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2021 (10) TMI 754 - AT - Income TaxTP Adjustment - arm’s length price adjustment in respect of the corporate guarantee issued by the assessee in respect of its associated enterprise - international transaction or not? - HELD THAT:- As in the light of the above judicial development, the ratio of a series of decisions of this Tribunal, including in the cases of assesse’s own case [2016 (5) TMI 633 - ITAT MUMBAI] and in the case of Micro Ink Ltd [2015 (12) TMI 143 - ITAT AHMEDABAD] and Bharati Airtel Ltd Vs ACIT [2014 (11) TMI 10 - ITAT HYDERABAD] holding that issuance of corporate guarantees does not constitute ‘international transaction’ under section 92B does not hold good in law any longer. The fact that these words are of non-jurisdictional High Court, in view of anything contrary thereto having been expressed by Hon’ble jurisdictional High Court and for the detailed reasons set out in our analysis earlier, does not make any material difference. Many of these decisions are authored by one of us (i.e. the Vice President) but that does not make any difference either. Once a higher judicial forum has expressed it’s views on an issue, our views have to make way for the same. We, therefore, hold that the issuance of corporate guarantee by the assessee did constitute an international transaction, and, to that extent, reject the plea of the assessee. Whether determination of arm’s length price at 3% is sustainable in law? - As held by Hon’ble jurisdictional High Court in the case of CIT Vs Everest Kento Cylinders Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT] rejected similar comparison of corporate guarantees with bank guarantees and upheld determination of arm’s length price at 0.5% - We, therefore, reject the determination of 3% arm’s length price by the authorities below and direct the Assessing Officer to adopt 0.5% as an arm’s length consideration for the corporate guarantee issued by the assessee in favour of its AE. To this limited extent, we uphold the plea of the assessee. TP Adjustment on account of clinical trial services provided by the Appellant to its AE - Whether entity level margins are required to be compared, or whether margins on the basis of split profit and loss account are required to be compared with the margins on transactions with AEs? - TPO has taken the entity level margins and when the objection was raised before the DRP, the DRP also confirmed the said action - HELD THAT:- We find that it is a well settled legal position that when relevant segmental results are available, and the segment computations are not in dispute, the entity level results have to make way for the segmental profit computations. We have also noted that in a subsequent year, i.e. assessment year 2013-14, the TPO himself has accepted this approach of the assessee- as evident from the TPO’s order placed , and the transfer pricing study report. There is thus no justification for disregarding segmental results for the present assessment year. In this view of the matter, we uphold the plea of the assessee in principle, and remit the matter to the file to the assessment stage for reconsideration in the above light.
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