PCIT Vs Karam Chand Thapar And Bros Coal Sales Ltd. (Calcutta High Court)
Calcutta High Court has dismissed an appeal filed by the Income Tax Department against Karam Chand Thapar And Bros Coal Sales Ltd., upholding the Income Tax Appellate Tribunal’s (ITAT) decision to delete a transfer pricing adjustment concerning a corporate guarantee commission. The ruling, dated February 28, 2023, for Assessment Year 2015-16, reinforces the acceptance of a 0.5% commission rate for such guarantees.
The Revenue had challenged the deletion of a transfer pricing adjustment of Rs. 7,71,77,867/-, arguing that the ITAT erred in sustaining the Commissioner of Income Tax (Appeals) [CIT(A)] order. The core issue was whether the corporate guarantee fee charged by the assessee to its Associated Enterprises (AEs) was at arm’s length.
The High Court, after reviewing the records, found that the ITAT had correctly determined that an average rate of 0.5% for corporate guarantee commission has been consistently accepted in multiple Tribunal decisions. The assessee in this case had already charged its AEs a 0.5% commission, which the Tribunal noted compared favorably with rates typically charged by the Bank of Singapore, often around 0.15%.
The ITAT’s decision was also supported by the Madras High Court’s ruling in PCIT Vs. Redington (India) Ltd. ([2020] 122 taxmann.com 136 (Mad)), which was applied to the facts of the present case. The Calcutta High Court concluded that no substantial question of law arose for its consideration, leading to the dismissal of the Revenue’s appeal.
