TaxTMI 
TaxTMI 
2016 (10) TMI 1374
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....ration networks. It has received interest on loans from its AEs, as per the details as under : Name of the AE Amount of balance Rate of interest Interest received Sasken Mexico 154,01,000 4.61% 1,14,603 Sasken Inc 17,24,50,125 3.24% 20,52,720 The assessee has benchmarked this transaction against the LIBOR using the CUP method. The six monthly US LIBOR is taken at 0.79% as against which it has received @4.61% and 3.24% interest, respectively, which are higher. Hence, these transactions were considered by the assessee to be at arm's length. 03. However, the TPO considered corporate bonds issued by the companies in India as against the government bonds for comparability of the interest rate earned. The TPO further relied upon the safety level of the corporate bonds based on the grading issued by CRISIL and considered the loans given by the assessee similar to corporate bonds falling within the grade of BB to D . The TPO was of the view that the risks in the loans given were too high for the company and considered the same to be in the grade of BB and corresponding interest rate was computed @14.74 percent and accordingly, Rs.2,67,68,300/ was a....
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.... Rs.2,46,00,977/- is to be deleted in entirety. 3.2 Without prejudice, the learned AO has erred in not considering the transfer pricing order rectified under section 92CA(5) r.w.s 154 of the Act dated 10.3.2014 and erred in adding back Rs.2,67,68,300/- (instead of Rs.2,46,00,977/-)." 05. The Ld. AR submitted that its main objections to the TPO's proposal was that Sasken was a debt-free company, the loans provided were from internal funds. Sasken India earns mostly in foreign currency with 80% of its sales and some of the domestic sales being in foreign currency. As per the newly introduced Safe Harbour rules by the CBDT, the prescribed ALP rate is the base rate of SBI if the loan to Indian subsidiaries outside India is in Indian currency. All these facts are acknowledged by the TPO in his order. Relying on this tribunal decisions in Sami Labs Ltd v DCIT, IT(TP)A no 1358/ Bang/2011 dt 04.12.2015 & Indegene Lifesystems P Ltd v ACIT , 2015 60 taxmann.com28 , he pleaded that the impugned loan to its AEs were out of its own funds , not out of borrowed funds, the loans are given in US dollars, interest was received in Indian rupees and when such transactions between it and it....
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....peal, the DRP, inter alia, found that assessee's submission is not based upon any tangible evidence in the sense that it has not maintained any separate accounts with regard to investments, the income from which is exempt. It merely denied to have incurred any expenditure vis-a-vis investment made for earning tax-free dividend income even though no such exempt income is earned during the year. It would be fair to note that investment decisions are complex in nature and a company is run by its Board of Directors and the business and investments are managed by key personnel, executives etc., for which experts are often consulted. The very existence of a corporate entity and its structure requires an administrative stablishment which require incurring of multifarious expenses including establishment, general and administrative expenses. It held that the case laws relied upon by the assessee cannot rescue it in-as-much as it has not maintained any accounts as mandated in section 14A(2)(3) and such an inaction on the part of the assessee cannot automatically shift the burden to the AO which is otherwise placed upon the assessee at the first instance. In this view of the matter, the Pane....
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....is regard, the AR submitted that although the DRP directed the AO to follow the ratio of the decision of Hon'ble Karnataka High Court in CIT v. Tata Elxsi Ltd [349 ITR 98], it had not given specific directions in respect of exclusion of royalty income from profits of STPI and SEZ units and exclusion of foreign currency expenditure, additional telecommunication and insurance expenses from export turnover although the assessee raised such issues before the DRP. The assessee filed a petition under Rule 13 of the IT (DRP) Rules, 2009, requesting the DRP to give specific directions in respect of the above mentioned objections. The DRP vide its order dt. 07.09.2015 , inter alia, held although the assessee raised the above issues viz grounds 7,8 &10, however the DRP has not issued any direction on such issues . It held that the rectification under rule 13 of DRP rules read with Section 144C can not be equated with section 154 as the scope under section 154 is "entire order", whereas the subject matter of rectification under rule 13 of DRP rules is only the direction (s) issued within the specified time. After such specified time , the DRP can not issue fresh directions and held that the r....
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....h is only consequential. AO is directed to give consequential relief to the assessee. IT(TP)A.No.376/Bang/2015 : Revenue's appeal : 16. The grounds of appeal taken by the Revenue are as under : 16.1 We find that the DRP had followed the judgment of Hon'ble jurisdictional High Court in the case of Tata Elxsi Ltd v. CIT [349 ITR 98], in directing exclusion of items deducted from export turnover from total turnover also for working out the deduction u/s.10A of the Act. Just for the reason that appeal has been filed by the Revenue against the judgment of jurisdictional High Court would not be a reason not to follow the jurisdictional High Court's judgment. We do not find any lacunae in the order of the DRP .In the result, appeal of the Revenue stands dismissed. 17. In the result, the appeal of the assessee is allowed for statistical purposes and the appeal of the Revenue is dismissed. Order pronounced in the open court on 21st day of October, 2016. ============= Document 1 5.1 6 6.1 6.2 7 7.1 8 8.1 Grounds relating to exclusion of royalty income from profits eligible for deduction under section 10A and 10AA of the Act The learned AO has....