TaxTMI 
TaxTMI 
2026 (9) TMI 1161
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.... 1.2. They failed to appreciate and ought to have held that mere issuance of corporate guarantee is not an 'International Transaction'. 1.3 The Appellant prays that the TPO/AO be directed to delete the transfer pricing adjustment on account of corporate guarantee. 1.4 Without prejudice to the above, the rate of corporate guarantee commission be reduced reasonably. 1,27,94,344 2. Short TDS credit granted: 2.1. On the facts and in the circumstances of the case and in law, the AO erred in granting short TDS credit of Rs. 1,18,04,783 in the computation sheet provided along with order u/s. 143(3) r.w.s 144C(13) of the Act. (a) TDS/TCS credit claimed in return of income - Rs. 1,20,50,65,196. (b) TDS/TCS additional credit claimed during assessment submission via letter dated 5th February 2025 - Rs. 14,08,212 (c) Total TDS/TCS credit claimed - Rs. 1,20,64,73,408 (d) TDS/TCS credit granted in assessment order - Rs. 1,19,51,43,845 (e) TDS/TCS credit short granted in assessment order (a + b - d) - Rs. 1,13,29,563 2.2. The AO failed to appreciate and ought to have granted full TDS credit as claimed by the Appellant. 1,13,29,563 3. Interest levied u....
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....er section 92B of the Act. The TPO placed reliance on Explanation (i)(c) to section 92B, inserted by the Finance Act, 2012 with retrospective effect from 01.04.2002, which specifically includes a "guarantee" within capital financing. The TPO also held that by providing a guarantee, the assessee provided a service to the AE because the guarantee enabled the AE to obtain banking or financing facilities and could also enable the AE to obtain funds at a lower rate of interest. The TPO therefore held that the guarantee gave an economic benefit to the AE and also involved assumption of risk by the assessee. 7. For benchmarking the transaction, the TPO did not accept the rate of 0.60% taken by the assessee. The TPO obtained guarantee commission rates charged by different banks and found that such rates ranged from about 0.45% to 2.64% per annum. The TPO arrived at a median bank rate of about 1.50%. However, after considering the difference between a bank guarantee and a corporate guarantee, the TPO applied a lower rate of 1% per annum. The TPO accordingly computed an aggregate transfer pricing adjustment of Rs. 5,08,31,722/- in respect of the corporate and performance guarantees. 8.....
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....ly considering bank guarantee rates ranging from 0.45% to 2.64% without carrying out a proper comparability analysis. 13. The DRP did not accept the assessee's objections. The DRP held that Explanation (i)(c) to section 92B specifically included a guarantee within the meaning of an international transaction. The DRP also relied upon the decision of the Hon'ble Bombay High Court in CIT v. Everest Kanto Cylinders Ltd., [2015] 378 ITR 57 (Bom.) / [2015] 232 Taxman 307 (Bom.) / [2015] 58 taxmann.com 254 (Bom.), and held that a corporate guarantee given to an AE was within the scope of transfer pricing provisions. 14. The DRP also rejected the assessee's contention that absence of an immediate cost took the transaction outside section 92B of the Act. The DRP held that issuance of a guarantee created a contingent liability for the guarantor and gave a financial benefit to the AE by improving its access to finance and by enabling it to borrow at a lower rate. The DRP therefore held that the guarantee had an economic effect and could not be treated merely as a shareholder activity. The DRP further held that providing a financial guarantee amounted to providing a financial service to ....
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.... and could also be dealt with under section 154 of the Act. The DRP therefore directed the Assessing Officer to verify the assessee's TDS/TCS claim and permitted the assessee to furnish the necessary facts and supporting evidence before the Assessing Officer. 20. The assessee is in appeal before us against the order passed by Ld. DRP. 21. We have heard the rival submissions and perused the material available on record. 22. As regards Ground No.1 relating to the transfer pricing adjustment on account of corporate guarantee, the assessee has primarily contended that issuance of a corporate guarantee on behalf of an AE does not constitute an "international transaction" under section 92B of the Act. We find that this issue is no longer res integra in the assessee's own case. In KEC International Limited v. DCIT / DCIT v. KEC International Limited, ITA Nos. 17 & 115/Mum/2018 for A.Y. 2012-13, order dated 14.09.2020, the Coordinate Bench has held that the corporate guarantee transaction is required to be benchmarked under the arm's length principle. The Coordinate Bench thereafter followed this view in the assessee's own cases for subsequent assessment years. In KEC Internationa....
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....53/Mum/2021 for A.Y. 2013-14 and ITA No. 502/Mum/2022 for A.Y. 2017-18, order dated 31.05.2023, the Coordinate Bench examined similar corporate guarantees given by the assessee on behalf of its overseas AEs. The Tribunal accepted 0.60% as the arm's length rate of corporate guarantee commission in respect of the corporate guarantees where the assessee had taken such rate on the basis of the facility available from its bank. The Tribunal also accepted the alternative contention of the assessee that 0.60% was the closest internal CUP and directed the TPO/Assessing Officer to recompute the transfer pricing adjustment by adopting 0.60% for the corporate guarantees covered by that direction. 27. Thus, there is a consistent line of decisions in the assessee's own case and, in the later assessment years, the Coordinate Benches have adopted 0.60% as the arm's length rate for corporate guarantees. We do not find any particular difference in the facts of the year under consideration which would justify departure from the above view merely because the TPO has collected external bank guarantee rates ranging from 0.45% to 2.64%. The assessee has itself adopted 0.60% on the basis of its bank f....