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TMI Blog2021 (5) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of syndicate that has extended loan facility to Tata Tea UK, however, the same have been ignored by the TPO and the assessing officer while passing the draft assessment order. In the absence of any cogent evidence, the Revenue has failed to discharge its onus while alleging that there was an outflow of funds from India by assessee or receivables from Rabobank London have been squared off for diversion of funds to syndicate for advancing loan to Tata Tea UK. The assessee cannot be expected to prove negative. We find that the TPO and the assessing Officer in draft assessment order has placed reliance solely on the letters furnished by an employee of the assessee without there being any corroborative evidence for making addition u/s.69 Commitment charges received by the assessee are in fact, part of interest income on the loan advanced - The assessee has clarified that the role of assessee was limited to identifying and referring the opportunity to Rabobank London. Rabobank London is the lead arranger for the loan and the other financial institutions/banks joined hands to form a consortium for extending loan facility to Tata Tea UK. The assessee is remunerated for the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ( in short the Act ). The appeal by Revenue in ITA No.1583/Mum/2014 for assessment year 2007- 08 is directed against the assessment order dated 07/01/2014 passed under section 143(3) r.w.s. 147 and 144C(13) of the Act. The assessee has filed cross objections in appeal by the Revenue for assessment year 2007-08. Since, the issues involved in both these appeals and cross objections are inter connected, these appeals are taken up together for adjudication and are decided by this common order. 2. Both the appeals have been filed with a delay of four days. Shri A. Mohan representing the Department referred to application dated 20/01/2021 filed by the Department stating reasons for delay in filing of the appeals. After considering the submissions made in application, the delay in filing of appeals is condoned and the appeals are admitted to be heard and disposed of on merits. ITA NO.1584/Mum/2014- A.Y 2006-07: 3. The Revenue has raised following grounds of appeal: 1. Whether in the facts and in the circumstances of the case and in Law, the Ld. DRP erred in deleting the addition made in draft assessment order on account of TP adjustment of an amount of GBP 37.5 mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14,71,32,881 CUP 9. Receipt for support service charges (Received) 80,38,180 CUP 10. Reimbursement of expenses(Received) 30,77,605 CUP 11. Reimbursement of expenses (Paid) 1,89,28,418 CUP Total 31,12,22,615 The transactions that are subject matter of dispute in the present appeal are at Sl.No.5, 6 and 7 of the above table. Apart from aforesaid transactions, the Revenue has assailed deleting of addition u/s. 69 of the Income Tax Act, 1961 (herein after referred to as the Act ). Submissions of the Departments 5. Shri A. Mohan representing the Department submitted that in ground No.1 2 of the appeal, the Revenue has assailed the findings of Dispute Resolution Panel (DRP) in deleting the addition made u/s 69 of the Act on account of Transfer Pricing (TP) adjustment of GBP 37.50 million (₹ 297.71 crores). The ld. Departmental Representative submitted that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. In respect of grounds No.3 4 of the appeal, the ld. Departmental Representative submitted that DRP has erred in deleting the addition in respect of interest paid on External Commercial Borrowings (ECB), guarantee fee paid and service fee paid. The assessee allegedly benchmarked the transaction by applying CUP. However, in proceedings before the TPO, the assessee admitted that there was no evidence of carrying out any cost benefit analysis or any benchmark analysis at the time of availing the services. The assessee could not give any valid explanation for incurring expenditure on payment of guarantee fee, service charges and interest on ECB. The DRP deleted the additions without examining the facts by making mere superficial observations. The ld. Departmental Representative prayed for reversing the findings of Assessing Officer and DRP and restoring the addition made in draft assessment order. Submissions on behalf of Assessee 7. Shri Percy Pardiwala appearing on behalf of the assessee submitted that the assessee has not extended any loan facility to Tata Tea UK. The addition u/s 69 of the Act has been made on mere mis-appreciation of the facts and conjunctures. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The fee received by assessee through Rabobank Singapore was offered to tax. The transaction between the assessee and Rabobank Singapore was found to be at arm s length and the same was accepted by the Department. 7.2. The ld. Counsel for the assessee further referred to the letter dated 28/09/2011 from Rabobank London at page 1034 and 1035 giving the list of banks/financial institutions that were part of consortium for extending loan to Tata Tea UK and the extent of loan facility provide by each of the participants of consortium. The ld. Counsel for the assessee pointed that the name of the assessee does not find mention in the said letter. The ld. Counsel for the assessee further referred to Global Substitution Certificate at page 961 and 962 of the paper book to show the names of banks/financial institutions that had contributed to the loan facility extended to Tata Tea UK. The ld. Counsel for the assessee referring to the above document furnished in the paper book contended that the documents on record clearly indicate that the assessee never extended any loan facility to the Tata Tea UK. Since, the assessee was not part of consortium for extending loan there was no occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsel for the assessee submitted that the assessee had sought advisory services from Rabobank Netherlands in respect of certain specialized project undertaken by it. The TPO has not disputed rendering of services nor the TPO disputed arm s length of transactions. The only reason for making adjustment is benefit test . The TPO has acted beyond jurisdiction in questioning benefit of services. The ld. Counsel for the assessee prayed for upholding the findings of DRP in respect of payment of interest on ECB, guarantee commission and fee for advisory services. Findings: 9. We have heard the submissions made by rival sides at length and have examined the documents on record. In ground No. 1 and 2 of the appeal, the Revenue has assailed the finding of DRP in deleting the addition of ₹ 297.71 Crores (GBP 37.5 million) made under section 69 of the Act. The contention of Revenue is that the assessee was part of consortium that had extended loan to Tata Tea UK. The Revenue has placed reliance on letters dated 27/07/2011 and 06/09/2011 written by one Mr. Chirag Vajani, Financial Controller of the assessee to the TPO in assessment proceedings for AY 2008-09. In letter dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000,000 2. Royal Bank of Scotland 20,000,000 3. Allied Irish Bank 14,166,667 4. HBOS 14,166,667 5. Lloyds TSB 14,166,667 82,500,000 In the aforesaid communication it is again reiterated that the loan to Tata Tea UK was granted by Rabobank London from funds in its Balance Sheet after borrowings from the market and in syndication with other members. No part of the loan provided to Tata Tea UK was funded by the assessee or any entity acting on behalf of the assessee. It was further clarified that Rabobank London provided loan on its own behalf and not on behalf of the assessee. 11. In the present case, the reason for invoking provisions of section 69 of the Act germinates from the contents of letters dated 27/07/2011 and 06/09/2011 written by one of the employee indicating that the assessee has extended loan of GBP 37.50 million as per part of syndicate and the participation/commitment fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... don. Rabobank London is the lead arranger for the loan and the other financial institutions/banks joined hands to form a consortium for extending loan facility to Tata Tea UK. The assessee is remunerated for the services rendered by way of share in upfront fee, participation/commitment fee. The share in participation/commitment fee at some percentage (0.40%) of the credit allocation of GBP37.5 million was the method of remunerating the assessee for the functions performed. Since, we have already held that the assessee had not participated in extending loan facility to Tata Tea UK through the consortium in any manner whatsoever, the remuneration received by the assessee in lieu of the services rendered cannot be termed as interest income of the assessee from the alleged advancing of loan. The aforesaid income received by the assessee has already been offered to tax, this fact has not been disputed by the Revenue. We find no merit in ground No.1 and 2 raised by the Revenue in appeal, the same are dismissed, accordingly. 14. In grounds No. 3 and 4 of appeal, the Revenue has assailed deleting of addition in respect of interest paid on External Commercial Borrowings (ECB), payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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