Meghmani Organics Ltd., Ahmedabad V. The DCIT.,Cent.Circle-1(1), Ahmedabad

ITA 2204/AHD/2013

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8852 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-03-2020
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Retrospective amendment; Question of law; Reasonable cause; Competent authority; Set aside
• Section: 271(1)(c); 143(3); 92D; 92B; 40(a)(ia); 10B; 144C; 207; 43; 48; 73; 72; 13; 119; 22; 92CA; 32; 263; 154; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD [CONDUCTED THROUGH VIRTUAL COURT] BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO. 2204/AHD/2013 (ASSESSMENT YEAR: 2009-10) MEGHMANI ORGANICS LIMITED MEGHMANI HOUSE, SHRINIVAS SOCIETY, VIKAS GRUH ROAD, AHMEDABAD-7 VS. DCIT CENTRAL CIRCLE-1(1), AHMEDABAD PAN NO. AAB CM0 644 E ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S. N. SOPARKAR SR. ADVOCATE WITH SHRI PARIN SHAH AR RESPONDENT BY : SHRI VINOD TANWANI, SR. D.R. DATE OF HEARING 22.07.2020 DATE OF PRONOUNCEMENT 28 . 0 7 . 20 20 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER DATED 18.06.2013 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS) I, AHMEDABAD ARISING OUT OF THE ORDER DA TED 29.01.2013 PASSED BY THE ACIT, CENTRAL CIRCLE-1(1), AHMEDABAD UNDER SECTION 143(3) R.W.S 144C OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED AS TO THE ACT) FOR ASSESSMENT YEAR 2009-10 WITH THE FOL LOWING GROUNDS:- 1. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE UPWARD ADJUSTMENT OF RS. 27,11,550/- IN RESPECT OF TRANSAC TION OF SALE OF PESTICIDES AND PIGMENTS. LD. CIT(A) OUGHT TO HAVE DELETED THE ADD ITION. ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 2 - 2. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING USE OF CUP AS THE MOST APPROPRIATE METHOD TO BENCHMARK THE INTERNATIO NAL TRANSACTION OF SALE OF PESTICIDES AND PIGMENTS REJECTING TNMM AS USED BY T HE ASSESSEE. 3. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING THE UPWARD ADJUSTMENT OF RS. 27,11,550/- CALCULATED BY THE TPO ON THE BASIS OF DIFFERENCE IN MONTHLY AVERAGE PRICE OF CHEMICAL SOLD TO AE AND NO N-AE. LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION. 4. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG UPWARD ADJUSTMENT OF RS. 10,77,945/- OF NOTIONAL GUARANTEE FEES MADE BY AO U NDER S. 92CA. THE REVENUE AUTHORITIES FAILED TO APPRECIATE THAT ADVANCEMENT O F GUARANTEE TO AE RESULTED NEITHER IN ANY BEARING ON ASSETS OF THE APPELLANT NOR ANY A DVANTAGE OF DIFFERENTIAL INTEREST RATE TO ASSOCIATE ENTERPRISE. LD. CIT(A) OUGHT TO HAVE QUASHED UPWARD ADJUSTMENT MADE ON THE BASIS OF SURMISES AND CONJECTURES HAVIN G ACCEPTED FAILURE OF TPO TO ADOPT SPECIFIC METHOD. 5. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG THE ADDITION OF RS. 23,52,547/- U/S. 10B ON THE GROUND THAT THE CONVERT IBLE FOREIGN EXCHANGE OF EXPORT SALES WAS NOT BROUGHT WITHIN EXTENDED TIME. THE DI SALLOWANCE IS UNJUSTIFIED AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 6. LEVY OF INTEREST U/S 234A/234B/234C & 234D OF TH E ACT IS NOT JUSTIFIED. 7. INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT I S NOT JUSTIFIED. 2. THE GROUND NOS. 1, 2 & 3 RELATE TO THE UPWARD AD JUSTMENT OF RS. 27,11,550/- IN RESPECT OF TRANSACTION OF SALE OF PE STICIDES AND PIGMENTS WERE NOT PRESSED BY THE LD. SENIOR COUNSEL APPEARIN G FOR THE ASSESSEE AT THE TIME OF HEARING OF THE MATTER. 3. THE NEXT GROUND RELATES TO CONFIRMING OF UPWARD ADJUSTMENT OF RS. 10,77,945/- OF NOTIONAL GUARANTEE FEES MADE BY LD. AO UNDER SECTION 92CA OF THE ACT. 4. AT THE TIME OF THE HEARING OF THE INSTANT APPEAL THE LD. SENIOR COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IS ENTIRELY COVERED IN ASSESSEES OWN CASE BY THE JUDG MENT AND ORDER PASSED ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 3 - BY THE CO-ORDINATE BENCH IN FAVOUR OF THE ASSESSEE IN ITA NO. 592/AHD/2013 FOR A.Y. 2008-09. A COPY OF THE SAID JUDGMENT WAS ALSO SUBMITTED BEFORE US. SUCH ARGUMENT ADVANCED BY THE LD. SENIOR COUNSEL A PPEARING FOR THE ASSESSEE HAS NOT BEEN CONTROVERTED SERIOUSLY BY THE LD. REPRESENTATIVE APPEARING FOR THE REVENUE WITH ALL H IS FAIRNESS; HE RELIES UPON THE ORDER PASSED BY THE REVENUE. 5. WE HAVE HEARD THE RESPECTIVE PARTIES, WE HAVE AL SO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD INCLUDING TH E ORDER PASSED BY THE HONBLE COORDINATE BENCH IN ITA NO. 592/AHD/2013 FO R A.Y. 2008-09 (MEGHMANI ORGANICS LTD. VS. ACIT) AS RELIED UPON BY THE LD. AR. WHILE DEALING WITH THE IDENTICAL ISSUE THE HONBLE COORDINATE BENCH HAS BEEN PLEASED TO OBSERVE AS FOLLOWS:- 9. IN GROUND NO. 2, THE ASSESSEE HAS RAISED THE FO LLOWING GRIEVANCE: 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING UPWARD ADJUSTMENT OF RS.16,98,410/- OF NOTIONAL GUARANTEE FEES MADE BY AO UNDER S. 92CA. THE REVENUE AUTHORITIES FAILED TO APPRECI ATE THAT ADVANCEMENT OF GUARANTEE TO AE RESULTED NEITHER IN ANY BEARING ON ASSETS OF THE APPELLANT NOR ANY ADVANTAGE OF DIFFERENTIAL INTEREST RATE TO ASSOCIATE ENTERPRISE. LD. CIT (A) OUGHT TO HAVE QUASHED UPWARD ADJUSTMENT MAD E ON THE BASIS OF SURMISES AND CONJECTURES HAVING ACCEPTED FAILURE OF TPO TO ADOPT SPECIFIC METHOD. 10. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CON CERNED, IT IS SUFFICIENT TO TAKE NOTE OF SOME UNDISPUTED FACTS OF THE CASE. THE ASSE SSEE HAD GIVEN CORPORATE GUARANTEES, IN RESPECT OF ITS ASSOCIATED ENTERPRISE S BY THE NAME OF MEGHMANI EUROPE BVBA, BELGIUM, FOR AN AMOUNT OF US DOLLARS 2 MILLIO N. THE ASSESSEE DID NOT CHARGE ANY CONSIDERATION FOR ISSUANCE OF THESE GUARANTEES, IN FAVOUR OF ITS AE. RELYING UPON THE TAX COURT OF CANADA DECISION IN THE CASE OF GE CAPITAL CANADA INC VS HER MAJESTY THE QUEEN [(2009) TCC 563], THE TPO PROCEEDED TO ADOPT THE DIFFERENCE BETWEEN THE CREDIT RATING OF THE ASSESSEE AND THE C REDIT RATING OF ITS SUBSIDIARY AS ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 4 - ADVANTAGE ACCRUING TO THE ASSESSE. THE CREDIT RATIN G OF THE ASSESSEE WAS TAKEN AS A, AS PER CRISIL DATA, AND THE CREDIT RATING OF SUBSID IARY WAS ASSUMED TO BE BBB+. THE INTEREST RATE APPLICATION FOR A AND BBB+ CREDIT RATING WERE NOTED TO BE 11.42% AND 13.31% RESPECTIVELY, AND THE DIFFERENCE OF 1.89 % WAS ASSUMED TO BE ARMS LENGTH CONSIDERATION OF THE CORPORATE GUARANTEES. O N THIS BASIS, AN ALP ADJUSTMENT OF US $ 37,800 (BEING 1.89% OF US $ 2,000,000), WHI CH WAS TAKEN AS EQUIVALENT TO INR 16,98,410, WAS MADE BY THE TPO. THE AO, ACCORDI NGLY, MADE AN ADDITION TO THE RETURNED INCOME ON THIS BASIS. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A), WHILE UPHOLDING THE STAND OF THE TPOI, OBSERVED AS FOLLOWS: 6. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSION OF THE A.R. OF THE APPELLANT CAREFULLY. IT IS SEEN THAT TH OUGH THE TPO HAS NOT MENTIONED THE SPECIFIC METHOD WHICH HE HAS ADOPTED FOR MAKING THE ADJUSTMENTS IN THIS CASE, IT IS SEEN THAT THE ASSES SING OFFICER HAS TAKEN A BENCH MARK RATE AND AS CALCULATED THE UPWARD ADJUST MENTS ON THE BASIS OF THE DIFFERENCE BETWEEN THE RATE APPLIED BY THE APPE LLANT. THIS DEALS IN THIS CASE AND THE BENCH MARK RATE. INTACT, IN PARA 6.24, THE TPO HAS CLEARLY MENTIONED THAT HE HAS APPLIED THE EXTERNAL CUP METH OD FOR WORKING OUT THE ADJUSTMENT. IN VIEW OF THE ABOVE, THE RELIANCE OF THE APPELLANT ON THE DECISION OF AMADEUS INDIA PVT. LTD. (DELHI HIGH COU RT) REPORTED IN 246 CTR 333 (DELHI) AND GENOM BIOTECH PVT. LTD. (MUMBAI ITAT) (2012) REPORTED IN 21 TAXMAN.COM 315 (MUM.) IS NOT RIGHT B ECAUSE THE ASSESSING OFFICER HAS MENTIONED AND APPLIED THE CUP METHOD. 6.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A.R. OF THE APPELLANT VIDE ORDER-SHEET ENTRY DATED 18.12.2012 WAS ASKED T O FURNISH BANK GUARANTEE RATE CHARGED BY THE BANKS. VIDE ORDER-SHE ET ENTRY DATED 12.12.2012, THE A.R. OF THE APPELLANT EXPRESSED HIS INABILITY PROVIDING BANK GUARANTEE BECAUSE WITHOUT ACTUAL DEAL NO BANK WAS R EADY TO QUOTE THE RATE FOR GUARANTEE FEES. HE ALSO STATED THAT RANGE OF RA TES CHARGED BY ICICI BANK WAS 0.5% TO 3%. IT IS SEEN THAT THE ASSESSING OFFICER HAS APPLIED THE RATE OF 1.89%. 6.2 IN VIEW OF THE ABOVE FACT THAT GUARANTEE RATE BY ICICI BANK VARYING BETWEEN 0.5% TO 3% AND THE ASSESSING OFFICE R HAS ADOPTED THE RATE OF 1.89% ON THE BASIS OF CRISIL RATINGS. THE SAME A PPEARS TO BE CORRECT. IN VIEW OF THE ABOVE, THE ADJUSTMENT MADE BY THE AS SESSING OFFICER IS UPHELD. 11. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 12. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 13. WE FIND THAT THIS ISSUE IS NOW COVERED, IN FAVO UR OF THE ASSESSEE, BY A DECISION OF THE COORDINATE BENCH IN THE CASE OF SIRO CLINPHARM PVT LTD VS DCIT AND VICE VERSA [(2016) 134 DTR 1 (MUMBAI)]. WHILE HOLDING THAT NO ARMS LENGTH PRICE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 5 - ADJUSTMENT CAN BE MADE IN THE HANDS OF THE ASSESSEE , ON RESPECT OF CORPORATE GUARANTEES ISSUED WITHOUT INCURRING ANY COSTS, THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS: 6. WHILE WE WILL, IN A SHORT WHILE, DEAL WITH VERY ELABORATE AND DETAILED SUBMISSIONS MADE BY LEARNED DEPARTMENTAL REPRESENTA TIVE, WE MAY BEGIN BY POINTING OUT THAT THIS ISSUE HAS BEEN DEALT WITH IN DETAIL BY DECISION OF A COORDINATE BENCH IN THE CASE OF MICRO INK VS ACIT [ (2016) 176 TTJ 8 (AHD)] = 2015-TII-520-ITAT-AHM-TP WHEREIN THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS: '21. IT IS ONLY ELEMENTARY THAT THE DETERMINATION O F ARM'S LENGTH PRICE, UNDER THE SCHEME OF THE INTERNATIONAL TRANSF ER PRICING SET OUT IN THE INCOME-TAX ACT, 1961, CAN ONLY BE DONE IN RE SPECT OF AN 'INTERNATIONAL TRANSACTION'. SECTION 92(1) PROVIDES THAT, '(A)NY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SH ALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE'. IN ORDER TO ATTRACT THE ARM'S LENGTH PRICE ADJUSTMENT, THEREFORE, A TRANSAC TION HAS TO BE AN 'INTERNATIONAL TRANSACTION' FIRST. THE EXPRESSION ' INTERNATIONAL TRANSACTION' IS A DEFINED EXPRESSION. SECTION 92B D EFINES THE EXPRESSION 'INTERNATIONAL TRANSACTION' AS FOLLOWS: '92B - MEANING OF INTERNATIONAL TRANSACTION (1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 9 2, 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 TANGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SERVICES, OR L ENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRIS ES AND SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MO RE ASSOCIATED 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. (2) A TRANSACTION ENTERED INTO BY AN ENTERPRISE WIT H A PERSON OTHER THAN AN ASSOCIATED ENTERPRISE SHALL, FOR THE PURPOS ES OF SUB-SECTION (1), BE DEEMED TO BE A TRANSACTION ENTERED INTO BET WEEN TWO ASSOCIATED ENTERPRISES, IF THERE EXISTS A PRIOR AGR EEMENT IN RELATION TO THE RELEVANT TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BETWEEN SUCH OTHER PERSON A ND THE ASSOCIATED ENTERPRISE. ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 6 - EXPLANATION: - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT - (INSERTED BY THE FINANCE ACT 2012, THOUGH WITH RETR OSPECTIVE EFFECT FROM 1ST APRIL 2002) (I) THE EXPRESSION 'INTERNATIONAL TRANSACTION' SHAL L INCLUDE- (A) THE PURCHASE, SALE, TRANSFER, LEASE OR USE OF T ANGIBLE PROPERTY INCLUDING BUILDING, TRANSPORTATION VEHICLE, MACHINE RY, EQUIPMENT, TOOLS, PLANT, FURNITURE, COMMODITY OR ANY OTHER ART ICLE, PRODUCT OR THING; (B) THE PURCHASE, SALE, TRANSFER, LEASE OR USE OF I NTANGIBLE 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, EXTER IOR DESIGN OR PRACTICAL AND NEW DESIGN OR ANY OTHER BUSINESS OR C OMMERCIAL RIGHTS OF SIMILAR NATURE; (C) CAPITAL FINANCING, INCLUDING ANY TYPE OF LONG-T ERM OR SHORTTERM 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 M ARKET RESEARCH, MARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTR ATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, A GENCY, SCIENTIFIC RESEARCH, LEGAL OR ACCOUNTING SERVICE; (E) A TRANSACTION OF BUSINESS RESTRUCTURING OR REOR GANISATION, ENTERED INTO BY AN ENTERPRISE WITH AN ASSOCIATED ENTERPRISE , IRRESPECTIVE OF THE FACT THAT IT HAS BEARING ON THE PROFIT, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES AT THE TIME OF THE TRANSACTION OR AT ANY FUTURE DATE; (II) THE EXPRESSION 'INTANGIBLE PROPERTY' SHALL INC LUDE - (A) MARKETING RELATED INTANGIBLE ASSETS, SUCH AS, T RADEMARKS, 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, LI TERARY WORKS AND COPYRIGHTS, MUSICAL COMPOSITIONS, COPYRIGHTS, MAPS , ENGRAVINGS; ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 7 - (D) DATA PROCESSING RELATED INTANGIBLE ASSETS, SUCH AS, PROPRIETARY COMPUTER SOFTWARE, SOFTWARE COPYRIGHTS, AUTOMATED D ATABASES, AND INTEGRATED CIRCUIT MASKS AND MASTERS; (E) ENGINEERING RELATED INTANGIBLE ASSETS, SUCH AS, INDUSTRIAL DESIGN, PRODUCT PATENTS, TRADE SECRETS, ENGINEERING DRAWING AND SCHEMATICS, BLUEPRINTS, PROPRIETARY DOCUMENTATION; (F) CUSTOMER RELATED INTANGIBLE ASSETS, SUCH AS, CU STOMER LISTS, CUSTOMER CONTRACTS, CUSTOMER RELATIONSHIP, OPEN PUR CHASE ORDERS; (G) CONTRACT RELATED INTANGIBLE ASSETS, SUCH AS, FA VOURABLE SUPPLIER, CONTRACTS, LICENCE AGREEMENTS, FRANCHISE AGREEMENTS , NON-COMPETE AGREEMENTS; (H) HUMAN CAPITAL RELATED INTANGIBLE ASSETS, SUCH A S, TRAINED AND ORGANISED WORKFORCE, EMPLOYMENT AGREEMENTS, UNION C ONTRACTS; (I) LOCATION RELATED INTANGIBLE ASSETS, SUCH AS, LE ASEHOLD INTEREST, MINERAL EXPLOITATION RIGHTS, EASEMENTS, AIR RIGHTS, WATER RIGHTS; (J) GOODWILL RELATED INTANGIBLE ASSETS, SUCH AS, IN STITUTIONAL GOODWILL, PROFESSIONAL PRACTICE GOODWILL, PERSONAL GOODWILL O F PROFESSIONAL, CELEBRITY GOODWILL, GENERAL BUSINESS GOING CONCERN VALUE; (K) METHODS, PROGRAMMES, SYSTEMS, PROCEDURES, CAMPA IGNS, SURVEYS, STUDIES, FORECASTS, ESTIMATES, CUSTOMER LISTS, OR T ECHNICAL DATA; (L) ANY OTHER SIMILAR ITEM THAT DERIVES ITS VALUE F ROM 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 POSITION 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 POINT OF T IME, AND ITS BREAKUP 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: ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 8 - 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 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 OR B Y 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 INDIA, WHICH WAS BR OUGHT 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 TRANSACTION' UNDER SEC TION 92B. CLEARLY, THEREFORE, THIS EXPLANATION IS TO BE READ IN CONJUN CTION WITH THE MAIN PROVISIONS, AND IN HARMONY WITH THE SCHEME OF THE P ROVISIONS, UNDER SECTION 92B. UNDER THIS EXPLANATION, FIVE CATEGORIE S OF TRANSACTIONS HAVE BEEN CLARIFIED TO HAVE BEEN INCLUDED IN THE DE FINITION OF 'INTERNATIONAL TRANSACTIONS'. 28. THE FIRST TWO CATEGORIES OF TRANSACTIONS, WHICH ARE STATED TO BE INCLUDED IN THE SCOPE OF EXPRESSION 'INTERNATIONAL TRANSACTIONS' BY THE VIRTUE OF CLAUSE (A) AND (B) OF EXPLANATION TO SECTION 92B, ARE TRANSACTIONS WITH REGARD TO PURCHASE, SALE, TRANSFE R, LEASE OR USE OF TANGIBLE AND INTANGIBLE PROPERTIES. THESE TRANSACTI ONS WERE ANYWAY COVERED BY 2 (A) ABOVE WHICH COVERED TRANSACTIONS ' IN 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 INTANGIB LE ASSETS. SIMILARLY, CLAUSE (D) DEALS WITH THE 'PROVISION OF SERVICES, INCLUDING ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 9 - PROVISION OF MARKET RESEARCH, MARKET DEVELOPMENT, M ARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPA IRS, DESIGN, CONSULTATION, AGENCY, SCIENTIFIC RESEARCH, LEGAL OR ACCOUNTING SERVICE' WHICH ARE ANYWAY COVERED BY 2(B) AND 3 ABO VE IN 'PROVISION FOR SERVICES' AND 'MUTUAL AGREEMENT OR A RRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WITH A BEN EFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MO RE OF SUCH ENTERPRISES'. THAT LEAVES US WITH TWO CLAUSES IN TH E EXPLANATION TO SECTION 92B WHICH ARE NOT COVERED BY ANY OF THE THR EE CATEGORIES DISCUSSED ABOVE OR BY OTHER SPECIFIC SEGMENTS COVER ED BY SECTION 92B, NAMELY BORROWING OR LENDING MONEY. 29. THE REMAINING TWO ITEMS IN THE EXPLANATION TO S ECTION 92B ARE SET OUT IN CLAUSES (C) AND (E) THERETO, DEALING WIT H (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, INCO MES, 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 TRAN SACTIONS SHOULD BE SUCH AS TO HAVE BEARING ON PROFITS, INCOMES, LOSSES OR ASSETS OF SUCH ENTERPRISE. IN OTHER WORDS, IN A SITUATION IN WHICH A TRANSACTION HAS NO BEARING ON PROFITS, INCOMES, LOSSES OR ASSETS OF SUCH ENTERPRISE, THE TRANSACTION WILL BE OUTSIDE THE AMBIT OF EXPRES SION 'INTERNATIONAL TRANSACTION'. THIS ASPECT OF THE MATTER IS FURTHER HIGHLIGHTED IN CLAUSE (E) OF THE EXPLANATION DEALING WITH RESTRUCTURING A ND REORGANIZATION, WHEREIN IT IS ACKNOWLEDGED THAT SUCH AN IMPACT COUL D BE IMMEDIATE OR IN FUTURE AS EVIDENT FROM THE WORDS 'IRRESPECTIV E OF THE FACT THAT IT (I.E. RESTRUCTURING 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 IMPLICIT IN THIS STAT UTORY PROVISION IS THAT WHILE IMPACT ON ' PROFIT, INCOME, LOSSES OR AS SETS' IS SINE QUA NON, THE MERE FACT THAT IMPACT IS NOT IMMEDIATE, BU T ON A FUTURE DATE, WOULD NOT TAKE THE TRANSACTION OUTSIDE THE AMBIT OF 'INTERNATIONAL TRANSACTION'. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT, AS IT APPEARS ON A PLAIN READING OF THE PROVISION, THIS EXCLUSION CLAUSE IS NOT FOR 'CONTINGENT' IMPACT ON PROFIT, INCOME, LOSSES OR AS SETS 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 DEUTSCHE BANK DID NOT EVEN HAVE ANY ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 10 - SUCH IMPLICATION BECAUSE NO BORROWINGS WERE RESORTE D 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 THE EXPRESSION 'INTERNATIONAL TRANSACTION' SHALL INCLUDE 'CAPITAL FINANCING, INCLUDING ANY TYPE OF LONG-TERM OR SHORT-TERM BORROWING, LEND ING OR GUARANTEE, PURCHASE OR SALE OF MARKETABLE SECURITIE S OR ANY TYPE OF ADVANCE, PAYMENTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS'. IN VIE W OF THE DISCUSSIONS ABOVE, THE SCOPE OF THESE TRANSACTIONS, AS COULD BE COVERED UNDER EXPLANATION TO SECTION 92B READ WITH SECTION 92B(1), IS RESTRICTED TO SUCH CAPITAL FINANCING TRANSACTION S, INCLUDING INTER ALIA ANY GUARANTEE, DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF BUSINESS, AS WILL HAVE 'A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OR SUCH ENTERPRIS E'. THIS PRECONDITION ABOUT IMPACT ON PROFITS, INCOME, LOSSE S OR ASSETS OF SUCH ENTERPRISES IS A PRECONDITION EMBEDDED IN SECT ION 92B(1) AND THE ONLY RELAXATION FROM THIS CONDITION PRECEDENT I S SET OUT IN CLAUSE (E) OF THE EXPLANATION WHICH PROVIDES THAT THE BEAR ING ON PROFITS, INCOME, LOSSES OR ASSETS COULD BE IMMEDIATE OR ON A FUTURE DATE. THE CONTENTS OF THE EXPLANATION FORTIFIES, RATHER THAN MITIGATES, THE SIGNIFICANCE OF EXPRESSION 'HAVING A BEARING ON PRO FITS, INCOME, LOSSES 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 INTERNATIONAL TRANSACTION AS THE CONDITION PRECEDENT WITH REGARD TO THE 'BEARING ON PROFIT, INCOME, LOSSES OR ASSETS' SET OUT IN SECTION 92B(1) MAY NOT BE FULFILLED. FOR EXAMPLE, AN ENTERPRISE MAY EXTEND GUARANTEES FOR PE RFORMANCE OF FINANCIAL OBLIGATIONS BY ITS ASSOCIATED ENTERPRISES . THESE GUARANTEES DO NOT COST ANYTHING TO THE ENTERPRISE ISSUING THE GUARANTEES AND YET THEY PROVIDE CERTAIN COMFORT LEVELS TO THE PARTIES DOING DEALINGS 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 GUARANTEE DE FAULT TAKES PLACE AND, THEREFORE, THE ENTERPRISE MAY HAVE TO PAY THE GUARANTEE AMOUNTS BUT SUCH A SITUATION, EVEN IF THAT BE SO, I S ONLY A HYPOTHETICAL SITUATION, WHICH ARE, AS DISCUSSED ABO VE, EXCLUDED. ONE MAY ALSO HAVE A SITUATION IN WHICH THERE IS A RECEI VABLE OR ANY OTHER DEBT DURING THE COURSE OF BUSINESS AND YET THESE RE CEIVABLES MAY NOT HAVE ANY BEARING ON ITS PROFITS, INCOME, LOSSES OR ASSETS, FOR EXAMPLE, WHEN THESE RECEIVABLES ARE OUT OF COST FRE E FUNDS AND THESE DEBIT BALANCES DO NOT COST ANYTHING TO THE PERSON A LLOWING SUCH USE OF FUNDS. THE SITUATIONS CAN BE ENDLESS, BUT THE CO MMON THREAD IS THAT WHEN AN ASSESSEE EXTENDS AN ASSISTANCE TO THE ASSOCIATED ENTERPRISE, WHICH DOES NOT COST ANYTHING TO THE ASS ESSEE AND ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 11 - 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, THEREFO RE, 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 R EAL BASIS, EVEN IF IN PRESENT OR IN FUTURE, AND NOT ON CONTINGENT OR HYPO THETICAL BASIS, AND THERE HAS TO BE SOME MATERIAL ON RECORD TO INDICATE , EVEN IF NOT TO ESTABLISH IT TO HILT, THAT AN INTRAAE INTERNATIONAL TRANSACTION HAS SOME IMPACT ON PROFITS, INCOME, LOSSES OR ASSETS. C LEARLY, THESE CONDITIONS ARE NOT SATISFIED ON THE FACTS OF THIS C ASE.' 23. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THIS DECISION IS NO LONGER GOOD LAW IN THE LIGHT OF EVEREST KANTO CYLINDERS LTD. DECISION (SUPRA) AND VODAFONE INDIA SERVICES (P.) L TD. DECISION (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 AP PRECIATE THE FACT THE ASSESSEE WAS CHARGING A .5% COMMISSION ON ISSUA NCE OF CORPORATE GUARANTEES, ON BEHALF OF THE AES, AND IT COULD NOT, THEREFORE, BE SAID THAT THE TRANSACTION WILL HAVE N O IMPACT ON 'PROFITS, INCOMES, LOSSES OR ASSETS OF SUCH ENTERPR ISE'. THIS ASPECT OF THE MATTER IS CLEAR FROM AN OBSERVATIONS IN THE REL ATED TRIBUNAL ORDER, WHICH IS REPORTED AS EVEREST KANTO CYLINDERS LTD (SUPRA), TO THE EFFECT THAT 'HOWEVER, IN THIS CASE, THE ASSESSE E HAS ITSELF CHARGED 0.5% GUARANTEE COMMISSION FROM ITS AE AND, THEREFOR E, IT IS NOT A CASE OF NOT CHARGING ANY KIND OF COMMISSION FROM IT S AE'. THE TRIBUNAL DID NOTE, IN THE IMMEDIATELY FOLLOWING SEN TENCE IN PARAGRAPH 23 ITSELF, THAT 'THE ONLY POINT TO BE SEE N IN THIS CASE IS WHETHER THE SAME IS AT ALP OR NOT'. THE VERY FACT O F CHARGING THIS GUARANTEE COMMISSION BRINGS THE ISSUANCE OF CORPORA TE GUARANTEES TO THE NET OF TRANSFER PRICING. NEVERTHELESS, THE A LP ADJUSTMENT MADE BY THE TPO WAS DELETED BY THE TRIBUNAL. AGGRIEVED B Y THE RELIEF SO GIVEN BY THE TRIBUNAL, THE MATTER WAS CARRIED IN FU RTHER APPEAL, BY THE COMMISSIONER, BEFORE THE HON'BLE BOMBAY HIGH CO URT WHICH EVENTUALLY UPHELD THE RELIEF GRANTED BY THE TRIBUNA L. 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 TRIBU NAL ON THIS ASPECT SINCE THE ADDITION, ON MERITS, WAS DELETED ANYWAY M AKING REVENUE'S ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 12 - SUCCESS IN THIS RESPECT HOLLOW AND OF NO DAMAGE TO THE INTERESTS OF THE ASSESSEE. IT WAS IN THIS BACKDROP THAT THE ACTI ON OF THE TRIBUNAL WAS UPHELD IN GRANTING RELIEF TO THE ASSESSEE ON ME RITS. IT IS DIFFICULT TO UNDERSTAND AS TO HOW THIS DECISION IS TAKEN AS S UPPORTING THE PROPOSITION THAT THE ISSUANCE OF CORPORATE GUARANTE E, EVEN IN A CASE IN WHICH NEITHER ANY GUARANTEE COMMISSION IS CHARGE D NOR ANY COSTS ARE INCURRED, IS AN INTERNATIONAL TRANSACTION. IN A NY CASE, THERE IS NOTHING IN THE OPERATIVE PORTION WHICH EVEN REMOTEL Y SUGGESTS THAT THEIR LORDSHIPS HAD ANY OCCASION TO ADDRESS THEMSEL VES TO THE QUESTION AS TO WHETHER THE ISSUANCE OF CORPORATE GU ARANTEE AMOUNTS TO INTERNATIONAL 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 COMMERCIAL BANKS THAT ISSUE BANK GUARANTEES WHICH ARE TREATED AS THE BLOOD OF C OMMERCE BEING EASILY ENCASHABLE IN THE EVENT OF DEFAULT, AND IF T HE BANK GUARANTEE HAD TO BE OBTAINED FROM COMMERCIAL BANKS, THE HIGHE R COMMISSION COULD HAVE BEEN JUSTIFIED. IN THE PRESENT CASE, IT IS ASSESSEE COMPANY THAT IS ISSUING CORPORATE GUARANTEE TO THE EFFECT T HAT IF THE SUBSIDIARY AE DOES NOT REPAY LOAN AVAILED OF IT FRO M ICICI, THEN IN SUCH EVENT, THE ASSESSEE WOULD MAKE GOOD THE AMOUNT AND REPAY THE LOAN. THE CONSIDERATIONS WHICH APPLIED FOR ISSUANCE OF A CORPORATE GUARANTEE ARE DISTINCT AND SEPARATE FROM THAT OF BA NK GUARANTEE AND ACCORDINGLY WE ARE OF THE VIEW THAT COMMISSION CHAR GED CANNOT BE CALLED IN QUESTION, IN THE MANNER TPO HAS DONE. IN OUR VIEW THE COMPARISON IS NOT AS BETWEEN LIKE TRANSACTIONS BUT THE COMPARISONS ARE BETWEEN GUARANTEES ISSUED BY THE COMMERCIAL BAN KS AS AGAINST A CORPORATE GUARANTEE ISSUED BY HOLDING COMPANY FOR T HE BENEFIT OF ITS AE, A SUBSIDIARY COMPANY. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE APPEAL DOES NOT RAISE ANY SUBS TANTIAL 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 IRRES PECTIVE OF WHETHER OR NOT SUCH TRANSACTIONS HAVE ANY 'BEARING ON PROFI TS, INCOMES, LOSSES, OR ASSETS OF SUCH ENTERPRISES'. REVENUE, TH EREFORE, DOES NOT DERIVE 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 ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 13 - 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 PETITI ON. BUT, WHETHER IT IS RELEVANT OR NOT FOR THE PURPOSE OF THE ASSESSMENT P ROCEEDINGS IN RESPECT OF THE PETITIONER WHICH ARE THE SUBJECT MAT TER OF THIS WRIT PETITION, IS RELEVANT. THE EFFECT 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 INCLUSI VE DEFINITION AS IS EVIDENT FROM THE WORDS 'TRANSFER' INCLUDES'. THIRDL Y, THE AMENDMENT IS WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1962. FOURTHLY, THE FINANCE ACT 2012 WHICH INTRODUCED, INTER 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. 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 SHARES O F 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 L ONGER RESTRICTED TO ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 14 - THE ASSET PER SE OR A RIGHT THEREIN, BUT ALSO EXTEN DS TO 'ANY INTEREST THEREIN'. PRIOR TO THE AMENDMENT, THE WORDS 'ANY IN TEREST THEREIN' WERE ABSENT. FURTHER, THE NATURE OF THE DISPOSAL IS ALSO EXPANDED. IT NOW INCLUDES THE CREATION OF ANY INTEREST IN ANY AS SET. MOREOVER, THE DISPOSAL OF OR CREATION OF ANY INTEREST IN THE ASSE T MAY BE DIRECT OR INDIRECT, ABSOLUTE OR CONDITIONAL, VOLUNTARY OR INV OLUNTARY. IT MAY BE BY WAY OF AN AGREEMENT OR OTHERWISE. FURTHER, THE C ONCLUDING WORDS CONSTITUTE A NON-OBSTANTE PROVISION. IT PROVIDES TH AT THE TRANSFER CONTEMPLATED THEREIN WOULD BE NOTWITHSTANDING THAT IT HAS BEEN CHARACTERISED AS BEING EFFECTED OR DEPENDENT UPON O R FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGI STERED OR INCORPORATED OUTSIDE INDIA. IT WOULD BE EVIDENT, THEREFORE, THAT A LOT MORE MUS T NOW BE SEEN AND CONSIDERED THAN BEFORE WHILE ARRIVING AT A CONCLUSI ON WHETHER THE TERMS AND CONDITIONS OF THE FRAMEWORK AGREEMENT CON STITUTED A TRANSFER OR ASSIGNMENT OF THE CALL OPTIONS BY ONE P ARTY 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 CL ARIFICATORY, WOULD MAKE A DIFFERENCE IN THE CONSTRUCTION OF THE PROVIS IONS OF THE FRAMEWORK AGREEMENTS THEMSELVES, TO WIT AS REGARDS THE CONSTRUCTION OF THE CLAUSES THEREOF WITHOUT THE AID OF ANY OTHER MATERIAL FOR INTERPRETING THEM. VODAFONE'S CASE OBV IOUSLY CONSIDERED THE AMBIT OF THE TERM 'TRANSFER' PRIOR TO THE AMEND MENT. IN THE PRESENT ASSESSMENT PROCEEDINGS, IT IS THE AMENDED D EFINITION WHICH WOULD HAVE TO BE CONSIDERED. 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 RECO RD OR THOSE MAY BE PERMITTED TO BE BROUGHT ON RECORD. 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 MUST, THEREFORE, BE DEEMED ALWAYS TO HAVE BEEN IN EXISTENCE. WE WILL PRESUME THAT IT WOU LD BE OPEN TO THE PETITIONER TO CONTEND, THEREFORE, THAT THE JUDGMENT OF THE SUPREME COURT WOULD REMAIN ENTIRELY UNAFFECTED FOR THE SUPR EME COURT MUST BE DEEMED TO HAVE CONSIDERED THE TERM AS PER ITS TR UE AMBIT, AS ALWAYS INTENDED BY THE PARLIAMENT. ON THE OTHER HAN D, IT MAY BE EQUALLY OPEN TO THE REVENUE TO CONTEND THAT CERTAIN INGREDIENTS OF A TRANSFER WERE NOT CONSIDERED BY THE REVENUE ITSELF IN THE PROCEEDINGS RELATING TO VODAFONE'S CASE ON ACCOUNT OF THE REVEN UE ITSELF NOT HAVING APPRECIATED OR REALIZED THE ACTUAL AMBIT OF THE TERM 'TRANSFER' WHICH ARE NOW CLARIFIED BY THE AMENDMENT . EVEN ASSUMING THAT THE REVENUE CANNOT RE-OPEN THE VODAFO NE CASE, IT ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 15 - CANNOT BE BARRED FROM RELYING UPON THE TRUE AMBIT O F THE TERM 'TRANSFER' IN FUTURE CASES, INCLUDING THE PROCEEDIN GS IN RESPECT OF THE PETITIONER. THUS, EVEN ASSUMING THAT THE JUDGMENT O F THE SUPREME COURT REMAINS UNAFFECTED BY THE CLARIFICATORY AMEND MENT, THE REVENUE WOULD BE ENTITLED HEREAFTER IN OTHER CASES, AT LEAST, TO APPRECIATE, ANALYZE AND CONSTRUE THE TRANSACTIONS R ELATING TO CALL OPTIONS, INCLUDING THE FRAMEWORK AGREEMENTS IN A PR OPER PERSPECTIVE 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, BYPASSING THE TRIBUNAL AND CONSIDERING ALL THESE QU ESTIONS IN EXERCISE OF THE HIGH COURT'S EXTRAORDINARY JURISDIC TION UNDER ARTICLE 226'. WHEN THEIR LORDSHIPS HAVE MADE IT CLEAR THAT THEY WOULD NOT LIKE TO BYPASS THE CHANNELS UNDER THE INCOME-TAX AC T AND PROCEED TO DECIDE THESE ISSUES IN WRIT JURISDICTION UNDER ARTI CLE 226, THERE CANNOT OBVIOUSLY BE ANY QUESTION OF THEIR LORDSHIPS DECIDING THE MATTER ONE WAY OR THE OTHER. ANY OBSERVATIONS MADE BY THEIR LORDSHIPS, WHILE DECLINING TO DECIDE THE MATTER IN WRIT JURISDICTION, CANNOT BE TREATED AS DECISIVE OF THE ISSUE ON MERIT S. WHILE IT IS TRUE THAT HON'BLE BOMBAY HIGH COURT HAS OBSERVED THAT TH E EFFECT OF AMENDMENT WILL HAVE TO BE CONSIDERED, HON'BLE BOMBA Y HIGH COURT HAS ALSO OBSERVED THAT EVEN AFTER TAKING INTO ACCOU NT THE AMENDMENTS, THE LEGAL IMPLICATIONS OF THIS AMENDMEN T IS STILL AN OPEN ISSUE WHICH WILL HAVE TO BE ADJUDICATED IN THE LIGHT OF PLEADINGS OF THE PARTIES. EVEN IN THESE OBSERVATIONS, WHICH D O NOT ANYWAY DECIDE ANYTHING ON MERITS, EFFECT OF A RETROSPECTIV E AMENDMENT WAS NOT IN THE CONTEXT OF THE PRECISE ISSUE BEFORE US, OR ON THE SCOPE OF THE INTERNATIONAL TRANSACTION, BUT IN RESPECT OF CO NNOTATIONS 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 , BECAUSE A CASE IS ONLY AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FOLLOW FROM SOME OBSERVATIONS WHICH FIND PLACE T HEREIN'. IN VIEW OF THESE DISCUSSIONS, THE RELIANCE PLACED ON VODAFO NE INDIA SERVICES ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 16 - (P.) LTD. (SUPRA) IS ALSO EQUALLY MISPLACED AND DEV OID OF LEGALLY SUSTAINABLE MERITS. IN ANY CASE, AS IS NOTED BY HON 'BLE SUPREME COURT IN THE CASE OF CIT V. SUN ENGG. WORKS (P.) LT D. [1992] 198 ITR 297/64 TAXMAN 442 (SC) = 2002-TIOL-242-SC-IT , 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OUT A WOR D 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 CONSI DERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT' THEI R LORDSHIPS FURTHER NOTED THAT 'A DECISION OF THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDE RED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE COURTS M UST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECIS ION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUD GMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATI ON BY THIS COURT, TO SUPPORT THEIR REASONING' IT WAS ALSO RECALLED TH AT IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA AIR 19 71 SC 530, HON'BLE SUPREME COURT 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 CONTAI NING A FULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTI ON DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT.' THAT PRECISE LY, HOWEVER, HAS BEEN THE APPROACH OF THE REVENUE AUTHORITIES IN PLA CING RELIANCE ON VODAFONE INDIA SERVICES (P.) LTD. (SUPRA) 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 MERITS. AS FOR COORDINATE BENCH DECISION IN THE CASE OF HINDALCO I NDUSTRIES (SUPRA), ALL IT DOES IS TO FOLLOW THE EVEREST KANTO DECISION BY HON'BLE BOMBAY 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 GUARANTEE COMMISSION WAS ACTUALLY CHARGED BY THE AS SESSEE. THAT IS NOT THE CASE BEFORE US. THE COORDINATE BENCH DECISI ONS DEALING WITH THE SITUATIONS IN WHICH THE GUARANTEE COMMISSION WA S ACTUALLY CHARGED, AND AS SUCH THERE WAS INDEED A BEARING ON THE PROFITS OF THE ASSESSEE, CLEARLY DONOT APPLY ON THIS CASE. WE, THE REFORE, REJECT THE RELIANCE ON THESE DECISIONS AS DEVOID OF LEGALLY SU STAINABLE MERITS. 29. LET US NOW DEAL WITH THE RELIANCE PLACED BY THE REVENUE AUTHORITIES ON GE CAPITAL'S CASE BY THE TAX COURT O F CANADA. IN THE DRP'S ORDER, A REFERENCE IS MADE TO WELL KNOWN CANA DIAN DECISION IN THE CASE OF GE CAPITAL CANADA (SUPRA). THE SAID CASE, TO QUOTE THE WORDS OF THE DRP, 'ALSO SHOWS THAT THE GROUP CO MPANY ISSUING THE GUARANTEE (I.E. GUARANTOR) WOULD, IN PRINCIPLE, AT LEAST NEED TO ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 17 - COVER THE COST THAT IT INCURS WITH RESPECT TO PROVI DING THE GUARANTEE' AND THAT 'THESE COSTS MAY INCLUDE ADMINISTRATIVE EX PENSES AS WELL AS THE COSTS OF MAINTAINING AN APPROPRIATE LEVEL OF CA SH EQUIVALENTS, CAPITAL, SUBSIDIARY CREDIT LINES OR MORE EXPENSIVE EXTERNAL FUNDING CONDITIONS ON OTHER DEBT FINANCE'. THE DRP HAD ALSO NOTED THAT 'IN ADDITION, THE GUARANTOR WOULD WANT TO RECEIVE APPRO PRIATE COMPENSATION FOR THE RISK IT INCURS' AND CONCLUDED THAT 'FOLLOWING THE ABOVE DISCUSSIONS, AN ARM'S LENGTH GUARANTEE FE ES IS TYPICALLY REQUIRED TO BE DETERMINED BY ESTABLISHING A RANGE O F FEES THAT THE GUARANTOR WOULD, AT LEAST, WANT TO RECEIVE AND THE FEES THAT THE GUARANTEED GROUP COMPANY WOULD BE WILLING TO PAY DE PENDING ON THE PREVAILING CONDITIONS WITHIN FINANCIAL 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 J UDICIAL PRECEDENTS IN INDIA, DOES NOT EVEN DEAL WITH THE FUNDAMENTAL Q UESTION AS TO WHETHER ISSUANCE OF A CORPORATE GUARANTEE IS AN INT ERNATIONAL TRANSACTION AT ALL- WHICH IS WHAT WE ARE CONCERNED WITH AT PRESENT. THIS TCC DECISION DEALT WITH A SITUATION IN WHICH T HE ASSESSEE WAS DENIED, IN COMPUTATION OF ITS BUSINESS INCOME, TAX DEDUCTION FOR PAYMENT OF GUARANTEE FEES ON THE GROUND THAT THERE WAS NO EFFECTIVE BENEFIT TO THE ASSESSEE, IN OBTAINING THE SAID GUAR ANTEE. AGGRIEVED BY DENIAL OF DEDUCTION, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CANADIAN TAX COURT, AND THE PLEA OF THE ASSESSEE WA S EVENTUALLY UPHELD. IT IS ALSO INTERESTING TO NOTE THAT AS A SE QUEL TO THIS TAX COURT OF CANADA DECISION, THE TRANSFER PRICING LEGISLATIO N WAS AMENDED, TO BRING GREATER CLARITY ON THE ISSUE AND AS A MEASURE OF ABUNDANT CAUTION, AND SECTION 247 (7.1), GRANTING SPECIFIC E XEMPTION TO GUARANTEE FEES, WAS INTRODUCED. THIS AMENDMENT IS A S 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 'PAR ENT') 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, OF A PARTICULAR AMO UNT OWING TO THE LENDER BY A NON-RESIDENT PERSON, IF (A) THE NON-RES IDENT PERSON IS A CONTROLLED FOREIGN AFFILIATE OF THE PARENT FOR THE PURPOSES OF SECTION 17 THROUGHOUT THE PERIOD IN THE YEAR DURING WHICH T HE 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 OWED TO THE PARENT. (HTTP://WWW.FIN.GC.CA/DRLEG-APL/ITA-LRIR-DEC12-L-EN G.PDF) 31. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT T HAT, UNDER THE CANADIAN LAW, THE DEFINITION OF 'INTERNATIONAL TRAN SACTION', UNLIKE AN ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 18 - EXHAUSTIVE DEFINITION UNDER SECTION 92B OF THE INDI AN INCOME-TAX ACT, 1961, IS A VERY BRIEF BUT INCLUSIVE AND BROAD DEFIN ITION TO THE EFFECT THAT ''TRANSACTION' INCLUDES A SERIES OF TRANSACTIO NS, AN ARRANGEMENT OR AN EVENT' [SEE SECTION 247(1) OF THE CANADIAN IN COME-TAX ACT, 1985; HTTP://LAWSLOIS. JUSTICE.GC.CA/ENG/ACTS/I-3.3 /PAGE-419.HTML#H- 156] COUPLED WITH THE LEGAL POSITION THAT ARM'S LEN GTH ADJUSTMENT TO THE PRICES OF SUCH TRANSACTION COME INTO PLAY 'WHER E A TAXPAYER OR A PARTNERSHIP AND A NONRESIDENT 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, 1 961 AND THE CANADIAN INCOME-TAX ACT, 1985 ARE SO RADICALLY DIFF ERENT THAT JUST BECAUSE A PARTICULAR TRANSACTION IS TO BE EXAMINED ON ARM'S LENGTH PRINCIPLE IN CANADA CANNOT BE A REASON ENOUGH TO HO LD THAT IT MUST MEET THE SAME IN INDIA AS WELL. WHILE THE CANADIAN TRANSFER PRICING LEGISLATION, AS INDEED THE TRANSFER PRICING LEGISLA TION IN MANY OTHER JURISDICTIONS, DOES NOT PUT ANY FETTERS ON THE NATU RE OF TRANSACTIONS BETWEEN THE AES, SO AS TO BE COVERED BY THE ARM'S L ENGTH PRICE ADJUSTMENT, AND, THEREFORE, COVERS ALL TRANSACTIONS BETWEEN THE RELATED ENTERPRISES, INDIAN TRANSFER PRICING LEGISL ATION COVERS ONLY SUCH TRANSACTIONS AS ARE 'IN THE NATURE OF PURCHASE , SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SE RVICES, OR LENDING OR BORROWING MONEY, OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTER PRISES'. OUR TRANSFER PRICING PROVISIONS, PERHAPS BEING IN THE Q UEST OF COMPREHENSIVE COVERAGE, HAVE ENDED UP IN A LIMITED 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 TRANSFER PRICING LAW TO CLARIFY THE POSITION THAT ALL CORPOR ATE GUARANTEES ISSUED BY THE ASSESSEE, IN SUPPORT OF ITS SUBSIDIAR IES, ARE NOT NECESSARILY INTERNATIONAL TRANSACTIONS. REVENUE, TH EREFORE, DOES NOT DERIVE ANY ADVANTAGE FROM THE TAX COURT OF CANADA'S DECISION IN THE CASE OF GE CAPITAL CANADA. THERE ARE MANY MORE ASPE CTS WHICH MAKE THIS DECISION WHOLLY IRRELEVANT IN THE PRESENT CONTEXT BUT SUFFICE TO SAY THAT RELEVANT LEGAL PROVISIONS AND CONTEXT B EING RADICALLY DIFFERENT, THE RELIANCE OF THIS DECISION MUST BE RE JECTED 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 CONCEPTUAL JUSTIFICATION FOR EXCLUSION OF CORPORATE GUARANTEES , UNDER CERTAIN CONDITIONS, FROM THE SCOPE OF TRANSFER PRICING ADJU STMENTS. TAKING NOTE OF THESE PROPOSED AMENDMENTS, 'TRANSFER PRICIN G AND INTRA GROUP FINANCING BY BAKKER & LEVVY, IBFD PUBLICATI ON (ISBN- ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 19 - 978-90-8722-153-9)' OBSERVES THAT 'PROPOSED SUBSECT ION 247(7.1) OF THE ITA PROVIDES THAT THE TRANSFER PRICING RULES WI LL NOT APPLY TO GUARANTEES PROVIDED BY CANADIAN PARENT CORPORATIONS IN RESPECT OF CERTAIN FINANCIAL COMMITMENTS OF THEIR CANADIAN CON TROLLED FOREIGN AFFILIATES TO SUPPORT THE ACTIVE BUSINESS OPERATION S OF THOSE AFFILIATES'. AS TO WHAT COULD BE CONCEPTUAL SUPPORT FOR SUCH AN EXCLUSION, WE FIND INTERESTING REFERENCES IN A DISC USSION PAPER ISSUED BY THE AUSTRALIAN TAX OFFICER IN JUNE 2008 AND TITL ED AS 'INTRA-GROUP FINANCE GUARANTEES AND LOANS' (HTTP://WWW.TRANSFERPRICING.COM/PDF/AUSTRALIA THIN%20CAPITALISATION.PDF). THE FACT THAT THIS DISC USSION PAPER DID NOT TRAVEL 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 BASI S ON WHICH, CONTRARY TO POPULAR BUT APPARENTLY ERRONEOUS BELIEF , THE ISSUANCE OF CORPORATE GUARANTEES CAN INDEED BE KEPT OUTSIDE THE AMBIT OF SERVICES. THE RELEVANT EXTRACTS 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 IN A POSITION TO OBTAIN A GUARANTEE FROM AN INDEPENDENT PARTY TO SUPPORT TH E BORROWINGS IT NEEDS. WHERE SUCH A GUARANTEE IS GIVEN IT COMPENSAT ES FOR THE INADEQUACIES IN THE FINANCIAL POSITION OF THE BORRO WER; SPECIFICALLY, THE FACT THAT THE SUBSIDIARY DOES NOT HAVE ENOUGH S HAREHOLDERS' FUNDS. ..... 103. IT WOULD NOT BE EXPECTED THAT A COMPANY PAY FO R THE ACQUISITION OF THE EQUITY IT NEEDS FOR ITS FORMATION AND CONTIN UED VIABILITY. EQUITY IS GENERALLY SUPPLIED BY THE SHAREHOLDERS 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 SUBSIDIA RY TO BE SELFSUFFICIENT AND RAISE THE DEBT FUNDING IT NEEDS, THE COSTS OF THE GUARANTEE (AND THE ASSOCIATED RISK) SHOULD REMAIN W ITH 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, T HE FACT THAT THE SUBSIDIARY DOES NOT HAVE ENOUGH SHAREHOLDERS' FUNDS '. THERE CAN BE NUMBER OF REASONS, INCLUDING REGULATORY ISSUES AND MARKET CONDITIONS IN THE RELATED JURISDICTIONS, IN WHICH S UCH A CONTRIBUTION, BY WAY OF A GUARANTEE, WOULD JUSTIFY TO BE A MORE A PPROPRIATE AND PREFERRED MODE OF CONTRIBUTION VIS-A-VIS EQUITY CON TRIBUTION. IT IS SIGNIFICANT, IN THIS CONTEXT, THAT THE CASE OF THE ASSESSEE HAS ALL ALONG BEEN, AS NOTED IN THE ASSESSMENT ORDER ITSELF, THAT 'SAID GUARANTEES ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 20 - WERE IN THE FORM OF CORPORATE GUARANTEES/QUASI-CAPI TAL AND NOT IN THE NATURE OF ANY SERVICES'. IN OTHER WORDS, THESE GUARANTEES WERE SPECIFICALLY STATED TO BE IN THE NATURE OF SHAREHOL DER ACTIVITIES. THE ASSESSEE'S CLAIM OF THE GUARANTEES BEING IN THE NAT URE OF QUASI- CAPITAL, AND THUS BEING IN THE NATURE OF A SHAREHOL DER'S ACTIVITY, IS NOT REJECTED EITHER. THE CONCEPT OF ISSUANCE OF COR PORATE GUARANTEES AS A SHAREHOLDER ACTIVITY IS NOT ALIEN TO THE TRANS FER PRICING LITERATURE IN GENERAL. ON THE CONTRARY, IT IS RECOGNIZED IN IN TERNATIONAL TRANSFER PRICING LITERATURE AS ALSO IN THE OFFICIAL DOCUMENT ATION AND LEGISLATION OF SEVERAL TRANSFER PRICING JURISDICTIO NS. THE 'OECD TRANSFER PRICING GUIDELINES FOR MULTINATIONAL ENTER PRISES AND TAX ADMINISTRATIONS' ITSELF RECOGNIZES THE DISTINCTION BETWEEN A SHAREHOLDER ACTIVITY AND A PROVISION FOR SERVICES, WHEN, CONTRASTING THE SHAREHOLDER ACTIVITY WITH BROADER TERM 'STEWARD SHIP ACTIVITY' AND THUS HIGHLIGHTING NARROW SCOPE OF SHAREHOLDER A CTIVITY, IT STATES THAT 'STEWARDSHIP ACTIVITIES COVERED A RANGE OF ACT IVITIES 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 'THESE LATTER TYPE OF NON-SHAREHOLDER ACTIVITIES COULD INC LUDE DETAILED PLANNING SERVICES FOR PARTICULAR OPERATIONS, MANAGE MENT OR TECHNICAL ADVICE (TROUBLE SHOOTING) OR IN SOME CASE S ASSISTANCE IN DAY-TO-DAY MANAGEMENT'. THE SHAREHOLDER ACTIVITIES ARE THUS SEEN AS CONCEPTUALLY DISTINCT FROM THE PROVISION OF SERVICE S. THE ISSUANCE OF CORPORATE GUARANTEE, AS LONG AS IT IS IN THE NATURE OF SHAREHOLDER ACTIVITY, CAN NOT, THEREFORE, AMOUNT TO A 'PROVISIO N 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) = 2003-TII-14-HC-AP- INTL . THEIR LORDSHIPS ALSO REFERRED TO LORD RADCLIFFE'S OBSERVATIONS IN OSTIME V. AUSTRALIAN MUTUAL PROVIDENT SOCIETY [1 960] 39 ITR 210 (HL), WHICH HAS DESCRIBED THE LANGUAGE EMPLOYED IN THE MODELS DEVELOPED BY THE OECD AS THE 'INTERNATIONAL TAX LAN GUAGE'. THE WORK DONE BY OECD IN THE FIELD OF TRANSFER PRICING IS NO LESS SIGNIFICANT. NO MATTER WHICH PART OF THE WORLD WE L IVE IN, AND IRRESPECTIVE OF WHETHER OR NOT THAT TAX JURISDICTIO N IS AN OECD MEMBER JURISDICTION, THE IMMENSE CONTRIBUTION OF TH E OECD, IN THE FIELD OF THE TRANSFER PRICING AS WELL, IS ADMIRED A ND RESPECTED. HOWEVER, THE RELEVANCE OF THIS WORK, SO FAR AS INTE RPRETATION TO TRANSFER PRICING LEGISLATION IS CONCERNED, MUST REM AIN CONFINED TO THE AREAS WHICH HAVE REMAINED INTACT FROM LEGISLATIVE O R JUDICIAL GUIDANCE. THERE IS NO SCOPE FOR PARALLEL OR CONFLIC TING GUIDANCE BY SUCH FORUMS. LEGISLATION IS AN EXCLUSIVE DOMAIN OF THE SOVEREIGN, AND, THEREFORE, AS LONG AS AN AREA IS ADEQUATELY CO VERED BY THE WORK ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 21 - OF LEGISLATION, THINGS LIKE GUIDANCE OF THE OECD, O R FOR THAT PURPOSE ANY OTHER MULTILATERAL FORUM, ARE NOT DECISIVE. WHI LE WE ARE ALIVE TO THE SCHOOL OF THOUGHT THAT WHEN THE DOMESTIC TRANSF ER PRICING REGULATIONS DO NOT PROVIDE ANY GUIDELINES, IT MAY H AVE TO BE DECIDED HAVING REGARD TO INTERNATIONAL BEST PRACTICES, WE D O NOT QUITE AGREE WITH IT INASMUCH AS, IN OUR CONSIDERED VIEW, REVENU E CANNOT SEEK TO WIDEN THE NET OF TRANSFER PRICING LEGISLATION BY TA KING REFUGE OF THE BEST PRACTICES RECOGNIZED BY THE OECD WORK. 35. WHILE DEALING WITH 'SPECIAL CONSIDERATION FOR I NTRA-GROUP SERVICES', THE 'OECD TRANSFER PRICING GUIDELINES FO R MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATIONS' HAS NOTED THAT THERE ARE TWO FUNDAMENTAL ISSUES WITH RESPECT TO THE INTRA-GROUP SERVICES- FIRST, WHETHER INTRA-GROUP SERVICES HAVE INDEED BEEN PROVI DED, AND, SECOND- IF THE ANSWER TO THE FIRST QUESTION IS IN P OSITIVE, THAT CHARGE TO THESE SERVICES SHOULD BE AT AN ARM'S LENGTH PRIC E. DEALING WITH THE FIRST QUESTION, WHICH IS RELEVANT FOR THE PRESENT P URPOSES, THESE GUIDELINES (2010 VERSION) STATE AS FOLLOWS: '7.6 UNDER THE ARM'S LENGTH PRINCIPLE, THE QUESTION WHETHER AN INTRAGROUP SERVICE HAS BEEN RENDERED WHEN AN ACTIVI TY IS PERFORMED FOR ONE OR MORE GROUP MEMBERS BY ANOTHER GROUP MEMB ER SHOULD DEPEND ON WHETHER THE ACTIVITY PROVIDES A RESPECTIV E GROUP MEMBER WITH ECONOMIC OR COMMERCIAL VALUE TO ENHANCE ITS CO MMERCIAL POSITION. THIS CAN BE DETERMINED BY CONSIDERING WHE THER AN INDEPENDENT ENTERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY IF PERFORMED F OR IT BY AN INDEPENDENT ENTERPRISE OR WOULD HAVE PERFORMED THE ACTIVITY INHOUSE FOR ITSELF. IF THE ACTIVITY IS NOT ONE FOR WHICH TH E INDEPENDENT ENTERPRISE WOULD HAVE BEEN WILLING TO PAY OR PERFOR M 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 POSSIBLE IN THE ABSTRACT TO SET FORTH CATEGORICALLY THE ACTIVITIES THAT DO OR DO NO T CONSTITUTE THE RENDERING OF INTRA-GROUP SERVICES. HOWEVER, SOME GU IDANCE MAY BE GIVEN TO ELUCIDATE HOW THE ANALYSIS WOULD BE APPLIE D FOR SOME COMMON TYPES OF ACTIVITIES UNDERTAKEN 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 MORE SPECIFIC MEMBERS OF THE GROUP. IN SUCH A CASE, IT IS RELATIV ELY STRAIGHTFORWARD TO DETERMINE WHETHER A SERVICE HAS BEEN PROVIDED. O RDINARILY AN INDEPENDENT ENTERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE SATISFIED THE IDENTIFIED NEED EITHER BY PERFORMING THE ACTIVITY INHOUSE OR BY HAVING THE ACTIVITY PERFORMED BY A THIRD PART Y. THUS, IN SUCH A CASE, AN INTRA-GROUP SERVICE ORDINARILY WOULD BE FO UND TO EXIST. FOR ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 22 - EXAMPLE, AN INTRA-GROUP SERVICE WOULD NORMALLY BE F OUND WHERE AN ASSOCIATED ENTERPRISE REPAIRS EQUIPMENT USED IN MAN UFACTURING 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 NARRO W RANGE OF SUCH CASES, AN INTRA-GROUP ACTIVITY MAY BE PERFORMED REL ATING TO GROUP MEMBERS EVEN THOUGH THOSE GROUP MEMBERS DO NOT NEED THE ACTIVITY (AND WOULD NOT BE WILLING TO PAY FOR IT WERE THEY I NDEPENDENT ENTERPRISES). SUCH AN ACTIVITY WOULD BE ONE THAT A GROUP MEMBER (USUALLY THE PARENT COMPANY OR A REGIONAL HOLDING C OMPANY) PERFORMS SOLELY BECAUSE OF ITS OWNERSHIP INTEREST I N ONE OR MORE OTHER GROUP MEMBERS, I.E. IN ITS CAPACITY AS SHAREH OLDER. THIS TYPE OF ACTIVITY WOULD NOT JUSTIFY A CHARGE TO THE RECIPIEN T COMPANIES. IT MAY BE REFERRED TO AS A 'SHAREHOLDER ACTIVITY', DISTING UISHABLE FROM THE BROADER TERM 'STEWARDSHIP ACTIVITY' USED IN THE 197 9 REPORT. STEWARDSHIP ACTIVITIES COVERED A RANGE OF ACTIVITIE S BY A SHAREHOLDER THAT MAY INCLUDE THE PROVISION OF SERVICES TO OTHER GROUP MEMBERS, FOR EXAMPLE SERVICES THAT WOULD BE PROVIDED BY A CO ORDINATING CENTRE. THESE LATTER TYPES OF NON-SHAREHOLDER ACTIV ITIES COULD INCLUDE DETAILED PLANNING SERVICES FOR PARTICULAR OPERATION S, EMERGENCY 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 S TRUCTURE OF THE PARENT COMPANY ITSELF, SUCH AS MEETINGS OF SHAREHOLDERS OF THE PARENT, ISSUING OF SHARES IN THE PARENT COMPANY AND COSTS O F THE SUPERVISORY BOARD; (B) COSTS RELATING TO REPORTING REQUIREMENTS OF THE PARENT COMPANY INCLUDING THE CONSOLIDATION OF REPORTS; (C) COSTS OF RAISING FUNDS FOR THE ACQUISITION OF I TS PARTICIPATIONS. IN CONTRAST, IF FOR EXAMPLE A PARENT COMPANY RAISES FUNDS ON BEHALF OF ANOTHER GROUP MEMBER WHICH USES THEM TO ACQUIRE A NEW COMPANY, THE PARENT COMPANY WOULD GENERALLY BE REGA RDED AS PROVIDING A SERVICE TO THE GROUP MEMBER. THE 1984 R EPORT ALSO MENTIONED 'COSTS OF MANAGERIAL AND CONTROL (MONITOR ING) ACTIVITIES RELATED TO THE MANAGEMENT AND PROTECTION OF THE INV ESTMENT AS SUCH IN PARTICIPATIONS'. WHETHER THESE ACTIVITIES FALL W ITHIN THE DEFINITION OF SHAREHOLDER ACTIVITIES AS DEFINED IN THESE GUIDE LINES WOULD BE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 23 - DETERMINED ACCORDING TO WHETHER UNDER COMPARABLE FA CTS AND CIRCUMSTANCES THE ACTIVITY IS ONE THAT AN INDEPENDE NT ENTERPRISE WOULD HAVE BEEN WILLING TO PAY FOR OR TO PERFORM FO R 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 ON E 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 CL EAR THAT A SHAREHOLDER ACTIVITY, IN ISSUANCE OF CORPORATE GUAR ANTEES, IS TAKEN OUT OF AMBIT OF THE GROUP SERVICES. CLEARLY, THEREF ORE, AS LONG AS A GUARANTEE IS ON ACCOUNT OF, WHAT CAN BE TERMED AS ' SHAREHOLDER'S ACTIVITIES', EVEN ON THE FIRST PRINCIPLES, IT IS OU TSIDE THE AMBIT OF TRANSFER PRICING ADJUSTMENT IN RESPECT OF ARM'S LEN GTH PRICE. IT IS ESSENTIAL TO APPRECIATE, AT THIS STAGE, THE DISTINC TION IN A SERVICE AND A BENEFIT. ONE MAY BE BENEFITED EVEN WHEN NO SERVIC ES ARE RENDERED, AND, THEREFORE, IN MANY A SITUATION IT'S A 'BENEFIT TEST' WHICH IS CRUCIAL FOR TRANSFER PRICING LEGISLATION, SUCH AS IN US REG ULATIONS 1.482- 9(1)(3)(I) WHICH DEFINES 'BENEFIT', FORM A US TRANS FER PRICING PERSPECTIVE, AS 'AN ACTIVITY IS CONSIDERED TO BE PR OVIDED A BENEFIT TO THE RECIPIENT IF THE ACTIVITY DIRECTLY RESULTS IN A REASONABLY IDENTIFIABLE INCREMENT OF ECONOMIC OR COMMERCIAL VA LUE 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 INTA NGIBLE PROPERTY OR OTHER RESOURCES CAPABILITIES OR KNOWLEDGE (INCLUDIN G KNOWLEDGE OF AND ABILITY TO TAKE ADVANTAGE OF A PARTICULARLY ADV ANTAGEOUS SITUATION OR CIRCUMSTANCES); AND MAKING AVAILABLE T O THE RECIPIENT ANY PROPERTY OR OTHER RESOURCES OF THE RENDERED' [R EGULATION 1.482- 9(1)(2)]. THE ISSUANCE OF GUARANTEES IS NOT WITHIN THE AMBIT OF TRANSFER PRICING IN UNITED STATES BECAUSE IT IS A S ERVICE BUT BECAUSE IT IS COVERED BY THE SPECIFIC DEFINITION DISCUSSED ABO VE. AS A MATTER OF FACT, DAVID S MILLER, IN A PAPER TITLED 'FEDERAL IN COME TAX CONSEQUENCES OF GUARANTEES; A COMPREHENSIVE FRAMEWO RK FOR ANALYSIS' PUBLISHED IN THE 'THE AMERICAN LAWYER VOL . 48, NO. 1 (FALL 1994), PP. 103- 165 (HTTP://WWW.JSTOR.ORG/STABLE/20 771688), HAS STATED THAT A GUARANTEE IS NOT A SERVICE. THE FOLLO WING 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 RE PRESENT PAYMENTS FOR SERVICES ANY MORE THAN PAYMENTS WITH R ESPECT TO OTHER FINANCIAL INSTRUMENTS CONSTITUTE PAYMENT FOR SERVIC ES39. A GUARANTOR ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 24 - DOES NOT ARRANGE FINANCING FOR THE DEBTOR, BUT MERE LY EXECUTES A FINANCIAL INSTRUMENT IN ITS FAVOUR. 38. SEE. E.G., CENTEL COMMUNICATIONS CO. V. COMMISS IONER, 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). TH E SERVICE'S CURRENT POSITION ON THE CHARACTERIZATION OF GUARANT EE FEES AS PAYMENT FOR SERVICES UNDER SECTION 482 IS INCONSIST ENT WITH ITS TREATMENT OF GUARANTEE FEES UNDER OTHER PROVISIONS. SEE P.L.R. 9410008 (DEC. 13, 1993). 39. BUT OF FEDERAL NAT'L MORTGAGE ASS'N V. COMMISSI ONER, 100 T.C. 541, 579 (1993) (FANNIE MAE PROVIDED SERVICES BY BU YING MORTGAGES). 37. WE ARE IN AGREEMENT WITH THESE VIEWS. THERE CAN THUS BE ACTIVITIES WHICH BENEFIT THE GROUP ENTITIES BUT THE SE ACTIVITIES NEED NOT NECESSARILY BE 'PROVISION FOR SERVICES'. THE FA CT THAT 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 POSI TION, 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 LEG AL POSITION, IT IS NOT OPEN TO US TO INFER THE SAME. HON'BLE SUPREME COURT , IN THE CASE OF SMT. TARULATA SHYAM V. CIT [1977] 108 ITR 345 (SC) = 2002-TIOL- 991-SC-IT-LB , TOOK NOTE OF THE SITUATION BEFORE THEIR LORDSHIPS IN THESE WORDS: 'WE HAVE GIVEN ANXIOUS THOUGHTS TO THE PERSUASIVE ARGUMENTS OF MR SHARMA. HIS ARGUMENTS, IF ACCEPTED, WILL CERTAINLY SOFTEN THE RIGOUR OF THIS EXTREMELY DRASTIC PROVISI ON AND BRING IT MORE IN CONFORMITY WITH LOGIC AND EQUITY'. HOWEVER, THEIR LORDSHIPS DECLINED TO DO SO ON THE GROUND THAT 'THE RE IS NO SCOPE FOR IMPORTING INTO THE STATUTE THE WORDS WHICH ARE NOT THERE. SUCH IMPORTATION WOULD BE NOT TO CONSTRUE BUT TO AMEND T HE STATUTE'. THEIR LORDSHIPS NOTED THAT 'EVEN IF THERE BE CASUS OMISSUS, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDICIAL INTERPRETATION'. THE BENEFIT TEST, WHICH IS SET OUT IN THE OECD GUIDANCE AND WHICH FINDS ITS PLACE IN THE INTERNATI ONAL BEST PRACTICES, DOES NOT FIND ITS PLACE IN THE MAIN DEFI NITION OF INTERNATIONAL TRANSACTION, EVEN THOUGH THERE IS A R EFERENCE TO THE EXPRESSION 'BENEFIT' IN THE CONTEXT OF COST OR EXPE NSE SHARING ARRANGEMENTS BUT THAT IS A DIFFERENT ASPECT OF THE MATTER ALTOGETHER. ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 25 - IN THE ABSENCE OF BENEFIT TEST BEING MENTIONED IN T HE DEFINITION FOR THE PRESENT PURPOSES, WE CANNOT INFER 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 BENE FIT TEST IS INTERLINKED WITH THE AN ARM'S LENGTH TEST IN THE SE NSE THAT IT SEEKS AN ANSWER TO THE QUESTION WHETHER UNDER A SIMILAR SITU ATION AN INDEPENDENT ENTERPRISE WOULD HAVE BEEN WILLING TO P AY FOR THE ACTIVITY CONCERNED, OR WOULD HAVE PERFORMED THE ACT IVITY IN-HOUSE FOR ITSELF. SO FAR AS THE BENEFIT TEST IS CONCERNED, AS WE HAVE NOTED EARLIER, IT IS ALIEN TO THE DEFINITION OF INTERNATI ONAL TRANSACTION' UNDER THE INDIAN TRANSFER PRICING LEGISLATION. SO FAR AS ARM'S LENGTH TEST IS CONCERNED, IT PRESUPPOSES THAT SUCH A TRANSACTION I S POSSIBLE IN ARM'S LENGTH SITUATION. HOWEVER, IN A SITUATION IN WHICH THE SUBSIDIARY DOES NOT HAVE ADEQUATE FINANCIAL STANDIN G OF ITS OWN AND IS INADEQUATELY CAPITALIZED, NONE WILL GUARANTEE FI NANCIAL 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 BEHAL F OF ITS CLIENTS WITH THE CONSIDERATION FOR WHICH THE CORPORATES ISS UE GUARANTEES 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 MEETIN G THE 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 THROU GH AND BY THE SUBSIDIARIES. IT IS INHERENTLY IMPOSSIBLE TO DECIDE ARM'S LENGTH PRICE OF A TRANSACTION WHICH CANNOT TAKE PLACE IN ARM'S L ENGTH SITUATION. THE MOTIVATION OR TRIGGER FOR ISSUANCE OF SUCH GUAR ANTEES IS NOT THE KIND FOR CONSIDERATION FOR WHICH A BANKER, FOR EXAM PLE, ISSUE THE GUARANTEES, BUT IT IS 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 ALTOGETHER. 40. AT THIS STAGE, IT WOULD APPROPRIATE TO ANALYZE THE BUSINESS MODEL OF BANK GUARANTEES, WITH WHICH CORPORATE GUARANTEES ARE 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 GUAR ANTEE, WILL PAY OFF THE DEBTS AND LIABILITIES INCURRED BY AN INDIVIDUAL OR A BUSINESS ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 26 - ENTITY IN CASE THEY ARE UNABLE TO DO SO. BY PROVIDI NG A GUARANTEE, A BANK OFFERS TO HONOUR RELATED PAYMENT TO THE CREDIT ORS UPON RECEIVING A REQUEST. THIS REQUIRES THAT BANK HAS TO BE VERY SURE OF THE BUSINESS OR INDIVIDUAL TO WHOM THE BANK GUARANTEE I S BEING ISSUED. SO, BANKS RUN RISK ASSESSMENTS TO ENSURE THAT THE G UARANTEED SUM CAN BE RETRIEVED BACK FROM THE BUSINESS. THIS MAY R EQUIRE THE BUSINESS TO FURNISH A SECURITY IN THE SHAPE OF CASH OR CAPITAL ASSETS. ANY ENTITY THAT CAN PASS THE RISK ASSESSMENT AND PR OVIDE SECURITY MAY OBTAIN A BANK GUARANTEE. THE CONSIDERATION FOR THE ISSUANCE OF BANK GUARANTEE, SO FAR AS A BANKER IS CONCERNED, IS THIS. WHEN THE CLIENT IS NOT ABLE TO HONOUR THE FINANCIAL COMMITME NTS AND WHEN CLIENT IS NOT ABLE TO MEET HIS FINANCIAL COMMITMENT S AND THE BANK IS CALLED UPON TO MAKE THE PAYMENTS, THE BANK WILL SEE K A COMPENSATION FOR THE ACTION OF ISSUING THE BANK GUARANTEE, AND F OR THE RISK IT RUNS INHERENT IN THE PROCESS OF MAKING THE PAYMENT FIRST AND REALIZING IT FROM THE UNDERLYING SECURITY AND THE CLIENT. EVEN W HEN SUCH GUARANTEES ARE BACKED BY ONE HUNDRED PER CENT DEPOS ITS, THE BANK CHARGES A GUARANTEE FEES. IN A SITUATION IN WHICH T HERE IS NO UNDERLYING ASSETS WHICH CAN BE REALIZED BY THE BANK OR THERE ARE NO DEPOSITS WITH THE BANK WHICH CAN BE APPROPRIATED FO R PAYMENT OF GUARANTEE OBLIGATIONS, THE BANKS WILL RARELY, IF AT ALL, ISSUE THE GUARANTEES. OF COURSE, WHEN A CLIENT IS SO WELL PLA CED 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 CORP ORATE GUARANTEE. THE GUARANTEES ARE ISSUED WITHOUT ANY SECURITY OR U NDERLYING ASSETS. WHEN THESE GUARANTEES ARE INVOKED, THERE IS NO OCCA SION FOR THE GUARANTOR TO SEEK RECOURSE TO ANY ASSETS OF THE GUA RANTEED ENTITY FOR RECOVERING PAYMENT OF DEFAULTED GUARANTEES. THE GUA RANTEES ARE NOT BASED ON THE CREDIT ASSESSMENT OF THE ENTITY, IN RE SPECT OF WHICH THE GUARANTEES ARE ISSUED, BUT ARE BASED ON THE BUSINES S NEEDS OF THE ENTITY IN QUESTION. EVEN IN A SITUATION IN WHICH TH E GROUP ENTITY IS SURE THAT THE BENEFICIARY OF GUARANTEE HAS NO FINAN CIAL MEANS TO REIMBURSE IT FOR THE DEFAULTED GUARANTEE AMOUNTS, W HEN INVOKED, THE GROUP ENTITY WILL ISSUE THE GUARANTEE NEVERTHELESS BECAUSE THESE ARE COMPULSIONS OF HIS GROUP SYNERGY RATHER THAN THE AS SURANCE THAT HIS FUTURE OBLIGATIONS WILL BE MET. WE SEE NO MEETING G ROUND IN THESE TWO TYPES OF GUARANTEES, SO FAR THEIR ECONOMIC TRIG GERS AND BUSINESS CONSIDERATIONS ARE CONCERNED, AND JUST BECAUSE THES E INSTRUMENTS SHARE A COMMON SURNAME, I.E. 'GUARANTEE', THESE INS TRUMENTS CANNOT BE SAID TO BE BELONG TO THE SAME ECONOMIC GENUS. OF COURSE, THERE CAN BE SITUATIONS IN WHICH THERE MAY BE ECONOMIC SI MILARITIES, IN THIS RESPECT, MAY BE PRESENT, BUT THESE ARE MORE OF AN E XCEPTION THAN THE RULE. IN GENERAL, THEREFORE, BANK GUARANTEES ARE NO T COMPARABLE WITH CORPORATE GUARANTEES. 41. AS EVIDENT FROM THE OECD OBSERVATION TO THE EFF ECT 'IN CONTRAST, IF FOR EXAMPLE A PARENT COMPANY RAISES FUNDS ON BEH ALF OF ANOTHER ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 27 - GROUP MEMBER WHICH USES THEM TO ACQUIRE A NEW COMPA NY, THE PARENT COMPANY WOULD GENERALLY BE REGARDED AS PROVI DING A SERVICE TO THE GROUP MEMBER', IT IS ALSO TO BE CLEAR THAT W HEN THE CORPORATE GUARANTEES ARE ISSUED FOR THE PURPOSE OF SUBSIDIARI ES RAISING FUNDS FOR ACQUISITIONS BY SUCH SUBSIDIARIES, THESE GUARAN TEES WILL BE DEEMED TO BE SERVICES TO THE SUBSIDIARIES, AND, AS A COROLLARY THERETO, WHEN CORPORATE GUARANTEES ARE ISSUED FOR THE SUBSID IARIES 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, WI TH THE HELP OF THE GUARANTEE GIVEN BY THE ASSESSEE, ARE NOT FOR ITS OW N BUSINESS PURPOSES. AS A PLAIN LOOK AT THE DETAILS OF CORPORA TE GUARANTEES WOULD SHOW, THESE GUARANTEES WERE ISSUED TO VARIOUS BANKS IN RESPECT OF THE CREDIT FACILITIES AVAILED BY THE SUB SIDIARIES FROM THESE BANKS. THE GUARANTEES WERE PRIMA FACIE IN THE NATUR E OF SHAREHOLDER ACTIVITY AS IT WAS TO PROVIDE, OR COMPENSATE FOR LA CK OF, CORE STRENGTH FOR RAISING THE FINANCES FROM BANKS. NO MATERIAL, I NDICATING TO THE CONTRARY, IS BROUGHT ON RECORD IN THIS CASE. GOING BY THE OECD GUIDANCE ALSO, IT IS NOT REALLY POSSIBLE TO HOLD TH AT THE CORPORATE GUARANTEES ISSUED BY THE ASSESSEE WERE IN THE NATUR E OF 'PROVISION FOR SERVICE' AND NOT A SHAREHOLDER ACTIVITY WHICH ARE M UTUALLY EXCLUSIVE IN NATURE. IN THE LIGHT OF THESE DISCUSSIONS, WE AR E OF THE CONSIDERED VIEW, AND ARE FULLY SUPPORTED BY THE OECD GUIDANCE IN THIS, THAT THE ISSUANCE OF CORPORATE GUARANTEES, IN THE NATURE OF QUASI-CAPITAL OR SHAREHOLDER ACTIVITY-AS IS THE UNCONTROVERTED POSIT ION ON THE FACTS OF THIS CASE, DOES NOT AMOUNT TO A SERVICE IN WHICH RE SPECT OF WHICH 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 2 00/24 TAXMANN.COM 199 (DELHI) = 2012-TII-01-HC-DEL-TP , A RE- CHARACTERIZATION OF A TRANSACTION IS INDEED PERMISS IBLE, INTER ALIA, IN A SITUATION '(I) WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM ITS FORM AND (II) WHERE THE FORM AND SUBSTANCE OF THE TRANSACTION ARE THE SAME BUT ARRANGEMENTS MADE IN R ELATION TO THE TRANSACTION, VIEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVI NG IN A COMMERCIALLY RATIONAL MANNER'. THE CASE OF A CORPOR ATE GUARANTEE CLEARLY FALLS IN THE SECOND CATEGORY AS NO INDEPEND ENT ENTERPRISE WOULD ISSUE A GUARANTEE WITHOUT AN UNDERLYING SECUR ITY AS HAS BEEN DONE BY THE ASSESSEE. WE MAY, IN THIS REGARD, REFER TO THE OBSERVATIONS MADE BY HON'BLE HIGH COURT, SPEAKING T HROUGH HON'BLE JUSTICE EASWAR (AS HE THEN WAS), AS FOLLOWS : '16. THE ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ('OECD', FOR SHORT) HAS LAID DOWN 'TRANSFER PRICING GUIDELINES' FOR ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 28 - MULTI-NATIONAL ENTERPRISES AND TAX ADMINISTRATIONS. THESE GUIDELINES GIVE AN INTRODUCTION TO THE ARM'S LENGTH PRICE PRINCIPLE AND EXPLAINS ARTICLE 9 OF THE OECD MODEL TAX CONVEN TION. THIS ARTICLE PROVIDES THAT WHEN CONDITIONS ARE MADE OR I MPOSED BETWEEN TWO ASSOCIATED ENTERPRISES IN THEIR COMMERCIAL OR F INANCIAL RELATIONS WHICH DIFFER FROM THOSE WHICH WOULD BE MADE BETWEEN INDEPENDENT ENTERPRISES THEN ANY PROFIT WHICH WOULD, BUT FOR TH OSE CONDITIONS, HAVE ACCRUED TO ONE OF THE ENTERPRISES, BUT, BY REA SON OF THOSE CONDITIONS, IF NOT SO ACCRUED, MAY BE INCLUDED IN T HE PROFITS OF THAT ENTERPRISE AND TAXED ACCORDINGLY. BY SEEKING TO ADJ UST THE PROFITS IN THE ABOVE MANNER, THE ARM'S LENGTH PRINCIPLE OF PRI CING FOLLOWS THE APPROACH OF TREATING THE MEMBERS OF A MULTI-NATIONA L ENTERPRISE GROUP AS OPERATING AS SEPARATE ENTITIES RATHER THAN AS INSEPARABLE PARTS OF A SINGLE UNIFIED BUSINESS. AFTER REFERRING TO ARTICLE 9 OF THE MODEL CONVENTION AND STATING THE ARM'S LENGTH PRINC IPLE, THE GUIDELINES PROVIDE FOR 'RECOGNITION OF THE ACTUAL T RANSACTIONS UNDERTAKEN' IN PARAGRAPHS 1.36 TO 1.41. PARAGRAPHS 1.36 TO 1.38 ARE IMPORTANT AND ARE RELEVANT TO OUR PURPOSE. THES E PARAGRAPHS ARE REPRODUCED BELOW:- '1.36 A TAX ADMINISTRATION'S EXAMINATION OF A CONTR OLLED TRANSACTION ORDINARILY SHOULD BE BASED ON THE TRANSACTION ACTUA LLY UNDERTAKEN BY THE ASSOCIATED ENTERPRISES AS IT HAS BEEN STRUCTURE D BY THEM, USING THE METHODS APPLIED BY THE TAXPAYER INSOFAR AS THES E ARE CONSISTENT WITH THE METHODS DESCRIBED IN CHAPTERS II AND III. IN OTHER THAN EXCEPTIONAL CASES, THE TAX ADMINISTRATION SHOULD NO T DISREGARD THE ACTUAL TRANSACTIONS OR SUBSTITUTE OTHER TRANSACTION S FOR THEM. RESTRUCTURING OF LEGITIMATE BUSINESS TRANSACTIONS W OULD BE A WHOLLY ARBITRARY EXERCISE THE INEQUITY OF WHICH COULD BE C OMPOUNDED BY DOUBLE TAXATION CREATED WHERE THE OTHER TAX ADMINIS TRATION DOES NOT SHARE THE SAME VIEWS AS TO HOW THE TRANSACTION SHOU LD BE STRUCTURED. 1.37 HOWEVER, THERE ARE TWO PARTICULAR CIRCUMSTANCE S IN WHICH IT MAY, EXCEPTIONALLY, BE BOTH APPROPRIATE AND LEGITIM ATE FOR A TAX ADMINISTRATION TO CONSIDER DISREGARDING THE STRUCTU RE ADOPTED BY A TAXPAYER IN ENTERING INTO A CONTROLLED TRANSACTION. THE FIRST CIRCUMSTANCE ARISES WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM ITS FORM. IN SUCH A CASE THE TAX ADMIN ISTRATION MAY DISREGARD THE PARTIES' CHARACTERIZATION OF THE TRAN SACTION AND RE- CHARACTERISE IT IN ACCORDANCE WITH ITS SUBSTANCE. A N EXAMPLE OF THIS CIRCUMSTANCE WOULD BE AN INVESTMENT IN AN ASSOCIATE D ENTERPRISE IN THE FORM OF INTEREST-BEARING DEBT WHEN, AT ARM'S LE NGTH, HAVING REGARD TO THE ECONOMIC CIRCUMSTANCES OF THE BORROWI NG COMPANY, THE INVESTMENT WOULD NOT BE EXPECTED TO BE STRUCTUR ED IN THIS WAY. IN THIS CASE IT MIGHT BE APPROPRIATE FOR A TAX ADMINIS TRATION TO CHARACTERIZE THE INVESTMENT IN ACCORDANCE WITH ITS ECONOMIC SUBSTANCE WITH THE RESULT THAT THE LOAN MAY BE TREA TED AS A SUBSCRIPTION OF CAPITAL. THE SECOND CIRCUMSTANCE AR ISES WHERE, WHILE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 29 - THE FORM AND SUBSTANCE OF THE TRANSACTION ARE THE S AME, THE ARRANGEMENTS MADE IN RELATION TO THE TRANSACTION, V IEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN A DOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER AND THE ACTUAL STRUCTURE PRACTICALLY IMPEDES THE TA X ADMINISTRATION FROM DETERMINING AN APPROPRIATE TRANSFER PRICE. AN EXAMPLE OF THIS CIRCUMSTANCE WOULD BE A SALE UNDER A LONG-TERM CONT RACT, FOR A LUMP SUM PAYMENT, OF UNLIMITED ENTITLEMENT TO THE INTELL ECTUAL PROPERTY RIGHTS ARISING AS A RESULT OF FUTURE RESEARCH FOR T HE TERM OF THE CONTRACT (AS PREVIOUSLY INDICATED IN PARAGRAPH 1.10 ). WHILE IN THIS CASE IT MAY BE PROPER TO RESPECT THE TRANSACTION AS A TRANSFER OF COMMERCIAL PROPERTY, IT WOULD NEVERTHELESS BE APPRO PRIATE FOR A TAX ADMINISTRATION TO CONFORM THE TERMS OF THAT TRANSFE R IN THEIR ENTIRETY (AND NOT SIMPLY BY REFERENCE TO PRICING) TO THOSE T HAT MIGHT REASONABLY HAVE BEEN EXPECTED HAD THE TRANSFER OF P ROPERTY BEEN THE SUBJECT OF A TRANSACTION INVOLVING INDEPENDENT ENTE RPRISES. THUS, IN THE CASE DESCRIBED ABOVE IT MIGHT BE APPROPRIATE FO R THE TAX ADMINISTRATION, FOR EXAMPLE, TO ADJUST THE CONDITIO NS OF THE AGREEMENT IN A COMMERCIALLY RATIONAL MANNER AS A CO NTINUING RESEARCH AGREEMENT. 1.38 IN BOTH SETS OF CIRCUMSTANCES DESCRIBED ABOVE, THE CHARACTER OF THE TRANSACTION MAY DERIVE FROM THE RELATIONSHIP BE TWEEN THE PARTIES RATHER THAN BE DETERMINED BY NORMAL COMMERCIAL COND ITIONS AS MAY HAVE BEEN STRUCTURED BY THE TAXPAYER TO AVOID OR MI NIMIZE TAX. IN SUCH CASES, THE TOTALITY OF ITS TERMS WOULD BE THE RESULT OF A CONDITION THAT WOULD NOT HAVE BEEN MADE IF THE PARTIES HAD BE EN ENGAGED IN ARM'S LENGTH DEALINGS. ARTICLE 9 WOULD THUS ALLOW A N ADJUSTMENT OF CONDITIONS TO REFLECT THOSE WHICH THE PARTIES WOULD HAVE ATTAINED HAD THE TRANSACTION 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 TRANSACTION OR SUBS TITUTE OTHER TRANSACTIONS FOR THEM AND THE EXAMINATION OF A CONT ROLLED TRANSACTION SHOULD ORDINARILY BE BASED ON THE TRANS ACTION AS IT HAS BEEN ACTUALLY UNDERTAKEN AND STRUCTURED BY THE ASSO CIATED ENTERPRISES. IT IS OF FURTHER SIGNIFICANCE THAT THE GUIDELINES DISCOURAGE RE-STRUCTURING OF LEGITIMATE BUSINESS TR ANSACTIONS. THE REASON FOR CHARACTERISATION OF SUCH RE-STRUCTURING AS AN ARBITRARY EXERCISE, AS GIVEN IN THE GUIDELINES, IS THAT IT HA S THE POTENTIAL TO CREATE DOUBLE TAXATION IF THE OTHER TAX ADMINISTRAT ION DOES NOT SHARE THE SAME VIEW AS TO HOW THE TRANSACTION SHOULD BE S TRUCTURED. 18. TWO EXCEPTIONS HAVE BEEN ALLOWED TO THE AFORESA ID PRINCIPLE AND THEY ARE (I) WHERE THE ECONOMIC SUBSTANCE OF A TRAN SACTION DIFFERS FROM ITS FORM AND (II) WHERE THE FORM AND SUBSTANCE OF THE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 30 - TRANSACTION ARE THE SAME BUT ARRANGEMENTS MADE IN R ELATION TO THE TRANSACTION, VIEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVI NG 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 O F A CORPORATE GUARANTEE AMOUNTS TO A 'PROVISION FOR SERVICE', SUC H A SERVICE NEEDS TO BE RECHARACTERIZED TO BRING IT IN TUNE WITH COMM ERCIAL REALITY 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 SUBSIDIARIE S WHEN THE BANKS ARE NOT WILLING TO EXTEND THOSE SUBSIDIARIES LOANS ON THE SAME TERMS AS WITHOUT A GUARANTEE. SUCH A GUARANTEE TRANSACTIO N CAN ONLY BE, AND IS, MOTIVATED BY THE SHAREHOLDER, OR OWNERSHIP CONSIDERATIONS. NO DOUBT, UNDER THE OECD GUIDANCE ON THE ISSUE, AN EXPLICIT SUPPORT, SUCH AS CORPORATE GUARANTEE, IS TO BE BENC HMARKED AND, FOR THAT PURPOSE, IT IS IN THE SERVICE CATEGORY BUT THA T OCCASION COMES ONLY WHEN IT IS COVERED BY THE SCOPE OF 'INTERNATIO NAL TRANSACTION' UNDER THE TRANSFER PRICING LEGISLATION OF RESPECTIV E JURISDICTION. THE EXPRESSION 'PROVISION FOR SERVICES' IN ITS NORMAL O R LEGAL CONNOTATIONS, AS WE HAVE SEEN EARLIER, DOES NOT COV ER ISSUANCE OF CORPORATE GUARANTEES, EVEN THOUGH ONCE A CORPORATE GUARANTEE IS COVERED BY THE DEFINITION OF INTERNATIONAL TRANSACT ION', IT IS BENCHMARKED IN THE SERVICE SEGMENT. IN VIEW OF THE ABOVE DISCUSSIONS, OECD GUIDELINES, AS A MATTER OF FACT, STRENGTHEN THE CLAIM OF THE ASSESSEE THAT THE CORPORATE GUARANTEES 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 FRO M THE 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 QUASICAPITAL OR NOT, ALP DETERMINATION MUST DEPEND ON WHAT AN INDEPENDENT ENTERPRISE WOULD HAVE CHARGED FOR SUCH A TRANSACTION. IN THIS LIGHT OF THESE DISCUSSIONS, WE HOLD THAT TH E ISSUANCE OF CORPORATE GUARANTEES IN QUESTION WAS NOT IN THE NAT URE OF 'PROVISION FOR SERVICES' AND THESE CORPORATE GUARANTEES WERE R EQUIRED TO BE TREATED AS SHAREHOLDER PARTICIPATION IN THE SUBSIDI ARIES. 44. AS FOR THE WORDS 'PROVISION FOR SERVICES' APPEA RING IN SECTION 92B, AND CONNOTATIONS THEREOF, OUR HUMBLE UNDERSTAN DING 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 O N THE SERVICES LIKE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 31 - MARKET RESEARCH, MARKET DEVELOPMENT, MARKETING MANA GEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, AGENCY, AND SCIENTIFIC RESEARCH, LEGAL OR ACCOUNTIN G SERVICE OR COORDINATION SERVICES. AS A MATTER OF FACT, EVEN IN THE EXPLANATION TO SECTION 92B-WHICH WE WILL DEAL WITH A LITTLE LATER, GUARANTEES HAVE BEEN GROUPED IN ITEM 'C' DEALING WITH CAPITAL FINAN CING, RATHER THAN IN ITEM 'D' WHICH SPECIFICALLY DEALS WITH 'PROVISIO N FOR SERVICES'. WHEN THE LEGISLATURE ITSELF DOES NOT GROUP 'GUARANT EES' IN THE 'PROVISION FOR SERVICES' AND INCLUDES IT IN THE 'CA PITAL FINANCING', IT IS REASONABLE TO PROCEED ON THE BASIS THAT ISSUANCE OF GUARANTEES IS NOT TO BE TREATED AS WITHIN THE SCOPE OF NORMAL CONNOTA TIONS OF EXPRESSION 'PROVISION FOR SERVICES'. OF COURSE, THE GLOBAL BEST PRACTICES SEEM TO BE THAT GUARANTEES ARE SOMETIMES INCLUDED IN 'SERVICES' BUT THAT IS BECAUSE OF THE EXTENDED DEFI NITION OF 'INTERNATIONAL TRANSACTION' IN MOST OF THE TAX JURI SDICTIONS. SUCH A WIDE DEFINITION OF SERVICES, WHICH CAN BE SUBJECT T O ARM'S LENGTH PRICE ADJUSTMENT, APART, 'TRANSFER PRICING AND INTR A-GROUP FINANCING BY BAKKER & LEVVY' (IBID) NOTES THAT 'T HE IRS HAS ISSUED A NON-BINDING FIELD SERVICE ADVICE (FSA 1995 WL 1918236, 1 MAY 1995) STATING THAT, IN CERTAIN CIRCUMSTANCES (EMPHASIS SUPPLIED), A GUARANTEE 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 G IVE SUCH HEDGED ADVICE. THIS WILL BE STRETCHING THE THINGS TOO FAR TO SUGGEST THAT JUST BECAUSE WHEN GUARANTEES ARE INCLUDED IN THE INTERNA TIONAL TRANSACTIONS, THESE GUARANTEES ARE INCLUDED IN SERV ICE SEGMENT IN CONTRADISTINCTION WITH OTHER HEADS UNDER WHICH INTE RNATIONAL 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 CONSIDE RED VIEW, PURELY FALLACIOUS LOGIC. IN OUR CONSIDERED VIEW, UNDER SEC TION 92B, CORPORATE GUARANTEES CAN BE COVERED ONLY UNDER THE RESIDUARY HEAD I.E. 'ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISE'. IT IS FOR THI S REASON THAT SECTION 92B, IN A WAY, EXPANDS THE SCOPE OF INTERNATIONAL T RANSACTION IN THE SENSE THAT EVEN WHEN GUARANTEES ARE ISSUED AS A SHA REHOLDER ACTIVITY BUT COSTS ARE INCURRED FOR THE SAME OR, AS A MEASUR E OF ABUNDANT CAUTION, RECOVERIES ARE MADE FOR THIS NON-CHARGEABL E ACTIVITY, THESE GUARANTEES WILL FALL IN THE RESIDUARY CLAUSE OF DEF INITION OF INTERNATIONAL TRANSACTIONS UNDER SECTION 92B. AS FO R THE LEARNED DEPARTMENTAL REPRESENTATIVE'S ARGUMENT THAT 'WHETHE R THE SERVICE HAS CAUSED ANY EXTRA COST TO THE ASSESSEE SHOULD NO T BE THE DECIDING FACTOR TO DETERMINE WHETHER IT IS AN INTERNATIONAL AND THEN GIVES AN EXAMPLE OF BRAND ROYALTY TO MAKE HIS POINT. WHAT, I N THE PROCESS, HE OVERLOOKS IS THAT SECTION 92B(1) SPECIFICALLY COVER S SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY'. THE EXPRESSION 'B EARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRIS ES' IS RELEVANT ONLY FOR RESIDUARY CLAUSE I.E. ANY OTHER SERVICES NOT SP ECIFICALLY COVERED ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 32 - BY SECTION 92B. IT WAS ALSO CONTENDED THAT, WHILE R ENDERING BHARTI AIRTEL DECISION, THE DELHI TRIBUNAL DID GO OVERBOAR D 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 I SSUE AS TO WHETHER THE PROVISION OF GUARANTEE WAS A SERVICE OR NOT'. T HAT'S NOT FACTUALLY CORRECT. WE ARE UNABLE TO SEE ANY MERITS IN LEARNED DEPARTMENTAL REPRESENTATIVE'S CONTENTION, PARTICULARLY AS DECISI ON CATEGORICALLY 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 THE 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 TY PE OF ADVANCE, PAYMENTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY O THER DEBT ARISING 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, THEREFOR E, ONE HAS TO PROCEED ON THE BASIS THAT IT DOES NOT ALTER THE BASIC CHARA CTER OF DEFINITION OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B. ACCO RDINGLY, THIS EXPLANATION IS TO BE READ IN CONJUNCTION WITH THE M AIN PROVISIONS, AND IN HARMONY WITH THE SCHEME OF THE PROVISIONS, U NDER SECTION 92B. UNDER THIS EXPLANATION, FIVE CATEGORIES OF TRA NSACTIONS HAVE BEEN CLARIFIED TO HAVE BEEN INCLUDED IN THE DEFINIT ION OF 'INTERNATIONAL TRANSACTIONS'. THE FIRST TWO CATEGOR IES OF TRANSACTIONS, WHICH ARE STATED TO BE INCLUDED IN THE SCOPE OF EXP RESSION 'INTERNATIONAL TRANSACTIONS' BY VIRTUE OF CLAUSE (A ) AND (B) OF EXPLANATION TO SECTION 92B, ARE TRANSACTIONS WITH R EGARD TO PURCHASE, SALE, TRANSFER, LEASE OR USE OF TANGIBLE AND INTANGIBLE PROPERTIES. THESE TRANSACTIONS WERE ANYWAY COVERED BY TRANSACTIONS '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 DESCRIPTIONS OF TANGIBLE AND INTANGIBLE ASSETS. SIMILARLY, CLAUSE (D) DEALS WITH THE 'PROVISION OF SERVICES, INCLUDING PROVISION OF MARKET RESEARCH, M ARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, AGENCY, SCI ENTIFIC RESEARCH, LEGAL OR ACCOUNTING SERVICE' WHICH ARE ANYWAY COVER ED IN 'PROVISION FOR SERVICES' AND 'MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATION OR A PPORTIONMENT OF, OR ANY CONTRIBUTION TO, ANY COST OR EXPENSE INCURRE D OR TO BE INCURRED IN CONNECTION WITH A BENEFIT, SERVICE OR F ACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUCH ENTERPRISE S'. THAT LEAVES US WITH TWO CLAUSES IN THE EXPLANATION TO SECT ION 92B WHICH ARE NOT COVERED BY ANY OF THE THREE CATEGORIES DISCUSSED AB OVE OR BY OTHER SPECIFIC SEGMENTS COVERED BY SECTION 92B, NAMELY BO RROWING OR ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 33 - LENDING MONEY. THE REMAINING TWO ITEMS IN THE EXPLA NATION TO SECTION 92B ARE SET OUT IN CLAUSE (C) AND (E) THERE TO, DEALING WITH (A) CAPITAL FINANCING AND (B) BUSINESS RESTRUCTURING OR REORGANIZATION. THESE ITEMS CAN ONLY BE COVERED IN THE RESIDUAL CLA USE OF DEFINITION IN INTERNATIONAL TRANSACTIONS, AS IN SECTION 92B (1 ), WHICH COVERS 'ANY OTHER TRANSACTION HAVING A BEARING ON PROFITS, INCOMES, LOSSES, OR ASSETS OF SUCH ENTERPRISES'. IT IS, THEREFORE, E SSENTIAL THAT IN ORDER TO BE COVERED BY CLAUSE (C) AND (E) OF EXPLANATION TO SECTION 92B, THE TRANSACTIONS SHOULD BE SUCH AS TO HAVE BEARING 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 EXPLANATION DEALING WITH RESTRUCTURING AND REORGANIZATION, WHEREIN IT I S ACKNOWLEDGED THAT SUCH AN IMPACT COULD BE IMMEDIATE OR IN FUTURE AS EVIDENT FROM THE WORDS 'IRRESPECTIVE OF THE FACT THAT IT (I.E. R ESTRUCTURING 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 IMPLICIT IN THIS STATUTORY PROVISION IS THAT WHI LE IMPACT ON ' PROFIT, INCOME, LOSSES OR ASSETS' IS SINE QUA NON, THE MERE FACT THAT IMPACT 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 WHILE LATTER I S A CERTAINTY, AND ONLY ITS CRYSTALLIZATION MAY TAKE PLACE ON A FUTURE DATE, THERE IS NO SUCH CERTAINTY IN THE FORMER CASE. IN THE CASE BEFO RE US, IT IS AN UNDISPUTED POSITION THAT CORPORATE GUARANTEES ISSUE D BY THE ASSESSEE TO THE VARIOUS BANKS AND CRYSTALLIZATION OF LIABILI TY UNDER THESE GUARANTEES, THOUGH A POSSIBILITY, IS NOT A CERTAINT Y. IN VIEW OF THE DISCUSSIONS ABOVE, THE SCOPE OF THE CAPITAL FINANCI NG TRANSACTIONS, AS COULD BE COVERED UNDER EXPLANATION TO SECTION 92B R EAD WITH SECTION 92B(1), IS RESTRICTED TO SUCH CAPITAL FINAN CING TRANSACTIONS, INCLUDING INTER ALIA ANY GUARANTEE, DEFERRED PAYMEN T OR RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF BUSINESS, 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 S ECTION 92B(1) AND THE ONLY RELAXATION FROM THIS CONDITION PRECEDE NT IS SET OUT IN CLAUSE (E) OF THE EXPLANATION WHICH PROVIDES THAT T HE BEARING ON PROFITS, INCOME, LOSSES OR ASSETS COULD BE IMMEDIAT E OR ON A FUTURE DATE. THESE GUARANTEES DO NOT HAVE ANY IMPACT ON IN COME, PROFITS, LOSSES OR ASSETS OF THE ASSESSEE. THERE CAN BE A HY POTHETICAL SITUATION IN WHICH A GUARANTEE DEFAULT TAKES PLACE AND, THERE FORE, THE ENTERPRISE MAY HAVE TO PAY THE GUARANTEE AMOUNTS BU T SUCH A ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 34 - SITUATION, EVEN IF THAT BE SO, IS ONLY A HYPOTHETIC AL SITUATION, WHICH ARE, AS DISCUSSED ABOVE, EXCLUDED. WHEN AN ASSESSEE EXTENDS AN ASSISTANCE TO THE ASSOCIATED ENTERPRISE, WHICH DOES NOT COST ANYTHING TO THE ASSESSEE AND PARTICULARLY FOR WHICH THE ASSE SSEE COULD NOT HAVE REALIZED MONEY BY GIVING IT TO SOMEONE ELSE DU RING THE COURSE OF ITS NORMAL BUSINESS, SUCH AN ASSISTANCE OR ACCOM MODATION DOES NOT HAVE ANY 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)] =2011-TII-92-ITAT-HYD- TP , A CO-ORDINATE BENCH HAD, VIDE ORDER DATED 9TH SEPT EMBER 2011, OBSERVED AS FOLLOWS: 'WE FIND THAT THE TP LEGISLATION PROVIDES FOR COMPU TATION OF INCOME FROM INTERNATIONAL TRANSACTION AS PER SECTION 92B O F THE ACT. THE CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE COMPAN Y DOES NOT FALL WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION. THE TP LEGISLATION DOES NOT STIPULATE ANY GUIDELINES IN RESPECT TO GUA RANTEE TRANSACTIONS. IN THE ABSENCE OF ANY CHARGING PROVIS ION, THE LOWER AUTHORITIES ARE NOT CORRECT IN BRINGING AFORESAID T RANSACTION IN THE TP STUDY. IN OUR CONSIDERED VIEW, THE CORPORATE GUA RANTEE 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 EXPLANATION TO SECTION 92B STATING THAT 'FOR THE REMOVAL OF DOU BTS', AS WE HAVE NOTED EARLIER IN THIS DECISION, 'CLARIFIED' THAT IN TERNATIONAL TRANSACTIONS INCLUDE, INTER ALIA, CAPITAL FINANCING BY WAY OF GUARANTEE. THIS LEGISLATIVE CLARIFICATION DID INDEE D GO WELL BEYOND WHAT A COORDINATE BENCH OF THIS TRIBUNAL HELD TO BE THE LEGAL POSITION AND WE ARE BOUND BY THE ESTEEMED VIEWS OF THE COORD INATE BENCH. WE ARE, THEREFORE, OF THE OPINION THAT THE EXPLANATION TO SECTION 92B DID INDEED ENLARGE THE SCOPE OF DEFINITION OF 'INTERNAT IONAL TRANSACTION' UNDER SECTION 92B, AND IT DID SO WITH RETROSPECTIVE EFFECT. IF, FOR ARGUMENT SAKE, IT IS ASSUMED THAT THE INSERTION OF EXPLANATION TO SECTION 92B DID NOT ENLARGE THE SCOPE OF DEFINITION , THERE CANNOT OBVIOUSLY BE ANY OCCASION TO DEVIATE FROM THE DECIS ION THAT THE COORDINATE BENCH TOOK IN FOUR SOFT LTD. CASE (SUPRA ), BUT IF THE SCOPE OF THE PROVISION WAS INDEED ENLARGED, AS IS OUR OPI NION, THE QUESTION THAT REALLY NEEDS TO BE ADDRESSED WHETHER, GIVEN TH E PECULIAR NATURE AND PURPOSE OF TRANSFER PRICING PROVISION, IS IT AT ALL A WORKABLE IDEA ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 35 - TO ENLARGE THE SCOPE OF TRANSFER PRICING PROVISIONS WITH RETROSPECTIVE EFFECT THERE CAN BE LITTLE DOUBT ABOUT THE LEGISLAT IVE COMPETENCE TO AMEND TAX LAWS WITH RETROSPECTIVE EFFECT, AND, IN A NY CASE, WE ARE NOT INCLINED TO BE DRAWN INTO THAT CONTROVERSY EITH ER. 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 'CLARIFICATORY' IN NATURE, IT IS AN ISSUE TO BE EXAMINED WHETHER AN ENHANCEMENT OF SCOP E OF THIS ANTI AVOIDANCE PROVISION CAN BE IMPLEMENTED WITH RETROSP ECTIVE EFFECT. UNDOUBTEDLY, THE SCOPE OF A CHARGING PROVISION CAN BE ENLARGED WITH RETROSPECTIVE EFFECT, BUT AN ANTI-AVOIDANCE MEASURE , THAT THE TRANSFER PRICING LEGISLATION INHERENTLY IS, IS NOT PRIMARILY A SOURCE OF REVENUE AS IT MAINLY SEEKS COMPLIANT BEHAVIOUR FROM THE ASS ESSEE VIS--VIS CERTAIN NORMS, AND THESE NORMS CANNOT BE GIVEN EFFE CT 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 BROUGHT AB OUT BY FINANCE ACT 2012, WE NEED NOT DEAL WITH THIS ASPECT OF THE MATTER IN GREATER DETAIL.' 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 EXPLANAT ION TO SECTION 92B OF THE ACT, THAT THE ISSUANCE OF CORPORATE GUARANTE ES IS COVERED BY THE RESIDUARY CLAUSE OF THE DEFINITION UNDER SECTIO N 92B OF THE ACT BUT SINCE SUCH ISSUANCE OF CORPORATE GUARANTEES, ON THE FACTS OF THE PRESENT CASE, DID NOT HAVE 'BEARING ON PROFITS, INC OME, LOSSES OR ASSETS', IT DID NOT CONSTITUTE AN INTERNATIONAL TRA NSACTION, UNDER SECTION 92B, IN RESPECT OF WHICH AN ARM'S LENGTH PR ICE ADJUSTMENT CAN BE MADE. IN THIS VIEW OF THE MATTER, AND FOR BO TH THESE INDEPENDENT REASONS, WE HAVE TO DELETE THE IMPUGNED ALP ADJUSTMENT. THE QUESTION, WHICH WAS RAISED IN BHART I AIRTEL'S CASE (SUPRA) BUT LEFT UNANSWERED AS THE ASSESSEE HAD SUC CEEDED ON MERITS, REAMINS UNANSWERED HERE AS WELL. HOWEVER, WE MAY AD D THAT IN THE CASE OF KRISHNASWAMY SPD V. UNION OF INDIA [2006] 2 81 ITR 305/151 TAXMAN 286 (SC) = 2006-TIOL-12-SC-IT , WHEREIN THEIR LORDSHIPS HAD, INTER ALIA, OBSERVED THAT 'THE LAW D OES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 36 - APHORISMS, ALL INTENTION OF COMPELLING IMPOSSIBILIT IES, AND THE ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL EXCEP TION IN THE CONSIDERATION OF PARTICULAR CASES. IT WAS FOR THIS REASON THAT A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF C HANNEL GUIDE INDIA LTD. V. ASSTT. CIT [2012] 139 ITR 49/25 TAXMA NN.COM 25 (MUM.) = 2012-TII-139-ITAT-MUM-INTL , HELD THAT EVEN THOUGH THE ASSESSEE HAD NOT DEDUCTED THE APPLICABLE TAX AT SOURCE UNDER SECTION 195, THE DISALLOWANCE COULD NOT BE MADE UND ER SECTION 40(A)(I) SINCE THE TAXABILITY WAS UNDER THE PROVISI ONS WHICH WERE AMENDED, POST THE PAYMENT HAVING BEEN MADE BY THE A SSESSEE, WITH RETROSPECTIVE EFFECT. ALL THIS ONLY SHOWS THAT EVEN WHEN LAW IS SPECIFICALLY STATED TO HAVE EFFECT FROM A PARTICULA R DATE, ITS BEING IMPLEMENTED IN A FAIR AND REASONABLE MANNER, WITHIN THE FRAMEWORK OF JUDGE MADE LAW, MAY REQUIRE THAT DATE TO BE TINK ERED WITH. WHEN A PROVISO IS INTRODUCED WITH EFFECT FROM A PARTICULAR DATE SPECIFIED BY THE LEGISLATURE, THE JUDICIAL FORUMS, INCLUDING THI S TRIBUNAL, AT TIMES READ IT AS BEING EFFECT FROM A DATE MUCH EARLIER TH AN THAT TOO. ONE SUCH CASE, FOR EXAMPLE, IS CIT V. ANSAL LANDMARK TO WNSHIP (P.) LTD. [2015] 377 ITR 635/234 TAXMAN 825/61 TAXMANN.COM 45 (DELHI) = 2015-TIOL-2026-HC-DEL-IT , WHEREIN HON'BLE DELHI HIGH COURT CONFIRMED THE ACTION OF THE TRIBUNAL IN HOLDING THAT THE PROVISION, THOUGH STATED TO BE EFFECTIVE FROM 1ST A PRIL 2013 MUST BE HELD TO BE EFFECTIVE FROM 1ST APRIL 2005. WHETHER S UCH AN EXERCISE CAN BE DONE IN THE PRESENT CASE IS, OF COURSE, SOME THING TO BE EXAMINED AND OUR OBSERVATIONS SHOULD NOT BE CONSTRU ED AS AN EXPRESSION ON MERITS OF THAT ASPECT OF MATTER. GIVE N THE FACT THAT THE ASSESSEE HAS SUCCEEDED ON MERITS IN THIS CASE, IT W OULD NOT REALLY BE NECESSARY 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 WHICH THE GRIEVANCE OF THE ASSESSEE IS UPHELD, I.E. GUARANTEES BEING IN THE NATURE OF SHAREHOLDER ACTIVITY AND EXC LUDIBLE FROM THE SCOPE OF SERVICES FOR THAT REASON ALONE, IS AN AREA WHICH HAD COME UP FOR CONSIDERATION FOR THE FIRST TIME. IN EFFECT, THEREFORE, THERE WAS NO CONFLICT ON THIS ISSUE OF AND THE OTHER ISSUES, GIVEN DECISION ON THE SAID ISSUE, WERE WHOLLY ACADEMIC. IT CANNOT BE OPEN TO REFER THE ACADEMIC QUESTIONS TO THE SPECIAL BENCH. NO DOUBT, SOME DECISIONS OF THE COORDINATE BENCHES WHICH HAVE REACHED THE DI FFERENT CONCLUSIONS. THERE IS, HOWEVER, NO CONFLICT IN THE REASONING. FOUR SOFT LTD. DECISION (SUPRA) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BUT THAT WAS WITH RESPECT TO THE LAW PRIOR TO INSERTION TO EXPLANATION TO SECTION 92B. AS FOR THE POSTAMENDMEN T LAW AND THE IMPACT OF AMENDMENT IN THE DEFINITION OF 'INTERNATI ONAL TRANSACTION', THE MATTER WAS AGAIN DECIDED IN FAVOUR OF THE ASSES SEE BY BHARTI AIRTEL LTD. DECISION (SUPRA) ON THE PECULIAR FACTS OF THAT CASE. THE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 37 - DECISIONS LIKE EVEREST KENTO CYLINDERS LTD. (SUPRA) AND ADITYA BIRLA MINACS WORLDWIDE (SUPRA) WERE DECISIONS IN WHICH TH E ASSESSEE HAD CHARGED THE FEES AND, FOR THAT REASON, SUCH CASES A RE COMPLETELY DISTINGUISHABLE AS DISCUSSED ABOVE. IN PROLIFIC' CO RP LTD. CASE (SUPRA), AS INDEED IN ANY OTHER CASE SO FAR, IT WAS NOT THE CASE OF THE ASSESSEE THAT CORPORATE GUARANTEES ARE QUASI-CAPITA L, OR SHAREHOLDER ACTIVITY, IN NATURE, AND, FOR THAT REASON, EXCLUDIB LE FROM CHARGEABLE SERVICES, EVEN IF THESE ARE HELD TO BE SERVICES IN NATURE. THAT PLEA HAS BEEN SPECIFICALLY ACCEPTED IN THE PRESENT CASE. THE REFORE, THE QUESTION WHETHER ISSUANCE OF CORPORATE GUARANTEE PE R SE IN GENERAL CONSTITUTES A 'INTERNATIONAL TRANSACTION' UNDER SEC TION 92B WOULD HAVE BEEN SOMEWHAT ACADEMIC QUESTION ON THE FACTS O F THIS CASE. IN ANY EVENT, IN PROLIFIC' CORP LTD. CASE (SUPRA), AN EARLIER CONSIDERED DECISION ON THE SAME ISSUE BY COORDINATE BENCH OF E QUAL STRENGTH WAS SIMPLY DISREGARDED AND THAT FACT TAKES THIS DEC ISION OUT OF THE AMBIT OF BINDING JUDICIAL PRECEDENTS. WE HAVE ALSO NOTED THAT IN VIEW OF THE DECISION A COORDINATE BENCH, IN THE CASE OF JKT FABRICS V. DY. CIT [2005] 4 SOT 84 (MUM.) AND FOLLOWING THE FULL B ENCH 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 DEC ISION DISREGARDING AN EARLIER BINDING PRECEDENT ON THE IS SUE IS PER INCURIUM. SUCH DECISIONS CANNOT BE BASIS FOR SENDIN G THE MATTERS TO SPECIAL BENCH SINCE OCCASION FOR REFERENCE TO SPECI AL BENCH ARISES WHEN BINDING AND CONFLICTING JUDICIAL PRECEDENTS FR OM COORDINATE BENCHES COME UP FOR CONSIDERATION. THAT WAS NOT THE CASE HERE. ALL THESE FACTORS TAKEN TOGETHER, IN OUR CONSIDERED VIE W, IT WAS NOT POSSIBLE IN THIS CASE TO REFER THE MATTER FOR CONST ITUTION OF A SPECIAL BENCH. IN ANY CASE, WHATEVER WE DECIDE IS, AND SHAL L ALWAYS REMAIN, SUBJECT TO THE JUDICIAL SCRUTINY BY HON'BLE COURTS ABOVE AND OUR ENDEAVOUR IS TO FACILITATE AND EXPEDITE, WITHIN OUR INHERENT LIMITATIONS, THAT PROCESS OF SUCH A JUDICIAL SCRUTI NY, IF AND WHEN OCCASION COMES, BY ANALYZING THE ISSUES IN A COMPRE HENSIVE 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 AND TO ENSURE SATISFACTORILY RESOLUTION O F THESE DISPUTES, MUST INCLUDE A CLEAR AND UNAMBIGUOUS LEGISLATIVE GU IDANCE ON THE TRANSFER PRICING IMPLICATIONS OF THE CORPORATE GUAR ANTEES AS ALSO ON THE METHODOLOGY OF DETERMINING ITS ALP, IF NECESSAR Y. OF COURSE, NO MATTER HOW GOOD IS THE LEGISLATIVE FRAMEWORK, THE I MPORTANCE OF A VERY COMPREHENSIVE ANALYSIS, IN THE TRANSFER PRICIN G STUDY, OF THE NATURE OF CORPORATE GUARANTEES ISSUED BY THE ASSESS EES, CAN NEVER BE OVEREMPHASIZED. THE SWEEPING GENERALIZATIONS, VAGUE STATEMENTS AND EVASIVE APPROACH IN THE TRANSFER PRICING STUDY REPORTS, WHICH ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 38 - ARE QUITE COMMON IN MOST OF THE TRANSFER PRICING RE PORTS, CANNOT DO GOOD TO A REASONABLE CAUSE. WHEN JUDICIAL CALLS ON THE COMPLEX TRANSFER PRICING ISSUES ARE TO BE TAKEN, UTMOST CLA RITY IN THE LEGISLATIVE FRAMEWORK AND A COMPREHENSIVE ANALYSIS OF RELEVANT FACTS, IN THE TRANSFER PRICING DOCUMENTATION, ARE B ASIC INPUTS. UNFORTUNATELY, BOTH OF THESE THINGS LEAVE A LOT TO BE DESIRED. WE CAN ONLY HOPE, AND WE DO HOPE, THAT THINGS WILL CHANGE FOR BETTER.' 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH. LEARNED DEPARTMENTAL REPRESENTATI VE'S WELL RESEARCHED ARGUMENTS DONOT PERSUADE US TO DEVIATE FROM THE STA ND SO TAKEN BY US. LET US DEAL WITH THESE ARGUMENTS IN LITTLE DETAIL. 8. LEARNED DEPARTMENTAL REPRESENTATIVE, IN HIS WRIT TEN NOTE, ACCEPTS THAT 'THE LEGISLATURE BROUGHT IN AMENDMENT (IN SECT ION 92B) BY THE FINANCE ACT, 2012, AFTER THE DECISION OF FOUR SOFT LTD DATE D 14/09/2011'. HE POINTS OUT THAT THE DECISION OF THE TRIBUNAL, IN THE CASE OF BHARTI AIRTEL (SUPRA), IS PER INCURIUM BECAUSE THERE WERE TWO DECISIONS OF TH IS TRIBUNAL, IN THE CASE OF EVEREST KANTO CYLINDERS LTD VS DCIT [(2012) 34 T AXMANN.COM 9 (MUM)] = 2012-TII-145-ITAT-MUM-TP AND MAHINDRA & MAHINDRA LTD VS DCIT [2012- TII-70-ITAT-MUM], WHICH WERE NOT CONSIDERED BY THE BHARTI AIRTEL DECISION. OUR ATTENTION IS ALSO INVIT ED TO THE RECTIFICATION PETITION FILED BY THE ASSESSING OFFICER, WHICH IS S AID TO BE PENDING FOR DISPOSAL BEFORE THE TRIBUNAL. WE DONOT FIND MERITS IN THIS PLEA. MAHINDRA & MAHINDRA DECISION (SUPRA) WAS PASSED ON 6TH JUNE 20 12, THOUGH AT A POINT OF TIME WHEN FINANCE ACT 2012 HAD JUST COME INTO FO RCE I.E. POST 28TH MAY 2012, WITHOUT EVEN BEING AWARE WHETHER OR NOT THE F INANCE ACT 2012 WAS PASSED AS IT GAVE CERTAIN DIRECTIONS DEPENDING UPON THE EXACT AMENDMENT BY THE SAID FINANCE ACT. THE MATTER WAS REMITTED TO TH E FILE OF THE ASSESSING OFFICER IN A RATHER SUMMARY MANNER. IT CANNOT BE, B Y ANY STRETCH OF LOGIC, AN AUTHORITY ON ANY LEGAL QUESTION ARISING OUT OF THE LAW WHICH, AS PER THE TRIBUNAL- WRONGLY THOUGH, WAS NOT EVEN IN EXISTENCE . AS FOR THE EVEREST KANTO DECISION (SUPRA), THE ISSUE WAS DECIDED AGAIN ST THE ASSESSEE AS, TO BORROW THE WORDS OF THE COORDINATE BENCH, 'HERE IN THIS CASE, IT IS UNDISPUTED THAT THE ASSESSEE IN ITS T.P. STUDY REPO RT AND ALSO THE TPO, HAVE ACCEPTED THAT IT IS AN INTERNATIONAL TRANSACTION AN D CUP IS THE MOST APPROPRIATE METHOD FOR BENCHMARKING THE CHARGING OF GUARANTEE FEE', AND, IT WAS FOR THIS SHORT REASON THAT THE MATTER WAS DECID ED AGAINST THE ASSESSEE. THE CO-ORDINATE BENCH HAD FURTHER OBSERVED 'IN THIS CASE, THE ASSESSEE HAS ITSELF CHARGED 0.5% GUARANTEE COMMISSION FROM ITS A E, THEREFORE, IT IS NOT A CASE OF NOT CHARGING OF ANY KIND OF COMMISSION FROM ITS AE. THE ONLY POINT WHICH HAS TO BE SEEN IN THIS CASE IS WHETHER THE SA ME IS AT ALP OR NOT'. LEARNED DEPARTMENTAL REPRESENTATIVE HAS INVITED OUR ATTENTION TO A DECISION OF THE BANGALORE BENCHES, IN THE CASE OF ADVANTA IN DIA LIMITED VS ACIT - 2015-TII-294-ITAT-BAN , WHICH IS IN FAVOUR OF THE ASSESSEE. WHILE LEARNED DEPARTMENTAL REPRESENTATIVE IS INDEED RIGHT, THAT I S A CASE IN WHICH THE ASSESSEE DID INFACT RECOVER CHARGES, WHICH INCLUDED MORE THAN THE COST INCURRED, FROM THE BENEFICIARY, AND, AS SUCH, IT CL EARLY HAD AN IMPACT ON THE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 39 - PROFITS OF THE ASSESSEE. THAT IS A CASE DISTINCT FR OM THE PRESENT SITUATION IN WHICH THERE IS NO IMPACT ON THE PROFITS OR LOSSES O R ASSETS OR INCOME OF THE ASSESSEE. IN ADVANTA DECISION (SUPRA), THIS ASPECT OF THE MATTER AND THE DISTINGUISHING FEATURE HAS BEEN DISCUSSED AT CONSID ERABLE LENGTH. LEARNED DEPARTMENTAL REPRESENTATIVE HAS THEN INVITED OUR AT TENTION TO THE FACT A SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED BY HO N'BLE DELHI HIGH COURT IN ITA NO. 607/2014 AGAINST THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF BHARTI AIRTEL (SUPRA). WHILE NO DOUBT THE MATTER IS NOW PENDING BEFORE HON'BLE HIGH COURT FOR THE JUDICIAL SCRUTINY BY THE IR LORDSHIPS, THAT FACT BY ITSELF DOES NOT REVERSE THE STAND TAKEN BY THE TRIB UNAL IN THE ORDER SO IMPUGNED. AS REGARDS THE DECISION OF BHARATI AIRTEL BEING ON ITS OWN PECULIAR FACTS, THERE CAN BE NO DENIAL OF THIS POSI TION BUT THAT DOES NOT MEAN THAT THE SO FAR AS ISSUES OF GENERAL APPLICATION AR E CONCERNED, THE STAND OF THE TRIBUNAL CANNOT HOLD GOOD. LEARNED DEPARTMENTAL REPRESENTATIVE THEN TAKES US THROUGH THE EXPLANATION TO SECTION 92 B TO EXPLAIN ITS TRUE SCOPE AND THROUGH BHARTI AIRTEL DECISION AS TO HOW FALLAC IOUS IS ITS LOGIC. ITS EMPHASIZED THAT THE IMPACT OF ISSUANCE OF BANK GUAR ANTEES, ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES, IS 'R EAL' AND NOT 'CONTINGENT' AS HELD IN BHARTI'S CASE. IT IS ALSO EMPHASIZED, APPAR ENTLY TO HIGHLIGHT THE FACT THAT IT IS NOT ONLY THE IMPACT ON ENTITY ISSUING TH E GUARANTEE BUT ALSO BENEFICIARY OF THE GUARANTEE THAT MATTERS IN THIS C ONTEXT, THAT THE WORD USED IN SECTION 92 B IS 'ENTERPRISES' AND NOT 'ENTERPRIS E'. IT IS THUS CONTENDED THAT THE IMPACT ON THE PROFITS, INCOMES, LOSSES OR ASSET S OF THE ENTITY ISSUING GUARANTEE IS IMPORTANT, BUT THE IMPACT ON THE PROFI TS, INCOME, LOSSES OR ASSETS OF THE ENTITY, WHICH IS BENEFICIARY OF THE GUARANTE E, IS ALSO IMPORTANT. IT IS POINTED OUT THAT BHARTI AIRTEL DECISION HAS EXAMINE D THIS ASPECT ONLY FROM THE POINT OF VIEW OF THE ENTITY ISSUING THE GUARANT EE AND THAT HAS ALSO BEEN DECIDED WRONGLY. AS FOR THESE ISSUES BEING RAISED B Y THE LEARNED DEPARTMENTAL REPRESENTATIVE, SUFFICE TO SAY THAT EV EN IF REASONING ADOPTED BY BHARTI AIRTEL DECISION IS INCORRECT, IT IS NOT F OR US TO EXAMINE THAT ASPECT OF THE MATTER. NOW THAT THE MATTER IS BEFORE HON'BLE H IGH COURT, AND THE MATTER IS ALREADY UNDER HEARING, THERE IS NO POINT IN GOIN G INTO THESE FINE POINTS, WHICH MAY AT BEST BE ERRORS OF JUDGMENT RATHER THAN A GLARING ERROR RENDERING THE DECISION TO BE PER INCURIUM, AT THIS STAGE. IN ANY CASE, THERE IS A SUBTLE DIFFERENCE IN 'IMPACT ON' AND 'INFLUENCE O N'. THE ISSUANCE OF A CORPORATE GUARANTEE MAY HAVE AN INFLUENCE ON THE PR OFITS, INCOMES, LOSSES AND ASSETS OF AN ENTITY, IN WHOSE FAVOUR THE GUARAN TEE IS ISSUED, BUT IT HAS NO IMPACT ON THE SAME AS LONG AS IT IS ISSUED WITHOUT A CONSIDERATION. TO TREAT THIS PHRASE AS IMPLYING A BENEFIT TEST, WILL, IN OU R CONSIDERED VIEW, STRETCHING THE THINGS TOO FAR. WE ARE, THEREFORE, NOT SWAYED B Y THE ARGUMENTS, THOUGH EXTREMELY WELL RESEARCHED AND THOUGHT PROVOKING, OF THE LEARNED DEPARTMENTAL REPRESENTATIVE- PARTICULARLY AT THIS S TAGE. HE HAS RAISED A NUMBER OF OTHER ARGUMENTS AS WELL BUT AS THOSE ARGU MENTS ARE ALREADY DEALT WITH IN THE CASE OF MICRO INK DECISION REPRODUCED A BOVE, WE SEE NO NEED TO AGAIN DEAL WITH THE SAME. 9. IN THE MICRO INK DECISION (SUPRA), WE HAD, AMONG ST OTHER THINGS, TAKEN NOT OF THE JUDICIAL DEVELOPMENTS LEADING TO THE INSERTI ON OF EXPLANATION TO ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 40 - SECTION 92B AND HOW WITHIN FOUR MONTHS OF FOUR SOFT DECISION (SUPRA) BEING ANNOUNCED, IT WAS NULLIFIED BY A LEGISLATIVE AMENDM ENT. THIS ASPECT OF THE MATTER HAS BEEN DEALT WITH IN PARAGRAPH 46 AND 47 O F THIS DECISION, WHICH HAS BEEN REPRODUCED EARLIER IN THIS ORDER, AT CONSI DERABLE LENGTH. IT ASSUMES EVEN MORE SIGNIFICANCE IN THE LIGHT OF A NEW JUDICI AL DEVELOPMENT THAT WE WILL DEAL WITH IN A SHORT WHILE NOW. IN THE PRESENT CASE , WE ARE DEALING WITH A SITUATION IN WHICH THE AMENDMENT WAS MADE WITH RETR OSPECTIVE EFFECT AND IT COVERED CERTAIN ISSUES WHICH WERE ALREADY SUBJECTED TO A JUDICIAL INTERPRETATION IN A PARTICULAR MANNER. LEARNED DEPA RTMENTAL REPRESENTATIVE DOES NOT EVEN DISPUTE IT. HE IS CANDID ENOUGH TO PL ACE ON RECORD THE FACT, BY WAY OF A WRITTEN NOTE, THAT THE ONE OF THE REASONS OF INSERTION OF EXPLANATION TO SECTION 92 B WAS TO NULLIFY THE FOUR SOFT DECISI ON (SUPRA). THE JUDICIAL INTERPRETATION SO GIVEN WAS CERTAINLY NOT THE END O F THE ROAD. THE MATTER COULD HAVE BEEN CARRIED IN APPEAL BEFORE HIGHER JUD ICIAL FORUMS. IF THE DECISION OF A JUDICIAL BODY DOES NOT SATISFY THE TA X ADMINISTRATION, NOTHING PREVENTS THEM FROM GOING TO THE HIGHER JUDICIAL FOR UM OR FROM SO AMENDING THE LAW, WITH PROSPECTIVE EFFECT, THAT THERE IS NO AMBIGUITY ABOUT THE INTENT OF LEGISLATURE AND IT IS CONVEYED IN UNAMBIGUOUS WORDS . 10. NULLIFYING A JUDICIAL INTERPRETATION THOUGH LEG ISLATIVE AMENDMENT, MUCH AS MANY OF US MAY ABHOR IT, IS NOT TOO UNCOMMON AN OCCURRENCE. OF COURSE, WHEN LEGISLATURE HAS TO TAKE AN EXTREME MEASURE TO NULLIFYING THE IMPACT OF A JUDICIAL RULING IN TAXATION, IT IS THE TIME FOR, AT LEAST ON A THEORETICAL NOTE, INTROSPECTION FOR THE DRAFTSMAN AS TO WHAT WENT SO WRONG THAT FUNDAMENTAL INTENT OF LAW OF LAW COULD NOT BE CONVEYED BY THE W ORDS OF THE STATUTE, OR, PERHAPS FOR THE JUDICIAL FORUMS, AS TO WHAT WENT SO WRONG THAT THE INTERPRETATION WAS SO OFF THE MARK VIS--VIS FUNDAM ENTAL PRINCIPLES OF TAXATION OR THE SOUND POLICY CONSIDERATIONS. HOWEVE R, AMENDMENT SO MADE ARE GENERALLY PROSPECTIVE, AND THERE IS A SOUND CON CEPTUAL FOUNDATION, AS HAS BEEN HIGHLIGHTED IN THE BINDING JUDICIAL PRECED ENTS THAT WE WILL DEAL WITH IN A SHORT WHILE, FOR THAT APPROACH. THERE IS NO DE ARTH OF EXAMPLES ON THIS ASPECT OF THE MATTER. TAKE FOR EXAMPLE, THE AMENDME NT TO SECTION 263 BY THE FINANCE ACT, 1961. IN MANY JUDICIAL PRECEDENTS, [SU CH AS IN THE CASE OF CIT VS SUNBEAM AUTO LIMITED (332 ITR 167) = 2009-TIOL-552-HC-DEL- IT WHEREIN IT WAS HELD THAT 'LEARNED COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT T O PASS ORDERS UNDER S. 263 OF THE ACT, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF AC TION WOULD BE OPEN'], IT WAS REITERATED THAT IT WAS ONLY THE LACK, NOT THE A DEQUACY, OF INQUIRY WHICH COULD CONFER JURISDICTION UNDER SECTION 263 ON THE COMMISSIONER. BY INSERTING EXPLANATION 2 TO SECTION 263(1), WHICH IN TER ALIA PROVIDED THAT POWERS UNDER SECTION 263 COULD ALSO BE INVOKED IN T HE CASES WHERE 'THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFIC ATION WHICH SHOULD HAVE BEEN MADE', ALL RATIO OF ALL THESE DECISIONS WAS NU LLIFIED. THAT, HOWEVER, IS DONE WITH PROSPECTIVE EFFECT, I.E. WITH EFFECT FROM 1ST JUNE 2015. AS A MATTER OF FACT, IT IS A LAUDABLE POLICY OF THE PRESENT TAX ADMINISTRATION TO STAY AWAY ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 41 - FROM MAKING THE RETROSPECTIVE AMENDMENTS, AND THUS CONTRIBUTE TO GREATER CERTAINTY AND CONGENIAL BUSINESS CLIMATE. NOTHING E VIDENCES IT BETTER THAN THIS SUBTLE, BUT EASILY DISCERNIBLE, PARADIGM SHIFT IN THE UNDERLYING APPROACH TO THE AMENDMENTS MADE IN SECTION 263 IN THE VERY F IRST FULL BUDGET OF THE PRESENT GOVERNMENT. 11. WHAT HAS, HOWEVER, BEEN DONE IN THE CASE BEFORE US IS TO AMEND THE LAW WITH RETROSPECTIVE EFFECT. OF COURSE, IT HAPPENED M UCH BEFORE THE CURRENT AWARENESS ABOUT THE EVILS OF RETROSPECTIVE TAXATION HAVING BEEN TRANSLATED INTO ACTION. 12. DEALING WITH SUCH A SITUATION, HON'BLE DELHI HI GH COURT HAS, IN THE CASE OF DIT VS NEW SKIES SATELLITE BV [TS-64- HC -DEL (2 016)] = 2016-TII-06- HC-DEL-INTL , OBSERVED AS FOLLOWS: 30. UNDOUBTEDLY, THE LEGISLATURE IS COMPETENT TO AM END A PROVISION THAT OPERATES RETROSPECTIVELY OR PROSPECTIVELY. NONETHEL ESS, WHEN DISPUTES AS TO THEIR APPLICABILITY ARISE IN COURT, IT IS THE ACTUA L SUBSTANCE OF THE AMENDMENT THAT DETERMINES ITS ULTIMATE OPERATION AND NOT THE BARE LANGUAGE IN WHICH SUCH AMENDMENT IS COUCHED.. 36. A CLARIFICATORY AMENDMENT PRESUMES THE EXISTENC E OF A PROVISION THE LANGUAGE OF WHICH IS OBSCURE, AMBIGUOUS, MAY HAVE M ADE AN OBVIOUS OMISSION, OR IS CAPABLE OF MORE THAN ONE MEANING. I N SUCH CASE, A SUBSEQUENT PROVISION DEALING WITH THE SAME SUBJECT MAY THROW LIGHT UPON IT. YET, IT IS NOT EVERY TIME THAT THE LEGISLATURE CHARACTERIZES AN AMENDMENT AS RETROSPECTIVE THAT THE COURT WILL GIVE SUCH EFFECT TO IT. THIS IS NOT IN DEROGATION OF THE EXPRESS WORDS OF THE LAW IN QUEST ION, (WHICH AS A MATTER OF COURSE MUST BE THE FIRST TO BE GIVEN EFFECT TO), BU T BECAUSE THE LAW WHICH WAS INTENDED TO BE GIVEN RETROSPECTIVE EFFECT TO AS A C LARIFICATORY AMENDMENT, IS IN ITS TRUE NATURE ONE THAT EXPANDS THE SCOPE OF TH E SECTION IT SEEKS TO CLARIFY, AND RESULTANTLY INTRODUCES NEW PRINCIPLES, UPON WHI CH LIABILITIES MIGHT ARISE. SUCH AMENDMENTS THOUGH FRAMED AS CLARIFICATORY, ARE IN FACT TRANSFORMATIVE SUBSTANTIVE AMENDMENTS, AND INCAPABLE OF BEING GIVE N RETROSPECTIVE EFFECT. . 37. AN IMPORTANT QUESTION, WHICH ARISES IN THIS CON TEXT, IS WHETHER A 'CLARIFICATORY' AMENDMENT REMAINS TRUE TO ITS NATUR E WHEN IT PURPORTS TO ANNUL, OR HAS THE UNDENIABLE EFFECT OF ANNULLING, A N INTERPRETATION GIVEN BY THE COURTS TO THE TERM SOUGHT TO BE CLARIFIED. IN O THER WORDS, DOES THE RULE AGAINST CLARIFICATORY AMENDMENTS LAYING DOWN NEW PR INCIPLES OF LAW EXTEND TO SITUATIONS WHERE LAW HAD BEEN JUDICIALLY INTERPR ETED AND THE LEGISLATURE SEEKS TO OVERCOME IT BY DECLARING THAT THE LAW IN Q UESTION WAS NEVER MEANT TO HAVE THE IMPORT GIVEN TO IT BY THE COURT? THE GENER AL POSITION OF THE COURTS IN THIS REGARD IS WHERE THE PURPOSE OF A SPECIAL IN TERPRETIVE STATUTE IS TO CORRECT A JUDICIAL INTERPRETATION OF A PRIOR LAW, W HICH THE LEGISLATURE CONSIDERS INACCURATE, THE EFFECT IS PROSPECTIVE. ANY OTHER RESULT WOULD MAKE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 42 - THE LEGISLATURE A COURT OF LAST RESORT. UNITED STAT ES V. GILMORE 8 WALL [(75 US) 330, 19L ED 396 (1869)] PEONY PARK V. O'MALLEY [223 F2D 668 (8TH CIR 1955)]. IT DOES NOT MEAN THAT THE LEGISLATURE DOES NOT HAVE THE POWER TO OVERRIDE JUDICIAL DECISIONS WHICH IN ITS OPINION IT DEEMS AS INCORRECT, HOWEVER TO RESPECT THE SEPARATION OF LEGAL POWERS A ND TO AVOID MAKING A LEGISLATURE A COURT OF LAST RESORT, THE AMENDMENTS CAN BE MADE PROSPECTIVE ONLY [REF COUNTY OF SACRAMENTO V STATE (134 CAL APP 3D 4 28) AND IN RE MARRIAGE OF DAVIES (105 III APP 3D 66)] (EMPHASIS, BY UNDERLINING, SUPPLIED BY US) 13. QUITE CLEARLY, IN VIEW OF THE LAW SO LAID DOWN BY THEIR LORDSHIPS ALSO, JUST BECAUSE A PROVISION IS STATED TO BE CLARIFICAT ORY, IT DOES NOT BECOME ENTITLED TO BE TREATED AS 'CLARIFICATORY' BY THE JU DICIAL FORUMS AS WELL. THE VIEW TAKEN BY HON'BLE DELHI HIGH COURT SUPPORT THIS LINE OF REASONING. EVEN WITHOUT THE BENEFIT OF GUIDANCE OF THEIR LORDSHIPS, THE VIEWS ARTICULATED BY A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF B HARTI AIRTEL (SUPRA) WERE OF A SOMEWHAT SIMILAR OPINION WHEN IT WAS OBSERVED THA T, 'UNDOUBTEDLY, THE SCOPE OF A CHARGING PROVISION CAN BE ENLARGED WITH RETROSPECTIVE EFFECT, BUT AN ANTIAVOIDANCE MEASURE, THAT THE TRANSFER PRICING LEGISLATION INHERENTLY IS, IS NOT PRIMARILY A SOURCE OF REVENUE AS IT MAINLY S EEKS COMPLIANT BEHAVIOUR FROM THE ASSESSEE VIS--VIS CERTAIN NORMS, AND THES E NORMS CANNOT BE GIVEN EFFECT FROM A DATE EARLIER THAN THE DATE NORMS ARE BEING INTRODUCED'. WE MAY ADD THAT RIGHT NOW WE ARE ONLY CONCERNED WITH THE Q UESTION OF RETROSPECTIVE AMENDMENT IN THE TRANSFER PRICING LEGISLATION, WHIC H HAS, AS WE WILL SEE, ITS OWN PECULIARITIES AND SIGNIFICANT DISTINCTION WITH NORMAL TAX LAWS WHICH SIMPLY IMPOSE TAX ON AN INCOME. 14. LEGISLATURE MAY DESCRIBE AN AMENDMENT AS 'CLARI FICATORY' IN NATURE, BUT A CALL WILL HAVE TO BE TAKEN BY THE JUDICIARY WHETHER IT IS INDEED CLARIFICATORY OR NOT. THIS DETERMINATION, I.E. WHETHER THE AMENDMENT IN INDEED CLARIFICATORY OR IS THE AMENDMENT TO OVERCOME A JUDICIAL PRECEDEN T, ASSUMES GREAT SIGNIFICANCE BECAUSE WHEN IT IS FOUND THAT THE PURP OSE OF SUCH INTERPRETIVE STATUTE, OR CLARIFICATORY AMENDMENT, IS 'CORRECT A JUDICIAL INTERPRETATION OF PRIOR LAW, WHICH THE LEGISLATURE CONSIDERS INACCURA TE, THE EFFECT IS PROSPECTIVE' AND, AS IN THIS CASE, IT DEALS WITH TR ANSFER PRICING LEGISLATION WHICH ESSENTIALLY SEEKS A DEGREE OF COMPLIANT BEHAV IOR FROM THE ASSESSEE VIS- -VIS CERTAIN NORMS-THE NORMS THE ASSESSEE SHOULD K NOW AT THE TIME OF ENTERING INTO THE TRANSACTIONS RATHER THAN AT THE T IME OF SCRUTINY OF HIS AFFAIRS AT A MUCH LATER STAGE. 15. IT IS VERY IMPORTANT TO BEAR IN MIND THE FACT T HAT RIGHT NOW WE ARE DEALING WITH AMENDMENT OF A TRANSFER PRICING RELATED PROVIS ION WHICH IS IN THE NATURE OF A SAAR (SPECIFIC ANTI ABUSE RULE), AND THAT EVER Y ANTI ABUSE LEGISLATION, WHETHER SAAR (SPECIFIC ANTI ABUSE RULE) OR GAAR (GE NERAL ANTI ABUSE RULE), IS A LEGISLATION SEEKING THE TAXPAYERS TO ORGANIZE THEIR AFFAIRS IN A MANNER COMPLIANT WITH THE NORMS SET OUT IN SUCH ANTI ABUSE LEGISLATION. AN ANTI- ABUSE LEGISLATION DOES NOT TRIGGER THE LEVY OF TAXE S; IT ONLY TELLS YOU WHAT ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 43 - BEHAVIOR IS ACCEPTABLE OR WHAT IS NOT ACCEPTABLE. W HAT TRIGGERS LEVY OF TAXES IS NON-COMPLIANCE WITH THE MANNER IN WHICH THE ANTI -ABUSE REGULATIONS REQUIRE THE TAXPAYERS TO CONDUCT THEIR AFFAIRS. IN THAT SENSE, ALL ANTI ABUSE LEGISLATIONS SEEK A CERTAIN DEGREE OF COMPLIANCE WI TH THE NORMS SET OUT THEREIN. IT IS, THEREFORE, ONLY ELEMENTARY THAT AME NDMENTS IN THE ANTI-ABUSE LEGISLATIONS CAN ONLY BE PROSPECTIVE. IT DOES NOT M AKE SENSE THAT SOMEONE TELLS YOU TODAY AS TO HOW YOU SHOULD HAVE BEHAVED Y ESTERDAY, AND THEN GOES ON TO LEVY A TAX BECAUSE YOU DID NOT BEHAVE IN THAT MANNER YESTERDAY. 16. WHEN THIS IS PUT TO THE LEARNED DEPARTMENTAL RE PRESENTATIVE THAT AS TO HOW THE TRANSFER PRICING LEGISLATION CAN BE EXPECTE D TO HAVE A RETROSPECTIVE AMENDMENT, WHICH IS ALMOST LIKE TELLING PEOPLE HOW THEY SHOULD HAVE BENCHMARKED THEIR INTERNATIONAL TRANSACTIONS IN PAS T AND THUS EXPECTING THEM TO DO THE IMPOSSIBLE, HIS STOCK REPLY IS THAT THE AMENDMENT ONLY CLARIFIES THE LAW, IT DOES NOT EXPAND THE LAW. 17. WELL, IF THE 2012 AMENDMENT DOES NOT ADD ANYTHI NG OR EXPAND THE SCOPE OF INTERNATIONAL TRANSACTION DEFINED UNDER SECTION 92B, ASSUMING THAT IT INDEED DOES NOT- AS LEARNED DEPARTMENTAL REPRESENTA TIVE CONTENDS, THIS PROVISION HAS ALREADY BEEN JUDICIALLY INTERPRETED, AND THE MATTER RESTS THERE UNLESS IT IS REVERSED BY A HIGHER JUDICIAL FORUM. H OWEVER, IF THE 2012 AMENDMENT DOES INCREASE THE SCOPE OF INTERNATIONAL TRANSACTION UNDER SECTION 92B, AS IS OUR CONSIDERED VIEW, THERE IS NO WAY IT COULD BE IMPLEMENTED FOR THE PERIOD PRIOR TO THIS LAW COMING ON THE STATUTE I.E. 28TH MAY 2012. THE LAW IS WELL SETTLED. IT DOES NOT EXPE CT ANYONE TO PERFORM AN IMPOSSIBILITY. REITERATING THIS SETTLED LEGAL POSIT ION, HON'BLE SUPREME COURT HAS, IN THE CASE OF KRISHNASWAMY S PD VS UNION OF I NDIA [(2006) 281 ITR 305 (SC)] = 2006-TIOL-12-SC-IT , OBSERVED AS FOLLOWS: THE OTHER RELEVANT MAXIM IS, LEX NON COGIT AD IMPOS SIBILIA-THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL APHORISMS, ALL INTENTION OF COMPELLING IMPOSSIBILITIES, AND TH E ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL EXCEPTION IN THE CONSIDERAT ION OF PARTICULAR CASES. [SEE : U.P.S.R.T.C. VS. IMTIAZ HUSSAIN 2006 (1) SCC 380, SHAIKH SALIM HAJI ABDUL KHAYUMSAB VS. KUMAR & ORS. 2006 (1) SCC 46, M OHAMMOD GAZI VS. STATE OF M.P. & ORS. 2000 (4) SCC 342 AND GURSHARAN SINGH VS. NEW DELHI MUNICIPAL COMMITTEE 1996 (2) SCC 459]. 18. IT IS FOR THIS REASON THAT THE EXPLANATION TO S ECTION 92 B, THOUGH STATED TO BE CLARIFICATORY AND STATED TO BE EFFECTIVE FROM 1S T APRIL 2002, HAS TO BE NECESSARILY TREATED AS EFFECTIVE FROM AT BEST THE A SSESSMENT YEAR 2013-14. IN ADDITION TO THIS REASON, IN THE LIGHT OF HON'BLE DE LHI HIGH COURT'S GUIDANCE IN THE CASE OF NEW SKIES SATELLITE BV (SUPRA) ALSO, THE AMENDMENT IN THE DEFINITION OF INTERNATIONAL TRANSACTION UNDER SECTI ON 92B, TO THE EXTENT IT PERTAINS TO THE ISSUANCE OF CORPORATE GUARANTEE BEI NG OUTSIDE THE SCOPE OF 'INTERNATIONAL TRANSACTION', CANNOT BE SAID TO BE R ETROSPECTIVE IN EFFECT. THE FACT THAT IT IS STATED TO BE RETROSPECTIVE, IN THE LIGHT OF THE AFORESAID GUIDANCE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 44 - OF HON'BLE DELHI HIGH COURT, WOULD NOT ALTER THE SI TUATION, AND IT CAN ONLY BE TREATED AS PROSPECTIVE IN EFFECT I.E. WITH EFFECT F ROM 1ST APRIL 2012 ONWARDS. 19. AS WE DEAL WITH THIS QUESTION, IT IS ALSO RELEV ANT TO CONSIDER WHETHER THIS TRIBUNAL CAN, WHILE ADJUDICATING ON THE APPEALS, TI NKER WITH THE DATE, AS SET OUT IN THE STATUTE, FROM WHICH AN AMENDMENT IS EFFE CTIVE. IN OUR HUMBLE UNDERSTANDING, AS A JUDICIAL FORUM, WE ARE BOUND NO T ONLY BY THE LAW AS LEGISLATED BY THE LEGISLATURE, BUT BY THE JUDGE MAD E LAW AS WELL. WE ARE A PART OF THE JUDICIAL HIERARCHY IN THIS SYSTEM. WE A RE BOUND BY THE LAW LAID DOWN BY HON'BLE COURTS ABOVE, AND ALL THAT WE ARE E XPECTED TO DO, AND WE DO, IS TO DECIDE THE ISSUES BEFORE US IN ACCORDANCE WITH THE PROVISIONS OF THE STATUTE, IN ACCORDANCE WITH THE LAW LAID DOWN BY HO N'BLE COURTS ABOVE AND IN THE LIGHT OF BINDING JUDICIAL PRECEDENTS. WHEN A BINDING JUDICIAL PRECEDENT REQUIRES US TO DEVIATE FROM THE SPECIFIC WORDS OF T HE PROVISIONS OF THE STATUTE IN A PARTICULAR MANNER, WE HAVE TO DO SO. THERE IS NO ESCAPE FROM THIS CALL OF DUTY. OF COURSE, WHATEVER WE DO IS, AND SHALL ALWAY S REMAIN, SUBJECT TO THE APPROVAL BY HON'BLE COURTS ABOVE. 20. THERE ARE A NUMBER OF DECISIONS IN WHICH OUR SO TINKERING WITH THE SPECIFIC WORDS IN THE STATUTE HAVE BEEN UPHELD, AS LONG AS THIS HAS BEEN SO DONE IN ACCORDANCE WITH THE JUDICIAL PRINCIPLES AND GUIDANCE IN THE JUDGE MADE LAW. IN THE CASE OF RAJEEV KUMAR AGARWAL VS AC IT [(2014) 249 ITD 363 (AGRA)] = 2014-TIOL-289-ITAT-AGRA , INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA), THOUGH SPECIFICALLY STATED TO BE WITH EFFECT FROM 1ST APRIL 2013, WAS READ TO BE EFFECTIVE FROM 1ST APRIL 2005. THE REASONING ADOPTED BY THE BENCH, SPEAKING THROUGH ONE OF US, WAS AS FOLLO WS: 8. WITH THE BENEFIT OF THIS GUIDANCE FROM HON'BLE D ELHI HIGH COURT, IN VIEW OF LEGISLATIVE AMENDMENTS MADE FROM TIME TO TIME, W HICH THROW LIGHT ON WHAT WAS ACTUALLY SOUGHT TO BE ACHIEVED BY THIS LEGAL PR OVISION, AND IN THE LIGHT OF THE ABOVE ANALYSIS OF THE SCHEME OF THE LAW, WE ARE OF THE CONSIDERED VIEW THAT SECTION 40(A)(IA) CANNOT BE SEEN AS INTENDED T O BE A PENAL PROVISION TO PUNISH THE LAPSES OF NON DEDUCTION OF TAX AT SOURCE FROM PAYMENTS FOR EXPENDITURE-PARTICULARLY WHEN THE RECIPIENTS HAVE T AKEN INTO ACCOUNT INCOME EMBEDDED IN THESE PAYMENTS, PAID DUE TAXES THEREON AND FILED INCOME TAX RETURNS IN ACCORDANCE WITH THE LAW. AS A COROLLARY TO THIS PROPOSITION, IN OUR CONSIDERED VIEW, DECLINING DEDUCTION IN RESPECT OF EXPENDITURE RELATING TO THE PAYMENTS OF THIS NATURE CANNOT BE TREATED AS AN 'IN TENDED CONSEQUENCE' OF SECTION 40(A)(IA). IF IT IS NOT AN INTENDED CONSEQU ENCE I.E. IF IT IS AN UNINTENDED CONSEQUENCE, EVEN GOING BY BHARTI SHIPYA RD DECISION (SUPRA), 'REMOVING UNINTENDED CONSEQUENCES TO MAKE THE PROVISIONS WORKABLE HAS TO BE TREATED AS RETROSPECTIVE NOTWITH STANDING THE FACT THAT THE AMENDMENT HAS BEEN GIVEN EFFECT PROSPECTIVELY'. REV ENUE, THUS, DOES NOT DERIVE ANY ADVANTAGE FROM SPECIAL BENCH DECISION IN THE CASE BHARTI SHIPYARD (SUPRA). 9. ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 45 - CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT I N COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE RECIPIENTS OF TH E PAYMENTS. SUCH A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THEREFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THERE IS NO A CTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT DEDUCTING TAX A T SOURCE, WHEN SUCH TAX DEDUCTIONS ARE DUE, BUT, SO FAR AS THE LEGAL FRAMEW ORK IS CONCERNED, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THERE ARE SEPARATE PENAL PROVISIONS TO THAT EFFECT. DEINCENTIVIZING A LAPSE AND PUNISHING A LAPSE ARE TWO DIFFERENT THING S AND HAVE DISTINCTLY DIFFERENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOT ATIONS. WHEN WE APPRECIATE THE OBJECT OF SCHEME OF SECTION 40(A)(IA ), AS ON THE STATUTE, AND TO EXAMINE WHETHER OR NOT, ON A 'FAIR, JUST AND EQUITA BLE' INTERPRETATION OF LAW- AS IS THE GUIDANCE FROM HON'BLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT CO ULD NOT BE AN 'INTENDED CONSEQUENCE' TO DISALLOW THE EXPENDITURE, DUE TO NO N DEDUCTION OF TAX AT SOURCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGHT TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTIO N 40(A)(IA), AS WE SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH IN COME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOL DING LAPSES BY THE ASSESSEE. IT IS NOT, IN OUR CONSIDERED VIEW, A PENA LTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RE STRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PEN ALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271C, AND, SECTION 40(A)(IA) DOES NOT ADD TO THE SAME. THE PROVISIONS OF SECTION 40(A)(IA), AS THEY EXISTED PRIOR TO INSERTION OF SECOND PROVISO T HERETO, WENT MUCH BEYOND THE OBVIOUS INTENTIONS OF THE LAWMAKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE ASSESSEE'S TAX WITHHOLDING LAPSE S DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCOMINGS OF PROVISION, AND THUS OBVI ATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFECT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN N ATURE EVEN THOUGH IT MAY NOT STATE SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPECTIVE EFFECT FROM THE POINT OF TIME WHEN TH E RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF THESE DISCUSSIONS, AS AL SO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW TH AT IT COULD HAVE BEEN AN 'INTENDED CONSEQUENCE' TO PUNISH THE ASSESSEE'S FOR NON DEDUCTION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PAYMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGHT TO TA X. THAT WILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. A CCORDINGLY, WE HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA ) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE (IA) OF SECTION 40(A ) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. 21. WHILE APPROVING THIS APPROACH, AND UPHOLDING TH E DECISION OF THE TRIBUNAL DO READ THESE PROVISIONS AS EFFECTIVE FROM 1ST APRIL 2005, HON'BLE ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 46 - DELHI HIGH COURT, IN CASE OF CIT VS ANSAL LANDMARK TOWNSHIPS PVT LTD [(2015) 377 ITR 635 (DEL)] = 2015-TIOL-2026-HC-DEL-IT , HAS OBSERVED AS FOLLOWS: 14. THE COURT IS OF THE VIEW THAT THE ABOVE REASONI NG OF THE AGRA BENCH OF ITAT AS REGARDS THE RATIONALE BEHIND THE INSERTION OF THE SECOND PROVISO TO SECTION 40(A) (IA) OF THE ACT AND ITS CONCLUSION TH AT THE SAID PROVISO IS DECLARATORY AND CURATIVE AND HAS RETROSPECTIVE EFFE CT FROM 1ST APRIL 2005, MERITS ACCEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE TO FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT IN ADOPTING THE R ATIO OF THE DECISION OF THE AGRA BENCH, ITAT IN (RAJIV KUMAR AGARWAL V. ACIT). 22. WHEN SUCH ARE THE VIEWS OF HON'BLE HIGH COURT, IT IS NOT OPEN TO US TO PROCEED ON THE BASIS THAT EVEN THOUGH THE AMENDMENT IS REQUIRED TO BE READ AS PROSPECTIVE, THE TRIBUNAL CANNOT DO SO AS IT IS A CREATURE OF THE INCOME TAX ACT ITSELF. IN OUR CONSIDERED VIEW, AND FOR THE DETAILED REASONS SET OUT ABOVE, AT BEST THE AMENDMENT IN SECTION 92B, AT LEA ST TO THE EXTENT IT DEALT WITH THE QUESTION OF ISSUANCE OF CORPORATE GUARANTE ES, IS EFFECTIVE FROM 1ST APRIL 2012. THE ASSESSMENT YEAR BEFORE US BEING AN ASSESSMENT YEAR PRIOR TO THAT DATE, THE AMENDED PROVISIONS OF SECTION 92 B H AVE NO APPLICATION IN THE MATTER. 23. FOR THIS REASON ALSO, THE IMPUGNED ALP ADJUSTME NT MUST STAND DELETED. WE MUST, HOWEVER, MAKE IT CLEAR THAT WHAT WE HAVE S TATED ABOVE, IN THE CONTEXT OF RETROSPECTIVE AMENDMENT, IS SPECIFICALLY IN THE CONTEXT OF TRANSFER PRICING LEGISLATION WHICH, AS WE HAVE OBSERVED EARL IER, BEING AN ANTI-ABUSE LEGISLATION, SEEKS A DEGREE OF COMPLIANT CONDUCT BY THE TAXPAYERS RATHER THAN BEING PRIMARILY A SOURCE OF REVENUE. 24. IN ALL FAIRNESS TO THE LEARNED DEPARTMENTAL REP RESENTATIVE, WE MAY ADD THAT THE DECISION OF HON'BLE DELHI HIGH COURT, IN T HE CASE OF NEW SKIES SATELLITE (SUPRA), WAS NOT AVAILABLE AT THE POINT O F TIME WHEN THIS MATTER CAME UP FOR HEARING, AND WE HAD, THEREFORE, NO OCCA SION TO HEAR REVENUE'S PERSPECTIVE ON THE SAME. WHILE THIS HEARING WAS CON CLUDED ON 7TH JANUARY, 2016, THE JUDGMENT IN NEW SKIES SATELLITE (SUPRA) W AS PRONOUNCED BY HON'BLE DELHI HIGH COURT ON 8TH FEBRUARY, 2016. HOW EVER, AS THAT IS NOT THE DECISIVE FACTOR SO FAR AS OUR CONCLUSIONS ARE CONCE RNED AND IT IS ONLY AN ADDITIONAL FACTOR IN SUPPORT OF OUR CONCLUSION, THA T DOES NOT MATTER REALLY. 14. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS S O EXPRESSED BY THE COORDINATE BENCH. ALL THE ARGUMENTS RAISED BY THE R EVENUE AUTHORITIES, IN THE IMPUGNED ORDERS AS ALSO IN THE SUBMISSIONS BEFORE U S, HAVE BEEN ELABORATELY DEALT WITH ABOVE, AND WE CONCUR WITH THE VIEWS OF THE CO- ORDINATE BENCH ON THE SAME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DEL ETE THIS ARMS LENGTH PRICE ADJUSTMENT OF RS 16,98,410. ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 47 - 15. GROUND NO. 2 IS THUS ALLOWED. 6. IT APPEARS FROM THE ABOVE JUDGMENT THAT RELYING UPON THE JUDGMENT PASSED BY THE MUMBAI TRIBUNAL IN THE CASE OF SIRO C LINPHARM PVT. LTD. VS. DCIT AND VICE VERSA, REPORTED IN (2016) 134 DTR 1 (MUMBAI), THE UPWARD ADJUSTMENT MADE ON NOTIONAL GUARANTEE FEES H AS BEEN DELETED. HENCE, TAKING INTO CONSIDERATION THE JUDGMENT PASSE D BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE ON THE IDENTICAL ISSUE WE FIND NO REASON TO DEVIATE FROM THE DECISION AND OBSERVATION IN ITS SU PPORT MADE THEREIN AND THUS, ACCORDINGLY WE DIRECT THE AO TO DELETE THE UP WARD ADJUSTMENT OF RS. 10,77,945/- FOR NOTIONAL GUARANTEE FEES. IN TH E RESULT, THIS GROUND OF APPEAL IS ALLOWED. 7. THE NEXT GROUND RELATES TO ADDITION OF RS. 23,52 ,547/- UNDER SECTION 10B FOR NOT BRINGING BACK CONVERTIBLE FOREI GN EXCHANGE OF EXPORT SALE WITHIN THE EXTENDED TIME. THE BRIEF FACTS LEADING TO THE CASE IS THIS THAT D URING THE ASSESSMENT PROCEEDING UPON PERUSAL OF THE FORM NO. 56G, IT WAS NOTICED THAT ASSESSEE HAS NOT RECEIVED PAYMENT OF EXPORT SALES O F CERTAIN INVOICES AMOUNTING TO RS. 6,46,47,317/-. SUCH AMOUNT WAS RE DUCED TO RS. 1,07,22,480/- AFTER EXTENDED TIME PERIOD AND IN VIE W OF THE PROVISIONS OF SEC. 155(11A) OF THE ACT. HENCE, THE EXEMPTION UND ER SECTION 10B OF THE ACT WAS REVISED AND RS. 23,52,547/- WAS DISALLO WED WITH RESPECT TO EXPORT SALES NOT RECEIVED OR BROUGHT INTO INDIA IN FOREIGN CONVERTIBLE EXCHANGE. IN APPEAL THE SAID ORDER WAS CONFIRMED T HE APPEAL OF THE FIRST APPELLATE AUTHORITY. HENCE, THE INSTANT APPEAL BEF ORE US. ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 48 - AT THE TIME OF HEARING OF THE INSTANT APPEAL THE L D. SENIOR COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IS REQUIRED TO BE VERIFIED BY THE LD. AO REGARDING THE AMOUNT N OT BROUGHT INTO INDIA INCONVERTIBLE FOREIGN EXCHANGE. IN VIEW OF THE PRO VISION UNDER SECTION 155(11A) OF THE ACT HE, THEREFORE, PRAYS FOR SETTIN G ASIDE THE ISSUE TO THE FILE OF THE LD. AO FOR VERIFICATION OF THE SAME WHI CH HAS NOT BEEN CONTROVERTED BY THE LD. DR WITH ALL HIS FAIRNESS. 8. WE HAVE HEARD THE RESPECTIVE PARTIES, WE HAVE AL SO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. IT APPEARS THAT THE REVENUE HAS REJECTED THE CLAIM OF THE ASSESSEE ON THE COUNT THAT UNLESS THE SALE PRECEDENTS ARE RE CEIVED INCONVERTIBLE FOREIGN EXCHANGE WITHIN THE PRESCRIBED TIME OR SUCH EXTENDED TIME AS GRANTED BY COMPETENT AUTHORITY DEDUCTION UNDER SECT ION 10B CANNOT BE GRANTED. HENCE, THE INSTANT APPEAL BEFORE US. THEREFORE, IN ORDER TO CONSIDER THE SUBMISSION MAD E BY THE LD. SENIOR COUNSEL APPEARING FOR THE ASSESSEE IN SUPPOR T OF HIS CLAIM THE PROVISION OF SEC. 155(11A) IS REQUIRED TO BE REPROD UCED:- (11A)WHERE IN THE ASSESSMENT FOR ANY YEAR, THE DED UCTION UNDER SECTION 10A OR SECTION 10B OR SECTION 10BA HAS NOT BEEN ALLOWED ON THE GROUND THAT SUCH INCOME HAS NOT BEEN RECEIVED IN CONVERTIBLE FOREIGN EXCHAN GE IN INDIA, OR HAVING BEEN RECEIVED IN CONVERTIBLE FOREIGN EXCHANGE OUTSIDE IN DIA, HAS NOT CONVERTED INTO CONVERTIBLE FOREIGN EXCHANGE OUTSIDE INDIA, HAS NOT BEEN BROUGHT INTO INDIA, BY OR ON BEHALF OF THE ASSESSEE WITH THE APPROVAL OF THE RES ERVE BANK OF INDIA OR SUCH OTHER AUTHORITY AS IS AUTHORIZED UNDER ANY LAW FOR THE TI ME BEING IN FORCE FOR REGULATING PAYMENTS AND DEALINGS IN FOREIGN EXCHANGE AND SUBSE QUENTLY SUCH INCOME OR PART THEREOF HAS BEEN OR IS RECEIVED IN, OR BROUGHT INTO , INDIA IN THE MANNER AFORESAID, THE ASSESSING OFFICER SHALL AMEND THE ORDER OF ASSESSME NT SO AS TO ALLOW DEDUCTION UNDER SECTION 10A OR SECTION 10B OR SECTION 10BA, AS THE CASE MAY BE, IN RESPECT OF SUCH INCOME OR PART THEREOF AS IS SO RECEIVED IN, OR BRO UGHT INTO, INDIA, AND THE PROVISIONS ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 49 - OF SECTION 154 SHALL, SO FAR AS MAY BE, APPLY THERE TO, AND THE PERIOD OF FOUR YEARS SHALL BE RECKONED FROM THE END OF THE PREVIOUS YEAR IN WHICH SUCH INCOME IS SO RECEIVED IN, OR BROUGHT INTO, INDIA. UPON PERUSAL OF THE PROVISION AS ENVISAGED 155(11A) OF THE ACT WE FIND THAT THE VERACITY OF THE CLAIMS NEEDS TO BE EXAMINED ON THE BASIS OF THE EVIDENCE IN REGARD TO AMOUNT OF CONVERTIBLE FOREIGN EXCHANGE AND THE TIME PERIOD SPECIFIED IN ORDER TO DETERMINE THE DISALLOWANCE, IF ANY, AND THUS, WE FIND IT FIT TO SET ASIDE THE ISSUE TO THE FILE OF THE AO TO AMEND THE ORDER OF THE ASSESSMENT SO AS TO ALLOW DEDUCTIO N UNDER SECTION 10B OF THE ACT IN RESPECT OF SUCH INCOME OR PART THEREOF W HICH IS BROUGHT INTO INDIA AND TO PASS ORDER IN THE LIGHT OF THE PROVISI ON LAID DOWN UNDER SECTION 155(11A) OF THE ACT. WHILE DOING SO THE LD . AO SHALL GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE ASSESSEE WILL BE AT LIBERTY TO ADDUCE EVIDENCE IN SUPPORT OF ITS CLAIM UNDER SECTION 10B OF THE ACT AS MENTIONED HEREINABOVE. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 28/07/2020 SD/- SD/- (WASEEM AHMED) (MS. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28/07/2020 TANMAY, SR. PS TRUE COPY ITA NO.2204/AHD/2013 MEGHMANI ORGANICS LTD. VS. DCIT ASST.YEAR 2009-10 - 50 - TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)- 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 22.07.2020 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23.07.2020 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 27 .07.2020 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 27.07.202 0 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S .07.2020 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28 .07.2020 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER