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TMI Blog2019 (4) TMI 1021X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance under Section 14A read with Rule 8D(2)(iii) of the Rules to average value of investment which yield exempt income during the year. The ground of the appeal is partly allowed. - ITA No.9/Del/2015 - - - Dated:- 12-4-2019 - Shri H.S. Sidhu, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri Manu K. Giri, Adv. For the Respondent : Shri Sanjay I. Bara, CIT(DR) ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against the final assessment order dated 07.11.2015 passed by the Dy. Commissioner of Income Tax, Circle-2(1), New Delhi (hereinafter referred to as the Assessing Officer ) for assessment year 2010- 11, pursuant to the direction of the learned Dispute Resolution Panel (in short DRP ) dated 17.10.2014. The grounds raised by the assessee in appeal are reproduced as under: 1. The assessment order passed in pursuance of the directions issued by the Hon ble Dispute Resolution Panel (DRP) is vitiate order as the Hon ble DRP erred both on facts and in law in partially confirming the arbitrary adjustment made by the learned Transfer Pricing Officer ( Ld. TPO) relating to the delayed payments receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the learned Assessing Officer referred the matter of determination of arm s length price of the international transaction to the learned Transfer Pricing Officer (TPO). The TPO though accepted the international transactions reported by the assessee, however, held that export proceeds were received after substantial delay and, therefore, he proceeded to make the adjustment for interests on delayed receivables from the AEs. The Ld. TPO made adjustment of ₹ 5,59,999/- in respect of the outstanding receivables from the AEs beyond the credit period of 90 days at the rate of interest of 14.75% based on PLR of State Bank of India. The Ld. Assessing Officer passed draft assessment order on 27.01.2014, including the proposed transfer pricing adjustment of ₹ 5,95,999/- and also disallowance under Section 14A of the Act. 2.1 Aggrieved, the assessee filed objections before the learned DRP, who upheld the disallowance proposed by the Assessing Officer. Pursuant to the direction of the Ld. DRP, the Assessing Officer passed final assessment order. Against the impugned final assessment order, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned in which the loan has to be repaid. Interest rates should not be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. Interest rates applicable to loans and deposits in the national currency of the borrower or the lender would vary and are dependent upon the fiscal policy of the Central bank, mandate of the Government and several other parameters. Interest rates payable on currency specific loans/ deposits are significantly universal and globally applicable. The currency in which the loan is to be re-paid normally determines the rate of return on the money lent, i.e. the rate of interest. Klaus Vogel on Double Taxation Conventions (Third Edition) under Article 11 in paragraph 115 states as under:- The existing differences in the levels of interest rates do not depend on any place but rather on the currency concerned. The rate of interest on a US $ loan is the same in New York as in Frankfurt-at least within the framework of free capital markets (subject to the arbitrage). In regard to the question as to whether the level of interest rates in the lender s State or that in the borrower s is deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mended by Klaus Vogel appeals to us and appears to be the reasonable and proper parameter to decide upon the question of applicability of interest rate. The loan in question was given in foreign currency i.e. US $ and was also to be repaid in the same currency i.e. US $. Interest rate applicable to loans granted and to be returned in Indian Rupees would not be the relevant comparable. Even in India, interest rates on FCNR accounts maintained in foreign currency are different and dependent upon the currency in question. They are not dependent upon the PLR rate, which is applicable to loans in Indian Rupee. The PLR rate, therefore, would not be applicable and should not be applied for determining the interest rate in the extant case. PLR rates are not applicable to loans to be re-paid in foreign currency. The interest rates vary and are thus dependent on the foreign currency in which the repayment is to be made. The same principle should apply. 3.4 Thus, respectfully following the findings of the Hon ble Delhi High Court, we direct Ld. AO/TPO to benchmark the transaction applying LIBOR rate of currency of invoice raised plus suitable basis points. Since, we have adjudicated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of whose decision-is binding on whom , the. Hon'ble Bombay Court considered in detail the hierarchy of the courts and has observed as under: It is also well-settled that though there is no specific provision making the law declared by the High Court binding on subordinate courts, it is implicit in the power of supervision conferred on a superior Tribunal that the Tribunals subject to its supervision would conform to the law laid down by it. It is in that view of the matter that the Supreme Court in East India Commercial Co. Ltd. v. Collector of Customs, AIR 1962 SC 1893 (at page1905) declared: We, therefore', hold that the law declared by the highest court in the State is binding on authorities or Tribunals under its superintendence, and they cannot ignore it. .... This position has been summed up by the Supreme Court in Mahadeolal Kanodia v. Administrator General of West Bengal, AIR 1960 SC 936 (at page 941) as follows: Judicial decorum no less than legal propriety forms the basis of judicial procedure. If one thing is more necessary in law than any other thing, it is the quality of certainty. That quality would totally disappear if jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal or revision of the original assessment, this view had not been accepted by the Bombay High Court, the Allahabad High Court and the Kerala High Court. Respondent No.1, accordingly, chose to accept the view of the Bombay, Allahabad and Kerala High Courts in preference to the view of the Calcutta High Court. In my view, the order of respondent No. 1 cannot be sustained on the simple ground that respondent No. 1 is an authority operating within the State of West Bengal and is bound by the decisions of the Nigh Court of this State ( see CIT v. Indian Press Exchange Ltd. [1989] 176 ITR 331 (Col) ; East India Commercial Co. Ltd. v. Collector of Customs AIR 1962 SC 1993, paragraph 29). In that view of the matter, the impugned order must be set aside and the Commissioner is directed to consider the matter afresh in keeping with the decisions of this court after giving the petitioners an opportunity of being heard. At least 48 hours clear notice must be given to the petitioners. The Commissioner will communicate the final order to the petitioner within eight weeks from the date of hearing. (iv) CIT v. J.K. Jain [1998] 230 ITR 839 (P H), observing as under: We have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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