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TMI Blog2020 (8) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... re International Services Pte. Ltd. (GOISPL), Singapore, has hired certain vessels from third parties on a bareboat charter basis. In respect of the outstanding bareboat charter hire charges to be paid by the AE, the assessee provided a performance guarantee in case there is a default of payment to the owner. During the proceedings before him, the Transfer Pricing Officer on examining the material available on record noticed that assessee's AE had hired three vessels on bareboat charter basis. He further found that as on 31st March 2011, the off-shore bareboat charges stood at Rs. 1,57,53,318. Noticing the above, the Transfer Pricing Officer called upon the assessee to justify the arm's length nature of performance guarantee provided by the assessee. In response, the assessee vide letter dated 15th February 2014, submitted that its liability is restricted to the unpaid monthly bareboat charges if any. It was submitted, since the owners had a right to take possession of the vessels on default, the actual liability, if any, that may devolve is not quantified. It was submitted, the performance guarantee provided by the assessee was a strategic investment for increasing the volume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25%. 7. The learned Departmental Representative relied upon the observations of learned DRP. 8. We have considered rival submissions and perused the material on record. Before we proceed to decide the issue, we deem it appropriate to put on record that before us the learned Authorised Representative has fairly submitted that the assessee would not like to raise the issue as to whether provision of performance/corporate guarantee comes within the purview of international transaction as defined under section 92B of the Act. Keeping in view the aforesaid submission of the learned Authorised Representative, we will proceed to deal with the issue on the footing that provision of performance / corporate guarantee comes within the purview of international transaction as contemplated u/s 92B of the Act. 9. Having held so, let us deal with the issue at hand. Undisputedly, the assessee has provided performance guarantee in respect of bareboat hire charges payable by the AE towards hiring of three vessels. It is evident, the assessee has not charged any guarantee commission/fee to the AE for provision of performance guarantee. Whereas, the Transfer Pricing Officer rejecting assessee's clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been disputed. It is further noticed that assessee's AE in Singapore has availed a loan from SBI, Singapore branch at interest rate of six months LIBOR plus 250 basis points. Considering the above, we are of the view that the rate of interest charged by the assessee is at arm's length requiring no further adjustment. Ground no.2, is allowed. 13. In ground no.3, the assessee has challenged the addition on account of adjustment made to arm's length price of corporate guarantee provided to the AE. 14. Brief facts are, assessee's subsidiary in Netherland acquired a vessel by availing loan. For availing of loan by the AE, the assessee provided unsecured corporate guarantee by charging guarantee fee @ 0.25%. The Transfer Pricing Officer, however, did not agree with the assessee and charged guarantee fee of 2.25%. 15. While considering the objections of the assessee, learned DRP reduced the rate of guarantee fee to 2%. 16. We have considered rival submissions and perused the material on record. It is the contention of the learned Authorised Representative that guarantee provided by the assessee is unsecured with no risk attached. He submitted, the value of vessels itself is mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will apply mutatis mutandis to this ground also. Accordingly, we direct the Assessing Officer to compute the arm's length price of performance guarantee commission @ 0.25%. 27. In ground no.2, the assessee has challenged the addition made on account of adjustment to the arm's length price of corporate guarantee provided for loan availed by the AE. 28. The issue raised in this ground is similar to ground no.3, raised by the assessee in its appeal being ITA no.2055/Mum./2016. Facts being identical, our decision therein will apply mutatis mutandis to this ground also. Following our decision as aforesaid, we direct the Assessing Officer to compute the arm's length price of corporate guarantee commission @ 0.25%. Ground raised by the assessee is partly allowed. 29. In ground no.4, the assessee has challenged the addition made by the Assessing Officer on account of difference between the interest credited to the Profit & Loss account and interest as shown in Form no.26AS. 30. We have considered rival submissions and perused the material on record. As could be seen, the addition of Rs. 18,62,317, has been made on account of difference in interest credited to the Profit & Loss account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, it is necessary for us to deal with a procedural issue relating to pronouncement of the order. The hearing of this appeal was concluded on 06.02.2020. As per rule 34(5) of the Income Tax (Appellate Tribunal) Rules,1963, ordinarily the appeal order has to be pronounced before expiry of ninety (90) days from the date of conclusion of hearing of appeal. Though, order was dictated and draft order was ready, however, it could not be finalized and pronounced, since, on 24.03.2020 a nationwide lockdown was enforced by the Government of India in view of COVID-19 pandemic. Due to the unprecedented situation arising out of such lockdown all activities ceased and no normal official work could be done. For this reason only the appeal order could not be pronounced within the period of 90 days. Being faced with a similar situation the Tribunal in case of DCIT V/s JSW Limited, ITA Nos.6264 & 6103/Mum/2018, dated 14th May 2020, after interpreting rule 34(5) of the Income Tax (Appellate Tribunal) Rules, 1963 as well as various decisions of the Hon'ble Supreme Court as well as the Hon'ble Jurisdictional High Court held that keeping in view the extraordinary situation prevailing due to the pandem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment". In the ruled so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any "extraordinary" circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon‟ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon‟ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon‟ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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