TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 583
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....ting 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 to its own foreign subsidiaries even though such companies were formed for the expansion of its own....
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....ed 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 guarantee of the nature provided by the assessee will not come within the meaning of international transaction in terms with section 92B of the Act. It is not di....
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.... 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 have been accepted. The benefit granted by the tribunal u/s 92B of Income Tax reads as under:- "92B. Meaning of international transaction.- (1) For the purposes of this section and se....
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....a 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 relied upon the recent decision of Bombay High Court in Commissioner of Income Tax vs. Everest Kento Cylinders Ltd. reported in 378 ITR 57 wherein it has been held as under:- "10. Having considered submissions....
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....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. During the course of the proceedings, the Transfer Pricing Officer issued a further notice dated 4 October 2011 recording that from Form 3CEB submitted on 30 September 2008, it appeared that the Petitioner had furnished a guarant....
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....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 have heard counsel for the parties. 8. Taking into account the observations made by the Bombay High Court as reproduced above, the first issue is answered in favour of the assessee and against the department. Tribunal while relying on the international trans....