PROGRESS SOFTWARE DEVELOPMENT PRIVATE LIMITED, HYD,HYDERABAD vs. ACIT, CIRCLE-16(2), HYDERABAD, HYDERABAD

PDF · subscribers
ITA 391/HYD/2015Status: DisposedITAT Hyderabad16 July 2024AY 2010-11Bench: SHRI K.NARASIMHA CHARY (Judicial Member), SHRI MADHUSUDAN SAWDIA (Accountant Member)4 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the interest rate on the ECB loan was fixed, within permissible limits, and consistently accepted by the revenue in previous years, it should be accepted for the current assessment year as well, following the rule of consistency.

What were the facts?

The assessee had taken an External Commercial Borrowing (ECB) loan at a fixed interest rate of 5.14% in FY 2005-06, which was within RBI's permissible limits. This rate remained unchanged and was accepted by the revenue in prior assessment years.

What were the issues?

The key issue was whether the interest rate on an ECB loan should be benchmarked based on prevailing market rates or accepted based on a fixed rate previously agreed upon and accepted by the revenue in prior assessment years.

Which sections of the Income-tax Act were involved?

Section 92C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD

Before: SHRI K.NARASIMHA CHARY & SHRI MADHUSUDAN SAWDIA

Hearing: 20/06/2024

ORDER PER K. NARASIMHA CHARY, J.M: Aggrieved by the assessment order dated 02/02/2014 passed by the Assessing Officer (“Ld. AO”), in the case of Progress So�ware Development Private Limited (“the assessee”) for the assessment year 2010-11. Brief facts of the case are that originally by common order dated 15/3/2021, a Coordinate Bench of this Tribunal disposed of ITA 391/Hyd/ 2015 also, allowing the plea of the assessee. However, subsequently by order dated 10/4/2024 in MA No. 18/Hyd/ 2022 the said order in the appeal was recalled insofar as ground No. 12 rela�ng to the interest paid on loan borrowed from Associated Enterprises (AEs), is concerned. That is how this ma�er has come up for considera�on again. We heard the counsel on ground No. 12.

2.

Case of the assessee is that it had taken an External Commercial Borrowing (ECB) loan during the Financial Year 2005-06 at a fixed rate of interest at 5.14% which was within the permissible all-in-cost ceiling no�fied by the RBI. Assessee pleads that since the borrowing in 2005-06 there have been no changes in the terms of loan and the same have been con�nued even during the year under considera�on, and therefore, the LIBOR rate and the all in cost ceiling no�fied by the RBI for the financial year 2005-06 itself should be considered. Apart from this, further plea taken by the assessee is that the learned TPO accepted the interest rate at 5.14% payable on ECB for the assessment years 2008-09 and 2009-10 also. Learned AR prayed that rule of consistency may be followed for this year also, since there are no compelling circumstances for the Revenue to deviate from the same. He placed reliance on the decision of the Hon'ble High Court of Karnataka in the case of CIT vs. GE India Technology Centre (P) Ltd (2021) 125 Taxmann.com 168 (Karnataka).

3.

Per contra, Ld. DR submi�ed that where the loans have been taken in the interna�onal markets, interest prevailing in the said markets should be adopted for benchmarking interest rates and, therefore, the 12-month USD LIBOR +2% should be adopted for benchmarking purposes and on that ground the impugned orders cannot be interfered with.

4.

We have gone through the record in the light of the submissions made on either side. There is no dispute that the assessee had taken the ECB loan during the Financial Year 2005-06 at a fixed interest rate of 5.14% and such was within the permissible limits of all in cost ceiling no�fied by the RBI. There are no changes in the terms of loan subsequently and the same situa�on is prevailing in respect of the year under considera�on also. For that ma�er in assessee’s own case for the Assessment Years 2008-09 and 2009-10 the Revenue accepted the interest rate at 5.14% payable on ECB to be Arms Length Price (“ALP”).

5.

In GE India technology Centre private limited (supra), the Hon’ble Karnataka High Court observed that where the learned TPO accepted certain rate of interest consistently in previous assessment years as well as in subsequent assessment years, Revenue cannot reject same for the assessment year under considera�on. In the circumstances we are of the considered opinion that when the assessee obtained the ECB loan at a fix rate of interest at 5.14% within the permissible all in cost ceiling no�fied by the RBI and the same situa�on is prevailing even during the year under considera�on also, and more par�cularly having accepted the same in the assessment years 2008-09 and 2009-10, it is not open for the Ld. TPO to deviate from the same. Ground No. 12 is allowed accordingly.

6.

In the result appeal of the assessee is allowed. Order pronounced in the open court on this the 16th day of July, 2024. Sd/- Sd/- (MADHUSUDAN SAWDIA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 16/07/2024

More judgments on Section 92C

All 1,769 judgments and leading authorities on Section 92C →

Recent GST High Court judgments

Search GST case law →