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2018 (5) TMI 1816 - AT - Income TaxTPA - Determination the ALP of the charge for giving a corporate guarantee - CUP method applicability - Held that:- Issuance of a corporate guarantee is a non-fund based transaction. The assessee in this case has obtained the quotes from RBS and as well as from Indusind Bank. The credit rating of the assessee and other financial data were considered by the banks, before giving a free quote to the assessee. Thus in our view the free quotes taken by the assessee for the very same transactions do constitute material for determination of ALP. Though the assessee has quoted a decision in the case of Asian Paints [2011 (10) TMI 629 - ITAT, MUMBAI] in support of its contention that the CUP method should be used for determination of arm’s length price and that such exercise would result in determination of ALP at 0.20%, we do not apply the same, as factually they are variations in facts. The credit rating of an organisation etc. plays an important role in determination of the rate. Geographical location, local government regulations etc. are also to be considered. In this case, corporate guarantee has been provided by the assessee to ABN AMRO Bank for AE BAMPL Mauritius and Strategic Food International Co. LLC, Dubai. Royal Bank of Scotland has given a free quote of 0.25%. This quote constitutes the ALP of this International Transaction in question. The average adopted by the assessee as ALP is in our view not the right approach as averages do not always give logical results. As this quote is the basis on which this transaction has taken place, we are of the opinion that this should be taken as the ALP. Hence, we direct the TPO as well as the Assessing Officer to adopt 0.25% as the ALP. Appeal of the Assessee is allowed in part.
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