The Dy. Commr. of Income Tax, Circle-1(1),, RAJKOT-GUJARAT v. M/s. Jyoti Automation Pvt. Ltd.,, RAJKOT-GUJARAT

ITA 183/RJT/2015 | 2009-2010
Pronouncement Date: 28-11-2017 | Result: Dismissed

Appeal Details

RSA Number 18324914 RSA 2015
Assessee PAN AABCJ1947R
Bench Rajkot
Appeal Number ITA 183/RJT/2015
Duration Of Justice 2 year(s) 6 month(s) 20 day(s)
Appellant The Dy. Commr. of Income Tax, Circle-1(1),, RAJKOT-GUJARAT
Respondent M/s. Jyoti Automation Pvt. Ltd.,, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2017
Appeal Filed By Department
Tags covered
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 28-11-2017
Assessment Year 2009-2010
Appeal Filed On 08-05-2015
Judgment Text
ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 1 OF 34 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO. 183/RJT/2015 & CO NO.48/RJT/2015 ASSESSMENT YEAR: 2009-10 THE DCIT ..................APPELLANT CIRCLE-1(1) RAJKOT VS. M/S. JYOTI CNC AUTOMATION PVT LTD ........................ RESPONDENT & PLOT NO. G-506 LODHIKA GIDC CROSS OBJECTOR VILLAGE METODA RAJKOT [PAN : AABCJ 1947 R] APPEARANCES BY: HARGOVIND SINGH FOR THE APPELLANT DM RINDANI FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 03.11.2017 DATE OF PRONOUNCING THE ORDER : 28.11.2017 O R D E R PER PRAMOD KUMAR AM: 1. THIS APPEAL FILED BY THE ASSESSING OFFICER AND THE CROSS OBJECTION FILED BY THE ASSESSEE CHALLENGE CORRECTNESS OF THE ORDER DATED 2 2 ND MARCH 2013 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 14 3(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2009-10. 2. IN THE FIRST GROUND OF APPEAL OF THE ASSESSING O FFICER FOLLOWING GRIEVANCE HAS BEEN RAISED: 1. THE HONBLE CIT(A)-I RAJKOT HAS ERRED IN LAW A ND ON FACT OF THE CASE IN RESTRICTING THE ARMS LENGTH INTEREST RATE ON LOAN F ROM 7.85% TO 5.75% FOR LOAN GIVEN TO ASSOCIATED ENTERPRISE. 3. THE GRIEVANCE RAISED BY THE ASSESSEE IN THE CROS S OBJECTION WHICH PERTAINS TO THE SAME ISSUE AND WILL THEREFORE BE TAKEN UP ALON GWITH THE ABOVE GROUND OF APPEAL IS AS FOLLOWS: THE HONBLE COMMISSIONER OF INCOME-TAX (APPEALS)-1 RAJKOT HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN UPHOLDING TH E ARMS LENGTH INTEREST RATE @ 5.75% FOR LOAN GIVEN TO ASSOCIATED ENTERPRISE 4. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE A SSESSEE THROUGH ITS FULLY OWNED FRENCH SUBSIDIARY BY THE NAME OF JYOTI SAS HAS ACQ UIRED AN EXISTING COMPANY IN FRANCE BY THE NAME OF HURON GAFFENSTADEN SAS. THE ASSESSEE FUNDED THIS ACQUISITION BY PROVIDING EUROS 42 50 00 000 OF EQU ITY CAPITAL AND WHAT WAS TERMED ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 2 OF 34 AS QUASI CAPITAL IN THE NATURE OF INTEREST FREE UN SECURED LOAN AMOUNTING TO EUROS 47 74 595. DURING THE COURSE OF PROCEEDINGS BEFORE THE TPO AN ARM LENGTH PRICE ADJUSTMENT WAS MADE FOR INTEREST ON THIS INTEREST FREE UNSECURED LOANS AT LIBOR PLUS AVERAGE INTEREST SPREAD IN EUROPE AND 100 BASI S POINT FOR FOREIGN EXCHANGE RISK. AS THE APPLICABLE LIBOR RATE WAS 4.12% AVERA GE SPREAD RATE IN EUROPE WAS 2.73% THE ADJUSTMENT WAS MADE AT 7.85% I.E. 4.12% PLUS 2.73% PLUS 1% FOR EXCHANGE RISK. THE ADJUSTMENT WAS THUS QUANTIFIED A T RS 2 39 69 696. HOWEVER WHEN MATTER TRAVELLED IN APPEAL BEFORE THE CIT(A) WHILE LEARNED CIT(A) UPHELD THE ADJUSTMENT IN PRINCIPLE HE SCALED DOWN THE ADJUSTM ENT ON TWO COUNTS- FIRST HE DELETED THE 100 BASIS POINT OR 1% RATE ADJUSTMENT O N ACCOUNT OF FOREIGN EXCHANGE RISK AND - SECOND HE SUBSTITUTED THE AVERAGE INT EREST SPREAD IN FRANCE BY AVERAGE INTEREST SPREAD IN EUROPE WHICH WERE AT 2.73% AND 1 .63% RESPECTIVELY. THE ALP ADJUSTMENT WAS THUS TAKEN AT 5.75% WHICH WORKED OUT TO 1 65 94 605. NONE OF THE PARTIES IS SATISFIED. WHILE ASSESSING OFFICER SEEKS THE RESTORATION OF ALP ADJUSTMENT AT 7.85% ASSESSEES CONTENTION THAT NO SUCH ALP AD JUSTMENT NEEDS TO BE MADE AT ALL. BOTH THE PARTIES IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. LEARNED COUNSEL FOR THE ASSESSEE HAS BEEN VERY F AIR IN NOT PRESSING THE CROSS OBJECTION AT ALL AND ALL THAT WE NEED TO DECIDE T HEREFORE IS THE CORRECTNESS OF TWO VARIATIONS MADE BY THE CIT(A) IN THE IMPUGNED ADJUS TMENT. WE MAY IN THIS REGARD REFER TO THE FOLLOWING OBSERVATIONS MADE BY THE LEA RNED CIT(A):- 4.3 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF TH E ASSESSING OFFICER IN HIS ASSESSMENT OF ORDER AND THE SUBMISSION OF THE APPEL LATE COMPANY. AT THE FIRST INSTANCE I DO NOT ACCEPT THE APPELLAN TS CONTENTION REGARDING THE QUASI EQUITY AND COMMERCIAL EXPEDIENCY RELYING UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF TATA AUTOCOMP SYSTEM S LIMITED (ITA NO.7354/MUM/11) WHEREIN IT WAS HELD THAT THE INTE REST FREE LOAN IS SUBJECT TO ARMS LENGTH TEST IRRESPECTIVE OF COMMERCIAL EXPEDI ENCY. THE APPELLANT COMPANY HAS ALSO CONTENDED THAT REQUI SITE APPROVAL OF THE RESERVE BANK OF INDIA (RBI) WAS OBTAINED AND RBI WH ILE GIVING APPROVAL KEEPS IN MIND ALL THE PROVISIONS OF LAW FURTHER RBI HAS A CCEPTS THE REMITTANCE AS IN THE FORM OF QUASI CAPITAL THEREFORE NO INTEREST NEED TO BE COMPUTED FOR THE PURPOSE OF THE INCOME TAX ACT 1961 HOWEVER SAME VI EW IS NOT ACCEPTABLE BECAUSE PERMISSION IS GIVEN BY THE RBI IS FOR TOTAL LY DIFFERENT PURPOSE. THE RBI IS ONLY CONCERNED WITH FOREIGN EXCHANGE AND THEY WO ULD LOOK MATTER FROM DIFFERENT POINT OF VIEW. HOWEVER WHAT IS THE ARMS LENGTH PRICE (ALP) OF LOAN ADVANCED TO ASSOCIATED ENTERPRISE IS NEED TO BE DEC IDED CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. IN PRESENT CASE SINC E ASSOCIATED ENTERPRISE IS SITUATED IN FRANCE IT IS MOST APPROPRIATE TO CONSID ER MARK UP ON THE BASIS OF AVERAGE SPREAD OVER LIBOR CHARGED IN FRANCE RATHER THAN ADOPTING MARK UP ON THE BASIS OF AVERAGE SPREAD OVER LIBOR CHARGED I N WHOLE EUROPEAN REGION. THE AVERAGE SPREAD CHARGED IN FRANCE OUT OF ANALYSI S CARRIED OUT BY TPO HIMSELF IS 163 BASIS POINT AS COMPARED TO 273 BASIS POINT OF WHOLE EUROPE THE SPREAD OVER LIBOR WOULD DEPEND ON VARIOUS ECONOMIC FACTORS OF EACH AND EVERY COUNTRY COMING IN EUROPEAN REGION. FURTHER TH E ARGUMENT OF THE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 3 OF 34 APPELLANT COMPANY REGARDING CONSIDERING INTERNAL CU P OF IDBI BANK WHEREIN BANK HAS CHARGED INTEREST @ LIBOR + 100 BASIS POINT S IS NOT TENABLE AS THE TRANSACTIONS DOES NOT COMPARE ON THE MATRIX OF GEOG RAPHY AS WELL AS END USE OF FUND I.E. IDBI BORROWING IS TO FINANCE THE WORKI NG CAPITAL WHEREAS THE TRANSACTION IN QUESTION IS FOR ACQUISITION OF FOREI GN BUSINESS THEREFORE IT WOULD NOT RESULT IN DETERMINING AN ALP UNDER COMPARABLE U NCONTROLLED PRICE (CUP) METHOD. IN ORDER TO DETERMINE ALP UNDER CUP METHOD COMPARISON SHOULD BE MADE BETWEEN TRANSACTIONS IN SAME REGION HAVING SAM E ECONOMIC FACTORS. AS THE COMPANY TO WHICH LOAN HAS BEEN GRANTED BY TH E APPELLANT COMPANY IS SITUATED IN FRANCE COMPARISON SHOULD BE MADE WITH OTHER COMPANIES SITUATED IN FRANCE ONLY AND NOT WHOLE EUROPE THEREFORE I R EDUCE THE SPREAD CHARGE OVER EUROPE FROM 273 BASIS POINT OF WHOLE EUROPE TO 163 BASIS POINT OF FRANCE. FURTHER TPO HAS ALSO ADDED 100 BASIS POINT TOWARDS FOREIGN EXCHANGE RISK COVERAGE. FOREIGN EXCHANGE RISK IS NORMAL IN EVER Y BUSINESS WHICH CARRIES OUT TRANSACTIONS WITH PARTIES OUTSIDE INDIA. THE CU RRENCY MAY FLUCTUATE BOTH WAYS I.E IT MAY INCREASE/DECREASE RESULTING IN LOSS/GAIN TO THE APPELLANT COMPANY. NO PARTY FACTORS THE FOREIGN EX CHANGE RISK ASSUMED BY HIM AT THE TIME OF ENTERING INTO ANY INTERNATIONAL TRANSACTIONS AND NO SEPARATE CHARGES ARE RECOVERED FOR THE SAME. THIS IS DUE TO THE FACT THAT IF THE CURRENCY FLUCTUATES AND PROFIT IS EARNED BY THE APPELLANT CO MPANY IT WOULD NO! PASS ON THE PROFIT TO THE OTHER PARTY. HENCE I DIRECT THE ASSESSING OFFICER TO DETERMINE THE ARM'S LENGTH INTEREST BY CONSIDERING THE EURO LIBOR PLUS MARK UP @ 163 BASIS POINT ON THE INTEREST FREE LOAN WHICH SHALL WORK OUT @ 5.75%. THE ASSESSE E GETS THE RELIEF ACCORDINGLY. 7. WE ARE IN CONSIDERED AGREEMENT WITH VERY WELL RE ASONED ANALYSIS BY THE LEARNED CIT(A) AND THE CONCLUSIONS ARRIVED AT BY HI M. AS LEARNED CIT(A) HAS RIGHTLY HELD THE ARMS LENGTH INTEREST RATE FOR A FINANCIN G TRANSACTION IN FRANCE SHOULD TAKE INTO ACCOUNT ONLY THE AVERAGE FRENCH INTEREST SPREA D AND NOT THE AVERAGE EUROPEAN INTEREST SPREAD AS ADMITTEDLY THE CONDITIONS IN ENT IRE EUROPEAN FINANCIAL MARKET ARE NOT THE SAME. SIMILARLY SO FAR AS THE ADJUSTMENT O N ACCOUNT OF FOREIGN EXCHANGE RISK IS CONCERNED NEITHER IS IT BASED ON ANY COGENT MAT ERIAL NOR ANYWAY ONE CAN IGNORE THE FACT THAT THE EXCHANGE FLUCTUATIONS ARE INHEREN T IN COMPARABLE TRANSACTIONS AS WELL. THE ACTION OF THE LEARNED CIT(A) THUS MEETS O UR APPROVAL ON BOTH THE COUNTS. IN VIEW OF THESE DISCUSSIONS AS ALSO BEARING IN MIND ENTIRETY OF THE CASE WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AN D DECLINE TO INTERFERE IN THE MATTER. 8. GROUND NO 1 OF THE ASSESSING OFFICER AS ALSO CR OSS OBJECTION OF THE ASSESSEE ARE THUS DISMISSED. 9. IN GROUND NO. 2 THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: 2. THE HONBLE CIT(A)-I RAJKOT HAS ERRED IN LAW AND ON FACT OF THE CASE IN DELETING THE ADDITION MADE BY THE AO OF RS.2 21 16 375/- ON ACCOUNT OF DETERMINATION OF ARMS LENGTH PRICE ON THE CORPORATE GUARANTEE PROVIDED BY THE APPELLANT COMPANY TO THE BANKS ON BEHALF OF ASSOCIA TED ENTERPRISE. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 4 OF 34 10. THE ASSESSEE HAD ISSUED CERTAIN CORPORATE GUARA NTEES FOR AN AMOUNT OF EUROS 11.25 MILLION TO ITS ASSOCIATED ENTERPRISES SO AS TO FACILITATE THE AES BORROWINGS ABROAD. THE ASSESSEE DID NOT CHARGE ANY FEES OR COM MISSION FOR THE ISSUANCE OF SUCH GUARANTEES. THE TPO WAS OF THE VIEW THAT THE A SSESSEE OUGHT TO HAVE CHARGED APPROPRIATE FEES FOR THE SAME AND ON THE BASIS OF THIS LINE OF REASONING AN ALP ADJUSTMENT OF RS.2 21 16 375 WAS MADE. TO ADJUDICAT E ON THIS GRIEVANCE OF THE ASSESSING OFFICER IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT THE LEARNED CIT(A) HAS DELETED THE IMPUGNED ADJUSTMENT ON ACCOUNT OF NOTIO NAL FEE FOR ISSUANCE OF CORPORATE GUARANTEES ON THE GROUND THAT THE ISSUAN CE OF SUCH A CORPORATE GUARANTEE BY THE ASSESSEE WITHOUT INCURRING ANY CO STS AND WITHOUT HAVING ANY IMPACT ON HIS PROFITS INCOMES LOSSES OR ASSETS D OES NOT AMOUNT TO AN INTERNATIONAL TRANSACTION. THAT IS THE SHORT GROUND ON WHICH THE DECISION OF THE LEARNED CIT(A) RESTS. BEYOND THIS BROAD LEGAL PRINCIPLE LEARNED C IT(A) HAS NOT DEALT WITH THE FACTS OF THE CASE AND WE ALSO THEREFORE REFRAIN FROM DOIN G SO. 11. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY A COORDINATE BENCH DECISION OF THIS TR IBUNAL IN THE CASE OF MICRO INK LTD VS ACIT [(2016) 176 TTJ 8 (AHD)]. IN ALL FAIRNE SS WE MUST PLACE ON RECORD THE FACT THAT HONBLE HIGH COURT HAS ADMITTED APPEAL A GAINST THAT ORDER AND ON THE SAME ISSUE BUT THAT DOES NOT DILUTE BINDING NATURE OF THE DECISION AS NOW THOUGH FOR ALL PRACTICAL PURPOSES THE FORUM FOR ADJUDICAT ION OF ASSESSING OFFICERS GRIEVANCE GETS SHIFTED TO A HIGHER FORUM. 12. WE MAY ADD FOR THE SAKE OF COMPLETENESS THAT IN THE CASE OF MICRO INK (SUPRA) THE COORDINATE BENCH HAS INTER ALIA OBSE RVED AS FOLLOWS: 21. IT IS ONLY ELEMENTARY THAT THE DETERMINATION OF ARM'S LENGTH PRICE UNDER THE SCHEME OF THE INTERNATIONAL TRANSFER PRIC ING SET OUT IN THE INCOME-TAX ACT 1961 CAN ONLY BE DONE IN RESPECT O F AN 'INTERNATIONAL TRANSACTION'. SECTION 92(1) PROVIDES THAT '(A)NY I NCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE'. IN ORDER TO ATTRACT THE ARM'S LENGTH PRICE ADJUSTMENT THEREFORE A TRANSACTION HAS TO BE AN 'INTERNATIONA L TRANSACTION' FIRST. THE EXPRESSION 'INTERNATIONAL TRANSACTION' IS A DEF INED EXPRESSION. SECTION 92B DEFINES THE EXPRESSION 'INTERNATIONAL T RANSACTION' AS FOLLOWS: '92B - MEANING OF INTERNATIONAL TRANSACTION (1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 92 92C 92D AND 92E 'INTERNATIONAL TRANSACTION'' MEANS A TRANSACTI ON BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES EITHER OR BOTH OF WHOM ARE NON-RESIDENTS IN THE NATURE OF PURCHASE SALE OR LEASE OF TANGIBL E OR INTANGIBLE PROPERTY OR PROVISION OF SERVICES OR LENDING OR B ORROWING MONEY OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFI TS INCOME LOSSES OR ASSETS OF SUCH ENTERPRISES AND SHALL INCLUDE A MUTU AL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES FOR THE ALLOCATION OR APPORTIONMENT OF OR ANY CONTRIBUTION TO ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WI TH A BENEFIT SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUCH ENTERPRISES. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 5 OF 34 (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE W ITH A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL FOR THE PURPOS ES OF SUB-SECTION (1) BE DEEMED TO BE A TRANSACTION ENTERED INTO BETWEEN TWO ASSOCIATED ENTERPRISES IF THERE EXISTS A PRIOR AGREEMENT IN R ELATION TO THE RELEVANT TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOC IATED ENTERPRISE OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERM INED IN SUBSTANCE BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERP RISE. EXPLANATION : - FOR THE REMOVAL OF DOUBTS IT IS HE REBY CLARIFIED THAT (INSERTED BY THE FINANCE ACT 2012 THOUGH WITH RETR OSPECTIVE EFFECT FROM 1ST APRIL 2002) (I) THE EXPRESSION 'INTERNATIONAL TRANSACTION' SH ALL INCLUDE (A) THE PURCHASE SALE TRANSFER LEASE OR USE OF TANGIBLE PROPERTY INCLUDING BUILDING TRANSPORTATION VEHICLE MACHINE RY EQUIPMENT TOOLS PLANT FURNITURE COMMODITY OR ANY OTHER ARTICLE P RODUCT OR THING; (B) THE PURCHASE SALE TRANSFER LEASE OR USE OF INTANGIBLE PROPERTY INCLUDING THE TRANSFER OF OWNERSHIP OR THE PROVISIO N OF USE OF RIGHTS REGARDING LAND USE COPYRIGHTS PATENTS TRADEMARKS LICENCES FRANCHISES CUSTOMER LIST MARKETING CHANNEL BRAND COMMERCIAL SECRET KNOW -HOW INDUSTRIAL PROPERTY RIGHT EXTERIOR DESI GN OR PRACTICAL AND NEW DESIGN OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE; (C) CAPITAL FINANCING INCLUDING ANY TYPE OF LONG -TERM OR SHORT-TERM BORROWING LENDING OR GUARANTEE PURCHASE OR SALE O F MARKETABLE SECURITIES OR ANY TYPE OF ADVANCE PAYMENTS OR DEFE RRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DURING THE COU RSE OF BUSINESS; (D) PROVISION OF SERVICES INCLUDING PROVISION OF MARKET RESEARCH MARKET DEVELOPMENT MARKETING MANAGEMENT ADMINISTR ATION TECHNICAL SERVICE REPAIRS DESIGN CONSULTATION AGENCY SCI ENTIFIC RESEARCH LEGAL OR ACCOUNTING SERVICE; (E) A TRANSACTION OF BUSINESS RESTRUCTURING OR RE ORGANISATION ENTERED INTO BY AN ENTERPRISE WITH AN ASSOCIATED ENTERPRISE IRRESPECTIVE OF THE FACT THAT IT HAS BEARING ON THE PROFIT INCOME LOS SES OR ASSETS OF SUCH ENTERPRISES AT THE TIME OF THE TRANSACTION OR AT AN Y FUTURE DATE; (II) THE EXPRESSION 'INTANGIBLE PROPERTY' SHALL I NCLUDE (A) MARKETING RELATED INTANGIBLE ASSETS SUCH AS TRADEMARKS TRADE NAMES BRAND NAMES LOGOS; (B) TECHNOLOGY RELATED INTANGIBLE ASSETS SUCH AS PROCESS PATENTS PATENT APPLICATIONS TECHNICAL DOCUMENTATION SUCH A S LABORATORY NOTEBOOKS TECHNICAL KNOWHOW; (C) ARTISTIC RELATED INTANGIBLE ASSETS SUCH AS LITERARY WORKS AND COPYRIGHTS MUSICAL COMPOSITIONS COPYRIGHTS MAPS ENGRAVINGS; (D) DATA PROCESSING RELATED INTANGIBLE ASSETS SU CH AS PROPRIETARY COMPUTER SOFTWARE SOFTWARE COPYRIGHTS AUTOMATED D ATABASES AND INTEGRATED CIRCUIT MASKS AND MASTERS; ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 6 OF 34 (E) ENGINEERING RELATED INTANGIBLE ASSETS SUCH A S INDUSTRIAL DESIGN PRODUCT PATENTS TRADE SECRETS ENGINEERING DRAWING AND SCHEMATICS BLUEPRINTS PROPRIETARY DOCUMENTATION; (F) CUSTOMER RELATED INTANGIBLE ASSETS SUCH AS CUSTOMER LISTS CUSTOMER CONTRACTS CUSTOMER RELATIONSHIP OPEN PUR CHASE ORDERS; (G) CONTRACT RELATED INTANGIBLE ASSETS SUCH AS FAVOURABLE SUPPLIER CONTRACTS LICENCE AGREEMENTS FRANCHISE AGREEMENTS NON-COMPETE AGREEMENTS; (H) HUMAN CAPITAL RELATED INTANGIBLE ASSETS SUCH AS TRAINED AND ORGANISED WORKFORCE EMPLOYMENT AGREEMENTS UNION C ONTRACTS; (I) LOCATION RELATED INTANGIBLE ASSETS SUCH AS LEASEHOLD INTEREST MINERAL EXPLOITATION RIGHTS EASEMENTS AIR RIGHTS WATER RIGHTS; (J) GOODWILL RELATED INTANGIBLE ASSETS SUCH AS INSTITUTIONAL GOODWILL PROFESSIONAL PRACTICE GOODWILL PERSONAL GOODWILL O F PROFESSIONAL CELEBRITY GOODWILL GENERAL BUSINESS GOING CONCERN VALUE; (K) METHODS PROGRAMMES SYSTEMS PROCEDURES CAM PAIGNS SURVEYS STUDIES FORECASTS ESTIMATES CUSTOMER LI STS OR TECHNICAL DATA; (L) ANY OTHER SIMILAR ITEM THAT DERIVES ITS VALUE FROM ITS INTELLECTUAL CONTENT RATHER THAN ITS PHYSICAL ATTRIBUTES.' 22. AS ANALYZED BY A COORDINATE BENCH IN THE CASE OF BHARTI AIRTEL LTD. (SUPRA) AND SPEAKING THROUGH ONE US THE LEGAL POSI TION WITH RESPECT TO THE ABOVE DEFINITION IS AS FOLLOWS: '25. AN ANALYSIS OF THIS DEFINITION OF 'INTERNATION AL TRANSACTION' UNDER SECTION 92B AS IT STOOD AT THE RELEVANT POIN T OF TIME AND ITS BREAK-UP IN PLAIN WORDS SHOWS THE FOLLOWING: AN INTERNATIONAL TRANSACTION CAN BE BETWEEN TWO OR MORE AES AT LEAST ONE OF WHICH SHOULD BE A NON-RESIDENT. AN INTERNATIONAL TRANSACTION CAN BE A TRANSACTION O F THE FOLLOWING TYPES: IN THE NATURE OF PURCHASE SALE OR LEASE OF TANGIBL E OR INTANGIBLE PROPERTY IN THE NATURE OF PROVISION OF SERVICES IN THE NATURE OF LENDING OR BORROWING MONEY OR IN THE NATURE OF ANY OTHER TRANSACTION HAVING A BEA RING ON THE PROFITS INCOME LOSSES OR ASSETS OF SUCH ENTERPRIS ES AN INTERNATIONAL TRANSACTION SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES FOR THE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 7 OF 34 ALLOCATION OR APPORTIONMENT OF OR ANY CONTRIBUTION TO ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WI TH A BENEFIT SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO A NYONE OR MORE OF SUCH ENTERPRISES. SECTION 92B (2) COVERING A DEEMING FICTION PROVID ES THAT EVEN A TRANSACTION WITH NON-AE IN A SITUATION IN WHICH SUC H A TRANSACTION IS DE FACTO CONTROLLED BY PRIOR AGREEMENT WITH AE O R BY THE TERMS AGREED WITH THE AE. 26. LET US NOW DEAL WITH THE EXPLANATION INSERTED WITH RETROSPECTIVE EFFECT FROM 1ST APRIL 2002 I.E. RIGHT FROM THE TIME OF THE INCEPTION OF TRANSFER PRICING LEGISLATION IN IN DIA WHICH WAS BROUGHT ON THE STATUTE VIDE FINANCE ACT 2012. 27. THIS EXPLANATION STATES THAT IT IS MERELY CLARI FICATORY IN NATURE INASMUCH AS IT IS 'FOR THE REMOVAL OF DOUBTS' AND THEREFORE ONE HAS TO PROCEED ON THE BASIS THAT IT DOES NOT ALTER THE BASIC CHARACTER OF DEFINITION OF 'INTERNATIONAL TRANSACTI ON' UNDER SECTION 92B. CLEARLY THEREFORE THIS EXPLANATION IS TO BE READ IN CONJUNCTION WITH THE MAIN PROVISIONS AND IN HARMON Y WITH THE SCHEME OF THE PROVISIONS UNDER SECTION 92B. UNDER THIS EXPLANATION FIVE CATEGORIES OF TRANSACTIONS HAVE B EEN CLARIFIED TO HAVE BEEN INCLUDED IN THE DEFINITION OF 'INTERNATIO NAL TRANSACTIONS'. 28. THE FIRST TWO CATEGORIES OF TRANSACTIONS WHICH ARE STATED TO BE INCLUDED IN THE SCOPE OF EXPRESSION 'INTERNATION AL TRANSACTIONS' BY THE VIRTUE OF CLAUSE (A) AND (B) OF EXPLANATION TO SECTION 92B ARE TRANSACTIONS WITH REGARD TO PURCHASE SALE TRA NSFER LEASE OR USE OF TANGIBLE AND INTANGIBLE PROPERTIES. THESE TR ANSACTIONS WERE ANYWAY COVERED BY 2 (A) ABOVE WHICH COVERED TR ANSACTIONS 'IN THE NATURE OF PURCHASE SALE OR LEASE OF TANGIB LE OR INTANGIBLE PROPERTY'. THE ONLY ADDITIONAL EXPRESSION IN THE CL ARIFICATION IS 'USE' AS ALSO ILLUSTRATIVE AND INCLUSIVE DESCRIPTIO NS OF TANGIBLE AND INTANGIBLE ASSETS. SIMILARLY CLAUSE (D) DEALS WITH THE ' PROVISION OF SERVICES INCLUDING PROVISION OF MARKET RESEARCH MARKET DEVELOPMENT MARKETING MANAGEMENT ADMINISTRATION TECHNICAL SERVICE REPAIRS DESIGN CONSULTATION AGENCY SCI ENTIFIC RESEARCH LEGAL OR ACCOUNTING SERVICE' WHICH ARE AN YWAY COVERED BY 2(B) AND 3 ABOVE IN 'PROVISION FOR SERVICES' AND 'MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCI ATED ENTERPRISES FOR THE ALLOCATION OR APPORTIONMENT OF OR ANY CONTRIBUTION TO ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH A BENEFIT SERVICE OR FACILITY PROV IDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUCH ENTERPRISES'. TH AT LEAVES US WITH TWO CLAUSES IN THE EXPLANATION TO SECTION 92B WHICH ARE NOT COVERED BY ANY OF THE THREE CATEGORIES DISCUSSED AB OVE OR BY OTHER SPECIFIC SEGMENTS COVERED BY SECTION 92B NAM ELY BORROWING OR LENDING MONEY. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 8 OF 34 29. THE REMAINING TWO ITEMS IN THE EXPLANATION TO S ECTION 92B ARE SET OUT IN CLAUSES (C) AND (E) THERETO DEALING WITH (A) CAPITAL FINANCING AND (B) BUSINESS RESTRUCTURING OR REORGAN IZATION. THESE ITEMS CAN ONLY BE COVERED IN THE RESIDUAL CLAUSE OF DEFINITION IN INTERNATIONAL TRANSACTIONS AS IN SECTION 92B(1) W HICH COVERS 'ANY OTHER TRANSACTION HAVING A BEARING ON PROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISES'. 30. IT IS THEREFORE ESSENTIAL THAT IN ORDER TO BE COVERED BY CLAUSES (C) AND (E) OF EXPLANATION TO SECTION 92B THE TRANSACTIONS SHOULD BE SUCH AS TO HAVE BEARING ON P ROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISE. IN OT HER WORDS IN A SITUATION IN WHICH A TRANSACTION HAS NO BEARING ON PROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISE THE T RANSACTION WILL BE OUTSIDE THE AMBIT OF EXPRESSION 'INTERNATIONAL T RANSACTION'. THIS ASPECT OF THE MATTER IS FURTHER HIGHLIGHTED IN CLAUSE (E) OF THE EXPLANATION DEALING WITH RESTRUCTURING AND REOR GANIZATION WHEREIN IT IS ACKNOWLEDGED THAT SUCH AN IMPACT COUL D BE IMMEDIATE OR IN FUTURE AS EVIDENT FROM THE WORDS 'I RRESPECTIVE OF THE FACT THAT IT (I.E. RESTRUCTURING OR REORGANIZAT ION) HAS BEARING ON THE PROFIT INCOME LOSSES OR ASSETS OF SUCH ENT ERPRISE AT THE TIME OF TRANSACTION OR ON A FUTURE DATE'. WHAT IS I MPLICIT IN THIS STATUTORY PROVISION IS THAT WHILE IMPACT ON ' PROFI T INCOME LOSSES OR ASSETS' IS SINE QUA NON THE MERE FACT THAT IMPA CT IS NOT IMMEDIATE BUT ON A FUTURE DATE WOULD NOT TAKE THE TRANSACTION OUTSIDE THE AMBIT OF 'INTERNATIONAL TRANSACTION'. I T IS ALSO IMPORTANT TO BEAR IN MIND THAT AS IT APPEARS ON A PLAIN READ ING OF THE PROVISION THIS EXCLUSION CLAUSE IS NOT FOR 'CONTIN GENT' IMPACT ON PROFIT INCOME LOSSES OR ASSETS BUT ON 'FUTURE' IM PACT ON PROFIT INCOME LOSSES OR ASSETS OF THE ENTERPRISE. THE IMP ORTANT DISTINCTION BETWEEN THESE TWO CATEGORIES IS THAT WH ILE LATTER IS A CERTAINTY AND ONLY ITS CRYSTALLIZATION MAY TAKE PL ACE ON A FUTURE DATE THERE IS NO SUCH CERTAINTY IN THE FORMER CASE . IN THE CASE BEFORE US IT IS AN UNDISPUTED POSITION THAT CORPOR ATE GUARANTEES ISSUED BY THE ASSESSEE TO THE DEUTSCHE BANK DID NOT EVEN HAVE ANY SUCH IMPLICATION BECAUSE NO BORROWINGS WERE RES ORTED TO BY THE SUBSIDIARY FROM THIS BANK. 31. IN THIS LIGHT NOW LET US REVERT TO THE PROVISI ONS OF CLAUSE (C) OF EXPLANATION TO SECTION 92B WHICH PROVIDES THAT T HE EXPRESSION 'INTERNATIONAL TRANSACTION' SHALL INCLUDE 'CAPITAL FINANCING INCLUDING ANY TYPE OF LONG-TERM OR SHORT-TERM BORRO WING LENDING OR GUARANTEE PURCHASE OR SALE OF MARKETABLE SECURI TIES OR ANY TYPE OF ADVANCE PAYMENTS OR DEFERRED PAYMENT OR RE CEIVABLE OR ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINES S'. IN VIEW OF THE DISCUSSIONS ABOVE THE SCOPE OF THESE TRANSACTI ONS AS COULD BE COVERED UNDER EXPLANATION TO SECTION 92B READ WI TH SECTION 92B(1) IS RESTRICTED TO SUCH CAPITAL FINANCING TRA NSACTIONS INCLUDING INTER ALIA ANY GUARANTEE DEFERRED PAYMEN T OR RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF B USINESS AS WILL HAVE 'A BEARING ON THE PROFITS INCOME LOSSES OR ASSETS OR SUCH ENTERPRISE'. THIS PRECONDITION ABOUT IMPACT ON PROFITS INCOME LOSSES OR ASSETS OF SUCH ENTERPRISES IS A P RECONDITION ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 9 OF 34 EMBEDDED IN SECTION 92B(1) AND THE ONLY RELAXATION FROM THIS CONDITION PRECEDENT IS SET OUT IN CLAUSE (E) OF THE EXPLANATION WHICH PROVIDES THAT THE BEARING ON PROFITS INCOME LOSSES OR ASSETS COULD BE IMMEDIATE OR ON A FUTURE DATE. THE CONTENTS OF THE EXPLANATION FORTIFIES RATHER THAN MITIGATES T HE SIGNIFICANCE OF EXPRESSION 'HAVING A BEARING ON PROFITS INCOME LO SSES OR ASSETS' APPEARING IN SECTION 92B(1). 32. THERE CAN BE NUMBER OF SITUATIONS IN WHICH AN I TEM MAY FALL WITHIN THE DESCRIPTION SET OUT IN CLAUSE (C) OF EXP LANATION TO SECTION 92B AND YET IT MAY NOT CONSTITUTE AN INTER NATIONAL TRANSACTION AS THE CONDITION PRECEDENT WITH REGARD TO THE 'BEARING ON PROFIT INCOME LOSSES OR ASSETS' SET OUT IN SEC TION 92B(1) MAY NOT BE FULFILLED. FOR EXAMPLE AN ENTERPRISE MAY EX TEND GUARANTEES FOR PERFORMANCE OF FINANCIAL OBLIGATIONS BY ITS ASSOCIATED ENTERPRISES. THESE GUARANTEES DO NOT COS T ANYTHING TO THE ENTERPRISE ISSUING THE GUARANTEES AND YET TH EY PROVIDE CERTAIN COMFORT LEVELS TO THE PARTIES DOING DEALING S WITH THE ASSOCIATED ENTERPRISE. THESE GUARANTEES THUS DO NOT HAVE ANY IMPACT ON INCOME PROFITS LOSSES OR ASSETS OF THE ASSESSEE. THERE CAN BE A HYPOTHETICAL SITUATION IN WHICH A GU ARANTEE DEFAULT TAKES PLACE AND THEREFORE THE ENTERPRISE MAY HAVE TO PAY THE GUARANTEE AMOUNTS BUT SUCH A SITUATION EVE N IF THAT BE SO IS ONLY A HYPOTHETICAL SITUATION WHICH ARE AS DISCUSSED ABOVE EXCLUDED. ONE MAY ALSO HAVE A SITUATION IN W HICH THERE IS A RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF BUSINESS AND YET THESE RECEIVABLES MAY NOT HAVE ANY BEARING ON I TS PROFITS INCOME LOSSES OR ASSETS FOR EXAMPLE WHEN THESE R ECEIVABLES ARE OUT OF COST FREE FUNDS AND THESE DEBIT BALANCES DO NOT COST ANYTHING TO THE PERSON ALLOWING SUCH USE OF FUNDS. THE SITUATIONS CAN BE ENDLESS BUT THE COMMON THREAD IS THAT WHEN AN ASSESSEE EXTENDS AN ASSISTANCE TO THE ASSOCIATED EN TERPRISE WHICH DOES NOT COST ANYTHING TO THE ASSESSEE AND PA RTICULARLY FOR WHICH THE ASSESSEE COULD NOT HAVE REALIZED MONEY BY GIVING IT TO SOMEONE ELSE DURING THE COURSE OF ITS NORMAL BUSINE SS SUCH AN ASSISTANCE OR ACCOMMODATION DOES NOT HAVE ANY BEARI NG ON ITS PROFITS INCOME LOSSES OR ASSETS AND THEREFORE IT IS OUTSIDE THE AMBIT OF INTERNATIONAL TRANSACTION UNDER SECTION 92 B (1) OF THE ACT. 33. IN ANY EVENT THE ONUS IS ON THE REVENUE AUTHOR ITIES TO DEMONSTRATE THAT THE TRANSACTION IS OF SUCH A NATUR E AS TO HAVE 'BEARING ON PROFITS INCOME LOSSES OR ASSETS' OF T HE ENTERPRISE AND THERE WAS NOT EVEN AN EFFORT TO DISCHARGE THIS ONUS. SUCH AN IMPACT ON PROFITS INCOME LOSSES OR ASSETS HAS TO BE ON REAL BASIS EVEN IF IN PRESENT OR IN FUTURE AND NOT ON CONTINGENT OR HYPOTHETICAL BASIS AND THERE HAS TO BE SOME MATERI AL ON RECORD TO INDICATE EVEN IF NOT TO ESTABLISH IT TO HILT T HAT AN INTRAAE INTERNATIONAL TRANSACTION HAS SOME IMPACT ON PROFIT S INCOME LOSSES OR ASSETS. CLEARLY THESE CONDITIONS ARE NOT SATISFIED ON THE FACTS OF THIS CASE.' ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 10 OF 34 23. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THIS DECISION IS NO LONGER GOOD LAW IN THE LIGHT OF EVEREST KANTO CY LINDERS LTD. DECISION (SUPRA) AND VODAFONE INDIA SERVICES (P.) LTD. DECIS ION (SUPRA) BY HON'BLE BOMBAY HIGH COURT. 24. AS FOR HON'BLE HIGH COURT'S JUDGMENT IN THE CAS E OF EVEREST KANTO CYLINDERS LTD. (SUPRA) IT IS NECESSARY TO APPRECIA TE THE FACT THE ASSESSEE WAS CHARGING A .5% COMMISSION ON ISSUANCE OF CORPORATE GUARANTEES ON BEHALF OF THE AES AND IT COULD NOT THEREFORE BE SAID THAT THE TRANSACTION WILL HAVE NO IMPACT ON 'PROFIT S INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISE'. THIS ASPECT OF THE MATT ER IS CLEAR FROM AN OBSERVATIONS IN THE RELATED TRIBUNAL ORDER WHICH I S REPORTED AS EVEREST KANTO CYLINDERS LTD (SUPRA) TO THE EFFECT THAT 'HO WEVER IN THIS CASE THE ASSESSEE HAS ITSELF CHARGED 0.5% GUARANTEE COMM ISSION FROM ITS AE AND THEREFORE IT IS NOT A CASE OF NOT CHARGING ANY KIND OF COMMISSION FROM ITS AE'. THE TRIBUNAL DID NOTE IN THE IMMEDIATELY FOLLOWING SENTENCE IN PARAGRAPH 23 ITSELF THAT 'TH E ONLY POINT TO BE SEEN IN THIS CASE IS WHETHER THE SAME IS AT ALP OR NOT'. THE VERY FACT OF CHARGING THIS GUARANTEE COMMISSION BRINGS THE IS SUANCE OF CORPORATE GUARANTEES TO THE NET OF TRANSFER PRICING. NEVERTHE LESS THE ALP ADJUSTMENT MADE BY THE TPO WAS DELETED BY THE TRIBU NAL. AGGRIEVED BY THE RELIEF SO GIVEN BY THE TRIBUNAL THE MATTER WAS CARRIED IN FURTHER APPEAL BY THE COMMISSIONER BEFORE THE HON'BLE BOM BAY HIGH COURT WHICH EVENTUALLY UPHELD THE RELIEF GRANTED BY THE T RIBUNAL. THE APPEAL BEFORE THE HON'BLE HIGH COURT WAS BY THE COMMISSION ER AND NOT BY THE ASSESSEE AND THEREFORE THE GRIEVANCE AGAINST THE ISSUANCE OF CORPORATE GUARANTEE BEING HELD TO BE AN INTERNATION AL TRANSACTION COULD NOT HAVE COME UP FOR CONSIDERATION. OF COURSE THE ASSESSEE HAD NO OCCASION TO CHALLENGE THE STAND OF THE TRIBUNAL ON THIS ASPECT SINCE THE ADDITION ON MERITS WAS DELETED ANYWAY MAKING REVE NUE'S SUCCESS IN THIS RESPECT HOLLOW AND OF NO DAMAGE TO THE INTERES TS OF THE ASSESSEE. IT WAS IN THIS BACKDROP THAT THE ACTION OF THE TRIB UNAL WAS UPHELD IN GRANTING RELIEF TO THE ASSESSEE ON MERITS. IT IS DI FFICULT TO UNDERSTAND AS TO HOW THIS DECISION IS TAKEN AS SUPPORTING THE PRO POSITION THAT THE ISSUANCE OF CORPORATE GUARANTEE EVEN IN A CASE IN WHICH NEITHER ANY GUARANTEE COMMISSION IS CHARGED NOR ANY COSTS ARE I NCURRED IS AN INTERNATIONAL TRANSACTION. IN ANY CASE THERE IS NO THING IN THE OPERATIVE PORTION WHICH EVEN REMOTELY SUGGESTS THAT THEIR LOR DSHIPS HAD ANY OCCASION TO ADDRESS THEMSELVES TO THE QUESTION AS T O WHETHER THE ISSUANCE OF CORPORATE GUARANTEE AMOUNTS TO INTERNAT IONAL TRANSACTION. THE OPERATIVE PORTION OF THE JUDGMENT IS REPRODUCED BELOW FOR READY REFERENCE: 'IN THE MATTER OF GUARANTEE COMMISSION THE ADJ USTMENT MADE BY THE TPO WERE BASED ON INSTANCES RESTRICTED TO THE COMMERCIAL BANKS PROVIDING GUARANTEES AND DID NOT C ONTEMPLATE THE ISSUE OF A CORPORATE GUARANTEE. NO DOUBT THESE ARE CONTRACTS OF GUARANTEE HOWEVER WHEN THEY ARE COMM ERCIAL BANKS THAT ISSUE BANK GUARANTEES WHICH ARE TREATED AS THE BLOOD OF COMMERCE BEING EASILY ENCASHABLE IN THE EVENT OF DEFAULT AND IF THE BANK GUARANTEE HAD TO BE OBTAINED FROM COMME RCIAL BANKS THE HIGHER COMMISSION COULD HAVE BEEN JUSTIF IED. IN THE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 11 OF 34 PRESENT CASE IT IS ASSESSEE COMPANY THAT IS ISSUIN G CORPORATE GUARANTEE TO THE EFFECT THAT IF THE SUBSIDIARY AE D OES NOT REPAY LOAN AVAILED OF IT FROM ICICI THEN IN SUCH EVENT THE ASSESSEE WOULD MAKE GOOD THE AMOUNT AND REPAY THE LOAN. THE CONSIDERATIONS WHICH APPLIED FOR ISSUANCE OF A CORP ORATE GUARANTEE ARE DISTINCT AND SEPARATE FROM THAT OF BA NK GUARANTEE AND ACCORDINGLY WE ARE OF THE VIEW THAT COMMISSION CHARGED CANNOT BE CALLED IN QUESTION IN THE MANNER TPO HAS DONE. IN OUR VIEW THE COMPARISON IS NOT AS BETWEEN LIKE TRANSACT IONS BUT THE COMPARISONS ARE BETWEEN GUARANTEES ISSUED BY THE CO MMERCIAL BANKS AS AGAINST A CORPORATE GUARANTEE ISSUED BY HO LDING COMPANY FOR THE BENEFIT OF ITS AE A SUBSIDIARY COM PANY. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE APPEAL DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AND IT IS DISMISSED.' 25. WE ARE UNABLE TO SEE IN THE JUDGMENT OF HON'BL E BOMBAY HIGH COURT ANY SUPPORT TO THE PROPOSITION THAT ISSUANCE OF CORPORATE GUARANTEES IS INHERENTLY WITHIN THE AMBIT OF DEFINI TION OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B IRRESPECTIVE OF WHET HER OR NOT SUCH TRANSACTIONS HAVE ANY 'BEARING ON PROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISES'. REVENUE THEREFORE DOES NOT DER IVE ANY HELP FROM THE SAID DECISION. 26. COMING TO HON'BLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES (P.) LTD. (SUPRA) WHICH HAS BEEN RE LIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WE FIND THAT T HE OPERATIVE PORTION OF THIS JUDGMENT SO FAR AS RELEVANT TO THI S DISCUSSION IS AS FOLLOWS: '213. THE AMENDMENT TO SECTION 2(47) RAISES SEVERAL IMPORTANT QUESTIONS OF FACT AND OF LAW. WHETHER OR NOT IT AFF ECTS THE PROCEEDINGS WHICH WERE THE SUBJECT MATTER BEFORE TH E SUPREME COURT IS NOT RELEVANT FOR THE PURPOSE OF THIS WRIT PETITION. BUT WHETHER IT IS RELEVANT OR NOT FOR THE PURPOSE OF TH E ASSESSMENT PROCEEDINGS IN RESPECT OF THE PETITIONER WHICH ARE THE SUBJECT MATTER OF THIS WRIT PETITION IS RELEVANT. THE EFFE CT OF THE AMENDMENT WOULD HAVE TO BE CONSIDERED. IT CANNOT BE BRUSHED ASIDE. 214. SECTION 2(47) AS AMENDED EVEN ON A CURSORY G LANCE RAISES VARIOUS ISSUES. IT IS NECESSARY TO NOTE FOUR PRELIM INARY ASPECTS OF EXPLANATION 2 TO SECTION 2(47). FIRSTLY AS THE OPE NING WORDS FOR THE REMOVAL OF DOUBTS IT IS HEREBY CLARIFIED THAT ...' INDICATE IT IS A CLARIFICATORY AMENDMENT. SECONDLY IT IS AN INCLU SIVE DEFINITION AS IS EVIDENT FROM THE WORDS 'TRANSFER' INCLUDES '. THIRDLY THE AMENDMENT IS WITH RETROSPECTIVE EFFECT FROM 1ST APR IL 1962. FOURTHLY THE FINANCE ACT 2012 WHICH INTRODUCED IN TER ALIA THE AMENDMENT TO SECTION 2(47) AND SECTION 92CA(2B) IS A VALIDATING ACT IN VIEW OF SECTION 119 THEREOF. 215. EXPLANATION 2 TO SECTION 247 BROADLY HAS FOUR ELEMENTS. DISPOSAL OR PARTING WITH OR CREATING ANY INTEREST I N AN ASSET. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 12 OF 34 THE ASSET OR ANY INTEREST IN THE ASSET. THE DISPOSING OF OR PARTING WITH THE ASSET OR CREAT ING ANY INTEREST THEREIN MAY BE: (A) DIRECT OR INDIRECT. (B) ABSOLUTE OR CONDITIONAL. (C) VOLUNTARY OR INVOLUNTARY. (D) BY AMENDMENT OR OTHERWISE. (IV) A NON-OBSTANTE PROVISION REGARDING THE NATURE OF A TRANSFER. IF AN ACT ARRANGEMENT TRANSACTION ETC. CONSTITUTES A TRANSFER AS DEFINED IN THE SECTION IT WOULD BE SO NOTWITHSTANDI NG THE TRANSFER OF RIGHTS HAVING BEEN CATEGORISED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SHARE OR SHA RES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA. 216. TWO ASPECTS OF A TRANSFER ARE CLARIFIED - THE ASSET ITSELF AND THE MANNER IN WHICH IT IS DEALT WITH. THE ASSET IS NO LONGER RESTRICTED TO THE ASSET PER SE OR A RIGHT THEREIN BUT ALSO EXTENDS TO 'ANY INTEREST THEREIN'. PRIOR TO THE AMENDMENT THE WORDS 'ANY INTEREST THEREIN' WERE ABSENT. FURTHER THE NATURE OF THE DISPOSAL IS ALSO EXPANDED. IT NOW INCLUDES THE CREATION OF A NY INTEREST IN ANY ASSET. MOREOVER THE DISPOSAL OF OR CREATION OF ANY INTEREST IN THE ASSET MAY BE DIRECT OR INDIRECT ABSOLUTE OR CO NDITIONAL VOLUNTARY OR INVOLUNTARY. IT MAY BE BY WAY OF AN AG REEMENT OR OTHERWISE. FURTHER THE CONCLUDING WORDS CONSTITUTE A NON- OBSTANTE PROVISION. IT PROVIDES THAT THE TRANSFER C ONTEMPLATED THEREIN WOULD BE NOTWITHSTANDING THAT IT HAS BEEN C HARACTERISED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INC ORPORATED OUTSIDE INDIA. IT WOULD BE EVIDENT THEREFORE THAT A LOT MORE MUS T NOW BE SEEN AND CONSIDERED THAN BEFORE WHILE ARRIVING AT A CONC LUSION WHETHER THE TERMS AND CONDITIONS OF THE FRAMEWORK A GREEMENT CONSTITUTED A TRANSFER OR ASSIGNMENT OF THE CALL OP TIONS BY ONE PARTY TO ANOTHER. 217. AT THE COST OF REPETITION WE ARE NOT CONCERNE D HERE WITH WHETHER THE AMENDMENT IS VALID OR NOT. ONE OF THE I SSUES HOWEVER THAT DOES ARISE IS WHETHER THE AMENDMENT ALBEIT CLARIFICATORY WOULD MAKE A DIFFERENCE IN THE CONST RUCTION OF THE PROVISIONS OF THE FRAMEWORK AGREEMENTS THEMSELVES TO WIT AS REGARDS THE CONSTRUCTION OF THE CLAUSES THEREOF WIT HOUT THE AID OF ANY OTHER MATERIAL FOR INTERPRETING THEM. VODAFONE' S CASE OBVIOUSLY CONSIDERED THE AMBIT OF THE TERM 'TRANSFE R' PRIOR TO THE AMENDMENT. IN THE PRESENT ASSESSMENT PROCEEDINGS I T IS THE AMENDED DEFINITION WHICH WOULD HAVE TO BE CONSIDERE D. 218. WE DO NOT FIND IT EITHER NECESSARY OR PROPER T O INDICATE THE APPLICATION OF SECTION 2(47) AS AMENDED TO THE PRES ENT PROCEEDINGS. THE APPLICATION WOULD DEPEND UPON THE FACTS ON RECORD OR THOSE MAY BE PERMITTED TO BE BROUGHT ON R ECORD. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 13 OF 34 219. THERE IS ANOTHER ASPECT. THE PETITIONER MAY WE LL CONTEND THAT THE AMENDED DEFINITION MAKES NO DIFFERENCE IT BEING CLARIFICATORY IN NATURE. THE PROVISIONS THEREOF MUS T THEREFORE BE DEEMED ALWAYS TO HAVE BEEN IN EXISTENCE. WE WILL PR ESUME THAT IT WOULD BE OPEN TO THE PETITIONER TO CONTEND THER EFORE THAT THE JUDGMENT OF THE SUPREME COURT WOULD REMAIN ENTIRELY UNAFFECTED FOR THE SUPREME COURT MUST BE DEEMED TO HAVE CONSID ERED THE TERM AS PER ITS TRUE AMBIT AS ALWAYS INTENDED BY T HE PARLIAMENT. ON THE OTHER HAND IT MAY BE EQUALLY OPEN TO THE RE VENUE TO CONTEND THAT CERTAIN INGREDIENTS OF A TRANSFER WERE NOT CONSIDERED BY THE REVENUE ITSELF IN THE PROCEEDINGS RELATING T O VODAFONE'S CASE ON ACCOUNT OF THE REVENUE ITSELF NOT HAVING AP PRECIATED OR REALIZED THE ACTUAL AMBIT OF THE TERM 'TRANSFER' WH ICH ARE NOW CLARIFIED BY THE AMENDMENT. EVEN ASSUMING THAT THE REVENUE CANNOT RE-OPEN THE VODAFONE CASE IT CANNOT BE BARR ED FROM RELYING UPON THE TRUE AMBIT OF THE TERM 'TRANSFER' IN FUTURE CASES INCLUDING THE PROCEEDINGS IN RESPECT OF THE PETITIO NER. THUS EVEN ASSUMING THAT THE JUDGMENT OF THE SUPREME COURT REM AINS UNAFFECTED BY THE CLARIFICATORY AMENDMENT THE REVE NUE WOULD BE ENTITLED HEREAFTER IN OTHER CASES AT LEAST TO APPRECIATE ANALYZE AND CONSTRUE THE TRANSACTIONS RELATING TO C ALL OPTIONS INCLUDING THE FRAMEWORK AGREEMENTS IN A PROPER PERS PECTIVE WHICH IT MAY NOT HAVE DONE EARLIER. 220. THESE ARE IMPORTANT ISSUES. THERE IS NO JUSTIF ICATION FOR WITHDRAWING THE PROCEEDINGS FROM THE CHANNEL PROVID ED BY THE INCOME-TAX ACT BYPASSING THE TRIBUNAL AND CONSIDER ING ALL THESE QUESTIONS IN EXERCISE OF THE HIGH COURT'S EXTRAORDI NARY JURISDICTION UNDER ARTICLE 226.' (EMPHASIS SUPPLIED ) 27. REVENUE'S EMPHASIS IS ON THE LAST TWO SENTENCES IN PARAGRAPH NO 213 WHICH STATE THAT 'THE EFFECT OF THE AMENDMENT W OULD HAVE TO BE CONSIDERED. IT CANNOT BE BRUSHED ASIDE' BUT IN DOIN G SO WHAT IT OVERLOOKS IS THE SUBSEQUENT OBSERVATIONS HIGHLIGHTE D ABOVE WHICH RECOGNIZE THE FACT THAT MERELY BECAUSE A SUBSEQUENT EXPLANATION IS INTRODUCED BY THE LEGISLATURE IT IS NOT AN OPEN AN D SHUT CASE AGAINST THE ASSESSEE OR THE REVENUE AND THAT ALL THESE OBS ERVATIONS ARE IN THE CONTEXT THAT 'THERE IS NO JUSTIFICATION FOR WITHDRA WING THE PROCEEDINGS FROM THE CHANNEL PROVIDED BY THE INCOME-TAX ACT BY PASSING THE TRIBUNAL AND CONSIDERING ALL THESE QUESTIONS IN EXE RCISE OF THE HIGH COURT'S EXTRAORDINARY JURISDICTION UNDER ARTICLE 22 6'. WHEN THEIR LORDSHIPS HAVE MADE IT CLEAR THAT THEY WOULD NOT LI KE TO BYPASS THE CHANNELS UNDER THE INCOME-TAX ACT AND PROCEED TO DE CIDE THESE ISSUES IN WRIT JURISDICTION UNDER ARTICLE 226 THERE CANNO T OBVIOUSLY BE ANY QUESTION OF THEIR LORDSHIPS DECIDING THE MATTER ONE WAY OR THE OTHER. ANY OBSERVATIONS MADE BY THEIR LORDSHIPS WHILE DEC LINING TO DECIDE THE MATTER IN WRIT JURISDICTION CANNOT BE TREATED AS DECISIVE OF THE ISSUE ON MERITS. WHILE IT IS TRUE THAT HON'BLE BOMBAY HIG H COURT HAS OBSERVED THAT THE EFFECT OF AMENDMENT WILL HAVE TO BE CONSIDERED HON'BLE BOMBAY HIGH COURT HAS ALSO OBSERVED THAT EV EN AFTER TAKING INTO ACCOUNT THE AMENDMENTS THE LEGAL IMPLICATIONS OF THIS AMENDMENT ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 14 OF 34 IS STILL AN OPEN ISSUE WHICH WILL HAVE TO BE ADJUDI CATED IN THE LIGHT OF PLEADINGS OF THE PARTIES. EVEN IN THESE OBSERVATION S WHICH DO NOT ANYWAY DECIDE ANYTHING ON MERITS EFFECT OF A RETRO SPECTIVE AMENDMENT WAS NOT IN THE CONTEXT OF THE PRECISE ISSUE BEFORE US OR ON THE SCOPE OF THE INTERNATIONAL TRANSACTION BUT IN RESPECT OF CONNOTATIONS OF 'TRANSFER'. AS LEARNED COUNSEL RIGHTLY CONTENDS IN THE LIGHT OF HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN THE CASE OF SUDHIR JAYANTILAL MULJI (SUPRA) 'RATIO OF A DECISION ALONE IS BINDING BECA USE A CASE IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FOLLOW FROM SOME OBSERVATIONS WHICH FIND PLACE THEREIN'. I N VIEW OF THESE DISCUSSIONS THE RELIANCE PLACED ON VODAFONE INDIA SERVICES (P.) LTD. (SUPRA) IS ALSO EQUALLY MISPLACED AND DEVOID OF LEG ALLY SUSTAINABLE MERITS. IN ANY CASE AS IS NOTED BY HON'BLE SUPREME COURT IN THE CASE OF CIT V. SUN ENGG. WORKS (P.) LTD. [1992] 198 ITR 297/64 TAXMAN 442 (SC) 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO P ICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ A S A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERE D IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT' THEIR L ORDSHIPS FURTHER NOTED THAT 'A DECISION OF THIS COURT TAKES ITS COLO UR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND W HILE APPLYING THE DECISION TO A LATER CASE THE COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION OF THIS CO URT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT TO SUP PORT THEIR REASONING' IT WAS ALSO RECALLED THAT IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA AIR 1971 SC 530 HON'BLE SUPREME COU RT HAD CAUTIONED THAT 'IT IS NOT PROPER TO REGARD A WORD CLAUSE OR A SENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COURT DIVORCED FROM ITS CONTEXT AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTI ON WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT.' THAT PRECISELY HOWEVER HAS BEEN THE APPROACH OF THE REVENUE AUTHO RITIES IN PLACING RELIANCE ON VODAFONE INDIA SERVICES (P.) LTD. (SUP RA) DECISION. WE REJECT THIS APPROACH. 28. FOR THE REASONS SET OUT ABOVE LEARNED DEPARTME NTAL REPRESENTATIVE'S RELIANCE ON HON'BLE BOMBAY HIGH CO URT'S JUDGMENTS IN THE CASES OF EVEREST KANTO (SUPRA) AND VODAFONE INDIA SERVICES (SUPRA) IS WHOLLY MISPLACED AND DEVOID OF ANY MERIT S. AS FOR COORDINATE BENCH DECISION IN THE CASE OF HINDALCO INDUSTRIES ( SUPRA) ALL IT DOES IS TO FOLLOW THE EVEREST KANTO DECISION BY HON'BLE BOM BAY HIGH COURT BUT THEN AS WE HAVE SEEN EARLIER THAT WAS A CASE IN WHICH THEIR LORDSHIPS WERE IN SEISIN OF A SITUATION IN WHICH GU ARANTEE COMMISSION WAS ACTUALLY CHARGED BY THE ASSESSEE. THAT IS NOT T HE CASE BEFORE US. THE COORDINATE BENCH DECISIONS DEALING WITH THE SIT UATIONS IN WHICH THE GUARANTEE COMMISSION WAS ACTUALLY CHARGED AND AS S UCH THERE WAS INDEED A BEARING ON THE PROFITS OF THE ASSESSEE CL EARLY DONOT APPLY ON THIS CASE. WE THEREFORE REJECT THE RELIANCE ON TH ESE DECISIONS AS DEVOID OF LEGALLY SUSTAINABLE MERITS. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 15 OF 34 29. LET US NOW DEAL WITH THE RELIANCE PLACED BY THE REVENUE AUTHORITIES ON GE CAPITAL'S CASE BY THE TAX COURT OF CANADA. IN THE DRP'S ORDER A REFERENCE IS MADE TO WELL KNOWN CANADIAN DECISION IN THE CASE OF GE CAPITAL CANADA (SUPRA). THE SAID CASE TO QUOTE THE WORDS OF THE DRP 'ALSO SHOWS THAT THE GROUP COMPANY ISSUING THE GUAR ANTEE (I.E. GUARANTOR) WOULD IN PRINCIPLE AT LEAST NEED TO CO VER THE COST THAT IT INCURS WITH RESPECT TO PROVIDING THE GUARANTEE' AND THAT 'THESE COSTS MAY INCLUDE ADMINISTRATIVE EXPENSES AS WELL AS THE COSTS OF MAINTAINING AN APPROPRIATE LEVEL OF CASH EQUIVALENT S CAPITAL SUBSIDIARY CREDIT LINES OR MORE EXPENSIVE EXTERNAL FUNDING CON DITIONS ON OTHER DEBT FINANCE'. THE DRP HAD ALSO NOTED THAT 'IN ADDI TION THE GUARANTOR WOULD WANT TO RECEIVE APPROPRIATE COMPENSATION FOR THE RISK IT INCURS' AND CONCLUDED THAT 'FOLLOWING THE ABOVE DISCUSSIONS AN ARM'S LENGTH GUARANTEE FEES IS TYPICALLY REQUIRED TO BE DETERMIN ED BY ESTABLISHING A RANGE OF FEES THAT THE GUARANTOR WOULD AT LEAST W ANT TO RECEIVE AND THE FEES THAT THE GUARANTEED GROUP COMPANY WOULD BE WILLING TO PAY DEPENDING ON THE PREVAILING CONDITIONS WITHIN FINAN CIAL MARKETS IN PRACTICE'. 30. HOWEVER WHILE DEALING WITH THIS ASPECT OF THE MATTER IT IS NECESSARY TO BEAR IN MIND THE FACT THAT THIS JUDICI AL PRECEDENT WHATEVER BE ITS WORTH IN THE HIERARCHY OF BINDING JUDICIAL P RECEDENTS IN INDIA DOES NOT EVEN DEAL WITH THE FUNDAMENTAL QUESTION AS TO WHETHER ISSUANCE OF A CORPORATE GUARANTEE IS AN INTERNATION AL TRANSACTION AT ALL- WHICH IS WHAT WE ARE CONCERNED WITH AT PRESENT. THI S TCC DECISION DEALT WITH A SITUATION IN WHICH THE ASSESSEE WAS DE NIED IN COMPUTATION OF ITS BUSINESS INCOME TAX DEDUCTION FOR PAYMENT O F GUARANTEE FEES ON THE GROUND THAT THERE WAS NO EFFECTIVE BENEFIT TO T HE ASSESSEE IN OBTAINING THE SAID GUARANTEE. AGGRIEVED BY DENIAL O F DEDUCTION ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CA NADIAN TAX COURT AND THE PLEA OF THE ASSESSEE WAS EVENTUALLY UPHELD. IT IS ALSO INTERESTING TO NOTE THAT AS A SEQUEL TO THIS TAX CO URT OF CANADA DECISION THE TRANSFER PRICING LEGISLATION WAS AMEN DED TO BRING GREATER CLARITY ON THE ISSUE AND AS A MEASURE OF ABUNDANT C AUTION AND SECTION 247 (7.1) GRANTING SPECIFIC EXEMPTION TO GUARANTEE FEES WAS INTRODUCED. THIS AMENDMENT IS AS FOLLOWS: (7.1) SUB-SECTION (2) DOES NOT APPLY TO ADJUST AN A MOUNT OF CONSIDERATION PAID PAYABLE OR ACCRUING TO A CORPOR ATION RESIDENT IN CANADA (IN THIS SUB-SECTION REFERRED TO AS THE ' PARENT') IN A TAXATION YEAR OF THE PARENT FOR THE PROVISION OF A GUARANTEE TO A PERSON OR PARTNERSHIP (IN THIS SUB-SECTION REFERRED TO AS THE 'LENDER') FOR THE REPAYMENT IN WHOLE OR IN PART O F A PARTICULAR AMOUNT OWING TO THE LENDER BY A NON-RESIDENT PERSON IF (A) THE NON-RESIDENT PERSON IS A CONTROLLED FOREIGN AFFILIA TE OF THE PARENT FOR THE PURPOSES OF SECTION 17 THROUGHOUT THE PERIO D IN THE YEAR DURING WHICH THE PARTICULAR AMOUNT IS OWING; AND (B ) IT IS ESTABLISHED THAT THE PARTICULAR AMOUNT WOULD BE AN AMOUNT OWING DESCRIBED IN PARAGRAPH 17(8)(A) OR (B) IF IT WERE O WED TO THE PARENT. (HTTP://WWW.FIN.GC.CA/DRLEG-APL/ITA-LRIR-DEC12-L-EN G.PDF) ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 16 OF 34 31. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT T HAT UNDER THE CANADIAN LAW THE DEFINITION OF 'INTERNATIONAL TRANSACTION' UNLIKE AN EXHAUSTIVE DEFINITION UNDER SECTION 92B OF THE INDIAN INCOME-T AX ACT 1961 IS A VERY BRIEF BUT INCLUSIVE AND BROAD DEFINITION TO TH E EFFECT THAT ''TRANSACTION' INCLUDES A SERIES OF TRANSACTIONS A N ARRANGEMENT OR AN EVENT' [SEE SECTION 247(1) OF THE CANADIAN INCOME-T AX ACT 1985; HTTP://LAWS-LOIS.JUSTICE.GC.CA/ENG/ACTS/I-3.3/PAGE- 419.HTML#H-156] COUPLED WITH THE LEGAL POSITION THAT ARM'S LENGTH A DJUSTMENT TO THE PRICES OF SUCH TRANSACTION COME INTO PLAY 'WHERE A TAXPAYER OR A PARTNERSHIP AND A NON-RESIDENT PERSON WITH WHOM THE TAXPAYER OR THE PARTNERSHIP OR A MEMBER OF THE PARTNERSHIP DOES N OT DEAL AT ARM'S LENGTH' [SEE SECTION 247(2) IBID]. WHEN ONE TAKES I NTO ACCOUNT THESE VARIATIONS IN THE STATUTORY PROVISIONS IT WILL BEC OME VERY OBVIOUS THAT THE PROVISIONS OF THE INDIAN INCOME-TAX ACT 1961 A ND THE CANADIAN INCOME-TAX ACT 1985 ARE SO RADICALLY DIFFERENT THA T JUST BECAUSE A PARTICULAR TRANSACTION IS TO BE EXAMINED ON ARM'S L ENGTH PRINCIPLE IN CANADA CANNOT BE A REASON ENOUGH TO HOLD THAT IT MU ST MEET THE SAME IN INDIA AS WELL. WHILE THE CANADIAN TRANSFER PRICI NG LEGISLATION AS INDEED THE TRANSFER PRICING LEGISLATION IN MANY OTH ER JURISDICTIONS DOES NOT PUT ANY FETTERS ON THE NATURE OF TRANSACTIONS B ETWEEN THE AES SO AS TO BE COVERED BY THE ARM'S LENGTH PRICE ADJUSTME NT AND THEREFORE COVERS ALL TRANSACTIONS BETWEEN THE RELATED ENTERPR ISES INDIAN TRANSFER PRICING LEGISLATION COVERS ONLY SUCH TRANSACTIONS A S ARE 'IN THE NATURE OF PURCHASE SALE OR LEASE OF TANGIBLE OR INTANGIBLE P ROPERTY OR PROVISION OF SERVICES OR LENDING OR BORROWING MONEY OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS INCOME LOSSES OR ASSETS OF SUCH ENTERPRISES'. OUR TRANSFER PRICING PROVISIONS PERH APS BEING IN THE QUEST OF COMPREHENSIVE COVERAGE HAVE ENDED UP IN A LIMIT ED SCOPE OF THE TRANSACTIONS BEING COVERED BY THE ARM'S LENGTH PRIC E ADJUSTMENTS FOR TRANSFER PRICING. IN ANY EVENT AS EMPHASIZED EARLI ER AS WELL THE DECISION WAS IN THE CONTEXT OF THE DEDUCTION AND POST THIS DECISION A SPECIFIC AMENDMENT WAS INTRODUCED IN THE CANADIAN T RANSFER PRICING LAW TO CLARIFY THE POSITION THAT ALL CORPORATE GUAR ANTEES ISSUED BY THE ASSESSEE IN SUPPORT OF ITS SUBSIDIARIES ARE NOT N ECESSARILY INTERNATIONAL TRANSACTIONS. REVENUE THEREFORE DOE S NOT DERIVE ANY ADVANTAGE FROM THE TAX COURT OF CANADA'S DECISION I N THE CASE OF GE CAPITAL CANADA. THERE ARE MANY MORE ASPECTS WHICH M AKE THIS DECISION WHOLLY IRRELEVANT IN THE PRESENT CONTEXT B UT SUFFICE TO SAY THAT RELEVANT LEGAL PROVISIONS AND CONTEXT BEING RADICAL LY DIFFERENT THE RELIANCE OF THIS DECISION MUST BE REJECTED FOR THIS SHORT REASON ALONE. 32. AS WE TAKE NOTE OF THE ABOVE LEGAL POSITION IN CANADA IT IS APPROPRIATE TO TAKE NOTE OF THE CONCEPT OF 'SHAREHO LDER ACTIVITIES' IN THE CONTEXT OF CORPORATE GUARANTEES WHICH PROVIDES CONC EPTUAL JUSTIFICATION FOR EXCLUSION OF CORPORATE GUARANTEES UNDER CERTAI N CONDITIONS FROM THE SCOPE OF TRANSFER PRICING ADJUSTMENTS. TAKING N OTE OF THESE PROPOSED AMENDMENTS 'TRANSFER PRICING AND INTRA GR OUP FINANCING BY BAKKER & LEVVY IBFD PUBLICATION (ISBN- 978-90-8 722-153-9)' OBSERVES THAT 'PROPOSED SUB-SECTION 247(7.1) OF THE ITA PROVIDES THAT THE TRANSFER PRICING RULES WILL NOT APPLY TO GUARAN TEES PROVIDED BY CANADIAN PARENT CORPORATIONS IN RESPECT OF CERTAIN FINANCIAL COMMITMENTS OF THEIR CANADIAN CONTROLLED FOREIGN AF FILIATES TO SUPPORT ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 17 OF 34 THE ACTIVE BUSINESS OPERATIONS OF THOSE AFFILIATES' . AS TO WHAT COULD BE CONCEPTUAL SUPPORT FOR SUCH AN EXCLUSION WE FIND I NTERESTING REFERENCES IN A DISCUSSION PAPER ISSUED BY THE AUST RALIAN TAX OFFICER IN JUNE 2008 AND TITLED AS 'INTRA-GROUP FINANCE GUARAN TEES AND LOANS' (HTTP://WWW.TRANSFERPRICING.COM/PDF/AUSTRALIA_THIN% 20CAPITALISATION.PD F). THE FACT THAT THIS DISCUSSION PAPER DID NOT TRA VEL BEYOND THE STAGE OF THE DISCUSSION PAPER IS NOT REALLY RELEVANT FOR THE PRESENT PURPOSES BECAUSE ALL THAT WE ARE CONCERNED WITH RIGHT NOW IS UNDERSTANDING THE CONCEPTUAL BASIS ON WHICH CONTRARY TO POPULAR BUT APPARENTLY ERRONEOUS BELIEF THE ISSUANCE OF CORPORATE GUARANT EES CAN INDEED BE KEPT OUTSIDE THE AMBIT OF SERVICES. THE RELEVANT EX TRACTS FROM THIS DOCUMENT ARE AS FOLLOWS: '102. AN INDEPENDENT COMPANY THAT IS UNABLE TO BORR OW THE FUNDS IT NEEDS ON A STAND-ALONE BASIS IS UNLIKELY TO BE I N A POSITION TO OBTAIN A GUARANTEE FROM AN INDEPENDENT PARTY TO SUP PORT THE BORROWINGS IT NEEDS. WHERE SUCH A GUARANTEE IS GIVE N IT COMPENSATES FOR THE INADEQUACIES IN THE FINANCIAL P OSITION OF THE BORROWER; SPECIFICALLY THE FACT THAT THE SUBSIDIAR Y DOES NOT HAVE ENOUGH SHAREHOLDERS' FUNDS. ..... 103. IT WOULD NOT BE EXPECTED THAT A COMPANY PAY FO R THE ACQUISITION OF THE EQUITY IT NEEDS FOR ITS FORMATIO N AND CONTINUED VIABILITY. EQUITY IS GENERALLY SUPPLIED BY THE SHAR EHOLDERS AT THEIR OWN COST AND RISK. 104. ACCORDINGLY TO THE EXTENT THAT A GUARANTEE SUB STITUTES FOR THE INVESTMENT OF THE EQUITY NEEDED TO ALLOW A SUBS IDIARY TO BE SELF-SUFFICIENT AND RAISE THE DEBT FUNDING IT NEEDS THE COSTS OF THE GUARANTEE (AND THE ASSOCIATED RISK) SHOULD REMA IN WITH THE PARENT COMPANY PROVIDING THE GUARANTEE.' 33. ON A CONCEPTUAL NOTE THUS THERE IS A VALID SC HOOL OF THOUGHT THAT THE CORPORATE GUARANTEES CAN INDEED BE A MODE OF OW NERSHIP CONTRIBUTION PARTICULARLY WHEN AS IS OFTEN THE CA SE 'WHERE SUCH A GUARANTEE IS GIVEN IT COMPENSATES FOR THE INADEQUAC IES IN THE FINANCIAL POSITION OF THE BORROWER; SPECIFICALLY THE FACT TH AT THE SUBSIDIARY DOES NOT HAVE ENOUGH SHAREHOLDERS' FUNDS'. THERE CAN BE NUMBER OF REASONS INCLUDING REGULATORY ISSUES AND MARKET CON DITIONS IN THE RELATED JURISDICTIONS IN WHICH SUCH A CONTRIBUTION BY WAY OF A GUARANTEE WOULD JUSTIFY TO BE A MORE APPROPRIATE A ND PREFERRED MODE OF CONTRIBUTION VIS-A-VIS EQUITY CONTRIBUTION. IT I S SIGNIFICANT IN THIS CONTEXT THAT THE CASE OF THE ASSESSEE HAS ALL ALON G BEEN AS NOTED IN THE ASSESSMENT ORDER ITSELF THAT 'SAID GUARANTEES WERE IN THE FORM OF CORPORATE GUARANTEES/ QUASI-CAPITAL AND NOT IN THE NATURE OF ANY SERVICES'. IN OTHER WORDS THESE GUARANTEES WERE SP ECIFICALLY STATED TO BE IN THE NATURE OF SHAREHOLDER ACTIVITIES. THE ASS ESSEE'S CLAIM OF THE GUARANTEES BEING IN THE NATURE OF QUASI-CAPITAL AN D THUS BEING IN THE NATURE OF A SHAREHOLDER'S ACTIVITY IS NOT REJECTED EITHER. THE CONCEPT OF ISSUANCE OF CORPORATE GUARANTEES AS A SHAREHOLDER A CTIVITY IS NOT ALIEN TO THE TRANSFER PRICING LITERATURE IN GENERAL. ON T HE CONTRARY IT IS RECOGNIZED IN INTERNATIONAL TRANSFER PRICING LITERA TURE AS ALSO IN THE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 18 OF 34 OFFICIAL DOCUMENTATION AND LEGISLATION OF SEVERAL T RANSFER PRICING JURISDICTIONS. THE 'OECD TRANSFER PRICING GUIDELINE S FOR MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATIONS' ITSELF RECOGNI ZES THE DISTINCTION BETWEEN A SHAREHOLDER ACTIVITY AND A PROVISION FOR SERVICES WHEN CONTRASTING THE SHAREHOLDER ACTIVITY WITH BROADER T ERM 'STEWARDSHIP ACTIVITY' AND THUS HIGHLIGHTING NARROW SCOPE OF SHA REHOLDER ACTIVITY IT STATES THAT 'STEWARDSHIP ACTIVITIES COVERED A RANGE OF ACTIVITIES BY A SHAREHOLDER THAT MAY INCLUDE PROVISION FOR SERVICES TO OTHER GROUP MEMBERS FOR EXAMPLE SERVICES THAT WOULD BE PROVIDE D BY A COORDINATING CENTRE'. IT PROCEEDED TO ADD IN THE I MMEDIATELY FOLLOWING SENTENCE AT PAGE 207 OF 2010 GUIDELINES THAT 'THES E LATTER TYPE OF NON-SHAREHOLDER ACTIVITIES COULD INCLUDE DETAILED P LANNING SERVICES FOR PARTICULAR OPERATIONS MANAGEMENT OR TECHNICAL ADVI CE (TROUBLE SHOOTING) OR IN SOME CASES ASSISTANCE IN DAY-TO-DAY MANAGEMENT'. THE SHAREHOLDER ACTIVITIES ARE THUS SEEN AS CONCEPTUALL Y DISTINCT FROM THE PROVISION OF SERVICES. THE ISSUANCE OF CORPORATE GU ARANTEE AS LONG AS IT IS IN THE NATURE OF SHAREHOLDER ACTIVITY CAN NO T THEREFORE AMOUNT TO A 'PROVISION FOR SERVICES'. 34. UNDOUBTEDLY PIONEERING WORK DONE BY THE OECD IN THE FIELD OF INTERNATIONAL TAXATION HAS BEEN JUDICIALLY RECOGNI ZED WORLDWIDE BY VARIOUS JUDICIAL FORUMS INCLUDING MOST NOTABLY BY HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. VISAKHAPAT NAM PORT TRUST [1983] 144 ITR 146/15 TAXMAN 72 (AP). THEIR LORDSHI PS ALSO REFERRED TO LORD RADCLIFFE'S OBSERVATIONS IN OSTIME V. AUSTR ALIAN MUTUAL PROVIDENT SOCIETY [1960] 39 ITR 210 (HL) WHICH HAS DESCRIBED THE LANGUAGE EMPLOYED IN THE MODELS DEVELOPED BY THE OE CD AS THE 'INTERNATIONAL TAX LANGUAGE'. THE WORK DONE BY OECD IN THE FIELD OF TRANSFER PRICING IS NO LESS SIGNIFICANT. NO MATTER WHICH PART OF THE WORLD WE LIVE IN AND IRRESPECTIVE OF WHETHER OR NOT THAT TAX JURISDICTION IS AN OECD MEMBER JURISDICTION THE IMMENSE CONTRIBUTION OF THE OECD IN THE FIELD OF THE TRANSFER PRICING AS WELL IS ADMIR ED AND RESPECTED. HOWEVER THE RELEVANCE OF THIS WORK SO FAR AS INTE RPRETATION TO TRANSFER PRICING LEGISLATION IS CONCERNED MUST REMAIN CONFI NED TO THE AREAS WHICH HAVE REMAINED INTACT FROM LEGISLATIVE OR JUDI CIAL GUIDANCE. THERE IS NO SCOPE FOR PARALLEL OR CONFLICTING GUIDANCE BY SUCH FORUMS. LEGISLATION IS AN EXCLUSIVE DOMAIN OF THE SOVEREIGN AND THEREFORE AS LONG AS AN AREA IS ADEQUATELY COVERED BY THE WORK O F LEGISLATION THINGS LIKE GUIDANCE OF THE OECD OR FOR THAT PURPOSE ANY OTHER MULTILATERAL FORUM ARE NOT DECISIVE. WHILE WE ARE ALIVE TO THE SCHOOL OF THOUGHT THAT WHEN THE DOMESTIC TRANSFER PRICING REGULATIONS DO N OT PROVIDE ANY GUIDELINES IT MAY HAVE TO BE DECIDED HAVING REGARD TO INTERNATIONAL BEST PRACTICES WE DO NOT QUITE AGREE WITH IT INASM UCH AS IN OUR CONSIDERED VIEW REVENUE CANNOT SEEK TO WIDEN THE N ET OF TRANSFER PRICING LEGISLATION BY TAKING REFUGE OF THE BEST PR ACTICES RECOGNIZED BY THE OECD WORK. 35. WHILE DEALING WITH 'SPECIAL CONSIDERATION FOR I NTRA-GROUP SERVICES' THE 'OECD TRANSFER PRICING GUIDELINES FOR MULTINATI ONAL ENTERPRISES AND TAX ADMINISTRATIONS' HAS NOTED THAT THERE ARE T WO FUNDAMENTAL ISSUES WITH RESPECT TO THE INTRA-GROUP SERVICES- FI RST WHETHER INTRA- GROUP SERVICES HAVE INDEED BEEN PROVIDED AND SECO ND- IF THE ANSWER ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 19 OF 34 TO THE FIRST QUESTION IS IN POSITIVE THAT CHARGE T O THESE SERVICES SHOULD BE AT AN ARM'S LENGTH PRICE. DEALING WITH THE FIRST QUESTION WHICH IS RELEVANT FOR THE PRESENT PURPOSES THESE GUIDELINES (2010 VERSION) STATE AS FOLLOWS: '7.6 UNDER THE ARM'S LENGTH PRINCIPLE THE QUESTION WHETHER AN INTRA-GROUP SERVICE HAS BEEN RENDERED WHEN AN ACTIV ITY IS PERFORMED FOR ONE OR MORE GROUP MEMBERS BY ANOTHER GROUP MEMBER SHOULD DEPEND ON WHETHER THE ACTIVITY PROVID ES A RESPECTIVE GROUP MEMBER WITH ECONOMIC OR COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION. THIS CAN BE DETERM INED BY CONSIDERING WHETHER AN INDEPENDENT ENTERPRISE IN CO MPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR TH E ACTIVITY IF PERFORMED FOR IT BY AN INDEPENDENT ENTERPRISE OR WO ULD HAVE PERFORMED THE ACTIVITY IN-HOUSE FOR ITSELF. IF THE ACTIVITY IS NOT ONE FOR WHICH THE INDEPENDENT ENTERPRISE WOULD HAVE BEE N WILLING TO PAY OR PERFORM FOR ITSELF THE ACTIVITY ORDINARILY SHOULD NOT BE CONSIDERED AS AN INTRA-GROUP SERVICE UNDER THE ARM' S LENGTH PRINCIPLE. 7.7 THE ANALYSIS DESCRIBED ABOVE QUITE CLEARLY DEPE NDS ON THE ACTUAL FACTS AND CIRCUMSTANCES AND IT IS NOT POSSI BLE IN THE ABSTRACT TO SET FORTH CATEGORICALLY THE ACTIVITIES THAT DO OR DO NOT CONSTITUTE THE RENDERING OF INTRA-GROUP SERVICES. H OWEVER SOME GUIDANCE MAY BE GIVEN TO ELUCIDATE HOW THE ANALYSIS WOULD BE APPLIED FOR SOME COMMON TYPES OF ACTIVITIES UNDERTA KEN IN MNE GROUPS. 7.8 SOME INTRA-GROUP SERVICES ARE PERFORMED BY ONE MEMBER OF AN MNE GROUP TO MEET AN IDENTIFIED NEED OF ONE OR M ORE SPECIFIC MEMBERS OF THE GROUP. IN SUCH A CASE IT IS RELATIV ELY STRAIGHTFORWARD TO DETERMINE WHETHER A SERVICE HAS BEEN PROVIDED. ORDINARILY AN INDEPENDENT ENTERPRISE IN C OMPARABLE CIRCUMSTANCES WOULD HAVE SATISFIED THE IDENTIFIED N EED EITHER BY PERFORMING THE ACTIVITY IN-HOUSE OR BY HAVING THE A CTIVITY PERFORMED BY A THIRD PARTY. THUS IN SUCH A CASE A N INTRA-GROUP SERVICE ORDINARILY WOULD BE FOUND TO EXIST. FOR EXA MPLE AN INTRA- GROUP SERVICE WOULD NORMALLY BE FOUND WHERE AN ASSO CIATED ENTERPRISE REPAIRS EQUIPMENT USED IN MANUFACTURING BY ANOTHER MEMBER OF THE MNE GROUP. 7.9 A MORE COMPLEX ANALYSIS IS NECESSARY WHERE AN A SSOCIATED ENTERPRISE UNDERTAKES ACTIVITIES THAT RELATE TO MOR E THAN ONE MEMBER OF THE GROUP OR TO THE GROUP AS A WHOLE. IN A NARROW RANGE OF SUCH CASES AN INTRA-GROUP ACTIVITY MAY BE PERFORMED RELATING TO GROUP MEMBERS EVEN THOUGH THOSE GROUP M EMBERS DO NOT NEED THE ACTIVITY (AND WOULD NOT BE WILLING TO PAY FOR IT WERE THEY INDEPENDENT ENTERPRISES). SUCH AN ACTIVITY WOU LD BE ONE THAT A GROUP MEMBER (USUALLY THE PARENT COMPANY OR A REGIONAL HOLDING COMPANY) PERFORMS SOLELY BECAUSE OF ITS OWN ERSHIP INTEREST IN ONE OR MORE OTHER GROUP MEMBERS I.E. I N ITS CAPACITY AS SHAREHOLDER. THIS TYPE OF ACTIVITY WOULD NOT JUS TIFY A CHARGE TO ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 20 OF 34 THE RECIPIENT COMPANIES. IT MAY BE REFERRED TO AS A 'SHAREHOLDER ACTIVITY' DISTINGUISHABLE FROM THE BROADER TERM 'S TEWARDSHIP ACTIVITY' USED IN THE 1979 REPORT. STEWARDSHIP ACTI VITIES COVERED A RANGE OF ACTIVITIES BY A SHAREHOLDER THAT MAY INC LUDE THE PROVISION OF SERVICES TO OTHER GROUP MEMBERS FOR E XAMPLE SERVICES THAT WOULD BE PROVIDED BY A COORDINATING C ENTRE. THESE LATTER TYPES OF NON-SHAREHOLDER ACTIVITIES COULD IN CLUDE DETAILED PLANNING SERVICES FOR PARTICULAR OPERATIONS EMERGE NCY MANAGEMENT OR TECHNICAL ADVICE (TROUBLE SHOOTING) OR IN SOME CASES ASSISTANCE IN DAY-TO-DAY MANAGEMENT. 7.10 THE FOLLOWING EXAMPLES (WHICH WERE DESCRIBED I N THE 1984 REPORT) WILL CONSTITUTE SHAREHOLDER ACTIVITIES UND ER THE STANDARD SET FORTH IN PARAGRAPH 7.6: (A) COSTS OF ACTIVITIES RELATING TO THE JURIDICAL STRUCTURE OF THE PARENT COMPANY ITSELF SUCH AS MEETINGS OF SHAR EHOLDERS OF THE PARENT ISSUING OF SHARES IN THE PARENT COMPANY AND COSTS OF THE SUPERVISORY BOARD; (B) COSTS RELATING TO REPORTING REQUIREMENTS OF T HE PARENT COMPANY INCLUDING THE CONSOLIDATION OF REPOR TS; (C) COSTS OF RAISING FUNDS FOR THE ACQUISITION OF ITS PARTICIPATIONS. IN CONTRAST IF FOR EXAMPLE A PARENT COMPANY RAISES FUNDS ON BEHALF OF ANOTHER GROUP MEMBER WHICH USES THEM TO A CQUIRE A NEW COMPANY THE PARENT COMPANY WOULD GENERALLY BE REGARDED AS PROVIDING A SERVICE TO THE GROUP MEMBER. THE 198 4 REPORT ALSO MENTIONED 'COSTS OF MANAGERIAL AND CONTROL (MO NITORING) ACTIVITIES RELATED TO THE MANAGEMENT AND PROTECTION OF THE INVESTMENT AS SUCH IN PARTICIPATIONS'. WHETHER THES E ACTIVITIES FALL WITHIN THE DEFINITION OF SHAREHOLDER ACTIVITIE S AS DEFINED IN THESE GUIDELINES WOULD BE DETERMINED ACCORDING TO W HETHER UNDER COMPARABLE FACTS AND CIRCUMSTANCES THE ACTIVI TY IS ONE THAT AN INDEPENDENT ENTERPRISE WOULD HAVE BEEN WILL ING TO PAY FOR OR TO PERFORM FOR ITSELF.' (EMPHASIS SUPPLIED) 36. WE HAVE NOTICED THAT THE 'OECD TRANSFER PRICING GUIDELINES FOR MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATIONS' SPECIFICALLY RECOGNIZES THAT AN ACTIVITY IN THE NATURE OF SHAREH OLDER ACTIVITY WHICH IS SOLELY BECAUSE OF OWNERSHIP INTEREST IN ONE OR MORE OF THE GROUP MEMBERS I.E. IN THE CAPACITY AS SHAREHOLDER 'WOULD NOT JUSTIFY A CHARGE TO THE RECIPIENT COMPANIES'. IT IS THUS CLEAR THAT A SHAREHOLDER ACTIVITY IN ISSUANCE OF CORPORATE GUARANTEES IS TAKEN OUT O F AMBIT OF THE GROUP SERVICES. CLEARLY THEREFORE AS LONG AS A GUARANTE E IS ON ACCOUNT OF WHAT CAN BE TERMED AS 'SHAREHOLDER'S ACTIVITIES' E VEN ON THE FIRST PRINCIPLES IT IS OUTSIDE THE AMBIT OF TRANSFER PRI CING ADJUSTMENT IN RESPECT OF ARM'S LENGTH PRICE. IT IS ESSENTIAL TO A PPRECIATE AT THIS STAGE THE DISTINCTION IN A SERVICE AND A BENEFIT. ONE MAY BE BENEFITED EVEN WHEN NO SERVICES ARE RENDERED AND THEREFORE IN M ANY A SITUATION IT'S A 'BENEFIT TEST' WHICH IS CRUCIAL FOR TRANSFER PRIC ING LEGISLATION SUCH AS IN US REGULATIONS 1.482-9(1)(3)(I) WHICH DEFINES 'BENE FIT' FORM A US TRANSFER PRICING PERSPECTIVE AS 'AN ACTIVITY IS CO NSIDERED TO BE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 21 OF 34 PROVIDED A BENEFIT TO THE RECIPIENT IF THE ACTIVITY DIRECTLY RESULTS IN A REASONABLY IDENTIFIABLE INCREMENT OF ECONOMIC OR CO MMERCIAL VALUE THAT ENHANCES THE RECIPIENT'S COMMERCIAL POSITION OR TH AT MAY BE REASONABLY ANTICIPATED TO DO SO'. THE EXPRESSION 'A CTIVITY' IN TURN IS DEFINED AS 'INCLUDING THE PERFORMANCE OF FUNCTIONS ; THE ASSUMPTION OF RISKS; THE USE BY A RENDERED OF TANGIBLE OR INTANGI BLE PROPERTY OR OTHER RESOURCES CAPABILITIES OR KNOWLEDGE (INCLUDING KNOW LEDGE OF AND ABILITY TO TAKE ADVANTAGE OF A PARTICULARLY ADVANTAGEOUS SI TUATION OR CIRCUMSTANCES); AND MAKING AVAILABLE TO THE RECIPIE NT ANY PROPERTY OR OTHER RESOURCES OF THE RENDERED' [REGULATION 1.482- 9(1)(2)]. THE ISSUANCE OF GUARANTEES IS NOT WITHIN THE AMBIT OF T RANSFER PRICING IN UNITED STATES BECAUSE IT IS A SERVICE BUT BECAUSE I T IS COVERED BY THE SPECIFIC DEFINITION DISCUSSED ABOVE. AS A MATTER OF FACT DAVID S MILLER IN A PAPER TITLED 'FEDERAL INCOME TAX CONSEQUENCES OF GUARANTEES; A COMPREHENSIVE FRAMEWORK FOR ANALYSIS' PUBLISHED IN THE 'THE AMERICAN LAWYER VOL. 48 NO. 1 (FALL 1994) PP. 103 -165 (HTTP://WWW.JSTOR.ORG/STABLE/20771688) HAS STATED THAT A GUARANTEE IS NOT A SERVICE. THE FOLLOWING OBSERVATIONS AT PAGES 114 ARE IMPORTANT: THE POSITION THAT GUARANTEES ARE SERVICES HAS BEEN DISCREDITED BY THE COURTS WITH GOOD REASON38. GUARANTEE FEES DO NOT REPRESENT PAYMENTS FOR SERVICES ANY MORE THAN PAYME NTS WITH RESPECT TO OTHER FINANCIAL INSTRUMENTS CONSTITUTE P AYMENT FOR SERVICES39. A GUARANTOR DOES NOT ARRANGE FINANCING FOR THE DEBTOR BUT MERELY EXECUTES A FINANCIAL INSTRUMENT IN ITS FAVOUR. 38 SEE. E.G. CENTEL COMMUNICATIONS CO. V. COMMISSI ONER 92 T.C. 612 632 (1989) AFF D 920 F2D 1335 (7TH CIR. 1990); BANK OF AM. V. UNITED STATES 680 F.2D 142 150 (CL. CT. 1982). THE SERVICE'S CURRENT POSITION ON THE CHARACTERIZATION OF GUARANTEE FEES AS PAYMENT FOR SERVICES UNDER SECTION 482 IS I NCONSISTENT WITH ITS TREATMENT OF GUARANTEE FEES UNDER OTHER PR OVISIONS. SEE P.L.R. 9410008 (DEC. 13 1993). 39 BUT CF FEDERAL NAT'L MORTGAGE ASS'N V. COMMISSIO NER 100 T.C. 541 579 (1993) (FANNIE MAE PROVIDED SERVICES BY BUYING MORTGAGES). 37. WE ARE IN AGREEMENT WITH THESE VIEWS. THERE CAN THUS BE ACTIVITIES WHICH BENEFIT THE GROUP ENTITIES BUT THESE ACTIVITI ES NEED NOT NECESSARILY BE 'PROVISION FOR SERVICES'. THE FACT T HAT THE OECD CONSIDERS SUCH ACTIVITIES IN THE SERVICES SEGMENT D OES NOT ALTER THE CHARACTER OF THE ACTIVITIES. WHILE THE GROUP ENTITY IS THUS INDEED BENEFITED BY THE SHAREHOLDER ACTIVITIES THESE ACTI VITIES DO NOT NECESSARILY CONSTITUTE SERVICES. THERE IS NO SUCH E XPRESS REFERENCE TO THE BENEFIT TEST OR TO THE CONCEPT OF BENEFIT ATTA CHED TO THE ACTIVITY IN RELEVANT DEFINITION CLAUSE OF 'INTERNATIONAL TRANSA CTION' UNDER THE DOMESTIC TRANSFER PRICING LEGISLATION. AS WE TAKE N OTE OF THESE THINGS IT IS ALSO ESSENTIAL TO TAKE NOTE OF THE LEGAL POSITIO N IN INDIA IN THIS REGARD. NO MATTER HOW DESIRABLE IS IT TO READ SUCH A TEST IN THE DEFINITION OF THE INTERNATIONAL TRANSACTION' UNDER OUR DOMESTIC TRANSFER PRICING LEGISLATION AS IS THE SETTLED LEGAL POSITI ON IT IS NOT OPEN TO US TO ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 22 OF 34 INFER THE SAME. HON'BLE SUPREME COURT IN THE CASE OF SMT. TARULATA SHYAM V. CIT [1977] 108 ITR 345 (SC) TOOK NOTE OF THE SITUATION BEFORE THEIR LORDSHIPS IN THESE WORDS: 'WE HAVE GIV EN ANXIOUS THOUGHTS TO THE PERSUASIVE ARGUMENTS OF MR SHARMA. HIS ARGUMENTS IF ACCEPTED WILL CERTAINLY SOFTEN THE RIGOUR OF THIS EXTREMELY DRASTIC PROVISION AND BRING IT MORE IN CONFORMITY WITH LOGI C AND EQUITY'. HOWEVER THEIR LORDSHIPS DECLINED TO DO SO ON THE G ROUND THAT 'THERE IS NO SCOPE FOR IMPORTING INTO THE STATUTE THE WORD S WHICH ARE NOT THERE. SUCH IMPORTATION WOULD BE NOT TO CONSTRUE BUT TO AM END THE STATUTE'. THEIR LORDSHIPS NOTED THAT 'EVEN IF THERE BE CASUS OMISSUS THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDI CIAL INTERPRETATION'. THE BENEFIT TEST WHICH IS SET OUT IN THE OECD GUID ANCE AND WHICH FINDS ITS PLACE IN THE INTERNATIONAL BEST PRACTICES DOES NOT FIND ITS PLACE IN THE MAIN DEFINITION OF INTERNATIONAL TRANSACTION EVEN THOUGH THERE IS A REFERENCE TO THE EXPRESSION 'BENEFIT' IN THE CONT EXT OF COST OR EXPENSE SHARING ARRANGEMENTS BUT THAT IS A DIFFERENT ASPECT OF THE MATTER ALTOGETHER. IN THE ABSENCE OF BENEFIT TEST BEING ME NTIONED IN THE DEFINITION FOR THE PRESENT PURPOSES WE CANNOT INFE R THE SAME. 38. ONE MORE THING WHICH IS CLEARLY DISCERNABLE FRO M THE ABOVE DISCUSSIONS IS THAT THE TESTS RECOGNIZED BY THESE G UIDELINES ARE INTERWOVEN TWIN TESTS OF BENEFIT AND ARM'S LENGTH. BENEFIT TEST IMPLIES THE RECIPIENT GROUP MEMBER SHOULD GET 'ECONOMIC OR COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION'. THE BENEFIT TE ST IS INTERLINKED WITH THE AN ARM'S LENGTH TEST IN THE SENSE THAT IT SEEKS AN ANSWER TO THE QUESTION WHETHER UNDER A SIMILAR SITUATION AN INDEP ENDENT ENTERPRISE WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY CON CERNED OR WOULD HAVE PERFORMED THE ACTIVITY IN-HOUSE FOR ITSELF. SO FAR AS THE BENEFIT TEST IS CONCERNED AS WE HAVE NOTED EARLIER IT IS ALIEN TO THE DEFINITION OF INTERNATIONAL TRANSACTION' UNDER THE INDIAN TRANSFE R PRICING LEGISLATION. SO FAR AS ARM'S LENGTH TEST IS CONCERNED IT PRESUP POSES THAT SUCH A TRANSACTION IS POSSIBLE IN ARM'S LENGTH SITUATION. HOWEVER IN A SITUATION IN WHICH THE SUBSIDIARY DOES NOT HAVE ADEQUATE FINA NCIAL STANDING OF ITS OWN AND IS INADEQUATELY CAPITALIZED NONE WILL GUAR ANTEE FINANCIAL OBLIGATIONS OF SUCH A SUBSIDIARY. 39. THE ISSUANCE OF FINANCIAL GUARANTEE IN FAVOUR O F AN ENTITY WHICH DOES NOT HAVE ADEQUATE STRENGTH OF ITS OWN TO MEET SUCH OBLIGATIONS WILL RARELY BE DONE. THE VERY COMPARISON BETWEEN T HE CONSIDERATION FOR WHICH BANKS ISSUE FINANCIAL GUARANTEES ON BEHALF OF ITS CLIENTS WITH THE CONSIDERATION FOR WHICH THE CORPORATES ISSUE GUARAN TEES FOR THEIR SUBSIDIARIES IS ILL-CONCEIVED BECAUSE WHILE BANKS SEEK TO BE COMPENSATED EVEN FOR THE SECURED GUARANTEES FOR T HE FINANCIAL RISK OF LIQUIDATING THE UNDERLYING SECURITIES AND MEETING T HE FINANCIAL COMMITMENTS UNDER THE GUARANTEE THE GUARANTEES ISS UED BY THE CORPORATES FOR THEIR SUBSIDIARIES ARE RARELY IF AT ALL BACKED BY ANY UNDERLYING SECURITY AND THE RISK IS ENTIRELY ENTREP RENEURIAL IN THE SENSE THAT IT SEEKS TO MAXIMIZE PROFITABILITY THROUGH AND BY THE SUBSIDIARIES. IT IS INHERENTLY IMPOSSIBLE TO DECIDE ARM'S LENGTH PRI CE OF A TRANSACTION WHICH CANNOT TAKE PLACE IN ARM'S LENGTH SITUATION. THE MOTIVATION OR TRIGGER FOR ISSUANCE OF SUCH GUARANTEES IS NOT THE KIND FOR CONSIDERATION FOR WHICH A BANKER FOR EXAMPLE ISSUE THE GUARANTE ES BUT IT IS ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 23 OF 34 MAXIMIZATION OF GAINS FOR THE RECIPIENT ENTITY AND THUS THE MNE GROUP AS A WHOLE. IN GENERAL THUS THE CONSIDERATION FOR ISSUANCE OF CORPORATE GUARANTEES ARE OF A DIFFERENT CHARACTER A LTOGETHER. 40. AT THIS STAGE IT WOULD APPROPRIATE TO ANALYZE THE BUSINESS MODEL OF BANK GUARANTEES WITH WHICH CORPORATE GUARANTEES AR E SOMETIMES COMPARED IN THE CONTEXT OF BENCHMARKING THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEES. A BANK GUARANTEE IS A SURETY THAT THAT THE BANK OR THE FINANCIAL INSTITUTION ISSUING THE GUARANTEE WILL PAY OFF THE DEBTS AND LIABILITIES INCURRED BY AN INDIVIDUAL OR A BUSI NESS ENTITY IN CASE THEY ARE UNABLE TO DO SO. BY PROVIDING A GUARANTEE A BA NK OFFERS TO HONOUR RELATED PAYMENT TO THE CREDITORS UPON RECEIVING A R EQUEST. THIS REQUIRES THAT BANK HAS TO BE VERY SURE OF THE BUSIN ESS OR INDIVIDUAL TO WHOM THE BANK GUARANTEE IS BEING ISSUED. SO BANKS RUN RISK ASSESSMENTS TO ENSURE THAT THE GUARANTEED SUM CAN B E RETRIEVED BACK FROM THE BUSINESS. THIS MAY REQUIRE THE BUSINESS TO FURNISH A SECURITY IN THE SHAPE OF CASH OR CAPITAL ASSETS. ANY ENTITY THAT CAN PASS THE RISK ASSESSMENT AND PROVIDE SECURITY MAY OBTAIN A BANK G UARANTEE. THE CONSIDERATION FOR THE ISSUANCE OF BANK GUARANTEE S O FAR AS A BANKER IS CONCERNED IS THIS. WHEN THE CLIENT IS NOT ABLE TO HONOUR THE FINANCIAL COMMITMENTS AND WHEN CLIENT IS NOT ABLE TO MEET HIS FINANCIAL COMMITMENTS AND THE BANK IS CALLED UPON TO MAKE THE PAYMENTS THE BANK WILL SEEK A COMPENSATION FOR THE ACTION OF ISS UING THE BANK GUARANTEE AND FOR THE RISK IT RUNS INHERENT IN THE PROCESS OF MAKING THE PAYMENT FIRST AND REALIZING IT FROM THE UNDERLYING SECURITY AND THE CLIENT. EVEN WHEN SUCH GUARANTEES ARE BACKED BY ONE HUNDRED PER CENT DEPOSITS THE BANK CHARGES A GUARANTEE FEES. I N A SITUATION IN WHICH THERE IS NO UNDERLYING ASSETS WHICH CAN BE RE ALIZED BY THE BANK OR THERE ARE NO DEPOSITS WITH THE BANK WHICH CAN BE APPROPRIATED FOR PAYMENT OF GUARANTEE OBLIGATIONS THE BANKS WILL RA RELY IF AT ALL ISSUE THE GUARANTEES. OF COURSE WHEN A CLIENT IS SO WELL PLACED IN HIS CREDIT RATING THAT BANKS CAN ISSUE HIM CLEAN AND UNSECURED GUARANTEES HE GETS NO FURTHER ECONOMIC VALUE BY A CORPORATE GUARA NTEE EITHER. LET US NOW COMPARE THIS KIND OF A GUARANTEE WITH A CORPORA TE GUARANTEE. THE GUARANTEES ARE ISSUED WITHOUT ANY SECURITY OR UNDER LYING ASSETS. WHEN THESE GUARANTEES ARE INVOKED THERE IS NO OCCASION FOR THE GUARANTOR TO SEEK RECOURSE TO ANY ASSETS OF THE GUARANTEED ENTIT Y FOR RECOVERING PAYMENT OF DEFAULTED GUARANTEES. THE GUARANTEES ARE NOT BASED ON THE CREDIT ASSESSMENT OF THE ENTITY IN RESPECT OF WHIC H THE GUARANTEES ARE ISSUED BUT ARE BASED ON THE BUSINESS NEEDS OF THE ENTITY IN QUESTION. EVEN IN A SITUATION IN WHICH THE GROUP ENTITY IS SU RE THAT THE BENEFICIARY OF GUARANTEE HAS NO FINANCIAL MEANS TO REIMBURSE IT FOR THE DEFAULTED GUARANTEE AMOUNTS WHEN INVOKED THE GROUP ENTITY W ILL ISSUE THE GUARANTEE NEVERTHELESS BECAUSE THESE ARE COMPULSION S OF HIS GROUP SYNERGY RATHER THAN THE ASSURANCE THAT HIS FUTURE O BLIGATIONS WILL BE MET. WE SEE NO MEETING GROUND IN THESE TWO TYPES OF GUARANTEES SO FAR THEIR ECONOMIC TRIGGERS AND BUSINESS CONSIDERAT IONS ARE CONCERNED AND JUST BECAUSE THESE INSTRUMENTS SHARE A COMMON S URNAME I.E. 'GUARANTEE' THESE INSTRUMENTS CANNOT BE SAID TO BE BELONG TO THE SAME ECONOMIC GENUS. OF COURSE THERE CAN BE SITUATIONS IN WHICH THERE MAY BE ECONOMIC SIMILARITIES IN THIS RESPECT MAY BE P RESENT BUT THESE ARE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 24 OF 34 MORE OF AN EXCEPTION THAN THE RULE. IN GENERAL THE REFORE BANK GUARANTEES ARE NOT COMPARABLE WITH CORPORATE GUARAN TEES. 41. AS EVIDENT FROM THE OECD OBSERVATION TO THE EFF ECT 'IN CONTRAST IF FOR EXAMPLE A PARENT COMPANY RAISES FUNDS ON BEHALF OF ANOTHER GROUP MEMBER WHICH USES THEM TO ACQUIRE A NEW COMPANY TH E PARENT COMPANY WOULD GENERALLY BE REGARDED AS PROVIDING A SERVICE TO THE GROUP MEMBER' IT IS ALSO TO BE CLEAR THAT WHEN THE CORPORATE GUARANTEES ARE ISSUED FOR THE PURPOSE OF SUBSIDIARI ES RAISING FUNDS FOR ACQUISITIONS BY SUCH SUBSIDIARIES THESE GUARANTEES WILL BE DEEMED TO BE SERVICES TO THE SUBSIDIARIES AND AS A COROLLAR Y THERETO WHEN CORPORATE GUARANTEES ARE ISSUED FOR THE SUBSIDIARIE S TO RAISE FUNDS FOR THEIR OWN NEEDS THE CORPORATE GUARANTEES ARE TO BE TREATED AS SHAREHOLDER ACTIVITY. THE USE OF BORROWED FUNDS FOR OWN USE IS A REASONABLE PRESUMPTION AS IT IS A MATTER OF COURSE RATHER THAN EXCEPTION. THERE HAS TO BE SOMETHING ON RECORD TO I NDICATE OR SUGGEST THAT THE FUNDS RAISED BY THE SUBSIDIARY WITH THE H ELP OF THE GUARANTEE GIVEN BY THE ASSESSEE ARE NOT FOR ITS OWN BUSINESS PURPOSES. AS A PLAIN LOOK AT THE DETAILS OF CORPORATE GUARANTEES W OULD SHOW THESE GUARANTEES WERE ISSUED TO VARIOUS BANKS IN RESPECT OF THE CREDIT FACILITIES AVAILED BY THE SUBSIDIARIES FROM THESE B ANKS. THE GUARANTEES WERE PRIMA FACIE IN THE NATURE OF SHAREHOLDER ACTIV ITY AS IT WAS TO PROVIDE OR COMPENSATE FOR LACK OF CORE STRENGTH F OR RAISING THE FINANCES FROM BANKS. NO MATERIAL INDICATING TO THE CONTRARY IS BROUGHT ON RECORD IN THIS CASE. GOING BY THE OECD GUIDANCE ALSO IT IS NOT REALLY POSSIBLE TO HOLD THAT THE CORPORATE GUARANTE ES ISSUED BY THE ASSESSEE WERE IN THE NATURE OF 'PROVISION FOR SERVI CE' AND NOT A SHAREHOLDER ACTIVITY WHICH ARE MUTUALLY EXCLUSIVE I N NATURE. IN THE LIGHT OF THESE DISCUSSIONS WE ARE OF THE CONSIDERED VIEW AND ARE FULLY SUPPORTED BY THE OECD GUIDANCE IN THIS THAT THE IS SUANCE OF CORPORATE GUARANTEES IN THE NATURE OF QUASI-CAPITA L OR SHAREHOLDER ACTIVITY- AS IS THE UNCONTROVERTED POSITION ON THE FACTS OF THIS CASE DOES NOT AMOUNT TO A SERVICE IN WHICH RESPECT OF WH ICH ARM'S LENGTH ADJUSTMENT CAN BE DONE. 42. AS OBSERVED BY HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. EKL APPLIANCES LTD. [2012] 345 ITR 241/209 TAXMAN 200/2 4 TAXMANN.COM 199 (DELHI) A RE-CHARACTERIZATION OF A TRANSACTION IS INDEED PERMISSIBLE INTER ALIA IN A SITUATION '(I) WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM ITS FORM AND (II) WHE RE THE FORM AND SUBSTANCE OF THE TRANSACTION ARE THE SAME BUT ARRAN GEMENTS MADE IN RELATION TO THE TRANSACTION VIEWED IN THEIR TOTALI TY DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERP RISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER'. THE CASE OF A C ORPORATE GUARANTEE CLEARLY FALLS IN THE SECOND CATEGORY AS NO INDEPEND ENT ENTERPRISE WOULD ISSUE A GUARANTEE WITHOUT AN UNDERLYING SECURITY AS HAS BEEN DONE BY THE ASSESSEE. WE MAY IN THIS REGARD REFER TO THE OBSERVATIONS MADE BY HON'BLE HIGH COURT SPEAKING THROUGH HON'BLE JUS TICE EASWAR (AS HE THEN WAS) AS FOLLOWS: '16. THE ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ('OECD' FOR SHORT) HAS LAID DOWN 'TRAN SFER PRICING ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 25 OF 34 GUIDELINES' FOR MULTI-NATIONAL ENTERPRISES AND TAX ADMINISTRATIONS. THESE GUIDELINES GIVE AN INTRODUCT ION TO THE ARM'S LENGTH PRICE PRINCIPLE AND EXPLAINS ARTICLE 9 OF THE OECD MODEL TAX CONVENTION. THIS ARTICLE PROVIDES THAT WH EN CONDITIONS ARE MADE OR IMPOSED BETWEEN TWO ASSOCIATED ENTERPRI SES IN THEIR COMMERCIAL OR FINANCIAL RELATIONS WHICH DIFFER FROM THOSE WHICH WOULD BE MADE BETWEEN INDEPENDENT ENTERPRISES THEN ANY PROFIT WHICH WOULD BUT FOR THOSE CONDITIONS HAVE ACCRUED TO ONE OF THE ENTERPRISES BUT BY REASON OF THOSE CONDITIONS IF NOT SO ACCRUED MAY BE INCLUDED IN THE PROFITS OF THAT ENTERPRISE A ND TAXED ACCORDINGLY. BY SEEKING TO ADJUST THE PROFITS IN TH E ABOVE MANNER THE ARM'S LENGTH PRINCIPLE OF PRICING FOLLO WS THE APPROACH OF TREATING THE MEMBERS OF A MULTI-NATIONAL ENTERPR ISE GROUP AS OPERATING AS SEPARATE ENTITIES RATHER THAN AS INSEP ARABLE PARTS OF A SINGLE UNIFIED BUSINESS. AFTER REFERRING TO ARTIC LE 9 OF THE MODEL CONVENTION AND STATING THE ARM'S LENGTH PRINCIPLE THE GUIDELINES PROVIDE FOR 'RECOGNITION OF THE ACTUAL TRANSACTIONS UNDERTAKEN' IN PARAGRAPHS 1.36 TO 1.41. PARAGRAPHS 1.36 TO 1.38 AR E IMPORTANT AND ARE RELEVANT TO OUR PURPOSE. THESE PARAGRAPHS A RE REPRODUCED BELOW: '1.36 A TAX ADMINISTRATION'S EXAMINATION OF A CONTR OLLED TRANSACTION ORDINARILY SHOULD BE BASED ON THE TRANS ACTION ACTUALLY UNDERTAKEN BY THE ASSOCIATED ENTERPRISES A S IT HAS BEEN STRUCTURED BY THEM USING THE METHODS APPLIED BY THE TAXPAYER INSOFAR AS THESE ARE CONSISTENT WITH THE M ETHODS DESCRIBED IN CHAPTERS II AND III. IN OTHER THAN EXC EPTIONAL CASES THE TAX ADMINISTRATION SHOULD NOT DISREGARD THE ACTUAL TRANSACTIONS OR SUBSTITUTE OTHER TRANSACTION S FOR THEM. RESTRUCTURING OF LEGITIMATE BUSINESS TRANSACT IONS WOULD BE A WHOLLY ARBITRARY EXERCISE THE INEQUITY O F WHICH COULD BE COMPOUNDED BY DOUBLE TAXATION CREATED WHER E THE OTHER TAX ADMINISTRATION DOES NOT SHARE THE SAM E VIEWS AS TO HOW THE TRANSACTION SHOULD BE STRUCTURED. 1.37 HOWEVER THERE ARE TWO PARTICULAR CIRCUMSTANCE S IN WHICH IT MAY EXCEPTIONALLY BE BOTH APPROPRIATE AN D LEGITIMATE FOR A TAX ADMINISTRATION TO CONSIDER DIS REGARDING THE STRUCTURE ADOPTED BY A TAXPAYER IN ENTERING INT O A CONTROLLED TRANSACTION. THE FIRST CIRCUMSTANCE ARIS ES WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FRO M ITS FORM. IN SUCH A CASE THE TAX ADMINISTRATION MAY DIS REGARD THE PARTIES' CHARACTERIZATION OF THE TRANSACTION AN D RE- CHARACTERISE IT IN ACCORDANCE WITH ITS SUBSTANCE. A N EXAMPLE OF THIS CIRCUMSTANCE WOULD BE AN INVESTMENT IN AN ASSOCIATED ENTERPRISE IN THE FORM OF INTEREST-BEARI NG DEBT WHEN AT ARM'S LENGTH HAVING REGARD TO THE ECONOMI C CIRCUMSTANCES OF THE BORROWING COMPANY THE INVESTM ENT WOULD NOT BE EXPECTED TO BE STRUCTURED IN THIS WAY. IN THIS CASE IT MIGHT BE APPROPRIATE FOR A TAX ADMINISTRATI ON TO CHARACTERIZE THE INVESTMENT IN ACCORDANCE WITH ITS ECONOMIC SUBSTANCE WITH THE RESULT THAT THE LOAN MA Y BE ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 26 OF 34 TREATED AS A SUBSCRIPTION OF CAPITAL. THE SECOND CIRCUMSTANCE ARISES WHERE WHILE THE FORM AND SUBST ANCE OF THE TRANSACTION ARE THE SAME THE ARRANGEMENTS M ADE IN RELATION TO THE TRANSACTION VIEWED IN THEIR TOTALI TY DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER AND THE ACTUAL STRUCTURE PRACTICALL Y IMPEDES THE TAX ADMINISTRATION FROM DETERMINING AN APPROPRIATE TRANSFER PRICE. AN EXAMPLE OF THIS CIRC UMSTANCE WOULD BE A SALE UNDER A LONG-TERM CONTRACT FOR A L UMP SUM PAYMENT OF UNLIMITED ENTITLEMENT TO THE INTELLECTU AL PROPERTY RIGHTS ARISING AS A RESULT OF FUTURE RESEA RCH FOR THE TERM OF THE CONTRACT (AS PREVIOUSLY INDICATED IN PA RAGRAPH 1.10). WHILE IN THIS CASE IT MAY BE PROPER TO RESPE CT THE TRANSACTION AS A TRANSFER OF COMMERCIAL PROPERTY I T WOULD NEVERTHELESS BE APPROPRIATE FOR A TAX ADMINISTRATIO N TO CONFORM THE TERMS OF THAT TRANSFER IN THEIR ENTIRET Y (AND NOT SIMPLY BY REFERENCE TO PRICING) TO THOSE THAT MIGHT REASONABLY HAVE BEEN EXPECTED HAD THE TRANSFER OF PROPERTY BEEN THE SUBJECT OF A TRANSACTION INVOLVIN G INDEPENDENT ENTERPRISES. THUS IN THE CASE DESCRIBE D ABOVE IT MIGHT BE APPROPRIATE FOR THE TAX ADMINISTR ATION FOR EXAMPLE TO ADJUST THE CONDITIONS OF THE AGREEMENT IN A COMMERCIALLY RATIONAL MANNER AS A CONTINUING RESEAR CH AGREEMENT. 1.38 IN BOTH SETS OF CIRCUMSTANCES DESCRIBED ABOVE THE CHARACTER OF THE TRANSACTION MAY DERIVE FROM THE RELATIONSHIP BETWEEN THE PARTIES RATHER THAN BE DET ERMINED BY NORMAL COMMERCIAL CONDITIONS AS MAY HAVE BEEN STRUCTURED BY THE TAXPAYER TO AVOID OR MINIMIZE TAX . IN SUCH CASES THE TOTALITY OF ITS TERMS WOULD BE THE RESULT OF A CONDITION THAT WOULD NOT HAVE BEEN MADE IF THE PART IES HAD BEEN ENGAGED IN ARM'S LENGTH DEALINGS. ARTICLE 9 WO ULD THUS ALLOW AN ADJUSTMENT OF CONDITIONS TO REFLECT T HOSE WHICH THE PARTIES WOULD HAVE ATTAINED HAD THE TRANS ACTION BEEN STRUCTURED IN ACCORDANCE WITH THE ECONOMIC AND COMMERCIAL REALITY OF PARTIES DEALING AT ARM'S LENG TH.' 17. THE SIGNIFICANCE OF THE AFORESAID GUIDELINES LI ES IN THE FACT THAT THEY RECOGNISE THAT BARRING EXCEPTIONAL CASES THE TAX ADMINISTRATION SHOULD NOT DISREGARD THE ACTUAL TRAN SACTION OR SUBSTITUTE OTHER TRANSACTIONS FOR THEM AND THE EXAM INATION OF A CONTROLLED TRANSACTION SHOULD ORDINARILY BE BASED O N THE TRANSACTION AS IT HAS BEEN ACTUALLY UNDERTAKEN AND STRUCTURED BY THE ASSOCIATED ENTERPRISES. IT IS OF FURTHER SIGNIF ICANCE THAT THE GUIDELINES DISCOURAGE RE-STRUCTURING OF LEGITIMATE BUSINESS TRANSACTIONS. THE REASON FOR CHARACTERISATION OF SU CH RE- STRUCTURING AS AN ARBITRARY EXERCISE AS GIVEN IN T HE GUIDELINES IS THAT IT HAS THE POTENTIAL TO CREATE DOUBLE TAXATION IF THE OTHER TAX ADMINISTRATION DOES NOT SHARE THE SAME VIEW AS TO H OW THE TRANSACTION SHOULD BE STRUCTURED. ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 27 OF 34 18. TWO EXCEPTIONS HAVE BEEN ALLOWED TO THE AFORESA ID PRINCIPLE AND THEY ARE (I) WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM ITS FORM AND (II) WHERE THE FORM AND S UBSTANCE OF THE TRANSACTION ARE THE SAME BUT ARRANGEMENTS MADE IN R ELATION TO THE TRANSACTION VIEWED IN THEIR TOTALITY DIFFER F ROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER.' 43. IT IS THUS CLEAR THAT EVEN IF WE ACCEPT THE CON TENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT ISSUANCE OF A CORP ORATE GUARANTEE AMOUNTS TO A 'PROVISION FOR SERVICE' SUCH A SERVIC E NEEDS TO BE RE- CHARACTERIZED TO BRING IT IN TUNE WITH COMMERCIAL R EALITY AS 'ARRANGEMENTS MADE IN RELATION TO THE TRANSACTION VIEWED IN THEIR TOTALITY DIFFER FROM THOSE WHICH WOULD HAVE BEEN A DOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER'. NO BANK WOULD BE WILLING TO ISSUE A CLEAN GUARANTEE I.E. WITHOUT UNDERLYING ASSET TO ASSESSEE'S SUBSIDIARIES WHEN T HE BANKS ARE NOT WILLING TO EXTEND THOSE SUBSIDIARIES LOANS ON THE S AME TERMS AS WITHOUT A GUARANTEE. SUCH A GUARANTEE TRANSACTION CAN ONLY BE AND IS MOTIVATED BY THE SHAREHOLDER OR OWNERSHIP CONSIDER ATIONS. NO DOUBT UNDER THE OECD GUIDANCE ON THE ISSUE AN EXPLICIT S UPPORT SUCH AS CORPORATE GUARANTEE IS TO BE BENCHMARKED AND FOR THAT PURPOSE IT IS IN THE SERVICE CATEGORY BUT THAT OCCASION COMES ONL Y WHEN IT IS COVERED BY THE SCOPE OF 'INTERNATIONAL TRANSACTION' UNDER T HE TRANSFER PRICING LEGISLATION OF RESPECTIVE JURISDICTION. THE EXPRESS ION 'PROVISION FOR SERVICES' IN ITS NORMAL OR LEGAL CONNOTATIONS AS W E HAVE SEEN EARLIER DOES NOT COVER ISSUANCE OF CORPORATE GUARANTEES EV EN THOUGH ONCE A CORPORATE GUARANTEE IS COVERED BY THE DEFINITION OF INTERNATIONAL TRANSACTION' IT IS BENCHMARKED IN THE SERVICE SEGM ENT. IN VIEW OF THE ABOVE DISCUSSIONS OECD GUIDELINES AS A MATTER OF FACT STRENGTHEN THE CLAIM OF THE ASSESSEE THAT THE CORPORATE GUARAN TEES ISSUED BY THE ASSESSEE WERE IN THE NATURE OF QUASI-CAPITAL OR SHA REHOLDER ACTIVITY AND FOR THIS REASON ALONE THE ISSUANCE OF THESE G UARANTEES SHOULD BE EXCLUDED FROM THE SCOPE OF SERVICES AND THUS FROM T HE SCOPE OF 'INTERNATIONAL TRANSACTIONS' UNDER SECTION 92B. OF COURSE ONCE A TRANSACTION IS HELD TO BE COVERED BY THE DEFINITION OF INTERNATIONAL TRANSACTION WHETHER IN THE NATURE OF THE SHAREHOLD ER ACTIVITY OR QUASI- CAPITAL OR NOT ALP DETERMINATION MUST DEPEND ON WH AT AN INDEPENDENT ENTERPRISE WOULD HAVE CHARGED FOR SUCH A TRANSACTIO N. IN THIS LIGHT OF THESE DISCUSSIONS WE HOLD THAT THE ISSUANCE OF COR PORATE GUARANTEES IN QUESTION WAS NOT IN THE NATURE OF 'PROVISION FOR SERVICES' AND THESE CORPORATE GUARANTEES WERE REQUIRED TO BE TREATED AS SHAREHOLDER PARTICIPATION IN THE SUBSIDIARIES. 44. AS FOR THE WORDS 'PROVISION FOR SERVICES' APPEA RING IN SECTION 92B AND CONNOTATIONS THEREOF OUR HUMBLE UNDERSTANDING IS THAT THIS EXPRESSION IN ITS NATURAL CONNOTATIONS IS RESTRIC TED TO SERVICES RENDERED AND IT DOES NOT EXTEND TO THE BENEFITS OF ACTIVITIES PER SE. WHETHER WE LOOK AT THE EXAMPLES GIVEN IN THE OECD M ATERIAL OR EVEN IN EXPLANATION TO SECTION 92B THE THRUST IS ON THE SERVICES LIKE MARKET RESEARCH MARKET DEVELOPMENT MARKETING MANAGEMENT ADMINISTRATION ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 28 OF 34 TECHNICAL SERVICE REPAIRS DESIGN CONSULTATION A GENCY AND SCIENTIFIC RESEARCH LEGAL OR ACCOUNTING SERVICE OR COORDINATI ON SERVICES. AS A MATTER OF FACT EVEN IN THE EXPLANATION TO SECTION 92B- WHICH WE WILL DEAL WITH A LITTLE LATER GUARANTEES HAVE BEEN GROU PED IN ITEM 'C' DEALING WITH CAPITAL FINANCING RATHER THAN IN ITEM 'D' WHI CH SPECIFICALLY DEALS WITH 'PROVISION FOR SERVICES'. WHEN THE LEGISLATURE ITSELF DOES NOT GROUP 'GUARANTEES' IN THE 'PROVISION FOR SERVICES' AND IN CLUDES IT IN THE 'CAPITAL FINANCING' IT IS REASONABLE TO PROCEED ON THE BASI S THAT ISSUANCE OF GUARANTEES IS NOT TO BE TREATED AS WITHIN THE SCOPE OF NORMAL CONNOTATIONS OF EXPRESSION 'PROVISION FOR SERVICES' . OF COURSE THE GLOBAL BEST PRACTICES SEEM TO BE THAT GUARANTEES AR E SOMETIMES INCLUDED IN 'SERVICES' BUT THAT IS BECAUSE OF THE E XTENDED DEFINITION OF 'INTERNATIONAL TRANSACTION' IN MOST OF THE TAX JURI SDICTIONS. SUCH A WIDE DEFINITION OF SERVICES WHICH CAN BE SUBJECT TO ARM 'S LENGTH PRICE ADJUSTMENT APART 'TRANSFER PRICING AND INTRA-GROU P FINANCING BY BAKKER & LEVVY' (IBID) NOTES THAT 'THE IRS HAS ISSU ED A NON-BINDING FIELD SERVICE ADVICE (FSA 1995 WL 1918236 1 MAY 19 95) STATING THAT IN CERTAIN CIRCUMSTANCES (EMPHASIS SUPPLIED) A GUA RANTEE MAY BE TREATED AS A SERVICE'. IF THE NATURAL CONNOTATIONS OF A 'SERVICE' WERE TO COVER ISSUANCE OF GUARANTEE IN GENERAL THERE COULD NOT HAVE BEEN AN OCCASION TO GIVE SUCH HEDGED ADVICE. THIS WILL BE S TRETCHING THE THINGS TOO FAR TO SUGGEST THAT JUST BECAUSE WHEN GUARANTEE S ARE INCLUDED IN THE INTERNATIONAL TRANSACTIONS THESE GUARANTEES AR E INCLUDED IN SERVICE SEGMENT IN CONTRADISTINCTION WITH OTHER HEADS UNDER WHICH INTERNATIONAL TRANSACTIONS ARE GROUPED THE GUARANTEES SHOULD BE TREATED AS SERVICES AND FOR THAT REASON INCLUDED IN THE DEF INITION OF INTERNATIONAL TRANSACTIONS. THAT IS IN OUR CONSIDERED VIEW PURE LY FALLACIOUS LOGIC. IN OUR CONSIDERED VIEW UNDER SECTION 92B CORPORATE G UARANTEES CAN BE COVERED ONLY UNDER THE RESIDUARY HEAD I.E. 'ANY OTH ER TRANSACTION HAVING A BEARING ON THE PROFITS INCOME LOSSES OR ASSETS OF SUCH ENTERPRISE'. IT IS FOR THIS REASON THAT SECTION 92B IN A WAY EXPANDS THE SCOPE OF INTERNATIONAL TRANSACTION IN THE SENSE THA T EVEN WHEN GUARANTEES ARE ISSUED AS A SHAREHOLDER ACTIVITY BUT COSTS ARE INCURRED FOR THE SAME OR AS A MEASURE OF ABUNDANT CAUTION RECOVERIES ARE MADE FOR THIS NON-CHARGEABLE ACTIVITY THESE GUARAN TEES WILL FALL IN THE RESIDUARY CLAUSE OF DEFINITION OF INTERNATIONAL TRA NSACTIONS UNDER SECTION 92B. AS FOR THE LEARNED DEPARTMENTAL REPRESENTATIVE 'S ARGUMENT THAT 'WHETHER THE SERVICE HAS CAUSED ANY EXTRA COST TO T HE ASSESSEE SHOULD NOT BE THE DECIDING FACTOR TO DETERMINE WHETHER IT IS AN INTERNATIONAL AND THEN GIVES AN EXAMPLE OF BRAND ROYALTY TO MAKE HIS POINT. WHAT IN THE PROCESS HE OVERLOOKS IS THAT SECTION 92B(1) SP ECIFICALLY COVERS SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY'. THE EXPRESSION 'BEARING ON THE PROFITS INCOME LOSSES OR ASSETS O F SUCH ENTERPRISES' IS RELEVANT ONLY FOR RESIDUARY CLAUSE I.E. ANY OTHER S ERVICES NOT SPECIFICALLY COVERED BY SECTION 92B. IT WAS ALSO CONTENDED THAT WHILE RENDERING BHARTI AIRTEL DECISION THE DELHI TRIBUNAL DID GO O VERBOARD IN DECIDING SOMETHING WHICH WAS NOT EVEN RAISED BEFORE US. IN T HE WRITTEN SUBMISSION IT WAS STATED THAT 'HON'BLE DELHI ITAT WAS NOT REQUESTED BY THE CONTESTING PARTIES TO DECIDE THE ISSUE AS TO WHETHER THE PROVISION OF GUARANTEE WAS A SERVICE OR NOT'. THAT' S NOT FACTUALLY CORRECT. WE ARE UNABLE TO SEE ANY MERITS IN LEARNED DEPARTMENTAL REPRESENTATIVE'S CONTENTION PARTICULARLY AS DECISI ON CATEGORICALLY ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 29 OF 34 NOTED THAT NOT ONLY BEFORE THE TRIBUNAL BUT THIS I SSUE WAS ALSO RAISED BEFORE THE DRP- AS EVIDENT FROM THE TEXT OF DRP DEC ISION. WE NOW TAKE UP THE ISSUE WITH RESPECT TO SPECIFIC MENTION OF TH E WORDS IN EXPLANATION TO SECTION 92B WHICH STATES THAT 'FOR T HE REMOVAL OF DOUBTS IT IS HEREBY CLARIFIED THAT (I) THE EXPRESS ION 'INTERNATIONAL TRANSACTION' SHALL INCLUDE.. (C) CAPITAL FINANCIN G INCLUDING ANY TYPE OF LONG -TERM OR SHORT -TERM BORROWING LENDING OR GUARANTEE PURCHASE OR SALE OF MARKETABLE SECURITIES OR ANY TYPE OF ADV ANCE PAYMENTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT AR ISING DURING THE COURSE OF BUSINESS.' THERE IS NO DISPUTE THAT THIS EXPLANATION STATES THAT IT IS MERELY CLARIFICATORY IN NATURE INASMUCH AS IT IS 'FOR THE REMOVAL OF DOUBTS' AND THEREFORE ONE HAS TO PROCEED ON T HE BASIS THAT IT DOES NOT ALTER THE BASIC CHARACTER OF DEFINITION OF 'INT ERNATIONAL TRANSACTION' UNDER SECTION 92B. ACCORDINGLY THIS EXPLANATION IS TO BE READ IN CONJUNCTION WITH THE MAIN PROVISIONS AND IN HARMON Y WITH THE SCHEME OF THE PROVISIONS UNDER SECTION 92B. UNDER THIS EX PLANATION FIVE CATEGORIES OF TRANSACTIONS HAVE BEEN CLARIFIED TO H AVE BEEN INCLUDED IN THE DEFINITION OF 'INTERNATIONAL TRANSACTIONS'. THE FIRST TWO CATEGORIES OF TRANSACTIONS WHICH ARE STATED TO BE INCLUDED IN TH E SCOPE OF EXPRESSION 'INTERNATIONAL TRANSACTIONS' BY VIRTUE O F CLAUSE (A) AND (B) OF EXPLANATION TO SECTION 92B ARE TRANSACTIONS WITH R EGARD TO PURCHASE SALE TRANSFER LEASE OR USE OF TANGIBLE AND INTANG IBLE PROPERTIES. THESE TRANSACTIONS WERE ANYWAY COVERED BY TRANSACTIONS 'I N THE NATURE OF PURCHASE SALE OR LEASE OF TANGIBLE OR INTANGIBLE P ROPERTY'. THE ONLY ADDITIONAL EXPRESSION IN THE CLARIFICATION IS 'USE' AS ALSO ILLUSTRATIVE AND INCLUSIVE DESCRIPTIONS OF TANGIBLE AND INTANGIBLE A SSETS. SIMILARLY CLAUSE (D) DEALS WITH THE ' PROVISION OF SERVICES INCLUDING PROVISION OF MARKET RESEARCH MARKET DEVELOPMENT MARKETING MANA GEMENT ADMINISTRATION TECHNICAL SERVICE REPAIRS DESIGN CONSULTATION AGENCY SCIENTIFIC RESEARCH LEGAL OR ACCOUNTING SERVICE' W HICH ARE ANYWAY COVERED IN 'PROVISION FOR SERVICES' AND 'MUTUAL AGR EEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRI SES FOR THE ALLOCATION OR APPORTIONMENT OF OR ANY CONTRIBUTION TO ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WI TH A BENEFIT SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUCH ENTERPRISES '. THAT LEAVES US WITH TWO CLAUSES IN T HE EXPLANATION TO SECT ION 92B WHICH ARE NOT COVERED BY ANY OF THE TH REE CATEGORIES DISCUSSED ABOVE OR BY OTHER SPECIFIC SEGMENTS COVER ED BY SECTION 92B NAMELY BORROWING OR LENDING MONEY. THE REMAINI NG TWO ITEMS IN THE EXPLANATION TO SECTION 92B ARE SET OUT IN CLAUS E (C) AND (E) THERETO DEALING WITH (A) CAPITAL FINANCING AND (B) BUSINESS RESTRUCTURING OR REORGANIZATION. THESE ITEMS CAN ONLY BE COVERED IN THE RESIDUAL CLAUSE OF DEFINITION IN INTERNATIONAL TRANSACTIONS AS IN SECTION 92B (1) WHICH COVERS 'ANY OTHER TRANSACTION HAVING A BEARING ON P ROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISES'. IT IS THER EFORE ESSENTIAL THAT IN ORDER TO BE COVERED BY CLAUSE (C) AND (E) OF EXPLAN ATION TO SECTION 92B THE TRANSACTIONS SHOULD BE SUCH AS TO HAVE BEA RING ON PROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISE. IN OT HER WORDS IN A SITUATION IN WHICH A TRANSACTION HAS NO BEARING ON PROFITS INCOMES LOSSES OR ASSETS OF SUCH ENTERPRISE THE TRANSACTIO N WILL BE OUTSIDE THE AMBIT OF EXPRESSION 'INTERNATIONAL TRANSACTION'. TH IS ASPECT OF THE MATTER IS FURTHER HIGHLIGHTED IN CLAUSE (E) OF THE EXPLANA TION DEALING WITH ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 30 OF 34 RESTRUCTURING AND REORGANIZATION WHEREIN IT IS ACK NOWLEDGED THAT SUCH AN IMPACT COULD BE IMMEDIATE OR IN FUTURE AS EVIDEN T FROM THE WORDS 'IRRESPECTIVE OF THE FACT THAT IT (I.E. RESTRUCTURI NG OR REORGANIZATION) HAS BEARING ON THE PROFIT INCOME LOSSES OR ASSETS OF SUCH ENTERPRISE AT THE TIME OF TRANSACTION OR ON A FUTURE DATE'. WHAT IS I MPLICIT IN THIS STATUTORY PROVISION IS THAT WHILE IMPACT ON ' PROFIT INCOME LOSSES OR ASSETS' IS SINE QUA NON THE MERE FACT THAT IMPACT IS NOT IMME DIATE BUT ON A FUTURE DATE WOULD NOT TAKE THE TRANSACTION OUTSIDE THE AMBIT OF 'INTERNATIONAL TRANSACTION'. IT IS ALSO IMPORTANT T O BEAR IN MIND THAT AS IT APPEARS ON A PLAIN READING OF THE PROVISION THIS E XCLUSION CLAUSE IS NOT FOR 'CONTINGENT' IMPACT ON PROFIT INCOME LOSSES O R ASSETS BUT ON 'FUTURE' IMPACT ON PROFIT INCOME LOSSES OR ASSETS OF THE ENTERPRISE. THE IMPORTANT DISTINCTION BETWEEN THESE TWO CATEGOR IES IS THAT WHILE LATTER IS A CERTAINTY AND ONLY ITS CRYSTALLIZATION MAY TAKE PLACE ON A FUTURE DATE THERE IS NO SUCH CERTAINTY IN THE FORM ER CASE. IN THE CASE BEFORE US IT IS AN UNDISPUTED POSITION THAT CORPOR ATE GUARANTEES ISSUED BY THE ASSESSEE TO THE VARIOUS BANKS AND CRYSTALLIZ ATION OF LIABILITY UNDER THESE GUARANTEES THOUGH A POSSIBILITY IS NO T A CERTAINTY. IN VIEW OF THE DISCUSSIONS ABOVE THE SCOPE OF THE CAPITAL FINANCING TRANSACTIONS AS COULD BE COVERED UNDER EXPLANATION TO SECTION 92B READ WITH SECTION 92B(1) IS RESTRICTED TO SUCH CAP ITAL FINANCING TRANSACTIONS INCLUDING INTER ALIA ANY GUARANTEE D EFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF B USINESS AS WILL HAVE 'A BEARING ON THE PROFITS INCOME LOSSES OR ASSETS OR SUCH ENTERPRISE'. THIS PRECONDITION ABOUT IMPACT ON PROFITS INCOME LOSSES OR ASSETS OF SUCH ENTERPRISES IS A PRECONDITION EMBEDDED IN SECT ION 92B(1) AND THE ONLY RELAXATION FROM THIS CONDITION PRECEDENT IS SE T OUT IN CLAUSE (E) OF THE EXPLANATION WHICH PROVIDES THAT THE BEARING ON PROFITS INCOME LOSSES OR ASSETS COULD BE IMMEDIATE OR ON A FUTURE DATE. THESE GUARANTEES DO NOT HAVE ANY IMPACT ON INCOME PROFIT S LOSSES OR ASSETS OF THE ASSESSEE. THERE CAN BE A HYPOTHETICAL SITUAT ION IN WHICH A GUARANTEE DEFAULT TAKES PLACE AND THEREFORE THE E NTERPRISE MAY HAVE TO PAY THE GUARANTEE AMOUNTS BUT SUCH A SITUATION EVEN IF THAT BE SO IS ONLY A HYPOTHETICAL SITUATION WHICH ARE AS DIS CUSSED ABOVE EXCLUDED. WHEN AN ASSESSEE EXTENDS AN ASSISTANCE TO THE ASSOCIATED ENTERPRISE WHICH DOES NOT COST ANYTHING TO THE ASS ESSEE AND PARTICULARLY FOR WHICH THE ASSESSEE COULD NOT HAVE REALIZED MONEY BY GIVING IT TO SOMEONE ELSE DURING THE COURSE OF ITS NORMAL BUSINESS SUCH AN ASSISTANCE OR ACCOMMODATION DOES NOT HAVE A NY BEARING ON ITS PROFITS INCOME LOSSES OR ASSETS AND THEREFORE IT IS OUTSIDE THE AMBIT OF INTERNATIONAL TRANSACTION UNDER SECTION 92B (1) OF THE ACT. 45. BEFORE WE PART WITH THIS ISSUE THERE ARE A COU PLE OF THINGS THAT WE WOULD LIKE TO BRIEFLY DEAL WITH. 46. THE FIRST ISSUE IS THIS. WE FIND THAT IN THE CA SE OF FOUR SOFT LTD V. DY. CIT [(2011) 142 TTJ 358 (HYD)] A CO-ORDINATE BENCH HAD VIDE ORDER DATED 9TH SEPTEMBER 2011 OBSERVED AS FOLLOWS : 'WE FIND THAT THE TP LEGISLATION PROVIDES FOR COMPU TATION OF INCOME FROM INTERNATIONAL TRANSACTION AS PER SECTIO N 92B OF THE ACT. THE CORPORATE GUARANTEE PROVIDED BY THE ASSESS EE COMPANY ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 31 OF 34 DOES NOT FALL WITHIN THE DEFINITION OF INTERNATIONA L TRANSACTION. THE TP LEGISLATION DOES NOT STIPULATE ANY GUIDELINES IN RESPECT TO GUARANTEE TRANSACTIONS. IN THE ABSENCE OF ANY CHARG ING PROVISION THE LOWER AUTHORITIES ARE NOT CORRECT IN BRINGING AFORESAID TRANSACTION IN THE TP STUDY. IN OUR CONSI DERED VIEW THE CORPORATE GUARANTEE IS VERY MUCH INCIDENTAL TO THE BUSINESS OF THE ASSESSEE AND HENCE THE SAME CANNOT BE COMPARED TO A BANK GUARANTEE TRANSACTION OF THE BANK OR FINANCIAL INSTITUTION.' 47. HOWEVER WITHIN LESS THAN FOUR MONTHS OF THIS D ECISION HAVING BEEN RENDERED THE FINANCE ACT 2012 CAME UP WITH AN EXPL ANATION TO SECTION 92B STATING THAT 'FOR THE REMOVAL OF DOUBTS ' AS WE HAVE NOTED EARLIER IN THIS DECISION 'CLARIFIED' THAT INTERNAT IONAL TRANSACTIONS INCLUDE INTER ALIA CAPITAL FINANCING BY WAY OF GU ARANTEE. THIS LEGISLATIVE CLARIFICATION DID INDEED GO WELL BEYOND WHAT A COORDINATE BENCH OF THIS TRIBUNAL HELD TO BE THE LEGAL POSITIO N AND WE ARE BOUND BY THE ESTEEMED VIEWS OF THE COORDINATE BENCH. WE A RE THEREFORE OF THE OPINION THAT THE EXPLANATION TO SECTION 92B DID INDEED ENLARGE THE SCOPE OF DEFINITION OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B AND IT DID SO WITH RETROSPECTIVE EFFECT. IF FOR ARGUME NT SAKE IT IS ASSUMED THAT THE INSERTION OF EXPLANATION TO SECTION 92B DI D NOT ENLARGE THE SCOPE OF DEFINITION THERE CANNOT OBVIOUSLY BE ANY OCCASION TO DEVIATE FROM THE DECISION THAT THE COORDINATE BENCH TOOK IN FOUR SOFT LTD. CASE (SUPRA) BUT IF THE SCOPE OF THE PROVISION WAS INDE ED ENLARGED AS IS OUR OPINION THE QUESTION THAT REALLY NEEDS TO BE ADDRE SSED WHETHER GIVEN THE PECULIAR NATURE AND PURPOSE OF TRANSFER PRICING PROVISION IS IT AT ALL A WORKABLE IDEA TO ENLARGE THE SCOPE OF TRANSFER PR ICING PROVISIONS WITH RETROSPECTIVE EFFECT THERE CAN BE LITTLE DOUBT ABOU T THE LEGISLATIVE COMPETENCE TO AMEND TAX LAWS WITH RETROSPECTIVE EFF ECT AND IN ANY CASE WE ARE NOT INCLINED TO BE DRAWN INTO THAT CON TROVERSY EITHER. ON THE ISSUE OF IMPLEMENTING THE AMENDMENT IN TRANSFER PRICING LAW WITH RETROSPECTIVE EFFECT IN THE CASE OF BHARTI AIRTEL LTD. (SUPRA) A COORDINATE BENCH HAD OBSERVED AS FOLLOWS: '34. THERE IS ONE MORE ASPECT OF THE MATTER. THE EX PLANATION TO SECTION 92B HAS BEEN BROUGHT ON THE STATUTE BY THE FINANCE ACT 2012. IF ONE IS TO PROCEED ON THE BASIS THAT THE PR OVISIONS OF EXPLANATION TO SECTION 92B ENLARGES THE SCOPE OF SE CTION 92B ITSELF EVEN AS IT IS MODESTLY DESCRIBED AS 'CLARIF ICATORY' IN NATURE IT IS AN ISSUE TO BE EXAMINED WHETHER AN ENHANCEMEN T OF SCOPE OF THIS ANTI AVOIDANCE PROVISION CAN BE IMPLEMENTED WITH RETROSPECTIVE EFFECT. UNDOUBTEDLY THE SCOPE OF A C HARGING PROVISION CAN BE ENLARGED WITH RETROSPECTIVE EFFECT BUT AN ANTI- AVOIDANCE MEASURE THAT THE TRANSFER PRICING LEGISL ATION INHERENTLY IS IS NOT PRIMARILY A SOURCE OF REVENUE AS IT MAINLY SEEKS COMPLIANT BEHAVIOUR FROM THE ASSESSEE VIS--V IS CERTAIN NORMS AND THESE NORMS CANNOT BE GIVEN EFFECT FROM A DATE EARLIER THAN THE DATE NORMS ARE BEING INTRODUCED. H OWEVER AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON MERITS AND EVEN AFTER TAKING INTO ACCOUNT THE AMENDMENTS B ROUGHT ABOUT BY FINANCE ACT 2012 WE NEED NOT DEAL WITH TH IS ASPECT OF THE MATTER IN GREATER DETAIL.' ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 32 OF 34 48. IN THE PRESENT CASE WE HAVE HELD THAT THE ISSU ANCE OF CORPORATE GUARANTEES WERE IN THE NATURE OF SHAREHOLDER ACTIVI TIES- AS WAS THE UNCONTROVERTED CLAIM OF THE ASSESSEE AND AS SUCH COULD NOT BE INCLUDED IN THE 'PROVISION FOR SERVICES' UNDER THE DEFINITION OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B OF TH E ACT. WE HAVE ALSO HELD TAKING NOTE OF THE INSERTION OF EXPLANATION T O SECTION 92B OF THE ACT THAT THE ISSUANCE OF CORPORATE GUARANTEES IS C OVERED BY THE RESIDUARY CLAUSE OF THE DEFINITION UNDER SECTION 92 B OF THE ACT BUT SINCE SUCH ISSUANCE OF CORPORATE GUARANTEES ON THE FACTS OF THE PRESENT CASE DID NOT HAVE 'BEARING ON PROFITS INCOME LOS SES OR ASSETS' IT DID NOT CONSTITUTE AN INTERNATIONAL TRANSACTION UNDER SECTION 92B IN RESPECT OF WHICH AN ARM'S LENGTH PRICE ADJUSTMENT C AN BE MADE. IN THIS VIEW OF THE MATTER AND FOR BOTH THESE INDEPENDENT REASONS WE HAVE TO DELETE THE IMPUGNED ALP ADJUSTMENT. THE QUESTION W HICH WAS RAISED IN BHARTI AIRTEL'S CASE (SUPRA) BUT LEFT UNANSWERED AS THE ASSESSEE HAD SUCCEEDED ON MERITS REAMINS UNANSWERED HERE AS WEL L. HOWEVER WE MAY ADD THAT IN THE CASE OF KRISHNASWAMY SPD V. UNI ON OF INDIA [2006] 281 ITR 305/151 TAXMAN 286 (SC) WHEREIN THEIR LORD SHIPS HAD INTER ALIA OBSERVED THAT 'THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADM INISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL AP HORISMS ALL INTENTION OF COMPELLING IMPOSSIBILITIES AND THE ADMINISTRATI ON OF LAW MUST ADOPT THAT GENERAL EXCEPTION IN THE CONSIDERATION OF PART ICULAR CASES. IT WAS FOR THIS REASON THAT A COORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF CHANNEL GUIDE INDIA LTD. V. ASSTT. CIT [2012] 139 I TB 49/25 TAXMANN.COM 25 (MUM.) HELD THAT EVEN THOUGH THE AS SESSEE HAD NOT DEDUCTED THE APPLICABLE TAX AT SOURCE UNDER SECTION 195 THE DISALLOWANCE COULD NOT BE MADE UNDER SECTION 40(A)( I) SINCE THE TAXABILITY WAS UNDER THE PROVISIONS WHICH WERE AMEN DED POST THE PAYMENT HAVING BEEN MADE BY THE ASSESSEE WITH RETR OSPECTIVE EFFECT. ALL THIS ONLY SHOWS THAT EVEN WHEN LAW IS SPECIFICA LLY STATED TO HAVE EFFECT FROM A PARTICULAR DATE ITS BEING IMPLEMENTE D IN A FAIR AND REASONABLE MANNER WITHIN THE FRAMEWORK OF JUDGE MA DE LAW MAY REQUIRE THAT DATE TO BE TINKERED WITH. WHEN A PROVI SO IS INTRODUCED WITH EFFECT FROM A PARTICULAR DATE SPECIFIED BY THE LEGI SLATURE THE JUDICIAL FORUMS INCLUDING THIS TRIBUNAL AT TIMES READ IT A S BEING EFFECT FROM A DATE MUCH EARLIER THAN THAT TOO. ONE SUCH CASE FOR EXAMPLE IS CIT V. ANSAL LANDMARK TOWNSHIP (P.) LTD. [2015] 377 ITR 63 5/234 TAXMAN 825/61 TAXMANN.COM 45 (DELHI) WHEREIN HON'BLE DELH I HIGH COURT CONFIRMED THE ACTION OF THE TRIBUNAL IN HOLDING THA T THE PROVISION THOUGH STATED TO BE EFFECTIVE FROM 1ST APRIL 2013 M UST BE HELD TO BE EFFECTIVE FROM 1ST APRIL 2005. WHETHER SUCH AN EXER CISE CAN BE DONE IN THE PRESENT CASE IS OF COURSE SOMETHING TO BE EXA MINED AND OUR OBSERVATIONS SHOULD NOT BE CONSTRUED AS AN EXPRESSI ON ON MERITS OF THAT ASPECT OF MATTER. GIVEN THE FACT THAT THE ASSE SSEE HAS SUCCEEDED ON MERITS IN THIS CASE IT WOULD NOT REALLY BE NECE SSARY TO DEAL WITH THAT ASPECT OF THE MATTER. 49. THE SECOND ISSUE IS THIS. WE MUST DEAL WITH THE QUESTION WHETHER IN THIS CASE THE MATTER SHOULD HAVE BEEN REFERRED T O A LARGER BENCH. THE PARTIES BEFORE US WERE OPPOSED TO THE MATTER BE ING SENT FOR CONSIDERATION BY THE SPECIAL BENCH AND AT LEAST ON E OF THE REASONS FOR ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 33 OF 34 WHICH THE GRIEVANCE OF THE ASSESSEE IS UPHELD I.E. GUARANTEES BEING IN THE NATURE OF SHAREHOLDER ACTIVITY AND EXCLUDIBLE F ROM THE SCOPE OF SERVICES FOR THAT REASON ALONE IS AN AREA WHICH HA D COME UP FOR CONSIDERATION FOR THE FIRST TIME. IN EFFECT THEREF ORE THERE WAS NO CONFLICT ON THIS ISSUE OF AND THE OTHER ISSUES GIV EN DECISION ON THE SAID ISSUE WERE WHOLLY ACADEMIC. IT CANNOT BE OPEN TO R EFER THE ACADEMIC QUESTIONS TO THE SPECIAL BENCH. NO DOUBT SOME DECI SIONS OF THE COORDINATE BENCHES WHICH HAVE REACHED THE DIFFERENT CONCLUSIONS. THERE IS HOWEVER NO CONFLICT IN THE REASONING. FO UR SOFT LTD. DECISION (SUPRA) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE BUT THAT WAS WITH RESPECT TO THE LAW PRIOR TO INSERTION TO EXPLA NATION TO SECTION 92B. AS FOR THE POST-AMENDMENT LAW AND THE IMPACT OF AME NDMENT IN THE DEFINITION OF 'INTERNATIONAL TRANSACTION' THE MATT ER WAS AGAIN DECIDED IN FAVOUR OF THE ASSESSEE BY BHARTI AIRTEL LTD. DECIS ION (SUPRA) ON THE PECULIAR FACTS OF THAT CASE. THE DECISIONS LIKE EVE REST KENTO CYLINDERS LTD. (SUPRA) AND ADITYA BIRLA MINACS WORLDWIDE (SUP RA) WERE DECISIONS IN WHICH THE ASSESSEE HAD CHARGED THE FEES AND FOR THAT REASON SUCH CASES ARE COMPLETELY DISTINGUISHABLE AS DISCUSSED A BOVE. IN PROLIFIC' CORP LTD. CASE (SUPRA) AS INDEED IN ANY OTHER CASE SO FAR IT WAS NOT THE CASE OF THE ASSESSEE THAT CORPORATE GUARANTEES ARE QUASI-CAPITAL OR SHAREHOLDER ACTIVITY IN NATURE AND FOR THAT R EASON EXCLUDIBLE FROM CHARGEABLE SERVICES EVEN IF THESE ARE HELD TO BE S ERVICES IN NATURE. THAT PLEA HAS BEEN SPECIFICALLY ACCEPTED IN THE PRE SENT CASE. THEREFORE THE QUESTION WHETHER ISSUANCE OF CORPORA TE GUARANTEE PER SE IN GENERAL CONSTITUTES A 'INTERNATIONAL TRANSACT ION' UNDER SECTION 92B WOULD HAVE BEEN SOMEWHAT ACADEMIC QUESTION ON THE F ACTS OF THIS CASE. IN ANY EVENT IN PROLIFIC' CORP LTD. CASE (SU PRA) AN EARLIER CONSIDERED DECISION ON THE SAME ISSUE BY COORDINATE BENCH OF EQUAL STRENGTH WAS SIMPLY DISREGARDED AND THAT FACT TAKES THIS DECISION OUT OF THE AMBIT OF BINDING JUDICIAL PRECEDENTS. WE HAVE A LSO NOTED THAT IN VIEW OF THE DECISION A COORDINATE BENCH IN THE CAS E OF JKT FABRICS V. DY. CIT [2005] 4 SOT 84 (MUM.) AND FOLLOWING THE FU LL BENCH DECISION OF HON'BLE AP HIGH COURT IN THE CASE OF CIT V. BR C ONSTRUCTIONS [1993] 202 ITR 222/[1994] 73 TAXMAN 473 (AP) A DECISION D ISREGARDING AN EARLIER BINDING PRECEDENT ON THE ISSUE IS PER INCUR IUM. SUCH DECISIONS CANNOT BE BASIS FOR SENDING THE MATTERS TO SPECIAL BENCH SINCE OCCASION FOR REFERENCE TO SPECIAL BENCH ARISES WHEN BINDING AND CONFLICTING JUDICIAL PRECEDENTS FROM COORDINATE BEN CHES COME UP FOR CONSIDERATION. THAT WAS NOT THE CASE HERE. ALL THES E FACTORS TAKEN TOGETHER IN OUR CONSIDERED VIEW IT WAS NOT POSSIB LE IN THIS CASE TO REFER THE MATTER FOR CONSTITUTION OF A SPECIAL BENC H. IN ANY CASE WHATEVER WE DECIDE IS AND SHALL ALWAYS REMAIN SUB JECT TO THE JUDICIAL SCRUTINY BY HON'BLE COURTS ABOVE AND OUR ENDEAVOUR IS TO FACILITATE AND EXPEDITE WITHIN OUR INHERENT LIMITATIONS THAT PRO CESS OF SUCH A JUDICIAL SCRUTINY IF AND WHEN OCCASION COMES BY ANALYZING THE ISSUES IN A COMPREHENSIVE AND HOLISTIC MANNER. 50. IN THE LIGHT OF THE DETAILED DISCUSSIONS ABOVE AND FOR THE DETAILED REASONS SET OUT ABOVE WE UPHOLD THE GRIEVANCE RAIS ED BY THE ASSESSEE. THE IMPUGNED ALP ADJUSTMENT OF RS 2 23 62 603 THUS STANDS DELETED. AS WE DO SO HOWEVER WE MUST ADD T HAT IN OUR CONSIDERED VIEW THE WAY FORWARD TO AVOID SUCH ISS UES BEING LITIGATED ITA NO. 183/RJT/2015 & CO 48/RJT/2015 DCIT VS. M/S JYOTI AUTOMATION PVT LTD ASSESSMENT YEAR: 2009-10 PAGE 34 OF 34 AND TO ENSURE SATISFACTORILY RESOLUTION OF THESE DI SPUTES MUST INCLUDE A CLEAR AND UNAMBIGUOUS LEGISLATIVE GUIDANCE ON THE T RANSFER PRICING IMPLICATIONS OF THE CORPORATE GUARANTEES AS ALSO ON THE METHODOLOGY OF DETERMINING ITS ALP IF NECESSARY. 13. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS S O EXPRESSED BY THE COORDINATE BENCH. RESPECTFULLY FOLLOWING THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH WE UPHOLD THE RELIEF GRANTED BY T HE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 14. GROUND NO. 2 IS ALSO THUS DISMISSED. 15. IN THE RESULT THE APPEAL FILED BY THE ASSESSIN G OFFICER AS ALSO THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. PRON OUNCED IN THE OPEN COURT TODAY ON THE 28 TH DAY OF NOVEMBER 2017 SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD THE 28 TH DAY OF NOVEMBER 2017 **AM**BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT 1. DATE OF DICTATION: ..27.11.2017- PREPARED BY HO NBLE AM ON HIS COMPUTER-...... ... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ....27.11.2017....... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 28.11.2017....... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 28.11.2017.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 28.11.2017.. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: ..