TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 1220
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....d in not holding that the order of Ld. TPO and the draft order of the Ld. AO (in so far it relates to transfer pricing proceedings) are void-ab-initio as the conditions of section 92C(3) of the Act have not been satisfied. 2. Determination of arm's length price by the Ld. TPO, Ld. AO and Hon'ble DRP for Corporate guarantee commission received by the Appellant 2.1. That the Ld. TPO /Ld. AO/ Hon'ble DRP erred in not appreciating the fact that the issuance of corporate guarantee on behalf of the AE is not an international transaction as per section 92B of the Act. 2.2. On the facts and circumstances of the case and in law, the Ld. TPO, Ld. AO and Hon'ble DRP erred in making an adjustment of INR 24,79,701/- in relation to issuance of corporate guarantee on behalf of Tega Industries Chile SpA ("Tega Chile'), and in doing so, have grossly erred by amongst other things: 2.2.1. Not appreciating that the corporate guarantee has been issued to bank on behalf of the AE in the capacity of a shareholder, as shareholder functions, and there is no provision of service which warrant a separate charge. 2.2.2. Applying an arbitrary approach to benchmark the corporate gu....
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....order was made by adding the variation of Rs. 24,79,701/- to the income of the assessee. Aggrieved with the assessment order, the assessee has filed the appeal before the Tribunal. 4. Rival contentions were heard and the submissions made and the paper book filed have been examined. No separate written submission has been made before the Tribunal and only the submission made before the Ld. AO, Ld. TPO and copy of orders passed by the Tribunal in assessee's own case have been filed. 5. Ground no. 1 being general in nature does not require any separate adjudication. 6. In the course of the appeal, the Ld. AR contended that the only ground of appeal is regarding the adjustment on account of corporate guarantee. The same is mentioned at para 3 to 3.3 of the directions of the Ld. DRP, which are as under: "3. Brief facts of the case 3.1 The assessee is primarily engaged in the development and manufacture of specialized wear resistant rubber lining offering a range of rubber, PU and ceramic based lining products. During the financial year 2020-21 relevant to the assessment year 2021-22 the assessee has entered into international transaction pertaining to guarantee for loans taken by....
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.... having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises. (2) A transaction entered into by an enterprise with a person other than an associated enterprise shall, for the purposes of sub-section (1), be 95[deemed to be an international transaction] entered into between two associated enterprises, if there exists a prior agreement in relation to the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise 96[where the enterprise or the associated enterprise or both of them are non-residents irrespective of whether such other person is a non-resident or not]. Explanation.-For the removal of doubts, it is hereby clarified that- (i) the expression "international transaction"98 shall include - (a)....
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....as also been paid by the AE but this plea will not apply in the said transactions because, we are dealing specifically with the transactions of corporate guarantee and that with the help of such corporate guarantee, the AE has gained and then as per the TP provisions, the assessee is required to offer the corporate guarantee fee as income. Therefore, in view of the provisions of Section 92B of the Act, the alleged transactions of corporate guarantee with the AE falls in the category of international transactions. Our view is further supported by the judgment of the Hon'ble Madras High Court in the case of Principal Commissioner of Income Tax 5 vs. M/s. Redington (India) Limited in T.C.A.Nos.590 & 591 of 2019 judgment dt.: 10.12.2020. Accordingly, ground raised by the assessee that the alleged transactions is not an international transactions, is hereby dismissed. 10. Now, so far as the Ground relating to calculation of corporate guarantee fee is concerned, we find that this issue has come up before various judicial forums and corporate guarantee fee range of 0.2% to 0.5% has been found to be justified. We find support from the judgment of the Hon'ble Bombay High Court in the case....