9911796707
TMI Blog2016 (6) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... sake of ready reference, grounds of appeal raised in appeal are reproduced hereunder: Direct Tax Grounds: 1.1 Based on facts and circumstances of the case, the Additional Commissioner of Income-tax, Range 1(3), Mumbai (hereinafter referred to as the AO) while passing the order dated 10th October, 2011 under section 143(3) r.w.s. 144C pursuant to the directions dated 28th September, 2011 of the Dispute Resolution Panel -II (hereinafter referred to as the DRP) erred in reducing 'Other Income' as shown below:- Particulars TMX Unit (Rs.) Multipurpose Formulation Unit (Rs.) Total (Rs) Interest on Employee loans 9,494 39,029 48,523 Other interest income 4,573 - 4,673 Miscellaneous income (Misc interest, service charges, lease rent) - 19,98,499 19,98,499 Total 14,167 20,37,528 20,51,695 from the amount of profit eligible for deduction under Section 80IB. 1.2 Without prejudice to the above, the AO erred in not excluding net amount of "Other Income' while computing the profits eligible for deduction under section 80IB. 2.1 The AO erred in setting off the losses of one 80IB unit against the profits of the other 80IB unit, for the purpose of computing deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellants during the course of hearing and overlooking the facts in the matter. 5.1 The AO erred in disallowing an amount of Rs. 11,55,931/- on account of provision for maintenance charges to building and an amount of Rs. 33,18,027 on account of provision for miscellaneous repair to plant and machinery under section 37(1) of the Act. 5.2 The AO erred in holding that the provisions represent mere estimates for repairs and maintenance of building and plant & machinery. 5.3 The AO while giving effect to the directions of the DRP, erred in, not considering the submissions made by the appellants during the course of hearing and overlooking the facts in the matter. The appellants pray that the AO be directed suitably in the matter. 6. The AO erred is not following the directions of the DRP, thereby not granting depreciation on software expenses of Rs. 1,75,000 disallowed in the assessment year 2006-07 as being capital in nature. 7. The AO erred in charging interest under section 234B of Rs. 3,46,01,142. Based on the outcome of the appeal the AO be directed to recompute the interest under section 234B. 8. The AO erred in charging interest under section 234C of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icides and formulations which are repacked and sold in the Indian markets. Under the 'Contract manufacturing' segment assessee is manufacturing active ingredient Thiamethoxam ("TMX") and its derivative products. This involves imports of raw materials from its AE, Syngenta Asia Pacific Pte. Ltd.("SAPL") and sale of finished goods to them. It has a manufacturing unit at Goa where it manufactures such active ingredients. Under the seeds segment as a whole, the assessee imports foundation/breeder seeds from its AE and then seeds procured are further developed at facilities located at Pune and Aurangabad. Post development of the seeds, the same are multiplied with the help of the farmers and sold locally. The transactions undertaken with the AE under the 'Crop Protection Segment' for the assessment year 2007-08 were as under:- PAYMENTS:- S No. Description of the transaction Amount (In rupees) AY 2007-08 Method Selected 1 Purchase of Raw material 2,370,124,106 2 Purchase of Finished Goods 129,459,931 TNMM 3 Purchase of packing material 3,906,119 4 Payment of Royalty 547,620 5 Payment towards employee Deferred share plan 908,046 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10.83 7 Phytochem (India) Ltd. 5.93 8 Sudarshan Chemicals Industries Ltd. (Segment) -12.37 Average mean 6.32% 5. The Ld. TPO after carrying out the detail analysis of the documentation and replies filed by the assessee, agreed with the most of the comparables, except for M/s. Sudarshan Chemicals Industries Ltd., which was sought to be excluded by the TPO on the ground that, firstly, it was a loss making comparable segment; secondly, there was under-utilization of the capacity of the relevant segment; and lastly, proportionate pigment export was more vis-àvis its Agro Chemical pigment export. The TPO further noted from the assessee's reply before him that the said company was rejected as a comparable by the assessee in the AY 2006-07 on the ground that, it was predominantly paint and dyes industries. The position remains the same for the assessment year 2007-08 also as it continues to be predominantly in Pigment Sector. Thus, he rejected this comparable and accordingly, the average mean result of margin worked out to 9.43%. 6. Before the TPO, another important plea was taken that by the assessee that, its operating margin was comparatively less in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the TPO after observing and holding as under:- * "Comparability of a company in TNMM is guided by three factors, viz function, asset, risk. If a company is functionally dissimilar TPO would be correct in rejecting such comparable. Under utilization of capacity reflects upon asset profile and function profile of a company. Similarly, a consistent loss making company has different asset profile than a normal company. Such companies are therefore correctly rejected by the TPO on FAR analysis basis. The assessee has not made a specific point in this ground. As per note 7 in assessee's notes to account, tax audit report, segment reporting as per AS 17 norms, the disputed comparable i.e. Sudarshan Chemicals Inds. Ltd. has two segments i.e. pigment for Rs. 296.03 cr and agrochemicals Rs. 88.12 Cr out of total sales at Rs. 384.15cr. It is seen that agrochemicals represent only 2294% of disputed comparable's turnover. Major turnover being in the nature of pigments, pre-dominant character of the comparable is not agrochemical but that of pigment manufacturer and therefore would not be a valid comparable. Further, it is seen that segmental accounts are not reliable as-they have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is compared, TPO is correct in not allowing separate adjustment towards market factors. * The assessee has not pointed out as to how the TPO has disregarded the provisions of Rule 10B(2) and (3) read with Rule 10C. A mere statement without substantiation cannot be considered. * Transfer of profit under TP provisions generally holds that if there is sub optimal profit in transactions then Arms length pricing needs to be established vis a vis AEs. In this background IT'O's action is reasonable". 8. Before us, Ld. Counsel Mr. Mukesh Bhutani, as regards the first objection raised by the TPO for rejection of Sudarshan Chemical Industries Ltd. as a comparable on the ground that it is a loss making segment, submitted that Sudarshan Chemicals is mainly engaged in the manufacturing and processing of organic and inorganic pigment, pesticides, agro, chemicals and other products from its manufacturing facilities at Pune, Roha and Mahad. Assessee as well as Sudarshan Chemicals, both are fullfledged entrepreneur bearing full risk and rewards for their business operations. Simply because there is a loss in a particular year, it cannot be the reason for exclusion because it depends ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the pigment segment is entirely different from the agro chemical segment of the Sudarshan Chemicals. The total exports of Sudarshan Chemicals were 35% of the total turnover, of which pigment segment contributed 95% and agro chemical segment contributed the balance 5%. The segmental profitability of the pigment and agro chemical segments have been separately reported in the financial accounts which is evident from Schedule 16 and Notes forming parts of the accounts for the year ending 31st March, 2007 which he showed it from the paper book page 236. He submitted that, the assessee for the purpose of benchmarking has only considered the agro chemicals segment of Sudarshan Chemicals and, therefore, the exports sales of the pigment segment have no bearing on the sales under agro chemical segment. Thus, TPO's action for placing reliance on the export data in relation to the pigment segment is misplaced. He also brought to our notice that in AYs 08-09, 09-10 and 10-11, the TPO himself has accepted Sudarshan Chemicals (segment) as comparable, therefore, in view of the principle of consistency this comparable should be accepted in this year also. In support of principle of consis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, namely "Topik" which was a premium product of the assessee and contributed approximately 15 to 20% of the total sales of this segment and also approximately 35% of the gross margin had sharply declined. Until AY 2006-07, the assessee was sole seller of this product in the country and it accordingly charged premium price, thus, resulting into high profitability in this segment. However, during the assessment year 2007-08, unanticipated competition entered into the market with generic substitute of "Topik" having significantly reduced prices, therefore, in order to sustain its market share, the assessee was forced by the market conditions to reduce the selling prices of its product. He further submitted that, if the assessee would not have reduced the price of the "Topik" it would have lost its market share significantly and would have saddled with high unsold inventory, blocked significant amount in working capital and subsequently may have led to write down the net realizable value of such inventory. He also pointed out that, the average sale rate of per metric ton in AY 2006-07 was Rs. 2957 which had reduced significantly in AY 2007-08 at Rs. 1634 and continued in the subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding given in the impugned orders as well as material relied upon before us. So far as transfer pricing adjustment of Rs. 20,73,62,327/- in the segment of "Crop Protection- License Manufacturing", the entire controversy revolves around inclusion/ exclusion of one comparable namely, Sudarshan Chemical Industries Ltd. (segment agro chemical). Another important limb of argument which has been argued before us to challenge the adjustment is that, looking to the market conditions; business and commercial considerations particularly sharp decline in sale price of the key product "Topik", adjustment should be made in the profit margin to remove the material difference in the determination of arm's length price. Before we deal with the inclusion or exclusion of the sole comparable, M/s Sudarshan Chemicals (segment), we would first deal upon the issue, whether any such adjustment on account of profit margin should be made or not, as it is quite a key factor for determination of arm's length price in the present case. It is an undisputed that TNMM is the MAM, whereby PLI has been arrived on operating profit/sales. The assessee has reported PLI of 4.21%. Its margin in TP Study Report has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of huge inventory. The comparative average sale price of 'Topic' in the earlier years and in this year had already been incorporated above. From the said comparative details, it has been pointed out that, the average sale-price of 'Topic' per metric ton, which was Rs. 2,957/- in AY 2006-07 had gone down to Rs. 1,634/-. Thus, there was a huge price reduction of almost 45%, causing sharp decline in profit margin. Whether on this peculiar factor which has not been rebutted by the revenue, any adjustment can be made in the profit margin. 15. The cornerstone of Transfer Pricing principle is the comparability analysis of a controlled transaction with an uncontrolled transaction which is substratum of arriving at Arm's length price. The controlled and uncontrolled transactions are comparable if none of the differences between the transactions materially affect the factor being examined in a given methodology, whether determination of prices or for profit margin and for such determination a reasonable accurate adjustment can be made to eliminate the material effects of any such differences. Rule 10B(2) of Income Tax Rules, provides the comparability of the transaction with uncontrolled tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Furthermore, a taxpayer seeking to enter a new market or expand (or defend) its market share might temporarily incur higher costs (e.g. due to start-up costs or increased marketing efforts) and hence achieve lower profit levels than other taxpayers operating in the same market". Further, para 1.62 of the OECD Guidelines states as under: When evaluating a taxpayer's claim that it was following a business strategy that temporarily decreased profits in return for higher long-run profits, several factors should be considered. Tax administrations should examine the conduct of the parties to determine if it is consistent with the professed business strategy .... Another factor to consider is whether the nature of the relationship between the parties to the controlled transaction would be consistent with the taxpayer bearing the costs of the business strategy. For example, in arm's length dealings a company acting solely as a sales agent with little or no responsibility for long-term market development would generally not bear the costs of a market penetration strategy ...." Thus, business strategies, market penetration, increase or save its market share are relevant and material f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable and accurate adjustment should be made to the profit margin because of huge price reduction of a premium product which constituted 35% of its gross profit margin. If such an adjustment is carried out, the net profit margin would be much higher. Whether, the impact on profit margin would be of 9.72% as stated by the Ld. Counsel before us, requires proper verification by the AO with regard to the data given before us. Because not only the figure of sale price needs verification for the purpose of adjustment, but also the contention raised by the Ld. DR that whether there is any impact on purchase of raw materials or not needs to be verified. Accordingly, we direct the AO to examine the impact of profitability after adjustment of price for "Topik" vis-à-vis the earlier years and make the necessary adjustment accordingly. 17. Though in view of our aforesaid finding, the issue of inclusion or exclusion of Sudarshan Chemicals (segmental) may become of academic interest, because if the adjustment as directed above is carried out, then perhaps the assessee's margin would fall within the +/- 5% range. However, we will also deal with the objections raised by the TPO for eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed, it is the facts and circumstances surrounding the company in question that should determine its status as a comparable, not its financial result. 3.65 Generally speaking, a loss-making uncontrolled transaction should trigger further investigation in order to establish whether or not it can be a comparable. Circumstances in which loss-making transactions/ enterprises should be excluded from the list of comparables include cases where losses do not reflect normal business conditions, and where the losses incurred by third parties reflect a level of risks that is not comparable to the one assumed by the taxpayer in its controlled transactions. Loss-making comparables that satisfy the comparability analysis should not however be rejected on the sole basis that they suffer losses". On the strength of the decisions relied by the ld. Counsel and also the OECD guidelines which have some persuasive value, we also hold that, if the loss making comparables otherwise satisfies the comparability analysis, the same cannot be rejected. The facts and circumstances associated with a given industry and FAR analysis should be the determinative factor. Thus, this reason given by the TPO canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any cogent reasons as to why in AY 2006-07 the Sudarshan Chemicals was excluded by the assessee itself, we find it very difficult to accept the theory of consistency as pleaded by the assessee before us. Whether this company was rejected by the assessee in earlier year due to some peculiar factor or FAR analysis or simply on the basis of any search criteria or filter applied etc. and why it has been included in this year has not been clarified before us. If the company was rejected on the reasons of filters applied or on any of search criteria, then it cannot be of much relevance for this year. However, if in the earlier year the FAR analysis was the same with all the other comparability criteria being analysed then assessee has to demonstrate and give strong reasons as to why it should not be excluded in this year. Since no materials has been placed before us on this aspect as highlighted by the revenue, therefore, we in the interest of justice are of the opinion that only for this limited purpose the matter should go back to the file of the TPO/AO to examine this aspect and to consider all the material facts and circumstances for rejection in the earlier year and acceptance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the technical know-how received is in the form of training to the breeders, production employees, marketing personnel and growers of sunflower and corn seeds. The training includes production and growing techniques. However, the assessee has not produced any form of evidence for the technical know received for the sunflower and corn flower production. The specific detail, like the quantum of seeds purchased, from whom it was purchased, the quantum of seeds bred & sold was not furnished, though specifically called for. He further noted from the details of expenses and reimbursement of expenses that payment for training workshop related expenses to professionals have been incurred separately. In such a scenario, there is no justification for making such a huge payment in the form of 'royalty'. He further noted that assessee is incurring 4% of turnover towards advertisement and marketing, which he held that any independent entity would not have made such a huge payment for such type of expenses. Accordingly, he disallowed the payment of royalty and added back the entire amount of Rs. 3,81,46,602/- under the seed segment business. 23. The DRP confirmed the order of the TPO an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SIL provided that subcontractors shall be bound with SIL by provisions as severe as in the present Agreement and especially shall accept, by written agreement, provisions identical mutatis mutandis to Article 3, 6, 7, 9 and 13. 2.4 The License also includes the right to have SEED promoted and commercialized by distributors within the TRRITORY under the TRADEMARKS provided that distributors shall be found with SIL by provisions with respect to TRADEMARKS as severe as in the present Agreement and especially shall accept, by written agreement, provisions identical mutatis mutandis to Article 5". It was further submitted that the benefit received by the assessee has been further documented in the TP Study as under: "7. Seeds Business 7.4 Characterisation 7.4.1 .... 7.4.2 SIL benefits from the technical know-how of SCPAG relating to the development of few varieties of seeds. It is engaged in the R&D, production, promotion and commercialization of seeds of field crops. Based on this knowledge, SIL has developed the capability of locally develop seeds that cater to the tropical climate of the region. Accordingly, SIL does not undertake any significant R&D on its account that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 2004-05 held that royalty paid in respect of licensed manufacturing segment should be benchmarked, using CUP method (in ITA nos. 2977/Mum/2006; 6575/Mum/2010;6448/Mum/2010;856 &948/Mum/2011). Thus, in this case also, there is an Internal CUP which should have been accepted. Lastly, he submitted that, royalty payment has been made as per the regulatory guidelines of the RBI and, therefore, such a payment made with the rate approved by the RBI cannot be held to be unjustified or not meeting Arm's Length Price. 27. Mr. Bhutani, also raised an alternative argument which has been raised vide additional ground that, even after payment of royalty is disallowed, the operating profit margin in assessee's Seed business is 23.70% which is much higher than the comparable companies where the average margin was 10.60%. Hence, no adjustment in any case is called for in this segment. He also clarified that, so far as observation of the TPO relating payment of training workshop related exercise etc. is concerned, he submitted that, same is entirely different nature of payment having no nexus with the payment made for technology i.e. 'royalty' and 'reimbursement'. 28. On the other hand, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before us, which has not been rebutted by the revenue that, the payment of royalty in the seed segment had passed the test of functional and economic justification and has been allowed in the earlier years. The assessee is importing basically the breeder seeds and with the aid of technical know-how of its AE and assists in further developing seeds at the facilities located in various parts of the country. Thus, to say that there is no benefit to the assessee from such proprietary information, trademarks, technical know-how would not be correct. Even in third party situation, proprietary rights, information and license to use trademarks and know-how is provided or make available then it would not be free of cost. In such transactions there is always a price which needs to be computed under the principles of "Arm's Length Price". Thus, we hold that, the contention of the TPO as well as direction of the DRP that royalty payment has to be treated as "Nil" cannot be justified in the wake of not only the "technical collaboration agreement" but also the actual conduct of the parties and the assessee who has earned huge returns during carrying out its activity by exploiting these intangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication and examination of this contention, the matter is being restored to the file of the TPO to see whether the assessee's operating profit margin under the 'Seed business segment' is much higher than the comparable companies. If it is found that assessee's contention with regard to higher profit margin in this segment is correct, then no adjustment in respect of royalty payment should be made. With this direction, ground no. 12 and additional ground is treated as allowed. 32. Now, we will come to other grounds of appeal, which have been raised vide grounds No.1 to 9. 33. At the outset, the Ld. Counsel submitted that, ground nos. 4.1 to 4.3; 5.1 to 5.3 are being not pressed, therefore, these grounds are treated as dismissed as not pressed. 34. In ground no. 1.1 to 1.2, the assessee has challenged deduction of "other income" from the amount of profits eligible for deduction under section 80IB. The details of "other income" have already been given in ground no.1.1 as reproduced earlier. So far as the 'interest of employee loan' is concerned, the Ld. Counsel fairly admitted that this issue has been decided against the assessee by the Tribunal in assessee's own case right from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unit; ii) Thiamethoxam Unit; iii) Topik Unit; and iv) Profenofos Unit. The AO required the assessee as to why deduction under section 80IB should not be calculated after adjusting consolidated loss of the two units against the profits of two other units. In response to the show cause notice, assessee relied upon certain case laws viz., CIT vs Canara Workshops, 161 ITR 320(SC) and various other Tribunal decisions. The Ld. AO however, rejected the assessee's contention that deduction has been claimed only in respect of two units without setting off of losses of other 2 units. The relevant observation of the AO in this regard is as under:- "The contention of the ARs is perused. The assessee draws a consolidated trading and P&L a/c including sales purchases and expenses of all the units. So profit and loss shown by the assessee company includes the profits and losses of all the units. Since the above losses are included in the profit or loss of the assessee company, its taxable income is already reduced to that extent. Even the AR admits to that in above submission. In such a situation on one hand the taxable profit of the company is reduced by these losses and on the 80IB. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered as a separate and independent unit. In support, he relied upon the following decisions:- a) Canara Workshops -161 ITR 320 (SC); b) Hindustan Construction Co. Ltd. -368 ITR 733 (Bom); c) Tridoss laboratories Ltd. -328 ITR 448 (Bom); d) Eskay Knit India Ltd. -ITA No.184 of 2007 (Bom); e) Sona Koyo Steering Systems Ltd -321 ITR 463 (Del); f) Modi Xerox Ltd [2012] -344 ITR 0411; g) Meera Cotton & Synthetic Mills P Ltd-29 SOT 177(All); h) Jindal Alluminium Ltd [2012] 19 ITR(T) 255 (Bang Trib); i) Nishikant S Shirodkar -ITA No.7626/M/2013 (Mum Trib). 39. On the other hand, Ld. DR strongly relied upon the order of the AO. 40. After considering the relevant finding given in the impugned orders as well as various decisions relied upon by the Ld. Counsel, we find that so far as the issue of claim of deduction under section 80IB, the profit and loss for 4 units for the year as well as profits eligible for deduction as per the assessee and as per the revenue is as under: Particular Multipurpose Thiamethoxam Unit Topik Unit Profenofos Unit Total Profit/loss for the year 20,00,51,614 2,19,69,406 (2,31,03,440) (49,83,380) As per Assessee : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of another such industrial undertaking to arrive at a computation of the quantum of deduction that is to be allowed to the assessee under s. 80-1(1) of the said Act. 9. In this regard, we may refer to the decision of this Court in the case of Dewan Kraft System (P) Ltd. (supra), which considered the pari materia provisions of s. 80-IA(7) of the said Act. In that case, the question arose with respect to computation of the deduction in relation to three units - the Kalamb unit, the Delhi unit and the Noida unit. This Court held that while computing the deduction under s. 80-IA of the said Act, the profits and gains of the Kalamb unit for the purposes of determining the quantum of deduction under s. 80-IA(5) was to be computed as if such eligible business of the said unit was the only source of income of the assessee. This Court observed that the AO had erroneously mixed the profits of the Delhi and Noida units and had thereby restricted the deduction to the extent of business income and that such an exercise was in total disregard of the provisions of sub-s. (7) of s. 80-IA of the said Act. It was held that the Kalamb unit, being the only unit of the assessee eligible for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial undertaking as the only source of income in order to arrive at the deduction under Chapter VI-A. However, this Court finds that the non obstante clause appearing in s. 80-1(6) of the Act, is applicable only to the quantum of deduction, whereas, the gross total income under s. 80B(5) which is also referred to in s. 801(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as suggested by the appellant is accepted it would almost render the provisions of s. 80A(2) of the Act nugatory and, therefore, the interpretation canvassed on behalf of the appellant cannot be accepted. It is true that under s. 80-1(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-s. (6) contemplates that only the profits shall be taken into account as if it were the only source of income. However, s. 80A(2) and s. 80B(5) are declaratory in nature. They apply to all the sections falling in Chapter VI-A. They impose a ceil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court also held that under s. 80-1(6), for the purposes of calculating the deduction, the loss sustained in one of the units is not to be taken into account because sub-s. (6) contemplates that only the profits shall be taken into account as if it were the only source of income. 13. The above discussion makes it absolutely clear that the Supreme Court decision sought to be relied upon by the learned counsel for the appellant/Revenue, rather than deciding the issue in favour of the Revenue, clinches the matter in favour of the assessee. In view of the foregoing discussion, the substantial question of law, referred to above, is decided in favour of the assessee and against the Revenue. The appeals are dismissed. 41. In the light of the aforesaid decision, we hold that each undertaking or unit is to be treated as independent and separate unit and it is those industrial undertaking which have a profit or gain are to be considered for computing the deduction. The loss making industrial undertaking would not come into picture at all. Thus respectfully following the aforesaid decision, we allow the claim of the assessee. 42. The next issue is with regard to addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired to be made in accordance with the method of accounting regularly employed by the assessee and further adjustment is required to be made to include the amount of any tax duty cess or fee by whatever name called actually paid or incurred by the assessee to bring the goods at place of its location and conditions as on the date of valuation. Therefore, the addition u/s 145A on account of duty is required to be made both in the valuation of purchase and sales as well as inventories. Hon'ble High Court of Delhi in case of Mahabir Aluminium (297 ITR 77) have held that adjustment o account of duty etc u/s 145A is required to be made to the opening stock. Therefore, adjustment on account of duty u/s 145A is required to be made at all stages including opening stock purchase and sales. We, therefore, set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination in the light of observations made in this order and after allowing opportunity of hearing to the assessee". 44. Thus, respectfully following the aforesaid decision, which in turn is based on the decision of Hon'ble Bombay High Court in the case of Mahalaxmi Glass Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,10,41,929 for Assessment Years 2000-01 to 2007-08 pertaining to profenofos unit while computing deduction under Section 80IB of the Act. (c) Based on facts and circumstances of the case and in law, the learned AO erred in setting off the brought forward losses of Rs. 2,31,03,440 for Assessment Year 2007-08 pertaining to Topik unit which had already been set-off by the AO in AY 2007-08. 3(a) Based on facts and circumstances of the case and in law, the learned AO in order passed under section 143(3) r.w.s. 144C of the Act pursuant to the directions of the DRP erred in adding an amount of Rs. 18,53,74,019/- to the value of closing stock on account of unutilized CENVAT credit. (b) Without prejudice to the above, the learned AO ought to have increased the amount of opening stock, purchases and sales by a similar amount as has been laid down in Section 145A of the Act. (c) Without prejudice to the above, the learned AO ought to have held the value of the opening stock of the subsequent assessment year i.e. 2009-10 should be increased by Rs. 18,53,74,019/- on account of the addition made to the closing stock for the assessment year 2008-09. (d) Without prejudice to the above, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profit of other eligible unit for deduction under section 80IB. 53. This issue is similar to the ground raised in appeal for the assessment year 2006-07 and accordingly in view of our finding given therein, we set aside the impugned issue to the file of the AO with similar direction and accordingly, ground No.3 is treated as partly allowed for statistical purposes. 54. Ground No. 4 is not pressed; accordingly, the same is dismissed as not pressed. 55. In ground no. 5, the assessee has challenged the disallowance of site restoration expenses. 56. Assessee's case before us is that, the actual expense incurred on restoration cost has not been allowed. It was stated that provision for 'site restoration expenses' were disallowed in AY 2006-07 and 2007-08 and actual cost incurred was allowed. The assessee has however incurred actual cost of Rs. 1,34,38,000/- against the provision which has been claimed as deduction and the AO has not considered the same. The DRP has directed the AO to allow the same after due verification of the provision made in the earlier years. Before the AO, the assessee submitted as under:- "We humbly submit that provisions for site restoration cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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