M/s. Hellmann Woldwide Logistics India Pvt. Ltd., Gurgaon V. DCIT, New Delhi

ITA 6433/DEL/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4841 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 01-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T M SHIVAKUMAR
• Keywords: Transfer pricing; International transaction; Additional evidence; Initiation of penalty proceedings; Wholly owned subsidiary
• Section: 92C; 143(3); 244A; 92F; 10B; 154; 92

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SH. R . K. PANDA, ACCOUNTANT MEMBER . . , AND/ $% & . '( , )$ * SMT. BEENA A. PILLAI, JUDICIAL MEMBER ./ IN ITA NO. 6433/DEL/2012 ( $ , -,/ ASSESSMENT YEAR 2008-2009) APPELLANT BY : SH. RAJAN SACHDEV, : SH. MANEESH BAWA, : SH. KARNIK GULATI, CAS. RESPONDENT BY : SH. T. M. SHIVA KUMAR, SR.DR DATE OF HEARING : 01.06.2017 DATE OF PRONOUNCEMENT : 29.08.2017 O R D E R PER BEENA A. PILLAI, J.M : 1. THE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAIN ST FINAL ASSESSMENT ORDER DATED 22/10/2012 PASSED UNDE R SECTION 144C READ WITH 143(3) OF THE ACT PASSED BY LD. DCIT, CIRCLE-10(1), NEW DELHI. SUBSEQUENTLY, ASSESSED INC OME WAS RECTIFIED TO RS.3,11,82,412/-, VIDE ORDER DATED 08/ 11/2012 UNDER SECTION 154 READ WITH 143(3) OF THE ACT. HELLMANN WORLDWIDE LOGISTICS INDIA PVT. LTD. DLF CYBER CITY, BUILDING NO. 9 14 TH FLOOR, TOWER-A, PHASE-III GURGAON - 1 22002. VS D CIT CIRCLE-10(1) NEW DELHI. GIR/PAN: AABCH7715F ./ / (APPELLANT) 01./ /(RESPONDENT) 2 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 2. BRIEF FACTS OF CASE ARE AS UNDER: ASSESSEE FILED RETURN OF INCOME DECLARING A LOSS OF RS. 6,55,59,110/- ON 31/03/2010. THE RETURN WAS PROCESS ED UNDER SECTION 143(1) OF THE ACT AND CASE WAS SELECT ED FOR SCRUTINY. NOTICES UNDER SECTION 143(2) OF THE ACT W AS ISSUED ALONGWITH NOTICE UNDER SECTION 142(1), AND A DETAIL ED QUESTIONNAIRE WAS ISSUED TO ASSESSEE. REPRESENTATIV ES OF ASSESSEE ATTENDED PROCEEDINGS FROM TIME TO TIME AND FURNISHED VARIOUS DETAILS AS CALLED FOR. ASSESSEE OPERATES AS A FREIGHT FORWARDING COMPANY, OFFERING SERVICES LIKE AIR FREIGHT AND SEE FREIGHT IN DOMESTIC AND INTERNATIONAL ARENA. IT IS ALSO BEEN RECORDED TO HA VE BEEN PROVIDING LAND, AIR AND OCEAN TRANSPORT SERVICES AN D WAREHOUSING AND CUSTOM CLEARANCE SERVICES. LD. TPO OBSERVED THAT ASSESSEE IS A WHOLLY OWNED SUBSIDIARY OF HELLM ANN INTERNATIONAL FORWARDERS GMBH, GERMANY. IT HAS BEEN RECORDED BY LD. TPO THAT, ASSESSEE STARTED ITS OPER ATIONS ON 01/12/2006 AND THE YEAR UNDER CONSIDERATION WAS FIR ST YEAR FOR FULL OPERATIONS OF THE COMPANY. IT HAS BEEN REC ORDED BY LD. TPO THAT ASSESSEE IS A PART OF HELLMANN NETWORK A. V. V., AND IS INVOLVED IN NUMEROUS BUT HOMOGENEOUS TRANSACTION S IN THE AREAS OF AIR FREIGHT AND SEA FREIGHT. THE SERVICES AND INTERNATIONAL TRANSPORT (SCHEDULING CARRIERS, TRANC E-SHIPMENT, SHIPMENT TRACKING AND PREPARING DOCUMENTATION ON AR RIVAL) FROM PART OF BASELINE FREIGHT HANDLING SERVICES PRO VIDED BY HWL NETWORK COMPANIES. THE SERVICES ARE OFFERED BY COMPANY DIRECTLY TO HELLMANN INDIAS CUSTOMERS OR AS A PART OF 3 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 DELIVERABLES SOLD TO OVERSEAS CUSTOMERS BY HELLMANN NETWORK PERSONNEL IN OTHER PARTS OF WORLD. PRIMARY INTERNAT IONAL TRANSACTIONS OF COMPANY DURING THE YEAR COMPRISED, FREIGHT ON IMPORTS AND EXPORTS RECEIVED AND PAID BY COMPANI ES RESPECTIVELY TO ITS AES. THE INTERNATIONAL TRANSAC TIONS ENTERED INTO BY ASSESSEE DURING YEAR ARE AS UNDER: ASSESSEE APPLIED CUP METHOD AS THE PRIMARY METHOD FO R BENCHMARKING OF FREIGHT TRANSACTIONS ENTERED INTO W ITH AE. TO CORROBORATE THE ECONOMIC ANALYSIS OF INTERNAT IONAL TRANSACTIONS, TNMM WAS CONSIDERED AS A SUITABLE CORROBORATIVE METHOD. IN THE TNMM METHOD, THE OP/VA E OF THE ASSESSEE IS -23.8 %. THE ASSESSEE HAS CLAIME D STARTUP ADJUSTMENTS IN THE OP IN APPENDIX -I FOR TH E TP REPORT AND AFTER ADJUSTMENT THE OP/VAE IS STATED TO BE 13.54 %. THE ASSESSEE HAS SELECTED FIVE COMPARABLES AND OP/VAE OF FIVE COMPARABLES IS 12.78%. BASED ON THE TNMM RESULTS, THE INTERNATIONAL TRANSACTIONS PERTAINING TO FREIGHT ON IMPORTS AND EXPORTS WERE CONCLUDED TO BE AT ARMS LENGTH. 3. DURING THE COURSE OF TP PROCEEDINGS LD. TPO REJECT ED CUP AND INTERNAL TNMM METHOD APPLIED BY ASSESSEE AG AINST EXTERNAL TNMM AS ADOPTED BY LD. TPO AS MOST APPROPR IATE METHOD. LD. TPO HELD THAT INTERNAL CUP AND INTERNAL TNMM ANALYSIS WERE NOT APPROPRIATE TO BENCHMARK INTERNAT IONAL NATURE OF TRANSACTION METHOD TOTAL VALUE OF FREIGHT ON IMPORTS AND EXPORTS (PAID/PAYABLE) CUP 32,05,31,765 FREIGHT ON IMPORTS AND EXPORTS (RECEIVED/RECEIVABLE ) TNMM 26,79,85,364 ALLOCATION OF SOFTWARE RELATED COSTS CUP 17,74,595 ALLOCATION OF MAINTENANCE COSTS CUP 1,48,340 REIMBURSEMENT OF EXPENSES TO GROUP COMPANIES CUP 7,85,896 4 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 TRANSACTIONS ENTERED INTO BY ASSESSEE WITH ITS AE D UE TO GEOGRAPHICAL/ECONOMIC DIFFERENCES THAT EXISTED BETW EEN AES AND NON AES. 4. THE OBJECTION AGAINST FINDINGS WERE RAISED BEFORE DRP, WHO HELD THAT THIRD-PARTY AGREEMENTS DO NOT CONSTIT UTE VALID CUP, SINCE AN AGREEMENT MERELY EMBODIES TERMS AND CONDITIONS WHICH ARE TO BE APPLIED IN CONTEXT OF A PROSPECTIVE TRANSACTION UNDERTAKEN BETWEEN CONTRACTING PARTIES. ANOTHER REASON FOR REJECTING APPLICATION OF INTERNAL TNMM B Y DRP WAS THAT IT WAS RAISED BEFORE DRP FOR THE FIRST TIME DI RECTLY AND NOT BEFORE TPO. THE DRP THUS UPHELD OBSERVATIONS OF TPO IN RESPECT OF MOST APPROPRIATE METHOD AND REJECTED CUP TO BE MOST APPROPRIATE METHOD AS AGREEMENTS ARE IN DIFFER ENT GEOGRAPHICAL TERRINES AND WOULD NOT BE ACCEPTABLE A ND UPHELD APPLICATION OF EXTERNAL TNMM TO INTERNATIONAL TRANS ACTIONS. 5. FURTHER TPO DID NOT ALLOW DIFFERENCE IN THE RISK P ROFILE IN WORKING CAPITAL ADJUSTMENT TO ELIMINATE MATERIAL DI FFERENCE. IT IS ALSO OBSERVED THAT TPO DID NOT ALLOW CLAIM OF PL US 15% BENEFIT OF ARMS LENGTH RANGE AS AMENDMENT TO PROVIS O TO SECTION 92C (2) IS APPLICABLE FROM ASSESSMENT YEAR 2009-10 ONWARDS AND IS PROSPECTIVE IN NATURE. THE ASSESSEE HAD PLACED RELIANCE UPON BOARD CIRCULAR NO. 12 DATED 23 /08/2001 WHEREIN IT WAS SPECIFIED THAT IN CASES WHERE RANGE IS WITHIN PLUS 5% BAND, NO ADJUSTMENT SHALL BE MADE. LD. TPO HOWEVER REJECTED THE CLAIM OF ASSESSEE WHICH WERE UPHELD BY DRP. 6. AGAINST DIRECTIONS OF DRP, LD. AO PASSED FINAL ASSESSMENT ORDER BY COMPUTING ASSESSED INCOME AT 5 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 RS.3,11,82,412/- BY APPLYING EXTERNAL TNMM AND REJE CTED WORKING CAPITAL ADJUSTMENT CLAIMED BY ASSESSEE. 7. AGAINST THIS FINAL ORDER, ASSESSEE IS IN APPEAL BE FORE US ON FOLLOWING GROUNDS OF APPEAL: 1. LD. DRP ERRED IN REJECTING APPELLANT'S C-U-P APPROACH BY SUMMARILY DISMISSING EVIDENTIARY VALUE OF COMPARABLE THIRD-PARTY CONTRACT DULY PLACED ON RECORD. AS A CONSEQUENCE, LD. DRP INTRODUCED NOTIONAL DEFINITION OF THE TERM 'TRANSACTION' IN TRANSGRESSION OF EXPRESS STATUTORY MEANING ASSIGNED TO THE TERM UNDER CLAUSE (V) OF SECTION 92F OF THE ACT; 2. LD. DRP, WHILE ADMITTING APPELLANT'S PLEA FOR ADMISSION OF ADDITIONAL EVIDENCE, ERRED IN DISMISSI NG APPELLANT'S CLAIM OF RELYING ON INTERNAL TNMM BASED UPON THE ARGUMENTS THAT: (I) SINCE SUCH ANALYSIS WAS NOT INCORPORATED INTO THE ORIGINAL TRANSFER PRICING DOCUMENTATION, APPELL ANT WAS PREVENTED BY PRINCIPLE OF PROMISSORY ESTOPPEL T O PRESS FOR ITS SELECTION AS THE 'MOST APPROPRIATE METHOD' DURING THE COURSE OF PROCEEDINGS BEFORE THE DRP; AND FURTHER THAT (II) SINCE SUCH ANALYSIS WAS PREPARED ON POST- FACTO BASIS, IT FAILED THE COMPARABILITY TEST LAID DOWN UNDER LAW, WITHOUT INDICATING WHICH PARTICULAR STATUTORY PROVISIONS WERE BEING REFERRED TO IN THE CURRENT CONTEXT. 3. WITHOUT PREJUDICE TO THE ABOVEMENTIONED GROUNDS, ID. DRP ERRED IN TERMS OF APPROVING TPO'S APPROACH OF SUMMARILY REJECTING THE COMPARABLES SELECTED BY THE APPELLANT WHILE UPHOLDING HIS SELECTION OF FUNCTIONALLY DISSIMILAR COMPANIES IN CONTEXT OF EXTERNAL TNMM, AND NOT GRANTING APPROPRIATE ADJUSTMENTS AS WARRANTED UNDER RULE 10B OF THE RULES. 4. LD. TPO MADE A GROSS COMPUTATION ERROR IN GIVING EFFECT TO DIRECTIONS ISSUED BY LEARNED DRP UNDER SECTION 144C(5) OF THE ACT WHILE RESTRICTING T HE 6 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 QUANTUM OF ADJUSTMENT TO THE AMOUNT OF INTERNATIONA L TRANSACTIONS. 5. LD. TPO ERRED IN MAKING THE ADJUSTMENT TO THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION S WITHOUT GIVING BENEFIT OF THE PROVISO TO SECTION 92 C(2) OF THE ACT. 6. LD. AO ERRED IN NOT DELETING THE DISALLOWANCE MADE UNDER SECTION 36(L)(III) OF THE ACT NOTWITHSTANDING CLEAR DIRECTIONS ISSUED BY LD. DRP UNDER SECTION 144C(5) OF THE ACT IN THIS REGARD. 7. LD. AO ERRED IN TERMS OF (I) NOT GRANTING DUE CREDIT FOR TAXES DEDUCTED AT SOURCE; (II) WITHDRAWING AND LEVYING INTEREST UNDER SECTION 244A AND 234D OF THE ACT, RESPECTIVELY; AND (III) INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. 8. GROUND NO.1: BEFORE US LD. COUNSEL SUBMITTED THAT ASSESSEE ADOPTED CUP AS MOST APPROPRIATE METHOD FOR THE PURPOSE OF DEMONSTRATING THE ARMS LENGTH NATURE OF INTERNATIONAL TRANSACTION ENTERED INTO BY ASSESSEE WITH ITS AES. HE RELIED UPON VARIOUS AGREEMENTS LICENSES EN TERED INTO BETWEEN ASSESSEE AND ITS AE AND ASSESSEE WITH INDEP ENDENT THIRD-PARTY IN OTHER JURISDICTIONS NAMELY, RAHTIHUO LINTA SUOMI OY., FINLAND ; AVI-AD WORLDWIDE LOGISTICS 2000 LIMI TED., ISRAEL; AND CARGO CENTRE LOGISTICS/R. A. PORTA S. R. L., UR UGUAY. 9. LD. COUNSEL SUBMITTED THAT THE THIRD-PARTY AGREEME NT SHOWS SIMILAR/IDENTICAL 50-50 REVENUE SHARING MODEL GENERALLY FOLLOWED ALL ACROSS FREIGHT FORWARDING IN DUSTRY REGARDLESS DOMICILE/PLACE OF RESIDENCE OF ORIGINATI NG DESTINATION COMPANIES. HE SUBMITTED THAT 50-50 REVE NUE 7 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 SHARING FORMULA HAS BEEN UNIVERSALLY APPLICABLE IN THE REAL COMMERCIAL WORLD. 10. ON THE CONTRARY, LD. DR SUBMITTED THAT RULE 10B (1 A) PRESCRIBES STEPS TO BE CONSIDERED WHILE CHOOSING AP PROPRIATE METHOD TO DERIVE ARMS LENGTH PRICE OF AN INTERNATIO NAL TRANSACTION. HE SUBMITTED THAT TRANSACTION ENTERED INTO BY ASSESSEE CANNOT BE OFFER UNIFORM PATTAR AS SERVICES RENDERED BY ASSESSEE WOULD BE OF VARIOUS NATURES. HE FURTHER SUBMITTED THAT DATA IS OF COMPANIES OPERATING IN DIFFERENT GE OGRAPHICAL LOCATION WOULD NOT PROVIDE A REALISTIC MEASURE BECA USE OF DIFFERENCES IN ECONOMIC CONDITIONS AND POLICIES OF RESPECTIVE GOVERNMENTS. HE THUS HEAVILY PLACED RELIANCE UPON O RDER PASSED BY LD. TPO AND DRP AND SUBMITTED THAT TNMM W OULD BE MOST APPROPRIATE METHOD AS IT IS MORE TOLERABLE AND EASE CAPABLE OF CONSIDERING ALL THE VARIANCES ARISING DU E TO GEOGRAPHICAL AND ECONOMIC DIFFERENCES WITH THOSE CO UNTRIES WITH WHICH ASSESSEE HAS ENTERED INTO TRANSACTIONS. 11. GROUND NO.2: ALTERNATIVELY, LD. COUNSEL SUBMITTED THAT APPELLANT HAD DEMONSTRATIVE ARMS LENGTH NATURE OF ITS INTERNATIONAL TRANSACTION WITH ITS OVERSEAS AFFILIA TED BY USING INTERNAL TNMM AS SECONDARY BENCHMARKING METHOD DURI NG COURSE OF DRP PROCEEDINGS. HE SUBMITTED THAT DRP RE JECTED USE OF INTERNAL TNMM WITHOUT GIVING ANY COGENT REAS ON AND REJECTED BY STATING THAT ASSESSEE HAD NOT SUBMITTED DATA FOR APPLICATION OF INTERNAL TNMM BEFORE LD. TPO. LD. CO UNSEL SUBMITTED THAT APPELLANT IS NOT PRECLUDED OR DEBARR ED FROM 8 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 PRODUCING A BETTER OR MORE ROBUST DATA TO ARRIVE AT THE ARMS LENGTH ANALYSIS. HE PLACED RELIANCE ON FOLLOWING DE CISIONS: BILAS OF (INDIA) LTD., REPORTED IN (2011) 136 TTJ 5 05 DESTINATION OF WORLD (SUBCONTINENT) PRIVATE LIMITED VERSUS ACIT REPORTED IN (2014) 34 ITR (T) 355 (DELHI-TRIB) LUMMUS TECHNOLOGY HEAT TRANSFER BV, REPORTED IN (20 14) 162 TTJ 263 (DELHI-TRIB). 12. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US AND JUDGMENTS RELIED UPON BY ASSESSEE IN ITS COMPENDIUM OF CASE LAW. 13. THE ASSESSEE HAS DEMONSTRATED KIND OF SERVICES REN DERED BY IT TO ITS AES AS WELL AS NON-AES BY PLACING RE LIANCE UPON AGREEMENTS MORE PARTICULARLY PLACED AT PAGES 156 ON WARDS OF THE PAPER BOOK. IT WAS ARGUED THAT ASSESSEE DEALS W ITH AE AS WELL AS INDEPENDENT PARTIES BEING NETWORK PARTNERS IN ALL REGIONS OF WORLD. HE SUBMITTED THAT WHEREVER THERE WERE NO AFFILIATES OF PARENT COMPANY OF ASSESSEE, THEY HAD NETWORK PARTNERS WHICH ARE THIRD-PARTY ENTITIES. ON PERUSAL OF AGREEMENTS PLACED AT PAGES 156 ON WORDS IT IS OBSER VED THAT AGREEMENT BETWEEN ASSESSEE WITH ITS AES AND ASSESS EE WITH ITS NON-AES 50: 50 RATIO. 14. BEFORE US, LD. COUNSEL CONTESTED FOR CUP TO BE USE D AS MOST APPROPRIATE METHOD. WHICH HAS BEEN REJECTED BY AUTHORITIES BELOW. DRP REJECTED IT AS AN AGREEMENT PRECEEDS AN ACTUAL TRANSACTIONS AND IS NOT A TRANSACTION PER SE AND THAT PRICE QUOTED IN AN AGREEMENT CAN BY NO STRETCH OF IMAGINATION TAKE THE SHAPE OF PRICE CHARGED OR ACTU ALLY PAID 9 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 UNDER CIRCUMSTANCES. WE ARE IN AGREEMENT WITH THIS VIEW OF DRP AND THEREFORE, REJECT THE USE OF CUP AS MAM. ACCORDINGLY GROUND NO. 1 RAISED BY ASSESSEE IS DISMISSED. 15. GROUND NO. 2: ALTERNATIVELY, LD. COUNSEL ARGUED FOR USE OF INTERNAL TNMM FOR THE PURPOSES OF COMPUTING ALP OF INTERNATIONAL TRANSACTION. 16. IN OUR CONSIDERED VIEW ACCURACY OF PROFITABILITY HA S TO BE VERIFIED IN CASE OF AE VS NON AES FOR THE PURPOSES OF APPLICATION OF INTERNAL TNMM. THE PLEA OF USE OF IN TERNAL TNMM WAS RAISED FOR FIRST TIME BEFORE DRP, WHICH WA S REJECTED BY OBSERVING AS UNDER: 4.8 GROUND NO. 8: THE OBJECTION REGARDING INTERNAL TNMM HAS BEEN CONSIDERED BY THE DRP. IN THE TP REPORT WHEN THE ASSESSEE INITIATED THE CORROBORATIVE ANALYSIS IT RESORTED TO EXTERNAL COMPARABLES. IT DI D NOT CARRY OUT AN INTERNAL FAR AND IDENTIFY PROPER REVENU E AND COSTS VIS A VIS THE AUDITED ACCOUNTS TO EMPHASI SE THAT THE INTERNAL COMPARABILITY OVERRIDES THE EXTER NAL COMPARABILITY UNDER TNMM. WE DO NOT AGREE THAT SUCH A SITUATION WILL ARISE AS LATE AS PROCEEDINGS BEFORE DRP. WITHOUT PREJUDICE WE ARE NOT PERSUADED BY ANY SUBSTANTIVE DATE WHICH MAY PROVE THAT SUCH INTERNAL SEGMENTAL WAS GENUINELY MAINTAINED FOR COMPARABILITY. HENCE, WE OVER RULE THIS GROUND OF OBJECTION. 17. IN VIEW OF THE ABOVE, WE SET ASIDE TO LD. TPO/AO F OR VERIFICATION OF APPLICABILITY OF INTERNAL TNMM TO T HE PRESENT FACTS OF THE CASE. ASSESSEE SHALL CARRY OUT INTERNA L FAR AND IDENTITY PROPER REVENUE AND COSTS VIS A VIS THE AUD ITED ACCOUNTS TO ESTABLISH INTERNAL COMPARABILITY UNDER TNMM AS 10 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 MAM. IN THE EVENT ASSESSEE FAILS TO DEMONSTRATE THE SAME, IT SHALL FILE DETAILS IN RESPECT OF EXTERNAL COMPARABL ES UNDER TNMM AS MAM AND TPO SHALL DECIDE THE ISSUE AS PER L AW BY GIVING PROPER OPPORTUNITY TO ASSESSEE. ACCORDINGLY THIS GROUND NO. 2 RAISED BY ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSE. 18. GROUND NO. 3 RAISED BY ASSESSEE BECOMES INFRUCTUOUS AS WE HAVE ALLOWED GROUND NO. 2 RAISED BY ASSESSEE FOR STATISTICAL PURPOSES IN TERMS OF INTERNAL COMPARABL ES USED BY ASSESSEE. 19. GROUND NO. 4 IS IN TERMS OF PROPORTIONATE ADJUSTMENTS, WE AGREE WITH ARGUMENTS OF LD. COUNSEL THAT ADJUSTM ENTS IF ANY ARISING DUE TO COMPUTATION OF ALP SHOULD BE RES TRICTED ONLY TO INTERNATIONAL TRANSACTION AND NOT TO ENTIRE TURNOVER OF ASSESSEE COMPANY. WE, THEREFORE, DIRECT ASSESSING O FFICER TO RESTRICT ADJUSTMENTS IF ANY TO INTERNATIONAL TRANSA CTIONS WHICH ARE FOUND BY HIM TO HAVE TAKEN PLACE AT A PRICE OTH ER THAN ALP. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE IS ALLOW ED. 20. GROUND NO. 5 IS IN RESPECT OF ALLOWABILITY OF BENEFIT OF PLUS -5% TO ARMS LENGTH RANGE AS PRESCRIBED UNDER S ECTION 92C (2) OF THE ACT. IT IS OBSERVED THAT LD. TPO HAS NOT ALLOWED BENEFIT OF PLUS -5% AS PROVIDED UNDER THE ACT WHERE AS LD. COUNSEL SUBMITTED THAT AMENDMENT INSERTED BY FINANC E ACT 2009 IS PROSPECTIVE IN NATURE AND CANNOT BE APPLIED TO YEAR UNDER CONSIDERATION. IT HAS BEEN SUBMITTED BY LD. C OUNSEL THAT BY WAY OF THIS AMENDMENT BASIS OF 11 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 TAXATION/DETERMINATION OF ARMS LENGTH PRICE IN RESP ECT OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY A TAXPAYER CHANGES. LD. COUNSEL FURTHER SUBMITTED THAT THIS AMENDMENT H AS EFFECT OF IMPOSING A NEW LIABILITY BY TAKING AWAY OPTION F ROM ASSESSEE. ACCORDINGLY, THIS AMENDMENT IS SUBSTANTIV E IN NATURE CANNOT BE APPLIED RETROSPECTIVELY. 21. WE AGREE WITH PRINCIPLE SUBMISSION ADVANCED BY LD. COUNSEL WHICH IS SUPPORTED BY VARIOUS DECISIONS OF HONBLE HIGH COURTS AND THIS TRIBUNAL. WE ACCORDINGLY DIREC T LD. TPO TO GRANT BENEFIT OF PLUS -5% RANGE WHILE COMPUTING ARMS LENGTH PRICE AS THE AMENDMENT INTRODUCED BY FINANCE ACT, 2009, IS PROSPECTIVE IN NATURAL AND WILL NOT BE APP LICABLE TO THE YEAR UNDER CONSIDERATION. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS ALLOWED. 22. GROUND NO. 6 IS IN RESPECT OF DISALLOWANCE UNDER SECTION 36 (1) (III) OF THE ACT. 23. LD. COUNSEL SUBMITTED THAT ASSESSING OFFICER ERRED IN NOT FOLLOWING DIRECTIONS ISSUED BY DRP. HE SUBMITTED TH AT ALL INTEREST FREE LOANS GIVEN BY ASSESSEE WERE FOR BUSI NESS PURPOSES. HE SUBMITTED THAT DRP WHILE DECIDING THIS ISSUE OBSERVED AS UNDER: THE AO HAS CONSIDERED THE LAST FIVE ITEMS TOTALING TO RS. 2,50,55,581/- ARE MAKING THE DISALLOWANCE. IT IS HOWEVER SEEN THAT ADVANCES TO EMPLOYEES, SERVICE TAX, INPUT CREDIT, THIRD PARTY ADVANCE FOR BUSINESS PURPOSES AND PREPAID EXPENSES ARE FOR THE BUSINESS PURPOSES OF THE ASSESSEE. THESE ADVANCES ARE MADE FOR THE PURPOSES OF CARRYING OUT THE 12 ITA NO. 6433/DEL/2012 A.Y 2008-0 9 BUSINESS ACTIVITY. SIMILARLY, ADVANCE DEPOSIT WITH AIRPORT AUTHORITY OF INDIA/CSF/SHIPPING LINES IS ALSO FOUND TO BE FOR THE BUSINESS PURPOSE OF THE ASSESSEE AS THE ASSESSEE ENGAGED IN THE BUSINESS OF FREIGHT FORWARDING AND IS OFFERING SERVICES SUCH AS AIR FREIGHT, SEA FREIGHT, WAREHOUSING DISPATCH AND CLEARANCE IN CARGO IN HARBOR AREAS AND CUSTOM CLEARANCE. THE ADVANCES TO AIRPORT AUTHORITY OF INDIA/CSF/SHIPPING LINES ARE ABSOLUTELY FOR THE BUSINESS PURPOSES OF THE ASSESSEE. THUS, THE AO IS NOT JUSTIFIED IN PROPOSING DISALLOWANCE OF INTEREST IN RESPECT OF THE ADVANCES. THE OBJECTION OF THE ASSESSEE IS SUSTAINED. THE AO IS DIRECTED NOT TO MAKE THE DISALLOWANCE OF RS. 9,89,705/- ON ACCOUNT OF INTEREST FREE ADVANCES. IN LIEU OF THE SAME, WE DIRECT LD. AO TO DELETE DIS ALLOWANCE OF RS.9,89,705/- ON ACCOUNT OF INTEREST FREE ADVANCES. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED 24. GROUND NO. 7 EASE IN RESPECT OF LEVY OF INTEREST UNDER SECTION 244A AND 234D OF THE ACT AND INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE SE ARE CONSEQUENTIAL IN NATURE AND THEREFORE, DO NOT REQUI RE ANY ADJUDICATION. INSOFAR AS NOT GRANTING OF DUE CREDIT FOR TAXES DED UCTED IS CONCERNED, LD. AO IS DIRECTED TO ALLOW CREDIT OF TA X IS PAID AS PER LAW. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS A LLOWED PARTLY. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST, 2017. SD/- SD/- (. . / R. K. PANDA) ( . / BEENA A. PILLAI) / ACCOUNTANT MEMBER /JUDICIAL MEMBER / DATE: 29.08.2017 3% **