TaxTMI 
TaxTMI 
2023 (2) TMI 207
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.... is engaged in the business of manufacturing of edible oils and its by-products, bakery shortenings and margarine, specialty facts etc filed its return of income for the AY 2012-13 on 29/11/2012 declaring a total income of Rs. 21,76,95,690/-. Subsequently, the assessee revised the return on 16/3/2013 revising the total income to Rs. 21,52,87,470/-. Another revised return on 20/11/2013 was filed by the assessee revising the total income of Rs. 24,21,46,720/-. The revised return of income filed on 20/11/2013 was summarily processed. Subsequently, the case was selected for scrutiny under CASS and statutory notices U/s. 143(2) & 142(1) were issued and served on the assessee. During the course of assessment proceedings the Ld. AO noticed that th....
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....13.85% based on the information available in the corporate website of SBI as against the rate adopted by the Ld. TPO @ 14.75%. Considering the directions of the Ld. DRP, the Ld. AO passed the final assessment order as directed by the Ld. DRP and made upward adjustment of Rs. 1,01,41,718/-. Aggrieved by the final assessment order of the Ld. AO, the assessee filed the present appeal before us. 3. The assessee has raised the following grounds in its grounds of appeal: "Based on the facts and circumstances of the case and in law, the Ld. AO / Ld. TPO and the Hon'ble Dispute Resolution Panel erred in: Transfer Pricing Matter: 1. (a) Grounds with respect to adjustment on interest on foreign currency working capital l....
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....ose of exporting to 3F India (Assessee), the assessee has granted advances in the form of working capital and term loans to its subsidiary companies located outside India. The Ld. AR further submitted that 3F India is bearing all the business risks whereas the AEs are bearing market risks only to the limited extent. The Ld. AR submitted that as per Rule 10B, comparables for the foreign currency loans provided by the assessee to its overseas subsidiaries would have to be loans provided in comparable conditions prevailing in the markets in which the respective parties to the transaction operates. The Ld. AR further submitted that since the loans given to AE are in the foreign currency, LIBOR rate should be adopted. The Ld. AR relied on the fo....
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....also invited our attention to the order of the Ld. DRP wherein the Ld. DRP has observed that there is a substantial increase in the borrowings of the assessee and therefore the Ld. DR pleaded that the order of the Ld. DRP shall be upheld. 6. Countering the argument of the Ld. DR, the Ld. AR submitted that the loan rates are higher in Ghana when compared to the loans given by assessee to its subsidiary companies. The Ld. AR further submitted that the average cost of borrowings for the year is 10.58% only. 7. We have heard both the sides and perused the material available on record. Admittedly, the assessee is charging interest on the loans granted to its AEs as follows: Name of the AE Loan Interest rate charged by the company ....
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.... 82,34,32,953 B Closing Balance of Loans 1,60,20,00,145 C Average loan balance during FY 2011-12 1,21,27,16,549 Average of A and B D Total interest cost during FY 2011-12 12,83,59,792 E Average cost of funds for 3F India 10.58% D/C 9. The Ld. TPO in para 4.3 of his order detailed the risks borne by the assessee in comparison with the risks borne by the AEs. We find that since the risk borne by the assessee is comparatively higher than the risks borne by the AEs and also the loans advanced to the subsidiary companies is with an intention to procure raw materials through its AEs and not with an intention to earn interest. We find that these loans were given solely for ....