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TMI Blog2013 (11) TMI 1703X X X X Extracts X X X X X X X X Extracts X X X X ..... e, proportionate management expenses or interest or other expenses could not be deducted while computing dividend income for the purpose of allowing deduction u/s.80M. Accordingly, Court declined to interfere in the relief granted by Ld. CIT(A) and Revenue s appeal is dismissed. Decision in this case of ACG Associated Capsules Pvt. Ltd. vs. CIT 343 ITR 89 [ 2012 (2) TMI 101 - SUPREME COURT] and Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 1TR 1 (SC) [ 1976 (11) TMI 1 - SUPREME COURT] In the result, the appeal filed by the assessee is partly allowed and appeal filed by the Department is dismissed. - ITA No.2393/MUM/2011 - - - Dated:- 29-11-2013 - Shri I.P. Bansal, Judicial Member And Shri Rajendra, Accountant Member, Assessee by: Shri F.V.Irani Revenue by: Shri Ajeet Kumar Jain/ O.P.Singh ORDER I.P.Bansal, These are cross appeals and they are directed against order of Ld. CIT(A)-15, Mumbai dated 12/1/2011 for assessment year 2003-04. The grounds of appeal raised by assessee as well as revenue read as under: Grounds of appeal in ITA No.2393/Mum/2011(Assessee s appeal): On the facts and in the circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the request of assessee s counsel vide letter dated 28/6/2013, as according to that letter one of the issues raised in the present appeal is referred to Special Bench in ITA No.5924/D/2012 and thereafter the present case was fixed on 25/11/2013. It was further informed by both the parties that the said Special Bench has been withdrawn and, therefore, this matter can be proceeded with. Ld. CIT-DR has submitted a letter stating that the said Special Bench has been withdrawn. Accordingly, we proceed to decide the present cross appeals. 2. Referring to ground No.1 of assessee s appeal, it was the case of Ld. AR that both the issues raised by the assessee are now covered by the decisions of Hon ble Supreme Court and since the benefit of these decisions were not available to Ld. CIT(A) when the appeal of the assessee was decided, the matter may be sent back to the file of AO for recalculation of deduction under section 80 HHC of the Income Tax Act,1961 (the Act) on both these issues as per the following decisions of Hon ble Supreme Court on these issues. 3. So far as it relates to first issue raised in first ground of assessee s appeal it relates to netting of the interest inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Method used 1. Purchase of Raw Materials 733.46 lakhs TNMM 2. Export of Manufactured Goods 5427.68 lakhs TNMM 3. Export of finished Goods-Sourcing (Trading) 3369.58 lakhs Cost Plus 4. Purchase of finished goods for trading 1251.85 lakhs TNMM 5. Receipt of Indenting Commission 151.18 lakhs TNMM 6. Payment of Indenting Commission 47.37 lakhs TNMM 7. Fee for research Development Received 96.03 lakhs TNMM 8. Miscellaneous Payments 119.81 lakhs TNMM 9. Receipt of Sourcing Fees 45.15 lakhs Cost Plus 10. Recovery of Export Expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 kgs at a WA? of ₹ 302.38 per kg. 700 kg is sold to unrelated parties at WAP of ₹ 383.89. The assessee has contended that considering the huge difference in quantity sold to related and unrelated parties, sales made to related parties should be accepted to be at Arms Length. However, it is seen that the difference of ₹ 81.51 price per KG is not small either, Considering the WA? is being used, no further adjustments are required in respect of the prices. Thus considering the WAP charged to related party and the unrelated party, it is observed that sales.ma4eto related party is under-priced to the extent of ₹ 81.51 per kg. This results into an adjustment of ₹ 23,96,394/- ₹ 81.51 * 29,400 kgs) (v) For the products PERMANENT RUBINE CA-E, the sale to related parties in Thailand is 2,200 kg at a WAP of ₹ 336.92 per kg. 120 kg is sold to unrelated parties in Sri Lanka at WAP of ₹ 356.26. Thus considering the WAP charged to related party and the unrelated party, it is observed that sales made to related party is under-priced to the extent of ₹ 19.24 per kg. This results into an adjustment of Rs.. 42,548/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat Ld. CIT(A) did not upheld the adjustment in respect of ACID ORANGE sales and, thus, an addition of ₹ 30,97,751/- made on that account was deleted. Similarly, after giving rebate of 5% on account of volume discount and 5% proviso benefit, Ld. CIT(A) has found that no adjustment was maintainable in respect of Permanent Rubain CA-E and adjustment in that regard was also deleted. Therefore, the TP adjustment which is upheld by Ld. CIT(A) is with regard to HOSTAPERM GREEN GN to the extent of ₹ 12,95,973/- and deleted the balance addition in this respect. As the main case of the assessee is regarding grant of discount on account of difference in volume the facts stated by the assessee in the statement of facts submitted before Ld. CIT(A) will be relevant and are as follows: 5.5.1 It was submitted that out of total sales the major portion in respect of HOSTAPERM GREEN GN represent sales of AE which are to the extent of 98% as against sales made to unrelated parties which are only to the extent of 2%. A chart was furnished which read as follows: Product Name Quantity sold to Clariant Group (AEs) Quantity sold to independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has allowed the adjustment to the extent to 10 per cent while the appellant has sought for an adjustment of 50 per cent. There is no doubt that the claim of the appellant is rather excessive, while that made by the Transfer Pricing Officer is rather on a lower side. Hence, considering that in the local trading the appellant in similar circumstances has been providing discounts while t ere is a case for higher adjustment than what has been made by the Transfer Pricing Officer, it cannot be as high as sought for by the appellant. It would be reasonable if the adjustment for the purpose is restricted to 20 percent on this account as against 10 per cent made by the Transfer Pricing Officer. 5.7 The second defense raised by Ld. AR was that assessee is entitled to get benefit on account of geographical regions He in this regard relied upon the submissions made in statement of facts and the relevant portion read as under: Arbitrary Comparison of Geographical Regions. The AO has equated totally dissimilar geographical regions in applying the CUP method in the case of the following products. Sales made in different geographical regions are, not simply comparable due to diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in this regard is grant of 20% discount on volume difference.. This contention of the assessee is supported by the arguments that in immediate preceding assessment year TPO had accepted such volume discount and reference in this regard has been made to the order of TPO rendered in respect of assessment year 2002-03, the relevant portion of which has been reproduced in the above part of this order. The relevant portion of impugned TPO s order has also been reproduced in the above part of this order. So as it relates to chemical HOSTAPERM the turnover for this year to the related parties is 29,400 Kgs. @ 302.38 per Kg as against similar sales made to AE s in A.Y 2002-03 to the tune of 23,500 Kgs. at the average the price of ₹ 310.83 per Kg. The uncontrolled party sales for the year under consideration for the same chemical is 700 kgs. as against the similar sales to unrelated parties of 125Kgs. Therefore, it cannot be said that there is any material difference in the facts of the two years i.e. A.Y 2002-03 and 2003-04. When the facts are same the question will be that whether on the same facts Department can take a different stand for the year under consideration which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in an earlier year, whether favoring the assessee or the Revenue, it cannot be argued in the subsequent year that the same incorrect approach should be repeated. The Hon ble Delhi High Court in CWT vs. Meattles (P) Ltd. (1984) 156 ITR 569 (Del) has held that the Revenue authorities cannot be stopped from taking a correct view of statutory provisions in a later year. 16.3. We have elaborately discussed above that how the method employed by the assessee for determining the ALP in respect of international transactions for the year under consideration is contrary) to the statutory provisions having no approval from any judicial forum. If such a wrong method has been inadvertently accepted by the TPO in an earlier year, we cannot grant a license to the assessee to continue calculating the ALP in such a grossly erroneous manner in perpetuity. It needs to be discontinued forthwith. We, therefore, reject this contention advanced on behalf of the assessee that the application of such a wrong method be granted a seal of approval on the basis of its acceptance by the TPO in a preceding year. 6.1 From the above observations of the Tribunal it is clear that the rule of consistenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle- namely, that of a setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. Reference was also made to Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 1TR 1 (SC) and then it was held (page 329 of 193 ITR): We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manner aforesaid and Ground No.2 of the Revenue s appeal is dismissed. 7. Apropos Ground No.1 of Revenue s appeal; the assessee claimed deduction under section 80M of the Act to the extent of gross dividend income received amounting to ₹ 94,17,412/-. The AO found that interest expenses to the extent of ₹ 11,67,900/- were attributable to expenditure incurred by the assessee for the purpose of earning dividend income. Similarly, AO observed that ₹ 50,000/- was further allocated as indirect expenses towards earning of the dividend income . The aggregate of both these amounts i.e. a sum of ₹ 12,17,900/- was reduced from the gross dividend income received and deduction under section 80M was allowed at ₹ 81,91,512/- as against the claim of the assessee to the extent of ₹ 94,17,412/- The reduction in the claim of deduction under section 80M amounting to ₹ 12,17,900/- was agitated in the appeal filed before Ld. CIT(A). who following the decision of Special Bench in the case of Punjab State Industrial Development Corporation Ltd. vs. DCIT 102 ITD 1(Chd)(SB) held that such disallowance was not called for. However, finding that in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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