DCIT Corporate Circle 1(1), CHENNAI V. Archean Industries P Ltd., CHENNAI

MA 102/CHNY/2023

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The case involves the Joint Commissioner of Income Tax (OSD), Corporate Circle -1(1), Chennai, as the petitioner, and M/s. Archean Industries Private Limited, as the respondent. The revenue filed a Miscellaneous Application under section 254(2) of the Income-tax Act, 1961, challenging the Tribunal's earlier decision which had provided relief to the assessee regarding the corporate guarantee commission. The revenue argued that the Tribunal had erred in considering an unsigned tri-partite agreement as valid evidence, which was rejected by the lower authorities. The Tribunal, however, upheld its previous decision, stating that the application was essentially seeking a review of the decision, which is not permissible under section 254(2).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134891 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 14-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 14-09-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 27-04-2023
• Other Referred Cases: CIT vs Reliance Telecom Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction
• Section: 92B; 254(2); 92CA

Judgement Text

आयकर अपीलीय अिधकरण, ‘डी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ᮰ी वी दुगाᭅ राव, ᭠याियक सद᭭य एवं ᮰ी मंजुनाथ. जी, लेखा सद᭭य के समᭃ BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER AND SHRI MANJUNATHA. G, HON’BLE ACCOUNTANT MEMBER Misc. Application No. 102/Chny/2023 [In IT(TP)A No. 37/Chny/2018] (िनधाŊरणवषŊ / Assessment Year: 2014-15) The Joint Commissioner of Income Tax (OSD), Corporate Circle -1(1), Chennai – 600 034. v. M/s. Archean Industries Private Limited, No.2, North Crescent Road, T. Nagar, Chennai – 600 017. [PAN: AAACA-7344-J] (ᮧाथᭅक /Petitioner) (ᮧ᭜यथᱮ/Respondent) ᮧाथᭅक कᳱ ओरसे/ Petitioner by : Shri. P. Sajit Kumar, JCIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. N. Arjun Raj, CA सुनवाई कᳱ तारीख/Date of Hearing : 15.09.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 15.09.2023 आदेश /O R D E R PER MANJUNATHA. G, ACCOUNTANT MEMBER: The revenue has filed present Miscellaneous Application u/s. 254(2) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) against order of the Tribunal in IT(TP)A No. 37/Chny/2018, dated 19.10.2022 for assessment year 2014- 15 2. The revenue has narrated facts of its case and mistakes stated to be apparent on record from the order of the tribunal :-2-: MA. No: 102/Chny/2023 dated 19.10.2022 and relevant contents of Miscellaneous Application filed by the revenue for assessment year 2014-15 are reproduced as under: “In the case of M/s Archean Industries Pvt. Ltd., PAN: AAACA7344J, for the A.Y. 2014-15 an order u/s 92CA (3) was passed by the Transfer Pricing Officer-1(1), Chennai on 31.10.2017 proposing the following adjustments: 1 Upward adjustment towards Corporate Rs 8,24,34,885/- Guarantee(fee) Chargeable 2 Upward adjustment towards interest Rs 6,19,18,843/- chargeable from AEs Total Rs 14,43,53,728/- In the order dated 31.10.2017, the TPO has made elaborate discussion on the claims made by the assessee on both the issues in its reply to the SCN. 2. The objections to the Draft Assessment Order incorporating the above referred adjustments made by the TPO, was rejected by Hon'ble DRP by stating as under: 4.5.8 It has also been argued that there are certain restricting covenants placed by the bank that prohibit the guarantor from charging any commission without the bank prior consent. We do not find any merit in this argument primarily because the commission would accrue to the assessee even before the loan agreement came into effect. More over there is no total prohibition as claimed. Some restriction if at all must have been placed on the charging of commission without prior consent of the bank probably because the bank wanted to be au of any cash flow with regard to the loan especially as the borrower and the guarantor related parties. The assessee could have taken prior consent of the bank and charges commission. :-3-: MA. No: 102/Chny/2023 Further the assessee has produced only an unsigned document to p its claim. Even if the unsigned document is taken to be correct, it is seen that document does not talk about commission. The assessee's arguments in this regard are rejected.”, Thus, it is evident that the claim of the assessee cannot be entertained based on "Unsigned Tri-partite Agreement" . 3. It is also brought to the notice that only the same unsigned Tri-partite agreement given by the appellant in the paper book filed before ITAT. Hon'ble ITAT did not take account this fact while deciding the appeal. 4. However, the Hon'ble ITAT in its Order dated 19.10.2022 in Paragraph No has given relief to the assessee on the issue of computing guarantee commission corporate guarantee given by the assessee to its AEs based on this "Unsigned Tri-partite Agreement", which was rejected by Hon’ble DRP. 5. It is to be mentioned here that section 92B was amended in finance Act 2012 w.e.f. 1-4-2002. It was held that the "corporate guarantee" is an international taxation. Hence even the appellant submits the signed agreement, their self-serving clauses in the agreement of 2009 cannot prevent the AO in charging the guarantee commission for the AY 2014-15. Prima facie the ITAT upheld that corporate guarantee is an "international transaction". 6. The Act of the Hon'ble ITAT in not considering the fact that the document relied upon by the assessee is an "Unsigned Tri-partite Agreement having no evidentiary value as it is "Unsigned", is a mistake apparent from record. Accordingly, this Miscellaneous Application is moved with the following grounds: The tri-partite agreement entered into between the assessee, its AE and the Banker is unsigned agreement of 2009 and hence the same cannot be relied upon while deciding the appeal for the A Y 2014-15. 7. Hence, it is prayed that the decision of Hon'ble ITAT on the issue of Corporate Guarantee Commission may :-4-: MA. No: 102/Chny/2023 kindly be recalled as it is a mistake apparent on record.” 3. We have heard both the parties and considered relevant contents of Miscellaneous Application filed by the revenue in light of order of the Tribunal in IT(TP)A No. 37/Chny/2018 dated 19.10.2022. The ld. DR, Shri. P. Sajit Kumar, JCIT, referring to pleading of the Assessing Officer in application filed u/s. 254(2) of the Act, and the order of the Tribunal in IT(TP)A No. 37/Chny/2018 dated 19.10.2022, submitted that although, the lower authorities have made TP adjustment towards corporate guarantee commission by rejecting unsigned tri-partite agreement submitted by the assessee, but the Tribunal has allowed relief to the assessee by considering very same unsigned agreement which constitutes mistake apparent on record, requires to be rectified u/s. 254(2) of the Act. We find that the pleading of the Assessing Officer in application filed u/s. 254(2) of the Act is devoid of merits, because the tribunal has given its finding on the issue of corporate guarantee commission in para 5.3 to 5.5 of order dated 19.10.2022 and held that TP adjustment suggested by the TPO with reference to corporate guarantee is unsustainable. Further, the tribunal while considering the :-5-: MA. No: 102/Chny/2023 issue has also taken note of tri-partite agreement between appellant and bankers and after considering relevant material available on record rendered its decisions. Therefore, the pleading of the Assessing Officer in Miscellaneous Application is nothing but seeking review to the decision rendered by the Tribunal in given facts and circumstances of the case, which is not permissible u/s. 254(2) of the Act. 4. The scope of rectification u/s. 254(2) of the Act is limited in as much as the powers u/s. 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Further, even if the order passed by the ITAT was erroneous on merits, in that case the remedy available to the assessee or respondent was to prefer an appeal before the High Court as held by the Hon’ble Supreme Court in the case of CIT vs Reliance Telecom Ltd in Civil Appeal No. 7110/2021, judgment dated 03.12.2021. Therefore, we are of the considered view that, there is no merit in Miscellaneous Application filed by the revenue and thus, we dismiss Miscellaneous Application filed by the revenue. :-6-: MA. No: 102/Chny/2023 5. In the result, Miscellaneous Application filed by the revenue is dismissed. Order pronounced in the court on 15 th September, 2023 at Chennai. Sd/- (वी दुगाᭅ राव) (V. DURGA RAO) ᭠याियकसद᭭य/Judicial Member Sd/- (मंजुनाथ. जी) (MANJUNATHA. G) लेखासद᭭य/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated: 15 th September, 2023 JPV आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ/CIT 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF