TaxTMI 
TaxTMI 
2022 (4) TMI 1438
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....of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 05/12/2016 respectively for the A.Y.2012-13. 2. The ground No.1 raised by the assessee is with regard to determination of Arm's Length Price (ALP) of the international transaction relating to processing fees received on account of guarantees issued to Indian companies based on counter guarantee from overseas branches. The ground No.2 raised by the assessee is challenging the rejection of Transactional Net Margin Method (TNMM) used by the assessee and adopting external Comparable Uncontrolled Price (CUP) method as the Most Appropriate Method (MAM). 3. We have heard rival submissions and perused the materials available on record. We find that assessee is a comm....
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....sessee has issued guarantee to customer based on the counter guarantee issued by its AEs. The assessee had benchmarked this transaction using TNMM as the MAM. The assessee has earned an operating margin of 237.32% on operating costs for issuing guarantees on behalf of its AEs. During the year under consideration, the assessee has earned Rs.19,17,370/- for provision of the said services. The assessee chose seven comparables and applying single year updated margins of seven comparable companies arrived at the arithmetic mean of 3.07% applying Operating Profit / Operating Cost (OP/OC) as Profit Level Indicator (PLI). This arithmetic mean margin of 3.07% was compared with assessee's margin of 237.32% and accordingly, assessee concluded that its....
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....antee fees rates charged by un-related third parties providing similar activities under similar terms and conditions. Accordingly, since internal CUP was not available, the ld. TPO obtained information u/s.133(6) of the Act from various banks seeking bank guarantee rates charged by the various banks to its customers. The said information obtained u/s.133(6) of the Act provided that the bank guarantee rates charged by the various third party banks ranged from 0.5% to 2% and the amount of fee charged decreased with increase in the guarantee amount. The discount or concession below these rates is also given depending upon the cash margin or security provided and the quality of credit rating of the borrower and other facilities obtained by the ....
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....the payment to the beneficiary in India. 3.6. Hence, from the aforesaid modus operandi, it could be concluded that assessee acts as a beneficiary bank i.e. issue guarantee in India on behalf of clients of overseas branches of ANZ based on the counter guarantee issued by such overseas ANZ branches. Since assessee is acting as the beneficiary, the entire risk of discharging the bank guarantees is borne by overseas ANZ branch issuing the counter guarantee. The assessee merely provides support service in connection with processing of the guarantees, typing out the guarantee agreement based on swift message received and issuing the said agreement to the beneficiary. The aforesaid functions performed by the assessee are not disputed by the lower....
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....ng the aforesaid secretarial services. Hence, what is to be looked into is under similar terms and conditions and under similar circumstances what is the guarantee fee charged by the third party comparables from their AEs. This is what precisely assessee has done in the instant case. The assessee had taken into account the third party comparable margins and compared the same with its margins using Transactional Net Margin Method. For this purpose, the assessee had taken the third party comparables which are engaged in providing liasoning services, managerial services, marketing services, administrative services and information services. Effectively all these services could be loosely termed as business support services. Hence, when the data....
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....tees wherein the assessee merely provides support services in connection with processing of the guarantees. The ld. AR also referred to page 380 of the paper book containing various swift messages received. The assessee also placed on record the reply letter dated 18/12/2015 filed before the ld. TPO in response to show-cause notice as to why 1% guarantee fee charged by third party Indian banks should not be considered as the arm's length price, placed reliance on the decision of the Mumbai Tribunal in the case of Asian Paints Ltd., vs. ACIT in ITA Nos. 2126 & 2178/Mum/2012 wherein specifically in the context of guarantee fees, this Tribunal had deleted the adjustment made as the said judgement was rendered simply relying on certain data fro....