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TMI Blog2010 (4) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... 80HHC without appreciating the fact that interest from debtors is not derived from export business and hence not eligible for deduction u/s 80HHC. 3) On the facts and in the circumstances of the case as well as in law, the ld CITA) has erred in deleting the addition made by the AO u/s 92CA(3) of Income Tax Act, 1961 amounting to Rs. 64,53,555/- without appreciating the fact that Arm Length Price of the international transaction of purchase of DETPCL was correctly determined by the transfer pricing authority in order u/s 92AC(3). 4) On the facts and in the circumstances of the case as well as in law, the ld CIT(A) has erred in deleting the addition made by the AO u/s 41(1) amounting to Rs. 9,99,033/- in respect of sundry creditors written back." 3 The relevant facts which are revealed from the record are as under: 3.1 The assessee is engaged in the manufacturing of agrochemicals as well as formulations which are mainly in the nature of pesticides, weedicide and plant growth stimulators. The assessee filed its return of income declaring the total income of Rs. 8,51,68,000 for the assessment year 2001-02. The assessee's case was selected for scrutiny and the assessment was framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the ld CIT(A) was of the opinion that interest received from the debtors should not be reduced while computing profit of the business under Explanation (baa). Now, the revenue is in appeal here before us. 8 So far as the controversy is concerned, there is no dispute about the facts that the assessee has received the interest from the debtors. In our opinion, the interest received from the debtors cannot be equated with the earning of interest used in Explanation(baa) as the interest received from the debtors is having direct nexus with the sale price which is delayed by the later to pay and compensate the said delayed interest is recovered. The interest is nothing but it is part of the sale consideration/sale price. In our opinion, 90% cannot be reduced from the same by applying Explanation (baa). We do not find any infirmity in the order of the ld CIT(A) on this issue; accordingly, we confirm the same. 9 Next issue is in respect of the addition made by the AO u/s 92CA(3) of the I T Act to the extent of Rs. 64,53,555/- which was deleted by the ld CIT(A). 9.1 The AO has made the reference to the Transfer Pricing Officer (TPO) u/s 92CA(1) of the I T Act as the assessee has ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the TPO and the assessee; the only controversy is in respect of the adoption of the data of uncontrolled transaction. The AO has taken into consideration the purity of the product imported by the assessee. The AO has noted that the assessee has imported DETPCL from China at the price lower than the price paid to AE, Denmark in spite of the fact that the purity level of the product was the same i.e.98.5% to 99% as imported from AE. The sum and suspense, the TPO adopted the average price of US$1.582 per kg to be the ALP of import of DETPCL from AE and worked out the ALP at US$499,753 as against US$639,171 paid by the assessee. 9.5 After considering the export rate, the TPO determined the ALP of the import of DETPCL at Rs.23,658,307/- which was finally resulted into the adjustment of Rs.64,53,355/. The AO made the adjustment which was based on the order passed by the TPO to the income of the assessee which was to the extent of Rs.64,53,355/-. 9.6 The assessee challenged the said adjustment before the ld CIT(A), who deleted the addition/adjustment made by the AO based order of the TPO mainly on two reasons that (1) the assessee has purchased DETPCL from the domestic market at a hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the totality of the facts and circumstances, in our opinion, the price paid by the assessee to the AE in Danmark is the ALP considering comparable uncontrolled transactions of the said product. We, therefore, do not find any reason to interfere with the findings of the ld CIT(A) and accordingly, we confirm the same. Ground no.3 of the revenue is, therefore, dismissed. 13 Next issue relates to the addition made by the AO u/s 41(1) at Rs. 9,99,033/- in respect of sundry debtors written back. 13.1 The facts pertaining to the issue are as under: It was noticed by the AO that the assessee has written off the sundry creditors to the extent of Rs. 9,99,033. The AO was of the opinion that as per sec.41(1), the said addition has to be made and therefore, he made the addition to the income of the assessee. The assessee carried the issue before the ld CIT(A), who deleted the addition. 13.2 The assessee contended that the said amount has already been debited to the P&L account and offered for taxation. The assessee had reduced the said amount from the bad debts written off and the net balance had debited to the P&L account at Rs. 2,24,810/- 14 We have heard the parties. The factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly assessment year 2004-05 is not before us. The assessee should make the claim in the respective assessment year if the same is written off. Accordingly, ground no.3 is dismissed. 23 Next issue is in respect of disallowance of claim for bad debts written of Rs. 12,33,837/-. 23.1 No supporting evidence in respect of the said claim of bad debts written off was furnished. The ld CIT(A) confirmed the action of the AO and also held that the assessee could not establish how the loss arisen in the course of the business. 23.2 The ld counsel of the assessee argued that the advances were made for the purchases and as the parties failed to send the goods; the advances which were outstanding and the same were written off as it was not possible for the assessee to recover the said advances. The outstanding balances recoverable were in respect of the advances made for purchase of the raw material and the same should be allowed. 24 On this issue, there is no proper discussion of the facts in the order of both the authorities; we, therefore, consider it fair to set aside the same to the file of the AO with the direction to adjudicate the issue afresh after verifying the facts whether ..... X X X X Extracts X X X X X X X X Extracts X X X X
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