Assessee's Appeals Allowed, Revenue's Appeal Dismissed

The Tribunal allowed the assessee's appeals on various grounds, directing the AO/TPO to re-examine and make necessary adjustments as per the guidelines provided. The revenue's appeal was dismissed.

---

---

Issues Involved:

1. Adjustment in Contract Manufacturing Segment
2. Disallowance of Royalty Payment
3. Adjustment on Account of Location Savings
4. Adjustment on Account of Green (Environmental) Cost
5. Set-off of Brought Forward Losses for Deduction under Section 80-IB
6. Addition to Closing Stock on Account of Unutilized CENVAT Credit
7. Depreciation on Repairs and Maintenance to Building
8. Non-granting of TDS Credit
9. Chargeability of Interest under Section 234B

Detailed Analysis:

1. Adjustment in Contract Manufacturing Segment:
The TPO re-characterized the activities of the assessee from toll manufacturer to contract manufacturer and made adjustments. The DRP remanded the issue to the TPO, who accepted the exclusion of a comparable company with significant related party transactions. The recomputed mean margin of comparables fell within the tolerance range, leading to deletion of the addition.

2. Disallowance of Royalty Payment:
The TPO disallowed royalty payments for corn and sunflower seeds, arguing no transfer of technology and non-patented products. The DRP upheld this disallowance. However, the Tribunal set aside this issue to the TPO for examining Internal CUP and comparable agreements in different geographical regions. The Tribunal directed the TPO to benchmark the ALP of royalty payments using these agreements or external CUP if necessary.

3. Adjustment on Account of Location Savings:
The TPO attributed location savings to the assessee due to cheaper labor costs in India. The Tribunal found no provision in Indian TP laws for such an adjustment and noted that the assessee's profit margins were already higher than comparables. It directed the deletion of the adjustment, emphasizing that location savings should be reflected in the comparables' operating margins.

4. Adjustment on Account of Green (Environmental) Cost:
The TPO argued that the assessee saved costs due to softer environmental norms in India. The Tribunal rejected this, noting the assessee's compliance with Indian environmental laws and significant environmental costs incurred. It directed the deletion of the adjustment, stating that such savings are embedded in the comparables' margins.

5. Set-off of Brought Forward Losses for Deduction under Section 80-IB:
The AO set off brought forward losses against profits for computing deduction under Section 80-IB. The Tribunal, following earlier years' decisions, held that each unit should be treated independently, and loss-making units should not affect the deduction of profit-making units. The Tribunal allowed the assessee's claim.

6. Addition to Closing Stock on Account of Unutilized CENVAT Credit:
The AO added unutilized CENVAT credit to closing stock without adjusting opening stock, purchases, and sales. The Tribunal, following earlier decisions, directed the AO to make adjustments at all stages, including opening stock, purchases, and sales, in line with the decision of the Bombay High Court.

7. Depreciation on Repairs and Maintenance to Building:
The AO did not grant depreciation on repairs and maintenance treated as capital expenditure. The Tribunal directed the AO to grant depreciation, consistent with the treatment in the assessment year 2010-11.

8. Non-granting of TDS Credit:
The Tribunal directed the AO to verify and grant the TDS credit accordingly.

9. Chargeability of Interest under Section 234B:
The Tribunal directed the AO to compute interest under Section 234B after giving due credit for the TDS amount.

Conclusion:
The Tribunal allowed the assessee's appeals on various grounds, directing the AO/TPO to re-examine and make necessary adjustments as per the guidelines provided. The revenue's appeal was dismissed.

---