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TMI Blog2020 (7) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of raw material at Rs. 73,20,85,000/- as against the transaction price of Rs. 83,32,29,000/- on account of adjustment to the arm's length price on the basis of the order passed under section 92CA(3) of the Act by the TPO. 1.2 That the assessing officer erred on facts and in law in not excluding International Flavors & Fragrances (I) Pvt. Ltd. from the set of comparable companies, in terms of the directions in the order passed under section 144C(5) of the Act by the Dispute Resolution Panel ("DRP"). 1.3 That the assessing officer / TPO erred on facts and in law in not considering Ultra Industries Ltd. as part of comparable companies in terms of the directions in the order passed under section 144C(5) of the Act of the DRP. 1.4 That the assessing officer / TPO erred on fact and in law in not appreciating that the average operating profit margin of the comparable companies after considering directions of the DRP is worked out to 7.65 % as against the profit margin of the appellant at 4.015 and therefore, the Transfer Pricing adjustment, proposed by the TPO, was liable to be deleted. Without prejudice: 1.5 That the assessing officer / TPO erred on facts and in law in obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the Ld. DRP erred in directing TPO to exclude M/s. International Flavors & Fragrances (I) Pvt. Ltd. On the basis of varying accounting period whereas the comparables are includable on the basis of corresponding accounting period of comparables and that of assessee" 2. "On the facts and circumstances of the case and in law, the Ld. DRP erred in directing TPO to include M/s Ultra International Co. Ltd. whereas the assessee itself contradicted the basis of inclusion i.e. high import component of the comparable and the assessee in the case of M/s Synthite Industries Ltd.". 3. Brief facts of the case are that the assessee-company is a corporate entity engaged in the business of manufacturing and marketing of industrial flavors, fragrances, and chemical specialties, filed its return of income for AY 2009-10 on 30.09.2009. The assessee while filing return of income reported international transaction with its associated enterprises (AE) and furnished report under Form 3CED. Consequent upon reporting of international transaction, the assessing officer (AO) made reference to the transfer pricing officer (TPO) for computation of arms length price (ALP) with regard the internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue 833229 International transaction of import of goods at ALP 732085 Adjustment under section 92 CA 101143 6. On receipt of order of TPO under section 92CA(3), the assessing officer added the adjustments suggested by TPO while passing draft assessment order under section 143(3)/144C(1). The assessing officer also disallowed claim of bad debts of Rs. 14,36,000/-, by taking view that the assessee despite issuing show cause notice failed to justified the claim of bad debts. The copy of draft assessment was served upon the assessee. The assessee exercised its option for filing objections before dispute resolution penal (DRP). The DRP after hearing the objections of the assessee directed the TPO/AO to exclude one comparable namely International Flavours and Fragrances (I) Ltd and to include Ultra International Co Ltd, thus granted partial relief to the assessee on TP issues. However, the disallowance of bad debts was affirmed by ld. DRP in its direction dated 21st October 2013. On receipt of directions of the DRP, the AO passed the final assessment order dated 29th November 2 013. Aggrieved by the directions of DRP both the parties have filed their respective appeal before this Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 174 of Income Tax Appellate Tribunal Manual. After considering the submission of ld. DR for the revenue that the delay in filing the appeal is not intentional or deliberate and the decision of Hon'ble Apex Court in Land Acquisition Collector Vs Mst Katiji and other (supra) wherein the Hon'ble Court held that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice to be preferred. Thus, considering the contents of the application for condonation of delay and the submissions of the ld. DR for the revenue that delay in filing the appeal was neither intentional nor deliberate and it was due to bonafide and wrong belief of the AO that the directions of DRP is against the assessee, the delay in filing appeal by revenue is condoned. 11. The ld. AR for the assessee while objecting the application of condonation of delay raised another objection that the appeal of revenue is not maintainable and submitted that sub-section (2A) of section 253 was inserted by Finance Act 2014 with retrospective effect from 01.06.2013, however, the same was omitted by Finance Act 2016 from 01.06.2016. It was argued that, the sub-section (2A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an admitted position that the assessee has neither filed Cross Objection for objecting the maintainability of the appeal filed by the revenue. However, the ld. AR for the assessee has raised legal objection, which goes to the root of amenability of the appeal filed by the revenue. Therefore, we admit the objection of the assessee on the maintainability of revenue's appeal. For appreciation of various legal aspects and effect of 'repeal' or 'omission', we have gone through the various sections 6, 6A and 24 of General Clauses Act. The section(s) 6, 6A and 24 of General Clauses Act are read as under; 6. Effect of repeal.-Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not- (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade, then, unless a different intention appears, the repeal shall not effect affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 15. Further a careful reading of section 6A this Act make it clear that where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 16. The Hon'ble Supreme Court in Bhagat Ram Sharma Vs Union of India (AIR 1988 SC 740) held that it is a matter of legislative practice to provide while enacting an amending law that an existing provision shall be deleted and a new provision substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground and with utmost regard to the decision of coordinate bench the coordinate bench relied by ld AR for the assessee in Texport Overseas (supra), we have noted that the bench was not having the benefit of the latest judgment of the Hon'ble Supreme Court in the matter of Fibre Boards P. Ltd [(2015) 52 taxmann.com 135] as well as in the matter of M/s. Shree Bhagwati Steel Rolling Mills [CA No.4280 of 2007, dt.24.11.2015] which were not brought to the notice of the bench by either of the parties. 20. The Hon'ble Supreme Court in these two matters had elaborately discussed the issue of repeal /omission and after relying upon the decision of the coordinate bench had decided the issue that omission will also be repealed and therefore by virtue of section 6 and 6A the action taken pursuant to the valid legislation during its life time before omission will be saved and will not come to end. The decision in the case of Texport Overseas Private Ltd (supra) was rendered without considering the decisions of the Hon'ble Apex Court in the cases of (i) M/s. Fibre Boards Pvt. Ltd and (ii) M/s Shree Bhagwati Steel Rolling vs. Commissioner of Central excise & another and also the statutory provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the provisions of Sec. 6 of the General Clauses Act would apply to allow the previous operation of the provision so omitted or anything duly done or suffered thereunder, and such a view is reasonable and for the public good. 18. At the coast of repetition we may note that the Hon'ble Supreme Court in the matter of Fibre Board (supra) and Bhagwati Steel Rolling (supra) had elaborately reproduced the paragraphs of General Finance Co., (supra) and also the earlier two judgments relied in General Finance Co., (supra), namely Rayala Corporation P. Ltd and Kolhapur Cane Sugar Works Ltd, and observed that even the court has not referred the matter to the larger bench. The Hon'ble Supreme Court in Fibre Board (supra) and Bhagwati Steel Rolling (supra) had also discussed the provision of law including the General Clauses Act, Section 6A and 24 and thereafter held that the repeal, omission and deletion are interchangeable and thereafter had held that 'omission' will have an effect of 'repeal' and 'repeal' will have an effect of 'omission'. The distinction carved out in Rayala Corporation (supra) was not correct and further the reference to the Constitution bench has not considered in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section 2A of Section 253 of the Act, is valid. 22. Now, we shall advert to various grounds of the appeals filed by the parties. Ground No. 1 & 1.1 in assessee's appeal is general and needs no specific adjudication. Ground No. 1.2 to 1.4 in assessee's appeal and Ground No. 2 & 3 of revenue's appeal are interconnected. The assessee is supporting the exclusion of comparable company namely International Flavors & Fragrances (I) Ltd (IFF) and inclusion of Ultra Industries Ltd (UIL). On the contrary the revenue in its appeal is challenging the exclusion of comparable IFF and inclusion of UIL. The ld. AR for the assessee submits that despite the direction of DRP for exclusion of comparable IFF and inclusion of UIL, if the direction is followed the margin of final set of comparable would be within tolerance range and the adjustment suggested by TPO is liable to be deleted. To support the exclusion of IFF the ld. AR for the assessee submits that this comparable company is also engaged in trading of goods. This company traded the goods of Rs. 242.72 Crore which is more than 16%. However, the assessee is only engaged in manufacturing and sale of industrial flavors and during the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 29.10.2012 submitted that RPT is Rs. 36.98 Crore out of total transaction of Rs. 382 Crore. The TPO concluded that RPT is less than 10% hence; the objection against the inclusion was rejected. The ld DRP excluded this comparable on the ground that that the accounts for this company is for the period of 27th December 2007 to 2nd January 2009, therefore, it does not fulfills the conditions of contemporary dates and directed TPO to exclude. Before us the ld. DR for the revenue submitted the financial data for the period of 27 December 2007 to 2nd January 2009. 25. The Hon'ble Bombay High Court in CIT Vs PTC Software [2016] 376 ITR 176 (Bom), while considering the question of law if the Tribunal erred in excluding comparable only on the ground that the said comparable had prepared the financial for the year ending on June against the assessee as on March. The High Court held that Rule 10B(4) of Income tax Rules, are clear and obligates that the data to be used for comparison should be data relating to the same financial year in which the international transaction were entered by the tested party. The contention of the revenue that mandates of Rule 10B can be ignored as difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he average mean margins of final set of comparable as per the direction of DRP would be within the tolerance range of +/- 5%, with the margin of assessee. Therefore, the discussions of the exclusion or inclusion of other comparable or other grounds of appeal raised by assessee have become academic. 31. Ground No. 2 relates to disallowance of bad debts. The ld. AR for the assessee submits that during the relevant financial year the assessee written off bed debts of Rs. 14.36 lakhs in the profit and loss accounts. Such bad debts were shown in the invoices raised on customers in the previous year and was credited to the accounts. The assessee during the year considering the facts that the amounts are not recoverable has written off during the year. The ld. AR for the assessee submits that the details of the bad debts are filed on record and the same were filed before the lower authorities. In support of his submissions the ld AR for the assessee relied on the decision of Hon'ble Supreme Court in TRF Vs CIT (323 ITR 397 SC), CIT Vs Essar Technology Ltd [2015] 228 Taxman 309 (Bombay) and CBDT Circular dated 30.05.2016. 32. Per contra the ld. DR for the revenue supported the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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