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2018 (4) TMI 1742 - AT - Income TaxTPA - Determination of arm's length price - AO erred in not issuing draft assessment order as per procedure laid down u/s 144C(1) of the Act by issuing the notice of demand u/s 156 of the Act & penalty notices u/s 271(1)(c) and 271AAB along with draft assessment order - HELD THAT:- Various courts have held that such assessment orders to be null and void ab-initio. We have carefully considered the submission and case laws relied. In all the case laws relied on by the assessee, the common mistake made by the AO in those assessments were that AO passed the final assessment order instead of Draft Assessment Order, the courts have held that as per section 144C(1), the AO has no right to pass final order pursuant to the recommendations made by the TPO. Accordingly, the order passed by the AO, thus, lacks jurisdiction. In the present case, the AO has passed the Draft 'Assessment' but sent demand notice and penalty notices along with the draft assessment order. Since the facts are not identical to the facts of the case laws relied on by the assessee, moreover, the AO has to pass draft assessment order as per provision and was accordingly passed by him. The accompanying notices along with the draft assessment order are only procedural mistakes, it cannot tantamount to passing of final assessment order. Accordingly ground raised by the assessee is dismissed. Addition in respect of corporate guarantee provided to AE - HELD THAT:- This Tribunal in the case of Four Soft (P.) Ltd. v. Dy. CIT [2014 (4) TMI 285 - ITAT HYDERABAD] agreed with the contention of ld. DR's submission that the corporate guarantee of the nature provided by the assessee is covered under the expanded definition of international transaction post amendment to international transaction. Further, the Hyderabad Benches consistent with the view that corporate guarantee provided by the taxpayer prior to amendment are not international transaction. Hence, it meant that post amendment, corporate guarantee provided by the taxpayer are international transaction. Therefore, corporate guarantee provided by the assessee will fall within the expanded definition of international transaction. Quantum of guarantee fee to be charged - We are in agreement with the assessee that corporate guarantee is contingent liability, relevant consequence depends upon future event. However, the quantum of exposure should be on the basis of actual exposure. In this case, it is not clear from the document submitted before us the actual exposure. Therefore, we find it appropriate to remit this issue back to the file of TPO/AO to determine the actual exposure of contingent liability for this AY and apply the rate of 0.53% as per the ratio of Glenmark Pharmaceuticals Ltd. [2013 (11) TMI 1583 - ITAT MUMBAI] on the actual contingent liability. It is needless to say that assessee may be given proper opportunity of being heard. Accordingly, ground raised by the assessee is allowed for statistical purposes. Disallowance of interest expenses on Sham transactions - HELD THAT:- The assessee made certain payments to M/s Silver Point Infratech Ld. during this AY and it claims that these are part of commercial payments on the contract business. There are back to back payments received from contractors and paid to the sub contractors. In this behalf, it has submitted a statement showing the relevant payments. (refer para 18.3). At the same time, we notice that this information was not submitted before the AO and DRP, but, ld. AR claims that these were submitted before DRP. Since these payments were not verified by the tax authorities, we find it appropriate to remit this issue back to AO to verify the claim of the assessee and if it is found that these are back to back payments, received from main contractor and paid to sub-contractor M/s Silver Point Infratech Ltd., the addition made on interest may be deleted - Ground raised by the assessee is allowed for statistical purposes.
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