Taxability of guarantees: related party guarantees treated as supply of service; Rule 28 valuation and exceptions clarified. Providing personal bank guarantees by directors is a supply of service between related persons and is valued under Rule 28; where RBI rules preclude payment, the open market value may be zero and thus no taxable value arises, except where remuneration is actually paid. Corporate guarantees between related persons, including holding company to subsidiary, are also a supply of service and their taxable value is determined under Rule 28 as amended by the newly inserted sub rule (2), which does not apply to personal guarantees.
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Taxability of guarantees: related party guarantees treated as supply of service; Rule 28 valuation and exceptions clarified.
Providing personal bank guarantees by directors is a supply of service between related persons and is valued under Rule 28; where RBI rules preclude payment, the open market value may be zero and thus no taxable value arises, except where remuneration is actually paid. Corporate guarantees between related persons, including holding company to subsidiary, are also a supply of service and their taxable value is determined under Rule 28 as amended by the newly inserted sub rule (2), which does not apply to personal guarantees.
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