2022 (6) TMI 839 - Income Tax

Head Note / Extract:
Deduction u/s.80IB(9) - interest income would be taxable as “business income” OR “income from other sources” - HELD THAT:- This Tribunal in assessee’s own case for A.Y.2009-10 by holding the interest income be treated as “income from business” and not as “income from other sources”. We find that this Tribunal in assessee’s own case for A.Y.2009-10 had held that temporary business funds were deposited by the assessee into the bank account till the date of its requirement and therefore by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Lok Holdings [2008 (1) TMI 365 - BOMBAY HIGH COURT] the said interest income would be taxable as “business income”. Respectfully following the same, the ground No.1 raised by the Revenue is dismissed. Deduction u/s.80IB(9) on profit earned by the assessee from exploration of natural gas - As per AO the provisions of Section 80IB(9) of the Act which restricts the deduction to exploration of mineral oil - AO in his assessment order took a view that “natural gas” does not fall into the category of “mineral oil” and hence restricted deduction u/s.80IB(9) of the Act to the proportionate profit relating to sale of only “crude oil” - CIT-A allowed the deduction - HELD THAT:- In view of the aforesaid decisions of this Tribunal in the case of Reliance Industries Ltd. which is a 90% joint venture partner of assessee and the decision of the Hon’ble Gujarat High Court in the case of Niko Resources Ltd., [2015 (3) TMI 986 - GUJARAT HIGH COURT] which is a sister concern of the assessee, we hold that the ld. CIT(A) had rightly granted relief to the assessee by allowing deduction u/s.80IB(9) of the Act on profit earned by the assessee for exploration of natural gas. Accordingly, the ground No.2 raised by the Revenue is dismissed. TP Adjustment made on account of interest chargeable on outstanding receivables - applying LIBOR rates - HELD THAT:- It is not in dispute that the receivables from AE were outstanding for more than two years. Accordingly, the ld. TPO observed that the same constitutes indirect funding by the assessee to its AE and therefore, the imputation of interest need to be made on the same. Whether the transaction of imputation of interest on outstanding receivables from AE would constitute an international transaction or not, is not in dispute before us. For the purpose of imputation of interest, the ld. TPO proposed the interest rate at 14.45% being the SBI prime lending rate. We hold that adoption of SBI prime lending rate @14.45% is definitely excessive and is not in order. In our considered opinion, applying LIBOR rates plus two basis points would be a reasonable rate of interest which should be adopted for benchmarking the international transaction of interest on outstanding receivables. We direct the ld. TPO / ld. AO to make transfer pricing adjustment in this regard accordingly.