2020 (1) TMI 1136 - HC - Income Tax

TP Adjustment - Interest free funds were advanced by the assessee out of its own resource to its wholly owned subsidiary - nature of quasiequity with the principal objective of protecting the interest of the assessee - Corporate guarantee provided by the assessee would not be invoked when the advance was converted into equity - Whether any transfer pricing adjustment by way of interest income can be made with respect to those allegedly interest free funds advanced by the assessee to its subsidiary? HELD THAT - The appeal be heard out on the above substantial question of law. As the respondent is represented by learned counsel, issuance and service of notice of the appeal is waived. The advocate-on-record for the appellant will file informal paper books by 3rd February 2020, serving at least one copy on the advocate-on-record for the respondent not later than three days before the date of hearing of this appeal. List the appeal for hearing in the monthly list of March, 2020.

Summary

Issues: Transfer pricing adjustment on interest-free funds advanced to subsidiary.

Analysis:
The High Court of Calcutta, comprising Justice I. P. Mukerji and Justice MD. Nizamuddin, heard the appeal concerning a substantial question of law arising from the tribunal's order dated 14 September 2018 in ITA 2225/Kol/2017 for the assessment year 2013-14. The appellant, represented by Mr. Asim Choudhury, Mr. Nilanjan Bhattacharjee, and Ms. Aesa Dey, questioned whether transfer pricing adjustment for interest income could be made on interest-free funds provided by the assessee to its subsidiary. The funds were advanced as quasiequity from the assessee's own resources to safeguard its interests, and the corporate guarantee would not be invoked upon conversion to equity.

The Court directed the appeal to be heard solely on the substantial question of law raised by the appellant. The respondent, represented by Mr. P. K. Bhowmick and Mr. Madhu Jana, waived the issuance and service of notice of the appeal. The advocate-on-record for the appellant was instructed to file informal paper books by 3rd February 2020, providing a copy to the advocate-on-record for the respondent at least three days before the hearing scheduled in March 2020. The Court disposed of the application for stay (GA No. 1239 of 2019) and ordered the supply of a certified photocopy of the order to the parties upon completion of all formalities.