Bomi Daruwala, Priyanka Jain, ARs for the Petitioner. A. Mohan CIT-DR (DR) for the Respondent.

1. These cross appeals are directed against the assessment order dated 29.11.2013 passed under section 143(3) read with section 144C(13) passed in pursuance of directions of dispute resolution penal-1 (DRP) dated 12.07.2016 for assessment year (AY) 2009-10. The assessee has raised following grounds of appeal:

1. That the assessing officer erred on facts and in law in completing the assessment under section 144/143(3) of the Income Tax Act, 1961 (‘the Act’) at an income of Rs. 18,79,46,027/- as against the income of Rs. 8,25,82,040/-returned by the appellant.

1.1 That the Assessing Officer/TPO erred on facts and in law in determining the arm’s length price of import of raw material at Rs. 73,20,85,000/- as againstthe transaction price of Rs. 83,32,29,000/- on account of adjustment to the arm’s length price on the basis of the order passed under section 92CA(3) of the Act by the TPO.

1.2 That the assessing officer erred on facts and in law in not excluding International Flavors & Fragrances (I) Pvt. Ltd. from the set of comparable companies, in terms of the directions in the order passed under section 144C(5) of the Act by the Dispute Resolution Panel (“DRP”).

1.3 That the assessing officer / TPO erred on facts and in law in not considering Ultra Industries Ltd. as part of comparable companies in terms of the directions in the order passed under section 144C(5) of the Act of the DRP.

1.4 That the assessing officer / TPO erred on fact and in law in not appreciating that the average operating profit margin of the comparable companies after considering directions of the DRP is worked out to 7.65 % as against the profit margin of the appellant at 4.015 and therefore, the Transfer Pricing adjustment, proposed by the TPO, was liable to be deleted. Without prejudice:

1.5 That the assessing officer / TPO erred on facts and in law in observing that no recognizable benefit is derived by the assessee from payment of royalty,technical fees and drawing and design fees, and hence, alternatively holding that the arm’s length price of aforesaid payment was Nil.

1.6 That the assessing officer / TPO erred on facts and in law in not considering Allied Perfumes Ltd. as part of comparable companies.

1.7 The assessing officer / TPO erred on facts and in law in considering the following companies for the purpose of benchmarking the international transactions undertaken by the appellant, not appreciating that such companies are functionally not comparable to the appellant.

a) AVT Natural Ltd.

b) Synthite Industries Ltd.

c) International Flavors and Fragrances (I) Ltd.

d) SH Kelkar Co. Pvt. Ltd.

Without prejudice:

1.8 The assessing officer / TPO erred on facts and in law, in not considering the risk adjustment to the margins of:

a) AVT Natural Ltd.

b) Synthite Industries Ltd.

c) International Flavors and Fragrances (I) Ltd.

d) SH Kelkar Co. Pvt. Ltd.

Without prejudice:

1.9 The assessing officer /TPO erred on facts and in law in not appreciating that the profitability of the appellant was low in the relevant previous year due to extraordinary factors, viz., unusual increase in raw material cost and salary cost, for which appropriate comparability adjustment was warranted.

Without prejudice:

1.10 The assessing officer /TPO erred on facts and in law in making the adjustment on the basis of the entire turnover of the appellant and not restricting the same to the value of international transaction of import of raw material.

2. The assessing officer erred on facts and in law in making disallowance of Rs.14,36,000/- being bad debt written off, allegedly holding that (i) the appellant failed to establish that the debtors have become bad and irrecoverable and (ii) did not prove that debtors written off were offered as revenue income in any of the previous year.

2.1 The assessing officer erred on facts and in law in not appreciating that under the law, there was no requirement to establish that the debts have become bad and irrecoverable and that the requirement for claim of deduction under section 36(1)(vii) of the Act was complied in the appellant’s case.

2. The revenue in its cross appeal has raised following grounds of appeal;

1. “On the facts and circumstances of the case and in law, the Ld. DRP erred in directing TPO to exclude M/s. International Flavors & Fragrances (I) Pvt. Ltd. On the basis of varying accounting period whereas the comparables are includable on the basis of corresponding accounting period of comparables and that of assessee”

2. “On the facts and circumstances of the case and in law, the Ld. DRP erred in directing TPO to include M/s Ultra International Co. Ltd. whereas the assessee itself contradicted the basis of inclusion i.e. high import component of the comparable and the assessee in the case of M/s Synthite Industries Ltd.”.

3. Brief facts of the case are that the assessee-company is a corporate entity engaged in the business of manufacturing and marketing of industrial flavors, fragrances, and chemical specialties, filed its return of income for AY 2009-10 on 30.09.2009. The assessee while filing return of income reported international transaction with its associated enterprises (AE) and furnished report under Form 3CED. Consequent upon reporting of international transaction, the assessing officer (AO) made reference to the transfer pricing officer (TPO) for computation of arms length price (ALP) with regard the international transaction reported in Form-3CED. During the transfer pricing adjustment proceedings, the TPO identified international transactions of import of raw material of Rs. 83,32,29,182/- for its APL. The assessee benchmarked the said transaction by adopting Transaction Net Margin Method (TNMM). The assessee has shown its profit margin @ 4.29%. The assessee treated itself as a tested party. Operating profit / income was considered for profit level indicator (PLI).

The assessees selected following four comparable company for comparison of its benchmarking;

Sr. No Comparables company Margin % Year

1. Bhagat Aromatic Ltd 4.54 Multiple year data

2. Everest Flavours Ltd 0.70 March 2006

3. Privi Organis Ltd 8.30 March 2006

4. Sharp Menthod India Ltd 6.08 Multiple year data Average 4.51

Assessee’s average 4.29

4. On the basis of the aforesaid figures the assessee claimed its transaction at arm’s length. The TPO carried out its own search and after giving show notice and considering the reply of the assessee included five more comparable. The assessee during the TP adjustment proceedings submitted two more comparable namely; (i) Allied Perfumers Ltd and (ii) Ultra international Ltd. for considering as additional comparables, however, the TPO rejected both the comparable. On the basis of following final set of nine (9) comparables the TPO worked out the mean margin of 9.14% ;

Sr. No Comparables company OP/Sales %

1. Bhagat Aromatic Ltd 4.54

2. Everest Flavours Ltd 0.70

3. Privi Organis Ltd 8.30

4. Sharp Menthod India Ltd 6.08

5. AVT Naturals Ltd 16.47

6. Synthite Industrial Ltd 16.67

7. International Flavours & Fragranance 19.61

8. Goldfields Fragranance Pvt Ltd 5.15

9. S.H. Kelkar Co Pvt Ltd 13.76 (Sr No. 5 to 9 included by TPO) Assessee’s average 9.14% Average 4.51

5. The TPO also noted that the assessee made working adjustment at entity level and overall margin was used to justify its control transaction. The TPO made adjustment at pro-rata basis. The TPO worked out the adjustment of Rs. 10,11,43,000/- in the following manner;

Particulars Amounts (Rs. 000/-)

Total operating income A 1973498

Total operating expenses -B 1894264

Operating profit C (A-B) 79234

NPM C/A as per books 4.01%

International transaction of import of goods at book value 833229

International transaction of import of goods at ALP 732085 Adjustment under section 92 CA 101143

6. On receipt of order of TPO under section 92CA(3), the assessing officer added the adjustments suggested by TPO while passing draft assessment order under section 143(3)/144C(1). The assessing officer also disallowed claim of bad debts of ₹ 14,36,000/-, by taking view that the assessee despite issuing show cause notice failed to justified the claim of bad debts. The copy of draft assessment was served upon the assessee. The assessee exercised its option for filing objections before dispute resolution penal (DRP). The DRP after hearing the objections of the assessee directed the TPO/AO to exclude one comparable namely International Flavours and Fragrances (I) Ltd and to include Ultra International Co Ltd, thus granted partial relief to the assessee on TP issues. However, the disallowance of bad debts was affirmed by ld. DRP in its direction dated 21st October 2013. On receipt of directions of the DRP, the AO passed the final assessment order dated 29th November 2 013. Aggrieved by the directions of DRP both the parties have filed their respective appeal before this Tribunal.

7. The revenue in its appeal has challenged the directions for exclusion of comparable namely, International Flavours and Fragrances (I) Ltd and for inclusion of Ultra International Co Ltd. The Assessee in its appeal has raised multiple grounds, which we have extracted in para -1 of this order.

8. Perusal of appeal filed by revenue reveals that appeal is filed after 43 days of prescribed period of limitation. The assessing officer/appellant has filed an application for seeking the condonation donation of delay in filing of appeal. In the application the applicant has pleaded that there is delay of 41 days in filing appeal before the Tribunal. It is further pleaded that the delay was due to bonafide belief of assessing officer that the direction DRP was against the assessee. The learned Departmental Representative (DR) for the revenue while making submission relied upon the contents of application and prayed that liberal approach may be taken while considering the application for condonation of delay. The ld. DR submits that the delay in filing the appeal was not intentional or deliberate but due to the wrong belief of assessing officer. The appeal is filed by public servant in his official duties and there is no reason to disbelieve the contents of the application for condonation of delay. The ld DR for the revenue relied upon the leading case law/ decision of Hon’ble Apex Court in case of Land Acquisition Collector Versus Mst Katiji and others [167 ITR 471 (SC)].

9. On the other hand the learned Authorised Representative (ld. AR) of the assessee vehemently opposed the application for condonation of delay filed by revenue. The ld. AR for assessee submits that each and every day of delay must be explained by the revenue. The approach in filing application for condonation of delay is causal. The application is deserve to be dismissed. In support of his submissions the ld AR for the assessee relied on the copy of Rule -10 of Income tax (Appellate Tribunal) Rules, 1963, Income Tax Appellate Tribunal Guidelines dated 13.04.1970 and para 174 of Income Tax Appellate Tribunal Manual.

10.We have considered the submission of both the parties and gone through the contents of application for condonation of delay. We have deliberated on the Rule -10 of Income tax (Appellate Tribunal) Rules, 1963, Income Tax Appellate Tribunal Guidelines dated 13.04.1970 and para 174 of Income Tax Appellate Tribunal Manual. After considering the submission of ld. DR for the revenue that the delay in filing the appeal is not intentional or deliberate and the decision of Hon’ble Apex Court in Land Acquisition Collector Vs Mst Katiji and other (supra) wherein the Hon’ble Court held that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice to be preferred. Thus, considering the contents of the application for condonation of delay and the submissions of the ld. DR for the revenue that delay in filing the appeal was neither intentional nor deliberate and it was due to bonafide and wrong belief of the AO that the directions of DRP is against the assessee, the delay in filing appeal by revenue is condoned.

11. The ld. AR for the assessee while objecting the application of condonation of delay raised another objection that the appeal of revenue is not maintainable and submitted that sub-section (2A) of section 253 was inserted by Finance Act 2014 with retrospective effect from 01.06.2013, however, the same was omitted by Finance Act 2016 from 01.06.2016. It was argued that, the sub-section (2A) was omitted from the statue by way of omission, hence, this sub-section shall be deemed as it was not on the statue book right from the beginning. The ld. AR for the assessee further submits that ‘omission’ and ‘repeal’ of provision in the statue carries different meanings and effect. Therefore, as per section 6 of General Clauses Act, the proceedings initiated under the omitted provisions cannot be continued unless there is saving clause to that effect while omitting such provisions. To buttress his submissions the ld AR for the assessee relied on the decision of Bangalore Tribunal in Textport Overseas Private Limited Vs DCIT (IT (TP) A. 1772/Bang/2017, which has been affirmed by High Court of Karnataka vide order dated 12.12.2019 reported vide [2020] 114 taxmann.com 568 (Karnataka High Court), Mumbai Tribunal in Add.CIT Vs WNS Global (ITA No. 4520/Mum/2013 dated 19.02.2019, reported vide [2020] 116 taxmann.com 20 (Mumbai - Trib.) and the decision of Hon’ble Supreme Court in General Finance Company Vs ACIT [2002] 257 ITR 338(SC)/ [2002] 124 Taxman 432(SC). Accordingly, the ld. AR for the assessee prayed for outright dismissal of the appeal filed by the revenue/ assessing officer.

12. On the other hand the ld. CIT-DR for the revenue submits that the assessee has not filed Cross Objection in the appeal filed by the revenue nor sought any permission for raising objection on the maintainability of the appeal of the revenue. The assessing officer filed the present appeal during the currency of the sub-section 253(2A) of the Act. And the appeal of the revenue cannot be treated as non-maintainable. The ld. DR further submits that the omission and repeal are broadly synonyms to each other.

If the submissions of the AR for the assessee is taken for consideration that there is no saving clause to that effect while omitting such provisions, similarly there is no proviso or clause for abating the proceedings, which were initiated during the currency of the sub-section (2A) of section 253 of the Act. The ld. DR for the revenue submits that the case laws relied on behalf of assessee is not applicable on the facts of the present case.

13. We have heard the submissions of the learned authorised representative (ld AR) for the assessee and the learned Departmental Representative (ld. DR) for the revenue and deliberated on the case laws relied on behalf of the assessee. It is an admitted position that the assessee has neither filed Cross Objection for objecting the maintainability of the appeal filed by the revenue. However, the ld. AR for the assessee has raised legal objection, which goes to the root of amenability of the appeal filed by the revenue. Therefore, we admit the objection of the assessee on the maintainability of revenue’s appeal. For appreciation of various legal aspects and effect of ‘repeal’ or ‘omission’, we have gone through the various sections 6, 6A and 24 of General Clauses Act. The section(s) 6, 6A and 24 of General Clauses Act are read as under;

6. Effect of repeal.-Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.

6-A. Repeal of Act making textual amendment in Act or Regulation:—

Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.

24. Continuation of orders, etc., issued under enactments repealed and re- enacted,. Where any (Central Act) or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any (appointment notification,) order, scheme, rule, form or bye-law, (made or) issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force and be deemed to have been (made or) issued under the provisions so re-enacted, unless and until it is superseded by any (appointment, notification,) order, scheme, rule, form or bye-law, (made or) issued under the provisions so re-enacted (and when any (Central Act) or Regulation, which, by a notification under Section 5 or 5A of the Scheduled Districts Act, 1874, (14 of 1874) or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn form the re-extended to such area or any part thereof the provisions of such Act or Regulations shall be deemed to have been repealed and re-enacted in such area or part within the meaning of this Section).

14. A careful reading of section 6 of General Clauses Act (this Act) makes it clear that made after the commencement of General Clauses Act, any Central Act or Regulation repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not effect affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.

15.Further a careful reading of section 6A this Act make it clear that where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.

16. The Hon’ble Supreme Court in Bhagat Ram Sharma Vs Union of India (AIR 1988 SC 740) held that it is a matter of legislative practice to provide while enacting an amending law that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. Such a law may also provide for the introduction of a new provision. There is no real distinction between 'repeal' and an 'amendment'. As per the commentary on Principles of Statutory interpretation by Justice G.P. Singh, “the legislative practice in India shows that ‘omission’ of a provision is treated as ‘amendment’. (page 675, Chapter; “Express Repeal”). Further Hon’ble Supreme Court in Ekambrarappa Vs EPTO (AIR 1967 1541), held that amending Act which limits the area of operation of existing Act by modifying the extent clause, result in partial repeal of the Act in respect of the area which its operation is excluded ( emphasis and under lines are added by us).

17. Further, the Hon’ble Supreme Court in the matter of Fibre Boards P. Ltd dated 11.08.2015 reported vide [(2015) 52 taxmann.com 135] /(2015) 10 SCC 333, as well as in the matter of M/s. Shree Bhagwati Steel Rolling Mills [CA No.4280 of 2007, dt.24.11.2015], reported vide (2016) 3 SCC 643, wherein the Hon’ble Supreme Court in these two cases elaborately discussed the issue of repeal /omission/ amendment etc, and held that ‘omission’ would amount to ‘repeal’. It is also held that there is no real distinction between an amendment and that “amendment” is in fact a wider term which includes deletion of the provision in an existing statue.

18. The Hon’ble Court in M/s. Shree Bhagwati Steel Rolling Mills (supra) in a later decision, while referring its order in Fibre Board Private Ltd (supra) held that omission would amount to repeal. “On the argument of the contesting parties that the omitted provision being treated as it never existed as per section 6 of General clauses Act would not apply to allow the previous operation of the provisions is omitted or anything done or suffered thereunder. Nor may a legal proceeding in respect of any rights and liability acquired or incurred under the enactment so omitted.” The Hon’ble Apex Court took a view that in majority of the cases, this would cause great public mischief, and that the decision in Fibre Board case was therefore clearly delivered by their lordship for the public good, being, at the least reasonably possible view and that no aspect of the question at their hand was remained unnoticed in Fibre Board Case.(emphasis added by us).

19. With the aforesaid legal back ground and with utmost regard to the decision of coordinate bench the coordinate bench relied by ld AR for the assessee in Texport Overseas (supra), we have noted that the bench was not having the benefit of the latest judgment of the Hon’ble Supreme Court in the matter of Fibre Boards P. Ltd [(2015) 52 taxmann.com 135] as well as in the matter of M/s. Shree Bhagwati Steel Rolling Mills [CA No.4280 of 2007, dt.24.11.2015] which were not brought to the notice of the bench by either of the parties.

20. The Hon’ble Supreme Court in these two matters had elaborately discussed the issue of repeal /omission and after relying upon the decision of the coordinate bench had decided the issue that omission will also be repealed and therefore by virtue of section 6 and 6A the action taken pursuant to the valid legislation during its life time before omission will be saved and will not come to end. The decision in the case of Texport Overseas Private Ltd (supra) was rendered without considering the decisions of the Hon’ble Apex Court in the cases of (i) M/s. Fibre Boards Pvt. Ltd and (ii) M/s Shree Bhagwati Steel Rolling vs. Commissioner of Central excise & another and also the statutory provision contained in section 6A of General clauses Act and hence, lacks any binding or persuasive value.

16. The Hon'ble Apex court in the case of Fibre Boards Pvt. Ltd and M/s. Shree Bhagwati Steel Rolling has doubted and disapproved its earlier decisions rendered in the case of Rayala Corporation (P) Ltd Vs Enforcement (1969) 2 SCR 412 and Kolhapur Cane Sugar Works Ltd Vs Union of India (2000) 2SCC536 and in the case of General Finance Company Vs CIT (2002) 7 SCC 1. Further, the Hon'ble Supreme Court in the case of Fibre Boards (I) Ltd, after referring to the provisions of Section 6A of the General Clauses Act held that "a repeal can be by way of an express “omission" and that even an implied repeal of a statute would fall within the expression "repeal" in section 6 of the General clauses Act. Repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression "repeal" in section 6 of General clauses Act. Considering the latest decision of Hon’ble Supreme Court in Fibre Board and Bhagwati Steel, the earlier decisions rendered by the Constitution Bench in Rayala Corporation (P) Ltd and Kolhapur Cansugar Works cannot be said to have laid down any ratio decidendi on an interpretation of the word "repeal" an "omission" would not be included. Their observations are in the nature of obiter dicta as held by the Supreme Court in Fibre Boards. It is also held that the earlier decisions have not referred to Section 6A of the General clauses Act and they lose their binding effect on an application of the "per incuriam” principle, as held by the Supreme Court in the case of Fibre Boards Private Limited. Thus, in our view the decision rendered in Royala Corporation Pvt. Ltd lacks binding value for the reasons discussed by the Apex Court in Fibre Boards Pvt. Ltd, the decision rendered in the case of Kolhapur Cane Sugar Works Ltd as also in the case of General Finance Company following the decision in Royala Corporation Ltd, loses its binding value.

17. As we have already noted that the Hon'ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills again reiterated that repeal would include repeal by way of an express omission. The Supreme Court further held that the decision in Fibre Boards Private Limited clarifies the law in holding than an omission would amount to repeal. As a result, the provisions of Sec. 6 of the General Clauses Act would apply to allow the previous operation of the provision so omitted or anything duly done or suffered thereunder, and such a view is reasonable and for the public good.

18. At the coast of repetition we may note that the Hon’ble Supreme Court in the matter of Fibre Board (supra) and Bhagwati Steel Rolling (supra) had elaborately reproduced the paragraphs of General Finance Co., (supra) and also the earlier two judgments relied in General Finance Co., (supra), namely Rayala Corporation P. Ltd and Kolhapur Cane Sugar Works Ltd, and observed that even the court has not referred the matter to the larger bench. The Hon’ble Supreme Court in Fibre Board (supra) and Bhagwati Steel Rolling (supra) had also discussed the provision of law including the General Clauses Act, Section 6A and 24 and thereafter held that the repeal, omission and deletion are interchangeable and thereafter had held that ‘omission’ will have an effect of ‘repeal’ and ‘repeal’ will have an effect of ‘omission’. The distinction carved out in Rayala Corporation (supra) was not correct and further the reference to the Constitution bench has not considered in view of a binding judgment of the Constitution bench in the matter of M.A.Tulloch & Co as well as the provisions of Section 6A of the General Clauses Act and thereafter the Court had held that the decision, in the matter of Rayala Corporation (supra) was per incurium.

19. In our humble view the Hon’ble Supreme Court in Fibre Board (supra) and Bhagwati Steel Rolling (supra) have declared that the law in Rayala Corporation is per in curium, on the basis of which General Finance Co., (supra) was passed. Thus, the later judgments in Fibre Board (supra) and Bhagwati Steel Rolling (supra) shall have a binding precedent on all Courts in India including this Tribunal.

20. We may mention that the decision of the Hon’ble Apex Court is declaration of law as per Article 141 of the Constitution of India. The law declared by Hon’ble Apex Court in Fibre Boards (P) Ltd (supra) dated 11.08.2015, was available when the decisions was rendered by Bangalore Tribunal Textport Overseas Pvt Limited Vs DCIT (supra), however, the same was not brought to the notice of the bench. The coordinate bench while rendering the decision relied on the decision of Hon’ble Apex Court in General Finance Co. Vs ACIT (supra), which was already declared as per-in curium. Similarly, the decision in General Finance Co (supra) is based on Rayala Corporation P. Ltd Vs Director of Enforcement (supra) and Kolhapur Canesugar Works Ltd Vs Union of India (supra). Considering the aforesaid legal position and the dates of various judgments of the Hon’ble Apex Court, we are of the view that the ld. AR for the assessee has referred and relied on the decisions of General Finance Company Vs ACIT (supra) which have been declared as per-in curium by Hon’ble Apex Court.

21. We are conscious of the facts that the latest law declared by Hon’ble Apex Court in various cases (supra) was not confronted with the ld. AR for the assessee; however, it is always presumed that the law declared by the Court is in the knowledge of the legal practitioner. We instead of going in further discussions are of the view that in view of the decision of Hon’ble Apex Court in Fibre Boards (P) Ltd (supra), the word ‘repeal’ includes ‘omission’. Thus, we do not find any merit in the objection raised by the ld. AR for the assessee which we are rejecting, being without any merit and held that appeal filed by the revenue with in currency of the sub-section 2A of Section 253 of the Act, is valid.

22. Now, we shall advert to various grounds of the appeals filed by the parties. Ground No. 1 & 1.1 in assessee’s appeal is general and needs no specific adjudication. Ground No. 1.2 to 1.4 in assessee’s appeal and Ground No. 2 & 3 of revenue’s appeal are interconnected. The assessee is supporting the exclusion of comparable company namely International Flavors & Fragrances (I) Ltd (IFF) and inclusion of Ultra Industries Ltd (UIL). On the contrary the revenue in its appeal is challenging the exclusion of comparable IFF and inclusion of UIL. The ld. AR for the assessee submits that despite the direction of DRP for exclusion of comparable IFF and inclusion of UIL, if the direction is followed the margin of final set of comparable would be within tolerance range and the adjustment suggested by TPO is liable to be deleted. To support the exclusion of IFF the ld. AR for the assessee submits that this comparable company is also engaged in trading of goods. This company traded the goods of Rs. 242.72 Crore which is more than 16%. However, the assessee is only engaged in manufacturing and sale of industrial flavors and during the previous year not engaged in trading. The financial data of this comparable is not available in public domain. The accounts of this company are available for the period from December 2007 to January 2009. Thus, it would be not proper to compare and benchmark the transaction on the basis of financial for different financial period. Thirdly, this comparable is also engaged in research and development (R&D) activity due to which earning higher profit. The company engaged in R&D activity may assume high risk and lead to generation of Intellectual Property Right (IPR). In support of his submissions the ld. AR for the assessee relied on the decision of Pune Tribunal in Honeywell Automation India Ltd India Ltd Vs DCIT (ITA NO. 4/Pune/08) and Bombay High Court in CIT Vs PTC Software (I) (P) Ltd 395 ITR 176.

23. Per contra the ld. DR for the revenue supported the order of TPO. The ld.DR for the revenue submits that the accounts of this comparable are available in the public domain and the revenue has filed the copies of the financial / annual report of IFF. The ld. DR further submits that there are decisions of Tribunal holding that if contemporaneous data is available and financials are available and data can be extrapolated for the financial year, the comparable should not be excluded. The ld. DR submits that the comparability of this company may be restored to the file of TPO for extrapolating and to examine the comparability. In support of his submissions the ld DR relied on the decision of Mumbai Tribunal Pangea3 Legal Database System (P) Ltd Vs ITO [2017] 79 taxmann.com (Mum- Trib). On the ratio that if the financial data is available for all quarters and it is otherwise possible to determine the transaction as well as profitability during the corresponding period, then it would be suffice comparability criteria and relied on the decision of Pune Tribunal in Schlumberger India Technology Center (P) Ltd Vs DCIT [2018] taxmann.com 19 (Pune- Trib).

24. We have considered the submissions of the ld. representatives of the parties and have gone through the orders of the lower authorities. The TPO proposed to include IFF as a valid comparable company by taking view that the assessee while making TP research for comparable, rejected this company only on the ground of (RPT) related party transaction (table –II page 2 of TPO order). On show cause the assessee vide its reply dated 29.10.2012 submitted that RPT is Rs. 36.98 Crore out of total transaction of Rs. 382 Crore. The TPO concluded that RPT is less than 10% hence; the objection against the inclusion was rejected. The ld DRP excluded this comparable on the ground that that the accounts for this company is for the period of 27th December 2007 to 2nd January 2009, therefore, it does not fulfills the conditions of contemporary dates and directed TPO to exclude. Before us the ld. DR for the revenue submitted the financial data for the period of 27 December 2007 to 2nd January 2009.

25. The Hon’ble Bombay High Court in CIT Vs PTC Software [2016] 376 ITR 176 (Bom), while considering the question of law if the Tribunal erred in excluding comparable only on the ground that the said comparable had prepared the financial for the year ending on June against the assessee as on March. The High Court held that Rule 10B(4) of Income tax Rules, are clear and obligates that the data to be used for comparison should be data relating to the same financial year in which the international transaction were entered by the tested party. The contention of the revenue that mandates of Rule 10B can be ignored as difference of three months was also rejected. The case law relied by ld DR for the revenue in Pangea3 Legal Database System (P) Ltd Vs ITO (supra) is not helpful to him as the quarter wise accounts for IFF is not available in the financial statements of this comparable. Even otherwise the decision of Jurisdictional High Court is having binding effect. Thus, considering the decision of the jurisdictional High Court, we affirm the order of ld. DRP for exclusion of IFF. In the result the ground No. 1 of revenue’s appeal is dismissed.

26. Now turning to the comparability of UIL. The ld.AR for the assessee supported order of DRP on inclusion of UIL and also submits that the activities of this comparable are similar to the assessee.

27. On the other hand the ld. DR for the revenue supported the order of TPO. The ld. DR further submits that the if the assessee claims that Synthite Industries should excluded on the basis of high import turnover component, then UIL should also be excluded. Thus, this comparable should not be accepted for inclusion in the final set of comparables.

28. We have considered the submissions of the parties and have gone through the orders of the TPO and DRP. During the TP proceedings the assessee vide its letter dated 29.10.2012 ask to TPO to include this comparable as the data of this company was not available at the time of search. The TPO rejected the prayer of the assessee by taking view that FAR (functions performed asset employed and the risk assumed) analysis was not done, and that in previous year this comparable was not taken though this company was appearing the search process of the assessee. The ld DRP directed to include this comparable on the ground that the activities of this comparable is similar to the assessee. We have seen that the ld DRP has considered the import contents of this comparables as well as Synthite Industries and included solely on the basis of activities. The ld DR for the revenue have not brought any fact to our notice to differentiate the similarities in function, thus, we upheld the inclusion of this comparable by ld DRP. In the result the ground No. 3 of the appeal by revenue is rejected.

29. In the result the appeal of the revenue is dismissed.

30. Further considering the details furnished by the assessee in support f Ground No. 1.2 to 1.4 that in case the exclusion of IFF and inclusion of UIL is affirmed the average mean margins of final set of comparable as per the direction of DRP would be within the tolerance range of +/- 5%, with the margin of assessee. Therefore, the discussions of the exclusion or inclusion of other comparable or other grounds of appeal raised by assessee have become academic.

31. Ground No. 2 relates to disallowance of bad debts. The ld. AR for the assessee submits that during the relevant financial year the assessee written off bed debts of Rs. 14.36 lakhs in the profit and loss accounts. Such bad debts were shown in the invoices raised on customers in the previous year and was credited to the accounts. The assessee during the year considering the facts that the amounts are not recoverable has written off during the year. The ld. AR for the assessee submits that the details of the bad debts are filed on record and the same were filed before the lower authorities. In support of his submissions the ld AR for the assessee relied on the decision of Hon’ble Supreme Court in TRF Vs CIT (323 ITR 397 SC), CIT Vs Essar Technology Ltd [2015] 228 Taxman 309 (Bombay) and CBDT Circular dated 30.05.2016.

32. Per contra the ld. DR for the revenue supported the order of the lower authorities.

33. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities and also deliberated on the various case laws cited by the ld. AR for the assessee. The ld. AR for the assessee vehemently submitted before us that during the relevant financial year the assessee written off bed debts of Rs. 14.36 lakhs in the profit and loss accounts. Such bad debts were shown in the invoices raised on customers in the previous year and was credited to the accounts. The assessee during the year considering the facts that the amounts are not recoverable has written off during the year. We have verified the amounts of bad debts, details of which are available at page No. 50 of PB.

34. The Hon’ble Bombay High Court in CIT Vs Essar Technology Ltd(supra) while considering the question of law whether Tribunal was right in allowing the bad debts claimed by the assessee even the same were not offered as income in the earlier years as per the provisions of section 36(2)(1). The Hon’ble Court held that the Tribunal did not commit any error in recording a factual finding that in the present case that the bad debt can be written off as irrecoverable, otherwise that would also have gone contrary to the judgment of the Supreme Court delivered in the case of T.R.F. Ltd. v. CIT [2010] 323 ITR 397/190 Taxman 391 (SC). In the result this ground of appeal is allowed.

35. In the result the appeal of the assessee is allowed and the appeal of the revenue is dismissed.

Order pronounced in the open court on 15/07/2020.

Sd/- Sd/-

S. RIFAUR RAHMAN PAWAN SINGH

ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Date: 15.07.2020