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TMI Blog2022 (6) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... issued u/s.143(3) r.w.s.92CA r.w.s.144C(1) of the Act, relevant to assessment year 2014-15. 2. The assessee has raised the following grounds of appeal: 1. The order passed by the learned Assessing Officer is against the law and facts of the case. 2. The learned Assessing Officer erred in making the addition of Rs.32,47,200/- without considering the evidence offered by the appellant. 3. The learned assessing officer ought to have considered the fact that the appellant has saved the interest payment to bank due to the fund transaction from the subsidiary company. 4. The learned assessing officer has wrongly interpreted that the appellant ought to have earned income out of the guarantee commission and disallowed the claim of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO after considering relevant submissions of the assessee, has made an upward adjustment of Rs.32,47,200/- towards guarantee fee @ 1.98% on total guarantee given by the assessee to its AE. The relevant findings of the TPO are as under: 7. The submissions of the assessee have been gone through in detail and the following observations are made: With regard to the guarantee extended by the assessee company, under normal conditions, an unrelated party would not have extended such guarantees without any compensation as in the assessee's case. Assessee's submission regarding the non-charging of bank guarantee commission is not acceptable, since the said loan has been transferred to India for setting up of new campus for the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arm's length price of the service fee charged by the Banks at 2.19%. As per the recent amendment with effect from 01.04.2002 to the provisions of Section 92B of the Income Tax Act, it has been stated that any capital financing including any type of long term or short term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business should be considered as an International Transaction. In the case of Glenmark Pharmaceuticals Ltd in 2017-TII-09-HC-IvIUM-TP dated 2ad February 2017, the Hon'ble Bombay High Court has upheld the, decision of the ITAT, Mumbai wherein the ITAT, relying on its own dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had also challenged guarantee fee worked out by the AO by taking into account bank guarantee fee charged by commercial banks and submitted that corporate guarantee and bank guarantee are two different transactions and thus, the rate, commercial banks charged to its customers, cannot be applied to corporate guarantee provided by an AE. The DRP after taking note of submissions of the assessee and also relevant provisions held that corporate guarantee provided by the assessee to its subsidiary, is very much an international transaction and ALP need to be completed for the same. As regards, guarantee fee charged by the AO by taking note of bank guarantee rate charged by commercial banks, the TPO rejected the arguments of the assessee and sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and thus, if you take that benefit, then there is no question of charging guarantee commission. 6. The Ld.DR, on the other hand, supporting the order of the DRP submitted that corporate guarantee is an international transaction as per the provisions of Sec.92B of the Act. Therefore, the TPO has rightly bench marked the corporate guarantee given by the assessee to its AE and thus, the arguments of the assessee needs to be rejected. The Ld.DR further submitted that when it comes to rate, at which, such guarantee commission needs to be charged, bank guarantee commission charged by a commercial bank, is a good comparable and thus, the AO has taken average bank guarantee commission charged by the commercial banks and computed commission on g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction. Therefore, the TPO has rightly held that providing corporate guarantee is an international transaction and hence, we reject the arguments of the Counsel for the assessee. 8. As regards imputing rate of commission on guarantee, it is a well settled principle of law by the decision of various courts, including the decision of the Hon'ble Bombay High Court in the case of CIT v. Everest Kento Cylinders Ltd. (supra), wherein, it has been clearly held that no comparison can be made between the guarantee issued by commercial banks as against corporate guarantee issued by holding company for benefit of its AE, a subsidiary company for computing ALP of guarantee commission. The Hon'ble Bombay High Court further held that when it comes rat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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