Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (5) TMI 294 - AT - Income TaxAddition u/s 69 - Transfer pricing adjustments - extending loan facility to Tata Tea UK as part of consortium/syndicate - letter written by one of the employee indicating that the assessee has extended loan of GBP 37.50 million as per part of syndicate and the participation/commitment fee of GBP 1,50,000 has been received by the assessee - HELD THAT:- Apart from the said letters, there is no other material on record to corroborate that the assessee in any manner participated in extending loan facility to Tata Tea UK as part of consortium/syndicate. The findings of the TPO and the Assessing Officer in draft assessment order that the assessee has advanced loans from undisclosed sources is merely based on surmises and conjunctures. It is a well settled legal proposition that suspicion, howsoever strong, cannot take place of evidence. Except from the letters referred above there is no material to back the observations made by the TPO/AO. On the contrary, the assessee has furnished various documents to substantiate that the assessee was not part of syndicate that has extended loan facility to Tata Tea UK, however, the same have been ignored by the TPO and the assessing officer while passing the draft assessment order. In the absence of any cogent evidence, the Revenue has failed to discharge its onus while alleging that there was an outflow of funds from India by assessee or receivables from Rabobank London have been squared off for diversion of funds to syndicate for advancing loan to Tata Tea UK. The assessee cannot be expected to prove negative. We find that the TPO and the assessing Officer in draft assessment order has placed reliance solely on the letters furnished by an employee of the assessee without there being any corroborative evidence for making addition u/s.69 Commitment charges received by the assessee are in fact, part of interest income on the loan advanced - The assessee has clarified that the role of assessee was limited to identifying and referring the opportunity to Rabobank London. Rabobank London is the lead arranger for the loan and the other financial institutions/banks joined hands to form a consortium for extending loan facility to Tata Tea UK. The assessee is remunerated for the services rendered by way of share in upfront fee, participation/commitment fee. The share in participation/commitment fee at some percentage (0.40%) of the credit allocation of GBP37.5 million was the method of remunerating the assessee for the functions performed - As already held that the assessee had not participated in extending loan facility to Tata Tea UK through the consortium in any manner whatsoever, the remuneration received by the assessee in lieu of the services rendered cannot be termed as interest income of the assessee from the alleged advancing of loan. The aforesaid income received by the assessee has already been offered to tax, this fact has not been disputed by the Revenue. We find no merit in ground No.1 and 2 raised by the Revenue in appeal, the same are dismissed. Addition in respect of interest paid on External Commercial Borrowings (ECB), payment of guarantee fee and service fee - charges/payments disallowed primarily for the reason that the assessee has not been able to establish need for the services and the benefit derived from the said services - HELD THAT:- In the instant case the assessee has borrowed funds from Rabobank Hong Kong to finance its working capital requirements. The interest paid to Rabobank Hong Kong on ECB has been reflected in the books. Tax has been duly deducted on the payment of interest. Similarly, in respect of guarantee fee and service fee the assessee has been able to substantiate that the payments have been made for the purpose of assessee’s business. The TPO cannot sit in the judgment whether these expenses were necessary for conducting the business or whether any benefit has been derived from the expenditure so incurred. The requirement of the law is that the expenditure should have been incurred ‘wholly and exclusively’ for the purpose of business.
|