Revenue's appeal dismissed; interest rate to match AE's country rate; no disallowance under Section 14A.

The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decisions on all contested issues. It affirmed that the rate of interest on loans from AEs should align with the prevailing rate in the AEs' country, rejected the disallowance of interest paid to subsidiaries due to sufficient own funds, and confirmed no disallowance under Section 14A as no exempt income was received. The Tribunal's decision was consistent with prior rulings and jurisdictional precedent, supporting the assessee on all grounds.

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Issues Involved:
1. Transfer Pricing (TP) Adjustment on Interest Received from Associated Enterprises (AEs)
2. Deletion of Disallowance of Interest Paid to Subsidiaries
3. Deletion of Disallowance under Section 14A read with Rule 8D

Summary:

1. Transfer Pricing (TP) Adjustment on Interest Received from Associated Enterprises (AEs):
The Revenue contested the CIT (A)'s rejection of the benchmarking done by the TPO regarding interest received by the assessee from AEs, arguing that the CIT (A) ignored the "Doctrine of Election" and "Doctrine of Approbation and Reprobation." The Tribunal noted that an identical issue was decided in favor of the assessee for the assessment year 2010-11, where the CIT (A) held that domestic PLR cannot be applied to benchmark the rate of interest on foreign currency loans. The Tribunal upheld the CIT (A)'s decision, affirming that the rate of interest should be in accordance with the rate prevailing in the country of residence of the AEs, thereby rejecting the Revenue's grounds.

2. Deletion of Disallowance of Interest Paid to Subsidiaries:
The Revenue challenged the deletion of disallowance of interest expenditure under Section 36(1)(iii) of the Act. The Tribunal referred to its decision in the assessee's case for the previous assessment year, where it was held that the assessee had sufficient own funds to advance loans to subsidiaries and that the rule of consistency should be followed. The Tribunal upheld the CIT (A)'s decision to delete the disallowance, finding no merit in the Revenue's grounds.

3. Deletion of Disallowance under Section 14A read with Rule 8D:
The Revenue contested the deletion of disallowance made under Section 14A read with Rule 8D. The Tribunal noted that the assessee did not receive any exempt income during the assessment year under consideration. Citing the jurisdictional High Court's decision in PCIT vs. Era Infrastructure (India) Ltd., the Tribunal held that no disallowance can be made in the absence of exempt income. The Tribunal upheld the CIT (A)'s decision, dismissing the Revenue's grounds.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decisions on all grounds. The order was pronounced in the open court on 16/10/2023.

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