TMI Blog2021 (11) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... itten off in the F.Y. 2013-14 on the raison d'etre that it was quantified after 31-03-2013, cannot be countenanced. The relevant factor to be considered is the date with reference to which the value of stock is determined and not the date when the exercise of such value determination is carried out. Had it been a case of the assessee valuing its inventory on any date after 31-03-2013 but giving effect in the balance sheet as on 31.3.2013, that would have warranted addition. we are confronted with a situation in which depletion has taken place with reference to the value of inventory on 31-03-2013. We, therefore, hold that the AO was not justified in making addition - Decided in favour of assessee. TP Adjustment - Addition of Corporate Guarantee - HELD THAT:- As the assessee own case [ 2021 (3) TMI 1162 - ITAT PUNE] Tribunal determined the Arm's Length fee from furnishing of the corporate guarantee at 0.5% as further increased by any expenditure actually incurred by the assessee in furnishing the guarantee. The ld. DR was fair enough to concede the position in this regard. Having regard to the rival but common submissions and respectfully following the order of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that it was valuing the stock as per the method 'Cost or Net realizable value, whichever is less'. The value of obsolescence of stock to the above tune was reflected in the balance sheet, signed on 28-05-2013. The ld. DRP observed that since the write off actually happened in the F.Y. 2013-14, there was no justification in allowing claim of write off in the F.Y. 2012-13 relevant to the assessment year under consideration, even though the audited accounts were signed on 28-05-2013. That is how, the DRP directed the AO to make enhancement by ₹ 23.12 crore. The AO made the enhancement in the final assessment order. Apart from the challenging the making of the addition on merits, the assessee has also assailed the direction given by the DRP for enhancement on a preliminary legal issue of jurisdiction. 3. At this juncture, it is pertinent to mention that this appeal was earlier fixed for hearing before a different combination of the Division Bench, wherein the ld. AR argued that the DRP had no power to take up the issue of stock write off. It was put forth that the AO did not consider the issue of stock write off in the draft order and hence, the DRP lacked juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vt Ltd., Vs. ACIT (ITA No. 1399/Del/2017 dt. 25.08.2017) reported in (2017) 85 taxmann. Com 163(Delhi - Trib) upheld of power of DRP to make addition even in respect of items which is not subject matter of variations proposed by the Assessing Officer by holding as under: 10. It is clear from the mandate of sub-section (8) that the DRP is empowered, inter alia, to enhance the variations proposed in the draft order. The Explanation to this sub-section inserted retrospectively from 1.4.2000 clarifies that the power of the DRP to enhance the variation shall include the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was not raised by the assessee. When we consider the language of sub-section (8) in conjunction with the Explanation, it clearly emerges that the DRP has a power to enhance variations proposed in the draft order on an international transaction, even if it was not raised by the assessee. 'Enhance the variations' include not only increasing the amount of transfer pricing adjustment already proposed, but also making a new transfer pricing adjustment, which was omitted to be propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held that the jurisdiction of the DRP would be confined to decide the variations that have been proposed in the draft assessment order and contested before it. Thus, it is clear that the Explanation was inserted by the Finance Act 2012 with retrospect effect from 01.04.2009 so as to empower the ld. D.R.P. to consider any issue arising out of the draft assessment order even if it is not in dispute. It is also equally settled position of law that the word assessment includes the return of income filed by the assessee. We do not find any contrary decision from any other Hon'ble High Court. Therefore, now the issue that boils down to single point i.e. whether the decision of non-jurisdictional High Court shall prevail over the decision of the Special Bench. 4. From the above extracts of the interim order passed by the DB rejecting the assessee's request for constitution of a Special Bench on the issue of power of the DRP to make enhancement on an issue which was not a part of the draft order, it is vivid that the Bench categorically held against the assessee by holding: 'Thus, it is clear that the Explanation was inserted by the Finance Act 2012 with retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, the draft order was notified on certain other issues but without any disallowance of expenditure u/s. 40(a)(i) of the Act on Employees Secondment charges and Reimbursement of expenses. The assessee challenged the draft order before the DRP. The DRP issued enhancement notice in respect of disallowance u/s. 40(a)(i) on Employees Secondment charges and Reimbursement of expenses. After entertaining the objections, the DRP directed the AO to make the disallowance u/s. 40(a)(i). The assessee filed writ petition No. 26313 of 2017 seeking to quash the direction of the DRP on the enhancement by urging that the DRP had no power to issue notice for enhancement as that issue was not considered by the AO in the draft order. The Hon'ble High Court considered the scope of the Explanation appended to section 144C(8) of the Act and rejected the assessee's writ petition by observing that: Thus, there is no impediment as such for the Dispute Resolution Panel to consider any matter arising out of the assessment proceedings relating to the Draft Assessment Order and no matter, such an issue was discussed in the Draft Assessment Order or not, but it should not be totally unconnected wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e between the two has been explained to be on account of considering the excise duty also as part of closing stock which was shown separately in the balance sheet and the difference on account of obsolete and non-moving inventory of ₹ 23.12 crs. The assessee has explained that this slow moving inventory was informed to the bank in the month of April to June, 2013 and as the audited account were signed on 28-05-2013 (sic 2017), the assessee had considered the write off in the audited accounts for the FY 2012-13 itself. As per the record the write-off has happened in FY 2013-14. Having considered the reasons given by the assessee we do not find any justification in claim of write-off in FY 2012-13 as even though the audited accounts were signed on 28/5/2013 the same pertained to F.Y. 2012-13 closing on 31/3/2013. The event as in the present case of valuation of non-moving obsolete inventory and write off of ₹ 23.12 cr. occurred only during F.Y. 2013-14. In light of the above the claim of write off of ₹ 23.12 cr in FY 2012-13 is incorrect and is been disallowed. The AO is directed to incorporate the same while finalizing the assessment. This will result in enhancemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of total obsolete and non-moving inventory, which needs to be written off as on 31-03-2013, is to the tune of ₹ 23,12,45,650/- as detailed out in the annexure enclosed . Then, there is the annexure running into few pages giving item-wise write off in quantity as well as value. It is on the basis of this certificate issued by the auditor on 02-04-2013 that the assessee, while finalizing its balance sheet on 28.5.2013, gave effect to the method of stock valuation consistently followed and reduced the value of inventory as shown on 31.3.2013 by the amount of such obsolescence to bring it at net realizable value. 10. From the above discussion, it clearly transpires that the obsolescence in the inventory was qua the value of stock as on 31-03-2013 and the assessee incorporated the effect of such reduction in the value of inventory by giving an appropriate note as an extraordinary event . The reduction has the effect of representing the condition of stock existing as on 31-03-2013 at its realizable value. It is not as if there was some depletion in the value of inventory taking place after 31-03-2013 which the assessee accounted for in its annual accounts for the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% as Corporate Guarantee fee and worked out the net transfer pricing adjustment at ₹ 12,81,40,000/-, after reducing ₹ 291.93 lakhs incurred in extending guarantee and recovered by the assessee from its AE. The assessee remained unsuccessful before the DRP, as a result of which the AO made the addition of ₹ 12.81 crore in the final assessment order. The assessee has come up in appeal before the Tribunal on this issue. 13. We have heard both the sides and gone through the relevant material on record. At the outset, the ld. AR contended that similar issue has been considered and decided by the Tribunal in its order for the assessment year 2014-15. A copy of such order dated 26-03-2021 passed in ITA No. 1693/PUN/2018 and other was placed on record. We have gone through the order. The decision on the issue of corporate guarantee fee has been incorporated in paras 7.17 and 7.18 of the order. After considering the entire gamut of material, the Tribunal determined the Arm's Length fee from furnishing of the corporate guarantee at 0.5% as further increased by any expenditure actually incurred by the assessee in furnishing the guarantee. The ld. DR was fair enough t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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