2022 (3) TMI 1463

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....ed for the limited purpose of de novo adjudication of grounds no. 2 to 6 in the assessee's appeal. 2. The grounds no. 2 to 6 in assessee's appeal are as under: "2. erred in determining the arm's length price of the international transaction of payment of corporate guarantee fees as NIL by considering it as shareholder activity and making transfer pricing adjustments of INR 7,23,100; 3. failed to appreciate that guarantee has been specifically included in the definition of international transaction while holding that it is a shareholder activity; 4. erred in not considering the fact that corporate guarantee fee has been determined considering average cost of interest that AE has paid on its non-liquid financing instruments obtai....

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....,36,749 5. In the transfer pricing analysis, the assessee conducted combined benchmarking of international transactions pertaining to payment for technical services, purchase of finished goods (Mockup), payment of corporate guarantee fees, payment for availing business support services and payment of interest on trade credit, on the basis that these transactions form an integral part of assessee's principal business of import of material for resale. Further, by adopting combined transaction approach, assessee compared its margin from its principal business activity with margins earned by other comparable companies in the same industry and claimed the international transactions to be at arm's length price ("ALP"). 6. The Assessing Officer ....

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....horised Representative ("learned A.R."), appearing for the assessee, submitted that provision of guarantee is specifically mentioned in the definition of 'international transaction' provided in Explanation (i) to section 92B of the Act inserted by Finance Act, 2012 with retrospective effect from 01.04.2002. Further, the said international transaction was also duly reflected in financials, transfer pricing study report and Form 3CEB filed by the assessee. Learned A.R. submitted that fees for corporate guarantee paid by the assessee at the rate of 2% is also in conformity with Safe Harbour Rules and thus is at ALP. 10. On the other hand, Shri. Tejinder Pal Singh, learned Departmental Representative vehemently relied upon the order passed by ....

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.... the Tribunal in Siro Clinpharm (P.) Ltd. v. ITO: ITA No. 847/Mum./2016, wherein the Tribunal following the decision of Hon'ble Madras High Court in Pr. CIT v. Redington India Ltd. [2021] 430 ITR 298 held that issuance of corporate guarantee constitutes an international transaction. 13. As is evident from the facts of the present case, the TPO/AO/CIT(A) considered the provision of corporate guarantee only as a shareholder's function being not in the nature of any service rendered by the A.E. and thus no payment was required to be paid to the A.E. As the TPO/AO rejected the combined benchmarking analysis conducted by the assessee and did not consider the said transaction as an international transaction, as claimed by the assessee, and bench....