TaxTMI 
TaxTMI 
2014 (11) TMI 254
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....s, plates etc. During the year under consideration, the assessee has made sales of Rs. 191,42,89,946/- to PT Essar Indonesia, a non-resident associate concern of the Assessee. Since it falls under the transfer pricing regulations, this was referred to the Transfer Pricing Officer for determination of the arm's length price for this transaction. The TPO passed the order u/s.92CA(3) dated 16.06.2009 by fixing the arm's length price for this sales. The difference in the value of sales as per the TPO comes to Rs. 5,82,41,193/-. Accordingly, this difference in the value of sales of Rs. 5,82,41,193/- was added to the declared income of the assessee in conformity with the arm's length price determined by the TPO. 4. During the course of assessment, the AO also found that assessee company has not deducted tax from expenditure of Rs. 14,37,53,592/- incurred towards interest on external commercial borrowing (ECB) from a consortium of foreign banks led by Bearishch Landensbank, Singapore. The assessee pointed out that the Company had got the approval of the CBDT for exemption of this interest from income chargeable to tax in India u/s. 10(15)(iv)(c) of the Act as per the Certif....
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....has been decided in appellant's favour by different first appellate authorities since A.Y.2000-01. The nature of the transaction remains the same, so there are no compelling reasons to deviate from the earlier positions. The interest paid by the appellant cannot be treated as „Income taxable? in the hands off the recipient by virtue of section 10(15)(iv)(c). In that case, the TDS provision are not applicable and consequently the provisions of Section 40(a) cannot be invoked. Thus, following the principle of judicial consistency the disallowance of Rs. 14,37,53,592/- is deleted." 7. Ground was raised by revenue with regard to deletion of disallowance in respect of interest payment on external commercial borrowings was also considered by the Tribunal in assessee's own case and matter was decided in favour of assessee after having following observation :- "10. Ground No. iv pertains to the disallowance of an amount of Rs. 11.94.crores. Assessee made a borrowal of US$ 40 Million (working out to Indian Rs. 143.46 crores) from abroad in March, 1997 by way of External Commercial Borrowing (ECB) from a consortium of foreign banks syndicated by Bearishch Landensbank, S....
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....s described in detail in the assessment order dated 07.03.2003 for the A.Yr. 2000-01, the Assessee has not fulfilled the purpose and conditions laid down u/s. 1 0(15)(iv)(c) that the loan amount has been utilised for the purchases outside India of (1) raw material (2) components and (3) capital plant and machinery since the amount has been received in Rupees which goes to show that foreign loan was converted into Rupees. Therefore, the assessee was asked as to why interest of Rs. 11,94,87,2161- should not be disallowed as per Sec. 40(a)(i) of the Income Tax Act. To the above, the assessee replied as under in its letter dated 01.03.2004 : The company has obtained the approval from the Government of India u/s. 10(15)(iv)(c) of the Income Tax Act, 1961 vide their letter dated 12.03.1997. As per the aforesaid section, interest received by the foreign bank is exempt from Indian Income Tax provided the company has obtained an approval from the Government of India u/s.10(15)(iv)(c). As the interest income is exempted from tax in the hands of recipient, the company had not deducted the TDS since no TDS can be deducted on a payment which is not taxable. Section 10....
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....ced on CIT vs. Chunilal Rameshwarlal 70 ITR 167 (Patna) where the High Court had occasion to interpret the word "in respect of" as under: The expression "in respect of" is vital connotations that the word "in" or "on". Hence a clause of Municipal tax though not the tax of premise or building may nevertheless be taxed in respect of the premises or building used for the business. Thus tax paid to Municipalities for carrying on a profession made within the municipality under section 150(a) of the Bihar and Orissa Municipality Act was held to be taxed in respect of the terms in which the business was carried on and covered by this". 13. On similar issue the learned CIT (A) in AY 2000-01 (copy placed on record) has held as under: 7.3 Shri Ahmed argues that it will be unreasonable to interpret the law as requiring that, say, if a note with number X has been borrowed, the same note bearing number X should be paid out. As has been emphasised on behalf of the appellant, the pivotal words are "in respect of". If the monies have been borrowed/debt incurred in respect of purchase outside India of raw materials or components or capital plant and machinery and the outg....
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....Since there is no requirement of TDS, question of disallowance under section 40(a)(ia) for non deduction of tax also does not arise. Moreover, as seen from the correspondence with the Ministry of Finance by the assessee company way back in December, 1996 and February, 1997 it can be noticed that the CBDT also insisted on verifying the deployment of funds and assessee vide the letter dated 7.2.1997 enclosed the Auditor?s certificate certifying the attached statement showing the deployment of funds equivalent to US$ 40.22 million and corresponding invoices for import of capital goods for the hot rolled coils project of the company out of Euro Convertible Bonds issue of US$ 75.00 million. They also placed on record the approval of the RBI for the purpose of financing the Put Option under Euro Convertible Bonds issue of USD 75 Million. After examining the relevant certificates the CBDT Foreign Tax Division vide letter dated 12.03.1997 granted the approval under section 10(15)(iv)(c). Therefore, the contention of assessee now made at the time of payment of interest does not survive as the issue of utilization of the funds was already examined by the CBDT at the time of granting exemptio....
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....in totality by aggregating the same whereas the TPO picked up two transaction where the price charged was less that the average market price and also beyond 5% permissible bandwidth to make the addition ignoring other transaction where the average price charged was more. Rule 10(A)(a) of the Rules defines a transaction to include a number of closely linked transaction. In case they are closely linked then they can be aggregated for determining the ALP. In the present case the appellant has exported Hot Rolled Coils to its AE in Indonesia between 30U1 June 2005 to 10th March,2006. The price has been determined from the website whose data is not subject to challenge. The product remains the same and the source of (website) from which the average price has been taken remains the same. As such this is a fit case for aggregation. In fact out of 8 transactions, there are only 3 transactions where the average price charged by the appellant to its AE is less. In fact if the average price is adopted for all the 8 transactions, then the average comes exactly to 420.71 which is what the price charged by the appellant to its AE. Thus the action of the TPO in resorting to pick....