ELICOKEM INDIA P. LTD, RAIGAD V. DCIT 3(1), MUMBAI

ITA 457/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1792 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 20-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M P CHAHAJED
• Keywords: Transfer pricing; Set aside

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI AMARJIT SINGH ( J M) I.T.A. NO. 457 /MUM/ 2017 (ASSESSMENT YEAR 20 10 - 11 ) M/S. ELIOKEM INDIA PVT. LTD. (CURRENTLY KNOWN AS APCOTEX INDUSTRIES LTD.) PLOT NO. 3/1, TALOJ A MIDC INDUSTRIAL AREA, P.B. NO. 13 TALOJA, RAIGAD DISTRICT PINCODE NO. 410 208. PAN : AABCE8488J V S. DCIT - 3(1) MUMBAI ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI PIYUSH CHHAJED & SHRI M.P. CHAHAJED DEPARTMENT BY SHRI ANAND MOHAN DATE OF HEARIN G 6.6 . 201 9 DATE OF PRONOUNCEMENT 11 . 6 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT - A DATED 31.10.2016 AND PERTAINS TO ASSESSMENT YEAR 2010 - 11. 2. THE ISSUE RAISED IS THAT LD CIT - A ERRED IN CONFIRMING THE TRANSFER PRICING ADJUSTMENT CONSIDERING THE RATE OF INTEREST PAID TO FULLY CONVERTIBLE DEBENTURES SHOULD BE AT 6.13% INSTEAD OF 10% AS PAID BY THE ASSESSEE COMPANY. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE HAS BOR ROWED RS.120 CROR E S FROM ITS HOLDING COMPANY IN FRANCE. IT HAD ALLOTTED 1.20 CRORS FULLY AND COMPULSORY CONVERTIBLE DEBENTURES OF RUPEES HUNDRED EACH. THE RATE OF INTEREST WAS 10 % PER ANNUM. THE TRANSACTION TOOK PLACE IN ASSESSMENT YEAR 2008 09. IN THIS YE AR THE ASSESSING OFFICER ACCEPTED THE SAME WITHOUT REFERRING THE SAME TO TRANSFER PRICING OFFICER. IN ASSESSMENT YEAR 2009 10 THE MATTER WAS REFERRED TO THE TRANSFER PRICING OFFICER AND NO ADJUSTMENT WAS MADE BY THE TRANSFER PRICING OFFICER. M/S. ELIOKEM INDIA PVT. LTD. (CURRENTLY KNOWN AS APCOTEX INDUSTRIES LTD.) 2 4. FOR THE PRE SENT ASSESSMENT YEAR THE TRANSFER PRICING OFFICER NOTED THAT ASSESSEE HAS OBTAINED THE SAID LOAN FROM ITS HOLDING COMPANY. THE TRANSFER PRICING OFFICER ALSO NOTED THAT THE SAID SUM WAS RAISED BY THE HOLDING COMPANY BY THE EQUITY SOURCE , CONVERTIBLE BONDS AS WELL AS BY OBTAINING LOAN. TRANSFER PRICING OFFICER ACCEPTED THAT THE RATE OF CHARGE/INTEREST APPLICABLE FOR THE EQUITY PORTION OF THE FUND RAISED WOULD BE 15% AND CONVERTIBLE BOND PORTION WAS 10% . HOWEVER IN MAKING THE TRANSFER PRICING ADJUSTMENT HE TOTA LLY IGNORED THE SAME AND CONSIDERED THAT 6.13% SHOULD BE THE STANDARD RATE ASSESSEE SHOULD HAVE PAID TO THE HOLDING COMPANY. THE ASSESSEE GAVE FIVE INSTANCES OF COMPARABLE RATES. THE TRANSFER PRICING OFFICER REFERRED ONLY TO 1 AND DISTINGUISHED THE SAME. T HE TRANSFER PRICING OFFICER DID NOT COMMENT UPON THE OTHER FOUR COMPARABLES GIVEN . THESE INCLUDED THE FOLLOWING : - SR.NO. NAME OF COMPANY COUPON RATE OF FCDS YEAR OF ISSUANCE 1 ESSEL MINING & INDUSTRIES LTD. 12% SECURED AND TO BE INCREASED TO 13% W.E.F. 31.3.2010 F.Y. 2007 - 08 2 HIMALAYA INTERNATIONAL LTD. 12% SECURED F.Y. 2008 - 09 3 PHTHALO COLOURS & CHEMICALS (INDIA) LTD. 13.25% SECURED F.Y. 2007 - 08 5. UPON ASSESSEES APPEAL THE LEARNED CIT - A SUSTAINED THE ORDER OF ASSESSING OFFICER. 6. AGAINST ABOV E ORDER ASSESSEE IS IN APPEAL BEFORE US. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS IS THE THIRD YEAR. IN EARLIER YEARS THE RATE OF INTEREST OF 10% HAS BEEN ACCEPTED. HENCE LEARNED COUNSEL SUBMITTED THAT WITHOUT ANY CHANGE IN FACTS OF LAW THE RATE OF INTEREST IN THIS YEAR SHOULD NOT HAVE BEEN DISTURBED. FURTHER THE LEARNED COUNSEL SUBMITTED THAT THE RATE WAS DULY ACCEPTED BY THE RESERVE BANK OF INDIA. HE FURTHER SUBMITTED THAT ASSESSEE HAS GIVEN FIVE INSTANCES AND ACCORDING TO THEM THE RATE OF INTE REST OF 10% COMPARED FAVOURABLY. HE SUBMITTED THAT THE TRANSFER PRICING OFFICER HAS DISTINGUISHED ONLY ONE AND HAS NOT BOTHERED TO DEAL WITH THE OTHER FOUR M/S. ELIOKEM INDIA PVT. LTD. (CURRENTLY KNOWN AS APCOTEX INDUSTRIES LTD.) 3 INSTANCES. THE LEARNED COUNSEL FURTHER SUBMITTED THAT ONLY A PART OF THE LOAN WAS RAISED BY THE HOLD ING COMPANY AS A LOAN FUND FOR WHICH THE RATE OF INTEREST WAS 6.13%. LEARNED COUNSEL FOR THE SUBMITTED THAT THE TRANSFER PRICING OFFICER HAS HIMSELF OBSERVED THAT THE ADVANCE GIVEN BY THE HOLDING COMPANY ALSO COMPRISED OF EQUITY PORTIONS RAISED BY THEM. LE ARNED COUNSEL SUBMITTED THAT THE TRANSFER PRICING OFFICER HAS HIMSELF AGREED THAT WOULD COST RATE OF INTEREST OF 15%. LEARNED COUNSEL SUBMITTED THAT IN THESE CIRCUMSTANCES TAKING 6.13% AS THE RATE OF INTEREST IS TOTALLY AGAINST THE NORMS. HENCE HE SUBMITTE D THAT ORDERS OF AUTHORITIES BELOW SHOULD BE SET ASIDE. 7. PER CONTRA LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF AUTHORITIES BELOW. HE SUBMITTED THAT HE IS NOT IN A POSITION TO THROW LIGHT ON THE FACTS PREVAILING IN THE PREVIOUS TWO Y EARS. FURTHER HE WOULD NOT POINT OUT ANYTHING AS TO WHY THE FOUR COMPARABLE SUBMITTED BY THE ASSESSEE HAS NOT BEEN COMMENTED UPON BY THE AUTHORITIES BELOW. LEARNED COUNSEL ALSO DID NOT SUBMIT ANYTHING AS TO WHY THE EQUITY PORTION RAISED BY THE HOLDING COMP ANY FOR WHICH THE TRANSFER PRICING OFFICER HIMSELF HAS ACCEPTED TO BE COSTING 15% SHOULD NOT BE GIVEN ANY WEIGHTAGE IN ARRIVING AT THE ARMS - LENGTH RATE OF INTEREST. 8. UP ON CAREFUL CONSIDERATION WE FIND OURSELVES IN AGREEMENT WITH THE SUBMISSION OF THE LEARNED COUNSEL OF THE ASSESSEE. THE SAID LOAN WAS RAISED THREE YEARS AGO. THE REVENUE HAS ACCEPTED THE RATE OF INTEREST OF 10% FOR THE SAME IN THE PAST TWO YEARS AND WITHOUT ANY CHANGE IN FACTS AND LAW IT NOW WANTS TO CHANGE THE SAME WITHOUT ANY COGENT RE ASON. UNDOUBTEDLY TAX PROCEEDINGS A RE NOT SUBJECT TO THE RES JUDICATA. HOWEVER HONOURABLE APEX COURT IN A CATENA OF CASE LAWS HAS EXPOUNDED THAT THERE HAS TO BE AN ELEMENT OF CONSISTENCY AND DIHOR S ANY CHANGE IN FACTS AND LAW THE SETTLED SITUATION SHOUL D NOT BE DISTURBED. 9. THE ASSESSEE ALSO DESERVES TO SUCCEED ON THE GROUND THAT ASSESSEE HAS GIVEN FIVE COMPARABLES. THE AUTHORITIES BELOW HAVE ONLY DISCUSSED ONE AND M/S. ELIOKEM INDIA PVT. LTD. (CURRENTLY KNOWN AS APCOTEX INDUSTRIES LTD.) 4 HAVE NOT AT ALL COMMENTED UPON THE OTHER FOUR. THIS CLEARLY SHOWS THAT THE RATE OF INTER EST CHARGED BY THE ASSESSEE WAS IN ACCORDANCE WITH THE RATE CHARGED BY THE COMPARABLES. 10. FURTHERMORE IT IS CLEAR THAT ONLY A PART OF THE LOAN WAS GRANTED BY THE HOLDING COMPANY BY RAISING LOANS AT THE RATE OF 6.13%. THE HOLDING COMPANY HAS ALSO GIVEN S UMS OUT OF EQUITY PORTION AND CONVERTIBLE BOND PORTION OF ITS RESOURCES. THE TRANSFER PRICING OFFICER HAS HIMSELF ACCEPTED THAT THE COST OF EQUITY PORTION WOULD BE 15% AND BOND WOULD BE 10 % . STILL THE TRANSFER PRICING OFFICER HAS TOTALLY IGNORED THE SAME AND HELD THAT ASSESSEE SHOULD HAVE PAID ONLY 6.13%. IN THESE CIRCUMSTANCES IN OUR CONSIDERED OPINION THE ORDERS OF AUTHORITIES BELOW IS LIABLE TO BE SET ASIDE. THEY ARE NOT AT ALL IN ACCORDANCE WITH THE FACTS CLEARLY SHOW N HEREINABOVE. FACTS DISCUSSED ABO VE SHOW THAT TPO HAS ADOPTED RATE OF INTEREST OF 6.13% TOTALLY ARBITRARILY. HE HAS TOTALLY IGNORED COMPARABLES SHOWN. HE HAS ALSO IGNORED COST OF FUNDS OF THE ASSESSEE HOLDING COMPANY RAISED BY WAY OF EQUITY SHARES AND CONVERTIBLE BONDS WHICH WERE CARRYING INTEREST RATE OF 15% AND 10% RESPECTIVELY. FURTHERMORE, RATE OF INTEREST HAVING BEEN ACCEPTED IN TWO ASSESSMENT YEARS CANNOT BE CHANGED WITHOUT ANY CHANGE IN FACTS OR LAW FOR THE PRESENT ASSESSMENT YEAR. 11. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DISCUSSION WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF ASSESSEE 12. IN THE RESULT ASSESSEES APPEAL STANDS ALLOWED ORDER HAS BE EN PRONOUNCED IN THE COURT ON 11 . 6 . 201 9 . SD/ - SD/ - (AMARJIT SINGH ) (SH A MIM YAHYA ) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 11 / 6 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT M/S. ELIOKEM INDIA PVT. LTD. (CURRENTLY KNOWN AS APCOTEX INDUSTRIES LTD.) 5 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. G UARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI