AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 714
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....he assessee without appreciating the finding of the TPO that, no evidence, to substantiate that the sale to Non- AE of up to 12% of production in January-2014 was sale of scrap alone, was furnished by the assessee company during transfer pricing proceeding. 3. On the facts and in the circumstances of the cases and in law, the Ld.CIT(A) has erred in observing that no addition on account of sales made to appellant or un-related parties were made without appreciating the fact that the issue under dispute was not quantity of stock but the nature of quality of material sold to Non-AE which was considered as comparable. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that no discrepancies or other material evidences were brought on record which can prove that contentions of the appellant regarding quality difference were incorrect without appreciating the fact that the TPO has clearly stated that no evidence to substantiate that the sales to Non-AE of up to 12% of production in January-2014 was sale of scrap alone was furnished by the assessee company during transfer pricing proceeding. 5 It is, therefore, pr....
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....ations during the year under consideration and was engaged in the business of manufacturing of TMT bars. The assessee purchased mild steel (MS) ingots from its associated Enterprise (AE) KSL and such transaction was reported in Form 3CEB. The assessee had adopted CUP Method while benchmarking these transactions. During the course of transfer pricing assessment, the TPO noted that the AE was charging higher price from the assessee than prices charged by it from nonrelated parties. The assessee submitted before the TPO that material purchased by it from its AE was of a different quality as compared to the sales made by the AE to non-related parties. The argument of assessee was partially accepted by the AO for the purchases made by the assessee in the months of December 2013, February 2014 and March 2014. The AO disputed purchases made only for the month of January 2014 on the ground that the sales made by AE's to non-related parties was 12.31% and such percentage was significantly higher in comparison with other months. Accordingly, the AO made a downward adjustment of purchases made from the AE by Rs. 2,05,23,752/-. 7. The assessee filed appeal before Ld. CIT(Appeals) who allowe....
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....rom the AE are not in the business of manufacture of TMT bars whereas appellant is in the business of manufacture of TMT Bars. The appellant has also submitted chemical analysis report for goods sold by KSL to non-related parties and the appellant in support of its claim that there was qualitative difference between such sales and such facts are not disputed by AO. The appellant has also submitted factory testing report from M/s. Geomin Laboratories to substantiate the quality of their products. These facts are accepted by AO in the order and no discrepancies or other material evidences were brought on record which can prove that contentions of the appellant regarding quality difference were incorrect. When the AE is selling goods to non-related parties, such parties are confirming quality of the material., the appellant establishing the fact that non-related parties are purchasing scrap quality product from KSL, the TPO was not justified in not accepting purchase price only in one month only by comparing sales made by KSL to the appellant and KSL to nonrelated parties. The copies of relevant bills and other evidences, as discussed herein, above for the month of January 2014 are si....
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....emaining three months. On the contrary the appellant has brought sufficient evidences on record to prove that there a qualitative difference in the goods sold by the AE to the appellant. As a word of caution, it may be a practice in steel industry to make products of non standard sizes and non standard specifications Le different from the ISI/BIS) without there being any significantly change in subsequent manufacturing and utility of the finished goods leading to sale at the rates lower than the market rates, I am of the considered view that still there would not be a case of doubting the transactions and making adjustment on account of arm's length pricing (ALP). In view of the circumstances in the case under consideration, the downward adjustments made by the TPO for Rs. 2,05,23,753/- is found not sustainable and is directed to be deleted. The related ground of appeal is allowed." 8. The Department is in appeal before us against the order passed by Ld. CIT(Appeals) deleting the additions made on account of downward adjustment of purchase price of MS ingots purchased by the assessee from its AE for the month of January 2014. Before us, the DR primarily relied on the observation....
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....re, there is in our view no rationale in making the adjustment only for the month of January 2014. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals),who after detailed discussion in the order, has deleted the adjustment made by the TPO on this issue. 10. In the result, the appeal of the Department is dismissed. Now we shall take up the assessee's cross appeal. Grounds Number 1: Depreciation on expenses incurred for increase in share capital for Rs. 5,24,023/- 11. The brief facts in relation to this ground of appeal are that the assessee incurred expenditure of Rs. 5,24,023/- in connection with the increase in authorised capital. The assessee claimed that such expenditure was incurred prior to commencement of commercial production and same was transferred to asset account along with the financial charges. The claim was not accepted by the AO on the ground that once expenditure is capitalised, the depreciation would be indefinitely claimed by the assessee which would result into charge on taxable profit every year. According to the AO, the methodology adopted by the assessee was not in consonance with the provisions of the Act as the assessee was required....
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....TR 117 and CIT Vs Mahindra Ugine and Steel Co Ltd (2001) 250 ITR 84 (Bom) where the Courts have denied depreciation on such expenses which were capitalised. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals) on this issue so as to call for any interference. 14. In the result, ground number 1 of the assessee's appeal is dismissed. Ground number 2: addition of Rs. 2,16,920/- on account of interest on the basis of Form 26AS offered to tax in subsequent year 15. The brief facts in relation to this ground of appeal are that assessee received interest income of Rs. 2,16,920/- which was not offered to tax in the return of income. During the course of assessment proceedings, the assessee agreed for such additions and additions were made by the AO. In appeal before Ld. CIT(Appeals), the assessee took the alternative contention that since interest income has been offered to tax in the subsequent year i.e. assessment year 2015-16, it would amount to double taxation in case this interest income is taxed in assessment year 2014-15 as well. Ld. CIT(Appeals) dismissed the appeal of the assessee with respect to this ground on the basis that since the assessee is following ....