Kwang Jin India Autosystems Pvt Ltd., Kancheepuram V. DCIT Corporate Circle 4(2), CHENNAI

ITTPA 38/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6667 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR M SRINIVASA RAO
• Assessee Lawyers: RAGHUNATHAN S
• Keywords: Business income; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , , & BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER IT(TP)A NO.38/CHNY/2018 ' ' / ASSESSMENT YEAR : 2014-15 M/S KWANG JIN INDIA AUTOSYSTEMS PVT. LTD., NO.G-8, G-9, G-10, SIPCOT INDUSTRIAL PARK, SRIPERUMBUDUR, KANCHEEPURAM, TAMIL NADU -602 106. PAN : AACCT 4145 L V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 4(2), CHENNAI - 600 034. (+/ APPELLANT) (-.+/ RESPONDENT) + / / APPELLANT BY : SH.RAGHUNATHAN.S., ADVOCATE -.+ / / RESPONDENT BY : DR. M. SRINIVASA RAO, CIT / / DATE OF HEARING : 16.09.2019 / / DATE OF PRONOUNCEMENT : 21.10.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -8, CHENNA I, DATED 28.06.2018 AND PERTAINS TO ASSESSMENT YEAR 2014-15. 2 IT(TP)A NO.38/CHNY/18 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IN THIS APPEAL IS EXCLUSION OF LOSS ON FOREIGN EXCHANGE FLUCTUATION F ROM THE OPERATING EXPENDITURE. 3. SHRI RAGHUNATHAN.S., THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE VERY ISSUE WAS CONSIDERED BY THI S TRIBUNAL IN INFAC INDIA PVT. LTD. V. DCIT IN IT(TP)A NO.27/CHNY /2018 DATED 05.10.2018. THIS TRIBUNAL, AFTER EXAMINING THE MAT ERIAL AVAILABLE ON RECORD, FOUND THAT THE PROFIT OR LOSS DUE TO FOREIG N EXCHANGE FLUCTUATION HAS TO BE EXCLUDED FROM THE OPERATING I NCOME FOR THE PURPOSE OF PLI. IN FACT, ACCORDING TO THE LD. COUN SEL, THIS TRIBUNAL PLACED ITS RELIANCE ON ANOTHER ORDER OF THIS TRIBUN AL IN DCIT V. HANIL TUBE INDIA PVT. LTD. IN I.T.A. NO.1037/MDS/2014 DAT ED 22.02.2017. 4. WE HEARD DR. M. SRINIVASA RAO, THE LD. DEPARTMEN TAL REPRESENTATIVE ALSO. THE LD. D.R. VERY FAIRLY SUBM ITTED THAT THIS TRIBUNAL IN THE CASE OF INFAC INDIA PVT. LTD. (SUPR A) FOUND THAT THE PROFIT OR LOSS DUE TO FOREIGN EXCHANGE FLUCTUATION HAS TO BE EXCLUDED FROM OPERATING INCOME FOR THE PURPOSE OF PLI. IN V IEW OF THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL, THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN THIS CASE TO THE EXTENT OF 1,62,06,505/- HAS TO BE EXCLUDED FROM OPERATING EXP ENDITURE. 3 IT(TP)A NO.38/CHNY/18 ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BEL OW ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO EXCLUDE TH E FOREIGN EXCHANGE FLUCTUATION FROM OPERATING INCOME / EXPEND ITURE. 5. THE NEXT ISSUE ARISES FOR CONSIDERATION IS ADJUS TMENT OF WORKING CAPITAL FOR DETERMINING THE ARM'S LENGTH PR ICE. 6. SHRI RAGHUNATHAN.S., THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE ISSUE OF WORKING CAPITAL ADJUSTM ENT WAS SPECIFICALLY RAISED BEFORE THE CIT(APPEALS). HOWEV ER, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) DISMISSED THE CLA IM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT SU BMITTED ANY RELEVANT FACTS TO ESTABLISH THAT IT IS OPERATING IN AN ENVIRONMENT OF NEGATIVE WORKING CAPITAL. REFERRING TO THE ORDER O F THIS TRIBUNAL IN THE CASE OF DOOSAN POWER SYSTEMS INDIA PVT. LTD. V. DCIT IN I.T.A. NO.581/MDS/2016 DATED 14.12.2016, THE LD.COUNSEL SU BMITTED THAT THE WORKING CAPITAL ADJUSTMENT IS MANDATED UNDER TH E SCHEME OF THE INCOME-TAX ACT, THEREFORE, SUCH ADJUSTMENT IS N ECESSARY WHILE COMPUTING THE PROFIT LEVEL INDICATOR. THE LD.COUN SEL FURTHER SUBMITTED THAT NECESSARY WORKING WAS FILED BEFORE T HE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS). HOWEVER, BOTH THE AUTHORITIES BELOW HAVE NOT CONSIDERED ON THE GROUND THAT IT WAS NOT AVAILABLE. 4 IT(TP)A NO.38/CHNY/18 THEREFORE, THE LD.COUNSEL SUBMITTED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECON SIDERATION. 7. WE HEARD DR. M. SRINIVASA RAO, THE LD. D.R. ALSO . THE CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING O FFICER ON THE GROUND THAT THE ASSESSEE HAS NOT FILED ANY MATERIAL TO ESTABLISH THAT IT IS OPERATING IN AN ENVIRONMENT OF NEGATIVE WORKI NG CAPITAL. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT TH E ASSESSEE HAS FILED THE MATERIAL TO INDICATE / ESTABLISH THE WORK ING CAPITAL INVOLVED IN THE FUNCTIONING OF THE ASSESSEE. IN THOSE CIRCU MSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT MAY N OT BE CORRECT TO SAY THAT THE ASSESSEE HAS NOT SUBMITTED RELEVANT FA CTS BEFORE THE CIT(APPEALS). THEREFORE, THE MATTER NEEDS TO BE RE MITTED BACK FOR RE-EXAMINATION. ACCORDINGLY, ORDERS OF BOTH THE AU THORITIES BELOW ARE SET ASIDE AND THE ISSUE OF WORKING CAPITAL ADJU STMENT IS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPE ALS) SHALL EXAMINE THE MATERIAL FILED BY THE ASSESSEE AND THER EAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVI NG A REASONABLE OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS ALSO AT LIBERTY TO FILE NECESSARY MATERIAL ONCE AGAIN BEFORE THE CIT(APPEAL S) SO THAT THE WORKING CAPITAL ADJUSTMENT CAN BE MADE. 5 IT(TP)A NO.38/CHNY/18 8. THE ASSESSEE HAS RAISED ONE MORE ISSUE WITH REGA RD TO NON- CONSIDERATION OF MISCELLANEOUS INCOME TO THE EXTENT OF 1,72,63,307/-. 9. SHRI RAGHUNATHAN.S., THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT 1,72,63,307/- IS PART OF OTHER INCOME AND OPERATING IN NATURE. ACCORDING TO THE LD. COUNSEL, THIS ISSU E WAS RAISED BEFORE THE CIT(APPEALS). HOWEVER, THE CIT(APPEALS) HAS NOT CONSIDERED THE SAME. THEREFORE, THE LD.COUNSEL SUB MITTED THAT THE MATTER MAY BE REMITTED BACK TO CIT(APPEALS) FOR DIS POSING OF THE GROUND RAISED BY THE ASSESSEE. 10. WE HEARD DR. M. SRINIVASA RAO, THE LD. D.R. ALS O. ADMITTEDLY, THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO THE SUM OF 1,72,63,307/- IN RESPECT OF BUSINESS INCOME WAS NOT DISPOSED BY THE CIT(APPEALS). WHEN THE ASSESSEE HA S RAISED A SPECIFIC GROUND, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) IS EXPECTED TO DISPOSE THE SAME IN ACC ORDANCE WITH LAW. SINCE SUCH AN EXERCISE WAS NOT DONE BY THE CI T(APPEALS), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATT ER HAS TO BE CONSIDERED BY THE CIT(APPEALS). ACCORDINGLY, THE I SSUE OF 6 IT(TP)A NO.38/CHNY/18 1,72,63,307/- IN RESPECT OF OTHER INCOME IS REMITTE D BACK TO THE FILE OF THE CIT(APPEALS) FOR CONSIDERATION. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER, 2019 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (RAMIT KOCHAR) (N.R.S. GANESAN) / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 21 ST OCTOBER, 2019. KRI. / - 5 65 /COPY TO: 1. + /APPELLANT 2. -.+ /RESPONDENT 3. 7 () /CIT(A)-8, CHENNAI 4. PRINCIPAL CIT-4, CHENNAI 5. 5 - /DR 6. ' /GF.