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2020 (8) TMI 190 - AT - Income TaxTP Adjustment - adjustment made to the arm’s length price of Corporate Guarantee issued in respect of payment of outstanding hire charges - TPO rejecting assessee’s claim has charged guarantee commission at 2.5% which has been reduced to 1.75% by learned DRP - HELD THAT:- Basis on which the Transfer Pricing Officer and learned DRP have determined the arm’s length price of guarantee commission is the commission charged by the State Bank of India, Singapore Branch, @ 1.25% per annum on the bank guarantee availed by the AE. We find substantial merit in the submission of the learned Authorised Representative that performance/corporate guarantee cannot be equated with bank guarantee. Even DRP has also observed that the assessee has provided an unsecured performance guarantee. It is further evident, the assessee itself has availed a bank guarantee from ICICI Bank on payment of guarantee commission of 0.25%. Keeping in view the aforesaid facts, we are of the considered opinion that the arm’s length price of the guarantee commission can be reasonably fixed at 0.25% by adopting as internal CUP the guarantee commission charged by the ICICI Bank on provision of bank guarantee to the assessee. Ground no.1, raised by the assessee is partly allowed. Addition made on account of adjustment made to the arm’s length price of interest on short term loan granted to the AE - HELD THAT:- Looking at the financial needs of the subsidiary, the assessee had provided short term loan for a period of 15 days or thereabout. For providing such loan, the assessee had charged interest at LIBOR plus 1.5%. The Transfer Pricing Officer, however, did not accept the rate of interest charged by the assessee. Adopting the prime lending rate of State Bank of India @ 7.50% and adding a mark–up of 1.50%, the Transfer Pricing Officer determined the arm's length interest rate @ 9.% and accordingly determined the arm’s length price of interest to be charged on the loan provided to the AE. While deciding the issue, learned DRP directed the Assessing Officer to charge interest @ LIBOR plus 4%. The fact that the assessee has provided a short term loan only for a period of 15 days to the AE has not been disputed. It is further noticed that assessee’s AE in Singapore has availed a loan from SBI, Singapore branch at interest rate of six months LIBOR plus 250 basis points. Considering the above, we are of the view that the rate of interest charged by the assessee is at arm's length requiring no further adjustment. Ground no.2, is allowed. Levy of interest under section 234A - HELD THAT:- We find that the return of income for the impugned assessment year has been filed within the due date provided under section 139(1) of the Act. That being the case, no interest under section 234A of the Act is chargeable. Ground no.4, is allowed. Levy of interest under sections 234B and 234C - HELD THAT:- We hold that since levy of interest under section 234B of the Act is consequential, assessee’s ground insofar as this issue is concerned, need not be adjudicated. As regards levy of interest under section 234C of the Act, we direct the Assessing Officer to charge such interest not on the assessed income, but on the income returned by the assessee. Thus, ground no.5, is partly allowed. Addition on account of difference between the interest credited to the Profit & Loss account and interest as shown in Form no.26AS - HELD THAT:- As submitted that the AO without seeking any explanation from the assessee has added the differential amount suo–motu. Further, it has been submitted that interest amounting to ₹ 9,48,516, has been offered to tax by the assessee in the subsequent financial year. Considering the submissions made by the learned Authorised Representative, we are of the view that the issue requires to be restored back to the file of the Assessing Officer for verifying assessee’s claim. The assessee must be given sufficient opportunity to reconcile the difference. After considering the submissions of the assessee, the Assessing Officer must decide the issue by taking into consideration all the evidences submitted by the assessee. With the aforesaid observations, the issue is restored back to the file of the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee.
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