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TMI Blog2024 (5) TMI 484X X X X Extracts X X X X X X X X Extracts X X X X ..... e guarantee. On perusal of the record show that this issue is decided against assessee by the Coordinate Bench in earlier assessment year in ITA No. 115/MUM/2018 order dated 14.09.2020 for the A.Y.2012-13. The relevant findings read as under: - "7.10. ........Therefore, the arguments that the said transactions could not be considered to be international transaction do not convince us and therefore, we hold that the same was to be benchmarked on ALP principles. The aforesaid reasoning / conclusion would also make the cited case laws of Ld. AR inapplicable to the facts of the present case. 7.11 Coming to the benchmarking rate of 2% as adopted by Ld. TPO, the same do not convince us since a pertinent fact to be noted that both the AEs were subsidiaries of the assessee which were special purpose vehicle to enable certain acquisition on behalf of the assessee and the assessee would be the ultimate beneficiary of such acquisition. Therefore, the assessee's risk in such a case would be very low since both the AEs were assessee's subsidiaries only. Therefore, considering the fact that it was a corporate guarantee for which no fees was paid by the assessee and going by the ratio of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned income has not been shown as its income by the assessee. It is the say of the counsel that the impugned income belongs to KEC TNR Infra JV and the TDS has been deducted in the name of KEC TNR Infra JV. Counsel pointed out that the claim of TDS has not been in either case. 10. We have given a thoughtful consideration to the orders of the authorities below, in the interest of justice and fair play, we deem it fit to set-aside this issue to the file of the Assessing Officer. The Assessing Officer is directed to verify in whose hands the income has been shown and allow the credit of Tax Deducted at Source as per the relevant provisions of the law. This ground is allowed for statistical purpose. 11. The last grievance relates to the disallowance under section 14A of the Act while computing the book profits under section 115JB of the Act. 12. We find that an identical quarrel was decided by this Tribunal in assessee's own case in A.Y. 2014-15 in ITA No. 1852/MUM/2022 order dated 04.12.2023 and the relevant findings read as under: - "026. Coming to the remaining grounds of appeal of assessee, as per ground number 2 the learned CIT - A has confirmed the addition of Rs. 93,145/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee for the Assessment Year 2012-13 [ITA No. 17&115/Mum/2018, dated 14/09/2020] wherein it was held by the Tribunal as under: "4. Upon careful consideration, the undisputed position that emerges are that the advances have been given by the assessee to an entity in which it held 50% share. The assessee has entered into a Joint Venture (JV) agreement with an entity namely Edison Jehamo Power (PTY) Ltd. (EJP) on 25/11/2009 with respect to transmission line construction project. The assessee's proportionate share in the JV was 50%. From the financial statements of JV entity as placed on record, it is quite discernible that the accumulated losses of that entity, at yearend, stood at 98.26 Million Rands which are substantially funded out of joint venture partners' account amounting to 162.80 Million Rands. The assessee's contribution in the JV account is 41.12 Million Rands. The JV incurred losses of 108.13 Million Rands during the year, which has primarily triggered the assessee to make the stated advances to its JV. These advances have been classified under the head Joint Venture partners' account. All these facts would lead strength to the argument of Ld. AR that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see before CIT(A), the transaction of performance guarantee was held to be an 'international transaction'. However, the CIT(A) deleted the transfer pricing addition in respect of performance guarantees by placing reliance of the decision of the Tribunal in the case of the Assessee for preceding assessment years. The CIT(A) observed that the issue relating to transfer pricing adjustment on account of guarantee fee to be recovered by the Assessee from its AEs in relation to performance guarantee was recurring in nature and was decided in favor of the Assessee and against the Revenue in appeals for the Assessment Year 2010-11/2011-12 as identical ground raised by the Revenue regarding the benchmarking of the transaction of giving performance guarantee was dismissed. 19. On perusal of the decision of the Tribunal in the case of the Assessee for the Assessment Year 2010-11, 2011-12 and 2012-13 (placed at pages 76 to 148 of the paper-book), we find that two performance guarantee on behalf of KEC Global FZ, LLC, UAE to Chadian Company for Water & Electricity (CCWE) have been continuing since Financial Year 2009-10 relevant to Assessment Year 2010-11. 20. First performance guarantee of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. in favour of U.S. subsidiaries at 0.2% of the guarantee. 21. We find that this Tribunal since A.Y. 2011-12 to A.Y. 2017-18 has decided this issue in favour of assessee by restricting the corporate guarantee at 0.2% of the guarantee but in A.Y. 2018-19 this Tribunal has directed to apply corporate guarantee rate @0.6%. The relevant findings in ITA No. 2512/MUM/2022 for the A.Y. 2018-19 read as under:- "7. With regard to corporate guarantee given to KEC Transmission LLC and KEC US LLC, USA (WOS) now known as SAE Tower Holding LLC, he submitted that the corporate guarantee given by the assessee in the A.Y.2011-12 and the rate for the same was also sustained by the Ld. DRP @1.16%. However, in the earlier assessment year and subsequent Assessment Years, the Coordinate Bench has sustained the same @0.20%. He prayed that following the rule of consistency the corporate guarantee @0.20% may be sustained by following the decision of the Coordinate Bench in the earlier Assessment Years. 8. However, at the time of hearing, the bench asked the Ld. AR of the assessee to substantiate the claim made on the issue of SAE Tower Holding LLC considering the fact that this guarantee was given in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It is submitted that corporate guarantee is not an international transaction The Appellant has also submitted that corporate guarantees were issued to enable AEs to avail credit facilities as a matter of commercial prudence primarily to protect the business interest of the group by fulfilling the shareholder's obligations. The Appellant has also claimed that non-charging of commission is justified where additional security is provided. In case of Al Sharif Group which obtained financing facility from SBI. Jeddah and Bank of Muscat, the banks obtained primary right over AEs contract receivables of project of Saudi Electricity company. While these receivables were security for the credit facility provided, the Appellant provided corporate guarantee to comply with administrative requirements. It is thus claimed that no risk was borne by the Appellant under the circumstances. As such charging of guarantee commission is not warranted. The Appellant has further stated that benchmarking rate of 2% adopted by the TPO is ad hoc and is not justified Reliance is placed on decision of the Hon'ble Bombay High Court in the case of Everest Kanto Cylinders Ltd v CIT (ITA 1165 of 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C US LLC & KEC Transmission LLC The operative part of the decision is already. produced in Para 6.7. It is seen that the facts of 2 corporate guarantees are different. The 3 guarantees under consideration are for availing of regular credit facilities whereas credit facilities from ICICI, UK was for certain of which the Appellant was to be the ultimate beneficiary Therefore, the benchmarking rates cannot be same. The Appellant has already charged 0.6% rate which is based on a facility letter by its own bank, which is a good comparable. It is, therefore, held that no interference is called for in the benchmarking @ 0.6% done by the Appellant and the adjustments made by the TPO are deleted" (Emphasis Supplied) 30. On perusal of the above, it can be seen that the CIT(A) held that the transaction of issuance of corporate guarantee to be an international transaction as per Explanation (1)(c) to Section 92B of the Act (inserted with retrospective effect from 01.04.2002 by Finance Act 2012). The CIT(A) rejected the contention of the Assessee to benchmark the guarantee fee in respect of the three corporate guarantees at the rate of 0.2% by highlighting the difference in the purpose of giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate guarantee given by the assessee under consideration. Accordingly, ground raised by the assessee is partly allowed." 22. Respectfully following the latest decision of the Coordinate Bench (supra) we direct the Assessing Officer to apply corporate guarantee rate @0.6%. This ground is partly allowed. 23. In the result, appeal filed by the revenue is partly allowed. ITA NO. 4022/MUM/2023 (A.Y. 2016-17) - ASSESSEE APPEAL 24. The first grievance relates to the TP adjustment on account of bank guarantee. This issue has been decided against the assessee by this Tribunal in earlier years and the same has been considered in detail in ITA No. 4021/MUM/2023 (supra), for our detailed discussion therein, this grievance is dismissed. 25. The second grievance relates to the short grant of TDS. 26. Similar issue has been considered and decided by us in ITA No. 4021/MUM/2023 (supra) vide Ground No. 3 of that appeal, for our detailed discussion therein, we direct accordingly. This ground is allowed for statistical purpose. 27. In the result, appeal filed by the assessee is partly allowed. ITA NO. 4076/MUM/2023 (A.Y. 2016-17) - REVENUE APPEAL 28. The first grievance relates to the dele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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