TMI Blog2016 (6) TMI 1386X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee against the order of the Ld. CIT(A)-15, Mumbai dated 14.3.2012 pertaining to assessment year 2007-08. 2. The assessee has raised following grounds of appeal: Additions under section 92CA(3) of the Act by redetermining the arm s length price of loan syndication transaction. 3.1.The learned CIT-A erred on facts and in law in upholding the order of the AO / TPO which arbitrarily attributed 100 percent of the loan syndication fee income to the Appellant and Nil to the AE without giving any cogent reasons. This conclusion of the CIT-A is based on a completely incorrect understanding of the functions performed, assets employed and risks assumed by the Appellant and the AE in relation to the subject international transaction. 3.2 The learned CIT-A erred in fact and law by upholding the order of the AO / TPO which stated that the loan was possible only because of the Appellant's efforts and that activities performed and risks undertaken by the Associated Enterprise ('AE') were routine in nature. The AO / TPO has also erred on facts in holding that the Appellant was responsible for receipt / disbursal of loan funds, timely repayments, etc. 3.3 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest paid on Call Money Borrowing 25,80,167 Interest paid on Repo Borrowing 14,38,727 Interest received on short term borrowing 13,38,727 Shared cost for collocated Premises 32,70,320 Net interest received on interest rate swaps 138,79,200 3. ABN AMRO Bank N.V. Hong Kong Branch office Fee/Commission received/receivable 599,84,604 5.1. The assessee received fee/commission from its AE at ₹ 5,99,84,604/- which had nomenclature as loan syndication fee. The details provided with regard to this transaction being loan syndication as provided in the TP study report was examined and accordingly it was observed that the functions performed by the AE in a loan syndication agreement were largely that of a routine loan provider. Accordingly the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Indian entity had been clearly ignored. 5.4. Accordingly, TPO determined the ALP of the syndication fee received by the assessee at 100% and not 50%. TPO held that Euros 21,92,414 should have been given to the assessee. In Rupee terms taking the value of 1 euro at ₹ 60/-, it comes to ₹ 13,15,44,840/-, out of which Rs,5,99,84,604/- had been received by the assessee. TPO held that the ALP of syndicate fee receivable by the appellant was 100% and by the AE NIL, which resulted into an adjustment of ₹ 7,15,60,236/-. While passing the order the TPO did not allow benefit of +/-5% to the assessee and nothing in this regard has been discussed in his order. The Assessing Officer passed his order in conformity with the ALP so determined by the TPO. 6. The Ld. CIT(A) upheld the order of the TPO. 7. We find that in similar circumstances, the Co-ordinate Bench has taken the following view in the case of M/s. Credit Lyonnais Vs ADIT: We have considered the rival submissions as well as relevant material on record. The assessee being Indian branch has helped the foreign currency loan syndication in respect of two loans to Reliance Petroleum Limited and Reliance Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tocol does not apply to the case of the assessee, now, the question arises as to whether the adjustment made by the authorities below is justified. For making the adjustment, the authorities below have taken into consideration, the income towards interest as well as the fee charged by the foreign branch from the clients. It is pertinent to note that when the loan is provided by the syndicate and the assessee has not contributed to the loan amount then as regards the income of interest, the same cannot be attributed to the assessee for providing the services of the financial analysis of the borrowers, market condition and regulatory environment in India. Since the assessee has provided certain services for that arms length charges can be determined as per the provisions of transfer pricing regulation. The TPO as well as CIT(A) has not brought out any comparable for determination of the arms length price but took the total income comprising interest as well as other fees charged by the foreign branches for allocation/attribution to the assessee. In this case, the ALP has not been determined by taking into consideration uncontrolled similar transaction. In our view, the interest canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e borrowers, general market conditions and regulatory environment. The learned AR has vehemently argued that as per para 4 of Protocol, profit cannot be attributed to the PE on account of facilitation of conclusion of loan agreement or mere singing thereof. We do not agree with the contention of the learned AR of the assessee because of the fact that the role of the assessee is not merely facilitation of conclusion of loan agreement or signing thereof but the services provided by the assessee are the corebasis for taking the decision of granting the loan by the syndicate. The assessee provided the services regarding clients creditability analysis, its capacity so as to consider the capacity to repay the loan and risk involved in the loan transaction. Therefore, the role of the assessee in providing such a crucial service is inevitable for taking the decision of providing loan and as such cannot be said to be a mere facilitation of conclusion of the loan agreement or signing thereof. At this stage, para 4 of the Protocol between the India and France is quoted for ready reference as under :- 4. No profits shall be attributed to a permanent establishment by reason of the mere purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee and other charges received by the foreign branches from the borrowers in question. Since none of the parties have come out with the suitable comparables, therefore, we find that the estimation made by the CIT(A) at the rate of 20% is just and proper, however, the same would be only in respect of the fee and charges other than interest received by the foreign branches. Thus, these grounds of the assessee are partly allowed. 25. As it is clear from the earlier order of this tribunal that the benefit of para 4 of the protocol between India and France does not apply as assessee has rendered the key services for taking decision of granting loan by the syndicate of Banks to the Indian borrowers, however as it was found that the TPO made the adjustment without considering any comparable. By following earlier orders of this Tribunal, we direct the AO/TPO to make adjustment in respect of the services performed by the assessee for foreign currency loan arranged for its existing clients by taking into account only the fee and other charges excluding interest received by the foreign branches from the borrowers in question by applying the rate of 20% as accepted in the earlier order. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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