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TMI Blog2017 (3) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 - - - Dated:- 27-2-2017 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : None For The Revenue : Mrs. Malathi Sridharan, DR ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being ITA No. 1234/Mum/2014, is directed against the appellate order dated 19th December, 2013 passed by learned Commissioner of Income Tax (Appeals)- 15, Mumbai (hereinafter called the CIT(A) ), for the assessment year 2009-10, the appellate proceedings before the learned CIT(A) arising from the assessment order dated 4th January, 2013 passed by learned Assessing Officer ( hereinafter called the AO ) u/s 143(3) r.w.s. 144C(3)(a) of the Income-tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- l. The LD CIT (A) -15 has erred in confirming the upward adjustment of ₹ 15,50,59,824/- on account of interest on transactions of loans and share application money given by the appellant company to its associates enterprises. Whereas, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions Limited) wherein the assessee had charged interest at the rate of 5% on loans advanced to Geodesic Hong Kong Ltd. and the basis of charging interest @ 5% was stated to be on the basis of LIBOR plus 200 basis point rate. It was further stated that the assessee company did not charge any interest on loan to Geodesic Technology Solutions Ltd., Hong Kong (GTSL) because the GTSL(AE) markets the products of assessee company all over the world, thus, for funding the capital requirement of GTSL, interest free loan was given. The assessee company was asked as to why interest @ 20.72% should not be charged in this year , as was charged on loan and share application money in assessment year 2008-09 . The assessee company in reply submitted as under:- a) The company had raised zero-coupon bonds during the year amounting to 125 million (Rs. 489 crores). These funds were placed in foreign currency, in bank accounts in UK and Singapore. The share application money was invested out of these funds which was the prerequisite for use of these funds. The term-sheet states that the proceeds from the issue of the bonds will be utilized primarily for strategic acquisitions and strategic alli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of LIBOR Plus 300 basis point, the reply for which was given by the assessee. However the TPO applied CRISIL rated bonds rating as per the show cause given on 06.09.2011 by rating the assessee AE as 'B' category and interest rate of 20.76% was applied, which is not acceptable to the assessee. d) It was stated that the assessee company had raised zero coupon bonds, on which notional interest of 6.60% p.a. was chargeable, if the bonds are not converted into equity after period of 5 years. It was further stated that the assessee had provided for accrual of notional interest in the balance sheet. The assessee also submitted that during the year, there was partial buyback of FCCB Bonds amounting and there was profit of ₹ 23,60,94,195/- and an amount of ₹ 2,60,63,445/- pertaining to notional interest debited in earlier year was written back. The assessee submitted that when the assessee company has not paid any interest but earned profit on Zero Coupon Bonds, then the Assessing Officer should not apply interest rate, which is more than the notional rate 6.60% charged to FCCB Bonds. e) It was submitted that the assessee company had raised these funds with the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .t. to interest-free loans and share application money advanced by the assessee to its AEs. Thus, the ALP of the loans and funds invested in the AEs as per TPO comes to 8.9% and TPO held that the assessee should have charged interest rate of 8.9% from the AEs, vide orders of the TPO dated 28.06.2012 passed u/s 92CA(3) of the Act, wherein TP adjustment of ₹ 15,50,59,8224/- towards interest on loans and share application money advanced by the assessee to its AE was proposed by TPO. The rate of interest of 8.9% applied by the TPO on loans and share application money advanced by the assessee to its AE s for determination of ALP was approved by the A.O vide assessment order dated 04-01-2013 passed by the AO u/s 143(3) r.w.s. 144C(3)(a) of the Act. 4. Aggrieved by the assessment order dated order dated 04-01-2013 passed by the AO u/s 143(3) r.w.s. 144C(3)(a) of the Act. , the assessee went into appeal before the ld. CIT(A) who upheld the assessment order of the A.O. vide appellate order dated 19-12-2013 passed by learned CIT(A) . The learned CIT(A) relied upon the decision of ITAT, Delhi in the case of Perot Systems TSI(India) Limited v. DCIT (2010-TIOL-ITAT-DEL). 5. Aggrieve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that in case the tax-payer advances loans to its AE in Germany , then rate of interest for TP purposes shall be applied based upon the rates prevailing in the Germany where loans are consumed. The relevant operative part of the decision of Hon ble Bombay High Court in the case of Tata Autocomp Systems Limited (supra) is reproduced as under:- 7. We find that the impugned order of the Tribunal inter alia has followed the decisions of the Bombay Bench of the Tribunal in cases of VVF Ltd. v. Dy. CIT [IT Appeal No. 673 (Mum.) of 2006] and Dy. CIT v. Tech Mahindra Ltd . [2011] 12 taxmann.com 132/46 SOT 141 (Mum.) (URO) to reach the conclusion that ALP in the case of loans advanced to Associate Enterprises would be determined on the basis of rate of interest being charged in the country where the loan is received/consumed. Mr. Suresh Kumar the learned counsel for the revenue informed us that the Revenue has not preferred any appeal against the decision of the Tribunal in VVF Ltd . ( supra ) and Tech Mahindra Ltd . ( supra ) on the above issue. No reason has been shown to us as to why the Revenue seeks to take a different view in respect of the impugned order from that ..... 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