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TMI Blog2022 (12) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... , while taking the decisions basing on the business expediency. It s not out of place at this juncture to refer to the observations of the Hon ble Bombay High Court in the case of Harshad J Choksi [ 2012 (8) TMI 710 - BOMBAY HIGH COURT] wherein it was held that if an amount cannot be deducted as a bad debt in view of non-compliance of the conditions precedent as provided under section 36(2) of the Act, the same will not prevent the assessee from claiming deduction of the same as business loss incurred in the course of carrying on the business. It is not in dispute that the interest that is written off was in fact shown in the P L Account on accrual basis and such interest income was assessed as business income in the earlier assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax, Central Circle-1(2), Hyderabad ( Ld. AO ) in the case of M/s. Aurobindo Pharma Ltd., ( the assessee ) for the assessment year 2009-10, under section 143(3) r.w.s. 153A r.w.s. 144C(13) of the Income Tax Act, 1961 (for short the Act ), consequent to the directions of Hon'ble Dispute Resolution Panel, Bengaluru ( DRP ), assessee filed this appeal. 2. Brief facts of the case are that the assessee is engaged in manufacturing and sale of bulk drugs, Active pharmaceutical Ingredients (APIs) and other pharmaceutical products. For the assessment year 2009- 10 the assessee filed the return of income declaring total income of Rs. 59,03,71,958/-, which was subsequently revised on 6/2/2010 declaring the same amount, but by including short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Henkel Chembond Surface Technologies Ltd Vs. ACIT (2021) 125 taxmann.com 65 (Mumbai Trib) and Kellogg India (P) Ltd Vs. DCIT (2019) 108 taxmann.com 223 (Mumbai Trib) for the principle that the transfer pricing adjustment proposed without resorting to any transfer pricing exercise as per any of the methods prescribed in section 92C (1) to determine the ALP, is bad in law and has to be deleted. 5. Second line of argument advanced on behalf of the assessee is that the assessee provided loans to its Associated Enterprises ( AEs ) for interest by showing the same in the P L Account on accrual basis, such an interest income in the past was assessed as business income in the earlier years under the head business income and was accepted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ALP. He invited our attention to the observations of the Ld. TPO that inasmuch as the assessee reported in form 3 CEB that the writing off of the accumulated interest on the loans and bad debts as international transaction, it is not open for the assessee now to claim the same as business loss. 7. We have gone through the record in the light of the submissions made on either side. Aurobindo (Datong) Biopharma Company Limited is a 100% wholly owned subsidiary of the assessee, manufacturing 6 APA, a derivative of Pen G and is the main ingredient of SSPs and cephalosporin drugs, and the company started commercial production in 2003 with annual production capacity of 1500 metric tons. Purpose of the assessee setting up the said unit was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il and proceeded to make the addition of Rs. 23,61,44,423/- on account of the accrued interest written off and Rs. 3,51,01,431/- bad debts written off (correct amount is Rs. 3,15,01,431/-). 9. It is pertinent to note here that the Ld. TPO did not make any adjustment in respect of the international transactions in respect of which the assessee adopted the Transactional Net Margin Method (TNMM) and Comparable Un-controlled Price (CUP) Methods. For determination of the ALP of the writing off transactions, Ld. TPO did not refer to any method contemplated under section 92C (1) of the Act. He simply stated that any unrelated commercial enterprise working at arm s length would have made all efforts to recover all its dues. In Henkel Chembond Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt held that where the assessee wrote off the outstanding interest on advances paid to its subsidiary as irrecoverable when the net worth of subsidiary eroded, assessee s claim of bad debt was to be allowed without expecting the assessee to prove that debts had actually became bad. In Pranava Electronics (P) Ltd (supra) the Hon ble Karnataka High Court held that writing off of irrecoverable loan in books of account is sufficient to claim the deduction for bad debts under section 36(1)(vii) of the Act, and the assessee is not required to be in money lending business to claim the said deduction. 12. It s not out of place at this juncture to refer to the observations of the Hon ble Bombay High Court in the case of Harshad J Choksi (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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