TaxTMI 
TaxTMI 
2023 (5) TMI 1492
X X X X Extracts X X X X
X X X X Extracts X X X X
....ectfully submits that: 1. The Assessment order passed by the learned Assessing Officer ("AO") and the order of the Dispute Resolution Panel ("DRP") under Income tax Act, 1961 ("the Act") are not in accordance with the law and are contrary to the facts and circumstances of the present case. Disallowance towards employee contribution to PF 2. The Ld. AO has erred, in law and on facts in disallowing the employee contribution towards Provident Fund amounting to INR. 2,51,120/- on the ground that the payments were remitted beyond the due date prescribed under the relevant Acts. 3. The Ld. AO has erred in not appreciating that the payments were made within the due date prescribed for filing return of income under section 139(1) of the Act and as such the payment is allowable expenditure. 4. The Ld. AO erred in not following the decision of this Hon'ble Tribunal in Assessee's own case in ITA No. 1974/Chny/2016 for AY 2009-10 and I.T.(TP)A.No.22/Chny/2020 for AY 2012-13. 5. The Ld. AO ought to have appreciated that the amendment to section 36(1)(va) of the Act brought out by the Finance Act, 2021 to disallow employee contri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional interest on outstanding receivables from AE. 13. The Ld. AO/TPO erred in incorrectly applying the most appropriate method while attributing notional interest. 14. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e. 4.711%) as against LIBOR rate 15. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned AO has erred in law and on facts by considering LIBOR plus 200 BPS (i.e. 4.711%) as held by this Hon'ble Tribunal in Assessee's own case in ITA No. 1974/Chny/2016 for AY 2009-10 and I.T.(TP)A.No.22/Chny/2020 for AY 2012-13. Upward revision on account of provision of corporate guarantee to AEs: 16. The Ld. AO/TPO has erred in law and on facts in considering corporate guarantee as a separate international transaction under Section 92B of the Act. 17. The Ld. AO/TPO ought to have appreciated that provisions of corporate guarantee is not in the nature of shareholder activity and as such it will cannot be regarded as internationa....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the Assessing Officer passed final assessment order u/s. 143(3) r.w.s. 144C(13) of the Act and determined total income of Rs. 20,01,79,040/- by making additions towards imputation of interest on outstanding receivable from AE and additions towards corporate guarantee commission. The Assessing Officer, had also made addition towards disallowance of employee contribution to PF u/s. 36(1)(va) of the Act. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). 4. The first issue that came up for our consideration from ground no. 2 to 5 of assessee's appeal is disallowance of employees contribution to PF u/s. 36(1)(va) of the Act. The Ld. Counsel for the assessee, fairly submitted that this issue is covered against the assessee by the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT [2022] 143 Taxman.com 178 SC, where it has been held that belated remittance of employees contribution to PF cannot be allowed u/s. 36(1)(va) of the Act. The ld. DR, submitted that this issue is now settled by the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt Ltd vs CIT (Supra). 5. We have heard both the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....yment or receivables arising during the course of business is international transactions and thus, outstanding receivables beyond credit period from AE is an international transactions which needs to be benchmarked. We further noted that when it comes to rate at which interest needs to be computed, it was held that SBI PLR is not an appropriate rate for benchmarking interest receivables from AE and thus, directed the Assessing Officer to adopt LIBOR + 200 basis point as basis for imputation of interest. The relevant findings of the Tribunal are as under: "12. We have heard both the parties, perused the materials available on record and gone through the orders of authorities below along with case laws cited by both the parties. As regards preliminary arguments of the AR for the assessee that delay in realization of receivables from AE beyond credit period is not a separate international transaction, we find that the definition of international transactions has been amended by insertion of clause (c) to explanation to Section 92B by the Finance Act, 2012 with retrospective effect from 01.04.2002, where the "capital financing including any type of long-term or short-term borr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the parties to the transaction requires consideration. The assessee has allowed credit to its AE which is a non-resident, therefore the benefits that the AE derives from enjoying the long credit period for payment in respect of services rendered has to be measured in terms of the interest that would have been incurred by the AE in the country of residence. If we go by the standards, the LIBOR rate is most appropriate rate of interest in the international market and which is accepted by most of the countries. Therefore, it would be most appropriate if the LIBOR rate is applied as most appropriate rate of interest for imputing interest on delay in receivables from AE. In this case, the AO has imputed notional interest by adopting PLR as the base rate whereas the ld.CIT(A) has directed the AO to adopt LIBOR rate as the base rate for imputing the interest with an appropriate spread befitting the credit standing of the AE. Therefore, we are of the considered view the LIBOR + 200 basis point rate is most appropriate rate and hence, direct the AO/TPO to adopt LIBOR + 200 basis point for imputing interest on overdue receivable. As regards, the argument of ld.AR for assessee that the TPO ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, rate adopted by the commercial bank is not appropriate rate because corporate guarantee given by the assessee's and guarantee given by commercial banks are different and thus, by following the decision of Hon'ble Bombay High Court in the case of CIT vs Everest Kanto Cylinders Ltd [2015] 378 ITR 57 (Bom), held that 0.5% is appropriate rate for benchmarking corporate guarantee. The relevant findings of the Tribunal are as under: "9. We have considered relevant materials on record. As regards the arguments of the Ld.AR for the assessee that corporate guarantee per se itself is not an international transaction, we find that after amendment of definition of international transaction, corporate guarantee given by any entity to its AE falls under the definition of international transactions in terms of sec. 92B of the Act and thus, any corporate guarantee given by the assessee to its AE is an international transaction, which needs to be bench marked. Further, when it comes to rate, at which, such guarantee commission needs to be benchmarked, then bank guarantee given by the commercial banks cannot be ayardstick to apply to corporate guarantees given by an entity. Further, the ....