TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 412
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.... were vital to decide the Ground No. 3 raised by the assessee. During the course of hearing before us, the Authorised Representative(AR)made same submissions and requested that both the documents would help the Bench to dispose the case. The Departmental Representative (DR) left the issue to the discretion of the Becnh. After going through the documents we find that they are relevant to decide the issue with regard to rate of loan. Therefore, document submitted are admitted as per Rule 29 of the Rules. ITA No. 1131/M/15(By Assessee ): 2. First ground of appeal is about disallowance of Rs. 1. 06lakhs u/s. 14A of the Act. During the course of hearing before us, the Authorised Representative (AR) of the assessee stated that considering the smallness of the tax effect the assessee was not interested in pursuing Ground No. 1. Hence, same stands dismissed as not pressed. 3. Second Ground is about addition of Rs. 7. 43 crores on account of guarantee commission pursuant to the direction of the Dispute Resolution Panel (DRP). During the assessment proceeding, the AO found that the assessee had entered into International Transactions (IT. s) with its Associate Enterprises (AE. s). He mad....
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....AY 2007-08 had upheld the additions made on account of guarantee commission, that the ALP rate of guarantee commission in the case of USA and Chinese AE. s had been restricted to 3%, that the assessee had taken huge risks in respect of corporate guarantee regarding Dubai, US and Chinese AE. s. The DRP restricted the rate of guarantee commission to 3% with regard to US and Chinese AE. s. 4. During the course of hearing before us, the AR stated that the Hon'ble Bombay High Court while deciding the appeal for AY. 2007-08(Income tax Appeal No. 1165 of 13 dt. 08. 05. 2015 ) had deliberated upon the issue. The DR stated that CUP adopted by the assessee was not same. He referred to Pg-No. 16 of the order of the TPO . 5. We have heard the rival submissions and perused the material. We find that the Hon'ble High Court had considered the following question regarding guarantee commission. "3. Whether on the facts and in the circumstances of the case and in law the Hon'ble ITAT "K" Bench Mumbai was right in deleting the addition of Rs. 28, 50, 353/- on account of TP adjustment on guarantee commission. " Upholding the order of the Tribunal, wherein the ITAT had deleted the additio....
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.... was advanced on 31. 10. 2007 at the fixed rate of 7%, that subsequent loans were advanced to AE at LIBOR + 1%. He found that average rate charged from AE was 3. 49%. With regard to EKC, Industrial-China the TPO found that the assessee had advanced a loan of USD 0. 85 million, that it had charged interest @ 5%, that an amount of USD 4. 30 million was advanced out of zero coupon foreign currency, convertible bonds and USD 3. 75 million was advanced from the reserves of the company . Referring to the order of the AY. 2008-09 the TPO proposed to apply the interest @ 14. 39% on the loans advanced to the AE. s. The assessee objected to the proposal of the TPO stating that it had raised zero coupon bonds during the year amounting to USD 35 million at an interest rate of 7. 25%, that these funds were placed in foreign currency in bank accounts in Citi Bank , London, that no interest was payable on the zero coupon bonds, that the assessee had raised funds from other sources, that during AY 2007-08 it had raised Rs. 92 crores by way of preferential allotment of shares to Brightwill Ltd. , that Rs. 88. 70 crores were raised by way of preferential allotment of shares to TVG India Investment H....
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....of interest. The DRP held that assessee had granted loan to its AE. s without any security, that it had undertaken various risks, that in a third party situation the transaction under consideration had to be benchmarked at the interest rate that could be cost of borrowing to the assessee, that businessmen would certainly charge a mark up to protect itself from various risks, that these factors were not considered by the Tribunal while deciding the issue, that the Tribunal had not considered the case of Perot Systems PSI (I) Ltd. (ITA. s/2320-2322/Del/2008, dt. 13. 10. 2009), that the Tribunal had decided the issue relying on its order in assessee's own case for the AY. 2008-09, that the decision of the Tribunal for 2008-09 could not be applied. Finally, the DRP dismissed the objections raised by the assessee. 8. Before us, the AR argued that the Tribunal had held that LIBOR + 2% would be a reasonable rate in such cases. He referred to the cases of Tata Autocom Systems Ltd. (56taxmann. com 206) and Cotton Naturals (I) )P. ) Ltd. (55taxmann. com 523). He also referred to order of the Tribunal for the AY 2009-10 in assessee's own case ITA/550/Mum/2014 dt. 27. 2. 15. The DR stated tha....