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TMI Blog2015 (11) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to DRUPA Exhibition expenses of Rs. 3.99 crores in view of the finding given in the assessment order for AY 2009-10; and, lastly (v) Initiation of penalty proceedings u/s 271(1)(c). 2. The brief facts qua the issue involved are that, the assessee company is engaged in the business of manufacture of printing and allied machineries. The assessee has acquired a subsidiary in USA, named as MDGM on 11th November, 2006, which has engaged in the business of manufacturing and servicing of WEB Offset Printing Machineries. The assessee during the year has entered into following international transactions with its AE :- S. No. Depreciation Name of AE Amount (In Rs.) i Sale of offset printing machines Manugraph Kenya Ltd 1,48,62,750 ii Advance given to AE Manugraph DGM, Inc. 10,15,10,000 iii Interest on advance given To AE Manugraph DGM, Inc. 48,31,400 iv Sale of spares to AE Manugraph DGM, Inc. 1,27,09,078 v Purchase from AE Manugraph DGM, Inc. 56,52,421 3. During the course of Transfer Pricing Proceedings, the TPO noted that the assessee has given loan to its AE amounting to Rs. USD 3.75 million (in terms of INR was Rs. 14.78 crores). Out of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO to adopt LIBOR + 2% as Arm's length interest in respect of loan provided to the assessee to its AE. The said decision is based on the decision of the co-ordinate Bench of the Tribunal in the case of Everest Kento Cylinder Ltd., in ITA 7073/Mum/2012 vide order dated 23.11.2012, which decision has now been confirmed by the Hon'ble High Court vide order dated 8th May, 2015. Not only that, now the Delhi High Court in the case of Cotton Industrial (I) Pvt. Ltd. Income Tax Appeal No. 233 of 2014 order dated 27th March, 2015 has held that LIBOR rates for benchmarking the transaction of providing of loan to foreign AE should be accepted. 6. On the other hand, Ld. DR strongly relied upon the order of the DRP. 7. We have heard rival submissions and also perused the impugned order and the material placed on record. On the loan given to its AE, the assessee has charged interest rate worked out on the basis of six months at LIBOR + 2%, which worked out at 3.75%. This Arm's Length interest was benchmarked by using Internal CUP on the basis of rate of interest paid on loans by the assessee availed from State Bank of India. However, the TPO has arrived at ALP 14.736% by taking the interest r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h situation and thereby proposed addition of Rs. 1,96,00,012/-. The DRP determined the ALP of cost of guarantee of 2% based on Safe Harbour Rules. Based on such directions the adjustment on account of cost of guarantee was restricted to Rs. 64,75,975/-. 10. Before us, the Ld. Counsel submitted that in the earlier years, the Tribunal in assessee's own case for the AY 2008-09 had held that corporate guarantee fee should be benchmarked @ 0.5%. This decision again is based on the co-ordinate Bench of the Tribunal in the case of Everest Kento Cylinder Ltd. Thus, he submitted that following the earlier year's precedence, the corporate guarantee should be taken at @ of 0.5%. On the other hand, Ld. DR had strongly relied upon the order of the DRP. 11. After considering the relevant finding given in the impugned orders and also the order of the Tribunal for the earlier years. We find that the Tribunal in AY 2008-09 has held that Arm's Length Guarantee Commission should be benchmarked by taking the rate of 0.5%. The decision of ITAT is based on the decision of Everest Kento Cylinder Ltd. which has been approved by the Hon'ble High Court. Thus, rate of 0.5% is wholly justified on the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's revised claim filed with AO vide letter dated 14 March 2014 Sub Rule (2) of Rule 8D 1 Amount of Expenditure Directly relating to the Income which does not form part of total income Nil Nil 2 In case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt the amount will be computed in accordance with the following formula : A Total Interest 1,72,01,388 1,44,36,388 B Average of value of Investments 33,61,36,911 33,61,36,911 C Average of total Assets 4,93,69,80,347 4,93,69,80,347 D Interest/Average of total Assets * Average of value of Investments 11,71,207 9,82,909 A/C*B 3 an amount equal to 1/2 percent of the average of value of investments, income from which does not or shall not form part of total Income. 16,80,684 16,80,685 Total Expenditure under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of assessee without giving any cogent reasons instead of 14.736% worked out by the TPO. 2. Whether on the facts and circumstances of the case and in law, the Hon'ble DRP was justified in arriving at ALP rate of corporate guarantee at 2% instead of 6% as suggested by the TPO without giving any cogent reasons. 3. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the Assessing Officer be restored". 22. As admitted by both the parties, ground no. 1 & 2 are similar to ground raised by the assessee in its appeal, therefore, in view of the finding given therein, the grounds raised by the Department are treated as dismissed. Because in so far as the adjustment on account of interest is concerned, we have already held that LIBOR + 2% is the appropriate rate to benchmark the interest rate in the case of the assessee following the judicial precedence of the earlier Tribunal order. Similarly, with regard to charging of rate of corporate guarantee fees, we have held that 0.5% rate of guarantee fees/commission is a reasonable rate following the earlier order of the Tribunal. Thus, ground raised by the revenue are dismissed. 23. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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