2020 (1) TMI 87

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.... (1), New Delhi (hereinafter referred to as 'the Revenue') by filing the present appeal sought to set aside the impugned order dated 26.10.2015 passed by the Commissioner of Income-tax (Appeals) - 44, New Delhi qua the assessment year 2011-12 on the grounds inter alia that :- "On the facts and circumstances of the case, the ld. CIT (A) has erred in law and on facts in directing the AO to take Arms Length Price of compensation for providing corporate guarantee @ 1% which determined as Rs. 2,89,13,635/- as against Rs. 7,45,97,179/- (@ 2.58%) computed by AO/TPO and thereby allowing a consequential relief of Rs. 4,56,83,544/-." 3. The Objector, M/s. Spentex Industries Limited, by filing the present cross objections challenged the im....

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.... brought on record the fact that it has not realized the amount it had charged to AE for which plan for restructuring dated 13.11.2009 had been approved by the competent authority and the dues of the unsecured creditors have been reduced to 29.15%. AO sought to apply mark up of 2.58% on the corporate guarantee given by the assessee by following the order passed in AY 2009-10. Declining the contentions raised by the assessee, AO made adjustment in Arm's Length Price (ALP) @ 2.58% for the corporate guarantee on the ground that the assessee has exposed itself to greater risk without charging any amount from its AE and thereby computed the same as under :- S. No. Transaction Amount of corporate guarantee (Rs.) Arm's Length Compensat....

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....of the Tribunal in case of Mahindra & Mahindra Ltd. vs. DCIT (2012) 24 taxmann.com 267 (Mumbai) held the transaction entered into by the assessee with its AE qua corporate guarantee as an international transaction. Ld. CIT (A) followed the decision of his predecessors of earlier years in restricting the ALP of compensation for providing corporate guarantee @ 1% as against 2.58% assessed by the AO. 11. It is brought to the notice of the Bench that identical issue has been decided in favour of the assessee by the coordinate Bench of the Tribunal in its own case for AYs 2008-09, 2009-10 & 2010-11 in ITA Nos. 4959/Del/2014, 6243/Del/2014 & 6244/Del/2014 respectively vide order dated 17.05.2018. 12. Bare perusal of the order (supra) passed....

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....clauses (c)), should also be such as to have a bearing on profits, incomes, losses or assets of such enterprise; (ii) The onus is on the revenue to demonstrate that the transaction has a bearing on profits, income, losses or assets of the enterprise. The said impact has to be on real basis, even if in present or in future, and not on contingent or hypothetical basis. There has to be some material on record to indicate, even if not to establish it to hilt, that an intra AE international transaction has some impact on profits, income, losses or assets; (iii) When an assessee extends assistance to the AE, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by givi....

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....aring on profits, incomes, losses or assets of such enterprise; (ii) The onus is on the revenue to demonstrate that the transaction has a bearing on profits, income, losses or assets of the enterprise. The said impact has to be on real basis, even if in present or in future, and not on contingent or hypothetical basis. There has to be some material on record to indicate, even if not to establish it to hilt, that an intra AE international transaction has some impact on profits, income, losses or assets; (iii) When an assessee extends assistance to the AE, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of its no....

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....n assessee's own case vide order (supra), we are of the considered view that old amendment vide which Explanation to section 92B has been introduced has been held to be prospective in nature, thus not applicable to the year under assessment. Because ALP of international transactions qua corporate guarantee has been determined by the AO as well as by the ld. CIT (A) merely by relying upon the amendment vide which Explanation to section 92B of the Act by the Finance Act, 2012 has been introduced by treating the same having retrospective effect, which is no more a valid and sustainable legal proposition. So, when explanation to section 92B of the Act is not applicable to the year under assessment, ALP of international transaction qua corporate....