ASST CIT (LTU) 2, MUMBAI V. EVEREST KANTO CYLINDER LTD, MUMBAI

ITA 1655/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3617 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 22-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M KAPOOR
• Keywords: Transfer pricing
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 1655 / MUM . /2016 ( ASSESSMENT YEAR : 20 11 12 ) ASSTT. COMMISSIONER OF INCOME TAX (LTU) 2, MUMBAI . APPELLANT V/S EVEREST KANTO CYLINDER LTD. 2014, RAHEJA CENTRE FREE PRESS JOURNAL MARG NARIMAN POINT, MUMBAI 400 021 PAN AAAECE0836F . RESPONDENT REVENUE BY : SHRI ANAND MOHAN ASSESSEE BY : SHRI S.M. KAPOOR DATE OF HEARING 29 . 1 1 .201 8 DATE OF ORDER 22.02.2019 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE ASSESSMENT ORDER DATED 28 TH JANUARY 2016, PASSED UNDER SECTION 143(3) R/W 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 2011 12 IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 1 (DRP), MUMBAI. 2 . IN GROUND NO.1, THE REVENUE HAS CHALLENGED THE DECISION OF THE 2 EVEREST KANTO CYLINDER LTD. DRP IN DIRECTING THE ASSESSING OFFICER TO CHARGE INTEREST ON THE LOAN ADVANCED T O THE ASSOCIATED ENTERPRISES (A E) IN U.A.E. AND CHINA BY APPLYING LIBOR RATE. 3 . BRIEF FACTS ARE, THE ASSESSEE AN INDIAN COMPANY IS A MANUFACTURER OF HIGH PRESSURE SEAMLESS GAS CYLINDER. DURING THE PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER IT WAS NOTICED BY HIM THAT THE ASSE SSEE HAS ADVANCED LOAN TO ITS A ES IN U.A.E. AND CHINA. FROM THE DETAILS FURNISHED, HE FOUND THAT THE INTEREST CHARGED BY THE ASSESSEE ON THE LOAN A DVANCED TO THE AE IN U.A.E IS AT THE AVERAGE RATE OF 1.33% BY APPLYING THE RATE OF LIBOR PLUS 1%. SIMILARLY, FOR THE LOAN ADVANCED TO THE A.E. IN CHINA, THE ASSESSEE HAS CHARGED INTEREST @ 5%. THE TRANSFER PRICING OFFICER AFTER EXAMINING THE CLAIM OF THE ASSESSEE WAS OF THE VIEW THAT THE INTEREST CHARGED BY THE ASSESSEE ON THE L OANS ADVANCED TO THE AES IN U.A.E. AND CHINA ARE NOT AT ARM'S LENGTH. ACCORDINGLY, HE DETERMINED THE RATE OF INTEREST ON THE LOAN ADVANCED TO THE A.E. IN U.A.E. AT 10.25% BY RELYING UPON HIS OWN ORDER FOR ASSESSMENT YEAR 2009 10. AS REGA RDS THE LOANS ADVAN CED TO THE AE IN CHINA HE APPLIED THE INTEREST RATE OF 10.25% AS WELL. AS A RESULT, AN AGGREGATE ADJUSTMENT OF ` 3,28,29,992, WAS PROPOSED BY THE TRANSFER PRICING OFFICER. IN TERMS OF THE ORDER PASSED BY THE TRANSFER PRICING OFFICER THE ASSESSING OFFICER MADE ADDITION OF ` 3,28,29,992, TO THE INCOME OF THE ASSESSEE IN THE DRAFT ASSESSMENT 3 EVEREST KANTO CYLINDER LTD. ORDER. AGAINST THE DRAFT AS SESSMENT ORDER SO PASSED, THE ASSESSEE RAISED OBJECTIONS BEFORE THE DRP. 4 . THE DRP AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD DIRECTED THE ASSESSING OFFICER TO CHARGE INTERES T ON THE LOAN ADVANCED TO THE AE IN U.A.E. @ 6 MONTHS LIBOR PLUS 350 BASIS POINTS AND IN RESPECT OF THE AE IN CHINA @ 6 MONTHS LIBOR PLUS 500 BASIS POINTS. BEING AGGRIEVED WITH THE AFORESAID DECISION OF THE DRP, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5 . AT THE OUTSET, THE LEARNE D AUTHORISED REPRESENTATIVE SUBMITTED , THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE EARLIER YEARS WHEREIN THE TRIBUNAL HAS ACCEPTED ASSESSEES CLAIM OF APPLYING LIBOR RATE. THUS, HE SUBMITTED , THERE IS NO NEED TO INTERFERE WITH THE DECISION OF THE DRP. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE AGREED THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE EARLIER ASSESSMENT YEAR S . 7 . HAVING CONSIDERED RIVAL SUBMISSIONS, WE HAVE NOTICED THAT WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 09, 2009 10 AND 2010 11, THE TRIBUNAL HAS DIRECTED THE ASSESSING OFFICER TO COMPUTE INTEREST IN RESPECT OF LOAN ADVANCE D TO 4 EVEREST KANTO CYLINDER LTD. THE A ES IN U.A.E. BY APPLYING THE RATE OF LIBOR PLUS BA SIS POINTS. IN RESPECT OF THE AE IN CHINA , THE INTEREST RATE UPHELD BY THE TRIBUNAL IS @ 7%. IN VIEW OF THE AFORESAID DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1131/MUM./2015, DAT ED 7 TH OCTOBER 2016, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF THE DRP ON THE ISSUE. GROUND RAISED IS DISMISSED. 8 . IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE DECISION OF THE DRP IN RESTRICTING THE COMMISSION ON CORPORATE GUARANTEES GIV EN TO THE BANKS ON BEHALF OF THE A ES LOCATED IN U.A.E., CHINA AND U.S.A. @ 1%, 1.25% AND 1.75% RESPECTIVELY. 9 . NOTABLY, THE TRANSFER PRICING OFFICER NOTICING THAT THE ASSESSEE HAS PROVIDED CORPORA TE GUARANTEE ON BEHALF OF THE AE PROCEEDED TO DETERMINE THE A RM'S LENGTH PRICE OF GUARANTEE COMMISSION AND PROPOSED AN ADJUSTMENT OF ` 10,44,81,000. WHILE CONSIDERING THE OBJECTIONS OF THE ASSESSEE, THE DRP DIRECTED THE ASSESSING OFFICER TO CHARGE GUA RANTEE COMMISSION @ 1% FOR THE AE IN U.A.E., 1.25% FOR THE AE IN C HINA AND 1.75% FOR THE AE IN U.S.A. IT IS SEEN FROM THE FACTS O N RECORD, WHILE DECIDING IDENTICAL ISSUE ARISING IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 09, 2009 10 AND 2010 11, THE TRIBUNAL HAS RESTRICTED THE GUARANTEE COMMISSION ON THE CORPORA TE GUARANTEES PROVIDED TO THE AES @ 0.5%. IN FACT, THE AFORESAID DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2007 08 WAS UPHELD BY THE HON'BLE 5 EVEREST KANTO CYLINDER LTD. JURISDICTIONAL HIGH COURT. KEEPING IN VIEW THE AFORESAID FACTS, THE DIRECTIONS OF THE DRP WITH REGARD TO THE GUAR ANTEE COMMISSION TO BE CHARGED ON THE CORPORATE GUARANTEE S PROVIDED TO THE A ES IS FOUND TO BE REASONABLE, HENCE, NOT REQUIRED TO BE INTERFERED WITH. GROUND RAISED IS DISMISSED. 10 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.02. 2 0 19 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 22.02.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI