TaxTMI 
TaxTMI 
2017 (1) TMI 1704
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..... 2.First Ground of appeal is about determination of Arm's-Length Price(ALP) of Loan Syndication Transaction (LST) and its allocation between the assessee and its AE. During the TP proceedings ,the TPO found that the assessee had entered into IT.s worth Rs. 63,60,93, 95,835/-, that it had received fee/commission from its AE of Rs. 92.72 crores, that same was nomenclature as Loan Syndicate Fee (LSF).After considering the submission of the assessee ,the TPO determined the ALP of Syndicate Fee received by the assessee at 100% as against the 50% shown by the assessee . He made an adjustment of Rs. 22.63 crores to the income of the assesse holding that the ALP of the Syndicate Fee was 100% and by AE was NIL. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authoty (FAA) and made elaborate submissions before him.After considering the submission of the aassessee and the orders of the TPO/AO,he held that his predecessor had decided the identical issue against the assessee,while deciding the appeal for the immediately preceding year i.e. AY.2007-08, that facts for both the years were similar. Finally,upholding the order of the AO/TPO ,he d....
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....rders of the authorities below. 5. We have heard the rival contentions and perused the orders of the authorities below and the decisions relied on by the assessee. The brief facts are that assessee has entered into following international transactions with its associated enterprises: S. No. Name of the AE Descriptionof property and nature of transaction Amount (Rs.) 1 ABN AMRO Asia Pacific PTE Ltd Purchase of Securities 158,15,83,600 2 ABN AMRO Bank N.V. India Branches (ABN Bank India) Purchase of Securities 301,15,90,151 Sale of Securities 2779,39,44,702 Custody charges paid 27,499 Professional charges paid/payable 1,30,000 Bank charges paid 511 Interest paid on Call Money Borrowing 25,80,167 Interest paid on Repo Borrowing 14,38,727 Interest received on short term borrowing 13,38,727 Shared cost for co-located premises 32,70,320 Net interest received on interest rate swaps 138,79,200 3 ABN AMRO Bank N.V. H....
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....e was no basis of so called profit split being 50:50 and this had no justification.TPO observed that in a third party situation a party which has helped the foreign party to sell in India would be charging from the ultimate buyer some commission. Similarly the Indian party would be charging some commission from foreign party whose goods have been sold in India mainly due to the efforts of Indian Party. In a comparable situation there would be no share of syndication fee. TPO held that the activities of the Indian entity had been clearly ignored. 5.4. Accordingly, TPO determined the ALP of the syndication fee received by the assessee at 100% and not 50%. TPO held that Euros 21,92,414 should have been given to the assessee. In Rupee terms taking the value of 1 euro at Rs. 60/-, it comes to Rs. 13,15,44,840/-, out of which Rs,5,99,84,604/- had been received by the assessee. TPO held that the ALP of syndicate fee receivable by the appellant was 100% and by the AE NIL, which resulted into an adjustment of Rs. 7,15,60,236/-. While passing the order the TPO did not allow benefit of +/-5% to the assessee and nothing in this regard has been discussed in his order. The Assessing Officer pass....
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....r loan agreement or mere signing thereof, then no profit shall be attributed to PE in terms of Article 7(2) of the Indo France DTAA. As we have discussed above that the assessee's role in providing the services is the core-basis of taking the decision of granting loan, therefore, the nature of services provided by the assessee do not fall under the terms facilitation of conclusion of loan agreement or signing thereof as stipulated under para 4 of the Protocol. 8.8 Having held that para 4 of the Protocol does not apply to the case of the assessee, now, the question arises as to whether the adjustment made by the authorities below is justified. For making the adjustment, the authorities below have taken into consideration, the income towards interest as well as the fee charged by the foreign branch from the clients. It is pertinent to note that when the loan is provided by the syndicate and the assessee has not contributed to the loan amount then as regards the income of interest, the same cannot be attributed to the assessee for providing the services of the financial analysis of the borrowers, market condition and regulatory environment in India. Since the assessee has pro....
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....spect of two loans to Reliance Petroleum Limited and Reliance industries Limited to the tune of US$50 million and USD$ 11 million, respectively. There is no dispute that for these two loans, Credit Agricole lndosuez (Asia), Syngapore worked as an agent and Credit Lyonnais worked as lead arrangers/cc- arrangers. The ANZ Investment Bank, BA Asia Ltd. as well as ABN Amro Bank were also worked as co-arrangers. The role of the assessee in these transactions of foreign currency loan under ECB was to provide financial analysis of the borrowers, general market conditions and regulatory environment. The learned AR has vehemently argued that as per para 4 of Protocol, profit cannot be attributed to the PE on account of facilitation of conclusion of loan agreement or mere singing thereof. We do not agree with the contention of the learned AR of the assessee because of the fact that the role of the assessee is not merely facilitation of conclusion of loan agreement or signing thereof but the services provided by the assessee are the corebasis for taking the decision of granting the loan by the syndicate. The assessee provided the services regarding clients creditability analysis, its capacity ....
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....deration uncontrolled similar transaction. In our view, the interest cannot be taken into account for attribution of income towards service charges/fees and, therefore, in the facts and circumstances of the case only the fee charged by the foreign branches can be taken into consideration for making adjustment under transfer pricing provisions. Accordingly, we direct the AO/TPO to make adjustment in respect of the services performed by the assessee for foreign currency loan arranged for its existing clients by taking into account only the fee and other charges received by the foreign branches from the borrowers in question. Since none of the parties have come out with the suitable comparables, therefore, we find that the estimation made by the CIT(A) at the rate of 20% is just and proper, however, the same would be only in respect of the fee and charges other than interest received by the foreign branches. Thus, these grounds of the assessee are partly allowed." 25. As it is clear from the earlier order of this tribunal that the benefit of para 4 of the protocol between India and France does not apply as assessee has rendered the key services for taking decision of granting....