NCC Limited, Hyderabad V. Asst. Commissioner of Income Tax, Central Circle-1(1), Hyderabad

ITA 435/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8457 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 16-07-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 01-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA KUM
• Assessee Lawyers: C S SUBRAMANYAM
• Keywords: Transfer pricing; International transaction; Retrospective amendment
• Section: 92B; 113; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 1719/HYD/16 2012-13 NCC LIMITED, HYDERABAD [PAN: AAACN7335C] ASST.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(1), HYDERABAD 435/HYD/18 2013-14 2154/HYD/18 2014-15 ASST.COMMISSIONER OF INCOME TAX, CIRCLE-16(1), HYDERABAD FOR ASSESSEE : SHRI C.S.SUBRAMANYAM , AR FOR REVENUE : S HRI RAJENDRA KUM AR , CIT - DR DATE OF HEARING : 16 - 0 7 - 20 2 1 DATE OF PRONOUNCEMENT : 19 - 0 8 - 2021 O R D E R PER S.S.GODARA, J.M. : THESE THREE ASSESSEES APPEALS FOR AYS.2012-13, 2013 -14 & 2014-15 ARISE AGAINST THE ACIT, CENTRAL CIRCLE-1(1) & CIRCLE- 16(1), HYDERABADS ASSESSMENT(S) DATED 28-11-2016, FRAMED IN FURTHERANCE TO THE DISPUTE RESOLUTION PANEL (DRP)-1, BENGALURUS DIRECTIONS DT.31-10-2016 (AY.2012-13) AND CIT(A)-4, HYDERABADS SEPARATE ORDERS DT.07-12-2017 P ASSED IN CASE NO.0059/2017-18/ACIT,CC-1(1)/CIT(A)-4/HYD/1 7-18 FOR AY.2013-14 AND DT.20-07-2018 IN CASE NO.10185/20 17- 18/ACIT,CIR.16(1)/CIT(A)-4/HYD/18-19 FOR AY.2014-15 INVOLVING PROCEEDINGS U/S.143(3) R.W.S.144C IN FIRS T AND FOREMOST AND U/S.143(3) R.W.S.92CA(3) OF THE INCOME T AX ACT, ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 2 -: 1961 [IN SHORT, THE ACT] IN LATTER TWIN ASSESSMENT YE ARS; RESPECTIVELY. HEARD BOTH THE PARTIES. CASE FILES PERUSED. 2. IT TRANSPIRES AT THE OUTSET THAT ITA NO.2154/HYD/2018 (AY.2014-15) SUFFERS FROM 24 DAYS DELAY IN FILING, STATED TO BE ATTRIBUTABLE TO THE REASON(S) BEYOND ITS CONTROL AS PER CONDONATION PETITION/AFFIDAVIT. NO REBUTTAL HAS COME FROM THE DEPARTMENTAL SIDE. THE IMPUGNED DELAY IS CONDONED THEREFORE. 3. WE NEXT NOTICE THAT THE ASSESSEES IDENTICAL SOLE SUBSTANTIVE GRIEVANCE AS PER THE MAIN AS WELL AS ADDI TIONAL GROUNDS IN ALL THESE APPEALS CHALLENGES CORRECTNESS OF LEARNED LOWER AUTHORITIES ACTION MAKING ARMS LENGTH PRICE ( ALP) ADJUSTMENT(S) OF RS.26,76,17,306/-, RS.18,77,00,000/ - AND RS.21,35,60,000/-; ASSESSMENT YEAR-WISE, RESPECTIVELY REGARDING ITS CORPORATE GUARANTEE(S). 4. LEARNED COUNSEL VEHEMENTLY CONTENDED DURING THE COURSE OF HEARING THAT THE AUTHORITIES BELOW HAVE ERRE D IN LAW AND ON FACTS IN MAKING THE IMPUGNED ALP ADJUSTMENTS INVOLVING VARYING SUMS OF MONEY. HE SOUGHT TO BUTTRESS THE POINT THAT SUCH A CORPORATE GUARANTEE IS PURELY A SHAREH OLDER ACTIVITY NOT FORMING ANY INTERNATIONAL TRANSACTION U/S. 92B OF THE ACT SO AS TO TRIGGER CHAPTER-X MECHANISM IN MOTION. HE ALSO INVITED OUR ATTENTION TO THE LEGISLATIVE AMENDMENT V IDE FINANCE ACT, W.E.F.01-04-2002 AND PINPOINTED THAT THE FIRST AND FOREMOST ASSESSMENT YEAR HEREIN IS AY.2012-13 WHE REAS THE FOREGOING EXPLANATION IS ONLY PROSPECTIVELY APPLI CABLE FROM AY.2013-14 ONWARDS FOR LATTER TWIN ASSESSMENT YEARS. ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 3 -: LEARNED COUNSEL HAS ALSO FILED WRITTEN SUBMISSIONS TO THE FOLLOWING EFFECT: FOR ALL THE ABOVE THREE YEARS THE COMMON GROUND BE FORE THE HON'BLE ITAT IS, ADDITION ON ACCOUNT OF TRANSFER PRICING AD JUSTMENT TOWARDS CORPORATE GUARANTEE FEE. NCC LTD, THE PARENT PROVID ED CORPORATE GUARANTEE TO THE BANKERS OF THE OVERSEAS SUBSIDIARY COMPANIES. THESE CORPORATE GUARANTEES ENABLED SUBSIDIARY COMPA NIES TO RAISE LOAN FUNDS TO MEET THE WORKING CAPITAL REQUIREMENTS OF THE SUBSIDIARIES IN THE RESPECTIVE COUNTRIES. THE TPO FOR ALL THE ASSESSMENT YEARS TOOK OBJECTION TO THE PROVISION OF CORPORATE GUARANTEE TO THE OVERSEAS SUBSIDIARIES WI THOUT A FEE. A TP ADJUSTMENT OF 0.53% OF THE CORPORATE GUARANTEES PRO VIDED TO THE SUBSIDIARIES WAS ADDED TO THE TOTAL INCOME OF NCC L TD. (FOR AY 2012- 13 A HIGHER ADDITION WAS MADE WHICH WAS SUBSEQUENTL Y CORRECTED BY THE LEARNED DRP AND BROUGHT IT TO 0.53%) PRAYER THE TP ADDITION IS PRAYED FOR DELETION FOR ALL THE ABOVE THREE ASSESSMENT YEARS ON THE TWO FOLLOWING GROUNDS. 1. PROVISION OF CORPORATE GUARANTEE IS NOT AN INTERNAT IONAL TRANSACTION U/S.92B, PRIOR TO AND AFTER THE AMENDME NT TO SEC.92B BY THE FINANCE ACT 2012. 2. THE ACTIVITY OF PROVIDING CORPORATE GUARANTEE TO TH E SUBSIDIARY BY THE PARENT COMPANY IS A SHAREHOLDERS ACTIVITY WH ICH IS TO BE EXCLUDED FROM THE PURVIEW OF THE TRANSFER PRICING R EGULATIONS. INTERNATIONAL TRANSACTION THE ABOVE ADJUSTMENT ARISING ON ACCOUNT OF PROVISIO N OF CORPORATE GUARANTEE TO THE OVERSEAS SUBSIDIARIES WAS SUBJECT MATTER OF NUMBER OF APPEALS DECIDED BY THE HON'BLE TRIBUNAL, THE COR PORATE GUARANTEE PROVIDED BY THE NCC LTD TO THE BANKERS OF THE SUBSI DIARIES IS A KIND OF A CONTINGENT ASSURANCE TO THE BANKERS THAT IN CA SE THE SUBSIDIARY DEFAULTS TO HONOR THE OBLIGATIONS, THE PARENT SHALT STEP INTO THE SHOES OF SUBSIDIARY AND HONOR THE OBLIGATIONS TOWARDS THE BANK. THIS KIND OF PARENT COMPANY GUARANTEE IS GIVEN TO ENABLE THE SUBSIDIARY TO RAISE FUNDS TO ORGANISE ITS BUSINESS. AS PER EXPLAN ATION C TO SEC.92B A TRANSACTION OF CORPORATE GUARANTEE IS CONSIDERED AS AN INTERNATIONAL TRANSACTION. THE OPERATING PORTION OF SUB-SECTION 1 REQUIRES THAT SUCH TRANSACTIONS SHOULD HAVE BEARING ON THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. NCC LTD HAS NOT CHARG ED ANY FEE ON ACCOUNT OF THIS TRANSACTION TO ITS SUBSIDIARY NOR N CC LTD HAS INCURRED ANY EXPENDITURE TOWARDS ISSUING SUCH LETTER OF GUAR ANTEE. BY PROVIDING SUCH GUARANTEE THE SUBSIDIARY CAN ENJOY T HE LOAN FACILITIES EXTENDED BY THE BANK. AS THE CONDITION PRECEDENT TO QUALIFY AS AN ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 4 -: INTERNATIONAL TRANSACTION OF HAVING IMPACT ON THE P ROFIT AND LOSS ACCOUNT FAILED, THE PROVISION OF CORPORATE GUARANTE E DOES NOT FIT INTO THE DEFINITION OF INTERNATIONAL TRANSACTION BEFORE THE AMENDMENT TO SEC.92B BY FINANCE ACT 2012 OR AFTER SUCH AMENDMENT . HENCE, ADJUSTMENT FOR ALL THE THREE YEARS IN DISPUTE IS UN JUST AND SHOULD BE DELETED. SHAREHOLDERS ACTIVITY THE PARENT COMPANY NCC LTD HAD MADE A CONTRIBUTION TOWARDS THE CAPITAL OF OVERSEAS SUBSIDIARIES. AS THE SHAREHOLDE R OF THE OVERSEAS SUBSIDIARIES OF NCC LTD IS ALSO OBLIGED TO PROVIDE NECESSARY CAPITAL TO CARRYON THE BUSINESS ACTIVITIES BY THE SUBSIDIARY. NCC LTD AS THE SHAREHOLDER SHOULD EITHER CONTRIBUTE OR ENABLE A LI NE OF CREDIT BEING AVAILABLE TO THE OVERSEAS SUBSIDIARIES. THIS KIND O F ACTIVITY IS RECOGNISED AS SHAREHOLDERS ACTIVITY TOWARDS ITS SUB SIDIARIES BECAUSE IT IS CONSIDERED NECESSARY SOLELY BECAUSE OF THE OW NERSHIP INTEREST. THE OECD TRANSFER PRICING GUIDELINES RECOGNISES THA T AN ACTIVITY IN THE NATURE OF SHAREHOLDERS ACTIVITY WOULD NOT JUSTI FY A CHARGE TO THE RECEPIENT COMPANIES. ACCORDINGLY A SHAREHOLDER ACTI VITY IS TAKEN OUT OF THE AMBIT OF GROUP SERVICES. IF THE PARENT COMPANY FAILS TO ORGANISE ENOUGH LOAN FUNDS TO THE OVERSEAS SUBSIDIARIES, IT HAS TO CONTRIBUTE CAPITAL AS A SHAREHOLDER TO THE OVERSEAS ENTITY, TO PROVIDE ADEQUATE RESOURCES, TO ENABLE THE OVERSEAS SUBSIDIARY TO CARRYON THE BUSINESS. HENCE, THE NATURE OF ACTIVITY OF PROVISION OF CORPORATE GUARANTEE TO THE OVERSEAS SUBSIDIARY IS A SHAREHOLDER ACTIVITY. WE PRAY THE HON'BLE TRIBUNAL TO TAKE THE ABOVE SUBM ISSION ON RECORD AND KINDLY DELETE THE ADDITION ON ACCOUNT OF TRANSF ER PRICING ADJUSTMENT. 5. WE FIND NO MERIT IN THE ASSESSEES FOREGOING CONTEN TIONS. THERE IS NO DISPUTE THAT THIS TRIBUNALS VARIOUS EARLIE R CO- ORDINATE BENCH DECISIONS (2015) 63 TAXMANN.COM 353 (A HD- TRIB), MICRO INK LTD VS. ACIT, BHARTI AIRTEL LTD., VS. ADDL.CIT, (2014) 63 SOT 113 (DELHI) AND (2017) 86 TAXMANN.COM 254 (HYD) BARTRONICS INDIA LTD, VS. DCIT HAD INDEED HELD A CORPORATE GUARANTEE TO BE PURELY A SHAREHOLDER ACTIVIT Y THAN FORMING AN INTERNATIONAL TRANSACTION U/S.92B OF THE ACT . THIS LEGAL PROPOSITION IS NO MORE RES INTEGRA IN VIEW OF THE PCIT VS. M/S.REDINGTON (INDIA) LIMITED, TCA NOS.590 & 591 OF 2019, ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 5 -: DT.10-12-2020 (MADRAS) TAKING NOTE OF NOT ONLY THE FOREG OING LEGISLATIVE POSITIONS (SUPRA) BUT ALSO HOLDING THAT THE SAME CARRIED RETROSPECTIVE EFFECT AS WELL. THEIR LORDSHIPS DETAILED DISCUSSION TO THIS EFFECT READS AS UNDER: 67.THE NEXT ISSUE IS WITH REGARD TO THE CORPORATE GUARANTEE AND BANK GUARANTEE. 68.FROM THE ANNUAL REPORT OF THE ASSESSEE, IT WAS S EEN THAT THE ASSESSEE HAD ISSUED GUARANTEES ON BEHALF OF ITS SUB SIDIARIES TO THE TUNE OF RS.464.36 CRORES AND ON BEHALF OF OTHERS, T O THE TUNE OF RS.3.42 CRORES. THE ASSESSEE WAS CALLED TO EXPLAIN THE SAME. THE ASSESSEE STATED THAT THEY HAD NOT ISSUED ANY FRESH GUARANTEE DURING THE ASSESSMENT YEAR 2009-10 AND THE GUARANTEE IS OU TSTANDING, IS PURELY ON ACCOUNT OF THE CURRENCY TRANSITION ADJUST MENT ON RESTATEMENT OF GUARANTEES OUTSTANDING AT THE CLOSIN G RATES PREVAILING ON 31ST MARCH 2009 FOR DISCLOSURE IN FINANCIAL STAT EMENT IN COMPLIANCE WITH THE ACCOUNTING STANDARDS. FURTHER, THE ASSESSEE STATED THAT THE OUTSTANDING GUARANTEE ISSUED BY THE ASSESSEE AS ON 31.03.2009 REPRESENTS GUARANTEE ISSUED ON BEHALF OF THE OVERSEAS SUBSIDIARIES IN EARLIER YEARS. FURTHER, THEY STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE RELEVANT AS SESSMENT YEARS, THE TPO MADE ADDITION TO THE CORPORATE GUARANTEE IS SUED DURING THOSE YEARS BY ADOPTING THE BENCH MARK RATE BASED O N THE AVAILABLE INTERNAL COMPARABLE UNCONTROLLED PRICE CHARGED BY T HE BANK AT 0.85%. THE ASSESSEE ALSO ISSUED CORPORATE GUARANTEE IN FAV OUR OF M/S.PARAMPARA WEDDING CADS AND M/S. BASKAR DIGITAL PRESS. THE TPO AFTER TAKING NOTE OF THE AMENDED SECTION 92B, W HICH WAS INTRODUCED WITH RETROSPECTIVE EFFECT FROM 01.04.200 2, EXAMINED THE FACTUAL ASPECT AND POINTED OUT THAT THOUGH THE ASSE SSEE STATED THAT THEY HAVE NOT ISSUED ANY FRESH GUARANTEE DURING THE ASSESSMENT YEAR 2009-10, THE GUARANTEES WERE LIVE AND WERE NOT CLOSED AS ON 31.03.2009 AND THE LIABILITY CONTINUED ON THE ASSES SEE AS ON 31.03.2009. NOTING THAT PROVIDING SUCH GUARANTEE IS ONE OF THE FINANCIAL SERVICE RENDERED BY THE ASSESSEE FOR WHIC H IT HAS TO BE REMUNERATED APPROPRIATELY AND THAT CONCERNED PARTIE S IN WHOSE FAVOUR THESE GUARANTEES WERE EXTENDED, WHERE ASSOCI ATED ENTERPRISES OF THE ASSESSEE AND THE TRANSACTIONS WE RE LARGELY INFLUENCED BY RELATED PARTIES, THE ASSOCIATED ENTER PRISES BENEFITED AND CONSEQUENTLY, THE INCOME WOULD ACCRUE ONLY TO S UCH NON-RESIDENT AND TO THAT EXTENT, SHIFTING OF TAX BASE FROM THE C OUNTRY IS BOUND TO HAPPEN IN SUCH TRANSACTION AND THE ASSESSEE SHOULD HAVE BEEN REMUNERATED APPROPRIATELY. THE CORPORATE GUARANTEE WAS TO THE TUNE OF RS.5574.13 LAKHS AND BANK GUARANTEE TO THE TUNE OF RS.40862.34 LAKHS. FURTHER, THE TPO OBSERVED THAT THERE IS NO T IME PERIOD FOR EXPIRY OF THE GUARANTEE. CONSEQUENTLY, IT WILL DEMA ND MORE ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 6 -: COMMISSION CHARGES THAN THE COMMISSION CHARGED BY T HE BANKS. THAT APART, THE ASSESSEE HAD TAKEN MAXIMUM RISK IN PROVI DING BANK GUARANTEE TO THEIR SUBSIDIARIES AND THE ENTIRE CRED IT RISK IS OWNED BY THE ASSESSEE, THE INDIAN COMPANY AND IT HAS TO BE R EIMBURSED AT MAXIMUM PERCENTAGE OF FEES. FURTHER, THE TPO NOTED AS TO THE MANNER IN WHICH THE BANK'S CHARGE COMMISSION ON GUA RANTEES EXTENDED AND OBSERVED THAT THE BANK WILL INSIST UPO N CASH DEPOSITS / GUARANTEE DEPOSITS / ASSET MORTGAGE ETC., TO EXTEND GUARANTEES ON BEHALF OF THEIR CLIENTS. FURTHER, IT WAS POINTED OU T THAT IF A SITUATION ARISES THAT THE BANK GUARANTEE HAS TO BE INVOKED, W HEN THE ASSOCIATE ENTERPRISE IS NOT IN GOOD FINANCIAL POSIT ION, OBVIOUSLY, THE ASSESSEE IS AT RISK AND THEY CLAIM THAT THERE IS NO RISK IN PROVIDING GUARANTEES CANNOT BE ACCEPTED. THE TPO DREW A COMPA RISON BETWEEN THE GUARANTEES ISSUED BY THE BANK AND GUARANTEES IS SUED BY THE ASSESSEE ON BEHALF OF THE ASSOCIATED ENTERPRISE TO THE BANK. IT HAS BEEN RECORDED THAT THE ASSOCIATED ENTERPRISES OF TH E ASSESSEE HAVE NOT PROVIDED ANY SECURITY TO THE ASSESSEE. IN THE A GREEMENT / CONTRACT BETWEEN THE ASSOCIATED ENTERPRISES AND THE ASSESSEE, NO CONDITION HAS BEEN IMPOSED ON THE ASSOCIATED ENTERP RISES TO PAY THE AMOUNT TO THE ASSESSEE AND EVEN IN SOME AGREEMENTS IF IT IS MENTIONED, IN THE EVENT OF THE ASSOCIATED ENTERPRIS ES FINANCIALLY BECOMING WEAK, THE RISK UNDERTAKEN BY THE ASSESSEE BECOMES GREATER. FURTHER, INVOKING A GUARANTEE PROVIDED TO AN ASSOCIATED ENTERPRISE IS VERY DIFFICULT AS IT DEPENDS ON THE F INANCIAL CONDITION OF THE ASSOCIATED ENTERPRISE AND THE LAW GOVERNING SUC H TRANSACTIONS IN THAT COUNTRY AND THE ASSESSEE IS BOUND BY THE PROVI SIONS OF FEMA AND RBI GUIDELINES. THEREFORE, THE TPO CONCLUDED TH AT THE BANK COMMISSION CHARGES CANNOT BE COMPARED FOR THE COMMI SSION CHARGES THAT HAS BEEN PAYABLE TO THE ASSESSEE BY THE ASSOCI ATED ENTERPRISES AND IT IS A CLEAR FINANCIAL SERVICES RENDERED BY TH E ASSESSEE TO THEIR ASSOCIATED ENTERPRISE, WHICH HAS TO BE COMPENSATED BY PROPER COMMISSION CHARGES. ACCORDINGLY, THE TPO HELD 2% SH ALL BE CHARGED AS COMMISSION AND PROPOSED AN UPWARD ADJUSTMENT TO THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.817.25 LAKHS. IN RES PECT OF THE GUARANTEES GIVEN TO UNRELATED PARTIES, THE TPO HELD THAT 2% SHOULD BE CHARGED AS GUARANTEE COMMISSION AND PROPOSED AN UPWARD ADJUSTMENT OF RS.111.48 LAKHS TO THE INCOME OF THE ASSESSEE. THE DRP AFTER HEARING THE ASSESSEE, HELD THAT THE TPO H AS NOT GIVEN COGENT REASONS FOR TAKING A DIFFERENT STAND THAN TH E STAND TAKEN BY THE DEPARTMENT IN THE EARLIER YEARS AS THE SAME GUA RANTEE IS CONTINUING DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, THERE CANNOT BE A DIFFERENT BENCH MARKING FROM THAT OF TH E PREVIOUS YEAR. ACCORDINGLY, THE DRP DIRECTED THE TPO TO ADOPT THE SAME RATE OF GUARANTEE COMMISSION AS WAS ADOPTED BY THE TPO IN T HE PRECEDING YEAR. ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 7 -: 69.THE DIRECTIONS ISSUED BY THE DRP WERE GIVEN EFFE CT TO BY THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 17.01 .2014. THE TRIBUNAL HELD THAT THE TP ADDITION MADE AGAINST THE CORPORATE AND BANK GUARANTEE IS NOT SUSTAINABLE IN LAW. THIS CONC LUSION IS BY OBSERVING THAT THE ASSESSEE HAS PROVIDED CORPORATE AND BANK GUARANTEES FOR THE OVERALL INTEREST OF ITS BUSINESS . IT REFERRED TO THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF BHART I AIRTEL LTD., WHEREIN IT IS HELD THAT CORPORATE GUARANTEE DOES NOT INVOLV E ANY COST TO THE ASSESSEE AND THEREFORE, IT IS NOT AN INTERNATIONAL TRANSACTION EVEN UNDER THE DEFINITION OF THE SAID TERM AS AMENDED BY THE FINANCE ACT, 2012. THE TRIBUNAL IS A FINAL AUTHORITY TO RENDER F INDINGS ON FACT. THE TRIBUNAL FAILED TO GIVE ANY REASON AS TO HOW THE DE CISION IN BHARTI AIRTEL LIMITED WOULD APPLY TO THE ASSESSEE'S CASE. FURTHERMORE, THERE WAS NO RECORD PLACED BEFORE THE TRIBUNAL BY THE ASS ESSEE THAT THEY HAVE NOT INCURRED ANY COST FOR PROVIDING BANK GUARA NTEE. AS OBSERVED EARLIER, THE TPO HAS COMPARED THE NATURE O F DOCUMENTATION EXECUTED BY THE ASSESSEE IN FAVOUR OF HIS ASSOCIATE D ENTERPRISE TO COME TO THE FACTUAL CONCLUSION THAT IT IS A FINANCI AL SERVICE. THIS FINDING OF FACT HAS NOT BEEN INTERFERED BY THE DRP, BUT THE DRP WAS OF THE VIEW THAT THE SAME TREATMENT, WHICH WAS GIVEN I N THE PREVIOUS ASSESSMENT YEAR SHOULD BE EXTENDED FOR THE ASSESSME NT YEAR UNDER CONSIDERATION ALSO AND THERE IS NO REASON GIVEN BY THE TPO FOR TAKING A DIVERGENT VIEW. THE FINDING THAT THE VERY SAME TR ANSACTION FOR THE PREVIOUS ASSESSMENT YEAR WAS SUBJECT MATTER OF TP A DJUSTMENT, HAS NOT BEEN DISPUTED BY THE TRIBUNAL RATHER NOT EVEN D EALT WITH BY THE TRIBUNAL. THEREFORE, THE FINDING RENDERED BY THE TR IBUNAL IS UTTERLY PERVERSE. 70.THE ARGUMENT OF THE LEARNED SENIOR COUNSEL APPEA RING FOR THE ASSESSEE IS THAT PRIOR TO THE AMENDMENT BROUGHT ABO UT IN SECTION 92B BY FINANCE ACT 2012, THE TRIBUNAL HAD DECIDED THAT FURNISHING OF A GUARANTEE BY AN ASSESSEE WAS NOT AN INTERNATIONAL T RANSACTION AS IT DID NOT FALL WITHIN ANY OF THE LIMBS OF SECTION 92B . IT IS SUBMITTED THAT TO GET OVER THE JUDICIAL PRONOUNCEMENT, THE EXPLANA TION WAS INSERTED. THE ARGUMENT IS THAT CLAUSE (C) OF THE EXPLANATION SUPPORTS THE CASE OF THE ASSESSEE INASMUCH AS THE EXPLANATION MAKES I T CLEAR THAT GIVING OF A CORPORATE GUARANTEE IS NOT A SERVICE. W ITHOUT PREJUDICE TO THE SAID CONTENTION, IT IS SUBMITTED THAT ONLY CORP ORATE GUARANTEE IS GIVEN BY THE ASSESSEE, WHICH ARE IN THE NATURE OF L ENDING ARE COVERED UNDER CLAUSE (C) OF EXPLANATION 1 TO SECTION 92B. F URTHER, IT IS SUBMITTED THAT THE NATURE OF TRANSACTIONS COVERED B Y CLAUSE (E) SPECIFICALLY INCLUDE EVEN THOSE TRANSACTIONS WHICH MAY NOT HAVE A BEARING ON THE PROFIT, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES AT THE TIME OF TRANSACTION ARE COVERED IF THEY HAVE SU CH A BEARING AT ANY FUTURE DATE. IT IS ARGUED THAT THE LANGUAGE USED IN THE EXPLANATION MAKES IT CLEAR THAT IN SO FAR AS THE TRANSACTIONS T HAT FALL WITHIN THE MAIN PART OF SECTION 92B ARE CONCERNED, SUCH TRANSA CTIONS MUST HAVE ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 8 -: A BEARING ON PROFIT, INCOME, LOSSES OR ASSETS OF AN ASSESSEE IN THE YEAR IN WHICH THE TRANSACTION IS EFFECTED. IN THE A SSESSEE'S CASE, THE CORPORATE GUARANTEES REPRESENT A CONTINGENT LIABILI TY AND LAY DORMANT AND HAVE NO BEARING ON THE CURRENT YEAR'S P ROFITS, INCOME OR LOSSES OF AN ASSESSEE AND CORPORATE GUARANTEE ARE N OT COVERED WITHIN THE DEFINITION OF INTERNATIONAL TRANSACTION. IT IS SUBMITTED THAT APPLYING DOCTRINE OF FAIRNESSAS EXPLAINED BY THE HO N'BLE SUPREME COURT OF INDIA IN THE CASE VATIKA TOWNSHIP PRIVATE LIMITED, THE EXPLANATION OUGHT TO BE READ AS PROSPECTIVE IN ITS APPLICATION AND RETROSPECTIVE IN ITS EFFECT SUCH THAT IT WILL ALSO COVER WITHIN ITS AMBIT GUARANTEES ISSUED PRIOR TO THE INTRODUCTION OF THE EXPLANATION BY FINANCE ACT 2012. 71.WE FIND FROM THE GROUNDS OF APPEAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL, NO GROUND WAS RAISED AS REGARDS THE A RGUMENT THAT THE EXPLANATION ADDED BY FINANCE ACT 2012, IS TO BE CON STRUED AS PROSPECTIVE IN ITS APPLICATION. FURTHERMORE, THE TR IBUNAL HAS ALSO NOT RECORDED IN ITS ORDER, MORE PARTICULARLY, FROM PARA GRAPH 92 THAT THE ASSESSEE HAD ARGUED ON THE ISSUE REGARDING PROSPECT IVITY / RETROSPECTIVITY. FURTHER, THE ASSESSEE HAS NOT CHAL LENGED THE VALIDITY OF THE EXPLANATION NOR ITS APPLICABILITY WITH RETRO SPECTIVE EFFECT. THAT APART, EVEN BEFORE THE DRP, SUCH CONTENTION WAS NOT RAISED. THE HON'BLE SUPREME COURT IN GOLD COIN HEALTH FOOD PRIV ATE LIMITED, WHILE DECIDING THE ISSUE WHETHER AN AMENDMENT WAS C LARIFICATORY OR SUBSTANTIVE IN NATURE OR WHETHER IT WILL HAVE RETRO SPECTIVE EFFECT HELD AS FOLLOWS: 14. THE PRESUMPTION AGAINST RETROSPECTIVE OPERATION IS NOT APPLICABLE TO DECLARATORY STATUTES IN DETERMINING, THEREFORE, THE NATURE OF THE ACT, REGARD MUST BE HAD TO THE SUBSTANCE RATHER THA N TO THE FORM. IF A NEW ACT IS TO EXPLAIN AN EARLIER ACT, IT WOULD BE W ITHOUT OBJECT UNLESS CONSTRUED RETROSPECTIVELY. AN EXPLANATORY ACT IS GE NERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO THE MEANING OF THE PREVIOUS ACT. IT IS WELL SETTLED THAT IF A STAT UTE IS CURATIVE OR MERELY DECLARATORY OF THE PREVIOUS LAW RETROSPECTIV E OPERATION IS GENERALLY INTENDED .AN AMENDING ACT MAY BE PURELY DECLARATORY TO CLEAR A MEANING OF A PROVISION OF THE PRINCIPAL ACT WHICH WAS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EFFECT (IBID., PP. 468-69). 15. THOUGH RETROSPECTIVITY IS NOT TO BE PRESUMED AN D RATHER THERE IS PRESUMPTION AGAINST RETROSPECTIVITY, ACCORDING TO C RAIES (STATUTE LAW, 7TH EDN.), IT IS OPEN FOR THE LEGISLATURE TO ENACT LAWS HAVING RETROSPECTIVE OPERATION. THIS CAN BE ACHIEVED BY EX PRESS ENACTMENT OR BY NECESSARY IMPLICATION FROM THE LANGUAGE EMPLO YED. IF IT IS A NECESSARY IMPLICATION FROM THE LANGUAGE EMPLOYED TH AT THE LEGISLATURE INTENDED A PARTICULAR SECTION TO HAVE A RETROSPECTIVE OPERATION, THE COURTS WILL GIVE IT SUCH AN OPERATIO N. IN THE ABSENCE OF A ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 9 -: RETROSPECTIVE OPERATION HAVING BEEN EXPRESSLY GIVEN , THE COURTS MAY BE CALLED UPON TO CONSTRUE THE PROVISIONS AND ANSWE R THE QUESTION WHETHER THE LEGISLATURE HAD SUFFICIENTLY EXPRESSED THAT INTENTION GIVING THE STATUTE RETROSPECTIVITY. FOUR FACTORS AR E SUGGESTED AS RELEVANT: (I) GENERAL SCOPE AND PURVIEW OF THE STAT UTE; (II) THE REMEDY SOUGHT TO BE APPLIED; (III) THE FORMER STATE OF THE LAW; AND (IV) WHAT IT WAS THE LEGISLATURE CONTEMPLATED. (P. 388) THE RULE AGAINST RETROSPECTIVITY DOES NOT EXTEND TO PROTECT FROM THE EFFECT OF A REPEAL, A PRIVILEGE WHICH DID NOT AMOUNT TO ACCRUED RIGHT. (P . 392) 72.A NEW ENACTMENT OR AN AMENDMENT MEANT TO EXPLAIN THE EARLIER ACT HAS TO BE CONSIDERED RETROSPECTIVE. THE EXPLANA TION INSERTED IN SECTION 92B BY FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 01.04.2002 COMMENCES WITH THE SENTENCE FOR THE REMO VAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT 73.AN AMENDMENT MADE WITH THE OBJECT OF REMOVAL OF DOUBTS AND TO CLARIFY, UNDOUBTEDLY HAS TO BE READ TO BE RETROSPEC TIVE AND COURTS ARE BOUND TO GIVE EFFECT TO SUCH RETROSPECTIVE LEGISLAT ION. 74.THE LEARNED SENIOR STANDING COUNSEL FOR THE REVE NUE REFERRED TO THE DECISION IN CO-OPERATIVE COMPANY LIMITED VS. CO MMISSIONER OF TRADE TAX IN CIVIL NO.2124 OF 2007 DATED 24.04.2007 , WHEREIN IT WAS HELD THAT WHEN AN AMENDMENT IS BROUGHT INTO FORCE F ROM A PARTICULAR DATE, NO RETROSPECTIVE OPERATION THEREOF CAN BE CON TEMPLATED PRIOR THERETO. THE EXPLANATION IN SECTION 92B SPECIFICALL Y HAS BEEN GIVEN RETROSPECTIVE EFFECT AND IT IS CLARIFICATORY IN NAT URE AND FOR THE PURPOSE OF REMOVAL OF DOUBTS. THIS ISSUE WAS CONSIDERED BY THIS COURT IN THE CASE OF SUDEXO FOOD SOLUTIONS INDIA PRIVATE LTD. 75.THE CONCEPT OF BANK GUARANTEES AND CORPORATE GUA RANTEES WAS EXPLAINED IN THE DECISION OF THE HYDERABAD TRIBUNAL IN THE CASE OF PROLIFIES CORPORATION LIMITED. IN THE SAID CASE, TH E REVENUE CONTENDED THAT THE TRANSACTION OF PROVIDING CORPORATE GUARANT EE IS COVERED BY THE DEFINITION OF INTERNATIONAL TRANSACTION AFTER R ETROSPECTIVE AMENDMENT MADE BY FINANCE ACT, 2012. THE ASSESSEE A RGUED THAT THE CORPORATE GUARANTEE IS AN ADDITIONAL GUARANTEE, PROVIDED BY THE PARENT COMPANY. IT DOES NOT INVOLVE ANY COST OF RIS K TO THE SHAREHOLDERS. FURTHER, THE RETROSPECTIVE AMENDMENT OF SECTION 92B DOES NOT ENLARGE THE SCOPE OF THE TERM INTERNATIONA L TRANSACTION TO INCLUDE THE CORPORATE GUARANTEE IN THE NATURE PROVI DED BY THE ASSESSEE THEREIN. THE TRIBUNAL HELD THAT IN CASE OF DEFAULT, GUARANTOR HAS TO FULFILL THE LIABILITY AND THEREFORE, THERE I S ALWAYS AN INHERENT RISK IN PROVIDING GUARANTEES AND THAT MAY BE A REAS ON THAT FINANCE PROVIDER INSIST ON NON-CHARGING ANY COMMISSION FROM ASSOCIATED ENTERPRISE AS A COMMERCIAL PRINCIPLE. FURTHER, IT H AS BEEN OBSERVED THAT THIS POSITION INDICATES THAT PROVISION OF GUAR ANTEE ALWAYS INVOLVES RISK AND THERE IS A SERVICE PROVIDED TO TH E ASSOCIATE ENTERPRISE IN INCREASING ITS CREDITWORTHINESS IN OB TAINING LOANS IN THE ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 10 -: MARKET, BE FROM FINANCIAL INSTITUTIONS OR FROM OTHE RS. THERE MAY NOT BE IMMEDIATE CHARGE ON P & L ACCOUNT, BUT INHERENT RISK CANNOT BE RULED OUT IN PROVIDING GUARANTEES. ULTIMATELY, THE TRIBUNAL UPHELD THE ADJUSTMENTS MADE ON GUARANTEE COMMISSIONS BOTH ON T HE GUARANTEES PROVIDED BY THE BANK DIRECTLY AND ALSO ON THE GUARA NTEE PROVIDED TO THE ERSTWHILE SHAREHOLDERS FOR ASSURING THE PAYMENT OF ASSOCIATE ENTERPRISE. 76.IN THE LIGHT OF THE ABOVE DECISIONS, WE HOLD THA T THE TRIBUNAL COMMITTED AN ERROR IN DELETING THE ADDITIONS MADE A GAINST CORPORATE AND BANK GUARANTEE AND RESTORE THE ORDER PASSED BY THE DRP. 5.1. WE ADOPT THE FOREGOING DETAILED DISCUSSION MUTATIS MUTANDIS AND HOLD THAT THE LEARNED LOWER AUTHORITIES HAVE RIGHTLY TREATED THE ASSESSEES CORPORATE GUARANTEE(S) IN ALL THE THREE IMPUGNED ASSESSMENT YEARS AS AN INTERNATIONAL TRANSACTION FALLING U/S.92B OF THE ACT. WE THEREFORE DECLINE THE ASSESSEES MULTIFACETED SUBMISSION IN LIGHT OF ITS MAIN AS WELL AS ADDITIONAL GROUND TOUCHING UPON THE IMPUGNED ISSUE. 6. LEARNED COUNSEL LASTLY SUBMITTED VERY FAIRLY THAT TH E ASSESSEE NO MORE WISHES TO RAISE ANY OTHER SUBSTANTIVE GROUND REGARDING QUANTIFICATION OF THE IMPUGNED CORPORATE GUA RANTEE ADJUSTMENT. REJECTED ACCORDINGLY. NO OTHER ARGUMENT HAS BEEN RAISED BEFORE US. 7. THESE THREE ASSESSEES APPEALS ARE DISMISSED IN ABOVE TERMS. A COPY OF THIS COMMON ORDER BE PLACED IN THE R ESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 19-08-2021 TNMM ITA NOS.1719/HYD/2016 435 & 2154/HYD/2018 :- 11 -: COPY TO : 1.NCC LIMITED, SURVEY NO.64, NCC HOUSE, MADHAPUR, HYDERABAD. 2.ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIR CLE- 1(1), HYDERABAD. 3.ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-16(1 ), HYDERABAD. 4.CIT(APPEALS)-4, HYDERABAD. 5.PR.CIT-4, HYDERABAD. 6.DISPUTE RESOLUTION PANEL (DRP), BENGALURU. 7.DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 8.ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICIN G), HYDERABAD. 9.D.R. ITAT, HYDERABAD. 10.GUARD FILE.