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Assistant Commissioner of Assistant Commissioner of Income Tax Circle--18(1), New Delhi. Vs.. M/s Yamaha Motor India Pvt.Ltd., First Floor, Nehru Place, Behind IFCI New Delhi 110 019
June, 26th 2014
                IN THE INCOME TAX APPELLATE TRIBUNAL
                                 `H' : NEW DELHI
                     DELHI BENCH `H

                        G.D.AGRAWAL, VICE PRESIDENT AND
            BEFORE SHRI G.D.AGRAWAL,
                            SIDHU, JUDICIAL MEMBER
                  SHRI H.S. SIDHU,

                        Nos.2663/Del/2012 & 2664/Del/2012
                    ITA Nos
                                Years : 2003-
                     Assessment Years             2004-05
                                        2003-04 & 2004-


Assistant Commissioner of         Vs.    M/s Yamaha Motor India Pvt.Ltd.,
Income
Income Tax,                              First Floor, The Great Eastern
Circle-18(1),
Circle-                                  Centre,
New Delhi.                               70, Nehru Place, Behind IFCI
                                         Tower,
                                         New Delhi ­ 110 019.
                                         PAN : AAACE1647C.
      (Appellant)                            (Respondent)

              Appellant by         :    Shri Ved Jain, CA and
                                        Shri V. Mohan, Advocate.
              Respondent by        :    Shri R.S. Meena, CIT-DR.

                                   ORDER

    G.D.AGRAWAL, VP :
PER G.D.AGRAWAL,
                                                2003-04) :-
ITA No.2663/Del/2012 ­ (Revenue's appeal for AY 2003-    :-
       This appeal by the Revenue is directed against the order of
learned CIT(A)-XXI, New Delhi dated 27th March, 2012 for the AY 2003-
04.


2.     The Revenue has raised the following grounds of appeal:-


       "1. On the facts and in the circumstances of the case
       and in law the learned CIT(A) erred in holding that the
       rejection of books of account by the AO was not proper and
       thereby deleting the addition of Rs.1,36,51,37,400/- made
       by the AO on estimated profits.

       1.1 On the facts and in the circumstances of the case
       and in law the learned CIT(A) erred in following the
       appellate order in assessee's own case for AY 2006-07
                                  2                    ITA-2663 & 2664/D/2012



     without appreciating the fact that the Department has filed
     appeal before the Hon'ble ITAT against the said appellate
     order for the assessment year 2006-07.

     1.2 On the facts and in the circumstances of the case
     and in law the learned CIT(A) erred in deleting the addition
     of Rs.1,36,51,37,400/- without appreciating the fact that
     the Assessing Officer has given due allowance for the
     change in product mix, competition and the assessee's
     smaller scale of operation while estimating the average
     profit of 4600/- per Motor Cycle sold and that logical and
     acceptable comparison has been made with M/s Hero
     Honda Motors Ltd. whose products are identical to that of
     the assessee i.e. Motor Cycles and both these companies
     are operating in the same market condition i.e. Indian Two
     Wheeler Market.

     2.     On the facts and in the circumstances of the case
     and in law the learned CIT(A) erred in deleting the
     disallowance of Rs.19,06,59,918/- made on account of
     royalty payments by the assessee company to its 100%
     holding company viz M/s Yamaha Motor Co.Ltd., Japan
     simply following its own order in the assessee's own case
     for the assessment year 2006-07 without appreciating the
     fact that there was no evidence and details of actual
     services rendered by the said holding company to the
     assessee company, in lieu of the royalty.

     3.    On the facts and in the circumstances of the case
     and in law the learned CIT(A) erred in allowing the claim of
     the assessee in respect of carry forward and set off of
     brought forward business losses from AY 2001-02 onwards
     and unabsorbed depreciation from AY 1997-98 onwards.

     4.   The appellant craves leave for reserving the right to
     amend, modify, alter, add or forego any ground(s) of
     appeal at any time before or during the hearing of appeal."

3.   At the outset, it was pointed out by the learned counsel for the
assessee that all the three grounds raised in this appeal by the
Revenue are covered in favour of the assessee by the decision of ITAT
in assessee's own case for AY 2006-07 vide ITA No.3166/Del/2011. He
stated that the assessment of the year under consideration was
                                   3                   ITA-2663 & 2664/D/2012



reopened on the basis of the finding of the Assessing Officer for AY
2006-07 and in respect of all the three grounds while rejecting the
books of account and making the addition, the Assessing Officer relied
upon the finding of his predecessor for AY 2006-07. That the CIT(A)
has allowed the relief following his own order for AY 2006-07 which is
upheld by the ITAT.





4.    Learned DR, on the other hand, relied upon the order of the
Assessing Officer.


5.    We have carefully considered the submissions of both the sides
and perused relevant material placed before us. Ground Nos.1, 1.1 &
1.2 are against the rejection of books of account and the deletion of
addition of `1,36,51,37,400/- which was made by the Assessing Officer
on account of estimated profits.   From a perusal of the assessment
order, we find that in paragraph 4.1, the Assessing Officer relied upon
the order of the Assessing Officer for AY 2006-07 and allowed an
opportunity to the assessee why the finding of his predecessor for AY
2006-07 may not be adopted in this year also. Though the assessee
objected to the Assessing Officer's proposal, however, the Assessing
Officer, after rejecting the assessee's objection, relied upon his own
finding for AY 2006-07 and made the addition of `1,36,51,37,400/-.
The conclusion of the Assessing Officer is recorded in paragraph 4.4 of
the assessment order as under:-


      "4.4 On a careful consideration of the facts and
      circumstances of the case and also in view of lack of
      effective rebuttal to the findings as detailed in the
      assessment order of A.Y. 2006-07, I am convinced that the
      Books of A/cs and the details submitted does not reveal the
      correct position of profit earned by the assessee company.
      Therefore, I am constrained to estimate the suppression of
      profits for the current year at Rs.136,51,37,400/- being
                                   4                   ITA-2663 & 2664/D/2012



      average profit of Rs.4,600/- (based on average profits per
      Bike of Hero Honda Motors Ltd) on the total no. of
      Motorcycles sold by the assessee company. While arriving
      at the average profit per bike of the assessee company, an
      allowance @ 14% has been given to the assessee company
      considering the difference in the level of activity and
      market share of the assessee company vis-a-vis M/s Hero
      Honda Motors Ltd."

6.    Learned CIT(A) allowed the relief following his own order for AY
2006-07. We find that in AY 2006-07, the Revenue, aggrieved with the
order of CIT(A), had filed the appeal. However, the ITAT approved the
order of the CIT(A) on this point and rejected Revenue's ground of
appeal which was raised against the deletion of the trading addition
made by the Assessing Officer in that year by estimating the profit.
The relevant finding of the ITAT reads as under:-


      "10. Thus, it is seen that apropos the first ground for
      rejection of assessee's books of account, i.e., the alleged
      difference in the quantity shown in Form No.3CEB and the
      quantitative details furnished by the assessee, as per the
      Assessing Officer, during the quarter April-June, 2005, as
      per the 3 CEB report, the figure was of 3138 motorcycles,
      whereas the quantitative details of 07.12.2009 showed a
      figure of `1025 motorcycles, giving a discrepancy of 2113
      motorcycles and there was a similar discrepancy for July-
      December, 2005 and January-March, 2006. The assessee,
      in its letter dated 17.12.2009, had stated that the details
      contained in Form 3 CEB were with reference to the royalty
      paid/payable by the assessee company and they were not
      the details of production, i.e., not the number of
      motorcycles produced by the assessee company.             A
      reconciliation had been filed by the assessee regarding the
      sale on which royalty had been paid and the sales during
      the year.      The Assessing Officer did not meet this
      explanation of the assessee and rather concluded, without
      any basis, that the assessee was maintaining different sets
      of books of account. Before the ld.CIT(A), Annexure V to
      the Form 3CEB was pointed out to show that in the Form
      3CEB, the number of motorcycles produced had nowhere
      been stated. In its written submissions filed before the
                             5                    ITA-2663 & 2664/D/2012



ld.CIT(A), the assessee requested for calling for a specific
comment by the Assessing Officer in this regard. The
CIT(A) called for a remand report from the Assessing
Officer. The Assessing Officer submitted not one, but two
remand reports. However, the contention of the assessee
was nowhere rebutted in either of these remand reports.
In the first remand report, as noted by the ld.CIT(A), the
assessee's contention was not even dealt with and even in
the second one, it was not rebutted. In response thereof,
the ld.CIT(A) found the stand taken by the assessee to be
correct. The Form 3CEB filed before the Assessing Officer
was found to be not about the number of motorcycles
produced by the assessee during the period, rather, it was
found to be concerning the royalty paid by the assessee
company during the relevant quarter. The ld.CIT(A) noted
that besides, the assessee had furnished a complete
reconciliation before the Assessing Officer, as also
incorporated in the assessment order. This reconciliation
had, however, been arbitrarily rejected by the Assessing
Officer. It was in these circumstances, that the ld.CIT(A)
held and, in our considered opinion, for the aforegoing
discussions, correctly so, that the Assessing Officer had
erred in concluding that there had been a difference in the
sales and quantitative details of the assessee.

11. Coming to the second ground for rejection of the
books of account, the Assessing Officer had observed that
the average sales of motorcycles by the assessee during
the year was low, as compared to the preceding
assessment year.      The Assessing Officer, on figures
discussed, had computed a suppression of sale value by
`1,461 per motorcycle. This amounted to a total alleged
suppression of `33,77,32,063/-. The ld.CIT(A) noticed that
in response to this query by the Assessing Officer, the
assessee had replied vide letter dated 23.11.2009,
whereafter, no further query was raised by the Assessing
Officer in the show cause notice dated 11.12.2009, but in
the assessment order, the said reply of the assessee had
been totally ignored and the Assessing Officer had,
referring to other non-relevant replies of the assessee
company, drawn an adverse inference against the
assessee. This fact of reference to a wrong reply of the
assessee was nowhere rebutted in the remand report
dated 22.09.2010 by the Assessing Officer. Pertinently, in
the said reply dated 23.11.2009, the assessee had
maintained that there had been a change in the product
                             6                    ITA-2663 & 2664/D/2012



mix during the year; that in the preceding year, the
motorcycle `Enticer' had been sold, which was not so in the
year under consideration; that there had been a decrease
in the sale price to meet the competition in the market;
that the figures were based on the books of account, in
which, no discrepancy had been found; that the assessee
had not been shown to have charged from its dealers any
price more than that stated in the sale invoice and the
books of account; and that the Assessing Officer had not
pointed out any error in respect of any sale. It was on the
basis of this, that the ld.CIT(A) observed that there was no
justification for the Assessing Officer to make an
assumption that the sale price charged by the assessee
during the year was lower than that in the preceding year.
Now, when the Assessing Officer has, neither in the
assessment order, nor in either of the remand reports,
been able to rebut the categorical assertions of the
assessee in this regard, as to how the ld.CIT(A) has erred in
accepting the assessee's contention, has not been made
out before us. Obviously, merely since the realization per
motor cycle for the year under consideration was low as
compared to that in the preceding year, this by itself
cannot lead the Assessing Officer to assume that the sale
price charged by the assessee company was under-stated
and the Assessing Officer evidently erred in making such
assumption. As correctly noted by the ld.CIT(A), unless
there is material evidence to disprove the contention of the
assessee, the sale stated in the books of account needs
must be accepted. Therefore, the ld.CIT(A) has rightly held
that on this score, the books were rejected by the
Assessing Officer merely by indulging in surmises.

12. Coming to the next reason adopted by the Assessing
Officer for rejecting the books of account, according to the
Assessing Officer, the assessee's explanation regarding the
losses incurred by it as compared to the profits earned by
other competitors, was not acceptable. Here, the CIT(A)
has noted that the Assessing Officer downloaded the
balance sheets of Hero Honda Motors Ltd. and Bajaj Auto
Ltd., and by taking Hero Honda Motors as an example,
worked out the profit at `470 per motorcycle, where, on
applying a rate of `4,000/- to 2,65,212 motorcycles sold by
the assessee during the year, estimated a profit of
`106,08,48,000/-. The reasons for the loss suffered by the
assessee company, as contended, were low market share,
low capacity utilization, very high debtors' turnover ratio,
                                   7                       ITA-2663 & 2664/D/2012



     high inventory ratio, shift in technology, higher personnel
     cost due to VRS and labour unions problem, advertisement
     and publicity cost, high material cost due to low volumes
     and high overhead cost because of dealer network and
     after sales service, etc. The Assessing Officer, it was taken
     note of by the ld.CIT(A), had totally ignored all these
     contentions of the assessee and in the remand reports, he
     had not been able to rebut any of such contentions. These
     contentions were dubbed by the Assessing Officer as being
     general in nature. No other comment was made. The
     ld.CIT(A) held such an approach to be no correct. Before
     us, nothing has been brought to support this action of the
     Assessing Officer. Obviously, profit can only be made
     when there is ability to do so. The factors pointed out by
     the assessee for not being able to make sales, have not
     been refuted. Therefore, in the presence of the said
     factors, without a doubt, the losses suffered by the
     assessee cannot be said to be either bogus, or inflated.
     The Assessing Officer did not prove otherwise.             No
     discrepancy was pointed out in the books of account of the
     assessee company concerning the expenditure incurred
     and claimed by the assessee. Nothing was brought to
     establish that the assessee had been charging a sale price
     higher than that noted in the books of account. Rather, the
     Assessing Officer arbitrarily compared the case of the
     assessee with other successful companies, which can
     never lead to appropriate estimation of profit of a loss
     bearing company like the assessee.

     13. In view of the above, on this issue also, the ld.CIT(A)
     has correctly held the rejection of the books of the
     assessee by the Assessing Officer to be incorrect. About
     the last ground raised by the Assessing Officer for rejecting
     the assessee's books of account, it was held that the
     assessee had been selling motorcycles at a lower price to
     its holding and subsidiary companies as compared to its
     domestic sales. The ld.CIT(A) has noted that the assessee,
     in its reply dated 17.12.2009, had pointed out that the
     export price was more than the domestic price, even in
     spite of the fact that the domestic sale price was inclusive
     of excise duty. A comparative chart, as follows, had been
     submitted :-

Name of the motorcycle   Average domestic   sale   Average Export price (Rs.)
model                    price (Rs.)
Fazer STD 5(YY5)         35,296/-                  36,690/-
                                   8                    ITA-2663 & 2664/D/2012



Fazer STD (5YY9)        35,339/-                 42,230/-
Crux (5KA3)             27,869/-                 38,456/-
Libero (5TS3)           32,234/-                 38,456/-
Crux FBD(5KA3)          27,283/-                 38,456/-
Crux SJP (5KA3)         27,284/-                 38,456/-


      14. The assessee had stated that it was entitled to DEPB
      benefits in respect of its export sales and if the total DEPB
      benefits were added to the export sale price, the effective
      export price would be substantially higher in comparison to
      the domestic sale price. The TPO's order dated 13.11.2009
      was also brought forth, wherein, on considering the export
      sales made by the assessee company to its holding
      company and subsidiary companies, the TPO had accepted
      the price of export shown by the assessee as being at
      arm's length. These contentions of the assessee as well as
      the TPO's order were found by the ld.CIT(A) to have been
      ignored by the Assessing Officer. The comparative charge
      submitted by the assessee had also not been found by the
      Assessing Officer to contain any discrepancy. In the
      remand report dated 22.09.2010 also, the Assessing
      Officer was not found to have entered any rebuttal to the
      assessee's contentions. After rejoinder to the remand
      report even in the second remand report, the Assessing
      Officer was found to have passed only peripheral orders of
      estimation of profit without answering the assessee's
      submission. It was on this that the ld.CIT(A) correctly held
      that in absence of material, the Assessing Officer could not
      tinker with the price determined by the TPO.

      15. It has gone unrebutted before us also, that if the
      contention of the Assessing Officer were to be accepted,
      the whole purpose of determination of arm's length price
      by the TPO would get defeated. To reiterate, the TPO has
      accepted, vide order dated 13.11.2009 (supra), the prices
      of export shown by the assessee to be at arm's length.

      16. In view of the above, even on this score, the rejection
      of books of account of the assessee by the Assessing
      Officer does not hold good and such action of the
      Assessing Officer has correctly been cancelled by the
      ld.CIT(A).

      17. For the above discussion, finding no merit therein,
      Ground Nos.1 and 2 raised by the Department are
      rejected."
                                    9                    ITA-2663 & 2664/D/2012




7.    Admittedly, the facts of the year under consideration are
identical to the facts in AY 2006-07, the Assessing Officer himself has
relied upon the finding recorded in the assessment order for AY 2006-
07 for rejecting the books of account and for estimating the profit. The
CIT(A) also relied upon his own order for AY 2006-07. Therefore, we do
not find any justification to take a view different than the view taken by
the ITAT in AY 2006-07. Respectfully following the same, we uphold
the order of learned CIT(A) on this point and reject ground Nos.1, 1.1 &
1.2 of the Revenue's appeal.


8.    Ground No.2 of the Revenue's appeal is against the deletion of
the disallowance of `19,06,59,918/- made on account of royalty
payment by the assessee company to its 100% holding company viz.,
M/s Yamaha Motor Co.Ltd., Japan. With regard to this ground also, the
facts are identical to AY 2006-07.      The Assessing Officer himself in
paragraph 5.1 of the assessment order recorded the following finding:-


      "5.1 For the detailed reasoning given in the assessment
      year 2006-07, the royalty paid, was disallowed and added
      back to the returned income, by holding that the same was
      paid to the holding company of the assessee, which was
      owning the entire 100% of the assessee's shares, thereby
      indicating that the said royalty was nothing but a
      colourable device to reduce profits by making a payment
      to own-self."

9.    Thus, it is evident that the Assessing Officer, relying upon the
finding in the assessment order for AY 2006-07, disallowed the royalty
payment of `19,06,59,918/-. On appeal, the CIT(A) allowed the relief
following the appellate order for AY 2006-07. The Revenue's appeal
for AY 2006-07 on this ground was rejected by the ITAT with the
following finding:-
                                   10                    ITA-2663 & 2664/D/2012




      "24. We do not find any error, as seen above, in the order
      of the ld.CIT(A) in this regard. It cannot be gainsaid that
      any expenditure incurred wholly and exclusively for the
      purposes of business is an allowable expenditure, even
      though, as in the present case, the payment is made to a
      100% shareholding company of the payer. That apart, u/s
      40A(2) of the Act, it is only the fair value of such
      expenditure, which is allowable. Besides, the arm's length
      price provisions take care of the payment in such
      transactions being at arm's length, as has been done in the
      present case by the TPO. The Assessing Officer proceeded
      merely on assumptions, surmises and conjectures which,
      undeniably, can never substitute hard evidence, which is
      entirely absent here. Neither Section 40(a)(i) nor Section
      2(22)(e) of the Act are applicable, as observed. Therefore,
      finding no merit therein, Ground No.4 taken by the
      department stands rejected."

10.   When admittedly the facts of the year under consideration are
identical to the assessment year 2006-07, we do not find any
justification to take a view different than the view taken by the ITAT for
AY 2006-07. We, therefore, respectfully following the above finding of
the ITAT in assessee's own case, uphold the order of learned CIT(A) on
this point and reject ground No.2 of the Revenue's appeal.


11.   Ground No.3 of the Revenue's appeal is against the set off of
brought forward business losses from AY 2001-02 onwards and
unabsorbed depreciation from AY 1997-98 onwards. On this point also,
the Assessing Officer relied upon the finding of the Assessing Officer
for AY 2006-07 and again, the CIT(A) allowed the relief following his
own order. On appeal, the learned Judicial Member decided the issue
in favour of the assessee by rejecting the Revenue's ground of appeal.
However, the learned Accountant Member did not agree with the same
and proposed that this issue needs to be set aside to the file of the
Assessing Officer because examination of relevant facts is required.
                                   11                    ITA-2663 & 2664/D/2012



The matter was referred to the Third Member to give his opinion on the
following question:-


      "1. Whether the issue challenging the CIT(A)'s action in
      allowing the assessee's claim of carried forward and set off
      brought forward losses and unabsorbed depreciation
      (Ground No.5 in the Department's Appeal in ITA
      No.3166/Del/2011) requires to be remitted to the Assessing
      Officer to examine the record maintained under the
      Companies Act and record a finding as to the percentage
      of shares held by M/s Yamaha Motor Co., Japan in the year
      of occurrence of loss and in the year of setting off of loss."

12.   The Third Member, vide his order dated 29th April, 2014, agreed
with the learned Judicial Member with the following finding:-


      "2.5.   Now I espouse the issue for my opinion on merits.
      From the above conflicting opinions of my ld. Brothers,
      one thing is vivid that both of them have agreed on the
      legal prescription of sec. 79 of the Act by holding that the
      benefit of set off of the brought forward loss from
      assessment year 2001-02 be allowed if the claim of the
      assessee about YMC holding 74% of the share capital on
      26.5.2000 turns out to be correct. Whereas the ld. JM
      upheld the order of the CIT(A) by accepting that, in fact,
      YMC held 24% of the shares of the assessee's company on
      26.5.2000, the ld. AM remitted the matter to the file of the
      A.O for necessary verification in this regard with suitable
      direction. The question which looms large before me is as
      to whether the contention of the assessee about YMC
      holding 74% shares on 26.5.2000 should be accepted
      without any further verification or the matter should be
      sent back to the Assessing Officer for a de novo
      examination. In this regard, it is relevant to note that when
      the A.O raised query as to why brought forward loss should
      not be disallowed, the assessee submitted its reply, the
      relevant part of which is on page 536 of the paper book.
      The following is the extract of the reply advanced by the
      assessee before the Assessing Officer :

      "In this regard, we would like to mention that initially the
      Assessee Company was incorporated as a 50:50 joint
                            12                    ITA-2663 & 2664/D/2012



venture between Escorts Ltd. and Yamaha Motor Co., Ltd,
Japan (YMC) in 1995. On may 26, 2000, 64,80,000 equity
shares of the Assessee Company representing 24% of its
total issued and paid up equity share capital were
transferred by Escorts Ltd. in favour of YMC. Accordingly,
with effect from May 26, 2000, the equity shares of the
Assessee Company were held by 70,20,000 equity shares
representing balance 26% of the total issued and paid up
equity share capital of the Assessee Company, and the
Assessee Company became a wholly owned subsidiary of
YMC. Accordingly, from the assessment year 2001-2002
onwards, the Assessee Company is entitled to claim
accumulated losses, since with effect from May 26, 2000,
(at all times) more than 51% of the total issued and paid
up equity share capital of the Assessee Company is being
held by YMC."

2.6. It can be clearly seen from the above reply that the
assessee made it unequivocal that 64,80,000/- equity
shares of the assessee company, representing 24% of its
total paid up capital, were transferred by M/s Escorts Ltd.
in favour of YMC Japan on 26.5.2000 and as such the total
shareholding of YMC Japan swell to 74% on that date.
Remaining 26% were claimed to have been acquired by
YMC on 15.6.2001. Despite this categorical submission, the
Assessing Officer chose to brand the assessee's
explanation as a `cooked up story' without showing as to
how the same was incorrect. There is no semblance of any
verification having been carried out by the AO to examine
the correctness of the assessee's version. The assessee
reiterated its stand before the ld. CIT(A) through written
submissions, the relevant part of which is available on
page 775 of the paper book. It was again stated that
on26.5.2000, 24% of the shareholding of the assessee
company was transferred by M/s Escorts Ltd. in favour of
YMC Japan. The ld. CIT(A), instead of directly acting on the
same, chose to seek remand report from the Assessing
Officer by sending such written submissions to him. The
Assessing Officer dealt with this issue in his first remand
report with the following observations as are extracted
below from page 823 of the paper book:

" No further comment is being made now on this issue, as
all contentions of assessee need      an independent
adjudication by the ld. CIT(A)."
                            13                    ITA-2663 & 2664/D/2012



2.7.    It can be seen that when the position about YMC
acquiring 24% of shares from M/s Escorts Ltd. on 26.5.2000
was restated in remand proceedings, the AO did not make
any adverse comment on the same. When the assessee
submitted its rejoinder to the AO's remand report, the ld.
CIT(A) once again sent such rejoinder to the AO for a
second remand report. The Assessing Officer made the
following comments in the second remand report, as are
available on page 836 of the paper book :

"VIII.  Set-off   of   accumulated       losses/unabsorbed
depreciation (Ground No. 11)

No further comments is required on this issue, as the
assessee has only reiterated its earlier contentions, which
has been duly answered to in the Assessment Order."

2.8. There is no dispute on the legal position that on YMC
holding 74% shares of the assessee company on 31.3.2001
and continuing to hold so up to 31.3.2006, there can be no
bar on the claim of set off of brought forward loss for the
assessment year 2001-02 against the income for the
assessment year 2006-07. From the above narration of
facts, it is palpable that the Assessing Officer got three
opportunities to examine the assessee's contention about
YMC acquiring further 24% shares on 26.5.2000 apart from
its original holding of 50%., firstly during the course of
assessment proceedings and then during two remand
proceedings. The assessee's pointed submission in this
regard came to be rejected by the Assessing Officer during
the original assessment proceedings without any reason
worth the name and the same position continued during
the two remand proceedings as well. It is trite that when an
assessee furnishes an explanation on a specific query, the
same is treated as accepted unless some inconsistencies
are found by the AO on its vetting or the assessee fails to
substantiate the same on being called upon to do so. If the
Officer does not dispute the correctness of the specific
explanation tendered by the assessee,          the same is
considered as correct and binding of the AO. It is totally
impermissible to dub the explanation given by the
assessee as a cooked up story without any evidence to the
contrary. Here is a case in which the Assessing Officer got
three opportunities of examining the assessee's
contention in this regard. If he was not satisfied with the
same, he was duty bound to bring the investigation to a
                                   14                   ITA-2663 & 2664/D/2012



      higher level and call for further corroboration. Having not
      done so, he could not have characterized the assessee's
      explanation as false. Even if it is presumed without
      agreeing that the AO was under some misconception qua
      the assessee's explanation during the assessment
      proceedings, he could have verified the same when
      remand reports were called for. Restoration to the A.O.
      would have been justified if despite his requiring the
      assessee to lead further evidence in support of its
      explanation, the assessee had failed to do so and the ld.
      CIT(A) had accepted the assessee's contention without
      getting comments from the AO. But in the facts of the
      instant case, the Assessing Officer did not raise any further
      query on the submissions repeatedly made before him in
      this regard. Even the ld. DR has brought no material on
      record to demonstrate any fallacy in the explanation
      tendered on behalf of the assessee. Since the ld. CIT(A)
      has accepted the same explanation as was given to the AO
      and both the ld. Members agree that the claim of the
      assessee is acceptable if such explanation is correct, I am
      of the considered opinion that no useful purpose will be
      served in once again sending the matter back to the AO for
      carrying out the examination of the claim for the fourth
      time. I, therefore, agree with the opinion expressed by the
      ld. JM on the first question."

13.   In view of the above, the issue raised by the Revenue vide
ground No.3 is also covered in favour of the assessee by the decision
of Third Member of ITAT. Respectfully following the same, we uphold
the order of learned CIT(A) on this point and reject ground No.3 of the
Revenue's appeal.


                                               2004-05 :-
ITA No.2664/Del/2012 ­ Revenue's appeal for AY 2004-   :-
14.   In this year, the Revenue has raised the following grounds:-


      "1. On the facts and in the circumstances of the case
      and in law the learned CIT(A) erred in holding that the
      rejection of books of account by the AO was not proper and
      thereby deleting the addition of Rs.1,17,69,78,000/- made
      by the AO on estimated profits.
                                  15                    ITA-2663 & 2664/D/2012



      1.1 On the facts and in the circumstances of the case
      and in law the learned CIT(A) erred in following the
      appellate order in assessee's own case for AY 2006-07
      without appreciating the fact that the Department has filed
      appeal before the Hon'ble ITAT against the said appellate
      order for the assessment year 2006-07.

      1.2 On the facts and in the circumstances of the case
      and in law the learned CIT(A) erred in deleting the addition
      of Rs.1,36,51,37,400/- without appreciating the fact that
      the Assessing Officer has given due allowance for the
      change in product mix, competition and the assessee's
      smaller scale of operation while estimating the average
      profit of 4400/- per Motor Cycle sold and that logical and
      acceptable comparison has been made with M/s Hero
      Honda Motors Ltd. whose products are identical to that of
      the assessee i.e. Motor Cycles and both these companies
      are operating in the same market condition i.e. Indian Two
      Wheeler Market.

      2.     On the facts and in the circumstances of the case
      and in law the learned CIT(A) erred in deleting the
      disallowance of Rs.18,23,80,966/- made on account of
      royalty payments by the assessee company to its 100%
      holding company viz M/s Yamaha Motor Co.Ltd., Japan
      simply following its own order in the assessee's own case
      for the assessment year 2006-07 without appreciating the
      fact that there was no evidence and details of actual
      services rendered by the said holding company to the
      assessee company, in lieu of the royalty.




      3.    On the facts and in the circumstances of the case
      and in law the learned CIT(A) erred in allowing the claim of
      the assessee in respect of carry forward and set off of
      brought forward business losses from AY 2001-02 onwards
      and unabsorbed depreciation from AY 1997-98 onwards.

      4.   The appellant craves leave for reserving the right to
      amend, modify, alter, add or forego any ground(s) of
      appeal at any time before or during the hearing of appeal."

15.   Ground No.1 & 1.1 are identical to ground Nos.1 & 1.1 of the
Revenue's appeal for AY 2003-04.       Ground No.1.2 appears to be
misconceived because in this year, the Assessing Officer made the
                                      16               ITA-2663 & 2664/D/2012



addition of `1,17,69,78,000/- on account of estimated profits which
was deleted by the CIT(A) and deletion is challenged by the Revenue in
ground No.1 & 1.1. In ground No.1.2, the Revenue has challenged the
deletion of addition of `1,36,51,37,400/-. No such addition was made
by the Assessing Officer in this year. So, the question of deletion of
above addition in AY 2004-05 did not arise.           The addition of
`1,36,51,37,400/- was made by the Assessing Officer in AY 2003-04
and which was deleted by the CIT(A) in that year.        It seems that
grounds for both the years have been drafted simultaneously on 29th
May, 2012 and, therefore, in AY 2004-05, by mistake, ground No.1.2 is
raised.     So far as ground Nos.1 & 1.1 are concerned, the same are
rejected for the detailed discussion in paragraph Nos.5 to 7 above.
Ground No.1.2 is rejected being misconceived and not arising from the
order of the CIT(A) for AY 2004-05.


16.   Ground No.2 is identical to ground No.2 for AY 2003-04 and, for
the detailed discussion in paragraph Nos.8 to 10 above, this ground is
rejected.


17.   Ground No.3 is similar to ground No.3 for AY 2003-04 and, for the
detailed discussion in paragraph Nos.11 to 13 above, this ground of the
Revenue's appeal is rejected.


18.   In the result, both the appeals of the Revenue are dismissed.
      Decision pronounced in the open Court on 24th June, 2014.


                    Sd/-                             Sd/-
                  SIDHU)
            (H.S. SIDHU)                      (G.D.AGRAWAL)
          JUDICIAL MEMBER                     VICE PRESIDENT

Dated : 24.06.2014
VK.
                                17                  ITA-2663 & 2664/D/2012




Copy forwarded to: -

1.   Appellant  : Assistant Commissioner of Income Tax,
               Circle-
               Circle -18(1), New Delhi.
2.   Respondent : M/s Yamaha Motor India Pvt.Ltd.,
               First Floor, The Great Eastern Centre,
               70, Nehru Place, Behind IFCI Tower,
               New Delhi ­ 110 019.

3.   CIT
4.   CIT(A)
5.   DR, ITAT

                           Assistant Registrar

 
 
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