DCIT, New Delhi V. M/s Triune Energy Services PVt. Ltd., New Delhi

ITA 1512/DEL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1520 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: PROF S SAMPATH
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 142(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 1512 /DEL/201 6 A.Y. : 2009-10 DCIT, CIRCLE 25(1), C.R. BUILDING, I.P. ESTATE, NEW DELHI VS. M/S TRIUNE ENERGY SERVICES PVT. LTD. B-1/H-4A, MOHAN COOPERATIVE INDL. ESTATE, MATHURA ROAD, NEW DELHI 110 044 (PAN: AAKCS1045E) (ASSESSEE) (RESPONDENT) REVENUE BY : MS. ASHIMA NEB, SR. DR ASSESSEE BY : PROF. S. SAMPATH, CA ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMPU GNED ORDER DATED 31.12.2015 OF THE LD. CIT(A)-14, NEW DELHI RE LEVANT TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED IN THIS APPEAL READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ORDER PASSED BY LD. CIT(A) IS ERRONEOUS AND THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 1,14,82,938/- MADE BY AO ON 2 ACCOUNT OF RENT PAID BY THE ASSESSEE COMPANY TO TPPL FOR USE OF ASSETS LIKE GENERATORS, AIR CONDITIONERS, ETC. 2. THE APPELLANT CRAVES, LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 22.9.2009 , DECLARING INCOME AT RS. 1,98,40,774/-. THE STATUTORY NOTICE U/S. 14 3(2) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS ISSUED TO THE ASSESS EE COMPANY ON 18.8.2010 AND SERVED UPON THE ASSESSEE COMPANY. LA TER ON A DETAILED QUESTIONNAIRE DATED 08.7.2011 WAS SENT TO THE ASSES SEE COMPANY ALONGWITH NOTICE U/S. 142(1) OF THE ACT. IN RESPONS E TO THE SAME, THE A.R. FOR THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONSULTANC Y SERVICES. DURING THE YEAR THE COMPANY HAS ENTERED INTO INTERNATIONAL TRANSACTION WITH ASSOCIATED ENTERPRISES AND FORM NO. 3CEB HAS BEEN F ILED BY THE ASSESSEE COMPANY IN RELATION TO INTERNATIONAL TRANSACTIONS E NTERED INTO BY THE COMPANY. A REFERENCE HAS BEEN MADE TO THE TRANSFER PRICING OFFICER TO DETERMINE THE ARMS LENGTH PRICE OF THE INTERNATIONA L TRANSACTIONS. THE TRANSFER PRICING OFFICER AFTER REVIEW OF THE TRANSF ER PRICING DOCUMENTS AS PRESCRIBED UNDER RULE 10D OF THE INCOME TAX RULES, 1962 AND AFTER 3 DETAILED DISCUSSIONS WITH THE A.R. FOR THE ASSESSEE , HAS PASSED THE ORDER UNDER SECTION 92CA(3) OF THE ACT DATED 14.1.2013. T HE LD. TRANSFER PRICING OFFICER HAS NOT DRAWN ANY ADVERSE INFERENCE IN RELATION TO INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESS EE COMPANY. THEREAFTER, THE AO HAS COMPLETED THE ASSESSMENT U/S . 143(3) OF THE ACT VIDE HIS ORDER DATED 30.3.2013 AT AN INCOME OF RS. 15,34,05,120/-, AFTER MAKING VARIOUS ADDITIONS/ DISALLOWANCES TO THE RETU RNED INCOME. AGAINST THE SAID ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 31.12.2015 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE ORDER OF THE LD . CIT(A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. ON THE CONTRARY, LD. A.R. FOR THE ASSESSEE RELIE D UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT LD. CIT(A) HAS PASSE D A WELL REASONED ORDER. HE FILED A PAPER BOOK CONTAINING PAGES 1 TO 50 IN WHICH HE HAS ATTACHED THE COPY OF WRITTEN SUBMISSIONS FILED BEFO RE THE LD. CIT(A)-XIV; COPY OF LEASE AGREEMENT BETWEEN TRIUNE PROJECTS PRI VATE LIMITED AND SAIPEM TRIUNE ENGINEERING PRIVATE LIMITED; COPY OF THE FRESH CERTIFICATE OF INCORPORATION CONSEQUENT UPON CHANGE OF NAME; COPY OF THE ORDER OF THE ITAT DELHI G BENCH IN THE CASE OF M/S SPARK HOTEL S PVT. LTD. ITA NO. 4631/DEL/2011; COPY OF THE ASSESSMENT ORDER FOR AY 2010-11 PASSED U/S. 143(3) OF THE I.T. ACT, IN THE CASE OF APPELLA NT; COPY OF DRP PANEL-II 4 ORDER U/S. 144C(5) OF THE I.T. ACT IN THE CASE OF T HE APPELLANT AND COPY OF AUDITOR REPORT AND AUDITED ANNUAL ACCOUNTS ALONGWIT H SCHEDULE FOR THE YEAR ENDED 31.3.2009. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT RECORDS, ESPECIALLY THE IMPUGNED ORDER AND THE PAPER BOOK FI LED BY THE ASSESSEE. WE FIND THAT THE ASSESSEE WAS ASKED TO JUSTIFY THE PAYMENT OF RENT TO TIPL FOR USE OF GENERATOR ETC. AO OBSERVED THAT AC TUAL VALUE OF GENERATOR HAS NOT BEEN PROVIDED BY THE ASSESSEE COMPANY DURIN G THE ASSESSMENT PROCEEDINGS. AS PER AO, IT APPEARS THAT ASSET RENT WAS THREE TIMES OF THE VALUE OF ASSET. RENT OF RS. 23,47,869/- WAS ALLOWED BY THE AO FOR AY 2008-09. ON AN ESTIMATE FOR THIS YEAR RS. 24,65,262 /- (5% INCREASE FROM LAST YEAR) WAS ALLOWED AND DIFFERENCE AMOUNT OF RS. 1,14,82,938/- WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF T HE ASSESSEE COMPANY. I NOTE THAT THE RENT WAS PAID HAVING REGARD TO THE MARKET RATE PREVALENT DURING THE RELEVANT PREVIOUS YEAR FOR THE USE OF SU CH ASSETS. HOWEVER, SUB-SECTION (2)(A) OF SECTION 40A OF THE ACT CLOTHE S THE AO WITH THE POWER TO DISALLOW EXPENDITURE, FOR WHICH PAYMENT I S MADE TO A RELATED PERSON, WHICH IS FOUND TO BE EXCESSIVE HAVING REGAR D TO THE LEGITIMATE NEEDS OF BUSINESS OF THE ASSESSEE. THE ONUS IS ON THE AO TO DEMONSTRATE WITH EVIDENCE THAT THE PAYMENT WAS EXCE SSIVE HAVING REGARD TO THE MARKET RATES. NO SUCH EVIDENCE HAS BEEN ADDU CED BY THE AO. THE DISALLOWANCE MADE IN SUCH CIRCUMSTANCES IS NOT SUST AINABLE IN LAW. WE FURTHER NOTE THAT IN ASSESSMENT YEAR 2010-11, THE D ISPUTE RESOLUTION PANEL (DRP) HAS ALLOWED THE CLAIM OF THE ASSESSEE A ND HAS DELETED THE 5 DISALLOWANCE PROPOSED BY THE AO. ALSO, THIS POSITIO N HAS BEEN ACCEPTED IN SUBSEQUENT YEAR BY THE AO HIMSELF. HENCE, IN OUR CO NSIDERED OPINION, THE DISALLOWANCE OF RS. 1,14,82,938/- CLAIMED ON ACCOUN T OF RENT PAID WAS RIGHTLY DELETED, WHICH DOES NOT NEED ANY INTERFEREN CE ON OUR PART, THEREFORE, WE UPHOLD THE WELL REASONED ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND ACCORDINGLY REJECT THE GRO UND RAISED BY THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED ON 28/11/2018. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 28/11/2018 SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES