POSITIVE PACKAGING P.LTD, MUMBAI V. DCIT CIR 3(2), MUMBAI

ITA 2483/MUM/2015

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8365 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 30-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VODAL RAJ SINGH
• Keywords: Value adopted by valuation officer; Capital asset; Depreciation; Transfer pricing; International transaction; Additional evidence; Fair market value; Corroborative evidences; Valuation report; Commercial expediency; TDS; Set aside
• Section: 64; 48; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER & SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO. 2483/MUM/2015 (ASSESSMENT YEAR: 2009-10) M/S POSITIVE PACKAGING INDUSTRIES LTD, 12A-06, B-WING, PARINEE CRESCENZO, C-38/39, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 PAN : AAACP2836Q VS DCIT CIRCLE 3(2), ROOM NO. 608, AAYAKAR BHAWAN, M.K.ROAD, MUMBAI-20 APPELLANT RESPONDEDNT APPELLANT BY SHRI BHAUMIK GODA (AR) RESPONDENT BY SHRI VODAL RAJ SINGH (CIT-DR) DATE OF HEARING 04-02-2020 DATE OF PRONOUNCEMENT 22-04-2020 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) {CIT (A)}-57 , MUMBAI DATED 20-02-2015 FOR AY 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING AN ADJUSTMENT OF RS. 9,59,103/- TO IN TERNATIONAL TRANSACTION OF RECEIPT OF INTEREST ON LOANS GRANTED BY THE APPELLA NT TO POSITIVE PACKAGING INDUSTRIES NIGERIA LTD., AN ASSOCIATED ENTERPRISE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING AN ADJUSTMENT OF RS. 97,52,114 TO INTERN ATIONAL TRANSACTION OF SALE OF COLOUR PRINTING MACHINE (ASSET FORMING PART OF BLOC K OF ASSETS) BY THE APPELLANT TO ITS POSITIVE PACKAGING UNITED (M.E.) FZCO, AN AS SOCIATED ENTERPRISE. 2 ITA 2483/MUM/2015 3. WITHOUT PREJUDICE TO THE GROUND NO. 2, ON THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERI NG, FOR THE PURPOSE OF COMPARING WITH THE ACTUAL SELLING PRICE, THE RECOMP UTED WDV OF THE COLOUR PRINTING MACHINE AFTER REDUCING FOREIGN EXCHANGE FL UCTUATION LOSS WHICH HAS BEEN ADDED AS PER THE PROVISIONS OF SECTION 43A OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS ERRED IN CONFIRMING AN ADJUSTMENT OF RS. 3,69,096/- TO INTER NATIONAL TRANSACTION OF SALE OF POUCHING MACHINE (ASSET FORMING PART OF BLOCK OF AS SETS) BY THE APPELLANT TO ITS DUBAI FLEX PACK (L.L.C.), AN ASSOCIATED ENTERPRISE. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONSIDERING THE QUOTATIONS OF UNRELATED PARTIES FOR PURCHASE OF MACHINES AS THE ADDITIONAL EVIDENCES AND NOT ADMITTING THEM WITHOUT APPRECIATING THE FACT THAT THEY WERE ALREADY SUBMITTED TO THE TRANSFER PRICING OFFICER. 6. WITHOUT PREJUDICE TO THE GROUND NO. 2 & 4, ON TH E FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN TAXING T HE DIFFERENCE, BETWEEN THE ARMS LENGTH PRICE DETERMINED BY THE TRANSFER PRICIN G OFFICER AND THE ACTUAL PRICE AT WHICH THE MACHINES WERE SOLD TO THE ASSOCI ATED ENTERPRISES, AS INCOME OF THE APPELLANT INSTEAD OF REDUCING IT FROM THE WR ITTEN DOWN VALUE OF THE PLANT & MACHINERIES BLOCK IN VIEW OF THE PROVISIONS OF SE CTION 43(6)(C) OF THE ACT. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS. 10,0 48/- PAID BY THE APPELLANT U/S. 201(1 A) ON DELAYED PAYMENT OF TDS. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING THE GROUND NO. 7 RAISED BEFORE HIM REGARDING THE DEPRECIATION ON GOODWILL MERELY BECAUSE IT WAS A FRESH CLAIM MAD E BY THE APPELLANT AND DID NOT ARISE FROM THE ASSESSMENT ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMP ANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF METALIZED FLEXIBLE PAC KAGING MATERIALS, ROTOGRAVURE CYLINDERS, METALIZED & CAST POLYPROPYLENE ( CPP) FILMS. THE ASSESSEE, WHILE FILING RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE IN FORM 3CEB REPORTED 3 ITA 2483/MUM/2015 INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTER PRISE (AES) WITH REGARD TO THE PAYMENT OF INTEREST ON LOAN AND FOR S ALE OF COLOUR PRINTING MACHINE AND PUNCHING MACHINE TO ITS AES. CONSEQUEN T UPON REPORTING INTERNATIONAL TRANSACTION, THE AO MADE REFERENCE TO TRANSFER PRICING OFFICER (TPO) FOR MAKING TRANSFER PRICING ADJUSTMEN T. DURING THE PROCEEDINGS BEFORE TPO, THE TPO NOTED THAT DURING T HE FINANCIAL YEAR 2008-09, THE ASSESSEE ALSO RECEIVED INTEREST ON LOA N PROVIDED TO ITS AE IN NIGERIA. THE ASSESSEE RECOVERED INTEREST OF RS.6 8,50,734/- @10% ON THE LOAN AMOUNT. THE ASSESSEE HAS TAKEN A LOAN FRO M STANDARD CHARTERED BANK (SCB) ON WHICH INTEREST WAS PAYABLE AT 8.40% PA, THE ASSESSEE ADVANCED THE SAID AMOUNT TO ITS AE. THE T PO ISSUED SHOW CAUSE NOTICE ASKING AS TO WHY 300 BASIS POINTS SHOU LD NOT BE ADDED TO THE COST OF BORROWING FOR OTHER RISK FACTORS. THE ASSESSEE FILED ITS REPLY DATED 10-10-2012. IN REPLY, THE ASSESSEE STATED TH AT THE ASSESSEE RECOVERED INTEREST OF RS.68,50,734/- DURING THE YEA R WHICH WAS THE RATE @10% ON LOAN PROVIDED TO AE IN NIGERIA. THE ASSESS EE ALSO AVAILED LOAN FROM SCB AT 8.4%. THE ASSESSEE FURTHER CONTEN DED THAT AS PER THE LOAN AGREEMENT WITH SCB, THE PURPOSE OF AVAILING LO AN WAS TO FINANCE/ EXPANSION MODERNISATION OF THE PROJECT OF THE ASSES SEE IN NIGERIA. THE ASSESSEE PAID 8.4% INTEREST TO SCB AND RECOVERED 10 % INTEREST FROM ITS AE. ACCORDINGLY, THE TRANSACTION SHOULD BE CONSIDE RED AS AT ARMS 4 ITA 2483/MUM/2015 LENGTH PRICE (ALP). THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY TPO. THE TPO CONCLUDED THAT THOUGH THE ASSESSEE HAS CHARGED INTEREST FROM ITS AE AT THE HIGHER RATE THAN ITS CO ST OF BORROWING THE SAID RATE IS NOT SUFFICIENT TO SECURE ITS INTEREST AGAINST VARIOUS RISK FACTORS SUCH AS ENTITY RISK, CURRENCY RISK AND COUN TRY RISK. THE ASSESSEE HAS PUT A MARK UP OF JUST 1.6% ON ITS COST OF BORRO WING. IT WAS FURTHER NOTED THAT IT IS AN INTERNATIONALLY KNOWN PRACTICE TO PUT A MARK UP OF 200 TO 300 BASIS POINT EVEN ON LIBOR DRIVEN RATE. THE TPO CONSIDERED 3% AS REASONABLE MARK UP ON THE COST OF BORROWING AND BENCHMARKED THE INTEREST CHARGEABLE AND WORKED OUT THE ADJUSTMENT ON DIFFERENCE OF RS.9,59,103/- AND MADE ADDITION TO TH E VALUE OF INTERNATIONAL TRANSACTION OF LOAN TRANSACTION. 3. THE TPO ALSO NOTED THAT DURING THE RELEVANT FINANCI AL YEAR, AS REPORTED BY THE ASSESSEE, THE ASSESSEE SOLD COLOUR PRINTING MACHINE TO ITS AE I.E. POSITIVE PACKAGING UNITED (M.E.) FZCO (PPU). THE ASSESSEE FURNISHED THE DETAILS OF EQUIPMENT AND ACCESSORY CO ST OF RS.3.55 CRORES, PREOPERATIVE EXPENSES OF RS.2.06 CRORES AND EXCHANGE FLUCTUATION COST OF RS.0.94 CRORES, THUS TOTALLING RS.6.56 CRORES. THE TPO NOTED THAT THE RATE AT WHICH MACHINERY WAS SOLD TO AE WAS LESS THAN THE WRITTEN DOWN VALUE (WDV) OF THE MACHINERY. ACCORDINGLY, THE TPO ISSUED SHOW CAUSE NOTICE ASKING AS TO WHY S UITABLE ADJUSTMENT 5 ITA 2483/MUM/2015 SHOULD NOT BE MADE ON THE BASIS OF BOOK VALUE OF TH E MACHINERY SOLD. THE ASSESSEE, VIDE ITS REPLY DATED 10-10-2012 CONTE NDED THAT THE MACHINERY WAS OBSOLETE AND THE CAPACITY UTILISATION OVER THE PAST THREE YEARS WAS LESS THAN 20%. THE INDEPENDENT VALUER VA LUED IT AT RS. 70 LAKHS AND THE COST OF REPAIR WAS RS.1.20 CRORE AND ACCORDINGLY SUBMITTED THAT THE SALE OF THE PRINTER AT THE SALE CONSIDERATION OF RS.71,10,000/- WAS AT ALP. THE CONTENTION OF ASSESS EE WAS NOT ACCEPTED BY TPO, AND CONCLUDED THAT THE ASSESSEE HA S NOT FOLLOWED THE INDEPENDENT AND OBJECTIVE PRICE DISCOVERY MECHANISM . THE ASSESSEE HAS RELIED ON VALUATION REPORT OF INDEPENDENT VALUE R WHICH IS SELF SERVING DOCUMENT. THE VALUER HAS MENTIONED TECHNIC AL DEFECT IN THE MACHINERY WHICH CONTRADICTS THE ASSESSEES CLAIM FO R UNDER UTILISATION OF CAPACITY. IF THERE IS NO SUFFICIENT CAPACITY UT ILISATION, THE QUESTION OF WEAR AND TEAR DAMAGE OF PARTS DOES NOT ARISE. HOWE VER, THE VALUER WITHOUT ANY BASIS OR BREAK-UP OF COMPONENT WISE COS T HAS ESTIMATED REPAIR OF RS.1.20 CRORES. ACCORDINGLY, TPO REJECTE D THE SUBMISSION OF ASSESSEE AND BENCHMARKED THE TRANSACTION ON THE BAS IS OF WRITTEN DOWN VALUE OF MACHINERY. THE WRITTEN DOWN VALUE OF MACH INERY AS ASSESSEES SUBMISSION DATED 10-10-2012 WAS RS.1,68, 62,114/- WHEREAS THE SALE OF CONSIDERATION WAS RS.71,10,000/-. THE TPO, CONSIDERING THE WRITTEN DOWN VALUE CONCLUDED THAT THE ARMS LEN GTH PRICE (ALP) 6 ITA 2483/MUM/2015 FALLS OUTSIDE (+) / (-) 5% OF THE TRANSACTION. THE REFORE, THE DIFFERENCE BETWEEN THE ALP AND THE TRANSACTION VALUE WAS SUGGE STED FOR ADJUSTMENT. ACCORDINGLY, THE TPO SUGGESTED ADJUSTM ENT OF RS. 97,52,114/-. THE TPO FURTHER NOTED THAT THE ASSESS EE ALSO SOLD ONE MORE MACHINE NAMELY POUCHING MACHINE TO ITS AE IN D UBAI AT RS. 1,27,980/-. THOUGH, THE TRANSACTION WAS REPORTED IN FORM 3CEB, BUT NO BENCHMARKING WAS MADE BY THE ASSESSEE. FURTHER THE ASSESSEE HAS NOT FURNISHED ANY MATERIAL TO SUBSTANTIATE THE COST MEC HANISM. THE TPO, IN ABSENCE OF ANY OTHER MATERIAL REGARDING THE MARKET PRICE OF THE MACHINE, THE WDV IN THE BOOKS OF THE ASSESSEE, WAS USED TO DETERMINE THE ALP OF THE TRANSACTION. THE WDV OF THIS MACHINE WAS RS. 4,97,076/-. AND THE VALUE OF TRANSACTION WAS RS. 1,27,980/-, WHICH WAS CLEARLY BEYOND +/- 5% OF THE TRANSACTION VALUE, ACCORDINGLY THE DIFFERENCE OF RS. 3,69,096/- WAS PROPOSED FOR ADJU STMENT. 4. ON RECEIPT OF REPORT OF TPO, THE AO MADE ADDITIONS IN THE DRAFT ASSESSMENT ORDER DATED 04.03.2013. THE COPY OF DRAF T ASSESSMENT ORDER WAS SERVED ON THE ASSESSEE. THE ASSESSEE VIDE ITS A PPLICATION DATED 26.03.2013 EXERCISED ITS OPTION TO FILE APPEAL BEFO RE LD. CIT (A). THE LD. CIT (A) UPHELD ALL THREE ADDITIONS, IN THE IMPU GNED ORDER DATED 20- 02-2015. THUS, FURTHER AGGRIEVED, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE US. 7 ITA 2483/MUM/2015 5. WE HAVE HEARD THE SUBMISSION OF LD.AR OF THE ASSESS EE AND LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO. 1 RELATES TO TRANSFER PRICING ADJUSTMENT (TP AD JUSTMENT) ON ACCOUNT OF INTEREST ON LOAN TO AE. THE LD. AR FOR THE ASSES SEE SUBMITS THAT THE ASSESSEE HAS SET UP ITS AE IN NIGERIA AND SOUTH AFR ICA. THE ASSESSEE AVAILED A LOAN OF US DOLLAR 50,00,000/- FROM STANDA RD CHARTERED BANK (SCB) @ 8.4% INTEREST RATE PER ANNUM DURING FINANCI AL YEAR UNDER CONSIDERATION. THE LOAN AMOUNT WAS ADVANCED TO ITS AE IN NIGERIA FOR SETTING UP A UNIT. THE ASSESSEE ENTERED INTO A FACI LITY AGREEMENT DATED 16 TH JULY 2006 WITH THE STANDARD CHARTERED BANK, COPY O F WHICH WAS PROVIDED TO THE LOWER AUTHORITIES. DURING THE RELEV ANT PERIOD THE ASSESSEE RECEIVED INTEREST OF 68,50,734/-. THE ASSESSEE CHARGED INTEREST @ 10% FROM ITS AE IN NIGERIA. THE ASSESSEE REPORTED THIS TRANSACTION IN ITS FORM 3CEB. DURING THE TRANSFER P RICING ADJUSTMENT, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY 300 BASIS POINT SHOULD NOT BE ADDED TO THE COST OF BORROWING FOR OTHER RIS K FACTOR FOR DETERMINING ALP. THE ASSESSEE EXPLAINED THAT THERE IS DIRECT NEXUS OF LOAN AVAILED AND ADVANCED TO ITS AE. THIS CAN BE DE MONSTRATED BY WAY OF FACILITY AGREEMENT WITH STANDARD CHARTERED BANK, WHERE THE PURPOSE OF LOAN IS MENTIONED AS FOR SETTING UP A UNIT IN NI GERIA. FURTHER, THE ASSESSEE HAD RECOVERED THE MARK UP OF 1.6% OVER THE BORROWING COST OF 8 ITA 2483/MUM/2015 8.4% AND ACCORDINGLY THE RECEIPT OF INTEREST AT 10% IS TO BE CONSIDERED AT ARMS LENGTH. THE TPO NOT ACCEPTED THE CONTENTIO N OF ASSESSEE AND APPLIED MARK UP AT THE RATE OF 3% ON THE COST OF BO RROWING AND ACCORDINGLY MADE ADJUSTMENT OF 9,59,103/-. THE LEARNED CIT (A) ALSO FAILED TO APPRECIATE THE SUBMISSION OF THE ASSESSEE AND UPHELD THE ADJUSTMENT SUGGESTED BY TPO. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT APPROACH OF LOWER AUTHORITIES IS NOT CORRECT. THE TRANSACTION OF LOAN IS AT APL AND NO ADJUSTMENT WAS WARRANTED. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THAT TPO MAY BE DIRECT ED TO DETERMINE ALP BY CONSIDERING LIBOR (LONDON INTERBANK OFFERED RATE ) + 2% AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT IN C IT VERSUS AURIONPRO SOLUTION PRIVATE LIMITED (99 CCH 0070 BOM BAY). 6. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THA T ARMS LENGTH INTEREST RATE FOR LOAN ADVANCED TO FOREIGN SUBSIDIA RY BY INDIAN COMPANY SHOULD BE COMPUTED BASED ON MARKET DETERMINED INTER EST RATES APPLICABLE TO CURRENCY IN WHICH LOAN HAS TO BE REPA ID AS HELD BY HONBLE DELHI HIGH COURT IN CIT VERSUS COTTON NATUR ALS (I)(P) LTD (55 TAXMANN.COM 523 DELHI). THE LEARNED AR ALSO REL IED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VERSUS TATA AUTOCOMP SYSTEM PRIVATE LIMITED (56 TAXMANN.COM 206 BOMBAY), WHEREIN IT WAS HELD THAT WHERE ASSESSEE ADVANCED LO ANS TO ITS AE 9 ITA 2483/MUM/2015 SITUATED IN GERMANY, RATE OF INTEREST WAS TO BE DET ERMINED ON THE BASIS OF RATE PREVAILING IN GERMANY, WHERE LOAN HAD BEEN CONSUMED. 7. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESEN TATIVE (DR) FOR THE REVENUE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. THE LD DR FOR THE REVENUE DID NOT CONTROVERTED THE DECISIONS OF HON BLE DELHI HIGH COURT IN CIT VERSUS COTTON NATURALS (I)(P) LTD (SU PRA) AND OF HONBLE BOMBAY HIGH COURT IN CIT VERSUS TATA AUTOCOMP SYSTE M PRIVATE LIMITED (SUPRA). 8. WE HAVE CONSIDERED THE RIVAL CONTENTION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HA VE ALSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LEARNED AR OF THE AS SESSEE. THE TPO SUGGESTED THE ADJUSTMENT BY ADDING MARK UP OF 3% B Y TAKING VIEW THAT THE ASSESSEE HAS CHARGED INTEREST FROM ITS A A T THE RATE HIGHER THAN ITS COST OF BORROWING, THE SAID RATE IS NOT SUFFICI ENT TO SECURE ITSELF AGAINST VARIOUS RISK FACTORS SUCH EDGE ENTITY RISK, CURRENCY RISK AND COUNTRY RISK. THE LEARNED COMMISSIONER (APPEALS) AF FIRMED THE ACTION OF TPO BY TAKING VIEW THAT THERE IS A RISK ASSOCIAT ED WITH THE UNSECURED LOAN, ONE HAS TO TAKE INTO ACCOUNT THE RI SK WHILE DECIDING ALP. ACCORDINGLY WHILE CONSIDERING ALL THE RISK ASS OCIATED WITH SUCH TRANSACTION THE MARK UP ADDED BY TPO IS REASONABLE. 10 ITA 2483/MUM/2015 9. THE LEARNED AR OF THE ASSESSEE WHILE MAKING HIS SUB MISSION VEHEMENTLY RELIED UPON THE DECISION OF HONBLE BOMB AY HIGH COURT IN CASE OF TATA AUTOCOMP SYSTEM LTD (SUPRA), AURIONPRO SOLUTION LTD (SUPRA) AND HONBLE DELHI HIGH COURT IN COTTON NATU RALS (I)(P) LTD (SUPRA). IN COTTON NATURAL SUPRA THE HONBLE DELHI HIGH COURT HELD THAT ARMS LENGTH INTEREST RATE FOR THE LOAN ADVANCED TO FOREIGN SUBSIDIARY BY INDIAN COMPANY SHOULD BE COMPUTED BASED ON MARKET D ETERMINED INTEREST RATE APPLICABLE TO CURRENCY IN WHICH LOAN HAS TO BE REPAID. SIMILARLY IN TATA AUTOCOMP SYSTEM LTD (SUPRA) IT WA S HELD THAT WHERE THE ASSESSEE ADVANCED LOANS TO ITS AE SITUATED IN G ERMANY, THE RATE OF INTEREST WAS TO BE DETERMINED ON THE BASIS OF RATE PREVAILING GERMANY WHERE LOAN HAD BEEN CONSUMED. THE HONBLE RAJASTHAN HIGH COURT IN CIT VERSUS VAIBHAV JAMES LTD [2017] 88 TAXMANN.COM 12 (RAJ) ALSO HELD THAT WHERE ASSESSEE EXTENDED LOAN TO ITS AE, A DJUSTMENT SHOULD BE MADE AT AVERAGE LIBOR RATE EXISTING AT THE TIME. CO NSIDERING THE AFORESAID DECISION OF DIFFERENT HIGH COURTS AND THE SUBMISSION OF LEARNED AR OF THE ASSESSEE VIDE THE ASSESSING OFFIC ER /TPO TO RECOMPUTE THE ADJUSTMENT ON ACCOUNT OF INTEREST ON LOAN TO ITS AES BY TAKING LIBOR +200 BASIS POINT. IN THE RESULT THIS G ROUND OF APPEAL IS PARTLY ALLOWED. 11 ITA 2483/MUM/2015 10. GROUND NO. 2 TO 6 RELATES TO ADJUSTMENT ON ACCOUNT OF SALE OF ASSET (COLOUR PRINTING MACHINE AND PUNCHING MACHINE) TO A E. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE SOLD COLOUR PRINTING MACHINE TO ITS AE IN FZCO FOR 71 LAKHS AND A PUNCHING MACHINE AT 1,27,980/-TO ITS AE IN DUBAI. THE ASSESSEE SOLD BOTH THE ASSET AT THE BEST AVAILABLE PRICE. THE ASSESSEE OBTAINED QUOTATIONS FOR COLOUR PRINTING MACHINE. TH E QUOTATIONS FOR BOTH THE ASSET I.E. COLOUR PRINTING MACHINE AND POU CHING MACHINE WAS OF 58.00 LAKHS AND RS.62.55 LAKHS ONLY, WHICH WERE LE SS THAN THE PRICE CHARGED FROM AE. THE TPO CONSIDERED THE WRITT EN DOWN VALUE (WDV) OF COLOUR PRINTING MACHINE AMOUNTING TO 1.68 CRORE AS PER INCOME TAX ACT, AGAINST THE ALP OF 71 LAKHS AS DETERMINED BY ASSESSEE. WITH REGARD TO THE PUNCHING MACHINE, THE TPO CONSIDERED WDV OF 4.97 LAKHS AS PER INCOME TAX ACT AGAINST THE ALP I N RESPECT OF THE SAID MACHINE. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT BOTH THE ASSET WERE SOLD AT THE BEST PRICE OF AVAILABLE FROM THE AES, WHICH WERE HIGHER THAN THE COMPARABLE QUOTATI ON OF AVAILABLE IN THE MARKET AND THE SAME SHOULD BE CONSIDERED AT ALP . FURTHER, THERE WAS A BUSINESS RATIONAL AND COMMERCIAL EXPEDIENCY F OR SELLING COLOUR PRINTER TO ITS AE AS THE EXISTING VERSION OF COLOUR PRINTING MACHINE HAD BEEN PHASED OUT. THE REPAIR AND MAINTENANCE OF COLO UR PRINTING 12 ITA 2483/MUM/2015 MACHINE WAS VERY HIGH BEING AN OBSOLETE ITEM WAS VE RY HIGH. THE ASSESSEE ALSO FURNISHED THE REPORT OF INDEPENDENT C HARTERED ENGINEER/VALUER FOR THE VALUATION OF COLOUR PRINTER . THE TPO DISREGARDED THE REPORT OF VALUER AND MADE ADJUSTMEN T ON THE BASIS OF WDV BOTH THE ASSETS. THE TPO HAS NO RIGHT TO DISRE GARD THE VALUATION REPORT, IF THE VALUATION REPORT WAS NOT ACCEPTABLE TO THE TPO, HE SHOULD HAVE REFER THE ISSUE TO THE EXPERT. IN SUPPORT OF HIS SUBMISSIONS THE LD AR FOR THE ASSESSEE ON THE POINT THAT VALUATION REP ORT OF EXPERT SHOULD NOT BE REJECTED, RELIED ON THE FOLLOWING DECISIONS; ACIT VS POSITIVE PACKAGING INDUSTRIES LTD (ITA NO. 4641/M/2016, CIT VS TITAN TIME PRODUCT LTD (2015) (58 TAXMANN.CO M313 BOMBAY), FIRST ADVANTAGE QUEST RESEARCH LIMITED VS ACIT (ITA 1546/M/2017). 11. THE LD AR FOR THE ASSESSEE ON THE POINT THAT VALU ATION REPORT IS AT ALP RELIED ON THE FOLLOWING DECISIONS; GKN SINTER METALS (P) LTD VS ACIT [2016] 71 TAXMANN .COM 297 (PUNE- TRIB), ACIT VS INTERUMP HYDRAULICS INDIA (P) LTD [2017] 82 TAXMANN.COM (CHENNAI TRIB), ACIT VS KOCH CHEMICAL TECHNOLOGY GROUP (INDIA) LTD [2015] 64 TAXMANN.COM 464 (MUMBAI TRIB), 13 ITA 2483/MUM/2015 TRUMPF INDIA (P) LTD VS ACIT [2015] 53 TAXMANN.COM 515( MUMBAI TRIB) TECUMASH PRODUCT INDIA (P) LTD VS ACIT [2014]41 TAXMANN.COM 385, ACIT VS CAPARO ENGINEERING INDIA LTD (P) LTD [2018] 91 TAXMANN.COM 330 ( DELHI- TRIB), ACIT VS SARENS HEAVY LIFTS (I) (P) LTD [2018] 93 TA XMANN.COM 431(DELHI TRIB). 12. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDER OF THE LOWER AUTHORITIES. THE LD. DR FOR THE REVENUE HAS N OT MADE ANY COMMENT ON THE VARIOUS DECISIONS RELIED BY LD. AR F OR THE ASSESSEE. 13. WE HAVE CONSIDERED THE RIVAL CONTENTION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HA VE ALSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LEARNED AR OF THE AS SESSEE. FIRST, WE ARE TAKING UP THE CLAIM/ ISSUE/ ADJUSTMENT RELATED WITH THE TRANSACTION OF SALE OF COLOUR PRINTING MACHINE. THE TPO SUGGESTED ADJUSTMENT OF RS. 97,52,114/- BY TAKING VIEW THAT WDV OF COLOUR PRINT ING MACHINE WAS 1.68 CRORE , HOWEVER, THE ASSESSEE CHARGED FROM IT S AE OF 71 LAKHS ONLY. THUS, THE TRANSACTION IN NOT AT ARMS LENGTH PRICE (ALP) BEING FALLS OUTSIDE (+) / (-) 5% OF THE TOLERANCE RANGE. THE TPO ACCORDINGLY SUGGESTED THE DIFFERENCE BETWEEN THE WDV AND THE CO ST RECOVERED BY THE ASSESSEE FOR ADJUSTMENT. THE TPO HAS NOT MADE R EFERENCE OF VALUATION REPORT IN HIS ORDER. THE LD CIT(A) AFFIRM ED THE ACTION OF THE 14 ITA 2483/MUM/2015 TPO BY TAKING THE SIMILAR VIEW. THE LD. CIT (A) NOT ACCEPTED THE REPORT OF VALUER BY TAKING VIEW THAT IT IS A SELF S ERVING DOCUMENT. THE LD. CIT (A) ALSO HELD THAT IN THE VALUATION IS NOTH ING BUT MORE THAN ESTIMATION AND THAT THERE IS NO ITEM WISE VALUATION . THE COPY OF THE QUOTATIONS FURNISHED BY THE ASSESSEE TO SUBSTANTIAT E THE COST WAS NOT CONSIDERED THE LD CIT(A) BY TAKING VIEW THAT THESE DOCUMENTS WERE NOT FILED BEFORE AND TREATED AS ADDITIONAL EVIDENCE. IT WAS HELD THAT NO APPLICATION FOR ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A FOR ADMITTING SUCH ADDITIONAL EVIDENCE WAS FILED BY ASS ESSEE. BEFORE US, THE LD. AR FOR THE ASSESSEE VEHEMENTLY ARGUES THAT THE VALUATION REPORT SHOULD NOT ORDINARILY BE REJECTED AND MADE RELIANCE ON VARIOUS CASE LAW INCLUDING IN ASSESSEES OWN CASE FOR AY 2010-11 IN ITA NO. 4641/M/2016 (SUPRA) AND OTHER CASES, WHICH WE HAVE MENTIONED ABOVE. 14. THE COORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010- 11(SUPRA) IN PARA-6 OF THE ORDER HELD THAT IF THE T PO WAS NOT AGREEING WITH THE VIEW OF THE INDEPENDENT VALUER, HE SHOULD HAVE REFERRED IT TO THE EXPERT INSTEAD OF UNDERTAKING THE VALUE HIMSELF , HE IS NEITHER TECHNICALLY QUALIFIED NOR COMPETENT TO UNDERTAKE TH E VALUATION. FURTHER, THE COORDINATE BENCH OF TRIBUNAL IN FIRST ADVANTAGE QUEST RESEARCH LTD VS DCIT (SURA) WHILE CONSIDERING THE V ALUATION REPORT OF 15 ITA 2483/MUM/2015 UNQUOTED SHARES WITH REGARD TO SALE OF SHARES BY AS SESSEE TO ITS AE HELD THAT THAT FOR FAIR VALUATION OF UNQUOTED SHARES OF A CORPORATE ENTITY ONLY ONE FACTORS SHOULD NOT BE CONSIDERED. IN OTHER WORDS SHARE PRICE DEPENDS UPON MANY FACTORS. IT IS SAID THAT THE MERE CAPITALIZATION OF ACTUAL PAST EARNINGS WOULD NOT PRODUCE A REASONABLE RESULT IN SUCH CASES AND THAT THE EMPHASIS HAS TO BE ON PROSPECTIV E EARNING CAPACITY RATHER THAN ACTUAL PAST EARNINGS-ALTHOUGH NATURALLY THE LATTER HAS TO BE USED AS A STARTING POINT TO CALCULATE THE FORMER(PA RA 3.5). IT WAS FURTHER HELD THAT THE PURPOSE BEHIND INTRODUCING THE TP PR OVISIONS IN THE ACT WAS TO ENSURE THAT GOODS/ SERVICES PURCHASED/SOLD O R RENDERED/AVAILED BY THE GROUP ENTITIES SHOULD BE AT MARKET RATE. IT WAS FOUND THAT TO AVOID TAXES THE AE.S WERE NOT SHOWING THE MARKET PR ICE OF IT.S (INTERNATIONAL TRANSACTIONS). SO, TO CURB THE MISUS E OF PROXIMITY OF GROUP CONCERNS LOCATED IN INDIA AND OUTSIDE INDIA P ROVISIONS OF CHAPTER X WERE INCLUDED IN THE STATUTE. WHAT THE LEGISLATUR E WANTED WAS THAT THE PRICE OF IT.S WITH AE SHOULD BE AT ARM'S LENGTH I.E., THAT AN INDEPENDENT PERSON IN THE MARKET WOULD PAY/RECEIVE THE SAME PRICE AS PAID/RECEIVED BY THE GROUP ENTITY FOR THE GOOD/SERV ICES. IF THE SURROUNDING CIRCUMSTANCES LEAD TO THE CONCLUSION TH AT PRICE CHARGED BY THE AE.S IS NOT THE NORMAL FAIR MARKET VALUE, THE D EPARTMENTAL AUTHORITIES CAN MAKE ADJUSTMENT TO THE PRICE SHOWN BY THE ASSESSEE. 16 ITA 2483/MUM/2015 BUT, THE ADJUSTMENTS CANNOT BE MADE WITHOUT ANY BAS IS. IN SHORT, THE BASIS OF TP ADJUSTMENT IS DETERMINING FAIR MARKET V ALUE OF IT.S ENTERED IN TO BY THE ASSESSEE. (PARA 3.5.1). 15. COORDINATE BENCH OF PUNE TRIBUNAL IN GKN SINTER MET ALS (P) LTD VS ACIT (SUPRA) WHILE CONSIDERING THE GROUNDS OF APPEA L, WHERE THE TPO MADE SUGGESTED ADJUSTMENT BY DISREGARDING THE REPOR T OF INDEPENDENT VALUER HELD AS UNDER; 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISION ON WHICH THE LD. AR OF THE ASSESSEE HAS PLACED RELIANCE. THE ONLY ISSUE RAISED IN THE APPEAL BEFOR E THE TRIBUNAL IS WITH REGARD TO THE VALUATION OF CAPITAL ASSET PURCHASED BY THE ASSESSEE FROM ITS AES. THE ASSESSEE IN SUPPORT OF HIS SUBMISSIONS HAS PLACED RELIANCE ON THE VALUATION CERTIFICATE ISSUED BY AN INDEPENDENT CHAR TERED ENGINEER AT UK WHEREAS THE REVENUE HAS PLACED RELIANCE ON THE VALU ATION MADE BY TPO BY EXTRAPOLATING THE ARITHMETIC MEAN OF OPERATING M ARGIN OF THE COMPANIES MANUFACTURING SIMILAR MACHINE IN INDIA AN D APPLYING CUP METHOD TO MARKUP THE IMPORT PRICE AT ALP. 7. THE CONTENTION OF THE LD. AR IS THAT THE AUTHORITI ES BELOW HAVE DISBELIEVED THE VALUATION CERTIFICATE ISSUED BY AN INDEPENDENT CHARTERED ENGINEER, WHEREAS THE SAME HAS BEEN ACCEPTED BY THE CUSTOMS AUTHORITIES AND EVEN IN THE SUBSEQUENT ASSESSMENT Y EAR I.E. ASSESSMENT YEAR 2009-10 THE VALUATION CERTIFICATE ISSUED BY TH E SAME CHARTERED ENGINEER HAS BEEN ACCEPTED BY THE TPO. WE ARE OF THE CONSIDERED VIEW THAT IF THE TPO WAS N OT SATISFIED WITH THE VALUATION CERTIFICATE GIVEN BY AN INDEPENDENT CHART ERED ENGINEER AT UK, THE TPO SHOULD HAVE REFERRED THE MATTER TO DVO WHO IS AN 17 ITA 2483/MUM/2015 EXPERT TO DETERMINE THE VALUE OF SUCH CAPITAL ASSET S. THE TPO HAS ERRED IN EXTRAPOLATING THE AVERAGE ARITHMETIC MEAN OF OPE RATING PROFIT OF COMPANIES MANUFACTURING SIMILAR MACHINES IN INDIA. 8. THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF COASTAL ENERGY (P.) LTD. V. ASSTT. CIT [2011] 12 TAXMANN.COM 355/46 SOT 286 (URO) (CHENNAI) FOR THE ASSESSMENT YEAR 2006-07 DECIDED ON 13-07-2 011 HAS OCCASION TO DEAL WITH THE ISSUE, WHERE THE TPO REFU SED TO ACCEPT THE VALUE ADOPTED BY THE CUSTOMS AUTHORITY. THE TRIBUNA L HAS HELD THAT THE VALUE ADOPTED BY THE CUSTOMS AUTHORITIES SHOULD BE ACCEPTED AS THE CUSTOMS AUTHORITIES ASSIGN VALUE TO THE IMPORTE D GOODS ON SCIENTIFIC FORMULATED METHOD AND THEIR VALUATION IS NOT AN ARBITRARY EXERCISE. THE RELEVANT EXTRACT OF THE OBSERVATIONS OF THE CHENNAI BENCH OF THE TRIBUNAL ARE AS UNDER: '6. THE NEXT QUESTION TO BE CONSIDERED IS WHETHER T HIS PRICE VARIATION NOTICED BY THE TPO SHOULD BE TAKEN AS THE BASIS FOR MAKING ADJUSTMENT IN THE TRANSFER PRICING. THE GRIE VANCE OF THE ASSESSEE IS THAT THE COMPARABLE PRICE HAS BEEN OBTA INED BY THE TPO FROM THE CUSTOMS AUTHORITIES AND THE VALUATION OF THE CUSTOMS AUTHORITIES NEED NOT NECESSARILY BE REALISTIC AS TH AT DEPARTMENT IS MORE INTERESTED IN COLLECTING IMPORT DUTIES. WE SHO ULD STATE WITHOUT FEAR OF CONTRADICTION THAT THE CUSTOMS AUTH ORITIES ARE ASSIGNING VALUES TO THE IMPORTED GOODS ON THE BASIS OF SCIENTIFICALLY FORMULATED METHODS AND THEY ARE RESPONSIBLE FOR MAK ING A FAIR ASSESSMENT VALUE OF THE IMPORTED GOODS. THE VALUATI ON MADE BY THE CUSTOMS AUTHORITIES IS NOT AN ARBITRARY EXERCIS E. BUT ON THE OTHER HAND, IT DEPENDS UPON LARGE VOLUME OF INTERNA TIONAL DATA CLASSIFIED ACCORDING TO INTERNATIONALLY ACCEPTED PR OTOCOL. THEREFORE, IT IS NOT POSSIBLE TO SAY THAT THE CREDI BILITY OF THE PRICE RATE FURNISHED BY CUSTOMS AUTHORITIES NEEDS TO BE D ISCOUNTED.' 18 ITA 2483/MUM/2015 THE VIEW TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL HAS BEEN FOLLOWED BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF C-DOT ALCATEL-LUCENT RESEARCH CENTRE (P.) LTD. ( SUPRA ). 9. THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF TECUMSEH PRODUCTS INDIA (P.) LTD. ( SUPRA ) IN A SIMILAR CASE WHERE THE VALUE OF IMPORTED MACHINE WAS NOT ACCEPTED BY THE TPO, THE T RIBUNAL HELD THAT TO DETERMINE THE VALUE OF MACHINERY THE BEST WAY IS TO REFER THE MACHINERY TO VALUATION OFFICER. WITHOUT DOING SO, T HE TPO OR DRP CANNOT DETERMINE VALUE AT NIL AND CONSEQUENTLY DENY DEPRECIATION CLAIM TO THE ASSESSEE. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL ARE AS UNDER : '(F) ( I ) AS BRIEFLY STATED ABOVE, ASSESSEE HAS IMPORTED CE RTAIN MACHINERY (OLD AS WELL AS NEW MACHINERY) FROM TPC U SA. THE PURCHASE PRICE OF THESE MACHINERIES WAS BASED ON FA IR MARKET VALUE AND SUPPORTED BY AN INDEPENDENT VALUER'S REPO RT M/S SGS GLOBAL TRADE SOLUTIONS INC., WHO CERTIFIED SECOND H AND MACHINERY PROCURED BY ASSESSEE. AS ASSESSEE SUBMITTED BEFORE THE AUTHORITIES, THE COMPARATIVE ANALYSIS OF THE MACHIN ERY PREPARED INDICATES THAT PURCHASE PRICE PAID TO M/S TPC USA I S LOWER THAN THE VALUE DETERMINED BY M/S SGS GLOBAL TRADE SOLUTIONS. ASSESSEE PAID CUSTOMS DUTY AND ALSO COUNTERVAILING DUTY AND THE VALUATION WAS ACCEPTED BY THE AUTHORITIES AT THE TIME OF IMPO RT. THOUGH TPO AS WELL AS DRP WERE OF THE OPINION THAT THE MACHINE RY DOES NOT HAVE ANY VALUE, WE DO NOT UNDERSTAND ON WHAT BASIS THEY HAVE COME TO THIS OPINION. THERE IS NO DISPUTE WITH THE FACT THAT THE MACHINERY WAS IMPORTED AND USED IN ASSESSEE'S BUSIN ESS FOR MANUFACTURING OF ITS COMPRESSORS/PARTS, SO, THERE I S NO DISPUTE WITH REFERENCE TO USAGE OF SECOND HAND MACHINERY. I T IS ALSO NOT THE CASE OF THE REVENUE THAT MACHINERY IMPORTED WAS KEPT IDLE AND ASSESSEE UNNECESSARILY PAID THE AMOUNT TO THE AE. T HIS BEING SO, THE VALUE PAID BY ASSESSEE DULY SUPPORTED BY VALUAT ION REPORT 19 ITA 2483/MUM/2015 CANNOT BE IGNORED. IN CASE OF ANY DOUBT ON THE MATT ER, THE BEST WAY IS TO REFER THE MACHINERY TO THE VALUATION OFFI CER UNDER THE IT ACT. WITHOUT DOING SO, THE TPO OR THE DRP HAS NO BA SE TO DETERMINE THE VALUE AT NIL AND CONSEQUENTLY DENYING THE DEPRECIATION CLAIM OF THE ASSESSEE WHILE AT THE SAM E TIME, THE PAYMENT OF CUSTOM DUTY AND COUNTERVAILING DUTY ARE CONSIDERED AS VALUE OF COST. NOT ONLY THAT, AS SUBMITTED BY ASSES SEE AND AS SEEN FROM THE TABLE FURNISHED, NEW MACHINERY WORTH US$ 5 00,965 WAS ALSO TREATED AS OLD MACHINERY AND VALUATION WAS DET ERMINED AT NIL. THIS SHOWS NON-APPLICATION OF MIND BY TPO AS WELL A S BY DRP.' 10. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KOCH CHEMICAL TECHNOLOGY GROUP (INDIA) LTD. ( SUPRA ) THE TRIBUNAL HAS HELD THAT BEFORE REJECTING THE VALUATION REPORT, THE TPO IS DUTY BOU ND TO REFER THE VALUATION OF MACHINERY TO DVO. THE TPO NOT BEING AN EXPERT TO DETERMINE THE VALUE OF MACHINE CANNOT ASCERTAIN THE FAIR MARKET VALUE OF MACHINE. THE RELEVANT EXTRACT OF THE FINDINGS OF THE TRIBUNAL ARE REPRODUCED HERE-IN-UNDER : '7. . . . . . . . . . . . . . . . . . . . IT IS TO BE NOTED THAT THE INVOICES SUBMITTED BY THE ASSESSEE INDICATE THAT THE ASSESSE E HAS PAID THE PRICE FOR PURCHASE OF MACHINERIES TO THE A.E. AS CL AIMED BY THE ASSESSEE. IT IS ALSO TO BE NOTED THAT THE PURCHASE PRICE PAID BY THE ASSESSEE IS SUPPORTED BY REPORT OF APPROVED VALUER FROM THE U.S.A. THEREFORE, IT IS VERY MUCH EVIDENT THAT TO S UBSTANTIATE THE PRICE PAID FOR PURCHASE OF CERTAIN SECOND HAND MACH INERIES FROM THE A.E., THE ASSESSEE HAS PRODUCED DOCUMENTARY EVI DENCES INCLUDING THE VALUATION REPORT. WHEREAS, THE TRANSF ER PRICING OFFICER, APART FROM MAKING SOME GENERAL OBSERVATION S TO THE EFFECT THAT THE DETAILS OF DATE OF PURCHASE BY THE A.E., DEPRECIATED VALUE IN ITS BOOKS ARE NOT AVAILABLE, H AS QUANTIFIED THE VALUE OF THE TWO MACHINERIES AT 50% OF THE VALU E CLAIMED BY THE ASSESSEE. ON WHAT BASIS HE ADOPTED 50% OF THE V ALUE AS ALP 20 ITA 2483/MUM/2015 HAS NOT BEEN PROVIDED BY THE TRANSFER PRICING OFFIC ER. IN OUR VIEW, WHEN THE ASSESSEE HAS SUBMITTED A REPORT FROM THE APPROVED VALUER INDICATING THE FAIR MARKET VALUE OF MACHINERIES PURCHASED, BEFORE REJECTING SUCH VALUATION REPORT, THE TRANSFER PRICING OFFICER WAS DUTY BOUND TO REFER THE VALUATI ON OF THE MACHINERIES TO THE DVO AS PER THE PROCEDURE LAID DO WN UNDER THE STATUTE. THE TRANSFER PRICING OFFICER NOT BEING AN EXPERT TO DETERMINE THE VALUE OF MACHINERIES AND THERE BEING NO OTHER MATERIAL BROUGHT ON RECORD BY HIM TO DEMONSTRATE TH AT HE MADE ENQUIRY OF ANY KIND TO ASCERTAIN THE FAIR MARKET VA LUE OF MACHINERIES, HE COULD NOT HAVE QUANTIFIED THE VALUE OF THE MACHINERIES AT 50% OF THE VALUE SHOWN BY THE ASSESS EE. THE DRP, IN OUR VIEW, HAS ALSO SUSTAINED THE DISALLOWANCE WI THOUT PROPER APPLICATION OF MIND AND IN A MECHANICAL MANNER. . . . . . . . . . . . ' THE TRIBUNAL FURTHER REMARKED THAT SINCE THE TPO FA ILED TO MAKE REFERENCE TO THE DVO FOR VALUATION OF ASSET AND MAD E 50% DISALLOWANCE OF PURCHASE VALUE OF MACHINERY IN AN A RBITRARY MANNER, THERE IS NO POINT IN REMITTING THE ISSUE BACK TO TH E TPO AND GIVE HIM SECOND INNINGS. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER: '7.2 WE MAY OBSERVE, THE LEARNED DEPARTMENTAL REPRE SENTATIVE HAD SUBMITTED BEFORE US THAT AT THIS STAGE ALSO, TH E MATTER CAN BE REMITTED BACK TO THE FILE OF THE TRANSFER PRICING O FFICER FOR MAKING A REFERENCE TO THE DVO FOR VALUATION OF ASSETS. HOW EVER, WE ARE UNABLE TO ACCEPT SUCH CONTENTION OF THE LEARNED DEP ARTMENTAL REPRESENTATIVE FOR THE SIMPLE REASON THAT WHEN THE TRANSFER PRICING OFFICER HAS FAILED TO REFER THE VALUATION T O THE DVO AND ON THE CONTRARY HAS PROCEEDED TO QUANTIFY THE VALUE OF THE MACHINERIES AT 50% BY ADOPTING A METHOD WHICH IS NO T IN CONFORMITY WITH THE STATUTORY PROVISIONS, IN OUR VI EW, THE MATTER CANNOT BE RESTORED BACK TO HIM AGAIN FOR GIVING HIM A SECOND 21 ITA 2483/MUM/2015 INNINGS. CONSIDERING THE FACT THAT 50% DISALLOWANCE MADE OUT OF THE PURCHASE VALUE OF MACHINERIES IS WITHOUT ANY BA SIS AND IN VIOLATION OF STATUTORY PROVISION, WE ARE INCLINED T O DELETE THE ADDITION MADE ON ACCOUNT OF ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER BY DISALLOWING 50% OF PURCHASE VALU E OF SECOND HAND MACHINERIES. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED.' 11. IN THE PRESENT CASE, WE OBSERVE THAT THE TPO HAS M ADE UPWARD ADJUSTMENT OF THE INTERNATIONAL TRANSACTIONS IN RES PECT OF VALUATION OF CAPITAL ASSET PURCHASED BY THE ASSESSEE FROM ITS AE S. THE SAID ADJUSTMENT HAS BEEN MADE BY THE TPO WITHOUT MAKING REFERENCE TO THE DVO AND REJECTING THE VALUATION REPORT FROM AN INDEPENDENT CHARTERED ENGINEER FURNISHED BY THE ASSESSEE. UNDIS PUTEDLY THE VALUATION REPORT WAS ACCEPTED BY THE CUSTOMS AUTHOR ITIES FOR THE PURPOSE OF LEVY OF IMPORT DUTY. WE DO NOT CONCUR WI TH THE ACTION OF TPO FOR MAKING SUCH ADJUSTMENT. THE ACT PROVIDES FO R REFERENCE TO VALUATION OFFICER FOR VALUATION OF CAPITAL ASSETS I N CASE OF ANY DOUBT. THE TPO HAS ERRED IN EXTRAPOLATING AVG. OPERATING M ARGIN OF INDIAN MANUFACTURES AND APPLYING CUP METHOD TO MARKUP IMPO RT PRICE AND DETERMINE ALP. IN SO FAR AS OBJECTION OF TPO WITH RESPECT TO VARIA TION IN THE BOOK VALUE OF CAPITAL ASSET AND THE PRICE AT WHICH ASSESSEE HA S PURCHASED THE CAPITAL ASSET IS CONCERNED, IT IS NOT NECESSARY THA T BOOK VALUE AND MARKET VALUE OF THE CAPITAL ASSET ARE AT PAR. OUR V IEW IS FURTHER FORTIFIED BY THE DECISION RENDERED BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF INTEL ASIA ELECTRONICS INC. INDIA V. ASSTT. DIT [2011] 9 TAXMANN.COM 197/46 SOT 48 (URO) (BANG.) . WE OBSERVED THAT THE DRP WHILE DEALING WITH THE OBJ ECTIONS OF THE ASSESSEE IN RESPECT OF VALUATION OF CAPITAL ASST HA S NOT PROPERLY APPRECIATED THE FACTS AND CIRCUMSTANCES. THE DRP HA S MERELY EXAMINED ONE ASPECT OF THE TRANSACTION RELATING TO PRICING OF CAPITAL 22 ITA 2483/MUM/2015 ASSET I.E. THE PRICE PAID BY ASSESSEE TO ACQUIRE OL D MACHINE VIZ-A-VIZ PRICE OF NEW MODEL OF SAME MACHINE. THE DRP HAS FAI LED TO TAKE HOLISTIC VIEW OF THE TRANSACTION. 12. THUS, IN VIEW OF THE FACTS OF THE CASE AND VARIOUS DECISIONS DISCUSSED ABOVE, WE SET ASIDE THE FINDINGS OF THE A UTHORITIES BELOW ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELE TE THE ADDITION MADE ON ACCOUNT OF ADJUSTMENT IN THE VALUE OF CAPITAL AS SET. ACCORDINGLY, GROUND NO. 3 RAISED IN THE APPEAL BY THE ASSESSEE I S ALLOWED. 16. IN VIEW OF THE AFORESAID FACTUAL AND LEGAL DISCUSS ION AND RESPECTFULLY FOLLOWING THE SAME, WE ARE OF THE VIEW THAT IF THE TPO WAS NOT SATISFIED WITH THE VALUATION REPORT BY AN INDEPENDE NT CHARTERED ENGINEER, THE TPO SHOULD HAVE REFERRED THE MATTER T O DVO WHO IS AN EXPERT TO DETERMINE THE VALUE OF SUCH CAPITAL ASSET . CONSIDERING THE RATION OF DECISIONS OF COORDINATE BENCH AS REFERRED ABOVE, WE DIRECT THE AO/TPO TO DELETE THE ADDITION/ ADJUSTMENT MADE ON A CCOUNT OF SALE OF COLOUR PRINTING MACHINE. 17. SO FAR AS ADJUSTMENT ON ACCOUNT OF TRANSACTION OF P UNCHING MACHINE TO AE IN DUBAI IS CONCERNED, THE LD. AR FOR THE ASSESS EE HAS NOT SPECIFICALLY SUBMITTED THAT ANY EXPERT REPORT OF VA LUER WAS OBTAINED NOR ANY SUPPORTING EVIDENCE IS BROUGHT TO OUR NOTICE, T O TAKE CONTRARY VIEW. NO CASE LAW IS BROUGHT OUR NOTICE. THEREFORE, WE AF FIRM THE FINDINGS OF THE LOWER AUTHORITIES WITH REGARD TO THE ADJUSTMENT ON INTERNATIONAL 23 ITA 2483/MUM/2015 TRANSACTION OF PUNCHING MACHINE. IN THE RESULT THES E GROUNDS OF APPEAL ARE PARTLY ALLOWED. 18. GROUND NO. 7 RELATES TO DISALLOWANCE OF INTEREST U NDER SECTION 201(1A) ON DELAYED PAYMENT OF TAX DEDUCTED AT SOURC E (TDS). DURING THE SUBMISSIONS THE LD. AR SUBMITS THAT HE IS NOT P RESSING THIS GROUND OF APPEAL. CONSIDERING THE SUBMISSIONS OF THE LD. A R FOR THE ASSESSEE THIS GROUND OF APPEAL IS DISMISSED AS NOT PRESSED. 19. GROUND NO. 8 RELATES TO NOT ADJUDICATING THE ISSUE REGARDING THE DEPRICIATION ON GOODWILL {GROUND NO. 7 BEFORE LD CI T(A)}. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE RAISED S PECIFIC GROUND OF APPEAL BEFORE LD CIT(A). THE LD CIT(A) DISMISSED TH E GROUND BY TAKING VIEW THAT THE SAME IS NOT EMANATING FROM THE ORDER OF ASSESSMENT. THE LD. AR SUBMITS THAT THIS GROUND MAY BE ADMITTED FOR ADJUDICATION AS ADDITIONAL GROUND OF APPEAL, THE FA CTS RELATING TO THIS GROUND OF APPEAL IS AVAILABLE ON RECORD AS THE AMOU NT OF GOODWILL IS ENTERED IN THE BLOCK OF ASSET AND NO NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. THE LD AR FURTHER SUBMITS THAT S IMILAR DEPRICIATION WAS ALLOWED BY LD CIT(A) IN APPEAL FOR AY 2008-09 A ND NO FURTHER APPEAL WAS FILED BY THE REVENUE. IN SUPPORT OF HIS SUBMISSION THE LD AR RELIED ON THE ORDER OF THE LD CIT(A)FOR AY 2008-09 DATED 24.03.2011. THE LD COUNSEL ALSO RELIED ON THE DECISIONS OF BOMB AY HIGH COURT IN 24 ITA 2483/MUM/2015 CIT VS PRUTHVI BROKERS & SHAREHOLDERS [2012] 349 IT R 336 (BOM) AND CIT VS B.G. SHIRKE CONSTRUCTION TECHNOLOGY (P) LTD [2017] 395 ITR 371(BOM). 20. ON THE OTHER HAND THE LD DR FOR THE REVENUE RELIED ON THE ORDER OF LD CIT(A). THE LD DR FOR THE REVENUE FURTHER SUBMITS T HAT IN CASE THE ADDITIONAL GROUND IS ADMITTED, THE ISSUE MAY BE RES TORED TO THE FILE OF AO/CIT(A) FOR ADJUDICATION AFRESH IN ACCORDANCE WIT H LAW. 21. WE HAVE CONSIDERED THE RIVAL CONTENTION OF BOTH TH E PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HA VE ALSO DELIBERATED ON VARIOUS CASE LAWS RELIED BY LEARNED AR OF THE AS SESSEE. WE HAVE NOTED THAT THE LD CIT(A) REJECTED THE CORRESPONDING GROUND OF APPEAL BY TAKING VIEW THAT THERE IS NO REFERENCE OF ISSUE IN THE ASSESSMENT ORDER. THE LD. AR FOR THE ASSESSEE VEHEMENTLY SUBM ITTED THAT THE FACTS RELATING TO THIS GROUND OF APPEAL IS AVAILABLE ON R ECORD AS THE AMOUNT OF GOODWILL IS ENTERED IN THE BLOCK OF ASSET AND NO NE W FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. THIS FACT IS NOT CONTROVER TED BY LD. DR FOR THE REVENUE. THUS, CONSIDERING THE FACTS THAT NO NEW FA CTS ARE REQUIRED TO BE BROUGHT ON RECORD AND THE DECISION OF BOMBAY HIG H COURT IN CIT VS PRUTHVI BROKERS & SHAREHOLDERS (SUPRA), WE ADMIT THIS GROUND OF APPEAL. 25 ITA 2483/MUM/2015 22. WE HAVE FURTHER SEEN THAT SIMILAR DEPRICIATION WAS ALLOWED BY LD CIT(A) IN APPEAL FOR AY 2008-09. CONSIDERING THE F ACTS THAT WE HAVE ADMITTED THE ADDITIONAL GROUND OF APPEAL, THEREFORE , WE RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE TH E CLAIM/ ISSUE AFRESH IN ACCORDANCE WITH LAW. NEEDLESS TO ORDER THAT BEFORE DECIDING THE CLAIM/ ISSUE THE ASSESSING OFFICER SHALL GRANT OPPORTUNITY OF HEARING TO THE ASSESSEE AND WOULD PASS THE ORDER IN ACCORDANCE WIT H LAW. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PU RPOSE. 23. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-04-2020. SD/- SD/- ( SHAMIM YAHYA ) ( PAWAN SINGH ) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 22 APRIL, 2019 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI