2013-VIL-655-BOM-DT

BOMBAY HIGH COURT

Income Tax Appeal (L) No. 1053 of 2012

Date: 08.01.2013

COMMISSIONER OF INCOME TAX-9

Vs

INDO AMERICAN JEWELLERY LTD.

For the Petitioner : Vimal Gupta, D. K. Kamwal
For the Respondent : Ajay Singh

BENCH

J. P. Devadhar And M. S. Sanklecha, JJ.

JUDGMENT

1. Following questions of law raised by the Revenue in this appeal :

A. Whether on the facts and in the circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 3,19,90,036/being adjustment made to armslength price in respect of international transactions of the Assessee Company with Associated Enterprises?

B. Whether on the facts and in the circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 87,66,641/being interest receivable on outstanding amount due to the Assessee Company from the Associated Enterprises?

2. As regard the first question is concerned, Counsel for the parties state that similar question raised by the Revenue in the Assessee's own case being Income Tax Appeal No. 6869 of 2010 has been rejected by this court on 27.11.2012. In this view of the matter, the first question cannot be entertained.

3. As regards the second question is concerned, the Transfer Pricing Officer while determining the Arms Length Price of the international transactions, noticed that the outstanding balance from Associated Enterprises was amounting to Rs. 8.76 crores. As that amount was outstanding for more than year, taking the rate of interest at 10%, the Transfer Pricing Officer determined the interest receivable at Rs. 87.66 lacs and added the same to the international transaction cost.

4. On appeal, the CIT(A) held that the total outstanding amount was Rs. 8.73 Crores and out of which the amount outstanding from the Associated Enterprises was to the extent of Rs. 5.11 Crores and the balance amount of Rs. 3.62 Crores was outstanding from non Associated Enterprises. Relying on the Board Circular no. 12 of 2001, the CIT(A) further held that in the present case, the profit of one Associated Enterprise is negligible and the other Associated Enterprise has incurred losses and therefore it cannot be said that the assessee had transfered any profit to the Associated Enterprises outside India by not charging interest on the outstanding payment which has been realised after the due date and accordingly deleted the interest charged on late realisation of the export proceeds.

5. On appeal filed by the Revenue, the ITAT upheld the order of CIT(A). While, upholding the order of CIT(A), the ITAT held that interest income is associated only with the lending or borrowing of money and not in case of sale. We express no opinion on the above reasoning of the ITAT and keep that reasoning open for debate in an appropriate case. However, in the facts of the present case, the specific finding of the ITAT is that there is complete uniformity in the act of the assessee in not charging interest from both the Associated Enterprises and Non Associated Enterprises debtors and the delay in realisation of the export proceeds in both the cases is same. In these circumstances the decision of the Tribunal in deleting the notional interest on outstanding amount of export proceeds realised belatedly cannot be faulted.

6. Accordingly, we see no reason to entertain the second question raised by the revenue.

7. The Appeal is accordingly dismissed with no order as to costs.

 

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