TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 468
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....ctions Amount (Rs.) JPC Equestrian Inc. Sale of goods 27490618 JPC Equestrian Inc. Interest on Loan 1990626 3. He observed that the ownership structure of the assessee as on 31.03.2010 is as under :- Shareholders No. shares % of holding Varun Sharma 995000 50% Tokie Sharma 995000 50% 4. He further observed from the TP documentation that the assessee has advanced foreign currency loan to its subsidiary JPC Equestrian Inc., the details of which are as under :- Amount of Loan USD 10,50,000 Interest Receivable Rs. 19,90,626 Effective interest 4% 5. He observed that the assessee has benchmarked the interest using CUP method. He, therefore, asked the assessee to justify such interest on the loan given to the subsidiary. Rejecting the various arguments advanced by the assessee, the TPO made an upward adjustment of Rs. 56,68,724/- on the following :- (a) Interest on Foreign Currency Loan - Rs.54,14,503/- (b) Receivables - Rs.2,54,221/- 6. The assessee approached the DRP, who vide order dated 29.09.2014 directed the Assessing Officer to adopt the figure of Rs. 49,35,541/- as against the upward adjustment of Rs. 54,14,503/- made....
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....e Hon'ble DRP erred in applying the safe harbour Rule while determining the abovesaid rate of interest despite the fact that the said Rules are not applicable to the relevant assessment year. (iv) On the facts and circumstances of the case, the learned TPO has erred both on facts and law in making 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 be a subsidiary in a foreign country. (v) On the facts and circumstances of the case, the learned TPO has erred both on facts and law in making a comparison with the foreign currency loan advanced by an Indian bank to an Indian entity and topping it up with various considerations ignoring the fact that com parables have to be placed in a similar situation and circumstances, that is, the rate of interest prevalent in the country in which the amount has been advanced. 6. On the facts and circumstances of the case, the Hon'ble DRP erred in ignoring the contention of the assessee that the loan having been advanced at a fixed rate way back in the year 2002 & 2003, the interest rate ....
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....of the Paper Book, he submitted that the Tribunal in assessee's own case for assessment year 2008-09 has decided the issue in favour of the assessee by holding that the adjustment suggested by the TPO is not warranted on this issue. The Revenue has not filed any appeal. Therefore, it has attained finality. 10. So far as assessment year 2009-10 is concerned, he submitted that no adjustment has been made. In assessment year 2011-12, the DRP and Assessing Officer has accepted the plea of the assessee on this issue and has not made any adjustment by following the decision of the Hon'ble Delhi High Court in assessee's own case. He accordingly submitted that the adjustment sustained by the DRP for this year has to be deleted. 11. Ld. DR on the other hand heavily relied on the order of the Assessing Officer/TPO/DRP. 12. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Tribunal, in assessee's own case for assessment year 2008-09 vide ITA No.5855/Del/2012 order dated 08.02.2013 from para 11 onwards has dec....
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....nally, Assessing Officer held that interest rate at 17.26% would be fair and reasonable. 13. Before the DRP assessee inter-alia contended that comparison has to be made with respect of advance or loan in USA and not based on Indian conditions. The comparison could also 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 ....
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....llowed the appeal of the assessee. We find when the Revenue filed an appeal against the order of the Tribunal, the Hon'ble Delhi High Court vide ITA No.233/2014 order dated 27.03.2015 dismissed the appeal filed by the Revenue. We further find the DRP in assessee's own case for assessment year 2011-12 directed the Assessing Officer to delete the adjustment towards interest of loan by observing as under :- "Grounds no.4 and 5 challenge the adjustment towards interest on loan. The assessee has contended that this issue has been decided in its favour by the Hon'ble Delhi High Court in the assessee's own case (CIT v Cotton Naturals (I) Pvt. Ltd. 2015-TII-09-HC-DEL-TP). The assessee stated that the facts this year, are the same as in the year, in which a similar adjustment has been deleted by the Hon'ble High Court. The assessee stated that the loan on which interest adjustment has been made is also the same. Respectfully following the decision of the Hon'ble High Court in the assessee's case, the AO is directed to delete the adjustment towards interest on loan." 14. In view of the consistent decisions of the Tribunal for assessment years 2007-08 and 2008-09 and in the light of the d....