Sona BLW Precision Forgings Ltd., New Delhi V. Addl. CIT, Special Range-8, New Delhi

ITA 525/DEL/2019

AI Insights

The case involves Sona BLW Precision Forgings Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals)-44, New Delhi, pertaining to the assessment year 2013-14. The primary contention was regarding the adjustment made by the Transfer Pricing Officer (TPO) under Section 92C of the Income Tax Act, 1961, related to the corporate guarantee fees extended by the appellant to the bankers of the associate enterprises. The TPO had proposed an adjustment of INR 1,06,66,002, which was upheld by the Assessing Officer and later by the CIT(A). The appellant contested this adjustment, citing that the operating margin as per the accepted benchmark method of TNMM was within an acceptable range even after considering the TPO's adjustment on corporate guarantee fee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121749 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 21-06-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 23-01-2019
• Other Referred Cases: ITA Nos. 204 & 3134/Del/2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 11; 143(3); 201; 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & Dr. B.R.R. KUMAR, ACCOUNTANT MEMBER I.T.A. No.525/DEL/2019 Assessment Year 2013-14 Sona BLW Precision Forgings Ltd. UGF-6, Indraprakash 21 Barakhamba Road New Delhi Vs. Addl. CIT Special Range-8 New Delhi TAN/PAN: AABCS4786P (Appellant) (Respondent) Appellant by: Ms. Aditi Gupta, AR Respondent by: Shri Rajesh Kumar, CIT (DR) Date of hearing: 22 06 2023 Date of pronouncement: 14 07 2023 O R D E R PER KUL BHARAT, A.M.: The capti oned appeal b y t he assessee i s dir ected again st the or der of t he ld. Commi ssi oner of I nco me Ta x (Ap peals)- 44, New Del hi [ ‘CI T(A) ’ in short ] dat ed 26. 11. 201 8 a ri si ng fro m th e assess me nt orde r dat ed 21. 11. 20 16 pass ed by th e Assessing O fficer (A O) unde r Sect ion 143(3) of t he Inc ome T ax A ct, 19 61 (t he Act ) pe rtaining to A ssess ment Y ear 20 13-14 . 2. The assessee has rai sed t he f oll owing gr ounds of appeal. “ 1 . T h e l e a r n e d C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s) e r r e d in l a w a n d f a c t s i n p a r t i a l l y u p h o l d i n g t h e a r m ' s l e n g t h pr i c e o f c o r p o ra t e g u a ra n t e e s e x t e n d e d b y t h e A p p e l l a n t t o t h e b a n k e r s o f t h e A s s o c i a t e E n t e r p r i s e s a n d t h e r e b y e r r e d i n u p h o l d i n g u p w a r d tr a n s f e r p ri c i n g a d j u s t m e n t o f R s . 6 6 ,3 0 , 4 5 0 ( n e t o f s u o m o t o a d j u s t me n t b y t h e A p p e l l a n t ) u / s . 9 2 C A o f t h e I n c o m e T a x A c t , 1 9 6 1 i n r e sp e c t o f C o rp o r a t e G u a r a n t e e C o m m i s s i o n . I.T.A. No.525/Del/2019 2 2 . W i t h o u t p r e j u d i c e t o t h e f o r e s a i d g r o u n d s , t h e le a r n e d C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) e r r e d i n f a c t s a n d l a w b y up h o l d i n g t h e p a r t i a l a d d i t i o n e v e n t h o u g h t h e o p e ra t i n g m a r g i n o f t h e a ss e s s e e a s p e r a c c e p t e d b e n c h m a r k m e t h o d o f T N M M , w a s w i t h i n a c c e pt a b l e r a n g e e v e n a f t e r c o n s i d e r i n g t h e T r a n s f e r P r i c i n g O f f i c e r' s a d j u s t m e n t o n c o r p o r a t e g u a r a n t e e f e e . ” 3. The f act s i n bri ef ar e that i n thi s case t he assessee f il ed i ts retur n of inco me decl ari ng i nco me at INR 28, 64, 70, 841/ - on 25. 01. 2013 whi ch was l at er re vised t o I NR 28,70,84,296/- on 20. 03. 2015. The case was select ed f or scr uti n y under CASS. The reaft er , stat utor y n oti ces wer e issued. The assessee-co mpa n y is engaged i n t he busi ness of manuf act uri ng of Preci sion F or ged Bevel Gears and S yn chr onizer ri ngs use d in the aut omobi l e industr y. I t was not i ced that durin g t he year under consi derat i on, t he assessee-compa n y had undert aken internati onal tr ansact ions t her efor e, t he mat ter was referre d t o Tra nsfer Pri ci ng Off icer ( TPO ) for det er mi ni ng Ar ms’ Lengt h Price who pr o pos ed that adjust me nt of I NR 1, 06, 66, 002/ - qua the value of i nt er nat ional transact i ons a gai nst this assessee di d not fi le an y obj ecti on be for e t he Dispute Resol ut ion Pa nel (DRP) . Thereaft er , t he Assessi ng O ffi cer made addition of I NR 1, 06, 66, 002/ -. Thus, t he Assessi ng Of ficer assessed t he i nco me at INR 29, 77, 50, 298/ - agai nst t he decl ar ed i nco me at INR 28, 64, 70, 841/ -. 4. Aggri eved agains t t his, t he assessee prefer red appeal bef ore t he l d. CI T( A) w ho sustai ned t he addi ti on by f ol l owi ng the or der of t he pr edecessor i n t he A ssessment Year 2 012-13. 5. Now t he assessee is i n appeal bef ore t hi s Tribunal . 6. At t he out set, the l d. counsel for t he assessee sub mit ted I.T.A. No.525/Del/2019 3 that under t he i dent ical facts Co-or dinat e Bench of thi s Tri bunal in respect of pr oceedi ngs r el at ed t o Assess ment Ye ar 201 2- 13 had deci ded t he i ssue i n favour of t he assessee b y di r ect ing t he Assessi ng Of f icer to appl y CUP met hod and r est or ed the mat ter to t he fil e of the Assessi ng Offi cer for fresh deter mi nati on. T he ld. cou nsel fur t her sub mi tt ed t hat foll owi ng the decisi on i n Assess ment Year 2012- 13, t he i ssue i n Assess ment Year 2016- 17 also was r est ored to the fi le of t he Assessi ng Offi cer, theref ore, i t was cont ended t hat mat t er be rest ore d t o the f il e of the Assessi ng Offi cer. 7. We have hear d t he rival cont ent i ons and peruse d the ma teri al avail abl e on r ec or d. 8. We f ind t hat the Co- or di nat e Bench of t he Tri bunal in ITA Nos. 204 & 3134/Del/ 2017 vi de or der dat ed 18. 11. 2021 f or Assess ment Years 2011- 12 & 2 012- 13 had r est ored th e i ssue t o the fi le of t he Assessing Offi cer. Thi s deci si on was also fol lowed b y t he Co- or di nate Bench in t he Assessment Year 2016- 17. For t he sake of clarit y, t he rel evant paragr aphs of the or der passed on 18. 11. 2021 ar e repr oduced her eunder: - “ 4 . A s s e s s e e f i l e d o b j e c t i o n s b e f o r e t h e D R P. D R P , a f t e r s o m e d i s c u s s i o n s , h e l d a s u n d e r : - “ I t i s w e l l s e t t l e d t h a t L I B O R b e i n g a n i n t e r n a t i o na l l y r e c o g n i z e d r a t e i s t h e a p p r o p r i a t e b e n c h m a r k i n t e r es t r a t e w h i c h c o n f o r m s t o t h e a r m ' s l e n g t h s t a n d a r d u n d e r th e C U P M e t h o d f o r b e n c h m a r k i n g f o r e i g n c u r r e n c y l o a n s . T h e L I B O R r a t e i s t h e r e f o r e t h e a p p r o p r i a t e u n c o n t r o l l e d c o m pa r a b l e t o b e a p p l i e d t o t h e a s s e s s e e ' s t r a n s a c t i o n s f o r t h e r e l ev a n t p e r i o d . I n c a s e s w h e r e t h e i n v o i c e s a r e r a i s e d i n f o r e i g n cu r r e n c y , t h e a p p l i c a b l e r a t e w i l l b e L I B O R p l u s , i n l i n e w i t h j ud g m e n t o f t h e H o n ' b l e D e l h i H i g h C o u r t i n t h e c a s e o f M / s C o t t o n N a t u ra l s . T h e A O i s d i r e c t e d t o v e r i f y t h e a s s e s s e e ' s c l a i m of t h e s a i d l o a n s b e i n g i n f o r e i g n c u r r e n c y f r o m t h e re l e v a n t ag r e e m e n t s , i n w h i c h c a s e t h e a p p l i c a b l e L I B O R r a t e o f i n t e r e s t s h o u l d b e t a k e n b a s e d o n c r e d i t r a t i n g , p u rp o s e a n d t e r m o f lo a n e t c . , I.T.A. No.525/Del/2019 4 w h i c h a r e s p e c i f i c t o t h e t e r m s o f t h e l o a n I p a y m en t w i t h t h e A E a n d t o r e - c o m p u t e t h e a d j u s t m e n t a c c o rd i n g l y . T he T P O s h a l l v e r i f y t h e c l a i m o f t h e a s s e s s e e t h a t t h e A E c o n c e r n e d w a s S o n a H o l d i n g B . V . N e t h e r l a n d a s p e r t h e a u d i t e d f i na n c i a l s a n d n o t S a n a B L W G e r m a n y a n d S o n a B L W U S A a s t a k e n i n th e d ra f t o r d e r T h i s G r o u n d i s d i s p o s e d o f f a s a b o v e . ” 5 . L d . C o u n s e l o f t h e a s s e s s e e p l e a d e d t h a t o n i d e nt i c a l i s s u e d , t h i s T r i b u n a l i n I T A N o s .2 0 4 & 3 1 3 4 / D e l . / 2 0 1 7 v i d e o rd e r d a t e d 1 8 .1 1 . 2 0 2 1 f o r A Y s 2 0 1 1 - 1 2 & 2 0 1 2 - 1 3 g a v e t h e f o l l o w i n g d i r e c ti o n s : - “ 1 6 . A s f a r a s i s s u e o f b e n c h m a r k i n g i s c o n c e r n e d , w e f i n d t h a t A s s e s s i n g O f f i c e r h a s a p p l i e d t h e ra t e o f 2 .0 2 % w h ic h h a s b e e n r e s t r i c t e d b y t h e C I T ( A ) t o 1 % o f t h e l o a n s a v a i l e d. H o w e v e r , w e a r e o f t h e o p in i o n t h a t , t h e t r a n s a c t i o n h a s t o b e b e n c h m a r k e d a p p l y i n g m o s t a p p ro p r i a t e m e t h o d a s p e r t h e p ro v i s i o n s o f t h e A c t . T h e a d j u s t m e n t m a d e b y t h e As s e s s i n g O f f i c e r t a k i n g a v e r a g e r a t e o f g u a r a n t e e c o m m i s s i o n b y t h e b a n k s c a n n o t b e h e l d a s a c o m p a r a b l e u n c o n t r o l l e d pr i c e . T h e L e a r n e d AO o r t h e T P O h a s t o c o m p a r e t h e t r a n s a c t i on o f t h e a s s e s s e e w i t h a c t u a l t r a n s a c t i o n h a p p e n e d d u r i n g r el e v a n t p e r i o d i n c i r c u m s t a n c e s c o m p a ra b l e t o t h e a s s e s s e e , a s p e r t h e s t r i c t r e q u i r e m e n t o f C U P m e t h o d . I n t h e c i r c u m s t a nc e s , w e f e e l i t a p p ro p r i a t e t o r e s t o r e t h e i s s u e o f b e n c h m a r k i n g o f t h e i n t e r n a t i o n a l t r a n s a c t i o n o f g u a r a n t e e f e e / c o m m i s s io n t o t h e f i l e o f t h e L d . A O / T P O f o r d e c i d i n g a f r e s h a f t e r p ro v i d in g a d e q u a t e o p p o r t u n i t y o f b e i n g h e a r d t o t h e a s s e s s e e. T h e g ro u n d o f t h e a p p e a l o f t h e a s s e s s e e , a r e a c c o r d i n gl y a l l o w e d f o r s t a t i s t i c a l p u rp o s e s . ” L d . C o u n s e l f o r t h e a s s e s s e e p l e a d e d t h a t t h e m a t t er m a y b e s e t a s i d e t o t h e A O / T P O i n a c c o r d a n c e w i t h t h e a b o v e sa i d o r d e r . 6 . P e r c o n t r a , l d . D R f o r t h e R e v e n u e d i d n o t h a v e a n y o b j e c t i o n t o t h i s p r o p o s i t i o n . 7 . A c c o r d i n g l y , i n t h e i n t e r e s t o f j u s t i c e , w e r e m it t h e i s s u e t o t h e A O t o c o n s i d e r t h e i s s u e a f r e s h i n t h e l i g h t o f t h e a f o r e s a i d o b s e r v a t i o n s o f t h e T r i b u n a l . N e e d l e s s t o a d d , a s s es s e e s h o u l d b e g r a n t e d a n o p p o r t u n i t y o f b e i n g h e a r d . ” 9. I t i s n ot di sput ed t hat t he l d. CI T( A) i n para gra ph 5. 6 of the i mpugned order has f ol lowed t h e deci sio n of pr ed ecessor i n the A. Y. 2012 -13. For t he sake of clari t y, t he sa me is repr oduced as un der: “ 5 . 6 T h e m a t e r i a l f a c t s o f t h e c a s e a t t h e s a m e i n t h e i n s t a n t y e a r a l s o . I n a c c o rd a n c e w i t h t h e p r i n c i p l e o f c o n s i s t e n c y , t he d o c t r i n e o f j u d i c i a l d i s c i p l i n e a n d r e sp e c t f u l l y f o l l o w i n g t h e o rd e r o f t h e C I T ( A ) - 4 4 , i n A p p e a l N o . 1 3 / 2 0 1 6 - 1 7 d a t e d 1 7 .0 1 . 2 0 1 7 f o r A Y 2 0 1 2 -1 3 , t h e A O / T P O i s d i r e c t e d t o c o n s i d e r A L P f o r c o rp o r a t e g u a ra n t e e a t 1 %. T h e g ro u n d s o f A p p e a l N o . 1 t o 6 a r e a c c o r d i n g l y d i s p o s e d o f f . ” I.T.A. No.525/Del/2019 5 10. We theref ore ta ki ng a c onsist ent vi ew, her eb y rest or e the issue t o t he fi le of the Assessi ng Of f i cer t o deci de i n accor da nce wi t h t he dir ecti on of t he Tri bunal i n I TAs No.20 4 & 3134/ Del /2017 or der date d 18. 11. 202 1. The gr ounds rai sed b y the assessee are all owed for st at i st i cal pur poses. 11. I n the result , the appeal of t he assessee i s allowed f or stati sti cal purpose s. Order pronounced in the open Court on 14/07/2023 Sd/- Sd/- [B.R.R. KUMAR] [KUL BHARAT] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /07/2023 prabhat