Case Law Details
Inflow Technologies Private Limited Vs ACIT (ITAT Bangalore)
The assessee, as a part of share purchase agreement, during the business structuring had given a corporate guarantee to one of its group supplier CISCO for supplies made to its AE (Inflow Singapore). According to the assessee, it did not intend to get any remuneration for the same since these activities were in the nature of shareholders / stewardship activities, and was only incidental to the main activities of the assessee. It was further submitted that it had not costed anything to the assessee in making such an arrangement. It was also contended that the above corporate guarantee did not have any bearing on the profit, loss, income, assets of the assessee so as to call it as an international transaction as contemplated u/s 92B(1) of the I.T.Act. The assessee also submitted that it was having advances of Rs.7,67,65,463 from its AE and advances from AE was well over the corporate guarantee of Rs.3,79,37,300 extended by the assessee in favour of its subsidiary. The AO / TPO rejected the submissions of the assessee and computed tax at 2% on the quantum of corporate guarantee given by the assessee to its AE.
The DRP held that the corporate guarantee given by the assessee to its AEs was an international transaction and would fall within the definition of international transaction u/s 92B of the I.T.Act brought in by Finance Act, 2012. The DRP after relying on various judicial pronouncements computed the rate at 1.6% instead of 2% computed by the AO / TPO.
The assessee being aggrieved, has filed this appeal before the Tribunal.
We have heard rival submissions and perused the material on record. The corporate guarantee is an international transaction and there is no doubt that the arm’s length price has to be computed with reference to the said transaction. However, in the instant case, it is the case of the assessee that amount of Rs.7,67,65,463 of the subsidiary is lying with the assessee on account of advance for which no interest was being charged by the subsidiary. This factual aspect has not been examined neither by the AO / TPO nor by the DRP. Hence, we are of the view that the matter needs to be examined afresh by the AO / TPO and we remit the issue to the files of the AO / TPO. It is ordered accordingly.
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