Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 6266 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 10 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-08-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
09-08-2016
Assessment Year
2010-2011
Appeal Filed On
07-10-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1545/HYD/2014 ASSESSMENT YEAR: 2010-11 IJM (INDIA) INFRASTRUCTURE LTD., HYDERABAD. PAN AAACI 7067A VS. ADDL. COMMISSIONER OF INCOME-TAX, RANGE 2, HYDERABAD. (ASSESSEE) (RESPONDENT) ITA NO. 1487/HYD/2014 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(1), HYDERABAD. VS. IJM (INDIA) INFRASTRUCTURE LTD., HYDERABAD. PAN AAACI 7067A (ASSESSEE) (RESPONDENT) ASSESSEE BY : SHRI V. RAGHAVENDRA RAO REVENUE BY : SHRI T. VENKAT REDDY DATE OF HEARING 09-08-2016 DATE OF PRONOUNCEMENT 24 -08-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS ARE CROSS APPEALS DIRECTED AGAI NST THE ORDER PASSED U/S 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) DATED 08/08/2014 RELATING TO AY 2010- 11. ITA NO. 1545/HYD/2014 BY THE ASSESSEE 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITS APPEAL: 2 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD 01. THE ORDER OF THE LEARNED ADDL. COMMISSIONER OF INCOME-TAX, RANGE-2, HYDERABAD PASSED U/S. 143(3) R.W.S. 144C(1 3) OF THE INCOME TAX ACT, 1961, IS AGAINST LAW AND FACTS OF T HE CASE. 02. THE LEARNED ASSESSING OFFICER AS WELL AS THE LE ARNED DRP OUGHT NOT TO HAVE DISALLOWED THE PAYMENTS OF RS.16, 31,41 ,612/- MADE TO THE SUB-CONTRACTORS, INASMUCH AS, THE APPEL LANT HAD DISCHARGED THE INITIAL ONUS THAT LIED ON THE PART O F THE APPELLANT BY PROVING THE IDENTITY OF THE PARTIES, NATURE OF S ERVICES RENDERED AND THE PAYMENTS MADE. 3. THE LEARNED ASSESSING OFFICER AS WELL AS THE DRP OUGHT TO HAVE APPRECIATED THAT WHEN THE APPELLANT HAD DISCHA RGED THE INITIAL ONUS THAT WAS EXPECTED OF HIM, NO DISALLOWA NCE OF THE PAYMENTS MADE TO THE SUB-CONTRACTORS CAN BE MADE WI THOUT RESORTING TO THE EXERCISE OF POWER U/S. 131 OF THE INCOME TAX ACT ON THE GROUND THAT THE APPELLANT HAD FAILED TO PROD UCE THE SUB- CONTRACTORS BEFORE THE ASSESSING OFFICER. 04. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEA RNED ASSESSING OFFICER AS WELL AS THE DRP OUGHT TO HAVE APPRECIATED THAT THERE CANNOT BE ANY INCOME FROM THE CONTRACTS WITHOUT INCURRING ANY EXPENDITURE FOR EXECUTION OF THE CONT RACTS AND THEREFORE, THE TOTAL DISALLOWANCE OF PAYMENTS MADE TO THE SUB- CONTRACTORS CANNOT BE MADE MERELY ON THE BASIS THAT EMPTY LETTER-HEADS OF THE SUB-CONTRACTORS ARE FOUND IN TH E PREMISES OF THE APPELLANT DURING THE COURSE OF SURVEY OPERATION S. 05. THE LEARNED ASSESSING OFFICER AS WELL AS THE LE ARNED DRP OUGHT TO HAVE APPRECIATED THAT THE EMPTY LETTER HEA DS OF SUB- CONTRACTORS FOUND IN THE PREMISES OF THE APPELLANT ARE NOT OF INCRIMINATING NATURE, NOR DOES IT INDICATE THAT EXP ENDITURE HAS BEEN INFLATED OR BOGUS EXPENDITURE HAS BEEN INCURRE D. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN INFRASTRUCTURE WORKS. FOR THE AY 2010-11, THE ASSES SEE FILED RETURN OF INCOME ON 25/09/10 WITH E-FILING DECLARING LOSS OF RS. 38,54,53,654/-, WHICH WAS PROCESSED U/S 143(1) ON 31/03/12 DETERMIN ED REFUND OF RS. 6,54,22,250/- (INCLUDING INTEREST U/S 244A OF RS. 7 0,09,524/-). THIS REFUND WAS ISSUED ON 18/05/12. THE ASSESSEE FILED R EPORT IN FORM 3CEB ON 12/10/10. THEREAFTER, THE CASE WAS PICKED U P UNDER CASS FOR SCRUTINY TO EXAMINE VARIOUS ASPECTS OF CONTRACT ORS BUSINESS. 3.1 DURING THE COURSE OF SURVEY U/S 133A AT THE PRE MISES OF THE ASSESSEE ON 08/02/2011, BLANK LETTER HEADS IN THE N AME OF VARIOUS CONCERNS APPARENTLY LOCATED AT DELHI WERE FOUND. UP ON QUESTIONING, 3 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD THE ASSESSEE COULD NOT PROVIDE PROPER ANSWERS. DURI NG THE PRESENT PROCEEDINGS, THE ASSESSEE WAS REQUESTED TO PRODUCE THE PARTIES FOR VERIFICATION. DESPITE REPEATED OPPORTUNITIES, THE A SSESSEE DID NOT PRODUCE THE PARTIES FOR VERIFICATION UNDER THE PLEA THAT THEY ARE NOT TRACEABLE. 3.2 INDEPENDENT ENQUIRIES WERE CONDUCTED TO ASCERT AIN THE CORRECT FACTS AND BANK ACCOUNT COPIES OF THE CONCERNS ALONG WITH OPENING FORMS HAVE BEEN OBTAINED. IT WAS FOUND THAT THE CON CERNS WERE VERY MUCH ACTIVE AND THE PERSONS BEHIND THE CONCERNS WER E AVAILABLE. IT WAS ALSO NOTICED THAT THE CONCERNS WERE NOT DOING A NY WORK AND ONLY PROVIDING ENTRIES AS NOTICED FROM THE BANK ACCOUNT ENTRIES WHICH WERE TYPICAL OF ACCOMMODATING CONCERNS (SHOWING RECEIPTS AND IMMEDIATE TRANSFERS WITHOUT ANY PURPOSE). IT WAS ALSO NOTICED THAT THOUGH THE SAID CONCERNS HAD MEAGER ASSET BASE AND NO WHEREWIT HAL, IT WAS SHOWN AS IF THEY WERE EXEC TING WORKS AND SUPPLYING MATERIAL IN REMOTE LOCATIONS FROM THEIR PLACE OF OPERATION. 3.3 DETAILS OF THE EXPENDITURE BOOKED IN THE NAME OF THE CONCERNS DURING THE YEAR IS AS FOLLOWS: S.NO. NAME OF THE PARTY AMOUNT IN RS. 1. SHEETAL ENTERPRISES 88133217 2. MARCO ENTERPRISES 49236294 3. RAJINDER CONSTRUCTION 16763636 4. RISHABH TRADE METALLIC PVT. LTD. 7207966 5. RAJ TRADERS 1800499 TOTAL 163141612 3.4 WHEN THE EVIDENCE WAS CONFRONTED TO THE ASSESS EE, ON 12-02- 14, THE ASSESSEE FURNISHED DETAILED SUBMISSIONS JUS TIFYING THE WORK SUPPOSEDLY DONE BY THE CONCERNS BUT IN THE END AGRE ED FOR THE DISALLOWANCE. THE LAST PARA OF THE SUBMISSIONS READ S AS FOLLOWS, 'TAKING THE ABOVE ASPECTS INTO CONSIDERATION IN A H OLISTIC MANNER, WE WISH TO SUBMIT THAT, THE WORKS EXECUTED THROUGH THE SUBCONTRACTORS AS LISTED IN PARA 10 ABOVE MAY BE DEALT BY THE DEPARTM ENT IN THE 4 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD MANNER, WHATEVER THE DEPARTMENT MAY THINK QUITE APP ROPRIATE AND REASONABLE, SINCE, WE ARE NOT IN A POSITION TO PROD UCE THE SUB- CONTRACTORS IN VIEW OF THE DETAILS AS EXPLAINED ABO VE. WE FURTHER SUBMITS THAT, EVEN IN THE EVENT OF DISALLOWANCE OF THE SAID SUBCONTRACTORS AMOUNT, WE WILL ABIDE BY THE DEPARTM ENT STAND FOR GIVING A QUIETUS TO PROLONGED LITIGATION AND TO BUY PEACE SUBJECT TO NOT TO LEVY THE PENALTY PROCEEDINGS'. 3.5 THE AO OBSERVED THAT THE ABOVE SUBMISSIONS CLEA RLY SHOW THAT THE ASSESSEE IS UNABLE TO JUSTIFY THE WORK/PURCHASE S FROM THE ALLEGED PARTIES AND ESCAPING ALL THROUGH BY STATING THAT TH E WORK WAS DONE LONG BACK AND IT IS NOT POSSIBLE TO TRACE THE PARTI ES. WHEN THE LATEST ADDRESS OF THE PARTIES IS PRODUCED AND WHEN THE DEP ARTMENT IS WILLING TO CALL THEM FOR VERIFICATION AT THEIR PLACE OF WO RK/RESIDENCE, THE ASSESSEE IS WILLING TO ACCEPT FOR THE DISALLOWANCE. THE PLEA OF THE ASSESSEE FOR NON-LEVY OF PENALTY WAS NOT ACCEPTED A ND THE AMOUNTS WERE PROPOSED TO BE DISALLOWED AND ADDED BACK BEING UNEXPLAINED PAYMENTS NOT ADMISSIBLE U/ S 37 IN THE DRAFT ASSESS MENT ORDER. 4. AGGRIEVED, THE ASSESSEE FILED ITS OBJECTIONS BEF ORE THE DRP. 5. BEFORE THE DRP, THE AR OF THE ASSESSEE SUBMITTED THAT DESPITE ASSESSEES INABILITY TO PRODUCE PARTIES, IT HAD FUR NISHED THE NAMES AND ADDRESSES OF THE PARTIES, THEIR PAN NUMBERS, DE TAILS OF BANK ACCOUNTS ETC., SO AS TO ENABLE THE AO TO CAUSE FURT HER ENQUIRIES. HE FURTHER SUBMITTED THAT THE APPELLANT HAD EXPRESSED THEIR INABILITY TO PRODUCE THEM BEFORE THE DEPARTMENT, SINCE PRESENTLY THEY ARE NOT DEALING WITH THEM. IN THE AOS OWN INVESTIGATION TH E FACTS THAT ARE REVEALED THE ENTITIES ARE NOT BOGUS AND THE BANK S TATEMENTS OF THE ENTITIES ESTABLISHED THE FACT THAT THEY WERE IN BUS INESS. ON VERIFICATION BY THE ASSESSING OFFICER, THE GENUINEN ESS OF THE TRANSACTIONS WERE ESTABLISHED AND HENCE REQUESTED T O DELETE THE ADDITION OF RS. 16,31,41,612/-. 5 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE DRP CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDE R: 8. THE SUM AND SUBSTANCE OF THE ARGUMENTS OF THE A PPELLANT IS THAT THE IDENTITY OF THE PARTIES AND THE PAYMENT S HAVE BEEN ESTABLISHED IN RESPECT OF EXPENDITURE RELATING TO S UB-CONTRACTOR PAYMENTS OF RS. 16,31,41,612/-, THEREFORE THE EXPEN DITURE HAS TO BE ALLOWED IN TOTO. MERE PAYMENT BY CHEQUE AND ESTA BLISHMENT OF IDENTITY OF THE PARTIES WHO RECEIVE THE PAYMENTS FROM THE APPELLANT DOES NOT PROVE GENUINENESS OF THE TRANSAC TIONS UNLESS AND UNTIL THE ASSESSEE ESTABLISHES WITH CREDIBLE EV IDENCES THE FACT OF RECEIVING SERVICES / GOODS FROM SUCH PARTIE S IN LIEU OF PAYMENTS MADE. ALTHOUGH IT IS VEHEMENTLY ARGUED BY THE APPELLANT THAT THE SERVICES HAVE BEEN RECEIVED FROM THESE PARTIES ON ACCOUNT OF SUB CONTRACT WORKS BUT UNABLE TO PROV E SUCH SERVICES WITH ANY EVIDENCE. IT IS THE ARGUMENT OF T HE APPELLANT THAT THOUGH PARTIES ARE NOT TRACEABLE BUT THE FACT REMAINS IS THAT THE SERVICES RENDERED BY SUCH PARTIES CAN BE PROVED WITH EVIDENCE ON HAND. IN THE ABSENCE OF SUCH ESTABLISHM ENT OF SERVICES / GOODS RECEIVED FROM THE PARTIES, THE PAY MENTS MADE TO SUCH PARTIES CANNOT BE ALLOWED AS EXPENDITURE FROM THE TOTAL INCOME OF THE ASSESSEE. ACCORDINGLY, THE DECISION O F THE ASSESSING OFFICER IS UPHELD AND THE OBJECTION OF TH E ASSESSEE IS REJECTED. 7. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 8. LD. AR OF THE ASSESSEE SUBMITTED THAT IN THE SIM ILAR SITUATION IN THE EARLIER AY 2008-09 ALSO ON SIMILAR SET OF FACTS , HONBLE ITAT IN ITA NO. 1814/HYD/2012 HELD AS BELOW: 7.13 THE INITIAL ONUS AND BURDEN OF PROOF WAS ON TH E ASSESSEE. IN THE INSTANT CASE, SUCH INITIAL ONUS AND BURDEN O F PROOF HAS BEEN DULY DISCHARGED BY THE ASSESSEE COMPANY BY PRO DUCING ITS AUDITED BOOKS OF ACCOUNTS, PAYMENT VOUCHERS-AND OTH ER DOCUMENTS GIVING FULL DETAILS AS TO THE NATURE OF T RANSACTIONS, WHICH NECESSITATED THE PAYMENT OF SUCH SUBCONTRACT WORKS AND THAT THIS WAS AN ACCEPTED NORM AND ESTABLISHED IN T HIS LINE OF BUSINESS AND THAT WITHOUT SUCH PAYMENT, IT WAS NOT POSSIBLE TO SURVIVE IN THIS LINE OF BUSINESS, AS WELL AS THE PR EVALENT TRADE PRACTICE IN THE LINE OF BUSINESS CARRIED ON BY THE ASSESSEE COMPANY ALL ALONG. HOWEVER, IN THIS CASE THE INFLAT ING OF EXPENDITURE BY THE ASSESSEE CANNOT BE RULED OUT. CO NSIDERING THE ENTIRE FACTS AND CIRCUMSTANCE OF THE CASE AND CHANCES OF INFLATING THE EXPENSES BY THE ASSESSEE, TO MEET THE ENDS OF JUSTICE, WE ARE INCLINED TO DISALLOW 15% OF THIS P AYMENT. 6 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD HE SUBMITTED THAT THE DISALLOWANCE WAS MADE @ 15% I N THE AY 2008- 09 AND THE DISALLOWANCE IS TOO HIGH, HE PRAYED THAT IT MAY BE REDUCED TO 5% OF PAYMENTS. 9. LD. DR, ON THE OTHER HAND, RELIED ON THE DRPS O RDER. 10. CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL FACTS ON RECORD. THE ASSESSEE MADE PAYMENT S TO CONTRACTORS WITHOUT PROVING THE GENUINENESS OF THE TRANSACTION/ CONTRACTORS, THE REASON BEING IT COULD NOT PRODUCE THE CONTRACTORS B EFORE ANY AUTHORITY. IN FURTHER INVESTIGATION, IT WAS PROVED BY THE DEPARTMENT THAT THESE CONTRACTORS ARE IN EXISTENCE. STILL, ASS ESSEE COULD NOT PRODUCE ANY OF THE CONTRACTORS BEFORE THE DEPARTMEN T. IN OUR VIEW, THE PAYMENTS WERE MADE TO CONTRACTORS, IT SHOWS THAT TH ERE EXISTS TRANSACTION, BUT, IN THE EARLIER AY THE COORDINATE BENCH OF THIS TRIBUNAL HAS ADJUDIATED THAT INFLATING OF EXPENDITU RE BY THE ASSESSEE CANNOT BE RULED OUT. THE CASE BEFORE US ALSO HAS SI MILAR FACTS AND CIRCUMSTANCES, THEREFORE, WE ARE ALSO INCLINED TO D ISALLOW 15% OF THE PAYMENT AS REASONABLE AND APPROPRIATE. 10.1 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ITA NO. 1487/HYD/2014 BY THE REVENUE 11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE DRP ERRED IN LAW IN HOLDING THAT THE TRANSA CTIONS ENTERED INTO BY THE ASSESSEE WITH FOREIGN JVS AND S ISTER CONCERNS DO NOT FALL UNDER THE DOMAIN OF 'INTERNATI ONAL TRANSACTIONS' U/S 92B EVEN WHEN THE MANAGEMENT AND CONTROL OF THE TRANSACTING PARTIES IS WITH IJM CORPORATION BET HARD, MALAYSIA. 2. THE DRP ERRED IN LAW IN IGNORING THE 3CEB REPOR T FILED BY THE ASSESSEE HIMSELF WHEREIN IT WAS ADMITTED THAT T HE TRANSACTIONS WITH THE JVS AND SISTER CONCERNS ARE ' INTERNATIONAL TRANSACTIONS' U/S 92B. 3 THE DRP OUGHT TO HAVE OBSERVED THAT IT HAS NOT BE EN CONTEMPLATED UNDER THE IT ACT THAT THE DISALLOWANCE S FROM THE EXPORT TURNOVER ALSO SHOULD BE REDUCED FROM THE TOT AL TURNOVER. 4 ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 7 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD 12. AS THE ASSESSEE COMPANY ENTERED INTO TRANSACTIO NS WITH THE AE WITHIN THE MEANING OF SECTION 92A AND 92B OF THE AC T, THE AO REFERRED THE MATTER TO THE TPO. 12.1 AFTER REJECTING THE TP ANALYSIS CONDUCTED BY T HE TAXPAYER, THE TPO HAS MADE AN INDEPENDENT ANALYSIS FOR SELECTION OF COMPARABLES UNDER TNMM AND SELECTED 13 COMPARABLES AS FINAL COM PARABLES AND THE ARITHMETIC MEAN PLI(OP/OC) WHICH COMES TO 15.25 % ON SALES AS AGAINST THE PLI OF THE TAXPAYER AT -6.76% WHICH IS OUTSIDE THE ARM'S LENGTH RANGE OF PLUS/MINUS FIVE PERCENT. OUT OF THE 13 COMPARABLE COMPANIES SELECTED BY THE TPO, THE TAXPAYER HAS OBJ ECTED, EVEN THOUGH THE SAME ARE ENGAGED IN SIMILAR ACTIVITIES. THE TPO PLACED RELIANCE ON VARIOUS CASE LAWS AND REJECTED THE OBJE CTIONS RAISED BY THE TAXPAYER, THEREBY COMPUTED AN AMOUNT OF RS.33,0 3,93,533/- HELD AS SHORTFALL BEING ADJUSTED U/S.92CA. THE AO VIDE H IS DRAFT ASSESSMENT ORDER DTD. 31/03/2014 COMPUTED THE TOTAL INCOME OF THE ASSESSEE AT NIL BY TAKING INTO ACCOUNT THE ADJUSTME NTS OF RS. 33,03,93,533/- MADE IN ACCORDANCE WITH THE TRANSFER PRICING ORDER PASSED U/S 92CA(3) BY THE TPO AND AFTER GIVING SET OFF TO THE CARRIED FORWARD LOSS OF AY 2009-10 OF RS. 10,95,69,588/-. 13. AGGRIEVED, THE ASSESSEE RAISED OBJECTIONS BEFOR E THE DRP. 14. BEFORE THE DRP, THE ASSESSEE SUBMITTED THAT TH E COMPANY M/S. IJM (INDIA) INFRASTRUCTURE LTD., IS A SUBSIDIA RY COMPANY OF IJMII (MAURITIUS) LTD., 99% OF THE EQUITY SHARES OF THE C OMPANY IS HELD BY IJMLL (MAURITIUS) LTD. IN TURN IJMII (MAURITIUS) LT D., IS A WHOLLY OWNED SUBSIDIARY OF IJM CORPORATION BERHAD, MALAYSIA. IJM CORPORATION BERHAD, MALAYSIA HAVE THEIR MCD PROJECT OFFICE IN D ELHI. DURING THE FINANCIAL YEAR 2005-06, IJM CORPORATION BERHAD, MAL AYSIA MCD PROJECT OFFICE HAD SECURED TWO CONTRACTS NAMELY I) MCD PROJECT FROM MUNICIPAL CORPORATION OF DELHI AND II) SAGAR C-4 PR OJECT FROM NATIONAL HIGHWAY AUTHORITY OF INDIA FOR UP-GRADATION OF EXIS TING ROAD. THE DELHI PROJECT OFFICE. IS CONSIDERED AS PERMANENT ESTABLIS HMENT. SUBSEQUENTLY, THE JOBS SECURED BY THE IJM CORPORATI ON BERHAD, 8 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD MALAYSIA, MCD PROJECT OFFICE DELHI WERE SUB-CONTRAC TED TO THE COMPANY AND ITS SUBSIDIARY COMPANY ON BACK TO BACK BASIS BY RETAINING VERY SMALL MARGIN OF LESS THAN 3.2%. THE IJM CORPORATION BERHAD DELHI PROJECT OFFICE IS FILING ITS INCOME TA X RETURN FOR ITS PROJECT OFFICE ACTIVITIES BEFORE THE INCOME TAX AUTHORITIES DELHI. THE COMPANY HAD SEVERAL JOINT VENTURES WITH OTHER BUSINESS ENTI TIES. ONE OF SUCH JOINT VENTURE ENTERED BY THE COMPANY IS WITH IJM CO RPORATION BERHAD, MALAYSIA BY NAME IJM-IJMIL JV. THE JOINT VENTURE HA S SECURED THREE CONTRACTS FROM DELHI METRO RAIL CORPORATION. THE CO NSTRUCTION WORK RELATING TO THE SAID CONTRACTS WERE SUB-CONTRACTED TO THE COMPANY. THE IJM-IJMII JV IS A RESIDENT BUSINESS ENTITY AND IS FILING THE RETURN OF INCOME IN INDIA. DURING THE FINANCIAL YEAR, THE APPELLANT HAS PURCHASED CERTAIN PLANT AND MACHINERY AND EQUIPMENT FROM M/S. ROAD BUILDER (M) SDN BHD PERMANENT ESTABLISHMENT (P E), AN ASSOCIATE ENTERPRISE, LOCATED AT 305, KANCHAN HOUSE , KARAMPURA COMMERCIAL COMPLEX, NEW DELHI. THE PE WAS REGISTERE D WITH THE RESERVE BANK OF INDIA AND REGISTRAR OF COMPANIES DE LHI AND HARYANA U/S 592 OF THE COMPANIES ACT, 1956. THE PE IS FILIN G THE RETURN BEFORE THE INDIAN INCOME TAX AUTHORITIES DELHI. FURTHER, T HE APPELLANT HAS PURCHASED CERTAIN EQUIPMENT FROM M/S. RBM PATI JOIN T VENTURE, AN ASSOCIATE ENTERPRISE SITUATED AT 305, KANCHAN HOUSE , KARAMPURA COMMERCIAL COMPLEX, NEW DELHI. THE JOINT VENTURE WA S INCORPORATED AT DELHI AND THE CONTROL AND MANAGEMENT OF THE AFFA IRS OF JV IS WHOLLY SITUATED AT DELHI OFFICE. THE JOINT VENTURE IS FILI NG THE INCOME TAX RETURNS BEFORE INDIAN INCOME TAX AUTHORITIES, DELHI . THE TRANSACTIONS DONE BY THE COMPANY WITH IJM CORPORATION BERHAD, MC D PROJECT OFFICE PE DELHI, IJM-IJMII JV DELHI ROAD BUILDER SO N BERHAD (RBM) A PERMANENT ESTABLISHMENT SITUATED AT DELHI AND RBM PATI JOINT VENTURE LOCATED AT DELHI HAD BEEN REPORTED AS INTER NATIONAL TRANSACTIONS IN FORM NO.3CEB. 14.1 IT WAS ALSO SUBMITTED THAT IN THE APPELLANT'S OWN CASE RELATING TO THE A.Y. 2008-09, THE HON'BLE INCOME TAX APPELLA TE TRIBUNAL HYDERABAD BENCH A HAS HELD THAT THE TRANSACTIONS BETWEEN THE 9 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD APPELLANT AND IJM BERHAD PERMANENT ESTABLISHMENT LO CATED AT DELHI AND TRANSACTIONS BETWEEN THE APPELLANT AND JOINT VE NTURES LOCATED IN INDIA DO NOT FALL UNDER SECTION 92B(2) OF THE INCOM E TAX ACT, 1961. THE DETAILS OF THE CASE LAW IS AS FOLLOWS: (A) DURING THE FINANCIAL YEAR RELATING TO THE A.Y. 2008-09, THE APPELLANT HAD WORK CONTRACT TRANSACTIONS WITH IJM C ORP MCD PROJECT OFFICE SITUATED AT DELHI AND IJM-IJMII JV LOCATED A T DELHI, IJM-NBCC- VRM JV LOCATED AT DELHI APART FROM REIMBURSEMENT OF EXPENSES RECEIVED AND PAID AND PURCHASE OF ASSETS FROM IJM-N BCC-VRM JV. (B) THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, HYDE RABAD BENCH 'A', HAS CATEGORICALLY HELD THAT, THE TRANSACTIONS BETWE EN THE APPELLANT AND IJM MCD PROJECT OFFICE DELI, IJM-IJMII JV, IJM- NBCC-VRM JV I.E. DO NOT FALL U/S. 92B(2) OF THE INCOME TAX ACT, 1961 . (C) CONSIDERING THE JURISDICTIONAL HON'BLE INCOME T AX APPELLATE TRIBUNAL HYDERABAD ORDER IN THE APPELLANT CASE, THE TRANSACTIONS BETWEEN THE APPELLANT AND IJM CORP BERHAND MCD PROJ ECT OFFICE PE SITUATED AT DELHI, RBM PROJECT OFFICE PE SITUATED A T DELHI, IJM-IJMII JV AND RBM PATI JV, ROAD BUILDER SDN BHD PE ARE NOT THE INTERNATIONAL TRANSACTIONS. HENCE, THE SAID TRANSAC TIONS BETWEEN THE APPELLANT AND MCD PROJECT OFFICE, RBM PROJECT OFFIC E AND JOINT VENTURES ARE NOT TO BE TREATED AS INTERNATIONAL TRA NSACTIONS. THE SAID TRANSACTIONS ARE TO BE ELIMINATED WHILE ARRIVING TH E ARMS LENGTH MEAN MARGIN FROM THE ARMS LENGTH PRICE OF SALES MADE TO THE ASSOCIATED ENTERPRISES. (D) THE DECISION OF THE TRIBUNAL IS BINDING ON THE LOWER AUTHORITIES AS THEY ARE SUB-ORDINATE TO TRIBUNAL. BY FOLLOWING PRU DENTIAL JUDICIAL DISCIPLINE, THE HON'BLE DISPUTE RESOLUTION PANEL HA S FOLLOWED THE HON'BLE INCOME TAX APPELLATE TRIBUNAL ORDER IN THE APPELLANT'S OWN CASE FOR THE A.Y. 2009-10 BY STATING THAT, AS PER T HE JUDICIAL DISCIPLINE, THE JURISDICTIONAL TRIBUNAL'S DECISION IS BINDING, THE PANEL 10 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD FOLLOWS THE ABOVE DECISION OF HON'BLE ITAT AND HOLD S THAT, THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE AES DO NO T FALL UNDER U/S. 92B(2) OF THE ACT AND ADDITION MADE TOWARDS TRANSFE R PRICING TRANSACTIONS ARE TO BE DELETED. 15. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE DRP NOTED THAT IN THE ASSESSEE-COMPANY'S OWN CASE RELAT ING TO ASST. YEAR 2008-09, HON'BLE INCOME TAX APPELLATE TRIBUNAL, HYD ERABAD BENCH 'A' IN ITS ORDER IN ITA NO.1814JHYDJ2012 DT.22-8-20 13 HAS CATEGORICALLY HELD THAT THE TRANSACTIONS BETWEEN TH E COMPANY AND ITS PE DO NOT FALL UNDER SECTION 92 B(2) OF THE ACT. TH E RELEVANT PORTION OF THE DECISION IS REPRODUCED HEREUNDER: 'THE PRIMARY CONDITION FOR ATTRACTING TRANSFER PRIC ING PROVISIONS IS THAT THERE SHOULD BE A TRANSACTION BETWEEN TWO OR M ORE AES IN TERMS OF SECTION 92A(1) AND 92A(2) OF THE ACT. AFTE R CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE AND THE FINDINGS OF THE DRP, WE ARE OF THE OPINION THAT THE TRANSACTIONS TAKEN PLACE ARE WITH DOMESTIC ENTERPRISES AND AT LE AST ONE AMONG THE AES ARE NOT NON-RESIDENT. BOTH THE ASSESS EE AND OTHER PARTIES WHICH WHOM THE ASSESSEE ENTERED INTO TRANSACTIONS ARE THE RESIDENTS FOR THE PURPOSE OF INDIAN TAXATIO N. ANY TRANSACTION BETWEEN THEM WILL NOT CONSTITUTE AN INT ERNATIONAL TRANSACTION. THE TRANSACTIONS BETWEEN THE ASSESSEE AND IJMII DO NOT FALL UNDER SECTION 92B(2) OF THE ACT AND THE SA ME IS THE POSITION IN THE CASE OF OTHER ENTITIES WITH WHOM TH E ASSESSEE CARRIED ON THE IMPUGNED TRANSACTIONS. IN OUR OPINIO N, THE ARGUMENT OF THE DEPARTMENT IS DEVOID OF MERIT. ACCO RDINGLY, WE AGREE WITH THE CONTENTION OF THE ASSESSEE'S COUNSEL ON LEGAL ISSUE AND ALLOW THE LEGAL GROUND RAISED BY THE ASSE SSEE. ' 15.1 FURTHER, THE DRPS NOTED THAT THE JURISDICTIONA L HON'BLE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ORDER IN ITS OWN C ASE RELATING TO THE ASST. YEAR 2008-09 AND ALSO IN THE CASE OF SWARNAND HRA IJMII INTEGRATED TOWNSHIP DEVELOPMENT CO. LTD., VS DCIT, THE TRANSACTIONS BETWEEN THE COMPANY AND IJM CORP BERHAD MCD PE SITU ATED AT DELHI, IJM-IJMII JV AND IJM-NBCC-VRM JV ARE NOT THE INTERNATIONAL TRANSACTIONS AND HENCE, THE SAID TRANSACTIONS BETWE EN THE COMPANY AND PE JOINT VENTURES ARE NOT TO BE TREATED AS INTE RNATIONAL TRANSACTIONS. SINCE AS PER THE JUDICIAL DISCIPLINE, THE JURISDICTIONAL 11 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD TRIBUNAL'S DECISION IS BINDING, THE DRP FOLLOWED TH E ABOVE DECISION OF HON'BLE ITAT AND HELD THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND THE AES DO NOT FALL U/S.92B(2) OF THE ACT AND T HE ADDITION MADE TOWARDS TRANSFER PRICING TRANSACTIONS IS DELETED. 16. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 17. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSED THE MATERIAL FACTS ON RECORD. AS THE ISSUE IN DISPU TE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE CITED SUPRA, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE DRP IN HOLDING THAT THE TRANSACTIONS B ETWEEN THE ASSESSEE AND THE AES DO NOT FALL U/S 92B(2) OF THE ACT AND THE ADDITION MADE TOWARDS TRANSFER PRICING TRANSACTIONS IS DELETED. 18. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 19. TO SUM UP, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 24 TH AUGUST, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 24 TH AUGUST, 2016 KV COPY TO:- 1) IJM (INDIA) INFRASTRUCTURE LTD., C/O PR DATLA & CO. CAS., 6-3-788/A/9, 1 ST FLOOR, DURGA NAGAR, AMEERPET, HYDERABAD - 016. 2) ADDL. CIT, RANGE 2, IT TOWERS, MASAB TANK, HYD . 3) DRP, HYDERABAD 4. DIT, INTERNATIONAL TAXATION, INCOME TAX TOWERS, 10-2-3, AC GUARDS, HYDERABAD 500 004. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 12 ITA NO. 1545 & 1487 /HYD/2014 IJM (INDIA) INFRASTRUCTURE LTD., HYD S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER
