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× Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India

These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

06-01-2020, Bombay Rayon Holdings, Section 147, 144C(1), Tribunal Mumbai

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2 weeks 3 hours ago #11956 by amit
Section - 147, 144C(1), 92C(1), 133, 234B, 271(l)(c)
Order Date - 06-01-2020
Favouring - Assessee Partly
Court - Tribunal Mumbai
Appellant - Bombay Rayon Holdings Ltd.
Respondent - ITO
Justice - SHAMIM YAHYA AM & PAWAN SINGH JM
Citation - 120Taxpundit60
Appeal No. - ITA No.5991/Mum/2018
Asstt. Year - 2014-15

Order

PER : SHAMIM YAHYA

These are appeals by the assessee against respective orders of the assessing officer passed under section 143(3) / 147 r.w.s. 144C(1) of the Income Tax Act, 1961 pursuant to directions of the Dispute Resolution Panel. Since the issues are common and connected and the appeals were heard together these are being consolidated and disposed of together for the sake of convenience

2. The common grounds of appeal read as under:-

For the sake of reference we are referring to the grounds of

A.Y.2009-10.
General

1. On the facts and circumstances of the case and in law, the learned Transfer Pricing Officer ('TPO') / learned Assessing Officer ('AO') / Hon'ble Dispute Resolution Panel ('DRP ) erred in making transfer pricing adjustment of INR 13,38,53,244 on a count of interest on transaction of loan advanced by the appellant to its a soc ated enterprise ('AE') in Italy, alleging the same to be not at arm's length in terms of the provisions of section 92C(1) and 92C(2) of the Income Tax Act 1961 ('the Act'), read with Rule 10D of the Income Tax Rules, 1962 ('the Rules').

Re-opening of assessment

2. On the facts and circumstances of the case and in law, the learned AO erred in issuing notice u/s 148 of the Act for re-opening the assessment without properly appreciating the facts of the case and in law.

3. On the facts and circumstances of the case and in law, the learned AO erred in re-opening the assessment on the basis of information received from DCIT, Central Circle - 6(3), Mumbai regarding survey action carried out u/s 133 A of the Act on M/s Bombay Rayon Fashions Ltd; the holding company of the appellant, during which statement of Shri Prashant Agarwal in the capacity of Managing Director of M/s Bombay Rayon Fashions Ltd. was recorded on oath u/s 131 of the Act

4. On the facts and circumstances of the case and in law, the learned AO further erred in not appreciating the decision of the Hon'ble Supreme Court in the case of CIT vs Kadar Khan Sons as reported in 352 ITR 480 which held that the learned AO has no power u/s 133 of the Act to administer oath and take a sworn statement.

Violation of Section 144CC13) of the Act

5. On the facts and circumstances of the case and in law, the learned AO/TPO erred in passing the final assessment order not in conformity with the directions of the Hon'ble DRP thus violating the mandatory provisions of section 144C(13) of the Act.

Loan transaction Interest should not be charged on the loan transaction

6. On the facts and circumstances of the case and in law, the learned TPO/ learned AO /Hon'ble DRP erred in disregarding the fact that the appellant had received interest free loan from its holding company i.e. Bombay Rayon Fashion Ltd. and advanced the said loan to BRFL Italia SRL, its AE in Italy, interest free for promoting the 'GURU' brand.

7. On the facts and circumstance of the case and in law, the learned TPO/ learned AO /Hon'ble DRP erred in disregarding the fact that the loan was advanced by the appellant to ts AE for promoting the 'GURU' brand in Italy and hence disregarded he purpose of the loan advanced by the appellant to its AE and thus determined adjustment without considering the surrounding circumstances / commercial expediency of the loan advanced by the appellant to its AE.

8. On the facts and circumstances of the case and in law, the learned TPO/ learned AO /Hon'ble DRP erred in not appreciating that the law requires the arm's length price to be determined keeping in mind the term 'having regard to' as used in section 92(1) of the Act. The learned TPO/ learned AO /Hon'ble DRP further erred in not appreciating that the income arising from an international transaction is required to be computed in relation to all relevant factors including those relevant to determine arm's length price. Without prejudice if interest is to be charged on the loan transaction, SBI PLR + 300bps cannot be applied.

9. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO erred in not issuing a show cause notice to the appellant for charging interest at SBI PLR + 300 basis points thus denying the opportunity to the appellant for making its submissions against the interest rate and thus violating principles of natural justice. The Hon'ble DRP further erred in upholding the action of the learned AO / learned TPO.

10. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO /Hon'ble DRP erred in concluding that the loan was advanced by the appellant to its AE in Indian currency i.e. INR. and hence erred in applying SBI PLR + 300 basis points as rate of interest.

11. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO /Hon'ble DRP erred in disregarding the fact that the appellant advanced loan to its AE in Euro and interest on loan has to be computed according to the currency of the country in which the loan is utilised.

12. On the facts and in the circumstances of the case and in law, learned TPO/ learned AO / Hon'ble DRP erred in following the rates prescribed under the Safe Harbor Rules which are not applicable to the appellant since the appellant is not an 'eligible assessee' within the meaning of Rule 10TB of the Rules.

13. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO /Hon'ble DRP erred in concluding the credit rating of the AE i.e. the borrower as 'below investment grade' thus applying a higher spread rate of 300bps. Without prejudice if interest is to be charged the rate of interest is to be
restricted to LIBOR / LIBOR + 200 bps.

14. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO / Hon'ble DRP erred in not restricting the rate of interest on the loan transaction to LIBOR rates without any spread.

15. Without prejudice, learned TPO/ learned AO / Hon'ble DRP erred in applying spread on LIBOR rates. The learned TPO/ learned AO / Hon'ble DRP further erred in not restricting the spread to 200 bps.

16. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO erred in not issuing a show cause notice to the appellant for applying swap calculator for calculating spread rate thus denying the opportunity to the appellant for making its submissions against the swap calculator and violating principles of natural justice. The Hon'ble DRP further erred in upholding the action of the learned AO / learned TPO.

17. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO erred in not providing / explaining the basis for the swap calculator and the basis of search criteria adopted for computing spread.

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