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‘Corporate Guarantee’ can be treated as ‘International Transaction’: ITAT [Read Order]

‘Corporate Guarantee’ can be treated as ‘International Transaction’: ITAT [Read Order]
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The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the Corporate Guarantee’ cannot be treated as an ‘international transaction’ for the purpose of section 92 of the Income Tax Act, 1961. The Assessing Officer made the addition of Rs.73,69,830/- qua Transfer Pricing Adjustment on account of providing corporate guarantee by the Assessee to its overseas...


The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the Corporate Guarantee’ cannot be treated as an ‘international transaction’ for the purpose of section 92 of the Income Tax Act, 1961.

The Assessing Officer made the addition of Rs.73,69,830/- qua Transfer Pricing Adjustment on account of providing corporate guarantee by the Assessee to its overseas associated enterprises companies, namely, PCI Asia Pacific Pvt. Ltd. and PCI Middle East FZE by treating the interest rate of 1.3% based on average fees charged by State Bank of India.

The assessee challenged said action of the Assessing Officer before the Commissioner claiming that ‘corporate guarantee’ is not an ‘international transaction’ as per Section 92 of the Act. However, the ld. Commissioner following the judgment of the Hon’ble Bombay High Court in the case of CIT Vs. Everest Kanto Cylinder Ltd. (2015) 378 ITR 57 (Bom.) partly affirmed the addition qua ‘corporate guarantee’ while reducing to 0.5% instead of 1.3% as determined by the AP/TPO.

Aggrieved, the assessee approached the Tribunal for relief.

Accountant Member Mr. R K Panda and Judicial Member N K Chaudhary confirmed the order of the first appellate authority and held that “considering the undisputed fact to the effect that Hon’ble Bombay and Madras high Courtin the cases referred above held the ‘Corporate Guarantee’ as ‘International Transaction’, we do not find any reason to interfere with the findings of the Ld. Commissioner for partly sustaining the addition under consideration and therefore the same is upheld. Consequently the Appeal of the Assessee is dismissed.”

To Read the full text of the Order CLICK HERE

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