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2022 (6) TMI 1300 - AT - Income TaxTP Adjustment - corporate guarantee - international transaction ot not? - HELD THAT:- From plain reading of definition, it is clear that lending or borrowing of money between two or more enterprises also comes under the definition of international transaction. When the assessee has provided guarantee on behalf of its AE for availing loan facility, it definitely bearing on the profits or loss of the assessee and thus, it falls within the definition of international transaction and thus, providing corporate guarantee is an international transaction, which needs to be bench marked to determine ALP of such transaction - TPO has rightly held that providing corporate guarantee is an international transaction and hence, we reject the arguments of assessee. As regards imputing rate of commission on guarantee, it is a well settled principle of law by the decision of various courts, including the decision in the case of CIT v. Everest Kento Cylinders Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] wherein, it has been clearly held that no comparison can be made between the guarantee issued by commercial banks as against corporate guarantee issued by holding company for benefit of its AE, a subsidiary company for computing ALP of guarantee commission. When it comes rate of commission, at which, such corporate guarantee needs to be bench marked, then depending upon each case, a reasonable rate may be adopted and thus, in the said case has upheld 0.5% commission on corporate guarantee. 0.5% is the reasonable rate for benchmarking corporate guarantee given by the assessee to its subsidiary AE. We direct the AO to make adjustment towards corporate guarantee fee @ 0.5% of total corporate guarantee given by the assessee to its AE. Appeal filed by the assessee is partly allowed.
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