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TMI Blog2025 (4) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... tion made by the ld. AO/ Transfer Pricing Officer to the tune of Rs.34,85,222/- in respect of international transaction, qua corporate guarantee by the assessee to its Associated Enterprises. 04. After hearing the rival contentions and perusing the materials available on record, we find that the issue is similar to the issue as has been decided in A.Y. 2013-14 and A.Y. 2014-15 by the co-ordinate Bench of the Tribunal in assessee 's own case and the ld. CIT (A) by following the same held that the corporate guarantee fee of 1% charged by the assessee is to be at arms' length. The finding of the ld. CIT (A) on this issue is extracted below:- "Having perused the findings of the Ld. TPO, it is noted that his analysis of ascertaining the stand-alone credit rating of the AE at CCC had no rationale basis. Even the identification of loan comparables to arrive at margin of 400 bps is found to have been done without citing the relevant FAR and Economic Analysis undertaken by him. It is accordingly noted that the benchmarking exercise carried out by the TPO suffered from fundamental infirmity and hence cannot be accepted. It is further noted that, my predecessor in appellant's own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of several factors. For instance, from the facts of the present case, it is noted that the major factor for higher profitability of eligible units was that it was manufacturing products such as Kesh King, Zandu Balm, Boroplus, Navratna which have higher contribution margins in comparison to the products manufactured at non-eligible units viz Fair and Handsome, Vasocare, Xtra Thanda etc. I am in agreement with the appellant that it is their prerogative and decision to manufacture higher margin products at units enjoying fiscal incentives and that such commercial decision taken by them cannot be questioned by the Assessing Officer. The reliance placed by the appellant on the decision of jurisdictional ITAT, Kolkata in the case of DCIT vs M/s Century Plyboards (I) Ltd. (ITA No. 2149/Kol/2019) is found to be of relevance. The relevant findings noted in this regard are as follows:- "19. We note that the case of the AO is that the profits derived by the assessee from the eligible business are more than the ordinary profits of other business and therefore he estimated at what could be a reasonable profit from such eligible business and such profit be taken as reasonably deemed to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been derived therefrom:"(Emphasis Given by us) 21. In terms of the above provision, it is only where it appears to the AO that owing to the close connection between the assessee carrying on eligible business and any other closely connected person, the course of business is so arranged that the business transacted between them produces to the assessee more than the ordinary profits, which might be expected to arise in such eligible business; that he shall compute the amount of profits as may be reasonably deemed to have been derived therefrom. A bare reading of the relevant provision indicates that in order to invoke the same, it is of utmost importance on the part of the AO to first demonstrate that the transactions between the assessee and the other related person were arranged' with a view to produce more profit to the assessee carrying on eligible business. The noteworthy point is that we are dealing with a deeming provision and a deeming provision or a legal fiction is one whose mandate does not exist but for such provision. Because of such deeming provision alone, the given imaginary state of affairs is taken as reality notwithstanding the fact that it is at var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because an assessee makes extra ordinary profit, it would not lead to the conclusion that the same was organized/arranged for the purpose of claiming higher deduction uls 10A of the Act. The case of the assessee is further supported by the decisions of the coordinate Benches of this Tribunal in AT Kearney India (P.) Ltd. v. Addl. CIT [2014] 50 taxmann.com 26/[2015] 153 ITD 693/[2014] 66 SOT 140 (ITAT Delhi) and Zavata India (P.) Ltd. v. ITO [2013] 31 taxmann.com 147/141 ITD 456 (Hyd. - Trib.)" It is noted that similar issue was adjudicated and decided in favour of the assessee by the Hon'ble ITAT, Guwahati in the case of Greenply Industries Ltd Vs ACIT in ITA No. 359/Gau/2019 wherein it was held as under:- "48. We observe that the eligible units run by the assessee claiming deduction of prof its under section 80IA(10) of the Act, purchased raw material, namely Vineer from non-eligible units located at Kriparampur and Rajkot Unit The assessee while furnishing the annual audited accounts along with the relevant report on Form 3CEB adopted the CUP method for computing the arm's length price of the transactions between the eligible and non-eligible units. But subsequently d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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