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TMI Blog2024 (12) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be deemed to be between the associated enterprises. What is important is to be examined now is if for the purpose of section 92B(2) of the Act, the assessee s transaction with EXIM Bank is an independent transaction or a prior agreement between the assessee and its AE, makes the assessee s transaction with EXIM Bank a deemed international transaction. Once the surety has paid the guaranteed debt, they are subrogated to the rights of the creditor against the principal debtor. This means that the surety can exercise all the rights that the creditor had against the principal debtor, such as the right to recover the amount paid from the principal debtor, and any security held by the creditor for the debt. The surety can also take legal acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngements through corporate guarantee for its AEs in 2011 and 2014 which were defaulted by the AE in May, 2016. The corporate guarantee was provided in favour of EXIM Bank and the assessee had admitted a liability of guarantee that the guarantee shall not exceed the amounts realized first by investments of JEPL in its subsidiary JEHBV and assets and investments held by its subsidiary JEHF or through its step down subsidiaries. Due to default of JEBV and JEHBV to whom loan guarantee of 50 million and 45 million respectively were provided their loans were classified as non-performing assets and bankruptcy proceedings were initiated in the Amsterdam District Court. The EXIM Bank served notice of revocation of these two corporate guarantees as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been invoked, so, there is no more any international transaction in existence from AY 2017-18 onwards. 5. The ld. DR has relied the orders of the ld. tax authorities below. 6. We have given thoughtful consideration to the matter on record and have gone through the audited financial statement of the assessee for AY 2018-19 and the tax audit report for AY 2018-19, copy of which is available at pages 1- 45 of the paper book. It can be appreciated that in notes to the standalone financial statements for the year ending 31st March, 2018, in the context of the present issues of corporate guarantee, a contingent liability note has been given. It is mentioned that although EXIM Bank has invoked the corporate guarantee, the liability of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -performing assets (NPA) by EXIM bank. The same was intimated to the assessee on May 2016 and initiated the recovery proceedings from the assessee being the primary guarantor. The assessee being the holding company, it is aware of the situation prior to the intimation received from the bank ie., in the previous year itself. Once the situation is apparent and recovery proceedings are commenced, the guarantee seized to exist at the beginning of the year itself. It is not something happens over night. The banks classify the loan as NPA after providing several opportunities and discussions. This process must have commenced prior to the intimation of default by the bank in the month of May 2016. That being so, the corporate guarantee provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intimation of classification of NPA. It is crystallized/non-existence of the guarantor in the beginning of the year itself, therefore, we cannot presume that the corporate guarantee existed, hence, there is no possibility that the assessee has continued the guarantee, in our view for this AY, there is no international transaction. Therefore, the TPO was wrong in initiating proceedings to bench mark corporate guarantee as there is no international transaction at the first place. 8. Taking into consideration the foresaid conclusion of the coordinate bench we are of the considered view that certainly once the international transaction arising out of the guarantee given for the benefit of AE goes, then what is left is a transaction between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally not relevant to examine the alleged international transaction of loan, between the assessee and the AE, arising out of invocation of guarantee by the EXIM Bank. In this context we are of considered view that this question of deemed loan would be dependent on discharge of debt of AE towards EXIM Bank after any payment is made by assessee or any recovery is enforced by EXIM Bank by any other mode of recovery of the guarantee amount. As the AE for whom the assessee entered into bank guarantee has not been benefitted by discharge of its debt and liability and same still stands. Thus actually so far there is no crystallized liability of the assessee. 12. At the same time, no cost or expense has been allocated or apportioned by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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