TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 1737
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.... referred to the Transfer Pricing Officer (TPO) to determine the arms length price (ALP). The TPO during the transfer pricing proceedings found that the assessee had given a loan to its foreign subsidiary M/s. Jayant PTE Limited (JPL) and the opening balance of the loan was Rs. 6,32,18,772/- and the closing balance was Rs. 5,32,15,257/- for the assessment year 2011-12. The assessee had adopted CUP method as the most appropriate method and loans were extended to the foreign subsidiary at an interest of 2% on outstanding balance. The CCL has paid the interest @ 1.5% to the financial institutions on the loans availed by the assessee company. Hence, the tax payer held that the transaction was at arms length price in its transfer pricing document. The TPO has examined the arms length price and held that Indian Prime Lending Rate (PLR) is a better CUP to determine the outbound loans and accordingly, called for the explanation from the assessee by show cause notice as to why the Indian PLR rate should not be adopted for bench marking the interest on loan transaction. The assessee filed its reply objecting for adopting the Indian PLR with detailed explanation. Not being convinced with the ....
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....der u/s 143(3) r.w.s. 92CA(3) of the Act. 3. Aggrieved by the order of the A.O./TPO, the assessee went on appeal before the CIT(A) and the Ld. CIT(A) allowed the appeal of the assessee vide order No.17/15-16/CIT(A-1)/GNT dated 30.11.2016 for the assessment year 2011-12 and order No.07/16-17/CIT(A-1)/GNT dated 30.12.2016 for the assessment year 2012-13. 4. Aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before us. 5. Appearing for the revenue, the Ld. D.R. argued that the assessee has given loans to its sister concerns, on outbound loans the interest reasonably has to be charged as per the Indian money market and as per the PLR of India for determining the arms length price. Though the loans were given in Singapore dollars, the assessee has converted the Indian rupees into Singapore dollars and lent the money. Therefore, the Ld. D.R. argued that when the monies were lent from India, the LOBOR is not applicable and Indian PLR is applicable. According to the Ld. D.R., there is no error in the order of the TPO/AO, which requires to be confirmed. 6. On the other hand, the Ld. A.R. argued that the Associated Enterprises (AEs) are wholly owned subsidiary companies o....
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....e Ld. CIT(A). 7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The assessee has given advances to its Associated Enterprises (AEs) i.e. M/s. Jayant PTE Limited (JPL) and charged the interest @ 2% and the assessee is paying the interest @ 1.5% on its advances. The loan was outbound loan and the AEs are wholly owned subsidiary companies of the assessee company. The Loans were advanced for the purpose of business but not with an intention to earn the interest. The prime aim for advancing the loans to AEs is improve the brand image, business purpose and to get the global market. The assessee has not borrowed any funds for the purpose of advancing loans to its subsidiary companies. All the funds were the internal accruals and there is no cost involved for advancing the funds. Hon'ble Delhi High Court in the case of Cotton Naturals cited (supra) held that for outbound loans, the interest rates as per LIBOR should be adopted but not PLR of Indian banks. The Ld. CIT(A) relied on the decision of Hon'ble Delhi High Court and other decisions relied upon by the Ld. A.R. and allowed the appeal of the assessee. 8....
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..... ]ayant PTE Ltd. with the above mentioned objects i.e. only for business purposes Viz, enhancing its brand value in global markets and to save on huge transportation costs. As on 01.04.2010, the opening balance in the above loan account is Rs. 6,32,18,772/- and at the end of the financial year i.e. as on 31.03.2011 the closing balance was P.s.5,32, 15,255/-. The Company being an 100% EOU with 100% exports, all its borrowings from Banks are in packing credit and in foreign currency and its effective borrowings cost is only 1.5% P.A. Though the entire amount was lent to its 100% subsidiary out of its own internal accruals with no cost, however, as a measure of fair corporate practice, the Company charged interest on the above loan at 2% which is much higher than the borrowing cost of the Company which is only 1.5% P.A. The Hon'ble Delhi High Court in the case of CIT-i Vs. Cotton Naturals (I)(T) Ltd., 55 taxmann.com 523 (Delhi) was held that the question whether the interest rate prevailing in India should be applied, for the lender was an Indian company/assessee, or the lending rate prevalent in the United States should be applied, for the borrower was a resident and an asse....
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....son to entertain the instant appeal as in similar matters the revenue has accepted the view of the Tribunal which has been relied upon by the impugned order. [Para 8]" The Hon'ble Bangalore ITAT 'C' Bench in the case of Indegee Life systems (P) Ltd., Vs. ACIT, Circle 11(40, Bangalore, 60 taxmann.com 28) held that "in the case of Siva Industries & Holdings Ltd. Vs. Asst. CIT [2011] 11 taxmann.com 404/46 SOT 112 (URO)(Chennai) identical issue was considered by the Tribunal. In fact, the ITAT Bangalore Bench in the case of TTK Prestige Ltd. v. Asst. CIT [IT Appeal No. 1257 (Bang) of 2011] for Assessment Year 2005-06,has also dealt with an identical issue and following the decision of the Mumbai Bench of the Tribunal in Tata Autocomp Systems Ltd. v. Asst. CIT [2012] 21 taxmann.com 6/52 SOT 48 held that in the matter of determination of ALP in respect of a loan transactions, LIBOR rate of interest should be the interest rate applied for determining the ALP. [Para 15] The Hon'ble ITAT, Chennai 'A' Bench in the case of Siva Industries & Holdings Ltd., Vs. ACIT, Company Circle- VI (4), Chennai, held that "once the transaction between the assessee and the associa....