AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 1762
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....n with interest in airports, energy, highways and urban infrastructure. GMR Infrastructure Limited is the holding company of the GMR group. During the assessment year under consideration, the assessee provided corporate guarantees to banks on behalf of its Associated Enterprises. The assessee took the stand that such guarantees did not affect its profits, income or assets and therefore the transfer pricing provisions under Chapter X were not applicable. It was also stated that there was no real risk since counter-guarantees were available from the borrowing entities. 4. The TPO, however, held that after insertion of the Explanation to section 92B of the Act, guarantees fall within "capital financing" and therefore constitute international transactions. Accordingly, he proceeded to examine the corporate guaranteed issue and made an adjustment. 5. Subsequently, the learned CIT (Transfer Pricing) examined the assessment records under section 263 of the Act and observed that the TPO had made adjustment in respect of corporate guarantees, but he (TPO) had not carried out proper enquiry regarding the Standby Letter of Credit (SBLC) arrangements. During TP proceedings, details of SB....
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....r also placed strong reliance on an earlier order of the Bangalore ITAT in the assessee's own case for AY 2014-15 in DCIT vs. GMR Airports Ltd. reported in [2025] 181 taxmann.com 630 (Bangalore - Trib.)[28-11-2025] In that year, the Tribunal had held that the SBLC commission paid by the assessee and not recovered from the AE was an international transaction and was liable for transfer pricing adjustment. The Tribunal had also rejected the arguments that the SBLC was merely a shareholder activity or was given for commercial expediency. In conclusion, the ld. Commissioner held that the TPO had not made the required enquiries or verification regarding the SBLC arrangements under the transfer pricing provisions. He therefore exercised his powers under section 263 and held that the order passed under section 92CA(3) dated 23.02.2023 was erroneous and prejudicial to the interests of the revenue. Accordingly, he set aside the order to the limited extent of examining the SBLC arrangements. The TPO was directed to conduct a fresh transfer pricing analysis on the SBLC commission borne by the assessee and not recovered from the AE, and to pass a new order after giving the assessee a proper op....
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....f an order passed by the Assessing Officer, the Explanation cannot be interpreted to create a new power to revise TPO orders. 12.5 Lastly, the assessee pointed out that the impugned revision order merely sets aside the TPO's order dated 23-02-2023 and does not revise or cancel the assessment order passed by the Assessing Officer. As the assessment order continues to remain intact, the assessee submitted that the exercise of jurisdiction under section 263 is legally unsustainable. 13. On the other hand, the learned Departmental Representative (DR) strongly defended the revisionary order passed by the learned CIT (Transfer Pricing) under section 263 of the Income-tax Act. According to the DR, the revision was validly invoked because the order passed by the Transfer Pricing Officer (TPO) under section 92CA(3) suffered from lack of proper enquiry in respect of the Standby Letter of Credit (SBLC) arrangements entered into by the assessee for its Associated Enterprises (AEs). 13.1 The ld. DR submitted that the SBLC transaction was admittedly reported by the assessee itself as an international transaction in Form 3CEB and in its transfer pricing study report. Once the assessee ha....
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....CIT(TP) had full jurisdiction to revise the TPO's order. 13.6 Lastly, the ld. DR emphasized that the ld. CIT(TP) had not made any addition himself but had merely set aside the order to the limited extent of fresh examination after proper enquiry and opportunity to the assessee. Accordingly, the appeal of the assessee deserved to be dismissed. 14. We have carefully considered the rival submissions of both the parties, perused the materials placed on record and examined the revisionary order passed under section 263 of the Act. The limited issue before us is whether the learned CIT(TP) was justified in holding that the order passed by the TPO under section 92CA(3) of the Act was erroneous insofar as it was prejudicial to the interests of the Revenue on account of lack of enquiry in respect of the Standby Letter of Credit (SBLC) arrangements. 14.1 From the record reproduced in the revision order, it is evident that though the assessee had furnished certain details of SBLC facilities obtained from Yes Bank and Axis Bank in favour of its Singapore AE, the TPO had merely reproduced the tabular information in the transfer pricing order. There is nothing to show that the TPO exami....
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....mmission borne by the assessee and not recovered from the AE constituted an international transaction liable for transfer-pricing adjustment and that the pleas of shareholder activity and commercial expediency were rejected. The existence of such binding precedents made it all the more necessary for the TPO to examine the issue in detail for the year under consideration, which admittedly was not done. 14.6 We also take note that in subsequent proceedings before the TPO, the assessee itself acknowledged that SBLC commission borne by it and not reimbursed by the AE was liable for adjustment in view of earlier Tribunal orders. This conduct further supports the conclusion of the learned CIT(TP) that the matter had not been properly examined in the original order. 14.7 Importantly, the ld. CIT(TP) has not substituted his own computation of arm's length price but has only set aside the TPO's order to the limited extent of SBLC arrangements and directed fresh examination after conducting necessary enquiries and after granting opportunity of hearing to the assessee. Such a limited remand, aimed at curing the defect of lack of enquiry, is well within the scope of section 263 of the Ac....