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2020 (7) TMI 435 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Primary function of the assessee is to provide business process outsourcing services (BPO), consisting of inbound customer services, outbound collections, transaction processing, financing and accounting services, knowledge management of complex technologies, telemarketing and invoice processing thus companies functionally dissimilar with that of assessee need to be selected from final list. Rejection of companies having RPT of more than 25% of the operating revenue as well as companies having different financial year ending. Adjustment on account of provision of Corporate and performance guarantee - HELD THAT:- As decided in M/S. EVEREST KENTO CYLINDERS LTD. [2015 (5) TMI 395 - BOMBAY HIGH COURT]manner in which the Transfer Pricing Officer has proceeded to determine the arm's length rate based on the probable rate being charged by the commercial banks is not justified. In this view of the matter, three per cent rate of guarantee commission fee determined as arm's length rate by the income-tax authorities cannot be approved, though the ld. DRP in its direction has already restricted it to 1.5%. In the alternative, the addition that is required to be sustained is the position canvassed by the assessee before the Transfer Pricing Officer i.e. adoption of 0.50 per cent as arm's length rate for the purpose of determining the arm's length income on account of guarantee commission fee in the instant case. Considering the entirety of facts and circumstances of the case and on the basis of the material available on record, the rate of 0.50 per cent is to be upheld for the purpose of determining the arm's length rate of the guarantee commission fee. In the result this ground of appeal is partly allowed. Adjustment on account of provision of loan to AE’s - HELD THAT:- Assessee vehemently submitted that direction of ld. DRP resulted in to total rate of interest at 8.8%. The Hon’ble Delhi High Court in CIT Vs Cotton Naturals (I) (P) Ltd [2015 (3) TMI 1031 - DELHI HIGH COURT] while considering the question of law whether the Income-Tax Appellate Tribunal was right in holding that the interest @ 4% p.a. charged by the respondent assessee from its subsidiary i.e. the Associated Enterprise was arm's length rate of interest and the adjustment made in the Assessment Order determining the arms' length rate of interest at 12.20% was unwarranted, held that Arm's length interest rate for loan advanced to foreign subsidiary by Indian company should be computed based on market determined interest rate applicable to currency in which loan has to be repaid. Hon’ble Jurisdictional High Court in CIT Vs Tata Autocomp System Ltd [2012 (5) TMI 45 - ITAT MUMBAI] also held that where assessee advanced loans to its AE situated in Germany, rate of interest was to be determined on basis of rate prevailing in Germany where loan had been consumed. Considering the aforesaid decisions of Hon’ble High Courts, we direct the AO/TPO to recompute the adjustment of interest on loan by following the decision of CIT Vs Tata Autocomp System Ltd (supra). The assessee is directed to provide necessary details to AO/TPO. In the result this Ground of appeal is allowed for statistical purpose. Income from sub-lease as income from other sources - Eligibility for deduction u/s 10A - HELD THAT:- Assessee has claimed deduction under section 10 A against the business income list of the assessee also credited a rental income of ₹ 6.53 crore in its profit and loss account and the same was included in the head of income from business on which the assessee claimed deduction under section 10A. The assessing officer took his view that the rental income is not eligible for deduction under section 10A. The DRP affirm the action of assessing officer as the same is not qualified for deduction under section 10A. Before us, the learned AR of the assessee failed to bring any convincing fact to treat the said rental income as a business income of the assessee. As noted that the DRP on the application of assessee for seeking rectification for its direction dated 07/09/2012, vide order dated 21st December 2012 has already directed the assessing officer/TPO to allow expenditure incurred in earning such income. Therefore, in our considered view no further direction is required.
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