TaxTMI 
TaxTMI 
2015 (11) TMI 741
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.... Rs. 28,51,891/- u/s 14A; (iv) Legal claim with regard to DRUPA Exhibition expenses of Rs. 3.99 crores in view of the finding given in the assessment order for AY 2009-10; and, lastly (v) Initiation of penalty proceedings u/s 271(1)(c). 2. The brief facts qua the issue involved are that, the assessee company is engaged in the business of manufacture of printing and allied machineries. The assessee has acquired a subsidiary in USA, named as MDGM on 11th November, 2006, which has engaged in the business of manufacturing and servicing of WEB Offset Printing Machineries. The assessee during the year has entered into following international transactions with its AE :- S. No. Depreciation Name of AE Amount (In Rs.) i Sale of offset printing machines Manugraph Kenya Ltd 1,48,62,750 ii Advance given to AE Manugraph DGM, Inc. 10,15,10,000 iii Interest on advance given To AE Manugraph DGM, Inc. 48,31,400 iv Sale of spares to AE Manugraph DGM, Inc. 1,27,09,078 v Purchase from AE Manugraph DGM, Inc. 56,52,421 3. During the course of Transfer Pricing Proceedings, the TPO noted that the assessee has giv....
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.... 5. Before us, the Ld. Counsel submitted that exactly similar issue had come-up for consideration before the Tribunal in assessee's own case for the assessment year 2008-09, wherein the Tribunal has directed the Assessing Officer/TPO to adopt LIBOR + 2% as Arm's length interest in respect of loan provided to the assessee to its AE. The said decision is based on the decision of the co-ordinate Bench of the Tribunal in the case of Everest Kento Cylinder Ltd., in ITA 7073/Mum/2012 vide order dated 23.11.2012, which decision has now been confirmed by the Hon'ble High Court vide order dated 8th May, 2015. Not only that, now the Delhi High Court in the case of Cotton Industrial (I) Pvt. Ltd. Income Tax Appeal No. 233 of 2014 order dated 27th March, 2015 has held that LIBOR rates for benchmarking the transaction of providing of loan to foreign AE should be accepted. 6. On the other hand, Ld. DR strongly relied upon the order of the DRP. 7. We have heard rival submissions and also perused the impugned order and the material placed on record. On the loan given to its AE, the assessee has charged interest rate worked out on the basis of six months at LIBOR + 2%, which worked out at ....
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....dering the difference between yield of A+ and BB rated points on which he worked out approximately rate of 6%. Accordingly, the TPO held that the assessee company should have charged on cost of guarantee commission fees of 6% for Arm's Length situation and thereby proposed addition of Rs. 1,96,00,012/-. The DRP determined the ALP of cost of guarantee of 2% based on Safe Harbour Rules. Based on such directions the adjustment on account of cost of guarantee was restricted to Rs. 64,75,975/-. 10. Before us, the Ld. Counsel submitted that in the earlier years, the Tribunal in assessee's own case for the AY 2008-09 had held that corporate guarantee fee should be benchmarked @ 0.5%. This decision again is based on the co-ordinate Bench of the Tribunal in the case of Everest Kento Cylinder Ltd. Thus, he submitted that following the earlier year's precedence, the corporate guarantee should be taken at @ of 0.5%. On the other hand, Ld. DR had strongly relied upon the order of the DRP. 11. After considering the relevant finding given in the impugned orders and also the order of the Tribunal for the earlier years. We find that the Tribunal in AY 2008-09 has held that Arm's Length Guaran....
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....lation has been given by the Counsel before us which is as under :- Calculation of expenditure as per section 14A rws rule 8D in relation to income which does not form part of total income As per Final AO order As per Assessee's revised claim filed with AO vide letter dated 14 March 2014 Sub Rule (2) of Rule 8D 1 Amount of Expenditure Directly relating to the Income which does not form part of total income Nil Nil 2 In case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt the amount will be computed in accordance with the following formula : A Total Interest 1,72,01,388 1,44,36,388 B Average of value of Investments 33,61,36,911 33,61,36,911 C Average of total Assets 4,93,69,80,347 4,93,69,80,347 D Interest/Average of total....