9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 398 - AT - Income TaxTP Adjustment - international transaction qua corporate guarantee by the assessee to its Associated Enterprises - HELD THAT - As we find that the issue is similar to the issue as has been decided in A.Y. 2013-14 and A.Y. 2014-15 by the co-ordinate Bench of the Tribunal in assessee s own case and the ld. CIT (A) by following the same held that the corporate guarantee fee of 1% charged by the assessee is to be at arms length. Arm s length price adjustment on account of eligible / non-eligible units between the assessee and its Associated Enterprises - as per TPO inter-unit transactions involving transfer of raw materials between eligible units and non- eligible unit were undertaken on cost-to-cost basis without any mark- up to increase the eligible profit of the eligible unit for claiming of higher exemption of the profit - CIT(A) deleted addition - HELD THAT - We find that the ld. CIT(A) has passed a very reasonable order by following the decision of M/s Century Plyboards (I) Ltd 2020 (12) TMI 55 - ITAT KOLKATA and Greenply Industries Ltd 2022 (7) TMI 1045 - ITAT GUWAHATI and deleted the transfer pricing adjustment correctly. Appeal of the Revenue is dismissed.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are: 1. Whether the corporate guarantee fee charged by the assessee to its Associated Enterprises (AEs) was at arm's length, and whether the deletion of the transfer pricing adjustment of Rs. 34,85,222/- by the CIT(A) was justified. 2. Whether the deletion of the arm's length price adjustment of Rs. 2,14,32,920/- by the CIT(A), concerning inter-unit transactions between eligible and non-eligible units, was appropriate. ISSUE-WISE DETAILED ANALYSIS Issue 1: Corporate Guarantee Fee - Relevant Legal Framework and Precedents: The relevant legal framework involves the determination of arm's length pricing for international transactions under transfer pricing regulations. Precedents considered include decisions from various High Courts and the Tribunal, which have established acceptable ranges for corporate guarantee fees. - Court's Interpretation and Reasoning: The Tribunal noted that the CIT(A) followed precedents from earlier assessment years (AY 2013-14 and AY 2014-15) in the assessee's own case, where a corporate guarantee fee of 1% was deemed to be at arm's length. The Tribunal agreed with the CIT(A)'s finding that the Transfer Pricing Officer's (TPO) analysis lacked a rational basis, particularly in ascertaining the stand-alone credit rating and loan comparables. - Key Evidence and Findings: The CIT(A) found that the TPO's benchmarking exercise was fundamentally flawed, lacking proper FAR and Economic Analysis. The CIT(A) also referenced various judicial decisions that supported a lower range for corporate guarantee fees. - Application of Law to Facts: The Tribunal applied the principles from prior decisions and found the CIT(A)'s reliance on these precedents justified. The Tribunal upheld the deletion of the transfer pricing adjustment as the 1% fee was within the acceptable range established by case law. - Treatment of Competing Arguments: The Tribunal considered the Revenue's arguments but found them unpersuasive against the weight of judicial precedents favoring the assessee's position. - Conclusions: The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's grounds challenging the deletion of the adjustment related to the corporate guarantee fee. Issue 2: Inter-Unit Transactions and Arm's Length Price Adjustment - Relevant Legal Framework and Precedents: The issue involves the application of transfer pricing regulations to inter-unit transactions and the determination of profits for eligible units under section 80-IE of the Income Tax Act. Relevant precedents include decisions from the ITAT and High Courts regarding profit adjustments in eligible units. - Court's Interpretation and Reasoning: The CIT(A) reasoned that higher profits in eligible units were due to legitimate business decisions, such as manufacturing higher-margin products at these units. The CIT(A) found the TPO's adjustments speculative and unsupported by tangible evidence. - Key Evidence and Findings: The CIT(A) noted that the TPO failed to demonstrate any 'arrangement' between the assessee and related parties that artificially inflated profits in eligible units. The CIT(A) referenced the decision in DCIT vs M/s Century Plyboards (I) Ltd., which emphasized the need for concrete evidence before making such adjustments. - Application of Law to Facts: The Tribunal concurred with the CIT(A) that the TPO's adjustments were based on assumptions rather than evidence. The Tribunal found that the CIT(A) correctly applied the law by requiring the TPO to substantiate claims of profit manipulation with credible evidence. - Treatment of Competing Arguments: The Tribunal considered the Revenue's contention but found the CIT(A)'s reliance on established case law and lack of evidence from the TPO to be decisive. - Conclusions: The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal against the deletion of the transfer pricing adjustment related to inter-unit transactions. SIGNIFICANT HOLDINGS - The Tribunal affirmed the CIT(A)'s decision to delete the transfer pricing adjustment concerning the corporate guarantee fee, holding that the fee charged was at arm's length. - The Tribunal upheld the CIT(A)'s deletion of the arm's length price adjustment for inter-unit transactions, emphasizing the lack of evidence for any 'arrangement' to inflate profits artificially. - The Tribunal reinforced the principle that adjustments under transfer pricing regulations require a rational basis and tangible evidence, rejecting speculative or assumption-based adjustments. - The final determination was to dismiss the Revenue's appeal, thereby affirming the CIT(A)'s orders on both issues.
|
