VIRGO ENGINEERS LTD, MUMBAI V. DCIT 15(3)(1), MUMBAI

ITA 3718/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8003 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KUMAR SINGH LD
• Assessee Lawyers: HIRO RAI LD
• Keywords: Arm length price

Judgement Text

ITA.NO.3718/MUM/2017 VIRGO ENGINEERS LIMITED ASSESSMENT YEAR 2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./IT(TP)A. NO.3718/MUM/2017 ( / ASSESSMENT YEAR: 2011-12) VIRGO E NGINEERS LIMITED (NOW MERGED WITH VIRGO VALVES & CONTROLS PVT LTD) 7B, 3 RD FLOOR SAMBHAVA CHAMBERS SIR P.M.ROAD, FORT MUMBAI 400 001 / VS. DEPUTY COMMISSIONER OF INCOME TAX 1(3)(2) AAYKAR BHAVAN M.K.ROAD MUMBAI 400 020 ./ ./PAN/GIR NO. AAACV-1586-H ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : HIRO RAI, LD. AR REVENUE BY : MANISH KUMAR SINGH, LD. DR / DATE OF HEARING : 02/01/2019 / DATE OF PRONOUNCEMENT : 08/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011-12 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-58 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-58/TR-51/2015-16 DATED 09/02/2017. THE ONLY ISSUE INVOLVED UNDER THE APPEA L IS COMPUTATION OF ARM LENGTH PRICE [ALP] OF CERTAIN CORPORATE GUARANTEE GIVEN BY ITA.NO.3718/MUM/2017 VIRGO ENGINEERS LIMITED ASSESSMENT YEAR 2011-12 2 ASSESSEE FOR ITS ASSOCIATES ENTERPRISES [AE]. ALTHOUGH MANY GROUNDS HAVE BEEN RAISED, THE ONLY POINT URGED DURING HEARI NG BY LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI HIRO RAI, IS THAT THE ALP OF THE SAME SHOULD BE COMPUTED @0.5% IN TERMS OF RATIO OF 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]. 2. UPON REFERENCE U/S 92CA (1), LD. ADDITIONAL COMMISSIONER OF INCOME TAX [TPO] NOTED THAT THE ASSESSEE PROVIDED CORPORATE GUARANTEE [CG] FOR RS.13.20 CRORES TO STATE BANK OF INDIA, GERMANY BRANCH FOR THE BENEFIT OF ITS AE NAMELY VIRGO EUROPE S.P.A. ITALY [VES]. THE GUARANTEE WAS GIVEN ON 29/09/2007 AND THE SAME CONTINUED UP-TO 16/12/2010. DURING IMPUGNED AY, THREE MORE SUCH GUA RANTEES WERE PROVIDED BY THE ASSESSEE FOR THE BENEFIT OF OTHER A ES AS WELL, THE DETAILS OF WHICH HAVE ALREADY BEEN NOTED BY LD. TPO IN ITS ORDER. NO FEES WERE CHARGED BY THE ASSESSEE AGAINST THE SAME ON THE GRO UND THAT THERE WAS NO SPECIAL BENEFIT TO THE AES. THE LD. TPO, ADOPTIN G A RATE OF 2% PER ANNUM, ARRIVED AT ALP OF THE SAME, BASED ON NUMBER OF DAYS FOR WHICH THE CG REMAINED IN FORCE. THE ADJUSTMENT THUS WORKED OUT TO RS.66.37 LACS WHICH WAS INCORPORATED IN THE ASSESSMENT ORDER DATED 24/04/2015. 3. UPON FURTHER APPEAL, LD. CIT, IN TERMS OF JUDGME NT OF THIS TRIBUNAL RENDERED IN GLENMARK PHARMACEUTICALS LTD. [43 TAXMANN.COM 191], REDUCED THE SAME TO 0.98%. STILL AGGRIEVED, THE ASS ESSEE IS IN FURTHER APPEAL BEFORE US. 4. UPON DUE CONSIDERATION OF FACTUAL MATRIX, WE FIN D THAT SINCE THE DECISION OF THIS TRIBUNAL RENDERED IN EVEREST KANTO CYLINDERS LTD. VS. ITA.NO.3718/MUM/2017 VIRGO ENGINEERS LIMITED ASSESSMENT YEAR 2011-12 3 DCIT [34 TAXMANN.COM 19] IN ESTIMATING THE CG @0.5% HAS ALREADY BEEN AFFIRMED BY HONBLE BOMBAY HIGH COURT, WE REDU CE THE SAME TO 0.5% PER ANNUM. THE LD. AO IS DIRECTED TO RECOMPUTE THE IMPUGNED ADDITION IN TERMS OF THIS ORDER. 5. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH JANUARY, 2019. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) !' / JUDICIAL MEMBER !' / ACCOUNTANT MEMBER MUMBAI; ! DATED : 08/01/2019 SR.PS:-JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. &' ( , ( , / DR, ITAT, MUMBAI 6. ')*+ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.