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TMI Blog2018 (1) TMI 1716X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Income tax Act, 1961 ('the Act') at an income of Rs. 134,76,30,400 as against the income of Rs. 112,28,90,705 returned by the appellant. 2. That the assessing officer erred on facts and in law in making an addition of Rs. 16,65,18,068 allegedly on account of difference from the arm's length price of the international transactions entered into by the appellant with its associated enterprise, on the basis of order passed by the Transfer Pricing Officer ('TPO') under section 92CA(3) of the Act. 3. That the assessing officer/ TPO erred on facts and in law in holding the arm's length price of the international transaction of payment of trademark fee of Rs. 7,84,24,000 to the Associated Enterprise ("AE"), The Goodyear Tire & Rubber Company, USA as Nil allegedly holding that no recognizable benefit has been passed on to the appellant and therefore there was no rationale for paying this trademark fees to the AE. 3.1 That the assessing officer/ TPO erred on facts and in law in not appreciating that the international transaction of payment of trademark fees w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in law in holding that expenditure incurred by the appellant which incidentally resulted in brand building for the foreign AE, was a transaction of creating and improving marketing intangibles for and on behalf of its foreign AE and further that such a transaction was in the nature of provision of a service by the appellant to the AE. 4.5 That assessing officer/TPO erred on facts and in law in not appreciating that such a Transfer Pricing adjustment could not at all be made in respect of AMP expenses which were found to constitute legitimate, bonafide and deductible business expenditure and the appellant was the economic owner of the benefit of such expenses. 4.6 That the assessing officer/TPO erred on facts and in law in not appreciating that the characterization of the appellant being that of a full fledged manufacturer and I or distributor performing all functions and bearing all risks, is the sole beneficiary of the AMP expenditure incurred by it, justified the conduct of the appellant in incurring and bearing the cost of AMP expenditure. 4.7 The assessing officer/TPO erred on facts and in law in not appreciating that such a Transfer Pricing adjustment cannot at all be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of merchandise by the export incentives available to the exporting entity. 5.5 That the assessing officer / TPO erred on facts and in law in holding that the export incentive does not form part of invoice price of goods sold and hence the same cannot be reduced from the cost of goods sold. 6. That the assessing offer erred on facts and in law in making disallowance of provision for replacement loss amounting to Rs. 61,53,000 allegedly on the ground that the appellant did not incur expenditure on account of replacement of goods in the subsequent years. 7. That the assessing officer erred on facts and in law in making an ad hoc disallowance of Rs. 3,80,12,100 being 30% of the total expenditure of Rs. 12,67,07,000 incurred by the appellant on advertisement and publicity holding that the expenditure was incurred for brand building for the entities owning the brand. 7.1 That the DRP erred on facts and in law in affirming the above disallowance proposed by the assessing officer allegedly following its order in assessment year 2009-10 7.2 That the assessing officer erred on facts and in law in not appreciating that the advertisement and publicity expenses were incurred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer erred on facts and in law in under Section 234B and Section 234C of the Act." "ITA No. 1004/Del./2016 (AY : 2011-12) 1. That the assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Income-tax Act, 1961 ('the Act') at an income of Rs. 132,46,38,800 as against the income of Rs. 109,38,32,595 determined by the appellant in its income tax return. 2. That the DRP/assessing officer erred on facts and in law in making an addition of Rs. 19,08,88,000 allegedly on account of difference from the arm's length price of the international transactions entered into by the appellant with its associated enterprise, on the basis of order passed by the Transfer Pricing Officer ('TPO') under section 92CA(3) of the Act. 3. That the assessing officer/ TPO erred on facts and in law in holding the arm's length price of the international transaction of payment of trademark fee of Rs. 9,54,44,000 to the Associated Enterprise ("AE"), the Goodyear Tire & Rubber Company, USA at Nil allegedly holding that no recognizable benefit has been passed on to the appellant and therefore there was no rationale for pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the associated enterprise and instead of payment of the trademark fee to the AE of Rs. 9,54,44,000, the appellant ought to have received equivalent amount as compensation for creating and developing marketing intangibles in India. 4.2 The DRP/assessing officer erred on facts and in law in not appreciating that the AMP expenses, etc., unilaterally incurred by the appellant in India could not be characterized as an international transaction as per section 92B, in the absence of any proved understanding / arrangement between the appellant and the associated enterprise, so as to invoke the provisions of section 92 of the Act. 4.3 The DRP/TPO erred on facts and in law in not appreciating that the only Transfer Pricing adjustment permitted by Chapter X of the Act was in respect of the difference between the arm's length price (ALP) and the contract or declared price, but the said provision could not be invoked to determine the 'quantum' I extent of business expenditure. 4.4 The DRP/assessing officer erred on facts and in law in holding that expenditure incurred by the appellant which incidentally resulted in brand building for the foreign AE, was a transaction of cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el./2017 (AY: 2012-13) 1. That the assessing officer erred on facts and in law in completing assessment under section 144C/143(3) of the Incometax Act, 1961 ('the Act') at an income of Rs. 1,19,58,49,260 as against the income of Rs. 92,07,70,135 determined by the appellant in its income tax return. 2. That the DRP/assessing officer erred on facts and in law in making an addition of Rs. 22,36,02,000 allegedly on account of difference from the arm's length price of the international transactions entered into by the appellant with its associated enterprise, on the basis of order passed by the Transfer Pricing Officer ('TPO') under section 92CA(3) of the Act. 3. That the assessing officer/ TPO erred on facts and in law in holding the arm's length price of the international transaction of payment of trademark fee of Rs. 11,18,01,000 to the Associated Enterprise ("AE"), the Goodyear Tire & Rubber Company, USA at Nil allegedly holding that no recognizable benefit has been passed on to the appellant and therefore there was no rationale for paying this trademark fees to the AE. 3.1 That the DRP/assessing officer erred on facts and in law in holding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly incurred by the appellant in India could not be characterized as an international transaction as per section 92B, in the absence of any proved understanding / arrangement between the appellant and the associated enterprise, so as to invoke the provisions of section 92 of the Act. 4.3 The DRP/TPO erred on facts and in law in not appreciating that the only Transfer Pricing adjustment permitted by Chapter X of the Act was in respect of the difference between the arm's length price (ALP) and the contract or declared price, but the said provision could not be invoked to determine the 'quantum' / extent of business expenditure. 4.4 The DRP/TPO erred on facts and in law in characterizing the appellant as a distributor and not a risk bearing manufacturer, not appreciating that around 77% of income earned by the appellant constitutes sale of manufactured goods. 4.5 That the DRP/TPO erred on facts and in law in concluding that the appellant is incurring AMP expenses at the behest and under the control of the AE and primarily for the benefit of the AE, allegedly relying on Article VIII - Infringement clause of the Trademark License Agreement entered between the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts and in law in relying on the decision of Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited to held that if the brand name is not owned by the assessee, such expenditure is incurred for the benefits of the enterprise who own the brand name, not appreciating that the said decision was made redundant by the Hon'ble Supreme Court. 6.1 That the assessing officer erred on facts and in law in not appreciating that the advertisement and publicity expenses were incurred by the appellant in the course of carrying on of its business and were allowable deduction as business expenditure. 7. That the assessing officer erred on facts and in law in under Section 234B and Section 234C of the Act." 2. Briefly stated, for the sake of brevity, the facts of ITA No. 1516/Del/2015 for AY 2010-11 are taken for adjudication of the controversy raked in all the aforesaid appeals are : the taxpayer is held by Goodyear USA of 74% and started its operation in 1922 and set up a manufacturing facility at Ballabhgarh, Haryana in 1961. The taxpayer is into the business of manufacturing and sale of passenger car, medium commercial truck, light truck and farm tyres. The taxpayer also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of marketing intangibles at Rs. 7,84,24,000/- and directed the AO to enhance the income of the taxpayer by Rs. 96,70,068/- by not allowing the taxpayer to reduce the export incentives to calculate the value of the goods sold and made the total enhancement of taxpayer's income at Rs. 16,65,18,068/-. 5. The taxpayer carried the matter before the ld. DRP by filing objections who has disposed of the objections. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the present appeals. 6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUNDS NO.1 & 2 OF ITA No. 1516/Del./2015 (AY: 2010-11) ITA No. 1004/Del./2016 (AY: 2011-12) ITA No. 1706/Del./2017 (AY: 2012-13) 7. Grounds No.1 & 2 of ITA Nos.1516/Del/2015, 1004/Del/2016 & 1706/Del/2017 are general in nature more specifically elaborated in the subsequent grounds, need no adjudication. GROUNDS NO.3, 3.1, 3.2, 3.4 OF ITA No. 1516/Del./2015 (AY: 2010-11) GROUNDS NO.3, 3.1, 3.2, 3.4, 3.5, 3.6 & 3.7 OF ITA No. 1004/Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exist and its entire operations would come to a halt. Accordingly, since the entire operation of the appellant is based on rights and licenses to manufacture the automobile tyres and tubes, for which royalty is being paid, the royalty payments cannot be separately evaluated. In the case of the appellant, it is nobody's case that the company has entered into diverse activities. The international transactions of the appellant primarily relate to its business of manufacturing of tyres and such international transactions are closely interlinked or inter-twined. It would also not be possible to determine separately profit from the international transactions of payment of trademark fees. Reliance in this regard is placed by the Ld. Assessee counsel on the decision of Hon'ble coordinate Bench of Tribunal, in a similar case of Maruti Suzuki India Limited vs. ACIT (ITA No. 5237/Del/2011), for assessment year 2005-06, too, held as under: "13.1 Thus, we agree with the submission of the appellant's counsel that the entire business model of the appellant is based on license from SMC, Japan for which royalty has been paid. Without such technology supply the appellant's business will cease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebok India Co Ltd (ITA no 213/2014), being part of the decision of Hon'ble High Court in the case of Sony Erickson, the Court has held as under: "185. Royalty payable for availing the right to use would depend upon corresponding price, which would have been paid by an independent or unrelated enterprise. This is judged by applying comparables. TPO has not rejected the quantum of royalty on the said principle. The reasoning given by the TPO is not only erroneous for the reasons stated above, but is also contrary to the Rules. Depending upon the method selected, net profit or gross profit of the assessed has to be compared with profit margins of related enterprise. The formula prescribed under the Rules does not accept the ratiocination adopted and applied by the TPO." 12. Another contention of the TPO that the Goodyear Brand was weak and therefore does not require payment of royalty, is not brought out from the records. The AR of the assessee has made elaborate submission and placed evidence on record to show that 'Goodyear' brand is considered to be one of the top most acclaimed brand across the globe. Therefore, there is no merit in the allegation of the TPO that Goodyear bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is no statutory sanction for roping in a comparable controlled transaction for the purposes of benchmarking. When it has been clearly mandated in all the relevant methods for determining ALP that the comparison has to be made by the enterprise's international transaction with comparable uncontrolled transaction, by no sheer logic a comparable controlled transaction can be employed for the purposes of making comparison. There is no warrant for diluting the prescription given by the statute or rules when such prescription itself serves the ends of justice properly and is infallible. If the view of the Revenue that a controlled transaction should not be shunted out for the purposes of benchmarking, is accepted, then all the relevant provisions contained in Chapter X in this regard, will become otiose. If such a contention of making comparison with a comparable controlled transaction is taken to its logical conclusion, then there will never arise any need to take up any case for transfer pricing scrutiny. The reason is obvious. ALP is determined for application in respect of transactions between two AE so that the profit likely to arise from such transactions is not underreport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given by the AE to the assessee, without charging consideration, on gratuitous basis in the preceding year, cannot de bar the AE from charging fee for the same services subsequently. The observations are: "8......When evaluating the arm'slength price of a service, it is wholly irrelevant as to whether the assessee benefits from it or not; the real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. Similarly, whether the AE gave the same services to the assessee in the preceding years without any consideration or not is also irrelevant. The AE may have given the same service on gratuitous basis in the earlier period, but that does not mean that arm's length price of these services is'nil'. The authorities below have been swayed by the considerations which are not at all relevant in the context of determining the arm's length price of the costs incurred by the assessee in cost contribution arrangement. 16. In light of the above, we conclude that there exists a direct nexus between the revenue earned by the assessee and the payment of royalty made to the associated enterprise for u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 4.10 & 4.11 OF ITA No. 1516/Del./2015 (AY: 2010-11) GROUNDS NO.4, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 & 4.7 OF ITA No. 1004/Del./2016 (AY: 2011-12) GROUNDS NO.4, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9 & 4.10 OF ITA No. 1706/Del./2017 (AY: 2012-13) 11. The issue as to making transfer pricing adjustment of Advertisement, Marketing and Sales Promotion (AMP) has also been dealt with by the coordinate Bench of the Tribunal in taxpayer's own case for AYs 2007-08, 2008-09 & 2009-10 (supra) and decided in favour of the taxpayer. Again, it is not in dispute that there is no change in the business model of the taxpayer so far as AMP expenses are concerned since AYs 2007-08, 2008-09 & 2009-10. The coordinate Bench of the Tribunal in taxpayer's own case (supra) proceeded to hold that incurring of AMP expenses by the taxpayer is not an international transaction of brand building of Goodyear brand undertaken by the taxpayer with AE and as such, no adjustment can be made by returning following findings :- 37. We have considered the arguments of the AR of the assessee and the DR. We agree with the submission of the AR of the assessee that the conclusion drawn by the ld. DR, by referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicates that the Assessee has not been an independent manufacturer and is only functioning as a contract manufacturer for the AE. It is also pointed out that the list of countries to which export is permitted by Honda, Japan included the countries falling in the same geographical location as India. It is stated that the terms of the agreement with such distributors in other countries "could have worked as a sound comparable" but that the Assessee had not chosen to make any such attempt in its TP documentation. 29. In response, it is pointed out on behalf of the Assessee that the payment of royalty fee for the HONDA trademark are separately benchmarked by the Assessee. That is not the subject matter of the dispute in the present case. It is further pointed out that the agreement whereunder license has been granted to the Assessee, does not contain any stipulation concerning the promotion of the brand name HONDA or for incurring AMP expenses for that purpose. There is, according to the Assessee, no tangible material to show that any arrangement or understanding, even an informal one, exists between the Assessee and its foreign AE in relation to AMP expenses. 38. Accordingly, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 579 Less : Rebate received -4,829,700 Total Elective cost 163,447,870 Add : 5% markup 8,172,394 Arms length price of export sales of traded goods 171,620,264 Revenue shown 161,950,196 Difference 9,670,068 14. The TPO accordingly proposed ALP of international transactions relating to export of trading goods at Rs. 17,16,20,264/- as against Rs. 16,19,50,196/- determined by the taxpayer. 15. This issue has come up before the coordinate Bench of the Tribunal in assessee's own case for AY 2006-07 which has further been followed in AYs 2007-08, 2008-09 & 2009-10 (supra), which has been confirmed by the Hon'ble Delhi High Court. For facility of reference, findings returned by the coordinate Bench of the Tribunal in taxpayer's own case for AY 2006-07 are reproduced as under :- "11.5 As regards issue of reduction of export incentive from goods sold is concerned, we find that the reasoning adopted by the TPO has considerable cogency. The export benefits are given to the taxpayers to promote and stimulate the growth of exports of goods and services in India. They are also meant to earn valuable foreign exchange for the country. The export incentive was available to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export incentives does not form part of the invoice price of goods sold. In such a case, it cannot be reduced from the cost of goods sold. We agree with the TPO that an expenditure that does not form part of the books of accounts cannot be treated as an expense for the purpose of transfer pricing accounting. 11.8 Assessee's reliance of Accounting Standard (AS)-II- Verification of inventories issued by Institute of Chartered Accountant of India (ICAI), for the purpose of determining the cost of purchase is not cogent as the reference to cost of purchase in this is not in the context of arm's length price in transfer pricing. 11.9 Assessee's reliance on the decision of the ITAT in Sony India (P) Ltd., vs. DCIT (Supra) is not applicable on the facts of the present case. The portion of this decision referred by the assessee's counsel was in the context of manufacturing of export to utilize idle facilities to enable the company to improve recovery of its fixed assembly cost. Moreover, in the present case, we are concerned with computation of cost plus markup which was not the case in the Sony India decision. 11.10 In the background of the aforesaid discussion, we are of the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by the coordinate Bench of the Tribunal for AY 2006-07, the order passed by the TPO is upheld to the extent of netting off of export incentive from the cost of goods sold and set aside the issue of netting off of rebate/ discount from the cost of goods sold to the file of AO/TPO for verification of the claim in view of the decision rendered by the Tribunal for AY 2006-07 by providing an opportunity of being heard to the taxpayer. Consequently, Grounds No.5, 5.1, 5.2, 5.3, 5.4 & 5.5 of ITA No. 1516/Del./2015 are allowed for statistical purposes. GROUND NO.6 OF ITA No. 1516/Del./2015 (AY: 2010-11) GROUNDS NO.5 & 5.1, OF ITA No. 1004/Del./2016 (AY: 2011-12) ITA No. 1706/Del./2017 (AY: 2012-13) 17. The AO has made disallowance of provision made by the taxpayer for replacement loss on the ground that the taxpayer has not incurred expenditure on account of replacement of goods in the subsequent years; that the same is not ascertained and is contingent in nature. The ld. AR for the taxpayer contended that this issue is again squarely covered in favour of the taxpayer in its own case in AYs 2006-07, 2007-08, 2008-09 and 2009-10 (supra). However, on the other hand, ld. DR fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the companies which are required to follow mercantile system of accounting. In this regard, we further find that Courts have consistently held the view that liability for provision for warranty for replacement on account of manufacturing defects arises at the time of sale and is to be allowed as deduction in that year on the basis of rational /scientific estimate, notwithstanding that the exact amount of liability is ascertained at a later date. We further find that action of the assessee in creating provision for warranty is also in consonance with the decision of the Hon'ble Apex Court in the case of Rotork Controls India Ltd. vs. C.I.T. 314 ITR 62. Similarly, we find that relying on the above decision in the case of Rotork Controls the Hon'ble High court in the case of C.I.T. vs. Whirlpool of India 242 CTR 245 too, dismissed the grounds of the revenue for disallowing provision for warranty. Reliance by the assessee's counsel in other case laws in this regard as mentioned above are also germane and support the case of the assessee. In the background of the aforesaid discussions and precedents, we hold that provision for warranty made by the assessee is allowable." 19. Followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of business and profession, the same are required to be allowed in full. So, in the given circumstances, ad hoc disallowance of advertisement expenses incurred by the taxpayer is not permissible under law. So, AO is directed to delete the same accordingly. Consequently, Grounds No.7, 7.1, 7.2, 7.3 of ITA N0.1516/DEL./2015, Grounds No.6 & 6.1 of ITA No. 1004/DEL./2016 and Grounds No.6, 6.1 & 6.2 of ITA No. 1706/ DEL./2017 are determined in favour of the taxpayer GROUNDS NO.6.2 OF ITA NO. 1004/DEL./2016 (AY 2011-12) 31. AO made disallowance of Rs. 54,17,314/- on account of shortfall on interest of provident fund on failure of the taxpayer to file clarification or supporting documents. This issue was specifically raised by the taxpayer before the ld. DRP as is evident from pages 210 & 211. The taxpayer addressed factual and legal submissions before the ld. DRP as under :- "10. Factual and legal arguments against the addition proposed by the assessing officer. During the subject year, assessee has claimed Rs. 15,95,33,526 incurred by it on account of Miscellaneous expenses. During the course of assessment hearing on 18 March, 2015, Ld. AO requested the assessee to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 43B of the Act are applicable on the interest paid by the assessee on the late payment of provident fund?" 36. Hon'ble High Court decided the aforesaid question in affirmative and operative part of the judgment is as under :- "11. We now revert back to the moot question, i.e., whether interest on delayed payment partakes the character of PF dues. Learned counsel for the Revenue laid great emphasis on the judgment in the case of Mahalakshmi Sugar Mills Co.(supra) itself and according to them, the Supreme Court clearly stated in that judgment that the interest payable on arrears of cess under Section 3(3) is in reality part and parcel of the liability to pay cess. It was an accretion to the cess. The arrears of cess "carries" interest; if the cess is not paid within the prescribed period a larger sum will become payable as cess. The exact language used by the Court and the context in which it was said is reproduced below: "10. Now the interest payable on an arrear of cess Under Section 3(3) is in reality part and parcel of the liability to pay cess. It is an accretion to the cess. The arrear of cess "carries" interest; if the cess is not paid within the prescribed period a lar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/- being the misc. charges and service tax written off out of misc. expenditure of Rs. 12,35,16,000/- on the grounds that the expenditure were not supported by vouchers and the taxpayer has failed to prove that the expenditure were incurred wholly and exclusively for the purpose of business; that the taxpayer has failed to deduct tax at source on certain expenditure and that some of the expenditure are in the nature of capital expenditure. 39. The ld. AR for the taxpayer drew our attention towards details of misc. expenditure to the tune of Rs. 12,35,16,000/- during the year under assessment, available at page 387 (Schedule 13) of the paper book. The taxpayer further filed the details of expenses disallowed, available at page 415 of the paper book, and details of amount adjusted on account of service tax, available at page 419 of the paper book, and given the break up at page 422 of the paper book. 40. The taxpayer brought on record the detail of expenditure qua disallowance of Rs. 35,84,180/-, available at pages 432 to 437 of the paper book, and invoices/ vouchers at pages 438 to 491 of the paper book. 41. Undisputedly, accounts of the taxpayer are audited by the statutory aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsistency. So, in view of the matter, AO is directed to delete the disallowance on account of stores and spares written off after verifying the documents available at pages 429 to 431 of the paper book. Consequently, Ground No.9 & 9.1 of ITA No. 1516/Del/2015 is determined in favour of the taxpayer GROUND NO.10 OF ITA NO. 1516/DEL/2015 (AY 2010-11) 45. AO made ad hoc disallowance of Rs. 25,00,000/- being 50% of the salary of administrative staff of the taxpayer on the ground that the same was attributed to capital work-in-progress and was required to be capitalized along with capital work-in-progress. The ld. AR for the taxpayer contended that since the role of Manufacturing Director and Plant Supervisor is to monitor the overall running of the factory and production, the salary paid to them cannot be capitalized on the ground that they were also engaged in supervising the capital work-in-progress along with their regular work. The ld. AR for the taxpayer further contended that since the taxpayer has undertaken extension of its existing business and not setting up a new facility or unit, the revenue expenses incurred for the same cannot be capitalized. 46. We are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 49. The AO made disallowance of Rs. 53,93,000/- on account of stores and spares written off on the ground that the details and supporting evidences of the written off stores and spares have not been furnished and the same was not verifiable with reference to physical disposal. The ld. AR for the taxpayer contended that in compliance to the directions issued by the DRP, they have submitted all details of stores and spares written off by reply dated 19.01.2015, available at pages 430 and 431 of the paper book, and its accounts are audited by statutory auditoRs. When we examine profit and loss account of the taxpayer, available at page 379 of the paper book, it shows that the taxpayer is a growing company having gross sale of Rs. 1167 crores as on March 31, 2010 as against Rs. 980 crores in the earlier years with gross profit of Rs. 734 crores as against Rs. 329 crores in the previous year and in the given circumstances, to write off useless stores is a business decision of the management which cannot be questioned particularly when the accounts of the taxpayer are audited one with supporting evidence. Moreover, the taxpayer has brought on record the complete details of the writte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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