DCIT CIR. 7(3)(2), MUMBAI V. GUJARAT GLASS LTD. (NOW KNOWN AS M/S. PIRAMAL GLASS LTD.), MUMBAI

ITA 4777/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7105 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JHA
• Assessee Lawyers: SHREEJA GANGWAL
• Keywords: Depreciation; Transfer pricing; International transaction; Rule of consistency; Bad and doubtful debts; Notional interest; Set aside
• Section: 92B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 4777 / MUM . /2016 ( ASSESSMENT YEAR : 20 0 5 06 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 7(3)(2), MUMBAI . APPELLANT V/S GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . RESPONDENT ITA NO. 4778/MUM./2016 ( ASSESSMENT YEAR : 2007 08 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 7(3)(2), MUMBAI . APPELLANT V/S GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . RESPONDENT 2 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) ITA NO. 4598/MUM./2016 ( ASSESSMENT YEAR : 2007 08 ) PIRAMAL GLASS LTD. (EARLIER KNOWN AS GUJARAT GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 6(3), MUMBAI . RESPONDENT ITA NO. 4780/MUM./2016 ( ASSESSMENT YEAR : 2008 09 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 7(3)(2), MUMBAI . APPELLANT V/S GUJARAT GLASS LTD. ( NOW KNOWN AS PIRAMAL GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . RESPONDENT ITA NO. 4599/MUM./2016 ( ASSESSMENT YEAR : 2008 09 ) PIRAMAL GLASS LTD. (EARLIER KNOWN AS GUJARAT GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . APPELLANT V/S ASSTT . COMMISSIONER OF INCOME TAX CIRCLE 6 ( 3 ), MUMBAI . RESPONDENT 3 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) ITA NO. 4779/MUM./2016 ( ASSESSMENT YEAR : 2009 10 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 7(3)(2), MUMBAI . APPELLANT V/S GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . RESPONDENT ITA NO. 4600/MUM./2016 ( ASSESSMENT YEAR : 2009 10 ) PIRAMAL GLASS LTD. (EARLIER KNOWN AS GUJARAT GLASS LTD.) PENINSULA CORPORATE PARK PIRAMAL TOWER, GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400 013 PAN AABCG0093R . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 7(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI RONAK DOSHI A/W SHRI HARDIK NIRMAL AND SHRI SHREEJA GANGWAL REVENUE BY : SHRI S.K. JHA DATE OF HEARING 13 .03.2019 DATE OF ORDER 30.04.2019 O R D E R PER BENCH THE AFORESAID APPEAL S, FOUR BY THE REVENUE AND THREE BY THE ASSESSEE , ARE FILED AGAINST SEPARATE ORDERS PASSED BY THE LEARNED 4 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) COMMISSIONER (APPEALS) 56, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR S 2005 06, 2007 08, 2008 09 AND 2009 10. 2 . SINCE , THE AFORESAID APPEALS R ELATE TO THE SAME ASSESSEE AND INVOLVE COMMON ISSUES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDE R. ITA NO. 4777/MUM./2016 REVENUES APPEAL A.Y. 2005 06 ) 3 . IN GROUND NO.1, THE REVENUE HAS CHALLENGED ALLOWANCE OF ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE . 4 . BRIEF FACTS ARE, IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1999 2000, THE ASSESSEE HAD ACQUIRED THE GLASS DIVISION FROM NICHOL AS PIRAMAL INDIA LTD. IN CONNECTION WITH THE SAID ACQUISITION, THE ASSESSEE HAD PAID AN AMOUNT OF ` 18 CRORE TOWARDS NON COMPETE FEE. THE NON COMPETE FEE PAID BY THE ASSESSEE WAS CAPITALIZED OVER VARI OUS FIXED ASSETS IN THE RATIO OF THEIR VALUES ESTIMATE D ON A FAIR BASIS ARRIVED AT BY THE TECHNICAL EXPERTS. IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 1999 2000, THE ASSESSEE CLAIMED DEPRECIATION AT THE APPLICABLE RATE DEPENDING UPON THE VALUE ALLOCATED TO THE RESPECTIVE BLOCK OF ASSETS. FOLLOWING THE SAID METHODOLOGY, THE ASSESSEE ALSO CLAIMED DEPRECIATION IN THE IMPUGNED ASSESSMENT YEAR. 5 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) RELYING UPON HIS DECISION IN ASSESSMENT YEAR 1999 2000, THE ASSESSING OFFICER DISALLOWED ASSESSEE S CLAIM O F DEPRECIATION ON THE NON COMPETE FEE CAPITALIZED OVER DIFFERENT ASSETS. THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 5 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LEARNED COMMISSIONER (APPEALS) FOUND THAT ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE CAPITALIZED OVER V ARIOUS BLOCK OF ASSETS WAS DISALLOWED BY THE TRIBUNAL IN ASSESSMENT YEAR 19 99 2000. FOLLOWING THE SAME, LEARNED COMMISSIONER (APPEALS) DISALLOW ED ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE CAPITALIZED OVER VARIOUS ASSETS. HOWEVER, FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001 02, HE ALLOWED ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE @ 25% BY TREATING IT AS AN INTANGIBLE ASSET. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER, HOWEVER, HE FAIRLY SUBMITTED THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR 2001 02. 7 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , ASSESSEES ALTERNATIVE CLAIM OF DEPRECIATION ON NON COMPETE FEE AS AN INTANGIBLE ASSET HAS BEEN ACCEPTED BY THE TRIBUNAL IN ASSESSMENT YEAR 2001 02, 6 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 2006 07 AND 2011 12. IN THIS CON TEXT, HE DREW OUR ATTENTION TO THE RESPECTIVE ORDERS OF THE TRIBUNAL. FURTHER, HE RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN PENTASOFT TECHNOLOGIES LTD. V/S DCIT, [2014] 222 TAXMAN 209 (MAD.) AND THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN CIT V/S INGERSOLL RAND INTERNATIONAL INDUSTRY LTD., 48 TAXMANN.COM 349. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE BEFORE US IS, WHETHER ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE @ 25% BY TREATING IT AS AN INTANGIBLE ASSET IS ACCEPTABLE OR NOT. AS COULD BE SEEN, THIS IS A RECURRING DISPUTE BETWEEN THE PARTIES SINCE THE ASSESSMENT YEAR 1999 2000. THOUGH, WHILE DECIDING THE ISSUE IN THE ASSESSMENT YEAR 1999 2000, VIDE ITA NO.4842/MUM./2004, DATED 5 TH AP RIL 2013, THE TRIBUNAL HAS DISALLOWED ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE BY TREATING IT AS AN INTANGIBLE ASSET, HOWEVER, WHILE DECIDING ASSESSEES APPEAL IN ASSESSMENT YEAR 2001 02 IN ITA NO. 9645/MUM./2004, DATED 2 ND MARCH 2016, THE TRIBU NAL THOUGH WAS CONSCIOUS OF ITS OWN CONTRARY DECISION IN ASSESSMENT YEAR 1999 2000, HOWEVER, TAKING NOTE OF THE DECISIONS OF HONBLE MADRAS HIGH COURT AND HONBLE KARNATAKA HIGH COURT , REFERRED TO ABOVE, ALLOWED ASSESSEES CLAIM OF DEPRECIATION BY TREATING THE NON COM PETE FEE AS AN INTANGIBLE ASSET. T HE SAME VIEW WAS REITERATED BY THE TRIBUNAL 7 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) WHILE DECIDING ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2006 07 IN ITA NO.5360/MUM./2010, DATED 16 TH DECEMBER 2016, AND IN ASSESSMENT YEAR 2011 12 IN ITA NO.157/MUM. /2011, DATED 4 TH JANUARY 2007. THEREFORE, FACTS BEING IDENTICAL, FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN THE ORDERS REFERRED TO ABOVE, AS WELL AS THE DECISION OF DIFFERENT HIGH COURTS CITED SUPRA, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUND IS DISMISSED. 9 . G ROUND NO.2 IS ON THE ISSUE OF DELETION OF DISALLOWANCE OF INTEREST ON BORROWED FUNDS AMOUNTING TO ` 1,41,56,808. 10 . BRIEF FACTS ARE, IN THE FINANCIAL YEAR 1999 2000, THE ASSESSEE HAD INVESTED A SUM OF ` 25.87 CRORE IN CEYLON GLASS CO. LTD., SRI LANKA, AND IN FINANCIAL YEAR 2002 03, IT HAD INVESTED ` 0.12 CRORE IN GUJARAT GLASS U.S. INC. USA. IN THE FINANCIAL YEAR 2001 02, THE ASSESSEE HAD MADE FURTHER INVESTMENT IN CEYLON GLASS CO. LTD. AND THE TOTAL INVESTMENT STOOD AT ` 28.89 CRORE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INVESTMENT MADE BY THE ASSESSEE IN THE AFORESAID ENTITIES WERE NOT FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, ATTRIBUTING INTEREST COST OF 4.88% TO THE FUNDS INVESTED IN THE AFORESAID T WO ENTITIES THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF ` 1,41,56,880, UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE 8 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) ACT ) ON THE REASONING THAT SUCH INVESTMENT OF FUNDS WAS NOT FOR THE PURPOSE OF BUSINESS. THE ASSESSEE CHALLENGED THE DISALLOWANCE BEFORE THE FIRST APPELLATE AUTHORITY. 11 . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND TAKING NOTE OF THE FACT THAT SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE PRECEDING ASSESSMENT YEAR S WERE DELETED BY THE TRIBUNAL WHI LE DECIDING ASSESSEES APPEAL S, LEARNED COMMISSIONER (APPEALS) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 12 . THE LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER, HOWEVER, HE FAIRLY SUBMITTED THA T THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR S . 13 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ISSUE HAS BEEN CONSISTENTLY DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSMENT YEAR S 2001 02, 2006 07 AND 2011 12. HE DREW OUR ATTENTION TO THE RESPECTIVE ORDERS OF THE TRIBUNAL. FURTHER, HE SUBMITTED , SINCE THE SUBSIDIARIES IN WHICH INVESTMENTS WERE MADE ARE IN THE SAME LINE OF BUSINESS, THE INVESTMENT IS FOR THE PURPOSE OF BUSINESS, HENCE, NO DISALLO WANCE OF INTEREST EXPENDITURE CAN BE MADE. IN THIS CONTEST , HE RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN S.A. BUILDERS V/S CIT, 288 ITR 001 (SC). WITHOUT PREJUD ICE TO 9 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) THE AFORESAID SUBMISSION , THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SINCE THE ASSESSEE WAS HAVING SUFFICIENT SURPLUS FUNDS TO MAKE THE INVESTMENT, NO DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT CAN BE MADE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S RELIANCE UTILITIES AND POWER LTD., [2009] 313 ITR 340 (BOM.). 14 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN, THE ASSESSING OFFICER HAS DISALLOWED A PART OF INTEREST EXPENDITURE ON THE REASONING THAT INVESTMENTS MADE BY THE ASSESSEE IN SISTER CONCERNS ARE NOT FOR THE PURPOSE OF BUSINESS. HOWEVER, IT IS NOTICED THAT WHILE DECIDING DISPUTE ARISING OUT OF SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2001 02, THE TRIBUNAL IN ITA NO.9645 AND 94 98/MUM./2004, DATED 2 ND MARCH 2016, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE INVESTMENT OF FUNDS IN SISTER CONCERN S ARE FOR THE PURPOSE OF BUSINESS. THE SAME VIEW WAS REITERATED BY THE TRIBUNAL WHILE DECIDING THE ISSUE IN ASSESSMENT YEAR 2006 07, VIDE ITA NO.8360/MUM./2010, DATED 16 TH DECEMBER 2016, AND FOR THE ASSESSMENT YEAR 2011 12 IN ITA NO.157/MUM./2016, DATED 4 TH JANUARY 2017. FACTS BEING IDENTICAL, FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASE AS REFERRED TO ABOV E, WE UPHOLD THE DECISION OF LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUND RAISED IS DISMISSED. 10 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 15 . GROUND NO.3 RELATES TO DELETION OF DISALLOWANCE MADE OF ` 9,84,533 ON ACCOUNT OF INTEREST ATTRIBUTABLE TO INTEREST FREE LOAN TO THE SISTER CONCERN AND DIRECTOR . 16 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING THE FINANCIAL S TATEMENT OF THE ASSESSEE NOTICED THAT OUTST ANDING DEW OF ` 3 LAKH FROM SHRI VIJAY SHAH AND ` 1,98,74,850, FROM PIRAMAL ENTERPRISES LTD. HAVE BEEN SHOWN AS PART OF LOANS AND ADVANCES. BEING OF THE VIEW THAT THE ASSESSEE HAD ADVANCED INTEREST FREE LOAN TO SI STER CONCERN AND DIRECTOR WITHOUT ANY BUSINESS PURPOSE THE ASSESSING OFFICER MADE A DISALLOWANCE OF ` 9,84,533, BY COMPUTING NOTIONAL INTEREST @ 4.88% PER A NNUM. IN APPEAL PROCEEDINGS, LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FACTS AND MATERIALS ON RECORD FOUND THAT THE AMOUNT RECEIVABLE FROM THE SISTER CONCERN CANNOT BE TREATED AS LOAN. FURTHER, HE OBSERVED , LOAN GIVEN TO SHRI VIJAY SHAH IS OUT OF OWN FUNDS AND WAS DISBURSED IN THE ASSESSMENT YEAR 1999 2000. FURT HER , NOTICING THAT IN THE ASSESSME NT YEAR 2001 02 SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS DELETED BY THE ASSESSING OFFICER , LEARNED COMMISSIONER (APPEALS) FOLLOWED THE SAME AND DELETED THE DISALLOWANCE MADE IN THE IMPUGNED ASSESSMENT YEAR. 17 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 11 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 18 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , ISSUE HAS BEEN DECIDED CONSISTENTLY IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR S . IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE RESPECTIVE ORDERS OF THE TRIBUNAL. 19 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSING OFFICER HAS COMPUTED NOTIONAL INTEREST ON CERTAIN AMOUNTS SHOWN AS RECEIVABLE FROM A SISTER CONCERN AND ONE OF THE DIRECTORS. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) AFTER VERIFYING THE FACTS ON RECORD HAS FOUND THAT THE AMOUNT RECEIVABLE FROM THE SISTER CONCERN IS NOT IN THE NATURE OF LOAN AND THE LOAN ADVANCE D TO ON E OF THE DIRECTORS IS OUT OF SURPLUS FUND. THE AFORESAID FACTUAL FINDING OF LEARNED COMMISSIONER (APPEALS) REMAINS UNCONTROVERTED. FURTHER, THE TRIBUNAL WHILE DECIDING THE ISSUE IN THE PRECEDING ASSESSMENT YEAR S, IN THE ORDERS REFERRED TO ABOVE, HAS DELETE D SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER. IN VIEW OF THE AFORESAI D, WE UPHOLD THE DECISION OF LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. 20 . GROUND NO.4 IS ON THE ISSUE OF DELETION OF DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND (P . F) AND PENSION FUND AMOUNTING TO ` 14,85,755. 12 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 21 . IN THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED TH AT EMPLOYEES CONTRIBUTION TO PF AND PENSION FUND WAS PAID BY THE ASSESSEE AFTER T HE DUE DATE PRESCRIBED UNDER EXPLANATION TO SECTION 36 (1)(VA) OF THE ACT . ACCORDINGLY, HE DISALLOWED THE DEDUCTION CLAIMED OF ` 14,85,755. LEARNED COMMISSIONER (APPEALS) WHILE DECIDING THE ISSUE IN APPEAL , ALLOWED ASSESSEES CLAIM SINCE THE EMPLOYEES CONTRIBUTION WAS PAID WITHIN THE G RACE PERIOD ALLOWED UNDER THE PF ACT AND MUCH BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT. 22 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE HAS PAID THE EMPLOYEES CONTRIBUTION TO PF AND PENS ION FUND WITHIN THE GRACE PERIOD ALLOWED UNDER THE RELEVANT ACTS. MOREOVER, SUCH PAYMENTS HAVE BEEN MADE BY THE ASSESSEE MUCH BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AS PER SECTION 139(1) OF THE ACT. THAT BEING TH E CASE, FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S GHATGE PATIL TRANSPORTS LTD., [2014] 368 ITR 749 (BOM. ), WE UPHOLD THE DECISION OF LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUND RAISED. 23 . IN GROUND NO.5, THE REVEN UE HAS CHALLENGED DELETION OF ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT ON THE MARKETING FEE PAID TO THE ASSOCIATED ENTERPRISES ( A E ). 13 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 24 . BRIEF FACTS ARE, DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PAID MARKETING FEE TO ITS AE FROM U.S. A. AND SRI LANKA. FROM THE MATERIAL AVAILABLE ON RECORD, THE TRANSFER PRICING OFFICER OBSERVED , THE MARKETING FEE PAID DURING THE YEAR TO THE AE IN USA IS CONSIDERABLY HIGHER COMPARED TO THE TOTAL TURNOVER. FURTHER , HE OBSERVED THAT THE SEGMENTAL ACCOUNTS S HOW THAT THE OPERATIVE PROFIT RATIO OF AE AT SRI LANKA WAS SHOWING A MARGIN OF 19.61% AND THIRD PARTY SALES WAS SHOWING A MARGIN OF 17.89%. WHEREAS, THE AE SEGMENT IN USA IS SHOWING NEGATIVE MARGIN OF 36 .79%. ACCORDING TO THE TRANSFER PRICING OFFICER, TH E NEGATIVE MARGIN WAS DUE TO HIGH MARKETING FEE PAID BY THE ASSESSEE. AFTER EXAMINING THE TRANSFER PRICING STUDY REPORT AND COMPARABLE S SELECTED THEREIN , THE TRANSFER PRICING OFFICER WAS OF THE VIEW THAT THE LOWER MARGIN OF THE COMPANY WAS DUE TO THE PAYME NT OF MARKETING FEE AND ACCORDINGLY PROPOSED AN ADJUSTMENT OF ` 1.58 CRORE. THE ASSESSING OFFICER MADE THE ADDITION ON THE BASIS OF TRANSFER PRICING ADJUSTMENT PROPOSED BY THE TRANSFER PRI CING OFFICER. WHILE DECIDING ASSESSEES APPEAL ON THE ISSUE OF TRANSFER PRI CING ADJUSTMENT, LEARNED COMMISSIONER (APPEALS) HELD THAT THE TRANSFER PRICING OFFICER WAS WRONG IN HOLDING THAT THE MARKETING FEES ARE RELATED TO SALES. HE OBSERVED , AS PER THE MATERIAL ON RECORD, IRRESPECTIV E OF TH E VOLUME OF SALES MADE TO THE AE, MARKETING FEE DOES NOT VARY. HE OBSERVED , SALE OF GLASS BOTTLES AND PAYMENT OF MARKETING 14 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) FEE ARE SEPARATE TRANSACTION S, HENCE, CANNOT BE BENCH MARKED TOGETHER. T HUS, ULTIMATELY, HE ACCEPTED ASSESSEES SEPARATE BENCH M ARKING OF TRANSACTION OF S ALES AND MARKETING FEE AND ULTIMATELY DELETED THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT. 25 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATION S OF THE TRANSFER PRICING OFFICER SUBMITTED , SINCE THE MARKETING FEE IS LINKED TO THE SALES , THE TRANSFER PRICING OFFICER WAS JUSTIFIED IN MAKING ADJUSTMENT TO THE MARGIN SHOWN BY T HE ASSESSEE RELATING TO SALES OF BOTTLE S . IN THIS CONTEXT, HE HEAVILY RELIED UPON THE OBSERVATIONS OF THE TRANSFER PRICING OFFICE R. 26 . THE LEARNED AUTHORISED REPRESENTATIVE STRONGLY RELY ING UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) SUBMITTED , WITHOUT ASSIGNING ANY VALID REASON FOR REJECTING THE METHOD APPLIED BY THE ASSESSEE , THE TRANSFER PRICING OFFICER HAS PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE OF MARKETING FEE BY ADOPTING A DIFFERENT APPROACH NOT PRESCRIBED IN THE STATUTE. FURTHER, HE SUBMITTED , WHEN THE METHOD APPLIED BY THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWED O VER THE YEARS AND ACCEPTED BY THE DEPARTMENT , IN THE ABSENCE OF ANY MATERIAL CHANGE IN FACTS, THE TRANSFER PRICING OFFICER CANNOT ADOPT A DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR. HE SUBMITTED , THE TRANSACTION RELATING TO SALE OF BOTTLE S AND MARK ETING FEE ARE COMPLETELY 15 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) DIFFERENT TRANSACTIONS , HENCE, CANNOT B E AGGREGATED TOGETHER FOR BENCH MARKING. THUS, HE SUBMITTED LEARNED COMMISSIONER (APPEALS) DECISION ON THIS ISSUE SHOULD BE UPHELD. 27 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN FROM THE FACTS ON RECORD, IN THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAD ENTERED INTO VARIOUS INTERNATIONAL TRANSACTION S WITH ITS A ES , SUCH AS , SALE OF GOODS TO AE IN USA, ROYALTY ON SAL ES RECEIVED, SALE OF GOODS TO AE IN SRI LANKA AND MARKETING FEE PAID TO THE AE IN USA. IT IS RELEVANT TO OBSERVE , THE ASSESSEE HAS BENCH MARKED EACH OF THE AFORESAID TRANSACTIONS SEPARATELY BY APPLYING ONE OF THE PRESCRIBED METHODS. THE TRANSFER PRICING OFFICER WHILE DETERMINING THE ARM'S LENGTH PRICE OF MARKETING SERVICES FEE PAID HAS AGGREGATED IT WITH THE SALES MADE TO THE AE AT USA AND WHILE DOING SO HAS SELECTED / REJECTED COMPARABLES RELATING TO THE SALE S SEGMENT. IN OUR VIEW, THE AFORESAID APPROACH OF THE TRANSFER PRICING OFFICER IS UNACCEP TABLE. WHEN THE TRANSFER PRICING OFFICER IS EXAMINING THE ARM'S LENGTH PRICE OF THE MARKETING FEE PAID , HE CANNOT CLU B IT WITH THE SALES TRANSACTION SINCE BOTH ARE SEPARATE AND DISTINCT TRANSACTIONS. FURTHER, THE AGREEMENT BETWEEN THE ASSESSEE AND THE AE C LEARLY ESTABLISH THAT THE PAYMENT OF MAR KETING FEE IS NOT LINKED TO SALES . THEREFORE, IN OUR VIEW, IT HAS TO BE BENCH MARKED SEPARATELY. MOREOVER, THE ASSESSEE IS FOLLOWING THE AF ORESAID METHOD OF BENCH MARKING ALL THE TRANSACTIONS 16 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) SEPARATELY CONSISTENTLY OV ER THE YEARS. IT IS ALSO FACT ON RECORD THAT THE DE PARTMENT HAS ACCEPTED THE BENCH MARKING DONE BY THE ASSESSEE IN ALL OTHER YEARS EXCEPT THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THERE BEING NO MATERIAL DIFFERENCE IN FACTS, FOLLOWING T HE RULE OF CONSISTENCY ALSO ASSESSEES BENCH MARKING HAS TO BE ACCEPTED. THE RATIO LAID DOWN BY THE HON'BLE JURISDICTION AL HIGH COURT IN PCIT V/S VISHAY COMPONENTS INDIA PVT . LTD., IN ITA NO.1643/2016, DATED 18 TH FEBRUARY 2019, SUPPORTS THIS VIEW. EVEN , THE HON'BLE SUPREME COURT IN CIT V/S KARGILL FOODS INDIA LTD., JUDGMENT DATED 24 TH OCTOBER 2016. HAS ALSO EXPRESSED SIMILAR VIEW. IN THE AFORESAID VIEW OF THE MATTER, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. 28 . IN GROUND NO.6, THE DEPARTMENT HAS CHA LLENGED THE DELETIO N OF DISALLOWANCE FOR PROVISION OF DOUBTFUL DEBTS AMOUNTING TO ` 2,31,79,785. 29 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 2,31,79,785, TO THE PROFIT & LOSS ACCOUNT TOWARDS PROVISIONS FOR DOUBTFUL DEBTS. HE NOTICED THAT , THOUGH , THE ASSESSEE HAS ADDED BACK THIS AMOUNT TO THE INCOME COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT, HOWEVER, IT HAS NOT DONE THE SAME WHILE COMPUTING THE BOOK PROFIT UNDER SEC TION 115JB. REFERRING TO THE EXPLANATION 1 (C) UNDER 17 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) SECTION 115JB(2) OF THE ACT, THE ASSESSING OFFICER HELD THAT THE AMOUNTS SET ASIDE TOWARDS PROVISION MADE FOR MAKING LIABILITIES OTHER THAN ASCERTAINED LIABILITIES HAVE TO BE ADDED BACK TO THE NET PROFIT . ACCORDINGLY, HE ADDED BACK THE AMOUNT UNDER DISPUTE WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. THE ASSESSEE CHALLENGED THE AFORESAID DECISION OF THE A .O. BEFORE THE FIRST APPELLATE AUTHORITY. 30 . AFTER CONSIDERING T HE SUBMISSIONS OF THE ASS ESSEE IN THE LIGHT OF THE DECISIONS CITED BEFORE HIM, LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE PROVISION FOR DOUBTFUL DEBT MADE B Y THE ASSESSEE IS NOT FOR MEETING A LIABILITY BUT FOR DIMIN UTION IN THE VALUE OF THE ASSET. THEREFORE , RELYING UPON THE JUDICIAL PRECEDENTS CITED BEFORE HIM THE LEARNED COMMISSIONER (APPEALS) REDUCED THE DISPUTED AMOUNT FROM THE BOOK PROFIT. 31 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER . W HEREAS , THE LEARNED AUTHORISED REPRE SENTATIVE STRONGLY SUPPORTED THE VIEW EXPRESSED BY THE LEARNED COMMISSIONER (APPEALS). 32 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN, THE ASSESSING OFFICER HAS ADDED BACK THE PROVISION FOR DOUBTFUL DEBT TAKING RECOU RSE TO EXPLANATION - 1(C) TO SECTION 115JB(2) OF THE ACT , AS IT IS NOT SET OUT FOR MEETING ANY 18 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) ASCERTAINED LIABILITY. HOWEVER, THE FACTS ON RECORD REVEAL THAT THE AMOUNT IN DISPUTE IS NOT A LIABILITY BUT DEBT RECEIVABLE BY THE ASSESSEE. THAT BEING THE CASE, EXPLANATION - 1(C) TO SECTION 115JB WOULD NOT APPLY. THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE IS UPHELD. 33 . IN GROUND NO.7, THE REVENUE HAS CHALLENGED DELETION OF DISALLOWANCE OF THE PROVISIONS MADE FOR NON MOVING / OBSOLETE INVENTOR Y. THE REASONING ON THE BASIS OF WHICH THE ASSESSING OFFICER MADE THE DISALLOWANCE IS SIMILAR TO GROUND NO.6. 34 . THEREFORE, IN VIEW OF OUR REASONING IN GROUND NO. 6, THE DECISION O F LEARNED COMMISSIONER (APPEALS) IS UPHELD. GROUND RAISED IS DISMISSED. 35 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.4778/MUM./2016 REVENUES APPEAL A.Y. 2007 08 36 . GROUND NO.1 RELATES TO DEPRECIATION ON NON COMPETE FEE. THIS GROUND IS IDENTICAL TO GROUND NO.1 OF ITA NO.4777/MUM./ 2016. FOLLOWING OUR DECISION IN PARA 8 O F THE ORDER, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). 19 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 37 . GROUND NO.2 RELATES TO DELETION OF DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 36(1)(III) OF THE ACT. TH IS GROUND IS IDENTICAL TO GROUND NO.2 OF ITA NO.4777/MUM./ 2016. FOL LOWING OUR DECISION IN PARA 14 OF THE ORDER, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). 38 . GROUND NO.3 IS ON THE ISSUE OF DELETION OF ADDITION OF INTEREST ON INTEREST FREE LOAN ADVANCED TO SISTER CONCERN. TH IS GROUND IS IDENTICAL TO GROUND NO.3 OF ITA NO.4777/MUM./2016. FOLLOWING OUR DECISION IN PARA 19 OF THE ORDER, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). 39 . GORUND NO.4, RELATES TO DELETION OF DISALLOWANCE MADE ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO P.F. AND PENSION FUND. 40 . THIS GROUND IS IDENTICAL TO GROUND NO.4 OF ITA NO.4777/MUM./ 2016. FOLLOWING OUR DECISION IN PARA 22 OF THE ORDER, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS). 41 . IN GROUND NO.5, THE REVENUE HAS CHALLENGED PARTIAL RE LIEF GRANTED BY THE LEARNED COMMISSIONER (APPEALS) IN RESPECT OF ADJUSTMENT MADE TO THE ARM'S LENGTH PRICE OF INTEREST ON INTER EST FREE LOAN ADVANCED TO THE ASSOCIATED ENTERPRISE (AE) AND COMMISSION ON CORPOR ATE 20 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) GUARANTEE PROVIDED TO THE AE. CHALLENGING THE DECISION OF LEARNED COMMISSIONER (APPEALS) ASSESSEE HAS RAISED CORRESPONDING GROUNDS IN ITS APPEAL FOR THE VERY SAME ASSESSMENT YEAR IN ITA NO.4598/MUM./ 2016. 42 . BRIEF FACTS ARE, THE TRANSFER PRICING OFFICER NOTICING THAT THE ASSESSEE HAS ADVAN CED INTEREST FREE LOAN TO ITS AE PIRAMAL GLASS (U.K) LTD., WAS OF THE VIEW THAT ARM'S LENGTH INTEREST HAS TO BE COMPUTED ON SUCH LOAN AS NO SUCH INTEREST FREE LOAN W OULD HAVE BEEN ADVANCED BY A NY THIRD PARTY. THE TRANSFER PRICING OFFICER OBSERVED , THE ASSESSEE HAD ADVANCED LOAN TO ANOTHER AE AT THE INTEREST RATE OF 7.3% TO 8.4%. HE ALSO OBSERVED THAT RBI PERMITS BORROWING AT A RATE EQUIVALENT TO 8.2% TO 8.77%. THUS, HE PROPOSED AN ADJUSTMENT OF ` 10,45,175, TOWARDS ARM'S LENGTH PRICE OF THE INTEREST ON THE INTE REST FREE LOAN. FURTHER, HE NOTICED THAT THE ASSESSEE HAD PROVIDED CORPORATE GUARANTEE WITHOUT CHARGING ANY GUARANTEE COMMISSION. THUS, HE PROCEEDED TO DETERMINE THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEE COMMISSION @ 3% WHICH RESULTED IN AN ADJUSTMENT OF ` 73,19,047. THE ADJUSTMENT S PROPOSED BY THE TRANSFER PRICING OFFICER WERE ADDED BACK BY THE ASSESSING OFFICER. THE ASSESSEE CHALLENGED THE AFORESAID ADDITION S BEFORE THE FIRST APPELLATE AUTHORITY. 21 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 43 . L EARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DIRECTED THE ASSESSING OFFICER TO COMPUTE THE ARM'S LENGTH PRICE OF THE INTEREST ON LOAN TO AE BY APPLYING LIBOR RATE INSTEAD OF PRIME LENDING RATE (PLR) OF RBI. AS REGARDS CORPORATE GUARANTEE COMMISSION, LEARNED COMMISSIONER (A PPEALS) DIRECTED THE ASSESSING OFFICER TO CHARGE GUARANTEE COMMISSION @ 0.5 %. 44 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATIONS OF THE TRANSFER PRICING OFFICER SUBMITTED THAT THE A RM'S LENGTH PRICE OF INTEREST AS DETERMINED BY THE TRA NSFER PRICING OFFICER IS PROPER. AS REGARDS GUARANTEE COMMISSION, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE TRANSFER PRICING OFFICER. 45 . THE LEARNED AUTHORISED REPRESENTATIVE , ON THE OTHER HAND , SUBMITTED , ARM'S LENGTH PRICE OF THE INTEREST ON INTER EST FREE LOAN ADVANCED TO THE AE MAY BE CHARGED AT LIBOR PLUS 200 BASIS POINTS. AS REGARDS CORPORATE GUARANTEE COMMISSION, LEARNED AUTHORISED REPRESENTATIVE THOUGH SUBMITTED THAT PROVISION OF CORPORATE GUARANTEE DOES NOT COME WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION UNDER SECTION 92B OF THE ACT, HOWEVER, HE SUPPORTED THE DETERMINATION OF ARM'S LENGTH PRICE OF GUARANTEE COMMISSION AT 0.5% AS WAS DONE BY LEARNED COMMISSIONER (APPEALS). 22 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 46 . WE HAVE CONSIDERED RIVA L SUBMISSIONS AND PERUSED MATERIAL ON RECORD. WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT TRANSFER PRICING PROVISION WOULD NOT APPLY TO THE LOAN TRANSACTION WITH THE A E. IN OUR CONSIDERED OPINION, THE PROVISION OF I NTEREST FREE LOAN TO THE AE COMES WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION UNDER SECTION 92B OF THE ACT, HENCE, TRANSFER PRICING PROVISIONS WILL APPLY. MOREOVER, SINCE BY PROVISION OF INTEREST FREE LOAN, A BENEFIT HAS ACCRUED TO THE AE WHICH MAY NOT HAVE BEEN THE CASE IF SUCH LOAN W OULD HAVE BEEN ADVANCED BY A THIRD PARTY , DETERMINATION OF ARM'S LENGTH PRICE OF THE INTEREST ON SUCH LOAN HAS TO BE MADE. HOWEVER, WE AGREE WITH THE LEARNED COMMISSIONER (APPEALS) THAT INTEREST CANNOT BE CHARGED BY APPLYI NG PLR RATE , SINCE , THE LOAN HAS BEEN ADVANCED TO THE AE IN A FOREIGN COUNTRY. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO CHARGE INTEREST ON INTEREST FREE LOAN TO THE AE AT LIBOR PLUS 200 BASIS POINTS. AS REGARDS GUARANTEE COMMISSION FOR PROVISION OF CO RPORATE GUARANTEE, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT IT DOES NOT COME WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION AS DEFINED UNDER SECTION 92B OF THE ACT. IN THE DECISIONS REFERRED TO BY THE LEARNED CO MMISSIONER (APPEALS), THE HON'BLE JURISDICTIONAL HIGH COURT HAS UPHELD THE DECISION OF THE TRIBUNAL IN COMPUTING CORPORATE GUARANTEE FEE @ 0.5%. IN VIEW OF THE AFORESAID, WE UPHOLD THE 23 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUNDS AR E DISMISSED. 47 . IN GROUND NO.6, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION MADE ON ACCOUNT OF PROVISION FOR DOUBTFUL ADVANCES WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 48 . THIS GROUND IS IDENTICAL TO GROUND NO.6 OF ITA NO.4777/MUM./ 2016 . IN VIEW OF DECISION IN PARA 32 OF THE ORDER , WE DISMISS THIS GROUND. 49 . IN THE RESULT, APPEAL IS DISMISSED. ITA NO. 4598 /MUM./2016 ASSESSEES APPEAL A.Y. 200 7 08 ) 50 . THE GROUNDS RAISED BY THE ASSESSEE ARE IN RELATION TO DETERMINATION OF ARM'S LENGTH PRICE OF INTEREST ON INTEREST FREE LOANS ADVANCED TO THE AE AND GUARANTEE COMMISSION ON CORPOR ATE GUARANTEE PROVIDED TO THE A E. 51 . WE HAVE DEALT WITH THESE ISSUES WHILE DECIDING CORRESPONDING GROUND BEING GROUND NO.5 IN REVENUES APPEAL IN ITA NO.4778/MUM./2016. ACCORDINGLY, THESE GROUNDS ARE DECIDED IN TERMS OF OUR DECISION IN PARA 46 OF THE ORDER. 52 . IN THE RESULT, APPEAL IS PARTLY AL LOWED . 24 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) ITA NO. 47 80/MUM./2016 REVENUES APPEAL A.Y. 200 8 09 ) 53 . THE ISSUE RAISED IN GROUND NO.1, IS IN RELATION TO ALLOWABILITY OF DEPRECIATION ON NON COMPETE FEE. 54 . THIS GROUND IS IDENTICAL TO GROUND NO.1 OF ITA NO.4777/MUM./ 2016. FOLLOWING OUR DECISION IN PARA 8 OF THE ORDER , WE DISMISS THE GROUND RAISED. 55 . IN GROUND NO.2, THE REVENUE HAS CHALLENGED DELETION OF DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 36(1)(III) OF THE ACT. THIS GROUND IS IDENTICAL TO GROUND NO.2 OF ITA NO.4777/MUM./201 6. FOLLOWING OUR DECISION IN PARA 14 OF THE ORDER , WE DISMISS THE GROUND RAISED. 56 . IN GROUND NO.3, REVENUE HAS CHALLENGED THE DELETION OF ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST CHARGED ON INTEREST FREE LOANS TO THE SISTER CONCERN. 57 . THIS GROUND IS IDENTICAL TO GROUND NO.3, OF ITA NO.4777/MUM./ 2016. FO LLOWING OUR DECISION IN PARA 19 OF THIS ORDER, WE DISMISS THE GROUND RAISED. 58 . IN GROUNDS NO.4 AND 5, THE REVENUE HAS CHALLENGED THE PARTIAL RELIEF GRANTED TO THE ASSESSEE ON ACCOUNT OF TRANSF ER PRICING 25 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) ADJUSTMENT ON INTEREST ON INTEREST FREE LOAN TO THE AE AND PROVISION OF CORPORATE GUARANTEE TO THE AE 59 . TH ESE GROUNDS ARE IDENTICAL TO GROUND NO.5 OF ITA NO.4778/ MUM./2016. FO LLOWING OUR DECISION IN PARA 46 OF THE ORDER, WE DISMISS THE GROUND S RAISED. 60 . IN GROUND NO.6, THE REVENUE HAS CHALLENGED DELETION OF ADDITION MADE TO THE BOOK PROFIT ON ACCOUNT OF DISALLOWANCE OF PROVISION OF NON MOVING / OBSOLETE INVENTORY. 61 . THIS GROUND IS IDENTICAL TO GROUND NO.6 AND 7, OF ITA NO.4777/ MUM./2016. FOLLOWI NG OUR DECISION IN PARA 32 AND 34 OF THE ORDER WE DISMISS THE GROUND RAISED. 62 . IN THE RESULT, APPEAL IS DISMISSED. ITA NO.4599/MUM./2016 ASSESSEES APPEAL FOR A.Y. 2008 09 63 . G ROUNDS NO.I AND II RAISED BY THE ASSESSEE ARE IN RELATION TO DETERMINATION OF ARM 'S LENGTH PRICE OF INTEREST ON INTEREST FREE LOANS ADVANCED TO THE AE AND GUARANTEE COMMISSION ON CORPORATE GUARANTEE PROVIDED TO THE AE. 64 . WE HAVE DEALT WITH THESE ISSUES WHILE DECIDING CORRESPONDING GROUND S , BEING GROUND NO. 4 AND 5 IN REVENUES APPEAL IN ITA NO. 47 8 0 / 26 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) MUM./2016. ACCORDINGLY, THESE GROUNDS ARE DECIDED IN TERMS OF OUR DECISION IN PARA 46 AND 51 OF THE ORDER. 65 . IN GROUND NO.(III), THE ASSESSEE HAS CHALLENGED ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT TO THE PRICE PAID FOR PURCHASE OF MOULDS. 66 . BRIEF FACTS ARE, IN THE COURSE OF PROCEEDINGS BEFORE HIM THE TRANSFER PRICING OFFICER FOUND THAT THE ASSESSEE HAD PURCHASED MOULDS FROM ITS AE ON PAYMENT OF ` 18,39,048. AS ALLEGED BY THE TRANSFER PRICING OFFICER, THE ASSESSEE DID NOT BENCHMARK THESE TRANSACTIONS IN THE TRANSFER PRICING STUDY REPORT. HE HAS FURTHER ALLEGED THAT, THOUGH , THE ASSESSEE SUBMITTED THAT HE HAS BE NCH MARKED THE TRANSACTION BY APPLYING COMPARABLE UNCONTROLLED PRICE (CUP) METHOD, HOWEVER, NO DETAILS RELATING TO CUP WERE F URNISHED. THUS, THE TRANSFER PRICING OFFICER CONCLUDED THAT THE PRICE PAID BY THE ASSESSEE TOWARDS PURCHASE OF MOULDS IS NOT AT ARM'S LENGTH. FURTHER, STATING THAT THERE IS NO CUP AVAILABLE , ON AD HOC BASIS HE MADE A DOWNWARD ADJUSTMENT OF 25% TO THE PRICE PAID WHICH RESULTED IN AN ADJUSTMENT OF ` 4,59,762. 67 . THE ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE LEARNED COMMISSIONER 27 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) (APPEALS), HOWEVER, HE DID NOT INTERFERE WITH THE DECISION OF THE TRANSFER PRICING OFFICER. 68 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , DUE TO NON AVAILABILITY OF COMPARABLE UNCONTROLLED TRANSACTION IN PUBLIC DOMAIN, THE ASSESSEE BENCH MARKED THE TRANSACTION BY OBTAINING A CERTIFICATE FROM AN INDEPENDENT VALUER. HE SUBMITTED , THE TRANSFER PRICING OFFICER HAS NOT FOLLOWED ANY PRESCRIBED METHOD AND HAS DETERMINED THE ARM'S LENGTH PRICE ON THE BASIS OF AD HOC ESTIMATION. THUS, HE SUBMITTED , THE ADJUSTMENT MADE BY TH E TRANSFER PRICING OFFICER IS UNSUSTAINABLE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I ) CLSA INDIA PVT. LTD. V/S DCIT, [2019] 101 TAXMANN.COM 388 (MUM.); AND II ) ITO V/S INTERTOLL ICS INDIA PVT. LTD., [2016] 180 TTJ 41 (MUM.); 69 . WITHOUT PREJUDICE TO THE AFORESAID SUBMISSIONS, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSING OFFICER BE DIRECTED TO DETERMINE THE ARM'S LENGTH PRICE BY APPLYING ENTITY LEVEL TRANSACTIONAL NET MARGIN METHOD (TNMM) LIKE OTHER INTERNATIONAL TRANSACTION S . 70 . THE LEARNED DEPARTMENTAL REPRESENTATIVE , THOUGH , RELIED UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) AND THE TRANSFER PRICING OFFICER, HOWEVER, HE SUBMITTED THAT THE ISSUE MAY BE RESTORED 28 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) BACK TO THE ASSESSING OFFICER FOR DETERMIN ING THE ARM'S LENGTH PRICE BY APPLYING ANY PRESCRIBED METHOD. 71 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE WAS UNABLE TO JUSTIFY ITS CLAIM THAT THE INTERNATIONAL TRANSACTION RELATING TO PURCHASE OF MOULD S WAS BENCH MARKED BY APPLYING CUP METHOD. SIMILARLY, WHILE DETERMINING THE ARM'S LENGTH PRICE OF THE DISPUTED TRANSACTION, THE TRANSFER PRICING OFFICER HAS NOT FOLLOWED ANY PRESCRIBED METHOD, BUT HAS DETERMINED THE ARM'S LENGTH PRICE ON PURELY ESTIMATION BA SIS. THIS, IN OUR VIEW, IS LEGALLY UNSUSTAINABLE. THE TRANSFER PRICING OFFICER IS DUTY BOUND TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION BY FOLLOWING ANY ONE OF THE METHODS PRESCRIBED IN THE STATUTE. THE TRANSFER PRICING OFFICER HA S NOT JUSTIFIED OR PROVIDED ANY VALID REASON WHY 25% DOWNWARD ADJUSTMENT HAS TO BE MADE TO THE PRICE PAID. THAT BEING THE CASE, THE ADDITION MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IS UNSUSTAINABLE. HOWEVER , CONSIDERING THE FACT THAT THE ASSESSEE HA S ALSO NOT PROPERLY BENCH MARKED THE TRANSACTION, WE ARE INCLINED TO RESTORE THE ISSUE TO THE ASSESSING OFFICER FOR DETERMINING THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION RELATING TO PURCHASE OF MOULD S BY APPLYING ANY ONE OF THE PRESCRIBED METH ODS. IN THIS CONTEXT, THE ASSESSING OFFICER SHOULD CONSIDER ASSESSEES CLAIM OF DETERMINATION OF ARM'S LENGTH PRICE BY APPLYING ENTITY LEVEL TNMM. 29 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) NEEDLESS TO MENTION, BEFORE DECIDING THE ISSUE, THE ASSESSING OFFICER MUST AFFORD REASONABLE OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 72 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO.4 77 9/MUM./2016 REVENUE S APPEAL FOR A.Y. 200 9 10 73 . IN GROUND NO.1, THE REVENUE HAS CHALLENGED ALLOWABILITY OF ASSESSEES CLAIM OF DEPRECIATION ON NON COMPETE FEE. 74 . THIS GROUND IS IDENTICAL TO GROUND NO.1 OF ITA NO.4777/MUM./ 2016. F OLLOWING OUR DECISION IN PARA 8 OF THE ORDER , WE DISMISS THE GROUND RAISED. 75 . IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF I NTEREST UNDER SECTION 36(1)(III) OF THE ACT. 76 . THIS GROUND IS IDENTICAL TO GROUND NO.2 OF ITA NO.4777/MUM./ 2016. FO LLOWING OUR DECISION IN PARA 14 OF THE ORDER , WE DISMISS THE GROUND RAISED. 77 . IN GROUND NO.3, THE REVENUE HAS CHALLENGED DELETION OF DISALLOW ANCE OF INTEREST ON BORROWED FUNDS TOWARDS INTEREST FREE LOAN TO THE SISTER CONCERN. 30 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) 78 . THIS GROUND IS IDENTICAL TO GROUND NO.3 OF ITA NO.4777/MUM./ 2016. FOL LOWING OUR DECISION IN PARA 19 OF THIS ORDER, WE DISMISS THE GROUND RAISED. 79 . GROUNDS NO.4 AND 5 ARE ON THE ISSUE OF PARTIAL RELIEF GRANTED BY THE LEARNED COMMISSIONER (APPEALS) WITH REGARD TO ADJUSTMENT MADE TO THE ARM'S LENGTH PRICE OF INTE REST ON INTEREST FREE LOAN TO AE PIRAMAL GLASS LTD. AND GUARANTEE COMMISSION ON CORPORATE GUARANTEE . 80 . THESE G ROUNDS ARE IDENTICAL TO GROUND NO. 5 OF ITA NO. 4778/MUM./2016. FO LLOWING OUR DECISION IN PARA 46 OF THIS ORDER, WE DISMISS THE GROUND S RAISED. 81 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.4600/MUM./2016 ASSESSEES APPEAL FOR A.Y. 2009 10 82 . THE GRO UNDS RAISED BY THE ASSESSEE ARE IN RELATION TO DETERMINATION OF ARM'S LENGTH PRICE OF INTEREST ON INTEREST FREE LOANS ADVANCED TO THE AE AND GUARANTEE COMMISSION ON CORPORATE GUARANTEE PROVIDED TO THE AE. 83 . WE HAVE DEALT WITH THESE ISSUES WHILE DECIDING COR RESPONDING GROUND S, BEING GROUND NO. 4 AND 5 IN REVENUES APPEAL IN ITA 31 GUJARAT GLASS LTD. (NOW KNOWN AS PIRAMAL GLASS LTD.) NO. 4779 /MUM./2016. ACCORDINGLY, THESE GROUNDS ARE DECIDED IN TERMS OF OUR DECISION IN PARA 46 AND 51 OF THE ORDER. 84 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. 85 . TO SUM UP, REVENUES APPEALS ARE DISMISSED AND ASSESSEES APPEALS ARE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30.04.2019 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 30.04.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI