GOCL CORPORATION LIMITED, HYDERABAD,HYDERABAD vs. DCIT, CIRCLE-2(2), HYDERABAD, HYDERABAD

We now advert to the assessee’s pleadings in both these assessment years. Its identical first grievance in AYs.2012-13, ground Nos.2 and 3 and 2, 4 and 5th substantive grounds in AY.2013-14; challenges correctness of the learned lower authorities’ action making Arm’s Length Price (ALP) adjustments of Rs.11,64,240/- and Rs.31,85,162/- pertaining to corporate guarantees; assessment year-wise; respectively.

Learned counsel’s first and foremost argument is that a corporate guarantee is a shareholder’s activity which has been wrongly treated as an international transaction u/s.92B read with Explanation inserted by the Finance Act, 2012 with retrospective effect from 01-04-2002. He next sought to draw a distinction between the twin impugned assessment years that such a corporate guarantee furnished in AY.2012-13 could not fall u/s.92B of the Act since the foregoing Explanation came to be inserted vide Finance Act, 2012 as against financial year involved herein 2011-12 only. He has also quoted (2015) 63 taxmann.com 353 (Ahd-Trib) Micro Ink Limited Vs. ACIT, Addl.CIT Vs. Bharti Airtel Ltd. Vs. ACIT (2014) 63 SOT 113 (Delhi) and DCIT Vs. M/s.Mankasia Ltd., dt.30-11-2018. We find no merit in assessee’s instant legal argument in principle since hon'ble Madras high court’s latest decision in Redington India Pvt. Ltd., Vs. DCIT, Tax Appeal No.590 and 591 of 2019, dt.10-12- 2020 has settled the law that a corporate guarantee indeed forms an international transaction and covered by the Explanation to section 92B with retrospective effect as well. The assessee’s first and foremost legal argument fails therefore.

Next comes quantification of the impugned corporate guarantee commission. The assessee admittedly adopted 0.5% commission rate as against that adopted @1.8% in the Transfer Pricing Officer’s (TPO) order. The fact also remains that the DRP’s order in AY.2013-14 has adopted similar corporate guarantee commission @1.3% only.

We stay back in AY.2012-13 and notice that the assessee’s second substantive ground seeks to reverse both the lower authorities’ alleged action denying carry forward set- off losses under the head ‘capital gains’ pertaining to AY.2010-11. It transpires during the course of hearing that this tribunal’s order in assessee’s appeal (AY.2011-12) has restored the issue of carried forward of short term losses pertaining to earlier assessment years back to the Assessing Officer. The said order has indeed not been considered in any of the lower appellate authorities’ adjudication(s). We therefore proceed on the very line of action in the impugned assessment year as well by adopting judicial consistency and direct the Assessing Officer to verify all the necessary facts in the light of the consequential adjudication in the earlier assessment year(s). Ordered accordingly. This second substantive ground is taken as allowed for statistical purposes.

The assessee’s third and last substantive ground in AY.2012-13 is that the learned lower authorities have erred in law and on facts in upholding capital gains addition of Rs.21,02,947/-. This Revenue’s case on the other hand in light of the DRP’s directions in para 2.3 is that the panel has already directed the Assessing Officer to verify the corresponding claim. The Assessing Officer’s consequential assessment dt.30-01-2017 holds that such an additional claim could not be entertained in absence of a revised return as per hon'ble apex court’s decision in Goetze (India) Ltd. Vs. CIT (2006) 284 ITR 323 (SC). We find no merit in the Revenue’s foregoing argument. Their lordships have made it clear in para 4 that the same only applies on the Assessing Officer’s jurisdiction to entertain a new claim than impinging upon the appellate authorities’ similar jurisdiction to allow the concerned parties to plead new grounds. We therefore direct the Assessing Officer to adjudicate the assessee’s impugned capital gains addition grievance on merits as per law within three effective opportunities of hearing. The assessee’s former appeal is partly allowed in above terms.

We are now left with AY.2013-14 appeal in latter substantive ground that the learned lower authorities have erred in law and on facts in not giving tax paid’s credit to the tune of Rs.3,53,84,355/- on distributed profits u/s.115-O of the Act.

These two assessee’s appeals are partly allowed in above terms. A copy of this common order be placed in the respective case files.