PR. COMMISSIONER OF INCOME TAX JAIPUR-II vs. M/S VAIBHAV GLOBAL LIMITED EARLIER KNOWN AS VAIBHAV GEMS LTD

PDF · subscribers
ITA/281/2018HC RajasthanRJHC02088241201827 May 2019Author: G R MOOLCHANDANI,S. RAVINDRA BHAT2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no merit in the revenue's appeal. Regarding the first issue, the court found the reduction of the ALP determination on interest, by applying LIBOR rates, to be reasonable. This was because the amounts were used by the Associated Enterprise (AE) abroad, and LIBOR rates were considered the appropriate yardstick. Concerning the second issue, the court held that a mere reduction in the ALP determination of the corporate guarantee fee, per se, does not result in a question of law, as urged by the revenue. The court noted that the ALP determination leading to adjustments on both counts had been subject to previous appeals, including one to the High Court, which were decided in favour of the assessee. Therefore, the appeal was dismissed.

What were the facts?

The appellant, Pr. Commissioner of Income Tax Jaipur-II, Jaipur, filed an appeal under Section 260-A of the Income Tax Act against the order of the Income Tax Appellate Tribunal (ITAT). The respondent is M/s Vaibhav Global Limited. The appeal challenges the ITAT's decision concerning two issues related to Transfer Pricing Officer's (TPO) orders. The first issue pertains to an adjustment of over ₹82 crore towards interest payable but not recovered, where the ITAT allegedly erred in modifying the rate. The second issue concerns the reduction of the corporate guarantee fee to 0.53%. The High Court noted that the ALP determination leading to these adjustments was previously decided in favour of the assessee by the ITAT, and a further appeal by the revenue to the High Court was unsuccessful.

What were the issues?

1. Whether the ITAT erred in modifying the Transfer Pricing Officer's (TPO) order concerning the rate of adjustment for interest payable but not recovered, which amounted to over ₹82 crore? (Question of law) 2. Whether the ITAT erred in reducing the corporate guarantee fee to 0.53%? (Question of law) Assessee's Contentions: The judgment does not record specific contentions made by the assessee. However, the court's reasoning implies that the assessee's position, as accepted by the ITAT and the High Court, was that the adjustments made by the TPO were erroneous. Revenue's Contentions: The revenue contended that the ITAT fell into error in its decision on both issues. Specifically, it urged that the TPO's order directing adjustment of over ₹82 crore towards interest payable but not recovered was erroneously modified as far as the rate is concerned. Secondly, it urged that the reduction of the corporate guarantee fee to 0.53% was not justified.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 281/2018 Pr. Commissioner Of Income Tax Jaipur-II, Jaipur (Raj) ----Appellant Versus M/s Vaibhav Global Limited Earlier Known As Vaibhav Gems Ltd, K-6-B Fateh Tiba Adarsh Nagar Jaipur ----Respondent For Appellant(s) : Mr. R.B. Mathur For Respondent(s) : HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE G R MOOLCHANDANI

Order 27/05/2019 The revenue in its appeal under Section 260-A of the Income Tax Act urges two questions of law and contends that the ITAT fell into error. Firstly it is urged that the Transfer Pricing Officer’s (TPO’s) order directing adjustment of over ₹ 82 crore towards interest payable but not recovered, was erroneously modified so far as rate is concerned. The second question urged is that the reduction of the corporate guarantee fee to 0.53% was not justified. This court notices that ALP determination which led to adjustments on both counts, were the subject matter of previous appeal decided in its favour by the ITAT. Further appeal to this court by the revenue was unsuccessful. Moreover the reduction of ALP determination on interest, in this court’s opinion,

(2 of 2) [ITA-281/2018] by applying LIBOR rates, is reasonable because the amounts were used by the AE Abroad and the yardstick, therefore, was naturally as per LIBOR rates. Likewise, as far as the ALP determination of the cooperate guarantee fee, mere reduction per se does not result in a question of law, as is urged in this appeal. For the above reason, this court is of the opinion that there is no merit in the appeal; it is accordingly dismissed. (G R MOOLCHANDANI),J (S. RAVINDRA BHAT),CJ

db/ashu /24

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →