Shakti Hormann Private Limited , Hyderabad v. Dy. Commissioner of Income Tax , Circle-3(1), Hyderabad

ITA 1954/Hyd/2018 | 2014-2015
Pronouncement Date: 07-05-2021 | Result: Partly Allowed

Appeal Details

RSA Number 195422514 RSA 2018
Assessee PAN AADCS4024Q
Bench Hyderabad
Appeal Number ITA 1954/Hyd/2018
Duration Of Justice 2 year(s) 7 month(s) 12 day(s)
Appellant Shakti Hormann Private Limited , Hyderabad
Respondent Dy. Commissioner of Income Tax , Circle-3(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
Last Hearing Date 08-03-2021
First Hearing Date 08-03-2021
Assessment Year 2014-2015
Appeal Filed On 25-09-2018
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD (THROUGH VIRTUAL HEARING) BEFORE SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI S.S. GODARA JUDICIAL MEMBER ITA NO. 1954/HYD/2018 A.Y. 2014 - 15 SHAKTI HORMANN PRIVATE LIMITED HYDERABAD. PAN: AADCS 4024 Q VS. DCIT CIRCLE - 3(1) HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI P. MURALI MOHANA RAO REVENUE BY: SHRI Y.V.S.T. SAI CIT - DR DATE OF HEARING: 08/03/2021 DATE OF PRONOUNCEMENT: 07 /0 5 /2021 ORDER PER A. MOHAN ALANKAMONY A.M: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT OF THE LD. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 3(1) PASSED U/S. 143(3) R.W.S 144C(13) OF THE ACT DATED 30/07/2018 FOR THE A.Y. 2014 - 15. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL HOWEVER THE CRUXES OF THE ISSUES ARE THAT: - 2 (I) THE LD. MEMBERS OF THE DRP HAVE ERRED IN CONFIRMING THE ORDER OF THE LOWER AUTHORITIES WHO HAD ADDED AN AMOUNT OF RS. 99 626/ - TOWARDS NOTIONAL INTEREST ON RECEIVABLES FROM THE ASSESSES AES WHILE ARR IVING AT THE ARMS LENGTH ADJUSTMENT U/S. 92CA OF THE ACT. (II) THE LD. AO HAS ERRED IN DISALLOWING THE CLUB EXPENDITURE AMOUNTING TO RS. 2 41 139/ - BY STATING THAT IT IS NOT FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. (III) THE LD. AO HAS ERRED IN MAKING AN ADHOC DISALLOWANCE OF RS. 10 LAKH TOWARDS EXPENDITURE INCURRED ON FREIGHT AND RS. 2 LAKHS TOWARDS EXPENDITURE INCURRED ON REPAIRS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING STEEL RODS FILED ITS RETURN OF INCOME ON 28/11/2014 ADMITTING TOTAL INCOME OF RS 9 03 08 870/ - . THEREAFTER THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143(3) 144C(13) OF THE ACT ON 30/07/2018 WHEREIN THE LD.AO MADE THE ABOVE MENTIONED ADDITIONS. 4. GROUND NO.1: ARMS LENGTH PRICE ADJUSTMENT OF RS. 99 626/ - TOWARDS NOTIONAL INTEREST ON RECEIVABLES FROM ASSOCIATED ENTERPRISES: 3 5. AT THE OUTSET THE LD. AR SUBMITTED THAT THE LD. REVENUE AUTHORITIES HAVE AD DED THE NOTIONAL INTEREST ON RECEIVABLES FROM THE ASSESSEES AES AT PLR RATE OF THE STATE BANK OF INDIA. THE LD. AR ARGUED THAT SINCE THE TRANSACTIONS ARE WITH THE AES OUTSIDE INDIA LIBOR RATE MAY BE ADOPTED. THE LD. AR FURTHER SUBMITTED THAT THE BENEFIT OF NETTI NG OFF NOTIONAL INTEREST ON TRANSACTION WITH THE SAME AES MAY BE GRANTED WITH RESPECT TO THE DEBIT AND CREDIT TRANSACTION S . THE LD. AR FURTHER ARGUED THAT THE NOTIONAL INTEREST MAY BE COMPUTED AFTER GIVING ALLOWANCE FOR A PERIOD OF 90 DAYS WITH RESPECT TO THE DEBIT AND CREDIT TRANSACTION WITH THE AES CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSESSEE. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD. REVENUE AUTHORITIES ON THIS ISSUE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD AND WE FIND MERIT IN THE ARGUMENTS ADVANCED BY THE LD. AR. SINCE THE TRANSACTIONS ARE CROSS - BORDER IT WOULD BE APPROPRIATE TO ADOPT LIBOR RATE OF INTEREST WHILE COMPUTING THE NOTIONAL INTEREST ON RECEIVABLES FROM THE AES. THIS BENCH OF THE TRIBUNAL HAS HELD SO ON VARIOUS EARLIER OCCASIONS WITH RESPECT TO THE SAME ISSUE . FURTHER IT WILL ALSO BE APPROPRIATE FOR NETTING OFF THE NOTIONAL INTEREST WITH RESPECT TO THE DEBIT AND CREDIT TRANSACTION WITH THE ASSESSEES AES BECAUSE WHEN NOTIONAL INTEREST IS CHARGED ON RECEIVABLES THE SAME SHOULD ALSO BE CHARGED ON PAYABLES. THEREFORE IN 4 THE CASE OF THE ASSESSEE WE HEREBY HOLD THAT LIBOR RATE OF INTEREST SHALL BE ADOPTED WHILE COMPUT ING THE NOTIONAL INTEREST ON RECEIVABLES AND PAYABLES FOR THE TRANSACTION WITH AES. FURTHER ON CONSIDERING THE NATURE OF TRADE OF THE ASSESSEE WE FIND IT APPROPRIATE TO FIX THE GRACE PERIOD OF 30 DAYS WHILE COMPUTING THE NOTIONAL INTEREST TOWARDS THE DEB IT AND CREDIT TRANSACTION WITH THE AES. IT IS ORDERED ACCORDINGLY. 7. GROUND NO:2: DISALLOWANCE OF CLUB EXPENDITURE OF RS. 2 41 139/ - : 8. THE LD. AO HAS DISALLOWED THE CLUB EXPENDITURE INCURRED FOR RS. 2 41 139/ - BY STATING THAT THE SAME WAS NOT JUSTIFIED AS BUSINESS EXPENDITURE BY THE ASSESSEE IN THE FORM - 3CD. EVEN BEFORE US THE ASSESSEE HAS NOT SUBSTANTIATED THAT THE EXPENDITURE WAS INCUR RED FOR THE PURPOSE OF THE ASSESSEES BUSINESS. HENCE WE HEREBY CONFIRM THE ADDITION MADE FOR RS. 2 41 139/ - BY THE LD. AO. 9. GROUND NO.:3: ADHOC DISALLOWANCE OF RS. 10 LAKH TOWARDS EXPENDITURE INCURRED ON FREIGHT AND RS. 2 LAKHS TOWARDS EXPENDITURE IN CURRED ON REPAIRS: 10. ON VERIFYING THE BILLS AND VOUCHERS WITH RESPECT TO THE EXPENDITURE CLAIMED BY THE ASSESSEE TOWARDS FREIGHT / TRANSPORTATION 5 CHARGES OF R S. 3 34 05 000/ - AND REPAIRS & OTHER EXPENDITURE OF RS. 23 97 087/ - THE LD. AO OBSERVED THAT THERE WERE SEVERAL SELF - M ADE VOUCHERS WHICH WERE NOT ACCESSIBLE FOR VERIFICATION. THEREFORE THE LD. AO ESTIMATED THE DISALLOWANCE OF FREIGHT / TRANSPORT EXPENSES AT RS. 10 LAKH AND RS. 2 LAKHS WITH RESPECT TO REPAIRS AND OTHER EXPENDITURE. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD. AO ON THE ISSUE BECAUSE IT IS AN ADMITTED FACT THAT SEVERAL BILLS AND VOUCHERS WERE NOT VERIFIABLE. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCE D IN THE OPEN COURT ON 07 TH MAY 2021. SD/ - SD/ - (S.S. GODARA) ( A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD DATED: 07 TH MAY 2021. OKK COPY TO: - 1) M/S. SHAKTI HORMANN PRIVATE LIMITED PLOT NO. 20 SRIPURI COLONY KARKHANA HYDERABAD 500 015. 2) DCIT CIRCLE - 3(1) HYDERABAD. 3) THE DISPUTE RESOLUTION PANEL - 1 BENGALURU 500 034. 4) THE DEPUTY COMMISSIONER OF INCOME TAX TRANSFER PRICING OFFICER - 2 HYDERABAD. 5) THE DR ITAT HYDERABAD 6) GUARD FILE