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TMI Blog2023 (7) TMI 899X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer-2), Ahmedabad ("the TPO") and the Deputy Commissioner of Income Tax, Central Circle-2, Vadodara ["the AO"] in making an upward adjustment of Rs. 28,33,393/- u/s. 92CA of the Income Tax Act, 1961 ("the Act"). 2. The learned CIT(A) erred in fact and in law confirming the action of the Id. TPO and the Id. AO in making adjustment of Rs. 28,33,393/- in determining Arm's Length Price ("ALP") of International Transactions in respect of loan advanced by the Appellant to its Associated Enterprise ("the AE"). 3.The learned CIT(A) erred in fact and in law confirming the action of the Ld. TPO and the Ld. AO in applying Comparable Uncontrolled Price ("CUP") method without rejecting Transaction Net Margin Method ("TNMM") selected by the Appellant as most appropriate method as per the provisions of section 92C of the Act read with Rule-10C of the Income Tax Rules, 1962 ("the Rules"). 4. The learned CIT(A) erred in fact and in law confirming the action of the Ld. TPO and the Ld. AO in applying the Arm's Length Principal on segregated transactions. 5.The learned CIT(A) erred in fact and in law confirming the action of the Ld. TPO and the Ld. AO in determining ALP of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Cobalt, Nickel and Copper. The assessee is acquiring raw material of Cobalt from Democratic Republic of Congo (DRC). For the purpose of seamless supply of raw material, it has set up wholly owned subsidiary first in UAE Sharjah namely Rubamin FZE (here after RFZE) and indirect subsidiary in DRC i.e. subsidiary company of RFZC namely Rubamin SPRL and Rubaco SPRL. 4.1 The assessee has provided interest free loans & Advances to its AE RFZE for Rs. 14,08,51,672/- which was treated as international transaction by the TPO in the original assessment proceeding under section 143(3) r.w.s. section 92C of the Act and accordingly worked the arm length of interest at Rs. 28,33,393/- only. The issue reached to this Tribunal in ITA No. 664 & 665/Ahd/2012. The Hon'ble bench vide order dated 17th February 2017 set aside the issue to file of the AO/TPO for de-novo adjudication. 4.2 The assessee in the set aside proceeding submitted that the loan transaction is in the nature of commercial expediency i.e. to help the operation of subsidiary so that the subsidiary would be able to make proper and assured supply of raw materials. Due to the impugned loan & advances, it has made arrangement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E is without any basis. Further, Assessee has not submitted any evidence to substantiated that by not charging interest on loan given to AE. It was able to extract a better price for its supplies. 12. Accordingly, the action of the Assessee in not charging interest on loan given to its AE located in UAE is not in accordance with Transfer pricing provisions. Hence, based on the Libor plus rate taken while passing original transfer pricing order for AY 2006-07 in respect of interest free loan advanced to AE, and upward adjustment of Rs.28,33,393 is made to the total income of the Assessee for A.Y 2006-07. (Upward adjustment of Rs.28,33,393/-) 5. Aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the upward adjustment made by the AO/TPO by observing as under: 6.5 For A.Y. 2006-07 the primary contention raised by the appellant is that it was commercially expedient for it to advance interest free loan to its AE and since the appellant determined the ALP by TNMM, the ALP of interest free advance given to the subsidiary (AE) cannot be determined by applying CUP method as was done by the TPO. The Ld. CIT(A) held that the applicability of the transfer pricing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar transaction with other unrelated parties. For that purpose assessment of the credit quality of the borrower and estimation of the credit rating, evaluation of terms of loan e.g. period of loan, the amount, the currency, interest rate basis, and any additional input such as convertibility and finally estimation of arms length terms for the loan based upon the key comparability factors and internal and/or external comparable transactions are relevant......... whether the funds are advance out of interest bearing funds or interest free advances or are commercially expedient for the assessee or not, is wholly irrelevant in the context............. Since in the instant case neither the assessee nor the TPO/ AO and the Ld. CIT(A) has examined the applicability of the CUP method as the most appropriate method in order to determined ALP or international transaction of interest free foreign currency loan to its subsidiary by the assessee, we considered it fair and appropriate to vacate the findings of the Ld. CIT(A) and restore the matter to the file of the AO for fresh adjudication with direction to recompute the ALP of aforesaid international transaction in the light in our aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the lower authorities. Among all the contentions, one of the arguments of the assessee was that transaction of advancing the interest-free loan to the AE should not be in isolation rather such transaction should be aggregated with the other transactions carried out by the assessee with the foreign AE. As such, the assessee, by supplying the interest free loan to AE, was able to carry out other transactions without any hindrance and seamlessly. According to the learned AR, the transaction of interest free loan was inextricably linked with the main object of the assessee whereby the assessee was able to procure the raw materials from the AE. If such transaction is aggregated with the other transaction carried out by the assessee with the AE, no adjustment is required to be made. It is for the reason that other transactions were carried out and admitted by the revenue to be at the arm length price. 8. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. The dispute in the case on hand before us revolves whether the amount of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate to consider the transaction (of which the routing is a part) in its entirety, rather than considering the individual parts of transaction on a separate basis. 9.3 We further find that the Para 3.13 of OECD Commentary also deals with the topic of Intentional set offs where it was mentioned that the Intentional set-offs generally occur between AEs in respect of controlled transactions wherein when one enterprise provides benefit to another enterprise within the group that is balanced to some degree by different benefits received from that enterprise in return. 9.4 This view is also considered in the judgment of Hon'ble High Court of Delhi in the case of Sony Ericsson Mobile Communications India (P.) Ltd. vs. CIT reported in [2015] 55 taxmann.com 240 (Delhi) detailed as under: Bundled/Inter-Connected Transactions ■ Clubbing of closely linked transactions, which would include continuous transactions, may be permissible and not excluded. Aggregation of closely linked transactions or segregation by the assessee should be tested by the Assessing Officer/TPO on the benchmark and the exemplar; whether such aggregation/segregation by the assessee should be interfered in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of appeal like other grounds of appeal are without prejudice to the others and is independent of the other grounds of appeal. 1. The learned Deputy Commissioner of Income tax, Central Circle 2, Vadodara [the AO"] erred in fact and in law in passing order u/s 143(3) r.w.s. 254 which is barred by limitation and void-ab-initio. 2. The assessment order passed u/s 143(3) r.w.s. 254 is liable to be quashed. 3. The learned AO erred in fact and in law in passing the assessment order on 30.01.2019 despite the fact that the last date to pass the order was on 31.12.2018 and consequently assessment order passed u/s 143(3) r.w.s 254 is barred by limitation. 4. We request the Hon'ble Members to consider the above additional ground of appeal in addition to others while deciding the appeal 11. At the outset, we note that the learned AR for the assessee at the time of hearing before us submitted that he has been instructed by the assessee not to press the impugned additional ground of appeal. Hence the impugned additional ground of appeal of the assessee is hereby dismissed as not pressed. 11.1 In the result appeal of the assessee is hereby partly allowed. Coming to ITA No. 1739 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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