Ramky Enviro Engineer Ltd., Hyd, Hyderabad v. ACIT, Cirlce-2(4), Hyd, Hyderabad

ITA 449/HYD/2016 | 2011-2012
Pronouncement Date: 19-03-2021 | Result: Allowed

Appeal Details

RSA Number 44922514 RSA 2016
Assessee PAN AAACR9626A
Bench Hyderabad
Appeal Number ITA 449/HYD/2016
Duration Of Justice 4 year(s) 11 month(s) 20 day(s)
Appellant Ramky Enviro Engineer Ltd., Hyd, Hyderabad
Respondent ACIT, Cirlce-2(4), Hyd, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2021
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB-B
Tribunal Order Date 19-03-2021
Date Of Final Hearing 13-01-2021
Next Hearing Date 13-01-2021
Last Hearing Date 15-10-2018
First Hearing Date 05-10-2020
Assessment Year 2011-2012
Appeal Filed On 29-03-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE S HRI SATBEER SINGH GODARA JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU ACCOUNTANT MEMBER ITA NO. 449 /H/201 6 ASSESSMENT YEAR: 201 1 - 1 2 RAMKY ENVIRO ENGINEERS LTD. HYDERABAD. PAN AAACR 9626A VS. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 2 ( 4 ) HYDERABAD. (APPELLANT) (RESPONDE NT) ASSESSEE BY: S HRI DARPAN KRIPLANI REVENUE BY: SHRI YVST SAI DATE OF HEARING: 1 3 /01/2021 DATE OF PRONOUNCEMENT: 19 /0 3 /2021 O R D E R PER BENCH: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER PASSED U/S 143(3) R.W.S. 153C RWS 144C OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT) DATED 28/01/2016 RELATING TO AY 2011 - 12 ON THE FOLLOWING GROUNDS OF APPEAL: BASED O N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED ASSESSING OFFICER ('AO')/ LEARNED ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 2 - : TRANSFER PRICING OFFICER ('TPO') AND THE HON'BLE DISPUTE RESOLUTION PANEL ('DRP') ERRED IN: TRANSFER PRICING MATTERS - 1. MAKING ADJUSTMENT OF RS. 2 43 30 447 / - ON THE CORPORATE GUARANTEE/LETTER OF COMFORT PROVIDED TO BANKS FOR LOAN/CREDIT LIMITS AVAILED BY WHOLLY OWNED SUBSIDIARIES/JV' S; 2. NOT APPRECIATING THAT THE SHAREHOLDER'S CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION (RETROSPECTIVE AND CLARIFICATORY AMENDMENT IN 2012) U/S 92B OF THE ACT; 3. NOT APPRECIATING THAT THE SHAREHOLDER'S CORPORATE GUARANTEE IS BENEFICIAL AND IN THE INTEREST OF RAMKY ENVIRO ENGINEERS LTD; 4. NOT UNDERTAKING AN OBJECTIVE ANALYSI S WHILE DETERMINING THE ALP ON THE SHAREHOLDER'S CORPORATE GUARANTEE; 5. DISCRIMINATING THE AE'S BY DETERMINING THE ALP FOR CORPORATE GUARANTEE PROVIDED TO AE'S VIS - A - VIS SIMILAR GUARANTEE PROVIDED BY THE COMPANY TO SUBSIDIARIES AND OTHERS IN INDIA IN VI OLATION OF ARTICLE 26 OF INDIA - SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT. ('DTAA'); 6. A. NOT DISTINGUISHING LETTER OF COMFORT VIS - A. - VIS CORPORATE GUARANTEE AND CONSIDERING THE SAME AS AN INTERNATIONAL TRANSACTION U/ S 92B OF THE ACT B. NOT APPR ECIATING THE FACT THAT LETTER OF COMFORT IS EXCLUDED FROM THE DEFINITION OF CORPORATE GUARANTEE AS PER SAFE HARBOR RULES AS NOTIFIED BY THE CBDT. 7. WITHOUT PREJUDICE NOT UNDERTAKING AN OBJECTIVE ANALYSIS FOR DETERMINING THE ALP ON THE CORPORATE ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 3 - : GUARANTEE/LETTER OF COMFORT AND DETERMINE THE ALP BASED ON THE BANK GUARANTEE RATES AVAILABLE IN STATE BANK OF INDIA (SBI) WEBSITE; 8. WITHOUT PREJUDICE NOT APPRECIATING THE JUDICIAL PRECEDENTS ON SIMILAR CORPORATE GUARANTEES. 9. WITHOUT PREJUDICE TO THE ABOVE NOT APPRECIATING AND ACCEPTING INTERNAL COMPARABLE GUARANTEE TRANSACTIONS OF THE ASSESSEE FOR THE BENCHMARKING PURPOSES. 10. NOT MAKING ADJUST MENTS FOR THE DIFFERENCES IN THE COMPARABLE TRANSACTIONS VIS - A - VIS SHAREHOLDER'S CORPORATE GUARANTEE; 11. SHORT CREDIT OF TDS AND ADVANCE TAX PAID. 12. LEVYING OF INTEREST U/ S 234A 234B AND 234C. THE APPELLANT CRAVES TO CONSIDER EACH OF THE ABOV E GROUNDS OF APPEAL WITHOUT PREJUDICE TO EACH OTHER AND CRAVES LEAVE TO ADD ALTER DELETE OR MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES. THEREFORE THE AO REFERRED THE CASE TO TPO FOR DETERMINATION OF ARMS LENGTH PRICE. THE TPO VIDE HIS ORDER DATED 30/12/2014 DETERMINED THE ARMS LENGTH PRICE IN RESPECT OF CORPORATE GUARANTEE FEE AT RS. 2 43 30 447/ - AND SHORTFALL WAS ARRIVED AT RS. 2 43 30 447/ - WHICH WAS ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 4 - : TREATED AS ADJUSTMENT U/S 92CA OF THE ACT AS PER THE FOLLOWING TABLE: S.NO. NAME OF THE AE CORPORATE GUARANTEE PROVIDED (RS.) RATE AMOUNT (RS. 1 AL - AHILA ENVIRONMENTAL SERVICES CO.LLC 8 36 33 474 2.25% 18 81 753 2 RAMKY CLEANTECH SERVICES PVT. LTD. 1 09 67 80 000 1.75% 1 91 93 650 3 RAMKY CLEANTECH SERVICES PVT. LTD. 17 40 08 559 1.75% 30 45 150 4 RVAC PVT. LTD. 62 26 880 2.75% 1 71 239 5 RVAC PVT. LTD. 14 05 630 2.75% 38 655 TOTAL 2 43 30 447 2.1 ACCORDINGLY THE AO PASSED THE DRAFT ASSESSMENT ORDER ON 11/03/2015 AND DULY SERVED ON THE ASSESSEE ON 12/03/2015 AFTER ENHANCING THE TOTAL INCOME OF THE ASSESSEE AT RS. 2 43 30 447/ - BY THE ADJUSTMENTS SUGGESTED BY THE TO IN HIS ORDER DATED 30/12/2014. 3. AGGRIEVED BY THE SAID ADJUSTMENTS THE ASSESS EE FILED ITS OBJECTIONS BEFORE THE DRP 1 BENGALUR U AND THE DRP VIDE ITS ORDER DATED 15/12/2015 UPHELD THE ADJUSTMENTS MADE BY THE TPO IN PRINCIPLE. HOWEVER THE DRP DIRECTED THAT THE ARMS LENGTH PRICE OF THE GUARANTEE SHOULD BE COMPUTED AT 1.75% AND NOT 2% ON THE CORPORATE GUARANTEE FEE EXCEEDING RS. 10 CRORES. ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 5 - : 4. ACCORDINGLY THE AO PASSED FINAL ASSESSMENT ORDER AS PER THE DIRECTIONS OF THE DRP COMPUTING THE ARMS LENGTH PRICE OF THE CORPORATE GUARANTEE FEE AT RS. 2 43 30 447/ - AND THE SHORTFALL OF RS . 2 43 30 447/ - WAS TREATED AS ADJUSTMENT U/S 92CA OF THE ACT AND THE TOTAL INCOME OF THE ASSESSEE WAS ENHANCED ACCORDINGLY U/S 92CA(3) OF THE IT ACT. 5. AGGRIEVED BY THE ORDER OF DRP THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. BEFORE US THE LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ASSESSEE HAS PROVIDED GUARANTEE/LETTER OF COMFORT/BG ON THE LOAN FOR CREDIT LIMIT OBTAINED BY ITS SUBSIDIARIES/JVS. HE SUBMITT ED THAT IT IS A NORMAL PRACTICE FOR BANKERS TO ASK FOR CORPORATE GUARANTEE FROM PARENT/GROUP COMPANY AS AN ADDITIONAL SAFEGUARD FOR THEIR LOAN ASSETS SO THAT THE PRIMARY SECURITY PROVIDED OR THE CASH FLOWS ON THE BASIS OF WHICH THE LOAN IS GUARANTEE IS NO T SUBSEQUENTLY DIVERTED TO OTHER GROUP COMPANIES. THE LD. AR SUBMITTED THAT THE ISSUE OF CORPORATE GUARANTEE BY ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 6 - : THE ASSESSEE TO ITS AES IS NOT AN INTERNATIONAL TRANSACTION. FOR THIS PROPOSITION HE RELIED ON VARIOUS ORDERS OF COORDINATE BENCH OF THIS TRIBU NAL WHICH ARE PLACED IN THE PAPER BOOK. 7. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW . HE FURTHER SUBMITTED THAT PROVIDING CORPORATE GUARANTEE COMES UNDER THE DEFINIT ION OF SERVICES AND PROVIDING SERVICES TO AES ARE ALREADY COVERED THAT IT IS AN INTERNATIONAL TRANSACTION. THE LETTER OF COMFORT IS A PART OF BANK GUARANTEE. THEREFORE AUTHORITIES BELOW HAVE RIGHTLY CALCULATED THE VALUE OF INTERNATIONAL TRANSACTION. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES A ND PERUSE THE MATERIAL ON RECORD AS WELL AS GONE THROUGH THE ORDERS OF REVENUE AUTHORITIES. THE CASE LAW RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS THEREFORE THE SAME ARE NOT APPLICABLE TO THE CASE OF THE WE REFER TO THE FOLLOWING CASES WHE RE THE CORPORATE GUARANTEE IS TREATED AS AN INTERNATIONAL TRANSACTION: ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 7 - : 8.1 IN THE CASE OF NIMBUS COMMUNICATIONS LTD [2013] 34 TAXMANN.COM 298 (MUMBAI TRIB ) THE COORDINATE BENCH HELD THAT SINCE THERE WAS A CLEAR BENEFIT ACCRUED TO AE BY GUARANTEE PROVID ED BY ASSESSEE AS IT IMPROVED CREDIT WORTHINESS AND HENCE LOWER INTEREST RATE GUARANTEE COMMISSION SHOULD HAD BEEN CHARGED AT ARMS LENGTH PRICE. 8.2 IN THE CASE OF ADVANTA INDIA LTD. [2015] 64 TAXMANN.COM 251 (BANGALORE TRIB.) THE COORDINATE BENCH HELD THAT THE ASSESSEE DID INCUR COSTS ON ISSUANCE OF THE GUARANTEE TO ITS SUBSIDIARY AND FOR THAT REASON THE ISSUANCE OF GUARANTEE INDEED HAD A BEARING ON THE PROFITS AND INCOME OF SUCH ENTERPRISE. AND HENCE THE ISSUANCE OF GUARANTEES ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE CONSTITUTED AN INTERNATIONAL TRANSACTION. 8.3 IN THE CASE OF INFOTECH ENTERPRISES LTD. V. ADDL. CIT [2014] 41 TAXMANN.COM 364 (HYD ERABAD - TRIB.) THE COORDINATE BENCH HELD THAT CORPORATE GUARANTEES ISSUED BY ASSESSEE TO INDIAN BANK FOR BENEFIT OF ITS US SUBSIDIARY IS AN INTERNATIONAL TRANSACTION WITHIN MEANING OF SECTION 92B. ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 8 - : THOUGH IMMEDIATE TRANSACTION WAS BETWEEN ASSESSEE AND CITI BANK OF INDIA BENEFIT OF GUARANTEE WAS FOR US SUBSIDIARY AND HENCE ASSESSEE HAD RENDERED A SERVICE TO ITS US SUBSIDIARY FOR WHICH IT MUST CHARGE FEES AT AN ARMS LENGTH. 8.4 IN THE CASE OF FOUR SOFT LTD. DY. CIT[2014] 44 TAXMANN.COM 479/149 ITD 732 (HYDERABAD - TRIB.) THE TRIBUNAL HELD THAT THE CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE COMES WITHIN THE SCOPE AND AMBIT OF INTERNATIONAL TRANSACTION BY VIRTUE OF EXPLANATION I (C) TO SECTION 92B OF THE ACT AS INSERTED WITH RETROSPECTIVE EFFECT . 8.5 IN THE CASE OF MYLAN LABORATORIES LTD. [2015] 63COM 179 (HYDERABAD TRIB.) THE COORDINATE BENCH HELD THAT THE T RANSACTION OF PROVIDING CORPORATE GUARANTEE INVOLVES SERVICE RENDERED TO AE AND THEREFORE PROVISIONS OF TRANSFER PRICING CAN BE INVOKED IN RE SPECT OF SUCH A TRANSACTION FOLLOWING DECISION OF FOUR SOFT LTD.(SUPRA). 8.6 IN THE CASE OF RELIANCE INDUSTRIES LTD.V. CIT [IT APPEAL NO. 4475 (MUM.) OF 2011 DATED 13 - 9 - 2013] THE ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 9 - : TRIBUNAL REJECTED THE ARGUMENT OF A SSESSEE THAT IT IS THE RESPONSIBILITY OF THE PARENT COMPANY TO PROVIDE GUARANTEE TO ITS SUBSIDIARIES / AES THEREFORE IN PRINCIPLE NO COMMISSION IS CHARGEABLE AND HELD THAT CG IS AN INTERNATIONAL TRANSACTION. 8.7 AS REGARDS TRANSFER PRICING ADJUSTMEN TS FOR CORPORATE GUARANTEE FEES IT IS OBSERVED IN THE FOLLOWING CASES AS UNDER: 8.8 IN THE CASE OF NIMBUS COMMUNICATION LTD. V. ADDL. CIT [2014] 42 TAXMANN.COM 139 (MUM. TRIB.) THE TRIBUNAL HELD THAT W HERE ASSESSEE HAD GIVEN CORPORATE GUARANTEE TO ITS AE WITHOUT CHARGING ANY COMMISSION ADJUSTMENT TO BE MADE AT 0.5 PER CENT 8.9 IN THE CASE OF RELIANCE INDUSTRIES LTD.V. CIT [IT APPEAL NO. 4475 (MUM.) OF 2011 DATED 13 - 9 - 2013] TRIBUNAL ACCEPTED THE RAT E OF 0.38% BEING AVERAGE RATE ON WHICH THE ASSESSEE HAS PAID GUARANTEE COMMISSION TO THIRD PARTY AND HELD THAT THE CHARGING OF A GUARANTEE COMMISSION DEPENDS UPON TRANSACTIONS TO TRANSACTION AND MUTUAL UNDERSTANDING BETWEEN THE PARTIES. ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 10 - : 8.9 IN THE CASE O F MYLAN LABORATORIES LTD. [2015] 63COM 179 (HYDERABAD TRIB.) ITAT DIRECTED THE TPO TO ADOPT 0.53 PER CENT AS THE GUARANTEE COMMISSION RATE INSTEAD OF 2 PER CENT ADOPTED BY HIM . 8.10 IN THE CASE OF EVEREST KANTO CYLINDER LTD. V. DY. CIT [2013] 34 TAXMAN N.COM (MUM. TRIB.) ITAT HELD THAT TPO WAS NOT JUSTIFIED IN DETERMINING ALP FOR BANK GUARANTEE AT RATE OF 3 PERCENT OF AMOUNT OF GUARANTEE APPLYING EXTERNAL COMPARABLES OF BANKS WITHOUT BRINGING INTO RECORD THAT UNDER WHICH TERMS AND CONDITIONS OTHER BAN KS WERE CHARGING GUARANTEE COMMISSION AT RATE OF 3 PER CENT. CHARGING OF 0.5 PER CENT GUARANTEE COMMISSION FROM AE BEING QUITE NEAR TO 0.6 PER CENT WHICH ASSESSEE HAD PAID TO ICICI BANK FOR CREDIT ARRANGEMENT RATE OF 0.5 PER CENT CAN BE SAID TO BE AT ARM S LENGTH . 8.11 IN THE CASE OF EVEREST KANTO CYLINDER LTD. V. DY. CIT [2013] 34 TAXMANN.COM (MUM. TRIB.) THE TRIBUNAL HELD THAT RATE OF 0.5 PER CENT GUARANTEE FEE/COMMISSION WOULD BE AT ARMS LENGTH WHERE RATES OF GUARANTEE COMMISSION CHARGED BY VARIOU S BANKS WERE FOUND TO BE IN ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 11 - : RANGE OF 0.15 PER CENT TO 3 PER CENT.(GODREJ HOUSEHOLD PRODUCTS LTD. V. ADDL. CIT [2014] 41 TAXMANN.COM 386 (MUM. - TRIB.) 8.12 FROM THE ABOVE CITED JUDGEMENTS IT IS CLEAR THAT THE BANK GUARANTEE IS AN INTERNATIONAL TRANSACTION . WE FOUND SUBSTANCE ON THE SUBMISSION OF LD. DR THAT THE BANK GUARANTEE IS AN INTERNATIONAL TRANSACTION; THE FINDINGS OF THE DRP IS AS UNDER: HAVI NG CONSIDERED THE SUBMISSIONS WE HAVE EXAMINED THE ORDER OF THE TPO AND FOUND THAT THIS ISSUE WAS EXAMINED AT LENGTH IN THE ORDER AT PAGES 3 - 10 AND FOR THE DETAILED REASONING HE HAS COMPUTED THE UPFRONT FEE & CREDIT RATING ON THE CORPORATE GUARANTEE EXTEN DED TO THE SUBSIDIARY COMPANIES (AES. ). WE ARE IN COMPLETE AGREEMENT WITH THE STAND TAKEN BY THE TPO AND CONSEQUENTLY DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE ASSESSEE THAT THERE WAS NO TRANSACTION AS SUCH BETWEEN THE ENTITIES. FURTHER IT IS SUBMITT ED BY THE TAX PAYER THAT OUT OF THE TOTAL CORPORATE GUARANTEE GIVEN THE TRANSACTION OF 1 09 67 80 000 / - IS IN THE NATURE OF LETTER OF COMFORT GIVE N IN FAVOUR OF M / S RAMKY CLEANTECH SERVICES PVT LTD WHILE ARGUING THAT THE LETTER OF COMFORT IS FUNCTIONALLY DIFFERENT DESERVING DIFFERENT TREATMENT. IN ORDER TO UNDERSTAND THE EXACT NATURE OF THIS TRANSACTION WE HAVE EXAMINED THE SUBMISSION MADE BY THE ASSESSEE AND NOTICED FROM THE SUBMISSIONS MADE BY THE TAX PAYER THAT THE LETTER OF. COMFORT ISSUED TO S81 WAS MEANT FOR 'ISSUING COUNTER BANK GUARANTEE IN SINGAPORE FOR CUSTOMERS' ON BEHALF OF RAMKY CL EANTECH ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 12 - : SERVICES PTE LTD SINGAPORE(AE) THUS THIS TRANSACTION IS NOTHING BUT INDIRECTLY MAKING THE BANKER ISSUE COUNTER BANK GUARANTEE BASED ON THE GUARANTEE PROV IDED BY THE TAX PAYER. THEREFORE IT AMOUNTS TO GIVING BANK GUARANTEE EVEN THOUGH WORDED AS A LETTER OF COMFORT. IN VIEW OF THIS ALL THE TRANSACTIONS UNDER EXAMINATION HERE IN THIS OBJECTION ARE TREATED AS CORPORATE/BANK GUARANTEE FOR THIS EXAMINATION. F URTHER THE TPO AT PARA 7.4 ONWARDS DISCUSSES THE ISSUE WITH REGARD TO THE CORPORATE GUARANTEE AND BASED ON THE AMENDMENT MADE TO SECTION 928 AND RELYING ON THE INFORMATION GATHERED FROM THE WEBSITE OF 581 AND OTHER BANKS AND THE GOVERNMENT GUARANTEE POLI CY OF THE MINISTRY OF FINANCE GAL THE TPO WORKED OUT A FEE AND TREATED THE SAME AS ARM'S LENGTH PRICE OF THE TRANSACTION. AT THIS JUNCTURE RELIANCE IS RESPECTFULLY PLACED ON DECISION OF THE HON'BLE ITAT HYDERABAD IN THE CASE OF PROLIFICS CORPORATION LTD WHEREIN THE HON'BLE ITAT HELD THAT THE TRANSACTION OF PROVIDING CORPORATE GUARANTEE INVOLVES SERVICE RENDERED TO AE AND THEREFORE PROVISIONS OF TRANSFER PRICING CAN BE INVOKED IN RESPECT OF SUCH A TRANSACTION. HOWEVER WE ARE OF THE VIEW THAT AS PER THE T PO HIMSELF SATED THE STATE BANK OF INDIA CHARGE FEE @ 1.75% OF THE GUARANTEE EXCEEDING RS. 10 CRORE HE WAS NOT JUSTIFIED IN COMPUTING THE ADJUSTMENT @ 2% ACCORDINGLY WE DIRECT THE A.O. TO RE - COMPUTE THE ALP OF THE GUARANTEE BY APPLYING ALP 21.75% ACC ORDING TO THE OBSERVATIONS MADE ABOVE. 8.13 NOW HONBLE MADRAS HIGH COURTS RECENT DECISION IN THE CASE OF PCIT VS. REDINGTON (INDIA) LTD. TCA NOS. 590 & 591 OF 2019 DATED 10/12/2020 HAS DECIDED THE VERY QUESTION IN REVENUES FAVOUR AS UNDER: ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 13 - : 67.THE NEXT ISSUE IS WITH REGARD TO THE CORPORATE GUARANTEE AND BANK GUARANTEE. 68.FROM THE ANNUAL REPORT OF THE ASSESSEE IT WAS SEEN THAT THE ASSESSEE HAD ISSUED GUARANTEES ON BEHALF OF ITS SUBSIDIARIES TO THE TUNE OF RS.464.36 CRORES AND ON BEHALF OF OT HERS TO THE TUNE OF RS.3.42 CRORES. THE ASSESSEE WAS CALLED TO EXPLAIN THE SAME. THE ASSESSEE STATED THAT THEY HAD NOT ISSUED ANY FRESH GUARANTEE DURING THE ASSESSMENT YEAR 2009 - 10 AND THE GUARANTEE IS OUTSTANDING IS PURELY ON ACCOUNT OF THE CURRENCY TR ANSITION ADJUSTMENT ON RESTATEMENT OF GUARANTEES OUTSTANDING AT THE CLOSING RATES PREVAILING ON 31ST MARCH 2009 FOR DISCLOSURE IN FINANCIAL STATEMENT IN COMPLIANCE WITH THE ACCOUNTING STANDARDS. FURTHER THE ASSESSEE STATED THAT THE OUTSTANDING GUARANTEE I SSUED BY THE ASSESSEE AS ON 31.03.2009 REPRESENTS GUARANTEE ISSUED ON BEHALF OF THE OVERSEAS SUBSIDIARIES IN EARLIER YEARS. FURTHER THEY STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE RELEVANT ASSESSMENT YEARS THE TPO MADE ADDITION TO THE CORPORATE GUARANTEE ISSUED DURING THOSE YEARS BY ADOPTING THE BENCH MARK RATE BASED ON THE AVAILABLE INTERNAL COMPARABLE UNCONTROLLED PRICE CHARGED BY THE BANK AT 0.85%. THE ASSESSEE ALSO ISSUED CORPORATE GUARANTEE IN FAVOUR OF M/S.PARAMPARA WEDDING CADS AND M/S. BASKAR DIGITAL PRESS. THE TPO AFTER TAKING NOTE OF THE AMENDED SECTION 92B WHICH WAS INTRODUCED WITH RETROSPECTIVE EFFECT FROM 01.04.2002 EXAMINED THE FACTUAL ASPECT AND POINTED OUT THAT THOUGH THE ASSESSEE STATED THAT THEY HAVE NOT ISSUED ANY FRESH GUARANTEE DURING THE ASSESSMENT YEAR 2009 - 10 THE GUARANTEES WERE LIVE AND WER E NOT CLOSED AS ON 31.03.2009 AND THE LIABILITY CONTINUED ON THE ASSESSEE AS ON 31.03.2009. NOTING THAT PROVIDING SUCH GUARANTEE IS ONE OF THE FINANCIAL SERVICE RENDERED BY THE ASSESSEE FOR WHICH IT HAS TO BE REMUNERATED APPROPRIATELY AND THAT CONCERNED P ARTIES IN WHOSE FAVOUR THESE GUARANTEES WERE EXTENDED WHERE ASSOCIATED ENTERPRISES OF THE ASSESSEE AND THE TRANSACTIONS WERE LARGELY INFLUENCED BY RELATED PARTIES THE ASSOCIATED ENTERPRISES BENEFITED AND CONSEQUENTLY THE INCOME WOULD ACCRUE ONLY TO SUCH NON - RESIDENT AND TO THAT EXTENT SHIFTING OF TAX BASE FROM THE COUNTRY IS BOUND TO HAPPEN IN SUCH TRANSACTION AND THE ASSESSEE SHOULD HAVE BEEN ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 14 - : REMUNERATED APPROPRIATELY. THE CORPORATE GUARANTEE WAS TO THE TUNE OF RS.5574.13 LAKHS AND BANK GUARANTEE TO TH E TUNE OF RS.40862.34 LAKHS. FURTHER THE TPO OBSERVED THAT THERE IS NO TIME PERIOD FOR EXPIRY OF THE GUARANTEE. CONSEQUENTLY IT WILL DEMAND MORE COMMISSION CHARGES THAN THE COMMISSION CHARGED BY THE BANKS. THAT APART THE ASSESSEE HAD TAKEN MAXIMUM RISK IN PROVIDING BANK GUARANTEE TO THEIR SUBSIDIARIES AND THE ENTIRE CREDIT RISK IS OWNED BY THE ASSESSEE THE INDIAN COMPANY AND IT HAS TO BE REIMBURSED AT MAXIMUM PERCENTAGE OF FEES. FURTHER THE TPO NOTED AS TO THE MANNER IN WHICH THE BANK'S CHARGE COMMISSI ON ON GUARANTEES EXTENDED AND OBSERVED THAT THE BANK WILL INSIST UPON CASH DEPOSITS / GUARANTEE DEPOSITS / ASSET MORTGAGE ETC. TO EXTEND GUARANTEES ON BEHALF OF THEIR CLIENTS. FURTHER IT WAS POINTED OUT THAT IF A SITUATION ARISES THAT THE BANK GUARANTEE HAS TO BE INVOKED WHEN THE ASSOCIATE ENTERPRISE IS NOT IN GOOD FINANCIAL POSITION OBVIOUSLY THE ASSESSEE IS AT RISK AND THEY CLAIM THAT THERE IS NO RISK IN PROVIDING GUARANTEES CANNOT BE ACCEPTED. THE TPO DREW A COMPARISON BETWEEN THE GUARANTEES ISSUED BY THE BANK AND GUARANTEES ISSUED BY THE ASSESSEE ON BEHALF OF THE ASSOCIATED ENTERPRISE TO THE BANK. IT HAS BEEN RECORDED THAT THE ASSOCIATED ENTERPRISES OF THE ASSESSEE HAVE NOT PROVIDED ANY SECURITY TO THE ASSESSEE. IN THE AGREEMENT / CONTRACT BETWEEN THE ASSOCIATED ENTERPRISES AND THE ASSESSEE NO CONDITION HAS BEEN IMPOSED ON THE ASSOCIATED ENTERPRISES TO PAY THE AMOUNT TO THE ASSESSEE AND EVEN IN SOME AGREEMENTS IF IT IS MENTIONED IN THE EVENT OF THE ASSOCIATED ENTERPRISES FINANCIALLY BECOMING WEAK THE RISK UNDERTAKEN BY THE ASSESSEE BECOMES GREATER. FURTHER INVOKING A GUARANTEE PROVIDED TO AN ASSOCIATED ENTERPRISE IS VERY DIFFICULT AS IT DEPENDS ON THE FINANCIAL CONDITION OF THE ASSOCIATED ENTERPRISE AND THE LAW GOVERNING SUCH TRANSACTIONS IN THAT COUNTRY AND THE ASSESSEE IS BOUND BY THE PROVISIONS OF FEMA AND RBI GUIDELINES. THEREFORE THE TPO CONCLUDED THAT THE BANK COMMISSION CHARGES CANNOT BE COMPARED FOR THE COMMISSION CHARGES THAT HAS BEEN PAYABLE TO THE ASSESSEE BY THE ASSOCIATED ENTERPRISE S AND IT IS A CLEAR FINANCIAL SERVICES RENDERED BY THE ASSESSEE TO THEIR ASSOCIATED ENTERPRISE WHICH HAS TO BE COMPENSATED BY PROPER COMMISSION CHARGES. ACCORDINGLY THE TPO HELD 2% SHALL BE CHARGED AS COMMISSION AND PROPOSED AN UPWARD ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 15 - : ADJUSTMENT TO THE I NCOME OF THE ASSESSEE TO THE TUNE OF RS.817.25 LAKHS. IN RESPECT OF THE GUARANTEES GIVEN TO UNRELATED PARTIES THE TPO HELD THAT 2% SHOULD BE CHARGED AS GUARANTEE COMMISSION AND PROPOSED AN UPWARD ADJUSTMENT OF RS.111.48 LAKHS TO THE INCOME OF THE ASSESSEE . THE DRP AFTER HEARING THE ASSESSEE HELD THAT THE TPO HAS NOT GIVEN COGENT REASONS FOR TAKING A DIFFERENT STAND THAN THE STAND TAKEN BY THE DEPARTMENT IN THE EARLIER YEARS AS THE SAME GUARANTEE IS CONTINUING DURING THE YEAR UNDER CONSIDERATION AND THEREF ORE THERE CANNOT BE A DIFFERENT BENCH MARKING FROM THAT OF THE PREVIOUS YEAR. ACCORDINGLY THE DRP DIRECTED THE TPO TO ADOPT THE SAME RATE OF GUARANTEE COMMISSION AS WAS ADOPTED BY THE TPO IN THE PRECEDING YEAR. 69.THE DIRECTIONS ISSUED BY THE DRP WERE GI VEN EFFECT TO BY THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 17.01.2014. THE TRIBUNAL HELD THAT THE TP ADDITION MADE AGAINST THE CORPORATE AND BANK GUARANTEE IS NOT SUSTAINABLE IN LAW. THIS CONCLUSION IS BY OBSERVING THAT THE ASSESSEE HAS PROVIDED C ORPORATE AND BANK GUARANTEES FOR THE OVERALL INTEREST OF ITS BUSINESS. IT REFERRED TO THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF BHARTI AIRTEL LTD. WHEREIN IT IS HELD THAT CORPORATE GUARANTEE DOES NOT INVOLVE ANY COST TO THE ASSESSEE AND THEREFORE IT IS NOT AN INTERNATIONAL TRANSACTION EVEN UNDER THE DEFINITION OF THE SAID TERM AS AMENDED BY THE FINANCE ACT 2012. THE TRIBUNAL IS A FINAL AUTHORITY TO RENDER FINDINGS ON FACT. THE TRIBUNAL FAILED TO GIVE ANY REASON AS TO HOW THE DECISION IN BHARTI AIRTEL LIMITED WOULD APPLY TO THE ASSESSEE'S CASE. FURTHERMORE THERE WAS NO RECORD PLACED BEFO RE THE TRIBUNAL BY THE ASSESSEE THAT THEY HAVE NOT INCURRED ANY COST FOR PROVIDING BANK GUARANTEE. AS OBSERVED EARLIER THE TPO HAS COMPARED THE NATURE OF DOCUMENTATION EXECUTED BY THE ASSESSEE IN FAVOUR OF HIS ASSOCIATED ENTERPRISE TO COME TO THE FACTUAL CONCLUSION THAT IT IS A FINANCIAL SERVICE. THIS FINDING OF FACT HAS NOT BEEN INTERFERED BY THE DRP BUT THE DRP WAS OF THE VIEW THAT THE SAME TREATMENT WHICH WAS GIVEN IN THE PREVIOUS ASSESSMENT YEAR SHOULD BE EXTENDED FOR THE ASSESSMENT YEAR UNDER CONSID ERATION ALSO AND THERE IS NO REASON GIVEN BY THE TPO FOR TAKING A DIVERGENT VIEW. THE FINDING THAT THE VERY SAME TRANSACTION FOR THE PREVIOUS ASSESSMENT YEAR WAS SUBJECT ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 16 - : MATTER OF TP ADJUSTMENT HAS NOT BEEN DISPUTED BY THE TRIBUNAL RATHER NOT EVEN DEALT WITH BY THE TRIBUNAL. THEREFORE THE FINDING RENDERED BY THE TRIBUNAL IS UTTERLY PERVERSE. 70.THE ARGUMENT OF THE LEARNED SENIOR COUNSEL APPEARING FOR THE ASSESSEE IS THAT PRIOR TO THE AMENDMENT BROUGHT ABOUT IN SECTION 92B BY FINANCE ACT 2012 THE TRIBUNAL HAD DECIDED THAT FURNISHING OF A GUARANTEE BY AN ASSESSEE WAS NOT AN INTERNATIONAL TRANSACTION AS IT DID NOT FALL WITHIN ANY OF THE LIMBS OF SECTION 92B . IT IS SUBMITTED THAT TO GET OVER THE JUDICIAL P RONOUNCEMENT THE EXPLANATION WAS INSERTED. THE ARGUMENT IS THAT CLAUSE (C) OF THE EXPLANATION SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS THE EXPLANATION MAKES IT CLEAR THAT GIVING OF A CORPORATE GUARANTEE IS NOT A SERVICE. WITHOUT PREJUDICE TO THE SAID CONTENTION IT IS SUBMITTED THAT ONLY CORPORATE GUARANTEE IS GIVEN BY THE ASSESSEE WHICH ARE IN THE NATURE OF LENDING ARE COVERED UNDER CLAUSE (C) OF EXPLANATION 1 TO SECTION 92B . FURTHER IT IS SUBMITTED THAT THE NATURE OF TRANSACTIONS COVERED BY CLAUSE (E) SPECIFICALLY INCLUDE EVEN THOSE TRANSACTIONS WHICH MAY NOT HAVE A BEARING ON THE PROFIT INCOME LOSSES OR ASSETS OF SUCH ENTERPRISES AT THE TIME OF TRANSACTION ARE COVERED IF THEY HAVE SUCH A BEARING AT ANY FUTURE DATE. IT IS ARGUED THAT THE LANGUAGE USED IN THE EXPLANATION MAKES IT CLEAR THAT IN SO FAR AS THE TRANSACTIONS THAT FALL WITHI N THE MAIN PART OF SECTION 92B ARE CONCERNED SUCH TRANSACTIONS MUST HAVE A BEARING ON PROFIT INCOME LOSSES OR ASSETS OF AN ASSESSEE IN THE YEAR IN WHICH THE TRANSACTION IS EFFECTED. IN THE ASSESSEE'S CASE THE CORPORATE GUARANTEES REPRESENT A CONTINGENT LIABILITY AND LAY DORMANT AND HAVE NO BEARING ON THE CURRENT YEAR'S PROFITS INCOME OR LOSSES OF AN ASSESSEE AND CORPORATE GUARANTEE ARE NOT COVERED WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION. IT IS SUBMITTED THAT APPLYING DOCTRINE OF FAIRNESSAS EXPLAINED BY THE HON'BLE SUPREME COURT OF INDIA IN THE CASE VATIKA TOWNSHIP PRIVATE LIMITED T HE EXPLANATION OUGHT TO BE READ AS PROSPECTIVE IN ITS APPLICATION AND RETROSPECTIVE IN ITS EFFECT SUCH THAT IT WILL ALSO COVER WITHIN ITS AMBIT GUARANTEES ISSUED PRIOR TO THE INTRODUCTION OF THE EXPLANATION BY FINANCE ACT 2012. ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 17 - : 71.WE FIND FROM THE GROUNDS OF APPEAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL NO GROUND WAS RAISED AS REGARDS THE ARGUMENT THAT THE EXPLANATION ADDED BY FINANCE ACT 2012 IS TO BE CONSTRUED AS PROSPECTIVE IN ITS APPLICATION. FURTHERMORE THE TRIBUNAL HAS ALSO NOT RECORDED IN ITS ORDER MORE PARTICULARLY FROM PARAGRAPH 92 THAT THE ASSESSEE HAD A RGUED ON THE ISSUE REGARDING PROSPECTIVITY / RETROSPECTIVITY. FURTHER THE ASSESSEE HAS NOT CHALLENGED THE VALIDITY OF THE EXPLANATION NOR ITS APPLICABILITY WITH RETROSPECTIVE EFFECT. THAT APART EVEN BEFORE THE DRP SUCH CONTENTION WAS NOT RAISED. THE HON 'BLE SUPREME COURT IN GOLD COIN HEALTH FOOD PRIVATE LIMITED WHILE DECIDING THE ISSUE WHETHER AN AMENDMENT WAS CLARIFICATORY OR SUBSTANTIVE IN NATURE OR WHETHER IT WILL HAVE RETROSPECTIVE EFFECT HELD AS FOLLOWS: 14. THE PRESUMPTION AGAINST RETROSPECTIVE O PERATION IS NOT APPLICABLE TO DECLARATORY STATUTES IN DETERMINING THEREFORE THE NATURE OF THE ACT REGARD MUST BE HAD TO THE SUBSTANCE RATHER THAN TO THE FORM. IF A NEW ACT IS TO EXPLAIN AN EARLIER ACT IT WOULD BE WITHOUT OBJECT UNLESS CONSTRUED RET ROSPECTIVELY. AN EXPLANATORY ACT IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL SETTLED THAT IF A STATUTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIVE OPERAT ION IS GENERALLY INTENDED AN AMENDING ACT MAY BE PURELY DECLARATORY TO CLEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT WHICH WAS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EFFECT (IBID. PP. 468 - 69). 15. THOUGH RETROSPECTIVITY IS NOT TO BE PRESUMED AND RATHER THERE IS PRESUMPTION AGAINST RETROSPECTIVITY ACCORDING TO CRAIES (STATUTE LAW 7TH EDN.) IT IS OPEN FOR THE LEGISLATURE TO ENACT LAWS HAVING RETROSPECTIVE OPERATION. THIS CAN BE ACHIEVED BY EXPRESS ENACTM ENT OR BY NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED. IF IT IS A NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED THAT THE LEGISLATURE INTENDED A PARTICULAR SECTION TO HAVE A RETROSPECTIVE OPERATION THE COURTS WILL GIVE IT SUCH AN OPERATION. IN THE ABSENCE OF A RETROSPECTIVE OPERATION HAVING BEEN EXPRESSLY GIVEN THE COURTS MAY BE CALLED UPON TO CONSTRUE THE PROVISIONS AND ANSWER THE QUESTION ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 18 - : WHETHER THE LEGISLATURE HAD SUFFICIENTLY EXPRESSED THAT INTENTION GIVING THE STATUTE RETROSPECTIVITY. FOUR FA CTORS ARE SUGGESTED AS RELEVANT: (I) GENERAL SCOPE AND PURVIEW OF THE STATUTE; (II) THE REMEDY SOUGHT TO BE APPLIED; (III) THE FORMER STATE OF THE LAW; AND (IV) WHAT IT WAS THE LEGISLATURE CONTEMPLATED. (P. 388) THE RULE AGAINST RETROSPECTIVITY DOES NOT EX TEND TO PROTECT FROM THE EFFECT OF A REPEAL A PRIVILEGE WHICH DID NOT AMOUNT TO ACCRUED RIGHT. (P. 392) 72.A NEW ENACTMENT OR AN AMENDMENT MEANT TO EXPLAIN THE EARLIER ACT HAS TO BE CONSIDERED RETROSPECTIVE. THE EXPLANATION INSERTED IN SECTION 92B BY FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 01.04.2002 COMMENCES WITH THE SENTENCE FOR THE REMOVAL OF DOUBTS IT IS HEREBY CLARIFIED THAT - 73.AN AMENDMENT MADE WITH THE OBJECT OF REMOVAL OF DOUBTS AND TO CLARIFY UNDOUBTEDLY HAS TO BE READ TO BE RETROSPECTIVE AND COURTS ARE BOUND TO GIVE EFFECT TO SUCH RETROSPECTIVE LEGISLATION. 74.THE LEARNED SENIOR STANDING COUNSEL FOR THE REVENUE REFERRED TO THE DECISION IN CO - OPERATIVE COMPANY LIMITED VS. COMMISSIONER OF TRADE TAX IN CIVIL NO.2124 OF 2007 DATED 24.04.2007 WHEREIN IT WAS HELD TH AT WHEN AN AMENDMENT IS BROUGHT INTO FORCE FROM A PARTICULAR DATE NO RETROSPECTIVE OPERATION THEREOF CAN BE CONTEMPLATED PRIOR THERETO. THE EXPLANATION IN SECTION 92B SPECIFICALLY HAS BEEN GIVEN RETROSPECTIVE EFFECT AND IT IS CLARIFICATORY IN NATURE AND FOR THE PURPOSE OF REMOVAL OF DOUBTS. THIS ISSUE WAS CONSIDERED BY THIS COURT IN THE CASE OF SUDEXO FOOD SOLUTIONS INDIA PRIVATE LTD. 75.THE CONCEPT OF BANK GUARANTEES A ND CORPORATE GUARANTEES WAS EXPLAINED IN THE DECISION OF THE HYDERABAD TRIBUNAL IN THE CASE OF PROLIFICS CORPORATION LIMITED. IN THE SAID CASE THE REVENUE CONTENDED THAT THE TRANSACTION OF PROVIDING CORPORATE GUARANTEE IS COVERED BY THE DEFINITION OF INTE RNATIONAL TRANSACTION AFTER RETROSPECTIVE AMENDMENT MADE BY FINANCE ACT 2012. THE ASSESSEE ARGU ED THAT THE CORPORATE GUARANTEE IS AN ADDITIONAL GUARANTEE PROVIDED BY THE PARENT COMPANY. IT DOES NOT INVOLVE ANY COST OF RISK TO THE SHAREHOLDERS. FURTHER THE RETROSPECTIVE AMENDMENT OF SECTION ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 19 - : 92B DOES NOT ENLARGE THE SCOPE OF THE TERM INTERNATIONAL TRANSACTION TO INCLUDE THE CORPORATE GUARANTEE IN THE NATURE PROVIDED BY THE ASSESSEE THEREIN. THE TRIBUNAL HELD THAT IN CASE OF DEFAULT GUARANTOR HAS TO FULFILL THE LIABILITY AND THEREFORE THERE IS ALWAYS AN INHERENT RISK IN PROVIDING GUARANTEES AND THAT MAY BE A REASON THAT FINANCE PROVIDER INSIST ON NON - CHARGING ANY COMMISSION FROM ASSOCIATED ENTERPRISE AS A COMMERCIAL PRINCIPLE. FURTHER IT HAS BEEN OBSERVED THAT THIS POSITION INDICATES THAT PROVISION OF GUARANTEE ALWAYS INVOLVES RISK AND THERE IS A SERVICE PROVIDED TO THE ASSOCIATE ENTERPRISE IN INCREASING ITS CREDITWORTHINESS IN OBTAINING LO ANS IN THE MARKET BE FROM FINANCIAL INSTITUTIONS OR FROM OTHERS. THERE MAY NOT BE IMMEDIATE CHARGE ON P & L ACCOUNT BUT INHERENT RISK CANNOT BE RULED OUT IN PROVIDING GUARANTEES. ULTIMATELY THE TRIBUNAL UPHELD THE ADJUSTMENTS MADE ON GUARANTEE COMMISSIO NS BOTH ON THE GUARANTEES PROVIDED BY THE BANK DIRECTLY AND ALSO ON THE GUARANTEE PROVIDED TO THE ERSTWHILE SHAREHOLDERS FOR ASSURING THE PAYMENT OF ASSOCIATE ENTERPRISE. 76.IN THE LIGHT OF THE ABOVE DECISIONS WE HOLD THAT THE TRIBUNAL COMMITTED AN ERROR IN DELETING THE ADDITIONS MADE AGAINST CORPORATE AND BANK GUARANTEE AND RESTORE THE ORDER PASSED BY THE DRP. WE THEREFORE HOLD THAT A CORPORATE GUARANTEE INDEED FORMS AN INTERNATIONAL TRANSACTION U/S 92B OF THE ACT. AND THAT EXPLANATION TO SECTION 92B; IN SERTED BY THE FINANCE ACT 2012 W.E.F. 01/04/2002 IS APPLICABLE WITH RETROSPECTIVE EFFECT. AS ASSESSSEES RELIANCE ON BHARTHI AIRTEL AND OTHER CATINA OF CASE LAW (SUPRA) IN THIS REGARD STAND OVERRULED . WE THUS DECLINE THE ASSESSEE S ARGUMENT AGAINST THE CORPORATE GUARANTEE AS AN INTERNATIONAL TRANSACTION IN PRINCIPLE. LEARNED COUNSELS NEXT ARGUMENT IS THAT THE ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 20 - : LOWER AUTHORITIES HAVE ALSO INCLUDED A LETTER OF COMFORT S UM OF RS. 1 09 67 80 000/ - AS PART OF CORPORATE GUARANTEE WHICH G OES AGAINST THE CASE LAW PCIT VS. REDINGTON (INDIA) LTD. CHENNAI (SUPRA) THEREFORE WE FIND PRIMA - FACIE MERIT IN ASSESSEES INSTANT LATTER ARGUMENT. THE FACT ALSO REMAINS THAT THE LEARNED TPO IS YET TO EXAMINE THE CORPORATE GUARANTEE F EE AMOUNT AS SE G REGATED BY THE SO CALLED LETTER OF COMFORT AMOUNT. WE THUS AFFIRM THE IMPUGNED CORPORATE GUARANTEE ADJUSTMENT ADDITION IN PRINCIPLE AND LEAVE IT TO OPEN FOR THE TPO TO FINALIZE CONSEQUENTIAL COMPUTATION IN ABOVE TERMS. 8.14 W E ARE ALSO OF THE CONSIDERED OPINION THA T THE ISSUE SHOULD BE EXAMINED BY THE TPO CALLING FOR INFORMATION FROM THE BANK THAT WHAT IS THE IMPACT OF THE COUNTER BANK GUARANTEE GIVEN BY THE ASSESSEE WHETHER IS THERE ANY LIABILITY FASTEN ON THE COMPANY IN CASE OF COUNTER BANK GUARANTEE. IF FOUND YE S THEN THE DRPS D ECISION IS CORRECT. IF THERE IS NO LIABILITY AS SUBMITTED BY THE LD. AR OR THE ASSESSEE THEN IT I S A MERE LETTER OF COMFORT AND NO ADDITION IS CALLED FOR. THE CASE LAW RELIED UPON BY THE LD. AR OF THE ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 21 - : ASSESSEE IS DISTINGUISHABLE ON FACT TO THE CASE OF THE ASSESSEE AND THE SAME ARE NOT OF ANY HELP TO THE ASSESSEE CASE. 8.14 IN VIEW OF THE ABOVE DISCU SSION WE REJECT THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE THAT THE ISSUE OF CORPORATE GUARANTEE BY THE ASSESSEE TO ITS AES IS NOT AN INTERNATIONAL TRANSACTION AND DIRECT THE AO/TPO TO DECIDE THE ISSUE AS PER OUR DIRECTIONS GIVEN IN PARA 8.13 (SUPRA) N EEDLESS TO SAY THAT REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE MAY BE PROVIDED IN THE MATTER. THE ASSESSEE IS ALSO DIRECTED NOT TO SEEK UNNECESSARY ADJOURNMENTS FOR EARLY DISPOSAL OF THE APPEAL. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 19 TH MARCH 2021 . SD/ - SD/ - ( SATBEER SINGH GODARA ) ( LAXMI PRASAD SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD DATED : 19 TH MARCH 20 2 1 K V ITA NO. 449 /H 2016 RAMKY ENVIRO ENGINEERS LTD. HYD. : - 22 - : C OPY TO : 1 RAMKY EN VIRO ENGINEERS LTD. RAMK Y TOWERS COMPLEX GACHIBOW LI HYDERABAD 500 032 2 ACIT CIRCLE 2( 4) 3 RD FLOOR POSNETT BHAVAN RAMKOTI TILAK ROAD HYDER ABAD 500 001. 3 DRP 1 BEGA LURU . 4 PR. CIT (CENTRAL RANGE) HYDERABAD 5 ITAT DR HYDERABAD. 6 GUARD FILE.