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2020 (10) TMI 243 - AT - Income TaxTP adjustment - Arm’s Length Price [ALP] of export of goods - Whether appellant had considered all the transaction with its associated enterprise? - HELD THAT:- TPO picked up only two transactions where the price charged was less than the average market price and also beyond 5% permissible band width to make the addition ignoring other transactions where the average price charged was more. Considering decision of ESSAR STEEL LTD. [2014 (11) TMI 254 - ITAT MUMBAI] if the transactions are the interlinked transactions then the ALP should be considered of export of goods on aggregate basis. It can be established in many ways that transactions are interlinked, one of the illustrative way is supply of goods billed separately but the purchase order is common and the rates are also predetermined with adjustments on account of material prices. Before us, no such data is available or any other information by which we can say that the transactions of export to associated enterprise are interlinked transactions - merely because they are the export of the same goods over a period to the Associated Enterprises, they do not become interlinked. There has to be a binding element behind all the transactions to make them one and connected. Such data was also not available before the learned Transfer Pricing Officer or learned Dispute Resolution Panel. If this fact is established by the assessee then the issue is squarely covered in favour of the assessee on this point by the decision of the coordinate bench. Direct the AO to compute the ALP considering the transactions of export to associated enterprise on aggregate basis after assessee establishes before him that all these export transactions of the associated enterprise are interlinked. To this extent, this issue is sent back to the file of the learned AO/TPO with a direction to the assessee to substantiate the argument that the transaction of export of goods to associated enterprise are interlinked. Benefit of tolerance range of +/- 5% in the price charged from the AE vis a vis ALP - HELD THAT:- As relying on THE DEVELOPMENT BANK OF SINGAPORE [2013 (8) TMI 175 - ITAT MUMBAI] we direct the assessee to furnish necessary computation and the TPO is directed to examine the same and decide this issue afresh. Credit of TDS denied - AO denied credit of TDS/TCS on the ground that the same pertained to preceding years, i.e. Rs. A.Y. 2007-08 and 2008-09 - HELD THAT:- No error or infirmity in the findings of the Assessing Officer. But, at the same time, the Revenue should not be benefitted unjustly. We, accordingly, direct the Assessing Officer to allow the credit of TDS/TCS as per provisions of law in preceding A.Ys. Adjustment of interest on loan received from AE - Interest is charged on the loan at the rate of 3 moths LIBOR plus 200 basis point - HELD THAT:- As decided in own case [2018 (11) TMI 1250 - ITAT DELHI] relying on CIT vs Cotton Naturals [2015 (3) TMI 1031 - DELHI HIGH COURT]has already held that the transaction cost of hedging cost is borne and paid by the borrower therefore transaction cost is not applicable in case in question the loan had to be repaid in the foreign currency. Even otherwise according to us the markup towards the transaction cost is exorbitant and comparison with the bank is also untenable. No rational in the impugned in further cost and risk premium on the rate directed by the learned Dispute Resolution Panel - direct the TPO to not to charge any risk premium following the decision of the coordinate bench. In view of this, the transaction cost imputed of 300 basis points cannot be sustained. TPO should have considered for both the years the LIBOR +200 basis points in both the financial year financial year for the benchmarking for the interest income of the assessee. Adjustment on account of corporate guarantee - HELD THAT:- As decided in own case TPO has benchmarked the transaction by obtaining the quote from bankers and Hon Bombay High court in case of THE COMMISSIONER OF INCOME TAX, MUMBAI Vs M/s EVEREST KENTO CYLINDERS LTD [2015 (5) TMI 395 - BOMBAY HIGH COURT] Even otherwise the commission charged by the assessee also in conformity with the rates quoted by Indusind bank and ING vasya bank. Further, the reasons given by us with respect to Risk adjustments and margins while deciding the issue of Interest receipt relying on the decision of Bharti Airtel decision [2017 (1) TMI 172 - ITAT DELHI]are equally applicable for this transaction too. Addition u/s 14A r.w.r 8D - disallowance should not exceed exempt income - HELD THAT:- We are of the considered opinion that the disallowance should not exceed exempt income - we draw support from the decision of Joint Investment Pvt Ltd [2015 (3) TMI 155 - DELHI HIGH COURT]. We direct the Assessing Officer to restrict the disallowance to ₹ 2,37,000/-. This ground is partly allowed. Set off of prior period expenses from prior period income - HELD THAT:- If the Assessing Officer was of the strong belief that the prior period expenses cannot be allowed in the year under consideration, then the AO should have realized that he is taxing prior period income earned during the year under consideration. We do not find any reason why the prior period expenses should not be netted off against the prior period income, which in our opinion is most logical way of treating the same. We draw support from the decision of Exxon Mobil Lubricants (P) Ltd. [2010 (9) TMI 36 - DELHI HIGH COURT], wherein observed that expenses pertaining to prior period were allowable in the relevant year in which the same were crystallized. On facts of the case, we direct the Assessing Officer to allow set off of prior period expenses with prior period income. - Decided in favour of assessee.
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