Terex Equipment (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 930/DEL/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2872 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 03-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 14-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H K CHAUDHARY
• Keywords: Related party transaction; Depreciation; Transfer pricing; International transaction; Rule of consistency; Additional depreciation
• Section: 143(3); 234B

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH I-2, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO.930/DEL/2013 ASSESSMENT YEAR: 2008-09 TEREX EQUIPMENT PVT. LTD., (FORMERLY KNOWN AS TEREX VECTRA EQUIPMENT PVT. LTD.), 108-110, 1 ST FLOOR, NARAIN MANZIL, 23, BARAKHAMBA ROAD, NEW DELHI. PAN AABCT 8105H (APPELLANT) VS. ACIT, COMPANY CIRCLE 16(1), NEW DELHI (RESPONDENT) APPELLANT BY SH. VED JAIN, ADVOCATE RESPONDENT BY SH. H.K. CHAUDHARY, CIT, DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE AO UNDER SECTION 143(3) R.W.S 144C OF THE INCOME TA X ACT DATED 15.11.2012 FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GR OUNDS : 1. THE ORDER OF THE LEARNED ASSISTANT COMMISSIONER O F INCOME TAX, COMPANY CIRCLE 16(1), NEW DELHI (ASSESSING OFFICER OR AO) PASSED PURSUANT TO THE ORDER OF THE LEARNED ADDITIONAL COM MISSIONER OF INCOME TAX (TRANSFER PRICING OFFICER) II (3), NEW DELHI ( TRANSFER PRICING OFFICER OR TPO) AND THE DIRECTIONS ISSUED BY THE HONBLE D ISPUTE RESOLUTION PANEL (THE DRP), TO THE EXTENT PREJUDICE TO THE A PPELLANT, IS ERRONEOUS, BAD IN LAW AND CONTRARY TO THE FACTS AND CIRCUMSTAN CES OF THE CASE. 2. GROUNDS OF OBJECTION RELATING TO TRANSFER PRICIN G MATTERS DATE OF HEARING 11.10.2018 DATE OF PRONOUNCEMENT 02 .11.2018 ITA NO. 930/DEL/2013 2 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE AO, TPO AND DRP ERRED IN MAKING AN ADJUSTMENT IN THE ARMS LENGTH PRICE (ALP) OF THE APPELLANTS INTERNATIONAL TRANSACTIO NS WITH RELATED PARTIES ON INR 2,59,00,000/-. 2.2 THE TPO, AO AND DRP HAVE ERRED, IN LAW AND IN FAC TS, BY NOT ACCEPTING THE ECONOMIC ANALYSIS UNDERTAKEN BY THE A SSESSEE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT READ WITH THE RULES, AND MECHANICALLY CONSIDERED THE PREVIOUS YEAR COMPARABL ES WITHOUT UNDERTAKING FRESH ECONOMIC ANALYSIS FOR THE DETERMI NATION OF THE ALP IN CONNECTION WITH THE IMPUGNED INTERNATIONAL T RANSACTION AND HOLDING THAT THE ASSESSEES INTERNATIONAL TRANSACTI ON IS NOT AT ARMS LENGTH. 2.3 THE TPO, AO AND DRP ERRED IN SELECTION OF INAPPRO PRIATE COMPARABLES. 2.4 THE TPO, AO AND DRP ERRED, IN LAW AND IN FACTS, B Y NOT MAKING SUITABLE ADJUSTMENTS TO ACCOUNT FOR VARIOUS DIFFERE NCES BETWEEN THE ASSESSEE VIS--VIS THE COMPARABLES AND IN THE PROCE SS ALSO NEGLECTED THE INDIA TRANSFER PRICING REGULATIONS, OECD GUIDEL INES ON TRANSFER PRICING AND JUDICIAL PRECEDENCE. 2.5 THE TPO, AO AND DRP ERRED ON FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW BY ERRONEOUSLY COMPUTING THE ADDITIONS T O BE RESTRICTED TO VALUE OF INTERNATIONAL TRANSACTIONS. 2.6 THE TPO, AO AND DRP HAVE ERRED, IN LAW AND IN FAC TS, BY DETERMINING THE ARMS LENGTH MARGIN / PRICE USING O NLY F.Y. 2007-08 DATA WHICH WAS NOT AVAILABLE TO THE ASSESSEE AT THE TIME OF COMPLYING WITH THE TRANSFER PRICING DOCUMENTATION R EQUIREMENTS. 2.7 THE TPO, AO AND DRP HAVE ERRED, IN NOT ALLOWING T HE OPTION UNDER THE PROVISO TO SECTION 92C(2) OF THE ACT IN LIMITIN G THE ADJUSTMENT AT A VARIATION OF 5 PERCENT TO THE ARMS LENGTH PRICE. 3. GROUNDS OF OBJECTION RELATING TO CORPORATE TAX M ATTERS 3.1 THE AO AND DRP HAVE ERRED IN LAW AND ON THE FACT S, IN NOT ALLOWING THE CLAIM FOR ADDITIONAL DEPRECIATION OF INR 19,45, 902/-. 3.2 THE AO HAS ERRED IN FACTS IN COMPUTING THE TOTAL ASSESSABLE INCOME AND THE TAX AND INTEREST PAYABLE WITHOUT CONSIDERIN G THE SET-OFF OF BROUGHT FORWARD BUSINESS LOSS AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE. 3.3 THE AO HAS ERRED ON FACTS AND CIRCUMSTANCES OF T HE CASE AND IN LAW IN COMPUTING THE ASSESSABLE INCOME WITHOUT FACTORIN G THE ABOVE ITA NO. 930/DEL/2013 3 GROUNDS AND CONSEQUENTIAL LEVY OF INTEREST UNDER SE CTION 234A, 234B AND 234C. ADDITIONAL GROUND OF APPEAL 1. THE LEARNED AO, TPO AND DRP OUGHT TO HAVE ELIMINATED THE EXPENSES INCURRED BY THE APPELLANT IN RELATION TO NON-CENVAT ABLE CUSTOMS DUTY, FREIGHT, INSURANCE, ETC, FROM THE VALUE OF INTERNAT IONAL TRANSACTION OF IMPORT OF RAW MATERIAL AS THE EXPENSES WERE INCURRE D WITH THE UNRELATED PARTIES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF EARTH MOVING AND CONST RUCTION EQUIPMENTS. DURING THE YEAR THE ASSESSEE HAS UNDERTAKEN FOLLOW ING INTERNATIONAL TRANSACTIONS:- S.NO. NATURE OF TRANSACTION METHOD USED BY ASSESSEE AMOUNT (IN CRORES) 1 PURCHASE OF RAW MATERIAL AND COMPONENTS AND SPARE PARTS CUP 18.3 2 SALE OF SPARE PARTS RPM 0.04 3 ROYALTY PAYMENT -- 4.24 4 PROVISIONS OF MARKETING SUPPORT SERVICES TNMM 0.46 5 PROVISIONS OF DESIGNING SERVICES TNMM 1.72 6 CORPORATE MANAGEMENT SERVICES TNMM 0.54 7 REIMBURSEMENT OF EXPENSES BY TVEPL COST - TO - COST 0.21 8 REIMBURSEMENT OF EXPENSES BY BENFORD LTD. COST - TO - COST 1.08 9 ECB REINSTATEMENT OF ECB AT PREVAILING EXCHANGING RATE TOTAL 27.02 3. THE ASSESSEE BENCHMARKED ABOVE TRANSACTIONS AS U NDER: I. THE INTERNATIONAL TRANSACTIONS RELATING TO PURCHASE OF RAW MATERIAL, COMPONENTS AND SPARE PARTS WERE BENCH MAR KED USING ITA NO. 930/DEL/2013 4 CUP, WHEREIN IT HAS BEEN SHOWN THAT IMPORTED RAW MA TERIAL, COMPONENTS AND SPARE PARTS PURCHASED FROM AES VIZ, FERMEC INTERNATIONAL LTD. UK AND BENFORD LTD. UK FOR THE P URPOSES OF ASSEMBLY, SALE AND PROVISION OF WARRANTY SUPPORT SE RVICES OF BACKHOE LOADERS, EXCAVATORS, SKID STEERS, COMPACTOR S AND RELATED COMPONENTS ARE LESS THAN THE PRICE PAID FOR PURCHAS E OF SAME GOODS FROM THIRD PARTY VENDORS, VIZ. CARRARO. II. SALE OF SPARE PARTS WAS BENCH MARKED USING RPM AS T HE MOST APPROPRIATE METHOD AND HAS COMPARED THE GROSS PROFI T MARGIN (GPM) BASED ON COSTS OF UNRELATED PARTY TRANSACTION S WITH THE GPM OF RELATED PARTY TRANSACTIONS. III. DURING THE YEAR ROYALTY WAS PAID AT 5% OF EX-WORKS DOMESTIC VALUE ADDED NET OF TAXES AND 8% OF EXPORTS, AS PER RBI GUIDELINES. SINCE, THE ROYALTY PAYMENTS ARE COVERED UNDER AUTOM ATIC ROUTE, NO BENCHMARKING IS STATED TO BE REQUIRED. IV. PROVISION OF MARKETING SUPPORT SERVICES AND DESIGNI NG SERVICES WERE BENCH MARKED USING TNMM AS THE MOST APPROPRIAT E METHOD. THE NET COST PLUS (NCP) MARGIN OF THE ASSESSEE, AS THE TESTED PARTY HAS BEEN SHOWN AT 15% AND THAT OF COMPARABLES HAVE BEEN SHOWN AT 12.60% IN MARKETING SUPPORT SERVICE (MSS) SEGMENT AND NCP OF TESTED PARTY IS 15% IN PROVISION OF DESI GNING SERVICES, WHEREAS THAT OF COMPARABLES HAS BEEN SHOWN AT 13.99 %. ITA NO. 930/DEL/2013 5 V. PAYMENTS OF CORPORATE MANAGEMENT CHARGES AND REIMBU RSEMENTS HAVE BEEN BENCH MARKED ON COST-TO-COST BASIS. 4. THE AO REFERRED THE MATTER FOR DETERMINATION OF ARMS LENGTH PRICE TO THE TPO. THE TPO DURING THE TRANSFER PRICING PROCEE DINGS FOUND THAT THERE IS CHANGE IN THE METHODOLOGY OF THE TP APPROACH DURING THE CURRENT YEAR AS COMPARED TO PREVIOUS YEAR IN WHICH ASSESSEE HAS BEN CH MARKED THE ABOVE TRANSACTIONS USING TNMM APPROACH AND ASKED THE ASSE SSEE TO JUSTIFY THE CHANGE IN METHOD FROM THE PREVIOUS YEAR. 5. IN RESPONSE TO THE SAME, ASSESSEE FILED A DETAIL ED REPLY. THE TPO, HOWEVER, WAS NOT SATISFIED WITH THE REPLY OF THE AS SESSEE AND BY USING TNMM AS THE MOST APPROPRIATE METHOD AND TAKING 9 COMPARA BLES, WORKED OUT THE MEAN AT 9.48% AND PROPOSED AN ADJUSTMENT OF RS.8.59 CRORE. ACCORDINGLY, THE ASSESSING OFFICER FRAMED DRAFT ASSESSMENT ORDER IN WHICH BESIDES THE ADDITION OF RS.8.59 CRORE PROPOSED BY TPO, HE ALSO MADE ANOT HER ADDITION OF RS.19,45,902/- ON ACCOUNT OF DISALLOWANCE OF ADDITI ONAL DEPRECIATION. 6. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED A PETITION BEFORE DISPUTE RESOLUTION PANEL OBJECTING TO THE ADJUSTMEN T PROPOSED BY TPO AND ADDITION MADE BY THE AO ON ACCOUNT OF DEPRECIATION. THE ASSESSEE OBJECTED TO THE METHOD USED BY THE TPO AND IN THE ALTERNATIVE, ALSO THE THREE COMPARABLES USED FOR APPLYING TNMM. THE ASSESSEE ALSO CHALLENGE D THE ACTION OF TPO IN WRONGLY TAKING COST OF GOODS SOLD AS THE COST BASE, AS AGAINST THE TOTAL OPERATING COST. ITA NO. 930/DEL/2013 6 7. THE DRP CONFIRMED THE ACTION OF THE TPO IN APPLY ING TNMM AS THE METHOD USED IN THE PRECEDING YEAR. ON THE ISSUE OF COMPARABLE USED FOR DETERMINATION OF THE TNMM, THE DRP DIRECTED TO EXCL UDE 1 OF THE COMPARABLE, I.E. SIKA ENTERPLANTS SYSTEMS LTD. BUT REJECTED THE OBJECTION OF THE ASSESSEE REGARDING TWO COMPARABLE, NAMELY BHARAT EARTH MOVER S LTD. AND TELCO CONSTRUCTION EQUIPMENT COMPANY. 7.1. THE DRP ON THE ISSUE OF ERROR IN TAKING COST O F GOODS SOLD REFERRED THE MATTER TO THE TPO, AGREEING WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY, THE DRP DIRECTED THE TPO TO CORRECT TH E ERROR AND REDUCE THE ADJUSTMENT. 7.2. THE DRP HOWEVER UPHELD THE ACTION OF THE AO IN DISALLOWING ADDITIONAL DEPRECIATION OF RS.19,45,902/-. CONSEQUENT TO THE D IRECTION OF THE DRP, THE AO PASSED THE FINAL ASSESSMENT ORDER, WHEREBY HE HAS M ADE AN ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICE OF RS.2.59 CRORES AND RS.19,45,902/- ON ACCOUNT OF ADDITIONAL DEPRECIATION. AGGRIEVED BY THIS ORDER OF AO, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 8. THE GROUND NO. 1 IS GENERAL AND HENCE, NEEDS NO SPECIFIC ADJUDICATION. 9. GROUND NO. 2.1 TO 2.2 ARE RELATING TO ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTIONS. IT WAS CONTENDED BY THE LD. AR THAT THE TPO AND DRP HAVE GONE WRONG IN REJECTING THE METHOD ADOPTED BY THE ASSESSEE FOR BENCHMARKING EACH OF THE INTERNATIONAL TRANSACTION. IT WAS CONTENDED THAT ASSESSEE HAS PROVIDED ALL THE DETAILS IN SUPPORT OF THE METHOD USED BY IT FOR DETERMINATION OF THE ARMS LENGTH PRICE, AND THE SA ME HAS BEEN REJECTED ITA NO. 930/DEL/2013 7 ARBITRARILY. ON THE OTHER HAND, THE LD. DR SUBMITTE D THAT THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES AS PREVAILING IN THE PRECEDING YEAR, THE RULE OF CONSISTENCY SHOULD BE ADOPTED FOR ADOPTING TNMM FOR BENCHMARKING THE INTERNATIONAL TRANSACTION. 10. WE HAVE CONSIDERED THE FACTS OF THE CASE. ON GO ING THROUGH THE SAME, WE NOTE THAT THE TPO HAS REJECTED THE ASSESSEES CONTE NTION ON THE GROUND THAT THE FACTS AND CIRCUMSTANCES REMAINED UNCHANGED VIS- -VIS THE PREVIOUS YEAR. THE DRP HAS ALSO CONFIRMED THE ACTION OF THE TPO ON THE SAME REASONING. WE SEE NO REASON TO INTERFERE WITH THE ACTION OF THE T PO IN THIS REGARD. ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 11. GROUND NO. 2.3 AND 2.4 ARE REGARDING SELECTION OF INAPPROPRIATE COMPARABLES. THE TPO HAS CONSIDERED 9 COMPARABLES. BEFORE THE DRP, THE ASSESSEE CHALLENGED INCLUSION OF 3 COMPARABLES. THE DRP ACCEPTED THE OBJECTION OF THE ASSESSEE WITH RESPECT TO 1 COMPARA BLE, I.E. SIKAENTERPLANTS SYSTEMS LTD. BUT REJECTED THE OBJECTION OF THE ASSE SSEE REGARDING TWO COMPARABLE, NAMELY BHARAT EARTH MOVERS LTD. AND TEL CO CONSTRUCTION EQUIPMENT COMPANY. 12. IT WAS CONTENDED BY THE LD. AR THAT BOTH THESE COMPARABLES NEED TO BE EXCLUDED ON THE FOLLOWING PREMISE : (I). BHARAT EARTH MOVERS LTD. IT WAS CONTENDED BY THE LD. AR THAT THIS IS A GOVERNMENT COMPANY, AS IS EVIDENT FROM ITS ANNUAL REPORT. IT HAS GOT PRIVILEGE BY BEING A GOVERNMENT COMPANY AND HENCE, THE SAME CANNOT BE ITA NO. 930/DEL/2013 8 CONSIDERED AS A COMPARABLE, AS IT GETS PREFERRED TR EATMENT FOR ALLOTMENT OF WORK/ORDERS FROM THE GOVERNMENT. IT WAS ALSO CONTEN DED THAT THE TURNOVER OF THIS COMPANY IS MORE THAN 7 TIMES OF THE TURNOVER OF ASSESSEE AND THEREFORE, THIS CANNOT BE AN APPROPRIATE COMPARABLES. THE LD. DR, HOWEVER, SUPPORTED THE ACTION OF THE TPO FOR INCLUSION OF THE ABOVE CO MPARABLE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDER PASSED BY THE TPO AND THE DRP. ON GOING THROUGH THE ANNUAL REPORTS OF THIS COMPANY, WE FIND THAT THE TURNOVER OF THIS COMPANY IS SUBSTANTIALLY HIGHER THAN THAT OF THE ASSESSEE COMPANY AND AS SUCH IT DO ES NOT PASS THE TURNOVER FILTER I THE COMPARABILITY TEST WITH THE TESTED PAR T, I.E., THE ASSESSEE. AS SUCH, IT IS NOT A GOOD COMPARABLE AND ACCORDINGLY, TPO IS DI RECTED TO EXCLUDE THIS COMPARABLE. (II). TELCO CONSTRUCTION EQUIPMENT COMPANY : IT WAS CONTENDED BY THE LD. AR THAT THIS COMPANY IS NOT A GOOD COMPARABLE A S IT FAILS THE TURNOVER FILTER AND ALSO ITS OWN INTANGIBLES IN THE FORM OF KNOW-HOW. IN THIS REGARD, THE LD. AR INVITED ATTENTION TO THE ANNUAL REPORT OF TH E COMPANY, WHERE IN THE FIXED ASSET SCHEDULE INTANGIBLES ARE APPEARING AS F IXED ASSETS. AS AGAINST THIS, IT WAS CONTENDED THAT THE ASSESSEE COMPANY DOES NOT HAVE ANY INTANGIBLE IN THE FORM OF KNOW-HOW, AS IS EVIDENT FROM ITS ANNUAL REPORT. FURTHER, IT WAS CONTENDED THAT THE TURNOVER OF THIS COMPANY IS MORE THAN 12 TIMES THE TURNOVER OF THE ASSESSEE AND THEREFORE, IT CANNOT B E CONSIDERED AS AN APPROPRIATE COMPARABLE. THE LD. DR, ON THE OTHER HA ND, PLACED RELIANCE ON THE ORDER PASSED BY THE TPO AND DRP. ITA NO. 930/DEL/2013 9 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF AUTHORITIES BELOW. ON GOING THROUGH THE ANNUAL REPO RT, IT IS EVIDENT THAT THIS COMPARABLE HAS GOT INTANGIBLE IN THE FORM OF KNOW-H OW, WHICH GIVE THIS COMPANY AN ADDED ADVANTAGE, AS AGAINST THE ASSESSEE COMPANY, WHICH DOES NOT HAVE SUCH INTANGIBLE. FURTHER, THE TURNOVER OF THIS COMPANY IS ALSO SUBSTANTIALLY HIGHER THAN THE TURNOVER OF THE ASSES SEE. TAKING INTO CONSIDERATION ALL THESE FACTS, WE HOLD THAT THIS IS NOT A GOOD COMPARABLE AND DIRECT THE TPO TO EXCLUDE THE SAME. ACCORDINGLY, GR OUNDS NOS. 2.3 AND 2.4 ARE ALLOWED. 15. ON GROUND NO. 2.5, IT WAS SUBMITTED BY THE LD. AR THAT THE NECESSARY RELIEF ON THIS ACCOUNT HAS BEEN GIVEN BY THE TPO CO NSEQUENT TO DRPS DIRECTIONS AND HENCE, THIS GROUND HAS BECOME INFRUC TUOUS. IN VIEW OF THE SUBMISSION OF THE AR, THIS GROUND IS DISMISSED, HAV ING BECOME INFRUCTUOUS. 16. GROUND NO. 2.6 IS DISMISSED AS NOT PRESSED. 17. GROUND NO. 2.7 IS REGARDING ALLOWING THE BENEFI T OF (+/-) 5% IN TERMS OF PROVISO TO SECTION 92C(2) OF THE ACT. THIS GROUND I S CONSEQUENTIAL TO GROUND NO. 2.3 AND 2.4. SINCE WE HAVE DIRECTED THE TPO TO EXCLUDE TWO COMPARABLES, THIS ISSUE OF ALLOWING BENEFIT OF +- 5% WILL BE CON SIDERED APPROPRIATELY BY THE TPO AS PER THE PROVISO TO SECTION 92C(2) OF THE ACT WHILE COMPUTING THE ADJUSTMENT IF ANY REQUIRED TO BE MADE ON ACCOUNT OF ARMS LENGTH PRICE. ITA NO. 930/DEL/2013 10 18. THE ASSESSEE HAS TAKEN AN ADDITIONAL GROUND OF APPEAL FOR EXCLUSION OF NON-CENVATABLE CUSTOM DUTY, FREIGHT, INSURANCE, ETC . FROM THE VALUE OF INTERNATIONAL TRANSACTION OF IMPORT OF RAW MATERIAL AS THESE EXPENSES WERE INCURRED AND PAID TO THE UNRELATED PARTIES. 19. IT WAS SUBMITTED BY THE LD. AR THAT THE TOTAL T RANSACTION OF RS.27.02 CRORE, ON WHICH ADJUSTMENT HAS BEEN PROPOSED, INCLU DE PAYMENT TOWARDS CUSTOM DUTY, FREIGHT, INSURANCE, ETC. AND THE SAME NEED TO BE EXCLUDED WHILE MAKING ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICE AS THESE PAYMENTS DO NOT FALL WITHIN THE MEANING OF INTERNATIONAL TRANSACTIO N. IN THIS REGARD, THE LD. AR INVITED OUR ATTENTION TO THE ORDER PASSED BY DRP IN ITS OWN CASE FOR THE A.Y. 2006-07, WHERE A SIMILAR ISSUE HAS ARISEN AND THE D RP HAS EXCLUDED THE SAME. THE LD. DR SUBMITTED THAT THIS IS A FACTUAL ISSUE A ND THE SAME CAN BE VERIFIED BY THE TPO. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AR E OF THE VIEW THAT ADJUSTMENT ON ACCOUNT OF ARMS LENGTH IS TO BE REST RICTED TO THE INTERNATIONAL TRANSACTIONS ONLY. THE PAYMENT OF NON-CENVATABLE CU STOMS DUTY, FREIGHT, INSURANCE, ETC. ARE NOT PAYMENT TO AE. ACCORDINGLY, SUCH PAYMENT ARE TO BE EXCLUDED FROM THE VALUE OF INTERNATIONAL TRANSACTIO NS WHILE MAKING ADJUSTMENT ON ACCOUNT OF ARMS LENGTH PRICE, AS DON E BY THE DRP IN ASSESSEES OWN CASE FOR A.Y. 2006-07. ACCORDINGLY, THE TPO IS DIRECTED TO VERIFY THE AMOUNT OF SUCH NON-CENVATABLE CUSTOM DUTY, FREIGHT, INSURANCE, ETC. AND EXCLUDE THE SAME FROM THE INTERNATIONAL TRANSACTION S, WHILE MAKING ADJUSTMENT WITH REFERENCE TO INTERNATIONAL TRANSACT ION ON ACCOUNT OF ARMS LENGTH PRICE DETERMINED BY IT. ITA NO. 930/DEL/2013 11 21. GROUND NO. 3.1 IS REGARDING CLAIM OF ADDITIONAL DEPRECIATION OF RS.19,45,902/- IN RESPECT OF ADDITION TO PLANT AND MACHINERY DURING THE YEAR. THE AO HAS DISALLOWED THE DEPRECIATION ON THE REASO NING THAT THE ADDITIONAL DEPRECIATION IS NOT AVAILABLE ON THE SMALL ADDITION S MADE BY ASSESSEE DURING THE YEAR. THIS ISSUE IS COVERED BY OUR ORDER OF THE EVEN DATE IN ASSESSEES OWN CASE FOR THE PRECEDING YEAR, WHERE WE HAVE UPHELD T HE CONTENTION OF THE ASSESSEE AND HAVE ALLOWED ADDITIONAL DEPRECIATION T O THE ASSESSEE IN THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. THE FA CTS BEING IDENTICAL, FOLLOWING THE ORDER OF THE PRECEDING YEAR, WE DIRECT THE AO T O ALLOW ADDITIONAL DEPRECIATION AS CLAIMED BY THE ASSESSEE. ACCORDINGL Y, THIS GROUND IS ALLOWED. 22. GROUND NO. 3.2 IS REGARDING SET OFF OF BROUGHT FORWARD BUSINESS LOSS. THE AO IS DIRECTED TO ALLOW THE SET OFF OF THE BROUGHT FORWARD LOSS AS PER THE LAW. 23. GROUND NO. 3.3 IS REGARDING CHARGING OF INTERES T UNDER SECTION 234A, 234B AND 234C OF THE ACT. THE INTEREST BEING CONSEQ UENTIAL, THE AO IS DIRECTED TO GIVE ITS CONSEQUENTIAL EFFECT. 24. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND NOVEMBER, 2018. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 ND NOVEMBER, 2018 *AKS*