TMI Blog2016 (11) TMI 1031X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity and not an activity to capitalize the opportunity cost for investing in new territories. We hold that for the tax authorities to consider re-characterizing the transaction the tax authorities must necessarily demonstrate that the transaction as claimed and documented is a sham or on the basis of facts and evidences is at a substantial variance with the stated form. In the absence of any such exercise the tax authorities are entering at their peril in the realm of arbitrariness. In the facts of the present case there is not even a whisper of a suggestion that it was a bogus transaction, as admittedly shares have been allotted. There is nothing in the provisions of the Act which empowers the tax authorities to insist that the interest free loan towards its AE for capitalization the opportunity of cost of entering in new territories must necessarily by modified and re-characterized into a loan simplicitor and considered to be an activity for earning interest. The tax authorities must bring on record facts and evidences impacting the veracity of the claim of the assessee and demonstrate the hollowness of the assessee’s claim. No such exercise has been done to counter the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Panel and consequentially Ld. Assessing Officer has erred in holding that only 20% of the advance is converted into equity and hence charging interest on the balance amount. 4. Without prejudice to the aforementioned ground, the Assessing Officer has erred in ignoring the alternative plea of the assessee that the rate of interest ought to have been at the LIBOR rate prevailing at the time of advancing the money. 5. That the Ld. Transfer Pricing Officer and Dispute Resolution Panel and consequentially Ld Assessing Officer grossly erred in law in not appreciating that the interest rates determined by CRISIL are determined for a different purpose and cannot be taken as comparable to international transactions of quasi equity to a 100% subsidiary. 6. That the determination of Arm's Length Price has not been done as per provisions of section 92C read with rule 10C of the Income Tax Act/Rule and the laws wants the class of AE to be one of the important criteria to determine the same. 7. That the Ld. TPO and DRP and consequentially Ld Assessing Officer failed to appreciate that the nature of transaction cannot reclassified from quasi-capital to loans as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ategy used for attaining its aims it was submitted that the company not only develops and acquires but also finances and actively manages a rapidly growing hospitality portfolio. Referring to the record and the accepted position it was submitted that approximately 6,000 rooms were under current development in most major cities and tourist destinations in India and the assessee at the relevant point of time was endeavoring to create a portfolio of 25,000 rooms in the next 5 years. This stated background of the assessee s functioning aims it was may kindly be given due consideration while deciding the issues as it is these admitted aims/visions which have been the guidifying factors for each decision and action of the assessee. 3.1. Referring to the synopsis filed, it was submitted that the first tranche of money was advanced towards this aim in August 2007 and thereafter continuously till February 2008, the funds have been advanced towards the above stated aim. It was submitted that since various steps were required to be taken and fulfilled before the amounts initially shown as loan could be converted into Equity which was the ultimately intention. The waiting period it was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment orders placed at paper book pages 85-93 and 94-100 respectively. Accordingly it was his submission that there being no change in facts and circumstances the factual position accepted by the Revenue deserves to be followed and no addition by way of adjustment was possible. 4. Arguments on Ground No.2 were advanced stating that in the eventuality the assessee does not succeed in Ground Nos. 1 and 3 by allowing Ground No.2 LIBOR rate may be applied instead of the rate applied by the TPO as the loan was admittedly given in US dollars. The TPO s search by resorting to obtain information by resorting to section 133(6) from Crisil for identifying the correct rate to be applied, it was submitted may be rejected as the application of Crisil BB rate on facts was not justified. The applicability of Libor rate it was submitted has judicial acceptance as would be evident from the decision of the Hon ble Delhi High Court in the case of CIT vs. Cotton Naturals P. Ltd.(2015) 55 taxmann.com 523/231 Taxman 401 (Delhi) and decision of the ITAT, Delhi in the case of Bharti Airtel Ltd. (specific page 67 of the paper book para 61 of the said order). Referring to the facts it was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies are operating. Thus what is the interest that would have been earned if such loans were given to unrelated parties in similar situation as that of subsidiaries is the measure which has to be applied. Since the tested party it was submitted is the tax payer in the circumstances the prevalent interest that could have been earned by the tax payer by advancing a loan to an unrelated party in India is to be considered. This has to be factored in with the situation of the tax payer's AE weak financial health as loan at what rate and condition would have been advanced. Thus this would be the relevant factor to be considered. In the circumstances, the assessee it was submitted has correctly chosen to argue on the rate of interest. The main issue it was submitted which needs to be considered is to decide the interest rate which the tax payer would have earned on advancing loan of above amounts to unrelated third parties with similar financial strength as that of the AE. It was submitted that it is also to be considered that there is no security provided by the AE's / subsidiaries against the loans advanced. 5.2. In these circumstances, it was submitted the TPO obtained necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72,580,000 7.1. The advancing of interest free loan of USD 72580000 to its AE, DLF Global Hospitality Ltd., Cyprus (DHHL/DLF) Cyprus has been reflected as an interest free loan of ₹ 2,91,99,60,465. The relevant extract from the TPO s order addressing the specific date and amounts on which the loans were given is reproduced hereunder:- It is seen from the Form No.3CEB and Transfer Pricing Study that the assessee company has advanced loans to its AE in Cyprus, DLF Global Hospitality Limited, as per the table below:- Date of initial Loan to DGHL Loan (US $) DHHL-DGHL Amount in INR 30.07.2007 51,000,000 2,069,582,692 18.09.2007 500,000 20,306,910 20.11.2007 16,000,000 629,918,780 11.12.2007 5,080,000 200,152,084 2,919,960,466 7.2. The assessee in support of its claim has stated before the TPO that the loan was advanced with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been earned if such loans were given to unrelated parties in similar situation as that of subsidiaries. Since the tested party is the tax payer, the prevalent interest that could have been earned by the tax payer by advancing a loan to an unrelated party in India, with the same weak financial health as that of the tax payer 's AE, will be considered. 2. As mentioned above, under the CUP method, the interest that is charged between unrelated parties under similar circumstances would be the arm's length interest. The main issue is to decide the interest rate at which the tax payer would have earned, in advancing loan of above amounts to unrelated third parties with similar financial strength as that of the AE. It is also to be mentioned that there is no security provided by the AE's /subsidiaries against the loans advanced. 7.4. The following extract brings out the reasoning of the TPO justifying the application of the rate which has been upheld by the DRP and heavily relied upon by the Ld.CIT. DR:- 3. Financial institutions generally weigh four elements in determining whether or not to issue loans and, if so, at what conditions and fees: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y marginally in safety from AAA ' issues. A Adequate Safety Instruments rated 'A' are judged to offer an adequate degree of safety, with regard to timely payment of financial obligations. However, changes in circumstances can adversely affect such issues more than those in the higher rating categories. BBB (Triple B) Moderate Safety Instruments rated 'BBB' are judged to offer moderate safety, with regard to timely payment of financial obligations for the present; however, changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal than for instruments in higher rating categories. BB (Double B) Inadequate Safe Instruments rated 'BB' are judged to carry inadequate safety, with regard to timely payment of financial obligations; they are less likely to default in the immediate future than instruments in lower rating categories, but an adverse change in circumstances could lead to inadequate capacity to make payment on financial obligations. B High Risk Instruments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n:- 5. Reply of the Assessee: The assessee has stated that this amount was in the form quasiequity since it was the intention of the assessee was to convert it into equity capital from the very beginning. It also states that to maintain flexibility, in case the funds were not used for the intended activity within the proposed period, it was initially granted as debt. It states that DHHL, being the parent company undertakes stewardship activities through the provision of funds and is not required to be compensated. It is stated that being a new entity, DGHL could not have accessed funds from any other source. This quasi equity was converted into equity and this became the basis to borrow from third party banks. The assessee has stressed on the commercial expediency of the transaction. The assessee has objected to the use of S.133(6) to gather information stating that it might not be authentic, it is not available in the public domain and it is like using secret comparables. (emphasis provided) 7.6. The assessee s objection that the TPO cannot question the commercial expediency of its activities was not accepted by the TPO. The TPO was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est was to be charged to the remaining amount. Information u/s 133(6) was obtained over ruling the objections of the assessee who had pleaded that no such powers were vested with the TPO. We find that the TPO s conclusion that section 92C(3) authorized him to use the information in his possession and the power to gather material under the said provision was similar to the power vested with the AO in the proceedings under section 143(3) was correct as the wording is almost the same in both the sections i.e. 92CA(3) and 143(3). Further we find that the view that subsection (7) of section 92CA empowers the TPO to utilize the same under section 133 (6)/131 and any falsity in the information given under the provisions of the Income Tax Act, 1961 is liable for penal action. Accordingly, we find that the conclusion drawn by the TPO that he had the power to seek information u/s 133(6) in principle is the correct view in law and the conclusion so drawn by the TPO is upheld by us. Whether the same was necessitated or relevant on facts before us is an area which, if need be, shall arise later. 7.8. To revert back to the proceedings before the TPO the record shows that he concluded the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,373 33,599,012 Total 286,155,618 7.9. On a perusal of the objections posed by the assessee before the DRP, it is seen that findings of the TPO were assailed on various ground including the ground that the TPO has treated the loan as loan simplicitor and as a pure debt instrument and not as an instrument of hybrid funding having traits of equity. The alleged modification misconstruing of facts by the TPO was assailed to be incorrect and misleading. Extracts from these Objection numbering 5.2.2 and 5.2.3 which has further being elaborated in Objection 5.2.9 before the DRP are extracted hereunder:- 5.2.9. Factual and legal arguments against the addition proposed by the Learned TPO A category of debt taken on by a company that has some traits of equity, such as having flexible repayment options or being unsecured. Examples of quasi-equity include mezzanine debt and subordinated debt. The definition/meaning of subordinated debt is provided as under: Debt that is either unsecured or has a lower priority than that of another debt claim on the same asset or property, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult that the loan may be treated as a subscription of capital. From the above, it can be clearly inferred that the funds provided by DHHL to DLF Cyprus can be considered to be quasi equity/capital requiring no interest payment in return. While there is no guidance available in the Indian Transfer Pricing Regulations, guidance issued by the ATO in Taxation Ruling TR 92/11 may also be referred to in this regard. It clearly states that contributions made or amounts extended by one company to the other may be considered as equity. The relevant extracts from the stated ruling is provided below: 60. In the context of applying Australia's transfer pricing rules, the principal factors that will be taken into account in determining whether a particular loan agreement should be treated as equivalent to a contribution to equity are detailed below..... 7.10. The reproduction of the following extract of Objection No.5.3.9 further brings out the fact that the tax payer justified its action of advancing of loan as a shareholders activity guided by commercial expediency etc.:- 5.3.9. Factual and legal arguments against the addition proposed by the Learned TPO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary and expedient given the facts of the instant case. (emphasis provided) 7.11. In the above facts, submissions and arguments advanced on behalf of the assessee, we find that the consistent claim of the assessee has been that it had aims and goals focused towards building its portfolio in premium segment hotels, resorts, serviced apartments, family recreational clubs in major cities and tourist destination. The decisions so taken had been guided by a vision to make its mark globally in countries like Sri Lanka, Thailand, Moracco, Bhutan, France, USA, Indonesia etc. We find that this is an accepted position as brought out from the following extract from the TPO s order itself which forms a part of the final assessment order also :- 4.2. DHHL was set up on 31 August 2006 as an integrated hospitality development and ownership company focused on premium segment hotels, resorts, serviced apartments, and family recreational clubs- DHHL has a vision to be. India's leading hospitality development and asset Ownership Company, and amongst the largest such companies globally. The company has been established as the hospitality arm of DLF Limited, which is its hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,069,582,691 Sep-07 2,069,582,691 20,306,910 2,089,889,602 Oct-07 2,089,889,602 2,069,582,692 20,306,910 Nov-07 20,306,910 6,29,918,780 650,225,690 Dec-07 650,225,690 200,152,084 850,377,774 Jan-08 850,377,774 850,377,774 Feb-08 850,377,774 850,377,774 Nil Mar-08 Nil Nil 7.14. Though we find that the claim that these advances were converted into equity is not disputed by the Revenue, however, for the sake of completeness it is worth referring that this claim has been supported by following documents placed before the TPO/AO; the DRP and now bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements within three months is an evidence on record.. 7.16.1. In the facts as they stand we are now called upon to decide whether in the peculiar facts and circumstances of the case it is an International Transaction or not. The Revenue claims that the fact of showing the interest free loan as an International Transaction to its subsidiary AE in Form 3CEB ipse dixit as considered in Perot Systems TSI vs DCIT [2010] 130 TTJ 685 (Del.) and also VVF Ltd. attracts the provisions of Chapter X of the Income Tax Act, 1961. The consistent objections posed by the tax payer though have been acknowledged by way of reproduction in the orders have not been considered necessary to address whether adjustment under Chapter X is warranted. The specious and facile reasoning that international transaction is acknowledged in Form 3CEB by the assessee itself cannot form the basis of the conclusion. At best it can form the starting point of the enquiry. In the light of the evidences on record and considering the arguments, we are inclined to hold that mere disclosure of the interest free loan as an international transaction by the tax payer in Form 3CEB would neither act as an estoppel nor fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll then as an interest free loan, if it has to be disbelieved, has to be shown as sham or bogus transaction. The facts are not so. In the face of the above consistent claim demonstrated by the assessee by way of facts and supporting evidences which stand unassailed by the Revenue on record, we therefore find no justification either in fact or law to uphold the Revenue s stand that the tax payer must necessarily be bound by the disclosure made in Form No.3CEB Report. There is nothing on record to support the conclusion that the interest free loan must necessarily be deemed to be an interest earning activity and not an activity to capitalize the opportunity cost for investing in new territories. We hold that for the tax authorities to consider re-characterizing the transaction the tax authorities must necessarily demonstrate that the transaction as claimed and documented is a sham or on the basis of facts and evidences is at a substantial variance with the stated form. In the absence of any such exercise the tax authorities are entering at their peril in the realm of arbitrariness. In the facts of the present case there is not even a whisper of a suggestion that it was a bogus transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the decisions rendered in Perot Systems TSI vs DCIT [2010] 130 TTJ 685 (Del.); Micro Inks Ltd vs ACIT [2013] 157 TTJ 289 (Ahd.); Four Soft Pvt. Ltd. vs DCIT [2014] 149 ITD 732 (Hyd); Prithvi Information Solutions Pvt. Ltd. vs ACIT [2014] 34 ITR (Tri) 429 (Hyd.) and thereafter came to the conclusion that none of these decisions had thrown any light on what constitutes quasi capital in the context of transfer pricing and its relevance in ascertainment of the arms length sales price of a transaction in the said context. The Coordinate Bench has quoted the decision of the Hon ble Delhi High Court in the case of Chryscapital Investment Advisors India Ltd Vs ACIT [(2015) 56 taxmann.com 417 (Delhi)] wherein their Lordships have begun by quoting the thought provoking words of Justice Felix Frankfurter to the effect that A phrase begins life as a literary expression; its felicity leads to its lazy repetition; and repetition soon establishes it as a legal formula, undiscriminatingly used to express different and sometimes contradictory ideas . The reference so made to the words of Justice Frankfurter was in the context of the concept of super profits . The Co-ordinate Bench observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the activity of interest free advances ultimately to be converted into equity by a holding company to a subsidiary company does not give rise to an international transaction. 7.18. Considering the said decision, we find that the Co-ordinate Bench was called upon to decide whether Chapter X was attracted in facts where the assessee had advanced interest free loans to its AE for the stated purpose of share application. These material facts and issue would be evident from the very wordings of Ground No.15 and 15.1 raised by the assessee before the Co-ordinate Bench. These grounds when read alongwith other related grounds agitated before the Co-ordinate Bench are being reproduced so as to bring out the gamut of issues agitated and considered:- 43. In ground no. 15, the assessee has raised the following grievance: 15. That the assessing officer/TPO erred on facts and in law in making addition of ₹ 19,15,45,943 on account of notional interest calculated @ 17.26% p.a. on the amount of share application money advanced by the appellant to its AEs. 15.1. That the assessing officer/TPO erred on facts and in law in not appreciating that the transaction of advancem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such information was not available in the public domain and therefore, could not have been relied upon for the purpose of determining the arm's length price. 15.5. Without prejudice, that the assessing officer/TPO erred in computing the amount of interest at ₹ 19,15,45,943, by applying rate of interest of 17.26% p.a. for the whole year on the consolidated amount of share application money, without considering the monthly balance of share application money. 15.6 That the assessing officer/TPO erred on facts and in law by disregarding established judicial pronouncements in India in making the Transfer Pricing adjustment. 7.18.1. The facts and the legal precedent with which the Coordinate Bench was seized of are set out in Paras 44 to 45 of the said order and are reproduced hereunder for the purposes of bringing out the similarity on the material facts:- 44. So far as this grievance of the assessee is concerned, the relevant material facts, to the extent necessary for our adjudication, are as follows. It is not in dispute that during the relevant previous year the assessee has made following payments towards share application money in its foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I 3 ITAT TEL TP). The TPO then proceeded to determine ALP of the deemed interest free loans to the AE, but, for the reasons we will set out in a short while, it is not really necessary to deal with facts relating to ALP determination part. When assessee raised the objection before the DRP on this issue, it was rejected by observing that, we agree with the TPO that capital locked up for want of transfer of shares for reasonably long period would partake the nature of loan . It was in this backdrop that payments for share application money were treated as interest free loans given to the AEs and ALP adjustment was made for interest thereon. Aggrieved, assessee is in appeal before us. (emphasis provided) 7.18.2. Considering the arguments on these facts and the legal precedent the Coordinate Bench came to the following conclusion:- 46. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case in the light of the applicable legal position. 47. We find that in the present case the TPO has not disputed that the impugned transactions were in the nature of payments for share application money, and thus, of capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd anything to show that an unrelated share applicant was to be paid any interest for the period between making the share application payment and allotment of shares, the very foundation of impugned ALP adjustment is devoid of legally sustainable merits. 48. Let us also deal with two judicial precedents which have been heavily relied upon by the TPO, as also by the learned Departmental Representative, on which their case rests. None of these decisions, however, deal with the core issue before us i.e. whether a capital contribution can be deemed to be partly an interest free loan, for the period till the shares were actually allotted, and partly as capital contribution, after the subscribed shares were issued by the subsidiary in which capital contribution was made. In the case of Perot Systems TSI India Ltd Vs. DCIT (supra), a coordinate bench of this Tribunal had an occasion to deal with the arm s length price adjustment with regard to interest free advances to the subsidiaries. That was a case in which the assessee, an Indian company, advanced interest-free loans to its 100% foreign subsidiaries. The subsidiaries used those funds to make investments in other step- down subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue authorities to recharacterize the transaction unless it is found to be a sham or bogus transaction. While there are no specific powers vested in the TPO to recharacterize the transaction, even under the judge made law, such rechracterization can be done by the revenue authorities when the transactions are found to be substantially at variance with the stated form. In the present case, there cannot even a suggestion to hold that this is a bogus transaction because admittedly the subscribed shares capital has indeed been allotted to the assessee. The transaction is thus accepted to be genuine in effect. 50. In view of these discussions, as also bearing in mind entirety of the case, we are of the considered view that the authorities below were in error in treating the payment of share application money, as partly in the nature of interest free loans to the AEs, and, accordingly, ALP adjustment based on that hypothesis was indeed devoid of legally sustainable merits. We delete the impugned adjustment of ₹ 19,15,45,943. The assessee gets the relief accordingly. As we have decided this ground of appeal on the fundamental issue that the payment of share application money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n bond market and interest rate were held to be wholly irrelevant. The TPO s reasoning that the tested party being the assessee i.e. the lender, the prevalent interest that could be earned by the taxpayer by advancing loan to an unrelated party in India was also considered and held to be inappropriate in view of the fact that since the interest rate on foreign currency loans necessarily being qualitatively different, thus it was held that even if the interest that the assessee would have earned was to be considered then such interest would be the interest that the assessee would have earned on foreign currency loans and not rupee denominated loans. In the facts of the present case the assessee has argued without prejudice to the main issue that if at all interest is to charged then judicial precedent sets out that it has to be the LIBOR rate + 2.5% interest as the rate charged by an independent Bank in the facts of the present case as the assessee s own CUP being the best CUP on record cannot be ignored. As addressed earlier, we are not called upon to decide the issue in the facts of the present case. 7.19. Reverting back to the main issue, we note that on behalf of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ument entered for exploiting the opportunity cost of investment as opposed to exploiting the activity of advancing funds for earning interest. As opposed to that we find that in the facts of the present case, the tax payer has made its case easily understandable and simpler by resorting to explain its activity of advancing interest free loan to its AE by the use of the expression quasi equity and mezzanine financing which terms are well understood in financial circles. For the sake of completeness, reference may be made to the definition as found available on Investopedia http://www.investopedia.com/term which defines quasi equity as a category of debt taken on by a company that has some traits of equity, such as having flexible repayment options or being unsecured Examples of quasi-equity include mezzanine debt and subordinated debt . It further defines Mezzanine financing as a hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities are expected to address contradictions in facts pleaded and wherever evidences are found to be not relevant or reliable then they must be rebutted/disproved by evidences. No authority need be cited to hold that the explanation of the assessee is to be accepted or rejected by the tax authorities by addressing the facts and not avoiding to address the same. The tax authorities are not expected to reproduce the explanation as a mere meaningless rhetoric and arrive at a conclusion without addressing and meeting the explanation and evidences relied upon by the assessee. If the tax payer claims it is an interest free loan as a share holding activity, to be utilized by the AE for acquiring and increasing its portfolio and on utilization and fulfilling the internal and external requirements by way of permissions and procedures of the regulatory authority etc. it is to be converted into equity and that too at a premium then it is the correctness of this claim which is to be specifically addressed and decided. Merely because it is shown as an international transaction itself will not decide the claim. As observed earlier this principle stands settled by the Bombay High Court where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicated together as these are interrelated. The TPO has justified his modification of taxpayers economic analysis (page 9 onwards) and issued a detailed showcause notice dated 1-12-2014. Replies filed by the Taxpayer have been examined and the reasons due to which the TP study had to be modified under rule 92C(3)(c) rws 92CA(3) are comprehensively discussed. While share application money was advanced on 16-11-2010, shares were allotted on 15-05-2011. Even in AY 2008-09 the DRP had affirmed order of TPO that advancement of share application money to AE was an interest free loan. The share application money advanced to DLF Global Hospitality Ltd Cyprus treated as a deemed loan is approved by DRP, however in view of decision in the case of Cotton Naturals(I) P Ltd 2015-TII-09-HC-DEL-TP. The rate applicable as per the Hon'ble High Court's prescription would be based on the interest rate applicable to the currency in which the loan is repayable i.e since this is a foreign currency loan, in such cases DRP typically directs the TPO to benchmark case using LIBOR plus after marking it up for transaction costs, risk and credit rating but not below Libor plus 400 points. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ministration. Thus, we find that this plank of the argument probably has consciously not been rebutted by the Revenue. We accordingly find no merit in the case of the Revenue. 7.22. Thus on a consideration of the above gamut of facts, circumstances, arguments, judicial precedent, we find that Ground No.1, 3 and 7 of the assessee are allowed. In the absence of any rebuttal on material facts and law, judicial precedent cited and considered, we find that no case has been made out by the Revenue to justify dismissal of the aforesaid grounds raised by the assessee. 7.23. We find that in view of the conclusion arrived at in Ground No.1, 3 7 we were not called upon to decide Ground No.2 of the assessee. However, since arguments of both the sides have been brought out and also while considering the facts in Bharti Airtel Ltd. for deciding the issues in Ground No.1, 3 7 the facts qua Ground No.2 being interlinked have been considered, we find ourselves in agreement with the view taken by the Co-ordinate Bench and therefore, Ground No.2 stands allowed. Ground No.4, 5 6 being arguments in support of Ground No.1 3 do not need any specific adjudication. 8. The next issue which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed management decisions involving not only inputs from various source but also acumen of senior management functionaries. Relying upon the impugned order it was submitted that cost is inbuilt into even these so called passive Investment. It was his argument that necessarily there must be incidental expenditures of collection, telephone, follow up etc. Since in the present case, out of total funds available/ raised by the assessee, a substantial portion of it amounting to ₹ 484,88,54,275/- has been invested in Shares and Mutual Funds, therefore, it can be held that expenditure in relation to earning of exempt dividend income are embedded in indirect expenses. 9.1. It was further his submission that the decision of the Special Bench in the case of Cheminvest Ltd. vs ITO, Ward-3(3), New Delhi further supports the view taken. 10. On a consideration of the rival submission and the material available on record, we find that the aforesaid decision of the Special bench in view of the decision of the Jurisdictional High Court in Cheminvest Ltd. (cited supra) following CIT vs Holcim is no longer good law. Reverting to facts, we find that the Ld.AR for exclusion of ₹ 4,428 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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