Dy. Commissioner of Income Tax , Circle-16(1), Hyderabad V. Nava Bharat Ventures Limited , Hyderabad

ITA 11/Hyd/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5428 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2012-2013
• Appeal Filed On: 03-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Transfer pricing; International transaction; Question of law
• Section: 92C; 10AA; 10B; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 11/HYD/2019 ASSESSMENT YEAR: 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(1), HYDERABAD VS M/S.NAVA BHARAT VENTURES LTD. HYDERABAD [PAN: AAACN7327C] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT.S.PRAVEENA, DR FOR ASSESSEE : SHRI P.V.S.S.PRASAD, AR DATE OF HEARING : 16-08-2021 DATE OF PRONOUNCEMENT : 21-09-2021 O R D E R PER S.S.GODARA, J.M. : THIS REVENUES APPEAL FOR AY.2012-13 ARISES FROM THE CIT(A)-4, HYDERABADS ORDER DATED 03-10-2018 PASSED IN CASE NO.0182 / 2016-17 / ACIT,CIR.16(1) / CIT(A)-4 / HYD / 18-19, IN PROCEEDINGS U/S.143(3) R.W.S.92CA(3) OF THE INCOM E TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. COMING TO THE REVENUES SOLE SUBSTANTIVE GRIEVANCE RAISING THE ISSUE OF INCLUSION OF DEPB ENTITLEMENT AS AN ADJUSTMENT UNDER RULE 10B INVOLVING RS.2,86,71,055/-, IT EMERGES DURING THE COURSE OF HEARING THAT THIS TRIBUNAL S CO- ORDINATE BENCHS ORDER IN ASSESSEES CASE ITSELF INVO LVING ITA NO.11/HYD/2019 :- 2 -: DEPARTMENTAL APPEAL ITA NO.634/HYD/2018, DT.22-07-2021 FOR AY.2013-14 HAS RESTORED THE TRANSFER PRICING OFFICER S (TPOS) IDENTICAL ACTION MAKING ADJUSTMENT AS UNDER: 7. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL PLEADINGS QUA THE ASSESSEES CASE THAT ITS DPEB BENEFITS DERI VED FROM SALE OF SILICO MANGANESE FERRO CHROME DESERVE TO BE CONSIDE RED AS AN ADJUSTMENT UNDER RULE 10B(1)(A)(II) OF THE INCOME T AX RULES. LEARNED COUNSEL HAS ALSO FILED A WRITTEN NOTE WITH CATENA O F CASE LAW HONBLE BOMBAY HIGH COURT (SUPRA), (2020) 119 TAXMANN.COM 401 (BANGALORE- TRIB) REITZEL INDIA (P.) LTD., VS. DCIT, (2019) 101 TAXMANN.COM 325 (PUNE-TRIB), CUMMINS INDIA LTD., VS. DCIT, (2018) 97 TAXMANN.COM 494 (KOLKATA - TRIB) DCIT VS. JJ EXPORTERS LTD. HOL DING THAT SINCE DPEB BENEFITS ARE EXPORT INCENTIVES FORMING PART OF OPERATING REVENUES, THE SAME ALSO DESERVE TO BE CONSIDERED AS AN ADJUSTMENT UNDER RULE 10B OF THE RULES. 8. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO FO REGOING RIVAL PLEADINGS AND FIND NO REASON TO AGREE WITH THE ASSE SSEES STAND SUPPORTING THE CIT(A)S FOREGOING CONCLUSION. THIS IS FOR THE PRECISE REASON THAT WE ARE DEALING WITH CHAPTER-X OF THE AC T IN THE NATURE OF (A) SPECIAL PROVISION RELATING TO AVOIDANCE OF ACT INTRODUCED AS AN ANTI-AVOIDANCE MEASURE BY THE LEGI SLATURE. SECTION 92(1) THEREUNDER STIPULATES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE. SECTION 92C PRESCRIBES THE DETA ILED MECHANISM FOR ALP COMPUTATION. SUB-SECTION (4) 1 ST PROVISO THEREOF ENVISAGES THAT NO DEDUCTION U/S.10A [OR SECTION 10AA] OR SECTION 10B ARE UNDER CHAPTER-VI SHALL BE ALLOWED IN RESPECT OF THE AMOUN T OF INCOME BY WHICH THE TOTAL INCOME OF THE ASSESSEE IS ENHANCED AFTER COMPUTATION OF INCOME UNDER THIS SUB-SECTION. 8.1. THE FOREGOING STATUTORY PROVISO IN SECTION 92C (4) ALSO FORMED SUBJECT MATTER OF ADJUDICATION IN THIS TRIBUNALS S PECIAL BENCHS DECISION DOSHI SERVICES P. LTD. VS. DCIT (TS) 1086- ITAT-2019 (AHD) WHEREIN THE ASSESSEES ENDEAVOUR SEEKING TO APPLY P URPOSIVE CONSTRUCTION STANDS DECLINED ON 24-10-2019. 8.2. COUPLED WITH THIS, THE LEGISLATURE HAS ALSO IN VESTED A DEFINITION CLAUSE IN SECTION 92F(II) THAT ARMS LENGTH PRICE MEANS A PRICE WHICH IS APPLIED OR PROPOSED TO BE APPLIED IN A TRA NSACTION BETWEEN PERSONS OTHER THAN ASSOCIATED ENTERPRISES IN UN-CON TROLLED CONDITIONS. LEARNED COUNSEL IS FAIR ENOUGH IN HIGH LIGHTING THE ISSUE BEFORE US AS TO WHETHER THE DPEB BENEFITS DERIVED F ROM THE CORRESPONDING SCHEME OUGHT TO BE CONSIDERED FOR ADJ USTMENT OR NOT UNDER RULE 10B(1)(A)(III) BEING IN THE NATURE OF A DIFFERENCE MATERIALLY AFFECTING THE PRICE IN OPEN MARKET. HONBLE APEX C OURTS LATEST FULL BENCH DECISION IN COMMISSIONER OF CUSTOMS VS. DILIP KUMAR (2018) 9 ITA NO.11/HYD/2019 :- 3 -: SCC 1 (FB)(SC) HOLDS THAT TAXING AND AN EXEMPTION P ROVISIONS HAVE TO BE STRICTLY CONSTRUED AND BENEFIT OF DOUBT IN SUCH AN INSTANCE GOES TO THE ASSESSEE AND REVENUE; RESPECTIVELY. WE ARE UNAB LE TO LOOSE SIGHT OF THE FACT THAT CHAPTER-X IS SPECIAL AS AGAINST ALL OTHER GENERAL PROVISIONS INCLUDING SECTION(S) 10, 10A, 10AA AND 1 0B ETC; AS THE CASE MAY BE. WE CITE LEGAL MAXIM GENERALIA SPEIALI BUS NON- DEROGANT MEANING THAT A GENERAL PROVISION DOES NOT APPLY AT THE COST OF THE SPECIAL ONE OR THE FORMER OF THEM MUST MAKE WAY FOR THE LATTER; RESPECTIVELY; AND, ARE OF THE OPINION THAT THE ASSE SSEES ARGUMENTS GO AGAINST ARMS LENGTH PRICE DEFINED AS A PRICE WHIC H IS APPLIED OR PROPOSED TO BE APPLIED IN A TRANSACTION BETWEEN PER SONS OTHER THAN ASSOCIATE ENTERPRISES, IN UNCONTROLLED CONDITIONS ONLY. SO FAR AS THE ASSESSEES CASE THAT VARIOUS JUDICIAL PRECEDENTS (SUPRA) HAVE ALREADY DECIDED THE ISSUE IN ITS FAVOU R, WE QUOTE THE FOREGOING HONBLE APEX COURTS DECISION BINDING ON ALL THE COURTS WITHIN THE TERRITORY OF INDIA AS PER ARTICLE 141 OF THE CONSTITUTION AND HOLD THAT NONE OF THEM CONSIDER THE LEGISLATURE SCH EME IN CHAPTER-X (SUPRA). AND THAT DEVIATES THEREFROM WOULD NOT ONL Y VIOLATES THE SAME BUT ALSO WOULD AMOUNTS TO NON-COMPLIANCE OF B ETWEEN PERSONS IN SECTION 92F. 9. HON'BLE JURISDICTIONAL HIGH COURTS FULL BENCH D ECISION IN (1993) 202 ITR 333 (AP) CIT VS. B.R.CONSTRUCTIONS ALSO HOL DS THAT A JUDICIAL PRECEDENT CEASES TO BE BINDING IN THE FOLLOWING CON DITIONS: 37. THE EFFECT OF BINDING PRECEDENTS IN INDIA IS T HAT THE DECISIONS OF THE SUPREME COURT ARE BINDING ON ALL THE COURTS. INDEED, ARTICL E 141 OF THE CONSTITUTION EMBODIES THE RULE OF PRECEDENT. ALL THE SUBORDINATE COURTS ARE BOUND BY THE JUDGMENTS OF THE HIGH COURT. A SINGLE JUDGE OF A HI GH COURT IS BOUND BY THE JUDGMENT OF ANOTHER SINGLE JUDGE AND A FORTIORI JUD GMENTS OF BENCHES CONSISTING OF MORE JUDGES THAN ONE. SO ALSO, A DIVISION BENCH OF A HIGH COURT IS BOUND BY JUDGMENTS OF ANOTHER DIVISION BENCH AND FULL . A SI NGLE JUDGE OR BENCHES OF HIGH COURTS CANNOT DIFFER FROM THE EARLIER JUDGMENTS OF CO-ORDINATE JURISDICTION MERELY BECAUSE THEY HOLD A DIFFERENT VIEW ON THE QUESTION OF LAW FOR THE REASON THAT CERTAINTY AND UNIFORMITY IN THE ADMINISTRATION OF J USTICE ARE OF PARAMOUNT IMPORTANCE. BUT, IF THE EARLIER JUDGMENT IS ERRONEO US OR ADHERENCE TO THE RULE OF PRECEDENTS RESULTS IN MANIFEST INJUSTICE, DIFFERING FROM THE EARLIER JUDGMENT WILL BE PERMISSIBLE. WHEN A DIVISION BENCH DIFFERS FROM THE JUDGMENT OF ANOTHER DIVISION BENCH, IT HAS TO REFER THE CASE TO A FULL BENCH. A SINGLE JUDGE CANNOT DIFFER FROM A DECISION OF A DIVISION BENCH EXCEPT WHEN THAT DECIS ION OR A JUDGMENT RELIED UPON IN THAT DECISION IS OVERRULED BY A FULL BENCH OR TH E SUPREME COURT, OR WHEN THE LAW LAID DOWN BY A FULL BENCH OR THE SUPREME COURT IS INCONSISTENT WITH THE DECISION. 38. IT MAY BE NOTICED THAT PRECEDENT CEASES TO BE A BINDING PRECEDENT - (I) IF IT IS REVERSED OR OVERRULED BY A HIGHER COURT, (II) WHEN IT IS AFFIRMED OR REVERSED ON A DIFFERENT GROUND, (III) WHEN IT IS INCONSISTENT WIT H THE EARLIER DECISIONS OF THE SAME RANK, (IV) WHEN IT IS SUB SILENTIO, AND (V) WHEN IT IS RENDERED PER INCURIAM. ITA NO.11/HYD/2019 :- 4 -: 39. IN PARAGRAPH 578 AT PAGE 297 OF HALSBURY'S LAWS OF ENGLAND, FOURTH EDITION, THE RULE OF PER INCURIAM IS STATED AS FOLLOWS : 'A DECISION IS GIVEN PER INCURIAM WHEN THE COURT HA S ACTED IN IGNORANCE OF A PREVIOUS DECISION OF ITS OWN OR OF A COURT OF CO-OR DINATE JURISDICTION WHICH COVERED THE CASE BEFORE IT, IN WHICH CASE IT MUST DECIDED W HICH CASE TO FOLLOW; OR WHEN IT HAS ACTED IN IGNORANCE OF A HOUSE OF LORDS DECISION , IN WHICH CASE IT MUST FOLLOW THAT DECISION; OR WHEN THE DECISION IS GIVEN IN IGN ORANCE OF THE TERMS OF A STATUTE OR RULE HAVING STATUTORY FORCE.' 40. IN PUNJAB LAND DEVELOPMENT AND RECLAMATION CORP ORATION LTD. V. PRESIDING OFFICER, LABOUR COURT , THE SUPREME COURT EXPLAINED THE EXPRESSION 'PER INCURIAM' THUS (AT PAGE 36 OF 77 FJR) : 'THE LATIN EXPRESSION PER INCURIAM MEANS THROUGH IN ADVERTENCE. A DECISION CAN BE SAID GENERALLY TO BE GIVEN PER INCURIAM WHEN THE SU PREME COURT HAS ACTED IN IGNORANCE OF A PERVIOUS DECISION OF ITS OWN OR WHEN A HIGH COURT HAS ACTED IN IGNORANCE OF A DECISION OF THE SUPREME COURT.' 42. AS HAS BEEN NOTICED ABOVE, A JUDGMENT CAN BE SA ID TO BE PER INCURIAM IF IT IS RENDERED IN IGNORANCE OR FORGETFULNESS OF THE PROVI SIONS OF A STATUTE OR A RULE HAVING STATUTORY FORCE OR A BINDING AUTHORITY. BUT, IF THE PROVISION OF THE ACT WAS NOTICED AND CONSIDERED BEFORE THE CONCLUSION ARRIVE D AT, ON THE GROUND THAT IT HAS ERRONEOUSLY REACHED THE CONCLUSION THE JUDGMENT CAN NOT BE IGNORED AS BEING PER INCURIAM. IN SALMOND ON JURISPRUDENCE, TWELFTH EDIT ION, AT PAGE 151, THE RULE IS SATED AS FOLLOWS : 'THE MERE FACT THAT (AS IS CONTENDED) THE EARLIER C OURT MISCONSTRUED A STATUTE, OR IGNORED A RULE OF CONSTRUCTION, IS NO GROUND FOR IM PUGNING THE AUTHORITY OF THE PRECEDENT. A PRECEDENT ON THE CONSTRUCTION OF A STA TUTE IS AS MUCH BINDING AS ANY OTHER, AND THE FACT THAT IT WAS MISTAKEN IN ITS REA SONING DOES NOT DESTROY ITS BINDING FORCE.' 43. IN CHOUDHRY BROTHERS' CASE , AS NOTICED ABOVE, THE DIVISION BENCH TREATED THE JUDGMENT IN CH. ATCHAIAH'S CASE , AS PER INCURIAM O N THE GROUND THAT THE EARLIER DIVISION BENCH DID NOT NOTICE THE SIGNIFICANT CHANG ES THE CHARGING SECTION 3 HAS UNDERGONE BY THE OMISSION OF THE WORDS 'OR THE PART NERS OF THE FIRM OR THE MEMBERS OF THE ASSOCIATION INDIVIDUALLY'-. IN OUR VIEW, THI S CANNOT BE A GROUND TO TREAT AN EARLIER JUDGMENT AS PER INCURIAM. THE CHANGE IN THE PROVISIONS OF THE ACT WAS PRESENT IN THE MIND OF THE COURT WHICH DECIDED CH. ATCHAIAH'S CASE . MERELY BECAUSE THE CONCLUSION ARRIVED AT ON CONSTRUING THE PROVISIONS OF THE CHARGING SECTION UNDER THE OLD ACT AS WELL AS UNDER THE NEW ACT DID NOT HAVE THE CONCURRENCE OF THE LATTER BENCH, THE EARLIER JUDGME NT CANNOT BE CALLED PER INCURIAM. 44. THOUGH A JUDGMENT RENDERED PER INCURIAM CAN BE IGNORED EVEN BY A LOWER COURT, YET IT APPEARS THAT SUCH A COURSE OF ACTION WAS NOT APPROVED BY THE HOUSE OF LORDS IN CASSELL AND CO. LTD. V. BROOME [1972] 1 AL L ER 801, WHEREIN THE HOUSE OF LORDS DISAPPROVED THE JUDGMENT OF THE COURT OF A PPEAL TREATING AN EARLIER JUDGMENT OF THE HOUSE OF LORDS AS PER INCURIAM. LOR D HAILSHAM OBSERVED (AT PAGE 809) : 'IT IS NOT OPEN TO THE COURT OF APPEAL TO GI VE GRATUITOUS ADVICE TO JUDGES OF FIRST INSTANCE TO IGNORE DECISIONS OF THE HOUSE OF LORDS IN THIS WAY.' ITA NO.11/HYD/2019 :- 5 -: 45. IT IS RECOGNISED THAT THE RULE OF PER INCURIAM IS OF LIMITED APPLICATION AND WILL BE APPLICABLE ONLY IN THE RAREST OF RARE CASES. THE REFORE, WHEN A LEARNED SINGLE JUDGE OR A DIVISION BENCH DOUBTS THE CORRECTNESS OF AN OTHERWISE BINDING PRECEDENT, THE APPROPRIATE COURSE WOULD BE TO REFER THE CASE TO A DIVISION BENCH OR FULL BENCH, AS THE CASE MAY BE, FOR AN AUTHORITATIV E PRONOUNCEMENT ON THE QUESTION INVOLVED AS INDICATED ABOVE. THE ABOVE-SAI D TWO QUESTIONS ARE ANSWERED AS INDICATED ABOVE. 46. IN THE RESULT, THE QUESTIONS REFERRED TO US ARE ANSWERED ACCORDINGLY. WE CONCLUDE IN THIS FACTUAL AND LEGAL BACKDROP THAT THE ASSESSEES ARGUMENT SEEKING TO INCLUDE DEPB AS AN ADJUSTMENT F OR ALP COMPUTATION BECAUSE IT IS IN THE NATURE OF AN OPERA TING INCOME, OUGHT NOT BE ACCEPTED AS IT TENDS TO HAVE AN OVERRIDING E FFECT ON APPLICATION OF CHAPTER-X OF THE ACT AS PER STRICTER INTERPRETAT ION RULE. WE THEREFORE ACCEPT THE REVENUES INSTANT FORMER SUBSTANTIVE GRI EVANCE. 3. THE ASSESSEE IS FAIR ENOUGH IN NOT PIN-POINTING A NY DISTINCTION ON FACTS OR LAW IN THESE TWIN ASSESSMENT YE ARS. WE THUS ADOPT JUDICIAL CONSISTENCY AND ACCEPT THE REVENUES INSTANT SOLE SUBSTANTIVE GRIEVANCE. 4. THIS REVENUES APPEAL IS ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.GO DARA) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 21-09-2021 TNMM ITA NO.11/HYD/2019 :- 6 -: COPY TO : 1.THE DY.COMMISSIONER OF INCOME TAX, CIRCLE-16(1), HYDERABAD. 2.M/S.NAVA BHARAT VENTURES LTD., 6-3-1109/1, 3 RD FLOOR, NAVA BHARAT CHAMBERS, RAJBHAVAN ROAD, SOMAJIGUDA, HYDERABAD. 3.CIT(APPEALS)-4, HYDERABAD. 4.PR.CIT-4, HYDERABAD. 5.D.R. ITAT, HYDERABAD. 6.GUARD FILE.