Case Law Details
PCI Limited Vs ACIT (ITAT Delhi)
The Assessing Officer made the addition of Rs.73,69,830/-qua Transfer Pricing Adjustment on account of providing corporate guarantee by the Assessee to its overseas associated enterprises companies, namely, PCI Asia Pacific Pvt. Ltd. and PCI Middle East FZE by treating the interest rate of 1.3% based on average fees charged by State Bank of India.
The said action of the Assessing Officer was challenged by the Assessee before the ld. Commissioner and it was claimed that ‘corporate guarantee’ is not an ‘international transaction’ as per Section 92 of the Act. However, the ld. Commissioner did not get impressed and following the judgment of the Hon’ble Bombay High Court in the case of CIT Vs. Everest Kanto Cylinder Ltd. (2015) 378 ITR 57 (Bom.)partly affirmed the addition qua ‘corporate guarantee’ while reducing to 0.5% instead of 1.3% as determined by the AP/TPO.
Though the Assessee has preferred the instant appeal against the impugned order on this particular issue in hand, however accepted the factual position as submitted by the ld. DR to the effect that vide order dated 10th December, 2020 the Hon’ble Madras High Court dealt with the identical issue in hand in the case of Pr. CIT Vs. M/s. Redington (India) Ltd. 430 ITR 298 and has clearly held that the ‘corporate guarantee’ is covered within the definition of ‘International Transaction’.
The Hon’ble High Court in the said case has also considered the Explanation introduced in Section 92B of the Act with effect from 1st April, 2002 by the Finance Act (2012) wherein it is clarified that the expression ‘International Transaction’ shall include ‘guarantee’ and held the same as retrospective.
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