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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
These cross appeals filed by the assessee, as well as the Revenue are filed against order of the CIT(Appeals)-22,
2 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. Mumbai dated 10.10.13 and it pertains to A.Y. 2008-09. Since facts are identical and issues are common, these appeals were heard together and are disposed of by this common order for the sake of convenience. The assessee has raised the following grounds of appeal: “1. On facts and in circumstances of the case and the Commissioner of Income- tax (Appeals) -- XXII, Mumbai ("Learned C[T(A)") has erred in upholding the order passed by the Additional Commissioner of Income-tax, Range 10(3), Mumbai ("Learned AO") which was bad in law to the extent of additions confirmed by the Learned CIT(A).
On facts and in circumstances of the case and in law, the Learned CITA) has erred in upholding disallowance of club expenses, aggregating to Rs.2,31,157 on the alleged ground that vouchers substantiating the claims were not produced before the Learned CITA).
On facts and in circumstances of the case and in law, the Learned C1TA) has erred in upholding disallowance made by the Learned A() by applying provisions of Rule 8D of the Income-tax Rules, 1962 ("the Rules") while making a disallowance under Section 14A of the Income-tax Act, '1961 ("the Act")
On facts and in circumstances of the case and in law, the Learned CITA) has erred in upholding disallowance of gift expenses, aggregating to Rs. 19,95,476.
On facts and in circumstances of the case and in law, the Learned CITA) has erred in confirming disallowance of compensation payment of Rs. 75,00,000 to Mr. SS Mohla on the alleged ground that the same is in the nature of commission on which tax has not been deducted as per provisions of Section 40(a)(ia) of the Act.
On facts and in circumstances of the case and in law, the Learned CIT(A) has erred in not appropriately adjudicating oil disallowance of Rs. 19,04,044 being write-off of doubtful deposits by the Appellant and merely directing the Learned AO for verification of claim.
On facts and in circumstances of the case and in law, the Learned CITA) has erred in upholding disallowance made by the Learned AO in respect of irrecoverable advances written off (in the nature of Duty Entitlement Pass Book Scheme credit and Duty drawback) aggregating to Rs. 51,45,651.
On facts and in circumstance of the case and in law, the Learned CIT(A) has erred in confirming disallowance under section 40A(2) of the Act of Rs. 22,45,472, being 50% of payment made to Bayer Polychem Limited on the alleged ground that the Appellant failed to justify this payment.
On facts and in circumstances of the case and in law, the Learned CIT(A) has erred in not appropriately adjudicating on the disallowance of Rs. 1,68,39,128 being
3 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. unrealized foreign exchange fluctuation loss on translation of trade receivables and trade payables and merely directing the Learned AO for verification of claim.
On facts and in circumstances of the case and in law, the Learned CITA) has erred in not appropriately adjudicating on the disallowance of Rs. 1 5,38,445 being unrealized foreign exchange loss, which is not capital in nature and merely directing the Learned AO for verification of claim.
On facts and in circumstances of the case and in law, the Learned CT'I'(A) has erred in not adjudicating on the additional ground relating to claim of Rs. 2,35,60,494 being amount erroneously disallowed under Section 40(a) of the Act.”
The brief facts of the case are that the assessee company is engaged in the business of manufacturing of insecticides and other chemical for plant protection, filed its return of income for A.Y. 2008-09 on 30.09.08 declaring total income of Rs.96,43,60,035/-. The assessee company also filed its revised return on 29.03.09 declaring total income of Rs.97,23,32,188/-. The case has been selected for scrutiny and notices under section 143(2) and 142(1) were issued. In response to notices, the authorised representative of the assessee appeared from time to time and furnished various details, as called for. The assessee also made various additional claims in the course of scrutiny assessment proceedings. The assessment has been completed under section 143(3) on 27.10.11 determining the total income at Rs.101,29,01,750/-, inter alia making various additions like disallowance of club expenses, disallowance under section 14A, disallowance of product trial expenses treating it as capital in nature, disallowance of gift expenses, disallowance of compensation paid to employee under section 40(a)(ia), rejection of bad debt claim, disallowance of written off of doubtful advances, disallowance of payments made to
4 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. associate concern under section 40A(2) etc. The AO also rejected various additional claims made by the assessee on the ground that additional claims made by the assessee cannot be allowed at this stage without filing revised return by relying upon the decision of Hon’ble Supreme Court in the case of Goetz India Ltd. vs. CIT 284 ITR 323.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The assessee has filed elaborate written submissions on additions made by the AO which has been reproduced by the Ld. CIT(A) in his order. The Ld. CIT(A) after considering relevant submissions of the assessee partly allowed the appeal, wherein he has deleted additions made by the AO towards disallowance of product trial expenses and disallowance of written off of doubtful debts, however, confirmed additions made by the AO towards disallowance of gift expenses, disallowance of compensation for failure to deduct TDS under section 40(a)(ia) of the Act, write off of bad and doubtful advances, disallowance of irrecoverable advances written off, disallowance of payments made to associate concern under section 40A(2) of the Act, however, allowed partly relief in respect of disallowance of payment of club membership fees and disallowance of expenditure under section 14A and also set aside the issue of disallowance of unrealized foreign exchange gain for further verification. Aggrieved by the order of Ld. CIT(A), the assessee as well as the Revenue are in appeal before us.
5 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. 4. The first issue that came up before us for consideration is disallowance of club membership of fee is of Rs.2,31,157/-. The AO disallowed club membership of Rs.2,31,157/- out of total expenditure incurred by the assessee of Rs.14,36,157/- on the ground that the assessee could furnish evidences to the extent of Rs.12,05,000/- and for the remaining amount of Rs.2,31,157/- no evidences have been filed to justify the expenditure incurred on the club membership fees. It is a contention of the assessee that it has furnished evidences on sample basis to the extent of Rs.12,05,000/- being 84% of the total expenditure. The invoices for the balance amount could not be submitted before the AO due to paucity of time. However, the same has been furnished before the Ld. CIT(A) vide submission dated 22.01.13, however, the Ld. CIT(A) without considering the same held that the remaining invoices were not submitted before him and accordingly upheld the disallowances made by the AO. The assessee further contended that the assessee had incurred various expenses under the head club membership which are wholly and exclusively incurred for the purpose of business only to facilitate the assessee to conduct its business more smoothly and efficiently. The lower authorities were erred in disallowing merely for the reason that no details have been filed including the evidences filed before the Ld. CIT(A).
We have heard both the parties and perused the material on record. The AO disallowed partial amount of Rs.2,31,157/- out of total club membership expenses of Rs.14,37,157/- on the ground that the assessee failed to furnish evidences. It is
6 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. the contention of the assessee that it has filed details for balance amount of Rs.2,30,623/- before the Ld. CIT(A) vide its submission dated 22.01.13. Such details have been furnished before us in the form of paper book. Therefore, we are of the considered view that the issue needs to be reexamined by the AO, in the light of evidences filed by the assessee. Hence, we set aside the issue to the file of AO and direct him to consider the issue afresh after affording a reasonable opportunity of hearing to the assessee.
The next issue that came up for our consideration is disallowance of expenses incurred in relation to exempt income under section 14A of the Income Tax Act, 1961. The facts with regard to the impugned order are that during the year under consideration the assessee had earned dividend income of Rs.1,03,17,000/- which was claimed exempt under section 10(34) of the Act. The assessee also had made suo- moto disallowance of Rs.21,26,636/- in its return of income. However, such disallowance has been revised to Rs.4,15,300/- vide its submission dated 23.08.11 before the AO. The AO has disallowed the expenditure incurred in relation to exempt income under section 14A by invoking rule 8D(2)(i), rule 8D(2)(ii) & rule 8D(2)(iii) and determined disallowance of Rs.48,16,710/- and made additions of Rs.26,90,074/- after reducing suo-moto disallowance made by the assessee of Rs.21,26,636/-. According to the AO, as per the provisions of section 14A of the Act, disallowance of expenses incurred in relation to exempt income ought to be made irrespective whether the exempt income was earned or not. The AO
7 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. further observed that the assessee has not maintained separate books of accounts pertaining to its exempt income and incurred common funds which cannot be segregate, therefore, invoked rule 8D(2) and determined disallowance as per prescribed method provided thereunder. The Ld. CIT(A) upheld addition made by the AO under rule 8D(2)(i) & (iii). However, directed the AO to verify the disallowance worked out under rule 8D(2)(ii) by observing that the assessee has incurred certain interest payments towards acquisition of plant and machinery, security deposit etc. and it was not possible for the assessee to invest the said funds to earn exempt income.
The Ld. A.R. for the assessee submitted that the assessee has made suo-moto disallowance of Rs.4,15,300/- towards expenditure incurred to earn exempt income and such computation has been furnished before the AO during the assessment proceedings. The AO has neither controverted nor recorded any satisfaction as regard disallowance offered by the assessee. Hence, the AO cannot made further disallowance by invoking rule 8D(2) of Income Tax Rules, 1962. The assessee further submitted that its investments in mutual funds of Rs.44,41,64,000/- are out of its own funds which is evident from the fact that its own funds are more than value of investments and also its current year cash profits itself is more than the value of investments, therefore, the question of interest disallowance does not arise. In this regard, relied upon plethora of judgments, including the
8 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. judgment of Hon’ble Bombay High Court in the case “CIT vs. Reliance Utilities and Power Ltd.” (2009) 313 ITR 340 (Bom).
We have heard both the parties and perused the material on record. There is no dispute with regard to applicability of provisions of section 14A. The assessee itself has made suo- moto disallowances in its return of income for Rs.21,26,636/-. However, such disallowance has been recomputed to Rs.4,15,300/- during the course of assessment proceedings. The dispute is with regard to computation worked out by the AO by invoking rule 8D(2) of Income Tax Rules, 1962. According to the assessee, no disallowance is called for in respect of interest expenses as it has not invested any borrowed funds in mutual funds which earned exempt income which is evident from the fact that its own funds are more than value of its investments. The assessee further contended that when mixed funds are available, both interest free and interest bearing, then a presumption would arise that investment could be out of interest free funds available with the assessee. We find force in the arguments of the assessee for the reason that the Hon’ble Bombay High Court in the case of “CIT vs. Reliance Utilities and Power Ltd.” (2009) 313 ITR 340 (Bom) has held that when mixed funds are available a general presumption is drawn that the investments in securities which earn the exempt income are out of own funds. Therefore, we are of the considered view that once the assessee has proved the availability of own funds in excess of value of investments, then the question of disallowance of interest expenses under rule 8D(2)(ii) does not arise. In this
9 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. case, the assessee has filed necessary details to prove availability of own funds. Hence, we are of the considered view that the AO was incorrect in disallowing interest expenses under rule 8D(2)(ii) of Income Tax Rules, 1962 and accordingly direct him to delete disallowance of interest expenses worked out under rule 8D(2)(ii).
In so far as disallowance of direct expenses under rule 8D(2)(i) the assessee itself has computed a sum of Rs.4,15,300/- and there is no dispute with regard to such disallowances. The AO further quantified a sum of Rs.19,06,210/- @ 0.5% of average value of investments. The assessee contended that only those expenses which have proximate nexus with the exempt income are required to be disallowed. Since it has already worked out disallowance of direct expenses no further disallowance is required under rule 8D(2)(iii). The assessee also has taken a plea of strategic investments for which it has relied upon certain judicial precedents. We find that initially the assessee has made suo- moto disallowance of Rs.21,26,636/-, however such disallowance has been revised to Rs.4,15,300/-. The assessee claimed that its disallowance of Rs.4,15,300/- is direct and proximate expenses therefore, the AO considered such disallowance under rule 8D(2)(i) of Income Tax Rules, 1962. The AO has further disallowed an amount of Rs.19,06,210/- under rule 8D(2)(iii). We find that from assessment year 2008-09 onwards the disallowance contemplated under section 14A shall be worked out under rule 8D(2) of Income Tax Rules, 1962. In this case, the assessee has not
10 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. maintained separate books of accounts. It has maintained common books of accounts where common expenditure has been incurred. In the absence of separate books of accounts it is difficult to ascertain exact amount of expenditure incurred for earning exempt income. Under these circumstances, the only way to quantify disallowance is by invoking rule 8D(2)(iii) of Income Tax Rules, 1962. The assessee has not disputed computation worked out by the AO including average value of investments. The assessee is only on the point that the AO has not recorded his satisfaction before disallowing further expenses. We find no merits in the arguments of the assessee for the reason that the AO has arrived at a satisfaction by rejecting computation worked out by the assessee towards suo-moto disallowances which means that the AO has considered the nature of expenses incurred by the assessee and also disallowances quantified in the light of exempt income earned for the year and hence we are of the considered view that the AO was right in invoking rule 8D(2)(iii) to quantify disallowance in respect of expenses incurred in relation to exempt income. Hence, we are of the considered view that there is no error in the computation worked out by the AO under rule 8D(2)(iii).
The next issue that came up for consideration is disallowance of gift expenses of Rs.19,95,476/-. The assessee had incurred gift expenses which were given to employees, the dealers, customers and other business associates and some gifts to government officials on festival occasions. Details of expenses were submitted to the AO. The AO
11 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. disallowed gift expenses on the ground that the assessee had failed to furnish evidences for actual utilisation of gift items, their necessity and purpose of business and accordingly, disallowed the entire expenditure incurred by the assessee. It is the contention of the assessee that expenses incurred under gift expenses are wholly and exclusively for the purpose of business which are given to employees, dealers and customers on festival occasions. The assessee further contended that the said expenses were incurred to facilitate smooth conduct of business, therefore, the AO was incorrect in disallowing such expenses.
Having heard both the sides and considered material on record, we do not find any merits in the arguments of the assessee for the reason that the assessee has failed to file any evidences to prove necessity of gifts given to employees, associates and government officials in relation to its business activity. Basically the expenses in the nature of gifts and rewards are in the nature of personal expenses and hence cannot be allowed as deductable under section 37(1) of the Income Tax Act 1961. Mere payment of fringe benefit tax on such expenses would not discharge the assessee’s obligation to prove such expenses to say that these are incurred wholly and exclusively for the purpose of business. The Ld. CIT(A) after considering the relevant submissions has rightly confirmed additions made by the AO. We do not find any error or infirmity in the order of the Ld. CIT(A). Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground raised by the assessee.
12 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. 12. The next issue that came up for consideration is disallowance of compensation payment of Rs.75,00,000/- under section 40(a)(ia) of the Income Tax Act, 1961 for failure to deduct tax at source. The factual matrix of the case in dispute is that the assessee has appointed Mr. SS Mohla a retired employee of the assessee company for securing order on their behalf. The assessee has paid commission to Mr. SS Mohla based on the sales generated by him. Mr. SS Mohla had filed a civil suit before the Hon’ble Delhi High Court making a claim of Rs.1,07,55,260/-. The assessee has settled the claim for an amount of Rs.75 lakhs. The AO disallowed compensation paid to Mr. SS Mohla on the ground that such expenditure is in the nature of capital expenditure which gives endure advantage to the assessee. The AO further observed that even if the payment was considered to be revenue in nature then the payment would be akin to salary to ex- employee or a contractual payment for settlement of contract and would be liable to TDS. Since assessee has failed to deduct TDS, the AO disallowed such expenditure under section 40(a)(ia) of the Income Tax Act, 1961. The Ld. CIT(A) confirmed additions made by the AO by holding that there was no employer employee relationship at the time of payment of such compensation, however, the said payment was purely in nature of disputed commission and the assessee ought to have deducted the tax on the same. Since assessee failed to deduct TDS on commission payment the AO was right in disallowing such compensation under section 40(a)(ia) of the Act.
13 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. 13. The Ld. A.R. for the assessee submitted that compensation paid to Mr. SS Mohla is one time, full and final settlement which was paid as per the settlement before Hon’ble Delhi High Court and also such payment is made for the purpose of restraining Mr. SS Mohla from sharing any confidential document, information, business and trade secret of the assessee with any competitor or third party. The assessee further contended that nowhere in the said agreement it is stated that the payment made to Mr. SS Mohla is in lieu of commission for securing orders, therefore, the question of deduction of TDS does not arise. In this regard, the Ld, A.R. relied upon certain judicial precedents, including the decision of Hon’ble Supreme Court in the case of CIT vs. Ashok Leyland Ltd. (1972) 86 ITR 549.
We have heard both the parties and perused the material on record. There is no dispute with regard to the fact that there is no employer and employee relationship between the assessee and Mr. SS Mohla. When compensation was paid to Mr. SS Mohla he was no longer an employee of the assessee. The assessee itself admitted that it has paid commission to Mr. SS Mohla for securing orders on their behalf. Since the dispute cropped up between the assessee and Mr. SS Mohla the matter went to court and the same has been settled before the court for payment of Rs.75 lakhs. The assessee has described such payment as compensation paid to Mr. SS Mohla for not disclosing confidential document, information, business and trade secrets of the assessee with any competitor or third party. Although the assessee claims that
14 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. payment made to Mr. SS Mohla is in the nature of compensation for which the provisions of TDS has no application, on perusal of facts available on record, we find that such payment is in the nature of commission for securing orders, therefore, we are of the considered view that mere change in nomenclature of the expenses does not absolve the assessee from the responsibility of complying with applicable TDS provisions. In this case, the assessee itself has admitted that it has paid commission for securing orders. Once the payment is in the nature of commission obviously the assessee ought to have deducted TDS under section 194H of the Act. Since the assessee has failed to deduce TDS, the AO has rightly disallowed such expenditure under section 40(a)(ia) of the Act. The Ld. CIT(A) after considering the relevant submissions has rightly confirmed additions made by the AO. In so far as case laws relied upon by the assessee, we find that all the case laws are rendered on different set of facts and has no application to the facts of the assessee’s case. Hence, we are inclined to uphold the finding of the Ld. CIT(A) and reject the ground raised by the assessee.
The next issue that came up for our consideration from the assessee as well as from Revenue’s appeal is disallowance of write off of doubtful deposits of Rs.19,04,044/-. The assessee had claimed deduction of write off of deposits which were long outstanding and had become irrecoverable. The said deposits consist of earnest money given to customers, distributors and government agencies which were written off as irrecoverable. The AO disallowed write off of bad debts on
15 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. the ground that the conditions prescribed under section 36(2) were not satisfied as the said deposits were never a trading deposits but balancing items, hence, deduction could not be allowed under section 36(1)(vii) of the Act. The Ld. CIT(A) partly allowed the claim of the assessee by holding that though the write off of deposits would not fall within the purview of section 36(1)(vii), it would be allowable as business loss under section 28 of the Act, provided the deposits were trade advances. Accordingly, directed the AO to verify the nature of advances and allow only trade advances.
The Ld. A.R. submitted that placing deposits with customers, distributors and government agencies at the time of submitting tenders was a business requirement and such deposits are incurred wholly and exclusively for the purpose of business. The Ld. A.R. further submitted that the said write off is allowable under section 37(1) of the Act, being revenue in nature and incurred wholly and exclusively for the purpose of business. In this regard, he relied upon certain judicial precedents, including the decision of Hon’ble Delhi High Court in the case of Mohan Making India Ltd. vs. CIT 59 DTR 401(Del HC).
We have heard the rival submissions of both the parties and perused the material on record. The AO disallowed write off of irrecoverable deposits on the ground that such deposits were never a trading deposits, but balancing items and same could not be allowed under section 36(1)(vii) of the Act, as the condition prescribed under section 36(2) were not satisfied. It
16 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. is the contention of the assessee that deposits in the nature of earnest money deposits are kept with various parties which are incurred wholly and exclusively for the purpose of business and out of tax suffered income. The assessee further contended that it has written off of such irrecoverable deposits in its books of accounts and hence complied with the provisions of section 36(1)(vii) read with section 36(2). Therefore, the AO was incorrect in disallowing write off of deposits. Having heard both the parties, we find merits in the arguments of the assessee for the reason that when deposits are given to various parties while filing tenders are in the nature of business expenditure which are incurred wholly and exclusively for the purpose of business. We further observe that the assessee has written off of such deposits in its books of accounts which fulfils the conditions prescribed under section 36(1)(vii) of the Act. However, the fact remains that the deposits written off by the assessee are balance sheet items and not part of trading receipts. If the assessee has given deposits out of its tax suffered income, then obviously such deposits are coming within the ambit of bad debts written off under section 36(1)(vii) of the Act. If the assessee has given such deposit out of its borrowings then obviously it does not fulfill the conditions prescribed under section 36(2) of the Act. Hence, the Ld. CIT(A) has rightly set aside the issue to the file of AO to verify whether such advances are trade advances or not. Therefore, we are of the considered view that the Ld. CIT(A) was right in setting aside the issue to the file of the AO to verify the nature of advances. There is no
17 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. grievance is caused to the assessee. The assessee can file necessary evidences before the AO to prove whether such advances are in the nature of trade advances or not. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground raised by the assessee.
The next issue that came up for consideration is disallowance of irrecoverable advances of Rs.51,45,651/-. The assessee has claimed a deduction of write off of advances which includes debit balance outstanding in DEPB provision account and amount receivable for duty drawback for recovery from Vietnam exports as the same were irrecoverable. The AO disallowed written off of irrecoverable advances on the ground that such advances were not bad debts of customers and hence could not be allowed under section 36(1)(vii) of the Act. The AO further observed that the assessee failed to show cause how these advances were irrecoverable. It is the contention of the assessee that export incentive in the form of duty entitlement of pass book accrued at the time of exports are offered to tax at the time of export and corresponding amount is shown under receivable as advance due. The assessee further contended that the objective of this scheme was to offset the incidence of customs duty by giving credit for tax is paid. To claim the set off of the import duty payable against the DEPB balance, the assessee should make application to the Customs Authorities within the time limit of 24 months from the date of export. If the application is not made within the time frame, the DEPB balance lapses. The assessee has verified the DEPB claims and found that all
18 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. claims are outstanding for more than six months and they are not claimable and hence an amount of Rs.39,39,160/- was written off.
We have heard both the parties and perused the material on record. There is no dispute with regard to the fact that when export incentives are claimed against exports such incentives are taxable in the year in which such exports were made. The assessee claims that it has offered DEPB claims in the year in which the exports were made and corresponding amount has been shown as receivable from the government. Since the time has lapsed for lodging a claim with the authorities, the assessee could not recover such incentives and accordingly written off in its books of accounts. We find force in the arguments of the assessee for the reason that when export incentive is offered to tax in the earlier period by showing the amount as receivable, then write off of such advance as irrecoverable is in the nature of bad debt which can be claimed as deduction under section 36(1)(vii) of the Income Tax Act, 1961. However, there is a contradiction in the claim made by the assessee in its books of accounts and the submissions made before the authorities. The assessee has claimed an amount of Rs.51,45,651/- as irrecoverable advances, however, as per the submissions the amount written off was at Rs.39,39,160/-. Therefore, we are of the view that the issue needs to be reexamined by the AO in the light of submissions of the assessee. Hence, we set aside the issue to the file of AO and direct him to examine the claim with necessary evidences before allowing the claim. If the
19 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. assessee is able to file evidences to the extent of Rs.51,45,651/-, then the AO is directed to allow write off irrecoverable advances.
The next issue that came up for consideration is adhoc disallowance of 50% of payment made to Bayer Polychem Ltd. of Rs.22,45,472/-. The assessee had made a payment of Rs.44,90,944/- to Bayer Polychem Ltd. a subsidiary company for supply of support services and supply of manpower. The AO has disallowed amount paid to associate concern on the ground that the payments were excessive and unreasonable. It is the contention of the assessee that for disallowance to be made under section 40A(2)(b) of the Act, the AO first ought to have formed an opinion that the payment was excessive in nature and then to compare with prevailing market rates. The AO has disallowed 50% of amount paid to associate concern without comparing such payments to the prevailing market rates.
Having heard both the sides and considered material on record, we find force in the arguments of the assessee for the reason that the assessee has furnished necessary details of payment made to its subsidiary company for rendering services. The AO has made adhoc disallowance of 50% without any reference to comparable cases to come to the conclusion that payments made by the assessee are excessive and unreasonable. Hence, we direct the AO to delete additions made towards disallowance of payments made under section 40(2)(b) of the Income Tax Act, 1961.
20 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd.
The next issue that came up for consideration is disallowance of unrealized foreign exchange pertaining to trade receivables. The assessee claimed a total foreign exchange loss of Rs.2,58,00,129/-. This includes both realized as well as unrealized foreign exchange loss. Out of the said amount a sum of Rs.1,68,39,128/- pertains to unrealized foreign exchange loss arising out of revaluation of trade receivables as per accounting standard 11 issued by the ICAI. The AO disallowed unrealized and realized foreign exchange loss on the ground that such loss is in nature of notional loss which was provided in the books of accounts on marked to market basis, therefore, cannot be allowed as deduction. The Ld. CIT(A), by following the ratio laid down by the Hon’ble Apex Court in the case of CIT V/s. Woodward Governor India Pvt. Ltd. 312 ITR 254 (SC), directed the AO to verify whether the said amount of unrealized foreign exchange was related to trading items and allow as per the judgments of the Hon’ble Supreme Court. The Ld. A.R. for the assessee submitted that in respect of unrealized foreign exchange loss of Rs.1,68,39,128/- the AO while giving effect to the order of the Ld. CIT(A) has allowed. Therefore, he does not want to press the ground. Accordingly, the ground taken by the assessee challenging the said addition has been dismissed as not pressed.
In so far as ground No.10 towards unrealized foreign exchange loss of Rs.15,38,445/- the AO disallowed such loss on the ground that it pertains to capital assets which ought to
21 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. have been added to the concerned asset. It is the contention of the assessee that although it has conceded such losses before the AO inadvertently, filed necessary details to prove that out of total loss of Rs.15,38,445/- a sum of Rs.14,54,445/- pertains to revenue account and the balance amount of Rs.84,000/- relates to capital account.
Having heard both the sides, we find that the Ld. CIT(A) has already set aside the issue to the AO to consider it afresh in the light of decision of Hon’ble Supreme Court in the case of CIT V/s. Woodward Governor India Pvt. Ltd. 312 ITR 254 (SC). Therefore, we are of the considered view that there is no grievance caused to the assessee. The assessee can file necessary details before the AO to prove the loss whether it pertains to revenue or capital in nature. We further observe that the assessee itself has admitted while giving effect to the order of the Ld. CIT(A) the AO has allowed unrealized foreign exchange loss. Therefore, we are of the considered view that there is no merits in the ground taken by the assessee and accordingly we reject ground taken by the assessee.
The issue raised in ground No.11 is with regard to non adjudication of additional ground by Ld. CIT(A) as filed by the assessee relating to the allowance of claim of Rs.2,35,60,494/- which was wrongly disallowed by the assessee while filing the return of income under section 40(a) of the Act.
22 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. 26. The facts in brief are that the assessee while computing the total income has wrongly disallowed a sum of Rs.2,35,60,494/- under section 40(a) of the Act on the belief that tax at source has not been deducted on the same as per the provision of the Act. Subsequently in A.Y. 2009-10 it was realized by the assessee that TDS was not applicable on the said expenses and accordingly the same were claimed in the return of income for A.Y. 2009-10. However, the AO during the assessment proceedings did not allow the deduction of the said sum on the ground that the same pertains to the earlier year and not admissible during the year.
In the appellate proceedings, the assessee filed the additional ground vide letter dated 12.07.2013 before the first appellate authority requesting for the admission and adjudication of additional ground on this issue. However, the Ld. CIT(A) did not adjudicate the same.
After hearing both the parties and perusing the material on record, we find that the assessee is within its right to raise the additional ground qua the deduction not claimed before the AO during the year. The assessee has raised the issue before the first appellate authority who has not adjudicated the same. In our opinion, the issue needs to be restored to the file of the Ld. CIT(A) so that the same could be decided on merits. The case of the assessee is squarely covered by the ratio laid down by the Hon’ble Bombay High Court in the case of CIT vs. “CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd.” (2012) 349 ITR 336 (Bom.) in which the Hon’ble Bombay High
23 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. Court has held that the assessee can raise before the appellate authorities any additional ground qua the deduction which was not claimed in the return of income. Since we have sent back some issues to the AO so we think it proper to restore this issue back to the file of the AO with the direction to decide the same after affording reasonable opportunity to the assessee as per the facts and applicable provisions of law. Accordingly, this ground is allowed for statistical purposes.
In the result, assessee’s appeal is partly allowed for statistical purposes.
ITA No.145/M/2014 (Revenue’s appeal) 30. The first issue that came up for consideration from Revenue’s appeal is disallowance of product trial expenses. The assessee had incurred product trial expenses of Rs.4,29,72,544/-. The assessee has incurred said expenses to conduct substantial tests before a product can be used in a particular crop. Such expenses were mandatorily incurred to register the product. The AO has allowed deduction of Rs.2,05,23,457/- under section 35 of the Act, however, did not allow weighted deduction with respect to the same. Further, the AO has disallowed an amount of Rs.2,24,49,087/- considering it to be capital in nature. The Ld. CIT(A) by following various judicial precedents as well as the DRP directions for A.Y. 2007-08 held that the expenses not covered under section 35 of the Act, for weighted deduction, but would be allowable under section 37 of the Act, unless it did not
24 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. create any enduring benefit. The relevant part of the order of the Ld. CIT(A) is extracted below: 4.1 The AO had discussed the issue in para 6 of the assessment order. The appellant is engaged in the business of manufacture and marketing of pesticides and insecticides which are toxic in nature and hence it is mandatory to get products registered with Central Insecticides Board & Regulatory Committee of India. As a part of registration process, the product trials are required to be conducted to check whether the product could be used for certain other crops or seeds. The trials are conducted with approved research institutes. The AO was of the view that the new product trial run expenses gives enduring benefit and it enables the appellant company to enter into a new market and hence it was of capital in nature. The expenses are specifically allowed u/s.35 and hence, the same cannot be allowed u/s.37 as it was of capital in nature.
4.2 The submission of the Product Trial Process is as follows:
2.3.1 “Modus operandi of the Product Trial Process is as follows:
2.3.1.1 Since the Appellant is in the business of manufacturing and marketing pesticides and insecticides which are toxic in nature, the Appellant carries out certain in-house checks and analysis on the existing line of products that can be used on various crops (commercially). For such checking and analysis, the Appellant incurs substantial costs thereon.
2.3.1.2 It is pertinent to note that molecules/ products are researched and developed by the Appellants parent company i.e. Bayer CropScience AG ('BCS AG") in Germany. Out of the pre-developed molecules/ products, specific molecules / products are identified by the Appellant for further development, registration and sale in India.
2.3.1.3 Internal development analysis is carried out by the Appellant in the fields on very small- scale for ascertaining the product suitability, to Indian agro-climatic conditions (like dosages, target crops, pests, diseases, weeds, etc.)
2.3.1.4 Before the products can be commercially marketed in India, the Appellant is required to get these products (pesticide and / or insecticide formulations) registered with Central Insecticides Board & Regulatory Committee ('Regulatory Authority).
2.3.1.5 The Regulatory Authority grants registration only after thorough evaluation of the product for its quality, efficacy and safety to human beings and the environment under Indian agro-climatic conditions for which a "Registration Dossier" has to be provided by the Appellant to such Regulatory Authority.
2.3.1.6 In order to prepare the "Registration Dossier", the Appellant engages various research associations and institutions to carry out analysis on Appellants
25 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. products. These research associations and institutions provide reports on product quality, efficacy, safety, etc which the Appellant uses to prepare a "Registration Dossier" to be submitted to the Regulatory Authority for obtaining registration.
2.3.1.7 It is important to note that the product quality, bio-efficacy and toxicologyreports obtained from above mentioned research association and institutions is one of the impotent requisite for the "Registration Dossier".
2.3.1.8 Thus, as can be seen from the above that payments to research associations and institutions, etc is primarily for obtaining product quality, bio- efficacy and toxicology reports which are required ingredients in order to prepare the “Registration Dossier” and obtain approval from Regulatory Authority to commence commercial production of selected products.
2.3.1.9 The processes under taken by the Appellant and the research associations and institutions is detailed as under for ease of understanding:
BCSL identifies products (from various products developed by BCS AG) for further development, registration and sale in India
Internal development analysis and checking is carried out by BCSL in the field on very small-scale for ascertaining the product suitability to Indian agro-climatic conditions
The results are discussed in internal meetings and products are given ‘go-ahead’ for initiating the product registration process Product quality, bio-efficacy and toxicology analysis with the approved research association/university/college 1) Bio-efficacy & Residues-Field analysis at State Agricultural University (“SAUs”), Government Institutes & Private Laboratories 2) Toxicology analysis in Private Laboratories 3) Chemistry & Packaging at Quality Assurance & Development Department Laboratories (“QADDL”) of BCSL
Preparation of “Registration Dossier” Product quality, bio-efficacy and toxicology analysis reports received from research associations/university/colleges/other institutions is analysed and compiled into “Registration Dossier” for submission to the Regulatory Authority for registration.
“Registration Dossier” is scrutinized and deficiencies may be raised by the Regulatory Authority-replies given by BCSL
“Registration Dossier” is scrutinized and deficiencies may be raised by the Regulatory Authority-replies given by BCSL
Product Registration granted by the Registration Authority
2.3.1.10 The Appellant is making payment to research associations and institutions for conducting bio-efficacy and toxicology analysis on its existing line of products, which are care goosed in the books of accounts under the head 'Product Trial Expenses. The payments to the approved research
26 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. associations/university/college/other institution are in the nature of "Sponsorships'. 2.3.1.11 In this connection, we are enclosing herewith a sample copy of the report provided by such research associations to the Appellant vide Annexure 6, page 118 to 131 of Paperbook. 2.3.2 Expenditure incurred on products in the existing line of business 2.3.6.1 In the present case, Appellant has incurred the said proauct trial expenses to check whether any of its existing line of products (which have already been researched., developed and are commercially being exploited) could be used for certain other crops or seeds. Thus, by incurring expenses on the existing line of products, the Appellant does not receive any enduring benefit which is capital in nature. Hence, the same ought to be allowed as a deduction. The expenses are for the existing inc of business i.e. manufacturing, processing and refining of insecticides, fungicides,weedicides, rodenticides and other chemicals used in the protection of crops.
2.3.6.2 In support of our claim, we wish to state that in the decision by the Amritsar Tribunal in case of DCIT VS Max India Ltd (105 TTJ 1002), it was held that the expenditure incurred by the assessee for- improvement in product specifications of BOPP films and to develop new varieties of BOPP films already manufactured by it, not being related to setting up of a new unit or expansion of the existing unit, is allowable as revenue expenditure.
2.36.3 Even in the case of Escorts Ltd. vs ACIT (104 ITD 427), the Delhi Tribunal has held that if new projects undertaken by the assessee were in the existing line of assessee's business, then the expenditure incurred on expansion and diversification of the existing business is allowable as a deduction u/s 37(1) of the Act. This view has been re-iterated by the Punjab & Haryana High Court in the case of CIT vs. Avon Cycles Limited (303 ITR 345).
2.3.6.4 The Appellant has incurred the said expenses solely for the purpose of carrying on and for furtherance of its business activities arid thus, this expenditure ought to be allowed as a deduction.
2.3.3 There is no enduring benefit as a result of product trial expenses 2.3.7.1 It is re-iterated that the Appellant is mandatorily required to get its products registered with the Regulatory Authority before the products can be commercially marketed in India. As a pan of this registration process, various product quality, bio- efficacy and toxicology analysis are required to he conducted. Thus, such expenditure is statutorily necessary for Appellant in order to carry on its business activities. Hence, these expenses ought to be allowed as a deduction under section 3 7(1) of the Act. By incurring expenditure on testing of existing line of products of the Appellant which may /may not be used on another crop or seed, no benefit of enduring nature accrues to the Appellant. It is “revenue expenditure" in nature. 2.3.7.2 In the decision of the Hon'ble High Court of Kerala in the case of CIT vs
27 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. Kerala State Industrial Development Corporation Ltd (182 ITR 62), it was held that expenses incurred in investigation research and feasibility study are in the nature of revenue expenses, if without incurring such expenses, it would not have been possible for the assessee to carry on business. 2.3.7.3 The test of enduring benefit alone is not conclusive for treating any expenditure as capital expenditure and it is necessary, to ascertain whether such expenditure results into an advantage of enduring nature to the assessee in the capital field or the revenue field so as to decide the exact nature of such expenditure. Reliance is placed on decision of the Hon'ble Supreme Court of Empire Jute Company Ltd vs. CIT[124 ITR 1]. 2.3.7.4 The test for allowability of an expenditure as a deduction under section 37(1) is to judge, whether the expense has been incurred with the sole object of furthering the trade or business interest of the assessee unalloyed or unmixed with any other consideration and that expenditure was necessitated or justified by commercial expediency. Reliance is place on the decision of the Hon'ble High Court of Punjab and Haryana in the case of Jamna Auto Industries vs CIT (167 Taxmann 192). 2.3.7.5 In the case of Gujarat Small Scale Industries Corporation Ltd vs. CIT [142 ITR 35], the Hon'ble Gujarat High Court has held that expenditure incurred before marketing the product in order to test its suitability for marketing, is expenditure of the nature of revenue. In the absence of these testing charges, the appellant would not be able to market its products. 2.3.7.6 Further, it is submitted that the observation of the Learned AO that section 35 is a specific for allowing research related expenses and accordingly it cannot be allowed under section 37(1) of the Act is incorrect. We wish to highlight that section 37(1) of the Act, is a residuary section as per which, any expenditure (not being capital/ / persona / penal in nature) which is not covered by sections 30 to 36 of the Act and is incurred wholly and exclusively for the purpose of business, would be allowed as a deduction. 2.3.7.7 Accordingly, considering the facts of the case and the judicial pronouncements discussed above, we wish to submit that the expenses incurred by the Appellant on product trial, are revenue in nature and as such allowable under section 37(1) of the Act. 2.3.7.8 Further we would like to submit that the Learned AO, in his assessment order (refer 6th para on page 6), has himself stated that the expenditure on product trials aggregating of Rs.2,24,49,087 is not covered under section 35 of the Act. Accordingly, where the expenses do not fall within the specific category i.e. section 35 of the Act, the same needs to be allowed as "revenue" expenditure under section 37(1) of the Act. 23.4 We wish to submit that the above stand of the Appellant has been confirmed by the DRP during AY 2007-08 proceedings. For AY 2007-08, the Appellant’s facts of the case were identical to the facts of the case for the year under consideration. After duly analysing and verifying the facts of the case for AY 2007-08, the Hon'ble DRP have accepted the contentions of Appellant to allow product trial expenses paid to associations / institutions (other than the institutions notified under section 35(1)(ii) of the Act for which weighted deduction is allowable) as revenue in nature
28 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. and allowed deduction for the same under section 37(1) of the Act. Copy of directions issued by DRP for AY 2007-08 is attached herewith vide Annexure 7, page 132 to 143 of Paperbook for ready reference. 2.3.5 Without prejudice to the above submissions of the Appellant, depreciation be allowed on such product trial expenses. 2.3.8.1 Without prejudice to the aforesaid contentions that the product trail expenses ought to be considered as revenue in nature and allowed as deduction, the Appellant wishes to submit as under: 2.3.8.2 Since the Learned AO has alleged that the expenses incurred on product quality, bio-efficacy and toxicology analysis are "capital expenditure" which gives enduring benefit to the assessee, it is submitted that the Appellant ought to be allowed depreciation tinder section 32 of the Act. 2.3.8.3 As mentioned above, Appellant is required to incur expenses on product quality, bio-efficacy and toxicology analysis in order to obtain approval from the Regulatory Authority. This registration is necessary for the company to commercially manufacture and sell its products. Accordingly, where these expenses are regarded as capital in nature (as held by the Learned AO in the year under consideration), it is submitted that the depreciation should be allowed to the Appellant by treating the same as 'know how" or business or commercial right. 2.3.8.4 The term "know how' has been explained under section 32 of the Act as any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto). It is submitted that based on the facts and process explained above as a result of incurring these expenses there is a technique which is registered with the Regulatory Authority, which assists Appellant in manufacturing and selling the products. Thus, where these expenses are regarded as capital in nature, depreciation ought to be allowed to the company as "know-how". 2.3.8.5 Further, as held by the Learned AO, since the expenses incurred gives enduring benefit to the Appellant by enabling it to register the product and commercially manufacture and sell the same, it is submitted that such payments could fall within the meaning of "business or commercial right" and thus, eligible for depreciation under section 32 of the Act. 2.3.8.6 Reliance is placed on the following case laws where the meaning of “business and commercial right” has been elaborated: • Techno Shares & Stocks Ltd. & Ors. vs. CIT [327 ITR 323] (SC) • Skyline Caterers (P) Ltd. vs. ITO [118 TTJ 344] (Mumbai Tribunal) • Kotak Forex Brokerage Ltd. vs. ACIT [33 SOT 237] (Mumbai Tribunal) • ACIT vs. American Express Services India Ltd. [ITA 74/2003 ITA 75/2003 ITA 653/2005] (Mumbai Tribunal) • ITO vs Medicorp Technologies India Ltd. [122 TTJ 394] (Chennai Tribunal)
29 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. • ACIT vs Real Image Tech. (P) Ltd. [120 TTJ 983] (Chennai Tribunal) • Ashoka Info (P) Ltd. vs. ACIT [123 TTJ 77] (Pune Tribunal).”
4.3 I have carefully considered the submissions of the appellant, the impugned assessment order. The product trial run expenditures are incurred by the appellant towards manufacture of a new product in the existing line of business. Since the insecticides and pesticides are toxic in nature, such products needs to be registered with the regulatory authority as mentioned above. Before getting the registration, the product has to be tested for its efficacy and toxicity. The appellant had debited a sum of Rs.4,29,72,544/- towards product trial expenses under the head 'miscellaneous expenses’. The AO found that out of total Rs.4.29 crores incurred, a sum of Rs.2,05,23,457/- alone was paid to recognized associations /universities /organizations, etc which gets covered u/s.35(1)(ii) and noticed that the balance Rs.2,24,49,087/- was not covered u/s.35 hence, did not allow the same as expenditure. The question as to whether the expenses incurred for getting registration with statutory authorities towards new product developed would amount to capital or revenue expenditure needs to be addressed. It is the contention of the appellant that test of enduring benefit alone cannot decide as to whether an expenditure is capital nor not, for which reliance was placed on the decision of Hon'ble Supreme Court in the case of Empire Jute Co. reported in 124 ITR 1. Reliance was also placed on the 'following decisions :- (I) Escorts Ltd. vs. ACIT 104 lTD 427 (Delhi ITAT) (ii) CIT vs. Avon Cycles Ltd. (303 ITR 345) (P & H) (iii) Jamna Auto Industries vs. CIT (167 Taxmann 192) (P& H) 4.4 Further, a copy of the directions issued to the AO by the Hon'ble DRP in the appellant's own case for A.Y.2007-08 was furnished which is available in annexure-7 of the paper-book in pages 132 to 143. The Hon'ble DRP had discussed the issue in para 9 to 9.4 of its order while adjudicating ground No.4 specifically raised against the disallowance of Product Trial Expenses amounting to Rs.2,92,03,883/-. The relevant portion of the finding of the Hon'ble DRP in pars 9.4 is as under :- “9.4 DRP has carefully considered the facts of the case, AO’s findings and observations and the and the assessee’s submission including the case law cited above. Considering that the expenditure incurred is only in the course of existing business and existing line of business, and that the product trial runs does riot bring into existence any new business asset (as the tested product may or may not he introduced in the market) and the nature of expenditure being only the testing the toxicity and the suitability for application, in the Indian market and expenditure also includes contributions/payments made to approved scientific institutions, CRP is of the view that the expenditure incurred is revenue in nature. All the four decisions cited above fully support such view. The expenditure incurred is allowable as deduction either under section 35(1)(ii) to the extent the relevant conditions are fulfilled and the balance as deduction u/s. 37. Hence, the assessee's claim for deduction is approved. The proposed addition should be dropped/deleted."
4.5 In view of the clear finding given by the Hon'ble DRP, I am of the view that the expenditure which is not covered u/s.35(1)(ii) needs to be allowed u/s.37 and
30 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. hence, the addition made by the AO is hereby deleted. This ground of appeal is allowed”.
The Ld. D.R. submitted that the Ld. CIT(A) was erred in directing the AO to consider the additional claim of weighted deduction on account of product trial expenses without examining fulfillment of condition for the same. The Ld. D.R. further submitted that Ld. CIT(A) was not justified in holding that the product trial expenses do not fall in the ambit of section 37 of the Act, as the same relates to capital expenditure. The Ld. D.R. further submitted that the Ld. CIT(A) allowed the claim of the assessee without appreciating the fact that the product trial expenses are giving enduring benefit to the assessee therefore, it is a capital in nature and not allowable under section 37 of the Act.
It is the contention of the assessee that product trial expenses are incurred to develop product before a product can be used on particular crop. Therefore, such expenses are deductable under section 37 of the Act. The Ld. A.R. further submitted that in assessee’s own case for A.Y. 2006-07, the ITAT has decided the issue in favour of assessee, wherein it has been held that product trial expense is allowable under section 37 of the Act. The Ld. A.R. further submitted that product trial expenses are eligible for weighted deduction under section 35 of the Act, as such expenses are in nature of R&D expenses, therefore, the AO was incorrect in not allowing weighted deduction.
31 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. 33. We have heard both the parties and perused the material on record. The assessee has incurred product trial expenses to develop a particular product before such product was used on a particular crop. We further notice that ITAT, in assessee’s own case for A.Y. 2006-07 in ITA No.7978/M/2010 has allowed product trial expenses claimed by the assessee. The relevant portion of the order is extracted below: “5.3. We have heard the rival submissions and perused the material before us we find that while dealing with the objections filed by the assessee for the a why 2007- 08 the DRP had allowed the direction under section 35 of the Act. In our opinion, the test to decide the nature of the expenditure i.e. capital or revenue expenditure the basic thing to be seen is as to whether the expenditure is for running the business of the assessee smoothly. If the expenditure is incurred for day-to-day business activities of the assessee and not for acquiring some asset it has to be allowed as revenue expenditure. In the case before us, it is a fact that no new asset came into existence. Secondly, the expenditure incurred was basically for carrying out the business. Payment to government agencies would not make any expenditure capital/revenue. Therefore, reversing the order of the AO, GOA -14 is decided in favour of the assessee.”
In this view of the matter and consistent with the view taken by the co-ordinate bench of the Tribunal, we are of the view that the assessee is eligible for deduction towards product trial expenses under section 37 of the Income Tax Act, 1961. In so far as assessee’s claim of weighted deductions under section 35, we find that the assessee has failed to file any kind of evidences to prove that such R&D expenditure has been approved by the competent authority to be eligible for weighted deduction, therefore we are of the considered view that there is no merit in the arguments of the assessee that the assessee is eligible for weighted deduction under section 35 of the Income Tax Act, 1961. The Ld. CIT(A) after considering the relevant submissions has rightly allowed the claim. We do not find any infirmity in the order of the Ld.
32 ITA No.7619/M/2013 M/s. Bayer CropScience Ltd. CIT(A). Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground raised by the Revenue.
Accordingly, the appeal filed by the Revenue is dismissed.
In the result, the appeal filed by the assessee is partly allowed for the statistical purposes and the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 07.06.2018.
Sd/- Sd/- (Saktijit Dey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 07.06.2018. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order
Dy/Asstt. Registrar, ITAT, Mumbai.