TMI Blog2017 (12) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... re accordingly allowed for statistical purposes. - ITA No.6910/Del/2014 - - - Dated:- 4-12-2017 - SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Assessee : Shri Venketesh Chaurasia, Adv. For The Department : Shri H. K. Choudhary, CIT-DR ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 27.11.2014 passed by the DCIT, Circle-6(2), New Delhi u/s 143(3) r.w.s. 144C of the I.T. Act for the assessment year 2010-11. 2. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing and export of Readymade Garments. It filed its return of income on 30.09.2010 declaring total income of ₹ 35,60,774/-. The Assessing Officer referred the matter to the TPO u/s 92CA(3) for computation of arm s length price of the international transactions entered into by the assessee. The TPO, during the course of TP assessment proceedings, observed that the assessee has reported the following international transactions in Form No.3CEB :- Name of the AE Nature of transactions Amount (Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer/TPO, the assessee is in appeal before the Tribunal by raising the following grounds :- 1. On the facts and circumstances of the case, the order passed by the learned AO under Section 143(3) read with Section 144C of the Act is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned AO has erred, both on facts and in law in making assessment at an income of ₹ 86,94,370/- as against income of ₹ 35,60,774/- declared by the assessee. 3. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making addition of ₹ 51,33,599/- as difference in arm's length price determined by Transfer Pricing Officer (TPO) in pursuance of DRP's order and the appellant. 4(i). On the facts and circumstances of the case, the learned AO has erred, both on facts and in law in making to make the above said addition in total disregard to the order of Hon'ble ITAT in assessee's own case for the Assessment Year 2007-08 2008-09. ( ii). That the AO has erred in making the addition despite the fact that the transaction being in pursuance of the same agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g study made by the appellant for determining the arm's length price. 9. On the facts and circumstances of the case, the learned AO has erred both on facts and in law in making the above-said addition without qualifying comparable instance for rate of interest on the comparable transaction. 10. On the facts and circumstances of the case, the learned AO has erred both on facts and in law ignoring the contention of the assessee that the variation of 5% plus-minus arm's length interest determined will not be applicable in the case of the assessee ignoring the specific provisions of the Act. 11. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 8. Ld. counsel for the assessee referred to the loan agreements, copy of which is placed at page 1 to 13 of the Paper Book and submitted that the loan was advanced at a fixed rate way back in the year 2002-03 and, therefore, the interest rate cannot be varied or changed in the year under consideration. Referring to the order of the DRP, ld. counsel for the assessee drew the attention of the Bench to the following observations :- DRP findings :- This panel has carefully con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of apparel as well as interest received on loan. The TPO accepted the assessee s submission qua sale of apparel that the same was at arms length. As regards interest the assessee mentioned that it has received interest at a rate of 4% which was comparable with the export packing credit rate obtained from independent banks in India. The TPO was not in agreement with the above contention of the assessee. He observed that it is to be seen that what the assessee would have earned by giving loans in the Indian market. He noted that lending or borrowing is not one of the main business of the taxpayer. He opined that what is to be considered is the prevalent interest that could have been earned by advancing a loan to an unrelated party in India with the same financial health as that of the tax payer s subsidiary. The TPO further observed that the taxpayer has not submitted the financial of the subsidiary, hence the financial healthy of the subsidiary cannot be judged. The TPO further noted that while deciding the interest rate that may be charged on receivables from AE s, Libor rate for calculating interest is not proper. He opined that instead of US rate, Indian rate is to be adopted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such a situation when the transaction was in foreign currency, and the transaction was an international transactions, then the transaction would have to be looked upon by applying the commercial principles in regard to international transactions. In such a situation domestic prime lending would have no applicability and the international rate fixed being LIBOR rate would have to be adopted. 16. Similar view as above was expressed by the ITAT in the case of M/s Four Soft Ltd., Hyderabad vs. DCIT Supra, Dy. C.I.T. vs. Tech. Mahindra Supra, Tata Autocomp Systems vs. ACIT Supra. 17. We further note that assessee has arrangement, for loan with Citi Bank, for less than 4%. However, for loan provided to its AE s it has charged 4% p.a. interest. Hence, adjustment suggested by the TPO is not warranted. 18. We further note that assessee s profits are exempt u/s. 10B. Hence, there is no case that assessee would benefit by shifting profits outside India. This view is supported by Bangalore Tribunal decision in this case Philips Software Centre P Ltd. vs. ACIT Supra and Mumbai Tribunal in the case of I.T.O. vs. Zydus Altana Health Care P Ltd. Supra. 19. We further not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as grounds no.7 and 8 are concerned, the said grounds relate to the addition on account of the interest on export proceeds receivable. 16. Ld. counsel for the assessee at the outset submitted that a rectification application u/s 154 is pending before the Assessing Officer and the same is yet to be decided. He further submitted that before the DRP the assessee had submitted that there is no international transaction on account of interest on export proceeds receivables and there was some calculation error. 17. Ld. DR on the other hand submitted that since the petition u/s 154 is pending before the Assessing Officer, the same may be restored to the file of the Assessing Officer for deciding the issue afresh. 18. After hearing both the sides, we find the rectification application filed before the Assessing Officer u/s 154 is pending. It is the submission of the ld. counsel for the assessee that there was some calculation error and there is no international transaction at all on account of receivables. Considering the totality of the facts of the case and considering that the rectification application is pending before the Assessing Officer which is yet to be disposed of, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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