TMI Blog2019 (12) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.6076/Del./2016 - - - Dated:- 6-12-2019 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ASSESSEE BY : SHRI ATUL NINAWAT, CA REVENUE BY : SHRI SANJAY I. BARA, CIT DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER This is second round of litigation as in the first round, the case was set aside to the AO for fresh adjudication by the Tribunal with direction to recompute the Arm s Length Price (ALP) of the transaction of the interest on loan. 2. The Appellant, M/s. Aithent Technologies Pvt. Ltd. (hereinafter referred to as the taxpayer ) by filing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustry norms. 8. The above grounds are without prejudice to each other. 3. Briefly stated the facts necessary for adjudication of the controversy at hand are : M/s. Aithent Technologies Pvt. Ltd., the taxpayer is a software consulting firm providing software solution to global clients. The Associate Enterprise (AE), Aithent Inc., is a New York based company who identifies the customers and thereafter, work is assigned to the taxpayer company. As per Transfer Pricing (TP) analysis, the taxpayer is primarily engaged in software development activities viz. off-the-shelf software and specified technical software specification. The compensation for software development between two related parties is determined either on time and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ) in the first round of litigation. Thereafter, ld. CIT (A) proceeded to hold that LIBOR plus 400 basis points seems appropriate rate for charging interest and thereby determined the interest rate of 5.1595% (March 2004 rate of LIBOR plus 400 basis points) on the outstanding loan as the arm s length price. Thereafter, matter was agitated by the taxpayer before the Tribunal who has restored the case back to the AO for fresh adjudication to recompute the ALP of the transactions. 5. After considering the submissions made by the taxpayer, the TPO proceeded to conclude that loan or borrowing money between two AEs is an international transaction and the interest chargeable on the loans to an AE requires to be computed on the arm s length pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case. 8. At the very outset, ld. AR for the taxpayer contended that the issue in question is duly covered in favour of the taxpayer in its own case for AY 2006-07 decided in ITA No.257/Del/2017 vide order dated 02.09.2019 . It is further contended that when granting a loan to wholly owned subsidiary is less risky as compared to loan granted by bank, TPO/DRP have erred in making the mark-up of 500basis points to the LIBOR and relied upon the decision rendered by the Hon ble Delhi High Court in the case of CIT vs. Cotton Naturals (I)(P) Ltd. (2015) 55 taxmann.com 523 (Delhi) and the decision rendered by Hon ble Rajasthan High Court in the case of CIT vs. M/s. Vaibhav Gems Ltd. (now known as Vaibhav Global Ltd.) in D.B. ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by holding that the taxpayer is entitled for the benefit of average LIBOR rate existing at that time which was 0.79% and also rejected the addition of ad hoc 2% applied by the Revenue by returning following findings :- 11. Regarding ITA No.149/2015 preferred by the assessee in view of the Delhi High Court judgment (para no.14), the international transaction is required to be accepted, therefore, Tribunal has committed serious error. The assessee will be entitled for the benefit of average LIBOR rate existing at that time which was 0.79% and addition of adhoc 2% is not proper. In that view of the matter, the addition of 2% interest in the income is required to be quashed and set aside. 11. Coordinate Bench of the Tribunal in tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , allowed in part. 12. In view of the facts and circumstances of the case discussed in the preceding paras and following the aforesaid decision rendered by Hon ble High Courts discussed in preceding paras and by the coordinate Bench of the Tribunal, we are of the considered view that transfer pricing adjustment qua the transaction of advancing loan by the taxpayer to its AE is to be determined at US LIBOR plus 170 basis points. Consequently, the TPO is directed to recompute the interest at US LIBOR plus 170 basis points to benchmark the international transactions qua interest on loan by the taxpayer to its AE. Consequently, the appeal filed by the taxpayer is allowed. Order pronounced in open court on this 6th day of December, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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