PMP AUTO COMPONENTS P.LTD, MUMBAI V. DCIT RG 7(3)(2), MUMBAI

MA 452/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8305 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 07-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUM; UDOL RAJ SINGH SR A R MA NOS
• Assessee Lawyers: RUNAK DOSHI HARDIK NIRMAL
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Notional interest
• Section: 201; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE S/SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND S/SHRI AMARJIT SINGH, JUDICIAL MEMBER M.A. N O . 452 / M/201 9 (ARISING OUT OF ITA (TP) NO. 587 /MUM/201 7 ) ( / ASSESSMENT YEAR: 201 2 - 13 ) MIRANDA TOOLS PVT. LTD (EARLIER KNOWN AS PMP AUTO COMPONENTS P. LTD.) PENINSULA SPENTA, 2 ND FLOOR, MATHURADAS MILL COMPOUND, SENAPATIBAPART MARG, LOWER PAREL, MUMBAI - 400013. / VS. DCIT CIRCLE 7(3)(2) ROOM NO.12, GROUND FLOOR, AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 400020. / . / . PAN/GIR NO. : AAACP7200N M.A. N O . 453 /M/201 9 (ARISING OUT OF ITA NO. 209 /M/201 6 ) ( / ASSESSMENT YEAR: 2011 - 1 2 ) MIRANDA TOOLS PVT. LTD (EARLIER KNOWN AS PMP AUTO COMPONENTS P. LTD. ) PENINSULA SPENTA, 2 ND FLOOR, MATHURADAS MILL COMPOUND, SENAPATIBAPART MARG , LOWER PAREL, MUMBAI - 400013 . / VS. DCIT CIRCLE 7(3)(2) ROOM NO. 12, GROUND FLOOR, AAYAKAR BHAVA N, M.K. ROAD, MUMBAI - 400020. / . / . PAN/GIR NO. : AAACP7200N ( / APPELLANT ) / APPLICANT .. ( / RESPONDENT ) / DATE OF HEARING: 08 / 11 /2 01 9 /DATE OF PRONOUNCEMENT: 09 / 01 / 2020 ASSESSEE BY: SHRI RUNAK DOSHI / HARDIK NIRMAL REVENUE BY: SHRI UDOL RAJ SINGH (SR. A R) MA NOS. 452 & 453 / MUM/20 1 9 A.Y S . 2012 - 13 & 2011 - 12 ORDER PER AMARJIT SINGH, J M TH IS ORDER SHALL DISPOSE OF THE MISCELLA N EOUS APPLICATION S BEARING NO S. 452 /M/201 9 & 453 /M/201 9 MOVED BY APPLICANT /ASSESSEE ARISING OUT OF ITA. NO. 587 /M/201 7 FOR THE A.Y.2012 - 13 & ITA. NO. 209 /M/201 6 FOR THE A.Y. 2011 - 12 DATED 24 . 0 5 .201 9 . 2. IT IS AVERRED IN THE APPLICATION THAT THE ASSESSEE/APPLICANT HAS RAISED THE GROUND NO.3 MENTIONED BELOW: - GROUND NO. III: ADDITION ON ACCOUNT OF TREATING EQUITY INVESTMENTS IN OVERSEAS SUBSIDAIRY AS A LOAN AND THEREBY MAKING AN ADDITION OF NOTIONAL INTEREST INCOME AMOUNTING TO RS.93,23,585. I. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN LAW. THE LD. AO. PURSUANT TO THE DIRECTIONS OF THE LD. I)RP. ERRE D IN TREATING EQUITY CAPITAL INVESTMENT MADE IN WHOLLY OWNED SUBSIDIARY IN THE PREVIOUS YEARS AS AN INTERNATIONAL TRANSACTION U/S 92B(I) AND RE - CHARACTERIZING THE SONIC AS A LOAN AND CALCULATING NOTIONAL INTEREST ON SUCH LOAN AMOUNTING TO RS. 93,23,585/ - . 2. THE LD. AO FAILED TO APPRECIATE AND OUGHT TO HAVE HELD THAT: THE ASSESSEE HAD MADE INVESTMENT IN ITS SUBSIDIARY IN PREVIOUS YEARS IS ON CAPITAL ACCOUNT. NO FURTHER INFUSION WAS DONE IN THE YEAR UNDER CONSIDERATION. SUCH INVESTMENT CANNOT BE RE - CHARACTE RIZED AS DEEMED LOAN AND THEREFORE. THE QUESTION OF CHARGING NOTIONAL INTEREST ON SUCH INVESTMENT DO NOT ARISE. 3. THE APPELLANT PRAYS THAT THE AFORESAID ADDITION MADE BY THE LA'. AO, PURSUANT TO THE DIRECTIONS OF THE HON 'BLE DRP, HE DELETED OR HE APPROPR IATELY REDUCED. 4. WITHOUT PREJUDICE TO 3 ABOVE THE INTEREST RATE CHARGED SHOULD BE RESTRICTED TO LIBOR + 2%. 3. IN THE TRIBUNAL HAS GIVEN THE FINDING IN PARA NO.23 WHICH IS HEREBY REPRODUCED AS UNDER: - 23. BY HONORING THE DECISION OF THE HON'BLE ITAT I N ASSESSEE S OWN CASE (SUPRA). WE REMIT THE ISSUE TO THE AO/TPO TO DETERMINE THE ISSUE ON THE SIMILAR GUIDELINE AS DISCUSSED ABOVE. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN THIS REGARD, THE APPLICANT WOULD LIKE TO DRAW THE A TTENTION OF THE HONBLE TRIBUNAL AT PARA 21 ON PAGE 20 OF THE APPELLATE ORDER OF THE TRIBUNAL. RELEVANT EXTRACT IS PRODUCED HEREIN UNDER: MA NOS. 452 & 453 / MUM/20 1 9 A.Y S . 2012 - 13 & 2011 - 12 - 21. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION ON ACCOUNT OF TREATING EQUITY INVESTMENT IN OVERSEAS SUBSIDIARY AS LOAN AND THEREBY MAKING AN ADDITION OF NOTIONAL INTEREST INCOME. AT THE VERY OUTSET. THE LIT REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE &LIE HAS DULY BEEN COVERED BY THE DECISION OF THE HON 'HE 1TAT IN THE ASSESSEE'S OWN CASE FOR THE A.12009.10 IN ITA. NO.1484/M/2014, THEREFORE, IN THE SAID CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ALLOWED. COPY OF ORDER DATED 2208.2014 PASSED IN THE ASSESSEE SE BEARING ITA.NO.1484/M/2014 FOR THE A.Y 2009 - 10 IS ON THE FILE IN WHICH THE FOLLOWING FINDING HAS BEEN GIVEN AS UNDER.: 4. IT IS STATED THAT THE TRIBUNAL HAS DECIDED THE MATTER OF CONTROVERSY ON THE BASIS OF DECISION IN THE ASSESSEES OWN CASE IN ITA. NO.1484/M2014 DATED 22.08.2014 FOR THE A.Y.2009 - 10 , THEREAFTER , THE SAID ORD ER WAS RECAL LED . THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE HONBLE HIGH COURT IN THE ASSESSEES OWN CASE LIES AT PAGE NO. 48 TO 58 OF THE PAPER BOOK. IT IS CONTENDED THAT IT IS A APPARENT MISTAKE ON RECORD WHICH IS LIABLE TO BE RECTIFIED IN THE INTEREST OF JUSTICE. 5 . NOTICE GIVEN. 6 . WE HAVE HEARD THE ARGUMENT ADVANCED BY THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. UNDOUBTEDLY, THE HONBLE ITAT HAS GIVEN THE FINDING IN PARA NO.23 AS UNDER: - 23. BY HONORING THE DECISION OF THE HON'BLE ITAT IN ASSESSEE S OWN CASE (SUPRA). WE REMIT THE ISSUE TO THE AO/TPO TO DETERMINE THE ISSUE ON THE SIMILAR GUIDELINE AS DISCUSSED ABOVE. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. IN THIS REGARD, THE APPLICANT WOU LD LIKE TO DRAW THE ATTENTION OF THE HONBLE TRIBUNAL AT PARA 21 ON PAGE 20 OF THE APPELLATE ORDER OF THE TRIBUNAL. RELEVANT EXTRACT IS PRODUCED HEREIN UNDER: - 21. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE ADDITION ON ACCOUNT OF TREATING EQUITY INV ESTMENT IN OVERSEAS SUBSIDIARY AS LOAN AND THEREBY MAKING AN ADDITION OF NOTIONAL INTEREST INCOME. AT THE VERY OUTSET. THE LIT REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE &LIE HAS DULY BEEN COVERED BY THE DECISION OF THE HON 'HE 1TAT IN THE ASSESSEE 'S OWN CASE FOR THE A.12009.10 IN ITA. NO.1484/M/2014, THEREFORE, IN THE SAID CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ALLOWED. COPY OF ORDER DATED 2208.2014 PASSED IN THE ASSESSEE SE BEARING ITA.NO.1484/M/2014 FOR THE A.Y 2009 - 10 IS ON TH E FILE IN WHICH THE FOLLOWING FINDING HAS BEEN GIVEN AS UNDER.: 7. THE ISSUE HAS DECIDED IN FAVOUR OF THE ASSESSEE BY RELYING UPON THE DECISION IN THE ASSESSEES OWN CASE FOR THE A.Y.2009 - 10 IN ITA. MA NOS. 452 & 453 / MUM/20 1 9 A.Y S . 2012 - 13 & 2011 - 12 NO.1484/M/2014 DATED 22.08.2014. THIS ORDER HAS BEEN RECALLED AND IN THIS REGARD THE ORDER LIES AT PAGE NO. 117 TO 119 OF THE PAPER BOOK . THE ORDER WAS PASSED BY HONBLE ITAT IN M.A. NO. 435/M/2014 DATED 31.05.2016. NO DOUBT, AT THE TIME OF ARGUMENTS, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ALSO PLACED REL IANCE UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN HIS OWN CASE LIES AT PAGE NO. 48 TO 58 OF THE PAPER BOOK. THEREFORE, WE ARE OF THE VIEW THAT THERE IS AN ERROR CREPT IN THE ORDER WHILE DECIDING THE ISSUE NO.3, THEREFORE, WE RECALLED THE ORDER FOR THE LIMIT ED PURPOSE TO DECIDE THE ISSUE NO.3 IN ITA. NO. 7724 /M/201 4 AFRESH IN ACCORDANCE WITH LAW, T HEREFORE, WE RECALLED THE ISSUE NO.3 AND DIRECT THE REGISTRY TO REFIX THE MATTER IN DUE COURSE OF TIME. THE PRESENT MISCELLANEOUS APPLICATION IS HEREBY ALLOWED ACCORDINGLY . IN THE RESULT , THE MISCELLANEOUS APPLICATION S FILED BY THE ASSESSEE ARE HERE BY ORDERED TO BE ALLOWED ACCORDINGLY . ORDER WAS PRON OUNCED IN TH E OPEN COURT ON 09 /01 / 20 20 SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI, DT: 09 /01 / 2020 V IJAY /SR. PS COPY TO : 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) 4 . THE CIT 5 . THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE, J , BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES