Wednesday, June 18, 2014

Updates on Direct Tax Laws-2

Whether Transfer Pricing Regulations apply to Guarantee Transactions given by an entity to its Associated Enterprise post amendment of Sec 92B by the Finance Act, 2012:
It all depends on various facts and one of the main factors to be considered is whether the AE had taken any loan based on the ‘Corporate Guarantee’ given by the other entity. If the answer is ‘Yes’, then it falls within the ambit of TP Provisions. [Four Soft (P) Ltd] [Hyd Tribunal – ITA Number 1901/Hyd / 2011]
On the other hand, where the AE had not taken any loan based on the ‘Corporate Guarantee’ extended by the other enterprise, then it does not fall under the scope of TP Provisions even after the amendment of Sec 92B by the Finance Act, 2012. [Bharti Airtel Ltd Vs Addl CIT] [2014] [43 Taxmann.com 150] [Delhi-Tribunal]
Where TP provisions are applicable, CUP method is to be used to benchmark the same.

No comments:

Post a Comment