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Facts
The Revenue appealed against the CIT(A)'s order concerning two issues for AY 2013-14. First, the CIT(A) restricted the corporate guarantee (CG) fee rate to 0.5%, disagreeing with the TPO's higher rates. Second, the CIT(A) held that excise duty exemption was a capital receipt, contrasting with the AO's treatment of it as a revenue receipt, which impacts the computation of book profit under MAT.
Held
The Tribunal upheld the CIT(A)'s decision on both counts. It confirmed the 0.5% corporate guarantee fee rate, citing previous co-ordinate bench decisions for the assessee's own case. It also affirmed that the excise duty exemption is a capital receipt not chargeable to tax and not includible in book profit for MAT under Section 115JB, relying on a jurisdictional High Court decision in the assessee's own case.
Key Issues
1. Whether the arm's length corporate guarantee fee should be restricted to 0.5% or benchmarked at higher rates determined by the TPO. 2. Whether excise duty exemption is a capital receipt not liable to tax under normal provisions and not includible in book profit for MAT under Section 115JB.
Sections Cited
Section 92C of Income-tax Act, 1961, Rule 10B of Income-tax Rules, 1962, Rule 10C of Income-tax Rules, 1962, Section 115JB of Income Tax Act, 1961, Section 92B of Finance Act, 2014, Section 115J of Income Tax Act
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Income Tax Appellate Tribunal, “Guwahati” BENCH, GUWAHATI
This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-22(hereinafter referred to as the “Ld. CIT(A)”] dated 31.01.2024 for the AY 2013-14.
The ground raised by the Revenue are as under:-
“1. That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred by restricting the guarantee fee rate to 0.5% which is much lower than the CG rate of 1.50%, 1.69% & 1.27% respectively as determined by the TPO, for SCB Loans, UOВ Loans and SBLC.
2. That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in stating that the CG fee should be benchmarked by the TPO at 0.5% without giving any scientific or logical reasoning for the same while the TPO had determined the rate based on the information available on record.
That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred by restricting the CG rate at 0.5% without considering the credit rating of the AE which is a vital factor while availing loan from a financial institution, and accordingly, the effective rate of interest was calculated and CG rate was determined accurately.
3.1. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered by the decision of the co-ordinate bench in assessee’s own case in for A.Y. 2014-15, wherein the co-ordinate Bench confirmed the order of ld. CIT (A) wherein the ld CIT(A) restricted the corporate guarantee fee at the rate of 0.5%. The operative part is extracted as under:-
34. Brief facts relating to this issue are that during the year under appeal, the assessee-company had following inter-company guarantee arrangements for its Associated Enterprises:- (i) Providing a Corporate Guarantee to Standard Chartered Bank (SCB) for a term loan/letter of credit facility on behalf of Greenlam Asia Pacific Pte. Ltd. (“Greenlam Asia ) (referred to pages 446 to 461 of the paper book); (ii) Providing a Corporate Guarantee to United Overseas Bank (UOB) for a commercial property loan on behalf of Greenlam Asia (referred to pages 462 to 471 of the paper book); and Blank
We have heard the rival contentions and perused the relevant records placed before us and carefully gone through the decisions referred and relied upon by the ld.
The issue raised in ground no.5 to7 is against the order of ld. CIT (A) holding the excise duty exemption is capital receipt as against the ld. AO’s order, wherein the same was treated as revenue receipt.
4.1. The facts in brief are that during the year the assessee has availed excise duty of ₹87,81,58,550/- in terms of excise notification no.50/2023, dated 10.06.2023, in respect of manufacturing unit of the assessee which are eligible for 100% excise duty exemption in respect of goods manufactured for a period of ten years from the date of the commencement of the production. The assessee has two manufacturing unit (i) Rudrapur Plywood Unit (ii) Rudrapur MDF Unit. The date of commencement of productions were made on 6th and 13th March 2007 respectively. The assessee claimed exemption in respect of these units comprising ₹40,39,05,189/- for Rudrapur Plywood Unit and ₹47,42,53,361/- in respect of Rudrapur MDF Unit.
4.2. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered by the “30. The Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, on considering the said issue, had, in paragraph No. 10, after noticing the facts involved, formulated the question arising for its consideration in the appeal preferred by the assessee being as under: "10. We have heard the rival contentions and perused the relevant material available on record. We note that the assessee runs two manufacturing units in the name of Rudrapur Plywood Unit and Rudrapur MDF Unit and both are covered by the Excise Notification No.50/2003 dated 10.06.2003. Both the units are located in backward areas and are eligible for 100% excise duty exemption in respect of goods manufactured and cleared from such units for a period of 10 years from the date of commencement of commercial production. The assessee has claimed the excise duty exemption from these two units at Rs.87,98,09,432/- which is in the nature of capital receipt not liable to be taxed. We also find that though the said amount is reflected in the Profit & Loss Account of the assessee and the amount being capital receipt has not been objected by the ld. CIT(Appeals) also, who has allowed deduction of the said amount vide his order dated 25.03.2019 under normal provisions of the Act, however, the order is silent on the exclusion of the said amount while computing the book profit under section 115JB of the Act, therefore, the issue is for our examination that "whether the excise duty exemption which is a capital receipt and not chargeable to tax under the normal provisions of the Act, is to be considered as a part of book profit for computing the book profit under section 115JB of the Act".
The Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, after considering the decisions applicable to the matter, relied upon by the assessee, as well as noticing the order passed by the Commissioner of Income Tax (Appeals), Dibrugarh, and the provisions of the Office Memorandum, dated 07.01.2003, issued by the Ministry of Commerce and Industry, Government of India, concluded as follows: "21. After going through the above referred judgments and decisions and on examining the facts of the instant case, we find that the excise duty exemption has been admittedly the capital receipt and the finding of the Id. CIT(Appeals) that the excise duty exemption is not liable to be taxed under the normal provisions of the Income Tax Act being not in dispute for us, the alleged capital receipt cannot be categorised as part of the book profit. In the case of assessee being covered by the excise duty notification, such sum collected on the goods manufactured and sold is in the nature of incentive subsidy given for establishing the units in backward areas and to generate employment 4.4. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 15.12.2025.