2010 (1) TMI 781 - ITAT, MUMBAI

Transfer pricing adjustment - interest free loans advanced by the assessee to its wholly owned foreign subsidiaries, Transfer Pricing Officer (TPO), adopted 14% p.a. as arms length interest on the sum advanced - TPO took into account details of borrowings by the assessee from different sources and came to the conclusion that since advances were made out of cash credit account with Citi Bank, it was appropriate to compute the ALP as the rates on which the assessee had borrowed money from the Citi Bank in the cash credit account - Held that:- it would be appropriate to accept internal CUP, i.e. the rate at which the assessee has resorted to foreign exchange borrowings from the ICICI, as arms length price under CUP method. The fact, as painstaking brought on record by the authorities below that this loan from ICICI bank was not used for the purposes of remittance to subsidiaries as interest free loans has no bearing for the purposes of computing ALP of interest free loan, Assessing Officer directed to recompute the ALP in the light of our above directions, matter remanded to Ao.

Deduction under section 80HHC - there was loss before taking into account incentives from export activities - Held that:- matter remanded to Assessing Officer for fresh computation in accordance with the provisions of Section 80HHC. as mended by the retrospective amendment.