Income Tax Appellate Tribunal - Delhi
Sona Blw Precision Forgings Ltd., New ... vs Addl. Cit, Special Range-8, New Delhi on 14 July, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I" DELHI
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
&
Dr. B.R.R. KUMAR, ACCOUNTANT MEMBER
I.T.A. No.525/DEL/2019
Assessment Year 2013-14
Sona BLW Precision Forgings Ltd. Vs. Addl. CIT
UGF-6, Indraprakash Special Range-8
21 Barakhamba Road New Delhi
New Delhi
TAN/PAN: AABCS4786P
(Appellant) (Respondent)
Appellant by: Ms. Aditi Gupta, AR
Respondent by: Shri Rajesh Kumar, CIT (DR)
Date of hearing: 22 06 2023
Date of pronouncement: 14 07 2023
ORDER
PER KUL BHARAT, A.M.:
The captioned appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-44, New Delhi ['CIT(A)' in short] dated 26.11.2018 arising from the assessment order dated 21.11.2016 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) pertaining to Assessment Year 2013-14 .
2. The assessee has raised the following grounds of appeal.
"1 . Th e learn ed Commissio n er o f In co me Ta x (Ap p ea ls) erred in law an d facts in pa rtia lly upho ld ing th e a rm's len g th p rice o f corpo ra te gu a ran tees exten d ed b y th e Appella nt to the b an kers of th e Asso cia te Enterp rises a nd th ereby erred in uph o lding u pwa rd tran sfer p ricin g ad ju stmen t o f Rs.6 6 ,30 ,450 (n et o f suo mo to ad ju stmen t by th e App ella n t) u/s. 92 CA o f the In come Ta x Act, 1 96 1 in resp ect o f Co rpo rate Gua ran tee Commissio n.I.T.A. No.525/Del/2019 2
2 . With o u t p rejud ice to th e fo resa id g round s, th e lea rn ed Co mmissio ner o f In come Ta x (Ap p ea ls) erred in fa cts and la w b y uphold ing th e p a rtia l ad d itio n even though th e o p era tin g margin o f th e a ssessee as p er a ccepted b en ch ma rk meth od o f TNMM, wa s with in a cceptab le ra ng e even a fter co n sid ering th e Tra n sfer Pricing Officer's a d ju stmen t on co rpo ra te guara n tee fee."
3. The facts in brief are that in this case the assessee filed its return of income declaring income at INR 28,64,70,841/- on 25.01.2013 which was later revised to INR 28,70,84,296/- on 20.03.2015. The case was selected for scrutiny under CASS. Thereafter, statutory notices were issued. The assessee-company is engaged in the business of manufacturing of Precision Forged Bevel Gears and Synchronizer rings used in the automobile industry. It was noticed that during the year under consideration, the assessee-company had undertaken international transactions therefore, the matter was referred to Transfer Pricing Officer (TPO) for determining Arms' Length Price who proposed that adjustment of INR 1,06,66,002/- qua the value of international transactions against this assessee did not file any objection before the Dispute Resolution Panel (DRP). Thereafter, the Assessing Officer made addition of INR 1,06,66,002/-. Thus, the Assessing Officer assessed the income at INR 29,77,50,298/- against the declared income at INR 28,64,70,841/-.
4. Aggrieved against this, the assessee preferred appeal before the ld. CIT(A) who sustained the addition by following the order of the predecessor in the Assessment Year 2012-13.
5. Now the assessee is in appeal before this Tribunal.
6. At the outset, the ld. counsel for the assessee submitted I.T.A. No.525/Del/2019 3 that under the identical facts Co-ordinate Bench of this Tribunal in respect of proceedings related to Assessment Year 2012-13 had decided the issue in favour of the assessee by directing the Assessing Officer to apply CUP method and restored the matter to the file of the Assessing Officer for fresh determination. The ld. counsel further submitted that following the decision in Assessment Year 2012-13, the issue in Assessment Year 2016- 17 also was restored to the file of the Assessing Officer, therefore, it was contended that matter be restored to the file of the Assessing Officer.
7. We have heard the rival contentions and perused the material available on record.
8. We find that the Co-ordinate Bench of the Tribunal in ITA Nos.204 & 3134/Del/2017 vide order dated 18.11.2021 for Assessment Years 2011-12 & 2012-13 had restored the issue to the file of the Assessing Officer. This decision was also followed by the Co-ordinate Bench in the Assessment Year 2016-17. For the sake of clarity, the relevant paragraphs of the order passed on 18.11.2021 are reproduced hereunder:-
"4 . Assessee filed objectio ns b efo re th e DRP. DRP, a fter so me discu ssions, h eld a s und er:-
"It is wel l settled th a t LIBOR b ein g an intern a tio na lly recog n ized ra te is the a pp ropria te b en ch ma rk in terest rate which con fo rms to the a rm's leng th standard und er th e CUP Meth od for b en chma rkin g foreign cu rren cy lo an s. Th e LIBOR ra te is th erefo re th e a ppropria te un contro lled compa rable to be app lied to th e a ssessee's tra nsa ctio n s fo r th e releva n t p eriod. In ca ses wh ere th e in vo ices a re ra ised in f oreign curren cy, th e app licab le ra te will b e LIBOR plus, in lin e with jud gment o f th e Hon 'b le Delh i Hig h Cou rt in th e case of M/s Co tto n Na tu ra ls. Th e AO is d irected to verify the assessee's claim o f th e sa id lo an s b eing in fo reign cu rren cy from th e releva nt agreemen ts, in wh ich case the a pplica ble LIBOR rate o f interes t sho u ld b e ta ken based on cred it ratin g , pu rpo se and term o f loan etc., I.T.A. No.525/Del/2019 4 which a re specific to th e terms of th e lo an I pa yment with the AE a nd to re-co mpu te th e ad ju stmen t a cco rd ing ly. Th e TPO sha ll ver ify th e cla im o f th e a ssessee th a t th e AE co n cern ed wa s Sona Ho lding B.V. Neth erland a s per th e au dited fin ancials and not S ana BLW German y and Sona BLW US A a s ta ken in the d ra ft o rd er This Ground is d ispo sed o ff a s abo ve."
5. Ld . Co un sel o f th e a ssessee p lead ed that on id en tica l issu ed , th is Tribu na l in ITA No s.204 & 3 13 4/Del./201 7 vid e o rd er da ted 18 .11 .2021 for AY s 20 11 -12 & 2 0 12 -1 3 ga ve th e fo llo wing d irectio n s :-
"1 6 . As fa r a s issu e o f b en chma rking is con cern ed , we fin d that Assessin g Officer h a s ap p lied the ra te o f 2 .02 % which ha s been restricted b y th e CIT(A) to 1 % o f the lo a ns a va iled. However, we a re o f th e o p in ion tha t, th e tra nsa ctio n ha s to be b en chma rked app lying mo st ap p rop ria te meth od as p er the p ro vision s of the Act. The ad ju stmen t made by th e Assessin g Officer ta kin g a verage rate o f gua rantee co mmission b y th e ban ks canno t be h eld as a compa rable un con tro lled price. The Lea rned AO or th e TPO ha s to co mpare the tran sa ctio n o f th e a ssessee with a ctua l tra nsa ctio n h app ened du ring relevant p eriod in circu mstan ces comp a rab le to th e a ssessee, a s p er th e str ict requ irement o f CUP method . In th e circu mstan ces, we feel it a pp rop ria te to restore th e issu e of benchma rking o f the in tern a tio nal tran sa ctio n o f gua ran tee fee/commissio n to th e file o f th e Ld. AO/T PO fo r deciding afresh a fter pro vid ing adequa te opp ortun ity of b ein g h eard to th e a ssessee. The g ro und o f th e app ea l o f th e assessee, a re acco rdin g ly a llo wed fo r sta tistica l p u rpo ses."
Ld . Coun sel fo r th e a ssessee p lea ded tha t th e ma tter ma y b e set a sid e to the AO/TPO in a cco rdan ce with th e a bove said o rder.
6. Per con tra , ld . DR fo r the Reven u e d id no t ha ve an y ob jection to this p ro po sitio n .
7. Acco rding ly, in the in terest of ju stice, we remit th e issu e to th e AO to con sid er th e issu e a fresh in the lig h t of the aforesa id ob serva tio n s o f the Tribu na l. Need less to a dd , a ssessee shou ld b e gra nted an oppo rtun ity o f being h ea rd."
9. It is not disputed that the ld. CIT(A) in paragraph 5.6 of the impugned order has followed the decision of predecessor in the A.Y. 2012-13. For the sake of clarity, the same is reproduced as under:
"5 .6 Th e ma teria l fa cts o f th e ca se a t the sa me in th e in stan t year a lso . In a cco rdan ce with th e p rin cip le o f con sisten cy, th e do ctrin e o f ju d icia l d iscip line a nd resp ectfully fo llo win g th e o rd er o f the CIT(A)- 44, in App ea l No. 1 3 /2016 -17 da ted 1 7 .01 .2017 for AY 2 012 -13 , th e AO/TPO is d irected to con sider ALP fo r co rpo ra te gua ra n tee a t 1 %. Th e g rou nds o f App ea l No . 1 to 6 are a cco rding ly d isposed o ff."I.T.A. No.525/Del/2019 5
10. We therefore taking a consistent view, hereby restore the issue to the file of the Assessing Officer to decide in accordance with the direction of the Tribunal in ITAs No.204 & 3134/Del/2017 order dated 18.11.2021. The grounds raised by the assessee are allowed for statistical purposes.
11. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 14/07/2023 Sd/- Sd/-
[B.R.R. KUMAR] [KUL BHARAT]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED: /07/2023
prabhat