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TMI Blog2017 (6) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... /12/2013 determining the ALP adjustment at Rs. 4,28,75,506/- which include the adjustments on account of interest received on advance given, corporate guarantee fee receivable and investment in subsidiary. The AO passed the draft assessment order u/s 143(3) r.w.s. 92CA(3) of the Act, dated 30/03/2014 determining the total income of the assessee at Rs. 14,67,04,072/- by making the following additions to the returned income as follows: a) Adjustment u/s 92CA in respect of international transactions relating to interest received on advances given. Rs. 1,61,69,956/- b) Adjustment u/s 92CA in respect of international transactions relating to corporate guarantee fee receivable Rs. 1,69,10,000/- c) Adjustment u/s 92CA in respect of investment in subsidiary companies. Rs. 97,95,550/- d) Disallowance of bad debts written off Rs. 7,34,963/-. Rs. 4,36,10,469. 3. Aggrieved by the order of the AO/TPO, the assessee raised objections before the DRP. 4. As regards adjustment u/s 92CA in respect of international transactions relating to interest received on advances given, the facts are that as per the RPT Disclosure contained in the annual report, TPO has seen that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the submissions of the assessee, the DRP gave directions as under: "1. Considering the fact that assessee already charged interest at 6%on the advances given to its AE, Vivimed Holding Ltd., Hong Kong, we direct the TPO to adopt LIBOR plus 200 basis points for computing the interest on loans/advances given to its AE and accordingly make the adjustment in excess of the interest already charged to AE i.e. Rs. 94,27,950/- in the current year. 2. On similar lines in respect of the loans/advances given to Vivimed Labs USA Inc and considering the fact that assessee has not charged any interest on the advances/loans given to its AE, we direct the TPO to adopt LIBOR plus 200 basis points for computing the interest on loans/advances given to its AE and accordingly make the adjustment. 5. Adjustment u/s 92CA in respect of international transactions relating to corporate guarantee fee receivable, the DRP held as follows: 9. The panel has gone through the submissions of assessee, the order of the TPO and the facts of the case. This panel is of the view that the corporate guarantee extended by the assessee company to its AE clearly falls under the definition of international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, in relation to the following international transactions with AEs: 1) Interest received on advances given to AE's - Rs. 17,31,122/- 2) Corporate Guarantee Fee - Rs. 41,20,050/-. 9. Accordingly, the AO passed final assessment order as per the directions of DRP. 10. Aggrieved by the order of DRP, the assessee is in appeal before us raising the following grounds of appeal: 1. Ground of objection towards addition of Rs. 17,31,122/- towards charging interest on advances of Rs. 51.83 million (ground Nos. 3 to 8). 2. Grounds of objection towards addition of Rs. 41,20,050/- towards charging corporate guarantee fees on corporate guarantee amount of Rs. 82.401 crores (Ground Nos. 9 to 18). 3. Grounds of objection towards addition of Rs. 7,34,963/- in respect of disallowance u/s 14A of the Act. (Ground Nos. 19 to 24.) 10.1 The revenue has raised the following grounds of appeal: "1. The order of Honourable DRP is erroneous both in law and facts of the case. 2. Whether in facts and circumstances of the case, the Honourable DRP is correct in holding that the interest rate should be taken at LIBOR +2% when there is no rationality given by the DRP in deciding such a rate. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termine ALP. The fact that advance was lent outside India the interest rate prevailing in the international market is relevant. The DRP/TPO argues that these loans were originated in Indian currency and recorded, as such, in the assessee's books. Hence, it has to be analysed in the Indian ALP is not acceptable. The money lent outside India is always converted into foreign currency and accordingly recorded. But, how the AE had recorded. Obviously not in Indian currency. Since, actual utilisation of the funds were outside India, obviously, the ALP of this kind also to be determined applying the international market condition. Hence, we follow the consistent view of the various Tribunals, in particular, the case of PMP Auto Components (P) Ltd. Vs. DCIT [2014] 50 Taxmann.com 272 (Mum.) wherein the coordinate bench has held that the assessee is a tested party and economic/commercial as well as geographical condition in which the assessee is doing business are relevant to be considered for the purpose of determining the arm's length price. Therefore, we direct the TPO to arrive at the ALP of these transactions applying LIBOR + 200 points. Accordingly this ground of the assessee is allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee and allow the grounds raised by the assessee on this issue." 16.1. However, the amendment to section 92B by the Finance Act, 2012, this amendment can only be prospective and not retrospective as held in the case of Siro Clinpharm Pvt. Ltd. in ITA No. 2618/Mum/2014. This provision is applicable from AY 2013-14 onwards. Hence, addition of corporate guarantee in this AY is deleted. Accordingly, the ground raised by the assessee is allowed and ground raised by revenue is dismissed. 17. As regards the disallowance of Rs. 7,34,936/- u/s 14A of the Act, the ld. AR submitted that section 14A will not apply where no exempt income is received or receivable during the relevant AY. For this proposition he relied on the following cases: 1. Prathista Industries Ltd., Vs. DCIT, ITA No. 1302/H/15 2. Cheminvest Ltd., [2015] 379 ITR 33 (Del.) 3. CIT Vs. Hero Cycles Ltd., 323 ITR 518 (P&H) 4. Relaxo Footwears Ltd. Vs. Addl. CIT, [2012] 50 SOT 102 5. Priya Exhibitors (P) Ltd. Vs. ACIT [2012], 54 SOT 356 6. M/s Vivimed Labs. Ltd., ITA No. 1882/Hyd/14 7. M/s Sun TV Networks Vs. ACIT, ITA No. 1340 & 1341/Mds/15 8. Madhucon Infra Ltd., Vs. ACIT, ITA No. 410/H/15. 18. Ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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