DCIT 5(1)(2), V. DINURJE JEWELLERY P. LTD,

MA 419/MUM/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 2830 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KUMAR BORA
• Keywords: Transfer pricing; International transaction; Notional interest
• Section: 92C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES K MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER M.A. NO.419/MUM/2014 ( ARISING OUT OF ITA NO.5875/MUM/2013, ASSESSMENT YEAR 2008-09) DY.COMMISSIONER OF INCOME-TAX 5(1), ROOM NO.568, 5 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 / VS. DINURJE JEWELLERY PVT. LTD. GE-8041/42, 8 TH FLOOR, GTOWER, BHARAT DIAMOND BROSE, G-BLOCK, BKC, BANDRA (E), MUMBAI 400 051 ! ./ '# ./ PAN/GIR NO. : AACCD3988P (APPLICANT) .. RESPONDENT ) APPLICANT BY: SHRI. VIJAY KUMAR BORA REVENUE BY : SHRI JITENDRA JAIN $ % / DATE OF HEARING : 20/02/2015 &'( $ % / DATE OF PRONOUNCEMENT : 20/02/2015 ) / O R D E R PER I.P.BANSAL, J.M: VIDE MISCELLANEOUS APPLICATION FILED AS ABOVE THE R EVENUE IS CLAIMING THAT A MISTAKE HAS CREPT IN THE ORDER OF THE TRIBUNAL WHE N THE BENEFIT OF PROVISO OF SAFE HARBOUR WAS GRANTED TO THE ASSESSEE. 2. THE GROUNDS ON WHICH THE REVENUE IS SEEKING RECT IFICATION IN THE APPLICATION ARE AS FOLLOWS: M.A. NO.419/MUM/2014 2 (1) THE HONBLE ITAT HAS ERRED IN APPLYING THE FOR MULA FOR +/- 5% MARGIN AS DISCUSSED IN PARA 7.4 OF ITATS ORDER AS ASSESSEE HAS NOT CHARGE D ANY INTEREST FROM THE AE ON DELAYED PAYMENT OF INTEREST RECEIVED. WHEN THE ASSESSEE HA S NOT CHARGED ANY INTEREST FROM THE AE, HE WILL NOT GET THE BENEFIT OF SECOND PROVISO TO S ECTION 92C OF INCOME TAX ACT, 1961. 2. WITHOUT PREJUDICE TO ABOVE THE INTEREST RATE AP PLIED BY HONBLE ITAT IS 7% FOR THE PURPOSE OF CALCULATION. IF ASSESSEE HAS CHARGED ZE RO INTEREST THE DIFFERENCE IN INTEREST RATE WILL BE MORE THAN 5% AND BENEFIT OF SECOND PROVISO TO SECTION 92C WILL NOT BE AVAILABLE TO ASSESSEE. 2.1 THE ASSESSEE DID NOT CHARGE INTEREST ON DELAYED PAYMENT RECEIVABLE FROM AE. THEREFORE, TP ADJUSTMENT OF RS.7,02,95,833/- WAS MA DE. IT WAS ONE OF THE CONTENTIONS OF THE ASSESSEE THAT ASSESSEE IS ALSO CHARGING SUCH INTEREST EVEN FROM NON-AES AND RELIANCE WAS PLACED ON THE HONBLE BOM BAY HIGH COURT DECISION IN THE CASE OF CIT VS. INDO AMERICAN JEWELLERY LTD., 44 TA XMANN.COM 310(BOM) IN WHICH IT WAS HELD THAT WHEN THERE IS A COMPLETE UNIFORMITY IN THE ACT OF THE ASSESSEE IN NOT CHARGING INTEREST FROM BOTH THE AE AND NON-AES DEBT ORS AND IF DELAY IN REALIZATION OF BOTH THE CASES IS SAME, THEN THE TRIBUNAL WAS RIGHT IN DELETING NOTIONAL INTEREST ON OUTSTANDING AMOUNT OF EXPORT AND PROCEEDS WHICH WERE REALIZED BELATEDLY. ON THESE SUBMISSIONS OF THE ASSESSEE, FOLLOWING THE A FOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT, IT WAS HELD BY THE TRIBUNAL THA T TO THE EXTENT OF DELAY OF 173 DAYS WHICH IS ALSO IN THE CASE OF NON-AES, TO THAT EXTENT NON CHARGING OF INTEREST BY THE ASSESSEE FROM ITS AE WOULD NOT CALL FOR DETERMI NATION OF ALP. AS THE DELAY IN REALIZATION OF PAYMENT IN THE CASE OF AES WAS 193 D AYS, FOR REST OF THE 20 DAYS IT WAS HELD THAT THE AMOUNT OF INTEREST BEING RS.9.70 LAC S WAS WITHIN THE +/- RANGE OF 5% AND VIDE PARA 7.5 IT WAS HELD THAT NO TP ADJUSTMEN T WAS CALLED FOR. FOR THE SAKE OF COMPLETENESS PARA 7.4 AND 7.5 ARE REPRODUCED BELOW: 7.4 THE ABOVE CALCULATIONS OF THE ASSESSEE HAVE NO T BEEN DISPUTED BY THE REVENUE AT ANY STAGE OF THE PROCEEDINGS. THEREFORE , WE ARE OF THE OPINION THAT ADDITION, IF ANY, CAN BE MADE ONLY TO THE EXTENT O F RS.9.70 LACS AS CALCULATED ABOVE AND THIS AMOUNT WILL ALSO FALL WITHIN THE +/- 5% RANGE, THEREFORE, NO M.A. NO.419/MUM/2014 3 ADDITION CAN BE MADE AS TRANSFER PRICING ADJUSTMENT EVEN ON ACCOUNT OF NON- CHARGING OF INTEREST FOR BELATED PAYMENT RECEIVED F ROM AES. 7.5 IN VIEW OF ABOVE DISCUSSION WE HOLD THAT NO AD DITION ON ACCOUNT OF TP ADJUSTMENT IN THE PRESENT CASE IS CALLED FOR AND THE ADDITION CONFIRMED BY LD. CIT(A) IS DELETED AND THE APPEAL FILED BY THE ASSE SSEE IS ALLOWED. 2.2 THUS, IT IS THE CASE OF THE REVENUE THAT TO THE EXTENT IT RELATES TO RS.9.70 LACS, SINCE NO INTEREST WAS CHARGED BY THE ASSESSEE FROM ITS AE EVEN FOR 20 DAYS, THEN INTERNATIONAL TRANSACTION OF THE ASSESSEE TO THAT E XTENT WOULD NOT BE AT ALP AND, THEREFORE, ADDITION TO THAT EXTENT HAS BEEN INCOR RECTLY DELETED. NET RECEIVABLE AMOUNTS BY THE ASSESSEE FROM ITS AE WAS A SUM OF RS .25.27 CRORES ON WHICH, IF THE INTEREST IS CALCULATED @ 7% FOR 20 DAYS, THEN THE S AME WOULD COME TO RS.9.70 LACS. THE REVENUE HAS SUBMITTED THE FOLLOWING CALCULATION TO SAY THAT +/- 5% RANGE IN THE PRESENT CASE WOULD A SUM OF RS.6.92 LACS AS THE ASS ESSEE DID NOT CHARGE INTEREST OF RS.9.70 LACS FOR 20 DAYS ON THE AMOUNT OF RS.25.27 CRORES THE AMOUNT OF ADDITION WOULD NOT FALL WITHIN +/- 5% RANGE. NET RECEIVABLE = RS. 25.27 CR. INTEREST RATE AS PER THE DISCUSSION IN THE HONBLE ITAT ORDER = 7% PERIOD DISCUSSED AS PER THE HONBLE ITAT ORDER = 20 DAYS +/- 5% COMPUTATION: 0% = RS.0 5% = 25.27*5%* 20 DAYS/365 = RS.6.92 LAKHS. HENCE THE RANGE IS 0 TO 6.92 LAKHS. INTEREST COMPUTATION ON 7% 25.27 CR*7%*20 DAYS/365 = RS.9.70 LAKHS. THUS, IN SHORT IT IS THE CASE OF THE REVENUE THAT A DDITION TO THE EXTENT OF RS.9.70 LACS HAS WRONGLY BEEN DELETED AND TO THAT EXTENT THERE I S MISTAKE IN THE ORDER AND THE SAME SHOULD BE RECTIFIED. M.A. NO.419/MUM/2014 4 3. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY CONSIDERED. WE SEE FORCE IN THE CONTENTION OF THE REVENUE THAT THERE IS MISTAKE IN THE ORDER OF THE TRIBUNAL TO THE EXTENT THAT ADDITION OF 9.70 LACS WAS REQUIRED TO BE UPHELD FOR THE REASON THAT THE SAME WOULD NOT FALL WITHIN THE +/- 5% RANGE. THEREFORE, WE AMEND PARA 7.4 AND 7.5 AS UNDER: 7.4 THE ABOVE CALCULATION OF THE ASSESSEE HAVE NO T BEEN DISPUTED BY THE REVENUE AT ANY STAGE OF THE PROCEEDINGS . THEREFOR E, WE ARE OF THE OPINION THAT ADDITION, IF ANY, SHOULD BE RESTRICTED ONLY TO A SUM OF RS.9.70 LACS AS CALCULATED ABOVE. 7.5 IN VIEW OF ABOVE DISCUSSIONS, WE HOLD THAT ADD ITION OF RS.9.70 LACS IS REQUIRED TO BE MADE AND REST OF THE ADDITION CONFIR MED BY LD. CIT(A) IS DELETED. THE APPEAL FILED BY THE ASSESSEE IS CONSIDERED TO B E PARTLY ALLOWED. 3.1 CONSEQUENTIAL TO THE ABOVE, THERE WILL BE RECT IFICATION IN PARA 13 ALSO WHICH WILL READ AS UNDER: 13. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND APPEAL FILED BY THE REVENUE IS DISMISSED. 4. IN THE RESULT, THE MISCELLANEOUS APPLICATION FI LED BY THE REVENUE IS ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON 20/02/2014 ) $ &'( * + , 20/02/2014 ' $ - . SD/- SD/- (D.KARUNAKARA RAO) (I.P.BANSAL) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; + DATED 20/02/2015 M.A. NO.419/MUM/2014 5 ) ) ) ) $ $$ $ /%0 /%0 /%0 /%0 10(% 10(% 10(% 10(% / COPY OF THE ORDER FORWARDED TO : 1. !2 / THE APPELLANT 2. /3!2 / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 05- /% , , / DR, ITAT, MUMBAI 6. - 6 / GUARD FILE. ) ) ) ) / BY ORDER, 30% /% //TRUE COPY// 7 77 7 / 8 8 8 8 ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS