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TMI Blog2016 (2) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act is erroneous. Transfer Pricing adjustment in respect of interest on loan given to subsidiary company - Held that:- Respectfully following the decision of this Tribunal in assessee’s own case for the AY 2008-09, interest charged on loan given to Australian subsidiary is deleted. Relief u/s. 91 - Credit for Dividend Distribution Tax - rectification - Held that:- We direct the Assessing Officer to consider this issue and pass appropriate orders on the rectification application filed by the assessee before him - IT(TP)A No. 1358/Bang/2011 - - - Dated:- 4-12-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For The Appellant : Shri Cherian K. Baby, CA For The Respondent : Shri Sudhakar Rao, CIT(DR) ORDER Per Asha Vijayaraghavan, Judicial Member This appeal by the assessee is directed against the order dated 20.09.2011 passed by the Assessing Officer u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 [ the Act ] relating to assessment year 2007-08. 2. The assessee is an Indian multinational company engaged in the export of standardized herbal extracts, fine chemicals, specialty chemic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in accordance with the decisions of the Hon ble jurisdictional High Court in the case of CIT v. Tata Elxsi Ltd. (349 ITR 98) and CIT v. Samsung Electronics Co. Ltd. (350 ITR 65) wherein it was held that determination of total turnover should be by adopting the export turnover and adding the domestic or other turnover to it and expenses deducted in determination of export turnover cannot be added back while determining the total turnover. It was also held by the High Court that there should be uniformity in the ingredients of both the numerator and the denominator of the formula, since otherwise it would produce anomalies or absurd results. Section 10A/10B is a beneficial section intended to provide incentives to promote exports and the incentive is to exempt profits relatable to exports. 6. The ld. counsel for the assessee argued that when the statute prescribes a formula, and in the said formula export turnover is defined, and when the total turnover includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Yokogawa India Limited. (supra). 11. We have heard both the parties. The reliance placed by the AO on the decisions of the Hon ble High Court of Karnataka in the case of Himatsingke Seide Ltd. reported in 286 ITR 255 for netting off loss of non- EOU undertakings from profit of EOU undertakings in determining the income is misplaced, as in that case, the Hon ble High Court of Karnataka considered carried forward depreciation of the same EOU unit and not business loss and depreciation of any other undertakings located at different places as in the case of the assessee. The ITAT Bangalore Bench has also clearly made out this distinction in several cases and hence setting off business loss and unabsorbed depreciation of other undertakings against profits of the EOU undertakings for the purpose of determining the deduction u/s. 10B of the I.T. Act is erroneous. The Unit wise break up of Profit Loss Account was filed before the AO during the course of the assessment proceedings. The Delhi Bench of the Tribunal in the case of ACIT v. M/s Keane India Limited, ITA No.3291/Del/2010 dated 20.5.2011 held as follows:- 6. Learned counsel for the assessee in support of his pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orms of the Reserve Bank of India. The company documented the interest charged using the CUP method. 14. It was submitted by the assessee that the CUP method seeks to ascertain ALP by taking into account prices at which similar transactions have been entered into by the assessee with unrelated parties i.e. internal CUP. Since the transaction was of lending money in foreign currency to its foreign subsidiary, the comparable transaction is foreign currency loan availed from unrelated parties by the assessee. 15. It was further submitted that the assessee had obtained external commercial borrowings from banks at LIBOR plus 50 basis points for meeting its business requirements. Interest charged to AE was at LIBOR plus 25 basis points taking into account the fact that the company has substantial own funds and it is a mix of owned and borrowed funds which was used for lending to the subsidiary. Interest charged during the period is at LIBOR + 25 basis points, which worked out to an average rate of 6.07% p.a. for the FY 2006-07. Thus the assessee concluded that the international transaction in respect of interest received is at arm s length and in compliance with the Transfer Pricin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 8.5.2015 are as follows:- 11. We have perused the orders and heard the rival contentions. TPO in his order dt. 30.10.2011, has noted that the interest of ₹ 5,57,226/- received by the assessee from its subsidiary in Australia was on a loan of ₹ 1,46,40,800. Equity share capital of assessee along with share capital money reserves and surplus by itself came to ₹ 74,50,67,577/- as on 31.3.2008 and this was ₹ 70,03,98,771/- as on 31.3.2007. Thus, obviously assessee had substantial own funds and even if we presume that the loan which was given to a subsidiary was from a common pool, we cannot say that any loan funds were used for such purpose. When own funds are more than the loans, an assessee can always take an argument that loan funds had gone from own funds. In any case, in the case of M/s. Siva Industries Holdings Ltd. (supra), in which one of us was a party, it was held as under in para 11 of its order: We have considered the rival submissions. A perusal of the order of the TPO clearly shows that the assessee had raised the funds by way of issuance of 0% optional convertible preferential shares. Thus it is noticed that the funds raised by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. However, the Assessing Officer has not given credit for the same. 22. The ld. counsel for the assessee submitted that rectification letters dated 18th Jan 2011, 3 Nov 2011 and Dec 2011 have been filed with the AO, but no rectification has been done till date. It was also submitted that minutes of the Board of Directors of the Japanese subsidiary company declaring dividend and application for certification of tax payment by the Japanese Company for JPY 333,333/- (Annexures N O of paperbook respectively) were filed during the course of assessment. It was thus prayed that the apparent error may be directed to be rectified. 23. We direct the Assessing Officer to consider this issue and pass appropriate orders on the rectification application filed by the assessee before him. 24. The last issue for consideration is regarding credit for GROUND V: Credit for Dividend Distribution Tax. It was submitted that Dividend Distribution Tax payable of ₹ 25,24,500 was paid by the assessee in the month of July 2007 and copies of the challan acknowledging payment and bank statements were submitted to the AO vide letters dated 18th Jan 2011, 3 Nov 2011 and 7th Dec 2011 (Annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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