2023 (8) TMI 367 - AT - Income Tax

TP adjustment - ALP for Corporate Guarantee Commission - HELD THAT - Relying on the decision of Everest Kanto Cylinder Limited, 2012 (11) TMI 1099 - ITAT MUMBAI as consistently considered 0.50% as ALP for benchmarking the Corporate Guarantee Commission issued to the Associated Enterprises AEs . Thus we are of the considered view that the ALP for Corporate Guarantee Commission shall be benchmarked @ 0.50% of the Corporate Guarantee issued to the AEs. We therefore direct the Ld. TPO to adopt 0.50% as the Corporate Guarantee Commission and accordingly this issue raised by the assessee in the relevant grounds of appeal is partly allowed. Notional interest on Outstanding Guarantee Commission - HELD THAT - We find merit in the argument of the Ld. AR that the assessee has not indulged in any systematic or organized activity of allowing the undue credit to the AEs. In the light of the facts and circumstances discussed above, we deem it fit and appropriate to consider the alternative plea raised by the Ld.AR in his written submissions and therefore direct the Ld. TPO to adopt the USD LIBOR rate while benchmarking the ALP for the interest on outstanding guarantee commission receivable by the assessee. Accordingly, this ground is allowed for statistical purposes. Notional interest on share application money given to the AEs - HELD THAT - As nothing brought on record by the Ld. Revenue Authorities to suggest that the transaction was a sham. Therefore judicially following the case of Aegis Limited 2019 (4) TMI 858 - BOMBAY HIGH COURT we are inclined to delete the addition of notional interest made by the Ld. TPO and hereby direct the TPO to delete the addition made on account of notional interest on the share application money outstanding. We therefore allow the appeal of the assessee on this ground.

Summary

Issues Involved:
The appeal challenges the final assessment order under Income Tax Act, 1961 for AY 2017-18, focusing on Transfer Pricing adjustments by the Taxation Authorities.

Corporate Guarantee Commission Issue:
The dispute revolves around the Corporate Guarantee Commission benchmarked at 1.90% by the Tax Authorities. The appellant argues for a lower rate based on previous cases, leading to a directive for the ALP to be 0.50%, aligning with past decisions.

Outstanding Guarantee Commission Interest Issue:
Concerns the notional interest on Outstanding Guarantee Commission, disputed as an international transaction. The appellant's argument for benchmarking with USD LIBOR rates is accepted for statistical purposes, deviating from the Tax Authorities' stance.

Interest on Share Application Money Issue:
Focuses on re-characterizing Share Application Money as unsecured loans, contested by the appellant citing investment compliance and business strategy. Relying on legal precedents, the Tribunal directs the deletion of the addition of notional interest, favoring the appellant's position.

The Tribunal's detailed analysis and reliance on legal precedents ensure a fair resolution of the Transfer Pricing disputes, ultimately partially allowing the appellant's appeal on the specified grounds.