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2021 (3) TMI 1397 - AT - Income TaxTP adjustment - arm’s length rate of interest to be charged on the loan advanced to AE - HELD THAT:- It is the case of the assessee that considering the LIBOR/EURIBOR rate of interest and the interest charged by various banks as noted by learned Commissioner (Appeals) in his order, which varied between LIBOR (+) 1.75% to 4%, the interest charged at 3% is at arm’s length. As noted, before Commissioner (Appeals) the assessee has specifically submitted that the LIBOR rate prevailing during the year was 0.53% p.a. The aforesaid factual position has remained uncontroverted before us. In assessee’s own case for assessment years 2012-13 and 2016-17 the interest charged at 3% on the loan granted to the same AE has been accepted by the TPO. Though, these orders passed by the TPO are for subsequent assessment years; however, they have persuasive value while determining the arm’s length rate of interest, as, there is no material change in the factual position. We hold that interest charged at 3% on the loan advanced to EM Germany should be considered to be at arm’s length. Hence, there is no need for any adjustment. Accordingly, the addition made is deleted. Disallowance made u/s 14A r.w.r.8D - As argued before rejecting assessee’s computation of disallowance and invoking rule 8D, the Assessing Officer has not recorded proper satisfaction - HELD THAT:- Legal position is fairly well settled that section 14A(2) of the Act mandates the Assessing Officer to record satisfaction indicating that the disallowance computed by the assessee is incorrect having regard to the books of account maintained by him. This condition has to be satisfied before invoking Rule 8D. In the facts of the present case, though, the assessee in specific terms has provided allocation of various expenditures for earning of exempt income, the Assessing Officer has neither dealt with the assessee’s claim nor has provided any reason as to why the claim of the assessee is not to be accepted in terms of section 14A(2) of the Act. Thus, in our considered opinion, the conditions of section 14A(2) in the present case has not been satisfied. In view of the above, we delete the disallowance. Assessee appeal is allowed.
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