TECHNOCRAFT INDUSTRIES (I) LTD, MUMBAI V. DCIT 8(3), MUMBAI

ITA 6686/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5566 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JANARDHANAN
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ITA NO. 6686 / MUM/20 14 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. TECHNOCRAFT INDUSTRIES (I) LTD., A - 25, MIDC MAROL INDUSTRIAL AREA ROAD NO.3, ANDHE RI (E) MUMBAI 400 093 VS. DEPUTY COMMISSIONER OF INCOME TAX, 8(3) MUMBAI PAN/GIR NO. AAACT2724P APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY SHRI V. JANARDHANAN DATE OF HEARING 15 / 05 /201 8 DATE OF PRONOUNCEME NT 31 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 15, MUMBAI DATED 20/08/2014 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. ONLY GRIEVANCE OF ASSESSEE REL ATES TO MAKING UPWARD ADJUSTMENT OF ALP BY TPO OF RS.58,29,300/ - IN RESPECT OF GUARANTEE FEE IN RESPECT OF CORPORATE GUARANTEE PROVIDED TO THE ASSESSEES FOREIGN SUBSIDIARY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING OF DRUM CLOSURES, PIPES AND COTTON YARD. DURING THE YEAR UNDER CONSIDERATION, THE TPO MADE UPWARD ADJUSTMENT IN ITA NO. 6686/MUM/2014 M/S. TECHNOCRAFT INDUSTRIES (INDIA) LTD., 2 RESPECT OF INTERNATIONAL TRANSACTION ENTERED INTO BY THE ASSESSEE W ITH ITS ASSOCIATED ENTERPRISES IN RESPECT OF GUARANTEE PROVIDED TO ITS AE. 4. IT WAS ARGUED BY LEARNED AR THAT GUARANTEE WAS ADVANCED BY THE ASSESSEE AS A MATTER OF COMMERCIAL PRESIDENCY TO PROTECT THE BUSINESS INTEREST OF THE GROUP AND I N THE ABSENCE OF GUARANTEE ASSESSEE WOULD HAVE PROVIDED THE FUNDS TO ITS SUBSIDIARY, HENCE PROVISION OF GUARANTEE DOES NOT LEAD TO ANY ADDITIONAL RISK IN THE ASSESSEE WARRANTING COMPENSATION. HE FURTHER PLACED ON RECORD THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CA SE OF EVEREST KANTO CYLINDER LTD., 378 ITR 57 WHEREIN UNDER SIMILAR FACTS AND CIRCUMSTANCE S, GUARANTEE COMMISSION WAS RESTRICTED TO 0 . 5%. LEARNED AR ALSO PLACED ON RECORD VARIOUS DECISIONS OF CO - ORDINATE BENCH ES IN CASE OF VIDEOCON INDUSTRIES LTD., 186 TT J 353 AND M/S. ASIAN PAINTS LTD., 149 ITD 551 , NIMBUS COMMUNICATION LTD., 45 ITD 582 (MUM), RELIANCE INDUSTRIES LTD., ITA NO.4475/MUM/2017 AND GODREJ HOUSEHOLD PROD UCTS LTD., ITA NO.7369/MUM/2010 WHEREIN GUARANTEE COMMISSION WAS DETERMINED AT 0.5%. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT, AS DISCUSSED IN VARIOUS JUDGMENTS THE RATE ADOPTED WAS IN THE RANGE OF 0.25% - 0.50%. THESE RATES WERE IN CASE OF CORPORATE GUARANTEE WHEREAS IN CASE OF ASSESSEE, IT IS ISSUANCE OF SBLC. HENCE, THE SAID RAT ES ARE NOT APPLICABLE IN CASE OF THE ASSESSEE. WE OBSERVE THAT THE ASSESSEE HAS BEEN CHARGED A RATE OF 0.9% BY AN INDIAN BANK FOR SBLC. IN OUR VIEW, THIS IS A CLEAR CASE OF INTERNAL CUP. FURTHER, IN THIS CASE, THE DR HAS NOT RAISED ANY OBJECTION ON ADOPTIO N OF INTERNAL CUP OF 0.9% P.A. HENCE, IN OUR OPINION SINCE THE INTERNAL CUP IS AVAILABLE WITH THE ASSESSEE, THE SAID RATE OF COMMISSION OF 0.9% P.A. SHOULD BE CONSIDERED AS ARMS LENGTH RATE OF COMMISSION. ACCORDINGLY, AO IS DIRECTED TO COMPUTE GUARANTEE F EES @0. 9 % . 6. NEXT GRIEVANCE PERTAINS TO ADDITION ON ACCOUNT OF INTEREST CHARGED O N LOAN ADVANCED TO AE AMOUNTING TO RS.59,172/ - . ISSUE UNDER ITA NO. 6686/MUM/2014 M/S. TECHNOCRAFT INDUSTRIES (INDIA) LTD., 3 CONSIDERATION IS SQUARELY COVERED BY THE DECISION OF DELHI HIGH COURT IN THE CASE OF COTTON NAT URALS (I) PVT. LTD., 55 TAXMANN.COM 523 WHEREIN IT WAS HELD THAT ARMS LENGTH INTEREST RATE FOR LOAN ADVANCED TO FOREIGN SUBSIDIARY BY THE INDIAN COMPANY SHOULD BE COMPUTED BASED ON MARKET DETERMINED INTEREST RATE APPLICABLE TO CURRENCY IN WHICH LOAN HAS TO BE REPAID. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN BY DELHI HIGH COURT, WE DIRECT THE AO TO COMPUTE INTEREST AS PER THE INTEREST RATES APPLICABLE TO CURRENCY IN WHICH LOAN WAS REQUIRED TO BE REPAID BY THE ASSESSEE. WE DIRECT ACCORDINGLY. . 7. W ITH RESPECT TO CLAIM OF DEDUCTION U/S.35D AND DEPRECIATION U/S.32(1)(II)(A) OF THE IT ACT, AO HAS DECLINED ASSESSEES CLAIM BY APPLYING GOETZE INDIA LTD., WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASS ESSEE HAD FILED LETTER DATED 29/10/2012 FURNISHING REVISED WORKING OF DEDUCTION U/S.35D. AS PER THE REVISED WORKING, ASSESSEE HAS CLAIMED DEDUCTION U/S.35D OF RS. 60,04,416/ - AS AGAINST THE ORIGINAL CLAIM OF RS.23,20,680/ - . HOWEVER, BY MISINTERPRETING THE D ECISION OF GOETZE INDIA LTD, THE AO DECLINED TO CONSIDER THE REVISED CLAIM. SIMILARLY, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED ITS LETTER DATED 01/03/2013 CLAIMING THEREIN ADDITIONAL DEPRECIATION OF RS.80,50,615/ - UNDER SECTION 32(1 )(II)(A) OF THE INCOME TAX ACT. BY MISINTERPRETING THE DECISION OF GOETZE INDIA LTD, THE AO DID NOT ACCEPT ASSESSEES REVISED CLAIM. WE DO NOT FIND ANY MERIT FOR THE SAME IN SO FAR AS THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA 187 ITR 688 HAS HELD THAT APPELLATE ITA NO. 6686/MUM/2014 M/S. TECHNOCRAFT INDUSTRIES (INDIA) LTD., 4 AUTHORITY CAN CONSIDER THE GROUND WHICH IS ARISING OUT OF THE ASSESSMENT PROCEEDINGS AND ALSO AS PER EXPLANATION TO SECTION 251 OF THE IT ACT. FURTHERMORE, IT HAS BEEN WELL SETTLED THAT PROPOSITION LAID DOWN IN THE CASE OF G OETZE INDIA LTD. IS APPLICABLE ONLY TO THE AO, WHEREAS TRIBUNAL HAVE GOT POWER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO IN SO FAR AS ALL THE FACTS ARE ALREADY AVAILABLE ON RECORD AND THE SAME IS ARISING OUT OF THE ASSESSMENT ORDERS. WE FOUND THAT I SSUE IS NOW SQUARELY COVERED BY THE DECISION OF BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE MFG. LTD., 328 ITR 81 WHEREIN IT WAS HELD THAT APPELLATE AUTHORITY HAS THE POWER TO ACCEPT THE ADDITIONAL GROUNDS. ACCORDINGLY, WE ACCEPT THE GROUND RAISED AND REST ORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY, BOTH THE ISSUES REGARDING REVISED CLAIM OF DEDUCTION U/S.35D AND ADDITIONAL DEPRECIATION U/S.32(1)(A) OF THE ACT IS RESTORED BACK TO TH E FILE OF THE AO FOR DECIDING AFRESH. NEEDLESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY BEFORE DECIDING THE ISSUE. WE DIRECT ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 31 / 07 /201 8 SD/ - ( SANDEEP GOSAIN ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 31 / 07 /201 8 KARUNA SR. PS ITA NO. 6686/MUM/2014 M/S. TECHNOCRAFT INDUSTRIES (INDIA) LTD., 5 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGI STRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//