TaxTMI 
TaxTMI 
2023 (1) TMI 258
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....d 6th September 2021, in the matter of assessment under section 143(3) of the Income Tax Act 1961, for the assessment year 2013-14. 2. Grievances raised by the parties, which are interconnected and will be taken up together, are as follows:- Grievances raised by the assessee Gurantee Commission charged in respect of corporate gurantee provided on behalf of Associated Enterprises. 1. erred in confirming the order of the AO/TPO in treating the guarantee given by Appellant to banks for giving loan to its Associated Enterprises as International Transaction within the meaning of Section 92B r.w.s. 92(1) of the Act. 2. erred in determining the ALP of gurantee commission at 0.50% p.a. given by the Appellant o....
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.... 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in arriving at the adhoc rate of 0.5% without adopting any of the methods prescribed in Section 92C which is violation of law? 5. The appellant prays that the order of the CIT(A) on the above grounds be set-aside and that of the Assessing Officer be restored. 6. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. The relevant material facts are as follows. The assessee before us is a company engaged in the business of port infrastructure facilities and engineering, construction and consultancy services etc. During the relevant previous year, the assessee entered into several....
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.... i.e. after the end of the relevant previous year, and in the light of the following rider given therein:- "Please note and it is reiterated that the above does not constitute any commitment or offer by the bank or its affiliates to extend credit to or to arrange financing on these or any other terms. Any such commitment can only be made after obtaining the relevant internal approvals by us, conduct and completion of satisfactory due diligence and documentation. The purpose of this letter is merely to facilitate further discussions between RPTL and the bank. Accordingly, we have the right to change these indicative terms and/or withdraw from further negotiations". 4. The learned Transfer Pricing Officer further noted, in v....
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....e AE is not an international transaction, in view of amended provisions of section 92B, vide Finance Act, 2012, inserting Explanation to section 92B of the Act. The issue remained for consideration is as to what would be the arm's length price for issuing the corporate guarantee in question. Appellant has benchmarked the transaction at 35 basis points i.e. 0.35% p.a, based on a letter for quotation from Royal Bank of Scotland, wherein they have stated that potential financing for Appellant's associates is expected to carry an interest pricing differential of 70 basis points to a similar direct facility for Appellant in that jurisdiction. The said interest pricing differential was apportioned between Appellant and its AE in ....
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....cause the material factor is the difference between these rates and not the quantum of these rates; every variation in such rates need not necessarily affect the variation between with guarantee and without guarantee interest rates, and, at the end of the day, the rate differential is an approximation-no matter how scientific or reasonable it is. If the rate differential between these two rates of interest is 70bps at the end of the relevant previous year, it is reasonable to proceed on the basis that such a differential would also prevail during the relevant previous year. The stand of the authorities below on this point, is thus not legally sustainable. As for the riders placed in quote, which have been extracted above and which have been....