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TMI Blog2015 (5) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held in para 102 that the TPO did not have any valid comparable and action of applying the CUP method was potentially incorrect and, therefore, finding of the TPO were reversed. However, later on while noting the admission of the Ld. Counsel for the assessee that one of the services provided by the holding company was financial service and there was international practice of passing on at least 50% of such benefits to the service provider, the Tribunal wrongly concluded that assessee had passed on 100% benefit to the associate enterprise and 50% of such sum shall be disallowed vide para 110 of the order. Therefore, the conclusive finding of the Tribunal in para 110 were contrary to the earlier finding in paras 95, 98 and 102 and therefore, there is an error in the order of the Tribunal. 3. He further submitted that assessee has merely paid the lump sum charges in accordance with pre-determined formula of services provided by the Principal of the assessee. Therefore, it was not fair to conclude that separate charges should be determined for financial services. He contended that benefit on account of financial services were Rs. 9.29 crores and if the Tribunal is correct in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact was confronted to Shri K.M. Gupta, Ld. Counsel for the assessee who was present at the time of hearing of the appeal is also present today admitted that assessee had made these submissions and had also furnished the amounts of financial benefits as well as agreed that at best only 50% of the such financial benefits can be shared with the holding company and 50% benefit can be retained by the assessee company. 5. We have considered the rival submissions carefully. We find that during assessment year 2007-08 the assessee has paid corporate service fee of Rs. 3,30,72,526/- which included some direct services and some services on account of sharing of I.T. Platform like SAP Etc. The nature of services was explained to be the "Corporate Service Charge: The AE provides the corporate services in the area of Production and Sales, Market Information, Business Intelligence, Safety, Health and Environment and Finance related strategic planning support to the assessee. For which it charges as per the allocation of total expense of DSM Corporate and Business Group Units." Some of these amounts particularly on account of I.T. Services were held to be payable by the TPO. However, since no b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led term loan from Deutsche Bank amounting to INR 52.63 crores. Such loan was granted by Deutsche Bank based upon a risk assumption agreement entered into by the associated enterprise with Deutsche Bank, Amsterdam. In this regard the following documents are attached for consideration by the Hon'ble Tribunal : (i) Loan agreement entered into by the appellant with Deutsche Bank (Annexure 1) (ii) Letter issued by Deutsche Bank, Amsterdam to the associated enterprise confirming assumption of risk on behalf of the appellant (Annexure 2) (iii) Deed of pledge of deposit entered into by the associated enterprise with Deutsche Bank, Amsterdam pledging an amount of EUR 10 million as guarantee against providing loan to the appellant (Annexure 3) As per the benchmarking analysis conducted by the appellant, the arm's length price of the guarantee issued by the associated enterprise in support of the appellant is 2.65% for financial year 2006-07 and 4.65% for financial year 2007-08 which translates into benefit of Rs. 39 crore and 2.45 crore respectively. The detailed benchmarking report along with credit rating analysis is provided as Annexure 4. It is respectfully submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st due to the guarantee provided by the associated enterprise against the LC facility availed by the appellant. The detailed economic analysis undertaken by the appellant for benchmarking the guarantee provided by the associated enterprise is provided as Annexure 4. The results of the analysis are summarized as under : Particulars Amount (INR) Amount of facility (EUR 30,000,000 @ Rs. 57 (A) 1,710,000,000 Prime Lending Rate of SBI(B) 12.75% Interest payable by DSM India (C= A*B) 218,025,000 Interest Rate available on FD (1 to 3 years ) (D) 8.75% Interest receivable by DSM India (E = A*D) 149,625,000 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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