9911796707
TMI Blog2013 (9) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of tax duty will also be made in purchases - Decided in favour of assessee. Disallowance of bad debt - Held that:- It is settled legal position as held by Hon ble Supreme Court in case of TRF Ltd.(2010 (2) TMI 211 - SUPREME COURT) that after amendment of provisions from assessment year 1998-99, burden is no longer on assessee to establish that debt has actually become irrecoverable. only conditions which are required to be fulfilled for allowance of bad debt is that debt should have been taken into account in computation on inomce of earlier year and should have been written off in books of accounts. There is no dispute that bad debt had actually been written off in books of accounts. CIT (A) has held that assessee had not produced any detail and evidence to show that such debts had been taken into account in computating income of ealier year. Issue is restored to file of AO for fresh decision after allowing opportunity of hearing to assessee to show that debt had been taken into account in computation of income of earlier year - Decided in favour of assessee. Disallowance of discount and commission expenses - Held that:- assessee could not submit complete details along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There was however no independent evidence produced before lower authorities to show superior quality of assessee s product. assessee vide letter has filed an additional evidence before Tribunal in form of quality certificate from Bee PharmLabs (Pvt.) Ltd. an independent accredited third party and also comparative selling rate of same product produced by Torrent Pharmand Unichem Laboratories Ltd has been filed and it has been requested that additional evidence may be submitted. It was argued that assessee was made aware of these additional evidence only after passing of order by CIT (A) and accordinlgy it has been requested for admission of same. In our view an independent evidence regarding quality of products and comparative prices will be useful in deciding issue - Decided in favour of assessee. Import of pigments - Held that:- assessee had placed sufficient material on record in support of its plethat low margin in case of pigment was not because of high import price but because of low selling price in domestic market which was highly competitive. comparison made by AO of pigment segment with non AE trading which had no pigment, in our view is not justified on facts of case. be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as international issues. 2. The dispute raised in ground no. 1(a) is general in nature and, therefore, does not require any adjudication. 3. The ground no. 1 (b) is regarding addition of ₹ 8332055/- on account on unutilised modvat credit in the value of closing stock. The AO had made the said addition as the assessee had not included the unutilised modvat credit in the closing stock u/s 145A of the IT Act. 3.1 The assessee disputed the decision of AO and submitted before CIT (A) that similar addition made in the earlier year has been deleted. It was also submitted that in case addition was required to be made into the closing stock, adjustment has also to be made in the purchases as well as in the opening stock. CIT(A) after considering the submissions of the assessee observed that similar issue had been considered in assessment year 2002-03 in which the CIT(A) had held that full effect of provision of section 145A were required to be given by including tax duty etc., in the opening stock/purchases also and not only in the closing stock. CIT (A) thereafter held that addition made by AO in the closing stock was confirmed and directed the AO to make similar adjustment in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord, noted that the tax have been deducted on 25.4.2003 i.e in the subsequent year. Therefore, it was not a case of tax being deducted in this year and payment made within a period of two months. CIT (A), therefore, held that deduction had to be allowed in assessment year 2004-05 after necessary verfication. Aggrieved by the said decision, the assessee is in appeal before Tribunal. 4.2 We have heard both the parties. The learned senior Counsel appearing for the assessee pointed out that the direction of CIT (A) for allowing the claim in the next year has not been given effect to by the AO. It was also submitted that the assessee will be satisfied if the claim was allowed in the next year. We have considered the matter carefully, we do not see any difficulty in allowing the claim in next year as the CIT(A) has given a clear finding that deduction was made in the next year and the amount was also paid next year. The order of CIT (A) holding that the claim has to be allowed next year is, therefore upheld. The AO will thus allow the deduction in assessment year 2004-05. 5. The dispute raised in ground no.1(d) is regarding disallowance of ₹ 58,91,675/- in respect of bad and irre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f earlier year and should have been written off in the books of accounts. There is no dispute that the bad debt had actually been written off in the books of accounts. The dispute is only whether the debt had been taken into account in the computation of income of earlier year. CIT (A) has held that the assessee had not produced any detail and evidence to show that such debts had been taken into account in computating the income of ealier year. This aspect in our view requires verification to which the assessee has no objection. We, therefore, restore the issue to the file of AO for a fresh decision after allowing opportunity of hearing to the assessee to show that the debt had been taken into account in computation of income of the earlier year. 6. The dispute raised in ground no. 1 (e) is reagarding disallowance of ₹ 5,32,69,000/-. The AO on examination of quantitative details of trading goods and manufacturing goods noted that there was under statement of closing stock. The assesse explained that the lower stock was because of shortage, free samples and giveaways under the company's bonus scheme. It was also submitted that it was a common practice amongst all pharmaceutic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal. 6.2 Before us the learned senior Counsel submitted that at the time of assessment, the assessee had file the call report of doctors before the AO which contained the names of the doctors. It was also submitted that the AO had not specifically called for the addresses of the doctors. It was pointed out that the assessee was a multinational company which was distributing free samples throughout India and details of the doctors were voluminous. It was also submitted that the assessee could provide such details if required. He also filed the details for the month of March giving names and addresses of the doctors which ran into several pages. It was argued that it was a common practice to distribute free samples and such claims have also been allowed in the past. The disallowance has been made only from this assessment year. The claim should, therefore, be allowed considering the past histroy. Learned DR on the other hand submitted that the burden was on the assessee to establish that the expenditure on account of samples was genuine and had been actually incurred which cannot be discharged without giving full details. It was also submitted that the disallowance could always be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the necessary details. Giving free samples is a normal business practice in pharmaceutical business and, therefore, disallowance of entire expenditure is prima facie unjustified. The matter in our view requires fresh examination after verification of details about names and addresses of doctors before the AO. We, therefore, set aside the order of CIT (A) on this point and restore the issue to the file of AO for passing a fresh order after necessary examination of the details filed by the assessee and after allowing opportunity of hearing to the assessee 7. Ground no. 1(f) relates to transfer pricing issue and will be taken up later. 8. The dispute raised in ground no. 1(g) is regarding deduction of ₹ 91,55,000/- in respect of contribution to LIC Group Insurance Scheme. The learned Senior Counsel at the time of hearing of the apeal did not press this ground. The ground is, therefore, dismissed as not prressed. 9. The ground no. 1 (h) is regarding disallowance of ₹ 5,00,000/- out of discount and commission expenditure claimed by the assessee. The AO noted that the assessee had claimed discount and commission of ₹ 1,89,87,006/-. The AO observed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no disallowance had been made either in the earlier year or in the subsequent year even in the scrutiny assessments made u/s 143 (3) of the IT Act. He also referred to the comparative details filed at page 835 of the paperbook as per which the commission and discount as percentage of sales this year was .55% compared to .43% in assessment year 2002-03. The difference being not big it was submitted that no disallowance should be made. The learned DR on the other hand strongly supported the orders of authorities below and placed reliance on the finding given in the respective orders. 9.3 We have perused the records and considered the the rival contentions carefully. The dispute raised is regarding estimated disallowance of ₹ 5,00,000/- out of discount and commission expenses of ₹ 1,89,87,006/- claimed by the assessee. The assessee could not submit complete details along with names and addresses of the parties with supporting evidence which was specifically requisitioned by the AO. Such details were also not been filed before CIT(A), and, therefore, he upheld the disallowance. It has been submitted before us, that similar claim had been made by the assessee both in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decision, the assessee is in appeal before Tribunal. 10.1 Before us, learned Senior Counsel advanced similar arguments as in case of discount and commission. He also referred to the comparative details given at page 835 of the paperbook to point out that expenditure on account of sales promotion as percentage of sales was lower this year compared to expenditure in the assessment year 2002-03. It was also submitted that no disallowance had been made either in the earlier year or in the subsequent years even in the scrutiny assessment. It was, therefore, urged that the addition made may be deleted. The learned DR on the other hand supported the order of CIT(A) and placed reliance on the findings given in his order. 10.2 We have perused the records and considered the rival contentions carefully. The dispute is regarding estimated disallowance out of sales promotion expenses. The assessee has claimed sales promotion expenses of ₹ 5,45,77,106/-. Estimated disallowance of 20,00,000/- had been made by AO as the assessee could not file full details relating to the claim. CIT(A) reduced the disallowance to ₹ 10,00,000/-. It has been submitted before us, that no disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 835 of the paperbook to point out that the claim this year as a percentage of sales was lower compared to in the immediate preceding year. It was further submitted that the assessee being a company no disallowance could also be made on account of personal issues. Reliance was placed on the judgment of Hon'ble High Court of Gujarat in case of Sayaji Iron & Engineering Co. (253 ITR 749). It was, therefore, urged that no disallowance should be made. The learned DR on the other hand supported the order of CIT(A) and placed reliance on the findings given in his order. 11.3 We have perused the records and considered the matter carefully. The dispute is regarding estimated disallowance of ₹ 10,00,000/- out of travelling, conveyance and vehicle expenses of ₹ 11,21,56,760/-. The AO had made estimated disallowance on the ground that full details of expenses with names and addresses of the parties had not been given. CIT (A) has confirmed the disallowance. We find that the issue is similar to the disallowance of sales promotion expenses which we have dealt with earlier. In the absence of full details and evidence the AO is justified in making the estimated disallowance. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of details is not possible before the AO without giving opportunity to the assessee which was not possible at the level of CIT (A) as he had no power to set aside the assessment. We, therefore, set aside the order of CIT (A) on this point and restore the matter to the file of AO for fresh order on this issue after necessary verification of details filed by the assessee and after allowing opportunity of hearing to the assessee. 13. The ground no. 1(l) is regarding allowability of claim of deduction u/s 80-IB in respect of DEPB income of ₹ 22,76,670/-. 13.1 The AO noted that the assessee had claimed deduction of ₹ 2,48,57,018/- u/s 80-IB of the IT Act., which also included deduction in respect of DEPB income. The AO disallowed the claim in respect of DEPB income on the ground that DEPB income was not derived from the business of the undertaking following the judgment of Hon'ble Supreme Court in case of Sterling Foods Ltd. Vs. CIT ( 237 ITR 579) and some other judgments. In appeal CIT (A) confirmed the disallowance made by AO, aggrieved by which the assessee is in appeal before Tribunal. 13.2 We have heard both the parties, perused the records and considered matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of loss of goods, damages etc., which was a part and parcel of business. The indenting commission had been received in the course of business for acting as indenting agents for certain parties in India. Therefore, the same arose from the business activity. The income from instruments service contracts had arisen from services rendered in connection with maintenance contracts and other services in respect of imports and sale of medical instruments. The same, therefore, arose from the business operation. It was also submitted that the miscellaneious income included scrap sales, sundry sales etc,. which should be excluded as the same went to reduce the cost of goods produced. CIT(A) however, did not accept the contentions raised and following the decision of his predecessor in assessment year 2002-03 confrimed the order of AO, aggrieved by which the assessee is in appeal before Tribunal. 15.3 Before us learned Senior Counsel argued that the AO had assessed the various receipts mentioned in this ground as income from business and not as income from other sources. As regards the interest on deposits, export incentives and indentin commission, he was agreeable to reduction of 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supra) 90% of net amount only should be reduced. Since in view of the judgment of Hon'ble Supreme Court, only the net receipts mentioned in Explanation (baa) are required to be reduced, we, therefore, set aside the order of CIT(A) on this point and direct the AO to reduced 90% of such net receipts after necessary verification. 15.5 The interest on delayed payment had been received from the customers for early payment of sale bills. It had been argued that this is an integral part of business operation and, therefore, should not be covered by the Explanation (baa). We agree with the submissions made as in our view interest on delayed payment has the same characteristics as the sale price and, therefore it has to be taken as arising from business operations and is not required to be reduced as per Explanation (baa). The insurance claim, it has been pointed out is covered in favour of the assessee by the judgment of Hon'ble High Court of Bombay in case of Pfizer ( 330 ITR 62). Earlier Hon'ble High Court of Bombay in case of Dresser Rand India Pvt. Ltd. (323 ITR 429) had held that insurance claim was covered by Explanation (baa). however in that case, Hon'ble High Court had proceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore Tribunal. 16.2 Before us learned Senior Counsel appearing for the assessee submitted that he had no objection for exclusion of interest on income tax refund at the rate of 100%. It was also submitted that the assessee will be satisfied if the interest on FD is also excluded fully provided netting is allowed to the assessee. In other words it was submitted that only net interest income should be excluded while computing deduction u/s 80HHC. The learne DR on the other hand placed reliance on the orders of authorities below. 16.3 We have perused the records and considered the rival contentions carefully. The dispute is regarding exclusion of interest on FD and interest on income tax refund from the profit of business while computing deduction u/s 80HHC. The interest on income tax refund has to be treated as income from other sources and, therefore, the entire amount is required to excluded from the profit of business while computing deduction u/s 80HHC. The learned senior Counsel also fairly agreed that the assessee had no objection if the interest on FD was also excluded from the profit of business providing the netting was allowed to the assessee. We find the claim reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... baa). The said Explanation applies to any receipts by way of brokerage, commission, interest, rent charges or any other receipts of similar nature included in the business profit. The amount under consideration is not receipt by the assessee during the year. It is only a write back of loss claimed earlier and credited to the P&L account without any actual receipt. Therefore, we agree with the submission of the learned Senior Counsel that the provisions of Explanation (baa) cannot be applied to such income. The amount has already been assessed as business income by the AO and, therefore, it would be fully eligible for deduction u/s 80HHC. We hold accordingly. 18. The dispute raised in ground no. 1 (q) is regarding reduction of the deduction allowed u/s 80-IB from the profit of business while computing deduction u/s 80HHC. The AO while computing deduction u/s 80HHC has reduced from the profit of business an amount of ₹ 2,43,59,001/- being the deduction allowed u/s 80-IB. 18.1 The assessee disputed the decision of AO and submitted before CIT (A) that only a sum of ₹ 135054 and not ₹ 2,48,57,018/- should be reduced from the business. CIT(A), however, did not accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made in the return of income. Aggrieved by the decision of CIT(A), the assessee is in appeal before Tribunal. 20.2 Before us the learned Senior Counsel submitted that the same issue had been considered by the Tribunal in assessee's own case in assessment year 2002-03 in ITA no. 2954/Mum/2006 and the Tribunal had restored the matter to the file of AO with certain observations. It was submitted that the claim may be restored to the file of AO this year also to examine afresh in the light of decision of Tribunal in assessment year 2002-03 (Supra). The learned DR placed reliance on the orders of authorities below. 20.3 We have perused the records and considered matter carefully. The assessee had incurred the SAP expenses in assessment year 2002-03 in which it had been treated as capital expenditure. The AO however did not allow depreciation in that year as the project had become operational in the next year i.e. in assessment year 2003-04. In assessment year 2003-04, the claim of depreciation has been disallowed by the authorities on the ground that the assessee had not made the claim in the return of income. The case of the assessee is that the claim was made by way of filing ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 31.3.2005. CIT (A) however did not accept the contentions raised and observed that the assessee should have made claim at first instance in assessment year 2003-04 itself which was not done. He, therefore, confirmed the order of AO disallowing the claim aggrieved by which the assessee is in appeal before Tribunal. 21.3 Before us, the learned Senior Counsel submitted that the disallowance of claim in assessment year 2002-03 had been considered by the Tribunal who in the para 8 of the said order confirmed the disallowance after observing that the claim was pending in dispute before the Tribunal for assessment year 2003-04. It was pointed out that the order of Tribunal in assessment year 2002-03 has become final and, therefore, the claim has to be allowed in this year. The learned DR placed reliance on the orders of authorities below. 21.4 We have perused the records and considered matter carefully. The dispute is regarding allowability of claim of long term capital loss from sale of Goa property in assessment year 2003-04. The authorities below have given a clear finding that the sale had taken place vide agreement dated 12.4.2002 which pertain to assessment year 2003-04. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct "Concor" an anti hypertension product. The TPO noted that M/s Unichem Laboratories Ltd was also engaged in manufacturing and sale of similar product i.e. "Corpis" which was operating in the same segment. The TPO obtained the information from the said party who reported that they had manufactured and sold the same during the year at the rate of ₹ 50,000/- per kg. It was also noted that the assessee during the year had purchased small quantity of "Bisoprolol Fumarate" at the rate of 70,000/- per kg from M/s Unichem Laboratories. TPO, therefore, asked the assessee to explain as to why the TP adjustment should not be made based on the purchase rate of Unichem Laboratories. 22.2 The assessee explained that the mateial purchased from M/s Unichem Laboratories Ltd. had been used by the assessee for manufacturing of the product but the said raw material developed higher level of impurity as compared to the raw material imported by the assessee from AE. The product i.e. " Concor " was the trademark developed by the associate enterprise and the assessee did not want to compromise on the reputation of the group. The assessee had, therefore, imported the raw material at a higher p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring the assessee accepted the approach adopted by the AO and thus upheld the adjustment made at ₹ 75,43,911/-. Aggrieved by the decision of CIT (A), the assessee is in appeal before Tribunal. 22.5 Before us, the learned Senior Counsel appearing for the assessee reiterated the submissions made before lower authorities that TNMM method was appropriate method for bench marking international transactions. It was pointed out that mean margin in case of comparables selected by the assessee was 13.36% whereas the margin of the pharma division in case of the assessee was 15.90%. Therefore, it was submitted that no adjustment was required. It was also argued that the material purchased from M/s Unichem Laboratories Ltd. was of a lower quality as it did not pass particle size test and bulk density test which determine the quality of the product. It was also submitted that the TPO had not accepted the claim of superior quality of the assessee on the ground that the same was not supported by any independent evidence. It was submitted that the assessee had now obtained an independent third party certificate regarding the superior quality of the material imported by the assessee. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whereas the turnover of the pharma segment was ₹ 220 crore. Therefore, the impact on price variation in respect of product on such high turnover would be too insginificant. The TPO, therefore, used CUP method and adopted the price charged by Unichem Laboratories Ltd for bench marking the transaction. The argument of the assessee that the AE had sold the same product to other group entities at a higher price had not been accepted. In our view the stand of the revenue authorities to reject such argument is reasonable as the other group entities were operating in different geographical locations and the transactions were with AE and therefore independent. 22.8 The assessee has also argued that there was major difference between quality of the product produced by the AE which was a branded item compared to the low quality goods manufactured by Unichem Laboratories Ltd. It has been argued that the material produced from Unichem Laboratories Ltd. did not pass the particle size test and bulk density test which determine the quality of the product. A certificate dated 1.3.2005 from the factory manager of the assessee had been produced which had been rejected by the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. Both these entities are engaged in trading of ferrous and no ferrous chemicals. Further, Anukuran Commercial Enterprises Ltd. is engaged in trading in shares. Segmental information is not available 2. Anukuran Commercial Enterprises Ltd. 3. Daga Petrochemicals Ltd. No information has been provided on the basis of which this company has been regarded as comparable to the assessee 4. Dhoot Industrial Finance Ltd. Besides chemical business, this company equally deals in electronics and paper. It also undertakes investments in share. Segmental information is not available 5. KPL International Ltd. No information has been provided on the basis of which this company has been regarded as comparable to the assessee 6. Nikhil Adhesives Ltd. This company deals in synthetic adhesives and emulsion products. 7. Signet Fincon Ltd. No information has been provided on the basis of which this company has been regarded as comparable to the assessee 23.1 The TPO observed that though under TNMM product similarity was not essential, there has to be close similarity in the functions performed, asset employed and risk assumed between the international transaction and uncontrolled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importing at lower price, the assessee referred to the complaint filed by the Sudarshan Chemicals a local manufacturer of chemicals, pigments and pesticides on the basis of which anti dumping duty had been levied in respect of one of the products of the assessee i.e. "Irodine". The very fact that anti dumping was levied by the customs duty authority showed that imports made by the assessee from the AE were at lower rate than the prevailing market price. The assessee also pointed out margin earned by the manufacturers of pigments in India was lower than the margin of 5% earned by the assessee. It was further submitted that Berger Pain had imported the same product at a higher rate. 23.4 TPO however did not accept the contentions raised. It was observed by him that the higher rate charged by the AE to the group entities was not comparable as it was a controlled transaction and sales were made in different geographical locations. Regarding the comparative case of import by the Berger Paint of Irodine at a price higher than the assessee, the TPO observed that it was a single instance in which the end customer had purchased the product which was not comparable to the case of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the e-mail correspendence dated 22.8.2002 submitted by the assessee clearly showed that the assessee was deliberately following the predatory pricing policy in India with a view to finish local competitors. The assessee had also not given the full details of submissions made before anti dumping authorities. Moreover CIT(A) further pointed out that anti dumping duty was restricted to only two types of pigments namely Eriodin 100 and Eriodin 111. The assessee had imported other pigments also. CIT(A), therefore, did not see any merit in the appeal filed by the assessee and accordingly confirmed the adjustment made by AO on account of import of pigments. Aggrieved by the decision of CIT(A) the assessee is in appeal before Tribunal. 23.7 Before us the learned Senior Counsel reiterated the submissions made before lower authorities that low margin in case of pigment was not because of higher import price but because of lower sale price due to severe competition in the domestic market. It was pointed that the anti dumping duty levied by the Government clearly showed that the assessee was importing the products at a very low price. It was futher submitted that though the anti dumping duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rphical locations and transactions were also with AE's which were controlled transactions. As regards the fall in selling price in the domestic market, it was submitted that the assessee at page 364 of the paperbook had given data only in relation to one product i.e IRI-100. The price of other products were not given and, therefore, no conclusion ccould be drawn that steep fall in prices was because of low selling price. It was further pointed out that the anti dumping duty levied by the Government was based on the order from other department which was not relevant as the action taken by other department is not important for determination of arm's length price. Reliance for the said proposition was placed on the decision of Tribunal in case of Sadio Formation (2011/TII/02 ITAT). It was thus argued that the adjustment made by TPO on the basis of intenal comparable was quite reasonable and has to be upheld. 23.9 In reply, the learned Senior Counsel submitted that the assessee had treated the pigment and other products as one segment and on that basis it had prepared the transfer pricing study. It was pointed out that it was the TPO who had split into pigment and other segment and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no adustment was required to be made. The TPO has not accepted the comparables selected by the assessee. He noted that the assessee had trading operations in respect of products imported from the AE which included pigment and also other products as well as trading of items purchased from non AE parties. The AO, therefore, asked the assessee to separate the AE and non AE transaction and also compute margin seaparately in case of pigments. The margin in respect of pigment was computed at 5% and maring in case of non pigment products imported from the AE was at 15% and in respect of non AE segment, the margin was 16%. The TPO has compared the margin of pigment segment with the margin of non AE segment and made adjustment accordinlgy. 23.11 The view taken by the TPO was that non AE segment was internal TNMM which was more suitable for comparison as the conditions were identical. The assessee gave the comparative case of import of the same product from Berger Paint but the same has been rejected by the TPO on the ground that it was an isolated instance of import by an end customer which was not comparable to the case of the assessee, which was a distributor. The argument of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ti dumping duty had been levied only in respect of two products i.e. IRI-100 and IRI -111. The authorities below have also pointed out that e-mail correspondence dated 28.2.2006 submitted by the assessee also showed that the AE was deliberately following the predatory pricing policy in respect of the product. On careful consideration of the entire material on record, we do not find merit in the approach adopted by the authorities below. The levy of anti dumping duty by the Government on any product imported in India whether by way of predatory pricing policy or otherwise is a clear indication of the fact that the said product is being exported to the country by the foreign parties at a very low price which adversely affects the local business. As regards the period of anti dumping duty notification, it has been pointed out before us by the assessee that though the anti dumping duty order was dated 30.11.2004, the period of enquiry was 1.4.2002 to 30-9-2003 which is supported by the details given at page 380 of the paperbook which had been submitted before the lower authorities. Thus the anti dumping duty order cannot be considered irrelevant to the period under consideration. 23.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the AO noted that as per the clause 3 of the agreement the assessee was to receive assistance from the parent in the following fields. (i) Support of engineering technology, construction of factory and services. (ii) Selection or right equipment, sourcing of supplies internationally. (iii) Support of production and quality control with regard to technical and analytical background. (iv) International marketing and sales trends. (v) Access to new products. (vi) Search for licence products. (vii) Information on engineering and scientific trends and training. (viii) International trends on finance and administration+ (ix) International banking contracts and issue of letters of comfort. (x) Advising on new trends on information technology and its implementation. (xi) Monitoring the setting up and working of the new project. (xii) Initiation/implementation of SAP. 24.1 The TPO asked the assessee to produce evidence regarding receipt of services under various heads mentioned in the agreement as well as payment of fees in the subsequent two years. The AO noted from the details filed that the payment of fees in each year was different which showed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated with the same. The assessee during the year had received significant support from the AE for implementation of SAP in India and in case the assessee had paid to the AE at man hour rate the technical services fees payble would have been significantly high. It was, therefore, urged that adjustment made by TPO was not justified. CIT (A) was however not satisfied with the explanation given. It was observed by him that the assessee had given general explanation without substantiating the claim. The assessee had given evidence only in respect of three out of twelve heads of services. Even during the appellate proceedings the assessee could not provide evidence in respect of all the services received during the year. CIT (A) therefore, confirmed the adjustment made by AO, aggrieved by which the assessee is in appeal before Tribunal. 24.3 Before us the learned Sernior Counsel assailed the order of CIT(A) confirming the adjustment made by AO/TPO. It was argued that adjustment under transfer pricing regulations had to be made on the basis of one of the prescribed methods only. The TPO had not followed any of the methods. He had made only estimated disallowance of expenses which is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... central point to more than one entities, the issue had been restored by the Tribunal to the file of AO. It was thus argued that in this case also the issue may be restored to the file of AO. The learned Senior Counsel however pointed out that the said decision of Tribunal was distinguishable as in that case services had been rendered and the issue was cost allocation which had been restored by the Tribunal. The said decision, therefore, will not apply to the facts of the present case. 24.5 We have perused the records and considered the rival contentions carefully. The dispute raised in this ground is regarding TP adjustment made by AO/TPO in relation to technical know how fess paid by the assessee at ₹ 1.57 crore to its parent in Gernamy. The details of the various services which parent company was required to provide to the assessee have been given in para 24 earlier. There are tweleve such services listed in the said para. The TPO on detailed examination concluded that during the year the parent company had provided services only under the three heads out of total twelve heads of services, which related to SAP implementation and quality control. The TPO has, therefore, hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee for the three services and compared with similar payment for such services by an independent party. No efforts have been made by TPO/AO to determine the market value of services received by the assessee during the year relating to SAP implementation and quality control to show that the assessee had paid more compared to any independent party for the same services. The assessee had submitted that in case the assessee had paid to the AE at man hour rate for the technical services provided during the year in relation to SAP implementation, the fees payable would have been significantly higer. There is nothing produced before us to controvert the said claim. The assessee has applied TNMM which shows that the margin shown by the assessee was higher than the comparable companies. The case of the assessee is also supported by the decision of Tribunal in case of Mc Can Erricson India Pvt. Ltd. (Supra) in which the decision of TPO to take the value of cergain services at nil has not been upheld. Considering the entirity of facts and circumstances, the adjustment made by TPO which is nothing but disallowance of expenses cannot be upheld. We, therefore, set aside the order of CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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