TaxTMI 
TaxTMI 
2015 (5) TMI 642
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....o 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, the Tribunal has held that the assessee was having suff....
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.... 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 is in the subsidiary and further the investment made in the subsidiaries pertains to the foreign subsidiaries of the assessee to the extent of Rs. 90.43 crores. There is a reduction of overall investment during the year under consideration. Up to the A.Y. 2007-08, the Tribunal has given ....
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....n 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 acquisition. The assessee has not recovered any guarantee commission on the guarantee given to CPI USA on the ground that the loan taken by CPI is in the nature of quasi equity. The assessee has bench marked its guarantee commission by applying CUP method and stated that YES Bank, had provided similar f....
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....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 credit agreement with YES Bank India in respect of inland and foreign LC where a guarantee commission of 0.5% per annum was to be paid by the assessee to YES Bank India for the Bank guarantee provided by the Bank. Thus 0.5% was the fair rate as per the prevailing market rate. The Ld. Authorized Representative has reiterated its contention regarding no commission received from EKC China because of reg....
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.... 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 commission to IGIGI Bank India for its credit arrangement. This could be a very good parameter and a comparable for taking it as internal GUP and comparing the same with the transaction with the AE. The charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the IGIGI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to....
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....ina, 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 the proceeds of zero coupon foreign currency convertible bonds which were interest free funds available with the assessee. Despite such interest free fund available with the assessee it has charged interest at the rate of 7% /LIBOR +1% from AE and accordingly there is no additional cost incurred by the assessee on such fund given to the AE. He has further submitted that providing the fund to the AE in the nature of share holders activity, therefore, providing assessee's own fund for fina....