Taxpayer wins advance tax credit verification but loses on corporate guarantee transaction classification under Section 92B

ITAT Kolkata allowed the assessee's claim for advance tax credit verification, directing the matter back to AO for necessary verification. The tribunal dismissed the assessee's contention that corporate guarantee transactions with associated enterprises are not international transactions, citing Section 92B provisions. However, ITAT granted partial relief on corporate guarantee fee calculation, directing TPO to compute fee at 0.5% instead of the higher rate applied, following judicial precedents establishing 0.2%-0.5% as justified range for such transactions.

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Issues:
1. Transfer Pricing adjustment on corporate guarantee commission
2. Determination of arm's length price
3. Rule of consistency
4. Loss on investment classification
5. Delay in deposit of employees' contributions
6. Disallowance of deduction under section 80JJAA
7. Arbitrary addition of income
8. Short grant of Advance Tax Credit
9. Short grant of TDS Credit
10. Non-grant of Foreign Tax Credit
11. Erroneous levy of Interest under section 234B
12. Erroneous levy of Interest under section 234C

Analysis:

Transfer Pricing Adjustment on Corporate Guarantee Commission:
The appeal concerns the Transfer Pricing (TP) adjustment on corporate guarantee commission received by the assessee. The assessee provided corporate guarantees to its subsidiaries, Tega Singapore and Tega Chile. The Transfer Pricing Officer (TPO) calculated the corporate guarantee fees at 6.96% for Tega Singapore and added an amount for the guarantee to Tega Chile. The assessee contended that the transactions did not qualify as international transactions and, alternatively, argued for a lower percentage for the corporate guarantee fees. The Tribunal held that the corporate guarantee transactions fell under international transactions as per Section 92B of the Income Tax Act. The Tribunal partially allowed the appeal, directing the TPO to compute the corporate guarantee fee at 0.5% and delete the excess amount added to the assessee's income.

Determination of Arm's Length Price:
The Tribunal addressed the issue of determining the arm's length price for the corporate guarantee commission received by the assessee. It considered the range of corporate guarantee fees applied in similar cases by various judicial forums, citing the judgment of the Bombay High Court in CIT v. Everest Kento Cylinders. The Tribunal directed the TPO to compute the corporate guarantee fee at 0.5% and eliminate the excess amount added to the assessee's income.

Rule of Consistency:
The grounds related to rule of consistency, loss on investment classification, delay in deposit of employees' contributions, disallowance of deduction under section 80JJAA, arbitrary addition of income, and short grant of Advance Tax Credit were dismissed as not pressed by the assessee.

Interest Levy under Sections 234B and 234C:
The Tribunal noted that the issues regarding the levy of interest under sections 234B and 234C were consequential and required no adjudication.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, specifically addressing the Transfer Pricing adjustment on corporate guarantee commission. The Tribunal directed the TPO to recompute the corporate guarantee fee at 0.5% and remove the excess amount added to the assessee's income. The issues related to interest levy under sections 234B and 234C were deemed consequential and did not require separate adjudication.

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