TaxTMI 
TaxTMI 
2016 (6) TMI 558
X X X X Extracts X X X X
X X X X Extracts X X X X
....g any interest. Similarly, Rs. 14 Crores was advanced to M/s TVS Logistics Investment UK Limited without charging any interest. Another sum of Rs. 21 Crores was advanced to M/s TVS Logistics Investments USA Inc. and no fee/interest was charged. According to the Ld. representative, the assessee-company is the ultimate authority to decide to expand its business in other countries. Therefore, the assessee-company is under the obligation to advance money to its Associate Enterprises for business expansion. The Ld. representative further clarified that the advances made to Associate Enterprises were not from borrowing. According to the Ld. representative, the assessee had surplus funds in the form of equity capital raised through issuance of share to Private Equity Investors. The Ld. representative further submitted that the assessee utilised the funds only for the purpose of expansion of its business through inorganic growth irrespective of the geographical boundaries. Therefore, adoption of LIBOR rate of interest is not warranted. 4. On the contrary, Smt. Vijayalakshmi, the Ld. Departmental Representative, submitted that the assessee made interest-free advances to its Associate Ent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xable jurisdiction. In this case, the assessee advanced funds to its Associate Enterprises and claiming before this Tribunal that it is mandatory for the assessee to advance for its expansion of business as per the shareholding arrangement in the form of equity capital raised. There may be an obligation, being shareholder of the Associate Enterprises, to advance money for expansion of its business. The question arises for consideration is when the assessee advanced funds to its Associate Enterprises in foreign country, from the equity capital raised and borrowed funds for its business in India and paid interest to the extent of Rs. 10.05 Crores, whether the profit of the assessee-company was shifted outside India so as to reduce tax burden in India? This Tribunal is of the considered opinion that the equity shares raised by the assessee is only for the purpose of expansion of its business and there is no compulsion for the assessee to utilize the funds raised in the form of equity capital in India. In other words, the funds raised from equity capital can also be utilized outside India since no cost involved in such capital. There is no prohibition for expanding the assessee's busin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Ld. representative for the assessee, submitted that the assessee has provided a Corporate Guarantee of approximately Rs. 14 Crores in favour of Multipart Solutions Limited, UK, a wholly owned subsidiary company of the assessee. According to the Ld. representative, the guarantee was for a bridge loan obtained by Multipart Solutions Limited from Export & Import Bank. The loan was obtained by the Multipart Solutions Limited, UK for meeting its working capital requirements. For providing the guarantee, according to the Ld. representative, the assessee has not charged any fee. Since the guarantee was provided to its Associate Enterprise, the assessee-company believed that the transaction was at arm's length as provided in Section 94C of the Act. The Ld. representative further submitted that providing guarantee to its Associate Enterprise does not involve any cost to the assessee, therefore, according to the Ld. representative, it has no bearing on profit, income, loss or asset of the assessee. Therefore, according to the Ld. representative, such guarantee is outside the ambit of international transaction. The Ld. representative placed his reliance on the decision of this Tribun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the assessee to its Associate Enterprise does not involve any cost to the assessee, therefore, it was outside the ambit of international transaction. In view of this decision co-ordinate Bench of this Tribunal on identical set of facts in respect of similar Corporate Guarantee, this Tribunal is of the considered opinion that determination of arm's length price may not be necessary. Mere pendency of appeal against the decision of this Tribunal in Redington (India) Limited (supra) cannot be a reason to take a different view. Unless and until order of this Tribunal is reversed by the Madras High Court in Redington (India) Ltd., the authorities below cannot take a different view on the subject. Therefore, by following the decision of co-ordinate Bench of this Tribunal in Redington (India) Ltd. (supra), the orders of the lower authorities are set aside. The adjustment made by the Transfer Pricing Officer as confirmed by the Dispute Resolution Panel is not justified. Accordingly, the addition made by the Transfer Pricing Officer is deleted. 11. The next ground of appeal is with regard to disallowance made under Section 14A of the Act. 12. Shri M. Viswanathan, the Ld. represen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decision on investment and maintaining the investment portfolio. Therefore, according to the Ld. D.R., the Transfer Pricing Officer has rightly disallowed the expenditure for earning the exempted income. 15. We have considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that major portion of investment was made in the Associate Enterprise outside the country. The assessee also claims that no expenditure was incurred for making the investment. The assessee has also claimed that if at all any income was generated on the investment made outside the country in Associate Enterprise that would be taxable in the hands of the assessee. Therefore, there is no question of applying provisions of Section 14A of the Act. The fact remains that the assessee has not maintained any separate books of account for the investment made by the assessee. Even though the assessee claims that major investment was made in Associate Enterprise, no details of such investment are available on record. Therefore, the claim of the assessee that major investment was made in Associate Enterprise is not substantiated. The fact remains that the ass....