9911796707
TMI Blog2019 (12) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... ling the present appeal sought to set aside the impugned order dated 28.09.2016 passed by the AO in consonance with the orders passed by the ld. DRP/TPO under section 143 (3) read with section 144C of the Act qua the assessment year 2004-05 on the grounds inter alia that :- "1. The Order of the Learned Assessing Officer ('Ld. AO') is bad in law and on the facts and circumstances of the case. 2. The Ld. Transfer Pricing Officer ('Ld. TPO')/ Ld. Assessing Officer ('Ld. AO') have erred on facts and circumstances of the case in determining the arm's length price of the appellant's international transaction with its associated enterprises in respect of interest on loan advanced to wholly owned subsidiary ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The compensation for software development between two related parties is determined either on time and material contract basis or on fixed price control basis. The customers are primarily USA, Canada based and AE determines the pricing for the customers. During the year under assessment, the taxpayer entered into international transactions as under :- S.No. International Transaction Method Used Value (in Rs.) 1 Software Development Services TNMM 6.461 crore 2 Recruitment Services 0.475 crore 3 Reimbursement of Expenses 0.128 crore 4 Loan Given 14.96 crore 4. The taxpayer has given interest free loan to its AE to the tune of Rs.14,95,79,141/- as on 31.03.2004. In the first round of litigation, ld. TPO vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke to advance a loan based on the cost of funds, even if the same are required through borrowings. Ld. TPO also proceeded to apply the CUP under which interest rate that an independent party would earn at arm's length on a loan extended under similar circumstances as no independent party would extend its loan based on cost of its fund only but it would add further spread over and above the interest rate at which it got the funds for his margin as well as for the risk it is undertaking by advancing a loan to a party carrying on business outside India and that also without security. Accordingly, ld. TPO determined the interest on loan at Rs.1,58,90,255/-. 6. The taxpayer carried the matter before the ld. DRP by way of filing objections, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the taxpayer to its AE by the TPO is also not approved by the Hon'ble High Court and returned the finding in favour of the taxpayer as under:- "32. On the question of adjustment made on account of the transaction cost, we do not appreciate the reasoning given by the TPO and find it difficult to accept. The transaction or hedging cost is borne and paid by the borrower. These are undertaken when they take loans in US Dollars or other foreign currencies because the borrower wants to cover any loss on account of the depreciation of the Indian Rupee vis-à-vis the foreign currency. The assessee in the present case is not the borrower, but the lender. Transaction cost is not, therefore, applicable in the case in question, as the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... litigation, the Ld. TPO reckoned the notional interest as per PLR and was confirmed by the Ld. DRP, In the second round of litigation, the ld. TPO bench marked the interest on loan at SBI PLR plus 300 basis points, whereas, ld. DRP, while following their own finding for the AY 2002-03 made it US LIBOR plus 500 basis points. It is not the case of the assessee that the facts involved in the matter are different from those involved for the AY 2002-03. It is not the case of the assessee that the findings of the ld. DRP for the AY 2002-03 are in any way disturbed in any subsequent proceedings. 10. In the circumstances, we are of the considered opinion that the LIBOR with mark up cannot be found fault with, having regard to the facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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