2014 (12) TMI 1149 - AT - Income Tax

Interest receivable on the loans advanced to the associate enterprise - Held that - It is an admitted fact that the loan was given in the year 2005. It is also undisputed fact that interest rate charged as LIBOR plus 200 basis points have been accepted in completed assessments from AYs 2005-06 to 2008-09. Thus, by taking a different view on the same set of facts violates the rule of consistency. Secondly, the DRP erred in considering the loan as loan from India. The fact of the matter is that it was a foreign currency loan which was given abroad. Therefore the most appropriate method is taking the LIBOR as correct benchmark. A similar view has been taken by the Tribunal in the case of Hinduja Global Solution Ltd. 2013 (6) TMI 420 - ITAT MUMBAI . Considering the past history and the decision of the Tribunal (supra), we find that the benchmarking done by the assessee is correct and the AO is directed to delete the addition.- Decided in favour of assessee. Disallowance u/s. 40A(2)(b) - Held that - As decided in assessee s own case for A.Y. 2005-06 neither the assessee has provided any comparable rates to the revenue authorities nor the revenue authorities have made any attempt either by asking the assessee to provide for the comparable nor they suo moto collected any data from the market. What the revenue authorities have done is that they have relied on the internal comparable only to arrive at a figure of estimated charges per carat. In fact, the AO should have collected independent data or have asked the assessee to provide comparable periodic rates prevailing in the market at Deesa to set the bench mark. This exercise has not been done by the AO or by the CIT(A), which according to us, the revenue authorities should have done to arrive at some definite estimate. Thus matter is restored to the file of the AO to be decided afresh - Decided in favour of assessee for statistical purposes. Disallowance of deduction for donations made u/s. 80G - assessee stated that for some reason the donation receipts could not be produced before the AO. Further, if one more opportunity is given, necessary details will be submitted before the AO - Held that - We direct the AO to consider the documentary evidence submitted by the assessee for the claim of deduction on account of donation u/s. 80G of the Act. The assessee is directed to submit necessary details in support of its claim. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Transfer pricing adjustment on interest income from loan to associate enterprise.
2. Disallowance under section 40A(2)(b) of the Act.
3. Disallowance of deduction for donations made under section 80G of the Act.

Transfer Pricing Adjustment on Interest Income:
The appeal was against the order made under section 143(3) read with section 144C of the Income Tax Act for the assessment year 2009-10. The case involved international transactions with associate enterprises exceeding Rs. 15 crores. The Transfer Pricing Officer (TPO) proposed an arm's length interest rate of 12% for a loan given to an associate enterprise. The Dispute Resolution Panel (DRP) directed the TPO to consider the arm's length price at 10.81%. The Tribunal found that the loan was given in a foreign currency and upheld the assessee's benchmarking at LIBOR plus 200 basis points, directing the deletion of the addition.

Disallowance under Section 40A(2)(b) of the Act:
The second grievance related to the disallowance of Rs. 1,48,61,119 under section 40A(2)(b) of the Act. The Tribunal noted a similar issue in the assessee's case for the assessment year 2005-06, where the matter was set aside to the AO. Following this precedent, the Tribunal restored the matter to the AO to be decided afresh in light of the direction given for the earlier assessment year.

Disallowance of Deduction for Donations under Section 80G:
The third ground related to the disallowance of deduction for donations made under section 80G of the Act. The counsel stated that the donation receipts were not produced before the AO due to some reason, and requested an opportunity to submit necessary details. As the matter was restored to the AO for another issue, the Tribunal directed the AO to consider the documentary evidence submitted by the assessee for the claim of deduction under section 80G of the Act. The assessee was instructed to provide necessary details to support the claim.

In conclusion, the Tribunal allowed the appeal in part for statistical purposes, directing specific actions for each issue raised in the appeal.