DY. COMMISSIONER OF INCOME TAX , CIRCLE-16(1), HYDERABAD vs. NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED , HYDERABAD

Brief facts of the case are that the assessee company filed its return of income for the A.Y 2014-15 on 29.11.2014 admitting loss income of Rs.200,95,68,402/-. During the assessment proceedings u/s 143(3) of the Act, the Assessing Officer observed that the assessee has entered into international transactions with its AE and therefore, determination of the ALP of the said transactions was referred to the TPO. The TPO observed that the assessee has given an advance of Rs.20,64,413/- to its subsidiary during the year and there was also a closing balance of advance to subsidiary of Page 1 of 3 Rs.34,88,85,713/-. The TPO proposed an interest @ 14.75% on the advances given by the assessee to its subsidiary, against which, the assessee preferred an appeal before the CIT (A) who directed the Assessing Officer to adopt the average LIBOR percentage of interest on the advance given to its subsidiaries. Aggrieved, the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

The learned DR relied upon the orders of the Assessing Officer while the learned Counsel for the assessee supported the orders of the CIT (A) and also placed reliance upon the following caselaw: i) & 2031/Hyd/2017 in assessee’s own case for A.Y 2012-13 & 2013-14. ii) Head Note of case BS Ltd (2019) 102 Taxmann.com 458 (Hyd.Trib) iii) Head Note of case Hinduja Global Solutions Ltd (2013) 35 Taxmann.com 348 (Mumbai Trib.) iv) Head Note of case Cotton Naturals (I) (P) Ltd (2013) 40 Taxmann.com 226 (Del.Trib.) v) Order in case of Geodesic Ltd (2015) 62 Taxmann.com 383 (Mumbai Trib.) vi) Head Note of case Siva Industries & Holdings Ltd (2012) 26 Taxmann.com 96 (Chennai Trib.) vii) Head Note of case Tata Autocomp Systems Ltd (2015) 56 Taxmann.com 206 (Bombay High Court) viii) Order in case of Vaibhav Gems Ltd (2018) 99 Taxmann.com 2 (S.C) 4. Having regard to the rival contentions and the material on record, we find that in a number of cases including the decisions relied upon by the learned Counsel for the assessee it has been held that where an assessee advances loans to its AEs outside India, rate of interest was to be determined on the basis of rate prevailing in the country wherein the loan has been consumed and it is not to be determined at a rate prevailing in India. We find that the CIT (A) has followed the precedents on the issue and has held that the LIBOR+ basis points in the rate of interest applicable in this case. Therefore, we find no reason to interfere with the orders of the CIT (A). 5. In the result, Revenue’s appeal is dismissed.