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2015 (11) TMI 741 - AT - Income TaxTransfer Pricing Adjustment on account of interest on loans advanced to Associate Enterprise - Held that:- On the loan given to its AE, the assessee has charged interest rate worked out on the basis of six months at LIBOR + 2%, which worked out at 3.75%. This Arm’s Length interest was benchmarked by using Internal CUP on the basis of rate of interest paid on loans by the assessee availed from State Bank of India. However, the TPO has arrived at ALP 14.736% by taking the interest rate based on average yield rate of DB rated points based on data collected from CRISIL. The DRP has reduced the said interest rate by holding that domestic cost of borrowing + mark-up of 3% should be applied which works out 9.90%. The applicability of interest rate based on LIBOR had come-up for consideration before the Tribunal in the case of the assessee in AY 2008-09 wherein, the Tribunal relying upon the decision of Everest Kento Cylinder Ltd. (2015 (5) TMI 395 - BOMBAY HIGH COURT) had directed the Assessing Officer /TPO to adopt LIBOR +2% as Arm’s lengths interest. Thus, following the earlier year’s precedence, we also hold that interest rate charged by the assessee on the loan given should be benchmarked with LIBOR +2% as Arm’s Length and, therefore, no adjustment is called for.- Decided in favour of assessee. Transfer Pricing Adjustment on account of Corporate Guarantee given by the assessee to the overseas bank in favour of its AE - Held that:- The Tribunal in AY 2008-09 has held that Arm’s Length Guarantee Commission should be benchmarked by taking the rate of 0.5%. hus, rate of 0.5% is wholly justified on the present case also. Disallowance u/s 14A - Held that:- As disallowance u/s 14A is restricted to the calculation part wherein the interest paid on loan taken for investment in foreign subsidiary has to be excluded. Based on that, the aggregate working of disallowance needs to be worked out. Accordingly, we direct the Assessing Officer to verify the calculation given by the assessee as incorporated to give consequential relief. - Decided partly in favour of assessee. Legal claim with regard to DRUPA Exhibition expenses - Held that:- In view of the facts narrated by the Ld. Counsel, we direct the Assessing Officer to allow 1/4th of the exhibition expenses in this year also consistent with the treatment given by the Assessing Officer in AY 2009-10 - Decided in favour of assessee.
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