2020 (7) TMI 745 - AT - Income Tax

Court upholds CIT(A)'s decision on cenvat credit, dismisses Revenue's appeal citing Covid-19 lockdown.

JointCommissioner of Income Tax, (OSD) CIR 6 (3) (2) Mumbai Versus M/s. Kansai Nerolac Paints Ltd

The court upheld the CIT(A)'s decision to delete the addition under section 145A for cenvat credit in closing stock. The use of the LIBOR rate to ... Maintainability of appeal - low tax effect - HELD THAT:- As learned counsel rightly contends, this appeal of the Revenue is no longer maintainable in view of the recent CBDT Circular No. 17 of 2019 dated 08.08.2019. The mandatory limit for cases in which Revenue can challenge the relief granted by the CIT(A) now stands enhanced to ₹ 50 lakhs. This concession granted by the Central Board of Direct Taxes (CBDT) is retrospective in effect inasmuch as it applies to all pending appeals as well. In view of the above position, the appeal of the Revenue is no longer maintainable and must be dismissed as such. On re-verification at the end of the Assessing Officer it comes out that the tax effect of more than ₹ 50 lakhs is being involved in the appeal or the appeal falls within the exemption clause of the Circular, then the Revenue will be at liberty to file Miscellaneous Application to recall the Tribunal order. The application should be filed within time limit prescribed in the Act. Issues:1. Correctness of order deleting addition under section 145A on account of cenvat credit in closing stock.2. Use of LIBOR rate to benchmark trade credits of associated enterprises.3. Consideration of TPO analysis in benchmarking trade credits.4. Maintainability of appeal by Revenue based on CBDT Circular No. 17 of 2019.5. Procedural issue regarding delay in pronouncement of orders.Analysis:1. The Assessing Officer challenged the correctness of the order deleting an addition under section 145A for cenvat credit in closing stock. The CIT(A) had deleted the addition, leading to the appeal. The issue revolved around the treatment of cenvat credit and its impact on the assessment for the year 2010-11.2. Another grievance raised was the use of the LIBOR rate to benchmark trade credits of associated enterprises. The Assessing Officer contended that the LIBOR rate was not appropriate for transactions related to the PESO currency of the Philippines. This issue highlighted the importance of selecting the correct benchmark rate for international transactions.3. The TPO's analysis under section 92CA(3) was not considered by the CIT(A) in benchmarking trade credits of associated enterprises. The appellant sought to set aside the CIT(A)'s order and confirm the AO's decision. This issue emphasized the significance of transfer pricing regulations and the role of TPO analysis in determining arm's length pricing.4. The appeal by the Revenue was challenged based on the CBDT Circular No. 17 of 2019, which increased the monetary limits for filing appeals before the Tribunal. The Tribunal dismissed the Revenue's appeal, citing the enhanced limit of Rs. 50 lakhs and the retrospective application of the circular to pending cases. The decision highlighted the impact of CBDT circulars on the maintainability of appeals.5. A procedural issue arose regarding the delay in pronouncing the orders beyond the prescribed 90-day limit. The Tribunal addressed the exceptional circumstances due to the nationwide lockdown imposed to prevent the spread of Covid-19. The Tribunal considered the lockdown period as extraordinary, leading to the exclusion of this time from the calculation of the 90-day limit for pronouncement of orders. The decision underscored the pragmatic approach in interpreting legal timelines during unprecedented disruptions in the justice delivery system.