TaxTMI 
TaxTMI 
2026 (8) TMI 1353
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....djustment under TP at the rate 1% and charging of interest on loan/receivables at 6 month LIBOR rate? (2) That the Ld. CIT(A) has erred in deleting the adjustment made by the TPO regarding the corporate guarantee at the rate of 2% per annum when even the Safe Harbour Rules laid down under Income-tax Rules provide for rate of 2% or more per annum on the amount guaranteed. ? (3) That the Ld. CIT(A) has erred in deleting the adjustment made by the TPO regarding the interest on loan without appreciating that the assessee had provided benefit to its Associated Enterprise by way of advancement of interest free loan and should have been compensated for the cost incurred in connection with such benefit. ? (4) That the Ld. CIT(A) has erred in deleting the adjustment made by the TPO regarding the interest on loan without appreciating that the basis (or benchmarking of interest for loan given to subsidiary can be obtained from the Master Circular on ECB and trade credits issued by the RBI dated 01.07.2011 wherein the ceiling of charging interest on loans exceeding 5 years is 6 months LlBOR+500 basis points and therefore, considering the risks involved owing to the f....
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....f the total amount guaranteed. Accordingly, he made an addition of Rs. 1,86,10,200/- as TP adjustment. 4. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A) and at the time of hearing, it was submitted that similar additions were made by the AO for AYs 2008-09 and 2009-10 which was reduced to 1% by the ITAT, Delhi. Based on the above findings, ld. CIT(A) has reduced the corporate guarantee to 1% for Assessment Year under consideration. 5. Aggrieved with the above order, Revenue is in appeal before us. 6. At the time of hearing, ld. DR of the Revenue heavily relied on the findings of the TPO and supported the action proposed by him at 2% on the total loan guaranteed. However, he accepted the fact that in the earlier years, ITAT has given relief to the assessee @ 1%. 7. On the other hand, ld. AR of the assessee relied on the findings of the ld. CIT(A). 8. Considered the rival submissions and material paled on record. We observed that this issue is squarely covered by the decision of coordinate Bench in assessee's own case for AY 2008-2009 vide order dated 21.07.2014 and relevant findings are as under :- "69.2 Now coming to the ....
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....ite of all of its efforts, the wholly owned subsidiaries could not generate sufficient revenue to support itself • The assessee has acknowledged that its subsidiaries and joint ventures outside India, were in need of infusion of funds due to financial turmoil and could not raise any raise any debt in local market, due to which it had to advance funds; • That the above AE could not trace any debt in local market and therefore, viable alternative available to its parent company was to remit financial support from India. • The assessee had advanced interest free loan instead of charging high rate of interest rate that would have possibly resulted in subsidiary being ceased to be a going concern and according to prevalent laws abroad would have to be liquidated. • The assessee has stated that same cannot be treated as international transactions. 11. After considering the above submissions, the TPO observed that during the year under consideration, assessee has give loan to M/s. Rich Rice Raisers Factory LLC and Indo European Foods Limited. After considering the submissions of the assessee, he proceeded to benchmark the interest rat....
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....rder has directed the AO/TPO to make the TP adjustment on Libor rate only instead of Libor + 400 BPS as determined by the TPO. He accepted the fact that ITAT has determined the interest by adopting Libor on both interest and interest on outstanding receivables. 17. On the other hand, ld. AR of the assessee brought to our notice the facts and findings of ITAT relating to interest on outstanding loan and outstanding receivables and relied on the findings of the ld. CIT (A). 18. Considered the rival submissions and material placed on record. We observed that the issue under consideration is decided by the coordinate Bench in assessee's own case order dated 31.07.2025 (supra) and the relevant findings of the same are reproduced below :- "8. After considering the submissions, we observed that Ld. CIT(A) has noted that during the year under consideration, the assessee has advanced the loan of Rs. 1570.29 lacs to its AE. While computing the arm's length price of this transaction, the TPO had applied LIBOR+ 500 basis point for computing notional interest of attributable to this transaction. The Ld. CIT(A), however, restricted the adjustment only to the LIBOR rate. We do not ....