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M/s. Perot Systems TSI (India) Pvt. Ltd. Versus ACIT, Circle 14 (1) , New Delhi.

2016 (4) TMI 577 - ITAT DELHI

Levy of penalty u/s 271(1)(c) - Transfer pricing adjustment - Held that:- As the adjustment made and confirmed by the Tribunal on account of armís length price in respect of interest free loan provided by the appellant to its wholly owned subsidiaries has been admitted by the Honíble High Court, so is clearly a debatable issue and so penalty levied cannot be sustained, so we order deletion of it. - Decided in favour of assessee - ITA No.2200 & 2201/Del./2011 - Dated:- 22-2-2016 - SHRI A.T. VARKE .....

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section 250(6) passed by the Commissioner of Income-tax (Appeals), XVII ["CIT(A)"], is bad in law and void-ab-initio. 2. On the facts and circumstances of the case and in law, the CIT(A) has erred in confirming the penalty levied by Assistant Commissioner of Income-tax, Circle 14(1), New Delhi ("AO") under section 271(1)(c) of the Act without recording adequate satisfaction during the course of assessment proceedings. 3. On the facts and circumstances of the case and in law, .....

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ent and hence no penalty ought to be levied. 6. On the facts and circumstances of the case and in law, the CIT(A) / AO erred in levying penalty in relation to mere difference of opinion as regards arm's length nature of a particular transaction under Section 92 of the Income Tax Act, 1961, especially when the subject assessment year was an initial year for applicability of Transfer Pricing regulations in India. 7. On the facts and circumstances of the case and in law, the learned CIT(A) / AO .....

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see filed an appeal before the CIT(A) who in turn has confirmed the addition of ₹ 1,38,94,980/-and allowed the relief of ₹ 4,58,5321-. The CIT(A) held that the extension of the loan were nothing but debt simplicitor and that the debt was a short term working capital loan repayable on demand. Being repayable on demand, it would mean that the loan is re-negotiated on an annual basis. The assessee preferred an appeal before the Tribunal and the Tribunal vide order dated 30.10.2009 dismi .....

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e enterprises (AEs) in January/February, 2001. The interest free loans have been utilized to make investment in other group companies. The Transfer Pricing Officer after considering the issue in detail determined the arm's length interest at loans given by the assessee to its AEs namely HPS Global Systems (Bermuda) Ltd. US$ 1.5. million and HPS Global Systems Hungray Liquidity Management Ltd. US$ 4.6. million at ₹ 35,29,552 and ₹ 1,08,23,960/- in place of nil interest declared by .....

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ings on 22.02.2006, 18.3.2010 and 23.3.2010. The assessee s explanations were duly considered and found unacceptable. The assessee contended that penalty for concealment of income cannot be imposed if the assessee proves that the price charged or paid in international transactions has been determined in accordance with section 92C in good faith and with due diligence. The assessee further submitted the penalty proceedings and assessment proceedings are independent proceedings and findings in ass .....

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sessee also relied upon various judicial pronouncements/decisions. The assessee's contentions are duly considered. The assessee's arguments in respect of loan transaction were not found acceptable by the TPO and the same were held as debt and not equity. In appeal also the assessee's contentions were not found acceptable and CIT(A) confirmed the addition in respect of arm's length price to the extent of ₹ 1,38,94,980/-. The assessee failed to substantiate its claim in asses .....

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s so, any amount added or disallowed in computing the total income u/s 92C shall, for the purposes of clause (c) of Section 271 (1)(c), be deemed to represent the income in respect of which particulars have been concealed or inaccurate particulars have been furnished. In view of the judgments of the Hon'ble Supreme Court in the case of K. P. Madhusudan vs. CIT 2511TR 99 and in the case of Union of India vs. Dharmendra Textile Processors (2008) 174 Taxman 571, it is on assessee to prove that .....

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ingredient for attracting civil liability, as is the case in the matter of prosecution under section 276C." In view of this, it was assessee's burden to prove that he was not guilty of concealment or giving inaccurate particulars of income, in which he failed. In view of the above discussion it is a fit case for imposition of penalty u/s 271(1)(c) of the I.T. Act, 1961 for furnishing inaccurate particulars of its income to the extent of ₹ 1,38,94,980/-. 6. Aggrieved, the assessee .....

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e adjustment on account of arm s length price in respect of interest free loans provided by the appellant to its wholly owned foreign subsidiaries? (2) If the answer to question No.1 is in the negative, whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal erred in law in not holding that +/-5% variation from the arm s length interest should have been allowed to the applicant in terms of the provisions of Section 92C (2) of the Income Tax Act, 1961? So, according .....

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e does not want us to interfere in the order of the authorities below and relied on their orders. 10. We have heard both the parties and perused the records. It is well settled that the finding in the assessment proceedings alone cannot be the sole basis to justify the imposition of penalty. Transfer pricing at the nascent stage where the assessee acts bonafidely, and in good faith, exercising due diligence compute prices charged or paid in international transaction and computes in accordance wi .....

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s been upheld by the Tribunal. 10.2 We also take note that the Hon ble jurisdictional High Court has held that when an issue is admitted by the High Court on the ground that the same involves substantial question of law then penalty cannot be levied on that issue against the assessee. 10.3 We take note that the Hon ble High Court has admitted the following substantial question of law, which is precisely on the issue on which the addition has been made in the appeals and on which the penalty is l .....

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the negative, whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal erred in law in not holding that +/-5% variation from the arm s length interest should have been allowed to the applicant in terms of the provisions of Section 92C (2) of the Income Tax Act, 1961? 10.4 We take note that in the case of Liquid Investment: ITA 240 of 2009, the Hon'ble jurisdictional Delhi High Court deleted the penalty levied by the assessing officer on the ground that the substa .....

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