9911796707
TMI Blog2022 (12) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2013 14. 2. In its appeal, assessee has raised following grounds: Ground 1: Determination of the arm's length price (ALP) of the international transaction relating to processing fees received on account of guarantees issued to Indian companies based on counter-guarantee from overseas branches That on the facts and in the circumstances of the case and in law, the learned AO, based on the directions of the Hon'ble DRP, erred in making the transfer pricing adjustment of Rs 7,96,36,154, by re-computing the arm's length price (ALP) of the international transaction undertaken by Australia and New Zealand Banking Group Limited, Mumbai Branch (ANZ Mumbai) relating to processing fees received on account of guarantees issued by ANZ Mumbai to Indian beneficiaries (based on the corresponding back to back guarantee provided by the overseas associated enterprises (AE's)). Ground 2: Rejecting the Transactional Net Margin Method (TNMM) used by the Appellant and adopting External Comparable Uncontrolled Price (COP) method as the most appropriate method That on the facts and in the circumstances of the case and in law, the learned AO. based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r technical services/ royalties under Article 12 of the India-Australia Double Taxation Avoidance Agreement (IA Treaty): a) Reimbursement of the actual cost incurred by the HO towards the software customization expenses for ANZ Mumbai amounting to Rs. 5,44,09,826; and b) Reimbursement of the actual cost incurred by HO towards the employees of ANZ Mumbai amounting to Rs 33,71,423. Ground 4: Erroneous computation of total tax payable Without prejudice to the above grounds, the learned AO erred in computing the total tax liability of the Appellant. Ground 5: Erroneous computation of surcharge and education cess on the income taxable under the provisions of IA treaty The learned AO erred in levying surcharge and education cess on the income of the Appellant taxable under the provisions of IA treaty. Ground 6: Non-grant of taxes deducted at source The learned AO has erred in not granting the full credit for tax deducted at source under the provisions of Income-tax Act, 1961. Ground 7: Erroneous computation of interest under section 234B and 234C of the Act The learned AO erred in computing consequential interest under section 234 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian branch received Rs. 15,39,624 as processing fees for issuing guarantees in India, which was secured by counter guarantees issued by the overseas branches of the assessee. The assessee benchmarked the above transaction by adopting Transactional Net Margin Method ( TNMM ) as the most appropriate method with Profit Level Indicator of operating profit on operating cost. The assessee selected 6 companies as comparable with single year updated margin of -3.78%. As the assessee computed its own margin at 894.70% over the operating costs incurred by it, accordingly, it claimed that the international transaction of receipt of processing fees is at arm s length price ( ALP ). 6. The Transfer Pricing Officer ( TPO ) vide order dated 28/10/2016 passed under section 92CA(3) of the Act applied Comparable Uncontrolled Price ( CUP ) as the most appropriate method for benchmarking the impugned international transaction. The TPO also collected information under section 133(6) from various banking companies in respect of commission received by them for guarantees issued to 3rd parties against counter guarantee issued by a foreign bank. Accordingly, the TPO came to the conclusion that India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich would onward then make the payment to the beneficiary in India. 3.6. Hence, from the aforesaid modus operandi, it could be concluded that assessee acts as a beneficiary bank i.e. issue guarantee in India on behalf of clients of overseas branches of ANZ based on the counter guarantee issued by such overseas ANZ branches. Since assessee is acting as the beneficiary, the entire risk of discharging the bank guarantees is borne by overseas ANZ branch issuing the counter guarantee. The assessee merely provides support service in connection with processing of the guarantees, typing out the guarantee agreement based on swift message received and issuing the said agreement to the beneficiary. The aforesaid functions performed by the assessee are not disputed by the lower authorities. When assessee is fully protected by overseas counter guarantee, we are unable to comprehend ourselves as to how CUP method could be applied therein as it would be impossible to make adjustment for the differences as per Rule 10B(1)(a) of the Income Tax Rules. In effect, we find that assessee is merely providing secretarial services or which can be loosely called as carrying out administrative function ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book filed before us. We also find the assessee vide its letter dated 28/10/2015 had filed a detailed annexure enclosed in pages 328-331 of the paper book listing the guarantees issued by it based on counter guarantee received from overseas branches of ANZ. The assessee also furnished the sample documents enclosing the copy of swift message received from ANZ New York advising the assessee to issue guarantee to Indian beneficiaries like Reliance Infrastructure Ltd., and providing counter guarantee. 3.8. The assessee also placed on record the copy of the swift message from assessee to ANZ New York confirming that guarantee has been issued to Reliance Infrastructure Ltd., confirming that guarantee has been issued by ANZ Mumbai. By all these documents, the ld. AR was vociferous in driving home the point that the entire risk of discharging the bank guarantees is borne by the overseas ANZ branch issuing the counter guarantees wherein the assessee merely provides support services in connection with processing of the guarantees. The ld. AR also referred to page 380 of the paper book containing various swift messages received. The assessee also placed on record the reply letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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