BHANSALI ENGINEERING POLYMERS LTD, MUMBAI V. ADDL CIT 8(1), MUMBAI

ITA 2756/MUM/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8012 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 11-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Rule of consistency; Wholly owned subsidiary
• Section: 92C; 143(3); 92B

Judgement Text

K IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 2576 / MUM/2015 ( / ASSESSMENT YEAR : 2010 - 11 ) APAR INDUSTRIES LIMITED APAR HOUSE, CORPORATE PARK, BUILDING NO. 5, SION TROMBAY ROAD, CHEMBUR, MUMBAI - 400071 / V. DEPU TY COMMISSIONER OF INCOME - TAX , CENTRAL CIRCLE 6(1) , AAYAKAR BHAWAN, M K ROAD, MUMBAI - 400020 ./ PAN : AAACG1840M ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: MR ANUJ KISNADWALA REVENUE BY : SHRI. MANOJ KUMAR, DR / DATE OF HEARING : 22 .10.2018 / DATE OF PRONOUNCEMENT : 02.01.2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY ASSESSEE, BEING ITA NO. 2576/ MUM/201 5 , IS DIRECTED AGAINST APPELLATE ORDER DATED 24.02.2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 55 , THANE (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2010 - 1 1 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM ASSESSMENT ORDER DATED I.T.A. NO.2576 /MUM/201 5 2 05.02.2014 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) READ WITH SECTION 144C OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2010 - 1 1 . 2. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL REVOLVES AROUND THE DETERMINATION OF ARMS LENGTH PRICE (ALP) U/ S 92C OF THE 1961 ACT WITH RESPECT TO COMMISSION CHARGEABLE BY THE ASSESSEE FROM ITS ASSOCIATED ENTERPRISES(AE) ON INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE WITHIN THE MEANING OF SECTION 92B WITH ITS ASSOCIATED ENTERPRISES (AE) NAMELY PETROLEU M SPECIALITY PTE LTD.(PSPL), A SINGAPORE BASED COMPANY (A WHOLLY OWNED SUBSIDIARY ) , OF PROVIDING CORPORATE GUARANTEE BY THE ASSESSEE FOR LOANS AVAILED BY ITS AFORESTATED AE BASED IN SINGAPORE . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF C ONDUCTOR,OIL AND RUBBER. THE TRANSFER PRICING OFFICE (TPO) HAS PROPOSED ADJUSTMENT OF RS. 1,54,82,741/ - IN THE ALP OF THE INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE WITH ITS AE NAMELY PSPL ,SINGAPORE OF PROVIDING CORPORATE GUARANTEE TO PSPL ,SING APORE FOR AVAILING LOANS FROM BANKS, VIDE ORDERS DATED 17.12.2013 PASSED BY TPO U/S 92CA(3) OF THE 1961 ACT. THE SAID ADJUSTMENT TO ALP BY TPO AS DETERMINED BY THE TPO LED TO ASSESSMENT ORDER DATED 05.02.2014 PASSED BY THE AO U/S 143(3) READ WITH SECTION 1 44C OF THE 1961 ACT , WHEREIN THE AO MADE ADDITION TO THE INCOME OF THE ASSESSEE OF THE AFORESTATED ADJUSTMENT TO ALP OF RS. 1,54,82,741/ - AS DETERMINED BY TPO. THE ASSESSEE CONTESTED THE SAID ADDITIONS BEFORE LEARNED CIT(A) WITHOUT SUCCESS AS LEARNED CIT( A) FOLLOWED THE APPELLATE DECISION OF HIS PREDECESSOR FOR AY 2009 - 10. THE LEARNED CIT(A) WHILE DISMISSING THE APPEAL OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR 2010 - 11 CAME TO FINDING THAT THE FACTS FOR THE IMPUGNED ASSESSMENT YEAR ARE SIMILAR TO THE FACTS FOR AY 2009 - 10 AND HENCE RULE OF CONSISTENCY DEMAND THAT THE APPELLATE ORDER PASSED BY LEARNED CIT(A) IN ASSESSEES OWN CASE FOR AY 2009 - 10 BE FOLLOWED WHICH LED TO DISMISSAL OF THE APPEAL OF THE ASSESSEE BY LEARNED CIT(A) ON THIS GROUND , VIDE APPE LLATE ORDER DATED 24.02.2015 PASSED BY I.T.A. NO.2576 /MUM/201 5 3 LEARNED CIT(A) . THAT IS HOW THE ASSESSEE IS BEFORE THE TRIBUNAL CHALLENGING DISMISSAL OF ITS APPEAL BY LEARNED CIT(A). THIS ISSUE HAS ARISEN IN IMMEDIATELY PRECEDING YEAR I.E. AY 2009 - 10 IN ASSESSEE S O W N C A S E IN AN AP PEAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL, WHEREIN TRIBUNAL WAS PLEASED TO COMPUTE ALP @0.5% OF THE CORPORATE GUARANTEE GIVEN BY THE ASSESSEES TO ITS AE NAMELY PSPL ,SINGAPORE ON LOANS AVAILED BY THE SAID P SPL, SINGAPORE, VIDE ORDERS IN ITA NO.956/MUM /2015 DATED 04.05.2018( TO WHICH ONE OF US NAMELY JUDICIAL MEMBER WAS MEMBER OF THE DIVISION BENCH WHO PASSED THE SAID ORDER) PASSED BY ITAT, MUMBAI, WHEREIN TRIBUNAL HELD AS UNDER: 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009 - 10 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - 15 [CIT(A)], MUMBAI, APPEAL NO.CIT(A) - 15/CURR.105/14 - 15 DATED 12/11/2014. THE ONLY ISSUE INVOLVED IN THE APPEAL IS TRANSFER PRICING [TP] ADJUSTMENT ON ACCOUNT OF CORPORATE GUARANTEE GIVEN BY THE ASSESSEE TO ONE OF ITS ASSOCIATED ENTERPRISES [AE].THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 34 ON 21/03/2013 U/S 143(3) READ WITH SECTION144C OF THE INCOME TAX ACT, 1961 WHEREIN THE ASSESSEE HAS BEEN SADDLED WITH TP ADJUSTMENT OF RS.1,66,20,644/ - AGAINST CORPORATE GUARANTEE AS PROPOSED BY LD. TRANSFER PRICING OFFICER [TPO] U/S 92CA(3). 2. FACTS IN BRIEF, QUA THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUS INESS OF MANUFACTURE OF TRANSFORMERS/SPECIALTY OILS, CONDUCTORS AND SYNTHETIC RUBBER PROVIDED CORPORATE GUARANTEE AMOUNTING TO RS.35.46 CRORES FOR ONE OF ITS AE NAMELY PETROLEUM SPECIALTY PTE LIMITED, SINGAPORE [PSPL]TO FACILITATE LC FACILITY BY SYNDICAT E BANK TO ITS AE. THE ASSESSEE DID NOT BENCHMARK THE SAME ON PREMISE THAT THE UNDERLYING LIABILITY WAS CONTINGENT IN NATURE AND GIVEN FOR OVERALL BUSINESS CONSIDERATION. HOWEVER, NOT CONVINCED, LD. TPO ARRIVED AT IMPUGNED TP ADJUSTMENT AGAINST THE SAME WH ICH WAS CALCULATED AT 5% PER ANNUM. THE SAME HAS BEEN INCORPORATED IN THE QUANTUM ASSESSMENT ORDER DATED 21/03/2013. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHOUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 12/11/2014, WHEREIN THE STAND O F THE LOWER AUTHORITIES HAS BEEN CONFIRMED. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR] PLACING RELIANCE ON VARIOUS DECISIONS OF THE TRIBUNAL SUBMITTED THAT I.T.A. NO.2576 /MUM/201 5 4 CORPORATE GUARANTEEWAS NOT AN INTERNATIONAL TRANSACTION WITHIN THE MEANING O F SECTION 92B AND THEREFORE, NO ADJUSTMENT THEREOF WAS REQUIRED. THE LD. AR, IN THE ALTERNATIVE, SUBMITTED THAT THE IMPUGNED ADDITION MAY BE RESTRICTED TO 0.495% AS ENJOYED BY THE ASSESSEE FROM ITS BANKERS. PER CONTRA, LD. DR DREW ATTENTION TO VARIOUS DECISIONS WHERE THE ADDITIONS HAS BEEN UPHELD BY THE JUDICIAL AUTHORITIES. 4. WE HAVE HEARD CAREFULLY HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT M ATERIAL ON RECORD. IN OUR OPINION CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE BROUGHT CERTAIN BENEFITS TO ITS AE BY WAY OF CREDIT FACILITY AND THEREFORE, THE SAME WAS REQUIRED TO BE COMPENSATED BY ITS AE. OUR VIEW IS DULY SUPPORTED BY THE DECISION OF THIS TRIBUNAL RENDERED IN EVEREST KANTO CYLINDERS LTD. VS. DCIT [34 TAXMANN.COM 19]AS AFFIRMED BY HONBLE BOMBAY HIGH COURT ON 08/05/2015 [58 TAXMANN.COM 254] WHEREIN THE RATE OF COMMISSION HAS BEEN ADOPTED @0.5%. RESPECTFULLY, FOLLOWING THE SAME, WE ESTIMAT E THE IMPUGNED ADDITIONS @0.5% PER ANNUM. THE LD. AO IS DIRECTED TO QUANTITY THE ADDITION AND RE - COMPUTE THE INCOME OF THE ASSESSEE IN TERMS OF OUR ABOVE ORDER. 5. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. WE HAVE ALSO OBSERVED THAT TRIBUNAL VIDE ORDERS IN ITA NO. 1557/MUM/2017 DATED 06.06.2018 FOR AY 2012 - 13 IN ASSESSEES OWN CASE HAS AGAIN COMPUTED ALP OF ITS INTERNATIONAL TRANSACTION WITH ITS SAME AE NAMELY PSPL , SINGAPORE OF PROVIDING CORPORATE GUARANTEE ON LOANS AVAILED BY ITS AE WHEREIN ALP OF COMMISSION ON SAID CORPORATE GUARANTEE WAS DETERMINED AT 0.5%. THE TRIBUNAL WHILE PASSING AFORESAID ORDERS DATED 06.06.2018 FOR AY 2012 - 13 FOLLOWED ITS DECISION FOR AY 2009 - 10. ONE US NAMELY JUDICIAL MEMBER WAS MEMBER OF THE DIVISION BENCH OF THE TRIBU NAL WHO PASSED THE AFORESAID ORDERS FOR AY 2012 - 13 . WE DONOT FIND ANY REASONS TO DEVIATE FROM AFORE SAID ORDERS OF THE TRIBUNAL FOR AY 2009 - 10 AND 2012 - 13 TAKING A CONSISTENT VIEW AND FOLLOWING THE RULES OF CONSISTENCY AS LAID DOWN BY HONBLE SUPREME COU RT IN THE CASE OF RADHASOAMI SATSANG V. CIT (1992) 193 ITR 321(SC) , WE DETERMINE ALP OF CORPORATE GUA RANTEE COMMISSION @0.5% ON INTERNATIONAL TRANSACTION OF PROVIDING CO RPORATE GUARANTEE I.T.A. NO.2576 /MUM/201 5 5 BY THE ASSESSEE TO ITS AE NAMELY PSPL, SINGAPORE FOR AVAILING LOANS. WE ORDER ACCORDINGLY. 3 . IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON 02.01.2019 . 02.01.2019 SD/ - SD/ - ( MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 02.01. 2019 COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI