2018 (6) TMI 1560

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....10.02.2016 under section 143(3) of the Income Tax Act, 1961(hereinafter 'the Act'). 2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making the addition of commission of corporate guarantee. For this assessee has raised the following ground: - "1. Addition of Rs. 89,04,600/- on account of commission on corporate guarantee given for AE as per order u/s 92CA(3) of the Income Tax Act: 1.1 On facts and circumstances of the case and in law, the learned CIT(A) erred in confirming the addition of Rs. 89,04,600/- made by AO on account of Commission of Corporate Guarantee. The learned CIT(A) erred in not appreciating the fact that MIs Petroleum Speciality Pte Ltd(PSPL....

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....n'ble Bombay High Court in the case of CIT vs Everest Kento Cylinders Ltd. computed the guarantee commission at the rate of 1.75% by observing in Para 7 as under: - "7. In this regard, attention is invited to the recent decision of Hon'ble Bombay High Court in the case of Everest kanto, wherein their lordships have held that the consideration for the issue of a bank guarantee and Corporate Guarantee are different However, their lordships have also held that if the guarantee was obtained from a bank, higher commission would be justified. Further, in the case of Glenmark Pharmaceuticals Ltd. in ITA No. 5031/ Mumbai/ 2012 dated 13.11 2013 (A Y. 2008-09), the Hon'ble ITAT has held that the naked quote rates applicable to the bank g....

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....ed less margin from the assessee on sale of goods, that is, oils as compared to the margins charged from third parties for the supply of oil in India and hence the portion of guarantee commission if chargeable, is already taken into consideration while billing the goods to the assessee and therefore the guarantee commission should not be charged. And It has also been submitted that even if it has to be charged, It should be charged at the rate of 0.3% as per the details gathered by the assessee from Union Bank of India from which assessee had obtained independent letter of sanction for giving of bank guarantee and which was subsequently obtained by the assessee. Thus it becomes very clear that the rate of corporate guarantee should not be m....

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....nals order in assessee's own case in ITA No. 956/Mum/2015 for AY 2009-10 vide order dated 04.05.2018, wherein Tribunal vide Para 4 restricted the disallowance at 0.5% by observing in Para 4 as under: - "4. We have heard carefully heard the rival contentions and perused relevant material on record. In our opinion corporate guarantee provided by the assessee brought certain benefits to its AE by way of credit facility and therefore, the same was required to be compensated by its AE. Our view is duly supported by the decision of this Tribunal rendered in Everest Kanto Cylinders Ltd. Vs. DCIT [34 Taxmann.com 19] as affirmed by Hon'ble Bombay High Court on 08/05/2015 [58 Taxmann.com 254] wherein the rate of commission has been adopted @....