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TMI Blog2022 (3) TMI 1463X X X X Extracts X X X X X X X X Extracts X X X X ..... same accordingly, we are of the view that matter be remanded to TPO only to benchmark the transaction of Payment for Corporate Guarantee Fees as an international transaction. As in the present case, TPO/AO wrongly treated Provision of Corporate Guarantee as a shareholder s functions instead of treating the same as an international transaction under the provisions of Explanation (i) to section 92B of the Act and accordingly computed the ALP of the same at NIL. This is not a case where TPO computed the ALP by applying incorrect benchmarking method. Rather, in the present case, the TPO/AO erred in characterisation of the transaction resulting in erroneous conclusion and benchmarking. It is also not been disputed by the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100; 3. failed to appreciate that guarantee has been specifically included in the definition of international transaction while holding that it is a shareholder activity; 4. erred in not considering the fact that corporate guarantee fee has been determined considering average cost of interest that AE has paid on its non-liquid financing instruments obtained from independent third parties; 5. failed to appreciate that guarantee was provided to Appellant for the entire amount of credit! OD facility irrespective of the same being partly utilized by the Appellant. 6. failed to appreciate that payment of corporate guarantee is linked to transaction of import of goods and hence should be aggregated with the said transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recovery of Expenses 13,15,916 TOTAL: 33,29,36,749 5. In the transfer pricing analysis, the assessee conducted combined benchmarking of international transactions pertaining to payment for technical services, purchase of finished goods (Mockup), payment of corporate guarantee fees, payment for availing business support services and payment of interest on trade credit, on the basis that these transactions form an integral part of assessee s principal business of import of material for resale. Further, by adopting combined transaction approach, assessee compared its margin from its principal business activity with margins earned by other comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Guarantee fees . Being aggrieved, the assessee is in appeal before us. 9. During the course of hearing, Shri. M.P. Lohia, learned Authorised Representative ( learned A.R. ), appearing for the assessee, submitted that provision of guarantee is specifically mentioned in the definition of international transaction provided in Explanation (i) to section 92B of the Act inserted by Finance Act, 2012 with retrospective effect from 01.04.2002. Further, the said international transaction was also duly reflected in financials, transfer pricing study report and Form 3CEB filed by the assessee. Learned A.R. submitted that fees for corporate guarantee paid by the assessee at the rate of 2% is also in conformity with Safe Harbour Rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an international transaction has also now been settled by decisions of various Courts. Recent being the decision rendered by the Co-ordinate bench of the Tribunal in Siro Clinpharm (P.) Ltd. v. ITO: ITA No. 847/Mum./2016, wherein the Tribunal following the decision of Hon ble Madras High Court in Pr. CIT v. Redington India Ltd. [2021] 430 ITR 298 held that issuance of corporate guarantee constitutes an international transaction. 13. As is evident from the facts of the present case, the TPO/AO/CIT(A) considered the provision of corporate guarantee only as a shareholder s function being not in the nature of any service rendered by the A.E. and thus no payment was required to be paid to the A.E. As the TPO/AO rejected the combined benchma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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