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2017 (5) TMI 7 - AT - Income TaxTransfer pricing adjustment suggested by the TPO on corporate guarantee provided - Held that - Brief facts relating to this issue are that during the financial year under consideration, the assessee through a common set of agreement, dated 17.07.2007 has provided a corporate guarantee for a combined loan of USD 150 million. The assessee did not charge any fee for the corporate guarantee given, whereas the TPO was of the opinion that the assessee has to charge guarantee fee. We find that the very same issue had arisen in the assessee s own case for the A.Y 2009-10 and this Tribunal by order above has held the corporate guarantee fee at 0.50% to be reasonable. Computing the deduction u/s 10B AO has set off of the business loss of co generation unit before allowing the deduction u/s 10B - Held that - As decided in Commissioner of Income-tax Versus Yokogawa India Ltd. 2011 (8) TMI 845 - Karnataka High Court the deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression total income of the assessee in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression total income of the assessee in Section 10A as total income of the undertaking . For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. Disallowance u/s 14A r.w.r 8D - Held that - We find that the assessee has earned dividend income and the A.Y being 2011-12 the provisions of Rule 8D r.w.s 14A are applicable. The only question to be considered now is whether the investment in APGPCL is to be excluded while computing the disallowance u/r 8D(iii) of the Act. The assessee s contention that APGPCL does not declare dividend to its shareholders and further that the benefit of subsidized rate of power is taxed in the hands of the company has not been verified by the authorities below. The benefit derived by the assessee by virtue of the investment is not dividend income but is subsidized rate of power. This subsidy is not exempt from tax. Further, if the benefit has resulted in enhanced business income/profits and has been taxed, then, no disallowance u/s 14A r.w.r. 8D can be made. Therefore, this limited issue is remitted to the file of the AO to verify the contention of the assessee and exclude the investment if the assessee s contention is found to be correct. TP adjustment on Interest on funds advanced to WOS - Held that - It is an international transaction and to adopt LIBOR as the rate of interest for T.P. Adjustment. TP adjustment on shareholder corporate guarantee - Held that - This issue is covered in favour of the assessee by the decision of the Coordinate Bench at Mumbai in the case of Siro Clinpharm Pvt Ltd 2016 (5) TMI 633 - ITAT MUMBAI wherein it was held the corporate guarantee was not international transaction prior to the amendment of section 92B by the Finance Act of 2012. Thus, ground of appeal is allowed and other grounds 5 & 7 to 12 are not adjudicated at this stage.
Issues Involved:
1. Transfer Pricing (TP) Adjustments for Purchase of Green Petroleum Coke (GPC) 2. TP Adjustments for Shareholders Corporate Guarantee 3. Corporate Tax Matters including Credit of TDS, Computation of Interest u/s 234C, and Penalty Proceedings u/s 271(1)(c) Detailed Analysis: 1. Transfer Pricing Adjustments for Purchase of Green Petroleum Coke (GPC): The assessee challenged the TP adjustments made by the AO for the purchase of GPC from its Associated Enterprise (AE). The AO had determined the Arm's Length Price (ALP) and made adjustments, which were confirmed by the Dispute Resolution Panel (DRP). The Tribunal found that the AO had selectively compared transactions and failed to consider the quality and market conditions affecting GPC prices. The Tribunal remanded the issue to the Transfer Pricing Officer (TPO) for fresh analysis in accordance with Rule 10B(1)(a) of the Income Tax Rules, emphasizing the need for a comprehensive comparison considering the quality, market conditions, and other relevant factors. 2. TP Adjustments for Shareholders Corporate Guarantee: The assessee provided a corporate guarantee for loans taken by its Wholly Owned Subsidiary (WOS) in the USA. The TPO determined the ALP for the guarantee fee at 2%, which was confirmed by the DRP. The Tribunal, following its earlier decisions and the decision in the case of Rain Commodities Ltd., held that a corporate guarantee fee of 0.50% was reasonable. The Tribunal also noted that the corporate guarantee should not be treated as an international transaction under section 92B of the Act before the amendment by the Finance Act of 2012. The Tribunal remanded the issue to the TPO for computation of the guarantee fee in accordance with the directions provided. 3. Corporate Tax Matters: - Credit of TDS: The Tribunal remitted the issue to the AO for verification and to provide relief if the assessee's claims were found to be correct. - Computation of Interest u/s 234C: The Tribunal noted that this issue is consequential to the computation of income and remanded it to the AO for giving consequential relief. - Penalty Proceedings u/s 271(1)(c): The Tribunal held that the initiation of penalty proceedings was premature and rejected the ground. Separate Judgments: The Tribunal delivered separate judgments for different assessment years, consistently applying the principles established in earlier cases and remanding issues for fresh analysis where necessary. The Tribunal's decisions emphasized the importance of a comprehensive and fair analysis in TP matters and the need for verification in corporate tax matters. Conclusion: The Tribunal's detailed analysis and directions for remand highlight the need for thorough and fair evaluation in TP adjustments and corporate tax matters, ensuring that all relevant factors are considered and that the assessee is given a fair opportunity to present their case.
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