TMI Blog2020 (11) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s A.E . - HELD THAT:- In the case of Corporate Guarantee there is no commitment of financial or capital assets of the entity. The guarantee is issued without any security or underlying asset. Corporate guarantee is extended by one corporate entity to a third party for or on behalf of its subsidiary/group entity/associated enterprise. It is in the nature of contingent liability. Keeping in view, the nature and extent of exposure and liability of guarantor in the case of corporate guarantee, it would be justified if guarantee commission is charged to the extent of actual exposure of facility availed instead of gross amount of facility extended. See BS LTD. case [ 2018 (4) TMI 1742 - ITAT HYDERABAD] . In the instant case, the assessee has purportedly availed facility of ₹ 2.48 crores as against corporate guarantee of ₹ 15.19 crores. For the purpose of determination of corporate guarantee commission in line with our observations and for the purpose to ascertain/verify the extent of corporate guarantee exposure, we deem it appropriate to restore this issue to the Assessing Officer. The ground No. 2 of the appeal is allowed for statistical purpose in the above said terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprise has availed the facility to the extent of ₹ 2.48 crores. 3. Ground No. 3 On the facts and circumstances of the case and in law, the Learned Commissioner of Income-tax (Appeals)-38, Mumbai ( CIT(A) )erred in upholding the order of the Asstt. Commissioner of Income Tax, Central Circle-42, Mumbai ( AO ) in making an addition of ₹ 1,66,80,000/-to total income on account of unexplained paintings. 2.1 Shri J.D. Mistry, appearing on behalf of the assessee submitted that in ground No. 1 of the appeal, the assessee has assailed the findings of Assessing Officer and the CIT(A) in treating the provision of Corporate Guarantee by the assessee for its Associate Enterprise (AE) as International Transaction. The ld. Counsel for the assessee submitted that the Corporate Guarantee offered by the assessee on behalf of its AE is not an International Transaction and hence, no Arms Length Price (ALP) is required to be determined for said transaction. To support his contention, the ld. Counsel for the assessee placed reliance on the following decisions:- (1) Bharti Airtel Ltd. v. Addl. CIT [2014] 43 taxmann.com 150/63 SOT 113 (URO) (Delhi - Trib.) (2) Micro Ink Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h block period. The ld. Counsel for the assessee submitted that similar additions in respect of paintings were made in the case of Ms. Kavita Singh, one of the promoters of the assessee company. The issue travelled to the Tribunal in Kavita Singh v. Dy. CIT [IT Appeal No. 1242 (Mum.) of 2012, dated 8-12-2017]. The Tribunal vide order accepted the documentary evidences furnished by the assesse during search and assessment stage and deleted the addition. The case of the assessee is on same pedestal, therefore, the additions in the case of assesse deserves to be deleted on same analogy. 4. Per contra, Shri Akhtar H. Ansari, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that the Hon'ble Bombay High Court in the case CIT v. Everest Kento Cylinders Ltd. [2015] 58 taxmann.com 254/232 Taxman 307/378 ITR 57, has held that Corporate Guarantee to an overseas AE is an international transaction. 4.1 In respect of ground no. 3 assailing addition on account of unexplained paintings, the ld. Departmental Representative submitted that the assessee has failed to bring on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer (TPO) held that the Corporate Guarantee is an international transaction. The TPO applied CUP to bench mark the international transaction holding guarantee commission @3% and made adjustment of ₹ 20,89,230/- . The assessee carried the issue in appeal before the CIT(A). The first appellate authority upheld the findings of TPO in treating corporate guarantee as international transactions. However, the rate of commission was reduced from 3% to 2.5%. Against the addition confirmed, the assessee is in appeal. 8. The ld. Counsel for the assesse in support of his submissions that corporate guarantee is not an international transaction has placed reliance on Tribunal decisions. The contentions raised by ld. Counsel are unsustainable in the light of decision rendered by Hon'ble Jurisdictional High Court in the case of Everest Kento Cylinders Ltd. (supra). Thus, we hold Corporate Guarantee facility provided to overseas AE by the assesse is an international transaction. In so far as the rate of commission is concerned, the Hon'ble High Court in the aforementioned decision has upheld corporate guarantee commission at 0.5%. The corporate guarantee rate in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to remit this issue back to the file of TPO/AO to determine the actual exposure of contingent liability for this AY and apply the rate of 0.53% as per the ratio of Glenmark Pharmaceuticals Ltd. (supra) on the actual contingent liability. In view of our above discussion, the ground No. 2 is allowed in principle. In the instant case, the assesse has purportedly availed facility of ₹ 2.48 crores as against corporate guarantee of ₹ 15.19 crores. For the purpose of determination of corporate guarantee commission in line with our observations and for the purpose to ascertain/verify the extent of corporate guarantee exposure, we deem it appropriate to restore this issue to the Assessing Officer. The ground No. 2 of the appeal is allowed for statistical purpose in the above said terms. 10. The third ground of appeal is in respect of addition of ₹ 1,66,80,000/- on account of unexplained paintings found during search operation at the premises of the assessee. There were in total 288 paintings which were inventoried having aggregate value of ₹ 19,39,92,950/-. The assesse was asked to explain source of purchase of the said paintings. Out of 288 paintings, 71 pain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the painting was purchased by the assessee prior to October/November, 1991. Since the painting is old and was not acquired during the block period, the addition cannot be made in respect of said painting. The reason given by Assessing Officer for rejecting the evidence furnished by the assessee is that it is difficult to ascertain that it is the same painting as shown in the old magazine. The addition has been made by the Assessing Officer purely on surmises and conjectures. 12. The next paintings taken as a test sample by the ld. Counsel for the assessee is at serial no. 2 and 3 of the annexure to Assessment order i.e. paintings titled 2 Hands (Bronze) and 2 Hands (Black) by Shamshad. The ld. Counsel for the assessee referring to pages 19, 20 and 21 of the Paper Book submitted that the paintings were purchased from Lawrence Art Gallery on 19-12-1997. The invoice of the painting is at page 19 of the Paper Book. At pages 20 and 21 are the description of paintings along with the image as well as the location of the office where paintings are placed. The Assessing Officer has rejected the documents furnished by the assessee on the ground that the description of the paintings d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. Annexure Evidence No. of Pain tings Addition by A.O. (in Rs.) ITAT order of Mrs. Kavita Singh-ITA No.1242/Mum/2012 dated 8 October, 2017 similar issue Prior to Block period (Annexure - I to III) 1 Annexure-I Magazines 11 1,20,00,000 2 Annexure-II Photographs 3 60,50,000 3 Annexure-III Vouchers, Bills 11 88,50,000 Page 6 7, Para-7 4 Annexure IV Panchnama 11 1,42,00,000 Page-6, Para-7 5 Annexure V Low Value 5 2,55,000 Page-8, Para-9 6 Annexure VI ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
