AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 512
X X X X Extracts X X X X
X X X X Extracts X X X X
....ound No.1: Disallowance of deduction under section 10B of the Income-tax Act, 1961 (Act) for Strides Technology & Research Division' ("STAR") unit for Rs. 142228,544/- 1. The Honorable Dispute Resolution Panel (Hon'ble DRP") and the Learned Assessing Officer (Ld. AO') erred in disallowing deduction under section 1OB of the Act on export profits earned by the STAR unit on the basis that the Appellant is merely granting the license to manufacture products by utilizing the Dossier' and the activity of preparation of dossier cannot be treated as manufacture or production of an article or thing' without appreciating facts of the case. Without prejudice to the above, the Hon'ble DRP and Ld. AO failed to appreciate the fact that the activities of STAR unit fall under information technology enabled products or services for the purpose of deduction under section 10B as notified by CBDT vide Notification No SC 890(E) dated 26/09/2000." 3. Brief facts are that the assessee is engaged in the business of manufacturing & trading of pharmaceuticals. The assessee claimed deduction under section 10B of the act on three EOU units eligible. The AO during the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the same can by no stretch of imagination be treated as manufacture or production of an article or thing and export thereof.' Hence the assessee's claim of deduction u/s 1OB of Rs. 14,22,28,544/- in respect of its Conti-act Manufacturing & Research Division' (STAR unit), was proposed to be disallowed." 4. The DRP also rejected the objection of the assessee vide Para 3.3. and 3.3.1 as under: - "3.3 We have considered the draft assessment order and the assessee's submissions. As we see, the assessee has sought to establish that the preparation of the dossier tantamount to production of article or thing in terms of Section 10B of the Act. The Assessing Officer has on the other hand examined the issue on the template of the immediate source of the fee in question and has then held that the immediate source of the free being for granting of the license and the dossier being only a process and not the source of the receipt of the fee, deduction is not allowable. Considering these two positions, we agree with the Assessing Officer. As we see, the preparation of the dossier is only a regulatory and intermediary process and not an end - product in itself in so fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tify that the right that are created do not exist at the time of filing the dossier and take shape only after the dossiers are filed. This is a lame justification as the contract right at the beginning makes it clear that the assessee is obligated to sell the rights or license. Once the contract stipulates this, it only becomes a matter of procedure and process when ultimately the customer can become the owner of the license. The fact remains that the customer is compensating the assessee for the license and not for the intermediary regulatory procedures and processes. Taking into account the foregoing, we find the denial of deduction u/s. 10B justified." Aggrieved, now assessee is in second appeal before Tribunal. 5. Before us, the learned Counsel for the assessee explained that the assessee is registered and approved EOU and he referred to Page 38 of assessee's paper book, wherein license issued by customs department is enclosed. This approval is issued vide order No. 176/2004 dated 15.09.2004 under section 65 of the customs Act, 1962 and unit is permitted to manufacturer as under: - "1. The unit is permitted to make use of imported capital goods viz., Plant and Ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd characterization of the reference drug, technical information on drug product, regulatory review. pre-formulation studies, formula development, analytical method development, analytical method validation, packaging development, scale up from lab scale, stability studies, bioequivalence studies, preparation and submission of technical dossier amongst others. Dosage form capabilities at STAR include tablets, soft gel capsules, hard gel capsules, lyophilized injectable, dry powder parenteral, liquid injectable, ointments and liquids. The unit was setup as a 100% EOU and registered with the Office of the Development Commissioner, Cochin Special Economic Zone. The Unit has been registered as an EOU w.e.f. 01.09.2004. We are enclosing the following documentary evidence in support of our claim: d. Letter of Permission - LoP No. 01/42/2004 :PER: EOU:KR:CSEZ/6819 dt. 18/08/2004 e. Green card No 770 dt. 01.09.2004 The Unit has not been formed by splitting up, or the reconstruction, of a business already in existence. Further, facility was setup with new machinery / equipment, which was not used previously for any purpose. The unit comm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lity as well as data relating to stability studies and bioequivalence studies. Although the end product is Dossier, the major activity involved is manufacturing which takes place at the STAR Facility. The Dossier would not be complete without manufacture of exhibit botches. The Dossier is prepared for a particular product for certain markets or all. For each market, a separate Dossier is prepared and is generally required to be supported by additional activity and data besides manufacturing of exhibit/commercial batches. Although the broad parameters for preparation and approval of 'Dossiers' are same for various countries / territories, there could be some changes in the preparation of 'Dossiers' in view of Regulatory requirements for the countries involved. Further, the assessee may sell the Dossiers to customers. With the sale of Dossier, the ownership passes on to the Buyer. Based on the approval of Dossier, the Buyer has to approach the Regulatory authorities to sell the Product in the Territory. The right to manufacture continues with the facility/entity which has manufactured the Product, as stated in the Dossier. It is incorrect to state that selling of Doss....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... product or manufacture of an article or thing, the deduction is not allowable. It is now established law that to be eligible for deductions and exemptions, the 'first degree nexus' with the eligible income is sine-qua-non. He cited the case law of Hon'ble Supreme Court in the case Liberty India vs. CIT 317 ITR 218. Enumerating in the context of eligibility of DEPB income for deduction u/s. 80IB of the Act, the principle is that any income beyond the first degree nexus between the profits and the undertaking would constitute an independent source of income and would not be eligible for the deduction. While coming to this decision, the Court has taken into account various judicial precedents which have evolved from time to time in the matter. Accordingly, he argued that in the present case the relevant issue here is not whether or not dossier is a product or manufacture of article or thing but what is the final deliverable with which the fee received i.e. the eligible income has the first degree nexus. The assessee's arguments in this regard are deficient in that the assessee has sought to justify that the right that are created do not exist at the time of filing the dossier....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, we find that R&D is a process of continuous production and development and at any time around 150 products are in different stages of development. STAR develops generic version of products by re-formulating an existing innovator product. This re-formulated generic version of the product is initially produced/ manufactured in the R & D facility as a "prototype". Subsequently, all the technical and other data relating to such product is compiled in the form of a "dossier" and submitted to the regulatory authorities. On receipt of approval, the product is sold as a generic version in the market on commercial terms. The assessee reformulates an innovator product into generic version which involves compiling of the 'Dossier' and submitting the same to the Regulatory Authorities. The Product Development Activity is a process related activity. The final outcome of the said activity is in the form of a 'Dossier". The dossier is the culmination of various activities which are primarily manufacturing of development and exhibit batch duly supported by data collection, stability studies and bio-equivalence studies. The Dossier documents the detailed method followed in the manufa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing of date or information will tantamount to manufacture or production of article or thing. The Tribunal in Para 19 to 25 held as under:- "19. A reading of the above agreement does show that there was substantial research work intended by both the parties. But the question is what would evolve out of the research. Is assessee's client paying only for doing the research or for the end results? If the payments are indeed for the end results can such results be classified as manufacture or production of article or thing? There is no dispute that the billings done by the assessee on its clients were based on the manhours spent by its chemists on the job, at agreed rates. That such payments were made only based on the contractual expectation of the end result is clear form clause B of the agreement reproduced above. The end result of the research work done by the assessee could be one among the following three alternatives (i) A speciality compound which is useful and to be used by the clients as a building block for other compounds of use in industry (ii) A speciality compound which turns out to be no good, due to lack of required properties (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct of human activity or effort. In the case of the assessee here, there are processes of research, efforts put in by assessees scientists, and products which are in the nature of compounds or research documentation. Such products were different from the ingredients that went to its making. 22. Though the term produce gets colour of the term manufacture as held by Hon'ble apex court in the case of N.C. Budharaja & Co.(supra), the next question is whether all the ingredients that are necessary to constitute manufacture should necessarily be there for production also. The obvious answer is no, since otherwise legislature would not have wasted their energy by adding that term in juxtapostition with the term manufacture. This is elucidated by the judgment of Hon'ble Calcutta High Court in the case of CIT v. Air Survey Co. of India (P.) Ltd. [1998] 232 ITR 707. The question before Hon'ble Calcutta High Court was whether business of surveying, mapping and aerial photography which resulted in photographs was production of article or thing. Revenue had rejected assessee's claim for investment allowance on the ground that the activity of the assessee could not be cal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....associated with movables-articles and goods big and small - but they are never employed to denote construction activity of the nature involved in construction of a dam or a building. 5. The word "production" in s. 32A(ii) therefore, comprehends processing activity and the word "article" in that provision includes movables. The data processing computers involves processing and therefore, capable of being regarded as part of process of production. The balance sheet, sales analysis, statements, etc. obtained as a result of processing are movables and are different from the data that was initially fed into the computer though based upon the data so fed in. The use to which end-product is put is different from the one to which raw data is put at the time it is fed into a computer. The end-product obtained as a result of data processing such as balance sheets etc. are therefore, capable of being regarded as new articles. 6. The data processing activity is an organised activity. The machines have to be operated by employing persons trained for that purpose. The employee and employer relationship in running a data processing company inevitably exists as between those who ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....there was whether wire line logging services, where electrical, acoustic, radioactive and electromagnetic analysis of rock is done to assess the potentiality for oil production would tantamount to manufacture of production of articles or things. Their Lordships held as under at para 31 of the judgments after considering the Apex court judgments in the case of N.C. Budharaja & Co. (supra) and CIT v. Oracle Software India Ltd. [2010] 320 ITR 546/187 Taxman 275. '31. Having analyzed the submissions of learned counsel of both the parties and the material available for our perusal and the cited case law, we find force in the submissions of Mr. Vohra, learned counsel for the assessee. No doubt, the raw material i.e. the primary input in the impugned activity is the "information" but can we equate this "information" with something which is being copied from there in toto. Whether the characteristics regarding which the information is being sent back to computers on surface from logging tools working inside the down hole can be compared to a characteristic which is available and readable without conducting highly technical scientific tests and calculations down inside the bore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....though based on manhour spent were for such results. Hon'ble Madras High court had again in the case of CIT v. N. Venkatraman [2000] 245 ITR 73/[2002] 123 Taxman 1035 clearly held that the nature of the state of the what is produced, i.e. whether an intermediary or final product, could not be criteria for deciding whether an assessee was manufacturing or producing an article or thing." 12. From the facts of the present case, it is clear that the fundamental requirement in all the agreement is creation of dossier, which is compilation of the relevant technical education to enable manufacture of product. Dossier has all the attributes of product being an article or thing and it is creation specifies the requirement of a production. In fact, creation of dossier entails the actual production of the formulation initially in the laboratory and therefore upto a batch size. In similar circumstances Hon'ble Supreme Court in the case of Scientific Engineering House Pvt. Ltd vs. CIT (1986) 157 ITR 86(SC) held that the compilation of technical knowhow is an article to be considered as capital asset eligible for deduction for depreciation. Similarly, the Mumbai Tribunal also in the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e restrictions of deduction upto 90% of profit was only applicable for AY 2003-04 having regard to the Use of ward "for" in the second proviso to section 10(B)(1) of the Act. The learned Counsel for the assessee referred to the second proviso to section 10(b)(1) of the Act which reads as under: - "Special provisions in respect of newly established hundred per cent export-oriented undertakings. 10B. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee : Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the underta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression "total income of the assessee" in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'. 18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5. Without prejudice to the above, if it is contended the unbilled revenue/ income has not accrued to the Appellant. the entire profits of STAR unit should not be taxed." 19. Brief facts are that the assessee is engaged in the business of manufacturing and trading of pharmaceuticals. The assessee has 100% EOU units, Sterile Products a non 10B unit and three 10B Units called Oral Dosage Forms (ODF), Betalactam Division (BLD) and Contract Manufacturing & Research Division (STAR). During the course of assessment proceedings AO required the assessee to finish the details of the unbilled revenue of STAR unit, and accordingly party wise details of the same were provided. It was also submitted that these represent 'Development Revenue recognized' for which no invoices have been raised. It was further submitted that the revenue has been recognized based on a technical estimates of the stage of work. During the course of assessment proceedings, the Assessee submitted a write up on how the units are eligible for 10B Deduction & also submitted a write up off activities done at R&D center, Copies of Agreements of Unbilled Debtors, list of debtors, Copies of EOU Agreements, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nother alternative argument before us with a view that in case income has not accrued and hence, not entitled for deduction under section 10B of the Act, then, the income cannot be assessed in the hands of the assessee in the absence of its accrual. He also argued that since the income has been assessed, which has been assessed as stated above, is based on accepted accounting principles, the Tribunal can direct the AO to verify whether the consideration has been received within 6 months of raising of the invoices and allow the deduction as claimed for the year under consideration. The learned CIT Departmental Representative has made submissions that the DRP and the AO has rightly not allowed the claim of deduction but he agreed to the alternative submissions of the assessee that the income cannot be assessed in the absence of its accrual in the year under consideration and since the income has been assessed the AO can be directed to verify whether consideration has been received within 6 months of raising of the invoices and in that case, income can be considered and deduction can be allowed as claimed in the year. 22. We have considered the issue and are of the view that income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act, certain companies are eligible for a weighted deduction of 150% of the expenditure incurred in respect of any scientific research. The assessee claimed that the AO has neither questioned eligibility of the Company to claim the weighted deduction nor the fact of incurring the expenditure This is apparent from the fact that the AO has allowed 100% deduction in respect of the expenditure incurred. What the AO has contended in disallowing the weighted deduction claim is the non-submission of Form 3CM arid Form 3CL. The DRP also confirmed the action of the AO. Aggrieved, assessee came in appeal before Tribunal. 27. The learned Counsel for the assessee stated that it has fulfilled all the conditions to claim weighted deduction in respect of expenditure claimed under section 35(2AB) of the Act. The assessee submitted following details before the lower authorities and even now before us:- 1. Copy of letter issued by department of scientific and industrial research renewing the recognition of In-house R & D unit upto 31.03.2010 and extension upto 31.03.2015. 2. Copy of application made to the secretary, DSIR for certification of the expenditure under section 35(2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p of judgment of Hon'ble Delhi High Court in the case of CIT vs. Sandan Vikas (India), (supra) wherein their lordships have held, following the judgments of Hon'ble Gujarat High Court in the case of CIT vs. Claris Lifesciences Ltd. (supra), that assessee would be eligible for deduction even if the approval is granted by the competent authority subsequent to the expiry of the previous year. The relevant portion of the judgment is reproduced below: "The Assessing Officer, however, refused to accord the benefit of the aforesaid provisions of weighted deduction to the assessee on the ground that recognition and approval was given by the DSIR in February/September 2006, i.e., in the next assessment year and, therefore, the assessee was not entitled to the benefit. The CIT(Appeal) accepted this view of the Assessing Officer and dismissed the appeal, however, the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal") has come to the conclusion that the assessee would be entitled to weighted deductions of the aforesaid expenditure incurred by the assessee in terms of the Section 35(2AB) of the Act and in coming to this conclusion, the Tribunal has relied upon th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce facility is approved, the entire expenditure so incurred on development of R&D facility has to be allowed for weighted deduction as provided by Section 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up research and development facility in India, the legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, intention of the legislature by making above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction. 10. We are in full agreement with the reasoning given by the Tribunal and we are of the view that there is no scope for any other interpretation and since the approval is granted during the previous year relevant to the assessment year in question, we are of the view that the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred under Section 35(2AB) of the Act by the assessee." 3. We are in full agreement with t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... prevalent rate in the neighbourhood areas, period of lease agreement, terms of agreement with the landlord amongst others). Without prejudice to the above, the Hon'ble DRP and Ld AO erred in disallowing the portion of rent as unreasonable only from non 10B units instead of disallowing the same from 10B units and non 10B units on the basis of actual rent paid." 31. Briefly stated facts are that the AO and DRP has considered that the sum of Rs. 1,26,05,528/- being rental expenditure claimed by assessee and rent paid to related parties is unreasonable in term of section 40A(2)(b) of the Act and therefore, disallowed the same. The assessee explained before the lower authorities that the differential rent paid to Chayadeep properties Pvt. Ltd. and K Narayanraju & K Bhaskaraju was based on quality of construction and further Chayadeep properties Pvt. Ltd. to whom the assessee paid this rent was declared as rental income, on the same amount and there is no tax evasion. The assessee before us explained that the fact that the rentals in 1995 in Bilekahalli, Bannerghatta Road, Bangalore was very low. The Bilekahalli area with no significant development was generally considered a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to change only such amount of rent as per the terms of the Agreement. Whereas, the rental agreements with related party were entered into during August 2004 in case of one property and June 2006 in case of two other properties. 33. We find from the facts of the case that the lower authorities failed to appreciat the facts that the significant portion of the property belonging to the related party are used for R&D and Corporate Office which houses the Corporate Office Finance, HR, R&D. SCM, Planning departments. This it is be rented out to any third party without any modification. This can as it is be rented out to any third party without any modification this had a central superior quality construction and utilization for corporate office structure of related party building compared to outside party building which is used for manufacturing plant. The rental agreements with outside party were entered into in May 2001 and the rents were fixed for initial 7 years. Whereas, the rental agreement with related party were entered into during August 2004 in case of one property and June 2006 in case of two other properties. 34. In view of the above facts, we are of the view that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee company has issued FCCB (listed in Singapore Stock Exchange) to the extent of US $ 40 million. These bonds carry an interest rate of 0.5% p.a. and are redeemable on April 19, 2010 at 136.78 percent of the Principal amount. Further, these bonds are convertible into shares by Bond holders on or after May 18, 2005. The total issue expenses relating to the issue of FCCB is USD $ 10,77,926 claimed in equal installments over a period of 5 years. Further, we find that these Bonds may be redeemed only in full, at any time on or after 18th April 2008 but before April 19th 2010 with a redemption premium of 68% p.a. As on 31' December 2005 the additional amount (including exchange fluctuation) which is payable on redemption was provided for under Debenture Redemption Reserve with a corresponding adjustment to Securities Premium. Further, none of the bonds were offered for conversion as on 31st March 2007. Further, the FCCB issue expenses have been allowed as a deduction in the Company's own case for the AY 2006-07. Based on GAAP principles, the premium needs to be accrued; consequently the liability has been accrued in the books in the year of receipt of FCCB funds. Premium on....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h redeemable after 10 years at a premium of 100 per cent had been issued during the assessment year in question. There is no reason for us to discard this note of the auditor. Even in the assessment order, no reasons have been given by the Assessing Officer for discarding this note of the auditors. Lastly, we may point out that even assuming for the sake of argument that the borrower had a discretion to change the terms of the issued debentures, there is nothing in the record to show that during the assessment year in question the borrower had exercised such a discretion. In the absence of factual matrix, we have no option but to confirm the judgment of the Tribunal. In our view, the judgment of this Court in the case of Taparia Tools Ltd. (supra) is applicable to this case. In our view, the judgment of the Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. (supra) is also applicable." 39. In view of the above facts, we are of the view that the assessee has rightly claimed the liability as expense and we allow the same. This issue of assessee's appeal is allowed. 40. The next issue in this appeal of assessee is against the order of DRP and AO in disallowing....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the disallowance under section 14A at Rs. 600/- i.e. to the extent of dividend income. We direct the AO accordingly. 43. The next two interconnected issues in this appeal of assessee are as regards to the levy of interest under section 234B and 234D of the Act. At the outset, the learned Counsel for the assessee drew our attention to ground No. 10 and 11 which reads as under:- "Ground No 10: Levy of interest under section 234B of the Act - Rs. 43,693,090 11. The Hon'ble DRIP and Ld AO erred in levying interest under section 234B of the Act which is consequential in nature. Ground No 11: Levy of interest under section 234D of the Act Rs. 1,688755 12. The Hon'ble DRP and Ld AO erred in levying interest under section 234D of the Act which is consequential in nature." 44. He stated that charging of interest under section 234B and 234D is consequential in nature and AO will charge interest as per the provisions of the Act at the time of giving appeal effect to the order of the Tribunal. As the issue is consequential, we direct the AO to charge interest as per law. 45. The next issue in this appeal of assessee is against the order of DRP and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....imbursement of expenditure is not an international transactions and the transfer pricing provisions are not applicable, we are not convinced with the same. On a reference to section 92B of the Act, it is observed that after amendment effected vide Finance Act, 2012, with retrospective effect from 1st April 2002, the definition of international transactions as provided under the Explanation (i) to section 92B, has been expanded to include the following transactions. ―Explanation.-For the removal of doubts, it is hereby clarified that- (i) the expression ―international transaction‖ shall include- (a) the purchase, sale, transfer, lease or use of tangible property including building, transportation vehicle, machinery, equipment, tools, plant, furniture, commodity or any other article, product or thing; (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot have entered into such type of transactions with unrelated parties, then the transaction between the related parties cannot be considered to be at arm's length. There is no dispute to the fact that while the assessee has incurred cost by availing credit facility it has advanced interest free funds by not charging interest on the expenditure incurred on behalf of the subsidiaries. Therefore, certainly, a benefit has accrued to the subsidiary on account of the assessee whereas a part of the profit base of the assessee on account of cost incurred on credit facility has been shifted to the subsidiary which otherwise could have been avoided if the surplus funds were available with it. In these circumstances, the principle of commercial expediency would not come into play. Therefore, in our view, as the assessee has not charged interest on outstanding receivables from the overseas subsidiaries, arm's length price of the same has to be determined. Having held so, it is necessary to quantify the rate of interest of such transaction. It is observed, the Transfer Pricing Officer has applied the average interest rate of domestic credit facility availed by the assessee. However, it ....