M/s. Lumax Industries Ltd., New Delhi V. JCIT, New Delhi

ITA 6961/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3179 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Related party transaction; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Rule of consistency; Earning of tax free income; Question of law; Revised return; Revenue expenditure
• Section: 92C; 143(3); 234B; 14A; 115JB; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6961/DEL/2014 ASSESSMENT YEAR : 2010-11 LUMAX INDUSTRIES LTD., B-85/86, MAYAPURI INDUSTRIAL AREA, PHASE-1, NEW DELHI. VS. JCIT, RANGE- 4, NEW DELHI. PAN : AAACL1126D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PRADEEP DINODIA, ADV. DEPARTMENT BY : SHRI H. K. CHOUDHARY, CIT-DR DATE OF HEARING : 07-09-2017 DATE OF PRONOUNCEMENT : 05-12-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 13.11.2014 PASSED BY THE ADDL.CIT, RANGE- 4, NEW DE LHI U/S 143(3) R.W.S. 144C(5) OF THE I.T. ACT FOR THE ASSESSMENT YEAR 201 0-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A MANUFACTURING CONCERN SPECIALIZING IN THE AUTOMOBILE LIGHTING BUS INESS. IT DEALS IN VARIOUS HIGH QUALITY AUTOMOTIVE LIGHTING EQUIPMENTS, WHICH INCLUDE HEADLAMPS, TAIL LAMPS, AUXILIARY LAMPS, SUNDRY LAMPS AND ACCESSORIE S FOR TWO WHEELERS AND FOUR WHEELERS. IT FILED ITS RETURN OF INCOME ON 29.09.2 010 DECLARING TOTAL INCOME OF RS.5,22,87,390/-. THE ASSESSING OFFICER REFERRED T HE MATTER TO THE TPO FOR DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTE RNATIONAL TRANSACTIONS CARRIED 2 ITA NO.6961/DEL/2014 ON BY THE ASSESSEE. THE TPO DURING THE COURSE OF T P ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS ENTERED INTO THE FOL LOWING INTERNATIONAL TRANSACTIONS DURING THE YEAR :- S.NO. NATURE OF INTERNATIONAL TRANSACTION AMOUNT (INR) MO ST APPROPRIATE METHOD 1 PURCHASE OF RAW MATERIAL, COMPONENTS, SUB-ASSEMBLY AND SPARE PARTS 123,087,886 TRANSACTIONAL NET MARGIN METHOD (TNMM) 2 SALE OF RAW MATERIALS, CONSUMABLES OR ANY OTHER SUPPLIES 14,855 COMPARABLE UNCONTROLLED PRICE METHOD (CUP) 3 PURCHASE OF FINISHED GOODS 855,723 RESALE PRICE METHOD (RPM) 4 PURCHASE OF TANGIBLE MOVABLE PROPERTY 4,990,745 T NMM 5 PAYMENT OF ROYALTY 91,945,174 CUP/TNMM 6 DESIGN, DRAWING & TESTING CHARGES 85,468,409 TNMM 7 ABSENCE FEES 42,312,547 TNMM 8 HOMOLOGATION CHARGES RECEIVED 3,909,318 CUP 9 REIMBURSEMENT OF TRAVELLING AND OTHER ANCILLARY EXPENSES 3,545,413 TNMM 10 WRITE OFF DEBIT NOTE ISSUED FOR AIR FREIGHT REIMBURSEMENT 1,160,855 TNMM 3. THE TPO ACCEPTED ALL THE TRANSACTIONS TO BE AT A RMS LENGTH PRICE EXCEPT THE PAYMENT OF ROYALTY AMOUNTING TO RS.91,945,174/- . THE ASSESSEE IN ITS TP STUDY REPORT HAD USED CUP METHOD TO BENCHMARK THE R OYALTY PAYMENT MADE TO ITS AE. FOR APPLICATION OF CUP, THE ROYALTY PAID B Y M/S MARUTI SUZUKI INDIA LIMITED DURING THE FINANCIAL YEAR 2009-10 WAS ADOPT ED AS A COMPARABLE UNCONTROLLED TRANSACTION. HOWEVER, THE ASSESSING O FFICER WAS NOT SATISFIED WITH THE CUP METHOD FOLLOWED BY THE ASSESSEE FOR DETERMI NATION OF THE ARMS LENGTH PRICE OF ROYALTY PAYMENT. ACCORDING TO HIM, THE AR MS LENGTH RATE FOR PAYMENT OF ROYALTY MAINLY DEPENDS ON THE PREMIUM THE INTANG IBLE COMMANDS IN THE 3 ITA NO.6961/DEL/2014 MARKET, THE UNIQUENESS OF THE INTANGIBLE AND ALSO T HE PERIOD FOR WHICH THE UNIQUENESS REMAINS. AN INDEPENDENT PARTY WOULD DET ERMINE THE ROYALTY RATE BY SEEING HOW THE UNIQUENESS CONTRIBUTES TO ITS CASH F LOWS OVER THE PERIOD IN WHICH THE UNIQUENESS CONTINUES. BEYOND THE PERIOD OF UNI QUENESS, THE INDEPENDENT PARTY WOULD NOT PAY ROYALTY EVEN IF IT GETS GOOD PR OFITS. IN VIEW OF THE ABOVE AND AFTER REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER REJECTED THE CUP METHOD ADOPTED BY THE ASSE SSEE FOR DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSAC TIONS OF ROYALTY PAYMENT DUE TO THE FOLLOWING REASONS :- A. EXTERNAL CUP APPLIED BY THE ASSESSEE CANNOT BE TAKEN AS A COMPARABLE UNCONTROLLED TRANSACTION AS CUP METHOD REQUIRES STR ICT STANDARD OF COMPARABILITY. B. THE ASSESSEE HAS NOT CARRIED A DETAILED BENCHMAR KING ANALYSIS DETAILING THE SEARCH STRATEGY AFTER APPLYING QUALITATIVE/QUANTITA TIVE FILTERS FOR BENCHMARKING THE SAID TRANSACTION. C. ROYALTY HAS NOT BEEN BENCHMARKED APPROPRIATELY U SING FUNDAMENTAL PRINCIPLES OF TRANSFER PRICING. D. THE ASSESSEE HAS BEEN UNABLE TO SHOW THAT THE TR ANSACTION OF ROYALTY PAYMENT IS AT ARMS LENGTH. E. ASSESSEE HAS IN EFFECT STATED THAT THE TPO CANNO T QUESTION WHY TRANSACTIONS ARE BEING MADE. F. HOWEVER, FOR THE REASONS HIGHLIGHTED ABOVE, MERE PRODUCTION OF AN AGREEMENT WITHOUT ANY UNDERLYING BASIS CANNOT FORM THE SOLE R EASON FOR ROYALTY PAYMENT. 4. AS PAYMENT OF ROYALTY IS A CLASS OF TRANSACTION OF ITS OWN THE TPO WAS OF THE OPINION THAT IT REQUIRES SEPARATE ANALYSIS. TH US FOR TP STUDY, THE ROYALTY TRANSACTION WAS ANALYZED BY HIM SEPARATELY UNDER CU P METHOD. ACCORDING TO HIM, THE ACT DOES NOT PRECLUDE THE TPO TO APPLY APP ROPRIATE METHOD FOR EACH 4 ITA NO.6961/DEL/2014 CLASS OF TRANSACTIONS LIKE PAYMENTS FOR INTANGIBLE IN THE FORM OF ROYALTY AND ALSO APPLY TNMM AT THE ENTERPRISE LEVEL. 5. THE TPO ALSO DID NOT ACCEPT THE CUP USED BY THE TAXPAYER AS THE TAXPAYER COMPARED THE PAYMENT OF ROYALTY WITH THE R OYALTY PAID BY MARUTI SUZUKI LTD. ON THE GROUND THAT EXTERNAL CUP REQUIRE S STRICT STANDARD OF COMPARABILITY AND MARUTI BRAND CANNOT BE COMPARED O N AN ADHOC BASIS, BECAUSE MARUTI WAS PAYING ROYALTY FOR OBTAINING LICENCE FOR MANUFACTURING A FINISHED PRODUCT I.E. AUTOMOBILE WHEREAS THE TAXPAYER HAD OB TAINED A LICENCE FOR MANUFACTURING AUTOMOBILE LIGHTING EQUIPMENT AND ACC ESSORIES. THE TPO ALSO HELD THAT ROYALTY PAYMENT DEPENDS ON THE PREMIUM TH E INTANGIBLE COMMANDS IN THE MARKET, THE UNIQUENESS OF THE INTANGIBLE AND AL SO THE PERIOD FOR WHICH UNIQUENESS REMAINS. SINCE, THE TAXPAYER HAD NOT CA RRIED A DETAILED BENCHMARKING ANALYSIS AFTER APPLYING QUALITATIVE AN D QUANTITATIVE FILTERS AND FUNDAMENTAL PRINCIPLE OF TRANSFER PRICING, THEREFOR E, THE TAXPAYERS METHOD FOR BENCHMARKING WAS NOT ACCEPTED BY THE TPO. 6. RELYING ON VARIOUS DECISIONS AND REJECTING THE E XPLANATION GIVEN BY THE ASSESSEE, THE TPO HELD THAT THE ARMS LENGTH PRICE OF THE ROYALTY PAYMENTS BY THE TAXPAYERS FOR USING OF KNOWHOW IS NIL BECAUSE O F THE FOLLOWING :- 1. THAT TAXPAYER DID NOT PRODUCE ANY EVIDENCE/ DOC UMENTATION ON HOW THE ROYALTY RATE FIXED. AT AN ARMS LENGTH, PARTY RECE IVING TECHNOLOGY WOULD LIKE TO SEE THE PROFITABILITY FROM FUTURE REVENUE STREAM S BEFORE FIXING A ROYALTY RATE. 2. THE TAXPAYER DID NOT PRODUCE ANY COST BENEFIT AN ALYSIS AT THE TIME OF ENTERING INTO THE AGREEMENT WITH ITS AE SHOWING THAT THE ROY ALTY RATE IS NOT FIXED BASED ON EXPECTED BENEFIT. 3. THERE IS NO PROOF THAT THE OTHER GROUP CONCERNS OR THIRD PARTIES ARE ALSO CHARGED IDENTICAL ROYALTY. 5 ITA NO.6961/DEL/2014 4. THE TAXPAYER HAS ALSO NOT BEEN ABLE TO SHOW THAT IT DERIVED ANY ECONOMIC BENEFIT FROM THE ALLEGED KNOW HOW RECEIVED THE AE. 5. THE PROFITABILITY IS BELOW THE ARITHMETICAL MEAN MARGIN OF THE COMPARABLE COMPANIES CONSIDERED BY THE TPO. 6. THE PROFIT THAT ACCRUES TO THE LICENSEE MAY NOT ARISE SOLELY THROUGH THE ENGINE OF THE TECHNOLOGY. THERE ARE RETURNS FROM THE MIX OF ASSETS IT EMPLOYS SUCH AS FIXED AND WORKING CAPITAL AND THE RETURNS FROM INTA NGIBLE ASSETS SUCH AS DISTRIBUTION SYSTEMS, TRAINED WORKFORCE, ETC. ALLO WANCE NEED TO BE MADE FOR THEM. IN THE ABSENCE OF ANY DATA PROVIDED BY THE T AXPAYER, IT IS IMPOSSIBLE TO KNOW WHAT PERCENTAGE OF PROFITS THE LICENSEE WOULD LIKE TO SHARE AT AN ARMS LENGTH AFTER REMOVING THE RETURNS FROM ASSETS EMPLO YED AND OTHER ECONOMIC FACTORS WHICH MAY NOT ARISE SOLELY THROUGH THE ENGI NE OF THE TECHNOLOGY. 7. THE ASSESSEE HAS NOT CARRIED A DETAILED BENCHMAR KING ANALYSIS DETAILING THE SEARCH STRATEGY AFTER APPLYING QUALITATIVE/QUANTITA TIVE FILTERS FOR BENCHMARKING THE SAID TRANSACTION. 7. THE TPO ACCORDINGLY MADE AN UPWARD ADJUSTMENT OF RS.9,19,45,174/- ON ACCOUNT OF PAYMENT OF ROYALTY U/S 92CA OF THE I.T. ACT. THE ASSESSING OFFICER PASSED THE DRAFT ASSESSMENT ORDER ACCORDINGLY BY MA KING UPWARD ADJUSTMENT OF RS.9,19,45,174/-. THE ASSESSING OFFICER IN THE DRA FT ASSESSMENT ORDER ALSO MADE ADDITION OF RS.14,13,027/- ON ACCOUNT OF PROVI SION OF WARRANTY, RS.8,59,277/- ON ACCOUNT OF PROVISIONS OF LEAVE ENC ASHMENT, RS.6,17,968/- ON ACCOUNT OF INTEREST/PENALTY PAID, RS.2,68,662/- ON ACCOUNT OF PERSONAL EXPENSES (DIRECTORS CREDIT CARD PAYMENTS), RS.10,200/- BEIN G PERSONAL EXPENSES INCURRED DUE TO MARRIAGE SHAGUN TO EMPLOYEES AND RS.16,000/- ON ACCOUNT OF DEDUCTION OF TDS OF IMPROPER RATE. 8. THE ASSESSEE APPROACHED THE DRP, WHO VIDE ORDER DATED 25.09.2014 UPHELD THE ACTION OF THE TPO IN HOLDING THE ARMS L ENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS FOR PAYMENT OF ROYALTY T O BE AT RS.NIL AND PROPOSING THE ADJUSTMENT OF RS.9,19,45,174/-. 6 ITA NO.6961/DEL/2014 9. SO FAR AS DISALLOWANCE OF RS.6,17,968/- IS CONCE RNED, THE DRP ALLOWED ONLY AN AMOUNT OF RS.3,64,937/- AS ADMISSIBLE AND C ONFIRMED THE BALANCE OF RS.2,53,031/-. THE DRP ALSO DELETED THE DISALLOWAN CE OF RS.16,000/- MADE BY THE ASSESSING OFFICER U/A 40(A)(IA) OF THE I.T. ACT . HOWEVER, THE VARIOUS OTHER ADDITIONS MADE BY THE ASSESSING OFFICER WERE SUSTAI NED BY THE DRP. THE ASSESSING OFFICER ACCORDINGLY PASSED THE ORDER U/S 143(3) R.W.S. 144C(5) ON 13.11.2014 DETERMINING THE TOTAL INCOME OF THE ASSE SSEE AT RS.16,63,14,520/-. 10. AGGRIEVED WITH SUCH ORDER OF THE ASSESSING OFFI CER, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS :- 1) THAT THE LEARNED DRP AND CONSEQUENTLY THE A.O. HAVE ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS. 9,47,49,368/- ON WHOLLY ILLEGAL, ERRONEOUS AND UNTENABLE GROUNDS. 2) THAT THE ORDER OF ASSESSMENT IS BAD IN LAW AND O N FACTS OF THE APPELLANT'S CASE. 3) THAT THE LD. TPO AND LD. DRP AND CONSEQUENTLY TH E LD. AO HAVE ERRED IN LAW, ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN MAKING ADDITION ON ACCOUNT OF ARM'S LENGTH PRICE UNDER SECTION 92CA(3) OF THE INCOME-TAX ACT AMOUNTING TO RS. 9,19,45,174/- ON WHOLLY ILLEGAL, E RRONEOUS AND UNTENABLE GROUNDS. 4) THAT THE HON'BLE DRP AND CONSEQUENTLY THE AO HAV E GROSSLY ERRED IN LAW AND FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT FOLLO WING THE JUDGEMENT OF HON'BLE DELHI ITAT IN ASSESSEE'S OWN CASE IN EARLIE R YEARS WHERE THE PAYMENT OF ROYALTY TO THE AE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN IDENTICAL FACTS. 5) THAT THE ORDER OF THE LD. AO BASED ON THE FINDIN GS OF THE LD. TPO AND THE DIRECTIONS OF THE LD. DRP U/S 144C(5) OF THE INCOME -TAX ACT, IS ERRONEOUS, UNTENABLE IN LAW AND ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE IN: 1. DETERMINING THE ALP OF THE TRANSACTION ON ACCOUN T OF PAYMENT OF ROYALTY TO THE AE OF THE APPELLANT AS NIL, 2. REJECTING THE INTERNAL & EXTERNAL CUP APPLIED BY THE APPELLANT FOR THE PAYMENT OF ROYALTY, 3. REJECTING THE BENCHMARKING DONE FOR THE PAYMENT OF ROYALTY UNDER THE OVERALL INTERNAL & EXTERNAL TNMM BY THE APPELLANT, 4. EXCEEDING THEIR JURISDICTION BY JUDGING THE ROYA LTY PAYMENTS MADE BY THE ASSESSEE THROUGH THE 'BENEFIT TEST', WHICH IS N OT A PRESCRIBED METHOD U/S 92C OF THE IT ACT. 5. HOLDING THAT THE APPELLANT HAS NOT BEEN ABLE TO SHOW THAT IT DERIVED ECONOMIC BENEFIT FROM THE KNOW HOW LICENSED FROM TH E AE, 6) THAT THE HON'BLE DRP AND CONSEQUENTLY THE AO HA VE GROSSLY ERRED IN LAW AND FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT ALLOW ING EXPENSES ON ACCOUNT OF 7 ITA NO.6961/DEL/2014 PROVISION OF WARRANTY TO THE EXTENT OF RS. 14,13,02 7/- AS PER NORMAL PROVISIONS OF THE INCOME TAX ACT TREATING THE SAME TO BE WITHO UT ANY SCIENTIFIC METHOD AND BEING UNASCERTAINED LIABILITY. 7) THAT THE HON'BLE DRP AND CONSEQUENTLY THE AO HAV E GROSSLY ERRED IN LAW AND ON THE FACTS OF THE APPELLANT'S CASE IN CONFIRMING THE ADDITION ON ACCOUNT OF INTEREST PAID FOR DELAYED PAYMENT OF INDIRECT TAXES , SUCH AS SALES-TAX, EXCISE, ETC OF RS. 253,031/- WHICH IS COMPENSATORY IN NATUR E. 8) THAT THE HON'BLE. DRP AND CONSEQUENTLY THE AO HA VE GROSSLY ERRED IN MAKING DISALLOWANCE ON ACCOUNT OF SALES PROMOTION EXPENSES OF RS. 2,68,662/- AND STAFF WELFARE EXPENSES OF RS. 10,200/- BY TREATING THE SAME TO BE PERSONAL IN NATURE. 9) THAT THE HONBLE DRP AND CONSEQUENTLY THE AO HAV E GROSSLY ERRED IN LAW IN: 1. NOT RESTRICTING THE DISALLOWANCE U/S 14A TO RS. 2,87,053/- BASED ON THE DRP'S OWN ORDER IN EARLIER YEARS AS AGAINST RS. 10, 15,149/- OFFERED BY THE ASSESSEE IN THE RETURN, BUT REVISED AMOUNT CLAI MED DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO. 2. HOLDING THAT NO CLAIM CAN BE ALLOWED UNLESS THE APPELLANT HAD FILED THE REVISED RETURN. 10) THAT THE HON'BLE DRP AND CONSEQUENTLY THE AO HA VE GROSSLY ERRED IN LAW AND ON THE FACTS OF THE APPELLANT'S CASE IN: 1. NOT ALLOWING RELIEF ON ACCOUNT OF DEPRECIATION O N UPS ETC @ 60%. 2. NOT CONSIDERING THE JUDGEMENT OF HONBLE DELHI I TAT IN ASSESSEE'S OWN CASE IN EARLIER YEARS WHERE THE ISSUE OF CHARGI NG DEPRECIATION @ 60% HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN I DENTICAL FACTS. 11) THE DRP AND CONSEQUENTLY THE A.O. HAVE ERRED IN LAW, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN CHARGING INTEREST UNDE R SECTION 234-B OF RS. 9,00,493/- AND UNDER SECTION 234-C OF RS. 6,75,842/ - OF THE INCOME TAX ACT, 1961 ON WHOLLY ERRONEOUS, ILLEGAL AND UNTENABLE GRO UNDS. 12) THAT THE HONBLE DRP AND CONSEQUENTLY THE AO HA VE GROSSLY ERRED IN LAW AND ON THE FACTS OF THE APPELLANTS CASE IN : 1. DISALLOWANCE THE PROVISION FOR WARRANTY AND LEAV E ENCASHMENT AS UNASCERTAINED LIABILITIES UNDER SECTION 115JB OF TH E INCOME TAX ACT (MAT PROVISIONS). 2. NOT APPRECIATING THAT CLAUSE (C) OF SECTION 115J B IS NOT APPLICABLE TO PROVISIONS FOR WARRANTY AND LEAVE ENCASHMENT AS THE Y ARE ASCERTAINED LIABILITIES. 13) THAT EACH GROUND IN INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. PRAYER THE APPELLANT-ASSESSEE PRAYS THAT THE RELIEF AS PER GROUNDS OF APPEAL ABOVE, MAY KINDLY BE ALLOWED TO IT AND THE APPELLANT MAY ALSO ALLOWED TO ADD, DELETE, AMEND OR SUBSTITUTE ANY GROUND(S) OF APPEAL EITHER AT OR BEF ORE THE DATE OF HEARING. 11. GROUNDS NO.1, 2 AND 13 BEING GENERAL IN NATURE ARE DISMISSED. 8 ITA NO.6961/DEL/2014 12. LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEA RING DID NOT PRESS THE GROUND NO.8 FOR WHICH THE LD. DR HAS NO OBJECTION. ACCORDINGLY, THE GROUND NO.8 IS DISMISSED AS NOT PRESSED. 13. SO FAR AS GROUND NO.3 TO 5 ARE CONCERNED, LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 HAS HELD THAT THE CIRCUMSTANCES BEFORE AND AFTER CO MING INTO EXISTENCE OF THE AE RELATIONSHIP BETWEEN THE ASSESSEE AND STANLEY ARE I DENTICAL AND THERE IS NO CHANGE IN THE FACTS. THEREFORE, THE ISSUE STANDS C OVERED IN FAVOUR OF THE ASSESSEE. 14. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER/TPO/DRP. 15. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IDENTICAL ISSUE HAD COME UP BEFO RE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YE ARS. WE FIND THE TRIBUNAL VIDE ITA NO.6212/DEL/2013 ORDER DATED 22.04.2016 HA S DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. THE ASSESSEE HAS ENTERED INTO TECHNICAL ASSISTANCE AGREEMENT WITH STANLEY EL ECTRIC COMPANY JAPAN ON 01.04.2007 FOR GRANT OF NONEXCLUSIVE AND NONTRANSFE RABLE LICENSE WITHOUT A RIGHT TO SUB-LICENSE, TO MANUFACTURE AND SALE LICENSE PRODUC T IN INDIA USING THE TECHNICAL INFORMATION OF STANLEY ELECTRIC COMPANY. SINCE 1990 THE ROYALTY IS BEING PAID BY THE ASSESSEE TO STANLEY @3% OF SALES. DURING THE PERIOD FROM 1990 TO 1994 THE TWO PARTIES WERE UNRELATED PARTY HENCE THE ROYALTY CONT RACT WAS MADE UNDER UNCONTROLLED CONDITIONS AND THE PAYMENT OF ROYALTY BY THE ASSESS EE TO AE CAN BE CONSIDERED AS COMPARABLE UNCONTROLLED PRICE FOR THE PURPOSE OF BE NCH MARKING THE ROYALTY PAYMENT FOR THE YEAR. ACCORDINGLY, ASSESSEE IN ITS TP STUDY REPORT HAS SAID THAT THE PAYMENT OF ROYALTY IS AT ARMS LENGTH PRICE AS THE AGREEMENT I S IN ACCORDANCE WITH INDUSTRIAL 9 ITA NO.6961/DEL/2014 POLICY OF THE GOVT. FURTHER IN ITS TP STUDY REPORT ASSESSEE APPLYING THE TNMM METHOD AND SUBMITTED THAT THE ABOVE TRANSACTION IS ALSO CONDUCTED AT AN ALP. ON THE IDENTICAL FACTS AND CIRCUMSTANCES IN THE CASE OF TH E ASSESSEE IN ITA NO.102/2014 DATED 28.10.2015 HAS NOT ADMITTED THE APPEAL OF THE REVENUE WITH RESPECT TO THE DETERMINATION OF ALP OF ROYALTY RELYING ON THE DECI SION OF CIT VS. EKL APPLIANCES LTD. 345 ITR 241 AND CIT VS. SONY ERICSON MOBILE CO MMUNICATION 374 ITR 118. THE COORDINATE BENCH FOR AY 2008-09 IN ITA NO.4456/DEL/ 2012 IN ASSESSEES OWN CASE HAS HELD AS UNDER:- 19. IN THIS REGARD, IT IS SEEN THAT DURING THE YEA R, ROYALTY WAS PAID BY THE ASSESSEE TO ITS AE ON SALES MADE USING THE TRADE MA RK OF STANLEY; THAT THE ASSESSEE IS A WIDELY HELD LISTED COMPANY, A MARKET LEADER. THE PAYMENT OF ROYALTY WAS FOR TRADE MARK, PATENT AND TECHNOLOGY. THE CONTRACT, I.E., THE TECHNICAL COLLABORATION AGREEMENT, BETWEEN THE ASSE SSEE AND ITS AE STOOD APPROVED BY THE GOVERNMENT SINCE 1984. EVER SINCE, THE ASSESSEE HAD BEEN CARRYING OUT THE MANUFACTURE OF SOME OF ITS PRODUCT S UNDER THE BRAND NAME OF STANLEY. FOR THIS, THE ASSESSEE HAD BEEN PAYING R OYALTY. APPROVAL IN THIS REGARD HAD BEEN PRE-OBTAINED FROM SIA, AS REQUIRED. THE RBI HAD ALSO GRANTED ITS APPROVAL, WHICH WAS BEING RENEWED YEARL Y. INITIALLY, THE ROYALTY HAD BEEN PAID @ 4% ON THE SALE OF SOME OF THE PRODU CTS PRODUCED UNDER THE BRAND NAME STANLEY. LATER, IT WAS REDUCED TO 3%. IN F.Y. 2003-04, STANLEY ELECTRIC COMPANY OF JAPAN ACQUIRED THE STATUS OF TH E AE OF THE ASSESSEE. THUS, IT WAS RIGHT FROM 1984, THAT TECHNICAL ASSIST ANCE GOT STARTED BEING GIVEN BY STANLEY ELECTRIC COMPANY, JAPAN TO THE ASSESSEE, WITH REGARD TO THE MANUFACTURE OF AUTOMOTIVE LIGHTINGEQUIPMENT. AS AVA ILABLE FROM PARA 1.4 OF THE AGREEMENT IN THE YEAR UNDER CONSIDERATION (COPY AT APB-I, 340-359, RELEVANT PORTION AT PAGE 342), A NON-EXCLUSIVE LICE NSE HAD BEEN GRANTED BY STANLEY, JAPAN TO THE ASSESSEE, ONLY FOR INDIA. AS PER THE CONDITIONS THEREOF, THE ASSESSEE WAS TO PAY ROYALTY ON ITS NET SALES, A FTER DEDUCTION FROM THE NET SALE PRICE OF THE LICENSED PRODUCTS SOLD BY LUMAX I N INDIA. THE BASIS OF CALCULATION OF PAYMENT OF ROYALTY, AS AGREED TO, IS CONTAINED IN ARTICLE 4 OF THE AGREEMENT (APB-I, PAGE 345). SUCH PAYMENT WAS TO BE @ 4% ON THE NET SALES. HOWEVER, DURING THE YEAR, ROYALTY WAS PAID @2.43% O N THE SALE OF LICENSED PRODUCTS, AMOUNTING TO RS.218.08 CRORES, AS AVAILAB LE AT APB-I, PAGE 385. THIS WAS SO, SINCE THE COST OF STANDARD IMPORTED CO MPONENTS, STANDARD LOCAL COMPONENTS AND CERTAIN OTHER DEDUCTIONS HAD BEEN DE DUCTED FROM THE NET SALES OF RS.218.08 CRORES. 20. THE LD. DR HAS CONTENDED THAT JUST BECAUSE THE ASSESSEE AND ITS AE ARE PUBLICLY LISTED COMPANIES, THIS IS NO REASON FO R THE REQUIREMENTS OF ALP TO BE FLOUTED. HOWEVER, THE ASSESSEE S CONTENTION REGARDING BOTH THE ENTITIES BEING LISTED COMPANIES, IT IS SEEN, IS NOT AT ALL T O SUPPORT ANY VIOLATION OF THE ALP PROVISIONS. THIS ARGUMENT, IN FACT, HAS BEEN TA KEN TO BOLSTER THE ASSERTION REGARDING BENEFITS OF THE TRANSACTIONS AND THE GENU INENESS THEREOF. 21. THE NEXT CONTENTION OF THE DEPARTMENT HAS BEEN THAT THE RBI APPROVAL SOUGHT TO BE RELIED ON BY THE ASSESSEE IS ONLY FOR THE PURPOSES OF FEMA/FERA AND IT DOES NOT STOP THE TRANSACTION FROM BEING LOO KED INTO BY THE INCOME-TAX AUTHORITIES FOR THE PURPOSE OF THE INCOME-TAX ACT. HERE AGAIN, IT IS SEEN THAT THIS ARGUMENT HAS BEEN TAKEN BY THE ASSESSEE ONLY T O STRESS THAT THE AGREEMENT BETWEEN THE ASSESSEE AND STANLEY WAS NOT MERELY A P APER TRANSACTION, RATHER IT WAS APPROVED BY THE RBI AS WELL, BESIDES OTHER GOVE RNMENTAL AUTHORITIES. IT HAS NOT BEEN SHOWN BY THE DEPARTMENT TO BE OTHERWIS E. 10 ITA NO.6961/DEL/2014 22. THE LD. DR THEN CONTENDED THAT THE ROYALTY IN Q UESTION WAS NOT BENCHMARKED BY THE ASSESSEE, AS HELD BY THE TPO AND THAT IT HAS NOT BEEN SHOWN THAT THE PAYMENT OF ROYALTY WAS AN ARMS LENG TH TRANSACTION. SINCE THE AVERAGE PLI OF THE COMPARABLES TAKEN BY HIM RESULTI NG IN 7.05% - OP/SALES WAS WITHIN THE (+)/(-) 5% RANGE OF THE ASSESSEES P LI WORKED OUT BY HIM AT 4.09%, THE RANGE BETWEEN 2.05%TO 12.05%, AS PER THE PROVISO TO SECTION 92C (2) (2A) OF THE ACT. 23. THE LD. DR HAS FURTHER CON TENDED THAT THE ASSESSEE DID NOT APPLY THE CUP METHOD PROPERLY, SINCE SUCH METHO D HAS BEEN SUPPORTED BY THE ASSESSEE, BASED ON THE APPROVAL BY THE RBI. IN THIS REGARD, WE FIND THAT AS NOTED ABOVE, THE ARGUMENT REGARDING THE RBI APPROVA L WAS RAISED BY THE ASSESSEE TO BUTTRESS THE CLAIM OF GENUINENESS OF IT S TRANSACTION. IN THE TPOS ORDER, THERE IS NOT EVEN AS MUCH AS A MENTION ABOUT RBI. SO FAR AS REGARDS THE DRS OBJECTION THAT THE PLEA OF EARLIER PAYMENT TO THE SAME PARTY, WHEN IT WAS NOT THE ASSESSEES AE, HAS NOT BEEN ALLOWED, IS NOT MAINTAINABLE, IT IS TO BE REITERATED HERE, AS ABOVE, THAT THE ASSESSEE DID BE NCHMARK ITS TRANSACTION BY TWO METHODS, I.E., CUP AND TNMM AND THIS WAS TAKEN NOTE OF BY THE TPO HIMSELF. APROPOS THE RELIANCE BY THE DEPARTMENT ON CGM GLOBAL (SUPRA), IT IS CORRECT THAT THEREIN, THE INTERNAL CUP WAS HELD TO BE NOT APPLICABLE, SINCE THE TRANSACTION WAS WITH AN AE HAVING RELATED PARTY TRANSACTIONS AND IT WAS HELD THAT THERE WAS NO EXTERNAL CUP FOR MAKING ANY COMPARISON IN THE RELEVANT YEAR, AS THE EARLIER AGENCY AGREEMENT WITH THE THIRD PARTY HAD EXPIRED AND RATES APPLICABLE IN THE EARLIER YEARS C OULD NOT BE MADE APPLICABLE DURING THE RELEVANT YEAR. HOWEVER, THIS DECISION DO ES NOT HAVE ANY ADVERSE EFFECT ON THE CASE OF THE ASSESSEE. THE FACTS HEREI N ARE ENTIRELY AT VARIANCE WITH THOSE OF CGM GLOBAL. HEREIN, AS OPPOSED TO T HE FACTS IN CGM GLOBAL, THE SAME ROYALTY AGREEMENT AND THE SAME LICENSE HAS BEEN IN CONTINUANCE FROM 1984 TILL THE YEAR UNDER CONSIDERATION, THE LI CENSE BEING RENEWED FROM YEAR TO YEAR, ALBEIT ON THE SAME TERMS AND CONDITIO NS. MOREOVER, THE FOLLOWING DECISIONS ARE INSTANCES OF THE EXTERNAL CUP HAVING BEEN EMPLOYED AND THIS HAS NOT BEEN DISPUTED BY THE DEPARTMENT:- 1. SONA OKEGAWA PRECISION FORGINGS LTD. VS. ACIT (ITANO.4781/DEL/2010) 2. ACIT VS. SONA OKEGAWA PRECISION FORGINGS LTD. (ITANO.260/DEL/2010. 3. CIT VS. FEDERAL MOGUL TPR INDIA LTD. (ITA NO.3 98/2012) 4. CLIMATE SYSTEMS INDIA LTD. VS. CIT (2009) 319 ITR 113(DELHI) 5. CIT VS. EICHER MOTORS LTD. (2007) 293 ITR 464 (MP) 6. PRAGA TOOLS LTD. VS. CIT (1980) 123 ITR 773 (A &P) 7. EKL APPLIANCES (2012-TII-01-HC-DEL-TP) 8. ERICSSON INDIA PVT. LTD. VS. DCIT (2012-TII-48 -ITAT-DEL-TP) 16 ITA NO.4456/DEL/2012 24. IN SONA OKEGAWA PRECISION FORGINGS LTD. (SUPR A), IT HAS BEEN HELD THAT SINCE THE ROYALTY PAID BY THE INDIAN COMPANY W AS 3% OF NET SALES AND IT FALLS WITHIN THE RANGE OF @ 8% ON EXPORT SALES AND 5% ON DOMESTIC SALES AS PER DIRECTIONS OF THE RBI, THEREFORE, THE PAYMENT S TANDS JUSTIFIED UNDER THE CUP METHOD. 25. THIS VIEW WAS ACCEPTED BY THE TRIBUNAL IN SONA OKEGAWAS CASE FOR ASSESSMENT YEAR 2004-05 ALSO, AS WELL AS IN CLIMAT E SYSTEMS(SUPRA), SWARAJ ENGINES LTD. (SUPRA) AND EICHER MOTORS ( SUPRA). 26. IN FEDERAL MOGUL (SUPRA), PAYMENT OF ROYALTY @3% ON THE SALE PRICE, ON TRANSFER OF TECHNICAL KNOWLEDGE AND INFORMATION, WAS ACCEPTED. 11 ITA NO.6961/DEL/2014 27. IN CLIMATE SYSTEMS INDIA LTD. (SUPRA), AGAIN, PAYMENT OF ROYALTY@ 3% ON THE SALE PRICE ON TRANSFER OF TECHNICAL KNOWL EDGE AND INFORMATION WAS ACCEPTED. 28. ALL THE ABOVE COMPANIES, LIKE THE ASSESSEE, WER E IN THE AUTO ANCILLARY INDUSTRY. 29. IN PRAGA TOOLS LTD. (SUPRA), WHICH WAS ALSO I N AN AUTO ANCILLARY INDUSTRY, PAYMENT OF ROYALTY @ 5% ON THE SALE PRICE , ON TRANSFER OF TECHNICAL KNOWHOW AND ASSISTANCE WAS ACCEPTED. 30. THE ROYALTY PAYMENT BY THE ABOVE COMPANIES IS D IRECTLY COMPARABLE WITH THAT MADE BY THE ASSESSEE COMPANY. THE ASSESSE E, AS OBSERVED, IS ALSO AN AUTO ANCILLARY, MANUFACTURING AUTOMOTIVE PARTS FOR OEMS. IN ALL THESE CASES, AS IN THAT OF THE ASSESSEE, THE PAYMENT OF ROYALTY WAS RELATED TO TRANSFER OF TECHNICAL ASSISTANCE AND KNOW-HOW IN THE AUTOMOTIVE INDUSTRY. THAT BEING SO, THE CUP METHOD IS AVAILABLE APROPOS THE ISSUE OF AR MS LENGTH PRICE QUA THE PAYMENT OF ROYALTY. 31. SO FAR AS REGARDS OTHER CASE LAWS RELIED ON BY THE DEPARTMENT, THE SAME ARE ALSO DISTINGUISHABLE ON FACTS, BEING ON GE NERAL PROPOSITIONS OF LAW RELEVANT TO THE SPECIFIC FACTS PRESENT IN THOSE CAS ES. IN THE PRESENT CASE, AN ALP ANALYSIS HAD BEEN DONE BY THE ASSESSEE, AS ABOV E. THE ASSESSEE APPLIED THE CUP METHOD AND THE TNMM. THE TPO, HOWEVER, DESP ITE BEING LEGALLY BOUND TO DO SO, DID NOT APPLY ANY METHOD. 32. APROPOS THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF INTERRA INFORMATION TECHNOLOGY (I) PVT. LTD. VS. D CIT, 2012-TIOL-142- ITAT-DEL-TP (SUPRA), IT IS SEEN THAT HERE ALSO, THE FACTS ARE AT A COMPLETE VARIANCE WITH THOSE OF THE ASSESSEES CASE, WHEREIN PAYMENT OF ROYALTY FOR SUPPLY OF TECHNOLOGY AND KNOWHOW TO MANUFACTURE LIC ENSED PRODUCTS WAS HELD TO BE FOR THE BENEFIT OF THE ASSESSEE AND THE SAME RATE OF ROYALTY PAYMENT WAS ALLOWED AS ALLOWED IN THE YEARS WHEN THE PARTIES WE RE NOT IN AN AE RELATIONSHIP, BUT WERE HAVING IDENTICAL TRANSACTION S AS THOSE IN THE YEAR UNDER CONSIDERATION BEFORE THE TRIBUNAL. IT WAS HELD THAT THE ROYALTY PAYMENT WAS A REVENUE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BENEFIT OF THE ASSESSEE. THE PART OF THE PAYMENT DISALLOWED AS CAP ITAL EXPENDITURE WAS HELD BY THE HONBLE DELHI HIGH COURT TO BE REVENUE EXPEN DITURE. IT IS AS SUCH THAT THE INVOCATION OF THE RULE OF CONSISTENCY HAS BEEN SOUGHT ON BEHALF OF THE ASSESSEE AND, IN OUR CONSIDERED OPINION CORRECTLY S O, CONTENDING THAT SINCE THE CIRCUMSTANCES BEFORE AND AFTER THE COMING INTO EXIS TENCE OF THE AE RELATIONSHIP BETWEEN THE ASSESSEE AND STANLEY ARE I DENTICAL INTER SE, IT CANNOT AT ALL BE SAID THAT THOUGH IN THE EARLIER YEARS, TH E ROYALTY PAYMENT WAS FOR THE BENEFIT OF THE ASSESSEE, SINCE THE INCEPTION OF THE AE RELATIONSHIP, IT CEASED TO BE SO, DUE TO WHICH, THE APPLICATION OF THE BENEFIT TEST BY THE TPO IS ENTIRELY UNCALLED FOR. PAYMENT OF ROYALTY WAS BEING CLAIMED AND ALLOWED RIGHT FROM 1984 TO ASSESSMENT YEAR 2003-04, AS BUSINESS EXPEND ITURE OF THE ASSESSEE AND NO NEW CIRCUMSTANCE HAS BEEN POINTED OUT BY EITHER OF THE AUTHORITIES BELOW TO HOLD THAT IN THE YEARS THEREAFTER, THE BENEFIT ACCR UED TO THE ASSESSEE BY THE PAYMENT OF SUCH ROYALTY HAS DRIED UP. THEREFORE, WE FIND THAT THE RELIANCE BY THE DEPARTMENT ON INTERRA (SUPRA), TO SUPPORT THE CONTENTION THAT THE RULE OF CONSISTENCY SHOULD NOT BE APPLIED, IS WHOLLY MISPLA CED. IT CANNOT BE GAINSAID THAT A JUDGMENT HAS TO BE, IN ITS ENTIRETY, CONSIDE RED IN THE BACKDROP OF AND WITH REFERENCE TO THE PECULIAR FACTS AND CIRCUMSTAN CES DOING THE ROUNDS THEREIN. IN INTERRA (SUPRA), THE ASSESSEE RAISED AN ARGUMENT THAT TRANSFER PRICING ADJUSTMENT AT BEST CANNOT EXCEED THE AMOUNT OF THE MARGIN RETAINED BY 12 ITA NO.6961/DEL/2014 THE ASSESSEE AS WELL AS THE AE. THIS ARGUMENT DID N OT FIND FAVOUR WITH THE TRIBUNAL. IT WAS ALSO CONTENDED THAT THE TPO HAD NO T MADE ANY ADJUSTMENT IN THE EARLIER YEARS AND AS SUCH, NO ADJUSTMENT WAS CA LLED FOR IN THE YEAR BEFORE THE TRIBUNAL AS WELL, ON THE PRINCIPLE OF CONSISTEN CY. THE TRIBUNAL OBSERVED THAT THE ASSESSEE HAD NOT BEEN ABLE TO DEMONSTRATE AS TO WHICH PARTICULAR CONCLUSION OF THE PREVIOUS TPO OR ASSESSING OFFICER HAD BEEN REVIEWED IN AN OPPOSITE MANNER BY THE CURRENT TPO AND THAT IT WAS A CASE OF NON-APPLICATION OF MIND BY THE PREVIOUS TPO ON SOME ISSUES. IT WAS THEREFORE, THAT THE TRIBUNAL REJECTED THIS ARGUMENT RAISED BY THE ASSES SEE. THIS IS THE BACKGROUND FOR THE TRIBUNAL NOT HAVING ALLOWED THE PRINCIPLE O F CONSISTENCY TO BE INVOKED IN THAT CASE. IN THE PRESENT CASE, HOWEVER, IT IS P ATENT ON RECORD THAT THE FACTS REMAIN IDENTICAL PRE-AE RELATIONSHIP AND THEREAFTER , AS ALSO THAT THE RELATED PAYMENT HAS BEEN CONSISTENTLY ALLOWED BY THE DEPART MENT ITSELF IN THE NUMEROUS EARLIER YEARS, WHERE THE ARGUMENTS WERE AT AN EXACTLY SIMILAR, NAY IDENTICAL FOOTING. 33. THE TPO HAS MADE THE DISALLOWANCE IN QUESTION M AINLY ON THE BASIS OF THE BENEFIT TEST. IN THIS REGARD, IT IS SEEN THAT T HE PAYMENT OF ROYALTY CANNOT BE EXAMINED DIVORCED FROM THE PRODUCTION AND SALES. RO YALTY IS INEXTRICABLY LINKED WITH THESE ACTIVITIES. IN THE ABSENCE OF PRO DUCTION AND SALE OF PRODUCTS, THERE WOULD BE NO QUESTION ARISING REGARDING PAYMEN T OF ANY ROYALTY. RULE 10A(D) OF THE ITAT RULES DEFINES TRANSACTION AS A NUMBER OF CLOSELY LINKED TRANSACTIONS. ROYALTY, THEN, IS A TRANSACTION CLOSE LY LINKED WITH PRODUCTION AND SALES. IT CANNOT BE SEGREGATED FROM THESE ACTIVITIE S OF AN ENTERPRISE, BEING EMBEDDED THEREIN. THAT BEING SO, ROYALTY CANNOT BE CONSIDERED AND EXAMINED IN ISOLATION ON A STANDALONE BASIS. ROYALTY IS TO B E CALCULATED ON A SPECIFIED AGREED BASIS, ON DETERMINING THE NET SALES WHICH, I N THE PRESENT CASE, ARE REQUIRED TO BE DETERMINED AFTER EXCLUDING THE AMOUN TS OF STANDARD BOUGHT OUT COMPONENTS, ETC., SINCE SUCH NET SALES DO NOT STAND RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THEREFORE, IT IS OUR CONSIDER ED OPINION THAT THE ASSESSEE WAS CORRECT IN EMPLOYING AN OVERALL TNMM FOR EXAMIN ING THE ROYALTY. THE TPO WORKED OUT THE DIFFERENCE IN THE PLI OF THE OUT SIDE PARTY (THE ASSESSEE) AT 4.09% AND THE COMPARABLES AT 7.05%. THIS HAS NOT BE EN SHOWN TO FALL OUTSIDE THE PERMISSIBLE RANGE. 34. THE DECISION OF THE TRIBUNAL IN EKLA APPLIANCE S, 2012-TII-01- HC DEL-TP, HAS BEEN SOUGHT TO BE DISTINGUISHED BY THE TPO, OBSERVING THAT THE FACTS IN THAT CASE ARE NOT IN PARI MATERIA WITH THO SE OF THE ASSESSEES CASE. HOWEVER, THEREIN ALSO, THE BENEFIT TEST HAD BEEN AP PLIED BY THE TPO, AS IN THE PRESENT CASE. THE MATTER WAS CARRIED INAPPEAL BEFOR E THE HONBLE HIGH COURT. THE HONBLE DELHI HIGH COURT HAS HELD THAT THE SO-C ALLED BENEFIT TEST CANNOT BE APPLIED TO DETERMINE THE ALP OF ROYALTY PAYMENT AT NIL AND THAT THE TPO COULD APPLY ONLY ONE OF THE METHODS PRESCRIBED UNDE R THE LAW. A SIMILAR VIEW HAS BEEN TAKEN IN SONA OKEGAWA PRECISION FORGINGS LTD. (SUPRA) AND IN KHS MACHINERY PVT. LTD. VS. ITO, 53 SOT 100 (AHM) (URO). 35. IT IS, THUS, SEEN THAT THE ROYALTY PAYMENT @ 3% BY THE ASSESSEE IS AT ARMS LENGTH. THE TECHNICAL COLLABORATION AGREEMENT STANDS APPROVED BY THE GOVERNMENT OF INDIA. THE ROYALTY PAYMENT HAS BEEN A CCEPTED BY THE DEPARTMENT AS HAVING BEEN MADE BY THE ASSESSEE WHOL LY AND EXCLUSIVELY FOR ITS BUSINESS PURPOSES. FOR ASSESSMENT YEARS 2004-05 AND 2005-06, SUCH PAYMENT OF ROYALTY HAS BEEN ALLOWED BY THE CIT (A). AS PER THE FEMA REGULATIONS, ROYALTY CAN BE PAID ON NET SALES @ 5% ON DOMESTIC S ALES AND @ 8% ON EXPORT SALES. THE ROYALTY PAYMENT BY THE ASSESSEE FALLS WI THIN THESE LIMITS. IT ALSO FALLS 13 ITA NO.6961/DEL/2014 WITHIN THE LIMITS OF PAYMENT OF ROYALTY IN THE AUTO MOBILE SECTOR, AS PER THE MARKET TREND. THIS PAYMENT OF ROYALTY IS AT THE SAM E PERCENTAGE AS THAT PAID BY OTHER AUTO ANCILLARIES IN THE AUTOMOTIVE INDUSTR Y. THEN, IN EKLA APPLIANCES (SUPRA) AND IN ERICSSON INDIA PVT. LTD . VS. DCIT, 2012-TII-48- ITAT-DEL-TP, IT HAS BEEN HELD THAT ROYALTY PAYMENT CANNOT BE DISALLOWED ON THE BASIS OF THE SO-CALLED BENEFIT TEST AND THE DOM AIN OF THE TPO IS ONLY TO EXAMINE AS TO WHETHER THE PAYMENT BASED ON THE AGRE EMENT ADHERES TO THE ARMS LENGTH PRINCIPLE OR NOT. THAT BEING SO, THE A CTION OF THE TPO IN THE PRESENT CASE, TO MAKE THE DISALLOWANCE MAINLY ON TH E GROUND OF THE BENEFIT TEST, IS UNSUSTAINABLE IN LAW. 36. KEEPING IN VIEW ALL THE ABOVE FACTORS, THE DISA LLOWANCE MADE ON ACCOUNT OF ROYALTY IS FOUND TO BE TOTALLY UNCALLED FOR AND IT IS DELETED AS SUCH. ACCORDINGLY, GROUND NOS.3 AND 4 RAISED BY THE ASSES SEE ARE ACCEPTED. 11. IN VIEW OF THE OF HONORABLE JURISDICTIONAL HIGH COURT IN ASSESSES OWN CASE WE INCLINE TO FOLLOW THAT DECISION OVER THE DECISION C ITED BY THE LD. DR IN CASE OF COMMISSIONER OF INCOME TAX, FARIDABAD VS M/S KNORRB REMSE INDIA PVT LTD. HOWEVER WE WOULD LIKE TO QUOTE PARA NO 29 OF THE DECISION WHERE IN HONOURABLE COURT HAS HELD AS UNDER :- 29. WE HASTEN TO ADD THAT IN THE CASE BEFORE US TH E ASSESSEE HAS, IN FACT, CONTENDED THAT IT HAS BENEFITED FROM THE INTERNATIONAL TRANSA CTIONS ENTERED INTO BY IT WITH ITS AES. HOWEVER, EVEN ASSUMING THAT THIS HAS NOT BEEN ESTAB LISHED, IT WOULD MAKE NO DIFFERENCE. 12. IN VIEW OF THE ABOVE FACTS AND RESPECTFULLY FOL LOWING THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE OF ASSESSEE FOR EARLIER YE ARS WHEREIN THE DECISION COORDINATE BENCH OF ITAT IN ASSESSEES OWN CASE IS UPHELD WE DIRECT THE LD. TPO/AO TO DELETE THE ADJUSTMENT OF RS.66957682/- MADE ON A CCOUNT OF ALP OF ROYALTY PAYMENTS. 16. SINCE THE FACTS OF THE INSTANT APPEAL ARE IDENT ICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN T HE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE SET-ASIDE THE ORDER OF THE ASSESSING OFF ICER/TPO/DRP ON THE ISSUE OF ROYALTY AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.9,19,45,174/- MADE ON ACCOUNT OF ARMS LENGTH PR ICE OF ROYALTY PAYMENT. 17. GROUND NO.6 BY THE ASSESSEE RELATES TO ADDITION ON ACCOUNT OF PROVISION OF WARRANTY OF RS.14,13,027/-. 14 ITA NO.6961/DEL/2014 18. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SING OFFICER DISALLOWED THE PROVISION FOR WARRANTY ON THE GROUND THAT THIS AMOU NT HAS BEEN CLAIMED WITHOUT ANY SCIENTIFIC METHOD AND IS CONTINGENT IN NATURE. FURTHER, HE ALSO RELIED ON THE ORDER OF HIS PREDECESSOR WHERE SUCH DISALLOWANCE WA S MADE. THE ADDITION WAS UPHELD BY THE DRP AND THE ASSESSING OFFICER IN THE FINAL ORDER. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2006-07, 2007-08 AND 2 008-09 HAS DELETED THE WARRANTY PROVISION AMOUNTING TO RS.42,07,000/-, RS. 35,06,410/- AND RS.84,48,000/- RESPECTIVELY. THE APPEAL FILED BY T HE REVENUE WAS NOT ADMITTED BY THE HIGH COURT ON THIS ISSUE FOR ASSESSMENT YEAR 2008-09. IT IS ALSO THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THA T IN SUBSEQUENT YEARS, THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION ON THIS COUNT. RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF EXCEL INDUSTRIES REPORTED IN 358 ITR 195, HE SUBMITTED THAT RULE OF CONSISTENCY SHOULD BE FOLLOWED. HE ALSO RELIED ON THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE ROTORK CONTROLS INDIA PVT. LTD. VS. CIT REPORT ED IN 314 ITR 62 TO THE PROPOSITION THAT NO ADDITION CAN BE MADE ON ACCOUNT OF PROVISION FOR WARRANTY. 19. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 20. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSME NT YEAR 2008-09. THE 15 ITA NO.6961/DEL/2014 TRIBUNAL VIDE ITA NO.4456/DEL/2012 ORDER DATED 31.0 5.2013 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 40. IN THIS REGARD, IT IS SEEN THAT THE ASSESSING OFFICER MADE THE DISALLOWANCE ON THE BASIS THAT THE PROVISION FOR WARRANTY WAS A CON TINGENT LIABILITY, HAVING NO SCIENTIFIC BASIS. INDEED, UNDISPUTEDLY, THE ASSESSE E WAS MAKING THE PROVISIONS ON ACTUAL WARRANTY BASIS FOR THE UNEXPIRED WARRANTY PE RIOD, PROVIDING WARRANTY OF ONE YEAR ON THE PRODUCTS WHICH IT WAS SELLING. IT CREAT ED PROVISION FOR WARRANTY FOR THE UNEXPIRED PERIOD OF WARRANTY AS AT THE END OF THE Y EAR, ON A PERCENTAGE OF THE ACTUAL WARRANTY EXPENSES DURING THE IMMEDIATELY PRIOR PERI OD, ON THE SALES MADE. IT HAS NOT BEEN SHOWN AS TO HOW THIS BASIS OF MAKING PROVISION FOR WARRANTY IS NOT SCIENTIFIC. MOREOVER, SIMILAR PROVISION FOR WARRANTY WAS NOT DI SALLOWED IN THE EARLIER YEARS, UPTO ASSESSMENT YEAR 2005-06. THIS POSITION IS ALSO SUPPORTED BY THE HONBLE SUPREME COURTS DECISION IN ROTORK CONTROLS INDIA PVT. LTD. (SUPRA) AND THE HONBLE DELHI HIGH COURT DECISION IN BECTON DICKIN SON (SUPRA). ACCORDINGLY, THIS ADDITION IS DELETED AND GROUND NO.5 IS ALLOWED. 21. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09, WE DIRECT THE ASS ESSING OFFICER TO DELETE THE ADDITION OF RS.14,13,027/- MADE ON ACCOUNT OF PROVI SION FOR WARRANTY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWE D. 22. GROUND NO.7 RELATES TO THE ACTION OF THE ASSESS ING OFFICER IN SUSTAINING THE ADDITION OF RS.2,53,031/- BEING INTEREST ON DEL AYED PAYMENT OF INDIRECT TAXES. 23. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD CLAIMED EXPENSES ON ACCOUNT OF INTEREST PAID ON BELATED PAY MENT OF EXCISE, SERVICES TAX, CUSTOM DUTY ETC. OF RS.6,17,968/-. THE DRP ALLOWED ONLY AN AMOUNT OF RS.3,64,937/- FOR WHICH DOCUMENTARY EVIDENCES WERE GIVEN AND SUSTAINED THE BALANCE AMOUNT OF RS.2,53,031/- FOR WHICH THE DETAI LS COULD NOT BE FILED AT THAT TIME. HE SUBMITTED THAT THE BALANCE AMOUNT IS ALSO OF SIMILAR NATURE WHICH HAS 16 ITA NO.6961/DEL/2014 BEEN ALLOWED BY THE DRP. HE PRODUCED CERTAIN CHALL ANS OUT OF THE AMOUNT SUSTAINED BY THE DRP OF RS.2,53,031/- AND SUBMITTED THAT THE SAME MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR V ERIFICATION OF THE CHALLANS. 24. HE FURTHER SUBMITTED THAT THE INTEREST ON ACCOU NT OF DELAYED PAYMENT OF INDIRECT TAXES IS COMPENSATORY IN NATURE AND IS NOT FOR INFRACTION OF ANY LAW AND, THEREFORE, IS AN ALLOWABLE EXPENDITURE U/S 37 OF TH E I.T. ACT. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF (I) PRAKASH COTTON MILLS PVT. LTD. VS. CIT REPOR TED IN 201 ITR 684, (II) LACHMANDAS MATHURADAS VS. CIT REPORTED IN 254 ITR 7 99 AND VARIOUS OTHER DECISIONS AS MENTIONED IN THE PAPER BOOK. 25. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER/TPO/DRP. 26. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE HAD CLAIMED EXPENSES ON ACCOUNT OF INTEREST PAID ON BELATED PAYMENT OF E XCISE, SERVICE TAX, CUSTOM DUTY ETC. OF RS.6,17,968/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER IN THE DRAFT ASSESSMENT ORDER. BEFORE THE DRP, THE ASSESS EE COULD ONLY PRODUCE DOCUMENTARY EVIDENCES OF RS.3,64,937/- FOR WHICH TH E DRP DIRECTED THE ASSESSING OFFICER TO DELETE SUCH DISALLOWANCE. HOW EVER, DUE TO NON-PRODUCTION OF FULL DETAILS, THE DRP SUSTAINED THE ADDITION OF RS.2,53,031/-. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IF AN OPPORTUNITY IS GIVEN TO THE ASSESSEE, HE WILL PRODUCE THE BALANCE DOCUMENTA RY EVIDENCE TO SUBSTANTIATE THAT THE BALANCE PAYMENT ALSO IS OF SIMILAR NATURE AND IS NOT ON ACCOUNT OF 17 ITA NO.6961/DEL/2014 INFRACTION OF LAW. FURTHER, IT IS HIS SUBMISSION T HAT THE INTEREST ON BELATED PAYMENT IS COMPENSATORY IN NATURE AND NOT FOR ANY I NFRACTION OF LAW. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER/TPO WITH A DIRECTION TO GRANT ANOTHER OPPORTUNITY TO THE ASS ESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS SATISFACTION REGARDING THE ALLOWABI LITY OF SUCH INTEREST ON BELATED PAYMENT OF INDIRECT TAXES TO THE EXTENT OF RS.2,53, 031/-. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 27. GROUND NO.9 BY THE ASSESSEE RELATES TO THE DISA LLOWANCE U/S 14A OF RS.10,15,149/- AS AGAINST RS.2,87,053/-. 28. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD VOLUNTARILY OFFERED TOTAL DISALLOWANCE OF RS.10,15,149/- CONSID ERING ALL THE LOANS FOR CALCULATION AS PER RULE 8D(2)(II), CONSIDERING THE LITIGATION IN EARLIER YEARS REGARDING THE INTEREST COMPONENT. HOWEVER, THE DRP IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 HAS HELD THAT ONLY WORKING CAPITAL LOAN HAS TO BE CONSIDERED FOR CALCULATION AS PER RULE 8D(II). IN VIEW OF THE ABOVE, THE ASSESSEE REVISED ITS CLAIM ON ACCOUNT OF DISALLOWANCE U/S 14 A DURING THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER ACCORDING TO WHICH, THE DISALLOWANCE SHALL REMAIN ONLY RS.2,87,053/- IF THE ORDER OF TH E DRP IS FOR ASSESSMENT YEAR 2008-09 IS FOLLOWED. HE SUBMITTED THAT THE ASSESSI NG OFFICER REJECTED THE CLAIM OF THE ASSESSEE BY RELYING ON THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. REPORTED IN 284 ITR 323 A CCORDING TO WHICH, THE 18 ITA NO.6961/DEL/2014 ASSESSEE CAN MAKE ANY NEW CLAIM ONLY BY FILING A RE VISED RETURN. HE SUBMITTED THAT THE DECISION OF THE HONBLE SUPREME COURT DOES NOT BAR THE ASSESSEE FOR MAKING ANY CLAIM BEFORE THE TRIBUNAL, WHICH WAS NOT THERE IN THE RETURN OF INCOME. RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. VS. CIT REPORTED IN 229 ITR 383 AND THE DECISION OF THE DEL HI BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS. MARUTI UDYOG LTD. REPORTED IN ( 2013) TIOL-08-ITAT-DEL, HE SUBMITTED THAT THE REQUEST OF THE ASSESSEE TO RE STRICT THE CLAIM OF DISALLOWANCE U/S 14A TO RS.2,87,053/- SHOULD BE ACCEPTED. REFER RING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF EVEREST KE NTO CYLINDERS LTD. REPORTED IN 378 ITR 57, HE SUBMITTED THAT THE HON'B LE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE ASSESSEE IS NOT BOUND BY THE ORIGINAL DISALLOWANCE OFFERED U/S 14A AND RESTRICTION OF DISALLOWANCE SUB SEQUENTLY IS JUSTIFIED. REFERRING TO THE DECISION OF THE HONBLE MADRAS HIG H COURT IN THE CASE OF CIT VS. ABHINITHA FOUNDATION PVT. LTD. VIDE ITA NO.811 OF 2016, HE SUBMITTED THAT THE HON'BLE HIGH COURT HAS HELD THAT EVEN IF THE CL AIM MADE BY THE ASSESSEE DOES NOT FORM PART OF THE ORIGINAL RETURN OR EVEN T HE REVISED RETURN, IT COULD STILL BE CONSIDERED, IF THE RELEVANT MATERIAL WAS AVAILAB LE ON RECORD. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF JOINT INVESTMENTS PVT. LTD. REPORTED IN 372 ITR 694, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT DISALLOWANCE U/S 14A CA NNOT EXCEED EXEMPT INCOME. HE SUBMITTED THAT THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR HAS EARNED 19 ITA NO.6961/DEL/2014 DIVIDEND INCOME OF RS.1,76,320/-, THEREFORE, THE DI SALLOWANCE U/S 14A IN ANY CASE SHOULD NOT EXCEED BEYOND RS.1,76,320/- WHEREAS THE ASSESSEE IS OFFERING DISALLOWANCE OF RS.2,87,053/-. HE ACCORDINGLY SUBM ITTED THAT THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED TO RS.1,76,320/-. 29. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER/TPO/DRP. 30. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE VARIOUS DE CISIONS RELIED ON BY BOTH THE SIDES. WE FIND THE ASSESSEE HAS VOLUNTARILY OFFERE D DISALLOWANCE OF RS.10,15,149/- CONSIDERING ALL THE LOANS FOR CALCUL ATION AS PER RULE 8D(2)(II). HOWEVER, DURING THE ASSESSMENT PROCEEDINGS, THE ASS ESSEE, ON THE BASIS OF THE ORDER OF THE DRP FOR ASSESSMENT YEAR 2008-09, REVIS ED ITS CLAIM OF DISALLOWANCE U/S 14A AT RS.2,87,053/- ON THE GROUND THAT THE INT EREST ONLY ON WORKING CAPITAL LOAN HAS TO BE CONSIDERED FOR RULE 8D(II). WE FIND THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT SUCH A NEW CLAIM MAY BE CLAIMED BY FILING A REVISED RETURN ONLY. FOR THE A BOVE PROPOSITION, THE ASSESSING OFFICER RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. (SUPRA). IT IS THE SUBMI SSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ABOVE DECISION OF THE HON'BLE SUP REME COURT DOES NOT BAR THE ASSESSEE FOR MAKING ANY CLAIM BEFORE THE TRIBUNAL W HICH WAS NOT THERE IN THE RETURN OF INCOME. WE FIND MERIT IN THE ABOVE SUBMI SSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. IT HAS BEEN HELD IN VARIOUS DECISION S THAT THE RATIO OF THE DECISION 20 ITA NO.6961/DEL/2014 IN THE CASE OF GOETZE INDIA LTD. (SUPRA) IS LIMITED TO THE POWERS OF THE ASSESSING OFFICER AND DID NOT IMPINGE THE POWERS OF THE APPEL LATE AUTHORITIES. THEREFORE, THE ASSESSEE CAN ALWAYS MAKE A NEW CLAIM BEFORE THE APPELLATE AUTHORITIES, IF IT WAS NOT CLAIMED BY FILING A REVISED RETURN. FURTHE R, IN A RECENT DECISION, THE HONBLE DELHI HIGH COURT IN THE CASE OF JOINT INVES TMENTS PVT. LTD. (SUPRA) HAS HELD THAT DISALLOWANCE U/S 14A CANNOT EXCEED THE EX EMPT INCOME. ALL THESE DECISIONS WERE NOT AVAILABLE BEFORE THE ASSESSING O FFICER OR THE DRP. FURTHER, THE EARNING OF EXACT AMOUNT OF DIVIDEND HAS ALSO NO T VERIFIED BY THE LOWER AUTHORITIES. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DECISIONS CITED (SUPRA). NEEDLESS TO SAY, THE ASSESSING OFFICER SH ALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GRO UND NO.9 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 31. GROUND NO.10 BY THE ASSESSEE RELATES TO DEPRECI ATION ON UPS AT THE RATE OF 60% OF RS.8,073/-. 32. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE DURING THE ASSESSMENT PROCEEDINGS REQUESTED THE ASSESSING OFFICER TO ALLO W THE DEPRECIATION ON UPS AT THE RATE 60% INSTEAD OF 15% AS CLAIMED BY HIM IN TH E RETURN OF INCOME ON THE GROUND THAT THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WAS KNOWN TO HIM ONLY AFTER THE RETURN WAS FILED IN WHICH THE TRIBUN AL ALLOWED THE CLAIM OF 21 ITA NO.6961/DEL/2014 DEPRECIATION ON UPS AT THE RATE 60%. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE FOR SUCH HIGHER RA TE OF DEPRECIATION ON THE BASIS OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF BSES YAMUNA POWER LTD. REPORTED IN (2010) TIOL-636-HC-DEL. THE ASSESSING OFFICER FURTHER REFERRED TO THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF GOETZE INDIA LTD. (SUPRA) ACCORDING TO WHICH, ANY N EW CLAIM MUST BE CLAIMED BY FILING A REVISED RETURN ONLY. LD. COUNSEL FOR T HE ASSESSEE REFERRED TO THE VARIOUS DECISIONS RELIED EARLIER REGARDING THE POWE R OF THE TRIBUNAL TO ENTERTAIN THE CLAIM WHICH WAS NOT MADE BY FILING A REVISED RE TURN. SINCE THE COURTS ARE CONSISTENTLY HOLDING THAT THE RATIO OF GOETZE INDIA LTD. (SUPRA) WAS LIMITED TO THE POWERS OF THE ASSESSING OFFICER AND DID NOT IMPINGE THE POWER OF THE APPELLATE AUTHORITIES AND SINCE THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE WAS KNOWN TO THE ASSESSEE ONLY AFTER THE ORIGINAL RETUR N WAS FILED AND SINCE THE ASSESSEE HAD MADE A CLAIM OF HIGHER DEPRECIATION BE FORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THEREF ORE, WE ARE OF THE CONSIDERED OPINION THAT THE HIGHER RATE OF DEPRECIATION AT 60% ON UPS SHOULD HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. IN VIEW OF THE A BOVE DISCUSSION, WE ALLOW THE CLAIM OF THE ASSESSEE OF HIGHER RATE OF DEPRECI ATION ON UPS. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 33. GROUND NO.11 RELATES TO CHARGING OF INTEREST U/ S 234B AND 234C. 22 ITA NO.6961/DEL/2014 34. AFTER HEARING BOTH THE SIDES, WE ARE OF THE OPI NION THAT CHARGING OF INTEREST UNDER THE ABOVE PROVISIONS ARE MANDATORY I N CONSEQUENTIAL IN NATURE. THEREFORE, THE ABOVE GROUND IS DISMISSED. 35. GROUND NO.12 RELATES TO DISALLOWANCE OF WARRANT Y PROVISION AND LEAVE ENCASHMENT U/S 115JB OF THE I.T. ACT. 36. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SING OFFICER DISALLOWED THE ABOVE PROVISION AND ADDED BACK THE SAME TO THE BOOK PROFIT U/S 115JB OF THE I.T. ACT BY TREATING THE SAME AS UNASCERTAINED LIAB ILITIES. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE MAKES THESE PROVISIONS CONSISTENTLY YEAR AFTER YEAR ON THE BASIS OF PAST A CTUAL RESULTS. IT IS ALSO HIS SUBMISSION THAT TREATING PROVISION FOR WARRANTY AND LEAVE ENCASHMENT AS UNASCERTAINED LIABILITIES AND THEREBY ADDING BACK T HE SAME U/S 115JB IS NOT CORRECT SINCE SECTION 115JB IS A CODE IN ITSELF AND ONLY SUCH ADJUSTMENTS ARE TO BE MADE WHICH ARE PERMITTED UNDER THE LAW. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. WE F IND THE HON'BLE SUPREME COURT IN THE CASE OF ROTORK CONTROLS INDIA P. LTD. VS. CIT REPORTED IN 314 ITR 62 HAS OBSERVED AS UNDER :- LIABILITY IS DEFINED AS A PRESENT OBLIGATION ARISI NG FROM PAST EVENTS, THE SETTLEMENT OF WHICH IS EXPECTED TO RESULT IN AN OUTFLOW FROM THE ENTERPRISE OF RESOURCES EMBODYING ECONOMIC BENEFITS. 37. WE FIND THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. BECTON DICKINSON INDIA PVT. LTD. REPORTED IN (2013) 29 TAX MANN.COM 80 HAS HELD AS UNDER :- 23 ITA NO.6961/DEL/2014 IN THE FACTS OF THE PRESENT CASE TOO THIS COURT IS OF THE OPINION THAT THE REASONING ADOPTED BY THE TRIBUNAL CANNOT BE FOUND FAULT WITH. THE CONSIDERATIONS WHICH WEIGHED WITH THE SUPREME COURT IN ROTORK CONTROLS I NDIA P. LTD. (SUPRA) IN CONCLUDING SUCH WARRANTY PROVISIONS WERE NOT CONTIN GENT LIABILITIES WOULD APPLY WITH GREATER FORCE TO NEGATE THE CLAIM BY THE REVENUE TH AT SUCH PROVISIONS ARE MADE FOR DIMINUTION IN THE VALUE OF ANY ASSET, SO AS TO BE C OVERED BY EXPLANATION 1(I) TO SECTION 115JB OF THE ACT. IN THESE CIRCUMSTANCES, THE COURT IS SATISFIED THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATIO N. 38. WE FIND THE HON'BLE SUPREME COURT IN THE CASE O F BHARAT EARTH MOVERS VS. CIT REPORTED IN 245 ITR 428 AND THE HONBLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MAJESTIC AUTO LTD. REPORTED IN 150 TAXMANN.COM 460 HAVE ALSO HELD SIMILAR VIEW. THE DELHI BENCH OF TH E TRIBUNAL IN THE CASE OF SONY INDIA P. LTD. VS. DCIT VIDE ITA NO.1181/DEL/20 05 HAS HELD AS UNDER :- WE, THEREFORE, HOLD THAT THE DECISION OF HONBLE P UNJAB & HARYANA HIGH COURT IN THE CASE OF MAJESTIC AUTO LTD. ON A SIMILAR ISSUE I S SQUARELY APPLICABLE IN THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) ALLOWING THE DEDUCTION CLAIMED BY TH E TAXPAYER ON ACCOUNT FOR PROVISION FOR WARRANTY HOLDING THE SAME TO BE AN AS CERTAINED LIABILITY. SIMILARLY, WE ALSO UPHOLD HIS IMPUGNED ORDER DELETING THE ADDITIO N MADE BY THE AO OF THE SAID AMOUNT WHILE COMPUTING THE BOOK PROFIT OF THE TAXPA YER COMPANY U/S 115JB. 39. WE FIND THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. HP TOURISM DEVELOPMENT CORP. LTD. REPORTED IN (2013 ) 35 TAXMANN.COM 450 RELYING ON THE DECISION IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) HELD THAT SINCE PROVISION MADE TOWARDS LEAVE ENCASHMENT OF EM PLOYEES WAS IN RESPECT OF ASCERTAINED AND DEFINITE LIABILITY, SAME WOULD NOT BE ADDED WHILE COMPUTING BOOK PROFIT FOR PURPOSE OF LEVY OF MAT UNDER SECTIO N 115JB. 40. IN VIEW OF THE DECISIONS CITED ABOVE, WE FIND T HAT TREATING PROVISION FOR WARRANTY AND LEAVE ENCASHMENT AS UNASCERTAINED LIAB ILITIES AND ADDING BACK THE 24 ITA NO.6961/DEL/2014 SAME U/S 115JB IS NOT IN CONSONANCE WITH THE PROVIS IONS IN VIEW OF THE JUDGEMENT THAT SECTION 115JB IS A CODE IN ITSELF AN D ONLY SUCH ADJUSTMENTS ARE TO BE MADE AS ARE PERMITTED UNDER THE LAWS. THE GROUN D RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 41. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 TH DAY OF DECEMBER, 2017. SD/- SD/- (KULDIP SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05-12-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE DRP-I, NEW DELHI 4) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI