TaxTMI 
TaxTMI 
2021 (8) TMI 1238
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.... latter twin assessment years; respectively. Heard both the parties. Case files perused. 2. It transpires at the outset that ITA No.2154/Hyd/2018 (AY.2014-15) suffers from 24 days delay in filing, stated to be attributable to the reason(s) beyond its control as per condonation petition/affidavit. No rebuttal has come from the departmental side. The impugned delay is condoned therefore. 3. We next notice that the assessee's identical sole substantive grievance as per the main as well as additional grounds in all these appeals challenges correctness of learned lower authorities' action making Arm's Length Price (ALP) adjustment(s) of Rs. 26,76,17,306/-, Rs. 18,77,00,000/- and Rs. 21,35,60,000/-; assessment year-wise, respectively regarding its corporate guarantee(s). 4. Learned counsel vehemently contended during the course of hearing that the authorities below have erred in law and on facts in making the impugned ALP adjustments involving varying sums of money. He sought to buttress the point that such a corporate guarantee is purely a shareholder activity not forming any international transaction u/s.92B of the Act so as to trigger Chapter-X mechanism in motion. He also inv....
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....rtion of sub-section 1 requires that such transactions should have bearing on the profit and loss account of the assessee. NCC Ltd has not charged any fee on account of this transaction to its subsidiary nor NCC Ltd has incurred any expenditure towards issuing such letter of guarantee. By providing such guarantee the subsidiary can enjoy the loan facilities extended by the bank. As the condition precedent to qualify as an international transaction of having impact on the profit and loss account failed, the provision of corporate guarantee does not fit into the definition of international transaction before the amendment to Sec.92B by Finance Act 2012 or after such amendment. Hence, adjustment for all the three years in dispute is unjust and should be deleted. Shareholders activity The parent company NCC Ltd had made a contribution towards the capital of overseas subsidiaries. As the shareholder of the overseas subsidiaries of NCC Ltd is also obliged to provide necessary capital to carryon the business activities by the subsidiary. NCC Ltd as the shareholder should either contribute or enable a line of credit being available to the overseas subsidiaries. This kind of activity ....
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....ompliance with the Accounting Standards. Further, the assessee stated that the outstanding guarantee issued by the assessee as on 31.03.2009 represents guarantee issued on behalf of the overseas subsidiaries in earlier years. Further, they stated that during the course of assessment proceedings in the relevant assessment years, the TPO made addition to the Corporate Guarantee issued during those years by adopting the bench mark rate based on the available internal comparable uncontrolled price charged by the bank at 0.85%. The assessee also issued Corporate Guarantee in favour of M/s.Parampara Wedding Cads and M/s. Baskar Digital Press. The TPO after taking note of the amended Section 92B, which was introduced with retrospective effect from 01.04.2002, examined the factual aspect and pointed out that though the assessee stated that they have not issued any fresh guarantee during the Assessment Year 2009-10, the guarantees were live and were not closed as on 31.03.2009 and the liability continued on the assessee as on 31.03.2009. Noting that providing such guarantee is one of the financial service rendered by the assessee for which it has to be remunerated appropriately and that con....
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....ore, the TPO concluded that the Bank commission charges cannot be compared for the commission charges that has been payable to the assessee by the Associated Enterprises and it is a clear financial services rendered by the assessee to their Associated Enterprise, which has to be compensated by proper commission charges. Accordingly, the TPO held 2% shall be charged as commission and proposed an upward adjustment to the income of the assessee to the tune of Rs. 817.25 lakhs. In respect of the guarantees given to unrelated parties, the TPO held that 2% should be charged as guarantee commission and proposed an upward adjustment of Rs. 111.48 lakhs to the income of the assessee. The DRP after hearing the assessee, held that the TPO has not given cogent reasons for taking a different stand than the stand taken by the Department in the earlier years as the same guarantee is continuing during the year under consideration and therefore, there cannot be a different bench marking from that of the previous year. Accordingly, the DRP directed the TPO to adopt the same rate of guarantee commission as was adopted by the TPO in the preceding year. 69. The directions issued by the DRP were give....
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....ee is given by the assessee, which are in the nature of lending are covered under clause (c) of Explanation 1 to Section 92B. Further, it is submitted that the nature of transactions covered by Clause (e) specifically include even those transactions which may not have a bearing on the profit, income, losses or assets of such enterprises at the time of transaction are covered if they have such a bearing at any future date. It is argued that the language used in the Explanation makes it clear that in so far as the transactions that fall within the main part of Section 92B are concerned, such transactions must have a bearing on profit, income, losses or assets of an assessee in the year in which the transaction is effected. In the assessee's case, the Corporate Guarantees represent a contingent liability and lay dormant and have no bearing on the current year's profits, income or losses of an assessee and Corporate Guarantee are not covered within the definition of international transaction. It is submitted that applying doctrine of fairnessas explained by the Hon'ble Supreme Court of India in the case Vatika Township Private Limited, the explanation ought to be read as prospective in....
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....courts may be called upon to construe the provisions and answer the question whether the legislature had sufficiently expressed that intention giving the statute retrospectivity. Four factors are suggested as relevant: (i) general scope and purview of the statute; (ii) the remedy sought to be applied; (iii) the former state of the law; and (iv) what it was the legislature contemplated. (p. 388) The rule against retrospectivity does not extend to protect from the effect of a repeal, a privilege which did not amount to accrued right. (p. 392) 72. A new Enactment or an Amendment meant to explain the earlier Act has to be considered retrospective. The explanation inserted in Section 92B by Finance Act 2012 with retrospective effect from 01.04.2002 commences with the sentence For the removal of doubts, it is hereby clarified that - 73. An Amendment made with the object of removal of doubts and to clarify, undoubtedly has to be read to be retrospective and Courts are bound to give effect to such retrospective legislation. 74. The learned Senior Standing counsel for the Revenue referred to the decision in Co-operative Company Limited vs. Commissioner of Trade Tax in Civil No.2124....