TMI Blog2023 (8) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, we deem it fit and appropriate to consider the alternative plea raised by the Ld.AR in his written submissions and therefore direct the Ld. TPO to adopt the USD LIBOR rate while benchmarking the ALP for the interest on outstanding guarantee commission receivable by the assessee. Accordingly, this ground is allowed for statistical purposes. Notional interest on share application money given to the AEs - HELD THAT:- As nothing brought on record by the Ld. Revenue Authorities to suggest that the transaction was a sham. Therefore judicially following the case of Aegis Limited [ 2019 (4) TMI 858 - BOMBAY HIGH COURT] we are inclined to delete the addition of notional interest made by the Ld. TPO and hereby direct the TPO to delete the addition made on account of notional interest on the share application money outstanding. We therefore allow the appeal of the assessee on this ground. - SHRI DUVVURU RL REDDY, HON BLE JUDICIAL MEMBER SHRI S BALAKRISHNAN, HON BLE ACCOUNTANT MEMBER For the Appellant : Sri GVN Hari, Advocate For the Respondent : Sri MN Murthy Naik, CIT-DR ORDER PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee filed an appeal before us. 4. The assessee has raised eight grounds in its appeal which comprises of the following issues: (i) Commission on Corporate Guarantee upheld by the Ld. DRP @ 1.90% (ii) Notional interest on Outstanding Guarantee Commission Receivables at Rs. 72,03,389/- upheld by the Ld. DRP . (iii) Interest on Share Application Money and investment in Preference Shares being re-characterized as interest free unsecured loans for Rs. 67,17,88,665/- upheld by the Ld. DRP. 5. Before us, at the outset, the Ld. AR submitted that this Bench has held the Corporate Guarantee Commission as an international transaction and has upheld the commission @ 0.50% on the outstanding guarantees issued. The Ld. AR relied on the decision of this Bench in the case of M/s. Devi Sea Foods Limited vs. DCIT in ITA No. 156/Viz/2022 (AY: 2018-19), dated 16/12/2022. Further the Ld. AR also submitted that in assessee s own case in ITA No. 553/Viz/2018 (AY: 2014-15), dated 3/4/2019 this Bench has considered the commission @ 1.90% based on the TP study for that Asst. Year. The Ld. AR therefore pleaded that similarly for the current assessment year, the assessee s Arm s Length Pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rantee commission receivable is not an international transaction. The Ld. AR therefore pleaded that in the alternative if this transaction is considered as an international transaction it can be benchmarked with reference to the USD LIBOR rates. Per contra, the Ld. DR relied on the order of the Ld. DRP and supported the directions given by them. 8. We have heard both the parties and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly, outstanding receivables is considered as an international transaction. As per the Explanation (i)(c) to section 92B of the Act, in the instant case it cannot be disputed to be an international transaction. The contention of the Ld. AR is against the benchmarking @ 7% on the outstanding guarantee commission receivable. The Ld. AR also demonstrated that the AE is in financial difficulties and hence the assessee has subscribed the preference share capital issued by the AE. In the assessee s own case for the AY 2013-14, this Coordinate Bench of the Tribunal relying on the decision of the Motherson Sumi Infotech Designs Limited vs. DCIT reported in (2018) 52 CCH 0122 (Delhi) and in the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the above, the Ld. AR submitted that the assessee has subscribed to share capital of AE and has not given any kind of financing. 10. We have heard both the parties and perused the material available on record and the orders of the Ld. Revenue Authorities. We find from the submissions made by the Ld. AR that the assessee has invested in the 8% of the preference share capital in the AE companies. Accordingly 8% preference shares were allotted to the assessee for Rs. 2,64,79,39,036/-. The balance amount of Rs. 3,99,80,12,401/- is held by AE s as share application money pending for future allotments. The Ld. AR in his submissions has mentioned that the Ld. TPO has miscalculated the investment of Rs. 887,71,00,000/- and computed the ALP by charging the interest @ 14.05% on such amount. It is also found from the written submissions of Ld.AR, that the investments in the share capital of the AE is part of the business strategy to acquire high quality coal on long term basis at a concessional price and to facilitate backward integration of the power projects. It is also found that there were no fresh borrowings during the FY 2016-17 as demonstrated by the Ld. AR in his written subm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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