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2015 (9) TMI 325 - AT - Income TaxTransfer pricing adjustment - CIT(A) deleted the addition - Held that:- For A.Y.04-05, similar issue has been decided by ITAT in favour of assessee following case of associate concern viz. M/s Dishman Pharmaceuticals & Chemicals Ltd. In view of above, CIT(A) was justified to direct the Assessing Officer to delete the adjustment made in assessment order in respect of Arm’s Length Price because PBIT of 17.13% is very much comparable and better than the industry average of 12.87%. Even margins with AE at 16.66% are better than overall PBIT. TPO was not justified in applying comparable Uncontrolled Price method and compare the purchase of 72,000kgs. Worth ₹ 5,25,69,297/- made from Germany with meager quantity of 2,000 kgs. Worth of ₹ 10,40,000/- made from Indian Party. Domestic and international rates cannot be compared. Fundamental requirement, in any of the method selected, is selection of comparables for benchmarking international transaction. Assessing Officer ought to have taken into consideration FAR analysis and should also take into account various factors such as, quality, quantity, pricing factors, government policy and transportation cost before comparing controlled transaction with uncontrolled transaction. Assessing Officer ought to have evaluated all the methods of transfer pricing, however, he selected directly CUP method being easy in apply. Assessing Officer has taken price from Database without pointing out any comparable cases. The industry average is not a comparable instance as held by the Special Bench in case of Aztec Software & Technology Services Ltd. Vs. ACIT (2007 (7) TMI 50 - ITAT BANGALORE). In view of above decision, order of CIT(A) on the issue is upheld. - Decided against revenue. Additions on account of deficit/excess consumption of raw materials - CIT(A) deleted the addition - Held that:- As going through the order of ITAT for A.Y. 2002-03, wherein issue has been decided in favour of assessee wherein the appellant had shown less consumption of certain input raw material of ₹ 63,04,605/- and the only inference is the same have been purchased from outside the books of account and the same is liable to be added as the investment from undisclosed sources and the appellant has shown more consumption of certain items to the extent of ₹ 1,32,57,449/- which has not been consumed and therefore, the purchased to this extent have been inflated to reduce the profit of the company. Thus the total addition which is liable to be made is ₹ 1,95,62,054/-. After considering the addition of ₹ 89,10,074/-, the income which is to be further enhanced is ₹ 1,06,51,333/-. Therefore, the AO is directed to enhance the income by ₹ 1,06,51,980/- Accordingly this ground is dismissed with direction to enhance the income by ₹ 1,06,51,980/- - Decided against revenue Interest expenditure disallowed u/s 36(I)(iii) - CIT(A) allowed claim - Held that:- CIT(A) granted relief to assessee by observing that issue is directly covered by the decision of S. A. Builders [2006 (12) TMI 82 - SUPREME COURT] wherein it has been held that money advance to sister concern can be considered as out of commercial expediency. In present case, money has been advanced to sister concern out of commercial expediency and therefore, following the decision of S. A. Builders (supra), no disallowance is called for. In any case, assesse has substantial interest free funds at its disposal so as to justify the advance to Associate concern as per accounts, obtaining balance of M/s. Dishman Pharmaceutical & Chemicals Ltd. was outstanding at ₹ 4 crore against which paid up capital and surplus of assesse was at ₹ 1,50,00,000/- and ₹ 6,98,59,670/- respectively. Further during year under consideration, assesse has given sum of ₹ 2,70,00,000/- to M/s. Dishman Pharmaceutical & Chemicals Ltd. against which they have returned amount of ₹ 3,85,90,000/- and therefore, on contrary, amount has been repaid during year under consideration. In view of this, disallowance was correctly deleted. - Decided against revenue Deemed dividend u/s 2(22)(e) - CIT(A) delted the addition - Held that:- As assessee and M/s Dishman Pharmaceuticals & Chemicals Ltd, both are engaged in business of manufacturing bulk drugs and chemicals. One of the condition for invoking provisions of Section 2(22)(e) of the Act is that money should be paid either by way of loans or advances. CIT(A) has rightly observed that these amounts are in nature of Inter Corporate Deposits (ICD), which has been given one corporate to another corporate and therefore, no loan or advance as contemplated u/s.2(22)(e) of the Act. CIT(A) from the ledger accounts observed that such accounts are in nature of deposits. Assessing Officer failed to appreciate that term ‘deposit’ cannot means ‘loan’ or ‘advance’. Accordingly, CIT(A) was justified in observing that Inter Corporate Deposits (ICD) being different from loans or advances, will not come under the purview of deemed dividend u/s.2(22)(e). See Bombay Oil Industries Ltd. vs. DCIT [2009 (1) TMI 519 - ITAT MUMBAI] - Decided against revenue
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