The Tax Publishers021 TaxPub(DT) 5695 (Mum-Trib) Greatship (India) Ltd. C/o Kalyaniwalla & Mistry LLP v. Dy. CIT In Favour of Assessee, Mum-Trib, ITA No. 7151/Mum/2017, 05-Oct-2021

INCOME TAX ACT, 1961

Section 92C

Kotak Mahindra Bank (as per its sanction letter) had expressed its willingness to give guarantee on behalf of AEs at a commission rate of 0.40% p.a/0.50% per annum. Credit sanction letter too would constitute a CUP for benchmarking the transaction of providing of corporate guarantee by the assessee to the banks for facilitating raising of loans by its AEs. Be that as it may, corporate guarantee fee at 0.43% was arm's length and, therefore, no TP adjustment was called for.

Transfer pricing - Determination of ALP - Guarantee commission -

Assessee tendered financial guarantee to banks on behalf of its two AEs. Though the assessee did not charge any commission from the AEs, however, it suo-moto offered commission rate of 0.46% which was nothing but average guarantee commission paid by the assessee to various banks. In other words, the assessee benchmarked the same on the basis of internal CUP. However, TPO rejecting the rate, worked out average Bank Guarantee Rate of 2.07% and opined that rate charged for corporate guarantee should not be less than the rate charged by the banks for giving bank guarantees. Finally, adopting this average rate of 2.07%, TPO proposed ALP adjustment. Held: Kotak Mahindra Bank (as per its sanction letter) had expressed its willingness to give guarantee on behalf of AEs at a commission rate of 0.40% p.a/0.50% per annum. Credit sanction letter too would constitute a CUP for benchmarking the transaction of providing of corporate guarantee by the assessee to the banks for facilitating raising of loans by its AEs. Be that as it may, corporate guarantee fee at 0.43% was arm's length and, therefore, no TP adjustment was called for.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14


INCOME TAX ACT, 1961

Section 92C

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