CARGILL TSF ASIA PTE LTD.,SINGAPORE vs. ADIT, NEW DELHI

1 ITA nos. 5260 & 5006/Del/2011 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE : JUDICIAL MEMBER ITA nos. 5260 & 5006/Del/2011 Asstt. Yr: 2003-04 & 2008-09 Cargill Financial Services Vs. Asstt. Director of Income-tax, Asia Pte Ltd., In Liquidation Circle(1), International Taxation 300, Beach Road, New Delhi. #23-00, The Concourse, Singapore. PAN: AACCC 4647 A

( Appellant ) (Respondent) Appellant by : Shri Rohan Khare & Shri A Srivastava & Shri D. Chopra Advocates Respondent by : Shri Anuj Arora CIT(DR)

Date of hearing : 04/03/2016. Date of order : 15/03/2016. O R D E R PER S.V. MEHROTRA, A.M:

These are assessee’s appeals against separate orders passed by the ld. CIT(A), relating to A.Yrs. 2003-04 & 2008-09. Since common issues are involved for adjudication, both the appeals were heard together and are

being disposed of by a consolidated order for the sake of convenience.

2 ITA nos. 5260 & 5006/Del/2011 2. The main issue in the present appeals is whether the amounts received

by assessee from its Indian associated enterprises were in the form of

interest or discounting charges. Brief facts are that the assessee (“CFSA”),

is a company incorporated in Singapore and is a tax resident of Singapore.

Accordingly, the assessee could opt to be governed by the provisions of the

Income-tax Act or the India-Singapore Treaty, which ever was more

beneficial to assessee. Assessee had entered into an agreement with Cargill

India Pvt. Ltd. (“CIPL”), the assessee’s associate, for the rendering of

certain administrative and support services relating to treasury and financial

activities, whereby CIPL was charged towards the cost of the services (on

actual usage basis), as per the method provided in the said agreement, on a

cost plus 5% mark up.

assessee as to why the amounts paid by Cargill India to it should not be

considered as interest as per sec. 2(28A) of the Act and para 4 of Article 11

of the tax treaty between India and Singapore and not discounting charges as

claimed by assessee. The assessee in its reply pointed out that it was

engaged in the business to subscribe, buy, underwrite or otherwise acquire,

own, hold, sell or exchange securities or investments of any kind including

negotiable instruments, commercial paper etc. Accordingly, as a part of its

3 ITA nos. 5260 & 5006/Del/2011 business, it draws, makes, accepts, endorses, discounts, executes and issues

promissory notes, bill of exchange etc. It was further pointed out that CIPL incorporated under the Indian Companies Act, was, inter alia, engaged in the business of import and export of agricultural commodities and processed foods. On few occasions CFSA had purchased bill of exchange/ demand

promissory note from CIPL. The assessee in detail explained its modus operandi which has been reproduced in the assessment order and also the need for discounting bills of exchange. The AO examined the assessee’s

contentions and concluded as under:- “5. In this case, as explained by the assessee, CIPL draws bill of exchange on the buyer. CIPL gets these bills of exchange discounted with CFSA (assessee), which remits the balance amount of bill of exchange (net of discount) to CIPL. On the maturity date the buyer pays the full amount of the bill of exchange to CFSA. As mentioned in the bill of exchange discounting, the pricing of the discounting is based on the Libor plus margin. The transaction from the perspective of the assessee is explained as below: - It purchases the bill of exchange, for which discounting agreement is entered- and this mentions the face value, the date of acceptance of the bill and maturity date. - The discounting agreement also has a mention of the pricing of the product and tenor of the bill. - The discounting agreement has a mention of the face amount, discount amount and the net proceeds payable by the assessee.

4 ITA nos. 5260 & 5006/Del/2011 - On the date of purchase of the bill of exchange, the assessee pays to CIPL the net proceeds after charging the discount on the face value. - On the date of maturity it receives the face value from the buyer/ obligor of the bill. - To summarize the transaction is a simple lending of money and receipt of the money advanced alongwith the interest on the maturity date. The face value of the product consists 'of the net proceeds paid at the time of buying and the discount value. - This transaction can be compared with a transaction that involves a loan equal to the net amount given by the assessee and repayment of this loan along with interest to CFSA, after the sale proceeds are received. Therefore, prima facie, the discount is nothing but the interest only. The money advanced by the. assessee is used for the purpose of business carried on by CIPL/ CGTIPL. 4. The AO, after considering detailed submissions and after examining the definition of “interest” in section 2(28A) of the Income-tax Act and also various circulars, held that the discounting charges were in the nature of

interest and, therefore, taxable in India. He, accordingly, taxed sum of Rs. 8,02,68,762/- @ 15% (in A.Y. 2003-04) and Rs. 558,084,042/- @ 15% (in A.Y. 2008-09) as per DTAA. 5. The assessee filed objections before ld. DRP, which vide its order

dated 9.8.2011 concluded that the whole transaction was a colourable device by the assessee company to earn interest from India without payment of tax. Ld. DRP in para 7 to 7.3 (A.Y. 2003-04) has observed as under:

5 ITA nos. 5260 & 5006/Del/2011 7. A perusal of the whole transaction leads to certain unanswered questions. (i) What is the expertise of Cargill India, 'which is not available with Cargill International, Geneva for the purchase of Argentine Soyabean from the internation.al market? (ii) When the supplier of goods as it appears is also a group company, why the transaction was routed through Cargill India? (iii) Whether at anytime• goods were inspected by Cargill India or Cargill International, Switzerland, the ultimate buyer? (iv) What are the terms of payment between the Indian company and the seller and why the same terms were not kept between Cargill India and the so called purchaser Cargill International Geneva . (v) There is no description of quality of goods in the invoice. The goods are purchased and sold without any quality specification and inspection of goods. (vi) What was the need of the Indian company for funds for which it approached the assessee for discounting. (vii) No comparative studies of the market has been submitted by the assessee where the Indian company approached for discounting of bills. (viii) No reason has been given as to why the bills were not discounted by the Indian company in the Indian market from any bank or financial institutions or any other company engaged in similar business. (ix) Where was the money invested by the Indian company after receiving it from the assessee?

6 ITA nos. 5260 & 5006/Del/2011 (x) Who is in possession of original bill landing and other export documents? (xi) What is the basis of information and expertise with Indian company to identify goods without inspection on high seas and negotiate and sell the same? (xii) No document has been submitted correspondence between the Indian International, Geneva. (xiii) No details are furnished as to how the debt has been recovered by the assessee from Cargill International Geneva? (xiv) No copies of final accounts of the assessee have been furnished before the AO or before this Panel to show the treatment of this transaction in their books of accounts. 7.1 In fact, the whole transaction is a colorful device by the assessee company to earn interest from India without payment of taxes. As the assessee cannot simply deposit funds in India to earn higher rate of interest then in other countries where its funds are lying idle it has entered into these transactions. The assessee company pays money to the Indian company, which invests it in India and the assessee gets a fixed predetermined interest rate. The payment of interest together with the principal by the Indian company to' the assessee is routed through another group company, which is called the buyer of goods. It is important' to note that promissory notes are given by the non-resident buyer prior to the raising of invoice by the Indian company. The transaction can •be explained by an example: 7.2 The assessee pays '90 to the Indian company and takes a promissory note of '100 to be received by it from another group company after one year. The Indian company invests '90 in Indian market and claims '10 as expenditure (interest payment). The non-resident buyer, who allegedly purchased the goods

7 ITA nos. 5260 & 5006/Del/2011 from the Indian company makes the payment to the assessee of '100 instead of making payment to the Indian company. The Indian company pays the cost of goods to the other company from whom the so called goods were purchased by the Indian company. In this way the Indian company remits back the entire money i.e. principal plus interest to the assessee through various group companies, who are so called seller and buyers of goods. 7.3 The term discounting instead of interest has been used by the assessee to avoid payment of taxes on interest income and also to avoid the violation of other regulatory laws like RBI, FEMA etc. The term discount is a misnomer for interest. The mere fact that the assessee has taken advantage of its wide group network to route the transactions will not change the true nature of the transaction. The mere fact that the assessee received its interest from another group company other than Cargill India makes no difference to the transaction. The Indian company while recording the above transaction terms this payment as interest and claims deduction, whereas the some amount is termed as discount by the assessee resulting into no tax payment by the entire group in India. Similar observations were made for A.Y. 2008-09.

assessing the interest income at Rs. 8,02,68,762/- taxable @ 15% for A.Y.

2003-04 and assessment order dated 5.9.2011 for A.Y. 2008-09 assessing

the interest income at Rs. 558,084,042/- taxable @ 15%.

following grounds of appeal (A.Y. 2003-04):-

8 ITA nos. 5260 & 5006/Del/2011 Based on the facts and circumstances of the case, the Appellant respectfully submits: 1. That the learned Assistant Director of Income Tax, Circle- 1 (1), International Taxation, New Delhi (hereinafter referred to as 'Learned AO') and Hon'ble Dispute Resolution Panel ('the DRP') have erred on the facts and in circumstances of the case and in law in initiating re-assessment proceedings based on mere change of opinion as there were no material facts on record giving rise to any valid reasons to believe that any income has escaped assessment. Accordingly, initiation of the re-assessment proceedings for A Y 2003-04 are bad in law. 2. Without prejudice to above, the Learned AO and Hon'ble DRP have erred in facts and in law in making the addition of discounting charges amounting to Rs 80,268,762 on the following grounds: 2.1 That on the facts and circumstances of the case and in law, the learned AO erred in characterizing the discounting charges to be in the nature of interest as per the definition of 'interest' under section 2(28A) of the Act and Article 11 of the Double Taxation Avoidance Agreement between India and Singapore ('the treaty'). 2.2 That on the facts and circumstances of the case and in law, the learned A - erred in misinterpreting / misconstruing the transaction of without recourse discounting of Promissory Notes ('PN') / Bills of Exchange ('BE') as a loan by the appellant to Cargill India Private Limited ('CIPL') by relying upon the irrelevant and un-contextual facts. 2.3 That on the facts and circumstances of the case and in law, the Learned AO and Hon'ble DRP has erred in not following the circulars issued by CBDT holding that discounting charges are not in the nature of interest, on the basis that the circulars

9 ITA nos. 5260 & 5006/Del/2011 are issued under section I94A of the Act and are applicable to only residents. 2.4 That on the facts and circumstances of the case and in law, the learned AO has erred in treating the discounting charges as taxable in India without appreciating the fact that the same is in the nature of business income and cannot be brought to tax in the absence of any Permanent Establishment ('PE') in India as per provisions of Article 5 of the treaty . 2.5 That on the facts and circumstances of the case and in law, the learned AO erred in not following the principle of judicial discipline by completely ignoring the favorable order of Hon'ble Delhi ITAT passed in the appellant's own case based on same set of facts for AY 2004-05 and AY 2005-06 and the order passed by the Hon'ble Delhi High Court in case of Cargill Global Trading India Pvt Ltd for A Y 2004-05 and A Y 2005-06 holding that such discounting charges paid to the appellant are not in the nature of interest and thus, are not taxable in India in the absence of a PE in India of the appellant. 2.6 Without prejudice to the contention that discounting charges are not in the nature of interest, the learned AO erred in holding that payment of interest is by CIPL to the assessee and therefore provision of section 9(l)(v)(c) are not applicable. 3. That the learned AO has erred in facts and in law in levying interest amounting to Rs. 12,431,624 under section 234B of the Act by completely ignoring the fact that no advance tax was payable by the appellant. 4. The learned AO has erred on the facts and the circumstances of the case and in law by initiating penalty proceedings u/s 271(l)(c) against the appellant for furnishing inaccurate particulars or for failure to disclose true particulars of income.

10 ITA nos. 5260 & 5006/Del/2011

The above grounds are independent and without prejudice to each other. The Appellant craves leave to add, alter, supplement, amend, vary, withdraw or otherwise modify the ground mentioned herein above at or before the time of hearing. 8. At the outset ld. counsel for the assessee submitted that the issue is

squarely covered by the Tribunal’s consolidated order dated 19.8.2011 in

assessee’s own case for AYs 2004-05 and 2005-06rendered in ITA nos.

579/Del/2010 and 580/Del/2010 and also by the decision of Tribunal in the

case of Cargill TSF Asia Pte Ltd. for A.Ys. 2005-06, 2006-07 and 2007-08

vide ITA nos. 581/Del/2010, ITA no. 3880 & 3057/Del/2010. He referred to

para 7 of the order in assessee’s own case, wherein it has been held as under: 6. We have duly considered the rival contentions and gone through the record carefully. In the case of Cargil Clobal Trading India (P) Ltd., the IT AT has made the following observations: "8. We have considered the rival submissions. In the instant case, the facts lie in a narrow compass inasmuch as that once the goods are exported out of India by the assessee company the assessee draw a bill of exchange on the buyer and therefore' discounts the aforesaid bill of exchange to CFSA. Therefore, as a result of discount of the bill of exchange. by the assessee company, it receives immediately discounted value of the bill of exchange i.e. face value less discount to the appellant. The short issue is what is the nature of t~is discount? According to the assessee, the atoresald discount is not in the. nature of interest and hence is not disallowable under section

11 ITA nos. 5260 & 5006/Del/2011 40(a)(i) 0 the Act whereas the Assess.ing Officer has held that this sum is in the nature of interest under 'section 2(28A) of the Act. Section 2(28A) of the Act provides as under:- "Interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of-the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized." It will be, evident from the above that interest payable in any manner in respect of any moneys borrowed or debt incurred and includes any service fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. It is thus seen that interest means either sum payable in respect of any money borrowed or debt incurred. In the instant case, it is not a case of debt incurred or moneys borrowed. In fact, here is a case where the assessee has merely discounted the .sale consideration receivable on sale of goods. It is not a case where any money has been borrowed or debt has been incurred. It is also not a case where any service fee or either charge has been paid in respect of money borrowed or debt incurred or in respect of any credit facility which has not been utilized. It is not a case where section 2(28A) of the Act can be invoked. 9. The word "Interest" is differently defined under Interest Tax Act. As per section 2(7) of Interest Tax Act, "interest" means interest on loans and advances made in India and includes>- (a) commitment chares on unutilized portion of any credit sanctioned for being availed of in India and (b) discount on promissory notes and bills of exchange drawn or made in India. Thus where the legislature was conscious of the fact that even the discount of bills of exchange is to be included within the definition of interest, the same was basically so' provided for. However, under the scheme of Income-tax Act the word "Interest" defined under section 2(28A) does not include the discounting charges on discounting of bills of exchange. Though the circular no. 65 was rendered in relation to

12 ITA nos. 5260 & 5006/Del/2011 deduction of-tax under section 194A, in respect of payment to a resident, the same will be relevant even for the purpose of considering whether the discount should be treated as interest or not. The CBDT has opined that where the supplier of goods makes over the usance bill/hundi to his bank which discounts the same and credits the net amount to the supplier's account straight away without waiting for realization of the bill on due date, the property in the usance bill/ hundi passes on to the bank and the eventual collection on due date is a receipt by the bank on its own behalf and not on behalf of the supplier. For such cases of immediate discounting the net payment made by the bank to the supplier is in the nature of a price paid for the bill. Such payment cannot technically be held as including any interest and therefore, no tax need be deducted at source from such payment by the bank. The decision relied by the Assessing Officer in the case of Vijay Ship Breaking Corp. (supra) has been reversed by the Hon'ble Supreme Court as reported in the case of Vijay Ship Breaking Corporation vs. CIT 219. CTR 63- 9; The. Hon'ble Supreme court held that usance interest payable outside India by an undertaking engaged in the business of ship breaking is exempt from payment of Income-tax by virtue of Explanation 2 added to section 1 0(150(iv)(c) with retrospective effect from 1.4.1962 and hence the assessee was. not liable to deduct tax at source under section 195 of the Act. The discounting charges are not in" the nature of interest paid by the assessee. Rather after deducting discount the assessee received net amount of the bill of exchange accepted by the purchaser. CFSA not having any permanent establishment in India, is not liable, to tax in respect or such discount earned by it and hence the assessee is not under obligation to deduct tax. at source under section 195 of the Act. Accordingly, the same amount cannot be disallowed by invoking section 40(a)(i) of the Act." “7. This finding of the ITAT in the case of Cargil Clobal Trading (P) Ltd. has been upheld by the Hon'ble High Court in ITA Nos. 331 and 204 of 2011. Learned CIT(Appeals) has also followed this order of the ITAT. We find that the issue in dispute is squarely covered by the above conclusion of the ITAT. Assessing Officer is not justified in considering the discounting charges akin to expression "interest"

13 ITA nos. 5260 & 5006/Del/2011 employed in sec. 2(28A) of the Income-tax Act, 1961. Apart from this one aspect, ITAT has examined it from other angle also. Taking into consideration the detailed order of the Learned CIT(Appeals), impugned in the appeals in the light of Hon'ble Delhi High Court's decision, we are of the view that no 'interference is called for. Hence, both the appeals are dismissed". 9. He further pointed out that the Tribunal’s order in the case of Cargil

Global Trading (P) Ltd., has been upheld by the Hon’ble Delhi High Court

in 335 ITR 94, wherein in para 5 to 7, Hon’ble High Court has observed as

under:

“5. We may notice at this stage that the respondent-assessee is in the export business. On the exports made by the assessee to its best buyers outside India, the assessee draws bills of exchange on those buyers located outside India. These bills of exchange are discounted by the assessee from CFSA who on discounting the bills immediately remits the discounted amount to the assessee. Thereafter, it is the obligation/headache of CFSA to realise the amounts from those buyers to whom the goods are exported and bills are drawn by the assessee. It is the said discounted charges which were claimed by the assessee as expenses under section 37(1) of the Act. The discounting facilities offered by CFSA to the assessee after charging its aforesaid discounted commission are not questioned by the Revenue. The only objection was that on this amount remitted by the assessee to CFSA, the assessee was to deduct tax at source (TDS) under section 195 of the Act and since it was not done, invoking the provisions of section 40(a)(i) of the Act, the expenditure was disallowed. 6. As pointed out above, according to the Assessing Officer, the aforesaid discounted charges by the assessee to CFSA were treated as interest within the meaning of section 2(28A) of the Act.

14 ITA nos. 5260 & 5006/Del/2011 7. We may also point out at this stage that CFSA is a company incorporated in Singapore and a tax resident of Singapore. CFSA, inter alia, underwrite or otherwise acquire, own, hold, sell or exchange securities or investments of any kind including negotiable instruments, commercial paper, etc. Accordingly, as a part of its aforesaid business, it draws, makes, accepts, endorses, discounts, executes and issues promissory notes, bill of exchange, etc. Further, CFSA does not have a permanent establishment (PE) in terms of articles 5 of the India Singapore Treaty ("the Treaty" or the "DTAA").” 10. Ld. A/R further pointed out that in the case of assessee, Hon’ble

Delhi High Court, following the decision in the case of Cargil Clobal

Trading (P) Ltd., dismissed the appeals filed by revenue vide order dated

24.4.2012 in ITA nos. 269/2012 and 272/2012, observing as under:- “These appeals have to be dismissed in view of the decision dated 1ih February, 2011 in ITA No.331/2011 Commissioner of Income Tax Vs. Cargill Global Trading Pvt. Ltd. (2011) 335 ITR 94 (Del.). Cargill Global Trading Pvt. Ltd. was the payer and the Assessing Officer had held that they were liable to deduct tax at source on the bill discounting which was treated and considered as interest paid. The High Court has not agree with the Revenue and has held that bill discount cannot be equated and treated as interest paid and therefore the tax at source was not liable to be deducted. The present appeals are directed against recipient Cargill Financial Services Asia Pvt Ltd. who had entered into the transaction/agreement with Cargill Global Trading Pvt. Ltd. The issue being identical and squarely covered by the decision of this Court in the case of Cargill Global Trading Pvt. Ltd. (supra), no substantial question of law arises and the appeals are dismissed.”

15 ITA nos. 5260 & 5006/Del/2011 11. He further pointed out that the SLP filed against the Hon’ble Delhi

High Court’s decision has been dismissed by the Hon’ble Supreme Court in

the case of Cargil Global Trading (P) Ltd. He, therefore, submitted that the

issue is squarely covered by the aforementioned decisions.

appreciated by Tribunal in earlier years and, therefore, the issue requires

reconsideration. He has filed detailed written submissions, which are

reproduced hereunder:

“SUBMISSIONS OF REVENUE ON SPECIFIC ASPECTS 1. The Revenue emphatically relies on the assessment orders of the relevant assessment years as well as directions of the DRP. 2. Without prejudice to these, following additional submissions are made. 3. These submissions below are ONLY on specific aspects. On balance aspects, oral submissions during the hearing, the Assessment Order as well as specific portions, favourable to Revenue, of DRP's orders are relied upon. 4. It is Revenue's humble submission and contention that the Hon'ble Tribunal could differ from its earlier decision, in view of decision of the Hon'ble Supreme Court in the case of Union of India v. Raghubir Singh [1989] 178 ITR 548 and that this is a fit case to do so. This aspect is detailed below. CARGILL TSF ASIA PTE L TO, SINGAPORE I AY 2008-09

16 ITA nos. 5260 & 5006/Del/2011 5. The Ld. AR has relied, inter alia, on the orders of the Hon'ble ITAT in the assessee's own case in AYs 2005-06, 2006- 07, 2007-08 (combined order dated 19.08.2011) which have also been confirmed by the Hon'ble HC, Delhi (combined order dated 19.11.2012). The copies of these orders have also been provided by Ld. AR in paper book and / or during the hearing. 6. It may kindly be seen from the said combined orders of the Hon'ble ITAT and Hon'ble HC that these have addressed the main issue whether or not the discounting charges earned by the assessee by discounting bills of exchange and promissory notes amounted to interest as defined u/s 2(28A) of the Income Tax Act. The Hon'ble courts have held that the said receipts are not in the nature of interest as defined u/s 2(28A}. 7. It is also seen from the said combined order of the Hon'ble ITAT that it has based its entire order and findings on the Hon'ble ITAT's order dated 19.08.2011 in the case of a related concern, namely Cargil Financial Services P. Ltd (CFSPL). At Para 6, page 5 of the order dated 19.08.2011, the Hon'ble ITAT notes that "There is no disparity of facts between both the assessees." Accordingly it has quoted extensively from the said order dated 19.08.2011 in the case of CFSPL starting at page 5 of its combined order till page 13 of its order. 8. Further, it is seen from the said ITAT order in the case of CFSPL (provided by Ld. AR) that, this order in turn relies on the order of ITAT in case of another related concern Cargil Global Trading India (P) Ltd. (CGTIPL). 9. While relying and quoting extensively from the order of the related concerns (CFSPL & CGTIPL), certain crucial facts (discussed below) remained to be considered and adjudicated by the Hon'ble ITAT. 10. Accordingly, the AO notes in the present AY 2008-09 at page 15, para 7.8 of the assessment order that certain vital

17 ITA nos. 5260 & 5006/Del/2011 facts remained to be considered/ presented to the Hon'ble Tribunal in the earlier years especially "role of Cargill Inc., role of buyer Cargill IntI. SA, RBI Circulars, FEMA provisions etc. were not presented before the Ld. ITAT which are very material for the case". 11. To put the issues in perspective, the Ld. DRP notes at Para 7 of its order/ directions: "In fact, the whole transaction is a colorable device by the assessee company to earn interest from India without payment of taxes. As the assessee cannot simply deposit funds in India to earn higher rate of interest then in other countries where its funds are lying idle it has entered into these transactions. The assessee company pays money to the Indian Company, which invests it in India and the assessee gets a fixed predetermined interest rate. The payment of interest together with the principal by the Indian company to the assessee is routed through another group company, which is called the buyer of goods. It is important to note that promissory notes are given by the non-resident buyer prior to raising of invoice by the Indian company”. 12. The thrust of Revenue's present submission, is that none of the above referred orders of Hon'ble ITAT (i.e., earlier orders of ITAT in the case of the assessee itself, or its orders in the cases of CFSPL & CGTIPL which have been relied and quoted by the ITAT in the case of the assessee) have considered and adjudicated the entire set of facts and circumstances. This has been very briefly highlighted above (at para 9,10,11) and has been detailed below. Thus, the Hon'ble ITAT and Hon'ble High Court have addressed only the legal issue as summarised at Para 6 above without addressing the facts and circumstances that lead to the unmistakable conclusion that the assessee, along with its related concerns, have put through colourable transactions for benefiting from the higher interest rates in

18 ITA nos. 5260 & 5006/Del/2011 India and avoiding payment of taxes. The scheme of transactions put through by the group is mainly to give color of bill discounting to interest earning activity in hands of the NR assessee while at the same time minimizing the tax liability in the hands to the supporting group Indian concern. 13. For sake of clarity and brevity, the said facts and circumstances that have not been considered I adjudicated by the Hon'ble ITAT in its earlier orders, as culled out from the Ld. DRP's directions, are as under: Para/page Issue Remarks, if of Ld. any DRP’s order Page 4, para 3 At the outset, DRP has put on This further record the non-cooperation of strengthens the the assessee. The DRP had Revenue’s contention asked the assessee to place on that the assessee, record the entire transactions, along with its group along with complete supporting companies, are using documents, for one month. The colourable assessee chose to submit transactions/ devices. selected documents and not the complete trail. Page 3-7, The limited information made Para 6.1 gives the available by the assessee or as issues/ aspects which Para 5-6.1 already available on record ahs are unanswered and been analysed by Ld. DRP. effectively questions the very genuineness of whole scheme of transactions used by the assessee along with its group concerns The findings of the DRP have to be read with the findings of

19 ITA nos. 5260 & 5006/Del/2011 the AO at page 22 of the assessment order (Gross margin of the assessee on sale is 0.05%. In comparison, the charges suffered by the Indian concern are large 5.75%. This ensures that max amount remains tax free in hands of assessee while the supporting Indian concern is able to reduce its tax liability). Page 7-8 The scheme used by the assessee is explained (with example). The term “discounting” used by the assessee are also put in context (also in the context of other regulations of RBI, FEMA).The DRP emphatically notes the finding that “The Indian company (related/ group concern) while recording the above transaction terms this payment as interest and claims deduction, whereas the same amount is termed as discount by the assessee resulting into no tax payment by the entire group in India.” Page 10-11 Assessee has placed heavy reliance on discounting being Page 9-9.1, without recourse. This has been analysed in light of RBI

20 ITA nos. 5260 & 5006/Del/2011 Page 12 regulations and facts of the case and has been found to be of no Last two help to the assessee and is also para without supporting evidence. Page 17 Page 9,12 Page 11, The “paper transactions” of the assessee have been highlighted Para 9.2-9.3 along with its non-compliance. The definition of “interest” in Page 13 the Income Tax Act and the Para DTAA has been put in (iv)&(v),(i) perspective Page 14 Para (ii) Page 11-12 Assessee’s reliance on CBDT circulars is analysed and Para 9.4 - rejected. Critical observations 9.6 therein include (i) Assessee has not approached bankers for discounting of so called bills; (ii) PNs of group concerns are not freely transferable by endorsement and delivery; (iii) The case of the assessee is a private arrangement among group concerns and cannot be compared with banking transactions and CDs. 14. The Revenue submissions remain on the same lines as above. RELIANCE ON judgment in Raghubir Singh [19891178 ITR 548 (SC)

21 ITA nos. 5260 & 5006/Del/2011 15. It is Revenue's humble submission and contention that the Tribunal could differ from its earlier decision, if such a need arose, in view of decision of the Supreme Court in the case of Union of India v. Raghubir Singh [1989] 178 ITR 548. The Supreme Court in the case of Raghubir Singh (supra) laid more emphasis on the principle of consistency that it should not differ from its earlier decision merely because a contrary view appears to be preferable. However, it is also laid down that if the previous decision is plainly erroneous, it would be a duty of the Court to say so and not to perpetuate the mistake. The Court also furnished two illustrations-{i) where relevant statutory provision was not brought to its notice, (ii) if a vital point was not considered. The submissions above emphasize that the matter is covered by the said point (ii). CONCLUSION 11. The undersigned is committed to provide any further clarification that the Hon'ble Bench may desire. 13. In the rejoinder ld. counsel has filed detailed submissions, which are

also reproduced hereunder: ““Brief facts While framing assessment for the subject year, the Ld. AO has characterized the discounting charges received by the Appellant on account of discounting of Bills of exchange / demand Promissory Notes (,hereinafter referred to as BE') from Indian group companies namely, Cargill India Private Limited and Cargill Global Trading Private Limited ('hereinafter collectively referred as Indian group companies') as interest under section 2(28A) of the income Tax Act, 1961 ('the Act') and under the DT AA between India and Singapore.

22 ITA nos. 5260 & 5006/Del/2011 2. Appellant's Contentions At the outset, the Appellant (being offshore entities Cargill TSF Asia Pte Ltd and Cargill Financial Services Asia Pte Ltd- In Liquidation) would like to highlight that the issue under consideration has already been adjudicated in favor of the Appellant in Appellant's own case vide the following orders: DIT v Cargill TSF Asia Pte Ltd A Y 2005-06, A Y 2006-07 & A Y 2007-08 (Delhi HC) (ITA No. ITA No. 62112012, ITA No. 63212012 and ITA No. 62412012) Cargill TSF Asia Pte Ltd A Y 2005-06, A Y 2006-07 & A Y 2007-08 (Delhi IT AT) (IT A No. 5811De1l2010, 3880IDell2010 and 30571De1l2010) DIT v Cargill Financial Services Asia Pvt Ltd A Y 2004-05 and A Y 2005-06 (Delhi High Court) (ITA 269/2012 and ITA 272/2012) ADIT v Cargill Financial Services Asia Pte Ltd A Y 2004-05 and A Y 2005-06 (Delhi IT AT) (IT A No. 579IDell20 10 and IT A No. 580IDell20 1 0) Further, it is pertinent to mention that in the Indian entities case being M/s Cargill Global Trading India Pvt. Ltd. and M/s Cargill India Pvt. Ltd. for the same A Y i.e. A Y 2008-09, the Ld. CIT(A) has held that the discounting charges paid to appellant (Cargill TSF Asia Pte Ltd) are not in the nature of interest and thus, no disallowance U/S 40(a)(i) was warranted. This order has been accepted by the Department and no further appeal was preferred. The facts and the issue involved in the above mentioned assessment years are identical to. the facts and issue involved in the years in question i.e. whether discounting charges is akin to interest income as defined u/s 2(28A) of the Act, taxable as

23 ITA nos. 5260 & 5006/Del/2011 per the provisions of the Act as well as the DT AA between India and Singapore (Reference in this regard may be made to the grounds of appeal raised). The Learned Department Representative ('Ld. DR') has raised concerns that crucial facts pertaining to the cases involved have not been considered by the Hon'ble ITAT while adjudicating the orders in earlier years. The Appellant here would like to submit its rebuttal on the specific concerns raised by the Ld. DR: Contention No.1: The AO in notes in the present AY 2008-09 at page 15, para 7.8 of the assessment order that certain vital facts remained to be considered/ presented to the Hon'ble Tribunal in the earlier years especially "role of Cargill Inc., role of buyer Cargill Intl. SA, RBI Circulars, FEMA provisions etc. were not presented before the Ld. ITAT which are very material to the case". Referring to the AO's order points to the fact that the ITAT order referred in the above allegation is that of Cargill Global Trading India Private Limited (CGTIPL - Indian group company) i.e. IT A NO. 684IDel/2009 for A Y 2004-05. The Appellant most humbly submits that the entire transaction pertaining to the discounting has been duly explained and captured in the CGTIPL ITA T order (Refer Para 4 on Page 2 of Annexure I). It is also submitted that the assessee is a non- resident company which does not have any presence in India. The transaction with Indian company was through proper banking channel wherein all laws and regulations would have been complied with. Neither tax authority nor any other authority has alleged any irregularity in the transaction as per applicable Indian law/regulation. It is also respectfully submitted that the questions that have been raised by the Learned Department Representative giving a flavour that certain vital facts regarding the role of the parties involved, RBI Circulars and FEMA provisions, which were

24 ITA nos. 5260 & 5006/Del/2011 material were not presented before the IT AT which were material to the case. These comments are obviously to impress upon this Hon'ble Tribunal to disregard the co-ordinate bench's decision which was passed on the identical issue and which was confirmed by the Hon'ble Delhi High Court. It is respectfully submitted that the issue before the Tribunal was the characterization of the receipts in the hands of the non-resident of the assessee and that is precisely what needs to be adjudicated. It is also submitted that making such bold allegations that certain material facts and roles played by the respective enterprises was not presented has no bearing on the issue. This is nothing but a misguided effort on behalf of the revenue to confuse the issue. At this juncture, it is also respectfully submitted that it is a settled proposition of law that the revenue cannot dictate to the taxpayer businessmen as to how to conduct its affairs and the question of commercial expediency cannot be raised by the revenue at this stage or at any stage prior. Hence, objections raised are of no consequence and deserves to be ignored. Contention No.2: Para 11 and para 12 of the Ld. DR's submission The finding of the Hon'ble DRP that the whole transaction is a colorable device merely entered by the Appellant to earn higher rate of interest on funds (which are lying idle abroad) and are give to Indian group companies, under the shelter of the discounting transaction, which in turn invests it in India and earns fixed pre-determined interest rate is merely an allegation and devoid of any material on record to prove the same. 'At the outset, it is submitted that the trade transaction are actual international trade which is even recognized by RBI as Merchanting Trade. There is actual movement of goods from one country to other through Ship, thus, the transaction cannot be termed as sham transaction or colorful transaction. The

25 ITA nos. 5260 & 5006/Del/2011 Appellant is not a party to the buy-sell agreement but it understands that the whole transaction is routed through banking channel and permitted by Indian regulator. The Appellant is in the business of providing financial services including dealing in negotiable instruments like bills of exchange, promissory note etc. It has purchased the PN at a discounted value (on non-recourse basis) which can't be termed as interest in the hands of the assesse as accepted by Hon'ble Delhi High Court as well as Supreme Court while dismissing the SLP. Most of the questions raised by the Hon'ble DRP pertains to the trading leg in which Appellant is not a party, thus, it cannot be asked to provide such detail. Moreover, the contention put forth by the Ld. DR that "The scheme of transaction put through by the group is mainly to give color of bill discounting to interest earning activity in hands of the NR Appellant while at the same time minimizing the tax liability in the hands to the supporting group Indian concern" is also not acceptable as the Appellant is not claiming that the income is not taxable in its hands. It merely says that the said income is a business income as the Appellant's are engaged in the business of buying and selling of financial instruments and due to the beneficial provisions of the DTAA, the said income is not taxable in India. Moreover, from the angle of the Indian entity as well, the said charges would be tax deductible even if the said transaction had been carried by the Indian group company with an unrelated entity like Indian banks etc. To the best of the knowledge, it has been communicated to the assessee that not only the said transaction was examined by assessing officer of the Indian group company but also by the Transfer Pricing officer wherein the same was duly accepted to be at arm's length price. It is respectfully reiterated that these reservations in the reply of the D.R. are again dangerously inclining towards

26 ITA nos. 5260 & 5006/Del/2011 questioning the commercial expediency of the transaction. It is also respectfully submitted that this is beyond the powers and scope vested in the assessing officer and as such deserves to be ignored. At this juncture, we would like to highlight the fact that the AOIDRP cannot question the genuineness of expenditure/ transactions being undertaken by an entity with any party unless there is something on record to prove otherwise. Reliance in this connection is placed on Supreme Court judgment of SA Builders v CIT 288 ITR 1 and Delhi High Court judgment of CIT v Dalmia Cements Pvt Ltd 254 ITR 377. Contention No.3: Para 13 of the Ld. DR's submission i.e. Arguments culled out from the DRP's order Contention on non-cooperation of the assessee in respect of submitting complete trail of documents and limited information available by the assessee: The Appellant had duly submitted all the vital documents pertaining to bill discounting vis a vis invoice raised by Indian group company on offshore buyer of goods, promissory note issued by offshore buyer of goods, discounting agreement between the Appellant and Indian group entity. Moreover, the relevant documents required by the Appellant for undertaking a usual business transaction has been duly submitted by the Appellant during assessment as well as DRP proceedings. Further, as regards, the contention on the margin of Indian group company is a subject matter of Indian group entity and as per information available, had been examined in the transfer pricing analysis by the TPO in case of Indian group companies and in no way shall impact the said discounting transaction of the Appellant. The finding that the Indian company records t!:e transaction as payment of interest and the appellant terms the same as discount is incorrect. Both the Indian group companies as well

27 ITA nos. 5260 & 5006/Del/2011 as the. Appellant terms the said transaction as discount transaction only. Reference is placed on the TP study of CIPL (extract of which is quoted on Page 14 of the DRP order) that the said transaction is discounting charges. Hence, both the Indian company and the Appellant have shown the said transaction as discounting charges. Paper transaction have been highlighted along with its non- compliance of the definition of "interest": The legal question as to whether the discounting charges is interest has already been discussed and adjudicated by the Delhi HC that the same is not in the nature of "interest". CBDT Circulars: The applicability of the CBDT Circulars relied by the Appellant have been duly considered and dealt in detail by the Delhi HC in the order of Cargill Global Trading India Private Limited Critical observations: The queries raised are from the stand point of Indian group companies and could not have been responded by the Appellant in this case. The Appellant had merely carried on a normal business transaction and has earned business income which by virtue of DTAA is not taxable in India. A perusal of the questions raised by the Dispute Resolution Panel are clearly indicative of the fact that these questions are not relevant to be raised now as these questions appear to question the necessity of entering into the transaction which again links to the question on commercial expediency .. As submitted above, the case before the Hon'ble Tribunal is that of a non-resident assessee and the issue which has arisen is the treatment of the receipts in the hands of such non- resident assessee. This issue has no bearing on the questions raised by the DRP and are wholly irrelevant for the determination of the issue by this Tribunal.

28 ITA nos. 5260 & 5006/Del/2011 Although, the above submission of the assessee addresses this point, but on an illustration to be given, the attention of the Hon'ble Tribunal is invited into the question No. VI which reads as under: "(vi) What was the need of the Indian company for funds for which it approached the assessee for discounting? " This is in itself would show that the revenue is questioning the commercial expediency of the transaction which it is not permissible. It is thus accordingly prayed that the written submission filed by the revenue are not determinative of any material fact or position of law and deserves to be ignored. As stated above, the issue is squarely covered in favor of the assessee by the decision of the Tribunal, the Hon'ble High Court and the Hon'ble Supreme Court. Contention No.4: Reliance on judgment in Raghubir Singh [1989] 178 ITR 548 (SC) Reliance on this judgment has been placed stating that the Hon'ble IT AT can deviate from its earlier decision as the vital points have not been considered. However, the Appellant would like to submit that all the facts of the transaction were duly presented before various authorities arid after consideration of necessary facts, the Hon'ble HC and ITAT have adjudicated the matter in favor of the Appellant. Without prejudice to the above, it is also submitted that in the Appeal filed by the assessee and the grounds raised the question that has been raised is regarding the characterization of the discounting charges and that is the only subject matter of the Appeal and in the absence of any cross objection - by the revenue, the Tribunal is not permitted to go beyond the subject matter of the appeal.

29 ITA nos. 5260 & 5006/Del/2011 This position is stated in concrete by the jurisdiction of the High Court in the case of Marubeni India Pvt. Ltd. v CIT (328 ITR 306) (Del). The relevant extracts of the judgment are as under:- "Sec. 254(1) provides that the Tribunal may, after hearing the parties on the appeal, 'pass such orders thereon' as it thinks fit. Thus, on a plain reading of the relevant provision of law, the power to pass such orders as the Tribunal thinks fit can be exercised only in relation to the matters that arise in the appeal and it is not open to the Tribunal to adjudicate on a question which is not in dispute and which does not form the subject- matter of the appeal. The word 'thereon' is a particularly significant and has been interpreted by many High Courts and Supreme Court to circumscribe the jurisdiction of the Tribunal to the subject-matter of the appeal, which is constituted of the original grounds of appeal and such additional grounds as may be raised by the leave of the Tribunal. The consensus of judicial opinion appears to be that the jurisdiction of the Tribunal is confined to the passing of orders on the subject-matter of the appeal, that in, those orders which are necessary for the disposal of the appeal. The Tribunal cannot give a finding in respect of the assessment of a year which is not the subject- matter of the appeal before it. The Tribunal thus can give a finding that the deduction/income does not belong to the relevant assessment year/years, but though it may incidentally find that the deduction/income relates to another assessment year, it cannot give a finding that the deduction/income belongs to another specified year. There is, however, an exception to the general rule that the jurisdiction of the Tribunal is confined to the subject-matter of appeal. The exception is where an additional ground has been raised with the leave of the Tribunal. In that case, the subject-matter of the appeals constitutes the original grounds of appeal and such additional

30 ITA nos. 5260 & 5006/Del/2011 ground/grounds as may be raised with the leave of the Tribunal. " 14. We have considered the rival submissions and have perused the

record of the case. We have extensively reproduced the submissions of both

the department and assessee, in order to appreciate the specific objections

raised by revenue.

pointed out by ld. DR in his detailed submissions, reproduced above. In

order to appreciate the submissions of ld. CIT(DR), we have to first

consider the brief background of the case.

and is tax resident of Singapore. It had entered into an agreement for cost

sharing with Indian party for rendering certain services. Besides this,

assessee had also discounted the bills of exchange (BE)/ demand promissory

notes (PN) of certain Indian group entities i.e. Cargill India Pvt. Ltd. and

Cargill Global Trading Pvt. Ltd. The assessee did not offer the income

earned by it on discounting the PN of Cargill India Pvt. Ltd. on the ground

that the same was in the nature of “business income” and was not taxable in

the absence of permanent establishment (PE) of the assessee in India. The

Indian group entities CIPL and CGTIPL got discounted the promissory

notes issued to them by the buyer of their goods for the assessee. For this

31 ITA nos. 5260 & 5006/Del/2011 purpose the assessee entered into a discounting agreement with Cargill India

Pvt. Ltd. for purchase of PN at a discount specifying the details of PN to be

discounted face value, discounted value, rate of discount, name of the

company who owed PN, date of maturity of PN, bank debts for payments

etc. The CIPL endorsed the PN in favour of the assessee on “without

recourse” basis. The said endorsement of PN signifies that all risks and

rewards of the PN stand transferred to the assessee and in no case the

assessee could make the Indian entity liable to make payment to the

assessee in case of delay or default on maturity. The assessee makes

payment of PN to the Indian entities as per the net present value. The

difference between the face value and net present value of the PN has been

considered as discounting charges. Further, the above facts were

summarized as under: “3.1.2.5. The above position may be summarized as under: - Cargill India approach the assessee for discounting of the PN issued to them by the buyers of goods; - The Assessee purchases the PN at a discount on 'without recourse' basis and pays the discounted amount to the Cargill India; The assessee earns income on maturity or subsequent sale of PN which Is In the nature of ‘business income' It may be worthwhile to mention here that purchase of PN on a 'without recourse' basis implies that:

32 ITA nos. 5260 & 5006/Del/2011 - Assessee purchases the PN from the Cargill India - Assessee pays the consideration based on present value which is less than the face value and the difference is regarded as-discount value. - Assessee does not have any right against the seller of PN I.e. Cargill India in case of any dispute or default in the encashment of PN on the due date. - Assessee has the right to collect the money from the entity which owed the PN in its own name. - Assessee does not recover the amount from the entity which owed the PN on behalf of the Cargill India but recovers the same in its own behalf.” 17. In the backdrop of aforementioned facts the income earned by the assessee has been considered as discounting charges in its hands and this

issue has been settled by the decision of Hon’ble Delhi High Court in the case of Cargill Global Trading Pvt. Ltd. (supra). Thus, the issue stands settled by Hon’ble Jurisdictional High Court and the SLP filed by the department in the case of Cargill Global Trading India Pvt. Ltd. has been

dismissed. The decision of Cargill Global Trading India Pvt. Ltd. has been followed in the case of assessee, as noted earlier. 18. Now the first aspect pointed out by ld. CIT(DR) with reference to para

7.8 at page 15 of assessment order is with reference to role of Cargill Inc. The said para is reproduced hereunder:- “7.8 As per the last order of the Ld. ITAT in the case of CGTIPL wherein appeal of I CGTIPL has been allowed inl.T.A. No.684/Del/2009 for A.Y. 2004-05 and subsequent years, this

33 ITA nos. 5260 & 5006/Del/2011 income of the assessee is held to be of not of the nature of interest however that order is passed by the Ld. IT AT wherein complete facts were not presented and specially facts relating to the assessee (Cargill TSF Asia Pte Ltd), role of Cargill Inc., role of buyer Cargill IntI. SA., RBI Circulars, FEMA provisions etc. were not presented before the Ld. IT AT which are very material for the case. Also, it becomes an undisputed fact that the interest income (discounting charges as per the nomenclature) arises in India, as is also mentioned by the assessee in the notes to return of income filed on 30-09-2008. Once the interest accrues/arises in India there is no need to go to section 9 of the Income Tax Act, 1961 which provides for 'Income deemed to accrue or arise in India'. Even otherwise, in the present case, the interest is also deemed to accrue or arise in India as: • The interest is paid by a person who is a resident and even also • Interest is payable in respect of any debt incurred, or. moneys borrowed and used, for the purposes of a business or profession earned on In India The amount borne by the CIPL I CGTIPL would be taxable in the hands of the assessee as per provisions of Section 5(2) of the I.T. Act. Therefore, it is held that the income Is taxable in the hands of the assessee as interest income.” 19. A bare perusal of the observations of AO makes it very clear that he has not at all referred to any RBI Circular, FEMA provision which had bearing on the facts of the case and how the receipt in the hands of assessee took the colour of interest and not the discounting charges. However, in this

34 ITA nos. 5260 & 5006/Del/2011 regard ld. CIT(DR) has referred to para 9 and 9.1 of ld. DRP’s order at page 10 & 11 wherein ld. DRP has, inter alia, observed that the assessee’s contention regarding discounting being ‘without recourse’ is of no help to assessee because the alleged seller of goods, and the alleged foreign buyer of goods i.e. Cargill International Geneva were obliged to honour the terms of payments as per RBI regulations within a stipulated time. Ld. DRP has further observed that as per RBI Regulations, every exporter of goods has to get the inward remittance within a stipulated time in India in foreign currency. It is further observed that, accordingly, the foreign buyer has to remit the fund to the Indian customer and the Indian customer was obliged to recover the money due to it in foreign currency from the supplier within the time specified by the RBI. 20. Ld. DRP further observed in para 9.1 that assessee had submitted before the AO and also before the Panel that there had been no default in realizing the promissory note so far. Ld. DRP further observed that since the transaction was between group company and the Indian company was obliged to recover the money from the buyer of alleged group, there was no risk involved in the transaction. The conclusion drawn by ld. DRP on this basis is that the obligation by the RBI to recover the money in fact changes the nature of the term ‘without recourse’. We do not find any substance in the observations of ld. DRP on this basis. The issue before us is whether the discounting charges, received by assessee on maturity of promissory note on realization of proceeds from the buyer, were in the nature of discounting charges or interest. The RBI regulations cannot decide the true nature of receipt in the hands of assessee. Had there been any violation of RBI regulation in the whole transaction, then action would have been initiated against the assessee in accordance with law. The conclusion drawn by ld.

35 ITA nos. 5260 & 5006/Del/2011 DRP is that as per the definition of interest in the Indian Income-tax Act and the DTAA the amount paid by the assessee is a debt to the Indian company and the assessee company has recovered the said debt with interest from the Indian company through another group company. In our opinion, this aspect has received specific consideration of Hon’ble High Court in the case of Cargill Global Trading Pvt. Ltd. (supra) and, therefore, this conclusion cannot be accepted. Further, ld. CIT(DR) has referred to para 7 and 7.2 of ld. DRP’s order, which has been reproduced by us earlier. In para 7.2, ld. DRP has, inter alia, observed that the Indian company, while regarding the above transaction terms the payment as interest and claims deduction, whereas the same amount is termed as discount by the assessee, resulting into no tax payment by the entire group in India. In the submissions made by assessee,, reproduced earlier, it has been specifically stated at page 5 that both the Indian companies as well as the assessee term the said transaction as discounting transaction only. In this regard ld. counsel has referred to page 14 of the DRP’s order wherein ld. DRP notes in para 9.8 as under: 9.8.The assessee also contended that in the TP study of CIPL discounting charges are classified as discounting charges. However, during the proceedings before this Panel the assessee has submitted on 02.06.2011 as follows: 1. Head under which discounting charges are debited in the books of Indian group entities

As per the information provided by the Indian group entities, they have recorded the discounting charges under the head “Financial Expenses” in their profit and loss accounts.”

36 ITA nos. 5260 & 5006/Del/2011 interest. The true nature of transaction cannot alter merely by clubbing the discounting charges under the head ‘financial expenses’. Therefore, this plea raised by ld. CIT(DR) on the basis of observation made by ld. DRP for distinguishing these facts in the current year from earlier years is without any basis. As far as ld. CIT(DR)’s submission regarding non-cooperation of assessee on the basis of observations made by ld. DRP in para 7 are concerned, we find that none of the authorities below have pointed out as to which particular information was missing in the entire trail of transaction. In the submissions filed by assessee it is clearly stated that all the relevant information were furnished before lower revenue authorities.

which were as under: “Assessee’s reliance on CBDT circulars is analysed and rejected. Critical observations therein include (i) Assessee has not approached bankers for discounting of so called bills; (ii) PNs of group concerns are not freely transferable by endorsement and delivery; (iii) The case of the assessee is a private arrangement among group concerns and cannot be compared with banking transactions and CDs”

37 ITA nos. 5260 & 5006/Del/2011 Hon’ble Supreme Court relied on by ld. DR in the case of Union of India Vs. Raghubir Singh 178 ITR 548 (SC) is of little help to the department. 24. In the result, both the appeals, preferred by the assessee, stand allowed.

Order pronouncement in open court on 15/03/2016.

Sd/- Sd/- (SUCHITRA KAMBLE ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15/03/2016. *MP* Copy of order to: 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, New Delhi.