Guarantee does not amount to an international transaction under section 92B of the Income Tax Act. ITAT
ABCAUS Case Law Citation:
ABCAUS 3162 (2019) (10) ITAT
Important case law relied upon by the parties:
M/s Suzlon Energy Ltd.-vs-ACIT (2017) 188 TTJ 278
Micro Ink Ltd Vs ACIT [(2016) 176 TTJ (Ahd)].
Siro Clinpharm Pvt Ltd VS DCIT and vice versa [TS 144 ITAT (2016) TP]
CIT Vs Ansal Landmark Townships Pvt Ltd [(2015) 377 ITR 635]
Rajeev Kumar Agarwal Vs ACIT [(2014) 249 ITD 363]
Krishnaswamy S Pd Vs Union of India [(2006) 281 ITR 305 (SC)]
In the instant case, cross appeals were filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals) inter alia on the counts that he partly upheld the adjustment made by the Transfer Pricing Officer (T..P.O.) in relation to fee for Financial Guarantee given by the appellant on behalf to its Associate Enterprise (A.E).
It was the case of the assessee that the financial guarantee was in the nature of the share holders activity, as it was to enable the A.E pay purchase consideration of acquisition, decision in relation to which was made by the appellant.
Further it was contended that the financial guarantee is quasi-equity in nature as the loan availed through financial guarantee had been repaid from time to time equity infusion. The provision of guarantee is not covered under the transfer pricing regulations.
Thus, it was contended that the CIT (A) erred in law and in facts in not undertaking a credit rating analysis for the appellant and the A.E and computed adjustment on an adhoc basis.
It was submitted that The CIT (A) had also failed to appreciate that no cost was incurred by the appellant in the provision of the performance guarantees and the said performance guarantees could not be equated with financial guarantee.
According to the assessee, mainly the following aspect had not been appreciated by the CIT(A)
(i). The service liability risk was borne by the Appellant as the services are either provided by its delivery centre in India (Offshore) or branch in UK (onsite); and
(ii). The said performance guarantee was in the nature of shareholder activity and quasi equity in nature.
(iii) No cost was incurred by the Appellant in provisions of these performance guarantees; and
(iv) The said performance guarantees cannot be equated with financial guarantee.
The Tribunal noted the order passed by the Hon’ble Co-ordinate Bench in assessee’s own case and also the recent judgment of the Co-ordinate Bench held that such a guarantee does not amount to an international transaction under section 92B of the Income Tax Act, 1961 (the Act).
Union Budget 2024-25 - Highlights of Tax Proposals - Watch Live The Union Finance Minister MS Sitharaman shall be presenting…
Before Amendment Section 14A cannot be invoked if no exempt income was earned - ITAT In a recent judgment, ITAT…
Patent Agent Exam 2025 & Trade Marks Agent Exam 2025. Last date to apply 08.08.2024 Office of the Controller General…
Penalty u/s 270A(9)(a) can not be levied on adhoc additions - ITAT In a recent judgment, ITAT Hyderabad has held…
Cancellation of GST registration with retrospective effect must be informed by reason - High Court In a recent judgment, Hon'ble…
CPC intimation u/s 143(1) valid though digitally signed after expiry of limitation period - ITAT In a recent judgment, ITAT…