M/s. Bridal Jewellery Mfg Co, New Delhi V. DCIT, Noida

ITA 645/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3906 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 05-08-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 02-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUBHAKANT SAHU
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-1 NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.645/DEL/2015 ASSESSMENT YEAR 2010-11 M/S. BRIDAL JEWELLERY MFG. CO., 2705, BASEMENT, BANK STREET, KAROL BAGH, NEW DELHI. V. DY. CIT, CIRCLE-1, NOIDA. TAN/PAN: AADFB0557C (APPELLANT) (RESPONDENT) APPELLANT BY: MS. ANANYA KAPOOR, ADV. RESPONDENT BY: SHRI SUBHA KANT SAHU, SR.D.R. DATE OF HEARING: 25 11 2019 DATE OF PRONOUNCEMENT: 17 02 2020 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER DATED 30.12.2014 , PASSED U/S.144C(5) R.W.S. 143(3)/92CA FOR THE ASSESSMENT Y EAR 2010-11 IN PURSUANCE OF DIRECTION GIVEN BY THE DRP VIDE ORDER DATED 21.10.2014. IN VARIOUS GROUNDS OF APPEA L THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS.8,38 ,860/- ON ACCOUNT OF INTEREST ON GRANT OF LOAN TO AE; AND ADD ITION / DISALLOWANCE OF RS.21,48,474/- ON ACCOUNT OF INTERE ST ON UNREALIZED EXPORT PROCEEDS. 2. THE FACTS IN BRIEF QUA THE ISSUE INVOLVED ARE TH AT I.T.A. NO.645/DEL/2015 2 ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF MANUFACTURING AND EXPORT OF GOLD JEWELLERY. DURING THE YEAR, IT HAS EXPORT ITS GOODS TO ITS AE AS WELL AS TO UNR ELATED PARTIES AND HAS USED CUP METHOD AS THE MOST APPROPRIATE MET HOD AND NET MARGIN OF COMPARABLE COMPANIES. DURING THE YEAR, ASSESSEE HAS GIVEN LOAN/ADVANCES TO ITS AE IN FOREI GN CURRENCY FOR FINANCIAL SUPPORT ON WHICH IT HAS NOT CHARGED ANY INTEREST. THE TPO HAS PROPOSED TO CHARGE THE IN TEREST @ 15 % AND THEREBY MADE AN UPWARD ADJUSTMENT OF RS.25,01,566/- BY TAKING THE AVERAGE PLR OF STATE B ANK OF INDIA. THE TPO HAS FURTHER NOTED THAT THE ASSESSEE HAS RECEIVABLE FROM ITS AE AGAINST ITS SALE MADE DURING THE YEAR ON WHICH ASSESSEE HAS NOT CHARGED ANY INTEREST. ACC ORDINGLY, THE TPO HAS APPLIED INTEREST RATE OF 15% ON THE DEL AYED RECEIVABLES AND MADE ADJUSTMENT OF RS.65,86,585/-. 3. THE DRP IN SO FAR AS ADJUSTMENT ON ACCOUNT OF LO AN GIVEN TO AE, HELD THAT, SINCE LOAN HAS BEEN GIVEN I N FOREIGN CURRENCY, THEREFORE, PLR OF SBI IS NOT A SUITABLE C OMPARABLE AND ACCORDINGLY, DIRECT THE TPO/ASSESSING OFFICER T O COMPLY LIBOR RATE TO DETERMINE THE ALP OF INTEREST TO BE C HARGED. IN RESPECT OF INTEREST ON OUTSTANDING RECEIVABLES, DRP HELD THAT CREDIT PERIOD ALLOWED TO THE AE IS MUCH MORE THAN A LLOWED TO NON AE AND ASSESSEE HAS NOT SUBSTANTIATED ITS CASE WITH EVIDENCE THAT FOR SIMILAR DELAYS NO INTEREST HAS BE EN CHARGED FROM THIRD PARTIES. THE DRP HAS FURTHER DIRECTED TH E TPO/ASSESSING OFFICER TO ALLOW THE LIBOR RATE. I.T.A. NO.645/DEL/2015 3 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEARS 2011-12 AND 2012-13 HAS HELD THAT PERIOD OF 90 DAYS CREDIT IS REASONABLE IN THE TRADE OF THE ASSESSEE AND MATT ER WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER/TPO T O COMPUTE THE TRANSFER PRICING ADJUSTMENT TO THE RECEIVABLE H AVING DELAYED RECEIPT OF PAYMENT OF MORE THAN 90 DAYS. IN SO FAR AS TRANSFER PRICING ADJUSTMENT ON ACCOUNT LOAN IS CONC ERN, NO ARGUMENT WAS PLACED AND IN FACT EVEN BEFORE THE TRI BUNAL THESE GROUNDS WERE NOT ADJUDICATED IN THE EARLIER YE ARS. 5. AFTER HEARING BOTH THE PARTIES ON THE ISSUE OF I NTEREST ON RECEIVABLES, WE FIND THAT THE ASSESSEES CONTENTION BEFORE THE AUTHORITIES BELOW WAS THAT IT HAS REALIZED INVOICES RAISED DURING THE YEAR, WITHIN 12 MONTHS FROM THE DATE OF INVOICE AND FURTHER ASSESSEE HAS NOT CHARGED ANY INTEREST F ROM THE UNRELATED PARTIES. SINCE, THE DRP HAS ALSO DIRECTED TO COMPUTE INTEREST AT LIBOR RATE TO DETERMINE THE ARM S LENGTH FOR THE INTEREST TO BE CHARGED ON THE RECEIVABLES, THEREFORE, INTEREST RATE OF SBI PLR OF 15% MADE BY THE TPO IS NO LONGER ISSUE BEFORE US. WE FIND THAT TRIBUNAL IN ASSESSEE S OWN CASE HAS DECIDED THIS ISSUE HOLDING THAT PERIOD OF 90 DA YS CREDIT IS REASONABLE. THE RELEVANT FINDING OF THE TRIBUNAL FO R THE ASSESSMENT YEAR 2012-13 IN ITA NO.5989/DEL/2016 REA DS AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER/TPO/DRP AND THE PAPER BOOK FILED ON BEHALF OF THE I.T.A. NO.645/DEL/2015 4 ASSESSEE. WE HAVE ALSO GONE THROUGH THE VARIOUS DEC ISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN TH E PAPER BOOK. WE FIND THE ASSESSING OFFICER, IN THE INSTANT CASE, ON THE BASIS OF THE REPORT OF THE TPO, MADE ADDITION OF RS.81,14,87 5/- BEING INTEREST ON UNREALIZED EXPORT PROCEEDS @ 12.65 PER ANNUM WHEN THE OUTSTANDING WAS RECEIVED BEYOND A PERIOD OF 60 DAYS FROM THE DATE OF INVOICE. WE FIND, THE DRP RESTRICTED SU CH DISALLOWANCE TO RS.30,98,408/-. WE FIND IDENTICAL I SSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12. WE FIND THE TRIBUNAL, AFTE R CONSIDERING THE ARGUMENTS MADE BY BOTH THE SIDES HA S HELD THAT THE PERIOD OF 90 DAYS CREDIT IS REASONABLE IN THE T RADE OF THE ASSESSEE AND ACCORDINGLY IT WAS RESTORED TO THE FIL E OF THE A.O./TPO TO COMPUTE THE TRANSFER PRICING ADJUSTMENT OF RECEIVABLES HAVING DELAY IN RECEIPT OF PAYMENT OF M ORE THAN 90 DAYS. THE RELEVANT PORTION OF THE ORDER OF THE TRIB UNAL READS AS UNDER: - 20. AS FAR AS THE ISSUE OF REQUEST OF THE LD. COUN SEL FOR ALLOWING CREDIT OF 90 DAYS IS CONCERNED, WE FIND TH AT THIS PERIOD OF 60 DAYS ADOPTED BY THE LD. TPO OR 90 DAYS REQUESTED BY THE ASSESSEE DEPEND ON THE PREVALENT B USINESS PRACTICE IN THE TRADE. THE LD. COUNSEL HAS POINTED OUT BEFORE US THAT IN ASSESSMENT YEAR 2015- 16 THE LD. TPO HIM SELF AS CONSIDERED THE RECEIVABLES BEYOND THE PERIOD OF 90 DAYS FOR THE PURPOSE OF TRANSFER PRICING ADJUSTMENT. WE HAVE VERIFIED THIS FACT FROM THE ORDER OF THE LD. TPO FOR ASSESSM ENT YEAR 2015-16 AVAILABLE ON PAGE 254 TO 277 OF THE PAPER B OOK. WE FIND FROM THE ANNEXURE-1 TO THE ORDER OF THE TPO TH AT RECEIVABLES BEYOND 90 DAYS HAVE BEEN CONSIDERED FOR TRANSFER I.T.A. NO.645/DEL/2015 5 PRICING ADJUSTMENT. IN VIEW OF THE RULE OF CONSISTE NCY, THE PERIOD OF 90 DAYS CREDIT IS FOUND TO BE REASONABLE IN THE TRADE OF THE ASSESSEE AND ACCORDINGLY WE DIRECT THE LD.AO /TPO TO COMPUTE THE TRANSFER PRICING ADJUSTMENT FOR RECEIVA BLES HAVING DELAY IN RECEIPT OF PAYMENT MORE THAN 90 DAYS. ACCO RDINGLY THE GROUND OF THE APPEAL RAISED BY THE ASSESSEE IN RESPECT OF TRANSFER PRICING ADJUSTMENT FOR INTEREST ON RECEIVA BLES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE RESTORE THE ISSUE TO THE FILE OF ASSESSING OFFICER/TPO TO COMPUTE THE TP ADJ USTMENT FOR RECEIVABLES HAVING DELAY IN RECEIPT OF PAYMENT OF M ORE THAN 90 DAYS. THE GROUND RAISED BY THE ASSESSEE IS ACCORDIN GLY PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. THUS, CONSISTENT WITH THE VIEW TAKEN IN THE EARL IER YEARS, WE DIRECT THE TPO TO COMPUTE THE TRANSFER PRICING A DJUSTMENT OF RECEIVABLES FROM AE ON THE DELAY OF PAYMENT OF M ORE THAN 90 DAYS AND THAT TO BY APPLYING LIBOR RATE. THUS, A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED. OTHER GROUNDS ARE N OT ADJUDICATED AS SAME WERE NOT ARGUED BEFORE US. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2020. SD/- SD/- [PRASHANT MAHARISHI] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH FEBRUARY, 2020 PKK: