TaxTMI 
TaxTMI 
2012 (11) TMI 111
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....nd factual basis for the same. 2. Learned AO has erred in law and on facts in referring the case of the appellant to the transfer pricing officer. Under the facts and circumstances of the case, there was no reasons to interfere with the pricing adopted by the appellant as the same is falling within the parameters of transfer pricing laid down under the scheme of the Act. 3. Alternatively and without prejudice, the order of the Additional Commissioner of Income Tax acting as Transfer Pricing Officer is without jurisdiction and against the express provisions of law in as much as Commissioner of Income Tax could not have acted as transfer pricing officer. 4. The learned assessing officer has erred in law and on facts in invoking the provisions of Chapter X without prima facie demonstrating that there was some tax avoidance. 5. The learned assessing officer has erred in law and on facts in making a reference to the Transfer pricing Officer (TPO) u/s.92C(3) r.w.s. 92CA(1) of the Act without providing an opportunity of being heard to the appellant. 6. In any case the whole reference and the consequent orders are b....
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....e 110308 (product name Novatic Olive R Pure). A certificated dated 6th August 2011 of M/s.Ghanshyam Parekh & Co., Chartered Accountants with the sale Invoices in support of the above contention are annexed herewith for appreciation of the Hon'ble Bench." 3.1 The ITAT Bench has considered the petition and thereafter vide an order sheet entry dated 25.01.2012 has decided that the additional evidences as mentioned at Serial no. 1 & 2. are to be admitted , but the additional evidence at Serial No. 3 was not allowed to be admitted. With this back ground now we shall proceed to decide the controversies raised in this appeal. 4. Before us in respect of the above grounds the Appellant has primarily raised the objections about the stand taken by the T.P.O. in respect of the following two additions:- (a) Upward adjustment in respect of the goods sold by the assessee to 'AE' at lower price as compared to the third party, the upward adjustment of ..... Rs.1,74,69,516/- (b) Commission received from M/s. Atul Europe Ltd. ($ 1,54,530 + $ 1,90,888) Not at Arm's Length hence upward adjustment of ..... Rs.2,71,82,980/- TOTAL ADDI....
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....nish internal/external comparable uncontrolled price for all the products exported to the A.E.'s. Hence for the purpose of determination of Arm's Length Price it was asked to furnish the comparable transaction for bench-marking. 4.4 The assessee has furnished the details of the products sold and also furnished the internal & external uncontrolled prices which were stated to be available to the assessee. The assessee had asked for the adjustments namely; (a) difference in application, (b) quantity discount, (c) marketing risk, (d) financial risk. The adjustments claimed by the assessee were listed by the TPO as under :- "(i) The assessee has claimed 100% adjustments in prices for issue of difference in applications. (ii) The assessee has claimed quantity discount of 2% and 5%. (iii) The assessee has claimed adjustment for marketing risk at 5% and for financial risk at 2%. (iv) The assessee has claimed adjustment in price due to long term contract at 11%. (v) The assessee has claimed price difference of 30-50% due to lower price prevailing in China market." 4.5 It is worth mentioning that the TPO has accepted the adjustment mentioned....
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....of other products. In view of the above, assessee's claim, specifically to these 4 products regarding upward quantity adjustment is rejected." 4.8 Finally the TPO has concluded that the upward adjustment as offered by the assessee of Rs. 1,09,80,062/- was to be increased to Rs. 1,74,69,516/-. To arrive at this figure there are Annexures to the said order as 'Annexure A to D' in relation to all the four Associate Enterprises, summarised as under :- Annexure "A" Rs. 1,11,28,585/- Annexure "B" Rs. 40,46,606/- Annexure "C" Rs. 42,62,272/- Annexure "D" Rs. 18,68,053/- Total Rs. 1,74,69,516/- 5. The matter was referred to Dispute Resolution Panel (in short DRP) and for the sake of completeness the relevant observations shall only be discussed. The chief objection of the assessee was that the over-all sale-price charged from the A.E. was more than comparing the Non-A.E. So it was pleaded that no adjustment was needed as the said International Transaction was at ALP. Secondly, it was urged that no profit was shifted from India to outside country, rather the over-all profit was retained in India by chargin....
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....f the DRP is hereby required to be mentioned through which it was opined that the important factor is the payment of tax qua India and not qua the tax along-with the A.E. The rationale behind the T.P. provisions is to curtail the avoidance of tax in India. Intent and purpose is to ensure that there is no diminution in the tax liability of an Indian Enterprise. How much tax is paid by the foreign A.E. is not relevant in the determination of correct tax liability in the hands of an Indian Enterprise. The payment of tax by A.E. abroad does not contribute anything to Indian exchequer. So it is wrong to argue that the tax liability of an Indian Enterprise is to be seen along-with the abroad tax liability of A.E. on a total basis. For this legal proposition the case law relied upon was Gharda Chemicals Ltd. 5.4 On the question of proposed adjustments of slae-price the comment of the Ld. DRP was that if a product has been manufactured and sold using similar functional analysis , by taking into consideration the Assets and the Risks assumed, then no adjustment could be allowed on account of any non-economic indicator. No such adjustment is envisaged in 10 B except where the assessee is ....
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....4 AEs was amounting to Rs.1,09,80,061/-, which was under charged. However, with those 4 AEs there were transactions which were over charged and tabulated under the head "deletion" amounting to Rs.3,02,85,147/-. He has submitted that since the amount which was overcharged was higher in figure, therefore the net amount was in the minus figure. Thus showing that there was no requirement of any adjustment since ultimate result of all the transaction was that there was no transfer of profit by charging less from the AEs. 5.7 He has also drawn our attention on OECD guidelines which were narrated to the Revenue Authorities and the extract of the same is as under:- "In this context, we rely on the clause (d) of Rule 10A of the income tax rules 1962 which permits aggregation of individual transactions for determination and application of arm's length price. Rule 10A(d) defines the transaction as follows: For the purposes of this rule and rules 10B to 10E. (a) uncontrolled transaction means a transaction between enterprises other than associated enterprises, whether resident or non-resident. (b) Property includes goods, articles or things and intangible....
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....iscounted was also adjusted. Furthermore, a 5% discount on account of marketing and distribution was given. He has thus pleaded that the adjustments which were made by the assessee were reasonable and should have been allowed by the TPO. Rather, he has appreciated that the TPO has given the claim of adjustment in respect of marketing risk and lower price prevailing in China market as also adjustment in price due to long term contract at 11%, but not allowed "difference in application" and "quantity discount". The adjustments as made by the TPO in annexure ABC & D are hypothetical and without any basis. 5.9 Ld.AR has vehemently contested that it was wrong on the part of the AO as well as TPO that the assessee himself has offered upward transfer pricing adjustment of Rs.1,09,80,061/-. He has informed that the amount was not offered but it was compared with the transactions with 4 AEs where the assessee has overcharged. He has argued that there was no "under charge" of sale price as alleged by the TPO because the price was fixed after considering several factors as prescribed under law. If those factors are to be taken into account and to be adjusted against the alleged under charg....
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....d the principle of aggregation, however while submitting the document in respect of transfer pricing the assessee has taken into account all the sale transactions to the AEs for the purpose of comparability pertaining to a single product. The assessee has calculated the average rate and the same was compared with the average rate of sale transaction to non-AE. He has pleaded that the assessee has therefore considered the products as a closely linked transaction for the purpose of comparability in accordance with the provisions of rule 10A(d), but it was an incorrect understanding of the said sub-section. Even under Rule 10B(1), the sub-rule(ii) says that the price is to be adjusted between the international transaction and the comparable uncontrolled transactions. The term used is "transaction" has significance because each transaction is to be compared which would materially effect the price in the open market. The ld. DR has argued that one of the criterion of comparability is the "Specific characteristics" of the property being transferred. Thus the aggregation is required to be carried out to such an extent that the specific characteristics of the property are not changed signi....
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.... is sold at 3680.44, giving an average per unit rate of 1844. In such a scenario it may be claimed that on aggregate basis the average price charged in second case is more, while the fact is that the first product was old at a largely depressed price, which is clearly not ALP. As per the Transfer Pricing Regulations, the arm's length price is required to be determined for each international transaction as defined in section 92(1) of the IT Act where in the section talks about "an" international transaction. By aggregating the transactions of different products, the non-arm's length nature of one transaction is masked by the price of other, which is clearly not as per the provisions of Indian law. In this respect reliance is also placed on the judgment delivered by ITAT, Mumbai in the ACIT v. Tara Ultimo Pvt. Ltd. 5.16 Ld.DR has also undertook to counter an another argument of Ld. AR where he has referred an OECD guideline wherein it was opined that there are often situations where separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. According to him, ALP is required to be computed on a transaction-by-transaction ....
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....The assessee company was thus considered as the "Tested Party" for the purpose of the said document. One more fact has also emerged that a preliminary search was performed by the assessee company to get the potentially comparable uncontrolled transaction so identified 'internal comparables'. We have therefore noticed that the transactions undertaken with unrelated enterprises by the assessee company were internally compared. It is worth to comment, which shall have a bearing in our decision hereinbelow, that those were somewhat similar transactions, but neither the same transaction nor identical transactions. There is no dispute that the most appropriate method selected by the assessee was the CUP method thus fulfilled the requirement of Rule 10C of I.T. Rules. The accepted policy is that under CUP method, the arm's length price for the transfer of tangible property being transacted between the related parties is to be determined by the price paid for the same or similar property in a transaction between unrelated parties. A little more to elaborate, so that the issue raised can be decided with in this parameter, a transaction is considered comparable only if both the tangible prop....
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....ed two adjustments i.e (1) an adjustment of 100% towards 'difference in application' and (2) an adjustment of 2% to 5% towards 'quantity discount'. After giving his reasons in the impugned referral order passed U/s 92CA(3), the TPO has attached four "A", "B", "C" & "D" Annexure giving the details of comparative data of sales made to AE and Non-AE. Annexure 'A' suggested the maximum upward adjustment of Rs.1,11,28,585/-. We have studied this annexure. There are four Divisions covered in 'A' Anx. We have further noticed that the maximum difference is in respect of a Product (110308) . The quantity sold to A.E. of this product was 9,259 Kg. but to Non A.E. quantity sold was 17,820 Kg. The FOB per Kg. rate was for A.E. at Rs.664.47 but rate charged from Non-A.E. was at Rs. 1,778.79. This was the basic reason of objection raised by the TPO. Since the rate per charged from the Non-A.E. was higher for the same product therefore it was objected that why the same was not charged from the assessee's subsidiaries. 5.19 On the other hand, from the side of the assessee, a summary of comparative data for the sales made to AE and non-AE have also been furnished by the assessee as well. Thes....
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....ore this part of the adjustment back to the stage of the AO for de novo consideration, needless to say after providing reasonable opportunity to the assessee. 5.19.1 It is expected from us to give a finding in respect of one of the adjustment as demanded by the assessee however, rejected by the T.P.O. We are talking about the claim of 100% adjustment in price for 'difference in application'. The claim of the assessee was that the clients use the product purchased differently as per their business requirement. It was argued that the products sold to different parties are being used differently by them. It was explained that a chemical can be utilized in different manner. Like-wise aromatics or colors were used in plastic paints as also can be used in auto paint. So the argument is that considering the application of a product, the price was fixed by the assessee, which was the cause of variation. We are not convinced by this proposal. The end use of a product by the buyer has no relevance in fixation of sale price. How a manufacturing company, like assessee, can alter the price of a manufactured product on the basis of it's utilization by a buyer. For e.g. a car is manufactured b....
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....te with supporting evidence the basis of applying 2% adjustment and in some cases it was found to be 5% adjustment. A natural question has also come up that whether such discount in sale price had also been granted by the assessee to Non-A.E. on bulk purchases. However, we are of the view that the T.P.O was not justified in rejecting that claim which is otherwise prevalent in the market and can be said to be a common market practice. But before claiming this adjustment the assessee must be fair in not claiming this adjustment on such sale transaction to A.Es. which are apparently lower than the sales to Non-A.E. Rather bulk- purchases by the A.Es. are only required to be taken into account for this adjustment. We direct accordingly. 5.20 We have given our thoughtful consideration on the argument advanced by both the sides on the application of principle of aggregation. In this regard, a reference of Rule 10A(d) was made. This sub-clause has defined the term "transaction" which includes a number of closely linked transaction. In our opinion, the closely linked transaction are those transaction where they cannot be segregated and if segregated, then such transaction cannot be eval....
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.... manufacturing different products. When the manufacturing process and risk factors are diversified, therefore it is not advisable to aggregate all those products. In this regard, functions performed, assets utilized and risk undertaken (in short FAR analysis) gives us certain guidelines and, therefore, on the basis of FAR analysis a product of one division cannot be compared with the product manufactured in other division. Rather, we have noted that there is a contradiction in the argument of ld.AR. Ld.AR has argued at one point of time that an adjustment is required on account of difference in application. In other words, the AR has admitted that the different products have different end-use. Whether such products can be considered as closely linked products is a question mark?. Rather, it is justifiable to hold, considering the FAR analysis of the case, that the arm's length price is required to be determined on a transaction-by-transaction basis. An aggregation, as suggested, is to be ruled out when ALP can be more accurately determined or evaluated on a separate basis. 5.22 From the side of the Revenue, Ld. DR Mr. Anurag Sharma has pleaded that the aggregation is suggested w....
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....ch transaction separately." In the light of the above discussion and respectfully following the precedents cited, we hereby reject the pleading of ld. AR through which it was demanded to aggregate the entire transaction with the AE for the whole year. 5.24 Mr. Soparkar has raised one more issue which was in respect of "tax avoidance motive". In this regard, at the outset, we hereby place reliance on Azetc Software & Technology Services Ltd. v. Asst. CIT reported at [2007] 107 ITD 141 (Bang) (SB), wherein vide para 16 the Respected Tribunal has opined that as per the mandate of section 92(1), income from International transaction between AEs has to be computed having regard to arm's length price. Therefore, question of tax avoidance is to be established by following mandatory provisions. In the opinion of the Respected Bench, the language used by the legislature is plain and ambiguous and there is nothing in the language employed by the legislature on the basis of which it can be said that AO must demonstrate the avoidance of tax before invoking these provisions. Even in the case of Cocacola India Inc. 309 ITR 194 (P&H) the Hon'ble Court has expressed that there is no merit in....
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.... case of Coca Cola India Inc.(supra) it was held that a decision of the AO to refer the international transaction to TPO for determination of ALP do not in any manner visit the assessee with any civil consequence. A safe-guard has already been provided in the Statute by making a compulsory provision about seeking of prior approval from the CIT by the AO. It was held that there should not be any grievance to the assessee because the TPO had given due opportunity to the assessee. We therefore hold that in the absence of any Statutory provision or a mandate of requirement of giving an opportunity before reference do not adversely affect a taxpayer because the TPO has definitely given sufficient opportunity to the assessee. Finally, in the result, this ground no. 1 along with the sub-grounds of the Assessee are restored back to the file of AO to re-compute the ALP as per the direction given hereinabove, however some of the contentions are rejected, therefore may be treated as partly allowed but for statistical purposes. 5.26 The TPO had also made an upward adjustment of Rs. 2,71,82,980/- on account of commission transaction. In this regard, at the outset, assessee has raised an a....
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....inted out that these views are on the basis of the provisions of Section 92CA, as applicable to the assessment year 2006-07, that is, prior to the introduction of sub-section (2A) of Section 92CA by virtue of the Finance Act, 29011 with effect from 01.06.2011." unquote. Respectfully following this decision, we hereby allow this additional ground of the assessee. 5.27 While reading the order of the Hon'ble Delhi High Court (supra) in the case of Amadeus India (P) Ltd. we have noted that it was also pronounced that the assessment is an exclusive jurisdiction of the AO. In the present case, the AO was handicapped about this information being not reported in Form 3CEB. Therefore, at the time of reference the AO could not know whether there was a cross-order transaction between the assessee and the AE of commission payment. In this regard, from the side of the Revenue ld. DR Mr. Sharma had referred CBDT Instruction No. 3 of 2003 which says that, quote "..... In order to make a reference to the TPO, the Assessing Officer has to satisfy himself that the taxpayer has entered into an international transaction with an associated enterprise. One of the sources form which the factual inform....
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....(1) & (2) of section 92C, then the AO may proceed to determine the arm's length price in relation to the said international transaction on the basis of such material or information or document available with him. As against this provision, a counter argument has been raised by ld. AR by referring the provisions of section 92CA sub-section (4) which says that On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the arm's length price as so determined by the Transfer Pricing Officer. The argument is that the AO shall compute the income in conformity with the arm's length price as determined by the AO, but if part of the TPO's adjustment is void ab initio, then that part ought not to be taken into account for the computation of total income. Ld. AR Mr. Soparkar has vehemently pleaded that such an exercise of computing the total income by taking into account an illegal procedure must not be approved and deserves to be held as void ab initio. In the present situation, as discussed hereinabove, specially when there was a non-disclosure on the part of the asses....
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....rder to the assessee. The assessee has one more opportunity to contest the addition. The assessee has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel. The DRP is also authorized to issue direction as it thinks fit for the guidance of the AO. At that stage as well the assessee has an opportunity of hearing. The AO is thereafter shall in conformity with the directions of the DRP complete the assessment proceedings. Only under sub-section 13 of section 144C of the Act, such direction are binding upon the assessee. So the existence of an international transaction can be examined by the DRP at the instance of the assessee. The Court has said that there is nothing to limit the powers of DRP. Therefore, finally the conclusion was drawn in favour of the Revenue because the assessee had more than one opportunity of hearing to contest an impugned addition. The Hon'ble Court has placed reliance on a decision of Hon'ble Delhi High Court pronounced in the case of Soni India Pvt. Ltd. 288 ITR 52 (Delhi). 5.28 On the basis of the decision of Hon'ble Jurisdictional High Court, discussed here....
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....ontrary the assessee was supposed to pay the commission to Atul Europe Ltd. In this connection, few correspondences with Atul Europe Ltd. are now placed in the compilation. It has also been contested that the assessee had never debited commission in its books of accounts and never claimed expenditure. From the facts and the evidences now placed it is evident that the counter-claims are yet to be re-examined afresh by the AO. If the assessee is in a position to demonstrate that no commission in fact was received and on investigation the AO is satisfied, then the impugned addition/upward adjustment is required to be deleted. With these directions, we hereby hold that the upward adjustment pertaining to the Transfer Pricing transaction regarding commission received from M/s. Atul Europe Ltd. of Rs. 2,71,82,980/- is to be decided afresh by the AO. This ground may be treated as partly allowed but for statistical purposes. 6. Ground Nos.7 & 8 read as under: Prior Period Expenses of Rs.1,11,31,209/- 7. The learned AO/DRP has erred in law and on the facts of the case in proposing to add prior period expenditure to the tune of Rs. 1,11,31,209/- to the total income of the Appellant ....
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.... the crystallization of liability was not produced. The DRP has finalised that since the assessee had maintained the accounts on mercantile basis, therefore AO was justified in proposing to make the said disallowance. 7. From the side of the appellant, ld. AR Mr. S.N. Soparkar has pleaded that the liability had crystallized during the year, therefore the expenditure was to be allowed in the year under consideration. He has cited Toyo Engg. India Ltd. v. Jt. CIT reported at [2006] 5 SOT 616 (Mum.) and CIT v. Jagatjit Industries Ltd. reported at [2010] 48 DTR (Del) 104. 8. On the other hand, from the side of the Revenue, ld. DR Mr. D.P. Gupta has supported action of the AO primarily on the ground that the assessee has neither demonstrated the nature of liability nor demonstrated the basis on which it was considered that the liability had crystallized during the year. 9. We have heard both the sides. We have also perused the orders of the authorities below in the light of the compilation filed. It is worth to mention that the neither the Revenue Department nor the appellant, both have explained the facts in respect of the nature of the "prior period expenses". We have careful....
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....reinabove, after providing a reasonable opportunity of hearing to the assessee. In the result, both the grounds of the assessee may be treated as allowed for statistical purposes only. 10. Ground No.9 reads as under: Disallowance of Rs.2,26,03,000/- u/s.14A of the Act. 9. The ld. AO/DRP has erred in law and on facts of the case by proposing to add Rs. 2,26,03,000/- u/s. 14A of the Act by applying provisions of Rule 8 of the income Tax rules, 1962. 10.1 The dividend income, which was claimed as an exempt income, was amounting to Rs. 4,26,31,480/-. The AO has proposed to invoke the provisions of section 14A to disallow the proportionate expenditure. The assessee's contention was that in the past there was huge accumulation of profits which was non-interest bearing, hence there was no requirement of disallowance of proportionate interest expense. It has also been argued that the loans taken were for specific purposes, hence not utilized for earning exempted dividend income. It has also been contended that in earlier years the assessee had claimed deduction u/s. 80M but no such allocation of expenditure was made for disallowance. The AO's observation was that the explanatio....
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.... dated 28.3.2011. Both these orders have been passed by the Hon'ble Gujarat High Court. These orders revolve around the issue of proportionate disallowance of interest and in this regard on the basis of the facts on those cases it was held that no part of the borrowed funds could be stated to have been diverted to earn tax-free income. Facts of those cases have revealed that the borrowed funds were utilized for its own business purposes and that the investment in earning tax-free income were made out of own interest-free funds. Therefore, the ld. AR has contested that the component of interest expenses was not to be taken into account in the formula as applied by the AO. 12. From the side of the Revenue, ld. CIT-DR has supported the orders of the lower authorities and argued that the assessee has not placed on record the nexus of investment of non-interest bearing own funds towards investment in tax-free dividend income. 13. We have heard both the sides. The question of applicability of section 14A on the present facts of the case must not be doubted because undisputedly a substantial amount was received as dividend income by the assessee. The only question is that how the in....
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....then the matter is to be remanded back for afresh investigation. It has also been made clear that the proviso to section 14A of the Act was effective from 2001-02. The Hon'ble Court has also pointed out the importance of Rule 8D of the I.T. Rules, 1962. It was made clear that sub-section (1) to section 14A was inserted with retrospective effect from 01/04/1962, however, sub-sections (2) & (3) were made applicable with effect from 01/04/2007. The proviso was inserted with retrospective effect from 11/05/2001, however Rule 8D was inserted by the Income Tax (Fifth Amendment), Rules, 2008 by publication in the Gazette dated 24/03/2008, relevant findings are reproduced below:- "(a) The ITAT had recorded a finding in the earlier assessments that the investments in shares and mutual funds have been made out of own funds and not out of borrowed funds and that there is no nexus between the investments and the borrowings. However, in none of those decisions was the disallowability of expenses incurred in relation to exempt income earned out of investments made out of own funds considered. Moreover, under Section 14A, expenditure incurred in relation to exempt income can be disallowe....
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....computing the total income of the assessee. Consequently, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total income under the Act, by virtue of the provisions of Section 14A(1); (ii) The payment by a domestic company under Section 115O(1) of additional income tax on profits declared, distributed or paid is a charge on a component of the profits of the company. The company is chargeable to tax on its profits as a distinct taxable entity and it pays tax in discharge of its own liability and not on behalf of or as an agent for its shareholders. In the hands of the shareholder as the recipient of dividend, income by way of dividend does not form part of the total income by virtue of the provisions of Section 10(33). Income from mutual funds stands on the same basis; (iii) The provisions of sub sections (2) and (3) of Section 14A of the Income Tax Act 1961 are constitutionally valid; (iv) The provisions of Rule 8D of the Income Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008 are not ultra vires the provisions of Section 14A, more particular....
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....atistical purposes. 14. Ground No.10 reads as under:- Disallowance of Rs.12,50,444/- in respect of irrecoverable balance written off 10. The ld. AO/DRP has erred in law and on facts of the case by proposing to disallow Rs. 12,50,444/- in respect of irrecoverable balance which were written off in the books of accounts. 14.1 The AO has noted that a sum of Rs. 29,55,870/- was debited as "irrecoverable balances written off" in the P&L account. The assessee has informed that out of the said amount which was written off in the P&L account a sum of Rs. 12,50,444/- was written off which was in respect to M/s. Sando Industries. It was informed that the assessee had given an advance to the said party for one equipment. The said party had completed the work, however, the assessee-company had afterwards decided not to take the said equipment. The assessee had also not paid the balance amount. On the part of the said party the advance given was retained and the assessee was not given back the said advance. In the opinion of the AO the advance was given for acquiring a capital asset. Such an advance would not be treated as a trading loss according to AO. Placing reliance on Motiram N....
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....eration, the AO had examined the internal consumption and the gain shown in the books of account. According to AO, the percentage of gain was at 32.26% which was inordinately high. The AO has also noted that the credit for electricity was taken at Rs. 5.199 on the basis of the charges of the Gujarat Electricity Board. As against that, the alleged notional rate of credit of electricity charges was reduced by the AO to Rs. 3.699 with the result the AO has calculated the cost of generation at Rs. 5,16,50,269/-. Resultantly, the claim was restricted to the said amount as against the claim of the assessee. About the third Unit, i.e. co-generation plant, the AO had worked out the gain at 19.99% which according to him was towards higher side. The AO has calculated the cost of generation by applying the notional rate of electricity credit at Rs.3.699 which resulted into a loss, hence the assessee's claim was disallowed. 17. At the outset, ld. AR has informed that earlier vide an order dated 16.5.2008 for A.Y. 2001-02 in assessee's own case titled as "Atul Limited v. The Income-tax Officer" (ITA No. 3528/Ahd/2004) it was held that in respect of "New Power Plant" that the same was merely ....
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....of depreciation for the current year, i.e. A.Y. 2006-07 was required to be reduced by the amount of depreciation already allowed from A.Y. 2001-02 uptill A.Y. 2005-06. The assessee had submitted a revised working of depreciation. According to the revised working, the depreciation was computed at Rs. 24,38,17,771/-. The difference between the two, i.e. the original claim of depreciation and the revised claim of depreciation was thus computed by the AO at Rs. 1,21,18,801/-. In the result, the excessive claim of depreciation was disallowed. In this regard, the only argument of the assessee's counsel was that the claim of depreciation for the year under consideration is consequential of earlier years' judgement. While deciding the appeal of the assessee for A.Y. 2001-02, Respected Coordinate Bench "D" Ahmedabad in ITA No. 3528/Ahd/2004 vide an order dated 16/05/2008 has affirmed the findings of the ld. CIT(A) and the depreciation as allowed by the AO was affirmed. Due to this reason, we are of the view that ld. AR has correctly stated that the recalculation of depreciation for the year under consideration was nothing but a consequential effect of the re-computation of depreciation. We ....