M/s. Seco Tools India Private Limited, Pune V. Deputy Commissioner of Income tax, Pune

ITA 403/PUN/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3379 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-12-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 17-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VIJAYA BHASKAR REDDY
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation; Wholly owned subsidiary; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH C, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER . / ITA NO.403/PUN/2017 / ASSESSMENT YEAR : 2012-13 M/S. SECO TOOLS INDIA PRIVATE LIMITED, GAT NO.582, PUNE NAGAR ROAD, KOREGAON BHIMA, PUNE 412216 PAN : AAACS8793F VS. DCIT, RANGE-6, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE FINAL ASSESSMENT ORDER DATED 22-12-2016 PASSED BY THE ASSESS ING OFFICER (AO) U/S.143(3) R.W.S.144C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) IN RELATION TO THE ASSESSMENT Y EAR 2012-13. 2. THE FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST THE MAKING B Y THE ASSESSING OFFICER OF THE TRANSFER PRICING ADDITION OF RS.8,68,87,423/- IN THE INTERNATIONAL TRANSACTION PERTAINING TO `CONTRACT MANUFACTURING SEGMENT. ASSESSEE BY SHRI NIKHIL PATHAK REVENUE BY SHRI T. VIJAYA BHASKAR REDDY DATE OF HEARING 02-12-2019 DATE OF PRONOUNCEMENT 03-12-2019 ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PART OF SECO GROUP, WHICH IS ENGAGED IN THE DEVELOPMENT, MANUFACTURING AND GLOBAL MARKETING OF METAL CUTTING PRODUCTS AND SOLUTIONS FOR CHIP-FORMING MACHINING INDUSTRIES. THE ASSESSE E IS A 100% SUBSIDIARY OF SECO, SWEDEN AND IS ENGAGED IN THE BUS INESS OF MANUFACTURING AND TRADING IN A WIDE RANGE OF CARBIDE INSERTS , MILLING CUTTERS AND TURNING TOOL HOLDERS AND CARRIERS. THE ASSESSEE FILED ITS RETURN DECLARING TOTAL INCOME OF RS.11.88 CRORE AND ODD. CERTAIN INTERNATIONAL TRANSACTIONS WERE REPORTED IN FORM NO.3CEB . THE AO MADE A REFERENCE TO THE TRANSFER PRICING OFFICER ( TPO) FOR DETERMINING THE ARMS LENGTH PRICE (ALP) OF THE INTERNATIONAL TRANSACTIONS. THE TPO OBSERVED THAT THE ASSESSEES BUSINES S OPERATIONS WERE SEGREGATED INTO THREE SEGMENTS, NAMELY, MANUFACTURING SEGMENT (COVERING THE DOMESTIC MANUFACTURING OPERATIONS); CONTRACT MANUFACTURING SEGMENT (COVERING THE SALE OF MANUFACTURED GOODS TO THE GROUP COMPANIES OUTSIDE INDIA); A ND DISTRIBUTION SEGMENT (COVERING THE IMPORT OF FINISHED GOODS FR OM ASSOCIATED ENTERPRISE AND RESALE TO DOMESTIC THIRD PARTIES). T HERE IS NO DISPUTE ON THE DISTRIBUTION SEGMENT AND MANUFACTURING SEGM ENT, FOR WHICH THE ARMS LENGTH PRICE (ALP) CAME TO BE ACCEPTED PURSUANT TO THE DIRECTION GIVEN BY THE DISPUTE RESOLUTION PANE L ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 3 (DRP). THE QUARREL IS ON THE DETERMINATION OF THE ALP IN RELA TION TO THE CONTRACT MANUFACTURING SEGMENT. THE ASSESSEE IS DOING CONTRACT MANUFACTURING IN THE EXPORT ORIENTED FACILITY (EOU) FACILITY EXCLUSIVELY FOR ITS AES AND IN DOMESTIC TARIFF AREA (D TA) UNIT, WHICH IS PARTLY FOR THE CONTRACT MANUFACTURING FOR AES AND PARTLY FOR NON-AES. FOR THE PURPOSE OF BENCHMARKING THE INSTANT INTERNATIONAL TRANSACTIONS, THE ASSESSEE AGGREGATED THE EOU FACILITYS MANUFACTURING PLUS DTA UNITS MANUFACTURING CONCE RNING ITS AES ONLY. THE ASSESSEE APPLIED THE TRANSACTIONAL NET MAR GINAL METHOD (TNMM) AS THE MOST APPROPRIATE METHOD FOR DEMONSTRA TING THAT THE INTERNATIONAL TRANSACTIONS IN CONTRACT MANUFACTURING SEGMENT WERE AT ALP. FOR DOING THIS, THE ASSESSEE CALCULATED ITS OPERATING PROFIT/TOTAL COST AT 9.16% AS AGAINST THE AVERAGE OP/O C OF THREE COMPANIES CHOSEN AS COMPARABLES ON THE BASIS OF MULTIPLE YEAR DATA AT 11.56%. THE TPO ACCEPTED APPLICATION OF THE TN MM AS THE MOST APPROPRIATE METHOD. HE, HOWEVER, DID NOT ACCE PT THE ASSESSEES BENCHMARKING DONE AT THE FIGURES BASED ON MU LTIPLE YEARS DATA. IN ADDITION TO THE THREE COMPARABLE COMPANIES ALREADY CHOSEN FOR BENCHMARKING, THE ASSESSEE PUT FORTH A CLAIM FOR C ONSIDERING FOUR NEW COMPANIES AS COMPARABLE, NAMELY, DIES & TOO LS LTD; JAINEX AAMCOL LTD.; ELECTRONICA TOUGH CARB LTD; AND PRECOMP ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 4 TOOLS LTD. THE TPO DID NOT ACCEPT THE INCLUSION OF THESE FOU R COMPANIES FOR THE REASONS DISCUSSED INFRA . PROCEEDING WITH SINGLE YEAR DATA OF THE THREE COMPANIES INITIALLY CHOSEN BY THE ASSE SSEE GIVING OP/TC AT 21.1%, THE TPO PROPOSED THE TRANSFER PRICING ADJUSTMENT OF RS.10,23,97,179/- BY TAKING THE ASSESSEES PROFIT LEVEL INDICATOR (PLI) AT 9.16%. THE ASSESSEE ASSAILED THE CORRECTNESS OF THE TPOS ACTION, INCORPORATED IN THE DRAFT O RDER, BEFORE THE DRP WHICH GAVE CERTAIN DIRECTIONS. COMPLYING WITH THE DIRECTIONS OF THE DRP, THE AO, IN THE IMPUGNED ORDER, WOR KED OUT THE TRANSFER PRICING ADDITION AMOUNTING TO RS.8,68,87,423/-, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIB UNAL. 4. AT THE OUTSET, THE LD. DR STRONGLY OBJECTED TO THE CONSIDE RATION OF THE FOUR COMPANIES AS COMPARABLE ON THE GROUND THAT THE SE WERE NOT PART OF THE ASSESSEES ORIGINAL TRANSFER PRICING DOCUMEN TATION AND HENCE IT WAS IMPERMISSIBLE ON THE PART OF THE ASSESSEE TO SELECT FRESH COMPANIES FOR COMPARABILITY DURING THE COURSE OF PR OCEEDINGS BEFORE THE TPO. 5. WE ARE NOT INCLINED TO SUSTAIN THE PRELIMINARY OBJECTION TAKEN BY THE LD. DR THAT THE ASSESSEE SHOULD BE PROSCRIBED FROM TAKING A STAND DIFFERENT FROM THE ONE TAKEN AT THE STAGE OF THE PREPA RATION OF ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 5 THE TP STUDY REPORT. IT GOES WITHOUT SAYING THAT THE OBJECT OF A N ASSESSMENT IS TO DETERMINE CORRECT INCOME. AS THE INCOME NO T ORIGINALLY OFFERED FOR TAXATION, IF OTHERWISE CHARGEABLE, IS RE QUIRED TO BE INCLUDED IN THE TOTAL INCOME, IN THE SAME BREATH, ANY INCOME WRONGLY INCLUDED IN THE TOTAL INCOME, WHICH IS OTHERWISE NOT CHARGEABLE, SHOULD BE EXCLUDED. THERE CAN BE NO ESTOPPE L AGAINST THE PROVISIONS OF THE ACT. EXTENDING THIS PROPOSITION FURTHER IN THE CONTEXT OF THE TRANSFER PRICING PROVISIONS, IF THE ASSESSEE F AILS TO REPORT AN OTHERWISE COMPARABLE CASE, THEN THE TPO IS OBLIGED TO INCLUDE THE SAME IN THE LIST OF COMPARABLES, AND IN THE SAME MANNER, IF THE ASSESSEE FAILED TO REPORT AN OTHERWISE COMPARABLE CA SE IN ITS TP STUDY REPORT DUE TO ONE REASON OR THE OTHER AND LATER O N CLAIMS THAT IT SHOULD BE CONSIDERED, THEN, THERE SHOULD BE NO FETTERS ON THE ASSESSEE CLAIMING SO, PROVIDED THE COMPANY SO REPORTED IS , IN FACT, COMPARABLE. SIMPLY BECAUSE A COMPANY WAS WRONGLY IGNORE D BY THE ASSESSEE AS COMPARABLE, CANNOT TIE ITS HANDS IN CONTENDIN G BEFORE THE AUTHORITIES THAT A PARTICULAR COMPANY WAS WRONGLY EXCLUDED FROM THE LIST OF COMPARABLE, WHICH IS, IN FACT, COM PARABLE. THERE IS NO QUALITATIVE DIFFERENCE IN A SITUATION WHERE THE ASSE SSEE CLAIMS THAT A WRONG COMPANY, INADVERTENTLY INCLUDED FOR THE PURPOSE OF COMPARISON, SHOULD BE EXCLUDED AND THE SITUATIO N IN ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 6 WHICH THE REVENUE DOES NOT ACCEPT A PARTICULAR COMPARABLE COMPANY CHOSEN BY THE ASSESSEE, ALBEIT LATER, AS COMPARA BLE. THE UNDERLYING OBJECT OF THE ENTIRE EXERCISE IS TO DETERMINE THE CO RRECT ARMS LENGTH PRICE OF AN INTERNATIONAL TRANSACTION. SIMPLY BEC AUSE A COMPANY WAS WRONGLY NOT CONSIDERED BY THE ASSESSEE AS COMPARABLE, CANNOT ACT AS A DETERRENT FOR CLAIMING THAT THIS C OMPANY IS, IN FACT, COMPARABLE AND BE CONSIDERED FOR EVALUATION. 6. THE SPECIAL BENCH OF THE TRIBUNAL IN DCIT VS. QUARK SYSTEMS PVT. LTD. (2010) 132 TTJ (CHD) (SB) 1 HAS HELD THAT A COMPANY WHICH WAS WRONGLY INCLUDED BY THE ASSESSEE AND ALSO BY THE TPO IN THE LIST OF COMPARABLES AT THE TIME OF COMPUTING THE ALP, CAN BE EXCLUDED BY THE TRIBUNAL, IF THE ASSESSEE PROVES THAT THE SA ME WAS WRONGLY INCLUDED. SIMILAR VIEW HAS BEEN TAKEN LATER ON BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. TATA POWER SOLAR SYSTEMS LTD. (2017) 298 CTR 0197 (BOM) HOLDING THAT A PARTY IS NOT BARRED IN LAW FROM WITHDRAWING FROM ITS LIST OF COMPARABLES, A COMPA NY INCLUDED ON ACCOUNT OF MISTAKE. THIS RATIO ALSO APPLIES IN THE REVERSE DIRECTION, THAT IS, WHERE THE ASSESSEE WRONGLY EXCLU DED A GOOD COMPARABLE FROM THE LIST OF COMPARABLES AND THEN PLEAD S FOR ITS INCLUSION IN THE FINAL LIST OF COMPARABLES. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. REUTERS INDIA PVT. LTD. (2016) ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 7 288 CTR 714 (BOM.) HAS HELD THAT THERE CAN BE NO ESTOPPEL IN POINTING OUT THE CORRECT FACTS BEFORE THE APPELLATE AUTHORITIES PARTICULARLY WHEN ALL FACTS ARE ON RECORD. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THERE IS N O MERIT IN THE PRELIMINARY ARGUMENT ADVANCED ON BEHALF OF THE REVENU E ON THIS COUNT, WHICH IS HEREBY REPELLED. 7. THOUGH THE GROUNDS RAISED BY THE ASSESSEE CHALLENGE SEVERAL ASPECTS IN THE PROCESS OF DETERMINATION OF THE ALP OF CONTRA CT MANUFACTURING SEGMENT, THE LD. AR PRESSED ONLY THE NON-INCLU SION OF FOUR ADDITIONAL COMPANIES BY THE AUTHORITIES BELOW IN THE LIST OF COMPARABLES. WE WILL, THEREFORE, FOCUS ONLY ON THESE FOUR COMPANIES IN THE SERIATIM FOR CONSIDERATION ON MERITS. DIES & TOOLS LTD. 8. THE TPO REJECTED THIS COMPANY AS COMPARABLE BY MENTIO NING ON PAGE 18 OF HIS ORDER THAT THE ASSESSEE STATED IN THE INITIAL TP STUDY REPORT THAT THE COMPANY IS ENGAGED IN MANUFACTURE O F GOI BOXES, PLATES & GRIDS. HOWEVER, WHILE SELECTING, THE ASSES SEE MENTIONED DIFFERENT BUSINESS DESCRIPTION, WHICH DEFEATS THE FUNDAMENTALS OF TRANSFER PRICING. HE OBSERVED THAT THE RPT FILTER WAS NOT MENTIONED; QUALITATIVE ANALYSIS WAS NOT DESCRIBED; EXPORT ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 8 FILTER WAS NOT PLACED; AND THE SELECTION WAS ONLY ON PRESUMPTIVE BASIS. THE DRP DID NOT CHANGE THE FORTUNE OF THE ASSESSEE ON THIS ISSUE. 9. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD. WE HAVE EXAMINED THE ACCEPT/REJECT MAT RIX, A COPY OF WHICH HAS BEEN PLACED AT PAGE 1119 OF THE PAPE R BOOK. AGAINST THE COMPANY DIES & TOOLS LTD AT SL. NO.76, THE AS SESSEE HAS MENTIONED: THE COMPANY IS ENGAGED IN MANUFACTURE OF GI BOXES, PLATES & GRIDS. THE LD. AR SUBMITTED THAT IT WAS AN ERROR ON THE PART OF THE ASSESSEE TO MENTION THE CORRECT NATURE OF MANUFACTURING DONE BY THIS COMPANY AND THE TPO ALSO FAILED TO EXAMINE THE ANNUAL REPORT OF THE COMPANY, WHICH WAS PLACED BEFORE HIS CONSIDERATION AS WELL. IN VIEW OF THE FACT THAT TH E TPO HAS NOT EXAMINED THE COMPARABILITY OR OTHERWISE OF THIS COMP ANY ON THE STRENGTH OF THE ANNUAL REPORT OR OTHER RELEVANT MATERIAL, WE DEEM IT APPROPRIATE TO SET-ASIDE THE IMPUGNED ORDER ON THIS SCORE AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR INDEPENDENTLY EXAMINING ITS COMPARABILITY. IN CASE, THE COMPANY IS FOUND TO BE SIMILAR ON FUNCTIONS, ASSETS & RISK (FAR) ANALYSIS, THEN THE S AME SHOULD BE INCLUDED AND VICE-VERSA . NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING. ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 9 JAINEX AAMCOL LTD. 10. WHILE REJECTING THIS COMPANY FOR INCLUSION IN THE LIST OF COMPARABLES, THE TPO HAS RECORDED THAT THE ASSESSEE STATE D IN THE TP STUDY REPORT THAT THE COMPANY FAILS INITIAL FILTER. IN ADDITION, THE TPO DID NOT CONSIDER IT COMPARABLE ON THE GROUND THAT RPT FILTE R WAS NOT MENTIONED, QUALITATIVE ANALYSIS WAS NOT DESCRIBED; EXPO RT FILTER WAS NOT PLACED ETC. 11. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD, WE FIND THAT THIS COMPANY WAS NOT IN THE ACCEPT/REJECT MATRIX. TO THAT EXTENT, THE RECORDING MADE IN THE ORDER PASSED BY THE TPO IS NOT APPROPRIATE. SINCE THE COMPARABILITY O F THIS COMPANY HAS NOT BEEN EXAMINED BY THE AO/TPO ON MERITS, WE CONSIDER IT EXPEDIENT TO SET-ASIDE THE IMPUGNED ORDER ON TH IS COUNT AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR EXAMINING IF THIS COMPARABLE IS REALLY COMPARABLE WITH THE ASSESSEE COMPANY. IN CASE THE SAME IS FOUND TO BE SO, THEN IT SHOULD BE INCLUDED AND VICE- VERSA . NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONA BLE OPPORTUNITY OF HEARING. ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 10 ELECTRONICA TOUGH CARB LTD. 12. THE TPO DID NOT INCLUDE THIS COMPANY IN THE LIST OF COMPARABLES BY NOTING THAT: THE ASSESSEE STATED IN THE TP STUDY REPORT THAT THIS COMPANY IS REJECTED. IN ADDITION, HE GAVE SIMILAR REASONS, BEING, NON-MENTIONING OF RPT FILTER, QUALITATIVE ANALYS IS NOT DESCRIBED; AND EXPORT FILTER NOT PLACED ETC., FOR REJECTIN G IT. 13. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD, WE FIND THAT THE REMARKS GIVEN BY THE TP O THAT THE ASSESSEE REJECTED THIS COMPANY IN TP STUDY REPORT, ARE NOT CORRECT. IN FACT, SUCH REMARKS FIND PLACE AT 1119 OF THE PAPER BOOK AGAINST THE COMPANY `ELECTRONIC MACHINE TOOLS LTD. AND NO T THE COMPANY UNDER CONSIDERATION, NAMELY, `ELECTRONICA TOUGH C ARB LTD.. REMARKS AGAINST THE `ELECTRONICA TOUGH CARB LTD. IN ACCEPT/MATRIX ARE ON PAGE 1136 OF THE PAPER BOOK IN WHICH IT HAS BEEN MENTIONED AS `NA (FAILS INITIAL FILTER). THE LD. AR SUBMITTE D THAT THE ASSESSEE EXCLUDED THIS COMPANY ON ACCOUNT OF THE ` NEGATIVE NET WORTH FILTER ON MULTIPLE YEAR DATA BASIS. IF HOWEVER, THE ALP DETERMINATION WAS TO BE DONE ON THE BASIS OF SINGLE YEAR DATA , AS WAS DONE BY THE TPO, THE LD. AR STATED, THEN THIS COMPANY H AS A POSITIVE NET WORTH. AS THE TPO HAS RIGHTLY PROCEEDED BY ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 11 CONSIDERING SINGLE YEAR DATA OF THE COMPARABLES AND THAT OF THE ASSESSEE, IT TURNS OUT THAT THE COMPARABILITY OF THIS COMPANY REMAINED TO BE EXAMINED ON MERITS. WE, THEREFORE, SET-AS IDE THE IMPUGNED ORDER AND DIRECT THE AO/TPO TO EXAMINE THE COMPARABILITY OF THIS COMPANY. IF THE SAME IS FOUND TO BE SIMILAR ON THE FAR ANALYSIS, THEN IT SHOULD BE INCLUDED AND VICE-VERSA . NEEDLESS TO SAY, THE ASSESSEE WILL BE ALLOWED A REASONABLE OPPORTUNITY OF HEARING. PRECOMP TOOLS LTD. 14. THE TPO REJECTED THIS COMPANY ON THE GROUND THAT IT WA S: `NOT LOCATED IN TP STUDY REPORT AS SELECTED COMPARABLE. THE TPO ADDUCED OTHER SIMILAR REASONS LIKE, RPT FILTER NOT MENTIONED; QUALITATIVE ANALYSIS NOT DESCRIBED; EXPORT FILTER NOT PLACED ETC. 15. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELE VANT MATERIAL ON RECORD, WE FIND IT IS AN ADMITTED POSITION THAT THIS COMPANY WAS NOT PART OF THE ORIGINAL ACCEPT/REJECT MATRIX. HOWEVER, FROM THE FRESH SEARCH CARRIED OUT BY THE ASSES SEE DURING THE COURSE OF PROCEEDINGS BEFORE THE TPO, THE ASSESSEE IN CLUDED IT. AS THE COMPARABILITY OF THIS COMPANY HAS NOT BEEN EXAMINED BY THE TPO ON MERITS, WE SET-ASIDE THE IMPUGNED ORDER AND DIREC T THE ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 12 AO/TPO TO EXAMINE IF THE COMPANY IS REALLY COMPARABLE AND T HEN DECIDE ON ITS INCLUSION OR OTHERWISE. 16. TO SUM UP, WE SET-ASIDE THE IMPUGNED ORDER ON THE QUESTION OF DETERMINATION OF THE ALP OF THE CONTRACT MANUFACTURING SEGM ENT AND REMIT THE MATTER TO THE FILE OF AO/TPO FOR FRESH DETERMINATIO N OF ITS ALP. FRESH DETERMINATION WILL BE DONE UNDER THE TNM METHOD AND ON SINGLE YEAR DATA BASIS. APART FROM THE FOUR COMPANIES DISCUSSED ABOVE, THE TPO WILL CONTINUE WITH THE INITIAL THREE COMPANIES ALREADY CONSIDERED BY HIM. 17. GROUND NOS. 8 AND 9 ARE AGAINST THE DISALLOWANCE OF INTEREST AND NON-GRANTING OF DEPRECIATION AND ADDITIONAL DEPRECIATION ON THE INTEREST EXPENSE DISALLOWED. 18. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSEE CLAI MED DEDUCTION OF INTEREST EXPENSE AT RS.34,12,953/-. THE AO DID NOT ALLOW SUCH DEDUCTION. THE ASSESSEE AGITATED THE MATTER BEF ORE THE DRP WHICH DID NOT APPROVE THE ASSESSEES CONTENTION. HOWEV ER, THE ASSESSEES ALTERNATIVE CONTENTION FOR CAPITALIZING THE AMOUNT AND GRANTING DEPRECIATION ON SUCH CAPITALIZED AMOUNT WAS ALLOWED AN D THE AO WAS DIRECTED TO ALLOW APPROPRIATE RELIEF ON THE DISALLOW ANCE OF SUCH INTEREST. THE AO, WHILE PASSING THE FINAL ORDER, D ID NOT GIVE ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 13 EFFECT TO THE DIRECTION OF THE DRP. THIS IS HOW, THE ASSESSEE IS BEFORE THE TRIBUNAL. 19. GROUND REGARDING DEDUCTIBILITY OF INTEREST AS A REVENUE EXPENDITURE WAS NOT PRESSED BY THE LD. AR. THE SAME IS THEREFORE, DISMISSED AS NOT PRESSED. 20. AS REGARDS THE CLAIM OF DEPRECIATION AND ADDITIONAL DEPRECIATION ON THE AMOUNT OF INTEREST CAPITALIZED, WE FIND THAT THE AO DID NOT GIVE EFFECT TO THE DIRECTION GIVEN BY THE DRP IN THIS REGARD. WE, THEREFORE, DIRECT THE AO TO GRANT DEPRECIATION E TC. ON THE AMOUNT OF INTEREST CAPITALIZED AS DIRECTED BY THE DRP AFTER GIV ING REASONABLE OPPORTUNITY OF HEARING. 21. GROUND NO.10 IS AGAINST NON-GRANTING OF DEPRECIATION FO R EXPENSES DISALLOWED AND CAPITALIZED IN PRECEDING YEARS, NAME LY, ASSESSMENT YEARS 2009-10 TO 2011-12. 22. HERE AGAIN, IT IS FOUND THAT THE DRP GAVE DIRECTION TO ALLOW THE DEPRECIATION TO THAT EXTENT, WHICH HAS NOT BEEN GIVEN EFF ECT BY THE AO. WE, THEREFORE, DIRECT THE AO TO EXAMINE THE CLAIM O F THE ASSESSEE AND PASS APPROPRIATE ORDER GIVING EFFECT TO THE D RPS ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 14 DIRECTION AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO TH E ASSESSEE. 23. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD DECEMBER, 2019. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 03 RD DECEMBER, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PR.CIT-V, PUNE , , / DR C, ITAT, PUNE; / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE ITA NO.403/PUN/2017 M/S. SECO TOOLS INDIA PRIVATE LIMITED 15 DATE 1. DRAFT DICTATED ON 02-12-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 03-12-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *