TMI Blog2018 (11) TMI 1711X X X X Extracts X X X X X X X X Extracts X X X X ..... y the general consensus among the hon'ble ITAT Benches that international transactions involving cross-border country loans to AE can be benchmarked against LIBOR, as also supported by the RBI s circu9lar that a spread ranging from 1% -2% over LIBOR is reasonable (or advancing loans. Therefore, in deciding the matter, it is held that an interest rate of LIBOR plus 2% can be held to be Arm s length rate of interest, and as for the case at hand, the interest charged by the assessee from its AE is higher than LIBOR plus 2%, the adjustment made by the ld. TPO in the case is held to be unjustified and not sustainable. See M/S EIH LIMITED AND VICE-VERSA [ 2018 (1) TMI 1372 - ITAT KOLKATA] - Revenue s appeals are dismissed. - ITA No.208-209/Kol/2018 Assessment Years :201-12 & 2013-14 - - - Dated:- 30-11-2018 - Shri S.S.Godara, Judicial Member and Shri, M. Balaganesh, Accountant Member By Assessee: Shri Ravi Tulsiyan, FCA By Revenue: Shri Sanjay Paul, Addl. CIT-SR-DR ORDER S.S.Godara, These two Revenue s appeals for assessment years 2011-12 and 201314 arise against Commissioner of Income Tax (Appeals)-22, Kolkata s sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational 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. The Explanation states that it is clarificatory in nature and is 'for the removal of doubts'. Thus, it does not alter the basic character of definition of 'international transaction' under the main section 92B. Under this Explanation, five categories of transactions have been clarified to have been included in the definition of 'international transactions'. Clauses (a) (b) and (d) do not cover guarantee, lending or loans. Other two, (c) and (e) deal with (i) capital financing, and (ii) business restructuring or reorganization. Clause (c) refers to lending or guarantee. But the Explanation which is for removal- of doubts or is clarificatory, cannot be read- independent of Section 92B(1). Section 92B(1), provides those transactions as international transactions which are in the nature of purchase, sale or lease of tangible or intangi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad 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 case) 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. 12.13 The Ld. CIT, DR's reliance in the case of Everest Kanto Cylinder Ltd. (supra) would not come to the rescue of Revenue because in that case, the parent company charged a fee of 0.5% on the AE for rendering this service. On this factual aspect, the Tribunal as well as the Hon'ble High Court held that it is an international transaction. Since in the case in hand, the assessee has not charged a penny from the AE, so the facts of the case are different and case law is distinguishable and, therefore, the Hon 'ble High Court's order cannot come to the rescue of the Revenue. We find that the Id. AR pointed out that in the said case, the Hon'ble Bombay High Court did not answer the specific question as to whether the issuance of corporate guarantee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t though the Explanation was introduced by Finance Act 2012, the rules were notified only on 10.6.2013. Hence the assessee cannot be expected to report this transaction also as an international transaction in its transfer pricing study and the audit report thereon. 12.17. In view of the aforesaid findings and respectfully following the various judicial precedents, we allow the Grounds 1.1. to 1.4 raised by the assessee. 5.1. Consistent with the view taken therein, we uphold the order of the Id. CIT(A) on this issue and dismiss this ground of the revenue. Accordingly, Ground No. 2 of the revenue is dismissed. 3. Learned Departmental Representative vehemently during the course contends that a corporate guarantee is very much an international transactions post facto amendment in sec. 92B of the Act with retrospective effect dated 01.04.2002 (supra). He fails to dispute the fact that the learned co-ordinate bench hereinabove has considered amended provision as well. There is no dispute that the CIT(A) has adopted judicial consistency in following his findings on the every issue in earlier assessment years attending finality upto this tribunal as well. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icing Officer that US LIBOR cannot be considered as a benchmark against US Dollar denominated loan. At para 4 of his order, he held as follows:- 4. Having examined the mater, it is to be said that the case law relied upon by the appellant, namely the judgment of ITAT(Delhi) in case of Kohinoor Foods Ltd. vs. ACT applicable in the case at hand, and covers the matter. The matter is well covered by the general consensus among the hon'ble ITAT Benches that international transactions involving cross-border country loans to AE can be benchmarked against LIBOR, as also supported by the RBI s circu9lar that a spread ranging from 1% -2% over LIBOR is reasonable (or advancing loans. Therefore, in deciding the matter, it is held that an interest rate of LIBOR plus 2% can be held to be Arm s length rate of interest, and as for the case at hand, the interest charged by the assessee from its AE is higher than LIBOR plus 2%, the adjustment made by the ld. TPO in the case is held to be unjustified and not sustainable. The ground of appeal stands allowed accordingly. As the ld. CIT(A) has followed the propositions of law laid down by different benches of the Tribunal on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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