AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 1203
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....R of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3. Since the assessee had entered into certain international transactions, the Assessing Officer referred the matter to the TPO u/s 92CA (1) of the Act for determination of the Arms' Length Price in respect of the international transactions reported by the taxpayer company. Accordingly, the TPO in his order passed on 31.7.2021 u/s 92CA(1) of the Act suggested upward adjustment of Rs.1,92,40,584/- on account of the following: a) Corporate Guarantee - Rs.1,34,01,000/- b) Interest on a Receivables - Rs. 58,39,584/- 4. The Assessing Officer thereafter passed the draft assessment order making the following two adjustments. Apart from the above two additions, he also made addition of Rs.1,49,18,829/- on account of disallowance u/s 14A and addition of Rs.67,46,635/- on a/c of duty drawback received. Accordingly, the Assessing Officer determined the total income of the assessee at Rs.23,59,83,602/- in the draft assessment order passed. 5. The assessee filed objections before the DRP and the DRP vide order dated 28.6.2022 gave partial relief to the assessee w....
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.... the fact that the credit rating of the AE's and country of incorporation is much higher than the credit rating of the assessee and Country of incorporation; the credit facilities are sanctioned Oy the banker based on the financial stability and credit rating of the associated enterprise, 2.7 The AO/TPO erred in calculating the ALP of the corporate guarantee fee using 'CUP' as the most appropriate method and by applying the rates of SBI without any basis and without complying with the procedure la down for computation of arm's length price as given in the provisions of section 92C of the Act. 2.8 The AO erred in not appreciating the fact that the TPO has erred in comparing the domestic bank rate with the international transaction which is not in accordance with Rule10B(1) of the Income Tax Rules, 1962. 2.9 The AO/TPO erred in not appreciating the fact that no comparison can be made between guarantee issued by commercial bank and the corporate guarantee issued by the holding company for the benefit of AE. 2.10 The AO/TPO erred in not appreciating the tact that the comparison should be based on real transactions of similar nature an....
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....n arm's length and making secondary TP adjustment by way of imputing interest on outstanding receivables is unwarranted. 3.6 The AO/TPO ought to have appreciated the fact that, the assessee has adopted TNMM method for ALP of determining the its transactions and the assessee is much operating margin of the higher than its comparables, hence adjustment with any regard to ALP affecting the margin would be operating unjustifiable and against the of Section 92C of provisions the Act. 3.7 The Ld. AO/TPO ought to have appreciated the fact that sales to AE includes a substantial interest profit element with aspect being embedded in it and on receivables therefore, interest cannot be coined as a transaction separate international as envisaged u/s 92B of the Act. 3.8 The AO/TPO ought to have appreciated assessee the fact that the is following a policy of not charging interest on receivables irrespective of the fact that whether the sales 3.6 3.7 A 3.8 As are made to AE or Non- AE. 3.9 The AO/TPO ought to have appreciated that assessee did not charge any interest on advances given to AE's and Non-AE. 3.10. AO/TPO erred in not considering th....
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....mpt and dividend income earned by the assessee during the year. 6.7 The AO ought to have appreciated the fact that the investments made by the assessee in its subsidiaries is for business expediency. 6.8 The AO erred in disallowing certain expenditure u/s.14A, without giving a finding that the expenditure by way of interest booked is not genuine and or a part of the expenditure is relatable to the investment in non-taxable income generating asset. 6.9 The AO ought to have appreciated the fact of case that Investment made in foreign subsidiary cannot be taxable under consideration of Income Tax Act 1961. 6.10 Without prejudice to above, the AO ought to have appreciated the fact that only the value of investment on which dividend income was earned should be taken as average value of investment for the purpose of calculation of disallowance u/s 14A of the Act and further the AO ought to have appreciated the fact the Assessee not have any dividend income during the year. 5. Erred in upheld the addition of Rs. 67,46,635/- towards duty drawback: 5.1 The Ld AO erred in making the addition of duty drawback of Rs. 67.46,635/- based on su....
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....mpany was not adversely affected by such letters of comfort. Further assessee submitted that section 92B does not cover corporate guarantee. The assessee objected for charging fee on corporate guarantee provided by it to its foreign AEs. It was submitted that the terms & conditions of corporate guarantee and normal bank guarantee are not similar and that the bank guarantee has direct impact on the assets of the assessee, since bank will not issue the same without any security. Accordingly, it was argued that normal bank guarantee cannot be adopted as comparable for determining the arm's length price of corporate guarantee. 8.3 However, the TPO was not satisfied with the arguments advanced by the assessee. Relying on the provisions of section 92B inserted retrospectively by the Finance Act 2012, information from the websites of various banks and and OECD guidelines, the TPO determined the ALP of corporate guarantee fees at Rs.1,34,01,000/- by adopting the PLI rate of corporate guarantee @ 1.80% per annum. The Assessing Officer accordingly made addition of the same in the draft assessment order. When the assessee objected, the DRP reduced the corporate guarantee charges to 1%. The....
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....ny distinguishable features brought to our notice against the order of the Tribunal in assessee's own case, we direct the Assessing Officer/TPO to adopt the corporate guarantee commission rate of .5% qua the extent of amount of assessee's corporate guarantee actually utilized. The grounds raised by the assessee on this issue are accordingly allowed for statistical purposes. 9. In Ground of appeal No.3 to 3.1.5 the assessee has challenged the order of the Assessing Officer in making addition of Rs.55,03,931/- on account of interest on outstanding receivables. 9.1 The learned Counsel for the assessee at the outset drew the attention of the Bench to the order of the DRP at Para 2.3.22 wherein it has been held as under: "2.3.22 In view of the above, considering the objections of the assessee, the TPO is directed to impute interest on receivables after netting off payables following credit period mentioned in the intercompany agreement with AEs or as per the invoice period date applying the SBI short term deposit rate". 9.2 He submitted that since the Assessing Officer in the final order has not followed the directions of the DRP, therefore, he has no objection if the ....
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....bsidiaries or as stock in trade and whether the intention or dominant purpose of holding shares would be relevant in determining applicability of section 14A has marked an end to this controversy by holding that the dominant purpose for which the investment into shares is made is not relevant. Since the dividend earned on such shares is not taxable, it would trigger applicability of section 14A and consequently, the expenditure must be disallowed. The AO therefore held that whether the exempt income is materialized or not is not a relevant factor for invoking provisions of section 14A. He accordingly made disallowance of Rs. 1,49,18,829/- which was upheld by the DRP. The Assessing Officer in the final order accordingly made addition of the same. 10.3 Aggrieved with such order of the Assessing Officer/DRP, the assessee is in appeal before the Tribunal. 10.4 The learned Counsel for the assessee made two fold arguments. He submitted that there is no exempt income and therefore, no disallowance could have been made. In his second plank of arguments, he submitted that the investments are made outside the Country in assessee's own subsidiary company. He submitted that any income fr....
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....ailable with him with regard to export import duty from the CBEC noticed that the assessee has received duty drawback to the tune of Rs.67,46,635/-. In absence of any details furnished by the assessee, the Assessing Officer inferred that the assessee has not offered the same to tax and therefore, brought the same to tax by making addition of the same. 11.2 Before the DRP, the assessee submitted that the company has already offered the income of duty drawback under the head business income which are as under: Revenue from operations Amount (in Rs.) Other operating revenue 1,92,93,630.11 (a) Job works 67,46,635.00 (b) Duty drawback 1,87,22,31.43 (c) Other Operating Revenues 4,47,62,396.54 Total 2,61,38,58,572.57 11.3 Based on the arguments advanced by the assessee, the DRP directed the Assessing Officer to verify the claim of the assessee from the books of account and if the claim is found to be correct, proposed addition be deleted. Assessing Officer thereafter in the final order made the addition. 11.4 Aggrieved with such order of the Assessing Officer, the assessee is in appeal before the Tribunal. 11.5 The learned Counsel for the as....