TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1116
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....the assessment year 2018-19 relevant to the financial year 2017-18. 2. Admittedly, the appellant-assessee had some international transactions on account of which the Transfer Pricing Officer (TPO) passed an order under Section 92CA of the Income Tax Act, 1961 (hereinafter referred to as "Act"), noticing that the appellant had provided a corporate guarantee to an Associated Enterprise (AE). The appellant assessee took up the contention that it had only recovered an amount of Rs.44,63,740/- from its subsidiary, representing the guarantee commission paid to Axis Bank, which provided the guarantee. However, the TPO by his order made reference to the bank guarantee rates for the financial year 2017-18 from five different banks and the average o....
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..... As against the assessment order dated 25.07.2022, pursuant to the proceedings of the DRP, the appellant filed an appeal before the Income Tax Appellate Tribunal as IT(TP)A No. 05/Coch/2022. Before the Tribunal, the appellant challenged the findings on the three points, noticed earlier, as also the disallowance under Section 35(2AB) of the Act. As regards the disallowance under Section 35(2AB) of the Act, the Tribunal, by the impugned order, directed a re-examination at the hands of the assessing authority. As regards the other three issues, the Tribunal refused to interfere, but for the slight modification of the determination of the transfer pricing addition, by reducing the same to 2.45% as against 2.56%. 4. It is against the afore fin....
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....only at 1%. True, the Tribunal has found that the appellant-assessee had not opted for the SHR. However, the Tribunal ought to have taken cue from the afore while proceeding to uphold the fixing of the rate with reference to the fee being charged by five different banks. We also notice the judgment of the Bombay High Court in Commissioner of Income Tax v. Everest Kento Cylinders Ltd. [(2015) 378 ITR 57], wherein the Court considered a transfer pricing adjustment on guarantee commission on almost similar circumstances. The assessee in that case had also provided a corporate guarantee, with respect to a loan availed by AE, charging a commission at the rate of 0.5%. The TPO found the guarantee fee to be on the lower rate and hence made referen....
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....at the Tribunal has not adverted to the principles laid down in the afore judgment while deciding the issue as noticed earlier. This is especially so when the appellant-assessee has specifically pointed out that it had only offered a corporate guarantee, as noticed earlier. In the light of the above, we are of the opinion that the matter requires a revisit at the hands of the Tribunal. 7. The second issue arising for consideration is the charging of interest on belated trade receivables. The contention of the appellant-assessee is to the effect that it has never charged any interest, and therefore, there is no requirement for carrying any transfer pricing adjustment. It was specifically pointed out that interest was not being charged as ag....
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....sion of Income Tax [2021 438 ITR 1] and Commission of Income Tax v. Reliance Industries Ltd. [(2019) 410 ITR 0466]. 9. The Tribunal has, however, held that the afore judgements were in respect of "apportionment of interest expenditure" and on account of the provisions of Rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as "Rules") as substituted with effect from 02.06.2016, not providing for any such apportionment, the assessment is justified. 10. In this connection, the provisions of Section 14A and Rule 8D of the Act and Rules require to be noticed, as under:- "Expenditure incurred in relation to income not includible in total income. 14A.(1)Notwithstanding anything to the contrary contained in this Act, for the purpos....
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....he circumstances prescribed therein. It is only in a situation where the provisions of Section 14A of the Act gets attracted, the question of applying the provision under Rule 8D of the Rules arises. 11. In this connection, we notice the judgment of the Apex Court in South Indian Bank (supra) wherein the Apex Court with reference to the provision of Section 14A of the Act, has laid down the following principles:- "27. The aforesaid discussion and the cited judgments advise this Court to conclude that the proportionate disallowance of interest is not warranted, under section 14A of Income Tax Act for investments made in tax free bonds/securities which yield tax free dividend and interest to Assessee Banks in those situations where, intere....