Dishman Pharmaceuticals & Chemicals Ltd., Ahmedabad V. The ACIT.,(OSD)Range-1, Ahmedabad

ITA 903/AHD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9799 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-12-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 26-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Bad and doubtful debts
• Section: 92C; 10B; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV , JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 903 & 1234/AHD/2010 ASSESSMENT YEAR :2002-03 DISHMAN PHARMACEUTICALS & CHEMICALS LTD., BHADRARAJ CHAMBERS, SWASTIK CROSS ROADS, AHMEDABAD THE DCIT(OSD), RANGE-1, AHMEDABAD V/S . & THE ACIT(OSD)-1, AHMEDABAD DISHMAN PHARMACEUTICALS & CHEMICALS LTD., BHADRARAJ CHAMBERS, SWASTIK CROSS ROADS, AHMEDABAD PAN NO. AAACD4164D (APPELLANT) .. (RESPONDENT) ' /BY ASSESSEE SHRI TUSHAR HEMANI, A.R. $ ' / BY REVENUE SMT. SMITI SAMANT, SR. D.R. % ' /DATE OF HEARING 23.12.2015 &'() ' /DATE OF PRONOUNCEMENT 08.01.2016 O R D E R PER : SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER THESE TWO APPEALS OF WHICH ONE IS FILED BY ASSESSEE AND THE OTHER BY REVENUE ARE AGAINST THE ORDER OF CIT(A)-VIII, AHMED ABAD, DATED 30.12.2009 FOR THE ASSESSMENT YEAR 2002-03. ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO BE ENGAGED I N THE BUSINESS OF MANUFACTURING BULK DRUGS AND CHEMICALS. THE ASSESS EE FILED ITS RETURN OF INCOME FOR A.Y. 02-03 ON 31.10.2002 DECLARING TOTAL INCOME AT RS.NIL. THE ASSESSMENT WAS INITIALLY FRAMED U/S.143(3) VIDE ORD ER DATED 22.03.2005 AND THE TOTAL INCOME WAS DETERMINED AT RS.20,51,93,078/ -. ON GIVING THE APPEAL EFFECT OF HONBLE ITATS ORDER, THE INCOME WAS DETE RMINED AT RS.28,15,711/-. SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUING NOTI CE U/S.148 OF THE ACT DATED 31.07.2006 AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S.147 R.W.S. 263 R.W.S. 254 R.W.S. 148(3) OF THE ACT VIDE ORDER DATED 31.12.2007 AND THE TOTAL INCOME WAS DETERMINED AT RS.5,46,52,300/-. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASS ESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 3 0.12.2009 GRANTED PARTIAL RELIEF TO THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE AN D ASSESSEE BOTH ARE IN APPEAL BEFORE US. THE GROUNDS RAISED BY THE ASSESS EE IN ITS APPEAL I.E. ITA NO.903/AHD/2010 READ AS UNDER: 1 THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN GOING BEYOND THE DIRECTIONS OF THIS HON'BLE ITAT IN A SET ASIDE PROCEEDINGS, WHICH IS NOT PERMISSIBLE UNDER THE LAW. ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 3 2 THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN MAKING TRANSFER PRICING ADJUSTMENT OF RS.49,31,625/- IN RESPECT OF ONE PRODUCT OF THE APPELLANT BY APPLYING THE CUP METHOD INSTEAD OF TNMM APPLIED BY THE APPEL LANT. 3 THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN TAKING A CONTRARY VIEW BY APPLYING CUP METHOD WHEREAS THE ID . CIT(A) HAS ALREADY ACCEPTED THE TNMM APPLIED BY THE APPELLANT FOR OTHER PRODUCTS AS THE MOST APPROPRIATE METHOD FOR ALP. 4 IN ANY CASE, EVEN AFTER APPLYING THE CUP METHOD OF FINDING OUT ALP, THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN NOT TAKING INTO CONSIDERATION VARIOUS FACTORS WHICH AFFECT THE PRICES OF A CONTROLLED TRANSACTIONS VIS-A-VIS UNCONTROLLED TRANSACTIONS. 5 THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN DISALLOWING WRIT TEN OFF SUNDRY BALANCES OF RS. 13,16,191/- AFTER HOLDING THAT TO C LAIM SUCH AMOUNT AS BAD DEBTS, DEBTS SHOULD HAVE BAD. 6 THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE ID. AO IN DISALLOWING LOSS ON FORFEITURE OF SHARES TO RS.4,65,074/-. 7 BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN PASSING THE ORDERS WITHOUT PROPERLY APPRECIATING THE FACT AND T HAT HE FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF BOTH THE AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLE S OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 8 THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234B/C/D OF THE ACT. 5.1 ON THE OTHER HAND, THE GROUNDS RAISED BY THE RE VENUE IN ITS APPEAL I.E. ITA NO.1234/AHD/2010 READ AS UNDER: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN PAR TLY DELETING THE ADDITION TO THE EXTENT OF RS.4,51,02,696/- WITHOUT APPRECIAT ION OF THE FACT THAT THE ASSESSEE HAS NOT SUBMITTED DETAILS JUSTIFYING P ROPER APPLICATION OF TNMM AND HAS NOT SUBMITTED DETAILS FOR THE PURPOSE OF COMPUTING ADJUSTMENTS FOR CUP METHODS. ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 4 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER SINCE THE ASSESSEE HAS FAILED TO DISCLOSE HIS TRUE INCOME . 6. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO.903 /AHD/2010. 6.1 BEFORE US, LD. A.R. AT THE OUTSET SUBMITTED THA T GROUND NO. 1 IS GENERAL GROUND AND THEREFORE, NEEDS NO ADJUDICATION AND THA T GROUND NOS.2 TO 4 OF ASSESSEES APPEAL AND GROUNDS RAISED BY THE REVENUE ARE INTER CONNECTED AND THEREFORE, CAN BE CONSIDERED TOGETHER. 7. THE TPO HAD MADE ADJUSTMENT IN SALE PRICE IN RES PECT OF 8 PRODUCTS BY REJECTING THE TNM METHOD SELECTED BY ASSESSEE AND A DOPTED CUP AS THE MOST APPROPRIATE METHOD AND THE AFORESAID ADJUSTMEN T RESULTED INTO ADDITION OF RS.5,00,55,321/-. THE ADJUSTMENT MADE BY THE AS SESSING OFFICER WAS UPHELD BY LD. CIT(A) VIDE ORDER DATED 03.08.2005. AGAINST THE ORDER OF CIT(A), MATTER WAS CARRIED BY THE ASSESSEE BEFORE H ONBLE ITAT. HONBLE ITAT VIDE ORDER DATED 18.08.2006 (ITA NO.2111/AHD/2 005) RESTORED THE ISSUE BACK TO ASSESSING OFFICER FOR DETERMINATION OF ALP. PURSUANT TO THE DIRECTIONS OF HONBLE ITAT, BEFORE ASSESSING OFFICER, ASSESSEE FURNISHED DETAILS OF GROSS PROFIT MARKUP. THE ASSESSEE WAS ASKED TO FURNISH N ECESSARY DOCUMENTS AND EVIDENCE. ASSESSING OFFICER NOTED THAT ASSESSEE DI D NOT FURNISH THE REQUIRED DETAILS AND THEREFORE, ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 31.12.2007 AND MADE ADDITIONS OF RS.5,00,55,321/-, THE SAME ADDITION AS MADE IN THE ORIGINAL ASSESSMENT ORDER THAT WAS FRAM ED BY ASSESSING OFFICER. ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 5 7.1 AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY CONFIRMING THE ADDITION OF ONLY RS.49,31,625/- BY H OLDING AS UNDER: 5.5 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE ID. A.R CAREFULLY. I HAVE ALSO GONE THROUGH THE TPO'S ORDER AND THE ORDE R OF HON'BLE ITAT IN THIS REGARD. THE HON'BLE ITAT WHILE SETTING ASIDE THE IS SUE REGARDING ALP HAD DIRECTED AS UNDER. IN VIEW OF THE TOTALLY OF THE FACTS AND CIRCUMSTANC ES OF THE CASE AND IN (HE INTEREST OF SUBSTANTIAL JUSTICE, WE ARE OF THE OPINION THAT SINCE THE TPO/ASSESSING OFFICER HAS NOT BEEN ABLE TO CONSIDER THE APPELLANT'S CASE FOR DETERMINATION OF ALP ON THE BASIS OF BREAK -UP OF GROSS PROFIT ON EXPORTS BETWEEN DISHMAN EUROPE LIMITED AND OTHER S, THE REJECTION OF THE APPELLANT'S CONTENTION FOR APPLICATION OF 'T RANSACTIONAL NET MARGIN METHOD' CANNOT BE UPHELD AND, THEREFORE, WE RESTORE THE ISSUE, RELATING TO DETERMINATION OF ALP WITH RESPECT TO TH E EXPORTS UNDER REFERENCE, BACK TO THE FILE OF ASSESSING OFFICER FO R FRESH DISPOSAL IN ACCORDANCE WITH LAW AND AFTER ALLOWING THE APPELLAN T A PROPER OPPORTUNITY OF BEING HEARD.' 5.6 IT IS SEEN THAT THE ASSESSING OFFICER WITHOUT A NALYZING THE WHOLE ISSUE AGAIN REPEATED THE TPO'S ORDER AND MADE THE IMPUGNE D ADDITION. IT MAY BE POINTED OUT THAT THERE ARE TWO ISSUES IN THE TPO'S ORDER WHICH REQUIRE ADJUDICATION VIZ FIRSTLY THE METHOD ADOPTED BY THE APPELLANT FOR THE PURPOSES OF CALCULATION OF ARM'S LENGTH PRICE (ALP) AND ANY VAR IATION OR CHANGE IN SAID METHOD BY THE TPO AND SECONDLY THE QUANTIFICATION O F TRANSFER PRICING ADDITION IN RESPECT OF ALP ADOPTED BY HIM. 5.7 THERE IS A DISPUTE BETWEEN THE TPO AND THE APPE LLANT WITH REGARD TO SELECTION OF METHOD FOR ARRIVING AT THE APPROPRIATE ALP. THE APPELLANT HAS ADOPTED TRANSACTIONAL NET MARGIN METHOD (TNMM) WHER EAS THE TPO IS OF THE VIEW THAT IN THE GIVEN CIRCUMSTANCES COMPARABLE UNC ONTROLLED PRICE METHOD (CUP) IS MOST APPROPRIATE TO DETERMINE ALP. 5.8 IN TERMS OF RULE 10B OF THE IT RULES THE TNMM R EQUIRES ESTABLISHING COMPARABILITY AT A BROAD FUNCTIONAL LEVEL. IT REQUI RES COMPARISON BETWEEN NET MARGINS DERIVED FROM THE OPERATION OF THE UNCONTROL LED PARTIES AND NET MARGIN DERIVED BY AN ASSOCIATED ENTERPRISE ON SIMILAR OPER ATION. UNDER THIS METHOD, THE NET PROFIT MARGIN REALIZED B Y AN ASSOCIATED ENTERPRISE FROM AN INTERNATIONAL TRANSACTION IS COM PUTED IN RELATION TO A PARTICULAR FACTOR SUCH AS COSTS INCURRED, SALES, AS SETS UTILIZED, ETC. THE NET PROFIT MARGIN REALIZED BY AN ASSOCIATED ENTERPRISE IS COMPARED WITH NET PROFIT MARGIN OF THE UNCONTROLLED TRANSACTIONS TO ARRIVE A T THE ALP. TNMM REQUIRES COMPARISON BETWEEN NET MARGINS DERIVE D FROM THE OPERATIONS OF THE UNCONTROLLED PARTIES AND NET MARG INS DERIVED BY AN ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 6 ASSOCIATED ENTERPRISE FROM SIMILAR OPERATIONS. NET MARGIN IS INDICATED BY THE RATE OF RETURN ON SALES OR COST OR OPERATING ASSETS , AND THIS FORMS THE BASIS FOR TNMM. A FUNCTIONAL ANALYSIS OF THE TESTED PARTY OR' THE INDEPENDENT ENTERPRISE, AS THE CASE MAY BE, IS REQUIRED TO DETE RMINE WHETHER THE TRANSACTIONS ARE COMPARABLE AND THE ADJUSTMENTS THA T ARE REQUIRED TO BE MADE TO OBTAIN RELIABLE RESULTS. THE TESTED PARTY W OULD HAVE TO CONSIDER OTHER FACTORS, LIKE COST OF ASSETS OF COMPARABLE COMPANIE S, ETC., WHILE APPLYING THE RETURN ON ASSETS MEASURE. ORDINARILY, THE TESTED PA RTY, HAS TO BE THE PARTY PROVIDED SERVICES BECAUSE IT IS ON THE BASIS OF RAT E OF RETURN ON SALES OR COST OR OPERATING ASSETS THAT TRANSACTIONAL MARGIN IS CO MPUTED. THESE PARAMETERS GENERALLY AVAILABLE IN THE CASE OF A PARTY PROVIDIN G SERVICES. 5.9 IN TERMS OF RULE 10B THE CUP METHOD IS APPLIED WHEN A PRICE IS CHARGED FOR A PRODUCT OR SERVICE. THIS IS ESSENTIALLY COMPA RISON OF PRICES CHARGED FOR THE PROPERTY OR SERVICES TRANSFERRED IN A CONTROLLE D TRANSACTION TO A PRICE CHARGED FOR PROPERTY OR SERVICES TRANSFERRED IN A C OMPARABLE UNCONTROLLED TRANSACTION. THE BEDROCK OF THIS METHOD IS THE IDEN TIFICATION OF AN IDENTICAL TRANSACTION, IN A SITUATION WHERE A PRICE IS CHARGE D FOR PRODUCTS OR SERVICES BETWEEN UNRELATED PARTIES. WHILE APPLYING CUP THE COMPARABILITY BETWEEN CONTRO LLED AND UNCONTROLLED TRANSACTIONS SHOULD NOT BE ONLY JUDGED FROM THE POINT OF PRODUCT COMPARABILITY, BUT SHOULD ALSO TAKE INTO CONSIDERAT ION THE EFFECT ON PRICE OF OTHER BROADER BUSINESS FUNCTIONS. EVEN MINOR DIFFERENCES IN CONTRACTUAL TERMS OR ECONOMIC CONDITIONS, GEOGRAPHICAL AREAS, RISKS A SSUMED, FUNCTIONS ASSUMED ETC. COULD AFFECT THE AMOUNT CHARGED IN AN UNCONTROLLED TRANSACTION. COMPARABILITY UNDER THIS METHOD DEPENDS ON CLOSE SI MILARITIES WITH RESPECT TO VARIOUS FACTORS. THE CUP CAN BE INTERNAL OR EXTERNAL. THE INTERNAL C UP IS THE PRICE THAT THE APPELLANT HAS PAID/CHARGED IN A COMPARABLE UNCO NTROLLED TRANSACTION WITH AN INDEPENDENT PARTY WHEN COMPARED TO THE PRICE PAI D / CHARGED IN A CONTROLLED TRANSACTION. EXTERNAL CUP IS A PRICE CHA RGED IN COMPARABLE UNCONTROLLED TRANSACTIONS BETWEEN THIRD PARTIES WHE N COMPARED TO THE PRICE OF A CONTROLLED TRANSACTION. HOWEVER, WHERE CUP METHOD IS TO BE APPLIED ON THE BASIS OF PUBLIC DATA, IT IS PROVIDED IN REGULATION 1.482-3(B)(5) THAT FOLLOWING REQUIREMENTS MUST BE MET: THE DATA IS WIDELY AND ROUTINELY USED IN ORDINARY COURSE OF BUSINESS IN THE INDUSTRY TO NEGOTIATE PRICES FOR UNCONTROLLED SALES. THE DATA IS USED TO SET PRICES IN THE CONTROLLED TRANSACTION IN THE SAME WAY THAT IT IS USED BY UNCONTROLLED TAX PAYERS IN THE INDUSTRY; AND THE AMOUNT CHARGED IN THE CONTROLLED TRANSACTION IS ADJUSTED TO REFLECT PRODUCT AND SERVICE VARIATIONS. THE US REGULATIONS FURTHER WARN THAT DATA FROM PUBL IC EXCHANGES, QUOTATION MEDIA SHOULD NOT BE USED IN EXTRAORDINARY SITUATIONS SUCH AS WAR ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 7 PERIOD, ECONOMIC DEPRESSION, NATURAL CALAMITIES PER IOD. WE ARE OF THE CONSIDERED VIEW THAT ABOVE PRINCIPLES ARE OF UNIVER SAL APPLICATION AND THERE IS NO GOOD REASON WHY THEY SHOULD NOT BE APPLIED IN TR ANSFER PRICING DETERMINATION IN INDIA. 5.10 I FIND CONSIDERABLE FORCE IN THE ARGUMENTS OF THE LD. A.R THAT THE APPELLANT HAS A LARGER SAY SO FAR AS SELECTION OF M ETHOD FOR DETERMINATION OF ALP IS CONCERNED. THE PROVISIONS DIRECTION 92C OF T HE ACT ARE VERY CLEAR IN THIS REGARD. THE APPELLANT HAS A RIGHT TO CHOOSE TH E BEST APPLICABLE METHOD FOR THE PURPOSE OF CALCULATION OF ALP. THE ASSESSING O FFICER/TPO CAN ALTER THAT METHOD PROVIDED HE FINDS SERIOUS DEFECTS IN THE SAM E AND HE FULFILLS THE THREE CONDITIONS AS LAID DOWN IN SEC. 92C(3) OF THE ACT. HON'BLE ITAT BANGALORE IN THE CASE OF PHILIPS SOFTWARE CENTRE P. LTD. V/S ACI T 119 TTJ 721 HAS HELD TRANSFER PRICING - COMPUTATION OF ARM'S LENGTH PRIC E- ' SELECTION OF APPROPRIATE METHOD - WHILE CONDUCTING TRANSFER PRICING STUDY TH E APPELLANT, AFTER EVALUATING THE CRITERION LAID DOWN IN RULE 10C(2), HAVING SELECTED THE CPM AS THE MOST APPROPRIATE METHOD, TPO. WITHOUT SHARING W ITH THE APPELLANT ANY ANALYSIS, BASIS OR REASONS WHICH LED HIM TO REJECT CPM AND SELECT TNMM AS THE MOST APPROPRIATE METHOD, WAS NOT JUSTIFIED IN D OING SO -TPO/ASSESSING OFFICER CAN CONDUCT A SCRUTINY OF THE MOST APPROPRI ATE METHOD EMPLOYED BY APPELLANT ONLY AFTER PROVING THAT THE DOCUMENTATION MAINTAINED BY THE APPELLANT IS DEFICIENT OR INSUFFICIENT IN ANY MANNE R - DATA USED BY THE APPELLANT BEING RELIABLE AND CORRECT AND APPELLANT HAVING DISCHARGED THE ONUS BY PREPARING A TRANSFER PRICING DOCUMENTATION, COND UCTING A COMPARABILITY ANALYSIS AND FURNISHING THE SAME TO THE TPO, THERE COULD BE NO INTERVENTION BY THE DEPARTMENT.'. 5.11 IN THE FACTS OF THE PRESENT CASE, THE APPELLAN T HAS ADOPTED TRANSACTIONAL NET MARGIN METHOD (TNMM FOR SHORT). THE APPELLANT H AS JUSTIFIED THE SAID METHOD BY STATING THAT HAVING REGARD TO THE SALES O F LARGE NUMBER OF PRODUCTS TO ITS ASSOCIATED ENTERPRISE, COUPLED WITH THE FACT THAT IT HAS ALSO SOLD DIVERSIFY PRODUCTS TO UNRELATED ENTERPRISES, AND LOOKING TO T HE COMPLEXITY OF THE TRANSACTIONS, PRODUCT DIVERSITY AND MULTIPLICITY OF TRANSACTIONS, THE SAID METHOD WAS THE ONLY PRACTICABLE METHOD TO DETERMINE THE AR MS LENGTH PRICES, UNDER THE SAID METHOD, APPELLANT FINDS THE PROFIT BEFORE INTEREST AND TAXATION (PBIT FOR SHORT) AS A PERCENTAGE OF TURNOVER AND THE SAME IN TURN, IS BEING COMPARED WITH SUCH PBIT OF OTHER ENTITIES DEALING I N IDENTICAL PRODUCTS AND HAVING COMPARABLE TURNOVERS. AS PER THE REPORT SUBM ITTED UNDER RULE 10D OF THE I. T. RULES, THE APPELLANT HAS GIVEN COMPARISON OF SUCH PBIT WITH VARIOUS OTHER CONCERNS AND IT HAS DEMONSTRATED THAT SUCH PB IT OF THE APPELLANT AT 20.19% WAS HIGHER THAN THE AVERAGE COMPARABLE PBIT OF SUCH SIMILAR ENTITIES AT 15.833%. RELEVANT EXTRACT OF RULE 10D WHEREIN A CHART HAS BEEN GIVEN IS REPRODUCED HEREIN BELOW FOR READY REFERENCE: STATEMENT OF AVERAGE % OF PROFIT BEFORE INTEREST AN D TAX OF VARIOUS COMPANIES IN THE GROUP OF ORGANIC CHEMICALS HAVING TURNOVER OF OVER RS.50 CRORES DURING FINANCIAL YEAR 2001-2002 AND HAVE PRO FITS EARNED DURING THE SAME YEAR. ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 8 SR. NO. NAME OF THE COMPANY NET SALES (RS.IN CRORES) PBIT (RS. IN CRORES) % OF PBIT TO NET SALES 1 AARTI INDUSTRIES LTD. 322.42 50.25 15.59% 2 AEGIS LOGISTICS LIMITED 107.33 18.41 17.15% 3 ALKYL AMINES CHEMICALS LTD. 85.06 13.68 16.08% 4 DEEPAK NITRATE LTD. 214.11 23.37 10.91% 5 GUJARAT FLOUROCHEMICALS LTD 119.45 40.47 33.88% 6 HIKAL LIMITED 114.08 27.85 24.41% 7 LAFTANS PETROCHEMICALS LTD. 64.22 3.99 6.21% 8 NARMADA CHEMATUR PETROCHEMICALS LTD. 203.31 46.45 22.85% 9 SCHENECTADY HERDLILIA LTD. 262.75 2.77 1.05% 10 TAMILNADU PETROPRODUCTS LTD. 697.27 119.54 17.14% TOTAL 2190.00 346.78 15.83% AS CAN BE SEEN THE OVERALL PBIT OF THE APPELLANT IS BETTER THAN THE INDUSTRY AVERAGE PBIT. THE ONLY REASON, APART FROM SOME GENE RAL REASONS, WHY THE AO HAS REJECTED THE SAID METHOD WAS THE ABSENCE OF BREAK-UP OF PBIT BETWEEN TRANSACTIONS WITH ASSOCIATED ENTERPRISE AND UNRELATED ENTITIES. IF THE PBIT WITH THE ASSOCIATED ENTERPRISE IS HIGHER THAN THE OVERALL PBIT, THE VERY GROUND FOR REJECTING THE SAID TNMM METHOD GOES AWAY . THE FOLLOWING CHART PLACED BEFORE THE AO AS WELL AS BEFORE ME PUTS THIS ISSUE AT REST AS IT IS VERY CLEAR THAT THE PBIT WITH AE WAS AS HIGH AS 30.98% W HICH IS HIGHER THAN BOTH THE PBIT OF THE APPELLANT AT 20.19% AND OVERALL IND USTRY AVERAGE PBIT OF 15.83%. PARTICULARS DEL OTHERS TOTAL TOTAL INCOME 263,332,635.00 476,746,306.00 740,078,941.33 PBIT 81,578,753.71 67,833,445.47 179,412,199.19 % 30.98% 14.23% 20.19% 5.12 IT MAY BE POINTED OUT THAT THE AO HAS GIVEN ONE MORE REASON FOR REJECTION OF APPELLANT'S CLAIM STATING THAT NECESSA RY DETAILS AS MENTIONED FAY TPO IN HIS ORDER WERE NOT PROVIDED DURING THE PROCE EDINGS UNDER REFERENCE. THIS OBSERVATION OF THE AO IS WITHOUT ANY REASONABL E BASE IN THE SENSE THAT THE ORIGINAL ASSESSMENT ORDER WAS SET ASIDE BY THE HON'BLE ITAT ON THIS GROUND THAT THE MATERIAL BROUGHT ON RECORD WAS NOT PRESENTED BEFORE THE AO. THEREFORE, THE HON'BLE TRIBUNAL DIRECTED THE AO TO EXAMINE THE DETAILS FILED BY THE APPELLANT BEFORE THE CIT(A) AFTER PASSING OF TH E ORIGINAL ASSESSMENT ORDER. THE AO WITHOUT EXAMINING THESE DETAILS AND ANALYZIN G THE COMPLETE FACTS REJECTED THE METHOD ADOPTED BY THE APPELLANT COMPLE TELY. 5.13 NOW COMING TO THE TPO'S ORDER WHICH IS THE BAS IS FOR THE ADJUSTMENT IN ALP UNDER REFERENCE, IT IS SEEN THAT THE TPO AFTER REJECTING THE APPELLANTS METHOD FOR DETERMINATION OF ALP HAS ANALYSED TRANSACTIONS IN RESPECT OF 9 ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 9 ITEMS SOLD BY THE APPELLANT TO ITS AE AND OTHER PAR TIES. THIS ANALYSIS CAN BE SEEN ON PAGES 14 TO 16 OF THE TPOS ORDER DATED 28.2 .2005. 5.14 THE TPO HAS MADE ADJUSTMENT WITH RESPECT TO 8 ITEMS NAMELY AND HAS IGNORED THE VARIATION IN ON& NAMELY CENTRAMIDE BP D UE TO SMALL EFFECT. 5.15 I HAVE EXAMINED THE DETAILS OF OTHER EIGHT ITE MS ON THE BASIS OF WHICH THE TPO HAS WORKED OUT THE VARIATION IN ALP. THE ALP WO RKED OUT BY THE TPO IN RESPECT OF 7 ITEMS BY APPLICATION OF CUP METHOD CAN NOT BE UPHELD FOR THE REASONS DISCUSSED IN THE TABLE BELOW AGAINST EACH I TEM. THEREFORE, THE APPLICATION TNMM BY THE APPELLANT FOR DETERMINATION OF ALP IS HEREBY APPROVED IN RESPECT OF 7 ITEMS OF THE TABLE BELOW. IT IS ALSO HELD THAT TPO HAS NOT BEEN ABLE TO BRING SUFFICIENT MATERIALS ON RECO RD TO REJECT THE APPELLANT'S METHOD AS REQUIRED U/S 92C(3) OF THE ACT. SR.NO. ARM'S LENGTH PRICE ADJUSTMENT REMARKS 1. BENZYL TRIETHYL AM RS.7,48,050/- COMPARISONS HAVE BEEN MADE WITH SALES MADE TO NON-AES WHICH ARE NOT AT ALL COMPARABLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE ANY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, THE AE PROVIDES ALL THESE SERVICES AND THEREFORE THE PR ICES ARE ROT COMPARABLE AS PROVIDED UNDER RULE 10C. IN ANY CASE TH E IMPORTANT FACTOR OF DEMAND AND SUPPLY SITUATIONS HAVE BEEN GIVEN B GO BY. THERE IS A MARKED DIFFERENCE IN THE VOLUMES WITH AE VIS-A-VIS NON-AE. 2. CETYL PRYIDINIUM C RS.32,38.026/- COMPARISONS HAVE BEEN MADE WITH SALES MADE TO NON-AES WHICH ARE NO T AT ALL COMPARABLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE ANY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, THE AE PROVIDES ALL THESE SERVICES AND THEREFORE THE PR ICES ARE NOT COMPARABLE AS PROVIDED UNDER RULE 1 0C. MOREOVER THE QUANTITY SOLD TO DEL WAS 34,550 KGS A S AGAINST 1,591 KGS SOLD TO DIFFERENT NON-AE PARTIES. 3. ETHYL TRIPHENYL PH RS.66,65,863/- COMPARISONS HAVE BEEN MADE WITH SALES MADE TO NON-AES WHICH ARE NOT AT ALL COMPARA BLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE ANY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, THE AE PROVIDES ALL THESE SERVICES AND THEREFORE THE PR ICES ARE NOT COMPARABLE AS PROVIDED UNDER RULE 10C. MOREOVER, THE COMPARAB LE SALES WERE MADE IN MALAYSIA AND KOREA WHICH ARE ASI AN COUNTRIES WHERE AS AE IS BASED IN EUROPE WHICH IS GEOGRAPHICALLY DISTANT AND DIFFERENT MARKET WHICH I S NOT AT ALL COMPARABLE. 4. GILBENCLAMIDE BP RS.5,48,150/- COMPARISONS HAVE BEEN MADE WITH, SALES MADE TO NON-AES WHICH ARE NOT AT ALL COMPARA BLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE ANY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, THE AE PROVIDES ALL THESE SERVICES AND THEREFORE THE PR ICES ARE N OT COMPARABLE AS PROVIDED UNDER RULE 10C. MOREOVER THE QUANTITY SOLD TO DEL WAS 955 KGS AS AGAINST 125 KGS SOLD TO DIFFERENT NON-AE PARTIES. 5. TETRA BUTYL AMM HP RS.2,69,71.112/- COMPARISONS HAVE BEEN MADE WITH SALES MADE TO NON- AES WHICH ARE NOT AT ALL COMPARABLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE A NY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, TH E AE PROVIDES ALL THESE SERVICES AND THEREFORE THE PR ICES ARE NOT COMPARABLE AS PROVIDED UNDER RULE 10C. MOREOVER, T HE QUANTITY SOLD TO DEL WAS 92,500 KGS AS AGAINST 2.350 KGS SOLD TO DIFFERENT NON-AE PARTIES. 6. TRIETHYL BENZYL AM RS.1,83,600/- COMPARISONS HAVE BEEN MADE WITH SALES MADE TO NON- AES WHICH ARE NOT AT ALL COMPARABLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE ANY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, THE AE PROVIDES ALL THESE SERVICES AND THEREFORE TH E PRICES ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 10 ARE NOT COMPARABLE AS PROVIDED UNDER RULE 10C. 7. TETRA ETHYL AMM BR RS. 13,79 ,800/- COMPARISONS HAVE BEEN MADE WITH SALES MADE TO NON- AES WHICH ARE NOT AT ALL COMPARABLE INASMUCH AS THESE ENTITIES DO NOT PROVIDE ANY MARKETING, TECHNICAL OR AFTER SALES SERVICES. AS AGAINST THIS, THE AE PROVIDES ALL THESE SERVICES AND THEREFORE TRIE P RICES ARE NOT COMPARABLE AS PROVIDED UNDER RULE 10C, MOREOVER, THE QUANTITY SOLD TO DEL WAS 20,000 KGS AS AGAINST 5000 KGS SOLD TO DIFFERENT NON-AE PARTIES. 5.16 AS REGARDS DETERMINATION OF ALP IN RESPECT OF THE TRANSACTIONS MADE BY THE APPELLANT FOR TETRA BUTYL AMM BR IT IS SEEN THAT THE APPELLANT HAD SOLD 1,91,125/- KG OF THIS PRODUCT FOR RS.4,37,07,708/-. THE APPELLANT HAS SOLD THE SAME MATERIAL TO UNRELATED PARTIES IN EUROPE NAMELY LA PORTE PERFORMANCE, NETHERLAND OF 1,07,100 KGS AT AVERAGE PRICE OF 282 PER KG. THE SAME PRODUCT IS SOLD TO THE ENTITIES IN JAPAN AND ISRAEL ALSO, T HE PRICE TO THOSE ENTITIES ARE MORE THAN RS. 315 PER KG. THE LA PORTE PERFORMANCE OF NETHERLAND IS VERY REGULAR CUSTOMER OF THE APPELLANT AND IT HAS PURCHA SED BOUQUET OF PRODUCTS FROM IT AND FOR THIS PRODUCT ALSO THE QUANTITIES AR E COMPARABLE. THE APPELLANT HAS CHARGED RS. 228 PER K.G TO ITS AE DISHMAN EUROP E 95% OF 282 I.E 267.9 PER KG. THEREFORE THE PROCESS CHARGED IS OUTSIDE TH E ARM'S LENGTH PRICE RANGE. ACCORDINGLY, THE TRANSACTION UNDER REFERENCE REQUIRES AN UPWARD ADJUSTMENT KEEPING IN VIEW THE PROVISIONS OF SEC. 9 2C OF THE ACT. 5.17 DURING THE APPELLATE PROCEEDINGS WHEN THIS DIS CREPANCY WAS BROUGHT TO THE NOTICE OF LD. A.R, HE SUBMITTED THAT THE ALP HA S TO BE WORKED OUT ON THE BASIS OF A SINGLE METHOD FOR ALL THE TRANSACTIONS C ARRIED OUT BY THE APPELLANT DURING THE RELEVANT PERIOD. THE CONTENTIONS MADE BY THE ID. A.R IN THIS REGARD CANNOT BE ACCEPTED FOR SIMPLE REASON THAT SEC. 92C( 1) OF THE ACT LAYS THAT THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION SHALL BE DETERMINED BY ANY OF THE SPECIFIED METHODS, BEING M OST APPROPRIATE METHOD, HAVING REGARD TO THE NATURE OF TRANSACTIONS OR CLAS S OF TRANSACTIONS OR CLASS OF ASSOCIATED PERSONS .........' THE PROVISIONS OF SEC . 92C(1) ARE, THEREFORE, VERY CLEAR IN THIS REGARD THAT DIFFERENT METHODS CAN BE ADOPTED FOR DETERMINING THE ALP IN RESPECT OF DIFFERENT TRANSACTIONS OR CLASS O F TRANSACTIONS. I HAVE ALREADY HELD ABOVE THAT IN THE GIVEN CIRCUMSTANCES, THE TNM M METHOD IS APPROPRIATE SO FAR AS THE TRANSACTIONS IN SEVEN PRODUCTS ENTERE D INTO BY THE APPELLANT WITH ITS AE AND OTHER CONCERNS AS MENTIONED BY THE TPO I N HIS ORDER. HOWEVER, THE TRANSACTIONS MADE BY THE APPELLANT WITH REGARD TO TETRA BUTYL AMM BR AS REFERRED TO ABOVE WITH ITS AE AND OTHER CONCERNS AR E NOT AT ARM'S LENGTH. THIS IS EVIDENT FROM THE DISCUSSION MADE BY THE TPO IN I TS ORDER. FURTHER, THE FACTS SO NARRATED BY THE TPO IN HIS ORDER IN THIS REGARD HAVE NOT BEEN CONTRADICTED BY THE LD. A.R DURING THE APPELLATE PROCEEDINGS. 5.18 THEREFORE, KEEPING IN VIEW THE SURROUNDING CIR CUMSTANCES THE ALP FOR THE TRANSACTIONS MADE BY THE APPELLANT IN RESPECT O F TETRA BUTYL AMM BR IS REQUIRED TO BE DETERMINED ON THE BASIS OF CUP METHO D. HOWEVER, WHILE ARRIVING AT THE APPROPRIATE ALP A REASONABLE ALLOWA NCE IS TO BE ALLOWED TO THE APPELLANT WITH REGARD TO THE SERVICES AVAILABLE TO IT FROM ITS AE VIS-A-VIS OTHER PARTIES, IN THE GIVEN CIRCUMSTANCES IT WOULD BE APP ROPRIATE IF 10% DISCOUNT IS ALLOWED ON THE PRICES OF TETRA BUTYL AMM BR CHARGED BY THE APPELLANT FROM THE PARTY EQUALLY PLACED TO ITS AE NAMELY LA PORTE PERFORMANCE, NETHERLAND, THE APPELLANT HAS CHARGED RS. 282 PER KG FROM SUCH PARTIES, THEREFORE AFTER ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 11 ALLOWING 10% DISCOUNT ON SUCH PRICE FOR MISCELLANEO US SERVICES AVAILABLE TO THE APPELLANT FROM ITS AE, IT SHOULD HAVE CHARGED R S. 253.80 PER K.G FROM ITS AE. AS AGAINST THIS THE APPELLANT HAS CHARGED ONLY RS. 228/KG. THEREFORE AN UPWARD ADJUSTMENT IS REQUIRED TO BE MADE BY RS. 25. 80 PER KG ON THE TOTAL SALES OF 1,91,125 KG MADE TO AE. THEREFORE, ADDITIO N OF RS. 49,31,625/- IS HEREBY CONFIRMED OUT OF RS. 5,00,55,321/- UNDER THI S HEAD. THE AO WILL WORK OUT RELIEF ACCORDINGLY. 7.3 AGGRIEVED BY THE ORDER OF LD.CIT(A), THE MATTER IS NOW BEFORE US. 7.4 BEFORE US, AT THE OUTSET, LD. A.R. REITERATED T HE SUBMISSIONS MADE BEFORE THE CIT(A). HE FURTHER SUBMITTED THAT WHILE DECIDING THE ISSUES NAMELY THE MOST APPROPRIATE METHOD FOR DETERMINING ALP & Q UANTIFICATION OF TP ADJUSTMENT, LD. CIT(A) HELD THAT TNMM METHOD TO BE THE MOST APPROPRIATE METHOD AND NOT THE CUP METHOD. HOWEVER, WHILE QUAN TIFYING ALP ADJUSTMENT, CIT(A) HELD THAT FOR TRANSACTION WITH O NE PARTICULAR PRODUCT, CUP TO BE THE MOST APPROPRIATE METHOD AND ACCORDINGLY T P ADDITION WAS CONFIRMED TO THE EXTENT OF RS.49,31,625/- AND BALANCE ADDITIO N OF RS.4,51,23,696/- WAS DELETED. LD. A.R. FURTHER SUBMITTED THAT THE ISSUE IN THE PRESENT CASE IS COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEES F AVOUR BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR A.YS. 2003-04 & 20 04-05 IN ITA NOS. 154 & 587/AHD/2007 & ITA NOS. 2180 & 3213/AHD/2007, WHERE IN HONBLE ITAT HAS HELD THAT TNMM METHOD IS THE MOST APPROPRIATE METHO D. HE FURTHER SUBMITTED THAT SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF ASS ESSEES ASSOCIATE CONCERN I.E. DCIT VS. SCHUTZ DISHMAN BIO-TECH PVT. LTD. IN ITA NOS. 2060/AHD/09, ITA NO.3141/AHD/11 AND OTHERS. HE ALSO PLACED ON RECOR D THE COPY OF THE AFORESAID ORDER. HE, THEREFORE, SUBMITTED THAT IN THE LIGHT OF THE DECISIONS OF THE TRIBUNAL, THE ENTIRE TP ADJUSTMENT SHOULD HAVE BEEN DELETED. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF ASSESSING OFF ICER BUT FAIRLY AGREED THAT ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 12 THE ISSUE IN THE YEAR UNDER APPEAL IS COVERED BY TH E DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS. 7.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE WHILE DECIDING THE APPEAL FOR EARLIER YEARS IN ITA NO.154 & 287/AHD/2007 & 2180 & 3213/AHD/2007 ORDER DATED 18.02.2011HELD A S UNDER: 37. AFTER GOING THROUGH THE FACTS IN ENTIRETY, WE ARE OF THE VIEW THAT THE FACTS IN THE PRESENT APPEALS ARE EXACTLY IDENTICAL TO THE CASE OF M/S. SCHUTZ DISHMAN BIOTECH IN ITA NO.554/AHD/2006 AND THIS ISS UE WAS ANSWERED AGAINST THE REVENUE BY THIS TRIBUNAL. IN ANY CASE, EVEN IN THE CASE OF ASSOCIATE CONCERN VIZ. SCHUTZ DISHMAN (SUPRA) THIS TRIBUNAL HAS UPHELD THE VERY SAME REASONS GIVEN BY THE ASSESSEE FOR NON-APP LICATION OF CUP METHOD OF AMP AND ACCORDINGLY, FOLLOWING THE TRIBUNALS DE CISION, WE ALLOW THE CLAIM OF THE ASSESSEE, UPHOLDING THE ORDER OF CIT(A) ON T HIS COMMON ISSUE OF THE REVENUES APPEALS. THIS COMMON ISSUE OF REVENUES APPEALS IS DISMISSED. IN VIEW OF THE SUBMISSION OF BOTH THE PARTIES THAT THE FACTS OF THE CASE IN THE YEAR UNDER APPEAL ARE IDENTICAL TO THAT OF EARLIER YEARS, WE RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF TRIB UNAL IN ASSESSEES OWN CASE IN EARLIER YEARS, DELETE THE ENTIRE ADDITIONS MADE BY THE ASSESSING OFFICER. IN THE RESULT, THESE GROUNDS OF ASSESSEE S APPEAL ARE ALLOWED AND THAT OF REVENUE ARE DISMISSED. 8. THE FIFTH GROUND IS WITH RESPECT TO CLAIM OF BAD DEBTS. 8.1 THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED RS.13,16,191/- ON ACCOUNT OF SUNDRY BALANCES WRITTE N OFF. DURING COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM TO WHICH ASSESSEE SUBMITTED THAT SINCE THE RE COVERY WAS NOT POSSIBLE IN THE NEAR FUTURE IT WAS DECIDED TO WRITE OFF THE AMO UNT. THE SUBMISSION OF THE ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 13 ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER AND ACCORDINGLY, DISALLOWED THE EXPENDITURE. THE ORDER OF ASSESSING OFFICER WAS UPHELD BY THE CIT(A). AGAINST THE ORDER OF CIT(A), MATTER WAS CA RRIED BEFORE THE HONBLE TRIBUNAL WHO SET ASIDE THE ISSUE TO THE FILE OF ASS ESSING OFFICER AND DIRECTED THE ASSESSEE TO PRODUCE THE NECESSARY EVIDENCE TO S UBSTANTIATE THE CLAIM. ASSESSING OFFICER NOTED THAT IN PURSUANCE TO THE DI RECTIONS OF TRIBUNAL, ASSESSEE DID NOT FILE NECESSARY EVIDENCES. HE, THE REFORE, DISALLOWED THE EXPENDITURE. IN SECOND ROUND, CIT(A) UPHELD THE OR DER OF ASSESSING OFFICER BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH C OURT IN CASE OF DHALL ENTERPRISE AND ENGINEERS PVT. LTD. VS. CIT 295 ITR 481 AND HELD THAT ASSESSEE HAS TO PROVE THE DEBTS HAVE BECOME BAD AND THAT IT HAD BECOME BAD DURING THE RELEVANT PERIOD. HE, ACCORDINGLY, U PHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 8.2 AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. 8.3 BEFORE US, LD. A.R. SUBMITTED THAT FOR CLAIMING BAD DEBTS THE ONLY CONDITION IS ITS WRITE OFF IN THE BOOKS OF ACCOUNT AND THAT ONCE THE ASSESSEE WRITES OFF DEBTS AS RECOVERABLE, ASSESSEE IS ELIGIB LE FOR CLAIMING DEDUCTION U/S.36(1)(VII) OF THE ACT. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE APEX COURT IN CASE OF TRF LTD. VS. CIT 323 ITR 397 (SC) AND SUBMITTED THAT THE RATIO LAID DOWN IN THE CASE OF DHALL ENTERPRISE (SUPRA) IS NO MORE A GOOD LAW IN VIEW OF THE AFORESAID APEX COURT DECISION. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDERS OF ASSESSING OFFICER AND CIT(A ). ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 14 8.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WRITING O FF BAD DEBTS. IT IS AN UNDISPUTED FACT THAT THE AMOUNT WHICH HAS BEEN CLAI MED BY THE ASSESSEE AS BAD DEBTS HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACC OUNT. HONBLE APEX COURT IN CASE OF TRF LTD. VS. CIT (SUPRA) HAS HELD THAT I N VIEW OF THE AMENDED PROVISIONS W.E.F. 01.04.1989 IT IS NOT NECESSARY FO R THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT HAS BECOME IRRECOVERABLE AND IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF T HE ASSESSEE. IN THE PRESENT CASE, WE ARE OF THE VIEW THAT THE RATIO OF THE AFOR ESAID DECISION OF HONBLE APEX COURT IN THE CASE OF TRF LTD. VS. CIT (SUPRA) SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE, WE, THEREFORE, DIRECT TH E DELETION OF ADDITION MADE BY ASSESSING OFFICER. THUS, THIS GROUND OF ASSESSE E IS ALLOWED. 9. THE NEXT GROUND OF ASSESSEES APPEAL IS WITH RES PECT TO DISALLOWING OF LOSS ON FORFEITURE OF SHARES OF RS.4,65,074/-. 9.1 BEFORE US, LD. A.R. SUBMITTED THAT HE DID NOT W ANT TO PRESS THIS GROUND. IN VIEW OF THE SUBMISSION OF LD. A.R., THIS GROUND IS DISMISSED AS NOT PRESSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND THAT OF REVENUE IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 08.01.2016 SD/- SD/- ( SHAILENDRA KUMAR YADAV ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- ITA NOS. 903 & 1234/AHD/2010 A.Y. 02-03 [DISHMAN PHARMACEUTICALS & CHEMICALS LTD. VS. ACIT(OSD)] PAGE 15 *+ , -. / APPELLANT /+ 01-. / RESPONDENT 2+ 345 6 / CONCERNED CIT 4+ 6- , / CIT (A) 9+ :; < 045 , 45) = 3 / DR, ITAT, AHMEDABAD >+ < ?@ A B / GUARD FILE. BY ORDER/ ,/= ,$ , 45) = 3