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TMI Blog2018 (11) TMI 1711X X X X Extracts X X X X X X X X Extracts X X X X ..... s overseas associate enterprises "AE" as proposed by the Transfer Pricing Officer and added in the course of the assessment in issue. We find that the instant as to whether a corporate guarantee amounts to an international transaction within the meaning of sec. 92B of the Act or not is no more res integra. This tribunal's co-ordinate bench's decision in assessee own case for assessment year 2012-13 ITA No.980/Kol/2017 decided on 28.09.2018 has adjudicated this very issue in it's favour as follows:- "5. Ground No. 2, is on the issue of determination of ALP on corporate guarantee on loans availed by AE. The Id. 'CITCA) held that the TP Provisions do not apply to the transactions of providing corporate guarantee prior to the amendment brought in by way of an explanation to Section 92B of the Act, by Finance Act, 2012. Further at page 45 he held that the methodology applied by the TPO in computing the ALP of the transactions was without reasonable and justifiable basis. We find that the findings of the Ld. CITCA), are in line with the decision of the Kolkata 'C' Bench of the Tribunal in the case of M/s. EIH Ltd. vs. DCIT (supra) wherein it was held as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r lease of tangible or intangible property or provision of services, or lending or borrowing money or any such transaction. This understanding of ours gets further clarified by, way of insertion of Explanation in section 92B(1) by the Finance Act 2012 with retrospective effect from 01.04.2002 vide clause (a) to (d). We find that in the said explanation, clause (e) alone has been carved out as an exception wherein, the transaction thereon has been specifically mandated to be an international transaction where a transaction of business restructuring or reorganization, entered into by an enterprise with an AE irrespective of the fact that it has bearing on the profits, incomes, losses, or assets of such enterprises at the time of transaction or at any future date. 12.12. Thus, we hold that when a parent company extends an assistance to the subsidiary, being associated enterprise, such as corporate guarantee to a financial institution for lending money to the subsidiary, which does not cost anything to the parent company, and which does not have any bearing on its profits, income, losses or assets, it will be outside the ambit of international transaction under section 92B(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on profits' incomes, losses, or assets of such enterprises'. Revenue, therefore, does not derive any help from the said decision. 12.14. The Id CIT DR would have had a case where a fee has been charged for the intra service which has been rendered (in the context of corporate guarantee), and, therefore, "the assessee or the Court has treated it as an international transaction, then the charge ot corporate guarantee has to.be.in accordance with Arm's Length principle. This means that the price for corporate guarantee should be that which would have been paid and accepted by independent enterprises in comparable circumstances. In that case transfer pricing adjustments are required. In that case, it has to be determined what will be the ALP of corporate guarantee commission paid by associate enterprise to the parent company providing corporate guarantee. Since that is not the case before us, we need not go into it 12.15. We also find that this very same issue came up for adjudication by this tribunal in assessee's own case for the Asst Year 2010-11 in ITA No. 530/Kol/2015 dated 9.6.2017 , wherein by placing reliance on the decision of co-ordinate bench of Mumb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan given to associated enterprises. During the course of assessment proceedings, the Assessing Officer made a reference to the Transfer Pricing Officer (TPO) for calculation of arm's length interest rate in respect of loan advanced by the assessee company to its Associate Enterprise (AE), Euro Asian Ventures FZE. The TPO arrived at arm's length interest rate of 20.15% by applying Comparable Uncontrolled Price (CUP) method and benchmarking the same against local interest rates and accordingly calculated the upward adjustment at Rs. 6,97,64,000/-. Before the ld. CIT(A),a the assessee submitted that it has charge interest @ 5% on the loan given to its AE i.e. EuroAsian Ventures FZE, which is at arm's length when benchmarked against LIBOR and hence no adjustment on this account was called for. He further relied on the decision of the Chennai Bench of the Tribunal in the case of Siva Industries & Holdings Ltd vs. ACIT (145 TTJ (Chennai) 497) and other decisions of the Tribunal for the proposition that if the loan advanced to an AE is denominated in foreign currency then interest rate thereon should be benchmarked against international rates being LIBOR and not against the domestic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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