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TMI Blog2016 (11) TMI 1513X X X X Extracts X X X X X X X X Extracts X X X X ..... m added to cost of internal borrowing while arriving at ALP of interest rate to compute interest on interest-free advance given by the assessee to its AE - Held that:- While deciding the first ground of appeal filed by the assessee we have discussed the facts of the issue under consideration. In our opinion,the AO was not justified in adding 3% risk premium to the cost of borrowing, as held by the DRP. We decide the effective ground of appeal against the AO. - ITA No.1054/Mum/2015, ITA No.1152/Mum/2015 - - - Dated:- 16-11-2016 - Shri Rajendra and Saktijit Dey, JJ. Revenue by: Shri N.K. Chand -CIT Assessee by: Dr. P. Daniel ORDER: Rajendra, Challenging the order of the Assessing Officer (AO), dated 29/12/2014, passed u/s. 143(3)r.w.s.144C (5)of the Act in pursuance of the directions of the Dispute Resolution Panel (DRP),the assessee has filed the present appeal.The AO has challenged the directions of the DRP. 2.Assessee-company,engaged in the business of manufacturing of studded jewellery and trading of cut and polished diamond, filed its return of income on 11/10/2010, declaring total income of ₹ 99.60 lakhs.During the assessment proceedings, the AO foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AE with the assessee is internal cost of borrowing, that the loan extended to the AE was in US dollars, that USD LIBOR would be the most appropriate rate for benchmarking the IT of provision of loan, that the TPO had wrongly made an adopted addition of 3% to the ALP rate of interest. It relied upon the case of Cotton Naturals (I) Private Ltd. (ITA/5855/Del/2012). 2.3.After considering the submission of the assessee and the orders passed by the TPO and the AO the DRP held that the assessee s borrowings from the bank had increased from ₹ 12.78 Crores at the beginning of the year two ₹ 23.56 Crores at the end of the year, that interest expenditure of ₹ 4.01 Crores was appearing in the profit and loss account of the assessee,that it was not in the business of lending, that the loan had been outstanding as interest-free loan for last two years without any payment of interest,that for the TP purposes it had to be seen how and what and independent enterprise would price the transaction if it was with an unrelated party, that an independent party would certainly not advance interest-free loan while incurring interest cost on borrowings, that if the said principle was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest for bench marking the transactions for providing interest free loan to the A.E. Again, in assessee s own case for the assessment year 2008 09, the Tribunal, while deciding similar issue followed its earlier order for the assessment year 2009 10, and held that LIBOR plus 2% is the appropriate rate of interest for the interest free loan transactions with A.E. The learned Departmental Representative has not brought to our notice any material change in the facts and circumstances in the impugned assessment year to deviate from the view expressed by the Tribunal in assessee s own case for the preceding assessment year. Therefore, applying the rule of consistency, we respectfully follow the order of the co ordinate bench in assessee s own case, as referred to above, and direct the Assessing Officer / Transfer Pricing Officer to compute the arm's length price of the interest charged on interest free loan to A.E. at LIBOR plus 2%. The ground raised by the assessee is disposed off accordingly. Respectfully,following the above order, we direct the AO to follow the orders for the earlier years.First ground of appeal is allowed in favour of the assessee, in part. 5.Second gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12 in the following manner: 13. We have considered the submissions of the parties and perused the material available on record. As is evident, the Assessing Officer in the draft assessment order, has made disallowance under section 14A r/w rule 8D, on the plea that assessee has made investment in assets giving rise to exempt income which was also confirmed by the DRP. However, contention of the assessee is two fold. Firstly, it has been submitted that investments are in overseas subsidiary, hence, the dividend earned from such companies are not exempt; the second contention of the assessee is, during the relevant previous year, assessee has not earned any exempt income. As far as first contention is concerned, it is observed, the Tribunal in assessee s own case for assessment year 2008 09 in ITA no.6929/Mum./2012, dated 20th January 2016, after considering similar claim made by the assessee, directed the Assessing Officer to examine and not to disallow any expenditure under section 14A if it is found that investment is made in foreign subsidiary. As far as the second contention of the assessee is concerned, the Hon'ble Delhi High Court in Cheminvest Ltd. v/s CIT, [2015] 61 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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