TaxTMI 
TaxTMI 
2015 (5) TMI 642
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..... 10,36,69,267/- on account of interest charged to Associate Enterprises pursuant to the directions of DRP." 2. Ground No. 1 is regarding disallowance u/s 14A. 3. During the year under consideration, the assessee has earned dividend income of Rs. 2,42,038/- which is claimed as exempt u/s 10(33) of the Act. During the course of assessment proceedings, the Assessing Officer asked the assessee to submit the working of disallowance u/s 14A. The assessee submitted the suo motu working of disallowance u/s 14A at Rs. 3, 10,601/- based on the decision of this Tribunal for the A.Y. 2007-08. The Assessing Officer did not accept the working of disallowance u/s 14A submitted by the assessee and applied Rule 8D and accordingly made a disallowance of Rs. 6,93,102/- comprising of disallowance on account of interest expenditure u/s 8D(2)(ii) at Rs. 4,34,802/- and towards administrative expenses under Rule 8D(2)(iii) at Rs. 2,58,300/-. The assessee objected the proposed disallowance before the DRP. However, the DRP has sustained the disallowance u/s 14A made by the Assessing Officer. 4. Before us, the Ld. Authorized Representative of the assessee has submitted that up to the A.Y. 2007-08, ....
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....p; Investment in Associates Everest Kanto Investment and Finance Ltd. 0.09 0.09 0.09 0.09 Everest Industrial Gases Private Ltd. 0.00 0.01 0.00 0.00 Total (A) 0.09 41.03 90.52 90.52 Other Investments GPT steel Industries Pvt. Ltd. 2.00 2.00 2.00 2.00 Solar Explosive Ltd. 0.45 0.00 0.00 0.00 Shivalik Global Ltd. 0.30 0.00 0.00 0.00 Mutual Fund UTI Fixed Maturity Plan/Growth Oriented Schemes 0.00 10.00 10.00 0.00 Other Mutual Funds/ Dividend Oriented Schemes 10.37 1.27 0.10 0.23 Total (B) 13.12 13.27 12.10 2.23 Grand Total (A+B) 13.22 54.30 102.62 92.74 7. From the above details, it is clear that during the year under consideration, the assessee has not made any fresh investment except a sum of Rs. 13 Lakh in the mutual fund scheme. Out of the total investment of Rs. 92.7 crores, the investment of Rs. 90.52 crores....
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....essee in the present appeal. Even no such ground was raised before the DRP. 10. Having considered the rival submissions as well as relevant material on record, we note that when the income of the assessee is assessed under the normal provisions of the Act for the A.Y. under consideration then this issue as raised by the Ld. Authorized Representative during the course of argument is only academic in nature and does not require any adjudication. 10. Ground No. 2 is regarding addition made on account of TP adjustment on guarantee commission. The assessee company is engaged in the business of manufacturing high pressure seamless gas cylinders and CNG cylinders. For the A.Y. under consideration, the assessee has provided guarantee to its Associate Enterprises namely EKC Dubai and EKC China for taking term loan from banks. The assessee has charged guarantee commission at the rate of 0.5% Per Annum from EKC Dubai, however, no guarantee commission was charged from EKC China because of the alleged regulations prohibiting such guarantee commission. Apart from this, the assessee has also provided corporate guarantee to CP Industries for borrowing USD 45 Million to make overseas acqui....
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....RP. The DRP determined the ALP of guarantee fee at Rs. 1% for the guarantee given to EKC Dubai and 3% for guarantee given to EKC China and CPI USA. Accordingly, the DRP directed the Assessing Officer to restrict the adjustment. The Assessing Officer in the final order restricted the adjustment at Rs. 7,30,80,525/-. Thus both assessee as well as revenue are aggrieved by the directions of DRP and final order of Assessing Officer and filed the respective appeals on this issue before us. The revenue in its appeal has raised following grounds:- "1.On the facts and in the circumstances of the case and in law, the Ld. DRP erred in restricting the rate @3% as against 4% made by TPO on account of corporate guarantee given to EKC Industries (Tianjin )Co. Ltd. China, without appreciating the facts of the case. 2. On the facts and in the circumstances of the case and in law, the Ld. DRP erred in restricting the rate @3% as against 4.5% made by TPO on account of corporate guarantee given to CP Industries, USA without appreciating the facts of the case" 12. Before us, the Ld. Authorized Representative of the assessee has submitted that the assessee has independent sanction letter of cre....
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....arging of 0.5% guarantee commission from AE was held to be quite near to 0.6%, where assessee has paid independently to the ICICI bank and charging of guarantee commission @0.5% from its AE was held to be at arm's length. The precise observation of the bench for the assessment year 2007-08 are as under :- "The universal application of rate of 3 percent for guarantee commission cannot be upheld in every case as it is largely dependent upon the terms and conditions, on which loan has been given, risk undertaken, relationship between the bank and the client, economic and business interest are some of the major factors which has to be taken into consideration. " "....in this case, the assessee has itself charged 0.5% guarantee commission from its AE, therefore, it is not a case of not charging of any kind of commission from its AE. The only point which has to be seen in this case is whether the same is at ALP or not. We have already come to a conclusion in the foregoing paras that the rate of 3% by taking external comparable by the TPO, cannot be sustained in facts of the present case. We also find that in an independent transaction, the assessee has paid 0.6% guarantee commissio....
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.... LIBOR + 1% EKC CHINA 2 Million 29 December 2007 7% EKC CHINA 0.5 Million 19 February 2007 7% EKC CHINA 0.5 Million 23 March 2008 7% 19. The assessee has bench marked its transaction of providing loan to AE at Dubai by using CUP method of LIBOR+0.5%. The assessee has charged interest to its Dubai AE for one loan of USD 10 Million at 7% interest rate and LIBOR +1% in respect of remaining loan. As regards the loan advanced to AE at China, the assessee has bench marked the loan transaction by using CUP method in the range of 5.58 to 6.84. Since the assessee has charged the interest at the rate of 7% from its AE at China, therefore, the assessee claimed its transaction at arm's length. The TPO did not accept the arm's length price determined by the assessee and has determined the arm's length interest rate at 10.25% and made the respective additions. The assessee raised objection before the DRP but could not succeed as the DRP has upheld the adjustment proposed by the TPO/Assessing Officer. 20. Before us, the Ld. Authorized Representative of the assessee has submitted that the loans were granted to its AE at Dubai and China from th....