TaxTMI 
TaxTMI 
2018 (9) TMI 1937
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....egard to determination of arm's length price (in short the 'ALP') of Corporate Guarantee Fees. This issue had been dealt elaborately in assessee's own case in I.T.A. No. 117/Kol/2017 for assessment year 2012-13 dated 16.05.2018 wherein it was held as under: "5. We have heard the contentions of both the parties and perused the materials available on records. At the outset we note that the impugned issue has already been decided in favour of assessee by this Tribunal in its own case in ITA No. 110/Kol/2016 for the AY 2011-12 vide order dated 12.1.2018. The relevant extract of the order is reproduced below: "12.10. We note that M/s. EIH flight is a startup company, it required funds primarily for acquisition of capital assets for setting up its operation and guarantee facilities given by the assessee/assessee company to the lender bank is normal business practice and obligation towards a subsidiary. Since the AE was a startup company, the assessee extended corporate guarantee to the third party borrowers as a matter of commercial prudence to protect its interest by fulfilling the shareholders obligation. We agree with the contention of the ld AR that the corporate gu....
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....lauses (a) (b) and (d) do not cover guarantee, lending or loans. Other two, (c) and (e) deal with (i) capital financing, and (ii) business restructuring or reorganization. Clause (c ) refers to lending or guarantee. But the Explanation which is for removal of doubts or is clarificatory, cannot be read independent of Section 92B(1). Section 92B(1), provides those transactions as international transactions which are in the nature of purchase, sale or lease of tangible or intangible property (explained by clauses (a) and (b) of the Explanation), or provision of services, (explained by clause (d) of the Explanation), or lending or borrowing money (explained by Clause (c) of Explanation). The plain reading of provisions of sec. 92B(1) of the Act indicate that the various transactions mentioned in section 92B(1) of the Act, (i.e. purchases, sales, provision for services, lending or borrowing or any other transaction) should have bearing on the profits, incomes, losses or assets of such enterprises. In our opinion, the condition precedent of a transaction having a bearing on profits, incomes, losses, or assets would apply to each of the aforesaid transactions namely purchase, sale, or lea....
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....an international transaction. Since in the case in hand, the assessee has not charged a penny from the AE, so the facts of the case are different and case law is distinguishable and, therefore, the Hon'ble High Court's order cannot come to the rescue of the Revenue. We find that the ld. AR pointed out that in the said case, the Hon'ble Bombay High Court did not answer the specific question as to whether the issuance of corporate guarantee is inherently within the ambit of definition of 'international transaction' irrespective of whether or not such transactions have any "bearing on profits, income, lossess or assets of such enterprises" u/s. 92B of the Act. We also note that the Ahmedabad Bench of this Tribunal supra after considering the decision of the Hon'ble Bombay High Court in Everest Kanto Cylinder Ltd. (supra) observed as under: "We are unable to see, in the judgment of Hon'ble Bombay High Court, any support to the proposition that issuance of corporate guarantee is inherently within the ambit of definition of 'international transaction' under section 92B irrespective of whether or not such transactions have any 'bearing on profits' incomes, losses, or assets of su....
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.... 2011-12 vide order dated 12-1-2018, the matter was remanded back to the file of TPO for fresh consideration by observing as under: "13.4. We have heard the rival submissions and are of the opinion that the LIBOR and basis points should be the criteria for meeting the cost of interest on the international transaction in respect of interest to be charged on the loan advanced to AE. For this purpose the credit rating of the assessee as well as the credit rating of the AE should be taken into account. Accordingly we deem it fit to remand the issue to the ld. TPO to determine the basis points on the basis of the aforesaid parameters and such other relevant parameter in accordance to law. Therefore, we remand this issue for this limited purpose back to the ld TPO / ld AO and to determine the issue as directed by us. Accordingly, the Grounds 2.1. & 2.2. raised by the assessee are allowed for statistical purposes and Ground 1 raised by the revenue is dismissed." Respectfully following the same we restore the issue to the file of TPO/AO for the fresh adjudication according to law and in the light of above stated discussion. Thus the ground of appeal of the assessee is all....
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....profits u/s 115JB of the Act. Aggrieved the assessee is in appeal before us. 5.2. We have heard ld. AR. We find from the comparative statement of own funds vis-àvis the investment made for the last six years as submitted by the ld. AR that the assessee is possessing sufficient own funds which are much more than the domestic investments made by it. Hence by placing reliance on the decision of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Limited reported in 313 ITR 340, we hold that no disallowance of interest is required to be made under Rule 8D(2)(ii) of the Rules. 5.3. With regard to disallowance under Rule 8D(2)(iii) of the Rules, the assessee pleaded that domestic investments which had yielded dividend income alone should be considered for the purpose of computing the disallowance under Third limb of Rule 8D(2) of the Rules, We find this argument is in consonance with the decision rendered by this Tribunal in the case of REI Agro Ltd. reported in 144 ITD 141. Accordingly, we direct the ld. AO to re-compute the disallowance in the light of the decision referred to supra. There is no dispute with regard to disallowance made under Rule 8D(2)(i)....
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....in favour of the assessee. Though this decision was rendered in the context of validity of section 263 proceedings of the ld CIT, this tribunal had adjudicated the issue on merits also and hence the reliance placed on the same is well founded. The operative portion of the said judgement is as under:- "4.4.1. On merits of the issue, on perusal of the various clauses in the lease deed (which are not reproduced herein for the sake of brevity) forming part of the paper book vide pages 87 to 98, we find that the ownership / title on the vehicles always lies with M/s Orix Auto Infrastructure Services Limited (lessor) during the subsistence of the lease vide clause 8 of the lease deed. We find that during the subsistence of this lease arrangement and till the vehicles are delivered back to the lessor, the lessee shall insure the vehicles with the lessor's name as the owner vide clause 11 of the lease deed. Clause 15 of the Lease deed clearly specifies that upon expiration or earlier termination of the lease, the lessee shall deliver to the lessor the said vehicles at a place designated by the lessor. We hold that since the ownership does not vest with the assessee at any point of time dur....
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....elves were not used by the assessee was irrelevant for the purpose of section. (ii) That a scrutiny of the material facts at hand raised a presumption of ownership in favour of the assessee. The vehicle, along with its keys, was delivered to the assessee upon which, the lease agreement was entered into by the assessee with the customer. The fact that at the end of the lease period, the ownership of the vehicle was transferred to the lessee at a nominal value did not make the assessee in effect a financier. No inference could be drawn from the registration certificate as to ownership of the legal title of the vehicle. If the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Tribunal, was not the case. (iii) That the entire lease rent received by the assessee was assessed as business income in its hands and the entire lease rent paid by the lessee been treated as deductible revenue expenditure in the hands of the lessee. This reaffirmed the position that the assessee was in fact the owner of the vehicle, in so far as section 32 of the Act is concerned. (iv) That, therefore, ....
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....ions of the lease agreement and the fact that depreciation on these trucks had been allowed to the lessor, the lease rent was deductible as revenue expenditure"- In the aforesaid case, there was a clause in the lease agreement giving an option to the lessee to buy back the asset on termination of the lease agreement. In the instant case, the assessee (lessee) falls in a better footing, in as much as there is no clause in the lease agreement, enabling the lessee to buy back the assets on termination of the lease arrangement. We find that the case law relied upon by the Learned DR on the decision of Delhi Tribunal need not be discussed as the issue is squarely covered by the High Court and Supreme Court in favour of the assessee." Respectfully following the aforesaid decisions, we find no infirmity in the order of the ld CITA in this regard. Accordingly, the Ground No. 4 raised by the revenue is dismissed." Respectfully taking the consistent view of this Tribunal as discussed above, we reverse the order of Ld. DRP and direct the AE to delete the same. This ground of appeal of the assessee is allowed." Respectfully following the aforesaid decision we dire....
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....llowing details are as under: 7.4. Business Fair and Exhibition Expenses - Rs. 30,29,516/- During the year, the assessee company has participated in various hotel programmes, exhibitions, designs & management and events held outside India. These programmes are arranged by very reputed organizations. Senior persons/ executives of the assessee company from marketing & sales department represented the assessee in those trade shows, exhibitions and event for marketing and promoting its hotel business. Since the assessee company's business is mainly dependent on foreign guest, it is necessary to promote and market its business outside India. This type of convention is a great platform to meet, interact with and present its hotel business to the meeting industry professionals who have potential for business into India. Besides, it also gets a great opportunity to meet world level recognized travel agents at one place. The country wise details of foreign remittances made in this regard are as under: The assessee further submitted the following details are as under: 7.5 Inspection Fees - Rs. 21,96,677/- The said payments are made for quality audit and the service provider pr....
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....owed for statistical purposes. 9. Ground no. 7 raised by the assessee is with regard to error in calculation of dividend distribution tax of gross dividend of Rs. 9,19,45,791/-. 9.1. We find that this issue has been adjudicated by this Tribunal in assessee's own case for assessment year 2012-13 in I.T.A. No. 117/Kol/2017 dated 16.05.2018, wherein, this issue was remanded back to the file of the ld. AO. Respectively following the same, we remand ground no. 7 raised by the assessee to the file of ld. AO. 10. Ground no. 8 raised by the assessee is with regard to charging of interest u/s 234D of the Act is consequential in nature and does not require any specific adjudication. 11. Ground no. 9 raised by the assessee is general in nature and does not require any specific adjudication. 12. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the Court on 14.09.2018 ============= Document 1 ALLOCATION OF EXPENDITURE DISALLOWABLE UNDER SECTION 14A ASSESSMENT YEAR 2013-2014 Nature of expenses Directors' Fees Salary of HO staff Expenses on Directors' Travelling, Conveyance, Printing, Postage & Te....
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.... knowledge oner, does not weed to Royalty Tasable as Royalty w/s Pather these are g services at is the the absence of PE in la G Y V Ne les & More International 475 C YCH No Tachler RAC PTS of the 111,291 206-23 Ðл General comercial the Not ature hese, PTS Business profits n the absence of in Indi Document 3 Y 4 (Pret in the FTS NA Lay Bad of The W use U Y Ys (Present in the PTS) NA all Lry Hotels of The World UK You Vos (Present in the PTS clas Worldwide Payet lyst/SL UK Y Y Yos (Prent in the PTS) N Worldwide Payment Systems/SLE مهم UK Yes Yes Yes (Present in the FTS else) NA Workle Payment fysts/SL Yes Yes Yes (Present in the PTB) N ABC Cop US Y Yes Yes (Present PS Na Radius Global Travel S 1954 Y Y Yes (Present in the PTS ) N Radius Global Travel Solutions 7 - US Ys Yes (Prent in the PTS) NA Sabre Hospitality Solutions 406300 31-3 FTS US Yes Yes Ys (Present in the PTS N Sabre Hospitality Solution Act US ....
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....A Ceneral marseil promotional services the ace Set technical under PTS as per DTAA Eves otherwise, there is no Document 4 Advertisement, Participation & Sales Promotion Sl. Country No. name Proposed disallowance 1. Germany (Rs.) 84,26,232/- Remarks The payment on account of Advertisement, Participation and Sales Promotion are not in the nature of "Fees for Technical services" and are hence not taxable in India on source rule basis under Section 9(1)(vii) of the Act. Further, since there Advertisement, Participation & Sales Promotion Country Proposed Sl. No. name disallowance Remarks 2. 3. 4. USA Canada UK (Rs.) is no transfer of knowledge they do not constitute Royalty as defined in domestic law. 63,60,647/- Payments made under this head are for generic commercial 9,62,382/- and promotional services availed by the assessee and not in 17,18,398/- the nature of FTS. Even otherwise, the definition of "FTS" is very narrow due to inclusion of make available and no taxes are required to be deducted while making remittances to such payees. Total 1,74,67,659....
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.... to be deducted while making remittances to such payees. 46,14,635 The payments are not in the nature of "Fees for Technical services" and are hence not taxable in India on source rule basis under Section 9(1)(vii) of the Act. Further, since there. is no transfer of knowledge they do not constitute Royalty as defined in domestic law. Total 1,29,57,532 Document 8 Whether DAA Whether make ava The USA Ve No Yes Through USA Treat Name of the Party Total Page No. Reference AD's contention Canada Yes Yes Yes (Present in PTS NA Paint Come 10 4-15 16-27 Canada Yes Yes Yes (Present in FTS NA Pit Come 104-305 G Yes No No Majke laternative Sales 196871 53-59 Yes Yes No No Majanke International Sale 14357 16-09 Gay Yes Yes No No Make Iternational дез Yes Yes No No Majanke International Sales 1141,430 83-8 Genea Ye Yes No No Majanke International Sales B004 87-96 Gay Yes Yes No No The Brand Agacy Inc. 53.773 109-18 USA Ves Yes Yes Present in PTS....