Cargill TSF Asia Pte Ltd., Singapore V. ADIT, New Delhi

ITA 5006/DEL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6347 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUJ ARORA
• Assessee Lawyers: A SRIVASTAVA; D CHOPRA S
• Keywords: Business income; Transfer pricing; Double taxation relief; Rule of consistency; Retrospective amendment; Permanent establishment; Question of law; Difference of opinion; Corroborative evidences; Commercial expediency; Change of opinion
• Section: 5(2); 234B; 37(1)

Judgement Text

1 ITA NOS. 5260 & 5006/DEL/2011 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA NOS. 5260 & 5006/DEL/2011 ASSTT. YR: 2003-04 & 2008-09 CARGILL FINANCIAL SERVICES VS. ASSTT. DIRECTOR OF INCOME-TAX, ASIA PTE LTD., IN LIQUIDATION CIRCLE(1), INTERNAT IONAL TAXATION 300, BEACH ROAD, NEW DELHI. #23-00, THE CONCOURSE, SINGAPORE. PAN: AACCC 4647 A ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI ROHAN KHARE & SHRI A SRIVASTAVA & SHRI D. CHOPRA ADVOCATES RESPONDENT BY : SHRI ANUJ ARORA CIT(DR) DATE OF HEARING : 04/03/2016. DATE OF ORDER : 15/03/2016. O R D E R PER S.V. MEHROTRA, A.M: THESE ARE ASSESSEES APPEALS AGAINST SEPARATE ORD ERS PASSED BY THE LD. CIT(A), RELATING TO A.YRS. 2003-04 & 2008-09. S INCE COMMON ISSUES ARE INVOLVED FOR ADJUDICATION, BOTH THE APPEALS WERE HE ARD TOGETHER AND ARE BEING DISPOSED OF BY A CONSOLIDATED ORDER FOR THE S AKE OF CONVENIENCE. 2 ITA NOS. 5260 & 5006/DEL/2011 2. THE MAIN ISSUE IN THE PRESENT APPEALS IS WHETHER THE AMOUNTS RECEIVED BY ASSESSEE FROM ITS INDIAN ASSOCIATED ENTERPRISES WERE IN THE FORM OF INTEREST OR DISCOUNTING CHARGES. BRIEF FACTS ARE TH AT THE ASSESSEE (CFSA), IS A COMPANY INCORPORATED IN SINGAPORE AND IS A TA X RESIDENT OF SINGAPORE. ACCORDINGLY, THE ASSESSEE COULD OPT TO BE GOVERNED BY THE PROVISIONS OF THE INCOME-TAX ACT OR THE INDIA-SINGAPORE TREATY, WHICH EVER WAS MORE BENEFICIAL TO ASSESSEE. ASSESSEE HAD ENTERED INTO A N AGREEMENT WITH CARGILL INDIA PVT. LTD. (CIPL), THE ASSESSEES ASSOCIATE, FOR THE RENDERING OF CERTAIN ADMINISTRATIVE AND SUPPORT SERVICES RELATIN G TO TREASURY AND FINANCIAL ACTIVITIES, WHEREBY CIPL WAS CHARGED TOWARDS THE CO ST OF THE SERVICES (ON ACTUAL USAGE BASIS), AS PER THE METHOD PROVIDED IN THE SAID AGREEMENT, ON A COST PLUS 5% MARK UP. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO SHOW CAUSED THE ASSESSEE AS TO WHY THE AMOUNTS PAID BY CARGILL INDI A TO IT SHOULD NOT BE CONSIDERED AS INTEREST AS PER SEC. 2(28A) OF THE A CT AND PARA 4 OF ARTICLE 11 OF THE TAX TREATY BETWEEN INDIA AND SINGAPORE AND N OT DISCOUNTING CHARGES AS CLAIMED BY ASSESSEE. THE ASSESSEE IN ITS REPLY POIN TED OUT THAT IT WAS ENGAGED IN THE BUSINESS TO SUBSCRIBE, BUY, UNDERWRI TE OR OTHERWISE ACQUIRE, OWN, HOLD, SELL OR EXCHANGE SECURITIES OR INVESTMEN TS OF ANY KIND INCLUDING NEGOTIABLE INSTRUMENTS, COMMERCIAL PAPER ETC. ACCOR DINGLY, AS A PART OF ITS 3 ITA NOS. 5260 & 5006/DEL/2011 BUSINESS, IT DRAWS, MAKES, ACCEPTS, ENDORSES, DISCO UNTS, EXECUTES AND ISSUES PROMISSORY NOTES, BILL OF EXCHANGE ETC. IT WAS FURT HER POINTED OUT THAT CIPL INCORPORATED UNDER THE INDIAN COMPANIES ACT, WAS, I NTER ALIA, ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF AGRICULTURAL COMMO DITIES AND PROCESSED FOODS. ON FEW OCCASIONS CFSA HAD PURCHASED BILL OF EXCHANGE/ DEMAND PROMISSORY NOTE FROM CIPL. THE ASSESSEE IN DETAIL E XPLAINED ITS MODUS OPERANDI WHICH HAS BEEN REPRODUCED IN THE ASSESSMEN T ORDER AND ALSO THE NEED FOR DISCOUNTING BILLS OF EXCHANGE. THE AO EXAM INED THE ASSESSEES CONTENTIONS AND CONCLUDED AS UNDER:- 5. IN THIS CASE, AS EXPLAINED BY THE ASSESSEE, CIP L DRAWS BILL OF EXCHANGE ON THE BUYER. CIPL GETS THESE BILLS OF EXC HANGE DISCOUNTED WITH CFSA (ASSESSEE), WHICH REMITS THE B ALANCE AMOUNT OF BILL OF EXCHANGE (NET OF DISCOUNT) TO CIP L. ON THE MATURITY DATE THE BUYER PAYS THE FULL AMOUNT OF THE BILL OF EXCHANGE TO CFSA. AS MENTIONED IN THE BILL OF EXCHA NGE DISCOUNTING, THE PRICING OF THE DISCOUNTING IS BASE D ON THE LIBOR PLUS MARGIN. THE TRANSACTION FROM THE PERSPECTIVE O F THE ASSESSEE IS EXPLAINED AS BELOW: - IT PURCHASES THE BILL OF EXCHANGE, FOR WHICH DISCOU NTING AGREEMENT IS ENTERED- AND THIS MENTIONS THE FACE VA LUE, THE DATE OF ACCEPTANCE OF THE BILL AND MATURITY DATE. - THE DISCOUNTING AGREEMENT ALSO HAS A MENTION OF THE PRICING OF THE PRODUCT AND TENOR OF THE BILL. - THE DISCOUNTING AGREEMENT HAS A MENTION OF THE FACE AMOUNT, DISCOUNT AMOUNT AND THE NET PROCEEDS PAYABL E BY THE ASSESSEE. 4 ITA NOS. 5260 & 5006/DEL/2011 - ON THE DATE OF PURCHASE OF THE BILL OF EXCHANGE, TH E ASSESSEE PAYS TO CIPL THE NET PROCEEDS AFTER CHARGING THE DI SCOUNT ON THE FACE VALUE. - ON THE DATE OF MATURITY IT RECEIVES THE FACE VALUE FROM THE BUYER/ OBLIGOR OF THE BILL. - TO SUMMARIZE THE TRANSACTION IS A SIMPLE LENDING OF MONEY AND RECEIPT OF THE MONEY ADVANCED ALONGWITH THE INT EREST ON THE MATURITY DATE. THE FACE VALUE OF THE PRODUCT C ONSISTS 'OF THE NET PROCEEDS PAID AT THE TIME OF BUYING AND TH E DISCOUNT VALUE. - THIS TRANSACTION CAN BE COMPARED WITH A TRANSACTI ON THAT INVOLVES A LOAN EQUAL TO THE NET AMOUNT GIVEN BY TH E ASSESSEE AND REPAYMENT OF THIS LOAN ALONG WITH INTEREST TO C FSA, AFTER THE SALE PROCEEDS ARE RECEIVED. THEREFORE, PRIMA FA CIE, THE DISCOUNT IS NOTHING BUT THE INTEREST ONLY. THE MONE Y ADVANCED BY THE. ASSESSEE IS USED FOR THE PURPOSE OF BUSINES S CARRIED ON BY CIPL/ CGTIPL. 4. THE AO, AFTER CONSIDERING DETAILED SUBMISSIONS A ND AFTER EXAMINING THE DEFINITION OF INTEREST IN SECTION 2(28A) OF T HE INCOME-TAX ACT AND ALSO VARIOUS CIRCULARS, HELD THAT THE DISCOUNTING CHARG ES WERE IN THE NATURE OF INTEREST AND, THEREFORE, TAXABLE IN INDIA. HE, ACCO RDINGLY, TAXED SUM OF RS. 8,02,68,762/- @ 15% (IN A.Y. 2003-04) AND RS. 558,0 84,042/- @ 15% (IN A.Y. 2008-09) AS PER DTAA. 5. THE ASSESSEE FILED OBJECTIONS BEFORE LD. DRP, W HICH VIDE ITS ORDER DATED 9.8.2011 CONCLUDED THAT THE WHOLE TRANSACTION WAS A COLOURABLE DEVICE BY THE ASSESSEE COMPANY TO EARN INTEREST FROM INDIA WITHOUT PAYMENT OF TAX. LD. DRP IN PARA 7 TO 7.3 (A.Y. 2003-04) HAS OBSERV ED AS UNDER: 5 ITA NOS. 5260 & 5006/DEL/2011 7. A PERUSAL OF THE WHOLE TRANSACTION LEADS TO CERT AIN UNANSWERED QUESTIONS. (I) WHAT IS THE EXPERTISE OF CARGILL INDIA, 'WHICH IS NOT AVAILABLE WITH CARGILL INTERNATIONAL, GENEVA FOR TH E PURCHASE OF ARGENTINE SOYABEAN FROM THE INTERNATION.AL MARKE T? (II) WHEN THE SUPPLIER OF GOODS AS IT APPEARS IS A LSO A GROUP COMPANY, WHY THE TRANSACTION WAS ROUTED THROUGH CAR GILL INDIA? (III) WHETHER AT ANYTIME GOODS WERE INSPECTED BY CARGILL INDIA OR CARGILL INTERNATIONAL, SWITZERLAND, THE UL TIMATE BUYER? (IV) WHAT ARE THE TERMS OF PAYMENT BETWEEN THE IND IAN COMPANY AND THE SELLER AND WHY THE SAME TERMS WERE NOT KEPT BETWEEN CARGILL INDIA AND THE SO CALLED PURCHASER C ARGILL INTERNATIONAL GENEVA . (V) THERE IS NO DESCRIPTION OF QUALITY OF GOODS IN THE INVOICE. THE GOODS ARE PURCHASED AND SOLD WITHOUT ANY QUALIT Y SPECIFICATION AND INSPECTION OF GOODS. (VI) WHAT WAS THE NEED OF THE INDIAN COMPANY FOR F UNDS FOR WHICH IT APPROACHED THE ASSESSEE FOR DISCOUNTING. (VII) NO COMPARATIVE STUDIES OF THE MARKET HAS BEE N SUBMITTED BY THE ASSESSEE WHERE THE INDIAN COMPANY APPROACHED FOR DISCOUNTING OF BILLS. (VIII) NO REASON HAS BEEN GIVEN AS TO WHY THE BILL S WERE NOT DISCOUNTED BY THE INDIAN COMPANY IN THE INDIAN MARK ET FROM ANY BANK OR FINANCIAL INSTITUTIONS OR ANY OTHER COM PANY ENGAGED IN SIMILAR BUSINESS. (IX) WHERE WAS THE MONEY INVESTED BY THE INDIAN CO MPANY AFTER RECEIVING IT FROM THE ASSESSEE? 6 ITA NOS. 5260 & 5006/DEL/2011 (X) WHO IS IN POSSESSION OF ORIGINAL BILL LANDING AND OTHER EXPORT DOCUMENTS? (XI) WHAT IS THE BASIS OF INFORMATION AND EXPERTIS E WITH INDIAN COMPANY TO IDENTIFY GOODS WITHOUT INSPECTION ON HIGH SEAS AND NEGOTIATE AND SELL THE SAME? (XII) NO DOCUMENT HAS BEEN SUBMITTED CORRESPONDENCE BETWEEN THE INDIAN INTERNATIONAL, GENEVA. (XIII) NO DETAILS ARE FURNISHED AS TO HOW THE DEBT HAS BEEN RECOVERED BY THE ASSESSEE FROM CARGILL INTERNATIONA L GENEVA? (XIV) NO COPIES OF FINAL ACCOUNTS OF THE ASSESSEE H AVE BEEN FURNISHED BEFORE THE AO OR BEFORE THIS PANEL TO SHO W THE TREATMENT OF THIS TRANSACTION IN THEIR BOOKS OF ACC OUNTS. 7.1 IN FACT, THE WHOLE TRANSACTION IS A COLORFUL DE VICE BY THE ASSESSEE COMPANY TO EARN INTEREST FROM INDIA WITHOU T PAYMENT OF TAXES. AS THE ASSESSEE CANNOT SIMPLY DEPOSIT FUN DS IN INDIA TO EARN HIGHER RATE OF INTEREST THEN IN OTHER COUNTRIE S WHERE ITS FUNDS ARE LYING IDLE IT HAS ENTERED INTO THESE TRAN SACTIONS. THE ASSESSEE COMPANY PAYS MONEY TO THE INDIAN COMPANY, WHICH INVESTS IT IN INDIA AND THE ASSESSEE GETS A FIXED P REDETERMINED INTEREST RATE. THE PAYMENT OF INTEREST TOGETHER WIT H THE PRINCIPAL BY THE INDIAN COMPANY TO' THE ASSESSEE IS ROUTED THROUGH ANOTHER GROUP COMPANY, WHICH IS CALLED THE BUYER OF GOODS. IT IS IMPORTANT' TO NOTE THAT PROMISSORY NOT ES ARE GIVEN BY THE NON-RESIDENT BUYER PRIOR TO THE RAISING OF I NVOICE BY THE INDIAN COMPANY. THE TRANSACTION CAN BE EXPLAINED B Y AN EXAMPLE: 7.2 THE ASSESSEE PAYS '90 TO THE INDIAN COMPANY AND TAKES A PROMISSORY NOTE OF '100 TO BE RECEIVED BY IT FROM A NOTHER GROUP COMPANY AFTER ONE YEAR. THE INDIAN COMPANY INVESTS '90 IN INDIAN MARKET AND CLAIMS '10 AS EXPENDITURE (INTERE ST PAYMENT). THE NON-RESIDENT BUYER, WHO ALLEGEDLY PURCHASED THE GOODS 7 ITA NOS. 5260 & 5006/DEL/2011 FROM THE INDIAN COMPANY MAKES THE PAYMENT TO THE AS SESSEE OF '100 INSTEAD OF MAKING PAYMENT TO THE INDIAN COMPAN Y. THE INDIAN COMPANY PAYS THE COST OF GOODS TO THE OTHER COMPANY FROM WHOM THE SO CALLED GOODS WERE PURCHASED BY THE INDIAN COMPANY. IN THIS WAY THE INDIAN COMPANY REMITS BACK THE ENTIRE MONEY I.E. PRINCIPAL PLUS INTEREST TO THE ASSESSEE THROUGH VARIOUS GROUP COMPANIES, WHO ARE SO CALLED SELLER A ND BUYERS OF GOODS. 7.3 THE TERM DISCOUNTING INSTEAD OF INTEREST HAS BE EN USED BY THE ASSESSEE TO AVOID PAYMENT OF TAXES ON INTEREST INCOME AND ALSO TO AVOID THE VIOLATION OF OTHER REGULATORY LAW S LIKE RBI, FEMA ETC. THE TERM DISCOUNT IS A MISNOMER FOR INTER EST. THE MERE FACT THAT THE ASSESSEE HAS TAKEN ADVANTAGE OF ITS WIDE GROUP NETWORK TO ROUTE THE TRANSACTIONS WILL NOT CH ANGE THE TRUE NATURE OF THE TRANSACTION. THE MERE FACT THAT THE A SSESSEE RECEIVED ITS INTEREST FROM ANOTHER GROUP COMPANY OT HER THAN CARGILL INDIA MAKES NO DIFFERENCE TO THE TRANSACTIO N. THE INDIAN COMPANY WHILE RECORDING THE ABOVE TRANSACTION TERMS THIS PAYMENT AS INTEREST AND CLAIMS DEDUCTION, WHEREAS T HE SOME AMOUNT IS TERMED AS DISCOUNT BY THE ASSESSEE RESULT ING INTO NO TAX PAYMENT BY THE ENTIRE GROUP IN INDIA. SIMILAR OBSERVATIONS WERE MADE FOR A.Y. 2008-09. 6. ACCORDINGLY, THE AO PASSED THE ASSESSMENT ORDER DATED 23.9.2011, ASSESSING THE INTEREST INCOME AT RS. 8,02,68,762/- TAXABLE @ 15% FOR A.Y. 2003-04 AND ASSESSMENT ORDER DATED 5.9.2011 FOR A.Y . 2008-09 ASSESSING THE INTEREST INCOME AT RS. 558,084,042/- TAXABLE @ 15%. 7. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL (A.Y. 2003-04):- 8 ITA NOS. 5260 & 5006/DEL/2011 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS: 1. THAT THE LEARNED ASSISTANT DIRECTOR OF INCOME TA X, CIRCLE- 1 (1), INTERNATIONAL TAXATION, NEW DELHI (HEREINAFTER REFERRED TO AS 'LEARNED AO') AND HON'BLE DISPUTE RESOLUTION PAN EL ('THE DRP') HAVE ERRED ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW IN INITIATING RE-ASSESSMENT PROCEEDINGS BASED ON MERE CHANGE OF OPINION AS THERE WERE NO MATERIAL FA CTS ON RECORD GIVING RISE TO ANY VALID REASONS TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT. ACCORDINGLY, INITIAT ION OF THE RE-ASSESSMENT PROCEEDINGS FOR A Y 2003-04 ARE BAD I N LAW. 2. WITHOUT PREJUDICE TO ABOVE, THE LEARNED AO AND H ON'BLE DRP HAVE ERRED IN FACTS AND IN LAW IN MAKING THE AD DITION OF DISCOUNTING CHARGES AMOUNTING TO RS 80,268,762 ON T HE FOLLOWING GROUNDS: 2.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN CHARACTERIZING THE DISCOUNT ING CHARGES TO BE IN THE NATURE OF INTEREST AS PER THE DEFINITI ON OF 'INTEREST' UNDER SECTION 2(28A) OF THE ACT AND ARTICLE 11 OF T HE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND SING APORE ('THE TREATY'). 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED A - ERRED IN MISINTERPRETING / MIS CONSTRUING THE TRANSACTION OF WITHOUT RECOURSE DISCOUNTING OF PROM ISSORY NOTES ('PN') / BILLS OF EXCHANGE ('BE') AS A LOAN B Y THE APPELLANT TO CARGILL INDIA PRIVATE LIMITED ('CIPL') BY RELYING UPON THE IRRELEVANT AND UN-CONTEXTUAL FACTS. 2.3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO AND HON'BLE DRP HAS ERRED IN NOT FOL LOWING THE CIRCULARS ISSUED BY CBDT HOLDING THAT DISCOUNTI NG CHARGES ARE NOT IN THE NATURE OF INTEREST, ON THE BASIS THA T THE CIRCULARS 9 ITA NOS. 5260 & 5006/DEL/2011 ARE ISSUED UNDER SECTION I94A OF THE ACT AND ARE AP PLICABLE TO ONLY RESIDENTS. 2.4 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO HAS ERRED IN TREATING THE DISCO UNTING CHARGES AS TAXABLE IN INDIA WITHOUT APPRECIATING TH E FACT THAT THE SAME IS IN THE NATURE OF BUSINESS INCOME AND CA NNOT BE BROUGHT TO TAX IN THE ABSENCE OF ANY PERMANENT ESTA BLISHMENT ('PE') IN INDIA AS PER PROVISIONS OF ARTICLE 5 OF T HE TREATY . 2.5 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN NOT FOLLOWING THE PRINCIPLE OF JUDICIAL DISCIPLINE BY COMPLETELY IGNORING THE FAVORABLE ORD ER OF HON'BLE DELHI ITAT PASSED IN THE APPELLANT'S OWN CA SE BASED ON SAME SET OF FACTS FOR AY 2004-05 AND AY 2005-06 AND THE ORDER PASSED BY THE HON'BLE DELHI HIGH COURT IN CAS E OF CARGILL GLOBAL TRADING INDIA PVT LTD FOR A Y 2004-0 5 AND A Y 2005-06 HOLDING THAT SUCH DISCOUNTING CHARGES PAID TO THE APPELLANT ARE NOT IN THE NATURE OF INTEREST AND THU S, ARE NOT TAXABLE IN INDIA IN THE ABSENCE OF A PE IN INDIA OF THE APPELLANT. 2.6 WITHOUT PREJUDICE TO THE CONTENTION THAT DISCO UNTING CHARGES ARE NOT IN THE NATURE OF INTEREST, THE LEAR NED AO ERRED IN HOLDING THAT PAYMENT OF INTEREST IS BY CIPL TO T HE ASSESSEE AND THEREFORE PROVISION OF SECTION 9(L)(V)(C) ARE N OT APPLICABLE. 3. THAT THE LEARNED AO HAS ERRED IN FACTS AND IN LA W IN LEVYING INTEREST AMOUNTING TO RS. 12,431,624 UNDER SECTION 234B OF THE ACT BY COMPLETELY IGNORING THE FACT THA T NO ADVANCE TAX WAS PAYABLE BY THE APPELLANT. 4. THE LEARNED AO HAS ERRED ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW BY INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) AGAINST THE APPELLANT FOR FURNISHING INACCURATE PARTICULARS OR FOR FAILURE TO DISCLOSE T RUE PARTICULARS OF INCOME. 10 ITA NOS. 5260 & 5006/DEL/2011 THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUPPLEMEN T, AMEND, VARY, WITHDRAW OR OTHERWISE MODIFY THE GROUND MENTI ONED HEREIN ABOVE AT OR BEFORE THE TIME OF HEARING. 8. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE ISSUE IS SQUARELY COVERED BY THE TRIBUNALS CONSOLIDATED ORD ER DATED 19.8.2011 IN ASSESSEES OWN CASE FOR AYS 2004-05 AND 2005-06REND ERED IN ITA NOS. 579/DEL/2010 AND 580/DEL/2010 AND ALSO BY THE DECIS ION OF TRIBUNAL IN THE CASE OF CARGILL TSF ASIA PTE LTD. FOR A.YS. 2005-06 , 2006-07 AND 2007-08 VIDE ITA NOS. 581/DEL/2010, ITA NO. 3880 & 3057/DEL /2010. HE REFERRED TO PARA 7 OF THE ORDER IN ASSESSEES OWN CASE, WHEREIN IT HAS BEEN HELD AS UNDER: 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORD CAREFULLY. IN THE CASE OF CARGIL CLOBAL TRADING INDIA (P) LTD., THE IT AT HAS MADE THE FOLL OWING OBSERVATIONS: '8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN TH E INSTANT CASE, THE FACTS LIE IN A NARROW COMPASS INA SMUCH AS THAT ONCE THE GOODS ARE EXPORTED OUT OF INDIA BY THE ASSESSEE COMPANY THE ASSESSEE DRAW A BILL OF EXCHAN GE ON THE BUYER AND THEREFORE' DISCOUNTS THE AFORESAID BILL OF EXCHANGE TO CFSA. THEREFORE, AS A RESULT OF DISCOUN T OF THE BILL OF EXCHANGE. BY THE ASSESSEE COMPANY, IT R ECEIVES IMMEDIATELY DISCOUNTED VALUE OF THE BILL OF EXCHANG E I.E. FACE VALUE LESS DISCOUNT TO THE APPELLANT. THE SHOR T ISSUE IS WHAT IS THE NATURE OF T~IS DISCOUNT? ACCORDING T O THE ASSESSEE, THE ATORESALD DISCOUNT IS NOT IN THE. NAT URE OF INTEREST AND HENCE IS NOT DISALLOWABLE UNDER SECTIO N 11 ITA NOS. 5260 & 5006/DEL/2011 40(A)(I) 0 THE ACT WHEREAS THE ASSESS.ING OFFICER H AS HELD THAT THIS SUM IS IN THE NATURE OF INTEREST UNDER 'S ECTION 2(28A) OF THE ACT. SECTION 2(28A) OF THE ACT PROVID ES AS UNDER:- 'INTEREST' MEANS INTEREST PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A D EPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INC LUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF-THE MONEY S BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILI TY WHICH HAS NOT BEEN UTILIZED.' IT WILL BE, EVIDENT FROM THE ABOVE THAT INTEREST PA YABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT IN CURRED AND INCLUDES ANY SERVICE FEE OR OTHER CHARGES IN RE SPECT OF THE MONEYS BORROWED OR DEBT INCURRED OR IN RESPECT OF A NY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. IT IS THUS SE EN THAT INTEREST MEANS EITHER SUM PAYABLE IN RESPECT OF ANY MONEY BO RROWED OR DEBT INCURRED. IN THE INSTANT CASE, IT IS NOT A CAS E OF DEBT INCURRED OR MONEYS BORROWED. IN FACT, HERE IS A CAS E WHERE THE ASSESSEE HAS MERELY DISCOUNTED THE .SALE CONSIDERAT ION RECEIVABLE ON SALE OF GOODS. IT IS NOT A CASE WHERE ANY MONEY HAS BEEN BORROWED OR DEBT HAS BEEN INCURRED. IT IS ALSO NOT A CASE WHERE ANY SERVICE FEE OR EITHER CHARGE HAS BEE N PAID IN RESPECT OF MONEY BORROWED OR DEBT INCURRED OR IN RE SPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. IT IS NOT A CASE WHERE SECTION 2(28A) OF THE ACT CAN BE INVOKED. 9. THE WORD 'INTEREST' IS DIFFERENTLY DEFINED UNDER INTEREST TAX ACT. AS PER SECTION 2(7) OF INTEREST TAX ACT, 'INTE REST' MEANS INTEREST ON LOANS AND ADVANCES MADE IN INDIA AND IN CLUDES>- (A) COMMITMENT CHARES ON UNUTILIZED PORTION OF ANY CREDIT SANCTIONED FOR BEING AVAILED OF IN INDIA AND (B) DI SCOUNT ON PROMISSORY NOTES AND BILLS OF EXCHANGE DRAWN OR MAD E IN INDIA. THUS WHERE THE LEGISLATURE WAS CONSCIOUS OF THE FAC T THAT EVEN THE DISCOUNT OF BILLS OF EXCHANGE IS TO BE INCLUDED WITHIN THE DEFINITION OF INTEREST, THE SAME WAS BASICALLY SO' PROVIDED FOR. HOWEVER, UNDER THE SCHEME OF INCOME-TAX ACT THE WOR D 'INTEREST' DEFINED UNDER SECTION 2(28A) DOES NOT IN CLUDE THE DISCOUNTING CHARGES ON DISCOUNTING OF BILLS OF EXCH ANGE. THOUGH THE CIRCULAR NO. 65 WAS RENDERED IN RELATION TO 12 ITA NOS. 5260 & 5006/DEL/2011 DEDUCTION OF-TAX UNDER SECTION 194A, IN RESPECT OF PAYMENT TO A RESIDENT, THE SAME WILL BE RELEVANT EVEN FOR THE PU RPOSE OF CONSIDERING WHETHER THE DISCOUNT SHOULD BE TREATED AS INTEREST OR NOT. THE CBDT HAS OPINED THAT WHERE THE SUPPLIER OF GOODS MAKES OVER THE USANCE BILL/HUNDI TO HIS BANK WHICH DISCOUNTS THE SAME AND CREDITS THE NET AMOUNT TO THE SUPPLIER 'S ACCOUNT STRAIGHT AWAY WITHOUT WAITING FOR REALIZATION OF TH E BILL ON DUE DATE, THE PROPERTY IN THE USANCE BILL/ HUNDI PASSES ON TO THE BANK AND THE EVENTUAL COLLECTION ON DUE DATE IS A R ECEIPT BY THE BANK ON ITS OWN BEHALF AND NOT ON BEHALF OF THE SUP PLIER. FOR SUCH CASES OF IMMEDIATE DISCOUNTING THE NET PAYMENT MADE BY THE BANK TO THE SUPPLIER IS IN THE NATURE OF A PRIC E PAID FOR THE BILL. SUCH PAYMENT CANNOT TECHNICALLY BE HELD AS IN CLUDING ANY INTEREST AND THEREFORE, NO TAX NEED BE DEDUCTED AT SOURCE FROM SUCH PAYMENT BY THE BANK. THE DECISION RELIED BY TH E ASSESSING OFFICER IN THE CASE OF VIJAY SHIP BREAKING CORP. (S UPRA) HAS BEEN REVERSED BY THE HON'BLE SUPREME COURT AS REPOR TED IN THE CASE OF VIJAY SHIP BREAKING CORPORATION VS. CIT 219 . CTR 63- 9; THE. HON'BLE SUPREME COURT HELD THAT USANCE INTE REST PAYABLE OUTSIDE INDIA BY AN UNDERTAKING ENGAGED IN THE BUSINESS OF SHIP BREAKING IS EXEMPT FROM PAYMENT OF INCOME-TAX BY VIRTUE OF EXPLANATION 2 ADDED TO SECTION 1 0(150 (IV)(C) WITH RETROSPECTIVE EFFECT FROM 1.4.1962 AND HENCE THE AS SESSEE WAS. NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 19 5 OF THE ACT. THE DISCOUNTING CHARGES ARE NOT IN' THE NATURE OF I NTEREST PAID BY THE ASSESSEE. RATHER AFTER DEDUCTING DISCOUNT TH E ASSESSEE RECEIVED NET AMOUNT OF THE BILL OF EXCHANGE ACCEPTE D BY THE PURCHASER. CFSA NOT HAVING ANY PERMANENT ESTABLISHM ENT IN INDIA, IS NOT LIABLE, TO TAX IN RESPECT OR SUCH DIS COUNT EARNED BY IT AND HENCE THE ASSESSEE IS NOT UNDER OBLIGATION T O DEDUCT TAX. AT SOURCE UNDER SECTION 195 OF THE ACT. ACCORDINGLY , THE SAME AMOUNT CANNOT BE DISALLOWED BY INVOKING SECTION 40( A)(I) OF THE ACT.' 7. THIS FINDING OF THE ITAT IN THE CASE OF CARGIL CLOBAL TRADING (P) LTD. HAS BEEN UPHELD BY THE HON'BLE HIGH COURT IN ITA NOS. 331 AND 204 OF 2011. LEARNED CIT(APPEALS) HAS ALSO FOLL OWED THIS ORDER OF THE ITAT. WE FIND THAT THE ISSUE IN DISPUTE IS S QUARELY COVERED BY THE ABOVE CONCLUSION OF THE ITAT. ASSESSING OFFICER IS NOT JUSTIFIED IN CONSIDERING THE DISCOUNTING CHARGES AKIN TO EXPRESS ION 'INTEREST' 13 ITA NOS. 5260 & 5006/DEL/2011 EMPLOYED IN SEC. 2(28A) OF THE INCOME-TAX ACT, 1961 . APART FROM THIS ONE ASPECT, ITAT HAS EXAMINED IT FROM OTHER ANGLE A LSO. TAKING INTO CONSIDERATION THE DETAILED ORDER OF THE LEARNED CIT (APPEALS), IMPUGNED IN THE APPEALS IN THE LIGHT OF HON'BLE DEL HI HIGH COURT'S DECISION, WE ARE OF THE VIEW THAT NO 'INTERFERENCE IS CALLED FOR. HENCE, BOTH THE APPEALS ARE DISMISSED'. 9. HE FURTHER POINTED OUT THAT THE TRIBUNALS ORDER IN THE CASE OF CARGIL GLOBAL TRADING (P) LTD., HAS BEEN UPHELD BY THE HON BLE DELHI HIGH COURT IN 335 ITR 94, WHEREIN IN PARA 5 TO 7, HONBLE HIGH COURT HAS OBSERVED AS UNDER: 5. WE MAY NOTICE AT THIS STAGE THAT THE RESPONDEN T-ASSESSEE IS IN THE EXPORT BUSINESS. ON THE EXPORTS MADE BY T HE ASSESSEE TO ITS BEST BUYERS OUTSIDE INDIA, THE ASSESSEE DRAW S BILLS OF EXCHANGE ON THOSE BUYERS LOCATED OUTSIDE INDIA. THE SE BILLS OF EXCHANGE ARE DISCOUNTED BY THE ASSESSEE FROM CFSA W HO ON DISCOUNTING THE BILLS IMMEDIATELY REMITS THE DISCOU NTED AMOUNT TO THE ASSESSEE. THEREAFTER, IT IS THE OBLIGATION/H EADACHE OF CFSA TO REALISE THE AMOUNTS FROM THOSE BUYERS TO WH OM THE GOODS ARE EXPORTED AND BILLS ARE DRAWN BY THE ASSES SEE. IT IS THE SAID DISCOUNTED CHARGES WHICH WERE CLAIMED BY THE A SSESSEE AS EXPENSES UNDER SECTION 37(1) OF THE ACT. THE DISCOU NTING FACILITIES OFFERED BY CFSA TO THE ASSESSEE AFTER CH ARGING ITS AFORESAID DISCOUNTED COMMISSION ARE NOT QUESTIONED BY THE REVENUE. THE ONLY OBJECTION WAS THAT ON THIS AMOUNT REMITTED BY THE ASSESSEE TO CFSA, THE ASSESSEE WAS TO DEDUCT TAX AT SOURCE (TDS) UNDER SECTION 195 OF THE ACT AND SINCE IT WAS NOT DONE, INVOKING THE PROVISIONS OF SECTION 40(A)(I) O F THE ACT, THE EXPENDITURE WAS DISALLOWED. 6. AS POINTED OUT ABOVE, ACCORDING TO THE ASSESSING OFFICER, THE AFORESAID DISCOUNTED CHARGES BY THE ASSESSEE TO CFSA WERE TREATED AS INTEREST WITHIN THE MEANING OF SECTION 2 (28A) OF THE ACT. 14 ITA NOS. 5260 & 5006/DEL/2011 7. WE MAY ALSO POINT OUT AT THIS STAGE THAT CFSA IS A COMPANY INCORPORATED IN SINGAPORE AND A TAX RESIDEN T OF SINGAPORE. CFSA, INTER ALIA, UNDERWRITE OR OTHERWIS E ACQUIRE, OWN, HOLD, SELL OR EXCHANGE SECURITIES OR INVESTMEN TS OF ANY KIND INCLUDING NEGOTIABLE INSTRUMENTS, COMMERCIAL P APER, ETC. ACCORDINGLY, AS A PART OF ITS AFORESAID BUSINESS, I T DRAWS, MAKES, ACCEPTS, ENDORSES, DISCOUNTS, EXECUTES AND I SSUES PROMISSORY NOTES, BILL OF EXCHANGE, ETC. FURTHER, C FSA DOES NOT HAVE A PERMANENT ESTABLISHMENT (PE) IN TERMS OF ART ICLES 5 OF THE INDIA SINGAPORE TREATY ('THE TREATY' OR THE 'DT AA'). 10. LD. A/R FURTHER POINTED OUT THAT IN THE CASE O F ASSESSEE, HONBLE DELHI HIGH COURT, FOLLOWING THE DECISION IN THE CAS E OF CARGIL CLOBAL TRADING (P) LTD., DISMISSED THE APPEALS FILED BY RE VENUE VIDE ORDER DATED 24.4.2012 IN ITA NOS. 269/2012 AND 272/2012, OBSER VING AS UNDER:- THESE APPEALS HAVE TO BE DISMISSED IN VIEW OF THE DECISION DATED 1IH FEBRUARY, 2011 IN ITA NO.331/2011 COMMISS IONER OF INCOME TAX VS. CARGILL GLOBAL TRADING PVT. LTD. (20 11) 335 ITR 94 (DEL.). CARGILL GLOBAL TRADING PVT. LTD. WAS THE PAYER AND THE ASSESSING OFFICER HAD HELD THAT THEY WERE L IABLE TO DEDUCT TAX AT SOURCE ON THE BILL DISCOUNTING WHICH WAS TREATED AND CONSIDERED AS INTEREST PAID. THE HIGH COURT HAS NOT AGREE WITH THE REVENUE AND HAS HELD THAT BILL DISCOUNT CA NNOT BE EQUATED AND TREATED AS INTEREST PAID AND THEREFORE THE TAX AT SOURCE WAS NOT LIABLE TO BE DEDUCTED. THE PRESENT APPEALS ARE DIRECTED AGAINST RECIPIENT CARGILL FINANCIAL SERVICES ASIA PVT LTD. WHO HAD ENTERED IN TO THE TRANSACTION/AGREEMENT WITH CARGILL GLOBAL TRADING P VT. LTD. THE ISSUE BEING IDENTICAL AND SQUARELY COVERED BY T HE DECISION OF THIS COURT IN THE CASE OF CARGILL GLOBAL TRADING PVT. LTD. (SUPRA), NO SUBSTANTIAL QUESTION OF LAW ARISES AND THE APPEALS ARE DISMISSED. 15 ITA NOS. 5260 & 5006/DEL/2011 11. HE FURTHER POINTED OUT THAT THE SLP FILED AGAIN ST THE HONBLE DELHI HIGH COURTS DECISION HAS BEEN DISMISSED BY THE HO NBLE SUPREME COURT IN THE CASE OF CARGIL GLOBAL TRADING (P) LTD. HE, THER EFORE, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE AFOREMENTIONED DEC ISIONS. 12. LD. DR, HOWEVER, SUBMITTED THAT THE FACTS HAVE NOT CORRECTLY BEEN APPRECIATED BY TRIBUNAL IN EARLIER YEARS AND, THERE FORE, THE ISSUE REQUIRES RECONSIDERATION. HE HAS FILED DETAILED WRITTEN SUB MISSIONS, WHICH ARE REPRODUCED HEREUNDER: SUBMISSIONS OF REVENUE ON SPECIFIC ASPECTS 1. THE REVENUE EMPHATICALLY RELIES ON THE ASSESSMEN T ORDERS OF THE RELEVANT ASSESSMENT YEARS AS WELL AS DIRECTIONS OF THE DRP. 2. WITHOUT PREJUDICE TO THESE, FOLLOWING ADDITIONAL SUBMISSIONS ARE MADE. 3. THESE SUBMISSIONS BELOW ARE ONLY ON SPECIFIC ASP ECTS. ON BALANCE ASPECTS, ORAL SUBMISSIONS DURING THE HEA RING, THE ASSESSMENT ORDER AS WELL AS SPECIFIC PORTIONS, FAVO URABLE TO REVENUE, OF DRP'S ORDERS ARE RELIED UPON. 4. IT IS REVENUE'S HUMBLE SUBMISSION AND CONTENTION THAT THE HON'BLE TRIBUNAL COULD DIFFER FROM ITS EARLIER DECISION, IN VIEW OF DECISION OF THE HON'BLE SUPREME COURT IN TH E CASE OF UNION OF INDIA V. RAGHUBIR SINGH [1989] 178 ITR 548 AND THAT THIS IS A FIT CASE TO DO SO. THIS ASPECT IS DETAILE D BELOW. CARGILL TSF ASIA PTE L TO, SINGAPORE I AY 2008-09 16 ITA NOS. 5260 & 5006/DEL/2011 5. THE LD. AR HAS RELIED, INTER ALIA, ON THE ORDERS OF THE HON'BLE ITAT IN THE ASSESSEE'S OWN CASE IN AYS 2005 -06, 2006- 07, 2007-08 (COMBINED ORDER DATED 19.08.2011) WHICH HAVE ALSO BEEN CONFIRMED BY THE HON'BLE HC, DELHI (COMBI NED ORDER DATED 19.11.2012). THE COPIES OF THESE ORDERS HAVE ALSO BEEN PROVIDED BY LD. AR IN PAPER BOOK AND / OR DURING TH E HEARING. 6. IT MAY KINDLY BE SEEN FROM THE SAID COMBINED ORD ERS OF THE HON'BLE ITAT AND HON'BLE HC THAT THESE HAVE ADD RESSED THE MAIN ISSUE WHETHER OR NOT THE DISCOUNTING CHARG ES EARNED BY THE ASSESSEE BY DISCOUNTING BILLS OF EXCHANGE AN D PROMISSORY NOTES AMOUNTED TO INTEREST AS DEFINED U/S 2(28A) OF THE INCOME TAX ACT. THE HON'BLE COURTS HAVE HELD THAT THE SAID RECEIPTS ARE NOT IN THE NATURE OF INTEREST AS DEFINED U/S 2(28A} . 7. IT IS ALSO SEEN FROM THE SAID COMBINED ORDER OF THE HON'BLE ITAT THAT IT HAS BASED ITS ENTIRE ORDER AND FINDINGS ON THE HON'BLE ITAT'S ORDER DATED 19.08.2011 IN THE CA SE OF A RELATED CONCERN, NAMELY CARGIL FINANCIAL SERVICES P . LTD (CFSPL). AT PARA 6, PAGE 5 OF THE ORDER DATED 19.08 .2011, THE HON'BLE ITAT NOTES THAT 'THERE IS NO DISPARITY OF F ACTS BETWEEN BOTH THE ASSESSEES.' ACCORDINGLY IT HAS QUOTED EXTE NSIVELY FROM THE SAID ORDER DATED 19.08.2011 IN THE CASE OF CFSP L STARTING AT PAGE 5 OF ITS COMBINED ORDER TILL PAGE 13 OF ITS ORDER. 8. FURTHER, IT IS SEEN FROM THE SAID ITAT ORDER IN THE CASE OF CFSPL (PROVIDED BY LD. AR) THAT, THIS ORDER IN TURN RELIES ON THE ORDER OF ITAT IN CASE OF ANOTHER RELATED CONCER N CARGIL GLOBAL TRADING INDIA (P) LTD. (CGTIPL). 9. WHILE RELYING AND QUOTING EXTENSIVELY FROM THE O RDER OF THE RELATED CONCERNS (CFSPL & CGTIPL), CERTAIN CRUC IAL FACTS (DISCUSSED BELOW) REMAINED TO BE CONSIDERED AND ADJ UDICATED BY THE HON'BLE ITAT. 10. ACCORDINGLY, THE AO NOTES IN THE PRESENT AY 200 8-09 AT PAGE 15, PARA 7.8 OF THE ASSESSMENT ORDER THAT CERT AIN VITAL 17 ITA NOS. 5260 & 5006/DEL/2011 FACTS REMAINED TO BE CONSIDERED/ PRESENTED TO THE H ON'BLE TRIBUNAL IN THE EARLIER YEARS ESPECIALLY 'ROLE OF C ARGILL INC., ROLE OF BUYER CARGILL INTI. SA, RBI CIRCULARS, FEMA PROVISIONS ETC. WERE NOT PRESENTED BEFORE THE LD. ITAT WHICH A RE VERY MATERIAL FOR THE CASE'. 11. TO PUT THE ISSUES IN PERSPECTIVE, THE LD. DRP N OTES AT PARA 7 OF ITS ORDER/ DIRECTIONS: 'IN FACT, THE WHOLE TRANSACTION IS A COLORABLE DEVI CE BY THE ASSESSEE COMPANY TO EARN INTEREST FROM INDIA WITHOU T PAYMENT OF TAXES. AS THE ASSESSEE CANNOT SIMPLY DEPOSIT FUN DS IN INDIA TO EARN HIGHER RATE OF INTEREST THEN IN OTHER COUNTRIE S WHERE ITS FUNDS ARE LYING IDLE IT HAS ENTERED INTO THESE TRAN SACTIONS. THE ASSESSEE COMPANY PAYS MONEY TO THE INDIAN COMPANY, WHICH INVESTS IT IN INDIA AND THE ASSESSEE GETS A FIXED P REDETERMINED INTEREST RATE. THE PAYMENT OF INTEREST TOGETHER WIT H THE PRINCIPAL BY THE INDIAN COMPANY TO THE ASSESSEE IS ROUTED THROUGH ANOTHER GROUP COMPANY, WHICH IS CALLED THE BUYER OF GOODS. IT IS IMPORTANT TO NOTE THAT PROMISSORY NOTE S ARE GIVEN BY THE NON-RESIDENT BUYER PRIOR TO RAISING OF INVOI CE BY THE INDIAN COMPANY. 12. THE THRUST OF REVENUE'S PRESENT SUBMISSION, IS THAT NONE OF THE ABOVE REFERRED ORDERS OF HON'BLE ITAT (I.E., EARLIER ORDERS OF ITAT IN THE CASE OF THE ASSESSEE ITSELF, OR ITS ORDERS IN THE CASES OF CFSPL & CGTIPL WHICH HAVE BEEN RELIED AND QUOTED BY THE ITAT IN THE CASE OF THE ASSESSEE) HAV E CONSIDERED AND ADJUDICATED THE ENTIRE SET OF FACTS AND CIRCUMS TANCES. THIS HAS BEEN VERY BRIEFLY HIGHLIGHTED ABOVE (AT PARA 9, 10,11) AND HAS BEEN DETAILED BELOW. THUS, THE HON'BLE ITAT AND HON'BLE HIGH COURT HAVE ADDRESSED ONLY THE LEGAL ISSUE AS S UMMARISED AT PARA 6 ABOVE WITHOUT ADDRESSING THE FACTS AND CI RCUMSTANCES THAT LEAD TO THE UNMISTAKABLE CONCLUSION THAT THE A SSESSEE, ALONG WITH ITS RELATED CONCERNS, HAVE PUT THROUGH C OLOURABLE TRANSACTIONS FOR BENEFITING FROM THE HIGHER INTERES T RATES IN 18 ITA NOS. 5260 & 5006/DEL/2011 INDIA AND AVOIDING PAYMENT OF TAXES. THE SCHEME OF TRANSACTIONS PUT THROUGH BY THE GROUP IS MAINLY TO GIVE COLOR OF BILL DISCOUNTING TO INTEREST EARNING ACTIVITY IN HA NDS OF THE NR ASSESSEE WHILE AT THE SAME TIME MINIMIZING THE TAX LIABILITY IN THE HANDS TO THE SUPPORTING GROUP INDIAN CONCERN. 13. FOR SAKE OF CLARITY AND BREVITY, THE SAID FACTS AND CIRCUMSTANCES THAT HAVE NOT BEEN CONSIDERED I ADJUD ICATED BY THE HON'BLE ITAT IN ITS EARLIER ORDERS, AS CULLED O UT FROM THE LD. DRP'S DIRECTIONS, ARE AS UNDER: PARA/PAGE OF LD. DRPS ORDER ISSUE REMARKS, IF ANY PAGE 4, PARA 3 AT THE OUTSET, DRP HAS PUT ON RECORD THE NON-COOPERATION OF THE ASSESSEE. THE DRP HAD ASKED THE ASSESSEE TO PLACE ON RECORD THE ENTIRE TRANSACTIONS, ALONG WITH COMPLETE SUPPORTING DOCUMENTS, FOR ONE MONTH. THE ASSESSEE CHOSE TO SUBMIT SELECTED DOCUMENTS AND NOT THE COMPLETE TRAIL. THIS FURTHER STRENGTHENS THE REVENUES CONTENTION THAT THE ASSESSEE, ALONG WITH ITS GROUP COMPANIES, ARE USING COLOURABLE TRANSACTIONS/ DEVICES. PAGE 3-7, PARA 5-6.1 THE LIMITED INFORMATION MADE AVAILABLE BY THE ASSESSEE OR AS ALREADY AVAILABLE ON RECORD AHS BEEN ANALYSED BY LD. DRP. PARA 6.1 GIVES THE ISSUES/ ASPECTS WHICH ARE UNANSWERED AND EFFECTIVELY QUESTIONS THE VERY GENUINENESS OF WHOLE SCHEME OF TRANSACTIONS USED BY THE ASSESSEE ALONG WITH ITS GROUP CONCERNS THE FINDINGS OF THE DRP HAVE TO BE READ WITH THE FINDINGS OF 19 ITA NOS. 5260 & 5006/DEL/2011 THE AO AT PAGE 22 OF THE ASSESSMENT ORDER (GROSS MARGIN OF THE ASSESSEE ON SALE IS 0.05%. IN COMPARISON, THE CHARGES SUFFERED BY THE INDIAN CONCERN ARE LARGE 5.75%. THIS ENSURES THAT MAX AMOUNT REMAINS TAX FREE IN HANDS OF ASSESSEE WHILE THE SUPPORTING INDIAN CONCERN IS ABLE TO REDUCE ITS TAX LIABILITY). PAGE 7-8 THE SCHEME USED BY THE ASSESSEE IS EXPLAINED (WITH EXAMPLE). THE TERM DISCOUNTING USED BY THE ASSESSEE ARE ALSO PUT IN CONTEXT (ALSO IN THE CONTEXT OF OTHER REGULATIONS OF RBI, FEMA).THE DRP EMPHATICALLY NOTES THE FINDING THAT THE INDIAN COMPANY (RELATED/ GROUP CONCERN) WHILE RECORDING THE ABOVE TRANSACTION TERMS THIS PAYMENT AS INTEREST AND CLAIMS DEDUCTION, WHEREAS THE SAME AMOUNT IS TERMED AS DISCOUNT BY THE ASSESSEE RESULTING INTO NO TAX PAYMENT BY THE ENTIRE GROUP IN INDIA. PAGE 10-11 PAGE 9-9.1, ASSESSEE HAS PLACED HEAVY RELIANCE ON DISCOUNTING BEING WITHOUT RECOURSE. THIS HAS BEEN ANALYSED IN LIGHT OF RBI 20 ITA NOS. 5260 & 5006/DEL/2011 PAGE 12 LAST TWO PARA PAGE 17 PAGE 9,12 REGULATIONS AND FACTS OF THE CASE AND HAS BEEN FOUND TO BE OF NO HELP TO THE ASSESSEE AND IS ALSO WITHOUT SUPPORTING EVIDENCE. PAGE 11, PARA 9.2-9.3 PAGE 13 PARA (IV)&(V),(I) PAGE 14 PARA (II) THE PAPER TRANSACTIONS OF THE ASSESSEE HAVE BEEN HIGHLIGHTED ALONG WITH ITS NON-COMPLIANCE. THE DEFINITION OF INTEREST IN THE INCOME TAX ACT AND THE DTAA HAS BEEN PUT IN PERSPECTIVE PAGE 11-12 PARA 9.4 - 9.6 ASSESSEES RELIANCE ON CBDT CIRCULARS IS ANALYSED AND REJECTED. CRITICAL OBSERVATIONS THEREIN INCLUDE (I) ASSESSEE HAS NOT APPROACHED BANKERS FOR DISCOUNTING OF SO CALLED BILLS; (II) PNS OF GROUP CONCERNS ARE NOT FREELY TRANSFERABLE BY ENDORSEMENT AND DELIVERY; (III) THE CASE OF THE ASSESSEE IS A PRIVATE ARRANGEMENT AMONG GROUP CONCERNS AND CANNOT BE COMPARED WITH BANKING TRANSACTIONS AND CDS. 14. THE REVENUE SUBMISSIONS REMAIN ON THE SAME LINE S AS ABOVE. RELIANCE ON JUDGMENT IN RAGHUBIR SINGH [19891178 IT R 548 (SC) 21 ITA NOS. 5260 & 5006/DEL/2011 15. IT IS REVENUE'S HUMBLE SUBMISSION AND CONTENTIO N THAT THE TRIBUNAL COULD DIFFER FROM ITS EARLIER DECISION , IF SUCH A NEED AROSE, IN VIEW OF DECISION OF THE SUPREME COUR T IN THE CASE OF UNION OF INDIA V. RAGHUBIR SINGH [1989] 178 ITR 548. THE SUPREME COURT IN THE CASE OF RAGHUBIR SINGH (SUPRA) LAID MORE EMPHASIS ON THE PRINCIPLE OF CONSISTENCY THAT IT SH OULD NOT DIFFER FROM ITS EARLIER DECISION MERELY BECAUSE A CONTRARY VIEW APPEARS TO BE PREFERABLE. HOWEVER, IT IS ALSO LAID DOWN THAT IF THE PREVIOUS DECISION IS PLAINLY ERRONEOUS, IT WOULD BE A DUTY OF THE COURT TO SAY SO AND NOT TO PERPETUATE THE MISTAKE. THE COURT ALSO FURNI SHED TWO ILLUSTRATIONS-{I) WHERE RELEVANT STATUTORY PROVISIO N WAS NOT BROUGHT TO ITS NOTICE, (II) IF A VITAL POINT WAS NO T CONSIDERED. THE SUBMISSIONS ABOVE EMPHASIZE THAT THE MATTER IS COVE RED BY THE SAID POINT (II). CONCLUSION 11. THE UNDERSIGNED IS COMMITTED TO PROVIDE ANY FUR THER CLARIFICATION THAT THE HON'BLE BENCH MAY DESIRE. 13. IN THE REJOINDER LD. COUNSEL HAS FILED DETAILED SUBMISSIONS, WHICH ARE ALSO REPRODUCED HEREUNDER: BRIEF FACTS WHILE FRAMING ASSESSMENT FOR THE SUBJECT YEAR, THE LD. AO HAS CHARACTERIZED THE DISCOUNTING CHARGES RECEIVED BY T HE APPELLANT ON ACCOUNT OF DISCOUNTING OF BILLS OF EXC HANGE / DEMAND PROMISSORY NOTES (,HEREINAFTER REFERRED TO A S BE') FROM INDIAN GROUP COMPANIES NAMELY, CARGILL INDIA PRIVAT E LIMITED AND CARGILL GLOBAL TRADING PRIVATE LIMITED ('HEREIN AFTER COLLECTIVELY REFERRED AS INDIAN GROUP COMPANIES') A S INTEREST UNDER SECTION 2(28A) OF THE INCOME TAX ACT, 1961 (' THE ACT') AND UNDER THE DT AA BETWEEN INDIA AND SINGAPORE. 22 ITA NOS. 5260 & 5006/DEL/2011 2. APPELLANT'S CONTENTIONS AT THE OUTSET, THE APPELLANT (BEING OFFSHORE ENTITI ES CARGILL TSF ASIA PTE LTD AND CARGILL FINANCIAL SERVICES ASIA PT E LTD- IN LIQUIDATION) WOULD LIKE TO HIGHLIGHT THAT THE ISSUE UNDER CONSIDERATION HAS ALREADY BEEN ADJUDICATED IN FAVOR OF THE APPELLANT IN APPELLANT'S OWN CASE VIDE THE FOLLOWIN G ORDERS: DIT V CARGILL TSF ASIA PTE LTD A Y 2005-06, A Y 200 6-07 & A Y 2007-08 (DELHI HC) (ITA NO. ITA NO. 62112012, ITA NO. 63212012 AND ITA NO. 62412012) CARGILL TSF ASIA PTE LTD A Y 2005-06, A Y 2006-07 & A Y 2007-08 (DELHI IT AT) (IT A NO. 5811DE1L2010, 3880IDELL2010 AND 30571DE1L2010) DIT V CARGILL FINANCIAL SERVICES ASIA PVT LTD A Y 2 004-05 AND A Y 2005-06 (DELHI HIGH COURT) (ITA 269/2012 AND IT A 272/2012) ADIT V CARGILL FINANCIAL SERVICES ASIA PTE LTD A Y 2004-05 AND A Y 2005-06 (DELHI IT AT) (IT A NO. 579IDELL20 10 AND IT A NO. 580IDELL20 1 0) FURTHER, IT IS PERTINENT TO MENTION THAT IN THE IND IAN ENTITIES CASE BEING M/S CARGILL GLOBAL TRADING INDIA PVT. LT D. AND M/S CARGILL INDIA PVT. LTD. FOR THE SAME A Y I.E. A Y 2 008-09, THE LD. CIT(A) HAS HELD THAT THE DISCOUNTING CHARGES PA ID TO APPELLANT (CARGILL TSF ASIA PTE LTD) ARE NOT IN THE NATURE OF INTEREST AND THUS, NO DISALLOWANCE U/S 40(A)(I) WAS WARRANTED. THIS ORDER HAS BEEN ACCEPTED BY THE DEPARTMENT AND NO FURTHER APPEAL WAS PREFERRED. THE FACTS AND THE ISSUE INVOLVED IN THE ABOVE MENTI ONED ASSESSMENT YEARS ARE IDENTICAL TO. THE FACTS AND IS SUE INVOLVED IN THE YEARS IN QUESTION I.E. WHETHER DISCOUNTING C HARGES IS AKIN TO INTEREST INCOME AS DEFINED U/S 2(28A) OF THE ACT , TAXABLE AS 23 ITA NOS. 5260 & 5006/DEL/2011 PER THE PROVISIONS OF THE ACT AS WELL AS THE DT AA BETWEEN INDIA AND SINGAPORE (REFERENCE IN THIS REGARD MAY B E MADE TO THE GROUNDS OF APPEAL RAISED). THE LEARNED DEPARTME NT REPRESENTATIVE ('LD. DR') HAS RAISED CONCERNS THAT CRUCIAL FACTS PERTAINING TO THE CASES INVOLVED HAVE NOT BEEN CONS IDERED BY THE HON'BLE ITAT WHILE ADJUDICATING THE ORDERS IN E ARLIER YEARS. THE APPELLANT HERE WOULD LIKE TO SUBMIT ITS REBUTTA L ON THE SPECIFIC CONCERNS RAISED BY THE LD. DR: CONTENTION NO.1: THE AO IN NOTES IN THE PRESENT AY 2008-09 AT PAGE 15, PARA 7.8 OF THE ASSESSMENT ORDER THAT CERT AIN VITAL FACTS REMAINED TO BE CONSIDERED/ PRESENTED TO THE H ON'BLE TRIBUNAL IN THE EARLIER YEARS ESPECIALLY 'ROLE OF C ARGILL INC., ROLE OF BUYER CARGILL INTL. SA, RBI CIRCULARS, FEMA PROVISIONS ETC. WERE NOT PRESENTED BEFORE THE LD. ITAT WHICH A RE VERY MATERIAL TO THE CASE'. REFERRING TO THE AO'S ORDER POINTS TO THE FACT THA T THE ITAT ORDER REFERRED IN THE ABOVE ALLEGATION IS THAT OF C ARGILL GLOBAL TRADING INDIA PRIVATE LIMITED (CGTIPL - INDIAN GROU P COMPANY) I.E. IT A NO. 684IDEL/2009 FOR A Y 2004-05 . THE APPELLANT MOST HUMBLY SUBMITS THAT THE ENTIRE TRANS ACTION PERTAINING TO THE DISCOUNTING HAS BEEN DULY EXPLAIN ED AND CAPTURED IN THE CGTIPL ITA T ORDER (REFER PARA 4 ON PAGE 2 OF ANNEXURE I). IT IS ALSO SUBMITTED THAT THE ASSES SEE IS A NON- RESIDENT COMPANY WHICH DOES NOT HAVE ANY PRESENCE I N INDIA. THE TRANSACTION WITH INDIAN COMPANY WAS THROUGH PRO PER BANKING CHANNEL WHEREIN ALL LAWS AND REGULATIONS WO ULD HAVE BEEN COMPLIED WITH. NEITHER TAX AUTHORITY NOR ANY O THER AUTHORITY HAS ALLEGED ANY IRREGULARITY IN THE TRANS ACTION AS PER APPLICABLE INDIAN LAW/REGULATION. IT IS ALSO RESPECTFULLY SUBMITTED THAT THE QUESTION S THAT HAVE BEEN RAISED BY THE LEARNED DEPARTMENT REPRESENTATIV E GIVING A FLAVOUR THAT CERTAIN VITAL FACTS REGARDING THE ROLE OF THE PARTIES INVOLVED, RBI CIRCULARS AND FEMA PROVISIONS, WHICH WERE 24 ITA NOS. 5260 & 5006/DEL/2011 MATERIAL WERE NOT PRESENTED BEFORE THE IT AT WHICH WERE MATERIAL TO THE CASE. THESE COMMENTS ARE OBVIOUSLY TO IMPRESS UPON THIS HON'BLE TRIBUNAL TO DISREGARD THE CO-ORDI NATE BENCH'S DECISION WHICH WAS PASSED ON THE IDENTICAL ISSUE AN D WHICH WAS CONFIRMED BY THE HON'BLE DELHI HIGH COURT. IT IS RE SPECTFULLY SUBMITTED THAT THE ISSUE BEFORE THE TRIBUNAL WAS TH E CHARACTERIZATION OF THE RECEIPTS IN THE HANDS OF TH E NON-RESIDENT OF THE ASSESSEE AND THAT IS PRECISELY WHAT NEEDS TO BE ADJUDICATED. IT IS ALSO SUBMITTED THAT MAKING SUCH BOLD ALLEGATIONS THAT CERTAIN MATERIAL FACTS AND ROLES P LAYED BY THE RESPECTIVE ENTERPRISES WAS NOT PRESENTED HAS NO BEA RING ON THE ISSUE. THIS IS NOTHING BUT A MISGUIDED EFFORT ON BE HALF OF THE REVENUE TO CONFUSE THE ISSUE. AT THIS JUNCTURE, IT IS ALSO RESPECTFULLY SUBMITTED THAT IT IS A SETTLED PROPOSI TION OF LAW THAT THE REVENUE CANNOT DICTATE TO THE TAXPAYER BUSINESS MEN AS TO HOW TO CONDUCT ITS AFFAIRS AND THE QUESTION OF COMM ERCIAL EXPEDIENCY CANNOT BE RAISED BY THE REVENUE AT THIS STAGE OR AT ANY STAGE PRIOR. HENCE, OBJECTIONS RAISED ARE OF NO CONSEQUENCE AND DESERVES TO BE IGNORED. CONTENTION NO.2: PARA 11 AND PARA 12 OF THE LD. DR' S SUBMISSION THE FINDING OF THE HON'BLE DRP THAT THE WHOLE TRANS ACTION IS A COLORABLE DEVICE MERELY ENTERED BY THE APPELLANT TO EARN HIGHER RATE OF INTEREST ON FUNDS (WHICH ARE LYING IDLE ABR OAD) AND ARE GIVE TO INDIAN GROUP COMPANIES, UNDER THE SHELTER OF THE DISCOUNTING TRANSACTION, WHICH IN TURN INVESTS IT I N INDIA AND EARNS FIXED PRE-DETERMINED INTEREST RATE IS MERELY AN ALLEGATION AND DEVOID OF ANY MATERIAL ON RECORD TO PROVE THE S AME. 'AT THE OUTSET, IT IS SUBMITTED THAT THE TRADE TRA NSACTION ARE ACTUAL INTERNATIONAL TRADE WHICH IS EVEN RECOGNIZED BY RBI AS MERCHANTING TRADE. THERE IS ACTUAL MOVEMENT OF GOOD S FROM ONE COUNTRY TO OTHER THROUGH SHIP, THUS, THE TRANSA CTION CANNOT BE TERMED AS SHAM TRANSACTION OR COLORFUL TRANSACTI ON. THE 25 ITA NOS. 5260 & 5006/DEL/2011 APPELLANT IS NOT A PARTY TO THE BUY-SELL AGREEMENT BUT IT UNDERSTANDS THAT THE WHOLE TRANSACTION IS ROUTED TH ROUGH BANKING CHANNEL AND PERMITTED BY INDIAN REGULATOR. THE APPELLANT IS IN THE BUSINESS OF PROVIDING FINANCIAL SERVICES INCLUDING DEALING IN NEGOTIABLE INSTRUMENTS LIKE BI LLS OF EXCHANGE, PROMISSORY NOTE ETC. IT HAS PURCHASED THE PN AT A DISCOUNTED VALUE (ON NON-RECOURSE BASIS) WHICH CAN' T BE TERMED AS INTEREST IN THE HANDS OF THE ASSESSE AS ACCEPTED BY HON'BLE DELHI HIGH COURT AS WELL AS SUPREME COURT WHILE DIS MISSING THE SLP. MOST OF THE QUESTIONS RAISED BY THE HON'BL E DRP PERTAINS TO THE TRADING LEG IN WHICH APPELLANT IS N OT A PARTY, THUS, IT CANNOT BE ASKED TO PROVIDE SUCH DETAIL. MOREOVER, THE CONTENTION PUT FORTH BY THE LD. DR TH AT 'THE SCHEME OF TRANSACTION PUT THROUGH BY THE GROUP IS M AINLY TO GIVE COLOR OF BILL DISCOUNTING TO INTEREST EARNING ACTIVITY IN HANDS OF THE NR APPELLANT WHILE AT THE SAME TIME MI NIMIZING THE TAX LIABILITY IN THE HANDS TO THE SUPPORTING GR OUP INDIAN CONCERN' IS ALSO NOT ACCEPTABLE AS THE APPELLANT IS NOT CLAIMING THAT THE INCOME IS NOT TAXABLE IN ITS HANDS. IT MER ELY SAYS THAT THE SAID INCOME IS A BUSINESS INCOME AS THE APPELLA NT'S ARE ENGAGED IN THE BUSINESS OF BUYING AND SELLING OF FI NANCIAL INSTRUMENTS AND DUE TO THE BENEFICIAL PROVISIONS OF THE DTAA, THE SAID INCOME IS NOT TAXABLE IN INDIA. MOREOVER, FROM THE ANGLE OF THE INDIAN ENTITY AS WELL, THE SAID CHARGE S WOULD BE TAX DEDUCTIBLE EVEN IF THE SAID TRANSACTION HAD BEEN CA RRIED BY THE INDIAN GROUP COMPANY WITH AN UNRELATED ENTITY LIKE INDIAN BANKS ETC. TO THE BEST OF THE KNOWLEDGE, IT HAS BEE N COMMUNICATED TO THE ASSESSEE THAT NOT ONLY THE SAID TRANSACTION WAS EXAMINED BY ASSESSING OFFICER OF THE INDIAN GRO UP COMPANY BUT ALSO BY THE TRANSFER PRICING OFFICER WHEREIN TH E SAME WAS DULY ACCEPTED TO BE AT ARM'S LENGTH PRICE. IT IS RESPECTFULLY REITERATED THAT THESE RESERVATIO NS IN THE REPLY OF THE D.R. ARE AGAIN DANGEROUSLY INCLINING TOWARDS 26 ITA NOS. 5260 & 5006/DEL/2011 QUESTIONING THE COMMERCIAL EXPEDIENCY OF THE TRANSA CTION. IT IS ALSO RESPECTFULLY SUBMITTED THAT THIS IS BEYOND THE POWERS AND SCOPE VESTED IN THE ASSESSING OFFICER AND AS SUCH D ESERVES TO BE IGNORED. AT THIS JUNCTURE, WE WOULD LIKE TO HIGHLIG HT THE FACT THAT THE AOIDRP CANNOT QUESTION THE GENUINENESS OF EXPEN DITURE/ TRANSACTIONS BEING UNDERTAKEN BY AN ENTITY WITH ANY PARTY UNLESS THERE IS SOMETHING ON RECORD TO PROVE OTHERW ISE. RELIANCE IN THIS CONNECTION IS PLACED ON SUPREME CO URT JUDGMENT OF SA BUILDERS V CIT 288 ITR 1 AND DELHI H IGH COURT JUDGMENT OF CIT V DALMIA CEMENTS PVT LTD 254 ITR 3 77. CONTENTION NO.3: PARA 13 OF THE LD. DR'S SUBMISSION I.E. ARGUMENTS CULLED OUT FROM THE DRP'S ORDER CONTENTION ON NON-COOPERATION OF THE ASSESSEE IN RE SPECT OF SUBMITTING COMPLETE TRAIL OF DOCUMENTS AND LIMITED INFORMATION AVAILABLE BY THE ASSESSEE: THE APPELLANT HAD DULY S UBMITTED ALL THE VITAL DOCUMENTS PERTAINING TO BILL DISCOUNTING VIS A VIS INVOICE RAISED BY INDIAN GROUP COMPANY ON OFFSHORE BUYER OF GOODS, PROMISSORY NOTE ISSUED BY OFFSHORE BUYER OF GOODS, DISCOUNTING AGREEMENT BETWEEN THE APPELLANT AND IND IAN GROUP ENTITY. MOREOVER, THE RELEVANT DOCUMENTS REQUIRED B Y THE APPELLANT FOR UNDERTAKING A USUAL BUSINESS TRANSACT ION HAS BEEN DULY SUBMITTED BY THE APPELLANT DURING ASSESSM ENT AS WELL AS DRP PROCEEDINGS. FURTHER, AS REGARDS, THE CONTENTION ON THE MARGIN O F INDIAN GROUP COMPANY IS A SUBJECT MATTER OF INDIAN GROUP E NTITY AND AS PER INFORMATION AVAILABLE, HAD BEEN EXAMINED IN THE TRANSFER PRICING ANALYSIS BY THE TPO IN CASE OF INDIAN GROUP COMPANIES AND IN NO WAY SHALL IMPACT THE SAID DISCOUNTING TRA NSACTION OF THE APPELLANT. THE FINDING THAT THE INDIAN COMPANY RECORDS T!:E TR ANSACTION AS PAYMENT OF INTEREST AND THE APPELLANT TERMS THE SAM E AS DISCOUNT IS INCORRECT. BOTH THE INDIAN GROUP COMPAN IES AS WELL 27 ITA NOS. 5260 & 5006/DEL/2011 AS THE. APPELLANT TERMS THE SAID TRANSACTION AS DIS COUNT TRANSACTION ONLY. REFERENCE IS PLACED ON THE TP STU DY OF CIPL (EXTRACT OF WHICH IS QUOTED ON PAGE 14 OF THE DRP O RDER) THAT THE SAID TRANSACTION IS DISCOUNTING CHARGES. HENCE, BOTH THE INDIAN COMPANY AND THE APPELLANT HAVE SHOWN THE SAI D TRANSACTION AS DISCOUNTING CHARGES. PAPER TRANSACTION HAVE BEEN HIGHLIGHTED ALONG WITH ITS NON- COMPLIANCE OF THE DEFINITION OF 'INTEREST': THE LEG AL QUESTION AS TO WHETHER THE DISCOUNTING CHARGES IS INTEREST HAS ALREADY BEEN DISCUSSED AND ADJUDICATED BY THE DELHI HC THAT THE SAME IS NOT IN THE NATURE OF 'INTEREST'. CBDT CIRCULARS: THE APPLICABILITY OF THE CBDT CIRCU LARS RELIED BY THE APPELLANT HAVE BEEN DULY CONSIDERED A ND DEALT IN DETAIL BY THE DELHI HC IN THE ORDER OF CARGILL GLOB AL TRADING INDIA PRIVATE LIMITED CRITICAL OBSERVATIONS: THE QUERIES RAISED ARE FROM THE STAND POINT OF INDIAN GROUP COMPANIES AND COULD NOT HAVE BEEN RESPONDED BY THE APPELLANT IN THIS CASE. THE APPELL ANT HAD MERELY CARRIED ON A NORMAL BUSINESS TRANSACTION AND HAS EARNED BUSINESS INCOME WHICH BY VIRTUE OF DTAA IS N OT TAXABLE IN INDIA. A PERUSAL OF THE QUESTIONS RAISED BY THE DISPUTE RE SOLUTION PANEL ARE CLEARLY INDICATIVE OF THE FACT THAT THESE QUESTIONS ARE NOT RELEVANT TO BE RAISED NOW AS THESE QUESTIONS AP PEAR TO QUESTION THE NECESSITY OF ENTERING INTO THE TRANSAC TION WHICH AGAIN LINKS TO THE QUESTION ON COMMERCIAL EXPEDIENC Y .. AS SUBMITTED ABOVE, THE CASE BEFORE THE HON'BLE TRIBUN AL IS THAT OF A NON-RESIDENT ASSESSEE AND THE ISSUE WHICH HAS ARI SEN IS THE TREATMENT OF THE RECEIPTS IN THE HANDS OF SUCH NON- RESIDENT ASSESSEE. THIS ISSUE HAS NO BEARING ON THE QUESTION S RAISED BY THE DRP AND ARE WHOLLY IRRELEVANT FOR THE DETERMINA TION OF THE ISSUE BY THIS TRIBUNAL. 28 ITA NOS. 5260 & 5006/DEL/2011 ALTHOUGH, THE ABOVE SUBMISSION OF THE ASSESSEE ADDR ESSES THIS POINT, BUT ON AN ILLUSTRATION TO BE GIVEN, THE ATTE NTION OF THE HON'BLE TRIBUNAL IS INVITED INTO THE QUESTION NO. V I WHICH READS AS UNDER: '(VI) WHAT WAS THE NEED OF THE INDIAN COMPANY FOR FUNDS FOR WHICH IT APPROACHED THE ASSESSEE FOR DISCOUNTING? ' THIS IS IN ITSELF WOULD SHOW THAT THE REVENUE IS QU ESTIONING THE COMMERCIAL EXPEDIENCY OF THE TRANSACTION WHICH IT I S NOT PERMISSIBLE. IT IS THUS ACCORDINGLY PRAYED THAT THE WRITTEN SUBMISSION FILED BY THE REVENUE ARE NOT DETERMINATI VE OF ANY MATERIAL FACT OR POSITION OF LAW AND DESERVES TO BE IGNORED. AS STATED ABOVE, THE ISSUE IS SQUARELY COVERED IN FAVO R OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL, THE HON'B LE HIGH COURT AND THE HON'BLE SUPREME COURT. CONTENTION NO.4: RELIANCE ON JUDGMENT IN RAGHUBIR S INGH [1989] 178 ITR 548 (SC) RELIANCE ON THIS JUDGMENT HAS BEEN PLACED STATING T HAT THE HON'BLE IT AT CAN DEVIATE FROM ITS EARLIER DECISION AS THE VITAL POINTS HAVE NOT BEEN CONSIDERED. HOWEVER, THE APPEL LANT WOULD LIKE TO SUBMIT THAT ALL THE FACTS OF THE TRANSACTIO N WERE DULY PRESENTED BEFORE VARIOUS AUTHORITIES ARID AFTER CON SIDERATION OF NECESSARY FACTS, THE HON'BLE HC AND ITAT HAVE ADJUD ICATED THE MATTER IN FAVOR OF THE APPELLANT. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTE D THAT IN THE APPEAL FILED BY THE ASSESSEE AND THE GROUNDS RAISED THE QUESTION THAT HAS BEEN RAISED IS REGARDING THE CHAR ACTERIZATION OF THE DISCOUNTING CHARGES AND THAT IS THE ONLY SUB JECT MATTER OF THE APPEAL AND IN THE ABSENCE OF ANY CROSS OBJECTIO N - BY THE REVENUE, THE TRIBUNAL IS NOT PERMITTED TO GO BEYOND THE SUBJECT MATTER OF THE APPEAL. 29 ITA NOS. 5260 & 5006/DEL/2011 THIS POSITION IS STATED IN CONCRETE BY THE JURISDIC TION OF THE HIGH COURT IN THE CASE OF MARUBENI INDIA PVT. LTD. V CIT (328 ITR 306) (DEL). THE RELEVANT EXTRACTS OF THE JUDGME NT ARE AS UNDER:- 'SEC. 254(1) PROVIDES THAT THE TRIBUNAL MAY, AFTER HEARING THE PARTIES ON THE APPEAL, 'PASS SUCH ORDERS THEREON' A S IT THINKS FIT. THUS, ON A PLAIN READING OF THE RELEVANT PROVISION OF LAW, THE POWER TO PASS SUCH ORDERS AS THE TRIBUNAL THINKS FI T CAN BE EXERCISED ONLY IN RELATION TO THE MATTERS THAT ARIS E IN THE APPEAL AND IT IS NOT OPEN TO THE TRIBUNAL TO ADJUDICATE ON A QUESTION WHICH IS NOT IN DISPUTE AND WHICH DOES NOT FORM THE SUBJECT- MATTER OF THE APPEAL. THE WORD 'THEREON' IS A PARTI CULARLY SIGNIFICANT AND HAS BEEN INTERPRETED BY MANY HIGH C OURTS AND SUPREME COURT TO CIRCUMSCRIBE THE JURISDICTION OF T HE TRIBUNAL TO THE SUBJECT-MATTER OF THE APPEAL, WHICH IS CONST ITUTED OF THE ORIGINAL GROUNDS OF APPEAL AND SUCH ADDITIONAL GROU NDS AS MAY BE RAISED BY THE LEAVE OF THE TRIBUNAL. THE CONSENS US OF JUDICIAL OPINION APPEARS TO BE THAT THE JURISDICTION OF THE TRIBUNAL IS CONFINED TO THE PASSING OF ORDERS ON THE SUBJECT-MA TTER OF THE APPEAL, THAT IN, THOSE ORDERS WHICH ARE NECESSARY F OR THE DISPOSAL OF THE APPEAL. THE TRIBUNAL CANNOT GIVE A FINDING IN RESPECT OF THE ASSESSMENT OF A YEAR WHICH IS NOT T HE SUBJECT- MATTER OF THE APPEAL BEFORE IT. THE TRIBUNAL THUS C AN GIVE A FINDING THAT THE DEDUCTION/INCOME DOES NOT BELONG T O THE RELEVANT ASSESSMENT YEAR/YEARS, BUT THOUGH IT MAY I NCIDENTALLY FIND THAT THE DEDUCTION/INCOME RELATES TO ANOTHER A SSESSMENT YEAR, IT CANNOT GIVE A FINDING THAT THE DEDUCTION/I NCOME BELONGS TO ANOTHER SPECIFIED YEAR. THERE IS, HOWEVER, AN EX CEPTION TO THE GENERAL RULE THAT THE JURISDICTION OF THE TRIBUNAL IS CONFINED TO THE SUBJECT-MATTER OF APPEAL. THE EXCEPTION IS WHER E AN ADDITIONAL GROUND HAS BEEN RAISED WITH THE LEAVE OF THE TRIBUNAL. IN THAT CASE, THE SUBJECT-MATTER OF THE A PPEALS CONSTITUTES THE ORIGINAL GROUNDS OF APPEAL AND SUCH ADDITIONAL 30 ITA NOS. 5260 & 5006/DEL/2011 GROUND/GROUNDS AS MAY BE RAISED WITH THE LEAVE OF T HE TRIBUNAL. ' 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE PERUSED THE RECORD OF THE CASE. WE HAVE EXTENSIVELY REPRODUCED THE SUBMISSIONS OF BOTH THE DEPARTMENT AND ASSESSEE, IN ORDER TO APPRECIATE THE SPECIFIC OBJECTIONS RAISED BY REVENUE. 15. NOW WE PROCEED TO CONSIDER THE ALLEGED DISTINGU ISHING FEATURES POINTED OUT BY LD. DR IN HIS DETAILED SUBMISSIONS, REPRODUCED ABOVE. IN ORDER TO APPRECIATE THE SUBMISSIONS OF LD. CIT(DR) , WE HAVE TO FIRST CONSIDER THE BRIEF BACKGROUND OF THE CASE. 16. THE ASSESSEE IS A COMPANY INCORPORATED UNDER TH E LAWS OF SINGAPORE AND IS TAX RESIDENT OF SINGAPORE. IT HAD ENTERED IN TO AN AGREEMENT FOR COST SHARING WITH INDIAN PARTY FOR RENDERING CERTAIN SER VICES. BESIDES THIS, ASSESSEE HAD ALSO DISCOUNTED THE BILLS OF EXCHANGE (BE)/ DEMAND PROMISSORY NOTES (PN) OF CERTAIN INDIAN GROUP ENTITIES I.E. CA RGILL INDIA PVT. LTD. AND CARGILL GLOBAL TRADING PVT. LTD. THE ASSESSEE DID N OT OFFER THE INCOME EARNED BY IT ON DISCOUNTING THE PN OF CARGILL INDIA PVT. LTD. ON THE GROUND THAT THE SAME WAS IN THE NATURE OF BUSINESS INCOME AND WAS NOT TAXABLE IN THE ABSENCE OF PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE IN INDIA. THE INDIAN GROUP ENTITIES CIPL AND CGTIPL GOT DISCOUNT ED THE PROMISSORY NOTES ISSUED TO THEM BY THE BUYER OF THEIR GOODS FO R THE ASSESSEE. FOR THIS 31 ITA NOS. 5260 & 5006/DEL/2011 PURPOSE THE ASSESSEE ENTERED INTO A DISCOUNTING AGR EEMENT WITH CARGILL INDIA PVT. LTD. FOR PURCHASE OF PN AT A DISCOUNT SPECIFYI NG THE DETAILS OF PN TO BE DISCOUNTED FACE VALUE, DISCOUNTED VALUE, RATE OF DI SCOUNT, NAME OF THE COMPANY WHO OWED PN, DATE OF MATURITY OF PN, BANK D EBTS FOR PAYMENTS ETC. THE CIPL ENDORSED THE PN IN FAVOUR OF THE ASS ESSEE ON WITHOUT RECOURSE BASIS. THE SAID ENDORSEMENT OF PN SIGNIFI ES THAT ALL RISKS AND REWARDS OF THE PN STAND TRANSFERRED TO THE ASSESSE E AND IN NO CASE THE ASSESSEE COULD MAKE THE INDIAN ENTITY LIABLE TO MAK E PAYMENT TO THE ASSESSEE IN CASE OF DELAY OR DEFAULT ON MATURITY. T HE ASSESSEE MAKES PAYMENT OF PN TO THE INDIAN ENTITIES AS PER THE NET PRESENT VALUE. THE DIFFERENCE BETWEEN THE FACE VALUE AND NET PRESENT V ALUE OF THE PN HAS BEEN CONSIDERED AS DISCOUNTING CHARGES. FURTHER, THE ABO VE FACTS WERE SUMMARIZED AS UNDER: 3.1.2.5. THE ABOVE POSITION MAY BE SUMMARIZED AS U NDER: - CARGILL INDIA APPROACH THE ASSESSEE FOR DISCOUNT ING OF THE PN ISSUED TO THEM BY THE BUYERS OF GOODS; - THE ASSESSEE PURCHASES THE PN AT A DISCOUNT ON 'W ITHOUT RECOURSE' BASIS AND PAYS THE DISCOUNTED AMOUNT TO T HE CARGILL INDIA; THE ASSESSEE EARNS INCOME ON MATURITY OR SUBSEQUENT SALE OF PN WHICH IS IN THE NATURE OF BUSINESS INCOME' IT MAY BE WORTHWHILE TO MENTION HERE THAT PURCHASE OF PN ON A 'WITHOUT RECOURSE' BASIS IMPLIES THAT: 32 ITA NOS. 5260 & 5006/DEL/2011 - ASSESSEE PURCHASES THE PN FROM THE CARGILL INDIA - ASSESSEE PAYS THE CONSIDERATION BASED ON PRESENT VA LUE WHICH IS LESS THAN THE FACE VALUE AND THE DIFFERENC E IS REGARDED AS-DISCOUNT VALUE. - ASSESSEE DOES NOT HAVE ANY RIGHT AGAINST THE SELLER OF PN I.E. CARGILL INDIA IN CASE OF ANY DISPUTE OR DEFAULT IN THE ENCASHMENT OF PN ON THE DUE DATE. - ASSESSEE HAS THE RIGHT TO COLLECT THE MONEY FROM TH E ENTITY WHICH OWED THE PN IN ITS OWN NAME. - ASSESSEE DOES NOT RECOVER THE AMOUNT FROM THE ENTIT Y WHICH OWED THE PN ON BEHALF OF THE CARGILL INDIA BUT RECO VERS THE SAME IN ITS OWN BEHALF. 17. IN THE BACKDROP OF AFOREMENTIONED FACTS THE INC OME EARNED BY THE ASSESSEE HAS BEEN CONSIDERED AS DISCOUNTING CHARGES IN ITS HANDS AND THIS ISSUE HAS BEEN SETTLED BY THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF CARGILL GLOBAL TRADING PVT. LTD. (SUPRA). T HUS, THE ISSUE STANDS SETTLED BY HONBLE JURISDICTIONAL HIGH COURT AND TH E SLP FILED BY THE DEPARTMENT IN THE CASE OF CARGILL GLOBAL TRADING IN DIA PVT. LTD. HAS BEEN DISMISSED. THE DECISION OF CARGILL GLOBAL TRADING I NDIA PVT. LTD. HAS BEEN FOLLOWED IN THE CASE OF ASSESSEE, AS NOTED EARLIER. 18. NOW THE FIRST ASPECT POINTED OUT BY LD. CIT(DR) WITH REFERENCE TO PARA 7.8 AT PAGE 15 OF ASSESSMENT ORDER IS WITH REFERENC E TO ROLE OF CARGILL INC. THE SAID PARA IS REPRODUCED HEREUNDER:- 7.8 AS PER THE LAST ORDER OF THE LD. ITAT IN THE CA SE OF CGTIPL WHEREIN APPEAL OF I CGTIPL HAS BEEN ALLOWED INL.T.A. NO.684/DEL/2009 FOR A.Y. 2004-05 AND SUBSEQUENT YEA RS, THIS 33 ITA NOS. 5260 & 5006/DEL/2011 INCOME OF THE ASSESSEE IS HELD TO BE OF NOT OF THE NATURE OF INTEREST HOWEVER THAT ORDER IS PASSED BY THE LD. IT AT WHEREIN COMPLETE FACTS WERE NOT PRESENTED AND SPECIALLY FAC TS RELATING TO THE ASSESSEE (CARGILL TSF ASIA PTE LTD), ROLE OF CARGILL INC., ROLE OF BUYER CARGILL INTI. SA., RBI CIRCULARS, FEM A PROVISIONS ETC. WERE NOT PRESENTED BEFORE THE LD. IT AT WHICH ARE VERY MATERIAL FOR THE CASE. ALSO, IT BECOMES AN UNDISPUTED FACT THAT THE INTERE ST INCOME (DISCOUNTING CHARGES AS PER THE NOMENCLATURE) ARISE S IN INDIA, AS IS ALSO MENTIONED BY THE ASSESSEE IN THE NOTES T O RETURN OF INCOME FILED ON 30-09-2008. ONCE THE INTEREST ACCRUES/ARISES IN INDIA THERE IS NO NEED TO GO TO SECTION 9 OF THE INCOME TAX ACT, 1961 WHICH PROV IDES FOR 'INCOME DEEMED TO ACCRUE OR ARISE IN INDIA'. EVEN O THERWISE, IN THE PRESENT CASE, THE INTEREST IS ALSO DEEMED TO AC CRUE OR ARISE IN INDIA AS: THE INTEREST IS PAID BY A PERSON WHO IS A RESIDE NT AND EVEN ALSO INTEREST IS PAYABLE IN RESPECT OF ANY DEBT INCURR ED, OR. MONEYS BORROWED AND USED, FOR THE PURPOSES OF A BUS INESS OR PROFESSION EARNED ON IN INDIA THE AMOUNT BORNE BY T HE CIPL I CGTIPL WOULD BE TAXABLE IN THE HANDS OF THE ASSESSE E AS PER PROVISIONS OF SECTION 5(2) OF THE I.T. ACT. THEREFORE, IT IS HELD THAT THE INCOME IS TAXABLE IN THE HANDS OF THE ASSESSEE AS INTEREST INCOME. 19. A BARE PERUSAL OF THE OBSERVATIONS OF AO MAKES IT VERY CLEAR THAT HE HAS NOT AT ALL REFERRED TO ANY RBI CIRCULAR, FEMA P ROVISION WHICH HAD BEARING ON THE FACTS OF THE CASE AND HOW THE RECEIP T IN THE HANDS OF ASSESSEE TOOK THE COLOUR OF INTEREST AND NOT THE DISCOUNTING CHARGES. HOWEVER, IN THIS 34 ITA NOS. 5260 & 5006/DEL/2011 REGARD LD. CIT(DR) HAS REFERRED TO PARA 9 AND 9.1 OF LD. DRPS ORDER AT PAGE 10 & 11 WHEREIN LD. DRP HAS, INTER ALIA, OBSERVED T HAT THE ASSESSEES CONTENTION REGARDING DISCOUNTING BEING WITHOUT REC OURSE IS OF NO HELP TO ASSESSEE BECAUSE THE ALLEGED SELLER OF GOODS, AND T HE ALLEGED FOREIGN BUYER OF GOODS I.E. CARGILL INTERNATIONAL GENEVA WERE OBLIG ED TO HONOUR THE TERMS OF PAYMENTS AS PER RBI REGULATIONS WITHIN A STIPULATED TIME. LD. DRP HAS FURTHER OBSERVED THAT AS PER RBI REGULATIONS, EVERY EXPORTER OF GOODS HAS TO GET THE INWARD REMITTANCE WITHIN A STIPULATED TIME IN INDIA IN FOREIGN CURRENCY. IT IS FURTHER OBSERVED THAT, ACCORDINGLY, THE FOREIGN BUYER HAS TO REMIT THE FUND TO THE INDIAN CUSTOMER AND THE INDIA N CUSTOMER WAS OBLIGED TO RECOVER THE MONEY DUE TO IT IN FOREIGN CURRENCY FRO M THE SUPPLIER WITHIN THE TIME SPECIFIED BY THE RBI. 20. LD. DRP FURTHER OBSERVED IN PARA 9.1 THAT ASSES SEE HAD SUBMITTED BEFORE THE AO AND ALSO BEFORE THE PANEL THAT THERE HAD BEEN NO DEFAULT IN REALIZING THE PROMISSORY NOTE SO FAR. LD. DRP FURTH ER OBSERVED THAT SINCE THE TRANSACTION WAS BETWEEN GROUP COMPANY AND THE INDIA N COMPANY WAS OBLIGED TO RECOVER THE MONEY FROM THE BUYER OF ALLE GED GROUP, THERE WAS NO RISK INVOLVED IN THE TRANSACTION. THE CONCLUSION DR AWN BY LD. DRP ON THIS BASIS IS THAT THE OBLIGATION BY THE RBI TO RECOVER THE MONEY IN FACT CHANGES THE NATURE OF THE TERM WITHOUT RECOURSE. WE DO NO T FIND ANY SUBSTANCE IN THE OBSERVATIONS OF LD. DRP ON THIS BASIS. THE ISSU E BEFORE US IS WHETHER THE DISCOUNTING CHARGES, RECEIVED BY ASSESSEE ON MATURI TY OF PROMISSORY NOTE ON REALIZATION OF PROCEEDS FROM THE BUYER, WERE IN THE NATURE OF DISCOUNTING CHARGES OR INTEREST. THE RBI REGULATIONS CANNOT DEC IDE THE TRUE NATURE OF RECEIPT IN THE HANDS OF ASSESSEE. HAD THERE BEEN A NY VIOLATION OF RBI REGULATION IN THE WHOLE TRANSACTION, THEN ACTION WO ULD HAVE BEEN INITIATED AGAINST THE ASSESSEE IN ACCORDANCE WITH LAW. THE CO NCLUSION DRAWN BY LD. 35 ITA NOS. 5260 & 5006/DEL/2011 DRP IS THAT AS PER THE DEFINITION OF INTEREST IN TH E INDIAN INCOME-TAX ACT AND THE DTAA THE AMOUNT PAID BY THE ASSESSEE IS A DEBT TO THE INDIAN COMPANY AND THE ASSESSEE COMPANY HAS RECOVERED THE SAID DEB T WITH INTEREST FROM THE INDIAN COMPANY THROUGH ANOTHER GROUP COMPANY. IN OU R OPINION, THIS ASPECT HAS RECEIVED SPECIFIC CONSIDERATION OF HONBLE HIGH COURT IN THE CASE OF CARGILL GLOBAL TRADING PVT. LTD. (SUPRA) AND, THERE FORE, THIS CONCLUSION CANNOT BE ACCEPTED. FURTHER, LD. CIT(DR) HAS REFERR ED TO PARA 7 AND 7.2 OF LD. DRPS ORDER, WHICH HAS BEEN REPRODUCED BY US EARLIE R. IN PARA 7.2, LD. DRP HAS, INTER ALIA, OBSERVED THAT THE INDIAN COMPANY, WHILE REGARDING THE ABOVE TRANSACTION TERMS THE PAYMENT AS INTEREST AND CLAIM S DEDUCTION, WHEREAS THE SAME AMOUNT IS TERMED AS DISCOUNT BY THE ASSESSEE, RESULTING INTO NO TAX PAYMENT BY THE ENTIRE GROUP IN INDIA. IN THE SUBMIS SIONS MADE BY ASSESSEE,, REPRODUCED EARLIER, IT HAS BEEN SPECIFICALLY STATED AT PAGE 5 THAT BOTH THE INDIAN COMPANIES AS WELL AS THE ASSESSEE TERM THE S AID TRANSACTION AS DISCOUNTING TRANSACTION ONLY. IN THIS REGARD LD. C OUNSEL HAS REFERRED TO PAGE 14 OF THE DRPS ORDER WHEREIN LD. DRP NOTES IN PARA 9.8 AS UNDER: 9.8.THE ASSESSEE ALSO CONTENDED THAT IN THE TP STUD Y OF CIPL DISCOUNTING CHARGES ARE CLASSIFIED AS DISCOUNTING C HARGES. HOWEVER, DURING THE PROCEEDINGS BEFORE THIS PANEL T HE ASSESSEE HAS SUBMITTED ON 02.06.2011 AS FOLLOWS: 1. HEAD UNDER WHICH DISCOUNTING CHARGES ARE DEBITED IN THE BOOKS OF INDIAN GROUP ENTITIES AS PER THE INFORMATION PROVIDED BY THE INDIAN GROUP ENTITIES, THEY HAVE RECORDED THE DISCOUNTING CHARGES UNDER TH E HEAD FINANCIAL EXPENSES IN THEIR PROFIT AND LOSS ACCOU NTS. 21. WE FAIL TO APPRECIATE AS TO HOW LD. DRP HAS DRA WN THE CONCLUSION FROM THE ABOVE STATEMENT THAT INDIAN COMPANY IS TRE ATING THIS AMOUNT AS 36 ITA NOS. 5260 & 5006/DEL/2011 INTEREST. THE TRUE NATURE OF TRANSACTION CANNOT ALT ER MERELY BY CLUBBING THE DISCOUNTING CHARGES UNDER THE HEAD FINANCIAL EXPEN SES. THEREFORE, THIS PLEA RAISED BY LD. CIT(DR) ON THE BASIS OF OBSERVATION M ADE BY LD. DRP FOR DISTINGUISHING THESE FACTS IN THE CURRENT YEAR FROM EARLIER YEARS IS WITHOUT ANY BASIS. AS FAR AS LD. CIT(DR)S SUBMISSION REGAR DING NON-COOPERATION OF ASSESSEE ON THE BASIS OF OBSERVATIONS MADE BY LD. D RP IN PARA 7 ARE CONCERNED, WE FIND THAT NONE OF THE AUTHORITIES BEL OW HAVE POINTED OUT AS TO WHICH PARTICULAR INFORMATION WAS MISSING IN THE ENT IRE TRAIL OF TRANSACTION. IN THE SUBMISSIONS FILED BY ASSESSEE IT IS CLEARLY STA TED THAT ALL THE RELEVANT INFORMATION WERE FURNISHED BEFORE LOWER REVENUE AUT HORITIES. 22. LD. CIT(DR) HAS FURTHER REFERRED TO THE OBSERVA TIONS OF LD. DRP, WHICH WERE AS UNDER: ASSESSEES RELIANCE ON CBDT CIRCULARS IS ANALYSED AND REJECTED. CRITICAL OBSERVATIONS THEREIN INCLUDE (I) ASSESSEE HAS NOT APPROACHED BANKERS FOR DISCOUNTING OF SO CALLED BILLS; (II) PNS OF GROUP CONCERNS ARE NOT FREELY TRANSFERABLE B Y ENDORSEMENT AND DELIVERY; (III) THE CASE OF THE ASS ESSEE IS A PRIVATE ARRANGEMENT AMONG GROUP CONCERNS AND CANNOT BE COMPARED WITH BANKING TRANSACTIONS AND CDS 23. ALL THESE OBSERVATIONS ARE PRIMARILY AIMING AT THE COMMERCIAL EXPEDIENCY OF THE TRANSACTION, WHICH ASPECT HAS ALR EADY BEEN CONSIDERED BY THE HONBLE JURISDICTIONAL HIGH COURT. AS WE HAVE E LABORATELY CONSIDERED ALL THE OBJECTIONS RAISED BY LD. CIT(DR) AND DO NOT FIN D ANY DISTINGUISHING FEATURE BEING BROUGHT ON RECORD FROM EARLIER YEARS , WE DO NOT FIND ANY REASON TO TAKE A DIFFERENT VIEW FROM EARLIER YEARS. THEREFORE, THE DECISION OF 37 ITA NOS. 5260 & 5006/DEL/2011 HONBLE SUPREME COURT RELIED ON BY LD. DR IN THE C ASE OF UNION OF INDIA VS. RAGHUBIR SINGH 178 ITR 548 (SC) IS OF LITTLE HE LP TO THE DEPARTMENT. 24. IN THE RESULT, BOTH THE APPEALS, PREFERRED BY T HE ASSESSEE, STAND ALLOWED. ORDER PRONOUNCEMENT IN OPEN COURT ON 15/03/2016. SD/- SD/- (SUCHITRA KAMBLE ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15/03/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.