TMI Blog2010 (1) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... ICICI, as arms length price under CUP method. The fact, as painstaking brought on record by the authorities below that this loan from ICICI bank was not used for the purposes of remittance to subsidiaries as interest free loans has no bearing for the purposes of computing ALP of interest free loan, Assessing Officer directed to recompute the ALP in the light of our above directions, matter remanded to Ao. Deduction under section 80HHC - there was loss before taking into account incentives from export activities - Held that:- matter remanded to Assessing Officer for fresh computation in accordance with the provisions of Section 80HHC. as mended by the retrospective amendment. - ITA No. 673/Mum/06, - - - Dated:- 8-1-2010 - Pramod Kumar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans so advanced. In the transfer pricing report submitted by the assessee, the method, on the basis of which arms length price (ALP) was said to be have been computed, was stated to be Comparable Uncontrolled Price (CUP) method, and the arms length price of these interest free borrowings was stated to be NIL. In the course of assessment proceedings, this issue was sent for the examination of the Transfer Pricing Officer (TPO), and the TPO was of the view that the arms length price of these interest free loans was required to be taken at 14% p.a. In this process, the TPO took into account details of borrowings by the assessee from different sources and came to the conclusion that since advances were made out of cash credit account with Cit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ALP of interest free loans @ 4.5% as was taken by him for the later assessment years. 5. Ironically, however, none of these contentions have any bearing on determination of arms length price under the Comparable Uncontrolled Price (CUP) Method which the assessee is said to be following and which has not been disturbed by the authorities below. 6. On a conceptual note, the purpose of making arms length adjustments, in prices at which transactions have been entered into with associated enterprises, is to nullify the impact of interrelationship between the associated enterprises. Unless the method on the basis of which such hypothetical prices are computed is such that costs are to be taken into account, these hypothetical prices hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at "during March 2002, we had been charging spreads of 150 bps to 300 bps over LIBOR in respect of foregin currency loans based on financial position and credit rating of the borrower". As for the LIBOR rate, as per the information provided by assessee, it ranged from 1,85000 (2 weeks) to 3.00250 (1 year). On the given facts, in our considered view, it would be appropriate to accept internal CUP, i.e. the rate at which the assessee has resorted to foreign exchange borrowings from the ICICI, as arms length price under CUP method. The fact, as painstaking brought on record by the authorities below that this loan from ICICI bank was not used for the purposes of remittance to subsidiaries as interest free loans has no bearing for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The only other issue that we need to deal with is assessee's grievance against deduction under section 80HHC being declined on the ground that there was loss before taking into account incentives from export activities. Learned representatives agree that on this issue the matter is to be sent back to the file of the Assessing Officer for fresh computation in accordance with the provisions of Section 80HHC. as mended by the retrospective amendment. Learned counsel for the assessee has filed before us the revised computation of deduction under section 80HHC, as directed by a co ordinate bench of the Tribunal for the assessment year 2001-02. Let matter be examined by the Assessing Officer on the same lines for this year as well. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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