TaxTMI 
TaxTMI 
2019 (3) TMI 2039
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....ng no. 2849/Ahd/2014 and assessee's CO. 330/Ahd/2014. The Revenue has raised following grounds of appeals. 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,65,68,726/- resulting from an upward adjustment made by the TPO, on Interest paid by the assessee towards loan. 2. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer 3. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent. 2.1 The assessee has raised following grounds in the CO 330/Ahd/2014 for A.Y 2007-2008 1. The Id. CIT(A) has grossly erred in law and on the facts of the case in confirming the action of Id. AO in making Transfer Pricing addition to the extent of Rs.32,79,706/- out of total addition of Rs.3,65,68,726/- made by the Id. AO on account of upward adjustment on interest paid to the Associate Enterprise. 2. The Id. CIT(A) has erred in law and on the facts of the case in adopting and applying Libor + 2.8% as ALP interest rate as against Libor + 3% rate of interest paid by the Appel....
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....ing the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. 9. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 3. The issue raised by the Revenue is that Ld. CIT (A) erred in deleting the addition made by the AO in part on account of the payment of interest expenses. 4. Briefly stated facts are that the assessee is a limited company and engaged in the business of cargo handling. The assessee in its balance sheet has shown a working capital loan of Rs. 186,67,00,000/- from its AE based in London. The assessee obtained the loan after taking approval from the Reserve Bank of India vide letter No. E.C(AH)NR No.173/05.25.307/03-04 dated 16/09/2003. Accordingly, the assessee has paid interest of Rs. 13,17,14,081/- at the rate LIBOR + 3% p.a. as agreed with the AE. 4.1 The assessee to justify the rate of interest on loan taken from the AE submitted that there is another company namely Chen....
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....omparison with the interest rate of third-party company namely, Torrent Pharmaceuticals Ltd. ( in short TPL) having an office in Gujarat itself. M/s TPL has taken a loan of US$20 million at the rate of LIBOR + 0.77 percent without furnishing any guarantee of whatsoever. In view of the above, the TPO has benchmarked the rate of interest for the assessee at the rate of LIBOR + 0.77 percent and accordingly the excess interest of Rs. 3,65,68,726/- was disallowed and added to the total income of the assessee. 6. Aggrieved assessee preferred an appeal to Ld. CIT (A). The assessee before the Ld. CIT (A) submitted that the TPO had not given any opportunity in respect of comparable selected by him. 6.1 The loan was taken by the assessee from its AE after taking the approval from Reserve Bank of India. As such interest was paid within the range as specified by the RBI. The provision of Rule 10B (2)(d) of Income Tax Rule required that the rate suggested by the Government should be considered while selecting the comparable. 6.2 The assessee also submitted that on the same set of facts the TPO in the assessment year 2006-07 had accepted the rate of interest on the money borrowed fro....
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....better debt-equity ratio and credit rating than the assessee. In view of the above the Ld. CIT (A) rejected the comparable of TPL and held that CCTPL is right comparable for benchmarking of interest. The Ld. CIT (A) after considering the factor as discussed above further held that it would be justifiable to take the rate of interest as arm length at the rate of LIBOR + 2.80 percent. Accordingly, Ld. CIT (A) deleted the addition made by the AO in part. 10. Being aggrieved by the order of Ld. CIT (A) both Revenue and assessee are in appeal before us. The Revenue before us is against the deletion made by the Ld. CIT(A) for Rs. 3,32,89,020/- Whereas the assessee is in the appeal for confirmation of the addition made by the TPO for Rs.32,79,706/-. 11. The Ld. DR, before us, submitted that while benchmarking rate of interest there is no need to compare the nature of industries. 11.1 Ld. AR before us contended in the earlier year the TPO has accepted the rate of interest on the borrowed fund from the AE. Therefore the interest rate for the year under consideration should also be allowed. 11.2 The learned AR alternatively submitted that at the most the order of the learned C....
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....the assessee is 2.61:1 whereas the debt equity ratio of torrent pharmaceutical Ltd is 0.60:1. iv. The assessee is not a cash-rich company whereas torrent pharmaceutical Ltd is a cash-rich company. v. The credit rating of the assessee and torrent pharmaceutical Ltd is altogether different as submitted by assessee reproduced as under: Credit Rating given by ICRA Credit Rating given to Torrent Pharmaceuticals Ltd by ICRA during F.Y. 2009-10. ICRA has reaffirmed LAA rating to Long Term fund based limits of Rs.4700 million indicating high credit quality. Further the ICRA has also reaffirmed A1 to Rs.100 million short term non fund based facilities and Rs.600 million Commercial paper programme indicating highest credit quality. Please find attached herewith letter showing credit rating given by ICRA to Torrent Pharmaceuticals Ltd vide Annexure 2 Credit Rating given to MICT Pvt. Ltd. by ICRA during F.Y. 2009- 10. ICRA has assigned LA rating to long Term Borrowing of Rs.8.0 million of MICT Pvt. Ltd. ICRA has also assigned A2 to the Rs.600 million short term non fund based facilities. ICRA has placed both rating watch with negat....
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....vidual factors as discussed above. As such in our considered view, the learned CIT (A) should have made the adjustments in the rate of interest after considering all the factors as discussed above individually. Accordingly, we are reluctant to confirm the order of the learned CIT (A). 14.7 However, after considering the facts in totality as discussed above, we are inclined to follow the rule of the of consistency in view of the judgment of Hon'ble Supreme court in the case of Radhasoami Satsang reported in 193 ITR 321 wherein it was held as under: "13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14. On these reasonings in the absence of any material change justifying the revenue to take a different v....