Tribunal adjusts international transaction fee and interest rate

The Tribunal partially allowed the appeal, confirming the corporate guarantee as an international transaction but adjusting the fee to 0.53%. Regarding loans and advances, the interest rate was recalculated at LIBOR+ 2.75%. General grounds of appeal were not addressed.

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Issues Involved:
1. Validity of the assessment order under section 143(3) read with section 144C and section 92CA(3) of the Income Tax Act, 1961.
2. Transfer pricing adjustment for corporate guarantees.
3. Transfer pricing adjustment for loans and advances given to Associated Enterprises (AEs).

Detailed Analysis:

1. Validity of the Assessment Order:
The appellant challenged the assessment order passed by the Deputy Commissioner of Income Tax under section 143(3) read with section 144C(5) of the Income Tax Act, 1961, arguing that it is "bad in law and void ab-initio." This issue, however, was not adjudicated as it was deemed general in nature.

2. Transfer Pricing Adjustment for Corporate Guarantees:
The assessee provided a bank guarantee of Rs. 62,83,52,637 to its AE during the financial year 2008-09. The TPO considered this an international transaction and deemed a 2% fee reasonable. The DRP upheld this finding. The Tribunal noted that in the previous assessment year (2009-2010), a similar issue was decided against the assessee but directed the AO to re-compute the corporate guarantee fee at 0.53%. The Tribunal upheld the DRP's finding that the corporate guarantee is an international transaction and directed the AO to adopt a corporate guarantee commission rate of 0.53%.

3. Transfer Pricing Adjustment for Loans and Advances:
The assessee provided an advance of Rs. 9,28,37,001 to SST North America Inc., an AE, for the acquisition of JYACC Inc., New York. The TPO treated this as an international transaction and charged interest on it. The DRP confirmed the chargeability of interest but directed the TPO to adopt LIBOR+ 4.75% basis points. The Tribunal, referring to its decision for the AY 2009-2010, directed the AO to adopt LIBOR+ 2.75% as the appropriate interest rate, instead of LIBOR+ 4.75%.

Conclusion:
The Tribunal concluded by partly allowing the assessee's appeal. The corporate guarantee was confirmed as an international transaction, but the fee was directed to be recalculated at 0.53%. For the loans and advances, the interest rate was directed to be recalculated at LIBOR+ 2.75%. The general grounds of appeal were not adjudicated.

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