TaxTMI 
TaxTMI 
2019 (12) TMI 1707
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....erprises), which did not cost anything to the assessee. This is a common issue in both the years and hence, we will take the facts from AY 2010-11 in ITA No.1039/Mum/2015 and will decide the issue. The assessee has raised the following grounds No. 3 to 13 with respect to this issue. 3. Briefly stated facts are that the assessee company is engaged in the business of manufacturing of flavors and fragrances. The AO framed the assessment under section 143(3) read with section 144C(3) of the Act vide order dated Nil, the Transfer Pricing Officer on verification of audit report filed by the assessee in form No. 3 CEB noticed that the assessee company had transactions with its associated concerns. Therefore, reference was made under section 92CA(1) of the Act to the Transfer Pricing Officer on 15.02.2013 for computation of Arm's Length Price in relation to the international transaction detailed in the audit report in form No. 3CEB. Accordingly, the Transfer Pricing Officer passed an order under section 92CA(3) of the Act dated 17.01.2014 by making adjustment of Rs. 2,58,94,592/- to the Arm's Length Price on account of interest free advances to the overseas AE. Accordingly, the ....
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....g vs. CIT (1992) 60 Taxman 248 (SC), the adjustment on account of interest cannot be made as the revenue is consistently not making any disallowance on this aspect. Further, he also made argument on the first ground i.e. the reference to Transfer Pricing Officer is without any jurisdiction. For this, he referred to following ground No. 3: - "3. The transfer pricing proceedings initiated by the AO under Section 92CA (1) of the Act, are without any jurisdiction and ought to be quashed." 7. Further, he made argument in respect to grounds on merits and the relevant Ground Nos 4 to 13 read as under: - "Addition on account of Transfer pricing adjustments. 4. the AO/ TPO/ DRP erred in making a transfer pricing adjustment of INR. 2,58,94,592/-. 5. The AO/ TPO/DRP erred in not considering the fact that there exists no basis of charge of income tax as per section 4 of the Act and thus, no income arises as per Section 92(1) of the Act on account of the loan given by the assessee to its AE. Accordingly, provisions of Chapter X of the Act are not applicable in the instant case. 6. The AO/ TPO/ DRP erred in not granting the assessee an opportunity ....
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....ms' length price, the same can be directed to the Transfer Pricing Officer. The learned Sr. Departmental Representative fairly argued that application of LIBOR rate on this interest can be directed by the Bench to the Transfer Pricing Officer. 9. We have gone through the facts and find from the financial statements of the assessee company that the assessee company has not made any further investment by way of loan to its AE during the year under consideration. In fact, during AY 2010-11, the AE has repaid an amount of USD 5 lakhs out of the outstanding balance of such loan. This should be taken into consideration while applying the LIBOR rates. As the issue is squarely covered by the decision of Hon'ble Bombay High Court in the case of Everest Kento Cylinders Ltd (supra), where it is directed that LIBOR rate should be applied as benchmarking to determine the arms' length price of International Transaction of loan. We direct the Transfer Pricing Officer accordingly. 10. Similar are the facts in AY 2011-12 in ITA No. 687/Mum/2016, hence, same decision will also apply in AY 2011-12. 11. The next issue in this appeal of assessee in ITA No. 1039/Mum/2015 for AY 2010....
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....rtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share & Stock Brokers (P.) Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 40. We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing to the theory o....