TMI Blog2015 (5) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... had tried to justify the payment on account of such financial services but when again it was confronted that if assessee had saved ₹ 100/- and if he pays the entire amount of ₹ 100/- to the holding company and in that case there would be no savings to the assessee. In response to this query, the Ld. Counsel on behalf of the assessee had admitted that there is international practice to pass on 50% of the amount of such financial savings on account of financial services and balance 50% was to be retained by the recipients of the services. This was found to be logical because benefit was being shared on 50 - 50 basis. Therefore, assessee was asked to give amount of total benefit on account of financial services.On the basis of above admission the Bench held that fee paid for other corporate services could not have increased so much and therefore, it was fair and just that that normal fee paid for corporate services should not be disallowed but in view of the increase in the amount the benefits obtained by the assessee on account of financial services have to be shared on the basis of 50-50. Thus no error in the order of Tribunal and therefore, no rectification can be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made by the assessee on TPO/Assessing Officer of services was only ₹ 6,14,13,983/-. If 100% financial benefit was transferred by the assessee then this becomes contradictory. In this background it was prayed that error may be rectified by holding that no adjustment should be made on account of services obtained by the assessee from the holding company. 4. On the other hand Ld. DR submitted that there is no error in the order of Tribunal. He pointed out that during the hearing it was pointed out on behalf of the Revenue that the amount paid on account of corporate services is continuously increasing over the period of time and the same therefore, cannot be related to only corporate services. However, the kind of corporate services which has been received by the assessee company could not justify the increase in the amounts in the later years. At that juncture, the Bench had posed this query to the Ld. Counsel for the assessee and in response it was submitted that in later years the assessee has started receiving financial services in the form of bank guarantees and sanction of limits at a very competitive interest rates. It was reiterated on behalf of the assessee that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts was added by way of adjustment by the TPO and this action was challenged before the Tribunal. When it was pointed out by the Revenue that in later years, the amount paid on account of Corporate Services is increasing from year to year substantially then a query was raised to determine the reason for such a big jump in the corporate service charges. At this stage, the Ld. Counsel has pointed out that the main reason for substantial increase in the amount of Corporate Services amount paid was on account of financial services. The assessee has started receiving financial services in the form of corporate guarantee as well as sanctions of the limit by banks on the recommendation of holding company because of which the assessee got the limits sanctioned from the bank at much lower rates than the market rates. At the instance of Bench the Ld. Counsel has also quantified the amounts of benefits received by the assessee company during these two years. The amounts of corporate service charges in various assessment years are as under :- Assessment year Amount (in Rs. ) 2007-08 22,700,000 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating analysis is provided as Annexure 4. It is respectfully submitted that as per the analysis conducted by the appellant, the credit rating was calculated in a scientific manner and the same was determined at B2. Considering the credit rating of the appellant, it would be appreciated that without the support of guarantee form it associated enterprise, the appellant could have borrowed money at a significant premium to the Prime Lending Rate (PLR) prevailing during the relevant financial year. However, on a conservative basis, the interest savings availed by the appellant, due to guarantee provided by the associated enterprise has been computed on the basis of prevailing PLR. The PLR prevailing during financial year 2006-07 was 10.75% whereas the PLR during financial year 2007-08 was the relevant period was 12.75% whereas the appellant had borrowed money at 8.10%. Considering the above factors, the interest cost savings enjoyed by the appellant due to guarantee provided by the associated enterprise for financial year 2006-07 and 2007-08 is as under : Financial Year Amount of loan (INR in Cr) Interest rate PLR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest savings by the appellant (F = C-E) 68,400,000 Guarantee fee (F/A%) 4% From the above analysis, it can thus be concluded that a guarantee fee charged by DSM Netherlands to DSM India at 4% for the overall arrangement, shall be considered to be at arm's length as required under Indian Regulations. In view of the aforesaid, it is respectfully submitted that the above documents now placed on record by the appellant pursuant to the query raised by the Hon'ble Tribunal may kindly be taken into consideration while adjudicating the appeal of the assessee. b. Issue of guarantee by DSM Finance B.V. The Ld DR contended that the appellant has entered into contract service agreement with DSM N.V. whereas the guarantee was been issued by another associated enterprise, DSM Finance B.V. In this regard it is respectfully submitted that DSM Finance B.V. is a part of corporate treasury division of the DSM group and has a mandate from DSM N.V. (now Royal DSM NV or Koninklijke DSM N.V) to manage/arrange/support the funding of DSM group companies. A power of attorney executed by DS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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