TMI Blog2022 (6) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... o comparison can be made between the guarantee issued by commercial banks as against corporate guarantee issued by holding company for benefit of its AE, a subsidiary company for computing ALP of guarantee commission. When it comes rate of commission, at which, such corporate guarantee needs to be bench marked, then depending upon each case, a reasonable rate may be adopted and thus, in the said case has upheld 0.5% commission on corporate guarantee. 0.5% is the reasonable rate for benchmarking corporate guarantee given by the assessee to its subsidiary AE. We direct the AO to make adjustment towards corporate guarantee fee @ 0.5% of total corporate guarantee given by the assessee to its AE. Appeal filed by the assessee is partly allowed. - IT (TP) A No.34/Chny/2018 - - - Dated:- 15-6-2022 - SHRI G. MANJUNATHA, HON BLE ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER Appellant by : Mr.B. Ramakrishnan, CA Respondent by : Dr.S.Palani Kumar, CIT O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the final assessment order passed by the Assessing Officer u/s.143(3) r.w.s.92CA r.w.s.144C(13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidering relevant submissions of the assessee, has made an upward adjustment of Rs.32,47,200/- towards guarantee fee @ 1.98% on total guarantee given by the assessee to its AE. The relevant findings of the TPO are as under: 7. The submissions of the assessee have been gone through in detail and the following observations are made: With regard to the guarantee extended by the assessee company, under normal conditions, an unrelated party would not have extended such guarantees without any compensation as in the assessee's case. Assessee's submission regarding the non-charging of bank guarantee commission is not acceptable, since the said loan has been transferred to India for setting up of new campus for the subsidiary company i.e., M/s TIPS South Hill Academy Inc. Further the said project has not materialized and the said amount has been transferred back to subsidiary company. Hence, ultimately the said amount has been used by subsidiary for its business purposes in the subsequent year. Further, the explanation about non-payment of Interest component lacks logic because the said amount has been transferred for the business of subsidiary and not used by assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious Judicial forums, by following the decision of the Hon'ble Mumbai High Court, the ALP of the transaction is fixed at 1.98% after giving risk adjustment and the benchmarking is done through the residual method specified under Rule 10AB of the IT Rules. Based on the discussions above, the guarantee amount is charged as under: Guarantee amount = Rs.11,40,00,000 + 5,00,00,000 = Rs. 16,40,00,000 Rate of Interest as discussed above 1.98% (2.19%- 10% for contingent risk) Interest amount = Rs. 16,40,00,000 x 1.98% = Rs. 32,47,200/- Hence, an upward adjustment to the tune of Rs.32,47,200/- is made towards Guarantee Fee. 4. The assessee filed objections against draft assessment order passed by the AO before the Dispute Resolution Panel and contended that providing corporate guarantee to its AE per se is not an international transaction. The assessee had also challenged guarantee fee worked out by the AO by taking into account bank guarantee fee charged by commercial banks and submitted that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightly bench marked the corporate guarantee given by the assessee to its AE and thus, the arguments of the assessee needs to be rejected. The Ld.DR further submitted that when it comes to rate, at which, such guarantee commission needs to be charged, bank guarantee commission charged by a commercial bank, is a good comparable and thus, the AO has taken average bank guarantee commission charged by the commercial banks and computed commission on guarantee given by the assessee. Therefore, there is no reason to take different view on this issue. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. As regards the first argument of the assessee that providing corporate guarantee per se is not an international transaction, we find that the provisions of Sec.92B of the Act, has been amended to expand the definition of international transaction, as per which, lending or borrowing money or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more AEs for the allocation or apportionment of, or any contr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
