M/s. Synergies Castings Limited, Hyderabad V. ACIT, Circle -3(2), Hyderabad

ITA 285/Hyd/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5253 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 17-09-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 02-07-2021
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Transfer pricing; International transaction; Retrospective amendment

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. 285/HYD/2021 ASSESSMENT YEAR: 2016-17 M/S.SYNERGIES CASTINGS LIMITED, HYDERABAD [PAN: AAICS7410H] VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.V.S.S.PRASAD, AR FOR REVENUE : SHRI Y.V.S.T.SAI, CIT-DR DATE OF HEARING : 17-09-2021 DATE OF PRONOUNCEMENT : 23-09-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2016-17 ARISES AGAINS T THE ASSESSMENT DATED 27-05-2021, FRAMED BY THE NATIONAL FACELESS ASSESSMENT CENTRE, DELHI IN FURTHERANCE TO THE DISPUTE RESOLUTION PANEL (DRP)-1, BENGALURUS DIREC TIONS DT.02-03-2021 IN F.NO.59/DRP-1/BNG/2019-20, INVOLVIN G PROCEEDINGS U/S.143(3) R.W.S.144C(13) R.W.C.144B OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]; RESPECTIVELY . HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. COMING TO THE FIRST AND FOREMOST ISSUE OF CORRECTNES S OF THE LEARNED LOWER AUTHORITIES ACTION MAKING CORPORATE GUARANTEE ADJUSTMENT OF RS.1,52,39,800/- @2% COMMISS ION RATE, LEARNED AUTHORISED REPRESENTATIVES VEHEMENT CONTEN TION ITA NO.285/HYD/2021 :- 2 -: BEFORE US IS THAT THE ASSESSEE HAS NOT DERIVED ANY INCO ME SINCE THE CORRESPONDING CORPORATE GUARANTEES OBJECT W AS TO HELP THE OVERSEAS ASSOCIATED ENTERPRISE AE WHICH NO WHERE YIELDED ANY RETURNS THEREUPON. MR.PRASAD THEREFORE SU BMITTED THAT THE LEARNED LOWER AUTHORITIES OUGHT NOT TO HAVE MADE ANY ADJUSTMENT IN VIEW OF THE FOREGOING CLINCHING ASPECT. WE EXPRESS OUR INABILITY TO ACCEPT THE ASSESSEES INSTANT FORMER SUBSTANTIVE GRIEVANCE. WE MAKE IT CLEAR THAT WE ARE DEA LING WITH CHAPTER-X OF THE ACT WHICH IS IN THE NATURE OF A SPECIAL PROVISION NOT DEPENDENT UPON ACTUALLY DERIVED INCOME COMPONENT; WHATSOEVER. COUPLED WITH THIS, HON'BLE MADRAS HIGH COURTS DECIS ION PCIT VS. M/S.REDINGTON (INDIA) LTD., (TCA NOS.590 AN D 591 OF 2019, DT.10-12-2020) HOLDS THAT A CORPORATE GUARANTEE TO BE AN INTERNATIONAL TRANSACTION U/S.92B, EXPLANATION-(C) W ITH RETROSPECTIVE EFFECT FROM 01-04-2001. WE THUS, AFFIRM TH E IMPUGNED CORPORATE GUARANTEE ADJUSTMENT IN PRINCIPLE. 3. NEXT COMES EQUALLY IMPORTANT ASPECT OF QUANTIFICATIO N OF THE IMPUGNED GUARANTEE. THIS TRIBUNALS CO-ORDINATE BE NCH DECISION IN THE CASE OF DCIT VS. M/S.NAVA BHARAT VENT URES LTD, ITA NO.634/HYD/2018, DT.22-07-2021, DECIDED THE I SSUE AS UNDER: 9.1. NEXT COMES LATTER ISSUE OF CORPORATE GUARANTE E ADJUSTMENT OF RS.3,51,06,335/- DELETED IN THE CIT(A)S DETAILED D ISCUSSION AS UNDER: 5.1 WITH REGARD TO ADJUSTMENT ON AMOUNT OF SHORTFA LL IN CORPORATE GUARANTEE COMMISSION OF RS.3,51,06,335/-, AFTER CON SIDERING THE SUBMISSIONS OF THE APPELLANT COMPANY AND ALSO BY FO LLOWING EARLIER ORDER IN THE APPELLANTS OWN CASE FOR THE AY.2011-1 2, WHEREIN I DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT COMPAN Y BY OBSERVING THAT, THE TRANSFER PRICING OFFICER HAD CHARGED COR PORATE GUARANTEE COMMISSION @ 2% WHICH IS HIGHER THAN THE APPELLANT CHARGED. SINCE ITA NO.285/HYD/2021 :- 3 -: THE APPELLANT HAS CHARGED A REASONABLE CORPORATE GU ARANTEE COMMISSION I.E. @ 0.875% ARE MORE THAN THE TRIBUNAL S ALLOWED. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER IS HEREBY DELETED. THEREFORE, THE ADDITION MADE BY THE ASSES SING OFFICER IS DELETED. 9.2. IT HAS COME ON RECORD THAT THE ASSESSEE HAD IT SELF RECORDED COMPARABLE GUARANTEE COMMISSION @8.75% I.E. MUCH MO RE THAN THAT THAT DECIDED BY THE TRIBUNAL (SUPRA). WE THEREFORE ADOPT JUDICIAL CONSISTENCY AND DECLINE REVENUES INSTANT LATTER SU BSTANTIVE GROUND FOR THIS PRECISE REASON ALONE. WE THUS AFFIRM THE IMPUGNED ADJUSTMENT @0.875% AS AGAI NST THE ASSESSEES STAND THAT THE SAME OUGHT TO BE TAKEN AS 0.5 % ONLY. WE THEREFORE PARTLY ACCEPT BOTH THE LEARNED REPRESENTATIVES ARGUMENTS AGAINST AND IN FAVOUR @2% COMMISSION IN ISSUE TO THIS LIMITED EXTENT. THE ASSESSE ES INSTANT FORMER SUBSTANTIVE GROUND SUCCEEDS IN ABOVE TER MS. 4. NEXT COMES THE LATTER ISSUE OF ALP ADJUSTMENT PERTAINI NG TO INTEREST ON RECEIVABLES TO THE TUNE OF RS.82,66,546/- EMANATING FROM THE ORDER OF TRANSFER PRICING OFFICER S (TPOS) AND DRPS DIRECTIONS GOING BY INTEREST RATE @7.5% AS PE R SBI DOMESTIC TERM DEPOSITS RETURNS. SUFFICE TO SAY, IT TRANSPIRES AT THE OUTSET THAT WE NEED NO T DELVE MUCH DEEPER QUA THE RELEVANT FACTS PERTAINING TO THE INSTANT ISSUE. WE FIND THAT ASSUMING BUT NOT ACCEPTING TH AT THE LD.LOWER AUTHORITIES HAVE RIGHTLY FOUND THE ASSESS EES INTEREST RECEIVABLES AS BEYOND THE PERIOD INVOLVING UN- CONTROLLED TRANSACTIONS, THE IMPUGNED ADJUSTMENT IS NOT L IABLE TO BE SUSTAINED FOR THE SOLE REASON THAT THE SAME HAS NOT ONLY BEEN MADE AS PER LIBOR RATE APPLICABLE IN CASE OF INTERNATIONAL TRANSACTIONS AFTER TAKING STATE BANK OF IN DIAS TERM DEPOSIT(S) RATE ONLY BUT ALSO NO COMPARABLE TO THI S EFFECT IN THE VERY SEGMENT HAS BEEN FOUND SO AS TO FORM THE ITA NO.285/HYD/2021 :- 4 -: NECESSARY BENCHMARKING IN UNCONTROLLED CIRCUMSTANCES. THE IMPUGNED ALP ADJUSTMENT OF RS.82,66,546/- IS DIRECTED TO BE DELETED THEREFORE. NO OTHER ARGUMENT HAS BEEN RAISED BEFORE US. 5. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 23-09-2021 TNMM ITA NO.285/HYD/2021 :- 5 -: COPY TO : 1.M/S.SYNERGIES CASTINGS LIMITED, FLAT NO.301, M.J.TOWERS, H.NO.8-2-698, ROAD NO.12, BANJARA HILLS , HYDERABAD. 2.THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD. 3.DISPUTE RESOLUTION PANEL (DRP)-1, BENGALURU 4.DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5.ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICIN G), HYDERABAD. 6.D.R. ITAT, HYDERABAD. 7. GUARD FILE.