TMI Blog2023 (9) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... the transfer pricing adjustment made in respect of special purpose loan of USD 110 million. Accordingly, ground No.1 raised by the assessee is allowed. Foreign tax credit tax while determining the tax liability on the assessee - HELD THAT:- We find that the interest income received by the assessee from Home Field International Ltd. (AE) was duly offered to tax by the assessee company in Mauritius. The assessee paid the due taxes thereon at Mauritius. The assessee is only seeking foreign tax credit for the taxes already paid at Mauritius since the very same interest income received from AE is also subjected to tax in India in the hands of the assessee. We find that this is a legitimate claim of the assessee and hence, we direct the ld. AO to grant foreign tax credit tax while determining the tax liability on the assessee pursuant to this Tribunal order. Accordingly, the additional ground raised by the assessee is allowed. Disallowance of payments made to various institutions by invoking the provisions of section 40A(9) - HELD THAT:- As relying on assessee own case [ 2019 (4) TMI 2064 - ITAT MUMBAI] we direct the ld. AO to delete the disallowance made in this regard. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that in order to apply this provision in the first instance, the Managing Director and Executive Director should be shareholders and they should have been paid commission in lieu of distribution of profit or as dividend. Since the ld. AR placed on record the list of shareholders for the first time before us to drive home the point that both the MD and ED were not shareholders of the assessee company at the relevant point in time, we deem it fit and appropriate to restore this issue to the file of the ld. AO for the limited purpose of verification of facts as to whether Mr. P R Menon and Shri Homi R Khushrokhan were shareholders of the assessee company at the relevant point in time. If they are not found to be shareholders, then the disallowance made u/s.36(1)(ii) of the Act should be deleted. Ground raised by the assessee is allowed for statistical purposes. Deduction made in respect of post retirement medical benefits provided to retired employees by the assessee company - assessee company has a scheme whereby the existing employees and employees who had retired from the services of the company on attainment of normal retirement age, are entitled for their medical c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the order against the final assessment order passed by the Assessing Officer dated 31/12/2009, 31/12/2010 19/10/2011 u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel-II (DRP in short) u/s. 144C(5) of the Act dated 27/09/2010 30/09/2011 for the A.Y. 2006-07 2007-08. 2. The ground No. 1 raised by the assessee is with regard to the transfer pricing adjustment on account of low rate of interest charged on advance to M/s. Home Field International P. Ltd (Associated Enterprises-AE). 2.1. We have heard rival submissions and perused the materials available on record. Home Field International Pvt. Ltd. (HIPL) in Mauritius is a 100% subsidiary of the assessee formed with a view to make investments globally. The assessee was bidding for acquisition of Egyptian Fertiliser Company through HIPL With a view to fulfil the pre-bid condition of 'Proof of funds letter' from an international banker, the assessee had lent USD 110 million to HIPL to show availability of funds with them. The lending of funds was from 16.05.2005 to 26.06.2005 i.e. for a period of 41 days. Since, the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia in the sum of USD 110376142.02, a sum of USD 110 million represent receipt of principal portion of the loan and interest of USD 3,76,247 after reducing bank charges of USD 105. 2.2. The monies received from the assessee by the AE was parked by the AE with Barclays bank in the form of short term deposits at Mauritius. The monies were lying with bank account at Mauritius in the name of AE for a period of 41 days and it had fetched interest of USD 376247.02. Since the bid was unsuccessful on 28/06/2005, the AE withdrew the amount in the sum of 110376247.02 on 28/06/2005 and returned the money to the assessee on the very same day. This goes to prove that the AE had actually received interest @3% on the funds parked by it with Barclays bank. The very same interest amount of USD 376247.02 had been returned to the assessee company by the AE without retaining any margin thereon. This peculiar fact itself goes to prove that the fund that was given to AE was not at the disposal of the AE to be utilised for any other purpose, rather it was used for special purpose funding to participate in the bid, for which purpose the funds were placed in the form of short term deposits with Barclay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas acquisitions. 3. To adjudicate on this issue, a few material facts, as discernible from material on record, need to be stated. The assessee before us is a company now merged in Bennett Coleman Co. Ltd., the flagship company of a well-known Indian media group- commonly known as 'Times Group'. At the relevant point of time, the assessee company, then known as Times Infotainment Media Ltd (TIML-India, in short), was a fully owned subsidiary of Bennett Coleman Co Ltd and was engaged, inter alia, in the radio broadcasting business. When the Times Group decided to expand its wings in the radio broadcasting business and acquire overseas companies engaged in this line of business, as is stated, it was considered commercially expedient to make these investments through the assessee company. A public listed company in the United Kingdom, by the name of Scottish Media Group plc (SMG-UK, in short), wanted to disinvest in its radio broadcasting business, and that is the reason it put to auction its entire shareholding in Virgin Radio Holdings Limited, UK, (Virgin Radio, in short) which was held through SMG's wholly-owned subsidiary Ginger Media Group Ltd, UK. (Gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. As a result of these transactions, TIML Golden became a wholly-owned subsidiary of TIML Global, TIML Global became a wholly-owned subsidiary of TIML, and, TIML anyway was already a wholly-owned subsidiary of BCCL. With this structure in place and the deal having been finalized, the flow of funds started to complete the transaction. TIML received Rs. 388.85 crores as interest-free deposits from its holding company, i.e. BCCL, and Rs. 100 crores as a subscription for 1% non-cumulative preference shares. TIML-India then remitted UK 56,824,316 (UK 1.2 million for equity, and balance UK 55.824 million as an interest-free loan to TIML-Global on 27 th June 2008. Once this amount of UK 56.82 million was received by TIML-Global, it paid UK 53.51 million, on that day itself, on behalf of TIML-Golden, for the acquisition of Virgin Radio shares, and the balance amount of TIML-Golden for other acquisition-related costs. The acquisition of shares in Virgin Radios by TIML-Golden was completed on 30th June 2008. A further payment of UK 3,75,000, as an interest-free loan, was made by TIML India to TIML Global for the working capital costs. It was in this backdrop that form 3CEB file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was confronted with, what appeared to us, infirmities in the application of CUP method, it was his submission that even if there are some shortcomings in the determination of the arm's length price, though he maintains that there are no such infirmities in substance, the matter may be remitted at the assessment stage for fresh adjudication on the determination of arm's length price. He fairly submits that if Indian PLR is not good enough as a benchmark for this loan, in all fairness, at least LIBOR is a good enough benchmarking tool for GBP denominated loan. Learned counsel reiterates his submissions, submits that this transaction is shown as a loan in the books of accounts as that is the only way in which it can shown, under the legal requirements, but then nothing really turns on how the transaction is treated for accounting purposes. Learned counsel for the assessee has vehemently opposed this suggestion and submitted that what is before this Tribunal is an adjudication on the arm's length price adjustment made and confirmed by the authorities below; if this arm's length price adjustment is incorrect, the Tribunal has to delete the same. As for what other remedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n what is the true nature of the transaction in question. The transaction is a remittance of Rs. 477.10 crores to a wholly-owned subsidiary for making further payment of the cost of acquisition of a target company in the name of a step-down subsidiary which is fully owned by this fully owned subsidiary of the assessee company. Let us not forget the fact that the assessee company was one of the successful bidders in the purchase of the entire equity capital of Virgin Radios, which was held by Ginger Group plc UK- a wholly-owned subsidiary of the Scottish Media Group plc. Upon carrying the due diligence, and completion of other prerequisite steps, the assessee makes a final proposal, on 10 th March 2008, with respect to the acquisition of Virgin Radios from Ginger Group plc UK, when TIML Global UK was not even in existence. TIML Global, the AE to which the remittance in question is made, was incorporated on 13 th June 2008 in the UK and acquired by the assessee on 18 th June 2008. Yet this final offer states that an SPV is formed especially for the purpose of acquiring Virgin Radios, and this SPV will be entirely funded from internal resources of the assessee company and its India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king remittance to an independent enterprise with the corresponding obligation to use the funds so remitted for acquiring a target company already selected by, and on the terms already finalized by, the entity remitting the funds. The essence of the transaction is a targeted acquisition and providing enabling funds for that purpose. Such a transaction, in our humble understanding, cannot be equated with providing funds to another enterprise as a loan simpliciter, on a commercial basis, which essentially implies that such a borrower can use the funds so received in such manner, even if subject to broad guidelines for purpose test, in furtherance of borrower's business interests. Ironically, however, that is precisely what the Transfer Pricing Officer has done and has been approved by the Dispute Resolution Panel as well. 14. It is also an admitted position that TIML-Global is a special purpose vehicle. A special purpose vehicle, or SPV as it is commonly called, is an entity that is set up for a special purpose or a special project. SPVs are often used by the promoters of a project or business to isolate the financial or legal risk associated with the project or activity fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is possible when the lender has functional control over the borrower, and that very control vitiates the arm's length situation. Section 92F(ii), as we have noted earlier, defines arm's length price as a real or hypothetical price in the same or materially similar transaction between persons other than associated enterprises, in uncontrolled conditions . In the first place, an enterprise and its SPV are inherently associated enterprises. The definition of 'associated enterprises' under section 92A(1) covers an enterprise which participates, directly or through one or more intermediaries, in the management or control or capital of the other enterprise . An SPV is entirely managed, entirely controlled and entirely owned by the enterprise which sets up the SPV. So far as section 92A(2) is concerned, SPVs are covered by more than one clause as the entire voting power (clause a) and entire share capital (clause b) of the SPV is held by the owner of that SPV, but loan advanced, if the remittance is to be treated as a loan to the SPV, by the owner of the SPV is clearly more than 50% of the book value of the assets owned by the SPV (clause c) at each stage. That is one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities (i.e. Indian entity and the overseas entity set up for a particular purpose or project), and these entities are independent of each other. In our humble understanding, when the overseas entity is, from a commercial perspective, a de facto non-entity and it has come into legal existence only for the furtherance of the interests of the company providing the wherewithal, all the gains that such an overseas entity belongs to the Indian company. The SPV in such a situation is no more than a conduit entity. In an arm's length situation, when an SPV is created for some specific project or purpose, therefore, the net gains of that project or purpose must go to the person(s) sponsoring the SPV. The next logical question then would be as to how does this principle translate into actionable reality. We find inputs from transfer pricing legislation in a developing economy in the African continent. Rule 8(1) of the Nigerian Income-tax (Transfer Pricing) Regulations 2018, which we have referred to and reproduced earlier in this order, throws important light on this aspect. What this rule holds, in plain words, is that an SPV, which does not control the financial risks associated with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affairs of its step-down subsidiary TIML-Golden as well, reflect a loss figure. In other words, there is no economic gain to the SPV in the relevant financial period, and, therefore, even going by this theory, the arm's length price of providing funds to the SPV, under the CUP method, would be 'nil'. Except for this arm's length price imputation- if all it can be so imputed under the CUP method, no amount of commercial interest, as in a borrowing simpliciter- whether LIBOR based or PLR based, can be attributed to the funding to the SPVs. The action of the authorities below on this point, thus, is unsustainable in law. Ground Nos 2 to 9 are thus allowed in the terms indicated above. 2.5. The only distinguishing feature of the assessee s case with that of the facts prevailing in Bennett Coleman And Co. Ltd supra is that, in that case, special purpose lending was given for the purpose of participation in the bid and the bid was successful, whereas in the instant case, the bid was not successful. Barring this, all the facts are identical. Hence, ratio laid down by the Co-ordinate Bench of this Tribunal supra would be squarely applicable to the facts of the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve heard the rival submissions and perused the materials available on record. We find that the assessee had made payment of Rs. 81,26,900/- to as entrance fee subscription and contribution towards service and facility use to the following persons:- Corporate Office Tata Sports Club - Rs 3,30,000 Mithapur Mithapur Nutan Balshikshan Sangh - Rs 19,00,000 Kindergarten Primary School - Rs 10,75,000 Flag Day Celebration - Rs 2,150 Babrala Tatachem D A V Public School - Rs 44,44,813 Tatachem Sports and Cultural Club - Rs 3,71,337 Total - Rs 81,26,900 5.2. The said payments were sought to be disallowed by the ld. AO by applying the provisions of section 40A(9) of the Act pursuant to the directions of the ld. DRP. Both the parties mutually agreed that this issue has already been settled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 2440/Mum/2011 dated 06.07.2022 for A.Y. 2004-05 6.3. The ld. AR also stated that the similar issue has been decided by this tribunal in the case of assessee s own subsidiary Rallis India Ltd case in ITA No. 5701/Mum/2008 for A.Y. 2004-05 ; in the case of BPL Refrigeration Ltd vs ACIT reported in 91 ITD 203 and in the case of Tata Autocomp Ltd in IT(TP)A No. 7596/Mum/2012 dated 12.06.2013. 6.4. Respectfully following the aforesaid judicial precedents, the Ground No. 4 raised by the assessee is allowed. 7. The Ground No. 5 raised by the assessee is with regard to disallowance of computer upgradation expenses, which was stated to be not pressed by the ld. AR as depreciation has been granted to the assessee in the later years. Hence Ground No. 5 raised by the assessee is dismissed as not pressed. 8. The Ground No. 6 raised by the assessee is challenging the denial of deduction u/s 80IA of the Act in respect of profits derived by the Mithapur Power Plant. 8.1. We have heard the rival submissions and perused the materials available on record. The assessee has claimed deduction u/s 80IA of the Act in respect of its Power Plant comprising of High-Pressure Boiler (HPB3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent adverse developments on facts. The method of working of the profit of the eligible undertaking adopted for the year is the same as it was for A.Y. 2001-02. This method has been consistently followed by the assessee in all the subsequent years also. 8.2. The audit report in Form 10CCB for the year under consideration is enclosed in page 125 of the paper book. The profit and loss account of the eligible power unit is enclosed in page 133 of the paper book. The workings for deduction u/s. 80IA of the Act are enclosed in page 131 of the paper book. 8.3. For the year under consideration, the sales figure for electricity is derived by multiplying units of electricity produced by the power plant with the fair market transfer price of Rs. 4.74 per unit. The rate of Rs. 4.74 per unit is derived as a equivalent cost of power per unit if the power would have been purchased from local state electricity board- i.e. Gujarat State Electricity Board. This is done as per the provisions of section 80(IA)(8) of the Act which provides for adoption of Fair Market Value (FMV) for goods transferred to another business of the assessee. 8.3.1. The sale of steam generated by the power proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be eligible in respect of captive power plant i.e. power generated in the power plant when captively conceived by other non- eligible units, deduction u/s. 80IA of the Act would be eligible for the said power plant. This issue is no longer res integra in view of the decision of the Hon ble Madras High Court in the case of Tamilnadu Petro Products Ltd. vs. ACIT reported in (2011) 51 DTR (Mad) 67. Similarly, the Hon ble Delhi High Court in the case of CIT vs. Orient Abrassive Ltd in ITA Nos. 991/2010, 1078/2010, 1077/2010, 1079/2010 and 535/2011 dated 31/07/2014 had also held that assessee would be eligible for deduction u/s. 80IA of the Act in respect of captive consumption of power generated from the eligible unit. Respectfully following the aforesaid decisions, we hold that assessee was duly justified in claiming deduction u/s. 80IA of the Act for captive consumption of power. In any case, the very same deduction was granted under the same facts and circumstances by the ld. AO himself in A.Y. 2001-02. Once, the deduction u/s. 80IA of the Act has been granted in the first year of its claim, then in subsequent year, the same cannot be withdrawn unless there are adverse factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered from the waste heat recover boiler in the form of steam. During the year ended March, 2003, the total quantity of steam generated is 1,02,295 MT. The said steam is used as power for the manufacture of PVC and Ilmenite and 6,240 MT was used towards internal consumption. During the year 66,990 MT of steam was consumed in the manufacture of PVC and 29,065 MT was consumed in the manufacture of Ilmenite. 18.9 The submission of the learned AR of the assessee is that since power in the form of steam was generated by the captive power plant and consumed in the manufacture of PVC and Ilmenite, therefore, the assessee is entitled for deduction under section 80-IA. Further, the learned AR submitted that on identical set of facts, the department filed Special Leave Petition before Hon ble Supreme Court against the judgment of Hon ble Madras High Court in T.C. No. 1773 of 2008 and vide judgment dated 6 th November, 2008, the Apex Court dismissed the department s appeal. In the said judgment Madras High Court dismissed the Department s appeal against the decision of Tribunal holding that the assessee was entitled to claim deduction under section 80-IA of the Act on the value of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ( the Act for short) in respect of the profits arising out of such activity. Obviously, therefore the attempt on the part of the assessee was to claim larger profit under the unit which was eligible for such deduction as against this, attempt of the revenue would be see that the ineligible unit shows greater profit. 6. The Tribunal in the impugned judgment extracted extensively from the order of CIT (Appeals) and independent reasons for confirming the same. In such order CIT (Appeals) had placed reliance on an earlier judgment of the Tribunal in case of Reliance Infrastructure Ltd. v. Addl. CIT [2011] 9 taxmann.com 186 (Mum. - Trib.). Learned counsel for the assessee had placed on record a copy of the judgment of the Tribunal in case of Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er at the rate of 4.74 power unit. 8.10. In view of the independent observations, we find that basis on which the deduction u/s. 80IA of the Act has been denied by the ld. AO for the year under consideration has no legs to stand in the eyes of law. Hence, we direct the ld. AO to grant deduction u/s. 80IA of the Act in respect of its captive power plant, in accordance with law. Accordingly, the ground No.6 raised by the assessee is allowed. 9. The ground No.7 raised by the assessee is challenging the denial of deduction u/s. 80IB of the Act in respect of fertilizer subsidy received by the Haldia unit in West Bengal. 9.1. We have heard rival submissions and perused the materials available on record. We find that assessee had received a price concession from the Government which has been coined as fertilizer subsidy. The assessee submitted that the maximum retail price for sale of fertilizers to farmers had been fixed at a concessional rate by the Government, i.e. in other words, the assessee is mandated to sell the fertilizers to the farmer only at the maximum retail price fixed by the Government which is below the actual market price. The difference between actual market pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Director and Executive Director as per the provisions of Companies Act 1956. It was specifically clarified that no commission was paid to any employee. The assessee stated that it had paid commission to Shri P R Menon, Managing Director in the sum of Rs. 80 lakhs and Shri Homi R Khushrokhan, Executive Director in the sum of Rs. 50 lakhs. Both these Directors i.e MD ED were drawing salary from the assessee company. The assessee pleaded that the said payments were made to these two Directors as permitted in the provisions of the Companies Act 1956. The assessee also submitted that the said commission has been taken into account as part or remuneration paid to the said Directors and due deduction of tax at source were complied with. The ld. AO however, did not heed to the contentions of the assessee and invoked the provisions of Section 36(1)(ii) of the Act and disallowed the same on the ground that the said commission has been paid to the shareholders by way of distribution of profits as dividend. In other words, the case of the Revenue is that in lieu of the dividend, this commission has been paid by the assessee to the Directors. The ld. AR before us vehemently argued that bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd No. 8 raised by the assessee is allowed for statistical purposes. 12. The ground No.9 raised by the assessee was stated to be not pressed by the ld. AR. The same is reckoned as a statement made from the Bar and accordingly, dismissed as not pressed. 13. The ground No. 10 raised by the assessee with regard to disallowance of machinery hire charges was decided against the assessee by this Tribunal in A.Y. 2002-03 and hence, the ld. AR did not press this ground. Accordingly, the ground No.10 is dismissed as not pressed. 14. The ground No. 11 raised by the assessee with regard to refusal to withdraw deduction of loss on foreign exchange fluctuation was stated to be not pressed by the ld. AR at the time of hearing. This issue is left open to be adjudicated in subsequent years, if the need arises. Accordingly, the ground No. 11 is dismissed as not pressed. 15. The ground No. 12 raised by the assessee is challenging the disallowance of deduction for early settlement scheme / voluntary retirement scheme expenses. The same was stated to be not pressed by the ld. AR as proportionate deduction was allowed to the assessee over a period of 5 years. Hence, the ground No. 12 is her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6% interest rate to be the arm s length price which is the domestic SBI Prime Lending Rate. (PLR). The assessee argued before the ld. DRP that when the loan is given in foreign currency, how the interest rate applicable at SBI PLR rates could be charged on the said loans. The assessee always argued that the currency in which the loan amount is getting consumed and the country in which the loan is getting utilized is to be considered and since the loan is in USD and the repayment from AE is also going to be in USD, then interest rate @LIBOR + 200 basis points would be at arm s length. The assessee in support of its submission also submitted a quotation received from HSBC for similar type of transaction which quoted interest rate of LIBOR + 0.5%. As against this, the assessee has charged interest @ LIBOR + 2% from its AE and accordingly, it was submitted that assessee s interest rate is at arm s length. The ld. DRP however, took a different view. The ld. DRP observed that out of USD 140.58 million, the assessee already had funds lying by way of FCCB issue proceeds to the extent of USD 112.22 million in its dollar account. Hence, for that amount, interest to be adopted would be LIBOR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk as in Frankfurt-at least within the framework of free capital markets (subject to the arbitrage). In regard to the question as to whether the level of interest rates in the lender's State or that in the borrower's is decisive, therefore, primarily depends on the currency agreed upon (BFH BSt.B1. II 725 (1994), re. 1 AStG). A differentiation between debt-claims or debts in national currency and those in foreign currency is normally no use, because, for instance, a US $ loan advanced by a US lender is to him a debt-claim in national currency whereas to a German borrower it is a foreign currency debt (the situation being different, however, when an agreement in a third currency is involved). Moreover, a difference in interest levels frequently reflects no more than different expectations in regard to rates of exchange, rates of inflation and other aspects. Hence, the choice of one particular currency can be just as reasonable as that of another, despite different levels of interest rates. An economic criterion for one party may be that it wants, if possible, to avoid exchange risks (for example, by matching the currency of the loan with that of the funds anticipated to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Revenue had made reference to Chapter 10 of the U.N. Transfer Pricing Manual, relevant portion of which reads: 10.4.10. Financial Transactions 10.4.10.1. Intercompany loans and guarantees are becoming common international transactions between related parties due to the management of cross-border funding within group entities of an MNE group. Transfer pricing of inter-company loans and guarantees are increasingly being considered some of the most complex transfer pricing issues in India. The Indian transfer pricing administration has followed a quite sophisticated methodology for pricing inter-company loans which revolves around: Examination of the loan agreement; A comparison of terms and conditions of loan agreements; The determination of credit ratings of lender and borrower; The identification of comparable third party loan agreements: and Suitable adjustments to enhance comparability. 10.4.10.2. The Indian transfer pricing administration has come across cases of outbound loan transactions where the Indian parent has advanced to its associated entities (AE) in a foreign jurisdiction either interest free loans or loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating of the lender and the borrower, identification of comparable third party loan agreements and suitable adjustments should be made. In addition to the aforesaid factors, the comparability analysis should also take into account the business relationship and the functions performed by the subsidiary AE for the parent company. In the present case, we are not concerned with paragraph 10.4.10.3 of the United Nations Transfer Pricing Manual. However, we are unable to agree with the position set out and asserted in paragraph 10.4.10.2 of the Manual. The reasoning given therein is contrary to the accepted international tax jurisprudence and the rules adopted and applied. There is no justification or a cogent reason for applying PLR for outbound loan transactions where the Indian parent has advanced loan to an AE abroad. Chapter 10 of the United Nations Practical Manual on Transfer Pricing relates to country practices. The said Chapter sets out an individual country's view point and its experiences for the information of the readers. The said Chapter does not reflect the view of the Manual. Paragraph 10.1 of the United Nations Practical Manual on Transfer Pricing for Developing Coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of provision of Section 92C of the Income Tax Act read with Rule 10B of the Income Tax Rules, the Hon'ble Tribunal was right in restricting the rate of interest on loans given to Associated Enterprises @ LIBOR + 2% instead of 17.22% proposed by the Transfer Pricing Officer? 19.3.1. This question was disposed of by the Hon ble Jurisdictional High Court by observing as under:- 3. Regarding Question No.(a) (a) It is an agreed position between the parties that the issue raised herein stand concluded against the Revenue and in favour of the Respondent - Assessee. This by the decision of this Court in the case of the same Respondent viz. Principal Commissioner of Income Tax v/s. Manugraph (Income Tax Appeal No. 454 of 2016) rendered on 19 November 2018. (b) The aforesaid decision was rendered following an earlier decision of this Court in the case of CIT v/s. M/s. Everest Kanto Cylinders Ltd. (378 ITR 67). (c) Therefore, for the reasons indicated in the above orders, the question No.(a) does not raise any substantial question of law, Thus not entertained. 19.4. Similar views were expressed by the Hon ble Jurisdictional High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties mutually agreed that this issue has already been settled in favour of the assessee by the co-ordinate bench decisions of this tribunal in assessee s own case as under:- Contribution to Tata Sports Club Covered by Tribunal order for A.Y. 2006-07 supra vide ground No.3 Mithapur Nutan Balshikshan Sangh Covered by Tribunal order for A.Y. 2006-07 supra vide ground No.3 Kindergarten Primary School Covered by Tribunal order for A.Y. 2006-07 supra vide ground No.3 Tatachem D A V Public School Covered by Tribunal order for A.Y. 2006-07 supra vide ground No.3 Tatachem Sports and Cultural Club Covered by Tribunal order for A.Y. 2006-07 supra vide ground No.3 21.3. With regard to payment made to various clubs as detailed above, we find that the Hon ble Supreme Court in the case of CIT vs. United Glass Manufacturing Co. Ltd reported in 28 taxmann.com 429 had stated that club membership fees paid for employees for seeking membership in the clubs and accordingly payment of entrance fees and subscription made thereon are allowable business expenditure u/s.37 of the Act. Similar propositions were also laid down by the Hon ble Jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of accounting followed by the assessee, the assessee claimed the said provision for post retirement medical benefits in the sum of Rs. 6,23,86,226 as a deduction while filing the return of income. The assessee submitted that the said provision has been made based on actuarial valuation report obtained by a registered valuer who is a Fellow Member of Institute of Actuaries, England and Fellow Member of Actuarial Society of India. The said Actuarial valuation report duly determined the provision figure to be made as on 31/03/2007 and as on 01/04/2006. The copy of the Actuarial valuation report was placed on record by the ld. AR based on the directions given by this Tribunal. This actuarial valuation report was prepared in accordance with the mandate provided in AS-15 issued by ICAI. In our considered opinion, this provision based on actuarial valuation would be clearly an ascertained liability for the assessee at the end of the year. The ld. AO however, strangely applied the provisions of Section 43B of the Act and held that since the said provision made for post retirement medical benefits had not been actually paid by the assessee, the same would become disallowable in terms of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Goetze India Ltd reported in 284 ITR 323 (SC), denied to grant deduction for the same. We find that the decision of Goetze India Ltd does not prohibit an assessee who has a valid claim to be made before the appellate authorities. Moreover the restriction provided by the said decision, shall not apply to appellate authorities. This is provided in the last paragraph of the decision of the Hon ble Supreme Court. However, the veracity of the claim had not been examined at all by the ld. AO. Hence, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue to the file of the ld. AO for denovo adjudication in accordance with law. The assessee is at liberty to produce fresh evidences, if any, in support of its contentions. Accordingly, the ground No.12 raised by the assessee is allowed for statistical purposes. 28. The ground No.13 raised by the assessee claiming deduction for provision for wealth tax and provision for advances while computing book profit u/s.115JB of the Act is similar to ground No.14 raised by the assessee for A.Y. 2006-07. Hence, the decision rendered in A.Y. 2006-07 shall apply to this assessment year also. 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 19/10/2011 and quantified the TP adjustment. The ld. TPO gave effect to the directions of the ld. DRP and passed an order on 25/10/2011 which is after the date of passing of final assessment order on 19/10/2011 by the ld. AO. In the said order passed by the ld. TPO, the ld. TPO had enhanced the TP adjustment figure by considering the different approach with regard to appropriation of repayment of loan made by the AE. The ld. AO thereafter passed an order u/s.154 of the Act on 31/07/2012 pursuant to this TPO order and made the addition as enhanced by the ld. TPO. 33.1. The ld. AR before us made submissions that once the final assessment order is framed on 19/10/2011, pursuant to the directions of the ld. DRP, the ld. TPO passing the order on 25/10/2011 has got no legs to stand in the eyes of law and the ld. AO erred in taking cognizance of the belated order passed by the ld. TPO and rectifying the same by way of an order u/s.154 of the Act. 33.2. In our considered opinion, this entire appeal becomes infructuous as there will be no grievance left to the assessee in view of our decision rendered in ground No.1 of assessee s appeal for the A.Y. 2007-08 in ITA No.8710/Mum/2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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