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2023 (1) TMI 258 - AT - Income TaxTP Adjustment - corporate guarantee provided on behalf of Associated Enterprises - TPO ascertained the ALP of corporate guarantee at 1.5%, accordingly, an ALP adjustment - CIT(A) who restricted the ALP adjustment to 0.5% - HELD THAT:- The stand of the authorities below on this point, is thus not legally sustainable. As for the riders placed in quote, which have been extracted above and which have been heavily relied upon by the learned TPO, these are usual features of legally guarded business quotations, and the presence of such rider do not vitiate the nature of quotation for indicating approximate prevailing rates. Nothing, therefore, turns on this cautious language which is quite common in the commercial documents anyway, either. In this view of the matter, we are unable to see any legally sustainable merits in the objections taken by the authorities below to the yield spread approach adopted by the assessee. The rejection of this method does not, therefore, meet our approval. As for the quotations obtained from HDFC Bank and State Bank of India, these quotations are for the bank guarantees simplicitor and not corporate guarantees given to bank to support the bank guarantees. These two kinds of guarantees are materially different, as has been held by a series of co-ordinate bench decisions. The right comparable, for application of CUP in this case, would have been the consideration for which corporate counter guarantees are issued, for the benefit of an associated enterprise, to a bank. In any event, once we come to the conclusion that the yield spread approach adopted by the assessee has been wrongly rejected, there is no need to deal with this clearly defective application of CUP method. No such inputs have been referred to, or relied upon, by the authorities below. We uphold the plea of the assessee. The benchmarking of corporate guarantee, on the peculiar facts of this case and in the light of yield spread method adopted by the assessee – which has not been faulted by the authorities below for any legally sustainable reasons, is upheld at 0.35%. Accordingly, plea of the assessee is upheld and plea of the Assessing Officer is rejected as infructuous.
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