TRICOM INDIA LTD, MUMBAI V. ITO 8(3)(3), MUMBAI

ITA 7444/MUM/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9504 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Set aside
• Section: 271(1)(c); 142(1); 10B; 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI PAWAN SINGH (JM) I.T.A. NO. 7444 /MUM/ 201 4 (ASSESSMENT YEAR 20 0 7 - 0 8 ) TRICOM INDIA LTD. GANDHI ESTATE A.K. ROAD, SAFED POOL SAKINAKA ANDHERI KURLA ROAD MUMBAI - 40 0 072. PAN : AAACT2807R V S . ITO - 8(3)(3) 202, 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI UODAL RAJ SINGH DATE OF HEARING 20.01 . 20 20 DATE OF PRONOUNCEMENT 1 8 . 0 3 . 20 20 O R D E R PER SHAMIM YAHYA (AM) : - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 15.9.2014 AND PERTAINS TO A.Y. 2007 - 08. THE ISSUE RAISED IS THAT LEARNED CIT(A) ERRED IN SUSTAINING PENALTY LEVIED U/S. 271(1)(C) OF THE I.T.ACT AMOUNTING TO RS. 101,44,741/ - . 2. BRIEF FACTS OF THE CASE ARE THAT PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IN THE PRESENT CASE WAS LEVIED WITH REFERENCE TO FOLLOWING ADDIT I ONS : - SR.NO. ISSUE ADDITIONS/DISALLOWANCES AS PER ORDER U/S. 1 43(3) ADDITIONS/DISALLOWANCE S A S PER ORDER OF CIT(A) 1 TRANSFER PRICING ADJUSTMENT 26,61,237 12,09,653 2 EXCLUSION OF OTHER INCOME FROM DEDUCTION CLAIMED U/S. 10B 2,89,29,208 2,89,29,208 TOTAL 3,15,90,445 3,01,38,861 2 AS REGARDS ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IS CONCERNED, THE SAME WAS WITH RESPECT TO CHARGING OF INTEREST ON MONEY ADVANCED BY THE ASSESSEE TO ITS ASSOCIATED ENTERPRISES BASED IN USA. THE ASSESSEE IN THIS CASE HAS CHARGED INTEREST @ OF 7.5% WHICH WAS APPROXIMATELY US LIBOR+200 BASIS POINTS. HOWEVER, THE TRANSFER PRICING OFFICER HAS CHARGED INTEREST @ 16.5%. 3. UPON ASSESSEES APPEAL LEARNED CIT(A) RESTRICTED THE SAME TO INTEREST AT LIBOR + 350 BASIS POINTS. FINALLY THE ADDITION SUSTAINED ON THIS ACCOUNT IS RS. 12,09 ,653/ - . PENALTY HAS BEEN LEVIED BY THE ASSESSING OFFICER WITH RESPECT TO THIS ADDITION. WHILE REJECTING TO THE ASSESSEES SUBMISSION THE AUTHORITIES BELOW PLACED RELIANCE UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSO RS AND OTHERS (295 ITR 244). ASSESSEES RELIANCE UPON HON'BLE SUPREME COURT DECISION IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) WAS ALSO DISTINGUISHED BY REFERRING TO HON'BLE SUPREME COURT DECISION IN THE CASE OF CIT VS. ZOOM COMMUNICATI ON PVT. LTD. (327 ITR 510). 4. WE FIND THAT IN THE PRESENT ISSUE IN DI SPUTE WAS CHARGING OF INTEREST ON SUMS ADVANCED TO THE ASSOCIATED ENTERPRISES. THE ASSESSEE HA S CHARGED INTEREST @ 7.5% WHICH TRANSLATED TO US LIBOR + 200 BASIS POINTS. THE TRANSFER PRI CING OFFICER REPLACED THE SAME WITH INTEREST RATE AT 1 6.5%. LEARNED CIT(A) HAS RESTRICTED THE SAME TO LIBOR + 350 BASIS POINTS. IN THIS REGARD UPON CAREFUL CONSIDERATION AND HEARING LEARNED DEPARTMENTAL REPRESENTATIVE, WE NOTE THAT IN CATENA OF CASES HON'B LE JURISDICTIONAL HIGH COURT HAS UPHELD INTEREST RATE TO BE CHARGED ON ADVANCE TO OVERSEAS ASS OCIATED ENTERPRISES @ OF LIBOR + 200 BASIS POINTS. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION THE ASSESSEES CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS WARRANTING LEVY OF PENALTY. MOREOVER, THE ASSESSEE HAS FURNISHED ALL NECESSARY PARTICULARS. THERE IS NO CONCEALMENT IN THIS REGARD. ADDITION MADE BY THE TRANSFER PRICING OFFICER IS EX FACIE UNSUSTAINABLE AND HAS BEEN SO HELD BY LEARNED CIT(A) WHO HAS REDUC ED THE SAME TO LIBOR + 350 BASIS POINTS. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION HON'BLE SUPREME COURT DECISION IN THE CASE OF RELIANCE 3 PETROPRODUCTS PVT. LTD. (SUPRA) DULY COME S INTO PLAY. IN THE SAID DECISION HON'BLE SUPREME COURT HAS HELD THAT IF A CLAIM OF THE ASSESSEE IS REJECTED THE SAME WOULD NOT AUTOMATICALLY LEAD TO THE ASSESSEE BEING VISITED WITH PENALTY U/S. 271(1)(C) OF THE ACT. IN OUR CONSIDERED OPINION THIS CASE LAW IS FULLY APPLICABLE ON THE FACTS OF THE PRESENT CASE. LEARNED CIT(A) HAS COMPLETELY ERRED IN S TAT ING THAT THE ABOVE SAID SUPREME COURT DECISION STANDS DISTINGUISHED BY HON'BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATION PVT. LTD. (SUPRA) . BY NO STRETCH OF IMAGINATION IT CAN BE S AID THAT HON'BLE DELHI HIGH COURT DECI SION IS HAVING AN OVERRIDING IMPACT ON THE SUPREME COURT DECISION. IN THIS VIEW OF THE MATTER, IN OUR CONSIDERED OPINION ON THE FACTS AND CIRCUMSTANCES OF THE CASE NO PENALTY U/S. 271(1)(C) OF THE ACT IS LIV IA BLE ON THE TRANSFER PRICING ADJUSTMENT OF INTER EST O N ADVANCES TO ASSOCIATED ENTERPRISE. 5. THE O THER ADDITION ON WHICH PENALTY HAS BEEN LEVIED I S EXCLUSION OF OTHER INCOME BEING INTEREST FROM DEDUCTION CLAIMED U/S. 10B AMOUNTING TO RS. 289,29,208/ - . PENALTY HAS ALSO BEEN LEVIED ON THIS ADDITION BY P LACING RELIANCE UPON HON'BLE SUPREME COURT DECISION IN DHARMENDRA TEXTILES PVT. LTD. (SUPRA). LEARNED CIT(A) WHILE CONFIRMING THE PENALTY HAS ALSO REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (317 ITR 218) , WHEREIN HE HAS HELD THAT IN THE SAID DECISION IT HAS BEEN HELD THAT RECEIPTS BEYOND THE FIRST DEGREE CANNOT BE CONSIDERED. THAT THE INTEREST INCOME CANNOT BE SAID TO BE DERIVED FROM THE BUSINESS OF PROVIDING ITES AND IT IS NOT OF FIRST DEGREE . LEARNED CIT(A) HIMSELF ACCE PTS THAT THIS DECISION IS NOT AVAILABLE WHEN ASSESSEE FILED ITS RETURN BUT LEARNED CIT(A) STATES THAT AFTER THE ISSUE OF NOTICE U/S. 142(1) ON 18.8.2008, AND PASSING OF ASSESSMENT ORDER ON 17.1.2011, THE ASSESSEE COULD HAVE ABIDED BY THE DECISION OF HON'B LE APEX COURT IF ITS INTENTION WAS BONAFIDE. FROM THE ABOVE IT IS ABUNDANTLY CLEAR THAT LEARNED CIT(A) HAS HIMSELF FOUND THAT TILL THE ISSUE WAS FINALLY DECIDED BY HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) THIS ISSUE WAS DEBATABLE. DEBATE WAS FULLY SETTLED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) AS ABOVE. IT IS ADMITTED FACT THAT THIS DECISION WAS NOT 4 AVAILABLE WHEN ASSESSEE FILED ITS RETURN. BY NO STRETCH OF IMAGINATION IT CAN BE ARGUED THAT ASSESSEE S HOULD HAVE ABIDED BY HON'BLE SUPREME COURT DECISION , WHICH IS NOT IN EXIST E NCE AT THAT TIME. IT IS SETT LED LAW THAT NOBODY CAN ASKED TO DO THE IMPOSSIBLE. HON'BLE SUPREME COURT IN THE CASE OF MEPCO INDUSTRIES LTD. VS. CIT (319 ITR 208) HAS REFERRED WITH AP PROVAL THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JIYAJEERAO COTTON MILLS LTD. ( 1 30 ITR 710) THAT SUBSEQUENT DECISION OF HON'BLE SUPREME COURT DID NOT OBLITERATE THE CONFLICT OF OPINION PRIOR TO IT. IN THIS VIEW OF THE MATTER IN OUR CONSIDERED OPINION THE ISSUE WAS DEBATABLE WHEN THE ASSESSEE FILED ITS RETURN OF INCOME. THERE IS NO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HENCE, IN TH E S E FACT S THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SU PRA) AS DISCUSSED ABOVE IS APPLICABLE FULLY ON THE FACTS OF THE PRESENT CASE. FURTHERMORE, THE ASSESSEES CONDUCT CANNOT BE SAID TO BE CONTUMACIOUS TO WARRANT LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THIS PROPOSITION IS DULY SUPPORTED BY THE DECISION OF THE LARGER BENCH OF SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (83 ITR 26). 6. ACCORDINGLY, IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT S , IN OUR CONSIDERED OPINION THE PENALTY LEVIED IN THIS REGARD IS NOT SUSTAIN ABLE. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE PENALTY. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 18 . 3 . 20 20 . SD/ - SD/ - ( P AWAN SINGH ) (SH A MIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 18 / 0 3 / 20 20 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI