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2021 (2) TMI 1318 - AT - Income TaxTP Adjustment - determine the arm s length purchase price of Bisoprolol Fumarate - Selection of MAM - TPO proposed to apply comparable uncontrolled price (CUP) method on the reasoning that similar product has been exported by Unichem Laboratories Ltd at a price of Rs.32,624.56, whereas, the assessee has purchased the same product from AE @Rs.64,815/- per keg - HELD THAT - When the matter ultimately travelled to Tribunal, the co-ordinate bench, though, upheld applicability of CUP, however, accepting assessee s plea held that considering strict quality control and stringent regulatory method followed in Germany compared to India, 10% quality adjustment has to be provided while determining ALP under CUP. Further, accepting assessee s plea, the Tribunal in no uncertain terms has held that only the price at which the product is sold in domestic market, that too, sale transaction exceeding quantity of 20 kgs has to be considered for applying CUP. Admittedly, in the facts of the present case the TPO while applying CUP has considered the price charged for export sales made by Unichem Laboratories Ltd. Therefore, in our considered view, such price adopted for applying CUP is invalid. That being the case, when no comparable price for sale of the product in the domestic market is available in terms of the directions of the Tribuanl in assessee s own case for Assessment Years 2009-10 and 2010-11 2016 (3) TMI 1105 - ITAT MUMBAI , there is no other course left open, but to accept the benchmarking of the assessee under TNMM. In view of the above, we delete the addition of Rs.95,48,976/-. This ground is allowed. Disallowance of 70% out of the expenditure incurred towards distribution of samples - HELD THAT - While deciding identical issue in assessee s own case for Assessment Year 2003-04 2013 (9) TMI 306 - ITAT MUMBAI the Tribunal has restored the issue to the Assessing Officer for fresh examination after verifying the details of names and addresses of doctors. Keeping in view the aforesaid directions of the Tribunal in assessee s own case, we restore the issue to the Assessing Officer for fresh examination after due opportunity of being heard to the assessee. While doing so, the Assessing Officer may also examine the decision of the co-ordinate bench in case of Johnson Johnson Ltd 2014 (2) TMI 555 - ITAT MUMBAI This ground is allowed for statistical purpose. Disallowance u/s 14A - assessee while working out the disallowance AO has also included investment in REC Bond and investment in NSB, NABARD and REC Bonds - HELD THAT - Such investment should be excluded for computing disallowance under rule 8D(2)(iii). We find substantial force in the aforesaid submission of the assessee. Accordingly, we direct the Assessing Officer to verify the claim of the assessee and exclude the investments capable of yielding taxable income from the average value of investment for computing the disallowance under rule 8D(iii). Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. Disallowance by invoking section 145A - AO while examining the details of loans and advances furnished by the assessee, noticed that the assessee had receivables on account of CENVAT credit and other taxes - HELD THAT - It is a fact that while deciding identical issue in assessee s own case for Assessment Year 2003-04, the Tribunal in the order referred to above, has restored the issue to the Assessing Officer for fresh examination keeping in view that the adjustment, if any, has to be made to opening stock, purchases, sales and closing stock. We have also noted that while giving effect to the order of the Tribunal, the Assessing Officer has deleted the adjustment made under section 145A of the Act. In view of the above, we restore the issue back to the Assessing Officer for fresh examination keeping in view the directions of the Tribunal in Assessment Year 2003-04 that adjustment, if any, must be made to opening stock, purchases, sales and closing stock. This ground is allowed for statistical purpose. It is a fact that while deciding identical issue in assessee s own case for Assessment Year 2003-04, the Tribunal in the order referred to above, has restored the issue to the Assessing Officer for fresh examination keeping in view that the adjustment, if any, has to be made to opening stock, purchases, sales and closing stock. We have also noted that while giving effect to the order of the Tribunal, the Assessing Officer has deleted the adjustment made under section 145A of the Act. In view of the above, we restore the issue back to the Assessing Officer for fresh examination keeping in view the directions of the Tribunal in Assessment Year 2003-04 that adjustment, if any, must be made to opening stock, purchases, sales and closing stock. This ground is allowed for statistical purpose. Disallowance of club expenditure holding it to be of capital nature - HELD THAT - We have noticed that while deciding identical issue in assessee s own case for Assessment Year 2007-08 2013 (9) TMI 163 - ITAT MUMBAI the Tribunal has allowed the claim of the assessee. Facts being identical, respectfully following the aforesaid decision of the Tribunal, we delete the disallowance made by the Assessing Officer. This ground is allowed. Disallowance u/s 43B(f) - HELD THAT - We find that in case of UOI Vs. Excide Industries Ltd. 2020 (4) TMI 792 - SUPREME COURT while reversing the judgment of the Hon ble Calcutta High Court, has held hat this type of expenditure has to be disallowed under section 43B(f) of the Act if they were not actually paid during the year. Following the decision of the Hon ble Supreme Court noted above, we dismiss the ground of the assessee.
Issues:
1. Transfer pricing adjustment challenge 2. Disallowance of expenditure towards distribution of samples 3. Disallowance under section 14A of the Act 4. Disallowance under section 145A of the Act 5. Disallowance of club expenditure 6. Disallowance under section 43B(f) Transfer Pricing Adjustment Challenge: The appeal was filed against the addition of Rs5.95,48,976/- on account of transfer pricing adjustment. The assessee, a resident company engaged in pharmaceutical and chemical products, had entered into international transactions with overseas Associate Enterprises (AEs). The Transfer Pricing Officer (TPO) applied the Comparable Uncontrolled Price (CUP) method for one raw material, Bisoprolol Fumarate, proposing an adjustment based on export prices. The Tribunal found the CUP applied by the TPO invalid and directed acceptance of the benchmarking under Transactional Net Margin Method (TNMM), deleting the addition. Disallowance of Expenditure towards Distribution of Samples: The Assessing Officer disallowed 70% of the expenditure incurred towards distribution of samples, as the assessee failed to provide necessary details. The Tribunal directed a fresh examination by the Assessing Officer, considering previous decisions and directing a review of similar cases, allowing the assessee an opportunity to substantiate the expenses. Disallowance under Section 14A of the Act: The assessee challenged the disallowance of Rs.1,09,16,789/- under section 14A of the Act, arguing for the exclusion of certain investments capable of yielding taxable income. The Tribunal directed the Assessing Officer to verify the claim, excluding investments yielding taxable income from the disallowance calculation under rule 8D(2)(iii). Disallowance under Section 145A of the Act: The disallowance of Rs.1,36,67,817 was challenged under section 145A of the Act. The Tribunal restored the issue to the Assessing Officer for a fresh examination, considering adjustments to opening stock, purchases, sales, and closing stock, following previous Tribunal directions and relevant case law. Disallowance of Club Expenditure: The disallowance of club expenditure was challenged and allowed based on a previous Tribunal decision in a similar case, leading to the deletion of the disallowance. Disallowance under Section 43B(f): The disallowance of Rs.13,50,000/- under section 43B(f) was upheld based on recent judgments, including a decision by the Hon’ble Supreme Court. The Tribunal dismissed the ground of the assessee following the legal precedent. The appeal was partly allowed, with certain disallowances upheld and others deleted based on detailed legal analysis and application of relevant case law and statutory provisions.
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