2017 (11) TMI 1750 - AT - Income Tax

Tribunal Corrects Corporate Guarantee Fees and Transfer Pricing Adjustments for A.Y 2009-12

The Tribunal rectified mistakes in the original order regarding the corporate guarantee fee for A.Y 2009-10 and 2010-11, finding it necessary to adjust ... Rectification of mistake - Mistake apparent from record - corporate guarantee has been held to be an international transaction - Held that:- We find that the Coordinate Bench of the Tribunal in the case of Siro Clinpharm Private Ltd (2016 (5) TMI 633 - ITAT MUMBAI) has considered all the above arguments of the Revenue to hold that the corporate guarantee cannot be treated as an international transaction prior to the amended provision of u/s 92B of the IT Act with effect from 01-04-2012 i.e from the A.Y 2013-14 onwards. Further, it is also seen for the A.Ys 2009-10 and 2010-11, the assessee had raised the ground that the corporate guarantee is not covered under the definition of international transaction u/s 92B of the IT Act, as ground of appeal No. 12 before us. In view of the same, we agree that there is a mistake apparent from record in the order of the Tribunal for the A.Ys 2009-10 & 2010-11 in confirming the corporate guarantee fee at 0.50% - decided against revenue Issues involved:Rectification of alleged mistakes in the order of the Tribunal for A.Y 2009-10, 2010-11, and 2011-12 regarding corporate guarantee fee and its classification as an international transaction.Detailed Analysis:1. Issue of Corporate Guarantee Fee for A.Y 2009-10 and 2010-11:The Tribunal had previously held 0.50% to be a reasonable corporate guarantee fee for these assessment years. The assessee contended that this finding was a mistake apparent from the record. On the other hand, the Revenue argued that this decision was correct. The Revenue also claimed that the case law of Siro Clinpharm Private Ltd, which supported the assessee's position, was not presented during the original hearing. After considering the arguments, the Tribunal found that the corporate guarantee fee issue for these years needed rectification as it was indeed a mistake apparent from the record.2. Classification of Corporate Guarantee as an International Transaction for A.Y 2011-12:In the case of A.Y 2011-12, the Tribunal had concluded that the corporate guarantee was not an international transaction. The Revenue contended that this decision was also a mistake apparent from the record. The Revenue argued that the corporate guarantee had always been an international transaction as per the pre-amended definition of international transaction under section 92B of the IT Act. However, the assessee argued that the amendment to Sec. 92B by the Finance Act specifically brought corporate guarantee into the realm of international transactions and should not be applied retrospectively. The Tribunal, after considering the arguments and the case law of Siro Clinpharm Private Ltd, held that the corporate guarantee could not be treated as an international transaction for the period prior to 01-04-2012. Therefore, the Tribunal dismissed the Revenue's MA and allowed the assessee's MAs for this issue.3. Transfer Pricing Adjustment for Corporate Guarantee Provided to AEs in USA:The Tribunal also addressed the transfer pricing adjustment suggested by the TPO regarding the corporate guarantee provided by the assessee to its AEs in the USA. The TPO believed that the assessee should have charged a guarantee fee for the corporate guarantee provided. However, the Tribunal, following the decision in the case of Siro Clinpharm Private Ltd, held that the corporate guarantee was not an international transaction for the period before 01-04-2012. Consequently, the Tribunal allowed certain grounds related to this issue and declined to adjudicate on others, as they would be merely academic exercises.In conclusion, the Tribunal allowed the MAs filed by the assessee and dismissed the MA filed by the Revenue, thereby rectifying the identified mistakes in the original order.