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2020 (2) TMI 257 - AT - Income TaxTP Adjustment - receipt of interest on loans and advance granted to AT&S India - HELD THAT:- In the instant case, the payment of interest made by AT&S India to AT&S Austria on the one hand and the receipt of interest by AT&S Austria from AT&S India on the other hand have taken place under the same agreement i.e. Loan Agreement and Distribution Agreement. In this scenario, if the arm’s length interest rate is determined by the DRP at LIBOR plus 450 basis points in the hands of AT&S Austria, then the international transactions under consideration would never be at arm’s length in the hands of AT&S India. Similarly, if the international transactions under consideration are accepted by the TPO to be at arm’s length in the hands of AT&S India, the same would never be at arm’s length in the hands of AT&S Austria. Thus, the international transactions under consideration would never be at arm’s length both in the hands of AT&S Austria and AT&S India simultaneously. The Legislature has never shown an intention to treat the same international transaction in two different ways in the hands of two associated enterprises such that there would be arm’s length price adjustment at least in the hands of one of the associated enterprises. Hence, the approach adopted by the DRP/TPO is not acceptable. We note that the assessee granted loan and advance to AT&S India in foreign currency (Euro) and AT&S India repaid principal / paid interest on loan and advance in foreign currency (Euro). Hence, in the instant case, Euro-LIBOR would be the appropriate benchmark that conforms to the arm’s length standard under the CUP Method. The assessee applied the Euro-LIBOR rates prevailing during the relevant period for computation of interest payable by AT&S India to the assessee and further added credit spread of 350 basis points (net of tax) for loan and 100 basis points for advance. Hence, the interest received by the assessee from AT&S India is at arm’s length under the CUP Method. In the assessee`s case, the DRP did not mention in his order the comparability analysis prescribed under clause (a) of sub-rule (1) of rule 10B of the Income-tax Rules, 1962. The DRP did not bring on record any comparable uncontrolled transaction under the CUP Method for substantiating that the interest rate of LIBOR plus 450 basis points conformed to the arm’s length standard under the CUP Method - we delete the upward adjustment to the income of the assessee. Arm’s length price adjustment made by the AO in respect of recovery of information technology (‘IT’) service cost from AT&S India - payment made by AT&S India to the assessee - HELD THAT:- Assessee entered into ‘IT Cost Pooling Agreement’ with its group companies including AT&S India under which all the parties to the aforesaid agreement combined together for financing the object of arranging IT products and related services for all the parties to the aforesaid agreement. No third party (i.e. third party means entity not being party to the ‘IT Cost Pooling Agreement’) was given access to the IT products and related services arranged by the assessee under the ‘IT Cost Pooling Agreement’. The costs incurred by the assessee for arranging IT products and related services were allocated to the parties to the aforesaid agreement on actual basis (i.e. without adding any profit element to the cost) using appropriate allocation keys mentioned in the aforesaid agreement. Thus, there was complete identity between the contributors to the IT cost pool and participators in the benefit under the aforesaid agreement i.e. both parties having been AT&S group companies. The fund contributed by the group companies was not spent for any purpose which was not within the scope of the aforesaid agreement. The payment made by AT&S India to the assessee is in the nature of reimbursement of cost, therefore we delete the addition ALP adjustment in respect of receipt of corporate guarantee fee from AT&S India - HELD THAT:- As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in the case of M/s Emami Limited [2019 (5) TMI 1371 - ITAT KOLKATA] , Assessment Year: 2013-14 and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the coordinate Bench. Respectfully following the above binding precedent, we delete the addition - Decided in favour of assessee
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