Case Law Details
MUFG Bank Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that counter guarantee with negligible risks can not per se be compared with guarantee offered by independent parties/ banks shouldering very high risk parameters as also observed by the co-ordinate bench in other assessment years.
Facts- The assessee is a foreign company incorporated under the laws of Japan and is a tax resident of Japan. The assessee operates its banking business in India under the license from RBI and is primarily engaged in wholesale banking operations in distinction to retail banking.
AO while framing the assessment order under 144C(13) r.w. Section 143(3) of the Act dated 31st October 2017 inter alia continued with the transfer pricing adjustments of INR 13,66,36,735/- made to the returned income of the assessee in respect of international transactions aboutthe receipt of counter-guarantee commission (impugned international transaction) from its Associated Enterprises. The AO in terms of TPO/DRP directions made an upward adjustment to the income of the Assessee about impugned transactions by using bank guarantee rates (average 2.63%) quoted by third-party banks as comparable uncontrolled data to determine the arms’ length price (ALP) of such impugned transaction.
Conclusion- We find rationale in the plea of the assessee that the counter guarantee with negligible risks can not per se be compared with guarantee offered by independent parties/ banks shouldering very high risk parameters as also observed by the co-ordinate bench in other assessment years. The Transfer Pricing Adjustment made in the impugned assessment order towards counter guarantee commission is thus grossly at odds with the factual position enunciated by the co-ordinate benches and hence such adjustment is totally uncalled for.
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