TMI Blog2020 (1) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no question of diversion of profit by the assessee company out of India. Moreover, there is not an iota of material on file to prove that the assessee company has incurred any cost in providing corporate guarantee. Consequently, addition made in this case on account of TP adjustment qua corporate guarantee fee is ordered to be deleted, hence, the appeal filed by the Revenue is hereby dismissed. Since transaction qua corporate guarantee entered into by the assessee company with its AE is held not to be an international transaction, there is no question of determining the ALP of compensation for providing corporate guarantee. CIT(A) has erred in passing the impugned order confirming the order passed by the AO to the extent of determining the ALP of corporate guarantee transaction @ 1% which is not sustainable in the eyes of law. Objections hopelessly time barred having been filed with delay of 512 days - Application filed for condonation of delay is too generic in nature and reasons given in the application for condonation of delay are not acceptable. In any case, facts as to reshuffling of staff of the company and even the Financial Controller and Finance Head have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yarn, cotton yarn, man-made fibre yarn, viscose cotton yarn and synthetic yarn etc.. Assessing Officer (AO) noticed that during the year under assessment, the assessee has undertaken international transaction with its Associated Enterprises (AE) with the use of Transactional Net Margin Method (TNMM) as the value of the international transactions was at ₹ 2,89,13,63,550/-. AO called upon the assessee to explain as to why the arm s length price of transactions qua corporate guarantee be not determined. During the year under assessment, corporate guarantee has been given by the taxpayer to its AE in the following cases :- (i) Corporate Guarantee to Tashkent Toyepa Textil for an amount of ₹ 192,85,17,500. (ii) Corporate Guarantee to Lehman Brothers for an amount of ₹ 87,36,66,050/-. (iii) Corporate Guarantee to CVCI for an amount of ₹ 8,91,80,000/-. 5. Assessee has brought on record the fact that it has not realized the amount it had charged to AE for which plan for restructuring dated 13.11.2009 had been approved by the competent authority and the dues of the unsecured creditors have been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the facts and circumstances of the case. 10. Ld. CIT (A) by invoking the provisions contained in Explanation to section 92B which is with retrospective effect from 01.04.2002 and by relying upon the decision rendered by the coordinate Bench of the Tribunal in case of Mahindra Mahindra Ltd. vs. DCIT (2012) 24 taxmann.com 267 (Mumbai) held the transaction entered into by the assessee with its AE qua corporate guarantee as an international transaction. Ld. CIT (A) followed the decision of his predecessors of earlier years in restricting the ALP of compensation for providing corporate guarantee @ 1% as against 2.58% assessed by the AO. 11. It is brought to the notice of the Bench that identical issue has been decided in favour of the assessee by the coordinate Bench of the Tribunal in its own case for AYs 2008-09, 2009-10 2010-11 in ITA Nos. 4959/Del/2014, 6243/Del/2014 6244/Del/2014 respectively vide order dated 17.05.2018. 12. Bare perusal of the order (supra) passed by the coordinate Bench of the Tribunal in assessee s own case goes to prove that identical issue has been decided in favour of the assessee by holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) . 14. A perusal of the aforesaid finding shows that no transfer pricing adjustment is to be made in case of no diversion of profits out of India. The flagship company of the assessee has accumulated brought forward losses to the tune of ₹ 290 crores and subsidiaries are also in heavy losses. Therefore, it cannot be said that there was any intention of diversion of profits out of India. Further, we find that the assessee has not incurred any cost in providing corporate guarantee. 15. A similar view was taken by the Ahmedabad Bench of the Tribunal in the case of Micro Ink Limited Vs. ACIT in ITA No. 2873/Ahd/2010. In this case, the Tribunal followed the decision of the Delhi Bench of the Tribunal. 16. The Chennai Bench of the Tribunal in the case of Redington India Ltd Vs. ACIT [2014] 49 TAxmann.com 146 has held as under: (i) A transaction between two enterprises constitutes an international transaction u/s 92B only if it has a bearing on profits, incomes, losses, or assets of such enterprises . Even the transactions referred to in the Explanation to s. 92 B, which was inserted with retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal in assessee s own case vide order (supra), we are of the considered view that old amendment vide which Explanation to section 92B has been introduced has been held to be prospective in nature, thus not applicable to the year under assessment. Because ALP of international transactions qua corporate guarantee has been determined by the AO as well as by the ld. CIT (A) merely by relying upon the amendment vide which Explanation to section 92B of the Act by the Finance Act, 2012 has been introduced by treating the same having retrospective effect, which is no more a valid and sustainable legal proposition. So, when explanation to section 92B of the Act is not applicable to the year under assessment, ALP of international transaction qua corporate guarantee cannot be determined. Furthermore, assessee company has filed the return of income declaring loss of ₹ 1,35,26,955/- as on 27.09.2011 and the flagship of the assessee company has accumulated brought forward losses to the tune of about ₹ 290 crores, there is no question of diversion of profit by the assessee company out of India. Moreover, there is not an iota of material on file to prove that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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