TaxTMI 
TaxTMI 
2022 (4) TMI 1438
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....round 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 commercial bank having its head office in Melbourne, Australia. Australia and New Zealand Banking Group (ANZ) commenced its banking operations in India with the opening of its first branch in Mumbai pursuant to the receipt of the banking license from Reserve Bank of India (RBI). During the relevant year, ANZ has a single branch in India operating in Mumbai. It is involved in normal banking activities including financing of foreign trade and foreign exchange transactions. The list of Associated Enterprises (AEs) with whom the assessee had carried out international transactions are as under:- • The Australia and New Zealand Banking Group Limited - Singapore Branch (ANZ Singapore) • ANZ Capital Private Limited (ANZ Capital) • ANZ Support Services India Private Limited (ANZSS) • ANZ Operations and Te....
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....ommission. Accordingly, the ld. TPO rejected those comparables and also TNMM method adopted by the assessee and proceeded to benchmark the guarantee transaction using external CUP method. The ld. TPO observed that during the year, overseas branches of the assessee executed inter-bank guarantees / indemnities, against which the assessee issued guarantees on behalf of the clients of overseas branches. The assessee received a commission of USD 400 per transaction for guarantees issued by it on behalf of its overseas branches. The ld. TPO observed that under the CUP method, the guarantee fees is quantified through a comparison of arm's length guarantee 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 amou....
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....aid functions performed by the assessee are not disputed by the lower authorities. When assessee is fully protected by overseas counter guarantee, we are unable to comprehend ourselves as to how CUP method could be applied therein as it would be impossible to make adjustment for the differences as per Rule 10B(1)(a) of the Income Tax Rules. In effect, we find that assessee is merely providing secretarial services or which can be loosely called as carrying out administrative functions. It is not in dispute that the assessee does not bear any risk in its books as it is fully protected by overseas counter guarantee / indemnity. In fact even assessee would not have to face the foreign exchange risk in view of the fact that whenever assessee is called upon to discharge the guarantee on behalf of the overseas branches, the assessee would first receive the monies from overseas branch because of the existing counter guarantee, and then discharge the same. The assessee is receiving processing fees from its AEs in foreign currency and the said fee is received immediately after the invoice is raised for the same, thereby the risk of exchange fluctuation would be very very negligible due to re....
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.... been issued by ANZ Mumbai. By all these documents, the ld. AR was vociferous in driving home the point that the entire risk of discharging the bank guarantees is borne by the overseas ANZ branch issuing the counter guarantees 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 from the market. The facts of the case before us squarely fit into the facts prevailing in the case of Asian Paints Ltd. 3.9. The assessee before the ld. DRP made an alternative submission that the fee of 1% proposed by the ld. ....