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| The Tax Publishers2021 TaxPub(DT) 5787 (Mum-Trib) INCOME TAX ACT, 1961
Section 92B Section 92C
Issuance of corporate guarantee by assessee did constitute an international transaction. However, TPO was directed to adopt 0.5% as an arm's length consideration for corporate guarantee issued by assessee in favour of its AE instead of 3% adopted by TPO.
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Transfer pricing - International transaction - Corporate guarantee -
Assessee extended corporate guarantee in respect of its AE, namely, Siro Clinpharm Germany, GmbH, to ABN Amro Bank for an amount of Rs. 19.44 crores. The assessee did not charge any guarantee commission to its AE but simply recovered the amount of Rs. 36,06,578, being 1.75% of the facility which was charged to assessee by said bank. TPO considered guarantee commission @ 3% as at arm's length and thus proposed ALP adjustment. Assessee contended that it was not an international transaction at all. Held: Issuance of corporate guarantee by assessee did constitute an international transaction. However, TPO was directed to adopt 0.5% as an arm's length consideration for corporate guarantee issued by assessee in favour of its AE.
Relied:CIT v. Everest Kento Cylinders Ltd ((2015) 58 Taxmann.com 152 (Bom-HC) : 2015 TaxPub(DT) 2547 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2010-11
INCOME TAX ACT, 1961
Section 92C
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