The Ahmedabad bench Income Tax Appellate Tribunal (ITAT) confirmed the upward adjustment made towards the guarantee fee in favor of the bank with respect to transactions carried out by Associate Enterprise.
The Assessee Intas Pharmaceuticals Ltd.is having international transactions with its Associated Enterprises. The assessee gave corporate guarantee in favor of CitiBank in respect of certain transactions carried out by the Associated Enterprises of the assessee. The Assessing Officer made an upward adjustment of Rs. 5,68,800/- pertaining to guarantee undertaken by the assessee to be at arm’s length.
Aggrieved by the order assesee filed an appeal before the CIT(Appeal). The CIT(A) who restricted the corporate guarantee fees @ 0.8% on the basis of submissions made by the assessee before the TPO/AO. Therefore the revenue filed an appeal before the tribunal.
The tribunal observed that it is well settled law that the transaction of furnishing corporate guarantee to overseas Associated Enterprises constitutes an international transaction and would be subject to Transfer Pricing regulations.
The assessee during the course of assessment proceedings has himself accepted to charge guarantee fee @ 0.8% as observed by CIT(A) in the appellate order. Accordingly, in view of the judicial precedents on the subject and the assessee’s own acceptance placed on record before the AO / TPO, we find no infirmity in the order of CIT(A)
After analyzing the submission of both parties, the bench comprising Annapurna Gupta (Accountant Member) & Siddhartha Nautiyal, (Judicial Member) confirmed the upward adjustment made towards the guarantee fee in favor of the bank with respect to transactions carried out by Associate Enterprise.
S. N. Soparkar, the counsel appeared for assessee and Dr. Darsi Suman Ratnam, counsel appeared for the Department representatives.
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