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TMI Blog2025 (4) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... aw materials/finished products for the assessee and selling finished products manufactured by the assessee in the neighbouring countries. During the year, the assessee facilitated the Stand by Letter of Credit (in short 'SBLC') facility of Rs. 33,16,64,500/- to Lava HK by issuing guarantee to its bank, i.e. Bank of Baroda which extended the said guarantee to HDFC Bank the lender of Lava HK. This transaction was examined by the Ld. Transfer Pricing Officer (in short 'the TPO') who proposed to make an adjustment in respect of guarantee issued by the assessee by imputing notional commission equivalent to the commission charged by State Bank of the India on bank guarantee issued to its customers. Accordingly, the TPO applied the rate of commission of 1.3% being commission charged by SBI on bank guarantee issued for an amount in excess of Rs. 10 Crores and made an adjustment of Rs. 8,27,766/- by considering the period for which credit limit was availed by Lava HK under SBLC. The same was sustained by the ld. DRP for which the assessee is in appeal before us by raising following grounds no.2 with its sub-ground no.2.1. "2. That the assessing officer erred on facts and in law in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue has been extensively examined by the Bench on which both of us were in quorum and the Bench has considered the ratio of decision of Mumbai Bench of the Tribunal in the case of CIT v. Everest Kento Cylinders Ltd. [2015] 58 taxmann.com 254 (Bom.) and has concluded that there is no difference between bank guarantee and SBLCs as compared to corporate guarantees. Further, we have also concluded that issuance of SBLC in the international transaction can be put to ALP tests. As for completeness, the observations and finding of the Bench in the case of Anand NVH Products Pvt. Ltd. in ITA No.705/Del/2022, order dated 02.12.2024 is reproduced below:- "11. We have given thoughtful consideration to the matter on record. Taking ground Nos.5 to 7, we are of the view that in common parlance, there is no difference between a Bank Guarantee and an SBLC in regards to their intended purpose however they may be governed by different rules and local laws with regard to their enforceability. However, for the purpose of issue before us, if the provision of benefit of any guarantee to AE has a bearing on the profits, income, losses or assets of the company and the overall risk exposure of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered the fact that a sum of Rs. 4,47,649/- was not conceded in the return but was adhoc acceptance during the course of assessment, the assessee could not be bound by it. The Tribunal as the second fact finding authority had gone into factual aspects in great detail and therefore having interpreted the law as it stood on the relevant date the order passed cannot be faulted. In the matter of guarantee commission, the adjustment made by the TPO were based on instances restricted to the commercial banks providing guarantees and did not contemplate the issue of a Corporate Guarantee. No doubt these are contracts of guarantee, however, when they are Commercial banks that issue bank guarantees which are treated as the blood of commerce being easily encashable in the event of default, and if the bank guarantee had to be obtained from Commercial Banks, the higher commission could have been justified. In the present case, it is assessee company that is issuing Corporate Guarantee to the effect that if the subsidiary AE does not repay loan availed of it from ICICI, then in such event, the assessee would make good the amount and repay the loan. The considerations which applied for issuance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment contrarily brought to our notice, we hereby direct that the adjustment in respect of corporate guarantee provided to AEs be determined at date of 0.5% instead of 1.3% determined by the revenue." 16. Here in case before us, we find that the assessee's bank has charged 0.50% per annum for the period after 17.06.2018 till 17.06.2022 and before that assessee was charged @ 1% for the period 17.06.2016 to 17.06.2018. Thus, in the financial year 2016-17 assessee had paid 1% as the cost of extending the SBLC to AE, for which assessed should have been compensated by the AE. Therefore, we are inclined hold that Ld. AO/TPO shall consider rate of 1%, to be ALP for this international transaction and accordingly we allow the grounds No.5-7. Further as per the provisions of Rule 115 of the Income-tax Rules, 1962, the TPO will apply the correct conversion rate for which assessee may also be given opportunity of hearing." 6. In the light of the above observation, we are inclined to hold that the Ld. Assessing Officer/Ld. TPO shall consider rate of 0.5% as against 1.3% to ALP for international transaction and accordingly determine the adjustment required to be made. Ground no.2 and its sub-g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts also bear the signatures of the same person. It is highly improbable, almost impossible, that a person, who has been regularly issuing receipts and writing dates on them and on other documents, would erroneously write the next month on any document written by them. This error becomes all the more improbable when it is seen that the said person has also issued another receipt (no.399) just before issuing this receipt. Another improbability in a genuine error would be writing both the day as well as month wrongly by a person working on the last day of the financial year on any document. These facts prove beyond doubt that it is not a case of a genuine error where a person wrongly wrote some other date on 31/03/2016 and later on corrected it by overwriting. It is a clear cut case of forgery where a receipt issued in the month of April, 2016 has been back-dated by dating it as 31/03/2016. 4.5 The above fact is further strengthened by the fact that the cheque was debited in the bank account of the assessee on 15/04/2016 which leaves no doubt that the donation was actually made after 31/03/2016. The fact that the impugned cheque was issued on 31/03/2016 does not prove that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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