TaxTMI 
TaxTMI 
2022 (8) TMI 798
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....bai ["learned CIT(A)"], for the assessment year 2008-09. 2. In this appeal, the assessee has raised following grounds: "GROUND TREATING THE INTEREST PAID TO BANK CORPORATE GUARANTEE GIVEN AS AN INTERNATIONAL TRANSACTION UNDER SECTION SB OF THE ACT 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) upholding the action Transfer Pricing Officer (TPO)/Assessing Officer (AO) in treating the interest paid to bank and corporate guarantee fee as "international transaction" u/s 92B of the Act. 2. He failed to appreciate and ought to have held that: a. The Appellant was not into the business of providing finance or guarantee and hence these transactions were not "International Trans....
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....erest paid on behalf of its AE. 2. He failed to appreciate and ought to have held that the interest paid by the Appellant was on account of its own business obligation and hence should be allowed as business expense. 3. He further failed to appreciate and ought to have held that the amount of interest paid by the Appellant was never claimed as an expense by the appellant and addition of the same interest expense to the income of the appellant would amount to double taxation. 4. Without prejudice, the Appellant submits that in case the addition of interest is upheld then such addition should be restricted to Rs 21,13,946/-equivalent to Appellant share in its AE, being 55% of share capital. 5. The Appellant....
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....tion, assessee reported following international transaction entered into with its associated enterprise: Sr. No. Nature of transaction FY 2007-08 Method adopted by the assessee 1. Investment in Equity Share Capital of the subsidiary company M/s PT Equity Communities, Jakarta, Indonesia 7,12,13,196 CUP 5. The Assessing Officer made reference to the Transfer Pricing Officer ('TPO') for determination of arm's length price of the international transactions entered into by the assessee. During the course of transfer pricing assessment proceedings, it was observed that amount remitted of Rs. 7,12,13,196, represented USD 17,61,849. As the shares invested was 16,50,000 shares at 1 USD, accordingly the assessee was asked t....
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....on behalf of the associated enterprise was not claimed and therefore no transfer pricing adjustment can be made in this regard. On the other hand, learned Departmental Representative ("learned DR") vehemently relied upon the orders passed by the lower authorities. 7. We have considered the rival submissions and perused the material available on record. In the present case, the associated enterprise of the assessee is its subsidiary company in which assessee holds majority control i.e. 55% of the shareholding. Apart from the assessee, two other persons staying in Indonesia held balance 45% of shareholding of the said subsidiary company. The associated enterprise of the assessee was to invest in coal mine in Indonesia and therefore for sai....
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....oup, therefore, possibility of manipulation of price charged or paid as such in their group concerns, could not be ruled out, which could lead to erosion of tax revenue to the country. Thus, with a view to provide statutory framework, which can lead to computation of reasonable, fair and equitable profits and tax in India, in the cases of such multi-national enterprises, new provisions were introduced in the Act, i.e. Chapter X which provides for special provisions relating to avoidance of tax. As per the provision of section 92 of the Act, any income arising from international transaction shall be computed having regard to the arm's length price. Further, vide Explanation to section 92, it has been clarified that allowance of any expense o....
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....eal, is pertaining to the adjustment on account of corporate guarantee. 10. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the course of transfer pricing assessment proceedings, it was observed that the assessee had provided corporate guarantee to its associated enterprise without any compensation/fees. The TPO vide order passed under section 92CA(3) of the Act observed that the assessee bears costs and risks in providing such guarantee, as it has pledged its shares as security and as the directors of the assessee company has provided guarantee for the loan availed by the associated enterprise, which an independent party would not have borne without any compensation. Therefore, the TPO imp....