2024 (6) TMI 879 - ITAT JAIPUR

TP Adjustment - corporate guarantee provided to AE - assessee by giving the corporate guarantee has exposed itself to a big risk for which nothing has been charged in return - HELD THAT - The facts of the case in hand suggest that assessee is not providing any corporate guarantee to any unrelated party thus this is not a business activity in the nature of financial services for the assessee. The security provided by the AE are sufficient in the event of any default giving immunity to the assessee company from any financial loss/burden. Net Profit Rate of AE is also a mere 1.58% thus not suggesting any possibility of shifting of profits or any effective benefit to AE out of this guarantee. Thus the facts of the case in hand are different, thus the finding rendered in the case of PCIT Vs Redington (India) Ltd 2020 (12) TMI 516 - MADRAS HIGH COURT are not applicable. Therefore, although the assessee has issued the corporate guarantee but the terms of guarantees and securities of the sanction letter of borrowing along with the financial position of AE suggest that there is not any financial burden to the assessee against said borrowing. As there is no bearing on profits, income, losses or assets of the assessee as a result of provision of guarantee and the judicial precedents cited by the assessee also support this view, thus the adjustment made on account of corporate guarantee provided to AE is hereby deleted. Addition of interest on the receivables outstanding from these AEs for more than 60 days - applying rate of interest of 5.475% (based on 6 Month LIBOR plus a mark up of 400 basis points), which was confirmed by Dispute Resolution Panel - HELD THAT - Receivables which are outstanding beyond 60 days have been treated as unsecured loans advanced to AEs and accordingly interest has been imputed thereon. Further TPO has adopted a credit policy of 60 days and the outstanding beyond 60 days have been termed as unsecured loans advanced whereas assessee has been giving a standard credit period of 180 days to AEs as well as third parties. Moreover, assessee is not charging any interest on payables too. The credit policy of the assessee is in line with RBI Guidelines on foreign exchange receivables thus there is no basis with the TPO in adopting credit period of only two months. Similar view has been expressed in the decision of GSS Infotech Ltd 2016 (7) TMI 243 - ITAT HYDERABAD which the assessee has relied upon. On the same credit terms export has been made to Non AEs by giving credit period of 180 days and no interest has been charged therefrom. Thus there is complete uniformity in the act of the assessee in not charging any interest from both the AE as well as Non AE debtors and on the same delay, the assessing officer is not justified in making the addition of notional interest to the assessee s arm s length price. The ratio decided in the case of CIT Vs Indo American Jewellery Ltd 2013 (1) TMI 804 - BOMBAY HIGH COURT is applicable in the present case also and accordingly the adjustment of interest is deleted.