The DCIT, Circle-4, Ahmedabad V. Ferromatik Milacron (I) Ltd., Ahmedabad

ITA 618/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9259 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 10-01-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 28-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Transfer pricing; International transaction; Rule of consistency; Unabsorbed depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 92E; 234B; 115JB; 201; 73; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH BEFORE: R. P. TOLANI , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER FERROMATIC MILACRON (INDIA) LTD. 53, MADHUBAN, NR. MADALPUR UNDERBRIDGE, AHMEDABAD PAN:AABCC0881D (APPELLANT /RESPONDENT ) VS THE ITO, WARD 4(3), AHMEDABAD (RESPONDENT /APPELLANT ) REVENUE BY : S H RI DIL EEP KUMAR , D . R. ASSESSEE BY: S H RI S.N. SOPARKAR , A.R. DATE OF HEARING : 10 - 01 - 2 017 DATE OF PRONOUNCEMENT : 06 - 02 - 2 017 / ORDER P ER : AMARJIT SINGH, ACC OUNTANT MEMBER : - THIS CROSS APPEAL FILED BY ASSESSEE AND REVENUE FOR A.Y. 2003 - 04 , AR IS E FROM ORDER OF THE CIT(A) - III, AHMEDABAD DATED 29 - 02 - 2008 IN APPEAL NO. CIT(A) - VIII/ITO. 4(3)/62/07 - 08 , IN PROCEEDINGS UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1 961; IN SHORT THE ACT . I T A NO S. 965 / A HD/2009 & 618/AHD/2011 A SSESSMENT YEAR 2003 - 04 I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING BOOK PROFIT FOR THE PURPOSE OF SEC. 115JB AT RS. 80, 19, 069/ - AS DETERMINED BY AO BY GRANTING SET OFF OF UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION F INDEPENDENTLY FOR EACH ASSESSMENT YEAR. BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATING THE RATIO UNDER THE PROVISIONS OF SEC. 115JB THAT AGGREGATE OF UNABSORBED LOSS OR UNABSORBED DEPRECIAT ION WHICHEVER IS LESS IS TO BE SET OFF FROM THE PROFIT OF THE YEAR FOR DETERMINATION OF THE CORRECT BOOK PROFIT. LD. CIT (A) OUGHT TO HAVE CONFIRMED THE BOOK PROFIT ADOPTED BY THE APPELLANT AND QUASHED THE ORDER OF AO. 2. THE LEARNED CIT (A) HAS GROSSLY E RRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY AO OF RS. 58, 02, 500/ - ON ACCOUNT OF WARRANTY PROVISION WITHOUT APPRECIATING THE FACT THAT AS PER THE ACCOUNTING STANDARDS OF ICAI PROVISION OF WARRANTY LIABILITY IS A DEFINITE LIABILITY AND NOT A CONTINGENT ONE. THE ID. CIT (A) WITHOUT INDEPENDENT APPLICATION OF MIND DISALLOWED THE WARRANTY PROVISION FOR THE YEAR UNDER CONSIDERATION ON THE BASIS OF APPELLATE ORDER FOR A.Y. 2001/02 & A.Y. 2004/05 IN THE CASE OF THE APPELLANT. THE ID. CIT (A) OUGHT TO HAVE DELETED THE SAID DISALLOWANCE MADE BY AO BY APPRECIATING RATIO OF VARIOUS AUTHORITIES PLACED BEFORE HIM. 3. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE PLEA OF ALLOWING WARRANTY PROVISION AS CONTINGENT LIABILITY IT IS PRAYED THAT ACTUAL EXPENDITUR E INCURRED DURING THE YEAR AGAINST WARRANTY MAY BE ALLOWED. 4. THE LEARNED CIT (A) HAS ERRED IN CONFIRMING ADDITION OF RS. 80, 01, 534/ - MADE BY AO ON ACCOUNT OF ARM'S LENGTH PRICE OF ROYALTY PAYMENT THAT IS BASED ON THE REPORT OF TRANSFER PRICING OFFICER (TPO) WHOSE VALUATION OF THE INTERNATIONAL TRANSACTION TAKEN AS NIL IS ARBITRARY, UNJUST AND COMPLETELY ERRONEOUS. BOTH THE LOWER AUTHORITIES HAVE ERRED IN NOT APPRECIATING VARIOUS SUBMISSIONS; EVIDENCES AND DOCUMENTS SUBMITTED BY THE APPELLANT THAT THE R OYALTY PAID TO MILACRON INC. USA WAS PURSUANT TO THE TECHNOLOGY LICENSE AGREEMENT THAT WAS DULY APPROVED BY FIPB & RBI. THE ID. CIT (A) OUGHT TO HAVE DELETED THE ADDITION MADE BY AO AND ALLOWED THE CLAIM OF ROYALTY PAYMENT MADE BY THE APPELLANT. 5. INITIATION OF PENALTY U/S 271 (1)(C ) AND 271G OF THE ACT IS NOT JUSTIFIED. I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 3 6. THE LEARNED CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 234 A, 234B AND 234C OF THE ACT. 3. THE REVENUE HAS RAISED FOLLOW ING GROUNDS OF APPEAL: - 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE PENALTY OF RS.50,72,980/ - ON LEVIED BY THE ASSESSING OFFICER . 2. THE ID. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO DISCHAR GE THE OPNUS CAST ON HIM BY EXPLANATION 7 TO SECTION 271(1)(C). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) OUGHT TO HAVE UPHELD THE DECISION OF THE ASSESSING OFFICER. GROUND NO. 1 OF THE ASSESSEE 4. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. NIL WAS FILED ON 27 TH NOV, 2003. THEREAFTER, NOTICE U/S143(2) OF THE ACT WAS ISSUED ON 11.10.2014. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN BOOK PROFIT BEFORE REDUCIN G THE BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION U/S. 115JB OF THE ACT TO THE AMOUNT OF RS. 1,27,21,661/ - AND THE ENTIRE AMOUNT WAS SET OFF AGAINST THE BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION AND THE BOOK PROFIT WAS SHOWN AT RS. NIL. SUBSEQUENT LY, T HE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE STATING THAT ASSESSEE WAS ENTITLED TO SET OFF BROUGHT FORWARD LO SS/UNABSORBED DEPRECIATION ONLY TO THE EXTENT OF RS. 47 , 02 , 592/ - THEREFORE, HE COMPUTED THE BOOK PROFIT AT RS. 80 , 19 , 069/ - . THE ASSESSING OFFICER ALSO POIN TED OUT THAT ASSESSEE HA D AGGREGATED THE I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 4 UNABSORBED BUSINESS LOSS AND UNABSORBED DEPRECIATION OF ALL THE EARLIER ASSESSMENT YEAR , THEREAFTER , REDUCED THE LESSER OF THE TWO WHEREAS THE CORRECT LEGAL POSITION WAS THAT FOR EACH ASSESSMEN T YEAR INDEPENDENTLY THE UNABSORBED DEPRECIATION LOSS AND UNABSORBED DEPRECIATION TO BE WORKED OUT AND THE LESSER OF THE TWO WAS TO BE ALLOWED TO BE ADJUSTED FROM THE BOOK PROFIT. AGGRIEVED AGAINST THE IMPUGNED ADDITION OF THE ASSESSING OFFICER, THE AS SESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY STATING AS UNDER: - 3.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE AND THE DECISIONS CITED BY TH E ID. AUTHORISED REPRESENTATIVE . THE APPELLANT HAS CONTENDED THAT THE AGGREGATE BUSINESS LOSS OR AGGREGATE DEPRECIATION WHICHEVER IS LOWER SHOULD BE DEDUCTED WHILE CALCULATING BOOK PROFIT U/S. 115JB. THIS CONTENTION IS NOT ACCEPTABLE BECAUSE AS PER THE PROVISIONS OF SECTION 115JB AND TH E CBDT CI RCULAR NO.495 DATED 22.9.1987 , THE BUSINESS LOSS OR DEPRECIATION WHICHEVER IS LESS IS TO BE DEDUCTED YEAR WISE AND NOT THE AGGREGATE OF THE TWO. I FIND THAT THE A.O. HAS COR RECTLY WORKED THE MAT LIABILITY . ACCORD INGLY, THIS GROUND IS DISMISSED . 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL CONTENDED THAT THE LD. CIT(A) HAS INCORRECTLY SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE WORKING OF PROFIT U/S. 115JB OF THE ACT. THE LEARNED COUNSEL RELIED ON TH E DECISION OF THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - 27 SOT 152 (MUM) 47 SOT 62 (MUM) 145 ITD 182 (MUM) 126 ITD 179 (DEL) I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 5 THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LD. CIT(A). 6 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL O N RECORD. WE NOTICED THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE AGGREGATE BUSINESS LOSS OR AGGREGATE DEPRECIATION WHICHEVER LOWER SHOULD BE DEDUCTED WHILE CALCULATING BOOK PROFIT U/S. 115JB OF THE ACT. ON OTHER HAND, THE ASSESSING OFFICER STATED THAT AS PER THE PROVISION OF SECTION 115JB AND THE C B DT CIRCULAR NO. 495 DATED 22/09//19 87, THE BUSINESS LOSS OR DEPRECIA TION WHICHEVER IS LESS IS TO BE DEDUCTED YEAR WISE AND NOT THE AGGREGATE OF THE TWO. IN THIS CONNECTION, WE HAVE PERUSED THE DECISION OF THE ITAT MUMBAI IN THE CASE OF THE AMLINE TEXTILE P. LTD (2009) 27 SOT 152 (MUM) IN WHICH IT WAS HELD THAT SOLITARY FIGURES OF THE UNABSORBED DEPRECIATION OR LOSS BROUGHT FORWARD FOR ALL THE EARLIER YEAR TAKEN TOGETHER WAS T O BE REDUCED FOR THE PURPOSE OF COMPUTING BOOK PROFIT UNDER SECTION 115JB. WE HAVE ALSO PERUSED THE CASE OF PETRO ARADITE PVT. LTD. (2013) 35 TAXMANN. COM 590 (MUMBAI TRIB) IN WHICH IT WAS STATED THAT RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE T RIBUNAL IN THE CASE OF AML INE TEXTILE P. LTD SUPRA THAT LOWER OF THE SOLITARY FIGURES OF THE UNABSORBED DEPRECIATION OR LOSS BROUGHT FORWARD FOR ALL THE EARLIER YEARS TAKEN TOGETHER IS TO BE REDUCED FOR THE PURPOSE OF COMPUTING BOOK PROFIT U /S. 115JB OF THE ACT. THE RELEVANT PART OF THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF AMLINE TEXTILE P. LTD VS. ITO, 27 SOT 152 IS REPRODUCED AS UNDER: - I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 6 THERE WAS ONE MORE REASON FOR NOT APPROVING THE VIEW TAKEN BY THE LOWER AUTHORITIES. SECTI ON 72(3), RESTRICTS THE PERIOD TO WHICH THE LOSS CAN BE CARRIED FORWARD TO NOT MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED. AS PER THIS SECTION, IF THERE IS A BROUGHT FORWARD LOSS WHICH IS MORE THAN EIGHT YEARS OLD, THAT HAS TO BE ABANDONED AND ONLY THE BROUGHT FORWARD LOSS OF LESS THAN THE PRESCRIBED PERIOD CAN BE CARRIED FORWARD FOR SET OFF AGAINST THE BUSINESS INCOME. ON THE CONTRARY, THERE IS NO PROHIBITION IN SECTION 115JB, AS PER WH ICH THE AMOUNT OF UNABSORBED LOSS IS TO BE DISCARDED AFTER THE EXPIRY OF EIGHT YEARS FROM THE YEAR IN WHICH IT WAS FIRST COMPUTED. EVEN IF LOSS IS BROUGHT FORWARD FROM 50 YEAR'S BACK, THAT HAS ALSO TO BE RECKONED. TO PUT IT SIMPLY, THE AMOUNT OF LOSS BROUG HT FORWARD OR UNABSORBED DEPRECIATION HAS TO BE CONSIDERED FOR AS MANY YEARS AS COMING IN THE BOOKS OF ACCOUNT RESPECTIVE OF ANY RIDER FOR A PARTICULAR NUMBER OF YEARS. THEREFORE, REFERENCE TO THE PROVISIONS OF SECTIONS 71 TO 73 FOR ARRIVING AT THE CONCLU SION THAT SECTION 115JB, REFERS TO YEAR - WISE CONSIDERATION OF THE LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION, WAS ERRONEOUS. [PARA 16] CLAUSE (B) OF EXPLANATION TO CLAUSE (III) OF EXPLANATION (1) TO SECTION 115JB(2), PROVIDES THAT THE PROVISIONS OF TH IS CLAUSE SHALL NOT APPLY IF THE AMOUNT OF LOSS BROUGHT FORWARD ON UNABSORBED DEPRECIATION IS NIL. THE COMMISSIONER (APPEALS) HAD RELIED ON THIS PROVISION FOR UPHOLDING THE ACTION OF THE ASSESSING OFFICER THAT SINCE THE LESS BEFORE DEPRECIATION FOR THE ASS ESSMENT YEAR 2001 - 02 WAS NIL, HENCE, NO DEDUCTION WAS PERMISSIBLE FOR THIS YEAR. A BARE PERSUAL OF THIS PROVISION BRINGS OUT THE INTENTION OF THE LEGISLATURE IN NOT ALLOWING THE REDUCTION OF THE SUBJECT - MATTER OF CLAUSE (III) FOR THE PURPOSE OF COMPUTING ' BOOK PROFIT', IF THE AMOUNT OF UNABSORBED DEPRECIATION OF BROUGHT FORWARD LOSS IS NIL. IN OTHER WORDS, IT HAS BEEN PROVIDED THAT THE REDUCTION IS NOT TO BE PERMITTED IF ONE OF THESE TWO FIGURES NAMELY, LOSS BROUGHT FORWARD OR UNABSORBED DEPRECIATION IS NIL . TO PUT IT SIMPLY, IF ONE OF THESE TWO FIGURES IS NIL, TH - EN THE OTHER FIGURE WILL BE IGNORED ALTOGETHER. THE RATIONALE BEHIND THIS PORTION OF ENACTMENT IS NOT TO UNNECESSARILY ALLOW THE REDUCTION OF ONE, IF THE OTHER IS NOT THERE. SINCE THE LOSS IS TO BE CONSIDERED BEFORE THE DEPRECIATION AND IF THERE IS BROUGHT FORWARD LOSS ONLY, BUT NO CORRESPONDING UNABSORBED DEPRECIATION OR VICE VERSA, THEN NO REDUCTION IS TO BE MADE OF THE AMOUNT OF BROUGHT FORWARD LOSS OR UNABSORBED DEPRECIATION, AS THE CASE MAY BE. IF THERE IS LOSS BROUGHT FORWAR D AND UNABSORBED DEPRECIATION FOR MORE THAN ONE YEAR, THEN ONE COMBINE FIGURE EACH OF UNABSORBED D EPRECIATION AND I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 7 BROUGHT FORWAR D LOSS FOR SUCH YEARS IS TO BE DETERMINED FOR CONSIDERATION. ADVERTING TO THE FACTS OF INSTANT C ASE, IT WAS FOUND THAT NONE OF THE FIG URES OF UNABSORBED DEPRECIATION OR BROUGHT FORWARD LOSS WAS NIL, HENCE THIS PART OF THE EXPLANATION WAS NOT RELEVANT. [PARA 17] IN VIEW OF THE FOREGOING DISCUSSION, THE LOWER OF THE SOLITARY FIGURES OF THE UNABSORBED DEPRECIATION OR JOSS B ROUGHT FORWARD FOR ALL THE EARLI ER YEARS TAKEN TOGETHER WAS TO BE REDUCED FOR THE PURPOSE OF COMPUTING 'BOOK PROFIT' UNDER SECTION 115JB, AS THE AGGREGATE AMOUNT OF UNABSORBED DEPRECIATION IN RESPECT OF THE FOUR YEARS WAS AT RS. 1,51, 15,393, WHICH WAS LOWER THAN THE AGGREGATE OF THE LOSS BEFORE DEPRECIATION AT RS. 2,40,75,717, THE ASSESSEE HAD RIGHTLY CLAIMED REDUCTION FOR THE LOWER AMOUNT OF RS. 1.51 CRORE. PARA 18] WE HAVE ALSO NOTICED THAT THE CO - ORDINATE BENCH OF ITAT AHMEDABAD I N THE CASE OF N.K. INDUSTRIES VS. ACIT AHMEDABAD ITA NO. 2131/AHD/2012 HAD DECIDED THE IDENTICAL ISSUE IN ACCORDANCE WITH THE DECISION MADE BY THE ITAT MUMBAI IN THE CASE OF AMLINE TEXTILES PVT. LTD VS. ITO (SUPRA). IN VIEW OF THE ABOVE STATED FACTS AND LE GAL FINDINGS IN OUR CONSIDERED OPINION, THE LD. CIT(A) IS NOT JUSTIFIED IN STATING THAT THE BUSINESS LOSS OR DEPRECIATION WHICHEVER IS LESS TO BE DEDUCTED YEAR WISE AND NOT THE AGGREGATE OF THE TWO , T HEREFORE, WE CONCLUDE THAT AGGREGATE OF BUSINESS LOSS OR DEPRECIATION WHICHEVER LOWER IS TO BE CONSIDERED FOR REDUCTION OUT OF THE BOOK PROFIT. IN THE RESULT , THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. GROUND NO S . 2 & 3 OF THE ASSESSEE 7 . DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFIC ER NOTICED THAT ASSESSEE HAS CLAIMED AMOUNT OF RS. 58 , 15 , 265/ - I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 8 AS PROVISION FOR WARRANTY. THE ASSESSING OFFICER DISALLOWED THE PROVISION FOR WARRANTY TREATING THE SAME OF THE NATURE OF CONTINGENT LIABILITY .HE FURTHER STATED THAT SIMILAR DISALLOWANCE WAS MA DE IN ASSESSMENT YEAR 2001 - 02 IN THE CASE OF THE ASSESSEE. AGGRIEVED AGAINST THE IMPUGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER , THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING O FFICER BY STATING AS UNDER: - 4. THE FOURTH GROUND OF APPEAL IS AGAIN ST DISALLOWANCE OF RS.58,02,500/ - OF WARRANTY PROVISION. THE A.O. OBSERVED THAT THE APPELLANT HAD RELIED UPON THE ACCOUNTING STANDARDS OF ICAI TO CONCLUDE THAT PROVISION IS RECOGNIZED FOR THE BEST ESTIMATE OF THE COSTS OF MAKING GOOD UNDER THE WARRANTY PRODUCTS SOLD BEFORE THE BALANCE SHEET DATE. THUS, PROVISION OF WARRANTY IS A DEFINITE LIABILITY AND NOT A CONTINGENT ONE. THE A.O. OBSERVED THAT APPELLANT PROVIDED WARRANTY FOR PERIOD OF 18 MONTHS WHICH MAY OR MAY NOT REQUI RE ANY EXPENSE, THE PRODUCTS ARE MADE DEFECT FREE AND SHOULD NOT REQUIRE ANY EXPENSES ON ACCOUNT OF WARRANTY. THOUGH IN SOME EQUIPMENTS AFTER SALE EXPENSES MIGHT BE NEEDED SUCH ESTIMATION OF EXPENSES AT THE TIME OF SALE OR AT THE YEAR END CAN NOT BE MADE . THE LIABILITY IS CONTINGENT AND IT DEPENDS ON FUTURE HAPPENING, AND THAT THAT NO EXPENSES HAVE BEEN CRYSTALISED OR ASCERTAINED OR QUANTIFIED DURING THE YEAR , SO THE A.O. DID NOT ALLOW SUCH PROVISION FOR WARRANTY. 4.1. BEFORE ME THE A.R. RELIED UPON THE FOLLOWING DECISIONS (1) CIT VS. VINITEC CORPN. (P) LTD., 278 ITR 337 (DELHI) (2) CIT VS. INDIAN TRANSFORMERS LTD., 270 ITR 259 (KERALA) (3) CIT VS. BEEMA MFRS. (P) LTD., 130 TAXMAN 400. (MAD.) (4) WIPRO GE MEDICAL SYSTE MS LTD., VS. DY. CIT 81 TTJ 455. (5) HERO HONDA MOTORS LTD. VS. JCIT 95 TTJ 782 THE A.R. ALSO RELIED UPON THE ACCOUNTING STANDARDS. I FIND THAT THE DISALLOWANCE OF WARRANTY HAS BEEN CONFIRMED BY THE CIT(A) FOR A.Y. 2001 - 02 AND A.Y. 2004 - 05 IN THE CASE O F THE APPELLANT. THEREFORE, FOLLOWING THE SAID ORDER OF C.I.T.(A) AND ALSO BECAUSE IT IS A CONTINGENT/ LIABILITY AND NOT AN ASCERTAINED LIABILITY THE DISALLOWANCE MADE BY THE A.O. IS CONFIRMED. I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 9 8. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL CONTENDED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER .HE PLACED RELIANCE ON THE DECISION OF CO - ORDINATE BENCH OF ITAT AHMEDABAD IN THE CASE OF THE ASSESSEE VIDE ITA NO. 874/AHD/2005 FOR A .Y.(2001 - 02) . ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 9. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF WARRANTY STATING THAT LIABILITY ARISING ON ACCOUNT OF WARRANTY WAS CONTINGENT AND DEPENDS UPON FUTURE HAPPENING . THE LD. CIT(A) CONFIRMED TH E DISALLOWANCE MADE BY THE ASSESSING OFFICER STATING THAT THE SAME HA D ALSO BEEN CONFIRMED BY THE LD. CIT(A) IN THE CASE OF THE ASSESS EE FOR ASSESSMENT YEAR 2001 - 02 AND ASSESSMENT YEAR 2004 - 05 RESPECTIVELY . IN THIS CONNECTION W E FIND THAT THE CO - ORDINATE BENCH OF ITAT AHMEDABAD WITH TAX APPEAL NO. 874/AHD/2005 FOR ASSESSMENT YEAR 2001 - 02 IN THE CASE OF ASSESSEE ITSELF HAD DECIDED THE IDENTICAL ISSUE AS UNDER: - 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD ALONG WITH THE ORDER OF THE TAX AU THORITIES. WE HAVE ALSO GONE THROUGH THE CASE LAW AS RELIED ON BEFORE US. THE QUESTION BEFORE US IS WHETHER THE PROVISION MADE BY THE ASSESSEE TOWARDS THE WARRANTY CAN BE REGARDED TO BE THE ASC ERTAINED LIABILITY TH AT LEADS TO PERSONAL OBLIGATION , OF THE SEE SO THAT IT CAN BE SAID THAT THE EXPENSES HAVE ACCRUED DURING THE YEAR. THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE PROVISION FOR WARRANTY HAS BEEN MADE ON THE BASIS OF PAST EXPERIENCE AND THE CLAM S MADE IN THE EARLIER YEA R. THE PROVISION HAS BEEN MADE B Y THE I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 10 ASSESSEE DURING THE YEAR AT THE RATE OF 1.2.5% OF THE TURNOVER WHILE THE ACTUAL CLAI M HAS BEEN SHOWN AT THE RATE OF 2.5% BUT WE ALSO NOTED THAT DURING THE SUBSEQUENT ASSESSMENT YEAR I.E. AY 2002 - 0 3, THE ASSESSEE HAS NOT MADE ANY PROVISION BUT RETURNED BACK THE PROVISION TO THE EXTENT OF RS. 2, 74,000/ - WHICH IS CLEAR FROM THE LETTER O F THE ASSESSEE DATED 27 TH FEBRUARY, 2005 FILED BEFORE THE AO. WE HAVE ALSO GONE THROUGH THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. V C1T [2009] 23 DTK (SC) 79 ON WHICH THE LEARNED AR HAS VEHEMENTLY RELIED. IN TH IS CASE, THE HON'BLE SUPREME COURT HAS HELD AS UNDER: - 'AT THIS STA GE, WE ONCE AGAIN REITERATE THAT A LIABILITY IS A PRESENT OBLIGATION ARISING FROM PAST EVENTS, THE SETTLEMENT OF WHICH' IS EXPECTED TO RESULT IN AN OUTFLOW OF RESOURCES AND IN RESPECT OF W HICH A RELIABLE ESTIMATE IS POSSIBLE OF THE AMOUNT OF OBLIGATION. AS STATED ABOVE, THE CASE OF INDIAN MOLASSES CO. (SUPRA) IS DIFFERENT FROM THE PRESENT CASE. AS STATED ABOVE, IN THE PRESENT CASE WE ARE CONCERNE D WITH AN ARMY OF ITEMS OF SOPHISTICA TED (SPECIALIZED) GOODS MANUFACTURED AND SOLD BY THE ASSESSEE WHEREAS THE CASE OF INDIAN MOLASSES CO. (SUPRA) WAS RESTRICTED TO AN INDIVIDUAL RETIREE. ON THE OTHER HAND, THE CASE OF METAL BOX COMPANY OF INDIA (SUPRA) PERTAINED TO AN ARMY OF EMPLOYEES WHO WERE DUE TO RETIRE IN FUTURE. IN THAT CASE THE COMPANY HAD! ESTIMATED ITS LIABILITY UNDER TWO GRATUITY SCHEMES AND THE AMOUNT OF LIABILITY WAS DEDUCTED FROM THE GROSS RECEIPTS IN THE P&L A/C: THE COMPANY HAD WORKED OUT ITS ESTIMATED LIABILITY ON ACTUARIAL VALUATION. IT HAD MADE PROVISION FOR SUCH LIABILITY SPREAD OVER TO A NUMBER OF YEARS. IN SUCH A CASE I T WAS HELD BY THIS COURT THAT THE PROVISION MADE BY THE ASSESSEE - COMPANY FOR MEETING THE LIABILITY IN CURRED BY IT UNDER THE GR ATUITY SCHEME WOULD BE ENTI TLED TO DE DUCTION OUT OF THE GROSS RECEIPTS FOR THE ACCOUNTING YEAR DURING WHIC H THE PROVISION IS MADE FOR THE LIABILITY. THE SAME, PRINCIPLE IS LAI D DOWN IN THE JUDGMENT OF THIS COURT IN THE CASE OF BHARAT EARTH OVERS (SUPRA). IN THA T CASE THE ASSESSEE C OMPANY HAD FORMULATED EAVE ENCASHMENT SCHEME. IT WAS HELD FOLLOWING THE JUDGMENT IN METAL BOX COMPANY OF INDIA (SUPRA), THAT THE PROVISION MADE BY THE ASSESSEE FOR MEETING THE LIABILITY INCURRED UNDER LEAVE 'ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLE MENT EARNED BY THE EMPLOYEES, WAS ENTITLED TO DEDUCTION OUT OF GROSS RECEIPTS FOR THE ACCOUNTING YEAR DURING WHICH THE PROVISION IS MADE FOR THAT LIABILITY. THE PRINCIPLE WHICH I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 11 EMERGES FROM THESE DECISIONS IS THAT IF THE HISTORICAL TREND INDICATES THAT LA RGE NUMBER OF S OPHISTICATED GOODS WERE BEIN G MANUFACTURED IN THE PAST AND IN THE PAST IF THE FACTS ESTABLISHED SHOW THAT DEFECTS, EXISTED IN - SOME OF - THE ITEMS MANUFACTURED AND SOLD THEN THE PROVISION MADE FOR WARRANTY IN RESPECT OF THE ARMY OF SUCH SOP HISTICATED GOODS WOULD BE ENTITLED TO DEDUCTION FROM THE GROSS RECEIPTS UNDER S. 37 OF THE 1961 ACT. IT WOULD ALL DEPEND ON THE DATA SYSTEMATICALLY, MAINTAINED BY THE, ASSESSEE. IT MAY BE NOTED THAT IN ALL THE IMPUGNED JUDGMENTS BEFORE US THE ASSESSEE(S) H AS SUCCEEDED' EXCEPT IN THE CASE OF CIVIL APPEAL NOS. 3506 TO 351Q.OF 2Q09H - ARISING OUT OF SLP(C) NOS. 14178 - 14182 OF 2007 RPTORFC CONTROLS INDIA (P) LTD. VS. CIT, IN WHICH THE MADRAS HIGH COURT HAS OVERRULED THE DECISION OF THE TRIBUNAL ALLOWING DEDUCTION UNDER S. 37 OF THE 1961 ACT. HOWEVER, THE HIGH COURT HAS FAILED TO NOTICE THE 'REVERSAL' WHICH CONSTITUTED PART OF THE DATA SYSTEMATICALLY MAINTAINED BY THE ASSESSEE OVER LAST DECADE.' FROM THE FINDINGS OF THE HON'BLE SUPREME COURT IT IS APPARENT THAT TH E LAW IS THAT IF THE HISTORICAL TR END INDICATES THAT LARGE NUMBER OF SOPHISTICATED GOODS WERE BEING MANUFACTURED IN THE PAST AND I N THE IF THE FACTS ESTABLISHED SHOW THAT DEFECTS EXISTED IN SOME OF THE ITEMS MANUFACTURED AND SOLD THEN THE PROVISION MA DE FO R WARRANTY IN RESPECT OF THE AR MY OF SUCH SOPHISTICATED GOODS WILL BE ALLOWABLE AS DEDUCTION FROM THE GROSS RECEIPTS UNDER SECTION 37 OF THE ACT PROVIDED THE ASSESSEE HAS MADE T HE PROVISION ON THE BASIS OF DATA MAINTAINED BY HIM THAT THE TO THAT EXTENT HAS TO BE INCURRED IN EACH OF THE ASSESSMENT YEAR S. WE COULD HAVE ALLOWED THE DEDUCTION TO THE ASSESSEE IN VIEW OF THE SAID DECISION BUT SINCE IN THIS CASE THE ASSESSEE HAS REVERSED THE PROVISION DURING THE AY 2002 - 03 TO THE EXTENT OF RS.2,74,000/ - AND DID NOT MAKE ANY PROVISION EVEN DURING THE AY 2002 - 03, WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES, RESTORE THIS ISSUE TO THE FILE OF THE AO WITH THE DIRECTION THAT THE AO WILL RE - DECIDE THIS ISSUE IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. V CIT [2009] 23 DTK (SC) 79 AFTER ASCERTAINING THAT THE PROVISION MADE 'BY THE ASSESSEE TOWARDS THE WARRANTY IS BASED ON THE BASIS OF THE CLAIM MADE BY THE CUSTOMERS IN THE PAST AND IS NOT IN EXCESS THEREOF BECAUSE THE PROVISION MADE BY THE ASSESSEE FOR WARRANTY IN THE AY 1990 - 91 WAS 0.5%, IN THE AY 2000 - 01 IT WAS 0.1% AND DURING THE I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 12 ASSESSMENT YEAR UNDER CONSIDERATION IT WAS 1.25%. THE REASONS FOR INCRE ASE IN THE PROVISION MUST BE DULY EXAMINED BY THE AO FOR ASCERTAINING THE CORRECT PROVISION TO BE ALLOWED AS DEDUCTION. WE ALSO NOTICED THAT HON BLE HIGH COURT OF GUJARAT IN TAX APPEAL NO. 926 OF 2010 ON THE ABOVE FINDING OF THE CO - ORDINATE BENCH OF THE ITAT HAS DISMISSED THE APPEAL OF THE REVENUE. WE ALSO NOTICED THAT ASSESSEE OFFICER STATED THAT ASSESSEE HAS PROVIDED THE FOLLOWING WORKING OF WARRANTY : - STATEMENT OF WARRANTY PROVISIONS A.Y.2003 - 04 PARTICULARS AMOUNT (RS.) MACHINE SALES DURING YEAR 59,31,24,618 WARRANTY @ 2.00% OF ABOVE 1,18,62,400 ROUNDED OFF TO RS. 100 1,18,62,500 LESS: OPENING PROVISION REVERSED (60,60,000) NET PROVISION 58,02,500 THE ASSESSING OFFICER HAS DISALLOWED THE ABOVE STATED CLAIM OF THE AS SESSEE STATING THAT NO EXPENSES WERE CRYSTALIZED, ASCERTAINED AND QUANTIFIED DURING THE YEAR. WE NOTICED THAT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2000 - 01 DECIDED BY THE COORDINATE BENCH OF ITAT AHMEDABAD ( SUPRA ) , THE ASSESSEE HAD C LAIMED WARRANTY PROVISIONS @ 1.25% WHEREAS IN THE YEAR UNDER CONSIDERATION AS PER THE WORKING GIVEN ABOVE THE WARRANTY PROVISIONS I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 13 WAS MADE @ 2% OF THE SALE MADE DURING THE YEAR. A FTER TAKING INTO CONSIDERATION, THE DECISION OF THE CO - ORDINATE BENCH OF THE ITAT (SUPRA), IN OUR CONSIDERED OPINION IT WILL BE MORE APPROPRIATE IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER, TO DECIDE THIS ISSUE AFRESH ACCORDING TO THE DIRECTIONS ISSUED BY THE CO - ORDINATE BENCH OF THE ITAT I N THE CASE OF THE ASSESSEE WITH TAX APPEAL NO. 874/AHD/2005 FOR ASSESSMENT YEAR 2001 - 02 STATED SUPRA IN THIS ORDER . THAT THE AO WILL RE - DECIDE THIS ISSUE IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA (P) LTD. V CIT [2009] 23 DTK (SC) 79 AFTER ASCERTAINING THAT THE PROVISION MADE 'BY THE ASSESSEE TOWARDS THE WARRANTY IS BASED ON THE BASIS OF THE CLAIM MADE BY THE CUSTOMERS IN THE PAST AND IS NOT IN EXCESS THEREOF BECAUSE THE PROVISION MADE BY THE ASSESSEE FOR WARR ANTY IN THE AY 1990 - 91 WAS 0.5%, IN THE AY 2000 - 01 IT WAS 0.1% AND DURING THE ASSESSMENT YEAR 2001 - 02 IT WAS 1.25% AND DURING THE YEAR UNDER CONSIDERATION IT WAS 2%. THE REASONS FOR INCREASE IN THE PROVISION MUST BE DULY EXAMINED BY THE AO FOR ASCERTAINING THE CORRECT PROVISION TO BE ALLOWED AS DEDUCTION. GROUND NO. 4 OF THE ASSESSEE 10 . DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 80 , 01 , 534/ - AS ARMS LENGTH PRICE OF INTERNATIONAL TRANSACTION MADE BY THE ASSE SSEE TO ITS ASSOCIATE CONCERNS ON THE BASIS OF REPORT OF THE TPO U/S. 92CA(A). AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 14 BEFOR E THE CIT(A). THE CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER STATING AS UNDER: - 5.2 I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLANT CAREFULLY AND ALSO PERUSED THE ASSESSMENT ORDER AND ALSO THE ORDER OF TPO. THE TPO HAS CATEGORICALLY HELD VIDE PARA 5 AS UNDER: 'II) THE ASSESSEE FAILED TO PROVIDE THE DETAILS OF COST OF DE VELOPMENT OF TECHNOLOGY BY ITS ASSOCIATED ENTERPRISES AND HOW THE ASSOCIATED ENTERPRISE RECOVERED THE SAME FROM THIRD PARTIES OR FROM OTHER GROUP ENTITIES.' III) THE ASSESSEE FAILED TO ESTABLISH WHETHER OTHER GROUP ENTITIES WERE BEING CHARGED ROYALTY AT AL L AND IF THEY WERE PAYING ROYALTY , THEN WHAT WAS THE RATE OF PAYMENT OF ROYALTY IN THOSE CASES. THE EXAMPLE OF ANOTHER JOINT VENTURE IN INDIA IS NOT RELEVANT AS IT ALSO BELONGS TO THE SAME COUNTRY. HERE, IT WILL BE MORE IMPORTANT TO KNOW THE RATES THAT A RE BEING CHARGED IN DIFFERENT REGIONS OF THE WORLD. TWO JOINT VENTURES PAYING ROYALTY TO THE SAME ASSOCIATED ENTERPRISE IS NOT IMPORTANT AS BOTH ARE LOCATED IN INDIA ONLY. IN VIEW OF THE ABOVE ANALYSIS, THE TOTAL AMOUNT OF ROYALTY OF RS.80,01,534/ - AS HA VING BEEN PAID TO ITS ASSOCIATED ENTERPRISES, IS DETERMINED AS NIL. THE A.O IS REQUIRED TO MAKE AN ADDITION OF RS. 80,01,534/ - IN THE TOTAL INCOME OF THE ASSESSEE.' IN THE ABOVE ORDER OF THE TPO, AS THE APPELLANT DID NOT FURNISH THE DETAILS OF COST OF D EVELOPMENT OF TECHNOLOGY BY ITS ASSOCIATED ENTERPRISE AND FAILED TO FURNISH THE DETAILS OF RATES WHICH WERE CHARGED IN THE DIFFERENT REGIONS OF THE WORLD, THE TPO HAS DETERMINED THE ARMS LENGTH PRICE OF THE ROYALTY TRANSACTION AS RS. NIL. IN VIEW OF THE AB OVE DISCUSSION, THE CLAIM OF THE APPELLANT FOR ROYALTY PAYMENT DISALLOWED BY THE AO AS NIL IS REJECTED AND THE ACTION OF THE AO IS UPHELD. THIS GROUND IS DISMISSED . 11. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, LEARNED COUNSEL STATED THAT THE LD. CIT(A) IS NOT CORRECT IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF TPO S ORDER . IN THIS CONNECTION, HE ALSO REFERRED TO THE PRECEDING AND SUBSEQUENT I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 15 ASSESSMENT YEARS IN THE CASE OF THE ASSESSEE IN WHICH NO ADDITION W ERE M ADE BY THE TPO AND ASSESSING OFFICER ON IDENTICAL ISSUES. HE ALSO REFER RED THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - BRINTONS CARPETS ASIA (P.) LTD. VS DCIT (2011) 139 TTJ 177 (PUNE) ACIT VS. NGC NETWORK (INDIA) (P.) LTD (2011) 10 TAXMANN. COM 140 (MUMBA I) ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE CIT(A). 12. AFTER HEARING THE CONTENTIONS OF BOTH THE SIDES AND PERUSAL OF MATERIAL ON RECORD, WE FIND THAT THE ASSESSING OFFICER, HAD MADE ADDITION OF RS. 80,01,534/ - TO T HE TOTAL INCOME OF THE ASSESSEE ON THE BASIS OF THE REPORT OF TPO U/S. 92E OF THE ACT STATING THAT PAYMENT OF ROYALTY OF RS. 80,01,534/ - MADE BY THE ASSESSEE TO MILACRON INC. (USA) WAS NOT AT ARM S LENGTH PRICE. WE FIND THAT ASSESSING OFFICER HAS NOT ELAB ORATED IN DETAILS THE FINDINGS OF THE TPO IN THE ASSESSMENT ORDER. WE NOTICED THAT THE LD. CIT(A) HAS SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER STATING THAT T HE ASSESSEE DID NOT FURNISH THE DETAILS OF COST OF DEVELOPMENT OF TECHNOLOGY BY I T S ASS OCIATED ENTERPRISE AND FAILED TO FURNISH THE DETAILS OF RATES WHICH WERE CHARGED IN THE DIFFERENT REGIONS OF THE WORLD. WE OBSERVED THAT THE TPO HAS NOT PROVIDED ANY BENCH MARKING BEFORE ARRIVING TO THE CONCLUSION THAT ROYALTY PAYMENT TO ITS ASSOCIATED EN TERPRISE TO BE DETERMINED AS NIL. WE FIND THAT DURING THE ASSESSMENT YEAR 2002 - 03 ON THE IDENTICAL ISSUES THE METHODS OF COMPUTATION OF ARM S LENGTH I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 16 PRICE HA D BEEN ACCEPTED BY THE DEPARTMENT WHICH WAS EVIDENT FROM THE TPO S ORDER DATED 12/10/2004 IN THE CASE OF THE ASSESSEE. WE FURTHER NOTICED THAT THE COMPUTATION OF ARM S LENGTH PRICE IN THE CASE OF THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEARS IN 2004 - 05 TO ASSESSMENT YEAR 2007 - 08 HAVE ALSO BEEN ACCEPTED BY THE DEPARTMENT. THESE FACTS CLEARLY INDICAT E THAT METHODS OF COMPUTATIONS ON IDENTICAL ISSUE HAD BEEN ACCEPTED BY THE DEPARTMENT IN ABOVE MENTIONED ASSESSMENT YEARS IN THE CASE OF THE ASSESSEE. WE FIND COMMONALITY OF THE FACTS IN THE CASE OF THE ASSESSEE ON THE IDENTICAL ISSUES EXISTED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND FOR THE OTHER ASS ESSMENT YEARS AS STATED ABOVE IN THIS O R DER. WE ALSO FIND THAT THE TPO HAD NOT SPECIFIED ANY STANDARD TO DISPROVE THE COMPUTATION OF ARMS LENGTH PRICE OF THE ASSESSEE AND NOT POINTED OUT ANY MATERIA L DIFFERENCES FOR NOT FOLLOWING THE RULE OF CONSISTENCY . IN OUR CONSIDERED OPINION IT IS MORE APPROPRIATE TO RESTORE TH IS MATTER TO THE FILE OF TPO FOR REWORKING OF TRANSFER PRICING ADJUSTMENT AFTER TAKING INTO CO NSIDERATION ABOVE STATED COMMON FACTS AND F INDING ON THE SIMILAR ISSUE OBSERVED IN THE OTHER ASSESSMENT YEAR IN THE CASE OF THE ASSESSEE TO PASS SPEAKING ORDER AFTER PROVIDING OPPORTUNITY TO THE ASSESSEE. 13. IN THE RESULT , THE GROUNDS NO.1 OF APPEAL OF THE ASSESSEE IS ALLOWED AND GROUNDS NO. 2 TO 4 OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSE S . GROUNDS NO.5 AND 6 OF APPEAL OF THE ASSESSEE ARE OF THE GENERAL NATURE. I.T.A NO. 965 /AHD/20 09 & 618/AHD/2011 A.Y. 2003 - 2004 PAGE NO FERROMATIC MILACRON (INDIA) LTD. VS. ITO 17 ITA NO. 618/AHD/2011 FILED BY REVENUE 1 4 . SINCE THE QUANTUM APPEAL OF THE ASSESSEE HAS BEEN DELETED AND SET ASIDE TO THE FILE OF CIT(A), SO GROUNDS OF APPEAL OF THE DEPARTMENT BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS INFRUCT U OUS. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 06 - 02 - 201 7 SD/ - SD/ - ( R. P. TOLANI ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 06 /02 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,