TMI Blog2017 (3) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... tained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year”. In this view of the matter, there is no good reason to take a different stand now and claim that aggregation of transactions cannot be permitted in this assessment year, so far as benchmarking of ANH sales to AE is concerned. The plea of the assessee is indeed well taken and it merits our acceptance. We have also noted that there is no dispute that once this principle is adopted, the benchmarking done of the assessee is to be accepted and the transactions are to be held as arm’s length transactions. The assessee, therefore, deserves to succeed on this issue. Section 35(2AB) weighted deduction denied - Held that:- The assessee at this stage raises an alternative submission as extracted herein above that authorities below ought to have held it eligible for section 35(1)(iv) deduction. We notice that the learned DRP has not considered the said argument in paragraph no.15.11 hereinabove. It merely holds that section 35(2) of the Act bars the impugned deduction pertaining to expenditure incurred on purchase of land etc. It however does not specifically p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceding assessment year 2005-06. Learned Departmental Representative at this stage points out the the impugned expenditure was incurred in preceding assessment year and therefore the same is not allowable in the instant assessment year. We observe in these peculiar facts that our above discussion in preceding paras relying on the case law of Taparia Tools Limited (supra) applies herein as well since there is no material in the case records to indicate any addition in assets resulting in enduring benefits. We further place reliance on Union of India vs. Azadi Bacho Andolan (2003 (10) TMI 5 - SUPREME Court ) to follow judicial consistency to conclude that once the Assessing Officer accepted similar claim in the preceding assessment year, he ought not to reject apportion of the said claim in the instant assessment year. We thus accept assessee’s instant substantive ground as well. - I.T.A. Nos.3416/Ahd/2010 & 792/Ahd/2011 - - - Dated:- 23-12-2016 - Pramod Kumar, AM and S.S. Godara, JM For The Appellant : S.N. Soparkar For The Respondent : M.P. Singh Richa Rastogi ORDER Per Bench: 1. These two appeals filed by the assessee appellant are directed against tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able uncontrolled transactions obtained from the information available in public domain and relied upon by the appellant in its transfer pricing documentation report. iii. The Ld.TPO/Ld. AO erred in comparing prices charged to AE and to non- AE based on invoice dates (which do not represent the transaction dates) in defiance of binding directions of Hon'ble DRP. iv. The Hon'ble DRP erred in directing that comparison of prices charged to AE and to non-AE be made Purchase Order date wise (i.e. PO date wise). The Hon'ble DRP failed to appreciate that PO date wise comparison does not reflect arm's length comparison and is impractical because on certain dates there may exists AE transaction(s) but Non-AE transaction(s) may not exist on same date and vice-versa and that such comparison result in absurdity. v. The Hon'ble DRP/Ld.TPO/Ld. AO erred in comparing prices charged to AE with highest price charged to non-AE following erroneous date-wise comparison, rather than taking date-wise average of all Non-AE prices as stipulated in proviso to 92C(2). vi. The Hon'ble DRP/Ld.TPO/Ld.AO erred in not carrying out adjustments for economically signif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble DRP/Ld. A.O. erred in disallowing an amount of ₹ 1,64,045/-, being the amount of difference between amortized amount of repairs and replacement expense in excess of the depreciation allowed in relation to the expenditure incurred on replacement of building roofing holding that the same was in the nature of capital expenditure eligible for depreciation only. The expenditure being in the nature of replacement/repairs deserves allowance as claimed. Ground No. 5: The Hon'ble DRP/Ld. A.O. erred in disallowing an amount of ₹ 3,15,346/-, being the amount of difference between the amortized amount of expense incurred on stores and spares in excess of the depreciation allowed in relation to the expenditure incurred on the purchase of stores and spares holding that the same was in the nature of capital expenditure eligible only for depreciation. The expenditure being in the nature of replacement/repairs deserves allowance as claimed. Ground No. 6: The Hon'ble DRP/Ld. A.O. erred in confirming the adjustment of Rs,698836/- being the amount of provision made towards liability for gratuity, incurred during the year and as determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal product), to its AE GCI USA. In the transfer pricing report, this transaction was benchmarked as follows: Sale of ANH: a. This intra-group transaction has been benchmarked on CUP Method for testing adherence to arm s length standards, using internal comparable uncontrolled transactions. b. Analysis establishes that average price charged by GCPL to third parties for sales of ANH in internal comparable uncontrolled transactions is ₹ 37.52/Kg. As against this, average price realised by GCPL from its AEs on sale of ANH is ₹ 38.07/Kg., which is higher than internal CUP. Accordingly, it is concluded that intragroup transactions of sale of ANH to AEs meets with arm s length standard. 4. The ascertainment of arm s length price of the assessee s transactions with its AEs came up for scrutiny before the Transfer Pricing Officer. During these proceedings, the TPO noted that the assessee has sold 60,10,855 kg of ANH to its AE on an average price of ₹ 38.07. He noted that there was a huge difference in the prices at which the assessee has sold to ANH to its AE vis- -vis the prices at which he has sold the same product to its non AEs. Taking the price at which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analyse profits of each transaction or if such transactions are so interrelated that this is most reliable means of benchmarking the outcome of transactions against the arm s length outcome. It was also noted that under rule 10A(d), the expression transaction includes a number of closely related transactions but the transactions can only be taken to be interlinked if its separate evaluation or profitability analysis is not possible. It was also noted that the assessee is incorrect in contending that the prices of ANH do not fluctuate much, as is evident from the data furnished by the assessee himself. It was noted that there is a wide variation in prices at which the product is sold to non AEs. A reference was also made to the pricing terms under the agreement with the AE which clearly indicated that the prevailing market prices was an essential input for price fixation which implied that the market prices were normally expected to vary from time to time. It was also noted that the purchase of 50% of production was due to requirement of the foreign collaboration approval and it should not, therefore, be taken as a commercial consideration affecting the prices. The DRP also reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle composite transaction . Their Lordships have then added that The assessee would, however, have to prove that although each sale and each provision of service is priced separately, they were all provided under one composite agreement which constitutes one international transaction . Similarly, in the case of Sony Ericsson Mobile Communication India Pvt Ltd Vs CIT [(2015) 374 ITR 118 (Del)], Hon ble Delhi High Court has observed that, There is considerable tax literature and text that CUP method, i.e. comparable uncontrolled price method, RP method, i.e. resale price method, and CP method (i.e. cost plus method) can be applied to a transaction or a closely linked or continuous transactions . Their Lordships have, in this backdrop, put in a word of caution that thus, it would be inappropriate to proceed with the arm s length price computation methods with a preconceived notion of singularity as a statutory mandate and that clubbing of closely linked, which could include continuous transactions, may be permissible and not ostracised . Clearly, therefore, in certain situations, such aggregation of transactions is permissible for benchmarking even when the prices at which tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in both the impugned assessment years 2006-07 2004-05, challenges action of both the lower authorities denying it section 35(2AB) weighted deduction of ₹ 76,28,284/- and ₹ 1,30,01,806; respectively. 11. We find that the learned CIT(A) in assessment year 2006-07 relies upon the DRP s findings, reading as under :- 15.10 We have considered the submissions of the assessee carefully, but the same are found not acceptable. The Assessing Officer in the Draft assessment order has given a categorical finding that sub-clause(3) of sub-section (2AB) of section 35 very clearly provides that no company shall be entitled for deduction unless it enters into an agreement with the prescribed authority for co-operation in research and development facility and for audit of accounts maintained for such facilities and the assessee was asked to give details and explanation as to whether it has complied with all the requirements of section 35(2AB) of the Act so that its claim could be considered for weighted deduction. However the assessee has not furnished any documents or other materials evidencing the fact that it has entered into an agreement with the prescribed authority as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g approval of its research development facility along with expenses incurred there upon as followed by necessary intimation from the prescribed authority to the Chief Commissioner/Commissioner of the Income Tax, as stipulated under rule 6(7A) of the I.T. Rules 1962. Learned counsel seeks to place reliance upon the Hon ble jurisdictional High Court s decision in the case of CIT vs. Claris Lifesciences Limited, 326 ITR 251 (Guj.) holding that even expenditure incurred prior to obtaining form 3CM is allowable as weighted deduction under section 35(2AB) of the Act. We find that the said case law is not applicable in facts of the instant case wherein necessary approval have nowhere been produced on record. The assessee vehemently submits that it had complied with all necessary facts. Our attention was invited to page no.64 of the Paper Book. Learned Departmental Representative points out that the same is not approval but recognition with specific stipulation that it is not to be read for the purpose of deduction in question. The assessee at this stage raises an alternative submission as extracted herein above that authorities below ought to have held it eligible for section 35(1)(iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apitalised followed by depreciation claim at the prescribed rate. 19. We have heard both the parties. Relevant findings perused. It has come on record that the assessee has in fact incurred the impugned sums on plant building s roof repair. The authorities below have taken strong cognizance to the effect that it has itself estimated benefits of above repairs to continue for a period of four years. We find this approach to be wholly unreasonable since this is not the lower authorities case that the assessee s repairs in question have in any manner added any structure or asset of permanent nature conferring it an enduring benefit. We further find Hon ble Apex Court in the case of Taparia Tools Limited vs. JCIT (2015) 372 ITR 605 (SC) has accepted a similar proposition that allowability of revenue expenditure claim cannot be denied merely on the ground that the same has been amortized or claimed for over a period of years. We accordingly accept assessee s corresponding substantive ground and direct the Assessing Officer to delete the impugned disallowance. This substantive ground succeeds. 20. Assessee s next substantive ground seeks to delete disallowance of ₹ 3,15,346/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fact that the expenses under consideration were not incurred during the financial year under consideration. The assessee before us has taken a legal plea that amortized claim of similar expense in the A.Y. 2005-06 is accepted by the Assessing Officer and following the rule of consistency, he ought to have allowed the same. The said argument of the assessee is devoid of merit as each assessment year is a separate assessment unit and each assessment proceeding is independent proceedings. The AO while finalizing the assessment of any particular assessment year has to correctly assess the assessee's income as per the provisions of law and he is not bound by the decision of his predecessor. It is admitted legal position that the maxim of Res Judicata is not applicable to the Income Tax proceedings. Reliance in this respect is placed on the following decisions: i) CIT vs. Foss Electronics 236 IT R 125 (Raj) ii) Radhasoami Satsang vs. CIT 193 ITR 321 (SC) iii) ACIT vs. Gendalal Hazarilal Co. 263 ITR 679 (MP) 19.6 In view of above, we hold that the AO has rightly held that the very accounting treatment given by the assessee in the books of accounts, proves t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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