Brief:
Assessee had provided a corporate guarantee on behalf of its associated enterprise M/s. Thomas Cook Mauritius Operations Co. Ltd. for banking facilities availed by it from HSBC bank to the extent of Rs.6,01,80,000/-. Transfer Pricing Officer was of the view that in the absence of any guarantee fee commission earned by the assessee from such transaction& thus for ALP the rate of 3% was taken to determine the arm’s length rate of the international transaction of provision of corporate guarantee on behalf of the associated enterprise. The above rate taken was rejected by ITAT & rate of 0.50% is approved & ITAT also allowed depreciation on Printer, Scanners, Switches, routers @ 60% as against 15% charged by AO.
Fact of Case:
- During the year under consideration, the assessee had provided a corporate guarantee on behalf of its associated enterprise M/s. Thomas Cook Mauritius Operations Co. Ltd. for banking facilities availed by it from HSBC bank to the extent of Rs.6,01,80,000/-. The stand of the Transfer Pricing Officer was that in the absence of any guarantee fee commission earned by the assessee from such
transaction, the same could not be said to have been recorded at an arm’s length price. The Transfer Pricing Officer referred to the information gathered from Allahabad Bank and the State Bank of India with respect to the rate of guarantee commission fee and accordingly determined a rate of 3%, that was liable to be charged as an arm’s length rate as guarantee commission fee. - Disallowance of claim of Depreciation on account of ‘excessive claim of depreciation on data cables by applying rate of depreciation of 15% applicable to the block of ‘plant and Machinery’ as against the rate of 60%
- Disallowance of claim of Depreciation on Jodhpur Property on account of ‘excessive claim of depreciation
Contention of Assessee:
The assessee has primarily argued that the rate of 3% adopted by the income-tax authorities in order to determine the arm’s length rate of the impugned international transaction was untenable and instead pointed out that in the following decisions of the Tribunal rate of 0.50% has been considered to be arm’s length rate on account of fee for providing corporate guarantee.
