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TMI Blog2016 (12) TMI 1551X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the loan advanced to a subsidiary at 247 basis points above the LIBOR rate to be not at arm’s length. These findings are essentially factual and based upon the choice of either accepting in entirety the DRP reasoning which itself had found the TPOs approach incorrect or substituting it with the ITAT’s reasoning. In other words, as between the views of the DRP and that of the ITAT, this court is being asked preferred that of the former. Ipso facto this does not constitute a question of law, however this Court finds some merit and substance in the revenue’s grievance with the ITAT’s observations that advances to foreign subsidiaries per se may not constitute international transactions. This court clarifies that such observatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans advanced to subsidiary/AE is contrary to the provisions of Chapter X of the Income Tax Act and Rule 10A of Income Tax Rules. (2) Whether the deletion of the disallowance under Section 14A was justified. 2. The assessee carries on business in digital cinema distribution network and in-cinema advertisements. As part of its return it had reported in international subsidiary in AE. The subject matter of the appeals concerns the loan advanced in dollar equivalent, for a five year term i.e. ₹ 45,61,65,318/- to its subsidiary/AE. The agreement between the parties stipulated tenure of five years for repayment of the loan and interest @ of 7% per annum. The transfer pricing officer rejected the assessee s contentions and indicated an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Siva Industries Holdings Ltd Vs ACIT [(2012) 145 TTJ 197 (Chennai)], dealing with the assessment year 2006-07 and while referring to LIBOR at 4.42, interest rate on advances to subsidiary at 6%, which was thus 158 points above the LIBOR rate, was held to be an arm's length price. ln view of these discussions, it cannot be said that the advance to subsidiary, at 247 basis points above the LIBOR, is not at an arm's length price. In any event, once DRP itself states that the Indian banks are charging 250 basis above LIBOR on similar loans, even though this interest rate could reach upto 400 basis points in some cases, there cannot be any good reason for holding that loan advanced to a subsidiary at 247 basis points above t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the choice of either accepting in entirety the DRP reasoning which itself had found the TPOs approach incorrect or substituting it with the ITAT s reasoning. In other words, as between the views of the DRP and that of the ITAT, this court is being asked preferred that of the former. Ipso facto this does not constitute a question of law, however this Court finds some merit and substance in the revenue s grievance with the ITAT s observations that advances to foreign subsidiaries per se may not constitute international transactions. This court clarifies that such observations should not be treated as binding and that it is up to the concerned Transfer Pricing Officer to undertake the necessary scrutiny having regard to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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