GLOBAL OFFSHORFE SERVICES LTD, MUMBAI V. DCIT 5(1)(1), MUMBAI

ITA 7321/MUM/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8385 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSAIN ANSARI
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; Initiation of penalty proceedings; Wholly owned subsidiary
• Section: 271(1)(c); 143(3); 92B; 234B; 250; 201; 139(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBERAND SHR I G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO. 7321 /MUM. /2016 ( ASSESSMENT YEAR : 20 12 13 ) ITA NO. 2055 /MUM. /2016 ( ASSESSMENT YEAR : 20 11 12 ) GLOBAL OFFSHORE SERVICES LTD. 101, SWAPNABHOOMI A S.K. BOLE ROAD, DADAR MUMBAI 400 028 PAN AAACG2204K . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE 5(1)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI NITESH JOSHI REVENUE BY : SHRI AKHTAR HUSAIN ANSARI DATE OF HEARING 06.02.2020 DATE OF ORDER 10.06.2020 O R D E R PER SAKTIJIT DEY. J.M. THE CAPTIONED APPEAL S HA VE BEEN FILED BY THE SAME ASSESSEE CHALLENGING THE ASSESSMENT ORDER S PASSED UNDER SECTION 143(3) R/W SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) FOR THE ASSESSMENT YEAR S 2011 12 AND 2012 13, IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 1 (DRP), MUMBAI. 2 GLOBAL OFFSHORE SERVICES LTD. ITA NO.2055/MUM./2016 ASSESSMENT YEAR 2011 12 2. IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE ON ACCOUNT OF ADJUSTMENT MADE TO THE ARMS LENGTH PRICE OF CORPORATE GUARANTEE ISSUED IN RESPECT OF PAYMENT OF OUTSTANDING HIRE CHARGES. 3. BRIEF FACTS ARE, THE ASSESSEE , A RESIDENT COMPANY , IS ENGAGED IN THE BUSINESS OF CHARTERING OF OFF SHORE SUPPLY VESSELS. THE A SSESSEES ASSOCIATED ENTERPRISE (AE) GARWARE OFF SHORE INTERNATIONAL SERVICES PTE. LTD. (GOISPL), SINGAPORE, HAS HIRED CERTAIN VESSELS FR OM THIRD PARTIES ON A BA REBOAT CHARTER BASIS. IN RESPECT OF THE OUTSTANDING BAREBOAT CHARTER H IRE CHARGES TO BE PAID BY THE AE , THE ASSESSEE PROVIDED A PERFORMANCE GUARANTEE IN CASE THERE IS A DEFAULT OF PAYMENT TO THE OWNER. DURING THE PROCEEDINGS BEFORE HIM, THE TRANSFER PRICIN G OFFICER ON EXAMINING THE MATERIAL AVAILABLE ON RECORD NOTI CED THAT ASSESSEES AE HAD H IRED THREE VESSELS ON BAREBOAT CHARTER BASIS. HE FURTHER FOUND THAT AS ON 31 ST MARCH 2011, THE OFF SHORE BAREBOAT CHARGES STOOD AT ` 1,57,53,318. NOTICING THE ABOVE, TH E TRANSFER PRICING OFFICER CAL LED UPON THE ASSESSEE TO JUSTIFY THE ARM'S LENGTH NATURE OF PERFORMANCE GUARANTEE PROVIDED BY THE ASSESSEE. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 15 TH FEBRUARY 201 4, SUBMITTED THAT ITS LIABILITY IS RESTRICTED TO THE UNPA ID MONTHLY BAREBOAT CHARGES IF ANY. IT WAS SUBMITTED , SINCE THE OWN ERS HAD A RIGHT TO TAKE 3 GLOBAL OFFSHORE SERVICES LTD. POSSESSION OF THE VESSELS ON DEFAULT, THE ACTUAL LIABILITY, IF ANY, THAT MAY DEVOLVE IS NOT QUANTIFIED. IT WAS SUBMITTED , THE PERFORMANCE GUARANTEE PROVIDED BY THE A SSESSEE WAS A STRATEGIC INVESTMENT FOR INCREASING THE VOLUME OF ITS BUSINESS SALES AND PROFIT THROUGH THE 100% SUBSIDIARY (AE). THEREFORE , NO GUARANTEE COMMISSION IS CHARGED. 4. FURTHER, IT WAS SUBMITTED , THE PERFORMANCE GUARANTEE PROVIDE D BY THE ASSESSEE TO THE AE CANNOT BE EQUATED WITH FINANCIAL GUARANTEE. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT IF AT ALL GUARANTEE COMMISSION HAS TO BE CHARGED, IT SHOULD BE CALCULATED @ 0.50%. THE TRANSFER PRICING OFFICER, HOWEVER, DID NOT FIND THE SUBMISSIONS OF THE ASS ESSEE ACCEPTABLE. HE OBSERVED , THE AE HAS BEEN GRANTED A WORKING CAPITAL FACILITY WHEREIN COMMISSION ON BANK GUARANTEE PROVIDED BY THE STATE BANK OF INDIA, SINGAPORE BRANCH, WAS CHARGED @ 1.25%. TAKING IT AS A BASIS, THE TRANSFER PRICING OFFICER DETERMINED THE GUARANTEE COMMISSION TOWARDS PROVISIONS OF PERFORMANCE GUARANTEE @ 2.5% ON THE AMOUNT OF ` 1,57,53,318, AND SUGGESTED AN ADJUSTMENT OF ` 3,93,832. THE ADJUSTMENT SUGGESTED BY THE TRANSFER PRICING OFFICER WAS ADDED TO THE INCOME OF THE ASSESSEE WHILE FRAMING THE DRAFT ASSESSMENT ORDER. 5. IN THE OBJECTIONS RAISED BEFORE THE DRP, THE ASSESSEE CONTESTED THE AFORESAID ADJUSTMENT. AFTER CONSIDERI NG THE SUBMISSIONS OF THE 4 GLOBAL OFFSHORE SERVICES LTD. ASSESSEE, LEARNED DRP HAVING FOUND THAT THE AE HAS OBTAINED A BANK GUARANTEE FROM THE STATE BANK OF INDIA, SINGAPORE BRANCH, A T COMMISSION RATE OF 1.75% AND FURTHER , KEEPING IN VIEW THE FACT THAT THE ASSESSEE HAS ISSUED AN UNSECUR ED PERFORMANCE GUARANTEE , REDUCED THE GUARANTEE COMMISSION TO 1.75%. 6. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE PERFORMANCE GUARANTEE PROVIDED BY THE A SSESSEE CANNOT BE EQUATED WITH B ANK GUARANTEE. THEREFORE, THE GUARANTEE COMMISSION CHARGED AT 1.25% BY THE STATE BANK OF INDIA, S INGAPORE BRANCH, FOR PROVIDING B ANK GUARANTEE CANNOT BE APPLIED AS A COMP ARABLE UNCONTROLLED PRICE (CUP) TO DETERMINE THE ARMS LENGTH PRICE OF PERFORMANCE GUARANTEE. IN THIS CONTEXT, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE DECISION OF THE HON'BLE JURISD ICTIONAL HIGH COURT IN CIT V/S E VEREST KEN TO CYLINDERS LTD., ITA NO.1165/2013, DATED 8 TH MAY 2015. FURTHER, HE SUBMITTED , THE ASSESSEE ITSELF HAS AVAILED A BANK GU ARANTEE FROM ICICI BANK WITH GUARANTEE COMMISS ION CHARGED @ 0.25%. THEREFORE, HE SUBMITTED , THE GUARANTEE COMMISSION CHARGED BY THE ICICI BANK SHOUL D BE CONSIDERED AS INTERNAL CUP AND ARMS LENGTH PRICE OF THE COMMISSION FOR PROVIDING PERFORMANCE GUARANTEE SHOULD BE COMPUTED BY APPLYING THE RATE OF 0. 25%. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF LEARNED DRP. 5 GLOBAL OFFSHORE SERVICES LTD. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE WE PROCEED TO DECIDE THE ISSUE, WE DEEM IT APPROPRIATE TO PUT ON RECORD THAT BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE HAS FAIRLY SUBMITTED THAT THE ASSESSEE WOULD NOT LIKE TO RAISE THE ISSUE AS TO WHETHER PROVISION OF PERFORMANCE/ CORPORATE GUARANTEE COMES WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION AS DEFINED UNDER SECTION 92B OF THE ACT. KEEPING I N VIEW THE AFORESAID SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE, WE WILL PROCEED TO DEAL WITH THE ISSUE ON THE FOOTING THAT PROVISION OF PERFORMANCE / CORPORATE GUARANTEE COMES WITHIN THE PURVIEW OF INTERNATIONAL TRANSACTION AS CONTEMPLATED U /S 92B OF THE ACT. 9. HAVING HELD SO, LET US DEAL WITH THE ISSUE AT HAND. UNDISPUTEDLY , THE ASSESSEE HAS PROVIDED PERFORMANCE GU ARANTEE IN RESPECT OF BAREBOAT HIRE CHARGES PAYABLE BY THE AE TOWARDS HIRING OF THREE VESSELS. IT IS EVIDENT , TH E ASS ESSEE HAS NOT C HARGED ANY GUARANTEE COMMISSION/FEE TO THE AE FOR PROVISION OF PERFORMANCE GUARANTEE. WHEREAS, THE TRANSF ER PRICING OFFICER REJECTING ASSESSEES CLAIM HAS CHARGED GUARANTEE COMMISSION AT 2.5% WHICH HAS BEEN REDUCED TO 1.75% BY LEARNED D RP. AS CAN BE SEEN, THE BASIS ON WHICH THE TRANSFER PRICING OFFICER AND LEARNED DRP HAVE DETERMINED THE ARMS LENGTH PRICE OF GUARANTEE COMMISSION IS THE COMMISSION CHARGED BY THE STATE BANK OF INDIA, SINGAPORE BRANCH, @ 1.25% PER ANNUM ON 6 GLOBAL OFFSHORE SERVICES LTD. THE BANK GUARANT EE AVAILED BY THE A E. HOWEVER, WE FIND SUBSTANTIAL MERIT IN THE SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT PERFORMANCE/ CORPORATE GUARANTEE CANNOT BE EQUATED WITH BANK GUARANTEE. EVEN, LEARNED DRP HAS ALSO OBSERVED THAT THE ASSESSEE HAS PROVID ED AN UNSECURED PERFORMANCE GUARANTEE. IT IS FURTHER EVIDENT , THE ASSESSEE ITSELF HAS AVAILED A BANK GUARANTEE FROM ICICI BANK ON PAYMENT OF GUARANTEE COMMISSION OF 0.25%. KEEPING IN VIEW THE AFORESAID FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE ARMS LENGTH PRICE OF THE GUARANTEE COMMISSION CA N BE REASONABLY FIXED AT 0.25% BY ADOPTING AS INTERNAL CUP THE GUARANTEE COMMISSION CHARGED BY THE ICICI BANK ON PROVISION OF B ANK GUARANTEE TO THE ASSESSEE . GROUND NO.1, RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 10. THE ISSUE RAISED IN GROUND NO.2, RELATES TO THE ADDITION MADE ON ACCOUNT OF ADJUSTMENT MADE TO THE ARMS LENGTH PRICE OF INTEREST ON S HORT TERM LOAN GRANTED TO THE A E. 11. BRIEF FACTS ARE, FOR CATERING TO ITS BUSINESS NEEDS THE ASSESSEE IS R E QUIRED TO SET UP OVERSEAS SUBSIDIARIES WHICH ARE PECULIAR TO SHIPPING INDUSTRY . FOR SETTING UP SUCH SUBSIDIARIES ADVANCING LOANS TO SUBSIDIARY IS ESSENTIAL. THUS, LOOKING AT THE FINANCIAL NEEDS OF THE SUBSIDIARY, THE ASSESSEE HAD PROVIDED SHORT TERM LOAN FOR A PERIO D OF 15 DAYS OR THEREABOUT. FOR PROVIDING SUCH LOAN, THE ASSESSEE HAD CHARGED INTEREST AT LIBOR PLUS 1.5%. THE TRANSFER PRICING OFFICER, 7 GLOBAL OFFSHORE SERVICES LTD. HOWEVER, DID NOT ACCEPT THE RATE OF INTEREST CHARGED BY THE ASSESSEE. ADOPTING THE PRIME LENDING RATE OF STATE BANK OF INDIA @ 7.50% AND ADDING A MARK UP OF 1.50%, THE TRANSFER PRICING OFFICER DETERMINED THE ARM'S LENGTH INTEREST RATE @ 9.% AND ACCORDINGLY DETERMINED THE ARMS LENGTH PRICE OF INTEREST TO BE CHARGE D ON THE LOAN PROVIDED TO THE AE. WHILE DECIDING THE ISSUE, LEARNED DRP DIRECTED THE ASSESSING OFFICER TO CHARGE INTEREST @ LIBOR PLUS 4%. 12. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACT THAT THE ASSESSEE HAS PROVIDED A SHORT TERM LOAN ONLY F OR A PERIOD OF 15 DAYS TO THE AE HAS NO T BEEN DISPUTED . IT IS FURTHER NOTICED THAT ASSE SSEES AE IN SINGAPORE HAS AVAILED A LOAN FROM SBI, SINGAPORE BRANCH AT INTEREST RATE OF SIX MONTHS LIBOR PLUS 250 BASIS POINTS . CONSIDERING THE ABOVE, WE ARE OF THE VIEW THAT THE RATE OF INTEREST CHARGED BY THE ASSESSEE IS AT ARM'S LENGTH REQUIRING NO FURTHER ADJUSTMENT . GROUND NO.2, IS ALLOWED. 13. IN GROUND NO.3, T HE ASSESSEE HAS CHALLENGED THE ADDITION ON ACCOUNT OF ADJUSTMENT MADE TO ARMS LENGTH PRICE OF CORPOR ATE GUARANTEE PROVIDED TO THE A E. 14. BRIEF FACTS ARE, ASSESSEES SUBSIDIARY IN NETHERLAND ACQUIRED A VESSEL BY AVAILING LOAN. FOR AVAILING OF LOAN BY THE AE , THE ASSESSEE PROVIDED UNSECURED CORPORATE GUARANTEE BY CHARGING GUARANTEE FEE @ 8 GLOBAL OFFSHORE SERVICES LTD. 0.25%. THE TRANSFER PRICING OFFICER, HOWEVER, DID NOT AGREE WITH TH E ASSESSEE AND CHARGED GUARANTEE FEE OF 2.25%. 15. WHILE CONSIDERING THE OBJECTIONS OF THE ASSESSEE, LEARNED DRP REDUCED THE RATE OF GUARANTEE FEE TO 2%. 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE LE ARNED AUTHORISED REPRESEN TATIVE THAT GUARANTEE PROVIDED BY THE ASSESSEE IS UNSECURED WITH NO RISK ATTACHED. HE SUBMITTED , THE VALUE OF VESSELS ITSELF IS MORE T HAN THE AMOUNT PAYABLE BY THE AE TOWARDS LOAN. THUS, HE SUBMITTED , OUTSTANDING LOAN AMOUNT IS FUL LY SECURED AGAINST THE ASSET. THEREFORE, THE LOAN PROVIDED BY THE LENDER IS FULLY SECURED. THUS, HE SUBMITTED , IN SUCH CIRCUMSTANCES, THE GUARANTEE FEE CHARGED A T 0.25% IS AT ARMS LENGTH . 17. HAVING CONSIDERED RIVAL SUBMISSIONS, WE FIND THAT THE VALUE OF THE VESSELS WHICH HAS BEEN PROVIDED AS A SECURITY TO THE LENDER BANK IS MUCH MORE THAN THE AMOUNT BORROWED. THEREFORE, THE LOAN PROVIDED BY THE LENDER BANK IS FULLY SECURED. IT IS ALSO A MATTER OF RECORD THAT THE CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE I S UNSECURED. KEEPING IN VIEW THE AFORESAID FACTS, WE ARE OF THE CONSIDERED VIEW THAT THE GUARANTEE FEE CHARGED BY THE ASSESSEE @ 0.25% IS AT ARM'S LENGTH REQUIRING NO FURTHER ADJUSTMENT. GROUND NO.3 IS ALLOWED. 9 GLOBAL OFFSHORE SERVICES LTD. 18. IN G ROUN D NO.4, THE ASSESSEE HAS CHALLENGED THE LEVY OF INTEREST UNDER SECTION 234A OF THE ACT. 19. HAVING CONSIDERED RIVAL SUBMISSIONS, WE FIND THAT THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR HAS BEEN FILED WITHIN THE DUE DATE PROVIDED UNDER SECTION 139(1) OF THE ACT. THAT BEING THE CASE, N O INTEREST UNDER SECTION 234A OF THE ACT IS CHARGEABLE. GROUND NO.4, IS ALLOWED. 20. IN GROUN D NO.5, THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT. 21. HAVING CONSIDERED RIVAL SUBMISSIONS, WE HOLD THAT SINCE LEVY OF INTEREST UNDER SECTION 234B OF THE ACT IS CONSEQUENTIAL, ASSESSEES GROUND INSOFAR AS THIS ISSUE IS CONCERNED, NEED NOT BE ADJUDICATED. AS REGARDS LEVY OF INTEREST UNDER SECTION 234C OF THE AC T, WE DIRECT THE ASSESSING OFFICER TO CHARGE SUCH INTEREST NOT ON THE ASSESSED INCOME, BUT ON THE INCOME RETURNED BY THE ASSESSEE. THUS, GROUND NO.5, IS PARTLY ALLOWED. 22. GROUND NO.6, RELATES TO INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF T HE ACT. 23. THE GROUND RAISED BY THE ASSESSEE BEING PRE MATURE AT THIS STAGE IS DISMISSED. 10 GLOBAL OFFSHORE SERVICES LTD. 24. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ITA NO. 7321 /MUM./2016 ASSESSMENT YEAR 2012 13 25. IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE ADJUSTMENT MADE TO THE ARMS LENGTH PRICE OF PERFORMANCE GUARANTEE PROVIDE D TOWARDS OUTSTANDING BAREBOAT CHARTER HIRE CHARGES. 26. THE ISSUE RAISED IN THIS G ROUND IS SIMILAR TO GROUND NO.1 RAISED BY THE ASSESSEE IN ITS APPEAL BEING ITA NO.2055/MUM./2016. FACTS BEING IDENTICAL, THEREFORE , OUR DECISION THEREIN WILL APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE ARMS LENGTH PRICE OF PERFORMANCE GUARANTEE COMMISSION @ 0.25%. 27. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ADDITION MA DE ON ACCOUNT OF ADJUSTMENT TO THE ARMS LENGTH PRICE OF CORPORATE GUARAN TEE PROVIDED FOR LOAN AVAILED BY THE A E. 28. THE ISSUE RAISED IN THIS GROUND IS SIMILAR TO GROUND NO.3, RAISED BY THE ASSESSEE IN ITS APPEAL BEING ITA NO.2055/MUM./2016. FAC TS BEING IDE NTICAL, OUR DECISION THEREIN WILL APPLY MUTATIS MUTANDIS TO THIS GROUND ALSO. FOLLOWING OUR DECISION AS AFORESAID, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE A RMS LENGTH PRICE OF CORPORATE 11 GLOBAL OFFSHORE SERVICES LTD. GUARANTEE COMMISSION @ 0.25%. GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 29. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE BETWEEN THE INTEREST CREDITED TO THE PROFIT & LOSS ACCOUNT AND INTEREST AS SHOWN IN FORM NO.26AS. 30. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS COULD BE SEEN, THE ADDITION OF ` 18,62,317, HAS BEEN MADE ON ACCOUNT OF DIFFERENCE IN INTEREST CREDITED TO THE PROFIT & LOSS ACCOUNT AND AS REFLECTED IN FORM NO.26AS. IT IS FURTHER SEEN THAT THE DISPUTED AMOUNT IS RECEIVED TOWARDS INTEREST FROM IDBI BANK, STATE BANK OF TRAVANCORE AND UNITED BANK OF INDIA. IT HAS BEEN SUBMITTED BEFORE US THAT INTEREST INCOME FOR THE LAST QUARTER WAS NOT ACCOUNTED IN THE BOOKS IN THE FINANCIAL YEAR 20 11 12, BUT WAS ACCOUNTED IN THE FINANCIAL YEAR 2012 13. FURTHER, IT HAS BEEN SUBMITTED THAT THE ASSESSING OFFICER WITHOUT SEEKING AN Y EXPLANATION FROM THE ASSESSEE HAS ADDED THE DIFFERENTIAL AMOUNT SUO MOTU. FURTHER, IT HAS BEEN SUBMITTED THAT INTEREST AMO UNTING TO ` 9,48,516, HAS BEEN OFFERED TO TAX BY THE ASSESSEE IN THE SUBSEQUENT FINANCIAL YEAR . C ONSIDERING THE SUBMISSIONS MADE BY THE LEARNED AUTHORISED REPRESEN TATIVE, WE ARE OF THE VIEW THAT THE ISSUE REQUIRES TO BE RESTORED BACK TO THE FILE OF THE ASSE SSING OFFICER FOR VERIFYING ASSESSEES CLAIM. THE ASSESSEE MUST BE 12 GLOBAL OFFSHORE SERVICES LTD. GIVEN SUFFICIENT OPPORTUNITY TO RECONCILE THE DIFFERENCE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASS ESSING OFFICER MUST DECIDE THE ISSUE BY TAKING INTO CONSIDERATION ALL THE EVIDENCES SUBMITTED BY THE ASSESSEE. WITH THE AFORESAID OBSERVATIONS, THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 31. IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED LEVY OF INTEREST UNDER SECTION 234A 32. HAVING CONSIDERED RIVAL SUBMISSIONS, WE DIRECT THE ASSESSING OFFICER NOT TO LEVY ANY INTEREST UNDER SECTION 234A OF THE ACT IF THE RETURN OF INCO ME HAS BEEN FILED WITHIN THE DUE DATE AS PROVIDED UNDER SECTION 139(1) OF THE ACT. 33. IN GROUND NO.6, THE ASSESSEE HAS CHALLENGED THE LEVY OF INTEREST UNDER SECTIONS 234B AND 234C OF THE ACT. 34. HAVING CONSIDERED RIVAL SUBMISSIONS, WE HOLD THAT SINCE LEVY OF I NTEREST UNDER SECTION 234B OF THE ACT IS CON SEQUENTIAL, THERE IS NO NEED FOR ADJUDICATION . AS REGARDS LEVY OF INTEREST UNDER SECTION 234C OF THE ACT, WE DIRECT THE ASSESSING OFFICER TO CHARGE SUCH INTEREST NOT ON THE ASSESSED INCOME, BUT ON THE INCOME RETU RNED BY THE ASSESSEE. THUS, GROUND NO.6, IS PARTLY ALLOWED. 13 GLOBAL OFFSHORE SERVICES LTD. 35. GROUND NO.7, RELATES TO I NITIATION OF PENALTY PROCEEDING UNDER SECTION 271(1)(C) OF THE ACT. 36. THE GROUND RAISED BY THE ASSESSEE BEING PRE MATURE AT THIS STAGE IS DISMISSED. 37. IN THE RESULT, APPEAL IS PARTLY ALLOWED. 38. TO SUM UP, BOTH THE APPEALS ARE PARTLY ALLOWED. 39. BEFORE WE PART, IT IS NECESSARY FOR US TO DEAL WITH A PROCEDURAL ISSUE RELATING TO PRONOUNCEMENT OF THE ORDER. THE HEARING OF THIS APPEAL WAS CONCLUDED ON 06.02.2020. AS PER RULE 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES,1963, ORDINARILY THE APPEAL ORDER HAS TO BE PRONOUNCED BEFORE EXPIRY OF NINETY (90) DAYS FROM THE DATE OF CONCLUSION OF HEARING OF APPEAL. THOUGH, ORDER WAS DICTATED AND DRAFT ORDER WAS READY, HOWEVER, IT COULD NOT BE FINALIZED AND PRONOUNCED, SINCE , ON 24.03.2020 A NATIONWIDE LOCKDOWN WAS ENFORCED BY THE GOVERNMENT OF INDIA IN VIEW OF COVID 19 PANDEMIC. DUE TO THE UNPRECEDENTED SITUATION ARISING OUT OF SUCH LOCKDOWN ALL ACTIVITIES CEASED AND NO NORMAL OFFICIAL WORK COULD BE DONE. FOR THIS REASON ONLY THE APPEAL ORDER COULD NOT BE PRONOUNCED WITHIN THE PERIOD OF 90 DAYS. BEING FACED WITH A SIMILAR SITUATION THE TRIBUNAL IN CASE OF DCIT V/S JSW LIMITED, ITA NOS.6264 & 6103/MUM/2018, DATED 14 TH MAY 2020, AFTER INTE RPRETING RULE 34(5) OF THE INCOME TAX (APPELLATE TRIBUNAL) 14 GLOBAL OFFSHORE SERVICES LTD. RULES, 1963 AS WELL AS VARIOUS DECISIONS OF THE HONBLE SUPREME COURT AS WELL AS THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT KEEPING IN VIEW THE EXTRAORDINARY SITUATION PREVAILING DUE TO THE PA NDEMIC, THE LOCKDOWN PERIOD HAS TO BE EXCLUDED FOR THE PURPOSE TIME LIMIT FIXED FOR PRONOUNCEMENT OF ORDER AS PER RULE 34(5). THE RELEVANT OBSERVATION OF THE BENCH IN THIS REGARD IS REPRODUCED HEREUNDER FOR BETTER CLARITY: 7. HOWEVER, BEFORE WE PART WIT H THE MATTER, WE MUST DEAL WITH ONE PROCEDURAL ISSUE AS WELL. WHILE HEARING OF THESE APPEALS WAS CONCLUDED ON 7TH JANUARY 2020, THIS ORDER THEREON IS BEING PRONOUNCED TODAY ON 14TH DAY OF MAY, 2020, MUCH AFTER THE EXPIRY OF 90 DAYS FROM THE DATE OF CONCLUS ION OF HEARING. WE ARE ALSO ALIVE TO THE FACT THAT RULE 34(5) OF THE INCOME TAX APPELLATE TRIBUNAL RULES 1963, WHICH DEALS WITH PRONOUNCEMENT OF ORDERS, PROVIDES AS FOLLOWS: (5) THE PRONOUNCEMENT MAY BE IN ANY OF THE FOLLOWING MANNERS: (A) THE BENC H MAY PRONOUNCE THE ORDER IMMEDIATELY UPON THE CONCLUSION OF THE HEARING. (B) IN CASE WHERE THE ORDER IS NOT PRONOUNCED IMMEDIATELY ON THE CONCLUSION OF THE HEARING, THE BENCH SHALL GIVE A DATE FOR PRONOUNCEMENT. (C) IN A CASE WHERE NO DA TE OF PRONOUNCEMENT IS GIVEN BY THE BENCH, EVERY ENDEAVOUR SHALL BE MADE BY THE BENCH TO PRONOUNCE THE ORDER WITHIN 60 DAYS FROM THE DATE ON WHICH THE HEARING OF THE CASE WAS CONCLUDED BUT, WHERE IT IS NOT PRACTICABLE SO TO DO ON THE GROUND OF EXCEPTIONAL AND EXTRAORDINARY CIRCUMSTANCES OF THE CASE, THE BENCH SHALL FIX A FUTURE DAY FOR PRONOUNCEMENT OF THE ORDER, AND SUCH DATE SHALL NOT ORDINARILY (EMPHASIS SUPPLIED BY US NOW) BE A DAY BEYOND A FURTHER PERIOD OF 30 DAYS AND DUE NOTICE OF THE DAY SO FIXED SH ALL BE GIVEN ON THE NOTICE BOARD. 8. QUITE CLEARLY, ORDINARILY THE ORDER ON AN APPEAL SHOULD BE PRONOUNCED BY THE BENCH WITHIN NO MORE THAN 90 DAYS FROM THE DATE OF CONCLUDING THE HEARING. IT IS, HOWEVER, IMPORTANT TO NOTE THAT THE EXPRESSION ORDINARI LY HAS BEEN USED IN THE SAID RULE ITSELF. THIS RULE WAS INSERTED AS A RESULT OF DIRECTIONS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIVSAGAR VEG RESTAURANT 15 GLOBAL OFFSHORE SERVICES LTD. VS ACIT [(2009) 317 ITR 433 (BOM)] WHEREIN THEIR LORDSHIPS HAD, INTER ALIA, DIRECTED THAT WE, THEREFORE, DIRECT THE PRESIDENT OF THE APPELLATE TRIBUNAL TO FRAME AND LAY DOWN THE GUIDELINES IN THE SIMILAR LINES AS ARE LAID DOWN BY THE APEX COURT IN THE CASE OF ANIL RAI (SUPRA) AND TO ISSUE APPROPRIATE ADMINISTRATIVE DIRECTIONS TO ALL THE B ENCHES OF THE TRIBUNAL IN THAT BEHALF. WE HOPE AND TRUST THAT SUITABLE GUIDELINES SHALL BE FRAMED AND ISSUED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL WITHIN SHORTEST REASONABLE TIME AND FOLLOWED STRICTLY BY ALL THE BENCHES OF THE TRIBUNAL. IN THE MEANWHI LE (EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW), ALL THE REVISIONAL AND APPELLATE AUTHORITIES UNDER THE INCOME - TAX ACT ARE DIRECTED TO DECIDE MATTERS HEARD BY THEM WITHIN A PERIOD OF THREE MONTHS FROM THE DATE CASE IS CLOSED FOR JUDGMENT . IN THE RULED SO FRAMED, AS A RESULT OF THESE DIRECTIONS, THE EXPRESSION ORDINARILY HAS BEEN INSERTED IN THE REQUIREMENT TO PRONOUNCE THE ORDER WITHIN A PERIOD OF 90 DAYS. THE QUESTION THEN ARISES WHETHER THE PASSING OF THIS ORDER, BEYOND NINETY DAYS, WAS NECESSITATE D BY ANY EXTRAORDINARY CIRCUMSTANCES. 9. LET US IN THIS LIGHT REVERT TO THE PREVAILING SITUATION IN THE COUNTRY. ON 24TH MARCH, 2020, HONBLE PRIME MINISTER OF INDIA TOOK THE BOLD STEP OF IMPOSING A NATIONWIDE LOCKDOWN, FOR 21 DAYS, TO PREVENT THE SPREAD OF COVID 19 EPIDEMIC, AND THIS LOCKDOWN WA S EXTENDED FROM TIME TO TIME. AS A MATTER OF FACT, EVEN BEFORE THIS FORMAL NATIONWIDE LOCKDOWN, THE FUNCTIONING OF THE INCOME TAX APPELLATE TRIBUNAL AT MUMBAI WAS SEVERELY RESTRICTED ON ACCOUNT OF LOCKDOWN BY THE MAHARASHTRA GOVERNMENT, AND ON ACCOUNT OF S TRICT ENFORCEMENT OF HEALTH ADVISORIES WITH A VIEW OF CHECKING SPREAD OF COVID 19. THE EPIDEMIC SITUATION IN MUMBAI BEING GRAVE, THERE WAS NOT MUCH OF A RELAXATION IN SUBSEQUENT LOCKDOWNS ALSO. IN ANY CASE, THERE WAS UNPRECEDENTED DISRUPTION OF JUDICIAL WO K ALL OVER THE COUNTRY. AS A MATTER OF FACT, IT HAS BEEN SUCH AN UNPRECEDENTED SITUATION, CAUSING DISRUPTION IN THE FUNCTIONING OF JUDICIAL MACHINERY, THAT HONBLE SUPREME COURT OF INDIA, IN AN UNPRECEDENTED ORDER IN THE HISTORY OF INDIA AND VIDE ORDER DAT ED 6.5.2020 READ WITH ORDER DATED 23.3.2020, EXTENDED THE LIMITATION TO EXCLUDE NOT ONLY THIS LOCKDOWN PERIOD BUT ALSO A FEW MORE DAYS PRIOR TO, AND AFTER, THE LOCKDOWN BY OBSERVING THAT IN CASE THE LIMITATION HAS EXPIRED AFTER 15.03.2020 THEN THE PERIOD FROM 15.03.2020 TILL THE DATE ON WHICH THE LOCKDOWN IS LIFTED IN THE JURISDICTIONAL AREA WHERE THE DISPUTE LIES OR WHERE THE CAUSE OF ACTION ARISES SHALL BE EXTENDED FOR A PERIOD OF 15 DAYS AFTER THE LIFTING OF LOCKDOWN. HONBLE BOMBAY HIGH COURT, IN AN O RDER DATED 15TH APRIL 2020, HAS, BESIDES EXTENDING THE VALIDITY OF ALL INTERIM ORDERS, HAS ALSO OBSERVED THAT, IT IS ALSO CLARIFIED THAT WHILE CALCULATING TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26T H MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY , AND ALSO 16 GLOBAL OFFSHORE SERVICES LTD. OBSERVED THAT ARRANGEMENT CONTINUED BY AN ORDER DATED 26TH MARCH 2020 TILL 30TH APRIL 2020 SHALL CONTINUE FURTHER TILL 15TH JUNE 2020. IT HAS BEEN AN UN PRECEDENTED SITUATION NOT ONLY IN INDIA BUT ALL OVER THE WORLD. GOVERNMENT OF INDIA HAS, VIDE NOTIFICATION DATED 19TH FEBRUARY 2020, TAKEN THE STAND THAT, THE CORONAVIRUS SHOULD BE CONSIDERED A CASE OF NATURAL CALAMITY AND FMC (I.E. FORCE MAJEURE CLAUSE) MAYBE INVOKED, WHEREVER CONSIDERED APPROPRIATE, FOLLOWING THE DUE PROCEDURE. THE TERM FORCE MAJEURE HAS BEEN DEFINED IN BLACKS LAW DICTIONARY, AS AN EVENT OR EFFECT THAT CAN BE NEITHER ANTICIPATED NOR CONTROLLED WHEN SUCH IS THE POSITION, AND IT IS OFFICIALLY SO NOTIFIED BY THE GOVERNMENT OF INDIA AND THE COVID - 19 EPIDEMIC HAS BEEN NOTIFIED AS A DISASTER UNDER THE NATIONAL DISASTER MANAGEMENT ACT, 2005, AND ALSO IN THE LIGHT OF THE DISCUSSIONS ABOVE, THE PERIOD DURING WHICH LOCKDOWN WAS IN FORCE CAN BE ANYTHING BUT AN ORDINARY PERIOD. 10. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING PRONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THA T THE ENTIRE COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING AT LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS IN FORCE. WE MUST FACTOR GROUND REALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE OR DER. LAW IS NOT BROODING OMNIPOTENCE IN THE SKY. IT IS A PRAGMATIC TOOL OF THE SOCIAL ORDER. THE TENETS OF LAW BEING ENACTED ON THE BASIS OF PRAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED. THE INTERPRETATION SO ASSIGNED BY US IS NOT ONLY IN CONSONANCE WITH THE LETTER AND SPIRIT OF RULE 34(5) BUT IS ALSO A PRAGMATIC APPROACH AT A TIME WHEN A DISASTER, NOTIFIED UNDER THE DISASTER MANAGEMENT ACT 2005, IS CAUSING UNPRECEDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM. UNDOUB TEDLY, IN THE CASE OF OTTERS CLUB VS DIT [(2017) 392 ITR 244 (BOM)], HONBLE BOMBAY HIGH COURT DID NOT APPROVE AN ORDER BEING PASSED BY THE TRIBUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HONBLE BOMBAY HIGH COURT ITSELF HAS, VIDE JU DGMENT DATED 15TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIMEBOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCO RDINGLY. THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY HONBLE JURISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT ALSO INDICATE THAT THIS PERIOD OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE. I N OUR CONSIDERED VIEW, EVEN WITHOUT THE WORDS ORDINARILY, IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING WHICH LOCKOUT WAS IN FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIMITS SET OUT IN RULE 34(5) OF THE APPELLATE TRIBUNAL RULES, 1963. VIEWED 17 GLOBAL OFFSHORE SERVICES LTD. THUS, THE EXCEPTION, TO 90 - DAY TIME - LIMIT FOR PRONOUNCEMENT OF ORDERS, INHERENT IN RULE 34(5)(C), WITH RESPECT TO THE PRONOUNCEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE. OF COURSE, THERE IS NO, AND THERE CANNOT BE ANY, BAR ON THE DISCRETION OF THE BENCHES TO REFIX THE MATTERS FOR CLARIFICATIONS BECAUSE OF CONSIDERABLE TIME LAG BETWEEN THE POINT OF TIME WHEN THE HEARING IS CONCLUDED AND THE POINT OF TIME WHEN THE ORDER THEREON IS BEING FINALIZED, BUT THEN, IN OUR CONSIDERED VIEW, NO SUCH EXERCISE WAS REQUIRED TO BE CARRIED OUT ON THE FACTS OF THIS CASE. 40 . FOLLOWING THE AFORESAID DECISION OF THE COORDINATE BENCH, WE PROCEED TO PRONOUNCE THE ORDER TODAY THE 10 TH DAY OF JUNE, 2020 BY PLACING IN THE NOTICE BOARD IN TERMS OF RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE,1963. SD/ - G. MANJUNATHA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 10.06.2020 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 ASSISTANT REGISTRAR ITAT, MUMBAI