M/S.TUPPADAHALLI ENERGY INDIA PRIVATE LIMITED,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, BANGALORE

O R D E R

Per Shri A.K. Garodia, Accountant Member

by the assessee are as under. “The grounds stated hereunder are independent of, and without prejudice to one another. The Appellant submits as under:

1. The Assessment Order issued by the Assessing Officer and the Transfer Pricing Order issued by the Transfer Pricing Officer are bad in law (a) The Ld. Deputy Commissioner of Income-tax, Circle 7(1)(1) ('Ld. AO') / Ld. Deputy Commissioner of Income Tax (Transfer Pricing) - 2(2)(2) ('Ld. TPO') erred on facts and in law in making an addition of INR 14,215,217 to the total income of the Appellant on account of adjustment to the arm's length price with respect to interest paid on External Commercial Borrowing ('ECB') availed from its associated

IT(TP)A No.2207/Bang/2016 Page 2 of 5 enterprise ('AE').

(b) The draft / assessment order issued by the Ld. AO, is bad on facts and in law, and is in violation of the principles of natural justice.

(c) On the facts and circumstances of the case and in law, the Ld. AO / TPO erred in not providing the Appellant an opportunity of being heard prior to incorporating a transfer pricing adjustment on the basis of the Spanish prime lending rate ('PLR') vis-a-vis the basis demonstrated by the Appellant for concluding the arm's length nature of interest paid on ECB (i.e. Internal Comparable Uncontrolled Price ('CUP') data furnished by the Appellant / reliance placed on RBI Master Circular).

(d) The Ld. Dispute Resolution Panel ('DRP') erred in rejecting the ECB benchmarking analysis furnished by the Appellant as additional evidence, during the course of proceedings before the Ld. DRP.

(e) The Ld. AO / TPO erred on facts and in law in rejecting the Transfer Pricing Study maintained by the Appellant, without providing cogent reasons for rejecting the approach adopted by the Appellant for justifying the arm's length nature of interest paid on ECB availed. 2 Determination of arm's length price by the TPO (a) The Ld. AO / TPO erred on facts and in law in disregarding EURlBOR as the basis for benchmarking arm's length price of interest paid on ECB, being a foreign currency denominated loan availed by the Appellant.

(b) The Ld. AO / TPO erred on facts and in law in disregarding EURlBOR adopted by the Appellant as the basis for availing a Euro denominated ECB, vis-a-vis the LIBOR, which is prevalent for transactions between banks for short term loans.

(c) The Ld. AO / TPO erred on facts and in law in computing the effective rate of interest paid on ECB at 7.90% vis-a-vis 6.65% demonstrated by the Appellant based on 6-months EURlBOR rate prevailing during FY 2011-12.

(d) The Ld. AO / TPO erred on facts and in law in adopting the foreign AE (viz. Acciona Energia Internacional SA) as the tested party, disregarding the fact that the tested party ought to taken as the Appellant, being resident of the country wherein the ECB has been received / consumed (viz. India).

(e) The Ld. AO / TPO erred in adopting the Spanish PLR as the external benchmark rate for determining the arm's length rate of interest on ECB availed, disregarding the Internal CUP data

IT(TP)A No.2207/Bang/2016 Page 3 of 5 furnished by the Appellant. (f) The Ld. AO / TPO erred in not taking cognizance of the fact that the internal CUP data furnished by the Appellant was preferable as benchmark vis-a-vis external CUP adopted by the Ld. TPO. (g) Without prejudice to the above grounds, the Ld. TPO erred in not undertaking a benchmarking analysis for determining arm's length nature of interest paid on ECB, adopting the Indian Appellant as the tested party. 3 Interest under section 244A of the Act The learned AO has erred in computing interest under Section 244A of the Act pursuant to the refund due to the Appellant. 4 Directions issued by the Ld. DRP The Ld. DRP has erred in law and on facts in not taking cognizance of the objections filed by the Appellant in relation to the draft assessment order issued by the Ld. AO / TP order and confirming the draft order of the Ld. AO. 5 Penalty proceedings The Appellant submits that based on the facts and circumstances of the case, there was no basis for the AO to initiate proceedings under Section 274 read with Section 271 of the Act. 6 Relief The Appellant craves leave to add to or alter, by deletion, substitution, modification or otherwise, the above grounds of appeal, either before or during the hearing of the appeal. The Appellant submits that the above grounds are independent and without prejudice to one another.”

IT(TP)A No.2207/Bang/2016 Page 4 of 5 Thereafter he submitted that as per the Tribunal order rendered in the case of DCIT Vs. Geodesic Ltd. as reported in 62 taxamann.com 383 (Mumbai Tribunal) order copy available on pages 21 to 23 of the compilation of the case laws, it was held that if interest payment is as per RBI master circular then the same can be followed for bench marking the ALP in respect of interest payment on ECB. He also submitted that copy of another Tribunal order rendered in the case of Ion Exchange (I) Ltd. Vs. Addl. CIT in dated 10.02.2014 is available on pages 24 to 34 and in this case also, similar issue was decided on the same line and in that case also, it was held that ld. CIT(A) has rightly held that according to master circular issued by RBI, the ALP is proper. He pointed out in that case also, the issue in dispute was of payment of interest on ECB.

IT(TP)A No.2207/Bang/2016 Page 5 of 5 High Court supports the case of the assessee. Hence we delete the addition made by the AO and TPO.

Order pronounced in the open court on the date mentioned on the caption page.