M/S. SECUREKLOUD TECHNOLOGIES LTD.,CHENNAI V. ITO, CORPORATE CIRCLE-3(1), CHENNAI

ITA 3232/CHNY/2024

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The case involves Securekloud Technologies Limited, which appealed against the final assessment order for the assessment year 2021-22, which included adjustments for notional interest on receivables and the notional value of a corporate guarantee. The Tribunal found that the assessee had not adequately represented its case during the initial proceedings due to logistical issues related to the COVID-19 pandemic, which affected their office operations. Consequently, the Tribunal decided to remand the matter back to the TPO/AO for a fresh assessment, allowing the assessee to present complete details to substantiate its claims.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 125969 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: M.V. SWAROOP
• Keywords: Condonation of delay; Transfer pricing; International transaction; Onus to prove; Notional interest
• Section: 143(3); 13

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member आयकर अपील सं./I.T.A. No.3232/Chny/2024 िनधाŊरण वषŊ/Assessment Year: 2021-22 M/s. Securekloud Technologies Limited, Bascon Futura SV 5th Floor, 10/1 Venkatanarayana Road, T. Nagar, Chennai 600 017. [PAN:AABCP6266D] Vs. The Income Tax Officer, Corporate Circle 3(1), Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri M.V. Swaroop, Advocate ŮȑथŎ की ओर से/Respondent by : Shri A. Sasi Kumar, CIT सुनवाई की तारीख/ Date of hearing : 17.04.2025 घोषणा की तारीख /Date of Pronouncement : 25.04.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against final assessment order dated 27.09.2024 passed under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 [“Act” in short] for the assessment year 2021-22. 2. We find that this appeal is filed with a delay of 18 days. The assessee filed an affidavit for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, we find the reasons stated by the assessee are bonafide, which really I.T.A. No.3232/Chny/24 2 prevented in filing the appeal in time. Thus, the delay is condoned and admitted the appeal for adjudication. 3. Ground No. 1 & 2 raised by the assessee are general in nature and requires no adjudication. 4. Ground No. 3, 4 & 5 raised by the assessee are relating to adjustment of notional interest determined by the Assessing Officer. 5. Brief facts of the case are that the assessee is a company and is a market leader of Enterprise Cloud Transformation in the highly regulated industries with stringent cloud security and compliance requirements. The assessee filed its return of income declaring NIL income after set off of brought forward loss. The Transfer Pricing Officer [TPO] proposed upward adjustment of ₹.68,67,312/- on account of interest on receivables to the value of international transaction. The DRP confirmed the same in the absence of any submissions from assessee’s side. The Assessing Officer passed final assessment order to that effect. 6. The ld. AR Shri M.V. Swaroop, Advocate submits that the assessee filed objections before the DRP against the draft assessment order, but, however, no representation was made due to shifting of assessee’s registered office. He submits that the concerned department of the assessee did not notice the communication received from the DRP calling I.T.A. No.3232/Chny/24 3 for personal hearing as the computer systems in the assessee’s office were dismantling and reinstallation the systems again. The ld. AR pleaded to remand the matter to the file of the TPO/AO for fresh consideration. 7. The ld. DR Shri A. Sasi Kumar, CIT drew our attention to page 3 of the TPO order and submits that the assessee has not raised any objection against the show-cause notice issued in respect of the proposed adjustment on account of interest receivable. Further, he argued that since there is no objection from assessee’s side, no purpose would serve in remanding the matter to the file of the Assessing Officer. 8. We have heard both the parties and perused the material available on record. We note that the impugned adjustment is relating to calculating the notional interest beyond 30 days on the amount receivable from associated enterprise. The contention of the ld. AR is that the TPO/AO without taking into consideration the impact of Covid pandemic, which has significantly disrupted cash flow management for every company. Further, the finding that 30 days credit period is industry average and it was an industry wide practice to extent the credit period of 30 days during Covid time. The ld. AR also brought to our notice that the Reserve Bank of India initially prescribed a credit period of 9 months, which was extended to 15 I.T.A. No.3232/Chny/24 4 months due to global circumstances in respect of Covid impact. As rightly pointed out by the ld. DR, we note that there was no submissions of the assessee in this regard before the TPO as it shows no objection whatsoever raised by the assessee during the course of draft assessment proceedings. On perusal of the DRP direction dated 17.09.2024, which is on record at page 32 of the appeal memo, wherein, it is clearly noted that there was no representation by the assessee vide para 1.1 of the DRP’s order. Therefore, considering the same and taking into consideration the facts and circumstances of the case and submissions of the ld. AR and ld. DR, we deem it proper to remit the matter to the file of the TPO/Assessing Officer for fresh consideration. Thus, ground No. 3, 4 & 5 raised by the assessee are allowed for statistical purposes. 9. Ground No. 6 to 13 raised by the assessee challenging the action of the Assessing officer in making upward adjustment on account of notional value of corporate guarantee. 10. At the outset, we note that the TPO discussed the issue from para 7 to 7.3 of the TPO’s order. The ld. AR drew our attention to para 3.1 of the DRP directions and submits that the issue may be remanded to the file of the TPO/AO. 11. The ld. DR did not report objection in this regard. I.T.A. No.3232/Chny/24 5 12. On perusal of para 3.1 of the DRP directions, we note that the panel clearly held that the assessee failed to discharge its burden to prove before the DRP as well as TPO for which, the ld. AR fairly conceded that the assessee could not make any submissions before the TPO. The ld. AR undertakes to file all relevant details before the TPO/AO in support of its claim. Therefore, taking into consideration and facts and circumstances of the case and in the interest of justice, we deem it proper to remand the matter to the file of the TPO/AO for fresh consideration. The assessee is at liberty to furnish complete details to substantiate its case before the TPO/AO. Thus, the ground No. 6 to 13 raised by the assessee is allowed for statistical purposes. 13. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 25th April, 2025 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 25.04.2025 Vm/- I.T.A. No.3232/Chny/24 6 आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "