ACIT 11(1), MUMBAI V. LIVEWIRE PROGRAMME TRDG. CO. P. LTD, MUMBAI

ITA 2866/MUM/2010

• Counselvise Citation: 286619914 RSA 2010
• Duration Of Justice: 5 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 02-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2010
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Transfer pricing; International transaction; Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA N O. 632 &2866 / MUM/20 1 0 ( / ASSESSMENT YEAR S : 2005 - 06 & 200 6 - 07 ) ACIT - 11(1), MUMBAI VS. M/S LIVEWIRE PROGRAMME TRADING CO. PVT. LTD., STAR HOUSE, DR. E.MOSES ROAD, MAHALAXMI, MUMBAI - 400011 ./ ./ PAN/GIR NO. : A A ACL 0864 E ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI LOVE KUMAR /ASSESSEE BY : SH. PERCY PARDIWALLA & MS. AARTI SATHE / DATE OF HEARING : 05 /0 5 / 2015 / DATE OF PRONOUNCEMENT 13/05 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH ESE ARE THE APPEALS FILED BY REVENUE AGAINST THE ORDER OF CIT(A) - 3 , MUMBAI , FOR THE ASSESSMENT YEAR S 200 5 - 06 & 2006 - 07 IN THE MATTER OF ORDER PASSED U/S.14 3 (3) OF TH E I.T.ACT . 2 . COMMON GRIEVANCE OF THE REVENUE IN BOTH THE APPEALS RELATES TO DELETING DISALLOWANCE OF INTEREST PAID TO STAR INDIA PVT. LTD. 3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN BUSIN ESS OF TRADING IN RIGHTS OF CINEMATOGRAPHIC FILMS AND TELEVISION PROGRAMME SOFTWARE ETC. DURING THE ITA NO. 632&2866 /1 0 2 COURSE OF SCRUTINY ASSESSMENT THE AO DISALLOWED INTEREST PAID TO STAR INDIA PVT. LTD. AS THE LOAN TRANSACTIONS HAVE NOT BEEN DECLARED IN FORM 3CEB AND, THER EFORE, ESCAPED ADDITION OF TRANSFER PRICING OFFICER. THE AO FURTHER HELD THAT ADVANCE WAS NOT TAKEN AS BUSINESS EXPEDIENCY, BUT WAS TO EVADE TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. BY THE IMPUGNED ORDER THE CIT(A) DELETED THE DISALLOWANCE AFTER OBSERV ING AS UNDER : - 2.3 FACTS, MATERIALS AVAILABLE ON RECORD AND CITED JUDICIAL PRECEDENCE HAVE BEEN CONSIDERED. THE A.O.'S OBSERVATION IN RESPECT OF BUSINESS EXPEDIENCY AND BUSINESS EXIGENCIES ARE OBSERVATIONS MADE WITHOUT CITING ANY EVIDENCE OR FACT FROM TH E APPELLANT'S CASE. THE OBSERVATION OF LOAN TAKEN FROM SIPL AND INTEREST PAYMENT TO THEM AS A METHOD OF EVASION OF TAX HAS ALSO NOT BEEN SUBSTANTIATED AND IS NOT JUSTIFIED IN VIEW OF THE FACT THAT BOTH COMPANIES ARE RESIDENTS IN INDIA FOR PURPOSE OF TAXATI ON. A.O. ALSO STATES SIPL TO BE 'ALLEGED NON - SEC.40A(2) CONCERN' DISREGARDING THE AUDIT REPORT AND WITHOUT ESTABLISHING HOW SIPL AND APPELLANT ARE RELATED CONCERNS WITHIN THE PROVISIONS OF SECTION 40A(2). THE ASSESSMENT ORDER IS ALSO SILENT AS TO THE CIRCU MSTANCES, FACTS AND REASONS BASED ON WHICH THE A.O. OBSERVED THAT THE APPELLANT COMPANY CANNOT BE EXPECTED TO SHOW A LOSS WITH A MARGIN OF 5.34% ALONG WITH REASON FOR TREATING THE FOREIGN EXCHANGE LOSS AS A GAIN. IN SO FAR AS THE LOAN TRANSACTION NOT BEING MENTIONED IN FORM 3CEB IS CONCERNED, A.O. HAS OMITTED TO TAKE NOTE OF THE FACT THAT BOTH APPELLANT AND SIPL ARE RESIDENT INDIAN COMPANIES AND THE TRANSACTIONS BETWEEN THEM ARE NOT INTERNATIONAL TRANSACTIONS U/S.92. 2.3.1 REGARDING BUSINESS EXPEDIENCY AND BUSINESS EXIGENCIES IT IS THE APPELLANT WHO WOULD DECIDE THE MATTER AND NOT REVENUE AS HELD BY VARIOUS DECISIONS OF HON'BLE COURTS. IT IS A QUESTION TO BE DECIDED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT AS PER THE REVENUE AUTHORITIES. IT IS ALSO SEEN THAT THE A.O. HAS NOT GONE INTO THE FACTS OF THE CASE TO IDENTIFY WHETHER THERE WERE ACTUALLY VALID REASONS FOR APPELLANT TO TAKE LOANS OR WHETHER THERE WERE ADEQUATE FUNDS AVAILABLE WITH THE APPELLANT LYING UNUTILIZED, IGNORING WHICH SUCH LOANS HAVE BEEN TAKEN AND PAYMENT OF INTEREST DEBITED. IN VIEW OF THE FACTS OF THE CASE AND MATERIAL AVAILABLE. THE APPELLANT'S CLAIM SEEMS JUSTIFIED. THE SAID DISALLOWANCE OF INTEREST EXPENSE OF RS.1,37,94,000/ - IS DELETED. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE FINANCIAL STATEMENTS OF ASSESSEE EVIDENCED UTILIZATION O F BORROWED FUNDS FOR PROC URING RIGHTS IN RESPECT OF VARIOUS GENRES OF FILMS ITA NO. 632&2866 /1 0 3 FROM THIRD PARTIES FOR SALE TO SGL ENTERTAINMENT. AS SUCH BORROW ED FUNDS ON WHICH INTERE ST HAS BEEN PAID WERE UTILIZED FOR PURPOSE OR BUSINESS ENTITLING ASSESSEE TO CLAIM DEDUCTION U/S 36(1)(III). REGARDING A.O. S O B SERVATION THAT THE ACT OF BORROWING FUNDS FROM SIPL IS NOT IN BUSINESS EXPEDIENCY AND WITH A VIEW TO AVOID TAXABILITY IN THE HAN DS OR THE ASSESSEE, WE FOUND THAT FUNDS WERE BORROWED FROM S IPL FOR B USINESS PURPOSE, THE EXPENSES BEING WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS BASED ON COMMERCIAL EXPEDIENCY. I NTEREST EXPENSES WERE INCURRED FOR PURPOSE OF ASSESSEE 'S OWN BUSINE SS, PROFITS OF WHICH ARE CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT. FURTHER WHETHER A PARTICULAR EXPENDITURE IS NECESSARY CONSIDERING COMMERCIAL EXPEDIENCY HAS TO BE DECIDED FROM THE POINT OF VIEW OF BUSINESSMAN ALONE AND NOT BY THE REVENUE AUTHORI TIES. FOR THIS PURPOSE RELIANCE CAN BE PLACED ON DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DCIT V/S CORE HEALTH CARE LTD.(2 TR 194), S.A. BUILDERS LTD. V/ S CIT (288 ITR 01), CIT V/ S PANIPAT WOOLLEN & GENERAL M ILLS CO. LTD. (103 ITR 66), BOMBAY SAMACH AR LTD. (74 ITR 723), CIT V/S SALES MAGNESITE (PVT) LTD ( 1995) (214 ITR 1) (BORN), CIT V/ S CHANDULAL KESHA V LAL & CO. (1960) (38 ITR 601), BOMBAY STEAM N AVIGA TION CO. PVT. LTD. V/ S CIT (1965) (56 ITR 52), CALCUTTA LANDING & SHIPPING CO. LTD. V/ S CIT (1967) (65 ITR 1) CAL), JK COMMERCIAL CORPN. LTD. V/ S CIT (1969) (72 ITR 296) (ALL), CIT VIS DALMIA CEM E NT ( B .) LTD (200 2) (254 ITR 377) (DEL.), DCIT V/S M/ S PARRY AND COMPANY LTD. (2008 - TIOL - 555 - I TAT - MAD), HATIWALA SILK MILLS V/ S ASSESSING OFFICER (2002) (19 TT ] 284) (AHM.), CIT VIS WALCHAND AND CO. ITA NO. 632&2866 /1 0 4 PVT. LTD. (196 7) (65 ITR 381) (SC), AND CIT V/ S RAJARARN BANDEKAR (1994) 208 ITR 503 (BO M ). A S PER THE FINDING RECORDED BY THE CIT(A) , M/S STAR INDIA PVT. LTD. IS NOT COMING WITHIN THE PURVIEW OF SECTION 40A(2), THEREFORE, IT CANNOT BE SAID THAT INTEREST SO PAID TO A RELATED PARTY SO AS TO AVOID BURDEN OF TAX ON THE ASSESSEE. THE DETAILED FINDINGS OF THE CIT(A) RECORDED AT PARA 2.3 AND 2.3.1 HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) DELETING DISALLOWANCE ON INTEREST. 5. AS THE FACTS AND CIRCUMSTANCES DURING THE ASSESSMENT YEAR 2006 - 07 ARE SAME, FOLLOWING REASONING GIVEN IN THE ASSESSMENT YEAR 2005 - 0 6 ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 6. IN THE RESULT, BOTH APPEAL S OF THE REVENUE ARE DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 13/05 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 13/05 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//