TMI Blog2019 (9) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... 1163 - ITAT MUMBAI] assessee s claim was not considered only for the reason that it was not made through a revised return of income. However, as held by the Hon'ble Supreme Court in Goetz India Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] restriction imposed therein for not entertaining a claim otherwise by way of revised return of income is only applicable to the Assessing Officer. That being the case, we restore the matter back to the file of the Assessing Officer for considering afresh in the light of the decision relied upon by the assessee. - the issue is hereby restored before the AO to decide the matter of controversy on the similar direction as given by Hon ble ITAT above TP Adjustment - corporate guarantee to its overseas A.E - HELD THAT:- As relying on assessee's case [ 2016 (4) TMI 1163 - ITAT MUMBAI] there is no dispute that the internal CUP by way of letter received from HSBC indicates that the commission charged for financial guarantee is 0.5%. Further, it is relevant to note that the Department in assessee s own case has accepted the arm's length price of corporate guarantee @ 0.5% in the assessment year 2006 07 and 2007 08. Thus, on consideration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of Section 37(l) of the Act. TRANSFER PRICING ISSUES Corporate Guarantee given on behalf of the Associated Enterprises 3) The learned Dispute Resolution Panel erred in holding that the transaction of giving corporate guarantees by the Appellant on behalf of its Associated Enterprises would fall within the definition of an international transaction under Section 92B of the Act and thereby erred in determining the Arm's Length price in respect of such Transaction. 4) The learned Dispute Resolution Panel erred in confirming the credit ratings of the Associated Enterprises at 131313- for the purpose of benchmarking the guarantee fee without appreciating that the Associate Enterprise's credit rating equaled that of the Appellant. 5) The learned Dispute Resolution Panel erred in confirming use of the data relating to rate of interest on corporate bonds in India to benchmark the guarantee commission given to its Associated Enterprises, which in any event is not in public domain. 6) The learned Dispute Resolution Panel erred in holding without any basis that the arms length rate of corporate guarantee commission in respect of the guarantees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anches at Delhi, Chennai, Kolkata and Mumbai and distributors and C F agents situated all over India. 4. A reference u/s 92CA(1) of the I.T. Act was made to the Transfer Pricing Officer on 23.07.2012 for computation of the Arm s Length Price (ALP) in relation to International Transactions. The TPO passed the order u/s 92CA(3) of the Act dated 30.01.2014 who has made an adjustment of ₹ 9,99,10,416/- to Arm s Length Price (ALP) which was added to the income of the assessee company. The draft assessment order was passed u/s 143(3) r.w.s. 144C(1) of the Act. After communication on draft assessment order, the assessee filed the objection before the DRP in view of the provisions u/s 144C of the Act. The DRP-3 has also issued the direction on 22.12.2014. Thereafter, the assessment order was passed by assessing the income in sum of ₹ 2,85,27,74,985/- and book profit u/s 115JB of the Act in sum of ₹ 2,87,56,65,511/-, the assessee was not satisfied on the issues which has been raised above, therefore, the assessee has filed the present appeal before us. ISSUE NO. 1 5. At the very outset, the Ld. Representative of the assessee has argued that the issue no. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Industrial Policy of Assam and Himachal Pradesh are actually the reimbursement of actual cost incurred by the assessee, therefore, it is an operational subsidy which goes to reduce the cost of manufacture resulting in enhancement of the profit of the assessee. It is the contention of the assessee that as the power and transport subsidy granted to the assessee has a direct nexus to the earning of profit it is a part of the business income, hence, eligible for deduction under section 80IC. It is noticed, in case of CIT v/s Meghalaya Steels Ltd. (supra), the Hon'ble Guwahati High Court while examining assessee s claim of deduction under section 80IB / 80IC, analysed the industrial policy of the year 1971 of the Assam Government and found that the transportation and power subsidy given by the Government under the scheme is towards actual reimbursement of cost incurred by the industry in respect of power and transportation. 13. The Hon'ble Guwahat High Court after taking into consideration the principle laid down by the Hon'ble Supreme Court in Liberty India Ltd. (supra) and a host OF other decisions, opined that if the subsidy is non operational in nature, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidy and cost of production. When cost is reduced, it naturally helps in earning of profit. Therefore, such profits have to be treated as profit and gains derived from the industrial undertaking. 14. As far as power subsidy is concerned, the High Court referring to the industrial policy of the year 1997, as extended by the Industrial Policy of Assam 2003, noticed that it provides for power subsidy to be given to eligible industrial units for a period of five years from the date of commercial production. It was further noticed, the power subsidy is available in the form of reimbursement of fully paid power bills with certain ceilings. The Court observed, reimbursement of fully paid power bills will obviously reduce the cost of production of an industrial undertaking contributing thereby to the profit and gains derived by the industrial undertaking and augmenting the income of the industrial undertaking. Therefore, there is a direct and first degree nexus between the industrial activities of the undertaking on the one hand and the subsidy in the form of power subsidy on the other. The Court while coming to such conclusion referred to the decision of the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the industrial undertaking. Therefore, the ratio laid down would not apply to the power and transport subsidy which directly reduces the cost of production. The Court observed, the DEPB considered by the Hon'ble Supreme Court in Liberty India Ltd. (supra) is a case of non operational subsidy as much as it does not relate to production, whereas the transport and power subsidy provided under the industrial policy are operational in nature, inasmuch as, they are related to production of industrial undertaking. Thus, it was held by the Court that the income received on account of power and transport subsidy would form part of the profit derived from the industrial undertaking, hence, eligible for deduction under section 80IC. 15. Though, it may be a fact that the Hon'ble Himachal Pradesh High Court in the decisions referred to by the learned Departmental Representative has taken a contrary view in respect of transport and power subsidy but on a careful analysis of these decisions, it is found that the Hon'ble High Court while coming to its conclusion has relied upon the decision of the Hon'ble Calcutta High Court in Andaman Timber Ltd. (supra) and the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee towards transport and power. As the Departmental Authorities have not examined the nature of subsidy with reference to the relevant industrial policy resolution and subsidy schemes, we are inclined to restore the matter back to the file of the Assessing Officer for deciding afresh keeping in view the ratio laid down in the decisions referred to above as well as the observations made by us. As far as the issue of particular assessment year in which the subsidy deemed to have accrued, we may observe, the Assessing Officer did not raise this issue in course of assessment proceedings. It is only the learned Commissioner (Appeals) who has raised this issue. However, there is nothing in the order of the learned Commissioner (Appeals) to suggest that assessee was given opportunity to explain its stand on the issue. Be that as it may, whether the subsidy has accrued as income in the impugned assessment year has to be decided on the basis of the fact when it was approved / accepted by the concerned authorities. Only when the concerned Government authorities verify the quantum and approve, the subsidy crystallizes as income. The decisions relied upon by the learned Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said circumstances, the issue is hereby restored before the AO to decide the matter of controversy on the similar direction has given by Hon ble ITAT above in ITA. No.1299/M/2013 dated 20.04.2016. Accordingly, this issue is decided in favour of the assessee against the revenue for the statistical purposes. ISSUE NO. 2 7. Under this issue the assessee has challenged the confirmation of the addition of the expenditure incurred for by back shares which is revenue in nature and is allowable u/s 37(1) of the Act. At the very outset, the Ld. Representative of the assessee has argued that this issue is also covered by the decision of Hon ble ITAT in the assessee s own case for the A.Y.2009-10 in ITA. No.1299/M/2013 dated 20.04.2016. The copy of order is on the file in which the relevant finding is hereby reproduced as under.:- 39. We have considered the submissions of the parties in the light of the case laws relied upon and perused the material available on record. As could be seen from the assessment order as well as the order of the first appellate authority, assessee s claim was not considered only for the reason that it was not made through a revised return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the aforesaid decision the Tribunal, Mumbai Bench, in Godrej Household Products Ltd., ITA no.7369/Mum./2010, dated 22nd November 2013, held the rate of guarantee commission of 0.5% as the arm's length price of the corporate guarantee provided by the assessee to its A.E. In the present case also, there is no dispute that the internal CUP by way of letter received from HSBC indicates that the commission charged for financial guarantee is 0.5%. Further, it is relevant to note that the Department in assessee s own case has accepted the arm's length price of corporate guarantee @ 0.5% in the assessment year 2006 07 and 2007 08. Thus, on consideration of overall facts and circumstances in the light of judicial pronouncements referred to above, we are of the considered opinion that the arm's length price of the corporate guarantee should be fixed at 0.5%. The Assessing Officer / Transfer Pricing Officer is directed to make adjustment accordingly. Ground no.12, raised by the assessee is partly allowed. 10. In view of the decision of the Hon ble ITAT mentioned above. We decide this issue in favour of the revenue against the assessee. ISSUE Nos. 4 to 7 11. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antee should be fixed at 0.5%. The Assessing Officer / Transfer Pricing Officer is directed to make adjustment accordingly. Ground no.12, raised by the assessee is partly allowed. 12. Since the assessee is fully covered in favour of the assessee by the above said decision and the facts are not distinguishable at this stage. Therefore, in the said circumstances, the arm s length price of corporate guarantee is hereby restricted to the extent of 0.5%. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE Nos. 8 to 12 13. At the very outset, the Ld. Representative of the assessee has argued that this issue is squarely covered by the decision of Bombay High Court in the case of Aurionpro Solutions Ltd. (ITA. No.1869 of 2014) (Bom High Court) and Marico Ltd. (ITA. No.9958/M/2011 8713/M/2011) (Mum), therefore, in the said circumstances, the claim of the assessee is liable to be allowed. However, on the other hand, the Ld. Representative of the Department has refuted the said contention. The factual position is this that the assessee company has given loan amounting to GBP 5,00,000/- to its AE namely Godrej Netherlands B.V. (GNBV) in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent assessee preferred an appeal to the Tribunal. The Tribunal by the impugned order held : (a) that the interest free loan extended by a company to its Associate Enterprise comes within the ambit of International Transaction and issue to be examined in such a case would be the ALP of such an International Transactions; and (b) With regard to quantum of addition on account of interest by ALP the impugned order held that as the amounts were advanced to Associated Enterprises in Germany, the rate of interest is to be determined on EURIBOR rate of interest i.e. rates prevailing in Europe. Thus partly allowed the respondent assessee's appeal by applying the decision of the Tribunal in the case of VVF Ltd. Vs. DCIT, (ITA No.673/Mum/06) and DCIT Vs. Tech Mahindra Ltd. (46 SOT 141) by holding that the loan advanced to an Associate Enterprise situated abroad, the rate of interest to be applied is the rate prevailing in the country where the loan has been consumed. 6. Mr.Pardiwala, learned Senior Advocate for the respondent-assessee pointed out that although they have raised an issue of transaction not being international transaction, before the Tribunal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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