2020 (1) TMI 1374 - AT - Income Tax

Computation of taxable income - Enhancing the ratio of commercial linehaul charges to total linehaul charges ( CCLC to TLC ratio ) - Whether DRP have erred by not considering the suo moto enhanced CLC to TLC ratio based on the methodology agreed between the competent authorities of the United States of America and India - as argued the actual CLC/TLC is 2.08% and the same may be adopted and estimated or adjusted CLC/TLC should not be more than 7.5% as was adopted by the Assessing Officer as a result of MAP proceedings - also that the Assessing Officer himself has adopted 4% as CLC/TLC ratio - HELD THAT - While the outcome of MAP proceedings does not indeed find the parties for the years other than years before the competent authorities it does indeed provide a reasonable basis particularly when it is dealing with an estimation parameter. The Assessing Officer has given vague reasons for deviating from the same in the present year. In our considered view therefore it will meet the ends of justice that 7.5% as adjusted CLC/TLC ratio is adopted for computing this year s taxable income as well. To this extent we uphold the plea of the assessee. Levy of interest under section 234B - assessee has only sought consequential relief as is admissible. Credit for tax deduction at source and levy of interest under section 234A - Assessee only pray for necessary verification of facts. Learned DR does not oppose the consequential relief and the verifications so sought. We accordingly allow these prayers as well.

Summary

Issues:
Challenge to correction of order by Commissioner of Income Tax for assessment under section 143(3) r.w.s. 144C(13) for the assessment year 2014-15 - Enhancement of CLC to TLC ratio from 4.00 percent to 7.50 percent - Disputed taxability of profits from operations using third party aircrafts - Application of MAP outcome for assessment years 2007-08 and 2008-09 - Penalty proceedings under section 271(l)(c) initiated for furnishing inaccurate particulars of income.

Analysis:
The appellant challenged the correction of the order passed by the Commissioner of Income Tax for the assessment year 2014-15. The main grievance raised was the enhancement of the CLC to TLC ratio from 4.00 percent to 7.50 percent. The appellant contended that this enhancement was done on an arbitrary basis without considering the actual ratio or the methodology agreed between the competent authorities of the United States of America and India. The appellant, a company incorporated in the USA, engaged in integrated air and ground transportation, used third party aircrafts for shipments. The assessing officer rejected the appellant's reliance on MAP outcomes for previous years and estimated the taxability based on a 10% CLC to TLC ratio and 4.07% global profitability ratio. Consequently, penalty proceedings were initiated under section 271(l)(c) for furnishing inaccurate income particulars.

The appellant raised objections before the DRP, which were unsuccessful, leading to the appeal. The arguments before the ITAT were twofold - first, to adopt the actual CLC/TLC ratio of 2.08%, and second, to cap the adjusted ratio at 7.5% as per MAP proceedings. The ITAT considered the arguments and upheld the plea of the appellant to adopt the 7.5% adjusted CLC/TLC ratio for computing taxable income for the current year. The ITAT also addressed the levy of interest under section 234B and granted consequential relief sought by the appellant. The appeal was partly allowed based on the adjustments made to the CLC/TLC ratio and the relief granted for interest and tax deductions.

In conclusion, the ITAT's decision focused on the disputed enhancement of the CLC to TLC ratio, the application of MAP outcomes, and the penalty proceedings initiated for inaccurate income particulars. The ITAT upheld the appellant's plea to adopt the 7.5% adjusted ratio and granted consequential relief for interest and tax deductions, thereby partially allowing the appeal.