When Purchases Have Been Sold and Sales Have Been Accepted, Whether the Corresponding/Same Purchases Can be Added to Income?


When Purchases Have Been Sold and Sales Have Been Accepted, Whether the Corresponding/Same Purchases Can be Added to Income?

When the bogus purchases have been found but the relevant sales have been accepted by taxing authorities, then it is not justified that the same purchases and sales both be added to the income assessee. 9 has been deaded so in m the of the concerned Cone The

It has been decided so in the case of Bhartiya International Ltd. v. DCIT [ITA No.2109/ Del/ 2022 (A.Y. 2017-18).






I.T.A. No.2109/DEL/2022

Assessment Year 2017-18

Bhartiya International Ltd.

E-52 New Mangla Puri Mehrauli, New Delhi.



Dy. Commissioner of Income- Tax,

Circle-4(2), New Delhi.

(Appellant) (Respondent)
Appellant by: Shri Amit Goel, Adv. Shri Nippun Mittal, CA

Mr. Pranav Yadav, Adv.

Respondent by: Shri Rajesh Kumar, CIT-DR
Date of hearing: 08 11 2023
Date of pronouncement: 02 01 2024

O R D E R 




The captioned appeal has been filed at the instance of the assessee against the final  assessment  order  dated  29.07.2022 passed under Section 143(3) r.w. Section  144B r.w. Section 144C(13) passed in pursuance of directions issued by Dispute Resolution Panel (DRP) dated 02. 06.2022 read with rectification order dated 28.06.2022 passed by  DRP  under  Rule  13 of the Dispute Resolution Panel Rules, 2009.

2.   The concise Grounds of Appeal filed by the assessee are reproduced hereunder for adjudication purposes:

“ 1. On the facts and circumstances of the case and in law, the impugned assessment order is invalid and  non- est  in  law  ( as  it  is  only  a draft order and not final order) and, therefore, the said order along with the demand created and notice issued u/ s.  156 are liable to be quashed. 

  1. On the facts and circumstances of the case and in law,  the  assessing   officer   erred  in   making   addition/ variation   of    Rs. 11,64, 88, 755/- on account of commission, brokerage and discount expenses. 
  1. On the facts and circumstances of the case and in law,  the  assessing officer/ Hon’ble DRP erred in making disallowance  of  Rs. 61,64, 363/- u/ s. 14 A of the Act. r.w. r 8D of the Income Tax Rules. 
  1. On the facts and circumstances of the case and in law,  the  assessing  officer/ Hon’ ble  DRP   erred   in   making   addition   of   Rs. 2,03, 96,540/- on account of disallowance of ESOP expense. 
  1. On the facts and circumstances of the case  an  in  law,  the  assessing officer has erred in making addition of Rs. 15, 17,87, 755/- on account of disallowance of purchases. 
  1. On the facts and circumstances of the case and in law,  the  assessing officer/ Id. TPO/ Hon’ble DRP have  erred  in  making adjustment  of Rs.23 , 06, 351/-  on  account  of commission  on standby letter of credit.”


3.   Grounds 1 of the concise ground (supra) is dismissed as not pressed in the wake of averments made by the assessee in the course of the hearing.

4.    Ground 2 concerns additions of Rs.11,64,88,755/- on account of disallowance of commission, brokerage and discount expenses claimed by the assessee.

4.1   In the draft  assessment  order,  the  AO  inter  alia  observed that assessee has claimed Rs.11,90, 44,517/- towards commission, brokerage and discount expenses. The party-wise details of expenses along with details of TDS deducted if any was  called for. The reply of the assessee was obtained. It was alleged in the draft assessment order that the assessee has not provided any details  of TDS deduction made on these expenses. The AO also alleged that the contract agreements  have  not  been  provided  to gauge  the nature of expenses. The assessee  on its  part  responded  to the queries raised and  pointed  out  that  commission  expenses  have been incurred for procurement of export orders, i.e, for  earning income outside  India for which the services have  been rendered by the overseas commission agents outside India and no services have been rendered in India. Party-wise break up of payments to agents situated outside India  were  provided  and  it was  pointed  that similar payments have been made  to  these  very  parties  in the earlier years too for obtaining such services of commission agents. Such expenses incurred have been found to be in  order  in the previous assessments carried  out  after  scrutiny  under  section 143(3) of the Act. Besides,  the  matter  has  been  also  examined under Transfer Pricing Regulations and no adverse  inference  has been drawn. The party-wise  response  of the  assessee  in tabular form have also been reproduced in paragraph 7.4 of the draft assessment order. It was pointed out  that  the  copy of agreements were duly submitted at the time of transfer pricing assessment and sample copies of agreements were  placed  before  the  AO  for perusal. It was thus contended that commission, brokerage and expenses etc. have been incurred wholly and exclusively for the purposes of  business of the  company which has  not been disturbed by the Transfer Pricing Officer. Such expenses have also been accepted in the assessment carried out under Section  143(3)  in respect of earlier assessment years.

4.2    The AO however  in the  draft  assessment  order  prepared under s. 144C(1) of the Act observed that the services rendered by these foreign commission agents  also  include  ‘quality  checks’ which requires technical expertise such payments thus fall within the ambit of ‘fee for  technical  services’  and  such  services  are being utilized for the  purpose  of business  carried out  in  India  or for earning any income  from  source  in  India  and  consequently such services are subjected to withholding tax provisions under Section 195 of the Act. The assessee have failed to deduct TDS on remittances made on account of such commission / brokerage and thus such expenses are liable to be disallowed.

5.   In the pursuance  of the  objections  filed  by the assessee  to the draft order, the DRP took note  of the  submissions  made  on behalf of  the assessee viz; (i) the  identical position of the  assessee on such commission  expenses  have  been  duly  accepted  in   the Y. 2014-15,     2015-16 and 2016-17 under Section 143(3) of the Act (ii) the foreign agents continue to be the same and the factual matrix of the assessee continues to be identical (iii) copy of agreements with foreign agents have  been produced before the  AO and there is no reference to any clause by which it reveals that any quality check of any technical nature is to be done by the foreign agents (iv) the clauses of agreement, filed before the Dispute Resolution Panel, do not  undertake  or signify that  quality  checks of the  product  is to be verified  to the  foreign commission  agents (v) the solitary basis of disallowance are so called assertions made towards quality checks which the assessee  denies.  The  assessee never stated in the course of hearing  through  virtual  conference (VC) that quality check was done by the commission agents  as wrongly observed in the draft assessment order.

5.1   In the light of these submissions, the DRP took a view that he Assessing Officer ought to have passed a reasoned order while making additions on the grounds of failure to deduct TDS on such payments.  The  DRP  thus  accordingly issued directions  to the  AO to incorporate a   factual and  legal position on the  issue of doctrine of consistency and also directed the AO to revisit the copies of agreement to ascertain the factum of quality  check  purportedly carried out by the foreign agents.

5.2     The Assessing Officer ultimately  passed  final  assessment order and reiterated that the assessee had admitted and stated  on record that parties to whom payments  have  been  made  have provided services of quality  checks  for  product  exported  at the time of virtual  conferences  accorded  to  the  assessee  on 21.08.2021. Consequently, the AO  applied the ratio on  decision of the Co-ordinate Bench in Hical Infra. Pvt. Ltd. [TS-252-ITAT- 2019(Bang.)] to hold  that  export  commission  paid  by  the  Indian tax payer would constitute fee for technical services under Section 9(1)(vii) of the Indian Income Tax Act. Consequently failure  to deduct TDS under Section 195 of the Act will lead to disallowance of such expenses by operation of law. The  AO  accordingly disallowed an amount of Rs.11,64,88,755/- towards commission expenses claimed as business expenses.

6.   In the appeal before Tribunal, the counsel  for   the assessee restated various submissions made before the lower authorities and submitted that in essence, the genuineness  of expenses, reasonableness thereof  etc.  is not  in dispute. It is also not in dispute that the commission expenses have been  incurred wholly and exclusively for the purpose of business as can be seen from the final assessment order. The sole ground for disallowance is failure to deduct TDS on remittances of commission payments stipulated in s. 195 of the  Act.  In this  regard,  the  ld.  counsel pointed out that the adverse conclusion drawn by the AO is solely based on so called assertions made on behalf of the assessee in VC meeting that the commission  agents  are  under  obligation  to indulge in quality checks which tantamount to fee being paid for rendering technical services to  such  agents  under  s. 9((1)(vii)  of the Act and thus liable for tax deduction at source under s. 195 of the Act and such failure would trigger s. 40(a)(i) of the  Act  to disallow the commission expenses to such foreign  agents. Addressing the point, the ld. counsel submitted that  while  the assessee has demonstrated total absence of any such clause in the agreement towards quality check, the Revenue  has  failed  to produce any evidence in support of such allegation. No recording of VC meeting has been provided despite request. Besides, the payments are being  made  for  obtaining  identical  services  year after year from the same parties under the same set up where such business expense on account of export commission has been duly accepted in tune with law. No factual deviation has  been  shown except for a self  serving  assertions  made  by  the  AO  that  some kind of confession was made on behalf of the  assessee  towards quality check. The ld. counsel submitted that such commission payments are made  for  sale  of its  product in overseas jurisdiction for which the services  are  rendered  and  utilized  outside  India. Such services neither require any  kind  of technical  expertise  nor any such services has been rendered in the instant case. Notwithstanding and without prejudice, a pertinent question would also arise whether any  and  every  activity  which  involves  some skill and expertise be called a technical service? The counsel thus submitted that without  going  into  such  aspects  as not  needed  in the  instant case, the Assessing Officer has  not   brought  any adverse facts on record to impugn such genuine business payments despite specific directions of the DRP.

6.1     The Ld.  Counsel also  pointed out  that such  commission paid to foreign entities for procurement of export orders are not susceptible to Indian taxation and  consequently in the  absence  of any income chargeable to tax in India, no obligation to deduct withholding tax arises  in India.  The  provisions  of s. 40(a)(i)  are not triggered in the absence of any liability to tax in India as attributable to commission income in the hands of foreign entities as held in plethora of judicial pronouncements.

6.2     The ld. counsel thus submitted that the action of the AO  is devoid of any legal or factual foundation and consequently sought reversal of the additions so made.

7.   The   DR  for the  Revenue, on the  other hand, relied upon the observations made in the final assessment order passed in pursuance of DRP  directions  and  also  submitted  in  furtherance that similar additions have been made in the A.Y.  2018-19  also having regard to the  factual  matrix  determined  by  the  AO  and there is no res judicata in tax proceedings and one small change in fact can lead to entirely different results.

8.  We have carefully considered the rival submissions  and perused the orders of the authorities    The  case  laws  cited have been perused carefully.

9.   The disallowance  of export  commission  expenses  owing  to non-deduction  to tax at source on such  remittances  is  in The assessee-company is engaged in the business of export of leather and textile products. The assessee company has entered into certain international transactions with agents in an overseas jurisdiction to carry out marketing and sales  related activities therein. Commission payments have been made for procurement of export orders  to various such overseas agents  such as Ultima Italia SRL, Italy; World Fashion Trade Ltd, Hong Kong; Trade World Ltd, Hong Kong and several other parties having establishment abroad. The  assessing  officer  has  denied  deduction of commission expenses for  non deduction  of TDS on such payments placing reliance on Hical Infra (supra).

9.1     In defense, it is the case of the assessee that commission payments are attributable to procurement  of export  orders  for earning an income outside India and in lieu of services rendered outside India. The overseas agents are  not  authorized to  conclude any contract  on behalf of the  Indian  company and  the  pricing  of the  product is also determined by the  Indian  Company.  The overseas agents carried out their assigned activity wholly outside India as a support for  procurement of export orders.  It is further case of the assessee that the AO in the final assessment order has disallowed such commission expenses aggregating to Rs.11,64,88,755/- solely on the ground that assessee has failed to deduct TDS under section 195 of the  Act  on commission payments and consequently  invoked  provisions  of Section  40(a)(i)  of the Act. For holding so, the  AO has branded  such commission expenses as ‘fee for technical services’ [chargeable under the Act under source rule of S. 9 of the Act] on the ground that  such commission agents are engaged in providing quality checks services while obtaining procurement order which observation is, in turn, based on purported  assertions  made  on behalf  of the assessee through Video Conferencing  (VC).  In rebuttal,  the assessee had denied making any such assertions before the DRP as well as in the  final  assessment stage. The  AO  has  not  referred to any documentary evidences including clause in the  agreements entered into with overseas agents which places such obligations of quality check  on the  commission  agents.  It is well  settled  that onus lies on the person  who  alleges  as observed in K.P.  Verghese vs. ITO (1981) 131 ITR 597 (SC). The Revenue cannot put an impossible burden on the assessee  to prove  a negative point.  The AO has  merely relied upon certain assertions purportedly made  by the representative of the assessee towards quality  check.  No evidence has been placed to establish the factum of any such assertions.  Be that  as it may,  such  allegations cannot  be imputed in the absence of any documentary evidence. The whole basis for making such whopping disallowance is shallow and  a damp squib. The assessee has repeatedly asserted that services  have  been rendered outside India by the overseas agents for procurement of orders without any technical or managerial assistance.

10.    Under the circumstances, in the absence of any adverse material, the factual matrix did not provide any scope for taxing such The  reasonableness  and  genuineness  of expenses are admittedly not in dispute. It is also not  in dispute  that commission expense has been  incurred wholly and  exclusively for the purposes of carrying  out  of the  business  of the  assessee. Similar expenses incurred by the assessee company in the  earlier years have been stated to be allowed  in  the  assessment  framed under Section 143(3) as emerging from records. The DRP has also observed that agreements with overseas  agent  do not  signify  that any quality checks of the products are carried out by foreign commission agents. Thus, the commission payments cannot be regarded as fee  for  technical  services.  Despite such  observations, no facts have been brought on record to the contrary in the final assessment order. Thus, in the absence of any services of technical nature,  commission  payments  to  selling  agents  outside  India  is outside the ambit of provisions of Section 9(1)(vii) r.w. Section 5 of the Act.

9.2    Plethora of judgments govern the field on the issue. Useful reference can be made to the decision rendered by the Co-ordinate Bench in CIT vs. EON Technology P. Ltd.,  (2011) 15  taxmann.com 391 (Del) and in the case of Prithvi Information Solutions Ltd.  Vs. ITO (2014)  47 taxmann.com  214  (HYD.);  Well  Spring  Universal vs. JCIT (2015) 56 taxmann.com 174.

 9.3    Under the provisions of s. 195 of the Act, taxes are required to be deducted at source on the payments made to non resident, only if  the  income payable to the  non resident is chargeable to  tax in India.  The income is chargeable to tax  in India in the  hands of the non resident where income received or deemed to have been received in India or the income has accrued or arisen or deemed to have accrued or arisen  in India.  The  assessee  has  appointed several non-resident entities to act as agent for services such as soliciting customers, securing orders, assisting in deliver of goods outside India etc. The commission in the instant  case  has  thus derived its genesis from sales. The property in goods have been transferred in overseas jurisdiction. We thus find force in the plea of the assessee that in the instant case where the overseas agents were paid commission for securing order etc.,  and  such  services were utilised for the purpose of making or earning income from a source outside India, the  assessee is under no  obligation to apply with provisions of Section 195 of the Act for the reasons that commission to such overseas agents are  not taxable under the Act. The AO  has  not  alleged or established any thing to  the  contrary. The AO was thus not justified  to  disallow  such  commission expenses under the Act. We thus  direct  the  AO  to reverse  and cancel the additions on this score.

10.   Hence, Ground 2 of the appeal of the assessee is allowed.

11.   Ground 3 concerns a disallowance  of Rs.61,64,363/- under Section 14A of the Act.

11.1     In the matter, the ld. counsel for the assessee submits at the outset that the  assessee  has earned  exempt  income  of Rs.1,01,073/- only during AY 2017-18 in  question as evident from the statement of total income and the audited financial statements placed in the paper book. As against such exempt  income,  the assessee has made suo motu disallowance of Rs.2,52,249/- on the basis of 1% of average value of investment from which tax free dividend income was received. The assessee thus contends that  in view of suo motu disallowance which  far  exceeds  the  exempt income, no further disallowance is permissible under Section 14A r.w. Rule 8D of the Income Tax Rules, 1963.

11.2   In the light of the  submissions  made  on behalf  of the assessee, no further disallowance under Section 14A is called for in the light of the judgment rendered in  the  case  of Joint Investments P. Ltd. Vs. CIT, (2015) 372 ITR 694 (Del) and Pr.CIT vs. Caraf Builders and Constructions P. Ltd.  (2019) 414  ITR 122 (Del) (SLP dismissed by SC). It  is well settled  law  that disallowance under Section 14A can be made  only  in respect of those investments which have yielded tax free  income  during  the year as held in Caraf  Builders  (supra)  and  ACB  India  Ltd.  vs. ACIT (2015) 374 ITR 108 (Del). The  AO  is thus  directed to  delete the disallowance under Section 14A made over and above the disallowance offered by the assessee.

11.3   Ground 3 of the appeal of the assessee is allowed.

12.   Ground 4 concerns additions of Rs.2,03,96,540/-  on account of disallowance of ESOP expenses.

12.1   As per the draft assessment order, the AO observed that the assessee has claimed Rs.2,03,96,540/- under  Section  37(1)  of the Act under  the  head ‘employees ESOP  compensation expenses’. It was submitted by the assessee that during the year under consideration, the company granted 1,64,650 options comprising equal number of equity shares in one or more tranches to eligible employees of the company. The options are granted with specific exercise period from the date of vesting  of shares and the  options are exercisable  at a pre-determined  price  of Rs.50  each  resulting in issue of share on discount to the  market price of the company shares on the date of grant.

12.2   As pointed out, it was asserted  before  the  lower  authorities that the expenses are incurred with  a view  to retain the  talent  / staff for the benefit of the  company  and  consequently  such expenses are allowable as business expenditure in the light of the judgments rendered in Biocon Ltd. vs. DCIT (2013) 35 taxmann.com 335 (SB); CIT vs. Lemon Tree Hotels Ltd. (supra)

  12.3   Before the DRP, the assessee reiterated that the expenses are neither notional nor capital in nature. The expenses incurred are revenue in character  and  is incurred  wholly  and  exclusively  for the purpose of business. The AO has wrongly placed reliance on decision of Co-ordinate Bench of Delhi Tribunal in Ranbaxy Laboratories which has been overturned by the Special Bench thereafter in Bicon Ltd..

12.4   The  issue is no  longer res  integra and  covered in  favour of the assessee by the Hon’ble  Jurisdictional  High  Court  in Lemon Tree  (supra). The  DRP  however confirmed the proposal moved by the AO essentially on the  ground  that  judgment  rendered  in  the case of Lemon Tree Hotel Ltd. (supra) has been admitted in the Revenue Appeal by the Hon’ble  Supreme  Court  as reported  in (2019) 104 taxmann.com 27 (SC). The additions  based  on admission of SLP by Hon’ble Supreme Court is not tenable. While holding in favour of the Assessee,  we  also  notice  the  assertions made on behalf of the assessee that similar claim has been allowed in the earlier years by the AO. No reason to take different stance in captioned assessment year has been brought to our notice. Thus, contrary view is not warranted.

12.5    We thus find force in the plea of the assessee for reversal of such We direct the AO accordingly.

12.6    Ground 4 is allowed.

13.   Ground 5 of the concise grounds(supra) concerns disallowance of Rs.15,17,87,755/- towards bogus purchases.

13.1  As per the draft assessment order, the AO proposed disallowance on account of bogus purchases of denim fabric from SunGold Trade Pvt. Ltd.(STPL) amounting to Rs. 15,17,87,755/- which was, in turn,  sold  to two  parties namely Shivoham Trading Pvt. Ltd. – Rs.5,05,85,780/-; and Shakumbri Tradelink Pvt. Ltd. – Rs.10,22,38,920/-. The AO held the purchases made from STPL as bogus purchases and proposed additions under Section  69C  of the Act in the draft assessment order.

13.2   The assessee submitted before the  DRP  that  the  assessee is also engaged in the business of trading of fabric. The impugned purchase from STPL represents trading activity  by the  assessee where the goods purchased have been sold to two parties without any  modification. Such  trading transactions have  resulted in  profit at Rs.10,36,945/- to the  assessee-company.  It was  contended  that the sale of goods to these two parties  could  not  be carried  out without corresponding purchase  which  is assailed  as bogus purchase by the AO.

13.3   In its draft assessment order,  the  DRP  referred  to the judgment rendered by the Hon’ble Gujarat High Court in the case of Pr.CIT vs. Tejua Rohit Kumar Kapadia (2018) 94 taxmman.com 324 (Guj.); and CIT vs. Bholanath Polyfab P. Ltd., (2013) 355  ITR 290 (Guj.) to observe that since the impugned purchases have been sold and the sales have been accepted, there is no rationale for disallowing the  purchases. The  DRP  also  referred to judgment  in the case of Balaji Textiles Industries P. Ltd. (1994) 49 ITD  177 (Mum.) providing similar view. The DRP accordingly expressed a view that there cannot be any  sale  without  purchases  in any business transaction as the accounting is complete only by taking into account both the sides of the  transactions.  The  sale  and purchase transactions are thus requires to be simultaneously considered. The AO  was accordingly directed  to make verifications in the light of such observations.

13.4   The AO  in the final assessment order however continued to treat the purchases of fabric from STPL as bogus and refused the claim made under Section 37 of the Act without bringing any fresh facts on record.

13.5   Before the Tribunal, the ld. counsel broadly reiterated the submissions made before  the  lower authorities  and  submitted  that in trading activity, the assessee has ultimately earned a profit of Rs.10,36,945/-. The details of purchases and sales are given in the assessment order itself. All the purchases and  sales  are  duly recorded in the books of account.  The  AO has  duly accepted  the sales but refused  to accept  the  purchases  and  consequently  failed to appreciate  that no sales  can  be carried  out  without corresponding purchases. The action of the  AO has  resulted  in double taxation one by way of sales recorded and second by disallowance of corresponding purchases of the  same  goods sold. The ld. counsel also contends  that  even  in terms  of directions passed by the DRP, the AO  was  not justified in  making addition as the DRP has  held  that  there  cannot  be sale  without  purchase. When the sale figure is taken  into account  by the  AO for computing the income of the assessee, purchase figure is required to be necessarily considered.

13.6   We find that the additions made by the  AO is not  only erroneous but is also  contrary  to directions  of DRP  and  settled legal position as held in Tejua Rohit Kumar Kapadia (supra); CIT vs. JMD Computers and Communications P. Ltd. (Del); Pr.CIT vs. Bansal Strips P. Ltd. (Del) and plethora of other judgments.

13.7   In the light of observations made by the DRP and plea raised on behalf of the assessee, we  find prima facie merit in the  plea  of the  assessee. While the AO has  cast doubt  on propriety  of purchases of fabric  made  from Sungold Trade P.  Ltd.  on the basis of assessment order passed in  the  hands  of  such  supplier, the  AO has accepted the corresponding sale transactions. The exclusion of purchases from the trading results is not permissible without corresponding exclusion of the sales in such trading activity for arriving at a fair and balanced view. The action of the AO patently offends the rudimentary principle of accounting. We accordingly direct the AO to reverse  the  additions  made  and  restore  the position taken by the assessee.

13.8   Ground No.5 of the appeal is thus allowed.

14.   Ground 6 concerns adjustment of Rs.23,06,351/- on account of commission on standby letter of credit.

14.1   The Transfer Pricing Officer (TPO) observed  that  the assessee has claimed Rs.68,64, 578/- incurred by it towards bank charges paid to bankers  for  standby  letter  of credit.  While incurring such expenses, the assessee has not charged any amount to its Associate Enterprises (AEs) for risk  borne  by  it.  The  TPO held that  assessee was  required to be compensated @ 2.5% by  its AEs on account of exposure of SBLC issued by the banks. The AO determined the Arms’ Length Price  of  such charges  at Rs.23,06,351/- and accordingly recommended adjustment of such amount under Section 92CA(3) of the Act.

14.2   Before the DRP, the assessee submitted that it  has  recovered full charges from the AEs and the AO / TPO was thus not justified in making further adjustment. In the  alternative,  the  adjustment made by the AO/TPO is on a very high side. It was submitted that SBLC has  been issued by the  company bankers without any  margin or any specific security. No cost has been borne by the assessee company. The actual bank commission  charged  by the  bank  has been duly recovered from the AEs. Therefore, there is no outgo.  In any case, the guarantee charges charged by the bank are on market rate and the assessee has also recovered  the  same  at the  rate  at which the bank has charged. The DRP however did not find any infirmity in the action of the  AO/TPO.  As  per  the  rectification order passed under Rule 13 of DRP, 2009, the DRP has  simply affirmed the action of the AO/TPO regarding the  proposed adjustment of Rs.23,06,351/- without any discernible reason.

14.3   Before the Tribunal, the ld. counsel contended that the TPO/DRP/AO have committed error in making adjustment of Rs.23,06,351/- on account  of commission  on standby  letter  of credit. The ld. counsel submitted that no cost has been borne by the assessee-company as submitted repeatedly before the lower authorities. The actual  bank  commission  charged  by  the  bank  at the market rate has been duly recovered  from  the  AEs  and therefore the AO/TPO/DRP was not justified in making further additions/adjustments. The ld. counsel reiterated  that  SBLC  has been issued by the company’s bankers without any margin or any specific security. In the alternative and without prejudice, the ld. counsel referred the judgment of the Co-ordinate Bench in Havells India vs. ACIT (2023) 101 ITR (Trib)  81 (ITAT  Delhi)  and submitted that the adjustment in respect of corporate guarantee provided to AEs be determined  @0.5%  instead  of 2.15% determined by the Revenue in the instant case. To support the adjustment at 0.5%, the assessee also referred to the  decision delivered by the Hon’ble  Bombay  High  Court  in the  case  of Everest Kento Cylinders Ltd.

14.4   In the  light of the  undisputed fact  emerging from  record that no cost has been  borne  by  the  assessee  company  and  in  the absence of any rebuttal  to the  assertion  that  actual  bank commission charges incurred has been  fully  recovered  from  the AEs, we hardly see any justification in the Transfer Pricing Adjustment on this We thus are not inclined to address the alternative plea of excessive estimation.

14.5    Ground 6 is allowed.

15.   In the result, the appeal of the assessee is partly

Order pronounced in the open Court on 02/01/2024 



Sd/-                                                                                          Sd/-

[SAKTIJIT DEY]                                                                 [PRADIP KUMAR KEDIA]

VICE PRESIDENT                                                                ACCOUNTANT MEMBER


DATED:       /01/2024



The copy of the order is as under:

1704197991-ITA No.2109-Del-2022 _Bhartiya International Ltd 1