ITAT Delhi Restricts Corporate Guarantee ALP to 0.5%

By CA Sandeep Kanoi Income Tax Judiciary August 26, 2026

TaxGuru Citation: 2026 taxguru.in 11507
Case Name: Luminous Power Technologies Pvt. Ltd Vs ACIT (ITAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2013-14
Courts: All ITAT, ITAT Delhi

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Luminous Power Technologies Pvt. Ltd Vs ACIT (ITAT Delhi)

Summary: The ITAT Delhi partly allowed the appeals for AYs 2013-14 to 2016-17 concerning transfer pricing adjustments, specified domestic transactions, head-office cost allocation, interest-free advance to an AE and advertisement expenditure. For AY 2013-14, the Tribunal held that the corporate guarantee furnished to HSBC Bank for the assessee’s step-down subsidiary constituted an international transaction under Explanation 1(c) to Section 92B, inserted by Finance Act, 2012 with retrospective effect from 01.04.2002. However, following CIT Vs Everest Kento Cylinders Ltd., the Tribunal restricted the guarantee commission to 0.5%. It also deleted the specified domestic transaction adjustment arising from omitted Section 92BA(i), following Texport Overseas. The head office was held to be a pure cost centre rather than an independent profit centre, and the Section 80IA(8) adjustment was deleted. For AY 2014-15, the Tribunal upheld 4.331% interest benchmarking on the interest-free advance to the AE and allowed deduction for the disputed advertisement expenditure, including fees paid to Sachin Tendulkar, design creation expenses and market research expenditure. The appeals for AYs 2015-16 and 2016-17 were partly allowed by applying the decisions rendered for AY 2014-15 mutatis mutandis. The order was pronounced on 22.07.2026.

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