TaxTMI 
TaxTMI 
2021 (8) TMI 896
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....erused the materials available on record. We find that assessee is engaged in the business of cutting and polishing rough diamonds and export of cut and polished diamonds. The assessee had given interest free loan of USD 13,50,000/- equivalent to INR 9,84,41,500/-to its wholly owned subsidiary Tai Shan Gems Ltd., (Hong Kong) which is an associated enterprise of the assessee (AE in short). The assessee stated that this loan is part of capital funding of the subsidiary. The assessee had not charged any interest on the said loan. The assessee also stated that the said loan transaction cannot be considered as international transaction within the meaning of Section 92B of the Act. The ld. TPO ignored this contention and show-caused the assessee as to why arm's length price of the interest receivable from AE on the loan given by the assessee during the year should not be benchmarked using LIBOR plus rates converted to fixed rate interest SWAP as per Bloomberg data base. The ld. TPO accordingly made a search for comparables of Bloomberg data base by using the following criteria:- i) Loans of the same current year in which loan given by assessee. ii) Loans pertaining to t....
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.... drew our attention to para 7 of the said Tribunal order for A.Y.2014-15 wherein this Tribunal had held that only LIBOR rate should be considered for the purpose of making transfer pricing adjustment on account of interest free loan given to wholly owned subsidiary. 5.1. Per contra, the ld. DR argued that naked LIBOR rate alone cannot be adopted as the same does not consider risk adjustments. He even stated that six months average of LIBOR rates for March 2013 worked out to 0.049% and on that the spread to be considered for the purpose of risk adjustments, even if it is considered at 4%, the total notional interest income ought to have been added by the ld. TPO would be 4.049%. In the instant case, the ld. TPO was very liberal in applying rate of interest @ 3.52%. 6. We find that the ld. DR in his argument was not able to point out any error in the order passed by this Tribunal for A.Y.2014-15. He merely pointed out by making a fresh argument that naked LIBOR alone cannot be adopted. We also find that the Hon'ble Rajasthan High Court in the case of CIT vs. Vaibhav Gems Ltd., reported in 88 Taxmann.com 12 which was heavily relied upon by the ld. AR had addressed the issue in d....
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....issions and perused the material available on record. We find that assessee has given corporate guarantee during the year on behalf of its AE in favour of Barclays Bank PLC on 02/04/2012 for an amount of USD 7500000, on the strength of which, the AE had taken loan from Barclays Bank. The assessee has not charged any commission / fees for issue of such guarantee for the benefit of the AE. The ld. TPO determined fee / commission for corporate guarantee at 2.25% and arrived at the transfer pricing adjustment figure of Rs. 93,35,250/-. In appellate proceedings, the ld. CIT(A) directed the ld. AO to determine the commission on corporate guarantee at 0.5% on the loans availed. 8.1. The ld. DR placed reliance on the decision of Co-ordinate Bench of Mumbai Tribunal in the case of Mahindra and Mahindra Ltd., and other Tribunal decisions in the case of Technimont JCB India Ltd., to support the order of the ld. TPO. We find that appeal of the Revenue against the order of the ld. CIT(A) for the year under consideration had been dismissed due to low tax effect. Hence we hold that the ld. DR before us cannot argue for determination of rate of commission beyond 0.5% as was held by the ld. CIT(....
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....3 raised by the assessee is challenging disallowance made on account of alleged non-genuine purchases. 10. We have heard rival submissions and perused the materials available on record. In the course of assessment proceedings, the ld. AO noticed that some of the purchases shown by the assessee from the following parties were part of Rajendra Jain group:- Sr.No. Name of the Party P.A.No. Purchase Amount (Rs.) 1. Aadi Impex AHOPJ3837B 1,84,99,827/- 2. Daksh Diamonds AURPS3696K 1,91,50,446/- 3. Nay an Gems AJBPJ5163F 32,31,260/- 4. Sun Diam ABFFS9587G 61,59,828/- Total 4,70,41, 361/- 10.1. The ld. AO observed that in the course of search and seizure action conducted u/s 132 of the Act in the case of Rajendra Jain group, it was found that the said group through various entities was providing accommodation entries by way of bogus purchase bills. On the basis of said information, the ld. AO called upon the assessee to prove the genuineness of purchases aggregating Rs. 4,7,41,361/-. In response to the said query, the assessee furnished the following documents before the ld. AO:- 1. Ledger ....
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....O after receipt of various documents from the assessee had not resorted to make any verification by issuing notice u/s.133(6) of the Act to the concerned suppliers. We also find that assessee had not furnished any confirmation from the said suppliers while furnishing the various documents. All the documents furnished by the assessee are only self-serving documents which are available in the books of accounts of the assessee company and which are not corroborated by third party confirmation. Even the assessee had failed to produce parties for examination as directed by the ld. AO. In these circumstances, it would be just and fair to conclude that the purchases made from the aforesaid suppliers remain unverifiable. But since, the corresponding sales made out of disputed purchases had not been doubted by the Revenue, it would be safe to conclude that assessee could have made purchases from grey market in order to have some savings in indirect taxes and the incidental profit element thereon for making purchases in cash. Based on the report of the task group for diamond sector published by the Government of India, Ministry of Commerce and Industry in this regard, wherein the benign / pr....
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....8D(2)(ii) - Rs. 30,40,255/- Under Rule 8D(2)(iii) - Rs. 64,28,769/- Total Rs. 94,69,024/- 12.2. We find that the ld. CIT(A) duly accepted the contentions of the assessee that assessee is having sufficient interest free funds in its kitty and hence, no disallowance of interest under Rule 8D(2)(ii) of the Rules is warranted. With regard to disallowance made under Rule 8D(2)(iii) of the Rules, the ld. CIT(A) upheld the disallowance made by the ld. AO with slight modification by giving a direction to the ld. AO to reduce the sum of Rs. 1,00,000/- voluntarily disallowed by the assessee u/s.14A of the Act. 12.3. We find that assessee has made investments in the following entities which, had fetched dividend income / had not fetched dividend income, as the case may be:- 12.3. The ld. AR argued before us that no objective satisfaction was recorded by the ld. AO for disregarding the claim of the assessee. We find that assessee had only made an adhoc disallowance of Rs. 1 lakh in the instant case u/s.14A of the Act and had also not provided the basis of arriving at such disallowance before the lower authorities. Hence, there is no need to record any satisfaction by th....