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2017 (3) TMI 1035 - AT - Income TaxTPA - ALP adjustment addition - Held that - It is an admitted past history of the case that all the transactions have been considered together all along, except in the assessment year 2005-06 in which transactions of each month are taken togetherrather than transactions of the entire financial period, and in none of the earlier assessment years, the sale transactions have been considered on standalone basis. It is only in the present year, a departure has been made by the TPO in this regard. Whether transactions are so interrelated in relation to the same contract as to be taken together is essentially a factual aspect permeating over the different years, and, as observed by Hon ble Supreme Court in the case of Radhasoami Satsang Vs CIT 1991 (11) TMI 2 - SUPREME Court , each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year . In this view of the matter, there is no good reason to take a different stand now and claim that aggregation of transactions cannot be permitted in this assessment year, so far as benchmarking of ANH sales to AE is concerned. The plea of the assessee is indeed well taken and it merits our acceptance. We have also noted that there is no dispute that once this principle is adopted, the benchmarking done of the assessee is to be accepted and the transactions are to be held as arm s length transactions. The assessee, therefore, deserves to succeed on this issue. Section 35(2AB) weighted deduction denied - Held that - The assessee at this stage raises an alternative submission as extracted herein above that authorities below ought to have held it eligible for section 35(1)(iv) deduction. We notice that the learned DRP has not considered the said argument in paragraph no.15.11 hereinabove. It merely holds that section 35(2) of the Act bars the impugned deduction pertaining to expenditure incurred on purchase of land etc. It however does not specifically pinpoint as to what was the expenditure incurred head-wise so as to be hit by the above bar in granting the impugned deduction. We thus deem it fit and proper to remit the issue back to the Assessing Officer for adjudication afresh as per law after examining necessary details stated in assessee s books of account after affording it adequate opportunity of hearing. This ground is partly accepted for both the assessment years, in the terms indicated hereinabove. Disallowing employees contribution to P.F. on belated payment thereof - Held that - Learned counsel filed before us Hon ble jurisdictional High Court s decision in CIT vs. Amoli Organics (P.) Limited 2013 (11) TMI 971 - GUJARAT HIGH COURT holding that if the assessee has deposited the above contributions within the grace period, the impugned disallowance is not sustainable. Revenue fails to rebut this legal position. We thus remit the issue back to the file of the Assessing officer for factual verification and allow the impugned contribution to the extent that has been deposited within the stipulated grace period. This ground of assessee s appeal succeeds for statistical purposes. Repair and replacement expenses of its building s roof holdings disallowed - Held that - Assessee has in fact incurred the impugned sums on plant building s roof repair. The authorities below have taken strong cognizance to the effect that it has itself estimated benefits of above repairs to continue for a period of four years. We find this approach to be wholly unreasonable since this is not the lower authorities case that the assessee s repairs in question have in any manner added any structure or asset of permanent nature conferring it an enduring benefit. We further find in the case of Taparia Tools Limited vs. JCIT (2015 (3) TMI 853 - SUPREME COURT ) has accepted a similar proposition that allowability of revenue expenditure claim cannot be denied merely on the ground that the same has been amortized or claimed for over a period of years. We accordingly accept assessee s corresponding substantive ground and direct the Assessing Officer to delete the impugned disallowance Disallowance of holding stores and spares as treated as capital expenditure - Held that - It has already come on record that the Assessing Officer himself has accepted assessee s action having amortized similar expenses in the immediately preceding assessment year 2005-06. Learned Departmental Representative at this stage points out the the impugned expenditure was incurred in preceding assessment year and therefore the same is not allowable in the instant assessment year. We observe in these peculiar facts that our above discussion in preceding paras relying on the case law of Taparia Tools Limited (supra) applies herein as well since there is no material in the case records to indicate any addition in assets resulting in enduring benefits. We further place reliance on Union of India vs. Azadi Bacho Andolan (2003 (10) TMI 5 - SUPREME Court ) to follow judicial consistency to conclude that once the Assessing Officer accepted similar claim in the preceding assessment year, he ought not to reject apportion of the said claim in the instant assessment year. We thus accept assessee s instant substantive ground as well.
Issues Involved:
1. Upward Transfer Pricing Adjustment 2. Weighted Deduction under Section 35(2AB) 3. Disallowance of Employees' Contribution to Provident Fund 4. Disallowance of Repairs and Replacement Expenses 5. Disallowance of Stores and Spares Expenses 6. Adjustment of Provision for Gratuity under Section 115JB 7. Validity of Notice under Section 148 8. Disallowance of Prior Period Expenses 9. Disallowance of Depreciation on Excess Cenvat Credit 10. Initiation of Penalty Proceedings under Section 271(1)(c) Issue-wise Detailed Analysis: 1. Upward Transfer Pricing Adjustment: The primary issue was the upward transfer pricing adjustment of ?1,12,40,558/- for the sale of ANH Chemical to an associated enterprise (AE). The appellant argued that the arm's length price should be determined on an annual aggregate basis, consistent with prior years. The Tribunal observed that aggregation of transactions is permissible under certain circumstances, supported by judicial precedents. Given the past history of the case, where transactions were considered together, the Tribunal found no reason to deviate from this approach. Consequently, the upward adjustment was deleted. 2. Weighted Deduction under Section 35(2AB): The appellant claimed weighted deduction for research and development expenses, which was denied due to non-compliance with procedural requirements, such as filing forms 3CK, 3CL, and 3CM. The Tribunal noted that the appellant failed to produce necessary approvals. However, it accepted the alternative claim for deduction under Section 35(1)(iv) and remitted the issue back to the Assessing Officer for fresh adjudication. 3. Disallowance of Employees' Contribution to Provident Fund: The disallowance of ?2,56,834/- for belated payment of employees' contribution to the Provident Fund was contested. The Tribunal referred to the jurisdictional High Court's decision, which allows such contributions if deposited within the grace period. The issue was remitted back to the Assessing Officer for factual verification. 4. Disallowance of Repairs and Replacement Expenses: The disallowance of ?1,64,045/- related to repairs and replacement of building roofing was challenged. The Tribunal found that the expenses did not result in an enduring benefit or add any new structure. Relying on the Supreme Court's decision in Taparia Tools Limited, the Tribunal allowed the expenditure as revenue in nature and directed the deletion of the disallowance. 5. Disallowance of Stores and Spares Expenses: The disallowance of ?3,15,346/- for stores and spares was contested. The Tribunal noted that similar expenses were amortized and accepted in the preceding year. Applying the principle of judicial consistency and the Supreme Court's ruling in Taparia Tools Limited, the Tribunal allowed the expenditure as revenue in nature. 6. Adjustment of Provision for Gratuity under Section 115JB: The Tribunal did not provide a detailed analysis for this issue in the judgment. 7. Validity of Notice under Section 148: The appellant challenged the issuance of notice under Section 148, claiming it was bad in law. The Tribunal did not provide a detailed analysis for this issue in the judgment. 8. Disallowance of Prior Period Expenses: The disallowance of prior period expenses amounting to ?3,23,170/- was confirmed by the lower authorities. The Tribunal did not provide a detailed analysis for this issue in the judgment. 9. Disallowance of Depreciation on Excess Cenvat Credit: The disallowance of depreciation related to excess Cenvat Credit amounting to ?16,68,060/- was contested. The Tribunal did not provide a detailed analysis for this issue in the judgment. 10. Initiation of Penalty Proceedings under Section 271(1)(c): The Tribunal did not provide a detailed analysis for this issue in the judgment. Conclusion: The Tribunal allowed the appeals in part, providing relief on several grounds including the deletion of the upward transfer pricing adjustment and allowing certain deductions. The issues were remitted back to the Assessing Officer for fresh adjudication where necessary. The judgment emphasized the importance of judicial consistency and adherence to established legal principles.
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