In Relation To Question v. Tata Autocomp

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1776 OF 2016 Pr.Commissioner of Income-Tax-1 … Appellant V/s. Cox & Kings Limited… Respondent --- Mr.Suresh Kumar for the Appellant.Mr.Hiten Chande with Mr.Ojas Gole i/by M/s PDS Legal for theRespondent. --- CORAM : AKIL KURESHI AND B.P.COLABAWALLA, JJ. DATE : FEBRUARY 11, 2019. P.C.:- 1.Revenue has filed this appeal against the judgment of theIncome Tax Appellate Tribunal. 2. Following questions were presented for our consideration: “I.Whether u/s 92(1) r.w. 92F(ii) r.w. Rule 10B,the ALP of interest on loan granted by the assesseeto its Singapore AE be determined by applying anadhoc mark-up of 200 basis points withoutconsideringanycomparableuncontrolledtransaction identified after considering factors such as nature of loan, nature of security and creditworthiness of the assessee and the parties involvedin the comparable uncontrolled transaction?II.Whether the determination by the ITAT of thearm's length guarantee commission @ 0.5% is inaccordance with the requirements of Chapter X ofthe I.T.Act?” 3.In relation to question No.1 the counsel for the partiespointed out that the issue is covered by the decision of this Courtin case of Commissioner of Income-tax-2 Vs. Tata Autocomp Systems Ltd.[1] in which the Court held and observed as under:- “7. We find that the impugned order of the Tribunalinter alia has followed the decisions of the BombayBench of the Tribunal in cases of “VVF Ltd. Vs.DCIT” (supra) and “DCIT Vs. Tech MahindraLtd.”(supra) to reach the conclusion that ALP in thecase of loans advanced to Associate Enterpriseswould be determined on the basis of rate of interestbeing charged in the country where the loan isreceived/consumed. Mr.Suresh Kumar the learnedcounsel for the revenue informed us that theRevenue has not preferred any appeal against thedecision of the Tribunal in “VVF Ltd. Vs. DCIT”(supra) and “DCIT Vs. Tech Mahindra Ltd.”(supra)on the above issue. No reason has been shown to usas to why the Revenue seeks to take a different viewin respect of the impugned order from that taken in“VVF Ltd. Vs. DCIT” (supra) and “DCIT Vs. TechMahindra Ltd.”(supra). The Revenue not havingfiled any appeal, has in fact accepted the decision ofthe Tribunal in “VVF Ltd. Vs. DCIT” (supra) and Priya Soparkar “DCIT Vs. Tech Mahindra Ltd.”(supra). 4. In relation to question No.2 we may notice that Tribunal'simpugned judgment while accepting the guarantee commission atthe rate of 0.5% relied on the decision of this Court in case ofThe Commissioner of Income Tax, Mumbai Vs. M/s EverestKento Cylinders Ltd. dated 8[th] May, 2015 in Income TaxAppeal No. 1165 of 2013. In such judgment the Court held asunder:- “10. Having considered submissions of Mr.Malhotrafor the revenue and Mr.Pardiwalla for the assessee,we are of the view that the order of the Tribunal asregards disallowance under section 14A andrestricting the same to Rs.1 lac was justified in viewof the material before the Tribunal. Furthermore,having considered the fact that a sum ofRs.4,47,649/- was not conceded in the return butwas adhoc acceptance during the course ofassessment, the assessee could not be bound by it.The Tribunal as the second fact finding authorityhad gone into factual aspects in great detail andtherefore having interpreted the law as it stood onthe relevant date the order passed cannot be faulted.In the matter of guarantee commission, theadjustment made by the TPO were based oninstances restricted to the commercial banksproviding guarantees and did not contemplate theissue of a Corporate Guarantee. No doubt these arecontracts of guarantee, however, when they areCommercial banks that issue bank guarantees which are treated as the blood of commerce being easilyencashable in the event of default, and if the bankguarantee had to be obtained from CommercialBanks, the higher commission could have beenjustified. In the present case, it is assessee companythat is issuing Corporate Guarantee to the effect thatif the subsidiary AE does not repay loan availed of itfrom ICICI, then in such event, the assessee wouldmake good the amount and repay the loan. Theconsiderations which applied for issuance of aCorporate guarantee are distinct and separate fromthat of bank guarantee and accordingly we are of theview that commission charged cannot be called inquestion, in the manner TPO has done. In our viewthe comparison is not as between like transactionsbut the comparisons are between guarantees issuedby the commercial banks as against a CorporateGuarantee issued by holding company for the benefitof its AE, a subsidiary company. In view of the abovediscussion we are of the view that the appeal doesnot raise any substantial question of law and it isdismissed. There will be no order as to costs.” 5.In the result, no question of law arises. Income Tax Appeal isdismissed. (B.P.COLABAWALLA,J.) (AKIL KURESHI,J.) ….