TMI Blog2019 (3) TMI 2039X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances. There is also no ambiguity that the assessee has paid the interest in the year under consideration which was also there during the assessment proceedings for the assessment year 2006-07. As there was no change in the facts and circumstances, we are of the view that no disallowance on account of interest expenses for the year under consideration is warranted. We are of the considered opinion that the rate of interest paid by torrent pharmaceutical Ltd cannot be compared with the rate of interest on the money borrowed with the assessee. Thus we hold that the rate at which the interest paid by the assessee to AE is at arm's length and no adjustment is warranted. We also make clear that the finding should not be used /quoted as a precedent in other cases as we are allowing the appeal of the assessee on the basis of the rule of consistency. Hence, the ground of appeal of the assessee is allowed, and the ground of appeal of the Revenue is dismissed. - Shri Rajpal Yadav, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Revenue : Shri Rajesh Meena, Sr. D.R. For the Assessee : Shri S.N. Soparkar, A.R. ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Assessment Year 2006-07, and therefore, in view of rules of uniformity and consistency, the same approach ought to have been adopted and no addition could have been made in the year under consideration. 5. The Id. CIT(A) as well as the Id. AO failed to appreciate that the interest paid by the Appellant to the Associate Enterprise is at Arm's Length Price as per the scheme of the Act, and therefore, no addition could have been made by the Id. AO. 6. Alternatively and without prejudice to above, the Id. CIT(A) has further erred in law and on the facts of the case in not appreciating that, if various factors are considered while making comparison with the loan obtained by the Chennai Container Terminal Pvt. Ltd., the ALP of the interest would come to interest @ Libor + 3%, which has been charged by the Appellant to the AE, and therefore, upward adjustment of Rs.3,65,68,7267- made by the Id. AO ought to have been deleted by the Id. CIT(A) entirely as against part relief. 7. Alternatively and without prejudice to above, the Id. CIT(A) has further erred in law and on the facts of the case in not appreciating that the upward adjustment on account of interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .66 cr. whereas CCTPL is having an unsecured loan of Rs. 204.37 cr. Therefore, the debt-equity ratio of the assessee and CCTPL is of 2.61:1 and 1.40:1 respectively. Thus assessee claimed to have taken the loan at a higher rate of interest. 2. Operational performance CCTPL is handling 881586 foot equivalent units(TEUs) whereas the assessee is handing 542363 foot equivalent units which is less than by 38.50 percent. 3. Commencement of business The assessee commenced its business in the financial year 2003-04 whereas CCTPL started its business in the financial year 2001-02. The assessee also claimed that it had repaid the entire loan in the financial year 2008-09 when it was able to arrange its fund. 5. However, the TPO disregarded the contentions of the assessee and also disregarded the comparable suggested by the assessee on the following grounds. 1. The assessee has taken a loan for US$ 40 million whereas CCTPL has taken a loan of US$ 9 million. 2. At the time when the assessee took the loan, M/s CCTPL was not part of the DP world group though the assessee was very much part of the DP world group which is a very important factor in deciding the rate of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the bank or its associated enterprises. 3. TPL is into the business of Drug manufacturing and belongs to pharmaceutical industries whereas the assessee is into the business of Cargo handling. 4. There is a huge difference between the debt-equity ratio of both the entities. The debt-equity of TPL is 0.60:1 whereas the debt-equity ratio of the assessee is 2.61:1. 5. TPL is a profit making company and declared earning per share at the rate of 13.35 whereas the assessee has declared earning per share at the rate of -5.89. 6. The profit of TPL has increased by 37.68 percent in comparison to the last year. 7. There is a huge difference between credit rating of TPL vis- -vis of the assessee. 8. The assessee being the first-year operation has obtained the loan of Rs. 186,67,00,000/- without any collateral for 5 years. Therefore it has paid the interest at arms length. The assessee has taken the loan at interest at the rate of LIBOR + 3% whereas RBI has prescribed LIBOR + 3.5 % which is lower than rate suggested by the RBI. 8.1 If assessee had taken the loan from any Indian bank then it would have paid a higher rate of interest than the rate it paid. 9. The Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 The facts of the case have already been discussed in the preceding paragraph, and there is no dispute concerning the same. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience. 14.3 It is an undisputed fact that the assessee has paid interest on the money borrowed from its AE at the rate of LIBOR+300 basis points in the assessment year 2006-07 which was accepted by the TPO in the assessment framed under section 143(3) read with section 92CA(3) of the Act. Thus, the order of the TPO for the assessment year 2006-07 has reached its finality. Therefore, in our considered view the TPO cannot take different view until and unless there is a change in the facts and circumstances. There is also no ambiguity that the assessee has paid the interest in the year under consideration which was also there during the assessment proceedings for the assessment year 2006-07. As there was no change in the facts and circumstances, we are of the view that no disallowance on account of interest expenses for the year under consideration is warranted. 14.4 We also note that the rate of interest paid by the assessee cannot be compared with the Torrent pharmaceutic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, we are of the considered opinion that the rate of interest paid by torrent pharmaceutical Ltd cannot be compared with the rate of interest on the money borrowed with the assessee. 14.5 Similarly, we also note certain similarities and dissimilarities between the rate of interest of the assessee and CCTPL which can be enumerated as under: i. The activities of both companies are similar. Therefore, this company can be taken for comparison. ii. The debt-equity ratio of the assessee is this 2.61:1 whereas that equity ratio of any CCTPL is 1.40:1. As there is a difference between the debt-equity ratio of the assessee and CCTPL, therefore there has to be some adjustment in the rate of interest on account of this. iii. The assessee has borrowed money from AE whereas CCTPL has borrowed money from the bank. This factor should also be adjusted in determining the rate of interest. iv. The credit rating of the assessee and CCTPL is altogether different which is also an important factor in deciding the rate of interest. v. The assessee has taken a loan without any collateral whereas the CCTPL has taken a loan after furnishing sufficient collateral to the bank. This fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee on the basis of the rule of consistency. Hence, the ground of appeal of the assessee is allowed, and the ground of appeal of the Revenue is dismissed. 15. Now coming to appeal of the Revenue and CO of the assessee bearing No. the ITA No.1457/Ahd/2015 and 12/Ahd/2015 for A.Y. 2008-09 16. The TPO after applying certain filters has selected 7 comparables and workout average rate of interest LIBOR + 95.57 basis points. The TPO also considered the TPL as a comparable case which was taken in the immediately preceding year where the rate of interest was LIBOR +77 basis points. Thus, the TPO worked out the proposed rate of interest at LIBOR + 86 basis points. 16.1 On questioned by the TPO, the assessee submitted that the comparable selected by the TPO cannot be considered due to the fact they belong to different nature of business activities, the risk profile of each industry, financial strength and condition in which the comparable companies took the loans. 16.2 However, the TPO was of the view that it was the duty of the assessee to benchmark the interest rate on the basis of any of the method prescribe u/s 92C of the Act. 16.3 The TPO also held that while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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