9911796707
TMI Blog2016 (11) TMI 1513X X X X Extracts X X X X X X X X Extracts X X X X ..... polished diamond, filed its return of income on 11/10/2010, declaring total income of Rs. 99.60 lakhs.During the assessment proceedings, the AO found that the assessee had entered into International Transactions (IT.s).He made a reference to the Transfer Pricing Officer(TPO) to determine the ALP of such transactions.Vide his order,dated 08/01/2014,the TPO made an upward adjustment of Rs. 2.48 Crores in relation to the IT.s. Accordingly, the AO passed a draft assessment order.The assessee filed its objections before the DRP with regard to the proposed adjustments.The AO finalised the assessment,as directed by the DRP and determined the income of the assessee at Rs. 3.60 Crores 2.1.First effective ground of appeal is about addition of Rs. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that interest rate varied from country to country due to geographical difference in pricing and cost, loan given in India could not be compared with a loan given in Mauritius, that the TPO was not right in law to benchmark the loan provided by the assessee to its overseas 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 hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as CUP, that what was relevant was the prices prevailing in current comparable period,that the risk estimation at the rate of 3% was not justified, that the TPO had merely mentioned that markup of 3% was necessary to cover various risk without giving sufficient detail to support his argument. Finally, the DRP directed to adopt PLR of State Bank of India prevailing the period under consideration to work out the adjustment without any markup. 3.During the course of hearing before us,the Authorised Representative (AR) argued that while deciding the appeals for the earlier to AY.s and subsequent AY.,the Tribunal had held that LIBOR +2% would be the fair rate of interest for the IT.s entered into by the assessee with its AE.The Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 ground of appeal pertains to disallowance of Rs. 69.44 lakhs,made u/s.14 A of the Act.The AO noted that the assessee had made investment of Rs. 25.73 Crores as on 31/ 03/ 2010, that it had not attributed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the copy of the order of the Tribunal before the AO despite calling for it. 6.Before us,the AR argued that while deciding the appeal for the AY. 2011 - 12, the Tribunal had held that no disallowance u/s. 14 A could be made if the assessee had not earned exempt income,that the investment made by the assessee was in the subsidiary companies,that the facts of the case for the year under consideration were similar to the facts for the AY.2011-12.The DR referred to the case of Maxopp Investment Ltd.(347 ITR 272) and RP Modi (115 ITR 59). 7.We have heard the rival submissions.We find that the Tribunal had adjudicated the issue while deciding the appeal for the AY.2011-12 in the following manner: "13. We have considered the submissions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble Supreme Court in Rajendra Prasad Moody (supra) and observed that the ratio laid down therein was in the context of allowability of deduction under section 57(iii), where the expression used is "for the purpose of making or earning such income", whereas under section 14A, the expression used is "in relation to income which does not form part of the total income". Thus, the principle emerging from the judicial pronouncements referred to above is, if the investments are made in foreign subsidiary, dividend income from which are not exempt and secondly if no exempt income is earned during the relevant previous year, no disallowance under section 14A can be made. As the Departmental Authorities have not properly examined the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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