DCIT Vs M/s. Russell Credit Limited (ITAT Kolkata)
Hon’ble High Court of Bombay in CIT Vs. the Great Eastern Shipping Co. Ltd. in ITA No. 1455 of 2014 dated 28.06.2017 has upheld the action of the Tribunal wherein it was held that arm’s length price in the case of loans advanced to AE would be determined on the basis of rate of interest being charged in the country where the loan is received/consumed. In the light of the aforesaid decisions of the Hon’ble Delhi High Court as well as Hon’ble Bombay High Court, the action of the assessee in adopting the bank rate prevailing in Australia is correct and the AO erred in adopting the Indian bank rate. The loan amount was given in Australian currency and as per the promissory note the AE has to return the amount in Australian Dollar. Therefore, applying the ratio laid by the Hon’ble High Courts discussed above, we hold that there was no necessity of any arm’s length adjustment in this case and, therefore, we direct the deletion of the addition made on this count. Ground of appeal of assessee in respect to Transfer Pricing raised by it is allowed.
FULL TEXT OF THE ITAT JUDGMENT
These are cross appeals filed by the revenue and assessee which are against the order of Ld. CIT(A)-VIII, Kolkata dated 20.12.2012 for AY 2009-10. Since both the appeals have been heard together, we dispose of the same by this consolidated order for the sake of brevity.
2. The grounds of appeal raised by the assessee are as under:
“1. Transfer Pricing Adjustment: (Rs.17,68,175 – Rs.15,75,444)= Rs. 1,92,731/-
For that the learned CIT(Appeals) was not justified in ignoring the provisions of section 92C for computation of arm’s length price and the relevant CBDT circulars on the subject.
For that the learned CIT(Appeals) erred in not considering the Accountant’s Report under section 92E and Form 3CEB wherein the detailed analysis and justification was given for the application of the CUP method in determining the arm’s length notional interest income.
For that the learned CIT(Appeals) was not justified in arbitrarily applying 10% rate without considering the provisions of the Income Tax Law.
Relief Prayed: The addition of Rs.1 ,92,731/- should be deleted.
