GARWARE FULFLEX INDIA PVT LTD ,MUMBAI vs. DCIT, CIRCLE 1(1)(1), MUMBAI

PER OM PRAKASH KANT, AM This appeal by the assessee is directed against final assessment order dated 28.10.2024 passed by the Ld. Dy. Commissioner of Income-tax, Circle 1(1)(1), Mumbai [hereinafter shall be referred as ‘Assessing Officer’] for assessment year 2021- 22, pursuant to the direction dated 13.09.2024 of the Ld. Dispute

Resolution Panel (DR appeal are reproduce
On the facts a Hon'ble DRP
AO have:
I. Legal Grou
1. Final Asse
Erred in pas read with sec dated 28 Oct section 153 of time limit for aforesaid ass quashed.
II. Grounds adjustment
2. Addition t adjustment b documentatio
Erred in prop of couple of considering th
Appellant to d international
3. In connec
Ld. TPO and transaction warranting a Erred and fai from the inte linked transa on the overa transaction is study report international

Garwar
ITA

RP). The grounds raised by the ed as under:
and in the circumstances of the case and and consequentially, the learned TPO a und of Appeal essment order is time barred ssing final assessment order under sec ction 144C(13) of the Act ('Final Assessm tober 2024 beyond the time limit prescr of the Act (i.e. by 31 December 2023), wh r passing the assessment order and sessment order is time barred and li s of Appeal in respect of transfe to the total income on account of trans by incorrectly not considering the an n posing an adjustment of INR 65,42,860 t international transactions of the Appell he analysis and documentation maintai determine the arm's length price ('ALP') o transactions.
ction with interest on overdue receiv d Ld. AO have erred in considering as a separate international tr a separate analysis iled to appreciate that receivable/ payab rnational transactions has been treated ction to other transactions and have been all basis considering TNMM, which ju s carried out at arm's length price as maintained by Appellant and is not transaction warranting any separate ana re Fulflex India Pvt. Ltd
2
A No. 6751/MUM/2024
e assessee in its d in law, the and learned ction 143(3) ment Order') ribed under hich is outer hence, the iable to be er pricing sfer pricing alysis and to the value lant by not ined by the of aforesaid vables, the g the said ransaction ble resulting d as closely n evaluated ustifies the per the TP a separate alysis.

declaring total incom revised on 28.03.202
income filed by the Processing Centre(CP income was determ return of income file scrutiny assessment
Act, 1961 (in short ‘th
3.1 The assessee co of latex natural rubb
USA Garflex Inc, US
Singapore were the A view of international
AEs, the Assessing
Pricing Officer (TPO) arm’s length price of the assessee. The Ld dated 28.10.2023 pr of transactions repor
Sl. No.
Natu
1. Guar
2. Inter
Total
3.2 The Assessing pricing adjustment
Garwar
ITA me at Rs.125,56,69,724/- whi
22 retaining the same income assessee was processed by PC), Bengaluru on 27.10.2022
mined at Rs.127,93,62,750/-.
ed by the assessee was selecte t and statutory notices under he Act’) were issued and complie ompany is a leading manufactur ber and elastic rubber products
SA and Garware Fulflex Intern
Associated Enterprises(AEs) of t transactions reported by the a Officer made reference to th u/s 92CA(1) of the Act for d f the international transactions d. TPO in order passed u/s 92C roposed following two adjustmen ted by the assessee:
ure of Transaction
Adjustm rantee Commission
5,42,59
rest on Overdue receivables
60,00,2
l
65,42,8
Officer taking into conside proposed by the Ld. TPO, is re Fulflex India Pvt. Ltd
5
A No. 6751/MUM/2024
ich was further
. The return of the Centralized
2 wherein total
Thereafter, the ed for complete the Income-tax ed with.
rer and exporter
. Elastomer Inc, ational Pte Ltd.
the assessee. In assessee with its he Ld. Transfer determination of entered into by CA(3) of the Act nts to the value ment Amount (INR)
99/-
261/-
860/- eration transfer ssued the draft assessment order o against the draft asse succeed. Pursuant to Officer passed the im transfer pricing adj amounting to Rs.5,42
receivables amountin in appeal before us b
4. The Ld. Counse pages 1 to 734 and 1224. 5. The ground Nos transfer pricing adju of the ‘interest on ov for the assessee subm not a separate inte analysis.
5.1 The brief facts details of the inter assessee, along with transactions, have b order of the learned reference, details of s
Garwar
ITA n 27.12.2023. The assessee essment order before the Ld. DR o the direction of the Ld. DRP mpugned final assessment ord ustment, firstly, for guarant
2,599/- and, secondly, for inte ng to Rs.60,00,260/-. Aggrieved, y way of grounds as reproduced el for the assessee filed a paper case law compilation containin s. 2 to 6 of the appeal of the ass ustment in relation to internatio verdue receivables’. Before us, t mitted that interest on overdue ernational transaction warrant relevant to the issue in dispu rnational transactions entered h the method adopted for benc been tabulated in paragraphs
Transfer Pricing Officer (“Ld. T said transactions are reproduced re Fulflex India Pvt. Ltd
6
A No. 6751/MUM/2024
filed objections
RP but could not P, the Assessing er after making tee commission erest on overdue
, the assessee is d above.
book containing ng pages 735 to sessee relates to onal transaction the Ld. Counsel receivables was ting a separate ute are that the d into by the chmarking such 2 and 3 of the TPO”). For ready d as under:

Nature of Transacti
Export of manufactu products to AEs
' ::
Purchase of raw mat
' ■
Commission paid to Availing Managemen
Services from AEs
Nature of Transactio
Provision of Managem
Services to AEs
Purchase of Assets fr
Dividend received fro
Issue of Equity Shar
Provision of Corporat behalf of AEs
Recovery of set-up fe
(for Corporate Guara
Recovery of bank rela corporate guarantee)
Garwar
ITA ions
Amount as per
Form 3CEB
Meth for Benc ured elastic
238,48,00,261
TNM terials from AEs
6,15,46,460
TNM
AE
1,83,04,099
TNM nt Support
27,59,349
TNM ns
Amount as per
Form 3CEB
Meth for Benc ment Support
53,94,416
TNM rom AEs
21,61,519
TNM om AEs
4,43,97,412
Othe es
5,00,00,000
Othe te Guarantee on Nil
Not a ees paid to bank antee) from AEs
18,25,000
Actu ated expenses (for ) from AEs
4,47,737
Actu re Fulflex India Pvt. Ltd
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A No. 6751/MUM/2024
hod adopted chmarking
MM
MM
MM
MM hod adopted chmarking
MM
MM er Method er Method applicable ual cost ual cost

Recovery of Freight E
AEs
Reimbursement of ex
5.2 The Ld. TPO d
(“MAM”) applied by international transa
Length Price (“ALP”) outstanding trade re had been realised be assessee. It was furth the assessee on such to the Ld. TPO, t constituted a separat of the Act, for which For this purpose, th specified under clau
Income-tax Rules, 19
plus 400 basis point interest. The Ld. TPO assessee, requiring i on receivables outsta not be undertaken. T average credit period
Garwar
ITA

Expenses from 2,85,24,425
Othe xpenses to AEs
11,83,050
Actu did not disturb the Most Appr the assessee for benchmarkin ctions and for determination
. However, the Ld. TPO observ eceivables from Associated Ent eyond the normal credit period her noted that no interest had b h delayed realisation of receiva the delayed realisation of tra te international transaction un the assessee had failed to dete he Ld. TPO relied on the Saf use (v) of sub-rule (2A) of Ru
962 (“the Rules”), prescribing si s as on 30.09.2020 as the arm
O accordingly issued a show cau t to explain why the benchmar anding for a period exceeding
The contention of the assessee d, inclusive of invoices settled w re Fulflex India Pvt. Ltd
8
A No. 6751/MUM/2024
er method ual Cost ropriate Method ng the aforesaid of their Arm’s ved that certain terprises (“AEs”) adopted by the been charged by ables. According ade receivables der section 92B ermine the ALP.
fe Harbour rate ule 10TD of the ix-month LIBOR m’s length rate of use notice to the rking of interest
60 days should to consider the within 60 days, was rejected. Thereaf portion of trade rec period, by applying s plus 400 basis point the Ld. TPO undertoo
AEs, as available at herein for brevity). O length interest on tra
5.3 The learned Disp action of the Ld. T receivables as a se meaning of section 9
doing so, the Pane coordinate Benches
Systems (India) (P.) L
Trib.), Satyam Ventur
362/Hyd/2021, date v. ACIT [2023] 148
Integrated Products taxmann.com 578 (B held that outstandi
(“AEs”), when allowed
30 days), constitute a independent benchm
Garwar
ITA fter, the Ld. TPO computed the ceivables which exceeded the six-month LIBOR (0.2597% as ts, aggregating to 4.2597%. Fo ok invoice-wise analysis of the r pages 13 to 32 of his order ( n this basis, the Ld. TPO determ ade receivables at ₹60,00,261/-.
pute Resolution Panel (“Ld. DR
TPO in treating the interest eparate international transact
92B of the Income-tax Act, 196
el relied upon a series of de of the Tribunal, inter alia,
Ltd. v. ITO [2022] 142 taxmann.c re Engineering Services (P.) Ltd.
ed 28-06-2022], Apache Footwea taxmann.com 371 (Hyd. – Tri
India Sales (P.) Ltd. v. DC
Bang. – Trib.), wherein it has be ing receivables from Associat d beyond the stipulated credit p a separate international transac marking, and that the levy of not re Fulflex India Pvt. Ltd
9
A No. 6751/MUM/2024
interest on that e 60-day credit on 30.09.2020) or this purpose, receivables from (not reproduced mined the arm’s
RP”) upheld the on outstanding tion within the 61 (“the Act”). In ecisions of the Zeta Interactive com 202 (Hyd. –
v. ACIT [ITA No.
ar India (P.) Ltd.
ib.), and Maxim
CIT [2022] 140
een consistently ted Enterprises period (generally ction warranting tional interest at 6 per cent is fair and aforesaid decisions, t plus basis points as considered and reject
5.4 The Ld. DRP fur assessee on the judg
CIT-2 v. Bechtel Ind
2016] was misplaced lay down any bindin substantial question subsequent pronoun
McKinsey Knowledge taxmann.com 237 (D
Pr. CIT v. AMD India
2018], as well as the CIT v. Patni Compute
Taxman 108 (Bom.), receivables from transaction.
5.5 The Ld. DRP fu consistent pattern payments from AEs and no interest was Garwar
ITA d reasonable. The Ld. DRP obse the contention of the assessees s the arm’s length rate had b ted.
rther recorded that the relianc gment of the Hon’ble Delhi Hi ia Pvt. Ltd. [ITA No. 379/2016
d, as in Bechtel the Hon’ble Hig ng ratio on the issue but mere n of law arose for consideratio ncements of the Hon’ble Delhi e Centre India (P.) Ltd. v. Pr.
Delhi), of the Hon’ble Karnataka a (P.) Ltd. [ITA No. 274 of 2018
e judgment of the juri ictiona er Systems Ltd. [2013] 33 taxm
, support the view that delaye
AEs constitutes a taxable further observed that the reco in the conduct of the ass were not collected within the s charged on such delayed col re Fulflex India Pvt. Ltd
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A No. 6751/MUM/2024
erved that in the to adopt LIBOR been specifically e placed by the gh Court in Pr.
6, dated 21-07- gh Court did not ely held that no on. In contrast,
High Court in CIT [2018] 96
a High Court in 8, dated 31-08- al High Court in mann.com 3/215
ed realisation of e international ord disclosed a sessee whereby stipulated time, llections. In the Panel’s view, deferme distinct internationa sale of goods or serv accordance with Ch rejected the assess characterised” any t were recognised by la
5.6 The Ld. DRP e under Chapter X are (SAAR), intended t transactions, and tha not arise in this conte
5.7 The assessee’s f adjustment had been the Transactional N adjustment for inter rejected. The Ld. DR any cogent explanati trade receivables/pa assessee or the comp for subsuming inter adjustment. The Pa
Garwar
ITA ent in collection of trading deb al transaction, independent of vices, and requires separate be hapter X of the Act. The Pan ee’s allegation that the Ld.
transaction, holding that dela aw as separate transactions per mphasised that transfer pricin in the nature of Specific Anti-A to counteract tax avoidance at the question of notional or re ext.
further objection, that once a n made in the determination of Net Margin Method (“TNMM”
rest on receivables was warra
RP found that the assessee had ion or computation of monthly ayables or the capital position parables, and therefore no case est on receivables within the anel reiterated that interest re Fulflex India Pvt. Ltd
11
A No. 6751/MUM/2024
bts represents a the underlying enchmarking in nel categorically
TPO had “re- ayed receivables se.
ng adjustments
Avoidance Rules in controlled eal income does working capital f margins under ”), no separate anted, was also d not furnished trade and non- n of either the e was made out working capital on receivables constituted a sep independent benchm
5.8 The Ld. DRP als the “net” receivable the purposes of com statutory definition u term “receivable” and 5.9 In conclusion, th the Ld. TPO in apply of the Act as the Mo delayed receivables, a six-month LIBOR p adjustment.
5.10 Before us, the submissions made b that impact of delay capital/ pricing vis- assessee relied on the Ltd. ITA 765/2016
Co-ordinate Bench of India Pvt. Ltd. v.
assessment year 202
of the Co-ordinate Be Garwar
ITA parate international transac marking.
so rejected the plea of the asses position (i.e., receivables minu mputing the ALP adjustment, h under the Explanation to sectio d not “net receivable”.
he Ld. DRP upheld the methodo ying the “other method” under s ost Appropriate Method for ben and affirmed the arm’s length ra plus 400 basis points for ld. counsel for the assessee before the Ld. DRP. In suppor yed AE receivable got subsum
-a-vis comparables, the Ld. C e decision of PCIT v. Kusum H for assessment year 2010-11
f the Tribunal in the case of Acq
. DCIT in ITA No. 4817/M
20-21. The assessee also relied ench of the Tribunal in the case re Fulflex India Pvt. Ltd
12
A No. 6751/MUM/2024
ction requiring ssee to consider us payables) for holding that the on 92B uses the ology adopted by section 92C(1)(f) nchmarking the ate of interest as computing the e relied on the rt of contention med in working
Counsel for the ealth Care Pvt.
and decision of quity Solutions
Mum/2024 for on the decision e of ACIT v. M/s

Instas Pharmaceuti assessment year 201
subsequent years, no 5.11 On the contrar relied on the decision grounds raised by the 6. The ld Counsel the ground challengi on receivables. In sum realization of receiva international transa underlying sale/ser benchmarked (b) an subsumed in the Transactional Net M debt free entity with unwarranted and (d comparable to or s customers, negating
6.1 The Ld. DR rebu written synopsis of h
7. We have heard t the assessee and the Garwar
ITA icals Ltd. in ITA No. 281/
15-16. The ld Counsel also su o addition has been made on thi ry, the Ld. Departmental Repr ns referred by the ld DRP and e assessee and filed a written su l for the assessee made extensiv ing the transfer pricing adjustm mmary the assessee contended ables from AEs does not consti action since they are closely rvices transactions, which ny notional interest on such r working capital adjustmen
Margin Method (TNMM) (c) the h no interest cost and hence a d) the credit period extended t horter than that for indepe any inference of undue benefit t utted all the arguments of ld AR is arguments, which is place on the rival submissions of the lear learned Departmental Represen re Fulflex India Pvt. Ltd
13
A No. 6751/MUM/2024
/Ahd/2021 for ubmitted that in is issue.
resentative (DR) objected to the ubmission.
ve arguments on ment of interest that (a) delayed itute a separate linked to the were already receivables was nt under the assessee being djustment was to the AEs was ndent (non-AE) to AEs.
R and also filed a n record.
rned counsel for ntative at length and have carefully p present case, the Tr portion of receivables outstanding beyond constituting a sep meaning of section 9
has determined its a at the rate of six-mo
Resolution Panel (“D noting that the com invoice basis, restric period beyond the ag and eliminating arbit
7.1 The contention interest on overdue r transaction per se, b sale transactions, wh
Transactional Net M warrant a separate receivables beyond th to the primary inte rendering of services characterised as a d
92B of the Act. It wa
Garwar
ITA erused the material available o ransfer Pricing Officer (“TPO”) s from Associated Enterprises (“A d the agreed credit period o arate international transactio
2B of the Income-tax Act, 1961
arm’s length price by imputing i nth LIBOR plus 400 basis poin
DRP”) has upheld the adjustm mputation was carried out on cting the imputation of intere greed credit term, thereby ensu trariness.
advanced on behalf of the a receivables does not constitute a but is inextricably linked with hich have already been benchma
Margin Method (“TNMM”), and analysis. According to the le he stipulated credit period are m ernational transactions of sal s, and any notional interest the distinct international transaction as urged that clause (i)(c) of the re Fulflex India Pvt. Ltd
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A No. 6751/MUM/2024
n record. In the has treated the AEs”) remaining of 60 days as on within the (“the Act”), and interest thereon nts. The Dispute ment so made, an invoice-by- est only to the uring objectivity assessee is that an international the underlying arked under the d hence do not earned counsel, merely incidental le of goods or ereon cannot be n under section e Explanation to section 92B—introd retrospective effect fr conjunction with “ca rule of eju em gen capital financing or b transactions, not tho
7.2 Per contra, the reliance on the statut to section 92B explic including … deferre arising during the c trade receivables from amendment of 2012, as a form of capita arm’s length compen of this Explanation ex
[Explanation.
(i) the express a. The purcha b. The purcha c. capital fina borrowing, le securities or a receivable course of bu
Garwar
ITA duced by the Finance
Act rom 1 April 2002—uses the term apital financing”, and therefor neris, only those receivables in borrowings should be regarded se arising from trading transact learned Departmental Represe tory provisions, submitted that citly brings within its ambit “ca ed payment or receivable or a course of business”, thereby c m AEs. It was argued that, post
, overdue receivables are statut al financing, necessitating ben nsation in the form of interest. T xplicitly provides that the expre
For the removal of doubts, it is hereby cla sion "international transaction" shall inclu ase...
ase...
ancing, including any type of long-term ending or guarantee, purchase or sale o any type of advance, payments or deferre or any other debt arising usiness.”
re Fulflex India Pvt. Ltd
15
A No. 6751/MUM/2024
t,
2012, with m “receivable” in re, applying the n the nature of as international tions.
entative, placing the Explanation apital financing, any other debt overing delayed the clarificatory torily recognised nchmarking and The Clause (i)(c) ssion:
arified that- ude- or short-term of marketable ed payment or during the 7.3 On a plain read the considered opinio of a debt arising dur the statutory defin legislature, by way o that such transac determination under accept the assessee’s
“receivable” is assoc course of business”, capital loans. The T characterised the ex transaction and benc
7.4 It was next cont is already subsumed
TNMM, since delaye creditor, which is co however, countered such cost is ordinari and failure to benc distort the arm’s leng
7.5 Having conside that while a properly
Garwar
ITA ing of the Explanation to section on that delayed receivables, bein ing the course of business, fall nition of an international tr of the 2012 amendment, has m ctions are liable to arm’s r section 92C. We are, there s plea founded on eju em gene iated with “any other debt ari
, and is not confined solely to TPO and the DRP, in our vie xtended credit period as an im chmarked it accordingly.
tended that any notional interes in the working capital adjustm ed collection imposes a financi ompensated through higher ma that beyond the arm’s length ily recovered through explicit in chmark delayed receivables se gth price.
red the rival submissions, we y computed working capital adj re Fulflex India Pvt. Ltd
16
A No. 6751/MUM/2024
n 92B, we are of ng in the nature squarely within ansaction. The made it explicit length price fore, unable to eris, as the word sing during the o borrowings or w, have rightly mplicit financing st on receivables ent made under ing cost on the argins. The DR, h credit period, nterest charges, eparately would are of the view djustment under TNMM as held in the Acquity Solutions Ind the need for a separa only be recognised computation of mon and the comparables the industry standar demonstrably captur case, the assessee comparables nor dem factors in abnormal d
7.6 We find merit figures, being year variations or identif
Moreover, receivables are indiscriminately circumstances, worki serve distinct purpos form of extended cre interest is warranted
7.7 The Ld. DRP has furnish proper work assessee and the co
Garwar
ITA e case of Kusum health care p dia P Ltd (supra) may, in certain ate interest adjustment, such su if: (i) the assessee has furni nthly trade receivables and pay s; (ii) the receivables in question rd arm’s length period; and (iii) res the impact of such delays.
has neither provided invoice monstrated that its working cap delays beyond the industry norm in the DRP’s observation that r-end snapshots, do not re fy delays beyond the normal s pending for less than and mor y aggregated in such da ing capital adjustment and inte ses; where a specific financing edit is identified, a separate b
.
s correctly observed that the as king capital adjustment to the omparable, which could obviat re Fulflex India Pvt. Ltd
17
A No. 6751/MUM/2024
Ltd (supra) and n cases, obviate ubsumption can shed a reliable yables for itself n do not exceed the adjustment
In the present e-level data for pital adjustment m.
t balance sheet flect intra-year l credit period.
re than one year ata.
In these erest adjustment g element in the enchmarking of ssessee failed to margins of the te the need for interest adjustment.
working capital adju assessee never quan documentation. Any the industry standar
As in the balance sh and the less than 1 y working capital a international transa particularly beyond relied upon by the industrial standard p on facts in the insta the each transaction periods for which del the assessee are acco
7.8 The assessee fa adjusted margins sub When the assessee it working capital adj comparables, it cann into consideration w length valuation of t
Garwar
ITA

The assessee alleged the TPO ustment to the comparable m ntified the working capital adj y abnormal delay in realising th rd period is not captured by the eet receivables pending for mor year both are being treated at pa adjustment don’t take into action of interest at delay the industrial standard period assessee covers the delay wit period and therefore, same are ant case, the Assessing Officer of receivable and computed the lay was exceeding 60 days. Thu ordingly rejected.
ailed to substantiate that the bsume any interest on outstand tself has not computed such co usted margin of the tested not find fault with the Ld. TPO working capital adjusted marg the purchase or sales transacti re Fulflex India Pvt. Ltd
18
A No. 6751/MUM/2024
for not granting margin but the justment in its he debtor above e balance sheet.
re than one year ar and therefore, account the yed receivables d. The decisions hin the normal distinguishable has considered e interest on the s contentions of working capital ding receivables.
mparison of the party with the O for not taking gin while arm’s ion to avoid the chargeability of the international transac
7.9 We also note tha an invoice-by-invoice portion of receivab excluding the agreed
Interest was compu realisation, at the rat rate drawn from the with Rule 10AB of th arm’s length outcom transfer pricing fram periods of compliance
7.10 It was the ass
(including those paid
TPO rightly focused o the transaction-wis computation, the benchmarking metho
7.11 The plea that th incurs no actual cos provisions are not c aimed at determinin
Garwar
ITA interest on overdue receivable ction.
at the TPO’s methodology was p e approach and charging inter bles outstanding beyond 60
d credit term already embedded uted prospectively from Day 6
te of six-month LIBOR plus 400
e Safe Harbour Rules under R he Income-tax Rules, 1962, as me. This granular approach ac mework and avoids distortion e with those of delay.
sessee who sought to average d within time) to dilute the impa on each specific instance of dela se analysis and correspon
DRP has upheld a fair a od.
he assessee is a debt-free entit st of funds is devoid of merit. T contingent upon actual expend ng the price which would have re Fulflex India Pvt. Ltd
19
A No. 6751/MUM/2024
e as a separate precise, adopting est only on the days, thereby d in the pricing.
61 until actual
0 basis points, a Rule 10TD, read indicative of an ccords with the n by averaging receivable days act, whereas the ay. By affirming nding interest and defensible ty and therefore
Transfer pricing diture; they are e been charged between independen
Even a debt-free ind charge interest for borrowings is therefo
7.12 Regarding the a AE receivables, we f onus of establishing contended that its r that with non-AE cu
AE receivables were receivables were outs the assessee, it did n credit period. The as comparison no notio receivables. The argu two fold reasons. T cycles is unsubstant averages without inv timelines for non-AE assume that third-p delays. Moreover the benchmarking of inte the inapplicability of well. In absence of Garwar
ITA nt enterprises under compara ependent party would, in the o extended credit. The absence ore irrelevant.
argument concerning the period find that the assessee failed to g a valid internal comparable receivable cycle with AEs was n stomers. It was contended that realised within 60 days , wher standing for a longer period, thu not confer any special benefit on ssessee contended that in view onal interest should be impu uments of the assessee are no he reliance on AE versus non tiated. The assessee has provid voice-level data, contractual ter
E customers. Without such deta party delays were exactly an e fact that internal CUP was no ernational transaction (Sales/Se internal CUP for benchmarking demonstrated arm’s length cre re Fulflex India Pvt. Ltd
20
A No. 6751/MUM/2024
able conditions.
ordinary course, e of third-party of AE and non- o discharge the e. The assessee not longer than t on average the reas the non-AE us, according to AEs in terms of of this internal uted on the AE t acceptable for n-AE receivable ded only overall rms, or recovery ails , one cannot nalogous to AE ot applied in the ervice) indicates g credit terms as edit policy with non-AEs, the claim remains un-substant
7.13 Further, the lea rule 10AB of the In determine the answ learned TPO took gui that the safe harb loans/advances to w clause 5 (v) of the LIBOR +400 basis po used this rate as an represented by the o that that the TPO’s a 10AB read with “safe with juri ictional pr on record any com prescribed under th
‘other method’ of t justified.
7.14 Further, as rega no addition on this a find that the learne demonstrate whether scrutiny assessment.
Garwar
ITA of AEs were not granted fav tiated.
arned TPO adopted the “other ncome-tax ( in short the Act) wer and interest on delayed r idance from the Safe Harbour R bour interest rate applicable wholly-owned subsidiaries ( Rul relevant notification , which w oints for the year in question. T indicative of arm’s-length rate f overdue receivables. The learned action of applying the other met e harbour rates” is found to be recedents. Before the assessee h mparison under CUP or any he rules. In some circumstanc aking safe harbour rate for ards the contention of the learn ccount has been made in subse d counsel has not furnished a r, in those years, the returns w
. On the contrary, the order of t re Fulflex India Pvt. Ltd
21
A No. 6751/MUM/2024
vourable terms, method” as per rules, 1962, to receivables. The Rules and noted for outbound le 10 TD) under was six-months
The learned TPO for notional loan d DR submitted thod under Rule e in consonance has not brought other method ces, we feel the comparison, is ned counsel that equent years, we any material to ere subjected to the learned TPO for Assessment Year
982 to 1054, clearly made on account of i facts, the argument a the addition on this i
7.15 In view of above of the Ld. TPO/DR receivable as a separ of LIBOR + 400 bps o ground Nos. 3 to dismissed.
The ground No. 7 &
8. The assessee c made towards the cor facts are that the as behalf of its foreign A any commission for t using information ob provided u/s 133(6) arm’s length comm adjustment to the b guarantee rates of Garwar
ITA

2022-23, as placed in the pape reflects that a transfer pricing interest on overdue receivables.
advanced by the learned counse ssue stands rejected.
e discussion, we find no infirmi
RP in benchmarking the int rate international transaction an on the delay beyond the period
6 raised by the assessee a 8 Corporate Guarantee challenged the adjustment of rporate guarantee commission.
sessee had extended a corpora
AE to enable it to obtain loan bu the same. The Ld. TPO applied t btained from independent bank of the Act and determined and mission @ 1.4% per annum bank guarantee rates. The deta f various banks during th re Fulflex India Pvt. Ltd
22
A No. 6751/MUM/2024
er book at pages adjustment was In view of these el for deletion of ity in the action erest on delay nd applying rate of 60 days. The are accordingly f Rs.5,42,599/-
The undisputed te guarantee on ut did not charge the CUP method under authority determined the m after making ails of corporate he year under consideration and m are extracted as unde
Bank nam
KotakMahi
StandardC
CitiBank
HDFCBank
IDBI
UnionBank
ICICI
Count
35th perce
Median
65th Perce
8.1 Further, the L
Bench of the Tr
Pharmaceuticals Ltd
5488/Mum/2012), w different from the c accepted and downw corporate guarantee ordinate Bench in Garwar
ITA mean of those rates reproduced er:
me
Rate indraBank
0.45%
CharteredBank
0.75%
0.90%
k
1.80%
2.00%
koflndia
3.00%
3.00%
8
entile
0.90 %
1.90%
entile
2.40 %
Ld. TPO relying on the decisi ribunal in the case of M d. (ITA No. 5031/Mum/2012
wherein it is held that bank corporate guarantee, naked qu ward adjustment should be mad e rate. Considering the decisi the case of Glenmark Pharm re Fulflex India Pvt. Ltd
23
A No. 6751/MUM/2024
by the Ld. TPO ion Co-ordinate
M/s
Glenmark
2 and ITA No.
guarantee are uote cannot be e to comparable ion of the Co- maceuticals Ltd.

(supra), the Ld. TPO determined the arm’s case of assessee at assessee submitted t ambit of the transfe the assessee are no guarantee to associa international transac section 92B inserted effect from 01.04.20
any type of guaran transaction. In the lig extended by an Indi falls within the amb
Hon’ble Allahabad Hi v. Add. CIT (supra) a parental corporate gu transaction under se
8.2 The contention holder activity not w for the reason that c the parenthood, but of valuable financial borrowing, the guara
Garwar
ITA made a downward adjustment s length rate of the corporate g t 1.4%. Before us, the Ld. C that such guarantees adjustmen r pricing adjustment. But said ot acceptable. The provision o ated enterprises is explicitly re ction under the Act. The Expl d by the Finance Act, 2012 wi
02, clarifies that “capital finan ntee” falls within the scope o ght of this amendment any corp an entity on behalf of its forei bit of international transaction igh Court in the case of Jubilan affirmed that by virtue of 2012
uarantee has to be regarded as a ction 92B of the act.
of the assessee that such guara warranting comparability is also corporate guarantee is not a ca a conscious assumption of ris services to its AE. By way of se antor enables the AE to obtain re Fulflex India Pvt. Ltd
24
A No. 6751/MUM/2024
t of 50 bps and guarantee in the Counsel for the nt is beyond the d contentions of of the corporate ecognized as an lanation (i)(c) to ith retrospective ncing, including of international porate guarantee ign AE squarely n. We note that t Pharmova Ltd.
2 amendment, a an international antee is a share o not acceptable asual incident of k and provision ecuring the AE’s n funds which it might not have been or to obtain them enhancement of the service conferred on parties would ordinar
8.3 The Ld. TPO ha bank guarantee rate guarantee at an A precedents. The Rul of 1% as such guaran reasonable bound. H
Everest Kento Cylind fees cannot be blind adjustments. Furthe
Bombay High Court
(supra) was decided change in the fina guarantee rates of ea consideration unles conditions is identica
8.4 In the present tangible benefit by w funds at favourable thus, such benefit
Garwar
ITA n possible to obtain otherwise o at a significantly lower inte
AE’s creditworthiness is a cl the AE, creating a benefit whi rily price.
as adopted a reasoned approac to downward looking to risk pro
ALP of 1.40% rate consisten le 10D of the Safe Habour Rule ntee thereby validating the 1.4%
Hon’ble Bombay High in the ders Ltd.(supra) cautioned that dly equated to corporate guar er, the rate which was upheld t in the case of Everest Kento d long back and there has be ancial market from year to y arlier years cannot be invoked in ss it is established that fin al to year for which reference is m case, it is evident that that way of enhanced creditworthin terms solely due to the pare cannot be left un-compensate re Fulflex India Pvt. Ltd
25
A No. 6751/MUM/2024
n its own credit erest rate. This lear intra-group ich independent ch by adjusting ofile by parental t with judicial prescribed rate
% rates as within case of CIT v.
bank guarantee rantees without by the Hon’ble o Cylinders Ltd.
een substantial year, therefore, n the year under nancial market made.
t AE derived a ness and access ent’s guarantee, ed under arm’s length principle. The be factually and lega the finding of the low by the assessee are a 9. In the ground N that sundry creditor were already credited and therefore, there income of the asse submitted that on th was already pendin opinion, the assessee the scrutiny proceed raised by the asses justice, we direct th application of the a dispute if not already assessee is according
10. The ground No credit of the pre-paid
CPC. Though this is however, this matte application before th
Garwar
ITA adjustment made by the ld. TP ally correct. Accordingly, we do wer authorities. The ground No.
accordingly dismissed.
No. 9 of the appeal of the asses rs written back added to total d by the assessee to the profit a was no need for CPC to add th essee. On the part of the a is issue rectification application ng before the Ld. Assessing e should have raised this issue dings before the AO but no s ssee. However, in the interest he Assessing Officer to attend t assessee on priority and decid y decided. The ground No. 9 of t gly allowed for statistical purpos o. 10 of the appeal of the asse d taxes not considered while in ssue does not arise from this er of verification and the ass he Assessing Officer for allowin re Fulflex India Pvt. Ltd
26
A No. 6751/MUM/2024
O thus found to not interfere in . 7 and 8 raised ssee is aggrieved income, which and loss account he same to total assessee it was n of the assessee
Officer. In our in the course of such issue was t of substantial the rectification de the issue in he appeal of the ses.
essee relates to ntimation by the order before us sessee may file ng credit as per law. This ground of statistical purposes.
11. The ground No 234A, 234C etc. In o imposed on this ther and same cannot b consequential to the adjudicate upon at th
12. In the result, statistical purposes.
Order pronoun (BEENA P
JUDICIAL M
Mumbai;
Dated: 28/08/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

Garwar
ITA the appeal of the assessee is a o. 11 relates to penalty initiat our opinion penalty has only in refore, this grievance is prematu be considered. Regarding inte e addition sustained, we are his stage.
appeal of the assessee is par nced in the open Court on 28
/-
PILLAI)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu re Fulflex India Pvt. Ltd
27
A No. 6751/MUM/2024
also allowed for ting charge u/s nitiated and not ure at this stage erest, which is not required to rtly allowed for /08/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai