Teradata India Pvt. Ltd., Gurgaon V. ACIT, Circle- 4(1), Gurgaon

ITA 7885/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3431 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Assessment Year: 2013-2014
• Appeal Filed On: 29-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3); 92B; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES I-2 : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA.NO.7885/DEL./2017 ASSESSMENT YEAR 2013-2014 TERRADATA INDIA PVT. LTD., 301-302, 3 RD FLOOR, TOWER- 4A, S-BLOCK, DLF CORPORATE PARK, DLF CITY PHASE-III, GURGAON, HARYANA 122 002. PAN AACCT6715A VS. THE ACIT, CIRCLE-4(1), 2 ND FLOOR, HSIIDC BUILDING, NR. SHANKAR CHOWK, NH-8, UDYOG VIHAR, PHASE-V, GURUGRAM 0 122 002. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI NAGESHWAR RAO, ADVOCATE FOR REVENUE : SHRI SANJAY KUMAR YADAV, D.R. DATE OF HEARING : 19.02.2018 DATE OF PRONOUNCEMENT : 21.02.2018 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ASSESSMENT ORDER DATED 29 TH NOVEMBER, 2017, UNDER SECTION 143(3) R.W.S. 144C OF THE I.T. ACT, 1961, PASSED BY ACIT, CIRCLE- 4(1), GURGAON, FOR THE A.Y. 2013-2014. 2 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GROUND NOS. 1 AND 2 ARE GENERAL, THEREFORE, THE SAM E NEED NO ADJUDICATION. HE HAS SUBMITTED THAT GROUND NOS. 3 T O 6 ARE T.P. GROUNDS. HOWEVER, GROUND NOS. 7 TO 9 ARE CORPORATE TAX GROUNDS OF APPEALS. GROUND NO.10 IS REGARDING INITI ATION OF PENALTY PROCEEDINGS WHICH IS INDEPENDENT AND DISTIN CT PROCEEDING. GROUND NO.11 IS REGARDING CHARGING OF T HE INTEREST UNDER SECTION 234B OF THE I.T. ACT, WHICH IS CONSEQ UENTIAL AND MANDATORY. THEREFORE, GROUND NOS. 10 AND 11 ARE ALS O NOT ARGUED. THEREFORE, IN THE PRESENT APPEAL, GROUND NO S. 3 TO 9 HAVE TO BE DISPOSED-OF. REST ARE REJECTED. 4. BRIEFLY, THE BACKGROUND OF THE CASE OF THE ASSE SSEE- COMPANY IS THAT DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE CASE OF THE ASSESSEE-COMPANY WAS REFERRED TO AC IT/TPO (T.P.), NEW DELHI, AS THE ASSESSEE-COMPANY HAD ENTE RED INTO INTERNATIONAL TRANSACTIONS. THE ORDER DATED 25 TH OCTOBER, 2016, 3 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON UNDER SECTION 92CA(3) OF THE ACT WAS PASSED BY TPO WHEREIN AN UPWARD ADJUSTMENTS OF RS.57,57,95,126 WAS MADE TO T HE ARMS LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTI ONS. THEREAFTER, A DRAFT ASSESSMENT ORDER WAS PASSED ON 28 TH DECEMBER 2016, WHEREIN THE TOTAL INCOME OF THE ASSESSEE-COMPANY WA S ASSESSED AT RS.86,23,06,341/- AFTER MAKING ADDITION OF RS.58,32,23,621/- ON FOUR COUNTS. AGGRIEVED BY THE PROPOSED ADDITIONS, THE ASSESSEE-COMPANY RAISED OBJECTIONS A GAINST THE DRAFT ASSESSMENT ORDER BEFORE DRP. THE DRP-I, NEW D ELHI, PASSED ITS ORDER DATED 26 TH NOVEMBER, 2017 AND ISSUED DIRECTIONS. ACCORDINGLY, THE IMPUGNED ASSESSMENT OR DER HAVE BEEN PASSED BY THE A.O. WHICH IS IN CHALLENGE BEFOR E THE TRIBUNAL. 4.1. THE GROUNDS NO.3 TO 6 OF APPEAL OF THE ASSESS EE ARE DECIDED AS UNDER. PART I - TRANSFER PRICING GROUNDS 3. THAT ON FACTS OF THE CASE AND IN LAW, THE DRP/TPO/A O HAVE ERRED IN REJECTING THE ECONOMIC ANALYSIS UNDER TAKEN 4 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON BY THE APPELLANT BY CONDUCTING A FRESH ECONOMIC ANA LYSIS FOR THE IMPUGNED TRANSACTIONS. 4. THAT ON FACTS AND IN LAW, THE DRP/TPO/AO HAVE GROSS LY ERRED BY CHARGING INTEREST ON CREDIT PERIOD GRANTED BY THE COMPANY UNDER NORMAL TRADE PRACTICES BY: (I) IDENTIFYING OUTSTANDING RECEIVABLES AS A SEPARATE INTERNATIONAL TRANSACTION; (II) BY RE-CHARACTERIZING THE NATURE OF OUTSTANDING RECEIVABLES AS LOAN ADVANCED TO ASSOCIATED ENTITIES (AES) (III) BY DETERMINING THE COMPARABLE UNCONTROLLED PRICE (CUP) METHOD AS THE MOST APPROPRIATE METHOD WITHOUT PROVIDING ANY COMPARABLE UNCONTROLLED TRANSACTION(S) THEREBY COMPROMISING THE MOST FUNDAMENTAL RULES AND PROVISIONS LAID DOWN IN THE A CT AND THE RULES TO DETERMINE THE ARMS LENGTH PRICE O F THE INTERNATIONAL TRANSACTION; (IV) BY APPLYING AN INTEREST RATE ON OUTSTANDING RECEIVABLES AT LIBOR PLUS 400 BASIS POINTS. 5 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON (V) BY IGNORING THE FACT THAT ACCOUNT RECEIVABLES ARISI NG FROM AN INTERNATIONAL TRANSACTION ARE CLOSELY LINKE D TO THE MAIN TRANSACTION AND SHOULD BE BENCHMARKED, USING A COMBINED TRANSACTION APPROACH, BY MAKING A WORKING CAPITAL ADJUSTMENT. (VI) BY DISREGARDING THE ORDER PASSED BY THE HONBLE ITA T IN APPELLANTS OWN CASE FOR A.Y. 2012-2013. (VII) BY DISREGARDING THE FACT THAT THE HONBLE ITAT HAD PLACED RELIANCE ON THE ORDER PASSED IN CASE OF KUSU M HEALTH CARE PRIVATE LIMITED (ITA NO. 765/2016) BY T HE HONBLE HIGH COURT OF DELHI. 5. THAT WITHOUT PREJUDICE TO THE ABOVE, ONCE WORKIN G CAPITAL ADJUSTMENT IS GRANTED NO SEPARATE ADJUSTMEN T ON ACCOUNT OF OUTSTANDING RECEIVABLES IS MAINTAINAB LE. 6. THAT IMPUGNED ORDER IS NOT IN CONFORMITY WITH DIRECTIONS OF DRP AND THE ADDITIONS WERE MADE WRONGLY. 5. THE TPO DISCUSSED THESE GROUNDS IN PARA-7 OF TH E ORDER. THE A.O. CONSIDERING THE FACTS AND THE DISCU SSION NOTED THAT DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DE BT ARISING 6 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON DURING THE COURSE OF BUSINESS MONEY IS HELD TO BE INTERNATIONAL TRANSACTION WITHIN THE MEANING OF SECTION 92B(1) O F THE ACT. THE TPO AFTER CONSIDERING ALL THE FACTS HELD THAT I NTEREST RATE OF 12.87% WOULD BE ARMS LENGTH LEVEL OF INTEREST THAT NEEDS TO BE CHARGED FOR THE DEEMED LOAN ADVANCE FOR THE PERIOD OF RECEIVABLE OUTSTANDING BEYOND THE PERIOD STIPULATED IN THE SER VICE AGREEMENT/INVOICE. AFTER CALCULATION OF THE INTERES T, ADJUSTMENT OF RS.15,34,91,486 WAS MADE AND TOTAL ALP OF INTERN ATIONAL TRANSACTION WAS COMPUTED AT RS.57,57,95,126. LEARNE D COUNSEL FOR THE ASSESSEE REFERRED TO PAGE-38 OF THE APPEAL PAPERS WHICH IS ORDER OF THE DRP, WHICH, ADJUDICATE D THE ISSUE AS GROUND NO.14. THE DRP NOTED THAT THIS GROUND PER TAINS TO T.P. ADJUSTMENT BY RE-CHARACTERIZATION OF DELAYED R ECEIVABLES AS A LOAN AND BENCHMARKING THE TRANSACTION OF OUTSTAND ING RECEIVABLES FROM A.E. USING INTEREST RATE CUP OF SB I BASE RATE PLUS 300 BASIS POINTS ON DELAYS IN REALIZATION OF P AYMENT FROM A.E. AGAINST THE INVOICES RAISED FOR THE PROVISION OF SERVICES. THE OBJECTIONS RAISED BY THE TAXPAYER WERE CONSIDERED B Y THE A.O. IN THE DRAFT ASSESSMENT ORDER. IT WAS NOTED THAT SI MILAR GROUND 7 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON HAD BEEN RAISED IN A.Y. 2012-2013 AS WELL. THE GROU ND HAS BEEN DISCUSSED BY THE DRP AT PAGE 4 AND 5 OF THE RECTIFI CATION ORDER PASSED ON 23 RD FEBRUARY, 2017 WHICH IS REPRODUCED IN THE ORDER OF THE DRP. THE DRP CONSIDERING THE BACKGROUND OF T HE ISSUE FOUND THAT THERE IS NO CHANGE IN THE FACTUAL MATRIX OF THE CASE FROM EARLIER YEARS. THE ASSESSEE HAS BROUGHT TO THE NOTICE THAT ITAT HAS, IN THIS MATTER, FOR A.Y. 2012-2013 HELD T HAT A SEPARATE ADJUSTMENT SHOULD NOT BE MADE FOR INTEREST ON OUTST ANDING RECEIVABLES, IF THE WORKING CAPITAL ADJUSTMENT HAS BEEN UNDERTAKEN. IT IS FURTHER NOTED THAT IT IS NOT KNOW N WHETHER ORDER OF THE ITAT DATED 08 TH AUGUST, 2017, HAVE BEEN CHALLENGED IN APPEAL BEFORE THE HONBLE JURISDICTIONAL DELHI H IGH COURT ON THE ISSUE. THE DRP, THEREFORE, DIRECTED THAT IN CAS E NO APPEAL HAS BEEN FILED, THE A.O./TPO SHALL FOLLOW ORDER OF THE TRIBUNAL. IN CASE APPEAL HAS BEEN FILED/IS BEING FILED, THE A .O./TPO IS DIRECTED TO APPLY RATE OF LIBOR PLUS 400BPS AS DIRE CTED BY THE DRP IN A.Y. 2012-2013. THE OBJECTIONS OF THE ASSESS EE- COMPANY WAS ACCORDINGLY, DISPOSED OF. 8 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON 6. LEARNED COUNSEL FOR THE ASSESSEE, AT THE VERY O UTSET SUBMITTED THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY ITAT, DELHI BENCH IN THE CASE OF SAME ASSESSEE IN A.Y. 20 12-2013 IN ITA.NO.87/DEL./2017 DATED 08 TH AUGUST, 2017, IN FAVOUR OF THE ASSESSEE IN PARA-9 OF THE ORDER. COPY OF THE ORDER IS PLACED ON RECORD. PARA-9 OF THIS ORDER IS REPRODUCED AS UNDER : 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT CASE LAWS ALONG WITH ORDER OF TPO, DRP & A .O. IN RESPECT OF FIRST ISSUE THE LD. AR RELIED UPON THE O RDER OF JURISDICTIONAL HIGH COURT IN CASE OF KUSUM HEALTH C ARE PVT. LTD. WHEREIN IT IS HELD AS UNDER:- 10. THE COURT IS UNABLE TO AGREE WITH THE ABOVE SUB MISSIONS. THE INCLUSION IN THE EXPLANATION TO SECTION 92B OF THE ACT OF THE EXPRESSION RECEIVABLES DOES NOT MEAN THAT DE HORS THE CONTEXT EVERY ITEM OF RECEIVABLES APPEARING IN THE ACCOUN TS OF AN ENTITY, WHICH MAY HAVE DEALINGS WITH FOREIGN AES WOULD AUTO MATICALLY BE CHARACTERISED AS AN INTERNATIONAL TRANSACTION. T HERE MAY BE A DELAY IN COLLECTION OF MONIES FOR SUPPLIES MADE, EV EN BEYOND THE AGREED LIMIT, DUE TO A VARIETY OF FACTORS WHICH WIL L HAVE TO BE INVESTIGATED ON A CASE TO CASE BASIS. IMPORTANTLY, THE IMPACT THIS 9 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON WOULD HAVE ON THE WORKING CAPITAL OF THE ASSESSEE W ILL HAVE TO BE STUDIED. IN OTHER WORDS, THERE HAS TO BE A PROPER I NQUIRY BY THE TPO BY ANALYSING THE STATISTICS OVER A PERIOD OF TI ME TO DISCERN A PATTERN WHICH WOULD INDICATE THAT VIS-A-VIS THE R ECEIVABLES FOR THE SUPPLIES MADE TO AN AE, THE ARRANGEMENT REFLECT S AN INTERNATIONAL TRANSACTION INTENDED TO BENEFIT THE A E IN SOME WAY. 11. THE COURT FINDS THAT THE ENTIRE FOCUS OF THE AO WAS ON JUST ONE AY AND THE FIGURE OF RECEIVABLES IN RELATION TO THAT AY CAN HARDLY REFLECT A PATTERN THAT WOULD JUSTIFY A TPO C ONCLUDING THAT THE FIGURE OF RECEIVABLES BEYOND 180 DAYS CONSTITUT ES AN INTERNATIONAL TRANSACTION BY ITSELF. WITH THE ASSES SEE HAVING ALREADY FACTORED IN THE IMPACT OF THE RECEIVABLES O N THE WORKING CAPITAL AND THEREBY ON ITS PRICING/PROFITABILITY VI S-A-VIS THAT OF ITS COMPARABLES, ANY FURTHER ADJUSTMENT ONLY ON THE BASIS OF THE OUTSTANDING RECEIVABLES WOULD HAVE DISTORTED THE PI CTURE AND RE- CHARACTERISED THE TRANSACTION. THIS WAS CLEARLY IMP ERMISSIBLE IN LAW AS EXPLAINED BY THIS COURT IN CIT V. EKL APPLIA NCES LTD. (2012) 345ITR 241 (DELHI). THE ISSUE IN THE PRESENT APPEAL IS ALSO IDENTICAL THEREFORE, SQUARELY COVERED BY THIS JUDGMENT IN FAV OUR 10 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON OF THE ASSESSEE. THEREFORE, GROUND NO. 4 & 5 ARE ALLOWED. 6.1. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT HE HAS VERIFIED THAT NO APPEAL HAS BEEN FILED BY THE D EPARTMENT BEFORE THE HONBLE JURISDICTIONAL DELHI HIGH COURT AGAINST THIS JUDGMENT. 7. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORD ER OF THE A.O./TPO/DRP. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE ORDER OF THE ITAT, DELHI BENCH IN THE CASE OF SAME ASSESSEE VIDE ORDER DATED 08 TH AUGUST, 2017, IN WHICH THE TRIBUNAL FOLLOWING THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF KUSUM HEALTHCARE PVT. LTD., DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE. THE DRP HAS ALSO ISSUED DIRECTION IN ITS ORDER THAT THIS ISSUE HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE. BUT, I T IS NOT CLEAR WHETHER ANY APPEAL HAS BEEN FILED/BEING FILED BY TH E DEPARTMENT BEFORE THE HONBLE JURISDICTIONAL DELHI HIGH COURT. 11 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, MADE A S TATEMENT THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL BEFORE THE HONBLE JURISDICTIONAL DELHI HIGH COURT. IN THIS VIEW OF TH E MATTER, WE ARE OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT, DELHI BENCH IN THE CASE O F THE SAME ASSESSEE FOR THE A.Y. 2012-2013 IN ITA.NO.87/DEL./2 017 DATED 08 TH AUGUST, 2017. EVEN IF AN APPEAL WOULD HAVE BEEN PE NDING BEFORE THE HONBLE JURISDICTIONAL DELHI HIGH COURT, IS NOT A GROUND TO TAKE A CONTRARY VIEW AGAINST THE ASSESSEE UNLESS THE ORDER OF THE TRIBUNAL HAVE BEEN SET ASIDE OR STAYED BY THE HONBLE JURISDICTIONAL DELHI HIGH COURT. IN THIS VI EW OF THE MATTER, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION. IN THE RESULT, GROUND N OS. 3 TO 6 OF THE ASSESSEE ARE ALLOWED. 9. GROUND NO.7 READS AS UNDER : PART II CORPORATE TAX GROUNDS OF APPEAL : 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP/AO ERRED IN DISALLOWING THE 12 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON CLAIM OF ADVANCE WRITTEN OFF AS SHOWN UNDER HEAD SUNDRY DEBTS WRITTEN OFF IN PROFIT AND LOSS A/C AMOUNTING TO RS.39,25,000 WITHOUT APPRECIATING THE FACT THAT THE SAME HAS BEEN INCURRED IN THE NORMAL COURSE OF BUSINESS AND INCIDENTAL TO THE OPERATION OF THE BUSINESS. 10. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO P AGE-39 OF THE APPEAL PAPERS WHICH IS ORDER OF THE DRP IN W HICH THIS ISSUE HAVE BEEN ADJUDICATED UPON BY THE DRP. THE AS SESSEE- COMPANY SUBMITTED THAT DURING THE YEAR UNDER CONSID ERATION, ASSESSEE-COMPANY HAD DEBITED RS.39,25,000/- (SUNDR Y DEBTS WRITTEN OFF) IN P & L A/C. THIS AMOUNT REPRESENTS DEBTS WHICH HAVE BECOME BAD DURING THE YEAR AND WERE WRITTEN OF F IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-COMPANY. ACCORDING LY, THE SAME WERE CLAIMED AS ALLOWABLE DEDUCTION IN COMPUTA TION OF TAXABLE INCOME OF THE ASSESSEE-COMPANY. IT WAS SUBM ITTED THAT THE AFORESAID SUM DID NOT REPRESENT A DEBT WHICH HA D BECOME BAD DURING THE YEAR, AS WAS INADVERTENTLY SUBMITTED BEFORE A.O. 13 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON THIS AMOUNT IS, IN FACT, REPRESENTS DEBIT BALANCE W HICH WAS APPEARING IN THE ACCOUNTS OF VENDOR AND WHICH WAS W RITTEN OFF, SINCE IT WAS NOT RECOVERABLE. THE ASSESSEE-COMPANY REQUESTED THE DRP TO CONDONE THIS MISTAKE ON THE PART OF THE ASSESSEE. IT WAS SUBMITTED THAT THIS SUM BEING LOSS INCURRED BY THE ASSESSEE-COMPANY IN THE ORDINARY COURSE OF BUSINESS AND INCIDENTAL TO THE OPERATION OF THE BUSINESS WHICH W AS CLAIMED AS DEDUCTION IN THE RETURN OF INCOME. THE A.O. HAS STATED THAT NO DEDUCTION CAN BE ALLOWED IN RESPECT OF BAD DEBT UNLESS SUCH DEBT OR PART THEREOF, HAS BEEN TAKEN INTO ACCOUNT I N COMPUTING THE INCOME OF THE ASSESSEE-COMPANY OF THE PREVIOUS YEAR, IN WHICH, THE AMOUNT OF SUCH DEBT OR PART THEREOF, IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR. THE DRP NOTED THAT ASS ESSEE- COMPANY HAS NOT PROVIDED ANY BASIC DETAILS OF WHEN THE AMOUNT WAS ADVANCED, TO WHOM AND FOR WHAT PURPOSE ETC. NEI THER HAS IT BEEN DEMONSTRATED THAT AMOUNT HAS TURNED BAD OR THE STEPS TAKEN BY THE ASSESSEE-COMPANY TO RECOVER THE AMOUNT S. FOREMOST, AS MENTIONED BY THE A.O, IT HAS NOT BEEN SHOWN AS TO IN WHICH YEAR IT WAS TAKEN INTO ACCOUNT FOR COMP UTATION OF 14 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON INCOME. THE DRP DID NOT INTERFERE WITH THE ORDER OF THE A.O. THE OBJECTION OF THE ASSESSEE WAS REJECTED. 10.1. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGES 263 TO 265 OF THE APPEAL PAPER WHICH IS OBJECTION F ILED BEFORE DRP IN WHICH IT WAS HIGHLIGHTED THAT ASSESSEE-COMPA NY SUFFERED LOSSES IN ORDINARY COURSE OF BUSINESS, WHI CH IS AN ALLOWABLE DEDUCTION. SOME CASE LAW ARE ALSO FILED I N SUPPORT OF THE CONTENTION. LEARNED COUNSEL FOR THE ASSESSEE, H OWEVER, VERY FAIRLY STATED THAT NO FURTHER DETAILS ARE AVAILABLE WITH THE ASSESSEE-COMPANY, EXCEPT AUDIT REPORT WHICH WAS FIL ED. 11. LD. D.R. ON THE OTHER HAND RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW. 12. CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF T HE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. T HE ASSESSEE- COMPANY HAS INITIALLY STATED THAT THE AMOUNT IN QUE STION REPRESENTED DEBTS HAVE BECOME BAD DURING THE YEAR A ND WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT. HOWEVER, IT WA S CLARIFIED BEFORE DRP THAT IT WAS A WRONG SUBMISSION MADE BY T HE 15 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON ASSESSEE-COMPANY BECAUSE THE AMOUNT IN FACT A DEBIT BALANCE WAS APPEARING IN THE ACCOUNTS OF THE VENDORS WHICH WERE WRITTEN OFF AS WERE NOT RECOVERABLE. THE ASSESSEE-C OMPANY CLAIMED THAT IT IS A BUSINESS LOSS. THE ASSESSEE-CO MPANY, HOWEVER, HAS NOT PROVIDED ANY BASIC DETAILS AS TO W HEN THE AMOUNT IN QUESTION WAS ADVANCED AND TO WHOM AND FOR WHAT PURPOSE AND WHAT STEPS HAVE BEEN TAKEN BY THE ASSES SEE- COMPANY FOR RECOVERY OF THESE AMOUNTS. SINCE THE AS SESSEE- COMPANY FAILED TO SUBSTANTIATE THE ISSUE OF INCURRI NG OF LOSSES IN THE ORDINARY COURSE OF BUSINESS BEFORE THE AUTHO RITIES BELOW AND NO FURTHER EVIDENCE OR DETAILS HAVE BEEN FURNIS HED BEFORE TRIBUNAL AS WELL, WE ARE OF THE VIEW THAT ASSESSEE- COMPANY HAS FAILED TO PROVE IF ANY ACTUAL BUSINESS LOSSES HAVE BEEN SUFFERED BY ASSESSEE-COMPANY. IN THESE CIRCUMSTANCES, GROUND NO.7 OF APPEAL OF THE ASSESSEE-COMPANY IS DISMISSED. 13. GROUND NO.8 READS AS UNDER : 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP/ AO ERRED IN DISALLOWING THE 16 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON CLAIM OF STOCK WRITTEN-OFF AMOUNTING TO RS.15,71,5 61 WITHOUT APPRECIATING THE FACT THAT THE SAME HAS BEE N INCURRED ON ACCOUNT OF OBSOLETE SPARE PARTS ACTUALL Y WRITTEN-OFF AS PER THE ACCOUNTING POLICY REGULARLY FOLLOWED BY THE APPELLANT. 14. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO P AGE-40 OF THE APPEAL PAPER WHICH IS ORDER OF THE DRP. THE DRP NOTED THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE- COMPANY HAD DEBITED A SUM OF RS.15,71,661 AS STOCK WRITTEN OFF TO ITS P & L A/C AND CLAIMED THE SAME AS AN ALLOWABLE EXPE NSE UNDER THE ACT. THIS WRITE OFF WAS ON ACCOUNT OF SOME OF T HE SPARE PARTS FOUND OBSOLETE DURING THE COURSE OF STOCK VERIFICAT ION CONDUCTED BY THE ASSESSEE-COMPANY FOR THE RELEVANT YEAR. IT W AS SUBMITTED THAT ACCOUNTING STANDARD-2 - VALUATION ON INVENTORY (AS-2) ISSUED BY THE ICAI PRESCRIBES THAT INVENTORIES LYIN G AS ON THE END OF THE YEAR ARE TO BE VALUED AS PER THE CONSIST ENT METHOD OF VALUING THE INVENTORIES AT LOWER OF COST AND NET R EALIZABLE VALUE. IT FURTHER PROVIDES THAT WHERE AN ITEM OF INVENTORY BECOMES 17 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON OBSOLETE, COST MAY NOT BE RECOVERABLE AND A CHARGE TO P & L A/C ON ACCOUNT OF SUCH OBSOLESCENCE HAS TO BE MADE TO B RING DOWN THE VALUE OF INVENTORY AT NET REALIZABLE VALUE. IN LINE WITH THE ABOVE PRESCRIBED TREATMENT, ASSESSEE HAD WRITTEN OF F THE VALUE OF SPARES IT FOUND OBSOLETE DURING THE COURSE OF VE RIFICATION. SUCH AMOUNT RELATES TO ACTUAL REDUCTION IN THE VALU E OF SPARE PARTS HELD BY THE ASSESSEE-COMPANY FOR ITS BUSINESS AND LOSS INCURRED ON SUCH ACCOUNT IS A TRADING/BUSINESS LOSS OF THE ASSESSEE-COMPANY WHICH IS FULLY ALLOWABLE UNDER THE ACT. 14.1. THE ASSESSEE-COMPANY REGULARLY EMPLOYED MERCANTILE SYSTEM OF ACCOUNTING AND AS PER THE MAND ATE OF AS- 2 SO APPLICABLE, THE DEDUCTION IS ALLOWABLE ON COMM ERCIAL ACCOUNTING. THE CLAIM OF ASSESSEE-COMPANY HAS NOT B EEN CONTROVERTED BY A.O. THE A.O. MERELY STATED THAT AS SESSEE- COMPANY APART FROM FURNISHING LEDGER ACCOUNT COULD NOT FURNISH REPORT OF ANY ENGINEER, PRODUCTION HEAD, CE RTIFICATE OF THIRD PARTY, TO SUGGEST THAT INVENTORY HAS BECOME O BSOLETE. NO SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE-COMPAN Y AT THE 18 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON ASSESSMENT STAGE. THE DRP CONSIDERING THE ISSUE NOT ED THAT A.O. HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE AMOUNT WRITTEN OFF BY THE ASSESSEE-COMPANY, HAS BEE N CLAIMED WRONGLY OR IS BOGUS. THE A.O. WAS, THEREFORE, DIREC TED TO VERIFY SUBMISSIONS OF THE ASSESSEE-COMPANY AND PASS A SPEA KING ORDER. 14.2. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGE 12 OF THE APPEAL PAPER WHICH IS ASSESSMENT ORDER IN WH ICH THE A.O. IN PARA 6.2.5 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE- COMPANY OBSERVED THAT NO EVIDENCE APART FROM A COPY OF THE LEDGER OF THE STOCK WRITTEN OFF WAS FILED BY ASSES SEE. THERE IS NO LIST OF STOCK THAT IS WRITTEN OFF SUBMITTED BY ASSE SSEE. THERE IS NO EVIDENCE PRODUCED BY THE ASSESSEE TO SUBSTANTIATE T HAT THE STOCK WRITTEN OFF WAS GENUINE OR TO SUBSTANTIATE THE FACT THAT THE SPARE PARTS WRITTEN OFF WERE IN FACT OBSOLETE. IN THE ABSENCE OF ANY EVIDENCE IT COULD NOT BE ASCERTAINED THAT CLAIM MAD E BY THE ASSESSEE-COMPANY FOR WRITTEN OFF OF OBSOLETE STOCK IS GENUINE. 19 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON THE CLAIM OF ASSESSEE-COMPANY, WAS ACCORDINGLY, REJ ECTED BY THE A.O. 15. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO P B 272 AND 273 WHICH IS OBJECTION FILED BEFORE DRP AS IS N OTED ABOVE. HE HAS SUBMITTED THAT ASSESSEE-COMPANY HAS NO OTHER EVIDENCE IN SUPPORT OF THE CLAIM MADE BEFORE THE AUTHORITIES BELOW. 16. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE, WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATT ER. THE ASSESSEE-COMPANY DID NOT FILE ANY EVIDENCE IN SUPPO RT OF ITS CLAIM EXCEPT FILING COPY OF THE LEDGER ACCOUNT. ASS ESSEE- COMPANY DID NOT SUBMIT ANY REPORT OF ENGINEER OR PR ODUCTION HEAD TO VERIFY THAT ACTUALLY THE INVENTORY HAS BECO ME OBSOLETE. MERE FILING OF THE LEDGER ACCOUNT IS NOT SUFFICIENT TO SUPPORT THE CLAIM OF THE ASSESSEE-COMPANY THAT THE STOCK HAS BE COME OBSOLETE. MERELY REFERRING TO ACCOUNTING STANDARD W OULD NOT SUPPORT THE CLAIM OF THE ASSESSEE-COMPANY THAT IN F ACT THE STOCK OF THE ASSESSEE-COMPANY HAS BECOME OBSOLETE. IN THE ABSENCE 20 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON OF ANY EVIDENCE IN SUPPORT OF THE CLAIM OF THE ASSE SSEE- COMPANY, NO INTERFERENCE IS CALLED FOR IN THE MATTE R. THE DRP HAS GIVEN ONE MORE CHANCE TO THE ASSESSEE-COMPANY T O GET THE CLAIM VERIFIED BEFORE A.O. HOWEVER, THE ASSESSEE-CO MPANY DID NOT AVAIL THE OPPORTUNITY AND DID NOT PRODUCE ANY R ELEVANT OR COGENT EVIDENCE BEFORE A.O. TO SUBSTANTIATE THE CLA IM OF OBSOLETE STOCK. NO INTERFERENCE IS CALLED FOR IN THE MATTER. GROUND NO.8 OF APPEAL OF ASSESSEE-COMPANY IS DISMISSED. 17. ON GROUND NOS.7 AND 8, LEARNED COUNSEL FOR THE ASSESSEE ALSO MADE AN ALTERNATIVE SUBMISSION AND SU BMITTED THAT ASSESSEE-COMPANY FOLLOWED COST PLUS METHOD AND IN CASE, THE COST IS DISALLOWED BY DISMISSING THE GROUND NOS .7 AND 8 OF APPEAL OF ASSESSEE, IT WOULD INCREASE IN PROFIT. TH EREFORE, WHILE DETERMINING PLI (PROFIT LEVEL INDICATOR), SAME MAY BE CONSIDERED TO GIVE CORRESPONDING BENEFIT IN THIS YEAR. THE ALT ERNATIVE CLAIM IS OBJECTED TO BY THE LD. D.R. BECAUSE IT IS NOT AR ISING OUT OF THE ORDERS OF THE AUTHORITIES BELOW. 21 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON 17.1. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, W E ARE OF THE VIEW THAT ALTERNATIVE CLAIM OF ASSESSEE-COMPANY , CANNOT BE CONSIDERED AT THIS STAGE. THE ONLY ISSUE OF T.P. WE RE RAISED IN GROUND NOS. 3 TO 6 WHICH HAVE BEEN ALLOWED. THEREFO RE, IT WOULD HAVE NO CONNECTION FOR DETERMINING THE T.P. ISSUE. FURTHER, THE ALTERNATIVE CLAIM OF ASSESSEE-COMPANY IS NOT ARISIN G OUT OF THE ORDERS OF THE AUTHORITIES BELOW. THIS ALTERNATIVE C LAIM OF ASSESSEE-COMPANY IS, THEREFORE, REJECTED. 18. GROUND NO.9 OF APPEAL OF ASSESSEE AS UNDER : 9. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. DRP/AO ERRED IN DISALLOWING A SUM OF RS.19,31,934 AS EXCESS DEPRECIATION CLAIM ON FIXED ASSETS ACQUIRED BY THE APPELLANT FROM NCR CORPORATION INDIA PRIVATE LIMITED. 19. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO P AGE-41 OF THE APPEAL PAPER WHICH IS ADJUDICATION BY THE DR P ON THIS ISSUE. THE DRP WITH REGARD TO ISSUE OF DISALLOWANCE OF DEPRECIATION ON THE FIXED ASSETS ACQUIRED BY ASSESS EE-COMPANY 22 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON FROM NCR CORPORATION IN F.Y. 2007-2008 NOTED THAT T HIS ISSUE HAVE BEEN DEALT WITH IN EARLIER A.YS. 2009-2010, 20 10-2011, 2011-2012 AND 2012-2013 AND OBJECTIONS OF THE ASSES SEE- COMPANY HAVE BEEN DISMISSED. ACCORDINGLY, THIS GROU ND HAS BEEN DISMISSED. 19.1. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF ITAT, DELHI BENCH FOR A.Y. 2012-2013 IN ITA.NO.87/DEL./20 17 DATED 08 TH AUGUST, 2017, IN WHICH IN PARA-10, THE TRIBUNAL RE STORED THE MATTER TO THE FILE OF THE A.O. TO VERIFY THE CL AIM OF ASSESSEE- COMPANY AS PER LAW. THE FINDINGS OF THE TRIBUNAL AR E REPRODUCED AS UNDER: 10. AS RELATES TO GROUND NO. 14 & 15, SIMILAR ISSUE WAS RAISED IN AY 2008-2009 WHICH WAS REMANDED BACK TO T HE ASSESSING OFFICER TO VERIFY THE CLAIM OF DEPRECIATI ON BY THE TRIBUNAL VIDE ORDER DATED 01.08.2016 IN ITA NO. 791/DEL/2013. THE EXTRACT OF THE SAID ORDER IS AS FOLLOWS:- 23 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON 11.4. THE LD.AR SUBMITTED THAT THE LD.AO ON ONE HAND ACCEPTED THE DIFFERENCE IN THE LIABILITY BUT HE SUB MITTED THAT THE DIFFERENTIAL AMOUNT BETWEEN THE PURCHASE CONSIDERAT ION AND THE VALUE AS PER THE VALUATION CERTIFICATE DID NOT ACCE LERATE THE DIFFERENCE IN THE FIXED ASSETS. HE SUBMITTED THAT T HE DIFFERENTIAL AMOUNT BETWEEN THE PURCHASE CONSIDERATION AND THE V ALUE OF ASSETS AS PER THE VALUATION CERTIFICATE HAS TO BE T RANSFERRED TO CAPITAL RESERVE AS IT REPRESENTS THE ACTUAL COST OF ASSETS TO THE ASSESSEE AND THE DEPRECIATION SHOULD BE FULLY ALLOW ED ON THE SAME. 11.5. ON THE CONTRARY THE LD.AR RELIED UPON THE ORDERS PASSED BY THE AUTHORITIES BELOW. 11.6. WE HAVE PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW AND THE ARGUMENTS ADVANCED BY BOT H THE PARTIES. IT IS SEEN THAT THE LD. AO HAD TAKEN DIFFE RENT FIGURES FOR CALCULATING THE VALUE OF FIXED ASSETS. WE ACCORDING LY SET ASIDE THE ISSUE TO THE LD. AO TO VERIFY THE CLAIM OF THE ASSE SSEE AS PER LAW. THUS ON SIMILAR LINE IN THE PRESENT ASSESSMENT YEAR ALSO THE ASSESSING OFFICER IS DIREC TED TO VERIFY THE CLAIM OF THE ASSESSEE AS PER LAW. THEREFORE, GROUND NO. 14 & 15 ARE PARTLY ALLOWED AS 24 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON THE MATTER IS REMANDED BACK TO THE ASSESSING OFFICE R TO VERIFY THE SAID CLAIM. 20. AFTER CONSIDERING THE RIVAL CONTENTIONS AND IN THE LIGHT OF THE ORDER OF THE TRIBUNAL DATED 08 TH AUGUST, 2017, WE BY RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL DA TED 08 TH AUGUST, 2017 (SUPRA), DIRECT THE A.O. TO VERIFY THE CLAIM OF THE ASSESSEE-COMPANY AS PER LAW AND PASS CONSEQUENTIAL ORDER. GROUND NO.9 OF APPEAL OF ASSESSEE-COMPANY IS ALLOWE D FOR STATISTICAL PURPOSES. 21. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY AL LOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (L.P. SAHU) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 21 ST FEBRUARY, 2018 VBP/- 25 ITA.NO.7885/DEL./2017 TERRADATA INDIA PVT. LTD., GURGAON COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT I - 2 BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSESSMENT. REGISTRAR : ITAT DELHI BENCHES : DELHI.