Rain Cements Limited, Hyd, Hyderabad V. DCIT, Circle-3(1), Hyd, Hyderabad

ITA 309/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2567 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Keywords: Capital asset; Business income; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Retrospective amendment; Question of law; Initiation of penalty proceedings; Wholly owned subsidiary; Reasonable cause; Commercial expediency; Revised return; Unabsorbed depreciation
• Section: 92C; 143(3); 92D; 92B; 92E; 234B; 14A; 115JB; 10B; 263; 90; 92

Judgement Text

ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 1 OF 82 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER APPEAL NO APPELLANT RESPONDENT A.Y 222/HYD/2014 RAIN CEMENTS LTD (FORMERLY KNOWN AS RA IN CII CARBON (INDIA) LTD PAN:AABCR 8858F DCIT, CIRCLE 3(1) HYDERABAD 2009-10 309/HYD/2015 -DO- -DO- 2010-11 344/HYD/2015 RAIN INDUSTRIES LTD (FORMERLY KNOWN AS RAIN COMMODITIES LTD) HYDERABAD PAN: AABCP 2276 K -DO- 2010-11 259/HYD/2016 RAIN CEMENTS LTD HYDERABAD PAN: AABCR 8858 F -DO- 2011-12 260/HYD/2016 RAIN INDUSTRIES LTD HYDERABAD PAN: AABCP 2276 K -DO- 2011-12 315/HYD/2015 DCIT CIRCLE 3(1) HYDERABAD RAIN COMMODITIES LTD HYDERABAD PAN:AABCP 2276K 2010-11 433/HYD/2016 -DO- RAIN INDUSTRIES LTD HYDERABAD PAN:AABCP 2276K 2011-12 434/HYD/2016 -DO- RAIN CEMENTS LTD HYDERABAD PAN:AABCR 8858 F 2011-12 FOR ASSESSEE : SMT.SUVIBHA NOLKHA FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR DATE OF HEARING : 27.02.2017 DATE OF PRONOUNCEMENT : 26.04.2017 ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 2 OF 82 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THE ABOVE APPEALS ARE FILED BY THE ASSESSEE AND TH E REVENUE FOR THE RESPECTIVE A.YS. ITA NO.222/HYD/2014-A.Y 2009-10 (ASSESSEES APPEAL) THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE AO DATED 23.12.2013 PASSED U/S 143(3) R.W.S. 14 4C(5) AND 144C(13) OF THE I.T. ACT, PURSUANT TO THE DIRECTION S OF THE DRP, DATED 27.11.2013. THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: TRANSFER PRICING ('TP') MATTERS 1. REJECTING THE ECONOMIC ANALYSIS AND SUBMISSIONS OF THE COMPANY AND MAKING TP ADJUSTMENTS TO THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISE CAE'): PURCHASE OF GREEN PETROLEUM COKE ('GPC') - RS 6,86,97,017; SHAREHOLDERS CORPORATE GUARANTEE- RS 13,86,30,000. GROUND SPECIFIC TO TP ADJUSTMENT FOR PURCHASE OF GPC 2. DETERMINATION OF ARM'S LENGTH PRICE ('ALP') OF CERTAIN PURCHASES OF GPC MADE BY THE APPELLANT FROM AES. 3. NOT APPRECIATING THE FACT THAT THE GPC PURCHASES FROM AE ARE AT SAME PRICE AT WHICH AE PURCHASED FROM INDEPENDENT SUPPLIER. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 3 OF 82 4. MAKING ADJUSTMENT ON SELECTIVE TRANSACTION WITHOUT CONSIDERING ALL THE TRANSACTION WITH AE DURING THE YEAR. 5. NOT APPRECIATING THE FACT THAT THE PRICES OF GPC VARY ON THE BASIS OF QUALITY AND HENCE, DIFFERENT CONSIGNMENTS OF GPC ARE NOT COMPARABLE. 6. DISREGARDING THE SUBMISSIONS/ EVIDENCE SUBMITTED BY THE APPELLANT. 7. NOT APPRECIATING THE FACT THAT THE PRICES OF GPC HAVE FLUCTUATED WIDELY DURING THE RELEVANT PREVIOUS YEAR, DUE TO EXTERNAL MARKET CONDITIONS AND HENCE, DIFFERENT CONSIGNMENTS OF GPC ARE NOT COMPARABLE. GROUND SPECIFIC TO TP ADJUSTMENT ON SHAREHOLDER CORPORATE GUARANTEE 8. MAKING ADJUSTMENT WHILE DETERMINATION OF ALP ON THE SHAREHOLDER CORPORATE GUARANTEE PROVIDED TO THE BANK ON BEHALF OF ITS WHOLLY OWNED SUBSIDIARY ('WOS'). 9. DETERMINING THE ALP ON THE SHAREHOLDER CORPORATE GUARANTEE PROVIDED BY THE COMPANY @ 2% ON THE GUARANTEE AMOUNT. 10. NOT APPRECIATING THE FACT THAT THE WOS WAS SET UP AS A SPECIAL PURPOSE VEHICLE FOR THE ACQUISITION OF BUSINESS IN USA. 11. NOT APPRECIATING THE FACT THAT AE HAD ALSO GUARANTEED THE LOAN TAKEN BY THE APPELLANT AND HENCE THE TRANSACTION IS RECIPROCATED. 12. NOT APPRECIATING THAT THE SHAREHOLDER CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION U/S 92B OF THE ACT. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 4 OF 82 13. NOT APPRECIATING THAT THE AMENDMENT TO SECTION 92B WOULD NOT APPLY TO THE FACTS OF THE CASE. 14. NOT UNDERTAKING AN OBJECTIVE ANALYSIS FOR DETERMINING THE ALP ON THE SHAREHOLDER CORPORATE GUARANTEE. 15. NOT MAKING ADJUSTMENTS FOR THE DIFFERENCES IN THE COMPARABLE TRANSACTIONS SELECTED VIS- A-VIS SHAREHOLDER CORPORATE GUARANTEE OF THE APPELLANT. 16. DISCRIMINATING THE US WOS BY DETERMINING THE ALP FOR SHAREHOLDER CORPORATE GUARANTEE VIS-A-VIS SIMILAR SHAREHOLDER CORPORATE GUARANTEE PROVIDED BY PARENT COMPANIES TO INDIAN SUBSIDIARIES IN VIOLATION OF ARTICLE 26 OF INDIAN DOUBLE TAXATION AVOIDANCE AGREEMENT. ('DTAA'). CORPORATE TAX MATTERS 17. NOT PROVIDING CREDIT OF TDS OF RS.1,87,322 18. COMPUTATION OF INTEREST U/S 234C OF THE ACT 19. INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 2. GROUND OF APPEAL NO.1 IS GENERAL IN NATURE, HENC E NEEDS NO SPECIFIC ADJUDICATION. 3. AS REGARDS GROUNDS OF APPEAL NO. 2 TO 7, BRIEF F ACTS ARE THAT THE ASSESSEE COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND TRADING OF CEMENT, CALCINED PETROLE UM COKE (CPC) AND GENERATION OF ELECTRICITY, FILED ITS RETU RN OF INCOME FOR THE RELEVANT A.Y ON 25.09.2010 ADMITTING A TOTAL LOS S OF RS.(-) 1,30,58,11,139 UNDER THE NORMAL PROVISIONS OF THE I NCOME TAX ACT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 5 OF 82 AND BOOK PROFIT OF RS.39,90,66,033 U/S 115JB OF THE ACT. SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN O F INCOME ON 9.10.2010 DISCLOSING NET INCOME OF RS.1,45,56,72,76 0 UNDER NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS. 39,90,66,033 U/S 115JB OF THE ACT. 4. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS FURNISHE D A REPORT IN FORM NO.3CEB IN ACCORDANCE WITH THE PROVISIONS OF SE CTION 92E ON 30.09.2009. AS PER THE REPORT, THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES AND THEREFO RE, THE AO REFERRED THE DETERMINATION OF THE ALP OF THE INTERN ATIONAL TRANSACTIONS TO THE FILE OF THE TPO U/S 92CA OF THE ACT. 5. THE TPO OBSERVED THAT THE ASSESSEE GENERATES ELECTRICITY FROM THE EXHAUST HOT GASES AND COKE FIN ES MATERIAL GENERATED DURING THE MANUFACTURE OF CALCINATED PETR OLEUM COKE (CPC) AND SUPPLIES SUCH ELECTRICITY TO THE INDUSTRI AL USERS IN THE STATE OF A.P AND THAT THE INTERNATIONAL TRANSACTION S WITH AES ARE ONLY IN CPC MANUFACTURING DIVISION. VIDE THESE TRAN SACTIONS, THE ASSESSEE HAD PURCHASED FROM RAIN CII CARBON LLC, GR EEN PETROLEUM COKE (GPC) AT RS.400,21,09,879, CPC AT RS.10,68,92,448 AND SOLD CPC TO RAIN CII CARBON LLC AT RS.73,99,15,000. THE TPO HAS OBSERVED THAT THE ASSE SSEE HAS BENCH MARKED THESE TRANSACTIONS USING THE INTERNAL CUP METHOD. THE TPO HELD THAT THE PURCHASE AND SALE OF CPC ARE AT ARMS LENGTH AND SO IS THE TRANSACTION OF REIMBURSEMENT O F EXPENSES. WITH REGARD TO PURCHASE OF GPC, HE OBSERVED THAT TH E ASSESSEE HAS ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 6 OF 82 COMPARED THE PRICE AT WHICH THE GPC WAS IMPORTED FR OM THE AE WITH THE PRICE AT WHICH THE GPC WAS IMPORTED FROM N ON AES. HOWEVER, THE TPO WAS OF THE OPINION THAT SOME OF TH E TRANSACTIONS OF PURCHASE OF GPC ARE NOT WITHIN THE ARMS LENGTH RANGE. HE OBSERVED THAT THERE WERE 5 TRANSACTIONS OF PURCHASE AND WHEN THEY ARE COMPARED WITH NON AE TRANSACTIONS OF THE N EAREST AVAILABLE DATES, THEY ARE NOT WITHIN THE ARMS LENG TH RANGE. THEREFORE, THE ASSESSEES EXPLANATION WAS CALLED FO R AND THE ASSESSEE SUBMITTED ITS REPLY VIDE LETTER DATED 12.0 9.2012. AFTER CONSIDERING THE ASSESSEES EXPLANATIONS, THEREAFTER THE TPO PROCEEDED TO REJECT THE ASSESSEES TP STUDY AND CON CLUDED THAT THE ASSESSEE HAD MADE AN EXCESS PAYMENT OF RS.6,86,97,0 17 AND DECLARED IT AS A SHORTFALL TO BE ADJUSTED U/S 92CA( 3) OF THE ACT. THE DRAFT ASSESSMENT ORDER WAS ACCORDINGLY PASSED AGAIN ST WHICH THE ASSESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP. T HE DRP CONFIRMED THE ORDER OF THE TPO/AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE VERY SAME ISSUE HAD ARISEN IN ASSESSEES OWN CA SE FOR THE A.Y 2009-10 IN THE CASE OF RAIN COMMODITIES LTD AND THI S TRIBUNAL AFTER CONSIDERING THE ISSUE AT LENGTH HAS REMANDED THE ISSUE TO THE FILE OF THE TPO WITH CERTAIN OBSERVATIONS. THE COPY OF THE ORDER OF THE TRIBUNAL IS FILED BEFORE US. 7. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 7 OF 82 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT FOR THE VERY SAME A.Y IN THE CASES OF ASSESSEES GROUP COMPANIES, THE TRIBUNAL IN ITA NO. 83/HYD/2014 AND OTHERS DATED 28.09.2016 HAS CONSIDERED THIS ISS UE AT LENGTH AND HAS HELD AS UNDER: 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY WHICH IS ENGAGED IN MANUFACTURE AND TRADING OF CEMENT, FILED ITS RETURN OF INCOME FOR THE A.Y. 2009-2010 ON 13.09.2009 DECLARI NG TOTAL INCOME OF RS.52,40,57,941. THE RETURN WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER, THE ASSESSMENT WAS TAKEN-UP FOR SCRUTINY BY ISSUANCE OF A NOTICE UNDER SECTION 143(2) OF THE ACT. SINCE THE ASSESSEE HAD ENTERED INTO INT ERNATIONAL TRANSACTIONS WITH ITS A.E., THE DETERMINATION OF TH E ALP OF THE INTERNATIONAL TRANSACTION WAS REFERRED TO THE TPO. THE TPO HAS PASSED THE ORDER UNDER SECTION 92CA OF THE ACT ON 31.10.2012 PROPOSING ADJUSTMENTS TO THE RETURNED INCOME OF THE ASSESSEE. ACCORDINGLY, A DRAFT ASSESSMENT ORDER WAS PASSED ON 28.02.2013 BY THE ASSESSING OFFICER DETERMINING THE INCOME AT RS.97,92,70,466 BY PROPOSING THE FOLLOWING TWO ADDI TIONS I.E., (1) TP ADJUSTMENT OF RS.43,17,62,526 AND (2) DISALLOWAN CE OF SAP EXPENSES OF RS.2,34,50,000. 3. AGGRIEVED BY THE PROPOSED ADDITIONS, THE ASSESSE E PREFERRED ITS OBJECTIONS BEFORE THE DRP WHICH GRANTED PARTIAL REL IEF TO THE ASSESSEE AND IN ACCORDANCE WITH THE DIRECTIONS OF T HE DRP THE FINAL ASSESSMENT ORDER WAS PASSED. AGAINST THE RELIEF GRA NTED BY THE DRP, THE REVENUE IS IN APPEAL BEFORE US, WHILE THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF THE ADJUSTMENTS PROPOSED BY THE ASSESSING OFFICER. IN THE ASSESSEE'S APPEAL, TH E ASSESSEE HAS RAISED AS MANY AS 27 GROUNDS OF APPEAL. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT GRO UND OF APPEAL NO.1 IS GENERAL IN NATURE AND NEEDS NO SPECIFIC ADJ UDICATION AND GROUND NOS. 24 TO 26 ARE AGAINST THE LEVY OF INTERE ST UNDER SECTION 234B AND 234C OF THE ACT AND BEING CONSEQUENTIAL IN NATURE, MAY BE REMANDED TO THE ASSESSING OFFICER FOR GIVING CO NSEQUENTIAL EFFECT. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. GROUND NO.27, BEING AGAINST THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, IS A PREMATURE GROUND AND IS ACCORDING LY REJECTED. 4. AS REGARDS GROUNDS NO.2 TO 8, THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD PURCHASED GREEN PETROLEUM COKE ('GPC') FOR A SUM OF RS.125,41,03,518 FROM ITS A.E. THE ASSESSEE BENC HMARKED THE INTERNATIONAL TRANSACTIONS USING INTERNAL CUP METHO D I.E., IT HAS ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 8 OF 82 COMPARED ITS PURCHASE PRICE OF GPC FROM ITS A.E. WI TH ITS PURCHASES OF GPC FROM ITS NON-A.ES. THE TPO HOWEVER , OBSERVED THAT ON EXAMINATION OF THE COMPARATIVE ANALYSIS DON E BY THE ASSESSEE, IT IS FOUND THAT SOME TRANSACTIONS WERE N OT WITHIN THE ARMS LENGTH RANGE. HE HAS PRESENTED THE SAME IN THE TABLE WHICH IS REPRODUCED HEREUNDER FOR READY REFERENCE. IMPORT PURCHASES OF GREEN PETROLEUM COKE FROM A.E. AND NON-A.E. FOR THE A.Y. 2009-10 A.E. PURCHASES NON-AE PURCHASES DIFF. BETWEEN THE FOB PER UNIT DIFF. AS % OF AE PURCHASE PRICE INV. NO IN. DATE TOTAL INV. VALUE (USD) NET QTY (MT) FOB PER UNIT (USD) INV. NO INV. DATE TOTAL INV. VALUE (USD) NET QTY. (MT) FOB PER UNIT (USD) 107944/ 100871 19.8.08 501032811 10253 436.8 008-08 12.8.08 1396823 7940 176 260.75 59.70 SAME ITEM SOLD BY AE TO A GRP.CO(RAIN CII CARBON) DIFF. BETWEEN THE FOB PER UNIT PRICES DIFF AS % OF AE PURCHASE PRICE INV. NO INV. DATE TOTAL INV. VALUE (USD) FOB PER UNIT (USD) 082208T 22.8.8 1395192 5847.9 238 198.8 45.51 082208M 22.8.8 330700 50106 66 370.8 84.89 107909 15.8.8 4244990 14739.6 288 148.8 34.07 AE PURCHASES 108108/ 108110 28.9.8 844222 19778 320 108095 26.9.08 2651945 13120 202 118 36.88 4.1. THE TPO THEREFORE, BROUGHT THESE DISCREPANCIES TO THE NOTICE OF THE ASSESSEE AND ASKED THE ASSESSEE TO EXPLAIN T HE SAID DISCREPANCIES. THE ASSESSEE, VIDE ITS REPLY DATED 1 7.10.2012 SUBMITTED THAT THE A.E HAS SOLD THE GPC TO THE ASSE SSEE AT ITS PURCHASE PRICE AND THERE IS NO MARK-UP ON THE SAME AND HENCE, THERE IS NO ARMS LENGTH ADJUSTMENT TO BE MADE. HOWE VER, THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S EXP LANATION HOLDING THAT, UNDER THE CUP METHOD, THE CONTROLLED TRANSACTION HAS TO BE COMPARED WITH AN UNCONTROLLED TRANSACTION AND NOT WITH ANY OTHER CONTROLLED TRANSACTION. HE HELD THAT IN THE CASE OF THE ASSESSEE, A.E'S PURCHASE OF GPC FROM THE ULTIMA TE SUPPLIERS IS ALSO A CONTROLLED TRANSACTION AND THEREFORE, IT CAN NOT BE COMPARED WITH THE ASSESSEE'S PURCHASE OF GPC FROM T HE A.E. HE, THEREFORE, DID NOT ACCEPT THE ASSESSEE'S CONTENTION S THAT SINCE IT HAS PURCHASED THE GPC FROM THE A.E. AT THE SAME PRI CE AT WHICH A.E. HAS PURCHASED IT, TO BE AT ARMS LENGTH. HE HE LD THAT THE ASSESSEE HAS FAILED TO ESTABLISH THAT GPC SUPPLIED BY THE A.E. WAS OF BETTER QUALITY THAN THAT SUPPLIED BY NON-A.ES AN D FURTHER THAT IT HAS ALSO FAILED TO SHOW THAT THE TERMS OF PAYMEN T IN THE A.E. PURCHASE WERE NOT IN ANY WAY BENEFICIAL TO IT THAN THOSE IN THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 9 OF 82 NON-A.E. PURCHASES. HE THEREFORE, HELD THAT THE ASS ESSEE'S CONTENTION THAT THE PURCHASE OF GPC FROM THE A.E. I S AT ARMS LENGTH IS NOT ACCEPTABLE. THEREAFTER, HE PROCEEDED TO COMPUTE THE ALP AND ARRIVED AT A SHORT-FALL OF RS.20,53,36,947 AND PROPOSED THE ADDITIONS. THE ASSESSING OFFICER, IN THE DRAFT ASSESSMENT ORDER, PROPOSED THE ADDITION AGAINST WHICH THE ASSE SSEE RAISED ITS OBJECTIONS BEFORE THE DRP. HOWEVER, THE DRP REJECTE D THE ASSESSEE'S OBJECTIONS AND THEREFORE, THE ASSESSEE I S IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REIT ERATING ASSESSEE'S SUBMISSIONS BEFORE THE TPO AND DRP, HAS DRAWN OUR ATTENTION TO THE ORDER OF THE TPO UNDER SECTION 92CA OF THE ACT TO DEMONSTRATE THAT THE TPO, INSTEAD OF COMPARING THE A.E. TRANSACTIONS WITH NON-A.E. TRANSACTIONS, HAS COMPAR ED THE NON- A.E. TRANSACTIONS WITH OTHER CONTROLLED TRANSACTION S, WHICH ACCORDING TO HIM, IS AGAINST THE PRINCIPLES OF T.P. ADJUSTMENTS. FURTHER, HE ALSO SUBMITTED THAT UNDER CUP METHOD, S TRICT COMPARISON HAS TO BE MADE AS TO THE NATURE AND QUAL ITY OF THE PRODUCT. HE HAS DRAWN OUR ATTENTION TO PAGES 2 AND 3 OF THE PAPER BOOK WHEREIN THE TRANSACTIONS PICKED-UP BY TH E TPO TO BE NOT AT ARMS LENGTH PRICE HAVE BEEN ANALYSED. THE A SSESSEE HAS PRODUCED THE COMPARATIVE CHART OF TRANSACTIONS CONS IDERED BY THE TPO TO BE NOT AT ARM'S LENGTH AND POINTED OUT THAT THE OTHER PRODUCT IN TERMS OF QUALITY AND COMPOSITION WITH TH E TYPE OF COKE PURCHASED BY THE ASSESSEE FROM EACH VENDOR IS AT VA RIANCE. HE SUBMITTED THAT OUT OF 07 TRANSACTIONS PICKED-UP BY THE TPO, ONE OF THE TRANSACTION IS FOR PURCHASE OF 'SHOT COKE' W HILE, THE OTHER TRANSACTIONS WERE FOR THE PURCHASE OF 'SPONGE COKE' . HE SUBMITTED THAT THE QUALITY OF THE PRODUCT ALSO DIFFERS AS IS EVIDENT FROM THE DIFFERENCE IN THE 'SULPHER CONTENT' OF THE PRODUCT. HE SUBMITTED THAT SULPHER CONTENT DETERMINES THE IMPURITY OF THE PRODUCT PURCHASED. HE HAS ALSO DRAWN OUR ATTENTION TO THE D IFFERENCE IN LOCATIONS FROM WHICH THE PRODUCT HAS BEEN PURCHASED . HE SUBMITTED THAT DEPENDING ON THE PRODUCT SOURCE, THE QUALITY OF THE PRODUCT DIFFERS AND THE PRICE ALSO VARIES. THEREFOR E, ACCORDING TO HIM, THE PRICE OF GPC IS INVERSELY RELATED TO THE C ONTENT OF THE SULPHER AND ALSO THE LOCATION OF THE SOURCE AND HEN CE, THE TRANSACTIONS CANNOT BE COMPARED WITH EACH OTHER. TH EREFORE, ACCORDING TO HIM, THE TPO HAS ERRED IN COMPARING TH E A.E. TRANSACTIONS WITH OTHER CONTROLLED TRANSACTIONS AND ALSO IN PICKING-UP ONLY SOME TRANSACTIONS. HE SUBMITTED THA T IF THE TRANSACTIONS IN ENTIRETY ARE CONSIDERED, THEN THE M ARGIN OF THE ASSESSEE IS VERY MUCH AT ARMS LENGTH PRICE WITH TH E OTHER NON- A.E. TRANSACTIONS. FURTHER, ACCORDING TO HIM, THE T PO HAS ALSO ERRED IN NOT TAKING INTO CONSIDERATION THE DIFFEREN CE IN THE PRODUCT AND QUALITY. HE THEREFORE, PRAYED THAT THE ISSUE MAY BE REMANDED TO THE FILE OF THE TPO FOR FRESH ANALYSIS. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 10 OF 82 6. THE LD. D.R. HOWEVER, SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW AND SUBMITTED THAT THERE IS HUGE DIFFERENCE I N THE PRICE CHARGED BETWEEN THE ASSESSEE AND A.E. AND RELATED P ARTIES. AS REGARDS THE ASSESSEE'S CONTENTION THAT IT IS A BACK -TO- BACK TRANSACTION I.E., A.E. OF THE ASSESSEE HAS SUPPLIED THE MATERIAL TO THE ASSESSEE AT ITS PURCHASE PRICE, THE D.R. SUBMIT TED THAT THE SAME IS NOT RELEVANT AS THERE MAY BE DIFFERENT CRIT ERIA AT WHICH THE A.E. HAS PURCHASED THE PRODUCT AS COMPARED TO T HE CIRCUMSTANCES UNDER WHICH THE ASSESSEE HAS PURCHASE D THE MATERIAL FROM ITS A.E. AS REGARDS THE DIFFERENCE IN THE PRODUCTS AND THEIR QUALITY, HE SUBMITTED THAT THE SAME IS NO T SUSTAINABLE AS THERE IS NOT MUCH OF VARIATION IN THE PRICE EVEN TH OUGH THE ASSESSEE HAS POINTED OUT THE VARIATIONS IN THE SULP HER CONTENT. THEREFORE, ACCORDING TO THE LD. D.R. THE TP ADJUSTM ENT CONFIRMED BY THE DRP SHOULD BE UPHELD. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT BOTH THE ASSESSEE AS WELL AS T HE ASSESSING OFFICER HAVE ADOPTED THE CUP METHOD FOR THE T.P. ST UDY AND THE DETERMINATION OF THE ARMS LENGTH PRICE OF THE TRANS ACTIONS. IT IS ALSO SEEN THAT THE ASSESSEE HAS ENTERED INTO VARIOU S INTERNATIONAL TRANSACTIONS WITH VARIOUS PARTIES BOTH A.E. AND NON -A.E. FOR PURCHASE OF GREEN PETROLEUM COKE ('GPC'). THE ASSES SING OFFICER HAS PICKED-UP ONLY A FEW TRANSACTIONS TO HOLD THAT THEY ARE NOT AT ARMS LENGTH. WE ARE CONVINCED BY THE SUBMISSIONS O F THE ASSESSEE THAT THE TRANSACTIONS WITH THE A.E. SHOULD BE COMPA RED WITH THE TRANSACTIONS WITH NON-A.ES AND CANNOT BE COMPARED T O ANY OTHER CONTROLLED TRANSACTIONS. THE TPO HAS COMPARED THE T RANSACTION OF THE ASSESSEE WITH ITS A.E. WITH OTHER CONTROLLED TR ANSACTIONS WHICH IS NOT PERMISSIBLE UNDER THE T.P. REGULATIONS AND G UIDELINES. FURTHER, THE DIFFERENCES BETWEEN THE PRODUCTS AND T HEIR QUALITY ALSO HAVE NOT BEEN TAKEN INTO CONSIDERATION BY THE TPO. THE CUP METHOD REQUIRES THE MOST DIRECT COMPARISON BETWEEN THE PRODUCTS AND IN CASE OF ANY VARIATION BETWEEN THE PRODUCTS, ADJUSTMENTS HAVE TO BE CARRIED OUT FOR SUCH VARIATIONS BEFORE C OMPARING THE PRICES. IT REQUIRES CLOSE SIMILARITY IN PRODUCTS, P ROPERTY OR SERVICES THAT ARE INVOLVED AND WHERE THE PRICES OF THE PRODUCT FLUCTUATES REGULARLY, TIMING OF THE TRANSACTION IS ALSO RELEVANT, I.E., THE MARKET CONDITIONS, AND THE TERMS AND COND ITIONS OF THE TRANSACTIONS WOULD ALSO MAKE MATERIAL DIFFERENCE. T HUS, THE SIMILARITY OF PRODUCTS AND THEIR QUALITY AND TERMS AND CONDITIONS SUCH AS SCOPE AND TERMS OF WARRANTEES PROVIDED, VOL UME OF SALES OR PURCHASES, CREDIT TERMS, ETC., LEVEL OF THE MARK ET SUCH AS WHOLESALE OR RETAIL ETC., AND THE GEOGRAPHIC MARKET I.E., THE PLACE IN WHICH THE TRANSACTION TAKES PLACE (LIKE A COUNTR Y), THE FOREIGN CURRENCY RISKS, THE ALTERNATIVES REALISTICALLY AVAI LABLE TO THE BUYER AND SELLER AND THE INTANGIBLE PROPERTY ATTACHED TO THE SALE ETC., ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 11 OF 82 ARE ALL THE FACTORS TO BE CONSIDERED WHILE COMPARIN G A TRANSACTION UNDER THE CUP METHOD. 7.1. FROM THE CHART PRODUCED BY THE ASSESSEE REFERR ED TO IN THE ABOVE PARAS, IT IS NOTICED THAT THE ASSESSEE HAD PU RCHASED THE GPC FROM VARIOUS COUNTRIES AND THEREFORE, THE GEOGRAPHI CAL SOURCE, INFLUENCES THE QUALITY AND COMPOSITION OF THE PRODU CT AND PROPORTIONATELY THE PRICE ALSO. THEREFORE, IN OUR O PINION, THE T.P. ANALYSIS MADE BY THE TPO NEEDS RE-CONSIDERATION. IN VIEW OF THE SAME, GROUNDS OF APPEAL NO. 2 TO 8 ARE REMITTED TO THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH ANALYSIS IN ACCORDA NCE WITH RULE 10B(1)(A) OF THE I.T. RULES. 9. SINCE THE FACTS BEFORE US ARE EXACTLY THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE ALSO TO THE FILE OF THE TPO FOR FRESH ANALYSIS IN ACCORDANCE WITH RULE 10B(1)(A) OF INCOME TAX RULES AND ALSO AS DIRECTED BY THE TRIBUNAL IN THE C ASE OF RAIN COMMODITIES LTD/RAIN INDUSTRIES LTD. THUS GROUNDS O F APPEAL NOS. 2 TO 7 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS GROUND NOS. 8 TO 16, BRIEF FACTS ARE THAT THE ASSESSEE THROUGH A COMMON FACILITIES AGREEMENT DATE D 17.07.2007 IN CONNECTION WITH ACQUISITION OF CII CARBON LLC HA S PROVIDED A CORPORATE GUARANTEE FOR A COMBINED LOAN OF US$ 150 MILLION WHEREIN THE ASSESSEE HAS GUARANTEED THE LOANS AVAIL ED BY ITS AES IN USA AND AE IN USA GUARANTEED THE LOAN AVAILED BY THE ASSESSEE. THE TPO ANALYSED THE INTEREST COVERAGE RA TIO AND THE DEBT EQUITY RATIO OF THE ASSESSEE AND ITS AE AND OB SERVED THAT THE ASSESSEE HAS BEEN SHOWING LOWER DEBT EQUITY RATIO A ND HIGHER INTEREST COVERAGE AND HENCE ENJOYS A BETTER CREDIT RATING AS COMPARED TO ITS AE. THUS, HE WAS OF THE OPINION THA T THE GUARANTEE GIVEN BY THE ASSESSEE CONVERTED A RISKY L OAN INTO A RISK FREE LOAN TO THE BANKERS, WHICH PROVIDED LOANS TO T HE ASSESSEES AE IN USA AND THEREFORE, THE ASSESSEE CARRIES HUGE COS TS IN TERMS OF ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 12 OF 82 THE RISKS TAKEN AND THEREFORE IS REQUIRED TO BE COM PENSATED IN THE FORM OF A FEE FOR PROVIDING THE BANK GUARANTEE AND THAT THE ASSESSEE OUGHT TO HAVE CHARGED THE GUARANTEE COMMIS SION ON THE CORPORATE GUARANTEES GIVEN BY IT. THE TPO CONSIDERE D THE CUP AS THE MOST APPROPRIATE METHOD AND HELD THE GUARANTEE FEE OF 2% ON THE LOAN GUARANTEED BY THE ASSESSEE AS REASONABLE. HE ACCORDINGLY DETERMINED THE ALP AND SUGGESTED THE ADJUSTMENT U/S 92CA OF THE ACT. THE AO PASSED THE DRAFT ASSESSMENT ORDER A GAINST WHICH THE ASSESSEE PREFERRED ITS OBJECTION BEFORE THE DRP . THE DRP CONFIRMED THE DRAFT ASSESSMENT ORDER ON BOTH THE CO UNTS AND THE FINAL ASSESSMENT ORDER WAS PASSED AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 11. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF APPROPRIATE GU ARANTEE FEE ON CORPORATE GUARANTEE GIVEN BY THE ASSESSEE TO AES IN USA HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF RAIN COMMODIT IES (NOW KNOWN AS RAIN INDUSTRIES) FOR THE VERY SAME A.Y AND THIS TRIBUNAL IN ITA NO.83/HYD/2014, DATED 28.09.2016 HAS CONSIDE RED THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. EVEREST KANTO CYLINDER LTD VS. DCIT, WHEREIN T HE CORPORATE GUARANTEE FEE AT 0.50% WAS ACCEPTED. FURTHER IT IS A LSO SUBMITTED THAT IN THE CASE OF RAIN COMMODITIES FOR THE A.Y 200 9-10, ALSO THIS ISSUE HAD ARISEN AND THE TRIBUNAL HAD HELD THE LIBO R + 0.50% TO BE REASONABLE GUARANTEE FEE. COPIES OF THE ORDERS A RE FILED BEFORE US. 12. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT IN THE CASE OF RAIN COMMODI TIES LTD FOR THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 13 OF 82 VERY SAME A.Y 2009-10 (CITED SUPRA), THE TRIBUNAL HA D CONSIDERED THE ISSUE AT LENGTH AND AT PARAS 8 TO 10.1 HAS HELD AS UNDER: 8. AS REGARDS GROUNDS NO. 9 TO 21 AGAINST THE DIREC TION OF THE DRP TO CALCULATE THE GUARANTEE FEE AT 1.25% ON THE GUARANTEE AMOUNT AS AGAINST THE TPO'S DIRECTION TO COMPUTE IT AT 2% ON THE GUARANTEE AMOUNT OF RS.300 CRORES IN FAVOUR OF THE LENDERS TO THE A.E., THE RAIN COMMODITIES USA INC., THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE HAD ARISEN IN AS SESSEE'S OWN CASE IN THE EARLIER YEARS AND THE TRIBUNAL HAD DIRE CTED THE ASSESSING OFFICER TO ADOPT THE LIBOR+ 0.50% AS GUAR ANTEE FEE. HE PLACED RELIANCE UPON THE DECISION OF MUMBAI TRIB UNAL IN THE CASE OF GLENN MARK PHARMACEUTICALS WHICH HAS BEEN F OLLOWED BY THIS TRIBUNAL IN ASSESSEE 'S OWN CASE FOR THE A.Y. 2008-09. 9. THE LD. D.R. HOWEVER, SUPPORTED THE ORDERS OF TH E TPO AND SUBMITTED THAT WHERE THE BORROWED FUNDS ARE ADVANCE D BY THE ASSESSEE IN INDIA TO THE A.E. IN USA, THEN THE LIBO R RATE CANNOT BE ADOPTED. HE SUBMITTED THAT THE RATES PREVAILING IN INDIA SHOULD BE ADOPTED AS RIGHTLY DONE BY THE TPO. HE ALSO FURT HER DISTINGUISHED THE INTEREST RATE ON LONG TERM LOANS AND SHORT TERM LOANS AND SUBMITTED THAT THE LIBOR RATE IS APPLICAB LE ONLY ON SHORT TERM LOANS. 10. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT IN ASSESSEE'S OWN CASE FOR THE A.Y. 2008-09, 'B' BENCH OF THIS TRIBUNAL, (TO WHICH ONE OF US I.E ., J.M. IS THE SIGNATORY), HAS CONSIDERED THE ISSUE AT LENGTH AND AT PARAS 10 TO 14 BY TAKING NOTE OF THE DECISION IN THE CASE OF M/ S. EVEREST KANTO CYLINDER LTD., VS. DCIT, THE ITAT HAS UPHELD THE CO RPORATE GUARANTEE FEE AT LIBOR + 0.50%. THE RELEVANT PARAGR APHS ARE REPRODUCED HEREUNDER FOR READY REFERENCE. ' 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. THE ASSESSEE FACILITATED THE ACQUISITION OF CII CARBON LLC BY RCUSA BY LENDING LOAN TO ITS WHOLLY OWNED ENTERPRISES. THE ASSESSEE HAS TAKEN THE DECISION TO MAKE INVESTMENT IN ITS AE EITHER ON SHARE CAPITAL O R LENDING LOAN USING ITS BUSINESS EXPEDIENCY. SINCE, I T HAD MADE THE DECISION TO MAKE LOAN TO ITS AE. BY VIRTUE OF AMENDMENT TO SECTION 92B, IT IS INTERNATIONAL TRANSACTION. ONCE IT IS CONSIDERED AS INTERNATIONAL TRANSACTION, IT IS PRUDENT TO MAKE BE NCH MARKING ALSO IN THE INTERNATIONAL ARENA. SIMILAR VIEWS WERE EXPRESSED BY THE COORDINATE BENCH OF THI S ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 14 OF 82 TRIBUNAL IN THE CASES OF FOUR SOFT PVT. LTD. (SUPRA) , SIVA INDUSTRIES & HOLDINGS LTD. (SUPRA) AND VIJAY ELECTRICALS LTD., (ITA NO. 1159/HYD/2013. IT WAS HE LD IN THE CASE OF SIVA INDUSTRIES AS BELOW : ' ONCE THE TRANSACTION BETWEEN THE ASSESSEE AND THE AE IS IN FOREIGN CURRENCY AND THE TRANSACTION IS AN INTER NATIONAL TRANSACTION, THEN, THE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYING THE COMMERCIAL PRINCIPLES IN REGAR D TO INTERNATIONAL TRANSACTION. IF THIS IS SO, THEN THE DOMESTIC PRIME LENDING RATE WOULD HAVE NO APPLICABILITY AND INTERNATIONAL RATE FIXED BEING LIBOR WOULD COME INT O PLAY. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT IS LIBOR RATE WHICH HAS TO BE CONSIDERED WHILE DETERMI NING THE ARM'S LENGTH INTEREST RATE IN RESPECT OF THE TR ANSACTION BETWEEN THE ASSESSEE AND THE AE'S.' CONSIDERING THE ABOVE VIEW, WE ARE INCLINED TO ACCEPT THE DECISION OF THE CIT(A) AND ACCORDINGLY W E DISMISS THE GROUNDS OF ASSESSEE AS WELL AS GROUND 2 OF THE REVENUE. 11. ALP ADJUSTMENT ON CORPORATE GUARANTEE ASSESSEE' S GROUNDS OF APPEAL: THE LD. CIT(A) HAS ERRED IN 7. MAKING ADJUSTMENT WHILE DETERMINATION OF ALP ON THE SHAREHOLDERS CORPORATE GUARANTEE PROVIDED TO BANK O N BEHALF OF WOS. 8. DETERMINING THE ALP ON THE SHAREHOLDER CORPORATE GUARANTEE PROVIDED BY THE APPELLANT @ 1.25% ON THE GUARANTEE AMOUNT. 9. NOT APPRECIATING THE FACT THAT WOS WAS SET UP AS A SPY FOR ACQUISITION OF BUSINESS IN USA. 10. NOT APPRECIATING THAT THE SHAREHOLDER CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL T RANSACTION U/S 92B OF THE ACT. 11. NOT APPRECIATING THAT THE AMENDMENT TO SECTION 92B WOULD NOT APPLY TO THE FACTS OF THE CASE. 12. NOT UNDERTAKING AN OBJECTIVE ANALYSIS FOR DETER MINING THE ALP ON THE SHAREHOLDER CORPORATE GUARANTEE. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 15 OF 82 13. NOT MAKING ADJUSTMENTS FOR THE DIFFERENCES IN T HE COMPARABLE TRANSACTIONS SELECTED VIS--VIS SHAREHOLDER CORPORA TE GUARANTEE PROVIDED BY THE APPELLANT. 14. DISCRIMINATING THE US WOS BY DETERMINING THE AL P FOR SHAREHOLDER-CORPORATE GUARANTEE VIS-A-VIS SIMILAR S HAREHOLDER CORPORATE GUARANTEE PROVIDED BY PARENT COMPANIES TO INDIAN SUBSIDIARIES IN VIOLATION OF ARTICLE 26 OF INDIA - US DOUBLE TAXATION AVOIDANCE AGREEMENT. ('DTAA'). REVENUE'S GROUND 3. THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED TH E FACT THAT ALP IS CALCULATED BY THE TPO AFTER CONSIDERING THE GUARANTEE FEE AND BY DEPENDING ON THE CREDIT RATING OF THE AE AND ONCE THE ALP IS APPROVED, THE PERCENTAGE ON GUARANTEE FEE CANNOT BE REVISED. LD. AR SUBMITTED THAT ASSESSEE, THROUGH A COMMON FA CILITIES AGREEMENT IN CONNECTION WITH OVERSEAS ACQUISITION O F SUBSIDIARY COMPANIES, HAD PROVIDED CORPORATE GUARANTEE IN FAVO UR OF RCUSA. THE TPO HAD NOTED THAT ASSESSEE HAD GUARANTE ED A CONSORTIUM OF BANKS, WHICH PROVIDED LOANS TO RCUSA, TO INDEMNIFY THE DEFAULTS, IF ANY, ON ACCOUNT OF LOAN REPAYMENT BY RCUSA. LD. AR SUBMITTED THAT A CORPORATE GUARANTEE DID NOT FALL WITHIN THE MEANING OF INTERNATIONAL TRANSACTION AS DEFINED IN SECTION 92B , THAT IT WAS IN THE NATURE OF SHAREHOLDER ACTIVITY IN THE BUSINESS INTEREST OF PARENT, THAT THE ASSESSEE WAS RESTRICTED BY LAW FROM CHARGING FEE FOR A CORPORATE GUARANTEE PRO VIDED BY IT IN TERMS OF PARA 2.2.9 OF THE RBI MASTER CIRCULAR ON G UARANTEES AND CO- ACCEPTANCE DATED 02/07/2012, THAT A CORPORATE G UARANTEE IS SECONDARY WITH NO COST OR RISK TO SHAREHOLDERS AND THAT IT WAS IN THE BUSINESS INTEREST OF THE ASSESSEE. LD. AR SUBMI TTED THAT WITHOUT PREJUDICE TO THE CLAIM THAT CORPORATE GUARA NTEES ARE NOT TO BE CHARGED, THE METHOD OF COMPUTATION OF THE GUA RANTEE FEE WAS ERRONEOUS. LD. AR ALSO SUBMITTED THAT THERE IS NO COST TO THE ASSESSEE AS IT WAS GIVEN ON THE BASIS OF HOLDING CO MPANY AND THERE IS NO PROFIT INVOLVED IN THIS YEAR. LD. AR SU BMITTED THAT THE TRANSACTION WAS NOT RELATING TO THIS YEAR. (REFER P AGES 56 TO 59 OF PAPER BOOK - RELATES TO PY 2005-06.). LD. AR RELIED ON THE FOLLOWING DECISIONS: 1. FOUR SOFT PVT. LTD., (SUPRA) 2. BHARTI AIRTEL LTD. VS. ACIT (ITA NO. 5816/DEL/20 12 3.REDINGTON (INDIA) LTD., VS. JCIT, (ITA NO.613/MDS /2014). ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 16 OF 82 12. LD. DR SUBMITTED THAT THE ASSESSEE HAD NOT REPO RTED THIS TRANSACTION AS INTERNATIONAL TRANSACTION. HE SUBMIT TED THAT THE CASE GLENMARK PHARMACEUTICALS VS. ACIT (ITAT- MUMBA I) HAD MADE AFTER CONSIDERING SOME CALCULATION TO ARRIVE T HE FIGURE 0.53% WHEREAS THE CIT(A) IN THE PRESENT CASE HAD AD OPTED 1.25% WITHOUT ANY BASIS. HE ALSO SUBMITTED THAT THE TPO H AD ANALYSED THE RISK FACTOR IN THIS TRANSACTION SINCE THE GUARA NTEE WAS GIVEN WITHOUT ANY SECURITY. HE ALSO SUBMITTED THAT EVEN T HOUGH THERE IS NO COST TO THE ASSESSEE BUT THERE IS INTRINSIC BENE FIT TO THE AE. HE SUBMITTED THAT HE RELIES ON THE ORDER OF AO/TPO AND JUSTIFIED THE ACTION OF THE AO. 13. AFTER TAKING INTO CONSIDERATION THE ABOVE DECIS ION OF THE TRIBUNAL AND THE RATIO OF THE FOUR SOFT PVT. LTD. ( SUPRA), WE HOLD THAT THE CORPORATE GUARANTEE IS AN INTERNATIONAL TR ANSACTION. FOR THE SAKE OF CLARITY AND READY REFERENCE, WE REPRODU CE THE RELEVANT PARAS BELOW: 25.4. IN THE AFORESAID VIEW OF THE MATTER, WE AGREE WITH THE TPO THAT ALP OF THE CORPORATE GUARANTEE HAS TO BE DETER MINED AS IT FALLS WITHIN THE SCOPE AND AMBIT OF AN INTERNATIONA L TRANSACTION AFTER THE RETROSPECTIVE AMENDMENT TO SECTION 92B. H OWEVER, IT APPEARS THAT THE TPO HAS APPLIED THE RATE OF 3.75%, WHICH IS APPLICABLE TO BANK GUARANTEE ISSUED BY THE BANK. AS THE CORPORATE GUARANTEE IS NOT IN THE NATURE OF BANK GUARANTEE, T HE RATE APPLICABLE TO BANK GUARANTEE PROVIDED BY THE BANK C ANNOT BE APPLIED TO CORPORATE GUARANTEE WHICH IS PROVIDED BY A GROUP COMPANY. IN CASE OF GLENMARK PHARMACEUTICALS VS. AC IT IN ITA NO. 5031/MUM/ 2012, DATED 13/11/2013, THE MUMBAI BE NCH OF THE TRIBUNAL AFTER ANALYSING THE FACTS IN THAT CASE HAD HELD THAT 0.53% CORPORATE GUARANTEE RATE IN THAT CASE WAS APP ROPRIATE. THE ITAT HYDERABAD BENCH IN CASE OF INFOTECH ENTERP RISES LTD. IN ITA NO. 115/HYD/2011 AND IN ITA NO. 2184/HYD/2011, DATED 16/01/2014 WHILE CONSIDERING IDENTICAL ISSUE OF DET ERMINING ALP OF CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE TO ITS AE FOLLOWED THE RATIO LAID DOWN IN CASE OF GLENMARK PH ARMACEUTICALS VS. ACIT (SUPRA) AND REMITTED THE ISSUE BACK TO THE TPO TO DECIDE THE QUANTUM OF CORPORATE GUARANTEE RATE BY FOLLOWIN G THE METHOD ADOPTED IN CASE OF GLENMARK PHARMACEUTICALS (SUPRA) . 26. SINCE THE ISSUE IN THE PRESENT CASE IS IDENTICA L TO THE ISSUE DECIDED BY THE ITAT, HYDERABAD BENCH IN CASE OF INF OTECH ENTERPRISES (SUPRA), FOLLOWING THE SAME, WE ALSO RE MIT THIS ISSUE TO THE FILE OF THE TPO TO DECIDE THE QUANTUM OF COR PORATE GUARANTEE RATES ACCORDINGLY. IF THE ASSESSEE IS ABL E TO BRING ON RECORD ANY COMPARABLES WITH REGARD TO CORPORATE GUA RANTEE, THE TPO MAY ALSO CONSIDER THE SAME WHILE DETERMINING AL P OF CORPORATE GUARANTEE. THE TPO MUST PROVIDE A REASONA BLE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 17 OF 82 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE D ECIDING THE ISSUE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPO SES.' THUS, THE GROUNDS 7 TO 11 ARE REJECTED. 14. AS REGARDS GROUNDS 12 TO 14 ARE CONCERNED, WE F IND THAT THEY ARE RELATING TO COMPUTATION OF ALP. THE AVERAGE MAR GIN OF THE COMPARABLES IN SIMILAR TRANSACTIONS HAS TO BE ARRIV ED AT BEFORE DETERMINING ALP. THIS ISSUE OF THE PERCENTAGE AT WH ICH THE CORPORATE GUARANTEE CAN BE BENCHMARKED HAS COME UP BEFORE VARIOUS BENCHES OF THE TRIBUNAL. WE FIND THAT IN TH E CASE OF GLENMARK PHARMACEUTICALS VS. ACIT IN ITA NO. 5031/M UM/2012, DATED 13/11/2013, THE TRIBUNAL HAS EXAMINED THE APP ROACH OF THE ASSESSEE THEREIN IN DETERMINING THE PERCENTAGE OF C ORPORATE GUARANTEE TO BE METHODICAL AND FOUND IT TO BE APPRO PRIATE. THUS, THE TRIBUNAL HAS LAID DOWN GUIDELINES FOR DETERMINA TION OF RATE OF CORPORATE GUARANTEE. IN THE CASE BEFORE US, THE AO ADOPTED 2% OF THE LOAN GUARANTEED AND THE SAME WAS REDUCED TO 1.2 5% BY THE LD. CIT(A) WITHOUT ANY BASIS OR STUDY IN THIS MATTER. W E FIND THAT IN THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUN AL IN FOUR SOFT PVT. LTD. (SUPRA), AND ALSO THE DECISION OF THE HON 'BLE MUMBAI HIGH COURT IN THE CASE OF M/S EVEREST KANTO CYLINDE R LTD. VS. DCIT, IT WAS HELD THAT COMMERCIAL BANKS GUARANTEES ARE EASILY ENCASHABLE IN THE EVENT OF DEFAULT HENCE HIGHER COM MISSION IS JUSTIFIED FOR THEM, WHEREAS IN CASE OF CORPORATE GU ARANTEE THE PARENT COMPANY WOULD REPAY LOAN IN CASE ITS AE DEFA ULTS. FURTHER, IT WAS HELD THAT THE CONDITIONS FOR ISSUAN CE OF CORPORATE GUARANTEES ARE DISTINCT AND SEPARATE FROM BANK GUAR ANTEE. ACCORDINGLY, THE HON'BLE HIGH COURT UPHELD ITAT DEC ISION OF GUARANTEE COMMISSION @ 0.50%. THE RELEVANT PORTION OF ITAT, MUMBAI DECISION IS REPRODUCED FOR CONVENIENCE: 21. SO FAR AS THE LEARNED SENIOR COUNSEL'S CONTENTI ON THAT GUARANTEE COMMISSION IS NOT AN INTERNATIONAL TRANSACTION AND THERE COULD NOT BE ANY METHOD FOR EVALUATING THE ALP FOR THE GUARANTEE COM MISSION, WE DO NOT FIND ANY MERIT IN THE SAID CONTENTION IN VIEW OF TH E AMENDMENT BROUGHT BY THE FINANCE ACT , 2012 WITH RETROSPECTIVE EFFECT FROM 1-4- 2002 BY WAY OF EXPLANATION ADDED IN SECTION 92B . PAYMENT OF GUARANTEE FEE IS INCLUDED IN THE EXPRESSION 'INTERNATIONAL TRANSACTI ON' IN VIEW OF THE EXPLANATION I(C) OF SECTION 92B . ONCE THE GUARANTEE FEE FALLS WITHIN THE MEANING OF 'INTERNATIONAL TRANSACTION', THEN THE ME THODOLOGY PROVIDED IN THE RULES ALSO BECOMES APPLICABLE. HERE IN THIS CAS E, IT IS UNDISPUTED THAT THE ASSESSEE IN ITS T.P. STUDY REPORT AND ALSO THE TPO, HAVE ACCEPTED THAT IT IS AN INTERNATIONAL TRANSACTION AND CUP IS THE M OST APPROPRIATE METHOD FOR BENCHMARKING THE CHARGING OF GUARANTEE FEE. WE ALSO DO NOT AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT THE RE COULD NOT BE ANY COST OR CHARGE OF GUARANTEE FEE BY PROVIDING CORPORATE G UARANTEE TO ITS SUBSIDIARY BECAUSE THERE IS AN ALWAYS ELEMENT OF BE NEFIT OR COST WHILE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 18 OF 82 PROVIDING SUCH KIND OF GUARANTEE TO AE. HOWEVER, IN THIS CASE, THE ASSESSEE HAS ITSELF CHARGED 0.5% GUARANTEE COMMISSI ON FROM ITS AE, 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 SAME IS AT ALP OR NOT. WE HAVE ALREADY COME TO A CO NCLUSION IN THE FOREGOING PARAS THAT THE RATE OF 3% BY TAKING EXTER NAL COMPARABLE BY THE TPO, CANNOT BE SUSTAINED IN FACTS OF THE PRESENT CA SE. WE ALSO FIND THAT IN AN INDEPENDENT TRANSACTION, THE ASSESSEE HAS PAID 0 .6% GUARANTEE COMMISSION TO ICICI BANK INDIA FOR ITS CREDIT ARRAN GEMENT. THIS COULD BE A VERY GOOD PARAMETER AND A COMPARABLE FOR TAKING I T AS INTERNAL CUP AND COMPARING THE SAME WITH THE TRANSACTION WITH THE AE . THE CHARGING OF 0.5% GUARANTEE COMMISSION FROM THE AE IS QUITE NEAR TO 0.6%, WHERE THE ASSESSEE HAS PAID INDEPENDENTLY TO THE ICICI BANK A ND CHARGING OF GUARANTEE COMMISSION AT THE RATE OF 0.5% FROM ITS A E CAN BE SAID TO BE AT ARMS LENGTH. THE DIFFERENCE OF 0.1% CAN BE IGNORED AS THE RATE OF INTEREST ON WHICH ICICI BANK, BAHRAIN BRANCH HAS GIVEN LOAN TO AE (I.E. SUBSIDIARY COMPANY) IS AT 5.5%, WHEREAS THE ASSESSE E IS PAYING INTEREST RATE OF MORE THAN 10% ON ITS LOAN TAKEN WITH ICICI BANK IN INDIA. THUS, SUCH A MINOR DIFFERENCE CAN BE ON ACCOUNT OF DIFFER ENTIAL RATE OF INTEREST. THUS, ON THESE FACTS, WE DO NOT FIND ANY REASON TO UPHOLD ANY KIND OF UPWARD ADJUSTMENT IN ALP IN RELATION TO CHARGING OF GUARANTEE COMMISSION. HENCE, THE ADDITION OF RS.28,50,353/- O N ACCOUNT OF TP ADJUSTMENT ON GUARANTEE COMMISSION IS HEREBY DELETE D AND THE ORDER OF THE CIT(A) IS SET ASIDE. ACCORDINGLY, GROUND NO.2 I S TREATED TO BE ALLOWED.' FOLLOWING THE ABOVE DECISION OF THE MUMBAI BENCH, W HICH HAS BEEN UPHELD BY THE HON'BLE HIGH COURT, WE FIND THAT IN T HE CIRCUMSTANCES OF THE SAID CASE, IT WAS HELD APPROPRIATE TO CHARGE TH E CORPORATE GUARANTEE AT 0.50% FROM ITS AE AND THAT IT CAN BE SAID TO BE AT ARM'S LENGTH. HOWEVER, IN THE CASE BEFORE US, WE FIND THAT THERE IS NO COR PORATE GUARANTEE COMMISSION CHARGED BY THE ASSESSEE. THEREFORE, WE R EMIT THIS ISSUE TO THE FILE OF THE AO/TPO TO DETERMINE THE ALP OF THE CORP ORATE GUARANTEE BY FOLLOWING THE JUDICIAL PRECEDENTS, MORE PARTICULARL Y, THE CASE OF GLENMARK PHARMACEUTICALS VS. ACIT (SUPRA). IN THE RESULT BOT H THE ASSESSEE'S AS WELL AS REVENUE'S APPEAL ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 14. THE GROUND 15 OF THE ASSESSEE RELATING TO TDS & TCS CREDIT, IS ALSO REMITTED BACK TO THE FILE OF AO.' 10.1. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT TH E ASSESSING OFFICER TO ADOPT THE SAME FOR THE RELEVANT ASSESSME NT YEAR ALSO. THE REVENUE IS ALSO AGGRIEVED BY THE DIRECTIONS OF THE DRP TO ADOPT LIBOR RATE BY RAISING GROUNDS OF APPEAL NO. 2 AND 3. IN VIEW OF THE ABOVE DECISION, THE REVENUE'S GROUNDS O F APPEAL NO.2 AND 3 ARE REJECTED AND ASSESSEE'S GROUNDS OF APPEAL NO. 9 TO 21 ARE TREATED AS ALLOWED. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 19 OF 82 13. AS THE FACTS AND CIRCUMSTANCES IN THE CASE BEFO RE US ARE EXACTLY THE SAME, WE ARE INCLINED TO FOLLOW THE DECISION OF THE COORDINATE BENCH IN THE GROUP CASES OF THE ASSESSEE AND WE HOLD THAT THE 0.50% IS REASONABLE CORPORATE GUARANTEE FEE . 14. IN THE RESULT, GROUND NOS. 8 TO 16 ARE ALLOWED. 15. AS REGARDS GROUND NO.17 FOR CREDIT OF TDS MADE, WE FIND THAT IT NEEDS VERIFICATION BY THE AO AND THERE FORE, THIS ISSUE IS REMITTED TO THE FILE OF THE AO FOR VERIFICATION AND GIVING RELIEF, IF ANY, TO THE ASSESSEE IN ACCORDANCE WITH LAW. 16. GROUND NOS. 18 AGAINST COMPUTATION OF INTEREST U/S 234C OF THE ACT, WE FIND THAT IT IS CONSEQUENTIAL T O THE COMPUTATION OF INCOME AND THEREFORE, IT IS ALSO SET ASIDE TO THE FILE OF THE AO TO GIVE CONSEQUENTIAL RELIEF TO THE ASSES SEE, IF ANY. 17. AS REGARDS GROUND NO.19 AGAINST INITIATION OF P ENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, WE FIND THAT IT IS PREMATURE AND THEREFORE, IT IS REJECTED. 18. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ITA NO.309/HYD/2015 -A.Y 2010-11 (ASSESSEES APPEAL) 19. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11. T HE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE AO DATED 21.1.2015 PASSED U/S 143(3) R.W.S. 144C(5) AND 144C(13) OF TH E I.T. ACT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 20 OF 82 TRANSFER PRICING ('TP') MATTERS 1. REJECTING THE SUBMISSIONS OF THE COMPANY AND MAKING TP ADJUSTMENT ON SHAREHOLDERS CORPORATE GUARANTEE PROVIDED TO BANK - RS. L5,21.00,000/. GROUND SPECIFIC TO TP ADJUSTMENT ON SHAREHOLDER CORPORATE GUARANTEE 2. MAKING ADJUSTMENT ON THE SHAREHOLDERS CORPORATE GUARANTEE PROVIDED TO THE BANK WITHOUT APPRECIATING THE FACT THAT WHOLLY OWNED SUBSIDIARY ('WOS) WAS SET UP AS A SPV FOR ACQUISITION OF BUSINESS IN USA. 3. NOT APPRECIATING THAT THE SHAREHOLDER CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION U/S 92B OF THE ACT. 4. NOT APPRECIATING THAT THE AMENDMENT TO SECTION 9 2B WOULD NOT APPLY TO THE FACTS OF THE CASE. 5. NOT APPRECIATING THE FACT THAT THE ASSOCIATED ENTERPRISE ('AE') HAD ALSO GUARANTEED THE LOAN TAKEN BY THE APPELLANT AND HENCE THE TRANSACTION IS RECIPROC AL. 6. DISCRIMINATING THE US WAS BY DETERMINING THE ALP FOR SHAREHOLDER CORPORATE GUARANTEE VIS-A-VIS SIMILAR SHAREHOLDER CORPORATE GUARANTEE PROVIDED BY PARENT COMPANIES TO INDIAN SUBSIDIARIES IN VIOLATION OF AR TICLE 26 OF INDIA - US DOUBLE TAXATION AVOIDANCE AGREEMENT . ('DTAA'). 7. NOT UNDERTAKING AN OBJECTIVE ANALYSIS FOR DETERMIN ING THE ALP ON THE SHAREHOLDER CORPORATE GUARANTEE AND MAKING ADJUSTMENT BY DETERMINING THE BENEFIT TO US WOS AS DIFFERENCE IN THE INTEREST RATE OF DIFFERENTLY RATED BONDS IN THE INDIAN MARKET I.E. 2% ADJUSTMENT ON TH E GUARANTEED AMOUNT. 8. NOT MAKING ADJUSTMENTS FOR THE DIFFERENCES IN TH E COMPARABLE TRANSACTIONS SELECTED VISA-VIS SHAREHOLDE R CORPORATE GUARANTEE PROVIDED BY THE APPELLANT. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 21 OF 82 CORPORATE TAX MATTERS 9. NOT ALLOWING THE EXEMPTION U/S 1OB OF THE ACT BEF ORE SETTING OFF OF BUSINESS LOSS OF NON-ELIGIBLE UNIT I .E. CO- GENERATION UNIT. 10. NOT PROVIDING ANY REASONING FOR COMPUTING EXEMP TION U/S 1OB AFTER SETTING OFF LOSSES OF NON-ELIGIBLE UN IT I.E. CO-GENERATION UNIT. 20. GROUND NO.1 IS GENERAL IN NATURE, HENCE NEEDS N O SPECIFIC ADJUDICATION. 21. GROUND NOS. 2 TO 8 ARE AGAINST THE TRANSFER PRI CING ADJUSTMENT SUGGESTED BY THE TPO ON CORPORATE GUARAN TEE PROVIDED BY THE ASSESSEE TO ITS AES IN USA. BRIEF FACTS REL ATING TO THIS ISSUE ARE THAT DURING THE FINANCIAL YEAR UNDER CONSIDERAT ION, THE ASSESSEE THROUGH A COMMON SET OF AGREEMENT, DATED 17.07.2007 HAS PROVIDED A CORPORATE GUARANTEE FOR A COMBINED L OAN OF USD 150 MILLION. THE ASSESSEE DID NOT CHARGE ANY FEE FO R THE CORPORATE GUARANTEE GIVEN, WHEREAS THE TPO WAS OF THE OPINION THAT THE ASSESSEE HAS TO CHARGE GUARANTEE FEE. WE FIND THAT THE VERY SAME ISSUE HAD ARISEN IN THE ASSESSEES OWN CASE FOR THE A.Y 2009-10 AND THIS TRIBUNAL BY ORDER OF EVEN DATED HAS IN PAR AS 12 TO 13 ABOVE HAS HELD THE CORPORATE GUARANTEE FEE AT 0.50 % TO BE REASONABLE. RESPECTFULLY FOLLOWING THE SAME, THE IS SUE IS REMITTED TO THE FILE OF THE TPO FOR COMPUTATION OF THE CORPO RATE GUARANTEE IN ACCORDANCE WITH THE DIRECTIONS AS ABOVE. 22. IN THE RESULT, GROUNDS NO. 2 TO 8 ARE ALLOWED. 23. AS REGARDS GROUNDS NO. 9 & 10 ARE CONCERNED, BR IEF FACTS ARE THAT WHILE COMPUTING THE DEDUCTION U/S 10 B OF THE ACT, ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 22 OF 82 THE AO HAS SET OFF OF THE BUSINESS LOSS OF CO GENER ATION UNIT BEFORE ALLOWING THE DEDUCTION U/S 10B OF THE ACT. THE LEAR NED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE CO-GENERATION U NIT IS NOT AN ELIGIBLE UNIT U/S 10B AND ONLY THE CPC KILN-2 UNIT IS ELIGIBLE FOR DEDUCTION. THUS, ACCORDING TO HIM, THE PROFIT/GAINS OF THE ELIGIBLE UNIT HAS TO BE COMPUTED ON A STAND ALONE BASIS AND THE PROFIT OR LOSS OF THE NON-ELIGIBLE UNIT CANNOT BE ADJUSTED AG AINST THE PROFITS OF THE ELIGIBLE UNITS BEFORE ALLOWING THE DEDUCTION U/S 10B OF THE ACT. IN SUPPORT OF THIS CONTENTION, THE LEARNED COU NSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF CIT VS. YOKOGAWA INDIA LTD REP ORTED IN (2017) 77 TAXMANN.COM 41 (S.C). 24. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 25. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE HON'BLE SUPREME COURT I N THE CASE OF CIT VS. YOKOGAWA INDIA LTD REPORTED IN (2012) 341 IT R 385 (KAR.) (CITED SUPRA) HAS AT PARAS 16 TO 18 HELD AS UNDER: 16. FROM A READING OF THE RELEVANT PROVISIONS OF SECTI ON 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLATED T HEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDING ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON-ELIGIBLE UNI TS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCTION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANTLY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CONTEMPORANEOUS CIRCULAR NO. 794 DAT ED 9.8.2000 WHICH STATES IN PARAGRAPH 15.6 THAT, 'THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPORT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER B USINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR THE PURPOSES OF TH IS PROVISION.' ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 23 OF 82 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [FIR ST PROVISO TO SECTIONS 10A(1); 10A (1A) AND 10A (4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS THE ELIGIBLE UNDER TAKING AND THAT IS ALSO HOW THE CONTEMPORANEOUS CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOOD THE SITUATION, IT IS ONLY LO GICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIGIBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THERE FORE, IMMEDIATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTIONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENCEMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE ACT FOR ARRIVING AT THE TOT AL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTIO N 10A HAS ALREADY BEEN DEALT WITH EARLIER AND IN THE OVERALL SCENARIO UNFO LDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDING THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTIO N 10A AS 'TOTAL INCOME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEALS AN D THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUTSET OF THI S ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE COMPUTING THE GROSS TOT AL INCOME OF THE ELIGIBLE UNDERTAKING UNDER CHAPTER IV OF THE ACT AN D NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. A LL THE APPEALS SHALL STAND DISPOSED OF ACCORDINGLY. 26. RESPECTFULLY FOLLOWING THE SAME, WE ALLOW GROUN DS OF APPEAL NO. 9 & 10. 27. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NO. 259/HYD/2016 A.Y 2011-12 (ASSESSEES APPEAL) : 28. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: TRANSFER PRICING (TP) MATTER 1. REJECTING THE SUBMISSIONS OF THE COMPANY AND MAKI NG TP ADJUSTMENTS TO THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH AE. FEE ON SHAREHOLDERS CORPORATE GUARANTEE TO BANK RS.2,20,25,940/- ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 24 OF 82 2. MAKING ADJUSTMENT ON THE SHAREHOLDERS CORPORATE GUARANTEE PROVIDED TO THE BANK/CREDITOR OF THE AE, WITHOUT APPRECIATING THE FACT THAT GUARANTEE WAS PROVIDED TO THE AE FOR THE PURPOSE OF ITS BUSINESS OPERATIONS (I.E., PROCURE RAW MATERIAL FROM THE SUP PLIER IN A TIMELY MANNER). 3. NOT APPRECIATING THAT THE SHAREHOLDERS CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION U1S 92B OF THE ACT. 4. NOT APPRECIATING THAT THE AMENDMENT TO SECTION 9 2B WOULD NOT APPLY TO THE FACTS OF THE CASE. 5. ADOPTING A RATE OF 1.75% BASED ON THE FEE CHARGED FROM THE LOCAL BANKS, WITHOUT APPRECIATING THAT THE GUARANTEE GIVEN IS A SHAREHOLDER CORPORATE GUARANTEE AS OPPOSED TO COMMERCIAL BANK GUARANTEE. 6. A) DETERMINING THE GUARANTEE FEE ON THE ENTIRE A MOUNT OF LOAN GUARANTEED TO THE BANK INSTEAD OF THE ACTUAL AMOUNT OF LOAN AVAILED BY THE AE. B) DETERMINING THE GUARANTEE FEE ON THE ENTIRE AMOU NT OF LOAN GUARANTEE TO THE CREDITOR INSTEAD OF THE ACTUAL PURCHASES MADE FROM THE CREDITOR BY THE AE. CORPORATE TAX MATTERS 7. REJECTING THE SUBMISSIONS OF THE COMPANY AND INVOKING THE PROVISIONS OF SECTION L4A OF THE INCOM E TAX ACT, 196 I READ WITH RULE 8D OF THE INCOME TAX RULES , 1962 TO THE TUNE OF RS. 3,73,750/-. 8. NOT APPRECIATING THAT THE PROVISIONS OF 14A ARE NOT APPLICABLE TO THE CASE, AS THE INVESTMENTS, INCOME FROM WHICH IS EXEMPT, IS MADE OUT OF THE ACCUMULATED PROF ITS AND NO PART OF THE BORROWED FUNDS WERE UTILIZED FOR MAKING SUCH INVESTMENTS. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 25 OF 82 9. NOT PROVIDING THE SET OFF OF PREVIOUS YEARS' LOS SES AND UNABSORBED DEPRECIATION, DUE TO PENDENCY OF MATTERS AT VARIOUS HIGHER APPELLATE AUTHORITIES. 10. SETTING OFF MAT CREDIT AGAINST THE GROSS TAX LIAB ILITY OF THE COMPANY WHICH IS COMPUTED AFTER SURCHARGE AND CESS. 11. LEVY OF INTEREST ON NON-PAYMENT OF DIVIDEND DISTRIBUTION TAX U/S I 15P OF THE ACT OF RS.3,21,76, 547/- . 12. PROVIDING SHORT CREDIT OF TDS AND TCS TO THE EXTEN T OF RS. 17,16,512/-. 13. ERRONEOUS CALCULATION OF INTEREST U/S 234D OF TH E ACT. 14. INITIATING PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT. 29. AS REGARDS GROUNDS 1 TO 6, BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CEMENT AND ALSO OF CALCINATED PETROLEUM COKE AND GE NERATION OF ENERGY. DURING THE YEAR, PURSUANT TO THE SCHEME OF ARRANGEMENT AMONGST RAIN INDUSTRIES LTD & RAIN CII CARBON (INDI A) LTD, THE CEMENT BUSINESS OF THE HOLDING COMPANY IS TRANSFERR ED TO THE ASSESSEE HEREIN. 30. DURING THE ASSESSMENT PROCEEDINGS, THE AO OBSER VED THAT THE ASSESSEE HAS REPORTED THAT IT HAS ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS AES FOR PURCHA SE OF GREEN PETROLEUM COKE, SALE OF INVESTMENTS AND REIMBURSEME NT OF EXPENSES RECEIVED. THEREFORE, THE AO REFERRED THE I SSUE OF DETERMINATION OF THE ALP OF THESE TRANSACTIONS TO T HE TPO U/S ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 26 OF 82 92CA OF THE ACT. THE TPO OBSERVED THAT THE ABOVE TR ANSACTIONS WERE AT ARMS LENGTH AND NO ADJUSTMENT THEREFOR IS CALLED FOR. 31. HOWEVER, THE TPO NOTICED THAT THE ASSESSEE COMP ANY HAD THE TRANSACTIONS OF CORPORATE GUARANTEE OF 35 M ILLION US$ TO RAIN CII CARBON LLC AND INVESTMENT OF RS.36,20,00,0 00 WAS MADE IN MOONGLOW COMPANY, BUSINESS INC, BVI WHICH W ERE NOT REPORTED IN FORM 3CEB AND NO BENCH MARKING ANALYSIS HAS BEEN DONE IN THE ASSESSEES TP STUDY. 32. THE TPO OBSERVED THAT THE ASSESSEE HAS GIVEN TH E FOLLOWING CORPORATE GUARANTEES DURING THE RELEVANT PREVIOUS YEAR: S.NO DATE GUARANTEE (IN USD) NAME OF THE BENEFICIARY O/S BALANCE AS ON MARCH 2011 (IN USD) 1 1.4.2010 5,000,000 CONCOPHILIPS COMPANY 10,000,000 2 3.1.2011 5,000,000 CONCOPHILIPS COMPANY EXTENDED GUARANTEE 3 10.6.2010 25,000,000 WELLS FARGO BANK N.A 15,925,000 33. THE TPO NOTICED THAT NO FEE HAS BEEN CHARGED BY THE ASSESSEE FOR THE ABOVE CORPORATE GUARANTEES. THE AS SESSEES EXPLANATION AS TO WHY THE FEE WAS NOT CHARGED WHERE IT INVOLVED SERVICES, WAS CALLED FOR. THE ASSESSEE SUBMITTED TH AT THE CORPORATE GUARANTEE (CG) DOES NOT FALL WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTIONS AND RELIED ON THE DECISION OF INCOME T AX APPELLATE TRIBUNAL, HYDERABAD IN THE CASE OF FOURSOFT LTD. THE TPO OBSERVED THAT BY VIRTUE OF THE AMENDMENT MADE TO SECTION 92B WITH ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 27 OF 82 RETROSPECTIVELY/ EFFECT FROM 1.4.2002, THE CORPORAT E GUARANTEE PROVIDED BY THE ASSESSEE HAS TO BE CONSIDERED AS AN INTERNATIONAL TRANSACTION AND THAT THE TRIBUNAL IN THE CASE OF FOU RSOFT FOR THE NEXT YEAR HAS HELD THAT IF THE FINANCE BILL OF 2012 IS PASSED BY THE PARLIAMENT AMENDING THE PROVISION OF SECTION 92B, T HE EARLIER DECISION OF INCOME TAX APPELLATE TRIBUNAL HAS TO BE IGNORED. THEREAFTER, HE PROCEEDED TO DETERMINE THE ALP OF CO RPORATE GUARANTEE PROVIDED BY THE ASSESSEE. HE ARRIVED AT 2 % P.A. ON THE OPENING BALANCE OR THE MAXIMUM DURING THE YEAR AS R EASONABLE CORPORATE GUARANTEE AND SUGGESTED ADJUSTMENT ACCORD INGLY. 34. THE AO PASSED THE DRAFT ASSESSMENT ORDER AND T HE ASSESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP WH ICH CONFIRMED THE DRAFT ASSESSMENT ORDER BUT RESTRICTED THE RATE/ FEE AT 1.75% AND THE AO ACCORDINGLY PASSED THEM FINAL ASSESSMENT ORDER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 35. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE OBJECTIONS RAISED BY THE ASSESSEE BEFORE THE TPO & DRP AND SUBMITTED THAT GIVING OF CORPORATE GUARANTEE TO THE AE DID NOT COST THE ASSESSEE AND FURTHER THAT CORPORATE GUARANTEE B ECAME AN INTERNATIONAL TRANSACTION ONLY BY VIRTUE OF THE RET ROSPECTIVE AMENDMENT MADE BY THE FINANCE BILL 2012 AND THEREFOR E, THE ASSESSEE CANNOT BE EXPECTED TO CHANGE A FEE ON THE GUARANTEE GIVEN BY IT WHEN IT WAS NOT AN INTERNATIONAL TRANSA CTION AT THE RELEVANT POINT OF TIME. FURTHER, SHE SUBMITTED AN AL TERNATE ARGUMENT THAT THE GUARANTEE GIVEN BY THE ASSESSEE W AS FOR SUPPLY CONTRACTS AND THEREFORE, THE LOANS WERE AVAILABLE O NLY TO THE EXTENT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 28 OF 82 THE MATERIAL WAS SUPPLIED AND THEREFORE THE FEE SHO ULD ALSO BE CHARGED ONLY ON THE AMOUNT OF LOAN AVAILED AND NOT ON THE ENTIRE AMOUNT OF LOAN AGAINST WHICH THE CORPORATE GUARANTE E WAS GIVEN. FOR THIS PROPOSAL, SHE PLACED RELIANCE UPON THE DECI SION OF INCOME TAX APPELLATE TRIBUNAL AT MUMBAI IN THE CASE OF MAN UGRAPH INDIA LTD IN ITA NO.4761/MUM/2013 DATED 25.03.2015. 36. AS REGARDS THE FEE ON CORPORATE GUARANTEE, SHE PRAYED THAT IT BE RESTRICTED TO 0.53% OF THE LOAN AVAILED A ND IN SUPPORT OF THIS CONTENTION, SHE PLACED RELIANCE UPON THE DECIS ION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF GLE NMARK PHARMACEUTICALS LTD IN ITA NO.5031/MUM/2012 DATED 13.11.2013. 37. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 38. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE A.Y BEFORE US IS A.Y 2011 -12, WHILE THE CORPORATE GUARANTEE HAS BEEN SPECIFICALLY BROUGHT U NDER THE AMBIT OF INTERNATIONAL TRANSACTION BY VIRTUE OF THE AMEND MENT TO SECTION 92B BY THE FINANCE ACT OF 2012 WITH RETROSPECTIVE EF FECT FROM 1.4.2002. THE ISSUE AS TO WHETHER THE AMENDMENT IS CLARIFICATORY AND EFFECTIVE RETROSPECTIVELY OR IS IT EFFECTIVE PR OSPECTIVELY HAS BEEN CONSIDERED EXTENSIVELY BY THE COORDINATE BENCH OF T HIS TRIBUNAL AT MUMBAI IN THE CASE OF SIRO CLINPHARM PRIVATE LTD IN ITA NO.2618/MUM/2014 AND ITA NO.2876/MUM/2014 DATED 31.3.2016. IN THIS DECISION, THE DECISION OF THE TR IBUNAL AT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 29 OF 82 HYDERABAD IN THE CASE OF FOURSOFT AND OTHER RELATED DECISIONS WERE CONSIDERED AND IT WAS HELD THAT THIS PROVISION BEIN G IN RESPECT OF TRANSFER PRICING LEGISLATION, WHICH IS ANTI-ABUSE L EGISLATION AND NOT PRIMARILY A SOURCE OF REVENUE, IS APPLICABLE PROSPE CTIVELY I.E. FROM THE A.Y 2013-14 ONWARDS. FOR THE SAKE OF CLARITY AND READY REFERENCE, THE RELEVANT PARAS ARE REPRODUCED HEREUN DER: ' 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 DEAL T WITH IN DETAIL BY DECISION OF A COORDINATE BENCH IN THE CASE OF MICRO INK VS ACIT [(2016) 176 TTJ 8 (AHD)] WHEREIN THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS: 21. IT IS ONLY ELEMENTARY THAT THE DETERMINATION OF ARM'S LENGTH PRICE, UNDER THE SCHEME OF THE INTERNATIONAL TRANSFER PRIC ING SET OUT IN THE INCOME-TAX ACT , 1961, CAN ONLY BE DONE IN RESPECT OF AN 'INTERNAT IONAL TRANSACTION'. SECTION 92(1) PROVIDES THAT, '(A)NY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE'. IN ORDER TO ATTRACT THE ARM'S LENGTH PRICE ADJUSTMENT, THEREFORE, A TRANSACTION HAS TO BE AN 'INTERNATIONA L TRANSACTION' FIRST. THE EXPRESSION 'INTERNATIONAL TRANSACTION' IS A DEFINED EXPRESSION. SECTION 92B DEFINES THE EXPRESSION 'INTERNATIONAL TRANSACTION' AS FOLLOWS: '92B - MEANING OF INTERNATIONAL TRANSACTION (1) FOR THE PURPOSES OF THIS SECTION AND SECTIONS 92 , 92C , 92D AND 92E , 'INTERNATIONAL TRANSACTION'' MEANS A TRANSACTION BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES, EITHER OR BOTH OF WHOM ARE NON-RESIDENTS, IN THE NATURE OF PU RCHASE, 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 ENTERPRIS ES AND SHALL INCLUDE A MUTUAL AGREEMENT OR ARRANGEMENT 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 C ONNECTION WITH A BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROV IDED 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 PURPOSES OF SU B-SECTION (1), BE DEEMED TO BE A TRANSACTION ENTERED INTO BETWEEN TWO ASSOCI ATED I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 ENTERPRI SES, IF THERE EXISTS A PRIOR AGREEMENT IN RELATION TO THE RELEVAN T TRANSACTION BETWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE, OR THE TERMS OF THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 30 OF 82 RELEVANT TRANSACTION ARE DETERMINED IN SUBSTANCE BE TWEEN SUCH OTHER PERSON AND THE ASSOCIATED ENTERPRISE. EXPLANATION : - FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT -- (INSERTED BY THE FINANCE ACT 2012, THOUGH WITH RETROSPECTIVE 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, MACHINERY, EQUIPM ENT, TOOLS, PLANT, FURNITURE, COMMODITY OR ANY OTHER ARTICLE, 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, EXTERIOR DESIGN OR PRACT ICAL AND NEW DESIGN OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE; (C) CAPITAL FINANCING, INCLUDING ANY TYPE OF LONG-T ERM OR SHORT- TERM BORROWING, LENDING OR GUARANTEE, PURCHASE OR SALE O F MARKETABLE SECURITIES OR ANY TYPE OF ADVANCE, PAYMENTS OR DEFE RRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DURING THE COU RSE OF BUSINESS; (D) PROVISION OF SERVICES, INCLUDING PROVISION OF M ARKET RESEARCH, MARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, AGENCY, SCIENTIFIC R ESEARCH, LEGAL OR ACCOUNTING SERVICE; (E) A TRANSACTION OF BUSINESS RESTRUCTURING OR REOR GANISATION, ENTERED INTO BY AN ENTERPRISE WITH AN ASSOCIATED ENTERPRISE, IRR ESPECTIVE OF THE FACT THAT IT HAS BEARING ON THE PROFIT, INCOME, LOSSES OR ASS ETS 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 AS LABOR ATORY NOTEBOOKS, TECHNICAL KNOWHOW; (C) ARTISTIC RELATED INTANGIBLE ASSETS, SUCH AS, LI TERARY WORKS AND COPYRIGHTS, MUSICAL COMPOSITIONS, COPYRIGHTS, MAPS , ENGRAVINGS; ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 31 OF 82 (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 PURCHASE ORD ERS; (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 CONTRACTS; (I) LOCATION RELATED INTANGIBLE ASSETS, SUCH AS, LE ASEHOLD INTEREST, MINERAL EXPLOITATION RIGHTS, EASEMENTS, AIR RIGHTS, WATER R IGHTS; (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 WIT H 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 TIME, AND ITS BREAK- UP IN PLAIN WORDS, SHOWS THE FOLLOWING: AN INTERNATIONAL TRANSACTION CAN BE BETWEEN TWO OR MORE AES, AT LEAST ONE OF WHICH SHOULD BE A NON-RESIDENT. AN INTERNATIONAL TRANSACTION CAN BE A TRANSACTION O F THE FOLLOWING TYPES: IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBL E OR INTANGIBLE PROPERTY, IN THE NATURE OF PROVISION OF SERVICES, IN THE NATURE OF L ENDING OR BORROWING MONEY, OR IN THE NATURE OF ANY OTHER TRANSACTION HAVING A BEA RING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES AN INTERNATION AL TRANSACTION SHALL INCLUDE A ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 32 OF 82 MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CONTRIBU TION 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 MORE OF SUC H ENTERPRISES. SECTION 92B (2), COVERING A DEEMING FICTION, PROVIDES THAT EVE N A TRANSACTION WITH NON-AE IN A SITUATION IN WHICH SUCH A TRANSACT ION IS DE FACTO CONTROLLED BY PRIOR AGREEMENT WITH AE OR BY THE TERMS AGREED WITH THE AE. 26. LET US NOW DEAL WITH THE EXPLANATION, INSERTED WITH RETROSPECTIVE EFFECT FROM 1ST APRIL 2002 I.E. RIGHT FROM THE TIME OF THE INCE PTION OF TRANSFER PRICING LEGISLATION IN INDIA, WHICH WAS BROUGHT ON THE STAT UTE 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 SECTION 92B . CLEARLY, THEREFORE, THIS EXPLANATION IS TO BE REA D IN CONJUNCTION WITH THE MAIN PROVISIONS, AND IN HARMON Y WITH THE SCHEME OF THE PROVISIONS, UNDER SECTION 92B . UNDER THIS EXPLANATION, FIVE CATEGORIES OF TRANSACTIONS HAVE BEEN CLARIFIED TO HAVE BEEN INCLU DED IN THE DEFINITION 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, TRANSFER, LEASE OR USE OF TANGIBLE AND INTANGIBLE P ROPERTIES. THESE TRANSACTIONS WERE ANYWAY COVERED BY 2 (A) ABOVE WHICH COVERED TR ANSACTIONS '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 IL LUSTRATIVE AND INCLUSIVE DESCRIPTIONS OF TANGIBLE AND INTANGIBLE ASSETS. SIM ILARLY, CLAUSE (D) DEALS WITH THE ' PROVISION OF SERVICES, INCLUDING PROVISION OF MAR KET RESEARCH, MARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, AGENCY, SCIENTIFIC RESEARCH, LEGAL OR ACCOUNTING SERVICE' WHICH ARE ANYWAY COVERED BY 2(B) AND 3 ABOVE IN 'PR OVISION FOR SERVICES' AND 'MUTUAL AGREEMENT OR ARRANGEMENT BETWEEN TWO OR MOR E ASSOCIATED ENTERPRISES FOR THE ALLOCATION OR APPORTIONMENT OF, OR ANY CONT RIBUTION TO, ANY COST OR EXPENSE INCURRED OR TO BE INCURRED IN CONNECTION WI TH A BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROVIDED TO ANYONE OR MORE OF SUC H ENTERPRISES'. THAT LEAVES US WITH TWO CLAUSES IN THE EXPLANATION TO SECTION 92B WHICH ARE NOT COVERED BY ANY OF THE THREE CATEGORIES DISCUSSED ABOVE OR BY OTHER SPECIFIC SEGMENTS COVERED BY SECTION 92B , NAMELY BORROWING OR LENDING MONEY. 29. THE REMAINING TWO ITEMS IN THE EXPLANATION TO SECTION 92B ARE SET OUT IN CLAUSES (C) AND (E) THERETO, DEALING WITH (A) CAPIT AL FINANCING AND (B) BUSINESS RESTRUCTURING OR REORGANIZATION. THESE ITEMS CAN ON LY BE COVERED IN THE RESIDUAL CLAUSE OF DEFINITION IN INTERNATIONAL TRANSACTIONS, AS IN SECTION 92B(1) , WHICH COVERS 'ANY OTHER TRANSACTION HAVING A BEARING ON P ROFITS, INCOMES, LOSSES, OR ASSETS OF SUCH ENTERPRISES'. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 33 OF 82 30. IT IS, THEREFORE, ESSENTIAL THAT IN ORDER TO BE COVERED BY CLAUSES (C) AND (E) OF EXPLANATION TO SECTION 92B , THE TRANSACTIONS SHOULD BE SUCH AS TO HAVE BEARIN G ON PROFITS, INCOMES, LOSSES OR ASSETS OF SUCH ENTER PRISE. 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 EXPRESSION 'INTERNATIONAL TRANSACTION'. THIS ASPECT OF THE MAT TER IS FURTHER HIGHLIGHTED IN CLAUSE (E) OF THE EXPLANATION DEALING WITH RESTRUCT URING AND REORGANIZATION, WHEREIN IT IS ACKNOWLEDGED THAT SUCH AN IMPACT COUL D BE IMMEDIATE OR IN FUTURE AS EVIDENT FROM THE WORDS 'IRRESPECTIVE 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 FUTUR E DATE'. WHAT IS IMPLICIT IN THIS STATUTORY PROVISION IS THAT WHILE IMPACT ON ' PROFI T, INCOME, LOSSES OR ASSETS' IS SINE QUA NON, THE MERE FACT THAT IMPACT IS NOT IMME DIATE, BUT ON A FUTURE DATE, WOULD NOT TAKE THE TRANSACTION OUTSIDE THE AMBIT OF 'INTERNATIONAL TRANSACTION'. IT IS ALSO IMPORTANT TO BEAR IN MIND THAT, AS IT APPEARS ON A PLAIN READING OF THE PROVISION, THIS EXCLUSION CLAUSE IS NOT FOR 'CONTIN GENT' IMPACT ON PROFIT, INCOME, LOSSES OR ASSETS BUT ON 'FUTURE' IMPACT ON PROFIT, I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 INCOME, LOSS ES OR ASSETS OF THE ENTERPRISE. THE IMPORTANT DISTINCTION BETWEEN THESE TWO CATEGORIES 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 FORMER CASE. IN T HE CASE BEFORE US, IT IS AN UNDISPUTED POSITION THAT CORPORATE GUARANTEES ISSUE D BY THE ASSESSEE TO THE DEUTSCHE BANK DID NOT EVEN HAVE ANY SUCH IMPLICATIO N BECAUSE NO BORROWINGS WERE RESORTED 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 L ONG-TERM OR SHORT-TERM BORROWING, LENDING OR GUARANTEE, PURCHASE OR SALE O F MARKETABLE SECURITIES OR ANY TYPE OF ADVANCE, PAYMENTS OR DEFERRED PAYMENT OR RE CEIVABLE OR ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS'. IN VIEW OF THE DISCUSSIONS ABOVE, THE SCOPE OF THESE TRANSACTIONS, AS COULD BE COVERED UN DER EXPLANATION TO SECTION 92B READ WITH SECTION 92B(1) , IS RESTRICTED TO SUCH CAPITAL FINANCING TRANSACTI ONS, 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 PRECONDI TION ABOUT IMPACT ON PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES IS A P RECONDITION EMBEDDED IN SECTION 92B(1) AND THE ONLY RELAXATION FROM THIS CONDITION PRECED ENT IS SET OUT IN CLAUSE (E) OF THE EXPLANATION WHICH PROVIDES THA T THE BEARING ON PROFITS, INCOME, LOSSES OR ASSETS COULD BE IMMEDIATE OR ON A FUTURE DATE. THE CONTENTS OF THE EXPLANATION FORTIFIES, RATHER THAN MITIGATES, T HE SIGNIFICANCE OF EXPRESSION 'HAVING A BEARING ON PROFITS, INCOME, LOSSES OR ASS ETS' 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 EXPLANATION TO SECTION 92B , AND YET IT MAY NOT CONSTITUTE AN INTERNATIONAL TRANSACTION AS THE COND ITION PRECEDENT WITH REGARD TO THE 'BEARING ON PROFIT, INCOME, LOSSES OR ASSETS' S ET OUT IN SECTION 92B(1) MAY NOT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 34 OF 82 BE FULFILLED. FOR EXAMPLE, AN ENTERPRISE MAY EXTEND GUARANTEES FOR PERFORMANCE OF FINANCIAL OBLIGATIONS BY ITS ASSOCIATED ENTERPRI SES. THESE GUARANTEES DO NOT COST ANYTHING TO THE ENTERPRISE ISSUING THE GUARANT EES AND YET THEY PROVIDE CERTAIN COMFORT LEVELS TO THE PARTIES DOING DEALINGS WITH T HE ASSOCIATED ENTERPRISE. THESE GUARANTEES THUS DO NOT HAVE ANY IMPACT ON INCOME, P ROFITS, LOSSES OR ASSETS OF THE ASSESSEE. THERE CAN BE A HYPOTHETICAL SITUATION IN WHICH A GUARANTEE DEFAULT TAKES PLACE AND, THEREFORE, THE ENTERPRISE MAY HAVE TO PA Y THE GUARANTEE AMOUNTS BUT SUCH A SITUATION, EVEN IF THAT BE SO, IS ONLY A HYP OTHETICAL SITUATION, WHICH ARE, AS DISCUSSED ABOVE, EXCLUDED. ONE MAY ALSO HAVE A SITU ATION IN WHICH THERE IS A RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF B USINESS AND YET THESE RECEIVABLES 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 ALLOWIN G SUCH USE OF FUNDS. THE SITUATIONS CAN BE ENDLESS, BUT THE COMMON THREAD IS THAT 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 DURING THE COURS E OF ITS NORMAL BUSINESS, SUCH AN ASSISTANCE OR ACCOMMODATION DOES NOT HAVE A NY BEARING ON ITS PROFITS, INCOME, LOSSES OR ASSETS, AND, THEREFORE, IT IS OUT SIDE THE AMBIT OF INTERNATIONAL TRANSACTION UNDER SECTION 92B (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 NATURE AS TO HAVE 'BEARING ON PROFITS, INCOME, LOSSES OR ASSETS' OF THE ENTERPRISE, AND THERE WAS NOT EVEN A N EFFORT TO DISCHARGE THIS ONUS. SUCH AN IMPACT ON PROFITS, INCOME, LOSSES OR ASSETS HAS TO BE ON REAL BASIS, EVEN IF IN PRESENT OR IN FUTURE, AND NOT ON CONTINGENT OR H YPOTHETICAL 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 O N PROFITS, INCOME, LOSSES OR ASSETS. CLEARLY, THESE CONDITIONS ARE NOT SATISFIED ON THE FACTS OF THIS CASE.' 23. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THIS DECISION IS NO LONGER GOOD LAW IN THE LIGHT OF EVEREST KANTO CYLINDERS LT D. DECISION (SUPRA) AND VODAFONE INDIA SERVICES (P.) LTD. 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 APPRECIATE THE FAC T THE ASSESSEE WAS CHARGING A .5% COMMISSION ON ISSUANCE OF CORPORATE GUARANTEES, ON BEHALF OF THE AES, AND IT COULD NOT, THEREFORE, BE SAID THAT THE TRANSACTION WILL HAVE NO IMPACT ON 'PROFITS, INCOMES, LOSSES OR ASSETS OF SUCH ENTERPRISE'. THIS ASPECT OF THE MATTER IS CLEAR FROM AN OBSERVATIONS IN THE RELATED TRIBUNAL ORDER, WHICH IS REPORTED AS EVEREST KANTO CYLINDERS LTD (SUPRA), TO THE EFFECT THAT 'HO WEVER, IN THIS CASE, THE ASSESSEE HAS ITSELF CHARGED 0.5% GUARANTEE COMMISSI ON FROM ITS AE AND, THEREFORE, IT IS NOT A CASE OF NOT CHARGING ANY KIN D OF COMMISSION FROM ITS AE'. THE TRIBUNAL DID NOTE, IN THE IMMEDIATELY FOLLOWING SENTENCE IN PARAGRAPH 23 ITSELF, THAT 'THE ONLY POINT TO BE SEEN IN THIS CAS E IS WHETHER THE SAME IS AT ALP OR NOT'. THE VERY FACT OF CHARGING THIS GUARANTEE COMM ISSION BRINGS THE ISSUANCE OF CORPORATE GUARANTEES TO THE NET OF TRANSFER PRICING . NEVERTHELESS, THE ALP ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 35 OF 82 ADJUSTMENT MADE BY THE TPO WAS DELETED BY THE TRIBU NAL. AGGRIEVED BY THE RELIEF SO GIVEN BY THE TRIBUNAL, THE MATTER WAS CAR RIED IN FURTHER APPEAL, BY THE COMMISSIONER, BEFORE THE HON'BLE BOMBAY HIGH COURT WHICH EVENTUALLY UPHELD THE RELIEF GRANTED BY THE TRIBUNAL. THE APPEAL BEFO RE THE HON'BLE I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 HIG H COURT WAS BY THE COMMISSIONER, AND NOT BY THE ASSESSEE, AND, THEREFO RE, THE GRIEVANCE AGAINST THE ISSUANCE OF CORPORATE GUARANTEE BEING HELD TO BE AN INTERNATIONAL TRANSACTION COULD NOT HAVE COME UP FOR CONSIDERATION. OF COURSE , THE ASSESSEE HAD NO OCCASION TO CHALLENGE THE STAND OF THE TRIBUNAL ON THIS ASPECT SINCE THE ADDITION, ON MERITS, WAS DELETED ANYWAY MAKING REVENUE'S SUCC ESS IN THIS RESPECT HOLLOW AND OF NO DAMAGE TO THE INTERESTS OF THE ASSESSEE. IT WAS IN THIS BACKDROP THAT THE ACTION OF THE TRIBUNAL WAS UPHELD IN GRANTING RELIE F TO THE ASSESSEE ON MERITS. IT IS DIFFICULT TO UNDERSTAND AS TO HOW THIS DECISION IS TAKEN AS SUPPORTING THE PROPOSITION THAT THE ISSUANCE OF CORPORATE GUARANTE E, EVEN IN A CASE IN WHICH NEITHER ANY GUARANTEE COMMISSION IS CHARGED NOR ANY COSTS ARE INCURRED, IS AN INTERNATIONAL TRANSACTION. IN ANY CASE, THERE IS NO THING IN THE OPERATIVE PORTION WHICH EVEN REMOTELY SUGGESTS THAT THEIR LORDSHIPS H AD ANY OCCASION TO ADDRESS THEMSELVES TO THE QUESTION AS TO WHETHER THE ISSUAN CE OF CORPORATE GUARANTEE AMOUNTS TO INTERNATIONAL TRANSACTION. THE OPERATIVE PORTION OF THE JUDGMENT IS REPRODUCED BELOW FOR READY REFERENCE: '............IN THE MATTER OF GUARANTEE COMMISSION, THE ADJUSTMENT MADE BY THE TPO WERE BASED ON INSTANCES RESTRICTED TO THE C OMMERCIAL BANKS PROVIDING GUARANTEES AND DID NOT CONTEMPLATE THE IS SUE OF A CORPORATE GUARANTEE. NO DOUBT THESE ARE CONTRACTS OF GUARANTE E, HOWEVER, WHEN THEY ARE COMMERCIAL BANKS THAT ISSUE BANK GUARANTEE S WHICH ARE TREATED AS THE BLOOD OF COMMERCE BEING EASILY ENCASHABLE IN THE EVENT OF DEFAULT, AND IF THE BANK GUARANTEE HAD TO BE OBTAINED FROM C OMMERCIAL BANKS, THE HIGHER COMMISSION COULD HAVE BEEN JUSTIFIED. IN THE PRESENT CASE, IT IS ASSESSEE COMPANY THAT IS ISSUING CORPORATE GUARANTE E TO THE EFFECT THAT IF THE SUBSIDIARY AE DOES NOT REPAY LOAN AVAILED OF IT FROM ICICI, THEN IN SUCH EVENT, THE ASSESSEE WOULD MAKE GOOD THE AMOUNT AND REPAY THE LOAN. THE CONSIDERATIONS WHICH APPLIED FOR ISSUANCE OF A CORPORATE GUARANTEE ARE DISTINCT AND SEPARATE FROM THAT OF BANK GUARANT EE AND ACCORDINGLY WE ARE OF THE VIEW THAT COMMISSION CHARGED CANNOT BE C ALLED IN QUESTION, IN THE MANNER TPO HAS DONE. IN OUR VIEW THE COMPARISON IS NOT AS BETWEEN LIKE TRANSACTIONS BUT THE COMPARISONS ARE BETWEEN G UARANTEES ISSUED BY THE COMMERCIAL BANKS AS AGAINST A CORPORATE GUARANT EE ISSUED BY HOLDING COMPANY FOR THE BENEFIT OF ITS AE, A SUBSIDIARY COM PANY. IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE APPEAL DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AND IT IS DISMISSED.' 25. WE ARE UNABLE TO SEE, IN THE JUDGMENT OF HON'BL E BOMBAY HIGH COURT, ANY SUPPORT TO THE PROPOSITION THAT ISSUANCE OF CORPORATE GUARANTEES IS INHERENTLY WITHIN THE AMBIT OF DEFINI TION OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B IRRESPECTIVE OF WHETHER OR NOT SUCH TRANSACTIONS HAVE ANY I.T.A. NOS. 2618 AND 2876/MUM /2014 ASSESSMENT YEAR: 2009-10 'BEARING ON PROFITS, INCOMES, LOSSES, OR ASSETS OF SUCH ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 36 OF 82 ENTERPRISES'. REVENUE, THEREFORE, DOES NOT DERIVE A NY 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 RELIED U PON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE FIND THAT THE OPERA TIVE PORTION OF THIS JUDGMENT, SO FAR AS RELEVANT TO THIS DISCUSSION, IS AS FOLLOW S: '213. THE AMENDMENT TO SECTION 2(47) RAISES SEVERAL IMPORTANT QUESTIONS OF FACT AND OF LAW. WHETHER OR NOT IT AFFECTS THE P ROCEEDINGS WHICH WERE THE SUBJECT MATTER BEFORE THE SUPREME COURT IS NOT RELEVANT FOR THE PURPOSE OF THIS WRIT PETITION. BUT, WHETHER IT IS R ELEVANT OR NOT FOR THE PURPOSE OF THE ASSESSMENT PROCEEDINGS IN RESPECT OF THE PETITIONER WHICH ARE THE SUBJECT MATTER OF THIS WRIT PETITION, IS RE LEVANT. 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 GLANCE RAISES VARIO US ISSUES. IT IS NECESSARY TO NOTE FOUR PRELIMINARY AS PECTS OF EXPLANATION 2 TO SECTION 2(47) . FIRSTLY, AS THE OPENING WORDS, FOR THE REMOVAL OF DOUBTS IT IS HEREBY CLARIFIED THAT ......', INDICATE IT IS A CLARIFICATORY AMENDMENT. SECONDLY, IT IS AN INCLUSIVE DEFINITION AS IS EVIDE NT FROM THE WORDS 'TRANSFER' INCLUDES '. THIRDLY, THE AMENDMENT IS WI TH 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 IN 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 TRANSFE R AS DEFINED IN THE SECTION IT WOULD BE SO NOTWITHSTANDING THE TRANSFER OF RIGHTS HAVING BEEN CATEGORISED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTER ED 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 THE ASSET PER SE OR A RIGHT THEREIN, BUT ALSO EXTENDS T O 'ANY INTEREST THEREIN'. PRIOR TO THE AMENDMENT, THE WORDS 'ANY INTEREST THE REIN' WERE ABSENT. FURTHER, THE NATURE OF THE DISPOSAL IS ALSO EXPANDE D. IT NOW INCLUDES THE CREATION OF ANY INTEREST IN ANY ASSET. MOREOVER, TH E DISPOSAL OF OR CREATION ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 37 OF 82 OF ANY INTEREST IN THE ASSET MAY BE DIRECT OR INDIR ECT, ABSOLUTE OR CONDITIONAL, VOLUNTARY OR INVOLUNTARY. IT MAY BE BY WAY OF AN AGREEMENT OR OTHERWISE. FURTHER, THE CONCLUDING WORDS CONSTIT UTE A NON-OBSTANTE PROVISION. IT PROVIDES THAT THE TRANSFER CONTEMPLAT ED THEREIN WOULD BE NOTWITHSTANDING THAT IT HAS BEEN CHARACTERISED AS B EING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SH ARE OR SHARES OF A COMPANY REGISTERED 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 CONSTITUT ED A TRANSFER OR ASSIGNMENT OF THE CALL OPTIONS BY ONE PARTY TO ANOT HER. 217. AT THE COST OF REPETITION, WE ARE NOT CONCERNE D HERE WITH WHETHER THE AMENDMENT IS VALID OR NOT. ONE OF THE ISSUES, HOWEV ER, THAT DOES ARISE IS WHETHER THE AMENDMENT, ALBEIT CLARIFICATORY, WOULD MAKE A DIFFERENCE IN THE CONSTRUCTION OF THE PROVISIONS OF THE FRAMEWORK AGREEMENTS THEMSELVES, TO WIT AS REGARDS THE CONSTRUCTION OF T HE CLAUSES THEREOF WITHOUT THE AID OF ANY OTHER MATERIAL FOR INTERPRET ING THEM. VODAFONE'S CASE OBVIOUSLY CONSIDERED THE AMBIT OF THE TERM 'TR ANSFER' PRIOR TO THE AMENDMENT. IN THE PRESENT ASSESSMENT PROCEEDINGS, I T IS THE AMENDED DEFINITION 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 PRESENT PROCEEDINGS. THE APPLICATION WOULD DEPEND UPON THE FACTS ON RECORD O R 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 CLA RIFICATORY IN NATURE. THE PROVISIONS THEREOF MUST, THEREFORE, BE DEEMED A LWAYS TO HAVE BEEN IN EXISTENCE. WE WILL PRESUME THAT IT WOULD BE OPEN TO THE PETITIONER TO CONTEND, THEREFORE, THAT THE JUDGMENT OF THE SUPREM E COURT WOULD REMAIN ENTIRELY UNAFFECTED FOR THE SUPREME COURT MUST BE D EEMED TO HAVE CONSIDERED THE TERM AS PER ITS TRUE AMBIT, AS ALWAY S INTENDED BY THE PARLIAMENT. ON THE OTHER HAND, IT MAY BE EQUALLY OP EN TO THE REVENUE TO CONTEND THAT CERTAIN INGREDIENTS OF A TRANSFER WERE NOT CONSIDERED BY THE REVENUE ITSELF IN THE PROCEEDINGS I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 RELATING TO VODAFONE'S CAS E ON ACCOUNT OF THE REVENUE ITSELF NOT HAVING APPRECIATED OR REALIZED T HE ACTUAL AMBIT OF THE TERM 'TRANSFER' WHICH ARE NOW CLARIFIED BY THE AMEN DMENT. EVEN ASSUMING THAT THE REVENUE CANNOT RE-OPEN THE VODAFO NE CASE, IT CANNOT BE BARRED FROM RELYING UPON THE TRUE AMBIT OF THE T ERM 'TRANSFER' IN FUTURE CASES, INCLUDING THE PROCEEDINGS IN RESPECT OF THE PETITIONER. THUS, EVEN ASSUMING THAT THE JUDGMENT OF THE SUPREME COURT REM AINS UNAFFECTED BY THE CLARIFICATORY AMENDMENT, THE REVENUE WOULD BE E NTITLED HEREAFTER IN OTHER CASES, AT LEAST, TO APPRECIATE, ANALYZE AND C ONSTRUE THE TRANSACTIONS ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 38 OF 82 RELATING TO CALL OPTIONS, INCLUDING THE FRAMEWORK A GREEMENTS IN A PROPER 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 PROVIDED BY THE INCOME-TAX ACT , BYPASSING THE TRIBUNAL AND CONSIDERING ALL THESE QU ESTIONS IN EXERCISE OF THE HIGH COURT'S EXTRAORDINARY 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 WOULD HAVE TO BE CONSIDERED. IT CANNOT BE BRUSHED ASIDE' BUT IN DOIN G SO WHAT IT OVERLOOKS IS THE SUBSEQUENT OBSERVATIONS HIGHLIGHTED ABOVE WH ICH RECOGNIZE THE FACT THAT MERELY BECAUSE A SUBSEQUENT EXPLANATION I S INTRODUCED BY THE LEGISLATURE, IT IS NOT AN OPEN AND SHUT CASE AGAINS T THE ASSESSEE OR THE REVENUE, AND THAT ALL THESE OBSERVATIONS ARE IN THE CONTEXT THAT 'THERE IS NO JUSTIFICATION FOR WITHDRAWING THE PROCEEDINGS FROM THE CHANNEL PROVIDED BY THE INCOME-TAX ACT , BYPASSING THE TRIBUNAL AND CONSIDERING ALL THESE QUESTIONS IN EXERCISE OF THE HIGH COURT'S EXTRAORDI NARY JURISDICTION UNDER ARTICLE 226'. WHEN THEIR LORDSHIPS HAVE MADE IT CLEAR THAT THEY WOULD NOT LIKE TO BYPASS THE CHANNELS UNDER THE INCOME-TAX ACT AND PROCEED TO DECIDE THESE ISSUES IN WRIT JURISDICTION UNDER ARTICLE 226 , THERE CANNOT OBVIOUSLY BE ANY QUESTION OF THEIR LORDSHIPS DECIDING THE MATTER ONE WAY OR THE OTHER. ANY OBSERVATIONS MADE BY THEI R LORDSHIPS, WHILE DECLINING TO DECIDE THE MATTER IN WRIT JURISDICTION , CANNOT BE TREATED AS DECISIVE OF THE ISSUE ON MERITS. WHILE IT IS TRUE T HAT HON'BLE BOMBAY HIGH COURT HAS OBSERVED THAT THE EFFECT OF AMENDMENT WIL L HAVE TO BE CONSIDERED, HON'BLE BOMBAY HIGH COURT HAS ALSO OBSE RVED THAT EVEN AFTER TAKING INTO ACCOUNT THE AMENDMENTS, THE LEGAL IMPLICATIONS OF THIS AMENDMENT IS STILL AN OPEN ISSUE WHICH WILL HAVE TO BE ADJUDICATED IN THE LIGHT OF PLEADINGS OF THE PARTIES. EVEN IN THESE OB SERVATIONS, WHICH DO NOT ANYWAY DECIDE ANYTHING ON MERITS, EFFECT OF A RETRO SPECTIVE AMENDMENT WAS NOT IN THE CONTEXT OF THE PRECISE ISSUE BEFORE US, OR ON THE SCOPE OF THE INTERNATIONAL TRANSACTION, BUT IN RESPECT OF CO NNOTATIONS OF 'TRANSFER'. AS LEARNED COUNSEL RIGHTLY CONTENDS, IN THE LIGHT O F HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN THE CASE OF SUDHIR JAYANTILAL M ULJI (SUPRA) 'RATIO OF A DECISION ALONE IS BINDING, BECAUSE A CASE IS ONLY A N I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 AUTHORITY FO R WHAT IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FOLLOW FROM SOME O BSERVATIONS WHICH FIND PLACE THEREIN'. IN VIEW OF THESE DISCUSSIONS, THE RELIANCE PLACED ON VODAFONE INDIA SERVICES (P.) LTD. (SUPRA) IS ALSO E QUALLY MISPLACED AND DEVOID 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 .) LTD. [1992] 198 ITR 297/64 TAXMAN 442 (SC), 'IT IS NEITHER DESI RABLE NOR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF THIS COURT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CON SIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. TH E JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGM ENT HAVE TO BE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 39 OF 82 CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THIS COURT' THEIR LORDSHIPS FURTHER NOTED THAT 'A DECISION OF T HIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN W HICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATER CASE, THE CO URTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DE CISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMEN T, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THI S COURT, TO SUPPORT THEIR REASONING' IT WAS ALSO RECALLED THAT IN MADHAV RAO JIVAJI RAO SCINDIA BAHADUR V. UNION OF INDIA AIR 1971 SC 530, HON'BLE SUPREME COURT HAD CAUTIONED THAT 'IT IS NOT PROPER TO REGAR D A WORD, CLAUSE OR A SENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COU RT, DIVORCED FROM ITS CONTEXT, AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTION WHEN THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT J UDGMENT.' THAT PRECISELY, HOWEVER, HAS BEEN THE APPROACH OF THE RE VENUE AUTHORITIES IN PLACING RELIANCE ON VODAFONE INDIA SERVICES (P.) LT D. (SUPRA) DECISION. WE REJECT THIS APPROACH. 28. FOR THE REASONS SET OUT ABOVE, LEARNED DEPARTME NTAL REPRESENTATIVE'S RELIANCE ON HON'BLE BOMBAY HIGH COURT'S JUDGMENTS I N THE CASES OF EVEREST KANTO (SUPRA) AND VODAFONE INDIA SERVICES ( SUPRA) IS WHOLLY MISPLACED AND DEVOID OF ANY MERITS. AS FOR COORDINA TE BENCH DECISION IN THE CASE OF HINDALCO INDUSTRIES (SUPRA), ALL IT DOE S IS TO FOLLOW THE EVEREST KANTO DECISION BY HON'BLE BOMBAY HIGH COURT, BUT TH EN, AS WE HAVE SEEN EARLIER, THAT WAS A CASE IN WHICH THEIR LORDSH IPS WERE IN SEISIN OF A SITUATION IN WHICH GUARANTEE COMMISSION WAS ACTUALL Y CHARGED BY THE ASSESSEE. THAT IS NOT THE CASE BEFORE US. THE COORD INATE BENCH DECISIONS DEALING WITH THE SITUATIONS IN WHICH THE GUARANTEE COMMISSION WAS ACTUALLY CHARGED, AND AS SUCH THERE WAS INDEED A BE ARING ON THE PROFITS OF THE ASSESSEE, CLEARLY DONOT APPLY ON THIS CASE. WE, THEREFORE, 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 OF CANADA. IN TH E DRP'S ORDER, A REFERENCE IS MADE TO WELL KNOWN CANADIAN DECISION I N THE CASE OF GE CAPITAL CANADA (SUPRA). THE SAID CASE, TO QUOTE THE WORDS OF THE DRP, 'ALSO SHOWS THAT THE GROUP COMPANY ISSUING THE GUAR ANTEE (I.E. GUARANTOR) WOULD, IN PRINCIPLE, AT LEAST NEED TO COVER THE COS T THAT IT INCURS WITH RESPECT TO I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSES SMENT YEAR: 2009- 10 PROVIDING THE GUARANTEE' AND THAT 'THESE COSTS M AY INCLUDE ADMINISTRATIVE EXPENSES AS WELL AS THE COSTS OF MAI NTAINING AN APPROPRIATE LEVEL OF CASH EQUIVALENTS, CAPITAL, SUBSIDIARY CRED IT LINES OR MORE EXPENSIVE EXTERNAL FUNDING CONDITIONS ON OTHER DEBT FINANCE'. THE DRP HAD ALSO NOTED THAT 'IN ADDITION, THE GUARANTOR WOU LD WANT TO RECEIVE APPROPRIATE COMPENSATION FOR THE RISK IT INCURS' AN D CONCLUDED THAT 'FOLLOWING THE ABOVE DISCUSSIONS, AN ARM'S LENGTH G UARANTEE FEES IS TYPICALLY REQUIRED TO BE DETERMINED BY ESTABLISHING A RANGE OF FEES THAT THE GUARANTOR WOULD, AT LEAST, WANT TO RECEIVE AND THE FEES THAT THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 40 OF 82 GUARANTEED GROUP COMPANY WOULD BE WILLING TO PAY DE PENDING ON THE PREVAILING CONDITIONS WITHIN FINANCIAL MARKETS IN P RACTICE'. 30. HOWEVER, WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS NECESSARY TO BEAR IN MIND THE FACT THAT THIS JUDICIAL PRECEDE NT, WHATEVER BE ITS WORTH IN THE HIERARCHY OF BINDING JUDICIAL PRECEDENTS IN INDIA, DOES NOT EVEN DEAL WITH THE FUNDAMENTAL QUESTION AS TO WHETHER IS SUANCE OF A CORPORATE GUARANTEE IS AN INTERNATIONAL TRANSACTION AT ALL- W HICH IS WHAT WE ARE CONCERNED WITH AT PRESENT. THIS TCC DECISION DEALT WITH A SITUATION IN WHICH THE ASSESSEE WAS DENIED, IN COMPUTATION OF IT S BUSINESS INCOME, TAX DEDUCTION FOR PAYMENT OF GUARANTEE FEES ON THE GROU ND THAT THERE WAS NO EFFECTIVE BENEFIT TO THE ASSESSEE, IN OBTAINING THE SAID GUARANTEE. AGGRIEVED BY DENIAL OF DEDUCTION, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CANADIAN TAX COURT, AND THE PLEA OF THE ASSESSEE WAS EVENTUALLY UPHELD. IT IS ALSO INTERESTING TO NOTE T HAT AS A SEQUEL TO THIS TAX COURT OF CANADA DECISION, THE TRANSFER PRICING LEGI SLATION WAS AMENDED, TO BRING GREATER CLARITY ON THE ISSUE AND AS A MEAS URE OF ABUNDANT CAUTION, AND SECTION 247 (7.1), GRANTING SPECIFIC EXEMPTION TO GUARANTEE FE ES, WAS INTRODUCED. THIS AMENDMENT IS AS FOLLOWS: (7.1) SUB-SECTION (2) DOES NOT APPLY TO ADJUST AN A MOUNT OF CONSIDERATION PAID, PAYABLE OR ACCRUING TO A CORPORATION RESIDENT IN CANADA (IN THIS SUB- SECTION REFERRED TO AS THE 'PARENT') IN A TAXATION YEAR OF THE PARENT FOR THE PROVISION OF A GUARANTEE TO A PERSON OR PARTNERSHIP (IN THIS SUB-SECTION REFERRED TO AS THE 'LENDER') FOR THE REPAYMENT, IN WHOLE OR IN PART, OF A PARTICULAR AMOUNT OWING TO THE LENDER BY A NON-RESI DENT PERSON, IF (A) THE NON-RESIDENT PERSON IS A CONTROLLED FOREIGN AFFILIA TE OF THE PARENT FOR THE PURPOSES OF SECTION 17 THROUGHOUT THE PERIOD IN THE YEAR DURING WHICH THE PARTICULAR AMOUNT IS OWING; AND (B) IT IS ESTABLISH ED THAT THE PARTICULAR AMOUNT WOULD BE AN AMOUNT OWING DESCRIBED IN PARAGR APH 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 TRANSACTION', UNLIKE A N EXHAUSTIVE DEFINITION UNDER SECTION 92B OF THE INDIAN INCOME-TAX ACT, 1961, IS A VERY I.T. A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10BRIEF BUT INCLUSIVE AND BROAD DEFINITION TO THE EFFECT THAT ''TRANSACTION' INCLUD ES A SERIES OF TRANSACTIONS, AN ARRANGEMENT OR AN EVENT' [SEE SECTION 247(1) OF THE CANADIAN INCOME-TAX ACT, 1985; HTTP://LAWS- LOIS.JUSTICE.GC.CA/ENG/ACTS/I-3. 3/PAGE-419.HTML#H-156] COUPLED WITH THE LEGAL POSITION THAT ARM'S LENGTH ADJUSTMEN T TO THE PRICES OF SUCH TRANSACTION COME INTO PLAY 'WHERE A TAXPAYER OR A P ARTNERSHIP AND A NON- RESIDENT PERSON WITH WHOM THE TAXPAYER OR THE PARTN ERSHIP, OR A MEMBER OF THE PARTNERSHIP, DOES NOT DEAL AT ARM'S LENGTH' [SEE SECTION 247(2) IBID]. WHEN ONE TAKES INTO ACCOUNT THESE VARIATIONS IN THE STATUTOR Y PROVISIONS, IT WILL BECOME VERY OBVIOUS THAT THE PROVISIONS OF THE INDIAN INCOME-TAX ACT , 1961 AND THE CANADIAN INCOME-TAX ACT, 1985 ARE SO RADICALLY DIFF ERENT THAT JUST BECAUSE A ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 41 OF 82 PARTICULAR TRANSACTION IS TO BE EXAMINED ON ARM'S L ENGTH PRINCIPLE IN CANADA CANNOT BE A REASON ENOUGH TO HOLD THAT IT MUST MEET THE SAME IN INDIA AS WELL. WHILE THE CANADIAN TRANSFER PRICING LEGISLATION, AS INDEED THE TRANSFER PRICING LEGISLATION IN MANY OTHER JURISDICTIONS, DOES NOT P UT ANY FETTERS ON THE NATURE OF TRANSACTIONS BETWEEN THE AES, SO AS TO BE COVERED B Y THE ARM'S LENGTH PRICE ADJUSTMENT, AND, THEREFORE, COVERS ALL TRANSACTIONS BETWEEN THE RELATED ENTERPRISES, INDIAN TRANSFER PRICING LEGISLATION CO VERS ONLY SUCH TRANSACTIONS AS ARE 'IN THE NATURE OF PURCHASE, SALE OR LEASE OF TA NGIBLE OR INTANGIBLE PROPERTY, OR PROVISION OF SERVICES, OR LENDING OR BORROWING MONE Y, OR ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES'. OUR TRANSFER PRICING PROVISIONS, PERHAPS BEING IN THE Q UEST OF COMPREHENSIVE COVERAGE, HAVE ENDED UP IN A LIMITED SCOPE OF THE T RANSACTIONS BEING COVERED BY THE ARM'S LENGTH PRICE ADJUSTMENTS FOR TRANSFER PRI CING. IN ANY EVENT, AS EMPHASIZED EARLIER AS WELL, THE DECISION WAS IN THE CONTEXT OF THE DEDUCTION, AND, POST THIS DECISION, A SPECIFIC AMENDMENT WAS INTROD UCED IN THE CANADIAN TRANSFER PRICING LAW TO CLARIFY THE POSITION THAT ALL CORPOR ATE GUARANTEES ISSUED BY THE ASSESSEE, IN SUPPORT OF ITS SUBSIDIARIES, ARE NOT N ECESSARILY INTERNATIONAL TRANSACTIONS. REVENUE, THEREFORE, DOES NOT DERIVE A NY ADVANTAGE FROM THE TAX COURT OF CANADA'S DECISION IN THE CASE OF GE CAPITA L CANADA. THERE ARE MANY MORE ASPECTS WHICH MAKE THIS DECISION WHOLLY IRRELE VANT IN THE PRESENT CONTEXT BUT SUFFICE TO SAY THAT RELEVANT LEGAL PROVISIONS A ND CONTEXT BEING 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 'SHAREHOLDER ACTIVITIES ' IN THE CONTEXT OF CORPORATE GUARANTEES WHICH PROVIDES CONCEPTUAL JUSTIFICATION FOR EXCLUSION OF CORPORATE GUARANTEES, UNDER CERTAIN CONDITIONS, FROM THE SCOP E OF TRANSFER PRICING ADJUSTMENTS. TAKING NOTE OF THESE PROPOSED AMENDMEN TS, 'TRANSFER PRICING AND INTRA GROUP FINANCING - BY BAKKER & LEVVY, IBFD PUB LICATION (ISBN- 978-90- 8722-153-9)' OBSERVES THAT 'PROPOSED SUB- SECTION 247 (7.1) OF THE ITA PROVIDES THAT THE TRANSFER PRICING RULES WILL NOT APPLY TO G UARANTEES PROVIDED BY CANADIAN PARENT CORPORATIONS IN RESPECT OF CERTAIN FINANCIAL COMMITMENTS OF THEIR CANADIAN CONTROLLED FOREIGN I.T.A. NOS. 2618 AND 2876/MUM/20 14 ASSESSMENT YEAR: 2009-10 AFFILIATES TO SUPPORT THE ACTIVE BUSINESS O PERATIONS OF THOSE AFFILIATES'. AS TO WHAT COULD BE CONCEPTUAL SUPPORT FOR SUCH AN EXCLUSION, WE FIND INTERESTING REFERENCES IN A DISCUSSION PAPER ISSUED BY THE AUST RALIAN TAX OFFICER IN JUNE 2008 AND TITLED AS 'INTRA-GROUP FINANCE GUARANTEES AND LOANS'HTTP://WWW.TRANSFERPRICING.COM/PDF/AUSTRALIA_ THIN%20CAPITALISATION.PDF ). THE FACT THAT THIS DISCUSSION PAPER DID NOT TRAV EL BEYOND THE STAGE OF THE DISCUSSION PAPER IS NOT REALLY RELEVANT FOR THE PRE SENT PURPOSES BECAUSE ALL THAT WE ARE CONCERNED WITH RIGHT NOW IS UNDERSTANDING TH E CONCEPTUAL BASIS 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 ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 42 OF 82 GUARANTEE FROM AN INDEPENDENT PARTY TO SUPPORT THE BORROWINGS IT NEEDS. WHERE SUCH A GUARANTEE IS GIVEN IT COMPENSATES FOR THE INADEQUACIES IN THE FINANCIAL POSITION OF THE BORROWER; SPECIFICALL Y, THE FACT THAT THE SUBSIDIARY DOES NOT HAVE ENOUGH SHAREHOLDERS' FUNDS . ..... 103. IT WOULD NOT BE EXPECTED THAT A COMPANY PAY FO R THE ACQUISITION OF THE EQUITY IT NEEDS FOR ITS FORMATION AND CONTINUED 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 SELF- SUFFICIENT AND RAISE THE DEBT FUNDING IT NEEDS, THE COSTS OF T HE GUARANTEE (AND THE ASSOCIATED RISK) SHOULD REMAIN WITH THE PARENT COMP ANY 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 OWNERS HIP CONTRIBUTION, PARTICULARLY WHEN, AS IS OFTEN THE CASE, 'WHERE SUC H A GUARANTEE IS GIVEN IT COMPENSATES FOR THE INADEQUACIES IN THE FINANCIAL P OSITION OF THE BORROWER; SPECIFICALLY, THE FACT THAT THE SUBSIDIAR Y DOES NOT HAVE ENOUGH SHAREHOLDERS' FUNDS'. THERE CAN BE NUMBER OF REASON S, INCLUDING REGULATORY ISSUES AND MARKET CONDITIONS IN THE RELA TED JURISDICTIONS, IN WHICH SUCH A CONTRIBUTION, BY WAY OF A GUARANTEE, W OULD JUSTIFY TO BE A MORE APPROPRIATE AND PREFERRED MODE OF CONTRIBUTION VIS-A-VIS EQUITY CONTRIBUTION. IT IS SIGNIFICANT, IN THIS CONTEXT, T HAT THE CASE OF THE ASSESSEE HAS ALL ALONG BEEN, AS NOTED IN THE ASSESSMENT ORDE R ITSELF, THAT 'SAID GUARANTEES WERE IN THE FORM OF CORPORATE GUARANTEES / QUASI-CAPITAL AND NOT IN THE NATURE OF ANY SERVICES'. IN OTHER WORDS, THESE GUARANTEES WERE 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 SHAREHOLDER'S ACTIVIT Y, IS NOT REJECTED EITHER. THE CONCEPT OF ISSUANCE OF I.T.A. NOS. 2618 AND 287 6/MUM/2014 ASSESSMENT YEAR: 2009-10CORPORATE GUARANTEES AS A S HAREHOLDER ACTIVITY IS NOT ALIEN TO THE TRANSFER PRICING LITERATURE IN GENERAL. ON THE CONTRARY, IT IS RECOGNIZED IN INTERNATIONAL TRANSFER PRICING LIT ERATURE AS ALSO IN THE OFFICIAL DOCUMENTATION AND LEGISLATION OF SEVERAL T RANSFER PRICING JURISDICTIONS. THE 'OECD TRANSFER PRICING GUIDELINE S FOR MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATIONS' ITSELF RECOGNI ZES THE DISTINCTION BETWEEN A SHAREHOLDER ACTIVITY AND A PROVISION FOR SERVICES, WHEN, CONTRASTING THE SHAREHOLDER ACTIVITY WITH BROADER T ERM 'STEWARDSHIP ACTIVITY' AND THUS HIGHLIGHTING NARROW SCOPE OF SHA REHOLDER ACTIVITY, IT STATES THAT 'STEWARDSHIP ACTIVITIES COVERED A RANGE OF ACTIVITIES BY A SHAREHOLDER THAT MAY INCLUDE PROVISION FOR SERVICES TO OTHER GROUP MEMBERS, FOR EXAMPLE SERVICES THAT WOULD BE PROVIDE D BY A COORDINATING CENTRE'. IT PROCEEDED TO ADD, IN THE IMMEDIATELY FO LLOWING SENTENCE AT PAGE 207 OF 2010 GUIDELINES, THAT 'THESE LATTER TYP E OF NON-SHAREHOLDER ACTIVITIES COULD INCLUDE DETAILED PLANNING SERVICES FOR PARTICULAR OPERATIONS, MANAGEMENT OR TECHNICAL ADVICE (TROUBLE SHOOTING) OR IN SOME CASES ASSISTANCE IN DAY-TO-DAY MANAGEMENT'. THE SHA REHOLDER ACTIVITIES ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 43 OF 82 ARE THUS SEEN AS CONCEPTUALLY DISTINCT FROM THE PRO VISION OF SERVICES. THE ISSUANCE OF CORPORATE GUARANTEE, AS LONG AS IT IS I N THE NATURE OF SHAREHOLDER ACTIVITY, CAN NOT, THEREFORE, AMOUNT TO A 'PROVISION FOR SERVICES'. 34. UNDOUBTEDLY, PIONEERING WORK DONE BY THE OECD, IN THE FIELD OF INTERNATIONAL TAXATION, HAS BEEN JUDICIALLY RECOGNI ZED WORLDWIDE BY VARIOUS JUDICIAL FORUMS, INCLUDING, MOST NOTABLY BY HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V. VISAKHAPATNAM PORT TRUST [1983] 144 ITR 146/15 TAXMAN 72 (AP). THEIR LORDSH IPS ALSO REFERRED TO LORD RADCLIFFE'S OBSERVATIONS IN OSTIME V. AUSTRALIAN MUTUAL PROVIDENT SOCIETY [1960] 39 ITR 210 (HL), WHICH HAS DESCRIBED THE LANGUAGE EMPLOYED IN THE MODELS DEVELOPED BY THE OE CD AS THE 'INTERNATIONAL TAX LANGUAGE'. THE WORK DONE BY OECD IN THE FIELD OF TRANSFER PRICING IS NO LESS SIGNIFICANT. NO MATTER WHICH PART OF THE WORLD WE LIVE IN, AND IRRESPECTIVE OF WHETHER OR NOT THAT TAX JURISDICTION IS AN OECD MEMBER JURISDICTION, THE IMMENSE CONTRIBUTION OF THE OECD, IN THE FIELD OF THE TRANSFER PRICING AS WELL, IS ADMIR ED AND RESPECTED. HOWEVER, THE RELEVANCE OF THIS WORK, SO FAR AS INTE RPRETATION TO TRANSFER PRICING LEGISLATION IS CONCERNED, MUST REMAIN CONFI NED TO THE AREAS WHICH HAVE REMAINED INTACT FROM LEGISLATIVE OR JUDICIAL G UIDANCE. THERE IS NO SCOPE FOR PARALLEL OR CONFLICTING GUIDANCE BY SUCH FORUMS. LEGISLATION IS AN EXCLUSIVE DOMAIN OF THE SOVEREIGN, AND, THEREFOR E, AS LONG AS AN AREA IS ADEQUATELY COVERED BY THE WORK OF LEGISLATION, THIN GS LIKE GUIDANCE OF THE OECD, OR FOR THAT PURPOSE ANY OTHER MULTILATERAL FO RUM, ARE NOT DECISIVE. WHILE WE ARE ALIVE TO THE SCHOOL OF THOUGHT THAT WH EN THE DOMESTIC TRANSFER PRICING REGULATIONS DO NOT PROVIDE ANY GUI DELINES, IT MAY HAVE TO BE DECIDED HAVING REGARD TO INTERNATIONAL BEST PRAC TICES, WE DO NOT QUITE AGREE WITH IT INASMUCH AS, IN OUR CONSIDERED VIEW, REVENUE CANNOT SEEK TO WIDEN THE NET OF TRANSFER PRICING LEGISLATION BY TAKING 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 FOR MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATIONS' HAS NOTED THAT THERE ARE TWO FUNDA MENTAL ISSUES WITH RESPECT TO THE INTRA-GROUP SERVICES- FIRST, WHETHER INTRA-GROU P SERVICES HAVE INDEED BEEN PROVIDED, AND, SECOND- IF THE ANSWER TO THE FIRST Q UESTION IS IN POSITIVE, THAT CHARGE TO THESE SERVICES SHOULD BE AT AN ARM'S LENG TH PRICE. DEALING WITH THE FIRST QUESTION, WHICH IS RELEVANT FOR THE PRESENT PURPOSE S, THESE GUIDELINES (2010 VERSION) STATE AS FOLLOWS: '7.6 UNDER THE ARM'S LENGTH PRINCIPLE, THE QUESTION WHETHER AN INTRA- GROUP SERVICE HAS BEEN RENDERED WHEN AN ACTIVITY IS PERFO RMED FOR ONE OR MORE GROUP MEMBERS BY ANOTHER GROUP MEMBER SHOULD DEPEND ON WHETHER THE ACTIVITY PROVIDES A RESPECTIVE GROUP MEMBER WITH EC ONOMIC OR COMMERCIAL VALUE TO ENHANCE ITS COMMERCIAL POSITION . THIS CAN BE DETERMINED BY CONSIDERING WHETHER AN INDEPENDENT EN TERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 44 OF 82 IF PERFORMED FOR IT BY AN INDEPENDENT ENTERPRISE OR WOULD HAVE PERFORMED THE ACTIVITY IN- HOUSE FOR ITSELF. IF THE ACTIVITY IS NOT ONE FOR WHICH THE INDEPENDENT ENTERPRISE WOULD HAVE BEEN WILLING TO P AY OR PERFORM FOR ITSELF, THE ACTIVITY ORDINARILY SHOULD NOT BE CONSI DERED 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 AB STRACT TO SET FORTH CATEGORICALLY THE ACTIVITIES THAT DO OR DO NOT CONS TITUTE THE RENDERING OF INTRA-GROUP SERVICES. HOWEVER, SOME GUIDANCE MAY BE GIVEN TO ELUCIDATE HOW THE ANALYSIS WOULD BE APPLIED FOR SOME COMMON T YPES 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 SPE CIFIC MEMBERS OF THE GROUP. IN SUCH A CASE, IT IS RELATIVELY STRAIGHTFOR WARD TO DETERMINE WHETHER A SERVICE HAS BEEN PROVIDED. ORDINARILY AN INDEPEND ENT ENTERPRISE IN COMPARABLE CIRCUMSTANCES WOULD HAVE SATISFIED THE I DENTIFIED NEED EITHER BY PERFORMING THE ACTIVITY IN- HOUSE OR BY HAVING T HE ACTIVITY PERFORMED BY A THIRD PARTY. THUS, IN SUCH A CASE, AN INTRA-GR OUP SERVICE ORDINARILY WOULD BE FOUND TO EXIST. FOR EXAMPLE, AN INTRA-GROU P SERVICE WOULD NORMALLY BE FOUND WHERE AN ASSOCIATED ENTERPRISE RE PAIRS EQUIPMENT USED IN MANUFACTURING BY ANOTHER MEMBER OF THE MNE GROUP . 7.9 A MORE COMPLEX ANALYSIS IS NECESSARY WHERE AN A SSOCIATED ENTERPRISE UNDERTAKES ACTIVITIES THAT RELATE TO MORE THAN ONE MEMBER OF THE GROUP OR TO THE GROUP AS A WHOLE. IN A NARROW RANGE OF SUCH CASES, AN INTRA-GROUP ACTIVITY MAY BE PERFORMED RELATING TO GROUP I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 MEMBERS EVEN THOUGH THOSE GROUP MEMBERS DO NOT NEED THE ACTIVITY (AND WOULD N OT BE WILLING TO PAY FOR IT WERE THEY INDEPENDENT ENTERPRISES). SUCH AN ACTIVITY WOULD BE ONE THAT A GROUP MEMBER (USUALLY THE PARENT COMPANY OR A REGIONAL HOLDING COMPANY) PERFORMS SOLELY BECAUSE OF ITS OWNERSHIP I NTEREST IN ONE OR MORE OTHER GROUP MEMBERS, I.E. IN ITS CAPACITY AS S HAREHOLDER. THIS TYPE OF ACTIVITY WOULD NOT JUSTIFY A CHARGE TO THE RECIP IENT 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 ACTIVITIES BY A SHARE HOLDER THAT MAY INCLUDE THE PROVISION OF SERVICES TO OTHER GROUP MEMBERS, F OR EXAMPLE SERVICES THAT WOULD BE PROVIDED BY A COORDINATING CENTRE. TH ESE LATTER TYPES OF NON-SHAREHOLDER ACTIVITIES COULD INCLUDE DETAILED P LANNING SERVICES FOR PARTICULAR OPERATIONS, EMERGENCY MANAGEMENT OR TECH NICAL 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, UNDER THE S TANDARD SET FORTH IN PARAGRAPH 7.6: ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 45 OF 82 (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 OF THE SUPER VISORY 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 N EW COMPANY, THE PARENT COMPANY WOULD GENERALLY BE REGARDED AS PROVI DING A SERVICE TO THE GROUP MEMBER. THE 1984 REPORT ALSO MENTIONED 'COSTS OF MANAGERIAL AND CONTROL (MONITORING) ACTIVITIES RELATED TO THE MANA GEMENT AND PROTECTION OF THE INVESTMENT AS SUCH IN PARTICIPATIONS'. WHETH ER THESE ACTIVITIES FALL WITHIN THE DEFINITION OF SHAREHOLDER ACTIVITIES AS DEFINED IN THESE GUIDELINES WOULD BE DETERMINED ACCORDING TO WHETHER UNDER COMPARABLE FACTS AND CIRCUMSTANCES THE ACTIVITY IS ONE THAT AN INDEPENDENT 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 SHAREHOLDER ACTIVITY, WHICH IS SOLELY I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 BECAUSE OF OWNERSHIP INTEREST IN ONE OR MORE OF THE GROUP MEMBERS, I.E. IN THE CAPAC ITY AS SHAREHOLDER 'WOULD NOT JUSTIFY A CHARGE TO THE RECIPIENT COMPANIES'. IT IS THUS CLEAR THAT A SHAREHOLDER ACTIVITY, IN ISSUANCE OF CORPORATE GUARANTEES, IS T AKEN OUT OF AMBIT OF THE GROUP SERVICES. CLEARLY, THEREFORE, AS LONG AS A GUARANTE E IS ON ACCOUNT OF, WHAT CAN BE TERMED AS 'SHAREHOLDER'S ACTIVITIES', EVEN ON THE F IRST PRINCIPLES, IT IS OUTSIDE THE AMBIT OF TRANSFER PRICING ADJUSTMENT IN RESPECT OF ARM'S LENGTH 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 SERVICES ARE REND ERED, AND, THEREFORE, IN MANY A SITUATION IT'S A 'BENEFIT TEST' WHICH IS CRU CIAL FOR TRANSFER PRICING LEGISLATION, SUCH AS IN US REGULATIONS 1.482-9(1)(3 )(I) WHICH DEFINES 'BENEFIT', FORM A US TRANSFER PRICING PERSPECTIVE, AS 'AN ACTI VITY IS CONSIDERED TO BE PROVIDED 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 THAT MAY BE REA SONABLY ANTICIPATED TO DO SO'. THE EXPRESSION 'ACTIVITY', IN TURN IS DEFINED, AS ' INCLUDING THE PERFORMANCE OF FUNCTIONS; THE ASSUMPTION OF RISKS; THE USE BY A RE NDERED OF TANGIBLE OR INTANGIBLE PROPERTY OR OTHER RESOURCES CAPABILITIES OR KNOWLED GE (INCLUDING KNOWLEDGE OF AND ABILITY TO TAKE ADVANTAGE OF A PARTICULARLY ADV ANTAGEOUS SITUATION OR CIRCUMSTANCES); AND MAKING AVAILABLE TO THE RECIPIE NT ANY PROPERTY OR OTHER RESOURCES OF THE RENDERED' [REGULATION 1.482-9(1)(2 )]. THE ISSUANCE OF GUARANTEES IS NOT WITHIN THE AMBIT OF TRANSFER PRIC ING IN UNITED STATES BECAUSE IT IS A SERVICE BUT BECAUSE IT IS COVERED BY THE SPECI FIC DEFINITION DISCUSSED ABOVE. AS A MATTER OF FACT, DAVID S MILLER, IN A PAPER TIT LED 'FEDERAL INCOME 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 ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 46 OF 82 (HTTP://WWW.JSTOR.ORG/STABLE/20771688), HAS STATED THAT A GUARANTEE IS NOT A SERVICE. THE FOLLOWING OBSERVATIONS, AT PAGES 114, ARE IMPORTANT: THE POSITION THAT GUARANTEES ARE SERVICES HAS BEEN DISCREDITED BY THE COURTS WITH GOOD REASON38. GUARANTEE FEES DO NOT RE PRESENT PAYMENTS FOR SERVICES ANY MORE THAN PAYMENTS WITH RESPECT TO OTH ER FINANCIAL INSTRUMENTS CONSTITUTE PAYMENT FOR SERVICES39. A GU ARANTOR DOES NOT ARRANGE FINANCING FOR THE DEBTOR, BUT MERELY EXECUT ES A FINANCIAL INSTRUMENT IN ITS FAVOUR. 38SEE. E.G., CENTEL COMMUNICATIONS CO. V. COMMISSIONER , 92 T.C. 612, 632 (1989), AFF D, 920 F2D 1335 (7TH CIR. 1990); BA NK OF AM. V. UNITED STATES, 680 F.2D 142, 150 (CL. CT. 1982). THE SERVI CE'S CURRENT POSITION ON THE CHARACTERIZATION OF GUARANTEE FEES AS PAYMEN T FOR SERVICES UNDER SECTION 482 IS INCONSISTENT WITH ITS TREATMENT OF GUARANTEE FE ES UNDER OTHER PROVISIONS. SEE P.L.R. 9410008 (DEC. 13 , 1993). 39BUT CF FEDERAL NAT'L MORTGAGE ASS'N V. COMMISSIONER, 100 T .C. 541, 579 (1993) (FANNIE MAE PROVIDED SERVICES BY BUYING MORTGAGES). 37. WE ARE IN AGREEMENT WITH THESE VIEWS. THERE CAN THUS BE ACTIVITIES WHICH BENEFIT THE GROUP ENTITIES BUT THESE ACTIVITI ES NEED NOT NECESSARILY BE 'PROVISION FOR SERVICES'. THE FACT THAT THE OECD CONSIDERS SUCH ACTIVITIES IN THE SERVICES SEGMENT DOES NOT ALTER T HE CHARACTER OF THE ACTIVITIES. WHILE THE GROUP ENTITY IS THUS INDEED B ENEFITED BY THE SHAREHOLDER ACTIVITIES, THESE ACTIVITIES DO NOT NEC ESSARILY CONSTITUTE SERVICES. THERE IS NO SUCH EXPRESS REFERENCE TO THE BENEFIT TEST, OR TO THE CONCEPT OF BENEFIT ATTACHED TO THE ACTIVITY, IN REL EVANT DEFINITION CLAUSE OF 'INTERNATIONAL TRANSACTION' UNDER THE DOMESTIC TRAN SFER PRICING LEGISLATION. AS WE TAKE NOTE OF THESE THINGS, IT IS ALSO ESSENTI AL TO TAKE NOTE OF THE LEGAL POSITION, IN INDIA, IN THIS REGARD. NO MATTER HOW DESIRABLE IS IT TO READ SUCH A TEST IN THE DEFINITION OF THE INTERNATI ONAL TRANSACTION' UNDER OUR DOMESTIC TRANSFER PRICING LEGISLATION, AS IS THE SE TTLED LEGAL POSITION, IT IS NOT OPEN TO US TO INFER THE SAME. HON'BLE SUPREME C OURT, IN THE CASE OF SMT. TARULATA SHYAM V. CIT [1977] 108 ITR 345 (SC) , TOOK NOTE OF THE SITUATION BEFORE THEIR LORDSHIPS IN THESE WORDS : 'WE HAVE GIVEN ANXIOUS THOUGHTS TO THE PERSUASIVE ARGUMENTS OF MR SHARMA. HIS ARGUMENTS, IF ACCEPTED, WILL CERTAINLY SOFTEN THE R IGOUR OF THIS EXTREMELY DRASTIC PROVISION AND BRING IT MORE IN CONFORMITY W ITH LOGIC AND EQUITY'. HOWEVER, THEIR LORDSHIPS DECLINED TO DO SO ON THE G ROUND THAT 'THERE IS NO SCOPE FOR IMPORTING INTO THE STATUTE THE WORDS W HICH ARE NOT THERE. SUCH IMPORTATION WOULD BE NOT TO CONSTRUE BUT TO AM END THE STATUTE'. THEIR LORDSHIPS NOTED THAT 'EVEN IF THERE BE CASUS OMISSUS, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDICIAL INTERPRETATION'. THE BENEFIT TEST, WHICH IS SET OUT IN THE OECD GUIDANCE AND WHICH FINDS ITS PLACE IN THE INTERNATIONAL BEST PRACTICES, DOES NOT FIND ITS PLACE IN THE MAIN DEFINITION OF INTERNATIONAL TRANSACTION, EVEN THOUG H THERE IS A REFERENCE TO THE EXPRESSION 'BENEFIT' IN THE CONTEXT OF COST OR EXPENSE SHARING ARRANGEMENTS BUT THAT IS A DIFFERENT ASPECT OF THE MATTER ALTOGETHER. IN THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 47 OF 82 ABSENCE OF BENEFIT TEST BEING MENTIONED IN THE DEFI NITION 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 TES T IMPLIES THE RECIPIENT GROUP MEMBER SHOULD GET 'ECONOMIC OR COMMERCIAL VAL UE TO ENHANCE ITS COMMERCIAL POSITION'. THE BENEFIT TEST IS INTERLINK ED WITH THE AN ARM'S LENGTH TEST IN THE SENSE THAT IT SEEKS AN ANSWER TO THE QUESTION WHETHER UNDER A SIMILAR SITUATION AN INDEPENDENT ENTERPRISE WOULD HAVE BEEN WILLING TO PAY FOR THE ACTIVITY CONCERNED, OR WOULD HAVE PERFORMED THE ACTIVITY IN-HOUSE FOR ITSELF. SO FAR AS THE BENEFIT TEST IS CONCERNED, AS WE HAVE NOTED EARLIER, IT IS ALIEN TO THE DEFINITION O F INTERNATIONAL TRANSACTION' UNDER THE INDIAN TRANSFER PRICING LEGISLATION. SO F AR 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 STANDING OF ITS OWN AND IS INADEQUATELY CAPITALIZED, NONE WILL GUARANTEE FINANCIAL OBLIGATI ONS 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 THE CONSIDERA TION FOR WHICH BANKS ISSUE FINANCIAL GUARANTEES ON BEHALF OF ITS C LIENTS WITH THE CONSIDERATION FOR WHICH THE CORPORATES ISSUE GUARAN TEES FOR THEIR SUBSIDIARIES, IS ILL-CONCEIVED BECAUSE WHILE BANKS SEEK TO BE COMPENSATED, EVEN FOR THE SECURED GUARANTEES, FOR T HE FINANCIAL RISK OF LIQUIDATING THE UNDERLYING SECURITIES AND MEETING T HE FINANCIAL COMMITMENTS UNDER THE GUARANTEE, THE GUARANTEES ISS UED BY THE CORPORATES FOR THEIR SUBSIDIARIES ARE RARELY, IF AT ALL, BACKED BY ANY UNDERLYING SECURITY AND THE RISK IS ENTIRELY ENTREP RENEURIAL IN THE SENSE THAT IT SEEKS TO MAXIMIZE PROFITABILITY THROUGH AND BY THE SUBSIDIARIES. IT IS INHERENTLY IMPOSSIBLE TO DECIDE ARM'S LENGTH PRI CE OF A TRANSACTION WHICH CANNOT TAKE PLACE IN ARM'S LENGTH SITUATION. THE MOTIVATION OR TRIGGER FOR ISSUANCE OF SUCH GUARANTEES IS NOT THE KIND FOR CONSIDERATION FOR WHICH A BANKER, FOR EXAMPLE, ISSUE THE GUARANTE ES, BUT IT IS MAXIMIZATION OF GAINS FOR THE RECIPIENT ENTITY AND THUS THE MNE GROUP AS A WHOLE. IN GENERAL, THUS, THE CONSIDERATION FOR IS SUANCE 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 AR E SOMETIMES COMPARED, IN THE CONTEXT OF BENCHMARKING THE ARM'S LENGTH PRICE OF CORPORATE GUARANTEES. A BANK GUARANTEE IS A SURETY THAT THAT THE BANK, OR THE FINANCIAL INSTITUTION ISSUING THE GUARANTEE, WI LL PAY OFF THE DEBTS AND LIABILITIES INCURRED BY AN INDIVIDUAL OR A BUSINESS ENTITY IN CASE THEY ARE UNABLE TO DO SO. BY PROVIDING A GUARANTEE, A BANK O FFERS TO HONOUR RELATED PAYMENT TO THE CREDITORS UPON RECEIVING A REQUEST. THIS REQUIRES THAT BANK ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 48 OF 82 HAS TO BE VERY SURE OF THE BUSINESS OR INDIVIDUAL T O WHOM THE BANK GUARANTEE IS BEING ISSUED. SO, BANKS RUN RISK ASSES SMENTS TO ENSURE THAT THE GUARANTEED SUM CAN BE RETRIEVED BACK FROM THE B USINESS. THIS MAY REQUIRE THE BUSINESS TO FURNISH A SECURITY IN THE S HAPE OF CASH OR CAPITAL ASSETS. ANY ENTITY THAT CAN PASS THE RISK ASSESSMEN T AND PROVIDE 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 COMMITMENTS AND WHEN C LIENT IS NOT ABLE TO MEET HIS FINANCIAL COMMITMENTS AND THE BANK IS CALL ED UPON TO MAKE THE PAYMENTS, THE BANK WILL SEEK A COMPENSATION FOR THE ACTION OF ISSUING THE BANK GUARANTEE, AND FOR THE RISK IT RUNS INHERENT I N THE PROCESS OF MAKING THE PAYMENT FIRST AND REALIZING IT FROM THE UNDERLY ING SECURITY AND THE CLIENT. EVEN WHEN SUCH GUARANTEES ARE BACKED BY ONE HUNDRED PER CENT DEPOSITS, THE BANK CHARGES A GUARANTEE FEES. IN A S ITUATION IN WHICH THERE IS NO UNDERLYING ASSETS WHICH CAN BE REALIZED BY TH E 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 PLACED IN HIS C REDIT RATING THAT BANKS CAN ISSUE HIM CLEAN AND UNSECURED GUARANTEES, HE GE TS NO FURTHER ECONOMIC VALUE BY A CORPORATE GUARANTEE I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 EITHER. LET US NOW COMPARE THIS KIND OF A GUARANTEE WITH A CORPORATE GUARANTEE . THE GUARANTEES ARE ISSUED WITHOUT ANY SECURITY OR UNDERLYING ASSETS. W HEN THESE GUARANTEES ARE INVOKED, THERE IS NO OCCASION FOR THE GUARANTOR TO SEEK RECOURSE TO ANY ASSETS OF THE GUARANTEED ENTITY FOR RECOVERING PAYM ENT OF DEFAULTED GUARANTEES. THE GUARANTEES ARE NOT BASED ON THE CRE DIT ASSESSMENT OF THE ENTITY, IN RESPECT OF WHICH THE GUARANTEES ARE ISSU ED, BUT ARE BASED ON THE BUSINESS NEEDS OF THE ENTITY IN QUESTION. EVEN IN A SITUATION IN WHICH THE GROUP ENTITY IS SURE THAT THE BENEFICIARY OF GUARAN TEE HAS NO FINANCIAL MEANS TO REIMBURSE IT FOR THE DEFAULTED GUARANTEE A MOUNTS, WHEN INVOKED, THE GROUP ENTITY WILL ISSUE THE GUARANTEE NEVERTHELESS BECAUSE THESE ARE COMPULSIONS OF HIS GROUP SYNERGY RATHER T HAN THE ASSURANCE THAT HIS FUTURE OBLIGATIONS WILL BE MET. WE SEE NO MEETI NG GROUND IN THESE TWO TYPES OF GUARANTEES, SO FAR THEIR ECONOMIC TRIGGERS AND BUSINESS CONSIDERATIONS ARE CONCERNED, AND JUST BECAUSE THES E INSTRUMENTS SHARE A COMMON SURNAME, I.E. 'GUARANTEE', THESE INSTRUMENTS CANNOT BE SAID TO BE BELONG TO THE SAME ECONOMIC GENUS. OF COURSE, THERE CAN BE SITUATIONS IN WHICH THERE MAY BE ECONOMIC SIMILARITIES, IN THIS R ESPECT, MAY BE PRESENT, BUT THESE ARE MORE OF AN EXCEPTION THAN THE RULE. I N GENERAL, THEREFORE, BANK GUARANTEES ARE NOT COMPARABLE WITH CORPORATE G UARANTEES. 41. AS EVIDENT FROM THE OECD OBSERVATION TO THE EFF ECT 'IN CONTRAST, IF FOR EXAMPLE A PARENT COMPANY RAISES FUNDS ON BEHALF OF ANOTHER GROUP MEMBER WHICH USES THEM TO ACQUIRE A NEW COMPANY, TH E PARENT COMPANY WOULD GENERALLY BE REGARDED AS PROVIDING A SERVICE TO THE GROUP MEMBER', IT IS ALSO TO BE CLEAR THAT WHEN THE CORPO RATE GUARANTEES ARE ISSUED FOR THE PURPOSE OF SUBSIDIARIES RAISING FUND S FOR ACQUISITIONS BY SUCH SUBSIDIARIES, THESE GUARANTEES WILL BE DEEMED TO BE SERVICES TO THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 49 OF 82 SUBSIDIARIES, AND, AS A COROLLARY THERETO, WHEN COR PORATE GUARANTEES ARE ISSUED FOR THE SUBSIDIARIES TO RAISE FUNDS FOR THEI R OWN NEEDS, THE CORPORATE GUARANTEES ARE TO BE TREATED AS SHAREHOLD ER ACTIVITY. THE USE OF BORROWED FUNDS FOR OWN USE IS A REASONABLE PRESUMPT ION AS IT IS A MATTER OF COURSE RATHER THAN EXCEPTION. THERE HAS TO BE SO METHING ON RECORD TO INDICATE OR SUGGEST THAT THE FUNDS RAISED BY THE SU BSIDIARY, WITH THE HELP OF THE GUARANTEE GIVEN BY THE ASSESSEE, ARE NOT FOR ITS OWN 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 SUBSIDIARIES FROM THESE BANKS. THE GUARANTEES WERE PRIMA FACIE IN THE NATURE OF SHAREH OLDER ACTIVITY AS IT WAS TO PROVIDE, OR COMPENSATE FOR LACK OF, CORE STRENGT H FOR RAISING THE FINANCES FROM BANKS. NO MATERIAL, INDICATING TO THE CONTRARY, IS BROUGHT ON RECORD IN THIS CASE. GOING BY THE OECD GUIDANCE ALSO, IT IS NOT REALLY POSSIBLE TO HOLD THAT THE CORPORATE GUARANTEES ISSU ED BY THE ASSESSEE WERE IN THE NATURE OF 'PROVISION FOR SERVICE' AND NOT A SHAREHOLDER ACTIVITY WHICH ARE MUTUALLY EXCLUSIVE IN NATURE. IN THE LIGH T OF THESE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW, AND ARE FULLY SUPPOR TED BY THE OECD GUIDANCE IN THIS, THAT THE ISSUANCE OF CORPORATE GU ARANTEES, IN THE I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-1 0 NATURE OF QUASI-CAPITAL OR SHAREHOLDER ACTIVITY- AS IS THE UN CONTROVERTED POSITION ON THE FACTS OF THIS CASE, DOES NOT AMOUNT TO A SERVIC E IN WHICH RESPECT 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 200/24 TAXMANN.COM 199 (DELHI), A RE-CHARACTERIZATION OF A TRANSACTION IS INDEED PERMISSIBLE, INTER ALIA, IN A SITUATION '(I) WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM ITS FORM AND (II) WHERE THE FORM AND SUBSTANCE OF THE T RANSACTION ARE THE SAME BUT ARRANGEMENTS MADE IN RELATION TO THE TRANSACTION, V IEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPEN DENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER'. THE CASE OF A C ORPORATE GUARANTEE CLEARLY FALLS IN THE SECOND CATEGORY AS NO INDEPENDENT ENTE RPRISE WOULD ISSUE A GUARANTEE WITHOUT AN UNDERLYING SECURITY AS HAS BEEN DONE BY THE ASSESSEE. WE MAY, IN THIS REGARD, REFER TO THE OBSERVATIONS MADE BY HON'BLE H IGH COURT, SPEAKING THROUGH 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 MULTI- NATIONAL ENTERPRISES AND TAX ADMINISTRATIONS. THESE GUIDELINES GIVE AN INTRODUCTION TO THE ARM'S LENGTH PRICE PRINCIPLE AN D EXPLAINS ARTICLE 9 OF THE OECD MODEL TAX CONVENTION. THIS ARTICLE PROVIDE S THAT WHEN CONDITIONS ARE MADE OR IMPOSED BETWEEN TWO ASSOCIAT ED ENTERPRISES IN THEIR COMMERCIAL OR FINANCIAL RELATIONS WHICH DIFFE R FROM THOSE WHICH WOULD BE MADE BETWEEN INDEPENDENT ENTERPRISES THEN ANY PROFIT WHICH WOULD, BUT FOR THOSE CONDITIONS, HAVE ACCRUED TO ON E OF THE ENTERPRISES, BUT, BY REASON OF THOSE CONDITIONS, IF NOT SO ACCRU ED, MAY BE INCLUDED IN THE PROFITS OF THAT ENTERPRISE AND TAXED ACCORDINGL Y. BY SEEKING TO ADJUST ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 50 OF 82 THE PROFITS IN THE ABOVE MANNER, THE ARM'S LENGTH P RINCIPLE OF PRICING FOLLOWS THE APPROACH OF TREATING THE MEMBERS OF A M ULTI-NATIONAL ENTERPRISE GROUP AS OPERATING AS SEPARATE ENTITIES RATHER THAN AS INSEPARABLE PARTS OF A SINGLE UNIFIED BUSINESS. AFT ER REFERRING TO ARTICLE 9 OF THE MODEL CONVENTION AND STATING THE ARM'S LENG TH PRINCIPLE, 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. THESE PARAGRAPHS ARE REPRO DUCED 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 STRUCTURED BY THEM, USING THE METHODS APPLIED BY THE TAXPAYER INSOFAR AS THESE AR E CONSISTENT WITH THE METHODS DESCRIBED IN CHAPTERS II AND III. IN OTHER THAN EXCEPTIONAL I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-1 0 CASES, THE TAX ADMINISTRATION SHOULD NOT DISREGARD THE ACTUAL TRAN SACTIONS OR SUBSTITUTE OTHER TRANSACTIONS 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 ADMINISTRATION DOES NOT SHARE THE SAME VIEWS AS TO HOW THE TRANSACTION SHOULD BE STRU CTURED. 1.37 HOWEVER, THERE ARE TWO PARTICULAR CIRCUMSTANCE S IN WHICH IT MAY, EXCEPTIONALLY, BE BOTH APPROPRIATE AND LEGITIMATE F OR A TAX ADMINISTRATION TO CONSIDER DISREGARDING THE STRUCTURE ADOPTED BY A TAXPAYER IN ENTERING INTO A CONTROLLED TRANSACTION. THE FIRST CIRCUMSTAN CE ARISES WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTION DIFFERS FROM IT S FORM. IN SUCH A CASE THE TAX ADMINISTRATION MAY DISREGARD THE PARTIES' C HARACTERIZATION OF THE TRANSACTION AND RE-CHARACTERISE IT IN ACCORDANCE WI TH ITS SUBSTANCE. AN EXAMPLE OF THIS CIRCUMSTANCE WOULD BE AN INVESTMENT IN AN ASSOCIATED ENTERPRISE IN THE FORM OF INTEREST-BEARING DEBT WHE N, AT ARM'S LENGTH, HAVING REGARD TO THE ECONOMIC CIRCUMSTANCES OF THE BORROWING COMPANY, THE INVESTMENT WOULD NOT BE EXPECTED TO BE STRUCTUR ED IN THIS WAY. IN THIS CASE IT MIGHT BE APPROPRIATE FOR A TAX ADMINISTRATI ON TO CHARACTERIZE THE INVESTMENT IN ACCORDANCE WITH ITS ECONOMIC SUBSTANC E WITH THE RESULT THAT THE LOAN MAY BE TREATED AS A SUBSCRIPTION OF CAPITA L. THE SECOND CIRCUMSTANCE ARISES WHERE, WHILE THE FORM AND SUBST ANCE OF THE TRANSACTION ARE THE SAME, THE ARRANGEMENTS MADE IN RELATION TO THE TRANSACTION, VIEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER AND THE ACTUAL STRUCTURE PRACTICALL Y IMPEDES THE TAX ADMINISTRATION FROM DETERMINING AN APPROPRIATE TRAN SFER PRICE. AN EXAMPLE OF THIS CIRCUMSTANCE WOULD BE A SALE UNDER A LONG-TERM CONTRACT, FOR A LUMP SUM PAYMENT, OF UNLIMITED ENTITLEMENT TO THE INTELLECTUAL PROPERTY RIGHTS ARISING AS A RESULT OF FUTURE RESEA RCH FOR THE 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 TRANS FER OF COMMERCIAL PROPERTY, IT WOULD NEVERTHELESS BE APPROPRIATE FOR A TAX ADMINISTRATION TO ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 51 OF 82 CONFORM THE TERMS OF THAT TRANSFER IN THEIR ENTIRET Y (AND NOT SIMPLY BY REFERENCE TO PRICING) TO THOSE THAT MIGHT REASONABL Y HAVE BEEN EXPECTED HAD THE TRANSFER OF PROPERTY BEEN THE SUBJECT OF A TRANSACTION INVOLVING INDEPENDENT ENTERPRISES. THUS, IN THE CASE DESCRIBE D ABOVE IT MIGHT BE APPROPRIATE FOR THE TAX ADMINISTRATION, FOR EXAMPLE , I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 TO ADJUST TH E CONDITIONS OF THE AGREEMENT IN A COMMERCIALLY RATIONAL MANNER AS A CONTINUING RESEARCH AGREEMENT. 1.38 IN BOTH SETS OF CIRCUMSTANCES DESCRIBED ABOVE, THE CHARACTER OF THE TRANSACTION MAY DERIVE FROM THE RELATIONSHIP BETWEE N THE PARTIES RATHER THAN BE DETERMINED BY NORMAL COMMERCIAL CONDITIONS AS MAY HAVE BEEN STRUCTURED BY THE TAXPAYER TO AVOID OR MINIMIZE TAX . IN SUCH CASES, THE TOTALITY OF ITS TERMS WOULD BE THE RESULT OF A COND ITION THAT WOULD NOT HAVE BEEN MADE IF THE PARTIES HAD BEEN ENGAGED IN ARM'S LENGTH DEALINGS. ARTICLE 9 WOULD THUS ALLOW AN 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 LENGTH.' 17. THE SIGNIFICANCE OF THE AFORESAID GUIDELINES LI ES IN THE FACT THAT THEY RECOGNISE THAT BARRING EXCEPTIONAL CASES, THE TAX A DMINISTRATION SHOULD NOT DISREGARD THE ACTUAL TRANSACTION OR SUBSTITUTE OTHE R TRANSACTIONS FOR THEM AND THE EXAMINATION OF A CONTROLLED TRANSACTION SHO ULD ORDINARILY BE BASED ON THE TRANSACTION AS IT HAS BEEN ACTUALLY UN DERTAKEN AND STRUCTURED BY THE ASSOCIATED ENTERPRISES. IT IS OF FURTHER SIG NIFICANCE THAT THE GUIDELINES DISCOURAGE RE-STRUCTURING OF LEGITIMATE BUSINESS TRANSACTIONS. THE REASON FOR CHARACTERISATION OF SUCH RE-STRUCTUR ING AS AN ARBITRARY EXERCISE, AS GIVEN IN THE GUIDELINES, IS THAT IT HA S THE POTENTIAL TO CREATE DOUBLE TAXATION IF THE OTHER TAX ADMINISTRATION DOE S NOT SHARE THE SAME VIEW AS TO HOW THE TRANSACTION SHOULD BE STRUCTURED . 18. TWO EXCEPTIONS HAVE BEEN ALLOWED TO THE AFORESA ID PRINCIPLE AND THEY ARE (I) WHERE THE ECONOMIC SUBSTANCE OF A TRANSACTI ON DIFFERS FROM ITS FORM AND (II) WHERE THE FORM AND SUBSTANCE OF THE T RANSACTION ARE THE SAME BUT ARRANGEMENTS MADE IN RELATION TO THE TRANS ACTION, VIEWED IN THEIR TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN A DOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER.' 43. IT IS THUS CLEAR THAT EVEN IF WE ACCEPT THE CON TENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT ISSUANCE OF A CORP ORATE GUARANTEE AMOUNTS TO A 'PROVISION FOR SERVICE', SUCH A SERVIC E NEEDS TO BE RE- CHARACTERIZED TO BRING IT IN TUNE WITH COMMERCIAL R EALITY AS 'ARRANGEMENTS MADE IN RELATION TO THE TRANSACTION, VIEWED IN THEI R TOTALITY, DIFFER FROM THOSE WHICH WOULD HAVE BEEN ADOPTED BY INDEPENDENT ENTERPRISES BEHAVING IN A COMMERCIALLY RATIONAL MANNER'. NO BAN K WOULD BE WILLING TO ISSUE A CLEAN GUARANTEE, I.E. WITHOUT UNDERLYING ASSET, TO ASSESSEE'S SUBSIDIARIES WHEN THE BANKS ARE NOT WILLING TO EXTE ND THOSE SUBSIDIARIES ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 52 OF 82 LOANS ON THE I.T.A. NOS. 2618 AND 2876/MUM/2014 ASS ESSMENT YEAR: 2009-10 SAME TERMS AS WITHOUT A GUARANTEE. SUCH A G UARANTEE TRANSACTION CAN ONLY BE, AND IS, MOTIVATED BY THE SHAREHOLDER, OR OWNERSHIP CONSIDERATIONS. NO DOUBT, UNDER THE OECD GUIDANCE O N THE ISSUE, AN EXPLICIT SUPPORT, SUCH AS CORPORATE GUARANTEE, IS T O BE BENCHMARKED AND, FOR THAT PURPOSE, IT IS IN THE SERVICE CATEGORY BUT THAT OCCASION COMES ONLY WHEN IT IS COVERED BY THE SCOPE OF 'INTERNATIONAL T RANSACTION' UNDER THE TRANSFER PRICING LEGISLATION OF RESPECTIVE JURISDIC TION. THE EXPRESSION 'PROVISION FOR SERVICES' IN ITS NORMAL OR LEGAL CON NOTATIONS, AS WE HAVE SEEN EARLIER, DOES NOT COVER ISSUANCE OF CORPORATE GUARANTEES, EVEN THOUGH ONCE A CORPORATE GUARANTEE IS COVERED BY THE DEFINI TION OF INTERNATIONAL TRANSACTION', IT IS BENCHMARKED IN THE SERVICE SEGM ENT. IN VIEW OF THE ABOVE DISCUSSIONS, OECD GUIDELINES, AS A MATTER OF FACT, STRENGTHEN THE CLAIM OF THE ASSESSEE THAT THE CORPORATE GUARANTEES ISSUED BY THE ASSESSEE WERE IN THE NATURE OF QUASI-CAPITAL OR SHAREHOLDER ACTIVITY AND, FOR THIS REASON ALONE, THE ISSUANCE OF THESE GUARANTEES SHOU LD BE EXCLUDED FROM THE SCOPE OF SERVICES AND THUS FROM THE SCOPE OF 'I NTERNATIONAL TRANSACTIONS' UNDER SECTION 92B . OF COURSE, ONCE A TRANSACTION IS HELD TO BE COVERED BY THE DEFINITION OF INTERNATIONAL TRANS ACTION, WHETHER IN THE NATURE OF THE SHAREHOLDER ACTIVITY OR QUASI- CAPITA L OR NOT, ALP DETERMINATION MUST DEPEND ON WHAT AN INDEPENDENT EN TERPRISE WOULD HAVE CHARGED FOR SUCH A TRANSACTION. IN THIS LIGHT OF THESE DISCUSSIONS, WE HOLD THAT THE ISSUANCE OF CORPORATE GUARANTEES IN Q UESTION WAS NOT IN THE NATURE OF 'PROVISION FOR SERVICES' AND THESE CORPOR ATE GUARANTEES WERE REQUIRED TO BE TREATED AS SHAREHOLDER PARTICIPATION IN THE SUBSIDIARIES. 44. AS FOR THE WORDS 'PROVISION FOR SERVICES' APPEA RING IN SECTION 92B , AND CONNOTATIONS THEREOF, OUR HUMBLE UNDERSTANDING IS THAT THIS EXPRESSION, IN ITS NATURAL CONNOTATIONS, IS RESTRIC TED TO SERVICES RENDERED AND IT DOES NOT EXTEND TO THE BENEFITS OF ACTIVITIE S PER SE. WHETHER WE LOOK AT THE EXAMPLES GIVEN IN THE OECD MATERIAL OR EVEN IN EXPLANATION TO SECTION 92B , THE THRUST IS ON THE SERVICES LIKE MARKET RESEARC H, MARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, AGENCY, AND SCIENTIF IC RESEARCH, LEGAL OR ACCOUNTING SERVICE OR COORDINATION SERVICES. AS A M ATTER 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 WI TH CAPITAL FINANCING, RATHER THAN IN ITEM 'D' WHICH SPECIFICALLY DEALS WI TH 'PROVISION FOR SERVICES'. WHEN THE LEGISLATURE ITSELF DOES NOT GRO UP 'GUARANTEES' 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 CONNOTATIONS OF EXPRESSION 'PROVISION FOR SERVICES'. OF COURSE, THE GLOBAL BES T PRACTICES SEEM TO BE THAT GUARANTEES ARE SOMETIMES INCLUDED IN 'SERVICES ' BUT THAT IS BECAUSE OF THE EXTENDED DEFINITION OF 'INTERNATIONAL TRANSACTI ON' IN MOST OF THE TAX JURISDICTIONS. SUCH A WIDE DEFINITION OF SERVICES, WHICH CAN BE SUBJECT TO ARM'S LENGTH PRICE ADJUSTMENT, APART, 'TRANSFER PRI CING AND INTRA-GROUP FINANCING - BY BAKKER & LEVVY' (IBID) NOTES THAT 'T HE IRS HAS I.T.A. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 53 OF 82 NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-1 0 ISSUED A NON- BINDING FIELD SERVICE ADVICE (FSA 1995 WL 1918236, 1 MAY 1995) STATING THAT, IN CERTAIN CIRCUMSTANCES (EMPHASIS SU PPLIED), A GUARANTEE MAY BE TREATED AS A SERVICE'. IF THE NATURAL CONNOT ATIONS OF A 'SERVICE' WERE TO COVER ISSUANCE OF GUARANTEE IN GENERAL, THERE CO ULD NOT HAVE BEEN AN OCCASION TO GIVE SUCH HEDGED ADVICE. THIS WILL BE S TRETCHING THE THINGS TOO FAR TO SUGGEST THAT JUST BECAUSE WHEN GUARANTEE S ARE INCLUDED IN THE INTERNATIONAL TRANSACTIONS, THESE GUARANTEES ARE IN CLUDED IN SERVICE SEGMENT IN CONTRADISTINCTION WITH OTHER HEADS UNDER WHICH INTERNATIONAL TRANSACTIONS ARE GROUPED, THE GUARANTEES SHOULD BE TREATED AS SERVICES, AND, FOR THAT REASON, INCLUDED IN THE DEFINITION OF INTERNATIONAL TRANSACTIONS. THAT IS, IN OUR CONSIDERED VIEW, PURE LY FALLACIOUS LOGIC. IN OUR CONSIDERED VIEW, UNDER SECTION 92B , CORPORATE GUARANTEES CAN BE COVERED ONLY UNDER THE RESIDUARY HEAD I.E. 'ANY OTH ER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISE'. IT IS FOR THIS REASON THAT SECTION 92B , IN A WAY, EXPANDS THE SCOPE OF INTERNATIONAL TRANSACTION IN THE SENSE THAT EVEN WH EN GUARANTEES ARE ISSUED AS A SHAREHOLDER ACTIVITY BUT COSTS ARE INCU RRED FOR THE SAME OR, AS A MEASURE OF ABUNDANT CAUTION, RECOVERIES ARE MADE FO R THIS NON-CHARGEABLE ACTIVITY, THESE GUARANTEES WILL FALL IN THE RESIDUA RY CLAUSE OF DEFINITION OF INTERNATIONAL TRANSACTIONS UNDER SECTION 92B . AS FOR THE LEARNED DEPARTMENTAL REPRESENTATIVE'S ARGUMENT THAT 'WHETHE R THE SERVICE HAS CAUSED ANY EXTRA COST TO THE ASSESSEE SHOULD NOT BE THE DECIDING FACTOR TO DETERMINE WHETHER IT IS AN INTERNATIONAL AND THEN G IVES AN EXAMPLE OF BRAND ROYALTY TO MAKE HIS POINT. WHAT, IN THE PROCE SS, HE OVERLOOKS IS THAT SECTION 92B(1) SPECIFICALLY COVERS SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY'. THE EXPRESSION 'BEARING ON TH E PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES' IS RELEVANT O NLY FOR RESIDUARY CLAUSE I.E. ANY OTHER SERVICES NOT SPECIFICALLY COVERED BY SECTION 92B . IT WAS ALSO CONTENDED THAT, WHILE RENDERING BHARTI AIRTEL DECISION, THE DELHI TRIBUNAL DID GO OVERBOARD IN DECIDING SOMETHING WHI CH WAS NOT EVEN RAISED BEFORE US. IN THE WRITTEN SUBMISSION, IT WAS STATED THAT 'HON'BLE DELHI ITAT WAS NOT REQUESTED BY THE CONTESTING PART IES TO DECIDE THE ISSUE AS TO WHETHER THE PROVISION OF GUARANTEE WAS A SERVICE OR NOT'. THAT'S NOT FACTUALLY CORRECT. WE ARE UNABLE TO SEE ANY MERITS IN LEARNED DEPARTMENTAL REPRESENTATIVE'S CONTENTION, PARTICULA RLY AS DECISION CATEGORICALLY NOTED THAT NOT ONLY BEFORE THE TRIBUN AL, BUT THIS ISSUE WAS ALSO RAISED BEFORE THE DRP- AS EVIDENT FROM THE TEX T OF DRP DECISION. WE NOW TAKE UP THE ISSUE WITH RESPECT TO SPECIFIC MENT ION OF THE WORDS IN EXPLANATION TO SECTION 92B WHICH STATES THAT 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT (I) THE EXPRESSION 'INT ERNATIONAL TRANSACTION' SHALL INCLUDE........ (C) CAPITAL FINANCING, INCLUD ING ANY TYPE OF LONG -TERM OR SHORT -TERM BORROWING, LENDING OR GUARANTEE, PUR CHASE OR SALE OF MARKETABLE SECURITIES OR ANY TYPE OF ADVANCE, PAYME NTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DUR ING THE COURSE OF BUSINESS.' THERE IS NO DISPUTE THAT THIS EXPLANATIO N STATES THAT IT IS MERELY CLARIFICATORY IN NATURE INASMUCH AS IT IS 'FOR THE REMOVAL OF DOUBTS', AND, THEREFORE, ONE HAS TO PROCEED ON THE BASIS I.T.A. N OS. 2618 AND ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 54 OF 82 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 THAT IT DOES NOT ALTER THE BASIC CHARACTER OF DEFINITION OF 'INTERNATIONAL TRANSACTI ON' UNDER SECTION 92B . ACCORDINGLY, THIS EXPLANATION IS TO BE READ IN CONJ UNCTION WITH THE MAIN PROVISIONS, AND IN HARMONY WITH THE SCHEME OF THE P ROVISIONS, UNDER SECTION 92B . UNDER THIS EXPLANATION, FIVE CATEGORIES OF TRANSACTIONS HAVE BEEN CLARIFIED TO HAVE BEEN INCLU DED IN THE DEFINITION OF 'INTERNATIONAL TRANSACTIONS'. THE FIRST TWO CATEGOR IES OF TRANSACTIONS, WHICH ARE STATED TO BE INCLUDED IN THE SCOPE OF EXPRESSIO N 'INTERNATIONAL TRANSACTIONS' BY VIRTUE OF CLAUSE (A) AND (B) OF EX PLANATION TO SECTION 92B , ARE TRANSACTIONS WITH REGARD TO PURCHASE, SALE, T RANSFER, LEASE OR USE OF TANGIBLE AND INTANGIBLE PROPERTIES. THESE TRANSA CTIONS WERE ANYWAY COVERED BY TRANSACTIONS 'IN THE NATURE OF PURCHASE, SALE OR LEASE OF TANGIBLE OR INTANGIBLE PROPERTY'. THE ONLY ADDITION AL EXPRESSION IN THE CLARIFICATION IS 'USE' AS ALSO ILLUSTRATIVE AND INC LUSIVE DESCRIPTIONS OF TANGIBLE AND INTANGIBLE ASSETS. SIMILARLY, CLAUSE ( D) DEALS WITH THE ' PROVISION OF SERVICES, INCLUDING PROVISION OF MARKE T RESEARCH, MARKET DEVELOPMENT, MARKETING MANAGEMENT, ADMINISTRATION, TECHNICAL SERVICE, REPAIRS, DESIGN, CONSULTATION, AGENCY, SCIENTIFIC R ESEARCH, LEGAL OR ACCOUNTING SERVICE' WHICH ARE ANYWAY COVERED IN 'PR OVISION FOR SERVICES' AND 'MUTUAL AGREEMENT OR ARRANGEMENT 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 C ONNECTION WITH A BENEFIT, SERVICE OR FACILITY PROVIDED OR TO BE PROV IDED TO ANYONE OR MORE OF SUCH ENTERPRISES '. THAT LEAVES US WITH TWO CLAU SES IN THE EXPLANATION TO SECT ION 92B WHICH ARE NOT COVERED BY ANY OF THE THREE CATEGORIES DISCUSSED ABOVE OR BY OTHER SPECIFIC SEGMENTS COVER ED BY SECTION 92B , NAMELY BORROWING OR LENDING MONEY. THE REMAINING TW O ITEMS IN THE EXPLANATION TO SECTION 92B ARE SET OUT IN CLAUSE (C) AND (E) THERETO, DEALING WITH (A) CAPITAL FINAN CING AND (B) BUSINESS RESTRUCTURING OR REORGANIZATION. THESE ITEMS CAN ON LY BE COVERED IN THE RESIDUAL CLAUSE OF DEFINITION IN INTERNATIONAL TRAN SACTIONS, 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, ESSENTIAL THAT IN ORDER TO BE COVERED BY CLAUSE (C) AND (E) O F EXPLANATION TO SECTION 92B , THE TRANSACTIONS SHOULD BE SUCH AS TO HAVE BEARIN G 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, I NCOMES, LOSSES OR ASSETS OF SUCH ENTERPRISE, THE TRANSACTION WILL BE OUTSIDE THE AMBIT OF EXPRESSION 'INTERNATIONAL TRANSACTION'. THIS ASPECT OF THE MAT TER IS FURTHER HIGHLIGHTED IN CLAUSE (E) OF THE EXPLANATION DEALING WITH RESTR UCTURING AND REORGANIZATION, WHEREIN IT IS ACKNOWLEDGED THAT SUC H AN IMPACT COULD BE IMMEDIATE OR IN FUTURE AS EVIDENT FROM THE WORDS 'I RRESPECTIVE 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 STATUTORY PROVISION IS THAT WHILE IMPACT ON ' PROFIT, INCOME, LOSSES OR ASSETS' IS SI NE QUA NON, THE MERE FACT THAT IMPACT IS NOT IMMEDIATE, BUT ON A FUTURE DATE, WOULD NOT TAKE THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 55 OF 82 TRANSACTION OUTSIDE THE AMBIT OF 'INTERNATIONAL TRA NSACTION'. 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 'CONTIN GENT' IMPACT ON PROFIT, INCOME, LOSSES OR ASSETS BUT ON 'FUTURE' IMPACT ON PROFIT, INCOME, LOSSES OR ASSETS OF THE ENTERPRISE. THE IMPORTANT DISTINCT ION BETWEEN THESE TWO CATEGORIES IS THAT WHILE LATTER IS A CERTAINTY, AND ONLY ITS CRYSTALLIZATION MAY TAKE PLACE ON A FUTURE DATE, THERE IS NO SUCH C ERTAINTY IN THE FORMER CASE. IN THE CASE BEFORE US, IT IS AN UNDISPUTED PO SITION THAT CORPORATE GUARANTEES ISSUED BY THE ASSESSEE TO THE VARIOUS BA NKS AND CRYSTALLIZATION OF LIABILITY UNDER THESE GUARANTEES, THOUGH A POSSI BILITY, IS NOT A CERTAINTY. IN VIEW OF THE DISCUSSIONS ABOVE, THE SCOPE OF THE CAPITAL FINANCING TRANSACTIONS, AS COULD BE COVERED UNDER EXPLANATION TO SECTION 92B READ WITH SECTION 92B(1) , IS RESTRICTED TO SUCH CAPITAL FINANCING TRANSACTI ONS, INCLUDING INTER ALIA ANY GUARANTEE, DEFERRED PAYMEN T OR RECEIVABLE OR ANY OTHER DEBT DURING THE COURSE OF BUSINESS, AS WILL H AVE 'A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OR SUCH ENTERPRIS E'. THIS PRECONDITION ABOUT IMPACT ON PROFITS, INCOME, LOSSES OR ASSETS O F SUCH ENTERPRISES IS A PRECONDITION EMBEDDED IN SECTION 92B(1) AND THE ONLY RELAXATION FROM THIS CONDITION PRECEDENT IS SET OUT IN CLAUSE (E) O F THE EXPLANATION WHICH PROVIDES THAT THE BEARING ON PROFITS, INCOME, LOSSE S OR ASSETS COULD BE IMMEDIATE OR ON A FUTURE DATE. THESE GUARANTEES DO NOT HAVE ANY IMPACT ON INCOME, PROFITS, LOSSES OR ASSETS OF THE ASSESSE E. THERE CAN BE A HYPOTHETICAL SITUATION IN WHICH A GUARANTEE DEFAULT TAKES PLACE AND, THEREFORE, THE ENTERPRISE MAY HAVE TO PAY THE GUARA NTEE AMOUNTS BUT SUCH A SITUATION, EVEN IF THAT BE SO, IS ONLY A HYPOTHET ICAL SITUATION, WHICH ARE, AS DISCUSSED ABOVE, EXCLUDED. WHEN AN ASSESSEE EXTE NDS AN ASSISTANCE TO THE ASSOCIATED ENTERPRISE, WHICH DOES NOT COST ANYT HING TO THE ASSESSEE AND PARTICULARLY FOR WHICH THE ASSESSEE COULD NOT H AVE REALIZED MONEY BY GIVING IT TO SOMEONE ELSE DURING THE COURSE OF ITS NORMAL BUSINESS, SUCH AN ASSISTANCE OR ACCOMMODATION DOES NOT HAVE ANY BE ARING ON ITS PROFITS, INCOME, LOSSES OR ASSETS, AND, THEREFORE, IT IS OUT SIDE THE AMBIT OF INTERNATIONAL TRANSACTION UNDER SECTION 92B (1) OF THE ACT. 45. BEFORE WE PART WITH THIS ISSUE, THERE ARE A COU PLE OF THINGS THAT WE WOULD LIKE TO BRIEFLY DEAL WITH. 46. THE FIRST ISSUE IS THIS. WE FIND THAT IN THE CA SE OF FOUR SOFT LTD V. DY. CIT [(2011) 142 TTJ 358 (HYD)], A CO-ORDINATE BENCH HA D, VIDE ORDER DATED 9TH SEPTEMBER 2011, OBSERVED AS FOLLOWS: 'WE FIND THAT THE TP LEGISLATION PROVIDES FOR COMPU TATION OF INCOME FROM INTERNATIONAL TRANSACTION AS PER SECTION 92B OF THE ACT. THE CORPORATE GUARANTEE PROVIDED BY THE ASSESSEE COMPANY DOES NOT FALL WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION. THE TP LEG ISLATION DOES NOT STIPULATE ANY GUIDELINES IN RESPECT TO GUARANTEE TR ANSACTIONS. IN THE ABSENCE OF ANY CHARGING PROVISION, THE LOWER AUTHOR ITIES ARE NOT CORRECT IN BRINGING AFORESAID TRANSACTION IN THE I.T.A. NOS. 2 618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 TP STUDY. IN OUR CONSIDERED ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 56 OF 82 VIEW, THE CORPORATE GUARANTEE IS VERY MUCH INCIDENT AL 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 DOUBTS', AS WE HAVE NOTED EARLI ER IN THIS DECISION, 'CLARIFIED' THAT INTERNATIONAL 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 LE GAL POSITION AND WE ARE BOUND BY THE ESTEEMED VIEWS OF THE COORDINATE BENCH. WE A RE, THEREFORE, OF THE OPINION THAT THE EXPLANATION TO SECTION 92B DID INDEED ENLARGE THE SCOPE OF DEFINITION OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B , AND IT DID SO WITH RETROSPECTIVE EFFECT. IF, FOR ARGUMENT SAKE, IT IS ASSUMED THAT T HE INSERTION OF EXPLANATION TO SECTION 92B DID NOT ENLARGE THE SCOPE OF DEFINITION, THERE CAN NOT OBVIOUSLY BE ANY OCCASION TO DEVIATE FROM THE DECISION THAT THE COORDINATE BENCH TOOK IN FOUR SOFT LTD. CASE (SUPRA), BUT IF THE SCOPE OF THE PRO VISION WAS INDEED ENLARGED, AS IS OUR OPINION, THE QUESTION THAT REALLY NEEDS TO BE A DDRESSED WHETHER, GIVEN THE PECULIAR NATURE AND PURPOSE OF TRANSFER PRICING PRO VISION, IS IT AT ALL A WORKABLE IDEA TO ENLARGE THE SCOPE OF TRANSFER PRICING PROVI SIONS WITH RETROSPECTIVE EFFECT THERE CAN BE LITTLE DOUBT ABOUT THE LEGISLATIVE COM PETENCE TO AMEND TAX LAWS WITH RETROSPECTIVE EFFECT, AND, IN ANY CASE, WE ARE NOT INCLINED TO BE DRAWN INTO THAT CONTROVERSY EITHER. ON THE ISSUE OF IMPLEMENTI NG 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 PROVISIONS OF EXPLANA TION TO SECTION 92B ENLARGES THE SCOPE OF SECTION 92B ITSELF, EVEN AS IT IS MODESTLY DESCRIBED AS 'CLARIFICATORY' IN NATURE, IT IS AN IS SUE TO BE EXAMINED WHETHER AN ENHANCEMENT OF SCOPE OF THIS ANTI AVOIDANCE PROV ISION CAN BE IMPLEMENTED WITH RETROSPECTIVE EFFECT. UNDOUBTEDLY, THE SCOPE OF A CHARGING PROVISION CAN BE ENLARGED WITH RETROSPECTI VE EFFECT, BUT AN ANTI- AVOIDANCE MEASURE, THAT THE TRANSFER PRICING LEGISL ATION INHERENTLY IS, IS NOT PRIMARILY A SOURCE OF REVENUE AS IT MAINLY SEEK S COMPLIANT BEHAVIOUR FROM THE ASSESSEE VIS--VIS CERTAIN NORMS, AND THES E NORMS CANNOT BE GIVEN EFFECT FROM A DATE EARLIER THAN THE DATE NORM S ARE BEING INTRODUCED. HOWEVER, AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON MERITS AND EVEN AFTER TAKING INTO ACCOUNT THE AMEND MENTS BROUGHT ABOUT BY FINANCE ACT 2012, WE NEED NOT DEAL WITH THIS ASPECT OF THE MATT ER 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 DEFINITIO N OF 'INTERNATIONAL TRANSACTION' UNDER SECTION 92B OF THE ACT. WE HAVE ALSO HELD, TAKING NOTE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 57 OF 82 OF THE INSERTION OF EXPLANATION TO SECTION 92B OF THE ACT, THAT THE ISSUANCE OF CORPORATE GUARANTEES IS COVERED BY THE RESIDUARY CLAUSE OF THE DEFINITION UNDER SECTION 92B OF THE ACT BUT SINCE SUCH ISSUANCE OF CORPORATE GUARANTEES, ON THE FACTS OF THE PRESENT C ASE, DID NOT HAVE 'BEARING ON PROFITS, INCOME, LOSSES OR ASSETS', IT DID NOT CONSTITUTE AN INTERNATIONAL TRANSACTION, UNDER SECTION 92B , IN RESPECT OF WHICH AN ARM'S LENGTH PRICE ADJUSTMENT CAN BE MADE. IN THIS VIEW O F THE MATTER, AND FOR BOTH THESE INDEPENDENT REASONS, WE HAVE TO DELETE T HE IMPUGNED ALP ADJUSTMENT. THE QUESTION, WHICH WAS RAISED IN BHART I AIRTEL'S CASE (SUPRA) BUT LEFT UNANSWERED AS THE ASSESSEE HAD SUCCEEDED O N MERITS, REAMINS UNANSWERED HERE AS WELL. HOWEVER, WE MAY ADD THAT I N THE CASE OF KRISHNASWAMY SPD V.UNION OF INDIA [2006] 281 ITR 30 5/151 TAXMAN 286 (SC), WHEREIN THEIR LORDSHIPS HAD, INTER ALIA, OBSERVED THAT 'THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISC LAIM AS IT DOES IN ITS GENERAL APHORISMS, ALL INTENTION OF COMPELLING IMPO SSIBILITIES, 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 CHANNEL GUID E INDIA LTD. V. ASSTT. CIT [2012] 139 ITB 49/25 TAXMANN.COM 25 (MUM.), HEL D THAT EVEN THOUGH THE ASSESSEE HAD NOT DEDUCTED THE APPLICABLE TAX AT SOURCE UNDER SECTION 195 , THE DISALLOWANCE COULD NOT BE MADE UNDER SECTION 40(A)(I) SINCE THE TAXABILITY WAS UNDER THE PROVISIONS WHIC H 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 TINKERE D WITH. WHEN A PROVISO IS INTRODUCED WITH EFFECT FROM A PARTICULAR DATE SPECIFIED BY THE LEGISLATURE, THE JUDICIAL FORUMS, INCLUDING THIS TR IBUNAL, AT TIMES READ IT AS BEING EFFECT FROM A DATE MUCH EARLIER THAN THAT TOO . ONE SUCH CASE, FOR EXAMPLE, IS CIT V. ANSAL LANDMARK TOWNSHIP (P .) LTD. [2015] 377 ITR 635/234 TAXMAN 825/61 TAXMANN.COM 45 (DELHI), WHERE IN 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 SUCH A N EXERCISE CAN BE DONE IN THE PRESENT CASE IS, OF COURSE, SOMETHING T O BE EXAMINED AND OUR OBSERVATIONS SHOULD NOT BE CONSTRUED AS AN EXPRESSI ON ON MERITS OF THAT ASPECT OF MATTER. GIVEN THE FACT THAT THE ASSESSEE HAS SUCCEEDED ON MERITS IN THIS CASE, IT WOULD NOT REALLY BE NECESSARY TO D EAL 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 TO A LARGER BENCH. THE PARTIES BEFORE US WERE OPPOSED TO THE MATTER BEING SENT FOR CONSIDERATION BY THE SPECIAL BENCH, AND AT LEAST ONE OF THE REASO NS FOR WHICH THE GRIEVANCE OF THE ASSESSEE IS UPHELD, I.E. GUARANTEE S BEING IN THE NATURE OF SHAREHOLDER ACTIVITY AND EXCLUDIBLE FROM THE SCOPE OF SERVICES FOR THAT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 58 OF 82 REASON ALONE, IS AN AREA WHICH HAD COME UP FOR CONS IDERATION FOR THE FIRST TIME. IN EFFECT, THEREFORE, THERE WAS NO CONFLICT O N THIS ISSUE OF AND THE OTHER ISSUES, GIVEN DECISION ON THE SAID ISSUE, WER E WHOLLY ACADEMIC. IT CANNOT BE OPEN TO REFER THE ACADEMIC QUESTIONS TO T HE SPECIAL BENCH. NO DOUBT, SOME DECISIONS OF THE COORDINATE BENCHES WHI CH HAVE REACHED THE DIFFERENT CONCLUSIONS. THERE IS, HOWEVER, NO CONFLI CT IN THE REASONING. FOUR SOFT LTD. DECISION (SUPRA) HAD DECIDED THE ISS UE IN FAVOUR OF THE ASSESSEE BUT THAT WAS WITH RESPECT TO THE LAW PRIOR TO INSERTION TO EXPLANATION TO SECTION 92B . AS FOR THE POST- AMENDMENT LAW AND THE IMPACT OF AMENDMENT IN THE DEFINITION OF 'INTERNATI ONAL TRANSACTION', THE MATTER WAS AGAIN DECIDED IN FAVOUR OF THE ASSESSEE BY BHARTI AIRTEL LTD. DECISION (SUPRA) ON THE PECULIAR FACTS OF THAT CASE . THE DECISIONS LIKE EVEREST KENTO CYLINDERS LTD. (SUPRA) AND ADITYA BIR LA MINACS WORLDWIDE (SUPRA) WERE DECISIONS IN WHICH THE ASSES SEE HAD CHARGED THE FEES AND, FOR THAT REASON, SUCH CASES ARE COMPLETEL Y DISTINGUISHABLE AS DISCUSSED ABOVE. IN PROLIFIC' CORP LTD. CASE (SUPRA ), AS INDEED IN ANY OTHER CASE SO FAR, IT WAS NOT THE CASE OF THE ASSES SEE THAT CORPORATE GUARANTEES ARE QUASI-CAPITAL, OR SHAREHOLDER ACTIVI TY, IN NATURE, AND, FOR THAT REASON, EXCLUDIBLE FROM CHARGEABLE SERVICES, E VEN IF THESE ARE HELD TO BE SERVICES IN NATURE. THAT PLEA HAS BEEN SPECIFICA LLY ACCEPTED IN THE PRESENT CASE. THEREFORE, THE QUESTION WHETHER ISSUA NCE OF CORPORATE GUARANTEE PER SE IN GENERAL CONSTITUTES A 'INTERNAT IONAL TRANSACTION' UNDER SECTION 92B WOULD HAVE BEEN SOMEWHAT ACADEMIC QUESTION ON THE FACTS OF THIS CASE. IN ANY EVENT, IN PROLIFIC' CORP LTD. CASE (SUPRA), AN EARLIER CONSIDERED DECISION ON THE SAME ISSUE BY CO ORDINATE BENCH OF EQUAL STRENGTH WAS SIMPLY DISREGARDED AND THAT FACT TAKES THIS DECISION 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 BENC H DECISION OF HON'BLE AP HIGH COURT IN THE CASE OF CIT V. BR C ONSTRUCTIONS [1993] 202 ITR 222/[1994] 73 TAXMAN 473 (AP), A DECISION D ISREGARDING AN EARLIER BINDING PRECEDENT ON THE ISSUE IS PER INCUR IUM. SUCH DECISIONS CANNOT BE BASIS FOR SENDING THE MATTERS TO SPECIAL BENCH SINCE OCCASION FOR REFERENCE TO SPECIAL BENCH ARISES WHEN BINDING AND CONFLICTING JUDICIAL PRECEDENTS FROM COORDINATE BENCHES COME UP FOR CONS IDERATION. THAT WAS NOT THE CASE HERE. ALL THESE FACTORS TAKEN TOGETHER , IN OUR CONSIDERED VIEW, IT WAS NOT POSSIBLE IN THIS CASE TO REFER THE MATTE R FOR CONSTITUTION OF A SPECIAL BENCH. IN ANY CASE, WHATEVER WE DECIDE IS, AND SHALL 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 SCRUTINY, IF AND WH EN I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 OCCASION COM ES, BY ANALYZING THE ISSUES IN A COMPREHENSIVE AND HOLISTI C 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 THAT, IN OUR CONS IDERED VIEW, THE WAY ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 59 OF 82 FORWARD, TO AVOID SUCH ISSUES BEING LITIGATED AND T O ENSURE SATISFACTORILY RESOLUTION OF THESE DISPUTES, MUST INCLUDE A CLEAR AND UNAMBIGUOUS LEGISLATIVE GUIDANCE ON THE TRANSFER PRICING IMPLIC ATIONS OF THE CORPORATE GUARANTEES AS ALSO ON THE METHODOLOGY OF DETERMININ G ITS ALP, IF NECESSARY. OF COURSE, NO MATTER HOW GOOD IS THE LEG ISLATIVE FRAMEWORK, THE IMPORTANCE OF A VERY COMPREHENSIVE ANALYSIS, IN THE TRANSFER PRICING STUDY, OF THE NATURE OF CORPORATE GUARANTEES ISSUED BY THE ASSESSEES, CAN NEVER BE OVEREMPHASIZED. THE SWEEPING GENERALIZATIO NS, VAGUE STATEMENTS AND EVASIVE APPROACH IN THE TRANSFER PRI CING STUDY REPORTS, WHICH ARE QUITE COMMON IN MOST OF THE TRANSFER PRIC ING REPORTS, CANNOT DO GOOD TO A REASONABLE CAUSE. WHEN JUDICIAL CALLS ON THE COMPLEX TRANSFER PRICING ISSUES ARE TO BE TAKEN, UTMOST CLARITY IN T HE LEGISLATIVE FRAMEWORK AND A COMPREHENSIVE ANALYSIS OF RELEVANT FACTS, IN THE TRANSFER PRICING DOCUMENTATION, ARE BASIC INPUTS. UNFORTUNATELY, BOT H OF THESE THINGS LEAVE A LOT TO BE DESIRED. WE CAN ONLY HOPE, AND WE DO HO PE, THAT THINGS WILL CHANGE FOR BETTER. 7. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH. LEARNED DEPARTMENTAL REPRESEN TATIVE'S WELL RESEARCHED ARGUMENTS DONOT PERSUADE US TO DEVIATE F ROM THE STAND 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 SECTION 92B ) BY THE FINANCE ACT , 2012, AFTER THE DECISION OF FOUR SOFT LTD DATED 14/09/2011'. HE POINTS OUT THAT THE DECISION OF THE TRIBUNAL, IN THE CASE OF BHARTI AIRTEL (SUPRA), IS PER INCURI UM BECAUSE THERE WERE TWO DECISIONS OF THIS TRIBUNAL, IN THE CASE OF EVEREST KANTO CYLINDERS LTD VS DCIT [(2012) 34 TAXMANN.COM 9 (MUM )] AND MAHINDRA & MAHINDRA LTD VS DCIT [2012- TII-70-ITAT- MUM], WHICH WERE NOT CONSIDERED BY THE BHARTI AIRTEL DECI SION. OUR ATTENTION IS ALSO INVITED TO THE RECTIFICATION PETI TION FILED BY THE ASSESSING OFFICER, WHICH IS SAID TO BE PENDING FOR DISPOSAL BEFORE THE TRIBUNAL. WE DONOT FIND MERITS IN THIS PLEA. MA HINDRA & MAHINDRA DECISION (SUPRA) WAS PASSED ON 6 TH JUNE 2 012, THOUGH AT A POINT OF TIME WHEN FINANCE ACT 2012 HAD JUST COME INTO FORCE I.E. POST 28 TH MAY 2012, WITHOUT EVEN BEING AWARE WHETHER OR NOT THE FINANCE ACT 2012 WAS PASSED AS IT GAVE CERTAIN DIRECTIONS DEPENDING UPON THE EXACT AMENDMENT BY THE SAID FINANCE ACT . THE MATTER WAS REMITTED TO THE FILE OF THE ASSESSING OF FICER IN A RATHER SUMMARY MANNER. IT CANNOT BE, BY ANY STRETCH OF LOG IC, AN AUTHORITY ON ANY LEGAL QUESTION ARISING OUT OF THE LAW WHICH, AS PER THE TRIBUNAL- WRONGLY THOUGH, WAS NOT EVEN IN EXIST ENCE. AS FOR THE EVEREST KANTO DECISION (SUPRA), THE ISSUE WAS DECID ED AGAINST THE ASSESSEE AS, TO BORROW THE WORDS OF THE COORDINATE BENCH, 'HERE IN THIS CASE, IT IS UNDISPUTED THAT THE ASSESSEE IN IT S T.P. STUDY REPORT AND ALSO THE TPO, HAVE ACCEPTED THAT IT IS AN INTER NATIONAL TRANSACTION AND CUP IS THE MOST APPROPRIATE METHOD FOR ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 60 OF 82 BENCHMARKING THE CHARGING OF GUARANTEE FEE', AND, I T WAS FOR THIS SHORT REASON THAT THE MATTER WAS DECIDED AGAINST TH E ASSESSEE. THE CO-ORDINATE BENCH HAD FURTHER OBSERVED 'IN THIS CAS E, THE ASSESSEE HAS ITSELF CHARGED 0.5% GUARANTEE COMMISSION FROM I TS AE, 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 SAME IS AT ALP OR NOT'. LEARNED DEPARTM ENTAL REPRESENTATIVE HAS INVITED OUR ATTENTION TO A DECIS ION OF THE BANGALORE BENCHES, IN THE CASE OF ADVANTA INDIA LIM ITED VS ACIT [(2015) TII- 294-ITAT-BAN], WHICH IS IN FAVOUR OF T HE ASSESSEE. WHILE LEARNED DEPARTMENTAL REPRESENTATIVE IS INDEED RIGHT, THAT IS A CASE IN WHICH THE ASSESSEE DID IN FACT RECOVER CH ARGES, WHICH INCLUDED MORE THAN THE COST INCURRED, FROM THE BENE FICIARY, AND, AS SUCH, IT CLEARLY HAD AN IMPACT ON THE PROFITS OF TH E ASSESSEE. THAT IS A CASE DISTINCT FROM THE PRESENT SITUATION IN WHICH THERE IS NO IMPACT ON THE PROFITS OR LOSSES OR ASSETS OR INCOME OF THE ASSESSEE. IN ADVANTA DECISION (SUPRA), THIS ASPECT OF THE MAT TER AND THE DISTINGUISHING FEATURE HAS BEEN DISCUSSED AT CONSID ERABLE LENGTH. LEARNED DEPARTMENTAL REPRESENTATIVE HAS THEN INVITE D OUR ATTENTION TO THE FACT A SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED BY HON'BLE DELHI HIGH COURT IN ITA NO. 607 /2014 AGAINST THE ORDER PASSED BY THE TRIBUNAL IN THE CAS E OF BHARTI AIRTEL (SUPRA). WHILE NO DOUBT THE MATTER IS NOW PENDING B EFORE HON'BLE HIGH COURT FOR THE JUDICIAL SCRUTINY BY THEIR LORDS HIPS, 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 AIR TEL BEING ON ITS OWN PECULIAR FACTS, THERE CAN BE NO DENIAL OF THIS POSITION BUT THAT DOES NOT MEAN THAT THE SO FAR AS ISSUES OF GENERAL APPLICATION ARE CONCERNED, THE STAND OF THE TRIBUNAL CANNOT HOLD GO OD. LEARNED DEPARTMENTAL REPRESENTATIVE THEN TAKES US THROUGH T HE EXPLANATION TO SECTION 92 B TO EXPLAIN ITS TRUE SCOPE AND THROUGH BHARTI AIRTEL DECISION AS TO HOW FALLACIOUS IS ITS LOGIC. ITS EMPHASIZED THAT THE IMPACT OF ISSUANCE OF BANK GUAR ANTEES, ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRIS ES, IS 'REAL' AND NOT 'CONTINGENT' AS HELD IN BHARTI'S CASE. IT IS AL SO EMPHASIZED, APPARENTLY TO HIGHLIGHT THE FACT THAT IT IS NOT ONL Y THE IMPACT ON ENTITY ISSUING THE GUARANTEE BUT ALSO BENEFICIARY O F THE GUARANTEE THAT MATTERS IN THIS CONTEXT, THAT THE WORD USED IN SECTION 92 B IS 'ENTERPRISES' AND NOT 'ENTERPRISE'. IT IS THUS CONT ENDED THAT THE IMPACT ON THE PROFITS, INCOMES, LOSSES OR ASSETS OF THE ENTITY ISSUING GUARANTEE IS IMPORTANT, BUT THE IMPACT ON THE PROFI TS, INCOME, LOSSES OR ASSETS OF THE ENTITY, WHICH IS BENEFICIAR Y OF THE GUARANTEE, IS ALSO IMPORTANT. IT IS POINTED OUT THAT BHARTI AI RTEL DECISION HAS EXAMINED THIS ASPECT ONLY FROM THE POINT OF VIEW OF THE ENTITY ISSUING THE GUARANTEE AND THAT HAS ALSO BEEN DECIDE D WRONGLY. AS FOR THESE ISSUES BEING RAISED BY THE LEARNED DEPART MENTAL REPRESENTATIVE, SUFFICE TO SAY THAT EVEN IF REASONI NG ADOPTED BY BHARTI AIRTEL DECISION IS INCORRECT, IT IS NOT FOR US TO EXAMINE THAT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 61 OF 82 ASPECT OF THE MATTER. NOW THAT THE MATTER IS BEFORE HON'BLE HIGH COURT, AND THE MATTER IS ALREADY UNDER HEARING, THE RE IS NO POINT IN GOING 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 ON'. THE ISSUANCE OF A CORPORATE GUARANTEE MAY HAVE AN INFLUENCE ON THE PROFITS, INC OMES, 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 ISSUE D WITHOUT A CONSIDERATION. TO TREAT THIS PHRASE AS IMPLYING A B ENEFIT TEST, WILL, IN OUR CONSIDERED VIEW, STRETCHING THE THINGS TOO F AR. WE ARE, THEREFORE, NOT SWAYED BY THE ARGUMENTS, THOUGH EXTR EMELY WELL RESEARCHED AND THOUGHT PROVOKING, OF THE LEARNED I. T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 DEPARTME NTAL REPRESENTATIVE- PARTICULARLY AT THIS STAGE. HE HAS RAISED A NUMBER OF OTHER ARGUMENTS AS WELL BUT AS THOSE ARGUMENTS A RE ALREADY DEALT WITH IN THE CASE OF MICRO INK DECISION REPROD UCED ABOVE, 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 T HE INSERTION OF EXPLANATION TO SECTION 92B AND HOW WITHIN FOUR MONTHS OF FOUR SOFT DECISION (SUPRA) BEING ANNOUNCED, IT WAS NULLIF IED BY A LEGISLATIVE AMENDMENT. THIS ASPECT OF THE MATTER HA S BEEN DEALT WITH IN PARAGRAPH 46 AND 47 OF THIS DECISION, WHICH HAS BEEN REPRODUCED EARLIER IN THIS ORDER, AT CONSIDERABLE L ENGTH. 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 RETROSPECTIVE EFFECT AND IT COVERED CERTAIN IS SUES WHICH WERE ALREADY SUBJECTED TO A JUDICIAL INTERPRETATION IN A PARTICULAR MANNER. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NO T EVEN DISPUTE IT. HE IS CANDID ENOUGH TO PLACE ON RECORD THE FACT, BY WAY OF A WRITTEN NOTE, THAT THE ONE OF THE REASONS OF I NSERTION OF EXPLANATION TO SECTION 92 B WAS TO NULLIFY THE FOUR SOFT DECISION (SUPRA). THE JUDICIAL INTERPRETATION SO GIVEN WAS C ERTAINLY NOT THE END OF THE ROAD. THE MATTER COULD HAVE BEEN CARRIED IN APPEAL BEFORE HIGHER JUDICIAL FORUMS. IF THE DECISION OF A JUDICIAL BODY DOES NOT SATISFY THE TAX ADMINISTRATION, NOTHING PR EVENTS THEM FROM GOING TO THE HIGHER JUDICIAL FORUM OR FROM SO AMENDING THE LAW, WITH PROSPECTIVE EFFECT, THAT THERE IS NO AMBI GUITY ABOUT THE INTENT OF LEGISLATURE AND IT IS CONVEYED IN UNAMBIG UOUS 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 JU DICIAL RULING IN TAXATION, IT IS THE TIME FOR, AT LEAST ON A THEORET ICAL NOTE, ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 62 OF 82 INTROSPECTION FOR THE DRAFTSMAN AS TO WHAT WENT SO WRONG THAT FUNDAMENTAL INTENT OF LAW OF LAW COULD NOT BE CONVE YED BY THE WORDS OF THE STATUTE, OR, I.T.A. NOS. 2618 AND 2876 /MUM/2014 ASSESSMENT YEAR: 2009-10 PERHAPS FOR THE JUDICIAL F ORUMS, AS TO WHAT WENT SO WRONG THAT THE INTERPRETATION WAS SO O FF THE MARK VIS- -VIS FUNDAMENTAL PRINCIPLES OF TAXATION OR THE SOU ND POLICY CONSIDERATIONS. HOWEVER, AMENDMENT SO MADE ARE GENE RALLY PROSPECTIVE, AND THERE IS A SOUND CONCEPTUAL FOUNDA TION, AS HAS BEEN HIGHLIGHTED IN THE BINDING JUDICIAL PRECEDENTS THAT WE WILL DEAL WITH IN A SHORT WHILE, FOR THAT APPROACH. THER E IS NO DEARTH OF EXAMPLES ON THIS ASPECT OF THE MATTER. TAKE FOR EXA MPLE, THE AMENDMENT TO SECTION 263 BY THE FINANCE ACT , 1961. IN MANY JUDICIAL PRECEDENTS, [SUCH AS IN THE CASE OF CIT VS SUNBEAM AUTO LIMITED (332 ITR 167) WHEREIN IT WAS HELD THAT 'LEA RNED COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ON E HAS TO KEEP IN MIND THE DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDERS U NDER 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 COUR SE OF ACTION WOULD BE OPEN'], IT WAS REITERATED THAT IT WAS ONLY THE L ACK, NOT THE ADEQUACY, OF INQUIRY WHICH COULD CONFER JURISDICTIO N UNDER SECTION 263 ON THE COMMISSIONER. BY INSERTING EXPLANATION 2 TO SECTION 263(1) , WHICH INTER ALIA PROVIDED THAT POWERS UNDER SECTION 263 COULD ALSO BE INVOKED IN THE CASES WHERE 'THE ORDE R IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOU LD HAVE BEEN MADE', ALL RATIO OF ALL THESE DECISIONS WAS NULLIFI ED. THAT, HOWEVER, IS DONE WITH PROSPECTIVE EFFECT, I.E. WITH EFFECT F ROM 1 ST JUNE 2015. AS A MATTER OF FACT, IT IS A LAUDABLE POLICY OF THE PRESENT TAX ADMINISTRATION TO STAY AWAY FROM MAKING THE RETROSP ECTIVE AMENDMENTS, AND THUS CONTRIBUTE TO GREATER CERTAINT Y AND CONGENIAL BUSINESS CLIMATE. NOTHING EVIDENCES IT BE TTER THAN THIS SUBTLE, BUT EASILY DISCERNIBLE, PARADIGM SHIFT IN T HE UNDERLYING APPROACH TO THE AMENDMENTS MADE IN SECTION 263 IN THE VERY FIRST 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 HA PPENED MUCH BEFORE THE CURRENT AWARENESS ABOUT THE EVILS OF RET ROSPECTIVE 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 (2016)], OBSERVED AS FOLLOWS: 30. UNDOUBTEDLY, THE LEGISLATURE IS COMPETENT TO AM END A PROVISION THAT OPERATES RETROSPECTIVELY OR PROSPECT IVELY. NONETHELESS, WHEN DISPUTES AS TO THEIR APPLICABILIT Y ARISE IN ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 63 OF 82 COURT, IT IS THE ACTUAL 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, AMBIGUO US, MAY HAVE MADE AN OBVIOUS OMISSION, OR IS CAPABLE OF MOR E THAN ONE MEANING. IN SUCH CASE, A SUBSEQUENT PROVISION D EALING WITH THE SAME SUBJECT MAY THROW LIGHT UPON IT. YET, IT IS NOT EVERY TIME THAT THE LEGISLATURE CHARACTERIZES AN AM ENDMENT AS RETROSPECTIVE THAT THE COURT WILL GIVE SUCH EFFE CT TO IT. THIS IS NOT IN DEROGATION OF THE EXPRESS WORDS OF THE LA W IN QUESTION, (WHICH AS A MATTER OF COURSE MUST BE THE FIRST TO BE GIVEN EFFECT TO), BUT BECAUSE THE LAW WHICH WAS INT ENDED TO BE GIVEN RETROSPECTIVE EFFECT TO AS A CLARIFICATORY AMENDMENT, IS IN ITS TRUE NATURE ONE THAT EXPANDS T HE SCOPE OF THE SECTION IT SEEKS TO CLARIFY, AND RESULTANTLY INTRODUCES NEW PRINCIPLES, UPON WHICH LIABILITIES MIGHT ARISE. SUCH AMENDMENTS THOUGH FRAMED AS CLARIFICATORY, ARE IN F ACT TRANSFORMATIVE SUBSTANTIVE AMENDMENTS, AND INCAPABL E OF BEING GIVEN RETROSPECTIVE EFFECT. ................. ..... 37. AN IMPORTANT QUESTION, WHICH ARISES IN THIS CON TEXT, IS WHETHER A 'CLARIFICATORY' AMENDMENT REMAINS TRUE TO ITS NATURE WHEN IT PURPORTS TO ANNUL, OR HAS THE UNDENI ABLE EFFECT OF ANNULLING, AN INTERPRETATION GIVEN BY THE COURTS TO THE TERM SOUGHT TO BE CLARIFIED. IN OTHER WORDS, DO ES THE RULE AGAINST CLARIFICATORY AMENDMENTS LAYING DOWN NEW PRINCIPLES OF LAW EXTEND TO SITUATIONS WHERE LAW HA D BEEN JUDICIALLY INTERPRETED AND THE LEGISLATURE SEEKS TO OVERCOME IT BY DECLARING THAT THE LAW IN QUESTION 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 INTERPRETIVE STATUTE IS TO CORRECT A JUDI CIAL INTERPRETATION OF A PRIOR LAW, WHICH THE LEGISLATUR E CONSIDERS INACCURATE, THE EFFECT IS PROSPECTIVE. ANY OTHER RE SULT WOULD MAKE THE LEGISLATURE A COURT OF LAST RESORT. UNITED STATES V. GILMORE 8 WALL [(75 US) 330, 19L E D 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 T O OVERRIDE JUDICIAL DECISIONS WHICH IN ITS OPINION IT DEEMS AS INCORRECT, HOWEVER TO RESPECT THE SEPARATION OF LEG AL POWERS AND TO AVOID MAKING A LEGISLATURE A COURT OF LAST R ESORT, THE AMENDMENTS CAN BE MADE PROSPECTIVE ONLY [ REF COUNT Y OF SACRAMENTO V ST ATE (134 CAL APP 3D 428) AND IN R E 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 CLARIFICATORY, ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 64 OF 82 IT DOES NOT BECOME ENTITLED TO BE TREATED AS 'CLARI FICATORY' BY THE JUDICIAL 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 BHARTI AIRTE L (SUPRA) WERE OF A SOMEWHAT SIMILAR OPINION WHEN IT WAS OBSERVED THAT, 'UNDOUBTEDLY, THE SCOPE OF A CHARGING PROVISION CAN BE ENLARGED WITH RETROSPECTIVE EFFECT, BUT AN ANTI- AVOIDANCE M EASURE, THAT THE TRANSFER PRICING LEGISLATION INHERENTLY IS, IS NOT PRIMARILY A SOURCE OF REVENUE AS IT MAINLY SEEKS COMPLIANT BEHAVIOUR F ROM THE ASSESSEE VIS--VIS CERTAIN NORMS, AND THESE NORMS C ANNOT 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 QUESTION OF RETROSPECTIVE AMENDMENT IN THE TRANSFER PRICING LEGISLATION, WHICH HAS, AS WE WILL SEE, ITS OWN PECULIARITIES AND SIGNIFICANT DISTINCTION WITH NORMAL TAX LAWS WH ICH 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 JUD ICIARY WHETHER IT IS INDEED CLARIFICATORY OR NOT. THIS DETERMINATION, I. E. WHETHER THE AMENDMENT IN INDEED CLARIFICATORY OR IS THE AMENDME NT TO OVERCOME A JUDICIAL PRECEDENT, ASSUMES GREAT SIGNIF ICANCE BECAUSE WHEN IT IS FOUND THAT THE PURPOSE OF SUCH INTERPRET IVE STATUTE, OR CLARIFICATORY AMENDMENT, IS 'CORRECT A JUDICIAL INT ERPRETATION OF PRIOR LAW, WHICH I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 THE LEGISLATURE CONSIDERS INACCURATE, THE EFFECT IS PROSPECTIVE' AND, AS IN THIS CASE, IT DEA LS WITH TRANSFER PRICING LEGISLATION WHICH ESSENTIALLY SEEKS A DEGRE E OF COMPLIANT BEHAVIOR FROM THE ASSESSEE VIS--VIS CERTAIN NORMS- THE NORMS THE ASSESSEE SHOULD KNOW AT THE TIME OF ENTERING INTO T HE TRANSACTIONS RATHER THAN AT THE TIME 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 RE LATED PROVISION WHICH IS IN THE NATURE OF A SAAR (SPECIFIC ANTI ABU SE RULE), AND THAT EVERY ANTI ABUSE LEGISLATION, WHETHER SAAR (SPECIFI C ANTI ABUSE RULE) OR GAAR (GENERAL ANTI ABUSE RULE), IS A LEGIS LATION SEEKING THE TAXPAYERS TO ORGANIZE THEIR AFFAIRS IN A MANNER COM PLIANT WITH THE NORMS SET OUT IN SUCH ANTI ABUSE LEGISLATION. AN AN TI-ABUSE LEGISLATION DOES NOT TRIGGER THE LEVY OF TAXES; IT ONLY TELLS YOU WHAT 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 CERT AIN DEGREE OF COMPLIANCE WITH THE NORMS SET OUT THEREIN. IT IS, T HEREFORE, ONLY ELEMENTARY THAT AMENDMENTS IN THE ANTI-ABUSE LEGISL ATIONS CAN ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 65 OF 82 ONLY BE PROSPECTIVE. IT DOES NOT MAKE SENSE THAT SO MEONE TELLS YOU TODAY AS TO HOW YOU SHOULD HAVE BEHAVED YESTERDAY, 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 EXPECTED TO HAVE A RETROSPECTIVE AMENDMENT, WHICH IS ALMOST LIK E TELLING PEOPLE HOW THEY SHOULD HAVE BENCHMARKED THEIR INTER NATIONAL TRANSACTIONS IN PAST AND THUS EXPECTING THEM TO DO THE IMPOSSIBLE, HIS STOCK REPLY IS THAT THE AMENDMENT ONLY CLARIFIE S 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 UNDE R SECTION 92B , ASSUMING THAT IT INDEED DOES NOT- AS LEARNED DEPART MENTAL REPRESENTATIVE CONTENDS, THIS PROVISION HAS ALREADY BEEN JUDICIALLY INTERPRETED, AND THE MATTER RESTS THERE UNLESS IT I S REVERSED BY A HIGHER JUDICIAL FORUM. HOWEVER, IF THE 2012 AMENDME NT DOES INCREASE THE SCOPE OF INTERNATIONAL TRANSACTION UND ER 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 STAT UTE I.E. 28 TH MAY 2012. THE LAW IS WELL SETTLED. IT DOES NOT EXPECT A NYONE TO PERFORM AN IMPOSSIBILITY. REITERATING THIS SETTLED LEGAL PO SITION, HON'BLE SUPREME COURT HAS, IN THE CASE OF KRISHNASWAMY S PD VS UNION OF INDIA [(2006) 281 ITR 305 (SC)], 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 ADMINISTRA TION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL AP HORISMS, ALL INTENTION OF COMPELLING IMPOSSIBILITIES, AND TH E ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL EXCEP TION IN THE CONSIDERATION 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, MOHAMMOD 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 SECTION 92 B, THOUGH STATED TO BE CLARIFICATORY AND STATED TO BE EFFECTIVE FROM 1 ST APRIL 2002, HAS TO BE NECESSARILY TREATED AS EFFECT IVE FROM AT BEST THE ASSESSMENT YEAR 2013-14. IN ADDITION TO THIS RE ASON, IN THE LIGHT OF HON'BLE DELHI HIGH COURT'S GUIDANCE IN THE CASE OF NEW SKIES SATELLITE BV (SUPRA) ALSO, THE AMENDMENT IN THE DEFI NITION OF INTERNATIONAL TRANSACTION UNDER SECTION 92B , TO THE EXTENT IT PERTAINS TO THE ISSUANCE OF CORPORATE GUARANTEE BEI NG OUTSIDE THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 66 OF 82 SCOPE OF 'INTERNATIONAL TRANSACTION', CANNOT BE SAI D TO BE RETROSPECTIVE IN EFFECT. THE FACT THAT IT IS STATED TO BE RETROSPECTIVE, IN THE LIGHT OF THE AFORESAID GUIDANCE OF HON'BLE D ELHI HIGH I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-1 0 COURT, WOULD NOT ALTER THE SITUATION, AND IT CAN ONLY BE T REATED AS PROSPECTIVE IN EFFECT I.E. WITH EFFECT FROM 1 ST AP RIL 2012 ONWARDS. 19. AS WE DEAL WITH THIS QUESTION, IT IS ALSO RELEV ANT TO CONSIDER WHETHER THIS TRIBUNAL CAN, WHILE ADJUDICATING ON TH E APPEALS, TINKER WITH THE DATE, AS SET OUT IN THE STATUTE, FR OM WHICH AN AMENDMENT IS EFFECTIVE. IN OUR HUMBLE UNDERSTANDING , AS A JUDICIAL FORUM, WE ARE BOUND NOT ONLY BY THE LAW AS LEGISLAT ED BY THE LEGISLATURE, BUT BY THE JUDGE MADE LAW AS WELL. WE ARE A PART OF THE JUDICIAL HIERARCHY IN THIS SYSTEM. WE ARE 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 ACC ORDANCE WITH THE PROVISIONS OF THE STATUTE, IN ACCORDANCE WITH THE L AW LAID DOWN BY HON'BLE COURTS ABOVE AND IN THE LIGHT OF BINDING JU DICIAL PRECEDENTS. WHEN A BINDING JUDICIAL PRECEDENT REQUI RES US TO DEVIATE FROM THE SPECIFIC WORDS OF THE PROVISIONS O F THE STATUTE IN A PARTICULAR MANNER, WE HAVE TO DO SO. THERE IS NO ES CAPE FROM THIS CALL OF DUTY. OF COURSE, WHATEVER WE DO IS, AND SHA LL ALWAYS 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)], INSERTION OF SECOND PROVISO TO SECTION 40(A)(IA) , THOUGH SPECIFICALLY STATED TO BE WITH EFFECT FROM 1ST APRI L 2013, WAS READ TO BE EFFECTIVE FROM 1ST APRIL 2005. THE REASONING ADOPTE D BY THE BENCH, SPEAKING THROUGH ONE OF US, WAS AS FOLLOWS: 8. WITH THE BENEFIT OF THIS GUIDANCE FROM HON'BLE D ELHI HIGH COURT, IN VIEW OF LEGISLATIVE AMENDMENTS MADE FROM TIME TO TIME, WHICH THROW LIGHT ON WHAT WAS ACTUALLY SOUGHT TO BE ACHIEVED BY THIS LEGAL PROVISION, AND IN THE LIGHT OF THE ABOVE ANALYSIS OF THE SCHEME OF THE LAW, WE ARE OF I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 THE CONSIDER ED VIEW THAT SECTION 40(A)(IA) CANNOT BE SEEN AS INTENDED TO BE A PENAL PROVISION TO PUNISH THE LAPSES OF NON DEDUCTION OF TAX AT SOURCE FROM PAYMENTS FOR EXPENDITURE- PARTICULARLY WHEN TH E RECIPIENTS HAVE TAKEN INTO ACCOUNT INCOME EMBEDDED IN THESE PA YMENTS, PAID DUE TAXES THEREON AND FILED INCOME TAX RETURNS IN ACCORDANCE WITH THE LAW. AS A COROLLARY TO THIS PROPOSITION, I N 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 ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 67 OF 82 CONSEQUENCE I.E. IF IT IS AN UNINTENDED CONSEQUENCE , EVEN GOING BY BHARTI SHIPYARD DECISION (SUPRA), 'REMOVING UNINTEN DED CONSEQUENCES TO MAKE THE PROVISIONS WORKABLE HAS TO BE TREATED AS RETROSPECTIVE NOTWITHSTANDING THE FACT THAT THE AMENDMENT HAS BEEN GIVEN EFFECT PROSPECTIVELY'. REVENUE, THUS, DO ES NOT DERIVE ANY ADVANTAGE FROM SPECIAL BENCH DECISION IN THE CA SE BHARTI SHIPYARD (SUPRA). 9. ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FO R THE LOSS OF REVENUE BY 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, THE REFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THE RE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT D EDUCTING TAX AT SOURCE, WHEN SUCH TAX DEDUCTIONS ARE DUE, BUT, SO F AR AS THE LEGAL FRAMEWORK IS CONCERNED, THIS PROVISION IS NOT FOR T HE 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 THINGS AND HAVE DISTINCTLY DIFFER ENT, AND SOMETIMES MUTUALLY EXCLUSIVE, CONNOTATIONS. WHEN WE APPRECIAT E THE OBJECT OF SCHEME OF SECTION 40(A)(IA) , AS ON THE STATUTE, AND TO EXAMINE WHETHER OR NOT, ON A 'FAIR, JUST AND EQUITABLE' INTERPRETATION OF LAW- AS IS THE GUIDANCE FROM HON'BLE DELHI HIGH COURT ON INTERPRETATION OF THIS LEGAL PROVISION, IN OUR HUMBLE UNDERSTANDING, IT COULD NOT BE AN 'IN TENDED CONSEQUENCE' TO DISALLOW THE EXPENDITURE, DUE TO NON DEDUCTION O F TAX AT SOURCE, EVEN IN A SITUATION IN WHICH CORRESPONDING INCOME IS BROUGH T TO TAX IN THE HANDS OF THE RECIPIENT. THE SCHEME OF SECTION 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 INCOME 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 271 C, 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 PROV ISO THERETO, WENT MUCH BEYOND THE OBVIOUS INTENTIONS OF THE LAWM AKERS AND CREATED UNDUE HARDSHIPS EVEN IN CASES IN WHICH THE I.T.A. N OS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009-10 ASSESSEE'S T AX WITHHOLDING LAPSES DID NOT RESULT IN ANY LOSS TO THE EXCHEQUER. NOW THAT THE LEGISLATURE HAS BEEN COMPASSIONATE ENOUGH TO CURE THESE SHORTCO MINGS OF PROVISION, AND THUS OBVIATE THE UNINTENDED HARDSHIPS, SUCH AN AMENDMENT IN LAW, IN VIEW OF THE WELL SETTLED LEGAL POSITION TO THE EFFE CT THAT A CURATIVE AMENDMENT TO AVOID UNINTENDED CONSEQUENCES IS TO BE TREATED AS RETROSPECTIVE IN NATURE EVEN THOUGH IT MAY NOT STAT E SO SPECIFICALLY, THE INSERTION OF SECOND PROVISO MUST BE GIVEN RETROSPEC TIVE EFFECT FROM THE POINT OF TIME WHEN THE RELATED LEGAL PROVISION WAS INTRODUCED. IN VIEW OF ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 68 OF 82 THESE DISCUSSIONS, AS ALSO FOR THE DETAILED REASONS SET OUT EARLIER, WE CANNOT SUBSCRIBE TO THE VIEW THAT IT COULD HAVE BEE N AN 'INTENDED CONSEQUENCE' TO PUNISH THE ASSESSEE'S FOR NON DEDUC TION OF TAX AT SOURCE BY DECLINING THE DEDUCTION IN RESPECT OF RELATED PA YMENTS, EVEN WHEN THE CORRESPONDING INCOME IS DULY BROUGHT TO TAX. THAT W ILL BE GOING MUCH BEYOND THE OBVIOUS INTENTION OF THE SECTION. ACCORD INGLY, 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 DELHI HIGH COURT, IN CASE OF CIT VS ANSAL L ANDMARK TOWNSHIPS PVT LTD [(2015) 377 ITR 635 (DEL)], 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 I NSERTION OF THE SECOND PROVISO TO SECTION 40(A) (IA) OF THE ACT AND ITS CONCLUSION THAT THE SAID PROVISO IS DECLARATORY AND CURATIVE A ND HAS RETROSPECTIVE EFFECT FROM 1ST APRIL 2005, MERITS AC CEPTANCE. 15. IN THAT VIEW OF THE MATTER, THE COURT IS UNABLE TO FIND ANY LEGAL INFIRMITY IN THE IMPUGNED ORDER OF THE ITAT IN ADOP TING THE RATIO 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 CA NNOT 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 LEAST TO THE EXTENT IT DEALT WITH THE QUESTION OF ISSUANCE OF CORPORATE GUARANTEES, IS EFFECTIVE FROM 1 ST APRIL 2012. THE I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT Y EAR: 2009-10 ASSESSMENT YEAR BEFORE US BEING AN ASSESSME NT YEAR PRIOR TO THAT DATE, THE AMENDED PROVISIONS OF SECTION 92 B HAVE 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 STATED ABOVE, IN THE CONTEXT OF RETROSPECTIVE AMENDMENT, IS SPECIFICALLY IN THE CONTEXT OF TRANSFER PRICING LEG ISLATION WHICH, AS WE HAVE OBSERVED EARLIER, BEING AN ANTI-ABUSE LEGIS LATION, 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 COU RT, IN THE CASE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 69 OF 82 OF NEW SKIES SATELLITE (SUPRA), WAS NOT AVAILABLE A T THE POINT OF TIME WHEN THIS MATTER CAME UP FOR HEARING, AND WE H AD, THEREFORE, NO OCCASION TO HEAR REVENUE'S PERSPECTIV E ON THE SAME. WHILE THIS HEARING WAS CONCLUDED ON 7 TH JANUARY, 2 016, THE JUDGMENT IN NEW SKIES SATELLITE (SUPRA) WAS PRONOUN CED BY HON'BLE DELHI HIGH COURT ON 8 T H FEBRUARY, 2016. H OWEVER, AS THAT IS NOT THE DECISIVE FACTOR SO FAR AS OUR CONCL USIONS ARE CONCERNED AND IT IS ONLY AN ADDITIONAL FACTOR IN SU PPORT OF OUR CONCLUSION, THAT DOES NOT MATTER REALLY. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. 26. AS REGARDS THE GRIEVANCES RAISED BY THE ASSESSI NG OFFICER- WHICH ARE SET OUT IN THE BEGINNING OF THIS ORDER, L EARNED REPRESENTATIVES FAIRLY AGREE THAT BOTH THE ISSUES R AISED THEREIN ARE COVERED, IN FAVOUR OF THE ASSESSEE, BY DECISIONS OF THE COORDINATE BENCHES IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT Y EARS 2003-04 I.T.A. NOS. 2618 AND 2876/MUM/2014 ASSESSMENT YEAR: 2009- 10 TO 2008-09. COPIES OF THESE DECISIONS WERE PLACE D BEFORE US AT PAGES 275-297 OF THE PAPER BOOK. 27. IN VIEW OF THE ABOVE DISCUSSIONS, AND RESPECTFU LLY FOLLOWING THE COORDINATE BENCHES, WE UPHOLD THE ORDER OF THE CIT(A) ON THESE ASPECTS AND DECLINE TO INTERFERE IN THE MATTE R. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSIN G OFFICER IS DISMISSED. 29. TO SUM UP, WHILE THE APPEAL FILED BY THE ASSESS EE IS ALLOWED, THE APPEAL FILED BY THE ASSESSING OFFICER IS DISMIS SED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 31 ST DAY OF MARCH, 2016. 39. RESPECTFULLY FOLLOWING THE SAME, ASSESSEES GRO UND OF APPEAL NO.3 IS ALLOWED AND GROUNDS 1,2 4 TO 6 NEED NO ADJUDICATION. 40. AS REGARDS GROUNDS 7 AND 8, AGAINST THE DISALLO WANCE U/S 14A R.W.R 8D OF I.T. RULES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE DRAFT ASSESSMENT ORDER, THE A O DISALLOWED 0.5% OF THE AVERAGE VALUE OF INVESTMENT U/S 14A R.W. R 8D AGAINST ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 70 OF 82 WHICH, THE ASSESSEE PREFERRED ITS OBJECTIONS AND TH E DRP DIRECTED THE AO TO EXCLUDE THE INVESTMENTS MADE BY THE ASSES SEE IN ITS FOREIGN SUBSIDIARIES WHILE COMPUTING THE DISALLOWAN CE U/S 14A OF THE ACT. IT IS SUBMITTED THAT IN THE FINAL ASSESSM ENT ORDER, THE AO HAS FOLLOWED THE DIRECTIONS OF THE DRP AND ARRIVED AT THE DISALLOWANCE AT RS.3,73,750. SHE SUBMITTED THAT THE ASSESSEE HAD OWN INTEREST FREE FUNDS, OUT OF WHICH THE INVESTMEN TS WERE MADE AND THEREFORE, HAD INCURRED NO EXPENDITURE FOR EARN ING OF DIVIDEND INCOME AND HENCE NO DISALLOWANCE U/S 14A WAS CALLED FOR. FURTHER, SHE ALSO SUBMITTED THAT THE INVESTMENTS IN APGPCL W AS FOR THE PURPOSE OF OBTAINING POWER AT A SUBSIDIZED RATE AND THAT APGPCL DOES NOT DECLARE ANY DIVIDENDS TO ITS SHAREHOLDERS AS THE INCENTIVE OF DIVIDEND IS ALREADY PROVIDED IN THE FORM OF SUBS IDIZED RATES OF POWER. IT IS FURTHER SUBMITTED THAT THE BENEFIT OF SUBSIDIZED RATE OF POWER IS TAXED IN THE HANDS OF THE COMPANY BY WAY O F ENHANCED BUSINESS INCOME/PROFIT. THUS, ACCORDING TO HER, THE ASSESSEES INVESTMENT OF RS.1,60,00,000 SHOULD BE EXCLUDED FRO M THE INVESTMENTS FOR CALCULATIONS OF DISALLOWANCE UNDER RULE 8D(III) OF THE I.T. RULES. 41. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. 42. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS EARNED DIV IDEND INCOME AND THE A.Y BEING 2011-12 THE PROVISIONS OF RULE 8D R.W.S 14A ARE APPLICABLE. THE ONLY QUESTION TO BE CONSIDERED NOW IS WHETHER THE INVESTMENT IN APGPCL IS TO BE EXCLUDED WHILE COMPUT ING THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 71 OF 82 DISALLOWANCE U/R 8D(III) OF THE ACT. THE ASSESSEES CONTENTION THAT APGPCL DOES NOT DECLARE DIVIDEND TO ITS SHAREHOLDE RS AND FURTHER THAT THE BENEFIT OF SUBSIDIZED RATE OF POWER IS TAX ED IN THE HANDS OF THE COMPANY HAS NOT BEEN VERIFIED BY THE AUTHORITIE S BELOW. THE BENEFIT DERIVED BY THE ASSESSEE BY VIRTUE OF THE IN VESTMENT IS NOT DIVIDEND INCOME BUT IS SUBSIDIZED RATE OF POWER. TH IS SUBSIDY IS NOT EXEMPT FROM TAX. FURTHER, IF THE BENEFIT HAS RESULTE D IN ENHANCED BUSINESS INCOME/PROFITS AND HAS BEEN TAXED, THEN, N O DISALLOWANCE U/S 14A R.W.R. 8D CAN BE MADE. THEREFORE, THIS LIMI TED ISSUE IS REMITTED TO THE FILE OF THE AO TO VERIFY THE CONTEN TION OF THE ASSESSEE AND EXCLUDE THE INVESTMENT IF THE ASSESSEES CONTEN TION IS FOUND TO BE CORRECT. THUS, GROUNDS NO. 7 & 8 ARE PARTLY ALLO WED. 43. GROUND NO.9 IS NOT PRESSED AT THE TIME OF HEARI NG AS IT IS SUBMITTED THE CONSEQUENTIAL RELIEF WILL BE GIVEN WHILE GIVING EFFECT TO THE ORDERS OF THE COURTS. HENCE REJECTED AS NOT PRESSED. 44. GROUND NO.10, IN OUR OPINION, NEEDS TO BE SET A SIDE TO THE FILE OF THE AO TO VERIFY THE CLAIM IN TERMS OF THE ITR FORM FILED BY THE ASSESSEE AND AO IS DIRECTED TO GIVE RELIEF, IF ANY, TO THE ASSESSEE IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING. GROUND NO.10 IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 45. SIMILARLY, GROUNDS 11, 12 & 13 ALSO NEED FACTUA L VERIFICATION BY THE AO. ACCORDINGLY, THESE GROUNDS ARE SET ASIDE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION IN ACC ORDANCE WITH LAW. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 72 OF 82 46. GROUND NO.14 AGAINST INITIATION OF PENALTY PROC EEDINGS U/S 271(1)(C) OF THE ACT IS REJECTED AS IT IS A PRE MATURE GROUND. 47. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NO.434/HYD/2016 REVENUES APPEAL (A.Y 2011-12) 48. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED DRP ERRED IN LAW AND ON FACTS OF THE CASE. 2. THE LEARNED DRP ERRED IN DIRECTING THE AO TO ADOPT CHARGING FEES @ 1.75% INSTEAD OF 2% TOWARDS CORPORATE GUARANTEE WITHOUT CONSIDERING UPFRONT FEES AND CREDIT RATING WHICH COMES TO 2% . 49. WE FIND THAT WHILE DEALING WITH ASSESSEES GROU ND OF APPEAL NO.3, WE HAVE ALREADY HELD THAT FOR THE RELE VANT A.Y, CORPORATE GUARANTEE CANNOT BE TREATED AS AN INTERNA TIONAL TRANSACTION. THEREFORE, THE REVENUES GROUND IS LIA BLE TO BE REJECTED. 50. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO.344/HYD/2015- A.Y 2010-11 (ASSESSEES APPEAL) 51. IN THIS APPEAL, THE ASSESSEE, RAIN INDUSTRIES L TD HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: TRANSFER PRICING ('TP') MATTERS 1. REJECTING THE SUBMISSIONS OF THE COMPANY AND MAKING TP ADJUSTMENTS TO THE FOLLOWING INTERNATIONA L TRANSACTIONS WITH ASSOCIATED ENTERPRISE ('AE'): ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 73 OF 82 INTEREST ON FUNDS TO WHOLLY OWNED SUBSIDIARY ('WOS' ) - RS.L,87,20,952; FEE ON SHAREHOLDERS CORPORATE GUARANTEE TO BANK - RS. 7,98,52,500. GROUND SPECIFIC TO TP ADJUSTMENT ON INTEREST ON FUNDS ADVANCED TO WOS 2. NOT APPRECIATING THE FACT THAT THE WOS WAS SET UP AS A SPECIAL PURPOSE VEHICLE (' SPV') FOR GLOBAL ACQUIS ITION AND THE FUNDS WERE PROVIDED AS A MATTER OF COMMERCIAL EXPEDIENCY TO FUND THE ACQUISITION. 3. NOT APPRECIATING THE FACT THAT THE ACQUISITION R ESULTED IN BENEFIT AND EXPANSION OF THE ASSESSEE'S BUSINESS . 4. DISCRIMINATING THE US WAS BY DETERMINING THE ALP FOR FUNDS PROVIDED AS LOANS VIS-A VIS SIMILAR LOANS PROVIDE D BY PARENT COMPANY TO INDIAN SUBSIDIARIES IN VIOLATI ON OF ARTICLE 26 OF INDIA - US DOUBLE TAXATION AVOIDANCE AGREEMENT. ('DTAA'). GROUND SPECIFIC TO TP ADJUSTMENT ON SHAREHOLDER CORPORATE GUARANTEE 5. MAKING ADJUSTMENT ON THE SHAREHOLDERS CORPORATE GUARANTEE PROVIDED TO BANK, WITHOUT APPRECIATING THE FACT THAT WOS WAS SET UP AS A SPV FOR ACQUISITION OF BUSINESS IN USA. 6. NOT APPRECIATING THAT THE SHAREHOLDERS CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION U/S 92B OF THE ACT. 7. NOT APPRECIATING THAT THE AMENDMENT TO SECTION 9 2B WOULD NOT APPLY TO THE FACTS OF THE CASE. 8. DISCRIMINATING THE US WAS BY DETERMINING THE ALP FOR SHAREHOLDER CORPORATE GUARANTEE VIS-A-VIS SIMILAR SHAREHOLDER CORPORATE GUARANTEE PROVIDED BY PARENT COMPANY TO INDIAN SUBSIDIARIES IN VIOLATION OF ARTI CLE 26 ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 74 OF 82 OF INDIA - US DOUBLE TAXATION AVOIDANCE AGREEMENT. ('DTAA'). 9. NOT MAKING ADJUSTMENTS FOR THE DIFFERENCES IN TH E COMPARABLE TRANSACTIONS SELECTED VISA-VIS SHAREHOLDE RS CORPORATE GUARANTEE PROVIDED BY THE APPELLANT. 10. NOT UNDERTAKING AN OBJECTIVE ANALYSIS FOR DETERMINING THE ALP ON THE SHAREHOLDER CORPORATE GUARANTEE AND DETERMINING 2% FEE BASED ON DIFFERENTIAL INTEREST RATES ON VARIOUS BONDS IN INDIA. 11. WITHOUT PREJUDICE TO THE GROUND THAT NO GUARANTE E FEE SHALL BE CHARGED, THE HON'BLE DRP ERRED IN NOT CONSIDERING THE HON'BLE DRP'S DIRECTIONS IN CASE OF THE ASSESSEE FOR THE A Y 2009-10, WHEREIN THE GUARANTEE FEE WAS DETERMINED AT 1.25%. 12. WITHOUT PREJUDICE, NOT DETERMINING THE GUARANTEE FEE ONLY ON THE AMOUNT OF OUTSTANDING LOAN. CORPORATE TAX MATTER 13. NOT PROVIDING CREDIT OF TCS OF RS. 35,96,567/-. 14. LEVY OF INTEREST U/S 234B ON TP ADJUSTMENTS ARI SING OUT OF RETROSPECTIVE AMENDMENT IN THE ACT. 15. INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 52. AS REGARDS GROUNDS 2 TO 4 ARE CONCERNED, THE BR IEF FACTS ARE THAT THE ASSESSEE HAD ENTERED INTO VARIOUS INTE RNATIONAL TRANSACTIONS WITH ITS AE AND DETERMINATION OF ALP W AS REFERRED TO THE TPO. FROM THE ANNUAL REPORT OF THE ASSESSEE, THE TPO NOTICED THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOAN TO I TS SUBSIDIARY, RAIN COMMODITIES (USA) INC. AND THE AMOUNT OUTSTANDING A S ON 31.3.2010 WAS RS.138,11,64,534 BUT THE ASSESSEE HAS NOT SHOWN THIS AS AN INTERNATIONAL TRANSACTION IN ITS T.P. DO CUMENTATION. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 75 OF 82 THEREFORE, THE TPO PROCEEDED TO CONDUCT THE ANALYSI S UNDER CUP METHOD AND CONCLUDED THAT THE AVERAGE COST OF BORRO WED FUNDS TO THE ASSESSEE WAS 10.85%, ON THE TOTAL SECURED AND U NSECURED LOANS AND HELD THAT HAD THE TAX PAYER NOT ADVANCED LOANS TO ITS AE, IT WOULD HAVE SAVED THE INTEREST COST. THEREFORE, HE W AS OF THE OPINION THAT THE COST OF THE FUNDS GIVEN AS LOAN BY THE TAX PAYER TO ITS AE WILL BE THE COST OF FUNDS TO THE TAXPAYER PLUS SOME REAS ONABLE AMOUNT OF RETURN BASED ON THE RISK ASSOCIATED WITH THE LENDIN G. FURTHER, HE WAS ALSO OF THE OPINION THAT SIZE OF THE BORROWER A LSO HAS A BEARING ON THE COST OF THE BORROWINGS. TAKING ALL THESE FAC TORS INTO CONSIDERATION, THE TPO COMPUTED THE ALP INTEREST RA TE ON THE LOAN ADVANCED BY THE ASSESSEE TO ITS AE AT 13.85% AND SUG GESTED THE SHORTFALL TO BE BROUGHT TO TAX. ACCORDINGLY, DRAFT ASSESSMENT ORDER WAS PROPOSED AGAINST WHICH THE ASSESSEE FILED ITS O BJECTIONS BEFORE THE DRP. THE DRP CONFIRMED THAT INTEREST IS TO BE C HARGED ON THE LOAN ADVANCED BY THE ASSESSEE TO ITS AE, BUT DIRECT ED THE AO TO ADOPT LIBOR + 200 BASIS POINTS FOR THE TP ADJUSTMEN T. THE FINAL ASSESSMENT ORDER WAS PASSED ACCORDINGLY. THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 53. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED ITS SUBMISSIONS BEFORE THE AUTHORITIES BELOW, WHILE THE LEARNED DR SUPPORTED THEIR ORDERS. 54. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE DRP HAS FOLLOWED THE DE CISIONS OF THIS TRIBUNAL IN THE CASE OF M/S. FOURSOFT LTD (TS-518, I NCOME TAX APPELLATE TRIBUNAL-2011(HYD) AND SIVA INDUSTRIES & HOLDINGS LTD (2011-TII-67-INCOME TAX APPELLATE TRIBUNAL-MAD-TP) TO HOLD THAT IT ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 76 OF 82 IS AN INTERNATIONAL TRANSACTION AND TO ADOPT LIBOR AS THE RATE OF INTEREST FOR T.P. ADJUSTMENT. 55. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCHES OF THIS TRIBUNAL (CITED SUPRA), WE SEE NO R EASON TO INTERFERE WITH THE DIRECTIONS OF THE DRP. GROUNDS 2 TO 4 ARE ACCORDINGLY REJECTED. 56. AS REGARDS GROUNDS 5 TO 12 AGAINST CORPORATE GU ARANTEE, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORDINATE BENCH AT MUMBAI IN THE C ASE OF SIRO CLINPHARM PVT LTD WHEREIN IT WAS HELD THE CORPORATE GUARANTEE WAS NOT INTERNATIONAL TRANSACTION PRIOR TO THE AMENDMEN T OF SECTION 92B BY THE FINANCE ACT OF 2012. THUS, GROUND OF APPEAL N O.6 IS ALLOWED AND OTHER GROUNDS 5 & 7 TO 12 ARE NOT ADJUDICATED A T THIS STAGE. 57. AS REGARDS GROUND NO.13, WE FIND THAT THE DRP H AD DIRECTED THE AO TO VERIFY THE ASSESSEES CLAIM, BUT AO HAS FAILED TO DO SO WHILE PASSING THE FINAL ASSESSMENT ORDER. AO IS DIRECTED TO FOLLOW THE DIRECTIONS OF THE DRP WHILE GIVING EFFECT TO TH IS ORDER. 58. GROUND NO.14 IS AGAINST LEVY OF INTEREST U/S 23 4B OF THE ACT ON T.P. ADJUSTMENT IS REMITTED TO THE FILE OF T HE AO TO GIVE CONSEQUENTIAL RELIEF, IF ANY, TO THE ASSESSEE. 59. GROUND NO.15 IS AGAINST INITIATION OF PENALTY U /S 271(1)(C) OF THE ACT IS REJECTED AS IT IS A PREMATU RE GROUND OF APPEAL. 60. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 77 OF 82 ITA NO.315/HYD/2015 (REVENUES APPEAL) 61. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS GIVEN BELOW: 1. THE LEARNED DRP ERRED IN LAW AND ON FACTS OF THE CASE. 2. THE HON'BLE DRP OUGHT NOT HAVE DIRECTED THE TPO/AO TO ADOPT LIBOR RATE FOR THE CALCULATION OF INTEREST CHARGEABLE ON THE LOANS ADVANCED BY THE ASSESSEE TO ITS AES IN USA. 3. THE HON'BLE DRP OUGHT TO HAVE APPRECIATED THAT THE LIBOR PLUS CANNOT BE TAKEN AS THE BASE FOR THE PURPOSE OF TP ADJUSTMENT IN RESPECT OF INTEREST ON LOAN ADVANCED TO THE AE FOR THE INTERNATIONAL TRANSACTIONS IN VIEW OF THE LATEST FRAUDS REGARDING THE L:IBOR SINCE BARCLAYS BANK AND UBS WERE FINED BY THE UNITED STATES DEPARTMENT OF JUSTICE FOR ATTEMPTED MANIPULATION OF THE LIBOR AND EURIBOR RATES AND ULTIMATELY UBS AGREED TO PAY TO REGULATORS. 62. SINCE, WE HAVE ALREADY UPHELD THE DIRECTIONS OF THE DRP WHILE DEALING WITH GROUND NOS. 2 TO 4 OF THE ASSESS EES APPEAL, THESE GROUNDS OF THE REVENUE ARE REJECTED. 63. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ITA NO.260/HYD/2016-A.Y 2011-12 (ASSESSEES APPEAL) 64. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: TRANSFER PRICING ('TP') MATTERS 1. REJECTING THE SUBMISSIONS OF THE COMPANY AND MAKING TP ADJUSTMENTS TO THE FOLLOWING INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISE ('AE'): ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 78 OF 82 INTEREST ON FUNDS TO WHOLLY OWNED SUBSIDIARY ('WOS') - RS. 1,95,52,086/-; FEE ON SHAREHOLDERS CORPORATE GUARANTEE TO BANK - RS. 8,16,88,110/-. GROUND SPECIFIC TO TP ADJUSTMENT ON INTEREST ON FUNDS ADVANCED TO WOS 2. NOT APPRECIATING THE FACT THAT THE WOS WAS SET UP AS A SPECIAL PURPOSE VEHICLE ('SPV') FOR GLOBAL ACQUISITION AND THE FUNDS WERE PROVIDED AS A MATTER OF COMMERCIAL EXPEDIENCY TO FUND THE ACQUISITION. 3. NOT APPRECIATING THE FACT THAT THE ACQUISITION RESULTED IN BENEFIT AND EXPANSION OF THE ASSESSEE'S BUSINESS. 4. DISCRIMINATING THE US WOS BY DETERMINING THE ALP FOR FUNDS PROVIDED AS LOANS VIS-A VIS SIMILAR LOANS PROVIDED BY PARENT COMPANY TO INDIAN SUBSIDIARIES IN VIOLATION OF ARTICLE 26 OF INDIA - US DOUBLE TAXATION AVOIDANCE AGREEMENT. ('DTAA'). 5. WITHOUT PREJUDICE TO THE ABOVE, THE INTEREST RATE ON FOREIGN CURRENCY LOAN TO AE IN USA SHOULD BE DETERMINED BY BENCHMARKING WITH COMPARABLE FOREIGN CURRENCY LOAN (I.E., AT LIBOR PLUS). 6. THE DRP ERRED IN NOT CONSIDERING ITS OWN DIRECTIONS IN THE COMPANY'S CASE FOR THE 2009-10 AND A Y 2010-11 WHEREIN THERE WERE SIMILAR FACTS OF THE CASE. GROUND SPECIFIC TO TP ADJUSTMENT ON SHAREHOLDER CORPORATE GUARANTEE 7. MAKING ADJUSTMENT ON THE SHAREHOLDERS CORPORATE GUARANTEE PROVIDED TO BANK ON BEHALF OF THE WOS, WITHOUT APPRECIATING THE ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 79 OF 82 FACT THAT WOS WAS SET UP AS A SPV FOR ACQUISITION OF BUSINESS IN USA. 8. NOT APPRECIATING THAT THE SHAREHOLDERS CORPORATE GUARANTEE IS NOT COVERED UNDER THE DEFINITION OF INTERNATIONAL TRANSACTION U/S 92B OF THE ACT. 9. NOT APPRECIATING THAT THE AMENDMENT TO SECTION 92B WOULD NOT APPLY TO THE FACTS OF THE CASE. 10. ADOPTING A RATE OF 1.75% BASED ON THE FEE CHARGED FROM THE LOCAL BANKS, WITHOUT APPRECIATING THAT THE GUARANTEE GIVEN IS A SHAREHOLDER CORPORATE GUARANTEE AS OPPOSED TO COMMERCIAL BANK GUARANTEE. 11. DETERMINING THE GUARANTEE FEE ON THE ENTIRE AMOUNT OF LOAN GUARANTEED INSTEAD OF THE ACTUAL AMOUNT OF LOAN AVAILED BY THE AE. 12. THE HON'BLE DRP ERRED IN NOT CONSIDERING ITS OWN DIRECTIONS IN THE COMPANY'S OWN CASE FOR THE A Y 2009-10 AND ALSO, THE ORDER OF HON'BLE CIT(A) IN THE COMPANY'S OWN CASE FOR A Y 2008-09, WHEREIN THE GUARANTEE FEE WAS DETERMINED AT 1.25%. CORPORATE TAX MATTERS 13. NOT PROVIDING CREDIT OF TDS OF RS. 53,71,764/-. 14. NOT PROVIDING CREDIT OF ADVANCE TAX OF RS. 50,00,000/-. 15. NOT PROVIDING THE FOREIGN TAX CREDIT CLAIMED U/S 90 OF THE ACT, AMOUNTING TO RS.1,14,66,741/-. 16. NOT PROVIDING CREDIT FOR ADJUSTMENT MADE TO CURRENT YEAR'S DEMAND TO THE TUNE OF RS. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 80 OF 82 3,20,33,679/-, WHICH WAS ADJUSTED WITH THE REFUND OF AY 2010-11. 17. ERRONEOUS CALCULATION OF INTEREST U/S 234D OF THE ACT. 18. INITIATING PENALTY PROCEEDINGS U/S 271 (L)(C) OF THE ACT. 65. IT IS SEEN THAT GROUND 1 IS GENERAL IN NATURE A ND NEEDS NO ADJUDICATION. 66. GROUNDS 2 TO 6 ARE AGAINST THE ALP ADJUSTMENTS TOWARDS INTEREST ON FUNDS ADVANCED TO WHOLLY OWNED SUBSIDIARY. WE FIND THAT THESE GROUNDS ARE SAME AS GROUNDS 2 TO 4 IN ITA NO.344/HYD/2015 AND FOR THE DETAILED REASONS GIVEN THEREIN, THESE GROUNDS ARE REJECTED. 67. GROUNDS 7 TO 12 ARE AGAINST THE ALP ADJUSTMENT ON SHAREHOLDER CORPORATE GUARANTEE AND ARE SIMILAR TO ASSESSEES GROUNDS 5 TO 12 IN ITA NO.344/HYD/2015. FOR THE DET AILED REASONS GIVEN THEREIN, THE GROUND NO.8 IS ALLOWED AND OTHER GROUNDS ARE NOT ADJUDICATED AT THIS STAGE. 68. GROUNDS 13 TO 17 NEED FACTUAL VERIFICATIONS BY THE AO. THEREFORE, THEY ARE REMITTED TO THE FILE OF THE AO FOR VERIFICATION AND CONSEQUENTIAL RELIEF, IF ANY, TO THE ASSESSEE IN AC CORDANCE WITH LAW. 69. GROUND NO.18 IS AGAINST INITIATION OF PENALTY U /S 271(1)(C) OF THE ACT IS PREMATURE AND IS ACCORDINGL Y REJECTED. 70. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 81 OF 82 ITA NO.433/HYD/2016 (A.Y 2011-12) REVENUES APPEAL 71. GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE LEARNED DRP ERRED IN LAW AND ON FACTS OF THE CASE. 2. THE LEARNED DRP ERRED IN DIRECTING THE AO TO ADOPT CHARGING FEES @ 1.75% INSTEAD OF 2% TOWARDS CORPORATE GUARANTEE WITHOUT CONSIDERING UPFRONT FEES AND CREDIT RATING WHICH COMES TO 2%. 3. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TIME OF HEARING. 72. WE FIND THAT WHILE DEALING WITH THE ASSESSEES GROUND OF APPEAL NO.8, WE HAVE ALREADY HELD THAT FOR THE RELE VANT A.Y, CORPORATE GUARANTEE IS NOT AN INTERNATIONAL TRANSAC TION U/S 92B OF THE ACT. THEREFORE, THE REVENUES APPEAL ALSO HAS N O MERIT. 73. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 74. TO SUM UP, ASSESSEES APPEALS ARE PARTLY ALLOWE D & REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 26 TH APRIL, 2017. VINODAN/SPS ITA NOS 2 22 309 OF 2014 RAIN GROUP CASES PAGE 82 OF 82 COPY TO: 1 RAIN CEMENTS LTD, RAIN CENTER, 34 SRINAGAR COLONY , HYDERABAD 500073 2 DCIT, CIRCLE 3(1) 7 TH FLOOR, I.T. TOWERS, HYDERABAD 3 D.R.P. HYDERABAD 4 ADDL.CIT(TP), HYDERABAD 5 DIRECTOR OF INCOME TAX (I.T. & T.P) HYDERABAD 6 CIT-III HYDERABAD 7 THE DR, ITAT HYDERABAD 8 GUARD FILE BY ORDER