WESTERN REFREGERATION P.LTD, MUMBAI V. DCIT CIR 7(3), MUMBAI

ITA 6796/MUM/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4536 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 11-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 92B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 6796 / MUM . /2014 ( ASSESSMENT YEAR : 20 10 11 ) WESTERN REFRIGERATION PVT. LTD. 7 B, PANNALAL SILK MILLS COMPOUND 78, LBS MARG, BHANDUP WEST MUMBAI 400 078 PAN AAACW0012H . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX (I.T) CIRCLE 7 ( 3 ), MUMBAI . RESPONDENT ASSESSEE BY : SHRI TANMAY PHADKE REVENUE BY : SHRI MANISH KUMAR DATE OF HEARING 12 . 03 .201 9 DATE OF ORDER 20.03.2019 O R D E R PER SAKTIJIT DEY, J.M. AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 27 TH AUGUST 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 15, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2010 11. 2 WESTERN REFRIGERATION PVT. LTD. 2 . IN THE GROUNDS RAISED, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE OF ` 28,99,418, ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT ON CORPORATE GUARANTEE. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING AND TRADING OF REFRIGERATION AND FREEZING EQUIPMENT S . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 7 TH OCTOBER 2010, DECLARING INCOME OF ` 4,20,72,347. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTION WI TH ITS ASSOCIATED ENTERPRISE (A E), MADE A R EFERENCE TO THE TRANSFER PRICING OFFICER TO DETERMINE THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION. IN THE COURSE OF PROCEEDINGS BEFORE HIM, THE TRANSFER PRICING OFFICER NOTICING THAT THE ASSESSEE HAS PROVID ED CORPORATE GUARANTEE TO THE AE WITHO UT CHARGING ANY FEE, CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE ARM'S LENGTH PRICE OF THE GUARANTEE FEE SHOULD NOT BE DETERMINED. THOUGH, THE ASSESSEE OBJECTED TO THE PROPOSED ADJUSTMENT, HOWEVER, THE TRANSFER PRICING OFFICER REJECTING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE ARM'S LENGTH PRICE OF THE CORPORATE GUARANTEE HAS TO BE DETERMINED. APPLYING THE COMMERCIAL BORROWING RATES OF SBI @ 0.625%, THE ASSESSING OFFICER DETERMINED THE ARMS LENGTH PRICE OF COMMISSION @ ` 28,99,418. THE AFORESAID TRANS FER PRICING ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER 3 WESTERN REFRIGERATION PVT. LTD. WAS ADDED BACK BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT. 4 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, IT WAS UNSUCCES SFUL. 5 . WE HAVE HEARD THE PARTIES AND PERUSED MATERIAL ON RECORD. THOUGH, IN GROUND NO.2, THE ASSESSEE HAS RAIS ED THE ISSUE THAT THE PROVISION OF CORPORATE GUARANTEE DOES NOT COME WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION DEFINED UNDER SECTION 92B OF THE ACT, HOWEVER, AT THE TIME OF HEARING OF THE APPEAL BEFORE US, THE ONLY SUBMISSION MADE BY THE LEARNED AUTHORISED REPRESENTATIVE IS , ARM'S LENGTH COMMISSION FOR CORPOR ATE GUARANTEE PROVIDED TO THE AE SHOULD BE DETERMINED BY APPLYING THE RATE OF 0.5%. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S EVEREST KENTO CYLINDERS LTD., [2015] 378 ITR 57 (BOM.) AND THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN ITA NO.882/MUM./2017, DATED 7 TH SEPTEM BER 2018. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) AND THE TRANSFER PRICING OFFICER. HAVING CONSIDERED RIVAL SUBMISSIONS, IT IS NOTICED THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN EVEREST KE NTO CYLINDERS LTD. (SUPRA), HAS HELD THAT THE GUARANTEE COMMISSION SHOULD BE CHARGED @ 4 WESTERN REFRIGERATION PVT. LTD. 0.5%. THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN FOLLOWED IN VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING THE DECISION IN CASE OF DCIT V/S R OLTA INDIA LTD., ITA NO.882/MUM./2017, DATED 7 TH SEPTEMBER 2018. IN VIEW OF THE AFORESAID, WE DIRECT THE ASSESSING OFFICER TO RE COMPUTE THE ARM'S LENGTH PRICE OF THE CORPORATE GUARANTEE FEE BY APPLYING THE RATE OF 0.5%. GROUNDS ARE PARTLY ALLOWED. 7 . IN VIE W OF THE ABOVE, GROUND NO.2 IS DISMISSED AND GROUNDS NO.1 AND 3 ARE PARTLY ALLOWED. 8 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.03.2019 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 20.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI