TaxTMI 
TaxTMI 
2025 (9) TMI 793
X X X X Extracts X X X X
X X X X Extracts X X X X
....nterest arrived at, by the TPO after careful consideration of the facts of the case. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the established precedence of rate of interest being upheld in iGate Computer System Ltd vs. The Addl. Commissioner of Income Tax, Range-4, Pune (ITA No.2504/PN/2012) at LIBOR plus 300 basis points for outstanding receivables. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the adjustment to interest on outstanding share application money paid by assessee to its AE without appreciating the fact that assessee could not derive any benefits till the time the shares were allotted to it. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the adjustment to interest on outstanding share application money paid by assessee to its AE without appreciating the fact that amount advanced by the assessee was parked with its AE for a considerable period of time without any allotment of shares and that the assessee allowed to forgo substantial interest income which would not be the case with independent third parties ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....interest cannot be charged. The assessee further submitted that the delay or late realisation of sale/service proceeds is incidental to the transaction of sale/service and not a separate international transaction in itself. Thus, it was submitted that no interest needs to be charged on delayed receivables, as the amount charged for sale/service covers every aspect of the transaction, including the time lag between the date of invoice and the date of receipt. 6. The TPO, vide order dated 30.10.2018 passed under section 92CA(3) of the Act, disagreed with the submission of the assessee and treated the outstanding receivables from associated enterprises as a separate international transaction, computing the interest as per Bloomberg data base at 4.83% per annum considering the credit period of 30 days while computing the interest chargeable on outstanding receivable from the associated enterprises. Accordingly, the TPO computed the interest on outstanding receivables at Rs. 2,79,948/-. In conformity, the AO passed the assessment order under section 143(3) read with section 144C(3) of the Act, inter alia, incorporating the transfer pricing adjustment proposed by the TPO. 7. The le....
X X X X Extracts X X X X
X X X X Extracts X X X X
....standing from the foreign subsidiary of the assessee, however, objected to considering 0.5% as the Basis Points over and above the LIBOR rate for computing the interest. The learned DR submitted that in the order of the Co-ordinate Bench of the Tribunal in preceding years, in the assessee's own case, there is no basis for considering 0.5% as the Basis Point. On the other hand, the learned Authorised Representative ("learned AR") submitted that in the absence of any material contrary to the findings of the Co-ordinate Bench in preceding years, the interest should be computed by considering 0.5% as the Basis Point over and above the LIBOR rates. 11. Having considered the submissions of both sides, we find that there is no dispute in considering the LIBOR rate for computing the interest on outstanding receivables from the associated enterprise, and the same is also in line with the ratio of the decision of the Hon'ble Delhi High Court in CIT vs. Cotton Naturals India Pvt. Ltd., reported in (2015) 55 taxman.com 523 (Del). However, in the present case, the issue arises as to what Basis Point should be adopted, in addition to the LIBOR rates, for computing the interest on outstanding ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that there is no impact on the profit and loss account or taxable income of the associated enterprise under the Act. Furthermore, the assessee also relied on the RBI notification, which states that an Indian party making a direct investment outside India should receive share certificates within six months of the investment. Accordingly, the assessee submitted that since the shares were allotted to the assessee within six months, no interest should be charged on the share application money. The TPO, vide order passed under section 92CA of the Act, disagreed with the submissions of the assessee and held that the RBI notification merely indicates the time frame within which the share certificate should be in possession of the Indian investor, and apart from the above, they do not have any other relevance. The TPO further held that there is no evidence to suggest that the associated enterprise was barred from using this amount for its own purposes during the period between the actual subscription and allotment. Thus, it was held that for the period during which the amount was lying with the associated enterprises without allotment of shares to the assessee, it represents an amount ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e re-characterized as Loan transaction. The TPO /Assessing Officer cannot disregard any apparent transaction and substitute it, without any material of exception circumstance highlighting that assessee has tried to conceal the real transaction or some sham transaction has been unearthed. The TPO cannot question the commercial expediency of the transaction entered into by the assessee unless there are evidence and circumstances to doubt. Here it is a case of investment in shares and it cannot be given different colour so as to expand the scope of transfer pricing adjustments by re-characterizing it as interest free loan. Now, whether in a third party scenario, if an independent enterprise subscribes to a share, can it be characterized as loan. If not, then this transaction also cannot be inferred as loan. The contention of the Ld. Counsel is also supported by the Hon'ble jurisdictional High Court in the case of DexiskierDhboal SA, ITA No. 776 of 2011 order dated 30th August, 2012 and by various other decisions, as cited by him. The Coordinate Benches of the Tribunal have been consistently holding that subscription of shares cannot be characterizes as loan and therefore no intere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omputed the disallowance of Rs. 133,79,75,727/- under section 14A read with Rule 8D of the Rules. 19. The learned CIT(A), vide impugned order, deleted the disallowance made by the AO on this issue. Being aggrieved, the Revenue is in appeal before us. 20. We have considered the submissions of both sides and perused the material available on record. In the present case, there is no dispute regarding the fact that during the year under consideration, the assessee did not earn any exempt income, and thus, claimed no exemption under section 10(34) of the Act while filing its return of income. We find that the Hon'ble Delhi High Court in Cheminvest Ltd. vs. CIT, reported in [2015] 378 ITR 33 (Delhi), held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. We further find that the Hon'ble Jurisdictional High Court in Pr. CIT v/s Kohinoor Project (P) Ltd., reported in [2020] 121 taxmann.com 177 (Bom.), rendered similar findings and dismissed the Revenue's appeal on a similar issue. Since, in the present case, the assessee has not earned any dividend income, therefore, respectfully following the aforesaid judici....