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2023 (2) TMI 1159 - AT - Income TaxTP adjustment - fees / commission for Corporate Guarantee given by the assessee on behalf of its AE - HELD THAT - In most of the decisions referred the rate of Guarantee Fee has been taken to be in the range of 0.3% to 0.5%. In the present case it is admittedly a fact on record that assessee suo motu has charged Guarantee Fee @ 0.50% from its AE. We also take note of the observations made by ld. CIT(A) in respect of basis of CCC credit rating adopted by the ld. TPO for the purpose of benchmarking of fee towards Corporate Guarantee which is devoid of any comparative factual data. Also ld. CIT(A) has considered the equal split of benchmarking rate arrived by ld. TPO between the assessee and its AE which doesn t bear any rationality As the fact that the assessee itself has suo motu charged Guarantee Fees/Commission @ 0.50% no reason to interfere with the findings given by the ld. CIT(Appeals) on this issue. Accordingly grounds taken by the Revenue in this respect are dismissed. Deposit of employee PF ESI contribution u/s 36(1)(va) - payment was made beyond the due date of filing the return - HELD THAT - The issue is squarely covered against the assessee in view of the recent judgment in the case of Chekmate Services Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT wherein it has been held that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B. Decided against assessee.
Issues Involved:
1. Transfer Pricing Adjustment on account of fees/commission for Corporate Guarantee given by the assessee on behalf of its Associated Enterprise (AE). 2. Disallowance towards deposit of employee PF & ESI contribution claimed under section 36(1)(va) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Transfer Pricing Adjustment on Corporate Guarantee Fees: The Revenue challenged the deletion of the Transfer Pricing adjustment made on account of the Corporate Guarantee fees provided by the assessee for its AE. The primary contention was that the Ld. CIT(A) erred in not following a recognized approach for determining the Corporate Guarantee (CG) Fee and arbitrarily adopting a rate based on factually distinguishable judgments. The Revenue supported the "interest saved approach" adopted by the TPO, which assigns 50% of the interest saved as Corporate Guarantee Fee to the assessee. The Tribunal noted that the issue of Corporate Guarantee Fee is well-settled and has been consistently decided in favor of the assessee in various judicial precedents, including the Bombay High Court's decision in CIT v. Everest Kanto Cylinder Limited and the ITAT Kolkata's decision in Berger Paints India Limited. The Tribunal observed that the assessee had already charged a Corporate Guarantee Fee at the rate of 0.50%, which falls within the accepted range of 0.3% to 0.5% established by various decisions. The Tribunal also found the TPO's basis of using a 'CCC' credit rating for benchmarking the fee to be devoid of any comparative factual data and the equal split of the benchmarking rate between the assessee and its AE to lack rationality. Consequently, the Tribunal upheld the Ld. CIT(A)'s decision to delete the upward adjustment towards the Corporate Guarantee Fee, dismissing the Revenue's grounds on this issue. 2. Disallowance under Section 36(1)(va) of the Act: This issue pertains to the disallowance of the employee PF & ESI contributions claimed under section 36(1)(va) for AY 2015-16. The Ld. Counsel for the assessee conceded that the issue is settled against the assessee in light of the Supreme Court's judgment in the case of Chekmate Services Pvt. Ltd. v. CIT. The Supreme Court held that the deduction under section 36(1)(va) cannot be claimed for delayed deposits of employees' contributions to PF, even if deposited within the due date of filing the return, as per Section 43B. The Tribunal, respecting the Supreme Court's judgment, dismissed the assessee's ground on this issue, thereby upholding the disallowance under section 36(1)(va). Conclusion: The Tribunal's decision resulted in the partial allowance of the Revenue's appeal for AY 2015-16 (pertaining to the disallowance under section 36(1)(va)) and the dismissal of the appeal for AY 2016-17 (pertaining to the Corporate Guarantee Fee adjustment). The order was pronounced in the open Court on 28th February 2023.
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