TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 646
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....sioner of Income Tax-1(3) (DCIT) pursuant to the directions issued by Dispute Resolution Panel -II (DRP) erred in making the price adjustments of Rs. 21,75,000 for interest paid on working capital loan obtained from SCB-India on 20 October 2008 considering that interest 14.75% is not at arm's length rate. SCCL submits that DRP have ignored the economic factors influencing the interest rate pricing on such loans granted by SCB-India based on which average internal comparables are considered as most appropriate for benchmarking such transactions. SCCL prays that the DCIT be directed to delete the adjustments made in his order under appeal. GROUND NO. 2: Transfer pricing adjustment related to Interest received from SCB-India on fixed deposits placed - Rs. 8,150 The learned DCIT pursuant to the directions issued by DRP erred in making price adjustments of Rs. 52,548 for interest received on fixed deposits placed with SCB-India considering the rate card of Punjab National bank (PNB) as a closest comparable benchmark. SCCL submits that DRP have rejected the internal comparables and directed DCIT to adopt PNB rate card for SCCL without assigning any reasons for the same....
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....d to Standard Chartered Bank, India [For short 'SCB India'] and (b) transfer pricing adjustment of INR 52,548/- in respect of interest received from SCB India on fixed deposits. The aforesaid transfer pricing adjustment was incorporated in the Draft Assessment Order, dated 14/02/2013. In addition, the Assessing Officer also proposed corporate tax addition which included, inter alia, disallowance of INR 9,00,000/- under Section 14A of the Act read with Rule 8D(2)(iii) of the Income Tax Rules, 1962 (hereinafter referred to as 'the Rules'), and (b) disallowance of INR 10,42,446/- being excess depreciation claimed by the Appellant. 5. Against the Draft Assessment Order, dated 14/02/2013, the Appellant filed objections before DRP which were disposed of vide order dated 01/11/2013. As per the direction of DRP, transfer pricing adjustment of INR 52,548/- in respect of interest received from SCB India on fixed deposits was reduced to INR 8,150/- while the other transfer pricing adjustment and additions/disallowances were confirmed vide Final Assessment Order dated 06/12/2013 passed under Section 143(3) read with Section 144C(13) of the Act. 6. Being aggrieved, the Appellant is now in app....
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....he interest rate of 14% was the closest comparable transaction. The TPO, thus, arrived at arm's length interest rate of 14%, and concluded that Appellant had paid excess interest of INR 21,75,000/- [29,00,00,000 x (14.75 - 14%)]. 10. We have heard the rival submissions and perused the material on record. During the course of hearing, the Ld. Authorised Representative for the Appellant had submitted that the interest rate on working capital loans is a function of prevailing market rates, liquidity conditions and other related economic/commercial factors surrounding the transaction. The Appellant had relied upon internal workings to substantiate the rate of interest of 14.75% as being arm's length rate of interest. The TPO erred in rejecting the aforesaid arm's length rate of interest and cherry picked a single transaction as the comparable transaction. He further submitted that the TPO erred in rejecting the loan transaction between SCB India and Mr. Amit Jadhav was closest comparable transaction which constituted internal CUP. 11. The Ld. Departmental Representative supported the order passed by the TPO/Assessing Officer and submitted that the TPO was justified in rejecting the a....
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.... INR 52,548/- made by the TPO/Assessing Officer in respect of interest received by the Appellant from SCB India on fixed deposits which was restricted to INR 8,150/- as per the following directions issued by the DRP. 15. We find that the TPO had compared the rate of interest charged by the Appellant with the Punjab National Bank ('PNB') interest rate card and noted that interest rate on fixed deposits exceeding INR 1 Crore was higher by 1%. Therefore, the TPO proposed transfer pricing adjustment of INR 52,548/-. However, DRP noted that the PNB interest rate card adopted by the TPO was effective from 01/03/2009 only and therefore, directed the TPO/Assessing Officer not to adopt the PNB interest rate card for deposits prior to 01/03/2009 and restricting the adjustment to interest on fixed deposit placed thereafter. Thus, in effect, the transfer pricing adjustment stood reduced from INR 8,150/-. 16. During the course of hearing, the Ld. Authorised Representative for the Appellant challenged the transfer pricing addition of INR 8,150/- contending that the PNB interest rate card cannot be adopted to benchmark the interest charged by a private company such as the Appellant as PNB was a....
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....the Assessee that the provisions of Section 14A of the Act read with Rule 8D could be invoked. It relevant observations of the Hon'ble Supreme Court are as under: "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, w....