DCIT, New Delhi V. M/s. Fresenius Kabi Oncology Ltd., New Delhi

ITA 3495/DEL/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5414 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 18-07-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 09-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY I BARA
• Keywords: Capital asset; Depreciation; Transfer pricing; International transaction; Additional evidence; Wholly owned subsidiary; Capital receipt
• Section: 92B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.575/DEL/2014 ASSESSMENT YEAR: 2005-06 DCIT, CIRCLE - 11(1), NEW DELHI. VS. FRESENIUS KABI ONCOLOGY LTD., (EARLIER KNOWN AS M/S DABUR PHARMA LTD.), ECHELON INSTITUTIONAL AREA, PLOT NO.11, SECTOR- 32, GURGAON-122001 PAN : AABCD7720L (APPELLANT) (RESPONDENT) ITA NO.3495/DEL/2014 ASSESSMENT YEAR : 2007-08 DCIT, CIRCLE - 11(1), NEW DELHI. VS. FRESENIUS KABI ONCOLOGY LTD., (EARLIER KNOWN AS M/S DABUR PHARMA LTD.), B-310, SOM DUTT CHAMBERS- I, BHIKAJI CAMA PLACE, NEW DELHI-110066 PAN : AABCD7720L (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI SANJAY I. BARA, CIT-DR ASSESSEE BY : SHRI K. M. GUPTA, ADV. DATE OF HEARING : 5.7.2018 DATE OF PRONOUNCEMENT : 1 3.10.2018 O R D E R PER SUDHANSHU SRIVASTVA, JM : ITA NO. 575/DEL/2014 HAS BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER DATED 25.11.2013 PASSE D BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXIX, NEW DELHI FOR 2 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 ASSESSMENT YEAR 2005-06. ITA NO. 3495/DEL/2014 IS A LSO THE DEPARTMENTS APPEAL WHICH HAS BEEN PREFERRED AGAINS T THE ORDER DATED 3.3.2014 PASSED BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS)-XXIX, NEW DELHI FOR ASSESSMENT YEAR 2007- 08. BOTH THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE, THEY ARE BEING DISPOSED OF BY THIS COM MON ORDER. ITA NO.575/DEL/2014 : 2.0 THIS APPEAL PERTAINS TO ASSESSMENT YEAR 2005-06 . FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMP ANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUTICALS AN D DRUGS. THE ASSESSEE COMPANY WAS INCORPORATED IN THE YEAR 2 003. IN THE INITIAL STAGES, IT WAS THE PHARMACEUTICAL BUSINESS ARM OF DABUR INDIA LIMITED. IN THE YEAR 2003 IT WAS DEMERGED FR OM DABUR INDIA LIMITED IN ORDER TO POSITION DABUR PHARMA LIM ITED AS A SPECIALTY PHARMACEUTICAL COMPANY BASED ON ALLOPATHI C FORM OF MEDICINE. IT FILED ITS RETURN OF INCOME DECLARING INCOME OF RS.2,81,80,075/-. SINCE THE ASSESSEE HAD ENTERED I NTO INTERNATIONAL TRANSACTIONS DURING THE YEAR AS DEFIN ED U/S 92B OF THE I.T. ACT, 1961, THE ASSESSING OFFICER (AO) REFE RRED THE MATTER 3 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINI NG OF THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTION S. 2.1 DURING THE YEAR, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH TWO ASSOCIATED ENTERPRISES (AES) NAMELY DABUR ONCOLOGY PLC AND DABUR NEPARL PRIVATE LIMITED. DAB UR ONCOLOGY PRIVATE LIMITED IS A 100% SUBSIDIARY OF DA BUR PHARMA LIMITED AND DABUR NEPAL LIMITED IS A 80% SUBSIDIARY OF DABUR PHARMA LIMITED. DURING THE YEAR, THE ASSESSEE HAD UNDERTAKEN THE FOLLOWING INTERNATIONAL TRANSACTIONS:- S.NO. DESCRIPTION OF TRANSACTION METHOD VALUE 1 PURCHASE OF GOODS TNMM 104.00 LACS 2 SALE OF GOODS TNMM 203.87 LACS 3 PURCHASE OF CAPITAL GOODS TNMM 213.50 LACS 2.2 THE ASSESSEE HAD ADOPTED TRANSACTIONAL NET MARG IN METHOD (TNMM) WITH OPERATING PROFIT (OP) EARNED ON SALES A S THE PROFIT LEVEL INDICATOR (PLI). THE ASSESSEE COMPANY HAD SE LECTED 9 COMPANIES AS COMPARABLES. THE MEAN OPERATING PROFI T EARNED ON 4 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 SALES WAS 8%. SINCE THE OPERATING PROFIT MARGIN ON SALES OF THE ASSESSEE WAS AT 9% AS PER THE TRANSFER PRICING (TP) REPORT, IT WAS CONTENDED BY THE ASSESSEE THAT THE INTERNATIONAL TR ANSACTION UNDERTAKEN BY THE ASSESSEE WITH ITS ASSOCIATED ENTE RPRISES (AES) WERE AT ARMS LENGTH. HOWEVER, THE TPO WAS NOT SAT ISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE OBSERVE D THAT THE ASSESSEE, WHILE APPLYING THE MOST APPROPRIATE METHO D (MAM) CHOSEN BY IT HAD USED THE OVERALL COMPANY MARGINS A ND HENCE ARRIVED AT THE FIGURE OF 9%. HE OBSERVED THAT THE IN THE CASE OF THE ASSESSEE THE INTERNATIONAL TRANSACTIONS RELATIN G TO PURCHASES WAS RS.317.5 LACS AND THAT RELATING TO SALES WAS RS .203.87 LACS. IT WAS FURTHER OBSERVED BY THE TPO THAT OUT OF THE PURCHASES AN AMOUNT OF RS.213.5 LACS WAS RELATED TO PURCHASE OF CAPITAL GOODS WHICH WAS NOT PART OF THE PROFIT AND LOSS ACCOUNT A ND WAS CAPITALIZED IN THE SCHEDULE OF ASSETS. HE, THEREFO RE, HELD THAT THE QUANTUM OF INTERNATIONAL TRANSACTIONS IN THIS CASE DID NOT MERIT A COMPANYWIDE TNMM. SINCE THE TNMM ADOPTED BY THE ASSESSEE WAS NOT ACCEPTABLE TO THE TPO AND THE RE-SALE PRICE METHOD, COST PLUS METHOD OR THE PROFIT SPLIT METHOD COULD NOT BE APPLIED IN THE INSTANT CASE, HE HELD THAT THE ONLY METHOD THAT COU LD BE EXPLORED 5 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 IN THIS CASE WAS THE CUP METHOD. HE, THEREFORE, AS KED THE ASSESSEE SPECIFICALLY TO SEARCH FOR EXTERNAL COMPAR ABLES. HOWEVER, THE ASSESSEE WAS UNABLE TO PRODUCE ANYTHING ON RECO RD. THE TPO, THEREFORE, PROCEEDED TO DETERMINE THE ARMS LE NGTH PRICE OF THE INTERNATIONAL TRANSACTIONS. 2.2.1. THE TPO OBSERVED THAT THE ASSESSEE HAD PURCH ASED ONE LIPHOLISER FROM DABUR ONCOLOGY PLC, WHICH IS IT S SUBSIDIARY, ON 09.08.2004. THIS PRODUCT WAS PURCHASED BY DABUR ONCOLOGY PLC FROM AN UNRELATED COMPANY BY THE NAME OF USIFRO ID ON 31.10.2000. USIFROID HAD INVOICED DABUR ONCOLOGY P LC FOR AN AMOUNT OF RS.27,75,000/- FRF (FRENCH FRANCS). DABU R ONCOLOGY PLC HAD, IN TURN, INVOICED THE ASSESSEE FOR AN AMOU NT OF GBP 2,50,000/-. AFTER CONVERTING THE SAME TO INDIAN RU PEES, THE PURCHASE PRICE OF THE LIPHOLISER IN THE HANDS OF DA BUR ONCOLOGY PLC CAME TO RS.1,66,22,250/-. DABUR ONCOLOGY PLC H AD SOLD THE LIPHOLISER TO THE ASSESSEE ON 09.08.2004 WHOSE CONVERSION RATE IN INDIAN RUPEE CAME TO RS.2,13,62,500/-. THU S, AS PER THE TPO, THE SAID LIPHOLISER WAS PRODUCED AT A HIGHER V ALUE BY THE ASSESSEE THAN PAID BY THE OVERSEAS ENTERPRISE TO TH E UNRELATED 6 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 PARTY. HE FURTHER OBSERVED THAT THE LIPHOLISER WAS IN THE HANDS OF DABUR ONCOLOGY PLC FROM 31.10.2000 TILL 09.08.20 04. THE RELATIVE BLOCK RELATED TO THREE FULL FINANCIAL YEAR S VIZ. 2001-02, 2002-03 AND 2003-04. ON BEING QUESTIONED BY THE TP O, IT WAS EXPLAINED BY THE ASSESSEE THAT THE MACHINE WAS NOT PUT TO USE BY THE OVERSEAS ASSOCIATE. HOWEVER, NOTHING WAS BROUGH T ON RECORD TO SHOW THAT THE LIPHOLISER WAS NOT PUT TO USE. TH E TPO NOTED THAT AS PER THE CORPORATE TAXATION STRUCTURE OF THE UNITED KINGDOM, DEPRECIATION WAS ALLOWABLE ON SUCH PLANT A ND MACHINERY @ 20%. SINCE THE SAID MACHINE (LIPHOLISE R) WAS PURCHASED AT A PRICE OF RS.1,66,22,250/-, HE COMPUT ED THE DEPRECIATION OF THE SAID INSTRUMENT YEAR-WISE AND A RRIVED AT A FIGURE OF RS.85,10,592/- BEING THE DEPRECIATED VALU E IN THE YEAR 2003-04. SINCE THERE WAS NO SUBMISSION BY THE ASSE SSEE ON THIS ISSUE EXCEPT STATING THAT THE SAID PRODUCT WAS USED BY THE OVERSEAS ASSOCIATE FROM 2000 TILL 2004 AND NO CAPIT AL ALLOWANCE WAS TAKEN THEREON AND THE ITEM WAS SOLD AT THE VALU E AT WHICH IT WAS PROCURED, THE TPO, REJECTING THE SUBMISSIONS MA DE BY THE ASSESSEE DETERMINED THE VALUE OF THE LIPHOLISER AT RS.85,10,592/- AS AGAINST RS.2,13,50,000/- DETERMINED BY THE ASSES SEE AND 7 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 MADE UPWARD ADJUSTMENT OF RS.85,10,592/- ON ACCOUNT OF PURCHASE OF LIPHOLISER. 2.3 THE TPO FURTHER OBSERVED THAT THE ASSESSEE HAD SOLD PACLITAXEL OF 3.6 KG FOR RS.173.36 LACS TO ITS ASSO CIATED ENTERPRISE NAMELY DABUR ONCOLOGY PLC. SINCE THE ASSESSEE HAD NOT GIVEN ANY COMPARATIVE RATES, THE TPO TRIED TO FIND OUT TH E EXPORT RATES OF PACLITAXEL FROM INDIA DURING THE RELEVANT PERIOD AND USED THE DATA FROM THE DATABASE OF THE EXPORT RATES MAINTAIN ED BY M/S INTERNATIONAL BUSINESS INFORMATION SERVICES, EAST B OMBAY 400068. AFTER ANALYZING THE RATES WITH THAT OF THE ASSESSEE AT FOB VALUE, HE DETERMINED THE CORRESPONDING FOB RATE S, WHICH ARE AS UNDER:- PARTY DATE QUANTITY FOB VALUE (INR) FOB VALUE PER UNIT (INR) DABUR ONCOLOGY PLC 17.05.2004 1200 GRAMS 44,74,954 3729 DABUR ONCOLOGY PLC 25.08.2004 1200 GRAMS 46,94,590 3912 DABUR ONCOLOGY PLC 27.12.2004 1200 GRAMS 45,72,425 3810 TOTAL 1,37,41,969 8 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 2.3.2 SINCE THE FOB VALUE FOR UNIT OF EXPORT SALES MADE BY THE ASSESSEE WERE LESS THAN THE EXPORT RATES OF THE THIRD PARTIES, HE ISSUED A SHOW-CAUSE NOTICE ASKING THE ASSESSEE T O EXPLAIN THE SAME. THEREAFTER, THE TPO COMPUTED THE DIFFERENCES IN RATES OF EXPORT MADE BY THE ASSESSEE AND THAT MADE BY THE UN RELATED PARTIES AS UNDER:- DATE OF CONTROLLED SALE DATE OF UNCONTROLLED SALE QUANTITY OF CONTROLLED SALES FOB PER GRAM OF CONTROLLED SALE (RS.) FOB PER GRAM OF UNCONTROLLED SALE (RS.) DIFFERENCE (DIFFERENCE IN FOB PER UNIT X QUANTITY) 17.05.2004 06.05.2004 1200 GRAMS 3729 6491.53 3315036 25.08.2004 20.07.2004 1200 GRAMS 3912 6596.36 3221232 27.12.2004 20.07.2008 1200 GRAMS 3810 6596.36 3343632 TOTAL 98,79,900 2.3.3 THE TPO, ACCORDINGLY, MADE AN ADJUSTMENT OF RS.98,79,900/- ON ACCOUNT OF SALE OF PACLITAXEL. 2.4 WITH REFERENCE TO THE INTERNATIONAL TRANSACTIO N RELATED TO SALE OF DISODIUM PAMIDRONATE, THE TPO OBSERVED T HAT THE ASSESSEE HAD SOLD 4.55 KGS OF THE SAME FOR RS.9.95 LACS TO ITS AES. AS THE ASSESSEE WAS NOT ABLE TO GIVE ANY COM PARATIVE RATES, THE TPO OBTAINED THE DATA FROM THE DATABASE OF EXPO RT RATES 9 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 MAINTAINED BY M/S INTERNATIONAL BUSINESS INFORMATIO N SERVICES AND DETERMINED THE UPWARD ADJUSTMENT OF RS.67,35,90 2/- BEING THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TIONS ON ACCOUNT OF DISODIUM PAMIDRONATE. 2.5 SIMILARLY, THE TPO OBSERVED THAT THE ASSESSEE HAD PURCHASED 2000 KG OF MCS (METHYLENE CHLORIDE SOLUBL E EXTRACT) AT RS.5200 PER KG FROM ITS ASSOCIATED ENTERPRISE, D ABUR NEPAL AND PAID RS.1,04,00,000/- FOR THE SAME. SINCE NO S UBSTANTIAL DETAILS WERE SUBMITTED BY THE ASSESSEE, THE TPO AGA IN RESORTED TO THE TAKING DATE FROM THE DATA BASE OF INTERNATIONAL BUSINESS SERVICES ND DETERMINED THE LANDED COST OF PURCHASE AT RS.6048/- PER KG. AFTER CONSIDERING THE PRO-RATA PRICE, THE TPO DETERMINED THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION AT RS.1,03,43,105/-. 2.6 THUS, THE TPO MADE ADDITION OF RS.3,97,98,315/- TO THE INTERNATIONAL TRANSACTIONS. THE ASSESSING OFFICER, THEREAFTER MADE ADDITION OF RS.3,97,98,315/- ON ACCOUNT OF ADJ USTMENT TO THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TION. 10 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 2.7 IN APPEAL, THE LD. CIT (APPEALS) DELETED THE U PWARD ADJUSTMENTS MADE BY THE TPO/ASSESSING OFFICER IN RE SPECT OF THE PURCHASE OF LIPHOLISER MACHINE AS WELL AS THE ADDIT ION ON ACCOUNT OF SALE OF PACLITAXEL DRUG AND DISODIUM PAMIDRONATE . THE LD. CIT (A) ALSO DELETED THE ADDITION MADE ON ACCOUNT O F MCS EXTRACT. 2.8 AGGRIEVED WITH SUCH ORDER OF THE LD. CIT (A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.3,97,98,315/- MADE BY ADJUSTMENTS TO THE ARMS L ENGTH PRICE. 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A)- XXIX , NEW DELHI BEING CONTRARY TO THE FACTS ON RECORD AND THE SETTL ED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. 3.0 THE LD. CIT DR STRONGLY SUPPORTED THE ORDER OF THE TPO. HE SUBMITTED THAT THERE WAS NO PROPER COMPLIANCE BEFOR E THE ASSESSING OFFICER. IT WAS SUBMITTED THAT ALTHOUGH THE LD. CIT (A) HAD CALLED FOR A REMAND REPORT FROM THE ASSESSING O FFICER, HE DID 11 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 NOT PROPERLY CONSIDER THE SAME. IT WAS SUBMITTED TH AT THE ORDER OF THE LD. CIT (A) BE REVERSED AND THAT OF THE ASSE SSING OFFICER/TPO BE RESTORED. IN HIS ALTERNATE CONTENTI ON, HE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FI LE OF THE ASSESSING OFFICER/TPO. 4.0 THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE LD. CIT (A). RE FERRING TO PAGE 167 OF THE PAPER BOOK, HE SUBMITTED THAT THE REPORT OF THE ACCOUNTANT TO FRESENIUS KABI ONCOLOGY LTD. WAS BROU GHT TO THE NOTICE OF THE LD. CIT (A) ACCORDING TO WHICH, THE L YOPHILISER MACHINE WAS CAPITALIZED BY DABUR PLC UNDER TANGIBLE FIXED ASSETS AND THAT NO DEPRECIATION WAS CHARGED ON THE LYOPHIL ISER. HE SUBMITTED THAT FULL DETAILS WERE GIVEN BEFORE THE L D. CIT (A) AND THE LD. CIT (A) HAD CALLED FOR THE REMAND REPORT FR OM THE ASSESSING OFFICER AND AFTER CONSIDERING THE REMAND REPORT HAD DELETED ALL THE FOUR ADDITIONS. IT WAS PRAYED THAT THE GROUNDS RAISED BY THE REVENUE BE DISMISSED. 12 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 ITA NO.3495/DEL/2014 : 5.0 THIS APPEAL PERTAINS TO ASSESSMENT YEAR 2007-0 8. FOR THIS YEAR, THE RETURN WAS FILED DECLARING INCOME OF RS. 5,58,74,312/-. SINCE THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTION DURING THE YEAR AS DEFINED U/S 92B OF T HE ACT, THE ASSESSING OFFICER (AO) MADE A REFERENCE TO THE TRAN SFER PRICING OFFICER (TPO) U/S 92CA(1) OF THE INCOME TAX ACT, 19 61 (HEREINAFTER CALLED THE ACT). THE TPO RECOMMENDE D TRANSFER PRICING ADJUSTMENT OF RS. 9,25,91,742/- ON ACCOUNT OF THE FOLLOWING TRANSACTIONS:- (I) CORPORATE GUARANTEE GIVEN TO ABN AMRO BANK FOR FOREIGN AES RS. 7659.70 LAKH. ARMS LENGTH PRICE (ALP) C OMPUTED BY THE ASSESSEE WAS NIL UNDER TNMM METHOD BUT THE TPO PROPOSED AN ADJUSTMENT OF RS. 3,63,83,575/- BY ADOPTING INTE REST RATE OF 4.75%. (II) LOAN GIVEN TO FOREIGN AES RS. 5735.76 LAKH. THE ASSESSEE HAD COMPUTED THE ALP BY APPLYING INTEREST RATE OF 7 % BUT THE TPO PROPOSED AN ADDITION OF RS. 5,62,088,167/- BY A DOPTING INTEREST RATE OF 14%. APART FROM THIS, THE ASSESSI NG OFFICER ALSO MADE A DISALLOWANCE OF RS. 20,92,221/- DEPRECIATION ON FIXED 13 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 ASSETS ON ACCOUNT OF CAPITAL SUBSIDY RECEIVED BY H OLDING THAT THE FIXED ASSETS WERE TO BE REDUCED BY THE AMOUNT OF SU BSIDY. (III) THE ASSESSING OFFICER ALSO MADE CERTAIN ADDIT IONS/ DISALLOWANCES ON ACCOUNT OF LATE DEPOSIT OF PF/ESI RATES AMOUNTING TO RS. 46,519/-, DISALLOWANCE OF DEPRECI ATION ON UPS AMOUNTING TO RS. 63,803/- AND DIFFERENCE IN VALUATI ON OF CLOSING STOCK AMOUNTING TO RS. 30,4,6090/-. 5.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. COMM ISSIONER OF INCOME TAX (A) CHALLENGING THE TRANSFER PRICING ADJUSTMENTS AS WELL AS THE ADDITIONS AND DISALLOWANCES ON CORPORAT E TAX GROUNDS. THE LD. COMMISSIONER OF INCOME TAX (A) PA RTLY ALLOWED THE ASSESSEE BY RESTRICTING THE ADJUSTMENT ON ACCOU NT OF CORPORATE BANK GUARANTEE AND INTEREST ON LOAN TO TH E TUNE OF RS. 66,76,850/- OUT OF THE TOTAL ADDITION OF RS. 9,25,9 1,742/-. THE LD. COMMISSIONER OF INCOME TAX (A) ALSO DELETED ANO THER DISALLOWANCE OF RS. 20,92,221/- WHICH HAD BEEN MADE BY THE ASSESSING OFFICER BY REDUCING THE WRITTEN DOWN VALU E OF THE ASSETS BY THE AMOUNT OF CAPITAL SUBSIDY RECEIVED BY THE WEST BENGAL GOVERNMENT. 14 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 5.2 AGGRIEVED WITH THIS ORDER OF THE LD. COMMISSION ER OF INCOME TAX (A), THE DEPARTMENT IS BEFORE THE ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITI ON TO THE TUNE OF RS. 66,76,850/- OUT OF TOTAL ADDITION O F RS. 9,25,91,742/- MADE ON ACCOUNT OF ADJUSTMENT IN ALP IN RESPECT OF CORPORATE BANK GUARANTEE AND INTEREST ON LOAN. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN DELETING THE DISALLOW ANCE OF RS. 20,292,221/- MADE BY REDUCING THE WDV OF ASSETS BY THE AMOUNT OF SUBSIDY RECEIVED FROM THE WEST BENGAL GOVERNMENT. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A)-XXIX, NEW DELHI BEING CONTRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW, BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6.0 THE LD. CIT DR SUBMITTED THAT THE ASSESSEE HAD PROVIDED CORPORATE GUARANTEE TO DABUR UK FOR WHICH IT HAD NOT CHARGED ANY GUARANTEE FEE AND THE ASSESSEE HAD BENC HMARKED THE SAID TRANSACTION UNDER TNMM. IT WAS FURTHER SU BMITTED THAT THE TPO HAD CALLED FOR INFORMATION U/S 133(6) OF TH E ACT FROM THE STATE BANK OF INDIA WHICH HAD SUBMITTED THAT IT WOU LD CHARGE A FEE OF 2.75% ON SIMILAR TRANSACTION. IT WAS FURTHE R SUBMITTED 15 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 THAT THE TPO HAD ALSO DETERMINED THAT ADDITIONAL CH ARGE OF 2% SHOULD BE LEVIED FOR THE RISK PROFILE OF DABUR UK C ONSIDERING THE FACT THAT THE ASSESSEE HAD NOT TAKEN ANY SECURITY I N RETURN FOR PROVIDING GUARANTEE TO ITS AE. ACCORDINGLY, AN ADJ USTMENT OF 4.75% WAS MADE. HOWEVER, THE LD. COMMISSIONER OF I NCOME TAX(A) HELD THAT DABUR UK HAD SAVED INTEREST OF 1% ON ACCOUNT OF TAKING CORPORATE GUARANTEE FROM THE ASSESSEE AND WAS OF THE OPINION THAT 0.5% SHOULD BE CHARGED BY THE ASSESSEE AS GUARANTEE FEE. IT WAS SUBMITTED THAT BY ADOPTING 0 .5% AS CORPORATE GUARANTEE FEES, THE LD. COMMISSIONER OF I NCOME TAX (A) HAD ERRED BECAUSE HE HAD NOT CONSIDERED THE RISK PR OFILE OF DABUR UK/THAILAND AND ALSO HAD NOT TAKEN INTO CONSI DERATION THE FINANCIAL PERFORMANCE AND CREDIT RATING OF THE AES. IT WAS FURTHER SUBMITTED THAT THE LD. COMMISSIONER OF INCO ME TAX (A) HAD ALSO ARBITRARILY SPLIT THE INTEREST SAVING OF 1 % BETWEEN AES AND THE ASSESSEE WITHOUT ANALYSING THE FUNCTIONS PE RFORMED, ASSETS UTILIZED AND RISK ASSUMED BY EACH OF THE TRA NSACTING ENTITIES. RELIANCE WAS PLACED ON THE DECISION OF I TAT MUMBAI BENCH IN MAROCO LTD. REPORTED IN TS-411-ITAT-2016 ( MUM)-TP FOR THE PROPOSITION THAT THERE WAS NO DIFFERENCE BE TWEEN A BANK 16 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 OR A CORPORATE ENTITY AS FAR AS CORPORATE GUARANTEE IS CONCERNED AND BOTH HAVE TO CONSIDER THE FUNCTIONS PERFORMED, ASSETS EMPLOYED AND RISKS ASSUMED. 6.1 WITH REFERENCE TO THE INTEREST ON LOAN, IT WAS SUBMITTED THAT THE ASSESSEE HAD PROVIDED LOAN TO ITS AES AT L IBOR +1.1% TO DABUR UK AND AT 7% TO DABUR THAILAND. IT WAS SUBMI TTED THAT THE TPO HAD REJECTED THE APPROACH ADOPTED BY THE AS SESSEE AS THE LOAN TRANSACTION WAS BENCHMARKED USING FIXED DEPOSITS/CORPORATE DEPOSITS ETC. WHICH WERE HIGHLY LIQUID IN NATURE AS AGAINST THE LOAN GIVEN TO THE AES. IT WA S SUBMITTED THAT THE TPO HAD BEEN CORRECT IN TAKING THE PREVAIL ING INTEREST RATE OF FOREIGN CURRENCY @400 BPS AND IN ALSO ADDIN G A TRANSACTION OF 300 BPS TOWARDS PREMIUM PAYABLE ON E NTERING INTO FORWARD CONTRACTS. IT WAS SUBMITTED THAT THE INTER EST RATE OF 14% HAD BEEN CORRECTLY APPLIED BUT THE LD. COMMISSIONER OF INCOME TAX (A) HAD ERRED IN REJECTING THE APPROACH OF THE TPO BY STATING THAT FOREIGN LOAN TO RESIDENT PERSON CANNOT BE COMP ARED WITH FOREIGN LOAN TO A NON-RESIDENT PERSON. IT WAS FURT HER SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAD ERR ED IN RELYING ON JUST ONE RATE GIVEN BY ABN AMRO BANK AND IN NOT CONSIDERING 17 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 THE GENERAL MARKET RATE. IT WAS ALSO SUBMITTED THA T THE LD. COMMISSIONER OF INCOME TAX (A) HAD NOT GIVEN DUE CONSIDERATION TO FACTS LIKE PURPOSE OF LOAN, TENURE OF LOAN, CURR ENCY ETC. 6.2 COMING TO THE SECOND ISSUE REGARDING DELETION OF DISALLOWANCE OF RS.20,92,221/- BY REDUCING THE WRIT TEN DOWN VALUE OF THE ASSETS BY THE AMOUNT OF SUBSIDY RECEIV ED FROM THE WEST BENGAL GOVERNMENT, IT WAS SUBMITTED THAT THE ASSESSEE HAD RECEIVED A STATE CAPITAL INVESTMENT SUBSIDY WHICH W AS RECEIVABLE ON EXPANSION OF INDUSTRIAL UNITS AND THIS AMOUNT HA D BEEN CREDITED BY THE ASSESSEE TO THE CAPITAL RESERVE ACC OUNT IN THE BOOKS OF ACCOUNTS. IT WAS SUBMITTED THAT THE ASSES SING OFFICER HAD ANALYSED WHETHER SUCH SUBSIDY WAS TO BE CONSIDE RED AS REVENUE IN NATURE OR CAPITAL IN NATURE. IT WAS ALS O SUBMITTED THAT THE ASSESSEE HAD NOT CREDITED THE SUBSIDY EITH ER TO ITS INCOME ACCOUNT NOR HAD REDUCED THE SUBSIDY FROM THE CAPITAL COST AND, THEREFORE, THE ASSESSING OFFICER TREATED THE SAME AS REVENUE RECEIPT. IT WAS SUBMITTED THAT THE LD. COM MISSIONER OF INCOME TAX (A) HAD ERRED IN DELETING THE ADJUSTMENT BECAUSE THE APPROACH OF THE ASSESSEE WAS AGAINST THE ACCEPTED A CCOUNTING 18 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 TREATMENT FOR SUBSIDIES. IT WAS SUBMITTED THAT THE ASSESSING OFFICER WAS CORRECT IN CONSIDERING THE SAME AS REVE NUE RECEIPT. 7.0 IN RESPONSE, THE LD. AR SUBMITTED THAT AS FAR AS THE DEPARTMENTS GROUND CHALLENGING THE RESTRICTION OF ADDITION WITH RESPECT TO CORPORATE GUARANTEE WAS CONCERNED, THE A SSESSEE HAD PROVIDED A LETTER FROM RBS BANK (FORMERLY ABN AMRO BANK) WHEREIN IT HAD BEEN MENTIONED THAT THE SAME LOAN CO ULD HAVE BEEN TAKEN AT LIBOR +1.5% IN THE ABSENCE OF CORPORA TE GUARANTEE AND, THUS, DABUR UK GOT THE BENEFIT OF 1% AND THEREFORE, GUARANTEE FEE SHOULD NOT EXCEED 0.5%. T HE LD. AR PLACED EXTENSIVE RELIANCE ON THE ORDER OF THE LD. C OMMISSIONER OF INCOME TAX (A) AND ALSO PLACED RELIANCE ON A NUMBER OF JUDICIAL PRECEDENTS/DECISIONS OF THE ITAT IN FAVOUR OF HIS C ONTENTION THAT THE CORPORATE GUARANTEE @ 0.5% HAD BEEN CORRECTLY A DJUDICATED BY THE LD. COMMISSIONER OF INCOME TAX (A). 7.1 WITH REFERENCE TO THE INTEREST ON LOAN, IT WAS SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (A), WHILE ALLOWING RELIEF TO THE ASSESSEE, HAD POINTED OUT THAT THE TPO HAD N OT SATISFIED THE CONDITIONS FOR APPLYING THE CUP METHOD AND HAD ALSO DULY CONSIDERED THE RATE QUOTED BY THE ABN AMRO BANK WIT H AND 19 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 WITHOUT CORPORATE GUARANTEE AND HAD ACCORDINGLY HEL D THAT THE LOANS ADVANCED TO DABUR UK AND DABUR THAILAND WERE TO BE BENCHMARKED USING LIBOR +1.5%. IT WAS SUBMITTED TH AT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) DES ERVED TO BE UPHELD ON THIS ISSUE. 7.2 WITH RESPECT TO THE DEPARTMENTS GROUND CHALLE NGING DISALLOWANCE OF RS. 20,92,221/- MADE BY RECOMPUTIN G THE WRITTEN DOWN VALUE OF THE ASSETS BY THE AMOUNT OF S UBSIDY RECEIVED FROM THE WEST BENGAL GOVERNMENT, IT WAS SU BMITTED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED SUBSIDY OF RS. 150 LAKH UNDER THE WEST BENGAL INCENTIVE SCHEME 2000 AND THE ASSESSEE HAD TREATED THIS SUBSIDY AS CAPITAL RECEIPT WHICH WAS VERY MUCH IN ACCORDANC E WITH THE NATURE OF SUBSIDY AND ALSO BY PLACING RELIANCE ON V ARIOUS JUDICIAL PRECEDENTS. THE LD. AR PLACED RELIANCE ON A NUMBER OF DECISIONS OF THE ITAT AS WELL AS JUDGMENTS OF THE HONBLE HIG H COURTS IN SUPPORT OF HIS CONTENTION THAT THE SUBSIDY IN QUEST ION WAS APPROPRIATELY CONSIDERED AS BEING CAPITAL IN NATURE BY THE ASSESSEE AND THE SAME SHOULD NOT HAVE BEEN DEDUCTED FROM THE 20 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 WRITTEN DOWN VALUE OF ASSETS. IT WAS PRAYED THAT T HE DEPARTMENTS APPEAL BE DISMISSED. 8.0 WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO P ERUSED THE MATERIAL ON RECORD. WE TAKE UP ITA NO. 575/DEL /2014 PERTAINING TO ASSESSMENT YEAR 2005-06 FIRST. THE F IRST LIMB OF DISPUTE BEFORE US IN THE TRANSFER PRICING ADJUSTMEN T PERTAINS TO PURCHASE OF LIPHOLISER MACHINE. IT IS A FACT BORNE OUT FROM RECORDS THAT THE ASSESSEE HAD IMPORTED LIPHOLISER M ACHINE IN 2004 AND HAD PAID CUSTOM DUTY THEREON AS PER THE P REVAILING CUSTOM RATES. THE ASSESSEE HAD SUBMITTED BEFORE TH E LD. COMMISSIONER OF INCOME TAX (A) THAT THIS LIPHOLISER WAS NEVER PUT TO USE BY DABUR UK AND THE SAME WAS IN ABSOLUTE LY NEW CONDITION. IT WAS ALSO HIGHLIGHTED BY THE ASSESSEE THAT THE CUSTOM AUTHORITIES HAD NOT DISPUTED THE DECLARED IM PORT PRICE OF THE MACHINE. THE CLAIM OF THE LIPHOLISER HAVING NO T BEEN PUT TO USE IN UK WAS ALSO SUPPORTED BY A CERTIFICATE FROM THE UK BASED CHARTERED ACCOUNTANT AND THE LD. COMMISSIONER OF IN COME TAX (A) HAS ACCEPTED THE SAME AFTER CALLING FOR COMMENT S FROM THE AO. APART FROM THIS, THE LD. COMMISSIONER OF INCOM E TAX (A) HAS ALSO CONSIDERED THE FITNESS CERTIFICATE OF THE LIPH OLISER FROM A UK 21 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 BASED CHARTERED ENGINEER WHEREIN IT HAS BEEN MENTIO NED THAT THIS MACHINE COULD BE USED FOR A FURTHER PERIOD OF 15 OR MORE YEARS. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ALSO HELD THAT THE CUSTOM VALUATION WAS AN ACCEPTABLE METHOD OF VALUATION AND, ACCORDINGLY, FOUND NO REASON TO UPHOLD THE TRA NSFER PRICING ADJUSTMENT AS PROPOSED BY THE TPO. ALTHOUGH THE DE PARTMENT HAS ARGUED AT LENGTH AGAINST THE ACTION OF THE LD. COMMISSIONER OF INCOME TAX (A) IN DELETING TRANSFER PRICING ADJU STMENT WITH REGARD TO THE IMPORT OF LIPHOLISER MACHINE, NO DEFE CT COULD BE POINTED OUT IN THE DOCUMENTS WHICH HAD BEEN RELIED UPON BY THE LD. COMMISSIONER OF INCOME TAX (A) WHILE DELETING T HE ADJUSTMENT. THE DEPARTMENT ALSO DOES NOT HAVE ANY COMPARATIVE CASE TO SUPPORT ITS STAND ON THE ISSUE AND, THEREFO RE, IT IS OUR CONSIDERED OPINION THAT THE LD. COMMISSIONER OF INC OME TAX (A) TOOK A REASONED AND LOGICAL VIEW OF THE WHOLE ISSUE BY PLACING RELIANCE ON THE VARIOUS EVIDENCES WHICH HAD BEEN AC CEPTED BY HIM AS ADDITIONAL EVIDENCES UNDER RULE 46A OF THE I NCOME TAX RULES. IT IS ALSO UNDISPUTED THAT THE LD. COMMISSI ONER OF INCOME TAX (A) HAD DULY OBTAINED THE COMMENTS OF THE ASSES SING OFFICER THROUGH A REMAND REPORT ON THESE ADDITIONAL EVIDENC ES BEFORE 22 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 PROCEEDING TO ADJUDICATE THE ISSUE. SINCE THERE IS NOTHING ON RECORD WHICH WOULD JUSTIFY DRAWING AN ADVERSE INFER ENCE, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX(A) ON THIS ISSUE AND WE UPHOLD THE AC TION IN DELETING THE TRANSFER PRICING ADJUSTMENT ON THIS AC COUNT. 8.1 COMING TO THE SECOND LIMB OF THE TRANSFER PRIC ING ADJUSTMENT WHICH PERTAINS TO SALE OF PACLITAXEL DRU G AND DISODIUM PAMIDRONATE, IT IS SEEN THAT THE ASSESSEE HAD APPLIED THE TNMM AS THE MOST APPROPRIATE METHOD AND THE NET MARGIN WAS COMPUTED AT 9% WHEREAS THE NET MARGIN OF THE CO MPARABLE COMPANIES WAS 8% ONLY. HOWEVER, THE TPO WENT ON TO REJECT THE TNMM METHOD AND APPLIED CUP METHOD AFTER OBTAINING INFORMATION FROM INTERNATIONAL BUSINESS INFORMATION SERVICES (IBIS) AND PROCEEDED TO COMPUTE THE FOB PRICE OF PA CLITAXEL AND DISODIUM PAMIDRONATE SOLD BY THIRD PARTY TO ARGENTI NA AND BRAZIL. THE LD. COMMISSIONER OF INCOME TAX (A), WH ILE ALLOWING RELIEF TO THE ASSESSEE, HAS NOTED THAT NO COMPARISO N HAD BEEN DONE BY THE TPO IN RELATION TO THE SALE OF PACLITAX EL AND DISODIUM PAMIDRONATE WITH UNCONTROLLED TRANSACTION. THE LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT A MERE PRICE 23 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 COMPARISON OF UNCONTROLLED TRANSACTION OF ASSESSEE WITH ANOTHER UNCONTROLLED TRANSACTION AS TAKEN FROM DATA BASE WA S A GROSS ERROR AS FAR AS THE APPLICATION OF CUP METHOD WAS T O BE CONSIDERED. THE LD. COMMISSIONER OF INCOME TAX (A) HAS FURTHER OBSERVED THAT THE TPO HAS USED THE DATA BASE OF EXP ORT RATES MAINTAINED BY IBIS WHICH DO NOT SATISFY STRINGENT C ONDITION OF COMPARABILITY REGARDING CUP METHOD. LD. COMMISSION ER OF INCOME TAX (A) HAS ALSO TAKEN INTO ACCOUNT THE FACT THAT THE PRICING OF A PARTICULAR DRUG IS GREATLY INFLUENCED BY THE FACTOR THAT WHETHER IT IS GENERIC OR OTHERWISE AS WELL AS QUANT ITY OF DRUGS, GEOGRAPHICAL LOCATION OF THE BUYER ETC. THE LD. CO MMISSIONER OF INCOME TAX (A) HAS ALSO NOTED THAT THE ASSESSEE WAS ABLE TO DEMONSTRATE THAT BY APPLYING TNMM THAT ITS MARGIN W AS BETTER THAN THOSE OF THE COMPARABLE COMPANIES. THE RELEVA NT OBSERVATIONS OF THE LD. CIT (A) ARE REPRODUCED HERE IN UNDER FOR A READY REFERENCE: 14.1 THE APPELLANT HAS APPLIED TNMM METHOD FOR JUSTIFICATION OF ARMS LENGTH PRICE FOR SALE OF PAC LITAXEL DRUG AND DISODIUM PAMIDRONATE FOR RS 173,36,291/- AND RS.9,95,076/- RESPECTIVELY TO ITS FOREIGN AE. AS PE R TP REPORT OF THE APPELLANT, THE APPELLANT HAD EARNED A NET MA RGIN OF 9% 24 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 WHICH IS HIGHER THAN AVERAGE NET MARGINS OF 8% EARN ED BY COMPARABLE COMPANIES. IT IS SEEN THAT THE LD. TPO H AD CHOSEN TO APPLY CUP METHOD AS AGAINST TNMM METHOD APPLIED BY THE APPELLANT AND HE HAS USED DATA OF EX PORT RATES MAINTAINED BY M/S INTERNATIONAL BUSINESS INFO RMATION SERVICES (IBIS), 104-A, RAJ UMANG, ASHOKVAN, DAHISA R, EAST BOMBAY-400068. AT THE STAGE OF APPLICATION OF METHO D, IT IS IMPORTANT TO ADHERE TO RULES ON SELECTION OF MOST A PPROPRIATE METHOD (MAM). THE APPELLANT CONTENDED THAT APPLICAT ION OF CUP METHOD REQUIRES HIGH DEGREE OF COMPARABILITY AN D FAR DETERMINATION FOR PROPER APPLICATION OF CUP. IT IS STATED THAT THE LD TPO FAILED TO CONDUCT THE COMPARABILITY OF C ONTROLLED TRANSACTION WITH UNCONTROLLED TRANSACTION WITHIN TH E REQUIREMENT OF RULE 10(B)(2). THE RULE 10(B)(2) REQ UIRES COMPARISON ON FOLLOWING FACTORS: 'FOR THE PURPOSES OF SUB-RULE (1), THE COMPARABILIT Y OF [AN INTERNATIONAL TRANSACTION OR A SPECIFIED DOMEST IC TRANSACTION] WITH AN UNCONTROLLED TRANSACTION SHALL BE JUDGED WITH REFERENCE TO THE FOLLOWING, NAMELY:- (A) THE SPECIFIC CHARACTERISTICS OF THE PROPERTY TR ANSFERRED OR SERVICES PROVIDED IN EITHER TRANSACTION; (B) THE FUNCTIONS PERFORMED, TAKING INTO ACCOUNT AS SETS EMPLOYED OR TO BE EMPLOYED AND THE RISKS ASSUMED, B Y THE RESPECTIVE PARTIES TO THE TRANSACTIONS; 25 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 (C) THE CONTRACTUAL TERMS (WHETHER OR NOT SUCH TERM S ARE FORMAL OR IN WRITING) OF THE TRANSACTIONS WHICH LAY DOWN EXPLICITLY OR IMPLICITLY HOW THE RESPONSIBILITIES, RISKS AND BENEFITS ARE TO BE DIVIDED BETWEEN THE RESPECTIVE P ARTIES TO THE TRANSACTIONS; (D) CONDITIONS PREVAILING IN THE MARKETS IN WHICH T HE RESPECTIVE PARTIES TO THE TRANSACTIONS OPERATE, INC LUDING THE GEOGRAPHICAL LOCATION AND SIZE OF THE MARKETS, THE LAWS AND GOVERNMENT ORDERS IN FORCE, COSTS OF LABOU R AND CAPITAL IN THE MARKETS, OVERALL ECONOMIC DEVELOPMENT AND LEVEL OF COMPETITION AND WHETHER TH E MARKETS ARE WHOLESALE OR RETAIL. ' 14.2 THE APPELLANT CONTENDED THAT THE LD TPO HAS NO T DEMONSTRATED THROUGH ANALYSIS WITHIN NORMS OF RULE 10(B)(2) AS TO HOW THE CUP METHOD WHICH REQUIRES HIGH DEGREE OF COMPARABILITY HAS BEEN TAKEN AS MAM. THE APPELLANT FURTHER CONTENDED THAT LD. TPO HAS NOT SHOWN THAT THE DATA TAKEN FROM INTERNATIONAL BUSINESS INFORMATION SERVICES IS UNCONTROLLED TRANSACTION. BESIDES THIS, THERE WERE DIFFERENCES ON ACCOUNT OF FOLLOWING FACTORS WHICH TPO COULD NOT RECONCILE BEFORE APPLYING CUP: - PROFILE OF CUSTOMER WHETHER RESELLER, DISTRIBUTOR OR END USER IS NOT CONFIRMED; 26 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 - PRICING TERMS AS TO TRADE DISCOUNTS, TURNOVER DIS COUNTS, CASH DISCOUNTS, RETURN POLICY AS SUCH HAS NOT BEEN COMPARED; - PRICING IMPACT ON GEOGRAPHY OF UK VERSUS ARGENTIN A HAS NOT BEEN DETERMINED; - QUALITY OF PRODUCT WHETHER GENERIC OR OTHERWISE A ND OTHER VARIABLES HAVE NOT BEEN DETERMINED. 14.3 GIVEN THE ABOVE FACTORS AND NON RECONCILIATION OF SOME OF BASIC COMPARABILITY NORMS, THE APPELLANT CONTEND ED THAT THE CUP CANNOT BE APPROPRIATELY APPLIED. THE SUBMIS SIONS OF THE APPELLANT HAVE BEEN DULY CONSIDERED. IT IS TRUE THAT CUP METHOD WHICH CALLS FOR DIRECT COMPARISON OF PRICE I S FAR MORE STRINGENT METHOD AND REQUIRES FOR ACCURATE INFORMAT ION TO MAKE ACCURATE COMPARISON AND ADJUSTMENT. ADMITTEDLY , IT SEEMS THAT NO COMPARISON HAS BEEN DONE BY THE LD. T PO IN RELATION TO SALE OF PACLITAXEL AND DISODIUM PAMIDRO NATE WITH UNCONTROLLED TRANSACTION. A MERE PRICE COMPARISON O F CONTROLLED TRANSACTION OF APPELLANT WITH UNCONTROLL ED TRANSACTION AS TAKEN FROM DATABASE IS GROSS ERROR A S FAR AS APPLICATION OF CUP METHOD IS CONSIDERED. GIVEN THE DIFFICULTY IN APPLICATION OF CUP METHOD, THE APPELLANT CONCEDE D THAT THEY HAD APPLIED A MORE TOLERANT TNMM METHOD WHERE MOST OF DIFFERENCES ON ACCOUNT OF FUNCTIONS AND RISKS AR E IRONED OUT AT NET LEVEL. THE APPELLANT SUBMITTED THAT ITS NET MARGINS ARE HIGHER THAN THE AVERAGE OF NET MARGINS AS EARNED BY 27 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 INDEPENDENT COMPARABLE COMPANIES. BESIDES THE OVERA LL MARGIN COMPARISON OF APPELLANT COMPANY, THE APPELLA NT ALSO PRODUCED AS ADDITIONAL EVIDENCE REGARDING SEGMENTAL NET MARGIN ANALYSIS OF ITS UK BRANCH THROUGH WHICH SALE OF PACLITAXEL AND DISODIUM PAMIDRONATE HAPPENED. THE N ET MARGIN ANALYSIS OF UK BRANCH IS REPRODUCED BELOW: TABLE FROM ABOVE TABLE, IT CAN BE SEEN THAT THE NET MARGI NS EARNED FROM SALE OF PACLITAXEL AND DISODIUM PAMIDRONATE IS HIGHER AT 14.10% VERSUS OTHER SALES AT 10.90%. 14.4 I FIND FORCE IN THE SUBMISSIONS OF THE APPELLA NT, AS IT HAS SUPPORTED ITS ARGUMENTS WITH PROPER ANALYSIS AND FA CTS. THE TPO HAS SIMPLY USED DATABASE OF EXPORT RATES MAINTA INED BY IBIS WHICH SATISFYING THE STRINGENT CONDITIONS OF COMPARABILITY REGARDING CUP METHOD. IT IS WELL KNOW N FACT THAT PRICING OF A DRUG IS GREATLY INFLUENCED BY FAC T WHETHER IT IS GENERIC OR OTHERWISE. QUANTITY OF DRUG AND GEOGR APHICAL LOCATION OF BUYER ARE OTHER VERY CRUCIAL FACTORS WH ICH DETERMINE PRICING. TPO HAS NOT SATISFIED EVEN THESE BASIC REQUIREMENTS. IN VIEW OF THESE FACTS AND CIRCUMSTAN CES, TNMM IS CONSIDERED AS MAM AND THE APPELLANT HAS DEMONSTRATED BY APPLYING TNMM THAT ITS MARGIN IS BE TTER THAT THAT OF COMPARABLES. IN LIGHT OF THE ABOVE EVI DENCES AND CIRCUMSTANCES OF THE CASE, I AM OF VIEW THAT INTERN ATIONAL TRANSACTION OF SALE OF PACLITAXEL AND DISODIUM PAMI DRONATE 28 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 SATISFY THE ARM'S LENGTH PRINCIPLE AND IT DOES NOT WARRANT AN ADDITION AS DONE BY THE LD. AO/TPO. ACCORDINGLY, I HOLD THAT THE ADDITION OF (RS.98,79,900 + 67,35,902) RS.1,66, 15,802 DESERVE TO BE DELETED. THE GROUND OF APPEAL IS ACCO RDINGLY ALLOWED. 8.1.1 ALTHOUGH THE DEPARTMENT HAS VEHEMENTLY ARGUE D AGAINST THE DELETION OF THE TRANSFER PRICING ADJUST MENT IN THIS REGARD, NO FACTUAL OR LEGAL INFIRMITY IN THE FINDIN G SO ARRIVED AT BY THE LD. COMMISSIONER OF INCOME TAX (A) COULD BE POI NTED OUT. ACCORDINGLY, IN VIEW OF THE FACTS OF THE CASE, WE F IND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE ALSO AND WE DISMISS THE GROUND RA ISED BY THE DEPARTMENT IN THIS REGARD. 8.2 THE THIRD LIMB OF THE TRANSFER PRICING ADJUSTM ENT IN THIS YEAR IS PERTAINING TO MCS (METHYLENE CHLORIDE SOLUBLE EXTRACT) FROM ITS ASSOCIATED ENTERPRISE DABUR NEPAL . IN THIS REGARD ALSO, THE ASSESSEE HAD APPLIED TNMM AS THE M OST APPROPRIATE METHOD BUT THE TPO REJECTED THE ASSESSE ES METHOD AND APPLIED CUP METHOD TO DETERMINE THE ALP FOR THE TRANSACTION PERTAINING TO THE PURCHASE OF MCS EXTRACT. THE LD. 29 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 COMMISSIONER OF INCOME TAX (A) WHILE DELETING THE P ROPOSED TRANSFER PRICING ADJUSTMENT HELD THAT A COST CERTIF ICATE WAS SUBMITTED BY THE ASSESSEE TO ESTABLISH THE PRICING OF THE MCS EXTRACT. THE LD. COMMISSIONER OF INCOME TAX (A) NO TED THAT THE COST PRICE PER KG AS PER COST CERTIFICATE WAS RS. 4 648 PER KG AS COMPARED TO THE PRICE OF RS. 32 PER KG WHICH WAS TA KEN BY THE TPO FOR COMPUTING PROPOSED ADJUSTMENT. THE LD. COM MISSIONER OF INCOME TAX (A) ALSO NOTED THAT THE TPO HAD NOT P ROVIDED ANY MATERIAL ON THE BASIS OF WHICH THE PRICE OF RS. 32 PER KG WAS TO BE SUPPORTED WHEREAS THE ASSESSEE HAD JUSTIFIED THE ALP BY USAGE OF TNMM METHOD. THUS, THE LD. COMMISSIONER O F INCOME TAX (A) FOUND THE WORKING AND DATA OF THE ASSESSEE MORE RELIABLE THAN THE WORKING OF THE TPO IN THIS REGARD AND THER EAFTER PROCEEDED TO ALLOW RELIEF TO THE ASSESSEE. THE RELE VANT OBSERVATIONS OF THE LD. CIT (A) ARE AS UNDER: 17.1 I HAVE CONSIDERED THE MANNER IN WHICH THE APPELLANT HAD BENCHMARKED THE INTERNATIONAL TRANSAC TION OF PURCHASE OF MCS EXTRACT. AS PER TP REPORT OF THE AP PELLANT, THE APPELLANT HAD EARNED A NET MARGIN OF 9% WHICH I S HIGHER THAN AVERAGE NET MARGINS OF 8% EARNED BY COMPARABLE COMPANIES. IT IS SEEN THAT LD TPO HAD CHOSEN TO APP LY CUP 30 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 METHOD AS AGAINST TNMM METHOD APPLIED BY THE APPELL ANT. AT THE STAGE OF APPLICATION OF METHOD, IT IS IMPORT ANT TO ADHERE TO RULES ON SELECTION OF METHOD. THE APPELLANT CONT ENDED THAT APPLICATION OF CUP METHOD REQUIRES HIGH DEGREE OF COMPARABILITY AND FAR DETERMINATION FOR PROPER APPL ICATION OF CUP. IT IS STATED THAT THE LD TPO FAILED TO SATISFY COMPARABILITY OF CONTROLLED TRANSACTION WITH UNCONT ROLLED TRANSACTION WITHIN THE REQUIREMENT OF RULE 10(B)(2) . THE APPELLANT SUBMITTED THAT NO DATA WHATSOEVER WAS SUP PLIED TO IT BY THE TPO TO OFFER ITS REBUTTAL ON BASIS ON WHI CH IMPORT PRICE OF RS 32 PER KG OF MCS EXTRACT WAS ARRIVED AT . 17.2 THE COST CERTIFICATE SUBMITTED BY THE APPELLAN T THROWS SOME LIGHT UPON THE PRICING OF MCS EXTRACT. THE COS T CERTIFICATE CANNOT BE BRUSHED ASIDE SIMPLY ON ACCOU NT OF IT HAVING BEEN UNVERIFIED. THE COST CERTIFICATE CLEARL Y SHOWS THAT COST PRICE PER KG TO PRODUCE MCS EXTRACT IS RS 4,648 PER KG WHICH IS FAR HIGHER THAN RS 32 PER KG AS PROPOSE D TO BE APPLIED BY THE LD. TPO. ON THE OTHER HAND, THE LD. TPO HAS NOT PROVIDED ANY MATERIAL ON BASIS OF WHICH HE SUPP ORTS THE PRICE OF RS 32 PER KG. THE APPELLANT WHEREAS HAS JU STIFIED THE ARM'S LENGTH PRICE OF MCS EXTRACT BY USAGE OF TNMM METHOD WHERE ITS NET MARGIN WAS HIGHER THAN COMPARABLE COM PANIES AND ALSO HAS LATER ON CORROBORATED THE COST OF PROD UCTION OF MCS EXTRACT WHICH SHOWS COST OF PRODUCTION PER KG O F MCS EXTRACT AT RS 4,648 PER KG, WHICH SEEMS MORE RELIAB LE VERSUS RS 32 AS APPLIED BY THE TPO. 31 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 17.3 IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE , I AM OF THE VIEW THAT THE TPO HAS NOT SATISFIED STRICT COMP ARABILITY CRITERIA BEFORE APPLYING CUP METHOD. THE APPELLANT HAS DEMONSTRATED ARMS LENGTH STATUS OF ITS TRANSACTION BY APPLYING TNMM. HENCE, I AM OF THE VIEW THAT ADDITI ONS MADE BY THE TPO OF RS.1,03,43,105/- DESERVES TO BE DELET ED. ACCORDINGLY, THE GROUND OF APPEAL IS ALLOWED. 8.2.1 ALTHOUGH THE DEPARTMENT HAS ARGUED VEHEMENTL Y AGAINST THE ACTION OF THE LD. COMMISSIONER OF INCOM E TAX (A) IN THIS REGARD, IT REMAINS UNDISPUTED THAT THE PROVISI ON FOR APPLYING CUP REQUIRE STRICT COMPLIANCE AND THE SAME WAS NOT DONE BY THE TPO. ACCORDINGLY, WE FIND NO REASON TO INTERFERE WI TH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS I SSUE ALSO AND WE DISMISS THE OBJECTIONS OF THE REVENUE IN THIS RE GARD. 9. IN THE RESULT, ITA NO. 575/DEL/2014 STANDS DISM ISSED. 10.0 COMING TO THE DEPARTMENTS APPEAL FOR ASSESSM ENT YEAR 2007-08, IT IS SEEN THAT THE TRANSFER PRICING ADJUSTMENT COMPRISE OF TWO LIMBS VIZ. CORPORATE GUARANTEE FEE AND INTEREST ON LOAN. AS FAR AS THE ISSUE OF CORPORATE BANK GUARAN TEE IS CONCERNED, THE ISSUE AROSE BECAUSE THE ASSESSEE HAD FAILED TO 32 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 CHARGE SERVICE FEE FOR THE CORPORATE GUARANTEE GIVE N TO ITS UK SUBSIDIARY AND THE TPO, AFTER OBTAINING INFORMATION U/S 133(6) OF THE ACT FROM STATE BANK OF INDIA REGARDING RATE OF BANK GUARANTEE, PROPOSED THE ALP ADJUSTMENT AT 4.75% AS AGAINST NIL BEING CLAIMED BY THE ASSESSEE. IT IS WELL SETTLED THAT PROVIDING BANK GUARANTEE IS AN INTERNATIONAL TRANSACTION AND THE SAME NEEDS TO BE BENCHMARKED AS PER PROVISIONS OF SECTIO N 92(1) OF THE ACT. THE LD. COMMISSIONER OF INCOME TAX (A) HAS AL SO HELD SO AND THEREAFTER HE PROCEEDED TO COMPUTE THE CORPORAT E GUARANTEE FEE @ 0.5%. WHILE DOING SO, THE LD. COMMISSIONER O F INCOME TAX (A) OBSERVED THAT THE ASSESSEE HAD GIVEN CORPORATE GUARANTEE TO A FOREIGN BANK FOR PROVIDING LOAN TO ITS FOREIGN AE I N FOREIGN CURRENCY WHEREAS THE TPO HAD CONSIDERED THE QUOTE F OR GIVING GUARANTEE IN INDIA. THE LD. COMMISSIONER OF INCOME TAX (A) ALSO TOOK INTO ACCOUNT THE FACT THAT THE ASSESSEES BANK WAS ABN AMRO WHEREAS THE TPO HAD USED THE QUOTE FROM THE SB I. THE LD. COMMISSIONER OF INCOME TAX (A) THEREAFTER PLACE D RELIANCE ON THE QUOTE FROM ROYAL BANK OF SCOTLAND (RBS) (FORMER LY ABN AMRO BANK) AND HELD THAT THERE WAS A SAVING OF 1% I N THIS REGARD, THE BENEFIT OF WHICH WAS ATTRIBUTABLE BOTH TO THE ASSESSEE 33 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 AS WELL AS THE FOREIGN AE. THEREAFTER BY SPLITTING THE BENEFIT BETWEEN THE TWO, THE LD.CIT (A) ARRIVED AT CORPORAT E BANK FEE OF 0.5%. WE AGREE WITH THE OBSERVATION OF THE LD. COM MISSIONER OF INCOME TAX (A) THAT THIS LETTER FROM RBS BANK HAS M ORE EVIDENTIARY VALUE AS IT IS FROM THE VERY SAME BANK WHICH GAVE LOAN TO DABUR UK. THE LD. COMMISSIONER OF INCOME T AX (A) HAS ALSO RECORDED A FINDING THAT HE HAS ALSO EXAMINED T HE TERMS AND CONDITIONS OF THE LOAN AGREEMENT DATED 17.3.2006 BE TWEEN ABN AMRO BANK, DABUR UK AND THAT DABUR UK HAS PROVIDED ADEQUATE SECURITY COLLATERALS TO THE SATISFACTION O F THE BANK. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ALSO MENTION ED THAT THE BANK HAD THE FIRST CHARGE ON THE ASSETS OF THE BORR OWER AS SECURITY FOR THE LOAN. THE DEPARTMENT WAS NOT ABLE TO POINT OUT ANY FACTUAL INFIRMITY IN THIS CATEGORICAL OBSERVATI ON OF THE LD. COMMISSIONER OF INCOME TAX (A). HOWEVER, WE DO NOT FULLY AGREE WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) IN THIS REGARD THAT THE BENEFIT OF INTEREST SAVING OF 1% SHOULD BE SHARED BETWEEN THE AE AND THE ASSESSEE EQUALLY AS N O COGENT REASONING HAS BEEN GIVEN FOR THE SAME AND, ACCORDIN GLY, WE DEEM IT FIT TO MODIFY THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX 34 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 (A) IN THIS REGARD TO THE EXTENT THAT CORPORATE GUA RANTEE FEE @1% SHOULD BE APPLIED IN THE CASE OF THE ASSESSEE IN PL ACE OF 0.5% AS HAS BEEN APPLIED BY THE LD. COMMISSIONER OF INCOME TAX (A). WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RE-COMP UTE THE ALP FOR CORPORATE GUARANTEE FEE @1%. THUS, THIS GROUND STA NDS PARTLY ALLOWED. 10.1 COMING TO THE SECOND LIMB OF THE TRANSFER PRI CING ADJUSTMENT WHICH PERTAINS TO INTEREST ON LOAN, IT I S SEEN THAT THE ASSESSEE HAD GIVEN LOAN TO TWO FOREIGN SUBSIDIARIES IN UK AND THAILAND AND HAD CHARGED INTEREST RATE OF LIBOR PLU S 1.1% AND 7% RESPECTIVELY WHEREAS THE TPO HAD APPLIED THE INT EREST RATE AT 14%. THE REASON FOR THE TPO IN APPLYING INTEREST R ATE OF 14% WAS THAT SINCE THE ASSESSEE HAS CHOSEN ITSELF AS TH E TESTED PARTY, THE RATE TO BE APPLIED WAS TO BE SEEN FROM THE PERS PECTIVE OF THE TESTED PARTY IN THE INDIAN BANK AND FURTHER FOR THE REASON THAT THE LOAN ADVANCE OF DABUR THAILAND WAS FROM BORROWE D CAPITAL. WHILE ALLOWING RELIEF TO THE ASSESSEE, THE LD. COMM ISSIONER OF INCOME TAX (A) TOOK INTO CONSIDERATION THE SUBMISSI ON OF THE ASSESSEE THAT THE LOAN ADVANCED TO THE UK SUBSIDIAR Y WAS AT 35 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 LIBOR PLUS 1.1% AND THE LOAN TAKEN BY THE UK SUBSID IARY FROM ABM AMRO BANK WAS AT LIBOR +1.5% WITH THE CORPORATE GUARANTEE OF THE ASSESSEE AND FURTHER THE CORPORATE GUARANTEE LOAN WAS AVAILABLE TO THE UK SUBSIDIARY AT LIBOR PL US 1.5%. WITH RESPECT TO THE LOAN TO DABUR THAILAND @7%, THE LD. COMMISSIONER OF INCOME TAX (A) WAS OF THE VIEW THAT LIBOR PLUS 1.5% COULD BE USED AS THE BASIS FOR ARRIVING AT THE ALP FOR THE LOAN TRANSACTION. ACCORDINGLY, THE LD. COMMISSIONE R OF INCOME TAX (A) HELD THAT INTEREST OF BOTH THE LOANS WAS TO BE CHARGED AT LIBOR PLUS1.5%. WE ALSO NOTE THAT THE LD. DRP FOR IMMEDIATELY PRECEDING ASSESSMENT YEAR 2006-07 HAS HELD THAT THE FOREIGN LOAN GIVEN TO UK SUBSIDIARY WAS TO BE BENCHMARKED A T LIBOR PLUS 100 BPS PLUS CERTAIN RISK ADJUSTMENT AND ACCOR DINGLY, RATE OF LIBOR PLUS 300 BPS WAS PROPOSED BY THE LD. DRP. ALTHOUGH THE LD. COMMISSIONER OF INCOME TAX (A) HAS DULY MAD E A MENTION OF THIS DIRECTION OF THE LD. DRP FOR ASSESSMENT YEA R 2006-07, IT IS APPARENT THAT HE HAS NOT CONSIDERED THE DIRECTIONS OF THE LD. DRP WHILE DECIDING THIS ISSUE. WE ALSO NOTE THAT THE A SSESSEE HAS NOT FILED ANY APPEAL AGAINST THIS DIRECTION OF THE LD. DRP FOR ASSESSMENT YEAR 2006-07. ACCORDINGLY, IN VIEW OF T HE FACTUAL 36 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 MATRIX, THIS ISSUE NEEDS TO BE RESTORED TO THE FILE OF THE LD. COMMISSIONER OF INCOME TAX (A) TO BE DECIDED AFRESH AFTER CONSIDERING THE DIRECTIONS OF THE LD. DRP IN THIS R EGARD IN ASSESSMENT YEAR 2006-07 AND AFTER GIVING THE ASSESS EE A PROPER OPPORTUNITY PRESENT ITS CASE. ACCORDINGLY, THIS GR OUND STANDS ALLOWED FOR STATISTICAL PURPOSES. 10.2 COMING TO THE REMAINING ISSUE WHICH IS THE DE LETION OF DISALLOWANCE OF RS 20,92,221/- PERTAINING TO CAPITA L SUBSIDY, IT IS SEEN THAT THE ASSESSEE HAD, IN TERMS OF WEST BENGAL INCENTIVE SCHEME 2000, EXPANDED ITS EXISTING INDUSTRIAL UNIT AT KALYANI, WEST BENGAL AND WAS ACCORDINGLY ELIGIBLE FOR A STAT E INVESTMENT SUBSIDY OF RS. 1.50 CRORE IN TERMS OF THE WEST BENG AL INDUSTRIAL POLICY. THIS PAYMENT WAS RECEIVED ON 23.09.2006 AN D THE ASSESSEE CREDITED THE SAME TO ITS CAPITAL RESERVE A CCOUNT TREATING THE SAME AS CAPITAL RECEIPT. HOWEVER, THE ASSESSIN G OFFICER TREATED THE SAME AS REVENUE RECEIPT AND REDUCED THE SAME FROM THE FIXED COST OF ASSETS AND, THEREAFTER ALLOWED DE PRECIATION POST THE OFFSET OF SUBSIDY. THE LD. COMMISSIONER OF INC OME TAX (A) HAS NOTED THAT HE HAS EXAMINED THE DOCUMENTS RELATI NG TO WEST 37 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 BENGAL INCENTIVE SCHEME, 2000 AND THAT FURTHER THIS SUBSIDY IS A ONE-TIME RECEIPT. IT HAS ALSO BEEN MENTIONED THAT NOWHERE ON THE PERUSAL OF THE DOCUMENTS IT WAS FOUND THAT THE SUBSIDY WAS TO BE RELATED TO THE REDUCTION OF THE COST OF FIXED ASSETS AND, FURTHER THE RECIPIENT OF THE SUBSIDY WAS FREE TO US E THE SUBSIDY IN ANY MANNER. WE FIND THAT AN IDENTICAL ISSUE HAD ARI SEN BEFORE THE KOLKATA BENCH OF THE ITAT IN BHAGWATI SPONGE (P) LT D. VS. DCIT REPORTED IN (2016) 72 TAXMANN.COM 40 (KOLKATA TRIB .) AND THE CO-ORDINATE BENCH HELD THAT THE CAPITAL INVESTMENT SUBSIDY RECEIVED FROM STATE GOVERNMENT COULD NOT BE REDUCED FROM THE COST OF CAPITAL ASSET FOR ALLOWING DEPRECIATION. A CCORDINGLY, RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH AS AFORE SAID, WE FIND NO REASON TO INTERFERE WITH THE FINDI NGS OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE AND WE DISMISS THE GROUNDS RAISED BY THE DEPARTMENT IN THIS REGARD. 11. ACCORDINGLY, ITA NO. 3495/DEL/2014 STANDS PART LY ALLOWED. 38 ITA NO.575/DEL/2014 ITA NO.3495/DEL/2014 12. IN THE FINAL RESULT, ITA NO. 575/DEL/2014 STAN DS DISMISSED AND ITA NO. 3495/DEL/2014 STANDS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF OCTOBER, 2018. SD/- SD/- ( R. K. PANDA) (SUDHANSHU SR IVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3RD OCTOBER, 2018 GS COPY FORWARDED TO:- 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI