TMI Blog2020 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed at 0.25% by adopting as internal CUP the guarantee commission charged by the ICICI Bank on provision of bank guarantee to the assessee. Ground no.1, raised by the assessee is partly allowed. Addition made on account of adjustment made to the arm s length price of interest on short term loan granted to the AE - HELD THAT:- Looking at the financial needs of the subsidiary, the assessee had provided short term loan for a period of 15 days or thereabout. For providing such loan, the assessee had charged interest at LIBOR plus 1.5%. The Transfer Pricing Officer, however, did not accept the rate of interest charged by the assessee. Adopting the prime lending rate of State Bank of India @ 7.50% and adding a mark up of 1.50%, the Transfer Pricing Officer determined the arm's length interest rate @ 9.% and accordingly determined the arm s length price of interest to be charged on the loan provided to the AE. While deciding the issue, learned DRP directed the Assessing Officer to charge interest @ LIBOR plus 4%. The fact that the assessee has provided a short term loan only for a period of 15 days to the AE has not been disputed. It is further noticed that assessee s AE in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als have been filed by the same assessee challenging the assessment orders passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short the Act ) for the assessment years 2011 12 and 2012 13, in pursuance to the directions of the Dispute Resolution Panel 1 (DRP), Mumbai. ITA no.2055/Mum./2016 Assessment Year 2011 12 2. In ground no.1, the assessee has challenged the addition made on account of adjustment made to the arm s length price of Corporate Guarantee issued in respect of payment of outstanding hire charges. 3. Brief facts are, the assessee, a resident company, is engaged in the business of chartering of off shore supply vessels. The assessee s Associated Enterprise (AE) Garware Offshore International Services Pte. Ltd. (GOISPL), Singapore, has hired certain vessels from third parties on a bareboat charter basis. In respect of the outstanding bareboat charter hire charges to be paid by the AE, the assessee provided a performance guarantee in case there is a default of payment to the owner. During the proceedings before him, the Transfer Pricing Officer on examining the material available on record noticed that assessee s AE had hired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State Bank of India, Singapore Branch, for providing bank guarantee cannot be applied as a Comparable Uncontrolled Price (CUP) to determine the arm s length price of performance guarantee. In this context, the learned Authorised Representative relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Everest Kento Cylinders Ltd., ITA no.1165/2013, dated 8th May 2015. Further, he submitted, the assessee itself has availed a Bank guarantee from ICICI Bank with guarantee commission charged @ 0.25%. Therefore, he submitted, the guarantee commission charged by the ICICI Bank should be considered as internal CUP and arm s length price of the commission for providing performance guarantee should be computed by applying the rate of 0.25%. 7. The learned Departmental Representative relied upon the observations of learned DRP. 8. We have considered rival submissions and perused the material on record. Before we proceed to decide the issue, we deem it appropriate to put on record that before us the learned Authorised Representative has fairly submitted that the assessee would not like to raise the issue as to whether provision of performance/corporate guarante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 15 days or thereabout. For providing such loan, the assessee had charged interest at LIBOR plus 1.5%. The Transfer Pricing Officer, however, did not accept the rate of interest charged by the assessee. Adopting the prime lending rate of State Bank of India @ 7.50% and adding a mark up of 1.50%, the Transfer Pricing Officer determined the arm's length interest rate @ 9.% and accordingly determined the arm s length price of interest to be charged on the loan provided to the AE. While deciding the issue, learned DRP directed the Assessing Officer to charge interest @ LIBOR plus 4%. 12. We have considered rival submissions and perused the material on record. The fact that the assessee has provided a short term loan only for a period of 15 days to the AE has not been disputed. It is further noticed that assessee s AE in Singapore has availed a loan from SBI, Singapore branch at interest rate of six months LIBOR plus 250 basis points. Considering the above, we are of the view that the rate of interest charged by the assessee is at arm's length requiring no further adjustment. Ground no.2, is allowed. 13. In ground no.3, the assessee has challenged the addition on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to charge such interest not on the assessed income, but on the income returned by the assessee. Thus, ground no.5, is partly allowed. 22. Ground no.6, relates to initiation of penalty proceedings under section 271(1)(c) of the Act. 23. The ground raised by the assessee being pre mature at this stage is dismissed. 24. In the result, appeal is partly allowed. ITA no.7321/Mum./2016 Assessment Year 2012 13 25. In ground no.1, the assessee has challenged the adjustment made to the arm s length price of performance guarantee provided towards outstanding bareboat charter hire charges. 26. The issue raised in this ground is similar to ground no.1 raised by the assessee in its appeal being ITA no.2055/Mum./2016. Facts being identical, therefore, our decision therein will apply mutatis mutandis to this ground also. Accordingly, we direct the Assessing Officer to compute the arm s length price of performance guarantee commission @ 0.25%. 27. In ground no.2, the assessee has challenged the addition made on account of adjustment to the arm s length price of corporate guarantee provided for loan availed by the AE. 28. The issue raised in this groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 139(1) of the Act. 33. In ground no.6, the assessee has challenged the levy of interest under sections 234B and 234C of the Act. 34. Having considered rival submissions, we hold that since levy of interest under section 234B of the Act is consequential, there is no need for adjudication. As regards levy of interest under section 234C of the Act, we direct the Assessing Officer to charge such interest not on the assessed income, but on the income returned by the assessee. Thus, ground no.6, is partly allowed. 35. Ground no.7, relates to initiation of penalty proceeding under section 271(1)(c) of the Act. 36. The ground raised by the assessee being pre mature at this stage is dismissed. 37. In the result, appeal is partly allowed. 38. To sum up, both the appeals are partly allowed. 39. Before we part, it is necessary for us to deal with a procedural issue relating to pronouncement of the order. The hearing of this appeal was concluded on 06.02.2020. As per rule 34(5) of the Income Tax (Appellate Tribunal) Rules,1963, ordinarily the appeal order has to be pronounced before expiry of ninety (90) days from the date of conclusion of hearing of appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon‟ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure‟ has been defined in Black‟s Law Dictionary, as an event or effect that can be neither anticipated nor controlled‟ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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