TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 1384
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.... 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 computing corporate guarantee fees without bringing anything on the record with regard to terms a....
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....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 adjudication he further submitted that with respect to Corporate Guarantee, Interest on receivables and Non-TP grounds i.e., ground nos.2 to 7, 8 to 11 and ground no.14, the T....
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....r 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 and Pune Benches of the Tribunals in the case of GMR Infrastructure Ltd in ITA No.344/Pun/2022 dt.25.05.2022 and Jain Irrigation Systems in ITA 822/Pun/2022 dt.22.12.2022, respectively. Respectfully followin....
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....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 High Court in Para 15 had mentioned that the issue receivable is essentially a question of fact. As mentioned hereinabove, in the present case, there is a delay in receiving the outstanding of Rs.62,38,68,941/- in respect of 519 invoices as mentioned hereinabove and there is no explanation given by the assessee for such a delay in receiving the amount. The very purpose of benchmarking the tra....
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....s 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 21. We have heard the rival contentions of the parties and perused the material available on record. Admittedly the tribunal in its earlier order had decided this identical issue in favour of the assessee in ITA No.1604 & 1605/HYD/2016 for A.Ys. 2011-12 and 2012-13 decided on 20.07.2018 wherein it was held as under : "8.4 As noted above the sum of Rs.2,632.50 lakhs (Rs.3,400.02 lakhs in A.Y. 2012-13) added by the Ass....
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....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 (88 ITR 192) (SC). It was the submission that the Hon'ble Supreme Court has referred additional three questions to Gujarat High Court and has not stayed or set-aside the judgment already given, on which the Ld. CIT(A) relied upon. He also submitted that the objects of the assessee R & D facility as stated in Form 3CM has been analysed by the Ld. CIT(A) and even though the expenditure was incurred outside for field trials, the expenditure has to be considered for the purpose of '....
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.... 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 considered to be 'substantial question of law' and referred to the Hon'ble High Court to hear the aforesaid three questions of law. However, the judgment already passed by the Gujarat High Court has not been set-aside. As Ld. CIT(A) has followed the Coordinate Bench decision, which was approved by the Gujarat High Court and as no contrary High Court judgment has been placed on record, we approve the order of the CIT(A) and reject the Revenue contentions." As the issue in both the years under considera....
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....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 the appellate authority is not acceptable to the department, which in itself is an objectionable phrase, and is the subject matter of an appeal can be no ground for not following the appellate order unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to the assessee and chaos in administration of the tax laws. 36. Following the above decision, Supreme Court again in Collector of Customs v. Krishna Sales (P.) Ltd. 1994 Supp. (3) SCC 73, reiterated the prop....
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....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 we have not expressed any opinion on merit. However, the Dispute Resolution Panel shall look into and consider the objections raised by the petitioner more particularly, about the decision of the Income Tax Appellate Tribunal in its own case for the Assessment Year 2014-15 and the judgment of the Supreme Court in SMIFS (1 supra) keeping in mind the discussions made above." 27. In the light of the above, respectfully following the decision of the Coordinate Bench of the Tribunal in the case of assessee for the earlier years and more particularly when the approval in Form 3CL had been gr....
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.... 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 it is seen that forex loss which is directly linked with the import and export transactions of each unit has also been allocated based on the sales made by the respective Units. This approach of the assessee is incorrect. Hence, it was proposed vide this office show cause notice dated 16/10/2018, to allocate the forex loss of Rs.50,67,91,371/- based on the proportion of export sales made by the SEZ unit on the total export sales. 9.4. In response to the above, the assessee vide its letter dated 24/10/2018 has merely submitted the allocation based on net sales is more appropriate method of allocation due to the reason that the exchange loss shall include loss incurred on capital transactions as well. 9.5. T....