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2020 (8) TMI 562 - AT - Income TaxTP Adjustment - adjustment on account of corporate and performance guarantee - assessee submits that provision of corporate guarantee does not lead to any income generation for the assessee and does not fall within the ambit of section 92C - whether determination of guarantee fee of 1.25% p.a. is arbitrary and incorrect? - whether guarantee is not an international transaction? - HELD THAT:- Considering the order of the Tribunal for earlier years [2020 (7) TMI 435 - ITAT MUMBAI] we direct the AO/TPO to compute the corporate guarantee @0.5%. So far as charging the performance guarantee assessee vehemently submitted that the lower authorities have not appreciated the fact that entire revenue from the performance of the contract flows to the assessee guaranteed for its own performance and there was no risk as regard the performance guarantee and it is the assessee who guaranteed for its own performance. Assessee in its statement of facts before ld DRP has specifically pleaded that in case of performance guarantee extended by the assessee, the contract entered by the Itelnet UK Ltd (on behalf of which the assessee has provided performance guarantee) with third party customers, it was actually the assessee who is undertaken they were as Itelnet UK Ltd subcontracts the work back to the assessee. The assessee is not exposed to any default risk on account of performance guarantee as it is the assessee itself who performs the work for the customer. Thus, the provision of performance guarantee by assessee with third party on behalf of its AE, Itelnet UK Ltd, has benefited the assessee itself since the actual service to be provided to third party was outsourced by the assessee by its AE. It is further pleaded that entire compensation received from the customer back to the assessee. We have noted that there is no finding of TPO on these facts. Considering the aforesaid factual aspects this part of ground of appeal related with performance guarantee is restored to the file of assessing officer/TPO to examine the effect and pass the order a fresh in accordance with law - appeal related with performance guarantee is allowed for statistical purpose. Adjustment of interest received from loans to AEs - assessee submits that the assessee provided loans to its four AEs - TPO made adjustment based on domestic cost of borrowing i.e. State bank of India (SBI) rate + 3% markup resulting in to a total rate of 9% for all the loans - assessee submits that the assessee had correctly charged and benchmarked interest received on loans advanced to AEs at LIBOR plus 2% - HELD THAT:- Considering the order of the Tribunal for earlier years [2020 (7) TMI 435 - ITAT MUMBAI] we direct the AO/TPO to recompute the adjustment of interest on loan by following the decision of CIT Vs Tata Autocomp System Ltd [2012 (5) TMI 45 - ITAT MUMBAI] - The assessee is directed to provide necessary details to AO/TPO. In the result this Ground of appeal is allowed for statistical purpose. Short deduction of TDS - HELD THAT:- AO is directed to verify the fact and grant appropriate relief to the assessee. MAT Computation u/s 115JB - error in computing the tax payable in terms of Section 115JB - assessee submits that the AO computed the tax liability in terms of section 115 JB by applying Minimum Alternate Tax rate of 18% instead of correct rate of 15% - HELD THAT:- Considering the submissions of the ld. AR for the assessee that the rectification application of the assessee is pending disposal from the year 2015, we direct the AO compute the tax liability in terms of the provisions of section 115JB as amended up to date.
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