GENERAL COMPUTER SERVICES INTERNATIONAL, MUMBAI V. PR CIT 31, MUMBAI

ITA 2615/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0991 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 27-04-2018
• Court: TRIBUNAL

Judgement Text

P A G E | 1 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, M UMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI RAVISH SOOD, JM ITA NO S. 2615 /MUM/201 8 ( / ASSESSMENT YEAR S : 20 13 - 14 ) M/S GENERAL COMPUTER SERVICES INTERNATIONAL, 1 - DILARAM ESTATE, S.V. ROAD, GOREGOAN (WEST), MUMBAI - 400062. / VS. PRINCIPAL COMMISSIONER OF INCOME TAX - 31, M UMBAI - 4000 51 . ./ ./ PAN NO. AAGFG5158B ( / ASSESSEE ) : ( / REVENUE) / ASSESSEE BY : SHRI ANANT N. PAI , A .R / REVENUE BY : SHRI RAJESH DAINOR , D.R. / DATE OF HEARING : 06 . 11 .201 8 / DATE OF PRONOUNCEMENT : 2 8 .11 .2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE PR INCIPAL COMMISSIONER OF INCOME TAX - 31 (FOR SHORT PRINCIPAL CIT ) , MUMBAI, DATED 27.03.2018 UNDER SEC. 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT) . THE ASSESSEE ASSAILING THE ORDER PASSED BY THE PRINCIPAL CIT HA S RAISED BEFORE US THE F OLLOWING GROUNDS OF APPEAL: - P A G E | 2 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 1 ON FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED PRINCIPAL COMMISSIONER ERRED IN REVISING THE APPELLANTS ASSESSMENT ORDER U/S. 263 OF THE INCOME TAX ACT, 1961, WHEN THE ASSESSMENT ORDER PASSED WAS NOT ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S 263 MAY THEREFORE PLEASE BE QUASHED IN APPEAL. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED PRINCIPAL COMMISSIONER U/S 263 IS ALSO NOT MAINTAINABLE AS THE TERMS ON WHIC H HIS ORDER WAS FINALLY PASSED WERE DIFFERENT FROM THE CHARGES FRAMED BY HIM FOR ASSUMING JURISDICTION U/S 263. THE APPELLANT PRAYS THAT THE ORDER PASSED U/S 263 MAY THEREFORE PLEASE BE QUASHED IN APPEAL 3 . THE APPELLANT RESERVES THE RIGHT TO ADD TO, AL TER OR DELETE ANY OF THE ABOVE GROUNDS WITH PERMISSION OF HONBLE TRIBUNAL . 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF PROVIDING INFRASTRUCTURAL FACILITIES TO EDUCATIONAL INSTITUTIONS HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 201 3 - 1 4 ON 30.09.2013, DECLARING TOTAL INCOME AT RS. 31,49,310 / - . ORIGINAL ASSESSMENT WAS FRAMED BY THE A.O VIDE HIS ORDER PASSED UNDER SEC. 143(3) OF THE ACT, DATED 29.03.2016 AND THE INCOME OF THE ASSESSEE WAS ASSESSED AT RS. 1,45,97,460/ - . 3. SUBSEQUENTLY, THE PRINCIPAL CIT IN EXERCISE OF HIS POWERS UNDER SEC. 263 CALLED FOR THE RECORDS OF THE ASSESSEE FIRM . ON A PERUSAL OF THE RECORDS IT WAS OBSERVED BY THE PRINCIPAL CIT THAT THE ASSESSEE FIRM HAD ADVANCED LOANS TO ITS OVERSEAS WHOLLY OWNED SUBSIDIARY VIZ. M/S UNIVERSAL MIDDLE EAST FZC OF RS. 8,00,52,640/ - . DURING THE YEAR THE WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC HAD REPAID AN AMOUNT OF RS. 6,35,70,983/ - TO THE ASSESSEE FIRM. I T WAS OBSERVED BY THE PRINCIPAL CIT THAT THE CLOSING BALANCE OF THE AMOUNT ADVANCED BY THE ASSESSEE FIRM TO ITS WHOLLY OWNED SUBSIDIARY STOOD REFLECTED AT RS. 8,63,32,167/ - (DR.) AS ON 31.03.2013. THE ASSESSEE HAD STATED TO HAVE CHARGED INTEREST OF RS. 1,09,71,766/ - @ 15% PER P A G E | 3 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 ANNUM ON THE AFORESAID LOAN ADVANCED TO ITS WHOLLY OWNED SUBSIDIARY. IT WAS NOTICED BY THE PRINCIPAL CIT THAT OUT OF THE TOTAL ADVANCES OF RS. 19.9 CRORE S WHICH WERE GIVEN BY THE ASSESSEE AND WERE OUTSTANDIN G AS ON 31.03.2013 , INTEREST WAS CHARGED ONLY ON THE ADVANCE GIVEN TO THE AFORESAID WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC. ON THE BALANCE AMOUNT OF ADVANCES OF RS. 11.3 CRORES NO INTEREST WAS CHARGED BY THE ASSESSEE . THE PRINCIPAL CIT NOTICED THAT THE A.O WHILE FRAMING THE ASSESSMENT UNDER SEC. 143(3), DATED 29.03.2016 HAD DISALLOWED INTEREST UNDER SEC. 36(1)(III) TO THE TUNE OF RS. 1,11,75,671/ - TO THE EXTENT THE INTEREST BEARING FUNDS WERE DIVERTED FOR ADVANCING OF INTEREST FREE LOAN S TO ITS SISTER CONCERNS . T HE PRINCIPAL CIT HELD A CONVICTION THAT AS THE AFORESAID ADVANCING OF LOAN S TO SISTER CONCERN S WAS AN INTERNATIONAL TRANSACTION, THEREFORE, AS PER THE MANDATE OF LAW THE A.O BEFORE MAKING THE AFORESAID DISALLOWANCE OUGHT TO HAVE REFERRED THE MATTER TO THE TRANSFER PRICING OFFICER (FOR SHORT TPO) FOR DETERMINING OF THE ARMS LENGTH PRICE UNDER SEC. 92CA OF THE ACT. ON THE BASIS OF HIS AFORESAID DELIBERATIONS THE PRINCI PAL CIT BEING OF THE VIEW THAT THE ORDER PASSED BY THE A.O UNDER SEC. 143(3), DATED 29.03.2016 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN VIEW OF CLAUSE (A) OF THE EXPLANATION 1 OF SEC. 263 OF THE ACT , ISSUED A SHOW CAUSE NOTICE (FOR SHORT SCN) , DATED 22.03.2018 AND CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME MAY NOT BE REVISED. 4. THE ASSESSEE IN HIS REPLY OBJECTED TO THE ASSUMPTION OF JURISDICTION BY THE PRINCIPAL CIT UNDER SEC. 263 OF THE ACT . IT WAS THE CONTENTION O F THE ASSESSEE THAT AS THE A.O HAD ARRIVED AT A POSSIBLE AND A PLAUSIBLE VIEW WHILE FRAMING THE ASSESSMENT, THUS THERE WAS NO OCCASION TO EXERCISE THE POWER OF REVISION UNDER SEC. 263 OF THE ACT. FURTHER, THE ASSESSEE TRIED TO IMPRESS UPON THE REVISIONAL AUTHORITY P A G E | 4 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 THAT AS THE INSTRUCTION NO. 03/201 6 , DATED 10.03.2016 ISSUED BY THE CBDT WAS APPLICABLE RETROSPECTIVELY, HENCE A REFERENCE TO THE TPO UNDER SEC. 92CA WAS NOT REQUIRED IN ITS CASE. HOWEVER, THE PRI NCIPAL CIT AFTER DELIBERATING AT LENGTH ON THE CONTENTION S ADVANCED BY THE ASSESSEE WAS NOT PERSUADED TO SUBSCRIBE TO THE SAME. ON A PERUSAL OF THE TP STUDY REPORT IT WAS NOTICED BY THE PRINCIPAL CIT THAT THE AMOUNT OF RS. 1,09,71,766 / - CLAIMED BY THE ASSESSEE TO HAVE BEEN CHARGED TOWARDS INTEREST @ 15% ON THE AMOUNT ADVANCED TO ITS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC NOT ONLY PERTAINED TO THE INTEREST PORTION ON THE SAID ADVANCE , BUT ALSO INCLUDED GUARANTEE FEE A ND RISK MANAGEMENT FEES. THE PRINCIPAL CIT OBSERVED THAT FOR BENCHMARKING PURPOSES THE ASSESSEE HAD CLUBBED ALL THESE THREE TRANSACTIONS AND HAD ADOPTED THE CUP METHOD. IT WAS OBSERVED BY HIM THAT THE ASSESSEE HAD COMPARED INTEREST CHARGED ON BUNCH OF ITS TRANSACTIONS WITH THE INTEREST CHARGED ON THE ADVANCES BY INDIAN BANKS. THE PRINCIPAL CIT WAS OF THE VIEW THAT AS CUP METHOD REQUIRE D ABSOLUTE SIMILARITY IN THE CONTROLLED AND UNCONTROLLED TRANSACTIONS , THEREFORE, THE METHOD APPLIED BY THE ASSESSEE ITSELF WAS NOT CORRECT . FURTHER, IT WAS OBSERVED BY HIM THAT AS ALL THE THREE TRANSACTIONS VIZ (I) INTEREST ON ADVANCES; (II) GUARANTEE FEE; AND (III) RISK MANAGEMENT FEES WERE INDEPENDENT TRANSACTIONS, HENCE THE ASSESSEE WAS REQUIRED TO BENCHMARK EACH OF THE TRA NSACTION SEPARATELY. THE PRINCIPAL CIT O N THE BASIS OF HIS AFORESAID DELIBERATIONS OBSERVED THAT AS THE ASPECT AS REGARDS BENCHMARKING OF THE TRANSACTIONS UNDER CONSIDERATION WERE BEYOND THE PURVIEW OF THE A.O TO EXAMINE, THUS IT WAS OBLIGATORY ON HIS PART TO HAVE REFERRED THE MATTER TO THE TPO. ON THE AFORESAID PREMISES THE PRINCIPAL CIT CHARACTERIZ ED THE ORDER PASSED BY THE A.O AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND SET ASIDE THE SAME TO HIS FILE WITH A DIRECTION TO RE - DO THE ASSE SSMENT AFTER MAKING A REFERENCE TO THE TPO. FURTHER, THE A.O WAS P A G E | 5 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 ALSO DIRECTED TO EXAMINE THE CLAIM OF THE ASSESSEE THAT THE LOANS OF RS. 11.3 CRORES PERTAINED TO DOMESTIC PARTIES AND WERE NOT IN THE NATURE OF SPECIFIED DOMESTIC TRANSACTIONS AS DEFINED IN SEC. 92BA OF THE ACT. THE A.O WAS FURTHER ADVISED TO REFER THE MATTER TO THE TPO IN ORDER TO FACILITATE ASCERTAINING THE CORRECTNESS OF THE AFORESAID CLAIM OF THE ASSESSEE. 5. AGGRIEVED, THE ASSESSEE HAS CARRIED THE ORDER PASSED BY THE PRINCIPAL CIT UNDER SEC. 263 OF THE ACT IN APPEAL BEFORE US. THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE AT THE VERY OUTSET OF THE HEARING OF THE APPEAL CHALLENGED THE VERY ASSUMPTION OF JURISDICTION BY THE PRINCIPAL CIT IN EXERCISE OF POWERS VESTED WITH HIM UNDER SEC. 263 OF THE ACT. THE LD. A.R SUBMITTED THAT JURISDICTION UNDER SEC. 263 COULD ONLY BE VALIDLY INVOKED WHERE THE ORDER PASSED BY THE A.O IS FOUND TO BE BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS SUBMITTED BY THE LD. A.R THAT AS THE A.O WHILE FRAMING THE ASSESSMENT HAD TAKEN A POSSIBLE AND A PLAUSIBLE VIEW AND DISALLOWED INTEREST UNDER SEC. 36(1)(III) OF RS. 1,11,75,671/ - , THEREFORE, THE PRINCIPAL CIT COULD NOT HAVE INVOKED HIS REVISIONAL JURISDICTION FOR THE PURPOSE OF SUBSTITUTING HIS VIEW AS AGAINST THAT OF THE A.O . IN SUPPORT OF HIS CONTENTION THE LD. A.R RELIED ON CERTAIN JUDICIAL PRONOUNCEMENTS VIZ. (I) CIT VS. GABRIEL INDIAN LTD. (1993) 203 ITR 108 (BOM); (II) RAZA TEXTIL ES LTD. VS. ITO (1973) 87 ITR 539 (SC); (III) ARUN KUMAR VS. UNION OF INDIA (2006) 286 ITR 89 (SC); AND (IV) SMT. SAROJ SUNIL KOTHARI VS. CIT (ITA NO. 2807/MUM/2014, DATED 04.11.2016) . THE LD. A.R FURTHER AVERRED THAT AS THE AMOUNT AGGREGATING TO RS. 11.3 CRORES ADVANCED BY THE ASSESSEE TO ITS SISTER CONCERNS WERE IN THE NATURE OF DOMESTIC TRANSACTIONS, THEREFORE, THE A.O HAD DISALLOWED INTEREST UNDER SEC. 36(1)(III) TO THE TUNE OF RS. 1,11,75,671/ - . IT WAS THE CONTENTION OF THE P A G E | 6 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 LD. A.R THAT THE REVISIONAL AUTHORITY HAD WRONGLY ASSUMED JURISDICTION BY MISCONCEIVING THE AFORESAID DOMESTIC TRANSACTIONS AS INTERNATIONAL TRANSACTIONS. THE LD. A.R FURTHER DRAWING OUR ATTENTION TOWARDS THE SUBMISSIONS MADE BEFORE THE REVISIONAL AUTHORIT Y SUBMITTED THAT IN THE BACKDROP OF THE FACTS OF THE CASE THE A.O WAS NOT OBLIGATED TO MAKE A REFERENCE TO THE TPO UNDER SEC. 92CA OF THE ACT. IN SUM AND SUBSTANCE, IT WAS THE CONTENTION OF THE LD. A.R THAT THE PRINCIPAL CIT HAD WRONGLY ASSUMED JURISDICTIO N AND REVISED THE ORDER PASSED BY THE A.O UNDER SEC. 143(3), DATED 29.03.2016. 6. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) SUBMITTED THAT THE PRINCIPAL CIT HAD RIGHTLY EXERCISED HIS JURISDICTION AND FINDING THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE HAD VALIDLY REVISED THE SAME . IT WAS AVERRED BY THE LD. D.R THAT THE 15% INTEREST CLAIMED BY THE ASSESSEE TO HAVE BEEN CHARGED ON THE AMOUNT ADVANCED TO I TS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC NOT ONLY PERTAINED TO INTEREST PORTION ON THE AMOUNT ADVANCED, BUT ALSO INCLUDED GUARANT EE FEE AND RISK MANAGEMENT FEES . THE LD. D.R SUBMITTED THAT AS THE ASSESSEE HAD FAILED TO BENCHMARK THE AFORESAID THREE TRANSACTIONS SEPARATELY AND HAD RATHER COMPARED INTEREST CHARGED ON BUNCH OF ITS TRANSACTIONS WITH THE INTEREST CHARGED ON THE ADVANCES BY INDIAN BANKS , THEREFORE, THE PRINCIPAL CIT HAD RIGHTLY OB SERVED THAT THE CUP METHOD APPLIED BY THE ASSESSEE WAS NOT FOUND TO BE CORRECT . IT WAS SUBMITTED BY THE LD. D .R THAT NO INFIRMITY DID EMERGE FROM THE ORDER PASSED BY THE PRINCIPAL CIT UNDER SEC. 263 OF THE ACT. 7 . WE HAVE HEARD THE AUTHORISED REPRESENTATI VES FOR BOTH THE PARTIES, PERUSED THE ORDER S OF THE LOWER AUTHORIT IES AND THE MATERIAL P A G E | 7 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 AVAILABLE ON RECORD. WE FIND FROM A PERUSAL OF THE SCN THAT THE PRINCIPAL CIT HAD INVOKED HIS REVISIONAL JURISDICTION ON THE GROUND THAT THOUGH THE A.O IN RESPECT OF T HE INTEREST FREE FUNDS OF RS. 11.3 CRORES ADVANCED BY THE ASSESSEE FIRM TO ITS SISTER CONCERNS HAD DISALLOWED THE CORRELATING INTEREST OF RS. 1,11,75,671/ - UNDER SEC. 36(1)(III ) , HOWEVER, AS THE SAME WERE AN INTERNATIONAL TRANSACTION, THEREFORE, BEFORE MAKING SUCH A DISALLOWANCE IT WAS OBLIGATORY ON HIS PART TO HAVE MADE A REFERENCE TO THE TPO FOR COMPUTATION OF ARMS LENGTH PRICE UNDER SEC. 92CA OF THE ACT. IN SUM AND SUBSTANCE, THE PRINCIPAL CIT HAD INVOKED HIS REVISIONAL JURISDICTION FOR THE REASON THA T THE A.O WHILE FRAMING THE ASSESSMENT HAD FAILED IN HIS STATUTORY OBLIGATION OF MAKING A REFERENCE TO THE TPO UNDER SEC. 92CA FOR DETERMINATION OF THE ARMS LENGTH PRICE OF THE INTEREST FREE ADVANCE S OF RS. 11.3 CRORES THAT WERE GIVEN BY THE ASSESSEE TO IT S SISTER CONCERNS . HOWEVER, THE PRINCIPAL CIT IN HIS ORDER PASSED UNDER SEC. 263 HAD SET ASIDE THE ASSESSMENT BY HOLDING THE SAME AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WITH DIRECTIONS TO THE A.O ON TWO GROUNDS VIZ (I) THAT FOR THE PURPOSE OF BENCHMARKING OF THE THREE TRANSACTIONS I.E. INTEREST CHARGED , GUARANTEE COMMISSION AND RISK MANAGEMENT FEES IN RESPECT OF AMOUNT ADVANCED BY THE ASSESSEE TO ITS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC , THE MATTER BE REFERRED TO THE TPO ; (II) TO VERIFY THE VERACITY OF THE CLAIM OF THE ASSESSEE FIRM THAT THE LOANS OF RS. 11.3 CRORES WERE ADVANCED TO THE DOMESTIC PARTIES AND THE SAME WERE NOT SPECIFIED TRANSACTIONS AS DEFINED IN SEC. 92BA OF THE ACT. 8 . WE FIND THAT THE ISSUE AS REGARDS BENCHMARKING OF THE INTERNATIONAL TRANSACTION OF ADVANCING OF INTEREST BEARING AMOUNT BY THE ASSESSEE TO ITS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC DID NOT FORM THE BASIS FOR WHICH THE PRINCIPAL CIT HAD VIDE P A G E | 8 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 HIS SC N DATED 22.03.2018 SOUGHT TO REVISE THE ORDER PASSED BY THE A.O UNDER SEC. 143(3), DATED 29.03.2016. HOWEVER, THE PRINCIPAL CIT IN HIS ORDER PASSED UNDER SEC. 263 OBSERVING THAT AS THE BENCHMARKING OF THE VARIOUS TRANSACTIONS VIZ (I) INTEREST CHARGED; (II) GUARANTEE FEE; AND (III) RISK MANAGEMENT FEES OF THE ASSESSEE WITH ITS WHOLLY OWNED SUBSIDIARY WAS NOT CORRECT LY DONE , HAD THUS DIRECTED THE A.O TO REFER THE MATTER TO THE TPO AND MAKE THE ASSESSMENT ON THE BASIS OF HIS REPORT . WE HA VE GIVEN A THOUGHTFUL CONSIDERATION TO THE AFORESAID DIRECTIONS OF THE PRINCIPAL CIT AND FIND NO INFIRMITY IN THE SAME. INSOFAR THE ISSUE THAT THE BENCHMARKING OF THE INTERNATIONAL TRANSACTION OF THE ASSESSEE WITH THE AFORESAID WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC DID NOT FORM PART OF THE SCN DATED 22.03.2018, THE SAME IN OUR CONSIDERED VIEW WOULD IN NO WAY EFFECT THE VALIDITY OF ASSUMPTION OF JURISDICTION BY THE REVISIONAL AUTHORITY , AS LONG AS THE ASSESSEE WAS AFFORDED AN OPPORTUNITY OF BEING HEARD IN RESPECT OF THE SAID ISSUE . ON A PERUSAL OF THE ORDER PASSED BY THE PRINCIPAL CIT IT IS DISCERNIBLE THAT THE ASSESSEE HAD FULL OPPORTUNITY TO CONTEST THE BASIS ON WHICH THE REVISIONAL AU THORITY WAS PROCEEDING WITH THE MATTER UNDER CONSIDERATION. RATHER, IT IS A MATTER OF FACT BORNE FROM THE RECORDS THAT THE REVISIONAL AUTHORITY HAD ARRIVED AT THE CONCLUSION IN RESPECT OF THE INCORRECTNESS OF THE BENCHMARKING OF THE INTERNATIONAL TRANSACTI ON OF THE ASSESSEE WITH ITS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC ON THE BASIS OF THE TP STUDY REPORT OF THE ASSESSEE . WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS NO INFIRMITY AS REGARDS THE ASSUMPTION OF JURISDICTION BY THE REVISIONAL AUTHORITY IN RESPECT OF THE INTERNATIONAL TRANSACTION S OF THE ASSESSEE FIRM WITH ITS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC DOES EMERGE FROM THE RECORDS. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT, MUMBAI VS. AMITABH BACHCHAN P A G E | 9 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 [CIVIL APPEAL NO. 5009 OF 2016(ARISING OUT OF SLP (C) NO. 11621 OF 2009]. 9 . INSOFAR THE VALIDITY OF THE DIRECTIONS OF THE REVISIONAL AUTHORITY IS CONCERNED, WE ALSO DO NOT FIND ANY INFIRMITY IN THE SA ME. ON A PERUSAL OF THE RECORDS IT EMERGES THAT INTEREST OF RS. 1,09,71,766/ - CLAIMED BY THE ASSESSEE TO HAVE BEEN CHARGED ON THE AMOUNT ADVANCED TO ITS WHOLLY OWNED SUBSIDIARY VIZ M/S UNIVERSAL MIDDLE EAST FZC NOT ONLY PERTAIN ED TO THE INTEREST PORTION O N SUCH ADVANCE, BUT ALSO INCLUDED GUARANTEE FEE AND RISK M ANAGEMENT FEES. THE ASSESSEE HAS CLUBBED ALL THESE THREE T RANSACTIONS AND HAD ADOPTED THE CUP METHOD. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE REVISIONAL AUTHORITY THAT AS ALL THE THREE TRANSACTIONS ARE INDEPENDENT TRANSACTIONS, THEREFORE , THE ASSESSEE WAS REQUIRED TO BENCHMARK EACH OF THE TRANSACTION SEPAR ATELY . THE ASSESSEE HAS NOT ONLY FAILED TO BENCHMARK THE TRANSACTION S SEPARATELY , BUT HAD WRONGLY COMPARED THE INTEREST CHARGED ON BUNCH OF ITS AFORESAID TRANSACTIONS WITH THE INTEREST CHARGED ON THE ADVANCES BY INDIAN BANKS. WE ARE OF THE CONSIDERED VIEW THAT THE REVISIONAL AUTHORITY HAD RIGHTLY OBSERVED THAT AS THE CUP METHOD REQUIRES ABSOLUTE SIMILARITY IN THE CONTROLLED AND UNCONTROLLED TRANSACTIONS, THEREFORE , THE FALLACY IN THE METHOD OF BENCHMARKING ADOPTED BY THE ASSESSEE WAS CLEARLY DISCERNIBLE FRO M THE RECORD AND HENCE COULD NOT BE ACCEPTED . FURTHER, WE ARE ALSO IN AGREEMENT WITH THE VIEW TAKEN BY THE PRINCIPAL CIT THAT AS THE ISSUE AS REGARDS THE BENCHMARKING OF THE AFOREMENTIONED BUNCH OF TRANSACTIONS WAS BEYOND THE PURVIEW OF THE A.O TO EXAMINE, THEREFORE, HE REMAINED UNDER A STATUTORY OBLIGATION TO HAVE REFERRED THE MATTER TO THE TPO WHILE FRAMING THE ASSESSMENT. WE ARE OF THE CONSIDERED VIEW THAT IN THE BACKDROP OF THE AFORESAID FACTS WHICH HAD RENDERED THE ASSESSMENT ORDER PASSED BY THE A.O UN DER SEC. 143(3) AS ERRONEOUS P A G E | 10 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE REVISIONAL AUTHORITY REMAINING WELL WITHIN THE REALM OF HIS JURISDICTION HAD RIGHTLY SET ASIDE THE MATTER TO THE FILE OF THE A.O WITH A DIRECTION TO RE - DO THE ASSESSMENT BY MA KING A REFERENCE TO THE TPO AND FRAME THE ASSESSMENT AFTER TAKING COGNIZANCE OF HIS REPORT. 10 . HOWEVER, WE ARE UNABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO THE DIRECTIONS OF THE REVISIONAL AUTHORITY TO THE EXTENT HE HAS CALLED UPON THE A.O TO EXAMINE THE CLAIM OF THE ASSESSEE THAT THE LOANS OF RS. 11.3 CRORES WERE ADVANCED TO DOMESTIC PARTIES AND WERE NOT IN THE NATURE OF SPECIFIED DOMESTIC TRANSACTION S AS DEFINED IN SEC. 92BA OF THE ACT. ON A PERUSAL OF THE SCN , D ATED 22.03.2018 ISSUED BY THE REVISIONAL AUTHORITY UNDER SEC. 263(1) OF THE ACT, IT EMERGES THAT THE REVISIONAL AUTHORITY HAD OBSERVED THAT T HE A.O WHILE MAKING THE DISALLOWANCE OF INTEREST UNDER SEC. 36(1)(III) TO THE TUNE OF RS. 1,11,75,671/ - ON THE INTE REST FREE ADVANCES OF RS. 11.3 CRORES GIVEN BY THE ASSESSEE TO ITS SISTER CONCERNS HAD LOST SIGHT OF THE FACT THAT AS THE SAME WERE INTERNATIONAL TRANSACTIONS, THEREFORE, BEFORE MAKING SUCH DISALLOWANCE THE MATTER OUGHT TO HAVE BEEN REFERRED BY HIM TO THE TPO FOR COMPUTATION OF THE ARMS LENGTH PRICE UNDER SEC. 92CA OF THE ACT. WE ARE UNABLE TO COMPREHEND T HAT NOW WHEN THE COMPLETE DETAILS OF THE ADVANCES AG GREGATING TO RS. 11.3 CRORES WERE THERE BEFORE THE REVISIONAL AUTHORITY IN THE COURSE OF THE PROCEEDINGS BEFORE HIM, THEREFORE, HE WAS SUPPOSED TO HAVE MADE NECESSARY VERIFICATION AS REGARDS THE CLAIM OF THE ASSESSEE THAT NO REFERENCE IN RESPECT OF SUCH DOMESTIC TRANSACTIONS WAS REQUIRED UNDER LAW. WE ARE UNABLE TO ENDORSE THE AFORESAID RESTORING OF THE MATTER BY THE REVISIONAL AUTHORITY, DEHORS ANY SPECIFIC FINDING ON HIS PART THAT THE ORDER OF THE A.O WA S FOUND TO BE ERRONEOUS AND P REJUDICIAL IN THE SAID CONTEXT . WE ARE OF THE CONSIDERED VIEW THAT REVISIONAL JURISDICTION CANNOT BE P A G E | 11 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31 ASSUMED BY A R E VISIONAL AUTHORITY FOR FACILITATING FISHING AND ROVING ENQUIRIES BY THE A.O . WE THUS TO THE EXTENT THE REVISIONAL AUTHORITY HAS CALLED UPON THE A.O TO EXAMINE AS TO WHETHER THE CLAIM OF THE ASSESSEE THAT LOANS OF RS. 11.3 CRORES WERE ADVANCED TO DOMESTIC PARTIES AND THE SAME WERE NOT SPECIFIED DOMESTIC TRANSACTIONS AS DEFINED IN SEC. 92BA OF THE ACT , VACATE HIS DIRECTIONS TO THE SAID EXT ENT . 1 1 . THE ORDER PASSED BY THE PRINCIPAL COMMISSIONER OF INCOME TAX - 31, MUMBAI UNDER SEC. 263 OF THE ACT IS PARTLY UPHELD IN TERMS OF OUR AFORESAID OBSERVATIONS. 1 2 . THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PR ONOUNCED IN THE OPEN COURT 2 8 . 11 .2018 S D / - S D / - ( SHAMIM YAHYA ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 28 .11 .2018 PS. ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 12 ITA NO . 2615/MUM/2018 M/S GENERAL COMPUTER SERVICES INTERNATIONAL. VS. PR. CIT - 31