M/S. EID PARRY INDIA LTD.,CHENNAI vs. DCIT, LTU-1, , CHENNAI

ITTPA 105/CHNY/2024Status: DisposedITAT Chennai21 April 2025AY 2011-1236 pages
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What were the facts?

The assessee, M/s. E.I.D. Parry India Ltd., filed appeals for assessment years 2011-12, 2012-13, 2013-14, and 2014-15 against orders of the CIT(Appeals). The Revenue also filed a cross-appeal for AY 2012-13. The primary dispute in the assessee's appeals for AYs 2011-12, 2012-13, and 2013-14 concerns the confirmation of the Arm's Length Price (ALP) computation at 1.65% on the value of a Letter of Comfort (LOC)/Guarantee provided by the assessee for its associated enterprise (AE). For AY 2011-12, the TPO had proposed a mark-up of 2.39% on the LOC/guarantee. The assessee's return for AY 2011-12 reported a loss of ₹.47,17,77,686/-. The TPO noted that the assessee provided an LOC/guarantee of ₹.4.46 crores to its AE, M/s. Parry America Inc.

What did the Tribunal hold?

The Tribunal held that the CIT(Appeals) was justified in allowing the claim of additional depreciation brought forward from AY 2011-12 for AY 2012-13. The Tribunal noted that the CIT(A) relied on the Tribunal's own decision for earlier assessment years and the Madras High Court's decision in CIT v. Aztec Auto (P) Ltd. The Revenue could not provide any contrary judgment from a higher court that modified or reversed these decisions. Therefore, the Revenue's appeal was dismissed on this ground. Regarding the ALP of LOC/Guarantee, the judgment does not explicitly state the Tribunal's final decision on the 1.65% confirmation, but the overall result indicates a partial allowance for the assessee. The Tribunal also addressed the issue of forward contract losses, directing the AO to verify if borrowings were for revenue account or fixed assets, allowing losses if on revenue account. The ground raised by the assessee for AY 2011-12 on this issue was dismissed, but the reasoning suggests a direction for verification. The operative part of the order states that the assessee's appeals are partly allowed for statistical purposes and the Revenue's appeal is dismissed.

What were the issues?

1. (Question of Law) Whether the CIT(Appeals) was justified in confirming the computation of Arm's Length Price (ALP) at 1.65% on the value of the Letter of Comfort (LOC)/Guarantee provided by the assessee for its associated enterprise for assessment years 2011-12, 2012-13, and 2013-14? Assessee's Contention: The assessee argued that the corporate guarantee was extended to preserve India's tax base. The TPO's observation that the assessee would not have given such a guarantee without fees to an independent enterprise was contested. The assessee also relied on the decision in M/s. Everest Kanto Cylinders Ltd. where it was decided that guarantee is an international transaction. Revenue's Contention: The Revenue, through the TPO's order, argued that the LOC/guarantee is an international transaction under Section 92B of the Act and requires appropriate remuneration. The TPO noted that the assessee bore charges of 1% per annum plus service tax, which affected its income/expenditure, and this fact was upheld in M/s. Everest Kanto Cylinders Ltd. The TPO also distinguished the assessee's case from Bharti Airtel and Redington (India) Limited. 2. (Question of Law) Whether the CIT(Appeals) was justified in directing the Assessing Officer to allow the claim of additional depreciation brought forward from AY 2011-12 in the assessment year 2012-13? Assessee's Contention: The assessee claimed additional depreciation under Section 32(1)(iia) for second-half additions made in AY 2011-12. The CIT(A) allowed the claim by following the Tribunal's decision in the assessee's own case for earlier years and the Madras High Court decision in CIT v. Aztec Auto (P) Ltd. Revenue's Contention: The Revenue argued that the Assessing Officer disallowed the claim based on the Tribunal's decision in Wheels India Ltd. for AY 2010-11. The Revenue could not controvert the higher court and tribunal judgments cited by the assessee.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(1),Section 143(2),Section 92CA,Section 92B,Section 37,Section 32(1)(iia),Section 43AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE KAND SHRI S.R. RAGHUNATHA

Hearing: 20.03.2025Pronounced: 21.04.2025

Heard together (2 matters)

ITA No.3113/CHNY/2024
I.T.A. No. 3251/Chny/2024

Read from the judgment's own cause title. This page is filed under one of them.

PER GEORGE GEORGE K, VICE PRESIDENT:

These four appeals filed at the instance of the a

The order continues below.

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