Income Tax Appellate Tribunal - Mumbai
Asst Cit (Ltu) 2, Mumbai vs Everest Kanto Cylinder Ltd, Mumbai on 22 February, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
"K" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA no. 1655/Mum./2016
(Assessment Year : 2011-12)
Asstt. Commissioner of Income Tax
(LTU)-2, Mumbai ................ Appellant
v/s
Everest Kanto Cylinder Ltd.
2014, Raheja Centre
Free Press Journal Marg ................ Respondent
Nariman Point, Mumbai 400 021
PAN - AAAECE0836F
Revenue by : Shri Anand Mohan
Assessee by : Shri S.M. Kapoor
Date of Hearing - 29.11.2018 Date of Order - 22.02.2019
ORDER
PER SAKTIJIT DEY, J.M.
Aforesaid appeal has been filed by the Revenue challenging the assessment order dated 28th January 2016, passed under section 143(3) r/w 144C(13) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2011-12 in pursuance to the directions of the Dispute Resolution Panel-1 (DRP), Mumbai.
2. In ground no.1, the Revenue has challenged the decision of the 2 Everest Kanto Cylinder Ltd.
DRP in directing the Assessing Officer to charge interest on the loan advanced to the Associated Enterprises (AE) in U.A.E. and China by applying LIBOR rate.
3. Brief facts are, the assessee an Indian company is a manufacturer of High Pressure Seamless Gas Cylinder. During the proceedings before the Transfer Pricing Officer it was noticed by him that the assessee has advanced loan to its AEs in U.A.E. and China. From the details furnished, he found that the interest charged by the assessee on the loan advanced to the AE in U.A.E is at the average rate of 1.33% by applying the rate of LIBOR plus 1%. Similarly, for the loan advanced to the A.E. in China, the assessee has charged interest @ 5%. The Transfer Pricing Officer after examining the claim of the assessee was of the view that the interest charged by the assessee on the loans advanced to the AEs in U.A.E. and China are not at arm's length. Accordingly, he determined the rate of interest on the loan advanced to the A.E. in U.A.E. at 10.25% by relying upon his own order for assessment year 2009-10. As regards the loans advanced to the AE in China he applied the interest rate of 10.25% as well. As a result, an aggregate adjustment of ` 3,28,29,992, was proposed by the Transfer Pricing Officer. In terms of the order passed by the Transfer Pricing Officer the Assessing Officer made addition of ` 3,28,29,992, to the income of the assessee in the draft assessment 3 Everest Kanto Cylinder Ltd.
order. Against the draft assessment order so passed, the assessee raised objections before the DRP.
4. The DRP after considering the submissions of the assessee in the context of facts and material on record directed the Assessing Officer to charge interest on the loan advanced to the AE in U.A.E. @ 6 months LIBOR plus 350 basis points and in respect of the AE in China @ 6 months LIBOR plus 500 basis points. Being aggrieved with the aforesaid decision of the DRP, the assessee is in appeal before the Tribunal.
5. At the outset, the learned Authorised Representative submitted, the issue has been decided in favour of the assessee in the earlier years wherein the Tribunal has accepted assessee's claim of applying LIBOR rate. Thus, he submitted, there is no need to interfere with the decision of the DRP.
6. The learned Departmental Representative agreed that the issue has been decided in favour of the assessee in the earlier assessment years.
7. Having considered rival submissions, we have noticed that while deciding identical issue in assessee's own case for assessment year 2008-09, 2009-10 and 2010-11, the Tribunal has directed the Assessing Officer to compute interest in respect of loan advanced to 4 Everest Kanto Cylinder Ltd.
the AEs in U.A.E. by applying the rate of LIBOR plus basis points. In respect of the AE in China, the interest rate upheld by the Tribunal is @ 7%. In view of the aforesaid decisions of the Tribunal in assessee's own case in ITA no.1131/Mum./2015, dated 7th October 2016, we do not find any reason to interfere with the decision of the DRP on the issue. Ground raised is dismissed.
8. In ground no.2, the Revenue has challenged the decision of the DRP in restricting the commission on corporate guarantees given to the Banks on behalf of the AEs located in U.A.E., China and U.S.A. @ 1%, 1.25% and 1.75% respectively.
9. Notably, the Transfer Pricing Officer noticing that the assessee has provided corporate guarantee on behalf of the AE proceeded to determine the arm's length price of guarantee commission and proposed an adjustment of ` 10,44,81,000. While considering the objections of the assessee, the DRP directed the Assessing Officer to charge guarantee commission @ 1% for the AE in U.A.E., 1.25% for the AE in China and 1.75% for the AE in U.S.A. It is seen from the facts on record, while deciding identical issue arising in assessee's own case for the assessment year 2008-09, 2009-10 and 2010-11, the Tribunal has restricted the guarantee commission on the corporate guarantees provided to the AEs @ 0.5%. In fact, the aforesaid decision of the Tribunal in assessment year 2007-08 was upheld by the Hon'ble 5 Everest Kanto Cylinder Ltd.
Jurisdictional High Court. Keeping in view the aforesaid facts, the directions of the DRP with regard to the guarantee commission to be charged on the corporate guarantees provided to the AEs is found to be reasonable, hence, not required to be interfered with. Ground raised is dismissed.
10. In the result, Revenue's appeal is dismissed.
Order pronounced in the open Court on 22.02.2019 Sd/- Sd/-
RAJESH KUMAR SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 22.02.2019
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Pradeep J. Chowdhury
Sr. Private Secretary
(Sr. Private Secretary)
ITAT, Mumbai