Precision Camshafts Limited Vs Assessment Unit (ITAT Pune)
Corporate Guarantee Fee Cannot Be Imputed When Bank Prohibits Charging; Ad-Hoc Interest Mark-Up Also Unsustainable – TP Additions Deleted by Pune Tribunal
Tribunal noted that the Bank of Baroda loan agreement expressly prohibited the Assessee from charging any guarantee commission to its Netherlands subsidiary. Following its own order for AY 2020-21, Tribunal held that when a third-party bank itself bars charging fees, the ALP cannot be anything other than NIL, making the TPO’s 0.5% adjustment unsustainable.
On the protective addition for interest, Tribunal held that the TPO had not used any prescribed TP method, and the Assessee’s 1.9% rate matched the bank’s independent rate and exceeded ECB benchmarks. Hence the ad-hoc uplift was invalid.
Result: Both TP additions deleted; appeal partly allowed.
FULL TEXT OF THE ORDER OF ITAT PUNE
This is an appeal filed by Assessee against the Assessment Order under section 143(3) r.w.s 144C(13) read with section 144B of the Act, 1961 dated 24.10.2024 for A.Y.2021-22 emanating from Dispute Resolution Panel’s order passed under section 144C(5) of the Act, dated 06.09.2024 and Draft Assessment Order passed under section 144C(1) of the Act, dated 20.12.2023. The Assessee has raised the following grounds of appeal :
“The following grounds are taken without prejudice to each other –
A. Validity of assessment order
The assessee submits that recently Hon’ble Madras High Court in the case of CIT vs. Roca Bathroom Products (P.) Ltd. [140 taxmann.com 304] has held that the outer time limit of 30 months in case of reference made to the TPO u/s. 153 would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within time limits prescribed. In the present case, the final assessment order has been passed beyond the time limit prescribed u/s. 153 accordingly, the said asst, order is null and void.
B. Transfer Pricing Issues
1. On the facts and in the circumstances of the case and in law, the Ld. AO /Ld. TPO has erred in proposing TP adjustment to the international transaction of corporate guarantee amounting to INR 21,46,000 to the total income by rejecting TP analysis conducted by the Appellant.
2. Corporate Guarantee as an international transaction
On the facts and in the circumstances of the case and in law, while erred in arriving at arm’s length price of corporate guarantee provided by the Appellant, the Ld. AO/Ld. TPO has erred in the following –
