The Principal Commissioner Of Income Tax-4, Mumbai v. M/S. S.g. Asia Holdings (India) P. Ltd

suresh IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.281 OF 2016 The Principal Commissioner of IncomeTax-4, Mumbai Vs.M/s. S.G. Asia Holdings (India) P. Ltd. .... Appellant .... Respondent Mr. Ashok Kotangle with Mr. Bhushan Wankhede i/byMs Padma Divakar for the Appellant.Mr. Arijit Chakravarty with Ms Shraddha Swarup &Mr. Abhishek Tilak i/by Rajan Mishra for the Respondent. CORAM: S.C. DHARMADHIKARI & B.P. COLABAWALLA, JJ. DATE : AUGUST 27, 2018 P.C: 1.By this appeal, the Revenue has challenged the order passed on 22-4-2015. That order was passed by the Income TaxAppellate Tribunal, Bench at Mumbai. 2.The Assessment Year is 2005-06. 3.The respondent/assessee received brokerage from its Page 1 of 5 suresh 12-ITXAG-281.2016.doc parent company S.G. Paris. The assessee was directed to furnishcertain details of this parent company and the rate of brokeragecharged. The assessee intimated the activities of the parentcompany and was asked to establish that the parent company isinvolved in arbitrage activity and the rate charged is higher,which the assessee failed to do. Thereafter, if the figures oftransaction charges, investor protection fund, stamp duty, etc.,were to be excluded, then, pure brokerage that the assessee ischarging is only 0.06%. 4.As the brokerage was charged at the lower rate, itwas recalculated in view of Section 92 of the Income Tax Act,1961 (for short, "the IT Act") and the parent company was heldto be involved in directional trade and the brokerage iscalculated at the rate that is prevalent in the market, that is0.25 for cash market and 0.05 for futures. On account of this,addition of Rs.2,89,82,746/- was made. 5.Aggrieved by this assessment order of 27-12-2007,the assessee preferred an appeal to the First Appellate Authority Page 2 of 5 suresh 6.Further aggrieved, the assessee approached theTribunal and the order under appeal was delivered in favour ofthe assessee. 7.We have heard Mr. Kotangle, appearing on behalf ofthe appellant/Revenue and Mr. Chakravarty, appearing onbehalf of the assessee. 8.With their assistance, we have perused the order under appeal. We have also perused the other annexures in thepaper-book. 9.The two questions proposed as substantial questionsof law are at pages 4 & 5. 10.However, in our opinion, no controversy as wide asis projected before us would arise simply because it isundisputed that there is a circular. It is undisputed that it gavecertain instructions and in the event the transaction is aninternational transaction, then, all the relevant provisions of the Page 3 of 5 suresh12-ITXAG-281.2016.docIT Act would be applicable. The instructions were issued by theCentral Board of Direct Taxes (CBDT). The factual finding in thiscase is that, given the nature of the transaction, these instructionswere applicable. If they were applicable, then, there ought to besome solid ground for ignoring a mandate flowing therefrom. Themandate is that the Assessing Officer should make a reference tothe Transfer Pricing Officer. That is to make the transfer pricingadjustment. In this case, no such reference was made despite thefacts warranting so. There is no acceptable or justifiable reason onrecord for refusing to abide by this condition in the CBDT circular.Once the circular goes unchallenged and binds the Revenue, then,in the absence of all this, the Tribunal held that the AssessingOfficer's order cannot be sustained. He could not have proceededto make the transfer pricing adjustment. 11.We do not see either any finding on ground 11,bearing the peculiar factual backdrop, to be vitiated in law orperverse. Further this is not a case of non-application of mind torelevant and germane tests or error of law apparent on the faceof the record. In the circumstances, the two questions proposed Page 4 of 5 suresh 12-ITXAG-281.2016.doc are not substantial questions of law. The Tribunal's possible view 11.We do not see either any finding on ground 11,bearing the peculiar factual backdrop, to be vitiated in law orperverse. Further this is not a case of non-application of mind torelevant and germane tests or error of law apparent on the faceof the record. In the circumstances, the two questions proposed Page 4 of 5 suresh 12-ITXAG-281.2016.doc are not substantial questions of law. The Tribunal's possible view in the backdrop of these facts and circumstances cannot beinterfered with. There is no merit in the appeal. It is dismissed but without any order as to costs. (B.P. COLABAWALLA, J.) (S.C. DHARMADHIKARI, J.) SureshDigitally signedby SureshJagdishJagdish SajnawatDate: 2018.08.3012:32:06 +0530Sajnawat Page 5 of 5