PRINCIPAL COMMISSIONER OF INCOME TAX 2 KOLKATA vs. M/S KARAM CHAND THAPAR AND BROS COAL SALES LTD

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ITAT/268/2023HC CalcuttaWBCHCO005582202331 January 2024Bench: THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM,HON'BLE JUSTICE SUPRATIM BHATTACHARYA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that there was no substantial question of law arising for consideration. The Tribunal had examined the aspect of corporate guarantee commission and found that an average rate of 0.5% had been accepted in several Tribunal decisions. The assessee had charged a commission of 0.5%, which compared favorably with the commission typically charged by banks like Bank of Singapore (around 0.15%). Therefore, the Tribunal concluded that the upward adjustment made on account of corporate guarantee commission could not be sustained and was accordingly deleted. The Tribunal relied on the decision in PCIT Vs. Redington (India) ltd. [2020] 122 taxmann.com 136 (Mad) and applied it to the facts of the case, holding in favor of the assessee. Consequently, the appeal filed by the revenue was dismissed.

What were the facts?

The appeal was filed by the Revenue (Principal Commissioner of Income Tax 2 Kolkata) against an order of the Income Tax Appellate Tribunal (ITAT), C-Bench, Kolkata, for the assessment year 2015-16. The ITAT had sustained the order of the Commissioner of Income Tax (Appeals) [CIT(A)] which deleted a transfer pricing adjustment of Rs. 7,71,77,867/-. This adjustment was made on account of a corporate guarantee provided by the assessee, M/s Karam Chand Thapar and Bros Coal Sales Ltd., on behalf of its Associated Enterprises. The CIT(A)'s order was dated 29th June, 2021, and the ITAT's order was dated 28th February, 2023. The High Court was considering the appeal under Section 260A of the Income Tax Act, 1961.

What were the issues?

The High Court was asked to decide two substantial questions of law: 1. Whether the ITAT erred in sustaining the CIT(A)'s order which deleted the transfer pricing adjustment of Rs. 7,71,77,867/- made on account of corporate guarantee given by the assessee on behalf of its Associated Enterprises, under Section 92C of the Income Tax Act, 1961. 2. Whether the ITAT erred in law by sustaining the CIT(A)'s order which did not follow a recognized approach for arriving at the Corporate Guarantee (CG) Fee and arbitrarily adopted a rate of CG Fees based on factually different judgments. Assessee's contentions: The judgment does not record specific contentions made by the assessee. However, it notes that the assessee had already charged a guarantee commission at 0.5% from its associated enterprises. Revenue's contentions: The revenue argued that the ITAT erred in sustaining the deletion of the transfer pricing adjustment and in not following a recognized approach for determining the CG Fee, arbitrarily adopting a rate based on different judgments.

Which sections of the Income-tax Act were involved?

Section 260A,Section 92C

AI-generated summary — verify with the full judgment below

OD – 26 IN THE HIGH COURT AT CALCUTTA Special Jurisdiction [Income Tax] ORIGINAL SIDE ITAT/268/2023 IA NO: GA/2/2023

PRINCIPAL COMMISSIONER OF INCOME TAX 2 KOLKATA VS M/S KARAM CHAND THAPAR AND BROS COAL SALES LTD.

BEFORE : THE HON’BLE CHIEF JUSTICE T.S. SIVAGNANAM

And THE HON’BLE JUSTICE SUPRATIM BHATTACHARYA Date : 31st January, 2024

Appearance : Mr.Tilak Mitra, Adv. Mr.Prithu Dudheria, Adv. ...for the appellant.

Mr.Shashwat Nayak, Adv. Mr.Barnik Ghosh, Adv. ...for the respondent.

The Court : This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated 28th February, 2023 passed by the Income Tax Appellate Tribunal, C-Bench, Kolkata (the Tribunal) in ITA No.320/Kol/2021 for the assessment year 2015-16. The revenue has raised the following substantial questions of law for consideration : “(a) WHETHER on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal was erred in sustaining the order of C.I.T(A), which deleted the transfer pricing adjustment of Rs.7,71,77,867/- made on account of Corporate

guarantee given by the Assessee on behalf of its Associated Enterprises? (b) WHETHER on the facts and in the circumstances of the case the Learned Income Tax Appellate Tribunal was erred in law in sustaining the order of CIT(A), which did not follow a recognized approach for arriving at the CG Fee and further erred in arbitrarily adopting a rate of CG Fees based on judgments which are factually different?”

After elaborately hearing the learned advocates for the parties and carefully perusing the materials on record and the reasoning given by the Commissioner of Income Tax (Appeals) [CIT(A)] in his order dated 29th June, 2021 and the finding of the learned Tribunal, we find that the learned Tribunal has examined the aspect and found that the average rate of corporate guarantee commission has been accepted for several decisions of the Tribunal at 0.5% and the assessee in the instant case has already charged a guarantee commission at 0.5% from the associated enterprises. Further, it was found on facts that this charge of commission compares favourably with the Bank of Singapore usually charge commission in the range of 0.15%. Therefore, it was held that the upward adjustment made on account of corporate guarantee commission cannot be sustained and, accordingly, the same was deleted. The Tribunal noted the decision in the case of PCIT Vs. Redington (India) ltd. [2020] 122 taxmann.com 136 (Mad) and applied the same to

the facts of the case and held in favour of the respondent/assessee. Thus, we find that there is no substantial question of law arising for consideration. Hence, the appeal fails and the same is dismissed. The connected application stands closed.

(T.S. SIVAGNANAM)

(CHIEF JUSTICE)

(SUPRATIM BHATTACHARYA, J.) S.Das/

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