TaxTMI 
TaxTMI 
2019 (5) TMI 289
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....anel-1 (DRP), Mumbai. 2. Grounds no.1 and 2 being general in nature do not require specific adjudication. 3. In grounds no.3 to 6, the assessee has challenged the addition made of Rs. 21,63,45,308, on account of transfer pricing adjustment by re-characterizing the closing balance of preferential shares held by the assessee as interest free loan to the Associated Enterprises (AE). 4. Brief facts are, the assessee, an Indian company, is engaged in providing customer interaction, back office, recovery and collection service in the sector of telecom, retail, financial service, energy, education and logistic. It provides call centre services through various centres in India. In the course of proceedings before him, the Transfer Pricing ....
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.... by the Transfer Pricing Officer. Of course, learned DRP modified the decision of the Transfer Pricing Officer in applying the rate of interest @ 11.91% and directed to charge interest at LIBOR plus 300 basis points. In view of such directions of learned DRP, the addition was reduced to Rs. 21,63,45,308. 6. Shri Rajan Vora, learned Authorised Representative for the assessee submitted, the issue has been decided by the Tribunal in favour of the assessee in the assessment year 2009-10 by holding that re-characterization of preferential shares to loan is invalid. He submitted, the aforesaid decision of the Tribunal was upheld by the Hon'ble Jurisdictional High Court while dismissing Revenue's appeal in assessment year 2009-10, vide judg....
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....the said order of the Tribunal is pending before the Hon'ble Jurisdictional High Court. However, as brought to our notice by the learned Authorised Representative, in the meanwhile, the Hon'ble Jurisdictional High Court has disposed of the appeal filed by the Revenue for the assessment year 2009-10, vide judgment dated 28th January 2019, in ITA no.1248/2016, upholding the decision of the Tribunal. Further, while deciding identical issue in the assessment years 2010-11 to 2013-14, the Tribunal has decided the issue in favour of the assessee in the orders referred to herein below:- i) ITA no.7694/Mum./2014, dated 08.02.2017, for A.Y. 2010-11; ii) ITA no.962 & 1556/Mum./2016, dated 12.05.2017, for A.Y. 2011-12 and 201....
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....essee held that interest expenditure relating to interest free loan advanced to related parties amounting to Rs. 51,56,903, has to be disallowed. Accordingly, applying the interest rate of 11.91%, he disallowed an amount of Rs. 61,41,187. Further, he observed that the assessee had advanced loan to a foreign subsidiary amounting to Rs. 162,66,70,442, at the interest rate of 9%. Being of the view that the rate of interest charged at 9% is lower than the rate of interest of 11.91% which is applicable, the Assessing Officer disallowed an amount of Rs. 70,76,031. Being aggrieved with such disallowance, though, the assessee raised objections before learned DRP, however, the disallowance made by the Assessing Officer was sustained. 12. Th....
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....ng the interest rate of 11.91%. 14. The learned Departmental Representative relied upon the observations of the Assessing Officer and learned DRP. 15. We have considered rival submissions and perused material on record. As regards the interest free loans advanced to the related parties in India amounting to Rs. 51,56,903, it is seen from the material on record that the assessee had huge surplus fund available with it amounting to Rs. 1844,95,00,000. Therefore, it is manifest, own funds available with the assessee was far in excess to the interest free loans advanced to the related parties. That being the case, no disallowance under section 36(1)(iii) of the Act can be made out of the interest expenditure in view of the ratio laid down....