GUJARAT GLASS P. LTD(EARLIER KNOWN AS GUJARAT GLASS P. LTD ),MUMBAI vs. ADDL CIT CIR 6(3), MUMBAI

Grounds no. 1 and 2 relate to claim of depreciation on non- compete fee. Briefly, the facts are the assessee is an Indian company engaged in the business of manufacturing and dealing in glass containers and vials for pharma and non-pharma markets. The assessee is also engaged in generation of power and investment activities. For the assessment year under consideration, assessee filed its return of income on 14.11.2006 declaring total income of Rs.29,34,01,925/- under the normal provisions and book profit of Rs.33,07,31,397/- u/s 115JB of the Income Tax Act, 1961 (in short „the Act‟). Subsequently, on 1.11.2007 assessee filed a revised return of income declaring NIL income under the normal provisions and book profit of Rs.18,26,32,081/- u/s 115JB of the Act. During the assessment proceedings, it was noticed by the Assessing Officer that the assessee had claimed depreciation of Rs.34,93,26,095/-. He also noticed from the assessment order of A.Y 1999-2000 that during the previous year relevant to A.Y 1999-2000, assessee had paid an amount of Rs. 18 crores to M/s. Piramal Enterprises Ltd. (PEL) which was capitalized over various assets allocated. He also noted that the Assessing Officer while completing the assessment for 1999-2000 had disallowed depreciation claimed on the said capitalized amount. He further noted that during the previous year relevant to A.Y 1999-2000, assessee had acquired the Glass division from M/s. Nicholas Piramal India Ltd. (NPIL) and in the return of income filed for the said year,

As far as the claim of depreciation on payment of non-compete fee to PEL, which was capitalized over various assets in A.Y 1999-2000 is concerned, the ld. AR submitted, the payment made towards non- compete fee at the time of acquiring the business of PEL was capitalized over various assets, therefore, assessee was entitled to claim depreciation. He submitted, even otherwise also, assessee is eligible to claim depreciation on non-compete fee as it is an intangible asset as defined u/s 32(1)(ii) of the Act. The ld. AR submitted, though the Tribunal in assessee‟s own case in A.Y 1999-2000 has rejected assessee‟s claim on both counts, i.e., depreciation on the capitalization made to various assets as well as payment made towards non- compete fee as intangible asset, however, in A.Y 2001-02 in assessee‟s own case the Tribunal, relying upon certain decisions of different Hon'ble High Courts, allowed assessee‟s claim of depreciation on non-compete fee as intangible asset. He, therefore, submitted the issue being covered in favour of assessee by virtue of the order of Tribunal in assessee‟s own case, the claim of depreciation should be allowed.

The ld. DR, on the other hand, strongly relying upon the observations of Assessing Officer and CIT(A) submitted that claim of depreciation on non-compete fee by treating it as an intangible asset is totally irrelevant as non-compete fee cannot be equated with the 5 Gujarat Glass Pvt. Ltd. category of assets described u/s 32(1)(ii) of the Act applying the rules of ejusdem generis. He further submitted, the Tribunal in assessee‟s own case for A.Y 1999-2000 has examined the issue in detail by verifying the contract and all other ancillary and incidental issues and keeping in view the decision of ITAT Special Bench in the case of Sharp Business System (India) Ltd., 133 ITD 275 came to a categorical finding that assessee is not eligible to claim depreciation on non-compete fee as it is not in the nature of an intangible asset as defined u/s 32(1)(ii) of the Act. He submitted that in A.Y 2001-02 while allowing assessee‟s claim of depreciation on non-compete fee, Tribunal has neither correctly followed its own decision for A.Y 1999- 2000 nor has applied or discussed the Special Bench decision in the case of Sharp Business System (India) Ltd. (supra). He submitted the Tribunal has not given any conclusive finding to which category of intangible asset non-compete fee belongs to. He further submitted, as depreciation claimed on non-compete fee was disallowed in A.Y 1999- 2000, it has not entered the block. He submitted, A.Y 1999-2000 being the first year of claim of depreciation, if in that assessment year claim of depreciation was denied, the claim cannot be allowed in subsequent assessment years. In support of his contention, the ld. DR relied upon the decision of ITAT in assessee‟s own case for A.Y 1999- 2000 and the decision of ITAT Special Bench in the case of Sharp Business System (India) Ltd. (supra).

We have considered the submissions of the parties and perused the material on record. As far as the factual aspect is concerned, there is no dispute that in the previous year relevant to A.Y 1999-2000 assessee had paid an amount of Rs. 18 crores to PEL towards non- compete fee. It is also a fact that the assessee had allocated the payment made towards non-compete fee to various fixed assets. The issue before us is whether the claim of depreciation on the amount of Rs. 18 crores paid towards non-compete fee is an allowable deduction. We have noted that the issue has two aspects; firstly, the assessee has claimed depreciation on the amount of Rs. 18 crores allocated to various fixed assets at the rate applicable to those assets. As far as this issue is concerned, in our view, assessee‟s claim cannot be accepted as the Tribunal in assessee‟s own case for A.Y 1999-2000 has rejected such claim. However, insofar as the alternative claim of the assessee that depreciation on payment of non-compete fee should be allowed by treating the same as an intangible asset is concerned, same requires consideration. There is no dispute that in assessee‟e own case for A.Y 1999-2000, the Tribunal while deciding the issue has held that non-compete fee cannot be regarded as an intangible asset of a similar nature as described in Sec. 32(1)(ii) of the Act. While coming to such a conclusion, the Tribunal has relied upon the ITAT Special Bench decision in the case of Sharp Business System (India)

We have observed that there is no decision of the jurisdictional High Court on the issue of allowability of depreciation on non-compete fee and whatever decisions on the issue are available, are from non- jurisdictional High Courts. Considering the fact that there are decisions of non-jurisdictional High Courts in favour and against the assessee, we are of the view that following the settled principle of law, the decision favourable to the assessee has to be followed. It is 8 Gujarat Glass Pvt. Ltd. further pertinent to mention here that decisions of the Hon'ble Madras and Karnataka High Courts were not before the Tribunal when the order for A.Y 1999-2000 was passed. Therefore, considering the fact that the subsequent order of Tribunal in assessee‟s own case for A.Y 2001-02 has followed the orders of two different High Courts, i.e., Hon'ble Madras and Karnataka High Courts, and also decision of the Mumbai Bench in the case of Shreya Lifescience Pvt. Ltd., we are inclined to follow the decision of Tribunal in assessee‟s own case for A.Y 2001-02 and allow assessee‟s claim of depreciation on non- compete fee.

In ground no.3, the dispute between the parties is restricted to adoption of actual cost. While the assessee has claimed depreciation on the value recorded in the books of the seller-company, the Department is of the view that the depreciation should be computed on the WDV as recorded in the books of the seller-company.

The ld. AR, at the outset, submitted that in assessee‟s own case for A.Y 1999-2000, the issue has been remitted back to the file of CIT(A) and in A.Y 2001-02, the matter has been remitted back to the Assessing Officer by the Tribunal.

The ld. DR has no objection for remitting the issue to the file of Assessing Officer with similar directions.

We have considered the submissions of the parties and perused the material on record. As noted earlier, the dispute between the assessee and the Department is in relation to adoption of actual cost for computing the depreciation. While the assessee has claimed depreciation on the value recorded in its books of account, the Assessing Officer has computed depreciation on the WDV as recorded in the books of the seller-company. In A.Y 1999-2000, while considering an identical nature of dispute arising out of claim of depreciation, the Tribunal had remitted the matter back to the file of CIT(A). In assessee‟s own case for A.Y 2001-02 also, the issue was remitted back to the Assessing Officer for deciding afresh. Consistent with the view taken by the Tribunal for A.Ys 1999-2000 and 2001-02, we restore the matter back to the file of Assessing Officer for deciding afresh keeping in view the directions of Tribunal in the preceding assessment years referred to above. This ground is allowed for statistical purposes.

In ground no. 4, assessee has challenged disallowance of interest on borrowed funds claimed as deduction u/s 36(1)(iii) of the Act.

Brief facts are, during the assessment proceedings, the Assessing Officer while examining the Balance Sheet of the company noticed that the assessee had invested ` 42.58 crore in its subsidiary companies

The Assessing Officer, while finalising the assessment in pursuance to directions of the DRP again made the disallowance on the reason that similar disallowance has been made in the assessment year 2005–06.

Learned Authorised Representative reiterating the stand taken before the DRP submitted, investments were made in M/s. Ceylon Glass Co. Ltd. in financial year 1999–2000 and no disallowance was made under section 36(1)(iii) in assessment year 2000–01. He further submitted, own interest free funds available with the assessee is more than investments made in subsidiary. Therefore, it has to be presumed that the investment made in subsidiary were out of own interest free funds and not borrowed funds. For such proposition, he relied upon the following decisions:–

Without prejudice to the aforesaid contention, it was submitted, even assuming that borrowed funds are used for investment in subsidiary, however, since such investment in shares is for controlling interest, the interest paid is allowable as deduction under section 36(1)(iii). In this context, he relied upon the following decisions:–

Further, learned Authorised Representative submitted, since the investment in shares is in a company which is in a similar line of business, the investment made is for commercial expediency, hence, no disallowance under section 36(1)(iii) can be made. For such proposition, he relied upon the following decisions:–

Learned Departmental Representative justifying the addition made by the Assessing Officer submitted, the principle laid down in 13 Gujarat Glass Pvt. Ltd. S.A. Builders (supra), has been doubted and the matter has been referred to a Larger Bench.

In rejoinder, learned Authorised Representative submitted, in assessee‟s own case for the assessment year 2001–02, the Tribunal has deleted the addition arising out of similar disallowance made by the Assessing Officer. In this context, he placed on record the order passed by the Tribunal, Mumbai Benches, in ITA no.9645/Mum./2004 an d ITA no.9498/Mum./2004 dated 2nd March 2016.

We have considered the submissions of the parties and perused the material available on record. While framing the draft assessment, the Assessing Officer has disallowed interest expenditure of ` 1.41 crore on the allegation that the investment in shares in subsidiary companies is not for the business purpose of the assessee, hence, not allowable under section 36(1)(iii). As could be seen from the observations of the DRP while dealing with the issue the DRP is prima– facie convinced with the assessee‟s contention that investment made with the subsidiaries were for promoting the business of the assessee, hence, the interest on borrowed capital cannot be held to be not being for the purpose of business of the assessee. He, therefore, directed the Assessing Officer to examine the submissions of the assessee and not to make any disallowance, the assessee‟s submissions are found to be correct. It is worth mentioning the assessee before the DRP as well as 14 Gujarat Glass Pvt. Ltd. in the course of hearing before us has demonstrated that it earned substantial revenue from the subsidiary by way of dividend, royalty, project fee, market survey fee and sale of finished goods. A chart has been furnished before us indicating the income earned from the aforesaid transactions with the subsidiary which far outweigh the interest cost on the investments made in shares of the subsidiary. Further, assessee‟s contention that it has sufficient interest free funds available to make the investment has not been controverted by the Assessing Officer. Moreover, it is observed in assessment year 2001– 02, the Tribunal while dealing with identical interest disallowance on account of investment made with the very same subsidiary, in the order referred to above has deleted the disallowance on the reasoning that investment in the subsidiary was out of commercial expediency. As the Assessing Officer has not examined the issue in proper perspective and has made the disallowance simply relying upon the disallowance made by him in assessment year 2005–06, we are of the view that such disallowance cannot be sustained. Accordingly, we delete the addition made by the Assessing Officer. In view of our aforesaid decision, the issue raised by the assessee in additional ground has become infructuous, hence, need not be adjudicated.

In ground no.5, the assessee has challenged the disallowance of interest at estimated cost of borrowing on amounts advanced to sister concern and directors.

Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has advanced interest free loan to sister concerns and directors, whereas, it paid interest of ` 14.74 crore on borrowed funds proceeded to compute interest at 5.16% on the interest free advance towards interest cost to be disallowed for advancing interest free loan and worked out the disallowance of ` 17,17,424.

The DRP after considering the submissions of the assessee, observed that the disallowance of interest on account of loan given to Piramal Glass, U.K. has been included by the Transfer Pricing Officer while determining the arm's length price in his order under section 92CA(3). Therefore, any further disallowance will amount to double addition. He further directed the Assessing Officer to examine whether the subsidiary to whom the assessee had advanced the loan is actively engaged in business of the assessee in Srilanka and U.K. and if the assessee‟s claim is found to be correct, no disallowance of interest should be made. The Assessing Officer, however, while finalising the assessment sustained the disallowance, though, at lesser figure of ` 13,87,213.

Learned Authorised Representative reiterating the stand taken before the DRP submitted that the Transfer Pricing Officer while

Learned Departmental Representative relied upon the observations of the Assessing Officer.

We have considered the submissions of the parties and perused the material available on record. The only issue which needs examination is whether the interest free loans advanced to sister concern and directors are for promoting the business of the assessee. We have noted, while considering similar issue of disallowance of interest on the amount given to sister concern and directors, the Tribunal, in assessee‟s own case for assessment year 2001–02 deleted the disallowance having found that such advances were made for commercial expediency. It is also worth mentioning the contention of the assessee that in respect of Piramal Glass, U.K., the Transfer Pricing Officer has already made disallowance while determining the arm's length price prima–facie appears to be correct. In view of the aforesaid, we delete the disallowance of ` 13,87,213. Ground no.5, is allowed.

Brief facts are, during the assessment proceedings, the Assessing Officer called upon the assessee to furnish details of sundry creditors and also called upon to explain why sundry creditors pending for more than three years should not be added under section 41(1). In response to the query raised by the Assessing Officer the assessee after furnishing a list of sundry creditors pending for more than three years submitted that there is no remission or cessation of liability in respect of said creditor as the amounts are still payable to them. The Assessing Officer, however, was not convinced with the submissions of the assessee and added back an amount of ` 4,47,842 under section 41(1). The assessee objected to such addition before the DRP.

Before the DRP, it was submitted by the assessee that where liability with regard to making payment have come to an end then only section 41(1) can be applied. It was further submitted, similar disallowance made in previous assessment years, have been deleted by the learned Commissioner (Appeals) on the ground that remission or cessation of liability is the pre–requisite for invoking the provisions of section 41(1). Considering the aforesaid submission of the assessee, DRP directed the Assessing Officer to examine the independent liabilities and only in case, he comes to a conclusion that there is a 18 Gujarat Glass Pvt. Ltd. remission / cessation of liability addition can be made under section 41(1). However, while finalising the assessment in pursuance to the direction of the DRP the Assessing Officer again made the addition.

Learned Authorised Representative submitted, in assessee‟s own case, in assessment year 2001–02, the Tribunal has upheld the order of the learned Commissioner (Appeals) in deleting the addition made under section 41(1) in respect of sundry creditors existing for more than three years. He further submitted, in the subsequent years, assessee has either returned back the amounts representing sundry creditors or has offered it as income and paid tax. Therefore, no disallowance should be made in the impugned assessment year.

Learned Departmental Representative relying upon the observations of the Assessing Officer, submitted that the claim of the assessee that sundry creditors were returned back and offered to tax needs verification.

We have considered the submissions of the parties and perused the material available on record. Primary contention of the assessee before us is, in the impugned assessment year there is no remission / cessation of liability in respect of the sundry creditors. In this context, it needs to be observed that in the assessment year 2001–02, the Assessing Officer had made similar disallowance of sundry creditor outstanding for more than three years. However, learned 19 Gujarat Glass Pvt. Ltd. Commissioner (Appeals) deleted the addition made under section 41(1) on the reasoning that merely because the liability is outstanding for more than three years, the same cannot be added back as income of the assessee under section 41(1), unless, it is proved that there is remission / cessation of liability. The aforesaid finding of the learned Commissioner (Appeals) was also upheld by the Tribunal in assessment year 2001–02, by relying upon the decision of the Hon'ble Supreme Court in CIT v/s Sugauli Sugar Works Pvt. Ltd., 236 ITR 518 and the decision of the Tribunal, Mumbai Bench, in Asia Business Ventures v/s ITO, 74 taxmann.com 84. In the course of hearing, the learned Authorised Representative has also furnished a chart before us of the sundry creditors existing for more than three years indicating that in one case, the outstanding amount was paid back to the sundry creditor and in rest of the cases, the amount was written back and offered to tax in different financial years. In view of the aforesaid, we direct the Assessing Officer to verify the aforesaid claim of the assessee and if it is found that the assessee has paid the amount to the creditor or it has written back and offered to tax the amount outstanding in subsequent assessment years no addition under section 41(1) can be made. This ground is allowed for statistical purposes.

In ground no.7, assessee has challenged the addition made of ` 71,25,000 being the claim for write–off of non–moving and obsolete finished goods.

Brief facts are, during the assessment proceedings, the Assessing Officer found that the assessee out of the provisions made of ` 1.40 crore for non–moving and obsolete inventories during the accounting year 2004–05 has written–off an amount of ` 71,25,000, in the year under consideration. When the Assessing Officer called upon the assessee to justify the claim of deduction by furnishing necessary details of non–moving / obsolete finished goods. As observed by the Assessing Officer, the assessee simply submitted a list of such goods. The Assessing Officer referring to the explanation submitted in the earlier assessment year observed that the assessee has failed to justify its claim of write–off and accordingly added back the amount of ` 71,25,000 and a further sum of ` 1.76 crore on account of provisions of inventory.

Before the DRP objecting to the addition proposed in the draft assessment order it was submitted by the assessee that the total addition aggregating to ` 2,47,25,000, consists of ` 1.76 crore towards provision of inventory which has already been added back by the assessee in the computation of business income and the balance amount of ` 71,25,000 was actually written–off during the year under consideration. It was submitted, this inventory was not written–off in the books of account and was claimed as deduction in the computation of income only. The Assessing Officer while computing business

The learned Authorised Representative referring to the computation of income for the impugned assessment year submitted, the assessee while adding back the provisions for non–moving and obsolete inventory amounting to ` 1.76 crore to the income has reduced an amount of ` 71,25,000 being inventories actually written– off out of earlier year‟s provisions. He submitted, in the draft assessment order, the Assessing Officer has added back both ` 1.76 crore and ` 71,25,000 which amounted to double addition. Referring to the details of inventory written–off, learned Authorised Representative

Learned Departmental Representative, however, asserted that there is no double disallowance and matter can be verified by the Assessing Officer.

We have considered the submissions of the parties and perused the material available on record. As it appears from the draft assessment order, the Assessing Officer made an aggregate addition of ` 2,47,25,000 consisting of ` 1.76 crore towards provisions of inventory of obsolete goods and ` 71,25,000 the inventory actually written–off. However, as it appears from the computation of income, the assessee had added back an amount of ` 1.76 crore to the income while reducing the amount of ` 71,25,000 being inventory actually written–off. Therefore, if the amount of ` 1.76 crore has already been added back to the income of the assessee, no further addition of the same amount can be made. Similarly, it appears from the final assessment order, the Assessing Officer while implementing the directions of the DRP, has restricted the disallowance to ` 71,25,000. Though, the DRP has directed the Assessing Officer to examine the issue of double disallowance, in our view, the Assessing Officer has not considered the same by applying his mind to the fact and material on 23 Gujarat Glass Pvt. Ltd. record. It appears from the computation of income, the Assessing Officer has again made addition of ` 1.76 crore and ` 71,25,000. Further, the Assessing Officer has not properly implemented the direction of the DRP that in case the inventory has irrevocably written– off in the books only amount which could be brought to tax is the amount received from sale of such inventory. Since the Assessing Officer has not properly examined the issue in strict compliance to the directions of the DRP, we are inclined to restore the issue to the file of the Assessing Officer for adjudication afresh after due opportunity of being heard to the assessee. The grounds no.7 and 8 are allowed for statistical purposes.

In ground no.8, the assessee has challenged the decision of the Departmental Authorities in including CENVAT credit to the opening and closing stock thereby resulting in addition of ` 19,82,740.

Brief facts are, during the assessment proceedings, the Assessing Officer noticing that the assessee has included unutilized CENVAT credit in the value of closing stock as on 31st March 2006, in terms of section 145A called upon the assessee to explain why it should not be added to the income. In reply, it was submitted by the assessee that it was following inclusive method for valuation of inventory. The opening stock and closing stock are inclusive of excise duty hence, the effect of increase and decrease of profit on account of element of excise duty

Learned Authorised Representative reiterating the stand taken before the Departmental Authorities submitted, the assessee is following inclusive method for valuation of closing stock consistently over the years. He submitted, as already CENVAT credit has been taken into account while valuing the closing stock, a further addition would amount to double addition. In support of such contention, he relied upon the following decisions:–

He submitted, the Assessing Officer should have examined whether assessee had followed guidance note of ICAI.

Learned Departmental Representative on the other hand submitted the issue can be verified by the Assessing Officer.

We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied

In ground no.9, assessee has challenged the disallowance of bad debt written–off in the books.

Brief facts are, in the assessment year 2005–06, the assessee had written–off bad debt to the tune of ` 62,09,372. However, the deduction claimed towards bad debt written–off was disallowed by the 27 Gujarat Glass Pvt. Ltd. Assessing Officer. When the amount claimed as bad debt was recovered by the assessee in the impugned assessment year, he claimed deduction of the said amount since its claim of bad debt in assessment year 2005–06 was disallowed by the Assessing Officer. However, the Assessing Officer did not entertain the claim of the assessee.

The DRP directed the Assessing Officer to examine the issue and incase of disallowance of claim of bad debt in assessment year 2005– 06 was upheld by the appellate authorities, then to allow assessee‟s claim in the impugned assessment year.

Learned Authorised Representative submitted before us, in assessment year 2005–06, the learned Commissioner (Appeals) has allowed assessee‟s claim while deciding the appeal filed by the assessee. He submitted, for keeping the issue alive the assessee has raised this ground. He submitted, the bad debt claimed has to be allowed in one year. He submitted, since assessee‟s claim has been allowed in assessment year 2005–06, it has to be disallowed in the impugned assessment year.

Learned Departmental Representative submitted, since the assessee‟s claim is allowed in assessment year 2005–06, it cannot be allowed in the impugned assessment year.

We have considered the submissions of the parties and perused the material available on record. As fairly submitted by the learned Authorised Representative, assessee‟s claim of deduction of an amount of ` 62,09,372, has been allowed by the first appellate authority while deciding assessee‟s appeal in assessment year 2005–06. That being the case, as the assessee has received the amount of bad debt in the impugned assessment year, it has to be assessed as income in the impugned assessment year. Accordingly, we dismiss assessee‟s ground no.9 on this issue.

In ground no.10, assessee has challenged the disallowance of deduction under section 80HHHC while computing book profit under section 115JB of the Act.

The Assessing Officer, while computing book profit under section 115JB, in the final assessment order, held that when the assessee is not eligible for deduction under section 80HHC under normal provisions, how it can be eligible for deduction under section 115JB. He further observed, as per clause (iv) to Explanation–1 of section 115JB, profit eligible under section 80HHC computed under section sub–section (3) or (3A) of section 80HHC, shall be reduced from the book profit. Accordingly, he disallowed assessee‟s claim of deduction under section 80HHC while computing book profit under section 115JB.

Learned Departmental Representative agreed with the aforesaid submissions of the assessee.

We have considered the submissions of the parties and perused the material available on record. As could be seen, the assessee claimed deduction under section 80HHC while computing book profit under section 115JB taking shelter under clause (iv) of Explantion–1 to section 115JB. As fairly submitted by the learned Authorised Representative, clause (iv) of Explanation–1 to section 115JB, has been omitted with retrospective effect from 1st April 2005. That being the case, assessee‟s claim cannot be allowed. Ground no.10, is dismissed.

In ground no.11, assessee had challenged the adjustment to the arm's length price by adopting TNMM instead of CUP as directed by DRP.

Brief facts are, the assessee in the relevant previous year, had earned revenue from sale of glass bottles and marketing services fees from its A.E. G.G., USA Inc., amounting to ` 2.05 crore. It is the case

Learned Authorised Representative submitted before us that even assuming that TNMM is the most appropriate method, however, there is a basic fallacy as the Assessing Officer has applied TNMM method even to non–A.E. sales which is not proper. In this context, he relied upon the following decisions:–

Learned Departmental Representative submitted, the assessee itself has bench marked under TNMM. Therefore, it cannot have any grievance if the same was adopted by the Transfer Pricing Officer.

We have considered the submissions of the parties and perused the material available on record. Basic grievance of the assessee before us is, even while computing margin under TNMM, the Assessing Officer / Transfer Pricing Officer should have applied it to A.E. sales only that too in respect of sales to GG USA Inc. We find merit in the aforesaid submissions of the assessee. The purpose of introducing transfer pricing provisions is to ascertain whether international transactions between two related parties are at arm‟s length. Therefore, non–A.E. transactions cannot be taken into account for computing the margin under TNMM. Accordingly, we direct the Assessing Officer / Transfer Pricing Officer to compute margin on the basis of sales made to GG USA Inc. only. Ground no.11 is allowed for statistical purposes.

In ground no.12, assessee has challenged the addition made on account of interest on interest free loan to Piramal Glass, U.K. and compensation for providing corporate guarantee to Gujarat Glass International.

Learned Departmental Representative has no objection if the issue is restored to the file of the DRP for deciding on merit.

We have considered the submissions of the parties and perused the material available on record. On a perusal of the observations of the DRP, in respect of ground no.17, we find that DRP has not adjudicated on the issue of charging of interest on interest free loan to Piramal Glass, U.K. and compensation for providing corporate guarantee to Gujarat Glass International Inc., USA. We have also found that the assessee had filed an application under section 154 before the DRP which is still pending. In view of the aforesaid fact, we restore the issue back to the file of the DRP for adjudication after providing due opportunity of being heard to the assessee. Ground no.12 is allowed for statistical purposes.