PR. COMMISSIONER OF INCOME TAX, AJMER vs. M/S SHARDA SPUNTEX PVT. LTD.

J U D G M E N T 11/05/2018

The instant Income Tax Appeal has been filed by the appellant- Revenue under Section 260A of the Income Tax Act, 1961 (Act of 1961) challenging the validity of the judgment dated 22nd of May 2017 passed by learned Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur (ITAT) (received by the Commissioner on 27.06.2017) in ITA No.155/Jodh/2016 for the Assessment Year 2009-10. As per facts of the case, assessment under Section 143 of the Act of 1961 for A.Y. 2009-10 was completed on 15.03.2013 by the assessing officer and total income of respondent-Assessee was assessed at Rs.2,53,97,970/- against the returned income of Rs.72,66,010/- after various additions and disallowances.

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Being aggrieved by the assessment order dated 15.03.2013, the respondent/assessee preferred appeal before the learned C.I.T. (A), Ajmer, however, the same was dismissed by said appellate authority vide order dated 28.01.2016. The respondent/assessee preferred further appeal against the order dated 28.01.2016 before the learned I.T.A.T. and the learned I.T.A.T. allowed the appeal (Appeal No.155/Jodh/2016) vide order dated 22.05.2017. The instant appeal has been filed to challenge the validity of impugned order dated 22.05.2017 on various grounds.

Learned counsel for the appellant submits that substantial question of law arises in this appeal, as to whether the Tribunal was justified in deleting the addition of Rs.1,79,92,192/- made on account of reference under Section 92CA (1) of the Act without considering reference drawn by the TPO in accordance with the provisions of law. It is also submitted that whether the Tribunal was justified in directing the assessing officer to allow the loss of Rs.701.08 lacs in A.Y. 2009-10 if not allowed in A.Y. 2010-11 without appreciating that its allowability had not been ascertained on merit by the assessing officer.

After hearing the learned counsel for the appellant for first substantial question of law which is regard to deletion of addition of Rs.1,79,92,192/-, we have perused the finding arrived at by the learned ITAT in paragraph 25 of the judgment/order. The learned ITAT while considering the entire facts of the case observed that in identical case decided by Delhi High Court in the case of CIT Vs. EKL Appliances Limited [(2012) 345 241 (Del.) held that re-

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characterization of a transition is possible in only two situations, i.e. (i) whether the economic substance of a transaction differs from its form and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner.

The learned ITAT categorically held that none of these conditions is satisfied in the present case. The form and substance of the transactions are the same. The Transfer Pricing Officer has not brought on record any material to demonstrate and establish that the form and substance of transactions are different. It is not, and it cannot be, the case of the Transfer Pricing Officer that the export transaction was a sham transaction to finance the AE. It is also observed that even on the amount received by the assessee in advance from its AE in earlier years, no interest was paid. Never in the past, the assessee has charged any interest from its export customers on delayed realization of its sales proceeds. Meaning thereby, the stand of the assessee that it has not charged interest on the delayed realization of debts in non-AE institutions, has rightly been accepted by the ITAT because it is admitted position of the case that no interest is charged from non- AE/s, which is independent transaction as well, there cannot be any occasion to make ALP adjustment for notional interest on delay in realization of trade debts from AE/s.

In our opinion, the finding given by the learned ITAT is based upon factual aspect of the matter, therefore, no question of (4 of 4) [ITA-56/2017]

law emerges for consideration in this regard.

So far as second substantial question of law, as suggested by the learned counsel for the appellant is concerned, we are of the opinion that the learned ITAT has remanded the question of claim of loss of Rs.701.08 lacs and passed order that AO shall verity whether the loss has ultimately been allowed in the A.Y.2010-11 and if not, then the same be allowed in the year under consideration.

In our opinion there is no force in this appeal because no substantial question of law arises for consideration.

Dismissed accordingly.

(RAMCHANDRA SINGH JHALA) J. (GOPAL KRISHAN VYAS) J.

DJ/- 19