2019 (4) TMI 858

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.... Tribunal erred in not considering the fact that the assessee had actually advanced/lent money to its AE in the garb of preference shares leading to attraction of provisions relating to Transfer Pricing in the ease of the assessee in view of Section 92B of the Act, without appreciating the fact that these preferential shares do not carry any dividend and are beyond scope of any capital appreciation ? 2. Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal erred in deleting an adjustment made u/s. 36(1)(iii) towards interest on interest free loans advanced to the companies under the same management, relying on the decision of Hon'ble Bombay High Court decision in the case of M/s. Relia....

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....d re-characterised the transaction of subscription of shares into advancing of unsecured loans. The Tribunal did not accept such conclusion, inter-alia on the grounds that the TPO cannot disregard the apparent transaction and substitute the same without any material of exceptional circumstances pointing out that the assessee had tried to conceal the real transaction or that the transaction in question was sham. The Tribunal observed that the TPO cannot question the commercial expediency of the assessee entered into such transaction. 3. We are broadly in agreement with the view of the Tribunal. The facts on record would suggest that the assessee had entered into a transaction of purchase and sale of shares of an AE. Nothing is brought on ....

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....assessee had total interest-free fund of Rs. 398 crores." 5. No question of law in this respect arises. 6. Question no.3 arises out of the additions made by the TPO in connection with the corporate guarantee given by the assessee in favour of its AE. The Tribunal restricted subject addition to 1% guarantee commission relying upon other decisions of the Tribunal along similar lines. The TPO had, however, added 5% by way of commission. 7. The learned Counsel for the assesseee drew our attention to a judgment of this Court in the case of Commissioner of Income-tax, Mumbai v. Everest Kento Cylinders Ltd. Reported in [2015] 58 taxmann.com 254 and submitted that there is a substantial difference between a bank guarantee and a corporate g....