M/s. Renishaw Metrology Systems Ltd., Pune V. Deputy Commissioner of Income-tax, Pune

ITA 376/PUN/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1117 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-07-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NANDITA KANCHAN
• Assessee Lawyers: ABHISHEK TILAK
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Rule of consistency; Commercial expediency; Revised return
• Section: 143(3); 92D; 37(1); 10B; 201; 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 37 6 /P U N/201 4 / ASSESSMENT YEAR : 20 09 - 10 M/S. RENISHAW METROLOGY SYSTEMS LTD., S.NO.283, HISSA NO.2, S.NO.284, HISSA NO.2 & 3A, RAISONI ESTATE, VILLAGE MANN, TALUKA MULSHI, PUNE 411057 . / APPELLANT PAN: A ABC R6361F VS. THE DY. COMMISSIONER OF INCOME TAX , CIRCLE 1(2) , PUNE . / RESPONDENT . / ITA NO. 2975 /P U N/201 7 / ASSESSMENT YEAR : 2009 - 10 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 5, PUNE . / APPELLANT VS. M/S. RENISHAW METROLOGY SYSTEMS LTD., S.NO.283, HISSA NO.2, S.NO.284, HISSA NO.2 & 3A, RAISONI ESTATE, VILLAGE MANN, TALUKA MULSHI, PUNE 411057 . / RESPONDENT PAN: AABCR6361F ASSESSEE BY : S /S HRI ARIJIT CHAKRA VARTY AND ABHISHEK TILAK REVENUE BY : MRS. NANDITA KANCHAN / DATE OF HEARING : 1 9 . 0 7 .201 9 / DATE OF PRONOUNCEMENT: 12 . 0 9 .201 9 ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 2 / ORDER PER SUSHMA CHOWLA, J M : OUT OF TWO APPEALS, ONE APPEAL FILED BY ASSES SEE IS AGAINST ORDER OF D CIT , CIRCLE - 1(2), PUNE, DATED 2 0 . 12 .201 3 RELATING TO ASSESSMENT YEAR 20 09 - 10 PASSED UNDER SECTION 143(3) R.W.S. 144C( 1 ) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . THE REVENUE FILED AN APPEAL AGAINST THE ORDER OF CIT(A) - 4, P UNE, DATED 03.07.2017 RELATING TO ASSESSMENT YEAR 2009 - 10 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. 2. BOTH THE APPEALS RELATING TO THE SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE S AKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.376/PUN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. GENERAL GROUNDS 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TRANSFER PRICING OFFICER ('TPO') AND THE LEARNED ASSESSING OFFICER ('AO') UNDER DIRECTIONS ISSUED BY THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP'), ERRED IN MAKING AN ADDITION OF RS.2,51,30,818 TO THE APPELLANT'S TOTAL INCOME BASED ON THE PROVISIONS OF CHAPTER X OF THE INCOME - TAX ACT, 1961 ('THE ACT'). 1.2 THE AO/TPO HAVE ERRED IN FACT AND IN LAW IN NOT PROVIDING ANY REASONS TO SHOW THAT THE CONDITIONS MENTIONED IN CLAUSES (A) TO (D) OF SECTION 92C(3) OF THE ACT WERE SATISFIED BEFORE MAKING AN ADJUSTMENT TO THE INCOME OF THE APPELLANT. 2. TRANSFER PRICI NG ADJUSTMENT IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES OF RS.32,63,569 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. TPO/AO HAS ERRED AND THE HON'BLE DRP HAS FURTHER ERRED IN UPHOLDING/CONFIRMING THE ACTION OF THE LD. TPO/AO IN ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 3 2.1 DISREGARDING COMPARABLE COMPANIES SELECTED BY THE APPELLANT DESPITE IT BEING FUNCTIONALLY COMPARABLE; 2.2 CHERRY PICKING COMPANIES WHICH ARE NOT FUNCTIONALLY COMPARABLE TO THE APPELLANT, WHICH IS ALSO EVIDENT FROM THE FACT THAT THE TPO HAS NOT SHARED THE SEARCH STRATEGY, ACCEPT REJECT MATRIX ETC. ADOPTED FOR SELECTION OF ALLEGED COMPARABLE COMPANIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE; 2.3 APPLYING THE FILTERS INCONSISTENTLY AS WELL AS MODIFYING T HE FILTERS TO CHERRY PICK COMPARABLES; 2.4 ERRONEOUSLY COMPUTING THE OPERATING MARGINS OF CHOSEN COMPARABLE COMPANIES WHILE MAKING ADJUSTMENT TO THE INTERNATIONAL TRANSACTION OF THE APPELLANT; 2.5 NOT ALLOWING ECONOMIC ADJUSTMENTS IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B OF THE RULES TO ACCOUNT FOR DIFFERENCE BETWEEN INTERNATIONAL TRANSACTIONS AND THE ALLEGED COMPARABLE UNCONTROLLED TRANSACTIONS SELECTED BY THE LEARNED TPO; 2.6 REJECTING THE USE OF MULTIPLE YEAR DATA I.E . CONTEMPORANEOUS DATA IN THE TRANSFER PRICING STUDY REPORT MAINTAINED AS PER SECTION 92D OF THE ACT READ WITH RULE 10D OF THE RULES USED FOR DETERMINING THE ARM'S - LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF THE APPELLANT PERTAINING TO PROVISION OF SOFTWARE DEVELOPMENT SERVICES TO ITS AE; 2.7 NOT ALLOWING THE VARIATION/REDUCTION OF 5 PERCENT FROM THE ARITHMETIC MEAN WHILE DETERMINING THE ARM'S LENGTH PRICE AS ENVISAGED UNDER THE PROVISO TO SECTION 92C(2) OF THE ACT 2.8 FAILING TO APPRECIATE THAT THE APPELLANT WAS CLAIMING TAX E XEMPTION UNDER SECTION 10A OF THE ACT AND ACCORDINGLY HAD NO INTENTION TO SHIFT PROFITS OUTSIDE INDIA BY MANIPULATING THE PRICES CHARGED IN ITS INTERNATIONAL TRANSACTIONS WHICH IS A PRE - REQUISITE CONDITION TO MAKE ANY ADJUSTMENT UNDER THE PROVISION OF CHAP TER X OF THE ACT. 3. TRANSFER PRICING ADJUSTMENT IN RESPECT OF AVAILING OF MANAGEMENT SERVICES OF RS.2,18,67,249 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. TPO/AO HAS ERRED AND THE HON'BLE DRP HAS FURTHER ERRED IN UPHOLDING/CONFIRM ING THE ACTION OF THE LD. TPO/AO IN 3.1 DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION PERTAINING TO PAYMENT OF MANAGEMENT SERVICES FEES BY THE APPELLANT TO ITS AE AS 'NIL' AGAINST RS.2,18,67,249 AS DETERMINED BY APPELLANT; 3.2 HOLDING T HAT THE APPELLANT FAILED TO FURNISH ADEQUATE EVIDENCES TO DEMONSTRATE THAT THE SERVICES WERE ACTUALLY RENDERED BY THE AE AND FURTHER PASSING GENERAL REMARKS ON THE EVIDENCES FILED INSTEAD OF GIVING SPECIFIC FINDING OR THE SAME. 3.3 QUESTIONING / ALLEGING THAT NO TANGIBLE OR DIRECT BENEFIT WAS DERIVED BY THE APPELLANT FROM RECEIPT OF THE INTRA - GROU P SERVICES AND ALSO QUESTIONING THE COMMERCIAL EXPEDIENCY FOR AVAILING SUCH SERVICES AND ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 4 FAILED TO APPRECIATE TH E JURISPRUDENCE THAT THE LD. TPO CANNOT GO BEYOND HIS POWERS IN QUESTIONING COMMERCIAL DECISION OF THE APPELLANT; 3.4 NOT APPLYING ANY METHOD PRESCRIBED BY THE RULES, TO DETERMINE THE ARM'S LENGTH PRICE OF THE INFRA - GROUP SERVICES I.E. MANAGEMENT SERVICES AND FAILED TO APPRECIATE THAT THE APPELLANT IN IT S TRANSFER PRICING DOCUMENTATION HA S BENCHMARKED THE SAID INTRA - GROUP SERVICES, BY USING THE TRANSACTIONAL NET MARGIN METHOD; 3.5 APPRECIATING THE FACT THAT THE INTERNATIONAL TRANSACTION OF MANAGEMENT FEES WAS CONSIDERED AT ARM'S LENGTH IN THI S ASSESSMENT PROCEEDING FOR AY 2008 - 09. THUS THE LD. AO / TPO HAVE NOT FOLLOWED THE 'RULE OF CONSISTENCY'. 4. OTHERS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTIO N 271( 1 )(C) OF THE ACT ON THE PREM ISE THAT THE APPELLANT HAS CONCEALED/FURNISHED INACCURATE PARTICULARS OF INCOME WITHOUT APPRECIATING THE FACT THAT ADJUSTMENT MADE IS NOT IN ACCORDANCE WITH THE LAW. 4. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER: - 5. MINIMUM ALTERNATE TAX (MAT) CREDIT CARRY FORWARD TO FUTURE YEARS: WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT HAS ERRONEOUSLY COMPUTED THE MAT CREDIT AT RS.8,224,958, AS THE DIFFERENCE BETWEEN TAX LIABILITY AS PER NORMAL PROVISIONS OF THE ACT AND MAT, BOTH LIABILITIES CALCULATED BEFORE APPLYING SURCHARGE AND EDUCATION CESS IN ITS RETURN OF INCOME FOR AY 2009 - 10, INSTEAD OF RS.9,318,878 AS A DIFFERENCE BETWEEN TAX LIABILITY AS PER NORMAL PROVISIONS OF THE ACT AND AS PER MAT (INCLUSIVE OF SURCHARGE AND E DUCATION CESS). 5. THE REVENUE IN ITA NO.2975/PUN/2017 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ALLOWING THE DEDUCTION U/S 10A & 10B OF THE INCOME TAX, ACT, 1961 BEFORE SETTING OFF BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION LOSS IN VIOLATION OF EXPRESS PROVISIONS OF CIRCULAR NO . 7/2013 ISSUED BY THE CBDT AS WELL AS HON'BLE SUPREME COURT DECISION IN THE CASE OF HIMATSINGKA SEIDE LTD (48 TAXMAN.COM 357). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN ALLOWING THE PROVISION OF OBSOLETE STOCK UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961. ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 5 3. FOR T HIS AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. FIRST, WE TAKE UP THE APPEAL OF ASSESSEE, WHEREIN THOUGH SEVERAL GROUNDS OF APPEAL HAVE BEEN RAISED BUT THE TWO ISSUES HAVE BEEN RAISED; ONE AGAINST TRANSFER PRICING ADJUSTMENT IN RESPECT OF SOFTWARE DEVELOPMENT SERVICES AMOUNTING TO 32,63,569/ - AND SECOND AGAINST TRANSFER PRICING ADJUSTMENT IN RESPECT OF AVAILMENT OF MANAGEMENT SERVICES TOTALING 2.18 CRORES. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND OF APPEAL, WHICH IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT P RESSED. 7. THE REVENUE IS IN APPEAL AGAINST ORDER OF CIT(A) IN ALLOWING DEDUCTION UNDER SECTION 10A AND 10B OF THE ACT BEFORE SETTING OFF OF BROUGHT FORWARD BUSINESS LOSSES AND DEPRECIATION LOSS. 8. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD ORIGINALLY FURNISHED RETURN OF INCOME DECLARING LOSS OF ABOUT ( - ) 2 CRORES AND BOOK PROFIT OF 7.94 CRORES. THE ASSESSEE THEN FILED REVISED RETURN DECLARING SAME LOSS UNDER THE INCOME TAX ACT BUT BOOK PROFIT AT 8.22 CRORES. THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF AUTOMATED METROLOGY AND HAD MANUFACTURING DIVISION, SOFTWARE DIVISION, SOURCING DIVISION AND SALES & MARKETING DIVISION. THE ASSESSEE HAS ENTERED INTO VARIOUS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD ENTERED INTO SEVERAL INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER MADE REFERENCE UNDER SECTION 92CA(1) OF THE ACT TO THE TRANSFER PRICING OFFICER (TPO) TO BENCHMARK ARM'S LENGTH PRICE OF INTERNATIONAL ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 6 TRANSACTIONS IN THE HANDS OF ASSESSEE. THE TPO MADE AN ADJUSTMENT OF 32,63,569/ - IN THE SEGMENT OF PROVISION OF SOFTWARE SERVICES. THE TPO ALSO BENCHMARKED THE TRANSACTION OF PAYMENT FOR MANAGERIAL SERVICES IN PURSUANCE TO AN AGREEMENT BETWEEN UK COMP ANY AND IT AND HELD THAT THE SERVICES PROVIDED WERE ROUTINE IN NATURE AND WERE EASILY AVAILABLE IN DOMESTIC AREA AND THE ASSESSEE HAD NOT ASKED FOR SERVICES AND THERE WAS NO NEED FOR THE SERVICES. HENCE, THE ARM'S LENGTH PRICE OF SERVICES WAS DETERMINED A T NIL. THE TPO MADE AN ADJUSTMENT OF 2.18 CRORES ; IN ALL 2.51 CRORES. THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER, AGAINST WHICH THE ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP). CONSEQUENT TO THE ORDER OF DRP, THE ASSESSING OFFICER PASSED FINAL ASSESSMENT ORDER MAKING TRANSFER PRICING ADJUSTMENT OF 2.51 CRORES, AGAINST WHICH THE ASSESSEE HAS FILED AN APPEAL BEFORE US. 9. FIRST OF ALL, WE TAKE UP THE ISSUE OF TRANSFER PRICING ADJUSTMENT IN THE SEGMENT OF PROVISION OF SOFTWARE DEVELOPMENT SERVICES BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES. THE ASSESSEE HAD APPLIED TNMM METHOD AND HAD TAKEN NET PROFIT / TOTAL COST AS ITS PLI AND HAD SELECTED CERTAIN CONCERNS AS COMPARABLES, WHICH WERE OBJECTED TO BY THE ASSESSING OFFICER. THE TPO FINALLY SELECTED 9 CO NCERNS AS COMPARABLES AS ACCEPTED IN EARLIER YEAR AND BENCHMARKED THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2008 - 09, SIMILAR ISSUE AROSE AND THE TRIBUNAL HAS DECIDED INCLUSION / EXCLUSION OF SOME COMPARABLES. WE PROCEED TO DECIDE THE ISSUE RAISED IN THIS REGARD BY REFERRING TO THE ARGUMENTS OF ASSESSEE IN RESPECT OF EACH OF THE COMPARABLES. ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 7 10. THE ASSESSEE IS AGGRIEVED BY INCLUSI ON OF CONCERN BODHTREE CONSULTING LTD. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE SAID CONCERN WAS NOT FUNCTIONALLY COMPARABLE AND IT WAS FOLLOWING DIFFERENT BUSINESS MODULE AND HAD FLUCTUATING MARGINS. IN THIS REGARD, WE FI ND THAT THE TRIBUNAL VIDE PARA 14 IN ITA NO.271/PUN/2013 RELATING TO ASSESSMENT YEAR 2008 - 09 VIDE ORDER DATED 16.11.2018 IN ASSESSEES OWN CASE HELD THAT THE CONCERN BODHTREE CONSULTING LTD. WAS NOT FUNCTIONALLY COMPARABLE TO THE ASSESSEE AND ALSO IT WAS F OLLOWING DIFFERENT BUSINESS MODULE. FOLLOWING THE SAME PARITY OF REASONING SINCE FACTS ARE SAME , WE HOLD THAT THE SAID CONCERN IS NOT COMPARABLE TO THE ASSESSEE. 11. THE NEXT CONCERN WAS FCS SOFTWARE SOLUTIONS LTD., WHICH WAS CLAIMED TO BE FUNCTIONALLY N OT COMPARABLE AS IT WAS RENDERING APPLICATION SERVICES. 12. WE FIND THAT SIMILAR ISSUE AROSE IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2008 - 09 (SUPRA) AND VIDE PARA 15, THE TRIBUNAL HAD DIRECTED ITS EXCLUSION. FOLLOWING THE SAME PARITY OF REASONING AS TH E FACTUAL ASPECTS ARE SAME , WE EXCLUDE THE SAID CONCERN FROM FINAL LIST OF COMPARABLES. 13. THE NEXT CONCERN WHICH THE ASSESSEE WANTS TO BE INCLUDED IS SIP TECHNOLOGIES LTD. THE ASSESSEE PLEADS THAT THE SAID CONCERN WAS EXCLUDED ON THE GROUND THAT IT WAS PERSISTENT LOSS MAKING CONCERN. HOWEVER, IN ASSESSMENT YEAR 2006 - 07, IT HAD SHOWN POSITIVE MARGINS OF 21.78%. THOUGH IN LAST YEAR, IT WAS SHOWN NEGATIVE MARGINS OF ( - ) 33.15%, BUT DURING THE YEAR UNDER CONSIDERATION, IT HAD SHOWN MARGINS OF NEGATIVE ( - ) 19.33%. THE LEARNED ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 8 AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE AT PAGE 223 OF PAPER BOOK I.E. IN THE CASE OF JOHN DEERE INDIA PVT. LTD. VS. DCIT REPORTED AS TS - 927 - ITAT - 2016(PUNE) - TP, RELATING TO ASSESSMENT YEAR 2009 - 10, WHEREIN VIDE PARA S 18 AND 19 THE SAID CONCERN WAS HELD TO BE NOT PERSISTENT LOSS MAKING. WE HAVE CONSIDERED THE PLEA OF ASSESSEE AND FIND MERIT IN THE SAME AND FOLLOWING THE SAME PARITY OF REASONING AS IN THE DECISION OF PUNE BENCH OF TRIBUNAL, HOLD THAT SIP TECHNOLOGIES LTD. IS TO BE INCLUDED IN THE FINAL LIST OF COMPARABLES. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN CASE TWO CONCERNS ARE EXCLUDED AND SIP TECHNOLOGIES LTD. IS INCLUDED, THEN ALL OTHER ISSUES IN GROUND OF APPEAL NO.2 WOULD BECOME ACADEMIC. HENCE, WE DO NOT ADJUDICATE THE SAME. THE PLEA OF ASSESSEE IS ALLOWED AND ADDITION MADE IN THIS REGARD IS DELETED. 14. NOW, COMING TO THE NEXT ISSUE RAISED I.E. IN RESPECT OF PAYMENT OF MANAGERIAL FEES. 15. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD ENTERED INTO MANAGEMENT SERVICE AGREEMENT WITH RENISHAW PLC IN 2006. UNDER THE SAID AGREEMENT, THE ASSOCIATED ENTERPRISE PROVIDED BUSINESS SUPPORT AND MANAGEMENT SUPPORT SERVICES TO THE ASSESSEE, WHICH THE ASSESSEE CLAIMED ENHANCED ITS OPERATIONAL EFFICIENCY AND ALSO STANDARDIZED ITS INTERNAL PROCESSES. THE ASSESSEE HAD FURNISHED DOCUMENTARY EVIDENCE I N THIS REGARD PROVIDING DETAILS OF PERSONNEL RENDERING THE SERVICES, NUMBER OF MAN HOURS SPENT, TOTAL COST INCURRED IN RENDE RING SUCH SERVICES AND ALSO EXPLANATION WAS GIVEN VIS - - VIS WORK DONE. THE INVOICES RECEIVED FROM ASSOCIATED ENTERPRISE WERE ALSO FURNISHED BEFORE THE AUTHORITIES BELOW. HOWEVER, THE TPO HELD THAT ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 9 IN FACT NO SERVICES WERE RECEIVED BY ASSESSEE AND ALSO OB SERVED THAT SERVICES WERE ROUTINE IN NATURE AND WERE NEITHER ASKED FOR NOR GIVEN BY ASSOCIATED ENTERPRISE AND THE TPO BENCHMARKED THE SAID TRANSACTION AT NIL AND MADE AN UPWARD ADJUSTMENT OF 2.18 CRORES. 16. THE LEARNED AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE POINTED OUT THAT LAST YEAR THE TPO HAD ACCEPTED THE SAID TRANSACTION TO BE AT ARM'S LENGTH PRICE. THE ASSESSING OFFICER HAD DISALLOWED THE SAID PAYMENT UNDER SECTION 37(1) OF THE ACT. HOWEVER, THE DRP DELETED THE ADDITION, AGAINST WHICH NO AP PEAL HAS BEEN FILED BY REVENUE. OUR ATTENTION WAS DRAWN TO THE ORDER OF TRIBUNAL IN THIS REGARD. HE ALSO POINTED OUT THAT THE ASSESSEE HAD FILED DETAILED LETTER TO THE TPO EXPLAINING THE NEED FOR AVAILING MANAGEMENT SERVICES DATED 06.05.2011 ALONG WITH S EVERAL ENCLOSURES AND ALSO DOCUMENTS WERE FILED EVIDENCING THE SAID PROVISION OF SERVICES. HOWEVER, THE TPO DOES NOT GIVE ANY COGENT REASON IN HOLDING THAT NO SERVICES WERE PROVIDED AND IN DETERMINING THE ARM'S LENGTH PRICE AT NIL. 17. THE LEARNED DEPART MENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES VIDE GROUND OF APPEAL NO.3 IS AGAINST ARM'S LENGTH PRICE OF TRANSACTION OF PA YMENT FOR MANAGERIAL SERVICES AVAILED FROM ASSOCIATED ENTERPRISE. THE AGREEMENT WHICH HAS BEEN ENTERED INTO BY ASSESSEE WITH ITS ASSOCIATED ENTERPRISE WAS W.E.F. 01.04.2006. THE ASSESSEE IS AVAILING MANAGERIAL SERVICES UNDER THE SAME AGREEMENT FROM YEAR TO YEAR. IN ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 10 ASSESSMENT YEAR 2007 - 08, NO ISSUE IN THIS REGARD WAS RAISED; IN ASSESSMENT YEAR 2008 - 09, THE TPO ACCEPTED THE ARM'S LENGTH PRICE BUT THE ASSESSING OFFICER HELD THAT THE SAID PAYMENT WAS NOT TO BE ALLOWED UNDER SECTION 37(1) OF THE ACT. THE DR P DELETED THE ADDITION, AGAINST WHICH NO APPEAL HAS BEEN FILED BY THE REVENUE. IN ASSESSMENT YEAR 2009 - 10 I.E. INSTANT ASSESSMENT YEAR, NO DISALLOWANCE HAS BEEN MADE BY ASSESSING OFFICER UNDER SECTION 37(1) OF THE ACT , BUT THE TPO HAD HELD THE ARM'S LENGT H PRICE AT NIL. THE TPO IN FINAL ANALYSIS HOLDS THE ASSESSEE NOT TO HAVE RECEIVED ANY SERVICES AND ALSO HOLDS THAT THERE WAS NO NEED TO AVAIL ANY SERVICES. 19. WE HAVE IN SERIES OF DECISIONS ALREADY DECIDED SIMILAR ISSUE OF PAYMENT ON ACCOUNT OF MANAGE RIAL SERVICES AVAILED BY ASSESSEE FROM ITS ASSOCIATED ENTERPRISES AND HAVE HELD THAT THE TPO OR THE ASSESSING OFFICER CANNOT SIT IN JUDGMENT OF THE DECISION OF BUSINESSMAN TO AVAIL SERVICES AND TO MAKE PAYMENTS FOR THAT. FURTHER, THE ASSESSEE HAS FILED DO CUMENTS JUSTIFYING NOT ONLY THE NEED OF THE SERVICES BUT ALSO THE AVAILMENT OF SERVICES. THE TPO HAS FAILED TO TAKE INTO COGNIZANCE THOSE DOCUMENTS / EVIDENCES AND WE FIND NO MERIT IN THE SAME. IN ANY CASE, THE SAID AGREEMENT BETWEEN THE PARTIES IS IN FORCE W.E.F. 01.04.2006 AND IN NONE OF THE EARLIER YEARS ANY ADDITION HAS BEEN MADE BY THE TPO /ASSESSING OFFICER . IN THE ABSENCE OF SAME AND FOLLOWING THE RULE OF CONSISTENCY WE FIND NO MERIT IN THE ORDERS OF TPO/ASSESSING OFFICE R AND THE SAME IS REVERSED. THE GROUND OF APPEAL NO.3 RAISED BY ASSESSEE IS THUS, ALLOWED. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE THUS, ALLOWED. 20. NOW, COMING TO THE APPEAL OF REVENUE, WHICH IS AGAINST SEPARATE ORDER PASSED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 11 21. THE FIRST GROUND OF APPEAL RAISED BY REVENUE IS AGAINST DEDUCTION ALLOWED UNDER SECTION 10A/10B OF THE ACT IN RESPECT OF TWO UNITS OPERATED BY ASSESSEE. THE QUESTION WHICH ARISES IS WHETHER THE SAID DEDUCTION IS TO BE ALLOWE D BEFORE ADJUSTMENT OF BROUGHT FORWARD LOSSES / DEPRECIATION OR AFTER IT. THE CIT(A) VIDE PARA 7.3.2 HAS HELD THE ISSUE TO BE COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD. VS. DCIT (2010) 191 TAXMAN 119 (BOM) . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO CONTROVERT THE SAID RELIANCE PLACED UPON BY THE CIT(A). ACCORDINGLY, WE HOLD THAT THE ISSUE STANDS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN HINDUSTAN UNILEVER LTD. VS. DCIT(SUPRA). THE GROUND OF APPEAL NO.1 RAISED BY REVENUE IS THUS, DISMISSED. 22. NOW, COMING TO SECOND ISSUE RAISED BY THE REVENUE WHICH IS AGAINST THE ORDER OF CIT(A) IN ALLOWING THE DEDUCTION ON ACCOUNT OF WRITE OFF OF O BSOLETE STOCK. 23. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DETAILS BEFORE THE ASSESSING OFFICER. HOWEVER, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CIT(A) AND POINTED OUT THAT THE DETAILS ARE AVAILABLE AT PAGES 329 TO 333 OF PAPER BOOK. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WHERE THE EVIDENCES ARE AVAILABLE AND THE ASSESSEE HAS WRITTEN OFF THE OBSOLETE STOCK, THEN TH E CLAIM OF ASSESSEE MERITS TO BE ALLOWED. ITA NO. 376 /P U N/20 1 4 ITA NO.2975/PUN/2017 RENISHAW METROLOGY SYSTEMS LTD. 12 CONSEQUENTLY, WE DISMISS THE GROUND OF APPEAL NO.2 RAISED BY REVENUE. THE GROUNDS OF APPEAL RAISED BY REVENUE ARE THUS, DISMISSED. 24 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED AND THE APPEAL OF REVENUE IS DI SMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF SEPTEMBER , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 12 TH SEPTEMBER , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPE LLANT ; 2. THE RESPONDENT; 3. THE DRP, PUNE / CIT(A) - 4, PUNE ; 4. THE CONCERNED CIT, PUNE / PR.CIT - 3, PUNE ; 5. THE DR B , ITAT, PUNE; 6. GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIV ATE SECRETARY , / ITAT, PUNE