TaxTMI 
TaxTMI 
2021 (3) TMI 1487
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....ar and grounds of appeal are identical in nature. After recording the submissions of both the parties, all these cases were heard together and disposed of vide this consolidated order. First, we would take up Revenue's appeal in ITA No. 1357/PUN/2017 for the assessment year 2012-13 for adjudication. ITA No. 1357/PUN/2017 (Revenue's appeal) A.Y. 2012-13 3. In ITA No. 1357/PUN/2017, grounds of appeal raised by the Revenue are as follows: "1. Whether on the facts and circumstances of the case and in law, the CIT(A) erred in deleting the additions of Rs. 2,20,82,539/- to the total income of the appellant on account of adjustment to the international transaction pertaining to export of finished goods to AE? 2. For this and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 3. The appellant craves leave to add, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 4. The brief facts of the case are that the assessee had entered into international transaction with the Associate....
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.... the year was Rs. 21,22,40,961/-. This included sale of traded as well as manufactured items. Turnover of traded items was Rs. 16,98,14,647/- whereas that of manufactured items was Rs. 4,24,26,314/-. The appellant selected certain companies as comparable by conducting a search in the public data base prowess. However, there was a difference in the margin as compared to that of the appellant. The margin of the appellant was less for the reasons such that- * The comparable selected had not incurred any expenditure towards slow moving inventory whereas the appellant had debited an amount of Rs. 21.79 lacs. * In the case of the appellant there was a foreign exchange loss of Rs. 5,01,620/- in trading activity and Rs. 10,35,660/- in manufacturing activity. 5.2.2. The appellant made the submission to the Ld. AO, a copy of which is enclosed for your ready reference along with the following documents- 1. Margin analysis of Comparable Companies on Revenue, 2. Split Financial as at 31st March, 2021 and 3. The margin analysis, the benchmarking for trading and manufacturing 5.2.3 The Ld. AO however did not accept the appellant's....
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....unsel for the assessee submitted that the assessee is carrying on two separate divisions i.e. two separate activities; one is the manufacturing and second is trading. The Assessing Officer had considered the operations of assessee in entirety and held it to be one activity. However, there is no dispute to the fact that the assessee was carrying on both manufacturing and trading activity separately. This fact has been accepted by the Tribunal in assessee's own case in ITA No. 1579/PUN/2014 for the assessment year 2010-11 dated 18.12.2018. The Ld. Counsel for the assessee further submitted that the relief granted to the assessee by the Ld. CIT(Appeals) is on the fact that entirety of the transaction has been consolidated to only one operation and relief was provided therein. However, there is no bifurcation of trading and manufacturing activities separately while giving relief to the assessee by the Ld. CIT(Appeals). Therefore, in the decision of the Tribunal for assessment year 2010-11 in assessee's own case (supra.), the matter was restored to the file of the Assessing Officer to benchmark two activities separately. Accordingly, the Ld. Counsel for the assessee prayed that ....
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....receding two years, the assessee was directed to apply the data of contemporaneous period, as per which the average worked out to 12.82%. The assessee was thus, show caused in this regard. The Assessing Officer did not accept the plea of assessee for benchmarking two transactions separately and noted that as against the margins of assessee at 2.94%, margins of comparables were 12.82% and hence, made an upward adjustment of Rs. 1,46,32,576/-. 7. The CIT(A) deleted the aforesaid adjustment following the same approach as he had applied in assessment years 2008-09 and 2009-10. 8. The Revenue is in appeal against the order of CIT(A). It may be pointed out herein itself that the issue was decided in favour of assessee by the CIT(A) in turn, relying on his own order for assessment years 2008-09 and 2009-10. 9. We find that the Revenue had filed appeals against the order of CIT(A) relating to assessment years 2008-09 and 2009-10. The appeals of Revenue were decided by the Tribunal vide order dated 26.04.2018 in ITA Nos. 669 & 670/PUN/2014, relating to assessment years 2008-09 & 2009-10. The Tribunal after taking note of the additional evidence filed by assessee b....
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....trading. 12. Now, coming to the second step, wherein it is the duty of Assessing Officer/TPO to benchmark two activities separately. Accordingly, we direct the Assessing Officer/TPO to apply TNMM method and go through the comparables selected by assessee and determine the arm's length price of international transactions entered into by assessee with its associated enterprises under the umbrella of manufacturing activity and also as part of trading activities. The two activities have to be benchmarked separately and independently, for which reasonable opportunity of hearing shall be provided to the assessee. Accordingly, we remit the issue back to the file of Assessing Officer/TPO in this regard. The grounds of appeal raised by Revenue are thus, allowed for statistical purposes." 9. That following the rule of consistency and after considering the fact that both the parties have agreed that the facts and circumstances and issues for this year also is absolutely identical and therefore, for assessment year 2012-13 also on this issue, we set aside the order of the Ld. CIT(Appeals) and restore the matter to the file of the Assessing Officer with the directions that two a....
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....other hand has submitted that the standard policy for the inventory provision followed by the assessee. He has further submitted that the provision on this account adversely affects the profitability of the company resulting in reduced profitability and at the same time when the provision is reversed as per the policy described above, it results in increasing profitability. The Ld. CIT(Appeals) on this issue has held as follows: "6.3.2 I have carefully perused the assessment order and the material placed on record. It is observed that the appellant has been following this consistent policy since the inception of the business. During the year under appeal, the appellant has not written back any provisions instead made provisions for write off of inventory on the policy followed. The AO has observed that the appellant had not written back any amount in the earlier also. There is another aspect involved in this issue. That is provision of Rs. 21,79,677/- was considered while computing margin for TP assessment and made addition to that extent. If the said provisions made is not allowed as business expenditure to that extent TP margin will be revised. As I have decided TP addit....
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....tional ground raised is legal in nature and as all the facts are on record, the assessee requests for admission of the above ground." 20. The Ld. DR did not raise any objection with regard to admission of additional ground for adjudication. 21. Having heard the submissions of both the parties herein, we find the additional grounds raised by assessee are legal in nature, hence, the same is admitted in line with the decision of Hon'ble Supreme court of India in the case of NTPC Ltd. Vs. CIT (supra.) 22. We find the Co-ordinate Bench of the Tribunal, Pune in the case of Synechron Technologies Private Limited Vs. ACIT, in ITA No. 1692/PUN/2018 for the assessment year 2014-15 dated 22.01.2021 had an occasion to deal with the similar issue and relevant observation of the Tribunal reads as follows: "32. With regard to Ground No. 9, the assessee contented that the TP adjustment has to be done restricting to the proportion of transaction with Associated Enterprises only. 33. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs. Firestone International (P.) Ltd., 378 ITR 558 has held that TP adjustment needs to be restricted to the trans....
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....ances of the case and in law, the CIT(A) erred in deleting the additions of Rs. 1,76,58,572/- made by the Assessing officer on account of an adjustment to the international transaction pertaining to export of finished goods to AE, when the earlier appeals for A.Y 2008-09 and A.Y 2012-13 have yet to come to its finality. 2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 3,79,205/- made by the Assessing officer on account of slow moving inventory, when the relevant provisions was not an ascertained liability. 3. For this and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 4. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 25. At the time of hearing both the parties agreed and submitted that the grounds of appeal for assessment year 2013-14 are absolutely identical and similar to the grounds of appeal raised in cross appeals for the assessment year 2012-13 by both the parties herei....