AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 102
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....onsidering the submissions of learned Departmental Representative (DR), we are satisfied that the delay in filing the appeal was due to reasonable cause. Accordingly, we condone the delay and admit the appeal for re-adjudication on merits. Though, the Department has raised four grounds, however, they are on the solitary issue of deletion of disallowance interest expenses amounting to Rs. 47,76,75,486/-. 3. Relevant facts deciding these issues are, the assessee is a resident corporate entity stated to be engaged in the business of trading, producing and mining etc. of coal in India as well as abroad. It is a wholly owned subsidiary of Reliance Power Ltd. a listed company. For the assessment year under dispute, assessee filed its return of....
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....e interest expenditure incurred by the assessee should not be disallowed under section (u/s.) 36(1)(iii) of the Act. In response to the show cause notice, the assessee submitted that the applicable rate of interest on bank loan at Netherland is 4%. Therefore, interest charged at the rate of 5% is in terms with the interest rate prevailing in the country of residence of borrower. He further found that in the year under consideration, the assessee had not carried out any business activity in terms with its object. Rather, the assessee is acting as a conduit siphon off the funds at a lower rate of interest to other companies in the group. Thus, based on the aforesaid analysis of facts, the Assessing Officer was of the view that charging of int....
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....that assessee is not only deriving interest income but was also deriving gain from fluctuation of foreign exchange as the rupee was rapidly devaluing against Euro. From the details available on record, he found that during the year under consideration the gain on account of foreign exchange fluctuation was Rs. 31,61,27,378/-, which was offered to tax. He also found that the assessee had reported similar foreign exchange gain in earlier years also. He further noted that while examining the arm's length nature of loan transactions between the assessee and its Netherland based subsidiary, the TPO has found the interest rate of 5% charged by the assessee to be within arm's length requiring no further adjustment. He further noted that the facts ....
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....ents in Indonesian company for procurement of Coal. He submitted, the assessee had availed loans from its holding company in India currency, whereas, loans advanced to the overseas subsidiary was in foreign currency. He submitted, the prevailing 'London Inter-Bank Offered' (LIBOR) rate for foreign currency loan in the country of residence of borrower was between 3% to 4%, whereas the assessee had charged interest at the rate of 5%. He submitted, considering these facts, the TPO has passed a clean order being satisfied with the arm's length nature of such transaction between the assessee and Netherland based subsidiary. In this context, he drew our attention to order dated 05.01.2021 passed u/s. 92CA(3) of the Act, copy of which is placed at....
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....y the assessee on the loan advanced to the foreign subsidiary and accordingly had made disallowance u/s. 36(1)(iii) of the Act by charging the interest at par with the rate of interest at which the assessee had availed loan from the holding company i.e. 15%. Undoubtedly, while the assessee has received loan from its holding company in Indian currency, it had advanced loan to the overseas subsidiary in foreign currency. Therefore, the rate of interest as per the judicially accepted principle has to be the rate of interest at which loan is available in the country of residence of the borrower. As per the facts brought on record, the LIBOR rate of interest of loan advanced by banks in the country of residence of overseas subsidiary is between ....