M/S. SIGMA ALDRICH CHEMICALS PRIVATE LIMITED,BENGALURU V. DCIT, CIRCLE-6(1)(1), BENGALURU

SA 81/BANG/2024

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M/s. Sigma Aldrich Chemicals Pvt. Ltd. filed a stay petition against a demand of Rs.20,34,02,460 for the assessment year 2021-22, issued under section 156 of the Income-tax Act, 1961. The company argued that it had already deposited Rs.4,04,00,000, which was not credited, and that the adjustments made by the Transfer Pricing Officer (TPO) were incorrect. The TPO had made additions based on adjustments in international transactions and interest on delayed receivables, which the assessee contested. The Tribunal noted errors in the margin computations and the interest calculations on outstanding receivables, leading to a decision in favor of the assessee for a stay on the demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25268 (ITAT-BANGALORE)
• Appeal Type: Stay Application
• Pronouncement Date: 06-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2021-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TATA KRISHNA
• Keywords: Transfer pricing; International transaction; Bad and doubtful debts; Rectification of order; Application of stay
• Section: 154

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER SP No.81/Bang/2024 [in IT(TP)A No.2601/Bang/2024] Assessment year : 2021-22 M/s. Sigma Aldrich Chemicals Pvt. Ltd., Plot No.12, Bommasandra Jigani Link Road, Industrial Area, Anekal Taluk, Bengaluru – 560 100. PAN: AAHCS 1882L Vs. The Deputy Commissioner of Income Tax, Circle 6(1)(1), Bangalore. APPELLANT RESPONDENT Appellant by : Shri Tata Krishna, Advocate Respondent by : Shri Parithivel, Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 03.01.2025 Date of Pronouncement : 06. 01.2025 O R D E R Per Prashant Maharishi, Vice President 1. SP No.81/Bang/2024 [in IT(TP)A No.2601/Bang/2024] is filed by M/s. Sigma Aldrich Chemicals Pvt. Ltd. (the assessee) for the assessment year 2021-22 on 27.12.2024 seeking stay of demand SP No.81/Bang/2024 Page 2 of 6 of Rs.20,34,02,460 as per notice of demand issued u/s. 156 of the Income-tax Act, 1961 (the Act) dated 22.10.2024. 2. The contentions raised in the stay petition are reiterated by the ld. AR. The first contention raised is that after the draft assessment order is passed, the assessee has deposited a sum of Rs.4,04,00,000 on 31.12.2024 for this assessment year which has not been granted credit to the assessee. If the above amount is considered as a credit, then the assessee has already deposited 20% of the demand outstanding. The ld. AR submitted a copy of the challan. Secondly, the ld. AR submitted that addition is made in view of the adjustment of international transaction of ITeS segment of Rs.31.05 crores, trading segment of Rs.27.53 crores and manufacturing segment of Rs.4.10 crores. He further submitted that addition of Rs.18.58 is made by the ld. TPO on account interest on delayed receivables without giving any working. He referred to the margin statement of the ld. TPO and submitted that the margin computed is incorrect. It was submitted that the rates & taxes of Rs.4.46 crores, CSR expenditure of Rs.1.76 crore and provision for doubtful debts of Rs.11.10 lakhs was considered by the TPO and assessee as non-operative expenditure, but the ld. TPO while computing the same has made the addition in the operating expenditure erroneously and therefore margin of the assessee has changed. He submits that if this correction is granted, the adjustment on account of the trading & manufacturing segment would fall within the assessee’s range and both these segments SP No.81/Bang/2024 Page 3 of 6 would be at arm’s length price. This leaves with only adjustment of ITeS segment where the margin taken by the TPO is 12.51% would be 13.75%. It was further stated that the receivable outstanding is considered by the TPO at Rs. 3904 crores and addition thereon has been made of Rs.18.58 crores, considering the delay of 335 days and adopted interest rate of 5.19%. The TPO has not given any break-up from where these figures are obtained. He submits that even if the average is taken despite other legal arguments, the addition would be substantially reduced. He submitted that incorrect computation of margin is accepted by the TPO as per issue No.2 as per remand report dated 29.8.2024, but DRP did not give any direction inadvertently, so, no correction was made by the ld. TPO. He further submits that an application for rectification of mistake was filed 27.8.2024 showing the apparent error in computation of interest of Rs.18.58 crores on outstanding receivables wherein the correct demand, if everything else is accepted, would become only Rs.11 crores. Such an application is still not responded to. In the end, he submitted that as the assessee has deposited Rs. 4.4 crores for which credit has not been given, which is more than 20% of the outstanding demand, assessee deserves stay. 3. The ld. DR vehemently objected to stay petition and submitted that amount of tax paid of Rs.4.4 crores has not been shown by the assessee to the ld. AO or the ld. DRP and therefore credit for the same was not given. He submits that the addition of Rs.18 crores is SP No.81/Bang/2024 Page 4 of 6 on account of the result of non-compliance by the assessee and therefore the assessee does not deserve any stay on the same. To the extent of computation of margin, he agreed that such correction can be made and balance tax due should be paid by the assessee. 4. We have heard the rival contentions and carefully perused the order of the ld. lower authorities. We have also considered the challan placed before us of Rs.4.4 crores paid by the assessee for AY 2021-22 on 31.3.2024 against the addition made in the above assessment order. Admittedly, though the amount outstanding is Rs. 20.34 crores had this information been provided to the AO, naturally the outstanding demand would have been less by the above sum and interest would have also gone down substantially. However, we find that the assessee has paid tax of Rs. 4.4 crores for which credit has not been given to the assessee, therefore naturally this amount can be considered towards 20% of the outstanding demand. 5. Further, assessee has categorically shown that there is an error in the computation of margin with respect to trading & manufacturing segment which is accepted by the ld. TPO in the remand report, but as the ld. DRP did not comment on the same, the ld. TPO/AO continued with the computational error. We are of the view that for such computational errors, the ld. TPO/ld. DRP has failed to do their duty to make such corrections when it is so obvious. Further, no doubt, while computing interest on outstanding receivable from SP No.81/Bang/2024 Page 5 of 6 AE, assessee did not give the invoices-wise information, but that does not mean that the ld. TPO should have computed interest by taking figure for which there is no substantial evidence. The application made by the assessee u/s. 154 of the Act is also pending, which clearly shows that if such arithmetical inaccuracy is removed, the addition of Rs.18 crores will come to half of that. Therefore, if the arithmetical accuracies are considered and if they are given import to the TP adjustment, the trading & manufacturing segment would prima facie fall within the arm’s length price and addition on account of ALP of ITeS, subject to other arguments, would also come down substantially. Therefore, according to us, prima facie balance of convenience lies in favor of the assessee. As the assessee has already deposited Rs.4.4 crores, which is more than 20% of the outstanding demand, the assessee deserves stay of demand on this ground. 6. Further assessee has also challenged that the assessment order passed by the ld. AO is time barred in view of the decision of the Hon’ble Madras High Court. Therefore, this issue is also prima facie covered in favour of assessee and hence assessee deserves stay on the demand. 7. Accordingly, we direct the ld. AO to verify the payment of Rs.4.4 crores by the assessee and then to keep the balance demand in abeyance, till disposal of the appeal or 180 days from the date of receipt of this order, whichever is earlier. SP No.81/Bang/2024 Page 6 of 6 8. The appeal of the assessee is fixed for a hearing on 26.3.2024. Assessee is directed to filing necessary paper book, statements, etc., in accordance with ITAT Rules, 1963. 9. In the result, the stay petition filed by the assessee is allowed as indicated above. Pronounced in the open court on this 06th day of January, 2025. Sd/- Sd/- ( SOUNDARARAJAN K.) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 06th January, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. "