Maanaveeya Development & Finance Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-16(2), Hyderabad

MA 123/Hyd/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3204 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 12 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 04-08-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 03-07-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: B
• Keywords: Rule of consistency; Arm length price; Set aside
• Section: 254(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Before Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member MA Nos.120/Hyd/2022 in ITA No.134/Hyd/2017 Assessment Year: 2011-12 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. ACIT, Circle 16(2), Hyderabad (Petitioner/ Appellant) (Respondent) MA No.121/Hyd/2022 in ITA No.149/Hyd/2017 Assessment Year – 2011-12 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. DCIT, Circle 16(2), Hyderabad. (Petitioner / Appellant) (Respondent) MA No.122/Hyd/2022 in ITA No.565/Hyd/2017 Assessment Year: 2012-13 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. ACIT, Circle 16(2), Hyderabad (Petitioner /Appellant) (Respondent) MA No.123/Hyd/2022 in ITA No.1507/Hyd/2018 Assessment Year – 2013-14 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. DCIT, Circle 16(2), Hyderabad (Petitioner / Appellant) (Respondent) MA No.124/Hyd/2022 in ITA No.1682/Hyd/2018 Assessment Year: 2014-15 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. DCIT, Circle 16(2), Hyderabad (Petitioner/ Appellant) (Respondent) M.A.Nos.120 to 126/Hyd/2022 2 O R D E R Per Laliet Kumar, J.M. These Miscellaneous Applications u/s 254(2) of the Income Tax Act 1961 are filed by the petitioner / assessee aggrieved by the order dt.14.12.2011 thereby seeking to recall or modify the said order. 2. The ld.AR has submitted that the order passed by the Tribunal is required to be recalled and for that purposes, he has made the following submissions : I. That there are certain factual errors in the order passed by the Bench , as it failed to consider the written submissions filled by the assessee. MA No.125/Hyd/2022 in ITA No.1811/Hyd/2018 Assessment Year – 2014-15 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. DCIT, Circle 16(2), Hyderabad. (Petitioner / Appellant) (Respondent) MA No.126/Hyd/2022 in ITA No.1506/Hyd/2018 Assessment Year – 2013-14 Maanaveeya Development & Finance P. Ltd. Hyderabad. PAN : AAECM1085E Vs. DCIT, Circle 16(2), Hyderabad. (Petitioner / Appellant) (Respondent) Assessee by: Sri Y. Ratnakar & Sri B. Satyanarayana Murthy. Revenue by : Sri Solge Jost Kottaram (D.R.) Date of hearing: 05.08.2022 Date of pronouncement: 16.08.2022 M.A.Nos.120 to 126/Hyd/2022 3 II. Tribunal hand not considered the policy issued by the RBI, CPID etc. III. Tribunal had not considered the details of Internal Cup for the purpose of benchmarking the interest on CCD. IV. The Tribunal has not considered the Safe Harbour Rules. V. The Tribunal has not considered the terms of allotment of CCDs , which are duly mentioned on CCDs , which clearly shows that CCD were issued in Indian currency. VI. The Tribunal has wrongly held Arm Length Price(ALP) under Chapter X Income Tax Act 1961 be computed by applying LIBOR plus 200 basic points as against SIB PLR plus (11% p.a.). 3. The assessee had also filed the following Chart showing various factual errors, which were committed by the Bench while passing the impugned order :- S. No. Errors in the order of ITAT for rectification u/s 254(2) Assessee’s Explanation 1 We make it clear first of all that it was very much imperative for the assessee to place on record that all the corresponding CCDs relevant scheme throwing sufficient light qua the currency sought to be forming part thereof'. (Para-5 The evidence available are the debenture bonds and the Financial statements of the respective years. They contain the detailed terms and conditions of CCDs. There is no agreement in writing separately between the parent company and the assessee company. 2 Page 13 (Annexure-B) in assessee's paper book in A.Y. 2012-13 itself makes it clear that the corresponding FD1 had been remitted/received in "Euros" only)". (Para-5) It is true that the funds were remitted by the parent in Dollars/Euros but the CCD application money was credited to the assesse's M.A.Nos.120 to 126/Hyd/2022 4 bank account in Indian rupees after conversion. The order of ITAT does not refer to the conversion into Indian rupees. The CCDs are denominated in INR currency and not a dollar or a Euro currency. 3 Coupled with this, its impugned interest payment has also witnessed foreign exchange fluctuation loss of Rs.39.91 crores as well on account of conversion in foreign currency. (Para-5) If the CCDs are borrowed in foreign exchange and repaid in foreign exchange, the CCD will be foreign exchange borrowing. In the present case, there is no repayment. The entire money received and converted into Indian Rupees and put into debenture bonds and interest on CCDs also paid in INR. At the time of conversion of CCDs into equity shares the dollar value was more than the value when the money was received. This resulted in a loss of Rs.39.91 crores (approx.) which was entirely borne by the lender and not the assessee company. The order was been passed on the erroneous presumption that the assessee company suffered the loss at the time of conversion which is not true. 4 “Coupled with this, the assessee had itself made it clear regarding absence of any agreement qua interest payment as well". (Para-5 The terms are contained in the debenture bonds and the financial statements of the assessee company. There is no separate agreement. The Hon'ble ITAT failed to consider that the absence of any separate agreement did not make any difference as all the terms of the CCDs are available. M.A.Nos.120 to 126/Hyd/2022 5 5 We have already held that the currency involved herein is not “Euro” only”. (Para-6) The currency involved is Euros/dollars in which it is received and converted into Indian rupees. There was never any reconversion of the amount lent into any foreign exchange. 6 The contention that a) that the money lent was converted into rupees and the assessee's bank a/c was credited with Indian rupees. b) that interest was paid at 11% in Indian rupees on INR Denominated CCD's. c) that the loss if any at the time of conversion into share capital is borne by the lender company that is, AE and the assessee company is not liable at all for any such loss. d) that the entire calculations are in Indian rupees. e) Issuance of CCD is part of FDI being quasi-equity in nature and considering the same as a loan would be completely against regulations laid by DIPB, RBI and FEMA. It is to be reiterated that issuance of CCDs was denominated in Indian Rupees and not foreign currency. f) that the details in pages 40 & 56 of paper book filed for asst. year 2012- 13, pages 96 & 98 of case law paper book before Hon'ble ITAT demonstrates that Euros and Dollars were converted into Rupees, CCD were issued at rupee value and those CCDs were converted into shares. g) that page 13 of the paper book filed for asst. year 2011-12 also indicate that CCDs were issued in Indian Rupees. h) That the calculation of interest for all these years by the TPO is on the rupee value and Para 6 enumerates the contentions of the assessee company which escaped the notice of the ITAT while deciding the appeal. 4. Ld.AR submitted the above noted mistakes go to the root of the matter, hence are required to be corrected by the Tribunal being the M.A.Nos.120 to 126/Hyd/2022 6 last fact finding body under the Income Tax Act 1961. For the above said proposition the ld.AR relied upon the following judgments/ decisions : a. Laxmi Electronic Corporation Ltd. Vs. CIT – 188 ITR 398 (All.) b. Honda Siel Power Products Ltd. Vs. CIT – 295 ITR 466 (SC) c. CIT Vs. S.K. Gupta – 327 ITR 267 (All.) d. Lochan Dan Bhatia Hingwala (P) Ltd. Vs. ACIT – 330 ITR 243 (Del.) e. CIT Vs. Reliance Telecom Ltd. – 440 ITR 1 (SC) f. A.R. Antulay Vs. R.S. Nayak – AIR 1988 SC 1531. g. ADIT Vs. Cumbum Co-operative Town Bank Ltd. 5. It was submitted by the ld.AR that though the Hon'ble Supreme Court had held in the case of CIT Vs. Reliance Telecom Ltd in Paras 4 to 6 that the Tribunal has no power to recall the order even if the order was erroneously passed either on facts or on law, however, the said judgment is distinguishable. He submitted that the Hon'ble Supreme Court failed to consider its Judgments in the case of Honda Siel Power Products Ltd. Vs. CIT, Full Bench Judgment in the case of A.R. Antulay Vs. R.S. Nayak and another reported in AIR 1998 SC 1531. Further Hon'ble Supreme Court had not pointed out what was the mistake committed by the ITAT, in the said decision, which is not rectifiable by the Tribunal while exercising its power under section 254. He had submitted that the Tribunal while exercising its power u/s 254 of the Act is empowered to rectify the mistakes which are apparent from the record including the mistakes mentioned in the chart reproduced herein and decided the issue accordingly. M.A.Nos.120 to 126/Hyd/2022 7 6. Per contra, the ld.DR for the Revenue submitted that in the grab of rectification application, the assessee wishes that the Tribunal should revisit the order passed by it and decide the issue in favour of the assessee which amounts to review of its own order by the Tribunal, which is not permissible in law. Ld.DR submitted that rectification of order either on account of fact or law is not permissible in view of the decision of Hon'ble Supreme Court in the case of Reliance Telecom (supra). 7. We have heard the rival contentions and perused the material available on record. In the order passed by Tribunal on 14.12.2021, the Tribunal had analysed the documents mentioned in the paper book at Page 13 referred in Para 5 of its order, whereby the Tribunal had mentioned, that the amount was received in Euro only. Further, the Tribunal had also mentioned that the safe harbour rules were not applicable as is clear from the reading of Para 6 of impugned order dt.14.12.2021 and lastly the Tribunal has decided that the interest rate payable on CCDs would be Libor plus 200 points. 8. In our view, the assessee’s only grievance is that the alleged written submissions filed by the assessee has not been reproduced and considered by the Tribunal while passing the order. In this regard, we may fruitfully refer to Rule 18(6) of the ITAT Rules, 1963 which reads as under : “A perusal of the same shows that only the documents that are referred to and relied upon by the parties during the course of argument alone be treated as part of record of the Tribunal”. From the reading of the above said Rule, it is amply clear that mere filing of any documents or written submissions will not be a ground to mention those documents / written submissions in the order M.A.Nos.120 to 126/Hyd/2022 8 unless those documents or written submissions are relied on or referred to by the assessee / Revenue during the course of arguments. In the present case, the Tribunal had referred to and recorded various submissions made by the Assessee in its order, and thereafter had decided the issue against the assessee. 9. Besides that, after the authoritative pronouncement by the Hon'ble Supreme Court in the case of Reliance Telecom (supra), the Tribunal has limited power to recall the order as circumscribed by the Hon’ble Supreme Court. 10. The decision relied upon by the ld.AR in the case of Honda Seal (supra) is not applicable to the present case as in the said case, the Hon'ble Supreme Court has referred to the principle of consistency and binding nature of the precedent and it was held that once the co-ordinate Bench of the Tribunal has decided the issue, then the Tribunal should not take a contrary view and in that context, the Hon'ble Supreme Court has allowed the M.A. filed by the assessee. But the facts of the present case are not like the facts in Honda Seal (supra). 11. Similarly, in the case of A.R. Antulay Vs. R.S. Nayak and another (supra), the decision relied upon by the assessee was in the context of Criminal Procedure Code / Constitution of India and therefore, the same is distinguishable and not applicable to the facts of the present case. 12. We may draw support from the recent decision of the co- ordinate Bench of the Tribunal in the case of Syed Sikander Ali, vide M.A. No.37/Hyd/2022 order dt.27.07.2022, wherein the Tribunal has held as under:- M.A.Nos.120 to 126/Hyd/2022 9 “4. We have gone through the record in the light of the submissions made on either side. The question now that arises for our consideration is whether any error in judgment which alleged to have been the result of non-consideration of the submissions made on behalf of the assessee in the perspective in which they were projected, would constitute an error apparent on record, so as to be recalled by the Tribunal in exercise of powers under section 254(2) of the Act. 5. Under section 254(2) of the Act, the Tribunal may at any time within six months from the end of the month in which the order was passed, with a view to rectify any mistake apparent from record, amend any order passed by it under sub-section (1), and shall make such an amendment if the mistake is brought to its notice by the assessee or the Assessing Officer. It is, therefore, incumbent upon the miscellaneous applicant to point out that there is mistake in the order that is apparent from the record. This aspect has been considered by the Hon'ble Apex Court in the case of Reliance Telecom Ltd. (supra). 6. In the case of Reliance Telecom Ltd. (supra), Hon'ble Apex Court held that in a case where a detailed order was passed by the ITAT, the said order could not have been recalled by the Appellate Tribunal in exercise of powers under section 254(2) of the Act; that if the assessee was of the opinion that the order passed by the ITAT was erroneous, either on facts or in law, in that case, the only remedy available to the assessee was to prefer the appeal before the High Court; that, therefore, as such, the order passed by the ITAT recalling its earlier order which has been passed in exercise of powers under section 254(2) of the Act is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under section 254(2) of the Act; and that, therefore, the order passed by the ITAT recalling its earlier order is unsustainable, which deserves to be set aside. It was further observed that merely because parties might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors section 254(2) of the Act, and the powers under section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Hon'ble Apex Court held that even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted, and if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the assessee was to prefer an appeal before the High Court. Observing so, the Hon'ble Supreme Court, in the case of Reliance Telecom Ltd. (supra), quashed the order passed by the ITAT, recalling the earlier order.” M.A.Nos.120 to 126/Hyd/2022 10 13. In the light of the above, we are of the opinion that the present Miscellaneous Applications filed by the assessee are not maintainable. Hence, the same are dismissed. 14. In the result, the Miscellaneous Applications filed by the petitioner / assessee are dismissed. Order pronounced in the Open Court on 16th August, 2022. Sd/- Sd/- Sd/- Sd/- (RAMA KANTA PANDA) ACCOUNTANT MEMBER (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 16th August, 2022. TYNM/sps / *Reddygp Copy to: S.No Addresses 1 Maanaveeya Development & Finance P. Ltd. Venugopal & Chenoy, C.A. 4-1-889/16/2, Tilak Road, Hyderabad – 500001. 2 ACIT / DCIT, Circle 16(2), Hyderabad. 3 The Commissioner of Income Tax (Appeals) – 4, Hyderabad. 4 Pr. CIT – 4, Hyderabad. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order