State Bank of India Vs ACIT (ITAT Mumbai Bench)
Safe Harbour Cannot Sail Backward—20% TP Mark-Up Cut To 10%; RBI-Based Real Income, Pension & Banking Deductions Largely Upheld
Summary: The consolidated order disposed of cross-appeals filed by State Bank of India & the Revenue for AYs 2012-13 & 2013-14. The disputes covered transfer pricing, pension liability, section 14A, depreciation & valuation of securities, interest on NPAs, retired employees’ medical benefits, foreign-branch income, bad debts, deductions u/s 36(1)(viia), 36(1)(viii), 80-IA & 80LA, TDS defaults, double-taxation relief & several banking-specific issues.
Most issues stood covered by earlier orders in SBI’s own cases. In the absence of any material change in facts or law, the Tribunal followed the principle of consistency.
Safe-Harbour Rules Cannot Apply Retrospectively
SBI rendered technical services to its associated enterprise, Nepal SBI Bank, by deputing personnel under an agreement approved by the regulatory authorities. It recovered ₹74,13,281 as technical-service fees. It also recovered ₹203.33 lakh from overseas associated enterprises towards ITeS and allocated head-office expenses.
The TPO applied a 20% mark-up by referring to the Safe Harbour Rules & proposed an aggregate adjustment of ₹55,49,256.
The Tribunal held that the Safe Harbour Rules were not applicable to AY 2012-13 & their prescribed 20% margin could not be mechanically imported into an earlier year. However, absence of applicable Safe Harbour Rules did not mean that the services could be accepted at arm’s length without examination. Deputation of personnel involved service & value addition requiring appropriate remuneration.
