TaxTMI 
TaxTMI 
2023 (6) TMI 175
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....ated to the issue of adjustment made to the international transaction of payment for information technology consultancy charges to the AE of the assessee amounting to Rs. 4,84,28,143/-, the ALP of which was determined by the TPO at NIL, holding, it was only in the nature of stewardship and supervisory services. All these grounds are being dealt with by us together. The said grounds read as under: 1. On the facts and in the circumstances of the case and in law, the Learned Income-tax Officer, Ward-1 (1)(3), Ahmedabad ('Ld. AO') and the Learned Deputy Commissioner of Income-tax, Transfer Pricing Officer- II ('Ld. TPO') under the directions of Honourable Dispute Resolution Panel ('Hon'ble DRP'), erred in making an upward adjustment of Rs. 1,47,36,729/- in relation to the international transaction of payment of Information Technology Consulting Charges to Associated Enterprise ('AE'). The Appellant prays that the additions made by the Ld. AO / TPO in relation to the international transactions of payment of intra-group services to AE be deleted. 2. On the facts and in the circumstances of the case and in law, the Ld. AO / TP....
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....id expense and the fact that taxes had been withheld and deposited to the credit of government on the said provision amount. The Appellant prays that the aforesaid addition be deleted. 8. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing devaluation of inventory amounting to Rs. 1,79,46,564. While making the addition, the Ld. AO erred in law and on facts on the following: i. in disregarding the stock valuation made by the Appellant as per AS 2 and section 145A of the Act; ii. in not appreciating the fact that no adverse remark is made by the Auditors in the audit report; iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years; The Appellant prays that the aforesaid addition be deleted. 9. On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in capitalising interest expense amounting to Rs. 59,12,913 to the capital work-in-progress ('CWIP') without any basis. I....
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....fic) of consultants work on site as well as provide the support for roll out from legacy system to RAINBOW. They charge for consultancy and travel costs of consultants. 5. It is important to note here that, these services received by BRIL are availed in both the segments i.e. Manufacturing and Trading segments. Hence the value of these international transactions has been allocated between manufacturing and trading activities by using sales value as a basis of allocation. Sales made by the manufacturing division are INR 207.57 crores and trading division is INR 185.89 crores i.e. the allocation ration being 50.89/6 and 49.11% respectively. 6. Sample invoices for the service are enclosed herewith as Annexure - K 1.1 5. Our attention was drawn to various invoices raised on account of the said services by its AE placed at PB Page No. 120 to 124 and also agreement for rendering of services of AE, placed before at PB Page No. 115 to 117. Our attention was also drawn to the list of employees who worked on the SAP project placed before us at PB page no. 522; schedule of sessions conducted during the implementation of SAP at page no. 523 to 524; minutes of meeting refle....
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....filed by the assessee as above the DRP was incorrect in holding that no services were rendered to the assessee. He further pointed out that the DRP concurred with the finding of the TPO that no services were rendered on this count or they were merely supervisory services, on the basis that quantum of charges paid by the assessee for these services was disproportionately higher in relation to the cost of the software for the implementation of which these services were procured by the assessee. He pointed out that the DRP had taken note that while software purchased for Rs. 2.91 crores, the maintenance cost claimed by the assessee as IT consultancy charges, was as high as Rs. 1.47 crores, and based on this, the DRP held that the assessee actually had not received any benefit on this count. The ld.counsel for the assessee contended that this cannot be the basis for holding that the assessee had not procured any service on account of IT consultancy, more particularly, when all evidences in this regard, as noted above, were filed by the assessee. The ld.DR on the other hand relied on the order of the DRP/TPO. 8. We have heard both the parties; we have also carefully considered sub....
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....or not to the assessee. Without pointing out any infirmity in the evidences furnished by the assessee, demonstrating rendering of IT services, the Revenue authorities, we hold could not have casually gone on to state that no services were rendered by the AE to the assessee, and that the evidences did not establish nature of services rendered. 9. In view of the same, we do not agree with the AO/DRP that no services were rendered by the AE to the assessee on account of IT consultancy services, and we therefore, direct the deletion of the adjustment made to the same by treating the ALP of the said services at NIL as opposed to Rs. 1,47,36,729/- claimed by the assessee. In view of the above, ground nos.1, 2 & 3 raised by the assessee are allowed. 10. Ground No. 4 raised by the assessee reads as under: 4. On the facts and in the circumstances of the case and in law, the Ld. AO / TPO under the directions of Hon'ble DRP, erred in making adjustment of Rs. 52,91,667/- in relation to the international transaction of payment of guarantee fees to AE. 11. The issue involved in this ground relates to the TP adjustment made in relation to international transactions of pay....
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.... all undertaken with AEs of the same group to which the assessee belonged. The borrowing, which was guaranteed, was from one of the AEs of the assessee i.e. Bosch Ltd., and the guarantor was also an AE belonging to the same group i.e. Robert Bosch GmbH. Besides, he also noted that the assessee was a debt-free entity with sufficient reserves and no lender, in such circumstances, would have asked for any guarantee fee on giving loans to the assessee. The assessee was found to be in a very sound financial position by the TPO. Thirdly, the TPO noted that the loan had been made for acquiring capital assets, and in such a situation he found that, the capital asset itself would have sufficed as collateral securities for the loan, and there was no requirement for any guarantee fee to be given by any party. He also noted that there was neither any insistence by the lender for guarantee, and as per the assessee it appeared to have been given more as a unilateral group policy for imposing guarantee fees on the assessee. His detailed findings in this regard at para 5(a) to 5(e) are as under: 16. His finding to the effect that no benefit accrued to the assessee on account of guarantee is bas....
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....n commercial wisdom of the assessee; * that once the requirement of guarantee services are appreciated, the same could not benchmarked at NIL. 20. Brief submissions of the assessee in this regard were filed before us as under: 21. We do not find any merit in the contentions made by the ld.counsel for the assessee made before us. The facts relating to the payment of guarantee commission that it was all an arrangement between the AE of the entities itself is not disputed, the lender being an AE of the assessee, as also the entity providing guarantee to the assessee, all belonging to the same group. It is also not disputed and denied that the assessee was a debt-free company with huge and sufficient reserves as noted by the TPO. There was no necessity demonstrated for guaranteeing of the loan. The service of guarantee in the facts of the case was not needed by the assessee at all as rightly noted by the AO/TPO. Therefore, we agree with the TPO that there was no rendering of any service of guarantee in the present case by the AE to the assessee, warranting payment of guarantee, if at all. Further, it is not denied that the loan had been taken by the assessee fo....
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....ation at the rate of 10% thereon and not 15%. The assessee was confronted with the same who responded by stating that it had claimed depreciation at the rate of 15% on office equipments which qualified as plant & machinery and were used in the factory premises. He stated that these equipments did not fall within the meaning of furniture and fittings. The AO was not convinced with the submission of the assessee, who held that as per the rate of depreciation prescribed under the Income Tax Rules, 1962 in Part-III of new Appendix, equipments are not covered under the plant & machinery, but they are covered under the category fittings on which rate of depreciation is 10%. Accordingly, he restricted the assessee's claim of depreciation on office equipments to 10% as opposed to 15% claim by the assessee, and excess depreciation so claimed by the assessee amounting to Rs. 11,71,648/- was proposed by the AO to be disallowed in his draft order passed under section 143C of the Act. 26. The assessee objected to the same before the ld.DRP contending that it had been consistently claimed depreciation at the rate of 15% on office equipments which qualified as plant & machinery, and which had ....
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....s, the ld.counsel for the assessee reiterated his contentions made before lower authorities which summarized briefly to the effect that - i) The assessee had been consistently claiming depreciation on office equipments which were in the nature of plant & machinery at the rate of 15% treating them as qualified for depreciation under the block "plant & machinery"; ii) That the major portion of the depreciation was claimed by the assessee on office equipments pertained to opening block of asset so qualified as office equipments on which the assessee had claimed depreciation at the rate of 15% in earlier years, and had been consistently allowed by the Revenue. In this regard, our attention was drawn to the Paper Book Page No. 58 of Volume-I of PB being particulars of depreciation allowable as per Income Tax Rules for the impugned year i.e. 2010-11 being part of tax audit report furnished by the assessee, pointing out there from the fact that of the total value of office equipments on which depreciation at the rate of 15% had been claimed by the assessee amounting to Rs. 2,32,52,570/-, an amount of Rs. 2,24,47,127/- represented the opening written down value of the blo....
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....e fact therefore is that the majority depreciation claimed by the assessee on office equipments at the rate of 15% related to the opening value of the block of asset coming over from past years, when these assets were acquired. It is an undisputed fact that all these opening WDV of office equipments value of Rs. 2.24 crores, the assessee had consistently been claiming depreciation at the rate of 15% and has been allowed the same also by the Revenue. The assesseehas consistently pleaded before the Revenue authorities and even before us and this contention of the assessee has never been controverted by the Revenue. Therefore, it is fact on record that out of total WDV of office equipments on which the assessee had claimed depreciation at therate of 15% of Rs. 2.36 crores, Rs. 2.24 crores value of office equipments had all along been allowed depreciation at the rate of 15% by the Revenue in the past. 31. With respect to these assets, we find, the Revenue has changed its stand of asset qualifying for depreciation at the rate of 10% merely on account of change of view that too without any basis. It is not that the Revenue has now come in possession of some details regarding these equ....
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.... and in law, the ld.AO erred in disallowing seminar expenses, exhibition expenses and advertisement expenses amounting to Rs. 32,82,122/- under section 40(a)(ia) of the Act without appreciating the fact that the said payments were not subject to TDS." 35. The ld.counsel for the assessee fairly admitted before us that the above ground does not arise from the order of the DRP. Thus, this ground no. 6 is dismissed as not maintainable. 36. Ground No. 7 raised by the assessee reads asunder: "On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in disallowing provision for advertisement expenses amounting to Rs. 85,500 by considering it as an ad hoc provision without appreciating the break-up of the said expense and the fact that taxes had been withheld and deposited to the credit of government on the said provision amount." 37. Briefly, the facts relating to the issue are that the AO on verification of the details filed by the assessee in respect of advertisement expenses noted that the assessee had made a provision of Rs. 85,500/- on account of advertisement expenses on adhoc basis, holding that provisi....
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....ment expense Sr. No. Particulars Party Name Amount (Rs.) 1 Graphics designing work for Bosch Rexroth - India training calendar 2010 including PDF interactive designing work. Vrushabh Art 15,000 2 FULL PAGE-FOUR COLOUR.SEARCH 1.3.10 Network 18 and Media Investment Ltd. 23,500 3 FULL PAGE-FOUR COLOUR.SEARCH 1.3. Network 18 and Media Investment Ltd. 23,500 4 FULL PAGE-FOUR COLOUR Network 18 and Media Investment Ltd. 23,500 Total 85,500/- The above table indicates that the provision for advertisement expense is not ad hoc in nature. Instead, the provision amount has been created on the basis of the abovementioned details and is in respect of an ascertained liability. The same were not submitted with the Ld. AO as it were not called for by the Ld. AO during the course of assessment proceedings. These have also been submitted in the application dated 10 April 2014 (Refer Page 58 to 58 of the DRP submission). 39. The ld.counsel for the assessee further contended that after passing of the order by the DRP rectification application was also been filed to the DRP pointing out incorrect ....
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....llant as per AS 2 and section 145A of the Act; ii. in not appreciating the fact that no adverse remark is made by the Auditors in the audit report; iii. in disregarding the contention of the Appellant that the current method of valuation of inventory has been followed consistently over the past years; The Appellant prays that the aforesaid addition be deleted." 42. Briefly stated facts are that the AO noted on verification of the details of inventory that the assessee has reduced the value of closing stock by an amount of Rs. 1,79,49,564/- being written off of slow moving stock. On being asked to justify and explain its claim, the assessee responded by stating that devaluation of stock had been done following the method of accounting prescribed under AS-2 for valuation of inventories requiring inventories to be valued at cost or net realizable value, whichever is lower, which practice the assessee had been consistently following in the past also, and which was in accordance the provisions of section 145A of the Act also. The AO however was not satisfied with the reply of the assessee for the reason that, he noted, while the assessee had reduced the val....
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....very aspect of the assessee's submission and arguments in the draft assessment order. Bosch rexorth (India) Ltd.is now merged with Hagglund Drives India Pvt. Ltd. Further, the assessee has not produced any submission on working of closing stock valuation to the panel of DRP as given in the case of Hagglund Drives Pvt.Ltd. 2.2 We have considered the arguments of the Assessing Officer as well as the assessee and its Authorised Representative. It is abundantly clear from the chart of closing stock, purchase and sales, is out of all spare parts, whether it is sold within 6 months or within 24 months or even from non moving items, that the realizable value of the closing stock was much more than the cost of item sold. From the profit earned on sale of spare parts it is clear that the sale price of items sold are not less than the cost price. There appears to be no justification for declaring the value of closing stock at 50% of the cost when the assessee himself has earned profit on each and every item sold. From the details of purchase, sales, opening stock and closing stock, in quantity and in value, it is proved beyond doubt that the realizable value of closing stock has....
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....e against the addition made on account of devaluation of closing stock is rejected." 44. The AO in compliance of the direction of the DRP accordingly disallowance of devaluation to the extent of Rs. 1,79,49,564/-. 45. Before us, the ld.counsel for the assessee reiterated contentions made before the authorities below. Briefly, his arguments were - i) Devaluation was in compliance with the AS-2 issued by the Institute of Chartered Accountants of India for accounting of valuation of inventory prescribing inventory to be valued at lower of cost or net realizable value; ii) That the assessee was consistently following the prescribed accounting standards and complied with the provision of section 145A of the Act in this regard also; iii) That devaluation of the inventory was done by a team of technical experts of the assessee-company in accordance with a system devised noting the reduction in value of stock on account of various factors and devising a method of devaluation on age-wise analysis of the assets; iv) Complete details of all the stocks so valued along with basis of devaluation was furnished to the authorities below; v) That in....
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....h the stock was received and any movement in the stock in the impugned year or preceding years. From this, it was pointed out that all the items of inventory which was devalued had shown no movement by way of receipt of impugned order and/or even by way of issue for production, thus confirming the fact that they were slow moving items and the devaluation was done in accordance with age-wise analysis method adopted by the assessee. * Letter dated 10.12.2014 addressed to the DRP pointing out all the details and explanation relating to devaluation of stock, which were also furnished to the AO and summarizing the devaluation so done by the assessee in each of its unit, thus pointing out that all necessary details and explanation also furnished before the lower authorities (placed before us at Page no. 617 to 620 of the PB). 47. The ld.counsel for the assessee therefore submitted that having furnished complete details and explanation regarding devaluation of the stock, and disallowance thereof was highly unjustified and needed to be deleted. 48. The ld.DR relied on the orders of the DRP/AO. 49. We have considered contentions of both the parties and gone through the ord....
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....o furnish to justify its claim. The claim of the assessee being based on scientific basis, approved by the statutory auditors also, and which has been following consistently year to year, we find no reason or justification for disallowing the same. The claim of the devaluation of inventory is accordingly allowed and disallowance so made of Rs. 1,79,49,564/- is directed to be deleted. This ground is allowed. 52. The ground no. 9 reads as under: "On the facts and in the circumstances of the case and in law, the Ld. AO under the directions of Hon'ble DRP erred in capitalising interest expense amounting to Rs. 59,12,913 to the capital work-in-progress ('CWIP') without any basis. It is prayed that the interest be allowed u/s 36(1)(iii) of the Act since it is for the purpose of business." 53. The brief facts relating to the issue are that the AO noted that the assessee has shown capital work-in-progress at Rs. 7,29,94,068/- which included capital advance of Rs. 70,17,554/-. He further noted the assessee had incurred an amount of Rs. 59,12,913/- as interest on loans. Accordingly, he asked the assessee to explain as to why proportionate interest should n....
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....the assessee had sufficient own interest free funds for investing in CWIP and presumption therefore was that interest bearing funds were utilized for the said purpose warranted no disallowance of interest as per the provisions of section 36(1)(iii) of the Act. In this regard, he drew our attention to the audited balance sheet of the assessee placed at PB 73 pointing out therefrom that total capital and reserves of the assessee during the impugned year stood at Rs. 134 crores as opposed to CWIP of Rs. 1.29 cores which facts clearly demonstrated that the assessee had more than sufficient interest free funds, which accordingly have to be presumed to have been invested in CWIP calling for no disallowance under section 36(1)(iii) of the Act. The reliance was placed on the decision of the ITAT, Ahmedabad in the case of CIL Nova Petrochemicals Ltd. Vs. ITO, ITA No. 1401/Ahd/2017 order dated 25.3.2019. (copy of which was placed before us). 56. The ld.counsel for the assessee further pointed out that its accounting policy adopted was in accordance with AS-16 prescribed by the ICAI for accounting of borrowing cost which require borrowing cost attributable to acquisition, construction or p....
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....see showing huge CWIP and interest expenditure incurred by the assessee. In view of the fact that the assessee has demonstrated that it was consistently following AS-16 which prescribes basis for accounting of interest cost in relation to fixed assets, and had demonstrated so also from its financial statement pertaining to the succeeding year and this fact was certified by the statutory auditors and even the tax auditors and further noting the fact that the assessee had sufficient interest free funds of its own for investing in CWIP, we hold that there was no basis with the Revenue nor any justification for holding that the assessee had huge interest bearing funds for CWIP and thus capitalizing the interest to the extent of Rs. 72,54,775/-. In view of the above, we direct the deletion of disallowance of interest expenditure to the extent of Rs. 59,12,913/-. Ground No. 9 is allowed. Now we take up Revenue's Appeal in IT(TP) 850/Ahd/2015 for A.Y.2010-11 58. Ground no. 1 reads as under: "(i) Whether the DRP has substantially erred in deleting the addition of Rs. 60,22,515/- being provision for product support despite the fact that the assessee has made only provision in....
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.... the same to the DRP who noted that identical claim had been allowed to the assessee in the preceding year both by the AO in Asst.Year 2009-10 and the Ld.CIT(A) and ITAT in earlier years including Asst.Year 2006-07. His finding at para-6 of the order in this regard are as under: "Addition on account of disallowance of provision of product support expenses: The next objection raised relates to disallowance of provision for product support expenses. The assessee mentioned that for A.Y 2009-10, the AO has passed in favourable assessment order and allowed the claim of the Assessee of provision for warranty expense. Further CIT(A) and ITAT has ruled in favour of the assessee regarding allowability of provision for warranty expenses. Reproduced below is are extract from the order fof CIT(A) for A.Y 2006-07 " Similar issue in earlier years has been decided in favour of the appellant by CIT (A) as well as IT A T in the appellants own case. The claims have been made on the basis of pending warrant claims received from branched at the close of the year. It is also seen that in earlier years, the CIT(A) have deleted such addition on the basis of the order of IT AT i....
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....owed/disa llowed by TPO Bosch Rexroth AG Information Technology Consulting Charges 59,76,501 Disallowed Information Technology Consulting Charges 58,65,189 Disallowed Information Technology Support Charges 25,23,700 allowed Information Technology Support Charges 7,18,384 allowed Template charges 2,91,40,800 disallowed Shanghai Bosch Rexroth Hydraulics & Automation Ltd Information Technology Consulting Charges 14,61,126 disallowed Information Technology Consulting Charges 14,33,913 disallowed Robert Bosch Gmbh Infrastructure Consultancy and Support Charges 22,37,042 disallowed Infrastructure Consultancy and Support Charges 4,79,338 disallowed Infrastructure . Consultancy and Support Charges 4,70,410 . disallowed Information Technology Support Charges 57,39,414 allowed Information Technology Support Charges 56,32,518 allowed Total 6,16,78,335 66. The TPO analyzed all the material before him regarding these intra-group services and held that the services rendered by the AEs with regard to template char....
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....NBOW. The AE providing services to control overall monitoring of the operations of the subsidiary/related entity (other than day-to-day management). The services were provided to align the operations of the assessee to the group's operations. 1,47,36,729 Control, supervisory and monitoring function 3 -do- IT Support charges- The payment is made for the use of hardware, network and software licenses. The AE provided services for maintenance of network, consolidation of the purchase of software licenses etc 1,46,14,016 The payment is not in the nature of control and supervisory function by the AE, 4 -do- Infrastructure consulting charges The AE provided the service The AE provided services to make certain that the 31,86,790 Control, supervisory and 67. The assessee, we have noted, had explained in detail the nature of services rendered by the AE relating to both template charges and infrastructure consultancy paid, and taking note of the same, the DRP held that they were not in the nature stewardship services, but to the direct benefit to the assessee, and accordingly deleted the adjustment proposed by the AO/TPO for the services at....
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....y the assessee. The DRP also rejected the TPO's contention that the production of software by the AE amounted to controlling and supervising activity. It pointed out that as per the facts before it, the software was developed to smoothen flow of the information and increased connectivity among the groups and this perse could not be said to be an activity being in the supervisory nature. Finding so, the DRP directed the deletion of adjustment made to the international transactions of intra-group charges of template charges of Rs. 2,91,40,800/-, the ALP of which was determined at NIL by the AO. The finding of the DRP at para 3.2 of his order is as under: "3.2 The fact of the matter is that the assessee claimed that they had bought this software Rainbow, as a one time measure and the amount has been capitalised in the assesee's books of accounts. The TPO has not discussed any facts to show that the software was not bought by the assessee. The TPO's main argument is on the pricing of the software. In our view pricing of the software can not be nil, unless it is held that no software was actually procured. We have already held that there is nothing on the record to hold....
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....relation to the said expenditures being for setting up of plant at Sanad; that the AE was providing consultancy and support services for the development of this infrastructure of the assessee for which these charges had been paid. The explanation of the assessee is reproduced at para-4 of the DRP's order as under: "The expenses incurred for provisioning of infrastructural related services mentioned in the agreement has been recovered from BRIL. The said expenses have been allocated with an appropriate base (time spent), at actual cost to BRIL. A part of the total expenses i.e. Rs. 2,237,042 relate to the expenses incurred for setting up the plant at Sanand and hence the same have been capitalized, whilst the balance Rs. 479,338 (Manufacturing Segment) and Rs. 470,410 (trading segment) are revenue in nature. Rs. 2,237,402 (capitalised) represent recovery of cost for infrastructure consultancy and support services availed by BRIL. BRIL is expanding its manufacturing facility in India with development of a new facility at Sanand, Ahmedabad. The facility is constructed based on the standards prescribed by the Bosch Group and with guidance on the infrastructural development fro....
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....smissed, and the appeal of the assessee is partly allowed. 76. Now we take up assessee's CO No. 84/Ahd/2015. 77. The grounds raised by the assessee in its CO are as under: "1. On the facts and in the circumstances of the case and in law, the Assessing Officer ("AO")/ Transfer Pricing Officer ("TPO") erred in not appreciating the fact that the Cross objector had capitalized the payment made to the AE for Template Charges amounting to INR 2,91,40,800 and claimed depreciation on it. It is therefore prayed that in the event if the objection of the AO is upheld, than the Ld. AO be directed not to adjust the entire payment made by the Cross objector as the international transaction has an impact on the taxable income only to the extent of depreciation claimed on the capital asset. 2. On the facts and in the circumstances of the case and in law, the AO/TPO erred in not appreciating the fact that the Cross objector had treated the payment made to the AE for Infrastructure Consultancy and Support services amounting to INR 31,86,790 as capital work in progress during the year under consideration and had not claimed depreciation on it. It is therefore prayed t....
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....sed. Order pronounced in the Court on 31st May, 2023 at Ahmedabad. ============= Document 1 6. Chtout As clearly brought out in the show cause letter issued to the assessee and the discussion made above following distinct features are noted in respect of this transaction. i. The loan has been taken from related party Bosch India. The guarantee has also been supplied by a group entity Robert Bosch GmbH Germany. ii. There does not appear to have been any distinct insistence by the lender for guarantee. No evidence of this nature was furnished by the assessee to this office iii. There is no evidence of third parties also insisting on guarantee for giving loan to the assessee. The assessee had sufficient reserves as well as assets to support the loan and za collateral guarantee was to support Came tn neither needed nor demanded. It had no other charge on these assets. v. A unilateral group policy imposing guarantee on the assessee and seeking charges for the same cannot be regarded as a service rendered to the assessee. vi. Since no service has been rendered by the AE, no charge can be attributed to the ....
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....t found acceptable. The issues raised by the assessee are dealt with as below a. The assessee has claimed that Bosch India is a public company and the transaction with it needs team's length. The stakeholders of Bosch India need to be secured from the loan taken by the related party. The contention of the assessee is not found correct. Bosch India was a related party which was well aware the financial position of the assessee company. The assessee is a debt free company which has profit reserves of Rs 107 crore and share premium reserves of Rs 9.5 crore. Even the money सतà¥à¤¯à¤®à¥‡à¤µ जयत was lent for purchase of an asset. The company has inventory of Rs 86 crore and debtors of Rs 117 crores Hence, any of the current assets could have formed a Suitable Henco security for the loan. Hence the necessity of the German guarantee is not found to be a requisite in this case b. home Tax Department Guarantee is either given at the insistence of the lender or if the financial position of the borrower is not sound and an additional support is requested by the lende....
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.... India Pvt Ltd ITA No. 8753/Mum/2010 has been examined and found to be not applicable to the case. This is not the case where the TPO is trying to advice the assessee relating to the conduct of its business. The issue at hand is why the guarantee given by the AE for the loan was taken from the Related Party. No evidence has been furnished by the assessee that the availing of the guarantee was a condition precedent to the availing of the loan. The assessee has also not demonstrated that the lender had insisted so not on the guarantee before issue loan. The assessee has also not demonstrated that the other lenders so insisted on the guarantee for giving loans The assessee has not demonstrated that its own assets, current or fixed, were insufficient to offer suitable collateral Under these circumstances imposition of a guarantee by the parent on all entities borrowing money from group co comp and charge of a certain amount as guarantee fee cannot be termed a normal business practice, much less an arm's length transaction. सतà¥à¤¯à¤®à¥‡à¤µ जयत m1 Document 7 f. The assess सà....
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....n may be sufficiently similar to generate the same overall profit margin. When this is the case, some adjustments will be appropriate. As discussed below in paragraph 2.16, the extent and reliability of such adjustments will affect the relative reliability of the analysis under the CUP method." seen th h.1 From perusal of the data submitted, it is seen that the loan taken from Deutsche bank is in the nature of short-term facilities which can be utilised by the assessee as-short-term advance, overdraft, letters of credit, bills of acceptance and export advances against confirmed purchase orders. No agreement for the loan taken from the related party and granted by the associate enterprise was provided, however, it was submitted that the loan was a short term loan and therefore it was considered as comparable with this transaction. In this regard, it is seen that even though the loan was stated to be short term loan, the quantum of loan Document 10 सतà¥à¤¯à¤®à¥‡à¤µ जयते appearing in the books of the assessee has in fact increased in successive years, as can be seen from the relevant extr....
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....00 2,750,000,000 $2,750,000,000 501,466 93,420,181 1,500,000,000 85,460,283 1,500,000,000 1,593,921,647 1,585,460,283 2,750,00,000 2,750,900,000 2,750,000,000 2,750,000,000 2,750,000,000 2,750,000,000 From perusal of the above extracts, it is seen that the quantum of loan which is taken on the strength of guarantee issued by the associate enterprise has not reduced and consequently, it cannot be considered as "short term loan". At the same time, it is also important to note that the loan taken by the assessee in the year under consideration has been Document 12 सतà¥à¤¯à¤®à¥‡à¤µ जयते utilised for purchase of fixed assets including land while the proceeds of loan considered as comparable by the assessee is required to be utilised for the purpose of short-term advances in the regular course of business. The discussion clearly means that the interest rates pertaining to transaction of the long term borrowing, as in the case of assessee, cannot be equated with interest rates of short-term borrowings, required to be used for the normal operations of the business. Docume....
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....Percentage of devaluation in current year. 1 2 01 3 4 o to 18 months 19 to 30 months 31 to 36 months 37 to 42 months 43 to 54 months 5 6 55 to 66 months 7 67 to 78 months 0% 50% 60% 20% 25% - 50%* 33% 50% * The percentage of devaluation depends on the nature of inventory and its usage. The practice of writing down inventories below cost to net realisable value is consistent with the view that inventories should not be carried in excess of amounts expected to be realised from their sale or use. The Company wishes to state that this policy is regularly employed by the Company over the past years and hence, it is also in accordance with the provisions of Section 145A of the Act. shminal valuation in order to Document 15 1. Devaluation of inventory: During the course of hearing on 24 February 2014, you had called for details on technical evaluation done by the Company on the basis of which inventories are devalued. In this connection, in addition to the technical basis submitted with you on 24 February 2014, we wish to submit our comments on the process of technical evaluation as und....