TaxTMI 
TaxTMI 
2017 (11) TMI 639
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....ature of interest on loans granted to Associated Enterprises (for short 'AEs') of the assessee, and enhancing the disallowance u/s 14A read with Rule 8D of the I.T. Rules to a tune of Rs. 29,03,632/-. 2. Briefly stated relevant facts are that the assessee is engaged in the business of manufacturing and trading of readymade garments and job work besides involving in the activities mainly in various subsidiaries throughout the world. Portfolio of the assessee comprises of shares and securities of many group companies and also of non group companies. During the relevant year the assessee had undertaken various International Transactions with its AEs and, among other things, had extended loans to three of its AEs in dollar denomination. Beside....
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....x Act, 1961 (for short called as the 'Act'). Hence, the assessee is before us in this appeal. 3. It is the argument of the Ld. AR that out of the three AEs who were extended loans, interest at 6% was offered in respect of Nor Pearl Knitwear Limited, Bangladesh and House of Pearl Fashions Limited, USA, whereas in respect of the Multination Textile Group Limited, Mauritius loan was extended without charging any interest because the said concern is the 100% subsidiary of the assessee and was running into losses, as such, out of business need of the assessee they extended the help not in the form of capital, because of the risk of resources being struck, but in the form of loan so that as and when the subsidiary comes out of financial problems....
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....than 6%, it is totally unjustified on the part of the authorities below not to accept 6% offered by the assessee. Ld. DR vehemently relied upon the orders of the authorities of the Assessing Officer. 5. We have carefully gone through the facts in the light of the contentions raised on either side. Insofar as the contentions of the assessee about non-chargeability of interest in respect of Multination Textile Group Limited, Mauritius is concerned, the contention of the assessee is that such AE was running into losses, thereby necessitated the assessee in the capacity of a parent to pump funds, but in view of the legal difficulties, instead of equity, funds are given in the form of loan so that in future they could be recovered easily. On th....
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....the pricing in the situations of cross border international transactions, where two enterprises which are subject to the same centre or direction or control (associated enterprise) maintain commercially or financially relations with other. In such a situation, the possibility exists that by way of intervention from the centre or otherwise, business conditions must be accepted by the acting units which differs from those which in the same circumstances would have agreed upon between un-related parties. The aim is to examine whether there is anomaly in the transaction which arises out of special relationship between the creditor and the debtor. Hence the contention of having actually not earned any income cannot come to the rescue of the asse....
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..... was acceptable in case of Nor Pearl Knitwear Limited, Bangladesh holding that in view of such concern obtaining loan at interest rate of SIBOR plus 3% p.a. However, when the matter came to the other two concerns, he had taken a view that the arm's length rate of interest would be the interest rate expected by an Indian lender either from bank or from any mutual fund etc., and on this premise he had chosen 16% taking clue from SBI PLR plus 350 points. There is an inherent inconsistency in the view taken by the TPO because, if at all the ALP interest in so far as the assessee is concerned is the interest rate expected by an Indian lender, then irrespective of the fact of Nor Pearl Knitweard Limited, Bangladesh obtained loan at Bangladesh at....