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TMI Blog2014 (11) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts as recorded in the impugned assessment order. During the course of assessment proceedings, the Assessing Officer noted that even though the assessee has transferred its pharmaceutical unit, i.e. Vita Life Laboratories, on going concern basis and on slump sale to one Arch Pharmalab Limited, the assessee has written off its bad debts of Rs. 28,65,157 in respect of the business so sold. The AO was of the view that since the related business itself is sold, the related bad debts cannot be allowed as deduction. The AO was of the view that when both the assets and liabilities of a unit are transferred, there cannot be any justification for claiming bad debts in respect of the unit so transferred. It was noted that the assessee has not been able to establish that bad debts pertain to its own business, and, therefore, the claim is to be treated as inadmissible. The assessee did raise grievance, before the DRP, against the addition of Rs. 28,65,157 but without any success. The DRP, in a rather brief and somewhat cryptic order, declined to interfere on this issue. While doing so, the DRP observed as follows: Before DRP, the matter was argued at length and detailed submissions on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been made on going concern basis, the debtors are transferred only on realization @ 95% since admittedly bad debts cannot exceed 5%, and, to that extent, the assessee continues to have financial exposure for realization of debtors. We have also noted claim of the assessee that while the pharma unit was sold, the business of the assessee did not continue inasmuch as pharma division did not constitute a separate and independent business of the assessee and inasmuch as it was merely a part of assessee's business in diversified lines with interconnection, interdependence and unity amongst various lines of business. We have also noted the plea of the assessee that in order to be entitled to claim of deduction under section 36(1)(vi) r.w,s. 26(2) it is not a condition precedent that the same business activity must be continuing. None of these submissions, including such a fundamental factual submission that correct amount of claim of deduction is Rs. 25.80 lakhs, as against Rs. 28,65,157, have been dealt with any of the authorities below. Such an approach, in our considered view, a very superficial approach and cannot meet any judicial approval. However, as there is no clear factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l before us. 12. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 13. We find that the law is by now well settled that the provisions of rule 8D can only be applied prospectively and, accordingly, find no relevance so far as assessments for the assessment years prior to 2008-09. Hon'ble jurisdictional High Court, in the case of Maxopp Investments Ltd Vs CIT (347 ITR 272) has held so. Learned Departmental Representative also does not dispute this legal position. In this view of the matter, the disallowance made by the AO by invoking rule 8D cannot be sustained. However, consistent with the view taken by various coordinate benches and having noted that there are no direct expenses incurred in earning this dividend income, we are of the considered view that interests of justice will be met by restricting the disallowance under section 14A to dividend income. The balance disallowance, therefore, stands deleted. The assessee gets the relief accordingly. 14. Ground No. 3 is thus partly allowed in the terms indicated above. 15. In ground no. 4(a) (b) and (c), the assessee has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as giving rie to an arm's length transaction. He thus proceeded to hold that this payment is not for intra group services, is purely for an incidental benefit and its arm's length price to the assessee is zero. Accordingly, an ALP adjustment of Rs. 44,28,721 was proposed by the TPO. The assessee objected to this adjustment before the DRP but without any success. In a brief order, reiterating the stand of the TPO, DRP rejected grievance of the assessee. Accordingly, the AO proceeded to make this adjustment of Rs. 44,28,721. The assessee is aggrieved and in appeal before us. 18. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 19. We find that the TPO has accepted profitability of these transactions on the basis of TNMM and yet picked up this reimbursement, which constitutes a charge on such profitability, for rejection. This is essentially a reimbursement of expenditure, without any mark up to the AE. When an AE is acting only as an intermediary in the provision of services and incur costs on behalf of the assessee, which the assessee would have incurred directly, it m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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