| The Tax Publishers2020 TaxPub(DT) 0178 (Del-Trib) INCOME TAX ACT, 1961
Section 92C
Since ALP of international transactions qua corporate guarantee was determined by AO as well as by CIT (A) merely by relying upon the amendment vide which explanation to section 92B by the Finance Act, 2012 was introduced by treating the same having retrospective effect, was held to be prospective in nature, and thus not applicable to the year under assessment. Consequently, the addition made on account of TP adjustment qua corporate guarantee fee was liable to be deleted.
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Transfer Pricing - Computation of ALP - Corporate guarantee -
AO notice that assessee-company gave corporate guarantee to its AE. Assessee submitted that it did not realize the amount it charged to AE for which plan for restructuring was approved and the dues of the unsecured creditors were reduced. Declining the submissions made by the assessee, the AO made adjustment in ALP @ 2.58% for the corporate guarantee on the ground that the assessee exposed itself to greater risk without charging any amount from its AE. CIT (A) by invoking the provisions contained in explanation to section 92B, which was with retrospective effect from 1-4-2002 held the transaction entered into by the assessee with its AE qua corporate guarantee as an international transaction. He further, restricted the ALP of compensation for providing corporate guarantee @ 1% as against 2.58% assessed by the AO. Held: It was found that ALP of international transactions qua corporate guarantee was determined by AO as well as by CIT (A) merely by relying upon the amendment vide which explanation to section 92B by the Finance Act, 2012 was introduced by treating the same having retrospective effect, was held to be prospective in nature, and thus not applicable to the year under assessment. So, when explanation to section 92B was not applicable to the year under assessment, ALP of international transaction qua corporate guarantee could not be determined. Moreover, there was not an iota of material on file to prove that the assessee incurred any cost in providing corporate guarantee. Consequently, the addition made on account of TP adjustment qua corporate guarantee fee was deleted.
Followed:Dy. CIT v. Spentex Industries Ltd. & Vice-versa [ITA No. 4959/DEL/2014, ITA No. 6243/DEL/2014, ITA No. 6244/DEL/2014, CO NO. 167/DEL/2017 A/o ITA No. 4959/DEL/2014, CO NO. 166/DEL/2017 A/o ITA No. 6243/DEL/2014, CO NO. 168/DEL/2017 A/o ITA No. 6244/DEL/2014, dt. 17-5-2018]
REFERRED :
FAVOUR : In assessee's favour
A.Y. :
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