TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 415
X X X X Extracts X X X X
X X X X Extracts X X X X
....t at Joda in Orissa and a Slurry transportation system and pellet plant at Paradeep, Orissa. The return of income was filed on 30.9. 2008 declaring total income of Rs. 91,88,612/-. Since the value of international transactions exceeded Rs. 15 crores, the case was referred to TPO by the Assessing Officer and the TPO passed order u/s. 92CA(3) dated 11.10.2011 proposing adjustment of Rs. 1,24,30,054/- on account of Arm's Length Pricing of the International Transactions. The Assessing Officer made addition of Rs. 1,24,30,054/- to the declared income of the assessee in conformity with the Arm's Length Price determined by the TPO in the order passed u/s. 143(3) r.w. section 144C of the Act dated 15th December, 2011. The assessee by letter dated 2.1.2012 informed the Assessing Officer that it would not be filing objections before the Dispute Resolution Panel and requested for passing final order. The final order dated 24.1.2012 was passed u/s. 143(3) of the Act. 4. During the previous year ended 31.3.2008, the assessee made trade advance of 10% of the contract value in relation to an initial payment towards composite contract entered into with its Associated Enterprise i.e. Global Suppli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....45 days of signing the contract through a letter of credit; i) on receipt of original invoice and ii) on receipt of bank guarantee from M/s Global Supplies (UAE) FZE for the advance amount to be paid by assessee The Ld. Counsel for the assessee submits that on the basis of the above agreement, the assesse received bank guarantee from M/s Global Supplies (UAE) FZE issued by Bank of India London branch dated 11.01.2008 for the amount of advance to be paid. The assessee made a payment of USD 8.52 million being 10% advance against supply of equipment on receipt of invoice dated 19.01.2008 (Pg 71 of P.B). The said payment was made on 31.01.2008 by acceptance of bill under letter of credit. The copy of correspondence addressed to Axis bank Ltd for accepting the bill (Pg 72-73 of P.B.). He submits that according to the TPO the assessee ought to have charged interest on the above amount paid towards advance for machinery. The TPO calculated notional interest amounting to Rs. 1,24,30,054/- by applying rate of 18.81% p.a. for 72 days. It is submitted that the TPO has erred in calculating interest for 72 days. The advance payment was made on 31.01.2008 so if at all interest was to be charg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ove, the Ld. Counsel for the assessee submits that if at all interest is to be charged, the rate of interest to be applied on the said amount ought to be at LIBOR and not the prime lending rate as applied by the TPO. In order to support the said contention, reliance is placed on the following decisions: a) Cotton Naturals (I) Pvt. Ltd. v DCIT [276 CTR 445 (Del)] b) Hinduja Global Solutions Ltd v Addl.CIT [145 ITD 361 (Mum)] c) Siva Industries & Holding Ltd. vs. CIT [145 DJ 497 (Chen)] . Without prejudice, it is further submitted that the amount was advanced by the assessee on 31.01.2008. Hence, if at all interest is to be computed, it has to be computed for 60 days and not 72 days as calculated by the TPO. The TPO has erred in calculating interest from the date of invoice instead of date of payment made which is erroneous. Without prejudice to the above, it is submitted that the TPO ought to have reduced the amount of interest on trade advance from capital work-in-progress of plant and machinery as it was related to acquisition of plant machinery. It is submitted that the TPO has erred in adding the amount of interest to the total income of the assessee instead of reducing the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and it cannot be given different colour so as to expand the scope of transfer pricing adjustments by re-characterizing it as interest free loan. Now, Aegis Limited ITA No.1213/M/2014 24 whether in a third party scenario, if an independent enterprise subscribes to a share, can it be characterize as loan. If not, then this transaction also cannot be inferred as loan. The contention of the Ld. Counsel is also supported by the Hon'ble jurisdictional High Court in the case of Dexiskier Dhboal SA, ITA No. 776 of 2011 order dated 30th August, 2012 and by various other decisions, as cited by him. The Co-ordinate Benches of the Tribunal have been consistently holding that subscription of shares cannot be characterizes as loan and therefore no interest should be imputed by treating it as a loan. Accordingly, on this ground alone, we delete the adjustment of interest made by the Assessing Officer. Thus, ground no. 14 is treated as allowed. 28. Next issue relates to adjustment of Rs. 16,70,226/-" 8. In the case of Bharati Airtel Ltd., in ITA No. 5816 of 2012 dated 11.3.2014, the Co-ordinate Bench held as under: Ïn any event, it is not open to the Revenue authorities to recharacterize ....