GOLDSTAR JEWELLERY LTD, MUMBAI V. JCIT (OSD) 8(1), MUMBAI

ITA 6570/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88016 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: K
• Next Hearing Date: 26-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 30-10-2012
• Court: TRIBUNAL
• Assessee Lawyers: CIRCUMSTANCES OF CASES
• Keywords: Transfer pricing; International transaction; Retrospective amendment; Initiation of penalty proceedings; Notional interest
• Section: 143(3); 92B; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, ACCOUNTANT MEMBER ITA NO.6570/MUM/2012 ASSESSMENT YEAR: - 2008-09 M/S GOLDSTAR JEWELLERY LIMITED. UNIT NO. IIIA,L GOLDSTAR HOUSE, BLOCK C, PLOT NO. 16(P), 17, 28, SEEPZ-SEZ, ANDHERI (EAST) MUMBAI 400 096. VS.` JOINT COMMISSIONER OF INCOME TAX (OSD) 8(1), MUMBAI. PAN:- AAACG3264B APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT IN PURSUANT TO THE DIRECTIONS OF DRP DATED 4.9.2012 PAS SED U/S 144C(5) OF THE INCOME TAX ACT FOR A.Y. 2008-09. THE ASSESSEE H AS RAISED FOLLOWING GROUNDS IN THIS APPEAL:- 1) THE LD. ASSESSING OFFICER/TPO/DRP ERRED IN LAW, FAC TS AND CIRCUMSTANCES OF THE CASES BY CONSIDERING CONTINUI NG DEBIT BALANCE WITH ASSOCIATE ENTERPRISE AS AN INTERNATIONAL TRANS ACTIONS. 2) THE LD. ASSESSING OFFICER/TPO/DRP ERRED IN LAW, FAC TS AND CIRCUMSTANCES OF THE CASES BY HOLDING THAT THE EXTE NDED CREDIT PERIOD ASSESSEE BY SHRI ALOK SAKSENA REVENUE BY SHRI. N.K. CHAND DATE OF HEARING 26.11.2014 DATE OF PRONOUNCEMENT 14.01.2015 M/S GOLDSTAR JEWELLERY LIMITED. 2 | P A G E ALLOWED TO THE AE AMOUNTED TO THE SHORT TERM FUNDING GRANTED TO THEM WITHOUT INTEREST WHICH IS TO BE CONSIDERED AS AN INTERNATIONAL TRANSACTION. 3) THE LD. ASSESSING OFFICER/TPO/DRP ERRED IN LAW, FAC TS AND CIRCUMSTANCES OF THE CASE BY ADOPTING THE RATE OF I NTEREST @ 18.816% (ULTIMATELY CONSIDERED @7%) ON OUTSTANDING AMOUNTS FROM ASSOCIATE ENTERPRISES. 4) THE LD. ASSESSING OFFICER ERRED IN THE FACTS AND IN LAW IN LEVYING OF INTEREST U/S 234B & 234C OF THE INCOME TAX ACT 1961 . 2. GROUND NOS. 1 TO 3 ARE REGARDING ADJUSTMENT OF NOT IONAL INTEREST ON ACCOUNT OF EXTENDED CREDIT PERIOD ALLOWED TO THE AE. 3. THE TRANSFER PRICING OFFICER (TPO) NOTED THAT AVE RAGE COLLECTION PERIOD OF THE ASSESSEE FROM ITS AE IS 351 DAYS AND 3 32 DAYS IN CASE OF MANUFACTURING OF JEWELLERY UNIT AND DIAMOND TRADING UNIT RESPECTIVELY. THE ASSESSEE ALSO FURNISHED THE DETAILS OF AVERAGE CR EDIT REALIZATION PERIOD FROM THE NON-AES. THE TPO NOTED THAT THE AVERA GE REALIZATION PERIOD FROM NON AE IS 125 DAYS AND 209 DAYS IN CASE O F MANUFACTURING OF JEWELLERY UNIT AND DIAMOND TRADING UNIT RESPECTIVEL Y. THUS THE TPO FOUND THAT THERE IS A DELAY OF 226 DAYS AND 123 DAYS IN CASE OF MANUFACTURING OF JEWELLERY UNIT AND DIAMOND TRADING UN IT RESPECTIVELY IN REALIZATION OF DUES FROM AE IN COMPARISON TO NON -AES. THE TPO OBSERVED THAT THE AE OF THE ASSESSEE IS GETTING THE BENEFIT OF MAKING THE LATE PAYMENT TO THE ASSESSEE AND THE BENEFIT IS GIVE N TO THE AE. ASSESSEE HAS BORROWED FUNDS FROM FROM THE FINANCIAL INSTITUTI ON ON WHICH IT IS BEARING THE INTEREST COST FOR WHICH NO REMUNERATION IS BEING CHARGED TO THE AE. ACCORDINGLY, THE TPO PROPOSED THE ADJUSTMENT OF RS. 2,49,95,139/- ON ACCOUNT OF DELAY IN REALIZATION FR OM AE BY APPLYING INTEREST AT THE RATE OF 18.816% AS ARMS LENGTH INT EREST . M/S GOLDSTAR JEWELLERY LIMITED. 3 | P A G E 4. BEFORE THE DRP, THE ASSESSEE HAS CONTENDED THAT A CONTINUING DEBIT BALANCE OR AMOUNT OUTSTANDING FROM THE AE ON ACCOUNT OF DELAYED REALIZATION DOES NOT AMOUNT TO AN INTERNATIONAL TRA NSACTION BUT IT IS INFACT THE RESULT OF ANOTHER INTERNATIONAL TRANSACT ION, NAMELY, EXPORT THAT HAS BEEN ENTERED INTO BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF NIMBUS COMM UINCATIONS LTD. (43 SOT 695). THE DELAY IN REALIZATION OCCURRED DUE TO TH E BAD ECONONOMIC CONDITION OF US MARKET IN THOSE DAYS WHERE THE AE OF THE ASSESSEE WAS LOCATED, NO FINANCIAL OR ANOTHER BENEFIT WAS MADE AV AILABLE TO THE AE. ALTERNATIVELY, THE ASSESSEE CONTENDED THAT THE ASSESS EE OBTAINED THE LOAN IN THE FORM OF PACKING CREDIT WHICH IS A PRE-SHIPMEN T LOAN FOR EXPORTS AND POST-SHIPMENT FINANCE. THE LOANS ARE SANCTIONED IN INDIAN RUPEE BUT ARE MAINLY AVAILED OF IN EQUIVALENT FOREIGN EXCHANGE . THE INTEREST ON THESE LOANS BY THE BANK IS ON THE BASIS OF SIX MONT HS LIBOR VARIES BETWEEN LIBOR PLUS 1% TO LIBOR PLUS 2%. THUS THE AS SESSEE SUBMITTED THAT THE WORKING OF SIX MONTH LIBOR WAS 4.701%. THE DRP DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT DU E TO THE RETROSPECTIVE AMENDMENT IN SECTION 92B BY THE FINANC E ACT 2012 W.E.F A.Y. 2002-03 MAKES IT CLEAR THAT SUCH A RECEIVABLE WILL AMOUNT TO AN INTERNATIONAL TRANSACTION. HOWEVER, THE DRP HAS MOD IFIED THE ADJUSTMENT BY REDUCING THE INTEREST RATE TO 7% INSTE AD OF 18.816% APPLIED BY THE TPO. 5. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE HAS REITERATED ITS CONTENTION AS BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE EXTENSION OF CREDIT PERIOD TO THE AE ON REA LIZATION OF SALE PROCEEDS IS NOT A SEPARATE INTERNATIONAL TRANSACTION BUT IT IS ARISING FROM M/S GOLDSTAR JEWELLERY LIMITED. 4 | P A G E THE INTERNATIONAL TRANSACTION OF SALE TO THE AE. HE HAS FURTHER CONTENDED THAT THE ASSESSEE DOES NOT CHARGE INTEREST EITHER F ROM THE AE OR FROM NON- AE FOR THE CREDIT PERIOD IN REALIZATION OF SALE PROCEEDS, THEREFORE, THE OUTSTANDING AMOUNT FROM THE AE ON ACCOUNT OF CO NTINUING DEBIT BALANCE FOR THE GOODS SUPPLIED IN NORMAL COURSE OF B USINESS IS NOT AN INTERNATIONAL TRANSACTION. WHEN THE REVENUE IS REC OGNIZED ONLY ON THE BASIS OF MERCANTILE METHOD OF ACCOUNTING THEN IT IS NOT NECESSARY THAT THE PAYMENT IS TO BE MADE AS SOON AS IT BECOMES DUE. IT IS NOT A LOAN OR BORROWING WHICH IS AN INDEPENDENT TRANSACTION AND CAN BE EXAMINED FOR THE PURPOSE OF ARMS LENGTH PRICE ON STAND ALONE BAS IS. THE TRANSACTION IS ONLY THE RESULT OF THE MAIN INTERNATIONAL TRANSACTI ON. THUS HE HAS SUBMITTED THAT IT IS THE POLICY OF THE ASSESSEE NOT TO CHARGE THE INTEREST ON THE CREDIT PERIOD OR DELAY IN REALIZATION OF THE S ALE PROCEEDS. IN SUPPORT OF HIS CONTENTION HE HAS RELIED UPON THE DECI SION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDO AMERICAN JEWELLERY LTD. (2014) 4 TAXMANN.COM 310 AND SUBMITTED THAT THE HON'BLE HIGH COURT UPHELD THE FINDING OF THE TRIBUNAL HOLDING THAT INTEREST INCOME IS ASSOCIATED ONLY WITH THE LENDING OR BORROWING OF MONEY AND NOT IN CASE OF SALE AND THERE IS A COMPLETE UNIFORMITY IN THE ACT OF THE ASSESSEE IN NOT CHARGING INTEREST FROM B OTH THE AE AND NON AE DEBTORS. THE LD. AUTHORIZED REPRESENTATIVE HAS ALSO FI LED THE DETAILS OF SALES TO THE AE AND NON AE AS WELL AS THE AVERAGE C OLLECTION PERIOD FROM AE AND NON AE. HE HAS SUBMITTED THAT THE SALE TO THE AE IS 18% OF THE TOTAL SALE OF THE ASSESSEE, THEREFORE, THE AVERAGE COLLECTION PERIOD IS MORE IN CASE OF THE AE THAN NON AE, THE SAME WOULD NOT A FFECT ANY BENEFIT TO THE AE BECAUSE THE 82% OF THE SALE IS TO NON AE. AL TERNATIVELY THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT THE ARM S LENGTH INTEREST M/S GOLDSTAR JEWELLERY LIMITED. 5 | P A G E RATE IN RESPECT OF THE AVERAGE PERIOD ALLOWED FOR REA LIZATION FROM THE AE SHOULD NOT BE MORE THAN THE COST OF FUND OF THE ASSES SEE. HE HAS SUBMITTED THAT THE ASSESSEE IS CHARGED INTEREST ON F OREIGN DEBTS AT THE LIBOR PLUS 2.5%. 6. ON THE OTHER HAND, THE LD. DR HAS CONTENDED THAT THE RE IS NO CONTENTION OF THE ASSESSEE BEFORE THE TPO THAT IT I S AN UNIFORM POLICY OF THE ASSESSEE NOT CHARGING INTEREST FROM AE AS WELL AS NON AE IN RESPECT OF REALIZATION OF SALES PROCEEDS. HE HAS REFERRED TH E AMENDMENT IN EXPLANATION TO SECTION 92B AND SUBMITTED THAT THE DEFE RRED PAYMENT/ RECEIVABLE FALLS UNDER THE DEFINITION OF INTERNATIO NAL TRANSACTION. HE HAS ALSO REFERRED THE MEMORANDUM OF FINANCE BILL 2012, WH EREBY THE EXPLANATION TO SECTION 92B HAS BEEN INSERTED AND SU BMITTED THAT DEFINITION OF TERM INTERNATIONAL TRANSACTION HAS BEE N EXTENDED AND INCLUDES THE CAPITAL FINANCING LONG TERM OR SHORT TE RM BORROWING, LENDING OR GUARANTEE, PURCHASE OR SALE OF MERCANTILE SECURI TIES OR ANY TYPE OF ADVANCE OR DEFERRED BILLS OR RECEIVABLES ANY OTHER DEBT S ARISING DURING THE COURSE OF BUSINESS. THUS THE LD. DR HAS SUBMITT ED THAT THE DEFERRED PAYMENT OR RECEIVABLE OF DEBT ARISING DURING THE COUR SE OF BUSINESS IS COVERED UNDER THE EXPRESSION INTERNATIONAL TRANSACTI ON AS PER CLAUSE C OF EXPLANATION TO SECTION 92B. IN SUPPORT OF HIS CONTE NTION HE HAS RELIED UPON THE DECISION OF BANGALORE BENCHES OF THIS TRIBU NAL IN THE CASE OF LOGIX MICRO SYSTEMS LTD VS. ACIT (42 SOT 525). THUS THE LD. DR HAS SUBMITTED THAT AFTER INSERTION OF EXPLANATION TO SE CTION 92B, THE DECISION RELIED UPON BY THE ASSESSEE IN THE CASE OF NIMBUS COMMUNICATIONS LTD. (SUPRA) AS WELL AS INDO AMERICAN JEWELLERY LTD. (SUP RA) BECOME IRRELEVANT. IN SUPPORT OF HIS CONTENTION HE HAS REL IED UPON THE DECISION M/S GOLDSTAR JEWELLERY LIMITED. 6 | P A G E OF HON'BLE HIGH COURT IN THE CASE CIT VS. PATNI COMPUTERS SYSTEM LTD. (33 TAXMANN.COM 3) AND SUBMITTED THAT THE HON'BLE HIGH COURT HAS REMITTED AN IDENTICAL ISSUE TO THE TRIBUNAL BY TAKIN G INTO CONSIDERATION THE AMENDMENT TO SECTION 92B(1) BY THE FINANCE ACT 2012 W.R.E.F. 01.04.2002. THE LD. DR HAS FURTHER CONTENDED THAT AS PER THE TERMS OF AGREEMENT BETWEEN THE PARTIES, THE CREDIT PERIOD IS ALLOWED ONLY FOR 150 DAYS BUT THE TPO HAS ALLOWED 180 DAYS WHICH IS MORE TH AN THE PERIOD AGREED BETWEEN THE PARTIES. 7. IN REBUTTAL, THE LD. AUTHORIZED REPRESENTATIVE HAS SUBMITTED THAT ONLY 13% OF THE TOTAL OUTSTANDING WAS REALIZABLE FR OM THE AE WHEREAS THE 87% FROM THE NON AE. FURTHER THE ASSESSEE IS AV AILING THE CREDIT FROM THE CREDITORS WHICH IN TURN ALLOWED TO THE DEBTORS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RELEV ANT MATERIAL ON RECORD. THE ASSESSEE HAS REPORTED INTERNATIONAL TRANS ACTION IN ITS TP REPORT REGARDING SALE TO ITS AE FROM MANUFACTURE OF JEWELLERY UNITS AND DIAMOND TRADING UNIT. THE TPO ACCEPTED THE PRICE CHARG ED BY THE ASSESSEE FROM AE AT ARMS LENGTH. HOWEVER, THE TPO HAS MADE THE ADJUSTMENT ON ACCOUNT OF NOTIONAL INTEREST FOR THE E XCESS PERIOD ALLOWED BY THE ASSESSEE TO AE FOR REALIZATION OF DUES. THE T PO APPLIED 18.816% PER ANNUM AS ARMS LENGTH ON THE OVER DUE AMOUNTS OF AE AND PROPOSED ADJUSTMENT OF RS. 2,49,95,139/-. THE DRP THOUGH CONC URRED WITH THE VIEW OF THE ASSESSING OFFICER/TPO ON THE ISSUE OF I NTERNATIONAL TRANSACTION, HOWEVER, THE ADJUSTMENT WAS REDUCED BY APPLYING THE INTEREST RATE OF 7% INSTEAD OF 18.816% APPLIED BY THE TPO. THE FIRST ISSUE RAISED BY THE ASSESSEE IS WHETHER THE AGGREGAT E PERIOD EXTENDED BY M/S GOLDSTAR JEWELLERY LIMITED. 7 | P A G E THE ASSESSEE TO THE AE WHICH IS MORE THAN THE AVERA GE CREDIT PERIOD EXTENDED TO THE NON-AE WOULD CONSTITUTE INTERNATIONA L TRANSACTION. WE ARE OF THE VIEW THAT AFTER THE INSERTION OF EXPLANA TION TO SECTION 92B(1), THE PAYMENT OR DEFERRED PAYMENT OR RECEIVABLE OR ANY DEBT ARISING DURING THE COURSE OF BUSINESS FALL UNDER THE EXPRESSI ON INTERNATIONAL TRANSACTION AS PER EXPLANATION. THEREFORE, IN VIEW OF THE EXPANDED MEANING OF THE INTERNATIONAL TRANSACTION AS CONTEMP LATED UNDER CLAUSE (I) (E) OF EXPLANATION TO SECTION 92B(1), THE DELAY IN REALIZATION OF DUES FROM THE AE IN COMPARISON TO NON-AE WOULD CERTAINLY FALLS IN THE AMBIT OF INTERNATIONAL TRANSACTION. HOWEVER, THIS TRANSACTI ON OF ALLOWING THE CREDIT PERIOD TO AE ON REALIZATION OF SALE PROCEEDS IS NOT AN INDEPENDENT INTERNATIONAL TRANSACTION BUT IT IS A CLOSELY LINKE D OR CONTINUOUS TRANSACTION ALONG WITH SALE TRANSACTION TO THE AE. THE CREDIT PERIOD ALLOWED TO THE PARTY DEPENDS UPON VARIOUS FACTORS WHIC H ALSO INCLUDES THE PRICE CHARGED BY THE ASSESSEE FROM PURCHASER. TH EREFORE, THE CREDIT PERIOD EXTENDED BY THE ASSESSEE TO THE AE CANNOT BE EX AMINED INDEPENDENTLY BUT HAS TO BE CONSIDERED ALONG WITH THE MAIN INTERNATIONAL TRANSACTION BEING SALE TO THE AE. AS PER RULE 10A(D) IF A NUMBER OF TRANSACTIONS ARE CLOSELY LINKED OR CONTINU OUS IN NATURE AND ARISING FROM A CONTINUOUS TRANSACTIONS OF SUPPLY OF AMENITY OR SERVICES THE TRANSACTIONS IS TREATED AS CLOSELY LINKED TRANSA CTIONS FOR THE PURPOSE OF TRANSFER PRICING AND, THEREFORE, THE AGGREGATE AN D CLUBBING OF CLOSELY LINKED TRANSACTION ARE PERMITTED UNDER SAID RULE. THI S CONCEPT OF AGGREGATION OF THE TRANSACTION WHICH IS CLOSELY LIN KED IS ALSO SUPPORTED BY OECD TRANSFER PRICING GUIDELINES. IN ORDER TO EXAM INE WHETHER THE NUMBER OF TRANSACTIONS ARE CLOSELY LINKED OR CONTINU OUS SO AS TO AGGREGATE FOR THE PURPOSE OF EVALUATION WHAT IS TO BE CONSIDERED IS THAT M/S GOLDSTAR JEWELLERY LIMITED. 8 | P A G E ONE TRANSACTION IS FOLLOW-ON OF THE EARLIER TRANSAC TION AND THEN THE SUBSEQUENT TRANSACTION IS CARRIED OUT AND DEPENDENT W HOLLY OR SUBSTANTIALLY ON THE EARLIER TRANSACTION. IN OTHER WORDS, IF TWO TRANSACTIONS ARE SO CLOSELY LINKED THAT DETERMINATION OF PRICE OF ONE TRANSACTION IS DEPENDENT ON THE OTHER TRANSACTION THE N FOR THE PURPOSE OF DETERMINING THE ALP, THE CLOSELY LINKED TRANSACTION S HOULD BE AGGREGATED AND CLUBBED TOGETHER. WHEN THE TRANSACTION ARE INFLU ENCED BY EACH OTHER AND PARTICULARLY IN DETERMINING THE PRICE AND PROFIT I NVOLVED IN THE TRANSACTIONS THEN THOSE TRANSACTIONS CAN SAFELY BE REGARDED AS CLOSELY LINKED TRANSACTIONS. IN THE CASE IN HAND THE CREDIT PE RIOD EXTENDED TO THE AE IS A DIRECT RESULT OF SALE TRANSACTION. THEREFORE NO QUESTION OF CREDIT PERIOD ALLOWED TO THE AE FOR REALIZATION OF SALE PROC EEDS WITHOUT HAVING SALE TO AE. THE CREDIT PERIOD EXTENDED TO THE AE CANNO T BE TREATED AS A TRANSACTION STAND ALONE WITHOUT CONSIDERING THE MAIN TRANSACTION OF SALE. THE SALE PRICE OF THE PRODUCT OR SERVICE DETERMINED B ETWEEN THE PARTIES IS ALWAYS INFLUENCED BY THE CREDIT PERIOD ALLOWED BY T HE SELLER. THEREFORE, THE TRANSACTION OF SALE TO THE AE AND CRE DIT PERIOD ALLOWED IN REALIZATION OF SALE PROCEEDS ARE CLOSELY LINKED AS TH EY ARE INTER LINKED AND THE TERMS AND CONDITIONS OF SALE AS WELL AS THE PR ICE ARE DETERMINED BASED ON THE TOTALITY OF THE TRANSACTION AND NOT ON I NDIVIDUAL AND SEPARATE TRANSACTION. THE APPROACH OF THE TPO AND D RP IN ANALYZING THE CREDIT PERIOD ALLOWED BY THE ASSESSEE TO THE AE WITHO UT CONSIDERING THE MAIN INTERNATIONAL TRANSACTION BEING SALE TO THE AE WILL GIVE DISTORTED RESULT BY DISREGARDING THE PRICE CHARGED BY THE ASSESS EE FROM AE. THOUGH EXTRA PERIOD ALLOWED FOR REALIZATION OF SALE PROCEEDS FROM THE AE IS AN INTERNATIONAL TRANSACTION, HOWEVER, FOR THE P URPOSE OF DETERMINING THE ALP, THE SAME HAS TO BE CLUBBED OR AGGREGATED WI TH THE SALE M/S GOLDSTAR JEWELLERY LIMITED. 9 | P A G E TRANSACTIONS WITH THE AE. EVEN BY CONSIDERING IT A S AN INDEPENDENT TRANSACTION THE SAME HAS TO BE COMPARED WITH THE INT ERNAL CUP AVAILABLE IN THE SHAPE OF THE CREDIT ALLOWED BY THE ASSESSEE T O NON AE. WHEN THE ASSESSEE IS NOT MAKING ANY DIFFERENCE FOR NOT CHARGI NG THE INTEREST FROM AE AS WELL AS NON-AE THEN THE ONLY DIFFERENCE BETWEE N THE TWO CAN BE CONSIDERED IS THE AVERAGE PERIOD ALLOWED ALONG WITH OUT STANDING AMOUNT. IF THE AVERAGE PERIOD MULTIPLIED BY THE OUT STANDING AMOUNT OF THE AE IS AT ARMS LENGTH IN COMPARISON TO THE AVER AGE PERIOD OF REALIZATION AND MULTIPLIED BY THE OUTSTANDING FROM NO N AES THEN NO ADJUSTMENT CAN BE MADE BEING THE TRANSACTION IS AT AR MS LENGTH. THE THIRD ASPECT OF THE ISSUE IS THAT THE ARMS LENGTH I NTEREST FOR MAKING THE ADJUSTMENT. BOTH THE TPO AND DRP HAS TAKEN INTO CONS IDERATION THE LENDING RATES, HOWEVER, THIS IS NOT A TRANSACTION OF LOAN OR ADVANCE TO THE AE BUT IT IS ONLY AN EXCESS PERIOD ALLOWED FOR REALIZ ATION OF SALES PROCEEDS FROM THE AE. THEREFORE, THE ARMS LENGTH IN TEREST IN ANY CASE WOULD BE THE AVERAGE COST OF THE TOTAL FUND AVAILABLE TO THE ASSESSEE AND NOT THE RATE AT WHICH A LOAN IS AVAILABLE. ACCORDING LY, WE DIRECT THE ASSESSING OFFICER/TPO TO RE-DO THE EXERCISE OF DETER MINATION OF ALP IN TERMS OF ABOVE OBSERVATION. 9. GROUND NO. 4 IS REGARDING LEVY OF INTEREST U/S 2 34B AND 234C. 10. THIS GROUND IS CONSEQUENTIAL IN NATURE AND, THERE FORE, NO SEPARATE FINDING IS REQUIRED ON THIS ISSUE. M/S GOLDSTAR JEWELLERY LIMITED. 10 | P A G E 11. GROUND NO. 5 IS REGARDING INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C). THIS GROUND IS PREMATURE AND NOT ARISING FROM THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY THE SAME IS DISMISSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14.0 1.2015 SD/- SD/- (N.K. BILLAIYA) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER ) ( J UDICIAL MEMBER ) MUMBAI DATED SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, K BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI