AI Drafter 
TaxTMI 
TaxTMI 
2020 (7) TMI 394
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....nditions/securities offered by the SBI, were not known and further adopting the fees, charged by DBS Bank as ALP without examining the terms St' conditions of the loan granted by DBS Bank or the security offered to the DBS Bank?" The appellant prays that the-order of the Ld. (CIT(A) be set aside and the order of the A.O be restored. 2. The assessee in its cross appeal has raised the following grounds of appeal ( revised grounds of appeal dated 31.05.2013 filed on 25.06.2013): Transfer pricing 1. The learned CIT(A) has erred in upholding transfer pricing adjustment of Rs. 7,03,48,212 to the income of the Appellant. A) Interest on loans/quasi equity given by the Appellant to its AEs On the facts and circumstances of the case, the learned CIT(A) has: 2. erred in confirming the rejection of the economic analysis undertaken by the Appellant in its transfer pricing study report to benchmark the aforesaid transaction. 3. erred in upholding the rejection of Transactional Net Margin Method as the most appropriate method to justify the arm's length nature of the aforesaid transaction and applying Comparable Uncontrolle....
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....rges on loans given by the Appellant to its AEs B) On the facts and circumstances of the case, the learned CIT(A) has: 14. erred in upholding adjustment of Rs. 78,94,837 on account of upfront fees and administrative charges on loans granted by the Appellant to its AEs. 15. Without prejudice to the above, erred in carrying on adjustment of 0.25 percent despite considering all-in-cost ceiling ECB rates issued by RBI as CUP for the purpose of benchmarking interest on loans. The above revised and modified grounds of appeal are without prejudice and are alternative to each other. 3. The assessee vide application dated 11.05.2013 (filed on 26/05/2013) has raised the following additional ground of appeal: 16. Failed to appreciate that the transfer pricing regulations does not apply to the extent of operations carried out through operating qualifying ships, being company registered under the Tonnage Tax Scheme (TTS) provided under the Act and income is computed as per the said scheme. 4. Brief facts of the case are that the assessee is a company engaged in the business of shipping and cargo handling services. The assessee-company filed its....
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....idered as an internal CUP for the purpose of benchmarking was also disregarded by TPO. The TPO made the adjustment of Rs. 7.29 crore on account of interest on loan by assessee by adopting 7.35% rate of interest being SBI Prime Lending rate. The TPO also noted that the assessee has not charged upfront fee and administrative charges on loan given to AE. The assessee in its reply stated that the upfront fees and administrative charge are charged by the Bank to cover certain cost incurred to provide the loan viz. fees paid for professional valuer for obtaining valuation certificate, fees paid for export for review of financial statement, fees paid for rating agencies for obtaining credit rating or for documentation etc. It was further stated that a lot of function are performed/efforts are put in by bankers for providing loan and hence upfront fees and administrative charges are charged by them. The assessee has not carried out any function performed by Bank and earned upfront fees and administrative charges are not charged. The assessee in alternative contention submitted that in case of adjustment and upfront fees is made; the same should be restricted to .25% of the loan amount, bei....
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....peal was treated as not pressed and resultantly dismissed. 9. Ground No. 2 to 13 relates to adjustment on account of interest on loan/quasi equity by assessee. The ld. AR of the assessee submits that during the relevant period, the assessee granted interest bearing and interest free loans to its AE for the purpose of vessel, purchase of rig and enabling the assessee to raised funds through IPO. The details of loan were provided to the lower authorities. The assessee adopted TNMM method as most appropriate method and compared the operating margin on operating income earned by assessee with that of comparable companies and justified internal transaction for granting interest free loan. The TPO made the adjustment of Rs. 7.29 crore on account of interest by adopting 7.75% to SBI Prime Lending rate. Before the ld. CIT(A), the assessee stated that internal CUP is available. The ld. CIT(A) upheld the order of TPO and also observed that granting of loan to AE cannot be considered as shareholder activities and that no documentary evidence has been furnished by assessee and held that no part of those loan have been converted into equity at all. However, the ld. CIT(A) granted part rel....
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....r Lines Singapore Pte Ltd Singapore Purchase of vessel 61,88,70,000/- Nill 06.01.2007 to 31.03.2007 3 Mercator International Ltd Singapore Downstream investment 2,73,64,599/- Nill 07.02.2007 to 31.03.2007 14. During the Transfer Pricing assessment, the TPO asked the assessee for justification as to why no interest is charged on the loans provided to AE. The assessee filed its detailed reply and contended that the AE suffered losses and its commercial operation had not started, thus, the AEs were not in a position to pay the interest. The assessee has set up AE in Singapore to expand its business operation abroad and sustaining its overseas subsidiaries and managed financial difficulties and have achieved the said purpose, the assessee has provided loan. It was also contended that the activity is a shareholder activity and not charging of interest was justified. The loan is provided from assessee is internal accrual and no cost is incurred in providing the said fund. The explanation furnished by the assessee was not accepted by the TPO. The TPO concluded that the assessee has not proved that the internal accrual was used to provide the loan. The a....
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....us, taken together for discussions and adjudication. The ld AR for the assessee submits that an adjustment of Rs. 3,15,79,348/- on account of upfront fee cost and administrative expenses on loan given to foreign AEs was made by TPO, however, on appeal the ld CIT(A) directed the TPO/AO to workout adjustment by taking consolidated rate of 0.25% of upfront fee for loan granted by assessee and deleted the addition of administrative charges. The ld AR for the assessee further submits that generally upfront fees and administrative charges are generally charged by the banks to recover certain costs incurred in providing loans, viz fees paid to professional valuer for obtaining valuation certificate, fees paid to experts for review of financial statements, fees paid to rating agencies for obtaining credit rating of the borrower, fees paid to professional for vetting the documents submitted by the borrower, the commission paid to agents/ financial intermediaries if any, expenses incurred for managing the loans account, they work monthly stock statements, dated statements and interim financial statements etc. Further, banks also prepare/vet the financial projections of the borrower, carry ou....