TaxTMI 
TaxTMI 
2019 (4) TMI 1382
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.... That on facts and circumstances of case, Ld. CIT(A) has erred in upholding validity of issue of notice u/s 153A of I.T. The Act, 1961 and consequential assessment even though it is not based on any incriminating material seized during course of search. (ii) That on similar facts, reassessment proceedings u/s 147 for AY 2004-05 were quashed by Hon'ble ITAT vide its order dated 8th January 2016 on ground that there was no tangible/incriminating material and as such on parity of reasoning and principle laid down, there is no legal basis for assuming jurisdiction u/s 153 A of I.T. Act, 1961. (iii) That scope of proceedings u/s 147 being wider than 153A, in absence of any incriminating material, proceedings u/s 153A are illegal and invalid. (iv) That in absence of pending assessment proceedings and existence of tangible material, there is no case of abatement of completed proceedings and assumption of jurisdiction u/s 153 A of I.T. Act, 1961. (v) That reference to special auditor u/s 142(2A) is illegal and uncalled for and report of special auditor cannot be a basis for any addition and disallowance as scope of section 153 A is confined to incriminating material. (vi) Th....
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....rovisions of section 14A are not applicable to facts of case. 7(i). That on facts and circumstances of case, Ld. CIT(A) was not justified in confirming disallowance of Rs. 17,58,546/- on account of excess claim of deduction u/s 80IB/IC on alleged ground that appellant had violated provisions of section 80IA(5) in as much as business losses pertaining to financial year 2001-02 and 2002-03 had not been taken into account while computing deduction under section 80IB/IC of The Act. (ii) That action of lower authorities is illegal, arbitrary and without jurisdiction as same is not in conformity with provisions of section 153 A of The Act. 8(i). That on facts and circumstances of case, Ld. CIT(A) was not justified in upholding disallowance of deduction u/s 80IB/80IC on ground that fair market value of goods transferred from Noida division to eligible units is higher in terms provisions of section 80IA(8) read with 80IB( 13) and 80IC(7) of The Act as follows : a. In respect of unprocessed goods, by restricting profit markup to extent of 2% instead of 10% as computed by assessing officer. b. In respect of processed Kathha (Catechu), by confirming valuation done by assessing ....
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....sions of section 153 A of The Act. 11(i). That on facts and circumstances of case, Ld. CIT(A) was not justified in restricting disallowance of deduction under section 80IB/IC by applying provisions of section 80IA(8) read with 80IB(13) and 80IC(7) of The Act, on account of re-computation of profits of eligible undertaking, by increasing value of common costs incurred at corporate office, depots, branches, etc. and allocated to such units in an appropriate ratio, with profit margin of 10% as against 26.14% applied by AO. (ii) That Ld. CIT(A) was not justified in holding that various corporate services rendered by corporate office, depots, branches, etc. to eligible undertakings, should have been allocated to eligible units at fair market price/cost plus appropriate mark-up for purposes of computing deduction under section 80IB/IC read with section 80IA(8) of The Act. (iii) That Ld. CIT(A) has failed to appreciate that no services were rendered by other divisions, viz., corporate office, depots, branches, etc., to eligible undertakings, but expenses were incurred by such divisions on behalf of eligible undertakings, which was subsequently allocated to such eligible units. (i....
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....ome. 14(i). That on facts and circumstances of case, LD. CIT(A) was not justified in confirming transfer pricing adjustment of Rs. 5,95,51,686/- to arm's length price of interest received from loan advanced to associated enterprise by relying on TPO's order. (ii) That CIT(A), assessing officer and TPO has erred on facts and in law in applying interest rate of 16.31% p.a. on basis of SBI prime lending rate + 400bps on loan advanced by appellant to its wholly owned subsidiary, namely, DS Business AG as against interest at rate of 3% p.a. charged by appellant. (iii) That CIT(A), assessing officer and TPO has erred on facts and in law in considering average Prime Lending Rate of SBI as arms length rate of interest without appreciating that such rate is applicable on loans availed in India in domestic currency. (iv) That loan was advanced by appellant to its associated enterprise in foreign denominated currency and accordingly LIBOR rates prevailing in international market should be considered for benchmarking and not SBI prime lending rate. 15(i) That lower authorities have erred in charging interest u/s. 234A, 234B & 234C of The Act without application of mind. (ii) Tha....
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....n facts & in circumstances of case, Ld. CIT(A) has erred in law & on facts in allowing amount of Rs.il,46,248/- on account of excise duty refund for computation of deduction u/s 801C. 8. Whether on facts & in circumstances of case, Ld. CIT(A) has erred in ^ law & on facts in deleting addition of Rs. 19,34,839/- made by AO on account of prior period expenses. 9. Whether on facts & in circumstances of case, Ld. CIT(A) has erreu in law & on facts in deleting addition of Rs. 2,63,45,007/- made on account of foreign exchange fluctuation, thus ignoring provision of AS-11. 10. Whether on facts & in circumstances of ease, Ld. CIT(A) has erred in law & on facts in deleting disallowance of Rs. 4,98,31,329/- made by AO on account section 14A of Income Tax The Act, 1961 and thus restricting disallowance to extent of exempt income. 11. Whether on facts & in circumstances of case, Ld. CIT(A) has erred in law & on facts in directing to take basis of calculation from lowest purchases from third party, thus ignoring facts and evidences of bogus purchases unearthed during course of search and post search proceedings. 12. Whether on facts & in circumstances of case, Ld. CIT(A) has erre....
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....t year 2005 - 06 to 2011 - 12 by way of a consolidated order partly allowing appeal of assessee and partly confirming certain additions/disallowances. Therefore, AO as well as assessee aggrieved with his order, have filed these appeals before coordinate bench. 5. We come to appeal of assessee where ground number 1 of appeal challenges validity of issuance of notice u/s 153A of The Act and consequential assessments made by learned assessing officer. As per this ground, assessee says that when 147 for assessment year 2004 - 05 were quashed by coordinate benches jurisdiction u/s 153A of The Act also does not survive. It was further mentioned that in absence of any incriminating material, proceedings under section 153A are illegal and invalid , assessee also challenged audit under section 142 (2A) of The Act and further stated that even otherwise various additions and disallowances in relation to proceedings under section 153A were merely made on basis of change of opinion and reappraisal of same facts which existed and examined during original assessment proceedings. 6. At time of hearing learned authorised representative did not press ground number 1 of appeal. Hence, it is dismi....
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....eing well established principle, there is no case of any disallowance u/s 40A(3) read with rule 6DD(b) of The Act. 10. With regards to reimbursement of expenses to extent of Rs. 9,66,500/- to employees, it is submitted that such reimbursement was towards accumulated bills of tour and travels and individual bills being less than Rs. 20,000/-, there is no case of breach of provisions of section 40A(3) of The Act. In this connection, reference may be made to decision of Delhi tribunal in case of ACIT v. Nirman Associates (Del ITAT) (ITA No. 4272/D/11). In light of facts and legal position clarified above, disallowance u/s 40A(3) is not sustainable and may kindly be deleted. 11. Learned CIT DR vehemently supported order of lower authorities and referred to special audit report wherein such disallowance is proposed. He further submitted that reimbursement of expenditure in Cash more than INR 20,000 is also in violation of provisions of section 40A (3) of The Act and therefore lower authorities has correctly applied provision of law in considering disallowance. 12. We have carefully considered rival contention and perused orders of lower authorities. We have also perused audit repo....
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....dismissed. 15. Ground number 4 of appeal is with respect to valuation of work in progress. learned assessing officer in para number 23 - 25 of assessment order noted that special auditor reported that assessee company has not classified its inventory as per requirement of schedule VI of Companies The Act, 1956. He observed that assessee company has not included in valuation of work in progress, indirect cost like manufacturing expenses, power and fuel, direct labor etc. and fixed and variable overheads like depreciation in plant and machinery, factory building, factory management, administration costs and other indirect costs incurred for conversion of stock in trade. Therefore, learned assessing officer noted that valuation of work in progress in form of semi finished goods and unpacked finished goods resulting in under valuation of inventory is of INR 31639765/- resulting in understatement of income to that extent. Unit wise details of valuation of working progress in form of semi finished goods and for unpacked goods was given as per para number 10 of audit report. Learned AO noted that difference in valuation of opening inventory of work in progress after loading of indirect ....
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....ing officer is only enhancing value of closing stock is mechanical and against principle laid down by Hon'ble Delhi High Court in case of CIT v. Mahavir Alluminium Ltd. (2008)297 ITR 77 (Del) in which it was held as under: "We are of opinion that in present case, there is no question of any double benefit being given to assessee. Paragraph 23.13 of guidance note itself makes it clear that whenever any adjustment is made in valuation of inventory, this will affect both opening as well as closing stock. It is also to be noted that if any adjustment is required to be made by a statute, (as for example Section 145A of The Act), effect to same should be given irrespective of any consequences on computation of income for tax purposes. Section 145A of The Act begins with as non-obstante clause, and therefore, to give effect to Section 145A of The Act, if there is a change in closing stock as on 31st March, 1999, there must necessarily be a corresponding adjustment made in opening stock as on 1st April, 1998. 17. He further submitted that Further, considering entirety of facts, adjustment in value of opening and closing stock would be a revenue neutral exercise and no fruitful purpose....
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....terest paid on borrowed funds at higher rate of interest as business expenditure. Assessee Company has given loans and advances to its group companies out of borrowed funds without charging adequate interest in some cases. Therefore, as interest charged from group companies are lower than rate of interest paid by it on funds borrowed. Therefore, special auditor noted that business expediency to borrow funds at higher rate of interest paid to its other group concerns on funds borrowed from them is not demonstrated. Hence it was reported that total interest claimed by assessee company as business expenditure of INR 20214239/- is not allowable. Reason being difference between higher interest rate borrowing of funds by applying rate of interest paid on funds borrowed and interest charged from group concerns at a lower rate, which is not allowable as an expenditure to assessee under provisions of section 36 (1) (iii) of The Act. On questioned by ld AO, assessee explained that assessee has given above funds to group companies out of retained earnings of assessee company and borrowed funds have not been utilized. It was further stated that borrowed funds have been utilized only for expans....
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.... and as such, there is no nexus between borrowed funds and advances made to sister concerns. As per comparative chart and bank statement placed at Page 2-21 of Supplementary Paper book - 2, he submitted that it is self evident that appellant has substantial noninterest bearing funds and it has to be presumed that business advances to sister concerns amounting to Rs. 43 Cr was out of own funds. Details of non-interest bearing funds submitted were as under : Share Capital Rs. 21,51,43,090/- Reserves and Surplus Rs. 571,60,32,751/- Total Rs. 593,11,75,841/- 22. He therefore submitted that position has to be examined in totality and it is not open to consider entries in bank account in a distorted and isolated manner. He further relied up on several judicial precedents as under : i. CIT v. Reliance Industries Ltd. [2019] 410 ITR 466 (SC) ii. CIT Vs. Bharti Televenture Ltd. 51 DTR 98 (Del.) iii. CIT Vs. Tin Box Co. 260 ITR 637 (Del.) iv. CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR 340 (Bom) 23. He submitted that in light of factual and legal position clarified above, there is no case of any disallowance of interest u/s 36(1)(iii) of Income Tax The Act, ....
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....ing loan to sister concern, cash credit account did have balance due to assessee from banks. It shows that borrowed funds have not been used by assessee for giving advances to sister concern. Therefore merely giving cheques from cash credit account does not show that assessee has utilized borrowed funds. Even otherwise assessee has huge excess funds available which are non-interestbearing in form of share capital and reserves and surplus compared to advances given to sister concern at lower rate of interest or without charging interest, honourable Supreme Court in 410 ITR 466 in para number 33 has held as under:- "33. We do not see how when Assessing Officer's views are that in cases of interest-free loans and interest given by assessee to its subsidiary companies are in above sums, still, principle laid down by this court that if there are funds available to them interestfree and overdraft or loans taken, would not apply. This view of Assessing Officer is ex facie contrary to settled principle that a presumption would arise that investment would be out of interest-free funds generated or available with company. Then, borrowed capital in hand in that case and interest expend....
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....f income as per tax audit report. It was further stated that Assessee Company has earned only INR 1596000/- as dividend income and borrowed funds were not at all utilized for investment in shares hence disallowance cannot be made. Learned AO rejected explanation of assessee and stated that substantial expenditure has been incurred by assessee for earning exempt income and therefore provisions of section 14 A are clearly attracted, hence, disallowance of INR 50268833/- was made applying provisions of section 14 A read with rule 8D of The Income Tax Rules. Ld CIT(A) has allowed substantial relief to assessee and has directed assessing officer to exclude growth oriented investments while applying Rule 8D(2)(iii). Also, regarding application of Rule 8D(2)(ii), ld CIT(A) held that investments which have been made through cash credit account, rate of interest in cash credit account should be adopted. However, assessee aggrieved with order of lower authorities has preferred this ground before us. 28. Learned authorised representative submitted that assessee has only earned exempt income to extent of Rs. 15,96,000/- which is corroborated from Schedule 16 of P&L a/c placed at Page 165 of ....
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....0,19,721 4,54,16,313 30. There is no dispute to effect that assessee has its own funds to extent of more than Rs. 590 crores and as such all these investments are fully covered from own funds and there is no case of any disallowance under rule 8D(2)(ii). Also, there being no case of any direct or indirect claim of interest in connection with investment, disallowance u/s 14A read with Rule 8D, if any, has to be restricted to 0.5% of average investment as specified in Rule 8D2(iii). Further, disallowance as per rule 8D(2)(iii) has to be computed only in respect of investments yielding exempt income and accordingly assessing officer is not justified in applying formula prescribed in Rule 8D to entire value of investment. legal position to this effect is well settled and reference may be made to decision of Delhi High Court in case of ACB India Ltd vs. ACIT [2015] 374 ITR 108 (Delhi High Court) in which it was held as under : "S. 14A & Rule 8D(2)(iii): In computing "average value of investment", only investments yielding non-taxable income have to be considered and not all investments." 31. Above said decision has been followed and applied by Hon'ble Delhi Tribunal in case of DCIT....
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...., of Income-tax The Act, 1961 - Expenditure incurred in relation to income not includible in total income (Computation of) - Assessment year 2010-11 - In course of assessment, Assessing Officer made addition on account of apportionment of expenses against exempted income under section 14A - Commissioner passed a revisional order directing Assessing Officer to enhance amount of addition under section 14A - Tribunal set aside revisional order as well as consequent assessment order passed by Assessing Officer enhancing addition made under section 14A - High Court upheld order of Tribunal holding that amount of disallowance under section 14A could be restricted to amount of exempt income only and not a higher figure - Whether on facts, SLP filed against decision of High Court was to be dismissed on merits- Held, yes." 34. Therefore he submitted that disallowance made by learned assessing officer as well as confirmed by learned CIT - A is not sustainable firstly on account of non-recording of satisfaction and secondly for reason that no interest disallowance even otherwise can be made. He further stated that while making expenditure disallowance only investments, which have yielded ta....
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...., no deduction shall be allowed in respect of expenditure incurred by assessee in relation to income, which does not form part of total income under The Act. As per sub-section (2) of section 14A, Ld . Assessing Officer would determine amount of expenditure incurred in relation to such income which does not form part of total income in accordance with method as may be prescribed, if having regard to accounts of assessee, he is not satisfied with correctness of claim of assessee in respect of such expenditure. Method for such purpose has been prescribed under rule 8D of Rules. Sub-rule (1) of rule 8D substantially reiterates what subsection (2) of section 14A provides. Essentially, under sub-rule (1), Assessing Officer would be authorized to determine expenditure to be disallowed in relation to earning tax- free income, in terms of sub-rule (2) where having regard to accounts of assessee of previous year, if he is not satisfied with correctness of claim of expenditure made by assessee or claim made by assessee is that no expenditure has been incurred in relation to income which does not form part of total income. Further Hon Supreme court in 402 ITR 640 has held that:- "41. Havin....
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....d of 10% as computed by assessing officer was restricted. With respect to processed catechu, he confirmed valuation by assessing officer and uphold markup of manufacturing expenses and profit rate at rate of 37.85% and 10% respectively. Assessee is further aggrieved in respect of processed cardamom where learned CIT - A confirmed valuation done by assessing officer and uphold markup of manufacturing expenses and profit rate @ of 37.85% and 10% respectively. 41. Learned assessing officer-examined fact, that assessee has transferred goods from units located at Noida to eligible undertaking at below fair market price. Special auditor reported that from units located at Noida assessee has transferred work in progress in form of processed raw material/semi finished goods worth INR 394051682/- to undertaking eligible for deduction u/s 80 IC below its cost, though assessee company ought to have transferred same at fair market price on date of transfer. Special auditor reported that during year under consideration unit has transferred work in progress and for working out value of such transfer, unit has followed same methodology as followed for valuation of its closing work in progress. ....
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....%. iii. With respect to cardamom, he confirmed action of assessing officer of loading of manufacturing expenses at rate of 37.58 percent and profit at rate of 10% as per Excise rules subject to deduction of cost of Chilka transferred to other units from addition. 42. Therefore, assessee is aggrieved with order of learned CIT - A has preferred this appeal. 43. Ld Authorised representative submitted as under :- i. That issue relates to transfer of following three products from Noida division to eligible unit in Guwahati : a. Supari b. Katha c. Elaichi ii. Assessing officer has recomputed value of goods transferred on basis of observation of Special Auditor after loading 14.73% mark up on account of manufacturing cost and further 10% mark up on account of profit to value of goods so transferred by applying provisions of section 80IA(8) read with section 80IB(13)/80IC(7) of The Act. iii. Ld CIT (A) has allowed part relief in respect of goods transferred without processing by reducing mark up to 2% and upheld valuation done by AO in respect of semi-processed goods. iv. In this connection, we may submit that assessing officer has failed to appreciate facts of ....
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....officer to make adjustments in claim of deduction by substituting fair market value of goods transferred from non-eligible unit to eligible unit. section specifically talks about market value that in itself means that product must be marketable having distinct identity. However, goods in present case are raw material being part of production process having no separate identity. product purchased from third parties is transferred after minimal processing and as such, there is not much difference between purchase price and transfer price of goods and as such assessing officer is not justified in enhancing value without making reference to any comparable cases. IX. Further, assessing officer has not brought anything on record to establish market value of goods for purpose of provision of section 80IA(8) and as such adjustment made to value of goods transferred from non-eligible unit to eligible unit is arbitrary and not supported by any cogent reasoning. x. There is thus no basis for addition because of 10% mark up even on cost of goods. xi. In any case, goods have been purchased on behalf of eligible units and at best, any mark up on account of profit should be on processing....
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....ied presents exceptional difficulties, Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation - 43[For purposes of this sub-section, "market value", in relation to any goods or services, means- (i) price that such goods or services would ordinarily fetch in open market; or (ii) arm's length price as defined in clause (ii) of section 92F, where transfer of such goods or services is a specified domestic transaction referred to in section 92BA.] 48. Above section provides that if eligible business receives any services/ goods from other units or business of assessee then if transaction value as recorded in books of account is not corresponding to market value of such goods or services on date of transfer then deduction u/s 80 IA shall be adjusted as a such transfer has been made at market value of such goods as on that date. Market value has further been defined to show that it is price such goods would ordinarily fetch in open market. For this year provisions of domestic transfer pricing does not apply and therefore clause number (ii) do not apply. Further, if assessing officer finds it exceptionally difficult AO m....
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....e unit to another should further be loaded by cost of 37.58%. Further 10% profit has been presumed under Central Excise provision for purpose of transfer of goods as captive consumption for another unit. Therefore if goods having a cost of Rs. 100/- is transferred to another unit, then transaction value of such goods shall be considered at INR 110/-. Therefore transferring unit will pay excise duty on INR 1 10 and unit to which such goods have been transferred will claim duty credit paid on transfer value of INR 110. Therefore, above rule can only be applied with respect to duty set off of excisable units. Central Excise rules has stated that INR 110/- would be deemed transaction value of such goods. Rule 8 of Central Excise valuation rule is a deeming provision. It does not say what could be market price of such goods but for purpose of levy of Central Excise it deems that INR 110/- shall be transaction value. Therefore, in absence of any mandate available that Central Excise valuation rule 8 provides for market price of such goods, same cannot be imported into provisions of section 80 IA (8) of The Act. However, as assessee himself has stated that profit can be imputed at rate of....
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....lty. 51. Learned authorised representative submitted that assessing officer himself has accepted rate of technical know-how / royalty @ 2.5% in AY 2013-14 onwards and no adjustment has been made in this regard. In these circumstances, addition in present year is inconsistent and not based on correct appreciation of facts of case. Factual position to this effect is supported from TPO order for AY 2013-14 and 2014-15 placed at Page 38 - 69 of Supplementary paper book 2. In any case, it is submitted that action of CIT(A) in loading mark up of 10% of technical know-how/royalty paid to Dharampal Satyapal & Sons P. Ltd. is arbitrary and not in accordance with provisions of section 80IA(10) of The Act. It is relevant to note that rate of technical know-how/royalty @ 2.5% over value of goods purchased by assessee and from Dharampal Satyapal & Sons P. Ltd. was mutually agreed as per written agreement and as such there is no question of mark-up of 10% on agreed technical know-how/royalty @ 2.5% particularly when same is payable to third party. Further, technical know-how/royalty is in respect of right to use technical know-how available with Dharampal Satyapal & Sons P. Ltd. in respect of ....
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....ountants of India [ICWA] on cost of production for captive consumption. Learned AO noted that from books of accounts it is observed that technical know-how has been booked at rate of 2.5% instead of 3% of raw material consumed resulting in over statement of profit of eligible units by INR 6227744/- and therefore it was held that such technical know-how fees paid to other concern is in nature of direct expenses and should be included in cost of production for purpose of determining market price of goods transferred. Accordingly learned AO on basis of audit report made an addition of INR 6227744/-. It is contention of learned authorised representative that in assessment year 2013 - 14 onwards no such adjustment has been made despite there being identical facts and circumstances of case and eligible unit is also eligible for deduction under those sections. This fact has not been controverted by learned departmental representative. Therefore, it is a fact that in subsequent year claim of assessee has been accepted by learned assessing officer and not disputed whereas in this year it has been disputed. Therefore, it is apparent that when claim of assessee has been accepted in subsequent....
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....erefore, for similar reason we also do not subscribe addition made by learned assessing officer by applying Central Excise valuation rules and imputing 10% profit margin in goods transferred to determine market price of such goods. Accordingly, ground number 10 of appeal of assessee is allowed. 58. Ground number 11 of appeal of assessee is against order of learned CIT - A with a direction to apply a profit margin of 10% against 26.14% applied by learned assessing officer over and above allocating value of common cost incurred at corporate office, depot, branches et cetera and allocated to such units and an appropriate ratio. Therefore, direction of learned CIT - A is to allocate appropriate cost of corporate office etc. then add that to a profit margin of 10% for purpose of working out deduction of eligible unit u/s 80 IB/IC/IA of The Act. Ld AO has made adjustment on basis of observation of Special Auditor as per which, common cost incurred in respect of eligible units must be allocated after loading mark up @ 26.14% being rate of operating profit after applying provisions of section 80IA(8) read with sub-section 13 of section 80IB and sub section 7 of section 80IC and making an....
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.... for services were not acceptable as these expenditure include even advertisement expenses, sales expenses etc. He further held that even if reimbursement of expenses for purchase of raw material and finished goods which goes for eligible undertaking some services have been provided by head office and branch office. He further held that learned CIT A has upheld that any independent persons would have charged trading profit margin on such transfer of goods. Accordingly, he applied estimated profit of 10% of such cost as profit of an office/branches/depot for such services. He therefore submitted that findings given by learned CIT - A are incontrovertible. 62. We have carefully considered rival contentions and perused orders of lower authorities as well as report of special auditor. Fact shows that AO has stated that though assessee has allocated all applicable cost to respective units however AO said that it should further be loaded by markup of 26.14% being operating profit after applying provisions of section 80 IA (8) read with subsection 13 of section 80 IB and section 7 of section 80 IC for making an upward adjustment on account of profit element on these common cost. Learned....
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.... selling and distribution arm of assessee and cost incurred is allocated to these respective units on basis of appropriate allocation key of 'sales'. Ld. AR of appellant relying on decision of coordinate bench of Cadila Healthcare Ltd. (supra) has submitted that there cannot be any specific demarcation between manufacturing and selling activities of assessee and profit accrues only at time of sales of goods only. Therefore, contention of revenue that selling and distribution function of assessee is a separate profit center is required to be rejected at threshold. We have carefully considered argument of ld. AR and of revenue on this point as well as ld. AO and Ld. DRP. We are of view that this argument is almost similar to argument raised by revenue in case of Cadila Healthcare Ltd. (supra) Coordinate bench has dealt with these arguments from all angles of controversy and has held as under :- '9.4 Ld. Counsel has asserted that undisputedly, it was an "inter-division transfer", hence it was expected to record same at arm's length price. He has pleaded that assessee is blowing hot and cold in same breath. When it comes to transfer of services and goods, it opposes ....
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.... on sale of products of Baddi Unit. It was recorded on presumption that sales were executed by Head Office by charging brand value, name of product and goodwill of Company. In any case, according to Ld. DR, a reasonable expenditure should have been provided, so that such an abnormal profit @ 58.66% could be checked. 9.6 In support of above submissions, Mr. Srivastava has placed on strong reliance on decision of Hon'ble Supreme Court in case of CIT v. Ahmedbhai Umarbhai & Co. [1950] 18 ITR 472 for legal proposition that, quote " profits received relate firstly to his business as a manufacturer, secondly to his trading operations, and thirdly to his business of import and export. Profit or loss has to be apportioned between these businesses in a business like manner and according to well established principles or accountancy." Unquote. He has also placed reliance on Liberty India (supra) . 10. We have heard both side at length. controversy as raised by Addl. CIT Mr. Mahesh Kumar, officiating as AO, has serious repercussions on subject of computation of "eligible profit" while claiming a deduction under Statute. adjustments as suggested by AO while working out manufacturing ....
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....nting standard has given certain guidelines, enumerated in short. In accounting "profit" is difference between purchase price and cost of bringing product to market. A "gross profit" is equal to sales revenue minus cost of goods sold or expenses that can be traced directly to production of goods. Rather, "operating profit" is also defined as equal to sales revenue minus cost of goods plus all expenses, except interest and taxes. Most of manufacturing companies have 'Total Cost' based pricing method. Total Cost has, broadly speaking, two components; i.e. raw-material plus value addition (it includes all overheads). Therefore, profit margin is price minus total cost. In manufacturing Unit, thus cost of conversion is production overheads, such as, direct labour cost and inextricably linked expenditure of production. In general, every manufacturing concern has fixed manufacturing capacity. So objective of such concern ought to be to maximize profit. Now problem, as posed, is that let us assume that said manufacturing unit is producing two products; viz. "A" & "B". For production of "A" product, let us say, there is less working hours, but fetching more value for less money. How....
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....oing so, identically, AO has not pinpointed any defect in working of "profit" of Baddi Unit. In such a situation, we can say that legal proposition as laid down by Delhi Bench can also be applied in present appeal as well. 10.4 AO has also concluded that only incremental profit, representing difference between profits earned earlier when products were procured on P2P basis and profits earned by Baddi Unit, should be treated as a manufacturing profit. AO has then said that earlier assessee was procuring products on P2P basis and showing average profit at 80%, however, on basis of average selling rate of produces manufactured by Baddi Unit average profit was gone up to 86%. AO has therefore restricted deduction only at 6%. He has placed reliance on Rolls Royce Plc (supra). In that case, assessee was a UK based company carrying on marketing and sales activities in India through a subsidiary. subsidiary was also rendering support services to assessee, a UK based company. assessee was carrying out manufacturing operations. It was held that 35% of its profits could be attributed to marketing activities carried out in India and, therefore, chargeable to tax in India. Facts of that case....
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....s disclosed at 58%. A question thus arises that what beneficial purpose could be served for reduction of gross profit to a lower percentage of net profit, specially when allegation of A.O. was that there was an attempt to declare higher profit of Baddi unit to get more advantage of deduction. On perusal of P&L account, it is an admitted factual position that assessee has in fact debited certain expenses which have included head office expenses, such as, marketing expenses and corporate expenses. Meaning thereby net profit of Baddi Unit was not merely production cost minus sale price, but difference of sale price minus all general expenses which were attributable to sales. Therefore, it is not reasonable to say that unreasonably profit was escalated. difference between two percentages of profit, i.e. about 28% ( G.P. - N.P.) thus represented expenditure which could be said to be in respect of marketing network and brand of product related expenses. AO has not complained about allocation of expenditure as made by assessee while computing profit of Baddi Unit. Once assessee has itself taken into account related expenses to arrive at net profit, then it was not reasonable on part of Re....
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....we examine separate profit & loss account of Baddi Unit, then it is apparent that only source of income was sales of qualified products. In said P&L A/c there was no component of any other sources of income except sale price and otherwise also assessee has confined claim only in respect of eligible profit which was derived from sales of pharmaceutical products. This section do not suggest that eligible profit should be computed first by transferring product at an imaginary sale price to head office and then head office should sale product in open market. There is no such concept of segregation of profit. Rather, we have seen that profit of an undertaking is always computed as a whole by taking into account sale price of product in market. 10.7 Ld. AO has suggested that assessee should have passed entries in its books of account by recording internal transfer of product from Baddhi Unit to head office marketing unit and that too at arm's length price. From side of appellant an argument was raised that what should be arm's length price in a situation when a product is ultimately to be sold in open market. Whether AO is suggesting that an imaginary line be drawn to determin....
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.... in accounts of eligible business do not correspond to market value of such goods, then for purposes of deduction profits and gains of such eligible business shall be computed as if transfer has been made at market value of such goods as on that date. Though section has its own importance but area under which this section operates is that where one eligible business is transferred to any other business. We again want to emphasis that word used in this section is "business" and not word "profit". We can hence draw an inference by describing these two words and thus have precisely noted that 'eligible business' has a different connotation which is not at par or identical with "eligible profit". matter we are dealing is not case where business as a whole is transferred. This is a case where manufacturing products were sold through C&F in market. Even this is not case that first sales were made by Baddi Unit in favour of head office or marketing unit and thereupon sales were executed by head office to open market. Once it was not so, then fixation of market value of such good is out of ambits of this section. If there is no inter-corporate transfer, then AO has no right to d....
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....rcation are business segment, geographical segment, etc. But as far as Revenue of an enterprise is concerned while segmentation is required, then Revenue from sales to external customers are reported in segmented statement of profit and loss. In an accounting system, an intra-company sale between divisions or units is not regarded as Revenue for purpose of such financial reporting. As per Accounting Standards an Enterprise Revenue ignores in house-sales that represent Revenue to one segment and Expense to another. In this connection, AO has discussed Hon'ble Supreme Court decision pronounced in case of Liberty India (supra). AO wanted to justify his attempt of segmentation on basis of theory that only profits derived due to manufacturing activity can be said to be derived from eligible undertaking. It was contested by AR before us that "segment reporting" is about segregation of business and not about segregation of any specific activity. In case of Liberty India (supra) it was observed that IT The Act broadly provides two types of tax incentives, namely, investment linked incentives and profit linked incentives. Court was discussing Chapter VIA which provides incentive in form....
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....re it arose, within British India or without British India, would be chargeable to excess profits tax just in same way as it chargeable to income-tax under Indian IT The Act. whole of his income arising in Raichur has legitimately been taxed under that The Act. In that decision also, word "business" was defined, i.e. business includes any trade, commerce or manufacture. It has also been said that all businesses, to which said law applied, carried on by same person shall be treated as one business for purpose of said The Act. question was about manufacturing activity and it was contended that if a man is a manufacturer as well as a seller of goods, then in his case term "part of a business" means carrying on all two activities together and therefore constitute part of business. One of Hon'ble Judges has said that activities which assessee carried on at Raichur was certainly a business of assessee. On one hand, it was argued that accrual of profit must necessarily be at place where sale proceeds are received or realized. But on other hand, it was argued that profits received relate (i) firstly to his business as a manufacture, (ii) secondly to his trading operations and (iii) thi....
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....is The Act shall not apply to any business whole of profits of which accrue or arise in an Indian State, and where profits of a part of a business accrue or arise in an Indian State, such part shall, for purposes of this provision, be deemed to be a separate business whole of profits of which accrue or arise in an Indian State, and other part of business shall, for all purposes of this The Act, be deemed to be a separate business." point for consideration was that whether on those facts third proviso to section 5 could be invoked. manufacturing activity of making ground-nut oil was carried out at Raichur (Hyderabad) which was treated as a separate business within meaning of said proviso and thereupon it was claimed as exempt being carried out within territorial jurisdiction of Indian State. So Court has observed that to succeed in their claim, it is incumbent upon assessee to show that there was in fact a part of a business and that profit had actually accrued or arose in that part of an Indian State. Court has clearly stated in para-41 that both elements should found exist and then only business could be treated as a separate business. However, said proviso has propounded only ....
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....nly when sale take place. This aspect has not been doubted or challenged even in said order. But in said order question was that if a part of a business consisted of manufacturing activity and that activity can be segregated so as to compute yield profit, then whether such profit accrue only at place where manufacture are sold. To answer this question, Hon'ble Court has commented in para- 49 that there was no express direction as to apportionment in third proviso to section-5 of EPT The Act. opinion expressed was very specific that a profit can accrue in respect to that part of a business only when apportionment is possible. Hon'ble Court has said that only on said assumption that apportionment was possible said proviso was based upon that presumption only. If no apportionment can be made in respect of process of a particular business, then that will not be considered to be a part of business at all and held that proviso will not apply. It was concluded that principle of apportionment was implied therein. After this detailed discussion, we thus arrive at conclusion that principle of apportionment was criteria for segregating manufacturing profit if it was feasible to do so.....
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....or market rate for working out eligible profit for deduction, has been decided. Ld. DR could not point out any other contrary judgment to decision cited by Ld. AR. Therefore, we respectfully following above decision of coordinate bench hold that provisions of section 80IA(8) of The Act does not apply to assessee on transfer of services of marketing division of company to eligible industrial undertaking whose profits are claimed as deductible." 63. Therefore in absence of any finding that head office, branches or depot are providing any services and are considered as a profit centre by assessee or any finding by learned assessing officer, no further profit can be attributed on actual cost allocated by these units to eligible units. Further actual cost charged by 3rd parties are merely allocated to eligible and non eligible units of assessee without making any further noticeable addition to such costs, profit ratio of 10% over and above cost cannot be imputed for working out eligible profit of unit. Further learned CIT - A in assessee's own case for assessment year 2004 - 05 has himself held that without any provision of services to assessee, he himself did not agree with finding o....
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....ed that profits of eligible undertaking should be reduced by INR 39571939/-. On appeal before learned CIT - A he held that definitely brand has been developed overall long period and is property of corporate or head office of company. Therefore, he confirmed above addition. 65. Learned authorised representative submitted that brand is owned by assessee company as such and every unit or division of company is owner of said brand. He therefore stated that it is impossible to comprehend as to how a company can pay royalty to itself. He further stated that learned assessing officer and Commissioner Appeals has picked up a wrong comparable to make addition in hands of assessee. It was stated that case of royalty in case of 'Tulsi mix' brand is out of context and not relevant to facts of case as in that case assessee himself is being royalty to an independent third party in view of exploitation of its brand name. On contrary it was submitted that present brand originally owned and used by various units of company and as such there is no case of any know how royalty to be reduced from eligible profit. He further stated that in similar circumstances and facts of case AO has not made any ....
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.... profit on this account, therefore, it is apparent that ld AO himself do not think that such adjustment is required to be made. Therefore, brand market value is also not determined by learned assessing officer. In view of this ground number 12 of appeal of assessee is allowed. 68. Ground number 13 of appeal is against confirmation of disallowance of INR 901187656/- in respect of claim of purchase of sandalwood oil from M/s Surya Vinayak industries Ltd and Allied perfumers private limited. Brief facts of case shows that ld assessing officer has made disallowance of purchase to extent of Rs. 72,23,61,646/- from M/s. Surya Vinayak Industries Ltd. (SVIL) and Rs. 17,88,26,010/- from M/s. Allied Perfume P. Ltd. (APPL) by making reference to seized annexure A- 1/ Page 52. Ld AO has alleged that part of purchases of sandalwood oil as recorded in books of assessee are inflated and bogus and that seller M/s. Surya Vinayak Industries Ltd. and APPL does not have production capacity to supply recorded quantity of Sandalwood Oil. However, CIT(A) has restricted disallowance to Rs. 54,94,24,290/- on ground that there is no dispute regarding purchase and use of quantity for manufacturing and sale....
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....IT(A) has not disputed fact that entire purchases of Sandalwood Oil is fully supported from invoices issued by parties and use of same for manufacturing of final product. Further, assessing officer was not justified in relying upon seized document Page 52 of Annexure A/1 as same is incoherent, dumb and wholly irrelevant to case of assessee. Further, seized document relates to AY 2011-12 and as such, it has no relevance or bearing to assessment year under consideration. It is also important to note that name of assessee is nowhere mentioned in said document and it is not known as to how such document is relevant to present case. Hon'ble ITAT has specifically disputed correctness of this document and has held that no adverse inference could be drawn on basis of same. He further submits that theory of bogus purchases and return of cash by SVIL and APPL as suggested by assessing officer has no valid basis as assessing officer has failed to bring any evidence on record to demonstrate alleged synchronized flow of cheque and cash between assessee and these companies and as such adverse inference is merely on hypothetical basis. reference to statement of various persons, who have no direct....
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....ion. While applying minimum rate of other party, CIT (A) has ignored fact that other parties have also supplied Sandalwood Oil at different rates as per details given at page 70 of Supplementary paper book 2. Further, CIT (A) has also ignored fact that various items manufactured are of different qualities and use of different category of raw material based on business and commercial expediency and also corroborated from manufacturing of difference quality and sale price and as such mechanical application of minimum rate is highly arbitrary and irrelevant. In any case, even if purchase price of other parties is to be considered, same should be average price and not lowest price. In light of above discussion and order of Hon'ble ITAT for AY 2005-06 to 09-10, Issue stands settled in favour of appellant as lower authorities have not brought anything on record to substantiate allegation of inflated purchases particularly when seized material relied upon does not belong to year under consideration and there is no other material or finding to support such addition. There is thus no justification for disallowance of claim of purchases to extent of Rs. 54,94,24,290/- on basis of application....
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....tion than revised yield ranges from 102.57% to 112.62 percentage of entire consumption of raw material, which gives an absurd result of finished goods production, which is exceedingly consumption. He further noted that quantity of finished product 4 KG on consumption of sandalwood oil ranges from 6.5 - 8.54 for various assessment years appears to be reasonable in variation whereas if entire quantity purchased from these 2 entities are ignored and finished product per KG consumption of sandalwood oil will range from 13.47 to 65.25 therefore he held that if quantity purchased from these 2 entities are not considered in quantitative details will give an erroneous and inconsistent results in terms of finished product ratio. He further found that views taken by him is also supported by words mentioned in seized documents annexure A - 1 and page number 42 seized from laptop of Mr. Gupta where there is a mention of adjustment of apportionment of excise duty and rate difference. Therefore, he gave a conclusive finding that purpose of these bills is just adjustment in prices. He further analyze details of purchases from all parties assessment year -wise in respect of sandalwood oil purchase....
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.... payment made up to 31.10.2010 of Rs. 6.70 crores as excess and there is two entry of rate difference and further there is an adjustment on account of excise duty and thereafter Rs. 2.04 crores is determined as amount to pay from which an amount paid by party of Rs. 10.50 crores is deducted which resulted into excess paid of Rs. 12.54 crores. Below that, there is a statement in which details of cash payment starting from 02.11.2010 to 24.11.2010 is mentioned totaling to Rs. 10.50 crores. A further details of account of SVIL and APPL is mentioned and net of it is stated to have been amount excess received of Rs. 9.49 crores which result in to amount to receive of Rs. 30436590/-. " 29. Surya Vinayak Industries in fact gave this document to Shri Rajiv Kumar who is managing Director of Dharampal Stayapal Ltd. This paper was shown to him vide question No. 13, which was replied by him by asking for some time. He further replied this question vide question No. 27. The ld AO further examined Shri Rajiv Gupta on 13.06.2011 where he has denied of having paid any excess cash to the assessee. The director of M/s. Surya Vinayak Industries Ltd was also summoned and his statement was recorded o....
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.... Vijay M. Vimawal (supra). Further, he also argued that the assessment of asst. yr. 2003-04 was actually completed under s. 143(3) on 30th March, 2006 i.e. prior to receipt of the impugned documents by the AO on 18th April, 2007, this assessment was not pending. Attending to these arguments of the counsel is superfluous and merely an academic exercise as we have upheld the applicability of the decision of the Tribunal in the case of LMJ International Ltd. (supra) for the proposition that the "where nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be disturbed" and other local decision cited above. Accordingly, the additional ground raised by the assessee for all the four appeals under consideration is allowed and in favour of the assessee." The matter reached honourable Bombay High court [2015] 63 taxmann.com 14 (Bombay)/ [2015] 235 Taxman 163 (Bombay)/ [2015] 378 ITR 84 (Bombay)/ [2015] 278 CTR 144 (Bombay) where in para no 7 it is held that If there is reference made to some loose papers found and seized from his residence indicating some "on money" receipt during the admission process then above co-rel....
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....eady on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. T....
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....and the assessee was directed to file returns for the six assessment years commencing from 2003- 04 onwards. The assessees filed returns for those years but disclosed Nil taxable income. These returns were accepted by the Assessing Officer, however, in respect of the assessment year 2007-08 there was a significant difference in the pattern of assessment for this year also, the return was filed for Nil income but there were certain documents and which showed that there were transactions of sale of development rights and from which profits were generated and taxable for the assessment year 2007-08. Thus, the receipt of Rs. 44 crores as deposit in the previous year relevant to the assessment year 2008-09 and later on became subject matter of the writ petition before the Delhi High Court. That was challenging the validity of notice under section 153C read with section 153A. In dealing with such situation and the peculiar facts that the Delhi High Court upheld the satisfaction and the Delhi High Court found that the machinery provided under section 153C read with section 153A equally facilitates inquiry regarding existence of undisclosed income in the hands of a person other than search....
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....he sum over paid by that company to the appellant is not small compared to the purchases. Even circular route stated by ld AO in various para of assessment order 143 onwards also proves contrary if read with the order passed u/s 154 of the act. Therefore according to revenue assessee has reduced the profit by booking the over invoiced purchases of the eligible units, and such income is also derived from the eligible industrial undertaking and further assessee is eligible for higher deduction u/s 80 IC of the act. 32. The LD AO has stated that the companies from whom the material has been purchased are not capable of supplying that quantity of raw material. The ld CIT (A) has held that the quantity details of the assessee cannot be doubted for the reason that amount of finished goods assessee has produced does not justify the lower consumption of material than what is shown by the assessee. This finding of facts is not disputed by revenue. Therefore it cannot be disputed that assessee has purchased the material. Now the issue is at what rate. If it s the case of the revenue that assessee has purchased goods at Rs. 100 But has booked purchases at Rs. 150 and received Rs. 50 back f....
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....t any [C] or [SU]. In the same way page No.2 to 6 of this annexure are the statement of physical stock as on 23.03.2010 prepared by the staff of Perfumery Division. All the items of this physical stock statement dated 23.03.2010 tally with the I.A.S. statement available in page No.9 to 12 taken on 31.3.2010. But surprisingly, the sandalwood oil is not included in this statement of physical stock taken on 23.03.2010 which goes to show there was no stock of sandalwood oil present on that day, whereas the closing balance of I.A.S. statement says closing balance of 2926 Kgs. This again proves the booking of bogus purchase of sandalwood oil by M/s DSL. Page no. 72 of Annexure 14 seized from Perfumery Division of Okhla are now being referred to and discussed. On page 72 there is mention of various raw material purchases as on 31.12.2010. Item No.8 is sandalwood oil where receipt as per MD (Shri Rajiv Gupta) is 12,694 Kg and as per Accounts it is 12,894. A different of 200 Kgs is there and in the remarks column it is mentioned that details are attached. And in this context entries of Page no. 67 are being referred. On this page bill wise detail of purchase from various parties of sandalwo....
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.... Assessment Years in question and the documents seized must established any correlation document-wise with the Assessment Years involved. From the above reading of the documents, it is apparent that none of the seized documents belongs to the Assessment Years 2005- 06 to 2009-10. Even otherwise, without commenting whether they are incriminating or not, it does not pertain to the assessment years involved. The ld CIT DR could not show us document, which pertained to the Assessment Year 2005-06 to 2009- 10. As none of the documents seized during the course of search are shown to us pertaining to the Assessment Year 2005-06 to 2009-10, we are of opinion that all the additions made by the ld Assessing Officer are not based on incriminating documents found during the course of search, hence they are not sustainable." 72. Therefore, the coordinate bench has given a categorical finding that this seized document does not belong to AY 2010-11 but for Ay 2011-12. There is no material shown to us by the LD CIT DR, which authorizes us to impute the seized papers pertaining to later years for making addition in the earlier years. Revenue has also not initiated any redressal mechanism provided....
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....3%. It was further contested that where transaction was of lending money in foreign currency to its foreign subsidiaries in such a situation domestic prime lending rate would have no applicability and international rate fixed being LIBOR should be taken as benchmark rate for international transaction. Learned transfer pricing officer rejected contention of assessee and stated that assessee, in process of lending money to its subsidiary has not followed arm's-length principle by not correctly assessing risk associated with international transaction of lending of money where cost of borrowing is not relevant but return that it would have earned in India if money was not lent should be benchmark. Therefore, he adopted return associated with BB rated bonds and calculated 16.67% rate of return. He further adopted an alternative analysis and stated that as there is no credit rating available of associated enterprise, he adopted BB and D ratings for it. He further exercised powers under section 133 (6) and obtained average yield on long-term instruments from Crisil. Reply received for yield BBB grade corporate bond for 5-year period of 11.22%, which he considered for BB rated bonds yield ....
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.... LIBOR rate applicable on loan. However learned transfer pricing officer determine ALP at INR 8 1714969/- and thereby addition of INR 59551686 has been made. He further submitted that learned transfer-pricing officer has used CUP method for benchmarking international transaction by adopting interest rate at rate of 16.31 percentages per annum by benchmarking with prime lending rate of state bank of India and making an adjustment of further 400 basis points. He submitted that since borrowing entity is a resident of Switzerland which is a country that functions on LIBOR plus rates, hence, borrowing entity would have received a loan on LIBOR plus rates in that jurisdiction. Therefore, there should be rate applicable for calculating arm's-length price as against interest rate based on Indian prime lending rate. He stated that this is based on logic that had borrowing entity approached banks in its own country of residence they would have paid interest on LIBOR plus rates. Further, he submitted that it is a settled legal position that in case of an associated enterprise transaction interest to be charged for benchmarking transaction of loans advanced by taxpayer to its foreign associate....
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....d subsidiary in Switzerland namely DS Business AG, Switzerland at interest rate of 3% per annum. Currency of loan is Foreign currency and therefore assessee stated that Swiss LIBOR should be taken for benchmarking interest rate and not Indian rate. In remand, report submitted by learned transfer pricing officer in para number 2.1 it is clearly submitted that assessee has given loan to its associated enterprise in foreign currency and however till now such loan has not been repaid by associated enterprise. From this, it is apparent that assessee has lent money to its foreign associated enterprise in foreign currency. Honourable Delhi High Court in CIT vs. Cotton Naturals P Limited [ 2015 - TII - 09 - HC - Del - TP] dated 27/03/2015 has clearly held that there is no justification or cogent reason for applying prime lending rate for outbound loan transactions where Indian patent has advance loan to an associated enterprises abroad. In view of this finding of learned CIT - A is not correct that prime lending rate should be applied. Though, learned CIT - A is correct in holding that there is no stipulation about repayment currency in loan agreement, However in absence of any such clause....
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....o adjustment has been made in this regard and therefore in present case addition is unwarranted. In view of this ground number 2 of appeal of learned assessing officer is dismissed. 81. Ground number 3 of appeal of learned assessing officer is with respect to reduction of claim u/s 80 IB of INR 3 2704671 made by learned assessing officer taking into account expenditure such as depreciation of fixed assets of corporate office and expenses of depot of INR 32704671/- incurred by business of assessee for providing services to eligible undertaking which is not been allocated to eligible undertaking and by reducing deduction u/s 80 IB and I 80 IC of The Act to that extent. 82. We have heard both parties. Learned CIT DR vehemently supported order of learned assessing officer and submitted that depreciation is required to be allocated to total expenditure incurred by eligible unit for purpose of working out right amount of eligible deduction. Learned authorised representative vehemently supported order of learned CIT - A. 83. We have carefully considered rival contention and perused order of lower authorities. Learned assessing officer has made adjustment of claim of deduction u/s 80....
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....s 32 of IT The Act. In present case, definitely there are units of appellant which are not claiming deduction u/s 80IB/80IC and headquarter assets can be said to be used for such units also. Further, I agree with arguments of Ld AR that depreciation cannot be bifurcated on proportionate basis. Accordingly, reduction on quantum of deduction u/s 80IB/80IC on account of depreciation cannot be confirmed. These grounds of appeal for various AYs are allowed." 84. On perusal of order of learned CIT (A), we find that issue has been decided after considering facts and submissions of appellant. He has rightly held that depreciation on assets of one particular unit/division cannot be allocated to some other unit/division and as such, finding recorded by CIT (A) is well reasoned and based on sound legal principles. Further issue is also supported by decision of coordinate bench in case of ACIT v. Secure Meters Ltd. (ITA No. 542/Ju/2007 & 349/JU/2009) (28.08.2012) wherein Hon'ble Tribunal upheld order of ld CIT (A) deleting adjustment of deduction u/s 80IB/IC on account of allocation of depreciation of assets in Head Office. relevant finding is as under : "2.8 above findings of ld. CIT (A)....
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....and branches et cetera was made. Both parties confirmed that this is connected to ground number 11 in appeal of assessee. As we have already allowed ground, number 11 of appeal of assessee this ground of appeal of learned AO does not survive for reason given by us therein. Accordingly, ground number 4 of appeal is dismissed. 87. Ground number 5 of appeal of learned AO is against order of learned CIT - A in deleting reduction of claim u/s 80 IB/80 IC of INR 6 9085390/- thus ignoring fact that royalty payment at rate of 3% which was made to sister concern taken by AO was rate approved by regional Dir. Ld Assessing officer has made impugned adjustment of claim of deduction u/s 80IB/IC on ground that royalty @ 1% of net sales paid to M/s. Dharampal Satyapal & Sons P. Ltd. (Third party) is less than rate approved by Regional Director of Central Government which is 3% and as such profit of eligible units and consequential claim of deduction 80IB/IC is inflated due to less royalty payment. Accordingly, claim of deduction was reduced by increasing royalty payment by eligible units by 2% of net sales in terms of provisions of 80IA(10) r.w.s. 80IB(13) & 80IC(7) of Income Tax The Act, 1961.....
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....0 IC of Rs. 2295045/- made by learned assessing officer on account of processing charges of betel not at rate of 3% in place of 2.5% taken by assessee, thus, ignoring fact that processing charges at rate of 3% which was made to sister concern taken by learned assessing officer was rate approved by regional Dir. Ld assessing officer has made impugned adjustment of claim of deduction u/s 80IB/IC on ground that Betel nut processing charges @ Rs. 2.5 per Kg paid to M/s. Dharampal Satyapal & Sons P. Ltd. (Third party) is less than rate approved by Regional Director of Central Government which is Rs. 3 per Kg and as such profit of eligible units and consequential claim of deduction 80IB/IC is inflated due to less payment of processing charges. Accordingly, claim of deduction was reduced by increasing Betel nut processing charges claimed by eligible units by Rs. 0.5 per Kg in terms of provisions of 80IA(10) r.w.s. 80IB(13) & 80IC(7) of Income Tax The Act, 1961. ld. CIT(A) deleted adjustment on ground that rate fixed by Regional Director was maximum ceiling limit and same cannot be considered as fair value for adjustment in terms of provisions of section 80IA(10) r.w.s. 80IB(13) & 80IC(7) ....
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....lter deduction u/s. 80IB/80IC of eligible undertaking on account of variation in job charges. Ground number 6 of appeal of learned AO is dismissed. 91. Ground number 7 of appeal of learned assessing officer is against action of learned CIT - A in allowing an amount of Rs. 1146248 on account of excise duty refund for computation of deduction u/s 80 IC of income tax The Act. assessing officer has considered adjustment on basis of observation of special auditor. Special auditor is of opinion that Excise duty refund is an incentive received from government and it is in nature of "other income" and cannot be said to be derived from industrial undertaking. Accordingly, claim of deduction u/s 80IC was reduced. ld CIT(A) deleted addition on basis of decision of Hon'ble Delhi High Court in case of sister concern of assessee in CIT v. M/s. Dharampal Premchand Ltd. 317 ITR 353 (Del) wherein Hon'ble High Court held that excise duty refund is linked with manufacturing activity of assessee and same qualifies for deduction u/s 80IB of The Act. Hon supreme court in Hon'ble Supreme Court in case of CIT v. Meghalaya Steels Ltd [2016] 383 ITR 217 (SC) has approved same. Therefore as honourable CIT ....
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....f appeal of AO is dismissed. 95. Learned assessing officer has challenged in ground number 9 deletion of addition of INR 2 6345007 made on account of foreign exchange fluctuation. Assessing officer has computed loss on fluctuation of foreign currency in respect of loan advanced to wholly owned subsidiary M/s. DS Business AG. Action of assessing officer is on basis of report of Special auditor wherein Special Auditor has observed as per AS-11, foreign currency transactions must be reported on closing rate as on Balance sheet date and any difference must be recognized as profit or loss. Even though, action of assessing officer in computing foreign exchange fluctuation loss has reduced income of assessee during year under reference, however, said treatment is principally wrong and against scheme of The Act. It is further clarified that this very issue is present in all years i.e. 2005-06 to 2011-12 wherein in some years it has resulted in increase in taxable income whereas in some years it has resulted in reduction. CIT(A) has decided issue vide consolidated order wherein effect of addition/loss of such foreign exchange fluctuation of foreign currency loan has been nullified on basi....
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.... foil division of assessee was charging Rs. 3,000/- per Kg from M/s. Dharampal Premchand Ltd. towards job work charges whereas it has charged Rs. 4,100/- per Kg from third parties and as it has resulted in understatement of income of assessee and inflation of profits of eligible units of sister concern. Accordingly, addition in respect of difference of rates was made. Ld CIT (A) has deleted addition on ground that impugned addition is purely on notional basis and not sustainable under law. 99. We have heard rival contentions whole addition has been made by learned assessing officer on presumption that Assessee Company has charge of charges at rate of INR 3000 per KG to its group concern for doing job work for them and silver file division as against INR 4100 per KG charged to other parties and other units of company. This was remark of special auditor and it was stated that if it were done for eligible units of group concern then group concerns would be entitled for higher deduction by INR 377876. It is evident that addition of higher rate of job charges is on hypothetical basis and against concept of real income. Further, it is not open to assessing officer to sit in armchair of....
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.... addition in hands of assessee. Therefore learned AO aggrieved with order of learned CIT - A preferred this appeal before us. 102. Learned departmental representative vehemently referred to order of learned assessing officer whereas learned authorised representative relied upon order of learned CIT - A. 103. We have carefully considered rival contention and perused orders of learned lower authorities. learned CIT - A is dealt with whole order as under:- "I have considered assessment order, written submission and oral arguments of Ld. AR. After considering entire facts and evidences gathered by assessing officer, which are reproduced in assessment order. I have held in case of M/s. SR Credit PVt. Ltd. in appeal no. 102/13-14/1253 vide appellate order dtd. 21/03/2013 that it could not established that these transactions are pertaining to appellant not M/s. SR Credit Pvt.Ltd. Therefore, capital gain arising out and these transactions are taxable in hands of M/s. SR Credit Pvt.Ltd. My finding in case of M/s. SR Credit Pvt. Ltd. in above said appeal no is reproduced as under:- I have considered assessment order, written submission, report of assessing officer and oral argument....
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....ssessing officer held that sale of shares of Coastal Power Projects Pvt. Ltd. by appellant is arranged transaction to reduce profit by Dharampal Satyapal Ltd (DSL) as Dharampal Satyapal Ltd, is having taxable income and appellant is only showing loss. Main grounds and evidence relied by assessing officer are as under:- a) Dharampal Satyapal Ltd. has sold 18,12,500/- shares of M/s. Coastal Power Projects Pvt. Ltd. on 21/08/2009 to appellant for consideration of Rs. 82.50 crores which ultimately was sold by appellant for Rs. 110,99,93,126/- to F11s. vide purchase agreement dtd. 09/10/2009. An agreement was found during search dtd. 12/03/2008 for sale of shares amongst Dharampal Satyapal Ltd. F11s and Coastal Ltd. where consideration was shown as Rs. 100,29,47,500/-. Therefore, assessing officer concluded that shares were transferred to appellant at lower cost. ii) Though formal engagement letter was issued by M/s. SR Credits Pv t.Ltd. to Yes Bank, however, Mr. Namit of Yes Bank which has maintained escrow account has stated that initial meeting was held between various officers of namely Sh. Anil Goswami, GM, DSL, Rajiv Gupta (MD), DSL. Mr. Rajesh Gupta, Director, DSL and offic....
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....res was held between Directors and Senior of Dharampal Satyapal Ltd. and Yes Bank was never confronted to assesse and is not even in record for assessing officer. Ld Assessing officer without seeing statement has incorporated content of such statement in assessment order. Even if it is presumed that at initial stage meeting were held between managing directors and directors and senior officer of Dharampal Satyapal Ltd and Yes Bank, it does not prove that transaction were sham as formal engagement letter was issued is name of appellant. appellant is definitely as associate entity of flagship company Dharampal Satyapal Ltd. Therefore, such initial meeting even it held as per statement relied by assessing officer in no way makes transaction unreal. Considering entire facts and circumstances of case, I do not agree with findings of assessing officer that transaction of transfer of shares of M/s. Coastal Power Projects Pvt. Ltd. does not pertain to appellant. Accordingly, I direct assessing officer to consider profit on sale of such transaction in hands of appellant. related first grounds on allowed. iii) Disallowance of Rs. 2,78,43,961/- under legal and professional expenses:- ....
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.... Ltd. and there is no new fact brought on record. Therefore, addition on account of capital gain for share transaction for sale of shares of Coastal Power Project Pvt. Ltd. cannot be taxed in hands of appellant. Therefore, addition made on account of capital gain for share transaction for same shares of Coastal Power Project Pvt. Ltd. is deleted in appellant's hand. These grounds of appeal are hereby allowed." 104. On careful perusal of finding of learned CIT - A it was found to be reasoned and based on settled legal principles. It may be appreciated that purchase and sale of shares of M/s. Coastal Projects P. Ltd. by assessee is properly documented and there is actual flow of consideration between parties. Further, assessing officer has not disputed genuineness of transaction and as such, impugned addition is merely on basis of conjectures and surmises. assessee is also produced all documents which are relevant to whole transaction at page number 74 - 123 of supplementary paper book. Learned departmental representative could not point out any infirmity in those documents with respect to whole transaction. Further, there is no material or evidence on record to establish that cons....
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....lowance of interest paid on borrowed funds to extent of Rs. 3,00,903/- u/s 36(l)(iii), it is not open to issue direction for charge of interest on notional basis in respect of advances to sister concerns for purpose of business. (ii) That these directions are illegal, arbitrary and beyond jurisdiction. 4(i) That on facts and circumstances of case, Ld. CIT(A) was not justified in confirming disallowance to Rs. 43,10,566/- u/s 14A without appreciating that impugned disallowance is without recording satisfaction in terms of provisions of section 14A(2) of The Act. (ii) That appellant has not incurred any expenditure for earning of exempt income and as such provisions of section 14A are not applicable to facts of case. (iii) That disallowance is illegal, arbitrary and or excessive. 5(i) That on facts and circumstances of case, Ld. CIT(A) was not justified in upholding disallowance of deduction u/s 80IB/80IC on ground that fair market value of goods transferred from Noida division to eligible units is higher in terms provisions of section 80IA(8) read with 80IB(13) and 80IC(7) of The Act as follows : a. In respect of unprocessed goods, by restricting profit markup to e....
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.... (ii) That profit mark up rate of 10% is highly arbitrary and without any valid basis or justification. (iii) That adjustment of cost and consequential reduction of claim of deduction u/s 80IB/80IC is illegal, arbitrary and based on conjectures and surmises. 9(i) That on facts and circumstances of case, Ld. CIT(A) was not justified in restricting disallowance of deduction under section 80IB/IC by applying provisions of section 80IA(8) read with 80IB( 13) and 80IC(7) of The Act, on account of re-computation of profits of eligible undertaking, by increasing value of common costs incurred at corporate office, depots, branches, etc. and allocated to such units in an appropriate ratio, with profit margin of 10% as against 27.09% applied by AO. (ii) That Ld. CIT(A) was not justified in holding that various corporate services rendered by corporate office, depots, branches, etc. to eligible undertakings, should have been allocated to eligible units at fair market price/cost plus appropriate mark-up for purposes of computing deduction under section 80IB/IC read with section 80IA(8) of The Act. (iii) That Ld. CIT(A) has failed to appreciate that no services were rendered by ot....
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....(A) was not justified in confirming transfer pricing adjustment of Rs. 8,88,34,690/- to arm's length price of interest received from loan advanced to associated enterprise by relying on TPO's order. (ii) That CIT(A), assessing officer and TPO has erred on facts and in law in applying interest rate of 16.31% p.a. on basis of SBI prime lending rate + 400bps on loan advanced by appellant to its wholly owned subsidiary, namely, DS Business AG as against interest at rate of 3% p.a. charged by appellant. (iii) That CIT(A), assessing officer and TPO has erred on facts and in law in considering average Prime Lending Rate of SBI as arms length rate of interest without appreciating that such rate is applicable on loans availed in India in domestic currency. (iv) That loan was advanced by appellant to its associated enterprise in foreign denominated currency and accordingly LIBOR rates prevailing in international market should be considered for benchmarking and not SBI prime lending rate. 13(i) That lower authorities have erred in charging interest u/s. 234A, 234B & 234C of The Act without application of mind. (ii) That charge of interest is not justified on facts and under law....
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.... respect to disallowance u/s 14 A of income tax The Act of INR 4 310566/-. Both parties agreed that this ground is identical to ground number 6 of appeal of assessee. They also confirmed that there is no change in facts and circumstances of case. We have carefully considered rival contention and perused ground number 6 of appeal of assessee for assessment year 2010 - 11 wherein we have deleted addition only because of reason that learned assessing officer has not recorded satisfaction u/s 14 A (2) of income tax Act. Therefore for similar reasons and with a direction that disallowance offered by assessee may be sustained to that extent only, we reverse order of learned CIT - A of confirming disallowance of INR 4 310566/- and allow ground number 4 of appeal accordingly. 112. Ground number 5 of appeal of assessee is with respect to disallowance confirmed by learned CIT - A of deduction u/s 80 IB/80 IC on ground that fair market value of goods transferred from Noida division to eligible unit is higher. Both parties agreed that facts relating to this ground are identical to ground number 8 of appeal of assessee for assessment year 2010 - 11. We have carefully considered rival contenti....
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....ariation in price of raw silver during year. Therefore, auditor stated that silver for unit has transferred products to eligible units below fair market value. Based on this , he worked out fair market value of products transferred to eligible units taking average market price and stated that there is an understatement of profit of unit by INR 13634222/- and over statement of profits of eligible units to that extent. Therefore, learned assessing officer made similar addition. On appeal before learned CIT - A above addition was confirmed. Therefore, assessee has challenged it before us. 115. Learned authorised representative submitted that auditors as well as assessing officer and learned CIT - A failed to consider that due to wide variation in price of goods being transferred by division during year average method used by assessing officer to compute transfer value is not justified. It was stated that silver for division of assessee at Noida procured silver for from third-party vendors at market price, which are, further transferred to eligible units at actual cost comprising of procurement cost, processing cost, freight expenses on FIFO [ 1st in 1st out] basis. Therefore, it was....
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....processing of goods. Even otherwise as stated by learned authorised representative that silver is a commodity price of which fluctuates every hour therefore approach of learned lower authorities in adopting average purchase price during year cannot substitute market value of silver purchased by assessee for its eligible unit. Therefore, at most processing cost of silver is service that has been transferred by non-eligible unit to eligible unit, which should have been done at market rate. At present assessee has considered process cost on actual cost basis and has loaded on price of silver. Therefore, we direct assessing officer to adopt a margin of 2% over process cost of processed silver transferred from non-eligible unit to eligible unit and to sustain disallowance of deduction to that extent only. Accordingly, ground number 7 of appeal of assessee is allowed partly to that extent. 118. Ground number 8 of appeal of assessee is with respect to disallowance of deduction u/s 80 IB/80 IC to extent of INR 582029/- by increasing value of goods transferred from can pack Division to eligible units on ground that fair market value of goods transferred is higher. Identical issue has been....
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.... considered another brand of Tulsi mix, which is paid by assessee to an outsider, and therefore addition was made. Above addition was deleted for reason that assessee has used the brand but there is no identification of market value in relation to Rajinigandha brand of assessee but it was with respect to Tulsi mix brand. Therefore, fair market value of property of their particular brand was not ascertained by learned assessing officer. Therefore, addition was deleted in that year. Accordingly for similar reasons we also reverse order of learned CIT - A and allow ground number 10 of appeal of assessee. 121. Ground number 11 of appeal is with respect to addition on purchase of sandalwood oil of INR 845488059/- holding that it is a bogus purchase shown by assessee. In all earlier years, we have decided this issue holding that seized documents does not belong to assessment year other than assessment year 2011 - 12. Therefore, cognizance is now required to be taken of these seized documents for this year. Brief facts of case shows that in respect of claim of purchase of sandalwood oil from M/s Surya Vinayak industries Ltd and Allied perfumers private limited. Brief facts of case shows....
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....fy allegation of inflation of purchase price. It has been held by Hon'ble ITAT that entire story of inflated purchases is merely on basis of conjectures and there is no real evidence to establish any sort of case against appellant. In light of finding of Tribunal, alleged annexure A-1/ Page 52 is not relevant to AY 2010-11 and same could not be considered as basis for any addition in AY 2010- 11. 123. He further submitted that Ld AO and LD CIT (A) has not disputed fact that entire purchases of Sandalwood Oil is fully supported from invoices issued by parties and also use of same for manufacturing of final product. Further, assessing officer was not justified in relying upon seized document Page 52 of Annexure A/1 as same is incoherent, dumb and wholly irrelevant to case of assessee. It is also important to note that name of assessee is nowhere mentioned in said document and it is not known as to how such document is relevant to present case. 124. He further submitted that theory of bogus purchases and return of cash by SVIL and APPL as suggested by assessing officer has no valid basis as assessing officer has failed to bring any evidence on record to demonstrate alleged synchro....
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....monstrate comparability of cases. There are several factors which affect price of a commodity and without making any objective comparison with regard to quality, brand, nature and type of product, there could be no ground or basis for applying data of a third party transaction. While applying minimum rate of other party, ld CIT (A) has ignored fact that other parties have also supplied Sandalwood Oil at different rates as per details given as per separate sheet. Further, ld CIT (A) has also ignored fact that various items manufactured are of different qualities and use of different category of raw material based on business and commercial expediency and also corroborated from manufacturing of difference quality and sale price and as such mechanical application of minimum rate is highly arbitrary and irrelevant. In any case, even if purchase price of other parties is to be considered, same should be average price and not lowest price. 128. He therefore submitted that thus there is no justification for disallowance of claim of purchases to extent of Rs. 845488059/- on basis of application of minimum third party purchase rate and same may kindly be deleted. 129. Learned department....
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....result of finished goods production that is exceeding consumption. He further noted that quantity of finished product per KG on consumption of sandalwood oil ranges from 6.5 - 8.54 for various assessment years appears to be reasonable in variation whereas if entire quantity purchased from these two entities are ignored then finished product per KG consumption of sandalwood oil will range from 13.47 to 65.25 kgs. Therefore, he held that if quantity purchased from these two entities are not considered in quantitative details it will give an erroneous and inconsistent results in terms of finished product ratio. He further found that views taken by him is also supported by words mentioned in seized documents annexure A - 1 and page number 42 seized from laptop of Mr. Gupta where there is a mention of adjustment of apportionment of excise duty and rate difference. Therefore, he gave a conclusive finding that purpose of these bills is just adjustment in prices. He further analyzed details of purchases from all parties assessment year -wise in respect of sandalwood oil purchase and he found that average rate of alleged purchase from these two entities is at a much higher rate compared to ....
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....ear. As seized document pertain to this year, therefore, ld assessing officer could have made an addition based on seized documents found during course of search, which conclusively proves that assessee has obtained bogus bills for sandalwood oil from these two concerns. Therefore, argument of assessee that as addition is not confirmed in those years, it should also not be made in this year is devoid of any merit and hence rejected. 132. Second argument of assessee that theory of bogus purchases and return of cash by two entities as suggested by assessing officer has no valid basis as assessing officer has failed to bring any evidence on record to demonstrate alleged synchronized flow of cheque and cash between assessee in this company and as such adverse inference is wrongly drawn. This argument does not hold any water in case as assessee was found to have purchased merely bills for purchase of sandalwood oil whereas it has conclusively proved that material has been purchased from grey market. Seized documents also shows that assessee has entered into cash transactions against bills issued by these parties as there is a perfect sharing of excise duty credit available to assessee....
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....replacing it with bogus bills of these two alleged concerns at higher rate. It is not at all necessary that bogus bills can be purchased only from related parties; therefore, argument of assessee that these two parties are unrelated to assessee is devoid of any merit. 137. Seventh arguments that further even purchases of bogus bills are also a commercial transaction, which has been carried out by these two entities between assessee and these parties. All documents supporting transaction in form of bills, vouchers, documents showing actual receipt of material, documents in support of actual movement of goods and consumption in manufacture of final products are not of any relevance for reason that assessee has in fact purchased goods, otherwise quantitative details shown by assessee would be skewed, only allegation is with respect to obtaining bills of purchase of material not at market rate but at higher rate. In view of this lower authorities have conclusively proved fact that assessee has purchased material from grey market and replaced it with bills of these two alleged entities without procuring goods from them and financial transaction is shown to have entered at higher than ....
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.... sandalwood was always stagnant and does not depend upon quality, brand, and nature of product, terms, and conditions of goods. In view of this, we find that there is no basis for taking minimum price for purpose of computing above addition. According to us, average price if taken by revenue for purpose of making addition would obliterate to some extent any difference between purchases on various dates, of different quantities, of different qualities, from different parties, from different destination and of different rates. This is also supported from fact that assessee has purchased sandalwood from 4 different parties of 18894.210 KG. In those 4 parties, two parties were alleged bogus bill providers are also included. Total purchases are of Rs. 1436436257/- during year. Average rate of purchases from balance two parties (ignoring 2 parties who provided bogus bills) ranges from Rs. 75882.10 - to INR 28272.38. Average rate of purchases is INR 54156.49 per kg. In view of above facts, we direct learned assessing officer to make addition in hands of assessee for 16702.800 kg by replacing purchase price shown by two parties in their bills by average rate of purchases of INR 54156.49 pe....
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....ether on facts & in circumstances of case, Ld. CIT(A) has erred in law & on facts in deleting reduction of claim u/s 80IB/80IC of Rs. 3,54,13,197/- made by AO by taking into account expenditure (depreciation of fixed assets of corporate office and expenses of depots) of Rs. 3,54,13,197/- incurred by businesses of assessee for providing services to eligible undertakings which has not been allocated to eligible undertakings and by reducing deduction u/s 80IB/80IC of The Act, to that extent. 4. Whether on facts & in circumstances of case, Ld. CIT (A) has erred in law & on facts in deleting reduction of claim u/s 80IB/80IC of Rs. 21,68,29,686/- made by AO by taking into consideration fair market value of services obtained by eligible undertakings from corporate offices, depot, and branches etc. thereby re-computing profits of eligible undertakings resulting in reducing of deduction 80IB/80IC to that extent. 5. Whether on facts & in circumstances of case, Ld. CIT(A) has erred in and on facts in deleting reduction of claim u/s 801B/80IC of Rs. 4,85,85,020/- thus ignoring fact that royalty payment @3% which was made to sister concern taken by AO was rate approved by Regional Directo....
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.... AO is with respect to deletion of royalty addition made by learned assessing officer at rate of 3% at rate approved by Ministry of company affairs in respect of goods transferred from perfumery division to eligible units. This is identical to ground number 2 of appeal of learned assessing officer wherein we have confirmed action of learned CIT - capital in deleting above addition as learned assessing officer himself in assessment year 2013 - 14 onwards has not made any adjustment accordingly for similar reasons we dismiss ground number 2 of appeal of learned assessing officer. 146. Ground number 3 of appeal of AO is with respect to disallowance of deduction u/s 80 IB and 80 IC where expenditure are not allocated to eligible undertaking. Both parties confirmed that this is identical to ground number 3 of appeal of learned assessing officer for assessment year 2010 - 11. As We Have Already Deleted Addition for Assessment Year 2010 - 11 with Respect to Depreciation of Fixed Assessee As Well As Allocation of Expenditure, for Similar Reasons Given Therein We Also Dismiss Ground Number 3 of Appeal 147. Ground Number 4 of Appeal of Learned Assessing Officer Is with Respect to Fair Ma....