TaxTMI 
TaxTMI 
2015 (5) TMI 639
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....OO/- by determining the arm's length Price of the corporate guarantee at Rs. 1,08,54,4OO/-. Your appellant prays that the DCIT be directed to delete the said addition made on account of adjustment of Rs. l,08,54,4OO/-. 2. The DCIT / TPO erred the adjustment of Rs. 143,38,197/- by erroneously determining the interest chargeable @ LlBOR plus 4.45% on loan given by the appellant to its AE AVTL Canada at Rs. 3,63,84,625/- in stead of Rs. 2,20,46,428/- charged by the appellant @ 6 month LlBOR + 1%. Hon'ble CIT (A) erred in partly allowing the interest rate and held that interest should be chargeable @ LlBOR plus 2% Your appellant submits that on the facts and the circumstances of the case, the Hon'ble CIT(A) ought not to have made the said adjustment of LlBOR plus 2% on interest chargeable on loan given to AVTL Canada. Your appellant prays that the DClT be directed to delete the said addition made on account of interest of LlBOR plus 2%. 3. The DCIT / TPO erred and Hon'ble CIT (A) erred in confirming the adjustment of Rs. 6,15,669/- by erroneously considering share application money of Rs. 4,48,01,190/- given to the appellant's AE Transworks BPO Philippines Ltd ....
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....ember 2014 (2) Everest Kanto Cylinder Limited (ITA NO. 542/Mum/2012 ) dated 23 November 2012( Mumbai Tribunal) (3) Glenmark Pharmaceuticals Limited (ITA No. 5031/M/2012 ) dated 13 November 2013) (Mumbai Tribunal) (4) M/s Godrej Household Products Ltd (ITA No. 7369/M/2010) (Mumbai Tribunal) (5) Nimbus Communication Ltd ( ITA No. 3664/M/2010) (Mumbai Tribunal) (dated 12 June 2013) (6) Reliance Industries Limited ( dated 13 September 2013) (Mumbai Tribunal) (7) Prolific Corporation Limited (ITA No. 237/Hyd/2014 dated 31 December 2014 (Mumbai Tribunal). 2.4 On the other hand, the ld. DR has relied upon the orders of authorities below and submitted that the assessee has undertaken the risk by providing the guarantee for the loan obtained by the AE from the bank, therefore, the differential rate adopted by the TPO is justified. 2.5 Having considered the rival submissions as well as relevant material on record, we agree with the alternative plea of the Ld. AR that the arm's length guarantee commission charges can be considered at the rate of 0.5% as held by this Tribunal in a series of decisions referred above. In the case of Everest Kanto Cylinder Ltd (supra), the Tribunal while ....
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....e during the year under consideration are pari materia, respectfully following the decision of the Tribunal in assessee's own case, we direct the AO to compute arm's length price of transaction as per the direction given by the Tribunal in the above order for A.Y. 2007-08. 2.6 Similar view has been taken by the Tribunal in all above referred decisions. Accordingly, following the earlier decisions of this Tribunal, we direct the AO/TPO to adopt 0.5% as arm's length guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the AE. 3. Ground No. 2 is regarding TP adjustment in respect of interest on loan given to AE. 3.1 During the year, the assesse has advanced a loan, under automatic route, to its wholly owned subsidiary AVTL Canada in order to accomplish the acquisition of Minacs Canada. In the TP documentation, the assesse bench marked the said transaction of providing loan to AE by using internal CUP of LIBOR+0.65%. The internal CUP was stated to have been determined by the assesse based on the loan availed from the DBS Bank at the rate of LIBOR+0.45% plus 0.20% each year for a period of 5 years. The assesse charged the interes....
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....(ITA No 1866/Hyd/2012) dated 29 November 2013; vi) Cotton Naturals (I) Pvt. Limited (ITA No 5855/Del/2012) dated 8 February 2013; vii) Siva Industries and Holdings Ltd. vs ACIT, IT Appeal No. 2148 (Mds.) of 2010; viii) Bharti Airtel Ltd (ITA No 581 6/0el/201Z) dated 11 March 2014 ix) Infotech Enterprises Limited (ITA No 115/Hyd/2011) dated 16 January 2014; x) Kohinoor Foods Ltd (ITA Nos 3688-3691/0el/2012 and ITA Nos 3868- 3869/0el/2012) dated 21 July 2014; and xi) Four Soft Ltd vs. OCIT, IT Appeal No. 1495 of 2011 (Hyderabad Tribunal) 12. In light of the above decisions, the rate to be used for undertaking an adjustment should be LlBOR and not the average yield rates considered by the learned TPO. The LlBOR rate for March 2008 was 2.6798%. However the assessee has charged 7% from its AE as per the internal CUP available. Thus, the assessee has charged interest to EKC Dubai and EKC China at the rate higher than existing LlBOR rates. Accordingly, the said transaction of providing loan to EKC Dubai and EKC China is at arm's length. Additions made by the AO are accordingly set aside." 3.6 Following, the orders of this Tribunal, we confirm the impugned order of CIT(A) qua t....
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....fore, so long the money was lying with the AE without issuing the shares, the same will be deemed as loan. 4.5 We have considered the rival submissions as well as relevant material on record. Though there was a delay in issuing the shares against the share application money given by the assesse to its AE, however, the assesse has duly explained the cause of delay and it was not a deliberate delay for using the money by subsidiary in the garb of share application money or by providing the fund by the assesse in the garb of share application money. The delay was due to obtaining necessary approval from the Securities and Exchange Commission, Phillipines. Finally, the shares were issued as per the share certificate dated 25.05.2008 which has been produced by the assesse as additional evidence. Since the document of issuance of equity shares in the name of the assesse by the subsidiary/AE vide share certificate were not before the authorities below, therefore, to the extent of limited purpose of considering the said document, we set aside this issue to the record of AO/TPO to consider the same. As far as the re-characterization of the share application money as loan, we note that the ....
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.... the subsidiary in the name of the assesse, which was duly explained by the assesse. Accordingly, this ground of the assesse's appeal is allowed in above terms. 5. Ground no. 4 is regarding depreciation on software expenditure. 5.1 At the time of hearing the Ld. AR of the assesse has submitted that the assesse does not wish to press this ground as the CIT(A) has given the relief in the A.Y. 2006-07, and accordingly the same may be dismissed as not pressed. 5.2 Ld. DR raised no objection if the ground no. 4 of the assesse's appeal is dismissed as not pressed. 5.3 Accordingly, we dismiss the ground no. 4 of the assesse's appeal being not pressed. 6. The assesse has also raised an additional ground vide application/letter dated 23.06.2014 which reads as under:- "1. On the facts and in the circumstances of the case and in law, if it is held in subsequent years (AY 2008-09 onwards) that expenditure on loan taken for Investment of USD 15.4 Million for the acquisition of Minacs Canada is capital in nature hence not allowable, the Income in relation to the same of Rs. 52,927,844/- must also be treated as capital receipt and not be taxable in the year under consideration." 6.1 We hav....
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....ntire loss was liable to be set off against the profits of the STPI unit." 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing deduction u/s. lOA without setting off the brought forward business losses by placing reliance upon the decision of the Karnataka High Court in the case of CIT v/s, Yakogawa India Pvt. Ltd.(Kar) 341 ITR 385 ignoring the fact that the department has not accepted the ratio laid down in the said case and preferred a SLP against the said decision." 7.1 Ground No. 1 is regarding the arm's length interest rate adopted by the CIT(A) at LIBOR+ 2% instead of LIBOR+4.45% adopted by the TPO. 7.2 This ground is common to the ground no. 2 of the assesse's appeal, in view of our finding on this issue in ground no. 2 of assesse's appeal, this ground of revenue's appeal is dismissed. 8 Ground no. 2 to 4 are regarding the allowance of deduction u/s 10A. 8.1 During the year, the assesse had two STPI units eligible for claiming deduction u/s 10A of the Act. These units were set up in Mumbai and Bangalore. The assesse has set off total profit from Domestic business against the loss from the non STPI unit and the balance loss w....