Deputy Commissioner of Income-tax, Cir 1(1), Pune V. M/s. City Corporation Ltd.,(Earlier known as M/s Amanora Future Towers P Ltd), Pune

ITA 44/PUN/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8496 (ITAT-PUNE)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 19-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARISE OUT OF
• Assessee Lawyers: AND OTHER
• Keywords: Transfer pricing; International transaction; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH, C PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER . / ITA NO.618/PUN/2020 / ASSESSMENT YEAR : 2014-15 M/S. CITY CORPORATION LIMITED, (EARLIER KNOWN AS M/S. AMANORA FUTURE TOWERS PVT. LTD.,), 917/9A, CITY CHAMBERS, F.C. ROAD, SHIVAJINAGAR, PUNE-411004 PAN : AAKCA3074H VS. DCIT, CIRCLE-1(1), PUNE APPELLANT RESPONDENT . / ITA NO.44/PUN/2021 / ASSESSMENT YEAR : 2014-15 / ORDER PER R.S.SYAL, VP : THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND OTHER BY THE REVENUE - ARISE OUT OF THE ORDER PASSED BY THE LD. CI T(A) ON 22.09.2020 IN RELATION TO THE ASSESSMENT YEAR 2014-15. DCIT, CIRCLE-1(1), PUNE VS. M/S. CITY CORPORATION LIMITED, (EARLIER KNOWN AS M/S. AMANORA FUTURE TOWERS PVT. LTD.,), 917/9A, CITY CHAMBERS, F.C. ROAD, SHIVAJINAGAR, PUNE-411004 PAN : AAKCA3074H APPELLANT RESPONDENT ASSESSEE BY SHRI SUHAS BORA REVENUE BY SHRI SANGRAM GAIKWAD & SHRI MAHADEVAN A.M. KRISHNAN DATE OF HEARING 16-08-2021 DATE OF PRONOUNCEMENT 17-08-2021 ITA NO.618/PUN/2020 AND ITA NO. 44/PUN/2021 M/S. CITY CORPORATION LTD., 2 2. THE DEPARTMENTAL APPEAL IS TIME BARRED BY 63 DAYS. THE LD. AR DID NOT RAISE ANY OBJECTION TO THE CONDONATION OF THE DELAY. THE DELAY IS HEREBY CONDONED AND THE APPEAL IS ADMITTED FOR HE ARING. 3. THE ONLY ISSUE RAISED BY THE REVENUE IN ITS APPEAL IS AGA INST THE DELETION OF TRANSFER PRICING ADDITION TOWARDS INTEREST ON DEBENTURES/CCDS. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A LEADING REAL ESTATE DEVELOPMENT, TOWNSHIP DEVELOPMENT, CONSTRUCTION AND PROPERTY MANAGEMENT COMPANY OF PUNE. I T INITIATED SOME MAJOR REAL ESTATE DEVELOPMENT PROJECTS INCLUDING DEVELOPMENT OF ONE OF THE LARGEST TOWNSHIP AMANORA PARK T OWN AT HADAPSAR, PUNE. A RETURN WAS FILED DECLARING TOTAL INCOME OF RS.41.87 CRORE. THE ASSESSEE REPORTED CERTAIN INTERNATION AL TRANSACTIONS AND SPECIFIED DOMESTIC TRANSACTIONS (SDTS) IN FORM NO. 3CEB. THE ASSESSING OFFICER (AO) MADE A REFERENC E TO THE TRANSFER PRICING OFFICER (TPO) FOR DETERMINING THE ARMS LE NGTH PRICE (ALP) OF THE TRANSACTIONS. INSTANTLY, WE ARE CONCERN ED WITH THE INTERNATIONAL TRANSACTION OF INTEREST OF CCDS PAID TO IIRF CYPRUS V. HOLDING LIMITED AMOUNTING TO RS.8,84,87,000/- AN D THE SPECIFIED DOMESTIC TRANSACTION OF PAYMENT OF INTEREST ON DEBE NTURES TO M/S. CITY CORPORATION LIMITED AMOUNTING TO RS.9,27,50,000/- . ITA NO.618/PUN/2020 AND ITA NO. 44/PUN/2021 M/S. CITY CORPORATION LTD., 3 THE ASSESSEE APPLIED THE COMPARABLE UNCONTROLLED PRICE (CUP ) METHOD TO DEMONSTRATE THAT THE INTERNATIONAL TRANSACTION AND THE SDT WERE AT ALP. THE TPO OBSERVED THAT THE ASSESSEE, IN FACT, AVAILED FUNDS FROM ITS RELATED CONCERNS AS SHARE CAPITAL BUT WRONGLY CLASSIFIED THEM AS DEBENTURES/CCDS FOR CLAIMING INTEREST DEDUC TION. RELYING ON HIS DECISION FOR THE A.Y. 2013-14, THE TPO FINALLY HELD THAT SUCH FINANCING BY THE RELATED CONCERNS WAS A SHAREHO LDERS ACTIVITY. HE, THUS RECHARACTERIZED THE TRANSACTIONS OF ISSUE O F DEBENTURES/CCDS AS THAT OF ISSUE OF EQUITY SHARES AND HELD THAT NO INTEREST PAYMENT WAS CALLED FOR. THAT IS HOW, HE DETERMINE D NIL ALP OF THE TRANSACTIONS AND ACCORDINGLY PROPOSED TRANSFER PRICING ADJUSTMENT OF RS.18,12,37,000/-. THE AO MADE SUCH AN ADDITION, WHICH CAME TO BE DELETED BY THE LD. CIT(A) BY MEANS OF HIS ORDER DATED 22-01-2018. THE LD. CIT(A) ALSO DIRECTED THE TPO TO VERIFY CERTAIN FACTS REGARDING THE ALP DETERMINATION OF THE INTEREST ON DEBENTURES/CCDS PAID BY THE ASSESSEE AT 17.5% AND RESTRICT THE ADDITION TO 1.13% IN A CERTAIN EVENTUALITY. BOTH THE SIDES HAVE C OME UP IN THEIR RESPECTIVE APPEALS BEFORE THE TRIBUNAL. 5. HAVING HEARD BOTH THE SIDES THROUGH VIRTUAL COURT AND GO NE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS SEEN THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESS EES OWN ITA NO.618/PUN/2020 AND ITA NO. 44/PUN/2021 M/S. CITY CORPORATION LTD., 4 CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2013- 14. IN FACT, THE TPO ALSO REFERRED TO HIS OWN DECISION TAKEN FOR THE ASSESSMENT YEAR 2013-14 FOR DETERMINING NIL ALP. THE T RIBUNAL, VIDE ITS ORDER DATED 18-12-2020 IN ITA NO.772/PUN/2018, HA S COUNTENANCED THE ASSESSEES STAND BY HOLDING THAT THE AS SESSEE RIGHTLY ISSUED DEBENTURES AND CCDS TO ITS AES AND THE AO WA S NOT JUSTIFIED IN RE-CHARACTERIZING THE TRANSACTIONS. AS REGARDS TH E ALP DETERMINATION, THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF AO/TPO FOR A FRESH DETERMINATION. SINCE THE FACTS AND CIRCUMSTANCES OF THE INSTANT APPEAL ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE PRECEDING YEAR, RESPECTFULLY FOLLOWING THE PRECE DENT, WE APPROVE THE VIEW TAKEN BY THE LD. CIT(A) AND HOLD THAT THE A O WAS NOT JUSTIFIED IN RE-CHARACTERISING THE TRANSACTION OF ISSUE OF DEBENTURES/CCDS AS THAT OF EQUITY SHARES. AS REGARDS THE ALP DETERMINATION, WE AGAIN FOLLOW THE VIEW TAKEN BY THE TRIBUNAL FO R THE IMMEDIATELY PRECEDING YEAR AND DIRECT THE AO/TPO TO RE- COMPUTE THE ALP OF THE TRANSACTIONS OF PAYMENT OF INTEREST ON DEBENTURES/CCDS. THUS THE DEPARTMENTAL GROUNDS ARE DISM ISSED. SINCE THE MATTER OF ALP DETERMINATION HAS BEEN SENT BACK TO THE AO/TPO, THE DIRECTION GIVEN BY THE LD. CIT(A) IN THIS REGARD, WHICH ITA NO.618/PUN/2020 AND ITA NO. 44/PUN/2021 M/S. CITY CORPORATION LTD., 5 FORMS THE SUBJECT MATTER OF THE ASSESSEES GROUND, HAS BECOME INFRUCTUOUS. 6. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND STATIN G THAT EDUCATION CESS AND SECONDARY AND HIGHER SECONDARY CESS AMOUNTING TO RS.26,66,359/- MAY BE ALLOWED AS A DEDUCTION WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE COMPANY. 7. THE HONBLE SUPREME COURT IN NATIONAL THERMAL POWER COMPANY LTD. VS. CIT (1998) 229 ITR 383 (SC) HAS OBSERVED THAT THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TA XING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JU DICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUN AL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUC TION IS DENIED, WE DO NOT SEE ANY REASON WHY THE ASSESSEE SHOU LD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESP ECT OF THAT ITEM. ANSWERING THE QUESTION POSED BEFORE IT IN AFFIRMATIVE , THEIR LORDSHIPS HELD THAT ON THE FACTS FOUND BY THE AUTHORITIES BELOW , IF A QUESTION OF LAW ARISES (THOUGH NOT RAISED BEFORE THE AUTHOR ITIES) WHICH HAS BEARING ON THE TAX LIABILITY OF THE ASSESSEE, THE TR IBUNAL HAS JURISDICTION TO EXAMINE THE SAME. HAVING GONE THROUGH THE ITA NO.618/PUN/2020 AND ITA NO. 44/PUN/2021 M/S. CITY CORPORATION LTD., 6 SUBJECT MATTER OF THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE , IT IS DISCERNIBLE THAT IT RAISES A PURE QUESTION OF LAW. WE, THEREFO RE, ADMIT THE SAME. 8 ON MERITS, THE ISSUE RAISED THROUGH THE ADDITIONAL GROUN D IS NO MORE RES INTEGRA IN VIEW OF THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN SESA GOA LT. VS. JCIT (2020) 423 ITR 426 (BOM.) IN WHICH IT HAS BEEN HELD THAT EDUCATION CESS IS NOT DISALLOWABLE EXPENDITURE U/S.40(A)(II) OF THE INCOME TAX ACT. 1961 (HE REINAFTER ALSO CALLED AS `THE ACT). SIMILAR VIEW WAS EARLIER TAKEN BY THE HONBLE RAJASTHAN HIGH COURT IN CHAMBAL FERTILISERS AND CHEMICALS LTD. AND ANOTHER VS. JCIT (2018) 102 CCH 0202 ( RAJ- HC). WE, THEREFORE, DIRECT THE AO TO ASCERTAIN THE CORRECT AMOUNT OF EDUCATION CESS AND THEN ALLOW A DEDUCTION FOR IT, AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED A ND THAT OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST, 2021. SD/- SD/- ( S.S. VISWANETHRA RAVI ) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 17 TH AUGUST, 2021 ITA NO.618/PUN/2020 AND ITA NO. 44/PUN/2021 M/S. CITY CORPORATION LTD., 7 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-13, PUNE 4. 5. 6. THE PCIT-5, PUNE DR, ITAT, C BENCH, PUNE / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR P RIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 16-08-2021 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17-08-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *