Mankind Pharma Limited, Delhi V. DCIT, Circle-1(1)(1), Meerut

ITA 2313/DEL/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7450 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I
• Next Hearing Date: 07-02-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 20-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 131; 144; 64; 72; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I” DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.2313/DEL/2022 Assessment Year 2018-19 Mankind Pharma Limited 208 Okhla Industrial Estate, Phase-III Okhla Industrial Estate S.O. Tehkand South East Delhi Vs. DCIT Circle-1(1)(1) Meerut TAN/PAN: AAACM9401C (Appellant) (Respondent) Appellant by: Shri Gaurav Jain, Adv. Shri Sudarshan Roy, Adv. Respondent by: Shri Rajesh Kumar, CIT (DR) Date of hearing: 08 02 2024 Date of pronouncement: 01 05 2024 O R D E R PER PRADIP KUMAR KEDIA-AM: T h e c a p t i o n e d a p pe a l ha s b e e n f i l e d a t t h e in s t a n c e o f t h e a s s e s s e e a ga i n s t t he f in a l a s s e s s m e n t or d e r d a t e d 28 . 0 7. 2 02 2 p a s s e d u n d e r Se c t i o n 14 3 (3 ) r. w . Se c t i o n 1 4 4C (1 3 ) r . w . Se c t i on 1 44 B o f th e I nc o m e T a x A c t (i n s h o rt ‘ t h e A c t ’ ) i n p u r s u a nc e o f d ir e c t i o n s i s sue d b y D i s p ut e R e s ol u t i o n Pa ne l ( D R P ) d a t e d 2 1 . 06 . 20 2 2 r e l e va n t t o A s s e s s m e nt Y e a r 20 1 8 - 1 9 . 2. T h e gr o u n ds of a pp e a l ra i s e d b y t h e a s s e s s e e r e ad a s u n d e r : “ 1 . T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n c o m p l e t i n g a s s e s s m e n t u n d e r s e c t i o n 1 4 4 C ( 1 3 ) r e a d w it h s e c t i o n 1 4 3 ( 3 ) a n d 1 4 4 B o f t h e I n c o m e - t a x A c t , 1 9 6 1 ( t h e A c t ' ) a t R s . 8 0 8 , 5 3 ,6 1, 9 1 7 a s a g a i n s t r e t u r n e d i n c o m e o f R s . 7 , 6 8 ,2 1 , 6 4 , 8 6 0 . 2 . T h a t o n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d i n la w t h e o r d e r d a t e d 2 8 . 0 7 . 2 0 2 2 p a s se d b y t h e a s s e s s i n g o f f i c e r u nd e r s e c t i o n 1 4 4 C (1 3 ) , h a v i n g b e e n p a s s e d b e y o n d l i m i t a t i o n p r o v i d e d i n t er m s o f S e c t i o n 1 4 4 C ( 1 3 ) r e a d w i t h s e c t i o n 1 5 3 (3 ) o f t h e A c t , i s i ll e g a l b e i n g b a r r e d b y l i m i t a t i o n , v o i d a b i n i t i o a n d i s l i a b l e t o b e q u a sh e d . 3 . T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d i n l a w i n m a k i n g t r a n s f e r I.T.A. No.2313/Del/2022 2 p r i c i n g a d j u s t m e n t o f R s . 2 1 , 9 2 , 4 0 , 6 7 6 / - i n r e l a t i on t o t h e s p e c i f i e d d o m e s t i c t r a n sa c t i o n s u n d e r t a k e n b y t h e a p p e l l a n t . 3 . 1 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n a d d i n g t h e t r a n s f e r p r i c i n g a d j u s t m e n t m a d e b y t h e T P O t o t h e i n c o m e o f t h e a p p e l l a n t n o t a p p r e c i a t i n g t h a t t h e a d d i t i o n / d i s al l o w a n c e o u g h t t o h a v e b e e n r e s t r i c t e d t o t h e d e d u c t i o n u n d e r s e c t i o n 8 0 I C/ 8 0 I E o f t h e A c t 3 . 2 T h a t t h e a s s e s s i n g o f f i c e r / T P O e r r e d o n f a c t s a n d i n l a w i n n o t a p p r e c i a t i n g t h a t t h e a s s e s s e e b e i n g a n e n t r e p r e n e ur i s e n g a g e d in a c t i v i t i e s s u c h a s r e s e a r c h a n d d e v e lo p m e n t , b r a n d b u i l d i n g a n d a d v e r t i s i n g a n d t h e r e f o r e c a n n o t b e s e l e c t e d a s t h e t e s t e d p a r t y f o r t h e p u r p o s e o f u n d e r t a k i n g b e n c h m a r k i n g a n a l y s i s . 3 . 3 T h a t t h e a s s e s s i n g o f f i c e r / T P O e r r e d o n f a c t s an d i n l a w i n n o t a p p r e c i a t i n g t h a t t h e a s so c i a t e d e n t e r p r i s e s b e i n g t h e s i m p l e r o f t h e t r a n s a c t i n g e n t i t i e s o u g h t t o h a v e b e e n s e l e c t e d a s t h e t e s t e d p a r t y . 3 . 4 T h a t t h e a s s e s s i n g o f f i c e r / T P O e r r e d i n f a c t s a n d i n l a w i n s e l e c t i n g f u n c t i o n a l l y d i f f e r e n t c o m p a n i e s a s c o m p a r a b l e f o r t h e p u r p o s e o f u n d e r t a k i n g b e n c h m a rk i n g a n a l y s i s R e : D i s a l l o w a n c e o f d e d u c t i o n u n d e r s e c t i o n 8 0 G o f t h e A c t a m o u n t i n g to R s . 6 , 3 8 ,1 3 , 6 0 1 / - 4 . T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d i n l a w i n m a k i n g d i s a l l o w a n c e o f R s . 6 , 3 8 ,1 3 , 6 0 1 o n a c c o u n t o f d i s a ll o w a n c e o f d e d u c t i o n u n d e r s e c t i o n 8 0 G o f t h e A c t h o l d i n g t h a t e x p e n d i t ur e i n c u r r e d f o r t h e p u r p o s e o f m e e t i n g C o r p o r a t e S o c i a l R e s p o n s i b i l i t y r e q u i r e m e n t s i s n o t a n a l l o w a b l e e x p e n d i t u r e . 4 . 1 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n n o t a p p re c i a t i n g t h a t t h e r e i s n o b a r i n c l a i m i n g d e d u c t i o n u n d e r s ec t i o n 8 0 G o f t h e A c t i n r e s p e c t o f d o n a t i o n s m a d e a s p a r t o f C S R e x p e n d i t u re . R e : D i s a l l o w a n c e o f D e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 A B ) a m o u n t i n g t o R s . 1 2 , 0 1 ,4 2 ,7 8 0 / - 5 . T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d i n l a w i n a l l o w in g w e i g h t e d d e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A c t a t R s . 1 0 0 , 9 0 , 6 8 , 0 0 0 a s a g a i n s t R s . 1 1 2 ,9 2 , 1 0 , 7 8 0 c l a i m e d b y t h e a p p e l l a nt t o w a r d s e x p e n d i t u r e i n c u r r e d o n s c i e n t i f i c r e s e a r c h . 5 . 1 Th a t t h e a s s e s s i n g o f f i c e r f a i l e d t o a p p r e c i a t e t h a t t h e a p p e l l a n t h a v i n g a p p ro v e d R & D C e n t r e s a n d h a v in g f u l f i l l e d t he c o n d i t i o n s o f s e c t i o n 3 5 ( 2 A B ) o f t h e A c t , i s e n t i t l e d t o w e i g h t e d d e d u c t i o n i n r e s p e c t o f t h e e n t i r e g r o s s e x p e n d i t u r e i n c u r r e d o n s c i e n t i f i c r e s e a r c h . 5 . 2 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n a l l o w in g d e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A c t o n l y t o t h e e x t e n t o f e x p e n d i t u r e a p p r o v e d b y D e p a r t m e n t o f S c i e n t i f i c a nd I n d u s t r i a l R e s e a rc h ( D S I R ) i n F o r m 3 C L . 5 . 3 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n n o t a p p re c i a t i n g I.T.A. No.2313/Del/2022 3 t h a t t h e r e i s n o p r o v i s i o n u n d e r t h e A c t e m p o w e r i n g D S I R t o a p p r o v e th e q u a n t u m o f e x p e n d i t u r e f o r t h e p u r p o s e s o f c l a i m i n g d e d u c t i o n u n d e r s e c t i o n 3 5 (2 A B ) o f t h e A c t . 5 . 4 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n n o t a p p re c i a t i n g t h a t t h e o n l y r e q u i r e m e n t f o r c l a i m i n g d e d u c t i o n u nd e r s e c t i o n 3 5 ( 2 A B ) o f t h e A c t i s t h a t t h e i n - h o u s e R e s e a r c h a n d D e v e l o p m en t f a c i l i t y i s t o b e a p p ro v e d b y D S I R a n d n o t f o r a p p r o v a l o f e x p e n s e s . 6 . T h a t o n t h e f a c t s a n d c i r c u m s t a n c e s o f t h e c a s e a n d i n l a w , t h e L d . A O e r r e d i n i n i t i a t i n g p e n a l t y p r o c e e d i n g s u n d e r S e c t io n 2 7 0 A o f t h e A c t . ” 3. T h e a s s e s s e e h a s a l s o m o ve d a n a pp l i c a t i o n un d e r R u l e 11 o f t he In c o m e T a x ( A p pe l l a t e T r ib u na l ) R ul e s , 1 9 63 d a t e d 08. 0 2 . 2 0 2 4 s e e k i n g a dm i s s i o n of a d di t i o n a l gr o u n d w hi c h r e a d a s u nd e r : “ " R e : D i s a l l o w a n c e o f D e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 AB ) a m o u n t i n g t o R s 1 2 , 0 1 , 4 2 ,7 8 0 5 . T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d i n l a w i n a l l o w i n g w e i g h t e d d e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A c t a t R s . 1 0 0 ,9 0 , 6 8 , 0 0 0 a s a g a i n s t R s . 1 1 2 , 9 2 , 1 0 ,7 8 0 c l a i m e d b y t h e a p p e l l a nt t o w a r d s e x p e n d i t u r e i n c u r r e d o n s c i e n t i f i c r e s e a r c h . 5 . 1 T h a t t h e a s s e s s i n g o f f i c e r f a i l e d t o a p p r e c i a t e t h a t t h e a p p e l l a n t h a v i n g a p p ro v e d R &D C e n t r e s a n d h a v i n g f u l f i l l e d t he c o n d i t i o n s o f s e c t i o n 3 5 ( 2 A B ) o f t h e A c t , i s e n t i t l e d t o w e i g h t e d d e d u c t i o n i n r e sp e c t o f t h e e n t i r e g r o s s e x p e n d i t u r e i n c u r r e d o n s c i e n t i f i c r e s e a r c h . 5 . 2 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n a l l o w i n g d e d u c t i o n u n d e r s e c ti o n 3 5 ( 2 A B ) o f t h e A c t o n l y t o t h e e x t e n t o f e x p e n d i t u r e a p p ro v e d b y D e p a r t m e n t o f S c i e n t i f i c a nd I n d u s t r i a l R e s e a r c h ( D S I R ) i n F o r m 3 C L . 5 . 3 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n n o t a p p r e c i a t i n g t h a t t h e r e i s n o p ro v i s i o n u n d e r t h e Ac t e m p o w e r i n g D S I R t o a p p r o v e t h e q u a n t u m o f e x p e n d i t u r e f o r t h e p u rp o s e s o f c l a i m i n g d e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A c t . 5 . 4 T h a t t h e a s s e s s i n g o f f i c e r e r r e d o n f a c t s a n d in l a w i n n o t a p p r e c i a t i n g t h a t t h e o n l y r e q u i r e m e n t f o r c l a i m i n g d e d u c t i o n u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A c t i s t h a t t h e i n - h o u s e R e se a r c h a n d D e v e l o p m e n t f a c i l i t y i s t o b e a p p ro v e d b y D S I R a n d n o t f o r a p p ro v a l o f e x p e n s e s . " 4. T h e l d . c o un s e l c o n t e nd e d t h a t a d d i t i on a l gr o u n d s o f i l e d a re a dm i s s i bl e i n v i e w o f j u dgm e nt re n de r e d b y t he H on ’bl e S up r e m e C o u rt i n th e c a s e o f N at i o na l T h e r m a l P o w e r C o . L t d. v . C I T (1 9 9 8 ) 2 29 ITR 38 3 (S C ) a n d b y t h e j u dgm e nt o f t h e H o n ’b l e D e l hi H i gh C o u rt i n t he I.T.A. No.2313/Del/2022 4 c a s e o f T a y l or I n s t r um e nt C o . (I n d i a ) Lt d. v s . C I T 1 9 8 I TR 1 (D e l. ) T he pr a ye r f o r a d m i s s i o n of a d d it i o na l gr ou n d no t e d a bove w h ic h a r e n ot in m e m or a nd u m of a p p e a l a re be i n g a d m i t t e d f or a d j u d i ca t i o n i n t e r m s o f R u l e 11 o f t h e I n c om e T a x ( A p p e ll a t e T r i b u na l ) R u l es , 1 9 6 3 o w i n g t o t he f a c t t ha t o bj e c t i o ns r a i s e d i n a dd i t i on a l gr ou n d a re l e ga l in n a t u r e f o r w h i c h r e l e va n t f a c t s a r e s t a t e d t o be e m a n a t in g f r om t h e e xi s t i n g re c o rd s . 5. T h e a s s e s s e e h a s a l s o f i l e d a p pl i c a t i o n un de r R ul e 29 o f t he In c o m e T a x ( A p p e ll a t e T r ib u na l ) R u l e s , 1 9 63 f o r a d mi s s i o n o f a d di t i o na l e vi d e nc e s t o s u p p o r t t h e c a s e b u i l t b y t h e a s s e s s e e b e f o r e t he l o w e r a ut h or i t i e s . A pa p e r bo ok ( vo l u m e 4) d a t e d 0 4 . 1 0 . 2 02 3 c o n t a in i n g a dd i t i on a l e vi d e nc e s w e re s o u gh t t o b e re f e rr e d a n d re l i e d u p on o n i t s a dm i s s i o n b y t he T ri b u n a l . T h e a d d i t i o na l e vi d e nc e s a re s t a t e d to be pr i m a ri l y i n t h e na t u re o f i n voi c e s a n d c o m p a ra t i ve c h a rt s / ta b u la t i o n s t o j us t i f y t he e x e c ut i o n o f t ra n s a c t i on s o f e l i gi bl e uni t s a t A L P. W e s ha l l de a l th e p e t i t i on f or a d m i s s i o n o f th e a d di t i o na l evi d e n c e s i n t he s u bs e q u e nt p a ra gra p h a t a p p r o pr i a te p l a c e . 6. G r o un d s N o . 1 a n d 2 a r e di s m i s s e d a s no t pr e s s e d . 7. G r o un d N o . 3 a n d s u b- g r o un d s t h e re t o c o n c e r n s T r ans f e r P ri c i n g A d j us t m e n t i n re l a t i on t o A r m s ’ Le n gt h P ri c e ( A LP ) of S pe c i f i e d D o m e s t i c T ra n s a c t i o n s ( S D T s ) . 8. B r ie f l y s t a t e d, t h e a s s e s s e e -c o m p a n y i s e n ga ge d i n t he b us i n e s s of m a nu f a c t u ri n g of ph a rm a c e u t i c a l a n d he a l t hc a r e p r o du c t s . T he a s s e s s e e ha s t h r e e m a n uf a c t ur i n g u ni t s a t Pa o nt a S a h i b- H i m ac ha l Pr a d e s h, U ni t - I , II a nd I I I . O u t of t he s a i d t hr e e un i t s , U n i t -I I a nd U n i t - I I I a r e e l igi b l e f o r de d u c t i o n u n d e r Se c t i on 80 -I C o f t he A c t , w h e r e a s Un i t - I i s no t e l i g i bl e f o r a n y b e n e f i c i a l t r e a t m e nt o r d e du c t i o n u n de r t a x l a w s . B e s i d e s , t he a s s e s s e e h a s a n ot h e r m a nu f a c t u r i n g un i t s i t u a t e d i n S i kk i m , w h i c h i s e l igi b l e f o r d e d u c t i o n u n d e r S e c t i o n 8 0 - I E of t h e Ac t . 8. 1 F o r t he a s s e s s m e n t y e a r u n de r c on s i d e r a t i on , t he r e t u r n f i l e d b y t he a s s e s s e e w a s s e l e c t e d f o r s c r ut i n y u n de r Se c t i o n 143 ( 3 ) of t h e A c t . T he I.T.A. No.2313/Del/2022 5 c a s e w a s r e f e r r e d t o t he T r a ns f e r P r i c i n g O f f i c e r (T P O ) i n t e rm s of S . 92 B A r. w . s 80 IA (8 ) & 8 0I A ( 10 ) o f t h e A c t f or c om p ut i n g A r m s ’ Le n g t h P r i c e i n r e s pe c t o f S pe c i f i e d D o m e s t i c T ra n s a c t i o n s ( S D T s ) t o w a rd s pu r c ha s e a n d s a l e o f g oo d s & s e r vi c e s , e n t e r e d i n t o b e t w e e n th e u n i t s e l igi b l e f o r d e d u c t io n un de r Se c t i o n 8 0 I C / 8 0I E of the A c t a n d o t h e r un i t s i nt e r s e a n d a l s o ot h e r A E s of t he a s s e s s e e e n t i t y. T h e a s s es s e e a s p e r i t s T ra n s f e r Pr i c i n g St u d y R e p o r t d i d n o t s e p a ra t e l y ben c hm a r k t h e S D T s e nt e r e d i nt o b y t h e e l i gi bl e u n i t s w i t h t he A s s oc i at e d E nt e r pr i s e s ( A E s ) of t he a s s e s s e e . T h e A s s e s s e e c o n du c t e d e n ti t y l e vel c o mp a r i s on o f O P/ O R o f t he a s s e s s e e -c o m pa n y ( c om b i ni n g a l l un i t s ) a s a w h ol e a n d c om p a re d i t w i t h th e o p e r a t i n g m a r gi n s of o t he r c o mpa r a bl e c o m p a n i e s . C o n s i de r i n g t h e O P / O R / T N M ( T ra n s a c t i on N e t M a r gi n ) of t h e a s s e s s e e - c om p a n y a s a w h o l e w h i c h a m o un t e d t o 1 9. 1 1% a s c o m pa r e d to O P/ O R / T N M o f c o m p a ra b l e c om p a n i e s a ve r a gi n g 8. 7 2 % , th e e n t i re t ra n s a c t i on s , w he t h e r S pe c i f i e d D om e s t i c T r a n s a c ti on or I n t e r na t i o na l T ra n s a c t i o n s w e r e o pi n e d t o pa s s t h e A r m s ’ Le n g t h Pr ic e t e s t a s p e r t he T P St u d y R e p o rt . 8. 2 H ow e ve r , o n re f e re n c e t o T PO f o r ve r i f i c a t i on of A LP o f S pe c i f i e d D o m e s t i c T r a ns a c t i o n e nt e r e d i nt o b y t h e e li gi b le un i t s , t he TP O pa s s e d or d e r d a t e d 3 0 . 0 7 . 2 0 2 1 u n de r Se c t i on 9 2C A ( 3 ) o f t h e A c t a l l e gi n g t ha t s i n c e t h e re s p e c t i ve e l i gi b l e un i t s ha ve e a r n e d h i gh e r p r o f it s v i s a v i s m e di a n of O P/ O R o f c o m p a ra b l e c o m p a n i e s , t h e re w a s a n e x is t e nc e o f a rr a n ge m e nt b e t w e e n e l i gi bl e u n it s a n d A E s w hi c h res u l t e d i n hi gh e r t h a n or d i n a r y p r o f i t s t o e l i gi b l e un i t s a n d t h us h a s g i ve n r i s e to e xc e s s i ve de d u c t i o n u n de r s . 8 0I C / 8 0 IE o f th e A c t . 8. 3 T h e T PO a f t e r c o n d u c t i n g f r e s h s e a r c h o n c o m p a ra b le c o m p a n i e s de t e r m i ne d t he O P / O R a t 1 1. 3 3% [ m e d i a n o f c o m p a ra b le c o m pa n i e s s e l e c t e d b y t h e T PO ] a s a ga in s t O P / O R of e l igi b le U ni t I I @ 1 4 . 91 % ; U ni t II I 3 8 . 3 3 % a nd Si k ki m U ni t 3 3. 6 1 % r e po r t e d b y t h e A s s e s s e e a nd c on s e q ue n t l y q ua n t i f i e d a d j us t m e n t of R s . 64 , 3 4, 7 8,2 6 1/ - un d e r s . 92 C A ( 3 ) b y i n v ok i n g S e c ti o n 8 0 I A ( 10 ) of t h e A c t in r e s p e c t of e l i gi bl e pr o f i t f o r t h e pu r p o s e s of c l a im i n g de d uc t i o n u n d e r Se c t i o n 8 0I C /8 0 I E o f I.T.A. No.2313/Del/2022 6 t he A c t . T h e T P O / A O a l s o ob s e r ve d t ha t t h e O P/ O R of n o n e l i gi b l e U n i t - I i s 5 . 7 6 % w he r e a s O P/ O R o f e l i gi b le un i t s i. e . U n it -I I a nd U ni t - I I I a re 14 . 9 1% a n d 38 . 3 3 % r e s pe c t i ve l y. T h e O P/ O R o f Si kk i m u ni t w a s f ou n d t o s t a nd a t 33 . 3 1 % . T h e T P O t h us o b s e r ve d t h a t t h e a s s e s s e e ’s bu s i n e s s m od e l ha s b e e n d e s i gn e d i n s u c h a w a y s o a s t o g r a nt m o r e t h a n or d i n a r y pr o f i t s t o t he e l i gi bl e p a rt y a nd t h e pr of i t s w e r e b e i n g a c tu a l l y s hi f t e d f r o m n o n e l i g i bl e u ni t a n d A E s t o e l i gi bl e u ni t s . 8. 4 T h e T PO t h u s c on c l u d e d t h a t t he a s s e s s e e h a s unj us t if i a bl y c l a i m e d hi gh e r d e d u c t i on u nd e r Se c t i o n 8 0I C / 8 0 I E q u a n t i f i e d a t R s . 64 , 3 4, 7 8 , 2 6 1/ - a nd p ro c e e de d t o m a k e a d j u s t m e n t un de r s . 8 0 I A ( 1 0 ) o f t he A c t. 9. P u r s u a n t t o t he o r d e r of t h e T P O , t he A O f o r w a rde d a d r a f t of t he pr o po s e d o rd e r o f t h e a s s e s s m e n t t o t h e a s s e s s e e pro po s i n g i nt e r a l i a f o l l ow i n g a dj u s t m e nt s . D e t a i l s o f T r a n sa c t i o n A m o u n t ( i n R s . ) T P a d j u s t m e n ts w . r . t . s p e c i f i e d d o m e s t i c t r a n sa c t i o n A d j u s t m e n t u / s 9 2 C A ( 3 ) / 8 0 I A ( 1 0 ) / 8 0 1 C / 8 0 I E o f t h e A ct 6 4 , 3 4 ,7 8 ,2 6 1 A g e i n g o f R e c e i v a b l e s 5 , 7 2 ,6 1 9 O t h e r a d d i t i o n s / d i s a l l o w a n c e s A d d i t i o n w . r . t . t o e x p e n d i t u r e i n c u r r e d o n i n -h o u s e s c i e n t i f i c r e s e a r c h u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A ct 1 2 , 0 1 ,4 2 ,7 8 0 D i s a l l o w a n c e w . r . t . d e d u c t i o n c l a i m e d u n d e r s e c t i o n 8 0 G o f t h e A c t o n a c c o u n t o f d o n a t i o n s g i v e n 6 3 8 ,1 3 , 6 0 1 A d d i t i o n w . r . t . d i f f e r e n c e i n D u t y D r a w b a c k 2 , 1 8 ,4 81 10 . O n r e c e i p t of t he d r a f t o r de r , t h e a s s e s s e e f i le d i t s ob j e c t i on t o s u c h va ri a t i o n s w i t h t h e D i s p ut e R e s o lu t i on Pa n e l (D R P ). 11 . P u r s u a n t t o r e f e r e nc e m a de b y t h e A s s e s s e e , t h e D R P i s s u e d i t s di r e c t i on da t e d 2 1 . 06 . 2 02 2 w he r e i n t h e vi e w o f t h e T P O t ha t t h e re e xi s t e d a n a r ra n ge m e n t b e t w e e n t he a s s e s s e e a n d i t s A s s o c i a t e d E nt e r pr i s e s ( A E s ) t o s hi f t pr of i t t o t h e e l i gi b le un i t s f r om A E s i n o r de r t o c l a i m hi ghe r d e d u c t i o n s w a s up he l d o n f i rs t p r i nc i pl e s . T h e t ra n s f e r pr i c i n g a dj u s t m e n t s of SD T s u nd e rt a k e n b e t w e e n e l i gi bl e u ni t s a n d t he I.T.A. No.2313/Del/2022 7 A E s o f t h e a s s e s s e e w e r e t hu s c a r ri e d o u t b a s e d on O P/ O R o f c o m pa r a bl e c om p a ni e s t o re d uc e t h e c l a i m of e l igi b l e d e du c t i ons . T h e D R P , o n f a c t s , ho w e ve r m od i f i e d a n d re s t r i c t e d th e p r o p os e d a d j u s tm e nt s i n p r op o r t i o n t o t h e va l ue o f S p e c i f i e d D o m e s t i c T ra n s a c t i on s un de r t a ke n b y t he a s s e s s e e . 12 . I n t e r m s o f t h e d i r e c t i o ns o f th e D R P , t h e T P O p a s s e d a n or d e r gi v i n g e f f e c t t o t h e D R P d i re c t i o n da t e d 2 1. 0 6 . 2 0 22 vi d e o rd e r d a t e d 21 / 0 7 / 2 0 2 2 a nd re c o m pu t e d t he A LP a dj u s t m e nt a s p e r t he di r e c t i on s i s s u e d. T h e p r o p o s e d a dj u s t m e nt w a s t h us b r ou gh t dow n f r o m R s . 64 , 3 4 , 7 8 , 2 6 1/ - t o R s . 2 1 , 92 , 40 , 6 7 6 / - . 13 . T h e A O p a s s e d f i na l a s s e s s m e n t o r de r d a t e d 28 . 07. 2 02 2 a n d m a de a dd i t i on s / d i s a ll o w a n c e s a s u nd e r: D e t a i l s o f T r a n s a c t i o n A m o u n t ( i n R s . ) T P a d j u s t m e n t w . r . t . s p e c i f i e d d o m e s t i c t r a n s a c t i o n A d j u s t m e n t u / s 9 2 C A ( 3 ) / 8 0 I A ( 1 0 ) / 8 0 I C / 8 0 I E o f t h e A c t 2 1 , 9 2 ,4 0 , 6 7 6 O t h e r a d d i t i o n s / d i s a l l o w a n c e s A d d i t i o n w . r . t . t o e x p e n d i t u r e i n c u r r e d o n i n - h o u s e s c i e n t i f i c r e s e a r c h u n d e r s e c t i o n 3 5 ( 2 A B ) o f t h e A ct 1 2 , 0 1 ,4 2 , 7 8 0 D i s a l l o w a n c e w . r . t . d e d u c t i o n c l a i m e d u n d e r S e c t i o n 8 0 G o f t h e A c t o n a c c o u n t o f d o n a t i o n s g i v e n 6 , 3 8 ,1 3 , 6 0 1 14 . A gg ri e ve d b y t he a dj u s t m e n ts m a d e t o t he re t u rn e d i n c o m e , t he a s s e s s e e pr e f e r re d a p p e a l be f or e t h e T r i b u n a l. 15 . A s r e ga r d s i m p u g ne d a d j us t m e n t s t o th e d e d uc t i on s e l i g i b le un d e r s . 8 0 I C & s . 80 I E o f A c t i n t e r m s of s e c t i on 8 0I A ( 10 ) r . w . s 92 C A ( 3 ) of t he A c t , t h e l d . c o un s e l f o r t he a s s e s s e e m a de w i de ra ngi n g s u bm i s s i on s w h i c h a r e b r oa d l y e n u m e r a t e d he r e u n de r : (i ) t he u ni t - w i s e de d u c ti o n c l a i m e d b y t he r e s pe c ti ve u n it s of t he a s s e s s e e s i t ua t e d i n H i m a c h a l Pr a de s h ( a va i l a b le f or de d u c t i o n un d e r Se c t i on 80 IC ) a n d m a nu f a c t u ri n g u ni t s i t ua t e d a t Sik ki m ( e l i gi b l e f o r de d u c t i o n u nd e r Se c t i on 8 0I E ) d u r i n g t h e ye a r un d e r c on s i de r a t i on i s a s un d e r: I.T.A. No.2313/Del/2022 8 U n i t T o t a l P r o f i t D e d u c t i o n c l a i m e d d u r i n g t h e y e a r u n d e r c o n s i d e r a t i o n U n i t I I ; P o a n t a ( @ 3 0 % ) R s . 3 7 , 3 7 , 5 9 , 3 3 3 / - R s . 1 1 , 2 1 , 2 7 , 8 0 0 / - U n i t-I I I ; P o a n t a ( @ 3 0 % ) R s . 3 7 , 3 6 , 7 4 , 4 1 1 /- R s . 1 1 , 2 1 , 0 2 , 3 2 3 / - S i k k i m U n i t ( @ 1 0 0 % ) R s . 1 6 , 4 1 , 9 8 , 9 4 0 /- R s . 1 6 , 4 1 , 9 8 , 9 4 0 /- T o t a l R s . 9 1 , 1 6 , 3 2 , 6 8 4 /- R s . 3 8 , 8 4 , 2 9 , 0 6 3 /- (i i ) T he a f o re s a i d e l i gi b l e un i t s h a ve e n t e r e d i nt o s o m e t ra n s a c t i on s re l a t i n g t o p u r c ha s e ( m a i nl y ra w - m a t e ri a l / pa c k i n g ma t e r i a l e t c . ) a n d s a l e (m a i n l y s c r a p e t c . ) w it h o t h e r r e la t e d A s s o c i a t e d Ent e r p r i s e s ( A E s ) of t he a s s e s s e e c o m pa n y. T h e s um m a r y o f u ni t w i s e p ur c ha s e a n d s a le t ra n s a c t i on s b e t w e e n t h e d e d u c ti o n s e e ki n g u n i t s a nd a s s o c i a t e d e nt e r p r i s e s ( A E s ) i s t a b ul a t e d a s un d e r : F i g u r e s i n C r o r e ( s ) S i k k i m U n i t U n i t – I I U n i t – I I I T o t a l S a l e s 7 7 . 5 3 2 6 8 .4 2 1 3 8 . 7 3 S a l e s t o A E s 0 . 1 5 1 7 . 9 1 0 . 6 5 % o f s a l e s t o A E s 0 . 1 9 % 6 . 6 7 % 0 . 4 7 % T o t a l P u r c h a s e 1 3 . 2 8 6 7 . 8 5 1 8 . 5 0 P u r c h a s e f r o m A E s 4 . 3 8 1 9 . 6 5 5 . 9 9 % o f p u r c h a s e t o A E s 3 2 . 9 8 % 2 8 . 9 6 % 3 2 . 3 9 % (i i i ) T h e a s s e s s e e d i d n ot s e p a ra t e l y b e n c h m a r k t h e S D T s e nt e r e d i n to b y t he e l i gi b l e un i t s w i t h t he A E s o f th e a s s e s s e e -c o mpa n y w i t h a n y s p e c i f i c m os t a pp r o p ri a t e m e t h od b u t c on d uc t e d e nt i t y l e ve l c om p a ri s o n o f O P/ O R o f t he a s s e s s e e -c o m pa n y a s a w h ol e a n d c om p a re d i t w it h t he op e r a t i n g m a r g i ns of o t he r c o m pa r a bl e c o m pa n i e s . C on s i d e ri n g t he O P/ O R / T N M M e t h o d o f th e a s s e s s e e - c o m p a n y a s a w h ol e, t h e p r o f i t I.T.A. No.2313/Del/2022 9 m a r gi n s t a n d s a t 1 9 . 11 % w h i c h i s f a r m o r e t h a n t he op e ra t i n g m a r gi n o f c om p a ra b l e c o m p a n i e s w h i c h s t a n ds a t a n a ve r a ge o f 8 . 72 % a s c o m pu t e d b y t h e A s s e s s e e . (i v ) T h e o pe r a t i n g p r of i t s o f t he re s p e c t i n g e l i gi bl e u n i ts a s s t a t e d a re t a bu l a t e d b e l o w . U n i t s T u r n o v e r ( R s . C r o r e s ) O p e ra t i n g P ro f i t ( R s . C r o r e s ) O P / O R % P a o n t a U n i t - I I 2 6 8 .4 2 4 0 . 0 3 1 4 . 9 1 P a o n t a U n i t - I I I 1 3 8 .7 3 5 3 . 1 7 3 8 . 3 3 S i k k i m U n i t , S i k k i m 7 7 . 5 5 2 6 . 0 6 3 3 . 3 1 ( v ) T h e T P O p r oc e e d e d t o m a ke a dj u s t m e n t s u nd e r s . 8 0I A ( 10 ) o n t he s o l e gr o un d t ha t e li gi bl e u n i t s h a ve re p or t e d hi g her p r of i ts c o m pa r e d t o U n i t - I n o t e l i gi b l e f or de d uc t i o n. T h e T P O i n p a ge 9 , p a r a 2 o f i t s o r d e r ob s e r ve d t ha t s i n c e t he e l i gib l e un i t s h a ve e a r ne d hi g he r pr o f i t s , t h e re e xi s t e d a n a r ra n ge me n t be t w e e n t h e e l i gi b l e u ni t s an d A E s b y i m pl i c a t i o n t ha t r e s ul t e d i n h i g h e r p r o f i t s . T h e e xi s t e n c e of so c a l l e d a rr a n ge m e nt c on t e m pl a t e d u nd e r s . 8 0 I A ( 1 0 ) w a s t h us s u p po s e d a nd pr e s u m e d ha vi n g re ga rd t o h i g he r p ro f i t s b y e l i gi b le un i t s vi s - à - v is n o n - e l i gi b l e u ni t . Fo r ho l d i n g p r e s um p t i on o f ‘ a rr a n ge m e n t ’ t h e T P O f a i l e d t o p o i nt o ut a n y i na c c u ra c y a t th e t r a n s a c t i on l e ve l b e t w e e n e l i gi ble u ni t s a n d A E s a n d w h e t he r s u c h t ra n s a c t i on s w e re a t m a rk e t p ri c e / A rm s ’ Le n gt h P r i c e o r no t . ( vi ) A s p e r t h e m a n d a t e o f s e c t i o n 8 0 I A ( 1 0 ) o f t h e A c t r e a d w i t h f i r s t pr o vi s o t he r e t o, e x i s t e nc e of ‘ a r r a n ge m e nt i s a pr e-c o n d i t i on b e f o re pr o c e e d i n g t o m a k e a n a r m ’ s l e n g t h a d j us tm e n t u n d er s . 9 2 B A of t he A c t . 16 . I t i s a t t hi s s t a ge a n d i n t h is c on t e xt t o c a n va s s & v i n d i c a t e t he I.T.A. No.2313/Del/2022 10 po i n t t h a t t h e t r a ns a c t i o ns e n t e re d i n t o b y e l i gi b le u n i t s w i t h i t s A E s w e r e a t a r m l e n g t h i n d e e d a n d w e r e q ui t e c o m pa r a bl e t o c o n t e m p o ra n e ou s pr i c e s o f s i m il a r t ra n s a c t i on s w i t h n on - A E s , a n e xho r t e d re f e r e n c e w a s m a de t o t h e a dd i t i o n a l e vi d e nc e s s o f i l e d on b e ha l f of a s s e s s e e . I t w a s s u bm i t t e d t ha t a dd i t i o n a l e vi d e nc e s a re e s s e n t i a ll y m e a n t t o a u gm e n t i t s pl e a o f b o na f i de s a n d pr ob i t y i n t he t r a ns a c t i o ns ca rr i e d o ut a t m a r ke t pr i c e be t w e e n e l i gi b l e un i t s a nd A E s of t h e A s s e s s ee e n t i t y. 16 . 1 T h e Ld . C o u ns e l p a u s e d to c o nt e n d h e r e t ha t t he n e e d t o f i l e a dd i t i on a l e vi de n c e s e m a n a t e f ro m t he p u r p o rt of f in di n gs o f t h e T P O a t pa ge 9 o f i ts or de r . T he l d . c ou n s e l s t ou t l y p o i nt ed ou t t ha t t h e a d di t i o na l e vi d e nc e s h a ve be e n f i l e d w i t h a s o l e m n i nt e n t t o de m on s t r a t e w i t h h i g h qu a l i t y i n te r n a l C U P d a t a th a t t he t r a ns a c t i o ns b e tw e e n e l i gi bl e un i t s a n d i t s A E s a r e a t a r m s l e n gt h a n d c o m p a ra b l e w i t h t h e t r a n s a c t i on s c a r r i e d ou t w i t h n o n A E s / t h i rd pa r t i e s . T a k i n g t h e p o i n t fu r t he r , t h e Ld . c o un s e l c on t e nd s t ha t i t w a s i n c u mb e n t o n T P O /A O i n l a w t o d e m o n s t ra t e e xi s t e n c e o f s o c a ll e d ‘ a r r a n ge m e nt ’ w i t h r e f e r e nc e t o s o m e m a t e r ia l to i nd i c a t e i n d u l ge n c e o f t h e A s s e s s e e i n a n y ‘ a r r a n gem e nt ’ s o a s t o pr o du c e t o t he a s s e s s e e m o r e p ro f i t s t ha n w h a t t h e a s s e s s e e m i gh t h a ve or d i n a r il y e x p e c t e d t o a r i s e f r o m s uc h b us i n e s s . T he A O / T P O h a s m i s e ra b l y f a i l e d t o d i s c h a r ge i t s on us i n t h is re gard . T he Ld . C o u ns e l re i t e r a te d t h a t t h e e x i s t e nc e of ‘ a r r a n ge m e n t’ un der S e c t i o n 8 0 I A ( 1 0 ) o f t he A c t c a n no t be a ll e ge d a nd p re s u m e d s o le l y f or t h e re a s o n t ha t e l igi b l e u n i t s ha ve e a r n e d m o re p ro f i t s t h a n n o n e li gi b l e u n i t s a s w r on g l y do n e b y t h e A O / T P O w it h o ut s a n c ti o n o f l a w . T h e A O t hu s h a s gl a r in g l y f a i l e d t o d i s c ha r ge i t s on us w h i le a l l e g in g e xi s t e nc e of ‘ a r r a n g e m e n t . 16 . 2 T h e Ld C ou n s e l va l i a n t l y c o n t e s t e d t h a t e ve n wi t ho u t t he a dd i t i on a l e vi de n c e s , t h e a c t i o n of th e A O / T P O i s ou t s i d e t h e b ou n ds o f l a w on t h e gr o u n d of ba l d s u pp o s i t io n of e xi s t e n c e o f a r r a n ge m e nt c on t e m pl a t e d u nd e r s . 8 0 I A (1 0 ) w i t h o ut a n y c o rr o b o ra t i o n w i t h t a n g i bl e m a t e r i a l . T he a c t io n o f t h e A O / T PO i s d i c t a t e d b y th e s ol e c o n s i d e ra t i o n of re l a t i ve l y hi gh e r p ro f i t s r e p o rt e d b y t he e l i gi bl e u n i t s qu a no n e l i g i bl e un i t . P r e s u m pt i o n o f a rr a n ge m e nt o n s u c h p r e m i s e i s c o nt r a r y t o s t a t e d I.T.A. No.2313/Del/2022 11 l e ga l p o s i t i on a s e nu n c ia t e d i n C I T v s . Sc h m e t z I n di a P . Lt d . 2 6 t ax m an n. c o m 3 36 ( B o m . ) ; PC I T v s . V e d a n s h J e w e l s P v t . Lt d. ( 2 0 1 8 ) 97 t ax m an n. c o m 5 2 1 ( R aj . ) ; C I T v s . H P G lo b al S o ft L t d. 3 4 2 I TR 26 3 (K ar . ); H o n e y w e l l A u to m a t i o n I n d i a Lt d. v s . D C I T i n I T A n o . 28 7 / P U N / 2 01 5 or de r da t e d 25 . 0 2 . 2 01 5 a nd m a n y o t h e r d e c i s i on s o f t he c o- o r d i na t e b e n c h of t ri b un a l . 16 . 3 T h e Ld. C o u ns e l f o r t he A s s e s s e e ne x t s u bm i t t ed t h a t w hi l e t he on u s o f e xi s t e n c e o f a r r a n ge m e n t l a y u p o n t he re ve nu e , t h e a s s e s s e e o n i t s p a rt s e e k s to b l u n t a n y th i n s u s p ic i o n of a r ra nge m e n t b y a s s e rt i ve l y de m o n s t ra t i n g a r m ’ s l e n gt h n a t u r e of t r a ns a c t i o ns wi t h t h e h e l p o f s u c h a dd i t i on a l e vi d e nc e s . T he Ld . C o u ns e l s u bm i t s t h a t t he a d di t i o na l e vi d e nc e s p l a c e d u n d e r R u l e 29 o f t h e I T A T R u l e s w il l on l y b ri n g gr ou n d re a l i t i e s t o t h e f o r e a n d w i l l o n l y t e s t i f y t h e a r m l e n g t h n a t ur e o f t ra n s a c t i on s b y e li g i bl e un i t s . T h e a d d i t i o na l e vid e nc e s m e r e ly s u pp o r t s t he t r a n s a c t i o n a t m a r ke t p ri c e b y t h e e l i gi b l e un it s . 17 . E x po u nd i n g o n t h e p e ti t i o n f o r a d m is s i o n o f a d di t i o na l e vi d e n c e s , t he l d. C o u n s e l s ub m i t t e d t ha t f o r t h e p u r p os e s of S e c ti o n 9 2B A r . w . Se c t i on 8 0 I A ( 1 0) o f t he A c t , t h e t ru e t e s t i s A r m s ’ Le n gt h P r i c e o f pu r c ha s e a n d s a l e s b e t w e e n e l i gi bl e u ni t s a n d p a r tie s in c l os e c o n ne c t i on . It i s on l y w h e n t he T PO / A O a r r i ve s a t a f i n di n g t h at t r a n s a c t i o ns o f pu r c ha s e a n d s a le s b e t w e e n t he e l i gi b l e u n i t s a n d it s A E s a re i n d e p a r t u re t o A r m s ’ Le n gt h P r i c e , i . e . , t he q u e s t i o n of a n y a dj u s t m e n t t o p ro f i t s o f e l igi b l e u n i t s , b y a p p l yin g a n y T P m e t ho d, w ou l d a ri s e . A r e f e r e nc e w a s m a de t o Se c t i o n 8 0 I A ( 8 ) a n d s . 8 0 I A ( 10 ) o f t he A c t t o s u b m i t th a t t h e s e pr o vi s i o ns r e q ui r e t h a t t h e pr of i t s a nd ga i n s of a n e l i gi b l e b u s i ne s s t o be c om p u te d a s i f t he t r a n s f e r o f g oo d s or s e r vi c e s w ere m a d e a t t he m a r ke t va l u e of go o d s o r s e r vi c e s on t he d a te o f t r a ns f e r . A s a c or o ll a r y, w ha t i s re q u i r e d t o be a s c e rt a i n e d i s w h e t he r t h e t ra n s f e r of goo d s a n d s e r vi c e s be t w e e n e l i gi b l e u ni t a n d t he n o n e li gi b l e un i t i nte r s e u n de r s . 8 0 I A ( 8 ) or w i t h A E s of t he a s s e s s e e u nd e r s . 8 0 I A ( 1 0 ) ha s ha p pe n e d a t m a r ke t pr i c e o r ot h e r w i s e . T h e Ld . C ou n s e l s u bm i t t e d t ha t t he r e i s no i n t e r t ra n s f e r o f go o d s o r s e r vi c e s b e t w e e n e l i gi bl e u ni ts a n d n o n e l i gib l e un i t s I.T.A. No.2313/Del/2022 12 a nd h e n c e s e c t i o n 80 I A ( 8 ) i s ne i t h e r a t tr a c t e d n o r a l l e ge d . T he t ra n s a c t i on s o f p u r c ha s e a n d s a l e o f g o o ds / s e r v ice s b e t w e e n e l i gi b l e un i t s w i t h A E s o f t h e A s s e s s e e e nt i t y ha ve ho w e ve r h a pp e ne d a l be i t i n a n i ns i g n i f i c a nt p ro p or t i on . A s p o i n t e d o u t , t h e a dd i ti on a l e vi d e n c e s h a ve be e n f il e d t o de m o n s t ra t e t h a t t r a n s a c t i o n s w i t h A Es ha ve h a p p e ne d on c om m e r c i a l c o n s i de r a ti o n s a nd a t or di n a r y m a rk e t pri c e a nd c on s e q ue n t l y no b re a c h of Se c t i on 8 0 I A ( 1 0 ) of t he A c t c a n be p e rc e i ve d . 18 . A s c o nt e n de d , t h e T P O a l s o i g no r e d t h e s i g ni f i ca n t c o nt e n t i o n o f t he a s s e s s e e t h a t e a c h o f t h e e l i gi b l e u n it m a nu f a ct u r e s d i f f e re n t ki n d o f pr o du c t s h a v in g d i f f e re n t p r o d uc t i o n p r o c e s s a nd d if f e r e n t m a r gi n s o f pr o f i t s b y h a vi n g d i f f e r e nt F A R s . T h e T P O c o nt i n ue d w it h t h e s a m e e xe r c i s e o f c on du c t i n g c o m pa r i s o n o f o p e r a t i n g p r o fi t s o f e l i gi b l e u ni t s a t u ni t l e ve l w i t h o p e r a t in g p ro f i t s of a l l e ge d c o mp a r a b l e c om p a ni e s b y a pp l yi n g T N M M e t h o d . T he e n t i re b a s i s of b e n c h m a rk in g c o nd uc t e d b y t he T P O b y c o m pa r i n g p r o f i t o f e l i gi b l e u n i t (i n s t ea d o f e nt i t y l e ve l ) w i th op e r a t i n g p r of i t s of a l l e ge d c om p a r a b l e c om p a ni e s is in h e re n t l y f a l l a c i ou s w i t ho ut f u l f i l l i n g t h e t e s t o f pr e s e nc e of ‘ a r r a n ge m e nt ’ a s j ud i c i a l l y u n de r s t o o d , w hi c h h o l ds t h e k e y f o r i n vok i n g p r o vi s i on s o f Se c t i on 9 2 B A r . w . Se c t i o n 8 0 I A ( 10 ) o f t he A c t . T he l d . c o un s e l t hu s ha r p e d t ha t t he a dd i t io n a l e vi de n c e s w ou l d m e r e l y de m o n s tr a t e t h e ba s i c t e ne t t ha t t h e t r a ns a c t i o n b e t w e e n t h e e l i g i bl e un it s , vi s -a - vi s i t s A E s a re c om p a ra b l e a n d a t A rm s ’ Le n g t h a n d ha s n ot re s u l t e d i n a n y c la n d e s t i ne pr o f i t s to e l i g i bl e u n i ts f o r w h i c h de d uc t i o n ha s be e n c l a i m e d un d e r Se c t i on 8 0 I C / 8 0I E o f t h e A c t . 19 . T h e Ld . C ou n s e l a d v e rt e d to t he D R P d i r e c t i o ns a n d s ub m i t te d t ha t t he D R P h a s e nd o r s e d t h e a c t i o n of t h e T P O / A O on e xi s t e n c e o f a rr a n ge m e nt be t w e e n t h e a s s e s s e e a nd i t s a s s o c i a te d e n t e rp r i s e s t o s h i f t t he pr o f i t s t o t he e l i g i bl e u n i t s f r om A E s w i t ho u t m a ki n g a n y i nd e pe n d e n t e xa m i n a t i o n o f t he t e s t of a l l e ge d ‘a r ra n ge m e n t ’ e i t he r . T he D R P ha s a c t e d i n a m u nd a ne a n d n o n c ha l a n t m a n ne r a s c a n be s e e n f ro m pa r a 3 . 1 a n d 3 . 2 o f t he D R P o rd e r w he r e i n it w a s s we e pi n gl y o bs e r ve d t ha t i n vi e w o f t he hi g he r p r o f it s d e c la r e d b y e l i gi b le u ni t s q u a n o n I.T.A. No.2313/Del/2022 13 e l igi b l e u n it s , t he p re s e n c e of a r r a n ge m e nt i . e . c oll u s i o n a u t om a t i c a l l y e xi s t s . N o o b j e c t i ve c o ns i d e ra t i o ns t o l e ga l o r f a ctu a l p os i ti o n h a s b e e n gi v e n b y t he D R P . 20 . T h e Ld . C o un s e l t h u s u r ge d f o r a d m i s s i o n of a d di t i o na l e vi d e n c e s f o r a dj u di c a t i on o f t h e gr i e va n c e ra i s e d i n i t s gr ou n ds o f a pp e a l. 21 . J oi n i n g t h e i s s u e , t h e l d . C IT - D R f o r t h e R e ve nue s t r o n gl y ra i s e d i t s o b j e c t i o n t o t he a d m i s s i o n o f a d d i t i o n a l e vi d e nc e s a t t h i s b e l a t e d s t a ge b e f or e t he T r i b u na l . 21 . 1 T h e l d. D R p oi n t e d o ut t h a t R ul e 2 9 d o e s no t con f e r , a s a m a t te r of ri gh t , a n y a l l ow a n c e t o pa r t i e s t o p r o d uc e a ny a d d it i o n a l e vi de n c e e i t h e r or a l o r d o c um e n t a r y b e f o re t he T r i b u n a l. T he ru l e s g o v e r ni n g t he a dm i s s i o n o f a d d i t io n a l e vi d e nc e s a re q u it e na r ro w a nd s t r i c t i n na t u re . R u l e 2 9 i s c o u c h e d i n a n e ga t i ve l a n gu a ge t o ba r t he p a r t i e s t o p r od uc e t he a dd i t io n a l e vi d e nc e s b e f o re T ri b u n a l . T h e p ow e r to a d m i t a d di t i o na l e vi d e nc e s u n de r R u l e 29 i s o n l y ve s t e d w i t h T r i bu nal . T h e T r i b u n a l h a s a di s c r e t i o n t o a d m i t t h e a dd i t i o n a l e vi de n c e s w he r e i t r e qu i re s a n y do c u m e n t t o be pr o d u c e d o r a n y w i t ne s s t o b e e xa m i ne d o r a n y a f f i d a vi t t o be f i l e d t o e na b l e i t t o p a s s o r de r o r f o r a n y ot he r s ub s t a nt i a l c a u s e . T he d is c re t i on t o a dm i t t he a dd i t i o n a l e vi de n c e s i s r e q u i re d t o be e xe r c i s e d j ud i c i a ll y. T h e l d . D R t hu s s u b m i t t e d th at t h e a s s e s s e e a t t h i s s t a ge i s n o t e n t i t l e d i n l a w t o r e nd e r f r e s h e vi d e nc e t o s u p po r t i t s c a se w h i c h h a s t he c o ns e q u e nc e t o m a ke o ut a n e w c a s e a lt oge t he r . A n a t t e m pt w a s m a d e t o di s t i n gu i s h t h e j ud gm e n t d e l i ve re d in the c a s e of S a n j ay K u m a r S i n g h v s . S t a t e of J h a r k h a n d i n C i v i l A p p e al N o. 1 7 6 0 o f 20 22 da t e d 1 0 t h Ma r c h , 20 2 2 ( SC ); C I T v s . Te x t H u n dr e d I n d i a P v t . Lt d . i n I T A N o . 2 0 7 7 , 2 0 6 1 an d 2 06 5 / 2 0 10 j ud gm e nt d at e d 1 4 . 01 . 2 01 1 r e f e r re d t o a nd re l i e d u po n b y t h e a s s e s s e . A re f e re n c e w a s a l s o m ade t o C I T v s . S m t . K a m a l C . M e h bo o b a ni , ( 19 95 ) 2 1 4 I TR 1 5 ( B o m ); K a n n ia p p a n Mu r i u ga d os s v s . I TO , (2 0 17 ) 7 9 t a x m an n . c om 2 4 4 (C hen n ai T r i b un al ) in t hi s r e ga r d . I.T.A. No.2313/Del/2022 14 22 . In r e j oi n de r , th e Ld . C o un s e l s u b m i t t e d t ha t R ul e 2 9 p e rm i t s t he T ri b un a l t o a d m i t t h e a d di t i o na l e vi d e nc e s w h e re t he t e s t o f ‘s u b s t a n ti a l c a us e ’ i s f o un d t o e xi s t . I n t he p re s e n t c a s e , t h e TP O a s w e l l a s A O pr o c e e d e d a ga i n s t t he a s s e s s e e w i th o ut s h ow i n g e x i st e nc e o f ‘a r ra n ge m e n t ’. Su c h po i n t go e s t o t he r o ot of t h e ma t t e r. T he w h ol e a dd i t i on i s a c om p l e t e no n - s t a r te r i n t he a b s e n c e of f u lf i l l m e n t o f s u c h pa r a m ou n t c on di t i o n. T h e a dd i t i on a l e vi d e nc e s , o n th e c o nt r a r y , po s i t i ve l y pr o ve s a b s e nc e of ‘a r ra n ge m e n t ’. N ot w i t hs t a nd i n g , t he o nu s w h i c h la y u p on t h e r e ve n u e w a s no t d i s c h a r ge d , a s s es s e e o n i t s p a rt pr o a c t i ve l y s e e ks t o d e m on s t r a t e ot h e r w i s e . T he a d di ti o n a l e vi d e n c e s pr o vi d e e n u nc i a t i o n o f b o na f i de s i n t he a c t i o n o f As s e s s e e a n d a bs e n c e o f a ny a r r a n ge m e nt pe r s e a nd n o n a dm i s s i on t h e re o f m a y p os s i bl y p r o vi de m i s l e a di n g re s ul t s w o ul d i n t u rn , l e d to s u b s t a n t i al m i s c a rr i a ge o f j us t i c e . T hi s i s m o r e s o w he r e t h e T P O ha s m a d e b a ld a l l e ga ti o n o f a rr a n ge m e nt gi vi n g r i s e t o a l l e ge d m or e t ha n no rm a l p r o f i t s t o t he e l igi b l e u ni t s b a s e d o n a no vi c e c om p a ri s on o f p ro fi t m a r gi n s of e l i gi bl e a nd n o n e l i g i b l e u n i t s [ p a ge 9 o f T PO or d e r ] w i t h out t a k i n g n o t e o f di f f e r e nt F A R s o f s u c h un i t s . T h e ld . c o un s e l n e x t s u bm i t t e d t ha t i t i s w r on g t o c o nt e n d o n t he pa r t o f r e ve n ue t ha t t he a ss e s s e e s e e k s t o m a ke ou t a n e w c a s e b y c h a n gi n g t he s t a n c e o n be n c hm a r kin g f r o m T N M M t o C U P m e t h o d w i t h t h e a i d of a d d i t i o na l e vi d e nc e s . I n t hi s re g a rd , t he l d . c ou n s e l p oi n t e d o u t t ha t th e a s s e s s e e d i d no t s pe c if ic a l l y b e n c h m a rk i t s S D T s t h r o u gh a n y s pe c i f i c m e t h od i n t h e T P St ud y R ep o r t . O t he r w i s e a l s o, t he a s s e s s e e i s e n t i tl e d t o r e s i l e f r o m w r o n g p os i t i o n t a ke n i n l a w a nd c a n e ve n c h o o s e t o c h a n ge t h e M A M f o r T P b e n c h ma r k i n g f o r t he f i r s t t i m e be f or e I T A T a s h e ld i n th e c a s e o f S t a r I n d i a ( P ) Lt d . vs . A C I T , 15 1 T a x m a nn . c om 77 ( M u m ) ( S B ) ; R o s ob o r o n s e r vi c e s I n di a Lt d . v s . D C I T , I T A N o . 7 2 55 / M U M / 20 1 8. I t w a s c o n t e n d e d t ha t in a n y e ve nt C U P i s m os t d i r e c t a n d r e li a b l e m e t h od a n d t h us m o s t a pp r o p r i a t e m e t h od f o r de t e r m i na t i o n o f A L P w h e re r e a s o na b l y c o m pa r a bl e d at a a re a va il a b l e . 23 . W e ha ve h e a rd t he ri va l s u b m is s i on s i n l e ngt h and pe r u s e d t he re l e va nt or de r pa s s e d b y t h e T P O / A O / D R P . T h e m a t e ria l re f e rr e d t o a n d I.T.A. No.2313/Del/2022 15 re l i e d u p o n ha ve a l s o be e n p e ru s e d c a re f ul l y . T h e co n t e nt i o n s on a dm i s s i o n o f a dd i t i on a l e vid e n c e s f i le d w i t h re f e r en c e t o R u l e 2 9 o f In c o m e T a x ( a p pe l l a t e ) T r i bu n a l R u l e s 1 9 63 a r g u e d in l e n gt h , h a s b e e n s i m u lt a n e o u s l y e xa m i n e d. 24 . T h e a d j us t m e n t m a d e b y t he A O u n d e r S e c ti o n 9 2BA r . w . S e c t i o n 92 C A r . w . Se c t i o n 8 0I A ( 10 ) i s i n q u e s t i o n w hi c h ha s t he e f f e c t of re d u c t i o n o f q u a nt u m o f d e d uc t i o n u nd e r S e c t i o n 8 0 IC / 8 0 I E o f t h e A c t to t he e x t e nt o f R s . 2 1 , 9 2 , 40 , 6 7 6 / - i n c on t r o v e rs y. 25 . W e s h a ll f i r s t a dd r e s s o u r s e l ve s o n t h e a d m is s io n of a d d i t i o na l e vi d e nc e s s t ro n g l y c o n t e s t e d b y b o t h s i d e s . 25 . 1 R u le 2 9 of t he I nc o m e T a x ( A p pe l l a t e T ri b u n a l ) R u le s , 19 63 , os t e n s i b l y p l a c e s a b a r on t he pa r t i e s to t he a pp e al t o pr o du c e a d di t i o na l e vi d e nc e s e i th e r o r a l o r d o c u m e n t a r y b e f o r e t he T r ib u n a l . H o w e ve r , t he T ri b un a l i s ve s t e d w i t h a j ud i c ia l d i s c r e ti o n t o a ll o w t h e p r o d u c t i on o f a dd i t i on a l e vi d e nc e s i n t he f o l l o w i n g c i r c um s t a n c e s; (i ) w he n t he T ri b u n a l r e q u ir e s a n y d o c u m e n t s t o b e p r o du c e d or a n y w i t n e s s t o b e e xa m i n e d o r a n y a f f i d a vi t to b e f i l e d t o e n a bl e i t t o p a s s or d e r s o r (i i ) w he n t he T ri b u n a l r e q ui r e s a n y d o c u m e n t s t o be p r o d u c e d o r a n y w i t n e s s t o b e e x a m i ne d o r a n y a f f i d a vi t t o b e f i l e d f o r a n y ot h e r s u bs ta n t i a l c a u s e o r (i i i ) w h e n t h e I nc o m e T a x A ut h o r i t i e s h a ve de c i d e d t he c a s e w i th o u t gi v i n g s uf f i c i e nt op po r t u n i t y t o t h e a s s e s s e e t o a dd uc e e vi d e n c e s e i t h e r on p oi n t s s p e c i f i e d b y t he m o r no t s p e c i f i e d b y th em . 25 . 2 I n t h i s b a c k d ro p, w e ta k e n o te of t h e p l e a r a is e d on b e ha l f o f t he a s s e s s e e t h a t a d di t i o na l e vi d e n c e s f i l e d p ri m a r il y de m o n s t r a t e th a t t he t ra n s a c t i on s b e t w e e n t h e e l i gi bl e u ni t s a n d n o n e l igi b l e u n i ts / A E s a re a t a rm s l e n gt h a nd a t o r di n a r y m a r ke t p r i c e a nd t h e re for e , n o c a us e of a c ti o n a ri s e s f o r i n vo c a t i on o f 8 0I A ( 10 ) to a l l e ge t h e e xi s t e n c e of a ny I.T.A. No.2313/Del/2022 16 ki n d of ‘a r ra n g e m e n t ’ f e t c hi n g mo r e t ha n or di n a r y pro f i t s to t h e a s s e s s e e . 25 . 3 P a ra 2 pa ge 9 of t h e or de r o f T P O ga t he r s s i gni f ic a n c e f or a dj u di c a t i o n o f c on t ro ve r s y t ow a r d s T r a ns f e r pr i c i ng a dj u s t m e n ts un d e r c ha l l e n ge a s p e r G r o un d N o . 3 o f t he G r ou nd s of a p pe a l . T h e o pe r a t i ve pa r a o f t h e o r de r o f T P O w o ul d be r e l e va n t f o r t h i s p ur p os e . "In the present case, the point to be noted is that the Assessee is showing excessive profits to claim higher deduction under section 80-1C/80IE of the Act. When two related parties, one of whom is eligible for a profit linked deduction under section 80-IC/80IE of the Act transacts business between them which is not an arm's length, designed in a way to grant more than normal profits to the eligible party, the profits are actually being shifted from the non-eligible party to the eligible party, which then unjustifiably claims higher deduction under section 80-IC/801E. From the above table it can be seen that OP/OR of Unit I (non eligible units) is 5.76% and OP/OR of eligible units (Unit-II is 14.91%, Unit-III is/38.33%, Sikkim Unit is 33.31%). Therefore it is clearly seen that assesse's business model is designed in such a way that to grant more than normal profits to the eligible party, the profits are actually being shifted from the non-eligible party to the eligible party, which then unjustifiably claims higher deduction under section 80-IC/80IE." 25.4 Likewise, the directions of DRP on such observations of TPO is also extracted for easy reference 3.1 The assessee has claimed deduction u/s.80IC/80IE fo the Act. It has three eligible units for claiming the above deductions, namely Unit-II (Paonta Shahib). Unit-III (Paonta Shahib) & Unit-IV (Sikkim). Unit-I (Paonta Sahib) is the non-eligible unit. The TPO has noted as follows:- S. No. Name of Unit OP/OR ratio 1. Unit I (Paonta Sahib) Non-eligible 5.76% 2. Unit II (Paonta Sahib) eligible 14.91% 3. Unit III (Paonta Sahib) eligible 38.30% 4. Unit IV (Sikkim) eligible 38.31% 3.2 In view of the above, the TPO has pointed out that there is an ‘arrangement’ between the assessee and the AE to shift profit to the eligible units from the non-eligible units.” 25 . 5 T h e c o nt r o ve rs y t o w a r ds T P a d j us t m e n t s a n d a dmi s s i o n o f a dd i t i on a l e vi d e nc e s h a s t h e ge n e s i s f l o w i n g f r om th e p r o vi s i o ns of S. 80 I A (1 0 ) o f t h e A c t w h i c h r e a d s a s u n d e r ; "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. I.T.A. No.2313/Del/2022 17 80-IA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. ...] (10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom: Provided that in case the aforesaid arrangement involves a specified domestic transaction referred to in section 92BA, the amount of profits from such transaction shall be determined having regard to arm's length price as defined in clause (ii) of section 92F." [Emphasis Added] 25 . 6 The nature of documentary evidence(s) sought to be admitted as additional evidences as per Rule 29 are broadly outlined as under: o Copy of purchase invoices showcasing a comparison of product-by-product purchases by eligible units from associated enterprises (AEs) and third parties during the year under consideration. o Copy of a purchase invoice(s) reflecting purchases by the deduction seeking units from the AEs and invoices of sales made by the AEs of same products to third parties. o Copy of the tax invoices for the sale transactions undertaken by the deduction seeking units with the associated enterprises, as well as invoices for further sales of the same products made by the associated enterprises. 26 . F or t h e pu r po s e s o f a dj u d ic a t i o n of G r o u n d no . 3 o f t h e a p pe a l t ow a r d s T P a d j us t m e n t s i n c on t ro ve r s y , s . 8 0 IA ( 1 0) of t h e A c t w a s a dve rt e d a nd a s s e s s e e ha s r a i s e d a p l e a t ha t t h e T PO h a s m a de a b a ld a l le ga t i o n t o w a r d s s h i f t i n g o f p ro f i t s f ro m A E s / non e l i gi bl e u ni t s t o t he e l igi b l e un i t s o f t h e a s s e s s e e t o m a ke un j us ti f i a ble c l a i m s of h i g h e r de d u c t i o n s u nd e r Se c t i o n 8 0 I C / 8 0 I E of t h e A c t b y t he e l i gi b l e u ni t s o f a s s e s s e e . T o a r r i vi n g a t s u c h s w e e p i n gs c o nc l u s i o n s, t he T P O h a s n o t c a ll e d f o r a n y do c um e n t s t o c o m p a re tr a n s a c t io n s w is e d e t a i ls n o r I.T.A. No.2313/Del/2022 18 ga t h e re d a n y m a t e ri a l i n c or r ob or a t i on a s s e l f e vi de n t f r om t he ob s e r va t i o n s n ot e d i n pa r a 2 5 . 4 s u p r a . M e r e e a r ni n g o f h i g h e r p r o f i t s b y e l igi b l e u ni t s vi s - a - v is ot h e r u ni t s h a s b e e n m a d e t h e ba s i s f o r a l l e ga t i on of ‘a r ra n ge m e n t ’ c o n t e m pl a t e d u n de r s . 8 0 I A ( 1 0 ) o f t h e A c t w h i c h i s s q ua r e l y o p p o s e d t o l e ga l p os it i o n a s e c ho e d i n j udi c i a l pr e c e de n t s . T he t ra n s a c t i on s w it h A E b y e l i gi b l e u n i t s o r t r a n s a c tio n s o f A E w i t h th i rd pa r t i e s e t c . a s t a bu l a t e d i n t he a d di t i o n a l e vi d e n ce do c u m e n t s m a n i f e s t ly de p i c t s a rm l e n gt h n a t ur e of t ra n s a c t i o n s a s s o u gh t t o be d e m o n s t ra t e d in t he c ou r s e o f he a r i n g . T he tr a n s a c t io n s w he n c o m pa re d w o u l d s h o w t ha t no p e rc e p t i bl e in c r e a s e i n t he p r of i t s o f t he e l i gib l e u n i t s h a ve r e s u l t e d f i r s t l y o n a c c o un t o f s m a ll pe r c e n t ag e o f t r a n s a c ti o n of p u r c h a s e / s a l e c a rr i e d o u t b y t h e a s s e s s e e w i t h i t s A E s / no n e l i gi bl e u n it s a nd t hu s h a ve no m a t e ri a l i m p a c t o n pr of i t a bi l i t y, s e c on dl y t he tr a ns a c t i o n p r i c e s a re qu i t e c o m pa r a bl e w i t h m a r ke t pr i c e s a n d t h i r d l y i n t e r m s o f S. 80 I A (1 0 ) of t h e A c t , t h e o n u s l a y u p o n t h e r e ve n ue t o pr o ve e x i s t e n c e o f a rr a n ge m e nt w h i c h w a s n e ve r d i s c ha r ge d . T h e a l l e ga ti o n b y T P O / A O / D R P i s a b s t ra c t in na t u re a n d h a s b e e n m a de s o l e l y f o r t he re a s o n t ha t t h e p ro f i t s of e l i gi b l e u n i t s a r e hi g h er t h a n t h a t o f n o n e l igi b l e u n it a s c a n b e s e e n f r om p a ra 2 5. 3 a nd 2 5 .4 e x t r a c t e d a b o ve . A d ve r s e i nf e re n c e b a s e d on s u c h ba l d a ll e ga t i on of T P O , e n do rs e d b y D R P i n a m e c h a ni c a l m a nn e r h a s c o m pe l l e d t h e a s s e s se e t o a s s i m i l a t e t he da t a t o re b ut s uc h ba l d a ll e ga t i on a nd d i s c ha r ge t he pu r po rt e d on u s w h i c h w a s n e ve r s h i f t e d t o A s s e s s e e b y t h e re ve nu e w h i le a l l e gin g a r r a n ge m e nt . T he l d . c ou n s e l d r a w s a f i ne d i s t i nc t i o n a n d s ub m i ts t h a t a r r a n ge m e nt i s a ‘c a u s e ’ a nd t h e h i g h e r p r of i t i s t h e e f f e c t . T h e h igh p ro f i t m u s t ne c e s s a ri l y be t he c o ns e qu e nc e of s u c h a rr a n ge m e nt . Th e o n us t o e s t a bl i s h a r r a n ge m e n t is up o n t h e o n e w h o a l l e ge s so. T h e l d. c o u ns e l s u bm i t s t h a t o n e x a m i n a t i on of a d d i t i o n a l e vi de n c e s f i l e d b y A s s e s s e e a s a p r oa c t i ve m e a s u re , i t w i l l b e a pp a re n t t h a t th e fi n di n gs o f t h e T PO w h i c h re s u l t e d i n t h e i m pu gn e d a d di t i on s a re c on t rar y t o t he e l e m e n t a ry f a c t s a va i l a b l e i n t h e m a t te r . T h e a d d it i o n a l e vi den c e s f i l e d a re i n t he f o r m of c om p a ra t i ve c h a rt s a n d In vo i c e s s h o w i n g va lu e of p u rc h a s e s / s a l e s m a de b y t h e e l i gi b l e u n i t s q u a c o m pa r a t i ve t ra n s a c t i on s c a rr i e d o ut I.T.A. No.2313/Del/2022 19 b y n o n A E s e t c . T h e a d di t i o na l e v i d e n c e s a t t e m p t s to u nc o v e r t h e m y th pr o po ga t e d b y t h e re ve nu e a n d e x p o s e s t h e c o nc e p t ual f la w i n t he a pp r oa c h a d o p t e d b y i t . T he a d di t i o na l e vi d e nc e s w ou l d n e ga t e t he a rt i f i c i a l p r i c e di s to r ti o n t o c l a i m hi ghe r d e du c t io n s a l l e ge d b y r e ve n ue w i t h o u t a n y b a s i s . T he a s s e s s e e t h us s u bm i t s t h a t the T r i b u na l i s f u l l y j us t i f i e d i n a d m it t i n g t he a dd i t i on a l e vi d e n c e s w her e i t i s of t h e o p in i o n t ha t s u bs t a nt i a l c a u s e o f j u s t i c e c a n no t be c a r ri e d o u t b y i g n o r i n g t he a dd i t i on a l e vi de n c e s . In t he a bs e nc e of s uc h a dd i t ion a l e vi de n c e s , t he T ri b un a l w o u l d b e pr e ve n t e d f r om a p p r e c i a t i n g t he re l e va n t f a c t s in pe r s p e c t i ve a nd t h e s ub s t a n t i a l c a u s e of j us ti c e w ou l d b e c on s e q ue n t l y de f e a t e d a n d d e n i e d t o t h e a s s e s s e e . T h e A s s e s s e e co n te n ds t h a t t he a dd i t i on a l e vid e nc e s m e re l y s e e k t o d i s c ha r ge on u s w h i c h w a s ne ve r s h i f t e d t o t h e A s s e s s e e b y r e ve n ue . A s p l e a d e d , a fa i r c o m p a r i s o n o f c on t ro l l e d a nd un c o n t ro l l e d t ra n s a c t i o n s w o ul d be ne c e s s a r y f or dr a w i n g f a i r c on c l us i on s o n t h e i s s u e . 27 . T o a dd re s s th e c on t r o ve r s y , w e f i r s t l y a f f i r m a ti ve l y n ot i c e t h a t t he l e ga l p os it i o n f o r a p pl i c a bi l i t y of Se c t i on 8 0 I A ( 10) i s t h e e xi s t e n c e o f ‘a r ra n ge m e n t ’ b e t w e e n t h e e l igi b le u ni t a n d A E s w hic h ho l d s t he k e y a n d i s a c o n di t i o n p re c e de n t t o t r i g g e r t he p r o vi s i o n s of Se c t i o n 8 0 I A ( 1 0) . I n t he a b s e nc e o f a n y a rr a n ge m e nt , t h e b us i ne s s t r a ns ac t e d be t w e e n e l i g i bl e un i t s a n d i t s A E d o n ot ge t c o ve re d w i t h in t h e a m b it o f S D T s d e f i n e d un d e r 9 2 B A o f t h e A c t a nd e ve nt u a l T r a n s f e r Pri c i n g a na l y s i s . I t i s t he pl e a of t h e a s s e s s e e th a t n o e f f o rt s w e r e m a d e b y th e A O t o p ri m a f a c ie c on c l ud e e x i s t e n c e of a n y a r ra n ge m e n t p e r s e a s c a ll e d u p on b y l a w be f or e m a ki n g r e f e r e nc e t o T P O f o r T P a na l ys i s . T h e e x i s t e nc e o f a rr a n ge m e nt t h u s go e s t o t h e ro o t of t h e m a t t e r of t h e c on tro ve r s y a n d un l e s s th e e x i s t e n c e o f a r r a n ge m e nt i s de m o ns t r a t e d w i t h s o m e e vi d e nc e s , t h e a d j u s t m e n t m a d e b y t he T P O w o ul d h a ve n o l e g t o s t a nd . B o t h A O a n d T PO h a ve c l e a rl y p ro c e e de d on h yp o t he s es r a t h e r t h a n a n y f a c t u a l e xi s t e n c e a nd s u c h a c t i o n of t he r e ve n u e a ut h o r i t i e s h a s c a us e d s u bs ta n t i a l i n j us ti c e t o t h e a s s e s s e e . I n t h e b a c k dro p, w hi l e t h e a f o r e s a i d e vi d e nc e s ha ve b e e n b r o u gh t o n re c o r d f or t h e f i r s t t i m e b e f o re the I.T.A. No.2313/Del/2022 20 T ri b un a l , i t i s m a n i f e s t t ha t s uc h a n a l ys i s o f c o m pa ra t i ve pu r c ha s e s a nd s a l e s s t r ik e s t o t h e r o ot of t he m a t t e r a nd a re e xtr e m e l y n e c e s s a r y t o c or r e c t l y a d j ud i c a te t he pe r t i ne n t i s s ue on e x i s t e nc e of ‘ a r ra n ge m e n t ’ be f or e t a ki n g a n y r a t i o na l vi e w i n m a t t e r . I t i s f ur t h e r p l e a o f t he a s s e s s e e t ha t t he a dd i t i on a l e vi de n c e go e s t o pr o ve c on s p i c u o us a b s e nc e of a n y a r ra n ge m e n t a n d t h e w h o le b a s i s o f r e f e r e nc e t o T PO a n d c on s e q ue n t a dd i t i o n b y w a y o f T P a d j u s t m e n t i s vi t ia t e d a nd un s u s t a i na b l e i n l a w . I t i s t hu s t h e pl e a o f t h e a ss e s s e e t h a t t o r e n d e r s u bs ta n t i a l c a us e of j u s t i c e , t h e T r i bu na l is n ot on l y e nt i t l e d in l a w b ut a l s o u nd e r a s a c r o s a nc t du t y t o a d m i t t h e a dd i t i on al e v i de n c e s , m or e s o , w h e re t h e l o w e r a ut h or i t i e s h a ve o m it t e d t o e x a m i ne t h e f a c t ua l a s p e c t on c om p a ra b l e m a r ke t va l u e o f g oo d s / s e r vi c e s o n t h e d at e o f t ra n s f e r e xp e c t e d o f t h e m i n l a w . 28 . T h e ld . c ou n s e l c o n t e n d s t ha t i t is j u d ic i a l l y s e tt l e d th a t t he pr e s e n c e o f c om p a ra b l y hi g h e r p r of i t yi e ld a t t r i bu ta bl e t o e li gi b le un i t s , w o ul d no t i ps o f ac t o le a d t o a pr e s u m pt i o n t h a t t h e re i n e vi t a b l y e xi s ts a n a rr a n ge m e nt p e r s e . Fo r s uc h p r o p o s i t i o n , a r e f e r e nc e w a s m a d e t o t he j ud gm e n t de l i ve re d i n t he c a s e o f C I T v s . Sc h m e t z I nd i a P v t . Lt d . , (2 01 2 ) 26 t a x m a nn . c om 33 6 (B o m ) w h e re i n i t w a s he l d t ha t w he r e t he A O h a s no t be e n a bl e t o pr o ve a n y a r ra n ge m e n t b e t w e e n pa r ti e s w h ic h r e s ul t e d i n e xt r a o r d in a r y p r of i t , d e n ia l of de d uc t i o n un d e r Se ct io n 1 0A i s n ot pe r m i s s i b l e . Si m i l a r vi e w h a s b e e n e xp re s s e d i n P r . C I T v s . V e d a n s h J e w e l s P v t. Lt d . , (2 0 1 8 ) 9 7 t ax m a n n. c o m 52 1 (R a j ) a l on g w i t h e vi d e nc e of a rr a n ge m e nt i s p a ra m o un t f o r s u c h a l l e ga t i o n. T he l d . c ou n s e l a l s o re f e rr e d t o t he j u dg m e nt i n th e c a s e of C I T v s . H . P . G l o b a l So f t Lt d. , 3 4 2 I T R 2 6 3 (K a r . ) w h e r e i n i t w a s i n t e r al i a ob s e r ve d b y t he C o u rt t h a t t h e re s h ou l d b e m a t e r i a l t o i nd i c a t e t h a t a s s e s s e e ha d i nd ul ge d i n a n a rr a n ge m e nt w i t h o t he r p e r s on s o a s t o p ro d u c e to the a s s e s s e e m o re pr o f i t s t ha n w h a t t h e a s s e s s e e m i ght ha ve be e n o r din a ri l y e x p e c t e d t o a ri s e f ro m s u c h bu s i n e s s . T h e l d . c o u ns e l a l s o re f er r e d t o t h e d e c i s i o n o f t he C o- o r d i na t e i n t h e c a s e o f H o n e y w e l l A ut o m a t i o n I n di a L t d. v s . D C I T i n I TA N o . 2 87 / P U N / 20 15 or de r d at e d 2 5 . 0 2 . 2 0 1 5 , w he r e i n i t w a s h e l d I.T.A. No.2313/Del/2022 21 t ha t o nu s i s p l a c e d up on t he A O t o d i s c ha r ge t h e b ur d e n o f e x is t e nc e a rr a n ge m e nt . 29 . O n c on s p e c t u s o f t h e va ri o u s j u d gm e n t s c it e d v iz ; M / s . Sc h e t m z In d i a I n d i a P v t . L t d. , (2 01 2 ) 26 t a x m a nn . c o m 3 36 ( Bo m ), P r . C I T v s . V e da n s h J e w e l s P v t . Lt d . , (2 01 8 ) 9 7 t a x m a nn . c o m 5 2 1 (R a j ); C I T v s . H . P . G l o b a l So f t Lt d . , 3 4 2 I T R 2 63 ( K a r . ) ; E t o n Te c hn o l o g i e s P v t . Lt d . v s . D C I T , I TA N o . 1 00 2 / P U N / 2 01 7 ( P un e I T A T ); M/ s . A B K now l e d ge S y s t e m s v I TO (I T A 8 9 4 / P U N / 20 1 6 ) ( P un e I TA T ) ; A C I T v s . F a ure c i a I n t e r i o r Sy s te m s I n di a ( P ) L t d . ( 2 02 0 ) 1 1 6 t ax m a n n. c o m 97 3 (P un e -T r i bu na l ) ; H o ne y w e l l A ut o m a ti o n I n d ia Lt d . v s . D C I T i n I TA N o.2 8 7 / P U N / 20 15 or de r da t e d 25 . 0 2 . 2 01 5 . Fo l l o w i n g s a l i e n t p r i n c i p l e s e m e r ge s o n a pp l i c a ti o n o f p r o vi s i o ns of S e c t i o n 80 I A ( 1 0 ) of t he A c t r e a d w i t h f i r s t pr o vi s o t he r e t o. (i ) E x i s t e n c e o f a r r a n ge m e n t b e t w e e n t h e d e du c t i on s e e ki n g u ni t s a nd ot h e r a s s o c i a t e d e n t e r p ri s e s i s a p r e -c o n d i t i on f or i n vo ki n g t he r i go r o f s e c t i on 8 0- IA (1 0) o f t h e A c t a n d n e e d s c o rr o bo ra t i on. i i ) M e r e c l o s e c o n n e c t i o n c a n no t p e r s e l e a d t o a n i n f e r e n c e t h a t t h e re i s a n a r r a n g e m e n t w h i c h h a s r e s u l t e d i nt o h i g h e r p r o f it s , (i i i ) E x t ra o rd i n a r y p r of i ts c a n n o t pe r s e l e a d t o t h e c o n c lu s i o n t h a t t h e re i s a n a r r a n ge m e n t b e t w e e n t h e pa r t i e s . (i v ) T h e c on c e pt o f P LI c a n no t pe r s e be a p pl i e d to h ol d t ha t t h e a s s e s s e e ha s e a r n e d s u p e r n or m a l pr o f i t s i n c a r r yi n g o n i t s b u s i n e s s . ( v ) T h e o n us i s o n R e ve nu e t o e s t a bl i s h t h e e x i s t e nc e o f a rr a n ge m e nt o n t he ba s i s o f s om e m a te r i a l w h i l e s e e ki n g a d j u s t m e n t i n t h e de d uc t i o n c l a i m e d w i t h t he a i d of Se c t i o n 8 0I A ( 10 ) r e a d w i t h p r o vi s o t h e re t o . ( vi ) I f t he a s s e s s e e ha s de m o ns t r a t e d t h a t t he t r a ns a c t i o ns be t w e e n t he e l igi b l e u ni t a nd A E w e r e c a r r ie d ou t a t m a rk e t p ric e , t he bu r de n p l a c e d on t h e a s s e s s e e s t a n d s d i s c ha r ge d a n d t he bu r de n s hi f t s u po n t he A s s e s s i n g O f f ic e r t o r e b ut t h e s a m e . I.T.A. No.2313/Del/2022 22 ( vi i ) T h e A O h a s t o d i s c h a r ge th e b u r de n b y p r o vi n g t h a t t h e t ra n s a c t i on s w e r e n ot a t m a r ke t p r i c e , b e f o re s a t i s f yi n g t he c ond it i o n of a r r a n ge m e nt w h i l e m a k i n g r e f e r e n c e t o T P O f or c o m p u t a t i o n of A LP . 30 . O n a n ua n c e d c o ns i d e r a ti o n of t he p l e a r a i s e d on be h a l f o f a s s e s s e e a nd c o un t e r pl e a o f t he re ve n u e , w e f i n d f o r c e i n th e s t a n c e o f t he a s s e s s e e t ha t t h e T P O / A O h a s m a d e a dj u s t m e n t u n d e r S e c t i o n 80 IA (1 0 ) r. w . s 92 B A b y s u pp o s i t i o n o f e xi s te n c e o f ‘ a rr a n gem e n t ’ m e r e l y o n t he gr o un d s of c om p a ra b l y h i gh e r p ro f it s r e p or t e d b y t he e l i gi b l e u ni t s vi s - a - vi s no n e l i gi b l e pa r t y. N o o t h e r b a s i s i s di s c e r n i bl e . T h e T P O / A O h a s c om p a re d t he p ro f i t s , u n i t w i s e i n s t e a d of e n t i t y le ve l c o m pa r i s o n i . e . Si n gl e U n i f i e d bu s i ne s s e nt i t y vi s - à - v i s u nc o nt r ol le d c o m p a r a b l e s . T he A s s e s s e e u n e q u i vo c a ll y c l a i m s no n e x i s t e nc e o f a n y a rr a n ge m e nt w h i c h , a s o b s e r ve d e a r l ie r , i s t h e b e dr o c k f o r a n y pl a u s i bl e T P a d j u s t m e nt . T he a dd i t i on a l e vi d e nc e s a p pe a r t o b r i n g c o m p a ra t i ve p urc h a s e pr i c e s o f va r i ou s p r o du c t s t r a n s a c te d be t w e e n A E s a nd n o n A E b y a n e l i gi b l e u n i t t o t he f o re . Si m i l a r is t h e c a s e w i t h s a l e s c a r ri e d o ut A E s vi s a vi s n o n A E s . N ot i c e a bl y, t he s a l e s t o A E s a r e i n s i g ni f i c a n t i n t h e c o n t e x t of t ot a l s a l e s . T h e p u r c ha s e s f ro m c l os e c on n e c t i o ns a re a lso m od e ra t e . I n s u c h m a t ri x , t o d i s pe l t he m i s c on c e pt i o n of f a c ts , i f a ny, a nd t o c o m e t o a n y de f i ni t i ve f i n d in g on e x i s t e nc e of ‘ a r r a n ge m e nt ’ , the a dm i s s i o n o f a dd i t i on a l e vi d e nc e , i n ou r vi e w , w ou l d b e p a ra m o u nt . 31 . T h e T P O h a d n o oc c a s i o n t o m a ke a n y c o m p a r a t i ve d a t a a na l y s i s o f t he t r a ns a c t i o n s be t w e e n e l i gi b l e u ni t s a n d A E s a n d s i m i la r t r a n s a c t i o n e xe c u t e d b y e l i gi b l e un i t s w i t h no n A E s . T h e T P O has a ls o n o t t a k e n i n t o a c c ou nt t he l o w p e r c e nt a ge o f s uc h S D T s i n t he c on t e xt of t h e c a s e a nd he n c e n o s i gn i f i c a nt i m p a c t o n re s ul t a n t p ro f i t s . Th e a s s e s s e e , on t he ot h e r h a n d , h a s a d ve r t e d t o t a bu l a ti o n s t o s ho w t h at t r a n s a c ti o n s b e t w e e n e l igi b l e u n i t s a n d i t s A E a r e a t A LP i n de e d . W e t hus f in d o s t e n s i bl e m e ri t i n pl e a f or a dm i s s i on of a dd i t i on a l e vi d e nc e s f i l e d u n de r R u l e 29 o f t he I n c o m e T a x ( A p p e l l a t e T r ib u na l ) R u l e s , 1 96 3 . 32 . W h i l e a d m it t i n g t he a d d i ti o na l e vi d e nc e s , ye t ano t he r a n gl e o c c u r I.T.A. No.2313/Del/2022 23 i n o u r m i n d . If t h e do c um e n t a r y e vi d e nc e s f il e d b y w a y o f a d di t i o na l e vi d e nc e s a re i gn or e d, i t w o u l d be ra t h e r di f f i c u lt f o r r e ve n ue t o t a k e a ra t i o na l vi e w t o w a r ds e x i s t e nc e of s u c h a rr a n ge m e n t. H e n c e , t he do c u m e n t a r y e vi d e n c e s f i l e d f o r s u c h pu r po s e s w o ul d b e r a t h e r be ne c e s s a r y f r om t he p e r s p e c ti ve o f r e ve n u e a l s o . T h e c a u s e of s ub s t a nt i a l j us t i c e a l s o d e ma n d s a dm i s s i on t o a r r i ve a t j us t a nd f a i r c on c l us i o n . 33 . W e a l s o a d ve rt t o a d dr e s s t h e ve he m e n t p l e a of r e ve nu e th a t a n e w c a s e i s s o u ght b e p re p a re d i n t he ga r b o f a d d i t io n al e vi d e nc e s . T he a s s e s s e e in t h i s r e g a r d h a s a l s o p oi n t e d o ut t h a t no n e w c a s e h a s b e e n s o u g ht t o be b ui l t . Se c t i o n 8 0I A ( 10 ) m e r e l y p o s t u l at e s e x is t e nc e o f a rr a n ge m e nt gi vi n g ri s e t o m o r e t h a n n o r m a l p r o f i t s t o e l i gi b l e u ni t s re s ul t i n g i n u n la w f u l e x c e s s i ve de d u c t i o n s . T he c h oi c e of T N M M or C U P a s a m os t a p p r op r ia t e m e t ho d i s r e l e va n t on l y f o r the t ra n s f e r p ri c i n g a na l ys i s a n d qu a n t i f i c a ti o n o f a d j us t m e n t s . T he p r ovi s i on s of s e c t i o n 80 I A (1 0 ) i t s e l f i s a no n s t a r t e r i n t h e a bs e n c e of arr a n ge m e n t . W e t hu s s e e no me r i t i n t h e p l e a ra i s e d on b e ha l f o f t he R e ve nue t h a t b y f i l i n g s u c h a dd i t i on a l e vid e n c e s , t h e a s s e s s e e i s s e e ki n g t o m ake o u t a n e w c a s e o f be n c hm a r k i n g f r om T N M M t o C U P m e t h o d w h i c h a l l e ge d ly r u ns c o n t r a r y t o T P St u d y R e p or t i n w hi c h t h e a s s e s s e e ha s i t s e l f t a k e n s t a n c e f o r n o n a pp l i c a bi l i t y o f C U P m e t ho d. St a t e dl y , t h e a s s e s s ee , i n t h e i n s t a nt c a s e , di d n o t s p e c i f i c a l l y be n c hm a r k i t s S T D s th r ou gh a n y s p e c i f i c m e t h od i n t he T P S tu d y R e p o r t a n d t h e re f or e , i t w o ul d be e r rone o us to c o nc l u de t ha t t he a s s e s s e e i s s e e k i n g to m a ke o u t a n e w c a s e b y c h a n gi n g t he m e t ho d of b e nc h m a r k i n g f r om T N M M t o C U P m e t h od f or t h e f i r s t t i m e be f or e t he T r i b u na l . T he i n t e r n a l C U P a v a i la b l e in t he i n s t a nt c a s e i s t he m os t d i re c t a n d r e a l i s t i c m e t h o d t o e va l u a t e m a rk e t p r i c e o f t ra n s a c t i on s c a rr i e d w i t h c l o s e c o nn e c t i on s . T h e a d di t i on a l e v i de n c e s f i l e d w o u ld t hr o w l i gh t on t h e b o na f i de s o f s u c h t r a n s a c t i o ns . 34 . T he H o n ’ b l e S u p re m e C o u r t i n t h e m a t t e r o f Te k R a m v s . C I T (2 01 4 ) 44 t ax m a n n . c o m 36 7 (SC ) h a s h e l d t ha t do c u m e n t s w h i c h a r e re l e va n t t o t he c a s e s h o u l d be l o ok e d i n to b y t he a p p e l l a t e b ody. T h e H on ’ b l e D e l hi H i gh C o u rt i n t h e c a s e of C I T v s . Te x t H un d r e d I nd i a P v t . L t d . , 3 5 1 I T R I.T.A. No.2313/Del/2022 24 57 ( D e l ) a n d C I T v s . V i r gi n S e c u r i t i e s a n d C r e d i ts (P . ) Lt d . (2 0 1 2 ) 2 0 t ax m an n. c o m 68 1 (D e l ) r e l i e d u p on o n b e h a l f o f t he a s s e s s ee ha ve h e l d t ha t t he a d d i t i o n a l e vi de n c e s w hi c h a r e c ru c i a l t o t h e d i s p os a l o f t he a pp e a l a nd ha d a di r e c t b e a ri n g o n t h e s u bj e c t m a t te r r e qu i re s t o be t a k e n i nt o a c c ou n t . 35 . T o c o n c lu d e , t h e a d di t i o na l e vi d e nc e s p l a c e d u nde r R u le 2 9 of t he In c o m e T a x ( A pp e l l a t e T ri b un a l ) R ul e s , 1 9 63 s t a n ds a d m i t t e d . 36 . O n m e ri t s , t h e l d . c o un s e l re f e rr e d t o t h e a d dit i o na l e vi d e nc e s a n d c on t e nd e d t ha t f i rs t l y; t h e t o ta l s a l e s t o A E s i n re s p e c t of S i kk i m u n i t s a nd o t he r e l i gib l e u ni t s a t Pa o nt a Sa hi b , H i m a c h a l P ra d e s h i s m i n i s c ul e a s c a n b e s e e n f r om t h e ta b u la t i o n s m a d e i n p a ra g r ap h 15 ( i i ) s u p r a . T h u s , s a l e s t o A E s d o n o t h a ve a n y m a t e r ia l i m p a c t o n t h e r e s u l t a n t p r o f i t s de r i ve d b y t h e e l i g i bl e u n i t s . Li k e w i s e , t he p ur c h as e f r o m A E s a re c om p a ra b l e t o s i m i l a r p u rc h a s e f r o m n o n A E s / t h i r d p a r t i e s a s de m o n s t ra b l e f r o m t he a dd i t io n a l e vi d e n c e s . T he l d. c o u ns e l re f e rr e d t o t a bu l a t io n / c h a r ts o f p ur c ha s e s s ho w i n g c om p a ri s on of t h e p u r c h a s e p ri c e of d i f f e re n t i t e m s w i t h A E a n d w i t h n o n A E e x t ra c t ed be l o w t o s u bm i t t ha t th e r e i s n o m a t e r ia l de p a rt u r e i n t h e pu r c h a s e p r i c e w h e n c om p a r e d w i t h t h e qu a n ti t y a nd t i m e of pu rc h a s e e t c . i s bo r ne i n mi n d . T he pu r c ha s e s m a d e w it h A E a n d n o n A E a re i n t he s i m i l ar r a nge a n d a t t i m e s , t o a d i s a d va n t a ge o f t h e a s s e s s e e a n d ha s res u l t e d i n d i s a d va nt a ge d pr o f i t o f t h e e l i g i b le u n it s a lb e i t i n s i gn i f i c a nt l y. E n t i t y N a m e o f r e l a t e d C o n c e r n N a t u r e o f t r a n s a c t i o n A s p e r 1 0 C C B C o r r e c t i o n A m o u n t o f p u r c h a s e P o a n t U n i t I I A N M P h a r m a P r i v a t e L i m i t e d P u r c h a s e o f p r o d u c t 4 3 3 2 2 7 3 8 - 4 3 3 2 2 7 3 8 P o a n t U n i t I I P h a r m a F o r c e L a b - I I P u r c h a s e o f p r o d u c t 9 7 4 3 1 - 9 7 4 3 1 P o a n t U n i t I I M e d i p a c k I n n o v a t i o n P r i v a t e L i m i t e d P u r c h a s e o f p r o d u c t 3 7 1 1 1 1 0 0 - 3 7 1 1 1 1 0 0 P o a n t U n i t I I A T o Z P r i n t e r P u r c h a s e o f p r o d u c t 2 1 3 6 5 9 4 5 - 2 1 3 6 5 9 4 5 P o a n t U n i t I I P r i n t m a n P u r c h a s e o f p r o d u c t - 9 2 3 1 9 5 - 9 2 3 1 9 5 P o a n t U n i t I I J . K . P r i n t P a c k P u r c h a s e o f p r o d u c t 1 0 0 7 5 2 3 9 - 1 0 0 7 5 2 3 9 P o a n t U n i t I I P h a r m a P e t I n d u s t r i e s P u r c h a s e o f p r o d u c t 5 5 4 6 6 5 7 - 5 5 4 6 6 5 7 P o a n t U n i t I I S i r m o u r R e m e d i e s P r i v a t e L i m i t e d P u r c h a s e o f p r o d u c t 3 3 6 3 0 - 3 3 6 3 0 I.T.A. No.2313/Del/2022 25 P o a n t U n i t I I A . S . P a c k e r s ( U n i t - I I ) P u r c h a s e o f p r o d u c t 3 4 5 1 0 4 1 8 - 3 4 5 1 0 4 1 8 P o a n t U n i t I I A . S . P a c k e r s P u r c h a s e o f p r o d u c t 3 4 5 1 0 4 1 8 2 2 5 7 7 2 9 3 1 1 9 3 3 1 2 5 P o a n t U n i t I I N . S . I n d u s t r i e s - P o a n t a P u r c h a s e o f p r o d u c t 6 9 6 1 9 8 6 - 6 9 6 1 9 8 6 P o a n t U n i t I I N . S . I n d u s t r i e s – U n i t - I I P u r c h a s e o f p r o d u c t 2 8 6 5 5 8 1 1 - 2 8 6 5 5 8 1 1 S u b T o t a l P o a n t a U n i t - I I 2 2 3 1 1 4 5 6 8 2 2 5 7 7 2 9 3 2 0 0 5 3 72 7 5 P o a n t a U n i t I I I A T o Z P a c k e r s P u r c h a s e o f p r o d u c t 4 2 0 5 4 6 0 - 4 2 0 5 4 6 0 P o a n t a U n i t I I I A . S . P a c k e r s P u r c h a s e o f p r o d u c t 3 7 6 7 7 6 - 3 7 6 7 7 6 P o a n t a U n i t I I I M e d i p a c k I n n o v a t i o n P r i v a t e L i m i t e d P u r c h a s e o f p r o d u c t 2 6 4 8 4 6 4 8 - 2 6 4 8 4 6 4 8 P o a n t a U n i t I I I M e d i f o r c e H e a l t h C a r e P v t . L t d . P u r c h a s e o f p r o d u c t 1 6 0 3 0 0 - 1 6 0 3 0 0 P o a n t a U n i t I I I P h a r m a F o r c e L a b - U n i t I I P u r c h a s e o f p r o d u c t - 3 4 8 1 0 - 3 4 8 1 0 P o a n t a U n i t I I I P r i n t M a n P u r c h a s e o f p r o d u c t 4 2 1 4 1 8 - 4 2 1 4 1 8 P o a n t a U n i t I I I A N M P h a r m a P v t . L t d . P u r c h a s e o f p r o d u c t 6 3 9 5 6 - 6 3 9 5 6 P o a n t a U n i t I I I J . K . P r i n t P a c k s P u r c h a s e o f p r o d u c t 1 4 0 1 8 5 - 1 4 0 1 8 5 P o a n t a U n i t I I I J P R L a b s P r i v a t e L i m i t e d P u r c h a s e o f p r o d u c t 4 0 1 1 2 5 0 - 4 0 1 1 2 5 0 S u b T o t a l P o a n t a U n i t I I I P u r c h a s e o f p r o d u c t 3 5 8 9 8 8 0 3 - 3 5 8 9 8 8 0 3 S i k k i m A T o Z P a c k e r s P u r c h a s e o f p r o d u c t 1 9 5 5 0 5 8 - 1 9 5 5 0 5 8 S i k k i m A . S . P a c k e r s U n i t I I P u r c h a s e o f p r o d u c t - 1 0 3 9 0 6 8 - 1 0 3 9 0 6 8 S i k k i m C o p m e d P h a r m a c e u t i c a l s P v t . L t d . P u r c h a s e o f p r o d u c t 4 1 9 9 0 - 4 1 9 9 0 S i k k i m J . K . P r i n t P a c k s ( P h a r m a D i v i s i o n ) P u r c h a s e o f p r o d u c t 6 8 3 1 7 8 - 6 8 3 1 7 8 S i k k i m M e d i p a c k I n n o v a t i o n s P v t . L t d . P u r c h a s e o f p r o d u c t 3 9 1 6 6 8 4 4 - 3 9 1 6 6 8 4 4 S i k k i m P h a r m a F o r c e L a b - U n i t I P u r c h a s e o f p r o d u c t 3 5 7 0 0 0 - 3 5 7 0 0 0 S u b T o t a l S i k k i m 4 3 2 4 3 1 3 8 4 3 2 4 3 1 3 8 3 0 2 2 5 6 5 0 9 2 2 5 7 7 2 9 3 2 7 9 6 7 9 2 1 6 M a t C o d e M a t – D e s c I n v . V e n d o r I n v - V e n d o r N a m e R P T U o M Q t y A m t A v g R a t e M i n R a t e M a x R a t e 1 0 0 0 0 0 0 9 D i S o d i u m E d e t a t e I . P . 0 0 0 0 1 0 0 0 6 0 S i r m o u r R e m e d i e s P v t . L t d . Y e s K G 1 0 0 . 0 0 2 8 5 0 0 . 0 0 2 8 5 2 8 5 2 8 5 1 0 0 0 0 0 0 9 D i S o d i u m E d e t a t e I . P . 0 0 0 0 1 0 1 7 6 1 K r o n o x L a b S c i e n c e s L t d . ( b l a n k ) K G 6 5 0 . 0 0 1 7 2 2 5 3 . 7 0 2 6 5 2 6 5 2 6 5 1 0 0 0 0 0 9 0 L - C a r n i t i n e L - T a r t r a t e 0 0 0 0 1 0 2 7 0 6 A N M P h a r m a P v t . L t d . Y e s K G 4 0 0 . 0 0 7 4 0 0 0 1 . 0 0 1 8 5 0 1 8 5 0 1 8 5 0 1 0 0 0 0 0 9 0 L - C a r n i t i n e L - T a r t r a t e 0 0 0 0 1 0 3 5 9 3 J . K . P r i n t s P a c k s ( P h a r m a D i v i s i o n ) ( b l a n k ) K G 2 5 . 0 0 4 4 5 0 0 . 0 0 1 7 8 0 1 7 8 0 1 7 8 0 1 0 0 0 0 1 1 0 P a n t o p r a z o l e S o d i u m I P 0 0 0 0 1 0 5 5 8 9 J P R L a b s P v t . L t d . Y e s K G 6 0 0 3 9 0 0 0 0 0 . 0 0 6 5 0 0 6 5 0 0 6 5 0 0 1 0 0 0 0 1 1 0 P a n t o p r a z o l e S o d i u m I P 0 0 0 0 1 0 0 0 9 1 A B S M e r c a n t i l e s P v t . L t d . ( b l a n k ) K G 1 1 0 0 . 0 0 6 4 1 5 0 0 2 . 2 0 5 8 3 2 5 4 0 0 6 2 7 5 1 0 0 0 0 1 1 7 P o v i d o n e I P ( K - 3 0 ) 0 0 0 0 1 0 0 0 4 6 P h a r m a F o r c e L a b - U n i t I I Y e s K G 5 0 . 0 0 2 9 5 0 0 . 0 0 5 9 0 5 9 0 5 9 0 1 0 0 0 0 1 1 7 P o v i d o n e I P ( K - 3 0 ) 0 0 0 0 1 0 0 1 1 2 N i s c h e m I n t e r n a t i o n a l ( b l a n k ) K G 1 0 0 . 0 0 6 1 0 0 0 . 0 0 6 1 0 6 1 0 6 1 0 1 0 0 0 0 3 7 6 A l p h a L i p o i c A c i d U S P 0 0 0 0 1 0 2 7 0 6 A N M P h a r m a P v t . L t d . Y e s K G 1 0 0 0 . 0 0 4 1 7 5 8 0 5 . 6 0 4 1 7 6 4 1 0 5 4 2 7 5 1 0 0 0 0 3 7 6 A l p h a L i p o i c A c i d U S P 0 0 0 0 1 0 2 1 2 6 N i s c h e m I n t e r n a t i o n a l P v t . ( b l a n k ) K G 5 0 0 . 0 0 2 0 9 5 5 0 1 . 9 3 4 1 9 1 4 0 3 0 4 2 7 5 I.T.A. No.2313/Del/2022 26 L t d . 1 0 0 0 0 5 7 2 O f l o x a c i n I P 0 0 0 0 1 0 2 7 0 6 A N M P h a r m a P v t . L t d . Y e s K G 1 3 1 7 5 . 0 0 2 5 8 6 9 9 6 0 . 0 0 1 9 6 4 1 8 3 6 2 3 4 5 1 0 0 0 0 5 7 2 O f l o x a c i n I P 0 0 0 0 1 0 0 0 9 4 A r c h i t C h e m i c a l s P v t . L t d . ( b l a n k ) K G 1 5 0 0 . 0 0 2 9 6 2 5 0 0 . 0 0 1 9 7 5 1 9 7 5 1 9 7 5 1 0 0 0 0 8 1 3 C a l c i u m C a r b o n a t e ( F i n e P o w d e r ) I P 0 0 0 0 1 0 0 0 4 6 P h a r m a F o r c e L a b - U n i t I I Y e s K G 4 5 5 . 6 5 1 3 6 6 9 . 5 0 3 0 3 0 3 0 1 0 0 0 0 8 1 3 C a l c i u m C a r b o n a t e ( F i n e P o w d e r ) I P 0 0 0 0 1 0 0 0 9 7 C l a r i o n P h a r m a c e u t i c a l s C o . ( b l a n k ) K G 3 3 8 7 5 . 0 0 9 2 6 1 7 5 . 0 0 2 7 2 7 2 8 1 0 0 0 1 2 1 3 M C C ( A v i c e l P H - 1 0 2 ) P h . E u r / U S N F 0 0 0 0 1 0 0 0 3 8 M e d i f o r c e H e a l t h c a r e P v t . L t d . Y e s K G 2 5 0 . 0 0 1 2 2 5 0 0 . 0 0 4 9 0 4 9 0 4 9 0 1 0 0 0 1 2 1 3 M C C ( A v i c e l P H - 1 0 2 ) P h . E u r / U S N F 0 0 0 0 1 0 0 1 1 7 S i g n e t C h e m i c a l C o r p . P v t . L t d . ( b l a n k ) K G 5 5 0 . 0 0 2 7 5 6 5 7 . 7 5 5 0 1 4 9 0 5 8 5 1 0 0 0 1 2 8 7 M i c r o c r y s t a l i n e C e l u l o s e ( A v i c e l P H 1 0 1 ) I P 0 0 0 0 1 0 0 0 4 6 P h a r m a F o r c e L a b - U n i t I I Y e s K G 7 9 . 4 0 4 0 4 9 4 . 0 0 5 1 0 5 1 0 5 1 0 1 0 0 0 1 2 8 7 M i c r o c r y s t a l i n e C e l u l o s e ( A v i c e l P H 1 0 1 ) I P 0 0 0 0 1 0 0 1 1 7 S i g n e t C h e m i c a l C o r p P v t . L t d . ( b l a n k ) K G 1 0 0 0 . 0 0 4 7 8 0 0 0 . 4 7 4 7 8 4 7 8 4 7 8 1 1 0 0 0 0 6 2 P l a i n A l u A l u F o i l 0 . 1 3 x 1 3 9 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 6 3 4 8 . 1 1 2 0 9 4 8 7 4 . 6 5 3 3 0 3 3 0 3 3 0 1 1 0 0 0 0 6 2 P l a i n A l u A l u F o i l 0 . 1 3 x 1 3 9 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 1 2 9 6 . 6 6 4 3 4 3 8 1 . 1 0 3 3 5 3 3 5 3 3 5 1 1 0 0 0 2 0 5 P l a i n A l u A l u F o i l 0 . 1 3 x 1 7 0 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 6 0 9 9 . 6 1 2 0 1 2 8 7 1 . 3 0 3 3 0 3 3 0 3 3 0 1 1 0 0 0 2 0 5 P l a i n A l u A l u F o i l 0 . 1 3 x 1 7 0 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 6 0 1 1 2 0 0 8 5 2 2 3 3 5 3 3 5 3 3 5 1 1 0 0 0 2 3 5 P l a i n A l u A l u F o i l 0 . 1 3 x 2 4 0 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 3 4 5 5 . 8 2 1 1 4 0 4 1 8 . 9 5 3 3 0 3 3 0 3 3 0 1 1 0 0 0 2 3 5 P l a i n A l u F o i l 0 . 1 3 x 2 4 0 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 1 0 1 . 3 2 3 3 9 4 2 . 2 0 3 3 5 3 3 5 3 3 5 1 1 0 0 0 2 6 7 A l u A l u F o i l 0 . 1 3 x 2 1 4 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 1 3 4 9 . 6 6 4 4 5 3 8 7 . 8 0 3 3 0 3 3 0 3 3 0 1 1 0 0 0 2 6 7 A l u A l u F o i l 0 . 1 3 x 2 1 4 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 2 1 8 . 0 2 7 3 0 3 6 . 7 0 3 3 5 3 3 5 3 3 5 1 1 0 0 0 2 6 8 P l a i n A l u A l u F o i l 0 . 1 3 x 2 0 2 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 1 8 7 5 . 2 5 6 1 8 8 3 2 . 5 0 3 3 0 3 3 0 3 3 0 1 1 0 0 0 2 6 8 P l a i n A l u A l u F o i l 0 . 1 3 x 2 0 2 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 3 0 9 . 6 6 1 0 3 7 3 6 . 1 0 3 3 5 3 3 5 3 3 5 1 1 0 0 0 3 9 5 B l . F o i l P t d . R E h e p t i n T a b 2 1 0 x 0 . 0 2 5 P S 0 0 0 0 1 0 0 7 5 9 P r i n t M a n Y e s K G 1 7 9 . 0 9 7 1 9 0 9 . 6 6 4 0 2 4 0 0 4 0 5 1 1 0 0 0 3 9 5 B l . F o i l P t d . R E h e p t i n T a b 2 1 0 x 0 . 0 2 5 P S 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . ( b l a n k ) K G 1 9 9 . 6 3 8 3 6 4 4 . 9 7 4 1 9 4 1 9 4 1 9 1 1 0 0 0 4 2 0 P l a i n A l u A l u F o i l 0 . 1 3 x 2 2 2 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 8 9 0 3 . 5 6 2 9 3 8 1 7 4 . 8 0 3 3 0 3 3 0 3 3 0 1 1 0 0 0 4 2 0 P l a i n A l u A l u F o i l 0 . 1 3 x 2 2 2 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 1 0 8 0 . 3 3 3 6 1 1 6 9 . 2 5 3 3 5 3 3 5 3 3 5 1 1 0 0 0 4 8 0 P l a i n A l u A l u F o i l 0 . 1 3 x 2 1 6 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 4 4 4 5 . 5 5 1 4 9 9 6 9 2 . 4 4 3 3 7 3 3 0 3 8 6 1 1 0 0 0 4 8 0 P l a i n A l u A l u F o i l 0 . 1 3 x 2 1 6 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 3 5 6 . 1 2 1 1 8 5 2 8 . 0 5 3 3 3 3 3 0 3 3 5 1 1 0 0 0 5 1 7 P l a i n A l u A l u F o i l 0 . 1 3 x 2 4 8 M m 0 0 0 0 1 0 2 3 1 6 M e d i p a c k I n n o v a t i o n s P v t . L t d . Y e s K G 4 6 1 1 . 0 8 1 5 2 2 0 6 5 . 3 9 3 3 0 3 3 0 3 3 0 1 1 0 0 0 5 1 7 P l a i n A l u A l u F o i l 0 . 1 3 x 2 4 8 M m 0 0 0 0 1 0 2 1 9 8 I C M P l a s t i c s P v t . L t d . ( b l a n k ) K G 7 0 9 . 7 9 2 3 4 2 3 0 . 7 0 3 3 0 3 3 0 3 3 0 2 0 0 0 7 7 9 1 L D P E P o l y B a g 2 4”X 3 6” 0 0 0 0 1 0 0 6 6 6 A T o Z P a c k e r s Y e s K G 1 0 3 3 2 . 6 3 1 4 9 8 2 3 1 . 3 5 1 4 5 1 4 5 1 4 5 2 0 0 0 7 7 9 1 L D P E P o l y B a g 2 4”X 3 6” 0 0 0 0 1 0 4 2 0 6 S a t y a m S t a t i o n e r y & G e n e r a l M a r t ( b l a n k ) K G 2 5 . 0 0 3 0 5 0 . 0 0 1 2 2 1 2 2 1 2 2 37 . O n b e i n g i n q ui r e d b y t h e b e n c h, t h e l d . c ou ns e l s t re n o u s l y t o ok I.T.A. No.2313/Del/2022 27 us th r ou gh t he va ri o us i t e m s o f p u r c ha s e a n d c o r r e sp o n d i n g p u rc h a s e s f r o m u nr e l a t e d e nt i t i e s or s u c h pu rc h a s e s m a d e b y AE s e t c . t o de m o n s t ra t e t ha t t h e s u pp l y r a t e b y t he A E s t o e l i gib l e un i t s a n d t h e t h i r d pa r t y a r e b r o a dl y in t h e s i m i la r r a n ge a nd ha vi n g no r e a l i m p a c t on t he s o c a ll e d e x t r a or di n a r y pr of i t s of t h e e l i g i bl e un i t on a c c o un t o f S D T s . T he l d. c o un s e l t h u s a s s e rt s t h a t a l l t h e tr a ns a c ti o n s o f p u rc h a s e a n d s a l e un d e rt a k e n b y t h e e l i g i bl e un i t s w i t h A E s a re a t m ar k e t p r i c e / A LP a n d t he r e f o re , i n t h e a bs e n c e of a n y a r ra n ge m e n t gi v i n g r i s e t o a n y a b no r m a l pr o f i t s t o t he e l i gi b l e u ni t s , i n v o c a t i o n o f Se c t i on 8 0 I A ( 1 0 ) r . w . Se c t i on 92 B A of t h e A c t i s w h o ll y u n w a r ra n t e d a nd c o n s e q u e nt l y t h e a d j u s t m e nt m a de u n de r t ra n s f e r p ri c i n g p ro v i s i on s i n t he f i na l a s s e s s m e n t or de r i s c on t ra r y t o t h e po s i t i o n o f l a w a n d f a c t u a l m a t r i x a n d t hu s r e qu i re s t o be re ve rs e d . 38 . I n e s s e n c e , i t i s t h e c a s e o f a s s e s s e e t h a t re ve nu e h a s m e r e l y a l le ge d e xi s te n c e o f a r r a n ge m e nt t o i n v o ke r i go u r s of S e c t i o n 80 IA (1 0 ) of th e A c t m e r e l y on t h e gr ou n d t ha t t h e e l i gi bl e un i t s h a ve d e ri ve d hi gh e r p e r c e nt a ge of pr o f i t i n c o m pa r i s o n t o n o n e li gi b l e u n i t s . A s c u l l e d ou t in t he pr e c e di n g p a ra g ra p h , i n t h e a b s e n c e o f an y m a t e ri a l t o e s t a bl i s h s h i f t i n g o f pr o f i t a n d e x i s t e nc e o f a r r a nge m e nt , t h e h i g h e r pr o f i t de r i ve d b y e l i gi b l e u n it vi s -à - vi s u ni t b y it s e l f c a n n ot gi ve r i s e t o a ny a d ve r s e i n f e r e n c e o f e x i s t e nc e of a rr a n ge m e nt . T he a s s e s s e e i n t he i ns ta n t c a s e ha s a t t e m p t e d t o d e m on s t r a t e t h a t th e t ra n s a c t i on b e tw e e n e l igi b l e u ni t a nd A E s w e re c a r r i e d ou t o n m a r ke t p ri c e b y p r o du c i n g t he bi l l s a n d t a b ul a t i o ns i n t he s ha p e of a dd i t io n a l e vi de n c e s . A s no t e d i n t he pr e c e di n g pa r a gr a ph s , t he p r i m a r y on u s w a s o n t h e AO t o c a l l f o r s u c h do c u m e n t s a s m a y b e c on s i d e r e d n e c e s s a r y t o s c r ut i ni z e w h e th e r h i gh e r pr o f i t s i n e l i gi b l e u n i t s a r e o n a c c o un t o f a n y a r ra n ge m e nt p e r s e. T he A O h a s n ot d i s c ha r ge d s u c h o n us b u t h a s m a d e b a l d al l e g a ti o n on t he gr o un d s o f r e l a t i ve l y h i gh e r p r o f i t s e a rn e d b y t h e e l i gib l e un i t s vi s - à - v i s no n e l i g i bl e u n it s . 39 . I n th e c ou r s e of h e a r i n g, w e ha ve be e n gr e a t l y a s s i s t e d o n b e h a l f of t he a s s e s s e e t o ga t h e r un d e r s t a n di n g t ha t t h e t r a nsa c t i o n w i t h c o nn e c t e d I.T.A. No.2313/Del/2022 28 e nt i t i e s a re a t m a rk e t pr i c e . W h e n s e e n i n t o t a l i ty, w e a r e i n c l i ne d t o a gr e e w i t h t he p l e a o f t he a s s e s s e e o n f i rs t p ri n c ipl e s t h a t r i go u r s o f Se c t i on 8 0 IA ( 1 0) a r e n ot a p p l ic a b l e i n a c a s e w h e re ne i t h e r t h e A O h a s di s c h a r ge d i t s o n u s t o e s t a b l i s h e xi s t e n c e o f a r ra nge m e n t n o r s u c h a rr a n ge m e nt i s d e m on s t r a bl e o n f a c t u a l a n a lys i s . T he f i n di n gs o f t he T P O / A O ho l di n g e x i s t e nc e o f a r r a n ge m e n t b e t w e e n t h e e l i g i b l e u ni t s a nd A E s m e re l y o n t h e b a s i s o f h i gh e r o pe r a ti n g p ro f i t s o f t he e l i gi b le u ni t s c a nn ot b e u ph e l d o n f i rs t p ri n c i p l e s i n t h e i n s t a nt c a s e . T he a s s e s s e e h a s pl a c e d a d d i ti o n a l e vi de n c e s t o r e b u t t he u ns up po r ted f i n d in g of t he T P O / A O t o d is l od ge e x i s t e n c e of a r ra n ge m e n t a nd t r ans a c t i o ns b e t w e e n t he e l i gi bl e u ni t s a n d A E s t o be a t m a rk e t p ri c e . 40 . H e nc e , t o t he l i m i t e d e x te n t o f ve ri f i c a t i o n o f a d d i t io n a l e vi de n c e s , w e d e e m i t a p pr o p r i a te t o r e m i t t h e m a tt e r b a c k t o th e f il e o f th e A O . T he A O s h a l l be a t l ib e rt y t o ve ri f y t h e c o rr e c t ne s s o f th e c l a i m o f t he a s s e s s e e t h a t t r a ns a c ti o n s of pu r c h a s e u nd e rt a k e n by t h e e l i gi bl e u ni t s w i t h i t s A E s a r e a t o r di n a r y a n d c o m p a ra b le m a r ke t p r i c e t o j us t i f y A LP . T he a s s e s s e e s h a l l a l s o b e e nt i t l e d t o be n c hm a r k t ra n s a c ti o n of t he e l igi b l e u ni t b y a p p l y i n g C U P m e t h od a s m o s t a p p r o pri a t e m e t h od t o j us t i f y l a c k o f a n y a r ra n ge m e n t c o n t e m p l a te d un de r S e c t i o n 8 0I A ( 10 ) o f t he A c t . T o t h i s l i m i t e d e xt e n t , t h e m a t t e r is s e t a s i de t o th e f i l e o f t he A O . T he a s s e s s e e s h a l l b e e n t i tl e d t o a d d u c e s u c h ev i de n c e s a s m a y be c on s i d e re d e x p e d i e n t t o s up p o r t i t s pl e a o n c om p a rab i l i t y of pu r c h a s e t ra n s a c t i on s c a r ri e d ou t b y e l i gi b l e un i t s w i t h i t s A E v iz . u n c on t r o l l e d t ra n s a c t i on s . 41 . A s r e ga r d s s a l e tr a n s a c t io n s b y e l i gi b l e u ni t s w i t h i t s A Es , w e do no t c on s i d e r i t ne c e s s a r y t o be s e t w it h f u r th e r b u rd e n o f p ro o f o n a s s e s s e e t o w a r d s a s p e c t s o f A LP h a vi n g r e ga r d t o n om i n a l p e rc e n t a ge o f s a l e t r a ns a c t i o ns c a r ri e d o ut w i t h A Es o w i n g t o m i ni s c u l e e f f e c t , i f a n y, on t h e o ve ra l l p ro f i t a b i li t y w h e n s e e n i n th e c o nt ex t . 42 . T h e A O s h a l l p a s s a re a s on e d o r de r t o w a r d s p r e se n c e o f ‘a r ra n ge m e n t ’ c o nt e m p l a t e d un de r Se c t io n 8 0 IA ( 1 0) , if a ny w hi l e I.T.A. No.2313/Del/2022 29 de t e r m i ni n g t h e i s s ue . T h e A O m a y m a k e re f e re n c e to T PO f o r de t e r m i na t i o n o f A L P o f th e c o nt r o ll e d t r a ns a c t i o n s a s p e r C U P m e t h o d i n t he e ve n t t h e p ri m a f a c i e e x i s t e n c e o f ‘a r ra n ge me n t ’ i s d i s c o ve r e d b y hi m i n t he f a c t ua l m a t ri x . 43 . G r o un d n o . 3 is t hu s a l l ow e d f o r s t a t i s t i c a l pur po s e s . 44 . G r o un d N o . 4 c on c e rn s d i s a l l o w a n c e of d e du c t i on u n de r S e c t i on 80 G o f t he A c t a m o u n t i n g t o R s . 6 , 3 8 , 1 3 , 6 0 1/ - . 45 . T h e A O o b s e r ve d t h a t t he a s s e s s e e ha s c l a i m e d de d uc t i o n t o t he e xt e n t o f R s . 6, 3 8, 1 3 , 60 1 / - u n de r Se c t i o n 80 G of t h e A c t . T h e A O n o t e d t ha t t h e a s s e s s e e h a s f il e d t he l i s t o f m o s t l y pr i va t e i ns ti t u t i on s / t r u s t / u ni ve rs i t y t o w h o m t he a s s e s s e e ha s m a de c o n t ri b ut i o n du r i n g t he ye a r u nd e r c on s i de r a t i o n a g gr e ga t i n g t o R s . 1 2 , 76 , 27 , 2 02 / - i n t he c o m pu t a t i on of i n c o m e w h i l e c a r r yi n g o u t th e t ot a l c o n t r i b u t i on o f R s . 12 , 8 7 , 8 8 , 9 7 9/ - t o w a r d s C o r po ra t e So c i a l R e s p o ns ib i l i t y ( C SR ) i n t e rm s o f E xp l a na t i o n- 2 t o S e c t i o n 3 7 ( 1 ) of th e A c t . T h e A O t h u s ob s e r ve d t ha t t h e a s s e s s e e h a s w r on gl y c l a im e d d e d uc t io n of 5 0 % o f C SR e xp e ns e s R s . 1 2 , 8 7 , 8 2 , 9 7 9 / - u nd e r Se c t i on 8 0G of t h e A c t t o w a rd s ou t go / e x pe n s e s w h i c h a re o t he r w i s e n ot e l igi b l e f or bu s i n e s s e xp e n s e s de d u c t i o n . T he A O a c c or d i n g l y d e n ie d t h e c l a i m of de d u c ti o n un d e r Se c t i on 8 0 G o f t h e A c t c o nn e c t e d t o e x pe n s e s i n c ur re d on a c c o u nt o f C S R . T h e D R P e n d o r s e d t h e a c t i on of t he A O w h i l e i ss u i n g d i r e c t i on s un d e r Se c t i o n 1 4 4C of t he A c t . 46 . T h e a s s e s s e e be f or e u s s u bm i t t e d t ha t du r i n g t he f i na n c i a l ye a r un d e r c on s i d e ra t i o n , t he a s s e s s e e h a s i nc u rr e d a n ex pe n di t u re o f R s . 12 , 8 7 , 8 3 , 0 0 0/ - i n a gg re ga t e b e i n g do na t i o ns a n d c o nt r i bu t i on s t o va r i ou s c h a r i t a b l e i ns t i tu t i on s a n d f u n d s . Su c h c o nt r i b ut i o ns m a de t o i m pl e m e n ti n g a ge n c ie s f o r u n de r t a k i n g C SR a c ti vi t i es a n d r e gi s t e r e d un d e r s . 1 2 A a n d 8 0G o f t h e A c t , h a v e n ot b e e n c l a im e d a s bu s i n e s s e xp e nd i t u r e be i n g i n t h e na t u re o f C SR e x pe n s e s i n vi e w o f E x pl a n a ti o n - 2 t o S e c t io n 3 7 ( 1 ) o f t he A c t. O p e ra t i o n o f s e c t i on 3 7 a nd s e c t i o n 80 G I.T.A. No.2313/Del/2022 30 be i n g m u t ua l l y e x c l u s i ve , a d e d u c t i on of R s . 6 , 3 8, 1 3, 6 0 1/ - [ b e in g 5 0 % o f s u c h c o nt r i bu t i o n s ] w a s c la i m e d un d e r S e c t i on 80 G of t h e A c t w hi c h w a s w r on gl y di s a l l o w e d b y t h e R e ve nu e A u t h o ri t i e s . T he c l a i m un de r 80 G w a s d e n ie d o n t h e gr o u n d t h a t s u c h e x p e n d it u r e be i ng i n t h e n a t ur e o f C S R a s p e r t e rm s of S e c t i o n 13 5 of t h e C om p a n ie s A ct , 2 0 1 3 , a n d t hu s no t a n a l l ow a bl e e x p e nd i t u r e un d e r t he h e a d ‘ bu s i n es s a nd pr of e s s i o n ’ a s pe r Se c t i on 3 7 ( 1 ) of t he A c t a n d h e nc e a l s o n o t e nti t l e d t o be c o ve r e d f o r de d u c t i o n un de r Se c t i on 8 0G of t he A c t . 46 . 1 I n t h i s c on t e xt , t h e l d . c o un s e l s u bm i t s t h a t t h e re c a n b e no q ua r re l t ha t a s p e r E x pl a n a t i o n- 2 t o Se c t i o n 37 o f t he A c t , t h e d e d uc t i o n t ow a rd s e xp e nd i t u r e i n c u r r e d on C SR a c t i vi ti e s r e f e rr e d t o i n Se c t i o n 13 5 o f t he C o m p a ni e s A c t , 2 0 1 3 s ha l l n o t b e d e e m e d t o be a n e xp e nd i t ur e in c u r r e d b y t h e a s s e s s e e f or t he p u rp os e s o f ‘ bu s i n e s s o r p rof e s s i o n ’ . H o w e ve r , di s a l l o w a n c e o f s u c h e x pe n s e s / ou t g o i n vi e w of s t ip u l a t i o ns m a d e in s e c t i on 37 o f t h e A c t do e s n ot p ut a n y f e t t e r s o n th e e l i gi b i li t y u n d e r ot h e r p r o vi s i o ns o f t h e A c t vi z . Se c t i o n 8 0G o f the A c t . T h e c l a i m is e l igi b l e f o r d e du c t i o n un d e r S. 8 0G un l e s s s t a t u t o ri l y p ro hi b i t e d. T h e l d. c ou n s e l c o n te n d s th a t t he r e b e i n g no ba r in l a w t o c l a i m d e d u c t i on un d e r Se c t i on 80 G o f t he A c t n o t w i t h s t a n d i n g i t s i ne l i gibi l i t y u nd e r Se c t i o n 37 ( 1) o f t h e A c t , t h e d e n ia l o f de d u c t i o n u nd e r s . 8 0 G i s w h o l l y m i s c on c e i ve d a n d u n j u s t i f i e d a c t io n . 46 . 2 T h e Ld . C o u n s e l s u b m i t s t h a t s e c t i o n 80 G of t he A c t a l l o w s a t a xp a ye r t o c l a i m d e d uc t i on s i n re s pe c t o f c o nt r i b ut i o n s m a d e t o c e r t a in c ha r i t a bl e In s t i t ut i o ns a n d F un ds e t c . Fu r th e r , s u b- S e c ti o n ( 2) ( a ) o f Se c t i on 8 0 G o f t h e A c t e nu m e ra t e s Fu n d s t o w ho m c o nt r i bu t i o n s a re e l igi b l e f o r s uc h de d uc t i o n. 46 . 3 A d ve rt i n g t o s u c h l i s t e n u m e ra t e d , t h e L d . C o un s e l po i nt s o u t t ha t C l a u s e (i i i hk ) a n d ( i i i h l ) o f t he A c t o f s u b - s e c t i on (2 ) (a ) o f s e c t i on 8 0 G of t he A c t a r e pe c ul i a r a n d p r o v i de s f o r s p e c i f i c ins t a nc e s w he r e C SR e xp e nd i t u r e n ot e l i gi b l e u nd e r s . 37 , i s a l s o n ot t o b e a ll o w e d a s de d u c t i o n u n de r s . 8 0 G t o o. T h e r e l e va nt p os i ti o n of s e c t i on 80 G ( 2 ) ( a ) o f I.T.A. No.2313/Del/2022 31 t he A c t i s re p r o d uc e d he r e u n de r : " (i i i h k ) t h e S w a c h h B h a r a t K o sh , s e t u p b y t h e C e n tr a l G o v e rn m e n t , o t h e r t h a n t h e s u m s p e n t b y t h e a s s e s s e e i n p u r s u a n c e o f C o r p o r a t e S o c i a l R e s p o n s i b i l i t y u n d e r su b - s e c t i o n ( 5 ) o f s e c t i o n 1 3 5 o f t h e C o m p a n i e s A c t , 2 0 1 3 ( 1 8 o f 2 0 1 3 ) ; o r ( i i i h l ) t h e C l e a n G a n g a F u n d , s e t u p b y t h e C e n t r a l G o v e r n m e n t , w h e r e s u c h a s s e s s e e i s a r e s i d e n t a n d s u c h su m i s o t h e r th a n t h e s u m sp e n t b y t h e a s s e s s e e i n p u r s u a n c e o f C o r p o r a t e S o c i a l R e s p o n s i bi l i t y u n d e r s u b - s e c t i o n ( 5 ) o f s e c t i o n 1 3 5 o f t h e C o m p a n i e s A c t , 2 01 3 ( 1 8 o f 2 0 1 3 ) ; o r " 46 . 4 T h e l e a r n e d c ou ns e l t hu s s u b m i t te d t h a t a s c o ro l l a r y t o t he l e gi s l a t i ve f i a t , s a ve a n d e xc e p t c a s e s f a l l i n g i n e x c e pt i o ns u n d e r 80 G ( 2 ) ( a )( i ii h k ) & ( ii i h l ), t he a s s e s s e e i s d ul y e li gi b l e f o r de d uc t i o n un d e r s . 80 G s u b j e c t t o f ul f i l m e n t of c o n di t i o ns , un h i nd e r e d b y i ne l i gi bi l i t y u n de r s . 3 7 o f t h e A c t . 46 . 5 T h e a s s e s s e e re f e rr e d t o t h e d e c i s i o n s r e n d e red b y t h e C o - o r d i na t e B e n c h i n t he c a s e o f N a t i on a l S e e d s C o r p or at i o n Li m i t e d v s . A C I T, I TA N o . 6 7 94 / D e l / 20 14 ; F i r s t A m e r i c an ( I n di a ) P r i v a t e Li m i t e d [ IT A N o . 17 6 2/ B a ng / 2 0 1 9 ; S o c i e t e G e ne r al e Se c u r i t i e s I n di a Pv t . Lt d. [ T S- 77 0 - I T A T -2 0 23 ( Mu m )] ; G o l d m a n S ac h s S e r v i c e s P r i v a te Lim i t e d [ IT (T P ) A N o . 23 5 5/ B a n g / 20 1 9 t o b ut t r e s s i t s c l a i m t ha t i n t h e s im i l a r f a c t s t he c l a i m o f d e d uc t i o n o n C SR e x p e ns e s h a ve be e n a l l o w ed u n d e r Se c t i o n 80 G o f t h e A c t n o t w i t h s t a nd i n g i ne l i gi b i l i t y f o r c la i m f o r t h e pu r p o s e s o f de d u c t i o n u n de r Se c t i on 3 7 o f t h e A c t . T he l d . c ou ns e l t hu s u r ge d f o r re ve rs a l of t he a c t i o n o f t h e R e ve nu e A u t ho r i t i e s . 47 . T h e l d. D R f o r th e R e ve n ue h o w e ve r r e f e r re d t o a n d re l i e d up o n t he vi e w t a ke n b y t h e A O a n d D R P . 48 . W e ha ve h e a rd t h e r i va l s u b m i s s i o n s . T h e c o nt r ove r s y re v ol ve s a ro u n d t he de d uc t i b i li t y o f do na t i o ns a n d c o nt r i bu ti on s t o F u n ds / b od i e s re gi s t e re d u n de r s . 1 2 A of t h e A c t on th e c o un t e r s o f s . 80 G o f t h e A c t w h e re C SR c o n tr i b ut i on s a r e no t e l i g i bl e f or de d uc ti o n u nd e r s . 37 of t he A c t . I.T.A. No.2313/Del/2022 32 48 . 1 W e f i n d t ha t t he i s s ue i s n o l o n ge r r e s i nt e g r a. S. 13 5 o f t he C o m p a ni e s A c t , 2 0 1 3 r e a d w i t h F A Q s d a t e d 2 5/ 0 8/ 2 0 2 1 i s s ue d b y t he M i n i s t r y o f C o r p o ra t e A f f a i r s G O I ( M C A ) p r o v i d e s f or d if f e re n t m od e s of i nc u r r i n g C S R e x p e n s e s . O n e o f t h e s pe c i f i e d m ode s i s ‘ C o n t r i b ut i o n t o Fu nd s r o ut e ’ , w h i c h in t e r a l i a a l lo w s t h e a s s e s se e t o m a ke c on t ri b u ti o ns t o v a ri o u s f u nd s s pe c i f i e d i n Sc he d u le V I I o f t he C o m p a ni e s A c t. T he c o nt r i bu t i on s t o s u c h f u nd s , qu al if i e d t o b e i n t he na t u re C SR e x pe n s e s un d e r C o m pa n i e s A c t , i s n ot e l igi b l e f or de d uc t i o n a s b u s i ne s s e x pe n d i t u r e i n v ie w o f s t a t ut o r y e x c l usi on c a r ve d o u t b y E xp l a na t i o n - 2 t o S e c ti o n 37 ( 1 ) o f t h e I nc o m e T a x A ct , 1 96 1 . H o w e ve r , s u c h e xc l u s i on e x t e n d s on l y t o t h e e x t e n t o f c o m pu ti n g b u s i n e s s i n c om e un d e r C ha p t e r I V -D of th e A c t . A s p e r t h e s c he m e o f t h e A c t, i n t he a bs e n c e o f a n y no n - o bs ta n t e c l a u s e , t h e r e do e s no t a p pe a r t o b e a n y b a r f o r t h e a s s e s s e e t o c l a i m be n e f i t un de r S e c ti o n 8 0 G, b r a c k e t e d un d e r Se c t i on V I A of t h e A c t , i f s uc h c o n t r i b u t i on s a r e el i gi bl e f or d e d uc t i on ot h e r w i s e . T h e e x c l us i o n s p r o vi de d i n 8 0G ( 2) ( a ) ( i ii h k ) & ( i i ih l ) q ua c e rt a i n s p e c if i c c o nt r i bu t i on s s uc h a s ‘ S w a c h h B h a ra t K os h ’ a n d ‘C l e a n G a n ga F u n d’ ra t h e r e x hi b i t s t he l e g is l a ti ve i nt e n t lo u d a n d c l e a r. Th u s o n a pl a i n re a d i n g, i t is e vi d e nt t h a t t h e a s s e s s e e w ou l d b e o rd i na r i l y e nt i t l e d t o de d uc t i o n o n c o nt r i b u t i on s m a d e t o f u n ds a n d b od i e s re gi s t e re d u n de r s . 1 2 A o f t he A c t r e ga r dl e s s o f s ti p u l a t io n s m a d e i n s . 37 ( 1) o f t h e A c t b a r ri n g t he e xc l u s i on c od i f i e d i n s . 8 0 G ( 2 ) ( a ) (i i i hk ) & (i i i h l ). A s a c o ro l l a r y t o de l i n e a t i o n s m a d e i n t he p re c e e d i n g p a r a gr a p h s , s . 37 a nd S. 8 0 G , a p pe a r m u t ua l l y e x c l us i ve s u bj e c t to e xc e p t i on s pr o vi d e d i n s u b - c l a u s e ( 2 ) ( a ) ( i i i h k ) & ( i i i hl ) of S. 8 0 G o f t h e A c t . 48 . 2 H e nc e , th e e x c e pt i o n c a r ve d o u t b y w a y o f E x pla n a t i o n 2 t o s . 3 7 (1 ) p r o h i bi t i n g c l a i m o f C SR e xp e ns e s a s b u s i ne s s ex p e nd i t u r e , b y it s e lf , w i l l n o t s e r ve a s a n y ki n d of i m pe d i m e nt f or t h e purp o s e s o f c l a i m o f de d u c t i o n un de r s . 8 0G of t he A c t . 49 . T h e C o - o r d in a t e b e n c h e s h a ve a f f i r m a t iv e l y a dj udi c a t e d t he i s s ue a s qu o te d on be h a l f of t he a s s e s s e e ( s u pr a ). I n c o ns on a nc e w i t h t h e vi e w t a ke n b y t he C o -o rd i n a t e B e n c he s re f e r r e d t o o n b e ha l f o f t he a s s e s s e e , I.T.A. No.2313/Del/2022 33 w e a r e i n c l in e d t o a c c e pt t h e p l e a r a is e d on b e ha l f o f t he a s s e s s e e . T he c on t ri b u ti o n m a de i n q u e s t i o n a r e n ot s h o w n t o b e fa l l i n g i n e x c l u s i on s pr o vi d e d i n (i i i hk ) o r (i i i hl ) o f s u b- s e c t i on 2 c l au s e ( a ) o f S . S . 8 0 G o f t he A c t . T h e a c t i o n o f t h e R e ve nu e A u t h o ri t i e s i s t hu s n ot s u s t a i na b l e i n l a w . T h e c l a i m of d e du c t i on o n C S R e x p e n s e s on t h e t o u c hs t on e o f Se c t i on 8 0 G i s t h u s a l l ow e d. 50 . G r o un d N o . 4 o f t h e a pp e a l of t h e a s s e s s e e i s a ll o w e d . 51 . G r o un d N o . 5 a n d s u b - gr o u n d s t he r e t o c o n c e rn s e li gi b i l i t y t o w a rd s w e i ght e d de d uc t i o ns u n de r Se c t i on 3 5 ( 2 A B ) of t h e A ct . 52 . B r ie f l y s t a t e d , t h e a s s e s s e e i nc u r r e d a s u m o f R s . 7 5, 2 8 , 0 7 , 1 8 6 / - a s e xp e nd i t u r e o n s c i e nt i f i c re s e a r c h on w hi c h a w e i ght e d d e du c t i on o f R s . 11 2 , 9 2 , 1 0 , 7 80 / - u nd e r Se c t i o n 3 5 ( 2 A B ) o f t h e A c t [ be i n g 1 5 0 % o f s u m i n c u r r e d] w a s c l a i m e d b y r a is i n g a d d i t io n a l g r ou n d u n d e r R ul e 1 1 o f t he In c o m e T a x (A p p e l l a t e T r i bu n a l ) R u l e s , 1 9 6 3 . T he A O c u rt a i l e d t he c l a i m a nd q u a nt i f i e d th e w e i gh t e d de d u c t i o n a t R s . 100 , 9 0, 6 8 , 00 0/ - . w i th re f e re n c e t o t h e a p p r o va l of e x p e nd i t ur e g r a n t e d b y t h e c om p e t e nt a ut h or i t y i . e . D e pa r t m e nt o f S c ie n t i f i c a n d I nd u s t ri a l R e s e a rc h ( D SI R ) . 53 . T h e di s a l l o w a n c e s w e re m a de b y t h e A O i n t h e d ra f t o r d e r t o w a rd s de d u c t i o n u n de r s . 35 ( 2A B ) w h ic h w a s h ow e ve r no t c ha l l e n ge d b y t he a s s e s s e e in t h e p r o c e e d i n gs b e f o r e D R P u nd e r s . 1 44C o f t he A c t. T he A O a c c o rd i n gl y r e in s t a t e d t h e d i s a l l ow a nc e i n t h e fi na l a s s e s s m e nt or d e r t o t h e e xt e n t o f R s . 1 2 , 01 , 4 2, 7 80 / -. T h e a s s e s s e e ha s r a i s e d a d di t i o na l gr o un d b e f o r e t h e T r i b un a l s e e k in g to c h a l l e n ge t h e re d uc t i o n o f c l a i m of de d u c t i o n . 54 . T h e l d . c o un s e l f o r t h e a s s e s s e e s u b m i t s t ha t as a ga i n s t t he c l a im of w e i gh t e d de d uc t i o n o f R s . 1 , 1 2, 9 2 , 1 0 , 78 0 / - ; s u c h d e d u c t i on c l a i m e d b y t h e a s s e s s e e w a s re s t r i c t e d t o R s . 10 0, 9 0 , 68 , 0 0 0 /- b y t h e A O o n t he gr o un d t h a t D S I R h a s gr a nt e d a pp ro va l o f t h e e x p e ndi t u r e i n c u r r e d qu a n ti f i e d a t R s . 6 7 , 2 7, 1 2, 0 0 0/ - a s a ga i ns t t he e xp end i t u r e c l a i m e d to ha ve be e n i nc u rr e d b y t h e a s s e s s e e a t R s . 7 5 , 2 8 , 0 7 , 18 6/ - . T he A O t hu s I.T.A. No.2313/Del/2022 34 w o rk e d o u t e l i g i bl e w e i g ht e d de d uc t i o n a t 15 0 % o f Rs . 6 7 , 2 7 , 12 , 00 0 / - a nd a l l o w e d d e du c t i on of R s . 1 0 0, 9 0, 6 8 , 00 0 / - un de r s. 3 5 (2 A B ) o f t he A c t . I n e s s e n c e , t he A O ha s s c a l e d do w n t he c l a i m of w e i ght e d d e d uc t i o n un d e r Se c t io n 3 5 ( 2 A B ) t o t h e e x t e n t o f R s . 1 2 , 0 1 , 4 2 ,78 0/ - . [ u n a pp ro ve d po r t i o n o f e x p e n d i t u r e R s . 8 , 00 , 9 5 , 0 0 0 + 5 0 % w e i g h t t he r e on R s . 4, 0 0 , 47 , 5 0 0 ] . 55 . T h e Ld . C o u n s e l a d ve r t e d t o t a b u l a t io n d e t a i l i ng c l a im o f de d u c t i o n u n d e r Se c t i on 3 5 ( 2 A B ) o f t he A c t f o r t he r e l e va nt A . Y . 2 01 8 - 19 u nd e r c o n s i de r a t i o n re p r o d uc e d he r e u n d e r : S r l . N o . D e t a i l s o f S c i e n t i f i c E x p e n d i t u r e A s p e r A s s e s s e e ‘ A ’ A s p e r D S I R ‘ B ’ D i f f e r e n c e ‘ C ’ ( A - B ) 1 . R e v e n u e E x p e n d i t u r e 6 5 , 2 9 , 5 0 , 0 0 0 5 7 , 7 3 , 9 3 , 0 0 0 7 , 5 5 , 5 7 , 0 0 0 2 . C a p i t a l E x p e n d i t u r e 9 , 9 8 , 5 7 , 0 0 0 9 , 5 3 , 1 9 , 0 0 0 4 5 , 38 , 0 0 0 3 . T o t a l : 7 5 , 2 8 , 0 7 , 0 0 0 6 7 , 2 7 , 1 2 , 0 0 0 8 , 0 0 , 9 5 , 0 0 0 4 . 1 0 0 % d e d u c t i o n u /s . 3 5 ( 1 ) ( i ) / ( i v ) 7 5 , 2 8 , 0 7 , 0 0 0 6 7 , 2 7 , 1 2 , 0 0 0 8 , 0 0 , 9 5 , 0 0 0 5 . W e i g h t e d d e d u c t i o n @ 5 0 % u / s . 3 5 ( 2 A B ) 3 7 , 6 4 , 0 3 , 5 0 0 3 3 , 6 3 , 5 6 , 0 0 0 4 , 0 0 , 4 7 , 5 0 0 6 . T o t a l : 1 1 2 , 9 2 , 1 0 , 5 0 0 1 0 0 , 9 0 , 6 8 , 0 0 0 1 2 , 0 1 , 4 2 , 5 0 0 56 . W i t h r e f e r e n c e t o s u c h t a bu l a ti o n s , t h e l d. c oun s e l s u b m i t t e d t ha t t he a g gr e ga t e e x pe n d it u r e i n c ur r e d b y t h e a s s e s s e e on the s c ie n t i f i c re s e a r c h s ta n d s a t R s . 7 5 , 2 8 , 07 , 0 0 0 / - . T h e D S IR ha s h o w e ve r a pp r o ve d t he e x pe n di t u re i n c u r re d a t R s . 67 , 2 7 , 1 2, 0 0 0/ - on l y. B a s e d o n a pp ro va l a t a c u rt a i l e d f i g ur e , t h e A O , i n t ur n, ha s re c o m pu t e d t he w e i gh t e d de d u c t i o n R s . 1 0 0, 9 0 , 68 , 00 0 / - b e i n g 15 0 % o f t h e a ppr o ve d e x p e n d i tu r e . 56 . 1 I n t h i s r e ga r d, th e l d . C o u n s e l m a d e tw o f o l d s u b m i s s i o n s . 56 . 1 . 1 F i r s t l y, i n t e r m s of S e c t i o n 3 5( 1 ) (i ) r . w . Se c t i on 3 5 (1 )( i v ) , e xp e nd i t u r e o n s c i e nt i f i c r e s e a r c h be i n g r e l a t e d t o t h e b u s i ne s s of t he a s s e s s e e i s e l i gi bl e f o r b u s i ne s s de d uc t i o n i n e n t ire t y w i t h o u t a n y f u rt h e r ri d e r q u a a p p r o va l of e x pe n s e s b y D S I R i n s o f a r a s S e c t i o n 35 (1 ) i s c on c e rn e d. W h e t h e r t he e xp e nd i t u r e i n c ur re d i s c a pit a l o r r e ve n ue i n na t u re i s a ls o of no c o n s e q u e nc e . T he re q u i r e m e nt of a pp ro va l o f e xp e ns e s b y D SI R , i f a n y, i s n o t a pp l i c a b l e i n s of a r a s a f o r e s a id I.T.A. No.2313/Del/2022 35 pr o vi s i o ns of Se c t i on 3 5 ( 1 ) ( i) / ( i v ) i s c on c e rn e d. He nc e , w i th o ut pr e j ud i c e , t he a s s e s s e e i s e nt i t l e d t o n o r m a l d e d uct i on o f 1 00 % of t he e xp e ns e s i n c u r r e d u n de r t h e u m b re l l a o f s . 3 5 ( 1) o f t h e A c t w i t ho u t a n y f e t t e r s o f a p pr o va l of D S I R . T h e q u a r r e l r e ga r di n g a p pr o v a l o f e n t i re e xp e ns e s b y D S I R , i f a ny , c a n p o s s i b l y e x i s t o nl y wi t h r e f e r e nc e t o w e i ght e d d e d uc t i o n w i t h re f e re n c e to Se c t i on 3 5( 2A B) of t he A c t . H e nc e , t he d e du c t i on o f 1 0 0 % of t he r e ve n u e a n d c a p i t a l e xp e nd i t u r e a gg r e ga t i n g t o R s . 8 , 0 0, 9 5 , 00 0 / - i n c u r re d o n s c ie n t i f i c r e s e a r c h i s qu a l i f i e d un d e r Se c t i on 3 5( 1 ) ( i )/ ( i v) w i t h ou t p re j u di c e t o t h e c o nte n t i o n t o w a rd s w e i ght e d de d uc t i o n t h e r e o f un d e r S e c t i o n 3 5 (2 A B ) of t he A c t . A re f e re n c e w a s m a d e t o t h e de c i s i o n o f t h e T ri b un a l i n t h e c a s e of F D C v s . P C I T, I TA N o. 1 0 31 / Mu m / 2 0 2 3 o r de r d a t e d 0 2. 0 8 . 2 0 23. T h e l d. c o un s e l t hu s s ub m i t s t h a t t h e A O h a s c o m m i t t e d gr os s e r r o r i n r e f u s i n g t o g r a nt de d u c t i o n o f R s . 8 , 0 0 , 9 5, 0 0 0/ - a va i l a bl e i n l a w u n der Se c t io n 35 ( 1 ) ( i v ) o f t he A c t o n t h e w r on g p re m i s e of l a c k o f a pp r o va l o f a m ou nt e l i gi b l e b y pr e s c r i be d a u t ho ri t y w h i c h a p p r o va l i s n o t n e c e s s a ry i n vi e w of j u d i c i a l f i a t . T h e l d. c ou n s e l r e i t e ra t e d t ha t q ua n t i f i c a t i on o f e x p e nd i t u r e b y D SI R i s n o t t h e c on di t i o n p re c e d e nt f or t he p ur po s e o f Se c t i o n 35 ( 1) (i ) / ( i v ) o f t he A c t a s l o n g a s t he f a c i l i t y i s a p p r o ve d b y D SIR . It i s no t t he c a s e o f th e A O t ha t s u c h e x p e n d it u r e h a s n ot b e e n l a i d ou t o r e xp a nd e d f o r t he p u r p o s e s o f s c i e n t i f i c re s e a r c h . Th e l d. c o u n s e l a l s o po i n te d o u t o n f a c t s t ha t t he c a pi t a l e x pe n d it u r e com p o ne n t d oe s n ot i nc l u de a n y e x pe n d i t u re i n c u r r e d on a c q ui s i t i o n of a n y la n d or b u i l d i n g a nd t h e r e f o re , w h o l e of t h e c a p i ta l e xp e n di t u re i s a l l o w a bl e un d e r Se c t i on 35 (1 )( i ) r . w . Se c t i o n 3 5 (1 ) ( i v) of t h e A c t. T he de d uc t i o n o f t he e xp e nd i t u r e h a s be e n de n i e d u nd e r S e c t i o n 3 5 ( 1 ) ( i )/( i v) s o le l y du e t o n o n a pp r o va l th e r e o f b y D S IR . 56 . 1 . 2 Se c o nd l y, T h e m a i n p ro v i s i o n of w e i ght e d de du c t i o n u n de r s . 35 ( 2A B ) do n o t p o s t u l a t e t he r e qu i re m e n t o f q u a n t i fi c a t i o n o f e xp e nd i t u r e a n d a p p ro va l t he r e of b y D S I R e it h e r . T he un de r l yi n g R u l e s i m po s i n g s u c h c o nd i t i on s s e e k t o w i d e n t h e t e r m s o f m a i n p ro vi s i o n s a n d t hu s n ot e n f o r c e a b l e i n l a w . I.T.A. No.2313/Del/2022 36 57 . W e a d ve rt t o f ir s t a s pe c t o f t he i s s ue . S e c t io n 3 5 ( 1 ) p ro vi d e s f o r no r m a l d e du c t i o n i n re s p e c t o f e x pe n d i t u r e o n s c i e nt i f i c re s e a r c h s u bj e c t t o t h e c on d i ti o n s s p e c if i e d t h e r e i n . T h e a s s e s s e e cl a i m s th a t a l l t he c on d it i o ns a re b ro a d l y s i m i l a r t o th e e l i gi b i li t y un d e r Se c t i o n 3 5( 2A B ) o f t he A c t a nd h a ve b e e n f ul l y m e t t o a s s e rt c l a i m u nde r s . 3 5 ( 1 ) o f t he A c t . T he A O h a s no t t e s t e d t he c l a i m o f e x p e n d i tu r e u n de r S e c t i o n 3 5 ( 1 ) a nd ha s d i s a l l o w e d t he e x pe n di t u re s o l e l y f or t he re a s o n th a t s u c h e xp e nd i t u r e t o th e e xt e n t of R s . 8 00 , 95 , 0 00 / - h a s n ot b e e n a p p r o ve d b y t he D S I R . A s r e p e a t e dl y e c h oe d i n t h e j ud i c i a l p re ce d e n t s , t he qu a n ti f i c a t io n a n d a pp r o va l of D S IR i s n ot t h e c on di t i o n p r e c e d e nt f o r t he pu r po s e s of a m o un t e l i gi bl e f o r d e d u c ti o n u n d e r s . 3 5 ( 1) o f t he A c t . W e t h us s e e ra t i o n a l e i n t h e p l e a o f the a s s e s s e e on t hi s s c o re . T he di s a l l o w a n c e o f c l a im o f d e d uc t i on of R s . 8 , 0 0, 9 5, 00 0 i s no t j us t i f i e d on t he c ou n t e r s o f s . 3 5 (1 ) m e r e l y o w i n g to l e s s e r q uan t i f i c a t i on of e l i gi bl e e xp e nd i t u r e b y D S IR . 58 . W e n ow a d ve rt t o t h e s e c o nd l i m b o f t he a r gu m e nt f o r e l i gi b i l it y o f w e i ght e d d e d uc t i o n t h e r e o n a m o un t i n g t o R s . 4 , 00 , 4 7 ,5 0 0 / - u n de r t he s h e lt e r of S e c t i o n 3 5 ( 2 A B ) of t h e A c t . I n a s e q ue l t o pl e a t o w a r d s c l a i m of de d uc t i o n u nd e r Se c t i o n 35 (1 ) , t h e l d . c o u n s e l fo r t h e a s s e s s e e s u bm i t t e d t h a t t h e a s s e s s e e i s a l s o e li gi bl e f o r w ei g h te d de d uc t i o n o f a dd i t i on a l 5 0 % o n e x p e n d i tu r e i n c u r r e d a t R s . 8, 0 0 , 95 , 0 0 0 / -. T h e ld . c ou n s e l re f e rr e d t o t he p r o vi s i on o f S e c t i o n 3 5 (2 A B) w hi c h de a l s w i t h w e i ght e d de d uc t i o ns a nd c on t e nd e d t ha t t h e s u bs t a n ti ve p ro vi s i on o f Se c t i on 3 5( 2A B ) o n l y p r e s c ri b e t o t h e e xt e n t t ha t th e R & D f a c i l i ty s h ou l d be a p p ro ve d b y t h e c o m pe t e n t a u t h o r i t y, i . e ., D S IR . T h e s e c t i on no w h e re p ro vi d e s f o r a pp ro va l o f e x pe n d i t u re b y t h e c o m pe t e n t a u t h o r i t y pe r s e. T he r e i s n o re q u i r e m e nt i n t he s u b s t a n t i ve pr o vi si o n t ha t t he e xp e nd i t u r e a l s o ne e d s t o be a p p r o ve d b y D S I R f o r th e pu r po s e o f c l a i m i n g de d uc t i o n o f w e i g ht e d a m ou nt i f t h e R & D C en t re i s a pp ro ve d f o r th i s p u r p o s e . T o bu t t re s s s u c h p ro p os i t i o n, t h e l d. c o u n s e l r e l i e d up o n t he j u d gm e nt d e l i ve r e d b y t h e H o n ’ bl e H i g h C ou r ts in t h e c a s e o f C I T v s . C l a r i s Li f e s c i e nc e s Lt d . , ( 20 1 0 ) 3 26 I T R 25 1 (G uj . ); C I T v s . Sa nd a n I.T.A. No.2313/Del/2022 37 V i k as ( I nd i a ) Lt d . , 3 3 5 I TR 1 17 ( D e l . ) a n d C o -o rd i n a t e B e nc h o f T r ib u na l i n t he c a s e of D C I T v s . F o r c e M o t o r s L t d . , ( 20 21 ) 1 3 3 t a x m an n . c o m 7 1 (P u n e - Tr i b . ) ; M i ni l e c In d i a ( P . ) Lt d v s . A C I T, ( 20 18 ) 93 t a x m a n n . c o m 21 3 ( P un e - T r i b . ) ; P r o v i m i A n i m a l N u tr i ti o n I n d i a P vt . L t d . v s . P C I T, (2 0 21 ) 2 4 t ax m a n n. c o m 7 3 ( B an g al o r e - T r i b. ) . 58 . 1 R i di n g on s u c h de c i s i o n s , t h e l d. c o u ns e l r e i te ra t e d t ha t o n c e t he R & D C e n t re / f a c i l i t y s t a n d s a p p r o ve d b y th e p r e s c r ib e d a u t ho r i t y, t he a s s e s s e e be c o m e s e n t i t l e d t o b e ne f i t o f w e i gh t e d ded uc t i o n on w ho l e o f a c tu a l e xp e n s e s i nc u r r e d n o t w i t hs t a n di n g l e s s e r a m ou n t a p p r o ve d b y pr e s c r i be d a ut h o r i t y. T h e j u d ge m e nt s r e f e r r e d h a ve i n t e r p re t e d t he pr o vi s i o ns o f s . 3 5 ( 2B ) t h a t q ua n t i f i c a t i on of e x pen d i t u r e e l i gi b l e f o r w e i ght e d d e d u c t i on b y pr e s c r ib e d a u t ho r it y i s no t th e re q ui r e m e nt o f l a w a nd a n a p pr o va l o f f a c i l i t y th u s w o ul d s u f f i c i e n t l y e n t i tl e t h e A s s e s s e e t o c l a i m w e i gh t e d d e d u c t io n o n w h ol e o f e x pe n d it u re i nc u r r e d t ow a rd s s c i e nt i f i c re s e a r c h. 58 . 2 T h e ld . c ou ns e l h o w e ve r t h e re a f t e r f a i r l y r e f er re d to s u b s t i t u t e d s u b R ul e (7 A ) o f R ul e 6 o f t h e I nc o m e T a x R u l e s 19 62 w h i c h l a ys d o w n gu i d e l i n e s re l a t i n g t o p r oc e d u r e t o b e f o l lo w e d p r e a n d po s t a pp ro va l o f R & D f a c i l i t y b y D S I R . T h e s u b s t i t ut e d p or t io n o f t he a f or e s a i d R u l e i s a pp l i c a bl e w . e . f . 0 1. 0 7. 2 0 16 r e a d s a s u n d e r : " [ P r e s c r i b e d a u t h o r i t y f o r e x p e n d i t u r e o n s c i e n t i f ic r e s e a r c h . [ ( 7 A ) A p p r o v a l o f e x p e n d i t u r e i n c u r r e d o n in - h o u s e r e s e a r c h a n d d e v e l o p m e n t f a c i l i t y b y a c o m p a n y u n d e r s u b - s e c t i o n ( 2 A B ) o f s e c t i o n 3 5 s h a l l b e s u b j e c t t o t h e f o l l o w i n g c o n d i t i o n s , n a m e ly : - ( a ) T h e fa c i l i t y s h o u l d n o t r e l a t e p u r e l y t o m a r k e t r e s e a r c h , sa l e s p r o m o t i o n , q u a l i t y c o n t r o l , t e s t i n g , c o m m e r c i a l p r od u c t i o n , s t y l e c h a n g e s , r o u t i n e d a ta c o l l e c t i o n o r a c t i v i t i e s o f a l i k e n a tu r e ; ( b ) T h e p r e s c r i b e d a u t h o r i t y s h a l l f u r n i s h e l e c t r o ni c a l l y i t s r e p o r t , - ( i ) i n r e l a t i o n t o t h e a p p r o v a l o f i n - h o u s e r e s e a r ch a n d d e v e l o p m e n t f a c i l i t y i n P a r t A o f F o r m N o . 3 C L ; ( i i ) q u a n t i f y i n g t h e e x p e n d i t u r e i n c u r r e d o n i n - h o u s e r e s e a r c h a n d d e v e l o p m e n t f a c i l i t y b y t h e c o m p a n y d u r i n g t h e p r e vi o u s y e a r a n d e l i g i b l e f o r w e i g h t e d d e d u c t i o n u n d e r s u b - s e c t i o n ( 2 A B ) o f se c t i o n 3 5 o f t h e A c t i n P a r t B o f F o r m n o . 3 CL ; ” I.T.A. No.2313/Del/2022 38 58 . 3 W i t h r e f e r e nc e t o s u bs ti t u t e d R u l e w hi c h s e e k s t o i ns e r t c o n d i t i o n of a p p r o va l of e x p e nd i t ur e i n c u r re d o n i n -h o u s e re se a r c h a nd de ve l op m e nt f a c i l i t y , t h e l d. c ou n s e l s u b m i t t e d t h at s u c h a m e n dm e n t i s s u bs e r vi e n t t o m a i n pr o vi s i o n a nd t h us c a nn o t o ve r ri d e a n d b r oa d e n t he ba n d w i dt h o f t he s u b s t a n ti ve p r o vi s i on s o f Se c t i o n 3 5 ( 2 A B ) of t h e A c t . T he l d . c o u n s e l s ub m i t t e d t h a t th e u nd e r l y i n g R u l e s b e in g s u b - o r d i n a t e t o t he m a i n pr o vi s i o ns , c a n n ot b u r d e n t h e a s s e s s e e w ith a dd i t i o n a l f e t t e r s on t he s u b s t a nt i ve c o n di t i on s e n a c t e d i n t h e ma i n s t a tut e , i . e . , Se c t i on 35 ( 2A B ) f o r t h e p r e s e n t pu r po s e . T h e l d . c o un s e l s ubm i t t e d th a t a s i nt e r p r e t e d b y t h e H on ’ bl e H i gh C ou r t o f d i f f e re n t j ur i s d ic t i o n i n c ho ru s , t he a va i l a b i l it y of b e n e f i t un de r Se c t i on 35 ( 2 A B ) to w a rd s e x pe n di t u re i nc u r r e d i n r e l a t i o n t o R & D f a c i li t y is n o t d e pe n den t up on t he qu a n ti f i c a t io n a n d a pp r o va l b y D S I R . T h e be n e f i t u nd e r S. 3 5 ( 2 A B ) w o ul d b e a va i l a bl e o n a c t u a l e xp e nd i t u r e i n c ur r e d as l o n g a s t h e R & D f a c i l i t y h o l d s t h e a p p r o va l of t he p r e s c ri b e d a u t h ori t y . 58 . 4 T h e ld . c o u ns e l t h e r e a f te r re f e rr e d t o t h e j u dgm e n t r e nd e re d i n t he c a s e o f C I T v s . Ta j M ah a l H ot e l , ( 1 9 7 1 ) 8 2 1 I T R 4 4 ( S C ); C IT v s . B om ba y St a t e T r a n s p o r t C o r p o r at i o n ( 1 9 79 ) 1 1 8 I T R 39 9 (B o m b ay ) t o s u bm i t t ha t i t i s a c a r d in a l ru l e of c o n s t r u c t i on tha t R u l e s a re m e a n t o n l y f o r t h e p u r p os e s o f c a rr yin g o u t t he p ro vi s io n s o f t h e A c t a n d R u l e s c a nn ot be t a k e a w a y w h a t w a s c on f e r re d b y t he A c t or w h i tt l e do w n i t s e f f e c t . 58 . 5 T h e l d. c o un s e l t h us s ub m i t t e d t ha t t h e e s s e n ce o f s uc h j ud gm e n t i s t ha t s ub s t a n t i ve p r o vi s i o n s o f t h e s t a t u t e c a n n ot be m o di f i e d o r di l u t e d t hr o u gh d e le ga t e d l e gis l a t i o n i n t h e f o rm o f r ul e s , n ot i f i c a t i o n a nd c i rc u l a rs . 58 . 6 T h e ld . c ou n s e l a l s o r e f e r r e d t o t he de c i s i o n o f t h e C o -o r d i na t e B e n c h re n de r e d i n t h e c a s e of U SV P v t . Lt d . v s . D C I T , I TA N o . 8 9 1 / M u m / 2 0 2 1 o r d e r d at e d 20 . 06 . 2 0 2 3 t o s u bm i t t h a t i t p e rt a i n s t o A Y 2 0 18 -1 9 a nd t h u s d e s pi t e t h e a m e n d me n t i n R u le 6( 7 A ) c om i n g in f o r c e w . e . f . 0 1 . 0 7 . 2 0 16 , t he T r i bu n a l f ol l o w e d t h e or d e r p a s s e d i n t he I.T.A. No.2313/Del/2022 39 a s s e s s e e ’ s o w n c a s e f o r t h e e a r li e r A s s e s s m e nt ye a rs w h e r e th e a m e n d e d R u l e s h a d n ot c o m e i n t o f o rc e a nd h e l d t h a t q ua n t i fi c a t i on of e xp e n di t u re b y D S IR a s p ro v i de d i n R u le 6 ( 7A ) i s n o t bi n di n g o n t he A O . T h e ld . c ou n s e l t hu s s o u g h t a p p ro pr i a t e re l i e f in t h e m a t t er . 59 . T h e l d . D R f o r t h e R e ve n ue , on t h e o t h e r h a n d, c i te d th e d e c i s i o n of t h e C o- o r d i n a t e B e n c h i n t he c a s e o f N at u r a l R e m e di e s P v t. Lt d . v s . A C I T, I TA N o . 7 0 4/ B a ng / 20 20 o r de r d a t e d 0 1. 0 1 . 20 2 1 t o c o u nt e r t he e l igi b i li t y c l a im of t he a s s e s s e e u n d e r S e c t i o n 3 5 (2 A B ) o f th e A c t . 60 . I n re j o i nd e r, t he ld . c o u ns e l s ub m i t t e d th a t t he a f o r e s a i d d e c i s i o n i n t he c a s e o f N at u r a l R e m e d i e s ( s u pr a ) r e l ie d u p on b y t h e R e ve n ue a c tu a l l y he l p s t he c a s e o f th e a s s e s s e e . T he l d . c oun s e l re f e rr e d to pa r a gr a p h 8 . 5 o f th e a f or e s a i d or d e r a n d s u bm i t t e d t ha t th e C o -o rd i na t e B e n c h h a s o b s e r ve d t h e re i n t ha t a m e n de d R u l e 6 ( 7 A ) a f f e c t s t he s u bs ta n t i ve r i ght v e s t e d un de r S e c ti o n 3 5 ( 2 A B ) of th e A c t d ue t o i ns e r t i on of c on di t i o ns t o w a rd s q ua n t i f i c a t i on of ex p e n d i tu r e b y D S IR i n t e rm s o f a m e nd e d R ul e a nd t he r e f o re , t h e p ro vis i on s of S e c t i o n 3 5 ( 2 A B ) w o ul d p r e va i l o ve r a m e nd e d R u l e s . 61 . W e h a ve c a re f ul l y c o n s i de r e d t h e r i va l s u bm i s s io n s o n t he e l igi b i li t y of w e i ght e d de d uc t i o n u n de r S e c t io n 35 (2 A B ) of t h e A c t i n t he c on t e xt o f t h e c a s e . 62 . S e c t i o n 3 5( 2 A B ) , i n a pl a i n l a n gu a ge , s t a t e s t ha t w h e r e a c om p a n y e nga ge d i n p re s c r i be d bu s i ne s s i n c u r s a n y e x pe n di t ure (e x c l ud i n g e xp e nd i t u r e o n c e r t a i n s pe c i f ie d c a p i t a l a s s e t ) , on i n -h o us e r e s e a r c h a n d de ve l op m e nt f a c i l i t y a s a p p r o ve d b y t h e p re s c r i b e d a u t ho r i t y , t h e n s u c h c om p a n y s h a ll b e e n t i tl e d t o w e i ght e d d e d u c t i on of e x p e n d i t u r e s o i nc u r r e d . R ul e 6 (7 A ) l a ys d o w n p r o c e d u re a n d c on d i ti o n s f o r e l i gi b i l i t y of de d uc t i o n u nd e r S e c t i on 35 ( 2 A B ) . O ne o f t he c on di t i o n s p r e s c ri b e d i s t ow a r d s qu a n ti f i c a ti o n o f e x pe n d it u r e b y t h e p r e s c ri b e d a u t ho ri t y. T he s u bs ti t u t e d pr o vi s i o n s of R u l e 6 ( 7 A ) i nt e r al i a p ro v i de s f o r a pp r o va l o f i n- h o u s e r e s e a r c h a nd d e ve l o p m e n t f a c i l i t y i n Pa r t -A o f f o rm 3 C L I.T.A. No.2313/Del/2022 40 pr e s c r i be d f o r t h i s p ur p os e . B e s i de s , i n t e r m s of sub s t i t u t e d R ul e 6 ( 7 A ) i ns e r t e d w . e . f 1 -6 -2 0 16 , t h e p r e s c r i be d a ut h o r i t y sh a l l a l s o qu a nt i f y t he e xp e nd i t u r e i nc u r r e d o n in - h o us e r e s e a r c h a n d d e ve lo pm e n t f a c i l it y b y t he c om p a n y f o r t h e pr e vi o us ye a r w h ic h i s e l i gi b l e f or w e i gh t e d de d u c t i o n u nd e r Se c t i on 35 (2 A B ) o f t he A c t a s p e r pa rt - B o f Fo rm 3C L. A d m i t te d l y, t he a p p r o va l o f t he p re s c ri b e d a u t ho r ity i s no t a va i l a b le i n re s pe c t o f e x p e n d i t u r e i nc u r r e d t o t h e tu n e of R s . 800 , 9 5, 0 00 / - in c on t e nt i o n . T h e re f or e , w e i gh t e d d e du c t i o n of 50 % o n s u c h a m o u nt w h i c h w o rk s o ut t o R s . 4 , 00 , 4 7, 5 00 / - i s n o t e l i g i b l e f o r de du c t i o n ow in g t o n o n - c om p l i a nc e o f a m e n d e d R u l e 6 (7 A ) o f t h e I nc o m e T a x R u l e s i n s o f a r a s A . Y . 2 0 18 - 1 9 i n q u e s t i on i s c o n c e r ne d . 63 . V a ri o us j u d gm e nt s r e f e r re d t o a n d r e l i e d up o n on be h a l f o f t he a s s e s s e e re l a t e s t o a s s e s s m e n t ye a r s p r io r t o t he am e n d m e n t i n R u l e 6( 7 A ) c om i n g i n t o e f f e c t w . e . f . 0 1 . 0 7 . 20 1 6 . T he H on’b l e C ou r t s h a d oc c a s i o n t o in t e rp r e t t h e p r o v i s i o n s o f Se c t i on 3 5 (2A B ) w hi c h w a s s i l e nt on t h e qu a nt i f i c a t i o n a s pe c t . T h e e rs t w hi l e R u le w as a l s o s i l e nt o n t he qu a n ti f i c a t io n . H a vi n g r e ga r d to a m bi g ui t y, t he C our t s , a t t h e re l e va nt t i m e , ha ve he l d t h a t qu a nt i f i c a ti o n o f e x p e nd i t u r e b y pr e s c r i be d a u t h o r i t y i s n o t i n c um b e nt f o r t h e p u r po s e s o f c l a i m i n g d e du ct i on e l i gi b l e u n d e r Se c t i on 35 ( 2 A B ) of th e A c t . T h e j u d g m e nt s w e re t h us r e n d e r e d a t t he t i m e w h e n s u c h c o n d i ti o n s w e re n o t i n b u i l t b y l e gi sl a t u re i n R u l e 6 ( 7 A ) of t he R ul e s . T h e H o n’ b le C o u r t s w e re s o l e l y d e pe n de n t o n i n t e r pr e t a t i ve pr o c e s s t o un d e r s t a n d t h e p u r p o r t o f s . 3 5 ( 2 A B ) du e t o pr e va i l i n g a m bi gui t y i n l a w w i t ho ut t h e be n e f i t o f s ub s t i t ut e d R ul e e n a c t e d l a t e r. 64 . T h e re c a n b e n o qu a rr e l t ha t , i n t h e c a s e o f a ny c o nf l i c t , ‘R ul e s ’ be i n g s u b - o r di n a te l e gi s l a t io n m u s t yi e l d t o m a i n St a t u t e . H o w e ve r, t h e re do e s no t a p pe a r t o b e a n y c o n f l ic t be t w e e n t h e m a i n s t a t u t e a n d t he un d e rl y i n g R u l e . T h e m a i n St a t u t e is s i l e nt o n q u a nt i f ic a t i o n a s pe c t o f e l igi b l e d e d uc t i o n . T h e s u bs ti t u t e d R ul e 6 (7 A ) , i n ou r vi e w , m e r e l y s t i pu l a t e s t he qu a n t i f i c a t io n o f e x p e n d i t u r e b y a pre s c r i be d a ut h o r i t y a n d he n c e c a n n ot b e s a id t o b e re p u gn a n t t o t h e p r o vi s ion s o f Se c t i o n 35 ( 2A B ) of t he A c t s il e n t on s u c h a s pe c t . R u l e 6( 7 A) i s m a c h i ne r y in I.T.A. No.2313/Del/2022 41 na t u re e n a c t e d to gi ve f u l l e f f e c t t o m a i n p r o vi s ion o f S . 3 5( 2 A B ) of t he A c t . T he qu a nt i f i c a t i o n o f e l i gi b l e e xp e n s e f or w e igh t e d de d u c t i o n i s pr o c e d u ra l o r a m a c h i ne r y e xe r c i s e . H e n c e , t h e re i s no w a r r a nt t o n e ga t e t he e f f e c t o f t h e s ub s t i t u te d R u l e w hi c h s e e k s t o li m i t th e a m ou nt o f w e i ght e d d e d u c t i o n t o t he e xt e n t o f a p p r o va l b y p r es c ri b e d a u t h o r i t y s u pp os e dl y c a r r yi n g d o m a in e x pe r t is e i n t h e f i e l d. T h e o b s e r va t i o ns m a de b y th e C o - o r di n a te B e n c h i n N a t u r a l R e m e d i e s (s u p ra) a r e m e r e l y i n t he na t u re of o b i t e r w h i l e a d j ud i c a t i o n o f t h e c a s e r e la t i n g t o A . Y . 2 01 6 - 1 7 w h e re t he s u b s t i t u t e d R u le h a d n o t c om e i n to f o r c e . T h e o b s e r va t i on s m a de t h us d o no t c a r r y a n y p re c e d e nt va l u e p e r s e. Si m i l a rl y, t he c o - or d i n a t e b e n c h i n U S V P. Lt d. ( s u p r a ) h a s a p pl i e d th e d e c is i on r e n de r e d i n a s s e s s e e ’s ow n c a s e i n e a r l i e r ye a r w i t ho u t a n y d i s c u s s i o n o n e f f e c t o f a m e nd m e nt i n R u l e 6( 7 A ) o f I . T . R ul e s . H e nc e , t he vi e w e x pr e s s e d i n U SV P . Lt d . (s u p ra ) i s n o t e n t it l e d t o g r e a t w e i gh t. 65 . W e t h us s e e l i t t l e m e r i t i n t h e p l e a ra i s e d on be h a l f o f t h e a s s e s s e e t o i gno re t h e s u b s t i t u t e d l a w e xp r e s s l y p r o vi de d i n R u l e 6 (7 A ) of t he A c t a nd t o i gn or e t h e q u a nt i f i c a ti o n c a r r i e d o u t b y t he p r e s c r i b e d a u t h o r i t y f o r t h e pu rp o s e s of de d uc t i o n u nd e r Se c t i o n 3 5( 2A B ) of th e A c t . T he c on t e nt i o n o f t he a s s e s s e e to a va i l w e i gh t e d d e du c ti on o n u n a pp ro ve d a m ou n t o f R s . 8 , 0 0 , 9 5, 0 0 0/ - is t hu s de vo id o f a n y m er it . T h e a s pe c t i s t hu s a d j ud i c a te d a ga i n s t t h e a s s e s s e e a n d i n f a vo u r o f t h e R e v e nu e . 66 . I n t h e r e s ul t , t h e a d d i t io n a l G r o u n d N o . 5 i s a ll o w e d i n p a r t . 67 . I n t h e r e s ul t , t h e a p p e a l of t he a s s e s s e e i s p art l y a l lo w e d . Order pronounced in the open Court on 01/05/2024 Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /05/2024 Prabhat