Whether a corporate guarantee forms an international transaction or not being a shareholder activity?

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “B” : HYDERABAD
(THROUGH VIDEO CONFERENCE)
BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

Rain Industries
Limited,
(Formerly known as Rain
Commodities Limited)
Hyderabad
[PAN: AABCP2276K]

Rain Cements Limited,
[Formerly known as Rain
CII Carbon (India) Limited]
Hyderabad
[PAN: AABCR8858F]

Appellant

vs

Dy.Commissioner of
Income Tax,
Circle-3(1),
Hyderabad

Respondent

For Assessee : Shri Nishant Thakkar, AR
For Revenue : Shri Rohit Mujumdar, DR
Date of Hearing : 07-06-2021
Date of Pronouncement : 24-08-2021
O R D E R

The instant batch of three cases pertains to two assessees’s group concerns M/s.Rain Industries Limited and M/s.Rain Cements Limited. These three appeals for AYs.2013-  14 & 2014-15; seriatim-wise, arise against the DCIT, Circle- 3(1), assessments dt.20-10-2017; 27-10-2017 and 14-05-2018 framed in furtherance to the Dispute Resolution Panel (‘DRP’)- 1, Bengaluru’s directions dt.06-09-2017 and 28-03-2018 in F.Nos.298, 299 & 41/DRP-1/BNG/2016-17 & 2017 18, involving proceedings u/s.143(3) r.w.s.144C(13) of the Income Tax Act, 1961 [in short, ‘the Act’]; respectively.

2.Next comes equally important aspect of quantification of the impugned corporate guarantee adjustment. It transpires during the course of hearing that this tribunal’s co-ordinate bench in former assessee M/s. Rain Industries Ltd’s appeal(s) for AY.2008-09 and 2009-10 ITA Nos157/Hyd/2014 and 83/Hyd/2014 dt.04-12-2015 and 28-09-2016, respectively, has directed the learned lower authorities to adopt 0.53 commission rate as against that in issue @ between 1.30% to 2.10% in TPO’s order(s) dt.31-10-2016. We thus adopt judicial consistency and direct the TPO to adopt 0.53% rate in both these assessees’ cases in all these respective assessment years.

3. Their lordships hold that Section 14A read with Rule 8D applies only in relation to an assessee’s exempt income than having any independent exigibility. It is an admitted fact that the assessee has not derived any exempt income in the relevant previous year. We therefore direct the Assessing Officer to delete the impugned disallowance for this precise reason alone.

4. The fact also remains that the Assessing Officer has not recorded any satisfaction qua the assessee’s books to this effect. Faced with this situation, we deem it appropriate to restore the instant case back to the Assessing Officer for his afresh adjudication thereof keeping in mind the assessees’ fund position in its books of accounts prima facie followed by the non-utilization of interest bearing funds as per law.

5. These twin assessees’ appeals are partly allowed in above terms. A copy of this common order be placed in the respective case files.
6. Order pronounced in the open court on 24th August, 2021.

Please find attached the enclosed file for the full judgement