FEDERAL EXPRESS CORPORATION , MUMBAI V. THE DEPUTY COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION)-2(3)(1), MUMBAI, MUMBAI

ITA 7312/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7284 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Appeal Filed On: 21-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVANEESH TIWARI
• Assessee Lawyers: ARPIT AGARWAL
• Keywords: Business income
• Section: 143(3)

Judgement Text

ITA NO . 7312 /MUM/2018 ASSESSMENT YEAR: 2014 - 15 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH, MUMBAI [CORAM: PRAMOD KUMAR (VICE PRESIDENT) AND AMARJIT SINGH (JUDICIAL MEMBER) ITA NO. 7312 /MUM/2018 ASSESSMENT YEAR: 2014 - 15 FEDERAL EXPRESS CORPORATION APPELLANT BOOMERANG, UNIT NO. 801, WING A, 8 TH FLOOR, CHANDIVALI FARM ROAD, ANDHERI (E) MUMBAI 400072 [PAN: AAACF4135D ] VS DEPUTY COMMISSIONER OF INCOME TAX RESPONDENT (INTERNATIONAL TAXATION) - 2(3)(1), MUMBAI APPEARANCES BY DHANESH BAFNA & ARPIT AGARWAL FOR THE APPELLANT AVANEESH TIWARI FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: : DECEMBER 27 TH , 20 20 DATE OF PRONOUNCEMENT : JANUARY 31 ST , 20 20 ORDER PER PRAMOD KUMAR, VP: 1. BY WAY OF TH IS APPEAL , THE APPELLANT HAS CHALLENGED CORRECTION OF ORDER DATED 27 TH SEPTEMBER 2018 PASSED BY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) - 2(3)(1), MUMBAI IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 1 44 C(13) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 20 14 - 15 . 2. THE ONLY G RIEVANCES PRESSED BEFORE US, AS RAISED IN SECOND GROUND OF APPEAL, AS AS FOLLOWS: - ITA NO . 7312 /MUM/2018 ASSESSMENT YEAR: 2014 - 15 PAGE 2 OF 4 2. ENHANCING THE RATIO OF COMMERCIAL LINEHAUL CHARGES TO TOTAL LINEHAUL CH ARGES CCLC TO TLC RATIO') 2.1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO AND THE HON'BLE DRP HAVE ERRED IN ENHANCING THE CLC TO TLC RATIO FROM 4.00 PERCENT TO 7.50 PERCENT, BASED ON THE MUTUAL AGREEMENT PROCEEDINGS FOR AY 2008 - 09 ON AN ARBITRARY BASIS, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2.2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO AND THE HON'BLE DRP HAVE ERRED BY NOT CONSIDERING THE ACTUAL CLC TO TLC RATIO. 2.3. WITHOUT PREJUDICE TO ABOVE, BASED ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED AO AND THE HON'BLE DRP HAVE ERRED BY NOT CONSIDERING THE SUO MOTO ENHANCED CLC TO TLC RATIO BASED ON THE METHODOLOGY AGREED BETWEEN THE COMPETENT AUTHORITIES OF THE UNITED STATES OF AMERICA AND INDIA. 3. THE ASSESSEE IS A COMPANY INCORPORATED IN THE USA, AND IS SAID TO BE ENGAGED IN THE BUSINESS OF INTEGRATED AIR AND GROUND TRANSP O RTATION OF TIME SENSITIVE SHIPMENTS. T HE ASSESS E E HAS USED IT S OWN AIRCRAFTS AND THE THIRD PARTY AIRCRAFT S F O R TRANSPORTATION OF THESE SHIPM ENTS. S O FAR AS THE USE OF THIRD PARTY AIRCRAF TS, ON WHICH THESE SHIPMENTS ARE TRANSPORTED, THE ASSESSEE HAS BEEN DECLINED THE TREATY PROTECTION UNDER ARTICLE 8 OF INDIA USA DOUBLE TAXATION AVOIDANCE AGREEMENT. T HE PROFITS FROM THESE OPERATIONS ARE COMPUTED BY ADOPTING THE RATIO OF COMMERCIAL LINE HAUL (ON THIRD PARTY AIRCRAFT) AT 10% AND COMPUTING TAXABLE INCOME ON THESE OPERATIONS @ 4.07% I.E. GLOBAL PROFITS. A S REGARD S ASSESSEE S RELIANCE ON MAP OUTCOME FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 AND THUS ADOPTING 7% OR 7.5%, THE ASSESSING OFFICER REJECTED THE SAID PLEA AND OBSERVED AS F OLLOWS: - 5. THE CONTENTIONS OF THE ASSESSEE WERE PLACED ON RECORD AND WERE DULY VERIFIED. IT IS SE EN THAT THE ASSESSEE HAS PROPOSED THAT THE ADDITIONS IF AT ALL ARE TO BE MADE THEN THE SAME MAY BE MADE AS PER THE METHODOLOGY LAID OUT IN MAP RESOLUTION. HOWEVER, IT MAY NOT BE OUT OF PLACE TO BRING ON RECORD THAT THE MAP PROCEEDINGS WERE FOR A.Y.2007 - 08 & 2008 - 09. THE TERMS, CONDITIONS, BUSINESS ENVIRONMENT AND CIRCUMSTANCES, ECONOMIC TREND ETC; PREVAILING AT THAT TIME WERE DIFFERENT. THUS THE MAP PROCEEDINGS WERE COMPLETED ON' THE BASIS OF ALL THESE CONDITIONS. FURTHER THE PERCENTAGE OF PROFIT MARGINS AR E DECIDED ON THE BASIS OF THE EXPENDITURE ALLOWABLE. UNDER THE PRESENT SCENARIO ALL THESE PARAMETERS ARE NOT AVAILABLE AND NOR HAVE THEY BEEN FURNISHED BY THE ASSESSEE. ACCORDINGLY, THE PLEA OF THE ASSESSEE IS NOT FOUND TENABLE. ACCORDINGLY, RATIO OF COMME RCIAL LINEHAUL TO TOTAL LINEHAUL IS ESTIMATED AND ENHANCED TO 10% AND THE PROFITABILITY ON THE SAME IS ESTIMATED AS PER THEIR GLOBAL PROFITABILITY RATIO WHICH IS 4.07% OF SUCH REVENUE. SUBJECT TO THE ABOVE REMARKS THE TAXABILITY IS WORKED OUT AS UNDER: S.NO PARTICULARS AMOUNT (IN RS.) (A) TOTAL REVENUE FROM INDIAN OPERATIONS 6,97,12,60,779 ITA NO . 7312 /MUM/2018 ASSESSMENT YEAR: 2014 - 15 PAGE 3 OF 4 (B) (C) RATIO OF COMMERCIAL LINEHAUL TO TOTAL LINEHAUL ESTIMATED SUPRA. 10% (D) REVENUE ATTRIBUTABLE TO USAGE OF THIRD PARTY AIRLINES [(A) * [QL 697,126,078 (E) TAXABLE INCOME FROM INDIAN OPERATIONS 4.07% OF [D) 28,373,031 SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS INCOME, THEREFORE PENALTY PROCEEDINGS U/S. 271(L)(C) OF THE ACT IS INITIATED. (ADD: BUSINESS INCOME TAXABLE : RS. 28,373,031/ - ) 4. AGGRIEVED, ASSESSEE RAISED AN OBJECTION BEFORE THE DRP BUT WITHOUT SUCCESS. T HE ASSESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL IN RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. LEARNED COUNSEL S ARGUMENT BEFORE US IS TWOF OLD - FIR ST, THAT THE ACTUAL CLC/ T LC IS 2.08% AND THE SAME MAY BE ADOPTED, AND, SECOND - THAT IN ANY E VENT , THE ESTIMATED OR ADJUSTED CLC/TLC SHOULD NOT BE MORE THAN 7.5% AS WAS ADOPTED BY THE ASSESSING OFFICER AS A RESULT OF MAP PROCEEDINGS. I T IS ALSO CONTENDED THAT THE ASSESSING OFFICER HIMSELF HAS ADOPTED 4% AS CLC/TLC RA TIO, AND THE SAME MAY BE ADOPTED THIS YEAR AS W ELL. L EARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND, RELIES UPON THE STAND OF THE ASSESSING OFFICER. 7. WHILE THE OUTCOME OF MAP PROCEED INGS DOES NOT INDEED FIND THE PARTIES FOR THE YEARS OTHER THAN YEARS BEFORE THE COMPETENT AUTHOR ITIES, IT DOES INDEED PROVIDE A REASONABLE BASIS PARTICULAR LY WHEN IT IS DEALING WITH AN E S TIMATION PARAMETER. T HE ASSESSING OFFICER HAS GIVEN VAGUE REASONS FOR DEVIATING FROM THE SAME IN THE PRESENT Y E AR. I N OUR CONSIDERED VIEW, THEREFORE, IT WILL MEET THE ENDS OF JUSTICE THAT 7.5% AS ADJUSTED CLC/TLC RATIO IS ADOPTED FO R COMPUTING THIS YEAR S TAXABLE INCOME AS WELL. TO THIS EXTENT, WE UPHOLD THE PLEA OF THE ASSESSEE. ITA NO . 7312 /MUM/2018 ASSESSMENT YEAR: 2014 - 15 PAGE 4 OF 4 8. AS REGARDS LEVY OF INTEREST UNDER SECTION 234B, THE ASSESSEE HAS ONLY SOUGHT CONSEQUENTIAL RELIEF , AS IS ADMISSIBLE. A S FOR CREDIT FOR TAX DEDUCTION AT SOURCE AND LEVY OF INTEREST UNDER SECTION 234A, LEARNED COUNSEL ONLY PRAY FOR NECESSARY VERIFI CA TION OF FACTS. L EARNED DR DOES NOT OPPOSE THE CONSEQUENT IAL RELIEF AND THE VERIFICATIONS SO SOUGHT. W E ACCORDINGLY ALLOW THESE PRAYERS AS WELL. N O OTHER SOME WAS PRESSED BEFORE US. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED I N THE OPEN COURT TODAY ON THE 31 ST DAY OF JANUARY ,2019 SD/ - SD/ - AMARJIT S I NGH PRAMOD KUMAR (JUDICIAL MEMBER) (VICE PRESIDENT) MUMBAI, DATED THE 31 ST DAY OF JANUARY , 2019 NISHANT VERMA SR.PS COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI