ORDER / आदेश

Per Rajesh Kumar, AM:

These are appeals filed by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as "the Ld. CIT(A)"), vide order u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 25.07.2024 and 10.12.2024 for the AYs 2021-22 & 2022-23. As the facts and circumstances are similar in all the appeals, hence, we will take ITA No.94/KOL/2025 for AY 2021-22 as lead case and decide the issue accordingly.

2. The issue raised in Ground Nos. 1 to 3 & 5 of the appeal is against the order of the ld. CIT(A) restricting the ALP fee rate of corporate guarantee [in short ‘CG’] issued by the assessee to its AE, M/s Indocean Developers Pvt Ltd [in short ‘IDPL’] to 0.25% instead of 0.5% as determined by the TPO.

3. The facts in brief are that, the assessee along with its subsidiary, M/s AA Infraproperties Pvt Ltd [in short ‘AAIPL’] had extended corporate guarantee to IDPL, Sri Lanka in relation to the loans availed by the AE from Banks / FIs. The appellant had benchmarked the ALP fee rate of corporate guarantee at NIL, on the ground that it was a shareholder activity and the financial condition of IDPL had deteriorated significantly and therefore realizability of the CG fee was in doubt. The ld. TPO however disagreed with this plea of the assessee and benchmarked the arm’s length fees of the corporate guarantee issued to IDPL, Sri Lanka at 0.5% by using the interest savings approach, and accordingly computed the TP adjustment at Rs.1,40,46,577/-.

4. In the appellate proceedings, the ld. CIT(A) following the decisions rendered by the Hon’ble Bombay High Court and Madras High Court in the cases of CIT Vs Everest Kanto Cylinder Ltd reported in 58 taxmann.com 254&Pr.CIT Vs Redington (India) Ltd(430 ITR 298) rejected the assessee’s plea that, the CG was a shareholder activity and held that adjustment was required to be made for guarantee commission. The ld. CIT(A) after perusing the corporate guarantee agreement noted that the said guarantee was extended jointly by the assessee and its subsidiary, AAIPL and therefore held that the ALP fee worked out by the ld. TPO was required to be jointly shared by both of them. The ld. CIT(A) therefore held that, the CG fee attributable to the assessee was 0.25%. The relevant observations of the ld. CIT(A) were as under:-

“5.4.3 In view of the above finding, the next issue for adjudication is the quantum of guarantee commission to be charged from the AEs for providing this corporate guarantee to IDPL, Sri Lanka. Having perused the findings of the Ld. TPO in light of submissions of the appellant, the computation of ALP corporate guarantee commission at 0.5% is found to be fair and reasonable. However, on perusal of the corporate guarantee agreement, it is noted that the said guarantee was extended jointly by the appellant and its subsidiary, AAIPL. I am therefore in agreement with the appellant that the ALP opportunity savings worked out by way of corporate guarantee fee would also have to be jointly shared between the appellant and AAIPL. Hence, I therefore hold that the appropriate CG fee in this regard ought to be 0.25%[50% of 0.5%]. As a consequence, the transfer pricing adjustment to the extent ofRs.70,23,288/- stands confirmed and the balance sum of Rs.70,23,287/- directed to be deleted…”

5. The ld. DR appearing for the Revenue vehemently supported the findings of the ld. TPO. According to him, the ld. TPO had fairly worked out the CG fee at 0.5% and that, no further adjustment or reduction was warranted on this account. Per contra, the ld. AR for the assessee supported the order of the ld. CIT(A).

6. After hearing the rival contentions and perusing the material on record, the undisputed facts of the case are that, the corporate guarantee was extended jointly by the assessee and its subsidiary to the Banks / FIs of the foreign AE, IDPL Sri Lanka. Accordingly, both the assessee and the subsidiary were faced with th