DCIT (International Taxation), New Delhi v. M/s The Bank of Tokyo Mistubishi UFJ Ltd.,, New Delhi

ITA 283/DEL/2016 | 2011-2012
Pronouncement Date: 27-05-2021 | Result: Dismissed

Appeal Details

RSA Number 28320114 RSA 2016
Assessee PAN AABCT3880D
Bench Delhi
Appeal Number ITA 283/DEL/2016
Duration Of Justice 5 year(s) 4 month(s) 6 day(s)
Appellant DCIT (International Taxation), New Delhi
Respondent M/s The Bank of Tokyo Mistubishi UFJ Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-05-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 27-05-2021
Assessment Year 2011-2012
Appeal Filed On 20-01-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI R.K. PANDA ACCOUNTANT MEMBER AND SHRI KULDIP SINGH JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.283/DEL./2016 (ASSESSMENT YEAR : 2011-12) DCIT CIRCLE 1(1)(2) VS. M/S. THE BANK OF TOKYO MI TSUBISHI INTERNATIONAL TAXATION UFJ LIMITED NEW DELHI. 3 JEEVAN VIHAR BUILDING PARLIAMENT STREET NEW DELHI 110 001. (PAN : AABCT3880D) CO NO.126/DEL/2016 (IN ITA NO.283/DEL./2016) (ASSESSMENT YEAR : 2011-12) M/S. THE BANK OF TOKYO MITSUBISHI VS. DCIT CIRCLE 1(1)(2) UFJ LIMITED INTERNATIONAL TAXATION 3 JEEVAN VIHAR BUILDING NEW DELHI. PARLIAMENT STREET NEW DELHI 110 001. (PAN : AABCT3880D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NISHANT TAKKAR ADVOCATE REVENUE BY : MS. MEERA SRIVASTAVA CIT DR DATE OF HEARING : 16.03.2021 DATE OF ORDER : 27.05.2021 O R D E R PER KULDIP SINGH JUDICIAL MEMBER : ITA NO.283/DEL./2016 CO NO.126/DEL/2016 2 THE AFORESAID APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE TAXPAYER/ASSESSEE ARE BEING DISPOSED OFF BY WAY OF COMPOSITE ORDER TO AVOID REPETITION OF DISCU SSION. 2. APPELLANT DEPUTY COMMISSIONER OF INCOME-TAX CI RCLE 1(1)(2) INTERNATIONAL TAXATION NEW DELHI (HEREINA FTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL SOUG HT TO SET ASIDE THE IMPUGNED ORDER DATED 18.12.2015 PASSED BY THE A SSESSING OFFICER (AO) IN CONSONANCE WITH THE ORDERS PASSED B Y THE LD. DRP/TPO UNDER SECTION 143 (3) READ WITH SECTION 144 C (13) OF THE INCOME-TAX ACT 1961 (FOR SHORT THE ACT) QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA THAT :- 1. THE DRP ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING TO DELETE THE ADDITION PROPOSED ON ACCOUNT OR SALARY O F EXPATRIATES EMPLOYEES. 2. THE DRP ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING TO DELETE THE ADDITION PERTAINING TO THE INTEREST PAID TO HO AND OTHER OVERSEAS BRANCHES OF THE BANK IGNORING THE PROVISIO NS OF CIRCULAR NO.740 DATED 17/07/1996 OF THE CBDT AND PROVISIONS OF SECTION 9 OF THE INCOME TAX ACT 1961. 3. THE DRP ERRED IN LAW AND ON FACTS OF THE CASE IN DIRECTING TO DELETE THE ADDITION MADE ON ACCOUNT OF INTEREST FRO M INDIAN BRANCHES TO THE HEAD OFFICE AND CLAIMED AS EXPENDIT URE. 4. THE DRP ERRED IN LAW AND ON FACTS OF THE CASE I N DIRECTING TO DELETE THE ADDITION MADE ON ACCOUNT OF ACCRUED DEFE RRED BANK GUARANTEE COMMISSION TO THE ASSESSEE FROM ITS HO/OV ERSEAS BRANCHES. 5. THE DRP ERRED IN LAW AND ON FACTS OF THE CASE IN NOT CONSIDERING THAT THE COMMISSION RECEIPT IS LIKE A F EE FOR ISSUING THE GUARANTEE AND IS NOT A CONTINGENT RECEIPT OR ADVANC E AND THEREFORE THE AMOUNT OF COMMISSION RECEIVED IS AN INCOME WHIC H ACCRUES AT THE TIME OF BANK ISSUING THE GUARANTEE AND SHOULD H AVE BEEN INCLUDED IN THE INCOME OF THE ASSESSEE. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 3 6. THE DRP ERRED IN LAW ON FACTS OF THE CASE IN DIR ECTING TO DELETE THE ADDITION OF RS.10 43 55 168/- PROPOSED T O BE MADE ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT IN RESPECT O F ARMS LENGTH PRICE (ALP) OF CORPORATE GUARANTEE. 7. THE DRP ERRED IN LAW AND ON FACTS OF THE CASE IN HOLDING THAT THE PROVISIONS OF SECTION 115JB OF ACT RELATING TO COMPUTING OF BOOK PROFIT FOR MAT PURPOSE SHALL NOT BE APPLICABLE TO T HE ASSESSEE AND THEREBY IGNORING THE PROVISIONS OF SECTION 2(17) OF THE ACT. 3. THE OBJECTOR THE BANK OF TOKYO MITSUBISHI UFJ L TD. BY FILING THE PRESENT CROSS OBJECTIONS CHALLENGED THE ASSESSMENT ORDER DATED 18.12.2015 PASSED BY THE ASSESSING OFFICER QU A THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA T HAT :- 1. THE HON'BLE DRP HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE BY NOT ACCEPTING THE PRIMARY ANALYSIS UND ERTAKEN BY THE RESPONDENT USING COMPARABLE UNCONTROLLED PRICE METHOD (CUP) FOR DETERMINATION OF THE ARM'S LENGTH PRICE O F THE INTERNATIONAL TRANSACTION PERTAINING TO RECEIPT OF GUARANTEE COMMISSION FOR GUARANTEES COUNTER GUARANTEED BY THE ASSOCIATED ENTERPRISE ('IMPUGNED TRANSACTION'). 2. THE HON'BLE DRP HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE BY NOT ACCEPTING THE SECONDARY ANALYSIS U NDERTAKEN BY THE RESPONDENT TO DETERMINE THE ARM'S LENGTH PRI CE OF THE IMPUGNED TRANSACTION WHEREIN ALL THE INTERNATIONAL TRANSACTIONS OF THE RESPONDENT WERE AGGREGATED AND THE ARM'S LENGTH PRICE WAS DETERMINED USING 'TRANSACTIONAL NE T MARGIN METHOD' ('TNMM') AS THE MOST APPROPRIATE METHOD USI NG 'OPERATING PROFITS / TOTAL ASSETS' AS THE PROFIT LE VEL INDICATOR. 3. THE HON'BLE DRP HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE BY NOT REJECTING THE ERRONEOUS COMPARABLE UNCONTROLLED PRICE DATA OBTAINED BY LD. TPO / LD. AO BY ISSUANCE OF 133(6) NOTICE WHICH WAS USED FOR COMPUT ING THE ARM'S LENGTH PRICE OF THE IMPUGNED TRANSACTION. 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : THE BANK OF TOKYO MITSUBI SHI UFJ LTD. (BTMU INDIA) THE TAXPAYER IS A NON-RESIDENT COMPAN Y INCORPORATED IN JAPAN ENGAGED IN WHOLESALE BANKING OPERATIONS ITA NO.283/DEL./2016 CO NO.126/DEL/2016 4 MAINLY CATERING TO THE REQUIREMENTS OF JAPAN BASED CORPORATE AND INDIVIDUAL CLIENTS. THE TAXPAYER OPERATES IN INDIA UNDER THE LICENCE FROM THE RESERVE BANK OF INDIA (RBI) AND IS GOVERNE D BY BANKING REGULATION ACT 1949. THE TAXPAYER IS NOT SIGNIFIC ANTLY ENGAGED IN RETAIL BANKING IN INDIA. 5. ALL THE BRANCHES OF TAXPAYER IN INDIA CONSTITUTE PERMANENT ESTABLISHMENT (PE) OF THE TAXPAYER IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF THE DOUBLE TAX AVOIDANCE AGREEMENT (DT AA). FOR THE YEAR UNDER ASSESSMENT THE TAXPAYER FILED ITS R ETURN DECLARING INCOME OF RS.228 02 36 682/-. THE TAXPAYER REPORTE DLY ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES (AES) AS UNDER :- S.NO. DESCRIPTION OF THE TRANSACTIONS AMOUNT (RS.) 1 PAYMENT OF SOFTWARE LICENSE FEE 3 427 875 2 PAYMENT FOR SOFTWARE DEVELOPMENT SERVICES 1 997 5 13 3 PAYMENT OF ANNUAL MAINTENANCE CHARGES FOR SOFTWARE MAINTENANCE 6 634 714 4 PAYMENT OF ACCOUNT MAINTENANCE CHARGES AND CLEARING CHARGES 518 007 5 PAYMENT OF COMMUNICATION CHARGES 4 009 696 6 PAYMENT OF COUNTER GUARANTEE COMMISSION 22 085 51 1 7 NET INTEREST RECEIVED ON NOSTRO/VOSTRO ACCOUNTS 524 307 8 RECEIPT OF SERVICE INCOME FOR ECB SYNDICATION 258 549 017 9 RECEIPT OF SUNDRY COMMISSION 517 292 10 INTEREST PAID ON INTER-OFFICE BORROWING 76 865 7 33 11 INTEREST RECEIVED FROM OVERNIGHT PLACEMENT OF FUNDS 1 054 887 12 INTEREST RECEIVED ON INTEREST RATE SWAP 8 010 00 0 13 INTEREST PAID ON INTEREST RATE SWAP 9 875 721 14 INTEREST RECEIVED ON CURRENCY SWAP 141 388 812 15 INTEREST PAID ON CURRENCY SWAP 255 573 472 ITA NO.283/DEL./2016 CO NO.126/DEL/2016 5 6. THE TAXPAYER IN ORDER TO BENCHMARK ITS INTERNATI ONAL TRANSACTIONS OF COUNTER GUARANTEE COMMISSION ADOP TED COMPARABLE UNCONTROLLED PRICE (CUP) AS MOST APPROPR IATE METHOD (MAM) WHEREIN THE REPRESENTATIVE GUARANTEE F EE CHARGED BY BTMU INDIA FROM SOME OF ITS LOCAL CUSTOMERS WERE COMPARED WITH THE COUNTER GUARANTEE COMMISSION RATES RECEIVE D BY BTMU FROM ITS OVERSEAS BRANCHES/AES. 7. HOWEVER THE TPO PROCEEDED TO DISAGREE WITH TP A NALYSIS MADE BY THE TAXPAYER TO BENCHMARK ITS INTERNATIONAL TRANSACTIONS TO ADOPT THE AVERAGE BANK GUARANTEE RATE AT ARMS LENG TH PRICE (ALP) AND PROPOSED AN ADDITION OF RS.10 43 55 168/- ON THIS ACCOUNT. 8. AO MADE ADDITION ON ACCOUNT OF RS.24 56 85 915/- BY WAY OF DISALLOWANCE OF SALARY PAID TO EXPAT EMPLOYEES. AO ALSO MADE DISALLOWANCE OF RS.7 69 92 545/- ON ACCOUNT OF INTE REST PAID BY INDIAN BRANCHES TO HO/OVERSEAS BRANCHES. AO FURTHE R MADE ADDITION OF RS.7 69 92 545/- ON ACCOUNT OF TAXING I NTEREST RECEIVED BY HO/OVERSEAS BRANCHES FROM INDIAN BRANCHES AND AL SO MADE ADDITION OF RS.98 33 728 ON ACCOUNT OF TREATMENT IN RESPECT OF DEFERRED BANK GUARANTEE COMMISSION. 9. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY WAY OF FILING THE OBJECTIONS WHO HAS DELETED THE ADDITI ON OF ITA NO.283/DEL./2016 CO NO.126/DEL/2016 6 RS.10 43 55 168/- ON ACCOUNT OF TRANSFER PRICING AD JUSTMENT QUA ALP OF CORPORATE GUARANTEE. LD. DRP ALSO HELD THAT PROVISIONS OF SECTION 115JB OF THE ACT RELATING TO COMPUTING OF B OOK PROFIT FOR MAT PURPOSE SHALL NOT BE APPLICABLE TO THE TAXPAYER . FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. DRP/TPO/AO THE REVENUE AS WELL AS THE TAXPAYER HAVE COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL AND CROSS OBJEC TIONS RESPECTIVELY. 10. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 OF ITA NO.283/DEL/2016 (REVENUES APPEAL) 11. AO HAS MADE DISALLOWANCE OF RS.24 56 85 915/- P AID AS SALARIES BY THE HEAD OFFICE INCLUDING INDIAN TAXES THEREON TO THE EXPATRIATE EMPLOYEES WORKING IN INDIA EXCLUSIVELY F OR THE PE OF THE TAXPAYER IN INDIA. HOWEVER LD. DRP DELETED THE AD DITION IT BEING AN IDENTICAL ISSUE DECIDED BY THE TRIBUNAL IN TAXPA YERS OWN CASE FOR AYS 2007-08 & 2008-09. 12. LD. DR FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS RAISED BY THE LD. DRP THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ITA NO.283/DEL./2016 CO NO.126/DEL/2016 7 TAXPAYER BY VIRTUE OF THE ORDER DATED 08.04.2016 PASSED BY THE HONBLE DELHI HIGH COURT IN ITA 604/2015 & ITA 605/ 2015 IN TAXPAYERS OWN CASE FOR AYS 2007-08 & 2008-09 AND VIDE ORDER PASSED BY THE TRIBUNAL IN TAXPAYERS OWN CASE FOR ASSESSMENT YEARS 2005-06 2007-08 2008-09 2009-10 2010-11 & 2015-16 IN ITA NOS.3707/DEL/2014 & 3755/DEL/2014 I TA NO.5364/DEL/2010 ITA NO.5104/DEL/2011 ITA NO.1162/DEL/2014 ITA NO.1174/DEL/2015 & ITA NO.7895/DEL/2019 RESPECTIVELY . 13. WE HAVE PERUSED THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR EARLIER YEARS FROM 1998-99 TO 2010-11 AND ORDER PASSED BY THE HONBLE DELHI HIGH COURT IN CASE OF TAXPAYER FOR AYS 2007-08 & 2008-09 (SUPRA). THE ISSUE BEFORE THE BENCH IS SQUARELY COVERED BY T HE ORDER (SUPRA) PASSED BY THE HONBLE DELHI HIGH COURT OPERATIVE P ART OF WHICH IS EXTRACTED FOR READY PERUSAL AS UNDER :- SALARIES PAID TO EXPATRIATES 9. THE FIRST QUESTION URGED CONCERNS THE PAYMENT O F SALARIES TO THE EXPATRIATES. IN DECIDING THIS ISSUE IN FAVOU R OF THE ASSESSEE THE ITAT HAS IN THE IMPUGNED COMMON ORDER REFERRED TO AND RELIED UPON THE DECISION OF ITS COORDINATE B ENCH AT KOLKATA IN ABN AMRO BANK V. JCIT (2005)97 ITD 1(ITAT [KOL]) . FURTHER THE ITAT FOLLOWED THE DECISION OF THE BOMBA Y HIGH COURT IN CIT V. EMIRATES COMMERCIAL BANK LTD. (2003 ) 262 ITR 55 (BOM.) WHERE THE BOMBAY HIGH COURT APPROVED THE VIEW TAKEN BY THE ITAT. THE ITAT AGREED THAT THE EXPENSE S HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY BY THE INDIAN BRANC H AND THEREFORE NO PART OF THESE EXPENSES CAN BE ALLOCATE D TO ANY OTHER ITA NO.283/DEL./2016 CO NO.126/DEL/2016 8 BRANCH OF THE HO AND THAT THERE WAS NO DISPUTE WITH REGARD TO THE NON-APPLICABILITY OF SECTION 44C OF THE ACT. 10. THIS COURT HAS PERUSED THE ORDER OF THE BOMBAY HIGH COURT IN EMIRATES COMMERCIAL (SUPRA) WHERE ON IDENT ICAL FACTS THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. TH IS ORDER OF THE BOMBAY HIGH COURT HAS BEEN AFFIRMED BY THE SUPREME COURT BY ORDER DATED 26TH AUGUST 2008 IN COMMISSIONER OF INC OME TAX V. M/S EMIRATES COMMERCIAL BANK LTD. WHICH IN TURN RE FERRED TO AN ORDER OF THE SAME DATE IN COMMISSIONER OF INCOME TAX. V. DEUTSCHE BANK AG (CA NO. 1544 OF 2006). 11. IN THAT VIEW OF THE MATTER THIS COURT DECLINE S TO FRAME A QUESTION ON THIS ISSUE. 14. SO FOLLOWING THE ORDER PASSED BY HONBLE HIGH COURT DISCUSSED IN PRECEDING PARAS THE LD. DRP HAS RIGHT LY DELETED THE ADDITION MADE BY THE AO BY HOLDING THAT EXPENSES HA VE BEEN INCURRED WHOLLY AND EXCLUSIVELY BY THE INDIAN BRANC H AND AS NO PART OF THESE EXPENSES CAN BE ALLOCATED TO ANY OTHE R BRANCH OF HO SECTION 44C OF THE ACT IS NOT APPLICABLE HENCE GRO UND NO.1 RAISED BY THE REVENUE IS DETERMINED AGAINST THE REVENUE. GROUNDS NO.2 & 3 OF ITA NO.283/DEL/2016 (REVENUES APPEAL) 15. THE REVENUE HAS CHALLENGED THE DISALLOWANCE OF INTEREST PAID BY THE INDIAN BRANCHES TO HO/OVERSEAS BRANCHES AND TAXING INTEREST RECEIVED BY HO/OVERSEAS BRANCHES FROM INDI AN BRANCHES MADE BY THE AO/DRP BY IGNORING THE PROVISIONS OF CI RCULAR NO.740 DATED 17.07.1996 OF CBDT AND PROVISIONS CONT AINED U/S 9 OF THE ACT. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 9 16. AGAIN LD. DR FOR THE REVENUE HAS FAILED TO CON TROVERT THE FINDINGS RAISED BY THE LD. DRP THAT THIS ISSUE IS C OVERED BY THE ORDER PASSED BY THE HONBLE DELHI HIGH COURT IN TAXPAYERS OWN CASE FOR AYS 2007-08 & 2008-09 ORDER PASSED BY THE HONBLE CALCUTTA HIGH COURT IN TAXPAYERS OWN CASE FOR AY 1 995-96 ORDER DATED 17.11.2014 AND ORDER PASSED BY THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2009-10 . 17. WE HAVE PERUSED THE ORDER (SUPRA) PASSED BY THE HONBLE DELHI HIGH COURT IN TAXPAYERS OWN CASE IN WHICH BO TH THESE ISSUES HAVE ALSO BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY RETURNING FOLLOWING FINDINGS :- INTEREST PAID TO THE HO AND INTEREST RECEIVED FROM INDIAN BRANCHES 12. THIS ISSUE APPEARS TO BE COVERED AGAINST THE RE VENUE BY THE DECISION OF THE CALCUTTA HIGH COURT DATED 23RD DECE MBER 2010 IN ABN AMRO BANK(2012) 343 ITR 81 (CAL). THE ITAT HAS FOLL OWED THE ABOVE DECISION OF THE CALCUTTA HIGH COURT AND DECIDED THE QUESTION IN FAVOUR OF THE ASSESSEE. 13. ON THIS ISSUE THE COURT FURTHER FINDS THAT TH E ORDER OF THE CALCUTTA HIGH COURT DATED 17TH NOVEMBER 2014 IN ITA NO. 175 OF 2004 (BANK OF TOKYO-MITSUBISHI LTD. V. DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION MUMBAI) HAS ALSO DECIDED TH IS ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING ITS JUDGMENT OF ABN AM RO BANK(SUPRA). THE TWO SPECIFIC QUESTIONS URGED BY THE ASSESSEE IN THAT CASE WERE ANSWERED IN ITS FAVOUR: (I) WHETHER INTEREST PAYMENT MADE BY THE INDIAN BR ANCH OF THE APPELLANT TO ITS HEAD OFFICE ABROAD WAS TO B E ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS OF THE APPELLANT 'S BRANCH IN INDIA ? (II) WHETHER MAKING SUCH PAYMENT TO THE HEAD OFFIC E THE APPELLANT'S SAID BRANCH WAS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 195 OF THE INCOME TAX ACT 1961? ITA NO.283/DEL./2016 CO NO.126/DEL/2016 10 14. IT IS SIGNIFICANT THAT IN THE AFOREMENTIONED O RDER THE CALCUTTA HIGH COURT NOTED THE FACT THAT THE SPECIAL LEAVE PE TITION PREFERRED BY THE REVENUE AGAINST THE JUDGMENT OF THE CALCUTTA HI GH COURT IN ABN AMRO BANK(SUPRA) WAS DISMISSED BY THE SUPREME COURT ON 3RD AUGUST 2012. 15. ACCORDINGLY THIS COURT DECLINES TO FRAME ANY QUESTION ON THIS ISSUE OF INTEREST PAID TO THE HO AS WELL AS THE INT EREST RECEIVED FROM THE INDIAN BRANCHES. DEFERRED BANK GUARANTEE COMMISSION . 18. SO WE ARE OF THE CONSIDERED VIEW THAT LD. DRP HAS PASSED THE IMPUGNED ORDER BY FOLLOWING THE DECISION RENDER ED BY HONBLE DELHI HIGH COURT AND ORDER PASSED BY THE TRIBUNAL I N TAXPAYERS OWN CASE IN EARLIER YEARS WE FIND NO GROUND TO INT ERFERE THE FINDINGS RETURNED BY THE LD. DRP HENCE GROUNDS NO. 2 & 3 RAISED BY THE REVENUE ARE DISMISSED. GROUNDS NO.4 & 5 OF ITA NO.283/DEL/2016 (REVENUES APPEAL) 19. THE REVENUE HAVE ALSO CHALLENGED THE DELETION O F ADDITION BY THE LD. DRP ON ACCOUNT OF ACCRUED DEFERRED BANK GUARANTEE COMMISSION TO THE TAXPAYER FROM ITS HO/OVERSEAS BRA NCHES AND HAS ALSO CHALLENGED THE FINDINGS RETURNED BY THE LD. DR P IN NOT CONSIDERING THAT THE COMMISSION RECEIVED IS LIKE A FEE FOR ISSUING THE GUARANTEE AND IS NOT A CONTINGENT RECEIPT OR DE FENCE AND THEREFORE THE AMOUNT OF COMMISSION RECEIVED IS AN INCOME WHICH ACCRUES AT THE TIME OF BANK ISSUING THE GUARANTEE A ND SHOULD HAVE BEEN INCLUDED IN THE INCOME OF THE TAXPAYER. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 11 20. LD. DR FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS RAISED BY THE LD. DRP THAT THIS ISSUE IS COVERED BY THE ORDER PASSED BY THE HONBLE CALCUTTA HIGH COURT IN TAXPAYERS OWN CASE FOR AY 1981-82 AND LD. DRP HAS FOLLOWED THAT DECISION FOR VARIOUS SUBSEQUENT ASSESSMENT YEARS. 21. THIS ISSUE HAS BEEN SUCCESSIVELY DECIDED BY THE TRIBUNAL IN AYS 1998-99 2000-01 2001-02 2002-03 2007-08 20 08-09 2009-10 & 2010-11 IN FAVOUR OF THE TAXPAYER IN ITS OWN CASES AND THE ORDER PASSED BY THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AYS 2007-08 & 2008-09 HAVE BEEN CONFIRMED BY HONBLE DELHI HIGH COURT . 22. COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2007-08 (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE TAXPAYE R BY FOLLOWING THE DECISION RENDERED BY HONBLE CALCUTTA HIGH COURT IN TAXPAYERS OWN CASE FOR AY 1995-96 (SUPRA) BY RETURNING FOLLOWING FINDINGS :- 86. GROUND NO. 8 IS REGARDING TREATMENT IN RESPECT OF DEFERRED BANK GUARANTEE COMMISSION. THE AO NOTED THAT THE COMMISS ION RECEIVED ON GUARANTEES IN RESPECT OF THE PERIOD WHICH HAD NOT E XPIRED WAS NOT OFFERED AS INCOME ACCRUED FOR THE YEAR BUT HAD BEEN TREATED AS AN ADVANCE IN LINE WITH THE ACCOUNTING POLICY FOLLOWED BY THE BANK. HE OBSERVED THAT AMOUNT OF COMMISSION RECEIVED IS AN I NCOME WHICH ACCRUES AT THE TIME THE BANK ISSUES THE GUARANTEE. THE PERIOD OF GUARANTEE HAS NOTHING TO DO WITH THE ASSESSEE'S RIG HT TO RECEIVE HAVING ARISEN. HE POINTED OUT THAT THE COMMISSION RECEIVED WAS LIKE A FEE FOR ISSUING THE GUARANTEE AND WAS NOT A CONTINGENT RECE IPT OR ADVANCE AND IT WAS ALSO NOT RETURNABLE AT THE END OF THE GUARAN TEE PERIOD. THUS THE AMOUNT OF COMMISSION RECEIVED WAS INCOME WHICH ACC RUED AT THE TIME THE BANK ISSUED THE GUARANTEE. LD. DRP CONFIRMED TH E AO'S ACTION INTER ALIA OBSERVING THAT THE DECISION OF HON'BLE KOLKATA HIGH COURT ITA NO.283/DEL./2016 CO NO.126/DEL/2016 12 IN ASSESSEE'S OWN CASE WAS NOT ACCEPTED BY THE DEPA RTMENT AND SLP HAD BEEN FILED BEFORE THE SUPREME COURT. 86.1 HAVING HEARD BOTH THE PARTIES WE FIND THAT TH IS ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE KOLKATA HIGH COURT IN THE CASE OF CIT V. BANK OF TOKYO LTD. [1993] 71 TAXMAN 85 WHEREIN UNDER SIMILAR CIRCUMSTANCES IT HAS BEEN HELD THAT FULL COMMISSION THOUGH PAYABLE AT THE OUTSET DID NOT CRYSTALLIZE IN TO PERFECT RIGHT TO RECEIVE SO FAR AS UNEXPIRED PERIOD WAS CONCERNED BE CAUSE THE PAYABILITY OR RECEIVABILITY FROM THE VIEW OF THE AS SESSEE BANK WAS COUNTER-BALANCED BY THE REFUNDABILITY DILUTING THE RIGHT TO RECEIVE INTO A CONTINGENT RIGHT AS REGARDS UNEXPIRED PERIOD OF T HE GUARANTEE. THE ASSESSEE CLARIFIED THAT FEDAI GUIDELINES PLACES AN OBLIGATION ON THE ASSESSEE TO REFUND THE PROPORTIONATE COMMISSION FOR THE UNEXPIRED PERIOD. THEREFORE RESPECTFULLY FOLLOWING THE DECIS ION OF HON'BLE KOLKATA HIGH COURT IN ASSESSEE'S OWN CASE THIS GRO UND IS ALLOWED. 23. THIS ISSUE WAS AGITATED BY THE REVENUE BEFORE T HE HONBLE DELHI HIGH COURT IN THE JUDGMENT (SUPRA) BUT HONBL E HIGH COURT HAS CONFIRMED THE FINDINGS RETURNED BY THE TRIBUNAL ON THIS ISSUE BY RETURNING FOLLOWING FINDINGS :- 16. THIS ISSUE APPEARS TO BE COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CALCUTTA HIGH COURT IN CIT V. B ANK OF TOKYO LTD. (1993) 71 TAXMAN 85 (CAL). 17. ACCORDINGLY THIS COURT DECLINES TO FRAME ANY Q UESTION ON THIS ISSUE. 24. SO FOLLOWING THE DECISION RENDERED BY THE COOR DINATE BENCH OF THE TRIBUNAL CONFIRMED BY THE HONBLE DELHI HIG H COURT AS THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE TAXPAY ER ON NUMEROUS OCCASIONS RIGHT FROM AYS 1998-99 TILL 2010-11 AND A S SUCH LD. DRP HAS BASED THEIR FINDINGS ON THE ORDER PASSED BY THE TRIBUNAL AND HONBLE DELHI HIGH COURT. CONSEQUENTLY THERE IS NO GROUND TO INTERFERE IN THE FINDINGS RETURNED BY THE LD. DR P AND AS SUCH GROUNDS NO.4 & 5 ARE DETERMINED AGAINST THE REVENUE . ITA NO.283/DEL./2016 CO NO.126/DEL/2016 13 GROUND NO.7 OF ITA NO.283/DEL/2016 (REVENUES APPEAL) 25. THE REVENUE HAS ALSO CHALLENGED THE FINDINGS RE TURNED BY THE LD. DRP THAT PROVISIONS OF SECTION 115JB OF THE ACT RELATING TO COMPUTING OF BOOK PROFIT FOR MAT PURPOSE ARE NOT AP PLICABLE TO THE TAXPAYER ON THE GROUND THAT THE LD. DRP HAS IGN ORED THE PROVISIONS CONTAINED U/S 2 (17) OF THE ACT. 26. LD. DR FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS RAISED BY THE LD. DRP THAT THIS ISSUE IS COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN TAXPAYERS OWN CASE FOR ASSESSME NT YEARS 2007-08 & 2008-09 . 27. WE HAVE PERUSED THE ORDER PASSED BY THE TRIBUNA L IN TAXPAYERS OWN CASE FOR AYS 2007-08 & 2008-09 (SUPRA) WHEREIN INSTANT ISSUE HAS BEEN THRASHED IN DETAIL AND DECID ED IN FAVOUR OF THE TAXPAYER BY RETURNING FOLLOWING FINDINGS :- 71.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RECORD OF THE CASE. THE FACTS ARE NOT D ISPUTED. 72. ADMITTEDLY THE ASSESSEE HAD PREPARED ITS ACCOU NTS AS PER THE REQUIREMENTS OF BANKING REGULATION ACT AND WHIL E FILING THE RETURN OF INCOME THOUGH IT HAD COMPUTED THE BOOK P ROFITS AS PER THE PROVISIONS OF SECTION 115JB ALSO BUT HAD GIVEN A NOTE THAT THE PROVISIONS OF SECTION 115JB WERE NOT APPLICABLE . IT IS ALSO NOT DISPUTED THAT PROFIT AND LOSS ACCOUNT OF ASSESSEE H AD NOT BEEN PREPARED AS PER PART II & III OF SCHEDULE VI TO THE COMPANIES ACT. 73. LD. COUNSEL HAS RELIED ON THE DECISION IN THE CASE OF MAHARASHTRA STATE ELECTRICITY BOARD (SUPRA) RELIAN CE ENERGY ITA NO.283/DEL./2016 CO NO.126/DEL/2016 14 LIMITED (SUPRA) KERALA STATE ELECTRICITY BOARD (SU PRA) WHICH HAVE BEEN RENDERED WITH REFERENCE TO ELECTRICITY (S UPPLY) ACT 1948. THE DECISION IN THE CASE OF ICICI LOMBARD GEN ERAL INSURANCE COMPANY LTD. HAS BEEN RENDERED WITH REFER ENCE TO ACCOUNTS PREPARED AS PER THE INSURANCE REGULATORY A ND DEVELOPMENT AUTHORITY (PREPARATION OF FINANCIAL STA TEMENTS ON AUDITOR'S REPORT OF INSURANCE COMPANY) REGULATION 2002. IN ALL THESE DECISIONS IT HAS BEEN HELD THAT SINCE THE ACC OUNTS WERE NOT PREPARED AS PER THE PROVISIONS OF PART II OF SCHEDU LE VI OF COMPANIES ACT AND THE ACCOUNTS WERE NOT LAID BEFORE THE ANNUAL GENERAL MEETING IN ACCORDANCE WITH THE PROVISIONS O F SECTION 210 OF THE COMPANIES ACT AS PER THE REQUIREMENTS OF SUB-SECTION (2) OF SECTION 115JB THEREFORE THE PROVISIONS OF SECTION 115JB WERE NOT APPLICABLE. EXPLANATION 3 HAS BEEN INSERTE D BY THE FINANCE ACT 2012 W.E.F. 01/04/2013 AS PER WHICH NO W THE BOOK PROFITS CAN BE COMPUTED ON THE BASIS OF ACCOUNTS PR EPARED UNDER THE GOVERNING ACT TO SUCH COMPANY. 73.1 LD. COUNSEL POINTED OUT THAT IN THE CASE OF S TATE BANK OF HYDERABAD (SUPRA) IT HAS BEEN HELD THAT THIS AMENDM ENT IS PROSPECTIVE AND THEREFORE IT IS NOT APPLICABLE FO R THE PRESENT ASSESSMENT YEAR. 74. LD. CIT(DR) HOWEVER POINTED OUT THAT TRIBUNAL HAS NOT CONSIDERED IN DETAIL THE IMPORT OF THIS AMENDMENT A ND HAS SIMPLY ON THE BASIS OF DATE OF INSERTION HAS OBSERVED THAT IT IS PROSPECTIVE. HE HAS POINTED OUT THAT IN THE CASE OF STATE BANK OF HYDERABAD PRIMARILY THE DECISION IN THE CASE OF MAH ARASHTRA STATE ELECTRICITY BOARD HAS BEEN FOLLOWED AND EXPLA NATION 3 HAS NOT BEEN CONSIDERED. IN OUR OPINION THIS EXPLANATIO N CANNOT BE HELD TO BE RETROSPECTIVE IN OPERATION BECAUSE IT HA S BROUGHT IN A SUBSTANTIAL CHANGE IN THE COMPUTATION PROVISION. TI LL THE INSERTION OF THIS AMENDMENT VARIOUS DECISIONS CLEA RLY HELD THAT IN CASE OF BANKING COMPANIES ELECTRICITY COMPANIES AND INSURANCE COMPANIES SINCE THEY WERE GOVERNED BY SP ECIAL ACTS AND THE PROFIT AND LOSS ACCOUNT WAS NOT PREPARED AS PER PART II OF SCHEDULE VI TO THE COMPANIES ACT THEREFORE THE CO MPUTATION PROVISIONS FAILED. ACCORDINGLY IN VIEW OF THE DECI SION OF SUPREME COURT IN THE CASE OF B.C. SRINIVASA SETTY (SUPRA) THE LAW TILL THE INSERTION OF THIS EXPLANATION WAS THAT THE PROVISIO NS OF SECTION 115JB WERE NOT APPLICABLE ON ACCOUNT OF IMPOSSIBILI TY OF COMPUTATION AS THE ACCOUNTS WERE NOT PREPARED IN AC CORDANCE WITH PART II SCHEDULE VI TO THE COMPANIES ACT. NOW BY INCORPORATING EXPLANATION 3 THE COMPANIES GOVERNED BY SPECIAL ACTS WHICH COME WITHIN THE AMBIT OF COMPANY U/S 2(1 7) ARE COVERED BY THE PROVISIONS OF SECTION 115JB. THEREFO RE THIS AMENDMENT BRINGS SUBSTANTIAL CHANGE IN THE TAXABILI TY OF COMPANIES GOVERNED BY THE SPECIAL ACTS AND THEREFO RE CANNOT BE HELD TO BE RETROSPECTIVE. IN THIS REGARD WE ALSO FI ND STRENGTH FROM THE RATIO LAID DOWN BY THE SUPREME COURT IN ITS DEC ISION DATED ITA NO.283/DEL./2016 CO NO.126/DEL/2016 15 16.9.2014 IN THE CASE OF CIT V. VATIKA TOWNSHIP (P. ) LTD. IN CIVIL APPEALS ARISING OUT OF SLP(C) NO. 1362 OF 2009 AND OTHERS. THE FIVE JUDGES BENCH OF THE SUPREME COURT STRIKES DOWN DIVISION BENCH RULING ON RETROSPECTIVE APPLICABILITY OF PROV ISO TO SECTION 113 OF THE INCOME TAX ACT HOLDING THE PROVISO TO OP ERATE PROSPECTIVELY. LAYING DOWN PERUSAL PRINCIPLES GOVER NING RETROSPECTIVITY THE SUPREME COURT HAS BEEN PLEASED TO RULE THAT UNLESS CONTRARY INTENTION APPEARS A LEGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE RETROSPECTIVE OPERATION CUR RENT LAW OUGHT TO GOVERN CURRENT ACTIVITIES LAW PASSED TODAY CANN OT APPLY TO PAST EVENTS. 75. LD. COUNSEL HAS ALSO RELIED ON THE DECISION IN THE CASE OF KRUNG THAI BANK PCL (SUPRA) IN WHICH IT HAS BEEN HE LD THAT SINCE IN THE CASE OF BANKING COMPANIES SCHEDULE VI IS NOT APPLICABLE THEREFORE SECTION 115JB CANNOT BE APPL IED. 76. THE MAT PROVISIONS WERE BROUGHT IN STATUTE BY THE INCOME TAX ACT BY FINANCE BILL 1996 AND THE HON'BL E FINANCE MINISTER WHILE INTRODUCING THIS PROVISION INTER AL IA OBSERVED THAT COMPANY ENGAGED IN THE POWER AND INFRASTRUCTUR E SECTOR WILL REMAIN EXEMPT FROM THE LEVY OF MAT. THIS PROVISION WAS BROUGHT IN TO BRING WITHIN THE TAX-NET THE ZERO TAX COMPANIES. IN FINANCE BILL 2000 THE HON'BLE FINANCE MINISTER I NTER ALIA PROPOSED THAT THE MAT BE LEVIED AT THE REVISED RATE OF 7.5% OF BOOK PROFITS AS DETERMINED UNDER THE COMPANIES ACT INSTEAD OF THE EXISTING EFFECTIVE RATE OF 10.5%. THE FINANCE B ILL 2002 VIDE CLAUSE (49) AMENDED SECTION 115JB OBSERVING AS UNDE R: 'CLAUSE 49 SEEKS TO AMEND SECTION. 115JB OF THE. IN COME- TAX ACT RELATING TO SPECIAL PROVISION FOR PAYMENT O F TAX BY CERTAIN COMPANIES. THE EXISTING PROVISIONS OF THE SAID SECTION PROVIDE FOR LEVY OF A MINIMUM TAX ON DOMESTIC COMPANIES OF AN AMOUN T EQUAL TO SEVEN AND ONE-HALF PER CENT. OF THE BOOK PROFIT IF THE TAX PAYABLE ON THE TOTAL INCOME CHARGEABLE TO T AX AS PER THE PROVISIONS OF THE INCOME-TAX ACT 1961 IS LESS THAN SEVEN AND ONE-HALF PER CENT OF THE BOOK PROFIT .. . SUB-CLAUSE (A) SEEKS TO PROVIDE THAT WHERE THE TAX PAYABLE ON THE TOTAL INCOME CHARGEABLE TO TAX IS LESS THAN SEVEN AND ONE-HALF PER CENT. OF BOOK PROFIT SUCH BOOK PR OFIT SHALL BE DEEMED TO BE THE TOTAL INCOME OF THE ASSES SEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH TOTAL INCOM E SHALL BE THE. AMOUNT OF INCOME-TAX AT THE RATE OF SEVEN A ND ONE- HALF PER CENT.' THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FRO M 1ST APRIL 2001 AND ITA NO.283/DEL./2016 CO NO.126/DEL/2016 16 WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSM ENT YEARS 2001-2002 AND SUBSEQUENT YEARS. 76.1 THIS MAKES THE INTENTION OF LEGISLATURE VERY C LEAR THAT THE MAT PROVISIONS ARE APPLICABLE ONLY TO DOMESTIC COMP ANIES AND NOT TO THE FOREIGN COMPANIES. 77. LD. DR HAS RELIED ON VARIOUS DECISIONS OF AUTH ORITY FOR ADVANCE RULING WHICH HAVE ELABORATELY BEEN CONSIDER ED IN THE ARGUMENTS ADVANCED BY HIM. THESE DECISIONS HAVE ONL Y PERSUASIVE VALUE AND ARE NOT BINDING ON US. WE FIND THAT CONSISTENT VIEW OF VARIOUS COORDINATE BENCHES IS TH AT SECTION 115JB IS NOT APPLICABLE IN CASE OF BANKING COMPANIE S. 78. EVEN IF FOR SAKE THE OF ARGUMENT LD. CIT(DR)'S CONTENTION IS ACCEPTED STILL IN VIEW OF THE PROVISIONS OF SECT ION 90(2) THE ASSESSEE'S CLAIM FOR LOWER IMPOST OF TAX WILL HAVE TO BE ACCEPTED BECAUSE THE PROVISIONS OF SECTION 115JB ARE SUBORDI NATE TO SECTION 90(2) AND HAVE NO OVERRIDING EFFECT ON THE SAID SECTION. 78.1 IN VIEW OF THE ABOVE DISCUSSION THIS GROUND I S ALLOWED BECAUSE IT HAS BEEN CLARIFIED BY LD. COUNSEL THAT T HE TAXABLE INCOME HAD BEEN COMPUTED AS PER THE PROVISIONS OF A RTICLE 7(3) OF THE DTAA. 28. AFORESAID FINDINGS RETURNED BY THE COORDINATE B ENCH OF THE TRIBUNAL HAVE BEEN CONFIRMED BY THE HONBLE DELHI H IGH COURT IN TAXPAYERS OWN CASE (SUPRA) BY RETURNING FOLLOWING FINDINGS :- APPLICABILITY OF SECTION 115JB 20. THE ITAT HAS AFTER AN ELABORATE DISCUSSION HAD COME TO THE CONCLUSION THAT THE ASSESSEE'S CLAIM FOR LOWER TAX WILL HAVE TO BE ACCEPTED BECAUSE SECTION 115JB IS SUBJECT TO SECTIO N 90(2) OF THE ACT AND THE TAXABLE INCOME OF THE ASSESSEE WOULD HA VE TO BE COMPUTED IN TERMS OF ARTICLE 7(3) OF THE DTAA. WHAT IS SIGNIFICANT IS THAT THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE HAS NOT BEEN PREPARED IN TERMS OF PART II OF SCHEDULE V I OF THE COMPANIES ACT 1956 AND IN FACT COULD NOT HAVE BEEN PREPARED IN TERMS THEREOF. CONSEQUENTLY THE QUESTION OF APPLIC ABILITY OF SECTION 115JB DID NOT ARISE. AS RIGHTLY POINTED OUT TILL THE INSERTION OF SECTION 115JB BANKING COMPANIES WERE REQUIRED TO PREPARE THEIR ACCOUNTS IN TERMS OF SPECIAL ACTS THA T THEY WERE GOVERNED BY AND THEREFORE THERE WERE NO COMPUTATIO N PROVISIONS ITA NO.283/DEL./2016 CO NO.126/DEL/2016 17 AS REGARDS SUCH BANKING COMPANIES. THE CHANGE BROUG HT OUT BY SECTION 115JB WAS THEREFORE NOT RETROSPECTIVE. 21. THE REASONING AND THE CONCLUSION OF THE ITAT ON THIS ISSUE APPEARS TO SUFFER FROM NO LEGAL INFIRMITY. CONSEQUE NTLY THE COURT DECLINES TO FRAME ANY QUESTION ON THIS ISSUE AS WELL. 29. SO FOLLOWING THE ORDER PASSED BY THE COORDINAT E BENCH OF THE TRIBUNAL AND CONFIRMED BY HONBLE DELHI HIGH CO URT WE ARE OF THE CONSIDERED VIEW THAT LD. DRP BY FOLLOWING TH E ORDER PASSED BY THE TRIBUNAL HAS RIGHTLY DECIDED THIS ISSUE IN F AVOUR OF THE TAXPAYER AND AS SUCH WE FIND NO SCOPE TO INTERFERE INTO THE FINDINGS ON THIS ISSUE. CONSEQUENTLY GROUND NO.7 IS DETERM INED AGAINST THE REVENUE. GROUND NO.6 OF ITA NO.283/DEL/2016 (REVENUES APPEAL) GROUNDS NO.1 2 & 3 OF CO NO.126/DEL/2016 FILED BY THE TAXPAYER 30. THE REVENUE BY RAISING GROUND NO.6 CHALLENGED T HE DELETION OF ADDITION OF RS 10 43 55 168/- BY THE LD. DRP PRO POSED TO BE MADE BY THE LD. TPO QUA THE ALP OF CORPORATE GUARAN TEE. AT THE SAME TIME THE TAXPAYER BY FILING CROSS OBJECTION A LSO CHALLENGED INTER ALIA THAT THE REJECTION OF PRIMARY ANALYSIS M ADE BY THE LD. DRP BY APPLYING CUP METHOD FOR BENCHMARKING THE ALP OF INTERNATIONAL TRANSACTIONS QUA RECEIPT OF GUARANTEE COMMISSION FOR GUARANTEES COUNTER GUARANTEED BY THE AE; THAT THE T AXPAYER ALSO CHALLENGED REJECTION OF SECONDARY ANALYSIS MADE BY THE TAXPAYER TO ITA NO.283/DEL./2016 CO NO.126/DEL/2016 18 BENCHMARK THE INTERNATIONAL TRANSACTIONS QUA RECEIP T OF GUARANTEE COMMISSION BY APPLYING TNMM USING OPERATING PROFIT/ TOTAL ASSETS AS THE PLI; AND THAT THE TAXPAYER ALSO CHALLENGED R EJECTION OF ACCEPTANCE OF ERRONEOUS CUP DATA OBTAINED BY THE LD . TPO/AO BY ISSUANCE OF NOTICE U/S 133 (6) OF THE ACT WHICH WAS USED FOR COMPUTING THE ALP OF IMPUGNED TRANSACTION. 31. DURING THE YEAR UNDER ASSESSMENT THE TAXPAYER REPORTEDLY ENTERED INTO INTERNATIONAL TRANSACTIONS AS UNDER :- S.NO. DESCRIPTION OF THE TRANSACTIONS AMOUNT (RS.) 1 PAYMENT OF SOFTWARE LICENSE FEE 3 427 875 2 PAYMENT FOR SOFTWARE DEVELOPMENT SERVICES 1 997 513 3 PAYMENT OF ANNUAL MAINTENANCE CHARGES FOR SOFTWARE MAINTENANCE 6 634 714 4 PAYMENT OF ACCOUNT MAINTENANCE CHARGES AND CLEARING CHARGES 518 007 5 PAYMENT OF COMMUNICATION CHARGES 4 009 696 6 RECEIPT OF COUNTER GUARANTEE COMMISSION 22 085 511 7 NET INTEREST RECEIVED ON NOSTRO/VOSTRO ACCOUNTS 524 307 8 RECEIPT OF SERVICE INCOME FOR ECB SYNDICATION 258 549 017 9 RECEIPT OF SUNDRY COMMISSION 517 292 10 INTEREST PAID ON INTER-OFFICE BORROWING 76 865 733 11 INTEREST RECEIVED FROM OVERNIGHT PLACEMENT OF FUNDS 1 054 887 12 INTEREST RECEIVED ON INTEREST RATE SWAP 8 010 000 13 INTEREST PAID ON INTEREST RATE SWAP 9 875 721 14 INTEREST RECEIVED ON CURRENCY SWAP 141 388 812 15 INTEREST PAID ON CURRENCY SWAP 255 573 472 32. THE TAXPAYER IN ORDER TO BENCHMARK ITS INTERNAT IONAL TRANSACTIONS QUA COUNTER GUARANTEE COMMISSION I.E . COMPARABLE ITA NO.283/DEL./2016 CO NO.126/DEL/2016 19 UNCONTROLLED PRICE (CUP) AS MOST APPROPRIATE METHOD (MAM) BY COMPARING REPRESENTATIVE GUARANTEE FEE CHARGED BY B TMU INDIA FROM SOME OF ITS LOCAL CUSTOMERS WITH COUNTER GUARA NTEE COMMISSION RATE RECEIVED BY BTMU FROM ITS OVERSEAS BRANCHES/AE. HOWEVER LD. TPO WHILE REJECTING THE TP STUDY MADE BY THE TAXPAYER PROCEEDED TO ADOPT AVERAGE BAN K GUARANTEE RATE AS ALP OF THE TRANSACTION AND PROPOSED AN ADDI TION OF RS.10 43 55 168/-. 33. HOWEVER LD. DRP BY FOLLOWING ITS EARLIER YEAR ORDER FOR AY 2010-11 ACCEPTED THE FAR ANALYSIS OF BTMU INDIA AND AE OF BTMU INDIA MADE BY THE TAXPAYER AND PROCEEDED TO DE LETE THE PROPOSED TP ADDITION MADE BY THE LD. TPO BY RETURNI NG FOLLOWING FINDINGS :- 33.0 FINDING : DRP HAS DULY CONSIDERED SUBMISSIONS OF THE ASSESSEE . IT HAS BEEN NOTED THAT TPO HAS TREATED COUNTER GUARANT EE COMMISSION AT THE SAME FOOTING AS GUARANTEE COMMISS ION. HOWEVER FROM THE ABOVE CHART OF FAR ANALYSIS IT I S CLEAR THAT IN TRANSACTION OF COUNTER GUARANTEE BTMU INDIA HAS VE RY FEW FUNCTIONS TO PERFORM AND FEW RISKS TO' ASSUME AS CO MPARED TO ITS FOREIGN AES. MOREOVER COUNTER GUARANTEE COMMISSION OF 0.10 TO 1.0% AS CHARGED BY BTMU INDIA IS IN LINE WITH WHAT HAS BEEN HELD BY VARIOUS TRIBUNAL'S DECISIONS ON ISSUE OF CO RPORATE GUARANTEE. THE FACTS OF CASE UNDER CONSIDERATION AR E IDENTICAL TO THOSE IN PRECEDING YEAR WHEREIN THEN DRP HAS DECIDE D THE ISSUE IN FAVOUR OF THE ASSESSEE. HENCE THE PANEL DIRECTS THE TPOI AO TO DELETE THE ADDITION. THE OBJECTION IS ALLOWED. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 20 34. LD. AR FOR THE TAXPAYER AT THE VERY OUTSET CO NTENDED THAT IDENTICAL ISSUE HAS ALREADY BEEN DECIDED BY THE COO RDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AYS 2009-10 & 2015-16 IN ITA NOS.1162/DEL/2014 & 7895/DEL/2019 RESPECTIVELY. HOWEVER AT THE SAME TIME LD. AR FOR THE TAXPAYER BY FILING CROSS OBJECTION CHALLENGED THE ORDER PASSED BY THE LD. DRP FOR NOT ACCEPTING ITS PRIMARY AND SECONDARY ANALYSIS BY USING CUP AND TNM M AS THE MAM RESPECTIVELY AND ALSO CHALLENGED THE ORDER OF T HE LD. DRP TO THE EXTENT OF NOT REJECTING THE ERRONEOUS CUP DATA OBTAINED BY THE TPO BY INVOKING THE PROVISIONS CONTAINED U/S 133 (6 ) OF THE ACT. 35. HOWEVER ON THE OTHER HAND LD. DR FOR THE REVE NUE CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. DRP BY CONTENDING INTER ALIA THAT EVERY YEAR IS SEPARATE A ND INDEPENDENT YEAR AND AS SUCH EARLIER DECISIONS BY THE LD. DRP/ TRIBUNAL ARE NOT BINDING ON THE REVENUE DEPARTMENT; THAT SINCE THE T AXPAYER PERFORMS ALL THE SIGNIFICANT FUNCTIONS VIZ. CREDITW ORTHINESS VIOLATION NEGOTIATION OF TERMS ETC. BEFORE ISSUAN CE OF THE GUARANTEE TO THE CUSTOMER IT IS WRONG TO CONSIDER THAT THE TAXPAYER PERFORMS LIMITED FUNCTION; THAT THE TAXPAYER BEARS SIGNIFICANT RISK AS THE VOLUME OF TRANSACTION IS HUGE AND TAXPAYER S TILL BEARS THE RISK OF DEFAULT EVEN IF THERE IS A COUNTER GUARANTE E BY THE AE. LD. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 21 DR HAS ALSO FILED WRITTEN ARGUMENTS ON THIS ISSUE W HICH HAS BEEN MADE PART OF THE JUDICIAL RECORD. 36. NO DOUBT THE FIRST CONTENTION RAISED BY THE LD . DR FOR THE REVENUE THAT EVERY YEAR IS TO BE TREATED AS A SEPAR ATE AND INDEPENDENT YEAR FOR THE PURPOSE OF ASSESSMENT BUT AT THE SAME TIME WE ARE OF THE CONSIDERED VIEW THAT WHEN THERE IS NO CHANGE IN THE BUSINESS MODEL OF THE TAXPAYER IN THE YEAR UNDE R ASSESSMENT VIS--VIS PRECEDING YEARS AS WELL AS SUCCEEDING YEA RS THE RULE OF CONSISTENCY GETS ATTRACTED IN VIEW OF THE LAW LAID DOWN BY HONBLE SUPREME COURT IN CASE OF RADHASOAMI SATSANG VS. CIT IN CIVIL APPEAL NOS.10574-10583 OF 1983 AND HONBLE DELHI HIGH COURT IN RAYBAN SUN OPTICS INDIA LTD. VS . CIT IN ITA 880/2016 & CM APPL.45967/2016 . SO WHEN LD. DR HAS FAILED TO POINT OUT ANY DISSIMILARITY IN THE FUNCTI ONAL PROFILE AND FACTS & CIRCUMSTANCES OF THE CASE OF THE YEAR UNDER CONSIDERATION VIS--VIS PRECEDING AND SUCCEEDING YEARS THIS CONT ENTION IS NOT SUSTAINABLE. 37. SO FAR AS SECOND CONTENTION RAISED BY THE LD. D R FOR THE REVENUE THAT THE TAXPAYER PERFORMS SIGNIFICANT FUNC TIONS AND BEARS SIGNIFICANT RISK IS CONCERNED THIS CONTENTION IS NOT SUSTAINABLE WHEN WE EXAMINE THE FAR ANALYSIS OF BTMU INDIA AND AE OF ITA NO.283/DEL./2016 CO NO.126/DEL/2016 22 BTMU INDIA MADE BY THE TAXPAYER WITH REGARD TO THE TRANSACTION UNDER CONSIDERATION WHICH IS EXTRACTED FOR READY PE RUSAL AS UNDER:- NOMENCLATURE MUFG INDIA AES OF MUFG INDIA THIRD PARTY BANKS COUNTER GUARANTEE BANK GUARANTEE FUNCTIONS PERFORMS EVALUATION OF BACKGROUND AND CREDIT WORTHINESS OF THE BORROWER NO YES YES NEGOTIATION OF THE TERMS AND CONDITIONS OF THE FACILITY NO YES YES ISSUANCE OF BANK GUARANTEE LIMITED YES YES MAINTAINING AND BUILDING CLIENT RELATIONSHIP NO YES YES PROCESSING FOR PAYMENTS IN CASE OF DEFAULT LIMITED YES YES COLLECTION OF CLAIMS FROM THE DEFAULTER NO YES YES RISK ANALYSIS DEFAULT RISK NO YES YES CREDIT AND COLLECTION RISK NO YES YES 38. AFORESAID FAR ANALYSIS WAS MADE AND BROUGHT BEF ORE THE LD. TPO BY APPLYING THE CUP METHOD AND AS A SECONDARY A NALYSIS TNMM. 39. BARE PERUSAL OF THE AFORESAID FAR ANALYSIS MADE BY THE TAXPAYER GOES TO PROVE THAT THE TAXPAYER ONLY PERFO RMS LIMITED FUNCTIONS SUCH AS PROCESSING THE REQUEST OF ISSUA NCE OF GUARANTEE FROM THE AES ISSUANCE/DELIVERY OF THE GUARANTEE ON STAMP PAPER SEEKING CONFIRMATION FROM THE AES FOR CANCELLATION OR EXTENSION OF THE GUARANTEE AND AT THE SAME TIME AE OF TAXPAYER PERFORMS ITA NO.283/DEL./2016 CO NO.126/DEL/2016 23 SIGNIFICANT FUNCTIONS NAMELY EVALUATION OF BACKGR OUND AND CREDIT WORTHINESS OF THE BORROWER NEGOTIATION OF THE TERM S AND CONDITIONS OF THE FACILITY ISSUANCE OF BANK GUARANTEE MAINTA INING AND BUILDING CLIENT RELATIONSHIP PROCESSING FOR PAYMEN TS IN CASE OF DEFAULT COLLECTION OF CLAIMS FROM THE DEFAULTER. SO WHEN WE COMPARE BOTH THESE FUNCTIONS PERFORMED BY THE TAXPA YER AND ITS AE WE HAVE NO HESITATION TO RECORD THAT THE TAXPAY ER PERFORMS SECRETARIAL FUNCTIONS ASSIGNED TO IT BY ITS AE AND ALL THE SIGNIFICANT FUNCTIONS ARE PERFORMED BY ITS AE. 40. SIMILARLY SO FAR AS RISK ATTRIBUTED TO THE TAX PAYER BY THE LD. DR IS CONCERNED WE ARE OF THE CONSIDERED VIEW THAT THE TAXPAYER BEARS NO RISK BECAUSE THE TAXPAYER ISSUED GUARANTEE AS PER INSTRUCTION OF ITS AE IN FAVOUR OF THE BENEFICIARY ONLY ON THE BASIS OF COUNTER GUARANTEE PROVIDED BY THE AE TO THE TA XPAYER. IN OTHER WORDS COUNTER GUARANTEE ISSUED BY AE COMPLET ELY PROTECTS THE TAXPAYER BY WAY OF REIMBURSEMENT BY THE AE IN T HE FORM OF COUNTER GUARANTEE IN CASE GUARANTEE ISSUED BY THE TAXPAYER IS INVOKED. 41. BY APPLYING THE AFORESAID YARDSTICKS LD. DRP I N THE ASSESSMENT YEAR 2010-11 IN TAXPAYERS OWN CASE DECI DED THE ISSUE IN FAVOUR OF THE TAXPAYER WHICH HAS BEEN ACCEPTED BY THE REVENUE DEPARTMENT. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 24 42. FOLLOWING ITS OWN ORDER FOR AY 2010-11 LD. DRP DECIDED THIS ISSUE IN FAVOUR OF THE TAXPAYER HAVING IDENTIC AL ISSUE. SO IN THESE CIRCUMSTANCES BANK GUARANTEE RATES USED BY T HE LD. TPO TO BENCHMARK THE INTERNATIONAL TRANSACTIONS CANNOT BE USED AS CUP AS HAS BEEN HELD BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE OF GHARDA CHEMICALS LTD. VS. DCIT IN ITA NO.2242/MUM/2 006 ORDER DATED 30.11.2009 BY RETURNING FOLLOWING FINDINGS :- 16. ALBEIT NO SUCH DISTINCTION BETWEEN INTERNAL A ND EXTERNAL CUP METHOD IS RECOGNIZED IN THE ACT OR RULES BUT SI NCE THE ARGUMENTS OF THE RIVAL PARTIES AND FINDINGS OF THE AUTHORITIES BELOW HAVE REVOLVED AROUND THESE TWO WE WILL TRY T O ASCERTAIN THE DIFFERENCE BETWEEN THEM. BASICALLY THE PURPOSE OF C OMPUTING ALP ON THE BASIS OF CUP METHOD IS TO COMPARE THE AD JUSTED PRICE CHARGED FROM OR PAID TO THE ASSESSEE FOR THE INTERN ATIONAL TRANSACTIONS WITH ITS AE VIS--VIS THAT CHARGED FRO M OR PAID TO THE UNRELATED PARTIES UNDER SIMILAR CIRCUMSTANCES. IN C ASE OF DIFFERENCE THE PRICE SETTLED IN THE UNCONTROLLED T RANSACTIONS AS ADJUSTED AS PER RULE IS TAKEN AS ALP WITH THE AE. THE INTERNAL CUP METHOD ENVISAGES COMPARING THE UNCONTROLLED TRA NSACTIONS OF THE ASSESSEE ITSELF WITH OTHER UNRELATED PARTIES SO AS TO DETERMINE THE ALP WITH THE AE. HOWEVER THE EXTERNAL CUP METHOD DISREGARDS THE PRICE CHARGED OR PAID BY THE ASSESSEE TO OR FROM ITS UNRELATED PARTIES AND CONTEMPLATES THE COM PARISON OF THE PRICE SO CHARGED FROM OR PAID TO ITS AE WITH SO ME EXTERNAL INDEPENDENT RELIABLE PRICE DATA UNDER SIMILAR CIRCU MSTANCES OF TRANSACTIONS WITH AE. ORDINARILY THE INTERNAL CUP M ETHOD SHOULD BE PREFERRED OVER THE EXTERNAL CUP METHOD AS IT NEUTRALIZES SEVERAL DISTINGUISHING FACTORS SUCH AS THE LOCAL FACTORS AND THE ECONOMIES AVAILABLE OR UNAVAILABLE TO THE ASSESSEE IN PARTICULAR HAVING BEARING OVER THE COM PARISON OF PRICE CHARGED FROM UNRELATED PARTIES AND AE. THE ES SENCE OF DETERMINING ALP UNDER CUP METHOD IS TO ENSURE THAT THE PRICE CHARGED BY THE INDIAN ENTERPRISE FROM ITS AE SHOULD BE CONSISTENT WITH THAT CHARGED FROM UNRELATED PARTIES UNDER SIMILAR CIRCUMSTANCES. THE IMPORTANCE OF THE SIMILAR CIRC UMSTANCES CANNOT BE LOST SIGHT OF IN THIS CONTEXT BECAUSE A R OUND CANNOT BE COMPARED WITH A SQUARE AND A RECTANGLE WITH A TRIAN GLE. IN OTHER WORDS THE UNCONTROLLED TRANSACTIONS WHICH ARE CONTE MPLATED FOR COMPARISON SHOULD BE ALIKE IF NOT IDENTICAL. SIMIL ARITY BETWEEN THE TWO SETS OF TRANSACTIONS CAN BE JUDGED BY THE Q UALITY GRADE AND QUANTITY OF THE MATERIAL. IN ADDITION THE FACT ORS LIKE THE ITA NO.283/DEL./2016 CO NO.126/DEL/2016 25 LOCATION OF THE PARTIES AVAILABILITY OF RAW MATERI AL; DEMAND AND SUPPLY EQUATION ALSO PLAY PIVOTAL ROLE IN FINDING O UT AS TO WHETHER THE TWO ARE REALLY COMPARABLE OR NOT. THUS IN THE I NTERNAL CUP METHOD THE LOCAL FACTORS OF AE IN THE OTHER COUNTRY AND ALL THE RELEVANT FACTORS WHICH COULD HAVE BEARING ON THE PR ICE SO CHARGED FROM AE MUST BE TAKEN INTO CONSIDERATION. W E ARE DEALING WITH A CASE IN WHICH THE ASSESSEE HAS ITS A E IN USA AND RATE CHARGED IS 14.66 US$ PER KG OF DICAMBA. THERE IS NO OTHER EXPORT BY THE ASSESSEE TO USA. THE UNCONTROLLED TRA NSACTIONS OF EXPORT MADE BY THE ASSESSEE ARE TO OTHER COUNTRIES SUCH AS UK NETHERLANDS NEWZEALAND AUSTRALIA FRANCE ETC. IN RESPECT OF WHICH AVERAGE RATE OF 20.67 US $ PER KG. OF DICAMBA HAS BEEN DETERMINED BY THE TPO FOR COMPUTING THE ALP. ALL OT HER TRANSACTIONS OF EXPORT BY THE ASSESSEE ARE TO NON-U SA COUNTRIES. THE PRICE ON WHICH A PARTICULAR PRODUCT IS AVAILABL E IN ONE COUNTRY MAY LARGELY VARY FROM THE PRICE PREVAILING IN OTHER COUNTRIES DUE TO HOST OF FACTORS. THE COUNTRY WHICH IS PRODUCER OF A PARTICULAR COMMODITY OR ITS RAW MATERIAL MAY H AVE LOWER SALE PRICE IN COMPARISON WITH THE COUNTRY WHICH IS SHORT OF SUCH NATURAL RESOURCES. SIMILARLY THE PRICE MAY VARY FRO M ONE COUNTRY TO ANOTHER DEPENDING UPON CLIMATIC CONDITIONS AND T HE DEMAND AND SUPPLY FACTORS. THUS THE PRICE CHARGED BY AN IN DIAN PARTY FROM UK OR AUSTRALIA MAY BE AT MUCH VARIANCE WITH T HAT CHARGED FROM USA. IN SUCH A SCENARIO NO VALID COMPARISON CA N BE MADE BETWEEN THE PRICE CHARGED BY THE ASSESSEE FROM OTHE R COUNTRIES WITH THAT FROM USA MORE PARTICULARLY WHEN WE VIEW THE QUANTITY EXPORTED TO USA ON WHOLESALE BASIS WITH THAT TO OTH ER COUNTRIES IN SMALL LOTS ON RETAIL BASIS. WE THEREFORE HOLD THAT THE INTERNAL CUP METHOD IS NOT SUITABLE IN THE PRESENT CIRCUMSTA NCES. 43. COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2009-10 (SUPRA) HAS ALSO HELD THAT THE TRANSACTION UNDER CONSIDERATION CANNOT BE COMPARED WITH BANK GUARANTE E RATES CHARGED BY THE THIRD PARTY BANK FROM THEIR CUSTOMER S BECAUSE SUCH BANKS PERFORMED ALL THE FUNCTIONS AND BEAR ALL THE RISKS PERFORMED/ BORNE BY AE OF THE TAXPAYER WHEREAS IN THE INSTANT CASE THE TAXPAYER IN THE SUBJECT TRANSACTION HAS MERELY FACI LITATED ITS AE AND BEARS NO RISK. ITA NO.283/DEL./2016 CO NO.126/DEL/2016 26 44. IN VIEW OF THE MATTER WE ARE OF THE CONSIDERED VIEW THAT LD. DRP HAS RIGHTLY DELETED THE ADDITION BY USING FAR A NALYSIS OF THE FUNCTIONS PERFORMED AND RISK ASSUMED BY THE TAXPAYE R QUA THE TRANSACTION UNDER CONSIDERATION. 45. NO DOUBT LD. DRP HAS EXTENDED RELIEF TO THE TA XPAYER BY DELETING THE IMPUGNED ADDITION BUT THE TAXPAYER BY FILING CROSS OBJECTION CHALLENGED THE DRPS ORDER FOR NOT ACCEPT ING THE PRIMARY ANALYSIS UNDERTAKEN BY THE TAXPAYER USING CUP METHO D AND NOT ACCEPTING SECONDARY ANALYSIS UNDERTAKEN BY THE TAXP AYER TO DETERMINE ALP OF IMPUGNED TRANSACTIONS BY AGGREGATI NG ALL THE INTERNATIONAL TRANSACTIONS BY USING TNMM WITH OP/TO TAL ASSETS AS PLI. 46. PERUSAL OF THE ORDER PASSED BY THE LD. TPO AT P AGE 29 GOES TO PROVE THAT LD. TPO HAS REJECTED THE INTERNAL CUP AP PLIED BY THE TAXPAYER TO BENCHMARK ITS INTERNATIONAL TRANSACTION S QUA GUARANTEE COMMISSION ON THE GROUND THAT IT HAS FAILED TO ESTA BLISH HIGH DEGREE OF COMPARABILITY ALONG WITH DIMENSION OF CONTRACTUA L TERMS DATE OF TRANSACTION ALTERNATIVES REALISTICALLY AVAILABLE W ITH THE GUARANTOR & THE GUARANTEE AND MARKET CONDITIONS TO SUBSTANTIATE ITS CASE. 47. CHALLENGING THE AFORESAID FINDINGS RETURNED BY THE LD. TPO LD. AR FOR THE TAXPAYER CONTENDED THAT IF LOCAL GUA RANTEE ISSUED BY THE TAXPAYER CANNOT BE CONSIDERED AS A VALID CUP AS OBSERVED BY ITA NO.283/DEL./2016 CO NO.126/DEL/2016 27 THE LD. TPO IN THE PRECEDING PARA THEN BANK GUARANT EE RATES USED BY THE LD. TPO ARE ALSO LIABLE TO BE REJECTED ON THE S AME RATIONALE AND FURTHER CONTENTED THAT JUDGMENT RENDERED BY THE HONBLE DELHI HIGH COURT IN CASE OF COTTON NATURALS (I) P VT. LTD. IN ITA 233/2014 RELIED UPON BY THE LD. TPO AND LD. DR IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 48. WE HAVE PERUSED THE JUDGEMENT PASSED IN CASE OF COTTON NATURALS (I) PVT. LTD. (SUPRA) WHICH DOES NOT COVER THE ISSUE BEFORE THE BENCH RATHER THE SAME IS QUA BENCHMARKIN G OF LOAN ADVANCED BY THE TAXPAYER TO ITS AE WHEREAS THE ISSU E IN THE INSTANT CASE IS BENCHMARKING OF INTERNATIONAL TRANSACTIONS QUA RECEIPT OF GUARANTEE COMMISSION FOR GUARANTEES COUNTER GUARANT EED BY THE AE. 49. AT THE VERY OUTSET LD. AR FOR THE TAXPAYER CON TENDED THAT IN CASE LOCAL GUARANTEES ISSUED BY THE TAXPAYER CANNO T BE CONSIDERED AS VALID CUP ON ACCOUNT OF COMPARABILITY FACTORS I N THAT CASE BANK GUARANTEE RATES USED BY THE LD. TPO ALSO REQUIRED T O BE REJECTED FOR THE SAME REASONS AND CONSEQUENTLY TAXPAYER COME UP WITH THE SECONDARY ANALYSIS ALREADY UNDERTAKEN BY THE TAXPAY ER TO DETERMINE THE ALP OF THE TRANSACTION UNDER CONSIDER ATION WHEREIN ALL THE INTERNATIONAL TRANSACTIONS OF THE TAXPAYER WERE AGGREGATED AND THE ALP WAS DETERMINED USING TNMM AS THE MAM US ING ITA NO.283/DEL./2016 CO NO.126/DEL/2016 28 OP/TOTAL ASSETS AS THE PLI AS THE SAME HAS ALREADY BEEN UPHELD BY THE TRIBUNAL IN TAXPAYERS OWN CASE IN AYS 2009-10 & 20 15-16 (SUPRA). 50. HOWEVER ON THE OTHER HAND LD. DR FOR THE REVE NUE CONTENDED THAT THIS CONTENTION OF THE LD. AR FOR TH E TAXPAYER HAS ALREADY BEEN EXAMINED BY THE TPO AND HAS RIGHTLY BE EN REJECTED AND RELIED UPON THE ORDER PASSED BY THE LD. TPO. 51. WE HAVE PERUSED PARA 6 OF THE TRANSFER PRICING ORDER WHEREIN THE LD. TPO HAS DISCUSSED THE TP ANALYSIS MADE BY T HE TAXPAYER TO BENCHMARK ITS INTERNATIONAL TRANSACTIONS INCLUDING TRANSACTION OF RECEIPT OF GUARANTEE COMMISSIONS BY THE TAXPAYER AS A BUNDLED TRANSACTIONS BUT THE LD. TPO DECLINED TO ACCEPT THE CONTENTION RAISED BY THE TAXPAYER THAT ALL THE INTERNATIONAL T RANSACTIONS OF TAXPAYER ARE TO BE BENCHMARKED IN AGGREGATED FORM B Y APPLYING TNMM AS THE MAM WITH OPERATING PROFIT/TOTAL ASSETS AS THE PROFIT LEVEL INDICATOR RATHER PROCEEDED TO USE THE CUP QUA RECEIPT OF GUARANTEE COMMISSION ISSUED BY COMPARING WITH THE B ANK GUARANTEE RATES. LD. TPO HOWEVER HAS NOT FOUND ANY FAULT WITH THE TRANSACTIONAL NET MARGIN METHOD ANALYSIS MADE BY TH E TAXPAYER. 52. AS DISCUSSED IN THE PRECEDING PARAS TPOS FIND ING USING CUP METHOD COMPARING THE COUNTER GUARANTEE TRANSACT ION WITH BANK GUARANTEE ISSUED BY THE THIRD PARTY BANKS TO T HEIR CUSTOMERS ITA NO.283/DEL./2016 CO NO.126/DEL/2016 29 HAS BEEN REJECTED BY THE LD. DRP. HOWEVER LD. TPO HAS WITHOUT RETURNING ANY FINDING REJECTED THE SECONDARY ANALYS IS UNDERTAKEN BY THE TAXPAYER BY APPLYING THE TNMM AS THE MAM BY OP/TOTAL ASSETS AS THE PLI. 53. UNDISPUTEDLY TNMM AS THE MAM WITH OP/TOTAL ASS ETS AS PLI AS THE MAM HAS BEEN HELD TO BE SUSTAINABLE BY T HE COORDINATE BENCH OF THE TRIBUNAL TO BENCHMARK THE INTERNATIONA L TRANSACTIONS QUA RECEIPT OF COUNTER GUARANTEE COMMISSION FROM AE IN AYS 2009-10 AND 2015-16. UNDISPUTEDLY THERE IS NO CHAN GE IN THE FUNCTIONAL PROFILE OF THE TAXPAYER QUA YEAR UN DER ASSESSMENT VIS--VIS AYS 2009-10 & 2015-16. 54. WE HAVE EXAMINED THE ORDER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL FOR AY 2015-16 (SUPRA) WHEREIN IDENTICAL ISSUE AS TO RECEIPT OF COUNTER GUARANTEE COMMISSION FROM AE HAS BEEN DECIDED IN FAVOUR OF THE TAXPAYER BY APPLYING TNMM BY BENCHMARKING THE BUNDLED OF INTERNATIONAL TRANSACTI ONS WITH ITS AE BY APPLYING THE COMBINED APPROACH BY RETURNING FOLL OWING FINDINGS:- 39. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTEN TION AND PERUSED THE ORDERS OF THE LOWER AUTHORITY AND THE D IRECTION OF THE LEARNED DISPUTE RESOLUTION PANEL. AS IN THE CASE OF THE ASSESSEE IN ITA NO. 1162/DEL/2014 FOR ASSESSMENT YEAR: 2009-10 DATED 21/5/2020 HAS CONSIDERED THE IDENTICAL ISSUE AS UND ER:- 53. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ISSUE RAISED VIDE GROUND OF APPEAL NO.1 2 IS ITA NO.283/DEL./2016 CO NO.126/DEL/2016 30 AGAINST THE TRANSFER PRICING ADJUSTMENT MADE ON ACC OUNT OF RECEIPT OF GUARANTEE COMMISSION. THE ASSESSEE WH ILE BENCHMARKING ITS INTERNATIONAL TRANSACTIONS IN THE TRANSFER PRICING REPORT APPLIED COMBINED APPROACH A ND HAS BENCHMARKED UNDER TNMM METHOD. THE CASE OF THE ASSESSEE IS THAT THE TRANSFER PRICING ANALYSIS UNDE RTAKEN BY APPLYING TNMM METHOD ON COMBINED APPROACH SHOULD BE ACCEPTED AS THE MARGINS OF THE ASSESSEE HAS BEEN ACCEPTED AND NO ADJUSTMENT HAS BEEN MADE IN TH E HANDS OF THE ASSESSEE. THE ONLY ADJUSTMENT WHICH WA S MADE IN THE HANDS OF THE ASSESSEE WAS ON ACCOUNT OF RECEIPT OF GUARANTEE COMMISSION. THE CASE OF THE ASSESSEE BEFORE US IS THAT AS PE IN INDIA IT HAS L IMITED ROLE AND WAS NOT BEARING ANY RISKS. THE ASSESSEE RE CEIVED PART OF GUARANTEE COMMISSION IN ITS CAPACITY AS FAC ILITATOR ONLY. WHEN THE PERSONS NEEDED GUARANTEE IN INDIA TO PARTICIPATE IN A TENDER THEN SERVICE OF THE BANK W AS UTILIZED FOR ISSUING GUARANTEE IN FAVOUR OF THE BEN EFICIARY. THE EVALUATION OF THE BENEFICIARY FOR THE CREDITWOR THINESS OF THE CUSTOMERS WAS PERFORMED BY THE OVERSEAS BRAN CHES WHEREAS THE ASSESSEE HAD LIMITED ROLE IN ISSUING LE TTER OF GUARANTEE IT RECEIVED 1% GUARANTEE COMMISSION. IN THESE FACTS THERE IS NO MERIT IN COMPARING THE RATE RECE IVED BY THE ASSESSEE WITH THE RATE CHARGED BY DIFFERENT BAN KS WHO ARE OPERATIONAL IN INDIA AND PROVIDING FINANCIAL GUARANTEE TO ITS CUSTOMERS WITH ALL RISK INVOLVED THEREIN. IN SUCH FACTS AND CIRCUMSTANCES THE ASSESSING OFFICER/TPO ERRED IN APPLYING THE RATE CHARGED BY A XIS BANK CANARA BANK PUNJAB NATIONAL BANK AND STATE BANK OF INDIA ETC. WITH ARITHMETIC MEAN OF 2.71% T O BENCHMARK THE INTERNATIONAL TRANSACTIONS BETWEEN TH E ASSESSEE AND ITS OVERSEAS BRANCHES OF RECEIPT OF BA NK GUARANTEE COMMISSION. THE DETAILS OF THE INTERNATIO NAL TRANSACTION ARE TABULATED IN THE ORDER OF THE TPO I TSELF AND THE SAME CLEARLY REFLECT THAT NO TRANSACTION IS UNDERTAKEN EXCEPT WITH OVERSEAS BRANCHES. THE ASSES SEE UNDOUBTEDLY IS ALSO PROVIDING THE SERVICES TO ITS C USTOMERS IN INDIA WHERE IT A RISK BEARING ENTITY. WE ARE OF THE VIEW THAT WHERE THE ASSESSEE HAS UNDERTAKEN BUNDLE OF INTERNATIONAL TRANSACTIONS WITH ITS AE AND THE SAME HAS BEEN BENCHMARKED BY APPLYING COMBINED APPROACH AND THE METHOD OF TNMM HAS BEEN USED AND THE MARGINS SHOWN BY THE ASSESSEE HAVE BEEN ACCEPTED; THEN THER E IS NO MERIT IN SEGREGATING THE INTERNATIONAL TRANSACTI ON OF THE RECEIPT OF THE GUARANTEE COMMISSION AND BENCHMARKING THE SAME SEPARATELY. THE MARGINS OF TH E COMBINED APPROACH HAS BEEN ACCEPTED AT ARM S LENGTH. CONSEQUENTLY THERE IS NO MERIT IN THE TRANSFER PRI CING ADJUSTMENT MADE IN THE HANDS OF THE ASSESSEE. THE S AME ITA NO.283/DEL./2016 CO NO.126/DEL/2016 31 IS THUS DIRECTED TO BE DELETED. THE GROUND OF APPEA L NO.12 IS THUS DELETED. 40. AS THE FACTS AND CIRCUMSTANCES OF THE CASE ARE IDENTICAL TO THE FACTS DECIDED IN CASE OF THE ASSESSEE FOR ASSES SMENT YEAR 2009 10 RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE HOLD ING THAT AS THE BANKING BUSINESS OF THE ASSESSEE AND THE TRANSACTIO NS RELATED TO THE ISSUE OF GUARANTEE COMMISSION ON BY THE ASSESSE E ARE INTERLINKED AND CLOSELY CONNECTED THEY SHOULD HAVE BEEN BENCHMARKED IN A BUNDLED MANNER. ACCORDINGLY GROUND NUMBER 9 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 55. SO FOLLOWING THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN TAXPAYERS OWN CASE FOR AY 2015-16 (SUPRA) WE ARE OF THE CONSIDERED VIEW THAT SINCE I SSUE IS IDENTICAL INTERNATIONAL TRANSACTIONS QUA RATE OF BANK GUARANT EE COMMISSION IS TO BE BENCHMARKED BY APPLYING THE TNMM AS THE MAM O N COMBINED APPROACH BASIS. THE TAXPAYER IN ITS TP AN ALYSIS HAS DULY FOLLOWED THE TP ANALYSIS UNDERTAKEN BY THE TAXPAYER IN ASSESSMENT YEARS 2009-10 & 2015-16 WHICH WAS PERUSED BY THE L D. TPO BUT HAS NOT DISPUTED THE SAME. 56. CONSEQUENTLY BENCHMARKING OF BUNDLE OF INTERN ATIONAL TRANSACTIONS BY THE TAXPAYER WITH ITS AE BY APPLYIN G COMBINED APPROACH AND TNMM HAS BEEN USED AND MARGIN SHOWN BY THE TAXPAYER HAS OTHERWISE BEEN ACCEPTED IN THESE CIRC UMSTANCES THE INTERNATIONAL TRANSACTIONS QUA RECEIPT OF COUNTER G UARANTEE COMMISSION BY THE AE CANNOT BE SEGREGATED FROM OTH ER INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE TAXPAY ER AS HAS BEEN ITA NO.283/DEL./2016 CO NO.126/DEL/2016 32 HELD BY THE LD. TPO/DRP THE MARGIN OF COMBINED APP ROACH HAS BEEN ACCEPTED AT ARMS LENGTH HENCE ADDITION MADE BY THE TPO IS NOT SUSTAINABLE AND AS SUCH IS ORDERED TO BE DELETE D. 57. CONSEQUENTLY GROUND NO.6 OF THE REVENUE IS DET ERMINED AGAINST THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE TAXPAYER ARE PARTLY ALLOWED. 54. RESULTANTLY THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTIONS FILED BY THE TAXPAYER ARE PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF MAY 2021. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 TH DAY OF MAY 2021 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.DRP 5.CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.