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TMI Blog2023 (10) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... d in concluding that the loans are given in foreign currency, even when the taxpayer has failed in submitting any tangible proof regarding the same." "iii) Whether, the CIT (A), in the facts and circumstances of the case and in law, was justified in not considering the facts presented by the TPO in its original order" "iv) On the facts and circumstances of the case, the Ld. CIT (A) has erred in disallowing interest amounting to Rs 1,23,10,923/- paid to subsidiaries. "v) On the facts and circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 2,49,332/- u/s 14A read with rule 8D of the Act." 3. Ground Nos. (i) to (iii) are in respect of TP adjustment made by the TPO on the interest received by the assessee from the AEs. 4. The ld. Counsel for the assessee, at the outset, submits that the Tribunal in assessee's own case in ITA. No. 6056/Del/2017 dated 28.02.2023 for the assessment year 2010-11 on identical facts decided the issue in favour of the assessee by deleting the transfer pricing adjustment on account of interest charged on loan advanced by the assessee to over-seas associated enterprises (AEs). 5. The ld. DR, however, submits that in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to unrelated parties. Thereafter, referring to various judicial precedents and risk factor involved in the advancement of loan, the TPO observed that the assessee was unable to demonstrate that the burden it has taken on behalf of subsidiaries had resulted in any tangible benefit either to it or to the group as a whole. Further, he observed, LIBOR is not applicable where the funds have been lent from rupee denominated fund as it would not be prudent for an enterprises to lend fund at a much cheaper interest rate than what is available as interest on rupee denominated loans. 7. Having held so, the TPO proceeded to apply the domestic Prime Lending Rate (PLR) applied by Indian Banks on commercial borrowings and determining the arm's length rate of interest on the loans advanced to the AEs at 14.74%. This resulted in a total adjustment of Rs. 1,95,31,473. The adjustment proposed by the TPO was added to the income of the assessee by the Assessing Officer while framing the assessment order. Assessee contested the aforesaid addition before learned Commissioner (Appeals). 8. After considering the submissions of the assessee in the context of facts and material on record as well as ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of LIBOR will be the rate on the day the loan was taken by the assessee on behalf of the AEs. He has further observed that additional mark up of 4% shall be added as the credit rates of the loan given by the assessee to its subsidiaries has been considered as (BB). However, while ultimately computing the adjustment, the TPO has applied domestic PLR applied by Indian Banks on commercial loans. 14. This, in our view, is unsustainable. Now, it is fairly well settled that the rate of interest on loans advanced by the assessee to AEs have to be in accordance with the rate of interest prevailing in the country of residence of the AEs wherein the loan was availed. This is the view expressed by Hon'ble jurisdictional High Court in case of CIT vs. Cotton Natural (I) Pvt. Ltd. (supra) and many other decisions. Therefore, domestic PLR rate cannot be applied in respect of loans advanced in foreign currency to AEs situated in USA and Europe. As regards, the submission of learned Departmental Representative that certain guiding principles laid down by the Hon'ble jurisdictional High Court have not been followed, we are not convinced. 15. Considering the fact that the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in assessment year 2009-10, the co-ordinate Bench in ITA No.1216/Del/2014 dated 30.09.2021 has deleted similar disallowance with the following observations: "26. A perusal of the facts show that on receiving financial assistance from the assessee, revenue from sales of M/s UniLink Engineering Pvt Ltd increased from Rs. 94.73 lakhs from F.Y 2005-06 to Rs. 26.12 crores in F.Y 2008-09. We further find that own funds of the assessee as on 31.03.2007 were at Rs. 33.35 crores which jumped to Rs. 127.62 crores as on 31.03 2009 and tp Rs. 139.17 crores as on 31.03.2009. 27. It is true that the loan was given in earlier F.Y and the assessee had sufficient own funds to give the loan. It is equally true that no disallowance was made in the earlier Assessment Year though the DRP 19 has observed that rest judicata is not applicable under Income Tax proceedings but, in our considered opinion, when the facts are same, and the law has not changed, then the rule of consistency ought to have been followed. Considering the facts of the case in totality, we do not find any merit in the addition of Rs. 72,23,773/- made by the Assessing Officer. We, accordingly, direct the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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