Baba Global Ltd., Delhi V. ACIT, Central Circle-29, New Delhi

ITA 5364/DEL/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1094 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 09-10-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 12-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘I’, NEW DELHI BEFORE SH. C.M. GARG, JUDICIAL MEMBER AND SH. N.K. BILLAIYA, ACCOUNTANT MEMBER ITA No.5364/Del/2018 Assessment Year: 2011-12 Baba Global Ltd. 4873, Chandni Chowk, New Delhi-110006 PAN No.AAACB6357N Vs ACIT Central Circle-29 New Delhi (APPELLANT) (RESPONDENT) Appellant Sh. Ashok Sharma, CA Respondent Sh. Mahesh Shah, CIT (DR) Date of hearing: 10/10/2022 Date of Pronouncement: 12/10/2022 ORDER PER N.K. BILLAIYA, AM: This appeal by the assessee is preferred against the order of the CIT(A)-44, New Delhi dated 23.05.2018 for A.Y.2011-12. 2. The revised concise grounds of appeal :- 1. That the learned CIT(A) has grossly erred in law directing the A.O. to increase the LIBOR rate by 150 basis points if loan was less than 50 crores and by 300 basis points if the loan was more than 50 2 crores as against the direction of Hon’ble ITAT to apply LIBOR rate. 2. That without prejudice to above grounds of appeal the learned CIT(A) has erred in law considering the alternative grounds of appeal regarding appropriateness of 4% padding to LIBOR rate by taking it as covered by the relief already granted vide para 4.7 of the appellate order. 3. That the leaned CIT has erred in not specifically directing the A.O./TPO to apply LIBOR rate to amount of loan not converted to share application money after verification in terms of directions vide para 22 of the Order of Hon’ble ITAT which should have consequently been done in terms of directions vide para 21 of the Order of Hon’ble ITAT, as while working out the relief to the appellant assessee, no relief was worked out in respect of this loan. 3. At the very outset the Counsel for the assessee drew our attention to the decision of the Tribunal in assessee’s own case and pointed out that this Tribunal had set aside the quarrel for fresh adjudication as per the directions but in the second round neither the AO nor the CIT(A) followed the directions of the Tribunal. 4. Per contra the DR strongly supported the orders of the lower authorities but could not point out any factual discrepancy in the submissions of the Counsels. 5. We have carefully perused the orders of the authorities below and have also the benefit of the order of this Tribunal in 3 ITA Nos. 1086 to 1091/Del/2015 for A.Y. 2006-07 to 2011-12 we find that while disposing the appeal the Tribunal at para -22 of its order (supra) has held as under :- “22. As regards the addition on this account in assessment year 2011- 12, the advance given to its subsidiary companies stand converted into share application money. Once the loan has been converted into share application money, for the issue of the share capital, then such amount cannot be considered as loan. The TPO is not permitted under the law to re-characterize the transaction and accordingly we are of the view that no interest on such share application money can be charged. The above view is supported by the judgment of the Coordinate Bench of the ITAT in the case of Bharti Airtel Ltd. vs. ACIT, [2014] 161 TTJ 0283 (Del) wherein the ITAT has held 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 sham application money, and thus, of capital contributions. The TPO has not made any adjustment with regard to the ALP of the capital contribution. He has however, treated these transactions partly as of an interest free loan, for the period between the dates of payment till the date on which shares were actually allotted, and partly as capital contribution, i.e. after the subscribed shares were allotted by the subsidiaries in which capital contributions were made. No doubt, if these transactions are treated 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 business 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 the facts of this case. We do not find so. We do not find any provision in law 4 enabling such deeming fiction. 23. In view of the above facts and the judgment of coordinate bench, the AO is directed to verify the date of conversion of loan to share application money and not to make any adjustment on account of interest post conversion of loan to share application money and accordingly this ground of the assessee is allowed for statistical purpose.” 6. The Counsel for the assessee vehemently stated that the CIT(A) has grossly erred in not following the directions of the Tribunal and has directed the AO/ TPO to increase LIBOR by 300 basis points if the amount of loan transaction was more than 50 crores and 150 basis points if the amount of loan was less than Rs. 50 crores. 7. We have given a thoughtful consideration to the orders of the coordinate Bench (supra) we find that the coordinate Bench in its order have specifically directed the AO to verify the date of conversion of loan of share application money and not to make any adjustment on account of interest post conversion of loan to share application money. We find that the coordinate Bench has directed that LIBOR rate should be adopted and the coordinate Bench nowhere mentions for further adjustment on any account thought it was aware that DRP had directed for further adjustment. The Coordinate Bench in ITA No.5362/Del/2018, 5362/Del/2018 and 5363/Del/2018 order dated 08.07.2022 has 5 held as under :- “6. Now the contention of the ld. Counsel of the assessee is that ITAT having seen fully seized of the matter had directed the application of only rate of interest of relevant currency and had not given any direction for adjustment by any basis point.” 8. Considering the decision of the Coordinate Bench (supra) we are of the considered view that the CIT(A) grossly erred in directing the AO/ TPO to increase LIBOR by 300 basis points / 150 basis points. The findings of the CIT(A) are thus set aside and the AO/ TPO is directed to apply only LIBOR rate on the impugned transaction. Ground No. 1 and 2 are allowed. 9. The issues raised vide ground No.3 are duly considered we find that the first appellate authority has not specifically directed the AO/ TPO to apply LIBOR rate after due verification interms of direction vide para 22 of the order of the Tribunal with these directions ground No.3 is also allowed. 10. In the result, the appeal of the assessee is allowed. 6 Order pronounced in the open court on 12.10.2022. Sd/- Sd/- (C.M. GARG) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA, Sr. Private Secretary* Date:- .10.2022 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation 10.10.2022 Date on which the typed draft is placed before the dictating Member 12.10.2022 Date on which the typed draft is placed before the Other member 12.10.2022 Date on which the approved draft comes to the Sr.PS/PS 12.10.2022 Date on which the fair order is placed before the Dictating Member for Pronouncement 12.10.2022 Date on which the fair order comes back to the Sr. PS/ PS 13.10.2022 Date on which the final order is uploaded on the website of ITAT 13.10.2022 Date on which the file goes to the Bench Clerk 13.10.2022 Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order