SHREE RENUKA SUGARS LIMITED,BELAGAVI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, BELGAUM, BELGAUM

ITTPA 238/PAN/2024

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Shree Renuka Sugars Limited appealed against the final assessment order passed by the Assessing Officer (A.O.) under sections 143(3) read with 144C(13) of the Income Tax Act, 1961, which was based on the directions from the Dispute Resolution Panel (DRP). The primary contention was regarding the determination of the Arm's Length Price (ALP) of interest paid on advances received against sales, which was set at nil by the lower authorities. The company argued that the interest charged at LIBOR+1% to its Associate Enterprise, Wilmar Sugar Holding Pte Ltd, Singapore, was in line with the agreement and should be considered in the ALP determination. The TPO had made an ALP adjustment of INR 3,87,29,158 based on this interest. The Tribunal found that the DRP and TPO might have overlooked critical evidence and the commercial rationale behind the transactions, leading to the remand of the issue back to the DRP for a comprehensive re-evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 706051 (ITAT-PANAJI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CAPT PRADEEP ARYA
• Assessee Lawyers: NARENDRA JAIN
• Keywords: Transfer pricing; International transaction; Commercial expediency
• Section: 143(3); 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH PANAJI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI G D PADMAHSHALI ACCOUNTANT MEMBER I T(TP)A.No. 238/PAN/2024 (A.Y.2020-21 ) Shree Renuka Sugars Limited, Kanakashree Arcade, JNMC Road, NehruNagar, Belagavi-590010, Karnataka. Vs. National e – Assessment Unit, Income Tax Department, Delhi. PAN/GIR No.:AADCS1728B Appellant .. Respondent Appellant by : Shri.Narendra Jain. AR Respondent by : Shri.Capt Pradeep Arya.DR Date of Hearing 25.06.2025 Date of Pronouncement 01.07.2025 आदेश / O R D E R PER PAVAN KUMAR GADALE, JM: The assessee has filed the appeal against the order of the Assessing Officer passed u/s 143(3) r.w.s 144C(13) of the Income Tax Act, 1961 passed in pursuance to the directions of the Dispute Resolution Panel (DRP) u/s 144C(5) of the Act. The assessee has raised grounds of appeal challenging the action of lower authorities in determining the ALP of interest paid on advance received IT(TP)A No. 238/PAN/2024 Shree Renuka Sugars Limited - 2 - against sales as Nil and also the lower authorities erred in passing the orders without considering the submissions and evidences. 2. The Brief facts of the case are that, the assessee company is engaged in the business of manufacturing of sugar, whole sale and retail trade. Further the assesse is also engaged in production, collection and distribution of electricity. The assessee has filed the return of income electronically for A.Y.2020-21 on 13.02.2021 declaring a total loss of Rs.387,15, 74,000/- under normal provisions of the Act and Book profit u/sec115JB of the Act is Rs.Nil and the return of income was processed u/sec 143(1)(a) of the Act. Subsequently, the case was selected for scrutiny under the E-assessment scheme CASS and the notice u/sec 143(2) and u/sec 142(1) of the Act was issued along with questionnaire. In compliance the assesse has complied with the details and information from time to time in ITBA portal. The Assessing officer (A.O) on perusal of the financial statements found that the assessee has international transactions with its Associate Enterprises (AE) and therefore the matter was referred to the Transfer Pricing Officer (TPO) for determination of Arm’s Length Price (ALP). The TPO on receipt of the directions of the A.O. has called for the information in support of ALP computed as per Form.no.- IT(TP)A No. 238/PAN/2024 Shree Renuka Sugars Limited - 3 - 3CEB. Whereas, the assessee has submitted the details and documents relating to the international transactions with its Associate Enterprises(AE) and the basis of computation of ALP.On the disputed issue in respect of charging of interest on advances against sales, the TPO found as per Form no.3CEB that the assessee has paid interest on advances against sales @Libor+1% to Wilmar Sugar Holding Pte Ltd Singapore and dealt on the benchmarking of interest and objections/submissions of the assesse at Para 4& 5 of the T.P.O order. Accordingly the TPO has made ALP adjustment of international transactions with interest on advance against sales of Rs.3,87,29,158/- and passed the order u/s 92CA(3) of the Act dated 28.07.2023. 3. The A.O. after the receipt of the TPO order, has passed a draft assessment order on 29.09.2023 u/s 144C(1) of the Act with (i) disallowance of trade advances of Rs.9,12,40,400/-and (iii) the Transfer pricing adjustment of Rs.3,87,29,158/- and assessed the total loss of Rs.365,72,24,250/-. The assessee aggrieved with the draft assessment order has filed the objections in Formno-35A with the Dispute Resolution Panel (DRP). The DRP has passed the directions u/s 144C(5) of the Act vide order dated 18.06.2024. Subsequently, the A.O. after the receipt of the orders of the DRP, has passed the final IT(TP)A No. 238/PAN/2024 Shree Renuka Sugars Limited - 4 - assessment order with ALP of interest on advance against sales of Rs.3,87,29,158/- and trade advance disallowance of Rs.3,87,29,158/- and assessed the total loss of Rs.365,72,24,250/-and passed the order u/s143(3) r.w.s 144C(13) of the Act on 26-07-2024. Aggrieved by the order of the AO, the assessee has filed an appeal before Honble Tribunal. 4. At the time of hearing the Ld.AR submitted that the Ground of appeal No.1 is general in nature. And the transfer pricing grounds of appeal are no 2 to 5. The Ld. AR submitted that the DRP has erred in confirming the action of the TPO in making the adjustment of interest on advances against sales @Libor+1% to Wilmar Sugar Holding Pte Ltd Singapore,its AE in the ordinary course of business as per the agreement entered and also lower authorities has not considered the submissions and evidences and denied the claim. The Ld.AR substantiated the submissions with judicial decisions and factual paper book. Per Contra, the Ld.DR supported the orders of the TPO and DRP. 5. We heard the rival submissions and perused the material on record. The Ld.AR emphasized that the lower authorities and the DRP has erred in overlooking the factual aspects that the interest was IT(TP)A No. 238/PAN/2024 Shree Renuka Sugars Limited - 5 - paid based on the agreement with the AE Wilmar Sugar Holding Pte Ltd Singapore and interest was paid because the assssee has received substantial advances from its AE in comparison with the third parties. Similarly the assessee is paying interest on sales advance to third parties in earlier years in ordinary course of business transactions. The Ld.AR demonstrated the agreement of sale of sugar to its AE placed at page 221 to 231 of the paper and at Clause 11 of the contract agreement were the seller i.e assessee agreed to pay the interest on the advance payment received @Libor+1% from the date of receipt of advance payment till the date of shipment. The Ld.AR highlighted on the objections filed before the DRP on 26.10.2023 and copy of letter along with the annexures filed in the proceedings of DRP on 22.5.2024 placed at page329 to 399 of the paper book. Whereas the TPO has dealt on the benchmarking of interest and objections/submissions of the assessee and made ALP adjustment of international transactions with interest on advance against sales of Rs.3,87,29,158/- overlooking the facts and material. We find that the Ld.AR has substantiated the IT(TP)A No. 238/PAN/2024 Shree Renuka Sugars Limited - 6 - submissions with the voluminous information on the interest on advances against sales @Libor+1% to Wilmar Sugar Holding Pte Ltd Singapore its AE in the ordinary course of business as per the agreement. The contentions raised by the Ld. AR that the DRP/TPO has not considered these facts and the assessee has substantial evidences and information and the DRP has over looked the commercial expediency of the transactions. We considering the facts, circumstances and the information filed restore this disputed issue for limited purpose to the file of the DRP as discussed in the above paragraphs to relook afresh and pass a speaking order. The assessee should be provided adequate opportunity of hearing and shall co operate in submit the information and we allow the grounds of appeal for statistical purpose. 6. In the result, the appeal filed by the assessee is allowed for statistical purpose. Order pronounced in the open court on 01.07.2025 Sd/- Sd/- (G D PADMAHSHALI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Panaji Dated 01.07.2025 IT(TP)A No. 238/PAN/2024 Shree Renuka Sugars Limited - 7 - आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / The CIT(A) 4. आयकर आयुÈत(अपील) / Concerned CIT 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, स×याͪपत ĤǓत //True Copy// 1. ( Asst. Registrar) ITAT, Panaji Date Initial 1. Draft dictated on PS 2. Draft placed before author PS 3. Draft proposed & placed before the second member PS 4. Draft discussed/approved by Second Member. PS 5. Approved Draft comes to the Sr.PS/PS PS 6. Kept for pronouncement on 7. File sent to the Bench Clerk 8. Date on which file goes to the AR 9. Date on which file goes to the Head Clerk. 10. Date of dispatch of Order. 11. Dictation Pad is enclosed 2. Other M "