The DCITPatan Circle, Patan V. M/s. Gokul Refoils & Solvent Ltd., Sidhpur

ITA 2403/AHD/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5472 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 12-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 64

Judgement Text

ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR VP AND MAHAVIR PRASAD JM] ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 DY COMMISSIONER OF INCOME TAX PATAN CIRCLE, PATAN .....APPELLANT VS GOKUL REFOILS & SOLVENT LTD ..........RESP ONDENT SUJANPUR PATIYA, HIGHWAY ROAD SIDHPUR 384 151 [PAN: AAACG8316N] APPEARANCES BY LALIT P JAIN FOR THE APPELLANT TUSHAR HEMANI FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : AUGUST 2, 2018 DATE OF PRONOUNCEMENT : NOVEMBER 1, 2018 O R D E R PER PRAMOD KUMAR, VP: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE LEARNED COMMISSIONER (APPEALS)S ORDER DATED 1 ST MAY 2015, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2011-12. 2. THE APPEAL RAISES AS MANY AS SEVEN GROUNDS OF A PPEAL BUT THE TWO SHORT ISSUES THAT WE ARE REALLY REQUIRED TO ADJUDICATE IN THIS CASE ARE WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN DELETING THE ARMS LENGTH PRICE ADJUSTMENTS OF RS 4 4,99,894 IN RESPECT OF INTEREST ON LOANS ADVANCED TO THE ASSOCIATED ENTERPRISES, AND OF RS 2 ,26,06,447 IN RESPECT OF GUARANTEE COMMISSION FOR THE CORPORATE GUARANTEES ISSUED BY T HE ASSESSEE IN FAVOUR OF ITS ASSOCIATED ENTERPRISES. LEARNED REPRESENTATIVES FAIRLY AGREE O N THIS PROPOSITION. 3. AS REGARDS THE ALP ADJUSTMENT OF RS 2,26,06,447, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR IN ASSESSEES OWN CASE, LEARNED CIT(A) HAD HELD THAT THE PAYMENT OF GUARANTEE COMMI SSION @ 1.375% WAS AT AN ARMS LENGTH CONSIDERATION, AND THE ORDER SO PASSED BY TH E CIT(A) HAD ATTAINED FINALITY INASMUCH AS THE REVENUE AUTHORITIES DID NOT CHALLENGE THE RELIE F SO GRANTED BY THE CIT(A). IN THE PRESENT YEAR, THE ASSESSEE, ON HIS OWN, HAS OFFERED ALP ADJ USTMENT @ 1.5% AS ARMS LENGTH CONSIDERATION FOR THE ISSUANCE OF GUARANTEES- WHICH IS CLEARLY MORE THAN THE ARMS LENGTH GUARANTEE COMMISSION HELD IN THE IMMEDIATELY PRECED ING ASSESSMENT YEAR. WHEN THE ARMS ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 2 OF 7 LENGTH CONSIDERATION OF GUARANTEE COMMISSION AT 1.5 % IS MORE THAN WHAT HAS BEEN JUDICIALLY HELD TO BE ARMS LENGTH CONSIDERATION FOR GUARANTEE COMMISSION, THERE CANNOT NORMALLY BE ANY BASIS TO HOLD THAT FURTHER ALP ADJUSTMENT IS RE QUIRED. IT IS ON THIS BASIS THAT THE CIT(A) HAS GRANTED THE IMPUGNED RELIEF FROM THE ASSESSING OFFICERS FINDING THAT THE ALP OF GUARANTEE COMMISSION SHOULD BE COMPUTED AT 4.67%. A T THE ASSESSMENT STAGE, GUARANTEE COMMISSION @ 4.67% ON US $ 15 MILLION FOR 82 DAYS A ND US $ 16.5 MILLION FOR 283 DAYS WAS THUS WORKED OUT AT RS 3,36,57,099. THE ALP DETE RMINED BY THE ASSESSEE SUO MOTU AT RS 1,190,50,652 WAS THUS FOUND SHORT BY RS 2,26,06,447 . THAT ALP ADJUSTMENT HAS BEEN, FOR THE REASONS SET OUT EARLIER, WAS DELETED BY THE CIT(A). THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE LEGAL POSITIO N. 5. WE FIND THAT THOUGH THERE IS NO RES JUDICATA IN THE INCOME TAX PROCEEDINGS, ONCE A FUNDAMENTAL ASPECT, PERMEATING THROUGH DIFFERENT AS SESSMENT YEARS, IS DECIDED IN A PARTICULAR MANNER BY THE JUDICIAL AUTHORITIES AND THE ASSESSIN G OFFICER ALLOWS THAT ASPECT TO REACH FINALITY, THERE IS NO REASON NORMALLY, UNLESS THERE IS A CHANGE IN THE MATERIAL FACTS AND CIRCUMSTANCES, TO DEVIATE FROM THE SAME. VIEWED THU S, FROM THE POINT OF VIEW OF CONSISTENCY, THE STAND OF THE CIT(A) MUST BE UPHELD. WHILE DEALI NG WITH THIS ASPECT OF THE MATTER, WE MAY USEFULLY REFER TO THE OBSERVATIONS OF HONBLE SUPRE ME COURT, IN THE CASE OF RADHASOAMI SATSANG VS CIT [(1992) 193 ITR 321 (SC)], AS FOLLOWS: 13. WE ARE AWARE OF THE FACT THAT STRICTLY SPEAKING RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS. AGAIN, EACH ASSESSMENT YEAR BEING A UNIT, WHAT IS DECIDED IN ONE YEAR MAY NOT APPLY IN THE FOLLOWING YEAR BUT WHERE A FUNDAMENTAL ASPECT PERMEATING THROUGH THE DIFFERENT ASSESS MENT YEARS HAS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HA VE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NO T BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. 14. ON THESE REASONINGS IN THE ABSENCE OF ANY MATER IAL CHANGE JUSTIFYING THE REVENUE TO TAKE A DIFFERENT VIEW OF THE MATTERAND IF THERE WAS NO CHANGE IT WAS IN SUPPORT OF THE ASSESSEEWE DO NOT THINK THE QUES TION SHOULD HAVE BEEN REOPENED AND CONTRARY TO WHAT HAD BEEN DECIDED BY T HE COMMISSIONER IN THE EARLIER PROCEEDINGS, A DIFFERENT AND CONTRADICTORY STAND SHOULD HAVE BEEN TAKEN. 6. THERE IS ONE MORE WAY OF LOOKING AT THE MATTER. IT IS A CASE IN WHICH THE ASSESSING OFFICER HAS ACCEPTED THE RELIEF GRANTED BY THE CIT( A) IN ONE YEAR AND CHALLENGED THE SIMILAR RELIEF IN THE NEXT YEAR. THAT COURSE OF ACTION DOES NOT SEEM LEGALLY PERMISSIBLE. AS THE SETTLED LEGAL POSITION IS, EVEN IF THE RELIEF GRANTED BY AN APPELLATE AUTHORITY IS ACCEPTED IN THE CASE OF ONE ASSESSEE, IT CANNOT BE CHALLENGED IN APPEAL, ON SIMILAR FACTS AND WITHOUT A JUST CAUSE, FOR ANOTHER ASSESSEE. IN THE CASE BEFORE US, THE RELIE F GRANTED BY THE CIT(A) IS ACCEPTED IN A CASE IN ONE YEAR AND IN THE SAME CASE, IT HAS BEEN CHALL ENGED, IN FURTHER APPEAL, IN THE NEXT YEAR, AND NO REASONS WHATSOEVER HAVE BEEN ASSIGNED FOR SU CH A DEVIATION. IN THE CASE OF UNION OF INDIA V. KAUMUDINI NARAYAN DALAL [2001] 249 ITR 219 , HONBLE SUPREME COURT HAD AN OCCASION TO CONSIDER WHETHER IT IS OPEN TO REVENUE TO ACCEPT A JUDGMENT IN THE CASE OF ONE ASSESSEE, AND APPEAL, AGAINST THE IDENTICAL JUDGMEN T IN THE CASE OF ANOTHER. THEIR LORDSHIPS ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 3 OF 7 HELD THAT SUCH A DIFFERENTIAL TREATMENT ON THE SAME SET OF FACTS WAS NOT PERMISSIBLE IN LAW, AND OBSERVED THAT, 'IT IS NOT OPEN TO REVENUE TO ACCEPT THE JUDGMENT IN THE CASE OF THE ASSESSEE IN THAT CASE AND CHALLENGE ITS CORRECTNESS IN THE CASE OF ANOTHER ASSESSEE, WITHOUT JUST CAUSE.' THE SAME VIEW WAS REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. V. CIT [2004] 266 ITR 992 , AND FOLLOWED BY THE HONBLE DELHI HIGH COURT IN T HE CASES OF CWT V. R.K.K.R. INTERNATIONAL (P.) LTD. [2005] 1 98 CTR 567 AND CIT V. NEO POLY PACK PVT. LTD. [2000] 245 ITR 492 . WHEN IT IS NOT POSSIBLE FOR THE REVENUE TO CHALLENGE AN ORDER OF THE APPELLATE AUTHORITY IN ON E CASE AND WHEN IT HAS ACCEPTED IDENTICAL ORDER OF THE APPELLATE AUTHORITY IN ANOTHER CASE, I T CANNOT AT ALL BE OPEN TO THE REVENUE, WITHOUT ANY JUST REASON, TO CHALLENGE THE ORDER OF THE APPELLATE AUTHORITY ON AN ISSUE ON WHICH RELIEF HAS BEEN GIVEN BY CIT(A) IN THE CASE O F THAT VERY ASSESSEE AND THE MATTER RESTS THERE BY NOT BEING CHALLENGED IN APPEAL. FOR THIS R EASON ALSO, THE RELIEF GRANTED BY THE CIT(A) CANNOT BE FAULTED WITH. 7. THERE IS STILL ANOTHER REASON FOR NOT DISTURBING THE RELIEF GRANTED BY THE CIT(A). THE ISSUE WHETHER ISSUANCE OF CORPORATE GUARANTEES CAN AT ALL BE TREATED AS INTERNATIONAL TRANSACTION HAS BEEN DECIDED IN FAVCOUR OF THE ASSE SSEE BY A COORDINATE BENCH DECISION IN THE CASE OF MICRO INK LTD VS ACIT [(2015) 63 TAXMAN.COM 353 (AH D)] AND AN APPEAL, AT THE INSTANCE OF THE REVENUE AUTHORITIES, AGAINST THE SA ID ORDER IS ADMITTED, AND PENDING FOR DISPOSAL, BEFORE HONBLE JURISDICTIONAL HIGH COURT. THEREFORE, THE CALL AS TO WHETHER A CORPORATE GUARANTEE CAN BE TREATED AS INTERNATIONAL TRANSACTION IS YET TO BE TAKEN BY HONBLE JURISDICTIONAL HIGH COURT, THE MATTER IS ALIVE BUT, FOR THE TIME BEING, IN THE LIGHT OF THIS TRIBUNALS DECISION, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. FOR THIS REASON ALONE, GRIEVANCE OF THE REVENUE IS SOMEWHAT ACADEMIC AT TH IS STAGE. BE THAT AS IT, WE ARE NOT INCLINED TO DEAL WITH THIS LARGER ISSUE IN THIS CASE. 8. IN VIEW OF THE DETAILED REASONS SET OUT ABOVE, A S ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER SO FAR AS ALP ADJUSTMENT IN RESPECT OF C ORPORATE GUARANTEES IS CONCERNED. 9. LET US NOW TURN TO ARMS LENGTH PRICE ADJUSTMENT S OF RS 44,99,894 IN RESPECT OF INTEREST ON LOANS ADVANCED TO THE ASSOCIATED ENTERP RISES. 10. SO FAR AS THIS ISSUE IS CONCERNED, IT IS SUFFIC IENT TO TAKE NOTE OF THE FACT THAT THE ASSESSEE HAS BENCHMARKED THE LOAN ON THE BASIS OF I NTERNAL CUP BY WAY OF THE INTEREST RATE ON WHICH THE ASSESSEE HAS BORROWED FROM THE OUTSIDE AG ENCIES. IN OTHER WORDS, THE STAND OF THE ASSESSEE IS THAT THE INTEREST RATE AT WHICH THE ASS ESSEE HAS BORROWED FOREIGN CURRENCY LOAN FROM THE BANKS SHOULD BE TREATED AS ARMS LENGTH IN TEREST FOR THE LOANS IT HAS ADVANCED TO ITS SUBSIDIARIES. THIS APPROACH WAS, HOWEVER, REJECTED BY THE TPO BY OBSERVING AS FOLLOWS: I. IT IS SEEN THAT THERE ARE SHORT TERM ADVANCE CR EDITS GRANTED BY SBI BASICALLY IN THE NATURE OF LETTERS OF CREDIT AGAINS T GOODS PURCHASED BY THE ASSESSEE COMPANY. THESE LCS ARE SUPPORTED BY 100% GUARANTEE AS WELL AS THE GOODS PURCHASED BY THE ASSESSEE AND IN GENERAL, SHORT TER M RISKS CARRYING SMALLER SPREADS THAN LONG TERM LOANS. II. THE FINANCIAL STATUS AND HENCE THE DEFAULT CRED IT RATING OF THE ASSESSEE COMPANY IS HIGHER THAN THAT OF THE AES WHOM LOANS H AVE BEEN GIVEN BY THE ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 4 OF 7 ASSESSEE. HENCE, EVEN IF THESE INSTANCES ARE ADOPT ED FOR BENCHMARKING THE TRANSACTION, THEY WILL HAVE TO BE ADJUSTED TO FACTO R THE CREDIT DIFFERENTIAL BETWEEN THE ASSESSEE AND ITS AE. III. IN LIGHT OF THE TWO MAJOR DIFFERENCES BETWEEN THE LOANS GIVEN BY THE ASSESSEE TO ITS AE AND THE INTERNAL CUP CITED, THE SUBMISSION MADE BY THE ASSESSEE THAT THESE PRESENT A PERFECT CUP FOR TRANS ACTION UNDER REFERENCE IS NOT CORRECT. HENCE, THE CUP PRESENTED BY THE ASSESSEE C OMPANY IS NOT FOUND ACCEPTABLE AND IS REJECTED. 11. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A). LEARNED CIT(A) UPHELD THE STAND OF THE ASSESSEE AND OBSERVED AS FO LLOWS: .. IT IS A SETTLED LAW THAT INTERNAL COMPARABLE R ATES, IF APPLICABLE, SHOULD BE ADOPTED AS ARMS LENGTH PRICE. THE YEAR UNDER APPE AL, THE APPLICANT HAS OFFERED INTEREST RATE OF 1.356 (LIBOR + 100 BASIS) SUO MOTO IN RESPECT OF LOANS ADVANCED TO ITS ASSOCIATED ENTERPRISES. THE APPELLANT HAS A VAILED LOANS FROM BANKS IN FOREIGN CURRENCY FROM INTERNATIONAL BANKS AT CHEAPE R RATE DETAILS OF WHICH ARE COMPILED ON PAGE NO. 29 OF THE PAPER BOOK. THE HIG HEST RATE AT WHICH LOANS HAVE BEEN AVAILED ARE AT 1.275% PER ANNUM BY THE APPELLA NT. THE APPELLANT HAS CHARGED 1.357% P.A. FROM ITS ASSOCIATED ENTERPRISES . THEREFORE I HOLD THAT THE RATE CHARGED BY THE APPELLANT MEETS THE ARMS LENGT H TEST. ACCORDINGLY THE ADDITION MADE BY THE AO/TPO CHARGING INTEREST RATE ABOVE 1.357% P.A. IS DELETED. THE GROUND IS ACCORDINGLY ALLOWED. 12. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIE F SO GRANTED BY THE CIT(A) AND IS IN APPEAL BEFORE US. 13. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED THE FACTS OF THE CASE IN THE LIGHT OF AP PLICABLE LEGAL POSITION. 14. IN OUR CONSIDERED VIEW, AS LONG AS THERE IS NO DISPUTE ABOUT THE FACT THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND ITS LENDERS A RE INDEPENDENT TRANSACTIONS, I.E. TRANSACTIONS BETWEEN NON ASSOCIATED ENTERPRISES, TH E INTEREST RATES CHARGED ON THESE TRANSACTIONS ARE VALID INTERNAL CUP INPUTS. WE HAVE NOTED THAT IT IS NOT EVEN REVENUES CASE THAT THESE TRANSACTIONS, INTEREST RATE ON WHICH ARE TREATED AS INTERNAL CUP INPUTS, ARE NOT INDEPENDENT TRANSACTIONS. IN OUR CONSIDERED VIEW, THE INTERNAL CUP IS MOST APPROPRIATE METHOD ON THE FACTS OF THIS CASE. WHAT IS OBJECTED TO BY THE REVENUE AUTHORITIES IS THAT THE TRANSACTIONS BETWEEN THE ASSESSEE AND ITS LENDERS, AND THE ASSESSEE AND ITS AES, ARE INCOMPARABLE INASMUCH AS THE CREDIT RATING OF THE A SSESSEES AES IS MUCH LOWER THAN THE ASSESSEE AND THE TRANSACTIONS ARE RELATIVELY UNSAFE , AND, THEREFORE, WHAT HOLDS GOOD FOR THE ASSESSEE DOES NOT NECESSARILY HOLD GOOD FOR THE AES . THAT APPROACH IGNORES THE GROUND REALITY THAT THE LOAN HAVING BEEN GRANTED TO AN ENTERPRISE WHICH IS UNDER FULL CONTROL IS A RELATIVELY SAFE LOAN, AND SUCH A LOAN, EVEN IN AN ARMS LENGTH SITUATION, HAS LESSER RISK PERCEPTION. AS WE DEAL WITH THIS ASPECT OF THE MATTER, WE MAY TAKE NO TE OF A COORDINATE BENCH DECISION IN THE ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 5 OF 7 CASE OF UFO MOVIES LTD VS ACIT [(2016) 66 TAXMANN.COM 120 ( DELHI - TRIB.)] , WHEREIN THE COORDINATE BENCH HAD, INTER ALIA, OBSERVED AS F OLLOWS: 7. WHILE EXPLORING SUCH POSSIBILITIES, IT WILL BE USE FUL TO TAKE NOTE OF THE FACT THAT IN THE CASE OF BHARTI AIRTEL LTD. V. ADDL. CIT [2014] 64 S OT 50 (URO)/43 TAXMANN.COM 50 (DELHI) , AND A COORDINATE BENCH HAD DELETED A SIMILAR ALP ADJUSTMENT ON ACCOUNT OF INTEREST AMOUNTING TO RS. 10,11,786 WHEREIN THE SAM E APPROACH OF ADOPTING 400 BASIS POINTS ABOVE THE LIBOR AS ALP WAS ADOPTED. WHILE DE LETING THIS ALP ADJUSTMENT, SPEAKING THROUGH ONE OF US, THE TRIBUNAL HAD, INTER ALIA, OBSERVED AS FOLLOWS: . 7.11 ADJUSTMENT FOR SECURITY USUALLY, BANKERS EXTENDING LOANS IN FOREIGN CURRENC Y ALSO INSIST ON SUFFICIENT SECURITY. IN THIS CASE, NO SECURITY IS OFFERED BY T HE AE. KEEPING IN VIEW THE FINANCIAL HEALTH OF THE SUBSIDIARY, IT MAY NOT BE IN A POSITI ON TO OFFER SECURITY. THUS AN ADJUSTMENT IS REQUIRED TO BE MADE FOR NOT OFFERING A SECURITY. THIS MAY BE COMPUTED AS THE DIFFERENCE BETWEEN THE INTEREST RATES PREVAI LING FOR THE BONDS OF EQUIVALENT CREDIT RATING OF THE AE AND SOVEREIGN GOVERNMENT BO NDS IN THE COUNTRY IN WHICH THE AE IS LOCATED. THIS CAN ALSO BE CONSIDERED AS THE G UARANTEE COST PAYABLE TO THE TAXPAYER FOR GIVING GUARANTEE FOR EQUIVALENT AMOUNT OF LOAN GIVEN TO THE AE I.E. THE RATE DIFFERENTIAL FOR THE DIFFERENCE IN INTEREST SP READ BETWEEN THE CREDIT RATING OF THE TAXPAYER AND THE AE. THUS AFTER THE ABOVE ANALYSIS, THE EQUIVALENT INTEREST RATE IS THE INTEREST RATE INCLUDING THE TRANSACTION COST FO R A FOREIGN CURRENCY LOAN, IF GIVEN TO THE AE FOR ITS CREDIT STANDING/RATING. 66. WE SEE NO SUBSTANCE IN THIS ADJUSTMENT EITHER. THE TPO HAS TAKEN THE LENDER AS THE TESTED PARTY, AND YET MADE ADJUSTMENTS FOR HIGH ER RISKS ON ACCOUNT OF ASSUMED LACK OF SECURITY AND INCREASED RISK OF SINGLE PARTY DEALING. THIS APPROACH OVERLOOKS THE FACT THAT THE ASSESSEE HAS ADVANCED MONIES TO I TS SUBSIDIARIES WHICH ARE UNDER ITS MANAGEMENT AND CONTROL- A FACTOR WHICH SUBSTANT IALLY REDUCES THE RISK RATHER THAN INCREASING IT. ON THESE FACTS, IT IS DIFFICULT TO UNDERSTAND, MUCH LESS APPROVE, ANY RATIONALE FOR ADJUSTMENT ON ACCOUNT OF HIGHER R ISKS. ON THIS POINT ALSO, WE SEE NO MERITS IN THE STAND OF THE TPO. (EMPHASIS, BY UN DERLINING, SUPPLIED BY US NOW)' 8. WHEN THE MATTER WAS CARRIED IN FURTHER APPEAL, THI S TIME BY THE COMMISSIONER, BEFORE HON'BLE DELHI HIGH COURT, THEIR LORDSHIPS WERE, VID E JUDGMENT, DATED 25TH FEBRUARY 2015- A COPY OF WHICH WAS PLACED BEFORE US BY THE L EARNED COUNSEL, PLEASED TO APPROVE THE REASONING ADOPTED BY THE TRIBUNAL. IN DOING SO, THEIR LORDSHIP OBSERVED AS FOLLOWS: '8. THE ITAT HAS ALSO TAKEN NOTE OF THE FACT THAT T WO SPECIFIC COMPARABLES OF USD BORROWINGS I.E. L&T AND SERI INFRASTRUCTURE, ON THE INTEREST RATE OF LIBOR HAD BEEN TAKEN INTO CONSIDERATION. THERE IS NO MATERIAL WHAT SOEVER, SAVE AND EXCEPT FOR VAGUE OBSERVATIONS ABOUT WEAK FINANCIALS OF THE SUB SIDIARIES - WHICH ARE NOT SUPPORTED BY ANY SPECIFIC FACTS AND PROCEED ON SWEE PING GENERALIZATIONS AND ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 6 OF 7 ASSUMPTIONS, TO REJECT THE COMPARABLES TAKEN BY THE ASSESSEE. WHEN A TRANSFER PRICING OFFICER REJECTS COMPARABLES TAKEN BY THE AS SESSEE, HE HAS TO SET OUT SPECIFIC, COGENT AND LEGALLY SUSTAINABLE REASONS FOR DOING SO . ON THIS POINT, THEREFORE, THE STAND OF THE ASSESSING OFFICER CANNOT BE ACCEPTED. 9. . . . . . . . . . . . . . . . . . . . . . 10. THE TRIBUNAL FURTHER NOTICED THAT THE ASSESSEE ADVA NCED MONIES TO THE SUBSIDIARIES WHICH WERE UNDER ITS MANAGEMENT AND CO NTROL, WHICH IN FACT SUBSTANTIALLY REDUCED THE RISK AND IN THESE CIRCUMS TANCES THERE WAS NO RATIONALE OF ADJUSTING ANY AMOUNT OF HIGHER BASIS. 11 . THIS COURT IS OF THE OPINION THAT THE REASONING O F THE ITAT ON EACH OF THE HEADS WHICH WENT INTO THE ADJUSTMENT OF RS. 10,11,7 86/- IS REASONABLE AND JUSTIFIED AND DOES NOT CALL FOR ANY INTERFERENCE. (EMPHASIS, BY UNDERLINING, SUPPLIED BY US)' 9. THAT WAS ALSO A CASE IN WHICH THE LENDER PARENT CO MPANY WAS TAKEN AS THE TESTED PARTY, THE LOAN WAS ADVANCED TO A SUBSIDIARY COMPAN Y WITHOUT MUCH TO THE CREDIT OF ITS FINANCIAL CREDENTIALS AND THE LOAN WAS TREATED AS A HIGH RISK LOAN RESULTING IN ADOPTING THE MAXIMUM LIBOR RATE ON WHICH DOLLAR LOANS WERE A DVANCED. YET, HON'BLE HIGH COURT SPECIFICALLY APPROVED THE TRIBUNALS REASONING THAT THE 'ASSESSEE ADVANCED MONIES TO THE SUBSIDIARIES WHICH WERE UNDER ITS MANAGEMENT AND CONTROL, WHICH IN FACT SUBSTANTIALLY REDUCED THE RISK AND IN THESE CIRCUMS TANCES THERE WAS NO RATIONALE OF ADJUSTING ANY AMOUNT OF HIGHER BASIS' . WHEN SUCH ARE THE VIEWS OF THEIR LORDSHIPS, IT IS FUTILE TO SUGGEST THAT THE LOANS ADVANCED BY THE PA RENTS TO SUBSIDIARY CAN INDEED BE TAKEN AS BB TO D GRADE INVESTMENTS WHICH REFERS TO, AS NO TED BY THE TPO HIMSELF AT PAGE 28 OF THE ORDER, INVESTMENTS WITH SERIOUS RISKS OF INADEQ UATE SAFETY, INVESTMENTS OF HIGH RISK, INVESTMENTS OF SUBSTANTIAL RISK AND INVESTMENTS OF DEFAULT. THE APPROACH ADOPTED BY THE DRP CANNOT, THEREFORE, MEET OUR APPROVAL. 15. WE ARE IN RESPECTFUL AGREEMENT WITH THE APPROAC H IMPLICIT IN THE ABOVE OBSERVATIONS, WHICH HAS ALSO FOUND FAVOUR WITH HONBLE DELHI HIGH COURT. THE CASE AS MADE OUT FOR LOWER CREDIT RATING OF THE AE WAS THUS DEVOID OF ANY LEGA LLY SUSTAINABLE MERITS, AND THE CIT(A) RIGHTLY REJECTED THAT THEORY. WE APPROVE THE CONCLU SIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE ON THIS COUNT AS WELL. 16. ON SECOND ISSUE ALSO, THE APPEAL OF THE ASSESSI NG OFFICER DOES NOT MEET OUR APPROVAL. 17. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUN CED IN THE OPEN COURT TODAY ON THE 1 ST DAY OF NOVEMBER, 2018. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (VICE P RESIDENT) AHMEDABAD, DATED THE 1 ST DAY OF NOVEMBER, 2018 ITA NO.: 2403/AHD/15 ASSESSMENT YEAR: 2011-12 PAGE 7 OF 7 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD