Corporate guarantee commission adjustment cannot stand where the 0.5% rate is supported by Tribunal practice and comparable material.

A transfer pricing adjustment on corporate guarantee commission was found unsustainable where the assessee had charged 0.5% from associated enterprises, the same rate had been accepted in several Tribunal decisions, and the record showed that the rate compared favourably with bank commission ranges. On those facts, the upward adjustment was deleted because a different arm's length estimate could not displace the supported and accepted commission rate.

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Issues: Whether the transfer pricing adjustment made on account of corporate guarantee commission was sustainable.

Analysis: The Tribunal found that a corporate guarantee commission rate of 0.5% had been accepted in several decisions and that the assessee had already charged commission at the same rate from its associated enterprises. It also noticed that this rate compared favourably with the bank commission range referred to in the record. On those facts, the Tribunal held that the upward adjustment could not be sustained.

Conclusion: The transfer pricing adjustment on account of corporate guarantee commission was deleted and the finding was affirmed in favour of the assessee.

Ratio Decidendi: Where the commission charged for a corporate guarantee is consistent with accepted Tribunal practice and supported by comparable factual material, an upward transfer pricing adjustment cannot be sustained merely on a different estimate of arm's length rate.

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