TMI Blog2017 (1) TMI 1819X X X X Extracts X X X X X X X X Extracts X X X X ..... the income arose in France, as the guarantee was given by the assessee, a French company to BNP Paribas, a French Bank, in France, therefore, Article-23.3 has no applicability as income arose out of India. Respectfully, following the decisions of the Tribunal, these grounds of the assessee are allowed. - Shri Joginder Singh, Judicial Member, and Shri Ashwani Taneja, Accountant Member For the Assessee by Shri M.M. Golvala Shri Raunak Vardhan For the Revenue by Shri Jasbir Chouchan CIT-DR ORDER Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 26/07/2016 of the Ld. Disputes Resolution Panel-1 (hereinafter DRP), Mumbai. The ground nos. 1 to 4, raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave a guarantee to BNP Paribas in France, whereunder some of its worldwide subsidiaries are entitled to avail of various facilities from a local BNP Paribas Branch, without the subsidiary furnishing any security. The English translation of the guarantee is available at page 19 to 27 of the application before the ld. DRP. For furnishing the said guarantee and in keeping with Transfer Pricing Regulations, the assessee raised an Arms Length Charge on its Indian affiliates. The guarantee commission charged by the assessee was at a flat rate of 0.5% on the guaranteed amount, irrespective of amount actually utilized. In the case of the Capgemini India, the guarantee amount was USD 50 million and in the case of Capgemini business services (India), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no liability to tax in India on the said business income. It was further contended that since Article 7 was applicable to the said guarantee commission, Article 23 was not at all applicable thereto. It was also submitted that this was further clear from the provisions of Article 23.1 itself. iii. Without prejudice to both the above contentions, it was contended as a second alternative that even under Article 23.3 the said amount was not taxable in India, as the said article could apply, only if income arises in India. In the instant case, the income arises in France because the guarantee is given by the appellant, a French company, to BNP Paribas in France and, therefore, even under Article 23.3 the said guarantee commission could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No.7198/Mum/2012) dated 28/03/2016, decided the issue in favour of the assessee. The relevant portion from the order of the Tribunal is reproduced hereunder for ready reference:- 3. Insofar as Ground of appeal nos. 1 to 4 are concerned, they relate to a single issue arising from the action of income-tax authorities in holding that guarantee commission earned by the assessee amounting to Rs.33,40,347/- was liable to tax in India. 4. In this context, the relevant facts are that the appellant is a foreign company incorporated in France and is a tax resident of France. It is engaged in the business of providing various support, sustenance and developmental service to Capgemini Group companies across the world. During the year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s own case for Assessment Year 2009-10 vide ITA No. 7198/Mum/2012 dated 28.3.2016. The relevant discussion in the order of the Tribunal dated 28.3.2016 (supra) reads as under :- 3. Rival contentions have been heard and record perused. Facts in brief are that the assessee is a resident of France and does not have a permanent establishment in India. During the year assessee has given a corporate guarantee BNP Paribas, a French Bank in France, on behalf of its various subsidiaries worldwide. During the year under consideration, in India, two subsidiaries of the assessee M/s.Capgemini India Pvt. Ltd. and Capgemini Business Services (India) Ltd. were sanctioned credit facilities by the Indian Branches of BNP Paribas, which credit faciliti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Before us, it was a common point between the parties that the facts and circumstances of the dispute in the instant year are similar to those considered by the Tribunal in Assessment Year 2009-10 (supra). It was also a common point between the parties that decision of the Tribunal dated 28.3.2016 (supra) continues to hold the field and, therefore, following the aforesaid precedent, in the instant year also the guarantee commission of Rs. 33,40,347/- earned by the assessee from the two associate Indian concerns cannot be held to be taxable in India. As a consequence, on this aspect, the assessee succeeds. In the light of the foregoing order, the one of the reason that the order for Assessment Year 2012-13 of Ld. DRP has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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