TaxTMI 
TaxTMI 
2022 (12) TMI 379
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....er the normal provisions and book profit of Rs.44,24,73,668 under MAT provisions. The return was processed u/s. 143(1) and the case was selected for scrutiny. Notice u/s. 143(2) was issued to the assessee. Since the assessee had entered into certain international transactions with its AE, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) u/s. 92CA of the Act for determining the Arm's Length Price (ALP) of the international transactions entered into by the assessee. During the course of TP assessment proceedings, the TPO noted that the assessee has entered into the following international transactions during the year under consideration with its Associated Enterprises (AEs) : Particulars Associated Enterprise Value of International Transactions (Rs.) Product Income received DQ Entertainment (Ireland) Ltd. 53,87,00,538 Professional Consultancy fee received DQ Entertainment (Ireland) Ltd. 71,67,196 Loan given DQ Entertainment (Ireland) Ltd. 1,85,32,054 Reimbursement of expenses received DQ Entertainment (Ireland) Ltd. 4,59,64,188 Reimburseme....
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.... adjustment of Rs 2,84,73,482/- as profit attributable to the appellant company under the Profit Split Method in connection with intangible assets which were absolutely sold to AE when such revenue is generated by AE of the appellant company i.e., DQ Ireland as an absolute owner of such intangible assets. 3. The Ld. DRP AO are erroneous in not considering the fact that the Intangible assets were sold to assessee's AE in earlier years at Arm's length price and accepted by the Ld. AO/TPO and therefore did not require any further adjustment. 4. The Ld. DRP AO has erred in law and facts, by making an adjustment for commission on guarantee on corporate guarantee provided by the Appellant to its subsidiary company DQ Entertainment (Ireland) Limited. 5. The Ld. DRP AO has erred in law and facts in considering the arm's length guarantee commission of 1.6% of the guarantee amount provided to a subsidiary company DQ Entertainment (Ireland) Limited resulting in an adjustment of Rs.1.69,66,363/- failing to appreciate that it is the onerous responsibility of parent company DQE India to provide corporate guarantee to its subsidiary DQE Ireland, which is to be categorized as ....
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....n account of commission on corporate guarantee, learned counsel for the assessee submitted that during the F.Y. 2013-14, the assessee company has given corporate guarantee amounting to Rs.106,03,97,701 to its subsidiary DQ Entertainment (Ireland) Ltd. in respect of credit facility offered from the Bank. He submitted that it is the responsibility of the parent company DQE India to provide guarantee to subsidiary DQE Ireland which is to be categorized as shareholders activity as specified in OECD Transfer Pricing guidelines, 2010. Accordingly, there is no economic justification of charging DQE Ireland in respect of the guarantee given. He submitted that since the issue of corporate guarantee by the assessee on behalf of its AE is in the nature of quasi capital or shareholder activity and not in the nature of "provision for services", therefore, the said transaction is to be excluded from the scope of international transaction u/s. 92B of the Act. He submitted that the TPO has computed the guarantee fee at 1.6% p.a. to the assessee company in connection with corporate guarantee given to the AE of Rs.106,03,97,701 at Bank guarantee rate of SBI which is taken at 1.6% which resulted an a....
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....le on demand besides the securities offered. Perusal of the sanction letters also show that the bank has given the guarantee based on the counter guarantee of the borrower and all other securities taken by the bank to provide other cash credit facilities. Besides the bank will charge additional interest of 2% / 5.5% if the guarantee was invoked. On the other hand. we note that the risks assumed by the assessee is much more, as it has not taken any counter securities but primarily responsible for the loan amount. Therefore, we are of the view that the ALP of the Corporate Guarantee applied by the TPO of 1.6% is very fair reasonable and appropriate and is accordingly UPHELD. It is also noted that the TPO has taken the effective guarantee value at Rs.54,35,11,471/-, working of which is not available. Therefore, the TPO/AO may cross-check with the information provided in table referred at para 2.3.1 above, and arrive at the correct amount after verification and which may be taken to compute the ALP adjustment on guarantee commission. " He accordingly submitted that the order of the Assessing Officer on this issue be upheld. 10. We have heard the rival arguments made by both the side....
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....trying to go beyond sales and making TP adjustments. We are asking ourselves, whether there is any international transaction exists. In our considered view, there is no international transaction after outright sale. There is no international transaction exists as per section 92Bof the Act as there is no transaction exists between assessee and with it's AE. We are inclined to reject the stand of the TPO. 15.1 Moreover, after the completion of the sale process, the "AE" has done transaction with the outsiders or outside the jurisdiction of the Indian territory but there is no transaction done with the assessee involving the above IP (jungle book) to consider that there exists a international transaction. Once, the IP is sold and Arm's length price is determined, the "IP" becomes the property of "AE". The assessee has no locus standi to claim any benefit neither the revenue. 15.2 The revenue has grievances on the arrangement and existences of group companies. There is no doubt, there exists tax planning. There can be tax planning within the four corners of the taxation laws. There is enough mechanism in the existing Act and also there is DTAA - arrangement with Ireland, ....