2018 (12) TMI 608 - SC - Income Tax

Addition on account of guarantee commission chargeable to its associated enterprises - tribunal deleted addition - whether the benchmark fixed by the Transfer Pricing Officer (TPO) for the international transaction by considering arm s length rate of the bank guarantee at 3% under Section 92CA(3) of the Income Tax Act, 1961 was correct? - Held that - Question No.1 has been rightly decided by the High Court in favour of the Assessee and against the Revenue. The same would, therefore, not require reopening in this appeal. Interest charged u/s 234B - MAT computation - Whether interest was not payable by the assessee/respondent under Section 234B of the Income Tax Act, 1961 on failure to deposit the advance tax in respect of tax payable under Section 115JB? - Held that - The matter will require an in-depth hearing. List the appeal on the said question i.e. question No.(ii) as per its turn.

Summary

Issues:
1. Addition of guarantee commission to the income of the assessee.
2. Interest payable under Section 234B of the Income Tax Act.

Issue 1: Addition of Guarantee Commission

The Supreme Court considered the appeal filed by the Revenue concerning the addition of a specific amount to the income of the assessee as guarantee commission chargeable to its Associate Enterprises. The Transfer Pricing Officer (TPO) had fixed the benchmark for the international transaction at 3% under Section 92CA(3) of the Income Tax Act, 1961. The Court reviewed the orders of the Tribunal and the High Court, which both favored the Assessee. The Court concluded that the High Court's decision was correct, and therefore, there was no need to reopen this issue in the appeal.

Issue 2: Interest Payable under Section 234B

Regarding the second issue of whether interest was payable by the assessee under Section 234B of the Income Tax Act, 1961 for failure to deposit advance tax in relation to tax payable under Section 115JB, the Court noted that this matter required a detailed hearing. The Court directed to list the appeal specifically for this question to be addressed in-depth at a later stage, indicating that further examination and discussion were necessary to reach a decision on the interest payable under Section 234B.

In summary, the Supreme Court's judgment addressed two main issues: the addition of guarantee commission to the assessee's income and the interest payable under Section 234B of the Income Tax Act. The Court upheld the decision in favor of the Assessee for the first issue based on the previous rulings, while scheduling a detailed hearing for the second issue to determine the interest payable under Section 234B.