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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘D’
Before: SHRI PRAMOD KUMAR
आदेश/O R D E R
PER MADHUMITA ROY- JM:
The instant appeal and cross objection filed by the Revenue and Assessee are directed against the order passed by the Ld. CIT(A) -7, Ahmedabad dated 07.12.2016 arising out of the order dated. 06.02.2015 passed by the DCIT Circle- 4(1)(1) Ahmedabad under sec. 143(3) r.w.s 144(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for A.Y. 2011-12.
C.O. No. 77/Ahd/2017 A.Y. 2011-12
Both the matters are heard analogously and are being disposed of by a common order.
The Revenue has filed the instant appeal with the following grounds:
“1. “Whether the Ld. CIT(Appeal) is right in law and on facts in deleting the addition being upward adjustment of Rs. 1,45,92,645/- while determining Arms Lengths Price under the Transfer Pricing Provision.” 2. “Whether the ld. CIT(Appeal) is right in law and on facts in deleting the addition of Rs. 15m77,90,288/- made u/s. 14a of the Act to determine book profit u/s. 115JB of the Act.””
The first ground relates to the upward adjustment while determining Arms Lengths Price under the Transfer Pricing Provision. Such adjustment was made with respect to “corporate guarantee” provided by the assessee to its associate enterprises. It is the case of the assessee that such corporate guarantee by the assessee has been issued on behalf of its subsidiary company is in the nature of quashi-capital or shareholder activity and not in the nature of “provision of service” and, therefore, the said transaction is to be excluded from the scope of “international transaction”. It has been placed by the Ld. AR for the assessee at the time of the hearing as well as before the authorities below that in assessee’sown case of A.Y. 2010-11 the Coordinate Bench has been pleased to delete the Transfer Pricing adjustment made in respect of “corporate guarantee”. Copy of the said judgment has also been submitted before us by the Ld. AR. However, Ld. DR failed to controvert such contention of the Ld. AR.
4. Heard the respective parties, perused the relevant materials available on record. It appears that Ld. CIT(A) followed the order passed by his predecessor. Further that the Ld. Tribunal while dealing with the issue in infavour of the assessee in Revenue’s appeal discussed as follows:-
C.O. No. 77/Ahd/2017 A.Y. 2011-12 “7. Similarly, the TP adjustment on account of corporate guarantee for working capital and Corporate guarantee for financing and other arrangements was considered by the Tribunal at Para 24 of its order. The relevant finding read as under:- 24. We are in respectful agreement with the views so expressed by the coordinate bench. Having said that, we may add that while it is true that an appeal against the said order, on the same issue, is admitted by Hon’ble jurisdictional High Court but then it is not, and it cannot be, anybody’s case that mere admission of appeal can vitiate binding nature of this judicial precedent. In any case, whatever we hold is, and shall always remain, subject to whatever Hon’ble jurisdictional High Court has to hold on the issue, and Hon’ble High Court, though in the case of another assessee i.e. Micro Ink (supra) is already seized of the matter. Respectfully following the views expressed by the coordinate bench, we hold that the assessee extending corporate guarantees to its AEs, particularly on the facts and in the circumstances of this case and when the assessee has done so in the course of its stewardship activities for its subsidiaries, does not constitute an international transaction, and, as such, no ALP adjustment can be made in respect of the same. Accordingly, entire ALP adjust stands deleted. As for the quantum of this adjustment, which is mainly the subject matter of grievance raised in revenue’s appeal, once the entire ALP adjustment stands deleted, that aspect of the matter is wholly academic and does not call for any adjudication by us.
Ground No. 3 in the Assessing Officer’s appeal is thus dismissed as infructuous, and grounds nos. 4,5,6, and 7 in the assessee’s appeal are thus allowed in the terms indicated above.
We see no reasons to take any other view of the matter that the view so take, by the coordinate bench, for the immediately preceding assessment year. We, therefore, uphold the grievances of the assessee and delete the impugned ALP adjustments.
As we have held that no such ALP adjustment is permissible, grievances raised by the Assessing Officer, with respect to quantification of ALP adjustment, are dismissed as infructuous.
As we part with the matter, we may add that a substantial question of law on this issue, in the case of Micro Ink Limited – the decision followed by us in coming to our aforesaid conclusions, has been admitted by Hon’ble jurisdictional High Court and the issue is thus pending for adjudication by Their Lordships. In this view of the factual position, even by deciding this appeal in favour of the assessee, it is nothing more than shifting of judicial forum before which the matter is now to be agitated. We have, therefore, refrained from dealing with elaborate arguments of the parties on merits at this stage.
In the result, and subject to the above observations, the appeal of the assessee is allowed.
8. Respectfully following the same, we confirm the findings of the First Appellate Authority.”
5. Respectfully following the same we find no infirmity in the impugned order passed by the appellate authority so as to warrant interference. In that view of the matter we confirm the same.
C.O. No. 77/Ahd/2017 A.Y. 2011-12
In the result, Revenue’s appeal is dismissed.
Ground No. 2:-
The Ld. CIT(A) deleted the adjustment of Rs. 15,77,90,288/- made to book profit under s. 115JB in respect of the provision of Sec. 14A of the Act. The short point involved in this particular matter is as to whether the amount of disallowance u/s. 14A can be added to the book profit u/s. 115JB. In appeal the first appellate authority allowed the same following the decision passed by his predecessor for the earlier years i.e. A.Ys. 2009-10 and 2011-12 in assessee’s own case. It is relevant tomention that the Ld. CIT(A) also relied upon the ratio laid down in the matter of Reliance Petroproducts Pvt. Ltd. vs. ACIT in where the Hon’ble Court was pleased to agree with the appellant that no positive enhancement to the book profit is justified and deleted such addition made by the Ld. AO.
At the time of hearing of the appeal, the order passed in assessee’s own case by the Coordinate Bench has also been handed over to us by the Ld. AR. The contention of the Ld. AR has not been controverted by the Ld. DR.
Heard the parties and perused the relevant materials available on record. We find that while holding that amount of such disallowance under s. 14A cannot be added to the book profit u/s. 115JB, the Coordinate Bench observed as follows:-
“12. Ground No. 3 relates to the deletion of the positive adjustment u/s. 14A while determining book profit u/s. 115JB of the Act.
While deciding the appeal for A.Y. 2009-10, the Tribunal has considered this issue at Para 38 while deciding ground no. 7 of Revenue’s appeal wherein the Coordinate Bench has decided the issue in favour of the assessee by drawing support from the decision of the Hon’ble High Court of Gujarat in the case of Alembic Ltd. in of 2014.
14. As no distinguishing decision has been brought on record in favour of the revenue. Respectfully following the findings of the Coordinate Bench, we decline to interfere. Ground No. 3 is also dismissed.
15. In the result, the appeal filed by the Revenue is dismissed.” 4
C.O. No. 77/Ahd/2017 A.Y. 2011-12
Respectfully relying upon the same we find no reason to interfere in the order of the Ld. CIT(A). Hence, the same is confirmed. Department’s appeal is found to be devoid of any merit, and thus dismissed.
In the result, department’s appeal is dismissed.
C.O. No. 77/Ahd/2017 A.Y. 2011-12(Assessee’s Appeal)
The assessee has challenged the order passed by the Ld. CIT(A) in confirming of disallowance of employees’ contribution to PF and ESIC amount to Rs. 15,20,519. Such disallowance was made by the Ld. AO on the account that the assessee has failed to deposit such sum within the prescribed due date which was, in turn, confirmed by the Ld. CIT(A). Both the authorities below made an observation that due date for payment of PF and ESIC is to be reckoned from the month of salary and not from the payment of salary. It is also submitted before us by the Ld. AR that the assessee’s case squarely covered in assesse’s own case in Suzlon Energy Ltd. vs. DCIT passed by this Ld. Coordinate Bench in & 765/Ahd/2018 for A.Ys. 2013-14 & 2014-15; copy whereof also submitted before us.
However, the Ld. DR relied upon the order passed by the authorities below in rejecting the claim of the assessee.
13. We have heard the respective parties and we have also perused the relevant materials available on record including the orders passed by the Coordinate Bench in assessee’s own case. It further appears from the record that Ld. CIT(A) while confirming the orders passed by the Ld. AO relied upon the judgment passed by the jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation, reported in (2014) 41 taxmann.com100 (Guj.) holding that employees’ contribution to the Employees’ Provident Fund (EPF) Employees’
C.O. No. 77/Ahd/2017 A.Y. 2011-12 State Insurance Corporation (ESIC) deposited beyond the due date prescribed u/s. 36(1)(va) of the Income Tax Act, 1961 would not be eligible for deduction u/s. 43B of the Act even after deposited before the due date of filing of tax return.
Upon perusal of the order passed by the Coordinate Bench we could understand that the Ld. Tribunal pleased to direct the AO to decide whether there was any delay or not in making such payment by the assessee. It has further observed that any delay deposit of PF/ESIC is to be disallowed in terms of the Hon’ble Gujarat High Court judgment as cited above. The relevant portion of the said judgment is as follows:-
“3. Learned representatives fairly agree that the aforesaid issue is squarely covered against the assessee by Hon'ble jurisdictional High Court's judgment in the case of CIT vs. Gujarat State Road Transport Corporation, 366 ITR 170 (Guj.), wherein it is categorically held that in the case of delayed deposit of employees' contribution to PF, the same will not be deductable in computing income under section 28 of the Act. The law so laid down by the Hon'ble jurisdictional High Court is binding on us. The mere fact that an appeal against the said decision is pending before the Hon'ble Supreme Court does not dilute binding nature of this judicial precedent. As regard dismissal of SLP in the case of Rajasthan State Beverages Corporation Ltd (2017) 84 taxmann.com 185 (SC), it is only elementary that when a SLP is dismissed by a non-speaking order, it does not constitute a law declared by Hon'ble Supreme Court, and as such, it is not binding under Article 141 of the Constitution of India. The authority, for this proposition, is contained in a series of judgments of Hon'ble Supreme Court, including, inter alia, in the cases of State of Manipur vs. ThingujamBrojenMeetai, (1996) 9 SCC 29; Om PrakashGargi v. State of Punjab, (1996) 11 SCC 399 and Sun Export Corpn v. Collector of Customs, AIR 1997 SC 2658. We, therefore, see no legally sustainable merit in the case of the assessee and, respectfully following the judgment of Hon'ble jurisdictional High Court in the case of Gujarat State Road Transport Corporation (supra), dismiss the grievance of the assessee in principle. We may, however, add that a co-ordinate bench of this Tribunal, in the case of Rajjratna Metal Industries Ltd Vs. ACIT (ITA No.940/Ahd/2015; order dated 22.09.2017), has observed as follows:- "3. Assessee's latter substantive ground challenges correctness of both the lower authorities' action disallowing/adding a sum of Rs.3,85,810/- u/s. 36(1 )(va) r.w.s. 2(24) of the Act on account late payment of employees' contribution to PF & ESI in question. There is no dispute that hon'ble jurisdictional high court's decision in CIT vs. Gujarat State Road Transport Corporation (2014) 366 ITR 170 (Guj) upholds such a disallowance in principle. The assessee's case however is that relevant due date has to be seen not from the relevant month of salary but the one pertaining to its payment. He then files a computation chart indicating it to have paid above employees' PF/ESI contributions on 22.05.2009 and 28.05.2009 as against the due dates thereof following on 20.06.2009. The Revenue fails to dispute this factual position. We therefore quote this tribunal's co-ordinate bench decision in Kanoi paper & Industries Ltd. vs. ACIT 75 TTJ 448 that the relevant date in such case is that of month of the actual payment of wages/salaries. We therefore rely on the above co-ordinate bench decision and direct the Assessing Officer to delete the impugned disallowance as well."
C.O. No. 77/Ahd/2017 A.Y. 2011-12
In effect thus while any delayed deposit of PF/ESI is to be disallowed, in terms of Hon'ble Gujarat High Court's judgment in the case of Gujarat State Road Transport Corporation (supra), the question as to whether there is a delay or not may be decided by the Assessing Officer in the light of above observations by the coordinate bench. The assessee will get relief, if found admissible, on that basis.
In the result, appeals of the assessee are allowed for statistical purposes.”
Respectfully relying upon the same we set aside the issue to the file of the Ld. AO to decide as to whether there is any delay or not and to pass orders strictly in accordance with law after giving an opportunity of being heard to the assessee and upon taking into consideration the evidence on record and the evidences which the assessee may choose to file at the time of hearing.
In the result, assessee’s appeal is allowed for statistical purposes.
[Order pronounced in the Court on 25-06-2019.]