Income Tax Appellate Tribunal - Ahmedabad
Rubamin Limited, Baroda vs Income Tax Officer,Ward-4(2),, Baroda on 17 February, 2017
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'ई' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH, AHMEDABAD
BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA Nos. 664/Ahd/2012
िनधा रण वष / Assessment Year : 2006-07
Rubamin Ltd., ITO,
Synergy House, Subhanpura, Vs Ward 4(2),
Baroda-39007 Baroda
PAN : AAACR 8758 H
आयकर अपील सं./ ITA Nos. 665/Ahd/2012
िनधा रण वष / Assessment Year : 2007-08
Rubamin Ltd., ACIT,
Synergy House, Subhanpura, Vs Circle-4
Baroda-39007 Baroda
PAN : AAACR 8758 H
आयकर अपील सं./ ITA Nos. 795/Ahd/2012
िनधा रण वष / Assessment Year : 2007-08
DCIT, Rubamin Ltd.,
Circle-4 Vs Synergy House, Subhanpura,
Baroda Baroda-39007
PAN : AAACR 8758 H
अपीलाथ /
अपीलाथ (Appellant) यथ
यथ /
थ (Respondent)
Assessee by : Shri Milin Mehta, AR
Revenue by : Shri Rakesh Jha, Sr DR
Date of Hearing : 05/01/2017
Date of Pronouncement in Court : 17/02/2017
आदेश/O R D E R
PER R.P. TOLANI, JUDICIAL MEMBER:-
It is a set of three appeals; one by the assessee for AY 2006-07 and the cross-appeals for AY 2007-08.
2. One common ground raised in all these appeals challenges that the ld. CIT(A) erred in law and on facts in upholding the AO's action of applying ITA Nos. 664, 665 & 795/Ahd/2012 Assessee : Rubamin Ltd AY : 2006-07 & 2007-08 2 Arm's Length Price (in short ALP) @ LIBOR + about 2% (assessee's appeal in AY 2006-07) and reducing the ALP adjustment of LIBOR+ about 0.75% (in assessee's and Department's appeal in AY 2007-08).
3. The relevant observations of the ld. CIT(A) in AY 2007-08 are as under:-
"4.1.2 The issue of charging of interest on the interest free loan given to the AE was also involved in the appellant's own case for AY 2006-07. In the appeal order passed in Appeal No.CAB/III-434/09-10 for AY 2006-07, it has been held that the action of TPO in making upward adjustment on account of interest free loan given by the appellant to its AE is correct. For this purpose, reliance has been placed upon the decision of ITAT, Delhi 'A' Bench in ITA No.3647/Delhi/2007 dated 09.12.2011 in the case of Aithent Technologies Pvt Ltd, in which the Bench had held that the determination of interest to be charged in such case is to be made as per the CUP method. But, at the same time, the ITAT has also held that for applying the CUP method, ALP should be recomputed on the basis of comparable transactions involving foreign currency lending by unrelated parties. In the year, the AE did not have transaction in foreign currency lending with any unrelated parties, hence, the action of the A.O. was upheld. In the order for the current year, the TPO had charged interest by applying US prime rates. On being asked, the appellant had submitted that during the previous year 2006-07, the AE had obtained loan from ABN Amro Bank at LIBOR + 0.75% interest rate. Hence, following the "decision of ITAT as mentioned above, the A.O. is directed to adopt the rate of LIBOR + 0.75% as the interest rate to be charged on the interest free loan given to the AE and recompute the adjustment to be made in ALP to be made accordingly."
4. The ld. Counsel for the assessee contends that the during the year under review had invested its capital in setting up its subsidiaries in view to stabilize the supply of the Raw-material (i.e. Cobalt Concentrate). The Company decided to fund the said operations by setting up a Company in Sharjah, UAE (Rubamin FZE) and its subsidiary in Congo (Rubecco SPRL) primarily for the reason that the said Companies shall collectively source the material from Congo and supply it to Rubamin, thus assuring the seamless supply of the material for the Cobalt business. The entire transfer pricing study had been undertaken keeping in mind the above background ITA Nos. 664, 665 & 795/Ahd/2012 Assessee : Rubamin Ltd AY : 2006-07 & 2007-08 3 of the appellant-company. The appellant had purchased cobalt from its AE, had exported consumables to its AE, had incurred recoverable expenditure on behalf of its AE and had also advanced a loan to its AE. Since all the transactions were inextricably linked to each other and also .there was a possibility that pricing of one transaction might affect pricing of the other, the appellant resorted to the TNMM method.
4.1 In AY 2006-07, the ld. CIT(A) confirmed the ALP adjustment of LIBOR +2% and in AY 2007-08, on the similar set of facts, reduced the LIBOR to 0.75% following the ITAT judgment in the case of Aithent Technologies Pvt Ltd in ITA No.3647/Delhi/2007 dated 09.12.2011.
4.2 Ld. Counsel for the assessee requested for the admission of additional evidences in the form of letter given by the assessee to the Deputy General Manager, State Bank of India, Industrial Finance Branch, Baroda in respect of remittance to assessee's UAE's wholly owned subsidiary M/s. Rubamin FZE to demonstrate that the funds were advanced by the assessee to M/s. Rubamin FZE, UAE to exploit an opportunity to fullest extent to give economies of scale in the international operations and maximize the gains with primary objective of ensuring the supply of raw-materials for the assessee's core area activities. This letter dated 18.06.2004 will also demonstrate that the assessee-company's main objective before the advances was to augment its own supply.
5. Ld. Departmental Representative, on the other hand, contends that this letter, though dated 18.06.2004, was not produced before any lower authorities and no sufficient cause has been shown towards claim that the assessee was prevented by any sufficient cause in not producing it before the authorities below.
ITA Nos. 664, 665 & 795/Ahd/2012 Assessee : Rubamin Ltd AY : 2006-07 & 2007-08 4 5.1 Alternatively, it is contended that in case this additional evidence is admitted, then the matter may be set aside and restored back to the file of ld. TPO to consider the same.
6. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. The correspondence in question is with the assessee's banker, i.e. State Bank of India, through which the remittance to M/s. Rubamin FZE, UAE was made alongwith RBI approval. Therefore, the document assumes a regulatory character which is in the files of the schedule bank and RBI. The assessee contends that the other copious evidence did not earlier satisfy the TPO about the business exigencies of advancing the loans; hence the additional evidence. A catena of judgments is available by now wherein the LIBOR+ and varying degree of incremental value has been adopted, which is evident from the fact that ld. CIT(A) has adopted a rate of LIBOR+ 2% in AY 2006-07 and 0.75% in AY 2007-08. In the entirety of facts and circumstances, we are inclined to admit the additional evidence and acceding to the alternate request of the ld. DR to remit the issue back to the ld. TPO to decide the same de-novo in view of above observations, for which the assessee has no objection.
7. The other issues for AY 2006-07 challenging the action of the ld. CIT(A) in confirming the part disallowance of Rs.3 lakhs out of Rs.5 lakhs made by Assessing Officer is not pressed as the same was accordingly requested by the assessee before the ld. CIT(A) which is evident from the ld. CIT(A)'s observations as under :-
"6.2 I have considered the assessment order and the appellate submission, in view of the facts narrated by the AO and the request made by the appellant, the AO is directed to restrict this disallowance to Rs.3,00,000/-. The appellant gets relief accordingly."
Accordingly, this ground is dismissed.
ITA Nos. 664, 665 & 795/Ahd/2012 Assessee : Rubamin Ltd AY : 2006-07 & 2007-08 5
8. In the result, assessee's appeal for AY 2006-07 is partly allowed for statistical purposes.
9. Apropos cross appeal for AY 2007-08, the ground about ALP adjustment of LIBOR +2/0.75% has been set aside and restored back to the file of ld. TPO. Accordingly, this ground of the assessee and Revenue are allowed for statistical purposes.
10. Apropos assessee's other issue pertaining to claim of sales tax exemption/subsidy as capital in nature has fairly considered by the ITAT in ITA Nos. 999, 2467 & 3426/Ahd/2008, in which it has been held as Revenue in nature. Accordingly, this ground of assessee is dismissed.
11. Apropos third issue challenging the allowability of deduction u/s 80IB on the amount of sales tax subsidy, the ld. Counsel for the assessee contends that the issue in question is squarely covered in favour of the assessee by the Hon'ble Supreme Court judgment in the case of CIT vs. M/s. Shree Balaji Alloys in Civil Appeal No.10061 of 2011 and CIT vs. Meghalaya Steel Ltd, 383 ITR 217. The ld. DR, on the other hand, supported the order of the Assessing Officer. The ground of sales tax subsidy being Revenue in nature is covered against the assessee by ITAT decision in assessee's own case. Once the sales tax subsidy is held to be Revenue in nature, the same amount becomes the income of the assessee's industrial undertaking; consequently, deduction u/s 80IB is to be allowed in favour of the assessee. Respectfully following the Hon'ble Supreme Court judgments in the case of M/s. Shree Balaji Alloys & M/s. Meghalaya Steel Ltd (supra), this ground of the assessee is allowed.
12. Apropos Revenue's remaining ground for AY 2007-08 challenging the ld. CIT(A)'s holding that the Corporate Guarantee given by the assessee ITA Nos. 664, 665 & 795/Ahd/2012 Assessee : Rubamin Ltd AY : 2006-07 & 2007-08 6 being a domestic transaction is outside the purview of TP provisions is claimed to be covered in favour of the assessee and against Revenue in the case of Micro Inks Limited vs. ACIT, reported in [2016] 157 ITD 132 (Ahmedabad - Trib.), wherein it was held as under:-
"48. In the present case, we have held that the issuance of corporate guarantees were in the nature of shareholder activities- as was the uncontroverted claim of the assessee, and, as such, could not be included in the 'provision for services' under the definition of 'international transaction' under section 92 B of the Act. We have also held, taking note of the insertion of Explanation to Section 92B of the Act, that the issuance of corporate guarantees is covered by the residuary clause of the definition under section 92 B of the Act but since such issuance of corporate guarantees, on the facts of the present case, did not have "bearing on profits, income, losses or assets", it did not constitute an international transaction, under section 92B, in respect of which an arm's length price adjustment can be made. In this view of the matter, and for both these independent reasons, we have to delete the impugned ALP adjustment."
Respectfully following the Co-ordinate Bench decision in the case of Micro Inks Limited (supra), this ground of the Revenue is dismissed.
13. In the result, assessee's appeals for AYs 2006-07 & 2007-08 are partly allowed for statistical purposes and the Revenue's appeal for AY 2007-08 is also partly allowed for statistical purposes.
Sd/- Sd/-
(MANISH BORAD (R.P. TOLANI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated /02/2017
*Biju T., Sr PS
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent.
3. संबंिधत आयकर आयु / Concerned CIT
4. आयकर आयु (अपील) / The CIT(A)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad