2024 (7) TMI 1177

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....the Act) order dated 12/12/2015 passed in pursuance of directions of the Dispute Resolution Panel (in short "DRP") under Section 144C(5) of the Act dated 10/12/2014. Facts of the case: 2. The present appeal filed by the assessee deals with the matter for A.Y. 2010-11, recalled vide order of the Tribunal dated 24-1-2024 in MA No.85/Ahd/2023 in IT(TP)AO.930/Ahd/2015. In the said MA, it was pointed out that the assessee had raised the issue of addition made by the AO/TPO on account of adjustment of Rs. 52,91,667/- in relation to the international transaction of payment of guarantee fees to AE and the assessee sought the deletion of the same before the Tribunal in its above appeal. This issue was raised in ground no.4 in ITA No.930/Ahd/20....

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....elation to international transactions of payment of guarantee fees by the assessee to its AE amounting to Rs. 52,91,667/- the Arm's Length Price(ALP) of which was determined at NIL by AO/TPO, objection of the assessee to which, was dismissed by the DRP. 4.1. The facts relating to the issue are that during the impugned year, the assessee has availed Rs. 100 crores borrowing from its group company viz. Bosch Ltd., Bangalore, and interest rate charged thereon was at the rate of 11%. For the said purpose, one of the AEs of the assessee i.e. Robert Bosch Gmbh acted as guarantor and charged guarantee fee at the rate of 0.75% per annum to the assessee for the guarantee provided. During the impugned year, the assessee accordingly paid guarantee ....

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....l group policy imposing guarantee on the assessee and seeking charges for the same cannot be regarded as a service rendered to the assessee. vi. Since no service has been rendered by the AE, no charge can be attributed to the transaction of giving guarantee to the assessee company. vii. No distinct benefit has accrued to the assessee in the form of reduced interest rate on account of guarantee. viii. The loan was to acquire capital assets which itself would have served as a collateral. Hence, an additional guarantee did not serve any purpose. ix. The transaction sought to be propagated as CUP is incomparable due to the following reasons: a. The loan transaction is not a simple transaction. it is ....

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.... extent of Rs 52,91,667/- is required to be made. Accordingly, the income of the assessee, is required to be adjusted upwards to the extent of Rs. 52,91,667/-." 4.2. The Ld.DRP confirmed the finding of the Ld.TPO and, accordingly, rejected the objection filed by the assessee. 4.3. Upon reconsideration of Ground No. 4 in the present appeal for the assessment year (A.Y.) 2010-11, we are required to adjudicate the matter concerning the Transfer Pricing (TP) adjustment made by the Assessing Officer (AO)/Transfer Pricing Officer (TPO) and upheld by the Dispute Resolution Panel (DRP) concerning the payment of guarantee fees to the Associated Enterprise (AE). 5. During the course of hearing before us, the Ld. Senior Counsel for the assess....

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....rough the order of Hon'ble High Court dated 23-7-2017. The relevant para of the said order is reproduced here for ready reference: "7. Now so far as the proposed Question (C), i.e. deleting the addition made on account of Transfer Pricing Adjustment of Rs. 23,51,667/- is concerned, apart from the fact that in the case of the very assess in earlier year, similar addition was deleted, even on merits also, the learned ITAT has observed as under:- "17. There is no dispute that all the three entities that is the assessee company, the lender company and the guarantor company are Associated Enterprises. There is also on dispute that the assessee has borrowed the money on interest of 12.25% per annum as against interest of 15% quo....

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....trated that the effective borrowing cost, including the guarantee fee, was (11.75%) lower than the bank's quoted interest rate (16%), thus justifying the economic rationale for the guarantee fee. 7.2. The TPO did not present compelling evidence to establish that the guarantee fee was unwarranted. The benefits derived, as seen in lower interest rates and favorable operating margins, substantiate the transaction's arm's length nature. 7.3. For A.Y. 2009-10, the Tribunal had deleted a similar addition, justifying the payment of guarantee commission. This decision was upheld by the Hon'ble Gujarat High Court, which noted the consistency of the assessee's operating margin and the benefit of lower borrowing costs compared to....