Delhi Tribunal Holds that a Loan Guarantee is Not Subject to Transfer Pricing Rules

In a recent ruling issued by the Delhi Income Tax Appellate Tribunal, it was held that a corporate guarantee provided to a foreign subsidiary for a bank loan is not subject to India's transfer pricing rules.

The case involved a multinational telecommunications company incorporated in India that provided a guarantee to secure a bank loan to provide working capital for its Sri Lankan subsidiary. The Indian company did not charge the subsidiary a fee for the guarantee. However, it did compute 0.6…