AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1160
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....le Madras High Court in the case of CIT vs. Roca Bathroom Products (P.) Ltd. [140 taxmann.com 304] has held that the outer time limit of 30 months in case of reference made to the TPO u/s. 153 would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within time limits prescribed. In the present case, the final assessment order has been passed beyond the time limit prescribed u/s. 153 accordingly, the said asst, order is null and void. B. Transfer Pricing Issues 1. On the facts and in the circumstances of the case and in law, the Ld. AO /Ld. TPO has erred in proposing TP adjustment to the international transaction of corporate guarantee amounting to INR 21,46,000 to the total income by rejecting TP analysis conducted by the Appellant. 2. Corporate Guarantee as an international transaction On the facts and in the circumstances of the case and in law, while erred in arriving at arm's length price of corporate guarantee provided by the Appellant, the Ld. AO/Ld. TPO has erred in the following - * ignored the fact that the corporate guarantee provided to subsidiary is in the nature of....
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....ns in Rule 10B. * whether the Ld. TPO/AO is correct in arriving at the ad-hoc rate of 0.50%, without conducting any benchmarking analysis prescribed in Section 92C which is violation of law? * Whether the rate of guarantee commission determined in the judgement can be adopted as a valid comparable using other method under Rule 10AB? 4. Charging of corporate guarantee commission would attract provision of section 92(3) of the act. On the facts and in the circumstances of the case and in law, the Ld. AO/Ld. TPO has erred in not appreciating the fact that the charging of guarantee commission to subsidiary required to be reimburse by the Assessee along with the mark-up as subsidiary company was set up as a cost-plus entity to provide support services to the Assessee. Therefore, charging of corporate guarantee commission would lead to attraction of Proviso of Section 92 (3) of the Act. The appellant company craves leave to add, alter, amend or delete any of the above grounds of appeal." 1.1 Additional Ground filed : "1] The learned A.O. / DRP erred in making an addition on protective basis of Rs. 13,81,700/- by adopting the Arm....
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....to the Assessee which were responded by the Assessee. TPO finally arrived at a conclusion that corporate guarantee is an International Transaction and needs to be benchmarked. The relevant paragraph (page 13-14 of TPO's order) of the order of the TPO is reproduced as under : "Therefore, corporate guarantee is very much an international transaction that needs to be benchmarked. Restriction by banker for charging any guarantee commission: Assessee contends as follows 1.3.1 The Assessee submits that the corporate deed agreement between PCL and BOB, London, submitted as Annexure 2, restricts PCL to charge any kind of guarantee commission to PCL NL in any form. This was one of the key covenants of the facility agreement between PCL PCL NL. and BOB, London The extract of the same is as below (page 9 of the corporate guarantee deed) GUARANTEE COMMISSION AND DEFAULT INTEREST 5.1 The Guarantor hereby declares and agrees that it has not received and shall not receive any security or commission from the Borrower for giving this Guarantee. 132. The Assessee submits that the condition to the loan facility itself mentioned that PCL w....
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....tion of the ALP of the fees for the above service. It is difficult to get the information related to uncontrolled prices of the corporate guarantee fee as usually AEs give these types of guarantee Considering the nature of transaction under consideration and considering the legal position on issue of corporate guarantee in light of decision of Hon'ble High Court of Bombay in The Commissioner of Income Tax vs M/S Everest Kanto Cylinders Ltd (INCOME TAX APPEAL NO.1165 OF 2013), "such other method as mentioned in section 92C(f) is considered as most appropriate method to benchmark this transaction As per Rule 10AB. the determination of ALP in relation to international transaction shall be the price which has been charged or would have been charged or paid for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts. The TPO has relied on a transaction where the assessee would have paid the charged under similar uncontrolled transaction with identical facts. In light of decision in Everrest Kanto (supra), ALP of corporate guarantee fees is being calculated at 0.5% as follo....
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....Tribunal. 7. Here onwards, we will discuss each and every ground raised by the Assessee. Ground No.A : 8. This ground is regarding time limit to pass final assessment order u/s. 153 of the Act. This ground was not pressed by the ld.AR. Accordingly, Ground No.A is dismissed as not pressed. Ground No.B : 9. This ground is regarding adjustment of Rs. 21,46,000/- on account of corporate guarantee commission. 10. At the outset of hearing, ld.AR brought to our notice that the issued is covered in favour of the assessee by the decision of this Tribunal in assessee's own case for earlier year in ITA No.1962/PUN/2024 for A.Y.2020-21 vide order dated 10.07.2025. Ld.AR filed copy of the said order. 11. Ld.Departmental Representative(ld.DR) for the Revenue has accepted that the facts for A.Y.2020-21 and A.Y.2021-22 regarding corporate guarantee commission charged by TPO are same. In these facts and circumstances of the case, ITAT"s order in Assessee's own case for earlier year has binding effect. The relevant paragraphs of ITAT order in ITA No.1962/PUN/2024 are reproduced as under : Quote."4.4 Thus, it can be observed that Bank of Baroda had imposed a specific con....
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....of bank guarantee and accordingly we are of the view that commission charged cannot be called in question, in the manner TPO has done. In our view the comparison is not as between like transactions but the comparisons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. In view of the above discussion we are of the view that the appeal does not raise any substantial question of law." Unquote. 4.7 Thus, it can be noted from the order of the Hon'ble Bombay High Court that the facts in the case of the assessee are distinguishable. In the case of the assessee, Bank of Baroda has specifically imposed the condition that no guarantee commission will be charged, however, in the case referred by TPO of Hon'ble Bombay High Court(supra), there was no such condition imposed by ICICI Bank, hence the said decision is distinguishable on facts and not applicable to the case of the assessee." Unquote. 12. Respectfully following ITAT"s decision in assessee's own case(supra), we direct the Assessing Officer/Transfer Pricing Officer to delete the addition of Rs. 21,46,000/- made on ....
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....TPO has not carried out any such exercise and therefore, simply referring to CUP method without any reference to the actual uncontrolled transaction and the price charged therein clearly indicates that no CUP method is adopted by him. Further, it is also his submission that in absence of any such reference in the order passed by the TPO for the year under consideration, the DRP is not justified in holding that the TPO has used Other Method as the most appropriate method especially when the TPO in the order for assessment year 2020-21 has clearly stated that the Other Method was being considered as the most appropriate method. 24. We find some force in the arguments of the Ld. Counsel for the assessee. A perusal of the order for assessment year 2020-21 of the TPO, copy of which is filed separately, shows that at para 21 of the order the TPO has observed as under: "Assessee has failed to substantiate that transaction of cost sharing arrangement/intra group services is intrinsically linked to manufacturing activity by way of a package deal. Therefore, aggregation approach taken by assessee was found to be not reliable and considering facts of the case and nature of t....
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....bligation upon the Respondent-Assessee to obtain technical assistance in all the 12 areas listed in the Agreement The Respondent-Assessee could ask for assistance in the areas required and the AE was obliged to give it. It is for the availability of the assistance in all twelve areas that the consideration was paid. Thus, no adjustment was required. It further held that the entire Transfer Price Adjustment was done by the Revenue without having been applied any of the methods prescribed under Section 92C of the Act to determine at the ALP. Consequently, the determination of ALP done by the Assessing Officer/TPO could not be justified. It further recorded the fact that no transfer pricing exercise was done by the Assessing Officer/TPO to determine the value of the services received by the Respondent-Assessee in respect of the three services which it had availed of from its AE before holding that the ALP in this case is Rs. 40 lakhs. This was became no exercise to bench mark it with comparable cases was done. Therefore, the consideration payable for the services availed of by the Respondent- Assessee to determine the ALP was not carried out. In the above view, the Tribunal allowed Re....