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2014 (7) TMI 674 - AT - Income TaxTransfer pricing adjustment on interest chargeable to AE – Unutilized share application money beyond 60 days treated as loan – Held that:- The decision in Bharti Airtel Limited (Bharti Crescent) Versus Additional Commissioner of Income Tax [2014 (3) TMI 495 - ITAT DELHI] followed - the transactions involving payment of share application money could not be treated as international transactions of loan given by the assessee company to its AE merely because there was a delay in allotment of shares - there is no finding about what is the reasonable and permissible time period for allotment of shares, and even if one was to assume that there was an unreasonable delay in allotment of shares, the capital contribution could have, at best, been treated as an interest free loan for such a period of ‘inordinate delay’ and not the entire period between the date of making the payment and date of allotment of shares. Even if ALP determination was to be done in respect of such deemed interest free loan on allotment of shares under the CUP method, as has been claimed to have been done in this case, it was to be done on the basis as to what would have been interest payable to an unrelated share applicant if, despite having made the payment of share application money, the applicant is not allotted the shares - That aspect of the matter is determined by the relevant statute - it was unreasonable and inappropriate to treat the transaction as partly in the nature of interest free loan to the AE - the addition made by the AO/TPO and sustained by the CIT(A) is to be set aside by way of TP adjustment on account of interest chargeable on the amount of share application money paid by the assessee and lying unutilized with its AE treating the same as the transaction of loan – Decided in favour of Assessee.
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