Case Law Details
Commissioner of Income Tax Vs Everest Kento Cylinders Ltd. (Bombay High Court)
Bombay HC clarifies bank guarantee vs. corporate guarantee distinctions in Everest Kento Cylinders case. Ruling impacts income tax computation.
In a recent judgment, the Bombay High Court addressed critical distinctions between bank guarantees and corporate guarantees, specifically concerning the computation of guarantee commission. The case, Commissioner of Income Tax vs. Everest Kento Cylinders Ltd., involved substantial questions of law related to the disallowance of interest under section 14A of the Income Tax Act, 1961, and the adjustment of guarantee commission under section 92CA. The High Court’s ruling sheds light on the nuanced nature of guarantee commissions, especially when comparing bank guarantees and corporate guarantees.
Background of the Case:
Everest Kento Cylinders Ltd., engaged in the manufacturing of high-pressure gas cylinders, had a subsidiary company in Dubai. The company filed its E-return for the assessment year 2007-08, declaring total income and showing book profit under section 115JB of the Income Tax Act. The case was selected for scrutiny, and the Transfer Pricing Officer (TPO) made adjustments concerning guarantee commission.
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