2012 (11) TMI 268

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....brief facts of the case are that the assessee company at the relevant time was engaged in leasing finance, trading in trade securities and investment in sales. It has filed its return of income-tax on 30th October, 2007 declaring an income of Rs.98,56,600. The case of the assessee was selected for scrutiny assessment and a notice under sec. 143(2) of the Income-tax Act, 1961 dated 26.09.2008 was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee is a 50% shareholder in a company, namely, PT Minda Asian Automotive Ltd. Indonesia. According to the assessee, this company was formed on 30th November 2001. The joint venture partners have given temporary loan to the said company ap....

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....ny. The rate of interest has to be seen according to the rates available in the international market. The assessee was required to charge libor on such loan and no interest. The libor in the international market was between 4% to 5% at that point of time. The loan was given in US $ and the amount was received back in the foreign currency. The rates charged by the assessee in between 6.5% to 7% was more than the libor rates available in the international market, therefore, no disallowance could be made out of the interest expenses on such loans which were used by the assessee for making advance to the joint venture . He also submitted that the assessee had gained a profit on foreign exchange fluctuation. This amount received by the assess....

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....sian company. Assessing Officer ought to have compared the libor rates prevalent in the international market at that point of time. The assessee has demonstrated that such rate was in between 4% to 5%. It has charged the rate in between 6.5% to 7%. Thus, in such situation, even on this count also, no disallowance can be made. Taking into consideration all these aspects, we allow the ground raised by the assessee and delete the disallowance. 6. In the result, the appeal of the assessee is allowed.   7. In the Revenue's appeal, the solitary issue is that Learned CIT(Appeals) has erred in restricting the disallowance under sec. 14A to Rs. 1 lac as against Rs.36,61,921 made by the Assessing Officer. 8. With the assistance of le....