DCIT CEN CIR 8(1), MUMBAI V. ALLCARGO LOGISTICS LTD, MUMBAI

ITA 4786/MUM/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5584 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2010-2011
• Appeal Filed On: 24-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH DESHPANDE
• Keywords: Depreciation; Transfer pricing; International transaction; Period of limitation; Valuation report; Revised return; Set aside
• Section: 143(3); 92B; 133(6); 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH K, MU MBAI BEFORE SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4786/MUM/2015 (ASSESSMENT YEAR- 2010-11) DCIT. CC -8(1), ROOM NO. 656, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 VS. M/S ALLCARGO LOGISTICS LTD. 5 TH FLOOR, DIAMOND SQUARE, CST ROPAD, KALINA, SANTACRUZ(E), MUMBAI-400098 PAN: AACCA2894D (APPELLANT) (RESPONDENT) C.O. NO.108/MUM/2016 (ASSESSMENT YEAR- 2010-11) M/S ALLCARGO LOGISTICS LTD. 5 TH FLOOR, DIAMOND SQUARE, CST ROPAD, KALINA, SANTACRUZ(E), MUMBAI-400098 PAN: AACCA2894D VS. DCIT. CC -8(1), ROOM NO. 656, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SAURABH DESHPANDE (DR) ASSESSEE BY : SHRI B.V. JHAVERI WITH SHRI I.M. CONTRACTOR ADVOCATES DATE OF HEARING : 04.09.2019 DATE OF PRONOUNCEMENT : 05.09.2019 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE U/S 253 OF THE INCOME-TAX AC T (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-55, MUMBAI DATED 30.05.2015 FOR ASSESSMENT YEAR (2010- 11). ON THE SERVICE OF THE NOTICES OF THE APPEAL TH E ASSESSEE HAS FILED ITS CROSS OBJECTION. THE REVENUE HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL: ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 2 (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED, IN DIRECTING THE AO TO ACCEPT CHARGING OF INTEREST TO AES AT LIBOR PLUS RATE AS ALP AND DELETE THE TRANSFER PRICING ADJUSTMENT MADE BY TPO? (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED, IN REJECTING THE OBSERVATION OF TPO THAT, LIBOR PLUS 3 00 BASIS RELATES TO EXTERNAL COMMERCIAL BORROWING POLICY AND IN THE CASE OF ASSE SSEE WHICH IS UNDER CONSIDERATION, THE ASSESSEE IN ADVANCING LOAN TO AE AND NOT MAKING EXTERNAL COMMERCIAL BORROWING ABROAD? (3) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED, IN IGNORING THE FACTS THAT INTERNATIONAL TRANSACTION O F ADVANCING OF LOAN TO BE BENCHMARKED BY TAKING ASSESSEE AS TESTED PARTY AND RATES IN INDIAN GEOGRAPHY?' (4) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN REJECTING THE ARMS LENGTH INTEREST RATE 13.37% BY T HE TPO, IS BASED ON THE INFORMATION, COLLECTED BY CRISIL U/ S. 133(6) AND H AS BEEN ALREADY CONFRONTED TO THE ASSESSEE BY ISSUING SHOW CAUSE NOTICE?' (5) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED, IN DELETING THE ADDITION MADE BY TPO AND HOLDING THAT LIBOR IS APPLICABLE WITHOUT BRINGING ANY SUCH TRANSACTION ON RECORD.' (6) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED, IN WITHOUT CONSIDERING THE FACT THAT ADVANCING THE LOA N BY ASSESSEE TO AE IS BY CONVERTING RUPEE TO DOLLAR AND THIS CONVERSION IS C LOSELY LINKED TRANSACTION AND PROFIT OF LOSS ARISING OUT OF THIS CONVERSION IS TO BE TAKEN INTO ACCOUNT' (7) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED, IN NOT CONSIDERING THAT FACT THE TRANSACTION OF SHARE APPLICATION, NO THIRD PARTY WOULD HAVE EVER AGREED TO RETAIN THESE MONEY AS APP LICATION MONEY WITHOUT SHARE BEING ALLOTTED FOR A PERIOD OF 12 MONTHS?' (8) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN REJECTING THE TPO S CONCLUSION THAT DELAY IN ALLOTM ENT OF SHARE ENTITLES THE ASSESSEE TO RECEIVE INTEREST AND THE TRANSACTION BE TWEEN THE AE AND THE ASSESSEE SHOULD BE RECORDED AS TO HAVE TAKEN WITHOUT INFLUEN CE OR HAS BEEN TAKEN BETWEEN TWO PARTIES ACTING AT ARMS LENGTHS? (9) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN LAW THE CIT (A) ERRED IN DELETING THE TRANSFER PRIC ING ADJUSTMENT MADE BY THE TPO ON THE ISSUE OF SHARE APPLICATION MONEY ADVANCE D TO THE AES RELYING ON THE DECISION OF THE DELHI ITAT IN THE CASE OF BHARTI AI RTEL LTD. (ITA NO. 5816/ DEL./ 12) WHEREIN, THE BASIS OF NEGATING TPOS ACTION OF A RRIVING AT THE ARM'S LENGTH INTEREST ON THE FUNDS LYING WITH THE AE HAS NOT BEE N DISCUSSED AND DEALT WITH? (10) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN REJECTING THE TPOS ACTION OF WORKING OUT THE GUARAN TEE COMMISSION @4.13% P. A BASED ON CREDIT RATING OF AE AND ON NUMBER OF DAYS, GUARANTEE WAS OUTSTANDING DURING THE F. Y. 2009-10 WITHOUT POINTING OUT ANY D EFECT IN THE COMPUTATION OF TPO?' (11) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DIRECTING GUARANTEE COMMISSION @ 0.05% WITHOUT ENTE RING ANY CUP WHICH IS CONTRARY TO LAW? (12) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT CONSIDERING TWO COMPARABLE TRANSACTION RELIED U PON BY THE ASSESSEE, OF ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 3 CORPORATE GUARANTEE BY YES BANK @ 0.85% AND AFTER M AKING SUITABLE ADJUSTMENT FOR PARPASU CHARGE AVAILABLE TO YES BANK? (13) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN NOT CONSIDERING THE OBSERVATION OF THE TPO THAT THE ASSESSEE DID NOT PRODUCE ANY VALID DOCUMENTARY EVIDENCE IN CONNECTION WITH THE C ORPORATE GUARANTEE OF HDFC BANK ?' (14) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN DIRECTING THE TPO ADJUSTMENT @ 0.05% WHEREAS THE DE CISION RELIED BY HIM SUGGEST THE RATE AT 0.45%? (15) 'ON. THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED , IN DIRECTING THE AO TO DELETE THE ADDITION ON ACCOU NT OF PURCHASE OF SEVEN CRANES OF RS. 2,49,56,596/- WITHOUT APPRECIATING THE FACT OF THAT THE CHARTER ENGINEER HAS CARRIED OUT VALUATION OF SAID CRANES BY STATING THA T ' IT HAS BEEN INFORMED TO US THAT THE EQUIPMENT HAS BEEN TESTED AND WAS CONFIRME D. AS BEING IN FULL WORKING ORDER ( THIS WAS NOT WITNESSED) ? (16) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN HOLDING THAT THE VALUATION REPORT OF THE CHARTERED ENGINEERS ACCEPTABLE WHEREAS THE SAME WAS REJECTED BY THE ITAT, BANGALORE BENCH IN THE CASE OF M/S. INTEL ASIA ELECTRONICS ON WHICH THE CIT(A) PLACED RELIANC E? (17) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED , IN DELETING THE ADJUSTMENT MADE BY TPO IN THE ABSEN CE OF ANY INVOICES REGARDING THE PURCHASE PRICE FOR THE AE IN CONNECTION TO THE CRANE REFERRED AS CK2500? (18) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN HOLDING THAT THE VALUE OF MACHINERY HAS INCREASED F ROM 1192000 TO 1435000 IN 16 MONTHS TIME FROM THE DATE OF PURCHASE BY AE TO S ALE OF AE TO ASSESSEE WITHOUT CONSIDERING THE DEPRECIATION VALUE?'. (19) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED , IN ACCEPTING THE CLAIM OF THE ASSESSEE THAT AE HAD VERIFIED THE MACHINES TO BE IN WORKING CONDITION BY CARRYING OUT DETAIL RUNNING TE ST FROM INDEPENDENT ENGINE WITHOUT ANY VALID DOCUMENTARY EVIDENCE IN SUPPORT O F THE CONTENTION OF THE ASSESSEE? (20) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED, IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCT ION U/S. 80IA(4) WITH TAKING IN TO CONSIDERATION THE CBDT CIRCULAR NO. 10/2005 DATE D 16/12/2005 AND THE FACT THAT JNPT PORT HAD WITHDRAWN ITS CERTIFICATION OF T HE COMPANY? THE APPELLANT PRAYS THAT THE ORDER OF THE CIT-(A), ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. IN CROSS OBJECTION THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: THE LD. CIT(A) ERRED IN NOT DIRECTING THE AO/TPO T O DELETE THE ADDITION MADE ON ACCOUNT OF GUARANTEE COMMISSION ON THE GROUND THAT PROVISIO N OF GUARANTEE IS NOT AN INTERNATIONAL TRANSACTION. 3. WE HAVE SEEN THAT THE CROSS OBJECTION OF THE ASSESS EE IS BARRED BY 228 DAYS OF PRESCRIBED PERIOD OF LIMITATION. THE ASSESSEE HAS F ILED APPLICATION FOR CONDONATION ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 4 OF DELAY WHICH IS SUPPORTED BY THE AFFIDAVIT OF SHR I SHASHI KIRAN SHETTY, MANAGING DIRECTOR OF THE COMPANY. IN THE AFFIDAVIT, THE ASSE SSEE HAS CONTENDED THAT AFTER SERVICE OF NOTICE OF APPEAL THE ASSESSEE WAS REQUIR ED TO FILE CROSS OBJECTION WITHIN 30 DAYS. HOWEVER, THE SAME COULD BE FILED AFTER 229 DAYS OF SERVICE OF NOTICE OF APPEAL FILED BY REVENUE. IT IS FURTHER CONTENDED TH AT THE ASSESSEE HAS RAISED A PURELY LEGAL ISSUE IN THE OBJECTION THAT GUARANTEE COMMISS ION IS NOT AN INTERNATIONAL TRANSACTION. THE LD. AR OF THE ASSESSEE ARGUED THAT THE CROSS OBJECTION RAISED BY ASSESSEE IS PURELY POINT OF LAW AND DOES NOT REQUIR E ANY FRESH FACT FOR CONSIDERATION BEFORE THE TRIBUNAL. THE LD. AR OF THE ASSESSEE FUR THER ARGUED THAT A LENIENT VIEW MAY BE TAKEN WHILE DECIDING THE APPLICATION FOR CON DONATION OF DELAY. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE NOT OBJECTED IN CA SE THE DELAY IS CONDONED. CONSIDERING THE CONTENTION OF BOTH THE REPRESENTATI VE OF THE PARTIES AND THE CAUSE OF DELAY EXPLAINED IN THE APPLICATION FOR CONDONATION OF DELAY, THE DELAY IN FILING THE CROSS OBJECTION BY ASSESSEE IS ALLOWED. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FLAGSHIP COMPANY OF M/S ALLCARGO GROUP AND IS ENGAGED IN THE BUSINESS OF LOGISTIC SE RVICES PROVIDER IN DOMESTIC AS WELL AS IN INTERNATIONAL MARKETS. THE ASSESSEE IS A LEADING LESS THAN A CONTAINER LOAD (LLC) CONSOLIDATOR IN INDIA OFFERING DIRECT OUTBOUND AND INBOUND LCL GROUP SERVICES TO AND FROM MAJOR CARGO DESTINATIONS WORLDWIDE. THE ASSESSEE PRIMARILY OPERATES IN MULTIMODAL TRANSPORT OPERATIO NS (MTO) AND CONTAINER FREIGHT STATION (CFS) BUSINESS IN MUMBAI, CHENNAI AND MUNDR A. THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 27 TH SEPTEMBER 2010 DECLARING TOTAL INCOME OF RS. 74,68,19052/-. SUBSEQUENTLY, A REVISED RETURN O F INCOME WAS FILED ON ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 5 29.03.2011DECLARING TOTAL INCOME OF RS. 22,93,20,91 0/-. IN THE RETURN OF INCOME, THE ASSESSEE HAS SHOWN INTERNATIONAL TRANSACTION WITH I TS ASSOCIATE ENTERPRISES (AE) EXCEEDING RS. 15 CRORE. CONSIDERING THE NATURE OF T RANSACTION AS CONTAINED AUDIT REPORT IN FORM NO. 3CEB A REFERENCE U/S 92CA(1) WAS MADE ON 26.11.2010. THE FOLLOWING DETAILS OF INTERNATIONAL TRANSACTION WERE REPORTED IN FORM NO. 3CEB FOR RELEVANT AY WITH ITS AE: S.NO. NATURE OF TRANSACTION AMOUNT IN RS. 1 PURCHASE OF CRANES 21,64,83,567 2 INCENTIVE (RECEIPTS) 27,94,04,356 3 INCENTIVE (PAYMENTS) 15,51,79,882 4 LOAN PROVIDED 15,29,67,774 5 COST ALLOCATION 2,64,07,157 6 INVESTMENT IN SHARES 6,86,88,000 7 REIMBURSEMENT OF FREIGHT (RECEIPTS) 17,59,03,995 8 REIMBURSEMENT OF MISCELLANEOUS EXPENDITURE (RECEI PTS) 20,05,28,507 9 REIMBURSEMENT OF EXPENSES (OTHERS) 63,47,676 10 REIMBURSEMENT OF FREIGHT (PAYMENTS) 25,02,47,534 11 REIMBURSEMENT OF MISCELLANEOUS EXPENDITURE (PAYMENT S) 8,31,32,767 TOTAL: 161,52,91,175 5. THE TRANSFER PRICING OFFICER (TPO) ENTERED INTO REF ERENCE AND VIDE NOTICE DATED 08.02.2013 ASKED THE ASSESSEE TO MAKE THE SUBMISSIO N IN SUPPORT OF ARMS LENGTH PRICE (ALP) REPORTED IN FORM NO. 3CEB. AFTER HEARI NG THE ASSESSEE, THE TPO MADE THE FOLLOWING UPWARD ADJUSTMENT INTO THE INTER NATIONAL TRANSACTION: S.NO. INTERNATIONAL TRANSACTION ADJUSTMENT AMOUNT (RS.) 1 ARMS LENGTH INTEREST RECEIVABLE ON LOANS ADVANCED TO AE 18021952 2 ARMS LENGTH COMPENSATION RECEIVABLE ON MONEY ADVANCED AS SHARE CAPITAL LYING AS SHARE APPLICATION MONEY. 1428409 3 ARMS LENGTH COMPENSATION FOR GUARANTEES ISSUED ON BEHALF OF AES 32633608 4 ADJUSTMENT TO THE INTERNATIONAL TRANSACTION OF PURCHASES OF CRANE IS RS. 2,93,60,700/-. THE 29360700 0 ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 6 AO IS REQUESTED TO CONSIDER THIS PRICE FOR ALLOWANCE OF DEPRECIATION IN RESPECT OF THESE CRANES IN FUTURE LESS: DEPRECIATION @ 15% 4404105 24956595 TOTAL ARM/S LENGTH PRICE AS PER TPO 7,70,40,564 6. BESIDES THE TRANSFER PRICING ADJUSTMENT (TPA), THE AO DISALLOWED THE DEDUCTION U/S 80IA OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A ), THE TPA AND DISALLOWANCE U/S 80IA OF THE ACT WAS ALLOWED. HOWEVER, WITH REGARD T O THE ADJUSTMENT BY BENCH MARKING GUARANTEE CHARGES @ .05% GUARANTEED AMOUNT GIVEN TO THE AE, THE AO WAS DIRECTED TO RE-COMPUTE THE CHARGES. AGGRIEVED B Y THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL CHALLENGING TH E DELETION OF DISALLOWANCE U/S 80IA AND THE DELETION ON ACCOUNT OF ADJUSTMENT OF I NTERNATIONAL TRANSACTION WITH REGARD TO PURCHASE OF 7 CRANES. THE ASSESSEE IN ITS CROSS OBJECTION HAS CHALLENGED THE ORDER FOR RE-COMPUTING THE GUARANTEE COMMISSION . 7. WE HAVE HEARD THE LD. DR FOR THE REVENUE AND LD. AR OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR RE VENUE SUBMITS THAT GROUND NO. 1 TO 6 RELATES TO T.P ADJUSTMENT OF RS. 1.80 CRORE ON ACCOUNT OF INTEREST OF LOAN ADVANCED TO ITS AE, GROUND NO. 7 TO 9 RELATES TO T. P. ADJUSTMENT OF RS. 14,28,409/- BEING INTEREST FOR DELAYED ALLOTMENT OF SHARES, GRO UND NO. 10 TO 14 RELATES TO T.P. ADJUSTMENT ON ACCOUNT OF CORPORATE GUARANTEE OF RS. 3.26 CRORE, GROUND NO. 15 TO 19 RELATES TO T.P. ADJUSTMENT OF RS. 2.49 CRORE FOR PURCHASE OF CRANES FROM ITS AE AND GROUND NO. 20 RELATES TO DEDUCTION U/S 80IA(4) . THUS, BASICALLY THERE IS FIVE EFFECTIVE GROUNDS OF APPEAL ARE RAISED IN THE PRESE NT APPEAL. 8. GROUND NO. 1 TO 6 RELATES TO T.P ADJUSTMENT OF RS. 1.80 CRORE ON ACCOUNT OF INTEREST OF LOAN ADVANCED TO ITS AE. THE LD. DR FO R THE REVENUE ARGUED THAT ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 7 ASSESSEE HAS ADVANCED A LOAN OF RS. 4,14,02,724/- I TS AE, ASIA LINES PVT. LTD. AND RS.11,15,65,050/- TO ALLCARGO BELGIUM NV RESPECTIVE LY, THIS LOAN WAS ADVANCED TO ASIA LINES PVT. LTD. FOR FIVE YEARS AND ALLCARGO BE LGIUM NV FOR THREE YEARS @ LIBOR + 300 POINTS. IN THE T.P. STUDY THE ASSESSEE STATED THAT THE RATE AT WHICH INTEREST IS RECEIVED BY ASSESSEE FROM ITS AE ARE IN LINE WITH INTEREST RATE BENCH MARK AS PER R.B.I. POLICY AND SUBMITTED THAT THE SAME WA S AT ALP. THE TPO ON THE BASIS OF CRISIL CREDIT RATING DETERMINED THE BENCH MARK A ND SUGGESTED THE ADJUSTMENT OF RS. 1,80,21,952/-. THE LD. CIT(A) DELETED THE ADJUS TMENT DIRECTING THE AO/TPO TO DELETE THE ADJUSTMENT ON THE BASIS OF DECISION OF H ONBLE BOMBAY HIGH COURT IN CIT VS. TATA AUTOCOMP SYSTEM PVT. LTD. (374 ITR 51 6). ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE IS RELIED UPON THE ORDER OF LD. CIT(A). THE LD AR FOR ASSESSEE FURTHER ARGUED THAT THE LD CIT(A) DECIDED THE GROUN D OF APPEAL ON THE BASIS OF THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. TA TA AUTOCOMP SYSTEM PVT LTD. AND BY MUMBAI TRIBUNAL IN CASE OF ION EXCHANGE (I) LTD. VS. ACIT IN ITA NO. 5109/MUM/2013 AND . 9. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE LD. TPO WHILE MAKING ADJ USTMENT OBSERVED THAT FOR ASIA LINES PVT. LTD. AS NO DETAILS REGARDING CREDIT RATI NG FOR ASIA LINES PVT. LTD. WAS PRODUCED AND CLAIMED THAT CREDIT RATING OF ASIA LIN ES PVT. LTD. SHOULD BE ADOPTED AS A+. HOWEVER, THE ASSESSEE PRODUCED THE CREDIT RA TING BY CRISIL FOR ITS AE ALLCARGO BELGIUM NV AS A+. THUS, THE CREDIT RATIN G FOR ASIA LINES PVT LTD. WAS CONSIDERED BY TPO AT BBB-. FOR ALLCARGO BELGIUM THE TPO OBSERVED THAT THE CREDIT RATING WAS OBTAINED ON 31.10.2013, WHICH CAN NOT BE SAID TO BE A VALID ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 8 DOCUMENTATION. FURTHER, THE CREDIT RATING WAS ARRIV ED BY TAKING INTO CONSIDERATION THE RESULT OF ALLCARGO BELGIUM ON 31.12.2001, 31.03 .2012 AND 31.03.2013 AND ALL THREE YEARS ARE SUBSEQUENT TO THE YEAR UNDER CONSID ERATION. THUS, THE CREDIT RATING CLAIMED BY ASSESSEE FOR ITS AE A+ WAS DEDUCTED A ND ADOPTED AS BBB- AND ON THE BASIS OF INFORMATION COLLECTED BY THE TPO FROM CRISIL U/S.133(6) FOR FINANCIAL YEAR 2009-10. THE TPO SUGGESTED THE ADJUSTMENT OF R S. 1,80,21,952/-. BEFORE THE LD. CIT(A) IT WAS ARGUED THAT ASIA LINES PVT. LTD. WAS SET UP TO ENGAGE IN THE BUSINESS OF ACQUIRING AND LEASING EQUIPMENT AND CRA NES IN THE TERRITORY OF MIDDLE EAST. THE LOAN WAS PROVIDED TO AE AS CAPITAL TO ENA BLE IT TO SET UP ITS BUSINESS AND TO ACQUIRE NECESSARY OPERATIONAL RESOURCES. ALLCARGO B ELGIUM MAINLY WAS A SPECIAL PURPOSE VEHICLE SET UP BY THE ASSESSEE FOR HOLDING ITS VARIOUS GROUP COMPANIES. THE LOAN WAS GIVEN TO AE FOR FUNDING ACQUISITION OF COM PANY ABROAD AND FOR PROVIDING CAPITAL TO DOWNSTREAM SUBSIDIARIES. THE ASSESSEE-CO MPANY GIVEN A TRADE ADVANCE TO ITS AE WHICH DID NOT RESULT ANY INCOME. FURTHER, AN AMOUNT OF RS. 1,72,30,927/- AND RS. 21,64,83,567/- WERE ADJUSTED AGAINST PURCHA SE OF CRANES BY ASSESSEE. THE LD. CIT(A) WHILE RELYING UPON THE DECISION OF HONB LE BOMBAY HIGH COURT IN TATA AUTOCOMP SYSTEM LTD. (SUPRA) WHEREIN IT WAS HELD TH AT ALP IN CASE OF LOAN ADVANCED TO OVERSEAS AE SHOULD BE DETERMINED ON THE BASIS OF RATE OF INTEREST BEING CHARGED IN THE COUNTRY WHERE THE LOAN IS RECE IVED/CONSUMED. THE HONBLE HIGH COURT MADE THE FOLLOWING OBSERVATIONS: 7. WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL IN TER ALIA HAS FOLLOWED THE DECISIONS OF THE BOMBAY BENCH OF THE TRIBUNAL IN CASES OF VVF LTD. V. DY. CIT [IT APPEAL NO. 673 (MUM.) OF 2006] AND DY. CIT V. TECH MAHINDRA LTD . [2011] 12 TAXMANN.COM 132/46 SOT 141 (MUM.) (URO) TO REACH THE CONCLUSION THAT ALP IN THE CASE OF LO ANS ADVANCED TO ASSOCIATE ENTERPRISES WOULD BE DETERMINED ON THE BA SIS OF RATE OF INTEREST BEING CHARGED IN THE COUNTRY WHERE THE LOAN IS RECEIVED/CONSUMED. MR . SURESH KUMAR THE LEARNED COUNSEL ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 9 FOR THE REVENUE INFORMED US THAT THE REVENUE HAS NO T PREFERRED ANY APPEAL AGAINST THE DECISION OF THE TRIBUNAL IN VVF LTD . ( SUPRA ) AND TECH MAHINDRA LTD . ( SUPRA ) ON THE ABOVE ISSUE. NO REASON HAS BEEN SHOWN TO US AS TO WHY THE REVENUE SEEKS TO TAKE A DIFFERENT VIEW IN RESPECT OF THE IMPUGNED ORDER FROM THAT TAKEN IN VVF LTD. ( SUPRA ) AND TECH MAHINDRA LTD . ( SUPRA ) . THE REVENUE NOT HAVING FILED ANY APPEAL, HAS IN FAC T ACCEPTED THE DECISION OF THE TRIBUNAL IN VVF LTD . ( SUPRA ) AND TECH MAHINDRA LTD . ( SUPRA ). 8. IN VIEW OF THE ABOVE WE SEE NO REASON TO ENTERTAIN THE PRESENT APPEAL AS IN SIMILAR MATTERS THE REVENUE HAS ACCEPTED THE VIEW OF THE TR IBUNAL WHICH HAS BEEN RELIED UPON BY THE IMPUGNED ORDER. ACCORDINGLY, WE SEE NO REASON T O ENTERTAIN THE PROPOSED QUESTIONS OF LAW. 10. CONSIDERING THE DECISION OF JURISDICTIONAL HIGH COU RT, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). THE LD CIT(A) APPLIED LIBOR +300 AS ARMS LENGTH RATE FOR THE LOAN ADVANCED THE ASSESSEE TO ITS AE, WHICH IS PROXIMATE TO SIMILAR RATE APPROVED BY THE HONBLE HIGH COURT IN CASE OF TATA AUTOCOUP SYSTEM LTD. (SUPRA). HENCE, GROUND NO.1 TO 6 RAISE D BY REVENUE IS DISMISSED. 11. GROUND NO.7 TO 9 RELATES TO T.P. ADJUSTMENT OF INTE REST ON THE ISSUE OF SHARE APPLICATION MONEY. THE LD. DR FOR THE REVENUE FURTH ER RELIED UPON THE ORDER OF TPO. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUED THAT THESE GROUNDS OF APPEAL ARE COVERED IN FAVOUR OF ASSESSEE IN ASSESSE ES OWN CASE FOR ASSESSMENT YEARS 2007-08 & 2008-09. IT WAS EXPLAINED THAT THE SHARE APPLICATION MONEY WAS GIVEN IN THE ASSESSMENT YEAR 2009-10, BUT NO ADJUST MENT BY WAY OF INTEREST ON DELAYED ALLOTMENT OF SHARES WAS MADE. 12. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SEEN THAT SIMI LAR GROUNDS OF APPEAL ARISED FOR CONSIDERATION OF TRIBUNAL IN ASSESSEES OWN CASE FO R AY 2007-08 & 2008-09 IN ITA NO. 4909, 4910/M/2012 AND THE SAME WAS DECIDED BY T RIBUNAL IN FAVOUR OF ASSESSEE HOLDING AS UNDER: 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN GROUND NO. 1 OF BOTH THE PR ESENT APPEALS, THE ASSESSEE HAS RAISED A ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 10 PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF ASSES SMENTS MADE BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT FOR BOTH THE YEARS UNDER CONS IDERATION WHILE IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE BY THE A. O. AND SUSTAINED BY THE LD. CIT(A) BY WAY OF TP ADJUSTMENT ON ACCOUNT OF INTEREST CHARGEA BLE ON THE AMOUNT OF SHARE APPLICATION MONEY PAID TO ITS AE AND LYING UNUTILIZED FOR A PER IOD BEYOND 60 DAYS TREATING THE SAME AS LOAN. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE COMMON ISSUE INVOLVED IN GROUND NO. 2 OF THE ASSESSEES APPEALS FOR BOTH THE YEARS UNDER CONSIDERATION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE LATEST DEC ISION OF DELHI BENCH OF ITAT IN THE CASE OF BHARTI AIRTEL LTD., VS. ACIT RENDERED VIDE ITS O RDER DATED 11-3-2014 PASSED IN ITA NO. 5816/DEL/12 WHEREIN A SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE HOLDING THAT THE TRANSACTIONS INVOLVING PAYMENT OF SHARE APPLICATION MONEY COULD NOT BE TREATED AS INTERNATIONAL TRANSACTIONS OF LOAN GIVEN BY THE ASSESSEE COMPANY TO ITS AE MERELY BECAUSE THERE WAS A DELAY IN ALLOTMENT OF SHARES. A COPY OF THE SAID ORDER OF THE TRIBUNAL IS ALSO PLACED ON RECORD BEFORE US AND PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE V IDE PARA NO. 47 OF ITS ORDER WHICH READS AS UNDER:- 47. WE FIND THAT IN THE PRESENT CASE THE TPO HAS NOT DISPUTED THAT THE IMPUGNED TRANSACTIONS WERE IN THE NATURE OF PAYMENTS FOR SHA RE APPLICATION MONEY, AND THUS, OF CAPITAL CONTRIBUTIONS. THE TPO HAS NOT MADE ANY ADJ USTMENT WITH REGARD TO THE ALP OF THE CAPITAL CONTRIBUTION. HE HAS, HOWEVER, TREAT ED THESE TRANSACTIONS PARTLY AS OF AN INTEREST FREE LOAN, FOR THE PERIOD BETWEEN THE DATE S OF PAYMENT TILL THE DATE ON WHICH SHARES WERE ACTUALLY ALLOTTED, AND PARTLY AS CAPITA L CONTRIBUTION, I.E. AFTER THE SUBSCRIBED SHARES WERE ALLOTTED BY THE SUBSIDIARIES IN WHICH CAPITAL CONTRIBUTIONS WERE MADE. NO DOUBT, IF THESE TRANSACTIONS ARE TREA TED AS IN THE NATURE OF LENDING OR BORROWING, THE TRANSACTIONS CAN BE SUBJECTED TO ALP ADJUSTMENTS, AND THE ALP SO COMPUTED CAN BE THE BASIS OF COMPUTING TAXABLE BUSI NESS PROFITS OF THE ASSESSEE, BUT THE CORE ISSUE BEFORE US IS WHETHER SUCH A DEEMING FICTION IS ENVISAGED UNDER THE SCHEME OF THE TRANSFER PRICING LEGISLATION OR ON TH E FACTS OF THIS CASE. WE DO NOT FIND SO. WE DO NOT FIND ANY PROVISION IN LAW ENABLING SU CH DEEMING FICTION. WHAT IS BEFORE US IS A TRANSACTION OF CAPITAL SUBSCRIPTION, ITS CH ARACTER AS SUCH IS NOT IN DISPUTE AND YET IT HAS BEEN TREATED AS PARTLY OF THE NATURE OF INTEREST FREE LOAN ON THE GROUND THAT THERE HAS BEEN A DELAY IN ALLOTMENT OF SHARES. ON F ACTS OF THIS CASE ALSO, THERE IS NO FINDING ABOUT WHAT IS THE REASONABLE AND PERMISSIBL E TIME PERIOD FOR ALLOTMENT OF SHARES, AND EVEN IF ONE WAS TO ASSUME THAT THERE WA S AN UNREASONABLE DELAY IN ALLOTMENT OF SHARES, THE CAPITAL CONTRIBUTION COULD HAVE, AT BEST, BEEN TREATED AS AN INTEREST FREE LOAN FOR SUCH A PERIOD OF INORDINATE DELAY AND NOT THE ENTIRE PERIOD BETWEEN THE DATE OF MAKING THE PAYMENT AND DATE OF ALLOTMENT OF SHARES. EVEN IF ALP DETERMINATION WAS TO BE DONE IN RESPECT OF SUCH DEE MED INTEREST FREE LOAN ON ALLOTMENT OF SHARES UNDER THE CUP METHOD, AS HAS BEEN CLAIMED TO HAVE BEEN DONE IN THIS CASE, IT WAS TO BE DONE ON THE BASIS AS TO WHAT WOULD HAV E BEEN INTEREST PAYABLE TO AN UNRELATED SHARE APPLICANT IF, DESPITE HAVING MADE T HE PAYMENT OF SHARE APPLICATION MONEY, THE APPLICANT IS NOT ALLOTTED THE SHARES. TH AT ASPECT OF THE MATTER IS DETERMINED BY THE RELEVANT STATUTE. THIS SITUATION IS NOT IN P URL MATERIA WITH AN INTEREST FREE LOAN ON COMMERCIAL BASIS BETWEEN THE SHARE APPLICANT AND THE COMPANY TO WHICH CAPITAL CONTRIBUTION IS BEING MADE. ON THESE FACTS, IT WAS UNREASONABLE AND INAPPROPRIATE TO TREAT THE TRANSACTION AS PARTLY IN THE NATURE OF IN TEREST FREE LOAN TO THE AE. SINCE THE TPO HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT AN UNRELATED SHARE APPLICANT WAS TO BE PAID ANY INTEREST FOR THE PERIOD BETWEEN MAKING THE SHARE APPLICATION ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 11 PAYMENT AND ALLOTMENT OF SHARES, THE VERY FOUNDATIO N OF IMPUGNED ALP ADJUSTMENT IS DEVOID OF LEGALLY SUSTAINABLE MERITS. 7. AS THE ISSUE INVOLVED IN GROUND NO. 2 OF THE PRE SENT APPEALS AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF B HARTI AIRTEL LIMITED (SUPRA) DECIDED BY THE TRIBUNAL, WE RESPECTFULLY FOLLOW THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND DELETE THE ADDITION MADE BY THE A.O./TPO AND SU STAINED BY THE LD. CIT(A) BY WAY OF TP ADJUSTMENT ON ACCOUNT OF INTEREST CHARGEABLE ON THE AMOUNT OF SHARE APPLICATION MONEY PAID BY THE ASSESSEE AND LYING UNUTILIZED WITH ITS AE TREATING THE SAME AS THE TRANSACTION OF LOAN. GROUND NO. 2 OF THE ASSESSEES APPEALS FOR BO TH THE YEARS UNDER CONSIDERATION IS ACCORDINGLY ALLOWED. 13. CONSIDERING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE ON IDENTICAL GROUNDS OF APPEAL FOR AY 2007-08 & 2008-09 IN ITA NO. 4909, 49 10/M/2012, WE DO NOT FIND ANY MERIT IN THE GROUNDS OF APPEAL RAISED BY REVENU E AND THE SAME ARE DISMISSED. 14. GROUND NO. 10 TO 14 RELATES TO T.P. ADJUSTMENT ON A CCOUNT OF CORPORATE GUARANTEE OF RS. 3.26 CRORE. THE ASSESSEE HAS ALSO RAISED CRO SS OBJECTION AGAINST THE DIRECTION OF LD. CIT(A) FOR NOT DELETING THE GUARANTEE COMMIS SION ON THE GROUND THAT PROVISION OF GUARANTEE IS NOT AN INTERNATIONAL TRAN SACTION. THE LD. DR FOR THE REVENUE RELIED UPON THE ORDER OF TPO/AO. 15. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUE D THAT ASSESSEE-COMPANY HAS GIVEN GUARANTEE TO ALL CARGO BELGIUM NV OF RS. 4581 60000/- AND TO ECO INTERNATIONAL NV OF RS. 332000000/-. THE TPO COMPUT ED ALP @ 4.13% ON THE OUTSTANDING CORPORATE GUARANTEE. HOWEVER, THE LD. C IT(A) RESTRICTED THE T.P. ADJUSTMENT TO 0.5% BASED ON DECISION OF MUMBAI TRIB UNAL IN CASE OF MANUGRAPH INDIA LTD. VS DCIT IN ITA NO. 4761/M/2013 DATED 25. 03.2015. IN ALTERNATIVE, IT WAS ARGUED THAT THE T.P. ADJUSTMENT MAY BE RESTRICT ED TO AMOUNT DETERMINED BY THE LD CIT(A). THE LD. AR OF THE ASSESSEE RELIED UPON T HE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT V/S EVEREST KENTO CYLINDERS LTD. [2015] 378 ITR 57/232 TAXMAN 307/58 TAXMANN.COM 254 (BOM.) AND THE DECISI ON OF DELHI TRIBUNAL IN ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 12 BHARTI AIRTEL LTD. VS. ACIT (63 SOT 113). IN THE RE JOINDER ARGUMENT, THE LD. DR FOR THE REVENUE FAIRLY CONCEDED ON FACTUAL POSITION. TH E LD. AR OF THE ASSESSEE WOULD ARGUE THAT IN CASE THE GROUNDS OF APPEAL RAISED BY REVENUE IS DISMISSED, THE ASSESSEE WOULD NOT PRESS THE GROUNDS RAISED IN CROS S OBJECTION THAT GUARANTEE COMMISSION IS NOT AN INTERNATIONAL TRANSACTION. HOW EVER, THE ISSUE MAY BE KEPT OPEN FOR FUTURE REFERENCE IN CASE THE ASSESSEE WISH ES TO AGITATE AGAIN BEFORE THE COURT OF LAW. 16. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE TPO NOTED THAT THE ASSESS EE HAS NOT REPORTED THE AFORESAID GUARANTEES AS INTERNATIONAL TRANSACTION IN FORM NO. 3CEB AND NOT BENCH MARKED IN THE T.P. STUDY REPORT. THE ASSESSEE WAS GIVEN SHOW -CAUSE NOTICE DATED 19.12.2013 AS TO WHY IT SHOULD NOT BE MADE BENCH MARKED. THE A SSESSEE FURNISHED IN REPLY DATED 06.02.2014. THE ASSESSEE CONTENDED THAT CORPO RATE GUARANTEE TRANSACTION IS NOT AN INTERNATIONAL TRANSACTION AS THE CONDITION O F RELEVANT TRANSACTION HAVING A BEARING ON PROFITS, INCOME, LOSS OR ASSET STILL EXI ST FOR TRANSACTION TO QUALIFY AS AN INTERNATIONAL TRANSACTION. THE CONTENTION OF ASSESS EE WAS NOT ACCEPTED BY TPO HOLDING THAT THE AMENDMENT IN SECTION 92B WITH RETR OSPECTIVE EFFECT FROM 01.04.2002 BRINGS THE TRANSACTION WITHIN THE NET OF INTERNATIONAL TRANSACTION. THIS ASPECT HAS BEEN UPHELD BY THE LD CIT(A) ABOVE, AND THE ASSESSEE IS IN APPEAL BEFORE US BY WAY OF CROSS OBJECTIONS. THIS ASPECT OF THE M ATTER HAS NOT BEEN SERIOUSLY PURSUED BEFORE US, AS THE CROSS OBJECTIONS ARE QUIT E BELATED AND THE LD REPRESENTATIVE HAS ADDRESSED THE ISSUE MORE ON THE QUANTUM OF THE ADDITION MADE BY ASSESSING OFFICER. ACCORDINGLY, WE PROCEED TO ADJUD ICATE THE ISSUE BASED ON THE ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 13 ASSESSMENT MADE BY THE CIT(A) ON THIS ASPECT. THE TPO CALCULATED THE GUARANTEE @ 4.13% P.A. ON AMOUNT BASED ON NUMBER OF DAYS THE GUARANTEE WAS OUTSTANDING DURING THE RELEVANT FINANCIAL YEAR AND WORKED THE A DJUSTMENT OF RS. 3,26,33608/-. ON THE RATE OF GUARANTEE COMMISSION, BEFORE LD. CIT (A), THE ASSESSEE SUBMITTED THAT 4.13% WAS EXCESSIVE AND UNREASONABLE. THE ASSESSEE REFERRED TO THE PROPOSAL YES BANK TO CHARGE GUARANTEE FEES OF 0.85% P.A., AND A LSO TO THE QUOTATION FROM HDFC BANK PROPOSING TO CHARGE GUARANTEE COMMISSION OF 1% OF THE VALUE OF GUARANTEE. THE LD. CIT(A) OBSERVED THAT RATE OF INT EREST @ 4.13% FOR BENCH MARKING GUARANTEE ADOPTED BY TPO WAS NOT SUPPORTED BY ANY VALID MATERIAL AND RELYING UPON THE DECISION OF MUMBAI TRIBUNAL IN MAN UGRAPH INDIA LTD. VS. DCIT IN ITA NO. 4761/2013 DATED 25.03.2015 DIRECTED THE AO TO RECOMPUTE THE T.P. ADJUSTMENT BY BENCH MARKING GUARANTEE CHARGE AT 0.5 % OF THE GUARANTEE GIVEN BY ASSESSEE TO ITS AES AND GRANTED PARTIAL RELIEF TO T HE ASSESSEE. THIS IS IN LINE WITH THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN CASE OF EV EREST KANTO CYLINDERS LTD (SUPRA). 17. WE HAVE SEEN THAT THE LD. CIT(A) DECIDED THE ISSUE ON THE BASIS OF DECISION OF JURISDICTIONAL ITAT IN THE CASE OF MANUGRAPH INDIA LTD (SUPRA), WHICH IS IN CONSONANCE WITH THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN EVEREST KANTO CYLINDER LTD (SUPRA). THUS, CONSIDERING THE AFORESA ID DECISION OF CO-ORDINATE BENCH OF TRIBUNAL, WE DO NOT FIND ANY ILLEGALITY AND INFI RMITY IN THE ORDER PASSED BY LD. CIT(A). HOWEVER, WE MAY MAKE IT CLEAR THAT THE ISSU E WHETHER THE GUARANTEE COMMISSION NOT FALL WITHIN THE PURVIEW OF INTERNATI ONAL TRANSACTION OR NOT IS LEFT ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 14 OPEN. WITH THESE OBSERVATIONS, THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED AND THE CROSS OBJECTION RAISED BY ASSESSEE IS DISMI SSED BEING INFRUCTUOUS. 18. GROUND NO. 15 TO 19 RELATES TO T.P. ADJUSTMENT OF R S. 2,49,56,595/- FOR PURCHASE OF CRANES. THE LD. DR FOR THE REVENUE ARGUED THAT THE AES HAD PURCHASED THE CRANES FROM THIRD PARTIES IN AND AROUND THE SAME TIME AND SOLD THE CRANES TO ASSESSEE. THE TPO AFTER ALLOWING THE DEPRECIATION SUGGESTED THE A DJUSTMENT OF RS. 2,49,56,595/-. THE APPROACH OF LD. CIT(A) WAS NOT CORRECT WHILE AC CEPTING THE BENCH MARK. 19. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE ARGUE D THAT THE ASSESSEE SUBMITTED THE ENTIRE DETAILS OF PURCHASE OF CRANES. THE CRANES WA S OLD AND USED ASSETS AND THEREFORE, THE ASSESSEE OBTAINED A VALUATION CERTIF ICATE FROM CHARTERED ENGINEER EVALUATED EXPECTED MARKET VALUE. THE CUSTOM AUTHORI TY HAS ACCEPTED THE SAID VALUATION FOR PAYMENT OF CUSTOM DUTY. THE TPO REJEC TED THE VALUE OF THE CRANES, WHICH WAS CERTIFIED BY CHARTERED ENGINEER WITHOUT R EFERRING MATTER TO DEPARTMENT VALUATION OFFICER (DVO). IT WAS ARGUED THAT THE TPO CANNOT REJECT VALUATION OF CHARTERED ENGINEER WITHOUT THE OPINION OF EXPERT. I T WAS FURTHER ARGUED THAT TPO GAVE A DIRECTION TO THE AO TO CONSIDER DEPRECIATION PORTION ON THE VALUE OF CRANES. HOWEVER, THE AO DISALLOWED THE ENTRE T.P. ADJUSTMEN T WITHOUT ALLOWING DEPRECIATION WHICH WAS CONSIDERED BY LD. CIT(A) AND ALLOWED ACCORDINGLY. THE LD. AR RELIED UPON THE DECISION OF MUMBAI TRIBUNAL IN C ASE OF GLOBAL PAYMENTS ASIA PACIFIC (INDIA) (P.) LTD. V. DCIT [2017] 78 TAXMANN .COM 262 (MUMBAI TRIB.) AND IN ACIT VS. KOCH CHEMICAL TECHNOLOGY GROUP (I) LTD. (ITA NO. 8091/M/11 DATED 30.11.2015). ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 15 20. WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PART IES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE TPO NOTICED FROM THE REPO RT IN FORM 3CEB THAT ASSESSEE HAS PURCHASED TWO CRANES FROM ITS AE FOR RS. 21,64, 83,567/-. TWO CRANES WAS PURCHASED FROM ASIA LINES PTY. LTD., DUBAI FOR RS. 6,92,11,500/- AND FIVE CRANES FROM ECU HEAVY LIFT WIJ, DOHA, QUATAR FOR RS. 14727 2067/-. THE ASSESSEE BENCH MARKED THE TRANSACTION BY CUP METHOD. IN SUPPORT OF VALUATION, THE ASSESSEE FURNISHED A CERTIFICATE OF CHARTERED ENGINEER. THE TPO FURTHER OBSERVED THAT THE CHARTERED ENGINEER HAS NOT SPECIFIED THAT EQUIPMENT (CRANES) IN FULL WORKING ORDER OR WERE TESTED FOR FULL WORKING ORDER BEFORE VALUIN G THE SAME AND REJECTED THE BENCH MARK. THE ASSESSEE WAS ASKED TO PRODUCE ALTERNATIVE BENCH MARKING AND TO PRODUCE THE COPIES OF INVOICES BY WHICH CRANES WERE PURCHAS ED. THE ASSESSEE FURNISHED THE FOLLOWING INFORMATION: S. NO. PARTICULARS YEAR OF MFR. DT. OF PURCHASE/ SALE FOR AE SALE PRICE (USD) FOR THE AE PURCHASE PRICE (USD) FOR THE AE DIFFERENCE USD 1 CK 2500 CRANE 2000 1150000 INVOICE NOT AVAILABLE 2 TEREX AMERICAN HC - 110 CRAWLER CRANE MANITOWOC 1994 24.6.2008/ 11.10.2009 625000 1192000 243000 3 TEREX AMERICAN HC-110 CRAWLER CRANE AC 4209 2007 24.6.2008/ 11.10.2009 810000 4 CRANE 2000 DEMAG AC- 80 HYDRAULIC TRUCK 2000 31.01.2008 /8.7.2009 464642 620429 5 TEREX AMERICAN HC - 110 CRAWLER CRANE AC 3914 2002 21.07.2008 /8.10.2009 599960 1173880 0 6 TEREX AMERICAN HC-110 CRAWLER CRANE AC 3803 2001 21.07.2008 /8.10.2009 573920 7 CRANE AC-3893 2000 13.09.2009 /30.09.200 9 240000 272000 ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 16 AFTER PERUSING THE DETAILS AND THE INVOICES FUR NISHED BY ASSESSEE, THE TPO MADE THE ADJUSTMENT IN THE FOLLOWING MANNER: 9.5 ON GOING THROUGH THE ABOVE TABULATION IT IS SE EN THAT THE CRANES AT S.NO. 2 & 3 ABOVE PURCHASED FOR USD $ 11,92,000 BY THE AE AT US D $ 1435000. THUS THE AE HAS PURCHASED THE CRANES USED THEM FOR A YEAR AND YET S OLD THEM FOR USD 1435000. AS CAN BE SEEN FROM THE PURCHASE INVOICES PRODUCED BY THE ASSESSEE, THE PURCHASES OF THE AE ARE FROM 3 RD PARTIES AND HENCE CAN BE TAKEN TO BE AS CUP. HAVIN G USED THESE CRANES FOR A YEAR, IT WOULD BE REASONABLE TO ASSUME A MINIMUM DE PRECIATION OF 10%. HENCE THE ARM'S LENGTH SALES VALUE OF THE CRANE IN THE HANDS OF THE AE WOULD BE 1192000 X 90% I.E. = 1072800. HENCE THE ASSESSEE HAS PAID AN EXCE SS CONSIDERATION ON THESE CRANES AMOUNTING TO USD 362200. ASSESSEE WAS THEREFORE REQ UIRED TO SHOW CAUSE AS TO WHY AN ADJUSTMENT OF USD 362200 SHOULD NOT BE MADE TO THE TRANSACTION OF PURCHASE OF TWO CRANES BY THE ASSESSEE FROM THE AE. THE RUPEE EQUIV ALENT OF THE ADJUSTMENT IS PROPOSED TO BE TAKEN AT RS. 1,62,99,000/- (TAKING ONE USD @ RS. 45/-). 9.6 SIMILARLY AS REGARDS THE CRANE LISTED AT S.NO.1 OF THE TABULATION, THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THE PURCHASE INVOICE. THE CRAN E IS ALSO VERY OLD (MANUFACTURED IN THE YEAR 2000). IN THE ABSENCE OF ANY SUPPORTING DO CUMENTATION, THE SAME RATIO OF ADJUSTMENT PROPOSED IN PARA 6.5 ABOVE, IS PROPOSED TO BE APPLIED TO THIS TRANSACTION AS WELL. THIS CRANE IS PURCHASED BY THE ASSESSEE FOR A CONSIDERATION OF USD $ 1150000. THE ADJUSTMENT AS PROPOSED IN PARA 6.5 ABOVE IS 25. 24% OF THE PURCHASE PRICE PAID BY THE ASSESSEE. HENCE APPLYING THIS RATIO, THE ADJUST MENT OF USD $ 290260 OR INR 1,30,61,700/- IS PROPOSED TO BE MADE TO THE TRANSAC TION OF PURCHASE OF THIS CRANE. ASSESSEE WAS THEREFORE REQUIRED TO SHOW CAUSE AS TO WHY THIS ADJUSTMENT OF INR 1,30,61,700/- SHOULD NOT BE MADE. 9.7 TO SUM U THIS DISCUSSION AN ADJUSTMENT OF RS.2, 93,60,700/- WAS PROPOSED TO THE INTERNATIONAL TRANSACTION OF PURCHASE OF CRANES. 21. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT ITS AE HAS INCURRED VARIOUS EXPENDITURE ON FREIGHT, INSURANCE, TRANSPORT, PERFO RMANCE OF WORKING TEST, SUPERVISION OF PROCESS OF INSPECTION, APPROVAL PURC HASES, DISPATCH AND DELIVERY OF CRANES. ALL THE EXPENSES WERE BORN BY ASSESSEE. IN ALTERNATIVE, IT WAS PLEADED THAT LD. TPO CANNOT MAKE CHERRY PICKING OF ONLY THOSE TR ANSACTION WHEREIN THE SALE PRICE OF CRANES WERE MORE THAN THE PURCHASE PRICE B Y THE AE AND THE ADJUSTMENT IF ANY SHOULD BE ONLY ON NET PROFIT EARNED BY AE I.E. USD 14651/- (WHICH IS WITHOUT CONSIDERING EXPENSES). THE LD. CIT(A) AFTER CONSIDE RING THE FACT OF THE CASE, THE SUBMISSION MADE AND THE DECISION OF BANGALORE TRIBU NAL IN CASE OF ASIA ELECTRONICS VS. ADIT (2011) 9 TAXMAN.COM(BANGALORE) WHEREIN IT WAS HELD THAT IN ABSENCE OF IDENTICAL TRANSACTION,AS OPTED BY ASSES SEE, THE VALUATION DETERMINED BY ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 17 REGISTERED VALUER WOULD BE THE MOST APPROPRIATE MEA NS UNDER THE CUP METHOD AND DIRECTED THE AO TO DELETE THE ADDITION. THOUGH, THE LD. CIT(A) HAS REFERRED TO THE DECISION OF THE BANGALORE BENCH OF THE TRIBU NAL FOR THE PROPOSITION THAT THE VALUATION REPORT OF AN EXPERT IS A VALID C UP DATA. SO, HOWEVER, IN THE PRESENT CASE, THE CERTIFICATE SO GIVEN BY THE CHART ERED ENGINEER IS A QUALIFIED ONE. IT HAS BEEN NOTED BY THE TPO IN PARA-9.2 OF HI S ORDER. MOREOVER, WE FIND THAT IN RELATION TO THE TRANSACTION OF PURCHAS E OF CK-2500 CRANE FOR USD 11,50,000, THERE WAS NO INFORMATION REGARDING T HE PURCHASE PRICE IN THE HANDS OF AE. SECONDLY, WITH RESPECT TO PURCHASE OF OTHER TWO CRANES, ONE OF THE CRANES WAS PURCHASED FROM AE FOR USD 8,1 0,000 AS AGAINST THE PURCHASE PRICE IN THE HANDS OF THE AE OF USD 5,22,0 00/-. AT THE TIME OF HEARING, IT WAS PUT TO THE LD. REPRESENTATIVE FOR T HE ASSESSEE THAT IN THE CONTEXT OF THE PURCHASE OF CRANE FOR A CONSIDERATIO N OF USD 8,10,000, THE PRINCIPLE ADOPTED BY THE CIT(A) IS NOT TENABLE. HOW EVER, THE PLEA OF THE LD. REPRESENTATIVE WAS THAT AN APPROPRIATE REDUCTION ON ACCOUNT OF DEPRECIATION BE ALLOWED BY DETERMINING THE ALP IN SUCH TRANSACTI ON. THIS PLEA OF THE ASSESSEE IN OUR VIEW IS QUITE REASONABLE AND THEREF ORE, WE AFFIRM THE DECISION OF THE CIT(A) EXCEPT TO THE EXTENT OF RETA INING ADJUSTMENT IN RELATION TO PURCHASE OF CRANE FOR USD 8,10,000 FROM THE AE (DEPICT AS ITEM 3 IN THE TABULATION IN PARA-9.4 OF THE ORDER OF THE TPO). IN THIS REGARD, THE ALP SHALL BE DETERMINED AFTER ALLOWING FOR A DEPREC IATION OF 10%. THE ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 18 ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE ALP ACCORDINGLY. THUS, ON THIS ASPECT REVENUE PARTLY SUCCEEDS. 22. GROUND NO. 20 RELATES TO DEDUCTION U/S 80IA(4). THE LD. DR FOR THE REVENUE FAIRLY CONCEDED THAT THIS GROUND OF APPEAL IS COVERED IN F AVOUR OF ASSESSEE IN ASSESSEES OWN CASE FOR AY 2004-05 TO AY 2009-10. THE LD. AR O F THE ASSESSEE APPRECIATED THE FAIRNESS OF LD. DR FOR THE REVENUE AND WOULD AR GUE THAT THE LD. CIT(A) GRANTED THE RELIEF TO THE ASSESSEE ON THE BASIS OF SPECIAL BENCH DECISION IN ASSESSEES OWN CASE FOR AY 2004-05 TO 2009-10. IT WAS FURTHER ARGU ED THAT AGAINST THE DECISION OF SPECIAL BENCH, THE REVENUE FILED APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT AND THE SAME HAS BEEN DISMISSED VIDE ORDER DA TED 21.04.2015 IN ITA NO. 1969 OF 2013 [374 ITR 645 (BOM.)]. 23. CONSIDERING THE CONTENTION OF LD. REPRESENTATIVES O F THE PARTIES WHEREIN BOTH THE PARTIES AGREED THAT THE GROUNDS OF APPEAL IS COVERE D IN FAVOUR OF ASSESSEE. THUS, THE GROUND NO. 20 RAISED BY REVENUE IS DISMISSED. 24. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. CO NO. 108/MUM/2016 25. CONSIDERING THE FACTS THAT THE APPEAL FILED BY THE REVENUE IS DISMISSED, THE C.O. FILED BY ASSESSEE HAVE BECOME INFRUCTUOUS, HENCE, D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05DAY OF SEPT EMBER 2019. SD/- SD/- (G.S. PAN NU) (PAWAN SINGH) VICE PRESEDENT JUDICIAL MEMBER MUMBAI; DATED 05/09/2019 S.K.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT ITA NO.4786/M/2015 & C.O. 108/M/2016- M/S ALLC ARGO LOGISTICS LTD. 19 BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/