DCIT 1(3)(2), MUMBAI V. THIRUMALAI CHEMICALS LTD, MUMBAI

ITA 579/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5267 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 25-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Assessee Lawyers: HIRO RAIDHARAN GANDHI
• Keywords: Transfer pricing; Tax effect; Liquidation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K , MUMBAI BEFORE S HRI SHAMIM YAHYA (AM ) AND SHRI RAM LAL NEGI (JM) ITA NO. 579 / MUM/20 1 7 ASSESSMENT YEAR: 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME TAX 1(3)(2), ROOM NO. 540, 5 TH FLOOR, AAYAKAR BHAW AN, M.K. ROAD, MUMBAI - 400020 VS. M/S THIRUMALAI CHEMICALS LIMITED, THIRUMALAI HOUSE, PLOT NO. 101/102, SION MATUNGA ESTATE, SCHEME NO. 6, ROAD NO. 29, SION (EAST), MUMBAI 400022 PAN: AAACT2015M (APPELLANT) (RESPONDENT) CO NO. 104 /MUM/201 7 (A RISING OUT OF ITA NO.579 /MUM/2017) ASSESSMENT YEAR: 2010 - 11 M/S THIRUMALAI CHEMICALS LIMITED, THIRUMALAI HOUSE, PLOT NO. 101/102, SION MATUNGA ESTATE, SCHEME NO. 6, ROAD NO. 29, SION (EAST), MUMBAI 400022 PAN: AAACT2015M VS. THE DEPUTY COMMISSIONE R OF INCOME TAX 1(3)(2), ROOM NO. 540, 5 TH FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) REVENUE BY : SHRI V. JENARDHANAN ( DR) ASSESSEE BY : SHRI HIRO RAI/DHARAN GANDHI (AR) DATE OF HEARIN G: 12/07 /201 8 DATE OF PRONOUNCEMENT: 11 / 10 /201 8 O R D E R PER RAM LAL NEGI, JM T HESE ARE T HE APPEAL AND CROSS OBJECTION FILED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY AGAINST THE ORDER DATED 13.10.2016 PASSED BY THE COMMISS IO NE R OF INCOME TAX (APPEALS) (FOR SHORT THE CIT (A)) - 58, MUMBAI, 2 ITA NO. 579 / MUM/2017 & CO NO. 104 /MUM/2018 ASSESSMENT YEAR: 2010 - 11 PE RTAI NING TO THE ASSESSMENT YEAR 2010 - 11 , WHEREBY THE LD. CIT (A) HAS PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST ORDER PASSED U/S 143 (3) R.W.S. 144 C OF THE INCOME TAX ACT, 19 61 (FOR SHORT THE ACT). ITA NO. 579 /MUM/2017 (ASSESSMENT YEAR: 2010 - 11 ) 2 THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL AGAINST THE IMPUGNED ORDER PASSED BY THE LD. CIT (A): - 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE TRANSFER PRICING ADJUSTMENT OF ADDITION OF INTEREST CHARGEABLE ON LOAN GRANTED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISE ON THE GROUND THAT THE ASSOCIATED ENTERPRISE WAS IN THE PROCESS OF LIQUIDATIO N DURING THE PREVIOUS YEAR? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) FAILED TO APPRECIATE THAT THE LOAN WAS ADVANCED IN THE YEAR 2000 AND THUS INTEREST RATE, AT ARMS LENGTH WOULD HAVE BEEN DECIDED IN THE YEAR 2 000 BASED ON ECONOMIC CIRCUMSTANCES THEN EXISTING AND HENCE THE EVENTS IN F.Y. 2008 - 09 OR 2009 - 10 WOULD NOT INFLUENCE THE DECISION THAT WAS TAKEN IN THE YEAR 2000? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN FAILING TO APPRECIATE THAT THE ARMS LENGTH INTEREST RATE WOULD NOT BE DEPENDENT ON WHETHER THE DEBTOR IS UNDER LIQUIDATION OR NOT AND THAT THE PROCESS OF LIQUIDATION AT BEST MAY ONLY BE A FACTOR TO WRITE OFF SUCH INTEREST IN THE BOOKS OF ACCOUNTS OF THE ASSESEE AND CANNOT BE GROUND FOR NON RECOGNITION OF THE INCOME BY THE ASSESSEE WHO IS BOUND BY THE MERCANTILE SYSTEM BEING FOLLOWED BY IT? 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADJUS TMENT MADE BY TPO AND AO IN RESPECT OF CHARGING OF INTEREST FROM AE BY HOLDING THAT ALP OF INTEREST TO BE CHARGED FROM AE SHOULD BE ZERO WHEN AE IS IN LIQUIDATION AND NOT GIVING DIRECTION TO 3 ITA NO. 579 / MUM/2017 & CO NO. 104 /MUM/2018 ASSESSMENT YEAR: 2010 - 11 CHARGE INTEREST @ LIBOR PLUS MARK UP AS HELD BY HIM IN ASSESSEES OWN CASE IN A.Y. 2011 - 12? 3. AT THE OUTSET, THE LD. COUNSEL FOR THE RESPON DENT/ASSESSEE POINTED OUT THAT THE TAX EFFECT OF THE RELIEF GRA NTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS BELOW RS.20 LACS AND AS PER THE CBDT CIRCULAR NO. 3/2018, F. NO. 279/MISC.142/2007 - ITJ (PT) DATED 11 TH JULY, 2018 ISSUED BY CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA LIMIT FIXED BY THE CBDT FOR FILING THE APPEAL BEFORE THE ITAT IS 20 LACS . 4. THE LD. DEPARTMEN TAL REPRESENTATIVE (DR) FAIRLY CONCEDED THAT TH IS APPEAL IS NOT MAINTAINABLE IN LIGHT OF THE ABOVE SAID CBDT CIRCULAR. THE LD. DR ALSO DID NOT POINT OUT THAT TH IS APPEAL FALL S IN ANY OF THE EXCEPTIONS CARVED OUT IN THE ABOVE SAID CIRCULAR. 5. WE HAVE GON E THROUGH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND THE GROUNDS OF APPEALS. WE FIND THAT THE TAX EFFEC T IN THE ABOVE REFERRED APPEAL IS LESS THAN RS. 20 LACS. ACCORDINGLY, W E DISMISS THE AFORESAID APPEAL FILED BY THE REVENUE. CO NO. 2 09/MUM/2018 (ASSESSMENT YEAR: 2010 - 11 ) THE ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE IMPUGNED ORDER ON THE FOLLOWING EFFECTIVE GROUND S : 1. WITHOUT PREJUDICE TO THE GROUNDS RAISED BY THE DEPARTMENT IN ITS APPEAL, THE LEARNED CIT AND THE LEARNED CI T (APPEALS) SHOULD HAVE ALLOWED THE AMOUNT OF RS. 46,55,093/ - AS A BAD DEBT. 2. THE LEARNED DY. CIT SHOULD HAVE ALLOWED THE EXPENSES OF RS. 5,78,480/ - DISALLOWED AS PRIOR PERIOD EXPENSES IN THE AY 2013 - 14 AS PERTAINING TO AY 2010 - 11. 4 ITA NO. 579 / MUM/2017 & CO NO. 104 /MUM/2018 ASSESSMENT YEAR: 2010 - 11 2. THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE DOES NOT WANT TO PRESS THE PRESENT CO. IN VIEW OF THE SUBMISSION MADE BY THE LD. COUNSEL, THE PRESENT CO IS DISMISSED AS NOT PRESSED. IN THE RESULT, APPEAL FILED BY THE REVENUE AS WELL AS THE CROSS OBJECTION FILED B Y THE ASSESSEE, ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH OCTOBER , 2018 . SD/ - SD/ - ( SHAMIM YAHYA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMB ER MUMBAI ; DATED: 11 / 10 / 2018 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A ) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI