ZEE ENTERTAINMENT ENTERPRISES LIMITED, MUMBAI V. ADDL. COMM OF INCOME TAX RANGE-11 (1), MUMBAI

MA 274/MUM/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5034 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-03-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: JAI BHANSALI
• Keywords: Transfer pricing; International transaction; Period of limitation; Block assessment; Time period of passing order; Rule 8D
• Section: 14A; 254(2); 158BD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “J" BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND MS KAVITHA RAJAGOPAL, HON'BLE JUDICIAL MEMBER MA. No. 274/MUM/2021 [ARISING OUT OF ITA.No. 3406/MUM/2014 (A.Y. 2008-09)] Zee Entertainment Enterprises Limited 18 th Floor, A Wing, Marathon Futurex N.M. Joshi Marg, Lower Parel Mumbai - 400013 PAN: AAACZ0243R v. Addl. CIT – Range – 11(1) 8 th Floor, Room No. 804 Old CGO Building Mumbai (Appellant) (Respondent) Assessee by : Shri Niraj Sheth & Shri Jai Bhansali Department by : Shri Mehul Jain Date of Hearing : 11.02.2022 Date of Pronouncement : 10.03.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this miscellaneous application assessee states that there are certain mistakes crept in the order of the Tribunal passed in ITA.No. 3406/MUM/2014 dated 05.05.2017 for the A.Y.2008-09. MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 2 2. Brief facts involved in this miscellaneous application are, the case of the assessee was selected for scrutiny and the matter was referred to Transfer Pricing Officer (TPO). During proceedings TPO asked the assessee to show cause as to why no transfer pricing adjustment should not be made in respect of the transaction of corporate guarantee given by the assessee by bench marking the guarantee commission @3% of the average loan amount outstanding. The assessee objected and contended before TPO that providing guarantee did not have any bearing on the profits, income, losses or assets of the assessee and therefore did not constitute international transactions. The TPO rejected the above contention of the assessee and proceeded to bench mark the corporate guarantee @3% to the average loan amount outstanding. On the recommendation of the TPO, Assessing Officer made the above addition and additionally Assessing Officer also disallowed disallowance u/s. 14A applying Rule 8D(2)(iii) of I.T. Rules. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) sustained the additions made by the TPO/Assessing Officer. 3. Aggrieved assessee preferred appeal before ITAT raising grounds of appeal in this regard. During the hearing assessee relying upon the decision of the Coordinate Bench in the case of Marico Ltd. v. ACIT MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 3 [70 taxmann.com 214], submitted that it is outside the ambit of international taxation. Further submitted that, where the assessee had not incurred any cost or had not borne virtually no risk, no transfer pricing adjustment was warranted or it best the alleged guarantee commission should be bench marked at 0.20% as held in the Coordinate Bench decision in the case of Asian Paints Ltd. v. Addl. CIT. Further he submitted that, without prejudice, that addition on account of transaction on corporate guarantee should not exceed 0.5% of the average outstanding balance of loan taken by the ATL. Assessee also made detailed submissions on disallowance u/s. 14A of the Act before the bench. After considering the submissions of both the counsels, the ITAT partly allowed the appeal of the assessee, with regard to issue of corporate guarantee by restricting the addition on corporate guarantee to 0.5% as opposed to 3% made by the Assessing Officer by relying on the Hon'ble Bombay High Court decision in the case of CIT v. Everest Kanto Cylinders Ltd., [378 ITR 57]. With regard to disallowance u/s.14A of the Act, ITAT deleted the disallowance of interest made by the Assessing Officer, however, confirmed the disallowance of 0.5% of average tax free investments as provided under Rule 8D(2)(iii) of I.T.Rules. MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 4 4. Aggrieved with the above order, assessee preferred appeal before Hon'ble Bombay High Court contenting that corporate guarantee and guarantee commission did not constituted as international transactions and ITAT erred in sustaining the disallowance u/s. 14A r.w. Rule 8D(2)(iii) of I.T.Rules, contesting that ITAT has not considered the primary plea raised before it that corporate guarantee is outside the purview of international transaction and with regard to disallowance u/s.14A of the Act, in order to calculate disallowance u/s. 14A r.w. Rule 8D(2)(iii) of I.T.Rules only investment which have earned exempt income ought to be considered. The Hon'ble High Court vide order dated 26.10.2021 observed that assessee ought to have filed the Miscellaneous Application before ITAT. The relevant extract of the order is reproduced below: - “2. Mr. Bhansali stated that what the Tribunal has recorded is not correct and appellant had in fact emphasized on the primary plea as well. In our view when that was the case, appellant could have filed Miscellaneous Application, if advised before the Income Tax Appellate Tribunal (for short, ITAT), which has not been done.” 5. Based on the above observation of the Hon'ble High Court, now assessee filed Miscellaneous Application contesting the order of the ITAT in which ITAT has not considered the emphasis made by the assessee MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 5 on primary plea relating to corporate guarantee and disallowance u/s.14A of the Act. 6. It is fact on record that the present Miscellaneous Application is filed on 12.11.2021 against order passed by the ITAT dated 05.05.2017. As per the new amendment to section 254(2) of the Act, the Miscellaneous Application can be filed at any time within six months from the end of the month in which order was passed with a view to rectify any mistake apparent on record. It is fact on record assessee has filed this Miscellaneous Application after above said limitation period as per the amended section and only upon the observation of the Hon'ble High Court it preferred to file the present Miscellaneous Application with a plea to condone the delay for filing the Miscellaneous Application considering the peculiar aspect and circumstances of the present case. In this regard he heavily relied on the decision of the ITAT Ahmadabad Bench in the case of Shri Bipinchandra Chimanlal Doshi v. DCIT in M.A. No. 215/AHD/2017 dated 02.12.2020 and also he relied on the decision of the ITAT Ahmadabad in the case of Rameshbhai V. Prajapati v. DCIT [127 taxmann.com 674] and ITAT Mumbai bench in the case of Mafatlal Securities Ltd. v. Joint CIT [119 MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 6 ITD 444]. For the purpose of record. Ld. AR also filed the copies of Hon'ble High Court order dated 26.10.2021 and 17.11.2021. 7. Ld. AR further submitted with reference to the Hon'ble Bombay High Court order dated 17.11.2021 that assessee had made submissions before Hon'ble Bombay High Court that assessee has preferred Miscellaneous Application before ITAT and if the Miscellaneous Application is allowed, perhaps appellant may not have to press this appeal. Based on the above submissions, Hon'ble High Court allowed the assessee to withdraw the appeal with liberty to file the fresh appeal raising of grounds including grounds raised in this appeal should the ITAT hold against appellant in the Miscellaneous Application. 8. With reference to above withdrawal of appeal by the assessee Ld.AR submitted that considering the special aspect and circumstances in the similar situation in Ahmadabad Bench in M.A. No. 215/AHD/2017 dated 02.12.2020, in the similar situation the order was recalled after four years, with reference to the date of appellant order by the Tribunal which is sought to be rectified. He brought to our notice the facts of the above said Miscellaneous Application and prayed that applying the above MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 7 ratio this Miscellaneous Application should also be entertained and recalled for adjudication. 9. On the other hand, Ld. DR submitted that case relied by Ld. AR is distinguishable and submitted that the order sought to be rectified now by the assessee in which the ITAT has passed the order after detailed discussion and dealt with the issue on merit. Therefore, the merit in the case relied by the Ld. AR relating to the Miscellaneous Application passed by the ITAT Ahmadabad bench cannot be relied. By relying on the order of CIT v. Reliance Telecom Ltd., [133 taxmann.com 41 (SC)] submitted that the Hon'ble Supreme Court held that the ITAT order could not be completely recalled by Tribunal in exercising of powers u/s.254(2) of the Act as the power granted u/s. 254(2) were only to rectify/correct any mistake apparent from the record. He submitted that there is no such mistake apparent on record, therefore the Miscellaneous Application should not be entertained. 10. Considered the rival submissions and material placed on record, we observe from the record that the present Miscellaneous Application is filed beyond the period of limitation allowed in amended section u/s.254(2) of the Act, as per the amended section Miscellaneous MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 8 Application can be filed within six months from the end of the month in which order was passed. In the given case certainly the limitation period is already over. Further Ld. AR submitted that the assessee filed the present Miscellaneous Application considering peculiar situation and circumstances and as per the directions of the Hon'ble Bombay High Court that the assessee should have filed Miscellaneous Application before ITAT. Ld. AR heavily relied on M.A. No. 215/AHD/2017 in which the ITAT Ahmadabad Bench has accepted the peculiar situation in the above said case and recalled the order even though the ITAT order was passed beyond the period of limitation i.e. four years. 11. We have considered the facts in the above case in which the facts are, assessee filed appeal against block assessment order passed by the Assessing Officer which was sustained by the Ld.CIT(A). The ITAT annulled the above assessment framed as invalid on the contours of section 158BD of the Act and consequently the assessment proceedings u/s.158BC of the Act in pursuance of jurisdiction wrongly acquired u/s.158DB of the Act was found to be bad and void ab initio. Since the ITAT annulled the block assessment it has left the other grounds of appeal on merits of addition remained un-adjudicated. MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 9 12. The revenue challenged the order of the ITAT and Hon'ble Gujarat High Court revised the order of the ITAT and set aside the Tribunal order dated 15.05.2009 by virtue of which the jurisdiction issue was adjudicated against the assessee. Subsequently, Special Leave Petition (SLP) was filed against the order of the Hon'ble Gujarat High Court before the Hon'ble Supreme Court and the SLP was however dismissed by the Hon'ble Supreme Court on 14.07.20017. Resultantly the jurisdictional issue was decided in favour of the Revenue. In light of the above fact, the Miscellaneous Application was filed by the assessee on 19.07.2017 i.e. within the period of 5 months from the date of Hon'ble Gujarat High Court decision on 27.02.2017 with reference to the legal point but belatedly after four years on limitation period. 13. In the Miscellaneous Application assessee sought recall of the order of the ITAT for adjudication of undecided other grounds. After considering the merits of the case and pursuing the facts, ITAT has addressed only the jurisdictional issue and did not touch upon the other grounds on merits and subsequently the Hon'ble Gujarat High Court and Hon'ble Supreme Court reversed the jurisdiction issue made by the ITAT and there is a live link with the judicial proceedings. The ITAT found that the case of the assessee should be entertained and allowed to recall MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 10 the above order in order to adjudicate on the other grounds which were not adjudicated earlier. 14. Coming to the present Miscellaneous Application filed by the assessee, we observe that ITAT has passed the order after duly considering the facts on record and adjudicated the issue. However, considered the primary issue raised by the assessee at the time of appeal which was alternate plea. It is the decision of the bench not to adjudicate on the alternate plea. We observe from the record that ITAT has considered all the aspects of the issues and came to the conclusion based on the material available on record. Since the assessee has raised several issues and ITAT has pondered upon the merits of the case relying the decision of the Hon'ble Jurisdictional High Court, therefore, there is no mistake apparent on record. The situation in the present Miscellaneous Application is totally different and there is no live link to the judicial proceedings and only upon certain remark made by Hon'ble High Court. This remark was made certainly after the expiry of limitation period. We observe from the record that there is absolutely no mistake apparent from the record and it is only non adjudication of alternate plea raised by the assessee. Therefore, the Miscellaneous Application filed by the assessee is beyond the period of limitation and MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 11 as per the amended provision Miscellaneous Application can be filed within six months from the end of the month in which order was passed. Therefore, in the present case the assessee has failed to present Miscellaneous Application within the period of limitation and also the issue raised by the assessee amount to review of the order which in our humble view ITAT has no power to review its own order. Other decision relied by the Ld. AR are relating to the period prior to amendment made to section 254(2) of the Act and distinguishable. Therefore, Miscellaneous Application filed by the assessee is dismissed. 15. In the net result, Miscellaneous Application filed by the assessee is dismissed. Order pronounced on 10.03.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board Sd/- Sd/- (KAVITHA RAJAGOPAL) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 10/03/2022 Giridhar, Sr.PS MA. No. 274/MUM/2021 Zee Entertainment Enterprises Limited 12 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER, (Asstt. Registrar) ITAT, Mum