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TMI Blog2015 (12) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(1)(va) of the Act read with section 43B of the Act if the said payments are made on or before the due date for filing the return of Income. See COMMISSIONER OF INCOME-TAX Versus ANZ INFORMATION TECHNOLOGY P. LTD. [2009 (9) TMI 69 - KARNATAKA HIGH COURT ] - Decided in favour of assessee - IT(TP)A No.214/Bang/2015, IT(TP)A No.179/Bang/2015 - - - Dated:- 9-10-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER For The Revenue : Smt. Chandana Ramachandran, CIT-III(DR) For The Assessee : Shri Ajit Kumar Jain, CA ORDER Per Asha Vijayaraghavan, Judicial Member These are cross appeals by the Department and the assessee for the assessment year 2010-11. IT(TP)A 214/B/2015 (Assessee s appeal) 2. The assessee, Agila Specialties Private Limited, was incorporated on March 3, 2004 and is a subsidiary of Strides Arcolab Limited (SAL ). The company was formerly known as Strides Specialties Private Limited and changed its name to Agila Specialties Private Limited with effect from July 2, 2010. The assessee company is engaged in the business of manufacture and marketing of pharmaceutical products, besides product develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total assessed income (256,046, 157) 5. Aggrieved the assessee preferred appeal before the DRP. The DRP partially upheld the assessment of ₹ 66,771,307 made by the AO to the income of the assessee. The DRP upheld the TPO s action of rejecting segmental data/allocation keys pertaining to transactions related to AE/ non-AE treating it as unreliable, thereby rejecting the internal TNMM applied by the assessee. In appeal before us, it was submitted that the DRP did not notice that the rejection of the internal TNMM was done by the TPO merely on the ground that there was a huge variation in the operating margin for AE and non-AE segment, without providing opportunity to the assessee to submit its case. 6. The ld. counsel for the assessee took us through the TP report for the FY 2010-11 and at page 37 of the paperbook pointed out to us that the sale of formulations being one of the segments, the assessee has adopted internal TNMM and the arm s length analysis is at 8.80% in the case of AE and 8.51% in the case of non-AE. It was submitted that assessee is engaged in the manufacturing and supply of generic products in the nature of sterile i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employed etc. Clause (ii) is material for the present purpose. It provides that the net profit margin realized by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base. The base of this provision takes one back to clause (i) which refers to cost incurred or sales effected or assets employed or to be employed. On splitting clause (ii) into two parts, it divulges that the reference is made to internal and external comparables. One part of clause (ii) refers to the net profit margin realised by the enterprise from a comparable uncontrolled transaction and the other part talks of the net profit margin realised by an uncontrolled enterprise from a comparable uncontrolled transaction . It transpires that whereas the first part refers to the profit margin from internal comparable uncontrolled transactions, the second part refers to profit margin from an external comparable uncontrolled transaction. Thus it is discernible that what is to be compared under this method is profit from a comparable uncontrolled transaction. The word comparable may encompass interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have recourse to such internal comparable case. . 14. Hence we are of the opinion that the TPO had erred in choosing an external comparable, when there was an internal comparable uncontrolled transaction which the assessee had taken in its TP study. The assessee s appeal is allowed. 15. In the result, the assessee s appeal is allowed. IT(TP)A No.179/Bang/2015 (Revenue s appeal) 16. The Department has raised the following grounds:- 1. The order of the Dispute Resolution Panel is opposed to law and the facts and circumstances of the case. 2. The DRP erred in directing the AO to compute mean of working capital adjustment in respect of comparables retained as per the actual figures worked out by the assessee without putting any restrictions without appreciating the fact that the TPO had put a cap on the basis of the average cost of working capital of the comparables selected by the TPO and that the accurate details of debtors and creditors of the assessee and the comparables were not available. 3. The DRP erred in deleting the disallowance of ₹ 1,50,64,297/- u/s 40(a)(i) relating to the payments of bio study expenses following the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now and therefore respectfully following the aforesaid decision of the Hon ble jurisdictional High Court, we dismiss the grounds No.3 4 raised by the department. 20. With respect to ground Nos.5 6 regarding the employees contribution to PF/ESI u/s. 36(1)(va), the assessee submitted before DRP as under:- 3.2 It is submitted that for the FY 2009-10, there were certain instances of delay in remitting the employees contribution to ESI account amounting to ₹ 7,621 within the due date prescribed under the relevant Act but deposited the same within the due date of filing of return of income under section 139(1) of the Act (i.e. within September 30, 2010). The details of delay and date of remittance of ESI payment is as under: Month Amount Due date of Remittance Actual date of remittance April 2009 1,290 May 21, 2009 May 23, 2009 May 2009 1,285 June 21, 2009 December 23, 2009 July 2009 ,468 August 21, 2009 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e employer would be allowed as deduction on actual payment. The Jurisdictional High Court of Karnataka in the case of CIT and Ors Vs Sabari Enterprises Ors (298 ITR 141), wherein the assessee had made contributions toward PF and ESI after the close of the accounting year but before the due date for filling of the return under s.139(1) of the Income-tax Act, 1961, held that the payments made could not be disallowed even if made beyond the period prescribed under section 36(1)(va) of the Act. In the case of Strides Arcolab Limited (2013) (ITA No. 2111 of 2012) (the holding company of the assessee) the Honourable Mumbai High Court, relying on the decision of CIT vs. Alom Extrusions Ltd [20091 319 ITR 306 (SC) has ruled in favor of the assessee. Further, in the following decision, the courts have held that if the employee s contribution is deposited by the employer to PFI ESI account within the due date of filing return of income then deduction is allowable. - CIT vs. Gujarat State Road Transport Corporation (2014) (366 ITR 170) (Raja HC) - CIT .vs. State Bank of Beaker Japer (2014) (363 ITR 70) (Raja HC) - CIT vs. Japer Idiot Veteran Enigma Ltd. (2014) (363 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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