JUBILANT PHARMOVA LIMITED V. JOINT COMMISSIONER OF INCOME TAX

IAPL/75/2022

AI Insights

The case involves Jubilant Pharmova Limited appealing against the decision of the Income Tax Appellate Tribunal (ITAT) regarding the treatment of a corporate guarantee provided to banks for loans to its Associated Enterprises. The key legal questions pertained to whether such a guarantee constitutes an 'international transaction' under Section 92B of the Income Tax Act, 1961, and the applicability of the Explanation to Section 92B introduced by the Finance Act, 2012, with retrospective effect to the Assessment Year 2011-12. The ITAT had previously treated the corporate guarantee as an international transaction, which the appellant contested. The Commissioner (Appeals) had remitted the matter back to the Assessing Officer for a fresh decision, which is currently pending.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 760585 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 26-09-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GAURAV MAHAJAN
• Assessee Lawyers: SUYASH AGARWAL
• Keywords: Arm's Length Price; Assessment Year 2011-12; Corporate guarantee; Income tax appeal; International transaction; Transfer Pricing Adjustment
• Section: 92B; 260A

Judgement Text

"Court No. - 39 Case :- INCOME TAX APPEAL No. - 75 of 2022 Appellant :- Jubilant Pharmova Limited Respondent :- Joint Commissioner Of Income Tax Counsel for Appellant :- Suyash Agarwal Counsel for Respondent :- Gaurav Mahajan Hon'ble Mrs. Sunita Agarwal,J. Hon'ble Vipin Chandra Dixit,J. Heard Sri Divyanshu Agrawal and Sri Suyash Agarwal, learned Advocates for the appellant and Sri Gaurav Mahajan, learned counsel for the Income Tax Department. In this Income Tax Appeal under Section 260A of the Income Tax Act, 1961, the substantial questions of law which have been framed for admission of appeal, are as under:- \"a) Whether or not the ITAT was legally correct in holding that the corporate guarantee provided by the appellant to banks for providing loan to its Associated Enterprises without charging any fee or commission, is an international transaction under Section 92B of the Income Tax Act, 1961 when the transaction is of such a nature as to have no bearing on profits, income, losses or assets of enterprise? b) Whether or not the ITAT was legally correct in holding that, the Explanation to Section 92B of the Income Tax Act, 1961 inserted in the statute vide Finance Act, 2012, enhancing the scope of an anti-avoidance provision, can be implemented with retrospective effect and made applicable to Assessment Year 2011-12? c) Whether or not the ITAT was legally correct in treating the corporate guarantee provided by appellant on behalf of its Associated Enterprises, as an international transaction under Section 92B of the Act disregarding the fact that the provision of corporate guarantee to the AEs was in the nature of shareholder activity for which arm's length compensation is not required.\" The Tribunal has noted that the issue relates to deletion of addition of Transfer Pricing Adjustment made to Arm's Length Price(ALP) of corporate guarantee provided to the Overseas Associated Enterprises. While the Transfer Pricing Officer, treating the corporate guarantee as an international transaction, charged guarantee commission at 4.86%. The Commissioner(Appeals) accepted the assessee's submission and held that the provision of corporate guarantee in the assessee's own case for the assessment year 2009-10 and 2010-11 came up for consideration before the Tribunal and while deciding the assessment, the matter has been remitted to the Assessing Officer for de-novo adjudication after due and reasonable opportunity of hearing to the assessee. The issue referred for reconsideration has been made in the light of the observation of the Commissioner(Appeals) and it was noticed that the Commissioner(Appeals) did not deal with them, as he held that the provision of corporate guarantee is not an international transaction. The Tribunal, in the current case of 2011-12 of the assessee, having noted the above fact, decided to remit the issue to the Assessing Officer for deciding afresh with similar direction. As the substantial questions of law framed herein relates to the same issue, the Assessing Officer would decide the fate. At this stage, when the matter is before the Assessing Officer for taking afresh decision, there is no question to entertain the substantial questions of law. The appeal is, accordingly dismissed. Order Date :- 26.9.2022 P.P. Digitally signed by POONAM PATEL Date: 2022.09.26 16:46:40 IST Reason: Location: High Court of Judicature at Allahabad "