TaxTMI 
TaxTMI 
2014 (1) TMI 1365
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....he arguments, evidences and factual errors pointed out by the assessee without giving any reason for not accepting the same. 4. (i) On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making an addition of Rs.42,06,807/- as difference in arm's length price determined by Transfer Pricing Officer (TPO) & the appellant. (ii) On the facts and circumstances of the case, the learned DRP erred in determining the reasonable interest rate at 12.20% per annum as against 4% determined by the assessee based on transfer pricing study. (iii) On the facts and circumstances of the case, the learned DRP has erred both on facts and in law in relying on comparison with uncomparables like government bonds and topping it up with the various considerations ignoring the fact that the assessee has given loan to an associated enterprise which happens to a subsidiary in a foreign country. (iv) On the facts and circumstances of the case, the learned DRP has erred both on facts and in law in relying on a comparison with the foreign currency loan advanced ....
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....appeal of the assessee on identical ground agreeing with the contention of the assessee that where the transaction was of money in foreign currency to its foreign subsidiary, the comparison had to be made with respect of advance and loan in U.S.A and not based on Indian conditions and the comparable transactions by unrelated parties in foreign currencies were relevant. Referring to the said order it was submitted that the Co-ordinate Bench held that in such a situation the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR should be taken as the bench-marked rate for the international transaction. It was pointed out that the Co-ordinate Bench had taken into consideration the fact that the assessee had arrangement for lending with CITI Bank for less than 4% and its profit were exempt u/s 10B as such there would be no case for the assessee to benefit by shifting of profits outside India. Copy available on record in support of the claim was relied upon. The Ld. Sr. DR on considering the order of the Co-ordinate Bench submitted that the issue is covered, however reliance was placed upon the impugned order. However at the time of dictati....
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....t from the balance sheet for financial year 2006-07, the TPO observed that certain amounts given as loans by assessee to its AE were outstanding as on 31.03.2006. The amount of international transaction reported in 3CEB was $ 10,50,000. The interest was received at the rate of 4%. 3.4 In view of the above, the TPO issue a detailed show cause notice to the assessee on 18.08.2010 stating that Arm's Length rate of interest on debt contracts of this nature is 14% & the same was proposed to be adopted for determining the ALP. 3.5 The TPO as per para 4 of his order show caused the assessee on account of the following facts :- "(a) The tax payer has extended loan to its associated enterprise at 4%. (b) Lending or borrowing is not one of the main businesses of the taxpayer. (c) Two independent enterprises in the similar circumstances as that of the tax payer and its subsidiary would have charged arm's length interest as compensation for the financial facility provided by one party to another keeping in view the financials of the subsidiary and no security being offered. (d)....
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....5%-12.50% in March 2007. So considering facts and circumstances, DRP finds that interest rate of 12.224% to be arm's length rate. The same is rounded off to 12.20%." 4.1 Accordingly the ALP was computed in the following manner:- "Interest is calculated @ 12.20% per annum on balances as on 31.03.2007 since no monthly closing balances have been provided. The objections of assessee are partly accepted. The A.O. is directed to amend the order accordingly." 5. The said direction was implemented by the AO who pass the impugned order. Aggrieved by which the assessee is in appeal before the Tribunal with the contention that the issue is covered in favour of the assessee by the order of the Co-ordinate Bench which stand has not been rebutted by the Revenue. The relevant finding is given in paras 11-20 which read as under :- "11. We have carefully considered the submissions and perused the records, we find that the assessee company in this case is a leading manufacturer of rider apparel. Assessee entered into international transaction as under:- Equestrian Apparel sold to JPC Equestrian Inc Rs. 48191540....
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....o be with rate of interest being paid by the multinational companies or banks in respect of money borrowed from India. However, the DRP agreed with TPO's point of view. But, it held that further addition on account of security is not needed. It opined that Arm's length interest rate may be taken as the PLR of RBI for the financial year 2007-08. In accordance with the above decision, the TPO adopted 13.25% as the rate of arms length interest rate. 14. We note that CUP method is the most appropriate method in order to ascertain arms length price of the international transaction as that of the assessee. We agree with the assessee's contention that where the transaction was of lending money in foreign currency to its foreign subsidiaries the comparable transactions, therefore, was of foreign currency lended by unrelated parties. The financial position and credit rating of the subsidiaries will be broadly the same as the holding company. In such a situation, domestic prime lending rate would have no applicability and the international rate fixed being LIBOR should be taken as the benchmark rate for international transactions. 15. T....