TMI Blog2021 (2) TMI 1333X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in their judgments. Entitled to refund on dividend distribution tax (DDT) paid @ 16.22% u/s. 115-O - HELD THAT:- As relying on Devrient [India] Pvt. Ltd. [ 2020 (10) TMI 750 - ITAT DELHI] we restore the entire issue to the file of the Assessing Officer with a direction that the claim of the assessee may be examined de novo. The assessee is directed to furnish all the necessary details in support of its claim. This ground of the assessee is allowed for statistical purposes. - ITA No. 684/Kol/2019 - - - Dated:- 17-2-2021 - Sri J. Sudhakar Reddy, Hon ble Accountant Member And Sri S.S. Godara, Hon ble Judicial Member For the Assessee : Shri Ravi Tulsiyan, FCA, appeared on behalf For the Revenue : Shri Sanjay Paul, Addl. CIT, D/R, ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) 22, Kolkata, (hereinafter the ld. Pr. CIT ), passed u/s. 250 of the Income Tax Act, 1961 (the Act ), dt. 28/02/2019, for the Assessment Year 2012-13. 2. The assessee is a company and is in the business of manufacturing refractory items. It has a wholly owned sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has not incurred any cost against providing letter of comfort/corporate guarantee or having any bearing on profit or loss or assets of its AE, the addition of Rs 28,53,625/- in the guise of guarantee fees at 0.5% is against the settled law. 4. That, the Ld. C.I.T.(A) upheld the action of the TPO/AO relying on a decision of ITAT, Kolkata holding another decision of the same Bench to be per incuriam when there are series of decisions on the legitimacy of the appellant's claim and in that view of the matter, he erred in not having decided the issue favouring the appellant as per settled position in law. 4.1. The assessee filed the following additional ground of app 1. That, on the facts and in the circumstances of the case, the appellant is entitled to refund of Dividend Distribution Tax (DDT) paid @ 16.22% u/s.115-O of the Act to its Japanese shareholders during A.Y. 2012- 13, which was in excess of rate applicable at 10% specified in DTAA between India and Japan. 4.2. The assessee filed a second additional ground, which is as follows:- That, on the facts and in the circumstances of the case, the appellant is entitled to deduction of Educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tect its investment interest, to help it achieve the assessee's business objective . Thus, we agree with the contention of the assessee that the objective of the assessee for providing guarantee was not to earn guarantee fee but to earn returns in the form of appreciation in investment value and receive dividends and, therefore, no TP adjustment ought to have been made in the facts and circumstances of the case. Coming to the alternate plea of the assessee that, in the facts and circumstances the corporate guarantee is not an International Transaction u/s. 92B of the Act, we note that term 'guarantee' was inserted in the definition of 'international transaction' in section 92B by inserting an Explanation in the Finance Act, 2012 with retrospective effect from 01/ 04/2002. The Explanation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.1. This Bench of the Tribunal in the case of CIT vs. Ferro Tech Ltd. in ITA Nos. 262 263/Kol/2018 (supra), held as follows: 4. Next comes corporate guarantees issue in both these assessment years. Learned CIT(A) has referred to this tribunal various decisions (supra) in concluding that a corporate guarantee does not amount to an international transaction within the meaning of Section 92B of the Act. The revenue fails to quote any judicial precedent to the contrary. We affirm the CIT(A) findings on the instant legal issue as well. The Revenue's identical first substantive ground seeking to revive ALP adjustment on interest as loans and corporate guarantee fails therefore. 8.2. Further, the Delhi Bench of the ITAT in the case of Bharti Airtel vs. Addl. CIT in ITA No. 5816/Del/2012, order dt. 11/03/2014, held as follows :- In any event, the onus is on the Revenue authorities to demonstrate that the transaction is of such a nature as to have bearing on profits, income, losses or assets of the enterprise, and there was not even an effort to discharge this onus. Such an impact on profits, income, losses or assets has to be on real basis, even if in present or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well- being of the AEs is of deep interest to the assessee; especially, where the business of the subsidiary generates synergies for the assessee. It is in the best interest of the group that the assessee has provided corporate guarantees to its AEs. The learned senior counsel relied on the decision of the ITAT, Delhi Bench, rendered in the : 6 -: ITA No. 2756/2017 SP No.90/2018 case of Bharti Airtel Ltd. v. ACIT (43 taxman.com 150), wherein it has held providing corporate guarantee does not involve any cost to the assessee and it is not an international transaction , even under the definition of the said term as amended by the Finance Act 2012, as it does not have any bearing on profits income, losses or assets of the assessee company. 48. As an alternative contention, the learned senior counsel argued that guarantees are provided to the assessee on behalf of AEs as an integral business activity of the assessee relating to supply of general management and distribution of logistic business, worldwide. Therefore, the transaction must be tested under the combined transaction TNMM approach rather than on a stand alone basis. The ITAT, Pune Bench in the case of Demag C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our own decision in the case of EIH Ltd. (supra) and CIT vs. Rohit Ferro Tech Ltd. (supra), we hold that the corporate guarantee issued by the assessee company to its fully owned subsidiary, is not an international transaction in terms of Section 92B of the Act. Consequently,The adjustment made u/s 92CA of the Act is hereby deleted and this ground of the assessee is allowed. 12. The assessee has raised two additional grounds. Both the additional ground are legal grounds and do not require enquiry into facts. are on record Under the circumstances, we admit both these additional grounds by applying the judgment of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. vs Commissioner Of Income 1998 229 ITR 383 SC. 13. After hearing rival contentions, we find that the issue of deduction of education cess is covered in favour of the assessee by the decision of the Hon ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. CIT [D.B. Income Tax Appeal No. 52/2018] The Hon ble Bombay High Court in the case of Sesa Goa Ltd. vs. JCIT reported in [2020] 117 taxmann.com 96 (Bombay) held that education cess cannot be disallowed by invoking S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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