HBL Power Systems Limited, Hyderabad V. Dy. Commissioner of Income Tax, Circle-2(2), Hyderabad

ITA 2177/Hyd/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2588 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2013-2014
• Appeal Filed On: 19-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARAYANA MURTHY NAIK
• Assessee Lawyers: SRINIVAS MADDURY
• Keywords: Transfer pricing
• Section: 92B; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A. NO. 2177/HYD/2017 ASSESSMENT YEAR: 2013-14 M/S.HBL POWER SYSTEMS LIMITED, HYDERABAD [PAN: AAACH8421K] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI SRINIVAS MADDURY, AR FOR REVENUE : SHRI NARAYANA MURTHY NAIK, DR DATE OF HEARING : 12-05-2021 DATE OF PRONOUNCEMENT : 23-06-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2013-14 ARISES FROM TH E DCIT, CIRCLE-2(2), HYDERABADS ASSESSMENT DATED 27-1 0-2017 FRAMED IN FURTHERANCE TO THE DISPUTE RESOLUTION PANEL (D RP)-1, BENGALURUS DIRECTIONS DT.12-09-2017 IN F.NO. 341/DRP - 1/BNG/2016-17 INVOLVING PROCEEDINGS U/S.143(3) R.W.S.144C(5) R.W.S.144C(13) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. ITA NO. 2177/HYD/2017 :- 2 -: 2. WE NOTICE AT THE OUTSET THAT THE ASSESSEES FORMER SUBSTANTIVE GRIEVANCE THAT THE LEARNER LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN MAKING ARMS LENGTH PRIC E (ALP) ADJUSTMENT OF RS.1,03,63,734/- PERTAINING TO INTERNATIONA L TRANSACTIONS WITH ITS OVERSEAS ASSOCIATED ENTERPRISES (A ES), DOES NOT REQUIRE TO DELVE MUCH DEEPER ON FACTS. IT IS AN ADMITTED FACT THAT THE LEARNED LOWER AUTHORITIES HAVE COM PUTED INTEREST ON THE ALLEGED RECEIVABLES QUA OVERSEAS AES M/S.GULF BATTERY CO. LTD., HBL AMERICA INC. AND HBL GERMANY, GM BH @6.5% INVOLVING CORRESPONDING SUMS OF RS.83,17,047/ -, RS.3,800/- AND RS.20,42,887/-; RESPECTIVELY. 3. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE TH AT THE TRANSFER PRICING OFFICERS (TPOS) ORDER DT.26-1 0-2016 HAD COMPUTED THE IMPUGNED INTEREST @14.45% GOING BY THE SBI S DOMESTIC TERM DEPOSITS RATES ONLY WHICH STOOD RESTRICTED IN THE DRPS DIRECTIONS TO THE EXTENT OF 6.5% IN ISSUE. THIS I S WHAT LEAVES THE ASSESSEE AGGRIEVED. 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE RIV AL CONTENTIONS. IT EMERGES FROM A PERUSAL OF THE TPOS O RDER THAT HE HAS NEITHER FINALISED THE CORRESPONDING COMPARABL ES IN THE VERY SEGMENT FORMING A MANDATORY CONDITION FOR MAKING ANY ALP ADJUSTMENT UNDER CHAPTER-X OF THE ACT NOR HAS HE TAKE N INTO CONSIDERATION YET ANOTHER EQUALLY IMPORTANT ASPECT THA T THE DOMESTIC BANKING RATES DO NOT APPLY CASE OF INTERNATI ONAL TRANSACTIONS WHICH ARE TO BE BENCHMARKED AS PER LIBOR RATES IN INTERNATIONAL CURRENCY ONLY. THE REVENUES C ASE BEFORE US IS THAT THE IMPUGNED BANKING RATE HAS BEEN RIGHTLY AD OPTED SINCE THE INTEREST ON RECEIVABLES AS PER SECTION 92B ITA NO. 2177/HYD/2017 :- 3 -: EXPLANATION-C INVOLVES ADOPTION OF SIMILAR CUP METHOD ONLY. WE FIND NO MERIT IN THE INSTANT ARGUMENT SINCE THE FOREGO ING LATTER ASPECT HAS ALSO NOWHERE BEEN CONSIDERED IN EITH ER OF THE LOWER AUTHORITIES ORDERS. WE ACCORDINGLY DELETE THE IMPUGNED ALP ADJUSTMENT FOR THIS PRECISE REASON ALONE. 5. NEXT COMES SECTION 14A R.W.S.115JB MAT COMPUTATION INVOLVING SUM OF RS.6,76,51,670/-. SUFFICE TO SAY, TH IS TRIBUNALS SPECIAL BENCHS DECISION IN ACIT VS. VIRE ET INVESTMENT P. LTD., (2017) [165 ITD 27] (DELHI) (SB) H AS ALREADY SETTLED THE ISSUE THAT SUCH A DISALLOWANCE DOES NOT FORM PART OF BOOK PROFITS COMPUTED U/S.115JB OF THE ACT. ORDERED ACCORDINGLY. 6. THIS ASSESSEES APPEAL IS ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 23-06-2021 TNMM ITA NO. 2177/HYD/2017 :- 4 -: COPY TO : 1.M/S.HBL POWER SYSTEMS LIMITED, C/O.PRASAD & PRASA D CHARTERED ACCOUNTANTS, FLAT NO.301, MJ TOWERS, 8-2- 698, ROAD NO.12, BANJARA HILLS, HYDERABAD. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2( 2), HYDERABAD. 3. DISPUTE RESOLUTION PANEL (DRP), BENGALURU. 4. DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5. ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICI NG), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.