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10. On merits, it was contended that the guarantees in question were purely performance/product warranties intrinsically linked to the licensing and maintenance of software products and not financial guarantees. The assessee, being the developer and owner of the software and source code, was contractually and technically obliged to provide software licence, updates, upgrades, professional services and maintenance. It was submitted that the obligations undertaken by the AEs towards their customers merely mirrored the :- 6 -: IT(TP)A No.33/CHNY/2024 obligations undertaken by the assessee towards the AEs. The guarantee, according to the AR, merely acknowledged the assessee's own contractual responsibility and could not be disaggregated from the principal transaction of sale/licensing of software. It was further submitted that the assessee earns royalty at 30% of the AE's sales and AMC revenue, which includes consideration for product warranty, and since the main transaction has been accepted at arm's length, no separate remuneration could be attributed to the warranty obligation. The AR also submitted that similar indemnity/performance clauses exist in agreements with domestic customers in India and no separate fee is charged. It was stated that even where bank guarantees were arranged in favour of Indian customers / in lieu of performance guarantee, no separate consideration was recovered. Therefore, it is submitted that, on the basis of internal CUP, the arm's length price of such guarantee is NIL. It was additionally pointed out that during the year the assessee had paid damages of Rs.2,86,14,809 to a customer of its Singapore AE, which was disclosed in Form 3CEB and examined and accepted by the TPO without adjustment, thereby establishing that the performance risk lies with the assessee and no separate guarantee fee can be imputed. The AR further relied on the principle of consistency, submitting that an identical issue was raised in AY :- 7 -: IT(TP)A No.33/CHNY/2024 2018-19 but dropped by the TPO after considering the assessee's explanation, and there being no change in facts, a contrary view was unwarranted. It was also contended that performance guarantees of this nature do not fall within the scope of Section 92B, as Explanation (i)(c) covers financial guarantees and not performance warranties, and since the benefit attaches to the product and not to the AE, no service is rendered to the AE. Without prejudice, it was argued that even if a fee were to be imputed, the rate should be restricted to 0.5% in line with judicial precedents, including the decision of the Mumbai Bench of the ITAT in the case of Everest Kanto Cylinder Ltd., reported in [2013] 34 taxmann.com 19 (Mumbai) as affirmed by the Hon'ble Bombay High Court in the case reported in [2015] 58 Taxman.com 254 (Mumbai). Further, it was submitted that guarantee fee is to be calculated only on pro- rata for the period during which the guarantee was in force during the year.