TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 243
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....e [AE] and disallowance made u/s 14A of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] r.w.r. 8D of the Income tax Rules. 4. At the very outset, it was brought to our notice that the quantum additions have been deleted by the Tribunal in ITA No. 4249/DEL/2013. It was further brought to our notice that only addition of Rs. 25,000/- u/s 14A of the Act was sustained on estimated basis. 5. We have carefully perused the orders of the Tribunal in ITA No. 4249/DEL/2013. We find that the TP adjustments were made on two counts. Firstly, the addition was on account of difference in interest on loan charged from AE and secondly, addition on account of adjustment of corporate guarantee. We find that these TP adjustments were deleted by the Tribunal at paras 58, 60, 67 and 68 of its order. We further find that the disallowance made u/s 14A of the Act has been restricted on estimated basis at Rs. 25,000/- and findings can be found at para 72 of the order of the Tribunal. 6. Since the foundation has been removed, the super structure must fall. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A). 7. In the result, the appea....
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....sp; 76,43,49,899 17. Since similar goods were sold by the appellant to unrelated third parties, the appellant, in its transfer pricing study has applied Comparable Uncontrolled price ('CUP') for benchmarking the aforesaid transaction. It was also submitted that since the goods exported by the appellant, namely, hot rolled and cold rolled stainless steel coils contains metal components such as nickel and iron, and the price of such metals varies on day to day basis, an appropriate comparison would be average of monthly prices of each variety of goods. (Page 73- 74 of the paper book). 18. Accordingly, in transfer pricing document, the appellant had benchmarked the international transactions of export of goods of various grades of steel by comparing the average monthly prices of goods sold to associated enterprise with average monthly prices of goods sold to uncontrolled enterprises of same grades, applying CUP method. Comparison of price of goods on monthly average prices is enclosed at pages 73-74 of the paper book. 19. The TPO, in the impugned order, disregarded the comparison of average price of goods exported by the assessee to its AEs and sought to carry out a detailed compa....
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.... assessee contains metal components such as nickel , the prices of the goods sold by the appellant is determined considering the prices prevailing in London metal exchange on the respective dates. It was further stated that there were huge price variation in the price of nickel in a particular year where it has fluctuated 33 times the base price. It was therefore stated that the price of the product sold on one specific date cannot be compared with the price of goods sold on any preceding or subsequent date and therefore it was stated that monthly average prices should be taken. For this proposition para number 3.9 of the revised OECD guidelines on transfer pricing was also relied upon along with the decision of the honourable Delhi High Court in case of Sony Ericsson Mobile Communications India private limited versus CIT 374 ITR 118. The assessee has also relied upon several other decisions, which are already reproduced by us earlier. The learned AR vehemently relied upon the decision of the coordinate bench in case of ACIT versus Essar Steel Limited in ITA number 3727/ MUM/ 2011 where the assessee has compared the average price of eight transactions of export of goods made to a....
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.... The ld. counsel for the assessee further argued that benefit of tolerance range of +/- 5% in the price charged from the AE vis a vis ALP should be given. For this proposition, reliance was placed on the decision of the co-ordinate Mumbai bench in the case of Development Bank of Singapore, 155 TTJ 265. It was pointed out that the Tribunal held that the benefit of range of +/-5% is available not only to a situation where more than one price is determined as ALP by the most appropriate method but also where only one price is determined as ALP. 28. We find that the Tribunal, in assessee's own case, for A.Ys 2007- 08 and 2008-09 [supra] has allowed this claim of the assessee holding as under: "45. The sixth argument of the assessee is with respect to, without prejudice, that the difference in the arm's length price of goods exported by the appellant to its associated enterprise fall within the range of 5% of the transacted price as provided under the second proviso to section 92C (2) Development Bank of Singapore [155 TTJ 265] wherein the tribunal held that the benefit of range of 5% is available not only to a situation where more than one price is determined as arm's length price b....
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.... both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 36. This adjustment can be bifurcated into two parts. Firstly, the adjustment relates to interest on loan received from AE amounting to Rs. 1,45,49,640/- and secondly, the issue of corporate guarantee amounting to Rs. 6,17,65,824/-. 37. During the financial year 2005-06, the appellant received interest of Rs. 56,68,570 on loan amounting to USD 25,00,000 granted to PT Jindal Stainless, Indonesia. Interest is charged on the loan at the rate of 3 moths LIBOR plus 200 basis point. 38. In case of appellant, comparable transaction is available where appellant JSL has availed loan from financial institutions, viz., State Bank of India, at the rate of 3 months LIBOR + 170 basis point and from ICICI at 3 months LIBOR + 140 basis point. JSL had provided the loan to PT Jindal Stainless, Indonesia at higher rate, i.e., 3 months LIBOR + 200 basis points. Copy of loan agreement e....
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....vailable in public domain on various websites of Indian banks and various free public reports where the lending rates are ranging from libor+ 350 basis points to 650 points for FY 2006 - 07. The assessee has granted loan to its subsidiary company. Therefore, economic purpose and substance of the debt claim or debt for which granting of credit calls for the lending rate would be determinative. The commercial expediency and related benefits of close connections with the above transaction, of course, would have a marginal significance and effect. The lending rates shown by the bankers as adopted by the learned Transfer Pricing Officer will not have any factoring of that consideration. Furthermore, the credit rating would also be an issue when the banks are lending to a foreign party. The learned assessing officer has also stated that adjustment for securities also required to be made and the bankers extending loan in foreign currency would be insisting on sufficient security which looking at the financial health of the subsidiary is not possible and therefore interest rates are required to be imputed which will take care of this aspect also. In the present case, the borrower is th....
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....asis points in both the financial year financial year for the benchmarking for the interest income of the assessee. 61. In view of this ground number 3 of the appeal for assessment year 2007 - 08 and ground number 4 of appeal of the assessee for assessment year 2008 - 09 is partly allowed." 43. Respectfully following the decision of the co-ordinate bench [supra], we hold accordingly. 44. In so far as the adjustment on account of corporate guarantee is concerned, we find that this issue was also considered and decided by the co-ordinate bench in A.Ys 2007-08 and 2008-09 [supra]. The relevant findings of the order read as under: "67. The second contention raised before us is that benchmarking by the assessee should be accepted. The assessee has charged guarantee commission from AE @ 1.5 %. The ld TPO has bench marked it after obtaining the quotation from various banks, which are 2.68 %. He further added 2 % as mark up because of security and margin adjustments. The assesse substantiated the Alp stating that ING Vasya bank has given a quote of 1.5 % further similar is stated to be the quote of Indusind bank. The TPO has also taken the quotes of Axis Bank, Canara Bank, PNB, and I....
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....is proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case." 49. in light of this decision of the Hon'ble High Court [supra], we direct the Assessing Officer to restrict the disallowance to Rs. 2,37,000/-. This ground is partly allowed. 50. In the result, the appeal of the Revenue is partly allowed. ITA No. 6518/DEL/2016 [ Assessee's appeal] ITA No. 6539/DEL/2016 [Revenue's appeal] 51. The above cross appeals by the assessee and Revenue are preferred against the order of the CIT(A) - 37, New Delhi dated 21.10.2016 pertaining to A.Y. 2010-11. 52. First we will take up assessee's appeal. 53. First grievance relates to TP adjustment of Rs. 16,65,766/- on account of alleged difference in ALP of international transaction on export of goods. 54. In addition to the challenge to this TP adjustment, the assessee has also claimed benefit of +/- 5% range as provided under the proviso to section 92C(2) of the Act. 55. An identical issue has been considered by us hereinabove in ITA No. 6517/DEL/2016 [supra]. For our detailed discussion therein, we hold accordingly. 56. Second grievance related to rejection of set off of p....