Tribunal adjusts corporate guarantee commission rate to 0.5% per annum

The Tribunal partially allowed the appeal, directing the AO to recompute the corporate guarantee commission at a rate of 0.5% per annum, citing benefits brought to the AE by the corporate guarantee. The decision was based on the principle of compensating the AE for credit facility benefits.

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Issues:
Appeal against addition of commission on corporate guarantee.

Analysis:
The appeal was against the CIT(A)'s confirmation of the AO's addition of commission on a corporate guarantee. The AO computed the guarantee commission at 1.75% following a decision of the Bombay High Court. The assessee argued that the subsidiary charged lower margins, and any commission should be at 0.3% based on bank guarantee rates. The CIT(A) upheld the AO's decision, stating that the guarantee commission worked out by the TPO was justified. The assessee cited a previous order by the Tribunal restricting the disallowance to 0.5%. The Tribunal agreed with the assessee, directing the AO to recompute the commission at 0.5%, partially allowing the appeal.

In conclusion, the Tribunal partially allowed the appeal, directing the AO to recompute the corporate guarantee commission at a rate of 0.5% per annum, following a previous order and citing benefits brought to the AE by the corporate guarantee. The decision was based on the principle of compensating the AE for credit facility benefits.

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