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2017 (11) TMI 639 - AT - Income TaxAddition on account of the International Transaction in the nature of interest on loans granted to Associated Enterprises - contentions of the assessee about non-chargeability of interest is that such AE was running into losses, thereby necessitated the assessee in the capacity of a parent to pump funds - Held that:- On a perusal of the financials of the Multination Textile Group Limited, Ld. CIT (A) found that the claim of the assessee was factually incorrect, inasmuch as the dividend payment from AE at 10,20,000 USD is more than the profit earned at 9,78,780 USD meaning thereby that there is no correlation between the profit and the amount of dividend received. Further Ld. TPO rejected this contention of the assessee by placing reliance on the decisions of a coordinate Bench of this Tribunal in Perot Systems TSI (India) Ltd. vs. DCIT (2009 (10) TMI 638 - ITAT DELHI) wherein the contention of the assessee that they have not earned any interest and it was commercially expedite to earn interest free loans was rejected holding that international transactions can not be equated with ordinary business transactions. Thus having regard to the facts and circumstances of the case, we do not find any merit in the argument that no ALP interest could be added on account of the loan advanced to Multination Textile Group Limited, Mauritius. Rate of interest - according to the assessee 6% offered in respect of House of Pearl Fashions Limited, USA is proper, whereas in respect of Multination Textile Group Limited a nominal interest at LIBOR plus 200 basic points may be charged - Held that:- There is an inherent inconsistency in the view taken by the TPO because, if at all the ALP interest in so far as the assessee is concerned is the interest rate expected by an Indian lender, then irrespective of the fact of Nor Pearl Knitweard Limited, Bangladesh obtained loan at Bangladesh at any rate less than this expected rate, he should not have accepted. The tested party in the case of Nor Pearl Knitwear Limited, Bangladesh and in the case of other two concerns is the assessee only. In respect of the same tested party the TPO cannot adopt two different yardsticks. Shifting of the testing parties in the same breath is not permissible. We, therefore, in this set of circumstances agree with the Ld. AR that since loans or advances in case of the two other concerns also in foreign currency, and all the three persons stand in the same footing, as such, the same treatment has to be given to them equally. With this view of the matter, we direct the AO to re-compute the ALP of the interest at 6% in respect of House of Pearl Fashions Limited, USA AND Multination Textile Group Limited, Maritius also. These grounds of appeal are allowed in part accordingly. Addition made by making disallowance u/s 14A read with Rule 8D - Held that:- In view of this establish principle of law laid down by the Hon’ble Jurisdictional High Court in a number of cases including HT Media (2017 (8) TMI 962 - DELHI HIGH COURT) and Godrej & Boyce Manufacturing Company Limited vs. DCIT (2017 (5) TMI 403 - SUPREME COURT OF INDIA), we find that the enhancement of the disallowance made by the AO by invoking Section 14A read with Rule 8D of the Rules is bad and cannot be sustained. We, therefore, direct the AO to delete the same.
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