TMI Blog2014 (11) TMI 254X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of payment of interest does not survive as the issue of utilization of the funds was already examined by the CBDT at the time of granting exemption - once the interest income is not taxable in the hands of recipient and was exempted by the Govt. of India, question of TDS on the interest paid by assessee does not arise – Decided against Revenue. Addition in respect of sale of AE – Held that:- Assessee has already considered all the 8 transactions with its AE in totality by aggregating the same whereas the TPO picked up two transactions where the price charge was less than the average market price - Rule 10(A)(a) defines a transaction to include a number of closely linked transaction – in case they are closely linked then they can be aggregated for determining the ALP - assessee has exported hot rolled coils to its AE between 30-6-2005 to 10-3-2006, the price has been determined from the website whose data is not subject to challenge - The product remains the same and the source from which the average price has been taken remains the same - if the average price is adopted for all the 8 transactions, then the average comes exactly to 420.71 which is what the price char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate dated 12.03.1997. The AO observed that assessee did not fulfill the purpose and conditions laid down under Sec. 10(15)(iv)(c), that the loan amount has been utilised for the purchases outside India of (1) raw material (2) components and (3) capital plant and machinery. Since the amount has been received in Rupees which goes to show that foreign loan was converted into Rupees. Accordingly It was disallowed in the assessment for earlier years from A.Y.2000-01 onwards. 5. By the impugned order, CIT(A) deleted the disallowance made in respect of interest payment on external commercial borrowings to the tune of ₹ 14.37 crores. The CIT(A) also deleted the addition of ₹ 5.82 crores made on account of transaction with associate enterprises. Against the above order of CIT(A), the Revenue is in appeal before us, wherein following grounds have been taken :- 1. Whether on the facts and in the circumstances of the case and in Law, was the Ld. CIT(A) was right in deleting the disallowance made by the AO in respect of Interest payment on External Commercial Borrowings to the tune of ₹ 14.37 Crores, despite the fact that the AO in it's Assessment Order had clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gapore. Assessee had incurred interest expenditure of ₹ 11,94,87,216 in the year under consideration on this loan. AO has disallowed the same under section 40(a)(ia) stating that no TDS has been made from this interest. Assessee has submitted that the interest on the above loan was exempted under section 10(15)(iv)(c) and thus no TDS was required to be made on this interest. The learned CIT (A) allowed assessee?s contention on the reason that the same issue was decided by his predecessor in favour of assessee. 11. The learned CIT (DR) relied on the orders of AO. Ld Counsel has submitted that approval under section 10(15)(iv)(c) of the Act was granted by the CBDT vide letter dated 12.03.1997. Assessee has not deducted TDS while making the payment since it had obtained approval under section 10(15)(iv)(c) of the Act. The approval granted by the CBDT has not been withdrawn. Approval once granted continues to be valid unless specifically withdrawn. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Chotatingrai Tea and Others (258 ITR 529). 12. We have considered the issue. There is no dispute with reference to assessee obtaining ECB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 In computing the total income of previous year, any income falling within any of the following clauses should not be included. 15(iv) interest payable . (c) by an industrial undertaking in India on any monies borrowed or debt incurred by it in a foreign country in respect of purchase outside India of Raw materials or components or capital plant and machinery, to the extent to which interest does exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of loan or debt and its repayment. Explanation - For the purpose of the item, purchase of capital plant and machinery include the purchase of such capital plant and machinery under the purchase agreement or lease agreement to purchase such plant and machinery From the aforesaid section, it is clear that, to get the exemption following conditions should be satisfied: i) Interest should be paid by an industrial undertaking in India ii) Money should be borrowed or debt should be incurred in a foreign country iii) It is borrowed in respect of purchase of raw materials, components or capital plant and machinery iv) Interest rate should be exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words in respect of have not been defined, I checked up Webster's unabridged dictionary and find the following meanings : (i) insofar as concerns (ii) as regards Substantively the words in respect of imply that if an amount X has been borrowed for payment to A, the amount X should reach A. The words in respect of do not require that the notes bearing number, say A-l to A-100, alone should go to A; as long as A gets the amount X, the requirement suggested by the words in respect of is satisfied. The Assessing Officer's contention is that the loan should not have been converted into rupees by bringing it into India and the appellant should not have spent it for various purposes. From the perusal of details and sample vouchers submitted by the appellant, it is seen that during the period March 1997 to March 1998 itself, the appellant spent over ₹ 400 crore in respect of purchases outside India of raw materials/components/plant and machinery. Since the appellant has paid out more than the borrowed amount in respect of the purchase of raw materials/components/ capital equipment after the borrowing, within a period of about a year, I am of the view that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of TDS on the interest paid by assessee does not arise. Therefore, the ground has no merit and accordingly rejected. As the facts and circumstances of the case during the year under consideration are same and the same loan is being continued during the year under consideration, respectfully following the order of the Tribunal in assessee s own case, we dismiss the ground raised by the Revenue. 8. With regard to addition of ₹ 5.82 crores in respect of sale to AE, we find that during the year under consideration, the assessee company had sold 108614.73 Metric Ton of Hot Rolled Coils ( HRC ) to its Associate Enterprise, PTEssar Indonesia, for an aggregate of ₹ 191,42,89,946. For benchmarking the international transactions the assessee company had used the Comparable Uncontrolled Price ( CUP ) method. For this purpose assessee has compared the price of HRC prevailing in the international market. The market rates have been obtained from the website www.stellbb.com. It provides the data regarding minimum and maximum price in the market on a particular day. However, transfer pricing adjustment was done in the case of following two transactions: Sales on 25/08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs ACIT (2010 TII 57-ITAT-MUM-TP) had occasion to examine a case with identical facts. In the above case, the assessee sold valves to its AE's, which constitutes 1 percent of the total sales. The appellant had adopted CUP methodology to justify its Arm's Length criterion. TPO made adjustment by comparing the price of valves sold at lower prices and ignored the valves sold at higher prices. Thus while making the adjustments TPO disregarded the fact that the appellant has also sold valves to its AE at prices higher as compared to the average charged to the third parties. In the above ruling, it was emphasized that, it would have been fair and reasonable on the part of the TPO to consider the aggregate of the sales made to the AE and then compare it with third parties as against the individual items considered by him. TPO has been selective in his approach and made the order arbitrary. It is not fair for a quasi-judicial authority to pick up those data, which are convenient and suitable to it and ignore the corresponding data which goes against it: Ultimately an order to stand has to have a mark of fairness, reasonableness and judiciousness. Considering the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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