TaxTMI 
TaxTMI 
2021 (2) TMI 1333
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....e any corporate guarantee fee in respect of the above guarantee provided for its AE. 2.1. The Transfer Pricing Officer, held that that the corporate guarantee by the assessee to its Associate Enterprise (AE) constituted an international transaction as per explanation to Section 92B of the Act and determined the Arm's Length Price as per provisions of Section 92CA of the Act and determined an adjustment of Rs.28,53,625/- as ALP. 3. Aggrieved the assessee carried the matter in appeal before the ld. CIT(A). The assessee argued that the transaction of providing corporate guarantee is not an international transaction. The ld. CIT(A) rejected the contention by following the decision of the Kolkata Bench of the Tribunal in the case of Dy. CIT vs. National Engineering Industries Ltd. (ITA No. 986 & 987/Kol/2017) order dt. 12/09/2018 The ld. CIT(A) also upheld the action of the TPO in benchmarking the corporate guarantee fee @ 0.5% and consequently the T.P. Adjustment dertermined 4. Aggrieved the assessee is before us on the following grounds: "1. That, the Ld. C.I.T.(A) erred in upholding the action of the Ld. TPOIAO in benchmarking the corporate guarantee fee at 0.....
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....al transaction in terms of Section 92B of the Act. For this proposition, he relied on a number of case-law including the order of the ITAT in the case of DCIT, Circle-8(1) vs. EIH Limited in ITA Nos. 153/Kol/2016 and 110/Kol/2016; order dt. 12/01/2018 and the decision in the case of CIT vs. Rohit Ferro Tech Ltd. In ITA Nos. 262 and 263/Kol/2018, dt. 12/10/2018 and other case-law He submitted that the ld. CIT(A) has wrongly relied on the decision of the Tribunal in case of DCIT vs. M/s. National Engineering Industries Ltd. (supra) as this order was per incurium. 6. The ld. D/R, on the other hand, relied on the order of the ld. CIT(A) and submitted that the decision of the M/s National Engineering Industries ltd. (supra) has been followed by the ld. CIT(A) and hence there is no infirmity in the order. 7. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the paper on record , order of the authorities below as well as case law cited, we hold as follows: 8. This Bench of the Tribunal in the case of EIH Limited (supra) held as follows :- "Since the AE was a start up company, the asses....
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....the main section 92B. Under this Explanation, five categories of transactions have been clarified to have been included in the definition of 'international transactions'. Clauses (a)(b) and (d) do not cover guarantee, lending or loans. Other two, (c) and (e) deal with (i) capital financing, and (U) business restructuring or reorganization. Clause (c) refers to lending or guarantee. But the Explanation which is for removal of doubts or is clarificatory, cannot be read independent of Section 92B(1). Section 92B(1), provides those transactions as international transactions which are in the nature of purchase, sale or lease of tangible or intangible property (explained by clauses (a) and (b) of the Explanation), or provision of services, (explained by clause (d) of the Explanation), or lending or borrowing money (explained by Clause (c) of Explanation). The plain reading of provisions of sec. 92B(1) of the Acts indicate that the various transactions in section 92B (1) of the Act, (i. e. purchases, sales, provision for services, lending or borrowing or any other transaction) should have bearing on the profits, incomes, losses or assets of such enterprises. In our opinion, the co....
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...., these conditions are not satisfied on the facts of this case We have held that even after the amendment in section 92B, by amending Explanation to section 92B, a corporate guarantee issued for the benefit of the AEs, which does not involve any costs to the assessee, does not have any bearing on profits, income, losses or assets of the enterprise and, therefore, it is outside the ambit of international transaction to which ALP adjustment can be made. As we have decided the matter in favour of the assessee on this short issue, we see no need to address ourselves to other legal issues raised by the assessee and the judicial precedents cited before us." 8.4. The Chennai Bench of the ITAT in the case of Siva Industries and Holdings Ltd. vs. DCIT, in ITA No. 2756/CHNY/2017 and S.P. 90/CHNY/2018, order dt. 20/03/2018 held as follows:- "15. We have heard both the parties and perused the material on record. This issue came up for consideration before this Tribunal in the Case of Redington India Ltd. Vs. JCIT in ITA No.513/Mds./2014 dated 07.07.2014 for assess held that:- "47. Regarding the above issue, the learned senior counsel contended that corpor....
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....ate method for Benchmarking transactions that are not independent of the business carried on by an assessee. The learned senior counsel submitted that the adjustment made against the corporate guarantee may be deleted." Accordingly this ground is decided in favour of the assessee and against the Revenue." 9. Applying the proposition of law laid down in the above case-law to the facts of the case, we hold that provision of bank guarantee, is not an international transaction within the meaning of Section 92B of the Act. 10. Now we take up the decision of the Tribunal in the case of M/s. National Engineering Industries Ltd. (supra). In this decision, the Tribunal relied upon the decision of the Special Bench of the Tribunal in the case of Instrumentarium Corporation vs DDIT, ITA No. 1548 & 1549/Kol/2009, for Assessment Year 2003 and 2004-05, order dt. 15/07/2016, for coming to the conclusion that corporate guarantee for the Assessment Year 2011-12 and 2012-13, is an international transaction. While doing so, the ITAT erroneously held that the order of the Tribunal, as it was held that M/s Tega Industries Limited Vs. DCIT, ITA No. 1912/Kol/2012, was per incuriam, as this....
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....der dt. 27/11/2018. Respectfully following the same, we allow this ground of the assessee. 14. The second additional ground is on the issue whether the assessee is entitled to refund on dividend distribution tax (DDT) paid @ 16.22% u/s. 115-O of the Act. The assessee submits that during the year it has paid dividend to Japanese Companies i.e., M/s Krosaki Harima Corporation and M/s. Sojitz Corporation. DDT @ 16.22% was paid by the assessee on these payments. The assessee claims that the DDT on dividend paid to the foreign companies should be restricted to 10% as per DTAA. The ld. Counsel submitted the Article 10 of the DTAA between India and Japan provides that tax on dividend shall be paid @ 10%. DDT in India is paid as per the provisions of the Section 115O of the Act. On the issue where DDT on dividend shall be paid as per the provision of Section 115-O of the Act or Article 10 of DTAA between India and Japan, the ld. Counsel for the assessee relied on the decision of the Delhi Bench of the Tribunal in the case of Giesecke and Devrient [India] Pvt. Ltd. vs. ACIT in ITA No. 7075/Del/2017, order dt. 13/10/2020. 14.1. The ld. D/R opposed the contentions and submitted that all....