DCIT, CIR-4(1), KOLKATA, Kolkata V. M/s Mcleod Russel India Ltd., Kolkata

ITA 2279/KOL/2019

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle-4(1), Kolkata as the appellant and M/s. Mcleod Russel India Limited as the respondent. The primary issue was the determination of the Arm's Length Price (ALP) for three international transactions during the Assessment Year 2014-15. These transactions included corporate guarantee fees, inter-unit transfers of tea leaves, and interest on loans to an Associate Enterprise (AE). The Tax Officer (TPO) had made adjustments to the ALP determined by the assessee, which were contested in the CIT(Appeals) and subsequently in the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129055 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-06-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 13-10-2019
• Other Referred Cases: M/s Tega Industries Ltd [76 taxmann.com 24], Dy.CIT Vs National Engineering Industries Ltd (ITA No. 986 & 987/Kol/2017), Aditya Birla Minac Worldwide Ltd Vs DCIT (56 taxman.com 317), ACIT Vs Nimbus Communications Ltd. (34 taxman.com 298), Hindalco Industries Ltd vs Addl CIT (62 taxman.com 181), Manugraph India Ltd Vs Dy.CIT (62 taxman.com 347), Mylan Industries Ltd Vs Asst.CIT (63 taxman.com 179), Rain Commodities Ltd Vs Addl.CIT (65 taxman.com 240), Prolifics Corpn. Ltd. v. Dy. CIT (68 SOT 104), Cotton Naturals (I) Pvt Ltd [TS-117-HC-2015(DEL)-TP], Tata Autocomp Systems Ltd, (TS-45-HC-2015(BOM)-TP), Varroc Engineering Pvt. Ltd vs. ACIT (ITAT Pune), Bhansali & Co.(TS-461-ITAT-2014(Mum)-TP), M/s Four Soft Ltd vs DCIT (ITA No. 1495/HYD/2010), DCIT vs Tech Mahindra Ltd (ITA No. 1176/Mum/2010), Mahindra & Mahindra Limited vs DCIT (ITA No.7999/Mum/2011), Cotton Naturals (I) Pvt. Ltd. Vs. DCIT, Circle 3(1) (I.T.A. No. 5855/Del/2012), Tata Autocomp Systems Ltd. Vs. Assistant Commissioner of Income Tax, (2012-(052)-SOT-0048-TBOM), Hinduja Global Solutions Ltd. vs. Addl. CIT, (ITA No. 254/Mum/2013), Aurinopro Solutions Ltd. vs. Addl. Commissioner of Income Tax (ITA No. 7872/Mum/2011), VVF Limited vs. DCIT (2010-TIOL-55-ITAT-MUM), M/s Aithent Technologies Pvt. Ltd. v/s ITO (2010-TII-134- ITAT-DEL-TP)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ADOPTING THIS
• Keywords: Transfer pricing; International transaction; Set aside
• Section: 92C; 92B; 207; 92CA

Judgement Text

ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 1 IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, KOLKATA Before Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member I.T.A. No. 2279/KOL/2019 Assessment Year: 2014-2015 Deputy Commissioner of Income Tax,......Appellant Circle-4(1), Kolkata, Aayakar Bhawan, 8 th Floor, P-7, Chowringhee Square, Kolkata-700069 -Vs.- M/s. Mcleod Russel India Limited...........Respondent 4, Mangoe Lane, Surendra Mohan Sarani, Kolkata-700001 [PAN: AAACE6918J] Appearances by: Smt. Ranu Biswas, Addl. CIT, Sr. D.R., appeared on behalf of the Revenue Shri N.S. Saini, A.R. and Priyanka Salarpuria, A.R., appeared on behalf of the assesseee Date of concluding the hearing : July 04, 2023 Date of pronouncing the order : July 07, 2023 O R D E R Per Shri Rajpal Yadav, Vice-President (KZ):- The Revenue is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-22, Kolkata dated 27 th February, 2019 passed for A.Y. 2014-15. ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 2 2. A perusal of the grounds of appeal would reveal that Revenue has taken nine grounds of appeal. However, it emerges out from the record that all these nine grounds revolve around three issues, whereby it is to be determined as to how Arm’s Length Price of three international transactions has to be carried out. 3. Brief facts of the case are that the assessee-company is a Member of the Williamson Magor Group. During the previous year under consideration, it was engaged primarily in the business of cultivation, manufacturing and sale of tea. The assessee owns tea estates in the State of Assam and West Bengal. It sold tea in both the domestic and international markets and earns revenue therefrom. It has filed its return of income for A.Y. 2014-15 electronically on 30.09.2014 declaring total income of Rs.28,79,66,760/-. The case of the assessee was selected for scrutiny assessment. A perusal of Form No. 3CEB revealed to the ld. Assessing Officer that the assessee had entered into international transaction s within the meaning of section 92CA of the Act with its Associate Enterprises and these transactions were required to be referred to the concerned TPO. Accordingly he referred those transactions to the ld. TPO, who determined Arm’s Length Price. The suggestions made by the ld. TPO towards adjustment of the Arm’s Length Price of transactions, which we are going to take into consideration in the following part of the order, have been considered by the ld. Assessing Officer and the additions were made accordingly. The ld. CIT(Appeals) has briefly ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 3 carved out these international transactions and thereafter took into consideration the each transaction. 4. With the assistance of ld. Representatives, we have gone through the record carefully. For taking note of the facts and circumstances as well as the finding of the ld. CIT(Appeals), we find that the ld. 1 st Appellate Authority has considered three international transactions, where the ld. TPO has suggested upward adjustment in the Arm’s Length Price of the value of the international transactions. Therefore, we deem it appropriate to take note of the finding of the ld. CIT(Appeals) in this regard, which reads as under:- “07. FINDINGS &DECISION: 1. I have carefully considered the submissions of the Ld. AR of the appellant and perused the observations of the Ld. TPO in the impugned order. In the order passed u/s 92CA(3) of the Act, the Ld. TPO has made the following transfer pricing adjustments: (i) Fees towards corporate guarantee Rs. 61,84,092/- (ii) Inter-unit transfers of eligible units Rs. 5,94,091/- (iii) Fees against corporate guarantee Rs. 2.16.33.836/- Rs. 2,84,12,01 9/- 2. I first proceed to deal with the transfer pricing adjustment of Rs,61,84,092/- in respect of the corporate guarantee issued by the appellant to its AE. From the material on record, it is noted that the assessee company had given corporate guarantees on behalf of its AE, BTHL for the loan/finance obtained by the AE from ICICI Bank, UK. In the Form 3CEB the appellant benchmarked the transaction involving issuance of corporate guarantee @ 0.5% out of abundant caution. The Ld. TPO was however not agreeable to the benchmarking exercise performed by the appellant and instead he benchmarked the corporate guarantee fees at 1.75% resulting in further transfer pricing adjustment of Rs.61,84,092/-. 3. In the appellate proceedings the appellant has contended that the issuance of corporate guarantee does not come within the meaning of 'international transaction' since it has no bearing on ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 4 the profits & losses of the company and therefore pleaded that no adjustment be made on this count. The Ld. AR of the appellant has relied on the decision rendered by the Hon'bie ITAT, Kolkata in the case of M/s Tega Industries Ltd [76 taxmann.com 24] and claimed that the issuance of corporate guarantee was in the nature of shareholder activity which did not have any bearing on the profits and losses of the appellant company and in that view of the matter the transfer pricing provisions ought not be applied to this international transaction. The Ld. AR also pleaded that the corporate guarantee provided to FLFZCO is not an international transaction within the meaning of section 92B and therefore the transfer pricing adjustment deserves to be deleted. The ld. AR has alternatively claimed that the corporate guarantee fee be benchmarked at 0.5% as suo motu offered by the appellant company. 4. After giving thoughtful consideration to the facts of the case, the provisions of law, and judicial precedents available on this subject; I find that the Hon'ble ITAT, Kolkata in their decision rendered on 12.09.2018 in the case of Dy.CIT Vs National Engineering Industries Ltd (ITA No. 986 & 987/Kol/2Q17) has held their earlier decision in the case of M/s Tega Industries Ltd (supra) to be per incuriam and held that the corporate guarantee was indeed an international transaction amenable to transfer pricing provisions contained in Chapter X of the Act. The relevant extracts of the judgment is as follows: 15. We have given a careful consideration of the rival submissions and perused the material available on record, we note that the assessee-company provided corporate guarantee on behalf of its associated enterprise - Birlasoft Inc. New Jersey, United States to Capital One, National Association Bank, and the total value of such guarantee was USD 10.5million(Rs.47.50 crores). The said guarantee was given on 11.03.2011, and the loan was made available to Birlasoft Inc by Capital One bank on 17.03.2011. It is also an undisputed fact that the assessee did not realize any guarantee commission from Birlasoft Inc; however, on amendment made in Finance Act 2012, the assessee-company had revised its Income- tax Return to include a deemed Guarantee Commission @0.38%, this being the average cost of all bank guarantees taken by the Assessee from the Indian Banks. It has also been categorically brought on record that the said corporate guarantee was never invoked and was ultimately returned on 31.12.2012.The AO/TPO determined the arm's length rate of Corporate Guarantee fee @3% p.a. without providing this year's data for benchmarking the ALP and/or assigning any reason. The TPO/AO just relied on the preceding year's Order where in the Corporate Guarantee fee was assessed @3% and ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 5 consequently this year also the Corporate Guarantee fee was assessed @3% as follows: We note that the application of rate of 3 percent for guarantee commission, as computed by the Id TPO in above cited table, cannot be upheld in every case as it is largely dependent upon the terms and conditions, on which loan has been given, risk undertaken, relationship between the bank and the client, economic and business interest are some of the major factors which has to be taken into consideration. In this case, the assessee has itself charged 0.38% guarantee commission from its AE, therefore, it is not a case of not charging of any kind of commission from its AE. The only point which has to be seen in this case is whether the same is at ALP or not. We have already come to a conclusion in the foregoing paras that the rate of 3% by taking external comparable by the TPO, cannot be sustained in facts of the present case. We note that on examination of the Transfer Pricing Study Report and Audited Accounts along with Form No.3CEB, it is noted that assessee company has given Corporate Guarantee to its AE, Birla Soft Inc., USA in FY 2010-11 (AY 2011-12). The total value of corporate guarantee given by the assessee to its AEs was USD 10.5 million. For the A.Y. 2012-13, the assessee has offered an amount of Rs. 20,54,850/- as corporate guarantee fee charged on such loan to the AE. The corporate guarantee fee was determined @0.38% on the value of corporate guarantee. We made it dear that guarantee fee arrangement is an international transaction but the guarantee fee percentage as determined by the TPO @ 3% is not correct on various counts, as explained above. We note that various decisions of Coordinate Benches of Mumbai Tribunal, where':":, the bank guarantee commission has been charged from 0.5% to 1 %. List of such decisions, are as under: We note that assessee-company had included a Guarantee Commission @0.38%, being the average cost of all bank guarantees taken by the Assessee from the Indian Banks, should not be considered at arm's length, that is, guarantee commission charged by bank is not a arm ' length price. Normally bank decides the guarantee commission based on the credit rating of the company, credit spread and past and future financial performance of the company therefore, the same should not be treated as arm's lengthy because every company does not have same credit rating and credit spread. We note that Id CIT(A) deleted the ALP adjustment of guarantee fee based on the judgment of Coordinate Bench ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 6 Kolkata in the case of M/s Tega Industries Limited Vs. DCIT, ITA No. 1912/Kol/2012. We note that judgment in the case of M/s Tega Industries Limited(supra) is per incuriam, as the same has been passed without considering the judgment of the coordinate bench in the case of M/s Electrosteel Casting Ltd, IT (SS) No.47 to 53 /Kol/2014, for A.Y. 2003- 04 to 2011-12, order dated 25.11.2016 and without considering the judgment of the Special Bench, on the theory of 'Base erosion profit shifting' in the case of M/s Instrumentarium Corporation, ITA No. 1548 and 1549/K/2009, for A.Y. 2003-04 and 2004-05 order dated 15.07.2016, therefore, we do not take into account the judgment of Coordinate Bench Kolkata in the case of M/s Tega Industries Limited (supra), so far the guarantee issue is concerned. In wake of these fact and without going into the other arguments of the assessee and also looking to the fact that the Tribunal in various cases has accepted guarantee commission chargeable between 0.5% to 1%, we hold that guarantee commission of 1 % should be chargeable. Here in this case, assessee itself has agreed to charge guarantee commission @ 0.38%% of the outstanding guaranteed amount, accordingly, we also hold that a guarantee commission should be benchmark by taking the rate of 1% of the outstanding guaranteed amount in line with the consistent views taken by the coordinate Benches, from its AE and adjustments should be made accordingly. Thus, this ground raised by the Revenue is treated as partly allowed. " 5. It is further noted that the provision of Section 92B has been amended by the Finance Act, 2012 having effect from AY 2013-14 and onwards whereby the following clause (c) was inserted in the Explanation to Section 92B by the Legislature: "(c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other 15debt arising during the course of business; " 6. Prior to the insertion of the above Explanation, the prevailing judicial view was that corporate guarantee does not qualify as an international transaction as it does not find mention in Section 92B and therefore no transfer pricing adjustment is possible. However in view of the amendment as set out above and insertion of the Explanation to Section 928, the Legislature has explicitly clarified that issuance of corporate guarantee falls within the meaning of 'International transaction'. Therefore respectfully following the ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 7 decision of Hon'ble ITAT, Kolkata (supra) and in light of the amended provisions of Section 92B, I hold that the issuance of corporate guarantee falls within the meaning of 'international transaction' and in that view of the matter I am of the considered view that it is required to be benchmarked under Chapter X of the Income-tax Act, 1961. However the corporate guarantee rate of 1.75% ascertained by the Ld. TPO is highly excessive and unreasonable. It is noted that the prevailing LIBOR rate of Banks for actual borrowings & lending was much lower than the aforesaid CG rate of 1.75% determined by the Ld. TPO for a non-fund based financial assistance. 7. It is noted that in the following cases the coordinate Benches of the Hon'ble Tribunal has held 0.50% to be appropriate arm's length price of corporate guarantees issued by assessees to. its foreign subsidiaries, The citations of some of the relevant decisions as are follows: Aditya Birla Minac Worldwide Ltd Vs DCIT (56 taxman.com 317) (ITAT Mumbai) ACIT Vs Nimbus Communications Ltd. (34 taxman.com 298) (ITAT Mumbai) Hindalco Industries Ltd vsAddl CIT (62 taxman.com 181) (ITAT Mumbai) Manugraph India Ltd VsDy.CIT (62 taxman.com 347) (ITAT Mumbai) Mylan Industries Ltd VsAsst.CIT (63 taxman.com 179) (ITAT Hyd) Rain Commodities Ltd VsAddl.CIT (65 taxman.com 240) (ITAT Hyd) Prolifics Corpn. Ltd. v. Dy. CIT (68 SOT 104) (ITAT Hyd) 8. In view of the above judgments, the suo moto adjustment of Rs.24,73,927/- made by the appellant, being 0.5% on account of CG fee is held to be fair & reasonable and no further adjustment is necessary in this regard. The Ld. AO/TPO is accordingly directed to delete the further adjustment of Rs.61,84,092/- made on account of corporate guarantee issued to the AE. 9. The next transfer pricing adjustment of Rs.5,94,091/- concerns the inter-unit transfers of tea leaves by non-eligible units to the units eligible for deduction u/s 80IE of the Act, From the impugned order it is noted that the Ld. TPO noted that in some instances in the months of Nov'13, Dec'13 & Mar'14; the price at which inter-unit tea leaves was transferred by Koomsong Tea Estate to eligible tea gardens, Borudubi, Beesakopie & Raliang u/s 80IE, was comparatively lower than the monthly average price at which ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 8 the eligible units purchased from other unrelated parties and therefore applying CUP Method, he computed downward adjustment of Rs.5,94,091/-. Although the adjustment made by the Ld. TPO looks justifiable at the first blush but after considering the overall facts of the case and the contentions put forth by the appellant, the impugned adjustment is noted to be ex-facie unsustainable. From the material on record, I find that the appellant had computed the transfer value of inter-unit despatches of tea leaves at the average annual weighted price of the respective tea garden. The Ld. AR of the appellant contended that the annual weighted price method was applied to ensure uniformity in all the inter-unit transfers and facilitate easy preparation of the stand alone accounts of the eligible units. Also the data available to apply average annual weighted price method was sufficiently large and therefore reliable. It is however noted that the Ld. TPO failed to pin point any infirmity in this benchmarking exercise conducted by the appellant. Instead after examining the details, he selectively changed the method from annual average price method to monthly average price method only in few instances of inter unit transfers wherein the monthly average price was higher than the annual average price. Such selective application of the monthly average price method is held to be deplorable and unwarranted, I find merit in the contention of the Ld.AR of the appellant that if the Ld. TPO felt that monthly average price method was better than annual average price method, then he ought to have applied it across all eligible tea gardens for all the months. I find that had the Ld. TPO applied monthly average price method across all inter unit transfers for all the months, the overall result i.e. the aggregate transfer value so arrived at would be comparable with the aggregate value of inter unit transfers computed under the annual average price method. On these facts the impugned adjustment of Rs.5,94,091/- made by the Ld, TPO is found to be unsustainable. 10. Even otherwise on the facts of the case, I find the average annual price method to be more reliable and appropriate in comparison to monthly average price method since the data set for average annual price method is bigger and therefore yields reliable results and furthermore it gives a uniform price which can be applied across all inter-unit transfers. For the reasons set out in the foregoing therefore the transfer pricing adjustment made by the Ld. TPO in respect of inter unit transfer of tea leaves is directed to be deleted. 11. The last transfer pricing adjustment of Rs.2,16,33,836/- is in respect of the interest charged by the appellant on the loans advanced to its AE, BTHL which was denominated in USD currency. During the relevant year the appellant had charged interest rate of 9% on the loans advanced to the AE. From the TP Study report, I find that the appellant benchmarked the transaction by applying CUP Method. From the Economic Analysis I find that the appellant benchmarked the loan initially by applying External CUP Method. The appellant this time considered itself to be the tested party. The ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 9 appellant obtained the prevailing LIBOR rates against which it benchmarked the transaction. Since the actual interest rate received from AE was 9%, under External CUP, it was concluded that the international transaction was at arm's length. 12. On examination of the transfer pricing order, I find that the Ld. TPO was not in agreement with the assessee's contentions and the TP study of the appellant. According to the Ld. TPO the application of CUP Method by the appellant was inappropriate. According to the Ld. TPO the CUP Method was to be applied and the arm's length interest rate was to be computed as a combination of the cost of funds in the hands of the assessee and a credit spread for taking the risk of advancing loan to the AE. The Ld. TPO after elaborate discussion, which has already been extracted above, concluded that the cost of funds in the hands of the appellant was L + 207 bps and the appropriate credit spread was 625 bps. The Ld. TPO by taking the prevailing 6 month US Li BOR for FY 2013-14 at 0.73 bps, computed the arm's length interest rate at 9.05%. The Ld. TPO thereafter considered the peak balance of loan and proposed adjustment of Rs.2,16,33,836/-. 13. On examination of appellant's submissions and TPO's order, I find that the adjustment proposed by the Ld. TPO was in violation of the proviso to Section 920 permitting variation of +/-3% of the ALP. In the facts of the present case the ALP interest rate was ascertained at 9.05% whereas the interest rate charged was 9% which is ex-facie within the prescribed range of +/-3% and therefore even under the methodology proposed by the Ld. TPO, the transaction in question is apparently at arm's length. It is noted that the Ld. TPO was apparently unjustified in considering the peak balance of loan i.e. Rs.6200 lacs to compute the ALP. The correct course of action would have been to compute the simple interest of 9.05% on daily balance basis or atleast monthly balance basis. Merely because on one particular date the peak balance was Rs.6200 lacs, the Ld. TPO could not presume that the said balance continued throughout the year to apply simple interest @ 9.05% per annum for the entire year. I find merit in the contention of the appellant that had the simple interest of 9.05% been applied to daily balance or atleast monthly balance; the actual interest charges @ 9% would be within prescribed range of_+/-3% of the ALP. On this ground alone, I find that the impugned adjustment of Rs,2,16,33,836/- made by the Ld. TPO was wholly untenable and is therefore set aside. 14. It may be also relevant to add that the question of manner & methodology of benchmarking loans advanced to AEs is a vexed issue and has been debated by various High Courts & Benches of the Income-tax Tribunal, From the judicial precedents which are available in the public domain, I find that the settled view is that the foreign currency denominated loans advanced to AEs should be benchmarked against the relevant currency denominated LIBOR rate, which is the present case is USD LIBOR. The relevant judicial precedents in this regard are as follows: ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 10 Cotton Naturals (I) Pvt Ltd [TS-117-HC-2015(DEL)-TP] Tata Autocomp Systems Ltd, (TS-45-HC-2015(BOM)-TP) Varroc Engineering Pvt. Ltd vs. ACIT (ITAT Pune) (ITA No.2482/PN/2012) Bhansali & Co.(TS-461-ITAT-2014(Mum)-TP) M/s Four Soft Ltd vs DCIT (ITA No. 1495/HYD/2010) DCIT vs Tech Mahindra Ltd (ITA No. 1176/Mum/20i0) Mahindra & Mahindra Limited vs DCIT (ITA No.7999/Mum/2011) Cotton Naturals (I) Pvt. Ltd. Vs. DCIT, Circle 3(1) (I.T.A. No. 5855/Del/2012) Tata Autocomp Systems Ltd. Vs. Assistant Commissioner of Income Tax, (2012-(052)-SOT-0048-TBOM) Hinduja Global Solutions Ltd. vs. Addl. CIT, (ITA No. 254/Mum/2013) Aurinopro Solutions Ltd. vs. Addl. Commissioner of Income Tax (ITA No. 7872/Mum/2011) VVF Limited vs. DCIT (2010-TIOL-55-ITAT-MUM) M/s Aithent Technologies Pvt. Ltd. v/s ITO (2010-TII-134- ITAT-DEL-TP) 15. In view of the above and respectfully following the judgments of the High Courts & Income Tax Appellate Tribunal, I hold that the interest rate charged by the appellant from AE was required to be benchmarked against the prevailing LIBOR(US) in FY 2013-14, i.e. 0.73%. Since the interest rate charged by the appellant on the loans granted to BTHL was 9%, I hold that no transfer pricing adjustment was called for in respect of appellant’s loan transactions with its AE conducted during FY 2013-14. In view of the foregoing the adjustment of Rs.2,16,33,836/- made by the Ld. TPO is deleted. Overall, therefore, Ground No. 2 of the appeal stands allowed”. 5. A perusal of the above order of the ld. CIT(Appeals) would reveal that basically three international transactions, whose ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 11 determination of Arm’s Length Price was disputed by the Revenue with the assessee. In these nine grounds of appeal, this aspect is being agitated by the Revenue. Let us take into consideration each transaction in seriatim. 6. The first transaction relates to the fees received by the assessee for giving Corporate Guarantee to its Associate Enterprises in U.K. Brief facts are that the Associate Enterprise has obtained finance/loans from ICICI Bank, UK. The assessee has extended corporate guarantees on such financial help to its AE, in lieu of that assessee has received corporate fees. In the form of 3CEB, the assessee has bench-marked the transaction involving issuance of corporate guarantee @0.5% out of abundant caution. The ld. TPO was of the view that the assessee ought to have received fees @1.75% instead of 0.5% calculated in the TP Study Report. 7. Before the ld. CIT(Appeals), the assessee took two pleas against this adjustment made by the ld. TPO. In the first-fold of argument, it was contended that corporate guarantee does not fall within the ambit of any international transaction. The assessee has made reference to two orders of the ITAT, but ld. 1 st Appellate Authority has rejected this fold of contention and upheld that providing of a corporate guarantee would fall within the ambit of international transaction. For such purpose, ld. CIT(Appeals) has made reference to clause (c) of Explanation ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 12 appended to section 92B, which has been brought to the Statute by the Finance Act, 2022. 8. The next question arose was the quantification of the fees required to be charged. On the strength of host of orders at the end of the ITAT, Mumbai Benches, Hyderabad Benches, it has been laid down that if an assessee has charged fees @0.5% on account of corporate guarantee provided by it, then such a fee would be considered at Arm’s Length Price and no further adjustment is required to be made. The assessee by adopting this method has worked out the value of Arm’s Length Price at Rs.24,73,927/- as against the fee of Rs.61,84,092/- determined by the TPO. The ld. 1 st Appellate Authority has followed the orders of the ITAT Coordinate Benches for holding that fee is to be charged at 0.50% for providing corporate guarantee. This finding is discernable from paragraph no. 7 of the ld. CIT(Appeals)’s order extracted supra. After taking note of this finding, we do not wish to interfere in this finding because it is based on the decisions of the Coordinate Benches. 9. The next item whose Arm’s Length Price has been disturbed by the ld. TPO is transfer pricing adjustment of Rs.5,94,091/- related to inter-unit transfers of tea leaves by non-eligible units to eligible for deduction under section 80IE of the Income Tax Act. It is pertinent to observe that the assessee in its T.P. Study Report has taken the price of leaves on average of the complete year, whereas the ld. TPO found difference on the basis of ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 13 monthly average. This methodology of the TPO has not been approved by the ld. CIT(Appeals) and after going through the paragraph 9 of the order of ld. CIT(Appeals) extracted supra, we do not find any ground to interfere with it because the method adopted by the ld. TPO would goad the adjudicating authority on contradictory findings. The TPO has not adopted any uniform method which can determine the inter-unit transfers of the tea leaves at the end of the year. It gives fluctuating results on quarterly basis, which is not a correct method for determining the income of any assessee. Therefore, we find merit in the order of the ld. CIT(Appeals) and this fold of contention of the Revenue taken up specifically in Ground No. 6 is rejected. 10. The next transaction is in respect of interest required to be charged by the respondent-assessee on the loans advanced to its A.E., BTHL, which was denominated in USD currency. 11. Brief facts of the case are that the assessee has given loan to its AE, BTHL. It has accounted interest income on such loan at 9%. The ld. TPO was of the view that this interest ought to have been charged @9.05% and accordingly made adjustment in the Arm’s Length Price towards upward adjustment. 12. The ld. CIT(Appeals) has examined this aspect and held that if both the rates are compared, then the margin would fall within ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 14 the range of +/-3% of the ALP. Hence, no addition is required to be made. We do not deem it necessary to extract the finding of the ld. CIT(Appeals) again recorded in paragraph no. 13, which is reproduced in the earlier part of the order. The ld. CIT(Appeals) has specifically held that the correct course of action would have been to compute the simple interest of 9.05% on daily balance basis or atleast monthly balance basis. Merely because on one particular date the peak balance was Rs.6,200 lacs does not authorize the TPO to presume that the said balance continued throughout the year to apply simple interest rate at 9.05% per annum for the entire year. Accordingly, ld. CIT(Appeals) has held that if this 9.05% interest rate be applied to daily balance basis or atleast monthly balance basis, then actual interest charges @9% would be within the prescribed range of +/-3% of the ALP and this aspect fall within the ambit provided in section 92C of the Income Tax Act and no adjustment is required. Therefore, no interference is called for in this finding of the ld. CIT(Appeals). Accordingly, this fold of contention is also rejected. 13. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on July 07, 2023. Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President(KZ) Kolkata, the 7 th day of July, 2023 Copies to : (1) Deputy Commissioner of Income Tax, Circle-4(1), Kolkata, Aayakar Bhawan, 8 th Floor, P-7, Chowringhee Square, Kolkata-700069 ITA No. 2279/KOL/2019 Assessment Year : 2014-2015 M/s. Mcleod Russel India Limited 15 (2) M/s. Mcleod Russel India Limited, 4, Mangoe Lane, Surendra Mohan Sarani, Kolkata-700001 (3) Commissioner of Income Tax (Appeals)- 22, Kolkata, (4) Commissioner of Income Tax- , (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.