Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI PAWAN SINGH, JM
1319/Mum/2017 आदेश / O R D E R Per Shamim Yahya, A. M.:
These are appeals by the Revenue and the assessee arising out of respective orders of the assessing officer passed under section 143(3) r.w.s. 144C for the respective assessment years passed pursuant to respective directions of the dispute resolution panel under section 92CA(3) for assessment years 2011-12 and 2012-13.
The issues are common and connected and the same read as under: Revenues appeal for assessment year 2011-12:
"On the facts and in the circumstances of the case and in law, the Dispute Resolution Panel erred in deleting the interest chargeable without considering that the tangible benefit has clearly been passed to the AE by charging consideration below ALP and therefore the same is required to be treated as interest free recoverable.
2. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid ground of appeal
at any time before or at the time of hearing of appeal.
3. The appellant prays that the direction of the DRP, Mumbai on the above directions be set-aside and that of the assessing officer be restored." Assessee's appeal for assessment year 2012-13:
The grounds stated here under are independent of, and without prejudice to each other:
1.
1. On the facts and circumstance of the case and in law, the Hon'ble Dispute Resolution Panel ('DRP') erred in confirming the action of the Assessing officer ('AO') / Transfer Pricing Officer ('TPO') in treating the transfer pricing adjustment made in A.Y. 2009-10 on account of sale of VPPMS unit, as an "outstanding receivable" and thereby, making an adjustment by imputing interest on such outstanding receivable. The Appellant prays that the AO / TPO be directed to not to treat the transfer pricing adjustment on sale of VPPMS Unit as an "outstanding receivable" and thereby delete the interest adjustment so made.
2. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in confirming the action of the AO/TPO on the alleged ground that the department has not accepted the earlier decisions of predecessor DRP in preceding assessment years and appeal is pending before the Hon'ble ITAT and also, the 1319/Mum/2017 department does not have right to appeal against the DRP's directions in the impugned assessment year. The Appellant therefore prays that the DRP directions be set aside and held as bad in law.
Brief facts on the issue relate to computation of interest on the amount of adjustment towards international transaction of sale of business done by the transfer pricing officer in assessment year 2009-10. In the said assessment year, the dispute resolution panel had directed that no secondary adjustment for interest can be imputed on the additions made. This ITAT in Revenues appeal for the said assessment year 2009-10 vide order of even date has upheld the direction of dispute resolution panel by adjudicating as under: 38. The Revenue is aggrieved that the dispute resolution panel has erred in deleting the interest chargeable. The transfer pricing officer has made the addition in this regard by observing as under: The assessee was to receive Rs.186.16 crores as Arm's Length consideration towards the sale of VDPPMS, since the assessee had received only Rs. 82.24 crores the TPO has treated the difference Rs.104.03 crores as outstanding as on 31-3-2009. 3.2.2 Since a tangible benefit has been passed to the AE by charging a consideration, which was below the ALP the TPO has treated the difference of Rs. 104.03 crores as interest free receivable and proceeded with the bench marking the benefit obtained by the AE. We find the observation of the TPO that had the actual difference which was charged by the assessee had been received it would have reduced the interest burden and also improved the working capital of the assessee. Had it been with any 3rd party, interest would have been charged on the interest receivable in such a situation, the TPO has considered the average PLRR 12% with markup of 3% risk factor and finally bench marked 15% as the ALP. Such interest benefit was charged for the period 1-10-2008 to 31- 3-2009.
Upon the assessee's objection, the dispute resolution panel has directed for the deletion of the addition. The distribution panel has observed as under: 3.2.3 In respect of the assessee's contention regarding secondary adjustment on the notion that such amount was lying with the assessee's 1319/Mum/2017 AE on which there is need of imputation of interest, it is stated that the concept of secondary adjustment is not expressly provided in the Chapter X of the Act. The mandate in this chapter is to determine arm's length price of the international transaction undertaken by the tax payer, which is what has been done by the TPO in the case on hand. Once this aspect is addressed, as per the requirement of law, there is nothing further provided to impute any secondary adjustment. Accordingly the action of the AO/TPO in charging interest on such amount of adjustment arrived at towards the ALP of the issue of equity share, over and above the amount of adjustment, is not found to be in accordance with the provisions of law. The AO is therefore, directed not to make the addition of Rs.7,80,26,2507- arrived at by the TPO as secondary adjustment on the amount arrived at as adjustment towards the transaction of issue of equity shares. In the view of directions above in respect of secondary adjustment done by the TPO, the other contentions of the assessee regarding recharacterization of nature of transaction, interest rate charged, rate charged to be LIBOR based etc become inconsequential and hence not discussed and no separate directions are considered necessary in regard to them.
Against the above order revenue is in appeal before us.
We have heard both the counsel and perused the records. On this issue, we note that the Transfer Pricing Officer has made an addition on account of interest on the international transaction pertaining to sale computed by him. In this regard, we find that the Dispute Resolution Panel has noted that the concept of secondary expenditure is not expressly provided in the Chapter X of the Act. It has been observed that the mandate in this chapter is to determine arm's length price of the international transaction undertaken by the tax payer, which is what has been done by the Transfer Pricing Officer. We agree with the ld. Departmental Representative that once this aspect is addressed, as per the requirement of law, there is nothing further provided to impute any secondary adjustment. Hence, we do not find any infirmity in the direction of the Dispute Resolution Panel that the action of the Transfer Pricing Officer in charging interest on such amount of adjustment arrived at towards the ALP of the issue of equity share, over and above the amount of adjustment, is not found to be in accordance with the provisions of law. Hence, we find ourselves in agreement with the direction of the Dispute Resolution Panel and hence we uphold the same. Accordingly, the Revenue’s appeal stands dismissed.
Since the same interest was deleted by the ITAT in assessee's own case, following the precedent we are of the considered opinion that no such interest is leviable.
1319/Mum/2017 5. In assessment year 2011-12, the dispute resolution panel has followed its earlier order. However, for assessment year 2012-13 the dispute resolution panel has not followed the earlier direction in order to keep the matter alive by observing that the Revenue has not accepted it. Be as it may, since the ITAT has already deleted the same addition in assessee's own case following the precedent, we hold that no addition in this case is sustainable.
In the result, the Revenue’s appeal stands dismissed and the assessee’s appeal stands allowed. Order pronounced in the open court on 13.04.2018 Sd/- Sd/- (Pawan Singh) (Shamim Yahya) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 13.04.2018 व.�न.स./Roshani, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. आयकर आयु�त(अपील) / The CIT(A) 3. आयकर आयु�त / CIT - concerned 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,