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2015 (1) TMI 551 - AT - Income TaxTransfer pricing adjustment - whether the interest free loans and guarantees provided by assessee to AE calls for any adjustment? - Held that:- There is no dispute to the fact that providing of loans to AE is an International Transaction as per the TP provisions. Therefore, the commercial considerations advanced by assessee can not be considered while examining the ALP of the transactions. We are of the opinion that the transaction of providing loans to subsidiary whether a direct loan or providing credit for initial expenditure, which is stated to be reimbursable, do call for adjustment. Therefore, in principle we approve the adjustment made on these transactions.Since, A.E. borrowed funds from ICICI Bank, U.K. @ LIBOR + 2.75%, we are of the opinion that, that rate should be considered as ALP of interest and A.O. is directed to workout the interest at that rate on the loan provided to SSTL north America. Assessee is also objecting to the adjustment on loan given to Arsin Corporation, another A.E. of Assessee. Here, assessee has charged interest at LIBOR + 1.50 BPS. Since, we have approved LIBOR + 2.75 points on the loan given to SST, North America (A.E.) we direct the A.O. to re-workout the interest on the loan provided to this A.E. at LIBOR + 2.75% only as against LIBOR + 4.75 charged by A.O./TPO. - Decided partly in favour of assessee. Guarantee fee - Held that:- We uphold the adjustment made on guarantee commission both on the guarantee provided to Bank directly and also on the guarantee provided to the erstwhile shareholders of JYACC for assuring the payment by AE. However, we direct the TPO to adopt the rate to 0.53% which is considered as arms length in other cases. - Decided partly in favour of assessee.
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