TaxTMI 
TaxTMI 
2021 (5) TMI 294
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....ken up together for adjudication and are decided by this common order. 2. Both the appeals have been filed with a delay of four days. Shri A. Mohan representing the Department referred to application dated 20/01/2021 filed by the Department stating reasons for delay in filing of the appeals. After considering the submissions made in application, the delay in filing of appeals is condoned and the appeals are admitted to be heard and disposed of on merits. ITA NO.1584/Mum/2014- A.Y 2006-07: 3. The Revenue has raised following grounds of appeal: 1. "Whether in the facts and in the circumstances of the case and in Law, the Ld. DRP erred in deleting the addition made in draft assessment order on account of TP adjustment of an amount of GBP 37.5 million (Rs. 297 crores)?" 2. "Whether in the facts and in the circumstances of the case and in Law, the Ld. DRP erred in deleting the addition made in draft assessment order on account of unexplained investment u/s.69 of the I.T. Act for Rs. 297.71 crores? 3. "Whether in the facts and in the circumstances of the case and in Law, the Ld. DRP erred in deleting the addition made in draft assessment order on accou....
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....submitted that the assessee in consortium with its Associated Enterprises (AE) Rabobank London and other Banks/Financial Institutions had advanced loan to Tata Tea (GB) Ltd. UK (in short 'Tata Tea UK'). During the course of TP proceedings for assessment year 2008-09 Sh. Chirag Vajrani, the representative of the assessee vide letter dated 27/07/2011 and 06/09/2011 admited that the assessee is part of the consortium for extending loan to Tata Tea UK and has received participation/commitment fee of the credit allocation of GBP 37.5 million. The ld. Departmental Representative pointed that a perusal of letter dated 27/07/2011 would show that the assessee has contributed GBP 37.50 million to loan consortium. In subsequent letter dated 06/09/2011 the same employee of the assessee company changed its stand and stated that the assessee was not part of the consortium but admitted that the assessee has received participation/commitment fee. The ld. Departmental Representative referred to the draft assessment order dated 08/05/2013 and submitted that letters furnished by the assessee are self-contradictory. The assessee has failed to furnish documentary evidence as part of Transfer Pricing st....
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....ctures. The assessee was instrumental in negotiating with Tata Tea UK for arranging loan through its AE. Since, the quantum of loan required by Tata Tea UK was substantial i.e GBP 160 million, neither the assessee nor AE of the assessee was in a position to extend such huge loan facility solely. The loan was extended to Tata Tea UK by consortium of banks/financial institutions with Rabobank London as lead lender. The assessee being originator of the deal was remunerated with percentage of interest earned. The ld. Counsel for the assessee referring to the letter dated 06/09/2011 pointed that the table given in the said letter would show that a loan of GBP 160 million was extended to Tata Tea UK during the financial year 2005-06 by consortium of six banks /financial institutions. The assessee was not part of that consortium. As per the arrangement the assessee was paid fee only for originating the deal. The assessee was not exposed to any financial risk. The ld. Counsel for the assessee referred to order under section 92CA(3) of the Act for assessment year 2008- 09, wherein the letter of the assessee dated 21/09/2011 is reproduced. The said letter clearly states that Rabobank London ....
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....re was no occasion for the assessee to furnish any loan documents in the TP study documentation. 7.3. The ld. Counsel for the assessee pointed that the observation of the Assessing Officer in draft assessment order are purely based on surmises and conjectures. The cloud of suspicion arose in the mind of Assessing Officer from two letters i.e. dated 27/07/2011 and 06/09/2011, wherein inadvertently Mr. Chirag Vajani, made same statements which were factually incorrect. The said statements were subsequently retracted by filing an affidavit. The ld. Counsel for the assessee submitted that if the assessee would have extended loan to overseas entity in a clandestine manner, without proper approval, apart from beaching Income tax Act, it would have also violated the provisions of Company Law, FEMA and various other laws that would have attracted major penalty. The ld. Counsel to support his argument placed reliance on the decision in the case of A.S. Sivan Pillai vs. CIT, 34 ITR 328(Mad). 8. In respect of ground No. 3 and 4 of the appeal, the ld. Counsel for the assessee submitted that the assessee had availed ECB loan under automatic route. The assessee had availed ECB to finance i....
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....r dated 27/07/2011 the list of participants that had extended credit facility to Tata Tea UK has been given. The name of assessee figures in that list and against the name of the assessee it has been mentioned that the assessee has extended credit facility to the tune of GBP 37.5 million. In the subsequent letter dated 06/09/2011 Chirag Vajani repudiated that the assessee was part of syndicate for extending loan. However, he stated that the assessee was paid participation/commitment fee of GBP 1,50,000 @ 0.40% of the credit allocation. The aforesaid letters do create an impression that the assessee in some manner was part of consortium that extended credit facility to Tata Tea UK. Later, Chirag Vajani retracted from the statements made in the aforesaid letters by filing an affidavit dated 04/03/2013 (page 1044 to 1047 of the paper book). 10. Further, to substantiate that the assessee was not part of consortium that had extended credit facility to Tata Tea UK, the assessee furnished various documents which inter-alia include; confirmation from Rabobank London (at page 958 of the paper book), Global Substitution Certificate giving list of participants (at pages 961 and 962 of the ....
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....to take note of the fact that the contents of letter on the basis of which addition u/s.69 of the Act was made, were retracted by way of affidavit. Further, the addition cannot be made solely on the basis of phraseology of the submissions made during proceedings. There has to be substantive evidence on record to corroborate with the statements. 12. The findings of the TPO and the Assessing Officer in draft assessment order that the assessee has advanced loans from undisclosed sources is merely based on surmises and conjunctures. It is a well settled legal proposition that suspicion, howsoever strong, cannot take place of evidence. Except from the letters referred above there is no material to back the observations made by the TPO/AO. On the contrary, the assessee has furnished various documents to substantiate that the assessee was not part of syndicate that has extended loan facility to Tata Tea UK, however, the same have been ignored by the TPO and the assessing officer while passing the draft assessment order. In the absence of any cogent evidence, the Revenue has failed to discharge its onus while alleging that there was an outflow of funds from India by assessee or receivab....
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....The same have not been disputed by the TPO. The assessee has benchmarked the transaction by applying CUP as the most appropriate method. The role of TPO is limited to determine ALP of the international transaction. The TPO cannot question the need or/and benefit derived from the international transaction. The Hon'ble Bombay High Court in the case of CIT vs. Lever India Exports Ltd., 292 CTR 393 has held that the jurisdiction of the TPO is only to determine ALP by applying most appropriate method specified under section 92C(1) of the Act. It is not the domain of TPO to determine allow ability of the expenditure. Similar view has been expressed in the case of CIT vs. EKL Appliance Ltd. 345 ITR 241 (Delhi). The Hon'ble Delhi High Court held that the TPO cannot question commercial expediency of the transaction or the quantum of benefit derived. 15. In the instant case the assessee has borrowed funds from Rabobank Hong Kong to finance its working capital requirements. The interest paid to Rabobank Hong Kong on ECB has been reflected in the books. Tax has been duly deducted on the payment of interest. Similarly, in respect of guarantee fee and service fee the assessee has been able to....