M/S GMR INFRASTRUCTURE LIMITED TAX ,BANGALORE vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2(2), BANGALORE

O R D E R

PER SHRI PAVAN KUMAR GADALE, JM :

3. The assessee company is in the business of promotion of infrastructure development and investments in the shares and securities, and filed the Return of Income on 29.11.2014 with total loss of Rs.35,66,74,072 under the normal provisions of Income Tax and Book Profits u/sec 115JB Rs.211,85,82,199. The case was selected for scrutiny and Notice under Section 143(2) of the IT Act was issued. The Assessing Officer as per Form 3CB Report filed by the assessee, found that the assessee has international transactions, and referred the matter for determination of Arm’s Length Price (ALP) to the Transfer Pricing Officer (TPO). Whereas the TPO made an adjustment of Rs.15,45,49,138 on transaction of Stand By Letter of Credit (SBLC) and similarly on Corporate Guarantee TP adjustment of Rs.41,28,60,585 and passed order u/sec 92CA of the Act. Subsequently, The AO along with the Transfer Pricing Adjustments, made disallowance under Section 14A of the act and unamortized amounts claimed and Finally Assessed the total income of Rs.1,67,87,08,248 and passed the order under Section 143(3) r.w.s. 144C of the Act dt.15.12.2017. Aggrieved by the order, the assessee has CIT(Appeals). The CIT(Appeals) on the disputed issue considered the submissions of the assessee and observed that the TPO has made adjustments towards commission for utilization of non-fund based limits of the assessee by Associated Enterprises (AEs) and the Bank has issued SBLC and charged commission of Rs.35,56,787. Whereas the assessee has recovered an amount of Rs.11,07,050 charged by the Bank from its ISG AE, and balance amount of Rs.24,49,737 is non-recoverable .Hence CIT(A) restricted the addition to the extent of Rs.24,49,737 and with other reliefs partly allowed the appeal. Aggrieved by the CIT (A) order, the assessee has filed an appeal with the Tribunal.

4. At the time of hearing, the learned Authorized Representative argued that the CIT(Appeals) has erred in restricting the addition to the extent of Rs.24,49,737. The contentions of the learned Authorized Representative that there is no requirement of ALP adjustment on this issue, as the AE is permitted to utilize its non-fund based limits, which is in the nature of shareholders operations and on commercial expediency,and prayed for allowing the appeal. Contra, the learned Departmental Representative supported the orders of CIT (Appeals). 5. We heard the rival contentions and perused the material on record. The sole matrix of the disputed issue as envisaged by the learned Authorized Representative that there is no requirement of TP Adjustment, as the standby letter of credit (SBLC) was issued in Group Concerns, where the AE was allowed to utilize the non-fund base limits of the assessee, which are in the nature of a shareholder activity and satisfy the test of commercial expediency. We found the CIT(Appeals) has made observations at page 10 and para 6.1.4 of the order which is read as under :

The learned Authorized Representative vehemently submitted that, there is no necessity of Transfer Pricing adjustment on SLBC because of commercial expediency, But could not controvert the observations and findings of the CIT(Appeals) with cogent evidence. Accordingly, we are not inclined to interfere with the order of CIT (A) on this disputed issue and confirm the same and dismiss the ground of appeal of the assessee.

6. In the result, the assessee appeal is dismissed. Pronounced in the open court on the date mentioned on the caption page.