TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 655
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....d AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly the Ground Nos. 2 & 2.1. raised by the assessee are hereby dismissed as not pressed. 4. The Ground Nos. 3 to 3.3. raised by the assessee are challenging the transfer pricing addition of Rs 16,48,31,724/- made by the Learned TPO on account of corporate guarantee. 5. We have heard the rival submissions and perused the materials available on record. The assessee is a subsidiary of JEE Energy Ventures Pvt. Ltd. (JEEVPL) and engaged in the business of oil and gas exploration and production. The assessee has entered into production sharing contract jointly with various joint venture partners as one part and Ministry of Petroleum and Natural Gas, Government of India for blocks in India and with Myanmar and Oil and Gas Enterprise for the block in Myanmar as other part of exploration of oil and gas. During the year under consideration, the assessee entered into an international transaction of provision of negative lien on receivables and participating interest (PI) on the oil and gas blocks. The background of the arrangement is as under:- SI. No. Name of the entity Amount involv....
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....nce has got access to the assets ultimately owned and controlled by the borrower company and has not got access to any additional assets over and above the assets owned by the borrower. Based on the above, no fee is warranted from the AEs by the assessee in relation to the above arrangement. 7. The Learned TPO disregarded the approach of the assessee and observed as under :- a) Explicit guarantees are those where a direct assurance is given by an affiliate. b) The assessee has provided an explicit guarantee for its AEs for obtaining the credit facilities resulting in direct benefit to the AE. c) Corporate guarantees fall under the envelope of international transactions as defined in Explanation to section 92B of the Act. d) The Corporate guarantee was entered into to proactively influence the profits and incomes and even loans and assets of the AEs on future dates. e) The assessee provided counter guarantee for the loans taken by the AEs. With the above observations, the Learned TPO alleged that the negative lien given by the assessee is akin to the Corporate guarantee and proceeded to benchmark the same by applying Comparable Unco....
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.... similar facts on record, on appeal, the coordinate bench held that the services provided by the assessee to their step down subsidiary falls within the definition of Corporate Guarantee and remitted the issue back to the file of AO/TPO to bench mark the same as an international transaction. From the decision of coordinate bench, it is clear that the submissions of the assessee for performing shareholder services do not fall under corporate guarantee were rejected. Therefore, before us also, the assessee submitted the similar arguments and we are inclined to reject the same. 7. The issue has to be analyzed based on the facts of each year, coming to the real issue in this year under consideration are, the assessee has given corporate guarantee to its step down subsidiaries while availing the loan by them in the past. In order to bench mark the transaction, it has to be evaluated every year and it cannot be held that once the guarantee is given in the past, it continued to have impact on every assessment year subsequently. In this case, the assessee has given guarantee towards the loan and primary obligation of servicing the loan to the bank when they granted loan to the ste....
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....s to be bench marked. After considering the facts on record, what is relevance is whether the guarantee existed at the commencement of the impugned AY, in this case, in our opinion, the assessee was aware as well as the intimation received from the bank in the month of May itself, therefore, there was no guarantee existed as soon as the intimation of classification of NPA. It is crystallized/nonexistence of the guarantor in the beginning of the year itself, therefore, we cannot presume that the corporate guarantee existed, hence, there is no possibility that the assessee has continued the guarantee, in our view for this AY, there is no international transaction. Therefore, the TPO was wrong in initiating proceedings to bench mark corporate guarantee as there is no international transaction at the first place. 8. Coming to the issue of method adopted by the TPO is proper or not, since we held that there is no international transaction existed relating to corporate guarantee in this assessment year, it is irrelevant at this stage to adjudicate on the issue of proper method adopted by the TPO or not. Accordingly, we direct the AO/TPO to delete the addition proposed in this AY....
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....se of JE Energy Ventures Private Limited vs ACIT in ITA No. 1450 / Del / 2022 for assessment year 2018-19 dated 13-12-2024, wherein this Tribunal by following the decision of this Tribunal for assessment year 2017-18 referred supra had observed as under:- 8. Taking into consideration the foresaid conclusion of the coordinate bench we are of the considered view that certainly once the international transaction arising out of the guarantee given for the benefit of AE goes, then what is left is a transaction between the assessee and the EXIM Bank only, which are unrelated parties. The vital constituent of an international transaction is that the same should be between associated enterprises. However, Section 92B(2) of the Act outlines the circumstances under which a transaction between two persons would be deemed to be between the associated enterprises. 9. What is important is to be examined now is if for the purpose of section 92B(2) of the Act, the assessee's transaction with EXIM Bank is an independent transaction or a prior agreement between the assessee and its AE, makes the assessee's transaction with EXIM Bank a deemed international transaction. ....
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....ety, upon payment or performance of the guaranteed debt, is entitled to all the rights that the creditor had against the principal debtor. In other words, once the surety has paid the guaranteed debt, they are subrogated to the rights of the creditor against the principal debtor. This means that the surety can exercise all the rights that the creditor had against the principal debtor, such as the right to recover the amount paid from the principal debtor, and any security held by the creditor for the debt. The surety can also guarantee amount. As the AE for whom the assessee entered into bank guarantee has not been benefitted by discharge of its debt and liability and same still stands. Thus actually so far there is no crystallized liability of the assessee. 14. Thus, we are of the considered view that Id. tax authorities below have fallen in error in proceeding with a proposition that the guarantee once invoked by the EXIM Bank became a debt towards the EXIM Bank on account of AE so as to treat the same as loan to AE and to charge an arm's length interest on the same. Consequently, the grounds of the assessee are sustained. The appeal of assessee is allowed and the im....