2021 (2) TMI 1012 - AT - Income Tax

Tribunal Grants Rectification in Income Tax Appeal: Corrects Guarantee Commissions Calculation

The Tribunal allowed the Miscellaneous Application seeking rectification of a mistake apparent from the record in an Income Tax Appeal. The correction ... Rectification of mistake - guarantee commission charge - Applicant submits that direction to the TPO/AO that the transfer pricing adjustment should be computed at 0.5% of the guarantee commission “in additions to the commissions already charged by the assessee' is an inadvertent error. The Applicant submits that the direction ought to be 'in case the commission already charged by the assessee is less than 0.5% - HELD THAT:- Upon careful consideration we agree that a mistake has crept into the order of the Tribunal. Hence, we direct that at page No. 14 in paragraph No. 12, line No. 16 & 17 the sentence “in additions to the commissions already charged by the assessee” is corrected as “in case the commission already charged by the assessee is less than 0.5%”. Issues:Rectification of mistake apparent from record in the order of the Tribunal in Income Tax Appeal Number 2068/Mum/2016.Detailed Analysis:1. Rectification of Mistake Apparent from Record:The applicant filed a Miscellaneous Application seeking rectification of a mistake apparent from the record in the order of the Tribunal in an Income Tax Appeal. The applicant contended that there were certain mistakes apparent in the order, specifically related to the calculation of guarantee commissions charged by the applicant on behalf of its subsidiaries. The applicant argued that the Transfer Pricing Officer had proposed an adjustment on account of the arm's length price (ALP) of guarantees given to banks for associated enterprises, which was confirmed by the Dispute Resolution Panel and the Assessing Officer. The applicant appealed to the Tribunal contesting this transfer pricing adjustment.2. Calculation of Guarantee Commission:During the proceedings, the applicant submitted that in previous decisions, a commission of 0.5% of the guarantee amount had been held as an arm's length commission for providing corporate guarantees. The applicant cited specific cases to support this argument. The Tribunal accepted the submission that 0.5% of the guarantee amount should be treated as the arm's length price. However, the Tribunal inadvertently directed the Assessing Officer/Transfer Pricing Officer to recompute the guarantee commission without considering the scenario where the applicant had already charged a commission in excess of 0.5%.3. Correction of Error in Tribunal's Order:Upon careful consideration, the Tribunal acknowledged that a mistake had crept into the order. The Tribunal directed the correction of a specific sentence in the order related to the computation of the guarantee commission. The sentence 'in additions to the commissions already charged by the assessee' was corrected to 'in case the commission already charged by the assessee is less than 0.5%.' This correction was deemed necessary to rectify the inadvertent error in the Tribunal's direction.4. Outcome of the Application:The Miscellaneous Application filed by the assessee seeking rectification of the mistake apparent from the record was allowed by the Tribunal. The correction in the order was made to ensure that the direction regarding the computation of the guarantee commission was accurately reflected. The Tribunal pronounced the order under Rule 34(4) of the ITAT Rules, thereby granting the relief sought by the applicant in the appeal.In conclusion, the judgment addressed the rectification of a mistake apparent from the record in the Tribunal's order regarding the computation of guarantee commissions, emphasizing the application of the arm's length price principle in transfer pricing adjustments.