DCIT, Circle-3(1), Hyderabad, Hyderabad V. Rain Cements Ltd., Hyd, Hyderabad

MA 46/Hyd/2017

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5869 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 09-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SEETHARAM
• Keywords: Transfer pricing; International transaction; Retrospective amendment
• Section: 92B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER M.A. NO. 32/HYD/2017 (IN ITA NO. 222/HYD/2014 ASSESSMENT YEAR: 2009-10) M.A. NO. 33/HYD/2017 (IN ITA NO. 309/HYD/2015 ASSESSMENT YEAR: 2010-11) M/S RAIN CEMENTS LIMITED., (FORMERLY KNOWN AS RAIN CII CARBON (INDIA) LIMITED), HYDERABAD PAN AABCR8858F (APPELLANT) VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), HYDERABAD (RESPONDENT) M.A. NO. 46/HYD/2017 (IN ITA NO. 259/HYD/2016 ASSESSMENT YEAR: 2011-12) DY. COMMISSIONER OF VS. M/S RAIN CEMENTS LIMITED., INCOME- TAX, CIRCLE-3(1) (FORMERLY KNOWN AS RAIN CII HYDERABAD. CARBON (INDIA) LIMITED), HYDERABAD PAN AABCR8858F (APPELLANT) (RESPONDENT) ASSESSEE BY : SMT. SUVIBHA NOLKHA REVENUE BY : SHRI M. SEETHARAM DATE OF HEARING : 13-10-2017 DATE OF PRONOUNCEMENT : 09-11-2017 ORDER M.A NOS.32, 33 &46/HYD/2017 RAIN CEMENTS LTD., HYDERABAD. PAGE 2 OF 7 PER P. MADHAVI DEVI, J.M.: THESE MAS ARE FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE FOR THE A.Y 2009-10, 2010-11 AND 2011-12 RESPECTIVELY, SEEKING RECTIFICATION OF ALLEGED MISTAKES APPEARING IN THE ORDER OF THE TRIBUNAL DATED 26-04-2017 IN ITA NO. 222/HYD/2014, ITA NO. 309/HYD/2015 AND 259/HYD/2016. 2. THE COMMON ISSUE INVOLVED IN ALL THESE APPEALS IS THAT THE ASSESSEE HAD ENTERED INTO AN INTERNATIONAL TRANSACTION OF OFFERING CORPORATE GUARANTEE TO ITS ASSOCIATE ENTERPRISES. THE TRIBUNAL IN ITS ORDER FOR THE A.Y 2009-10 AND 2010-11 HAS HELD 0.50% TO BE REASONABLE CORPORATE GUARANTEE FEE, WHILE IN ITA NO. 259/HYD/2016 FOR THE A.Y 2011-12, THE TRIBUNAL HAD HELD THAT THE TRANSACTION OF CORPORATE GUARANTEE IS NOT AN INTERNATIONAL TRANSACTION AS IT HAS BECOME AN INTERNATIONAL TRANSACTION ONLY BY VIRTUE OF THE AMENDMENT OF SEC. 92B OF THE FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 01-04-2012. TO COME TO THIS CONCLUSION, THE TRIBUNAL FOLLOWED THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AT MUMBAI IN THE CASE OF SIRO CLINPHARM PRIVATE LTD IN ITA NO. 2618/MUM/2014 AND ITA NO.2876/MUM/2014 DATED 31.3.2016, WHEREIN THE TRIBUNAL HAD HELD THAT THE CORPORATE GUARANTEE IS NOT AN INTERNATIONAL M.A NOS.32, 33 &46/HYD/2017 RAIN CEMENTS LTD., HYDERABAD. PAGE 3 OF 7 TRANSACTION PRIOR TO 01-04-2012. IT IS THE CASE OF THE ASSESSEE THAT FOR THE A.YS 2009-10 AND 2010-11 THE FINDING OF THE TRIBUNAL HOLDING 0.50% TO BE THE REASONABLE CORPORATE GUARANTEE FEE IS A MISTAKE APPARENT FROM RECORD, WHILE IT IS THE CASE OF REVENUE THAT FOR THE A.Y 2011-12, THE FINDING OF THE TRIBUNAL THAT IT IS NOT AN INTERNATIONAL TRANSACTION IS A MISTAKE APPARENT FROM RECORD AND THEREFORE THESE MISTAKES NEED TO BE RECTIFIED. 3. IT IS ALSO THE CASE OF THE REVENUE THAT THE CASE LAW OF SIRO CLINPHARM PRIVATE LTD IN ITA NO.2618/MUM/2014 AND ITA NO.2876/MUM/2014 DATED 31.3.2016 HAS NOT BEEN PUT FORWARD TO THE REVENUE AT THE TIME OF HEARING. IN VIEW OF THIS CONTENTION OF THE REVENUE IN THE MA, WE HEARD THE LD. DR AT LENGTH ON THE APPLICABILITY OR OTHERWISE OF THE DECISION OF SIRO CLINPHARM PRIVATE LTD (SUPRA) AND ALSO THE PROSPECTIVE APPLICABILITY OF THE AMENDMENT TO SEC. 92B OF FINANCE ACT WHILE HEARING THESE M.AS. 4. THE LD. DR RELIED UPON PRE-AMENDED DEFINITION OF INTERNATIONAL TRANSACTION U/S 92B OF THE IT ACT AND SUBMITTED THAT THE CORPORATE GUARANTEE WAS ALWAYS AN INTERNATIONAL TRANSACTION EVEN AS PER THE SAID DEFINITION. THE LD. COUNSEL M.A NOS.32, 33 &46/HYD/2017 RAIN CEMENTS LTD., HYDERABAD. PAGE 4 OF 7 FOR THE ASSESSEE ON THE OTHER HAND, SUBMITTED THAT BY VIRTUE OF THE AMENDMENT TO SEC. 92B BY THE FINANCE ACT, THE CORPORATE GUARANTEE HAS BEEN SPECIFICALLY BROUGHT INTO AN INTERNATIONAL TRANSACTION AND THEREFORE IT CANNOT BE TREATED TO BE RETROSPECTIVELY APPLICABLE. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SIRO CLINPHARM PRIVATE LTD (SUPRA) HAS CONSIDERED ALL THE ABOVE ARGUMENTS OF THE REVENUE TO HOLD THAT THE CORPORATE GUARANTEE CANNOT BE TREATED AS AN INTERNATIONAL TRANSACTION PRIOR TO THE AMENDED PROVISION OF U/S 92B OF THE IT ACT WITH EFFECT FROM 01-04-2012 I.E FROM THE A.Y 2013-14 ONWARDS. FURTHER, IT IS ALSO SEEN FOR THE A.YS 2009-10 AND 2010-11, THE ASSESSEE HAD RAISED THE GROUND THAT THE CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION U/S 92B OF THE IT ACT, AS GROUND OF APPEAL NO. 12 BEFORE US. IN VIEW OF THE SAME, WE AGREE THAT THERE IS A MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL DATED 26-04-2017 FOR THE A.YS 2009-10 & 2010-11 IN CONFIRMING THE CORPORATE GUARANTEE FEE AT 0.50% IN ITA NO. 222/HYD/2014 AND 309/HYD/2015 WHILE THERE IS NO MISTAKE APPARENT FROM RECORD M.A NOS.32, 33 &46/HYD/2017 RAIN CEMENTS LTD., HYDERABAD. PAGE 5 OF 7 IN THE ORDER OF THE TRIBUNAL DATED 26-04-2017 IN ITA NO. 259/HYD/2016, WHEREIN THE CORPORATE GUARANTEE HAS BEEN HELD TO BE NOT AN INTERNATIONAL TRANSACTION FOR THE ASSESSMENT YEARS PRIOR TO A.Y 2013-14. IN VIEW OF THE SAME, THE MA FILED BY THE REVENUE IS DISMISSED AND THE MAS FILED BY THE ASSESSEE ARE ALLOWED AND CONSEQUENTLY PARA NOS. 13, 14, 21 & 22 ARE IS RECTIFIED BY SUBSTITUTING THE FOLLOWING: 13. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL AT MUMBAI IN THE CASE OF SIRO CLINPHARM PRIVATE LTD IN ITA NO.2618/MUM/2014 AND ITA NO.2876/MUM/2014 DATED 31.3.2016 HAS HELD THAT THE AMENDMENT TO SEC. 92B BY THE FINANCE ACT WITH RETROSPECTIVE EFFECT FROM 01-04-2002 IS, IN FACT APPLICABLE PROSPECTIVELY I.E FROM 2013-14 ONWARDS. THEREFORE, WE ARE INCLINED TO FOLLOW THIS ORDER THAN THE ORDER IN THE ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEARS CITED SUPRA AS IT GOES TO THE ROOT OF THE MATTER. IN VIEW OF THE SAME, WE HOLD THAT THE CORPORATE GUARANTEE CANNOT BE TREATED AS AN INTERNATIONAL TRANSACTION FOR THE PRIOR TO 01- 04-2012. M.A NOS.32, 33 &46/HYD/2017 RAIN CEMENTS LTD., HYDERABAD. PAGE 6 OF 7 14. IN THE RESULT, GROUND NOS. 12 & 14 ARE ALLOWED AND OTHER GROUNDS I.E NOS. 8 TO 11 AND 14 TO 16 ARE NOT ADJUDICATED AS IT WOULD ONLY RESULT IN AN ACADEMIC EXERCISE. 21. GROUND NOS. 2 TO 8 ARE AGAINST THE TRANSFER PRICING ADJUSTMENT SUGGESTED BY THE TPO ON CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE TO ITS AES IN USA. BRIEF FACTS RELATING TO THIS ISSUE ARE THAT DURING THE FINANCIAL YEAR UNDER CONSIDERATION, THE ASSESSEE THROUGH A COMMON SET OF AGREEMENTS, DATED 17.07.2007, HAS PROVIDED A CORPORATE GUARANTEE FOR A COMBINED LOAN OF USD 150 MILLION. THE ASSESSEE DID NOT CHARGE ANY FEE FOR THE CORPORATE GUARANTEE GIVEN, WHEREAS THE TPO WAS OF THE OPINION THAT THE ASSESSEE HAS TO CHARGE GUARANTEE FEE. WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF SIRO CLINPHARM PRIVATE LTD (SUPRA) AND RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT CORPORATE GUARANTEE IS NOT AN INTERNATIONAL TRANSACTION FOR THE PERIOD PRIOR TO 01-04-2012. IN THE RESULT GROUND NOS. 3 TO 4 ARE ALLOWED. IN VIEW OF THE ABOVE DECISION, THE OTHER GROUNDS NEED NO ADJUDICATION. M.A NOS.32, 33 &46/HYD/2017 RAIN CEMENTS LTD., HYDERABAD. PAGE 7 OF 7 21. IN THE RESULT, GROUND NOS. 3 & 4 ARE ALLOWED AND GROUND NOS. 5 TO 8 ARE NOT ADJUDICATED AS IT WOULD RESULT IN AN ACADEMIC EXERCISE. 6. IN THE RESULT, MAS FILED BY ASSESSEE ARE ALLOWED AND MA FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH NOVEMBER, 2017. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 09 TH NOVEMBER, 2017. KRK COPY TO:- 1. RAIN CEMENTS LTD, RAIN CENTRE, 34 SRINAGAR COLONY, HYDERABAD-500073 2. DCIT, CIRCLE 3(1), HYDERABAD 3) D.R.P, HYDERABAD 4) ADDL. CIT (TP), HYDERABAD 5) DIRECTOR OF INCOME TAX (IT & TP) HYDERABAD 6) CIT-III, HYDERABAD 7)THE DEPARTMENT REPRESENTATIVE, I.T.A.T., HYD. 8) GUARD FILE.