TMI Blog2018 (10) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... e of business. The assessee had not incurred any expenditure towards the corporate guarantee. The revenue could not bring any evidence to establish that the assessee had incurred any expenditure for extending the corporate guarantee. As stated by the Ld. AR it is the obligation on the part of the assessee to extend the support and assistance to its subsidiaries for business development. Since the facts are identical, respectfully following the view taken by coordinate benches in the case laws cited, we hold that the corporate guarantee given by the assessee on behalf of its AE would not constitute an international transaction within the meaning of 92B of the Act. Accordingly, we uphold the order of the Ld. CIT(A) and dismiss the appeal of the revenue. - I.T.A.No.191/Viz/2018 - - - Dated:- 28-9-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri K.C.Das, DR For The Respondent : Shri K.Ramesh Babu, AR ORDER PER D. S. SUNDER SINGH, Accountant Member: This appeal is filed by the revenue against the order of the Commissioner of Income-Tax (Appeals) [CIT(A)]-2, Guntur vide I. T. A. No. 10131 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest in international transactions in outbound loans and the same is considered to be at Arm Length Price. However, not being convinced with the explanation of the assessee, the TPO has charged the interest @14. 45% PLR prevailing during the financial year 2012-13 and proposed for adjustment. The AO made the adjustment as proposed by the TPO and accordingly made the addition of ₹ 62,07, 858/- in respect of the adjustment of interest on the amounts advanced to its AE. 3. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld. CIT(A) deleted the addition holding that on the loan granted by the assessee to its AE located at abroad, LIBOR rate of interest is applicable for determining the arm length price. Since, the interest charged by the assessee on loan given to its AE was higher than the LIBOR, the same is to be accepted and no adjustment is warranted. The Ld. CIT(A) relied on the decision of the Hon ble Delhi High Court in the case of CIT Vs. Cotton Naturals (I) Pvt. Ltd. (2015) 55 taxmann. com 523 (Delhi), Hon ble Bombay High Court in the case of CIT Vs. TATA Auto Comp Systems Ltd. 374 ITR 516 (Bombay), the decision of ITAT Chennai B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is corporate guarantee fee. The assessee has given corporate guarantee to its AE, for an amount of ₹ 163, 69, 02, 000/- which was not disclosed in Form 3CEB and TP study report and no income was offered from it. The TPO levied guarantee charges @1. 3% on ₹ 163, 69, 02, 000/- and proposed the adjustment of ₹ 2, 12, 79, 726/-, whereas the company did not provide for guarantee charges. The assessee submitted before the TPO that the assessee had not incurred any expenditure for corporate guarantee and the guarantee was given to protect the interest of shareholders and for securing the credit facilities to its 100% subsidiaries which are new companies without any financial track record and credit rating. Therefore, the Ld. AR submitted before the TPO that there is no case for making any adjustment on account of guarantee charges. However, not being impressed with the explanation offered by the assessee, the TPO suggested for adjustment of ALP towards corporate guarantee for an amount of Rs. ₹ 2,12,79, 726/-, u/s 92CA of the Act. Accordingly, the AO made the addition while framing the assessment u/s 143(3) r. w. s. 92CA(3) dated 27. 12. 2016 and made the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee to a financial institution for lending money to the subsidiary, which does not cost anything to the parent company, and which does not have any bearing on its profits, income, losses or assets, it will be outside the ambit of international transaction under section 9213(1) of the Act. In this regard, we would like to hold that issuance of corporate guarantee by the assessee to its AE would have influence on the profits, incomes, losses or assets of enterprise 'but not necessarily have any impact on the profits, incomes, losses or assets' as admittedly no consideration was received by the assessee in respect of this corporate guarantee from its AE. We find that the Ahmedabad Tribunal in the ease of Micro Ink Ltd. (supra) had observed that if a subsidiary (AE in the instant case) could not borrow money from third party sources on its own standing and the guarantee provided by the parent (assessee in the instant se) enables it to make such borrowing, then the guarantee could be said to be a shareholder function, not warranting a guarantee fee. This ratio would squarely be applicable to the facts of the instant case before us. 5. 1. Similarly in the case Dr. Reddy La ..... X X X X Extracts X X X X X X X X Extracts X X X X
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