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2023 (7) TMI 899 - AT - Income TaxTP upward adjustment on account of interest free loan to AE - Assessee has provided interest-free advances to its associated enterprises - HELD THAT:- Question whether any adjustment is required under TP provision on account of such interest erosion advances is in negative because the assessee got such huge business from its associated enterprises, which would not have been possible until the assessee had not incorporated a company in UAE and DRC. Transaction for advancing the interest-free loans to the associated enterprises has to be seen in the context of the benefit received by it from such associated enterprises. Transaction of interest free loans/ advances viz a viz the benefit received by the assessee are intrinsic ably linked which has to be evaluated after aggregating both the transactions. Transaction of interest free advances cannot be viewed without considering the benefit derived by the assessee from the associated enterprises. On analyzing the notional interest added by the TPO under the transfer pricing adjustment with the benefit derived by the assessee, the interest cost appears to be negligible. The amount of interest cost as compared amount of gross import of material and export generated by the assessee is far more than the interest expenses after converting in India rupees. No adjustment under the transfer pricing provisions is required to be made with respect to the interest free loans and advances by the assessee to its associated enterprises in the given facts and circumstances. Hence, the ground of appeal of the assessee is allowed.
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