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2014 (1) TMI 709 - AT - Income TaxDisallowance u/s. 14A – Held that:- Following assessee's own case for A.Y. 2006-07 - In view of the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT] – Rule 8D applied by the AO to work out the disallowance u/s. 14A was not applicable to the year under consideration - The said disallowance for the year under consideration, was required to be worked out on some reasonable basis - The working furnished by the assessee for making the disallowance u/s. 14A was fair and reasonable – Decided in favour of assessee. Transfer Pricing adjustments – held that:- A perusal of the order of the TPO clearly shows that the TPO has proceeded entirely on erroneous facts. In our considered opinion , if an assessing authority proceeds with facts which are remotely connected with the facts in issue and makes up his mind , such order cannot form any basis for higher authorities - The TPO has salvaged the situation by rectifying his order u/s. 154 of the Act - But he has rectified only the financial figures which were wrongly taken by him - The Ld. CIT(A) also erred in not appreciating the facts in their right perceptive - The Ld. CIT(A) completely ignored the fact that the loan of USD 4 million was given by the assessee to its AE in the earlier years - No TP adjustment was done in the earlier year - This year what the assessee has charged is only on the loan brought forward from the earlier year - The Ld. CIT(A) further erred in not considering the second USD loan of Rs. 17 Million in its right perceptive as the loan was repaid during the same year - The loan of USD 4 million was given in earlier accounting year and as per the agreement, the rate of interest was taken at 5% - The fixed rate of interest cannot be accepted to be changed with the subsequent change in LIBOR - As the loan of USD 17 million has been repaid within the year itself, there is no logic in taking the rate for more than 5 years at 6 months LIBOR plus 350 basis point - The benchmarking done by the assessee are based on the interest paid by it on its own borrowings of loan in foreign currency from KEXIM bank and also from State Bank of India - The interest charged by the assessee on the loan given by it to its AE is at arm's length and no further adjustment is required – Decided in favour of assessee.
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