TMI Blog2021 (4) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... of phraseology of the submissions made during proceedings. There has to be substantive evidence on record to corroborate with the statements. The findings of the TPO and the Assessing Officer in draft assessment order that the assessee has advanced loans from undisclosed sources is merely based on surmises and conjunctures. It is a well settled legal proposition that suspicion, howsoever strong, cannot take place of evidence. Except from the letters referred above there is no material to back the observations made by the TPO/AO. On the contrary, the assessee has furnished various documents to substantiate that the assessee was not part of syndicate that has extended loan facility to Tata Tea UK, however, the same have been ignored by the TPO and the assessing officer while passing the draft assessment order. In the absence of any cogent evidence, the Revenue has failed to discharge its onus while alleging that there was an outflow of funds from India by assessee or receivables from Rabobank London have been squared off for diversion of funds to syndicate for advancing loan to Tata Tea UK. Assessee cannot be expected to prove negative. The onus is on the Department to substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and exclusively' for the purpose of business. This fact has not been disputed by the Assessing Officer. We find no merit in ground No. 3 and 4 of the appeal by the Revenue, hence, dismissed. - ITA Nos. 1584, 1583/MUM/2014 and C.O. No. 73/MUM/2014 - - - Dated:- 26-3-2021 - Vikas Awasthy , Member ( J ) And N. K. Pradhan , Member ( A ) For the Appellant : A. Mohan For the Respondents : Percy Pardiwala and Nitesh Joshi ORDER Per Vikas Awasthy , JM The appeal by the Revenue in ITA No. 1584/Mum/14 for 2006-07 is directed against the assessment order dated 07/01/2014 passed under section 143(3) r.w.s. 147 and 144C(13) of the Income Tax Act, 1961 (in short 'the Act'). The appeal by Revenue in ITA No. 1583/Mum/2014 for assessment year 2007-08 is directed against the assessment order dated 07/01/2014 passed under section 143(3) r.w.s. 147 and 144C(13) of the Act. The assessee has filed cross objections in appeal by the Revenue for assessment year 2007-08. Since, the issues involved in both these appeals and cross objections are inter connected, these appeals are taken up together for adjudication and are decided by this common order. 2. Both the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PSM 3. Fee for Investment Bankking Services- Mergers Acquisitions(Received) 47,51,516 PSM 4. Fees for Loan Support services (Received) 4,90,79,381 PSM 5. Guarantee Fee (Paid) 3,13,168 CUP 6. Fees for services (Paid) 5,63,600 CUP 7. Interest on ECB(Paid) 3,81,92,596 CUP 8. Payment for Support Services(Paid) 14,71,32,881 CUP 9. Receipt for support service charges (Received) 80,38,180 CUP 10. Reimbursement of expenses(Received) 30,77,605 CUP 11. Reimbursement of expenses (Paid) 1,89,28,418 CUP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft assessment order in para 5.9 to contend that in assessment year 2008-09 an adjustment to the tune of ₹ 29.50 crores was made on account of interest foregone in respect of amount advanced to Rabobank London (AE). Since, the assessee failed to disclose the loan advanced, an amount of ₹ 297.71 crores in respect of loan extended to Tata Tea UK through consortium was added u/s. 69 of the Act. The ld. Departmental Representative vehemently defended the findings of Assessing Officer in draft assessment order. The ld. Departmental Representative finally submitted that the assessee has failed to substantiate that the assessee had not advanced loan to Rabobank London. To discharge its onus, the assessee could have furnished copy of Balance Sheet of Rabobank London. 6. In respect of grounds No. 3 4 of the appeal, the ld. Departmental Representative submitted that DRP has erred in deleting the addition in respect of interest paid on External Commercial Borrowings (ECB), guarantee fee paid and service fee paid. The assessee allegedly benchmarked the transaction by applying CUP. However, in proceedings before the TPO, the assessee admitted that there was no evidence of carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book) was written by Chirag Vajani, Financial Controller of assessee. It was inadvertently stated in the letter that the assessee is part of consortium. The statement made in the letter was retracted by Mr. Vajani in his affidavit dated 04/03/2013 (at page 1044 to 1047 of the paper book). Thus, the statement made on behalf of the assessee by Chirag Vajani was retracted. 7.1. The ld. Counsel for the assessee submitted that a perusal of letter dated 17/01/2013 at page 1036 and 1037 of the Paper Book would show that Rabobank Singapore had clarified that in lieu of assessee originating the loan transaction and getting the opportunity to issue the credit allocation, is entitled to fee equivalent to 2/8th of the net income earned by Rabobank Singapore under loan transaction. The fee received by assessee through Rabobank Singapore was offered to tax. The transaction between the assessee and Rabobank Singapore was found to be at arm's length and the same was accepted by the Department. 7.2. The ld. Counsel for the assessee further referred to the letter dated 28/09/2011 from Rabobank London at page 1034 and 1035 giving the list of banks/financial institutions that were part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to substantiate that ECB loan facility was availed for business purpose only. The DRP accepted the contentions of the assessee and deleted the adjustment. The ld. Counsel for the assessee further contended that the assessee had paid guarantee fee to Rabobank Hong Kong for the loan guaranteed by the said AE. The assessee had extended loans to Noble Grain/Siddarth Soya. The interest on said loan was guaranteed by Rabobank Hong Kong. In case of default in payment of interest, the assesse would have recovered the interest amount from Rabobank Hong Kong. The assessee paid guarantee commission/fee to Rabobank Hong Kong after deducting tax at source. These facts have not been disputed. Consequently, the DRP deleted adjustments. 8.1. With regard to payment of service fee, the ld. Counsel for the assessee submitted that the assessee had sought advisory services from Rabobank Netherlands in respect of certain specialized project undertaken by it. The TPO has not disputed rendering of services nor the TPO disputed arm's length of transactions. The only reason for making adjustment is 'benefit test'. The TPO has acted beyond jurisdiction in questioning benefit of services. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... originating transaction for extending credit facility to Tata Tea UK. The assessee forwarded the opportunity to Rabobank London, its AE. Since, exposure to credit facility sought by Tata Tea UK was substantial, Rabobank London along with other participating banks/financial institutions formed a consortium for extending the credit facility. Rabobank London vide letter dated 28/9/2011 (at page 1034 of paper book) has given the details of constituents of consortium and the credit facility extended by each of them. Rabobank London retained GBP 77.5 million and syndicate contributed GBP 82.5 million: S.No. Name of the participating member Amount of loan disbursed during FY 2005-06 (BGP) 1. Citibank 20,000,000 2. Royal Bank of Scotland 20,000,000 3. Allied Irish Bank 14,166,667 4. HBOS 14,166,667 5. Lloyds TSB 14,166,667 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan to Tata Tea UK. The assessee cannot be expected to prove negative. The onus is on the Department to substantiate that the assessee has advanced amount to Rabobank London for loan to Tata Tea UK or assessee's funds have been diverted in any manner to fund part of said loan. We find that the TPO and the assessing Officer in draft assessment order has placed reliance solely on the letters furnished by an employee of the assessee without there being any corroborative evidence for making addition u/s. 69 of the Act. 13. The second limb of presumption is that the commitment charges received by the assessee are in fact, part of interest income on the loan advanced. The assessee has clarified that the role of assessee was limited to identifying and referring the opportunity to Rabobank London. Rabobank London is the lead arranger for the loan and the other financial institutions/banks joined hands to form a consortium for extending loan facility to Tata Tea UK. The assessee is remunerated for the services rendered by way of share in upfront fee, participation/commitment fee. The share in participation/commitment fee at some percentage (0.40%) of the credit allocation of GBP37.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. The TPO cannot sit in the judgment whether these expenses were necessary for conducting the business or whether any benefit has been derived from the expenditure so incurred. The requirement of the law is that the expenditure should have been incurred 'wholly and exclusively' for the purpose of business. This fact has not been disputed by the Assessing Officer. We find no merit in ground No. 3 and 4 of the appeal by the Revenue, hence, dismissed. 16. In the result, appeal by the Revenue for assessment year 2006-07 is dismissed. ITA NO. 1583/MUM/2014 (A.Y. 2007-08) C.O. 73/MUM/2014: 17. The Revenue in appeal has raised solitary ground. The same reads as under: Whether in the facts and in the circumstances of the case and in Law, the Ld. DRP erred in directing the Assessing Officer not to charge any notional interest on the unexplained investment of ₹ 297 crores as the DRP for the A.Y. 2006-07 has deleted the addition even though the Department is filing 2nd appeal to the ITAT for A.Y. 2006-07? 18. The ground of appeal in assessment year 2007-08 is a corollary to the issues raised by the Revenue in appeal for assessment year 2006-07. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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