ITAT Holds Corporate Guarantee as International Transaction, Grants Relief to Tega Industries by Restricting TP Adjustment to 0.5% Fee

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT ) granted relief to Tega Industries by restricting the Transfer Pricing (TP) adjustment to 0.5% in respect of a corporate guarantee fee, while holding that such a guarantee qualifies as an international transaction under Section 92B of the Income Tax Act,1961.

Tega Industries Ltd.,appellant-assessee, filed its return of income for Assessment Year (AY) 2021-22 on 15.03.2022, declaring total income of ₹118.64 crore. The company was engaged in providing customized solutions to industries such as mining, mineral beneficiation, and slurry transportation.

The case was selected for complete scrutiny through Computer Assisted Scrutiny Selection (CASS), and a notice under Section 143(2) was issued on 28.06.2022. In response, the assessee submitted its reply on 06.07.2022. As the case involved a transfer pricing risk, it was referred to the Transfer Pricing Officer (TPO) with the required approval.

The TPO passed an order on 25.10.2023 under Section 92CA(3), proposing an Arm’s Length Price adjustment of ₹24.79 lakh. The assessee raised objections before the Dispute Resolution Panel, which issued directions under Section 144C(5) on 19.09.2024. However, the adjustment remained unchanged.

The final assessment order was passed by adding the adjustment to the assessee’s income. Aggrieved by this, the assessee filed the present appeal before the tribunal.

The tribunal heard both sides and examined the submissions and paper book filed. No separate written submission was filed before the appellate tribunal; only earlier submissions made before the AO and TPO, along with copies of tribunal’s orders in the assessee’s own case, were placed on record.

During the appeal, the assessee's representative submitted that the only issue under dispute was the adjustment made on account of corporate guarantee, as detailed in the Dispute Resolution Panel (DRP)’s directions, which outlined the nature of the transaction, the method adopted, and the adjustment proposed by the TPO.

The assessee argued that a corporate guarantee does not qualify as an international transaction. Without prejudice to this claim, it was alternatively submitted that if considered, the corporate guarantee fee should be computed at 0.5%, as accepted in the assessee’s own case for AY 2018-19 in ITA No. 539/Kol/2022, order dated 08.04.2024.

The two member bench comprising George Mathan (Judicial Member) and Rakesh Mishra( Accountant Member) after considering the submissions and statutory provisions, held that the corporate guarantee qualified as an international transaction under Section 92B of the Act. However, since the Coordinate Bench had upheld a 0.5% fee in the assessee’s own case for AY 2018-19, the tribunal granted partial relief and directed the TPO/AO to adopt the same rate and delete the excess adjustment.

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