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TMI Blog2023 (4) TMI 1155X X X X Extracts X X X X X X X X Extracts X X X X ..... uty in the closing stock in pursuance of provisions of Section 145A of the Act were already included in the profit offered by the assessee. There was no adjustment / addition was required to be made. AO made the adjustment. This issue is already decided by the co-ordinate Bench and therefore, respectfully following the decision of the co-ordinate Bench in assessee s own case for A.Y. 2005-06 and 2007-08 to 2009-10, the addition deserves to be deleted. Disallowance of claim of writing off non-moving and obsolete finished goods - AO held that there is no concrete evidence of any write off or co-relation of sale out of such alleged written off material, made the addition - HELD THAT:- As the provision is made by the assessee in the earlier year which was not claimed as deduction in that year but would actually provisions are reversed and actual write off of the inventory is made in this year and assessee has claimed it as deduction. We find that the above sum disallowed amounts to double disallowance. Accordingly, we direct the learned Assessing Officer to delete the disallowance. TP Adjustment - addition on account of the Arm's Length Price of interest on interest free loan given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of quasi equity. The assessee has merely made the submission however has not substantiated it by putting any financial data to justify the above claim. In the transfer pricing study report also assessee has not given any justification on these grounds. Assessee submitted that it had sufficient own funds available at its disposal out of which the loan was given to the subsidiary company to meet its working capital requirements and therefore knowing charging of interest is justified - AR failed to show us any provision of the income tax act in chapter X to show that payment of interest by the lender is a necessary condition to determine the arm's-length price of an international transaction of loan by assessee to its subsidiary company. Therefore, this argument also deserves to be rejected. Addition on account of compensation for providing corporate guarantee to Piramal glass USA and Grammar Glass Europe - TPO adopted compensation at the rate of 3% per annum and computed the arm's-length price of the guarantee commission. When the matter was set aside by the coordinate bench back to the file of the learned dispute resolution panel, found that in the assessee's own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT ) U/S 145A OF THE ACT AMOUNTING TO ₹19,82,740/-: 1. On the facts and circumstances of the case and in law, the A.O. erred in including in CENVAT credit in both opening and closing stock and take the net impact in respect of Unutilised CENVAT of ₹19,82,740 to the income of the appellant on the alleged ground that the Appellant has not included it in closing stock following exclusive method and hence the same is not in accordance with section 145A of the Act. 2. The Appellant prays that the AO be directed to delete the aforesaid addition of ₹19,82,740/- u/s 145A. GROUND III: AO CANNOT TRAVEL BEYOND THE DIRECTION OF THE APPELLATE AUTHORITY: 1. On the facts and in circumstances of the case and in law, the AO while giving effect to the order of the Hon'ble Tribunal has exceeded its jurisdiction and thus, the additions made by the AO are to be set-aside and/or to be quashed. 2. The Appellant prays that the AO be directed to delete the aforesaid addition. WITHOUT PREJUDICE TO GROUND NO.III. GROUND NO.IV: DISALLOWANCE OF CLAIM FOR WRITE OFF OF NON-MOVING AND OBSOLETE FINISHED GOODS: 1. On the facts and circumstances of the case and in law, the A.O. erred in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case and in the law, the AO erred in levying interest u/s.234D of the Act amounting to Rs. 46,34,039/- 2. The Appellant prays that the AO be directed to delete the interest levied. GENERAL IX: The Appellant craves leave to add and/or to amend and/or to alter the above ground(s) of appeal. 03. The brief facts of the case show that assessee is a company engaged in the business of manufacturing and dealing in glass containers and vials for pharma and non-pharma industries. These glasses are manufactured for Cosmetic and Perfumery markets also. The assessee is also engaged in the business of power and investment activities. 04. Assessee filed its return of income on 14th November, 2006, declaring income of ₹29,34,01,925/- as per the normal provisions of computation of total income. The book profit was computed at ₹33,07,31,397/-. The return was revised on 1st November, 2007, at ₹ nil as per normal computation and book profit was computed at ₹18,26,32,081/-. The case was selected for scrutiny. 05. Assessee has entered into an international transactions and therefore, reference was made to the learned Transfer Pricing Officer for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the closing stock. According to Provision of Section 145A of the Act, the learned Assessing Officer asked the assessee why the same should not be added. After taking the explanation of the assessee, Assessing Officer made the addition of ₹19,82,740/-, which travelled to the co-ordinate Bench. The matter was set aside to the file of the learned Assessing Officer for fresh consideration. The learned Assessing Officer repeatedly made addition. 010. The original assessment also had the transfer pricing adjustment on account of interest free loan and corporate guarantee issue. The matter was set aside by ITAT to the file of the learned Dispute Resolution Panel for adjudication. In the appeal effect order, the learned Transfer Pricing Officer made an adjustment of ₹4,83,083/- being interest on interest free loan to Piramal Glass, UK Limited and ₹52,20,246/- on account of corporate guarantee commission. The learned Transfer Pricing Officer noted that in the earlier years the computation of interest was made by the ITAT by adopting libor +200 points as Arm's length interest rate whereas the learned Transfer Pricing Officer has taken libor + 300 points as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock of finished goods are inclusive of excise duty. Therefore, the fact of increase or decrease in the profit on account of element of excise duty has already been taken care of in the books of accounts and therefore, no adjustment was required under Section 145A of the Income-tax Act, 1961 (the Act). The learned Assessing Officer rejected the contention of the assessee and made the addition of the above sum. 016. The learned Authorized Representative submitted that for A.Y. 2005-06 to 2007-08 to 2009-10, identical issue arose in the case of assessee , wherein the co-ordinate Bench in ITA No.477/Mum/2016, dated 30th April, 2019, has allowed the claim of the assessee. The Revenue has accepted the above decision and has not preferred any appeal against the same. Several other judicial precedents were relied upon. Therefore, it was submitted that this issue is squarely covered in favour of the assessee. 017. The learned Departmental Representative vehemently supported the order of the learned Assessing Officer. 018. We have carefully considered the rival contentions. We find that the assessee has followed the inclusive method of accounting and valuation of inventory. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not consider the same. Despite the above direction of the learned Dispute Resolution Panel, the learned Assessing Officer made the disallowance and therefore, the co-ordinate Bench held that the learned Assessing Officer has not properly implemented the direction of the learned Dispute Resolution Panel. The co-ordinate Bench also noted that if the inventory has been written off in the books of account, only the sale of such inventory could be brought to the taxation. Pursuant to the above direction, the learned Assessing Officer repeated the same addition. 021. Before the learned Assessing Officer, assessee submitted that assessee has debited to the profit and loss account provision for obsolete inventory is made. Such provision is added to the total income of the assessee at the time of making computation of total income for taxation purpose. Further, when such provision is actually written off, assessee claims the same as deduction in the computation of total income. During this year, the assessee has written off , out of the provision already disallowed in earlier years and claims it as a deduction. As the provision is made by the assessee in the earlier year which was not cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subsidiary company therefore, no interest can be imputed. The learned Authorized Representative further submitted that LIBOR is the appropriate rate for benchmarking and adjustment should be restricted to libor rate only. The assessee placed heavy reliance in the decision of the co-ordinate Bench in case of Hinduja Global Solutions Limited Vs. ACIT in ITA No.254/Mum/2013 for A.Y. 2008-09. 024. During the course of hearing, the co-ordinate Bench asked for several documents however, the assessee submitted that as the matter pertains to A.Y. 2006-07 which is almost a 15 year old matter, therefore, the assessee is not in a position to give all the details asked by the Bench. However, assessee submitted the financial statements of its subsidiary and the transfer pricing study report for the relevant year. The assessee also relied heavily on the decision of the co-ordinate Bench in case of Crest animation studios Limited vs. ACIT 42 taxmann.com 222. 025. We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that assessee has one subsidiary in United Kingdom. Assessee has given loan of ₹20.85 million to Piramal Glass, UK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the facts of the case, we are of the considered opinion that LIBOR +200 base points justified for benchmarking the transaction. However, the orders of the appeal are not longer appealable by the Department. Therefore, we are of the view that LIBOR +200 points should be used for benchmarking the transaction in case the decisions of the honourable ITAT are accepted by the Department, hence, the rate applied by the TPO may be considered in case the Department has not accepted the decisions of the honourable ITAT. 026. Accordingly, respectfully following the decision of the coordinate bench in assessee's own case in many assessment years, we do not find any infirmity in the order of the learned assessing officer/transfer pricing officer in adopting interest on interest for loan to the UK subsidiary company at arm's length at LIBOR +200 points. Accordingly, the adjustment made by the learned AO/TPO of ₹ 4,021,663/ on this count is confirmed. 027. With respect to the argument that LIBOR rate without any markup should have been used based on certain decisions is devoid of any merit because the London interbank offered rate (LIBOR) is benchmarking interest rate at which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of the income tax act in chapter X to show that payment of interest by the lender is a necessary condition to determine the arm's-length price of an international transaction of loan by assessee to its subsidiary company. Therefore, this argument also deserves to be rejected. 031. Accordingly, ground number 7 of the appeal is dismissed. 032. Ground number seven is with respect to the addition on account of compensation for providing corporate guarantee to Piramal glass USA and Grammar Glass Europe. Assessee has given corporate guarantee on 21/1/2006 amounting to US$ 2 crores to export import Bank of India and also US$ 50 lakhs to export import Bank of India on 20/3/2006. Assessee has treated the provision of guarantee is an international transaction but has not made the same. The learned TPO adopted compensation at the rate of 3% per annum and computed the arm's-length price of the guarantee commission at ₹ 5,220,246/ . When the matter was set aside by the coordinate bench back to the file of the learned dispute resolution panel, has per direction dated 30/9/2019 found that in the assessee's own case for assessment year 2007 08, 2009 10 and 2011 12 to 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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