TaxTMI 
TaxTMI 
2026 (9) TMI 119
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....025-26/1082743851(1)). The AO had earlier passed draft assessment order dated 17.02.2025 u/s. 144C(1) of the 1961 Act (DIN & Order No. ITBA/AST/F/144C/2024-25/ 1073372246(1)), wherein the AO proposed an addition of Rs. 11,89,73,250 /- on account of ALP adjustment u/s. 92C as proposed by ld. TPO in its Transfer pricing order dated 24.01.2025 passed u/s. 92CA(3)(DIN & Order No. ITBA/TPO/F/92CA3/2024-25/1072502096(1)), which were subjected to challenge by the assessee by filing objection before the ld. DRP which culminated into an order passed by ld. DRP dated 18.11.2025 u/s. 144C(5) of the 1961 Act. The learned TPO passed order giving effect to the directions of ld. DRP, vide order dated 04.12.2025(DIN & Order No. ITBA/COM/F/17/2025-26/ 1083325508(1)). 2. The Grounds of appeal raised by the assessee in Memo of Appeal filed with Income Tax Appellate Tribunal, Delhi Benches, New Delhi, reads as under:- "1.1. On the facts and circumstances of the case and in law, the impugned final assessment order dated December 16, 2025 framed by the Ld. AO is bad in law. 2. On the facts and circumstances of the case & in law, the assessment order passed under section 143(3) read ....
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....pugned transaction does not fall within the ambit of 'international transaction' as defined under section 92B of the Act. 6. On the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest under section 234B of the Act. 7. On the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the Grounds of Appeal contained herein or add any further grounds as may be considered necessary either before or during the hearing the objections." 3. The brief facts of the case are that the assessee is a Company Incorporated in India, and is primarily engaged in the business of Oil and Gas exploration and production. The company has Participating Interests('PI') in Eight Oil and Gas Blocks, which were acquired in various New Exploration Licensing Policy('NELP') bidding rounds except Participating Interests in two Blocks acquired in the past from its ultimate holding company, JE Energy Ventures Private Limited ( her....
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.... guaranteeing the due performance and discharge by JEVPL of its obligations and liabilities to Exim Bank in terms of the guarantee. The details of counter corporate guarantee submitted by the assessee before the TPO, is tabulated below as under:- Nature of Guarantee provided on behalf of the AE Name of the beneficiary Amount of loan in USD Amount of Guarantee Fee Counter Corporate Guarantee provided on behalf of the AE JEBV and JEHBV 45,000,000 and 50,000,000 Nil 3.3 The TPO issued SCN dated 31.12.2024 to the assessee, and sought details concerning the negative lien provided by the assessee on its receivables and interest in Oil Blocks for the loans availed by its AE's. The assessee submitted in response that as per TPSR, it is the JEKPL Private Limited and JODPL Private Limited, and not the assessee had provided counter corporate guarantees for guaranteeing due performance and discharge by JE Energy Ventures Private Limited, Corporate Guarantor ('JEEVPL') of its obligations. It was submitted that the assessee has only provided negative lien upon its present and future Participating interests and receivables of Oil and Gas Blocks. The assessee submi....
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....E's in the assessee. It was further submitted that the said arrangement does not have any impact on the profits, income, losses or assets of the assessee. Thus, it was submitted that the assessee should not be liable to comply with the requirements embodied by the TP provisions contained in Section 92 to 92F of the 1961 Act, read with Rule 10A to 10E of the 1962 Rules. The assessee enclosed copy of the loan agreements between the AEs and EXIM Bank, before the TPO. The assessee further submitted that it reported provision of negative lien in the Form No. 3CEB, but the same does not qualify to be an international transaction. The assessee submitted that no fee was charged from its AE. It was submitted that the assessee provided negative lien on all receivables and Participating Interest on all oil and gas Blocks held by it at the time of obtaining such loans i.e. August, 2011 and January, 2014. It was submitted that, thereafter, the borrower companies i.e. JEEBV and JEHBV were adjudged bankrupt vide order of Amsterdam District Court dated 22.09.2017 and appointed a bankruptcy Trustee. It was submitted that since then the affairs of JEEBV and JEHBV are being managed by such Bankruptcy....
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....the taxpayer. This order was followed by ITAT for assessment year 2018-19. The assessee submitted that the aforesaid order of the ITAT shall be squarely applicable in the case of the assessee for the impugned assessment year 2022-23, and hence no Transfer Pricing adjustment is warranted. 3.5 The ld. TPO rejected the contentions of the assessee, and held that the negative lien provided by the assessee constitute International Transaction, and Arm Length corporate guarantee rate was worked out by ld. TPO by averaging the Corporate Guarantee rate of two banks viz. Tamil Nadu Mercantile Bank Limited which stood at 2.50% and SBI which stood @0.80%, thus average rate of 1.65% was applied by the TPO, wherein additions to the tune of Rs. 11,89,73,250/- by way of TO adjustment to compute ALP of the Corporate Guarantee provided, was proposed by the ld. TPO. 4. The ld. AO passed draft assessment order wherein additions as proposed by the ld. TPO to the tune of Rs. 11,89,73,250/- by way of TP adjustment to compute ALP of the international transaction of providing negative lien by the assessee was incorporated in the draft assessment order dated 17.02.2025 passed by the AO u/s....
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....e is based at India namely JEVPL, who provided Corporate Guarantee to Exim Bank wrt loans raised by JEEBV and JEHBV from Exim Bank. The assessee only provided Negative Lien to Exim Bank wrt aforesaid two loans. This negative lien extended over the Participating Interest held by the assessee in Oil and Gas Exploration Blocks as well on Receivables. It was submitted that the loans extended by Exim Bank were declared NPA in May, 2016.The said loans were not repaid and default took place. Exim Bank invoked Corporate Guarantee provided by JEVPL. It was submitted that JEEBV and JEHBV are both under liquidation. It was submitted that because of default, the continuation of service wrt negative lien provided by the assessee ceased to exist. It was submitted that the assessee did not receive any fee from its AE for providing negative lien. The value of international transaction is taken at Nil. Our attention was drawn to the order of ITAT in assessee's own case for assessment year 2017-18 in ITA No.1718/Del/2022 vide order dated 08.10.2025. The ld. Counsel for the assessee also relied upon the order of the ITAT in the case of JE Energy Ventures Private Limited v. DCIT, in ITA no. 513/Del/20....
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....f JEEBV based at Netherland. The assessee is step down subsidiary of JEHBV based at Netherland. Ultimate parent company of the assessee, JEEBV, as well JEHBV is JEEVL which is an Indian Company. Foreign currency term loans were taken by the Subsidiaries of JEEVL viz. JE Energy BV(JEEBV) & Jubilant Energy (Holdings) BV(JEHBV) from Export Import Bank of India, as follows:- • Foreign Currency Term Loan Limit of US$50 Million taken by JEEBV in August, 2011 for financing, exploration and development expenses incurred/to be incurred in various Oil Blocks of the Jubilant Group. • Foreign Currency Term Loan Limit of US$45 Million taken by JEHBV in January, 2014 for investments in the subsidiaries of JEHBV mainly for exploration, development and related activities in various operating companies owning Oil and Gas Assets. 7.2 In relation to the above foreign currency loans, JEEVPL had provided Corporate Guarantee to the lending bank i.e. Exim Bank on behalf of JEEBV and JEHBV. It is claimed by the assessee that pursuant to the Corporate Guarantee provided by JEEVPL, the assessee provided a negative lien on all its Receivables and Participating Interest (PI) of Oi....
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....) is immediate Holding Company of JEEBV (Company incorporated under laws of Netherland) . Further, JEEBV (Company incorporated under laws of Netherland) is immediate Holding Company of the assessee (an India Company incorporated under the laws of India ) . Thus, JEEVL is ultimate Holding Company of the assessee, while the assessee is step down subsidiary of JEHBV. As is emerging from records, JEEVL, JEHBV and JEEBV are investments companies, as they, hold investments in their subsidiaries, step down subsidiaries etc. . It is to be understood that these investments by way of subscription to share capital of subsidiaries/step down subsidiaries, which is appearing on the assets side of the Balance Sheets of these aforestated investments companies(Holding Companies Balance Sheet) as an investments in share capital of their subsidiaries/step down subsidiaries. The investment in share capital is basically holding of a financial instruments which derives its value from the underneath assets viz. Real Assets be it tangible or intangibles. These investments companies are not owning any underneath Real assets, and are merely holding share investments in the Subsidiary/step down subsidiaries ....
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....t Import Bank of India stipulates providing of financial assistance upto limit of US$50 Million by Exim Bank for part financing of JEEBV Oil Exploration, development and production expenses incurred/to be incurred in various oil and gas assets of the borrower or its subsidiary companies in India and overseas. This agreement, inter-alia, provide for furnishing of security by the Borrower, which, inter-alia, provides furnishing of Corporate Guarantee by JEEVL(earlier known as Jubilant Enpro Private Limited) which shall not exceed the amount raised from a) all investment by JEEVL in its subsidiary Jubilant Energy (Holding ) BV(now known as JEHBV) (b) The assets and investments held by its said subsidiary or through its step-down subsidiary(Page 217/PB/Schedule III(clause ii) to Dollar Loan Agreement dated 01.08.2011-relevant extract reproduced in this order). It is pertinent to mention that JEHBV is subsidiary of JEEVL, while JEEBV is subsidiary of JEHBV . Further, the assessee is subsidiary of JEEBV. Thus, through Corporate Guarantee executed by the ultimate parent company i.e. JEEVL in favour of Exim Bank to secure the financial assistance of US$50 Million extended by Exim Bank vide....
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....essee, while JEEVL, JEHBV and JEEBV, are merely investment companies holding financial instruments, while real assets are held by the operating subsidiary viz. The assessee. The assessee has not borrowed any money from Exim Bank, and it was under no obligation to create any negative lien in favour of Exim Bank. There was no bounden obligation on the assessee not to dispose off or create charge with respect to assets owned by it in favour of any party merely on the basis that JEEVL has issued Corporate Guarantee, unless the assessee was made confirming party to the loan agreement or to the Corporate guarantee issued by JEEVL in favour of Exim Bank, but now the Exim Bank stipulated for negative lien to be executed by the assessee. That is the reason why Exim Bank stipulated for creation of negative lien by operating company owning real assets viz. Participating interest in Oil and Gas Exploration Block and Receivables, in their favour. Rather it is because of this negative lien so created by the assessee, which is one of main core strength based on which, the Exim Bank has granted loans to JEEBV. The real strength and value of Corporate Guarantee issued by JEEVL or even creation of c....
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....rejected. Broadly, similar are the covenants with respect to second dollar loan agreement dated 09.01.2014 entered into between JEHBV and Exim Bank, except for few modifications such as taking additionally an undertaking for non-disposal of shareholding by various investments companies in subsidiaries/ associated company which has been taken as an additional security by Exim Bank, pledge of such share holding in favour of Exim Bank etc. . Even if charge on investments held in shares by JEHBV and JEEBV is created by way of undertaking/pledge of such shareholding by the borrower, its holding company, its subsidiary etc in favour of Exim Bank, but then also said charge/pledge is not perfect until the negative lien is created on the real assets owned by the operating company viz. the assessee. Thus, our decision aforesaid shall wrt loan raised in August 2011 apply to this second loan raised by JEHBV in January 2014, so far of the adjudication of the issue before us is concerned. Thus, the assessee has by creating negative lien on its Participating Interest in Oil and Gas Block Explorations and Receivables, has majorly crippled its capacity to borrow and expand. It will also have negati....
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.... ALP, the TPO applied average rates for bank guarantees charged by the two Banks namely TMB and SBI, while the ld. DRP applied ratio of judgment and order of Hon'ble Delhi High Court in the case of Cotton Naturals(supra) which concerns itself with the loans granted to AE's, while in the instant case the assessee has created negative lien on Participating Interest in Oil and Gas Exploration Blocks and Receivables, which is itself creating negative lien onsubstantial business undertaking crippling its capacity to expand and to borrow, and which may entail itself to higher borrowing costs as its substantial undertaking got subjected to negative lien. Thus, the ALP shall be computed in accordance with applicable TP Provisions, keeping in view aforesaid factual context. Thus, the appeal of the assessee is allowed for statistical purposes in the manner as stipulated above . We order accordingly. 8. In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the Open Court on 19.08.2026. ============= Document 1 à¤à¤¾à¤°à¤¤à¥€à¤¯ गैर नà¥à¤¯à¤¾à¤¯à¤¿à¤• à¤à¤• सà¥....
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....ice from such advisers as it has deemed necessary: (ü) it Is not relying on any communication (written or oral) of Exim Bank as an Investment advice or as a recommendation to enter into the loan transaction; (iii) it has not received any assurance or guarantee or representation from Exim Bank as to the appropriateness or merits of the currency in which the loan facility is sought to be availed of by the Borrower or the rate of interest applicable thereto; and (iv) it is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the risks of the Ican transaction, and is also capable of assuming and assumes the financial and other risks in respect thereof. X. Conversion Option Exim Bank, at its sole discretion, shall have an option to convert part / whole of outstanding Dollar Loan Into Shares of the Borrower at a mutually agreed price upon such terms and conditions as may be stipulated by Exim Bank and agreed by the Borrower. XI. General Conditions to form part of Agreement This Agreement shall be read with the General Conditions contained in the Arinexure hereto which shall form an int....
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....of the first charge on the participating interest in oil & gas, the negative lien stands converted into 2"" charge on the residual cash flows after meeting the debt service obligations of the 1" charge holder. For JUBILANT ENERGY N.V. Director Document 4 AS WITNESS this Agreement has been signed by the duty authorised representatives of the parties the day and year first before written. For JUBILANT ENERGY N.V. Liam For Export-Import Bank of India Name Designa BARbossa -The - Deputy General Manager & Regionel Head à¤à¤¾à¤°à¤¤à¥€à¤¯ निरà¥à¤¯à¤¾à¤¤-आपस देव Export-Import Bank of india gy Director For Jubilant Energy NV Name : Ajay Khandelwal Designation: Director Document 5 कारà¥à¤¯à¤¾à¤² 3.0 DRQ 2013 à¤à¤¾à¤°à¤¤à¥€à¤¯ गैर नà¥à¤¯à¤¾à¤¯à¤¿à¤• à¤à¤• सौ रà¥à¤ªà¤¯à¥‡ Rs. 100 ONE HUNDRED RUPEES रà¥. 100 सतà¥à¤¯à¤®à¥‡à¤µ जयते 00100 100100100 à¤à¤¾à¤°à¤....
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.... - (vi) of the General Conditions within the specified time period(s) therefor, an additional interest at the rate of 1% over and above the applicable interest rate under Clause V(i) above will be charged for non- compliance with each of clause V(iv) (a). (b) and (c) on the outstanding amount on a mutually exclusive basis with retrospective effect from the date of disbursement till Part A and Part B of the Condition Subsequent and Section XV(b)(i) - (vi) of the General Conditions are duly complied with. Such additional interest shall be payable over and above the applicable interest or penal interest under Clause V as specified herein and over any further interest and liquidated damages. (v) In the event that the Borrower does not comply with any of the requirements of Section XV (b) (vil), the Borrower shall be liable to pay penal interest at the rate of 1% on the outstanding amount with retrospective effect from the date of disbursement till Section XV(b)(vii) of the General Conditions has been duly complied with. Such penal interest shall be payable over and above the applicable interest or additional interest under Clause V above and over any further interest and liquidated ....
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....bles pertaining to all other oil and gas assets held by the Borrower and/or subsidiaries and any other company which holds/shall hold (PI) in any oil and/or gas block; provided that in case of fund raising for a particular oil and gas asset/block against security of the first charge on the PI and related cash flows or escrow of receivables in the said asset/block with prior approval of Exim Bank, the negative lien stands converted into a second charge over the PI and residual cash flows/receivables after meeting the debt service obligations of the first charge- holder(s). vi. A Mandate to be addressed by the Borrower to Jubilant Energy N.V., Netherlands, (JENV) irrevocably authorising JENV to assigning all receivables due to the Borrower including interalia, dividends, interest and any other monies from JENV, in favour of Exim Bank. vil. An Undertaking from the Borrower for non-disposal of its shareholding in Jubilant Energy N.V. (JENV), Netherlands, duly acknowledged/confirmed by JENV; vili. An Undertaking from Jubilant Energy N.V. (JENV), Netherlands for non-disposal of its shareholding in: a) in Jubilant Energy India Holding Limited, Cyprus, (JEIHL), duly acknowledge....
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....on behalf of JEPL hereby undertakes to procure creation of pledge over the shareholding of JEPL in the share capital of the Borrower within a period of 3(three) months from the date of first disbursement; In case of failure to comply with the conditions stated at (xii) and (xili) above by the Borrower, JEPL, JEKPL of JODPL, an additional interest of 1% per annum will be charged on the outstanding loan amount with retrospective effect from the date(s) of disbursement till completion of the above security formatities to the satisfaction of Exim Bank. The total additional interest as stipulated above shall not exceed 1% per annum. CONDITION SUBSEQUENT: Part A: 1. The Borrower shall within a period of fifteen days from the date of first Advance reconstitute its Board of Director(s) in order to complete and perfect the Condition Subsequent securities contemplated herein. 2. The Borrower shall procure submission of the following perfected document(s) to the satisfaction of Exim Bank on behalf of the Corporate Guarantor(s) within a period of seven (7) days from the receipt of Reserve Bank of India approval in relation to the corporate guarantee: a. An irrevocable and unc....