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TMI Blog2016 (9) TMI 1440X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 144C and read with the order passed by the Learned Transfer Pricing Officer (hereinafter referred to as 'TPO'), under section 92CA(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') is bad in law and void ab-initio. 3. The Learned AO/DRP erred in upholding the transfer pricing adjustment of Rs. 2,48,32,927 as determined by the Learned TPO without appreciating the functions performed, assets employed and risk assumed by the Appellant with regard to the international transactions. 4. On the facts and circumstances of the case and in contrary to law, the Learned AO/DRP erred in confirming the TPO's stand with regard to the corporate guarantee given by the Appellant. 4.1. In not appreciating the fact that the transaction of corporate guarantee given as a shareholder is not in the nature of "international transaction" as defined in section 92B and hence is outside the purview and scope of Chapter X of the Act. 4.2. In making a transfer pricing adjustment for the corporate guarantees given by the Appellant to various third parties on behalf of its Associated Enterprise (' AE') which is continuing from prior years and was also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal according to law." 2. Brief facts of the case are that the assessee company, engaged in the business of providing software development and support services, has filed its return of income for the A.Y. 2010- 2011 on 11.10.2010 admitting total income of Rs. 11,41,14,552 under normal provisions and book profit of Rs. 18,28,79,806 under section S.115JB of the I.T. Act, 1961. During the assessment proceedings under section 143(3) of the Act, the Assessing Officer observed that the assessee has entered into international transactions with it's A.E. Therefore, the determination of the Arms Length Price ("ALP") of the international transactions was referred to the TPO under section 92CA of the Act. The TPO, by order dated 28.08.2013, computed the ALP adjustment at Rs. 2,48,32,927. The Assessing Officer accordingly, proposed draft assessment order, against which the assessee preferred its objections before the DRP. The DRP, vide orders dated 28.07.2014, rejected the objections 1 and 2 of the assessee and allowed the objections 3 and 4. In consonance with the directions of the DRP, final assessment order is passed and aggrieved by the denial of the relief to the assessee by the DRP, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on general arm's length principles. Whether the mere presence of a guarantee support to an A.E. is subject to T.P. provisions has been a contentious issue in the Indian context. However, the issue of whether a charge should be imposed for provision of a guarantee is primarily a factual inquiry. The assessee argued that the corporate guarantee is an additional guarantee provided by the parent company and it does not involve any cost or risk to the shareholders. The assessee also argued that the retrospective amendment to section 928 of the ITL, by Finance Act, 2012 does not enlarge the scope of the term "International Transaction" to include the corporate guarantee in the nature provided by assessee. DR on the other hand, contended that the transaction of providing the corporate guarantee is covered by the definition of international transaction after the retrospective amendment made by Finance Act, 2012. Therefore, the transaction was subject to T.P. provisions and needed ALP determination. It was the submission that there is no service rendered by assessee to the A.E. Assessee relied on the views expressed by Australian Tax Officer placing relevant copy before us which was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case for AY 200607 no longer holds good since the order passed by the coordinate bench is prior to the amendment made to provision of section 92B of the Act. It will be pertinent to mention here that this issue was also considered by the ITAT Mumbai Bench in case of Mahindra & Mahin.dra Vs. DCIT in ITA No. 8597/Mum/2010, 54 SOT (UR) 146. The coordinate bench of this Tribunal while considering similar argument advanced on behalf of the assessee by placing reliance on the decision of the Four Soft Ltd. (supra), held as under: "15.2. After hearing the rival submissions we feel that Assessing Officer will have to follow the decision of the ITAT Hyderabad or the amended provision. of the Act in this regard. If the Finance Bill of 2012 is passed by the Parliament amending the provisions of section 92B, with effect from 1st April, 2002, he will have to ignore the decision of the ITAT Hyderabad. In case section 92B is not amended with retrospective effect, he should grant relief to the appellant." 25.4. In the aforesaid view of the matter, we agree with the TPO that ALP of the corporate guarantee has to be determined as it falls within the scope and ambit of all international transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as an international transaction and charged interest on the same. The DRP confirmed the chargeability of interest thereon but however, directed the TPO to adopt LIBOR+ 4.75% basis points. For coming to this conclusion also, the DRP relied upon its order for the A.Y. 2009-2010. The Learned Counsel for the assessee submitted that this issue also was decided by the Coordinate Bench of this Tribunal for the A.Y. 2009-2010 wherein the Tribunal has directed the Assessing Officer to adopt LIBOR+ 2.75% only as against the LIBOR+ 4.75% charged by the Assessing Officer/TPO. He therefore, prayed for similar direction for the impugned A.Y. as well. 9. The Ld. D.R. was also heard. 10. Having regard to the rival contentions and the material on record, we find that the Tribunal in the A.Y. 2009- 2010 has considered this issue at para-5 which is reproduced hereunder for ready reference. "5. We have considered the issue and perused the documents on record. The two issues to be considered are whether the interest free loans and guarantees provided by assessee to AE calls for any adjustment. As far as adjustment of interest on loans provided, assessee even though is objecting to adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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