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2020 (2) TMI 951 - HC - Income TaxTP Adjsutment - TPO determining the arms length price of the syndication fee at 100% - ITAT remanded the matter back to the file of the Assessing Officer to decide the issue afresh by considering the decisions relied upon by the Tribunal for allocation of non-syndication fee between the assessee and associated enterprise after giving opportunity of being heard to the assessee - HELD THAT - As decided in M/S CREDIT LYONNAIS VERSUS ADIT(INTERNATIONAL TAXATION) 2014 (7) TMI 1 - ITAT MUMBAI TPO as well as CIT(A) has not brought out any comparable for determination of the arms length price but took the total income comprising interest as well as other fees charged by the foreign branches for allocation/ attribution to the assessee. In this case, the ALP has not been determined by taking into consideration uncontrolled similar transaction. Interest cannot be taken into account for attribution of income towards service charges/fees and, therefore only the fee charged by the foreign branches can be taken into consideration for making adjustment under transfer pricing provisions. Since none of the parties have come out with the suitable comparables, therefore, we find that the estimation made by the CIT(A) at the rate of 20% is just and proper, however, the same would be only in respect of the fee and charges other than interest received by the foreign branches. No error or infirmity in the view taken by the Tribunal in remanding the matter back to the file of the Assessing Officer for a fresh decision in accordance with law.
Issues involved:
Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) for the assessment year 2008-09 questioning the direction given by ITAT to the Assessing Officer regarding the arms length price of syndication fee and the application of rates in violation of section 92(3) of the Act. Analysis: The appellant Revenue challenged the ITAT's order directing the Assessing Officer to follow specific decisions for determining the arms length price of the syndication fee. The Transfer Pricing Officer initially determined the arms length price at 100%, resulting in an addition to the assessee's income. The Commissioner of Income Tax (Appeals) upheld this decision. However, the Tribunal remanded the matter back to the Assessing Officer to decide afresh by considering certain decisions for allocation of non-syndication fee, emphasizing the importance of comparable transactions in transfer pricing regulations. The Tribunal relied on previous decisions involving M/s Credit Lyonnais and Calyon Bank, where it was established that interest income should not be considered for attribution of service charges/fees. The Tribunal directed the Assessing Officer to make adjustments based only on the fee and charges received by foreign branches, without considering interest. The Tribunal found the estimation made by the CIT(A) at 20% to be appropriate for such fees and charges. Consequently, the Tribunal restored the issue to the Assessing Officer for a fresh decision in line with the law and relevant precedents. The High Court upheld the Tribunal's decision, finding no error in remanding the matter for a fresh decision. The Court concluded that the proposed questions of law did not arise from the Tribunal's order. Therefore, the appeal was dismissed without any order as to costs. In summary, the case involved a dispute over the arms length price of a syndication fee, with the Tribunal directing the Assessing Officer to reconsider the issue based on specific precedents and principles of transfer pricing regulations. The Court affirmed the Tribunal's decision and dismissed the appeal, emphasizing the importance of considering comparable transactions and excluding interest income from the attribution of service charges/fees.
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