JSW Energy Limited Vs ACIT (ITAT Mumbai)
In JSW Energy Limited Vs ACIT, the ITAT Mumbai dealt with transfer pricing adjustments relating to interest on loans advanced to Associated Enterprises (AEs), deduction under Section 80-IA, and benchmarking of power supplied to AEs.
The assessee, engaged in the business of power generation and operation of power plants, had entered into international and specified domestic transactions with its AEs. During assessment proceedings, the Transfer Pricing Officer (TPO) made an upward adjustment of ₹14.57 crore relating to interest on loans advanced to its Mauritius AE and also reduced deduction claimed under Section 80-IA by ₹51.69 crore. The Dispute Resolution Panel (DRP) upheld the TPO’s approach.
Regarding benchmarking of interest on AE loans, the assessee submitted that loans were advanced at floating LIBOR-based rates and that it had suo motu offered interest income at LIBOR plus 300 basis points in its return even though no actual interest was received. The TPO rejected this benchmarking and treated the loan as a long-term loan requiring application of fixed interest rates derived from Bloomberg data. The DRP confirmed the adjustment, observing that the conduct of parties differed from contractual terms because no interest or principal had been repaid over several years.
