TaxTMI 
TaxTMI 
2023 (6) TMI 1384
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng the transfer pricing adjustment of Rs. 2,58,44,350/- proposed by the TPO on account of alleged shortfall in corporate guarantee fees on the corporate guarantee issued by the assessee company to its Associated Enterprise. 3. The Ld. DRP/AO ought to have appreciated the fact that corporate guarantee was given by the assessee company as a procedural compliance for availing the loan by its subsidiary and for the overall benefit of the group and it was provided as a part of the parental obligation to its subsidiaries and is in nature of shareholder service. 4. The Ld. DRP/AO erred in not appreciating the fact that corporate guarantees are totally different from bank guarantees and in case of bank guarantees they are highly secured and liquid and encashable by the beneficiary instantly without any legal route. The Ld. DRP/AO further erred in adopting rate which is fixed by the Indian Bankers considering the various factors in India failing to appreciate the fact that the said transaction entered by the appellant is outside India. 5. The Ld. DRP/AO has erred in law and on facts in adopting an average rate of 1.8% of the amount of loan outstanding for computin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e fact that the forex loss may also consist of loss on t import of raw materials which is also used for manufacturing and selling in domestic market and therefore allocating the forex loss in the ratio of sales turnover would be more appropriate. c. Non-TP grounds 14. The Ld. DRP/AO erred in not allowing the weighted deduction U/s 35(2AB) of the IT Act 1961, in respect of the expenditure incurred in connection with Clinical Trials / Bio Analytical and Bio equivalence studies without appreciating the legal implication of Explanation to sec.35(2AB) of the IT Act which entitles the assessee company for its claim. D. General 15. Any other ground that may be urged at the time of hearing with the previous approval of the Hon'ble Tribunal, it is prayed that the relief sought for may be granted to the assessee." 4. Feeling aggrieved by the order passed by the DRP/assessing officer, the assessee is in appeal before us on the grounds mentioned hereinabove. 5. The ld.AR for the assessee had made elaborate submissions before us in support of the grounds of the assessee. Ld. AR submitted that ground nos.1 and 15 are general in nature and requires no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he submissions and found that the charges paid by the assessee cannot be compared for the purposes of determining the ALP of corporate guarantee commission. In our view, no third party would provide similar type of services/corporate guarantee on behalf of its AE and expose itself to the risk of giving the corporate guarantee. Therefore, the charges paid by the assessee to SBI cannot be compared for the purpose of determining the ALP of corporate guarantee commission. The Co-ordinate Bench in the case of Vivimed Labs vide its decision dated 12-04-2022 had adjudicated corporate guarantee commission @ 0.5% qua the extent of the amount of the assessee's corporate guarantee actually utilised in these four assessment years. Thereafter, similar view had been taken by various Tribunals restricting the addition to 0.5% of the amount guaranteed as corporate guarantee commission. Recently, Delhi Tribunal in the case of Havells India Ltd. Vs. ACIT (LTU) in ITA No.6509/Del/2018 dt.09.05.2022 had also echoed the above said view and held that the addition of 0.5% on the amount guaranteed would be the appropriate benchmark to determine the ALP. Similar decision was also passed by the Bangalore an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....46,805 10. From the perusal of the Chart, it is absolutely clear that there were 519 invoices valued at Rs.62,38,68,941/- for which the payments were due beyond the credit period 60 days. In our view, the lower authorities have computed the Arm's Length Price and have mentioned that the same being international transaction, the same is required to be bench marked by considering the SBI short term deposit interest rate. 11. The above-said issue of delay in receivables is no more res integra. The co-ordinate Bench in the cases relied upon by the Revenue examined the issue and thereafter directed the TPO / Assessing Officer to apply rate of interest of 6% on outstanding receivable at the year end. The assessee had relied upon various judgements. All these judgments have been considered by the coordinate Bench and thereafter, the above said direction was issued by the Bench. 12. The reliance of the assessee on the decision of Hon'ble Delhi High Court in the case of PCIT Vs. Boeing India Pvt. Ltd., reported in 2022 (10) TMI 498 is of no use to the assessee as in the said judgement, the Hon'ble Delhi H....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 Apache Footwear India Pvt.Ltd. this kind of activity and permit a third party to use the working capital of the assessee and earn profit thereon. In the present case, though the assessee was required to maintain the T.P. Study and file the same before the TPO to show that the assessee's transactions with it's A.E. were at Arms Length however, nothing has been brought to our notice that the assessee has brought any comparable instance. In these circumstances, the TPO had applied the banking rate as applicable to short term loans. In our view, the same is required to be corrected and instead thereof, ALP is to be computed by adding notional interest @ 6% on the receivable. Considering the totality of facts and circumstances, in view of the decisions cited supra and in view of foregoing discussion, we dismiss the appeal of the assessee. Accordingly, the appeal of the assessee is dismissed." 14. Respectfully following our own decision, we direct the Assessing Officer to determine the ALP and compute the same by adding notional interest @ 6% on the receivable beyond a period of 60 days. Thus, ground nos. 5 to 10 are partly allowed. XXXXXXXXXXX XXXXXXXXXXX ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r three questions which were not answered and that does not affect the decision already given and the order of Gujarat High Court has not been set-aside. He further referred to the Explanation-2 to section 32(2AB) and relied on the following case law:- (i) ITAT Ahmedabad decision in the case of Intas Pharmaceuticals Ltd v. DCIT (ITA Nos. 807/Ahd/2010 and others, dated 14.08.2015); (ii) CIT vs. Cadila Healthcare Ltd (214 Taxman 0672); (iii) SRI Biotech Laboratories India Ltd vs. ACIT (36 ITR (Trib) 88); (iv) CIT vs. Claris Lifesciences Ltd (326 ITR 251) (Guj) and (v) CIT vs. Sandan Vikas (India) Ltd (335 ITR 117) (Guj) 8. Referring to the decision of Concept Pharmaceuticals Ltd (supra) it was submitted that the later decision of the ITAT has analysed the Explanation to section 32(2AB) which was approved by the Gujarat High Court. Since the decision has not considered the Explanation given, the decision need not be followed. It was further contended that when there are two possible views, the one (c)h is in favour of the assessee should be followed as held by the Hon'ble Supreme Court in the case of CIT vs. Vegetables Products Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sideration before the coordinate bench of this Tribunal in assessee's own case for Ays 2011-12 and 2012-13 (supra), wherein the coordinate bench has held as under: "9. We have considered the rival contentions and perused the case law placed on record. In the decision of Concept Pharmaceuticals Ltd (supra) the Coordinate Bench did not allow the expenditure spent outside the R & D unit but the Bench has not considered the explanation introduced with reference to 'Clinical Trials'. By very nature, the Clinical Trials cannot alone be done within research facility as they require cooperation from the Medical Doctors, Hospitals, Volunteers and patients, therefore such expenditure has to be necessarily spent outside the facility, but for the purpose of 'in-house' research. This issue was examined by the Coordinate Bench which was subject matter of appeal before the Gujarat High Court and Gujarat High Court has approved the same. As seen from the order of the Supreme Court in Special Leave to Appeal (c) No. 770/2015, dated 13.10.2015, the grievance of Revenue with reference to non framing of three questions were considered by the Hon'ble Supreme Court as those three questions are ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ange in facts. The Hon'ble jurisdiction High Court in the case of State of Andhra Pradesh Vs. Commercial Tax Officer and another reported in 169 ITR 564 and also in the case of Mylan Laboratory [2022] 137 taxmann.com 178 (Telangana) had reiterated that the decision of the Co-ordinate Bench of the Tribunal is binding on the Assessing Officer in the following manner : "34. We are afraid such a view taken by the Assessing Officer can be justified. Rather, it is highly objectionable for an Assessing Officer to say that decision of the Income Tax Appellate Tribunal is not acceptable; and that since it has been appealed against, the issue of allowability of depreciation on goodwill has not attained finality. Unless there is a stay, order/decision of the jurisdictional Income Tax Appellate Tribunal is binding on all income tax authorities within its jurisdiction. 35. In Union of India v. Kamlakshi Finance Corporation Ltd. 1992 taxmann.com 16, Supreme Court held and reiterated that the principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... try to evade from the binding effect of a Supreme Court decision by trying to find out 'distinguishing features'. Though unnecessary, we are still compelled to refer to Article 141 of the Constitution of India which says that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. Therefore, it is the bounden duty of all authorities whether administrative or quasi judicial or judicial to follow the law declared by the Supreme Court. 41. While we agree with the learned Standing Counsel that the draft Assessment Order has not yet attained finality as it still has to be placed before the Dispute Resolution Panel and therefore, in the circumstances, we feel that interfering at this stage may not be justified as it would preempt decision-making by the high-powered Dispute Resolution Panel. However, we hope and trust that the Dispute Resolution Panel shall look into all aspects of the matter, more particularly, the discussions made above while passing appropriate order(s) under sub-section (8) of section 144C of the Act, and if necessary further personal hearing shall be afforded to the petitioner. 42. We make it clear that w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt (in Rs.) Allocation of interest, bank charges and exchange loss on operations from other units to SEZ units 23,74,30,807 Allocation of formulation head office salaries to SEZ division on sales basis 20,64,64,037 9.2. It is seen from the page 74 of the TP Study Report that the assessee has adopted other method as the MAM to benchmark the above transactions. It is further seen that the assessee has allocated the interest, bank charges, exchange loss and head office salaries from other units to the SEZ unit based on sales made by each unit as follows : Particulars Amount (Rs.) Reference Total Sales 80,91,31,01,110 A SEZ Sales 17,91,82,97,495 B Formulation + SEZ Sales 53,56,44,01,321 C Total Interest and Bank Charges 56,53,67,571 Total Exchange Loss 50,67,91,371 Total interest, bank charges and exchange loss 107,21,58,942 D Total Head Office Salaries 61,71,97,173 E Total interest, bank charges and exchange loss 23,74,30,807 (D/A)*B Allocation of Head Office Salaries 20,64,64,037 (E/C)*B 9.3. The above analysis of the assessee was considered and....