Capital Financing Transactions u/s 92B
The Delhi Bench of ITAT has held that capital financing transactions covered by clause (i)(c) of the Explanation to section 92B are international transactions only if they have any real bearing as distinct from contingent effect on the profits, income, losses or assets of the enterprise. Corporate guarantees issued for the benefit of Associated Enterprises (AEs) do not cost anything to the issuing enterprise and yet may provide certain comfort levels to the parties dealing with the AEs. These guarantees do not have any impact on profits, income, losses or assets of the enterprise. Therefore, corporate guarantees do not fall within the scope of the term ‘international transaction’ even after insertion of Explanation to section 92B by Finance Act, 2012 wref 1-4-2002.