Assessee is Tega Industries Ltd
Engaged in providing customized solutions for mining, mineral beneficiation, bulk material handling, environment, and slurry transportation industries.
Assessee's Contention | Revenue's Contention | ITAT's Judgement |
|---|---|---|
Contended that the issuance of a corporate guarantee on behalf of its AE is not an international transaction as per Section 92B of the Act and argued that argued that it is a shareholder function and does not involve the provision of a service that warrants a separate charge. | TPO/AO/DRP treated the corporate guarantee provided by the assessee to its AEs as an international transaction. | ITAT held that a corporate guarantee qualifies as an international transaction under Section 92B (2) and Explanation (i)(c), includes "capital financing, including any type of long-term or short-term borrowing, lending or guarantee" within the inclusive definition of "international transaction." |
Argued that the TPO/AO/DRP wrongly applied the Comparable Uncontrolled Price (CUP) method to benchmark the corporate guarantee transaction, which was not in line with Section 92C (2) and Rule 10B(1)(a). | Computed an arm's length price adjustment of INR 24,79,701/- by determining a corporate guarantee fee based on the interest savings achieved by the AE due to the guarantee. | The ruling cited the Madras High Court in Principal Commissioner of Income Tax 5 vs. M/s. Redington (India) Limited, affirming corporate guarantees as international transactions. |
Highlighted that the guarantee fee was excessive, citing ITAT rates of 0.20%-0.53% and its own 0.5% precedent from AY 2018-19. | Held that the transaction qualifies under Section 92B since it affects the profits, income, losses, or assets of the enterprises and confers a benefit (lower interest rates) to the AE. | ITAT noted that the issue of corporate guarantee fee calculation has been addressed by various judicial forums, with a common range of 0.2% to 0.5% being considered justified. |
The Kolkata ITAT held that corporate guarantees constitute international transactions under Section 92B.
