2020 (2) TMI 1708 - AT - Income Tax

Tribunal Affirms CIT(A) on Transfer Pricing Adjustment for Stand By Letter of Credit

M/s. GMR Infrastructure Limited Versus Asst. Commissioner of Income Tax, Central Circle 2 (2), Bangalore

The Tribunal upheld the CIT(A)'s order on Transfer Pricing Adjustment concerning Stand By Letter of Credit (SBLC), citing commercial expediency and lack ... TP Adjustment towards Stand by Letter of credit - adjustments towards commission for utilization of non-fund based limits of the assessee by Associated Enterprises (AEs) and the Bank has issued SBLC and charged commission - AR contented that there is no requirement of ALP adjustment as the AE is permitted to utilize its non-fund based limits, which is in the nature of shareholders operations and on commercial expediency - HELD THAT:- As vehemently submitted that, there is no necessity of Transfer Pricing adjustment on SLBC because of commercial expediency, But could not controvert the observations and findings of the CIT(Appeals) with cogent evidence. Accordingly, we are not inclined to interfere with the order of CIT (A) on this disputed issue and confirm the same and dismiss the ground of appeal of the assessee. Issues:Appeal against CIT(A) order under Section 143(3) r.w.s. 144C and 250 of the Income Tax Act, 1961 regarding Transfer Pricing Adjustment on Stand By Letter of Credit (SBLC) and Corporate Guarantee, Disallowance under Section 14A, and unamortized amounts claimed.Analysis:The assessee, engaged in infrastructure development and investments, filed an appeal against the CIT(A) order under Section 143(3) r.w.s. 144C and 250 of the Income Tax Act, 1961. The Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) for determination of Arm's Length Price (ALP) due to international transactions. The TPO made adjustments on SBLC and Corporate Guarantee transactions. The AO also made disallowances under Section 14A and assessed the total income. The CIT(A) partially allowed the appeal after considering submissions, restricting the addition on SBLC to a non-recoverable amount. The assessee appealed to the Tribunal, arguing against the restriction of the addition by the CIT(A). The Authorized Representative contended that no TP adjustment was required due to commercial expediency, as the AE was permitted to utilize non-fund based limits. The Departmental Representative supported the CIT(A)'s orders.During the hearing, the Tribunal considered the arguments and material on record. The Authorized Representative argued against the TP adjustment on SBLC, emphasizing commercial expediency. However, the Tribunal found that the CIT(A) had made observations and findings supporting the adjustment. As the Authorized Representative failed to provide sufficient evidence to counter the CIT(A)'s findings, the Tribunal upheld the CIT(A)'s order and dismissed the appeal. Consequently, the assessee's appeal was dismissed by the Tribunal.In conclusion, the Tribunal upheld the CIT(A)'s order regarding the Transfer Pricing Adjustment on Stand By Letter of Credit (SBLC) based on commercial expediency and lack of sufficient evidence to challenge the CIT(A)'s findings. The Tribunal dismissed the appeal filed by the assessee, confirming the CIT(A)'s decision on the disputed issue.