TaxTMI 
TaxTMI 
2019 (9) TMI 1694
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....law, the ld. CIT (A) has erred in confirming the order of ld. AO in making disallowance of Rs. 1,03,508/- u/s 36(1)(va) and, thereby, adding the same as income u/s 2(24)(x). The action of the ld. CIT (A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by allowing the expense of Rs. 1,03,508/- u/s 36(1)(va). 3. The assessee craves its right to add, amend, or alter any of the grounds on or before the hearing." Ground No. 1 is regarding the addition made by the TPO/AO on account of adjustment in respect of the payment of interest to related parties. 2. The assessee company is engaged in the business of manufacturing and sale of Transformers, PCC Poles etc. The assessee filed its return of income on 01.10.2014 declaring total income of Rs. 3,53,27,440/-. The case was selected for scrutiny and the AO noted that the assessee has entered into certain Specified Domestic Transactions on account of payment of interest to the related parties. Accordingly the AO made a reference under section 92CA to the TPO for determination of Arm's Length Price in respect of the Specified Domestic Transactions entered into by the assessee wit....
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....mputing at Arm's Length Price, the ld. CIT (A) has taken the interest paid to the unrelated parties and excluded the brokerage paid by the assessee in respect of such transactions of loan taken from unrelated parties. Therefore, the ld. CIT (A) has arrived to the Arm's Length interest rate at 14.5% being the average interest rate excluding brokerage paid by the assessee to the unrelated parties. 3. Before us, the ld. A/R of the assessee has submitted that when the Internal CUP is accepted by the ld. CIT (A) as most appropriate method then the actual cost of finance obtained from the unrelated parties ought to have been taken at Arm's Length Price to benchmark the Specified Domestic Transactions of payment of interest to the related parties. He has referred to the details of the interest paid to the related parties as well as to unrelated parties and submitted that the TPO as well as the AO has not disputed the actual cost of loan taken from the unrelated parties being interest and brokerage at 15.36% in comparison to the interest paid to the related parties at 15%. Therefore, the ld. A/R has submitted that the transaction of payment of interest to the related parties is at Arm's....
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....l 19 Y 15% 403,339 - 15% Annually 15% 3 Akhil Agrawal HUF 20 Y 15% 86,970 - 15% Annually 15% 4. Alok Agrawa 21 Y 15% 577,555 - 15% Annually 15% 5. Alok Agrawal HUF 22 Y 15% 297,714 - 15% Annually 15% 6. Atul Agrawal 23- 24 Y 15% 578,513 - 15% Annually 15% 7. Atul Agrawal HUF 25 Y 15% 327,449 - 15% Annually 15% 8. Deepali Garawal 26 Y 15% 356,401 - 15% Annually 15% 9. Himanshi Agarwal 27 Y 15% 80,114 - 15% Annually 15% 10. Purva Agarwal 28 Y 15% 239,577 - 15% Annually 15% 11 Pushpa Agarwal 29 Y 15% 641,333 - 15% Annually 15% 12 Sapna Agarwal 30 Y 15% 541,065 - 15% Annually 15% 13. Siddhanth Agarwal 31 Y 15% 1,366 - 15% Annually 15% ....
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....s from 13.20% to 15.60%. Apart from the interest, the assessee has also paid brokerage in respect of the payment to the unrelated parties. Thus the effective rate of interest inclusive of brokerage comes to 15.36% on average. Once the average effective rate of interest paid to the unrelated parties is not in dispute at 15.36%, then the Specified Domestic Transactions of payment of interest to the related parties have to be tested with the Internal CUP being average rate of interest paid to the unrelated parties. The assessee has also taken a plea before the authorities below that the payment of interest to the unrelated parties is bi-monthly/quarterly as against annually to the related parties. This is also a cost adding factor in respect to the unrelated party payment of interest. Having regard to the undisputed fact that the assessee has paid the effective average rate of interest inclusive of brokerage at 15.36%, then the payment of interest to related parties at 15% is at Arm's Length. It is also pertinent to note that even by applying the Arm's Length Interest at 14.50% based on the Internal CUP which is an average of 15 transactions then the tolerance range provided under sec....
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....if the decision is in their favour." In view of the same the disallowance made by the Assessing Officer is confirmed. This ground of appeal is dismissed." The ld. A/R of the assessee has submitted that the ld. CIT (A) has misunderstood the decision of Hon'ble Jurisdictional High Court and an identical issue has been considered by the Tribunal in case of Rajasthan Cottage Industries vs. ITO in ITA No. 983/JP/2018 vide decision dated 24.04.2019. At the outset, we note that this Tribunal has taken a consistent view on this issue and in case of Rajasthan Cottage Industries vs. ITO (supra) the Tribunal after considering the decision of Hon'ble Jurisdictional High Court in case of PCIT vs. M/s. Rajasthan Renewable Energy Corporation Limited in DB IT Appeal No. 10, 11 & 12/2018 dated 13.03.2018 which was followed by the ld. CIT (A) while passing the impugned order, has decided this issue in favour of the assessee in para 2 as under :- "2. The only issue in this appeal is regarding disallowance of employees contribution to PF & ESI after the due date of payment as per respective Acts PF & ESI however, it was paid before the due date of filing of return of income U/s 139(1) o....