Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2017 (4) TMI 864 - ITAT MUMBAI

2017 (4) TMI 864 - ITAT MUMBAI - TMI - TPA - ALP - Addition on corporate guarantee given to Associated Enterprise (AE) - Held that:- As decided in Videocon Industries vs. DCIT [2017 (3) TMI 187 - ITAT MUMBAI] in similar circumstances the details of loans vis--vis the security thereof had already been reproduced above. It has also been brought on record that State Bank of India has charged bank guarantee commission to assessee by giving 50% concession on the rate of 1.75% which works out to appr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

commission around 0.50% can be accepted as ALP. Accordingly, we hold that the corporate guarantee commission fee which is to be recovered from AE should be 0.50% which would meet the arms length requirement. Thus, under the facts and circumstances of the case, we direct the TPO/Assessing Officer to take the corporate guarantee fee @ 0.50% and make the adjustment accordingly - Disallowance of depreciation on intangible assets confirmed - Disallowance on account of provisions for post ret .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. AR of the assessee, we restore this ground of appeal to the file of AO to examine the issue afresh, if the claim of the assessee is covered by the prevision of section 43B of the Act and passed the order in accordance with law. - ITA No. 269/Mum/2014 - Dated:- 15-3-2017 - Sh. Rajendra, Accountant Member and Pawan Singh, Judicial Member For The Assessee : Shri Bhavin Shah with Ms. Vaibhavi Patel (AR) For The Revenue : Shri Saurabh Deshpande (DR) Order u/s.254(1)of the Income- tax Act,1961(Act) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ciation of ₹ 11,90,285/- on intangible assets acquired in earlier year. (iii) The ld. CIT(A) erred in confirming the disallowance of expenses amounting to ₹ 1,56,87,826/- u/s 14A r.w.Rule 8D(iii). (iv) The ld. CIT(A) erred in confirming the disallowance of ₹ 71,99,65/- in respect of provision for post retirement medical scheme treating a contingent liability. (v) The ld. CIT(A) erred in confirming the disallowances of ₹ 5,24,659/- as prior period expenses. 2. Brief facts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction with its AE. The ld. TPO after giving opportunity of hearing to the assessee submitted its report/order dated 20.01.2011 to the AO. The ld. TPO determined the ALP of international transaction relating to cost of guarantee for ₹ 2,16,986/-. On the basis of order passed u/s 92CA(3) of the Act by TPO, the AO added ₹ 2,16,986/- on account of corporate guarantee. The AO further disallowed a sum of ₹ 1,56,87,826/- u/s 14A, disallowed the depreciation on intangible assets amount .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ve (DR) for the Revenue and perused the material available on record. First ground of appeal relates to Transfer Pricing Adjustment of ₹ 2,16,986/- on account of commission on corporate guarantee. The ld. AR of the assessee argued that this ground of appeal is covered in favour of assessee by a number of decision by the Tribunal including the decision of of Everest Kanto Cylinder Ltd. It was further argued by ld. AR of the assessee that the Tribunal in case of Everest Kanto Cylinder Ltd. v .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

given a corporate guarantee for the benefit of its AE in United Arab Amirat which prima-facie qualified as an international transaction. The assessee however, had not considered the same to be an international transaction. The TPO further observed that assessee has given a corporate guarantee of Rs. 5.5 Crore to M/s Mahindra Middle East Services Centre (FZC). The ld. TPO called the information from the Union Bank of India. The Union Bank of India furnished its reply and disclosed that Bank Guara .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

international transaction. The assessee has not any kind of bench mark, the TPO concluded that assessee has not discharged his primary onus of bench marking for transaction and proceeded to determine the ALP. The TPO further concluded that during the relevant year, the bank rate was 6% and for the week ended on 28.09.2007 upto 05.10.2007, the rate was 6% while average PLR rate for this period was in between 12.75 to 13.25% and worked out the ALP on CUP Method of ₹ 2,16,986/-. The TPO sugge .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

whether corporate guarantee is an International Transaction or not, because before us, the Ld. counsel Mr. Sonde has mainly raised the issue that, benchmarking if at all is required to be done, then same should be done by taking the corporate guarantee commission rate between 0.25% and 0.50% and in support of which he relied on various decisions. He has not stressed on this issue, whether corporate guarantee is an international transaction or not. Whence assessee before us is not pursuing the ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to financial institution/banks in respect of loan or credit facilities extended to its two AEs and letter of undertaking to the lenders in the case of another AE. For providing such corporate guarantee it has recovered 0.25% as guarantee commission. In support of charging of 0.25%, the assessee, first of all, contended that the loans for which the assessee has given guarantee are primarily covered by pledged securities, hypothecation of debtors balances and other assets of the AE, therefore, it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

like, country risk, currency risk and entity risk etc., then charging of corporate guarantee commission would fall down below 0.5%. Thus, this constitutes a kind of internal CUP available to the assessee to benchmark the transaction of giving corporate guarantee/letter of undertaking. Moreover, there are catena of decisions wherein this Tribunal has held that corporate guarantee commission around 0.50% can be accepted as ALP. Accordingly, we hold that the corporate guarantee commission fee which .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e the adjustment accordingly. Thus, Ground No.1 is partly allowed. 6. Ground No.2 relates to disallowance of depreciation of ₹ 11,90,285/- on intangible assets. The ld. AR of the assessee fairly conceded that this Ground of Appeal is covered against the assessee in assessee s own case for AY 2009-10 in ITA No. 1822/Mum/2013 dated 31.07.2015. The ld. DR for the Revenue confirmed the contention of ld. AR of the assessee. Considering the contention of ld. AR of the assessee, the Ground No.2 r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and closing share capital and free reserve of ₹ 12389.88 Lakhs as per page 9-14 of Paper Book (PB). On the other hand, ld. DR for the Revenue supported the order of authorities below. We have considered the rival contention of the parties and gone through the orders of authorities below 8. We have considered the rival contentions of the parties and noticed that the similar issue was adjudicated by the Tribunal for AY 2009-10 in ITA No. 1310/M/2013 and in cross appeal of Revenue vide ITA No .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

irement medical scheme. The ld. AR of the assessee argued that this issue is covered against the assessee in assessee s own case for Ay 2009-10 in ITA No. 1822/Mum/2013 dated 31.07.2015. The ld. DR for the Revenue not disputed the contention of ld. AR of the asessee. We have considered the rival contention of the parties and seen that similar disallowance was made against the assessee in the AY 2009-10 and the same was upheld by the co-ordinate bench of this Tribunal holding as under: 6. The thi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, therefore, it was an unascertained liability. 6.1 Before us the Ld. Representative for the assessee fairly conceded that similar issue came before the Tribunal in the case of the group concern M/s. Mahindra &Mahindra Ltd. for assessment year 2007-08 and vide order dated 8/6/2012 in ITA No.7999/Mum/2011, similar liability has been held to be an unascertained liability which was not allowable as a deduction under section 37(1) of the Act. Following the aforesaid precedent, we hereby affirm t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is allowable expenses in the year when payment was made. On the other hand, ld. DR for the Revenue relied upon the orders of authorities below. 12. We have considered the rival contention of the parties and gone through the order of authorities below. The AO during the assessment observed from the Tax Audit Report (TAR) that assessee has claimed service tax expenses of ₹ 5,24,659/- under the prior period expenses. The assessee was asked to give explanation with regard to the said expenses, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version