Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI ‘I-2’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI SUCHITRA KAMBLE
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the assessee is preferred against the order of the DRP-2, New Delhi dated 24.09.2015 pertaining to A.Y 2011-12.
2 2. The grievance of the assessee is two-fold. Firstly, the assessee is aggrieved by the adjustment in respect of international transaction of interest on the loan advanced by the assessee to its Associated Enterprise [AE] and secondly, the assessee is aggrieved by the disallowance made u/s 14A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act] r.w.r 8D of the Income-tax Rules, 1962.
At the very outset, the ld. AR stated that both the issues have been decided in favour of the assessee and against the Revenue by the Tribunal in assessee’s own case for A.Y 2008-09.
Per contra, the ld. DR could not bring any distinguishing decision in favour of the Revenue.
We have carefully considered the orders of the authorities below. We find force in the contention of the ld. Counsel for the assessee. Identical issues were considered by the Tribunal in assessee’s own case in A.Y 2008-09 in ITA No. 63215/DEL/2012. Relevant findings of the coordinate bench read as under:
“11. There are any number of decisions by the coordinate benches which show that the interest rates charged on foreign currency, say US dollars, loans are much lower than the 250 to 500 basis points above the LIBOR having been to be generally applicable rates. For instance, in the cases of Bharti Airtel (supra), which pertains to the assessment years 2007-08 and 2008- 09, the comparable cases were taken as 150 basis points above LIBOR and in the range of 140-170 basis points above LIBOR. In contrast to this comparable case, the interest charged in the present case is 247 points above the LIBOR rate. In the case of Siva Industries & Holdings Ltd Vs ACIT [(2012) 145 TTJ 497 (Chennai)], dealing with the assessment year 2006-07 and while referring to LIBOR at 4.42, interest rate on advances to subsidiary at 6%, which was thus 158 points above the LIBOR rate, was held to be an arm's length price. In view of these discussions, it cannot be said that the advance to subsidiary, at 247 basis points above the LIBOR, is not at an arm's length price. In any event, once DRP itself states that the Indian banks are charging 250 basis above LIBOR on similar loans, even though this interest rate could reach upto 400 basis points in some cases, there cannot be any good reason for holding that loan advanced to a subsidiary at 247 basis points above the LIBOR rate is not at an arm's length price. That apart, as noted earlier in this order, once Hon'ble Delhi High Court, observes that the "assessee advanced monies to the subsidiaries which were under its management and control, which in fact substantially reduced the risk and in these circumstances there was no rationale of adjusting any amount of higher basis", it cannot be open to the transfer pricing authorities to contend that this loan should be treated as a high risk loan on which high interest rate should be charged even within the range of interest rates charged by the Indian banks generally. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete this arm's length price adjustment of Rs
74,20,785 in respect of interest charged on advances to the subsidiaries.”
We find that during the year under consideration LIBOR was less than what it was in A.Y 2008-09. Considering the findings of the coordinate bench given on LIBOR in A.Y 2008-09, we do not find any reason why the same should not be followed for the year under consideration also. Respectfully following the findings of the coordinate bench [supra] we direct the AO to delete the addition on this count.
Second grievance relates to disallowance of Rs. 4,60,906/- u/s 14A r.w.r 8D of the Act.
We find that the assessee has not earned any exempt income during the year under consideration as is evident from the computation of income exhibited at pages 251 of the paper book. We find that the assessee has pointed out to the DRP that no exempt income is earned during the F.Y. under consideration. Since there is no exempt income earned during the year under consideration, no disallowance is to be made u/s 14A r.w.r 8D of the Act. Our view is fortified by the decision of the Special
5 Bench of the Tribunal in the case of M/s Cheminvest Ltd 121 ITD 318 which was affirmed by the Hon'ble High Court of Delhi. Same view is taken by the Hon'ble Gujarat High Court in the case of Corrtech Energy (P) Ltd 372 ITR 97. In view of the above, disallowance of Rs. 4,90,906/- is directed to be deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 31st July, 2018.