TMI Blog2014 (12) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... n the arm’s length interest rate and accordingly no adjustment on account of arm’s length of interest is warranted - the arm’s length rate of interest would be taken as the interest on deposit in Bank – thus, the interest charged by the assessee at the rate of 10% would be at arm’s length and no adjustment is called for on this account - the interest charged by the assessee at the rate of 10% from its AE is at arm’s length and the additions made is to be set aside – Decided in favour of assessee. Adjustment of interest for delayed realization of sale from AE – Held that:- The TPO has verified the documents produced by the assessee and confirmed the non-charging of interest on delayed export receipts either from AE or non AE - due to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of interest on loan advanced to AE in UK as per the direction of Dispute Resolution Panel-II, Mumbai u/s. 144C(5) of the Income Tax Act, 1961. 2. During the year under consideration, the assessee advanced loan of US$ 33,50,000/- equivalent to INR 16,98,78,500 to its AE namely Carlton Travel Goods Ltd., U.K.. The assessee charged interest at the rate of 10% per annum on the said loan advanced to AE. The assessee adopted CUP as the most appropriate method for bench marking its interest charged to the AE and applied LIBOR of 2.93% as ALP. Thus the assessee claimed that the interest charged to AE is higher than the LIBOR and, therefore, the same is at arm s length. The TPO was of the view that assessee is a tested party and, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of 10% on the advances to the AE is more than the cost of the fund borrowed by the assessee. In support of his contention he has relied upon the following decisions:- (i) Siva Industries and Holdings Ltd. Vs. ACIT (2012) 145 TTJ 530 (ii) Four Soft Ltd. Vs. DCIT in (ITA no. 1495/Hyd/2010 (iii) Naturals (I) Pvt. Ltd. Vs. DCIT (2013) 22 ITR (T) 438 (Delhi-Trib.) (iv) Aurionpro Solutions Ltd. Vs. ADDL. CIT (2013) 27 ITR (T) 276 (v) Autocomp Systems Ltd. V. ACIT (2012) 52 SOT 48 (vi) CES P. Ltd. Vs. DCIT (2014) 41 taxmann.com 409 (vii) Hinduja Global Solutions Ltd. Vs. Addl CIT (2013) 145 ITD 361 (viii) Apollo Tyres Ltd. in ITA no. 616/Coch/2011. It is submitted that the Tribunal has consistently taken a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lending rate for bench marking the arm s length interest, whereas the assessee has advanced the loan to its AE and the comparable interest would be the interest income on placing the amount in bank deposit. Therefore, even from that angle, the interest charged by the assessee at the rate of 10% would be at arm s length and no adjustment is called for on this account. Thus in view of the above discussion as well as following the earlier decisions of this Tribunal, we hold that the interest charged by the assessee at the rate of 10% from its AE, in the facts and circumstances of the case is at arm s length and accordingly, the addition made by the Assessing Officer on this account is deleted. 7. The revenue in ITA no. 881/Mum/2014 has rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made the adjustment of ₹ 5,50,16,111/-. 9. Before the DRP, the assessee submitted that it does not charge any interest on delayed payment on account of sales affected either in India or on export sales. It is the policy of the company and even in the normal business practices, interest is not charged on delayed payment from customers. Thus it was contended that under this consistent policy, no interest is charged on the export outstanding from the AE even when the amounts are due for a longer period. The assessee further contended that allowing the credit period on export sale is not international transaction per se, but is a result of the international transaction and hence cannot be subjected to transfer pricing regulations. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Del/2011. 10. In the case of CIT Vs. Indo American Jewellery Ltd. (supra), the Hon'ble High Court has held in para 5 as under:- On appeal filed by the revenue, the ITAT upheld the order of CIT(A). While, upholding the order of CIT(A), the ITAT held that interest income is associated only with the lending or borrowing of money and not in case of sale. We express no opinion on the above reasoning of ITAT and keep the reasoning open for debate in an appropriate case. However, in the facts of the present case, the specific finding of ITAT is that there is complete uniformity in the act of the assessee in not chargin the interest from both the Associated Enterprises and Non Associated Enterprises debtors and the delay in realization ..... X X X X Extracts X X X X X X X X Extracts X X X X
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