Appeal Details
Counselvise Citation
[2015] 134 COUNSELVISE.COM (IT) 2313 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 11 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
04-12-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
K
Next Hearing Date
17-03-2015
Assessment Year
2007-2008
Appeal Filed On
27-12-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MU MBAI BEFORE SHRI A.K. GARODIA, AM AND SHRI AMIT SHUKLA, J.M. ./ I.T.A. NO.7026 & 7025/MUM/2013 ( / ASSESSMENT YEAR: 2007-08 & 2008 - 09) M/S PAN INDIA NETWORK INFRAVEST PVT. LTD., CONTINENTAL BUILDING, 135, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400 018. / VS. ADDL. COMMISSIONER OF INCOME TAX, RANGE 7 (1), MUMBAI. ./ ./PAN/GIR NO. AACCP 2459H ( /APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO.7608/MUM/2013 ( / ASSESSMENT YEAR: 2007-08) ADDL. COMMISSIONER OF INCOME TAX, RANGE 7 (1), MUMBAI. / VS. M/S PAN INDIA NETWORK INFRAVEST PVT. LTD., CONTINENTAL BUILDING, 135, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400 018. ./ ./PAN/GIR NO. AACCP 2459H ( /APPELLANT ) : ( / RESPONDENT ) / ASSESSEE BY : SHRI VIJAY MEHTA / REVENUE BY : SHRI N. PADMANABJAN / DATE OF HEARING : 01/12/2015 !'# / DATE OF PRONOUNCEMENT : 04.12.2015 $% / O R D E R PER A. K. GARODIA, A. M: OUT OF THIS BUNCH OF THREE APPEALS, THERE ARE TWO CROSS APPEALS FOR A. Y. 2007 08 AND THE REMAINING APPEAL IS FILED BY THE ASSESSE E FOR A.Y. 2008 09. ALL THESE 2 ITA NO. 7026, 7025 & 7608 /MUM/2013 APPEALS WERE HEARD TOGETHER AS A COMMON ISSUE IS IN VOLVED AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPE AL IN A.Y. 2007 - 08: ADDITION ON ACCOUNT OF NOTIONAL INTEREST FOR SHARE APPLICATION MONEY PAID TO AE. 1. THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN UP HOLDING ADDITION/ADJUSTMENT TO INCOME BEING ALP/ NOTIONAL I NTEREST ON ADVANCE SHARE APPLICATION MONEY GIVEN, EVEN THOUGH THERE IS NO INCOME FROM AE TO WHICH TRANSFER PRICING PROVISIONS CAN BE APPLIED. T HE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG , CONTRARY TO THE FACTS OF T HE CASE AND AGAINST THE PROVISIONS OF LAW. 2. THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE TREATMENT OF THE ADVANCE FOR SHARE APPLICATION MONEY (ASAM) AGAI NST WHICH EVENTUALLY SHARES ARE ALLOTTED AS INTEREST FREE LOAN WITHOUT P ROVING IT AS LOAN UNDER THE GUISE OF ASAM HENCE ADJUSTMENT/ ADDITION TO INCOME IS MISPLACED, WRONG AND BEYOND THE PROVISIONS OF LAW AND REQUIRED TO BE DELETED. 3. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALT ER ALL OR ANY OF THE GROUNDS OF APPEAL. 3. THE ASSESSEE HAS RAISED FOLLOWING GROUND OF APPE AL IN A.Y. 2008 - 09: ADDITION ON ACCOUNT OF NOTIONAL INTEREST FOR SHARE APPLICATION MONEY PAID TO AE. 1. THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN UP HOLDING ADDITION/ADJUSTMENT TO INCOME BEING ALP/ NOTIONAL I NTEREST ON ADVANCE SHARE APPLICATION MONEY GIVEN, EVEN THOUGH THERE IS NO INCOME FROM AE TO WHICH TRANSFER PRICING PROVISIONS CAN BE APPLIED. T HE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG, CONTRARY TO THE FACTS OF TH E CASE AND AGAINST THE PROVISIONS OF LAW. 3 ITA NO. 7026, 7025 & 7608 /MUM/2013 2. THE LEARNED CIT (A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE TREATMENT OF THE ADVANCE FOR SHARE APPLICATION MONEY (ASAM) AGAI NST WHICH EVENTUALLY SHARES ARE ALLOTTED AS INTEREST FREE LOAN WITHOUT P ROVING IT AS LOAN UNDER THE GUISE OF ASAM HENCE ADJUSTMENT/ ADDITION TO INCOME IS MISPLACED, WRONG AND BEYOND THE PROVISIONS OF LAW AND REQUIRED TO BE DELETED. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT (A) ERR ED IN LAW AND FACTS IN NOT APPLYING LIBOR RATE AS CUP/ALP OF INTERNATIONAL TRA NSACTIONS ON ADVANCE SHARE APPLICATION MONEY TREATED AS INTEREST FREE LO AN AS HELD IN VARIOUS DECISIONS. THE REASONS GIVEN BY HIM FOR DOING SO AR E WRONG, CONTRARY TO THE FACTS OF THE CASE AND AGAINST THE PROVISIONS OF LAW . 4. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND OR ALT ER ALL OR ANY OF THE GROUNDS OF APPEAL. 4. THE GROUNDS RAISED BY THE REVENUE IN A.Y. 2007 08 ARE AS UNDER: 1. THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW IN DELETING HE ADDITION OF RS. 92,78,558/- MADE BY APPLYING ARMS LENGTH PRICE BASED ON THE DOMESTIC PLR BY TRANSFER PRICING OFFICER/ASSESSING OFFICER WITHOUT PROPERLY APPRECIATING THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BROUGHT BY THE TRANSFER PRICING OFFICER/ASSESSING OFFICER IN THE ASSESSMENT ORDER. 2. THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW A ND BY HOLDING THAT LIBOR SHOULD HAVE BEEN ACCEPTED BY THE TPO/AO AS MO ST SUITABLE BENCH FOR DETERMINING THE ALP IN CASE OF FOREIGN CURRENCY LOA N WITHOUT APPRECIATING THE FACT THAT DOMESTIC PRIME LENDING RATE ADOPTED BY THE TPO /AO IS MOST APPROPRIATE IN THIS CASE. 5. IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESS EE THAT IN THE PRESENT CASE, THE ISSUE INVOLVED IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- A. DCIT VS. CADILA HEALTHCARE LTD., 39 TAXMAN.COM 5 1, P. B. PAGES 31 TO 36. 4 ITA NO. 7026, 7025 & 7608 /MUM/2013 B. BHARTI AIRTEL LIMITED VS. ADDL. CIT IN ITA NO. 5 816/DEL/2012 DATED 11.03.2014, P. B. PAGES 37 TO 45 (RELEVANT PAGES). C. PARLE BISCUITS PVT. LIMITED VS. DCIT IN ITA NO. 9010/MUM/2010 DATED 11.04.2014, P. B. PAGES 46 TO 56. D. ALLCARGO GLOBAL LOGISTICS LIMITED VS. ACIT IN IT A NO. 4909 & 4910/MUM/2012 DATED 11.06.2014, P. B. PAGES 57 TO 6 6. E. AEGIS LIMITED VS. ADDL. CIT IN ITA NO. 1213/MUM/ 2014 DATED 27.07.2015, P. B. PAGES 67 TO 72 (RELEVANT PAGES). F. DIT VS. BESIX KIER DABHOL SA, 210 TAXMAN 151, P .B. PAGES 73 TO 74 (HEAD NOTE). G. DCIT VS. VIKAS OBEROI, 64 SOT 101 (MUM). P. B. P AGES 75 TO 78. 6. HE ALSO SUBMITTED THAT IN THE CASE OF BHARTI A IRTEL LIMITED VS. ADDL. CIT (SUPRA), THE TRIBUNAL HAS DULY CONSIDERED AND DISTI NGUISHED BOTH TRIBUNAL ORDERS ON WHICH, RELIANCE IS PLACED BY THE A.O. AND THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE CASE OF BHARTI AIRTEL LIMITED VS. ADDL. CIT (SUPRA). HE ALSO SUBMITTED THAT EVENTUALLY, THE SHARES WERE ALLOTTED AS PER SH ARE SCRIPT COPY AVAILABLE ON PAGE 12 OF THE PAPER BOOK. 7. AS AGAINST THIS, LEARNED DR OF THE REVENUE SUBMI TTED A COPY OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S PMP AUTO COMPONEN TS (P) LTD. VS. DCIT IN ITA NO. 1484 & 1506/MUM/2014 DATED 22.08.2014. HE SUBMI TTED THAT IN THAT CASE, SHARES WERE ALLOTTED AFTER ONE YEAR AND IT WAS HELD BY THE TRIBUNAL THAT IT WAS ABNORMAL DELAY AND THEREFORE, ARMS LENGTH INTEREST TO BE ADDED. H E SUBMITTED THAT IN THE PRESENT CASE, THE SHARES WERE ALLOTTED ON 29.03.2010 I.E. AFTER M ORE THAN 3 AND HALF YEARS FROM THE DATE OF AGREEMENT ON 01.08.2006 AND THEREFORE, THIS TRIBUNAL ORDER SHOULD BE FOLLOWED IN THE FACTS OF THE PRESENT CASE. 8. IN THE REJOINDER, IT WAS SUBMITTED BY THE LEARNE D AR OF THE ASSESSEE THAT IN PARA 18 OF THAT TRIBUNAL ORDER RELIED UPON BY THE LEARNE D DR, IT IS NOTED THAT THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE REGARDIN G THE TERMS AND CONDITIONS OF SUCH 5 ITA NO. 7026, 7025 & 7608 /MUM/2013 SHARE APPLICATION MONEY AND ALLOTMENT OF SHARES BUT IN THE PRESENT CASE, THE AGREEMENT IS AVAILABLE ON PAGES 13 TO 14 OF THE PAPER BOOK AN D AS PER THE SAME, THE SHARE APPLICATION MONEY WILL LIE AS SHARE APPLICATION MON EY TILL THE SHIP IS PURCHASED AND REFURBISHED/UPGRADED AND IF THE TIME LINE FOR DOING SO IS NOT MET, THE ASSESSEE CAN RECALL THE APPLICATION MONEY WITH INTEREST AND CONV ERSION OF SHARE APPLICATION MONEY INTO SHARES IS AT THE DISCRETION OF THE ASSESSEE. H E SUBMITTED THAT UNDER THESE FACTS, THIS TRIBUNAL ORDER IS NOT APPLICABLE IN THE PRESENT CAS E BECAUSE THE SAME IS DISTINGUISHABLE ON FACTS. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S PMP AUTO COMPONENTS (P) LTD. VS. DCIT (SUPRA). WE FIND THAT AS PER THE FACTS OF THAT CASE, THE AMOUNT WAS GIVEN TO AE AS LOAN WITHOUT CHARGING ANY INTEREST AND THE DISPU TES RAISED BEFORE THE TRIBUNAL WERE TWO ONLY. FIRST DISPUTE WAS REGARDING INTEREST RATE ADOPTED BY THE TPO BY IGNORING LIBOR RATE AND THE SECOND DISPUTE WAS TP ADJUSTMENT MADE ON ACCOUNT OF NOTIONAL INTEREST ON LOAN GIVEN TO SUBSIDIARY. HENCE, THIS W AS NOT A CLAIM IN THAT CASE THAT THE AMOUNT GIVEN TO THE SUBSIDIARY COMPANY IS ON ACCOUN T OF SHARE APPLICATION MONEY BUT IN THE PRESENT CASE, THIS IS ADMITTED POSITION THAT THE AMOUNT IN QUESTION WAS GIVEN AS SHARE APPLICATION MONEY. THEREFORE, THIS TRIBUNAL O RDER IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. 10. NOW, WE EXAMINE THE APPLICABILITY OF THE TRIBUN AL ORDER RENDERED IN THE CASE OF BHARTI AIRTEL LIMITED VS. ADDL. CIT (SUPRA). IN THA T CASE, THE MONEY WAS ADVANCED TO AE FOREIGN SUBSIDIARIES AS SHARE APPLICATION MONEY AS IN THE PRESENT CASE AND SHARES WERE ALLOTTED AFTER 13 TO 16 MONTHS AS AGAINST 42 M ONTHS IN THE PRESENT CASE. IN PARA 47 OF THIS TRIBUNAL ORDER, THE TRIBUNAL HAS CONSIDE RED THIS ARGUMENT ALSO THAT THERE IS DELAY IN ALLOTMENT OF SHARES. THE TRIBUNAL STATED T HAT SINCE THE TPO HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT ANY UNRELATED SHARE AP PLICANT WAS TO BE PAID ANY INTEREST FOR THE PERIOD BETWEEN MAKING THE SHARE APPLICATION MONEY PAYMENT AND ALLOTMENT OF SHARES, THE VERY FOUNDATION OF IMPUGNED ALP ADJUSTM ENT IS DEVOID OF LEGALLY 6 ITA NO. 7026, 7025 & 7608 /MUM/2013 SUSTAINABLE MERITS. IN THE PRESENT CASE ALSO, THE T PO HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT ANY UNRELATED SHARE APPLICANT WAS TO BE PAID ANY INTEREST FOR THE PERIOD BETWEEN MAKING THE SHARE APPLICATION MONEY P AYMENT AND ALLOTMENT OF SHARES. IN FACT, IN THE PRESENT CASE, THE TPO HAS REPRODUCE D THE SUBMISSIONS OF THE ASSESSEE IN PARA 4.2 OF HIS ORDER WHERE THE ASSESSEE SUBMITTED THAT THE AMOUNTS WERE PROVIDED AS EQUITY/QUASI EQUITY AND SUBSEQUENTLY CONVERTED INTO EQUITY SHARES. THEREAFTER IN VERY NEXT PARA I.E. PARA 4.3 OF HIS ORDER, THE TPO START S WITH THIS OBSERVATION THAT THE CONCERN OF THE ASSESSEE THAT CONVERSION OF LOAN INT O EQUITY PRECLUDES THE TPO TO DETERMINE THE ARMS LENGTH INTEREST ON THE ABOVE IN TEREST FREE LOAN IS COVERED IN FAVOUR OF THE REVENUE BY A TRIBUNAL ORDER RENDERED IN THE CASE OF PEROT SYSTEMS TSI LTD. VS. DCIT, (2010) TIOL ITAT DELHI. BUT THERE IS NO S UCH MENTION IN THE WRITTEN SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE REPRO DUCED BY THE TPO IN PARA 4.2 OF HIS ORDER. HENCE, THE TPO HAS CONSIDERED THIS TRANS ACTION AS A LOAN TRANSACTION BY BRUSHING ASIDE THE SUBMISSIONS OF THE LEARNED AR OF THE ASSESSEE THAT THIS MONEY WAS GIVEN AS SHARE APPLICATION MONEY AND THAT TOO WITH OUT GIVING ANY FINDING OR INDICATION ANY BASIS TO SAY THAT THIS IS A LOAN TRA NSACTION. AS IN THE CASE OF BHARTI AIRTEL LIMITED VS. ADDL. CIT (SUPRA), IN THE PRESEN T CASE ALSO, THE TPO HAS NOT BROUGHT ON RECORD ANYTHING TO SHOW THAT ANY UNRELATED SHARE APPLICANT WAS TO BE PAID ANY INTEREST FOR THE PERIOD BETWEEN MAKING THE SHARE AP PLICATION MONEY PAYMENT AND ALLOTMENT OF SHARES. THEREFORE EVEN FOR THIS DELAY IN ALLOTMENT OF SHARES ALSO, THE VERY FOUNDATION OF IMPUGNED ALP ADJUSTMENT IS DEVOID OF LEGALLY SUSTAINABLE MERITS. HENCE, BY RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDE R, WE HOLD THAT THE IMPUGNED ALP ADJUSTMENT IS DEVOID OF MERIT AND THEREFORE DELETED IN BOTH YEARS BECAUSE IT WAS AGREED BY BOTH SIDES THAT FACTS ON THIS ASPECT ARE IDENTICAL IN BOTH YEARS. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 12. REGARDING THE APPEAL OF THE REVENUE, WE FIND TH AT IN VIEW OF OUR DECISION IN RESPECT OF THE APPEAL OF THE ASSESSEE IN ABOVE PARA AS PER WHICH, WE HAVE HELD THAT NO ALP ADJUSTMENT IS TO BE MADE IN THE PRESENT CASE, T HE DISPUTE RAISED BY THE REVENUE 7 ITA NO. 7026, 7025 & 7608 /MUM/2013 THAT SUCH ADJUSTMENT SHOULD BE AS PER DOMESTIC PLR AS AGAINST LIBOR RATE APPROVED BY CIT (A) DOES NOT SURVIVE AND THEREFORE, THE APPE AL OF THE REVENUE IS LIABLE TO BE REJECTED. WE ORDER ACCORDINGLY. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 14. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH DECEMBER, 2015 SD/- SD/- (AMIT SHUKLA) (A.K. GARODIA) $ / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER & ' MUMBAI; ($ DATED : 04.12.2015 PS. ASHWINI GAJAKOSH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT - CONCERNED 5. ,-. //01 , 01# , & ' / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, & ' / ITAT, MUMBAI
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