JOGPL PRIVATE LIMITED,GREATER NOIDA vs. DEPUTY COMMISSIONER OF INCOME TAX, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘H’: NEW DELHI BEFORE SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER AND SHRI SUDHIR KUMAR, JUDICIAL MEMBER IT (TP)A No.65/Del/2026 (ASSESSMENT YEAR:2022-23) JOGPL Private Limited, Deputy Commissioner of Plot No.15, Knowledge Park-2, Income-tax, Greater Noida-201306, v. Circle-13(1) Uttar Pradesh. Central Revenue Building, New Delhi 110002. PAN-AAACE0169K (Appellant) (Respondent) Shri K.M. Gupta, Adv. Assessee by Ms. Kashish Gupta, CA and Ms. Shruti Khimta, AR Department by Shri Sidharth Bhimsingh Meena, CIT-DR Date of Hearing 21.05.2026 Date of Pronouncement 19.08.2026

ORDER PER RAMIT KOCHAR, AM: This appeal in IT(TP)A No.65/Del/2026 has arisen from assessment order dated 16.12.2025 passedby ld. Assessing Officer u/s. 143(3) r.w.s. 144C (13) read with Section 144B of the Income-tax Act,1961 (hereinafter called “the Act”) (DIN:ITBA/AST/S/143(3)/2025-26/1083743048(1), wherein addition to the tune of Rs. 33,08,89,845/- on account of ALP adjustment u/s 92C were made by the learned Assessing Officer (‘AO’) in the hands of the assessee, which assessment order has been passed by the AO in pursuance to the directions given by the Ld. Dispute Resolution Panel-2, New Delhi, vide orders dated 18.11.2025 passed u/s.

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144C(5) of the Act (DIN : ITBA/DRP/M/144C(5)/2025-26/1082743851(1)) . The AO had earlier passed draft assessment order dated 17.02.2025 u/s. 144C(1) of the 1961 Act (DIN & Order No. ITBA/AST/F/144C/2024-25/1073372246(1)), wherein the AO proposed an addition of Rs.11,89,73,250 /- on account of ALP adjustment u/s 92C as proposed by ld. TPO in its Transfer pricing order dated 24.01.2025 passed u/s 92CA(3)(DIN & Order No. ITBA/TPO/F/92CA3/2024- 25/1072502096(1)), which were subjected to challenge by the assessee by filing objection before the ld. DRP which culminated into an order passed by ld. DRP dated 18.11.2025 u/s 144C(5) of the 1961 Act. The learned TPO passed order giving effect to the directions of ld. DRP , vide order dated 04.12.2025(DIN & Order No. ITBA/COM/F/17/2025-26/1083325508(1)).

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3.2 Not appreciating that no service subsisted after default by the borrower for the borrowing in question; 3.3 Ignoring the fact that the value of loans taken by Holding companies (AEs) exceeds the value of assets on which negative lien is provided by the Appellant. 4. On the facts and in the circumstances of the case and in law, without prejudice to the above grounds, the Ld. DRP erred in directing the Ld. TPO to benchmark the disputed transaction by applying LIBOR+rate based on the credit rating of the AE in view of decision of the Hon'ble Delhi High Court in the case of Cotton Naturals (276 CTR 445). In doing so, the Ld. AO/TPO/DRP erred in, 4.1 Placing reliance on the judgment of the Hon'ble Delhi High Court's ruling in the case of Cotton Naturals wherein a foreign currency loan has been benchmarked using LIBOR whereas the present case relates to the benchmarking of a negative lien; accordingly, the said decision is clearly distinguishable on facts and inapplicable to the Appellant's case. 4.2 Applying an arbitrary LIBOR rate of 4.589% for benchmarking the alleged international transaction. 5. On the facts and in the circumstances of the case and in law, the Ld. AO/TPO erred in disregarding/not following the order of the Hon'ble Tribunal passed in the Appellant's own case for AY 2017-18, wherein it was held that the impugned transaction does not fall within the ambit of 'international transaction' as defined under section 92B of the Act. 6. On the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest under section 234B of the Act. 7. On the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act. The above grounds are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the Grounds of Appeal contained herein or add any further grounds as may be considered necessary either before or during the hearing the objections.”

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production. The company has Participating Interests(‘PI’) in Eight Oil and Gas Blocks, which were acquired in various New Exploration Licensing Policy(‘NELP’) bidding rounds except Participating Interests in two Blocks acquired in the past from its ultimate holding company , JE Energy Ventures Private Limited ( hereinafter called ‘JEVPL’) , India. It has also one block in Myanmar. The assessee has entered into Production Sharing Contract(‘PSC’) jointly with various Joint Venture Partners as one part and Ministry of Petroleum and Natural Gas (Government of India) for Blocks in India and with Myanmar and Oil and Gas Enterprises for the Block in Myanmar as other part for exploration of Oil and Gas. Pursuant to the PSC’s unincorporated joint ventures (JV’s) have been formed to undertake necessary economic activities for production of oil and gas. The assessee had filed return of income u/s 139(1) of the 1961 Act on 28.10.2022, declaring income of Rs. 1,15,25,348/-. The return of income was processed u/s 143(1) of the 1961 Act. The case of the assessee was selected by Revenue for framing complete scrutiny assessment under CASS to verify the reasons which are recorded in details by the AO in the assessment order. As per Form No. 3CEB, it was noticed by the AO that the assessee had shown aggregate value of international transactions of Rs. Nil as well Specified Domestic Transactions as per books of accounts as Nil, during the year under consideration. However, the AO observed that the assessee has entered into international transactions in the nature of Guarantee. The AO also observed that assessment order u/s 143(3) r.w.s. 144C(13) of the 1961 Act, dated 31.05.2022 was passed by the AO in consequence to the Directions of DRP u/s 144C(5) of the 1961 Act, dated 31.03.2022, wherein TP adjustment by computing ALP of the international transactions, to the tune of Rs. 16,48,31,724/- was made in the hands of the assessee , for assessment year 2017-18. The AO referred the matter to TPO in view of para 3.3(b) of the

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Instruction No. 3/2016[F.No. 500/9/2015-APA-II] dated 10.03.2016, after obtaining approval of the PCIT or CIT. The TPO observed from the TP documentation submitted by the assessee during the TP audit proceedings , shows that the assessee has entered into following international transactions : S.No. Nature of Name of AE(s) Method Amount in INR(In International Thousands) Transactions 1. Negative Lien JE Energy B.V. Nil

Other Method

Nil Jubilant Energy (Holding) BV

3.2 From the Transfer Pricing Study Report(‘TPSR’) submitted by the assessee, the TPO observed that the assessee has provided counter corporate guarantee for guaranteeing the due performance and discharge by JEVPL of its obligations and liabilities to Exim Bank in terms of the guarantee. The details of counter corporate guarantee submitted by the assessee before the TPO, is tabulated below as under:- Nature of Name of the Amount of loan in Amount of Guarantee beneficiary USD Guarantee Fee provided on behalf of the AE Counter Corporate JEBV and 45,000,000 and Guarantee JEHBV 50,000,000 Nil provided on behalf of the AE

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3.3 The TPO issued SCN dated 31.12.2024 to the assessee, and sought details concerning the negative lien provided by the assessee on its receivables and interest in Oil Blocks for the loans availed by its AE’s. The assessee submitted in response that as per TPSR, it is the JEKPL Private Limited and JODPL Private Limited , and not the assessee had provided counter corporate guarantees for guaranteeing due performance and discharge by JE Energy Ventures Private Limited, Corporate Guarantor (‘JEEVPL’) of its obligations. It was submitted that the assessee has only provided negative lien upon its present and future Participating interests and receivables of Oil and Gas Blocks. The assessee submitted that foreign currency term loans were taken by the Subsidiaries of JEEVPL viz. JE Energy BV(JEEBV) & Jubilant Energy (Holdings) BV(JEHBV) from Exim Banks as follows:  Foreign Currency Term Loan Limit of US$50 Million taken by JEEBV in August, 2011 for financing, exploration and development expenses incurred/to be incurred in various Oil Blocks of the Jubilant Group. Foreign Currency Term Loan Limit of US$45 Million taken by  JEHBV in January, 2014 for investments in the subsidiaries of JEHBV mainly for exploration , development and related activities in various operating companies owning Oil and Gas Assets. 3.4 In relation to the above loans, JEEVPL had provided corporate guarantee to the lending bank on behalf of JEEBV and JEHBV. Pursuant to the Corporate Guarantee provided by JEEVPL, the assessee provided a negative lien on all its receivables and Participating Interest (PI) of Oil and Gas Blocks held by the assessee. The assessee submitted that ‘Negative Lien’ refers to a negative covenant which restricts a person from any kind of encumbrance over his assets or

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otherwise disposing them without the prior consent of the other person in whose favour he has given such an undertaking. The assessee submitted that negative lien does not provide to the lender , the right to sell the assets of the party. It ensures that the asset remains with the company during the currency of the loan, without any additional encumbrances or potential disposal. The assessee submitted that the negative lien does not impose any obligation upon assessee to reimburse Exim Bank in case of default by JEEBV & JEHBV or JEEVL. The assessee submitted that it is merely an undertaking that during currency of the loan, the assets/goods deposited against the loan shall not be charged without the banks permission. The assessee submitted that the operative subsidiaries of JEEBV allowed a negative lien on the Participating Interest in Oil and Gas Blocks held by the assessee and receivables thereof, only to provide additional comfort to the lender. Accordingly, the negative lien by the assessee does not provide any financial benefit/service to JEEBV and JEHBV. The assessee submitted that the said arrangement does not result in any additional obligation(current or future) for the assessee other than those which are included on account of ownership interest of the AE’s in the assessee. It was further submitted that the said arrangement does not have any impact on the profits, income , losses or assets of the assessee. Thus, it was submitted that the assessee should not be liable to comply with the requirements embodied by the TP provisions contained in Section 92 to 92F of the 1961 Act, read with Rule 10A to 10E of the 1962 Rules. The assessee enclosed copy of the loan agreements between the AEs and EXIM Bank, before the TPO. The assessee further submitted that it reported provision of negative lien in the Form No. 3CEB, but the same does not qualify to be an international transaction. The assessee submitted that no fee was charged from its AE. It was submitted that the assessee provided negative lien on all receivables and Participating Interest on all oil and

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gas Blocks held by it at the time of obtaining such loans i.e. August, 2011 and January, 2014. It was submitted that, thereafter, the borrower companies i.e. JEEBV and JEHBV were adjudged bankrupt vide order of Amsterdam District Court dated 22.09.2017 and appointed a bankruptcy Trustee. It was submitted that since then the affairs of JEEBV and JEHBV are being managed by such Bankruptcy Trustee and the liquidation process is still ongoing. It was submitted that Exim Bank then issued letter of invocation towards the Corporate Guarantor- JEEVPL for recovery of outstanding dues , but has not issued any communication towards assessee as the assessee was under no obligation to make good such loss incurred to the Exim Bank. Thus, it was claimed that the said negative lien provided by the assessee to Exim Bank did not provide any additional service to the lending bank ,and it was merely a part of Belt & Brace policy adopted. It was submitted that the lending bank has only resorted to covering a bundle of duplicative securities but in essence has got access to the assets ultimately owned and controlled by the borrower company and has not got access to any additional assets over and above the assets owned by the borrower. It was submitted that the said negative lien should not be treated as akin to Corporate Guarantee, as the Exim Bank has not get access to any additional assets pursuant to such Negative Lien. Thus, it was submitted that the said negative lien has not provided any access to any additional assets unlike the provisions of Corporate Guarantee. It was submitted that Exim Bank did not approach the assessee for reimbursing the losses incurred due to non payment of outstanding dues by the Borrower Companies. Thus, it was claimed that no fee was charged from AE’s by the assessee as is usually charged in the case of arrangement of Corporate Guarantee. The assessee relied upon judgment and order of Hon’ble Bombay High Court in the case of Bank of India Limited v. Rustom Fakirji Cowasjee , AIR 1955 BOM 419.The

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assessee further submitted that TPO has taken no adverse view wrt negative lien provided by the assessee to Exim Bank in respect of aforestated foreign currency term loan limit of US $ 50 Million taken by JEEBV in August, 2011, during the TP proceedings conducted for assessment year 2012-13. The assessee also relied upon the order passed by ITAT in the case of JEEVPL (Corporate Guarantor) for assessment year 2017-18, wherein the Tribunal held that where intimation of classification of borrower as NPA had been received in May, 2016, the guarantee arrangement ceased to exist since the beginning of the year, and the ITAT observed that consequently no international transaction existed since the beginning of the year and relief was provided to the taxpayer. This order was followed by ITAT for assessment year 2018-19. The assessee submitted that the aforesaid order of the ITAT shall be squarely applicable in the case of the assessee for the impugned assessment year 2022-23, and hence no Transfer Pricing adjustment is warranted. 3.5 The ld. TPO rejected the contentions of the assessee, and held that the negative lien provided by the assessee constitute International Transaction , and Arm Length corporate guarantee rate was worked out by ld. TPO by averaging the Corporate Guarantee rate of two banks viz. Tamil Nadu Mercantile Bank Limited which stood at 2.50% and SBI which stood @0.80% , thus average rate of 1.65% was applied by the TPO , wherein additions to the tune of Rs. 11,89,73,250/- by way of TO adjustment to compute ALP of the Corporate Guarantee provided ,was proposed by the ld. TPO. 4. The ld. AO passed draft assessment order wherein additions as proposed by the ld. TPO to the tune of Rs. 11,89,73,250/- by way of TP adjustment to compute ALP of the international transaction of providing negative lien by the assessee was

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incorporated in the draft assessment order dated 17.02.2025 passed by the AO u/s 144C(1) of the 1961 Act. 5. Aggrieved, the assessee filed objections before ld. DRP. Vide Directions dated 18.11.2025, the ld. DRP upheld that negative lien provided by the assessee in the instant case constitute international transaction as it is Corporate financial guarantee on the basis of which loans were granted by Exim Bank to the Associated Enterprises, and hence need to be benchmarked at Arms Length Price(ALP) as it falls within the scope of Explanation (i)(c) to Section 92 of the 1961 Act . The ld. DRP relied upon orders of Mumbai Tribunal in the case of Essar Shipping Limited v. DCIT in ITA No. 4719/Mum/2018 , and also in the case of Jubilant Energy Private Limited v. ACIT, in ITA No. 7602/Del/2017. So far as computation of ALP is concerned, the ld. DRP relied upon judgment and order of Hon’ble Delhi High Court in the case of CIT v. Cotton Naturals India Private Limited, reported in (2015) 55 taxmann.com 523(Del.HC), and directed that ALP of the afore-stated transaction be computed by applying LIBOR+ rate prevalent during the relevant period based on the credit rating of the AE’s. 6. Still Aggrieved, the assessee has filed an appeal with the Tribunal. At the outset, ld. Counsel for the assessee submitted that the issue in this appeal is covered by the order of the Tribunal in assessee’s own case for assessment year 2017-18 in ITA no. 1718/Del/2022, dated 08.10.2025. The ld. Counsel for the assessee submitted that the assessee is not pressing ground number 2 , which raised the challenge that the assessment order passed by the AO is barred by limitation u/s 153 vis-à-vis Section 144C of the 1961 Act, keeping in view judgment and order of Hon’ble Madras High Court in the case of CIT v. Roca Bathroom reported in (2022) 140 taxmann.com 304(Mad. HC). It was submitted that the assessee never provided any Guarantee. It was submitted that the assessee company is subsidiary of Foreign

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Entity based at Netherland which is its immediate parent company. The assessee is engaged in Oil and Gas Exploration , holding Production Sharing Contracts in the field of Oil and Gas Blocks. It was submitted that Export Import Bank of India(EXIM Bank) provided term loans to holding company of the assessee as well to holding company of its immediate holding company ( both based at Netherland) namely JEEBV and JEHBV. The final ultimate holding company of the assessee is based at India namely JEVPL , who provided Corporate Guarantee to Exim Bank wrt loans raised by JEEBV and JEHBV from Exim Bank. The assessee only provided Negative Lien to Exim Bank wrt aforesaid two loans. This negative lien extended over the Participating Interest held by the assessee in Oil and Gas Exploration Blocks as well on Receivables. It was submitted that the loans extended by Exim Bank were declared NPA in May, 2016.The said loans were not repaid and default took place. Exim Bank invoked Corporate Guarantee provided by JEVPL.It was submitted that JEEBV and JEHBV are both under liquidation. It was submitted that because of default, the continuation of service wrt negative lien provided by the assessee ceased to exist. It was submitted that the assessee did not receive any fee from its AE for providing negative lien. The value of international transaction is taken at Nil. Our attention was drawn to the order of ITAT in assessee’s own case for assessment year 2017-18 in ITA No.1718/Del/2022 vide order dated 08.10.2025. The ld. Counsel for the assessee also relied upon the order of the ITAT in the case of JE Energy Ventures Private Limited v. DCIT, in ITA no. 513/Del/2022, dated 05.07.2024.It was submitted that Revenue has filed an appeal u/s 260A of the 1961 Act with Hon’ble High Court against the aforesaid orders passed by the Tribunal, but the same is not yet admitted and is not listed so far. Our attention was also drawn to the order passed by ld. DRP, wherein ld. DRP followed the judgment and order of Hon’ble Delhi High Court in the case of

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Cotton Naturals(supra). It was submitted that ld. DRP erred in applying LIBOR+ rate prevalent during the relevant period based on the credit rating of the AE’s. It was submitted that TPO in its order giving effect applied interest rate of 4.589%(LIBOR 0.339% + 425 basis points) as directed by ld. DRP to compute ALP of international transaction with AE of the assessee of providing negative lien on its Participating Interest in Production Sharing Contracts and Receivables. It was submitted that the ld. TPO accepted that ALP of negative lien provided by the assessee in favour of its Foreign AE to be Nil for assessment year 2012-13, while passing TP order u/s 92CA(3) of the 1961 Act, dated 20.01.2016. (Page 311- 312/PB) . It was submitted that it is for the first time in assessment year 2017-18, the ld. TPO made TP additions wrt negative lien provided by the assessee in favour of the Exim Bank. 6.2 The ld. CIT-DR relied upon the orders of the authorities below, and submitted that order for assessment year 2017-18 passed by ITAT in assessee’s own case is in challenge before Hon’ble High Court. 7. We have considered rival contentions and perused the material on record. We have observed that the assessee is in the business of exploration and production of Oil and Gas. It has Participating Interest in eight oil and gas blocks in India , and one in Myanmar. The assessee has entered into Production Sharing Contract(PSC) jointly with various JV partners as one part and Ministry of Petroleum and Natural Gas (GOI) for blocks in India and with Myanmar and Oil and Gas enterprise for the block in Myanmar as other part for exploration of oil and gas in the following fields. Pursuant to the PSCs , unincorporated JV have been formed to undertake necessary economic activities for production of Oil and Gas. Thus, the assessee is an operating Company holding Real Assets in the form of Participating Interest in Oil and gas Exploration Blocks and Receivables. The assessee’s is immediate

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subsidiary of JEEBV based at Netherland. The assessee is step down subsidiary of JEHBV based at Netherland. Ultimate parent company of the assessee, JEEBV, as well JEHBV is JEEVL which is an Indian Company. Foreign currency term loans were taken by the Subsidiaries of JEEVL viz. JE Energy BV(JEEBV) & Jubilant Energy (Holdings) BV(JEHBV) from Export Import Bank of India , as follows:-  Foreign Currency Term Loan Limit of US$50 Million taken by JEEBV in August, 2011 for financing, exploration and development expenses incurred/to be incurred in various Oil Blocks of the Jubilant Group. Foreign Currency Term Loan Limit of US$45 Million taken by  JEHBV in January, 2014 for investments in the subsidiaries of JEHBV mainly for exploration , development and related activities in various operating companies owning Oil and Gas Assets. 7.2 In relation to the above foreign currency loans, JEEVPL had provided Corporate Guarantee to the lending bank i.e. Exim Bank on behalf of JEEBV and JEHBV. It is claimed by the assessee that pursuant to the Corporate Guarantee provided by JEEVPL, the assessee provided a negative lien on all its Receivables and Participating Interest (PI) of Oil and Gas Blocks held by the assessee. The assessee submitted that ‘Negative Lien’ refers to a negative covenant which restricts a person from any kind of encumbrance over his assets or otherwise disposing them without the prior consent of the other person in whose favour he has given such an undertaking. The assessee submitted that negative lien does not provide to the lender , the right to sell the assets of the party. It ensures that the asset remains with the company during the currency of the loan, without any additional encumbrances or potential disposal. The assessee submitted that the

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negative lien does not impose any obligation upon the assessee to reimburse Exim Bank in case of default by JEEBV & JEHBV or JEEVL. The assessee submitted that it is merely an undertaking that during currency of the loan, the assets/goods deposited against the loan shall not be charged without the banks permission. The assessee submitted that the operative subsidiaries of JEEBV allowed a negative lien on the PI and receivables thereof, only to provide additional comfort to the lender. It is claimed that the negative lien by the assessee does not provide any financial benefit/service to JEEBV and JEHBV. The assessee submitted that the said arrangement does not result in any additional obligation(current or future) for the assessee other than those which are included on account of ownership interest of the AE’s in the assessee. It was further submitted that the said arrangement does not have any impact on the profits, income , losses or assets of the assessee. Thus, it was submitted that the assessee should not be liable to comply with the requirements embodied by the TP provisions contained in Section 92 to 92F of the 1961 Act, read with Rule 10A to 10E of the 1962 Rules. Under these contextual background, it will be profitable at this stage to refer to the relevant portion of both the loan agreements entered into with Exim Bank as well security offered under these agreements, which are reproduced hereunder:

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7.3 Before we proceed further, it is important to understand the Corporate Structure as well underlying assets held by these entities viz. JEEVL (an India Company incorporated under the laws of India ) which is an immediate Holding Company of JEHBV (Company incorporated under laws of Netherland) , while afore-stated JEHBV(Company incorporated under laws of Netherland) is immediate Holding Company of JEEBV (Company incorporated under laws of Netherland) . Further , JEEBV (Company incorporated under laws of Netherland) is immediate Holding Company of the assessee (an India Company incorporated under the laws of India ) . Thus, JEEVL is ultimate Holding Company of the assessee, while the assessee is step down subsidiary of JEHBV. As is emerging from records, JEEVL, JEHBV and JEEBV are investments companies, as they , hold investments in their subsidiaries, step down subsidiaries etc. . It is to be understood that these investments by way of subscription to share capital of subsidiaries/step down subsidiaries , which is appearing on the assets side of the

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Balance Sheets of these aforestated investments companies(Holding Companies Balance Sheet) as an investments in share capital of their subsidiaries/step down subsidiaries. The investment in share capital is basically holding of a financial instruments which derives its value from the underneath assets viz. Real Assets be it tangible or intangibles. These investments companies are not owning any underneath Real assets, and are merely holding share investments in the Subsidiary/step down subsidiaries Companies including operating subsidiary viz. the assessee, wherein these share investments are financial instruments deriving their value from underneath Real Assets which are owned by the assessee which is an operating company, and the Real Assets owned by the assessee are in the form of Participating Interest in eight Oil and Gas Exploration Blocks situated in India as well one in Myanmar along with Receivables. No doubt, these investment companies through their share investments in the assessee could wield control over management and affairs of the assessee through nomination on Board of Directors, Exercising Control through Shareholder Meetings/Resolution etc as well indirect ownership of the operating assets owned by the assessee through exercise of rights and privileges of being shareholders in the assessee company, but , however the facts remain that the assessee is a separate legal entity incorporated under the laws of India distinct and separate from its shareholders who may be owning the entire share capital of the assessee, and the real dominion over Real assets viz. Participating Interest in Production Sharing Contract in Oil and Gas Exploration Block and Receivable including power to dispose off, alienate, create charge etc. are enjoyed by the assessee, as these Real Assets are directly owned by the assessee. Thus, the doctrine of Corportae Veil will set in , which of course can be lifted under certain circumstances, but in the normal circumstances, the assessee is to be treated as separate and distinct entity from its holding company who may be

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owning its entire shareholding, and shall be protected under the Doctrine of Corporate Veil. Reference is drawn to Celebrated Classic decision of House of Lords in the case of Salomon v. Salomon and Company Limited(1897) AC 22 , (1896) UKHL1. We are conscious of the fact that principles of Res-judicata are not applicable to income-tax proceedings, but however, consistency is to be maintained. It is also true that two wrongs will never make one right. With this background, we shall proceed to analyse the loan agreement and security clauses in the loan agreement and the undertaking for negative lien executed by the assessee. The Dollar Loan Agreement(PB/Page 208-238) dated 01.08.2011 executed Between Jubilant Energy NV(Now Known as Jubilant Energy B.V., the Netherlands viz. JEEBV), the Netherlands and Export Import Bank of India stipulates providing of financial assistance upto limit of US$50 Million by Exim Bank for part financing of JEEBV Oil Exploration, development and production expenses incurred/to be incurred in various oil and gas assets of the borrower or its subsidiary companies in India and overseas. This agreement , inter-alia , provide for furnishing of security by the Borrower, which , inter-alia, provides furnishing of Corporate Guarantee by JEEVL(earlier known as Jubilant Enpro Private Limited) which shall not exceed the amount raised from a) all investment by JEEVL in its subsidiary Jubilant Energy (Holding ) BV(now known as JEHBV) (b) The assets and investments held by its said subsidiary or through its step-down subsidiary(Page 217/PB/Schedule III(clause ii) to Dollar Loan Agreement dated 01.08.2011-relevant extract reproduced in this order). It is pertinent to mention that JEHBV is subsidiary of JEEVL, while JEEBV is subsidiary of JEHBV . Further, the assessee is subsidiary of JEEBV. Thus, through Corporate Guarantee executed by the ultimate parent company i.e. JEEVL in favour of Exim Bank to secure the financial assistance of US$50 Million extended by Exim Bank vide letter dated

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01.08.2011 in favour of JEEBV, Exim Bank has extended its charge over the assets and investments of the subsidiaries including step down subsidiaries of JEEVL. Thus, this Corporate Guarantee will , inter-alia, cover valuation of operating assets owned by the assessee. But, there is a Doctrine of Corporate Veil which will set in , and the assessee being independent company duly incorporated under the laws of India being a separate legal entity can still independently create charge over its assets or even dispose off or deal with its assets in the manner it may like, which could also entail selling / creating charge in favour of third party in a collusive move by undervaluing such transaction , which could compromise security held by Exim Bank by way of Corporate Guarantee issued by JEEVL i.e. the ultimate holding company of the assessee. Thus, in order to perfect its charge , and to ensure that the value of its security does not get compromised by any of the unilateral decision of the assessee being a Separate legal entity, Exim Bank stipulated creation and execution of negative lien by the assessee company on its present and future participating interest and receivables pertaining to oil and gas blocks in favour of Exim Bank (Schedule III(clause v) to Dollar Loan Agreement dated 01.08.2011(also reproduced in this order)). The assessee executed undertaking for negative lien dated 25.09.2013 in favour of Exim Bank, which is placed in Paper Book at Page 145-150, wherein the assessee agreed, confirmed and undertook not to create any further charge over participating interest in Oil and Gas Exploration Blocks owned by it, and also not to create any further charge in respect of present and future receivables from its participating interest in the oil and gas exploration blocks, and if the same is required to be done , it will require prior written consent of Exim Bank. Thus, to say that the negative lien is created merely in pursuance to Corporate Guarantee given by JEEVL shall be undermining the true spirit and purpose of creating negative lien by the assessee in favour of Exim

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Bank.The negative lien is a valuable security held by Exim Bank , and in the absence of the same, security held by Exim Bank by way of Corporate Guarantee issued by JEEVL in their favour , was not complete as the underlying real assets are owned by operating subsidiary viz. The assessee, while JEEVL, JEHBV and JEEBV , are merely investment companies holding financial instruments, while real assets are held by the operating subsidiary viz. The assessee. The assessee has not borrowed any money from Exim Bank, and it was under no obligation to create any negative lien in favour of Exim Bank. There was no bounden obligation on the assessee not to dispose off or create charge with respect to assets owned by it in favour of any party merely on the basis that JEEVL has issued Corporate Guarantee , unless the assessee was made confirming party to the loan agreement or to the Corporate guarantee issued by JEEVL in favour of Exim Bank, but now the Exim Bank stipulated for negative lien to be executed by the assessee. That is the reason why Exim Bank stipulated for creation of negative lien by operating company owning real assets viz. Participating interest in Oil and Gas Exploration Block and Receivables , in their favour. Rather it is because of this negative lien so created by the assessee, which is one of main core strength based on which , the Exim Bank has granted loans to JEEBV. The real strength and value of Corporate Guarantee issued by JEEVL or even creation of charge on the shares held by the investments companies in the instant case is being derived from the Real assets viz. Participating Interest in eight Oil and Gas Exploration Blocks in India and one in Mayanmar, as well Receivables owned by the operating company viz. the assessee. Thus, negative lien is a valuable right. The assessee being under no obligation to issue any such negative lien in favour of Exim Bank, as it is not the borrower of the financial assistance granted by Exim Bank. Issuance of undertaking of negative lien by the assessee in favour of Exim Bank to secure loan granted by Exim Bank

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in favour of its holding company JEEBV, was an international transaction entered into by the assessee with its AE, which is covered under Explanation 1(c) Section 92 of the 1961 Act . Much is said that even if it is assumed that said negative lien is international transaction , then also the service has ceased to exist because the loan has become NPA effective from May, 2016, and hence no TP adjustment by way of computing ALP of the said negative lien can be computed. It is said that JEEBV is under state of bankruptcy under laws of Netherland, and bankruptcy trustee is appointed by Amsterdam District Court , copy of order dated 22.09.2017 is enclosed(Page 206/207 of PB). It is also stated that Exim Bank has invoked Corporate Guarantee issued by JEEVL. We are afraid that this contention of the assessee lacks merit, Once bankruptcy trustee is appointed, he will take all appropriate steps to protect the assets and interest of the company under Bankruptcy. The existing liabilities , obligations , interests and assets of such company shall be identified and dealt with by the Bankruptcy Trustee according to laws, which may lead to various possible solutions such as existing promoters coming forward and settling the dues, sale of investments held by the borrower or Corporate Guarantee provider, and substituting the promoters by brining new promoter and managements who can infuse funds to clear the liabilities, and so on and so forth with the last option being to liquidate the company under Bankruptcy . Thus, the negative lien held by Exim Bank shall continue to operate in their favour even if JEEBV or JEHBV has come under bankruptcy. Thus, this contention of the assessee that the service under negative lien has ceased owing to JEEBV or JEHBV coming under Bankruptcy, stand rejected. Broadly, similar are the covenants with respect to second dollar loan agreement dated 09.01.2014 entered into between JEHBV and Exim Bank, except for few modifications such as taking additionally an undertaking for non-disposal of shareholding by various

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investments companies in subsidiaries/ associated company which has been taken as an additional security by Exim Bank , pledge of such share holding in favour of Exim Bank etc. . Even if charge on investments held in shares by JEHBV and JEEBV is created by way of undertaking/pledge of such shareholding by the borrower, its holding company, its subsidiary etc in favour of Exim Bank , but then also said charge/pledge is not perfect until the negative lien is created on the real assets owned by the operating company viz. the assessee. Thus, our decision aforesaid shall wrt loan raised in August 2011 apply to this second loan raised by JEHBV in January 2014, so far of the adjudication of the issue before us is concerned. Thus, the assessee has by creating negative lien on its Participating Interest in Oil and Gas Block Explorations and Receivables , has majorly crippled its capacity to borrow and expand. It will also have negative impact on credit rating enjoyed by the assessee, and consequently on the interest rates to be charged for borrowings to be made by the assessee which shall now be charged higher interest rates being applicable to unsecured loans, as all its Participating Interest in Oil and Gas Exploration Block as well receivables are put under negative lien in favour of Exim Bank ,and no fresh charge can be created except with written prior permission of Exim Bank. Thus, the assessee may be required to borrow at higher rate of interest vis-a-vis interest rate at which it could have borrowed if no negative lien existed as the assessee could have offered security such as Participating interest as well Receivable against loans to be raised, but now with aforesaid negative lien , the higher interest rate as applicable to unsecured loans shall be payable. Further, the Borrowing Companies viz. JEHBV and JEEBV have raised loans from Exim Bank, and they are under no obligation to invest such funds for the benefit of the assessee. They have freedom to invest in its exploration , development and production expenses incurred/to be incurred in various oil and

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gas assets of the Borrower or its subsidiaries in India or overseas. These Borrowing Companies will benefit from expansion in oil and gas blocks either directly or through their subsidiaries/step down subsidiaries , which will lead to enhanced profits and consequently enhanced valuations of their investment, for no ostensible benefit which may accrue to the assessee but rather prejudice is caused to the assessee by way of negative lien on its Participating Interest and Receivable. Thus, this is the service provided by the assessee to its AE’s as the negative lien is provided in favour of Exim Bank on behalf of its AE’s. Thus, the assessee need to be compensated for such negative lien , which is an international transaction , at Arms Length Price. So far as computation of ALP of the international transaction of providing negative lien, we are of the considered view that the matter need to be restored back to the file of the AO/TPO to compute afresh ALP of the international transaction entered into by the assessee with its AE wrt providing of negative lien in favour of Exim Bank on behalf of JEHBV and JEEBV , in accordance with applicable Transfer Pricing Provisions. We have observed that both the TPO as well ld. DRP erred in computing ALP, the TPO applied average rates for bank guarantees charged by the two Banks namely TMB and SBI , while the ld. DRP applied ratio of judgment and order of Hon’ble Delhi High Court in the case of Cotton Naturals(supra) which concerns itself with the loans granted to AE’s , while in the instant case the assessee has created negative lien on Participating Interest in Oil and Gas Exploration Blocks and Receivables, which is itself creating negative lien onsubstantial business undertaking crippling its capacity to expand and to borrow, and which may entail itself to higher borrowing costs as its substantial undertaking got subjected to negative lien. Thus, the ALP shall be computed in accordance with applicable TP Provisions , keeping in view aforesaid factual

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context. Thus, the appeal of the assessee is allowed for statistical purposes in the manner as stipulated above . We order accordingly. 8. In the result, appeal of the assessee is allowed for statistical purposes. Order is pronounced in the Open Court on 19.08.2026.

Sd/- Sd/- /- (SUDHIR KUMAR) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:19.08.2026 *PK, Sr. Ps* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI