Value Labs LLP, Hyderabad v. Asst. Commissioner of Income Tax, Circle-8(1), Hyderabad

ITA 1729/Hyd/2019 | 2015-2016
Pronouncement Date: 07-05-2021 | Result: Partly Allowed

Appeal Details

RSA Number 172922514 RSA 2019
Assessee PAN AAKFV2276K
Bench Hyderabad
Appeal Number ITA 1729/Hyd/2019
Duration Of Justice 1 year(s) 5 month(s) 10 day(s)
Appellant Value Labs LLP, Hyderabad
Respondent Asst. Commissioner of Income Tax, Circle-8(1), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2021
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB-B
Tribunal Order Date 07-05-2021
Date Of Final Hearing 08-04-2021
Next Hearing Date 08-04-2021
Last Hearing Date 05-04-2021
First Hearing Date 05-04-2021
Assessment Year 2015-2016
Appeal Filed On 27-11-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH HYDERABAD. BEFORE SHRI S.S. GODARA JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO. 1729/ HYD/201 9 (ASSESSMENT YEAR : 201 5 - 1 6 ) M/S. VALUE LABS LLP. PLOT NO.41 PHASE II HITECH CITY HYDERABAD - 500 081 PAN AAKFV 2276K VS. ASST. COMMISSIONER OF INCOME TAX CIRCLE 8(1) HYDERABAD. APPELLANT RESPONDENT APPELLANT BY : SHRI P. MURALI MOHANA RAO. RESPONDENT BY : SHRI ROHIT MAJUMDAR (D.R.) DATE OF HEARING : 8.4. 2021. DATE OF PRONOUNCEMENT : 07. 05 .2021. O R D E R PER SHRI S.S. GODARA J.M. : THIS ASSESSEE'S APPEAL FOR ASSESSMENT YEAR 2015 - 16 ARISES AGAINST ACIT CIR.8(1) HYDERABAD S ASSESSMENT DT.23.10.2019 FRAMED IN PURSUANT TO THE DISPUTE RESOLUTION PANEL ( DRP ) - I BANGALORE/HYDERABA DS D IRECTION S DT.19.09.2019 IN F.NO .54/DRP - 1/BNG/2019 - 20 INVOLVING PROCEEDINGS U/S. 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT 1961 ('THE ACT'). 2 ITA NO. 1729/HYD/2019 HEARD BOTH PARTIES. CASE FILE PERUSED. 2 . THE ASSESSEE'S FIRST AND FOREMOST SUBSTANTIVE GRIEVANCE CHALLENGES CORRECTNESS OF THE LEARNED LOWER AUTHORITIES ACTION MAKING ARMS LENGTH PRICE (ALP) ADJUSTMENT OF RS.1 06 35 050 PERTAINING TO DIS INVESTMENT OF SHARES HELD IN VALUE LABS INDIA VALUE LABS SWEDEN VLIT SERVICES BV NETHERLANDS AND VALUE LABS UK LTD UK TO VALUE LABS GLOBAL SOLUTIONS PTE. LTD. SINGAPORE . THERE IS NO DISPUTE THAT THE ASSESSEE HAD TRANSFERRED ALL THESE 1 0 0 000 50 000 AND 65 000 SHARES AT FACE VALUE OF 1 EURO 1 SWEDEN CRONER AND 1 BRITAIN POUND EACH ; RESPECTIVELY. THE ASSESSING OFFICER TREATED THE SAME AS AN INTERNATIONAL TRANSACTION U/S. 92C OF THE ACT AND MADE NECESSARY REFERE NCE TO THE TRANSFER PRICING OFFICER (TPO) U/S. 92CA OF THE ACT. THE TPO THEREAFTER PASSED ORDER DT.13.10.2018 PROPOSING THE IMPUGNED ADJUSTMENT AFTER ADOPTING DISCOUNTED CASH FLOW METHOD WHICH HAS BEEN UPHELD RIGHT UPTO THE DRP DIRECTION S . 3 . WE HAVE HEA RD RIVAL CONTENTIONS AGAINST AND IN SUPPORT OF THE IMPUGNED ADJUSTMENT COMING FROM THE ASSESSEE'S AND REVENUES SIDE. IT TRANSPIRES AT THE OUTSET THAT THE INSTANT ISSUE 3 ITA NO. 1729/HYD/2019 AS TO WHETHER SUCH A TRANSACTION FORM PART OF ASSESSEE'S CAPITAL ACCOUNT AND ITS EXIG IBILITY TO CHAPTER X OF THE ACT IS NO MORE RES INTEGRA. VARIOUS JUDICIAL PRECEDENTS AND MORE PARTICULARLY HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF PCIT VS. PMP AUTO COMPONENTS PVT. LTD. (2009) 416 ITR 435 (BOM) AND VODAFONE INDIA SERVICES LIM ITED 368 ITR 001 (BOM) HOLD IN VIEW OF THE CBDT CIRCULAR NO.2/2015 DT.29.01.2015 TH A T SUCH A CAPITAL ACCOUNT TRANSACTION DO ES NOT GIVE RISE TO INCOME IN THE REVENUE COUNT SO AS TO BE TREATED AS AN INTERNATIONAL TRANSACTION U/S. 92B OF THE ACT. THEIR LORDS HIPS HOLD THAT THERE IS NO FURTHER DISTINCTION REGARDING INSOURCED AND OUTSOURCED TRANSACTIONS IN THE INSTANT SEGMENT SO FAR AS PROVISIONS OF THE ACT TO THIS EFFECT ARE CONCERNED. WE ADOPT THE VERY REASONING MUTATIS MUTANDI S AND DELETE THE IMPUGNED ALP AD JUSTMENT OF RS.1 06 35 050. THE ASSESSEE SUCCEEDS IN ITS FIRST SUBSTANTIVE GROUND THEREFORE. 4 . THE LEARNED COUNSEL IS FAIR ENOUGH THAT HE IS NOT PRESSING FOR ASSESSEE'S SECOND SUBSTANTIVE GROUND PERTAINING TO ALP ADJUSTMENT OF INTEREST ON WORKING C APITAL ADVANCE S OF RS.59 631 4 ITA NO. 1729/HYD/2019 KEEPING IN MIND THE SMALLNESS OF THE AMOUNT INVOLVED. THIS GROUND IS REJECTED IN FOREGOING TERMS. 5 . THE ASSESSEE'S THIRD SUBSTANTIVE GROUND SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION TREATING ITS BIOMASS UNIT EXPENDIT URE OF RS.7 63 42 550 AS CAPITAL IN NATURE. IT TRANSPIRES AT THE OUTSET WITH THE ABLE ASSISTANCE OF BOTH THE PARTIES THAT DEPARTMENT HAD MADE IDENTICAL DISALLOWANCE IN ASSESSMENT YEAR 2014 - 15 WHICH ALREADY STAND DELETED IN ASSESSEE'S APPEAL ITA NO .1922/H YD/2018 DT.9.4.2021 . 6 . L EARNED DEPARTMENT REPRESENTATIVE FAILS TO DISPUTE THAT THE EXPENDITURE ON P ERSONNEL AND ADMINISTRATIVE EXPENDITURE INTEREST AND DEPRECIATION ARE IDENTICAL AS IN THE SAID EARLIER ASSESSMENT YEAR. WE THUS ADOPT THE VERY REASONING AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. 7 . THE ASSESSEE'S 4 TH SUBSTANTIVE GROUND SEEKS TO DELETE THE ESTIMATED BUSINESS DE VELOPMENT EXPENSES OF RS.11 41 403 ON ESTIMATION BASIS. THE REVENUES CASE IS THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE ITS IMPUGNED EXPENDITURE CLAIM BY WAY OF FILING ALL THE COGENT DETAILS QUA THE CORRESPONDING BUSINESS 5 ITA NO. 1729/HYD/2019 EXPENDITURE OF RS.1 08 70 509 WHICH RESULTED IN THE IMPUGNED DISALLOWANCE WHEREAS THE ASSESSEE'S CASE IS THAT IT HAD DULY FILED ALL THE BOOKS OF ACCOUNTS AND LEDGER S ALL ALONG. FACED W ITH THIS SITUATION WE DEEM IT APPROPRIATE TO RESTRICT THE IMPUGNED DISALLOWANCE TO A LUMP SUM ALLO WANCE OF RS.6 LAKHS WITH A RIDER THAT THE SAME SHALL NOT BE TREATED AS PRECEDENT IN ANY OTHER ASSESSMENT YEAR. 8 . L EARNED COUNSEL NEXT STATED AT BAR THAT THE ASSESSEE FURTHER WISHES NOT TO PRESS FOR ITS 5 TH SUBSTANTIVE GROUND REGARDING TDS CREDIT OF RS.1 03 425 KEEPING IN MIND THE SMALLNESS OF THE AMOUNT. THIS GROUND IS REJECTED ACCORDINGLY. 9. NECESSAY COMPUTATION SHALL FOLLOW AS PER LAW. 10. THIS ASSESSEE'S APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH MAY 2021. SD/ - SD/ - (LAXMI PRASAD SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD DT. 07 .05. 2021. * REDDY GP 6 ITA NO. 1729/HYD/2019 COPY TO : 1. M/S. VALUE LABS LLP PLOT NO.41 PHASE II HITECH CITY HYDERABAD - 500 081 2. ACIT CIR.8(1) HYDERABAD. 3. PR. C I T HYDERABAD. 4. CIT(APPEALS) - HYDE RABAD. 5. DR ITAT HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY ITAT HYDERABAD.