INCOME TAX ACT, 1961

Section 92C

Transfer pricing - Determination of ALP - An irrevocable and unconditional corporate guarantee given for purchase of vessels by AE - Non-charging of guarantee commission in terms of sanction letter issued by bank

Assessee and M/s. B.G. pursuant to conditions stipulated by Bank of Baroda, London extended an irrevocable and unconditional corporate guarantee for purchase of vessels by its AE abroad, without charging any guarantee commission. TPO suggested ALP adjustment on this count.Held: Sanction letter issued by Bank of Baroda, London as placed on record by assessee also revealed that corporate guarantee was to be given in accordance with applicable RBI guidelines and it further stipulated that no guarantee commission was payable by AE to the guarantors. Thus, guarantee had been given in terms of sanction letter issued by Bank of Baroda and non-charging of guarantee commission was also as per conditions stipulated by the bank. Also, corporate guarantee had been given by assessee as well as M/s. B.G., however, no addition on account of guarantee commission was made in the hands of M/s. B.G., therefore, no addition on account of non-receipt of guarantee commission was called for in assessee's case as well.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 115VP

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