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2015 (11) TMI 487 - ITAT DELHI

2015 (11) TMI 487 - ITAT DELHI - TMI - Transfer pricing adjustment - Held that:- There are four types of gum base. In the case of orion and lotto the cost of production was adopted as the market price by the Assessing Officer. This is not tenable in view of decisions relied upon by the assessee in the case of JCIT vs.Cipla Ltd. (2005 (2) TMI 748 - ITAT MUMBAI) and the judgement of the Hon’ble Gujarat High Court in the case of Anil Starch Products Ltd. vs. CIT (1965 (9) TMI 55 - GUJARAT HIGH COUR .....

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d as incorrect by the First Appellate Authority.

As there is no other material available on record, to challenge the transfer price declared by the assessee, which is on the basis of invoices from CAFOSA, we have no other alternative but to uphold this claim. In the result we dismiss this appeal by the Revenue. - Decided in favour of assessee. - I.T.A. No. 4794/Del/2012 - Dated:- 9-10-2015 - Shri G. C. Gupta, Vice President And Shri J. Sudhakar Reddy, Accountant Member For the Appella .....

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bble gums, chewing gums, lollipops and toffees amalgamated with the appellant with the appointed date of April 01, 2005. Wrigley India Private Limited is engaged in the business of manufacture and sale of confectionary products like bubble gums, chewing gum, candies etc. Joyco India amalgamated into Wrigley India with the appointed dated of April 01,2005. The amalgamation was duly approved by the Delhi high Court vide its order dated September 08, 2006 which became effective on filing of the cer .....

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ion 143(3) of the Act vide order dated February 27, 2006 assessing the total income of the company at ₹ 9,98,42,060/- as against the returned income of ₹ 6,37,63,610/-. Out of the various disallowances made by assessing officer, specific disallowances made by the AO relevant for the issues under consideration are as under:- * Reducing the deduction under section 80IB of the Act from its claim of Rs.l1,08,78,645 to ₹ 7,59,29,232 on account of denying the deduction under section .....

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to the company at the time of termination of membership. If amount is not refundable, then the expenditure would be deductible under section 37(1) of the Act. The Tribunal remanded the matter to the file of AO examine the whether the club expenditure was refundable and decide whether the expenditure is deductible or not. * Deduction under section 80-IB of the Act:- The Tribunal allowed the deduction to the Gumbase unit under section 80IB of the act. However, it asserted that what is required to .....

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ance of club membership fee was reduced from ₹ 10,00,000/- to ₹ 3,00,000/-. The club membership fee of ₹ 3,00,000/- is not allowable as business expenditure and therefore, needs to be disallowed. • The AO allowed the deduction under section 80-18 of the Act in respect of the profits derived. by the Gumbase unit considering the lower market value of the goods transferred to other units. As a result, overall deduction under section 80IB has been reduced to ₹ 8,10,18,15 .....

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he A.O. submitted a remand report and the assessee filed a rejoinder on 3.5.2012. After considering the same, the Ld.CIT(A) allowed the claim of the assessee. 6. Aggrieved the Revenue is in appeal before us on the following grounds. 1. On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in allowing the relief to assessee of ₹ 2,98,60,495/- disallowed by the AO by reducing deduction u/s 80IB of the I.T. Act. 2. The appellant craves for reserving the right t .....

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appellate proceedings and the issue is limited to the determination of market value of price at which the goods are transferred from gum base unit to other units, for the purpose of computing quantum of deduction u/s 80 IB of the Act. He contended that the assessee inflated the transfer price with the objective of inflating the exemption u/s 80 IB of the Act, as other Unit-I is eligible only for exemption of 30% of the profit. He relied on the order of the A.O. and submitted that the Ld.CIT(A) h .....

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h of the Tribunal and the judgement of the Hon ble Gujarat High Court in the case of Anil Starch Products Ltd. vs. CIT (1966) 59 ITR 514, for the proposition that cost of production cannot be taken as market value of goods, as done by the A.O. in the case of orion and lotti kinds of gum base, out of the four different kinds of gum base. He pointed out that the Ld.Commissioner held that the A.O. has taken a rate, without assigning any rationale to her action. 11. This is a second round of appella .....

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of transfer in the Indian market. This has not been done either at the stage by the Ld.Counsel, this matter is restored to the file of the AO for fresh adjudication after hearing the assessee. The matter shall be decided in the light of directions contained in this order as aforesaid. Thus, these grounds are also treated as allowed for statistical purposes. 12. During the course of assessment proceedings, on a query, the AO submitted that gum base is not easily available in the market and that t .....

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response, it was submitted that this company was dependent on imported gum base only. The AO carried out an internet search and found that a company by name M/s Sun Euro Base was having an international high quality gum base factory and that M/s Candico of Mohan Cooperative Industrial Estate, New Delhi was its customer. Notices u/s 133(6) were issued and it was found from the information gathered, that the base price of gum base in the local market ranges from ₹ 52/- to ₹ 96/- only. .....

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