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TMI Blog2019 (10) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, the ground Nos. 1-3 raised by the revenue are dismissed. - ITA No. 5840/Mum/2017 - - - Dated:- 17-7-2019 - SHRI M. BALAGANESH, AM AND SHRI RAVISH SOOD, JM For The Revenue : Shri Anand Mohan For The Assessee : Shri Anuj Kisnadwala ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.5840/Mum/2017 for A.Y.2013-14 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-56, Mumbai in appeal No. CIT(A)-56/ACIT-LTU-2/2016-17/313-G dated 22/06/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.c. 144C of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 18/01/2017 by the ld. Assistant Commissioner of Income Tax (Large Taxpayer Unit) -2, Mumbai (hereinafter referred to as ld. AO). 2. The ground No.1-3 raised by the assessee is with regard to the action of the ld. CIT(A) in deleting the adjustment made on account of corporate guarantee given by the assessee on behalf of its AE by accepting 1% guarantee fee charged by the assessee to be at arm s length. 3. The brief facts of this issue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Societe Generale, Paris 4. Interest rate at which loan was taken by the AE Euribor+ 385 bps Euribor+395bps 5. Amount of guarantee USD 52 mn USD 42mn 6. Guarantor (s) Glenmark Generic Limited, India Glenmark Generic Limited, India 7. Loan Type: Bilateral Term Loan (the Facility ) Bilateral Term Loan (the Facility ) 8. Security: Unsecured Unsecured 9. Tenor 4 Years 3-5 years 10. Guarantee Fee 1% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficient number of comparables. Hence we had to proceed with bonds search from Bloomberg. The process by which a range of arm's length credit guarantee fee was estimated for the inter-company guarantee facility can be summarized as follows: Estimation of the credit rating of GGFSA; Search and identification of third party comparable uncontrolled loans / bonds which are comparable to the inter-company guarantee facility in order to estimate an appropriate fee of guarantee; and Establishing an inter-quartile range of arm's length credit guarantee fee for the inter-company guarantee facility based on the above searches. In order to determine the arm's length nature of the credit guarantee fee applied on the inter-company guarantee facility, appellant analysed the following: The creditworthiness of the guaranteed (GGFSA) with respect to the inter-company guarantee facility; and The characteristics of the inter-company guarantee facility. The financial analysis yielded the following inter-quartile range of credit spread from the Bloombe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .133(6) of the Act and based on the same, he determined the ALP at 1.5% of the guarantee amount and accordingly made the adjustment of ₹ 98,62,989/- towards guarantee fee. 3.9. The assessee submitted that bank rate cannot be compared with corporate guarantee due to difference in function, assets and risk involved. The assessee placed reliance in this regard (1) on the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Everest Kanto Cylinders Ltd., reported in 58 taxman.com 254 (Bom) (2) Coordinate Bench decision of this Tribunal in the case of Glenmark Pharmaceuticals Ltd., for A.Yrs 2008-09 and 2009-10 ( which is the holding company of the assessee). The assessee also argued that the bank rate used by the ld. TPO to compute the ALP is outside the scope of the definition of internal CUP and external CUP . The assessee submitted that the interest saved by the AE due to guarantee provided by the assessee company comes to nil and on that basis, the assessee company had benchmarked the guarantee fee at nil even though it had actually charged fee of 1% from its AE. 3.10. The assessee further submitted that international interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Order of Hon'ble Mumbai Bench of tribunal A.Y Guarantee fee commission Remarks 1. Asst. CIT v. Reliance industries limited 2006-07 0.38% Based on 10 instances given on Page.No.66 of order 2. ACIT v. M/s Asian Paints Ltd. 2005-06 0.25% to 0.35% Citi Bank Page. No. 17 of order. HSBC Page No. 19 of order 3. M/s Everest Kento Cylinder Ltd v. DCIT 2007-08 0.6% ICIC Bank- Page NO 21 of the order 4. Asst. CIT v. M/s Nimbus Communication Ltd 2005-06 0.5% M/s Everest Kento has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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