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TMI Blog2025 (1) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... amount given to the AEs.
>Therefore, we have no hesitation to delete the addition confirmed by the Ld. DRP being 1.9% of the corporate guarantee amount. Thus, the grounds raised by the assessee are allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act observed that during the year, the assessee has provided Corporate Guarantee on behalf of its subsidiaries. The Ld. TPO also observed that the assessee has reported the same in Form 3CEB as "shareholder activity" by using other method. The assessee further submitted that 3F India has provided shareholder corporate guarantee on behalf of its overseas subsidiaries in the capacity of a holding company. The guarantee provided by the company is due to the AEs being subsidiaries to 3F India, which is provided for the benefit of the Group and not as a revenue earning service and hence no guarantee fee should be computed. The assessee's contention before the Ld. TPO was in order to attract the ALP adjustment, the transaction has to qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the various banks charge fee ranging from 1.3% to 3%. Hence, for computation of ALP the median of the various rates was adopted as the ALP as provided in Rule 10B of the IT Rules, 1962 and thus the Ld. TPO worked out the ALP to 1.9% for the corporate guarantee of above Rs. 10 Crs. Accordingly, the Ld. TPO computed the corporate guarantee at Rs. 2,08,11,742/- and made the TP adjustment u/s. 92CA of the Act. Thus, the Ld. TPO observed that the Ld. AO is required to enhance the total income of the taxpayer by Rs. 2,08,11,742/- by way of TP adjustment U/s. 92CA(3) of the Act and passed the order dated 23/07/2023. Aggrieved by the adjustment made by the Ld. TPO and against the draft assessment order dated 29/09/2023, the assessee raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions given by the ITAT for the same issue in the assessee's own case for the AY 2014-15 and 2016-17. >3. Without prejudice to the above ground, not undertaking appropriate benchmarking analysis and upholding the ad-hoc approach adopted by Ld. TPO ie., >(a) no method chosen by the Ld. TPO to benchmark the corporate guarantee transaction. >(b) Not undertaking a detailed benchmarking analysis and considering the financial guarantee as bank guarantee. >4. Without prejudice to the above ground, the Hon'ble DRP erred in not providing directions basis various judicial precedents of considering a lower rate to benchmark corporate guarantee transaction. >5. Without prejudice to the above ground, the Hon'ble DRP erred in not appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used the material available on record. We have also gone through the orders of the Ld. Revenue Authorities. The only issue raised by the assessee in this appeal is with respect to charging the corporate guarantee commission @ 1.9% of the corporate guarantee estimated at Rs. 2,08,11,742/-. The Ld. DRP while confirming the order of the Ld. TPO has observed that the doctrine of res judicata is not applicable to the tax matters and thereby upheld the TP adjustment of Rs. 2,08,11,742/- being 1.9% of the corporate guarantee fees. However, in the assessee's own case in the earlier AYs 2014-15 and 2016-17 by relying on various case laws including the decision of the Hon'ble Bombay High Court in the case of CIT vs. Everest Kanto Ltd reported in 378 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Bombay High Court held that the corporate guarantee commission is an international transaction and should be charged @ 50% on the corporate guarantee amount given to the AEs. In the case of M/s. Devi Sea Foods Limited vs. DCIT, Circle-3(1), Visakhapatnam in ITA No. 75/Viz/2022 (AY; 2017-18), dated 09/09/2022 this Bench of the Tribunal has held that the corporate guarantee given to the AE is an international transaction and shall be chargeable @ 0.50% on the amount of corporate guarantee given to the AEs. In view of the above discussions and by respectfully following the ratio laid down in various judicial pronouncements as discussed above, we are of the considered view that the corporate guarantee commission is an international transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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