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2017 (8) TMI 479 - AT - Income TaxAccrual of income - Addition on Deferred Bank Guarantee Commission - method of accounting - Held that:- As part of the banking activities, the assessee gives guarantee on behalf of its customers and in consideration thereof, the assessee charged commission from such customers. The commission income arising from the guarantee given on behalf of the customer has been recognized by the assessee over the life of the bank guarantee. On perusal of the statement of facts filed before the Ld. CIT-(A), it is evident that assessee has followed consistent method of accounting of crediting income over the period of life of the bank guarantee, following the decision of the Hon’ble Calcutta High Court (1993 (5) TMI 172 - CALCUTTA HIGH COURT ) in its own case for assessment year 1981-82. The Ld. CIT-(A) has allowed relief to the assessee following the above decision of the Hon’ble Calcutta High Court. In view of above, we do not find any error in the finding of the Ld. CIT-(A) on the issue in dispute - Decided in the favour of the assessee. Disallowance on account of freight and forwarding & clearing charges - allowable business expenditure - Japanese food stuffs imported for the expat employees - assessee submitted that to develop a congenial business relations and create new business opportunities so as to expend the client base of the bank, it had to serve customary foodstuffs to entertain such Japanese customers visiting various branches of the bank - Held that:- In view of the identical issue adjudicated by the Tribunal in the case of the assessee itself, respectfully following the same, we consider the expenditure in dispute as allowable business expenditure - Decided in the favour of the assessee. Transfer pricing adjustment on account of marketing and support services - ECBs issued by Head Office and foreign branches - violation of principle of natural Justice - Held that:- We have observed that the Ld. TPO has made adjustment without providing any opportunity of hearing or issuing any show cause to the assessee for proposing the adjustment. The action of the TPO is definitely in violation of the principles of the natural Justice. We are also equally aware of the fact that the Ld. CIT-(A) was not empowered to restore the issue to the file of the TPO for deciding afresh. He should have called for a remand report from the TPO and should have decided the issue after providing opportunity of being heard to the assessee. However, due to mistake on the part of the Ld. CIT-(A), the assessee cannot be allowed to suffer the justice. Further, we note that issue in dispute in the case of Credit Lyonnais (2014 (7) TMI 1 - ITAT MUMBAI) was in respect of interest of charges received from foreign branches regarding syndicating of loan, whereas the issue in dispute in present case is regarding fee from foreign branches in respect of continued ECB. The decision of the said case is distinguishable on facts. Thus we restore the issue of computation of arm’s length price in respect of the international transaction of marketing and support services for ECBs issued by Head Office and foreign branches, to the file of the Transfer Pricing Officer (TPO)/ AO for deciding afresh in accordance with law.
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