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2022 (12) TMI 783 - AT - Income TaxMaintainability of revenue appeal against the order of CIT(A) granting relief to assessee - NCLT has declared moratorium u/s 14 of IBC Code in the case of assessee - IBC Code overriding in any other enactment including Income Tax Act - AR has submitted that Hon ble by Edelweiss Asset Reconstruction Company Ltd.against the assessee u/s 7 of the IBC Code and has declared moratorium - HELD THAT - Hon ble Apex Court in the case of PCIT vs. Monnet Ispat Energy Ltd. 2018 (8) TMI 1775 - SC ORDER has held that IBC Code will override anything inconsistent in any other enactment including Income Tax Act. When NCLT has declared moratorium u/s 14 of IBC Code in the case of assessee, then there is a complete bar to initiate and continue proceedings against the assessee before any authority. Therefore, in view of the moratorium granted by NCLT, no proceedings against the assessee can continue. In view of the aforesaid facts, the appeal of Revenue deserves to be dismissed. However, liberty is granted to the Revenue to seek revival of the appeal after the lifting of the moratorium and in accordance with law. Grounds of appeal filed by Revenue are dismissed.
Issues:
1. Arm's length price of compensation for providing corporate guarantee on behalf of its A.E. 2. Restriction of arm's length price of compensation for providing corporate guarantee on behalf of Indian Subsidiary. Analysis: Issue 1: The case involved a dispute regarding the arm's length price of compensation for providing a corporate guarantee on behalf of its Associated Enterprise (A.E.). The Assessing Officer (AO) determined the price at 2.58%, while the Commissioner of Income Tax (Appeals) restricted it to 1%, providing relief of Rs. 5,60,11,287 to the appellant. The key question raised was whether the CIT(A) was justified in reducing the arm's length price. The appellant argued for the reduction based on certain grounds, leading to substantial relief being granted. The issue was thoroughly discussed, and the grounds for appeal were presented before the tribunal. Issue 2: Another aspect of the case involved the restriction of the arm's length price of compensation for providing a corporate guarantee on behalf of the Indian Subsidiary. The CIT(A) justified the reduction to 1% instead of 2.5%, considering the provisions of section 40A(2)(b) of the Income-tax Act. The appellant had the opportunity to amend, modify, or add grounds of appeal during the hearing. The issue was deliberated upon, and the tribunal considered the arguments presented by both parties. The judgment highlighted the significance of the National Company Law Tribunal's order declaring a moratorium under the Insolvency and Bankruptcy Code, which had implications on the liabilities and obligations of the assessee. The tribunal cited the precedent set by the Hon'ble Apex Court in a similar case, emphasizing that the IBC Code would override any inconsistency with other enactments, including the Income Tax Act. The declaration of moratorium by the NCLT had legal implications, leading to a complete bar on initiating or continuing proceedings against the assessee. Consequently, the appeal of the Revenue was dismissed, with the tribunal granting liberty to seek revival post the lifting of the moratorium and in compliance with the law. The judgment was pronounced in open court on 23.11.2022, concluding the legal proceedings in the matter.
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