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2015 (7) TMI 974 - AT - Income TaxTransfer pricing adjustment - Applicability of interest rate - Held that:- Assessee employed the CUP method for depicting that this international transaction was at arm’s length price. The applicability of the CUP as the most appropriate method or the selection of comparable uncontrolled transaction has not been disputed by the TPO. - assessee paid interest to Bank of Nova Scotia @ 9% per annum, which has not been disputed by the TPO. He simply picked up the above extracted clause from the Sanction letter indicating that in the event of any default or untimely repayment by the assessee, penal interest will be charged by the bank @ 18.5%. The assessee’s categorical statement before the TPO that there was no default committed by it in making repayment leading to payment of interest at such higher rate to the bank, has remained uncontroverted. It means that the assessee actually paid interest @ 9% during the year and no eventuality of paying interest @ 18.5% due to default or untimely repayment arose during the year. Since the CUP method talks of making a comparison of the international transaction with the actual ‘price charged or paid’ in a comparable uncontrolled transaction, which is 9% in the present case, we cannot accept the view point of the authorities below in substituting the hypothetical price of 18.5%, which would have been paid in the case of an eventuality, that never occured. Actual interest paid by the assessee to its bank @ 9% per annum constitutes a comparable uncontrolled transaction. Since the assessee itself charged interest from its AE @ 9% on the amounts due, the same makes up arm’s length price of the transaction not warranting any transfer pricing adjustment on this score - Decided partly in favour of assessee.
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