AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (3) TMI 1103
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....491 on account of interest on loan given to AE by considering arm's length return on investment @ 17.26% p.a instead of Libor plus 2% (5% p.a) which the Appellant has charged to its AE; 4. Without prejudice to above, in not providing the benefit of the variation of 5 percent from the arithmetic mean as provided in the proviso to Section 92C(2) of the Act, while making the adjustment to the value of international transactions of the Appellant; Addition of Rs. 3,27,68,010 on account of adjustment in respect of cost of guarantees given to the bankers for wholly owned subsidiary Manugraph DGM: Revised Grounds 5. in making adjustment of Rs. 3,27,68,010 on account of guarantee executed by the Appellant in favour of overseas bankers in respect of loan taken by its AE from the bankers without appreciating the commercial and economic interest of the Appellant in the AE as well as disregarding the fact that the it was not providing any benefit to AE; 6. in making adjustment in respect of bank guarantee given by the Appellant applying arbitrary and adhoc method; 2. The assessee has also raised following additional grounds along with application dated 22.07.2014:- ADDITIONAL GROUNDS....
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.... Authorized Representative has submitted that the provisions of section 14A are not applicable in the case of the assessee because there was no direct expenses incurred in respect of such income. The Assessing Officer had not given any reason with regard to the satisfaction of the same as required under section 14A(2) of the Act. He has further submitted that the Assessing Officer cannot reject the assessee's claim merely on the basis of presumption that some expenditure may have been incurred for earning the exempt income. The satisfaction has to be reached on a cogent basis and the onus is on the Assessing Officer to establish the nexus between the expenditure and exempt income. Alternatively, the Ld. Authorized Representative has submitted that the activity of investment were carried out by the executives of the Finance Department along with handling the accounts, banking and finance activity of the company. The assessee does not have separate treasury department to look after the investment portfolio of the company. He has further submitted that the total investments includes the investment made in the mutual funds with growth scheme which does not yield any dividend income....
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....r on account of balance interest expenditure in view of the order of this Tribunal in assessee's own case. Even for the A.Y. 2008-09, the Tribunal observed that disallowance under Rule 8D has been worked out by the Assessing Officer on the total investment which included investment made in the mutual funds with growth scheme does not yield any dividend income. Therefore, the Ld. Authorized Representative has submitted that no fresh investment was made for the A.Y. 2009-10 and accordingly no disallowance can be made on account of interest expenditure u/s 14A of the Income Tax Act. As far as the disallowance of administrative expenses is concerned, he has submitted that out of Rs. 92.74 crores, investment of Rs. 90.52 crores is in the subsidiaries of the assessee which too in the foreign subsidiaries. Therefore, to the extent of investment in the subsidiary no disallowance is called for u/s 14A on account of administrative expenses. Thus the Ld. Authorized Representative has submitted that the disallowance if at all can be made on account of administrative expenses, the same may be by considering the investment to the extent of Rs. 2.23 crores only and should be restricted to Rs.....
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....ing decisions:- (1) Everest Kanto Cylinder Ltd. (ITA No. 7073/Mum/2012) dated 25 September 2014 (2) Bhansali & Co (ITA No. 825/Mum/2014) dated 5 December 2014 (3) PMP Autocomponents P. Ltd. (ITA No. 1484/Mum/2014) dated 22 August (4) Aurionpro Solutions Limited (36 CCH 6) (Mumbai Tribunal) (5) Great Eastern Shipping Co. LTd (ITA No. 397/Mum/2012) dated 10 January 2014 (6) Hinduja Global Solutions Limited (36 CCH 131) (Mumbai Tribunal) (7) Bharti Airtel Limited (ITA No. 5816/Del/2012) dated 11 March 2014 (AY 2008-09) 11. On the other hand, the Ld. DR has submitted that the loan was given by the assesssee, therefore, the assessee is the tested party and the rate prevailing in the Indian market should be adopted as arm's length interest for the purpose of loan advanced by the assessee to AE. He has relied upon the order of authorities below. 12. We have considered the rival submissions as well as relevant material record. At the outset, we note that this issue of arm's length interest in respect of the loan provided by the assessee to its AE has been considered by the Tribunal in the series of decisions relied upon by the assessee. The Tribunal in the case of Eve....
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....rantee/letter of Rs. 59.58 crores to PNC Bank National Association for the working capital facilities to be availed by its wholly owned subsidiary MDGM, USA/AE. The assessee has not reported this transaction in the TP study report as an International transaction. During the course of transfer pricing assessment proceedings, the TPO proposed to bench mark the transaction of corporate guarantee provided by the assessee to its AE by adopting rate of return for risk bearing as arm's length price. The TPO considered the difference between the PLR rate and the bank rate as a risk bearing rate. Such difference was computed at 6% based on PLR rate and bank rate, accordingly, the TPO adopted the guarantee at 6% and proposed the adjustment of Rs. 3,27,68,010/-. 16. The CIT(A) confirmed the action of the TPO/AO in adopting the 6% as arm's length cost of guarantee/guarantee charges. 17. Before us, the Ld. AR of the assesse has submitted that the transaction of giving corporate guarantee to the bank is not an international transaction . In support of his contention he has relied upon the decision of Delhi Benches of this Tribunal in the case of Bharti Airtel Ltd (ITA No 5816/Del/201Z)....
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....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 havealready 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 be at arms length. The difference of 0.1% can be ignored as the rate of interest on which IGIGI Bank, Bahrain Branchhas given loan to AE (i.e. subsidiary company) is at 5.5%, whereas the assessee is paying interest rate of more than 10% on ....