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2016 (5) TMI 1438 - AT - Income TaxTPA - ALP determination - comparables selection criteria - India USA Double Taxation Avoidance Agreement effect - Held that:- In earlier years, the assessee had taken distributors as comparables, a stand not accepted by the department which used service provider as comparable and that the assessee itself had accepted this stand by going in far MAP proceedings and accepting that decision, the learned TPO has failed to appreciate the fact that for the earlier years, on behalf of associated enterprises, an application was made under Article 27 of India USA Double Taxation Avoidance Agreement (DTAA) to settle the disputes arising from their assessments and it was pointed out that assessments in India resulted in double taxation especially in view of transfer pricing adjustment made in the case of assessee. In the settlement reached between competent authorities of India and United States, the latter agreed to provide co-relative relief in the assessments of associated enterprises for the transfer pricing adjustment made in the hands of the assessee to avoid double taxation. We thus agree with the submissions of the Learned AR that such act of assessee’s should not be considered as a consent of the assessee about the adjustment proposed by the department in earlier years as the assessee, in good faith had not pressed for any appeal. We in the interest of justice and to meet out ends of justice set aside the matter to the file of the Assessing Officer to decide the issue afresh after undertaking fresh search of comparable companies. It is needless to mention over here that while deciding the issue afresh, the Assessing Officer will afford opportunity of being heard to the assessee and will meet out the submission of the assessee by speaking order. Addition on account of interest on borrowed capital amount - Held that:- Under similar set of facts, the ITAT in the appeal of the present assessee for the assessment year 2004-05 had decided the identical issue as held Assessing Officer had not brought on record any material to show that the loan obtained by the assessee under ECB was diverted to group companies. In the absence of such nexus, it cannot be said that amount borrowed for the purpose of business was diverted for non-business purposes. In the absence of any such material on record, in our considered opinion, CIT(Appeals) was justified in deleting the addition on the ground that there was no nexus between the money borrowed and expenses incurred by the assessee - Decided in favour of the assessee.
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