KEC International Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai disposed of four cross-appeals filed by KEC International Limited and the Revenue for Assessment Years 2015-16 and 2016-17. The appeals involved transfer-pricing adjustments relating to corporate and performance guarantees, foreign tax credit for tax paid in Kenya, TDS credit relating to KEC TNR Infra JV, disallowance under Section 14A while computing book profit under Section 115JB, interest-free business advances to EJP KEC Joint Venture, South Africa, and benchmarking of guarantee commission. Since common issues were involved, all four appeals were heard together and disposed of by a common order.
For AY 2015-16, the assessee’s first grievance concerned a transfer-pricing addition on account of corporate guarantee. The Tribunal noted that the issue had already been decided against the assessee in its own case for AY 2012-13. In that earlier decision, the corporate guarantee transaction was held to require benchmarking under the arm’s length principle. However, considering that the associated enterprises were subsidiaries functioning as special purpose vehicles for acquisitions ultimately benefiting the assessee and that no guarantee fee had been paid, the earlier Bench, following the principle in KEC International Limited’s case for AY 2012-13 and the decision in Everest Kanto Cylinders Ltd. Vs DCIT, had estimated the TP adjustment at 0.20%. Following that precedent, the Tribunal dismissed the assessee’s ground.
