TMI Blog2019 (6) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual period the loan was outstanding. A.O./TPO has failed to address this issue. So the amount of adjustment made by the A.O./TPO being erroneous is not sustainable. - Decided in favour of the assessee. Non grant of credit of dividend distribution tax - additional ground raised - HELD THAT:- We find that both the above grounds were not raised before the D.R.P. The issues raised cannot be made to be a part of appeal before the ITAT. Nevertheless on the touchstone of the Hon ble Apex Court decision in the case of CIT v/s. Shelly Products [ 2003 (5) TMI 4 - SUPREME COURT] we direct that the A.O. may consider the issue raised as per law and factual verification. - ITA No.338/Mum/2017 (Assessment Year: 2012-13) - - - Dated:- 4-2-2019 - Shri Shamim Yahya And Shri Ravish Sood, JJ. Appellant by: Shri Rajan Vora and Shri Pranay Gandhi Respondent by: Shri V. Jenardhan ORDER Shamim Yahya, This appeal by the assessee is arising out of the order of the Assessing Officer (A.O. for short) passed u/s. 143(3) r.w.s. 144C(5) 144C(13) r.w.s. 92CA(3) of the Income Tax Act, 1961 ( the Act' for short) dated 27.12.2016 pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,33,205 computed by the Appellant on account of the following: a) calculating the interest on loans given to AE for period 365 days as against the actual period of 315 days (ie from 1 April 2011 to 9 February 2012) and thereby making an adjustment of excess interest for period of 51 days; and b) computing interest charged by Appellant at the rate of 4.522% p.a., for the entire period, without appreciating the fact that, during the year. the Appellant had charged different rates at six months LIBOR + 400 bps (ie. 4.522%, 4.7799% and 4.797%) for the loans given to its AE. 2. Interest under section 234B and Section 234C of the Act 2.1 erred in levying interest of ₹ 33,49,209 under section 234B of the Act and interest of ₹ 34,15,348 under section 234C of the Act: 3. Non-grant of credit of dividend distribution tax of ₹ 74,01,125 3.1 erred in not granting credit of dividend distribution tax paid of ₹ 74,01,125/- 4. Initiating penalty under Section 271(1)(c) of the Act 4.1 erred in initiating penalty proceedings under Section 271(1)(c) of the Act. 3. Apropos transfer pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fixed rate LIBOR by the TPO according to which a benchmark rate of 6.819% has been adopted. The TPO, on the other hand, has held LIBOR+400bps to be a proper arm's length interest rate. He has relied on Bloomsberg database of loans in US while computing the LIBOR rate, and has arrived at the average spread of all USD loans made in US at 170.64 bps and by converting floating rate LIBOR+170bps to a fixed rate interest for a loan of five year duration, an interest rate of 6.819% has been arrived at. The TPO has used Bloomsberg data base to arrive at this value. 4.20 The reliance placed by the assessee on earlier judgements of the hon'ble ITAT is not found to be in accordance with the facts of the case. It is seen that the facts in the current year are totally different from that in those years when the Department did not have access to reliable data and the benchmarking was done on estimate basis. In that year, the department had not relied on proper and reliable data base in order to arrive at the correct spread and the correct LIBOR. Accordingly, the hon'ble ITAT was constrained to use the best possible data in order to ensure justice. 4.21 In the curr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the paper-book), the Hon'ble Tribunal has held as under: 12. We have considered the rival submissions as well as relevant material record. At the outset, we note that this issue of arm's length Interest in respect of the loan provided by the assessee to its AE has been considered by the Tribunal in the series of decisions relied upon by the assessee. The Tribunal in the case of Everest Kanto Cylinder Ltd. (supra), has considered this issue in para 11 and 12 as under:- 11. We had considered rival contentions and gone through the orders of lower authorities. As per our considered opinion, appropriate international rates should be used for the purpose of the comparability analysis. For this purpose, the London Inter-Bank Offer Rate (LIBOR) is an internationally recognized rate for benchmarking loans denominated in foreign currency. For this purpose, reliance may be placed on the following decision of the coordinate bench.-- i) Great Eastern Shipping Co.Ltd (ITA No 397/M12012) dated 10 January 2014; ii) Mahindra Mahindra Limited (ITA No 7999/M/2011) dated 8 June 2012; iii) Hinduja Global Solutions Limited (ITA No 2541M12013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Co-co-ordinate Bench in the case of Everest Ken to Cylinder Ltd. (supra) had directed the Assessing Officer/TPO to adopt LIBOR +2% as Arm's lengths interest. As pointed out by the Ld. Counsel, the decision of the Tribunal in the case of Everest Kento Cylinder Ltd. has been upheld by the Hon'ble Bombay High Court in the Income Tax Appeal No. 1165 of 2013. Thus, following the earlier years precedence, we also hold that interest rate charged by the assessee on the loan given should be benchmarked with LIBOR +2% as Arm's Length and, therefore, no adiustment is called for. Thus, ground no. 1 as raised by the assessee is treated as allowed. 2.18 Further, in this regard, reliance is also placed on following decisions wherein LIBOR rates have been affirmed for benchmarking loans given to foreign subsidiaries: Cotton Natural India Pvt. Ltd. (ITA no. 233/2014) dated 27 March 2015 (Delhi HC) Tata Autocomp Systems Ltd (ITA No 1320/2012) dated 13 February 2015 (Bombay HC) Aurionpro Solutions Ltd (Bombay HG) (ITA no. 1869 of 2014) dated 9 June 2017 (Bombay HG) 2.19 In light of the above, it is respectf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dice submissions: 2.22 It is respectfully submitted that the learned AD has erred in not following the direction of Hon'ble DRP to re-compute the interest based on the number of the days for which the loan was outstanding. While doing so, the learned TPO/ AG has made following errors: a) calculating the interest on loans given to AE for period 365 days as against the actual period of 315 days (ie from 1 April 2011 to 9 February 2012) and thereby making an adjustment of excess interest for period of 51 days; and b) computing interest charged by Appellant at the rate of 4.522% pa., for the entire period, without appreciating the fact that, during the year, the Appellant had charged different rates at six months LIBOR + 400 bps (le. 4.522%, 4.7799% and 4.797%) for the loans given to its AE. (Refer the rectification application filed by the TPO for working of correct information at page 221 to 226 of the paperbook) 2.23 Accordingly, it is respectfully submitted that if the said errors are rectified the adjustment shall reduced to ₹ 79,33,205 as against ₹ 96,08,615 as computed by the learned AO/ TPO. 6. The ld. Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wishes to submit that MIL declared a dividend of ₹ 456.23 Iakhs in the Annual General Meeting held on 27 September 2011 and paid tax of ₹ 74,01,125/- under section 1150 of the Act on 28 September 2011., However, inadvertently the assessment year mentioned in the challan was AY 2011-12 instead of AY 2012-13. (Refer copy of challan at page no 241 to 244 of the paperbook). 3.3 In view of the above, we request your Honour to direct the AO to grant credit of dividend distribution tax of ₹ 74,01,125/-. Apropos additional ground relating to short grant of TDS credit of ₹ 11,90,046/- 10. The assessee s submissions are as under: 5.1 The A0 in the Income-tax Computation form issued along with notice under section 156 of the Act and the Assessment order dated 27 December 2016, had erroneously granted TDS credit amounting to ₹ 3343.423 as against ₹ 45,33,469 as claimed by the Appellant in return of income. 5.2 In view of the above, there has been short grant of credit of TDS amounting to ₹ 11,90,046. TDS details of the Appellant for the year under consideration is as below: A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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