M/s. Cotton Naturals (I) Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 6910/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3061 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 23-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Transfer pricing; International transaction; Notional interest
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6910/DEL/2014 ASSESSMENT YEAR : 2010-11 COTTON NATURALS (I) PVT. LTD., E-28, CONNAUGHT PLACE, NEW DELHI. VS. DCIT, CIRCLE- 6(2), NEW DELHI. PAN : AABCC2214J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VENKETESH CHAURASIA, ADV. DEPARTMENT BY : SHRI H. K. CHOUDHARY, CIT-DR DATE OF HEARING : 06-09-2017 DATE OF PRONOUNCEMENT : 04-12-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 27.11.2014 PASSED BY THE DCIT, CIRCLE-6(2), NEW DEL HI U/S 143(3) R.W.S. 144C OF THE I.T. ACT FOR THE ASSESSMENT YEAR 2010-11. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF READYMA DE GARMENTS. IT FILED ITS RETURN OF INCOME ON 30.09.2010 DECLARING TOTAL INCO ME OF RS.35,60,774/-. THE ASSESSING OFFICER REFERRED THE MATTER TO THE TPO U/ S 92CA(3) FOR COMPUTATION OF ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACT IONS ENTERED INTO BY THE ASSESSEE. THE TPO, DURING THE COURSE OF TP ASSESSM ENT PROCEEDINGS, OBSERVED 2 ITA NO.6910/DEL/2014 THAT THE ASSESSEE HAS REPORTED THE FOLLOWING INTERN ATIONAL TRANSACTIONS IN FORM NO.3CEB :- NAME OF THE AE NATURE OF TRANSACTIONS AMOUNT (RS.) JPC EQUESTRIAN INC. SALE OF GOODS 27490618 JPC EQUESTRIAN INC. INTEREST ON LOAN 1990626 3. HE OBSERVED THAT THE OWNERSHIP STRUCTURE OF THE ASSESSEE AS ON 31.03.2010 IS AS UNDER :- SHAREHOLDERS NO. SHARES % OF HOLDING VARUN SHARMA 995000 50% TOKIE SHARMA 995000 50% 4. HE FURTHER OBSERVED FROM THE TP DOCUMENTATION TH AT THE ASSESSEE HAS ADVANCED FOREIGN CURRENCY LOAN TO ITS SUBSIDIARY JP C EQUESTRIAN INC., THE DETAILS OF WHICH ARE AS UNDER :- AMOUNT OF LOAN USD 10,50,000 INTEREST RECEIVABLE RS. 19,90,626 EFFECTIVE INTEREST 4% 5. HE OBSERVED THAT THE ASSESSEE HAS BENCHMARKED TH E INTEREST USING CUP METHOD. HE, THEREFORE, ASKED THE ASSESSEE TO JUSTI FY SUCH INTEREST ON THE LOAN GIVEN TO THE SUBSIDIARY. REJECTING THE VARIOUS ARG UMENTS ADVANCED BY THE ASSESSEE, THE TPO MADE AN UPWARD ADJUSTMENT OF RS.5 6,68,724/- ON THE FOLLOWING :- (A) INTEREST ON FOREIGN CURRENCY LOAN - RS.54,14,5 03/- 3 ITA NO.6910/DEL/2014 (B) RECEIVABLES - RS.2,54,221/- 6. THE ASSESSEE APPROACHED THE DRP, WHO VIDE ORDER DATED 29.09.2014 DIRECTED THE ASSESSING OFFICER TO ADOPT THE FIGURE OF RS.49,35,541/- AS AGAINST THE UPWARD ADJUSTMENT OF RS.54,14,503/- MADE BY THE ASSESSING OFFICER IN THE DRAFT ASSESSMENT ORDER AS DETERMINED BY THE TPO. S O FAR AS AMOUNT RECEIVABLES IS CONCERNED, THE DRP DIRECTED TO SUBSTITUTE THE SA ME AT RS.1,98,058/- IN PLACE OF RS.2,54,221/- AS DETERMINED BY THE ASSESSING OFF ICER IN THE DRAFT ASSESSMENT ORDER. THUS, IN EFFECT, THE ADJUSTMENT MADE BY THE TPO AT RS.56,68,724/- WAS REVISED TO RS.51,33,599/-. THE ASSESSING OFFICER A CCORDINGLY PASSED THE ORDER ON 27.11.2014 MAKING ADDITION OF RS.51,33,599/- TO THE RETURNED INCOME AS SHOWN BY THE ASSESSEE AT RS.35,60,774/-. 7. AGGRIEVED WITH SUCH ORDER OF THE ASSESSING OFFIC ER/TPO, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOW ING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED AO UNDER SECTION 143(3) READ WITH SECTION 144C OF T HE ACT IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED, BOTH ON FACTS AND IN LAW IN MAKING ASSESSMENT AT AN INCOME OF RS. 86,94,370/- AS AGAINST INCOME OF RS. 35,60,774/- DECLARED BY THE A SSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED BOTH ON FACTS AND IN LAW IN MAKING ADDITION OF RS.51,33,599 /- AS DIFFERENCE IN ARM'S LENGTH PRICE DETERMINED BY TRANSFER PRICING OFFICER (TPO) IN PURSUANCE OF DRP'S ORDER AND THE APPELLANT. 4(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED, BOTH ON FACTS AND IN LAW IN MAKING TO MAKE THE ABOVE SAID A DDITION IN TOTAL DISREGARD TO THE ORDER OF HON'BLE ITAT IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007-08 & 2008-09. (II). THAT THE AO HAS ERRED IN MAKING THE ADDITI ON DESPITE THE FACT THAT THE TRANSACTION BEING IN PURSUANCE OF THE SAME AGREEMEN T, THE FACTS REMAINING THE SAME, THE ORDER OF THE HON'BLE ITAT IS BINDING ON H IM. 5(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED AO HAS ERRED, BOTH ON 4 ITA NO.6910/DEL/2014 FACTS AND IN LAW IN MAKING THE TO MAKE ADDITION OF AN AMOUNT OF RS. 49,35,541/- ON ACCOUNT OF DIFFERENCE IN ARM'S LENGT H PRICE ON THE TRANSACTION OF INTEREST ON LOAN GIVEN TO THE SUBSIDIARY. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP ERRED IN DETERMINING THE REASONABLE INTEREST RATE @ 14.75% P ER ANNUM AS AGAINST 4% DETERMINED BY THE ASSESSEE BASED ON TRANSFER PRICIN G STUDY. (III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE DRP ERRED IN APPLYING THE SAFE HARBOUR RULE WHILE DETERMINING TH E ABOVESAID RATE OF INTEREST DESPITE THE FACT THAT THE SAID RULES ARE N OT APPLICABLE TO THE RELEVANT ASSESSMENT YEAR. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED TPO HAS ERRED BOTH ON FACTS AND LAW IN MAKING COMPARISON WITH UNCOMPARABL ES LIKE GOVERNMENT BONDS AND TOPPING IT UP WITH THE VARIOUS CONSIDERAT IONS IGNORING THE FACT THAT THE ASSESSEE HAS GIVEN LOAN TO AN ASSOCIATED ENTERP RISE WHICH HAPPENS TO BE A SUBSIDIARY IN A FOREIGN COUNTRY. (V) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED TPO HAS ERRED BOTH ON FACTS AND LAW IN MAKING A COMPARISON WITH THE FOREI GN CURRENCY LOAN ADVANCED BY AN INDIAN BANK TO AN INDIAN ENTITY AND TOPPING IT UP WITH VARIOUS CONSIDERATIONS IGNORING THE FACT THAT COM PARABLES HAVE TO BE PLACED IN A SIMILAR SITUATION AND CIRCUMSTANCES, THAT IS, THE R ATE OF INTEREST PREVALENT IN THE COUNTRY IN WHICH THE AMOUNT HAS BEEN ADVANCED. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON 'BLE DRP ERRED IN IGNORING THE CONTENTION OF THE ASSESSEE THAT THE LOAN HAVING BEEN ADVANCED AT A FIXED RATE WAY BACK IN THE YEAR 2002 & 2003, THE INTEREST RATE CANNOT BE VARIED OR CHANGED IN THE YEAR UNDER CONSIDERATION. 7(I). ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HOB'BLE DRP HAS ERRED, BOTH ON FACTS AND IN LAW IN MAKING TO MAKE ADDITION OF A N AMOUNT OF RS. 1,98,058/- ON ACCOUNT OF INTEREST ON EXPORT PROCEEDS RECEIVABL E. (II) THAT THE ABOVE ADDITION HAS BEEN PROPOSED I GNORING THE FACT THAT THERE IS NO PROVISION OF NOTIONAL INTEREST ON SUCH TRANSACTIONS UNDER THE ACT. 8. THAT THE ABOVE SAID ADDITION HAS BEEN MADE IGNORING THE DETAILED TRANSFER PRICING STUDY MADE BY THE APPELLANT FOR DETERMINING THE ARM'S LENGTH PRICE. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED AO HAS ERRED BOTH ON FACTS AND IN LAW IN MAKING THE ABOVE-SAID ADDITION WITHOUT QUALIFYING COMPARABLE INSTANCE FOR RATE OF INTEREST ON THE COM PARABLE TRANSACTION. 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED AO HAS ERRED BOTH ON FACTS AND IN LAW IGNORING THE CONTENTION OF THE ASS ESSEE THAT THE VARIATION OF 5% PLUS-MINUS ARM'S LENGTH INTEREST DETERMINED WILL NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE IGNORING THE SPECIFIC PROVISIO NS OF THE ACT. 11. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR AL TER ANY OF THE GROUNDS OF APPEAL. 8. LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE LOA N AGREEMENTS, COPY OF WHICH IS PLACED AT PAGE 1 TO 13 OF THE PAPER BOOK A ND SUBMITTED THAT THE LOAN WAS ADVANCED AT A FIXED RATE WAY BACK IN THE YEAR 2 002-03 AND, THEREFORE, THE 5 ITA NO.6910/DEL/2014 INTEREST RATE CANNOT BE VARIED OR CHANGED IN THE YE AR UNDER CONSIDERATION. REFERRING TO THE ORDER OF THE DRP, LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING OBSERVATIONS :- DRP FINDINGS :- THIS PANEL HAS CAREFULLY CONSIDERE D THE SUBMISSIONS OF THE TAXPAYER AND THE ARGUMENTS OF THE TPO AND GIVES THE FOLLOWIN G FINDINGS: 1. IT IS SEEN THAT DELHI BENCH OF HONBLE ITAT HAS PASSED ORDER DATED 13- 10-2013 IMPINGING ON THE ISSUE FOR THE AY 2007-08. THIS PANEL HAS VERIFIED FROM THE TPO AND IT HAS BEEN INFORMED THAT DEPARTMENT HAS PREFERRED APPEAL AGAINST THE SAID ORDER OF HONBLE ITAT. ACCORDINGLY, THIS PANEL IS CONSTRAINT NOT TO FOLLOW THE ORDER OF HONBLE ITAT. 9. HE SUBMITTED THAT THE APPEAL FILED BY THE DEPART MENT BEFORE THE HONBLE DELHI HIGH COURT HAS BEEN DISMISSED VIDE ITA NO.233 /2014 ORDER DATED 27.03.2015, COPY OF WHICH IS PLACED AT PAGES 61 TO 82 OF THE PAPER BOOK. REFERRING TO PAGE 14 TO 50 OF THE PAPER BOOK, HE SU BMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008-09 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ADJUSTMENT SUGG ESTED BY THE TPO IS NOT WARRANTED ON THIS ISSUE. THE REVENUE HAS NOT FILED ANY APPEAL. THEREFORE, IT HAS ATTAINED FINALITY. 10. SO FAR AS ASSESSMENT YEAR 2009-10 IS CONCERNED, HE SUBMITTED THAT NO ADJUSTMENT HAS BEEN MADE. IN ASSESSMENT YEAR 2011- 12, THE DRP AND ASSESSING OFFICER HAS ACCEPTED THE PLEA OF THE ASSESSEE ON TH IS ISSUE AND HAS NOT MADE ANY ADJUSTMENT BY FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE. HE ACCORDINGLY SUBMITTED THAT THE ADJUSTMENT SUSTAINED BY THE DRP FOR THIS YEAR HAS TO BE DELETED. 6 ITA NO.6910/DEL/2014 11. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER/TPO/DRP. 12. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND THE TRIBUNAL, IN ASSESSEES OWN CASE FOR ASSES SMENT YEAR 2008-09 VIDE ITA NO.5855/DEL/2012 ORDER DATED 08.02.2013 FROM PARA 1 1 ONWARDS HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS A ND PERUSED THE RECORDS, WE FIND THAT THE ASSESSEE COMPANY IN THIS CASE IS A LE ADING MANUFACTURER OF RIDER APPAREL. ASSESSEE ENTERED INTO INTERNATIONAL TRANSACTION AS UNDER:- EQUESTRIAN APPAREL SOLD TO JPC EQUESTRIAN INC RS.48 191540/- LOAN PROVIDED TO JPC EQUESTRIAN INC 10,50,000 $ 12. AS PER THE TP DOCUMENT, CUP METHOD HAS BEEN CHO SEN TO BENCH MARK THE SALE OF APPAREL AS WELL AS INTEREST RECEIVED ON LOAN. TH E TPO ACCEPTED THE ASSESSEES SUBMISSION QUA SALE OF APPAREL THAT THE SAME WAS AT ARMS LENGTH. AS REGARDS INTEREST THE ASSESSEE MENTIONED THAT IT HAS RECEIVED INTERES T AT A RATE OF 4% WHICH WAS COMPARABLE WITH THE EXPORT PACKING CREDIT RATE OBTA INED FROM INDEPENDENT BANKS IN INDIA. THE TPO WAS NOT IN AGREEMENT WITH THE ABOVE CONTENTION OF THE ASSESSEE. HE OBSERVED THAT IT IS TO BE SEEN THAT WHAT THE ASSESS EE WOULD HAVE EARNED BY GIVING LOANS IN THE INDIAN MARKET. HE NOTED THAT LENDING O R BORROWING IS NOT ONE OF THE MAIN BUSINESS OF THE TAXPAYER. HE OPINED THAT WHAT IS TO BE CONSIDERED IS THE PREVALENT INTEREST THAT COULD HAVE BEEN EARNED BY ADVANCING A LOAN TO AN UNRELATED PARTY IN INDIA WITH THE SAME FINANCIAL HEALTH AS THAT OF THE TAX PAYERS SUBSIDIARY. THE TPO FURTHER OBSERVED THAT THE TAXPAYER HAS NOT SUBMITTE D THE FINANCIAL OF THE SUBSIDIARY, HENCE THE FINANCIAL HEALTHY OF THE SUBSIDIARY CANNO T BE JUDGED. THE TPO FURTHER NOTED THAT WHILE DECIDING THE INTEREST RATE THAT MAY BE C HARGED ON RECEIVABLES FROM AES, LIBOR RATE FOR CALCULATING INTEREST IS NOT PROPER. HE OPINED THAT INSTEAD OF US RATE, INDIAN RATE IS TO BE ADOPTED. HE OBSERVED THAT AN I NDEPENDENT PERSON IN INDIA WOULD EXPECT THE MAXIMUM RETURN ON ITS INVESTMENT, AND IF THE LENDING RATE IS HIGHER IN INDIAN CURRENCY THEN HE WOULD NOT LEND IN FOREIGN C URRENCY WHERE THE LENDING RATE IS NOT SO ATTRACTIVE. THE TPO FURTHER NOTED THAT IT SH OULD NOT BE FORGOTTEN THAT, HAD THE AE OF THE ASSESSEE COMPANY WOULD HAVE GOT LOAN FROM ANY BANK OR FINANCIAL INSTITUTION IN THE PLACE OF RESIDENCY AT LIBOR RATE , THEN WHY IT DID NOT AVAIL OF LOAN AT SUCH A RATE. ASSESSING OFFICER OBSERVED THAT, NO CO MPANY IN INDIA WOULD LIKE TO INVEST IN THE FORM OF LOAN OUTSIDE INDIA AND THAT ALSO WIT HOUT SECURITY AS THE INTEREST RETURNS IN INDIA WOULD BE HIGHER THAN THOSE PREVAILING IN D EVELOPED MARKETS. FINALLY, ASSESSING OFFICER HELD THAT INTEREST RATE AT 17.26% WOULD BE FAIR AND REASONABLE. 13. BEFORE THE DRP ASSESSEE INTER-ALIA CONTENDED TH AT COMPARISON HAS TO BE MADE WITH RESPECT OF ADVANCE OR LOAN IN USA AND NOT BASE D ON INDIAN CONDITIONS. THE 7 ITA NO.6910/DEL/2014 COMPARISON COULD ALSO BE WITH RATE OF INTEREST BEIN G PAID BY THE MULTINATIONAL COMPANIES OR BANKS IN RESPECT OF MONEY BORROWED FRO M INDIA. HOWEVER, THE DRP AGREED WITH TPOS POINT OF VIEW. BUT, IT HELD THAT FURTHER ADDITION ON ACCOUNT OF SECURITY IS NOT NEEDED. IT OPINED THAT ARMS LENGTH INTEREST RATE MAY BE TAKEN AS THE PLR OF RBI FOR THE FINANCIAL YEAR 2007-08. IN ACCOR DANCE WITH THE ABOVE DECISION, THE TPO ADOPTED 13.25% AS THE RATE OF ARMS LENGTH INTER EST RATE. 14. WE NOTE THAT CUP METHOD IS THE MOST APPROPRIATE METHOD IN ORDER TO ASCERTAIN ARMS LENGTH PRICE OF THE INTERNATIONAL TR ANSACTION AS THAT OF THE ASSESSEE. WE AGREE WITH THE ASSESSEES CONTENTION THAT WHERE THE TRANSACTION WAS OF LENDING MONEY IN FOREIGN CURRENCY TO ITS FOREIGN SUBSIDIARI ES THE COMPARABLE TRANSACTIONS, THEREFORE, WAS OF FOREIGN CURRENCY LENDED BY UNRELA TED PARTIES. THE FINANCIAL POSITION AND CREDIT RATING OF THE SUBSIDIARIES WILL BE BROAD LY THE SAME AS THE HOLDING COMPANY. IN SUCH A SITUATION, DOMESTIC PRIME LENDING RATE WO ULD HAVE NO APPLICABILITY AND THE INTERNATIONAL RATE FIXED BEING LIBOR SHOULD BE TAKE N AS THE BENCHMARK RATE FOR INTERNATIONAL TRANSACTIONS. 15. THE ABOVE VIEW IS DULY SUPPORTED BY FOLLOWING C ASE LAWS RELIED UPON BY THE ASSESSEES COUNSEL. IN SIVA INDUSTRIES AND HOLDING LTD. VS. ACIT SUPRA IT WAS HELD BY ITAT THAT THE ASSESSEE HAD GIVEN THE LOAN TO THE AS SOCIATE ENTERPRISE IN U.S. DOLLARS, AND IN SUCH A SITUATION WHEN THE TRANSACTION WAS IN FOREIGN CURRENCY, AND THE TRANSACTION WAS AN INTERNATIONAL TRANSACTIONS, THEN THE TRANSACTION WOULD HAVE TO BE LOOKED UPON BY APPLYING THE COMMERCIAL PRINCIPLES I N REGARD TO INTERNATIONAL TRANSACTIONS. IN SUCH A SITUATION DOMESTIC PRIME LE NDING WOULD HAVE NO APPLICABILITY AND THE INTERNATIONAL RATE FIXED BEING LIBOR RATE W OULD HAVE TO BE ADOPTED. 16. SIMILAR VIEW AS ABOVE WAS EXPRESSED BY THE ITAT IN THE CASE OF M/S FOUR SOFT LTD., HYDERABAD VS. DCIT SUPRA, DY. C.I.T. VS. TECH . MAHINDRA SUPRA, TATA AUTOCOMP SYSTEMS VS. ACIT SUPRA. 17. WE FURTHER NOTE THAT ASSESSEE HAS ARRANGEMENT, FOR LOAN WITH CITI BANK, FOR LESS THAN 4%. HOWEVER, FOR LOAN PROVIDED TO ITS AE S IT HAS CHARGED 4% P.A. INTEREST. HENCE, ADJUSTMENT SUGGESTED BY THE TPO IS NOT WARRA NTED. 18. WE FURTHER NOTE THAT ASSESSEES PROFITS ARE EXE MPT U/S. 10B. HENCE, THERE IS NO CASE THAT ASSESSEE WOULD BENEFIT BY SHIFTING PROFIT S OUTSIDE INDIA. THIS VIEW IS SUPPORTED BY BANGALORE TRIBUNAL DECISION IN THIS CA SE PHILIPS SOFTWARE CENTRE P LTD. VS. ACIT SUPRA AND MUMBAI TRIBUNAL IN THE CASE OF I .T.O. VS. ZYDUS ALTANA HEALTH CARE P LTD. SUPRA. 19. WE FURTHER NOTE THAT IN THIS CASE THE LOAN AGRE EMENT WAS FOR FIXED RATE OF INTEREST. THE LIBOR HAS BEEN ACCEPTED IN DECISION R EFERRED ABOVE AS THE MOST SUITABLE BENCH MARK FOR JUDGING ARMS LENGTH PRICE IN CASE F OR FOREIGN CURRENCY LOAN. HENCE, ADJUSTMENT AS MADE BY THE TPO IS NOT WARRANTED. 20. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE HOLD THAT THE RATE OF INTEREST CHARGED BY THE ASSESSEE FOR TH E LOANS TRANSACTIONS WITH THE AE WAS ARMS LENGTH PRICE. HENCE, NO TRANSFER PRICING ADJUS TMENT IS CALLED FOR. 21. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED . 13. WE FIND FOLLOWING THE ABOVE DECISION THE TRIBUN AL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 VIDE ITA NO.3265/DEL/20 11 ORDER DATED 30.10.2013 HAS ALLOWED THE APPEAL OF THE ASSESSEE. WE FIND WHEN THE REVENUE 8 ITA NO.6910/DEL/2014 FILED AN APPEAL AGAINST THE ORDER OF THE TRIBUNAL, THE HONBLE DELHI HIGH COURT VIDE ITA NO.233/2014 ORDER DATED 27.03.2015 DISMISS ED THE APPEAL FILED BY THE REVENUE. WE FURTHER FIND THE DRP IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 DIRECTED THE ASSESSING OFFICER TO DELETE TH E ADJUSTMENT TOWARDS INTEREST OF LOAN BY OBSERVING AS UNDER :- GROUNDS NO.4 AND 5 CHALLENGE THE ADJUSTMENT TOWARD S INTEREST ON LOAN. THE ASSESSEE HAS CONTENDED THAT THIS ISSUE HAS BEEN DEC IDED IN ITS FAVOUR BY THE HONBLE DELHI HIGH COURT IN THE ASSESSEES OWN CASE (CIT V COTTON NATURALS (I) PVT. LTD. 2015-TII-09-HC-DEL-TP). THE ASSESSEE STATED THAT T HE FACTS THIS YEAR, ARE THE SAME AS IN THE YEAR, IN WHICH A SIMILAR ADJUSTMENT HAS B EEN DELETED BY THE HONBLE HIGH COURT. THE ASSESSEE STATED THAT THE LOAN ON WHICH INTEREST ADJUSTMENT HAS BEEN MADE IS ALSO THE SAME. RESPECTFULLY FOLLOWING THE DECIS ION OF THE HONBLE HIGH COURT IN THE ASSESSEES CASE, THE AO IS DIRECTED TO DELETE THE A DJUSTMENT TOWARDS INTEREST ON LOAN. 14. IN VIEW OF THE CONSISTENT DECISIONS OF THE TRIB UNAL FOR ASSESSMENT YEARS 2007-08 AND 2008-09 AND IN THE LIGHT OF THE DIRECTI ON OF THE DRP FOR ASSESSMENT YEAR 2011-12 AND CONSIDERING THE FACT THAT NO ADJUS TMENT WAS MADE ON ACCOUNT OF INTEREST ON LOAN GIVEN TO THE SUBSIDIARY FOR ASS ESSMENT YEAR 2009-10, WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION IS CALLE D FOR ON ACCOUNT OF DIFFERENCE IN ARMS LENGTH PRICE ON THE TRANSACTION ON ACCOUNT OF INTEREST ON LOAN GIVEN TO THE SUBSIDIARY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 15. SO FAR AS GROUNDS NO.7 AND 8 ARE CONCERNED, THE SAID GROUNDS RELATE TO THE ADDITION ON ACCOUNT OF THE INTEREST ON EXPORT PROCE EDS RECEIVABLE. 16. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBM ITTED THAT A RECTIFICATION APPLICATION U/S 154 IS PENDING BEFORE THE ASSESSING OFFICER AND THE SAME IS YET TO BE DECIDED. HE FURTHER SUBMITTED THAT BEFORE TH E DRP THE ASSESSEE HAD 9 ITA NO.6910/DEL/2014 SUBMITTED THAT THERE IS NO INTERNATIONAL TRANSACTIO N ON ACCOUNT OF INTEREST ON EXPORT PROCEEDS RECEIVABLES AND THERE WAS SOME CALC ULATION ERROR. 17. LD. DR ON THE OTHER HAND SUBMITTED THAT SINCE T HE PETITION U/S 154 IS PENDING BEFORE THE ASSESSING OFFICER, THE SAME MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE ISSUE AFRESH. 18. AFTER HEARING BOTH THE SIDES, WE FIND THE RECTI FICATION APPLICATION FILED BEFORE THE ASSESSING OFFICER U/S 154 IS PENDING. I T IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS SOME CALCUL ATION ERROR AND THERE IS NO INTERNATIONAL TRANSACTION AT ALL ON ACCOUNT OF RECE IVABLES. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING T HAT THE RECTIFICATION APPLICATION IS PENDING BEFORE THE ASSESSING OFFICER WHICH IS YE T TO BE DISPOSED OF, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THE GROUNDS NO.7 AND 8 ARE ACCORDING LY ALLOWED FOR STATISTICAL PURPOSES. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 04 TH DAY OF DECEMBER, 2017. SD/- SD/- (KULDIP SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04-12-2017. 10 ITA NO.6910/DEL/2014 SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE DRP-I, NEW DELHI 4) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI