Interest on Wrongful Input Tax Credit is mandatory where excess transitional credit was retained and later reversed, and related objections were rejec...
Where inter-company loans are advanced to subsidiary entities under the assessee's management and control, a higher arm's length interest rate is not justified merely because the loans are unsecured or the subsidiaries have a weaker credit profile. The Tribunal applied the principle noted in Bharti Airtel Limited and held that control over the subsidiary reduces, rather than increases, lending risk. It also found that the earlier accepted interest rates for the USA and Netherlands entities had not been disturbed in prior years and no fresh material showed any change in risk profile. The transfer pricing adjustment to the arm's length price of interest was therefore deleted.
Where inter-company loans are advanced to subsidiary entities under the assessee's management and control, a higher arm's length interest rate is not justified merely because the loans are unsecured or the subsidiaries have a weaker credit profile. The Tribunal applied the principle noted in Bharti Airtel Limited and held that control over the subsidiary reduces, rather than increases, lending risk. It also found that the earlier accepted interest rates for the USA and Netherlands entities had not been disturbed in prior years and no fresh material showed any change in risk profile. The transfer pricing adjustment to the arm's length price of interest was therefore deleted.
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