Case Law Details
DCIT Vs Rabo India Finance Ltd (ITAT Mumbai)
ITAT Mumbai held that guarantee fees paid to holding company for loan advanced by assessee to third party is commercial/ business expediency and hence allowable as deduction under Section 37 of the Income Tax Act.
Facts- RIFL (assessee) had given a loan to third party ‘Noble Grain/Sidharth Soya’ and for the said loan, Rabobank Hong Kong had provided a guarantee that in case of default by the borrower entity. RIFL would recover the amount from Rabo Hong Kong RIFL had taken such a guarantee in order to protect its interest in case of default by borrower for which it paid guarantee fees.
Revenue, vide the present appeal, contested that DRP erred in deleting the addition made in draft assessment order on account of interest on external commercial borrowing. DRP erred in deleting addition made in draft assessment order on account of Guarantee fee paid of ₹.5,63,600/-, Service fee paid of ₹.5,63,600/- and Interest on ECB of ₹.3,90,69,364/- paid to its holding company even though no substantial/specific service have been rendered by the holding company. Ld. DR relied on the findings of the TPO/Assessing Officer.
Conclusion- Held that Ld. DRP has considered the issues with the various documents submitted before them and issues were properly directed to be part of the business operation of the assessee carried on by them in India and it is part of the Indi-an operation. Therefore, we do not see any reason to disturb their findings and nothing on record shows that the expenditure claimed by the assessee is not relating to the business carried on by it in In-dia. Therefore, the ground raised by the revenue is accordingly, dismissed.
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