TaxTMI 
TaxTMI 
2025 (9) TMI 568
X X X X Extracts X X X X
X X X X Extracts X X X X
....IT(A) is correct in holding that the adjustment made by the TPO was not sustainable without examining the facts of the case and the evidences examined by the TPO and only relying on the judgment of the Ld. CIT(A) in the previous years? 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in reducing the adjustment made by the TPO relying on the judgment of the Ld.CITA) for the previous years, ignoring the basic tenet that the transfer pricing audit is highly facts-intensive and facts-driven and the contemporaneous facts have to considered and evaluated for every AY independently as dictated by Rule 10B(4) and by taking into account the comparability rains enshrined in Rule 10B(2)? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in reducing the adjustment when the comparable data itself is not charging the same commission for domestic bank guarantees and foreign bank guarantees? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in granting relief on the disallowance of depreciation and maintenance cost aggregating Rs. 9,99,16,686/- in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s (being loans) taken by its AEs. The TPO further observed that the corporate guarantee is a weaker substitute to a Bank Guarantee, therefore, the additional risk assumed by the assessee is to be charged. Thus, the TPO valued the service charges receivable by the assessee for the corporate guarantee issued to its AE at 1% amounting to Rs. 2,66,71,257/- as adjustment towards the Arm's length Price of International Transaction. Thereafter, the AO based on TPO order made addition of Rs. 2,66,71,257/-. 4.2 Aggrieved the assessee preferred an appeal before the Ld.CIT(A) and the Ld.CIT(A) directed the AO to adopt rate of 0.2% by taking note that corporate guarantee fees offered by SBI to assessee was at the rate of 0.2% and followed his own predecessors order on this issue by observing as under: 8. The second ground relates to adjustment to Arms-Length price adopted by the appellant for Corporate Guarantee (CG) issued by the appellant to Financial Institutions on behalf of AEs on which appellant has not charged any fee since it is not an International Transaction u/s 92B of the act. The TPO rejected the appellant's argument and proposed notional fees of 1% for CGs iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rporate guarantee' given to its AEs to the tune of Rs. 356,17,22,311/- by noticing that the 'corporate guarantee' fees offered by the SBI to the assessee was @ 0.2% per annum which was taken as external bench- mark, while computing the ALP for providing 'corporate guarantee' to its AEs and is noted to have followed his predecessors action in the assessee's own case for AY 2011-12 wherein also similar action was taken. Before us, the Ld.AR supporting the impugned action of the Ld.CIT(A) drew our attention to the SBI letter which shows the details of CG fees offered by SBI to the assessee company @ 0.2% Per Annum which fact is discernable from Page No.36 of the Paper Book. According to the Ld.AR, similar action taken by the Ld.CIT(A) for AY 2010-11 & 2011-12 based on guarantee fees charged by SBI, has not been challenged by the Revenue. Therefore, according to him, the impugned action of the Ld.CIT(A) shouldn't be disturbed. Per contra, the Ld.DR couldn't rebut the contention of the Ld.AR that similar action of the Ld.CIT(A) has been accepted by Revenue in assessee's own case for AYs 2010-11 & 2011-12, however he vehemently supported the action of AO. 4.4 Having heard both parties....
X X X X Extracts X X X X
X X X X Extracts X X X X
....High Court in the case of Pr. CIT v. Redington (India) Ltd. [2020] 122 taxmann.com 136/[2021] 430 ITR 298 (Madras), wherein, the Hon'ble Madras High Court held that, inherent risk cannot be ruled out in providing guarantees and hence the transaction involving issuance of corporate guarantee is covered by the definition of international transaction consequent to retrospective amendment made by the Finance Act, 2012 and, accordingly adjustments are required to be made for guarantee commission. The relevant findings taken note of by us is as follows: - "75. The concept of Bank Guarantees and Corporate Guarantees war explained in the decision of the Hyderabad Tribunal in the case of Prolifics Corporation Limited. In the said case, the Revenue contended that the transaction of providing Corporate Guarantee is covered by the definition of international transaction after retrospective amendment made by Finance Act, 2012. The assessee argued that the Corporate Guarantee is an additional guarantee, provided by the Parent company. It does not involve any cost of risk to the shareholders. Further, the retrospective amendment of Section 92B does not enlarge the scope of the term i....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Following the same, we direct the AO to restrict adjustment to 0.5% of the guarantee value. This ground is therefore partly allowed. 4.5 Respectfully following the Tribunal order in the assessee's own case for AY 2019-20 on the issue, and relying on the decision of Hon'ble jurisdictional Madras High Court in the case of Pr. CIT v. Redington (India) Ltd. 430 ITR 298 (Madras), we modify the order of the Ld.CIT(A) and direct the AO to sustain the addition @ 0.5% of the guarantee value. Thus, this ground of Revenue is partly allowed. 5. Ground No.4 of Revenue is against the action of the Ld.CIT(A) granting relief on the disallowance of depreciation and maintenance cost aggregating Rs. 9,99,16,686/- in respect of aircraft. 5.1 Brief facts are that the assessee company claims to own an aircraft and has claimed depreciation @40% on the same. During this year, depreciation was claimed at Rs. 4,73,63,414/-, l.e., 40% of opening WDV. Further, the assessee has claimed to have incurred operating expenditure on this aircraft to the tune of Rs. 5,25,53,272/-, which consists of crew salary, fuel, routine maintenance & spares etc. The AO asked the assessee to provide the details of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the Aircraft was used for the purpose of business. According to the Ld.CIT(A), log books and aircraft movement sheet were produced before the AO as well as before him during the appellate proceedings and thereafter, the Ld.CIT(A) having been convinced that the Aircrafts was used for its business use has followed the decision of this Tribunal in assessee's own case for earlier years and directed the AO to allow the depreciation and other expenditure necessary to operate Aircraft by observing as under: 11. Ground no. five relates to disallowance of depreciation and maintenance cost totaling to Rs. 9,99,16,686/- claimed on Aircrafts. The AO disallowed these expenses on the ground that the aircrafts have not been put to used for the business of the Appellant. 11.1 The Appellant has submitted that it had purchased aircraft in 2007 for its business use due to increasing international business and connectivity to small town which are not regularly connected by scheduled operators. The Appellant also leased the aircraft to third party for used on which fees earned was offered to tax as business income. The Appellant submitted log books and Aircraft movement sheet which ....