LAQSHYA MEDIA P.LTD, MUMBAI V. ASST CIT 10(2)(1), MUMBAI

MA 11/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4314 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2012-2013
• Appeal Filed On: 10-01-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIM KUMAR MODILD
• Assessee Lawyers: RAJAN VORALD
• Keywords: Transfer pricing; International transaction; Commercial expediency

Judgement Text

1 ITA NO.11/MUM/2019 [ARISING OUT OF ITA NO.1984/MUM/2017] LAQSHYA MEDIA P.LTD. ASSESSMENT YEAR-2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM M.A. NO.11/MUM/2019 [ARISING OUT OF IT[TP]A NO.1984/MUM/2017 ( / ASSESSMENT YEAR: 2012-13) LAQSHYA MEDIA L IMITED [EARLIER KNOWN AS LAQSHYA MEDIA PVT. LTD.] LAQSHYA HOUSE, SARASWATI BAUG SOCIETY ROAD, JOGESHWARI (E) MUMBAI. / VS. A CIT - 10(2)(1) ROOM NO.509/216A AAYKAR BHAVAN M.K. ROAD, CHURCHGATE MUMBAI-400 020. ./ ./PAN/GIR NO. AAACL-5004-C ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : RAJAN VORA-LD. AR / RESPONDENT BY : ASHIM KUMAR MODI-LD.DR /DATE OF HEARING : 01/03/2019 / DATE OF PRONOUNCEMENT : 12/03/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. BY WAY OF THIS MISCELLANEOUS APPLICATION, THE AS SESSEE SEEKS CERTAIN RECTIFICATION IN TRIBUNAL ORDER DATED 14/11/2018 FO R ASSESSMENT YEAR 2012- 13. 2 ITA NO.11/MUM/2019 [ARISING OUT OF ITA NO.1984/MUM/2017] LAQSHYA MEDIA P.LTD. ASSESSMENT YEAR-2012-13 2. DRAWING OUR ATTENTION TO THE APPLICATION, LD. AU THORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI RAJAN VORA, SUBMITTED THAT THE TRIBUNAL WHILE ADJUDICATING ASSESSEES GROUND QUA TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF LOANS GIVEN BY ASSESSEE TO ITS AE , VIDE PARA NOS. 5.6 & 5.7 RELIED UPON THE DECISION OF SPECIAL BENCH OF KOLKATA TRIBUNAL RENDERED IN INSTRUMENTATION CORPORATION LTD. [71 TAXMANN.COM 19 3] AS REFERRED BY THE ASSESSEES REPRESENTATIVE DURING HE ARING OF THE APPEAL. IT WAS THE SUBMISSIONS THAT THE LOANS WERE GRANTED BY THE ASSESSEE TO ITS AE OUT OF COMMERCIAL EXIGENCIES. HOWEVER, INTEREST WAS NOT CHARGED DUE TO WEAK FINANCIAL POSITION OF THE AES AND THE FACTS EVIDENCING THAT RECOVERABILITY OF THE INTEREST AS WELL AS THE LOANS GIVEN TO ITS AE WERE BAD WERE BROUGHT ON RECORD THROUGH VARIOUS DOCUMENTS. B ASED ON THESE EVIDENCES AND VARIOUS JUDICIAL PRECEDENCE, IT WAS A RGUED THAT NON-CHARGING OF INTEREST BY THE ASSESSEE WAS AT ARMS LENGTH IN VIEW OF PRINCIPLE OF COMMERCIAL EXPEDIENCY AND REAL-INCOME THEORY. IT WA S ALSO SUBMITTED THAT FOR THE PURPOSE OF BENCHMARKING OF INTEREST, THE CO MPARABLE TO BE ADOPTED SHOULD BE LOAN GIVEN BY BANKS WHICH HAVE TURNED INT O STRESSED ASSETS SINCE THE AE HAS NOT BEEN ABLE TO REPAY ANY OF ITS DEBTS AND TH E LOANS HAVE FINALLY BEING CONVERTED INTO EQUITY IN FY 2016-17. THE LD. AR FURTHER SUBMITTED THAT THE DECISION OF SPECIAL BENCH CITED ABOVE WAS SOUGHT TO BE DISTINGUISHED ON FACTS SINCE IN THAT CASE THE ASSES SEE WAS NOT ABLE TO JUSTIFY THE COMMERCIAL RATIONALE BEHIND NON-CHARGIN G OF INTEREST AND ALSO NO COMPARABLE WERE BROUGHT ON RECORD FOR THE PURPOSE O F BENCHMARKING. 3 ITA NO.11/MUM/2019 [ARISING OUT OF ITA NO.1984/MUM/2017] LAQSHYA MEDIA P.LTD. ASSESSMENT YEAR-2012-13 THEREFORE, THE SAID DECISION HAS NOT BEEN CONSIDERE D IN ITS ENTIRETY AND THE DECISION OF THE TRIBUNAL IS BASED ONLY ON CERTAIN O BSERVATIONS MADE IN THE CITED ORDER AND THEREFORE, THE ORDER REQUIRE RECTIF ICATION. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR] SUBMITTED THAT THE ASSESSEE WAS MERELY SEEKING A REVIEW OF THE ORDER. 3. WE HAVE CAREFULLY CONSIDERED THE SAME. UPON CARE FUL CONSIDERATION OF PARA 5.6 OF THE STATED ORDER, WE FIND THAT ONLY A PRINCIPLE HAS BEEN DRAWN ON THE STRENGTH OF STATUTORY PROVISIONS TO ARRIVE AT A CONCLUSION THAT SO LONG AS THE TRANSACTIONS IS AN INTERNATIONAL TRANSACTION WI THIN THE FRAMEWORK OF LAW, THE COMPUTATION OF INCOME THERE-FROM HAS TO BE ON THE BASIS OF ARMS LENGTH PRINCIPLE. WHILE ARRIVING AT SUCH A CONCLUSION, ST RENGTH HAS BEEN DRAWN FROM THE CITED DECISION OF THE SPECIAL BENCH. THIS BEING THE CASE, THE SUBMISSION THAT THE CITED DECISION WAS FACTUALLY DI FFERENT AND DISTINGUISHABLE, IN OUR OPINION, CARRY NO WEIGHT. 4. PROCEEDING FURTHER, IN PARA 5.7, THE MATTER OF QUANTIFICATION OF APPROPRIATE APPLICABLE RATE HAS BEEN REMITTED BACK TO THE FILE OF LD. AO / TPO WITH CERTAIN OBSERVATIONS IN THE LIGHT OF ADDIT IONAL EVIDENCES SUBMITTED BY THE ASSESSEE. IT IS MADE CLEAR THAT THE ARMS LE NGTH PRICE OF THE STATED TRANSACTIONS SHALL BE DETERMINED WITHIN THE FRAMEWO RK OF LAW KEEPING IN VIEW THE PRINCIPLE LAID DOWN IN PARA 5.6 OF THE SAID ORDER. NEEDLESS TO ADD THAT THE ASSESSEE IS FREE TO AGITATE THE APPLICABLE RATE OF STATED TRANSACTIONS. 4 ITA NO.11/MUM/2019 [ARISING OUT OF ITA NO.1984/MUM/2017] LAQSHYA MEDIA P.LTD. ASSESSMENT YEAR-2012-13 5. THE MISCELLANEOUS APPLICATION STANDS DISMISSED E XCEPT TO THE EXTENT INDICATED IN PRECEDING PARAGRAPHS. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH MARCH, 2 019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12/03/2019 SR.PS:-JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. $ % / THE APPELLANT 2. &'% / THE RESPONDENT 3. ( $ ) / THE CIT(A) 4. / CIT CONCERNED 5. ( )&* , $* , / DR, ITAT, MUMBAI 6. ) ,-. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.