TaxTMI 
TaxTMI 
2017 (2) TMI 116
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....d 24th December, 2015, passed under section 143(3) r.w.s 144C(13) in pursuance of directions given by the DRP dated 27.11.2015. Since common issues are involved in all the appeals arising out of identical set of facts, therefore, the same were heard together and are being disposed off by way of this consolidated order. The various transfer pricing issues involved in all the appeals at a glance are highlighted as under:- Sl. No. Issue under Appeal AY 2009-10 AY 2010-11 AY 2011-12 1 Adjustment in contract Manufacturing segment Departmental Appeal (Computation of 5% Range working as per Proviso to section 92C(2) of the Income tax Act, 1961 ( „Act‟) Rs.26,08,53,000 NA NA 2 Disallowance of royalty Payment -(Assessee's Appeal) Rs.4,79,44,806 (Ground Nos. 3 & 3.1) Rs.6,13,25,824 Ground Nos. 3 & 3.1 Rs.5,53,93,209 Ground Nos.3 &3.1 3 Adjustment on account of location savings- (Assessee's appeal) Rs54,69,43,636 Rs60,45,21,233 Ground No.4 and 4.1 Rs.65,26,11,480 Ground No.4 & 4.1 4 Adjustment on account of green (environment) cost- (Assessee's appeal) Rs.1,47,27,846 Ground No.5 Rs.1,79,80,345 Ground No.5 NA 2. To understand the facts and im....
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....d not restricting the adjustment on account of location saving to Appellants contract manufacturing activities i.e. Rs. 45,88,53,296, in accordance with the directions of DRP. 5. Based on the facts and circumstances of the case and in law, the learned AO/ TPO pursuant to the directions of the DRP, erred in making arbitrary adjustment of Rs. 1,47,27.846 based on conjectures and surmises in relation to environment/ green cost savings and further erred in not appreciating that the same was not an international transaction amenable to TP provisions. 6. That the learned AO/ TPO erred on the facts and circumstances of the case and in law in not granting the benefit of economic and risk adjustments Corporate-tax grounds: 7. Based on the facts and circumstances of the case and in law, the learned AO, pursuant to the directions of the DRP, erred in setting off the brought forward losses of Rs. 8,10,29,424 pertaining to Profenofos unit against the profits of the current year while computing deduction under Section 80-IB of the Act. 8(a) Based on the facts and the circumstances of the case and in law, the learned AO, pursuant to the directions of the DRP, erred in adding an amount o....
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..... The assessee has a manufacturing unit at Goa where it manufactures such active ingredients (i.e. TMX and its derivate products). The assessee has reported its segmental accounts in the following manner:- Segment Crop Protection Segment Seeds Total Sub- segment I Sub- Segment-II Crop Protection- Total Particulars Crop Protection Licensed Manufacturing Crop Protection Contract Manufacturing Gross sales 79,96,232 38,93,619 1,18,89,851 25,60,669 1,44,50,520 Less: Excise Duty (6,48,164) - (6,48,164) (6,48,164) Net Sales 73,48,068 38,93,619 1,12,41,687 25,60,669 1,38,02,356 Less: Cost of goods sold (52,34,359) (34,61,675) (86,96,034) (12,81,355) (99,77,389) Less: Operating Expenses (9,79,139) - (9,79,139) (6,71,743) (16,50,882) Operating Profit 11,34,570 4,31,944 15,66,514 6,07,571 21,74,085 Add: Other Income Other 1,03,071 4,097 1,07,168 Less: Other Expenses (45,785) (3,554) (49,339) Profit for the year 16,23,800 6,08,114 22,31,914 (OP/Sales) 14.19% -- 23.73% OP/TC 12.48% &nbs....
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....r efforts on creating new varieties with greater productivity, better tolerance to pests, diseases and environmental stresses, and improved quality characteristics such as nutritional composition, safety, consumer appeal and shelf life. In the years 2006, 2007 and 2008, Syngenta set aside USD $232 million, $283 million and $343 million, respectively in total research and development spending for the seeds business, representing approximately 14% of its annual seeds turnover in each year; * The assessee also explained that in the seeds business, the parent seeds provide the key property/characteristic of the seeds and play a vital role in the yield/ productivity of the crop. These parent seeds are further developed into hybrid seeds (i.e. plant material). These parent and hybrid seeds are owned by Syngenta Crop Protection AG ('SCPAG') and the hybrid seeds (i.e. plant material) are provided to SIL; * Subsequent to this, SIL carries out the modification to the plant material imported which are resistant to diseases, viruses and climatic conditions, according to specific guidelines/ protocols on the process and procedures as prescribed by the Headquarters in Switzerland to ....
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....up for consideration before the Tribunal in the assessee's own case for the assessment years 2007-08 and 2008-09 wherein, the matter has been set aside to the file of the TPO to examine the Internal CUP. He also brought to our notice that, in the assessment year 2003-04, the similar matter was restored back to the file of the TPO by the Tribunal, in pursuance thereof; TPO had examined the Internal Cup and accepted the payment of 'Royalty' on the same rate. On merits, Mr. Bhutani submitted that assessee has substantiated the determination of ALP of the entire transaction along with royalty payments in its Transfer Pricing Study Report by using TNMM as MAM which has been accepted in the earlier years also. The assessee had carried out detailed search analysis after selecting the comparables and in the TP Study Report it has been reported that, the operating margin of the assessee in the Seed Segment is far better than operating profit margins of comparables. The comparative profit margin of the assessee in various assessment years vis-a-vis the comparables were highlighted in the following manner:- Assessment Year Operating profit Margin of assessee (seed segment) Operating profit....
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....vide history, data, information and best seed-breeding solutions to user groups; * In addition, training programs imparting knowledge about breeding methods, techniques, and novel technologies are also arranged for the breeders. d) Receipt of technology in form of basic seeds by the Assessee from its AE is demonstrated by the grant of 'Permit for Import of Germplasm/ Transgenic/ Genetically Modified Organism for Research Purpose' by the National Bureau of Plant Genetic Resources ("NPGBR") to the assessee. 8. As regards the TPO's action for benchmarking the royalty rate of hybrid corn and sunflowers seeds @ 1% and 2% for the domestic and exports sales respectively as against 5% and 8% paid by the assessee by treating the same at par with "brand name license fee" (BNLF) and other seeds, Mr. Bhutani highlighted the following distinguishing features between the contracts of the two categories of the agreement:- Sr.No. Particulars Royalty agreement (Corn & Sunflower seeds) BNFL agreement (other Seeds) 1 Rates as per agreement 5% and 8% for domestic and export sales respectively 1% and 2% for Domestic and export sales respectively 2 Purpose of payment Royalty for t....
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....d by the AEs to the third parties which was around 12%. Thus, the royalty payment by the assessee is at Arm's length. He further pointed out that, even if the agreements relates to different geographical regions, however, the geographical circumstances will not make a difference because the terms of technology transfer being the same. Even if one goes by 'Royalty Stat Database', then also the comparables drawn are mostly from different geographical regions. 9. On the other hand, Ld. DR submitted that, the royalty has to be benchmarked separately as it may not be covered under the PLI worked under the TNMM. In support he strongly relied upon the decision of Hon'ble P&H High Court in the case of CIT vs. Knorr Bremise India Pvt. Ltd., Income-tax Appeal No.182 of 2013 judgment dated 06.11.2015. Objecting to the Internal CUP based on different agreement by the AE at different geographical locations, he submitted that, it is one of the major factor which makes a difference while carrying out the comparability analysis and that is why it has been kept as part of Rule 10B(2). He submitted that, if at all CUP method is to be applied, then external CUP should be looked into and for that pur....
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.... fact that the assessee's AE, Syngenta Seeds AG, Switzerland has been supplying plant material / basic seed to the assessee in terms of 'Technical Collaboration Agreement'. The assessee based on such proprietary rights, proprietary information, valuable technical knowhow and trademarks owned by AE carries out to produce, promote, and commercialize corn and sunflower seeds in the domestic market through its own process and modification to suit to Indian climatic condition. It bears the trademark of the AE in respect of which the royalty is being paid. The benefits derived by the assessee under the agreement and also the use of technology in the form of basic seeds have already been discussed above. The issue of royalty payment has chequered history, that is, similar payment in terms of same technical collaboration agreement has been made to the AE in the earlier years also. In the assessment year 2007-08 this issue has been dealt by the Tribunal after discussing the entire facts in the following manner:- 29. We have heard the rival submissions and perused the relevant finding given in the impugned orders as well as material placed before us. It is an undisputed fact that assessee h....
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....be treated as "Nil" cannot be justified in the wake of not only the "technical collaboration agreement" but also the actual conduct of the parties and the assessee who has earned huge returns during carrying out its activity by exploiting these intangibles. 30. Once we hold that the royalty payment cannot be computed at "Nil", the next issue which comes before us is how to compute the Arm's Length Price of such a transaction. The Ld. Counsel before us has contended that, there is an Internal-CUP which is based on agreement dated 13th August, 1995 with the third parties namely, HSAL & Sandoz India Ltd. The third party data have been rejected on the ground 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....
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....hat, the Assessing Officer/TPO in earlier years consecutively in three assessment years has specifically dealt and analyse the similar agreements of the assessee's AEs with third parties in the different geographical regions. Therefore, no exception should be carved out in this year and accordingly, these agreements can be examined or analyzed by the TPO if the geographical location does not have any material effect on the determination of the prices. Thus, we direct the TPO/AO that while carrying out the comparability analysis under CUP method, should also examine these agreements as referred to above by different AE's with third parties to benchmark the ALP of 'royalty payment'. In case, the Internal CUP are not available or the comparability analysis is not possible then External CUP can be explored by looking into the 'Royalty Stat Data' available for the Indian comparables working under the similar kind of technical agreements and conditions for which royalty is being paid. Thus, with this direction, the issue of royalty is being sent back to the file of the AO/TPO for re-adjudication in line of the direction given herein above. 12. The next issue for our consideration is Tra....
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....on the ground that, firstly, locational saving is not tagged with reallocation of an existing business. It can arise wherever factors of production are employed keeping in view the locational advantage of a particular location to give rise to the saving with respect to one or many of the factors of production, like cheap finance, cheap labour, cheap raw materials etc. He also referred to India's position on United Nations Transfer Pricing Draft in this regard; secondly, in case of India, cheap manpower is clear and distinguishing factor and, therefore, in terms of Draft United Nations Model, India has a clear location advantage vis-à-vis the labour supply; lastly, as regards the decision of ITAT Delhi Bench, he submitted that the said decision is being further challenged by the Department and in fact there is another decision of Co-ordinate Bench of ITAT Delhi Bench in the case of Li-Fang, which upholds the principle of locational saving. He proposed to calculate the location saving on export business of the assessee as per the following formula:- Location Savings Cost of per employee Globally (A) Less: Cost of per employee in India (B) Difference C= (A) - (B) Value of ....
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....ced to Rs. 54,69,636/- out of Rs. 56,83,40,074/-. 15. Before us, Mr. Bhutani retreating the same submissions which were made before the authorities below, relied heavily upon the coordinate Bench decision in the case of Watson Pharma Private Ltd vs DCIT, reported in [2015] 168 TTJ 281 (Mum). The sum and substance of the Tribunal's conclusion can be summarized as under:- * The assessee as well as AE operates in a perfectly competitive market and the assessee has to exclusive access to factors that may lead to super normal profits from location specific advantages. Revenue authorities were not able to substantiate the adjustment made; * The ALP principle requires benchmarking with comparables, and any advantage accruing from location savings would be reflected in profitability earned by comparables; * OECD and G20 in Action 8: Guidance on Transfer Pricing Aspects of Intangibles concluded that where local market comparables are available specific adjustment for location savings is not required; * TPO's reliance on UN TP Manual about was considered incorrect reliance, because UN Manual, is basically a view of Indian tax administration and is not binding on Appellate authorities; a....
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....ng from an international transaction; d) It is to be appreciated that a transaction per se involves a bilateral contract between the parties. Unilateral action without any binding obligation cannot be termed as transaction. Reference was invited to the 'Objective and Scope of Transfer Pricing Provisions' as given in Circular No.14 of 2001; e) Reliance was also placed on the following decisions, wherein, existence of an agreement, understanding or arrangement to substantiate the existence of an international transaction under section 92B of the Act has been held to be an essential requirement: * Vodafone India Services Private Limited vs UOI and Ors 368 ITR 1 (Bom); * Maruti Suzuki India Limited vs CIT [2016] 381 ITR 117 (Del); * CIT vs Whirlpool of India Limited [2016] 281 ITR 154 (Del); * Bausch & Lomb Eyecare (India) Private Limited vs Addl CIT [2016] 381 ITR 227 (Del); and * Patni Computers Systems Limited vs DCIT 60 DTR 113 (Pune). He submitted that the above judgments make it amply clear that existence of income/ potential income is the very basis to assume jurisdiction for invoking TP provisions to benchmark or examine the transaction having regard to the express....
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....rty comparable companies, in same geographical location, performing similar functions and assuming similar risk, would earn. Thus, it can be stated that return on location specific advantages, if any, are already embedded in the operating margins of comparable companies. 16. On the other hand, Ld. DR strongly objecting to the Ld. Counsel's contention on the power of the TPO for making such adjustment sans any specific reference made by the Assessing Officer to the TPO, he submitted that the guidelines issued by the CBDT in 2016 is administrative in nature and deals with the procedural aspect for AO and TPO which cannot be reckoned as retrospective. The power of the TPO is not carved by the new Instructions but from the Statute itself. After referring to the said CBDT Instruction No.3 of 2016 dated 10th March, 2016, he submitted that Board has specifically mentioned "henceforth" which inter alia means that, from the date of the Instruction and not prior to this date. In support, he referred to para 4.1 of the said instruction. Referring to the decision of Sony Ericson, 374 ITR 118 he submitted that TPO has suo-motto power to examine the international transactions. The TPO in course....
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....ieve improved financial outcome from the provision of the same product or services relative to alternative locations, that is, the places where costs are lower than the location where the activities were initially performed or carried out. The features and factors include labourers/skilled labourers, incentives, market advantage, infrastructure and other factors of costs savings. The location saving arise from the cost saving due to differences in the costs of operations between high cost and low cost tax jurisdictions. Earlier this concept was recognized under OECD Transfer Pricing Guidelines, wherein in Chapter 9 dealing with "Business Restructuring", this concept has been discussed in the following manner:- "9.148 Location savings can be derived by an MNE group that relocates some of its activities to a place where costs (such as labour costs, real estate costs, etc.) are lower than in the location where the activities were initially performed, account being taken of the possible costs involved in the relocation (such as termination costs for the existing operation, possibly higher infrastructure costs in the new location, possibly higher transportation costs if the new operati....
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....consequence, it should be possible to find comparables data to determine the conditions in which a third party would be willing at arm's length to manufacture the clothes for the enterprise. In such a situation, a contract manufacturer at arm's length would generally be attributed very little, if any, part of the location savings. Doing otherwise would put the associated manufacturer in a situation different from the situation of an independent manufacturer, and would he contrary to the arm's length principle; 9.152 As another example assume now that an enterprise in Country X provides highly specialized engineering services to independent clients. The enterprise is very well known for its high quality standard. It charges a fee to its independent clients based on a fixed hourly rate that compares with the hourly rate charged by competitors for similar services in the same market. Suppose that the wages for qualified engineers in Country X are high. The enterprise subsequently opens a subsidiary in Country Y where it hires equally qualified engineers for substantially lower wages, and subcontracts a large part of its engineering work to its subsidiary in Country Y, th....
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....re suitable local comparable data to determine the conditions in which third party would be carrying out such an activity which would be the measure of Arm's Length and if on such comparability analysis the price received or charged is comparable then no attribution on account of locational savings can be made. If comparable data are available where transaction is being tested or where the tested party is located, then the benefits of location savings can be said to have been captured in the ALP which has been determined. Now, in the OECD / G-20 "Based Erosion & Profit Shifting Project" (BEPS), New Guidelines on the concept of locational savings have been illustrated under "Action 8". These guidelines recommend that, while determining how the locational savings are to be shared between two or more Associated Enterprises then at the threshold it is necessary to consider, firstly, whether location savings exists; secondly, the amount of any net location savings; thirdly, the extent to which locational savings are either retained by a Member or Members of the MNE Group or are passed on to independent customers or suppliers; and lastly, where locational savings are not fully passed on ....
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....e adjustment is not at all justified sans any specific provision or guidelines. 19. Here in this case, the entire transaction between assessee and the AE have been analyzed under TNMM and the assessee's profit margin vis-a-vis the comparables have not only be accepted at Arm's Length Price, albeit its margin has been found to be higher than the average profit margin of the comparables. In that situation, any kind of return or advantage on account of location savings, already stands embedded/ captured in the operating margin of the Arm's Length Price determined vis-a-vis the comparability of the operating margins of the comparable companies. The TPO or the DRP have not carried out any comparability analysis with an uncontrolled transaction to show that such a factor materially affects the price/profit margin of the transaction. Such a comparability analysis with the uncontrolled transaction is sine-qua-non for the determination of Arm's Length Price by choosing any of the prescribed method. If such an exercise has not been carried out, then such kind of TP adjustment should not be permitted to be made. If the revenue's case is that, though not canvassed before us, such an adjustmen....
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...."functional risks", "enterprise risk" etc. without any material on record to establish such findings. If such findings are warranted, they should be supported by demonstrable reason, based on objective facts and the relative evaluation of their weight and significance". Thus, the Transfer Pricing adjustment cannot be on vague generalities. Accordingly, the adjustment made on account of 'location saving' for sums amounting to Rs. 54,69,43,636/- is directed to be deleted. 20. In view of our finding, the other pleas and arguments raised by the parties before us regarding powers of the TPO at the time of reference and recording of satisfaction by AO before reference, etc. (as discussed by us in foregoing paragraphs) are not being dealt upon and as they have become pure academic in view our finding given above. 21. Now, we come to the issue of Transfer Pricing adjustment on account of green environmental cost savings. The TPO noted that, assessee is engaged in the business of manufacturing and selling of agro chemicals and multiplication and selling of high yield variety seeds. The process of manufacturing has serious and hazardous environmental impact upon land, water and air of Indi....
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....if it has to carry on its business operations in India and comply with the environmental laws in India. 22. The TPO rejected the assessee's contention on the following reasons:- "i) As per information available in the public domain, Syngenta AG has to incur 3.72% of its sales revenue in making provisions for fighting environment degradation including regulatory compliance related with this whereas no such matching expenses is to be incurred or provision made by the assessee in India. If the assessee were to undertake this manufacturing in the USA, or it would have followed the same stringent environmental norms here in India, it would have incurred / provided for 3.72% of its sales i.e., Rs. 53.69cr. Obviously, the assessee is saving this cost by manufacturing and exporting from Indian soils owing to soft environmental regime in India; ii) Permission from GOA Pollution control Board is under Indian Environmental Regulations and norms which as discussed above are soft compare to the first World countries. Permission from the above board only signifies that Indian norms shall be adhered to. It does not signify that the assessee is adhering to the same norms as prevalent in first ....
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....AG -Form 20F For 2008 -Note 19 Page F-46 432 Total Sales B Syngenta AG -Form 20F for 2008 Note 5 Page F-30 11,624 % of environmental Provision to total sales C= A/B% 3.716% Particulars Source USD million Total Sales of SIL D As per financial statement 14,450,520 Savings on Environmental Compliance cost INR 53,69,81,323 The above calculated entire savings is to be considered. The savings allocable to assessee is treated at 75% as degradation of water and soil is long term, degradation of environment has severe impact on life and fauna and reversal process is cumbersome and costly. This would also be in consonance with the Indian position in various international discussion fora that arm's length compensation for cost savings and location rents should be such that both parties would benefit from participating in the transaction. In other words, it should be not less than zero and not greater than the value of cost savings and locations rents; it should also reflect an appropriate split of the cost savings and location rents between the parties. Accordingly, the adjustment has been made at 75% of the savings which is Rs. 4....
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....) The assessee sells goods to its AE as well as third parties in India. If no additional compensation is received by the assessee from third parties then why any additional compensation should apply to its transaction with AEs; m) The assessee submitted that the formula shared by the Ld. TPO on 18 January 2013 whereby 50% of location specific regulatory advantages were proposed to be attributed to the assessee is without any basis. However, in the TP Order, the TPO has allocated 75% towards the assessee. Thus, the same is against the principles of natural justice; n) Without prejudice to the above, the Ld. TPO erred in considering accumulated environmental provision instead of the current year provision; o) During AY 2009-10, the assessee has incurred environmental costs of 28,12,31,626/- which accounts for 3.24% of the total third party sales and 1.95% of total sales of the assessee. Since, the actual environmental cost incurred by the assessee is more than 0.51%, there are no savings made by the assessee on account of environmental cost". 24. The DRP however confirmed the action of the TPO and held that the environmental norms in India stand at par with the most developed cou....
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....d high standards mentioned in internal HSE policy. The assessee incurred a huge cost on maintaining a team of about 36 personnel for monitoring compliances of HSE, taking approvals from regulatory authorities, monitoring and adhering to quality standards, preparation and filing of compliance reports, etc. The actual costs incurred by the assessee amounted to Rs. 28,12,31,627 and Rs. 27,93,79,758 in AY 2009-10 & 2010-11 respectively. He further pointed out that cost incurred by the assessee is significantly higher than the cost environmental cost saving attributed to the assessee by the TPO in respect of the same is given in the following manner:- Particulars Amount (for AY 2009-10) Amount (for AY 2010-11) Environmental provision for the year (in USD million) (as per Form 20F) (A) 59 48 Total Sales (in USD million) (as per Form 20F) (B)(B) 11,624 10,992 Percentage of environmental provision to total sales (A/B) 0.51% 0.44% Export sales of SIL (in Rs.) 5,77,56,25,724 817,28,83,912 0.51% of above exports sales (in Rs.) (C) 2,94,55,691 3,59,60,689 Actual environmental costs incurred by the Assessee (in Rs.) (D) 28,12,31,625 27,93,79,758 Savings attributed to the A....
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.... Forest and also has filed returns regarding disposal of hazardous waste in Form 4 submitted to State Pollution Control Board, performance reports of 'Affluent Treatment Plant', air quality and meteorological data. Further, it has been stated that assessee has incurred cost of Rs. 27.94 crores approximately on account of environmental and HSE compliance in AY 2010-11 and in assessment year 2009-10, the assessee has incurred environmental cost of Rs. 28.12 crores. Here it has not been rebutted that these costs has not been incurred or under a comparable analysis with the comparables cost incurred by the assessee has not been found to be commensurate with the industry norm. The assessee had actually incurred environmental cost of more than 0.5% of total sales; therefore, there is no separate saving which can be attributed on the saving of the environmental cost. As incorporated in the foregoing paras, the assessee in its submissions duly supported by documentary evidences has pointed out to number of environmental compliances carried out by it to prove that in India also there is no laxity of compliance of laws and it had incurred huge costs on environmental protection measures and c....
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....losses of 80IB units against the profits 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 ....
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....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 Cotton & Synthetic Mills P Ltd-29 SOT 177(All); h) Jindal Alluminium Ltd [2012] 19 ITR(T) 255 (Bang Trib); i) Nishikant S Shirodkar -ITA No.7626/M/2013 (Mum Trib). 39. On the other hand, Ld. DR strongly relied upon the order of the AO. 40. After considering the relevant finding given in the impugned orders as well as various decisions relied upon by the Ld. Counsel, we find that so far as the issue of claim of deduction under section 80IB, the profit and loss for 4 unit....
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....sidered for computing the deduction. The loss making industrial undertaking would not come into the picture at all. The plain reading of the provision suggests that the loss of one such industrial undertaking cannot be set off against the profit of another such industrial undertaking to arrive at a computation of the quantum of deduction that is to be allowed to the assessee under s. 80-1(1) of the said Act. 9. In this regard, we may refer to the decision of this Court in the case of Dewan Kraft System (P) Ltd. (supra), which considered the pari-materia provisions of s. 80-IA(7) of the said Act. In that case, the question arose with respect to computation of the deduction in relation to three units - the Kalamb unit, the Delhi unit and the Noida unit. This Court held that while computing the deduction under s. 80-IA of the said Act, the profits and gains of the Kalamb unit for the purposes of determining the quantum of deduction under s. 80-IA(5) was to be computed as if such eligible business of the said unit was the only source of income of the assessee. This Court observed that the AO had erroneously mixed the profits of the Delhi and Noida units and had thereby restricted th....
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....ich 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 deduction under s. 80-1(6), the AO, no doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deduction under Chapter VI-A. However, this Court finds that the non obstante clause appearing in s. 80-1(6) of the Act, is applicable only to the quantum of deduction, whereas, the gross total income under s. 80B(5) which is also referred to in s. 801(1) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. If the interpretation as suggested by the appellant is accepted it would almost render the provisions of s. 80A(2) of the Act nugatory and, therefore, the interpretation canvassed on behalf of the appellant cannot be accepted. It is true that under s. 80-1(6) for the purpose of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub....
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....ld 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 undertaking as the only source of income of the assessee in order to arrive at a deduction under Chapter VI-A. The Supreme Court also held that under s. 80-1(6), for the purposes of calculating the deduction, the loss sustained in one of the units is not to be taken into account because sub-s. (6) contemplates that only the profits shall be taken into account as if it were the only source of income. 13. The above discussion makes it absolutely clear that the Supreme Court decision sought to be relied upon by the learned counsel for the appellant/Revenue, rather than deciding the issue in favour of the Revenue, clinches the matter in favour of the assessee. In view of the foregoing discussion, the substantial question of law, referred to above, is decided in favour of the assessee and against the Revenue. The appeals are dismissed. 41. In the light of the aforesaid decision, we hold that each undertaking or unit is to be treated as independent and separate unit and it is those industrial undertaking which have a profit or gain are to be con....
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....n 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 value. Under the provisions of section 145A, the valuation of purchase and sale and inventories for the purpose of determining the income is required to be made in accordance with the method of accounting regularly employed by the assessee and further adjustment is required to be made to include the amount of any tax duty, cess or fee by whatever name called actually paid or incurred by the assessee to bring the goods at place of its location and conditions as on the date of valuation. Therefore, the addition u/s 145A on account of duty is required to be made both in the valuation of purchase and sales as well as inventories. Hon'ble High Court of Delhi in case of Mahabir Aluminium (297 ITR 77) have held that adjustment on account of duty etc u/s 145A is required to be made to the opening stock. Therefore, adjustment on account of duty u/s 145A is required to be made at all stages including opening stock purchase and sales. We, therefore, set aside the order of CIT(A) and restore the matt....
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.... agreement with Associated Enterprises, the profit margin on cost is determined, the second proviso to Section 92C(2) of the Act has necessarily to be invoked on profit margin to the exclusion of sale price /sale proceeds, the latter being irrelevant secondary calculation for determining the tolerance limit envisaged in the second proviso". 38. As regards the Departmental appeal, it has been submitted that by the ld. Counsel that the TPO has made adjustment to Arm's Length Price to the transaction pertaining to sale of finished goods made to AEs in the crop protection-contract manufacturing segment to the tune of Rs. 26,08,53,000. This was done by re-characterizing the activities of the assessee to that of a toll manufacturer to a contract manufacturer. Subsequently, a search process was carried out with the functional profile of the assessee characterized as a contract manufacturer where a set of 6 comparables were finalized. The assessee agitated the inclusion of only one comparable company, that is, M/s Elder Projects on the ground that it was having significant related party transactions. The DRP merely remanded the issue to the TPO for verification of RPT. The TPO accepted t....