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2020 (5) TMI 665 - AT - Income TaxDisallowance of salary paid overseas to expatriates of the Appellant working in India by the Head Office and the Indian taxes paid thereon by the Head Office - HELD THAT:- This issue decided in favour of assessee [2016 (4) TMI 817 - DELHI HIGH COURT]. Interest paid to Head Office and overseas branches and interest received from Indian branches need to be deleted as relied by own case [2016 (4) TMI 817 - DELHI HIGH COURT]. Interest received by the Indian branches from its own Head Office/ overseas branches - chargeable to tax in the hands of the assessee or not? - HELD THAT:- The issue stands covered in favour of the assessee by the decision of the Hon’ble Bombay High Court in the case of DIT vs M/s. Credit Agricole Indoseuz [2015 (6) TMI 974 - BOMBAY HIGH COURT] MAT applicability - assessee is a banking company which draws up its account as per the Banking Regulation Act and not as per Part II & III of the Schedule VI of the Companies Act - HELD THAT:- Provision of section 115JB of the Act are not applicable to the assessee company. Taxability of interest received on ECB, given to Indian Borrowers - HELD THAT:- Interest on ECBs was not attributable to the Indian branches of the assessee and only the portion was taxable in the hands of the Indian branches for the role played in arranging the ECBs. We find that the issue raised in the present appeal is fully covered in favour of the assessee and where the assessee had already offered to tax, the portion attributable to it, then there is no merit in making any other additions in the hands of the assessee. The Tribunal in own case [2019 (9) TMI 731 - ITAT DELHI] had also allowed the claim in the hands of assessee. Ground of appealby the assessee is thus allowed. Treatment in respect of Deferred Bank Guarantee Commission - HELD THAT:- There is no merit in the orders of the authorities below in treating the commission received on Bank Guarantee as taxable on receipt basis. We find that the said issue stands covered in favour of the assessee by the order of the Hon’ble High Court in assessee’s own case in Assessment Year 2007-08 and 2008-09 [2016 (4) TMI 817 - DELHI HIGH COURT] Higher rate of tax - Applicable rate of tax on the income of the assessee attributable to its PE in India - rate of tax to be charged i.e. rate of tax on foreign company @ 40% or rate of tax on the domestic company @ 30% - HELD THAT:- As relying on assessee's own case assessee cannot be regarded as treated less favourably by taxing at a higher rate. As a result the appeal of the assessee on this ground is dismissed. TP Adjustment - Receipt of guarantee commission - assessee while benchmarking its international transactions in the transfer pricing report applied combined approach and has benchmarked under TNMM method - HELD THAT:- The evaluation of the beneficiary for the creditworthiness of the customers was performed by the overseas branches, whereas the assessee had limited role in issuing letter of guarantee, it received 1% guarantee commission. In these facts, there is no merit in comparing the rate received by the assessee with the rate charged by different banks who are operational in India and providing financial guarantee to its customers, with all risk involved therein Assessing Officer/TPO erred in applying the rate charged by Axis Bank, Canara Bank, Punjab National Bank and State Bank of India, etc. with arithmetic mean of 2.71% to benchmark the international transactions between the assessee and its overseas branches of receipt of bank guarantee commission. The details of the international transaction are tabulated in the order of the TPO itself and the same clearly reflect that no transaction is undertaken except with overseas branches. The assessee undoubtedly is also providing the services to its customers in India where it a risk bearing entity. We are of the view that where the assessee has undertaken bundle of international transactions with its AE and the same has been benchmarked by applying combined approach and the method of TNMM has been used and the margins shown by the assessee have been accepted; then there is no merit in segregating the international transaction of the receipt of the guarantee commission and benchmarking the same separately. The margins of the combined approach has been accepted at Arm’s Length. Consequently, there is no merit in the transfer pricing adjustment made in the hands of the assessee. The same is thus directed to be deleted.
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