9911796707
TMI Blog2024 (7) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... as not carried out Credit rating analysis of the assessee. In any Loan the Credit rating of borrower is the most important factor. However, in this case the Assessee has not tried to understand its Credit rating. In the TPSR the assessee has mentioned that it has used Other Method for benchmarking the transaction. However, as per the Income tax Act no such other method is allowed. Thus, the Benchmarking Analysis of the impugned Interest claimed to have been carried out by the assessee suffers from many defects. TPO has applied State bank of India base rate. It is also a fact that normally no bank gives corporate loan at the Base rate of Interest. The exact dates of the Loan disbursements are also not mentioned in the Transfer Pricing Study Report of the assessee or Form 3CD. There is an Advance of Rs. 10294,00,000/- by the Assessee to Air Products and Chemicals Inc USA. In the TPSR it is merely mentioned that the said advance is for supply of capital goods for Phase 2 of Kochi Project, however no specific schedule for delivery of the capital goods is mentioned. An independent third party while giving Loan will analyse all such advances given by the assessee. Interest Rates in other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer after obtaining permission from the CBDT. AR has not produced any documentary evidence to rebut the facts recorded in the order sheet. Therefore, the Case of the assessee was duly transferred to the Jurisdictional Assessing Officer after obtaining due permission of the CBDT as per the Section 144B(8) of the Act. Therefore, the Jurisdictional Assessing Officer (JAO) had due authority of the law to pass the Final Assessment Order as per the Act once he has received the case on transfer as section 144B(8) of the Act. Accordingly, the Jurisdictional Assessing Officer, passed the final Assessment order. Hence, we do not find any illegality in the impugned Final Assessment Order. Assessee appeal dismissed. - S HRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBE R For the Assessee : Shri Chandni Shah Ridhi Maru AR For the Revenue : Shri Subhakant Sahu IRS, DR ORDER PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the assessee against the Final Assessment Order dated 31.05.2022 passed under section 143(3) r.w.s. 144C(13) of the Act by Assistant Commissioner of Income Tax, Circle-4, Pune. Brief Facts of the Case : 2. In this case the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant b) Allowing only a marginal spread of 25 basis points over the SBI Base Rate for determining the Arm s Length Price by concluding that the credit risk is minimal in case of inter-company loan transaction. In light of above the Appellant prays that the TP adjustment ought to be deleted. Ground No. 3: Without prejudice to above, on the facts and in the circumstances of the case and in law, the Ld. DRP/Ld. ACIT/Ld. TPO erred in rejecting the alternate benchmarking analysis conducted by the Appellant after considering the range of normal lending rates of various banks prevailing in India during the quarter when the loan agreements were entered into. Ground No. 4: On the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating the penalty proceedings under Section 274 r.w.s. 270 of the Act. In view of foregoing grounds of appeal, the Appellant most humbly prays that the abovementioned TP adjustment ought to be deleted. Submission of Ld. AR : 3. Ld. Authorised Representative(AR) for the assessee filed paper book. Ld.AR explained that the Assessee is a 100% subsidiary of Air Products and Chemicals Inc USA. Assessee is mainly engaged in manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting is part of the report filed by the Ld.DR. Therefore, the Ld. DR pleaded that there is no merit in the legal ground raised by the assessee. 5. Ld.DR submitted that the TPO has benchmarked the transaction using CUP method. TPO has used the SBI base rate as the CUP. Since the AE has given the loan to its group concern there is no risk of non-recovery of the loan. Therefore, no mark up is required. Findings and Analysis : 6. We have heard both the parties and perused the records. We will first produce the basic facts of the case as appearing in the TPSR and the TPO s order. 6.1 There are two loan agreements. Vide Loan Agreement dated 18/05/2015 between Air Products Holdings BV Netherland and Assessee, the Air Products Holdings BV Netherland had agreed to lend up to Rs. 1300,00,00,000/-. The Loan was available for drawing from the date of agreement to 30th April 2017. The repayment was to be made in 13 quarterly intervals as per the schedule given in the agreement. The Clause 2 of the Agreement specified interest, which is reproduced as under : The outstanding balance of the principal amount of the loan (which shall for the avoidance of doubt includes any amount of interest rolled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have been willing to borrow from Company C, including the possibilities of not lending or borrowing any amount (see comments upon The lender s and borrower s perspectives in Section C.1.1.1 of this chapter). Consequently, the remainder of Company C s advance to Company B would not be delineated as a loan for the purposes of determining the amount of interest which Company B wouldhave paid at arm s length the accurate delineation of the actual transaction should begin with a thorough identification of the economically relevant characteristics of the transaction consisting of the commercial or financial relations between the parties and the conditions and economically relevant circumstances attaching to those relations , including: an examination of the contractual terms of the transaction, the functions performed, assets used, and risks assumed, the characteristics of the financial instruments, the economic circumstances of the parties and of the market, and the business strategies pursued by the parties . 10.18. In common with the analysis of any other transaction between associated enterprises, in applying the arm s length principle to a financial transaction it is necessary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that normally no bank gives corporate loan at the Base rate of Interest. The exact dates of the Loan disbursements are also not mentioned in the Transfer Pricing Study Report of the assessee or Form 3CD. There is an Advance of Rs. 10294,00,000/- by the Assessee to Air Products and Chemicals Inc USA. In the TPSR it is merely mentioned that the said advance is for supply of capital goods for Phase 2 of Kochi Project, however no specific schedule for delivery of the capital goods is mentioned. An independent third party while giving Loan will analyse all such advances given by the assessee. Interest Rates in other Countries : 9. As per OECD guidelines one also has to do economic analysis of the Lender. The Lender Air products Holdings BV Netherland is a Netherland based entity. The Interest rates in 2014, 2015 in Netherland were in the range 0.1 to 0.3 % per annum. Overall, the Interest Rate in USA, UK and many other developed countries were in the range of 0.5 to 2.5 % pa. One year LIBOR was hovering between 0.5 to 0.6% pa. in 2014. Thus, the funds were available at a very low interest rate outside India. This also means that the AE Air products Holdings BV Netherland would have ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot at Arm s Length. Accordingly, we confirm that the Arm s Length Interest in this case should be SBI base rate plus 25 basis points for the impugned Loan, which will be simple interest. 10.2 Accordingly the Ground Number 2 and 3 of the Assessee are rejected. 10.3 Ground No.4 is about initiation of Penalty which is premature, hence does not need any adjudication. Hence Ground No.4 rejected as unadjudicated. Ground Number 1: 11. By this ground the assessee has challenged the validity of the Final Assessment Order. 11.1 The Ground No.1 of the Assessee is reproduced here as under for ready reference: Ground No.1: On the facts and in the circumstances of the case and in law, the Assistant Commissioner of Income Tax-4, Pune ( the ACIT ) erred in passing the final assessment order in the absence of jurisdiction as per the provisions of Section 144B rendering the final assessment order to be null and void The Appellant prays that the final assessment order is null and void being passed in violation of the law and deserves to be quashed. Findings and Analysis : 12. In this case, draft assessment order under section 144C of the Income Tax Act was passed by Assessing Officer(AO) of the Natio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
