Brief about the case
In the case of Hindalco Industries Ltd. -Vs- The Addl. Commissioner of Income tax, there were several grounds on which the appeal was made, both by the revenue as well as the assessee. The major ground being of transfer pricing has been discussed here under. Other grounds have been discussed in the facts mentioned herein.
The Assessee-company purchased cooper concentrates from its AE as well as non-AEs – Assessing Officer noticed that purchase price was higher in case of AE vis-a-vis non-AEs – Accordingly, he worked out differential price for purchases effected and added same to total income of assessee – It was found that there was no difference between AE and non-AE with regard to methodology adopted for determining price of copper concentrates but difference occurred as non-AEs had synchronized reduction of treatment charges with Japanese rates on calendar year basis whereas AE followed financial year basis for reduction of treatment charges. Held, temporary price differentials occurring due to fluctuation in treatment charges should be ignored and thus, addition made should be deleted.
The assessee had given corporate guarantee to its AEs and charged guarantee fee at 0.25 per cent per annum. The Assessing Officer noticed that a US bank had charged a fee of 1.5 per cent to 2 per cent to the guarantee given by it. Accordingly, he adopted the rate of 1.75 per cent and computed the guarantee commission/fee, which resulted in an addition of Rs. 9.70 crores. The Commissioner (Appeals) also confirmed the same. On appeal to the Mumbai ITAT , it relied on the case of CIT v. Everest Kanto Cylinder Ltd. [2015] 232 Taxman 307/58 taxmann.com 254 which was considered by the Bombay High Court. Accordingly, order of Commissioner (Appeals) on this issue was modified and the Assessing Officer is directed to compute the addition by adopting the rate of 0.50 per cent.
Facts of the case:
