TaxTMI 
TaxTMI 
2021 (2) TMI 1018
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns advanced to the Associated Enterprises (AE). 3. Brief facts are, the assessee is a resident company engaged in manufacturing of cut and polished diamonds. During the year under consideration, the assessee had entered into international transactions with its overseas AEs. In the course of proceedings before him, the Transfer Pricing Officer noticed that the assessee has advanced loans to two of its AEs situated in Hong Kong and United Arab Emirates (UAE) for capital funding of the subsidiary. However, such loans were advanced without charging any interest. Being of the view that such interest free loans would not have been advanced to third parties, the Transfer Pricing Officer proceeded to determine the arm's length interest and pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under similar circumstances would not have been provided to unrelated parties, arm's length interest has to be determined. It is further observed, in the course of proceedings before the first appellate authority the assessee relying upon various judicial precedents had submitted that arm's length interest should be determined by applying LIBOR rate. Since, learned Commissioner (Appeals) has accepted the aforesaid contention of the assessee, we do not find any infirmity in the decision of learned Commissioner (Appeals). This ground is dismissed. 8. In ground no.2, the assessee has challenged the addition made of Rs. 13,04,860, on account of adjustment made towards fee on corporate guarantee. 9. Brief facts are, during the transfer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of corporate guarantee is not an international transaction, we are not convinced with it. A reading of Explanation-1(c) of section 92B of the Act, makes it clear that the provision of any kind of guarantee will come within the ambit of international transaction under section 92B of the Act. Further, as rightly observed by learned first appellate authority, the Tribunal, Mumbai Bench, in Everest Kanto Cylinders Ltd. v/s DCIT, [2013] 34 Taxman.com 19 (Mum.) while negating identical contention made by the assessee has held that provision of corporate guarantee is an international transaction. The aforesaid decision of the Co-ordinate Bench has also been upheld by the Hon'ble Jurisdictional High Court in case of the same assessee as reporte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n entries by way of bogus purchase bills. On the basis of such information, the Assessing Officer called upon the assessee to prove the genuineness of purchases aggregating to Rs. 43,90,781. In response to the query raised, the assessee furnished some documentary evidences, such as, ledger account of the concerned parties, purchase invoices, bank statements showing payment made towards purchases, sale invoices showing corresponding sale, quantitative details of purchase and sales of the cut and polished diamonds purchased from the concerned entities. Further, to verify the genuineness of these purchases the Assessing Officer issued notices under section 133(6) of the Act to the concerned parties. As observed by the Assessing Officer, in res....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bom.); ii) PCIT v/s Saporji Palonji Co. Ltd., 117 Taxman.com 625 (Bom.); iii) PCIT v/s Unipax India, 108 taxmann.com 454; and iv) PCIT v/s Vaman International Pvt. Ltd., ITA no.1940/2017 (Bom.) 17. The learned Departmental Representative strongly relined upon the observations of the Assessing Officer and learned Commissioner (Appeals). 18. We have considered rival submissions in the light of the decisions relied upon and perused material on record. The factual matrix reveals that the two of the entities from whom the assessee had purchased diamonds of Rs. 43,19,781, were found to be part of Rajendra Jain Group. The details of such purchases are as under:- Nayan Gems Rs. 17,80,846 Sun Diam Rs. 26,09,935 Total Rs. 43,90,781 19.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be concluded that the assessee purchased the goods from some other source. Therefore, to that extent, the genuineness of purchases made from Sun Diam still remains in doubt. In view of the aforesaid, to take care of any leakage of revenue on account of suppression of profit from the alleged purchases from Sun Diam the profit element embedded in such purchases has to be treated as income of the assessee. Having held so, it has to be decided what should be the reasonable rate of profit which can be applied. As noticed, the Assessing Officer has referred to a report of the task group for Diamond sector published by the Government of India, Ministry of Commerce and Industry, New Delhi, wherein the benign / presumptive taxation threshold was se....