TMI Blog2017 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... aken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly. Disallowance u/s 14A r.w.r 8D - Held that:- We find that the assessee has earned dividend income and the A.Y being 2011-12 the provisions of Rule 8D r.w.s 14A are applicable. The only question to be considered now is whether the investment in APGPCL is to be excluded wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AE'): Purchase of Green Petroleum Coke ( GPC ) - ₹ 6,86,97,017; Shareholders corporate guarantee- ₹ 13,86,30,000. Ground specific to TP adjustment for purchase of GPC 2. Determination of Arm's Length Price ( ALP ) of certain purchases of GPC made by the Appellant from AEs. 3. Not appreciating the fact that the GPC purchases from AE are at same price at which AE purchased from independent supplier. 4. Making adjustment on selective transaction without considering all the transaction with AE during the year. 5. Not appreciating the fact that the prices of GPC vary on the basis of quality and hence, different consignments of GPC are not comparable. 6. Disregarding the submissions/ evidence submitted by the Appellant. 7. Not appreciating the fact that the prices of GPC have fluctuated widely during the relevant previous year, due to external market conditions and hence, different consignments of GPC are not comparable. Ground specific to TP adjustment on shareholder corporate guarantee 8. Making adjustment while determination of ALP on the shareholder corporate guarantee provided to the bank on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. As per the report, the assessee had entered into international transactions with its AEs and therefore, the AO referred the determination of the ALP of the international transactions to the file of the TPO u/s 92CA of the Act. 5. The TPO observed that the assessee generates electricity from the exhaust hot gases and coke fines material generated during the manufacture of Calcinated Petroleum Coke (CPC) and supplies such electricity to the industrial users in the state of A.P and that the international transactions with AEs are only in CPC manufacturing division. Vide these transactions, the assessee had purchased from Rain CII Carbon LLC, Green Petroleum Coke (GPC) at ₹ 400,21,09,879, CPC at ₹ 10,68,92,448 and sold CPC to Rain CII Carbon LLC at ₹ 73,99,15,000. The TPO has observed that the assessee has bench marked these transactions using the internal CUP method. The TPO held that the purchase and sale of CPC are at Arm s Length and so is the transaction of reimbursement of expenses. With regard to purchase of GPC, he observed that the assessee has compared the price at which the GPC was imported from the AE with the price at which the GPC was imported from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer determining the income at ₹ 97,92,70,466 by proposing the following two additions i.e., (1) TP adjustment of ₹ 43,17,62,526 and (2) Disallowance of SAP expenses of ₹ 2,34,50,000. 3. Aggrieved by the proposed additions, the assessee preferred its objections before the DRP which granted partial relief to the assessee and in accordance with the directions of the DRP the final assessment order was passed. Against the relief granted by the DRP, the Revenue is in appeal before us, while the assessee is in appeal against the confirmation of the adjustments proposed by the Assessing Officer. In the assessee's appeal, the assessee has raised as many as 27 grounds of appeal. At the time of hearing, the Learned Counsel for the assessee submitted that ground of appeal No.1 is general in nature and needs no specific adjudication and ground Nos. 24 to 26 are against the levy of interest under section 234B and 234C of the Act and being consequential in nature, may be remanded to the Assessing Officer for giving consequential effect. Assessing Officer is directed accordingly. Ground No.27, being against the initiation of penalty proceedings under section 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the addition against which the assessee raised its objections before the DRP. However, the DRP rejected the assessee's objections and therefore, the assessee is in appeal before us. 5. The Learned Counsel for the assessee, while reiterating assessee's submissions before the TPO and DRP, has drawn our attention to the order of the TPO under section 92CA of the Act to demonstrate that the TPO, instead of comparing the A.E. transactions with non-A.E. transactions, has compared the non- A.E. transactions with other controlled transactions, which according to him, is against the principles of T.P. adjustments. Further, he also submitted that under CUP method, strict comparison has to be made as to the nature and quality of the product. He has drawn our attention to pages 2 and 3 of the paper book wherein the transactions picked-up by the TPO to be not at arm s length price have been analysed. The assessee has produced the comparative chart of transactions considered by the TPO to be not at arm's length and pointed out that the other product in terms of quality and composition with the type of Coke purchased by the assessee from each vendor is at variance. He submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the assessee as well as the Assessing Officer have adopted the CUP method for the T.P. study and the determination of the arms length price of the transactions. It is also seen that the assessee has entered into various international transactions with various parties both A.E. and non-A.E. for purchase of Green Petroleum Coke ( GPC ). The Assessing Officer has picked-up only a few transactions to hold that they are not at arm s length. We are convinced by the submissions of the assessee that the transactions with the A.E. should be compared with the transactions with non-A.Es and cannot be compared to any other controlled transactions. The TPO has compared the transaction of the assessee with its A.E. with other controlled transactions which is not permissible under the T.P. regulations and guidelines. Further, the differences between the products and their quality also have not been taken into consideration by the TPO. The CUP method requires the most direct comparison between the products and in case of any variation between the products, adjustments have to be carried out for such variations before comparing the prices. It requires close similarity in products, property or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion that the guarantee given by the assessee converted a risky loan into a risk free loan to the bankers, which provided loans to the assessee s AE in USA and therefore, the assessee carries huge costs in terms of the risks taken and therefore is required to be compensated in the form of a fee for providing the bank guarantee and that the assessee ought to have charged the guarantee commission on the corporate guarantees given by it. The TPO considered the CUP as the most appropriate method and held the guarantee fee of 2% on the loan guaranteed by the assessee as reasonable. He accordingly determined the ALP and suggested the adjustment u/s 92CA of the Act. The AO passed the draft assessment order against which the assessee preferred its objection before the DRP. The DRP confirmed the draft assessment order on both the counts and the final assessment order was passed against which the assessee is in appeal before us. 11. At the time of hearing, the learned Counsel for the assessee submitted that the issue of appropriate guarantee fee on corporate guarantee given by the assessee to AEs in USA had come up before the Tribunal in the case of Rain Commodities (now known as Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phs are reproduced hereunder for ready reference. 10. We have considered the submissions of both the parties and perused the material facts on record as well as the orders of the revenue authorities. The assessee facilitated the acquisition of CII Carbon LLC by RCUSA by lending loan to its wholly owned enterprises. The assessee has taken the decision to make investment in its AE either on share capital or lending loan using its business expediency. Since, it had made the decision to make loan to its AE. By virtue of amendment to section 92B, it is international transaction. Once it is considered as international transaction, it is prudent to make bench marking also in the international arena. Similar views were expressed by the coordinate bench of this Tribunal in the cases of Four Soft Pvt. Ltd. (supra), Siva Industries Holdings Ltd. (supra) and Vijay Electricals Ltd., (ITA No. 1159/Hyd/2013. It was held in the case of Siva Industries as below : Once the transaction between the assessee and the AE is in foreign currency and the transaction is an international transaction, then, the transaction would have to be looked upon by applying the commercial principles in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of banks, which provided loans to RCUSA, to indemnify the defaults, if any, on account of loan repayment by RCUSA. Ld. AR submitted that a corporate guarantee did not fall within the meaning of international transaction as defined in section 92B, that it was in the nature of shareholder activity in the business interest of parent, that the assessee was restricted by law from charging fee for a corporate guarantee provided by it in terms of para 2.2.9 of the RBI Master Circular on guarantees and Co- acceptance dated 02/07/2012, that a corporate guarantee is secondary with no cost or risk to shareholders and that it was in the business interest of the assessee. Ld. AR submitted that without prejudice to the claim that corporate guarantees are not to be charged, the method of computation of the guarantee fee was erroneous. Ld. AR also submitted that there is no cost to the assessee as it was given on the basis of Holding company and there is no profit involved in this year. Ld. AR submitted that the transaction was not relating to this year. (Refer pages 56 to 59 of paper book - relates to PY 2005-06.). Ld. AR relied on the following decisions: 1. Four Soft Pvt. Ltd., (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case is identical to the issue decided by the ITAT, Hyderabad Bench in case of Infotech Enterprises (supra), following the same, we also remit this issue to the file of the TPO to decide the quantum of corporate guarantee rates accordingly. If the assessee is able to bring on record any comparables with regard to corporate guarantee, the TPO may also consider the same while determining ALP of corporate guarantee. The TPO must provide a reasonable opportunity of being heard to the assessee before deciding the issue. This ground is allowed for statistical purposes. Thus, the grounds 7 to 11 are rejected. 14. As regards grounds 12 to 14 are concerned, we find that they are relating to computation of ALP. The average margin of the comparables in similar transactions has to be arrived at before determining ALP. This issue of the percentage at which the corporate guarantee can be benchmarked has come up before various benches of the Tribunal. We find that in the case of Glenmark Pharmaceuticals Vs. ACIT in ITA No. 5031/Mum/2012, dated 13/11/2013, the Tribunal has examined the approach of the assessee therein in determining the percentage of corporate guarantee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of any kind of commission from its AE. The only point which has to be seen in this case is whether the same is at ALP or not. We have already come to a conclusion in the foregoing paras that the rate of 3% by taking external comparable by the TPO, cannot be sustained in facts of the present case. We also find that in an independent transaction, the assessee has paid 0.6% guarantee commission to ICICI Bank India for its credit arrangement. This could be a very good parameter and a comparable for taking it as internal CUP and comparing the same with the transaction with the AE. The charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the ICICI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to be at arm s length. The difference of 0.1% can be ignored as the rate of interest on which ICICI Bank, Bahrain Branch has given loan to AE (i.e. subsidiary company) is at 5.5%, whereas the assessee is paying interest rate of more than 10% on its loan taken with ICICI Bank in India. Thus, such a minor difference can be on account of differential rate of interest. Thus, on these facts, we do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regards Ground No.19 against initiation of penalty proceedings u/s 271(1)(c) of the Act, we find that it is premature and therefore, it is rejected. 18. In the result, assessee s appeal is partly allowed for statistical purposes. ITA No.309/Hyd/2015 -A.Y 2010-11 (Assessee s appeal) 19. This is assessee s appeal for the A.Y 2010-11. The assessee is aggrieved by the order of the AO dated 21.1.2015 passed u/s 143(3) r.w.s. 144C(5) and 144C(13) of the I.T. Act. The assessee has raised the following grounds of appeal: TRANSFER PRICING ( TP ) MATTERS 1. Rejecting the submissions of the Company and making TP adjustment on shareholders corporate guarantee provided to Bank - Rs. l5,21.00,000/. Ground specific to TP adjustment on shareholder corporate guarantee 2. Making adjustment on the shareholders corporate guarantee provided to the bank without appreciating the fact that wholly owned subsidiary ( WOS ) was set up as a SPV for acquisition of business in USA. 3. Not appreciating that the shareholder corporate guarantee is not covered under the definition of international transaction U/S 92B of the Act. 4. Not appreciating that the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, brief facts are that while computing the deduction u/s 10B of the Act, the AO has set off of the business loss of co generation unit before allowing the deduction u/s 10B of the Act. The learned Counsel for the assessee has submitted that the co-generation unit is not an eligible unit u/s 10B and only the CPC Kiln-2 Unit is eligible for deduction. Thus, according to him, the profit/gains of the eligible unit has to be computed on a stand alone basis and the profit or loss of the non-eligible unit cannot be adjusted against the profits of the eligible units before allowing the deduction u/s 10B of the Act. In support of this contention, the learned Counsel for the assessee placed reliance upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Yokogawa India Ltd reported in (2017) 77 Taxmann.com 41 (S.C). 24. The learned DR however, supported the orders of the authorities below. 25. Having regard to the rival contentions and the material on record, we find that the Hon'ble Supreme Court in the case of CIT vs. Yokogawa India Ltd reported in (2012) 341 ITR 385 (Kar.) (cited Supra) has at Paras 16 to 18 held as under: 16. From a reading of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly . 26. Respectfully following the same, we allow grounds of appeal No. 9 10. 27. In the result, assessee s appeal is allowed. ITA No. 259/Hyd/2016 A.Y 2011-12 (Assessee s appeal): 28. The assessee has raised the following grounds of appeal: TRANSFER PRICING ( TP ) MATTER 1. rejecting the submissions of the company and making TP adjustments to the following international transactions with AE. Fee on shareholders Corporate Guarantee to Bank ₹ 2,20,25,940/- 2. Making adjustment on the shareholders corporate guarantee provided to the bank/creditor of the AE, without appreciating the fact that guarantee was provided to the AE for the purpose of its business operations (i.e., procure raw material from the supplier in a timely manner). 3. Not appreciating that the shareholders corporate guarantee is not covered under the definition of international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Therefore, the AO referred the issue of determination of the ALP of these transactions to the TPO u/s 92CA of the Act. The TPO observed that the above transactions were at Arm s Length and no adjustment therefor is called for. 31. However, the TPO noticed that the assessee company had the transactions of corporate guarantee of 35 million US$ to Rain CII Carbon LLC and Investment of ₹ 36,20,00,000 was made in Moonglow Company, Business Inc, BVI which were not reported in Form 3CEB and no bench marking analysis has been done in the assessee s TP study. 32. The TPO observed that the assessee has given the following corporate guarantees during the relevant previous year: S.No Date Guarantee (in USD) Name of the beneficiary O/s balance as on March 2011 (in USD) 1 1.4.2010 5,000,000 Concophilips Company 2 3.1.2011 5,000,000 Concophilips Company extended guarantee 10,000,000 3 10.6.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given. For this proposal, she placed reliance upon the decision of Income Tax Appellate Tribunal at Mumbai in the case of Manugraph India Ltd in ITA No.4761/Mum/2013 dated 25.03.2015. 36. As regards the fee on corporate guarantee, she prayed that it be restricted to 0.53% of the loan availed and in support of this contention, she placed reliance upon the decision of the Coordinate Bench of the Tribunal in the case of Glenmark Pharmaceuticals Ltd in ITA No.5031/Mum/2012 dated 13.11.2013. 37. The learned DR, on the other hand, relied upon the orders of the authorities below. 38. Having regard to the rival contentions and the material on record, we find that the A.Y before us is A.Y 2011-12, while the corporate guarantee has been specifically brought under the ambit of international transaction by virtue of the amendment to section 92B by the Finance Act of 2012 with retrospective effect from 1.4.2002. The issue as to whether the amendment is clarificatory and effective retrospectively or is it effective prospectively has been considered extensively by the Coordinate Bench of this Tribunal at Mumbai in the case of Siro Clinpharm Private Ltd in ITA No.2618/Mum/2014 and ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise with a person other than an associated enterprise shall, for the purposes of sub-section (1), be deemed to be a transaction entered into between two associated I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 enterprises, if there exists a prior agreement in relation to the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise. Explanation : - For the removal of doubts, it is hereby clarified that -- (inserted by the Finance Act 2012, though with retrospective effect from 1st April 2002) (i) the expression international transaction shall include-- (a) the purchase, sale, transfer, lease or use of tangible property including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing; (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional practice goodwill, personal goodwill of professional, celebrity goodwill, general business going concern value; (k) methods, programmes, systems, procedures, campaigns, surveys, studies, forecasts, estimates, customer lists, or technical data; (l) any other similar item that derives its value from its intellectual content rather than its physical attributes.' 22. As analyzed by a coordinate bench, in the case of Bharti Airtel Ltd. (supra) and speaking through one us, the legal position with respect to the above definition is as follows: '25. An analysis of this definition of 'international transaction' under Section 92B, as it stood at the relevant point of time, and its break- up in plain words, shows the following: An international transaction can be between two or more AEs, at least one of which should be a non-resident. An international transaction can be a transaction of the following types: in the nature of purchase, sale or lease of tangible or intangible property, in the nature of provision of services, in the nature of lending or borrowing money, or in the nature of any other transaction having a bearing on the profits, incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and 3 above in provision for services and mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to anyone or more of such enterprises . That leaves us with two clauses in the Explanation to Section 92B which are not covered by any of the three categories discussed above or by other specific segments covered by Section 92B, namely borrowing or lending money. 29. The remaining two items in the Explanation to Section 92B are set out in clauses (c) and (e) thereto, dealing with (a) capital financing and (b) business restructuring or reorganization. These items can only be covered in the residual clause of definition in international transactions, as in Section 92B(1), which covers any other transaction having a bearing on profits, incomes, losses, or assets of such enterprises . 30. It is, therefore, essential that in order to be covered by clauses (c) and (e) of Explanation to Section 92B, the transactions should be such as to have bearing on profits, incomes, losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred payment or receivable or any other debt during the course of business, as will have a bearing on the profits, income, losses or assets or such enterprise . This precondition about impact on profits, income, losses or assets of such enterprises is a precondition embedded in Section 92B(1) and the only relaxation from this condition precedent is set out in clause (e) of the Explanation which provides that the bearing on profits, income, losses or assets could be immediate or on a future date. The contents of the Explanation fortifies, rather than mitigates, the significance of expression 'having a bearing on profits, income, losses or assets' appearing in Section 92B(1). 32. There can be number of situations in which an item may fall within the description set out in clause (c) of Explanation to Section 92B, and yet it may not constitute an international transaction as the condition precedent with regard to the 'bearing on profit, income, losses or assets' set out in Section 92B(1) may not be fulfilled. For example, an enterprise may extend guarantees for performance of financial obligations by its associated enterprises. These guarantees do not cost anythi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra), it is necessary to appreciate the fact the assessee was charging a .5% commission on issuance of corporate guarantees, on behalf of the AEs, and it could not, therefore, be said that the transaction will have no impact on profits, incomes, losses or assets of such enterprise . This aspect of the matter is clear from an observations in the related Tribunal order, which is reported as Everest Kanto Cylinders Ltd (supra), to the effect that However, in this case, the assessee has itself charged 0.5% guarantee commission from its AE and, therefore, it is not a case of not charging any kind of commission from its AE . The Tribunal did note, in the immediately following sentence in paragraph 23 itself, that the only point to be seen in this case is whether the same is at ALP or not . The very fact of charging this guarantee commission brings the issuance of corporate guarantees to the net of transfer pricing. Nevertheless, the ALP adjustment made by the TPO was deleted by the Tribunal. Aggrieved by the relief so given by the Tribunal, the matter was carried in further appeal, by the Commissioner, before the Hon'ble Bombay High Court which eventually upheld the relief gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons are between guarantees issued by the commercial banks as against a Corporate Guarantee issued by holding company for the benefit of its AE, a subsidiary company. In view of the above discussion we are of the view that the appeal does not raise any substantial question of law and it is dismissed. 25. We are unable to see, in the judgment of Hon'ble Bombay High Court, any support to the proposition that issuance of corporate guarantees is inherently within the ambit of definition of 'international transaction' under section 92B irrespective of whether or not such transactions have any I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 bearing on profits, incomes, losses, or assets of such enterprises . Revenue, therefore, does not derive any help from the said decision. 26. Coming to Hon'ble Bombay High Court in the case of Vodafone India Services (P.) Ltd. (supra), which has been relied upon by the learned Departmental Representative, we find that the operative portion of this judgment, so far as relevant to this discussion, is as follows: '213. The amendment to section 2(47) raises several important questions of fact and of law. Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, the concluding words constitute a non-obstante provision. It provides that the transfer contemplated therein would be notwithstanding that it has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India. It would be evident, therefore, that a lot more must now be seen and considered than before while arriving at a conclusion whether the terms and conditions of the Framework agreement constituted a transfer or assignment of the call options by one party to another. 217. At the cost of repetition, we are not concerned here with whether the amendment is valid or not. One of the issues, however, that does arise is whether the amendment, albeit clarificatory, would make a difference in the construction of the provisions of the Framework agreements themselves, to wit as regards the construction of the clauses thereof without the aid of any other material for interpreting them. Vodafone's case obviously considered the ambit of the term transfer prior to the amendment. In the present assessment proceedings, it is the amended definition which would have to be considered. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is not an open and shut case against the assessee or the revenue, and that all these observations are in the context that there is no justification for withdrawing the proceedings from the channel provided by the Income-tax Act, bypassing the Tribunal and considering all these questions in exercise of the High Court's extraordinary jurisdiction under Article 226 . When Their Lordships have made it clear that they would not like to bypass the channels under the Income-tax Act and proceed to decide these issues in writ jurisdiction under article 226, there cannot obviously be any question of Their Lordships deciding the matter one way or the other. Any observations made by Their Lordships, while declining to decide the matter in writ jurisdiction, cannot be treated as decisive of the issue on merits. While it is true that Hon'ble Bombay High Court has observed that the effect of amendment will have to be considered, Hon'ble Bombay High Court has also observed that even after taking into account the amendments, the legal implications of this amendment is still an open issue which will have to be adjudicated in the light of pleadings of the parties. Even in these obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut above, learned Departmental Representative's reliance on Hon'ble Bombay High Court's judgments in the cases of Everest Kanto (supra) and Vodafone India Services (supra) is wholly misplaced and devoid of any merits. As for coordinate bench decision in the case of Hindalco Industries (supra), all it does is to follow the Everest Kanto decision by Hon'ble Bombay High Court, but then, as we have seen earlier, that was a case in which Their Lordships were in seisin of a situation in which guarantee commission was actually charged by the assessee. That is not the case before us. The coordinate bench decisions dealing with the situations in which the guarantee commission was actually charged, and as such there was indeed a bearing on the profits of the assessee, clearly donot apply on this case. We, therefore, reject the reliance on these decisions as devoid of legally sustainable merits. 29. Let us now deal with the reliance placed by the revenue authorities on GE Capital's case by the Tax Court of Canada. In the DRP's order, a reference is made to well known Canadian decision in the case of GE Capital Canada (supra). The said case, to quote the words of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section referred to as the lender ) for the repayment, in whole or in part, of a particular amount owing to the lender by a non-resident person, if (a) the non-resident person is a controlled foreign affiliate of the parent for the purposes of section 17 throughout the period in the year during which the particular amount is owing; and (b) it is established that the particular amount would be an amount owing described in paragraph 17(8)(a) or (b) if it were owed to the parent. (http://www.fin.gc.ca/drleg-apl/ita-lrir-dec12-l-eng.pdf) 31. It is also important to bear in mind the fact that, under the Canadian law, the definition of 'international transaction', unlike an exhaustive definition under section 92B of the Indian Income-tax Act, 1961, is a very I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10brief but inclusive and broad definition to the effect that 'transaction' includes a series of transactions, an arrangement or an event [See Section 247(1) of the Canadian Income-tax Act, 1985; http://laws- lois.justice.gc.ca/eng/acts/I-3.3/page-419.html#h-156] coupled with the legal position that arm's length adjustment to the prices of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antees which provides conceptual justification for exclusion of corporate guarantees, under certain conditions, from the scope of transfer pricing adjustments. Taking note of these proposed amendments, 'Transfer Pricing and Intra Group Financing - by Bakker Levvy, IBFD publication (ISBN- 978-90- 8722-153-9)' observes that Proposed sub- section 247(7.1) of the ITA provides that the transfer pricing rules will not apply to guarantees provided by Canadian parent corporations in respect of certain financial commitments of their Canadian controlled foreign I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 affiliates to support the active business operations of those affiliates . As to what could be conceptual support for such an exclusion, we find interesting references in a discussion paper issued by the Australian Tax Officer in June 2008 and titled as Intra-group finance guarantees and loans http://www.transferpricing.com/pdf/Australia_Thin%20Capitalisation.pdf ). The fact that this discussion paper did not travel beyond the stage of the discussion paper is not really relevant for the present purposes because all that we are concerned with right now is understan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um/2014 Assessment year: 2009-10corporate guarantees as a shareholder activity is not alien to the transfer pricing literature in general. On the contrary, it is recognized in international transfer pricing literature as also in the official documentation and legislation of several transfer pricing jurisdictions. The 'OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations' itself recognizes the distinction between a shareholder activity and a provision for services, when, contrasting the shareholder activity with broader term stewardship activity and thus highlighting narrow scope of shareholder activity, it states that Stewardship activities covered a range of activities by a shareholder that may include provision for services to other group members, for example services that would be provided by a coordinating centre . It proceeded to add, in the immediately following sentence at page 207 of 2010 Guidelines, that These latter type of non-shareholder activities could include detailed planning services for particular operations, management or technical advice (trouble shooting) or in some cases assistance in day-to-day management . The sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the answer to the first question is in positive, that charge to these services should be at an arm's length price. Dealing with the first question, which is relevant for the present purposes, these Guidelines (2010 version) state as follows: '7.6 Under the arm's length principle, the question whether an intra- group service has been rendered when an activity is performed for one or more group members by another group member should depend on whether the activity provides a respective group member with economic or commercial value to enhance its commercial position. This can be determined by considering whether an independent enterprise in comparable circumstances would have been willing to pay for the activity if performed for it by an independent enterprise or would have performed the activity in- house for itself. If the activity is not one for which the independent enterprise would have been willing to pay or perform for itself, the activity ordinarily should not be considered as an intra-group service under the arm's length principle. 7.7 The analysis described above quite clearly depends on the actual facts and circumstances, and it is not possible in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute shareholder activities, under the standard set forth in paragraph 7.6: (a) Costs of activities relating to the juridical structure of the parent company itself, such as meetings of shareholders of the parent, issuing of shares in the parent company and costs of the supervisory board; (b) Costs relating to reporting requirements of the parent company including the consolidation of reports; (c) Costs of raising funds for the acquisition of its participations. In contrast, if for example a parent company raises funds on behalf of another group member which uses them to acquire a new company, the parent company would generally be regarded as providing a service to the group member. The 1984 Report also mentioned costs of managerial and control (monitoring) activities related to the management and protection of the investment as such in participations . Whether these activities fall within the definition of shareholder activities as defined in these Guidelines would be determined according to whether under comparable facts and circumstances the activity is one that an independent enterprise would have been willing to pay for or to perform for itself.' (Emphasis s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated that a guarantee is not a service. The following observations, at pages 114, are important: The position that guarantees are services has been discredited by the courts with good reason38. Guarantee fees do not represent payments for services any more than payments with respect to other financial instruments constitute payment for services39. A guarantor does not arrange financing for the debtor, but merely executes a financial instrument in its favour. 38See. e.g., Centel Communications Co. v. Commissioner, 92 T.C. 612, 632 (1989), aff d, 920 F2d 1335 (7th Cir. 1990); Bank of Am. v. United States, 680 F.2d 142, 150 (Cl. Ct. 1982). The Service's current position on the characterization of guarantee fees as payment for services under section 482 is inconsistent with its treatment of guarantee fees under other provisions. See P.L.R. 9410008 (Dec. 13, 1993). 39But cf Federal Nat'l Mortgage Ass'n v. Commissioner, 100 T.C. 541, 579 (1993) (Fannie Mae provided services by buying mortgages). 37. We are in agreement with these views. There can thus be activities which benefit the group entities but these activities need not necessarily be 'provision for servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it test is interlinked with the an arm's length test in the sense that it seeks an answer to the question whether under a similar situation an independent enterprise would have been willing to pay for the activity concerned, or would have performed the activity in-house for itself. So far as the benefit test is concerned, as we have noted earlier, it is alien to the definition of international transaction' under the Indian transfer pricing legislation. So far as arm's length test is concerned, it presupposes that such a transaction is possible in arm's length situation. However, in a situation in which the subsidiary does not have adequate financial standing of its own and is inadequately capitalized, none will guarantee financial obligations of such a subsidiary. 39. The issuance of financial guarantee in favour of an entity, which does not have adequate strength of its own to meet such obligations, will rarely be done. The very comparison, between the consideration for which banks issue financial guarantees on behalf of its clients with the consideration for which the corporates issue guarantees for their subsidiaries, is ill-conceived because while banks seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e backed by one hundred per cent deposits, the bank charges a guarantee fees. In a situation in which there is no underlying assets which can be realized by the bank or there are no deposits with the bank which can be appropriated for payment of guarantee obligations, the banks will rarely, if at all, issue the guarantees. Of course, when a client is so well placed in his credit rating that banks can issue him clean and unsecured guarantees, he gets no further economic value by a corporate guarantee I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 either. Let us now compare this kind of a guarantee with a corporate guarantee. The guarantees are issued without any security or underlying assets. When these guarantees are invoked, there is no occasion for the guarantor to seek recourse to any assets of the guaranteed entity for recovering payment of defaulted guarantees. The guarantees are not based on the credit assessment of the entity, in respect of which the guarantees are issued, but are based on the business needs of the entity in question. Even in a situation in which the group entity is sure that the beneficiary of guarantee has no financial means to reimburse it fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder activity which are mutually exclusive in nature. In the light of these discussions, we are of the considered view, and are fully supported by the OECD Guidance in this, that the issuance of corporate guarantees, in the I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 nature of quasi-capital or shareholder activity- as is the uncontroverted position on the facts of this case, does not amount to a service in which respect of which arm's length adjustment can be done. 42. As observed by Hon'ble Delhi High Court in the case of CIT v. EKL Appliances Ltd. [2012] 345 ITR 241/209 Taxman 200/24 taxmann.com 199 (Delhi), a re-characterization of a transaction is indeed permissible, inter alia, in a situation (i) where the economic substance of a transaction differs from its form and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner . The case of a corporate guarantee clearly falls in the second category as no independent enterprise would issue a guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.37 However, there are two particular circumstances in which it may, exceptionally, be both appropriate and legitimate for a tax administration to consider disregarding the structure adopted by a taxpayer in entering into a controlled transaction. The first circumstance arises where the economic substance of a transaction differs from its form. In such a case the tax administration may disregard the parties' characterization of the transaction and re-characterise it in accordance with its substance. An example of this circumstance would be an investment in an associated enterprise in the form of interest-bearing debt when, at arm's length, having regard to the economic circumstances of the borrowing company, the investment would not be expected to be structured in this way. In this case it might be appropriate for a tax administration to characterize the investment in accordance with its economic substance with the result that the loan may be treated as a subscription of capital. The second circumstance arises where, while the form and substance of the transaction are the same, the arrangements made in relation to the transaction, viewed in their totality, differ from tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such re-structuring as an arbitrary exercise, as given in the guidelines, is that it has the potential to create double taxation if the other tax administration does not share the same view as to how the transaction should be structured. 18. Two exceptions have been allowed to the aforesaid principle and they are (i) where the economic substance of a transaction differs from its form and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner.' 43. It is thus clear that even if we accept the contention of the learned Departmental Representative that issuance of a corporate guarantee amounts to a 'provision for service', such a service needs to be recharacterized to bring it in tune with commercial reality as arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner . No bank would be willing to issue a clean guarantee, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... management, administration, technical service, repairs, design, consultation, agency, and scientific research, legal or accounting service or coordination services. As a matter of fact, even in the Explanation toSection 92B- which we will deal with a little later, guarantees have been grouped in item 'c' dealing with capital financing, rather than in item 'd' which specifically deals with 'provision for services'. When the legislature itself does not group 'guarantees' in the 'provision for services' and includes it in the 'capital financing', it is reasonable to proceed on the basis that issuance of guarantees is not to be treated as within the scope of normal connotations of expression 'provision for services'. Of course, the global best practices seem to be that guarantees are sometimes included in 'services' but that is because of the extended definition of 'international transaction' in most of the tax jurisdictions. Such a wide definition of services, which can be subject to arm's length price adjustment, apart, Transfer Pricing and Intra-Group Financing - by Bakker Levvy (ibid) notes that the IR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of guarantee was a service or not . That's not factually correct. We are unable to see any merits in learned Departmental Representative's contention, particularly as decision categorically noted that not only before the Tribunal, but this issue was also raised before the DRP- as evident from the text of DRP decision. We now take up the issue with respect to specific mention of the words in Explanation to Section 92B which states that For the removal of doubts, it is hereby clarified that (i) the expression international transaction shall include........ (c) capital financing, including any type of long -term or short -term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business. There is no dispute that this Explanation states that it is merely clarificatory in nature inasmuch as it is 'for the removal of doubts', and, therefore, one has to proceed on the basis I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 that it does not alter the basic character of definition of 'international transaction&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses or assets of such enterprise. In other words, in a situation in which a transaction has no bearing on profits, incomes, losses or assets of such enterprise, the transaction will be outside the ambit of expression 'international transaction'. This aspect of the matter is further highlighted in clause (e) of the Explanation dealing with restructuring and reorganization, wherein it is acknowledged that such an impact could be immediate or in future as evident from the words irrespective of the fact that it (i.e. restructuring or reorganization) has bearing on the profit, income, losses or assets of such enterprise at the time of transaction or on a future date . What is implicit in this statutory provision is that while impact on profit, income, losses or assets is sine qua non, the mere fact that impact is not immediate, but on a future date, would not take the transaction outside the ambit of 'international transaction'. It is also important to bear in mind that, as it appears on a plain reading of the provision, this exclusion clause is not for contingent impact on profit, income, losses or assets but on future impact on profit, income, losses or ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from international transaction as per Section 92B of the Act. The corporate guarantee provided by the assessee company does not fall within the definition of international transaction. The TP legislation does not stipulate any guidelines in respect to guarantee transactions. In the absence of any charging provision, the lower authorities are not correct in bringing aforesaid transaction in the I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 TP study. In our considered view, the corporate guarantee is very much incidental to the business of the assessee and hence, the same cannot be compared to a bank guarantee transaction of the Bank or financial institution. 47. However, within less than four months of this decision having been rendered, the Finance Act 2012 came up with an Explanation to Section 92B stating that for the removal of doubts , as we have noted earlier in this decision, clarified that international transactions include, inter alia, capital financing by way of guarantee. This legislative clarification did indeed go well beyond what a coordinate bench of this Tribunal held to be the legal position and we are bound by the esteemed views of the coordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of the assessee, and, as such, could not be included in the 'provision for services' under the definition of 'international transaction' under section 92B of the Act. We have also held, taking note of the insertion of Explanation to Section 92B of the Act, that the issuance of corporate guarantees is covered by the residuary clause of the definition under section 92B of the Act but since such issuance of corporate guarantees, on the facts of the present case, did not have bearing on profits, income, losses or assets , it did not constitute an international transaction, under section 92B, in respect of which an arm's length price adjustment can be made. In this view of the matter, and for both these independent reasons, we have to delete the impugned ALP adjustment. The question, which was raised in Bharti Airtel's case (supra) but left unanswered as the assessee had succeeded on merits, reamins unanswered here as well. However, we may add that in the case of Krishnaswamy SPD v.Union of India [2006] 281 ITR 305/151 Taxman 286 (SC), wherein Their Lordships had, inter alia, observed that the law does not compel a man to do what he cannot possibly perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onflict on this issue of and the other issues, given decision on the said issue, were wholly academic. It cannot be open to refer the academic questions to the special bench. No doubt, some decisions of the coordinate benches which have reached the different conclusions. There is, however, no conflict in the reasoning. Four Soft Ltd. decision (supra) had decided the issue in favour of the assessee but that was with respect to the law prior to insertion to Explanation to Section 92B. As for the post- amendment law and the impact of amendment in the definition of 'international transaction', the matter was again decided in favour of the assessee by Bharti Airtel Ltd. decision (supra) on the peculiar facts of that case. The decisions like Everest Kento Cylinders Ltd. (supra) and Aditya Birla Minacs Worldwide (supra) were decisions in which the assessee had charged the fees and, for that reason, such cases are completely distinguishable as discussed above. In Prolific' Corp Ltd. case (supra), as indeed in any other case so far, it was not the case of the assessee that corporate guarantees are quasi-capital, or shareholder activity, in nature, and, for that reason, excludibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive framework, the importance of a very comprehensive analysis, in the transfer pricing study, of the nature of corporate guarantees issued by the assessees, can never be overemphasized. The sweeping generalizations, vague statements and evasive approach in the transfer pricing study reports, which are quite common in most of the transfer pricing reports, cannot do good to a reasonable cause. When judicial calls on the complex transfer pricing issues are to be taken, utmost clarity in the legislative framework and a comprehensive analysis of relevant facts, in the transfer pricing documentation, are basic inputs. Unfortunately, both of these things leave a lot to be desired. We can only hope, and we do hope, that things will change for better. 7. We are in considered agreement with the views so expressed by the coordinate bench. Learned Departmental Representative's well researched arguments donot persuade us to deviate from the stand so taken by us. Let us deal with these arguments in little detail. 8. Learned Departmental Representative, in his written note, accepts that the legislature brought in amendment (in Section 92B) by the Finance Act, 2012, after the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a case distinct from the present situation in which there is no impact on the profits or losses or assets or income of the assessee. In Advanta decision (supra), this aspect of the matter and the distinguishing feature has been discussed at considerable length. Learned Departmental Representative has then invited our attention to the fact a substantial question of law has been admitted by Hon'ble Delhi High Court in ITA No. 607/2014 against the order passed by the Tribunal in the case of Bharti Airtel (supra). While no doubt the matter is now pending before Hon'ble High Court for the judicial scrutiny by Their Lordships, that fact by itself does not reverse the stand taken by the Tribunal in the order so impugned. As regards the decision of Bharati Airtel being on its own peculiar facts, there can be no denial of this position but that does not mean that the so far as issues of general application are concerned, the stand of the Tribunal cannot hold good. Learned Departmental Representative then takes us through the Explanation to Section 92 B to explain its true scope and through Bharti Airtel decision as to how fallacious is its logic. Its emphasized that the impact o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B and how within four months of Four Soft decision (supra) being announced, it was nullified by a legislative amendment. This aspect of the matter has been dealt with in paragraph 46 and 47 of this decision, which has been reproduced earlier in this order, at considerable length. It assumes even more significance in the light of a new judicial development that we will deal with in a short while now. In the present case, we are dealing with a situation in which the amendment was made with retrospective effect and it covered certain issues which were already subjected to a judicial interpretation in a particular manner. Learned Departmental Representative does not even dispute it. He is candid enough to place on record the fact, by way of a written note, that the one of the reasons of insertion of Explanation to Section 92 B was to nullify the Four Soft decision (supra). The judicial interpretation so given was certainly not the end of the road. The matter could have been carried in appeal before higher judicial forums. If the decision of a judicial body does not satisfy the tax administration, nothing prevents them from going to the higher judicial forum or from so amending the law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to greater certainty and congenial business climate. Nothing evidences it better than this subtle, but easily discernible, paradigm shift in the underlying approach to the amendments made in Section 263 in the very first full budget of the present Government. 11. What has, however, been done in the case before us is to amend the law with retrospective effect. Of course, it happened much before the current awareness about the evils of retrospective taxation having been translated into action. 12. Dealing with such a situation, Hon'ble Delhi High Court has, in the case of DIT vs New Skies Satellite BV [TS-64- HC -DEL (2016)], observed as follows: 30. Undoubtedly, the legislature is competent to amend a provision that operates retrospectively or prospectively. Nonetheless, when disputes as to their applicability arise in court, it is the actual substance of the amendment that determines its ultimate operation and not the bare language in which such amendment is couched........ 36. A clarificatory amendment presumes the existence of a provision the language of which is obscure, ambiguous, may have made an obvious omission, or is capable of more than one meaning. In su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to be treated as 'clarificatory' by the judicial forums as well. The view taken by Hon'ble Delhi High Court support this line of reasoning. Even without the benefit of guidance of Their Lordships, the views articulated by a coordinate bench of this Tribunal, in the case of Bharti Airtel (supra) were of a somewhat similar opinion when it was observed that, Undoubtedly, the scope of a charging provision can be enlarged with retrospective effect, but an anti- avoidance measure, that the transfer pricing legislation inherently is, is not primarily a source of revenue as it mainly seeks compliant behaviour from the assessee vis- -vis certain norms, and these norms cannot be given effect from a date earlier than the date norms are being introduced . We may add that right now we are only concerned with the question of retrospective amendment in the transfer pricing legislation, which has, as we will see, its own peculiarities and significant distinction with normal tax laws which simply impose tax on an income. 14. Legislature may describe an amendment as 'clarificatory' in nature, but a call will have to be taken by the judiciary whether it is indeed clarifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal transaction defined under section 92B, assuming that it indeed does not- as learned Departmental Representative contends, this provision has already been judicially interpreted, and the matter rests there unless it is reversed by a higher judicial forum. However, if the 2012 amendment does increase the scope of international transaction under section 92B, as is our considered view, there is no way it could be implemented for the period prior to this law coming on the statute i.e. 28 th May 2012. The law is well settled. It does not expect anyone to perform an impossibility. Reiterating this settled legal position, Hon'ble Supreme Court has, in the case of Krishnaswamy S Pd Vs Union of India [(2006) 281 ITR 305 (SC)], observed as follows: The other relevant maxim is, lex non cogit ad impossibilia-- the law does not compel a man to do what he cannot possibly perform. The law itself and its administration is understood to disclaim as it does in its general aphorisms, all intention of compelling impossibilities, and the administration of law must adopt that general exception in the consideration of particular cases. [See : U.P.S.R.T.C. vs. Imtiaz Hussain 2006 (1) SCC 380, Shai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade law. In the case of Rajeev Kumar Agarwal Vs ACIT [(2014) 249 ITD 363 (Agra)], insertion of second proviso to Section 40(a)(ia), though specifically stated to be with effect from 1st April 2013, was read to be effective from 1st April 2005. The reasoning adopted by the bench, speaking through one of us, was as follows: 8. With the benefit of this guidance from Hon'ble Delhi High Court, in view of legislative amendments made from time to time, which throw light on what was actually sought to be achieved by this legal provision, and in the light of the above analysis of the scheme of the law, we are of I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 the considered view that section 40(a)(ia) cannot be seen as intended to be a penal provision to punish the lapses of non deduction of tax at source from payments for expenditure- particularly when the recipients have taken into account income embedded in these payments, paid due taxes thereon and filed income tax returns in accordance with the law. As a corollary to this proposition, in our considered view, declining deduction in respect of expenditure relating to the payments of this nature cannot be treated as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 271 C, and, section 40(a)(ia) does not add to the same. The provisions of Section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and created undue hardships even in cases in which the I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009-10 assessee's tax withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, and thus obviate the unintended hardships, such an amendment in law, in view of the well settled legal position to the effect that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically, the insertion of second proviso must be given retrospective effect from the point of time when the related legal provision was introduced. In view of these discussions, as also for the detailed reasons set out earlier, we cannot subscribe to the view that it could have been an intended consequence to punish the assessee's for non deduction of tax at source by declining the deduction in respect of related pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dd that the decision of Hon'ble Delhi High Court, in the case of New Skies Satellite (supra), was not available at the point of time when this matter came up for hearing, and we had, therefore, no occasion to hear revenue's perspective on the same. While this hearing was concluded on 7 th January, 2016, the judgment in New Skies Satellite (supra) was pronounced by Hon'ble Delhi High Court on 8 t h February, 2016. However, as that is not the decisive factor so far as our conclusions are concerned and it is only an additional factor in support of our conclusion, that does not matter really. 25. In the result, appeal of the assessee is allowed. 26. As regards the grievances raised by the Assessing Officerwhich are set out in the beginning of this order, learned representatives fairly agree that both the issues raised therein are covered, in favour of the assessee, by decisions of the coordinate benches in assessee's own case for the assessment years 2003-04 I.T.A. Nos. 2618 and 2876/Mum/2014 Assessment year: 2009- 10 to 2008-09. Copies of these decisions were placed before us at pages 275-297 of the paper book. 27. In view of the above discussions, and respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D(iii) of the Act. The assessee s contention that APGPCL does not declare dividend to its shareholders and further that the benefit of subsidized rate of power is taxed in the hands of the company has not been verified by the authorities below. The benefit derived by the assessee by virtue of the investment is not dividend income but is subsidized rate of power. This subsidy is not exempt from tax. Further, if the benefit has resulted in enhanced business income/profits and has been taxed, then, no disallowance u/s 14A r.w.r. 8D can be made. Therefore, this limited issue is remitted to the file of the AO to verify the contention of the assessee and exclude the investment if the assessee s contention is found to be correct. Thus, grounds No. 7 8 are partly allowed. 43. Ground No.9 is not pressed at the time of hearing as it is submitted the consequential relief will be given while giving effect to the orders of the Courts. Hence rejected as not pressed. 44. Ground No.10, in our opinion, needs to be set aside to the file of the AO to verify the claim in terms of the ITR form filed by the assessee and AO is directed to give relief, if any, to the assessee in accordance with l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment on shareholder corporate guarantee 5. Making adjustment on the shareholders corporate guarantee provided to bank, without appreciating the fact that WOS was set up as a SPV for acquisition of business in USA. 6. Not appreciating that the shareholders corporate guarantee is not covered under the definition of international transaction U/S 92B of the Act. 7. Not appreciating that the amendment to section 92B would not apply to the facts of the case. 8. Discriminating the US was by determining the ALP for shareholder corporate guarantee vis-a-vis similar shareholder corporate guarantee provided by parent company to Indian subsidiaries in violation of Article 26 of India - us Double Taxation Avoidance Agreement. ('DTAA'). 9. Not making adjustments for the differences in the comparable transactions selected visa-vis shareholders corporate guarantee provided by the Appellant. 10. Not undertaking an objective analysis for determining the ALP on the shareholder corporate guarantee and determining 2% fee based on differential interest rates on various bonds in India. 11. Without prejudice to the ground that no guarantee fee shall be charged, the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the rival contentions and the material on record, we find that the DRP has followed the decisions of this Tribunal in the case of M/s. Foursoft Ltd (TS-518, Income Tax Appellate Tribunal-2011(Hyd) and Siva Industries Holdings Ltd (2011-TII-67-Income Tax Appellate Tribunal-MAD-TP) to hold that it is an international transaction and to adopt LIBOR as the rate of interest for T.P. Adjustment. 55. Respectfully following the decision of the Coordinate Benches of this Tribunal (cited Supra), we see no reason to interfere with the directions of the DRP. Grounds 2 to 4 are accordingly rejected. 56. As regards grounds 5 to 12 against corporate guarantee, we find that this issue is covered in favour of the assessee by the decision of the Coordinate Bench at Mumbai in the case of Siro Clinpharm Pvt Ltd wherein it was held the corporate guarantee was not international transaction prior to the amendment of section 92B by the Finance Act of 2012. Thus, ground of appeal No.6 is allowed and other grounds 5 7 to 12 are not adjudicated at this stage. 57. As regards ground No.13, we find that the DRP had directed the AO to verify the assessee s claim, but AO has failed to do so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business. 4. Discriminating the US WOS by determining the ALP for funds provided as loans vis-a vis similar loans provided by parent company to Indian subsidiaries in violation of Article 26 of India - US Double Taxation Avoidance Agreement. ('DTAA'). 5. Without prejudice to the above, the interest rate on foreign currency loan to AE in USA should be determined by benchmarking with comparable foreign currency loan (i.e., at LIBOR plus). 6. The DRP erred in not considering its own directions in the Company's case for the 2009-10 and A Y 2010-11 wherein there were similar facts of the case. Ground specific to TP adjustment on shareholder corporate guarantee 7. Making adjustment on the shareholders corporate guarantee provided to bank on behalf of the WOS, without appreciating the fact that WOS was set up as a SPV for acquisition of business in USA. 8. Not appreciating that the shareholders corporate guarantee is not covered under the definition of international transaction u/s 92B of the Act. 9. Not appreciating that the amendment to section 92B would not apply to the facts of the case. 10. Adopting a rate of 1.75% based on the fee charged from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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