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2023 (3) TMI 254 - ITAT CHENNAITP Adjustment - International transactions with its AEs for providing software consultancy services - Selection of MAM - CUP method OR TNMM - HELD THAT:- There is no reason for the TPO to reject CUP method selected by the assessee to bench mark international transactions with its AEs when the assessee was consistently following said CUP method. Further, the assessee has filed comparable transactions of third party sales and proved that margin earned from AE transactions is higher than the margin earned from non-AE transactions. It is a well settled principle of law by the decision of the Hon’ble Supreme Court in the case of Radhasaomi Satsang [1991 (11) TMI 2 - SUPREME COURT] that although, res judicata is not applicable to Income Tax proceedings, but rule of consistency needs to be followed unless there is a change in facts and circumstances which requires to be considered a different approach or method for considering any issue. As here is no change in the facts and circumstances of the case for the impugned assessment year when compared to previous two years and thus, TPO ought to have followed CUP method selected by the assessee for benchmarking international transactions with its AEs. DRP without appreciating the above facts, has simply upheld TNMM as most appropriate method and upheld the TP adjustment as suggested by the TPO. Hence, we reverse the findings of the DRP and direct the TPO to consider CUP as most appropriate method to bench mark international transactions with its AEs. Accordingly, we direct the TPO to delete the addition made towards TP adjustment made towards AE sales. TP adjustment towards corporate guarantee - assessee company has given a corporate guarantee for the foreign currency loan of US from Axis Bank, Hong Kong to its AE XIUS holdings USA and computed guarantee commission @1% on total corporate guarantee given by the assessee to its AE and has made adjustment - HELD THAT:- We find that after amendment of definition of international transaction, corporate guarantee given by any entity to its AE falls under the definition of international transactions in terms of sec.92B of the Act and thus, any corporate guarantee given by the assessee to its AE is an international transaction, which needs to be bench marked. When it comes to rate, at which, such guarantee commission needs to be benchmarked, then bank guarantee given by the commercial banks cannot be a yardstick to apply to corporate guarantees given by an entity. Further, the guarantee commission rate is depending upon the facts of each case and the risk involved in the transactions between the assessee and its AE - As following the decision of the Hon’ble Bombay High Court in the case of Everest Kanto Cylinder Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] we direct the TPO to benchmark corporate guarantee fees @ 0.5% on total corporate guarantee given by the assessee to its AE. Appeal filed by the assessee is partly allowed.
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