Transfer Pricing: No Penalty Under 271(1)(c) for Interest-Free Loans to AE When Facts Fully Disclosed

ITAT reversed penalty under s.271(1)(c) regarding transfer pricing adjustment on interest-free loans to associated enterprises. While TPO made upward adjustment at SBI PLR, later restricted to LIBOR+200bps, assessee had disclosed all relevant facts in returns. Bombay HC admitted appeal on substantial questions of law, indicating debatable nature of issue. Given that two reasonable interpretations were possible and necessary disclosures were made, penalty for furnishing inaccurate income particulars was deemed unjustified. The tribunal emphasized that when legal interpretations are genuinely disputable and pending higher court review, s.271(1)(c) penalties cannot be sustained. Revenue's grounds dismissed. .....

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