TaxTMI 
TaxTMI 
2017 (12) TMI 583
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....es of the case, the ITAT was justified in law and has not acted perversely in deleting the additions without considering the amendment in Section 92B by which the explanation was inserted with retrospective effect from 1.4.2002. 2. Whether in the facts and in circumstances of case, the ITAT was justified in law and has not acted perversely in directing to delete adjustments on account of notional interest income in delay in collection of sales proceeds from the associated enterprises." 3.2 Appeal No.149/2015 admitted on 14.9.2016 "1. Whether under the facts and circumstances of the case and in law the respondent and the appellate authorities are justified in confirming applicability of adjustment @ prevailing LIBOR rate plus 2% on account of interest free loans provided by the Appellant to its Associated Enterprises in the assessment year without considering the view that the average LIBOR rate existing at that time was only 0.79% and addition of adhoc 2% is unjustified, arbitrary and against the provisions of law? 2. Whether the Ld. ITAT is justified in approving adjustment on account of charging of National Interest on the Loans advanced by the Appellant t....
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....layed payments. (ii) Corporate guarantee provided to AEs without any consideration. (iii) Notion interest on loans advanced to AEs. (iv) Sales made by the assessee to AEs under the Transaction Net Margin Method (for short 'TNMM') The assessee filed the detailed submissions which were rejected by the TPO and the transfer pricing adjustments on above counts were made which is subject matter of the grounds raised above. Similarly, the AO further made corporate addition by rejecting the books of the assessee u/s 145(3) of the Act and made addition of Rs. 12,15,891/- in respect of DTA Units. Accordingly a draft notice was served on the assessee on 20.03.2013. The assessee in terms of Section 144C of the Act approached the Dispute Resolution Panel (for short 'DRP') which also confirmed these additions. 5. Counsel for the department has strongly relied upon the decision of the Hyderabad Tribunal in the case of Four Soft Pvt. Ltd. Vs. DCIT ITA No.1903/Hyd/2011 decided on 28.3.2014 wherein it has been held as under:- "25.2 Having considered the submissions of the parties, we are unable to accept the contention of the learned AR that corporate guaran....
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....by the bank. As the corporate guarantee is not in the nature of bank guarantee, the rate applicable to bank guarantee provided by the bank cannot be applied to corporate guarantee which is provided by a group company. In case of Glenmark Pharmaceuticals v. ACIT in ITA No. 5031/Mum/2012, dated 13/11/2013, the Mumbai Bench of the Tribunal after analysing the facts in that case had held that 0.53% corporate guarantee rate in that case was appropriate. The ITAT Hyderabad Bench in case of Infotech Enterprises Ltd. in ITA No. 115/Hyd/2011 and in ITA No. 2184/Hyd/2011, dated 16/01/2014 while considering identical issue of determining ALP of corporate guarantee provided by the assessee to its AE followed the ratio laid down in case of Glenmark Pharmaceuticals v. ACIT (supra) and remitted the issue back to the TPO to decide the quantum of corporate guarantee rate by following the method adopted in case of Glenmark Pharmaceuticals (supra)." 5.1 The same has been subsequently diluted by the High Court. 5.2 He contended that the tribunal has committed serious error in allowing the appeal and it is a fit case to be decided in favour of the department and the finding of CIT(A) ought to hav....
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....IT (supra) and Dy. CIT v. Tech Mahindra Ltd. (supra). The Revenue not having filed any appeal, has in fact accepted the decision of the Tribunal in VVF Ltd. v. Dy. CIT (supra) and Dy. CIT v. Tech Mahindra Ltd. (supra)." 5.4 Counsel for the appellant has also relied upon the decision of Delhi High Court in Commissioner of Income Tax vs. Cotton Naturals (I) Pvt. Ltd. reported in (2015) 276 CTR 445 (Del.) wherein Delhi High Court held as under:- "14. We note that CUP method is the most appropriate method in order to ascertain arms length price of the international transaction as that of the assessee. We agree with the assessee's contention that where the transaction was of lending money in foreign currency to its foreign subsidiaries the comparable transactions, therefore, was of foreign currency Tended by unrelated parties. The financial position and credit rating of the subsidiaries will be broadly the same as the holding company. In such a situation,-domestic prime lending rate would have no applicability and the international Rate Mixed being LIBOR should be taken as the benchmark rate for international transactions." 6. Counsel for the respondent Mr. Pathak has....
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....l Commissioner of Income Tax (2013) 359 ITR 46 (Bom) wherein it has been held as under:- "3. On 25 September 2009, the Assessing Officer addressed a letter to the Commissioner of Income-tax-VI, Mumbai seeking approval for a reference under Section 92CA(1) to the Transfer Pricing Officer for computation of the Arms Length Price in relation to 17 Assessees of which the Petitioner was mentioned at Serial No.12. In seeking the approval of the Commissioner, the Assessing Officer relied upon an instruction of the Central Board of Direct Taxes requiring that all cases where international transactions exceed a stipulated amount of Rs. 15 crores and covered by Section 92C be selected for compulsory scrutiny. The approval of the Commissioner of Income-tax - VI was communicated to the Assessing Officer under an intimation dated 30 September 2009. The Assessing Officer made a reference to the Transfer Pricing Officer on 9 October 2009 stating that she considered it necessary and expedient to make a reference under Section 92CA(1) for the computation of the Arms Length Price. The Transfer Pricing Officer initially issued a notice to the Petitioner under Section 92CA on 3 March 2010. Du....
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....for overseas business expansion for Hindalco itself through the SPV. Further, in discharging its responsibility to arrange funds for this acquisition, Hindalco has provided a corporate guarantee to the international banks who have in turn provided funds to BVCo. Thus in the opinion of the company, and having regard to the economic and commercial factors, it would be inappropriate for Hindalco to charge a fee from BVCo for providing such a guarantee as there was no service provided by Hindalco to BVCo, which was merely a SPV, and like all SPVs, was created to fulfill the specific objective of acquiring Novell for the parent company, Hindalco. Hence, looking to the overall substance of the transaction no scope remains to charge a Guarantee Fee for Corporate Guarantee provided to such SPV. Thus no determination of arm's length price is warranted from an Indian transfer pricing perspective. In the alternative, charge of a NIL guarantee fee satisfies the criteria of arm's length return to Hindalco, considering the facts and circumstances of the case." 6.2 He has also relied upon the judgment of the ITAT Hyderabad which is subsequently diluted by High Court judgments. 7. We....