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2014 (4) TMI 27 - ITAT HYDERABADTransfer pricing adjustment Loans given to subsidiaries Held that:- The decision in Siva Industries & Holdings Ltd. [2011 (5) TMI 451 - ITAT, CHENNAI ] Followed The assessee has given the loan to the Associated Enterprises in US dollars - The assessee is also receiving interest from the Associated Enterprises in Indian rupees - Once the transaction between the assessee and the Associated Enterprises is in foreign currency and the transaction is an international transaction, then the transaction would have to be looked upon by applying the commercial principles in regard to international transaction - LIBOR rate which has to be considered while determining the arm's length interest rate in respect of the transaction between the assessee and the Associated Enterprises - no addition on this count is liable to be made in the hands of the assessee. Few of loans provided in AY 2003-04 and 2004-05 in the case of Arubindo and Arubindo Farmo industria Farmaceutica Ldta and loans obtained from Axis bank and Federal Bank where the rate of interest paid was LIBOR +2.1% and LIBOR +3.25% - Assessee seems to have advanced at LIBOR +3% to Aurbindo whereas rate of interest received in Aurobindo Farmo industria Farmaceutica LTDA is 13.06% - to the extent of advances which were given at a rate lesser than the rate at which those are obtained, the AO is directed to examine, and the rate of interest paid should be considered as ALP in order to determine the interest received Decided partly in favour of Assessee. Claim u/s 35D of the Act Loans obtained in foreign currency convertible points Held that:- Both legally and factually the addition cannot be sustained the AO is bound to follow the directions of the DRP - AO cannot pass the order against the directions of DRP as per the provisions of law - Assessees claim is allowable as decided in M&M Ltd. Vs. JCIT [2009 (10) TMI 639 - ITAT MUMBAI] debentures when issued is a loan, whether it is convertible or non- convertible, does not militate against the nature of the debenture being loan - the expenditure incurred would be admissible as revenue expenditure Decided in favour of Assessee. Claim u/s 10B of the Act Exclusion of freight charges - Held that:- In case any amount is excluded to be from export turnover, the same is required to be excluded from the total turnover as well The decision in Income-Tax Officer Versus Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] followed - for the purpose of applying the formula u/s 10B(4), the freight, telecom charges or insurance attributable to delivery of articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing technical services outside India are to be excluded both from the export turnover and from the total turnover, which are numerator and denominator respectively in the formula the AO is directed to exclude that amount from total turnover, if the same is excluded from the export turnover. Unrealized export proceeds Held that:- RBI as a part of foreign trade policy in September, 2004 announced by Government of India had issued a general Circular on 01-11-2004 as Circular No. 25 wherein it has been decided that 100% export oriented units (EOUs) and units set up in Hardware Technology Parks (HTPs) and Software Technology Parks (STPs) and Bio Technology Parks (BTPs) should be allowed to realize and repatriate the full value of export proceeds within a period of 12 months from the date of export - RBI is the authority as far as the foreign trade is concerned and income-tax Act also permits such extended period, if duly authorized - thus, the AO is directed not to exclude the export proceeds received from the export turnover as well as from the total turnover, as they were received with in time permitted by RBI. Denial of benefit u/s 35 of the Act Held that:- Principally the amount is allowable u/s 35 even though weighted deduction is not allowable as Assessee could not furnish relevant forms - AO/DRP however did not consider the actual claim of Assessee i.e. first R&D expenditure and then weighted deduction - While allowing weighted deduction on some of the amounts, the balance amount was totally ignored, which is to be considered u/s 35(1)(iv) - Relying upon Ayushakti Ayurved (P) Ltd. Vs. ACIT [2010 (2) TMI 761 - ITAT, Mumbai] both the AO/DRP did not even consider the objections raised by Assessee in this regard thus,the matter is remitted back to the AO for fresh examination Decided in favour of Assessee.
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