APAR INDUSTRIES LTD,MUMBAI vs. DCIT CC 6(1), MUMBAI

Facts in brief, qua the same are that the assessee being resident corporate assessee engaged in the business of manufacture of Transformers/Specialty Oils, Conductors and Synthetic Rubber provided corporate guarantee amounting to Rs.35.46 Crores for one of its AE namely Petroleum Specialty PTE Limited, Singapore [PSPL] to facilitate LC facility by Syndicate bank to its AE. The assessee did not benchmark the same on premise that the underlying liability was contingent in nature and given for overall business consideration. However, not convinced, Ld. TPO arrived at impugned TP adjustment against the same which was calculated at 5% per annum. The same has been incorporated in the quantum assessment order dated 21/03/2013. Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 12/11/2014, wherein the stand of the Lower authorities has been confirmed. Aggrieved, the assessee is in further appeal before us.

The Ld. Authorized Representative for assessee [AR] placing reliance on various decisions of the Tribunal submitted that corporate guarantee was not an international transaction within the meaning of ITA.No.956/Mum/2015 Apar Industries Limited Assessment Year 2009-10 Section 92B and therefore, no adjustment thereof was required. The Ld. AR, in the alternative, submitted that the impugned addition may be restricted to 0.495% as enjoyed by the assessee from its bankers. Per Contra, Ld. DR drew attention to various decisions where the additions has been upheld by the judicial authorities.

We have heard carefully heard the rival contentions and perused relevant material on record. In our opinion corporate guarantee provided by the assessee brought certain benefits to its AE by way of credit facility and therefore, the same was required to be compensated by its AE. Our view is duly supported by the decision of this Tribunal rendered in Everest Kanto Cylinders Ltd. Vs. DCIT [34 Taxmann.com 19] as affirmed by Hon’ble Bombay High Court on 08/05/2015 [58 Taxmann.com 254] wherein the rate of commission has been adopted @0.5%. Respectfully, following the same, we estimate the impugned additions @0.5% per annum. The Ld. AO is directed to quantity the addition and re-compute the income of the assessee in terms of our above order.

Resultantly, the appeal stands partly allowed. Order pronounced in the open court on 04th May, 2018 Sd/- Sd/- (Mahavir Singh) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांकDated : 04.05.2018 Sr.PS:-Thirumalesh ITA.No.956/Mum/2015 Apar Industries Limited Assessment Year 2009-10 आदेश की �ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. 3. आयकरआयु�(अपील) / The CIT(A) आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. 6. गाड�फाईल / Guard File