9911796707
TMI Blog2014 (4) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... y which has been deleted by the ld. CIT(A). 4. We have heard the arguments of both the sides and also perused the relevant material placed on record. The ld. Counsel for the assessee has fairly and frankly conceded that the assessee has no case on the issue of disallowance of Rs. 13,94,869/- made on account of interest attributable to the interest free advance given to M/s Taj & Taida. He has urged that this issue may therefore be decided against the assessee. Accordingly, the impugned order of the ld. CIT(A) on this issue is set aside and that of the A.O. making a disallowance of Rs. 13,94,869/- is upheld. 5. As regards the disallowance of balance interest of Rs. 25,90,000/- and Rs. 16,83,978/- attributable to the interest free advances given to KTC and other group companies, it is observed that similar disallowance was made in the case of the assessee for the earlier years. In A.Y. 1989-90, this issue was referred to a Third Member and vide the Third member decision reported as DCIT vs. Indian Hotel Co. Ltd. In 92 ITD 97, the same was decided in favour of the assessee by a majority view holding that the relevant advances having been given by the assessee to its subsidiary compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money was finally returned to the assessee with interest @ 19% and the interest so received was duly offered by the assessee in the relevant year. A similar view has been taken by the Tribunal in the subsequent years i.e. assessment years 1996-97 to 2002-03. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to the earlier years, we respectfully follow the orders of the Tribunal for the said years and uphold the impugned order of the ld. CIT(A) giving relief to the assessee on this issue. Ground No. 3 of the Revenue's appeal for A.Y. 2003-04 is accordingly dismissed. 9. The next issue raised in ground No. 4 of the Revenue's appeal for A.Y. 2003-04 relates to the deletion by the ld. CIT(A) of the addition made by the A.O. on account of disallowance of expenditure of Rs. 53,42,708/- incurred by the assessee on the replacement of carpets. 10. We have heard the arguments of both the sides and also perused the relevant material placed on record. It is observed that a similar disallowance on account of expenditure incurred by the assessee on replacement of carpets was made by the A.O. treating the same as capital expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which has been deleted by the ld. CIT(A). 14. During the year under consideration, the assessee had entered into certain international transactions with its AEs within the meaning of section 92 of the Act and the said transactions were duly reported in the TP study report filed by the assessee in Form No. 3CEB along with the return of income. A reference in this regard was made by the A.O. u/s 92 CA(1) to the TPO for determining the Arm's Length Price (ALP) of these international transactions. One of the international transactions entered into by the assessee with its AE was of loan given by the assessee to M/s Taj International Hotels (HK) Ltd. (TIHK) of USD 40 million. The said AE was to be financed from the euro-equity issue of the assessee for investing in St. James Court Hotels and Apartments on London. Since the euro-equity issue was delayed, the assessee obtained short term bridge loan from ICICI and SCICI to finance TIHKs investments into St. James Court Hotel and Apartments. The loan taken by Taj International Hotels (HK) Ltd. from the assessee was duly repaid by that AE in the financial year 1995-96 and even part of the total outstanding interest was also paid by it to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diaries failed to do so. He held that the letters of comfort thus could not be equated with guarantee and addition made by the A.O./TPO by way of TP adjustment treating the same as bank guarantee was deleted by the ld. CIT(A). 18. During the year under consideration, the assessee had paid a sum of Rs. 2,93,68,773/- to its AE IHMS Inc. for availing of sales promotion services in the US. For the said services, the assessee company paid the sales promotion fees to IHMS with a mark-up of 10% on cost. In its TP study report, this transaction was bench marked by the assessee by following TNMM method using Indian comparables. Since the operating margin of the assessee was higher than the arithmetic mean of the operating margin of the comparable companies as shown in the TP study report, these international transactions involving payment made for availing sales promotion services in the US were claimed to be at ALP by the assessee. The TPO rejected the assessee's claim of selecting itself as the tested party and required the assessee to carry out a fresh search for comparables on a US database by taking IHMS as the tested party. As per the requirement of the TPO, the assessee company carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the assessee was obliged to take approval of the concerned bank before disposal of its investment/asset. He contended that this obligation contained in the letter of comforts made it akin to guarantee given by the assessee and addition on account of TP adjustment for guarantee commission was rightly made by the A.O./TPO. 22. As regards the TP adjustment made in respect of the international transactions of the assessee involving availing of sales promotion services from its AE in US, he strongly relied on the order of the A.O. in support of the Revenue's case on this issue. 23. The ld. Counsel for the assessee, on the other hand, submitted that interest on outstanding interest was recovered by the assessee from its AE at LIBOR rate as per the approval given by the RBI and this approval given by the RBI itself clearly indicated CUP. He contended that the LIBOR in any case has been accepted by the Tribunal as ALP of the international transactions of loans in the following three cases:- 1. Hinduja Global Solutions Ltd. Vs. Addl. CIT ITA No. 254/Mum/2013 2. Cotton Naturals (I) P. Ltd. DCIT ITA No. 5855/Del/2012 3. Four Soft Ltd. Vs. DCIT ITA No. 1495/Hyd/2010 24. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is inclined to entertain this new argument of the ld. Counsel for the assessee, the matter may be sent back to the A.O./TPO in order to give them an opportunity to examine the same. 27. We have considered the rival submissions and also perused the relevant material on record. As regards the issue relating to arm's length rate of of interest charged by the assessee company to its AE on the outstanding interest, it is observed that the same is squarely covered by the decision of co-ordinate Bench of this Tribunal rendered in the case of Hinduja Global Solutions Ltd. Vs. ACIT vide its order dtd. 5th June, 2013 in ITA No. 254/mum/2013 wherein it was held, following the decision of Delhi Bench of this Tribunal in the case of Cotton Naturals (I) P. Ltd. Vs. DCIT, that the CUP method is the most appropriate method to determine the arm's length rate of interest of the international transaction involving lending of money by the assessee company in foreign currency to its AE and LIBOR being inter-bank rate fixed for the international transaction has to be adopted as arm's length rate. Respectfully following this decision of the co-ordinate Bench of this Tribunal, we uphold the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . has also not been able to point out any reason given by the A.O./TPO to justify the change of tested party from the assessee company to the AE in US. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(A) deleting the TP adjustment made by the A.O./TPO in respect of the international transactions involving availing of sales promotion services by the assessee from its AE in US. Ground No. 6 of the revenue's appeal for A.Y. 2003-04 is accordingly treated as partly allowed for statistical purpose. 30. Now, we shall take up the appeal of the Revenue for A.Y. 2004-05 being ITA No. 2678/Mum/2009. 31. As regards ground No. 1 of this appeal, it is observed that the issue involved therein relating to disallowance of interest of Rs. 16,05,188/- attributable to the interest free advance given by the assessee company to the other group companies is similar to the one involved in ground no. 1 & 2 of the Revenue's appeal for A.Y. 2003-04. Following our conclusion drawn in A.Y. 2003-04, we sustain the disallowance made by the A.O. on this issue only to the extent of interest, if any, attributable to the interest free advance given by the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to appreciate the ratio of decision of the Apex Court in the case of CIT vs. Lakshmi Machine Works 290 ITR 660. 6. The ld. CIT(A) has further erred in excluding receipt of Rs. 4,16,04,715/- from Taj Lounge from total receipt of business for computation of deduction u/s 80HHD without appreciating the ratio of the Apex Court decision in the case lf Lakshmi Machine Works (supra)." 36. While computing the deduction u/s 80HHD of the Act, the assessee company had excluded operating fees of Rs. 32,70,93,451/- and receipt from Taj Lounge of Rs. 4,16,04,715/- from the total business receipts. The A.O., however, included both these amounts in the total business receipts for the computation of deduction u/s 80HHD of the Act on the presumption that these receipts gave rise to business income. On appeal, the ld. CIT(A) accepted the stand of the assessee on this issue relying on the decision of Hon'ble Bombay High Court in the case of CIT vs. Sudarshan Chemicals Industries Ltd. 245 ITR 769 and directed the A.O. to exclude both these amounts from the total business receipts of the assessee for the purpose of deduction u/s 80HHD of the Act. 37. At the time of hearing before us, the ld. Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
