Transfer pricing adjustment on international transaction ...

TP adjustment on guarantee fees paid to AE deleted as borrowing cost+fee<bank rate. Economic rationale upheld.

Case Laws Income Tax

July 24, 2024

Transfer pricing adjustment on international transaction involving payment of guarantee fees to associated enterprise was held unjustified. Assessee demonstrated effective borrowing cost including guarantee fee was lower than bank's quoted interest rate, justifying economic rationale. Tax authorities failed to present compelling evidence against guarantee fee. Benefits of lower interest rates and favorable operating margins substantiated arm's length nature. Tribunal had deleted similar addition previously, upheld by High Court considering consistency in operating margin, benefit of lower borrowing costs compared to bank rates justifying guarantee fee. Present case mirrored facts and circumstances, necessitating consistency in judicial decisions for legal certainty and fairness. TP adjustment made by tax authorities was unjustified, addition on account of guarantee fee payment to associated enterprise was deleted.

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Transfer pricing adjustment on international transaction ...

TP adjustment on guarantee fees paid to AE deleted as borrowing cost+fee<bank rate. Economic rationale upheld.

Case Laws Income Tax

July 24, 2024

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