TMI Blog2016 (6) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that, the agreement relates to the year 1995, whereas the payment has been made in 2006 by the assessee to its AE. However, we fail to understand if the terms of the agreement are still in force and has not been terminated then how the year of agreement will make a difference. If a similar payment has been made to the third party in this year, then, if other attributes of CUP are fulfilled then same has to be considered for the comparability analysis to benchmark the ALP of the payment. What is required to be seen is, whether the terms and conditions of the agreement with the third party and the terms and conditions of the agreement with the AE are similar or not. If they are similar, then definitely there is a situation of internal CUP, unless some material differences is shown between the two agreements or there is change in the facts from year 1995 to this year or any other criteria of significance. We find that the Tribunal in respect of ‘license manufacturing segment’ has restored back the matter to the file of the TPO for benchmarking the same by using CUP method. On the same principle, we are also in agreement that CUP method should be applied for benchmarking this transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Mahalaxmi Glass Works Pvt. Ltd (2009 (4) TMI 182 - BOMBAY HIGH COURT ), we decide this issue accordingly and restore the matter to the file of the AO with similar direction. Disallowance of site restoration expenses - Held that:- Here the case of the assessee before us is that it has itself disallowed the provision and now it is being claimed on actual basis. We accept this contention that once it is undisputed fact that the assessee’s claim has been disallowed in the earlier years then, actual expenditure incurred in this year has to be allowed. Before us, the Ld. Counsel has also pointed out that, in AY 2009- 10, a similar expense on actual basis has been allowed. Accordingly, we direct the AO to allow the actual expenditure incurred during this year on site restoration cost. Accordingly, ground no. 5 is treated as allowed. Non-granting of TDS credit/short-deduction of TDS - Held that:- We direct the AO to verify the contention of the assessee and grant the credit after verification. - ITA No. : 8534/Mum/2011, ITA No. : 649/Mum/2013 - - - Dated:- 1-6-2016 - SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IB unit, for the purpose of computing deduction under section 80IB. 2.2 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 thereby overlooking facts of the case. 2.3 The AO erred in not taking cognizance of the facts in the appellants case thereby placing reliance on a decision, which had no application in the applicant s case. 2.4 The AO ought to have appreciated the fact that while computing the deduction under section 80IB, each unit was to be considered as a separate and independent unit. 2.5 The appellants submit that even after set off of losses of the 80IB units against the profits of non 80IB units, the Gross Total income would work to ₹ 82.92 crores, which was substantially more than the deduction claimed under section 80IB. 3.1 The AO erred in adding an amount of ₹ 19,00,63,130 to the value of closing stock on account of unit of unutilized CENVAT credit. 3.2 Without prejudice and in any event, the AO ought to have increased the amount of purchases by a similar amount as has been laid down in Section 145A. The assessee there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal the AO be directed to recompute the interest under section 234B. 8. The AO erred in charging interest under section 234C of ₹ 7,27,684/- as against NIL chargeable per the Return of Income. 9. The AO erred in charging interest under section 234D of ₹ 82,75,343. Based on the outcome of the appeal the AO be directed to recompute the interest under section 234D. Transfer Pricing Grounds 10. On the facts and circumstances of the case, the AO erred on facts and in law in adding ₹ 20,73,62,327/- to the income of the assessee by holding that its international transaction of Purchase of Raw Material does not satisfy the arm s length standard under the Income-tax Act, 1961 ( the Act ). 11. Without prejudice to ground no. 10 above, the AO erred on facts and in aw in not allowing (+/-) 5% range option allowable to the assessee under the proviso to section 92C(2) of the Act. 12. On the facts and circumstances of the case, the AO erred both on facts and in law in adding ₹ 3,81,46,602/- to the income of the assessee by disallowing the entire payment of Royalty on seeds to the Associated Enterprise . Besides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elected 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 Reimbursement of salary 14,505,179 CUP Sub-Total 25,19,451,001 Receipts:- S No. Description of the transaction Amount (In rupees) AY 2007-08 Method Selected 1 Sale of Finished Goods 2,813,405,595 TNMM 2 Reimbursement of expenses 14458212 - Sub-Total 2,827, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les as the financial data of one comparable for the current year was not available. The list of such comparables companies along with the average profit mean was as under: Sr.No. Name of company OP/Sales % 1 Asia Arch Timber Protection Ltd 9.68 2 Bhagiradha Chemicals Industries Ltd 14.84 3 Dhanuka Pesticides Ltd. 8.93 4 Ficom Organics Ltd - 5 Kilpest India Ltd 6.38 6 Nagarjuna Agrichem Ltd. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 20,73,63,327/- in the following manner:- Particulars Amount (Rs.) Net Sales 4,42,59,49,105 Operating expenses Purchases from AE 1,80,83,46,565 From Non-AEs 1,85,17,75,939 Other non-AE expenses 55,58,21,927 Total operating expenses 4,21,59,44,431 Operating profit 21,00,04,674 OP/Sales 4.74% ALP OP/Sales A 9.43% Net Sales B 4,42,59,49,105 Arm's length operating profit C=A B 41,73,67,001 Total Operating cost D=B-C 4,00,85,82,104 Less: non-AE purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such a risk is market determined profit. Any departure from market determined profit points towards possibility of transfer of profit. The assessee has failed to bring out any specific point against the TPOs. action. The TPO has considered various factors in detail in para 6.6 6.7 of his order. The assessee has benchmarked its transaction on TNMM. MINIM is comparison of operating profit margins of different players in the same industry, the industry being agrochemicals and products being different formulations to deal with agricultural sector. Operating profit margin rises out of numerous products being sold by a player in the market. Adjustment for a lesser performance of a particular product of assessee cannot be given when such minute breakups are not available for all comparables: Moreover, factors such as bad monsoon, adverse weather etc. are equally applicable to all players in agrochemical industries. Operating profit of all the players are a result of various market forces. Section 92C(4) states that the total income of the assessee may be computed by TPO having regard to the arms length price so determined. We find no reason to hold that the TPO has used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 SOT 294(Mum)(URO); ii) TCL Holdings (P) Ltd. v. ACIT [2013) 59 SOT 68 (Mum-TRIB); iii) Qualcomm India (P) Ltd v. ACIT [2014] 147 ITD 17 (Del-TRIB); iv) Cummins Turbo Technologies Ltd v.DDIT [2014]147 ITD 463(Pun); v) Apotex Research P Ltd. v DCIT [2013] 59 sot 117 (Bang). He also placed reliance on OECD guidelines to show that the loss making comparables that satisfies the functional and comparability analysis should not be rejected on the sole basis that they have suffered losses. L astly , he submitted that an entity level Sudarshan Chemicals has not made any loss and it was only in this particular segment there was a loss. 9. Regarding under-utilization of the capacity, he submitted that simply because the agro chemical segment of the Sudarshan Chemicals was functioning at 53% of its capacity utilization, it could not be the ground for rejection especially when other comparable companies accepted in this year were also having similar capacity utilization levels. He also gave the following details to show the various capacity utilization of the comparables selected and accepted in this year:- Name of the comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Coming to the assessee s other limb of contention that the market condition, business and commercial consideration and peculiar feature present in this year has to be taken into account to see the profitability and if required, adjustment should be made in the profit margin to determine the correct Arm s Length Margin. He pointed out in the TP Study report and in various submissions made before TPO; the assessee demonstrated the reasons for low margin in this year in the license manufacturing - crop protection segment. As a licensed manufacturer, it purchases goods from its AE as well as from others to manufacture agro chemicals using technology of from the Syngeta group and sell the goods in the domestic market. The assessee exploits the domestic market for its own commercial gain and is therefore, solely entitled to the rewards and the risks associated with the business. The impact of the market conditions, like increased competition, relative pricing pressures in this year, change in demand patterns and climatic conditions has affected assessee in this year which has resulted into low margin. He submitted that if the margins earned by the comparable manufacturers and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icantly in AY 2007-08 at ₹ 1634 and continued in the subsequent years also. This reason itself shows that there is rejection in sale price by almost 45% and if assessee would have continued to sell the Topic @ ₹ 2957, assessee s profit would have been 9.27%. To demonstrate the effect of drop on the margins of profitability on account on sale of topic he gave the following comparative details: Particulars Profitability before Adjustment for Topik (Topik sold at INR 1,534) Profitability after adjustment for Topik (Topik sold at INR 2957) Net Sales 44,25,949 4,721,973 Less: Operating Cost Materials 33,32,431 3,332,431 Factory Overheads 3,27,691 3,27,691 Operating Expenses 5,44,297 544,297 Operating Profit 2,21,530 517,554 Operating Profit/Sales 4.44% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been benchmarked with the help of 7 comparables whereby the arithmetic mean was arrived at 6.32% based on current year data and hence it was reported that, the profit margin of 4.21% in this segment is at ALP. Mr. Mukesh Bhutani before us has stated that operating profit margin of licensed manufacturing segment has always been more than 10%, ranging between 10.43% to 15.41%, however it was particularly in this year that the profit margin has declined to 4.21% due to various factors. The operating profit margin of this segment for various assessment years were stated to be as under: AY Arm s length operating Profit margin of comparable companies As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06-07 had gone down to ₹ 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 transaction which has to be judged with reference to specific characteristics of the property transferred or services provided; FAR analysis; contractual terms; conditions prevailing in the markets, that is, economic conditions in which respective parties transact or operate inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 factors determining prices and profit. All these factors have to be taken into consideration while eliminating the material effects which warrants some kind of reasonable accurate adjustments. 16. Before us the material factors which have been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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- -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 eliminating the said comparable from the comparability list. The first objection raised by the TPO is that, Sudarshan Chemicals had incurred loss in AY 2007-08; therefore, it cannot be included in comparable list. As far as FAR analysis and functionality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation 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 cannot be the criteria or ground for rejection from the comparability list. 18. On the second objection of under-utilization of the capacity of Sudarshan Chemicals, the Ld. Counsel before us as stated herein above has demonstrated that almo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 this year as well as in the subsequent years. 21. Thus, in view of our discussion above, so far as the inclusion/exclusion of Sudarshan Chemicals is concerned, we reject the TPO s other three contentions but for the last contention, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng process including benefits of technical knowhow received from the AE. Technical collaboration agreement including specific approvals received from the RBI was also furnished. The TPO noted 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 exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse includes the rights to multiply the lines and varieties and produce the BASIC SEED as per SIL s requirement. The License also includes the right to have SEED produced by sub-contractors within the TERRITORY on behalf 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 commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till in force and will remain so unless it is terminated by either of the parties. Hence, it cannot be the ground, because this agreement has not been terminated. Further, ITAT Mumbai Bench in the assessee s own case for the assessment year 2002-03 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 relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar for the first time albeit is a recurring payment from the earlier years and also in the subsequent years and no such adjustment or disallowance has been made in the seeds segment. It has been categorically stated before the authorities below and 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 tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h have been arrived at 10.80%. In such case, no adjustment in respect of the said international transaction is required. However, this aspect of the matter has not been dealt upon either by the AO or by the DRP, therefore, only for the purpose of verification 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of non 80IB units for working out the eligible profits under section 80IB. 37. Brief facts are that, the assessee company in its Audit report in Form No.10 had made a claim for deduction under section 80IB with regard to its 4 unit namely: i) Multipurpose Formulation 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 incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,00,51,614 2) Thiamethoxam Unit 2,19,69,406 2,19,59,406 3) Topik Units -- 2,31,03,440 2,31,03,440 4) Profenofos Unit -- 49,83,380 49,83,380 Total 22,20,21,020 2,80,86,820 19,39,34,200 The DRP also confirmed the said disallowance of deduction. 38. Before us the Ld. Counsel submitted that, for the purpose of computing the deduction under section 80IB, each unit has to be considered 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 Cot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relying upon the decision of Supreme Court in the case of Synco Industries Ltd, 299 ITR 44 reads as under:- 8. It is further clear from a plain reading of the aforesaid provisions that the deduction under S. 80-I is to be made in case the gross total income includes any profits and gains derived from an industrial undertaking, etc., in case such profits and gains are included in the gross total income of the assessee. The deduction in the case of a company, in view of the proviso to s. 80-1(1), is to be given to the extent of 25 per cent of such profits and gains of such an industrial undertaking. It is also clear that in view of s. 80-1(6), which begins with a non obstante clause, the quantum of deduction is to be computed as if the industrial undertaking were the only source of income of the assessee during the relevant years. In other words, each industrial undertaking or unit is to be treated separately and independently. It is only those industrial undertakings, which have a profit or gain, which would be considered for computing the deduction. The loss making industrial undertaking would not come into the picture at all. The plain reading of the provision suggests tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwise. While doing so, the Supreme Court further made it clear that the gross total income must be determined by setting off business losses of earlier years before allowing deduction under Chapter VI-A and that if the resultant income is 'nil', then the assessee cannot claim any deduction under Chapter VI-A. While coming to the aforesaid conclusion, the Supreme Court was also confronted with an argument which had been raised on the basis of the provisions of s. 80-1(6) that the profits of one industrial undertaking cannot be set off against the losses suffered by the other industrial undertaking. The Supreme Court was of the view that the provisions of s. 80-1(6) were only for the purposes of computing the quantum of deduction, whereas the gross total income was to be computed in terms of the Act as provided in s. 80B(5). It is apparent that the Supreme Court distinguished the provisions of s. 80-1(6) which was for the purposes of computing the quantum of deduction from the provisions of s. 80-I (1) and s. 80-13(5) which deal with the manner in which the gross total income is to be considered. The Supreme Court observed as under:- 13.While computing the quantum of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is nil the assessee would not be entitled to deductions under Chapter VI-A of the Act. 11. From the above extract, it is apparent that the Supreme Court did not at all hold that while computing the deduction under s. 80-1(6), the loss of one eligible industrial undertaking is to be set off against the profit of another eligible industrial undertaking. All that the Supreme Court said was that in computing the gross total income of the assessee, the same has to be determined after adjusting the losses and that, if the gross total income of the assessee so determined turns out to be 'nil', then the assessee would not be entitled to deduction under Chapter VI-A of the said Act. 12. We agree with the submissions made by the learned counsel for the assessee that there is nothing in the decision in the case of Synco Industries Ltd. (supra) which would enable us to detract from the position indicated by this Court in Dewan Kraft System (P) Ltd. (supra) and, as indicated by us above. In fact, the Supreme Court clearly held that while computing the quantum of deduction under s. 80-1(6), the AO, no doubt, has to treat the profits derived from an industrial undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases was not accepted. In appeal CIT(A) agreed with AO that this being the first year of change, the method of accounting u/s 145A was bound to have impact on the profit. He, therefore, confirmed the addition made by AO, aggrieved by which the assessee is in appeal before Tribunal. 2.3.1. Before us the learned AR for the assessee submitted that the assessee was following the exclusive method of accounting in which duty was not routed through the profit loss account. It was also submitted that adjustment u/s 145A will have to be made at all stages including opening stock and purchases and if this was done this would not result in any addition to the total income. Reliance was placed on the judgment of Hon'ble High Court of Bombay in case of Mahalaxmi Glass Works Pvt. Ltd (318 ITR 116) and on the judgment of Hon7ble Supreme Court in case of CIT Vs. Dynavision Ltd. (348 ITR 380). The learned DR on the other hand supported the orders of authorities below and placed reliance on the finding given in the respective orders. 2.3.2 We have perused the records and considered the matter carefully. The dispute is regarding addition on account of duty to the closing stock v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/2013 for AY 2008-09, vide which following grounds have been raised:- 1(a) 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 the following ther Income from the amount of profit eligible for deduction under Section 80 IB of the Act:- Particulars Multipurpose Formulation Unit (Rs.) Topik Unit (Rs) TMX Unit (Rs) Profenos Unit (Rs.) Total (Rs.) Interest Income - - 11,989 33,753 45,742 Rental Income 79,975 - - - 79,975 Other External Income 14,46,431 28,12,878 - - 42,59,309 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing repairs and maintenance expenses amounting to ₹ 68,89,477 as capital expenditure. 5. Based on facts and circumstances of the case and in law, the learned AO in the order passed under section 143(3) r.w.s. 144C of the Act pursuant to the directions of the DRP erred in not allowing actual site restriction expenses of ₹ 1,34,38,000. 6. Based on facts and circumstances of the case and in law, the learned AO in not recording the brought forward losses for being set off against the income in the subsequent years. 7(a) On the facts and circumstances of the case, the AO erred both on facts and in law in adding ₹ 3,53,30,934/- to the income of the Appellant by disallowing the payment of royalty on corn and sunflower seeds to its Associated Enterprise. (b) The Appellant prays that the above adjustment be deleted. 8. Based on the facts and circumstances of the case and in law, the learned AO erred in non-granting of correct credit of taxes paid during the year. 9. Based on the facts and circumstances of the case and in law, the learned AO erred in charging interest under section 234B of ₹ 4,50,28,500. 10. Based on the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the actual expenditure incurred should be allowed as a deduction. In view of the above, as directed by the DRP, we humbly submit that the restoration expenses of ₹ 1,34,38,000/- should be allowed as deduction . However, the AO held that, assessee s claim is not acceptable as in AY 2006-07, the Department has not disallowed the provision and assessee should have claimed the deduction by claiming revised return. Here the case of the assessee before us is that it has itself disallowed the provision and now it is being claimed on actual basis. We accept this contention that once it is undisputed fact that the assessee s claim has been disallowed in the earlier years then, actual expenditure incurred in this year has to be allowed. Before us, the Ld. Counsel has also pointed out that, in AY 2009- 10, a similar expense on actual basis has been allowed. Accordingly, we direct the AO to allow the actual expenditure incurred during this year on site restoration cost. Accordingly, ground no. 5 is treated as allowed. 57. Next issue argued before us is with regard to non-granting of TDS credit/short-deduction of TDS of ₹ 17,45,272/-. Accordingly, we direct the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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