHT TO OUR NOTICE THAT THE ORDER PASSED BY THE COORDINATE BENCH IN A.Y. 2009-10 & 2010-11 WAS FOLLOWED IN A.Y. 2012 -13 & 2013-14 AND THE MATTER WAS RESTORED TO THE FILE OF LD. CIT( A). 5. THE LD. A.R. SUBMITTED THAT THE LD. CIT(A), IN T HE TWO YEARS UNDER CONSIDERATION HAS TAKEN NOTE OF THE DECISION RENDERED BY THE ITAT IN A.Y. 2009-10 & 2010-11. THE LD. CIT(A) ALS O NOTED THAT THE TPO HAS FURNISHED REMAND REPORT SUBMITTED FOR A.Y. 2013-14, WHEREIN HE HAS OBSERVED THAT THE MARGIN DECLARED BY THE ASSESSEE AT ENTITY LEVEL IS MORE THAN THE MARGIN OF COMPARABLE COMPANIES. 6. ACCORDINGLY, THE LD. CIT(A) HAS CALLED FOR A REM AND REPORT FROM TPO FOR BOTH THE YEARS UNDER CONSIDERATION. THE TP O HAS REPORTED THAT THE TAX PAYERS MARGIN IS HIGHER THAN THE MARGI N OF COMPARABLE COMPANIES. ACCORDINGLY, THE LD. CIT(A) HELD THAT N O TP ADJUSTMENT IS CALLED FOR IN BOTH THE YEARS UNDER CONSIDERATION . 7. WE HEARD THE PARTIES ON THIS ISSUE. WE NOTICE TH AT IDENTICAL ISSUE HAS BEEN RESTORED TO THE FILE OF LD. CIT(A) B Y THE COORDINATE BENCHES. IN THE REMAND PROCEEDINGS, THE LD. CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE TPO WITH REGARD TO THE MARGI N DECLARED BY THE ASSESSEE UNDER TNMM. THE TPO HAS ALSO REPORTED THAT THE MARGIN DECLARED BY THE ASSESSEE FOR HIGHER THAN THE MARGIN OF COMPARABLE COMPANIES. IDENTICAL REPORT HAS BEEN GI VEN BY THE TPO FOR THE YEARS UNDER CONSIDERATION ALSO. ACCORDINGL Y, THE LD. CIT(A) HAS DELETED THE TRANSFER PRICING ADJUSTMENT MADE DU RING THE YEARS UNDER CONSIDERATION. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY LD. CI T(A) IN ASSESSMENT YEAR 2011-12. 5.0 FINDINGS 5.1 IN THE LIGHT OF THE SUBMISSIONS OF THE APPELLAN T, IT IS OBSERVED FROM THE RECORD THAT AN IDENTICAL ISSUE WAS THERE IN THE TP ASSESSMENTS FOR AY 2013-14, 2009-10, 2010-11. IT IS SEEN FROM THE RECORD THAT C ONSEQUENT TO THE HON'BLE ITAT DECISION FOR AY 2009-10 & 2010-11 REMANDING THE ISS UE TO THE CIT(A)1, THE ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 4 OF 9 MATTER WAS TAKEN UP FOR HEARING TO DECIDE THE ISSUE AS PER THE DIRECTIONS OF THE ITAT AND FINALLY DECIDED IN FAVOUR OF THE APPELLANT . 5.1.1 DURING FY 2008-09, THE MARGINS ON ACCOUNT OF THE INTERNATIONAL TRANSACTION DESPITE PAY-OUT OF THE LICENSE FEE AND MANAGEMENT FEE WERE 25.49% FOR FY 2008-09 AND 19.42 FOR FY 2009-10 WHICH ARE H IGHER THAN THE MARGINS OF THE COMPARABLE COMPANIES IDENTIFIED BY THE COMPA NY AT 9.05% FOR FY 2008- 09 AND 8.57% FOR FY 2009-10 RESPECTIVELY. THE SAID MARGIN HAS BEEN ARRIVED AT AFTER AGGREGATING LICENSE FEES, ROYALTY AND MANA GEMENT FEES. THE TPO DID NOT AGREE WITH THE POSITION TAKEN BY THE COMPANY IN AGGREGATING THE TRANSACTIONS. ON APPEAL, THE THEN HON'BLE CIT(A) UP HELD THE COMPANY'S POSITION IN RELATION TO THE LICENCE FEE AND MANAGEMENT FEE. 5.1.2 THE REVENUE PREFERRED APPEAL TO ITAT. THE HON . ITAT IN THIS CASE HAD HELD THAT AGGREGATION OF TRANSACTION IS PERMISSIBLE UNDE R ACT AND RULES FRAMED THERE UNDER. THE ITAT ALSO HELD THAT THE ACTION OF THE TP O TO HOLD THAT THE ARM'S LENGTH PRICE IS `NIL' IS INCORRECT AND THAT THE REVENUE CO ULD NOT DECIDE WHAT WAS NECESSARY FOR A TAXPAYER AND WHAT WAS NOT. THE REQUIREMENT OF SERVICES SHOULD HAVE BEEN JUDGED FROM THE VIEW POINT OF THE TAXPAYER AS A BUS INESSMAN. THE ITAT ALSO NOTED THAT THE ASSESSEE IS JOINT VENTURE COMPANY AND THE TPO CANNOT LOSE SIGHT OF VARIOUS BENEFITS WHICH MAY FLOW TO INDIAN PARTNER DUE TO PR OVISION FOR MAKING THE PAYMENT FOR THE USE OF LICENSE. THE ITAT HAS HELD THAT THE TNMM ADOPTED BY THE COMPANY IS CORRECT. THE RELEVANT PART OF ITAT DECISION IS REPRODUCED BE LOW: '20 ............... IN VIEW OF THE ABOVE AND AS WEL L AS IN VIEW OF FINDING RECORDED HEREIN ABOVE THAT ALL THESE INTERNATIONAL TRANSACTI ONS ARE LINKED TO THE MAIN BUSINESS BEING CARRIED ON BY THE ASSESSEE AND SUCH CLOSELY LINKED TRANSACTIONS ARE TO BE ANALYSED IN AGGREGATE TO DETERMINE THE AR M'S LENGTH PRICE. MOREOVER, IT IS DIFFICULT TO COMPREHEND THE MANUFAC TURING OF DRUGS IN INDIA WITHOUT THERE BEING ANY OPERATION IN LICENCE TO MAN UFACTURE THE DRUGS FROM THE STATUTORY AUTHORITIES AND FOR THAT TO HAVE THE ACCESS ON THE FORMULATION WHICH IS THE TECHNICAL KNOWLEDGE AND DOMAIN OF AE. THE PRICES CHARGED BY THE ASSESSEE AND THE AMOUNT OF LICENCE FEES PAID TO AE CANNOT BE EXAMINED ON STAND-ALONE BASIS, BECAUSE IT WILL HAVE EFFECT OF D ETERMINATION THE NET PRIZES RECEIVED BY THE ASSESSEE. FURTHER THE CHARGES PAID BY THE ASSESSEE (11/) TO AE FOR ACQUIRING THE TECHNICAL KNOW-HOW AND IS A VALUA BLE ASSET. IN THE PRESENT CASE, TPO HAS NOT BROUGHT ON RECORD ANY COMPARABLE UNCONTROLLED PARTY (JV OR OTHERWISE) WHICH IS MANUFACTURING THE DRUGS WITH THE SAME PRICES OR LESS PRICES AS THAT OF THE ASSESSEE WITHOUT SEPARATELY C HARGING THE LICENSE FEE, THEREFORE THE APPROACH OF THE TRANSFER PRICING OFFI CER TO COMPUTE NIL CHARGES FOR THE LICENSE FEE CANNOT BE UPHOLD AS TRA NSFER PRICES ADJUSTMENT CAN BE MADE IN ACCORDANCE WITH THE ONE OF THE METHOD PR OVIDED UNDER THE RULES FRAMED UNDER THE INCOME-TAX ACT. IN VIEW THEREOF, W E FIND NO MERIT IN THE ANALYSIS CARRIED OUT BY THE TPO BY BENCHMARKING THE LICENCE FEE. IN FACT, ASSESSEE BY AGGREGATION OF TRANSACTIONS IN THE TP S TUDY HAD BENCHMARKED THE ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 5 OF 9 ARM'S LENGTH PRICE OF ALL THE TRANSACTIONS BY COMPA RING OPERATING PROFIT / OPERATING COST AT THE ENTITY LEVEL WAS 25.49% AS AG AINST THE NON-AE IT WAS 5.26 %. HOWEVER, WE OBSERVE THAT THE COMPARABILITY ANALYSIS IN THE TP STUDY CARRIED OUT BY THE ASSESSEE BY AGGREGATION OF TRANS ACTIONS ADOPTING TNMM AS THE MOST APPROPRIATE METHOD HAS NOT BEEN EXAMINE D BY EITHER OF THE AUTHORITIES BELOW WHO HAVE MERELY CONCENTRATED MERE LY ON THE ISSUE OF AGGREGATION /SEGREGATION OF TRANSACTIONS. THE CIT ( A) HAS MECHANICALLY ACCEPTED THE RESULTS OF THE ASSESSEE TO BE AT ARM'S LENGTH BY ACCEPTING THE OPERATING PROFIT/ OPERATING COST OF THE ASSESSEE AS 25.49% AS AGAINST NON-AE AT 5.26%. IN THAT VIEW OF THE MATTER, WE DEEM IT AP PROPRIATE TO REMAND THE ISSUE TO THE FILE OF THE CIT (A) FOR EXAMINING THE CORREC TNESS OF THE ALP AT THE ENTITY LEVEL BY APPLYING THE TNMM AS THE MOST APPROPRIATE METHOD BY AGGREGATING THE TRANSACTIONS. THE CIT (A) IS DIRECTED TO TAKE T HE REMAND REPORT FROM THE TPO IN THIS REGARD AND AFFORD THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD IN THE MATTER' IN RELATION TO MANAGEMENT FEES, THE HON. ITAT SIMIL ARLY HELD THE ISSUES SUBSTANTIALLY IN FAVOUR OF THE COMPANY. THE RELEVAN T PARAS HAVE BEEN REPRODUCED BELOW: 21........... THE ASSESSEE HAS FURNISHED THE DETAIL S OF THE SERVICES AVAILABLE BY THE ASSESSEE FROM MEDREICH TO THE ASSESSING OFFICER AS MENTIONED AT PAGE 22- 23 OF THE TRANSFER PRICING ORDER. THE TPO HAD MENTI ONED THE REPLY PURSUANT TO THE SHOW CAUSE NOTICE IN HIS ORDER AND THE ASSES SEE HAS CONCLUDED 'IT IS FURTHER SUBMITTED THAT AFTER FACTORING IN COST OF A LL RELATED PARTY TRANSACTION THE COMPANY HAS EARNED AND OPERATING MARGIN OF 22.5 3% WHICH IS SIGNIFICANTLY HIGHER THAN 9.05% EARNED BY THE COMPA RABLE COMPANIES THUS ESTABLISHING ALL THE UNDERLYING TRANSACTION INCLUDI NG THE TRANSACTION FOR PAYMENT OF LICENCE FEE AND MANAGEMENT FEE ARE AT AR M'S LENGTH ......................... ' (PAGE 40 OF TPO ORDER). TPO HAD THE RECORDED THE CONTRADICTION FINDINGS INASMUCH AS IT WAS MENTIONED THAT THAT THERE WAS DUPLICATION OF SERVICES AS ALLEGED THERE WAS NO EVI DENCE OF RENDERING THE SERVICES FOR THE MANAGEMENT. IN OUR VIEW TAXPAYER C OULD ONLY BE ASKED TO MAINTAIN AND PRODUCE THE EVIDENCE OF RECEIPT OF SER VICE WHICH A BUSINESSMAN KEEPS AND MAINTAINS REGARDING SERVICES RECEIVED FROM A THIRD PARTY. THE BURDEN OF MAINTENANCE OF DOCUMENTS / EVI DENCES COULD NOT BE HIGHER ON THE TAXPAYER MERELY DUE TO THE REASON THA T IT WAS RECEIVING SERVICES FROM ITS AES FURTHER TPO HAS NOT HELD THAT THE SIMI LAR KIND OF SERVICES WAS ALREADY AVAILABLE WITH THE TAXPAYER WITH ANY CONCRE TE EVIDENCE. IN THE ABSENCE OF ANY INSTANCES OF SERVICES PROVIDED BY TH E AE AND FROM THE FACT THAT SERVICES AVAILED BY THE TAXPAYER FROM THE THIR D PARTIES WERE SIMILAR IN NATURE, THE TPO'S VIEWPOINT ON DUPLICATION TEST WAS NOT ACCEPTABLE. 22....IN OUR CONSIDERED VIEW, THE FACTS OF THE CASE BEFORE US ARE MATERIALLY SIMILAR INASMUCH AS THE SERVICES ARE INDEED RENDERE D BY THE AE, AS EVIDENT FROM THE DOCUMENTARY EVIDENCES ON RECORD AND YET IT S ARM'S LENGTH VALUE IS HELD TO BE NIL ONLY BECAUSE, ACCORDING TO THE AUTHO RITIES BELOW, THESE SERVICES WERE WORTHLESS, THESE SERVICES WERE NOT RE QUIRED BY THE ASSESSEE, THE ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 6 OF 9 ASSESSEE COULD HAVE PERFORMED THESE SERVICES ON ITS OWN AND THE SERVICES WERE NOT RENDERED BY THE GROUP ENTITY. THE TPO HAS REJECTED THE DETERMINATION OF ARM'S LENGTH PRICE ON THE BASIS OF TNMM, AT ENTITY LEVEL, BUT THEN HE HAS NOT ADOPTED ANY OTHER PERMISSIBLE METHO D FOR DETERMINATION OF ARM'S LENGTH PRICE. SUCH A COURSE OF ACTION, AS NOT ED ABOVE, IS NOT PERMISSIBLE IN LAW. JUST BECAUSE THESE SERVICES ARE WORTHLESS I N THE EYES OF THE REVENUE AUTHORITIES, THE ARM'S LENGTH PRICE OF THESE SERVIC ES CANNOT BE HELD TO BE NIL. SIMILARLY, THE FINDINGS THAT NO SERVICES WERE RENDE RED AND THAT THE ASSESSEE COULD HAVE PERFORMED THESE SERVICES ON ITS OWN ARE CONTRADICTORY. IF NO SERVICES WERE RENDERED, WHICH SERVICES THE AUTHORIT IES BELOW HOLD THAT THE ASSESSEE COULD HAVE PERFORMED ON ITS OWN THE COMPU TATION OF NIL FOR MANAGEMENT SERVICES BY THE TPO WAS DONE ON THE BASIS OF METHOD NOT PERMISSIBLE UND ER THE LAWS BY BRINGING IN THE COMPARABLE UNCONTROLLED TRANSACTION BY THE T PO HOWEVER, WE OBSERVE THAT THE COMPARABILITY ANALYSIS IN THE TP STUDY CARRIED OUT BY THE ASSESSEE BY AGGREGATION OF TRANSACTIONS ADOPTING TNMM AS THE MOST APPROPRIATE METHOD HAS NOT BEEN EXAMINED BY EI THER OF THE AUTHORITIES BELOW WHO HAVE MERELY CONCENTRATED MERELY ON THE IS SUE OF AGGREGATION / SEGREGATION OF TRANSACTIONS. THE CIT (A) HAS MECHAN ICALLY ACCEPTED THE RESULTS OF THE ASSESSEE TO BE AT ARM'S LENGTH BY AC CEPTING THE OPERATING PROFIT / OPERATING COST OF THE ASSESSEE AS 25.49% AS AGAIN ST NON-AE AT 5.26%. IN THAT VIEW OF THE MATTER, WE DEEM IT APPROPRIATE TO REMAND THE ISSUE TO THE FILE OF THE CIT (A) FOR EXAMINING THE CORRECTNESS O F THE ALP AT THE ENTITY LEVEL BY APPLYING THE TNMM AS THE MOST APPROPRIATE METHOD BY AGGREGATING THE TRANSACTIONS. THE CIT (A) IS DIRECTED TO TAKE THE R EMAND REPORT FROM THE TPO IN THIS REGARD AND AFFORD THE ASSESSEE ADEQUATE OPP ORTUNITY OF BEING HEARD IN THE MATTER' 5.1.3 IN VIEW OF THE ABOVE, THE HON. ITAT AFFIRMED THE APPROACH ADOPTED BY THE COMPANY BUT REMANDED THE MATTER BACK TO THIS OFFICE TO EXAMINE WHETHER THE COMPANY HAS CORRECTLY AGGREGATED THE TRANSACTIONS O F LICENSE FEE AND MANAGEMENT FEE TO DETERMINE THE ARM'S LENGTH PRICE USING THE T NMM. CONSEQUENTLY, THE CIT(A)- 1, AFTER OBTAINING REPORT FROM THE TPO AFTER EXAMIN ING THE CORRECTNESS OF THE ALP AT THE ENTITY LEVEL BY APPLYING THE TNMM AS THE MOS T APPROPRIATE METHOD BY AGGREGATING THE TRANSACTIONS, DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT AS THE MARGINS OF THE APPELLANT WERE MORE THE ALP. 5.2 IDENTICAL VIEW WAS TAKEN BY THE HON'BLE TRIBUNA L IN THE CASE OF THE APPELLANT UNDER IDENTICAL CIRCUMSTANCES FOR AY 2013-14 AFFIRM ING THEIR DECISION FOR THE AY 2009-10 & 2010-11. 5.4 THUS, THE HON. ITAT FOR AY 2013-14 ALSO AFFIRME D THE APPROACH ADOPTED BY THE COMPANY BUT REMANDED THE MATTER BACK TO THIS OFFICE TO EXAMINE WHETHER THE COMPANY HAS CORRECTLY AGGREGATED THE TRANSACTIONS O F LICENSE FEE AND MANAGEMENT FEE TO DETERMINE THE ARM'S LENGTH PRICE USING THE T NMM. CONSEQUENT TO THE DIRECTIONS OF THE HON. ITAT, THE CIT(A) AFTER CALLI NG FOR A REMAND REPORT FROM THE LD. TPO, PURSUANT TO UNDERTAKING A FRESH BENCHMARKI NG ANALYSIS AFTER AGGREGATING THE INTERNATIONAL TRANSACTIONS OF 'MANAGEMENT FEES' AND 'LICENSE FEES' WITH ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 7 OF 9 MANUFACTURING ACTIVITY. THE LD. TPO IN HIS REMAND R EPORT DATED 20-02-2019 HAS CONCLUDED AS UNDER: 'THE TAXPAYER'S MARGIN OF 29.70% (PAGE 3 OF TPO'S O RDER DATED 28.10.2016) AS COMPUTED BY THE TPO AT ENTITY LEVEL, IS HIGHER THAN THE TPO'S COMPARABLES MARGIN 18.05%. THUS, THE TAXPAYER 'S MARGIN IS MUCH HIGHER THAN THE ALP DETERMINED BY THE TPO.' 5.6 FINALLY, AFTER CONSIDERING THE REMAND REPORT, I T WAS HELD BY THE CIT(APPEALS), AS UNDER : 'CONSIDERING THE DIRECTIONS OF THE HON'BLE 'TAT IN THE FIRST ROUND OF LITIGATION REFERRED SUPRA, THE MATTER WAS REFERRED TO THE TPO, FOR EXAMINING THE CORRECTNESS OF THE ALP AT THE ENTITY LEVEL BY AGGREGATION OF TRANSACTIONS AFTER APPLYING THE TNMM AS THE MOST AP PROPRIATE METHOD. THE TPO, DCIT, TRANSFER PRICING 1(1)(1), BENGALURU VIDE REMAND REPORT DT 20-02-2019, REMARKED THAT THE TAX PAYERS MARGIN BEING HIGHER THAN THE COMPARABLE'S MARGIN, AND SUGGESTED NO ADJUSTMENT. C ONSIDERING THE SAME, THE ADJUSTMENT MADE IN THE ORIGINAL ORDER IN RESPECT OF LICENSE FEE AND MANAGEMENT FEE (IMPUGNED ORDER) IS DELETED ON T HIS GROUND.' 5.7 THE FACTS AND CIRCUMSTANCES OF THE ISSUE INVOLV ED IN THE PRESENT ASST YEAR BEING IDENTICAL TO THAT OF THE ASST YEARS 2009-10, 2010-11 & 2013-14, I AM CONSTRAINED TO FOLLOW THE DECISIONS OF THE HON'BLE ITAT, BANGALORE PRONOUNCED FOR THESE YEARS (SUPRA), AND ACCORDINGLY, IT IS DECIDED TO EXAMINE THE CORRECTNESS OF THE ALP AT THE ENTITY LEVEL BY AGGREGATION OF TRANSACTI ONS AFTER APPLYING THE TNMM AS THE MOST APPROPRIATE METHOD. 5.8 FOR THE ABOVE PURPOSE, THE MATTER WAS REFERRED TO TPO VIDE THIS OFFICE LETTER DATED 01.10.2018, FOR EXAMINING THE CORRECTNESS OF THE ALP AT THE ENTITY LEVEL BY AGGREGATION OF TRANSACTIONS AFTER APPLYING THE TNMM AS THE MOST APPROPRIATE METHOD. THE TPO, DCIT, TRANSFER PRICING 1(1)(1), BE NGALURU VIDE REMAND REPORT DT 08.05.2019, REMARKED THAT THE TAX PAYERS MARGIN BEING HIGHER THAN THE COMPARABLE'S MARGIN, SUGGESTED NO ADJUSTMENT. 5.9 CONSIDERING THE SAME, RESPECTFULLY FOLLOWING TH E BINDING DECISIONS OF THE HON'BLE BY BANGALORE ITAT IN APPELLANTS OWN CASE(SU PRA), I AM OF THE VIEW THAT AT ENTITY LEVEL THE TAX PAYERS MARGIN BEING HIGHER THA N THE COMPARABLE'S MARGIN, NO ADJUSTMENT IS CALLED FOR. CONSEQUENTLY, THE ADJUSTM ENT MADE IN THE ORIGINAL ORDER IN RESPECT OF LICENSE FEE AND MANAGEMENT FEE (IMPUG NED ORDER) DOES NOT STAND. ACCORDINGLY, THE SAME IS DELETED, WHILE ALLOWING TH E GROUND NO 2 OF THE APPELLANT. 8. THUS WE NOTICE THAT THE LD. CIT(A) HAS DELETED T HE ADDITION AFTER OBTAINING REPORT FROM TPO ON THE TNMM METHOD ADOPTED BY THE ASSESSEE AND AFTER HOLDING THAT THE TRANSACTIONS OF PAYMENT OF MANAGEMENT FEE AND ROYALTY HAVE TO BE AGGREGATED IN THE FACTS AND ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 8 OF 9 CIRCUMSTANCES OF THE CASE. ACCORDINGLY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) IN BOTH THE YEARS ON THIS ISSUE. 9. IN A.Y. 2014-15 THE REVENUE HAS RAISED ONE MORE ISSUE RELATING TO DISALLOWANCE MADE U/S 43B OF THE ACT ON ACCOUNT OF DELAYED PAYMENT OF ESI. THE LD. CIT(A) DELETED THE SAME WI TH THE FOLLOWING OBSERVATIONS: 8.0 GROUND NO 10: DELAYED PAYMENT OF ESI GROUND 10: THE LAO ERRED IN DISALLOWING A SUM OF RS . 8,04,121/- BEING THE EMPLOYEE'S CONTRIBUTION TO THE PROVIDENT FUND SINCE THE APPELLANT HAD REMITTED THE SAME BEYOND THE DUE DATE UNDER THE PROVIDENT FUND REGULATIONS, DESPITE THE SAME HAVING BEEN REMITTED BEFORE THE DUE DATE OF FILING INCOME-TAX R ETURN OF THE APPELLANT. 8.1.1 THE COMPANY HAD MADE A PAYMENT OF RS. 8,04,12 1/- BEING THE EMPLOYEE'S CONTRIBUTION TO THE PROVIDENT FUND BEYON D THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACT BUT BEFORE T HE DUE DATE OF FURNISHING THE RETURN OF INCOME. THE COMPANY PLA CED RELIANCE ON THE RULING OF THE HON'BLE KARNATAKA HIGH COURT I N ESSAE TERAOKA (P) LTD. VS. DCIT (43 TAXMANN.COM 33) (SEE P. 335 OF THE CASE LAWS COMPILATION), WHEREIN IT HAS BEEN HEL D THAT SECTION 43B OF THE INCOME-TAX ACT PROVIDES AN EXTEN SION TO THE EMPLOYER TO MAKE PAYMENT OF CONTRIBUTION TO PROVIDE NT FUND OR ANY OTHER FUND TILL THE 'DUE DATE' APPLICABLE FOR F URNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AND THE EVIDENCE OF SUCH PAYMENT IS FURNIS HED BY THE ASSESSEE ALONG WITH SUCH RETURN. IN SHORT, THIS PRO VISION STATES, NOTWITHSTANDING ANYTHING CONTAINED IN ANY. OTHER PR OVISION CONTAINED IN THIS ACT, A DEDUCTION OTHERWISE ALLOWA BLE IN THIS ACT IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY WAY OF CONTRIBUTION TO ANY FUND SUCH AS PROVIDEN T FUND SHALL BE ALLOWED IF IT IS PAID ON OR BEFORE THE DUE DATE AS CONTEMPLATED UNDER SECTION 139(1). THIS PROVISION HAS NOTHING TO DO WITH THE CONSEQUENCES, PROVIDED FOR UNDER THE PF ACT/PF SCHE ME/ESI ACT, FOR NOT DEPOSITING THE 'CONTRIBUTION' ON OR BE FORE THE DUE DATES THEREIN. 8.1.2 THE COMPANY SUBMITS THAT WHERE THE AMOUNT TO BE REMITTED TO THE PROVIDENT FUND IS REMITTED BEFORE THE DUE DATE FOR FILING THE INCOME-TAX RETURN, A DEDUCTION CAN BE CLAIMED OF TH E SAID AMOUNT UNDER SECTION 36(1)(VA) OF THE ACT AND WOULD NOT AT TRACT DISALLOWANCE UNDER SECTION 36(1)(VA) OR SECTION 43B OF THE ACT. IN THIS REGARD, ASSESSEE HAD PLACED RELIANCE ON THE RULING BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF ESSAE T ERAOKA PRIVATE LIMITED VS. DCIT (43 TAXMANN.COM 33) (SEE P. 335 OF THE CASE LAWS COMPILATION). 8.2 HAVING CONSIDERED THE SUBMISSIONS, IT IS OBSERV ED THAT THE APPELLANT HAD REMITTED THE EMPLOYEES' CONTRIBUTION TO PROVIDENT FUND, ITA NOS.2052 & 2053/BANG/2019 M/S. ADCOCK INGRAM LTD., BANGALORE PAGE 9 OF 9 AMOUNTING TO RS. 8,04,121/- BEFORE THE DUE DATE FOR FILING THE INCOME-TAX RETURN, AND ACCORDINGLY AS HELD BY THE HON'BLE KARN ATAKA HIGH COURT IN THE JUDICIAL PRECEDENTS RELIED ON BY THE APPELLANT IN THE CASE OF ESSAE TERAOKA PRIVATE LIMITED VS. DOT (43 TAXMANN.COM 33) & SHABARI ENTERPRISES, I ALLOW THIS GROUND OF THE APPELLANT. 10. WE NOTICE THAT THE LD. CIT(A) HAS FOLLOWED THE BINDING DECISION OF HONBLE KARNATAKA HIGH COURT RENDERED IN THE CAS E OF ESSAE TERAOKA PRIVATE LIMITED (SUPRA). HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(A) ON TH IS ISSUE. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH SEPT, 2020 SD/- (GEORGE GEORGE K. ) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 18 TH SEPT, 2020. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.