M/S. GLOBAL OFFSHORE SERVICES LTD,MUMBAI V. DY. COMMISSIONER OF INCOME TAX 5(1)(1), MUMBAI

ITA 5479/MUM/2024

AI Insights

The case revolves around the determination of the Arm's Length Price (ALP) for a corporate guarantee provided by Global Offshore Services Ltd. to a bank for a loan to its subsidiary, Global Offshore Services BV. The dispute was primarily about whether the ALP should be set at 1.4%, as determined by the Assessing Officer and upheld by the Dispute Resolution Panel, or at 0.25% as argued by the appellant. The ITAT examined previous years' assessments where a 0.5% commission was deemed reasonable and found similar precedents supporting the appellant's position. The Tribunal's decision to uphold a 0.5% commission rate was influenced by consistency in the appellant's past tax assessments and comparable cases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471282 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2021-2022
• Other Referred Cases: Aditya Birla Nuvo Ltd. (ITA No. 563/Mum/2018, A.Y. 2013-14), Everest Kento Cylinders Ltd. [ITA No. 1165 of 2013 (Bom) Taxsutra.com]
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHTAR HUSSAIN
• Assessee Lawyers: NITESH JOSHI
• Section: 143(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “K” Bench, Mumbai. Before Shri Sandeep Gosain (JM) & Shri Omkareshwar Chidara (AM) ITA No. 5479/MUM/2024 (Assessment Year : 2021-22) Global Offshore Services Ltd. 3rd Floor, Prospect Chambers, D.N. Road Fort, Mumbai-400 001. Vs. DCIT 5(1)(1) Room No. 525 Aayakar Bhavan M.K. Road Mumbai-400020. PAN : AAACG2204K Appellant Respondent Assessee by : Shri Nitesh Joshi Revenue by : Shri Akhtar Hussain Ansari Date of Hearing : 02/12/2024 Date of pronouncement : 13/02/2025 O R D E R Per Omkareshwar Chidara (AM) :- The appellant company has filed above cited appeal and the only issue is to be adjudicated is whether arm’s length price (ALP for short) determined by the Ld. AO with respect to corporate guarantee given to bank for granting loan to its subsidiary Global Offshore Services BV at rate of 1.4% is correct. The following grounds of appeal are taken by the appellant in the above captioned appeal :- 1. That on the facts and the circumstances of the case and in law, the Assessing Officer & Dispute Resolution Panel [hereinafter referred to as 'AO/DRP'] has erred in proposing to determine Arm's Length Price with respect to corporate guarantee given to bank for granting loan to its subsidiary Global offshore Services B.V (GOSBV) at 1.40%. Accordingly, an adjustment of Rs.4,68,59,304 has been made to the Total Taxable Income. 2. On the facts and the circumstances of the case and in law and based on the above grounds of appeal, AO/DRP has erred in initiating penalty proceedings under section 270A(1). 3. Various observations made by the DRP/AO in their respective orders are either incorrect or are untenable. 2 2. Thus, the only issue to be decided in this appeal is whether the ALP or commission to be charged is to be determined at 1.4% as applied by the Ld. AO or 0.25% as charged by the appellant company. 3. In this case, from the A.Y. 2015-16 to 2019-20, the appellant company itself offered commission income @ 0.5%. In the A.Y. 2017-18, the ITAT, Mumbai in appellant’s own case has decided that charging the same at the rate of 0.5% is reasonable. But, again from A.Y. 2020-21 and A.Y. 2021-22, the appellant company offered commission @ 0.25%. The assessment for A.Y.2020-21 was completed u/s. 143(1) of the Income Tax Act and hence no comment. As far as A.Y. 2021-22 is concerned, the impugned assessment year, the appellant has charged 0.25% as commission, whereas the Revenue charged the same @ 1.40% and Ld. DRP has also sustained the addition of charging @ 1.4%. In other words, 1.15% upwards adjustment was made by the Department and upheld by Ld. DRP. 4. As the Ld. AO and Ld. DRP have come to a conclusion of charging the commission @ 1.40% is reasonable, the appellant company is aggrieved and filed an appeal before the ITAT with the grounds of appeal mentioned in page No. 1 of this order. 5. During the hearing proceedings before the Bench, the Ld. AR of the appellant has submitted, in response to a question as to how much percentage was charged in earlier year in similar facts and circumstances, that for A.Y. 2015-16 to 2019-20, it was stated that the company itself charged 0.50% as commission. The Ld. DR has argued that adjustment of ALP @ 1.4% made by the Department should be upheld in view of the reasons mentioned in detail in the assessment order and the order of Ld. DRP. 6. In view of the following, the Bench has decided that the charging of commission @ 0.5% is held to be reasonable and appropriate : 3 a) For the A.Ys. 2015-16 to 2019-20, in similar facts and circumstances, the appellant company itself charged 0.5% commission on the same vessels and offered the same as income in its Return of Income. b) For the A.Y. 2017-18, the Hon'ble ITAT in appellant’s own case has adopted the rate @ 0.5% charging as commission is reasonable. c) The Coordinate Bench in the case of Aditya Birla Nuvo Ltd. (ITA No. 563/Mum/2018, A.Y. 2013-14 has also taken similar decision and upheld the guarantee commission @ 0.5%. d) Hon'ble Bombay High Court in the case of Everest Kento Cylinders Ltd. [ITA No. 1165 of 2013 (Bom) Taxsutra.com] has held that charging of commission @ 0.5% is reasonable with respect to corporate guarantee given to bank. 7. The appellant of appellant is partly allowed as mentioned above. Order pronounced in the open Court on 13/02/2025. Sd/- Sd/- (SANDEEP GOSAIN) (OMKARESHWAR CHIDARA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 13/02/2025 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai PS "