ACT INFRAPORT LIMITED ,MUMBAI vs. DCIT, CIRCLE 1(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “K”, MUMBAI BEFORE SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No.4641/Mum/2025 (Assessment year: 2016-17) ITA No.4642/Mum/2025 (Assessment year: 2018-19)

ACT Infraport Ltd. vs DCIT Circle 1(1)(1), Mumbai Gr. Floor, 14, Shipping House 533, AayakarBhavan, Mumbai- 26, Kumptha Street, Fort, Mumbai-400001 PAN: AAECA9098H APPELLANT RESPONDENT Assessee by : Shri Prakash Shah (Sr. Advocate) & Shri Suyog Bhave Revenue by : Shri Bhagirath Ramawat (Sr.DR) Date of hearing : 08/06/2026 Date of pronouncement : 12/06/2026 O R D E R Per Bench: Both the appeals of the assessee filed against the order of the Ld. Commissioner of Income Tax-Appeals-55, Mumbai [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’) for Assessment Years 2016-17 & 2018-19, date of orders 04.06.2025 & 06.06.2025 respectively. The impugned orders emanated from the order of the Ld. Deputy Commissioner of Income Tax Circle 1(1)(1), Mumbai (for brevity the ‘Ld. AO’)

2 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. order passed under section 143(3) r.w.s. 144C(3) of the Act date of orders 24.01.2020 & 26.11.2021 for AYs 2016-17 & 2018-19 respectively.

3 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. 3. Ground No. 3 On the facts and in the circumstances of the case, the Hon'ble CIT(A), erred on facts and in law in in not appreciating that corporate guarantee is not covered by the scope of any of clauses of the Explanation to section 92B of the Act. 4. Ground No. 4 On the facts and in the circumstances of the case, the Hon'ble CIT(A), erred on facts and in law in not appreciating that mere issuance of corporate guarantee by the Appellant is not an international transaction within the meaning of section 928(1) of the Act as it does not have a bearing on PILA of the Appellant especially when it is not invoked by the lending bank during the subject year. 5. Ground No. 5 On the facts and in the circumstances of the case, the Hon'ble CIT(A), erred on facts and in law in not appreciating that corporate guarantee is not even in the nature of provision for services, hence it is not an international transaction under section 92B of the Act. 6. Ground No. 6 On the facts and in the circumstances of the case: the Hon'ble CIT(A), erred on facts and in law in not taking into account the differences in functions performed, assets employed and risks assumed between the international transaction of the Appellant (Corporate Guarantee) and the comparable transactions (Bank Guarantee) and not adjusting the net margins of the comparable companies (Banks) for the same in accordance with the provisions of Rule 10B of Income-tax Rules, 1962. 7. Ground No. 7 On the facts and in the circumstances of the case, the Hon'ble CIT(A), erred on facts and in law in determining Arm's Length Price of commission on corporate guarantee at 0.50% which is excessive and high. 8. Ground No. 8 On the facts and in the circumstances of the case, the Hon'ble CIT(A), erred on facts and in law in determining Arm's Length Price of commission on corporate guarantee at 0.50% on average of amount of corporate guarantee as on 01st April 2016 and 31 March 2017 instead of computing on amount of corporate guarantee as on 31st March 2017

4 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. 9. Ground No. 9 The Appellant craves leave to add, alter, modify, omit, substitute or amend all or any of the grounds of appeal before or during the course of appellate proceedings.”

5 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. 5. The Ld. AR advanced detailed submissions and filed a written note of arguments along with a paper book comprising pages 1 to 308, which has been taken on record. The Ld. AR presented his submissions in two parts, ground-wise, as under: Ground No. 1 to 7:- 6. The issuance of corporate guarantee by assessee to AE is not an international transaction in terms of section 92B of the Act. The Ld. AR contended that the assessee is a limited company engaged in business of providing total services covering shipping, freight forwarding to all parts of the world, the customs clearance, transportation, storage and distribution, import/export, documentation and other shipping allied services. During the impugned year the assessee had entered into various international transactions with its AEs and ALP of the same was accepted by the Ld. TPO without making any adjustment therein. But only related to adjustment of commission of corporate guarantee the assessee had provided guarantee to ICICI Bank for purpose of providing the term loan to its subsidiary namely Sunbright Shipping (SA) Panama. If the assessee could not have provided the guarantee, it could have required to provide funds to its own as a debt or it would have to invest the funds as equity into SSL to enable the purchase of ship. The assessee had provided corporate guarantee for term loan, taken by its AE of USD 14.23 million (Rs. 94,50,14,300/-) for purchase of ship. The AE was not benefitted by guarantee so given and it was the assessee who benefitted as a result of commercial benefits to secure for future and business strategy should be taken into consideration while making any TP adjustment in respect of such transactions and has relied on the OECD transfer pricing guidelines issued in 2010. The Ld. AO had applied of average bank

6 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. guarantee of Rs.0.675% in determining the ALP of guarantee commission for entire amount of CG provided to AE.

7 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. such guarantee could not be regarded as falling within the ambit of “banking and other financial services”. Accordingly, it was contended that clause (i)(c) of Explanation 2 to section 92B applies only to guarantees issued by financial institutions in the course of their business and, therefore, the corporate guarantee furnished by the assessee to its subsidiary falls outside the scope of an “international transaction” and cannot be subjected to transfer pricing adjustment under section 92B of the Act.

Vide the above quoted submissions, the appellant has claimed that clause (c) of Explanation to section 92B does not specifically mention that "corporate guarantee" is an international, transaction. The appellant has further claimed that the term "capital financing" mentioned in clause (c) is applicable to financial institutions only, since the term used in this clause is "during the course of business". These claims of the appellant are not found correct. It has been held in various decisions of judicial authorities as discussed above that the term "capital financing" includes corporate guarantee also. Further, the claim of the appellant that only financial institutions are covered under the term "during the course of business" is also misplaced. It is clear that any "capital financing activity undertaken "during the course of business" is covered in this definition. The appellant has itself agreed in its above quoted submissions that the corporate guarantee was given on behalf of AE in furtherance of own economic and business

8 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. interest of the appellant and further claimed to be a part of shareholder activity and also claimed that the guarantee was given to protect the deterioration of its investments. Hence, it is clear that the decision of giving of corporate guarantee was undertaken during the course of business of the appellant. There are various decisions of judicial authorities including that of various Hon'ble High Courts where corporate guarantee has been held to be an international transaction for assessee's other than financial institutions, including those discussed above. The decisions cited by the appellant have been rendered in specific facts of those cases and with respect to Excise and custom law, which is governed by a different Act and not Income Tax Act, which is required to be considered in the instant case. The appellant has relied on the judgement of Hon'ble Supreme Court in the case of Edelweiss Financial Services Ltd 2023 (73) GSTL 4(SC), wherein it was held that issuance of corporate guarantee to group companies without consideration would not be taxable service. However, it is noted that the said decision was rendered in the context of, and while interpreting, the provisions of Service Tax Act and not the provisions of Income-tax Act. Hence such findings cannot be generally applied to the instant case while interpreting the provisions of Income Tax Act, on which direct judgements of Hon'ble High Courts/Hon'ble ITAT have been rendered. In fact unlike service tax regime, GST law has a deeming fiction that assumes that an activity between related parties would qualify as supply even if consideration does not exist. Hence, it is clear that the decision does not directly apply to the instant proceedings involving interpretation of the provisions of the Income-tax Act, which are different. Thus the above arguments raised by the appellant are not found correct and are accordingly rejected. The grounds of appeal raising such contentions are, therefore, Dismissed.”

Ground no.7 Alternate ground related to ALP of commission on corporate guarantee is liable to be computed on basis of fresh borrowing during the relevant period or Act base closing balance of the loan amount:-

9 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. Manugraph India Ltd. vs DCIT, ITA No.4761/Mum/2013 date of pronouncement 25.03.2015 and the order of coordinate bench of ITAT Bengaluru in case of Sasken Technologies Ltd. vs. ACIT, IT(TP) No.788/Bang/2022 dated 11.11.2022. The Ld. AR filed a written note the relevant part of the note in relation of his argument is reproduced as below: “Without prejudice to the above, the ALP of the commission on corporate guarantee is liable to be computed on the basis of fresh borrowing during the relevant period or, at best, the closing balance of the loan amount (Ground No. 7] 20. Without prejudice to the above and assuming without admitting that the issuance of corporate guarantee is an international transaction, it is submitted that the Arm's Length Price ("ALP") of the alleged commission on the corporate guarantee given by the Appellant is liable to be computed based only on fresh borrowings during the relevant FY or, at best, the closing balance of the loan amount. 21. It is submitted that guarantee commission can be computed only on the basis of any fresh borrowings made by the AE, for which the assessee has provided the guarantee. 22. It is submitted that since the guarantee commission is charged for assuming the risk for providing the guarantee to the bank, in respect of the loan availed by the AE, any adjustment on account of guarantee charges has to be only in respect of the actual loan availed by the AE during the year. 23. In this regard, reliance is placed on the judgment of this Hon'ble Tribunal in Manugraph India Ltd. v. DCIT 2015 (3) TMI 1103 ITAT MUMBAI. 21. The additional ground raised by the assessee in respect of the guarantee commission is not a new ground but only a additional plea in respect of the ground number 3 of the main ground raised by the assessee. Since the guarantee commission is charged for assuming the risk for providing the guarantee to the bank in respect of loan availed by the AE, therefore, we find merits in the additional plea raised by the assessee that the adjustment on account of guarantee commission charges has to be only in respect of the amount of actual loan availed by the AE during the year. Accordingly, we direct the AO/TPO to compute the adjustment by taking into account actual loan amount availed by the AE during the year in this respect.

10 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. 24. In the present case, vide letter dated 27.09.2011, the ICICI Bank had sanctioned a loan of USD 13.27 million and derivatives of USD 0.48 million to SSL for the purpose of acquisition of a ship. (pg.288 of 2016-17 paperbook and Pg. 258 of 2018-19 paperbook). However, SSL only availed the loan facility of USD 13.27 million. 25. The said loan of USD 13.27 million was ultimately disbursed to SSL on 15.11.2011 and was payable by way of quarterly instalments. The last of the said instalments was paid by SSL on 15.11.2018.

“3(a) In the event of any default on the part of the Borrower in payment/repayment of any of the moneys referred to Clause 2 above, or in the event of any default on the part of the Borrower to comply with or perform any of the terms, conditions and covenants

11 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. contained in the Facility Documents, the Guarantors shall, upon demand to the Guarantors, forthwith pay to the Bank without demur all/part of the amounts as demanded by the Bank payable by the Borrower under the Facility Documents...." 33. Further, reliance is placed on the following judgments of this Hon'ble Tribunal:

(i) Sasken Technologies Ltd. Versus The Assistant Commissioner of Income Tax, Circle 6 (1) (1), Bangalore 2022 (11) TMI 1340 ITAT Bangalore.

(ii) Associated Capsules Pvt. Ltd. v. ACIT [2020] 121 taxmann.com 103 (Mumbai Trib). 34. In any event, it is submitted that the learned Commissioner (A) has erred in not following the judgment of this Hon'ble Tribunal in the case of Sasken Technologies (supra). It is submitted that in the said case, the Hon'ble Tribunal has affirmed the view taken by the TPO and that the same is binding on the learned Commissioner (A). 35. In the present case, it is pertinent to note that vide its letters both dated 23.01.2021 (pg. 308 of 2016-17 paperbook) and (pg. 278 of 2018-19 paperbook), ICICI Bank has confirmed the outstanding loan amount as on 31.03.2016 and 31.03.2018, respectively. 36. Considering the above closing balances, the amount of commission @ 0.50% is computed as follows: Sr. Particulars FY 2015-16 FY 2017-18 No. 1 Actual Closing Balance of Loan (USD) 61,57,280 13,16,384 2 Exchange Rate 66.3329 65.08 3 Amount of Guarantee for computing 40,84,30,239 8,56,70,271 Commission (Rs.) 4 Commission Percentage 0.50 0.50 5 Actual Guarantee Commission (Rs. 27,56,904 5,78,274 37. It is submitted that the addition, if any, of guarantee commission is liable to be restricted to the above amounts for the subject years.”

12 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. considering the balance of loan amount on 31.03.2016. Ld. DR further stated that the Ld. CIT(A) had discussed this issue in detail in impugned appellate order. The relevant paragraphs of the Ld. CIT(A)’s order are reproduced as below: “6.4 Ground nos.14/11A: Additional grounds of appeal: 6.4.1 Vide Ground 14 of appeal, the appellant had requested leave to add, amend and/or alter any of the grounds of appeal. Subsequently, vide above quoted submissions, the appellant has submitted the above quoted additional grounds of appeal 11A of the appeal and requested for admission of additional grounds of appeal which is quoted below:- Ground No. 11A Commission to be computed on actual amount of Loan payable by SSL as on 31st Mar 2016 and not on whole amount of Corporate Guarantee

"The Learned AO has erred, on the facts and circumstances of the case and in law, in determining Arm's Length Price of Commission chargeable at 0.675% on the whole /entire amount of Guarantee of USD 14.23 Million (equivalent to Rs. 94,50,14,300) without appreciating the fact that the Associated Enterprises was liable to pay USD 61,57,280 (equivalent to Rs. 40,84,30,239) as on 31st Mar 2016 and restricting the amount of Commission on such liability."It is noted that this additional ground of appeal has been taken on a without prejudice basis, since it has been claimed that the impugned transaction of corporate guarantee is not an international transaction. The said claims made by the appellant have already been dismissed while disposing Grounds 1 to 6 above. Further, the TPO has been directed to adopt ALP rate of 0.5% instead of 0.675%, as discussed in the decision w.r.t. Ground 7 to 11 of appeal.

In this regard, it is noted that the Hon'ble Supreme Court (SC) in the case of National Thermal Power Co. Ltd. vs. CIT (1998) has held that the appellate authorities including CIT(A) has the power to admit the additional grounds and adjudicate thereon provided they pertain to legality of the assessment or any other matter that could have a bearing on the outcome of the appeal. Further, the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. has, held that an appellate authority while hearing the appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers, which the subordinate authority may have in the matter. The additional claims and grounds made by the appellant are being admitted based on above reasons cited by the appellant and placing reliance on the decisions of judicial authorities as discussed above. The additional grounds of appeal are being admitted in the interest of natural justice and since the issue raised is

13 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. intrinsically linked to the quantification of the corporate guarantee adjustment and for proper adjudication of the issue involved and in view of legal precedents.

6.4.2 In its above quoted submission, the appellant has claimed that the amount guaranteed by the Appellant cannot exceed the amount of loan payable by SSL to the Bank and hence, it has been argued that the Guarantee Commission should be computed on actual amount of loan payable by SSL as on 31st Mar 2016, and not on the whole amount of Guarantee. The appellant has claimed that the amount of Loan payable by SSL as on 31st Mar 2016 was USD 6,157,280 as per Letter dated 23rd Jan 2021 issued by ICICI Bank. The amount of Commission @ 0.675% on actual loan has been computed by the appellant as follows:

Sr. Description Commission as per Ld. Commission as per No. AO/TPO Appellant 1 Amount of Guarantee (in USD) $ 1,42,30,000 Amount of Actual Loan as on 31st 2 $ 61,57,280 March 2016 (in USD) 3 Exchange Rate 66.41 66.3329 4 Amount of Guarantee for computing 945014300 40,84,30,239 commission [1 * 3] [2 * 3] 5 Percentage of Commission 0.675% 0.675% 6 Amount of Commission (4 * 5) 63,78,847 27,56,904 The appellant has claimed that in view of above, the Learned AO/ΤΡΟ both have computed Commission in excess by at least Rs.36,21,943/- (63,78,847 -27,56,904). With respect to the above, the appellant in its above quoted submissions has relied upon various decisions viz. Jurisdictional Hon'ble Mumbai Tribunal in the case of Manugraph India Ltd. vs. DCIT in ITA No. 4761/Mum/2013 for AY.2008-09-Order dated 25.03.2015; Manugraph India Ltd. vs. DCIT [2021] 126 taxmann.com 358 (Mumbai Trib.) for AY.2011-12;BS Ltd. vs. ACIT [2018] 94 taxmann.com 346 (Hyderabad Trib); Jurisdictional Hon'bleMumbai Tribunal in the case of Associated Capsules Pvt. Ltd. vs. ACIT [2020] 121 taxmann.com 103 (Mumbai Trib). The appellant has further placed reliance on the decision of Hon'ble ITAT Bangalore in the case of Sasken Technologies Ltd. [TS- 788-ITAT-2022 (Bang)-TP], in which reliance has been also placed on other decisions viz. in the case of Medrich Ltd. vs. Asstt. CIT [ITA No. 1574 (Bang.) of 2019, dated 12-4-2021], in the case of Manipal Global Education Services (P.) Ltd. vs. Dy. CIT [2018] 95 taxmann.com 94 (Bang - Trib.), in the case of Xchanging Solutions Ltd. vs. Dy. CIT [2017] 78 taxmann.com 54 (Bang Trib.) and in the case of ACIT vs. Tejas Networks Ltd. [2022] 139 Taxmann.com 430 (Bangalore Trib.). These claims of the appellant have been perused w.r.t the facts of the instant case.”

14 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. 12. The Ld. DR further contended that the Ld. CIT(A) had already accepted the principle that commission on a corporate guarantee should not be levied on the entire loan amount. Since the AE had availed the loan in the year 2011, only the outstanding loan balance remaining during the relevant financial year should be considered for determining the corporate guarantee commission chargeable to the assessee. The Ld. DR submitted that, in the case of Seskan Technologies Ltd. (supra), the Coordinate Bench of the ITAT, Bengaluru had approved the computation of corporate guarantee commission with reference to the outstanding loan balance as at the end of the financial year. However, in the present case, the revenue authorities have not computed the corporate guarantee commission on the outstanding balance of the loan at the end of the relevant financial year. Therefore, according to the Ld. DR, the decision relied upon by the Ld. AR is factually distinguishable and does not support the assessee’s contention. The Ld. DR further invited our attention to paragraph 6.4.4 of the impugned appellate order, which is reproduced below: “6.4.4 From the above discussion, it is clear that judicial authorities have held that the corporate guarantee is contingent liability, relevant consequence depends upon future event. However, the quantum of exposure should be on the basis of actual exposure. In the instant case, it is clear that the corporate guarantee was given by the appellant against loan taken by its AE in 2011, and thus, its AE was paying the term loan in instalments / from time to time. Thus, the payments already made by its AE in discharge of its term loan liability in earlier years would naturally reduce the actual exposure of the appellant during the relevant financial year in the event of default by its AE. As regards the above quoted claim of the appellant that the adjustment should be considered based on the figure of outstanding amount as on 31.03.2016, the same is not found to be fully correct. It is noted that Hon'ble ITA -Bangalore in the case of Sasken Technologies Ltd(supra) had considered theclosing amount of outstanding loan based on the own action of the TPO in the said case. To compute the actual amount of maximum

15 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. exposure during the relevant Financial year, it would be more prudent to consider the average of the opening (01/04/2015) and closing figure (31.3.2016) of the relevant financial year of outstanding/maximum liability instead of considering the figure of only 31.03.2016. Therefore, the TPO is directed to compute ALP on the average amount of exposure as discussed above in the case of appellant by adopting the rate of 0.5% as discussed in Ground nos.7 to 11 above. As a result, this additional ground no.11A of appeal is considered as Partly allowed.”

16 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. international transaction within the meaning of section 92B of the Act. Consequently, Grounds Nos. 1 to 7 raised by the assessee are dismissed.

17 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. In the present case, the Ld. CIT(A) has rightly appreciated that the corporate guarantee represents a contingent exposure throughout the year and that a more reasonable and equitable method for determining the assessee’s actual exposure is to consider the average of the opening and closing outstanding loan balances. Such an approach appropriately captures the extent of risk undertaken by the assessee during the relevant financial year and is more reflective of the arm’s length principle. Accordingly, we find no infirmity in the findings of the Ld. CIT(A). The decisions relied upon by the assessee are factually distinguishable and do not advance its case. Therefore, the order of the Ld. CIT(A) directing the computation of corporate guarantee commission at 0.50% on the average outstanding exposure is upheld. The Ground No-8 raised by the assessee on this issue is dismissed. 15. In the result, the appeal of the assessee bearing ITA Nos. 4641 and 4642/Mum/2025 are dismissed. Order pronounced in the open court on 12th day of June 2026. Sd/- Sd/- (OM PRAKASH KANT) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 12/06/2026 SAUMYASr.PS Copy of the Order forwarded to: अपीलाथ�/The Appellant , 1. 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file.

18 ITA Nos.4641 and 4642/Mum/2025 ACT Infraport Ltd. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI