Case Law Details
DCIT Vs M/s. Rabo India Finance Ltd. (ITAT Mumbai)
In the present case, the reason for invoking provisions of section 69 of the Act germinates from the contents of letters dated 27/07/2011 and 06/09/2011 written by one of the employee indicating that the assessee has extended loan of GBP 37.50 million as per part of syndicate and the participation/commitment fee of GBP 1,50,000 has been received by the assessee. Apart from the said letters, there is no other material on record to corroborate that the assessee in any manner participated in extending loan facility to Tata Tea UK as part of consortium/syndicate. In the first place the Assessing Officer has failed to take note of the fact that the contents of letter on the basis of which addition u/s.69 of the Act was made, were retracted by way of affidavit. Further, the addition cannot be made solely on the basis of phraseology of the submissions made during proceedings. There has to be substantive evidence on record to corroborate with the statements.
The findings of the TPO and the Assessing Officer in draft assessment order that the assessee has advanced loans from undisclosed sources is merely based on surmises and conjunctures. It is a well settled legal proposition that suspicion, howsoever strong, cannot take place of evidence. Except from the letters referred above there is no material to back the observations made by the TPO/AO. On the contrary, the assessee has furnished various documents to substantiate that the assessee was not part of syndicate that has extended loan facility to Tata Tea UK, however, the same have been ignored by the TPO and the assessing officer while passing the draft assessment order. In the absence of any cogent evidence, the Revenue has failed to discharge its onus while alleging that there was an outflow of funds from India by assessee or receivables from Rabobank London have been squared off for diversion of funds to syndicate for advancing loan to Tata Tea UK. The assessee cannot be expected to prove negative. The onus is on the Department to substantiate that the assessee has advanced amount to Rabobank London for loan to Tata Tea UK or assessee’s funds have been diverted in any manner to fund part of said loan. We find that the TPO and the assessing Officer in draft assessment order has placed reliance solely on the letters furnished by an employee of the assessee without there being any corroborative evidence for making addition u/s.69 of the Act.
The second limb of presumption is that the commitment charges received by the assessee are in fact, part of interest income on the loan advanced. The assessee has clarified that the role of assessee was limited to identifying and referring the opportunity to Rabobank London. Rabobank London is the lead arranger for the loan and the other financial institutions/banks joined hands to form a consortium for extending loan facility to Tata Tea UK. The assessee is remunerated for the services rendered by way of share in upfront fee, participation/commitment fee. The share in participation/commitment fee at some percentage (0.40%) of the credit allocation of GBP37.5 million was the method of remunerating the assessee for the functions performed. Since, we have already held that the assessee had not participated in extending loan facility to Tata Tea UK through the consortium in any manner whatsoever, the remuneration received by the assessee in lieu of the services rendered cannot be termed as interest income of the assessee from the alleged advancing of loan. The aforesaid income received by the assessee has already been offered to tax, this fact has not been disputed by the Revenue.
TPO cannot decide necessity of expense for business
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