ACIT CIRCLE-3(3)92), MUMBAI V. M/S TANIA INDUSTRIES PVT LTD., MUMBAI

ITA 7312/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4678 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SREENIVASARAGHAVAN S IYENGARLD
• Assessee Lawyers: D H ANESH BAFNA LD
• Keywords: Double taxation relief
• Section: 13

Judgement Text

ITA NO.7312/MUM/2018 FEDERAL EXPRESS CORPORATION ASSESSMENT YEAR: 2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.7312/MUM/2019 ( / ASSESSMENT YEAR: 2015-16) FEDERAL EXPRESS CORPORATION BOOMERANG, UNIT NO.801 WING A, 8 TH FLOOR CHANDIVALI FARM ROAD, ANDHERI(EAST), MUMBAI-400 072. / VS. DCIT(INTERNATIONAL TAXATION) -2(3)(1) ROOM NO.1614, 16 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT MUMBAI-400 021. !' ./ ./PAN/GIR NO. AAACF-4135-E ( '$ /APPELLANT ) : ( %&'$ / RESPONDENT ) REVENUE BY : SHRI SREENIVASARAGHAVAN S.IYENGAR-LD. DR ASSESSEE BY : SHRI DHANESH BAFNA-LD. AR / DATE OF HEARING : 28/01/2021 / DATE OF PRONOUNCEMENT : 11/02/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID MATTER IS A RECALLED MATTER SINCE THE APPEAL WAS EARLIER DISPOSED-OFF VIDE ORDER DATED 31/01/2020. H OWEVER, UPON ASSESSEES MISCELLANEOUS APPLICATION MA NO.204/MUM/ 2020 ORDER DATED 06/01/2021, THE ORDER HAS BEEN RECALLED, THOU GH FOR VERY LIMITED PURPOSE, IN THE FOLLOWING MANNER: - 4. THE PLEA OF THE ASSESSEE APPLICANT IS INDEED COR RECT. THE ASSESSING OFFICER HIMSELF HAD ADOPTED 4% AS CLC/TLC RATIO, AN D THE SAME WAS, AS NOTED BY US REQUIRED TO BE ADOPTED THIS YEAR AS WELL. THE MENTION OF 7.5% AS ADJUSTED CLC/TLC RATIO, IN PARAGRAPH 7, WAS CLEARLY AN INADVERTENT ERROR. WE, THEREFORE, DEEM IT FIT AND P ROPER TO RECALL THE ITA NO.7312/MUM/2018 FEDERAL EXPRESS CORPORATION ASSESSMENT YEAR: 2014-15 2 MATTER ON THIS POINT, AND REFIX THE MATTER FOR ADJU DICATION AFRESH ON THAT POINT. THE REGISTRY IS DIRECTED TO REFIX THE MATTER FOR THE ABOVE PURPOSES, BEFORE THE REGULAR BENCH ON 29.01.2021. O RDER ACCORDINGLY . ACCORDINGLY, THE MATTER HAS COME UP FOR FRESH HEARI NG FOR LIMITED PURPOSE OF DETERMINING CORRECT COMMERCIAL LINEHAUL CHARGES TO TOTAL LINEHAUL CHARGES (CLC / TLC) RATIO. 2. THE PERUSAL OF TRIBUNAL ORDER DATED 31/01/2020 W OULD REVEAL THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF IN TEGRATED AIR AND GROUND TRANSPORTATION OF TIME SENSITIVE SHIPMEN TS. THE ASSESSEE USED ITS OWN AIRCRAFTS AS WELL AS THIRD PA RTY AIRCRAFT FOR TRANSPORTATION OF THESE SHIPMENTS. IN CASE OF THIRD PART AIRCRAFTS, THE ASSESSEE HAS BEEN DENIED TREATY PROTECTION UNDER AR TICLE 8 OF INDIA USA DTAA AND THE PROFITS FROM THESE OPERATIONS WERE COMPUTED BY LD. AO BY ADOPTING RATIO OF COMMERCIAL LINE HAUL (ON THIRD PARTY AIRCRAFTS) @10% AND PROFIT ON THE SAME WAS ESTIMATE D AT GLOBAL PROFITABILITY RATIO OF 4.07% OF SUCH REVENUE. THE S TAND OF LD. AO, UPON CONFIRMATION BY LD. DRP, WAS UNDER CHALLENGE B EFORE THIS TRIBUNAL WHEREIN THE ASSESSEE ARGUED FOR ACCEPTANCE OF ACTUAL CLC/TLC RATIO OF 2.08%. IT WAS FURTHER ARGUED THAT THE ESTIMATED RATIO SHOULD NOT BE MORE THAN 7.5% AS ADOPTED BY LD . AO AS A RESULT OF MAP PROCEEDINGS. FURTHER, LD. AO HIMSELF HAD ADOPTED RATE OF 4% IN PREVIOUS YEAR AND THEREFORE, THE SAME SHOULD HAVE BEEN ADOPTED IN THIS YEAR AS WELL. THE BENCH, IN PA RA 7, DIRECTED LD. AO TO ADOPT THIS RATIO @7.5%. 3. DURING MA PROCEEDINGS, THE ATTENTION WAS BROUGHT , INTER-ALIA, TO THE FACT THAT LD. DRP HAD ALREADY REDUCED THE RA TIO TO 7.5% AGAINST WHICH THE ASSESSEE WAS IN FURTHER APPEAL BE FORE THIS ITA NO.7312/MUM/2018 FEDERAL EXPRESS CORPORATION ASSESSMENT YEAR: 2014-15 3 TRIBUNAL AND KEEPING IN VIEW THE FACT THAT TRIBUNAL AGREED FOR ADOPTION OF METHODOLOGY PRESCRIBED UNDER MAP PROCEE DINGS, THE CORRECT RATIO TO BE ADOPTED SHOULD HAVE BEEN 4% INS TEAD OF 7.5%. CONCURRING WITH THE SUBMISSIONS, THE BENCH DIRECTED FOR PLACING THE ISSUE OF DETERMINATION OF CORRECT RATIO AFRESH. ACC ORDINGLY, WE PROCEED TO DETERMINE THE SAME. 4. THE LD. AR, SHRI DHANESH BAFNA, URGED FOR ADOPTI ON OF 4% RATIO AS ADOPTED BY LD. AO IN THE IMMEDIATELY PRECE DING YEAR. THE LD. DR, ON THE OTHER HAND, FILED WRITTEN SUBMISSION S, BY DRAWING ATTENTION TO THE FACT THAT RATIO TAKEN BY MAP AUTHO RITY FOR AYS 2007- 08 & 2008-09 WAS 7.0% & 7.5% RESPECTIVELY AGAINST T HE ACTUAL RATIO OF 3.28% & 3.23% AS AGAINST 10% ADOPTED BY LD . AO IN THOSE YEARS. THUS, MAP AUTHORITIES MADE ADDITION OF 3.72% & 3.77% IN BOTH THE YEARS AGAINST THE ACTUAL RATIO. THEREFORE, IN THE CURRENT YEAR, THE RATIO SHOULD BE ADOPTED AS 5.3% AFTER ADD ING 3.22% (SOLELY FOR THE PURPOSE OF ROUNDING) TO THE ACTUAL RATIO OF 2.08%. 5. AT THE OUTSET, THE FINAL RATES ADOPTED IN EARLIE R YEARS, AS TABULATED BY LD. AR, COULD BE NOTED AS FOLLOWS: - AY ACTUAL CLC/ TLC RATIO (%) (A) CLC / TLC RATIO (%) CONSIDERED BY THE AO DURING ASSESSMENT (B) ENHANCED CLC / TLC RATIO (%) AS PER MAP ORDER / AO BASED ON MAP ORDER (C) AUTHORITY PROVIDING RELIEF (D) INCREASE IN THE ENHANCED RATIO BASED ON MAP TO ACTUAL (E) 2007 - 08 3. 28 10.00 7.00 MAP 2.13 TIMES 2008 - 09 4. 23 10 .00 7.50 MAP 1.77 TIMES 2009 - 10 4. 17 10.00 7.50 ITAT / AO 1.80 TIMES 2010 - 11 4. 40 8.00 8.00 AO 1.82 TIMES 2011 - 12 3. 44 7.00 7.00 AO 2.03 TIMES 2012 - 13 1. 53 3.50 3.50 AO 2.29 TIMES 2013 - 14 1.81 4.00 4.00 AO 2.21 TIMES 2014 - 15 (ASSESSMENT YEAR UNDER CONSIDERATION) 2.08 10.00 (REDUCED TO 7.5% BY THE HON'BLE DRP) 4.00 (AS PER THE METHOD AGREED IN MAP PROCEEDINGS 1.92 TIMES ITA NO.7312/MUM/2018 FEDERAL EXPRESS CORPORATION ASSESSMENT YEAR: 2014-15 4 UPON PERUSAL OF COLUMN (E), IT COULD BE OBSERVED TH AT FINAL RATIO AS ADOPTED IN ASSESSEES CASE, IN EARLIER YEARS, VARIE S IN THE NARROW RANGE OF 1.77 TO 2.29 TIMES OF ACTUAL RATIO. FURTHE R, THE RATIO ADOPTED BY LD. AO IN IMMEDIATELY PRECEDING YEARS IS 4% AND MORE SO, THIS RATIO IN AY 12-13 IS 3.5%. THEREFORE, THE RATIO OF 4%, AS SUBMITTED BY LD. AR, IN OUR CONSIDERED OPINION IS F AIR AND REASONABLE RATIO ON THE FACTS AND CIRCUMSTANCES. WE ORDER SO. 6. THE APPEAL STANDS PARTLY ALLOWED TO THE EXTENT I NDICATED IN THE ORDER. ORDER PRONOUNCED ON 11 TH FEBRUARY, 2021 SD/- SD/- SD/- (AMARJIT SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 11/02/2021 SR.PS, JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. %&'$ / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. -.% / , / , / DR, ITAT, MUMBAI 6. .012 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.