TMI Blog2016 (10) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... ’s length rate at LIBOR +2%. It appears that as regards the transactions of loan to its AE at China, the said transaction is at arm’s length as the as has charged the interest at 7%, therefore, only with respect to the transaction of loan to AE at Dubai are required to be re-computed for the purpose of TP adjustment - ITA No. 1131/Mum/2015, ITA No. 1042/Mum/2015 - - - Dated:- 7-10-2016 - Shri Rajendra, Accountant Member and Saktijit Dey, Judicial Member Revenue by: Shri N. K. Chand-CIT Assessee by: Shri Shekhar Gupta ORDER Per Rajendra A. M. Challenging the order dated 24. 12. 2014 of the DRP-1, Mumbai, the Assessing Officer (AO) and the assessee have filed cross appeals for the above mentioned Assessment year (AY). Assessee-company, engaged in the business manufacturing of gas cylinders, filed its return of income on 15. 10. 2010declaring income of ₹ 18. 84 Crores. The AO completed the assessment u/s. 143(3) r. w. s. 144C(13) on 29. 10. 2015, determining its income at ₹ 33. 41 Crores. Vide its application, dt. 26/9/2016, the assessee made submissions to allow it to produce additional evidences as per Rule 29 of the ITAT Rules, 1963(Rules). It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of China such a payment was not allowable. He also noticed that the assessee had further given corporate guarantee to CP Industries, USA for borrowing of 45 million USD. 3. 1. The TPO found that in the TP report it was submitted that while determining the Arm s- Length Price(ALP) at 0. 5% the assessee had applied CUP. It was contended that Yes Bank, an independent banker, had provided similar financing arrangement to EKC, India and had charged 0. 5% for the said financial arrangement, that internal comparable had been used to determine arms length rate for commission charged by EKC India to EKC Dubai. After considering the submission of the assessee, the TPO suggested an adjustment of ₹ 10, 79, 62, 267/- on account of corporate guarantee commission as under :- Name of the AE Corporate Guarantee Commission Charged ALP of the Corporate Guarantee Commission Adjustment EKC International FZE, UAE 53,97,238 10,796,143 53,97,238 EKC Industries (Tianjin), China NIL 75,10,361 75,10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, it is assessee company that is issuing Corporate Guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which applied for issuance of a Corporate guarantee are distinct and separate from that of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done. In our view the comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. In view of the above discussion we are of the view that the appeal does not raise any substantial question of law and it is dismissed. There will be no order as to costs . We find that there is no material difference between the facts of the earlier year and the facts for the year under consideration. Therefore, respectfully following the principle laid down by the Hon'ble High Court in assessee s own case, we hold that DRP was not justified in confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nchmarking the transaction, that the assessee was bearing risk of foreign exchange fluctuation on funds raised by it and for investing in share capital of the AE, that the assessee should have charged interest rate of 9. 55% from the AE. s as per the cost plus method. He calculated the interest to be charged on EKC-International UAE as under :- An adjustment of ₹ 6, 88, 34, 448/- is made on account of interest and an adjustment of ₹ 10, 79, 62, 267/- is made on account of corporate guarantee. Therefore, total adjustment in this case is worked out to ₹ 17, 67, 96, 715/-. This order is in response to specific reference under Section 92CA(1) of the Act received and will apply to the case of the Assessee for A. Y. 2010-11 only and not for any subsequent years. Similar calculation was made for the Chinese AE. Finally, he made the following adjustment on account of loans given to AE. s. Name of the AE Interest Charged ALP of the Interest Adjustment EKC International FZE, UAE 1,28,34,502 6,25,92,961 4,97,58,459 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, at the outset, we note that an identical issue has been considered and decided by this Tribunal in assessee s own case for A. Y. 2008-09 in para 11 and 12 as under:- 11. We had considered rival contentions and gone through the orders of lower authorities. As per our considered opinion, appropriate international rates should be used for the purpose of the comparability analysis. For this purpose, the London Inter Bank Offer Rate (LIBOR) is an internationally recognized rate for benchmarking loans denominated in foreign currency. For this purpose, reliance may be placed on the following decision of the coordinate bench :- i) Great Eastern Shipping Co. Ltd (ITA No 397/M/2012) dated 10 January 2014; ii) Mahindra Mahindra Limited (ITA No 7999/M/2011) dated 8 June 2012; iii) Hinduja Global Solutions Limited (ITA No 254/M/2013) dated 5 June 2013 iv) Aurionpro Solutions Limited (ITA No 7872/M/2011) dated 12 April 2013; v) Aurobindo Pharma Ltd (ITA No 1866/Hyd/2012) dated 29 November 2013; vi) Cotton Naturals (I) Pvt. Limited (ITA No 5855/Del/2012) dated 8 February 2013; vii) Siva Industries and Holdings Ltd. vs ACIT, IT Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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